EXHIBIT 2.1
STOCK ACQUISITION AGREEMENT
BY AND AMONG
SCIENTIFIC TECHNOLOGIES INCORPORATED,
XXXXXXX INSTRUMENTS, INC.
AND
XXXX XXXXXXX
Dated as of March 31, 1999
EXECUTION COPY
TABLE OF CONTENTS
Page
ARTICLE I THE PURCHASE AND SALE 1
1.1 The Purchase and Sale 1
1.2 The Closing 1
1.3 Purchase Price and Payment 2
1.4 Purchase Price Adjustment 2
1.5 Escrow 3
1.6 Deliveries by Shareholder and the Company 4
1.7 Deliveries by Buyer 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
2.1 Organization of the Company 4
2.2 Company Capital Structure 5
2.3 Subsidiaries 5
2.4 Authority 5
2.5 Company Financial Statements 5
2.6 No Undisclosed Liabilities 6
2.7 No Changes 6
2.8 Tax Matters 7
2.9 Restrictions on Business Activities 8
2.10 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment 9
2.11 Intellectual Property 9
2.12 Agreements, Contracts and Commitments 10
2.13 Interested Party Transactions 12
2.14 Governmental Authorization 12
2.15 Litigation 12
2.16 Accounts Receivable 12
2.17 Minute Books 12
2.18 Environmental Matters 13
2.19 Brokers' and Finders' Fees; Third Party Expenses 13
2.20 Employee Benefit Plans 14
2.21 Insurance 16
2.22 Year 2000. 16
2.23 Compliance with Laws 17
2.24 Complete Copies of Materials 17
2.25 Representations Complete 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER 17
3.1 Organization, Standing and Power 17
3.2 Authority 17
3.3 Litigation 18
ARTICLE IV CONDUCT PRIOR TO THE CLOSING 18
4.1 Conduct of Business of the Company 18
4.2 No Solicitation 19
4.3 No Encumbrance 20
ARTICLE V ADDITIONAL AGREEMENTS 20
5.1 Access to Information 20
5.2 Confidentiality 20
5.3 Expenses 20
5.4 Public Disclosure 21
5.5 Consents 21
5.6 Tax Matters 21
5.7 Best Efforts 21
5.8 Notification of Certain Matters 22
5.9 Additional Documents and Further Assurances 22
ARTICLE VI CONDITIONS TO THE ACQUISITION 22
6.1 Conditions to Obligations of Each Party to Effect the
Acquisition. 22
6.2 Additional Conditions to Obligations of Company. 23
6.3 Additional Conditions to the Obligations of Buyer 23
ARTICLE VII SURVIVAL; INDEMNIFICATION; ESCROW 25
7.1 Survival; Limitations on Indemnification. 25
7.2 Indemnification Procedures 26
7.3 Escrow Arrangements 27
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 30
8.1 Termination 30
8.2 Effect of Termination 31
8.3 Amendment 31
8.4 Extension; Waiver 31
ARTICLE IX GENERAL PROVISIONS 31
9.1 Notices 31
9.2 Interpretation 32
9.3 Counterparts 32
9.4 Entire Agreement; Assignment 32
9.5 Severability 33
9.6 Other Remedies 33
9.7 Governing Law 33
9.8 Rules of Construction 33
INDEX OF EXHIBITS
Exhibit Description
Exhibit A Consulting and Non-Competition Agreement
Exhibit B Schedule of Employees to Receive Retention Bonuses
Exhibit C Schedule of Employees to enter into Employment
Agreements
Exhibit D Form of Employment Agreement
Exhibit E Form of Legal Opinion to be rendered by Xxxxx & Xxxxxx,
P.C.
Exhibit F Form of Proprietary Information Agreement
Exhibit G Schedule of Indemnifiable Losses
INDEX OF SCHEDULES
Company Schedule Description
2.3 Subsidiaries
2.4 Authority
2.5 Company Financial Statements
2.6 No Undisclosed Liabilities
2.7 No Changes
2.8 Tax Matters
2.9 Restrictions on Business Activities
2.10 Titles of Properties; Absence of Liens and
Encumbrances; Condition of Equipment
2.11 Intellectual Property
2.12 Agreements, Contracts and Commitments
2.14 Government Authorization
2.15 Litigation
2.16 Accounts Receivable
2.18 Environmental Matters
2.19 Brokers' and Finders' Fees; Third Party Expenses
2.20 Employee Benefit Plans
2.21 Insurance
2.22 Year 2000
4.1 Conduct of Business of the Company
5.1 Access to Information
5.6 Tax Matters
EXECUTION COPY
STOCK ACQUISITION AGREEMENT
This STOCK ACQUISITION AGREEMENT (this "Agreement") is made and
entered into as of March 31, 1999 by and among Scientific Technologies
Incorporated, an Oregon corporation ("Buyer"), Xxxxxxx Instruments, Inc.,
a Utah corporation (the "Company") and Xxxx Xxxxxxx, the sole shareholder
of the Company ("Shareholder").
RECITALS
A. The Boards of Directors of each of the Company and Buyer
believe it is in the best interests of each company and their respective
shareholders that Buyer acquire all of the outstanding capital stock of
the Company (the "Acquisition").
B. Shareholder is the owner of and has good and valid title to
all shares of capital stock of the Company, free and clear of any legal or
equitable encumbrances.
C. Subject to the terms and conditions of this Agreement, Buyer
will purchase and Shareholder will sell all of the capital stock of the
Company in consideration for a check or wire transfer of United States
dollars, as set forth in Article I hereof.
D. A portion of the cash otherwise payable by Buyer in connection
with the purchase and sale of the capital stock of the Company will be
placed in escrow by Buyer, the release of which amount will be contingent
upon certain events and conditions, all as more fully set forth in
Article VII, Section 7.3 hereof.
E. The Company, Shareholder and Buyer desire to make certain
representations and warranties and enter into other agreements in
connection with the Acquisition.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the parties hereto agree as follows:
ARTICLE I
THE PURCHASE AND SALE
I.1 The Purchase and Sale. At the Closing (as defined in
Section 1.2 below) and subject to and upon the terms and conditions of
this Agreement, Shareholder agrees to sell and deliver to Buyer, and Buyer
agrees to purchase from Shareholder, all of the outstanding shares of the
Company's capital stock (the "Shares") free and clear of all liens, claims
and encumbrances.
I.2 The Closing. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Acquisition (the "Closing")
will take place as promptly as practicable, but no later than five (5)
business days, following satisfaction or waiver of the conditions set
forth in Article VI hereof, at the offices of Xxxxx & Xxxxxx, P.C., 00
Xxxx Xxxxxx, Xxxxx, Xxxx, unless another place or time is mutually agreed
to in writing by Buyer and the Company. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date".
I.3 Purchase Price and Payment. The aggregate purchase price to
be paid by Buyer to Shareholder for the Shares) will be, subject to
adjustment as set forth in Section 1.4 below, two million six hundred
thirty one thousand two hundred seventeen dollars and fifty six cents
($2,631,217.56), which number represents two million six hundred thirty-
seven thousand dollars ($2,637,000) (the "Aggregate Maximum
Consideration") less any and all payment obligations of the Company
(including all principal and interest payments) arising under, relating to
or otherwise in connection with (x) that certain Promissory Note dated
June 30, 1995 in the aggregate principal amount of $425,000, together with
interest accruing at the rate of 7.0% per annum, payable by the Company to
Xxxx X. Xxxxxxx, Inc. (the "ECL Note"), (y) any bank debt currently
outstanding and payable by the Company (the "Bank Debt") and (z) under the
ECL Consulting Agreement (defined in Section 6.3(l) below) (the Aggregate
Maximum Consideration, less any payment obligations of the Company under
the ECL Note, the Bank Debt and the ECL Consulting Agreement, shall be
hereinafter referred to as the "Purchase Price").
I.4 Purchase Price Adjustment. The Purchase Price will be subject
to adjustment as follows:
(a) Closing Balance Sheet. Within 30 days following the
Closing, Shareholder will prepare (or cause to be prepared) and deliver to
Buyer a balance sheet (the "Closing Balance Sheet") of the Company as of
the Closing Date audited or reviewed (at the sole discretion of Buyer) by
an independent auditing firm selected and paid for by Buyer. The Closing
Balance Sheet will be prepared in accordance with United States generally
accepted accounting principles ("GAAP") as in effect as of the Closing
Date consistent with the basis of accounting and classification
procedures, judgments and estimation methodologies employed by Shareholder
in preparation of the December 31 Balance Sheet (defined in Section
1.4(c)(i) below).
(b) Buyer's Review of the Closing Balance Sheet. Buyer and
Buyer's accountants will have 30 days (the "Buyer Review Period") from
Buyer's receipt of the Closing Balance Sheet to review the Closing Balance
Sheet and during such period Shareholder and its accountants will
cooperate with Buyer and Buyer's accountants and answer Buyer and Buyer's
accountants' questions and provide such additional schedules and materials
as Buyer and Buyer's accountants may reasonably request in order for Buyer
and Buyer's accountants to have a meaningful review of the Closing Balance
Sheet.
(c) Adjustment of Purchase Price. Subject to the provisions
of Section 1.4(d), the Purchase Price will be adjusted as follows:
(i) For purposes of this Agreement, the term "Closing
Net Book Value" will mean the amount obtained by subtracting (x) the total
liabilities from (y) the total assets, in each case as set forth on the
Closing Balance Sheet delivered by Shareholder, or, if any items on such
balance sheet are disputed by Buyer, the Closing Balance Sheet mutually
agreed upon by Buyer and Shareholder after resolution of their disputes,
or, if no resolution is had, the Closing Balance Sheet reflecting the
determination of the Accountants (as defined in Section 1.4(d)(ii) below);
and the term "December 31 Net Book Value" will mean the amount obtained by
subtracting (x) the total liabilities from (y) the total assets, in each
case as set forth on the reviewed, unaudited
balance sheet of the Company as of December 31, 1998 previously delivered
to Buyer by the Company (the "December 31 Balance Sheet").
