AGREEMENT AND PLAN OF MERGER
AMONG
RESMED INC.
SERVO MAGNETICS ACQUISITION, INC.
SERVO MAGNETICS INCORPORATED
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MAY 14, 2002
TABLE OF CONTENTS
-------------------
1. DEFINITIONS 1
2. THE MERGER 6
(A) THE MERGER 6
(B) THE CLOSING 6
(C) EFFECTIVE TIME 6
(D) EFFECTS OF THE MERGER 7
(E) CERTIFICATE OF INCORPORATION 7
(F) BYLAWS 7
(G) OFFICERS AND DIRECTORS OF SURVIVING CORPORATION 7
(H) DELIVERIES OF ▇▇▇▇▇▇▇ AND TARGET AT CLOSING 7
(I) DELIVERIES OF PARENT AND MERGER SUB AT CLOSING 8
3. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS 8
(A) CAPITAL STOCK OF MERGER SUB 8
(B) CONVERSION OF TARGET SHARES 8
(C) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK 8
(D) CONVEYANCE OF CONSIDERATION TO ▇▇▇▇▇▇▇ 8
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION 9
(A) REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇ 9
(B) REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB 11
5. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGET 14
(A) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER 15
(B) CAPITALIZATION 15
(C) AUTHORIZATION OF TRANSACTION 15
(D) NONCONTRAVENTION. 16
(E) APPROVALS 16
(F) BROKERS' FEES 16
(G) TITLE TO ASSETS . 16
(H) SUBSIDIARIES 16
(I) FINANCIAL STATEMENTS 16
(J) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END 17
(K) UNDISCLOSED LIABILITIES 19
(L) LEGAL COMPLIANCE. 19
(M) TAX MATTERS 19
(N) REAL PROPERTY 22
(O) INTELLECTUAL PROPERTY 23
(P) TANGIBLE ASSETS . 26
(Q) INVENTORY 26
(R) CONTRACTS 26
(S) NOTES AND ACCOUNTS RECEIVABLE 27
(T) POWERS OF ATTORNEY 27
(U) INSURANCE 27
(V) LITIGATION 28
(W) PRODUCT WARRANTY. 28
(X) PRODUCT LIABILITY 29
(Y) EMPLOYEES 29
(Z) EMPLOYEE BENEFITS 29
(AA) GUARANTIES 31
(BB) ENVIRONMENTAL MATTERS 31
(CC) CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET 32
(DD) DISCLOSURE 32
6. POST-CLOSING COVENANTS 32
(A) GENERAL 32
(B) LITIGATION SUPPORT 33
(C) TRANSITION 33
(D) CONFIDENTIALITY . 33
(E) COVENANT NOT TO COMPETE 34
(F) NON-SOLICITATION. 34
(G) SHARE CERTIFICATES 34
(H) NEW YORK STOCK EXCHANGE LISTING 35
(I) FINANCIAL STATEMENTS 35
7. REMEDIES FOR BREACHES OF THIS AGREEMENT 35
(A) SURVIVAL OF REPRESENTATIONS AND WARRANTIES 35
(B) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PARENT 35
(C) INDEMNIFICATION PROVISIONS FOR BENEFIT OF ▇▇▇▇▇▇▇ 36
(D) MATTERS INVOLVING THIRD PARTIES 36
(E) DETERMINATION OF ADVERSE CONSEQUENCES 38
(F) LIMITATIONS ON INDEMNIFICATION 38
(G) OTHER INDEMNIFICATION PROVISIONS 39
8. TAX MATTERS 39
(A) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE 39
(B) STRADDLE PERIODS. 40
(C) COOPERATION ON TAX MATTERS 40
(D) CERTAIN TAXES 41
(E) CHARACTERIZATION OF PAYMENTS 41
(F) S CORPORATION STATUS 41
9. REORGANIZATION MATTERS 41
(A) INTENDED TREATMENT 41
(B) REPORTING 41
10. MISCELLANEOUS 41
(A) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS 41
(B) NO THIRD-PARTY BENEFICIARIES 42
(C) ENTIRE AGREEMENT. 42
(D) SUCCESSION AND ASSIGNMENT 42
(E) COUNTERPARTS 42
(F) HEADINGS 42
(G) NOTICES 42
(H) GOVERNING LAW 43
(I) AMENDMENTS AND WAIVERS 43
(J) SEVERABILITY 43
(K) EXPENSES 44
(L) CONSTRUCTION 44
(M) INCORPORATION OF EXHIBITS AND SCHEDULES 44
(N) SPECIFIC PERFORMANCE 44
(O) SUBMISSION TO JURISDICTION 44
(P) ALTERNATIVE DISPUTE RESOLUTION 45
EXHIBIT A - FORM OF CERTIFICATE OF INCORPORATION
EXHIBIT B - FINANCIAL STATEMENTS
EXHIBIT C - FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D - MATTERS TO BE COVERED BY OPINION OF COUNSEL TO ▇▇▇▇▇▇▇ AND TARGET
EXHIBIT E - FORM OF EMPLOYMENT AGREEMENT
EXHIBIT F - FORM OF ASSIGNMENT OF INVENTIONS
SCHEDULE 2(G) - OFFICERS OF SURVIVING CORPORATION
SCHEDULE 2(H) - MANDATORY CONSENTS
▇▇▇▇▇▇▇ DISCLOSURE SCHEDULE - EXCEPTIONS TO ▇▇▇▇▇▇▇' REPRESENTATIONS AND
WARRANTIES
TARGET DISCLOSURE SCHEDULE - EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
CONCERNING THE TARGET
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 14, 2002 (THIS
"AGREEMENT"), BY AND AMONG RESMED INC., A DELAWARE CORPORATION (THE "PARENT"),
SERVO MAGNETICS ACQUISITION, INC., A DELAWARE CORPORATION AND A WHOLLY OWNED
SUBSIDIARY OF PARENT ("MERGER SUB"), SERVO MAGNETICS INCORPORATED, A CALIFORNIA
CORPORATION (THE "TARGET"), AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ( "▇▇▇▇▇▇▇"). THE PARENT, MERGER
SUB, ▇▇▇▇▇▇▇ AND THE TARGET ARE REFERRED TO COLLECTIVELY HEREIN AS THE
"PARTIES."
WHEREAS, THE RESPECTIVE BOARDS OF DIRECTORS OF PARENT, MERGER SUB AND TARGET
HAVE EACH DETERMINED THAT THE MERGER (AS DEFINED BELOW) IS IN THE BEST INTERESTS
OF THEIR RESPECTIVE SHAREHOLDERS AND HAVE APPROVED THE MERGER UPON THE TERMS AND
SUBJECT TO THE CONDITIONS SET FORTH IN THIS AGREEMENT, WHICH INCLUDE THAT THE
ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, NO PAR VALUE, OF TARGET ("TARGET
COMMON STOCK"), WILL BE CONVERTED INTO THE RIGHT TO RECEIVE A COMBINATION OF
COMMON STOCK, PAR VALUE $.004 PER SHARE, OF PARENT (THE "PARENT COMMON STOCK")
AND CASH, AS FURTHER DESCRIBED HEREIN; AND
WHEREAS, ▇▇▇▇▇▇▇ OWNS ALL OF THE OUTSTANDING CAPITAL STOCK OF THE TARGET AND HAS
APPROVED THIS AGREEMENT AND THE MERGER IN HIS CAPACITY AS SOLE SHAREHOLDER OF
THE TARGET; AND
WHEREAS, IN ORDER TO EFFECTUATE THE FOREGOING, THE TARGET, UPON THE TERMS AND
SUBJECT TO THE CONDITIONS OF THIS AGREEMENT AND, IN ACCORDANCE WITH THE
CALIFORNIA CORPORATIONS CODE (THE "CCC") AND THE DELAWARE GENERAL CORPORATION
---
LAW (THE "DGCL"), WILL MERGE WITH AND INTO MERGER SUB (THE "MERGER").
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE MUTUAL PROMISES HEREIN
MADE, AND IN CONSIDERATION OF THE REPRESENTATIONS, WARRANTIES, AND COVENANTS
HEREIN CONTAINED, THE PARTIES AGREE AS FOLLOWS.
1. DEFINITIONS.
-----------
"ACCREDITED INVESTOR" HAS THE MEANING SET FORTH IN REGULATION D PROMULGATED
-------------------
UNDER THE SECURITIES ACT.
"ADVERSE CONSEQUENCES" MEANS ALL ACTIONS, SUITS, PROCEEDINGS, HEARINGS,
---------------------
INVESTIGATIONS, CHARGES, COMPLAINTS, CLAIMS, DEMANDS, INJUNCTIONS, JUDGMENTS,
ORDERS, DECREES, RULINGS, DAMAGES, DUES, PENALTIES, FINES, COSTS, LOST TAX
BENEFITS, AMOUNTS PAID IN SETTLEMENT, LIABILITIES, OBLIGATIONS, TAXES, LIENS,
LOSSES, EXPENSES, AND FEES, INCLUDING COURT COSTS AND REASONABLE ATTORNEYS' FEES
AND EXPENSES.
"AGREEMENT OF MERGER" HAS THE MEANING SET FORTH IN 2(C) BELOW.
---------------------
"AFFILIATE" HAS THE MEANING SET FORTH IN RULE 12B-2 OF THE REGULATIONS
---------
PROMULGATED UNDER THE EXCHANGE ACT.
--------
"AFFILIATED GROUP" MEANS ANY AFFILIATED GROUP WITHIN THE MEANING OF CODE
-----------------
1504(A) OR ANY SIMILAR GROUP DEFINED UNDER A SIMILAR PROVISION OF STATE, LOCAL
OR FOREIGN LAW.
1
"BASIS" MEANS ANY PAST OR PRESENT FACT, SITUATION, CIRCUMSTANCE, STATUS,
-----
CONDITION, ACTIVITY, PRACTICE, PLAN, OCCURRENCE, EVENT, INCIDENT, ACTION,
FAILURE TO ACT, OR TRANSACTION THAT FORMS OR WOULD BE REASONABLY LIKELY TO FORM
THE BASIS FOR ANY SPECIFIED CONSEQUENCE.
"CASH CONSIDERATION" MEANS $7,625,000, TO BE PAID TO ▇▇▇▇▇▇▇ IN HIS CAPACITY AS
-------------------
THE SOLE SHAREHOLDER OF THE TARGET AS PARTIAL CONSIDERATION FOR THE MERGER.
"CCC" MEANS THE CALIFORNIA CORPORATIONS CODE, AS AMENDED.
"CERTIFICATE OF MERGER" HAS THE MEANING SET FORTH IN 2(C) BELOW.
-----------------------
"CLOSING" HAS THE MEANING SET FORTH IN 2(B) BELOW.
-------
"CLOSING DATE" HAS THE MEANING SET FORTH IN 2(B) BELOW.
-------------
"CLOSING VALUE" MEANS$29.
--------------
"CODE" MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
----
"CONFIDENTIAL INFORMATION" MEANS ANY INFORMATION CONCERNING THE BUSINESSES AND
-------------------------
AFFAIRS OF THE TARGET THAT IS NOT ALREADY GENERALLY AVAILABLE TO THE PUBLIC.
"CONSIDERATION" MEANS COLLECTIVELY (I) THE CASH CONSIDERATION AND (II) THE
-------------
SHARES.
----
"CONTROLLED GROUP OF CORPORATIONS" HAS THE MEANING SET FORTH IN CODE 1563.
-----------------------------------
"DEFERRED INTERCOMPANY TRANSACTION" HAS THE MEANING SET FORTH IN REG.
-----------------------------------
1.1502-13.
--------
"DGCL" MEANS THE DELAWARE GENERAL CORPORATION LAW, AS AMENDED.
----
"EFFECTIVE TIME" HAS THE MEANING SET FORTH IN 2(C) BELOW.
---------------
"EMPLOYEE BENEFIT PLAN" MEANS ANY (A) NONQUALIFIED DEFERRED COMPENSATION OR
-----------------------
RETIREMENT PLAN OR ARRANGEMENT WHICH IS AN EMPLOYEE PENSION BENEFIT PLAN, (B)
---
QUALIFIED DEFINED CONTRIBUTION RETIREMENT PLAN OR ARRANGEMENT WHICH IS AN
-
EMPLOYEE PENSION BENEFIT PLAN, (C) QUALIFIED DEFINED BENEFIT RETIREMENT PLAN OR
-
ARRANGEMENT WHICH IS AN EMPLOYEE PENSION BENEFIT PLAN (INCLUDING ANY
MULTIEMPLOYER PLAN), OR (D) EMPLOYEE WELFARE BENEFIT PLAN OR MATERIAL FRINGE
BENEFIT PLAN OR PROGRAM.
"EMPLOYEE PENSION BENEFIT PLAN" HAS THE MEANING SET FORTH IN ERISA 3(2).
--------------------------------
"EMPLOYEE PENSION DEFINED BENEFIT PLAN" MEANS AN EMPLOYEE PENSION BENEFIT PLAN
---------------------------------------
THAT IS OR WAS SUBJECT TO TITLE IV OF ERISA.
"EMPLOYEE WELFARE BENEFIT PLAN" HAS THE MEANING SET FORTH IN ERISA 3(1).
--------------------------------
"EMPLOYMENT AGREEMENT" HAS THE MEANING SET FORTH IN 2(H) BELOW.
---------------------
2
"ENVIRONMENTAL LAWS" MEANS ANY AND ALL APPLICABLE INTERNATIONAL, FEDERAL, STATE,
------------------
OR LOCAL LAWS, STATUTES, ORDINANCES, REGULATIONS, POLICIES, GUIDANCE, RULES,
JUDGMENTS, ORDERS, COURT DECISIONS OR RULE OF COMMON LAW, PERMITS, RESTRICTIONS
AND LICENSES, WHICH (I) REGULATE OR RELATE TO THE PROTECTION OR CLEAN UP OF THE
ENVIRONMENT; THE USE, TREATMENT, STORAGE, TRANSPORTATION, HANDLING, DISPOSAL OR
RELEASE OF HAZARDOUS SUBSTANCES, THE PRESERVATION OR PROTECTION OF WATERWAYS,
GROUNDWATER, DRINKING WATER, AIR, WILDLIFE, PLANTS OR OTHER NATURAL RESOURCES;
OR THE HEALTH AND SAFETY OF PERSONS OR PROPERTY, INCLUDING WITHOUT LIMITATION
PROTECTION OF THE HEALTH AND SAFETY OF EMPLOYEES; OR (II) IMPOSE LIABILITY OR
RESPONSIBILITY WITH RESPECT TO ANY OF THE FOREGOING, INCLUDING WITHOUT
LIMITATION THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY
ACT (42 U.S.C. 9601 ET SEQ.), OR ANY OTHER LAW OF SIMILAR EFFECT.
"ENVIRONMENTAL PERMITS" MEANS ANY MATERIAL PERMIT, LICENSE, AUTHORIZATION OR
----------------------
APPROVAL REQUIRED UNDER APPLICABLE ENVIRONMENTAL LAWS.
--
"ERISA" MEANS THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED.
-----
"ERISA AFFILIATE" MEANS ANY ENTITY WHICH IS (OR AT ANY RELEVANT TIME WAS) A
----------------
MEMBER OF A "CONTROLLED GROUP OF CORPORATIONS" WITH, UNDER "COMMON CONTROL"
---
WITH, OR A MEMBER OF AN "AFFILIATED SERVICE GROUP" WITH ANY PERSON, AS DEFINED
---
IN 52(A) OR (B), OR 414(B), (C), (M) OR (O) OF THE CODE, OR UNDER "COMMON
CONTROL" WITH ANY PERSON WITHIN THE MEANING OF 4001(B)(1) OF ERISA.
"EXCESS LOSS ACCOUNT" HAS THE MEANING SET FORTH IN REG. 1.1502-19.
---------------------
"EXCHANGE ACT" MEANS THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
-------------
"EXTREMELY HAZARDOUS SUBSTANCE" HAS THE MEANING SET FORTH IN 302 OF THE
-------------------------------
EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT OF 1986, AS AMENDED.
------
"FIDUCIARY" HAS THE MEANING SET FORTH IN ERISA 3(21).
---------
"FINANCIAL STATEMENTS" HAS THE MEANING SET FORTH IN 5(I) BELOW.
---------------------
"GAAP" MEANS UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS IN EFFECT
----
FROM TIME TO TIME.
"HAZARDOUS SUBSTANCES" MEANS ANY POLLUTANT, CHEMICAL, SUBSTANCE AND ANY TOXIC,
---------------------
INFECTIOUS, CARCINOGENIC, REACTIVE, CORROSIVE, IGNITABLE OR FLAMMABLE CHEMICAL,
OR CHEMICAL COMPOUND, OR HAZARDOUS SUBSTANCE, MATERIAL OR WASTE, WHETHER SOLID,
LIQUID OR GAS, THAT IS SUBJECT TO REGULATION, CONTROL OR REMEDIATION UNDER ANY
ENVIRONMENTAL LAWS, INCLUDING WITHOUT LIMITATION, ANY QUANTITY OF ASBESTOS IN
ANY FORM, UREA FORMALDEHYDE, PCBS, RADON GAS, CRUDE OIL OR ANY FRACTION THEREOF,
ALL FORMS OF NATURAL GAS, PETROLEUM PRODUCTS OR BY-PRODUCTS OR DERIVATIVES.
"▇▇▇▇▇▇▇ DISCLOSURE SCHEDULE" HAS THE MEANING SET FORTH IN 4(A) BELOW.
-----------------------------
"INDEMNIFIED PARTY" HAS THE MEANING SET FORTH IN 7(D) BELOW.
------------------
3
"INDEMNIFYING PARTY" HAS THE MEANING SET FORTH IN 7(D) BELOW.
-------------------
"INTELLECTUAL PROPERTY" MEANS (A) ALL INVENTIONS (WHETHER PATENTABLE OR
----------------------
UNPATENTABLE AND WHETHER OR NOT REDUCED TO PRACTICE), ALL IMPROVEMENTS THERETO,
-------
AND ALL PATENTS, PATENT APPLICATIONS, AND PATENT DISCLOSURES, TOGETHER WITH ALL
REISSUANCES, CONTINUATIONS, CONTINUATIONS-IN-PART, REVISIONS, EXTENSIONS, AND
REEXAMINATIONS THEREOF, (B) ALL TRADEMARKS, SERVICE MARKS, TRADE DRESS, LOGOS,
TRADE NAMES, AND CORPORATE NAMES, TOGETHER WITH ALL TRANSLATIONS, ADAPTATIONS,
DERIVATIONS, AND COMBINATIONS THEREOF AND INCLUDING ALL GOODWILL ASSOCIATED
THEREWITH, AND ALL APPLICATIONS, REGISTRATIONS, AND RENEWALS IN CONNECTION
THEREWITH, (C) ALL COPYRIGHTABLE WORKS, ALL COPYRIGHTS, AND ALL APPLICATIONS,
REGISTRATIONS, AND RENEWALS IN CONNECTION THEREWITH, (D) ALL MASK WORKS AND ALL
APPLICATIONS, REGISTRATIONS, AND RENEWALS IN CONNECTION THEREWITH, (E) ALL TRADE
SECRETS AND CONFIDENTIAL BUSINESS INFORMATION (INCLUDING IDEAS, RESEARCH AND
DEVELOPMENT, KNOW-HOW, FORMULAS, COMPOSITIONS, MANUFACTURING AND PRODUCTION
PROCESSES AND TECHNIQUES, TECHNICAL DATA, DESIGNS, DRAWINGS, SPECIFICATIONS,
CUSTOMER AND SUPPLIER LISTS, PRICING AND COST INFORMATION, AND BUSINESS AND
MARKETING PLANS AND PROPOSALS), (F) ALL COMPUTER SOFTWARE (INCLUDING DATA AND
RELATED DOCUMENTATION), (G) ALL OTHER PROPRIETARY RIGHTS, AND (H) ALL COPIES AND
TANGIBLE EMBODIMENTS THEREOF (IN WHATEVER FORM OR MEDIUM).
"KNOWLEDGE" MEANS ACTUAL KNOWLEDGE AFTER REASONABLE INVESTIGATION.
---------
"LEASE INDEMNIFICATION OBLIGATION" HAS THE MEANING SET FORTH IN 7(C) BELOW.
----------------------------------
"LIABILITY" MEANS ANY LIABILITY (WHETHER KNOWN OR UNKNOWN, WHETHER ASSERTED OR
---------
UNASSERTED, WHETHER ABSOLUTE OR CONTINGENT, WHETHER ACCRUED OR UNACCRUED,
WHETHER LIQUIDATED OR UNLIQUIDATED, AND WHETHER DUE OR TO BECOME DUE, INCLUDING,
BUT NOT LIMITED TO CONTRACTUAL PERFORMANCE OBLIGATIONS CONTAINED IN THE MATERIAL
CONTRACTS), INCLUDING ANY LIABILITY FOR TAXES.
"MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT" MEANS, WITH RESPECT TO
------------------------- -----------------------
ANY PERSON, ANY CHANGE OR EFFECT THAT IS OR IS REASONABLY LIKELY TO BE
-
MATERIALLY ADVERSE TO THE BUSINESS, OPERATIONS, ASSETS, CONDITION (FINANCIAL OR
-
OTHERWISE), PROSPECTS OR RESULTS OF OPERATIONS OF THAT PERSON; PROVIDED THAT
WITH RESPECT TO PARENT, A CHANGE IN THE MARKET PRICE OF PARENT COMMON STOCK
SHALL NOT BE A MATERIAL ADVERSE EFFECT ON PARENT; PROVIDED, FURTHER, THAT ANY
EFFECT ARISING SOLELY FROM OR RELATING SOLELY TO THE ANNOUNCEMENT OF (I) THE
MERGER OR (II) THE EXECUTION OF THIS AGREEMENT, SHALL NOT BE DEEMED TO
CONSTITUTE A MATERIAL ADVERSE EFFECT ON ANY PERSON.
