Exhibit 2
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
AlliedSignal Inc.,
a Delaware corporation;
Clink Acquisition Corp.,
a Delaware corporation;
Clean Link, Inc.,
a California corporation;
and
the Shareholders of Clean Link, Inc.
___________________________
Dated as of October 21, 1998
___________________________
TABLE OF CONTENTS
PAGE
Section 1.Description of Transaction 1
1.1 Merger of Merger Sub into the Company 1
1.2 Effect of the Merger 1
1.3 Closing; Effective Time 2
1.4 Articles of Incorporation and Bylaws; Directors
and Officers 2
1.5 Conversion of Shares 2
1.6 Escrow of Shares 3
1.7 Closing Balance Sheet 4
1.8 Post-Closing Purchase Price Adjustment 5
1.9 Earnout Amount 5
1.10 Closing of the Company's Transfer Books 7
1.11 Exchange of Certificates 7
1.12 Reserved 8
1.13 Tax Consequences 8
1.14 Accounting Treatment 8
1.15 Further Action 8
Section 2.Representations and Warranties of the Company
and the Shareholders 9
2.1 Due Organization; No Subsidiaries; etc. 9
2.2 Articles of Incorporation and Bylaws; Records 9
2.3 Capitalization, etc. 10
2.4 Financial Statements 10
2.5 Absence of Changes 11
2.6 Title to Assets 13
2.7 Bank Accounts; Receivables; Customers 13
2.8 Equipment; Leasehold 14
2.9 Proprietary Assets 14
2.10 Contracts 15
2.11 Liabilities 18
2.12 Compliance with Legal Requirements 18
2.13 Governmental Authorizations 18
2.14 Tax Matters 18
2.15 Employee Benefit Plans; Labor and Employment
Matters 20
2.16 Environmental Matters 22
2.17 Insurance 23
2.18 Related Party Transactions 23
2.19 Legal Proceedings; Orders 24
i
2.20 Authority; Binding Nature of Agreement 24
2.21 Non-Contravention; Consents 24
2.22 Company Action 25
2.23 Shareholder Approval 25
2.24 SEC Filings 26
2.25 Advisory Fees 26
Section 3.Representations and Warranties of Shareholders 26
3.1 Shares 26
3.2 Authority of Shareholders; Binding Nature of
Agreements 26
3.3 Non-Contravention; Consents 27
3.4 Ability 27
3.5 Investment Representations 28
3.6 SEC Filings 29
Section 4.Representations and Warranties of Parent and
Merger Sub 29
4.1 Organization and Good Standing 29
4.2 Authorization and Enforceability 29
4.3 No Violation of Laws or Agreements 30
4.4 Consents 30
4.5 Parent Common Stock 30
4.6 SEC Filings 30
4.7 Financial Statements 31
4.8 Brokerage 31
Section 5.Covenants of the Parties 31
5.1 Confidentiality 31
5.2 Tax Matters 32
5.3 Tax Refund 32
5.4 Cooperation on Tax Matters 32
5.5 Tax Indemnification 33
5.6 Treatment of Certain Payments 35
5.7 Interest 35
Section 6.Deliveries to Parent, Merger Sub and the Company
at the Closing 35
Section 7.Deliveries to Shareholders at the Closing 36
Section 8.Indemnification, Etc. 37
8.1 Survival of Representations, Etc. 37
8.2 Indemnification by Shareholders for Company
Matters 37
8.3 Threshold; Ceiling 38
ii
8.4 Indemnification by Shareholders for Shareholder
Representations and Warranties and Covenants 39
8.5 Exclusive Remedy 39
8.6 Claims Against Escrow Shares 39
8.7 No Contribution 41
8.8 Interest 41
8.9 Defense of Third Party Claims 41
8.10 Exercise of Remedies by Indemnitees Other Than
Parent 42
Section 9.Miscellaneous Provisions 42
9.1 Shareholders' Agent 42
9.2 Further Assurances 42
9.3 Fees and Expenses 42
9.4 Attorneys' Fees 43
9.5 Notices 43
9.6 Reserved 43
9.7 Time of the Essence 43
9.8 Headings 43
9.9 Counterparts 44
9.10 Governing Law 44
9.11 Successors and Assigns 44
9.12 Remedies Cumulative; Specific Performance 44
9.13 Waiver 44
9.14 Amendments 44
9.15 Severability 45
9.16 Parties in Interest 45
9.17 Entire Agreement 45
9.18 Construction 45
iii
EXHIBITS & SCHEDULES
EXHIBITS
Exhibit A - Shareholders
Exhibit B - Certain definitions
Exhibit C - Form of Amended and Restated Articles of
Incorporation of Surviving Corporation
Exhibit D - Directors and officers of Surviving
Corporation
Exhibit E - Form of Escrow Agreement
Exhibit F - Form of Registration Rights Agreement
Exhibit G - Form of Retention Agreement
Exhibit H - Persons to sign Retention and Noncompetition
Agreements
Exhibit I - Form of Noncompetition Agreement
Exhibit J - Form of Release
Exhibit K - Form of legal opinion of Sweeney, Mason,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
Exhibit L - Form of legal opinion of AlliedSignal Inc.
SCHEDULES
Schedule 1 Five-Year Earnout Gross Margin Percentage Scale
Schedule 2 Sixth-Year Earnout Gross Margin Percentage Scale
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this
"Agreement") is made and entered into as of October 21, 1998 by
and among: AlliedSignal Inc., a Delaware corporation ("Parent");
Clink Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"); Clean Link, Inc., a
California corporation (the "Company"); the parties identified on
Exhibit A (the "Shareholders") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as
Shareholders' Agent. Certain other capitalized terms used in this
Agreement are defined in Exhibit B.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a
merger of Merger Sub into the Company in accordance with this
Agreement and the California General Corporation Law and the
Delaware General Corporation Law (the "Merger"). Upon
consummation of the Merger, Merger Sub will cease to exist, and
the Company will become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "Code"). For
accounting purposes, it is intended that the Merger be treated as
a "purchase."
C. The Shareholders own a total of 209,000 shares of the
Common Stock (no par value per share) of the Company,
constituting all of the outstanding capital stock of the Company.
AGREEMENT
The parties to this Agreement agree as follows:
Description of Transaction
1.1 Merger of Merger Sub into the Company. Upon the terms
and subject to the conditions set forth in this
Agreement, at the Effective Time (as defined in Section
1.3), Merger Sub shall be merged with and into the
Company, and the separate existence of Merger Sub shall
cease. The Company will continue as the surviving
corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of the
California General Corporation Law and the Delaware General
Corporation Law.
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take
place at the offices of ▇▇▇▇▇▇ Godward LLP, Five ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date
hereof immediately after execution of this Agreement
by the parties hereto. (The date hereof is referred
to in this Agreement as the "Closing Date.") Contemporaneously
with or as promptly as practicable after the Closing,
a properly executed agreement of merger conforming to
the requirements of Chapter 11 of
the California General Corporation Law shall be filed
with the Secretary of State of the State of California
and a properly executed certificate of merger conforming
to the requirements of the Delaware General Corporation
Law shall be filed with the Secretary of State of the
State of Delaware. The Merger shall become effective as
of the later of the time such agreement of merger is
filed with and accepted by the Secretary of State of the
State of California and the time such certificate of
merger is filed with and accepted by the Secretary of
State of the State of Delaware (the "Effective Time").
1.4 Articles of Incorporation and Bylaws; Directors and
Officers.
(a) The Articles of Incorporation of the Surviving
Corporation shall be amended and restated as of the
Effective Time to conform to Exhibit C;
(b) The Bylaws of the Surviving Corporation shall be amended
and restated as of the Effective Time to conform to the
Bylaws of Merger Sub as in effect immediately prior to
the Effective Time; and
(c) The directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the
individuals identified on Exhibit D.
Conversion of Shares.1.5 Conversion of Shares.
(a) Subject to Section 1.11(c), at the Effective Time, by
virtue of the Merger and without any further action on
the part of Parent, Merger Sub, the Company or any
Shareholder:
(i) the 4,000 shares of common stock (no par value per
share) of the Company (the "Company Common Stock") held
by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ immediately prior to the Effective
Time shall be converted into the right to receive an
aggregate of 3,976 shares of the common stock (par value
$1.00 per share) of Parent ("Parent Common Stock") and
the right to receive additional consideration pursuant to
Sections 1.8 and 1.9;
(ii) the 2,000 shares of Company Common Stock held
by ▇▇▇ ▇. ▇▇▇▇▇ immediately prior to the Effective Time
shall be converted into the right to receive an aggregate
of 1,434 shares of Parent Common Stock, $20,000 in cash
and the right to receive additional consideration
pursuant to Sections 1.8 and 1.9;
(iii) the 40,000 shares of Company Common Stock
held by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ immediately prior to the
Effective Time shall be converted into the right to
receive an aggregate of 39,768 shares of Parent Common
Stock and the right to receive additional consideration
pursuant to Sections 1.8 and 1.9;
(iv) the 3,000 shares of Company Common Stock held
by ▇▇▇▇ ▇. ▇▇▇▇▇ immediately prior to the Effective Time
shall be converted into the right to receive an aggregate
of 2,982 shares of Parent Common Stock and the right to
receive additional consideration pursuant to Sections 1.8
and 1.9;
(v) the 40,000 shares of Company Common Stock
held by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ immediately prior to the
Effective Time shall be converted into the right to
receive an aggregate of 39,768 shares of Parent Common
Stock and the right to receive additional consideration
pursuant to Sections 1.8 and 1.9;
(vi) the 40,000 shares of Company Common Stock
held by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ immediately prior to the
Effective Time shall be converted into the right to
receive an aggregate of 32,842 shares of Parent Common
Stock, $250,000 in cash and the right to receive
additional consideration pursuant to Sections 1.8 and
1.9;
(vii) the 40,000 shares of Company Common Stock
held by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ immediately prior to the Effective
Time shall be converted into the right to receive an
aggregate of 39,768 shares of Parent Common Stock and
the right to receive additional consideration pursuant to
Sections 1.8 and 1.9;
(viii) the 40,000 shares of Company Common Stock held by Adel
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ immediately prior to the Effective Time
shall be converted into the right to receive an aggregate
of 39,768 shares of Parent Common Stock and the right to
receive additional consideration pursuant to Sections 1.8
and 1.9; and
(ix) each share of the common stock (par value
$.001 per share) of Merger Sub outstanding immediately
prior to the Effective Time shall be converted into one
share of common stock of the Surviving Corporation.
(b) If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or
other condition under any applicable restricted stock
purchase agreement or other agreement with the Company,
then the shares of Parent Common Stock issued in exchange
for such shares of Company Common Stock will also be
unvested and subject to the same repurchase option, risk
of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends.
1.6 Escrow of Shares. Pursuant to the Escrow Agreement, the
form of which is attached as Exhibit E hereto, at the Closing,
Parent shall issue a certificate for 83,117 shares of Parent
Common Stock, which shall be in addition to the shares of Parent
Common Stock issuable pursuant to Section 1.5(a)(i) hereof (the
"Escrow Shares"), in the name of Escrow Agent or its nominee,
evidencing the shares of Parent Common Stock to be held in escrow
in accordance with the Escrow Agreement. The Escrow Shares shall
be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any
creditor of any party hereto. The Escrow Agent has agreed to
accept delivery of the Escrow Shares and to hold the Escrow
Shares in escrow (the "Escrow"), subject to the terms and
conditions of this Agreement and the Escrow Agreement. The
The Escrow Shares shall be released to Parent, and Parent
may be required to deposit into the
Escrow additional shares of Parent Common Stock as Escrow
Shares, in accordance with the terms of the Escrow
Agreement.
1.7 Closing Balance Sheet. Within 120 days after the Closing Date,
Parent will prepare and present to the Shareholders' Agent a
proposed balance sheet of the Company as of the Closing Date (the
"Proposed Closing Balance Sheet"), together with the
calculation of the Net Working Capital of the Company as
of the Closing Date (the "Closing Calculation"). The
Proposed Closing Balance Sheet shall be prepared in
accordance with GAAP and shall present fairly the
financial position of the Company as of the Closing Date
using practices and procedures consistent with those used
in the preparation of the Company Financial Statements,
except that no indebtedness for borrowed money shall be
included in the calculation of Net Working Capital. The
Shareholders' Agent shall have the right to review
Parent's workpapers (the "Workpapers") utilized in
preparing the Proposed Closing Balance Sheet and the
Closing Calculation for purposes of verifying the
accuracy of the Proposed Closing Balance Sheet and the
Closing Calculation. The Proposed Closing Balance Sheet
and the Closing Calculation shall be binding upon the
parties to this Agreement unless the Shareholders' Agent
gives written notice of disagreement with the Proposed
Closing Balance Sheet or the Closing Calculation to
Parent within 30 days after its receipt of the Proposed
Closing Balance Sheet, specifying the nature and extent
of such disagreement in sufficient specificity that
Parent is able to investigate and respond to each element
of such disagreement. If Parent and the Shareholders'
Agent agree upon the Proposed Closing Balance Sheet
and/or the Closing Calculation within 15 days after
Parent's receipt of such notice from the Shareholders'
Agent, such agreement shall be binding upon the parties
to this Agreement. If Parent and the Shareholders' Agent
are unable to resolve any such disagreement within such
period, the disagreement may be referred for final
determination to an independent accounting firm of
national reputation selected by the mutual agreement of
Parent and the Shareholders' Agent (the "Balance Sheet
Selected Firm"), and the resolution of the disagreement
and the Closing Calculation resulting therefrom shall be
final and binding upon the parties hereto for purposes of
this Agreement. If Parent and the Shareholders' Agent
cannot agree on the Balance Sheet Selected Firm, it shall
be a national accounting firm chosen by the independent
auditors for Parent. The Closing Balance Sheet as
finally determined by the parties or by the Balance Sheet
Selected Firm is the "Closing Balance Sheet." Each party
shall bear its own costs related to the preparation and
investigation of the Proposed Closing Balance Sheet, the
Closing Balance Sheet, any items of disagreement, and the
Closing Calculation. The fees and disbursements of the
Balance Sheet Selected Firm shall be shared equally by
Parent and the Shareholders.
1.8 Post-Closing Purchase Price Adjustment.
(a) If the Closing Calculation of the Net Working Capital on the
Closing Balance Sheet is greater than the Net Working Capital as
shown on the Unaudited Interim Balance Sheet (the difference
being an "Unpaid Balance") then, within fifteen
business days after the final determination of the Closing
Balance Sheet, Parent shall deliver to the
Shareholders'Shareholder's Agent a number of shares of
Parent Common Stock having a value (based on a deemed value
of $36.09375 per share of Parent Common Stock) equal to the
Unpaid Balance (rounded to the nearest whole share). Any
payment by Parent pursuant to this Section 1.8(a) shall be
apportioned by the Shareholders' Agent between the
Shareholders in proportion to their percentage ownership of
the Company as set forth in Exhibit A hereto.
(b) If the Closing Calculation of the Net Working
Capital on the Closing Balance Sheet is less than the Net
Working Capital as shown on the Unaudited Interim Balance
Sheet (the difference being an "Overpayment") then,
within fifteen business days of the final determination
of the Closing Balance Sheet, Parent shall be entitled to
offset the Overpayment against the Earnout Amount and
receive from the Escrow Shares a number of shares of
Parent Common Stock having a value (based on a deemed
value of $36.09375 per share of Parent Common Stock)
equal to the Overpayment (rounded to the nearest whole
share). Any shares released to Parent pursuant to this
Section 1.8 shall not apply to the $1,000,000 limit on
offsets to the Earnout Amount provided in Sections 1.9
and 8.3(b) hereof.
1.9 Earnout Amount.
(a) As used herein, the following terms have the following
meanings:
(i) "Earnout Amount" means the sum of the Five-Year Annual
Earnout Amounts and the Sixth-Year Earn-Out Amount paid
by Parent in respect of each of the Five-Year Earnout
Years and calendar year 2004 in accordance with this
Section 1.9.
(ii) "Earnout Year" means each of calendar years 1999, 2000,
2001, 2002, 2003 and 2004.