(ii) If the December 31 Net Book Value shall exceed the
Closing Net Book Value, Shareholder will pay to Buyer within three
business days after the date on which the Closing Net Book Value is
finally determined pursuant to Section 1.4(d) hereof, an amount (the
"Adjustment") equal to such excess plus interest thereon at the rate of
8.00% per annum, compounded annually from the Closing Date to the date of
payment. The payment by Shareholder to Buyer of the Adjustment pursuant
to this Section 1.4(c)(ii) will be made by wire transfer of immediately
available funds to an account of Buyer at a bank specified by Buyer.
(iii) If the Closing Net Book Value shall exceed the sum
of the December 31 Net Book Value, Buyer will pay to Shareholder, within
three business days after the date on which the Closing Net Book Value is
finally determined pursuant to Section 1.4(d) hereof, an amount equal to
such excess plus interest thereon at the rate of 8.00% per annum,
compounded annually from the Closing Date to the date of payment. The
payment by Buyer to Shareholder of the Adjustment pursuant to this
Section 1.4(c)(iii) will be made by wire transfer of immediately available
funds to an account of Shareholder at a bank specified by Shareholder.
(d) Disputes.
(i) Subject to Section 1.4(d)(ii), the Closing Balance
Sheet delivered by Shareholder to Buyer will be final, binding and
conclusive on the parties hereto.
(ii) Buyer may dispute any amounts reflected or not
reflected on the Closing Balance Sheet to the extent the net effect of all
such disputed amounts in the aggregate would (x) affect the amount to be
paid by Shareholder pursuant to Section 1.4(c)(ii) or the amount to be
paid by Buyer pursuant to Section 1.4(c)(iii) and (y) amount to greater
than 5% of the Closing Net Book Value reflected on the Closing Balance
Sheet originally submitted to Buyer by Shareholder pursuant to
Section 1.4(a) hereof, provided, that, Buyer will notify Shareholder in
writing of each disputed item, and will specify the amount thereof in
dispute, not later than the expiration of the Buyer Review Period. If
Buyer and Shareholder are able to resolve all the disputed items, then the
Closing Balance Sheet agreed upon by Buyer and Shareholder will be final,
binding and conclusive on the parties hereto. If Buyer and Shareholder
are unable to resolve some or all of such disputed items and are therefore
unable to agree as to the Closing Balance Sheet and the resultant Closing
Net Book Value within 20 days following the expiration of the Shareholder
Review Period, Buyer and Shareholder will submit within five days the
items remaining in dispute for resolution to a nationally recognized
accounting firm (the member of which who will be primarily responsible for
resolving such disputes will have had substantial auditing experience and
substantial experience in arbitration or other dispute resolution
proceedings concerning accounting issues) selected by mutual agreement of
Buyer and Shareholder (or failing such agreement between Buyer and
Shareholder, as selected by mutual agreement of Buyer's independent
accountants and Shareholder's independent accountants, or failing such
agreement between Buyer's independent accountants and Shareholder's
independent accountants, as appointed by the American Arbitration
Association) (the "Accountants"), which will, within 30 days after
submission, determine, based solely on presentations by Buyer and
Shareholder (and their respective accountants) and not by independent
review, and render a written report to the parties upon, such remaining
disputed items and the resultant calculation of the Closing Balance Sheet
and the Closing Net Book Value in accordance with the provisions hereof,
and such report and the resultant Closing Balance Sheet will be final,
binding and conclusive on the parties hereto. Any arbitration pursuant to
this Section 1.4(d) shall be held in Salt Lake City (located in the State
of Utah). In resolving any disputed item, the Accountants may not assign
a value to such item greater than the greatest value for such item
claimed by either party or less than the smallest value for such item
claimed by either party. The fees and disbursements of the Accountants
(and of the American Arbitration Association, if any) (a) will be borne by
Buyer if the Closing Net Book Value finally determined pursuant to this
Section 1.4(d)(ii) shall be greater than 100% of the Closing Net Book
Value reflected on the Closing Balance Sheet originally submitted to Buyer
by Shareholder pursuant to Section 1.4(a) hereof, or (b) will be borne by
Shareholder if the Closing Net Book Value finally determined pursuant to
this Section 1.4(d)(ii) shall be equal to or less than 100% of the Closing
Net Book Value reflected on the Closing Balance Sheet originally submitted
to Buyer by Shareholder pursuant to Section 1.4(a) hereof.
I.5 Escrow. Promptly following the Closing, Buyer shall deposit
an aggregate cash amount of two hundred fifty thousand dollars ($250,000)
(the "Escrow Amount") into an escrow account in accordance with the
provisions of Article VII below.
I.6 Deliveries by Shareholder and the Company. At the Closing,
Shareholder shall deliver, or cause to be delivered share certificate or
certificates representing the Shares owned by Shareholder, duly endorsed
for transfer to Buyer. The Company shall deliver the following:
(a) a copy of the Company's Articles of Incorporation, as
amended through the date hereof, certified by the Secretary of State of
the State of Utah;
(b) a certificate of the Secretary of State of the State of
Utah to the effect that the Company is legally existing and in good
standing under the laws of such state;
(c) a certificate of the appropriate governmental
authorities of the State of Utah to the effect that the Company has filed
all tax returns required to be filed and has no outstanding tax liability
(so-called "tax good standing" certificates);
(d) to the extent not maintained at the Company's principal
executive office, the Company's minute books, stock books and corporate
seal; and
(e) a certificate of the Secretary of the Company certifying
as to the Company's Articles of Incorporation and Bylaws that the minutes
of the Board of Directors of the Company relating to the transactions
contemplated hereby are true, correct and complete and that such minutes
have not been rescinded, superseded or otherwise modified since the date
thereof.
I.7 Deliveries by Buyer. At the Closing, Buyer shall deliver the
following:
(a) the payment required by Section 1.3 hereof, by wire
transfer to such accounts as Shareholder shall indicate to Buyer at least
two (2) business days prior to the Closing; and
(b) a certificate of the Secretary of Buyer certifying as to
Buyer's Articles of Incorporation, Bylaws and resolutions of the Board of
Directors of Buyer relating to the transactions contemplated hereby and
attesting to the incumbency and signatures of the appropriate officers of
Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each of the Company and Shareholder jointly and severally represents
and warrants to Buyer, subject to such exceptions as are specifically
disclosed in the disclosure letter supplied by the Company and Shareholder
to Buyer (the "Company Schedules") and dated as of the date hereof, as
follows:
II.1 Organization of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Utah, but is not qualified to do business as a foreign
corporation in any other jurisdiction. The Company has the corporate
power to own its properties and to carry on its business as now being
conducted. The Company has delivered a true and correct copy of its
Articles of Incorporation and Bylaws, each as amended to date, to Buyer.
II.2 Company Capital Structure. The authorized capital stock of
the Company consists of 50,000 shares, all of which are designated as
Common Stock, 5 shares of which are issued and outstanding (the
outstanding Common Stock is hereinafter referred to as the "Company
Capital Stock"). All of the Company Capital Stock is held by Shareholder.
All outstanding shares of the Company's Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject
to preemptive rights created by statute, the Articles of Incorporation or
Bylaws of the Company or any agreement to which the Company is a party or
by which it is bound.
II.3 Subsidiaries. Except as set forth on Schedule 2.3, the
Company does not have and has never had any subsidiaries or affiliated
companies and does not otherwise own and has never otherwise owned any
shares of capital stock or any interest in, or control, directly or
indirectly, any other corporation, partnership, association, joint venture
or other business entity.
II.4 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company.
The Company's Board of Directors has unanimously approved the
Acquisition, this Agreement and the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms except as such enforceability may
be limited by principles of public policy and subject to the laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief
or other equitable remedies. Except as set forth on Schedule 2.4, the
execution and delivery of this Agreement by the Company does not, and, as
of the Closing, the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (any such event, a "Conflict") (i) any provision
of the Articles of Incorporation or Bylaws of the Company or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company or its
properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local
or foreign governmental authority, instrumentality, agency or Commission
("Governmental Entity") or any third party (so as not to trigger any
Conflict), is required by or with respect to the Company in connection
with the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby, except for (i) such consents,
waivers, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state
securities laws and (ii) such other consents, waivers, authorizations,
filings, approvals and registrations which are set forth on Schedule 2.4.
II.5 Company Financial Statements. Schedule 2.5 sets forth the
December 31 Balance Sheet and the related reviewed, unaudited statements
of income for the twelve-month period then ended and the Company's
reviewed, unaudited balance sheets as of December 31, 1996 and 1997 and
the related reviewed, unaudited statements of income for the twelve-month
periods then ended (collectively, the "Company Financials"). The Company
Financials are true, complete and correct in all material respects and
have been prepared in accordance with GAAP applied on a basis consistent
throughout the periods indicated and consistent with each other. The
Company Financials present fairly the financial condition and operating
results of the Company as of the dates and during the periods indicated
therein, subject to normal year-end adjustments, which will not be
material in amount or significance in the aggregate.
II.6 No Undisclosed Liabilities. Except as set forth in
Schedule 2.6, the Company does not have any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any
type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in
accordance with GAAP consistently applied), which individually or in the
aggregate, has not been reflected in the December 31 Balance Sheet.