"MATERIAL CONTRACTS" HAS THE MEANING SET FORTH IN 5(R) BELOW.
-------------------
"MERGER SUB" HAS THE MEANING SET FORTH IN THE PREFACE ABOVE.
-----------
"MOST RECENT BALANCE SHEET" MEANS THE BALANCE SHEET CONTAINED WITHIN THE MOST
----------------------------
RECENT FINANCIAL STATEMENTS.
-
"MOST RECENT FINANCIAL STATEMENTS" HAS THE MEANING SET FORTH IN 5(I) BELOW.
-----------------------------------
"MOST RECENT FISCAL QUARTER END" HAS THE MEANING SET FORTH IN 5(I) BELOW.
----------------------------------
"MOST RECENT FISCAL YEAR END" HAS THE MEANING SET FORTH IN 5(I) BELOW.
-------------------------------
4
"MULTIEMPLOYER PLAN" HAS THE MEANING SET FORTH IN ERISA 3(37).
-------------------
"ORDINARY COURSE OF BUSINESS" MEANS THE ORDINARY COURSE OF BUSINESS CONSISTENT
-----------------------------
WITH PAST CUSTOM AND PRACTICE (INCLUDING WITH RESPECT TO QUANTITY AND
FREQUENCY).
"PARENT" HAS THE MEANING SET FORTH IN THE PREFACE ABOVE.
------
"PARENT COMMON STOCK" MEANS ANY SHARE OF THE COMMON STOCK, PAR VALUE $.004 PER
---------------------
SHARE, OF THE PARENT.
"PARENT INDEMNIFIED PARTY" HAS THE MEANING SET FORTH IN 7(B) BELOW.
--------------------------
"PARENT SEC DOCUMENTS" HAS THE MEANING SET FORTH IN 4(B)(VI) BELOW.
----------------------
"PARTY" HAS THE MEANING SET FORTH IN THE PREFACE ABOVE.
-----
"PBGC" MEANS THE PENSION BENEFIT GUARANTY CORPORATION.
----
"PERSON" MEANS AN INDIVIDUAL, A PARTNERSHIP, A CORPORATION, AN ASSOCIATION, A
------
JOINT STOCK COMPANY, A TRUST, A JOINT VENTURE, AN UNINCORPORATED ORGANIZATION,
-
OR A GOVERNMENTAL ENTITY (OR ANY DEPARTMENT, AGENCY, OR POLITICAL SUBDIVISION
THEREOF).
"POST-CLOSING PARTIAL PERIOD" HAS THE MEANING SET FORTH IN 7(B)(II) BELOW.
-----------------------------
"PRE-CLOSING PARTIAL PERIOD" HAS THE MEANING SET FORTH IN 7(B)(II) BELOW.
----------------------------
"PRE-CLOSING PERIODS" HAS THE MEANING SET FORTH IN 7(B)(II) BELOW.
--------------------
"PROHIBITED TRANSACTION" HAS THE MEANING SET FORTH IN ERISA 406 AND CODE 4975.
----------------------
"PROPERTY TAXES" HAS THE MEANING SET FORTH IN 8(B) BELOW.
---------------
"REGISTRATION RIGHTS AGREEMENT" HAS THE MEANING SET FORTH IN 2(H) BELOW.
-------------------------------
"REPORTABLE EVENT" HAS THE MEANING SET FORTH IN ERISA 4043.
-----------------
"SEC" MEANS THE SECURITIES AND EXCHANGE COMMISSION.
---
"SECURITIES ACT" MEANS THE SECURITIES ACT OF 1933, AS AMENDED.
---------------
"SECURITY INTEREST" MEANS ANY MORTGAGE, PLEDGE, LIEN, ENCUMBRANCE, CHARGE, OR
------------------
OTHER SECURITY INTEREST, OTHER THAN (A) MECHANIC'S, MATERIALMEN'S, AND SIMILAR
-
LIENS, (B) LIENS FOR TAXES NOT YET DUE AND PAYABLE, (C) PURCHASE MONEY LIENS AND
LIENS SECURING RENTAL PAYMENTS UNDER CAPITAL LEASE ARRANGEMENTS, AND (D) OTHER
LIENS ARISING IN THE ORDINARY COURSE OF BUSINESS AND NOT INCURRED IN CONNECTION
WITH THE BORROWING OF MONEY.
"SHARES" MEANS 853,448 SHARES OF PARENT COMMON STOCK TO BE ISSUED TO ▇▇▇▇▇▇▇ IN
------
HIS CAPACITY AS THE SOLE SHAREHOLDER OF THE TARGET AS PARTIAL CONSIDERATION FOR
THE MERGER.
5
"STRADDLE PERIOD" HAS THE MEANING SET FORTH IN 7(B)(II) BELOW.
----------------
"SUBSIDIARY" MEANS ANY CORPORATION WITH RESPECT TO WHICH A SPECIFIED PERSON (OR
----------
A SUBSIDIARY THEREOF) OWNS A MAJORITY OF THE COMMON STOCK OR HAS THE POWER TO
VOTE OR DIRECT THE VOTING OF SUFFICIENT SECURITIES TO ELECT A MAJORITY OF THE
DIRECTORS.
"SURVIVING CORPORATION" HAS THE MEANING SET FORTH IN 2(A) BELOW.
----------------------
"TARGET" HAS THE MEANING SET FORTH IN THE PREFACE ABOVE.
------
"TARGET COMMON STOCK" MEANS ANY SHARE OF THE COMMON STOCK, NO PAR VALUE, OF THE
--------------------
TARGET.
"TARGET DISCLOSURE SCHEDULE" HAS THE MEANING SET FORTH IN 5 BELOW.
----------------------------
"TAX" MEANS ANY FEDERAL, STATE, LOCAL, OR FOREIGN INCOME, GROSS RECEIPTS,
---
LICENSE, PAYROLL, EMPLOYMENT, EXCISE, SEVERANCE, STAMP, OCCUPATION, PREMIUM,
---
WINDFALL PROFITS, ENVIRONMENTAL (INCLUDING TAXES UNDER CODE 59A), CUSTOMS
--
DUTIES, CAPITAL STOCK, FRANCHISE, PROFITS, WITHHOLDING, SOCIAL SECURITY (OR
--
SIMILAR), UNEMPLOYMENT, DISABILITY, REAL PROPERTY, PERSONAL PROPERTY, SALES,
--
USE, TRANSFER, REGISTRATION, VALUE ADDED, ALTERNATIVE OR ADD-ON MINIMUM,
--
ESTIMATED, OR OTHER TAX OF ANY KIND WHATSOEVER, INCLUDING ANY INTEREST, PENALTY,
--
OR ADDITION THERETO, WHETHER DISPUTED OR NOT.
"TAX RETURN" MEANS ANY RETURN, DECLARATION, REPORT, CLAIM FOR REFUND, OR
-----------
INFORMATION RETURN OR STATEMENT RELATING TO TAXES, INCLUDING ANY SCHEDULE OR
------
ATTACHMENT THERETO, AND INCLUDING ANY AMENDMENT THEREOF.
--
"THIRD PARTY CLAIM" HAS THE MEANING SET FORTH IN 7(D) BELOW.
-------------------
2. THE MERGER.
-----------
(A) THE MERGER
-----------
. UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS
AGREEMENT, AND IN ACCORDANCE WITH THE DGCL AND THE CCC, THE TARGET SHALL BE
MERGED WITH AND INTO MERGER SUB AT THE EFFECTIVE TIME (AS DEFINED BELOW).
FOLLOWING THE MERGER, THE SEPARATE CORPORATE EXISTENCE OF THE TARGET SHALL CEASE
AND MERGER SUB SHALL CONTINUE AS THE SURVIVING CORPORATION (THE "SURVIVING
---------
CORPORATION") IN ACCORDANCE WITH THE DGCL AND THE CCC.
------
(B) THE CLOSING
------------
. THE CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (THE
"CLOSING") SHALL TAKE PLACE AT THE OFFICES OF ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ IN COSTA MESA,
----
CALIFORNIA, CONCURRENTLY WITH THE EXECUTION OF THIS AGREEMENT, OR ON SUCH OTHER
DATE AS THE PARTIES MAY MUTUALLY DETERMINE (THE "CLOSING DATE").
-------------
(C) EFFECTIVE TIME
---------------
. UPON THE CLOSING, THE PARTIES SHALL FILE WITH THE SECRETARY OF STATE OF
THE STATE OF DELAWARE A CERTIFICATE OF MERGER IN THE FORM, AND TOGETHER WITH
SUCH CERTIFICATES, AS IS REQUIRED UNDER THE DGCL (THE "CERTIFICATE OF MERGER"),
---------------------
EXECUTED IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF THE DGCL, AND AS SOON AS
REASONABLY PRACTICABLE THEREAFTER SHALL FILE A CERTIFIED COPY OF THE CERTIFICATE
OF MERGER WITH THE SECRETARY OF STATE OF THE STATE OF CALIFORNIA, AS IS REQUIRED
UNDER THE CCC, AND SHALL MAKE ALL OTHER FILINGS, RECORDINGS OR PUBLICATIONS
REQUIRED UNDER THE DGCL OR THE CCC IN CONNECTION WITH THE MERGER. THE MERGER
6
SHALL BECOME EFFECTIVE AT SUCH TIME AS THE CERTIFICATE OF MERGER IS FILED WITH
THE SECRETARY OF STATE OF THE STATE OF DELAWARE, OR AT SUCH OTHER TIME AS THE
PARTIES MAY AGREE AND SPECIFY IN THE CERTIFICATE OF MERGER (THE TIME THE MERGER
BECOMES EFFECTIVE BEING THE "EFFECTIVE TIME").
---------------
(D) EFFECTS OF THE MERGER
------------------------
. AT AND AFTER THE EFFECTIVE TIME, THE MERGER WILL HAVE THE EFFECTS SET
FORTH IN THE APPLICABLE PROVISIONS OF THE CCC AND THE DGCL. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, AT THE EFFECTIVE TIME, UNLESS OTHERWISE
PROVIDED HEREIN, ALL THE PROPERTY, RIGHTS, PRIVILEGES, POWERS AND FRANCHISES OF
THE TARGET AND MERGER SUB SHALL VEST IN THE SURVIVING CORPORATION, AND ALL
DEBTS, LIABILITIES AND DUTIES OF THE TARGET AND MERGER SUB SHALL BECOME THE
DEBTS, LIABILITIES AND DUTIES OF THE SURVIVING CORPORATION.
(E) CERTIFICATE OF INCORPORATION
------------------------------
. THE CERTIFICATE OF INCORPORATION OF MERGER SUB, AS IN EFFECT IMMEDIATELY
PRIOR TO THE EFFECTIVE TIME SHALL BE AMENDED AS SET FORTH IN EXHIBIT A ATTACHED
---------
HERETO, AND, AS SO AMENDED, SHALL BE THE CERTIFICATE OF INCORPORATION OF THE
SURVIVING CORPORATION UNTIL THEREAFTER AMENDED AS PROVIDED THEREIN OR BY
APPLICABLE LAW.
(F) BYLAWS
------
. THE BYLAWS OF MERGER SUB AS IN EFFECT IMMEDIATELY PRIOR TO THE EFFECTIVE
TIME SHALL BE THE BYLAWS OF THE SURVIVING CORPORATION UNTIL THEREAFTER CHANGED
OR AMENDED AS PROVIDED THEREIN OR BY APPLICABLE LAW.
(G) OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
----------------------------------------------------
. THE PERSONS LISTED ON SCHEDULE 2(G) SHALL BE THE OFFICERS OF THE
SURVIVING CORPORATION, UNTIL THE EARLIER OF THEIR RESIGNATION OR REMOVAL OR
OTHERWISE CEASING TO BE AN OFFICER OR UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY
ELECTED AND QUALIFIED, AS THE CASE MAY BE. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ SHALL BE THE DIRECTORS OF THE SURVIVING CORPORATION, UNTIL
THE EARLIER OF THEIR RESIGNATION OR REMOVAL OR OTHERWISE CEASING TO BE A
DIRECTOR OR UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY ELECTED AND QUALIFIED, AS
THE CASE MAY BE.
(H) DELIVERIES OF ▇▇▇▇▇▇▇ AND TARGET AT CLOSING
-------------------------------------------------
. AT THE CLOSING, ▇▇▇▇▇▇▇ AND TARGET WILL DELIVER TO PARENT AND MERGER
SUB:
(I) CERTIFICATES REPRESENTING ALL OUTSTANDING SHARES OF TARGET COMMON STOCK;
(II) AN OPINION FROM TARGET'S COUNSEL WHICH ADDRESSES THE ITEMS SET FORTH IN
EXHIBIT D;
----------
(III) COPIES OF ALL THIRD PARTY CONSENTS LISTED ON SCHEDULE 2(H) ATTACHED
-------------
HERETO;
(IV) AN EMPLOYMENT AGREEMENT IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS
EXHIBIT E (THE "EMPLOYMENT AGREEMENT") EXECUTED BY ▇▇▇▇▇▇▇;
-------- ---------------------
(V) ASSIGNMENT OF INVENTIONS, IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS
EXHIBIT F, EXECUTED BY ALL EMPLOYEES OF TARGET AS OF THE CLOSING DATE;
---------
7
(VI) A REGISTRATION RIGHTS AGREEMENT IN SUBSTANTIALLY THE FORM ATTACHED
HERETO AS EXHIBIT C RELATING TO THE SHARES (THE "REGISTRATION RIGHTS AGREEMENT")
--------- -----------------------------
EXECUTED BY ▇▇▇▇▇▇▇; AND
(VII) SUCH OTHER CLOSING CERTIFICATES AND INSTRUMENTS AS THE PARENT MAY
REASONABLY REQUEST IN CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
(I) DELIVERIES OF PARENT AND MERGER SUB AT CLOSING
-----------------------------------------------------
. AT THE CLOSING, PARENT AND MERGER SUB WILL DELIVER TO ▇▇▇▇▇▇▇ AND
TARGET:
(I) THE CONSIDERATION, AS CONTEMPLATED BY 3;
(II) THE REGISTRATION RIGHTS AGREEMENT EXECUTED BY PARENT;
(III) THE EMPLOYMENT AGREEMENT EXECUTED BY MERGER SUB;
(IV) A FORM OF RELEASE OR TERMINATION AGREEMENT EVIDENCING THAT ▇▇▇▇▇▇▇ HAS
BEEN RELEASED FROM ALL PERSONAL GUARANTEES OF INDEBTEDNESS OF THE TARGET UNDER
THAT CERTAIN CREDIT AGREEMENT, DATED AS OF APRIL 1, 1999, BY AND BETWEEN TARGET
AND ▇▇▇▇▇ FARGO BANK, N.A., AS AMENDED TO THE DATE HEREOF; AND
(V) SUCH OTHER CLOSING CERTIFICATES AND INSTRUMENTS AS ▇▇▇▇▇▇▇ MAY
REASONABLY REQUEST IN CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
3. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
-------------------------------------------------------------------------
. AS OF THE EFFECTIVE TIME, BY VIRTUE OF THE MERGER AND WITHOUT ANY ACTION
ON THE PART OF THE HOLDER OF ANY SHARES OF TARGET STOCK OR ANY SHARES OF CAPITAL
STOCK OF MERGER SUB:
(A) CAPITAL STOCK OF MERGER SUB
-------------------------------
. EACH ISSUED AND OUTSTANDING SHARE OF CAPITAL STOCK OF MERGER SUB SHALL
REMAIN ISSUED AND OUTSTANDING.
(B) CONVERSION OF TARGET SHARES
------------------------------
. AT AND AS OF THE EFFECTIVE TIME, ALL OUTSTANDING SHARES OF TARGET COMMON
STOCK, IN AGGREGATE, SHALL BE CONVERTED INTO THE RIGHT TO RECEIVE THE
CONSIDERATION, PAYABLE AS SET FORTH BELOW. NO SHARE OF TARGET STOCK SHALL BE
DEEMED TO BE OUTSTANDING OR TO HAVE ANY RIGHTS, OTHER THAN THE RIGHT TO RECEIVE
THE CONSIDERATION, AFTER THE EFFECTIVE TIME.
(C) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK
-----------------------------------------------------------
. EACH SHARE OF TARGET COMMON STOCK THAT IS OWNED BY TARGET AND EACH SHARE
OF TARGET COMMON STOCK THAT IS OWNED BY PARENT, MERGER SUB OR ANY OTHER WHOLLY
OWNED SUBSIDIARY OF PARENT SHALL AUTOMATICALLY BE CANCELED AND RETIRED AND SHALL
CEASE TO EXIST, AND NO PARENT COMMON STOCK OR OTHER CONSIDERATION SHALL BE
DELIVERED IN EXCHANGE THEREFOR.
(D) CONVEYANCE OF CONSIDERATION TO ▇▇▇▇▇▇▇
------------------------------------------
. SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, ON THE CLOSING
DATE, IN EXCHANGE FOR CERTIFICATES REPRESENTING ALL OF THE OUTSTANDING TARGET
COMMON STOCK, PARENT SHALL DELIVER TO ▇▇▇▇▇▇▇ (A) CASH, PAYABLE BY WIRE TRANSFER
OF IMMEDIATELY AVAILABLE FUNDS, IN THE AMOUNT OF THE CASH CONSIDERATION, AND (B)
A CERTIFICATE OR CERTIFICATES IN THE NAME OF ▇▇▇▇▇▇▇ REPRESENTING IN THE
AGGREGATE 853,448 SHARES.
8
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
--------------------------------------------------------------
(A) REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇
---------------------------------------------
. ▇▇▇▇▇▇▇ REPRESENTS AND WARRANTS TO THE PARENT AND MERGER SUB THAT THE
STATEMENTS CONTAINED IN THIS 4(A) ARE CORRECT AND COMPLETE AS OF THE DATE OF
THIS AGREEMENT, EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE DELIVERED BY
▇▇▇▇▇▇▇ TO THE PARENT ON THE DATE HEREOF, INITIALED BY THE PARTIES AND ATTACHED
HERETO (THE "▇▇▇▇▇▇▇ DISCLOSURE SCHEDULE"). NOTHING IN THE ▇▇▇▇▇▇▇ DISCLOSURE
----------------------------
SCHEDULE IS DEEMED ADEQUATE TO DISCLOSE AN EXCEPTION TO A REPRESENTATION OR
WARRANTY MADE HEREIN, HOWEVER, UNLESS THE ▇▇▇▇▇▇▇ DISCLOSURE SCHEDULE IDENTIFIES
THE EXCEPTION WITH PARTICULARITY AND DESCRIBES THE RELEVANT FACTS IN DETAIL.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE MERE LISTING (OR INCLUSION
OF A COPY) OF A DOCUMENT OR OTHER ITEM SHALL NOT BE DEEMED ADEQUATE TO DISCLOSE
AN EXCEPTION TO A REPRESENTATION OR WARRANTY MADE HEREIN (UNLESS THE
REPRESENTATION OR WARRANTY HAS TO DO WITH THE EXISTENCE OF THE DOCUMENT OR OTHER
ITEM ITSELF). THE ▇▇▇▇▇▇▇ DISCLOSURE SCHEDULE WILL BE ARRANGED IN PARAGRAPHS
CORRESPONDING TO THE LETTERED AND NUMBERED PARAGRAPHS CONTAINED IN THIS 4(A),
AND DISCLOSURE OF ANY MATTER IN ANY SUCH PARAGRAPH IS DEEMED TO BE DISCLOSURE
FOR THE PURPOSES OF THE CORRESPONDINGLY NUMBERED PARAGRAPH OF THIS 4(A) ONLY,
AND NOT FOR ANY OTHER PARAGRAPH OF THIS 4(A), OR FOR ANY OTHER PURPOSE.
(I) AUTHORIZATION OF TRANSACTION. ▇▇▇▇▇▇▇ HAS FULL POWER AND AUTHORITY TO
------------------------------
EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM HIS OBLIGATIONS HEREUNDER.
THIS AGREEMENT CONSTITUTES THE VALID AND LEGALLY BINDING OBLIGATION OF ▇▇▇▇▇▇▇,
ENFORCEABLE IN ACCORDANCE WITH ITS TERMS AND CONDITIONS. NO NOTICE TO, OR
CONSENT OF, ▇▇▇▇▇▇▇'▇ SPOUSE IS REQUIRED UNDER ANY LAW, STATUTE, RULE OR
REGULATION RELATED TO MARITAL OR COMMUNITY PROPERTY IN ORDER FOR ▇▇▇▇▇▇▇ TO
EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM HIS OBLIGATIONS HEREUNDER AND
CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY, AND NO RIGHTS OF ▇▇▇▇▇▇▇'▇
SPOUSE UNDER ANY SUCH LAW, STATUTE, RULE OR REGULATION SHALL BE TRIGGERED BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PERFORMANCE BY ▇▇▇▇▇▇▇ OF HIS
OBLIGATIONS HEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
HEREBY.
