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MERGER AGREEMENT
DATED MAY 24, 1999
by and among
POLYMICRO TECHNOLOGIES, LLC,
a Delaware limited liability company,
PMT HOLDINGS, LLC,
a Delaware limited liability company,
POLYMICRO TECHNOLOGIES, INC.,
a California corporation,
and
THE SPECTRANETICS CORPORATION,
a Delaware corporation
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TABLE OF CONTENTS
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Section 1. Definitions..................................................1
Section 2. Basic Transaction............................................4
(a) The Merger...................................................4
(b) The Closing..................................................4
(c) Actions at the Closing.......................................4
(d) Effect of Merger.............................................4
(e) Procedure for Payment........................................5
(f) Closing of Transfer Records..................................5
Section 3. Conditions to Obligations of the Parent and the Buyer........6
(a) Representations and Warranties...............................6
(b) Performance of Covenants.....................................6
(c) Absence of Material Adverse Change...........................6
(d) Absence of Litigation........................................6
(e) Stockholder Approval.........................................6
(f) Closing Deliveries...........................................6
(g) Regulatory Approvals, Licenses and Permits...................7
(h) Opinion of the Company's Counsel.............................7
(i) [Intentionally Omitted.].....................................7
(j) Estoppel Certificates........................................7
(k) [Intentionally Omitted.].....................................7
(l) Supply Agreement.............................................7
(m) Proceedings..................................................8
(n) Financing....................................................8
(o) Consents and Approvals.......................................8
(p) FIRPTA Affidavit.............................................8
Section 4. Conditions to Obligation of the Company and the Company
Stockholder..................................................8
(a) Representations and Warranties...............................9
(b) Performance of Covenants.....................................9
(c) Absence of Litigation........................................9
(d) Closing Deliveries...........................................9
(e) Opinion of the Buyer's Counsel..............................10
(f) Proceedings.................................................10
(g) Supply Agreement............................................10
Section 5. Representations and Warranties of the Company Stockholder...10
(a) Organization of the Company and the Company Stockholder.....10
(b) Authorization of Transaction................................11
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(c) Noncontravention............................................11
(d) Capitalization..............................................11
(e) Approval....................................................11
(f) Brokers' Fees...............................................12
(g) Subsidiaries and Investments................................12
(h) Financial Statements........................................12
(i) Events Subsequent to March 31, 1999.........................12
(j) Absence of Undisclosed Liabilities..........................14
(k) Legal Compliance............................................14
(l) Title to Properties.........................................15
(m) Real Property...............................................15
(n) Tax Matters.................................................16
(o) Intellectual Property.......................................16
(p) Contracts and Commitments...................................17
(q) Insurance...................................................18
(r) Litigation..................................................18
(s) Employees...................................................19
(t) Employee Benefits...........................................19
(u) Environmental, Health and Safety............................20
(v) Customers...................................................20
(w) Warranty....................................................21
(x) Affiliated Interests........................................21
(y) Governmental Permits........................................21
(z) Working Capital Matters.....................................22
(aa) Year 2000 Issues............................................22
(bb) Disclosure..................................................22
Section 6. Representations and Warranties of the Buyer.................22
(a) Organization of the Parent and the Buyer....................22
(b) Authorization of Transaction................................22
(c) Noncontravention............................................22
(d) Approval....................................................23
(e) Brokers' Fees...............................................23
(f) Investment Intent...........................................23
(g) Equity Financing............................................23
Section 7. Pre-Closing Covenants.......................................23
(a) Affirmative Covenants of the Company........................23
(b) Negative Covenants of the Company...........................24
(c) Distribution of Cash........................................25
(d) Affirmative Covenants of the Buyer..........................25
Section 8. Indemnification.............................................25
(a) Survival....................................................25
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(b) Indemnification.............................................26
(c) Other Indemnification Provisions............................27
Section 9. Additional Agreements.......................................28
(a) Press Releases..............................................28
(b) Transaction Expenses........................................28
(c) Tax Matters.................................................28
(d) Confidentiality.............................................30
(e) Non-Competition, Non-Solicitation and Confidentiality.......30
(f) Transition Assistance.......................................32
(g) Accounts and Other Receivables..............................32
(h) Further Assurances..........................................32
(i) Insurance Recoveries........................................32
(j) Access to Records...........................................33
(k) COBRA Continuous Coverage...................................33
(l) Company Savings Plan........................................33
(m) Company Stockholder Option Plans............................34
Section 10. Termination; Effect of Termination..........................34
(a) Termination.................................................34
(b) Termination After Breach....................................35
(c) Effect of Termination.......................................35
Section 11. Miscellaneous...............................................35
(a) No Third Party Beneficiaries................................35
(b) Entire Agreement............................................35
(c) Successors and Assigns......................................35
(d) Counterparts................................................36
(e) Headings....................................................36
(f) Notices.....................................................36
(g) Governing Law...............................................37
(h) Amendments and Waivers......................................37
(i) Incorporation of Exhibits and Schedules.....................37
(j) Construction................................................37
(k) Remedies....................................................38
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LIST OF SCHEDULES
Schedule 3(o)(iv) - Necessary Contractual Consents
Schedule 5(a) - Qualified Jurisdictions
Schedule 5(d) - Capitalization; Options, Warrants, Purchase Rights, etc.
Schedule 5(h) - Financial Statements
Schedule 5(i) - Events Subsequent to March 31, 1999
Schedule 5(j) - Undisclosed Liabilities
Schedule 5(n) - Tax Matters
Schedule 5(o) - Intellectual Property
Schedule 5(p) - Contracts and Commitments
Schedule 5(q) - Insurance
Schedule 5(r) - Litigation
Schedule 5(t) - Employee Benefits
Schedule 5(u) - Environmental, Health and Safety
Schedule 5(w) - Warranty
Schedule 5(x) - Affiliated Interests
Schedule 5(y) - Governmental Permits
Schedule 7(b) - Negative Covenant Exceptions
Schedule 8(b)(iv) - Capital Lease Obligations to Be Assumed
Schedule 9(e)(ii)(A) - Non-Hire for the Company Stockholder
Schedule 9(e)(ii)(B) - Non-Hire for Surviving Company
LIST OF EXHIBITS
Exhibit A Form of Supply Agreement
Exhibit B Form of Press Release
Exhibit C Allocation of Purchase Price
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is entered into on May 24, 1999,
by and among PMT Holdings, LLC, a Delaware limited liability company ("Parent"),
Polymicro Technologies, LLC, a Delaware limited liability company and wholly
owned subsidiary of Parent (the "Buyer"), Polymicro Technologies, Inc., a
California corporation (the "Company"), and The Spectranetics Corporation, a
Delaware corporation and the holder of all the capital stock of the Company (the
"Company Stockholder"). The Buyer, the Parent, the Company and the Company
Stockholder are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer shall acquire
the Company through a forward merger of the Company with and into the Buyer.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
Section 1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Business" means the business conducted by the Company on or prior to the
Closing Date, which is comprised of manufacturing, assembling, marketing,
selling and distributing glass capillary tubing, optical fibers, precision glass
pieces, assemblies and cables and related products for analytical and scientific
instruments and other specialty applications.
"California General Corporation Law" means the California Corporations Code
of the State of California, as amended.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular Code provision shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Company Common Stock" means the shares of the common stock, par value
$.001 per share, of the Company.
"Company Share" means any share of Company Common Stock.
"Delaware LLC Law" means the Delaware Limited Liability Company Act, as
amended.
"Employee Benefit Plan" of any Person means any Employee Pension Benefit
Plan or Employee Welfare Benefit Plan, fringe benefit plan, policy, program or
arrangement, whether or
not terminated, whether or not subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and whether or not funded (including
stock bonus, deferred compensation, pension, bonus, vacation, incentive,
severance or health and welfare plan).
"Employee Pension Benefit Plan" has the meaning set forth in Section 3(2)
of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section 3(1)
of ERISA.
"Employment Agreements" means any employment agreements that the Buyer or
the Surviving Company enter into with members of the Company's senior management
on or about the Closing Date.
"Environmental, Health and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Occupational Safety and Health Act of
1970, each as amended, together with all other laws, rules and regulations of
federal, state, local and foreign governments (and all agencies thereof) and
other requirements having the force or effect of law relating to or imposing
liability or standards of conduct concerning pollution or protection of the
environment, public health and safety, or employee health and safety, and all
judgments, orders and decrees of federal, state, local and foreign governments
(and all agencies thereof) having the force and effect of law issued or
promulgated thereunder, and all related common law theories.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any reference to any particular ERISA section shall be interpreted
to include any revision of or successor to that section regardless of how
numbered or classified.
"GAAP" means United States generally accepted accounting principles applied
on a consistent basis.
"Intellectual Property" means all of the following items (other than any
off-the-shelf "shrink-wrap" software) used in the conduct of the Business that,
now or hereafter, may be secured throughout the world: (i) all inventions
(whether or not patentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures; (ii) all trademarks, service marks, trade dress, logos, trade
names, and corporate names and all applications, registrations and renewals in
connection therewith; (iii) all copyrightable works, all copyrights (registered
and unregistered), and all applications, registrations, and renewals in
connection therewith; (iv) all trade secrets and confidential information
(including ideas, formulas, compositions, know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, financial, business
and marketing plans and customer and supplier lists and related information);
(v) all computer software and software systems (including data, databases and
related documentation); (vi) all other intellectual property rights; (vii) all
licenses or other agreements to or
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from third parties regarding the foregoing; and (viii) all copies and tangible
embodiments, of the foregoing (in whatever form or medium), in each case
including the items set forth on Schedule 5(o).
"IRS" means the Internal Revenue Service.
"Knowledge of the Company" means the actual knowledge of the following
individuals: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, regardless
of when asserted or claimed), including any liability for Taxes.
"Lien" means any security interest, pledge, bailment (in the nature of a
pledge or for purposes of security), mortgage, deed of trust, the grant of a
power to confess judgment, conditional sales and title retention agreement
(including any lease in the nature thereof), charge, encumbrance or other
similar arrangement or interest in real or personal property.
"Material Adverse Effect" means, with respect to any Person or business,
any change or effect that, individually or in the aggregate with all other
changes or effects, is or would reasonably be likely to be materially adverse to
the business, operations, assets, Liabilities, financial condition or results of
operations of such Person or business (other than changes or effects relating to
the U.S. economy generally) or would prevent such Person or business from
performing any of its material obligations under this Agreement.