(iii) "Five-Year Earnout Year" means each of the
calendar years 1999, 2000, 2001, 2002 and 2003.
(iv) "Gross Margin" means Net Sales, as defined in Section
1.9(a)(vi), less cost of goods sold on a basis
consistent with past practices and in accordance with
GAAP, which includes direct and indirect production
labor, material, depreciation of facilities and
equipment used for manufacturing purposes, outside
manufacturing subcontractors and service personnel,
freight and other production expenses, except that
salaries and commissions of sale force, travel and
entertainment expenses and show marketing expenses
shall not be included in the cost of goods sold.
(v) "Gross Margin Percentage" means Gross Profit divided by
Net Sales.
(vi) "Net Sales" means the aggregate annual gross revenues
of the Company, calculated on the accrual basis
consistent with past revenue recognition policies
generally applicable to its business, less freight,
returns, rebates and allowances for doubtful accounts.
(vii)"Proposed Annual Earnout Amount" means a Proposed
Annual Five-Year Earnout Amount or a Proposed Sixth-Year Earnout
Amount.
(viii)"Proposed Annual Five-Year Earnout Amount"
means, for each Five-Year Earnout Year, the product of
(i) annual Net Sales for such Five-Year Earnout Year in
excess of $7,500,000 multiplied by (ii) the applicable
earnout percentage based on the Company's Gross Margin
Percentage in the applicable Earnout Year as set forth
on Schedule 1 hereto, as calculated by Parent in the
manner required hereby.
(ix) "Proposed Sixth-Year Earnout Amount" means, for
calendar year 2004, the product of (i) annual Net Sales
for calendar year 2004 in excess of $7,500,000
multiplied by (ii) the applicable earnout percentage
based on the Company's Gross Margin Percentage in
calendar year 2004 as set forth on Schedule 2 hereto,
as calculated by Parent in the manner required hereby.
(b) Parent will calculate each Proposed Annual Earnout
Amount and the Company's Gross Margin for each Earnout Year and ▇▇▇▇
▇▇▇▇>
present such calculations, in reasonable
detail, to the Shareholders' Agent and the Escrow Agent
no later than 45 days after the end of the related
Earnout Year. Parent will maintain such records as are
necessary to calculate each Proposed Annual Earnout
Amount and the Company's Gross Margin and Gross Margin
Percentage for each Earnout Year. The Proposed Annual
Earnout Amount shall be binding upon the parties to this
Agreement and determined to be the "Annual Earnout
Amount" unless the Shareholders' Agent gives written
notice of disagreement with any Proposed Annual Earnout
Amount to Parent and the Escrow Agent within 30 days
after its receipt of a Proposed Annual Earnout Amount,
specifying the nature and extent of such disagreement in
sufficient specificity that Parent is able to investigate
and respond to each element of such disagreement, and
Parent will give the Shareholders' Agent reasonable
access to records needed to verify the calculation of
each Proposed Annual Earnout Amount. If Parent and the
Shareholders' Agent are unable to resolve any such
disagreement within such period, the disagreement shall
be referred for final determination to an independent
accounting firm of national reputation selected by the
mutual agreement of Parent and the Shareholders' Agent
(the "Earnout Selected Firm"), and the resolution of that
disagreement and the Annual Earnout resulting therefrom
shall be final and binding upon the parties hereto for
purposes of this Agreement. If Parent and the
Shareholders' Agent cannot agree on the Earnout Selected
Firm, it shall be a national accounting firm chosen by
the independent auditors for Parent. The Annual Earnout
as finally determined by the parties or by the Earnout
Selected Firm is the "Annual Earnout." Each party shall
bear its own costs related to the preparation and
investigation of the Annual Earnout Amount. The fees and
disbursements of the Earnout Selected Firm shall be
shared equally by Parent and the Shareholders unless the
Earnout Selected Firm shall determine based upon its
assessment of the relative merits of the positions taken
by each in any disagreement presented to such firm that a
different proportion is equitable.
(c) Subject to Section 1.8, this Section 1.9 and Section
8.3(b), on the fifteenth Trading Day after determination of the
Annual Earnout Amount (the "Earnout Payment Date"), the Escrow
Agent shall release to the Shareholders' Agent from the Escrow
Shares a number of shares of Parent Common Stock having a value
(based on the Average Trading Price as of the Earnout Payment
Date) equal to the Annual Earnout Amount in respect
of the immediately preceding Earnout Year (rounded to the nearest
whole share); provided, however, that the Annual Earnout Amount
for each Earnout Year shall be payable only if and to the extent
that the Company's Gross Margin Percentage of at least 30% in any
such Earnout Year, as set forth in Schedules 1 and 2 hereto. The
Shareholders' Agent shall distribute to the Shareholders their
proportional share (as set forth on Exhibit A) of the number of
Escrow Shares (if any) issued in payment of the Annual Earnout
Amount. Subject to the provisions of Sections 5.5 and 8 hereof,
Parent shall be entitled to offset against the Annual Earnout
Amount an aggregate amount of up to $1,000,000 to the extent the
Shareholders have Liability to the Indemnitees pursuant to
Section 5.5 or 8.2(a) hereof for Losses or Damages, as
applicable, provided that, except with respect to claims under
Section 8.2(a)(iii), Parent shall have notified Shareholders'
Agent of such claims on or prior to the first anniversary of the
date hereof.
1.10 Closing of the Company's Transfer Books. At the
Effective Time, holders of certificates representing
shares of the Company's capital stock that were
outstanding immediately prior to the Effective Time shall
cease to have any rights as shareholders of the Company,
and the stock transfer books of the Company shall be
closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No
further transfer of any such shares of the
Company's capital stock shall be made on such stock transfer books
after the Effective Time. If, after the Effective Time,
a valid certificate previously representing any of such
shares of the Company's capital stock (a "Company Stock
Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section
1.11.
1.11 Exchange of Certificates.
(a) No fractional shares of Parent Common Stock shall
be issued in connection with the Merger, and no
certificates for any such fractional shares shall be
issued. In lieu of such fractional shares, any holder of
capital stock of the Company who would otherwise be
entitled to receive a fraction of a share of Parent
Common Stock pursuant to Section 1.5 hereof (after
aggregating all fractional shares of Parent Common Stock
issuable to such holder pursuant to Section 1.5 hereof)
shall, upon surrender of such holder's Company Stock
Certificate(s), be paid in cash the dollar amount
(rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by $36.09375.
(b) Parent and the Surviving Corporation shall be
entitled to deduct and withhold from any consideration
payable or otherwise deliverable to any holder or former
holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving
Corporation may be required to deduct or withhold
therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are
so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid
to the Person to whom such amounts would otherwise have
been paid.
(c) Neither Parent nor the Surviving Corporation shall
be liable to any holder or former holder of capital stock
of the Company for any shares of Parent Common Stock (or
dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official
pursuant to any applicable abandoned property, escheat or
similar law.
(d) The shares of Parent Common Stock to be issued
pursuant to this Agreement shall be characterized as
"Restricted Securities" under the federal securities
laws, and under such laws such shares may be resold
without registration under the Securities Act of 1933, as
amended (the "Securities Act"), only in certain limited
sets of circumstances. Each certificate evidencing
shares of Parent Common Stock to be issued pursuant to
this Agreement shall bear the following legend (together
with any legend required by applicable state securities
laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT
COVERING THE ISSUANCE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION."
1.12 Reserved.
1.13 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section
368(a)(2)(E) of the Code. The parties to this Agreement hereby adopt
this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.14 Accounting Treatment. For
accounting purposes, the Merger is intended to be treated
as a "purchase."
1.15 Further Action. If, at any time
after the Effective Time, any further action is
determined by Parent to be reasonably necessary to carry
out the purposes of this Agreement or to vest the
Surviving Corporation or Parent with full right, title
and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of
the Surviving Corporation and Parent shall be fully
authorized (in the name of Merger Sub, in the name of the
Company and otherwise) to take such action.
SECTION 2. Representations and Warranties of the Company and
the Shareholders
The Company and the Shareholders jointly and severally
represent and warrant, to and for the benefit of the
Indemnitees, as follows:
2.1 Due Organization; No Subsidiaries; etc.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of
the State of California and has all necessary power and
authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to
own and use its assets in the manner in which its assets
are currently owned and used; and (iii) to perform its
obligations under all Company Contracts.
(b) Except as set forth in Part 2.1(b) of the
Disclosure Schedule, the Company has not conducted any
business under or otherwise used, for any purpose or in
any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the names
"CleanLink," "CleanLink, Inc.," "Clean Link" and "Clean
Link, Inc."
(c) The Company is not and has not been required to be
qualified, authorized, registered or licensed to do
business as a foreign corporation in any jurisdiction
other than the jurisdictions identified in Part 2.1(c) of
the Disclosure Schedule, except where the failure to be
so qualified, authorized, registered or licensed has not
had and will not have a Material Adverse Effect on the
Company. The Company is in good standing as a foreign
corporation in each of the jurisdictions identified in
Part 2.1(c) of the Disclosure Schedule.
(d) Part 2.1(d) of the Disclosure Schedule accurately
sets forth (i) the names of the members of the Company's
board of directors, (ii) the names of the members of each
committee of the Company's board of directors, and (iii)
the names and titles of the Company's officers.
(e) The Company does not own any controlling interest
in any Entity, and the Company has never owned,
beneficially or otherwise, any shares or other securities
of, or any direct or indirect equity interest in, any
Entity. The Company has not agreed and is not obligated
to make any future investment in or capital contribution
to any Entity.
Articles of Incorporation and Bylaws; Records.2.2
Articles of Incorporation and Bylaws; Records. The
Company has delivered to Parent accurate and complete
copies of: (1) the Company's articles of incorporation
and bylaws, including all amendments thereto; (2) the
stock records of the Company; and (3) the minutes and
other records of the meetings and other proceedings
(including any actions taken by written consent or
otherwise without a meeting) of the shareholders of the
Company, the board of directors of the Company and all
committees of the board of directors of the Company.
There have been no formal meetings or other proceedings
of the shareholders of the Company, the board of
directors of the Company or any committee of the board of
directors of the Company that are not fully reflected in
such minutes or other records. There has not been any
violation of any of the provisions of the Company's
articles of incorporation or bylaws, and the Company has
not taken any action that is inconsistent in any material
respect with any resolution adopted by the Company's
shareholders, the Company's board of directors or any
committee of the Company's board of directors. The stock
records, minute books and other records of the Company
are accurate, up-to-date and complete in all material
respects, and have been maintained in accordance with
prudent business practices.
2.3 Capitalization, etc
(a) The authorized capital stock of the Company
consists of: 500,000 shares of Company Common Stock, of
which 209,000 shares have been issued and are outstanding
as of the Closing Date. All of the outstanding shares of
Company Common Stock have been duly authorized and
validly issued, are fully paid and non-assessable are
held of record and beneficially as set forth in Part
2.3(a) of the Disclosure Schedule. Except as set forth
in Part 2.3(a) of the Disclosure Schedule, there is no
repurchase option which is held by the Company and to
which any of such shares is subject. There are no
securities, options, warrants, rights, calls,
subscription agreements, commitments or understandings of
any nature whatsoever that directly or indirectly (i)
call for the issuance, sale, pledge or other disposition
of any shares of capital stock of the Company or any
securities convertible into, or other rights to acquire,
any shares of capital stock of the Company, (ii) obligate
the Company to grant, offer or enter into any of the
foregoing or (iii) relate to the voting or control of
such capital stock, securities or rights.
(b) All outstanding shares of Company Common Stock
have been issued and granted in compliance with (i) all
applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in
applicable Contracts.
(c) The Company has never repurchased, redeemed or
otherwise reacquired any shares of capital stock or other
securities of the Company.
2.4 Financial Statements.
(a) Part 2.4 of the Disclosure Schedule includes the
following financial statements and notes (collectively,
the "Company Financial Statements"):
(i) The unaudited balance sheets of the Company
as of December 31, 1997, and the related unaudited income
statements of the Company for the year then ended,
together with the notes thereto; and
(ii) the unaudited balance sheet of the Company as
of June 30, 1998 (the "Unaudited Interim Balance Sheet"),
and the related unaudited income statement of the Company
for the six months then ended.
(b) The Company Financial Statements are accurate and
complete in all material respects and present fairly the
financial position of the Company as of the respective
dates thereof and the results of operations and (in the
case of the financial statements referred to in Section
2.4(a)(i)) cash flows of the Company for the periods
covered thereby. The Company Financial Statements have
been prepared based on the books and records of the
Company and in accordance with GAAP applied on a
consistent basis throughout the periods covered (except
as disclosed in the footnotes thereto and except that the
financial statements referred to in Section 2.4(a)(ii) do
not contain footnotes and are subject to normal and
recurring year-end adjustments, which will not,
individually or in the aggregate, be material in
magnitude).
2.5 Absence of Changes. Except as set forth in Part 2.5
of the Disclosure Schedule, since December 31, 1997:
(a) to the best of the Knowledge of the
Company and the Shareholders, there has not been any
event, occurrence, or change in circumstances or facts
regarding the Company or its business that has had or
that may be reasonably expected to have, either alone or
in the aggregate, a Material Adverse Effect on the
Company;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use
of, any of the Company's assets (whether or not covered
by insurance);
(c) the Company has not declared, accrued, set aside
or paid any dividend or made any other distribution in
respect of any shares of capital stock, and has not
repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities;
(d) the Company has not sold, issued or authorized the
issuance of (i) any capital stock or other security, (ii)
any option or right to acquire any capital stock or any
other security, or (iii) any instrument convertible into
or exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its
rights under, or permitted the acceleration of vesting
under, any restricted stock purchase agreement;
(f) there has been no amendment to the Company's
articles of incorporation or bylaws, and the Company has
not effected or been a party to any Acquisition
Transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar
transaction;
(g) the Company has not formed any subsidiary or
acquired any equity interest or other interest in any
other Entity;
(h) the Company has not made any (i) single capital
expenditure or commitment in excess of Fifty Thousand
Dollars ($50,000) for additions to property, plant,
equipment or intangible capital assets or aggregate
capital expenditures and commitments or (ii) sale,
assignment, transfer, lease or other disposition of or
agreement to sell, assign, transfer, lease or otherwise
dispose of any asset or property having a value of Fifty
Thousand Dollars ($50,000) in the aggregate other than in
the ordinary course of business;
(i) the Company has not (i) entered into or permitted
any of the assets owned or used by it to become bound by
any Contract that is or would constitute a Material
Contract (as defined in Section 2.10(a)),
or (ii) amended or prematurely terminated, or waived any material
right or remedy under, any such Contract;
(j) the Company has not (i) acquired, leased or
licensed any right or other asset from any other Person,
(ii) sold or otherwise disposed of, or leased or
licensed, any right or other asset to any other Person,
or (iii) waived or relinquished any right, except for
immaterial rights or other immaterial assets acquired,
leased, licensed or disposed of in the ordinary course of
business and consistent with the Company's past practices
prepaid any expense of the Company;
(k) the Company has not (i) written off as
uncollectible, or established any extraordinary reserve
with respect to, any account receivable or other
indebtedness or (ii) prepaid any expense of the Company;
(l) the Company has not made any pledge of any of its
assets or otherwise permitted any of its assets to become
subject to any Encumbrance, except for pledges of
immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person
(other than pursuant to routine travel advances made to
employees in the ordinary course of business), or (ii)
incurred or guaranteed any indebtedness for borrowed
money;
(n) the Company has not (i) granted any severance,
continuation or termination pay to any director, officer,
shareholder or employee of the Company, (ii) entered into
any employment, deferred compensation or other similar
agreement (or any amendment to any such existing
agreement) with any director, officer, shareholder or
employee of the Company, (iii) increased benefits payable
or potentially payable under any severance, continuation
or termination pay policies or employment agreements with
any director, officer, shareholder or employee of the
Company, (iv) increased compensation, bonus or other
benefits payable or potentially payable to directors,
officers, shareholders or employees of the Company, (v)
changed the terms of any bonus, pension, insurance,
health or other Plan of the Company, or (vi) represented
to any employee or former employee of the Company that
Parent would assume, continue to maintain or implement
any Plan after the Closing Date;
(o) the Company has not changed any of its methods of
accounting or accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal
Proceeding;
(r) the Company has not entered into any material
transaction or taken any other material action outside
the ordinary course of business or inconsistent with its
past practices; and
(s) the Company has not agreed or committed to take
any of the actions referred to in clauses "(c)" through
"(r)" above.