II.7 No Changes. Except as set forth in Schedule 2.7, since the
date of the December 31 Balance Sheet, there has not been, occurred or
arisen any:
(a) transaction by the Company except in the ordinary course
of business as conducted on that date;
(b) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $20,000;
(c) destruction of, damage to or loss of any assets,
business or customer of the Company (whether or not covered by insurance);
(d) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(e) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its assets;
(g) declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of the Company, or
any direct or indirect redemption, purchase or other acquisition by the
Company of any of its capital stock;
(h) increase in the salary or other compensation payable or
to become payable by the Company to any of its officers, directors,
employees or advisors, or the declaration, payment or commitment or
obligation of any kind for the payment, by the Company, of a bonus or
other additional salary or compensation to any such person except as
otherwise contemplated by this Agreement or the transactions contemplated
hereby, other than normal course of business salary increases in
connection with ongoing yearly reviews or promotions (none of which
exceeds 10% of the previous year's salary);
(i) acquisition, sale or transfer of any asset of the
Company, except in the ordinary course of business as conducted on that
date;
(j) amendment or termination of any material contract,
agreement or license to which the Company is a party or by which it is
bound;
(k) loan by the Company to any person or entity (other than
expense advances to employees, all of which are immaterial in any amount
and are issued in the normal course of business), incurring by the Company
of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of
any debt securities of others;
(l) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of
the Company;
(m) the commencement or notice or threat of commencement of
any lawsuit or proceeding against or investigation of the Company or its
affairs;
(n) notice of any claim of ownership by a third party of
Company Intellectual Property Rights (as defined in Section 2.11 below) or
of infringement by the Company of any third party's intellectual property
rights;
(o) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(p) change in pricing or royalties set or charged by the
Company;
(q) any event or condition of any character that has or
could be reasonably expected to materially impair the Company's business
or the value of such business; or
(r) negotiation or agreement by the Company or any officer
or employees thereof to do any of the things described in the preceding
clauses (a) through (q) (other than negotiations with Buyer and its
representatives regarding the transactions contemplated by this
Agreement).
II.8 Tax Matters.
(a) Definition of Taxes. For the purposes of this
Agreement, "Tax" or, collectively, a "Taxes", means any and all federal,
state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities, including taxes based upon
or measured by gross receipts, income, profits, sales,
use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes,
together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in
Schedule 2.8:
(i) The Company as of the Closing will have prepared
and filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any
and all Taxes concerning or attributable to the Company or its operations
and such Returns are true and correct in all material respects and have
been completed in accordance with applicable law in all material respects.
(ii) The Company as of the Closing: (A) will have paid
or accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes,
FICA, FUTA and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment
of any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company executed any waiver of
any statute of limitations on or extending the period for the assessment
or collection of any Tax.
(iv) No audit or other examination of any Return of the
Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company does not have any liabilities for
unpaid federal, state, local and foreign Taxes which have not been
adequately accrued or reserved against on the December 31 Balance Sheet,
whether asserted or unasserted, contingent or otherwise, and the Company
has no knowledge of any basis for the assertion of any such liability
attributable to the Company, its assets or operations.
(vi) The Company has provided to Buyer or its legal
counsel copies of all federal and state income and all state sales and use
Tax Returns filed for all periods since the date of the Company's
inception.
(vii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens") on the assets of the
Company relating to or attributable to Taxes.
(viii) The Company has no knowledge of any basis
for the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the
Company.
(ix) None of the Company's assets are treated as "tax-
exempt use property" within the meaning of Section 168(h) of the Internal
Revenue Code (the "Code").
(x) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of
the Company that, individually or collectively, could give rise to the
payment of any amount that would not be
deductible pursuant to Section 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, and has not been at any
time, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal
income tax deductions is accurately reflected on the Company's tax books
and records in all material respects.
(c) S Corporation Status. The Company has been an
S Corporation within the meaning of Section 1361 of the Code since its
inception.
II.9 Restrictions on Business Activities. Except as set forth on
Schedule 2.9, there is no agreement (non-compete or otherwise),
commitment, judgment, injunction, order or decree to which the Company is
a party or otherwise binding upon the Company which has or reasonably
could be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company.
II.10 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment.
(a) The Company owns no real property, nor has it ever owned
any real property. Schedule 2.10(a) sets forth a list of all real
property currently, or at any time in the past, leased by the Company, the
name of the lessor, the date of the lease and each amendment thereto and,
with respect to any current lease, the aggregate annual rental and/or
other fees payable under any such lease. All such current leases are in
full force and effect, are valid and effective in accordance with their
respective terms, and there is not with respect to the Company and to the
knowledge of the Company, any other party to such leases, under any of
such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default).
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for
use in its business, free and clear of any Liens (as defined in
Section 2.8(vii)), except as reflected in the Company Financials or in
Schedule 2.10(b) and except for liens for taxes not yet due and payable.
(c) Except as described in Schedule 2.10(c), the equipment
(the "Equipment") owned or leased by the Company is, taken as a whole,
(i) adequate for the conduct of the business of the Company as currently
conducted and (ii) in good operating condition, regularly and properly
maintained, subject to normal wear and tear.
II.11 Intellectual Property.
(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net
lists, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material (excluding Commercial
Software as defined in Paragraph (c) below) that are material to the
business of the Company as currently conducted or as proposed to be
conducted by the Company (collectively, the "Company Intellectual Property
Rights" and each, a "Company Intellectual Property Right").
(b) Schedule 2.11 sets forth a complete list of all patents,
trademarks, registered copyrights, registered maskworks, trade names and
service marks, and any applications therefor in respect of any of the
foregoing, included in the Company Intellectual Property Rights, and
specifies, where applicable, the jurisdictions in which each such Company
Intellectual Property Right has been issued or registered or in which an
application for such issuance and registration has been filed, including
the respective registration or application numbers and the names of all
registered owners. Schedule 2.11 also sets forth a complete list of all
material licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which the Company or any other person
is authorized to use any Company Intellectual Property Right (excluding
object code end-user licenses granted to end-users in the ordinary course
of business that permit use of software products without a right to
modify, distribute or sublicense the same ("End-User Licenses")) or other
trade secret material to the Company, and includes the identity of all
parties thereto, a description of the nature and subject matter thereof,
the applicable royalty and the term thereof. The Company is not in
violation of any license, sublicense or agreement described on such list.
The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, (A) will not cause
the Company to be in violation or default under any such license,
sublicense or agreement, (B) entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement or (C) will not require the Company to repay any funds already
received by it from a third party. The Company is the sole and exclusive
owner or licensee of, with all right, title and interest in and to (free
and clear of any liens or encumbrances), the Company Intellectual Property
Rights, and has sole and exclusive rights (and is not contractually
obligated to pay any compensation to any third party in respect thereof)
to the use thereof or the material covered thereby in connection with the
services or products in respect of which the Company Intellectual Property
Rights are being used.
(c) Except as set forth in Schedule 2.11, no claims with
respect to the Company Intellectual Property Rights have been asserted or
are threatened by any person nor are there any valid grounds, to the
knowledge of the Company, for any bona fide claims (i) to the effect that
the manufacture, sale, licensing or use of any of the products of the
Company as now manufactured, sold or licensed or used for manufacture,
use, sale or licensing by the Company infringes on any copyright, patent,
trade xxxx, service xxxx, trade secret or other proprietary right of any
third party, (ii) against the use by the Company of any trademarks,
service marks, trade names, trade secrets, copyrights, maskworks, patents,
technology, know-how or computer software programs and applications used
in the Company's business as currently conducted by the Company, or
(iii) challenging the ownership by the Company, validity or effectiveness
of any of the Company Intellectual Property Rights. All registered
patents, trademarks, service marks and copyrights held by the Company are
valid and subsisting. To the knowledge of the Company, there is no
material unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, including any
employee or former employee of the Company. No Company Intellectual
Property Right or product of the Company is subject to any outstanding
decree, order, judgment, or stipulation restricting in any manner the
licensing thereof by the Company. The Company has not entered into any
agreement (other than exclusive distribution agreements identified as such
in the Company Schedules) under which the Company is restricted from
selling, licensing or otherwise distributing any of its products to any
class of customers, in any geographic area, during any period of time or
in any segment of the market. The Company has a policy requiring each
employee and contractor to execute proprietary information and
confidentiality agreements substantially in the Company's standard forms
and all current and former employees and contractors of the Company have
executed such an agreement.
(d) "Commercial Software" means packaged commercially
available software programs generally available to the public through
retail dealers in computer software which have been licensed to the
Company pursuant to end-user licenses and which are used in the Company's
business but are in no way a component of or incorporated in or
specifically required to develop or support any of the Company's products
and related trademarks, technology and know-how.
II.12 Agreements, Contracts and Commitments.
(a) Except as set forth on Schedule 2.12(a), the Company
does not have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement,
contract or commitment with an employee or individual consultant or
salesperson or consulting or sales agreement, contract or commitment with
a firm or other organization,
(v) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $10,000,
(viii) any agreement of indemnification or
guaranty,
(ix) any agreement, contract or commitment containing
any covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person,
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $10,000,
(xi) any agreement, contract or commitment relating to
the disposition or acquisition of assets or any interest in any business
enterprise,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments
relating to the borrowing of money or extension of credit, including
guaranties referred to in clause (viii) hereof,
(xiii) any purchase order or contract for the
purchase of raw materials involving $10,000 or more other than purchases
in the ordinary course of business,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement, or
(xvi) any other agreement, contract or commitment that
involves $20,000 or more or is not cancelable without penalty within
thirty (30) days.
(b) Except for such alleged breaches, violations and
defaults, and events that would constitute a breach, violation or default
with the lapse of time, giving of notice, or both, all as noted in
Schedule 2.12(b), the Company has not breached, violated or defaulted
under, or received notice that it has breached, violated or defaulted
under, any of the terms or conditions of any agreement, contract or
commitment to which it is a party or by which it is bound (any such
agreement, contract or commitment, a "Contract"). Each Contract set forth
in any of the Company Schedules is in full force and effect and, except as
otherwise disclosed in Schedule 2.12(b), is not subject to any default
thereunder of which the Company has knowledge by any party obligated to
the Company pursuant thereto. The Company has obtained, or will obtain
prior to the Closing, all necessary consents, waivers and approvals of
parties to any Contract as are required in connection with the
Acquisition.