"Ordinary Course of Business" means the ordinary course of the Business
consistent with past custom and practice.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Pre-Closing Breaches" means breaches of contract, breaches of warranty,
torts, infringements, claims, defaults or violations of law arising in each case
as of or prior to the Closing.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which a majority of the
total voting power or ownership of which is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security,
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unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Section 2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, the Company shall merge with and into the Buyer (the "Merger") at the
Effective Time, and the Buyer shall be the limited liability company surviving
the Merger (the "Surviving Company").
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ in
Chicago, Illinois, commencing at 9:00 a.m. local time on the second business day
following satisfaction or waiver of all of the conditions of the Parties set
forth in Sections 3 and 4 below, or such other date as the parties may mutually
determine (the "Closing Date"), it being understood that, as of the date of this
Agreement, the Parties intend that the Closing shall occur as promptly as
reasonably practicable following receipt by the Company and the Buyer of the
necessary State of California tax clearances with respect to the Merger.
(c) Actions at the Closing. At the Closing, (i) the Company shall deliver
to the Buyer the various certificates, instruments and documents referred to in
Section 3 below, (ii) the Buyer shall deliver to the Company the various
certificates, instruments and documents referred to in Section 4 below, (iii)
the Parties shall cause a Plan and Agreement of Merger (the "Delaware
Certificate of Merger") in a mutually agreed upon form to be filed and become
effective with the Secretary of State of the State of Delaware, and (iv) the
Parties shall cause a Plan and Agreement of Merger (the "California Certificate
of Merger") in a mutually agreed upon form hereto to be filed and become
effective with the Secretary of State of the State of California.
(d) Effect of Merger.
(i) General. The Merger shall become effective (the "Effective Time")
at the time that the Delaware Certificate of Merger has been filed with the
Secretary of State of Delaware (or the time the Delaware Certificate of
Merger becomes effective if the Delaware Certificate of Merger is
pre-filed), and the California Certificate of Merger to be filed hereunder
shall also provide that the Merger shall become effective at the Effective
Time. The Merger shall have the effects set forth in the Delaware LLC Law
and the California General Corporation Law. The Surviving Company may, at
any time after the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either the Company or
the Buyer in order to carry out and effectuate the transactions
contemplated by this Agreement.
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(ii) Certificate of Formation. The Certificate of Formation of the
Surviving Company as of the Effective Time shall read as did the
Certificate of Formation of the Buyer immediately prior to the Effective
Time.
(iii) Operating Agreement. The Limited Liability Company Operating
Agreement of the Surviving Company as of the Effective Time shall read as
did the Limited Liability Company Operating Agreement of the Buyer
immediately prior to the Effective Time.
(iv) Directors and Officers. The board of managers of the Buyer shall
remain the board of managers of the Surviving Company at and as of the
Effective Time (retaining their respective positions and terms of office).
(v) Conversion of Company Shares. At and as of the Effective Time, all
of the outstanding Company Shares shall be converted into the merger
consideration (the "Merger Consideration"), which shall consist of
$15,000,000 in the aggregate. After the Effective Time, no Company Share
shall be deemed to be outstanding or to have any rights other than those
rights set forth in this Section 2(d)(v), and each option, warrant,
purchase right, subscription right, conversion right, exchange right and
other contract or commitment that could require the Company to issue, sell
or otherwise cause to become outstanding any capital stock of the Company
shall be deemed to be canceled or otherwise terminated, and neither the
Buyer nor the Surviving Company shall have any obligation to the holders of
any such interests.
(vi) Membership Interests of the Buyer. At and as of the Effective
Time, all of the outstanding limited liability company units of the Buyer
shall remain all of the outstanding limited liability company units of the
Surviving Company.
(e) Procedure for Payment.
(i) At the Effective Time, the Surviving Company shall deliver the
Merger Consideration to the Company Stockholder by wire transfer of
immediately available funds.
(ii) Immediately after the Effective Time, the Company Stockholder
shall surrender the certificates representing all of the Company Shares,
duly endorsed in blank or accompanied by duly executed stock powers, to the
Surviving Company.
(f) Closing of Transfer Records. After the close of business on the Closing
Date, transfers of Company Shares outstanding prior to the Effective Time shall
not be made on the stock transfer books of the Surviving Company.
Section 3. Conditions to Obligations of the Parent and the Buyer. The
obligation of the Parent and the Buyer to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions as of the Closing:
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(a) Representations and Warranties. Each of the representations and
warranties set forth in Section 5 that is qualified as to materiality shall have
been true and correct when made and shall be true and correct on and as of the
Closing Date as if made on and as of the Closing Date (other than any
representations and warranties that address matters only as of a certain date,
which shall be true and correct as of such certain date), and each of the
representations and warranties set forth in Section 5 that is not so qualified
shall have been true and correct in all material respects when made and shall be
true and correct in all material respects on and as of the Closing Date as if
made on and as of the Closing Date (other than representations and warranties
that address matters only as of a certain date, which shall be true and correct
as of such certain date), in each case without giving effect to any disclosure
made after the date hereof (including pursuant to Section 7(a)(iii)).
(b) Performance of Covenants. Each of the Company and the Company
Stockholder shall have performed and complied with all agreements and covenants
required to be performed by it under this Agreement at or prior to the Effective
Time that are qualified as to materiality and shall have performed or complied
in all material respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Effective Time that are
not so qualified as to materiality.
(c) Absence of Material Adverse Change. Since the date of the Latest
Balance Sheet, there shall have been no Material Adverse Effect on the Company.
(d) Absence of Litigation. As of the Closing, there shall not be (i) any
injunction, writ, or temporary restraining order or any other order of any
nature issued by a court or governmental agency of competent jurisdiction
directing that the transactions provided for herein or any of them not be
consummated as herein provided or (ii) to the Knowledge of the Company, any
action, suit or proceeding pending or threatened before any court or
governmental body with respect to the transactions contemplated hereby.
(e) Stockholder Approval. The board of directors of the Company and the
Company Stockholder shall have approved this Agreement and the transactions
contemplated hereby, shall have not in any manner have rescinded or revoked such
approvals, and the Company Stockholder shall have waived all dissenters,
appraisal or other similar rights with respect to all Company Shares in
connection with the Merger.
(f) Closing Deliveries. The Company shall have delivered to the Buyer all
of the following:
(i) a certificate to the effect that each of the conditions set forth
in Sections 3(a), 3(b), 3(d) and 3(e) have been satisfied, and that to the
Knowledge of the Company, the condition set forth in Section 3(c) has been
satisfied;
(ii) certified copies of the resolutions of (A) the Company's and the
Company Stockholder's boards of directors approving this Agreement and
authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated
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herein and (B) the Company Stockholder, as the sole stockholder of the
Company, adopting this Agreement and approving the Merger;
(iii) certified copies of the articles of incorporation and bylaws of
the Company; and
(iv) certificates of good standing of the Company issued by the
Secretary of State of the State of California, the Secretary of State of
the State of Arizona and the Secretary of State (or other appropriate
office) of all other jurisdictions in which the nature of the Company's
business or assets requires the Company to be qualified to do business.
(g) Regulatory Approvals, Licenses and Permits. The Buyer shall have
received evidence reasonably satisfactory to it that all regulatory approvals,
licenses and permits have been received from each jurisdiction in which the
Company presently has operations such that the Buyer shall be legally entitled
to continue to provide the same products and services that the Company provided
before the consummation of the transactions contemplated hereby (the Buyer
hereby agreeing to use Buyer's commercially reasonable efforts to satisfy this
condition).
(h) Opinion of the Company's Counsel. The Buyer shall have received an
opinion, dated the Closing Date, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Company,
addressed to the Buyer and in form and substance reasonably satisfactory to the
Buyer, which covers, among other matters, the validity and effectiveness of the
Merger under the California General Corporation Law.
(i) [Intentionally Omitted.]
(j) Estoppel Certificates. The Buyer shall have received estoppel
certificates and non-disturbance agreements, in form and substance reasonably
satisfactory to it, with respect to each lease or sublease set forth on Schedule
5(m)(ii) attached hereto.
(k) [Intentionally Omitted.]
(l) Supply Agreement. The Buyer and the Company Stockholder shall have
entered into a Supply Agreement having the terms and conditions set forth in
Exhibit A attached hereto (the "Supply Agreement"), and the Supply Agreement
shall be in full force effect and shall not have been amended or modified.
(m) Proceedings. All corporate and other proceedings taken or required to
be taken by the Company in connection with the transactions contemplated hereby
to be consummated at or prior to the Closing, and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Buyer and its
counsel.
(n) Financing. The Buyer and the Parent shall have obtained senior
financing in an amount sufficient to consummate the transactions contemplated
hereby and to provide working capital for the Business, on terms and conditions
no less favorable to it that those set forth in the
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financing letter from LaSalle Bank, dated May 20, 1999 (the "Financing Letter")
(which terms and conditions the Buyer agrees are satisfactory to it).
(o) Consents and Approvals. The Company will have obtained on terms
reasonably satisfactory to the Buyer all of the following:
(i) written releases of all guarantees of the Company for indebtedness
or any other Liability or obligation of any other Person;
(ii) payoff letters with respect to all indebtedness for borrowed
money and written releases of all liens relating to the Company's assets;
(iii) written agreements that terminate all intercompany contracts and
arrangements, other than the Supply Agreement, and that remove the Company
as a party from all contracts and agreements not primarily or exclusively
related to the Business to which both the Company and the Company
Stockholder are parties, in each case effective as of the Effective Time;
and
(iv) all third party (including governmental) consents and approvals
that are necessary for the consummation of the transactions contemplated
hereby and the Buyer's operation of the Business after Closing, or that are
required in order to prevent a breach of or default under, a termination or
modification of, or acceleration of the terms of, any contract or
arrangement that is disclosed on Schedule 3(o)(iv) attached hereto.
(p) FIRPTA Affidavit. The Company Stockholder shall deliver, or cause to be
delivered, to the Buyer an executed affidavit, dated not more than 30 days prior
to the Closing Date, in accordance with Code Section 1445(b)(2) and Treasury
Regulations Section 1.1445-2(b), which statement certifies that the Company is
not a foreign person and sets forth the Company's name, identifying number and
address.
The Buyer and the Parent may waive any condition specified in this Section 3 if
they execute a writing so stating at or prior to the Closing.