(II) NONCONTRAVENTION. NEITHER THE EXECUTION AND THE DELIVERY OF THIS
----------------
AGREEMENT, NOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY, WILL
(A) VIOLATE ANY CONSTITUTION, STATUTE, REGULATION, RULE, INJUNCTION, JUDGMENT,
ORDER, DECREE, RULING, CHARGE, OR OTHER RESTRICTION OF ANY GOVERNMENT,
GOVERNMENTAL AGENCY, OR COURT TO WHICH ▇▇▇▇▇▇▇ IS SUBJECT OR (B) CONFLICT WITH,
RESULT IN A BREACH OF, CONSTITUTE A DEFAULT UNDER, RESULT IN THE ACCELERATION
OF, CREATE IN ANY PARTY THE RIGHT TO ACCELERATE, TERMINATE, MODIFY, OR CANCEL,
OR REQUIRE ANY NOTICE OR CONSENT UNDER ANY AGREEMENT, CONTRACT, LEASE, LICENSE,
INSTRUMENT, OR OTHER ARRANGEMENT TO WHICH ▇▇▇▇▇▇▇ IS A PARTY OR BY WHICH HE IS
BOUND OR TO WHICH ANY OF HIS ASSETS IS SUBJECT.
(III) APPROVALS. NO CONSENT, APPROVAL, ORDER OR AUTHORIZATION OF, OR
---------
REGISTRATION, DECLARATION OR FILING WITH, OR PERMIT FROM, ANY GOVERNMENTAL
ENTITY IS REQUIRED BY OR WITH RESPECT TO ▇▇▇▇▇▇▇ IN CONNECTION WITH THE
EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE CONSUMMATION BY ▇▇▇▇▇▇▇ OF THE
TRANSACTIONS CONTEMPLATED HEREBY EXCEPT FOR: (A) THE FILING OF THE CERTIFICATE
OF MERGER WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE PURSUANT TO THE
DGCL; (B) THE FILING OF THE AGREEMENT OF MERGER WITH THE SECRETARY OF STATE OF
THE STATE OF CALIFORNIA PURSUANT TO THE CCC; (C) SUCH FILINGS AND APPROVALS AS
MAY BE REQUIRED BY ANY APPLICABLE NON-U.S. GOVERNMENTAL ENTITY; (D) SUCH FILINGS
AND APPROVALS AS MAY BE REQUIRED BY ANY NON-U.S. PREMERGER NOTIFICATION,
SECURITIES, CORPORATE OR OTHER LEGAL REQUIREMENT, AND (E) SUCH CONSENTS,
APPROVALS, ORDERS, AUTHORIZATIONS, REGISTRATIONS, DECLARATIONS AND FILINGS THE
FAILURE OF WHICH TO MAKE OR OBTAIN COULD NOT REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT ON TARGET OR PARENT OR MATERIALLY IMPAIR OR DELAY THE
ABILITY OF THE PARTIES TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
9
(IV) BROKERS' FEES. ▇▇▇▇▇▇▇ HAS NO LIABILITY OR OBLIGATION TO PAY ANY FEES
--------------
OR COMMISSIONS TO ANY BROKER, FINDER, OR AGENT WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT FOR WHICH THE PARENT OR MERGER SUB COULD BECOME
LIABLE OR OBLIGATED.
(V) INVESTMENT. ▇▇▇▇▇▇▇ (A) UNDERSTANDS THAT THE SHARES HAVE NOT BEEN, AND
----------
WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR UNDER ANY STATE SECURITIES
LAWS, AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON FEDERAL AND STATE
EXEMPTIONS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING, (B) IS ACQUIRING
THE SHARES SOLELY FOR HIS OR ITS OWN ACCOUNT FOR INVESTMENT PURPOSES, AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF, (C) IS A SOPHISTICATED INVESTOR WITH
KNOWLEDGE AND EXPERIENCE IN BUSINESS AND FINANCIAL MATTERS, (D) HAS RECEIVED
CERTAIN INFORMATION CONCERNING THE PARENT AND HAS HAD THE OPPORTUNITY TO OBTAIN
ADDITIONAL INFORMATION AS DESIRED IN ORDER TO EVALUATE THE MERITS AND THE RISKS
INHERENT IN HOLDING THE SHARES, (E) IS ABLE TO BEAR THE ECONOMIC RISK AND LACK
OF LIQUIDITY INHERENT IN HOLDING THE SHARES, AND (F) IS AN ACCREDITED INVESTOR
FOR THE REASONS SET FORTH ON THE ACCREDITED INVESTOR QUESTIONNAIRE ATTACHED TO
THE ▇▇▇▇▇▇▇ DISCLOSURE SCHEDULE.
(VI) TARGET SHARES. ▇▇▇▇▇▇▇ HOLDS OF RECORD AND OWNS BENEFICIALLY 4,250,000
-------------
SHARES OF TARGET COMMON STOCK, BEING ALL OF THE OUTSTANDING SHARES OF TARGET
COMMON STOCK, FREE AND CLEAR OF ANY RESTRICTIONS ON TRANSFER (OTHER THAN ANY
RESTRICTIONS UNDER THE SECURITIES ACT AND STATE SECURITIES LAWS), TAXES,
SECURITY INTERESTS, OPTIONS, WARRANTS, PURCHASE RIGHTS, CONTRACTS, COMMITMENTS,
EQUITIES, CLAIMS, AND DEMANDS. ▇▇▇▇▇▇▇ IS NOT A PARTY TO ANY OPTION, WARRANT,
PURCHASE RIGHT, OR OTHER CONTRACT OR COMMITMENT THAT COULD REQUIRE ▇▇▇▇▇▇▇ TO
SELL, TRANSFER, OR OTHERWISE DISPOSE OF ANY CAPITAL STOCK OF THE TARGET (OTHER
THAN THIS AGREEMENT). ▇▇▇▇▇▇▇ IS NOT A PARTY TO ANY VOTING TRUST, PROXY, OR
OTHER AGREEMENT OR UNDERSTANDING WITH RESPECT TO THE VOTING OF ANY CAPITAL STOCK
OF THE TARGET, AND HAS FULL AUTHORITY TO VOTE THE SHARES OF TARGET COMMON STOCK
HELD BY HIM.
(VII) NO CONTRARY ACTION. ▇▇▇▇▇▇▇ HAS NOT TAKEN OR CAUSED TO BE TAKEN, OR
--------------------
AGREED TO TAKE OR CAUSE TO BE TAKEN, ANY ACTION, AND HAS NO PLAN OR INTENTION TO
TAKE OR CAUSE TO BE TAKEN ANY ACTION THAT WOULD, OR IS REASONABLY LIKELY TO,
PREVENT THE MERGER FROM QUALIFYING AS A REORGANIZATION WITHIN THE MEANING OF
SECTION 368(A) OF THE CODE, NOR DOES ▇▇▇▇▇▇▇ KNOW OR HAVE REASON TO KNOW OF ANY
FACT, AGREEMENT, PLAN OR OTHER CIRCUMSTANCE THAT WOULD, OR IS REASONABLY LIKELY
TO, PREVENT THE MERGER FROM QUALIFYING AS A REORGANIZATION WITHIN THE MEANING OF
SECTION 368(A) OF THE CODE. FOR PURPOSES OF THIS REPRESENTATION, ANY FAILURE OR
OMISSION TO ACT, OR THE CAUSING OF ANY FAILURE OR OMISSION TO ACT, SHALL
CONSTITUTE AN ACTION TAKEN, OR CAUSED TO BE TAKEN, AS APPROPRIATE.
10
(B) REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB
-------------------------------------------------------------------
. PARENT AND MERGER SUB REPRESENT AND WARRANT TO ▇▇▇▇▇▇▇ AND THE TARGET
THAT THE STATEMENTS CONTAINED IN THIS 4(B) ARE CORRECT AND COMPLETE AS OF THE
DATE OF THIS AGREEMENT.
(I) ORGANIZATION OF THE PARENT AND MERGER SUB. EACH OF PARENT AND MERGER
--------------------------------------------
SUB IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING, AND IN GOOD STANDING
UNDER THE LAWS OF THE STATE OF DELAWARE. EACH OF PARENT AND MERGER SUB HAS ALL
REQUISITE CORPORATE POWER AND AUTHORITY TO OWN, LEASE AND OPERATE ITS PROPERTIES
AND TO CARRY ON ITS BUSINESS AS NOW BEING CONDUCTED, AND IS DULY QUALIFIED
AND IN GOOD STANDING TO DO BUSINESS IN EACH JURISDICTION IN WHICH THE BUSINESS
IT IS CONDUCTING, OR THE OPERATION, OWNERSHIP OR LEASING OF ITS PROPERTIES,
MAKES SUCH QUALIFICATION NECESSARY, EXCEPT WHERE THE FAILURE TO SO QUALIFY,
INDIVIDUALLY, OR IN THE AGGREGATE, WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON
THE BUSINESS, OPERATIONS, ASSETS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS
OF THE PARENT AND ITS SUBSIDIARIES TAKEN AS A WHOLE.
(II) AUTHORIZATION OF TRANSACTION. EACH OF PARENT AND MERGER SUB HAS FULL
------------------------------
POWER AND AUTHORITY (INCLUDING FULL CORPORATE POWER AND AUTHORITY) TO EXECUTE
AND DELIVER THIS AGREEMENT AND TO PERFORM ITS OBLIGATIONS HEREUNDER. THE
EXECUTION AND DELIVERY OF THIS AGREEMENT BY PARENT AND MERGER SUB AND THE
CONSUMMATION BY PARENT AND MERGER SUB OF THE TRANSACTIONS CONTEMPLATED HEREBY
HAVE BEEN DULY APPROVED BY THE BOARDS OF DIRECTORS OF PARENT AND MERGER SUB AND
BY THE SOLE SHAREHOLDER OF MERGER SUB. NO OTHER CORPORATE PROCEEDINGS ON THE
PART OF PARENT OR MERGER SUB ARE NECESSARY TO AUTHORIZE THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY. THIS AGREEMENT CONSTITUTES THE VALID AND
LEGALLY BINDING OBLIGATION OF THE PARENT AND MERGER SUB, ENFORCEABLE IN
ACCORDANCE WITH ITS TERMS AND CONDITIONS.
(III) SHARES. WHEN ISSUED IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT,
------
THE SHARES WILL BE DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE.
(IV) NONCONTRAVENTION. NEITHER THE EXECUTION AND THE DELIVERY OF THIS
----------------
AGREEMENT, NOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY, WILL
VIOLATE ANY CONSTITUTION, STATUTE, REGULATION, RULE, INJUNCTION, JUDGMENT,
ORDER, DECREE, RULING, CHARGE, OR OTHER RESTRICTION OF ANY GOVERNMENT,
GOVERNMENTAL AGENCY, OR COURT TO WHICH THE PARENT OR MERGER SUB IS SUBJECT OR
ANY PROVISION OF THEIR RESPECTIVE CHARTER OR BYLAWS.
11
(V) APPROVALS. NO CONSENT, APPROVAL, ORDER OR AUTHORIZATION OF, OR
---------
REGISTRATION, DECLARATION OR FILING WITH, OR PERMIT FROM, ANY GOVERNMENTAL
ENTITY IS REQUIRED BY OR WITH RESPECT TO PARENT OR MERGER SUB IN CONNECTION WITH
THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE CONSUMMATION BY PARENT AND
MERGER SUB OF THE TRANSACTIONS CONTEMPLATED HEREBY EXCEPT FOR: (A) THE FILING OF
THE CERTIFICATE OF MERGER WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE
PURSUANT TO THE DGCL; (B) THE FILING OF THE AGREEMENT OF MERGER WITH THE
SECRETARY OF STATE OF THE STATE OF CALIFORNIA PURSUANT TO THE CCC; (C) FILINGS
WITH THE SEC REQUIRED UNDER THE EXCHANGE ACT; (D) SUCH FILINGS AND APPROVALS AS
MAY BE REQUIRED BY ANY APPLICABLE STATE SECURITIES, "BLUE SKY" OR TAKEOVER LAWS;
(E) SUCH FILINGS WITH THE SEC UNDER THE SECURITIES ACT AS MAY BE REQUIRED IN
CONNECTION WITH THE ISSUANCE OF THE SHARES AND THE SUBSEQUENT REGISTRATION OF
THE SHARES PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT REFERRED TO IN 7
BELOW; (F) SUCH FILINGS AND APPROVALS AS MAY BE REQUIRED BY THE RULES AND
REGULATIONS OF THE NEW YORK STOCK EXCHANGE; (G) SUCH FILINGS AND APPROVALS AS
MAY BE REQUIRED BY ANY APPLICABLE NON-U.S. GOVERNMENTAL ENTITY; (H) SUCH FILINGS
AND APPROVALS AS MAY BE REQUIRED BY ANY NON-U.S. PREMERGER NOTIFICATION,
SECURITIES, CORPORATE OR OTHER LEGAL REQUIREMENT, AND (I) SUCH CONSENTS,
APPROVALS, ORDERS, AUTHORIZATIONS, REGISTRATIONS, DECLARATIONS AND FILINGS THE
FAILURE OF WHICH TO MAKE OR OBTAIN COULD NOT REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT ON THE BUSINESS, OPERATIONS, ASSETS, FINANCIAL CONDITION
OR RESULTS OF OPERATIONS OF THE PARENT AND ITS SUBSIDIARIES TAKEN AS A WHOLE, OR
MATERIALLY IMPAIR OR DELAY THE ABILITY OF THE PARTIES TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
(VI) PARENT SEC DOCUMENTS. THE PARENT HAS FILED ALL REQUIRED REPORTS,
----------------------
SCHEDULES, FORMS, STATEMENTS AND OTHER DOCUMENTS WITH THE SEC SINCE JUNE 30,
2000 (SUCH DOCUMENTS, TOGETHER WITH ALL EXHIBITS AND SCHEDULES THERETO AND
DOCUMENTS INCORPORATED BY REFERENCE THEREIN, COLLECTIVELY REFERRED TO HEREIN AS
THE "PARENT SEC DOCUMENTS"). AS OF THEIR RESPECTIVE DATES, NONE OF THE PARENT
---------------------
SEC DOCUMENTS CONTAINED WHEN FILED ANY UNTRUE STATEMENT OF A MATERIAL FACT OR
OMITTED TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING. THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT
INCLUDED IN THE PARENT SEC DOCUMENTS COMPLIED AS TO FORM IN ALL MATERIAL
RESPECTS WITH THE PUBLISHED RULES AND REGULATIONS OF THE SEC WITH RESPECT
THERETO, WERE PREPARED IN ACCORDANCE WITH GAAP APPLIED ON A CONSISTENT BASIS
DURING THE PERIODS INVOLVED (EXCEPT AS MAY BE INDICATED IN THE NOTES THERETO OR,
IN THE CASE OF THE UNAUDITED STATEMENTS, AS PERMITTED BY RULE 10-01 OF
REGULATION S-X OF THE SEC) AND FAIRLY PRESENT IN ACCORDANCE WITH APPLICABLE
REQUIREMENTS OF GAAP (SUBJECT, IN THE CASE OF THE UNAUDITED STATEMENTS, TO
NORMAL YEAR-END ADJUSTMENTS AND OTHER ADJUSTMENTS DISCUSSED THEREIN) THE
CONSOLIDATED FINANCIAL POSITION OF THE PARENT AS OF THEIR RESPECTIVE DATES AND
THE RESULTS OF OPERATIONS AND THE CONSOLIDATED CASH FLOWS OF THE PARENT AND ITS
CONSOLIDATED SUBSIDIARIES FOR THE PERIODS PRESENTED THEREIN.
(VII) BROKERS' FEES. NEITHER PARENT NOR MERGER SUB HAS ANY LIABILITY OR
--------------
OBLIGATION TO PAY ANY FEES OR COMMISSIONS TO ANY BROKER, FINDER, OR AGENT WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT FOR WHICH ▇▇▇▇▇▇▇ OR
TARGET COULD BECOME LIABLE OR OBLIGATED.
12
(VIII) NO CONTRARY ACTION.
--------------------
(A) EXCEPT WITH RESPECT TO (1) OPEN-MARKET PURCHASES OF PARENT COMMON STOCK
PURSUANT TO A GENERAL STOCK REPURCHASE PROGRAM OF PARENT THAT HAS NOT BEEN
CREATED OR MODIFIED IN CONNECTION WITH THE MERGER, (2) REPURCHASES IN THE
ORDINARY COURSE OF BUSINESS OF UNVESTED SHARES, IF ANY, ACQUIRED FROM TERMINATED
EMPLOYEES; OR (3) PAYMENTS OF CASH, IF ANY, IN LIEU OF THE ISSUANCE OF
FRACTIONAL SHARES, NEITHER PARENT NOR ANY PERSON RELATED TO PARENT WITHIN THE
MEANING OF TREAS. REG. 1.368-1(E)(3), (E)(4) AND (E)(5) HAS ANY PLAN OR
INTENTION TO, REDEEM OR OTHERWISE ACQUIRE ANY OF THE SHARES FOLLOWING THE
MERGER.
(B) NEITHER PARENT NOR, TO THE KNOWLEDGE OF PARENT, ANY PERSON RELATED TO
PARENT (WITHIN THE MEANING OF TREAS. REG. 1.368-1(E)(3), (E)(4) AND (E)(5))
HAS ACQUIRED ANY TARGET COMMON STOCK IN CONTEMPLATION OF THE MERGER OR OTHERWISE
AS PART OF A PLAN OF WHICH THE MERGER IS A PART.
(C) PARENT HAS NO PLAN OR INTENTION TO CAUSE THE SURVIVING CORPORATION,
AFTER THE MERGER, TO ISSUE ADDITIONAL SHARES OF THE COMMON STOCK OF THE
SURVIVING CORPORATION THAT WOULD RESULT IN PARENT LOSING CONTROL OF THE
SURVIVING CORPORATION WITHIN THE MEANING OF 368(C) OF THE CODE.
(D) EXCEPT FOR TRANSFERS OF STOCK AND ASSETS DESCRIBED IN TREAS. REG.
1.368-2(K) OR TRANSFERS OF SHARES OF COMMON STOCK OF THE SURVIVING CORPORATION
TO ANOTHER SUBSIDIARY CONTROLLED BY PARENT WITHIN THE MEANING OF CODE 368(C),
PARENT HAS NO PLAN OR INTENTION TO LIQUIDATE THE SURVIVING CORPORATION; TO MERGE
THE SURVIVING CORPORATION WITH OR INTO ANOTHER CORPORATION; TO SELL OR OTHERWISE
DISPOSE OF THE STOCK OF THE SURVIVING CORPORATION; OR, EXCEPT FOR DISPOSITIONS
MADE IN THE ORDINARY COURSE OF BUSINESS, TO CAUSE THE SURVIVING CORPORATION TO
SELL OR OTHERWISE DISPOSE OF ANY OF ITS ASSETS.
(E) ASSUMING (1) THE TARGET CURRENTLY CONDUCTS A BUSINESS, AND (2) SUCH
BUSINESS IS THE TARGET'S "HISTORIC BUSINESS" WITHIN THE MEANING OF TREAS. REG.
1.368-1(D), AND (3) NO ASSETS OF THE TARGET HAVE BEEN SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF THAT WOULD PREVENT PARENT FROM CONTINUING THE "HISTORIC
BUSINESS" OF THE TARGET OR FROM USING A "SIGNIFICANT PORTION" OF THE TARGET'S
"HISTORIC BUSINESS ASSETS" IN A BUSINESS FOLLOWING THE MERGER, AS SUCH TERMS ARE
USED IN TREAS. REG. 1.368-1(D), PARENT WILL CAUSE THE SURVIVING CORPORATION TO
CONTINUE THE TARGET'S HISTORIC BUSINESS OR USE A SIGNIFICANT PORTION OF THE
TARGET'S HISTORIC BUSINESS ASSETS IN A BUSINESS. FOR PURPOSES OF THIS
REPRESENTATION, PARENT WILL BE DEEMED TO SATISFY THE FOREGOING REPRESENTATION IF
(X) THE MEMBERS OF PARENT'S QUALIFIED GROUP (AS DEFINED IN TREAS. REG.
1.368-1(D)(4)(II)), IN THE AGGREGATE, CONTINUE THE HISTORIC BUSINESS OF THE
TARGET OR USE A SIGNIFICANT PORTION OF THE TARGET'S HISTORIC BUSINESS ASSETS IN
A BUSINESS, OR (Y) THE FOREGOING ACTIVITIES ARE UNDERTAKEN BY A PARTNERSHIP AS
CONTEMPLATED BY TREAS. REG. 1.368-1(D)(4) (PROVIDED, HOWEVER, THAT IN THE EVENT
THAT ANY ASSUMPTION SET FORTH IN THIS 4(B)(VIII)(E) IS INCORRECT, THIS
4(B)(VIII)(E) SHALL NOT BE CONSIDERED TO BE OR HAVE BEEN BREACHED).
13
(F) NEITHER PARENT NOR MERGER SUB IS AN INVESTMENT COMPANY AS DEFINED IN
368(A)(2)(F)(III) AND (IV) OF THE CODE.