2.6 Title to Assets.
(a) The Company owns, and has good, valid and
marketable title to, all assets purported to be owned by
it, including: (i) all assets reflected on the
Unaudited Interim Balance Sheet; (ii) all assets
referred to in Parts 2.7(b) and 2.9 of the Disclosure
Schedule and all of the Company's rights under the
Contracts identified in Part 2.10 of the Disclosure
Schedule; and (iii) all other assets reflected in the
Company's books and records as being owned by the
Company. Except as set forth in Part 2.6 of the
Disclosure Schedule, all of said assets are owned by the
Company free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes
not yet due and payable, and (y) minor liens that have
arisen in the ordinary course of business and that do not
(in any case or in the aggregate) materially detract from
the value of the assets subject thereto or materially
impair the operations of the Company.
(b) Part 2.6(b) of the Disclosure Schedule identifies
all assets that are material to the business of the
Company that are being leased or licensed to the Company.
The Company is not in default under any of the leases
listed on Part 2.6(b) of the Disclosure Schedule.
2.7 Bank Accounts; Receivables; Customers.
(a) Part 2.7(a) of the Disclosure Schedule provides
accurate information with respect to each account
maintained by or for the benefit of the Company at any
bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts
receivable, notes receivable and other receivables of the
Company as of June 30, 1998. Except as set forth in Part
2.7(b) of the Disclosure Schedule, all existing accounts
receivable of the Company (including those accounts
receivable reflected on the Unaudited Interim Balance
Sheet that have not yet been collected and those accounts
receivable that have arisen since June 30, 1998 and have
not yet been collected) (i) represent valid obligations
of customers of the Company arising from bona fide
transactions entered into in the ordinary course of
business, (ii) are current and will be collected in at
their recorded amounts when due (except to the extent the
Company elects not to collect late charges and interest
consistent with past practices), without any counterclaim
or set off.
(c) Part 2.7(c) of the Disclosure Schedule sets forth
a correct and complete list (by name, address and persons
to contact) of the ten largest customers (based on
revenues generated by the Company from such customers
through the sale of products by the Company) of the
Company ("Major Customers") for the years ended December
31, 1997 (actual) and December 31, 1998 (estimated, with
actuals through June 30, 1998). As of the date hereof,
neither the Company nor any Shareholder is aware of any
development regarding the Company's relationship with one
or more of the Major Customers (i) which could reasonably
be expected to result in a Material Adverse Effect on the
Company or (ii) which indicates that, following the
Closing, any such Major Customer will either terminate
current purchase orders or refuse to purchase additional
products from the Company.
Equipment; Leasehold.2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible
assets owned by or leased to the Company are adequate for
the uses to which they are being put, are in good
condition and repair (ordinary wear and tear excepted)
and are adequate for the conduct of the Company's
business in the manner in which such business is
currently being conducted.
(b) The Company does not own any real property or any interest
in real property, except for the leasehold created under the real
property lease identified in Part 2.10(a) of the Disclosure Schedule
(the "Lease"). The property leased pursuant to the Lease (the
"Leased Real Property") constitutes all of the real property leased
or occupied by the Company in connection with the Company's
business. Except as set forth on Part 2.8(b) of the
Disclosure Schedule, the Lease is in full force and
effect, and all rent and other material sums and charges
payable by the Company as tenant thereunder are current.
No written notice of any default under the Lease has been
given or received by the Company. There are no
subleases, licenses or other agreements granting any
Person other than the Company any right to the
possession, use, occupancy or enjoyment of the Leased
Real Property. The Company has all right, title and
interest of the lessee under the Lease, free and clear of
any and all Encumbrances.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets
forth, with respect to each Company Proprietary Asset
registered with any Governmental Body or for which an
application has been filed with any Governmental Body,
(i) a brief description of such Proprietary Asset, and
(ii) the names of the jurisdictions covered by the
applicable registration or application. Part 2.9(a)(ii)
of the Disclosure Schedule identifies and provides a
brief description of all other Company Proprietary Assets
owned by the Company. Part 2.9(a)(iii) of the Disclosure
Schedule identifies and provides a brief description of
each Proprietary Asset licensed to the Company by any
Person (except for any Proprietary Asset that is licensed
to the Company under any third party software license
generally available to the public at a cost of less than
$10,000), and identifies the license agreement under
which such Proprietary Asset is being licensed to the
Company. Except as set forth in Part 2.9(a)(iv) of the
Disclosure Schedule, the Company has good, valid and
marketable title to all of the Company Proprietary Assets
identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the
Disclosure Schedule, free and clear of all liens and
other Encumbrances, and has a valid right to use all
Proprietary Assets identified in Part 2.9(a)(iii) of the
Disclosure Schedule. Except as set forth in Part
2.9(a)(v) of the Disclosure Schedule, the Company is not
obligated to make any payment to any Person for the use
of any Company Proprietary Asset. Except as set forth in
Part 2.9(a)(vi) of the Disclosure Schedule, the Company
has not developed jointly with any other Person any
Company Proprietary Asset with respect to which such
other Person has any rights.
(b) The Company has taken reasonably adequate measures
and precautions to protect and maintain the
confidentiality and secrecy of all Company Proprietary
Assets (except Company Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise
to maintain and protect the value of all Company
Proprietary Assets.
(c) To the best of the Knowledge of the Company and
the Shareholders, none of the Company Proprietary Assets
infringes or conflicts with any Proprietary Asset owned
or used by any other Person. To the best of the Knowledge
of the Company and the Shareholders, the Company is not
infringing, misappropriating or making any unlawful use
of, and the Company has not at any time infringed,
misappropriated or made any unlawful use of, or received
any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any
Proprietary Asset owned or used by any other Person. To
the best of the Knowledge of the Company and the
Shareholders, no other Person is infringing,
misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person
infringes or conflicts with, any Company Proprietary
Asset.
(d) Except as set forth in Part 2.9(d) of the
Disclosure Schedule: (i) each Company Proprietary Asset
conforms in all material respects with any specification,
documentation, performance standard, representation or
statement made or provided with respect thereto by or on
behalf of the Company; and (ii) there has not been any
claim by any customer or other Person alleging that any
Company Proprietary Asset (including each version thereof
that has ever been licensed or otherwise made available
by the Company to any Person) does not conform in all
material respects with any specification, documentation,
performance standard, representation or statement made or
provided by or on behalf of the Company, and, to the best
of the Knowledge of the Company and the Shareholders,
there is no basis for any such claim.
(e) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Company to
conduct its business in the manner in which such business
has been and is being conducted. Except as set forth in
Part 2.9(e) of the Disclosure Schedule, (i) the Company
has not licensed any of the Company Proprietary Assets to
any Person on an exclusive basis, and (ii) the Company
has not entered into any covenant not to compete or
Contract limiting its ability to exploit fully any of its
Proprietary Assets or to transact business in any market
or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the
Disclosure Schedule, (i) all current and former employees
of the Company have executed and delivered to the Company
an agreement (containing no exceptions to or exclusions
from the scope of its coverage) that is substantially
identical to the form of Intellectual Property and
Confidential Information Agreement previously delivered
to Parent, and (ii) all current and former consultants
and independent contractors to the Company have executed
and delivered to the Company an agreement (containing no
exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of
Intellectual Property and Consultant Confidential
Information Agreement previously delivered to Parent.
2.10 Contracts.
(a) Part 2.10(a) of the Disclosure Schedule
identifies:
(i) each Company Contract relating to the
employment of, or the performance of services by, any
employee, consultant or independent contractor;
(ii) each Company Contract relating to the
acquisition, transfer, use, development, sharing or
license of any technology or any Proprietary Asset;
(iii) each Company Contract imposing any
restriction on the Company's right or ability (A) to
compete with any other Person, (B) to acquire any product
or other asset or any services from any other Person, to
sell any product or other asset to or perform any
services for any other Person or to transact business or
deal in any other manner with any other Person, or (C)
develop or distribute any technology;
(iv) each Company Contract creating or involving
any agency relationship, distribution arrangement or
franchise relationship;
(v) each Company Contract relating to the
acquisition, issuance or transfer of any securities;
(vi) each Company Contract relating to the
creation of any Encumbrance with respect to any asset of
the Company;
(vii) any mortgage, indenture, note, installment
obligation or other Company Contract for or relating to
the borrowing of money by the Company;
(viii) each Company Contract involving or
incorporating any guaranty, any pledge, any performance
or completion bond, any indemnity or any surety
arrangement;
(ix) any Company Contract related to any
obligation to make payments, contingent or otherwise,
arising out of the prior acquisition of the business of
other Persons;
(x) each Company Contract creating or relating to
any partnership or joint venture or any sharing of
revenues, profits, losses, costs or liabilities;
(xi) each Company Contract relating to the
purchase or sale of any product or other asset by or to,
or the performance of any services by or for, any Related
Party (as defined in Section 2.18);
(xii) each Company Contract constituting or
relating to a Government Contract or Government Bid;
(xiii)any other Company Contract that was entered into
outside the ordinary course of business or was
inconsistent with the Company's past practices;
(xiv)any other Company Contract that has a term of more than
60 days and that may not be terminated by the Company
(without penalty) within 60 days after the delivery of a
termination notice by the Company;
(xv) any other Company Contract that contemplates
or involves (A) the payment or delivery of cash or other
consideration in an amount or having a value in excess of
$50,000 in the aggregate, or (B) the performance of
services having a value in excess of $50,000 in the
aggregate; and
(xvi)any other material Contract.
(Contracts in the respective categories described in clauses
"(i)" through "(xvi)" above are referred to in this Agreement as
"Material Contracts.")
(b) The Company has delivered to Parent accurate and
complete copies of all written Contracts identified in
Part 2.10(a) of the Disclosure Schedule, including all
amendments thereto. Part 2.10(b) of the Disclosure
Schedule provides an accurate description of the material
terms of each Company Contract that is not in written
form. Each Contract identified in Part 2.10(a) of the
Disclosure Schedule is valid and in full force and
effect, and, to the best of the Knowledge of the Company
and the Shareholders, is enforceable by the Company in
accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing
specific performance, injunctive relief and other
equitable remedies.
(c) Except as set forth in Part 2.10(c) of the
Disclosure Schedule:
(i) the Company has not violated or breached, or committed
any default under, any Company Contract, and, to the best of the
Knowledge of the Company and the Shareholders, no other Person has
violated or breached, or committed any default under, any Company
Contract;
(ii) to the best of the Knowledge of the Company
and the Shareholders, no event has occurred, and no
circumstance or condition exists, that (with or without
notice or lapse of time) will, or could reasonably be
expected to, (A) result in a violation or breach of any
of the provisions of any Company Contract, (B) give any
Person the right to declare a default or exercise any
remedy under any Company Contract, (C) give any Person
the right to accelerate the maturity or performance of
any Company Contract, or (D) give any Person the right to
cancel, terminate or modify any Company Contract;
(iii) since December 31, 1992, the Company has not
received any notice or other communication regarding any
actual or possible violation or breach of, or default
under, any Company Contract; and
(iv) the Company has not waived any of its
material rights under any Material Contract.
(d) The Contracts identified in Part 2.10(a) of the
Disclosure Schedule collectively constitute all of the
Contracts necessary to enable the Company to conduct its
business in the manner in which its business is currently
being conducted.
(e) Part 2.10(e) of the Disclosure Schedule identifies
and provides a brief description of each proposed
Contract as to which any bid, offer, award, written
proposal, term sheet or similar document has been
submitted or received by the Company since January 1,
1998 outside the ordinary course of business.
(f) Part 2.10(f) of the Disclosure Schedule provides
an accurate description and breakdown of the Company's
backlog under Company Contracts.
2.11 Liabilities. The Company has no accrued,
contingent or other liabilities of any nature, either
matured or unmatured (whether or not required to be
reflected in financial statements in accordance with
GAAP, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities"
column of the Unaudited Interim Balance Sheet; (b)
accounts payable or accrued salaries that have been
incurred by the Company since June 30, 1998 in the
ordinary course of business and consistent with the
Company's past practices; (c) liabilities under the
Company Contracts identified in Part 2.10(a) of the
Disclosure Schedule, to the extent the nature and
magnitude of such liabilities can be specifically
ascertained by reference to the text of such Company
Contracts; and (d) the liabilities identified in Part
2.11 of the Disclosure Schedule. The Company does not
have outstanding any indebtedness for borrowed money.
2.12 Compliance with Legal Requirements. The Company is, and has at
all times since December 31, 1992 been, in compliance with all
applicable Legal Requirements, except where the failure
to comply with such applicable Legal Requirements has not
had and will not have a Material Adverse Effect on the
Company. Except as set forth in Part 2.12 of the
Disclosure Schedule, since December 31, 1992, the Company
has not received any notice or other communication from
any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal
Requirement.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the
Company, and the Company has delivered to Parent
accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure
Schedule. The Governmental Authorizations identified in
Part 2.13 of the Disclosure Schedule are valid and in
full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the
Company to conduct its business in the manner in which
its business is currently being conducted. The Company
is, and at all times since December 31, 1992 has been, in
substantial compliance with the terms and requirements of
the respective Governmental Authorizations identified in
Part 2.13 of the Disclosure Schedule. Since December 31,
1992, the Company has not received any notice or other
communication from any Governmental Body regarding (a)
any actual or possible violation of or failure to comply
with any term or requirement of any Governmental
Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 Tax Matters Except as provided in Part
2.14 of the Disclosure Schedule:
(a) all Returns required to be filed with any Taxing
Authority with respect to any Pre-Closing Tax Period by
or on behalf of the Company have, to the extent required
to be filed on or before the date hereof, been filed when
due (taking into account any permitted extensions);
(b) to the best of the Knowledge of the Company and
the Shareholders, as of the time of filing, the Returns
were accurate and complete in all material respects and
do not contain a disclosure statement under Code Section
6662 (or any predecessor provision or comparable
provision of any Law);
(c) all Taxes that are due have been timely paid, or
withheld and remitted to the appropriate Taxing
Authority;
(d) the Company is not delinquent in the payment of
any material Tax or has requested any extension of time
within which to file any Return and has not yet filed
such Return;
(e) the Company has not been granted any extension or
waiver of the statute of limitations period applicable to
any Return, which period (after giving effect to such
extension or waiver) has not yet expired;
(f) the Company is not a party to or bound by any
closing agreement or offer in compromise with any Taxing
Authority;
(g) there is no claim, audit, action, suit,
proceeding, or, to the best of the Knowledge of the
Company and the Shareholders, any investigation now
pending against or with respect to the Company in
respect of any Tax or Tax Asset;
(h) there are no requests for rulings or
determinations in respect of any Tax or Tax Asset pending
between the Company and any Taxing Authority;
(i) the Company is not a party to any agreement,
contract, arrangement or plan that has resulted or would
result, separately or in the aggregate, in connection
with this Agreement or any change of control of the
Company, in the payment of any "excess parachute
payments" within the meaning of Code Section 280G;
(j) the Company has not agreed to make, or is not
required to make, any adjustment under Code Section 263A
or 481(a) or any comparable provision of state or foreign
Tax laws by reason of a change in accounting method or
otherwise, and the Company has not taken action which is
not in accordance with past practice that could defer a
Liability for Taxes of the Company from any Pre-Closing
Tax Period to any Post-Closing Tax Period;
(k) there are no liens for Taxes upon the assets of
the Company except liens for current Taxes not yet
delinquent;
(l) no Shareholder is subject to withholding under
Code Section 1445 with respect to any transaction
contemplated hereby;
(m) the Company is not currently under any contractual
obligation to pay any amounts of the type described in
clause (ii) or (iii) of the definition of "Tax;"
(n) the Company does not have and has not had or has
had a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention
between the United States and such foreign country, and
the Company has not engaged in a trade or business
within, or derived any income from any foreign country;
(o) the Company is not a party to any joint venture,
partnership, or other arrangement or contract which could
be treated as a partnership for Federal, state, local or
foreign Tax purposes;
(p) to the best of the Knowledge of the Company and
the Shareholders, the provision for Taxes on the
Unaudited Interim Balance Sheet (excluding deferred
taxes) is at least equal, as of the date thereof, to all
unpaid Taxes of the Company, whether or not disputed, for
the Pre-Closing Tax Period and the provision for Taxes on
the Closing Date Balance Sheet (excluding deferred taxes)
will be at least equal, as of the date thereof, to all
unpaid Taxes of the Company, whether or not disputed, for
the Pre-Closing Tax Period; and
(q) the Company's adjusted tax basis in the property,
plant and equipment for Federal Tax purposes on the
Closing Date shall be zero.