Section 4. Conditions to Obligation of the Company and the Company
Stockholder. The obligation of the Company and the Company Stockholder to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions as of the
Closing:
(a) Representations and Warranties. Each of the representations and
warranties set forth in Section 6 that is qualified as to materiality shall have
been true and correct when made and shall be true and correct on and as of the
Closing Date as if made on and as of the Closing Date (other than any
representations and warranties that address matters only as of a certain date,
which shall be true and correct as of such certain date), and each of the
representations and warranties set forth in Section 6 that is not so qualified
shall have been true and correct in all material respects
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when made and shall be true and correct in all material respects on and as of
the Closing Date as if made on and as of the Closing Date (other than
representations and warranties that address matters only as of a certain date,
which shall be true and correct as of such certain date), in each case without
giving effect to any disclosure made after the date hereof.
(b) Performance of Covenants. Each of the Parent and the Buyer shall have
performed and complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Effective Time that are
qualified as to materiality and shall have performed or complied in all material
respects with all other agreements and covenants required to be performed by it
under this Agreement at or prior to the Effective Time that are not so qualified
as to materiality.
(c) Absence of Litigation. As of the Closing, there shall not be (i) any
injunction, writ or temporary restraining order or any other order of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein or any of them not be consummated as
herein provided or (ii) any action, suit or proceeding pending or threatened
before any court or governmental body with respect to the transactions
contemplated hereby.
(d) Closing Deliveries. The Buyer shall have delivered to the Company all
of the following:
(i) a certificate to the effect that each of the conditions specified
in Sections 4(a) through 4(c), inclusive, have been satisfied;
(ii) certified copies of the resolutions of (A) each of the Buyer's
and the Parent's board of managers approving this Agreement and authorizing
the execution and delivery of this Agreement and the consummation of the
transactions contemplated herein and (B) the Parent, as the sole member of
the Buyer, adopting this Agreement and approving the Merger;
(iii) a certified copy of the certificate of formation of each of the
Buyer and the Parent; and
(iv) a certificate of good standing of the Parent issued by the
Secretary of State of the State of Delaware and certificates of good
standing of the Buyer issued by the Secretary of State of the State of
Delaware, the Secretary of State of the State of Arizona and the Secretary
of State (or other appropriate office) of all other jurisdictions in which
the nature of the Company's business or assets requires the Company to be
qualified to do business.
(e) Opinion of the Buyer's Counsel. The Company shall have received an
opinion, dated the Closing Date, of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Buyer,
addressed to the Company Stockholder and in form and substance reasonably
satisfactory to the Company Stockholder, which covers, among other matters, the
validity and effectiveness of the Merger under the Delaware LLC Law.
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(f) Proceedings. All corporate and other proceedings taken or required to
be taken by the Buyer in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing and all documents incident thereto
shall be satisfactory in form and substance to the Company and its counsel.
(g) Supply Agreement. The Buyer and the Company Stockholder shall have
entered into the Supply Agreement, and the Supply Agreement shall be in full
force and effect and shall not have been amended or modified.
The Company and the Company Stockholder may waive any condition specified in
this Section 4 if they execute a writing so stating at or prior to the Closing.
Section 5. Representations and Warranties of the Company Stockholder. As a
material inducement to the Buyer to enter into and perform its respective
obligations under this Agreement, the Company Stockholder represents and
warrants to the Buyer that, except as set forth on Schedule 5 attached hereto
(the "Disclosure Schedule"):
(a) Organization of the Company and the Company Stockholder. Each of the
Company and the Company Stockholder is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and the Company is qualified to do business in every jurisdiction
in which the failure to so qualify could have a Material Adverse Effect on the
Company. Schedule 5(a) of the Disclosure Schedule lists all of the jurisdictions
in which the Company is qualified to do business as a foreign corporation. The
copies of the Company's certificate of incorporation and bylaws which have been
furnished to the Buyer reflect all amendments made thereto at any time prior to
the date of this Agreement and are correct and complete in all material
respects. Except as set forth on Schedule 5(a) of the Disclosure Schedule, the
stock certificate books and the stock record books of the Company which have
been furnished to the Buyer are correct and complete. The Company is not in
default under or in violation of any provision of its certificate of
incorporation or in default under or in violation of any provision of its
bylaws.
(b) Authorization of Transaction. The Company Stockholder has all requisite
corporate power and authority to execute and deliver this Agreement, and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Company, enforceable in accordance with its
terms and conditions. The Company Stockholder has full power, authority and
legal capacity to execute and deliver this Agreement and to perform its
obligations hereunder, and this Agreement constitutes the valid and legally
binding obligation of the Company Stockholder, enforceable in accordance with
its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, shall
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which the Company or the Company Stockholder is
subject or any provision of the articles of incorporation and bylaws of either
the Company or the Company Stockholder or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under, any agreement, contract, lease, license, instrument or other
arrangement to which the Company or the
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Company Stockholder is a party or by which it is bound or to which any of the
Company Shares or the Company's assets is subject or (iii) result in the
imposition of any Lien upon the Company Shares or any of the Company's assets.
Neither the Company nor the Company Stockholder is required to give any notice
to, make any filing with, or obtain any authorization, consent or approval of
any government or governmental agency or NASDAQ in order for the Parties to
consummate the transactions contemplated by this Agreement.
(d) Capitalization. Schedule 5(d) of the Disclosure Schedule sets forth the
authorized number and par value of each class of capital stock of the Company,
the number of shares of each such class issued and outstanding and the number of
shares of each class held in treasury. All of such issued and outstanding shares
of the Company have been duly authorized, are validly issued, fully paid and
nonassessable, are not subject to, nor were they issued in violation of, any
preemptive rights or securities law restrictions, and are owned of record and
beneficially by the Company Stockholder, free and clear of any Liens. Schedule
5(d) of the Disclosure Schedule sets forth a correct and complete listing of all
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require the Company to issue, sell or otherwise cause to become
outstanding any of its capital stock. Except as set forth on Schedule 5(d) of
the Disclosure Schedule, there are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Company or any repurchase, redemption or other obligation to acquire for
value any shares of any class of capital stock of the Company. Except as set
forth on Schedule 5(d) of the Disclosure Schedule, the Company is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
(e) Approval. The Company Stockholder, as the sole stockholder of the
Company, and the board of directors of the Company have approved this Agreement
and the transactions contemplated hereby (including the Merger).
(f) Brokers' Fees. Except for payments to be made to HT Capital Advisors,
L.L.C. (which will be paid in full when due by the Company Stockholder), neither
the Company nor the Company Stockholder has any liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
(g) Subsidiaries and Investments. At all times prior to the date hereof,
the Company has not had any Subsidiaries. The Company does not own, directly or
indirectly, any stock, partnership, limited liability company, or joint venture
interest in, or any security issued by, any other Person.
(h) Financial Statements. Schedule 5(h) attached hereto contains the
following financial statements (collectively the "Financial Statements"):
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(i) the balance sheets of the Company as of December 31, 1996,
December 31, 1997 and December 31, 1998 (the "1998 Balance Sheet") and the
related consolidated statements of income and cash flows for the fiscal
years then ended, which have been audited in connection with the audit of
the Company Stockholder's consolidated financial statements for such
periods (but not separately audited) completed by KPMG Peat Marwick,
L.L.P.; and
(ii) the unaudited balance sheet of the Company as of March 31, 1999,
and the related statement of income for the three-month period then ended
(the "Latest Balance Sheet").
Each of the Financial Statements has been based on information contained in the
books and records of the Company (which books and records are accurate, correct
and complete in all material respects) and fairly presents in all material
respects the financial condition and results of operations of the Company as of
the times and for the periods referred to therein, and the Financial Statements
have been prepared in accordance with GAAP as applied to the consolidated
financial statements of the Company Stockholder, subject in the case of the
Latest Balance Sheet to the absence of normal year-end adjustments and full
footnote disclosure.
(i) Events Subsequent to March 31, 1999. Since March 31, 1999, there has
not been any Material Adverse Effect on the Company. Since that date, except as
set forth on Schedule 5(i) of the Disclosure Schedule:
(i) the Company has not sold, leased, transferred or assigned any of
its assets, tangible or intangible, other than for fair consideration in
the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract, lease
or license (or series of related agreements, contracts, leases and
licenses) either involving more than $50,000 or outside the Ordinary Course
of Business, except as specifically contemplated by Section 9(l) of this
Agreement;
(iii) no party (including the Company) has accelerated, terminated,
modified or canceled (except with the prior written approval of the Buyer)
any agreement, contract, lease, license, instrument or other arrangement
(or series of related agreements, contracts, leases, licenses, instruments
and arrangements) involving more than $50,000 to which the Company is a
party or by which the Company is bound and, to the Knowledge of the
Company, no party intends to take any such action;
(iv) the Company has not imposed (or experienced the imposition of)
any Lien upon any of its assets, tangible or intangible, other than any
Lien for current Taxes not yet due and payable;
(v) the Company has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any Person (or series of
related capital investments,
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loans, or acquisitions) either involving more than $10,000 or outside the
Ordinary Course of Business;
(vi) the Company has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any Person (or series of
related capital investments, loans, or acquisitions), other than advances
to employees in the Ordinary Course of Business;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$50,000 singly or $100,000 in the aggregate;
(viii) the Company has not canceled, compromised, waived, or released
any right or claim (or series of related rights or claims) either involving
more than $10,000 or outside the Ordinary Course of Business;
(ix) the Company has not delayed or postponed the payment of accounts
payable or other Liabilities, obligations or expenses (except in the
Ordinary Course of Business), nor has it accelerated or advanced the
collection of receivables or the selling of accounts (except in the
Ordinary Course of Business);
(x) the Company has not experienced any material casualty loss
(whether or not covered by insurance) to its assets, nor has it delayed or
postponed any capital expenditures;
(xi) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(xii) the Company has not granted any increase in the base
compensation of any of its directors, officers or employees other than any
increase that, when combined with all other increases in the prior 12-month
period, did not exceed 8% of the compensation on the date of such increase
or increases and was in the Ordinary Course of Business;
(xiii) the Company has not adopted, amended, modified or terminated
any bonus, profit-sharing, incentive, severance or other plan, contract or
commitment for the benefit of any of its directors, officers and employees,
except as specifically contemplated by this Agreement;
(xiv) the Company has not made any loans or advances to any of its
directors, officers, employees or affiliates, other than advances to
employees in the Ordinary Course of Business;
(xv) the Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
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(xvi) there has been no change made or authorized in the certificate
of incorporation or bylaws of the Company;
(xvii) the Company has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock;
(xviii) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash
or in kind) or redeemed, purchased or otherwise acquired any of its capital
stock, other than any cash dividends which shall not result in a breach by
the Company of the representations and warranties set forth in Section 5(z)
hereof;
(xix) there has not been any other occurrence, event, incident,
action, failure to act or transaction that has had a Material Adverse
Effect on the Company; and
(xx) the Company has not committed or agreed to do any of the
foregoing, except as specifically contemplated by Section 9(l) of this
Agreement.