(G) ASSUMING THAT, AT THE EFFECTIVE TIME, THE TARGET WILL HOLD AT LEAST 90
PERCENT OF THE FAIR MARKET VALUE OF ITS NET ASSETS AND AT LEAST 70 PERCENT OF
THE FAIR MARKET VALUE OF ITS GROSS ASSETS HELD IMMEDIATELY PRIOR TO THE
EFFECTIVE TIME, AT THE EFFECTIVE TIME, THE SURVIVING CORPORATION WILL HOLD AT
LEAST 90 PERCENT OF THE FAIR MARKET VALUE OF THE TARGET'S NET ASSETS AND AT
LEAST 70 PERCENT OF THE FAIR MARKET VALUE OF THE TARGET'S GROSS ASSETS AND AT
LEAST 90 PERCENT OF THE FAIR MARKET VALUE OF MERGER SUB'S NET ASSETS AND AT
LEAST 70 PERCENT OF THE FAIR MARKET VALUE OF MERGER SUB'S GROSS ASSETS HELD
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME. FOR PURPOSES OF THIS REPRESENTATION
(INCLUDING THE ASSUMPTION SET FORTH ABOVE), AMOUNTS USED BY THE TARGET TO PAY
MERGER EXPENSES, AMOUNTS PAID BY THE TARGET TO REDEEM STOCK, SECURITIES,
WARRANTS OR OPTIONS OF THE TARGET AS PART OF ANY OVERALL PLAN OF WHICH THE
MERGER IS A PART, AND AMOUNTS DISTRIBUTED BY THE TARGET TO ▇▇▇▇▇▇▇ (EXCEPT FOR
ANY REGULAR, NORMAL DIVIDENDS) AS PART OF AN OVERALL PLAN OF WHICH THE MERGER IS
A PART, INCLUDING, BUT NOT LIMITED TO, ANY INDEBTEDNESS OWED BY ▇▇▇▇▇▇▇ TO THE
TARGET THAT IS FORGIVEN AS PART OF AN OVERALL PLAN OF WHICH THE MERGER IS A
PART, IN EACH CASE WILL BE TREATED AS CONSTITUTING ASSETS OF THE TARGET
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME (PROVIDED, HOWEVER, THAT IN THE EVENT
THAT THE ASSUMPTION SET FORTH IN THIS 4(B)(VIII)(G) IS INCORRECT, THIS
4(B)(VIII)(G) SHALL NOT BE CONSIDERED TO BE OR HAVE BEEN BREACHED).
(H) PARENT AND MERGER SUB WILL PAY THEIR RESPECTIVE EXPENSES, IF ANY,
INCURRED IN CONNECTION WITH THE MERGER. IN THE MERGER, NO LIABILITIES OF
▇▇▇▇▇▇▇ WILL BE ASSUMED BY PARENT, AND PARENT WILL NOT ASSUME ANY LIENS,
ENCUMBRANCES OR ANY SIMILAR LIABILITIES RELATING TO ANY TARGET COMMON STOCK
ACQUIRED BY PARENT IN THE MERGER.
(I) AT THE EFFECTIVE TIME, THERE WILL BE NO INTERCORPORATE INDEBTEDNESS
EXISTING BETWEEN PARENT OR MERGER SUB AND THE TARGET THAT WAS ISSUED OR
ACQUIRED, OR WILL BE SETTLED, AT A DISCOUNT.
5. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGET
---------------------------------------------------------
. ▇▇▇▇▇▇▇ AND TARGET REPRESENT AND WARRANT TO PARENT AND MERGER SUB THAT
THE STATEMENTS CONTAINED IN THIS 5 ARE CORRECT AND COMPLETE AS OF THE DATE OF
THIS AGREEMENT, EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE DELIVERED BY
TARGET TO THE PARENT ON THE DATE HEREOF, INITIALED BY THE PARTIES AND ATTACHED
HERETO (THE "TARGET DISCLOSURE SCHEDULE"). NOTHING IN THE TARGET DISCLOSURE
----------------------------
SCHEDULE SHALL BE DEEMED ADEQUATE TO DISCLOSE AN EXCEPTION TO A REPRESENTATION
OR WARRANTY MADE HEREIN, HOWEVER, UNLESS THE TARGET DISCLOSURE SCHEDULE
IDENTIFIES THE EXCEPTION WITH PARTICULARITY AND DESCRIBES THE RELEVANT FACTS IN
DETAIL. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE MERE LISTING (OR
INCLUSION OF A COPY) OF A DOCUMENT OR OTHER ITEM SHALL NOT BE DEEMED ADEQUATE TO
DISCLOSE AN EXCEPTION TO A REPRESENTATION OR WARRANTY MADE HEREIN (UNLESS THE
REPRESENTATION OR WARRANTY HAS TO DO WITH THE EXISTENCE OF THE DOCUMENT OR OTHER
ITEM ITSELF). THE TARGET DISCLOSURE SCHEDULE IS ARRANGED IN PARAGRAPHS
CORRESPONDING TO THE LETTERED AND NUMBERED PARAGRAPHS CONTAINED IN THIS 5, AND
DISCLOSURE OF ANY MATTER IN ANY SUCH PARAGRAPH IS DEEMED TO BE DISCLOSURE FOR
THE PURPOSES OF THE CORRESPONDINGLY NUMBERED PARAGRAPH OF THIS 5 ONLY, AND NOT
FOR ANY OTHER PARAGRAPH OF THIS 5, OR FOR ANY OTHER PURPOSE.
14
(A) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER
----------------------------------------------------
. THE TARGET IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING, AND IN
GOOD STANDING UNDER THE LAWS OF THE STATE OF CALIFORNIA. THE TARGET IS DULY
AUTHORIZED TO CONDUCT BUSINESS AND IS IN GOOD STANDING UNDER THE LAWS OF EACH
JURISDICTION WHERE SUCH QUALIFICATION IS REQUIRED, EXCEPT WHERE THE FAILURE TO
SO QUALIFY, INDIVIDUALLY, OR IN THE AGGREGATE, WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT ON THE TARGET. 5(A) OF THE TARGET DISCLOSURE SCHEDULE LISTS THE
JURISDICTIONS IN WHICH THE TARGET IS DULY AUTHORIZED TO CONDUCT BUSINESS. THE
TARGET HAS FULL CORPORATE POWER AND AUTHORITY AND ALL LICENSES, PERMITS, AND
AUTHORIZATIONS NECESSARY TO CARRY ON THE BUSINESSES IN WHICH IT IS ENGAGED AND
IN WHICH IT PRESENTLY PROPOSES TO ENGAGE AND TO OWN AND USE THE PROPERTIES OWNED
AND USED BY IT. 5(A) OF THE TARGET DISCLOSURE SCHEDULE LISTS THE DIRECTORS AND
OFFICERS OF THE TARGET. THE TARGET AND ▇▇▇▇▇▇▇ HAVE DELIVERED TO THE PARENT
CORRECT AND COMPLETE COPIES OF THE CHARTER AND BYLAWS OF THE TARGET (AS AMENDED
TO DATE). THE MINUTE BOOKS (CONTAINING THE RECORDS OF MEETINGS OF THE
SHAREHOLDERS, THE BOARD OF DIRECTORS, AND ANY COMMITTEES OF THE BOARD OF
DIRECTORS), THE STOCK CERTIFICATE BOOKS, AND THE STOCK RECORD BOOKS OF THE
TARGET PROVIDED TO PARENT ARE CORRECT AND COMPLETE. THE TARGET IS NOT IN DEFAULT
UNDER OR IN VIOLATION OF ANY PROVISION OF ITS CHARTER OR BYLAWS.
(B) CAPITALIZATION
--------------
. THE ENTIRE AUTHORIZED CAPITAL STOCK OF THE TARGET CONSISTS OF 15,000,000
TARGET SHARES, OF WHICH 4,250,000 TARGET SHARES ARE ISSUED AND OUTSTANDING AND
NO TARGET SHARES ARE HELD IN TREASURY. ALL OF THE ISSUED AND OUTSTANDING TARGET
SHARES HAVE BEEN DULY AUTHORIZED, ARE VALIDLY ISSUED, FULLY PAID, AND
NONASSESSABLE, AND ARE HELD OF RECORD BY ▇▇▇▇▇▇▇. THERE ARE NO OUTSTANDING OR
AUTHORIZED OPTIONS, WARRANTS, PURCHASE RIGHTS, SUBSCRIPTION RIGHTS, CONVERSION
RIGHTS, EXCHANGE RIGHTS, OR OTHER CONTRACTS OR COMMITMENTS THAT COULD REQUIRE
THE TARGET TO ISSUE, SELL, OR OTHERWISE CAUSE TO BECOME OUTSTANDING ANY OF ITS
CAPITAL STOCK. THERE ARE NO OUTSTANDING OR AUTHORIZED STOCK APPRECIATION,
PHANTOM STOCK, PROFIT PARTICIPATION, OR SIMILAR RIGHTS WITH RESPECT TO THE
TARGET. THERE ARE NO VOTING TRUSTS, PROXIES, OR OTHER AGREEMENTS OR
UNDERSTANDINGS WITH RESPECT TO THE VOTING OF THE CAPITAL STOCK OF THE TARGET.
(C) AUTHORIZATION OF TRANSACTION
------------------------------
. THE TARGET HAS FULL POWER AND AUTHORITY (INCLUDING FULL CORPORATE POWER
AND AUTHORITY) TO EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM ITS
OBLIGATIONS HEREUNDER. THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY THE
TARGET AND THE CONSUMMATION BY THE TARGET OF THE TRANSACTIONS CONTEMPLATED
HEREBY HAVE BEEN DULY APPROVED BY THE BOARD OF DIRECTORS AND THE SOLE
SHAREHOLDER OF THE TARGET. NO OTHER CORPORATE PROCEEDINGS ON THE PART OF THE
TARGET OR ITS SHAREHOLDER IS NECESSARY TO AUTHORIZE THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY. THIS AGREEMENT CONSTITUTES THE VALID AND
LEGALLY BINDING OBLIGATION OF THE TARGET, ENFORCEABLE IN ACCORDANCE WITH ITS
TERMS AND CONDITIONS.
15
(D) NONCONTRAVENTION
----------------
. NEITHER THE EXECUTION AND THE DELIVERY OF THIS AGREEMENT, NOR THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY, WILL (I) VIOLATE ANY
CONSTITUTION, STATUTE, REGULATION, RULE, INJUNCTION, JUDGMENT, ORDER, DECREE,
RULING, CHARGE, OR OTHER RESTRICTION OF ANY GOVERNMENT, GOVERNMENTAL AGENCY, OR
COURT TO WHICH THE TARGET IS SUBJECT OR ANY PROVISION OF THE CHARTER OR BYLAWS
OF THE TARGET OR (II) CONFLICT WITH, RESULT IN A BREACH OF, CONSTITUTE A DEFAULT
UNDER, RESULT IN THE ACCELERATION OF, CREATE IN ANY PARTY THE RIGHT TO
ACCELERATE, TERMINATE, MODIFY, OR CANCEL, OR REQUIRE ANY NOTICE OR CONSENT UNDER
ANY AGREEMENT, CONTRACT, LEASE, LICENSE, INSTRUMENT, OR OTHER ARRANGEMENT TO
WHICH THE TARGET IS A PARTY OR BY WHICH IT IS BOUND OR TO WHICH ANY OF ITS
ASSETS IS SUBJECT (OR RESULT IN THE IMPOSITION OF ANY SECURITY INTEREST UPON ANY
OF ITS ASSETS).
(E) APPROVALS
---------
. NO CONSENT, APPROVAL, ORDER OR AUTHORIZATION OF, OR REGISTRATION,
DECLARATION OR FILING WITH, OR PERMIT FROM, ANY GOVERNMENTAL ENTITY IS REQUIRED
BY OR WITH RESPECT TO TARGET IN CONNECTION WITH THE EXECUTION AND DELIVERY OF
THIS AGREEMENT OR THE CONSUMMATION BY TARGET OF THE TRANSACTIONS CONTEMPLATED
HEREBY EXCEPT FOR: (A) THE FILING OF THE CERTIFICATE OF MERGER WITH THE
SECRETARY OF STATE OF THE STATE OF DELAWARE PURSUANT TO THE DGCL; (B) THE FILING
OF THE AGREEMENT OF MERGER WITH THE SECRETARY OF STATE OF THE STATE OF
CALIFORNIA PURSUANT TO THE CCC; (C) SUCH FILINGS AND APPROVALS AS MAY BE
REQUIRED BY ANY APPLICABLE NON-U.S. GOVERNMENTAL ENTITY; (D) SUCH FILINGS AND
APPROVALS AS MAY BE REQUIRED BY ANY NON-U.S. PREMERGER NOTIFICATION, SECURITIES,
CORPORATE OR OTHER LEGAL REQUIREMENT, AND (E) SUCH CONSENTS, APPROVALS, ORDERS,
AUTHORIZATIONS, REGISTRATIONS, DECLARATIONS AND FILINGS THE FAILURE OF WHICH TO
MAKE OR OBTAIN COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT ON PARENT OR MATERIALLY IMPAIR OR DELAY THE ABILITY OF THE PARTIES TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
(F) BROKERS' FEES
--------------
. THE TARGET HAS NO LIABILITY OR OBLIGATION TO PAY ANY FEES OR COMMISSIONS
TO ANY BROKER, FINDER, OR AGENT WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
(G) TITLE TO ASSETS
-----------------
. THE TARGET HAS GOOD AND MARKETABLE TITLE TO, OR A VALID LEASEHOLD
INTEREST IN, THE PROPERTIES AND ASSETS USED BY IT, LOCATED ON ITS PREMISES, OR
SHOWN ON THE MOST RECENT BALANCE SHEET OR ACQUIRED AFTER THE DATE THEREOF, FREE
AND CLEAR OF ALL SECURITY INTERESTS, EXCEPT FOR PROPERTIES AND ASSETS DISPOSED
OF IN THE ORDINARY COURSE OF BUSINESS SINCE THE DATE OF THE MOST RECENT BALANCE
SHEET.
(H) SUBSIDIARIES
------------
. THE TARGET DOES NOT CONTROL DIRECTLY OR INDIRECTLY OR HAVE ANY DIRECT OR
INDIRECT EQUITY PARTICIPATION IN ANY CORPORATION, PARTNERSHIP, TRUST, OR OTHER
BUSINESS ASSOCIATION.
(I) FINANCIAL STATEMENTS
---------------------
. ATTACHED HERETO AS EXHIBIT B ARE THE FOLLOWING FINANCIAL STATEMENTS
----------
(COLLECTIVELY THE "FINANCIAL STATEMENTS"): (I) UNAUDITED BALANCE SHEETS AND
---------------------
STATEMENTS OF INCOME, STATEMENTS OF SHAREHOLDERS' EQUITY, AND CASH FLOW AS OF
AND FOR THE FISCAL YEARS ENDED DECEMBER 31, 1997, DECEMBER 31, 1998, DECEMBER
31, 1999, DECEMBER 31, 2000, AND DECEMBER 31, 2001 (THE "MOST RECENT FISCAL YEAR
-----------------------
END"), FOR THE TARGET; AND (II) AN UNAUDITED BALANCE SHEET AND STATEMENT OF
---
INCOME, STATEMENT OF SHAREHOLDERS' EQUITY, AND CASH FLOW (THE "MOST RECENT
---
FINANCIAL STATEMENTS") AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 (THE
---
"MOST RECENT FISCAL QUARTER END"), FOR THE TARGET. THE FINANCIAL STATEMENTS
----------------------------------
(INCLUDING THE NOTES THERETO) HAVE BEEN PREPARED IN ACCORDANCE WITH GAAP APPLIED
---
ON A CONSISTENT BASIS THROUGHOUT THE PERIODS COVERED THEREBY, PRESENT FAIRLY THE
FINANCIAL CONDITION OF THE TARGET AS OF SUCH DATES AND THE RESULTS OF OPERATIONS
OF THE TARGET FOR SUCH PERIODS, ARE CORRECT AND COMPLETE, AND ARE CONSISTENT
WITH THE BOOKS AND RECORDS OF THE TARGET (WHICH BOOKS AND RECORDS ARE CORRECT
AND COMPLETE); PROVIDED, HOWEVER, THAT THE MOST RECENT FINANCIAL STATEMENTS ARE
SUBJECT TO NORMAL YEAR-END ADJUSTMENTS (WHICH WILL NOT BE MATERIAL INDIVIDUALLY
OR IN THE AGGREGATE) AND LACK FOOTNOTES AND OTHER PRESENTATION ITEMS.
16
(J) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END
-------------------------------------------------------
. SINCE THE MOST RECENT FISCAL YEAR END, THERE HAS NOT BEEN ANY ADVERSE
CHANGE IN THE BUSINESS, FINANCIAL CONDITION, OPERATIONS, RESULTS OF OPERATIONS,
OR FUTURE PROSPECTS OF THE TARGET, OTHER THAN AS EXPLICITLY CONTEMPLATED BY THIS
AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SINCE THAT DATE:
(I) THE TARGET HAS NOT SOLD, LEASED, TRANSFERRED, OR ASSIGNED ANY OF ITS
ASSETS, TANGIBLE OR INTANGIBLE, OTHER THAN FOR A FAIR CONSIDERATION IN THE
ORDINARY COURSE OF BUSINESS;
(II) THE TARGET HAS NOT ENTERED INTO ANY AGREEMENT, CONTRACT, LEASE, OR
LICENSE (OR SERIES OF RELATED AGREEMENTS, CONTRACTS, LEASES, AND LICENSES)
EITHER INVOLVING MORE THAN $35,000 OR OUTSIDE THE ORDINARY COURSE OF BUSINESS;
(III) NO PARTY (INCLUDING THE TARGET) HAS ACCELERATED, TERMINATED, MODIFIED,
OR CANCELLED ANY AGREEMENT, CONTRACT, LEASE, OR LICENSE (OR SERIES OF RELATED
AGREEMENTS, CONTRACTS, LEASES, AND LICENSES) INVOLVING MORE THAN $35,000 TO
WHICH THE TARGET IS A PARTY OR BY WHICH TARGET IS BOUND;
(IV) NO SECURITY INTEREST HAS BEEN IMPOSED UPON ANY OF THE TARGET'S ASSETS,
TANGIBLE OR INTANGIBLE;
(V) THE TARGET HAS NOT MADE ANY CAPITAL EXPENDITURE (OR SERIES OF RELATED
CAPITAL EXPENDITURES) EITHER INVOLVING MORE THAN $35,000 OR OUTSIDE THE ORDINARY
COURSE OF BUSINESS;
(VI) THE TARGET HAS NOT MADE ANY CAPITAL INVESTMENT IN, ANY LOAN TO, OR ANY
ACQUISITION OF THE SECURITIES OR ASSETS OF, ANY OTHER PERSON (OR SERIES OF
RELATED CAPITAL INVESTMENTS, LOANS, AND ACQUISITIONS) EITHER INVOLVING MORE THAN
$35,000 OR OUTSIDE THE ORDINARY COURSE OF BUSINESS;
(VII) THE TARGET HAS NOT ISSUED ANY NOTE, BOND, OR OTHER DEBT SECURITY OR
CREATED, INCURRED, ASSUMED, OR GUARANTEED ANY INDEBTEDNESS FOR BORROWED MONEY OR
CAPITALIZED LEASE OBLIGATION EITHER INVOLVING MORE THAN $35,000 SINGLY OR
$35,000 IN THE AGGREGATE;
17
(VIII) THE TARGET HAS NOT DELAYED OR POSTPONED THE PAYMENT OF ACCOUNTS
PAYABLE AND OTHER LIABILITIES OUTSIDE THE ORDINARY COURSE OF BUSINESS;
(IX) THE TARGET HAS NOT CANCELLED, COMPROMISED, WAIVED, OR RELEASED ANY
RIGHT OR CLAIM (OR SERIES OF RELATED RIGHTS AND CLAIMS) EITHER INVOLVING MORE
THAN $35,000 OR OUTSIDE THE ORDINARY COURSE OF BUSINESS;
(X) THE TARGET HAS NOT GRANTED ANY LICENSE OR SUBLICENSE OF ANY RIGHTS UNDER
OR WITH RESPECT TO ANY INTELLECTUAL PROPERTY;
(XI) THERE HAS BEEN NO CHANGE MADE OR AUTHORIZED IN THE CHARTER OR BYLAWS OF
THE TARGET;
(XII) THE TARGET HAS NOT ISSUED, SOLD, OR OTHERWISE DISPOSED OF ANY OF ITS
CAPITAL STOCK, OR GRANTED ANY OPTIONS, WARRANTS, OR OTHER RIGHTS TO PURCHASE OR
OBTAIN (INCLUDING UPON CONVERSION, EXCHANGE, OR EXERCISE) ANY OF ITS CAPITAL
STOCK;
(XIII) THE TARGET HAS NOT DECLARED, SET ASIDE, OR PAID ANY DIVIDEND OR MADE
ANY DISTRIBUTION WITH RESPECT TO ITS CAPITAL STOCK (WHETHER IN CASH OR IN KIND)
OR REDEEMED, PURCHASED, OR OTHERWISE ACQUIRED ANY OF ITS CAPITAL STOCK;
(XIV) THE TARGET HAS NOT EXPERIENCED ANY DAMAGE, DESTRUCTION, OR LOSS
(WHETHER OR NOT COVERED BY INSURANCE) TO ITS PROPERTY;
(XV) THE TARGET HAS NOT MADE ANY LOAN TO, OR ENTERED INTO ANY OTHER
TRANSACTION WITH, ANY OF ITS DIRECTORS, OFFICERS, AND EMPLOYEES OUTSIDE THE
ORDINARY COURSE OF BUSINESS;
(XVI) THE TARGET HAS NOT ENTERED INTO ANY EMPLOYMENT CONTRACT OR COLLECTIVE
BARGAINING AGREEMENT, WRITTEN OR ORAL, OR MODIFIED THE TERMS OF ANY EXISTING
SUCH CONTRACT OR AGREEMENT;
(XVII) THE TARGET HAS NOT GRANTED ANY INCREASE IN THE BASE COMPENSATION OF
ANY OF ITS DIRECTORS, OFFICERS, AND EMPLOYEES OUTSIDE THE ORDINARY COURSE OF
BUSINESS;
(XVIII) THE TARGET HAS NOT ADOPTED, AMENDED, MODIFIED, OR TERMINATED ANY
BONUS, PROFIT-SHARING, INCENTIVE, SEVERANCE, OR OTHER PLAN, CONTRACT, OR
COMMITMENT FOR THE BENEFIT OF ANY OF ITS DIRECTORS, OFFICERS, AND EMPLOYEES (OR
TAKEN ANY SUCH ACTION WITH RESPECT TO ANY OTHER EMPLOYEE BENEFIT PLAN);
(XIX) THE TARGET HAS NOT MADE ANY OTHER CHANGE IN EMPLOYMENT TERMS FOR ANY
OF ITS DIRECTORS, OFFICERS, AND EMPLOYEES OUTSIDE THE ORDINARY COURSE OF
BUSINESS;
(XX) THE TARGET HAS NOT MADE OR PLEDGED TO MAKE ANY CHARITABLE OR OTHER
CAPITAL CONTRIBUTION OUTSIDE THE ORDINARY COURSE OF BUSINESS;
18
(XXI) THERE HAS NOT BEEN ANY OTHER OCCURRENCE, EVENT, INCIDENT, ACTION,
FAILURE TO ACT, OR TRANSACTION OUTSIDE THE ORDINARY COURSE OF BUSINESS INVOLVING
THE TARGET, OTHER THAN THE ACCRUAL OF PROFESSIONAL FEES IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT; AND
(XXII) THE TARGET HAS NOT COMMITTED TO ANY OF THE FOREGOING.