Part 2.14 of the Disclosure Schedule contains a complete and
accurate list of all jurisdictions to which any material Tax is
properly payable by the Company.
2.15 Employee Benefit Plans; Labor and Employment Matters.
(a) Part 2.15(a) of the Disclosure Schedule sets forth
a true, correct and complete list of all of (i) the
employee benefit plans, arrangements or policies (whether
or not written), whether U.S. or foreign, and whether or
not subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), including, without
limitation, any stock option, stock purchase, stock
award, retirement, pension, deferred compensation, profit
sharing, savings, incentive, bonus, health, dental,
hearing, vision, drug, life insurance, cafeteria,
flexible spending, dependent care, fringe benefit,
vacation pay, holiday pay, disability, sick pay, workers
compensation, unemployment, severance pay, employee loan,
educational assistance plan, policy or arrangement, and
(ii) any employment, indemnification, consulting or
severance agreement, under which any current or former
employee or director of the Company has any present or
future right to benefits or under which the Company has
any present or future liability (collectively, the
"Plans"). Neither the Company nor any of its Affiliates
has communicated to present or former employees of the
Company or formally adopted or authorized any
additional Plan or any change in or termination of any existing
Plan. No Plan covers employees other than employees of
the Company.
(b) The Company has delivered to Parent a complete and
current copy of each Plan document or a written
description of any unwritten Plan; any employee handbook
applicable to employees of the Company; and with respect
to any Plan, any related trust agreement or insurance
contract, the most recent summary plan description, the
most recent IRS determination letter, and the two most
recent Forms 5500 or 5500-C/R (including all attached
schedules) and financial statements.
(c) Except as set forth on Part 2.15(c) of the
Disclosure Schedule:
(i) Each Plan has been established and
administered in accordance with its terms and all
applicable Legal Requirements.
(ii) Each Plan intended to be tax-qualified under
Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service as
to its tax-qualified status under the Code and nothing
has occurred since the date of such favorable
determination letter which would adversely affect the
qualified status of such Plan.
(iii) All contributions and premiums required to
have been paid under or with respect to any Plan have
been timely paid.
(iv) Each individual who is characterized by the
Company as an independent contractor for purposes of
income tax withholding or employment or unemployment
taxes has been appropriately classified as an independent
contractor under IRS Rev. Rul. 87-41 or Section 530 of
the Revenue Act of 1978.
(d) With respect to any Plan, no actions, suits,
claims or proceedings (other than routine claims for
benefits) are pending or, to the best of the Company's
and the Shareholders' Knowledge, threatened, and no facts
or circumstances exist which could be reasonably expected
to give rise to any such actions, suits, claims or
proceedings. No Plan is currently under any governmental
investigation or audit and, to the best of the Company's
and the Shareholder's Knowledge, no such investigation or
audit is contemplated or under consideration.
(e) No event has occurred and no condition exists that
could be reasonably expected to subject Parent, the
Company or any Plan, directly or indirectly (through an
indemnification agreement or otherwise), to a liability
for a breach of fiduciary duty, a "prohibited
transaction," within the meaning of Section 406 of ERISA
or Section 4975 of the Code, or any tax, fine or penalty
under ERISA or the Code.
(f) The Company has never maintained or contributed
to, or had an obligation to contribute to, (i) a "single-
employer plan" within the meaning of Section 4001(a)(15)
of ERISA, (ii) a plan subject to Section 412 of the Code,
(iii) a plan subject to Section 4063 or 4064 of ERISA, or
(iv) a "multiemployer plan" within the meaning of Section
3(37) or 4001(a)(3) of ERISA.
(g) No Plan provides health, life insurance or other
welfare benefits to retirees or other terminated
employees of the Company, other than continuation
coverage required by Section 4980B of the Code or
Sections 601-608 of ERISA ("COBRA") or any similar State
law.
(h) The Company has no liability (contingent or
otherwise) with respect to (i) any employee benefit plan,
policy or arrangement previously maintained or
contributed to by the Company or (ii) any employee
benefit plan, policy or arrangement currently or
previously maintained or contributed to by an Affiliate
of the Company, including, without limitation, liability
under Section 412, 4971 or 4980B of the Code or Title IV
of ERISA.
(i) Neither the execution of this Agreement nor the
consummation of the transactions contemplated by this
Agreement, will (i) increase the amount of benefits
otherwise payable under any Plan, (ii) result in the
acceleration of the time of payment, exercisability,
funding or vesting of any such benefits, except as
provided in Part 2.15(i) of the Disclosure Schedules or
(iii) result in any payment (whether severance pay or
otherwise) becoming due to, or with respect to, any
current or former employee or director of the Company.
(j) Part 2.15(j) of the Disclosure Schedule sets forth
a true, correct and complete list of the following:
(i) all arrangements, written or oral, which
compel the employment of any person in the status of
"employee" by the Company;
(ii) the names, job titles and current salary or
wage rates of all employees of the Company and their
hourly or yearly salary, together with a summary of all
bonus, incentive compensation or other additional
compensation or similar benefits paid to such persons for
the 1997 calendar year and estimated for the 1998
calendar year;
(iii) the names of all employees of the Company who
are not actively at work for any reason other than
vacation, and the reason for such absence; and
(iv) the names, job titles and current salary or
wage rates of all independent contractors, including any
consultants, and leased employees who perform services
for the Company.
(k) No employees of the Company are, or within the
last three years have been, covered by a collective
bargaining agreement or represented by a union or other
bargaining agent, and, to the best of the Company's and
the Shareholders' Knowledge, no employee organizing
efforts are pending with respect to employees of the
Company. Within the last three years, there has been no
strike, work slowdown or other material labor dispute
with respect to employees of the Company, nor to the best
of the Company's and the Shareholders' Knowledge is any
strike, work slowdown or other material labor dispute
pending. None of the Shareholders has any reason to
believe that (i) the consummation of the Merger or any of
the other transactions contemplated by this Agreement
will have a material adverse effect on the Company's
labor relations, or (ii) any of the Company's employees
intends to terminate his or her employment with the
Company.
2.16 Environmental Matters. The Company is in compliance in all
material respects with all applicable Environmental Laws, which
compliance includes the possession by the Company of all permits and
other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the
terms and conditions thereof. The Company has not
received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens
group, employee or otherwise, that alleges that the
Company is not in compliance with any Environmental Law, and, to the
best of the Knowledge of the Company and the Shareholders, there are
no circumstances that may prevent or interfere with the Company's
compliance with any Environmental Law in the future. To the best of
the Knowledge of the Company and the Shareholders, no current
or prior owner of any property leased or controlled by
the Company has received any notice or other
communication (in writing or otherwise), whether from a
Government Body, citizens group, employee or otherwise,
that alleges that such current or prior owner or the
Company is not in compliance with any Environmental Law.
All Governmental Authorizations currently held by the
Company pursuant to Environmental Laws are identified in
Part 2.16 of the Disclosure Schedule. (For purposes of
this Section 2.16: (i) "Environmental Law" means any
federal, state, local or foreign Legal Requirement
relating to pollution or protection of human health or
the environment (including ambient air, surface water,
ground water, land surface or subsurface strata),
including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Materials of
Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is
otherwise a danger to health, reproduction or the
environment.)
2.17 Insurance. Part 2.17 of the Disclosure
Schedule identifies all insurance policies maintained by,
at the expense of or for the benefit of the Company (the
"Insurance Policies") and identifies any material claims
made thereunder, and the Company has delivered to Parent
accurate and complete copies of the Insurance Policies.
Each of the Insurance Policies is in full force and
effect. Part 2.17 of the Disclosure Schedule also sets
forth for each Insurance Policy the type of coverage, the
name of the insureds, the insurer, the premium, the
expiration date, the period to which it relates, the
deductibles and loss retention amounts and the amounts of
coverage. Since December 31, 1992, the Company has not
received any notice or other communication regarding any
actual or possible (a) cancellation or invalidation of
any insurance policy, (b) refusal of any coverage or
rejection of any claim under any insurance policy, or (c)
material adjustment in the amount of the premiums payable
with respect to any insurance policy.
2.18 Related Party Transactions.
(a) Except as set forth in Part 2.18(a) of the
Disclosure Schedule: (a) no Related Party has, and no
Related Party has at any time since December 31, 1992
had, any direct or indirect interest in any material
asset used in or otherwise relating to the business of
the Company; (b) no Related Party is, or has at any time
since December 31, 1992 been, indebted to the Company;
(c) since December 31, 1992, no Related Party has entered
into, or has had any direct or indirect financial
interest in, any material Contract, transaction or
business dealing involving the Company; (d) no Related
Party is competing, or has at any time since December 31,
1992 competed, directly or indirectly, with the Company;
and (e) no Related Party has any claim or right against
the Company (other than rights under company Options and
rights to receive compensation for services performed as
an employee of the Company). (For purposes of the
Section 2.18 each of the following shall be deemed to be
a "Related Party": (i) each of the Shareholders; (ii)
each individual who is, or who has at any time since
December 31, 1992 been, an officer of the Company; (iii)
each member of the immediate family of each of the
individuals referred to in clauses "(i)" and "(ii)"
above; and (iv) any trust or other Entity (other than the
Company) in which any one of the individuals referred to
in clauses "(i)", "(ii)" and
"(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.)
(b) Part 2.18(b) of the Disclosure Schedule identifies
and describes all transactions between AirTek or ▇▇▇▇▇▇▇
and the Company between January 1, 1997 and the date
hereof.
2.19 Legal Proceedings; Orders.
(a) Except as set forth in Part 2.19(a) of the
Disclosure Schedule, there is no pending Legal
Proceeding, and (to the best of the Knowledge of the
Company and the Shareholders) no Person has threatened to
commence any Legal Proceeding: (i) that involves the
Company or any of the assets owned or used by the Company
or any Person whose liability the Company has or may have
retained or assumed, either contractually or by operation
of law; or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or
otherwise interfering with, the Merger or any of the
other transactions contemplated by this Agreement. To
the best of the Knowledge of the Company and the
Shareholders, except as set forth in Part 2.19(a) of the
Disclosure Schedule, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that
will, or that could reasonably be expected to, give rise
to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) Except as set forth in Part 2.19(b) of the
Disclosure Schedule, no Legal Proceeding has ever been
commenced by or has ever been pending against the
Company.
(c) There is no order, writ, injunction, judgment or
decree to which the Company, or any of the assets owned
or used by the Company, is subject. None of the
Shareholders is subject to any order, writ, injunction,
judgment or decree that relates to the Company's business
or to any of the assets owned or used by the Company. To
the best of the Knowledge of the Company and the
Shareholders, no officer or other employee of the Company
is subject to any order, writ, injunction, judgment or
decree that prohibits such officer or other employee from
engaging in or continuing any conduct, activity or
practice relating to the Company's business.
2.20 Authority;Binding Nature of Agreement. The Company has the
absolute and unrestricted right, power and authority to
enter into and to perform its obligations under this
Agreement; and the execution, delivery and performance by
the Company of this Agreement have been duly authorized
by all necessary action on the part of the Company, its
board of directors and its shareholders. This Agreement
constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in
accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing
specific performance, injunctive relief and other
equitable remedies.
Non-Contravention; Consents.2.21Non-Contravention;
Consents. Except as set forth in Part 2.21 of the
Disclosure Schedule, neither (1) the execution, delivery
or performance of this Agreement or any of the other
Transactional Agreements, nor (2) the consummation of the
Merger or any of the other transactions contemplated by
this Agreement, will directly or indirectly (with or
without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the Company's articles of incorporation or
bylaws, or (ii) any resolution adopted by the Company's shareholders,
the Company's board of directors or any committee of the Company's
board of directors;
(b) contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the
right to challenge any of the transactions contemplated
by this Agreement or to exercise any remedy or obtain any
relief under, any applicable Legal Requirements or any
order, writ, injunction, judgment or decree to which the
Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a violation
of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate or modify, any Governmental
Authorization that is held by the Company or that
otherwise relates to the Company's business or to any of
the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation
or breach of, or result in a default under, any provision
of any Company Contract that is or would constitute a
Material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such
Company Contract, (ii) accelerate the maturity or
performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien
or other Encumbrance upon or with respect to any asset
owned or used by the Company (except for minor liens that
will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or
materially impair the operations of the Company).
Except as set forth in Part 2.21 of the Disclosure Schedule, the
Company is not and will not be required to make any filing with
or give any notice to, or to obtain any Consent from, any Person
in connection with (x) the execution, delivery or performance of
this Agreement or any of the other Transactional Agreements, or
(y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
Company Action.2.22 Company Action. The Board of
Directors of the Company (at meetings duly called and
held), has (a) determined that the Merger is advisable
and fair and in the best interests of the Company and its
shareholders, (b) unanimously approved this Agreement and
the Merger in accordance with the provisions of
California law, (c) unanimously recommended the adoption
and approval of this Agreement and the Merger by the
holders of Company Common Stock, and (d) adopted a
resolution having the effect of causing the Company not
to be subject, to the extent permitted by applicable law,
to any state takeover law that may purport to be
applicable to the Merger and the other transactions
contemplated by this Agreement.
Shareholder Approval.2.23 Shareholder Approval. The
holders of all of the outstanding shares of Company
Common Stock have adopted and approved this Agreement,
the Merger and the other transactions contemplated by
this Agreement. None of the outstanding shares of Company
Common Stock is, or may become, "dissenting shares"
within the meaning of Section 1300(b) of the California
General Corporation Law.
SEC Filings.2.24 SEC Filings. Parent has heretofore
delivered to the Company, and the Company acknowledges
receipt of, the Parent Reports.
Advisory Fees.2.25 Advisory Fees. There is no
investment banker, broker, finder or other intermediary
or advisor that has been retained by or is authorized to
act on behalf of any Shareholder or the Company who
might be entitled to any fee, commission or reimbursement of
expenses from Parent upon consummation of the
transactions contemplated by this Agreement.
SECTION 3. Representations and Warranties of Shareholders
Except where limited to a specific Shareholder, each
Shareholder represents and warrants to and for the benefit of the
Indemnitees as follows:
3.1 Shares. Such Shareholder is the owner, of
record and beneficially, of all of the shares of Company
Common Stock described as owned by such Shareholder in
Part 2.3(a) of the Disclosure Schedule, owns such shares
free and clear of any and all Encumbrances, and has full
power and authority to deliver such Shares to Parent and
to transfer to Parent at the Effective Time good, valid
and marketable title to such shares, free and clear of
any and all Encumbrances, without obtaining the consent
or approval of any third party. Such Shareholder has
delivered to Parent an accurate and complete copy of the
stock certificate representing the shares of Company
Common Stock held by such Shareholder.
3.2 Authority of Shareholders; Binding Nature of Agreements.
(a) (i) Such Shareholder has the requisite right,
power and capacity to enter into and to perform such
Shareholder's obligations under each of the Transactional
Agreements to which such Shareholder is a party; (ii)
this Agreement constitutes the legal, valid and binding
obligation of such Shareholder, enforceable against such
Shareholder in accordance with its terms, subject to (A)
laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (B) rules of
law governing specific performance, injunctive relief and
other equitable remedies; and (iii) upon the execution of
each of the other Transactional Agreements at the
Closing, each of such other Transactional Agreements to
which such Shareholder becomes a party will constitute
the legal, valid and binding obligation of such
Shareholder, and will be enforceable against such
Shareholder in accordance with its terms, subject to (A)
laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (B) rules of
law governing specific performance, injunctive relief and
other equitable remedies.