(j) Absence of Undisclosed Liabilities. Except as set forth on Schedule
5(j) of the Disclosure Schedule, the Company has no Liability or obligation (in
each case, of the type required under GAAP to appear on the balance sheet (or
the notes thereto) of a corporation or business), except for (i) liabilities
reflected in the liabilities section of the Latest Balance Sheet (including the
notes thereto) and (ii) liabilities which have arisen since the date of the
Latest Balance Sheet in the Ordinary Course of Business.
(k) Legal Compliance. The Company has complied in all material respects
with all applicable laws, rules and regulations of federal, state, local and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice is pending,
or during the past three years has been filed or commenced, against the Company
alleging any failure to so comply.
(l) Title to Properties.
(i) The Company owns good and marketable title, free and clear of all
Liens (other than Liens for current taxes not yet due and payable
("Permitted Liens") and Liens otherwise reflected on the Latest Balance
Sheet, which Liens will be discharged as of or prior to Closing), to all of
the properties and assets (A) reflected on the Latest Balance Sheet or (B)
used in the conduct of the business of Company, except for leased
properties and assets. The Company owns or leases under valid leases all
facilities, machinery, equipment, computer hardware and other tangible
assets necessary for the conduct of the Business as conducted as of the
date of the Latest Balance Sheet and as of the Closing.
-14-
(ii) The facilities, machinery, equipment, computer hardware and other
tangible assets of the Company are in operable condition and repair in all
material respects and are usable in the Ordinary Course of Business to
conduct the Business as presently conducted, and the Company has replaced
with comparable property or restored to its prior condition any of its
property which has been damaged or destroyed since March 31, 1999.
(m) Real Property.
(i) The Company does not own any real property.
(ii) Schedule 5(m)(ii) attached hereto lists and describes briefly all
real property leased or subleased to the Company. The Company has delivered
to the Buyer correct and complete copies of the leases and subleases listed
on Schedule 5(m)(ii) (as amended to date). With respect to each lease and
sublease listed on Schedule 5(m)(ii):
(A) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect, and shall continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(B) to the Knowledge of the Company, no party to the lease or
sublease is in breach or default of the lease or sublease, and no
event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(C) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(D) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (C), inclusive, above
are true and correct with respect to the underlying lease;
(E) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold
or subleasehold; and
(F) all facilities leased or subleased thereunder have received
all material approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof and
have been operated and maintained in all material respects in
accordance with applicable laws, rules and regulations.
(n) Tax Matters. Except as set forth on Schedule 5(n) attached hereto, (i)
the Company has timely filed or shall timely file all Tax Returns which are
required to be filed on or prior to the Closing Date, subject to any applicable
extensions, and all such Tax Returns are true, complete and accurate in all
material respects, (ii) the Company has paid all Taxes due on or prior
-15-
to the Closing Date (subject to any applicable extensions) (whether or not shown
or required to be shown on any Tax Return), and no such Taxes are delinquent,
(iii) no deficiency for any amount of Tax has been asserted or assessed by a
taxing authority against or with respect to the Company, and to the Knowledge of
the Company, no such assessment or asserted Tax Liability will be made with
respect to Taxes to be paid on or prior to the Closing Date, (iv) no claim has
ever been made by an authority in a jurisdiction where Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction, (v) the
Company has not consented to extend the time in which any Tax may be assessed or
collected by any Taxing authority, except for consents that have expired or that
have been revoked.
(o) Intellectual Property. Except as set forth on Schedule 5(o) of the
Disclosure Schedule, (i) Schedule 5(o) identifies each patent and patent
application owned or used by the Company (or the Company Stockholder with
respect to the Business), each registered trademark, trade name, service ▇▇▇▇
and copyright and application for the registration thereof owned or used by the
Company (or the Company Stockholder with respect to the Business), and each
outstanding license, agreement or other permission that the Company (or the
Company Stockholder with respect to the Business) has granted to or received
from any third party with respect to any Intellectual Property, (ii) to the
Knowledge of the Company, the Company owns and possesses, or will own and
possess as of the Effective Time to the extent now owned or possessed by the
Company Stockholder or any of its Affiliates, good title to, or a valid and
enforceable license to use, all Intellectual Property and other proprietary
rights that are necessary for the operation of the Business as of the date of
the Latest Balance Sheet and as of the Closing, free and clear of all Liens,
(iii) to the Knowledge of the Company, none of the Intellectual Property owned
or used by the Company (or the Company Stockholder with respect to the
Business), is being infringed, opposed or attacked by any Person, (iv) neither
the Company nor the Company Stockholder has received notice of any claim, suit,
action or proceeding pending and, to the Knowledge of the Company, there is no
claim, suit, action or proceeding threatened against the Company (or the Company
Stockholder with respect to the Business) asserting that the use of any of the
Intellectual Property owned or used by the Company (or the Company Stockholder
with respect to the Business) infringes the rights of any Person, (v) to the
Knowledge of the Company, neither the Company nor the Company Stockholder has
received any notice of, or is aware of any facts that would indicate a
likelihood of, any infringement or misappropriation by, or conflict with, any
Person with respect to any Intellectual Property owned or used by the Company
(or the Company Stockholder with respect to the Business), (vi) to the Knowledge
of the Company, neither the Company nor the Company Stockholder has infringed,
misappropriated or otherwise conflicted with any intellectual property rights of
any Person or is aware of any infringement, misappropriation or conflict that
will occur as a result of the continued operation of the Business as currently
conducted, (vii) all registration, application, maintenance and filing fees due
as of the Closing with respect to any patents, trademarks and copyrights owned
by the Company (or the Company Stockholder with respect to the Business), have
been paid in full and properly submitted, and (viii) the transactions
contemplated by this Agreement will have no adverse effect on the right, title
and interest of the Surviving Company, as successor-in-interest to the Company,
after the Effective Time in and to the Intellectual Property set forth on
Schedule 5(o) (or, to the Knowledge of the Company, any other Intellectual
Property) owned or used by the Company (or the Company Stockholder with respect
to the Business) prior to the Effective Time.
-16-
(p) Contracts and Commitments. Except as set forth on Schedule 5(p) of the
Disclosure Schedule, the Company is not a party to any:
(i) written or oral contract for the employment of any officer,
individual employee, or other Person or entity on a full-time, part-time,
consulting or other basis, or agreement providing severance benefits or
relating to loans to officers, directors, employees or Affiliates, other
than advances in the Ordinary Course of Business;
(ii) agreement or indenture relating to the borrowing of money or
otherwise incurring interest-bearing indebtedness or to the mortgaging,
pledging or otherwise placing a Lien on any asset or group of assets of the
Company;
(iii) guarantee of any Liability or obligation;
(iv) lease or agreement under which it is lessee of or holds or
operates any personal property, owned by any other party, except for any
lease of personal property under which the aggregate annual rental payments
do not exceed $25,000;
(v) lease or agreement under which it is lessor of or permits any
third party to hold or operate any personal property owned or controlled by
it under which the aggregate annual rental payments do not exceed $25,000;
(vi) assignment, license, indemnification or agreement with respect to
any form of Intellectual Property;
(vii) contract or group of related contracts with the same party
(excluding purchase orders entered into in the Ordinary Course of Business)
for the purchase or sale of products or services under which the
undelivered balance of such products and services has a selling price in
excess of $100,000;
(viii) contract or agreement concerning confidentiality or
non-competition or which prohibits it from freely engaging in business;
(ix) contract relating to the distribution, marketing or sales of its
services;
(x) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other plan or arrangement
for the benefit of its current or former directors, officers or employees,
other than the plan specifically contemplated by Section 9(l) of this
Agreement; or
(xi) other agreement (or group of related agreements) that is either
(A) material to the Company and has not been entered into in the Ordinary
Course of Business or (B) not terminable by the Company on less than 90
days' notice without payment or penalty.
-17-
Except as specifically disclosed on Schedule 5(p), the Company has performed in
all material respects all obligations required to be performed by it and is not
in default under or in breach of nor in receipt of any claim of default or
breach under any agreement, lease, contract, commitment or other agreement to
which it is a party; and no event has occurred which with the passage of time or
the giving of notice or both would result in a default, breach or event of
noncompliance by the Company under any such agreement. The Buyer has been
supplied with a correct and complete copy of each of the contracts which are
referred to on Schedule 5(p), together with all amendments, waivers or other
changes thereto. The Business is not subject to any collective bargaining
agreement.
(q) Insurance. Schedule 5(q) of the Disclosure Schedule lists and briefly
describes each insurance policy maintained by the Company with respect to the
Business. Since March 31, 1999, the Company has had no claim which could be
expected to cause a material increase in the rates of such insurance policies.
(r) Litigation. Except as set forth on Schedule 5(r) of the Disclosure
Schedule, to the Knowledge of the Company, there are no actions, suits,
proceedings (including arbitration proceedings), orders, governmental
investigations or inquiries or claims pending or against or affecting the
Company (or the Company Stockholder with respect to the Business), or before or
by any governmental department, commission, board, bureau, agency or
instrumentality, and, to the Knowledge of the Company, there is no basis for any
of the foregoing. To the Knowledge of the Company, neither the Company nor the
Company Stockholder (with respect to the Business) is subject to any outstanding
injunction, judgment, order, decree or charge of any court or governmental
agency.
(s) Employees. To the Knowledge of the Company, no executive, key employee
or group of employees of the Company has any plans to terminate employment with
the Company. The Company has complied in all material respects with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes, and, to the Knowledge of the Company, it does not have
any material labor relations problems (including any union organization
activities, threatened or actual strikes or work stoppages or material
grievances). To the Knowledge of the Company, there are no unfair labor practice
charges or complaints pending or threatened against the Company.
(t) Employee Benefits.
(i) Schedule 5(t) of the Disclosure Schedule contains an accurate and
complete list of each Employee Benefit Plan maintained or required to be
contributed to by the Company (or the Company Stockholder with respect to
the Business) or with respect to which Company has any Liability or
potential Liability (collectively, the "Plans"). With respect to each of
the Plans, the Company previously has provided the Buyer with true and
complete copies of, where applicable, (1) the most recent annual report on
Form 5500 filed with the Internal Revenue Service ("IRS"), (2) the plan
documents pursuant to which such
-18-
plan is maintained, administered and funded, (3) the most recent actuarial
valuation and financial statement relating to such Plan, and (4) the most
recent favorable determination letter issued by the IRS.