(K) UNDISCLOSED LIABILITIES
------------------------
. THE TARGET HAS NO LIABILITIES (AND, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇
AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR FINANCIAL
MATTERS) OF THE TARGET, THERE IS NO BASIS FOR ANY PRESENT OR FUTURE ACTION,
SUIT, PROCEEDING, HEARING, INVESTIGATION, CHARGE, COMPLAINT, CLAIM, OR DEMAND
AGAINST ANY OF THEM GIVING RISE TO ANY LIABILITY), EXCEPT FOR (I) LIABILITIES
SET FORTH ON THE FACE OF THE MOST RECENT BALANCE SHEET (RATHER THAN IN ANY NOTES
THERETO) AND (II) LIABILITIES WHICH HAVE ARISEN AFTER THE MOST RECENT FISCAL
QUARTER END IN THE ORDINARY COURSE OF BUSINESS (NONE OF WHICH RESULTS FROM,
ARISES OUT OF, RELATES TO, IS IN THE NATURE OF, OR WAS CAUSED BY ANY BREACH OF
CONTRACT, BREACH OF WARRANTY, TORT, INFRINGEMENT, OR VIOLATION OF LAW).
(L) LEGAL COMPLIANCE
-----------------
. THE TARGET AND ITS PREDECESSORS AND AFFILIATES HAVE BEEN IN MATERIAL
COMPLIANCE WITH ALL APPLICABLE LAWS (INCLUDING RULES, REGULATIONS, CODES, PLANS,
INJUNCTIONS, JUDGMENTS, ORDERS, DECREES, RULINGS, AND CHARGES THEREUNDER) OF
FEDERAL, STATE, LOCAL, AND FOREIGN GOVERNMENTS (AND ALL AGENCIES THEREOF), AND
NO ACTION, SUIT, PROCEEDING, HEARING, INVESTIGATION, CHARGE, COMPLAINT, CLAIM,
DEMAND, OR NOTICE HAS BEEN FILED OR, TO THE KNOWLEDGE OF ▇▇▇▇▇▇▇ AND THE
DIRECTORS AND OFFICERS OF THE TARGET, COMMENCED OR THREATENED AGAINST ANY OF
THEM ALLEGING ANY FAILURE SO TO COMPLY.
(M) TAX MATTERS.
------------
(I) FILING OF TAX RETURNS. THE TARGET HAS DULY AND TIMELY FILED WITH THE
------------------------
APPROPRIATE TAX AUTHORITIES ALL TAX RETURNS REQUIRED TO BE FILED THROUGH THE
DATE HEREOF. ALL SUCH TAX RETURNS FILED ARE COMPLETE AND ACCURATE IN ALL
RESPECTS. THE TARGET HAS DISCLOSED ON ITS FEDERAL INCOME TAX RETURNS ALL
POSITIONS TAKEN THEREIN THAT COULD GIVE RISE TO A SUBSTANTIAL UNDERSTATEMENT OF
FEDERAL INCOME TAX WITHIN THE MEANING OF 6662 OF THE CODE. THE TARGET IS NOT
CURRENTLY THE BENEFICIARY OF ANY EXTENSION OF TIME WITHIN WHICH TO FILE ANY TAX
RETURN. NO CLAIM HAS EVER BEEN MADE BY AN AUTHORITY IN A JURISDICTION WHERE THE
TARGET DOES NOT FILE TAX RETURNS THAT IT IS OR MAY BE SUBJECT TO TAXATION
BY THAT JURISDICTION.
(II) PAYMENT OF TAXES. ALL TAXES OWED BY THE TARGET (WHETHER OR NOT SHOWN ON
----------------
ANY TAX RETURN) HAVE BEEN PAID. THE UNPAID TAXES OF THE TARGET (I) DID NOT, AS
OF THE MOST RECENT FISCAL QUARTER END, EXCEED THE RESERVE FOR TAX LIABILITY
(EXCLUDING ANY RESERVE FOR DEFERRED TAXES ESTABLISHED TO REFLECT TIMING
DIFFERENCES BETWEEN BOOK AND TAX INCOME) SET FORTH ON THE FACE OF THE MOST
RECENT BALANCE SHEET (RATHER THAN IN ANY NOTES THERETO), AND (II) WILL NOT
EXCEED THAT RESERVE AS ADJUSTED FOR OPERATIONS AND TRANSACTIONS THROUGH THE
CLOSING DATE IN ACCORDANCE WITH THE PAST CUSTOM AND PRACTICE OF THE TARGET IN
FILING ITS TAX RETURNS.
19
(III) AUDITS, INVESTIGATIONS, DISPUTES OR CLAIMS. NO DEFICIENCIES FOR TAXES
------------------------------------------
HAVE BEEN CLAIMED, PROPOSED OR ASSESSED BY ANY TAXING OR OTHER GOVERNMENTAL
AUTHORITY AGAINST THE TARGET. THERE ARE NO PENDING OR, TO THE KNOWLEDGE OF ANY
OF ▇▇▇▇▇▇▇, THE TARGET, OR ANY DIRECTOR OR OFFICER (OR EMPLOYEES RESPONSIBLE FOR
TAX MATTERS) OF THE TARGET, THREATENED AUDITS, INVESTIGATIONS, DISPUTES OR
CLAIMS OR OTHER ACTIONS FOR OR RELATING TO ANY LIABILITY FOR TAXES WITH RESPECT
TO THE TARGET, AND THERE ARE NO MATTERS UNDER DISCUSSION WITH ANY GOVERNMENTAL
AUTHORITIES, OR OF WHICH ANY OF ▇▇▇▇▇▇▇, THE TARGET, OR ANY DIRECTOR OR OFFICER
(OR ANY EMPLOYEE RESPONSIBLE FOR TAX MATTERS) OF THE TARGET, HAS KNOWLEDGE, WITH
RESPECT TO TAXES THAT ARE LIKELY TO RESULT IN AN ADDITIONAL LIABILITY FOR TAXES
WITH RESPECT TO THE TARGET. NO AUDITS OF FEDERAL, STATE AND LOCAL TAX RETURNS
OF THE TARGET BY THE RELEVANT TAX AUTHORITIES HAVE BEEN INITIATED OR COMPLETED,
AND THE TARGET HAS NOT BEEN NOTIFIED THAT ANY TAX AUTHORITY INTENDS TO AUDIT A
TAX RETURN FOR ANY PERIOD. THE TARGET HAS DELIVERED TO PARENT COMPLETE AND
ACCURATE COPIES OF ALL TAX RETURNS OF THE TARGET FOR THE YEARS ENDED ON OR AFTER
DECEMBER 31, 1997, AND COMPLETE AND ACCURATE COPIES OF ALL EXAMINATION REPORTS
AND STATEMENTS OF DEFICIENCIES ASSESSED AGAINST OR AGREED TO BY THE COMPANY
SINCE DECEMBER 31, 1997. THE TARGET HAS NOT WAIVED ANY STATUTE OF LIMITATIONS
IN RESPECT OF TAXES OR AGREED TO ANY EXTENSION OF TIME WITH RESPECT TO A TAX
ASSESSMENT OR DEFICIENCY.
(IV) ASSET LIENS. THERE ARE NO LIENS FOR TAXES (OTHER THAN FOR CURRENT
------------
TAXES NOT YET DUE AND PAYABLE) ON ANY ASSETS OF THE TARGET OR ON ANY TARGET
SHARES.
(V) TAX ELECTIONS. ALL ELECTIONS WITH RESPECT TO TAXES AFFECTING THE TARGET
-------------
THAT ARE EFFECTIVE AS OF THE DATE HEREOF ARE SET FORTH IN 5(M) OF THE TARGET
DISCLOSURE SCHEDULE. THE TARGET: (I) IS NOT A PERSONAL HOLDING COMPANY WITHIN
THE MEANING OF 542 OF THE CODE; (II) HAS NOT CONSENTED AT ANY TIME UNDER
341(F)(1) OF THE CODE TO HAVE THE PROVISIONS OF 341(F)(2) OF THE CODE APPLY TO
ANY DISPOSITION OF THE TARGET'S ASSETS; (III) HAS NOT AGREED, NOR IS REQUIRED,
TO MAKE ANY ADJUSTMENT UNDER 481(A) OF THE CODE BY REASON OF A CHANGE IN
ACCOUNTING METHOD OR OTHERWISE, AS A RESULT OF ANY TRANSACTIONS, OPERATIONS OR
EVENTS OCCURRING ON OR PRIOR TO THE CLOSING DATE; (IV) HAS NOT MADE AN ELECTION,
NOR IS REQUIRED, TO TREAT ANY ASSET OF THE TARGET AS OWNED BY ANOTHER PERSON
PURSUANT TO THE PROVISIONS OF 168(F) OF THE INTERNAL REVENUE CODE OF 1954, AS
AMENDED AND IN EFFECT IMMEDIATELY PRIOR TO THE ENACTMENT OF THE TAX REFORM ACT
OF 1986, OR AS TAX-EXEMPT BOND FINANCED PROPERTY OR TAX-EXEMPT USE PROPERTY
WITHIN THE MEANING OF 168 OF THE CODE; AND (V) HAS NOT MADE ANY ELECTIONS WITH
RESPECT TO ANY OF THE FOREGOING NOR IS REQUIRED TO APPLY ANY OF THE FOREGOING
RULES UNDER ANY COMPARABLE STATE, LOCAL OR FOREIGN TAX PROVISION.
(VI) PRIOR AFFILIATED GROUPS. THE TARGET HAS NEVER BEEN A MEMBER OF AN
-------------------------
AFFILIATED GROUP OR ANY GROUP OF CORPORATIONS FILING A CONSOLIDATED, COMBINED,
UNITARY OR SIMILAR TAX RETURN. THE TARGET HAS NO LIABILITY FOR THE TAXES OF ANY
PERSON OTHER THAN THE TARGET (I) UNDER TREASURY REGULATIONS 1.1502-6 (OR ANY
SIMILAR PROVISION OF STATE, LOCAL OR FOREIGN LAW), (II) AS A TRANSFEREE OR
SUCCESSOR, (III) BY CONTRACT, OR (IV) OTHERWISE.
20
(VII) TAX RULINGS; BINDING AGREEMENTS. THE TARGET HAS NOT REQUESTED OR
----------------------------------
RECEIVED ANY RULING FROM ANY TAX AUTHORITY, OR SIGNED ANY BINDING AGREEMENT WITH
ANY TAX AUTHORITY (INCLUDING, WITHOUT LIMITATION, ANY ADVANCE PRICING
AGREEMENT), THAT WOULD AFFECT THE AMOUNT OF TAX LIABILITY OF THE TARGET AFTER
THE CLOSING DATE.
(VIII) POWER OF ATTORNEY. THERE IS NO POWER OF ATTORNEY GRANTED BY THE
-------------------
TARGET RELATING TO ANY TAX THAT IS CURRENTLY IN FORCE.
(IX) TAX SHARING AGREEMENTS. THERE ARE NO, AND AT THE CLOSING DATE THERE
------------------------
WILL BE NO, TAX-SHARING AGREEMENTS OR SIMILAR ARRANGEMENTS WITH RESPECT TO OR
INVOLVING THE TARGET, AND, AFTER THE CLOSING DATE, THE TARGET SHALL NOT BE BOUND
BY ANY SUCH TAX-SHARING AGREEMENTS OR SIMILAR ARRANGEMENTS OR HAVE ANY LIABILITY
THEREUNDER FOR AMOUNTS DUE IN RESPECT OF ANY PERIODS.
(X) PARTNERSHIPS AND SINGLE MEMBER LLCS. THE TARGET (I) IS NOT SUBJECT TO
-------------------------------------
ANY JOINT VENTURE, PARTNERSHIP, OR OTHER ARRANGEMENT OR CONTRACT WHICH IS
TREATED AS A PARTNERSHIP FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR (II)
DOES NOT OWN A SINGLE MEMBER LIMITED LIABILITY COMPANY WHICH IS TREATED AS A
DISREGARDED ENTITY.
(XI) WITHHOLDING. THE TARGET HAS WITHHELD AND PAID ALL TAXES REQUIRED TO
-----------
HAVE BEEN WITHHELD AND PAID IN CONNECTION WITH AMOUNTS PAID OR OWING TO ANY
EMPLOYEE, INDEPENDENT CONTRACTOR, CREDITOR, SHAREHOLDER, OR OTHER THIRD PARTY.
THE TARGET IS NOT A "UNITED STATES REAL PROPERTY HOLDING CORPORATION" WITHIN THE
MEANING OF 897 OF THE CODE.
(XII) PARACHUTE PAYMENTS. THERE IS NO CONTRACT, AGREEMENT, PLAN OR
-------------------
ARRANGEMENT COVERING ANY EMPLOYEE OR FORMER EMPLOYEE OF THE TARGET (WITH RESPECT
TO THEIR RELATIONSHIP WITH THE TARGET) THAT, INDIVIDUALLY OR COLLECTIVELY,
PROVIDES FOR THE PAYMENT BY THE TARGET OF ANY AMOUNT (I) THAT IS NOT DEDUCTIBLE
UNDER 162(A)(1) OR 404 OF THE CODE OR (II) THAT IS AN "EXCESS PARACHUTE
PAYMENT" PURSUANT TO 280G OF THE CODE.
(XIII) TAX-EXEMPT INTEREST. NONE OF THE ASSETS OF THE TARGET DIRECTLY OR
--------------------
INDIRECTLY SECURES ANY DEBT THE INTEREST ON WHICH IS TAX-EXEMPT UNDER 103(A) OF
THE CODE.
(XIV) PERMANENT ESTABLISHMENT. THE TARGET DOES NOT HAVE, AND HAS NOT HAD, A
-----------------------
PERMANENT ESTABLISHMENT IN ANY FOREIGN COUNTRY, AS DEFINED IN ANY APPLICABLE TAX
TREATY OR CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND SUCH FOREIGN
COUNTRY.
(XV) INTERNATIONAL BOYCOTT. THE TARGET HAS NEVER PARTICIPATED IN NOR IS
----------------------
PARTICIPATING IN AN INTERNATIONAL BOYCOTT WITHIN THE MEANING OF 999 OF THE
CODE.
21
(XVI) S CORPORATION ELECTION. THE TARGET HAS BEEN A VALIDLY ELECTING S
------------------------
CORPORATION WITHIN THE MEANING OF SECTIONS 1361 AND 1362 OF THE CODE AT ALL
TIMES SINCE ITS FORMATION, AND WILL BE AN S CORPORATION UP TO AND INCLUDING THE
CLOSING DATE.
(XVII) NO SUBSIDIARIES. NONE OF THE TARGET'S ASSETS CONSTITUTE STOCK IN A
----------------
CORPORATION.
(XVIII) TAX-FREE REORGANIZATION. TARGET HAS NOT TAKEN OR CAUSED TO BE
------------------------
TAKEN, OR AGREED TO TAKE OR CAUSE TO BE TAKEN, ANY ACTION, AND HAS NO PLAN OR
INTENTION TO TAKE OR CAUSE TO BE TAKEN ANY ACTION THAT WOULD, OR IS REASONABLY
LIKELY TO, PREVENT THE MERGER FROM QUALIFYING AS A REORGANIZATION WITHIN THE
MEANING OF SECTION 368(A) OF THE CODE, NOR DOES IT KNOW OR HAVE REASON TO KNOW
OF ANY FACT, AGREEMENT, PLAN OR OTHER CIRCUMSTANCE THAT WOULD, OR IS REASONABLY
LIKELY TO, PREVENT THE MERGER FROM QUALIFYING AS A REORGANIZATION WITHIN THE
MEANING OF SECTION 368(A) OF THE CODE. FOR PURPOSES OF THIS REPRESENTATION, ANY
FAILURE OR OMISSION TO ACT, OR THE CAUSING OF ANY FAILURE OR OMISSION TO ACT,
SHALL CONSTITUTE AN ACTION TAKEN, OR CAUSED TO BE TAKEN, AS APPROPRIATE.
(XIX) SECTION 1374 OF THE CODE. THE TARGET WOULD NOT BE LIABLE FOR ANY TAX
-------------------------
UNDER SECTION 1374 OF THE CODE IF ITS ASSETS WERE SOLD FOR THEIR FAIR MARKET
VALUE AS OF THE CLOSING DATE. THE TARGET HAS NOT, IN THE PAST 10 YEARS, (A)
ACQUIRED ASSETS FROM ANOTHER CORPORATION IN A TRANSACTION IN WHICH THE TARGET'S
TAX BASIS FOR THE ACQUIRED ASSETS WAS DETERMINED, IN WHOLE OR PART, BY REFERENCE
TO THE TAX BASIS OF THE ACQUIRED ASSETS (OR ANY OTHER PROPERTY) IN THE HANDS OF
THE TRANSFEROR OR (B) ACQUIRED THE STOCK OF ANY CORPORATION WHICH IS A QUALIFIED
SUBCHAPTER S SUBSIDIARY.
(N) REAL PROPERTY.
--------------
(I) THE TARGET DOES NOT OWN ANY REAL PROPERTY.
(II) 5(N)(II) OF THE TARGET DISCLOSURE SCHEDULE LISTS AND DESCRIBES BRIEFLY
ALL REAL PROPERTY LEASED TO THE TARGET. THE TARGET AND ▇▇▇▇▇▇▇ HAVE MADE
AVAILABLE TO THE PARENT CORRECT AND COMPLETE COPIES OF THE LEASES LISTED IN
5(N)(II) OF THE TARGET DISCLOSURE SCHEDULE (AS AMENDED TO DATE). THE TARGET IS
NOT PARTY TO ANY SUBLEASE. WITH RESPECT TO EACH LEASE LISTED IN 5(N)(II) OF THE
TARGET DISCLOSURE SCHEDULE:
(A) THE LEASE IS LEGAL, VALID, BINDING, ENFORCEABLE, AND IN FULL FORCE AND
EFFECT;
(B) THE LEASE WILL CONTINUE TO BE LEGAL, VALID, BINDING, ENFORCEABLE, AND IN
FULL FORCE AND EFFECT ON IDENTICAL TERMS FOLLOWING THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY;
(C) THE TARGET IS NOT IN BREACH OR DEFAULT AND, TO THE KNOWLEDGE OF ANY OF
▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR
REAL PROPERTY MATTERS) OF THE TARGET, NO OTHER PARTY TO THE LEASE IS IN BREACH
OR DEFAULT, AND NO EVENT HAS OCCURRED WHICH, WITH NOTICE OR LAPSE OF TIME, WOULD
CONSTITUTE A BREACH OR DEFAULT OR PERMIT TERMINATION, MODIFICATION, OR
ACCELERATION THEREUNDER;
22
(D) NEITHER THE TARGET NOR, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE
DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR REAL PROPERTY
MATTERS) OF THE TARGET, ANY OTHER PARTY TO THE LEASE HAS REPUDIATED ANY
PROVISION THEREOF;
(E) THERE ARE NO DISPUTES, ORAL AGREEMENTS, OR FORBEARANCE PROGRAMS IN
EFFECT AS TO THE LEASE;
(F) THE TARGET HAS NOT ASSIGNED, TRANSFERRED, CONVEYED, MORTGAGED, DEEDED IN
TRUST, OR ENCUMBERED ANY INTEREST IN THE LEASEHOLD;
(G) ALL FACILITIES LEASED THEREUNDER HAVE RECEIVED ALL APPROVALS OF
GOVERNMENTAL AUTHORITIES (INCLUDING LICENSES AND PERMITS) REQUIRED IN CONNECTION
WITH THE OPERATION OF THE TARGET'S BUSINESS AS CURRENTLY CONDUCTED AND HAVE BEEN
OPERATED AND MAINTAINED BY TARGET IN SUBSTANTIAL COMPLIANCE WITH APPLICABLE
LAWS, RULES, AND REGULATIONS;
(H) ALL FACILITIES LEASED THEREUNDER ARE SUPPLIED WITH UTILITIES AND OTHER
SERVICES NECESSARY FOR THE OPERATION OF SAID FACILITIES; AND
(O) INTELLECTUAL PROPERTY.