(b) (i) The spouse of such Shareholder, if applicable,
has the requisite right, power and capacity to execute
and deliver and to perform his or her obligations under
the Spousal Consent being executed by him or her; and
(ii) such Spousal Consent constitutes such spouse's
legal, valid and binding obligation, enforceable against
such spouse in accordance with its terms, subject to (A)
laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (B) rules of
law governing specific performance, injunctive relief and
other equitable remedies.
3.3 Non-Contravention; Consents. Except as set forth in Part 3.3 of the
Disclosure Schedule, neither the execution and delivery
of any of the Transactional Agreements by such
Shareholder, nor the consummation or performance by such
Shareholder of any of the Transactions to which it is a
party, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the
right to challenge any of the Transactions or to exercise
any remedy or obtain any relief under, any material
applicable Legal Requirements or Order to which such
Shareholder is subject; or
(b) contravene, conflict with or result in a violation
or breach of or a default under any provision of, or give
any Person the right to declare a default under, any
material Contract to which such Shareholder is a party or
by which such Shareholder is bound.
Except as set forth in Part 3.3 of the Disclosure Schedule, such
Shareholder was not, is not and will not be required to make any
filing with or give any notice to, or to obtain any material
Consent from, any Person in connection with the execution and
delivery of any of the Transactional Agreements or the
consummation or performance of any of the Transactions.
3.4 Ability.
(a) Except as set forth in Part 3.4 of the Disclosure
Schedule, such Shareholder:
(i) has not (A) at any time since August 1, 1995
made a general assignment for the benefit of creditors,
(B) at any time since August 1, 1995 filed, or had filed
against such Shareholder, any bankruptcy petition or
similar filing, (C) at any time since August 1, 1995
suffered the attachment or other judicial seizure of all
or a substantial portion of such Shareholder's assets,
(D) at any time since August 1, 1995 admitted in writing
such Shareholder's inability to pay such Shareholder's
debts as they become due, or (E) taken or been the
subject of any action that may have an adverse effect on
such Shareholder's ability to comply with or perform any
of such Shareholder's covenants or obligations under any
of the Transactional Agreements; and
(ii) is not subject to any Order that would have a
material adverse effect on such Shareholder's ability to
comply with or perform any of such Shareholder's
covenants or obligations under any of the Transactional
Agreements.
(b) (i) There is no Proceeding pending, and to the
Knowledge of such Shareholder no Person has threatened to
commence any Proceeding against such Shareholder, that
would reasonably be expected to have a material adverse
effect on the ability of such Shareholder to comply with
or perform any of such Shareholder's covenants or
obligations under any of the Transactional Agreements;
and (ii) to the Knowledge of such Shareholder, no event
has occurred, and no claim, dispute or other condition or
circumstance exists, that would reasonably be expected to
give rise to or serve as a basis for the commencement of
any such Proceeding.
3.5 Investment Representations.
(a) Such Shareholder is aware (i) that the Parent
Common Stock to be issued to such Shareholder in
connection with the Merger will not be registered and
will not be issued pursuant to a registration statement
under the Act, but will instead be issued in reliance on
the exemption from registration set forth in Section 4(2)
of the Act and in Rule 506 under the Act and (ii) that
neither the Merger nor the issuance of such Parent Common
Stock has been approved or reviewed by the Securities and
Exchange Commission (the "SEC") or by any other
governmental agency.
(b) Such Shareholder is aware that (i) because the
Parent Common Stock to be issued in connection with the
Merger will not be registered under the Act at the time
of issuance, such Parent Common Stock cannot be resold
unless such Parent Common Stock is registered under the
Act or unless an exemption from registration is
available; and (ii) (A) except as expressly provided in
the Registration Rights Agreement, Parent will be under
no obligation to file a registration
statement with respect to the Parent Common Stock to be issued to
such Shareholder in connection with the Merger; and (B) the
provisions of Rule 144 under the Act, if applicable, will
permit resale of the Parent Common Stock to be issued to
such Shareholder in connection with the Merger only under
limited circumstances, and such Parent Common Stock must
be held by such Shareholder for at least one year before
it can be sold pursuant to Rule 144.
(c) The Parent Common Stock to be issued to such
Shareholder in connection with the Merger will be
acquired by such Shareholder for investment and for his,
her or its own account, and not with a view to, or for
resale in connection with, any unregistered distribution
thereof.
(d) Each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ Mahkamreh and Adel ▇▇▇▇▇▇
▇▇▇▇▇▇▇ represents and warrants to and for the benefit of
Parent that he or she has appointed purchaser
representatives (each, a "Shareholder Representative") to
act as his or her purchaser representative in connection
with his, her or its evaluation of the merits and risks
of the Merger and such Shareholder's investment in Parent
Common Stock. Such Shareholder further acknowledges to
and for the benefit of Parent that he or she has read and
understands the Disclosure Documents (as defined below)
(including the exhibits thereto) and has had the
opportunity to meet with his or her Shareholder
Representative for the purpose of discussing the merits
and risks of the Merger and such Shareholder's proposed
investment in Parent Common Stock.
(e) Such Shareholder has received, reviewed and
considered Parent's annual report on Form 10-K for the
fiscal year ended December 31, 1997 and reports or
documents required to be filed by Parent under Sections
13(a), 14(a), 14(c) and 15(d) of the Exchange Act since
the filing of the annual report on Form 10-K with respect
to the Merger and the transactions contemplated by this
Agreement (the "Disclosure Documents").
(f) Such Shareholder has been given the opportunity:
(i) to ask questions of, and to receive answers from,
persons acting on behalf of the Company and Parent
concerning the terms and conditions of the Merger and
the contemplated issuance of Parent Common Stock in
connection with the Merger, and the business, properties,
prospects and financial condition of the Company and
Parent; and (ii) to obtain any additional information (to
the extent the Company or Parent possesses such
information or is able to acquire it without unreasonable
effort or expense and without breach of confidentiality
obligations) requested to verify the accuracy of the
information set forth in the Disclosure Document.
(g) (i) Such Shareholder either alone or with his or
her Shareholder Representative is knowledgeable,
sophisticated and experienced in making, and is qualified
to make, decisions with respect to investments in
securities presenting investment decisions like that
involved in such Shareholder's contemplated investment in
the Parent Common Stock to be issued in connection with
the Merger; (ii) such Shareholder understands and has
fully considered the risks of acquiring and owning Parent
Common Stock and further understands that: (A) an
investment in Parent Common Stock is a speculative
investment which involves a high degree of risk; and (B)
there are substantial restrictions on the transferability
of the Parent Common Stock to be issued in connection
with the Merger, and, accordingly, it may not be possible
for such Shareholder to liquidate his, her or its
investment in such Parent Common Stock (in whole or in
part) in the case of emergency; and (iii) such
Shareholder is able to hold the
Parent Common Stock that he, she or it is to receive in the
connection with Merger for a substantial period of time.
(h) Parent will rely on his, her or its
representations and warranties set forth in this Section
3.5 for purposes of determining his, her or its
suitability as an investor in Parent Common Stock and for
purposes of confirming the availability of an exemption
from the registration requirements of the Act.
3.6 SEC Filings. Parent has heretofore
delivered to such Shareholder, and such Shareholder
acknowledges receipt of, the Parent Reports.
SECTION 4. Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub jointly and severally represent and
warrant to the Company and the Shareholders as follows:
4.1 Organization and Good Standing.
(a) Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State
of Delaware.
(b) Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Delaware. Parent is the sole stockholder of
Merger Sub. Parent owns all of the outstanding capital
stock of Merger Sub, free and clear of all Encumbrances.
Merger Sub is disregarded as an entity separate from
Parent for federal tax purposes.
4.2 Authorization and Enforceability. With respect to each of Parent
and Merger Sub: (a) such entity has full power and authority
to execute, deliver and perform this Agreement and the
other Transactional Agreements to which such entity is a
party, (b) the execution, delivery and performance by
such entity of this Agreement and the other Transactional
Agreements to which such entity is a party have been duly
authorized by all necessary action on the part of such
entity, (c) this Agreement and the other Transactional
Agreements to which either entity is a party have been
duly executed and delivered by such entity, and (d) each
of this Agreement and each of the other Transactional
Agreements to which such entity is a party is a legal,
valid and binding obligation of such entity, enforceable
against such entity in accordance with its terms.
4.3 No Violation of Laws or Agreements. The execution, delivery, and
performance by Parent and Merger Sub of this Agreement
and the other Transactional Agreements to which either
entity is a party do not, and the consummation by Parent
and Merger Sub (as applicable) of the transactions
contemplated hereby and thereby will not, (a) contravene
any provision of the Certificate of Incorporation or
Bylaws of Parent or Merger Sub, or (b) violate, conflict
with, result in a breach of, or constitute a default (or
an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or
result in or permit the termination, modification,
acceleration, or cancellation of, (i) any indenture,
mortgage, loan or credit agreement, license, instrument,
lease, contract, plan, permit or other agreement or
commitment, oral or written, to which either Parent or
Merger Sub is a party, or by which any of either entity's
assets may be bound or affected, or (ii) any judgment,
injunction, writ, award, decree, restriction, ruling, or
order of any arbitrator or Governmental Body or any
applicable Legal Requirement to which Parent or Merger
Sub is subject.
4.4 Consents. No Consent of, or registration or filing with, any
Person (governmental or private) is required in connection with the
execution, delivery and performance by Parent or Merger Sub
of this Agreement, the other Transactional Agreements to which
Parent or Merger Sub is a party, or the consummation by Parent or
Merger Sub of the transactions contemplated hereby or
thereby except any required Consent of, or registration
or filing with, any foreign Governmental Body.
4.5 Parent Common Stock. As of the date hereof, 1,000,000,000
shares of Parent Common Stock are authorized for issuance.
As of September 30, 1998, 560,050,080 shares of Parent Common
Stock were issued and outstanding and 156,407,404 shares of Parent
Common Stock were held in the treasury of Parent or owned by any
Subsidiary of Parent. Parent has a sufficient number of
unreserved shares of Parent Common Stock to perform the
transactions contemplated hereby. All shares of Parent
Common Stock to be issued in connection with the Merger,
when so issued, will be duly authorized, validly issued,
fully paid and non-assessable, free of preemptive rights
and all Encumbrances and will be issued in compliance
with all applicable Legal Requirements.
4.6 SEC Filings. Parent has heretofore
delivered to the Company and the Shareholders the
following documents (the "Parent Reports"): (a) Parent's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, (b) Parent's Quarterly Reports on Form
10-Q for the fiscal quarters ended March 31, 1998 and
June 30, 1998, (c) Parent's proxy statement relating to
its 1998 Annual Meeting of Stockholders, (d) Parent's
Annual Report to Stockholders for 1997, and (e) any other
report filed during 1998, and prior to the date of this
Agreement, with the Securities and Exchange Commission
under the Securities Act or the Exchange Act. As of
their respective dates, each of the Parent Reports
complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case
may be, and none contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading. Since
January 1, 1998, Parent has timely filed all reports and
registration statements and made all filings required to
be filed with the SEC under the rules and regulations of
the SEC.
4.7 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial
statements of Parent and its consolidated subsidiaries
included in or incorporated by reference into the Parent
Reports (including any related notes and schedules) have been prepared
in accordance with GAAP (except as may be indicated in the
notes thereto or as permitted by the Securities Act or
the Exchange Act in the case of unaudited financial
statements included in or incorporated by reference into
the Parent Reports) and fairly present the consolidated
financial position of Parent and its consolidated
subsidiaries as of the dates thereof and the consolidated
results of their operations for the periods then ended,
subject, in the case of the unaudited consolidated
interim financial statements, to normal year-end
adjustments and any other adjustments described therein.
4.8 Brokerage. Neither Parent, Merger Sub nor
any of their respective Affiliates has made any agreement
or taken any other action which might cause any
Shareholder to become liable for a broker's or finder's
fee or commission as a result of the transactions
contemplated hereunder.
SECTION 5. Covenants of the Parties
5.1 Confidentiality.
(a) From and after the Closing Date, each Shareholder
shall (x) treat and hold as confidential all information
concerning the conduct, affairs or operations of the
Company's or Parent's business ("Confidential
Information"), and (y) refrain from using any
Confidential Information in any manner detrimental to
Parent or the Company. This Section 5.1 will not apply
to any Confidential Information which (i) is generally
available to the public (other than by reason of any
disclosure by any Shareholder which constitutes or is the
result of a breach of this Section 5.1), (ii) is
available to any Shareholder from a third party not known
to such Shareholder to be under an obligation to Parent
to keep such information confidential or (iii) is
independently developed by such Shareholder. If any
Shareholder is compelled (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, such Shareholder will notify Parent promptly
after such Shareholder becomes aware of such requirement
and shall cooperate with Parent so that Parent may (at
Parent's expense) seek an appropriate protective order.
If any Shareholder, on the advice of counsel, is
compelled to disclose any Confidential Information to any
Governmental Body, such Shareholder will use reasonable
efforts to ensure that such disclosure is limited to that
Confidential Information which is so required to be
disclosed.
(b) The parties hereto recognize and agree that in the
event of a breach by any Shareholder of the provisions of
this Section 5.1, money damages would not be an adequate
remedy to Parent or its Affiliates for such breach and,
even if money damages were adequate, it would be
impossible to ascertain or measure with any degree of
accuracy the damages sustained by Parent. Accordingly,
if there should be a breach or threatened breach by any
Shareholder of the provisions of this Section 5.1, Parent
and its Affiliates shall be entitled to an injunction
restraining such Shareholder from any breach without
showing or proving actual damage sustained by Parent, as
the case may be. Nothing in the preceding sentence shall
limit or otherwise affect any remedies that Parent may
otherwise have under applicable law.
5.2 Tax Matters.
(a) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees
(including any penalties and interest) incurred in
connection with this Agreement (including any real
property transfer tax and any similar Tax) shall be paid
by the Shareholders when due, and the Shareholders will,
at their own expense, file all necessary Tax Returns and
other documentation with respect to all such Taxes and
fees, and, if required by applicable Legal Requirements,
the Company will, and will cause its Affiliates to, join
in the execution of any such Tax Returns and other
documentation.
(b) At its option, the Company may elect, for any Post-
Closing Tax Period, where permitted by applicable Legal
Requirements, to carry forward any Tax Asset that would,
absent such election, be carried back to a Pre-Closing
Tax Period in which the Company filed a separate Tax
Return.
(c) On or prior to the Closing Date, any Tax Sharing Agreements
to which the Company is a party shall terminate as to the Company and
the Company shall not thereafter have any liability under any
such Tax Sharing Agreements.
5.3 Tax Refund. Each Shareholder shall be
entitled to retain any Tax refund and interest thereon
that is paid to such Shareholder in connection with any
item of the Company reflected in a Federal Tax Return, or
a Separate Tax Return (to the extent a refund for such
Separate Tax Return is not reflected in Closing Date
Balance Sheet) filed by such Shareholder for any Pre-
Closing Tax Period, unless such refund is attributable to
a carryback from a Post-Closing Tax Period, in which case
such refund shall belong to the Company.
5.4 Cooperation on Tax Matters.
(a) The Company and each Shareholder shall cooperate
fully, as and to the extent reasonably requested by the
other party, in connection with the preparation and
filing of any Tax Return, statement, report or form
(including any report required pursuant to Section 6043
of the Code and all Treasury Regulations promulgated
thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include
the preparation of Pro Forma Returns as set forth in
Section 5.4(b) and 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 Company and each Shareholder agree (i) to
retain all books and records under their respective
control with respect to Tax matters pertinent to the
Company relating to any Pre-Closing Tax Period until the
expiration of the applicable statute of limitations
(taking into account any waivers or extensions) or, if
sooner, such time as a Final Determination shall have
been made with respect to Taxes for such period, and to
abide by all record retention agreements entered into
with any Taxing Authority, and (ii) to give the other
party reasonable written notice prior to destroying or
discarding any such books and records and, if either
party so requests, the other party shall allow the
requesting party to take possession of such books and
records.