(ii) Except as set forth on Schedule 5(t), no Plan is or ever was
subject to Title IV of ERISA or to the funding requirements of Section 412
of the Code or Section 302 of ERISA.
(iii) The Company has no obligation to contribute to or any Liability
or potential Liability (including actual or potential withdrawal Liability)
with respect to any "multiemployer pension plan" (as defined in Section
3(37) of ERISA) or with respect to any employee benefit plan of the type
described in Section 4063 or 4064 of ERISA or in Section 413(c) of the
Code.
(iv) With respect to each of the Plans, all payments, premiums,
contributions and reimbursements required to be made by the Company as of
March 31, 1999 shall have been made or properly accrued on the Latest
Balance Sheet, and there is no unfunded Liability of the Company as of
March 31, 1999 which is not reflected on the face of the Latest Balance
Sheet (or the notes thereto).
(v) Each of the Plans has been administered in accordance with its
terms in all respects and is in compliance in all respects with all
applicable laws and regulations. No transaction with respect to any of the
Plans has occurred which could subject the Company to a penalty under ERISA
or the Code. No action, suits, claims, charges or investigations with
respect to the Plans (other than routine claims for benefits) are pending
or, to the Knowledge of the Company, threatened.
(vi) Each of the Plans (other than the Company Savings Plan (as
defined in Section 9(l))) which is intended to be a qualified plan within
the meaning of Section 401(a) of the Code has been determined by the IRS to
be so qualified and, to the Knowledge of the Company, nothing has occurred
to cause the loss of such qualified status.
(vii) No Plan provides health, medical, accident, life insurance or
other "welfare-type" benefits with respect to current or former employees
of the Company beyond their retirement or other termination of employment
with the Company other than coverage mandated by Section 4980B of the Code
or other applicable law.
(viii) No underfunded defined benefit plan (as defined in Section
3(35) of ERISA) subject to Title IV of ERISA has been transferred out of
the controlled group of companies (within the meaning of Section 414 of the
Code) of which the Company is or was a member.
(u) Environmental, Health and Safety. Except as set forth on Schedule 5(u)
of the Disclosure Schedule, the Company has obtained all material permits,
licenses, and other authorizations which are required for the ownership and
operation of the Business under all
-19-
applicable Environmental, Health and Safety Laws. Except as set forth on
Schedule 5(u) of the Disclosure Schedule, neither the Company nor the Company
Stockholder (with respect to the Business) has handled or disposed of any
substance, arranged for the disposal of any substance, exposed any employee or
other individual to any substance or condition, or owned or operated its
business or any property or facility so as to give rise to any liability or
corrective or remedial obligation under any Environmental, Health and Safety
Laws, which liability or obligation is, or could reasonably be anticipated to
become, material. Except as set forth on Schedule 5(u) of the Disclosure
Schedule, the Company has complied in all material respects with all
Environmental, Health and Safety Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against the Company (or the Company Stockholder with respect to the
Business) alleging any failure to comply in all material respects with any
Environmental, Health and Safety Laws. Except as set forth on Schedule 5(u) of
the Disclosure Schedule, neither the Company nor the Company Stockholder (with
respect to the Business) has either expressly or by operation of law, assumed or
undertaken any Liability or obligation of any other Person under any
Environmental, Health and Safety Laws, which Liability or obligation is, or
could reasonably be anticipated to become, material. The transactions
contemplated by this Agreement do not impose any obligations under any
Environmental, Health and Safety Laws for site investigation or cleanup, or
notification to any government agencies or third parties.
(v) Customers. No customer or supplier has terminated or materially reduced
its business with the Company since the date of the Latest Balance Sheet. The
Company has not received any notice that any customer or supplier intends to
terminate or materially reduce its business with the Company. To the Knowledge
of the Company, none of the Company's customers or suppliers has such intention.
(w) Warranty. To the Knowledge of the Company, each product provided by the
Company has been in conformity with all applicable contractual commitments and
specifications and all express and implied warranties (collectively,
"Warranties"), and the Company neither has, nor is there any basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand giving rise to, any Liability or other damages in
connection with any Warranties. To the Knowledge of the Company, the aggregate
amount charged or expensed for Warranty matters in the Financial Statements was
sufficient to cover all Losses under the Warranties for products sold or
delivered by the Company during the periods covered by such Financial
Statements. No product provided by the Company is subject to any guaranty,
warranty or other indemnity granted by the Company or the Company Stockholder
beyond the Company's standard terms and conditions of sale or service. Schedule
5(w) of the Disclosure Schedule includes copies of the standard terms and
conditions of product sales by the Company (containing applicable guaranty,
warranty and indemnity provisions).
(x) Affiliated Interests. Except as set forth on Schedule 5(x) of the
Disclosure Schedule, neither the Company Stockholder nor any officer, director
or Affiliate of the Company or any relative of such an officer, director or
Affiliate, has any agreement with the Company (other than any such agreement
that the Company Stockholder will cause to be terminated as of or prior to
Effective Time without cost to the Company), or any interest in any property
(real, personal or
-20-
mixed, tangible or intangible) used in or pertaining to the Business, except
solely as a stockholder or employee. Schedule 5(x) describes in reasonable
detail all corporate level services that have historically been provided to the
Business by the Company Stockholder (e.g., audit functions).
(y) Governmental Permits. Except as set forth on Schedule 5(y) of the
Disclosure Schedule, the Company owns, holds or possesses, in respect of the
Business, all governmental licenses, franchises, permits, privileges,
immunities, approvals and other authorizations which are necessary to entitle
the Company to own or lease, operate and use its properties and to carry on and
conduct the Business as currently conducted (herein collectively called
"Governmental Permits") . Schedule 5(y) sets forth a list and brief description
of each such material Governmental Permit held by the Company. The Company has
fulfilled and performed in all material respects its respective obligations
under each of such Governmental Permits and, to the Knowledge of the Company, no
event has occurred or condition or state of facts exists which constitutes or,
after notice or lapse of time or both, would constitute a breach or default
under any such Governmental Permit. To the Knowledge of the Company, no notice
of cancellation, of default or of any material dispute concerning any such
Governmental Permit, or of any event, condition or state of facts describe in
the preceding sentence, has been received by the Company. To the Knowledge of
the Company, there is no proceeding pending or threatened to revoke, modify or
otherwise fail to renew any such Governmental Permit. Except as set forth on
Schedule 5(y), each of such Governmental Permits is valid, subsisting and in
full force and effect and may be assigned and transferred to the Buyer in
accordance with this Agreement without (i) the occurrence of any breach, default
or forfeiture of material rights thereunder or (ii) the consent, approval or act
of, or the making of any filing with, any governmental body, regulatory
commission or other party.
(z) Working Capital Matters. All accounts receivable of the Business are
reflected properly on the Company's books and records, are valid receivables,
subject to no setoffs or counterclaims, and are current and collectible, subject
only to the reserve for bad debts set forth on the face of the Latest Balance
Sheet as adjusted for the passage of time through the Closing Date in accordance
with GAAP.
(aa) Year 2000 Issues. To the Knowledge of the Company, all computer
programs that have been used by (and all applications that have been prepared or
developed by) the Business in its past operations which use only two digits to
identify a year in any date field have been remediated to correct any problems
that might arise therefrom in connection with the occurrence of the end of the
twentieth century, and the Business has not and will not suffer any Liabilities
or obligations with respect to Year 2000 issues arising from products that have
been developed or sold by the Business prior to Closing.
(bb) Disclosure. To the Knowledge of the Company, neither this Agreement
nor any of the schedules, attachments or exhibits hereto, contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
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Section 6. Representations and Warranties of the Buyer. As a material
inducement to the Company to enter into and perform its obligations under this
Agreement, the Buyer represents and warrants to the Company and the Company
Stockholder as follows:
(a) Organization of the Parent and the Buyer. Each of the Parent and the
Buyer is duly organized, validly existing, and in good standing under the laws
of the State of Delaware.
(b) Authorization of Transaction. Each of the Buyer and the Parent has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligations of the Buyer and the Parent, enforceable in accordance with its
terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, shall
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which the Buyer or the Parent is subject or any
provision of their respective certificates of formation or limited liability
company operating agreements or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which the Buyer or the Parent is a party or by which they are bound or to
which any of their respective assets is subject. The Buyer is not required to
give any notice to, make any filing with, or obtain any authorization, consent
or approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(d) Approval. The Parent, as the sole member of the Buyer, and the board of
managers of the Buyer have approved this Agreement and the transactions
contemplated hereby (including the Merger), and neither shall have revoked or
rescinded such approvals prior to the consummation thereof.
(e) Brokers' Fees. Neither the Buyer nor the Parent has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
(f) Investment Intent. The Buyer's acquisition of the Company and its
outstanding capital stock shall be for its own account for investment purposes,
and the Buyer understands that such capital stock may not transferred under the
federal securities laws or any applicable state securities law without
registration or pursuant to an applicable exemption from registration.
(g) Equity Financing. The Parent and the Buyer possess a commitment from
Keystone Capital, Inc. and/or its Affiliates to receive from such parties, at
the time the Buyer receives the senior debt financing described in the Financing
Letter, equity and/or subordinated debt financing in an aggregate amount of no
less than $6,500,000.
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Section 7. Pre-Closing Covenants.
(a Affirmative Covenants of the Company. From and after the date of this
Agreement to the Closing Date, except as otherwise consented to in writing by
the Buyer or as specifically contemplated by this Agreement, the Company shall,
and the Company Stockholder shall cause the Company to:
(i conduct its operations in accordance in all material respects with
all applicable laws and regulations and in the Ordinary Course of Business
and use reasonable efforts to preserve intact its business organization,
keep available the services of officers and employees, and maintain
satisfactory relationships with suppliers, customers and others having
business relationships with it;
(ii manage its working capital in the Ordinary Course of Business
(including with respect to the collection of receivables, the payment of
payables and the maintenance of inventory and supplies).