----------------------
(I) THE TARGET OWNS OR HAS THE RIGHT TO USE PURSUANT TO LICENSE, SUBLICENSE,
AGREEMENT, OR PERMISSION ALL INTELLECTUAL PROPERTY NECESSARY FOR THE
OPERATION OF THE BUSINESSES OF THE TARGET AS PRESENTLY CONDUCTED. EACH ITEM OF
INTELLECTUAL PROPERTY OWNED OR USED BY THE TARGET IMMEDIATELY PRIOR TO THE
CLOSING HEREUNDER WILL BE OWNED OR AVAILABLE FOR USE BY THE SURVIVING
CORPORATION ON IDENTICAL TERMS AND CONDITIONS IMMEDIATELY SUBSEQUENT TO THE
CLOSING HEREUNDER. TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND
OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR INTELLECTUAL PROPERTY MATTERS)
OF THE TARGET, THE TARGET HAS TAKEN ALL NECESSARY ACTION TO MAINTAIN AND PROTECT
EACH ITEM OF INTELLECTUAL PROPERTY THAT IT OWNS OR USES.
(II) THE TARGET HAS NOT INTERFERED WITH, INFRINGED UPON OR MISAPPROPRIATED
ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, AND NONE OF ▇▇▇▇▇▇▇ OR THE
DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR INTELLECTUAL
PROPERTY MATTERS) OF THE TARGET HAS EVER RECEIVED ANY CHARGE, COMPLAINT, CLAIM,
DEMAND, OR NOTICE ALLEGING ANY SUCH INTERFERENCE, INFRINGEMENT,
MISAPPROPRIATION, OR VIOLATION (INCLUDING ANY CLAIM THAT THE TARGET MUST LICENSE
OR REFRAIN FROM USING ANY INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY). TO
THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES
WITH RESPONSIBILITY FOR INTELLECTUAL PROPERTY MATTERS) OF THE TARGET, NO THIRD
PARTY HAS INTERFERED WITH, INFRINGED UPON OR MISAPPROPRIATED ANY INTELLECTUAL
PROPERTY RIGHTS OF THE TARGET.
23
(III) 5(O)(III) OF THE TARGET DISCLOSURE SCHEDULE IDENTIFIES EACH PATENT OR
REGISTRATION WHICH HAS BEEN ISSUED TO THE TARGET WITH RESPECT TO ANY OF ITS
INTELLECTUAL PROPERTY, IDENTIFIES EACH PENDING PATENT APPLICATION OR APPLICATION
FOR REGISTRATION WHICH THE TARGET HAS MADE WITH RESPECT TO ANY OF ITS
INTELLECTUAL PROPERTY, AND IDENTIFIES EACH LICENSE, AGREEMENT, OR OTHER
PERMISSION WHICH THE TARGET HAS GRANTED TO ANY THIRD PARTY WITH RESPECT TO ANY
OF ITS INTELLECTUAL PROPERTY (TOGETHER WITH ANY EXCEPTIONS). THE TARGET AND
▇▇▇▇▇▇▇ HAVE MADE AVAILABLE TO THE PARENT CORRECT AND COMPLETE COPIES OF ALL
SUCH PATENTS, REGISTRATIONS, APPLICATIONS, LICENSES, AGREEMENTS, AND PERMISSIONS
(AS AMENDED TO DATE) AND CORRECT AND COMPLETE COPIES OF ALL OTHER WRITTEN
DOCUMENTATION EVIDENCING OWNERSHIP AND PROSECUTION (IF APPLICABLE) OF EACH SUCH
ITEM. 5(O)(III) OF THE TARGET DISCLOSURE SCHEDULE ALSO IDENTIFIES EACH TRADE
NAME OR UNREGISTERED TRADEMARK USED BY THE TARGET IN CONNECTION WITH ANY OF ITS
BUSINESSES. WITH RESPECT TO EACH ITEM OF INTELLECTUAL PROPERTY REQUIRED TO BE
IDENTIFIED IN 5(O)(III) OF THE TARGET DISCLOSURE SCHEDULE:
(A) THE TARGET POSSESS ALL RIGHT, TITLE, AND INTEREST IN AND TO THE ITEM,
FREE AND CLEAR OF ANY SECURITY INTEREST, LICENSE, OR OTHER RESTRICTION;
(B) THE ITEM IS NOT SUBJECT TO ANY OUTSTANDING INJUNCTION, JUDGMENT, ORDER,
DECREE, RULING, OR CHARGE;
(C) NO ACTION, SUIT, PROCEEDING, HEARING, INVESTIGATION, CHARGE, COMPLAINT,
CLAIM, OR DEMAND IS PENDING OR, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE
DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR INTELLECTUAL
PROPERTY MATTERS) OF THE TARGET, IS THREATENED WHICH CHALLENGES THE LEGALITY,
VALIDITY, ENFORCEABILITY, USE, OR OWNERSHIP OF THE ITEM; AND
(D) THE TARGET HAS NEVER AGREED TO INDEMNIFY ANY PERSON FOR OR AGAINST ANY
INTERFERENCE, INFRINGEMENT, MISAPPROPRIATION, OR OTHER CONFLICT WITH RESPECT TO
THE ITEM.
(IV) 5(O)(IV) OF THE TARGET DISCLOSURE SCHEDULE IDENTIFIES EACH ITEM OF
INTELLECTUAL PROPERTY THAT ANY THIRD PARTY OWNS AND THAT THE TARGET USES
PURSUANT TO LICENSE, SUBLICENSE, AGREEMENT, OR PERMISSION. THE TARGET AND
▇▇▇▇▇▇▇ HAVE MADE AVAILABLE TO THE PARENT CORRECT AND COMPLETE COPIES OF ALL
SUCH LICENSES, SUBLICENSES, AGREEMENTS, AND PERMISSIONS (AS AMENDED TO DATE).
WITH RESPECT TO EACH ITEM OF INTELLECTUAL PROPERTY REQUIRED TO BE IDENTIFIED IN
5(O)(IV) OF THE TARGET DISCLOSURE SCHEDULE:
(A) THE LICENSE, SUBLICENSE, AGREEMENT, OR PERMISSION COVERING THE ITEM IS
LEGAL, VALID, BINDING, ENFORCEABLE, AND IN FULL FORCE AND EFFECT;
24
(B) THE LICENSE, SUBLICENSE, AGREEMENT, OR PERMISSION WILL CONTINUE TO BE
LEGAL, VALID, BINDING, ENFORCEABLE, AND IN FULL FORCE AND EFFECT ON IDENTICAL
TERMS FOLLOWING THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY;
(C) THE TARGET IS NOT, AND, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE
DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR INTELLECTUAL
PROPERTY MATTERS) OF THE TARGET, NO OTHER PARTY TO THE LICENSE, SUBLICENSE,
AGREEMENT, OR PERMISSION IS IN BREACH OR DEFAULT, AND, TO THE KNOWLEDGE OF ANY
OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR
INTELLECTUAL PROPERTY MATTERS) OF THE TARGET, NO EVENT HAS OCCURRED WHICH WITH
NOTICE OR LAPSE OF TIME WOULD CONSTITUTE A BREACH OR DEFAULT OR PERMIT
TERMINATION, MODIFICATION, OR ACCELERATION THEREUNDER;
(D) THE TARGET HAS NOT, AND, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE
DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR INTELLECTUAL
PROPERTY MATTERS) OF THE TARGET, NO OTHER PARTY TO THE LICENSE, SUBLICENSE,
AGREEMENT, OR PERMISSION HAS REPUDIATED ANY PROVISION THEREOF;
(E) WITH RESPECT TO EACH SUBLICENSE, THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN SUBSECTIONS (A) THROUGH (D) ABOVE ARE TRUE AND CORRECT WITH RESPECT TO
THE UNDERLYING LICENSE;
(F) THE UNDERLYING ITEM OF INTELLECTUAL PROPERTY IS NOT SUBJECT TO ANY
OUTSTANDING INJUNCTION, JUDGMENT, ORDER, DECREE, RULING, OR CHARGE;
(G) NO ACTION, SUIT, PROCEEDING, HEARING, INVESTIGATION, CHARGE, COMPLAINT,
CLAIM, OR DEMAND IS PENDING OR, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE
DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR INTELLECTUAL
PROPERTY MATTERS) OF THE TARGET, IS THREATENED WHICH CHALLENGES THE LEGALITY,
VALIDITY, OR ENFORCEABILITY OF THE UNDERLYING ITEM OF INTELLECTUAL PROPERTY; AND
(H) THE TARGET HAS NOT GRANTED ANY SUBLICENSE OR SIMILAR RIGHT WITH RESPECT
TO THE LICENSE, SUBLICENSE, AGREEMENT, OR PERMISSION.
(V) TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND
EMPLOYEES WITH RESPONSIBILITY FOR INTELLECTUAL PROPERTY MATTERS) OF THE TARGET,
THE TARGET WILL NOT INTERFERE WITH, INFRINGE UPON OR MISAPPROPRIATE ANY
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES AS A RESULT OF THE CONTINUED
OPERATION OF ITS BUSINESSES AS PRESENTLY CONDUCTED.
(VI) NONE OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH
RESPONSIBILITY FOR INTELLECTUAL PROPERTY MATTERS) OF THE TARGET IS AWARE OF ANY
NEW PRODUCTS, INVENTIONS, PROCEDURES, OR METHODS OF MANUFACTURING OR PROCESSING
THAT ANY COMPETITORS OR OTHER THIRD PARTIES HAVE DEVELOPED WHICH REASONABLY
COULD BE EXPECTED TO SUPERSEDE OR MAKE OBSOLETE ANY PRODUCT OR PROCESS OF THE
TARGET.
25
(P) TANGIBLE ASSETS
----------------
. THE TARGET OWNS OR LEASES ALL BUILDINGS, MACHINERY, EQUIPMENT, AND OTHER
TANGIBLE ASSETS NECESSARY FOR THE CONDUCT OF ITS BUSINESS AS PRESENTLY
CONDUCTED. EACH SUCH TANGIBLE ASSET IS FREE FROM DEFECTS (PATENT AND LATENT),
HAS BEEN MAINTAINED IN ACCORDANCE WITH NORMAL INDUSTRY PRACTICE, IS IN GOOD
OPERATING CONDITION AND REPAIR (SUBJECT TO NORMAL WEAR AND TEAR), AND IS
SUITABLE FOR THE PURPOSES FOR WHICH IT PRESENTLY IS USED.
(Q) INVENTORY
---------
. THE INVENTORY OF THE TARGET CONSISTS OF RAW MATERIALS AND SUPPLIES,
MANUFACTURED AND PURCHASED PARTS, GOODS IN PROCESS, AND FINISHED GOODS, ALL OF
WHICH IS MERCHANTABLE AND FIT FOR THE PURPOSE FOR WHICH IT WAS PROCURED OR
MANUFACTURED, AND NONE OF WHICH IS SLOW-MOVING (BASED ON THE PAST EXPERIENCE OF
TARGET AS TO THE LENGTH OF TIME INVENTORY IS HELD BY IT PRIOR TO SALE),
OBSOLETE, DAMAGED, OR DEFECTIVE, SUBJECT ONLY TO THE RESERVE FOR INVENTORY
WRITEDOWN SET FORTH ON THE FACE OF THE MOST RECENT BALANCE SHEET (RATHER THAN IN
ANY NOTES THERETO) AS ADJUSTED FOR THE PASSAGE OF TIME THROUGH THE CLOSING DATE
IN THE ORDINARY COURSE OF BUSINESS OF THE TARGET.
(R) CONTRACTS
---------
. 5(R) OF THE TARGET DISCLOSURE SCHEDULE LISTS THE FOLLOWING CONTRACTS
AND OTHER AGREEMENTS TO WHICH THE TARGET IS A PARTY (THE "MATERIAL CONTRACTS"):
------------------
(I) ANY AGREEMENT (OR GROUP OF RELATED AGREEMENTS) FOR THE LEASE OF PERSONAL
PROPERTY TO OR FROM ANY PERSON PROVIDING FOR LEASE PAYMENTS IN EXCESS OF
$35,000 PER ANNUM;
(II) ANY AGREEMENT (OR GROUP OF RELATED AGREEMENTS) FOR THE PURCHASE OR SALE
OF RAW MATERIALS, COMMODITIES, SUPPLIES, PRODUCTS, OR OTHER PERSONAL PROPERTY,
OR FOR THE FURNISHING OR RECEIPT OF SERVICES, THE PERFORMANCE OF WHICH WILL
EXTEND OVER A PERIOD OF MORE THAN ONE YEAR, RESULT IN A LOSS TO THE TARGET, OR
INVOLVE CONSIDERATION IN EXCESS OF $35,000;
(III) ANY AGREEMENT CONCERNING A PARTNERSHIP OR JOINT VENTURE;
(IV) ANY AGREEMENT (OR GROUP OF RELATED AGREEMENTS) UNDER WHICH IT HAS
CREATED, INCURRED, ASSUMED, OR GUARANTEED ANY INDEBTEDNESS FOR BORROWED MONEY,
OR ANY CAPITALIZED LEASE OBLIGATION, IN EXCESS OF $35,000 OR UNDER WHICH IT HAS
IMPOSED A SECURITY INTEREST ON ANY OF ITS ASSETS, TANGIBLE OR INTANGIBLE;
(V) ANY AGREEMENT CONCERNING CONFIDENTIALITY OR NONCOMPETITION;
(VI) ANY AGREEMENT WITH ANY OF ▇▇▇▇▇▇▇ AND HIS AFFILIATES (OTHER THAN THE
TARGET);
(VII) ANY PROFIT SHARING, STOCK OPTION, STOCK PURCHASE, STOCK APPRECIATION,
DEFERRED COMPENSATION, SEVERANCE, OR OTHER PLAN OR ARRANGEMENT FOR THE BENEFIT
OF ITS CURRENT OR FORMER DIRECTORS, OFFICERS, AND EMPLOYEES;
(VIII) ANY COLLECTIVE BARGAINING AGREEMENT;
26
(IX) ANY AGREEMENT FOR THE EMPLOYMENT OF ANY INDIVIDUAL ON A FULL-TIME,
PART-TIME, CONSULTING, OR OTHER BASIS PROVIDING ANNUAL COMPENSATION IN EXCESS OF
$35,000 OR PROVIDING SEVERANCE BENEFITS;
(X) ANY AGREEMENT UNDER WHICH IT HAS ADVANCED OR LOANED ANY AMOUNT TO ANY OF
ITS DIRECTORS, OFFICERS, AND EMPLOYEES OUTSIDE THE ORDINARY COURSE OF BUSINESS;
(XI) ANY AGREEMENT UNDER WHICH THE CONSEQUENCES OF A DEFAULT OR TERMINATION
COULD HAVE A MATERIAL ADVERSE EFFECT ON THE TARGET; OR
(XII) ANY OTHER AGREEMENT (OR GROUP OF RELATED AGREEMENTS) THE PERFORMANCE
OF WHICH INVOLVES CONSIDERATION IN EXCESS OF $35,000.
THE TARGET AND ▇▇▇▇▇▇▇ HAVE MADE AVAILABLE TO THE PARENT A CORRECT AND
COMPLETE COPY OF EACH WRITTEN MATERIAL CONTRACT (AS AMENDED TO DATE) AND A
WRITTEN SUMMARY SETTING FORTH THE TERMS AND CONDITIONS OF EACH ORAL MATERIAL
CONTRACT. WITH RESPECT TO EACH SUCH AGREEMENT: (A) THE AGREEMENT IS LEGAL,
VALID, BINDING, ENFORCEABLE, AND IN FULL FORCE AND EFFECT; (B) THE AGREEMENT
WILL CONTINUE TO BE LEGAL, VALID, BINDING, ENFORCEABLE, AND IN FULL FORCE AND
EFFECT ON IDENTICAL TERMS FOLLOWING THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY; (C) THE TARGET IS NOT, AND, TO THE KNOWLEDGE OF ANY OF
▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR
CONTRACT MATTERS) OF THE TARGET, NO OTHER PARTY IS IN BREACH OR DEFAULT, AND NO
EVENT HAS OCCURRED WHICH WITH NOTICE OR LAPSE OF TIME WOULD CONSTITUTE A BREACH
OR DEFAULT, OR PERMIT TERMINATION, MODIFICATION, OR ACCELERATION, UNDER THE
AGREEMENT; AND (D) THE TARGET HAS NOT, AND, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇
AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR CONTRACT
MATTERS) OF THE TARGET, NO OTHER PARTY HAS REPUDIATED ANY PROVISION OF THE
AGREEMENT.
(S) NOTES AND ACCOUNTS RECEIVABLE
--------------------------------
. ALL NOTES AND ACCOUNTS RECEIVABLE OF THE TARGET ARE REFLECTED PROPERLY
ON THEIR BOOKS AND RECORDS, ARE VALID RECEIVABLES SUBJECT TO NO SETOFFS OR
COUNTERCLAIMS, ARE CURRENT AND COLLECTIBLE, AND WILL BE COLLECTED IN ACCORDANCE
WITH THEIR TERMS AT THEIR RECORDED AMOUNTS, SUBJECT ONLY TO THE RESERVE FOR BAD
DEBTS SET FORTH ON THE FACE OF THE MOST RECENT BALANCE SHEET (RATHER THAN IN ANY
NOTES THERETO) AS ADJUSTED FOR THE PASSAGE OF TIME THROUGH THE CLOSING DATE IN
ACCORDANCE WITH THE PAST CUSTOM AND PRACTICE OF THE TARGET.
(T) POWERS OF ATTORNEY
--------------------
. THERE ARE NO OUTSTANDING POWERS OF ATTORNEY EXECUTED ON BEHALF OF THE
TARGET.
(U) INSURANCE
---------
. 5(U) OF THE TARGET DISCLOSURE SCHEDULE SETS FORTH THE FOLLOWING
INFORMATION WITH RESPECT TO EACH INSURANCE POLICY (INCLUDING POLICIES PROVIDING
PROPERTY, CASUALTY, LIABILITY, AND WORKERS' COMPENSATION COVERAGE AND BOND AND
SURETY ARRANGEMENTS) TO WHICH THE TARGET HAS BEEN A PARTY, A NAMED INSURED, OR
OTHERWISE THE BENEFICIARY OF COVERAGE AT ANY TIME WITHIN THE PAST THREE YEARS:
(I) THE NAME, ADDRESS, AND TELEPHONE NUMBER OF THE AGENT;
27
(II) THE NAME OF THE INSURER, THE NAME OF THE POLICYHOLDER, AND THE NAME OF
EACH COVERED INSURED;
(III) THE POLICY NUMBER AND THE PERIOD OF COVERAGE;
(IV) THE SCOPE (INCLUDING AN INDICATION OF WHETHER THE COVERAGE WAS ON A
CLAIMS MADE, OCCURRENCE, OR OTHER BASIS) AND AMOUNT (INCLUDING A DESCRIPTION OF
HOW DEDUCTIBLES AND CEILINGS ARE CALCULATED AND OPERATE) OF COVERAGE; AND
(V) A DESCRIPTION OF ANY RETROACTIVE PREMIUM ADJUSTMENTS OR OTHER
LOSS-SHARING ARRANGEMENTS.
WITH RESPECT TO EACH SUCH INSURANCE POLICY: (A) THE POLICY IS LEGAL, VALID,
BINDING, ENFORCEABLE, AND IN FULL FORCE AND EFFECT; (B) NEITHER THE TARGET NOR,
TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES
WITH RESPONSIBILITY FOR INSURANCE MATTERS) OF THE TARGET, ANY OTHER PARTY TO THE
POLICY IS IN BREACH OR DEFAULT (INCLUDING WITH RESPECT TO THE PAYMENT OF
PREMIUMS OR THE GIVING OF NOTICES), AND NO EVENT HAS OCCURRED WHICH, WITH NOTICE
OR THE LAPSE OF TIME, WOULD CONSTITUTE SUCH A BREACH OR DEFAULT, OR PERMIT
TERMINATION, MODIFICATION, OR ACCELERATION, UNDER THE POLICY; AND (C) NO PARTY
TO THE POLICY HAS REPUDIATED ANY PROVISION THEREOF. THE TARGET HAS BEEN COVERED
DURING THE PAST THREE YEARS BY INSURANCE IN SCOPE AND AMOUNT CUSTOMARY AND
REASONABLE FOR THE BUSINESS IN WHICH IT HAS ENGAGED DURING THE AFOREMENTIONED
PERIOD. 5(U) OF THE TARGET DISCLOSURE SCHEDULE DESCRIBES ANY SELF-INSURANCE
ARRANGEMENTS AFFECTING THE TARGET.
(V) LITIGATION
----------
. 5(V) OF THE TARGET DISCLOSURE SCHEDULE SETS FORTH EACH INSTANCE IN
WHICH THE TARGET (I) IS SUBJECT TO ANY OUTSTANDING INJUNCTION, JUDGMENT, ORDER,
DECREE, RULING, OR CHARGE OR (II) IS A PARTY OR, TO THE KNOWLEDGE OF ANY OF
▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR
LITIGATION MATTERS) OF THE TARGET, IS THREATENED TO BE MADE A PARTY TO ANY
ACTION, SUIT, PROCEEDING, HEARING, OR INVESTIGATION OF, IN, OR BEFORE ANY COURT
OR QUASI-JUDICIAL OR ADMINISTRATIVE AGENCY OF ANY FEDERAL, STATE, LOCAL, OR
FOREIGN JURISDICTION OR BEFORE ANY ARBITRATOR. NONE OF THE ACTIONS, SUITS,
PROCEEDINGS, HEARINGS, AND INVESTIGATIONS SET FORTH IN 5(V) OF THE TARGET
DISCLOSURE SCHEDULE COULD RESULT IN ANY MATERIAL ADVERSE CHANGE IN THE TARGET,
EXCEPT AS DESCRIBED IN 5(V) OF THE TARGET DISCLOSURE SCHEDULE. NONE OF ▇▇▇▇▇▇▇
OR THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR LITIGATION
MATTERS) OF THE TARGET HAS ANY REASON TO BELIEVE THAT ANY SUCH ACTION, SUIT,
PROCEEDING, HEARING, OR INVESTIGATION MAY BE BROUGHT OR THREATENED AGAINST THE
TARGET.