(b) On April 30, 1999 with respect to the tax year
ending on the Closing Date, the Company shall deliver to
each Shareholder a draft of a pro forma Federal Tax
return (a "Pro Forma Federal Return") and appropriate pro
forma State Tax returns (a "Pro Forma State Return" and
together with the Pro Forma Federal Returns, the "Pro
Forma Returns") of the Company for the tax year beginning
on January 1, 1998 and ending on the Closing Date,
prepared in accordance with Section 5.4(c). Each
Shareholder shall have the right at such Shareholder's
expense to review all work papers and procedures used to
prepare the Pro Forma Returns.
(c) The Pro Forma Returns shall be prepared as if the
Company were filing its own separate return for all Pre-
Closing Tax Periods; provided, however, that income,
deductions, credits and losses shall be computed in a
manner consistent with past practices. The Shareholders
and Parent agree that the Company will prepare the Pro
Forma Federal Return for the period beginning January 1,
1998 and ending on the Closing Date pursuant to Treasury
Regulations Section 1.1502-76(b)(2) (and will not elect to ratably
allocate non-extraordinary items for the year in which the Closing
Date occurs pursuant to Treasury Regulations Section
1.1502-76(b)(2)(ii), but may ratably allocate non-extraordinary
items for the month in which the Closing Date occurs pursuant to
Treasury Regulations Section 1.1502-76(b)(2)(iii)).
The Pro Forma State Return shall be prepared in
accordance with comparable provisions under applicable
Legal Requirements.
(d) The Shareholders and Parent further agree, upon
request, to use all reasonable efforts to obtain, or
cause the Company to obtain any certificate or other
document from any governmental authority or customer of
the Company or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to
the transactions contemplated by this Agreement).
5.5 Tax Indemnification.
(a) The Shareholders, jointly and severally, shall
indemnify each of the Indemnitees from and against, and
shall compensate and reimburse each of the Indemnitees
for, any Damages which are directly or indirectly
suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject
(regardless of whether or not such Damages relate to any
third-party claim) and which arise from or as a result
of, or are directly or indirectly connected with any (i)
Tax of the Company related to the Tax Indemnification
Period, (ii) Tax of the Company resulting from any
inaccuracy in or breach of Section 2.14 or any breach of
the Shareholders' obligations under Section 5.2 and (iii)
Liabilities arising out of or incident to the imposition,
assessment or assertion of any Tax described in clause
(i) or (ii), including those incurred in the contest in
good faith appropriate proceedings relating to the
imposition, assessment or assertion of any such Tax, and
any Liability as transferee (the sum of (i), (ii) and
(iii) being referred to herein as a "Loss"), provided,
however, that the Shareholders shall not be obligated to
pay any Loss attributable to a Separate Tax except to the
extent that the aggregate amount of such Losses exceeds
the amount of any reserve for Tax liabilities
attributable to Separate Taxes (excluding deferred taxes)
reflected in the Closing Balance Sheet.
(b) For purposes of this Section 5.5, in the case of
any Taxes that are imposed on a periodic basis and are
payable for a Tax period that includes (but does not end
on) the last day of the applicable Tax Indemnification
Period (the "Allocation Date"), the portion of such Tax
related to the applicable Tax Indemnification Period
shall (i) in the case of any Taxes other than gross
receipts, sales or use Taxes and Taxes based upon or
related to income, be deemed to be the amount of such Tax
for the entire Tax period multiplied by a fraction the
numerator of which is the number of days in the Tax
period ending on and including the Allocation Date and
the denominator of which is the number of days in the
entire Tax period, and (ii) in the case of any Tax based
upon or related to income and any gross receipts, sales
or use Tax, be deemed equal to the amount which would be
payable if the relevant Tax period ended on and included
the Allocation Date. The portion of any credits relating
to a Tax period that begins before and ends after the
Allocation Date shall be determined as though the
relevant Tax period ended on and included the Allocation
Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner
consistent with prior practice of the Company.
(c) Upon payment by any Indemnitee of any Loss, the
Shareholders shall discharge their obligation to
indemnify such Indemnitee against such Loss by paying to
a such Indemnitee or the Company, as designated by
Parent, an amount equal to the amount of such Loss.
(d) Any payment pursuant to this Section 5.5 shall be
made not later than 30 days after receipt by the
Shareholders' Agent of written notice from Parent or the
Company stating that any Loss has
been paid by an Indemnitee and the amount thereof and of the
indemnity payment requested.
(e) Parent agrees to give, or cause the Company to
give, prompt notice to the Shareholders' Agent of any
Loss or the assertion of any claim, or the commencement
of any Legal Proceeding in respect of which indemnity may
be sought hereunder which Parent deems to be within the
ambit of this Section 5.5 (specifying with reasonable
particularity the basis therefore) and will give the
Shareholders' Agent such information with respect thereto
as the Shareholders' Agent may reasonably request. The
Shareholders' Agent may, at the expense of the
Shareholders, review all work papers and procedures used
to prepare any Separate Tax Return for any Pre-Closing
Tax Period of the Company; and participate in and, except
as provided in Section 5.5(f), upon notice to the
Company, assume the defense of any Legal Proceeding
(including any Tax audit) in respect of which indemnity
may be sought; provided that (i) the Shareholders'
counsel is reasonably satisfactory to the Company, (ii)
the Shareholders' Agent shall thereafter consult with the
Company upon the Company's reasonable request for such
consultation from time to time with respect to such Legal
Proceeding (including any Tax audit) and (iii) the
Shareholders' Agent shall not, without the Company's
consent, agree to any settlement with respect to any Tax
if such settlement could adversely affect the Tax
liability of Parent, any of its Affiliates or the
Company. If the Shareholders' Agent assumes such
defense, the Company shall have the right (but not the
duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel
employed by the Shareholders' Agent, and the
Shareholders' Agent shall not assert that the Loss, or
any portion thereof, with respect to which the Company
seeks indemnification is not within the ambit of this
Section 5.5. If the Shareholders' Agent elects not to
assume such defense, the Company may pay, compromise or
contest the Tax at issue. The Shareholders shall be
liable for the fees and expenses of counsel employed by
the Company for any period during which the Shareholders'
Agent has not assumed the defense a Legal Proceeding.
Whether the Shareholders' Agent chooses to defend or
prosecute any claim, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
(f) The Company shall control the defense of any claim
that relates to (i) Taxes described in Section 5.5(b) or
(ii) any Separate Return filed by the Company.
(g) The Shareholders shall not be liable under this
Section 5.5 with respect to any Tax resulting from a
claim or demand the defense of which the Shareholders
were not offered the opportunity to assume as provided
under Section 5.5(e) to the extent that the Shareholders'
liability under this Section 5.5 is adversely affected as
a result thereof. No investigation by Parent or any of
its Affiliates at or prior to the Closing Date shall
relieve the Shareholders of any Liability hereunder.
(h) Any claim of any Indemnitee under this Section 5.5
may be made and enforced by Parent or the Company on
behalf of such Indemnitee.
Treatment of Certain Payments.5.6 Treatment of Certain
Payments. Any amount paid to an Indemnitee under Section
5.2 shall be treated as a reduction in the purchase
price.
5.7 Interest. Any payment required to be made under Section 5.5 that
is not made when due shall bear interest at the rate per annum
determined from time to time under the provisions of Code Section
6621(a)(2) for each day until paid.
SECTION 6. Deliveries to Parent, Merger Sub and the Company at the Closing
Each Shareholder shall cause to be delivered to Parent,
Merger Sub and the Company the following agreements and
documents, each of which shall be in full force and effect:
(a) all Consents required to be obtained in connection
with the Merger and the other transactions contemplated
by this Agreement (including the consents identified in
Part 2.21 of the Disclosure Schedule);
(b) Escrow Agreement in the form of Exhibit E,
executed by each of the Shareholders and the Escrow
Agent;
(c) Registration Rights Agreement in the form of
Exhibit F, executed by each of the Shareholders;
(d) Retention Agreements in the form of Exhibit G,
executed by the individuals identified on Exhibit H;
(e) Noncompetition Agreements in the form of Exhibit
I, executed by the Shareholders and the individuals
identified on Exhibit H;
(f) a Release in the form of Exhibit J, executed by
each of the Shareholders;
(g) intellectual, covenants property and
confidential information agreements, reasonably
satisfactory in form and content to Parent, executed by
all employees and former employees of the Company and by
all consultants and independent contractors and former
consultants and former independent contractors to the
Company who have not already signed such agreements
(including the individuals identified in Part 2.9(f) of
the Disclosure Schedule);
(h) statement conforming to the requirements of
▇▇▇▇▇▇▇ ▇.▇▇▇ - ▇(▇)(▇)(▇) ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Treasury
Regulations;
(i) an estoppel certificate, dated as of a date not
more than five days prior to the Closing Date and
satisfactory in form and content to Parent, executed by
AMB Property L.P.;
(j) a legal opinion of Sweeney, Mason, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇, dated as of the Closing Date, in the form of
Exhibit K;
(k) written resignations of all directors and officers
of the Company, effective as of the Effective Time;
(l) evidence, reasonably satisfactory to Parent, as to
the repayment in full of the Shareholders' Notes; and
(m) original stock certificates and duly executed
instruments of transfer with respect to all outstanding
shares of Company Common Stock.
SECTION 7. Deliveries to Shareholders at the Closing
Parent shall cause to be delivered to the Shareholders the
following documents, each of which shall be in full force and effect:
(a) Escrow Agreement in the form of Exhibit E,
executed by the Escrow Agent, Parent and the Company;
(b) Registration Rights Agreement in the form of
Exhibit F, executed by Parent and the Company;
(c) Retention Agreements in the form of Exhibit G,
executed by Parent and the Company;
(d) stock certificates representing the shares of
Parent Common Stock to be issued pursuant to Section
1.5(a); and
(e) a legal opinion of Deputy General Counsel of
Parent dated as of the Closing Date, in the form of
Exhibit L.
SECTION 8. Indemnification, Etc
8.1 Survival of
Representations, Etc
(a) The representations and warranties made by the
Shareholders (including the representations and
warranties set forth in Sections 2 and 3) shall survive
the Closing and shall expire on the first anniversary of
the Closing Date, except that the representations and
warranties in Section 2.15 shall survive for the full
period of all applicable statutes of limitations (giving
effect to any written waiver, mitigation or extension
thereof) (the "Expiration Date"); provided, however, that
if, at any time prior to the Expiration Date, any
Indemnitee (acting in good faith) delivers to any of the
Shareholders a written notice alleging the existence of
an inaccuracy in or a breach of any of the
representations and warranties made by the Shareholders
(and setting forth in reasonable detail the basis for
such Indemnitee's belief that such an inaccuracy or
breach may exist) and asserting a claim for recovery
under Section 8.2 or 8.4 based on such alleged inaccuracy
or breach, then the claim asserted in such notice shall
survive the Expiration Date until such time as such claim
is fully and finally resolved. All representations and
warranties made by Parent and Merger Sub shall terminate
and expire as of the Effective Time, and any liability of
Parent or Merger Sub with respect to such representations
and warranties shall thereupon cease.
(b) The representations, warranties, covenants and
obligations of the Company and the Shareholders shall
provide the basis for the rights and remedies that may be
exercised by the Indemnitees, and shall not be limited or
otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge
of, any of the Indemnitees or any of their
Representatives.
(c) For purposes of this Agreement, each statement or
other item of information set forth in the Disclosure
Schedule or in any update to the Disclosure Schedule
shall be deemed to be a representation and warranty made
by the Company and the Shareholders in this Agreement.
8.2 Indemnification by Shareholders for Company Matters.
(a) From and after the Effective Time (but subject to
Section 8.3), the Shareholders, jointly and severally, shall
hold harmless and indemnify each of the Indemnitees from and
against, and shall compensate and reimburse each of the Indemnitees
for, any Damages which are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees
may otherwise become subject (regardless of whether or not such
Damages relate to any third-party claim) and which arise
from or as a result of, or are directly or indirectly
connected with: (i) any breach of any
representation or warranty set forth in Section 2 (without giving
effect to any "Material Adverse Effect" or other materiality
qualification or any similar qualification contained or
incorporated directly or indirectly in such
representation or warranty); (ii) any Environmental Laws
in respect of any condition existing on the Closing Date
that constitutes a violation of any Environmental law or
that would require under Environmental Laws any
investigation, cleanup, remediation or removal action
with respect to the presence of Hazardous Materials;
(iii) U.S. Patent No. 5,674,039 or (iv) any Legal
Proceeding relating to any breach of the type referred to
in clause "(i)" above or the matters described in clause
(ii) or (iii) above (including any Legal Proceeding
commenced by any Indemnitee for the purpose of enforcing
any of its rights under this Section 8).
(b) Notwithstanding the provisions of Section 8.2(a),
it is agreed that the Indemnitees' rights against the
Shareholders with respect to Taxes shall be governed by
Section 5.5 except as provided in Sections 8.3 and 8.5.
(c) The Shareholders acknowledge and agree that, if
the Surviving Corporation suffers, incurs or otherwise
becomes subject to any Damages as a result of or in
connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then
(without limiting any of the rights of the Surviving
Corporation as an Indemnitee) Parent shall also be
deemed, by virtue of its ownership of the stock of the
Surviving Corporation, to have incurred Damages as a
result of and in connection with such inaccuracy or
breach.
8.3Threshold; Ceiling.
(a) The Shareholders shall not be required to make any
indemnification payment pursuant to Section 5.5 or 8.2(a)
for any inaccuracy in or breach of any of their
representations and warranties set forth in Section 2 or
3 until such time as the total amount of all Damages
(including the Damages arising from such inaccuracy or
breach and all other Damages arising from any other
inaccuracies in or breaches of any representations or
warranties) that have been directly or indirectly
suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the
Indemnitees has or have otherwise become subject, exceeds
$50,000, in the aggregate. (If the total amount of such
Damages exceeds $50,000, then the Indemnitees shall be
entitled to be indemnified against and compensated and
reimbursed only for the portion of such Damages exceeding
$50,000.)
(b) Subject to Section 8.3(c), the maximum aggregate
liability of all of the Shareholders under Sections 5.5
and 8.2(a) shall be limited to Parent's right to offset
against the Earnout Amount and withhold up to the
aggregate amount of $1,000,000 pursuant to Section 1.9.
(c) The Shareholders shall not be required to make any
indemnification payment pursuant to Section 5.5 or 8.2(a)
for any matter unless Parent shall have notified the
Shareholders' Agent of a claim for indemnification
hereunder with respect to such matter on or prior to the
first anniversary hereof, except for claims under Section
8.2(a)(iii), as to which there shall be no time limit.
(d) Notwithstanding any provision in this Agreement to
the contrary, the liability of a Shareholder for fraud,
intentional misrepresentation or other willful misconduct
by such Shareholder shall not be limited as set forth in
Section 8.3(a), 8.3(b) or
8.3(c), and any claim with respect to such liability need
not be presented prior to the Expiration Date.
(e) Notwithstanding anything in this Agreement, each
Shareholder's aggregate liability with respect to any
Damages recoverable pursuant to Sections 5.5 and 8.2
shall not exceed such Shareholder's pro rata portion of
such Damages after application of the limitations
contained in this Section 8, based on the percentage
ownership of such Shareholder as set forth in Exhibit A
hereto.
8.4 Indemnification by Shareholders for Shareholder
Representations and Warranties and Covenants. From and
after the Effective Time, each Shareholder shall hold
harmless and indemnify each of the Indemnitees from and
against, and shall compensate and reimburse each of the
Indemnitees for, any Damages which are directly or
indirectly suffered or incurred by any of the Indemnitees
or to which any of the Indemnitees may otherwise become
subject (regardless of whether or not such Damages relate
to any third-party claim) and which arise from or as a
result of, or are directly or indirectly connected with:
(i) any breach of any representation or warranty of such
Shareholder set forth in Section 3 (without giving effect
to any "Material Adverse Effect" or other materiality
qualification or any similar qualification contained or
incorporated directly or indirectly in such
representation or warranty); (ii) any breach of any
covenant or obligation of such Shareholder (including the
covenants set forth in Section 5); or (iii) any Legal
Proceeding relating to any breach of the type referred to
in clause "(i)" or "(ii)" above (including any Legal
Proceeding commenced by any Indemnitee for the purpose of
enforcing any of its rights under this Section 8).