(iii promptly inform the Buyer in writing of any variances (whether
such variances occurred or arose before, on or after the date of this
Agreement), to the Knowledge of the Company, from the representations and
warranties contained in Section 5;
(iv permit, and shall cause its officers, directors, employees,
attorneys, accountants and other representatives and agents to permit, the
Buyer and its Affiliates, agents and representatives (including
accountants, attorneys and potential lenders) full and complete access, at
all reasonable times during normal business hours with reasonable prior
notice, to the Company's books, records, property, facilities, customers,
suppliers, sales representatives, consultants, directors, officers,
personnel related to its business and independent accountants and to all of
its business, financial, legal, tax, compensation and other data and
information concerning the Company and its affairs;
(v continue to make capital expenditures in accordance with the
Company's budgeted plans;
(vi use commercially reasonable efforts to obtain all third party and
governmental approvals necessary or desirable to consummate the
transactions contemplated hereby (including consents to assignment of
leases, contracts and agreements), the expense of which will be paid by the
Buyer and/or the Company Stockholder as mutually agreed upon, and to cause
the other conditions to the obligations of the Buyer hereunder to be
satisfied;
(vii use commercially reasonable efforts to seek the satisfaction of
the conditions set forth in Section 4 of this Agreement; and
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(viii not later than the Effective Time, pay in full all bonuses
resulting from or attributable to (i) the occurrence of a change of control
of the Company or the Business or (ii) the Company's or the Company
Stockholder's agreements (other than the Employment Agreements) with
officers or employees of the Business to assist in the sale, merger or
other disposition of the Business or to remain employed with the Business
prior to or following such occurrence.
(b Negative Covenants of the Company. Except as set forth on Schedule 7(b),
from and after the date of this Agreement to the Closing Date, without the prior
written consent of the Buyer (which consent shall not be unreasonably withheld
or delayed), the Company shall not, nor shall the Company Stockholder permit the
Company to:
(i take or commit to take any action that would require disclosure
under Section 5(i); or
(ii except as specifically contemplated by this Agreement, enter into
any material contract, agreement or other obligation (whether oral or
written), or enter into any transaction other than in the Ordinary Course
of Business.
(c Distribution of Cash. On or prior to the date immediately preceding the
Closing Date, the Company Stockholder shall be permitted to cause the Company to
make a dividend or distribution to the Company Stockholder of cash then actually
held by the Company, and the Company Stockholder shall, effective as of
immediately prior to the Effective Time, cause to be canceled all intercompany
accounts then existing between the Company, on the one hand, and the Company
Stockholder and its Affiliates, on the other hand.
(d Affirmative Covenants of the Buyer. From and after the date of this
Agreement to the Closing Date, the Buyer shall use commercially reasonable
efforts (i) to obtain financing on the terms and conditions set forth in the
Financing Letter and (ii) to seek the satisfaction of the conditions set forth
in Section 3 of this Agreement.
Section 8. Indemnification.
(a Survival. All of the representations, warranties, covenants and
agreements set forth in this Agreement or in any certificate or other writing
delivered in connection with this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby (regardless of any
investigation by or on behalf of the damaged Party or the acceptance of any
certificate or opinion) and shall continue in full force and effect; provided,
however, that no Party shall be entitled to recover for any Loss (as defined
below) alleged by such Party to arise from or relate to a breach of
representations and warranties set forth in Sections 5 or 6, unless written
notice thereof is delivered to the other Parties prior to the Applicable
Limitation Date. For purposes of this Agreement, the term "Applicable Limitation
Date" shall be the date that is eighteen months after the Closing Date;
provided, however, that there shall be no Applicable Limitation Date (i.e., such
representations and warranties shall survive forever) with respect to the
following Losses: (i) any Loss arising from or relating to a breach of the
representations and warranties of the Company
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Stockholder set forth in Sections 5(a) (Organization of the Company and the
Company Stockholder), 5(b) (Authorization of Transaction), 5(c)
(Noncontravention), 5(d) (Capitalization), 5(e) (Approval), 5(f) (Brokers'
Fees), 5(l)(i) (Title to Properties) or 5(x) (Affiliated Interests), and (ii)
any Loss arising from or relating to a breach of the representations and
warranties of the Buyer set forth in Sections 6(a) (Organization of the Parent
and the Buyer), 6(b) (Authorization of Transaction), 6(c) (Noncontravention),
6(d) (Approval) or 6(e) (Brokers' Fees); further provided, however, that the
Applicable Limitation Date with respect to any Loss arising from or relating to
a breach of the representations and warranties of the Company Stockholder set
forth in Section 5(u) (Environmental, Health and Safety) shall be the third
anniversary of the Closing Date (i.e., such representations and warranties shall
survive for three years from the Effective Time); further provided, however,
that the Applicable Limitation Date with respect to any Loss arising from or
relating to a breach of the representations and warranties of the Company
Stockholder set forth in Section 5(j) (Absence of Undisclosed Liabilities) shall
be the second anniversary of the Closing Date (i.e., such representations and
warranties shall survive for two years from the Effective Time); and further
provided, however, that the Applicable Limitation Date with respect to any Loss
arising from or relating to a breach of the representations and warranties of
the Company Stockholder set forth in Section 5(n) (Tax Matters) shall be the
date of expiration of the statute of limitations (after giving effect to any
extensions thereto) (i.e., such representations and warranties shall survive for
the applicable statute of limitations).
(b Indemnification.
(i If the Merger occurs, the Company Stockholder shall indemnify and
hold harmless the Surviving Company, or, if the Merger does not occur, the
Company and the Company Stockholder shall, jointly and severally, indemnify
and hold harmless the Buyer, and in each case their respective officers,
directors, shareholders, employees and affiliates (collectively, as the
case may be, the "Buyer Group") against any loss, Liability, damage or
expense, including reasonable legal expenses and costs associated therewith
(each, a "Loss"), which they may suffer, sustain or become subject to as
the result of the breach by the Company or the Company Stockholder of any
representation, warranty, covenant or agreement contained in this Agreement
or any certificate delivered by or on behalf of the Company at or prior to
the Closing.
(ii If the Merger occurs, the Surviving Company shall indemnify and
hold harmless the Company Stockholder, or, if the Merger does not occur,
the Buyer shall indemnify and hold harmless the Company and its officers,
directors, shareholders and employees against any Losses which they may
suffer, sustain or become subject to (A) as the result of a breach by the
Buyer of any representation, warranty, covenant or agreement contained in
this Agreement or any certificate delivered by or on behalf of the Buyer at
or prior to the Closing or (B) as a result of the operation of the Business
by the Surviving Company on and after the Closing Date; provided, however,
that this clause (B) shall not derogate from any rights or remedies the
Surviving Company may have pursuant to Section 8(b)(i) for breaches by the
Company or the Company Stockholder.
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(iii After the Closing, the Buyer shall not be entitled to recover for
any Losses arising from or relating to a breach of representations and
warranties set forth in Section 5, unless (and then only to the extent
that) the aggregate Losses for all such breaches exceeds $150,000, and the
Buyer shall not be entitled to recover from the Company Stockholder more
than an aggregate of $1,500,000 for Losses arising from or relating to such
breaches, except in each case to the extent that any such Loss arises from
or relates to a breach of any representation or warranty set forth in those
sections having no Applicable Limitation Date (i.e., Sections 5(a), 5(b),
5(c), 5(d), 5(e), 5(f), 5(l)(i) or 5(x)) or having an Applicable Limitation
Date that is the date of expiration of the applicable statute of
limitations (i.e., Section 5(n)).
(iv If the Merger occurs, the Company Stockholder shall indemnify and
hold harmless the Surviving Company and the Buyer Group for (A) any
indebtedness for borrowed money and, to the extent not set forth on the
Latest Balance Sheet, any deferred purchase price payments, capital lease
obligations (other than any capital lease obligations set forth on Schedule
8(b)(iv) attached hereto) and deferred rent arising out of arrangements or
relationships of the Company entered into or in existence prior to the
Effective Time (in each case, together with any obligations as a guarantor
for any such obligations of any other Person, and any liens on the
Company's assets with respect to any of the foregoing) and (B) any Losses
which they may suffer, sustain or become subject to as a result of the
operation of the businesses of the Company Stockholder and its affiliates
(other than the Business) prior to, on or after the Closing Date.
(v If any third party notifies any Party (the "Indemnified Party")
with respect to any matter which may give rise to a claim for
indemnification against any other Party (the "Indemnifying Party") under
this Section 8(b), then the Indemnified Party shall notify each
Indemnifying Party thereof. Within 30 days after receipt of notice of a
particular matter, the Indemnifying Party may assume the defense of such
matter; provided that (A) the Indemnifying Party shall retain counsel
reasonably acceptable to the Indemnified Party, (B) the Indemnified Party
may participate in the defense of such claim, at its own expense, with
co-counsel of its choice to the extent that the Indemnified Party believes
in its sole discretion that such matter shall affect its ongoing business
and (C) the Indemnifying Party may not consent to the entry of any judgment
with respect to the matter or enter into any settlement with respect to the
matter which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from any Liability or
obligation with respect thereto. If, within such 30-day period, the
Indemnifying Party does not assume the defense of such matter, the
Indemnified Party may defend against the matter in any manner that it
reasonably may deem appropriate and may consent to the entry of any
judgment with respect to the matter or enter into any settlement with
respect to matter with the consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed). The Indemnified Party shall
cooperate with the Indemnifying Party in all matters arising under this
Section 8(b).
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(vi All indemnification payments made pursuant to this Section 8 will
be deemed to be adjustments to the total Merger Consideration described in
Section 2(d)(v) hereof.
(vii For purposes of this Section 8, "Losses" shall be calculated net
of any Tax benefits and the amount of any insurance proceeds (less any
retropremium obligations and the present value of increased insurance costs
attributable thereto) that have actually been received by the Buyer or the
Surviving Company.
(c Other Indemnification Provisions. If the Merger occurs, neither the
Company nor the Surviving Company, as its successor in interest, will have any
obligation of contribution or otherwise to the Company Stockholder as a result
of any breach by the Company or the Company Stockholder prior to the Merger of
any representation, warranty, covenant or agreement contained in this Agreement.
The Company Stockholder agrees that it may not make any claim for
indemnification against the Company or the Surviving Company by reason of the
fact that it or one of its Affiliates was a stockholder, director, officer,
employee or agent of the Company or was serving at the request of the Company as
a trustee, director, officer, employee or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether such claim is pursuant to
any statute, charter document, bylaw, agreement or otherwise) with respect to
any action, suit, proceeding, complaint, claim or demand brought by the Buyer or
the Surviving Company against the Buyer or any other Person (whether such
action, suit, proceeding, complaint, claim or demand is pursuant to this
Agreement, applicable law or otherwise). The Company Stockholder on behalf of it
and all of its affiliates hereby releases the Company (and the Surviving
Company, as its successor in interest), upon and after the Effective Time, from
any and all claims the Company Stockholder may have against the Company in its
capacity as a stockholder of the Company or in connection with any products
liability with respect to products sold by the Company to the Company
Stockholder or any of its Affiliates, in each case that arise from or relate to
matters, acts or omissions occurring prior to the Effective Time.