II.13 Interested Party Transactions. Except as set forth on
Schedule 2.13, no officer and director of the Company nor Shareholder (nor
any ancestor, sibling, descendant or spouse of any of such persons, or any
trust, partnership or corporation in which any of such persons has an
interest), has any direct or indirect (i) interest in any entity which
furnished or sold, or furnishes or sells, services or products that the
Company furnishes or sells, or proposes to furnish or sell, or
(ii) interest in any entity that purchases from or sells or furnishes to,
the Company, any goods or services or (iii) beneficial interest in any
contract or agreement set forth in Schedule 2.12; provided, that,
ownership of no more than one percent (1%) of the outstanding voting stock
of a publicly traded corporation shall not be deemed an "interest in any
entity" for purposes of this section 2.13.
II.14 Governmental Authorization. Schedule 2.14 accurately lists
each material consent, license, permit, grant or other authorization
issued to the Company by a governmental entity (i) pursuant to which the
Company currently operates or holds any interest in any of its properties
or (ii) which is required for the operation of its business or the holding
of any such interest (hereinafter collectively referred to as "Company
Authorizations"), which Company Authorizations are in full force and
effect and constitute all Company Authorizations required to permit the
Company to operate or conduct its business substantially as it is
currently and has been conducted or hold any interest in its properties or
assets.
II.15 Litigation. There is no action, suit, claim or proceeding of
any nature pending or threatened against the Company, Shareholder or their
respective properties or assets or any of the Company's officers or
directors (with respect to the operations of the Company), nor, to the
knowledge of the Company and Shareholder, is there any basis therefor.
Except as set forth in Schedule 2.15, there is no investigation pending or
threatened against the Company, Shareholder or their respective properties
or assets or any of the Company's officers or directors (nor, to the best
knowledge of the Company and Shareholder, is there any basis therefor) by
or before any governmental entity. Schedule 2.15 sets forth, with respect
to any pending or threatened action, suit, proceeding or investigation,
the forum, the parties thereto, the subject matter thereof and the amount
of damages claimed or other remedy hereby requested. No governmental
entity has at any time challenged or questioned the legal right of the
Company to manufacture, offer or sell any of its products in the present
manner or style thereof.
II.16 Accounts Receivable.
(a) The Company has made available to Buyer a list of all
accounts receivable of the Company reflected on the December 31 Balance
Sheet ("Accounts Receivable"), along with a range of days elapsed since
invoice.
(b) Except as set forth on Schedule 2.16(b), all Accounts
Receivable of the Company arose in the ordinary course of business, are
carried at values determined in accordance with generally accepted
accounting principles consistently applied and are collectible except to
the extent of reserves therefor set forth in the December 31 Balance
Sheet, except to the extent that the matters described in Schedule 2.5 may
affect the collectability of accounts receivable from the parties
described in such Schedule 2.5, to the extent described on Schedule 2.5.
No person has any Lien on any of such Accounts Receivable and no request
or agreement for material deduction or discount has been made with respect
to any of such Accounts Receivable.
II.17 Minute Books. The minute books of the Company made available
to counsel for Buyer are the only minute books of the Company and contain
a reasonably accurate summary of all meetings of directors (or committees
thereof) and shareholders or actions by written consent since the time of
incorporation of the Company.
II.18 Environmental Matters.
(a) Hazardous Material. Except as set forth on Schedule
2.18(a) and as reasonably would not be expected to result in a material
liability to the Company, no underground storage tanks and no amount of
any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law to be radioactive, toxic, hazardous
or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the
regulations promulgated pursuant to said laws, (a "Hazardous Material"),
but excluding office and janitorial supplies, are present, as a result of
the deliberate actions of the Company, or, to the Company's knowledge
(without duty of independent investigation), as a result of any actions of
any third party or otherwise, in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that
the Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as reasonably
would not be expected to result in a material liability of the Company,
the Company has not transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has the
Company disposed of, transported, sold, manufactured or stored any product
containing a Hazardous Material (collectively "Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. No material action,
proceeding, revocation proceeding, amendment procedure, writ, injunction
or claim is pending or threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company.
The Company is not aware of any fact or circumstance which could involve
the Company in any material environmental litigation or impose upon the
Company any material environmental liability.
(e) Capital Expenditures. Except as set forth on
Schedule 2.18, the Company is not aware of any capital expenditures which
are required in order for it to comply with Environmental Laws.
II.19 Brokers' and Finders' Fees; Third Party Expenses. Other than
the fees and expenses incurred in connection with the services rendered to
the Company by Founders Capital Corporation, which fees and expenses shall
be borne by the Shareholder, the Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby. Schedule 2.19 sets forth
a reasonable estimate of all Third Party Expenses (as defined in
Section 5.3) expected to be incurred by the Company in connection with the
negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby.
II.20 Employee Benefit Plans.
(a) Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with the Company within the meaning of
Section 414(b), (c) or (m) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement
providing for compensation, severance, termination pay, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether formal or informal, funded
or unfunded and whether or not legally binding, including without
limitation, each "employee benefit plan", within the meaning of
Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any "Employee" (as defined below), and
pursuant to which the Company or any Affiliate has or may have any
material liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, or
retired employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each
management, employment, severance, consulting or similar agreement or
contract between the Company or any Affiliate and any Employee;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan", as defined in
Section 3(37) of ERISA; and
(viii) "Pension Plan" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within the
meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and
complete list of each Company Employee Plan and each Employee Agreement.
The Company does not have any plan or commitment, whether legally binding
or not, to establish any new Company Employee Plan or Employee Agreement,
to modify any Company Employee Plan or Employee Agreement (except to the
extent required by law or to conform any such Company Employee Plan or
Employee Agreement to the requirements of any applicable law, in each case
as previously disclosed to Buyer in writing, or as required by this
Agreement), or to enter into any Company Employee Plan or Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
(c) Documents. The Company has provided to Buyer where
applicable (i) correct and complete copies of all documents embodying or
relating to each Company Employee Plan and each Employee Agreement
including all amendments thereto and written interpretations thereof;
(ii) the most recent annual actuarial valuations, if any, prepared for
each Company Employee Plan; (iii) the two most recent annual reports
(Series 5500 and all schedules thereto), if any, required under ERISA in
connection with each Company Employee Plan or related trust; (iv) if the
Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary
plan description together with the most recent summary of material
modifications, if any, required under ERISA with respect to each Company
Employee Plan; (vi) all IRS determination letters and rulings relating to
Company Employee Plans and copies of all applications and correspondence
to or from the IRS or the Department of Labor ("DOL") with respect to any
Company Employee Plan; and (vii) all communications material to any
Employee or Employees relating to any Company Employee Plan and any
proposed Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would
result in any material liability to the Company.
(d) Employee Plan Compliance. With respect to the Company's
compliance under any Company Employee Plan, to the Company's knowledge,
(i) the Company has performed in all material respects all obligations
required to be performed by it under each Company Employee Plan and each
Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in material
compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) no
"prohibited transaction", within the meaning of Section 4975 of the Code
or Section 406 of ERISA, has occurred with respect to any Company Employee
Plan; (iii) there are no actions, suits or claims pending, or, to the
knowledge of the Company, threatened or anticipated (other than routine
claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan; (iv) except as described in
Schedule 2.20(d), each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Closing in accordance with its terms,
without liability to the Company, Buyer or any of its Affiliates (other
than ordinary administration expenses typically incurred in a termination
event); (v) there are no inquiries or proceedings pending or, to the
knowledge of the Company or any Affiliate, threatened by the IRS or DOL
with respect to any Company Employee Plan; and (vi) neither the Company
nor any Affiliate is subject to any penalty or tax with respect to any
Company Employee Plan under Section 402(i) of ERISA or Section 4975
through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it
ever, maintained, established, sponsored, participated in, or contributed
to, any Pension Plan which is subject to Part 3 of Subtitle B of Title I
of ERISA, Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee
Plan provides, or has any liability to provide, life insurance, medical or
other employee benefits to any Employee upon his or her retirement or
termination of employment for any reason, except as may be required by
statute, and the Company has never represented, promised or contracted
(whether in oral or written form) to any Employee (either individually or
to Employees as a group) that such Employee(s) would be provided with life
insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) Effect of Transaction.
(i) The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either
alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee Agreement,
trust or loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
(ii) No payment or benefit which will or may be made by
the Company or Buyer or any of their respective affiliates with respect to
any Employee will be characterized as an "excess parachute payment",
within the meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in
all material respects with all applicable federal and state laws, rules
and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect
to Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Employees (other than amounts which may be required to be withheld as a
result of an Employee's receipt of Acquisition Consideration); (iii) is
not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any
of the foregoing; and (iv) is not liable for any payment to any trust or
other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other
benefits for Employees.
(j) Labor. No work stoppage or labor strike against the
Company is pending or threatened. The Company is not involved in or
threatened with, any labor dispute, grievance, or litigation relating to
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in material liability to the Company. Neither the
Company nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act which
would, individually or in the aggregate, directly or indirectly result in
a material liability to the Company. The Company is not presently, nor
has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by the Company. The
Company is not aware that any employee of the Company has any present
intention of terminating such employee's employment with the Company.
II.21 Insurance. With respect to the insurance policies and
fidelity bonds covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company, except as
set forth on Schedule 2.21, there is no claim by the Company pending under
any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All
premiums due and payable under all such policies and bonds have been paid
and the Company is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). The Company has no knowledge of any
threatened termination of, or material premium increase with respect to,
any of such policies.
II.22 Year 2000.
(a) All of the software products marketed or developed by
the Company are Year 2000 Compliant (as hereinafter defined) and, to the
knowledge of the Company, none of such products will be materially
adversely affected by the advent of the year 2000, the advent of the
twenty-first century or the transition from the twentieth century through
the year 2000 and into the twenty-first century. "Year 2000 Compliant"
means, as applied to a software product, that: (A) such software product
will operate and correctly store, represent and process (including sort)
all dates (including single and multi-century formulae and leap year
calculations), such that errors will not occur when the date used is in
the Year 2000, or in a year preceding or following the Year 2000; (B) such
software product has been written and tested to support numeric and date
transitions from the 20th century to the twenty-first century, and back
(including without limitation all calculations, reporting, printing,
displays, reversals, disaster and vital records recoveries); and (C) such
software product will function without error or interruptions from
functions which may involve date information from more than one century,
in each case.