(W) PRODUCT WARRANTY
-----------------
. EACH PRODUCT MANUFACTURED, SOLD, LEASED, OR DELIVERED BY THE TARGET HAS
BEEN IN MATERIAL CONFORMITY WITH ALL APPLICABLE CONTRACTUAL COMMITMENTS AND ALL
EXPRESS AND IMPLIED WARRANTIES, AND TARGET HAS NO LIABILITY (AND, TO THE
KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH
RESPONSIBILITY FOR PRODUCT WARRANTY MATTERS) OF THE TARGET, THERE IS NO BASIS
FOR ANY PRESENT OR FUTURE ACTION, SUIT, PROCEEDING, HEARING, INVESTIGATION,
CHARGE, COMPLAINT, CLAIM, OR DEMAND AGAINST ANY OF THEM GIVING RISE TO ANY
LIABILITY) FOR REPLACEMENT OR REPAIR THEREOF OR OTHER DAMAGES IN CONNECTION
THEREWITH, SUBJECT ONLY TO THE RESERVE FOR PRODUCT WARRANTY CLAIMS SET FORTH ON
THE FACE OF THE MOST RECENT BALANCE SHEET (RATHER THAN IN ANY NOTES THERETO) AS
ADJUSTED FOR THE PASSAGE OF TIME THROUGH THE CLOSING DATE IN ACCORDANCE WITH THE
PAST CUSTOM AND PRACTICE OF THE TARGET. NO PRODUCT MANUFACTURED, SOLD, LEASED,
OR DELIVERED BY THE TARGET IS SUBJECT TO ANY CONTRACTUAL GUARANTY, WARRANTY, OR
OTHER INDEMNITY BEYOND THE APPLICABLE TERMS AND CONDITIONS OF SALE OR LEASE. THE
CUSTOMER AGREEMENTS WHICH FORM PART OF THE MATERIAL CONTRACTS (COPIES OF WHICH
HAVE BEEN DELIVERED TO THE PARENT) CONTAIN ALL TERMS AND CONDITIONS OF SALE OR
LEASE FOR THE TARGET RELATED TO SUCH CUSTOMER AGREEMENTS (INCLUDING ALL
APPLICABLE GUARANTY, WARRANTY AND INDEMNITY PROVISIONS).
28
(X) PRODUCT LIABILITY
------------------
. THE TARGET HAS NO LIABILITY (AND, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND
THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR PRODUCT
LIABILITY MATTERS) OF THE TARGET, THERE IS NO BASIS FOR ANY PRESENT OR FUTURE
ACTION, SUIT, PROCEEDING, HEARING, INVESTIGATION, CHARGE, COMPLAINT, CLAIM, OR
DEMAND AGAINST ANY OF THEM GIVING RISE TO ANY LIABILITY) ARISING OUT OF ANY
INJURY TO INDIVIDUALS OR PROPERTY AS A RESULT OF THE OWNERSHIP, POSSESSION, OR
USE OF ANY PRODUCT MANUFACTURED, SOLD, LEASED, OR DELIVERED BY THE TARGET.
(Y) EMPLOYEES
---------
. TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND
EMPLOYEES WITH RESPONSIBILITY FOR EMPLOYMENT MATTERS) OF THE TARGET, NO
EXECUTIVE, KEY EMPLOYEE, OR GROUP OF EMPLOYEES HAS ANY PLANS TO TERMINATE
EMPLOYMENT WITH THE TARGET. THE TARGET IS NOT A PARTY TO OR BOUND BY ANY
COLLECTIVE BARGAINING AGREEMENT, NOR HAS IT EXPERIENCED ANY STRIKES, GRIEVANCES,
CLAIMS OF UNFAIR LABOR PRACTICES, OR OTHER COLLECTIVE BARGAINING DISPUTES. THE
TARGET HAS NOT COMMITTED ANY UNFAIR LABOR PRACTICE. NONE OF ▇▇▇▇▇▇▇ OR THE
DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR EMPLOYMENT
MATTERS) OF THE TARGET HAS ANY KNOWLEDGE OF ANY ORGANIZATIONAL EFFORT PRESENTLY
BEING MADE OR THREATENED BY OR ON BEHALF OF ANY LABOR UNION WITH RESPECT TO
EMPLOYEES OF THE TARGET. 5(Y) OF THE TARGET DISCLOSURE SCHEDULE LISTS EACH
EMPLOYEE OF THE TARGET AND HIS OR HER (I) TITLE OR JOB DESIGNATION, (II) BASE
RATE OF PAY FOR THE YEAR 2002, (III) ANY ANTICIPATED BONUS, PROFIT SHARING OR
OTHER CASH COMPENSATION FOR THE YEAR 2002, AND (IV) TOTAL COMPENSATION
(INCLUDING ANY BONUS, PROFIT SHARING OR OTHER CASH COMPENSATION) FOR THE YEARS
2000 AND 2001.
(Z) EMPLOYEE BENEFITS.
------------------
(I) 5(Z) OF THE TARGET DISCLOSURE SCHEDULE LISTS EACH EMPLOYEE BENEFIT PLAN
THAT THE TARGET MAINTAINS OR TO WHICH THE TARGET CONTRIBUTES.
(A) EACH SUCH EMPLOYEE BENEFIT PLAN (AND EACH RELATED TRUST, INSURANCE
CONTRACT, OR FUND) PRESENTLY COMPLIES AND HAS BEEN MAINTAINED IN COMPLIANCE WITH
ITS TERMS AND COMPLIES BOTH IN FORM AND IN OPERATION IN ALL RESPECTS WITH
THE APPLICABLE REQUIREMENTS OF ERISA, THE CODE, AND OTHER APPLICABLE LAWS.
(B) ALL REQUIRED REPORTS AND DESCRIPTIONS (INCLUDING FORM 5500 ANNUAL
REPORTS, SUMMARY ANNUAL REPORTS, PBGC-1'S, AND SUMMARY PLAN DESCRIPTIONS) HAVE
BEEN FILED OR DISTRIBUTED APPROPRIATELY WITH RESPECT TO EACH SUCH EMPLOYEE
BENEFIT PLAN. TO THE EXTENT APPLICABLE, THE REQUIREMENTS OF PART 6 OF SUBTITLE B
OF TITLE I OF ERISA AND OF CODE 4980B HAVE BEEN MET WITH RESPECT TO EACH SUCH
EMPLOYEE BENEFIT PLAN WHICH IS AN EMPLOYEE WELFARE BENEFIT PLAN.
29
(C) ALL CONTRIBUTIONS (INCLUDING ALL EMPLOYER CONTRIBUTIONS AND EMPLOYEE
SALARY REDUCTION CONTRIBUTIONS) WHICH ARE DUE HAVE BEEN PAID TO EACH SUCH
EMPLOYEE BENEFIT PLAN WHICH IS AN EMPLOYEE PENSION BENEFIT PLAN AND ALL
CONTRIBUTIONS FOR ANY PERIOD ENDING ON OR BEFORE THE CLOSING DATE WHICH ARE NOT
YET DUE HAVE BEEN PAID TO EACH SUCH EMPLOYEE PENSION BENEFIT PLAN OR ACCRUED IN
ACCORDANCE WITH THE PAST CUSTOM AND PRACTICE OF THE TARGET. ALL PREMIUMS OR
OTHER PAYMENTS FOR ALL PERIODS ENDING ON OR BEFORE THE CLOSING DATE HAVE BEEN
PAID WITH RESPECT TO EACH SUCH EMPLOYEE BENEFIT PLAN WHICH IS AN EMPLOYEE
WELFARE BENEFIT PLAN.
(D) THE TERMS OF EACH SUCH EMPLOYEE BENEFIT PLAN WHICH IS AN EMPLOYEE
PENSION BENEFIT PLAN THAT IS INTENDED TO QUALIFY UNDER CODE 401(A) HAS BEEN
DETERMINED BY THE INTERNAL REVENUE SERVICE TO QUALIFY UNDER 401(A) OF THE CODE.
(E) THE MARKET VALUE OF ASSETS UNDER EACH SUCH EMPLOYEE BENEFIT PLAN WHICH
IS AN EMPLOYEE PENSION DEFINED BENEFIT PLAN (OTHER THAN ANY MULTIEMPLOYER PLAN)
EQUALS OR EXCEEDS THE PRESENT VALUE OF ALL VESTED AND NONVESTED LIABILITIES
THEREUNDER DETERMINED IN ACCORDANCE WITH PBGC METHODS, FACTORS, AND ASSUMPTIONS
APPLICABLE TO AN EMPLOYEE PENSION DEFINED BENEFIT PLAN TERMINATING ON THE DATE
FOR DETERMINATION.
(F) THE TARGET AND ▇▇▇▇▇▇▇ HAVE MADE AVAILABLE TO THE PARENT CORRECT AND
COMPLETE COPIES OF THE PLAN DOCUMENTS AND SUMMARY PLAN DESCRIPTIONS, THE MOST
RECENT DETERMINATION LETTER RECEIVED FROM THE INTERNAL REVENUE SERVICE, THE MOST
RECENT FORM 5500 ANNUAL REPORT, AND ALL RELATED TRUST AGREEMENTS, INSURANCE
CONTRACTS, AND OTHER FUNDING AGREEMENTS WHICH IMPLEMENT EACH SUCH EMPLOYEE
BENEFIT PLAN.
(II) WITH RESPECT TO EACH EMPLOYEE BENEFIT PLAN THAT THE TARGET OR ANY OF
ITS ERISA AFFILIATES MAINTAINS OR EVER HAS MAINTAINED OR TO WHICH ANY OF THEM
CONTRIBUTES, EVER HAS CONTRIBUTED, OR EVER HAS BEEN REQUIRED TO CONTRIBUTE, OR
WITH RESPECT TO WHICH TARGET OR ANY OF ITS ERISA AFFILIATES HAVE OR MAY, OR IN
THE PAST HAD, OR ARE OR HAVE BEEN DEEMED TO HAVE ANY LIABILITY OR OBLIGATIONS
WITH RESPECT THERETO:
(A) NO SUCH EMPLOYEE BENEFIT PLAN WHICH IS AN EMPLOYEE PENSION BENEFIT PLAN
(OTHER THAN ANY MULTIEMPLOYER PLAN) HAS BEEN COMPLETELY OR PARTIALLY TERMINATED
OR BEEN THE SUBJECT OF A REPORTABLE EVENT (AS DEFINED IN 4043(C) OF ERISA AND
THE PBGC REGULATIONS PROMULGATED THEREUNDER) AS TO WHICH NOTICES WOULD BE
REQUIRED TO BE FILED WITH THE PBGC. NO PROCEEDING BY THE PBGC TO TERMINATE ANY
SUCH EMPLOYEE PENSION BENEFIT PLAN (OTHER THAN ANY MULTIEMPLOYER PLAN) HAS BEEN
INSTITUTED OR, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS
(AND EMPLOYEES WITH RESPONSIBILITY FOR EMPLOYEE BENEFITS MATTERS) OF THE
TARGET, THREATENED.
30
(B) THERE HAVE BEEN NO TRANSACTIONS IN VIOLATION OF 404 OR 406 OF ERISA OR
ANY PROHIBITED TRANSACTIONS WITH RESPECT TO ANY SUCH EMPLOYEE BENEFIT PLAN FOR
WHICH NO EXEMPTION EXISTS UNDER 408 OF ERISA OR 4975(C)(2) OR (D) OF THE CODE.
TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS (AND EMPLOYEES
WITH RESPONSIBILITY FOR EMPLOYEE BENEFITS MATTERS) OF THE TARGET, NO FIDUCIARY
HAS ANY LIABILITY FOR BREACH OF FIDUCIARY DUTY OR ANY OTHER FAILURE TO ACT OR
COMPLY IN CONNECTION WITH THE ADMINISTRATION OR INVESTMENT OF THE ASSETS OF ANY
SUCH EMPLOYEE BENEFIT PLAN. NO ACTION, SUIT, PROCEEDING, HEARING, OR
INVESTIGATION WITH RESPECT TO THE ADMINISTRATION OR THE INVESTMENT OF THE ASSETS
OF ANY SUCH EMPLOYEE BENEFIT PLAN (OTHER THAN ROUTINE CLAIMS FOR BENEFITS) IS
PENDING OR, TO THE KNOWLEDGE OF ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS AND OFFICERS
(AND EMPLOYEES WITH RESPONSIBILITY FOR EMPLOYEE BENEFITS MATTERS) OF THE TARGET,
THREATENED. NONE OF ▇▇▇▇▇▇▇ OR THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH
RESPONSIBILITY FOR EMPLOYEE BENEFITS MATTERS) OF THE TARGET HAS ANY KNOWLEDGE OF
ANY BASIS FOR ANY SUCH ACTION, SUIT, PROCEEDING, HEARING, OR INVESTIGATION.
(C) THE TARGET AND ITS ERISA AFFILIATES HAVE NOT INCURRED, AND NONE OF
▇▇▇▇▇▇▇ OR THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR
EMPLOYEE BENEFITS MATTERS) OF THE TARGET HAS ANY REASON TO EXPECT THAT THE
TARGET OR ANY OF ITS ERISA AFFILIATES WILL INCUR, ANY LIABILITY TO THE PBGC
(OTHER THAN PBGC PREMIUM PAYMENTS) OR OTHERWISE UNDER TITLE IV OF ERISA
(INCLUDING ANY WITHDRAWAL LIABILITY) OR UNDER THE CODE WITH RESPECT TO ANY SUCH
EMPLOYEE BENEFIT PLAN WHICH IS AN EMPLOYEE PENSION BENEFIT PLAN.
(III) NEITHER THE TARGET OR ANY OF ITS ERISA AFFILIATES CONTRIBUTES TO, EVER
HAS CONTRIBUTED TO, OR EVER HAS BEEN REQUIRED TO CONTRIBUTE TO ANY
MULTIEMPLOYER PLAN OR HAS ANY LIABILITY (INCLUDING WITHDRAWAL LIABILITY) UNDER
ANY MULTIEMPLOYER PLAN.
(IV) NEITHER THE TARGET NOR ANY OF ITS ERISA AFFILIATES MAINTAINS OR HAS
EVER MAINTAINED OR CONTRIBUTED TO, OR EVER HAS BEEN REQUIRED TO CONTRIBUTE TO
ANY EMPLOYEE WELFARE BENEFIT PLAN PROVIDING MEDICAL, HEALTH, OR LIFE INSURANCE
OR OTHER WELFARE-TYPE BENEFITS FOR CURRENT OR FUTURE RETIRED OR TERMINATED
EMPLOYEES, THEIR SPOUSES, OR THEIR DEPENDENTS (OTHER THAN IN ACCORDANCE WITH
CODE 4980B OR SIMILAR STATE LAW).
(AA) GUARANTIES
----------
. THE TARGET IS NOT A GUARANTOR OR OTHERWISE IS LIABLE FOR ANY LIABILITY
OR OBLIGATION (INCLUDING INDEBTEDNESS) OF ANY OTHER PERSON.
(BB) ENVIRONMENTAL MATTERS.
----------------------
(I) THE TARGET IS NOW AND ALWAYS HAS BEEN IN MATERIAL COMPLIANCE WITH ALL
ENVIRONMENTAL LAWS.
31
(II) THE TARGET HAS ALL ENVIRONMENTAL PERMITS NECESSARY FOR THE CONDUCT AND
OPERATION OF ITS BUSINESS AS PRESENTLY CONDUCTED, AND ALL SUCH PERMITS ARE IN
GOOD STANDING.
(III) THERE IS NOT NOW AND HAS NOT BEEN ANY HAZARDOUS SUBSTANCE USED,
GENERATED, TREATED, STORED, TRANSPORTED, DISPOSED OF, RELEASED, HANDLED OR
OTHERWISE EXISTING ON, UNDER, ABOUT, OR EMANATING FROM OR TO, ANY TARGET OWNED,
LEASED OR OPERATED PROPERTY ASSOCIATED WITH THE BUSINESS EXCEPT IN SUBSTANTIAL
COMPLIANCE WITH ALL APPLICABLE ENVIRONMENTAL LAWS.
(IV) THE TARGET HAS NOT RECEIVED ANY NOTICE OF ALLEGED, ACTUAL OR POTENTIAL
RESPONSIBILITY FOR, OR ANY INQUIRY OR INVESTIGATION REGARDING, ANY RELEASE OR
THREATENED RELEASE OF HAZARDOUS SUBSTANCES OR ALLEGED VIOLATION OF, OR
NON-COMPLIANCE WITH, ANY ENVIRONMENTAL LAW, NOR IS ANY OF ▇▇▇▇▇▇▇ AND THE
DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR ENVIRONMENTAL
MATTERS) OF THE TARGET AWARE OF ANY INFORMATION WHICH MIGHT FORM THE BASIS OF
ANY SUCH NOTICE OR ANY CLAIM.
(V) THERE IS NO SITE TO WHICH THE TARGET HAS TRANSPORTED OR ARRANGED FOR THE
TRANSPORT OF HAZARDOUS SUBSTANCES AS TO WHICH ANY OF ▇▇▇▇▇▇▇ AND THE DIRECTORS
AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR ENVIRONMENTAL MATTERS) OF
THE TARGET HAS ANY INFORMATION THAT WOULD REASONABLY LEAD ANY OF THEM TO
CONCLUDE THAT ANY SUCH SITE IS OR MAY BECOME THE SUBJECT OF ANY ENVIRONMENTAL
ACTION.
(VI) TRUE, COMPLETE AND CORRECT COPIES OF THE WRITTEN REPORTS, AND ALL PARTS
THEREOF, OF ALL ENVIRONMENTAL AUDITS OR ASSESSMENTS OF WHICH ANY OF ▇▇▇▇▇▇▇ AND
THE DIRECTORS AND OFFICERS (AND EMPLOYEES WITH RESPONSIBILITY FOR ENVIRONMENTAL
MATTERS) OF THE TARGET HAS KNOWLEDGE AND THAT HAVE BEEN CONDUCTED AT ANY TARGET
OWNED, LEASED OR OPERATED PROPERTY, HAVE BEEN MADE AVAILABLE TO THE PARENT.
(CC) CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET
---------------------------------------------------
. NONE OF ▇▇▇▇▇▇▇ AND HIS AFFILIATES HAS BEEN INVOLVED IN ANY BUSINESS
ARRANGEMENT OR RELATIONSHIP WITH THE TARGET WITHIN THE PAST 12 MONTHS, AND NONE
OF ▇▇▇▇▇▇▇ AND HIS AFFILIATES OWNS ANY ASSET, TANGIBLE OR INTANGIBLE, WHICH IS
USED IN THE BUSINESS OF THE TARGET.
(DD) DISCLOSURE
----------
. NONE OF (I) THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS 5, OR
(II) ANY WRITTEN MATERIALS FURNISHED BY ▇▇▇▇▇▇▇ OR THE TARGET TO THE PARENT,
CONTAINS ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL
FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS AND INFORMATION CONTAINED THEREIN
NOT MISLEADING.
6. POST-CLOSING COVENANTS
-----------------------
. THE PARTIES AGREE AS FOLLOWS WITH RESPECT TO THE PERIOD FOLLOWING THE
CLOSING.
(A) GENERAL
-------
. IN CASE AT ANY TIME AFTER THE CLOSING ANY FURTHER ACTION IS NECESSARY OR
DESIRABLE TO CARRY OUT THE PURPOSES OF THIS AGREEMENT, EACH OF THE PARTIES WILL
TAKE SUCH FURTHER ACTION (INCLUDING THE EXECUTION AND DELIVERY OF SUCH FURTHER
INSTRUMENTS AND DOCUMENTS) AS THE OTHER PARTY REASONABLY MAY REQUEST, ALL AT THE
SOLE COST AND EXPENSE OF THE REQUESTING PARTY (UNLESS THE REQUESTING PARTY IS
ENTITLED TO INDEMNIFICATION THEREFOR UNDER 7 BELOW). ▇▇▇▇▇▇▇ ACKNOWLEDGES AND
AGREES THAT FROM AND AFTER THE CLOSING THE PARENT WILL BE ENTITLED TO POSSESSION
OF ALL DOCUMENTS, BOOKS, RECORDS (INCLUDING TAX RECORDS), AGREEMENTS, AND
FINANCIAL DATA OF ANY SORT RELATING TO THE TARGET. NOTWITHSTANDING THE
FOREGOING, PARENT AND MERGER SUB WILL PERMIT ▇▇▇▇▇▇▇ AND HIS REPRESENTATIVES TO
HAVE, AT ▇▇▇▇▇▇▇'▇ SOLE COST AND EXPENSE, FULL, COMPLETE AND PROMPT ACCESS TO
AND THE RIGHT TO MAKE COPIES OF ANY AND ALL DOCUMENTS REASONABLY REQUESTED BY
▇▇▇▇▇▇▇ THAT RELATE IN ANY MANNER TO ANY ADVERSE CONSEQUENCES CLAIMED BY PARENT
UNDER 7 BELOW FOR PURPOSES OF EVALUATING THE MERITS OF THE CLAIMED ADVERSE
CONSEQUENCES IN CONNECTION WITH ▇▇▇▇▇▇▇'▇ INDEMNIFICATION OBLIGATIONS UNDER 7
BELOW OR DEFENDING AGAINST ANY SUCH ADVERSE CONSEQUENCES; PROVIDED, HOWEVER,
THAT ▇▇▇▇▇▇▇ SHALL HAVE AGREED IN WRITING TO USE ANY DOCUMENTS REQUESTED
PURSUANT TO THIS SENTENCE ONLY FOR THE PURPOSES SET FORTH HEREIN. FOR THE
PURPOSES OF THIS 6(A), WITHOUT LIMITING THE FOREGOING, IT SHALL NOT BE DEEMED
REASONABLE FOR ▇▇▇▇▇▇▇ TO REQUEST ACCESS TO DOCUMENTS SUBJECT TO ATTORNEY-CLIENT
OR OTHER SIMILAR PRIVILEGE.