Section 9. Additional Agreements.
(a Press Releases. Except as required by applicable law, the Parties agree
that no press release or other public announcement (including in any trade
journal or other publication) of the transactions contemplated hereby shall be
made without the prior written consent of each of the Parties (it being
understood that the Parties have agreed to a press release announcing the
execution and delivery of this Agreement in the form of Exhibit B attached
hereto).
(b Transaction Expenses. The Buyer shall pay all of its expenses incurred
in connection with the transactions contemplated hereby. The Company Stockholder
shall pay all of its expenses and all of the expenses of the Company incurred in
connection with the transactions contemplated hereby, including in each case all
of the fees and expenses of all advisers used in the transactions contemplated
hereby, such as investment, accounting and legal services.
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(c Tax Matters. The following provisions shall govern the allocation of
responsibility as between the Buyer, the Surviving Company, the Company and the
Company Stockholder for certain Tax matters following the Effective Time:
(i Allocation of Merger Consideration. The Merger Consideration shall
be allocated among the assets acquired in connection with the Merger and
the covenant not to compete entered into in connection with the Merger as
set forth on Exhibit C attached hereto. (the "Allocation"). Each of the
Surviving Company and the Company Stockholder shall allocate the Purchase
Price among the assets acquired by the Surviving Company and the covenant
not to compete entered into by the Company Stockholder in accordance with
this Allocation and shall report the purchase and sale of the assets of the
Company on all Tax Returns in a manner consistent with the Allocation. Each
of the Surviving Company, the Company and the Company Stockholder shall
file Internal Revenue Service Form 8594 in a timely manner consistent with
the Allocation.
(ii Cooperation on Tax Matters. The Surviving Company and the Company
Stockholder shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. The Surviving Company and the Company Stockholder agree
(A) to retain all books and records with respect to Tax matters pertinent
to the Company relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by the Surviving Company or the Company Stockholder, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B)
to give the other parties reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other
parties so request, the Surviving Company or the Company Stockholder, as
the case may be, shall allow the other parties to take possession of such
books and records.
(iii Tax Returns. The Company Stockholder shall be responsible for
filing all income Tax Returns of the Company with respect to all taxable
periods ending on or before the Closing Date in accordance with the
Allocation and applicable law, and the Surviving Company shall be
responsible for filing all other Tax Returns of the Company that have not
been filed on or prior to the Closing Date.
(iv Tax Indemnification. The Company Stockholder shall pay to the
applicable governmental authority (or, to the extent already paid by the
Surviving Company) promptly reimburse the Surviving Company for) (A) any
income Tax attributable to or owed by the Company with respect to any
taxable period (or portion of a taxable period) ending on or before the
Closing Date (or for any Tax year beginning before and ending after the
Closing Date to the extent allocable to the portion of such period
beginning before and ending on the
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Closing Date), (B) any Tax imposed on the Company, the Company Stockholder
or any of their Affiliates as a consequence of the Merger or attributable
to the transfer of assets from the Company to the Surviving Company, except
for Transfer Taxes (which are governed by Section 9(c)(v) of this
Agreement) and Taxes, if any, arising from the Employment Agreements, (C)
the unpaid Taxes of any Person (other than the Company) that are imposed on
the Company under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor
with respect to any taxable period (or portion of a taxable period) that
ends on or prior to the Closing Date, and (D) the unpaid Taxes of any
Person (other than the Company) that are imposed on the Company by contract
or other indemnity agreement entered into by or on behalf of the Company
prior to the Closing Date. Taxes shall be allocated to periods ending on or
before the Closing Date and to periods beginning after the Closing Date by
closing the books of the Company as of the end of the Closing Date.
(v Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other Taxes and other fees (in each case, including any
penalties and interest) of a similar type or kind ("Transfer Taxes")
incurred in connection with this Agreement or in connection with the
transactions contemplated hereby shall be paid when due one-half by the
Company Stockholder and one-half by the Buyer, and the Company Stockholder
shall, at its own expense, file on behalf of the Surviving Company all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees. The Company Stockholder shall notify the Buyer of any Transfer Taxes
the Buyer is obligated to pay pursuant to the preceding sentence at least
10 days before such obligation is due to be paid. The Buyer shall wire
transfer funds to the Company Stockholder no later than three days before
such payments are due. If required by applicable law, the Surviving Company
shall join in the execution of any such Tax Returns and other
documentation.
(d Confidentiality. Whether or not the transactions contemplated hereby are
consummated, the Parties shall keep, and shall cause each of their respective
Affiliates, advisors, agents and representatives to keep, confidential all
information and materials regarding any other Party reasonably designated by
such Party as confidential at the time of disclosure thereof. The Company and
the Company Stockholder shall not, and shall not permit their Affiliates,
advisors, representatives and agents to, disclose the terms and provisions of
this Agreement without the prior written consent of the Buyer. If the
transactions contemplated hereby are not consummated, the Buyer and each of its
Affiliates, advisors, representatives and agents shall maintain confidentiality
of all non-public, proprietary information obtained during its due diligence
review of the Company and shall return to the Company or destroy all documents
received from the Company and all copies thereof containing any such
information. The provisions of this Section 9(d) shall be subject to any
disclosure obligations under securities laws as to which the Company Stockholder
is advised by its counsel are applicable to it.
(e Non-Competition, Non-Solicitation and Confidentiality.
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(i Non-Competition. As a material inducement to the Buyer to enter
into and perform its obligations under this Agreement, during the
Non-Compete Period, the Company Stockholder agrees to the provisions of
Sections 9(e)(ii) and 9(e)(iii) and agrees not to engage (whether as an
owner, operator, manager, employee, officer, director, consultant, advisor
or representative or through any contractual relationship), other than on
behalf of the Surviving Company and its Affiliates, directly or indirectly
in the manufacture, marketing, distribution or sale of (i) any fused silica
capillary tubing materials or products for any application and (ii) any
materials or products for use in analytical instruments; provided that
ownership of less than 2% of the outstanding stock of any publicly-traded
corporation shall not be deemed to be engaging solely by reason thereof in
any of its businesses, so long as the Company Stockholder has no active
participation in the business of such corporation. If the final judgment of
a court of competent jurisdiction declares that any term or provision of
this Section 9(e)(i) is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration or area of the term or
provision, to delete specific words or phrases, or to replace any invalid
or unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified. The term "Non-Compete Period" means the period
beginning on the Closing Date and ending on the fifth anniversary of the
Closing Date.
(ii Non-Solicitation. The Company Stockholder agree that, during the
Non-Compete Period, the Company Stockholder (i) shall not, shall cause its
subsidiaries not to, and shall use their best efforts not to permit any
Affiliates to, directly or indirectly contact, approach or solicit for the
purpose of offering employment to or hiring (whether as an employee,
consultant, agent, independent contractor or otherwise) any Person employed
by the Company or the Company Stockholder at any time during the three
months prior to the Closing Date, without the prior written consent of the
Buyer, and (ii) shall not induce or attempt to induce any customer or other
business relation of the Buyer to terminate or materially reduce any
business relationship the Buyer. The term "indirectly" as used in this
Section 9(e) is intended to mean any acts authorized or directed by or on
behalf of the Company or the Company Stockholder or any Person controlled
by the Company Stockholder. Without limiting the generality of the
foregoing, during the Non-Compete Period, the Company Stockholder agrees
that it shall not actually hire any of the Persons set forth on Schedule
9(e)(ii)(A) attached hereto, and the Buyer agrees that neither it nor the
Surviving Company shall actually hire any of the Persons set forth on
Schedule 9(e)(ii)(B) attached hereto.
(iii Post-Closing Confidentiality. If the transactions contemplated by
this Agreement are consummated, the Company and the Company Stockholder
shall treat and hold as confidential any information concerning the
Business and/or the affairs of the Company that is not already generally
available to the public (the "Confidential Information"), refrain from
using any of the Confidential Information except in connection with this
Agreement or on behalf of the Buyer and its Affiliates, and deliver
promptly to the
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Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in
his possession or under his control; provided that the Company Stockholder
may disclose the Confidential Information to the extent necessary to
complete federal, state or local personal income tax returns or to the
extent required to comply with applicable requirements of securities laws.
In the event that the Company or the Company Stockholder is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand or
similar process) to disclose any Confidential Information, the Company or
the Company Stockholder shall notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or
waive compliance with the provisions of this Section 9(e)(iii). If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Company or the Company Stockholder is, on the advice of counsel, compelled
to disclose any Confidential Information to any tribunal or else stand
liable for contempt or other governmental sanctions, the Company or the
Company Stockholder may disclose the Confidential Information to the
tribunal; provided that the Company or the Company Stockholder shall use
reasonable efforts to obtain, at the request of Buyer, an order or other
assurance that confidential treatment shall be accorded to such portion of
the Confidential Information required to be disclosed as the Buyer shall
designate.
(iv Trade Names. Neither the Company nor the Company Stockholder shall
use, or permit any Affiliates to use, the names, trade names, trademarks or
service marks used by the Company prior to the date of this Agreement in
connection with the Business, or any names confusingly similar thereto or
any translations or derivatives thereof in any manner anywhere in the world
after Closing.
(v Remedy for Breach. Each of the Company and the Company Stockholder
acknowledge and agree that in the event of a breach by such Person of any
of the provisions of this Section 9(e), monetary damages shall not
constitute a sufficient remedy. Consequently, in the event of any such
breach, the Buyer or its successors or assigns may, in addition to other
rights and remedies existing in its favor, apply to any court of law or
equity of competent jurisdiction for specific performance, injunctive
relief, or both, or any other equitable remedies available to enforce or
prevent any violations of the provisions hereof, in each case without the
requirement of posting a bond or proving actual damages.
(f Transition Assistance. Neither the Company nor the Company Stockholder
shall directly or indirectly in any manner take any action which is designed,
intended or might be reasonably anticipated to have the effect of discouraging
customers, suppliers, lessors, licensors and other business associates from
maintaining the same business relationships with the Company after the date of
this Agreement as were maintained with the Company prior to the date of this
Agreement.