(b) Except as set forth in Schedule 2.22 and except where
the same could not reasonably be expected to materially impair the
business of the Company or the value of such business, (A) all of the
Company's internal computer systems comprised of software, hardware,
databases or embedded control systems (microprocessor controlled, robotic
or other device) related to the Company's business (collectively, a
"Business System"), that constitutes any material part of, or is used in
connection with the use, operation or enjoyment of, any material tangible
or intangible asset or real property of the Company, including its
accounting systems, are Year 2000 Compliant and (B) to the Company's
knowledge, the conduct of the Company's business with customers
and suppliers will not be materially adversely affected by the advent of
the year 2000, the advent of the twenty-first century or the transition
from the twentieth century through the year 2000 and into the twenty-first
century.
II.23 Compliance with Laws. The Company has materially complied
with, is not in material violation of, and has not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation, domestic or foreign.
II.24 Complete Copies of Materials. The Company has delivered or
made available true and complete copies of each document that has been
requested by Buyer or its counsel.
II.25 Representations Complete. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor
any statement made in any Company Schedule or certificate furnished by the
Company pursuant to this Agreement, or furnished in or in connection with
documents mailed or delivered to Shareholder in connection with soliciting
Shareholder's consent to this Agreement and the Acquisition, contains or
will contain at the Closing, any untrue statement of a material fact, or
omits or will omit at the Closing to state any material fact, necessary in
order to make the statements contained herein or therein, in the light of
the circumstances under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
III.1 Organization, Standing and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Oregon. Buyer has the corporate power to own its properties and
to carry on its business as now being conducted and is duly qualified to
do business and is in good standing in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on the
ability of Buyer to consummate the transactions contemplated hereby.
III.2 Authority. Buyer has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes
the valid and binding obligations of Buyer, enforceable in accordance with
its terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies.
III.3 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Buyer has received
any notice of assertion against Buyer which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay Buyer's purchase of
the Company Capital Stock contemplated by this Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
IV.1 Conduct of Business of the Company. During the period from
the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing, the Company agrees to carry
on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, to pay its debts and Taxes when
due, to pay or perform other obligations when due, and, to the extent
consistent with such business, use all reasonable efforts consistent with
past practice and policies to preserve intact the Company's present
business organizations, keep available the services of its present
officers and key employees and preserve their relationships with
customers, suppliers, distributors, licensors, licensees, and others
having business dealings with it, all with the goal of preserving
unimpaired the Company's goodwill and ongoing businesses at the Closing.
The Company shall promptly notify Buyer of any event or occurrence or
emergency not in the ordinary course of business of the Company, and any
material event involving the Company. Except as expressly contemplated by
this Agreement or as set forth on Schedule 4.1, the Company shall not,
without the prior written consent of Buyer:
(a) Enter into any commitment or transaction not in the
ordinary course of business or any commitment or transaction of the type
described in Section 2.7 hereof;
(b) Transfer to any person or entity any Company
Intellectual Property Right (other than pursuant to end user licenses in
the ordinary course of business);
(c) Enter into or amend any agreements pursuant to which any
other party is granted marketing, distribution or similar rights of any
type or scope with respect to any products of the Company;
(d) Amend or otherwise modify (or agree to do so), except in
the ordinary course of business, or violate the terms of, any of the
agreements set forth or described in the Company Schedules;
(e) Commence any litigation;
(f) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of
the Company, or repurchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock (or options, warrants or other
rights exercisable therefor);
(g) Except for the issuance of shares of Company Capital
Stock upon exercise or conversion of presently outstanding Company Options
and warrants issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of
its capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments
of any character obligating it to issue any such shares or other
convertible securities;
(h) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating
with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
business of the Company;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets;
(k) Incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities of the Company
or guarantee any debt securities of others;
(l) Grant any severance or termination pay (i) to any
director or officer or (ii) to any other employee except payments made
pursuant to standard written agreements outstanding on the date hereof or
as described in Schedule 2.12(a);
(m) Adopt or amend any employee benefit plan, or enter into
any employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage
rates of its employees;
(n) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(o) Pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or adequately
reserved against in the Company Financials (or the notes thereto);
(p) Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, enter
into any closing agreement, settle any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(q) Enter into any strategic alliance or joint marketing
arrangement or agreement; or
(r) Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(a) through (q) above, or any other
action that would prevent the Company from performing or cause the Company
not to perform its covenants hereunder.
IV.2 No Solicitation. Until the Closing, the Company will not (nor
will the Company permit any of the Company's officers, directors, agents,
representatives or Affiliates (including without limitation Founders
Capital Corporation) to) directly or indirectly, take any of the following
actions with any party other than Buyer and its designees:
(a) solicit, encourage, initiate or participate in any
negotiations or discussions with respect to, any offer or proposal to
acquire all or any portion of the Company's business and properties or
capital stock whether by merger, private offering, consolidation, purchase
of assets, tender offer or otherwise,
(b) disclose any information not customarily disclosed to
customers and others in the ordinary course of business other than its
attorneys or financial advisors concerning the Company's business and
properties or afford to any person or entity access to its properties,
books or records, or
(c) assist or cooperate with any person to make any proposal
to purchase all or any part of the capital stock of the Company or assets,
other than selling products of the Company in the ordinary course of
business.
In the event the Company shall receive during the period specified
in this Section 4.2 any offer or proposal, directly or indirectly, of the
type referred to in clause (a) or (c) above, or any request for disclosure
or access pursuant to clause (b) above, the Company shall immediately
inform Buyer as to any such offer or proposal.
IV.3 No Encumbrance. Until the earlier of the Closing Date or the
date of termination of this Agreement, the Company and Shareholder will
not (nor will the Company or Shareholder permit any of the Company's or
Shareholder's respective officers, directors, agents, representatives or
Affiliates (including without limitation Founders Capital Corporation) to)
directly or indirectly, take any action which could in any way and at any
time impair Shareholder's good and valid title to all Company Capital
Stock or could cause or lead to the creation of any lien, claim, charge,
restriction, pledge, security interest, option, right of any nature or
other legal or equitable encumbrance with regard to any share or shares of
the Company Capital Stock.
ARTICLE V
ADDITIONAL AGREEMENTS
V.1 Access to Information. The Company shall afford Buyer and its
accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Closing to (a) all of
the Company's properties, books, contracts, commitments and records, and
(b) all other information concerning the business, properties and
personnel (subject to restrictions imposed by applicable law or by
contract, which contracts are listed in Schedule 5.1) of the Company as
Buyer may reasonably request. The Company agrees to provide to Buyer and
its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. No information or knowledge
obtained in any investigation pursuant to this Section 5.1 shall affect or
be deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the
Acquisition.
V.2 Confidentiality. Each of the parties hereto hereby agrees to
keep such information or knowledge obtained in any investigation pursuant
to Section 5.1, or pursuant to the negotiation and execution of this
Agreement or the effectuation of the transactions contemplated hereby,
confidential ("Confidential Information"); provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party
can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the
public and did not become so known through any violation of law,
(c) became known to the public through no fault of such party, (d) is
later lawfully acquired by such party from other sources, (e) is required
to be disclosed by order of court or government agency with subpoena
powers, (f) is disclosed in the course of any litigation between any of
the parties hereto or (g) is developed independently by either party
without reference to, or specific knowledge of, the other parties'
Confidential Information.
V.3 Expenses. Whether or not the Acquisition is consummated, all
fees and expenses incurred in connection with the Acquisition including,
without limitation, all legal, accounting, financial advisory, consulting
and all other fees and expenses of third parties ("Third Party Expenses")
incurred by a party in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party
incurring such fees and expenses.
V.4 Public Disclosure. Unless otherwise required by law, prior to
the Closing, no disclosure (whether or not in response to an inquiry) of
the subject matter of this Agreement shall be made by any party hereto
unless approved by Buyer and the Company prior to release, provided, that,
such approval shall not be unreasonably withheld, subject, in the case of
Buyer, to Buyer's obligation to comply with applicable securities laws.
V.5 Consents. The Company shall use its best efforts to obtain
the consents, waivers and approvals under any of the Contracts as may be
required in connection with the Acquisition (all of such consents and
approvals are set forth in Schedule 2.4) so as to preserve all rights of,
and benefits to, the Company thereunder.
V.6 Tax Matters.
(a) S Status. The Company shall maintain its tax status as
an S Corporation up to the Closing Date and Shareholder shall not revoke
or otherwise terminate the election of the Company to be treated as an
S Corporation.
(b) Tax Returns. Shareholder shall be responsible for
timely filing all federal and state income tax returns of the Company for
taxable periods ending on or prior to the Closing Date and shall have paid
or will pay all income taxes attributable to the income of the Company for
such periods. Such returns will be prepared and filed in accordance with
applicable law and in a manner consistent with past practices and shall be
subject to review and approval by Buyer, except as disclosed on Schedule
5.6(b). After the Closing Date, Buyer and the Company, on the one hand,
and Shareholder, on the other hand, will make available to the other, as
reasonably requested, all information, records or documents relating to
the liability for Taxes of the Company for all periods ending on or prior
to the Closing Date and will preserve such information, records or
documents until the expiration of any applicable statute of limitations or
extensions thereof.
(c) Election Under Section 338(h)(10). Shareholder shall
join with Buyer in making a joint election on Form 8023 for the Company
under Section 338(h)(10) of the Code, under Treasury Regulation
Section 1.338(h)(10)-1(d) and under any applicable similar provisions of
state law with respect to the purchase of the Shares ("Section 338
Election"). Buyer shall timely prepare IRS Form 8023 (and any required
attachments) and any similar state and local tax forms (and any required
attachments) required to make the Section 338 Election and Shareholder
agrees to execute such forms.