8.5 Exclusive Remedy. Except for acts constituting fraud,
intentional misrepresentation or other willful misconduct, and
except for the indemnification provided in the Registration Rights
Agreement, the indemnification provided for in Section
5.5 and in this Section 8 shall be the exclusive remedy
in respect of any matter subject to the indemnification
hereunder and no claim or cause of action with respect to
any misrepresentation, breach or default as to any
representation, warranty, agreement, covenant or
obligation contained in this Agreement shall be
enforceable unless made in accordance with the
procedures, and, within the time periods, set forth in
Section 5.5 and in this Section 8, as applicable. Except
for acts constituting fraud, intentional
misrepresentation or other willful misconduct and except
in connection with a breach by a Shareholder of a
Transactional Agreement, no Shareholder shall have any
liability to any Indemnitee under Sections 5.5 and 8.2(a)
except as a result of Parent's right to offset against
and withhold up to $1,000,000 of the Earnout Amount
pursuant to Section 1.9.
8.6 Claims Against Escrow Shares.
(a) Claims by Parent with respect to the Escrow Shares
shall be made as follows:
(i) If Parent determines in good faith that an
event has occurred that may entitle it to indemnification
pursuant to Section 8.2(a), and if Parent wishes to make
a claim against the Escrow with respect to such event,
then Parent shall deliver to both the Shareholders' Agent
and the Escrow Agent a written notice of such possible
event (a "Claim Notice") setting forth (x) a brief
description of the circumstances supporting Parent's
belief that such event has occurred, and (y) to the
extent feasible, anon- non-binding, preliminary estimate
of the aggregate dollar amount of all Damages
that have arisen and may arise as a result of such event (such
aggregate amount being referred to as the "Claim
Amount").
(ii) Within forty-five (45) days after the
delivery of a Claim Notice to the Shareholders' Agent,
the Shareholders' Agent shall deliver to Parent, with a
copy to the Escrow Agent, a written notice (the "Response
Notice") containing: (x) instructions to the effect that
Escrow Shares having a value equal to the entire Claim
Amount set forth in such Claim Notice are to be released
from the Escrow to Parent; or (y) instructions to the
effect that Escrow Shares having a value equal to a
specified portion (but not the entire amount) of the
Claim Amount set forth in such Claim Notice are to be
released from the Escrow to Parent, together with a
statement that the remaining portion of such Claim Amount
is being disputed; or (z) a statement that the entire
Claim Amount set forth in such Claim Notice is being
disputed. If no Response Notice is received by Parent
from the Shareholders' Agent within forty-five (45) days
after the delivery of a Claim Notice to the Shareholders'
Agent, then the Shareholders' Agent shall be deemed to
have given instructions on behalf of each of the
Shareholders that Escrow Shares having a value equal to
the entire Claim Amount set forth in such Claim Notice
are to be released to Parent from the Escrow.
(b) The Escrow Shares shall be released from Escrow to
Parent as follows:
(i) If the Shareholders' Agent gives (or is
deemed to have given) instructions that Escrow Shares
having a value equal to the entire Claim Amount set forth
in a Claim Notice are to be released from the Escrow to
Parent, then the Escrow Agent shall, promptly following
the required delivery date for the Response Notice,
transfer, deliver and assign to Parent a number of Escrow
Shares held in the Escrow having a value (based on the
Average Trading Price as of the date of the release of
shares to Parent) equal to the Claim Amount (or such
lesser number of Escrow Shares as is then held in the
Escrow).
(ii) If a Response Notice delivered by the
Shareholders' Agent in response to a Claim Notice
contains instructions to the effect that Escrow Shares
having a value equal to a specified portion (but not the
entire amount) of the Claim Amount set forth in such
Claim Notice are to be released from the Escrow to
Parent, then (i) the Escrow Agent shall, promptly
following the required delivery date for the Response
Notice, transfer, deliver and assign to Parent a number
of Escrow Shares held in the Escrow having a value (based
on the Average Trading Price as of the date of the
release of shares to Parent) equal to such specified
portion of such Claim Amount, and (ii) the procedures set
forth in Section 6 of the Escrow Agreement shall be
followed with respect to the remaining portion of such
Claim Amount.
(iii) If a Response Notice delivered by the
Shareholders' Agent in response to a Claim Notice
contains a statement that all or a portion of the Claim
Amount set forth in such Claim Notice is being disputed
(such Claim Amount or the disputed portion thereof being
referred to as the "Disputed Amount"), then,
notwithstanding anything contained in Section 5 of the
Escrow Agreement, the Escrow Agent shall continue to hold
in the Escrow (in addition to any other shares of Parent
Common Stock permitted to be retained in the Escrow,
whether in connection with any other dispute or
otherwise) Escrow Shares having a value (based on the
Average Trading Price as of the date of the release of
shares to Parent) equal to 120% of the Disputed Amount.
Such Escrow Shares shall continue to be held in the
Escrow until (i) delivery of a notice executed by Parent and the
Shareholders' Agent setting forth instructions to the Escrow Agent
regarding the release of such shares, or (ii) delivery of a copy
of an arbitrator's order setting forth instructions to the
Escrow Agent as to the release of such shares, all as more
specifically set forth in the Escrow Agreement. The Escrow
Agent shall thereupon release Escrow Shares from the Escrow
in accordance with the instructions set forth in such notice or
arbitrator's order. (The parties acknowledge that it is appropriate
to retain more than 100% of the Claim Amount in the
Escrow in recognition of the fact that Parent may have
underestimated the aggregate amount of the actual and
potential Damages arising in connection with a particular
Claim Notice.)
8.7 No Contribution. Each Shareholder
waives, and acknowledges and agrees that he or she shall
not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of
indemnity or other right or remedy against the Surviving
Corporation in connection with any indemnification
obligation or any other liability to which he may become
subject under or in connection with this Agreement.
8.8 Interest. Any Shareholder who is required to
hold harmless, indemnify, compensate or reimburse any
Indemnitee pursuant to this Section 8 with respect to any
Damages shall also be liable to such Indemnitee for
interest on the amount of such Damages (for the period
commencing as of the date on which such Shareholder first
received notice of a claim for recovery by such
Indemnitee and ending on the date on which the liability
of such Shareholder to such Indemnitee is fully satisfied
by such Shareholder) at a floating rate equal to the rate
of interest publicly announced by Bank of America, N.T. &
S.A. from time to time as its prime, base or reference
rate.
8.9 Defense of Third Party Claims. In the event of the assertion
or commencement by any Person of any claim or Legal Proceeding
(whether against the Surviving Corporation, against Parent or
against any other Person) with respect to which any of
the Shareholders may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee
pursuant to this Section 8, Parent shall have the right,
at its election, to proceed with the defense of such
claim or Legal Proceeding on its own. If Parent so
proceeds with the defense of any such claim or Legal
Proceeding:
(a) all reasonable expenses relating to the defense of
such claim or Legal Proceeding shall be advanced by
Parent but borne and paid exclusively by the Shareholders
pursuant to the offset right set forth in Sections 1.9
and 8.3(b);
(b) each Shareholder shall make available to Parent
any documents and materials in his possession or control
that may be necessary to the defense of such claim or
Legal Proceeding; and
(c) Parent shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the
consent of the Shareholders' Agent (as defined in Section
9.1); provided, however, that such consent shall not be
unreasonably withheld.
Parent shall give the Shareholders' Agent prompt notice of the
commencement of any such Legal Proceeding against Parent or the
Surviving Corporation; provided, however, that any failure on the
part of Parent to so notify the Shareholders' Agent shall not
limit any of the obligations of the Shareholders under this
Section 8 (except to the extent such failure materially
prejudices the defense of such Legal Proceeding).
8.10 Exercise of Remedies by Indemnitees Other Than Parent.
No Indemnitee (other than Parent or any successor thereto
or assign thereof) shall be permitted to assert any
indemnification claim or exercise any other remedy under
this Agreement unless Parent (or any successor thereto or
assign thereof) shall have consented to the assertion of
such indemnification claim or the exercise of such other
remedy.
SECTION 9. Miscellaneous Provisions
9.1 Shareholders' Agent. The Shareholders hereby irrevocably
appoint ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as their agent for purposes of Sections 5.5
and 8 (the "Shareholders' Agent"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ hereby accepts
her appointment as the Shareholders' Agent. Parent shall
be entitled to deal exclusively with the Shareholders'
Agent on all matters relating to Sections 5.5 and 8, and
shall be entitled to rely conclusively (without further
evidence of any kind whatsoever) on any document executed
or purported to be executed on behalf of any Shareholder
by the Shareholders' Agent, and on any other action taken
or purported to be taken on behalf of any Shareholder by
the Shareholders' Agent, as fully binding upon such
Shareholder. If the Shareholders' Agent shall die,
resign, become disabled or otherwise be unable to
fulfill her responsibilities as agent of the
Shareholders, then the Shareholders shall, within ten
days after such resignation, death or disability, appoint
a successor agent and, promptly thereafter, shall notify
Parent of the identity of such successor. Any such
successor shall become the "Shareholders' Agent" for
purposes of Sections 5.5 and 8 and this Section 9.1. If
for any reason there is no Shareholders' Agent at any
time, all references herein to the Shareholders' Agent
shall be deemed to refer to the Shareholders.
9.2 Further Assurances. Each party
hereto shall execute and cause to be delivered to each
other party hereto such instruments and other documents,
and shall take such other actions, as such other party
may reasonably request (prior to, at or after the
Closing) for the purpose of carrying out or evidencing
any of the transactions contemplated by this Agreement.
9.3 Fees and Expenses. Each party to this Agreement shall bear
and pay all fees, costs and expenses (including legal fees
and accounting fees) that have been incurred or that are
incurred by such party in connection with the transactions
contemplated by this Agreement, including all fees, costs and expenses
incurred by such party in connection with or by virtue of
(a) the investigation and review conducted by Parent and
its Representatives with respect to the Company's
business (and the furnishing of information to Parent and
its Representatives in connection with such investigation
and review), (b) the negotiation, preparation and review
of this Agreement (including the Disclosure Schedule) and
all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in
connection with the transactions contemplated by this
Agreement, (c) the preparation and submission of any
filing or notice required to be made or given in
connection with any of the transactions contemplated by
this Agreement, and the obtaining of any Consent required
to be obtained in connection with any of such
transactions, and (d) the consummation of the Merger;
provided, however, that all such fees, costs and expenses
incurred by or for the benefit of the Company (including
all such fees, costs and expenses incurred prior to the
date of this Agreement and including the amount of all
special bonuses and other amounts that may become payable
to any officers of the Company or other Persons in
connection with the consummation of the transactions
contemplated by this Agreement) shall be borne and paid
by the Shareholders and not by the Company.
9.4 Attorneys' Fees. If any action or
proceeding relating to this Agreement or the enforcement
of any provision of this Agreement is brought against any
party hereto, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which
the prevailing party may be entitled).
9.5 Notices. Any notice or other communication
required or permitted to be delivered to any party under
this Agreement shall be in writing and shall be deemed
properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery
service or by facsimile) to the address or facsimile
telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone
number as such party shall have specified in a written
notice given to the other parties hereto):
if to Parent or Merger Sub:
AlliedSignal Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company:
Clean Link, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to any of the Shareholders:
c/o Shareholders' Agent
▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.6 Reserved.
9.7 Time of the Essence. Time is of the essence of this Agreement.
9.8 Headings. The underlined headings contained in
this Agreement are for convenience of reference only,
shall not be deemed to be a part of this Agreement and
shall not be referred to in connection with the
construction or interpretation of this Agreement.
9.9 Counterparts. This Agreement may be
executed in several counterparts, each of which shall
constitute an original and all of which, when taken
together, shall constitute one agreement.
9.10 Governing Law. This Agreement shall
be construed in accordance with, and governed in all
respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of
laws).
9.11 Successors and Assigns. This
Agreement shall be binding upon: the Company and its
successors and assigns (if any); the Shareholders and
their respective personal representatives, executors,
administrators, estates, heirs, successors and assigns
(if any); Parent and its successors and assigns (if any);
and Merger Sub and its successors and assigns (if any).
This Agreement shall inure to the benefit of: the
Company; the Shareholders; Parent; Merger Sub; the other
Indemnitees (subject to Section 8.10); and the respective
successors and assigns (if any) of the foregoing. Parent
may freely assign any or all of its rights under this
Agreement (including its
indemnification rights under Sections 5.5 and 8), in whole or
in part, to any other Person without obtaining the consent or
approval of any other party hereto or of any other Person.
9.12 Remedies Cumulative; Specific Performance. Except as otherwise
provided herein, the rights and remedies of the parties
hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any
breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision
set forth in this Agreement for the benefit of any other
party to this Agreement, such other party shall be
entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific
performance or mandamus to enforce the observance and
performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach
or threatened breach.
9.13 Waiver.
(a) No failure on the part of any Person to exercise
any power, right, privilege or remedy under this
Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power,
right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or
of any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right,
privilege or remedy under this Agreement, unless the
waiver of such claim, power, right, privilege or remedy
is expressly set forth in a written instrument duly
executed and delivered on behalf of such Person; and any
such waiver shall not be applicable or have any effect
except in the specific instance in which it is given.
9.14 Amendments. This Agreement may not be
amended, modified, altered or supplemented other than by
means of a written instrument duly executed and delivered
on behalf of Parent, Merger Sub, the Company and the
holders of a majority of the outstanding shares of
Company Common Stock.
9.15 Severability. In the event that any
provision of this Agreement, or the application of any
such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to
Persons or circumstances other than those as to which it
is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
9.16 Parties in Interest. Except for
the provisions of Sections 1.5, 1.6, 1.8, 1.9 and 8, none
of the provisions of this Agreement is intended to
provide any rights or remedies to any Person other than
the parties hereto and their respective successors and
assigns (if any).
9.17 Entire Agreement. This Agreement and
the other agreements referred to herein set forth the
entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all
prior agreements and understandings among or between any
of the parties relating to the subject matter hereof and
thereof.
9.18 Construction.
(a) For purposes of this Agreement, whenever the
context requires: the singular number shall include the
plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders;
and the neuter gender shall include the masculine and
feminine genders.
(b) The parties hereto agree that any rule of
construction to the effect that ambiguities are to be
resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed
to be terms of limitation, but rather shall be deemed to
be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in
this Agreement to "Sections" and "Exhibits" are intended
to refer to Sections of this Agreement and Exhibits to
this Agreement.
The parties hereto have caused this Agreement to be executed
and delivered as of the date first written above.
"Parent:" AlliedSignal Inc.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President and General Counsel
Electronic Materials
"Merger Sub:" Clink Acquisition Corp.,
a Delaware corporation
By: /s/▇▇▇▇ ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title:
"Company:" Clean Link, Inc.,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
"Shareholders:" /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇
-----------------------
▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------
▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ Adel ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------
Adel ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
"Shareholders Agent:"
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as agent of the Shareholders
EXHIBIT A
SHAREHOLDERS
Name Percentage Ownership of the Company
------------------ -------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 1.913%
▇▇▇ ▇. ▇▇▇▇▇ 0.962%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 19.138%
▇▇▇▇ ▇. ▇▇▇▇▇ 1.435%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 19.138%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 19.138%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 19.138%
Adel ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 19.138%
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
Acquisition Transaction. "Acquisition Transaction" shall mean
any transaction involving:
(a) the sale, license, disposition or acquisition of
all or a material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i)
any capital stock or other equity security of the Company
(other than common stock issued to employees of the
Company, upon exercise of Company Options or otherwise,
in routine transactions in accordance with the Company's
past practices), (ii) any option, call, warrant or right
(whether or not immediately exercisable) to acquire any
capital stock or other equity security of the Company
(other than stock options granted to employees of the
Company in routine transactions in accordance with the
Company's past practices), or (iii) any security,
instrument or obligation that is or may become
convertible into or exchangeable for any capital stock or
other equity security of the Company; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving the Company.