(g Accounts and Other Receivables. The Company Stockholder shall promptly
forward to the Buyer any and all proceeds from accounts and other receivables of
the Business that are received by the Company Stockholder or any of its
Affiliates after the Closing Date, and the Buyer shall promptly forward to the
Company Stockholder any and all proceeds from accounts and
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other receivables of the Company Stockholder that are received by the Surviving
Company after the Closing Date.
(h Further Assurances. As a material obligation of each Party to consummate
the transactions contemplated by this Agreement, from time to time after the
Closing, each Party shall at its own expense (i) cooperate with the other Party,
(ii) perform any further act and (iii) will execute and deliver such documents
or instruments as may be reasonably requested by the other Parties to this
Agreement in order to effectuate any transaction, act or agreement contemplated
by this Agreement.
(i Insurance Recoveries. The Company Stockholder shall, upon the request of
the Buyer or the Surviving Company at and after the Effective Time, use
commercially reasonable efforts to pursue any claims or rights that the Company
Stockholder or any of its Affiliates may have pursuant to any occurrence-based
insurance policies in effect during any period prior to the Effective Time with
respect to any actual or alleged damages incurred by the Company or the
Business. All proceeds received or recovered by the Company Stockholder or any
of its Affiliates under such insurance policies (less any retropremium
obligations and the present value of increased insurance costs attributable
thereto) shall be paid promptly to the Surviving Company when so received or
recovered.
(j Access to Records. The Company agrees to retain and maintain such books,
records and financial data of the Company for a period of not less than two
years from the Closing Date. During such period, the Company shall provide the
Company Stockholder and its representatives reasonable cooperation and access,
during normal business hours and upon reasonable notice, with respect to such
books, records and financial data, and the Company Stockholder shall provide the
Company and its representatives reasonable cooperation and access, during normal
business hours and upon reasonable notice, with respect to the books and records
and other financial data relating to the Business, if any, that are included in
materials of the Company Stockholder, in each case as may be necessary for
general business purposes, including the preparation of financial statements and
the handling of tax audits; provided that such cooperation, access and
assistance does not unreasonably disrupt the normal operations of the Company or
the Company Stockholder.
(k COBRA Continuous Coverage. Effective as of the Closing Date and
thereafter, the Buyer shall provide continuation coverage under one or more
group health plans maintained by the Buyer to each qualified beneficiary with
respect to any group health plan maintained or previously maintained by the
Company whose qualifying event occurs prior to or on the Closing Date, in
accordance with COBRA. Neither the Company Stockholder, any Company Stockholder
Affiliate nor any of their group health plans shall be obligated to provide
continuation coverage to any such qualified beneficiary, and the Buyer shall be
solely responsible and liable for paying, performing and discharging all
obligations to provide continuation coverage to any such qualified beneficiary
in accordance with COBRA (and any liabilities relating thereto). For purposes of
this Section 9(k), (i) "COBRA" shall mean Section 4980B of the Code and Title I,
Subtitle B, Part 6 of ERISA, as such provisions are amended from time to time,
and the rules and regulations
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promulgated thereunder, (ii) "group health plan," "qualified beneficiary" and
"qualifying event" shall have their respective meanings under COBRA, and (iii) a
"Company Stockholder Affiliate" shall mean any Person that, at any relevant time
on or after the Closing Date, is required to be treated as a single employer
with the Company Stockholder in accordance with Section 414(b), (c), (m) or (o)
of the Code.
(l Company Savings Plan. Effective as of the date determined by the Company
Stockholder (which date shall be no later than the Closing Date) (the "Spinoff
Date"), the Company Stockholder shall cause the accounts under The Spectranetics
Corporation Salary Savings Plan (the "Company Stockholder Savings Plan") of
those participants in the Company Stockholder Savings Plan who are employed by
the Company on the Spinoff Date to be "spunoff" into a separate plan (the
"Company Savings Plan") in accordance with Sections 401(a)(12) and 414(l) of the
Code, Treasury Regulations Section 1.414(l)-1 and Section 208 of ERISA. The
Company shall establish the Company Savings Plan effective as of the Spinoff
Date. The Company Stockholder shall cause the trustee(s) of the Company
Stockholder Savings Plan to transfer, to the trust established under the Company
Savings Plan, the assets "spunoff" to the Company Savings Plan, and such assets
shall be transferred, in kind, based on the investments of the accounts
"spunoff" to the Company Savings Plan. The Company Stockholder and the Company
shall each file a Form 5310-A with respect to such "spinoff," to the extent
required by the Code, and shall execute such documents and take such actions as
are necessary to accomplish such "spinoff" and the establishment of the Company
Savings Plan. Effective as of the Closing Date, the Buyer shall assume the
sponsorship of the Company Savings Plan. As soon as administratively feasible
following the Closing Date, the Buyer shall submit the Company Savings Plan and
the trust established under the Company Savings Plan to the IRS for a
determination of its qualified and tax-exempt status under Sections 401 and 501
of the Code. The Buyer shall amend the Company Savings Plan and the trust under
the Company Savings Plan as and if requested by the IRS as a condition of
granting a favorable determination of the qualified and tax-exempt status of the
Company Savings Plan and the trust established under the Company Savings Plan.
The Buyer shall be responsible for all required compliance testing, reporting,
disclosure and funding with respect to the Company Savings Plan on and after the
Closing Date.
(m Company Stockholder Option Plans. All options to acquire shares of the
Company Stockholder's capital stock that have been granted to employees of the
Company prior to the date of this Agreement are options that have been granted
pursuant to plans and arrangements of the Company Stockholder, which plans and
arrangements are being retained by the Company Stockholder and for which the
Company Stockholder shall be solely responsible and liable. The Company
Stockholder shall permit employees that hold such stock options to continue to
hold such stock options until termination or expiration thereof pursuant to the
terms and conditions of the applicable option grant and such plan or
arrangement, and the Company Stockholder shall permit such employees to exercise
all or any portion of such stock options at any time prior to such termination
or expiration to the extent permitted pursuant to the terms and conditions of
the applicable option grant and such plan or arrangement. The Company
Stockholder shall not grant any additional options to employees of the Company,
and shall not amend or modify the terms and conditions of (including by taking
any action to terminate) the stock options held by employees of
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the Company (other than any acceleration of vesting), except to the extent that
any such amendment or modification applies equally to the Company Stockholder's
employees. Neither the Company, the Buyer nor the Surviving Company shall have
any Liability or obligation to any of the Company's employees with respect to
options to acquire shares of the Company Stockholder's capital stock.
Section 10. Termination; Effect of Termination.
(a Termination. Subject to Section 10(b) below, this Agreement may be
terminated prior to the Closing as follows:
(i by mutual written consent of the Buyer, the Parent, the Company and
the Company Stockholder;
(ii by either (A) the Buyer and the Parent, if there has been a
material breach on the part of the Company or the Company Stockholder, or
(B) the Company and the Company Stockholder, if there has been a material
breach on the part of the Buyer or the Parent, in each case of any
representation, warranty, covenant or agreement contained in this
Agreement; or
(iii by either (A) the Buyer and the Parent, or (B) the Company and
the Company Stockholder, if the transactions contemplated hereby have not
been consummated by July 31, 1999.
(b Termination After Breach. Neither the Buyer and the Parent, on the one
hand, nor the Company and the Company Stockholder, on the other hand, shall be
entitled to terminate this Agreement pursuant to Section 10(a) if the willful or
knowing breach of this Agreement by such Person(s) has prevented the
consummation of the transactions contemplated hereby.
(c Effect of Termination. Except for the provisions of Section 8 (solely
with respect to breaches of this Agreement prior to the time of termination of
this Agreement), Section 9(b), Section 9(d), Section 10 and Section 11, which
shall survive any termination of this Agreement, in the event of the termination
of this Agreement, this Agreement shall thereafter become void and have no
effect, and no Party hereto shall have any liability to any other Party hereto
or its directors or officers in respect thereof, except for breaches of this
Agreement prior to the time of such termination.
Section 11. Miscellaneous.
(a No Third Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(b Entire Agreement. This Agreement (including the documents referred to
herein and the letter agreement, dated May 18, 1999) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements
or representations by or among the
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Parties, written or oral, that may have related in any way to the subject matter
hereof.
(c Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties named herein and their respective successors and
assigns. Prior to the Closing, no Party may assign either this Agreement or any
of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties; provided that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its affiliates or
designate one or more of its affiliates to perform its obligations hereunder and
(ii) assign its rights (but not its obligations) under this Agreement to any
lender as collateral security for providing financing for the transactions
contemplated hereby.
(d Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(e Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given when delivered
personally to the recipient or telecopied to the recipient (provided that it is
followed by a hard copy) or one business day after it is sent to the recipient
by reputable express courier service (charges prepaid), and addressed to the
intended recipient as set forth below:
If to the Company or the Company Stockholder:
The Spectranetics Corporation
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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If to the Parent or the Buyer:
c/o Keystone Capital, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address or telecopy number set forth
above using any other means, but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may change the address
or telecopy number to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(g Governing Law. All questions with respect to the effect of the Merger
and other corporate law questions relating to the transactions contemplated by
this Agreement shall be governed by and construed in accordance with the
Delaware LLC Law and the California General Corporation Law, as applicable. All
other questions concerning the construction, validity and interpretation of this
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of New York without giving effect to any choice or conflict of
law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
(h Amendments and Waivers. Prior to the Closing, no amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Buyer, the Parent, the Company and the Company Stockholder. At
any time after the Closing, no amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the Surviving
Company, the Parent and the Company Stockholder. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty, covenant or agreement
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
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(i Incorporation of Exhibits and Schedules. The exhibits and schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(j Construction. Where specific language is used to clarify by example a
general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The word "including" shall mean "including
without limitation." The language used in this Agreement shall be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Pronouns in this
Agreement relating to the male gender also apply to the female and neuter
genders unless the context clearly requires a contrary interpretation.
(k Remedies. The Parties shall each have and retain all other rights and
remedies existing in their favor at law or equity, including, without
limitation, any actions for specific performance and/or injunctive or other
equitable relief (including, without limitation, the remedy of rescission) to
enforce or prevent any violations of the provisions of this Agreement.
* * * * *
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IN WITNESS WHEREOF, the Parties have executed this Merger Agreement as of
the date first above written.
POLYMICRO TECHNOLOGIES, LLC,
a Delaware limited liability company
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
PMT HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
POLYMICRO TECHNOLOGIES, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
THE SPECTRANETICS CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