V.7 Best Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its best efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and
filings and to remove any injunctions or other impediments or delays,
legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to
the parties hereto the benefits contemplated by this Agreement; provided,
that, Buyer shall
not be required to agree to any divestiture by Buyer or the Company or any
of Buyer's subsidiaries or affiliates of shares of capital stock or of any
business, assets or property of Buyer or its subsidiaries or affiliates or
the Company or its affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to
own or exercise control of such assets, properties and stock.
V.8 Notification of Certain Matters. The Company shall give
prompt notice to Buyer, and Buyer shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty
of the Company and Buyer, respectively, contained in this Agreement to be
untrue or inaccurate at or prior to the Closing and (ii) any failure of
the Company or Buyer, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.8 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
V.9 Additional Documents and Further Assurances. Each party
hereto, at the request of another party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE ACQUISITION
VI.1 Conditions to Obligations of Each Party to Effect the
Acquisition. The respective obligations of each party to this Agreement
to effect the Acquisition shall be subject to the satisfaction at or prior
to the Closing of the following conditions:
(a) Corporate Approvals. This Agreement and the Acquisition
shall have been approved and adopted by the requisite vote of Shareholder.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Acquisition shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Acquisition, which makes the
consummation of the Acquisition illegal.
(c) Consulting and Non-Competition Agreement. Buyer and
Shareholder shall have entered into a Consulting and Non-Competition
Agreement, substantially in the form attached hereto as Exhibit A (the
"Consulting Agreement") pursuant to which, among other things, Buyer shall
have agreed to pay to Shareholder (in addition to the Purchase Price
otherwise payable to Shareholder pursuant to this Agreement) an annualized
salary of $50,000 in exchange for consulting services set forth therein.
The Consulting Agreement shall have a one-year term.
(d) Employee Retention Bonuses. Promptly following the
Closing, Buyer agrees to establish a retention bonus program under which
the employees listed on Exhibit B hereto (each, an "Employee" and
collectively, the "Employees") shall be entitled to receive retention
bonuses in the aggregate amount of $100,000 (the "Retention Bonus"). The
Retention Bonus shall be payable to each such Employee in the respective
amount specified on Exhibit B hereto on the first anniversary of the
Closing Date, provided, that, such Employee continues to be an employee or
consultant of Buyer on such anniversary date. In the event that an
Employee is no longer an employee or consultant of Buyer on such
anniversary due to (x) a voluntary termination of such Employee or (y) an
involuntary termination of such Employee for Cause (as defined in an
Employment and Noncompetition Agreement of even date herewith by and
between Employee and Buyer (the "Employment Agreement")), then such
Employee's portion of the Retention Bonus indicated on Exhibit B hereto
and otherwise payable to such Employee on such date shall be forfeited by
such Employee and reallocated to Buyer. In the event that an Employee is
no longer an employee or consultant of Buyer on such anniversary due to
(x) an involuntary termination by such Employee for any reason other than
for Cause, (y) if such Employee becomes Totally Disabled (as defined in
the Employment Agreement) or (z) upon such Employee's death, then such
Employee (or such Employee's estate, as applicable) shall be entitled to
receive such Employee's portion of the Retention Bonus within ten (10)
days following the first anniversary of the Closing Date.
(e) Employment Agreements. Each person listed on Exhibit C
shall have executed and delivered to Buyer an Employment Agreement,
substantially in the form attached hereto as Exhibit D (the "Employment
Agreements") and all of the Employment Agreements shall be in full force
and effect.
VI.2 Additional Conditions to Obligations of Company. The
obligations of the Company to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Closing of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:
(a) Representations, Warranties and Covenants. The
representations and warranties of Buyer in this Agreement shall be true
and correct on and as of the Closing as though such representations and
warranties were made on and as of such time and Buyer shall have performed
and complied with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the
Closing.
(b) Certificate of Buyer. Company shall have been provided
with a certificate executed on behalf of Buyer by one of its executive
officers to the effect that, as of the Closing:
(i) all representations and warranties made by Buyer
in this Agreement are true and correct in all material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Buyer on or before such date have been so
performed.
VI.3 Additional Conditions to the Obligations of Buyer. The
obligations of Buyer to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Closing of each of the following conditions, any of which
may be waived, in writing, exclusively by Buyer:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Company in this Agreement shall be
true and correct in all material respects on and as of the Closing as
though such representations and warranties were made on and as of such
time and the Company shall have performed and complied with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Closing.
(b) Certificate of Company. Buyer shall have been provided
with a certificate executed on behalf of the Company by its President to
the effect that, as of the Closing:
(i) all representations and warranties made by the
Company in this Agreement are true and correct in all material respects;
and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by the Company on or before such date have been
so performed.
(c) Claims. There shall not have occurred any claims
(whether or not asserted in litigation) which may materially and adversely
affect the consummation of the transactions contemplated hereby or the
business assets (including intangible assets), financial condition or
results of operations of the Company.
(d) Third Party Consents. Any and all consents, waivers,
and approvals listed pursuant to Schedule 2.4 shall have been obtained.
(e) Legal Opinion. Buyer shall have received a legal
opinion from Xxxxx & Xxxxxx, P.C., legal counsel to the Company,
substantially in the form of Exhibit E hereto.
(f) No Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or
regulatory restraint or provision challenging Buyer's proposed acquisition
of the Company, or limiting or restricting Buyer's conduct or operation of
the business of the Company (or its own business) following the
Acquisition shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be
pending.
(g) No Material Adverse Changes. There shall not have
occurred any material adverse change in the business, assets (including
intangible assets), results of operations, liabilities (contingent or
accrued), prospects or financial condition of the Company.
(h) Litigation. There shall be no action, suit, claim or
proceeding of any nature pending, or threatened, against Buyer or the
Company, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the Acquisition
or the other transactions contemplated by the terms of this Agreement.
(i) Property Information and Invention Assignment Agreement.
Each employee of and consultant to the Company shall have entered into a
Proprietary Information and Invention Assignment Agreement with Buyer in
substantially the form attached hereto as Exhibit F.
(j) Zions Note Release. Shareholder shall have satisfied in
full all payment obligations (including all principal and interest
payments) arising under, relating to or otherwise in connection with that
certain Promissory Note dated September 9, 1998 in the aggregate principal
amount of $252,000, together with interest accruing thereon at a rate of
LIBOR plus 3.10% per annum, payable by the Company to Zions First National
Bank (the "Zions Note"), and such satisfaction shall be evidenced by a
receipt, a release and such other documentation reasonably requested by
Buyer or Buyer's counsel. In connection with such satisfaction, the
Company shall be fully relieved of any and all such payment obligations
under the Zions Note.
(k) Transfer of Xxxxxxx Name. Xxxx X. Xxxxxxx, Inc. shall
have (x) licensed to the Company all rights to use the "Xxxxxxx" trade
name, together with any and all trade names, trademarks, service marks and
the like which incorporate the "Xxxxxxx" name that it owns (collectively,
the "Xxxxxxx Name") and (y) transferred all right, title and interest in
certain specified intellectual property, pursuant to an instrument of
transfer executed by the President of Xxxx X. Xxxxxxx, Inc., in form and
substance satisfactory to Buyer. Such license of the Xxxxxxx Name shall
be on a nonexclusive basis, provided, however, that Xxxx X. Xxxxxxx, Inc.
shall agree that it will not license to any third party any right to use,
own or otherwise exploit the "Xxxxxxx Name" if such third party is
engaged, either directly or indirectly, in the sale, marketing,
manufacture, development, design, engineering or production of any
products, goods or equipment which directly or indirectly compete with the
products or services of the Company, or the business of the Company as
conducted or currently proposed to be conducted (including without
limitation the manufacture, sale or distribution of ultrasonic sensors,
sensor technology and sensor instrumentation). Upon the Closing, Buyer
shall possess such rights to use the Xxxxxxx Name previously granted to
the Company.
(l) Termination of ECL Consulting Agreement. The Company
and Xxxx X. Xxxxxxx, Inc. shall have terminated that certain Consulting
Agreement dated June 30, 1995 by and between such parties (the "ECL
Consulting Agreement").
(m) ECL Note Release. Xxxx X. Xxxxxxx, Inc. shall have
released the Company from any and all payment obligations or liability
arising under, relating to or otherwise in connection with the ECL Note
pursuant to an instrument reasonably satisfactory to Buyer and Buyer's
counsel.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; ESCROW
VII.1 Survival; Limitations on Indemnification.
(a) The representations and warranties and covenants and
agreements of the parties contained herein will survive the Closing (even
if the damaged party knew or had reason to know of any misrepresentation
or breach of warranty at the time of Closing), subject to the time
limitations set forth in Section 7.1(b) below. Notwithstanding the first
sentence of this Section 7.1, and without limiting the generality thereof,
any representation or warranty, covenant or agreement in respect of which
indemnity may be sought under any section of this Agreement will survive
the time at which it would otherwise terminate pursuant to this Agreement,
if notice of the breach of the representation or warranty, covenant or
agreement giving rise to such indemnity shall have been given to the party
against whom such indemnity may be sought, prior to such time.
(b) If the Closing occurs, Shareholder will have no
liability (for indemnification or otherwise) pursuant to this Article VII
with respect to any representation or warranty, or covenant or obligation
to be performed and complied with prior to the Closing Date, other than
those contained in Sections 2.2, 2.8, 2.18 and 5.6, unless on or before
the date that is twelve (12) months after the date of Closing, Buyer
notifies Shareholder of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known to Buyer (in accordance with
Section 7.2). Any claim made by Buyer with respect to Sections 2.2, 2.8,
2.18 or 5.6, or relating to the matters set forth on Exhibit G hereto, may
be made at any time, subject to applicable statutes of limitations.