Affiliate. "Affiliate" of any Person means any Person
directly or indirectly controlling, controlled by or under common
control with such Person.
Allocation Date. "Allocation Date" shall have the meaning
set forth in Section 5.5(b) of the Agreement.
Annual Earnout. "Annual Earnout" shall have the meaning set
forth in Section 1.9(b) of the Agreement.
Annual Earnout Amount. "Annual Earnout Amount" shall have
the meaning set forth in Section 1.9(b) of the Agreement.
Average Trading Price. "Average Trading Price" means, as of
a specified date, the average of the daily high and low closing
prices of AlliedSignal Common Stock as reported on the NYSE
Composite Tape on each of the twenty (20) consecutive trading
days immediately preceding (and not including) such date.
Agreement. "Agreement" shall mean the Agreement and Plan of
Merger and Reorganization to which this Exhibit B is attached
(including the Disclosure Schedule), as it may be amended from
time to time.
Balance Sheet Selected Firm. "Balance Sheet Selected Firm"
shall have the meaning set forth in Section 1.7 of the Agreement.
Claim Amount. "Claim Amount" shall have the meaning set
forth in Section 8.6(a) of the Agreement.
Claim Notice. "Claim Notice" shall have the meaning set
forth in Section 8.6(a) of theAgreement.
Agreement.Closing. "Closing" shall have the meaning set
forth in Section 1.3 of the Agreement.
Closing Balance Sheet. "Closing Balance Sheet" shall have
the meaning set forth in Section 1.7 of the Agreement.
Closing Calculation. "Closing Calculation" shall have the
meaning set forth in Section 1.7 of the Agreement.
Closing Date. "Closing Date" shall have the meaning set
forth in Section 1.3 of the Agreement.
COBRA. "COBRA" shall have the meaning set forth in Section
2.15(g) of the Agreement.
Code. "Code" means Internal Revenue Code of 1986, as
amended.
Combined State Tax. "Combined State Tax" means, with
respect to each such state or any local taxing jurisdiction, any
income or franchise Tax payable to any state or any local taxing
jurisdiction in which the Company files Returns with a member of
the Seller Group on a consolidated, combined or unitary basis for
purposes of such income or franchise Tax.
Company. "Company" shall have the meaning set forth in the
Introductory Paragraph of the Agreement.
Company Common Stock. "Company Common Stock" shall have the
meaning set forth in Section 1.5 of the Agreement.
Company Contract. "Company Contract" shall mean any
Contract: (a) to which the Company is a party; (b) by which the
Company or any of its assets is or may become bound or under
which the Company has, or may become subject to, any obligation;
or (c) under which the Company has or may acquire any right or
interest.
Company Financial Statements. "Company Financial
Statements" shall have the meaning set forth in Section 2.4(a) of
the Agreement.
Company Proprietary Asset. "Company Proprietary Asset"
shall mean any Proprietary Asset owned by or licensed to the
Company or otherwise used by the Company.
Company Stock Certificate. "Company Stock Certificate"
shall have the meaning set forth in Section 1.10 of the
Agreement.
Confidential Information. "Confidential Information" shall
have the meaning set forth in Section 5.1(a) of the Agreement.
Consent. "Consent" shall mean any approval, consent,
ratification, permission, waiver or authorization (including any
Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other
agreement, contract, subcontract, lease, understanding,
instrument, note, warranty, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature.
Damages. "Damages" shall include any loss, damage, injury,
decline in value, liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee (including reasonable attorneys'
fees), charge, cost (including costs of investigation) or expense
of any nature.
Disclosure Documents. "Disclosure Documents" shall have the
meaning set forth in Section 3.5(e) of the Agreement.
Disclosure Schedule. "Disclosure Schedule" shall mean the
schedule (dated as of the date of the Agreement) delivered to
Parent on behalf of the Company and the Shareholders.
Disputed Amount. "Disputed Amount" shall have the meaning
set forth in Section 8.6(b) of the Agreement.
Earnout Amount. "Earnout Amount" shall have the meaning set
forth in Section 1.9(a) of the Agreement.
Earnout Payment Date. "Earnout Payment Date" shall have the
meaning set forth in Section 1.9(c) of the Agreement.
Earnout Selected Firm. "Earnout Selected Firm" shall have
the meaning set forth in Section 1.9(b) of the Agreement.
Earnout Year. "Earnout Year" shall have the meaning set
forth in Section 1.9(a) of the Agreement.
Effective Time. "Effective Time" shall have the meaning set
forth in Section 1.3 of the Agreement.
Encumbrance. "Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance,
claim, infringement, interference, option, right of first
refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any
security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the
use of any asset and any restriction on the possession, exercise or transfer
of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any
non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company
or joint stock company), firm or other enterprise, association,
organization or entity.
Environmental Law. "Environmental Law" shall have the
meaning set forth in Section 2.16 of the Agreement.
ERISA. "ERISA" shall have the meaning set forth in Section
2.15(a) of the Agreement.
Escrow. "Escrow" shall have the meaning set forth in
Section 1.6 of the Agreement.
Escrow Agent. "Escrow Agent" shall mean State Street Bank
and Trust Company of California, N.A.
Escrow Shares. "Escrow Shares" shall have the meaning set
forth in Section 1.6 of the Agreement.
Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
Expiration Date. "Expiration Date" shall have the meaning
set forth in Section 8.1(a) of the Agreement.
Federal Tax. "Federal Tax" means any Tax imposed under
Subtitle A of the Code.
Five Year Earnout Amount. "Five Year Earnout Amount" shall
have the meaning set forth in Section 1.9(a) of the Agreement.
Final Determination. "Final Determination" shall mean (i)
any final determination of Liability in respect of a Tax that,
under applicable Legal Requirements, is not subject to further
appeal, review or modification through proceedings or otherwise
(including the expiration of a statute of limitations or a period
for the filing of claims for refunds, amended returns or appeals
from adverse determinations), including a "determination" as
defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD or (ii) the payment of Tax by
Parent, the Company, the Shareholders or any of their Affiliates,
whichever is responsible for payment of such Tax under applicable
Legal Requirements, with respect to any item disallowed or
adjusted by a Taxing Authority, provided that such responsible
party determines that no action should be taken to recoup such
payment and the other party agrees in writing.
Government Bid. "Government Bid" shall mean any quotation,
bid or proposal submitted to any Governmental Body or any
proposed prime contractor or higher-tier subcontractor of any
Governmental Body.
Government Contract. "Government Contract" shall mean any
prime contract, subcontract, letter contract, purchase order or
delivery order executed or submitted to or on behalf of any
Governmental Body or any prime contractor or higher-tier
subcontractor, or under which any Governmental Body or any such
prime contractor or subcontractor otherwise has or may acquire
any right or interest.
Governmental Authorization. "Governmental Authorization"
shall mean any: (a) permit, license, certificate, franchise,
permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available
by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any
Governmental Body.
Governmental Body. "Governmental Body" shall mean any: (a)
nation, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature; (b)
federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, department, agency,
commission, instrumentality, official, organization, unit, body
or Entity and any court or other tribunal).
Gross Margin Percentage. "Gross Margin Percentage" shall
have the meaning set forth in Section 1.9(a) of the Agreement.
Gross Margin. "Gross Margin" shall have the meaning set
forth in Section 1.9(a) of the Agreement.
Indemnitees. "Indemnitees" shall mean the following
Persons: (a) Parent; (b) Parent's current and future affiliates
(including the Surviving Corporation); (c) the respective
Representatives of the Persons referred to in clauses "(a)" and
"(b)" above; and (d) the respective successors and assigns of the
Persons referred to in clauses "(a)", "(b)" and "(c)" above;
provided, however, that the Shareholders shall not be deemed to
be "Indemnitees."
Knowledge. An individual shall be deemed to have
"Knowledge" of a particular fact or other matter if such
individual is actually aware of such fact or other matter after
due inquiry concerning the truth or existence of such fact or
other matter, including due inquiry of the Company's tax,
accounting and legal advisors.
The Company shall be deemed to have "Knowledge" of a
particular fact or other matter if any of the Shareholders, the
controller of the Company has Knowledge of such fact or other
matter.
Lease. "Lease" shall have the meaning set forth in Section
2.8(b) of the Agreement.
Leased Real Property. "Lease Real Property" shall have the
meaning set forth in Section 2.8(b) of the Agreement.
Legal Proceeding. "Legal Proceeding" shall mean any action,
suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding),
hearing, inquiry, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving,
any court or other Governmental Body or any arbitrator or
arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any
federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance,
code, edict, decree, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental
Body.
Loss. "Loss" shall have the meaning set forth in Section
5.5(a) of the Agreement.
Major Customers. "Major Customers" shall have the meaning
set forth in Section 2.7(c) of the Agreement.
Material Adverse Effect. An event or other matter will be
deemed to have a "Material Adverse Effect" on the Company if such
event or other matter would have a material adverse effect on the
Company's business, condition, assets, liabilities, operations,
financial performance or prospects taken as a whole.
Material Contract. "Material Contract" shall have the
meaning set forth in Section 2.10(a) of the Agreement.
Material of Environmental Concern. "Material of
Environmental Concern" shall have the meaning set forth in
Section 2.16 of the Agreement.
Merger. "Merger" shall have the meaning set forth in
Recital A of the Agreement.
Merger Sub. "Merger Sub" shall have the meaning set forth
in the Introductory Paragraph of the Agreement.
Net Sales. "Net Sales" shall have the meaning set forth in
Section 1.9(a) of the Agreement.
Net Working Capital. "Net Working Capital" means Total
Current Assets minus Total Current Liabilities.
Overpayment. "Overpayment" shall have the meaning set forth
in Section 1.8(b) of the Agreement.
Parent. "Parent" shall have the meaning set forth in the
Introductory Paragraph of the Agreement.
Parent Common Stock. "Parent Common Stock" shall have the
meaning set forth in Section 1.5(a) of the Agreement.
Parent Reports. "Parent Reports" shall have the meaning set
forth in Section 2.25 of the Agreement.
Person. "Person" shall mean any individual, Entity or
Governmental Body.
Plans. "Plans" shall have the meaning set forth in Section
2.15(a) of the Agreement.
Pro Forma Combined State Return. "Pro Forma Combined State
Return" shall have the meaning set forth in Section 5.4(b) of the
Agreement.
Pro Forma Federal Return. "Pro Forma Federal Return" shall
have the meaning set forth in Section 5.4(b) of the Agreement.
Pro Forma Return. "Pro Forma Return" shall have the meaning
set forth in Section 5.4(b) of the Agreement.
Post-Closing Tax Period. "Post-Closing Tax Period" means
any Tax period beginning after the Closing Date or, with respect
to any Tax Period beginning before and ending after the Closing
Date, the portion thereof beginning on the day after the Closing
Date.
Proposed Closing Balance Sheet. "Proposed Closing Balance
Sheet" shall have the meaning set forth in Section 1.7 of the
Agreement.
Proposed Annual Earnout Amount. "Proposed Annual Earnout
Amount" shall have the meaning set forth in Section 1.9(a) of the
Agreement.
Proposed Annual Five Year Earnout Amount. "Proposed Annual
Five Year Earnout Amount" shall have the meaning set forth in
Section 1.9(a) of the Agreement.
Proposed Sixth Year Earnout Amount. "Proposed Sixth Year
Earnout Amount" shall have the meaning set forth in Section
1.9(a) of the Agreement.
Proprietary Asset. "Proprietary Asset" shall mean any: (a)
patent, patent application, trademark (whether registered or
unregistered), trademark application, trade name, fictitious
business name, service ▇▇▇▇ (whether registered or unregistered),
service ▇▇▇▇ application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise,
system, computer software, computer program, invention, design,
blueprint, engineering drawing, proprietary product, technology,
proprietary right or other intellectual property right or
intangible asset; or (b) right to use or exploit any of the
foregoing.
Related Party. "Related Party" shall have the meaning set
forth in Section 2.18 of the Agreement.
Representatives. "Representatives" shall mean officers,
directors, employees, agents, attorneys, accountants, advisors
and representatives.
Response Notice. "Response Notice" shall have the meaning
set forth in Section 8.6(a) of the Agreement.
Return. "Return" means any return, declaration, report,
statement or other document (including any estimated Tax or
information return or report) required to be filed with respect
to any Tax.
SEC. "SEC" shall mean the United States Securities and
Exchange Commission.
Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended.
Seller Group. "Seller Group" means, with respect to Federal
Taxes, the affiliated group of corporations (as defined in
Section 1504(a) of the Code) of which a Shareholder is the common
parent and with respect to Combined State Taxes, the
consolidated, combined or unitary group of which a Shareholder or
any of its affiliates and the Company is a member.
Separate Tax. "Separate Tax" means any Tax of the Company
which accrues in a Pre-Closing Tax Period, other than a Federal
Tax or a Combined State Tax.
Shareholder Representative. "Shareholder Representative"
shall have the meaning set forth in Section 3.5(d) of the
Agreement.
Shareholders. "Shareholders" shall have the meaning set
forth in the Introductory Paragraph of the Agreement.
Shareholders' Notes. "Shareholders' Notes" shall mean the
promissory notes with a current aggregate principal balance of
$800,000 executed by certain of the Shareholders in favor of the
Company in connection with the purchase of such Shareholders'
equity interests in the Company.
Surviving Corporation. "Surviving Corporation" shall have
the meaning set forth in Section 1.1 of the Agreement.
Tax. "Tax" means (i) any tax imposed under Subtitle A of
the Code and any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value
added, transfer, franchise, profits, license, lease, service,
service use, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, capital stock,
occupation, property, environmental or windfall profit tax,
premium, custom, duty or other tax, governmental fee or other
like assessment or charge of any kind whatsoever, together with
any interest, penalty, addition to tax or additional amount
imposed by any Governmental Authority (a "Taxing Authority")
responsible for the imposition of any such tax (domestic or
foreign), (ii) liability of the Company for the payment of any
amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group,
or being a party to any agreement or arrangement whereby
Liability of the Company for payments of such amounts was
determined or taken into account with reference to the Liability
of any other Person for any period during the Tax Indemnification
Period, and (iii) Liability of the Company for the payment
of any amounts as a result of being party to any Tax Sharing Agreement
or with respect to the payment of any amounts of the type
described in (i) or (ii) as a result of any express or implied
obligation to Indemnify any other Person.
Tax Asset. "Tax Asset" means any net operating loss, net
capital loss, investment tax credit, foreign tax credit,
charitable deduction or any other credit, deduction or other tax
attribute which could reduce Taxes (including without limitation
deductions and credits related to alternative minimum Taxes).
Tax Indemnification Period. "Tax Indemnification Period"
means (i) with respect to any Tax described in clause (i) of the
definition of "Tax," any Pre-Closing Tax Period of the Company;
(ii) with respect to any Tax described in clause (ii) of the
definition of "Tax," any Pre-Closing Tax Period of the Company
and the Tax year of any member of a group described in such
clause (ii) which includes (but does not end on) the Closing Date
and (iii) with respect to any Tax described in clause (iii) of
the definition of "Tax," the survival period of the obligation
under the application contract or arrangement.
Tax Sharing Agreements. "Tax Sharing Agreements" means all
existing Tax sharing agreements or arrangements (whether or not
written) binding the Company and any agreements or arrangements
which afford any other Person the benefit of any Tax Asset of the
Company, afford the Company the benefit of any Tax Asset of any
other Person or require or permit the transfer or assignment of
income, revenues, receipts, or gains.
Total Current Assets. "Total Current Assets" means total
current assets in accordance with GAAP. Total Current Assets
shall not reflect the Shareholders' Notes.
Total Current Liabilities. "Total Current Liabilities"
means total current liabilities in accordance with GAAP.
Trading Day. "Trading Day" means a day on which either the
national securities exchange or Nasdaq which then constitutes the
principal securities market for the Parent Common Stock is open
for general trading.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance
Sheet" shall have the meaning set forth in Section 2.4(a) of the
Agreement.
Unpaid Balance. "Unpaid Balance" shall have the meaning set
forth in Section 1.8(a) of the Agreement.
Workpapers. "Workpapers" shall have the meaning set forth
in Section 1.7 of the Agreement.