(c) The maximum liability of Shareholder (for
indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with
prior to the Closing Date pursuant to this Article VII, other than those
in Sections 2.2, 2.8, 2.18 and 5.6, shall be $450,000 (which amount shall
be inclusive of any amounts disbursed to Buyer from the Escrow Fund
(defined below)). There shall be no maximum liability with respect to
matters related to Sections 2.2, 2.8, 2.18 and 5.6, or matters set forth
on Exhibit G hereto. Notwithstanding anything in this Article VII to the
contrary, nothing herein shall limit any remedy that Buyer or Shareholder
may have for fraud or wilful misconduct.
VII.2 Indemnification Procedures.
(a) Subject to Section 7.1(c), Shareholder will indemnify
Buyer against and agree to hold harmless from any and all damage, loss,
liability, claim, obligation of any nature whatsoever and expense
(including without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses) ("Loss") incurred by Buyer, its
officers, directors, or affiliates arising out of any breach of any
representation or warranty, covenant or other agreement of Shareholder or
the Company contained or incorporated by reference herein. In addition,
and subject to Section 7.1(c), notwithstanding any disclosures made
pursuant to this Agreement or any other disclosures made by Shareholder or
the Company to Buyer, Shareholder will also indemnify Buyer, its officers,
directors, and affiliates against and agree to hold harmless from any Loss
relating to or resulting from any liabilities, obligations or commitments
of, and all claims against the Company arising from or based upon any
condition, event or action existing on or occurring prior to the Closing
Date (including without limitation any payment obligations otherwise
incurred or to be incurred by the Company set forth on Exhibit G attached
hereto), except for (i) liabilities set forth on the face of the Closing
Balance Sheet (as adjusted, if at all, pursuant to the provisions of
Section 1.4(d) hereof) to the extent of the amount recorded for such
liabilities on the face of such balance sheet, and (ii) payment or
performance obligations (other than those set forth on Exhibit G hereto)
arising out of contracts and agreements to which the Company is a party
and which are disclosed pursuant to Sections 2.11 or 2.12 of this
Agreement or are not required to be disclosed pursuant to the terms of
Sections 2.11 or 2.12 hereof.
(b If seeking indemnification pursuant to Section 7.2,
Buyer, its officers, directors, or affiliates, as the case may be (the
"indemnified party"), will give prompt notice to Shareholder (the
"indemnifying party") of the assertion of any claim, or the commencement
of any action or proceeding, in respect of which indemnity may be sought
hereunder. The indemnified party will have the right in its sole
discretion to control the defense of and settle any such claim; provided,
however, that except with the consent of the indemnifying party, no
settlement of any such claim will alone be determinative of the amount of
any indemnity hereunder. In the event that the indemnifying party has
consented to any such settlement, the indemnifying party will have no
power or authority to object under any provision of this Article VII to
the amount of any indemnification claim by Buyer with respect to such
settlement. The indemnifying party will be entitled, at its expense, to
participate in such
defense. No investigation by the indemnified party at or prior to the
Closing will relieve the indemnifying party of any liability hereunder.
(c If any third party shall notify the indemnified party
with respect to any matter (a "Third Party Claim") which may give rise to
a claim for indemnification against the indemnifying party under this
Article VII, the indemnified party shall promptly notify the indemnifying
party thereof in writing; provided, however, that no delay on the part of
the indemnified party in notifying any indemnifying party shall relieve
the indemnifying party from any obligation hereunder unless (and then
solely to the extent) the indemnifying party thereby is substantially
prejudiced.
(d The indemnified party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner such indemnified party reasonably may
deem appropriate (and such indemnified party need not consult with, or
obtain any consent from, any indemnifying party in connection therewith),
and the indemnifying party will remain responsible for any Losses the
indemnified party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Article VII. Notwithstanding the foregoing sentence,
counsel for the indemnifying party shall be permitted to monitor the
indemnified party's defense of a Third Party Claim for the purpose of
advising the indemnifying party of the status and progress of the defense.
Any such activity shall be at the sole expense of the indemnifying party.
(e Without limiting the generality of the foregoing, except
with respect to any tax jurisdiction that does not recognize
S corporations as pass-through entities and to the extent any tax
jurisdiction does not accord S corporation tax treatment to nonresident
shareholders, Shareholder hereby agrees to indemnify and hold Buyer
harmless from, against and in respect of any U.S. federal or state income
Tax liability (including interest and penalties), if any, resulting from
the Company failing to qualify as an S corporation under
Section 1361(a)(1) of the Code (or state counterpart) for every taxable
year on or before the Closing Date as to which the Company (or, as
applicable, Buyer) filed or files Tax Returns claiming status as an
S corporation.
VII.3 Escrow Arrangements.
(a Escrow Fund. At the Closing, Shareholder will be deemed
to have received and deposited with the Escrow Agent (as defined below)
the Escrow Amount (together with any interest earned thereon during the
term of the escrow set forth in this Section 7.3, the "Escrow Fund")
without any act of Shareholder. As soon as practicable after the Closing
Date, the Escrow Amount, without any act of Shareholder, will be deposited
with Xxxxxxx Land Title Company of Logan, Utah (the "Escrow Agent"). The
Escrow Fund will be governed by the terms set forth herein. The Escrow
Fund will be available to effect any Adjustment to the Purchase Price made
pursuant to Section 1.4 and to serve as partial security for Shareholder's
indemnification obligations under Section 7.2(a) hereof.
(b Escrow Period; Distribution upon Termination of Escrow
Period. Subject to the following requirements, the Escrow Fund will be in
existence immediately following the Closing Date and will terminate at
5:00 p.m., Utah time, on the earlier of the date twelve (12) months from
the Closing Date or the date the full amount of the Escrow Fund has been
disbursed pursuant to Section 7.3(d) below (the "Escrow Period");
provided, that, the Escrow Period will not terminate with respect to such
amount (or some portion thereof) if in a reasonable judgement of Buyer,
subject to the objection of Shareholder and the subsequent arbitration of
the matter in the manner provided in Section 7.3(f) hereof, such amount
(or some portion thereof) together with the
aggregate amount remaining in the Escrow Fund is necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate delivered to the
Escrow Agent prior to termination of such Escrow Period with respect to
facts and circumstances existing prior to the termination of such Escrow
Period. As soon as all such claims have been resolved, the Escrow Agent
will deliver to Shareholder the remaining portion of the Escrow Fund not
required to satisfy such claims.
(c Protection of Escrow Fund. The Escrow Agent will hold
and safeguard the Escrow Fund during the Escrow Period, will treat such
fund as a trust fund in accordance with the terms of this Agreement and
not as the property of Buyer or Shareholder and will hold and dispose of
the Escrow Fund only in accordance with the terms hereof. The Escrow Fund
will be invested subject to the discretion of the Escrow Agent in demand
and time deposits in banks or savings institutions, short term
certificates of deposits or Treasury bills, or money market account
instruments.
(d Claims Upon Escrow Fund. Upon receipt by the Escrow
Agent at any time on or before the last day of the Escrow Period of a
certificate signed by any officer of Buyer (an "Officer's Certificate"):
(A) stating that Buyer has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Losses, and (B) specifying
in reasonable detail the individual items of Losses included in the amount
so stated, the date each such item was paid or properly accrued, or the
basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is
related, the Escrow Agent will, subject to the provisions of
Section 7.2(f) hereof, deliver to Buyer (x) out of the Escrow Fund or
(y) in the event that the Escrow Fund is or becomes exhausted, by wire
transfer (within three business days) of immediately available funds to an
account of Buyer at a bank specified by Buyer, as promptly as practicable,
an amount equal to such Losses.
(e Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such
certificate will be delivered to Shareholder and for a period of thirty
(30) days after such delivery, the Escrow Agent will make no delivery to
Buyer of any Escrow Funds pursuant to Section 7.2(d) hereof unless the
Escrow Agent shall have received written authorization from Shareholder to
make such delivery. After the expiration of such thirty (30) day period,
the Escrow Agent will make delivery from the Escrow Fund in accordance
with Section 7.2(d) hereof, provided, that, no such payment or delivery
may be made if Shareholder shall object in a written statement to the
claim made in the Officer's Certificate, and such statement shall have
been delivered to the Escrow Agent prior to the expiration of such thirty
(30) day period.
(f Resolution of Conflicts; Arbitration.
(i0 In case Shareholder shall so object in writing to
any claim or claims made in any Officer's Certificate, Buyer and
Shareholder will attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If Buyer and
Shareholder should so agree, a memorandum setting forth such agreement
will be prepared and signed by both parties and will be furnished to the
Escrow Agent. The Escrow Agent will be entitled to rely on any such
memorandum and distribute funds from the Escrow Fund in accordance with
the terms thereof.
(ii0 If no such agreement can be reached after good
faith negotiation, either Buyer or Shareholder may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration will not be
commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter will be settled by
arbitration conducted by three arbitrators. Buyer and Shareholder will
each select one arbitrator, and the two arbitrators so selected will
select
designed to reduce the cost and time for discovery while allowing the
parties an opportunity, adequate in the sole judgement of the arbitrators,
to discover relevant information from the opposing parties about the
subject matter of the dispute. The arbitrators will rule upon motions to
compel or limit discovery and will have the authority to impose sanctions,
including attorneys fees and costs, to the extent of a court of competent
law or equity, should the arbitrators determine that discovery was sought
without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of a majority
of the three arbitrators as to the validity and amount of any claim in
such Officer's Certificate will be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in Section 7.2(e) hereof,
the Escrow Agent will be entitled to act in accordance with such decision
and make or withhold payments out of the Escrow Fund in accordance
therewith. Such decision will be written and will be supported by written
findings of fact and conclusions which will set forth the award, judgment,
decree or order awarded by the arbitrators.
(iii0 Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration will be held in Salt Lake City, Utah, under the rules then in
effect of the American Arbitration Association. For purposes of this
Section 7.2(f), in any arbitration hereunder in which any claim or the
amount thereof stated in the Officer's Certificate is at issue, Buyer will
be deemed to be the "Non-Prevailing Party" in the event that the
arbitrators award Buyer less than the sum of seventy-five percent (75%) of
the disputed amount plus any amounts not in dispute; otherwise,
Shareholder will be deemed to be the "Non-Prevailing Party." The Non-
Prevailing Party to an arbitration will pay its own expenses, the fees of
each arbitrator, the administrative fee of the American Arbitration
Association, and the expenses, including without limitation, reasonable
attorneys' fees and costs, incurred by the other party to the arbitration.
(g Escrow Agent's Duties.
(i0 The Escrow Agent will be obligated only for the
performance of such duties as are specifically set forth herein, and as
set forth in any additional written escrow instructions which the Escrow
Agent may receive after the date of this Agreement which are signed by an
officer of Buyer and an officer of the Company, and may rely and will be
protected in relying or refraining from acting on any instrument
reasonably believed to be genuine and to have been signed or presented by
the proper party or parties. The Escrow Agent will not be liable for any
act done or omitted hereunder as Escrow Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted
pursuant to the advice of counsel will be conclusive evidence of such good
faith.
(ii0 The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by
any other person, excepting only orders or process of courts of law, and
is hereby expressly authorized to comply with and obey orders, judgments
or decrees of any court. In case the Escrow Agent obeys or complies with
any such order, judgment or decree of any court, the Escrow Agent will not
be liable to any of the parties hereto or to any other person by reason of
such compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
(iii0 The Escrow Agent will not be liable in any respect
on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv0 The Escrow Agent will not be liable for the
expiration of any rights under any statute of limitations with respect to
this Agreement or any documents deposited with the Escrow Agent.
(v0 In performing any duties under the Agreement, the
Escrow Agent will not be liable to any party for damages, losses, or
expenses, except for gross negligence or willful misconduct on the part of
the Escrow Agent. The Escrow Agent will not incur any such liability for
(A) any act or failure to act made or omitted in good faith, or (B) any
action taken or omitted in reliance upon any instrument, including any
written statement of affidavit provided for in this Agreement that the
Escrow Agent shall in good faith believe to be genuine, nor will the
Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with legal counsel in
connection with Escrow Agent's duties under this Agreement and shall be
fully protected in any act taken, suffered, or permitted by him/her in
good faith in accordance with the advice of counsel. The Escrow Agent is
not responsible for determining and verifying the authority of any person
acting or purporting to act on behalf of any party to this Agreement.
(vi0 If any controversy arises between the parties to
this Agreement, or with any other party, concerning the subject matter of
this Agreement, its terms or conditions, the Escrow Agent will not be
required to determine the controversy or to take any action regarding it.
The Escrow Agent may hold all documents and the Escrow Fund and may wait
for settlement of any such controversy by final appropriate legal
proceedings or other means as, in the Escrow Agent's discretion, the
Escrow Agent may be required, despite what may be set forth elsewhere in
this Agreement. In such event, the Escrow Agent will not be liable for
damage.
Furthermore, the Escrow Agent may at its option, file an
action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to
deposit with the clerk of the court all documents and funds held in
escrow, except all cost, expenses, charges and reasonable attorney fees
incurred by the Escrow Agent due to the interpleader action and which the
parties jointly and severally agree to pay. Upon initiating such action,
the Escrow Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement.
(vii0 The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold the Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and
expenses, including reasonable costs of investigation, counsel fees, and
disbursements that may be imposed on the Escrow Agent or incurred by the
Escrow Agent in connection with the performance of his/her duties under
this Agreement, including but not limited to any litigation arising from
this Agreement or involving its subject matter.
(viii0 The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the parties; provided,
however, that no such resignation will become effective until the
appointment of a successor escrow agent which will be accomplished as
follows: Buyer and Shareholder will use their best efforts to mutually
agree on a successor escrow agent within thirty (30) days after receiving
such notice. If Buyer and Shareholder fail to agree upon a successor
escrow agent within such time, the Escrow Agent will have the right to
appoint a successor escrow agent authorized to do business in the State of
Utah. The successor escrow agent will execute and deliver an instrument
accepting such appointment and it will, without further acts, be vested
with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. The
Escrow Agent will be discharged from any further duties and liability
under this Agreement.
(h Fees. Half of all fees of the Escrow Agent for
performance of its duties hereunder will be paid by Shareholder and half
of all such fees will be paid by Buyer. It is understood that the fees
and usual charges agreed upon for services of the Escrow Agent will be
considered compensation for ordinary services as contemplated by this
Agreement. In the event that the conditions of this Agreement are not
promptly fulfilled, or if the Escrow Agent renders any service not
provided for in this Agreement, or if the parties request a substantial
modification of its terms, or if any controversy arises, or if the Escrow
Agent is made a party to, or intervenes in, any litigation pertaining to
this escrow or its subject matter, the Escrow Agent will be reasonably
compensated for such extraordinary services and reimbursed for all costs,
attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Each of Buyer and Shareholder promises to pay
one half of these sums upon demand.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
VIII.1 Termination. Except as provided in Section 8.2 below,
this Agreement may be terminated and the Acquisition abandoned at any time
prior to the Closing:
(a by mutual consent of the Company and Buyer;
(b by Buyer or the Company if: (i) the Closing has not
occurred by April 15, 1999 (it being understood that the parties hereto
shall use commercially reasonable best efforts to effect the Closing on or
before April 1, 1999); (ii) there shall be a final nonappealable order of
a federal or state court in effect preventing consummation of the
Acquisition; or (iii) there shall be any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the
Acquisition by any governmental entity that would make consummation of the
Acquisition illegal;
(c by Buyer if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the Acquisition by any Governmental Entity, which
would: (i) prohibit Buyer's or the Company's ownership or operation of all
or a portion of the business of the Company or (ii) compel Buyer or the
Company to dispose of or hold separate all or a portion of the business or
assets of the Company or Buyer as a result of the Acquisition;
(d by Buyer if it is not in material breach of its
obligations under this Agreement and there has been a material breach of
any representation, warranty, covenant or agreement contained in this
Agreement on the part of the Company and such breach has not been cured
within five (5) business days after written notice to the Company
(provided, that, no cure period shall be required for a breach which by
its nature cannot be cured);
(e by the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of
any representation, warranty, covenant or agreement contained in this
Agreement on the part of Buyer and such breach has not been cured within
five (5) business days after written notice to Buyer (provided, that, no
cure period shall be required for a breach which by its nature cannot be
cured).
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by
the Board of Directors (as applicable) of the party taking such action.
VIII.2 Effect of Termination. In the event of termination of
this Agreement as provided in Section 8.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
Buyer or the Company, or their respective officers, directors or
shareholders, provided, that, each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided,
further, that the provisions of Sections 4.2, 5.2, 5.3 and Article IX of
this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
VIII.3 Amendment. Except as is otherwise required by
applicable law after Shareholder approves this Agreement, this Agreement
may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
VIII.4 Extension; Waiver. At any time prior to the Closing,
Buyer, on the one hand, and the Company, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with
any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
IX.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a if to Buyer, to:
Scientific Technologies Incorporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
with a copy at the same address to the attention of
Xx. Xxx Xxxxxxx
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxx, Esq.
(b if to the Company, to:
Xxxxxxx Instruments, Inc.
000 X. Xxxx
Xxxxx, Xxxx 00000
with a copy to:
Xxxxx & Xxxxxx, P.C.
00 Xxxx Xxxxxx
Xxxxx, Xxxx 00000
Attention: Miles Xxxxxx, Esq.
(c) if to Shareholder, to:
Xxxx Xxxxxxx
0000 Xxxxx 0000 Xxxx
Xxxxx Xxxxx, Xxxx 00000
IX.2 Interpretation. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed
by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
IX.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
IX.4 Entire Agreement; Assignment. This Agreement, the schedules
and Exhibits hereto, and the documents and instruments and other
agreements among the parties hereto referenced herein: (a) constitute the
entire agreement among the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof;
(b) are not intended to confer upon any other person (including, without
limitation, those persons listed on Exhibits B, C and D hereof) any rights
or remedies hereunder; and (c) shall not be assigned by operation of law
or otherwise except as otherwise specifically provided, except that Buyer
may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
IX.5 Severability. In the event that any provision of this
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder
of this Agreement will continue in full force and effect and the
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision
of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes
of such void or unenforceable provision.
IX.6 Other Remedies. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or
by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
IX.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
IX.8 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation and execution of
this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in
an agreement or other document will be construed against the party
drafting such agreement or document.
IN WITNESS WHEREOF, Buyer and the Company have caused this Stock
Acquisition Agreement to be signed by their duly authorized respective
officers, all as of the date first written above.
Buyer: Company:
Scientific Technologies Incorporated Xxxxxxx Instruments, Inc.
By: /s/Xxxxxx X. Xxxxxxx By: /s/Xxxx Xxxxxxx
Name Xxxxxx X. Xxxxxxx MarkLundahl
Title President and CEO Title President
Shareholder:
/s/Xxxx Xxxxxxx
Xxxx Xxxxxxx
Escrow Agent:
(with respect to Article VII)
Xxxxxxx Land Title Company of Logan, Utah
By: /s/Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Adams_____________
Title President
***STOCK ACQUISITION AGREEMENT***
Exhibit G
Schedule of Indemnifiable Losses
1. Any and all payment obligations of the Company arising under,
relating to or otherwise in connection with the Zions Note, the ECL Note
and/or the Bank Debt.
2. Any and all payment obligations of the Company under, relating
to or otherwise in connection with that certain Consulting Agreement dated
June 30, 1998 by and between the Company and Xxxx X. Xxxxxxx, Inc.,
including without limitation any transfer fees set forth in Section 2.02
thereof.
3. Any and all payment obligations of the Company under, relating
to or otherwise in connection with any key man life insurance policy
payable on the life of Shareholder.
4. Verbal or written payment agreements, obligations or
arrangements between Shareholder and any employee of the Company.