32
(B) LITIGATION SUPPORT
-------------------
. IN THE EVENT AND FOR SO LONG AS ANY PARTY ACTIVELY IS CONTESTING OR
DEFENDING AGAINST ANY ACTION, SUIT, PROCEEDING, HEARING, INVESTIGATION, CHARGE,
COMPLAINT, CLAIM, OR DEMAND IN CONNECTION WITH (I) ANY TRANSACTION CONTEMPLATED
UNDER THIS AGREEMENT OR (II) ANY FACT, SITUATION, CIRCUMSTANCE, STATUS,
CONDITION, ACTIVITY, PRACTICE, PLAN, OCCURRENCE, EVENT, INCIDENT, ACTION,
FAILURE TO ACT, OR TRANSACTION ON OR PRIOR TO THE CLOSING DATE INVOLVING THE
TARGET, THE OTHER PARTY WILL COOPERATE WITH HIM OR IT AND HIS OR ITS COUNSEL IN
THE CONTEST OR DEFENSE, MAKE AVAILABLE THEIR PERSONNEL, AND PROVIDE SUCH
TESTIMONY AND ACCESS TO THEIR BOOKS AND RECORDS AS SHALL BE NECESSARY IN
CONNECTION WITH THE CONTEST OR DEFENSE, ALL AT THE SOLE COST AND EXPENSE OF THE
CONTESTING OR DEFENDING PARTY (SUBJECT TO THE RIGHT, IF ANY, OF THE CONTESTING
OR DEFENDING PARTY TO OBTAIN INDEMNIFICATION THEREFOR UNDER 7 BELOW).
(C) TRANSITION
----------
. ▇▇▇▇▇▇▇ WILL NOT TAKE ANY ACTION THAT IS DESIGNED OR INTENDED TO HAVE
THE EFFECT OF DISCOURAGING ANY LESSOR, LICENSOR, CUSTOMER, SUPPLIER, OR OTHER
BUSINESS ASSOCIATE OF THE TARGET FROM MAINTAINING THE SAME BUSINESS
RELATIONSHIPS WITH THE TARGET AFTER THE CLOSING AS IT MAINTAINED WITH THE TARGET
PRIOR TO THE CLOSING. ▇▇▇▇▇▇▇ WILL REFER ALL CUSTOMER INQUIRIES RELATING TO THE
BUSINESSES OF THE TARGET TO THE PARENT FROM AND AFTER THE CLOSING.
(D) CONFIDENTIALITY
---------------
. ▇▇▇▇▇▇▇ WILL TREAT AND HOLD AS SUCH ALL OF THE CONFIDENTIAL INFORMATION,
REFRAIN FROM USING ANY OF THE CONFIDENTIAL INFORMATION EXCEPT IN CONNECTION WITH
THIS AGREEMENT, AND DELIVER PROMPTLY TO THE PARENT OR DESTROY, AT THE REQUEST
AND OPTION OF THE PARENT, ALL TANGIBLE EMBODIMENTS (AND ALL COPIES) OF THE
CONFIDENTIAL INFORMATION WHICH ARE IN HIS OR ITS POSSESSION. IN THE EVENT THAT
▇▇▇▇▇▇▇ IS REQUESTED OR REQUIRED (BY ORAL QUESTION OR REQUEST FOR INFORMATION OR
DOCUMENTS IN ANY LEGAL PROCEEDING, INTERROGATORY, SUBPOENA, CIVIL INVESTIGATIVE
DEMAND, OR SIMILAR PROCESS) TO DISCLOSE ANY CONFIDENTIAL INFORMATION, ▇▇▇▇▇▇▇
WILL NOTIFY THE PARENT PROMPTLY OF THE REQUEST OR REQUIREMENT SO THAT THE PARENT
MAY SEEK AN APPROPRIATE PROTECTIVE ORDER OR WAIVE COMPLIANCE WITH THE PROVISIONS
OF THIS 6(D). IF, IN THE ABSENCE OF A PROTECTIVE ORDER OR THE RECEIPT OF A
WAIVER HEREUNDER, ▇▇▇▇▇▇▇ IS, ON THE ADVICE OF COUNSEL, COMPELLED TO DISCLOSE
ANY CONFIDENTIAL INFORMATION TO ANY TRIBUNAL OR ELSE STAND LIABLE FOR CONTEMPT,
THAT SELLER MAY DISCLOSE THE CONFIDENTIAL INFORMATION TO THE TRIBUNAL; PROVIDED,
--------
HOWEVER, THAT ▇▇▇▇▇▇▇ SHALL USE HIS BEST EFFORTS TO OBTAIN, AT THE REQUEST OF
-------
THE PARENT, AN ORDER OR OTHER ASSURANCE THAT CONFIDENTIAL TREATMENT WILL BE
--
ACCORDED TO SUCH PORTION OF THE CONFIDENTIAL INFORMATION REQUIRED TO BE
--
DISCLOSED AS THE PARENT SHALL DESIGNATE. THE FOREGOING PROVISIONS SHALL NOT
--
APPLY TO ANY CONFIDENTIAL INFORMATION WHICH IS GENERALLY AVAILABLE TO THE PUBLIC
--
IMMEDIATELY PRIOR TO THE TIME OF DISCLOSURE.
33
(E) COVENANT NOT TO COMPETE
--------------------------
. FOR A PERIOD OF THREE YEARS FROM AND AFTER THE CLOSING DATE, ▇▇▇▇▇▇▇
WILL NOT, AND WILL NOT PERMIT ANY AFFILIATE OF ▇▇▇▇▇▇▇ TO, ENGAGE DIRECTLY OR
INDIRECTLY IN ANY BUSINESS THAT THE TARGET CONDUCTS AS OF THE CLOSING DATE IN
ANY GEOGRAPHIC AREA IN WHICH THE TARGET CONDUCTS THAT BUSINESS AS OF THE CLOSING
DATE; PROVIDED, HOWEVER, THAT NO OWNER OF LESS THAN 1% OF THE OUTSTANDING STOCK
-------- -------
OF ANY PUBLICLY TRADED CORPORATION SHALL BE DEEMED TO ENGAGE SOLELY BY REASON
THEREOF IN ANY OF ITS BUSINESSES. IF THE FINAL JUDGMENT OF A COURT OF COMPETENT
JURISDICTION DECLARES THAT ANY TERM OR PROVISION OF THIS 6(E) IS INVALID OR
UNENFORCEABLE, THE PARTIES AGREE THAT THE COURT MAKING THE DETERMINATION OF
INVALIDITY OR UNENFORCEABILITY SHALL HAVE THE POWER TO REDUCE THE SCOPE,
DURATION, OR AREA OF THE TERM OR PROVISION, TO DELETE SPECIFIC WORDS OR PHRASES,
OR TO REPLACE ANY INVALID OR UNENFORCEABLE TERM OR PROVISION WITH A TERM OR
PROVISION THAT IS VALID AND ENFORCEABLE AND THAT COMES CLOSEST TO EXPRESSING THE
INTENTION OF THE INVALID OR UNENFORCEABLE TERM OR PROVISION, AND THIS AGREEMENT
SHALL BE ENFORCEABLE AS SO MODIFIED AFTER THE EXPIRATION OF THE TIME WITHIN
WHICH THE JUDGMENT MAY BE APPEALED.
(F) NON-SOLICITATION
----------------
. FOR A PERIOD OF THREE YEARS FROM AND AFTER THE CLOSING DATE, ▇▇▇▇▇▇▇
SHALL NOT, DIRECTLY OR INDIRECTLY, AND WILL NOT PERMIT ANY AFFILIATE OF ▇▇▇▇▇▇▇
TO, (I) OFFER EMPLOYMENT TO OR SEEK TO OFFER EMPLOYMENT TO ANY PERSON WHO IS
EMPLOYED BY THE PARENT OR ANY OF ITS AFFILIATES ON OR AFTER THE CLOSING DATE,
UNLESS THE PARENT OR AFFILIATE FIRST TERMINATES THE EMPLOYMENT OF SUCH EMPLOYEE
OR GIVES ITS WRITTEN CONSENT TO SUCH EMPLOYMENT OR OFFER OF EMPLOYMENT, (II)
INDUCE OR ATTEMPT TO INDUCE ANY PERSON WHO IS EMPLOYED BY THE PARENT OR ANY OF
ITS AFFILIATES ON OR AFTER THE CLOSING DATE TO LEAVE THE EMPLOY OF THE PARENT OR
ANY OF ITS AFFILIATES OR (III) INDUCE OR ATTEMPT TO INDUCE ANY CUSTOMER,
SUPPLIER, VENDOR, LICENSEE OR BUSINESS RELATION OF THE PARENT OR ANY OF ITS
AFFILIATES TO CEASE DOING BUSINESS WITH THE PARENT OR ANY OF ITS AFFILIATES OR
IN ANY WAY INTERFERE WITH THE RELATIONSHIP BETWEEN ANY CUSTOMER, SUPPLIER,
VENDOR, LICENSEE OR BUSINESS RELATION OF THE PARENT OR ANY OF ITS AFFILIATES.
▇▇▇▇▇▇▇ SHALL NOT BE PRECLUDED FROM HIRING ANY SUCH PERSON WHO (I) INITIATES
DISCUSSIONS REGARDING SUCH EMPLOYMENT OR (II) RESPONDS TO ANY PUBLIC
ADVERTISEMENT PLACED BY ▇▇▇▇▇▇▇.
(G) SHARE CERTIFICATES
-------------------
. EACH CERTIFICATE EVIDENCING SHARES WILL BE IMPRINTED WITH A LEGEND
SUBSTANTIALLY IN THE FOLLOWING FORM:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED FOR
---------------
SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
OR BLUE SKY LAWS.
EACH HOLDER DESIRING TO TRANSFER SHARES FIRST MUST FURNISH THE PARENT WITH A
WRITTEN OPINION SATISFACTORY TO THE PARENT IN FORM AND SUBSTANCE FROM COUNSEL
SATISFACTORY TO THE PARENT BY REASON OF EXPERIENCE TO THE EFFECT THAT THE HOLDER
MAY TRANSFER THE SHARES AS DESIRED WITHOUT REGISTRATION UNDER THE SECURITIES
ACT.
34
(H) NEW YORK STOCK EXCHANGE LISTING
-----------------------------------
. THE PARENT SHALL USE ITS REASONABLE BEST EFFORTS TO CAUSE THE SHARES TO
BE APPROVED FOR QUOTATION ON THE NEW YORK STOCK EXCHANGE, SUBJECT TO OFFICIAL
NOTICE OF ISSUANCE.
(I) FINANCIAL STATEMENTS.
---------------------
(I) IF REQUESTED IN WRITING BY PARENT, ▇▇▇▇▇▇▇ SHALL PREPARE, AT PARENT'S
EXPENSE, AND DELIVER TO THE PARENT AS SOON AS PRACTICABLE BUT NOT LATER THAN
FORTY-FIVE (45) DAYS AFTER THE CLOSING DATE FINANCIAL STATEMENTS FOR THE TARGET
AUDITED BY KPMG LLP FOR THE YEARS ENDED DECEMBER 31, 1999, DECEMBER 31, 2000 AND
DECEMBER 31, 2001, INCLUDING YEAR END BALANCE SHEETS AND RELATED STATEMENTS
OF INCOME AND CASH FLOWS FOR THE BUSINESS FOR THE YEARS THEN ENDED. ▇▇▇▇▇▇▇
SHALL USE HIS BEST EFFORTS TO PROVIDE ALL ASSISTANCE REQUESTED BY PARENT AND THE
SURVIVING CORPORATION IN CONNECTION WITH THE PREPARATION OF SUCH AUDITED
FINANCIAL STATEMENTS.
(II) IN THE EVENT THAT THE PARENT CONCLUDES THAT IT IS NECESSARY OR
ADVISABLE TO PREPARE FINANCIAL STATEMENTS OF THE TARGET FOR ANY OTHER PERIODS
PRIOR TO CLOSING, ▇▇▇▇▇▇▇ AGREES TO COOPERATE WITH THE PARENT, PROVIDE IT WITH
REASONABLE ACCESS TO APPROPRIATE FINANCIAL RECORDS AND PERSONNEL AND DIRECT THE
TARGET'S INDEPENDENT ACCOUNTANTS TO ASSIST THE PARENT. ANY FEES AND EXPENSES OF
THE OUTSIDE INDEPENDENT ACCOUNTANTS SHALL BE PAID BY THE PARENT.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
--------------------------------------------
(A) SURVIVAL OF REPRESENTATIONS AND WARRANTIES
----------------------------------------------
. ALL OF THE REPRESENTATIONS AND WARRANTIES OF EACH PARTY CONTAINED IN
THIS AGREEMENT SHALL SURVIVE THE CLOSING HEREUNDER (EVEN IF PARENT OR ▇▇▇▇▇▇▇
KNEW OR HAD REASON TO KNOW OF ANY MISREPRESENTATION OR BREACH OF WARRANTY OR
COVENANT AT THE TIME OF CLOSING; PROVIDED, HOWEVER, THAT PARENT OR ▇▇▇▇▇▇▇, AS
APPLICABLE, HAS DISCLOSED TO ▇▇▇▇▇▇▇ OR PARENT, AS APPLICABLE, IN WRITING SUCH
KNOWLEDGE AS SOON AS REASONABLY PRACTICABLE AFTER IT BECAME KNOWN TO THE PARENT
OR ▇▇▇▇▇▇▇, AS APPLICABLE) AND CONTINUE IN FULL FORCE AND EFFECT FOR TWELVE (12)
MONTHS FOLLOWING THE CLOSING DATE; PROVIDED, HOWEVER, THAT THE REPRESENTATIONS
AND WARRANTIES CONTAINED IN 4(A)(I), 4(A)(IV), 4(A)(VI), 4(B)(II), 4(B)(III),
4(B)(VII), 5(B), 5(C), 5(F), 5(H), 5(M), 5(Z) AND 5(BB) SHALL CONTINUE IN FULL
FORCE AND EFFECT THEREAFTER (SUBJECT TO ANY APPLICABLE STATUTES OF LIMITATIONS).
(B) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PARENT.
----------------------------------------------------------
35
(I) IN THE EVENT ▇▇▇▇▇▇▇ OR THE TARGET BREACHES (OR IN THE EVENT ANY THIRD
PARTY ALLEGES FACTS THAT, IF TRUE, WOULD MEAN ▇▇▇▇▇▇▇ OR THE TARGET HAS
BREACHED) ANY OF THEIR RESPECTIVE REPRESENTATIONS, WARRANTIES, AND COVENANTS
CONTAINED HEREIN, THEN ▇▇▇▇▇▇▇ AGREES TO INDEMNIFY THE PARENT, THE SURVIVING
CORPORATION, AND THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES,
REPRESENTATIVES, SUCCESSORS, TRANSFEREES AND ASSIGNEES (EACH A "PARENT
------
INDEMNIFIED PARTY") FROM AND AGAINST THE ENTIRETY OF ANY ADVERSE CONSEQUENCES
---------
SUCH INDEMNIFIED PARTY MAY SUFFER THROUGH AND AFTER THE DATE OF THE CLAIM FOR
INDEMNIFICATION (INCLUDING ANY ADVERSE CONSEQUENCES SUCH INDEMNIFIED PARTY MAY
SUFFER AFTER THE END OF ANY APPLICABLE SURVIVAL PERIOD) RESULTING FROM, ARISING
OUT OF, RELATING TO, IN THE NATURE OF, OR CAUSED BY THE BREACH (OR THE ALLEGED
BREACH).
(II) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, ▇▇▇▇▇▇▇
SHALL INDEMNIFY, SAVE AND HOLD HARMLESS THE INDEMNIFIED PARTIES FROM AND AGAINST
ANY AND ALL ADVERSE CONSEQUENCES INCURRED IN CONNECTION WITH, ARISING OUT OF,
RESULTING FROM OR RELATING OR INCIDENT TO: (X) ANY AND ALL TAXES (A) OF THE
TARGET (1) WITH RESPECT TO ALL PERIODS ENDING ON OR PRIOR TO THE CLOSING DATE
(THE "PRE-CLOSING PERIODS") AND (2) WITH RESPECT TO ANY PERIOD BEGINNING BEFORE
-------------------
THE CLOSING DATE AND ENDING AFTER THE CLOSING DATE (A "STRADDLE PERIOD"), BUT
---------------
ONLY WITH RESPECT TO THE PORTION OF SUCH PERIOD UP TO AND INCLUDING THE CLOSING
DATE (SUCH PORTION SHALL BE REFERRED TO HEREIN AS THE "PRE-CLOSING PARTIAL
-------------------
PERIOD" AND THE PORTION OF SUCH PERIOD AFTER THE CLOSING DATE SHALL BE REFERRED
-
TO HEREIN AS THE "POST-CLOSING PARTIAL PERIOD"), OR (B) FOR WHICH THE TARGET IS
---------------------------
LIABLE UNDER TREASURY REGULATIONS 1.1502-6 (OR ANY SIMILAR PROVISION OF STATE,
LOCAL OR FOREIGN LAW), AS A TRANSFEREE OR SUCCESSOR, BY CONTRACT, OR OTHERWISE;
AND (Y) ANY UNTRUTH OR INACCURACY OF ANY REPRESENTATION OR WARRANTY OF OR BY
▇▇▇▇▇▇▇ OR THE TARGET CONTAINED IN 5(M) (TAX MATTERS); IN EACH CASE TO THE
EXTENT SUCH TAXES ARE NOT REFLECTED IN THE RESERVE FOR TAX LIABILITY (RATHER
THAN ANY RESERVE FOR DEFERRED TAXES ESTABLISHED TO REFLECT TIMING DIFFERENCES
BETWEEN BOOK AND TAX INCOME) SHOWN ON THE FACE OF THE MOST RECENT BALANCE SHEET
(RATHER THAN IN ANY NOTES THERETO). FOR PURPOSES OF THIS SECTION, TAXES
REQUIRED TO BE APPORTIONED AS PROVIDED IN CLAUSE (I)(A) OF THIS SUBSECTION SHALL
BE APPORTIONED BETWEEN THE PRE-CLOSING PARTIAL PERIOD AND POST-CLOSING PARTIAL
PERIOD OF ANY STRADDLE PERIOD IN ACCORDANCE WITH THE PROVISIONS DESCRIBED IN
8(B) OF THIS AGREEMENT
(C) INDEMNIFICATION PROVISIONS FOR BENEFIT OF ▇▇▇▇▇▇▇
------------------------------------------------------
. IN THE EVENT PARENT OR MERGER SUB BREACHES (OR IN THE EVENT ANY THIRD
PARTY ALLEGES FACTS THAT, IF TRUE, WOULD MEAN PARENT OR MERGER SUB HAS BREACHED)
ANY OF THEIR RESPECTIVE REPRESENTATIONS, WARRANTIES, AND COVENANTS CONTAINED
HEREIN, THEN PARENT AGREES TO INDEMNIFY ▇▇▇▇▇▇▇ FROM AND AGAINST THE ENTIRETY OF
ANY ADVERSE CONSEQUENCES ▇▇▇▇▇▇▇ MAY SUFFER THROUGH AND AFTER THE DATE OF THE
CLAIM FOR INDEMNIFICATION (INCLUDING ANY ADVERSE CONSEQUENCES ▇▇▇▇▇▇▇ MAY SUFFER
AFTER THE END OF ANY APPLICABLE SURVIVAL PERIOD) RESULTING FROM, ARISING OUT OF,
RELATING TO, IN THE NATURE OF, OR CAUSED BY THE BREACH (OR THE ALLEGED BREACH).
PARENT FURTHER AGREES TO INDEMNIFY ▇▇▇▇▇▇▇ FROM AND AGAINST THE ENTIRETY OF ANY
ADVERSE CONSEQUENCES ▇▇▇▇▇▇▇ MAY SUFFER ARISING OUT OF, OR RELATING TO ▇▇▇▇▇▇▇'▇
PERSONAL GUARANTY OF THE OBLIGATIONS OF TARGET UNDER THAT CERTAIN STANDARD
COMMERCIAL/INDUSTRIAL SINGLE-TENANT LEASE BY AND BETWEEN EJM DEVELOPMENT CO. AND
TARGET, DATED DECEMBER 14, 1994, AS AMENDED AND MODIFIED IN WRITING TO THE DATE
HEREOF (THE "GUARANTEED LEASE"), TO THE EXTENT THAT SUCH ADVERSE CONSEQUENCES
-----------------
ARISE AFTER THE CLOSING DATE DUE TO ANY FAILURE OF THE SURVIVING CORPORATION TO
PERFORM ITS OBLIGATIONS AS ASSIGNEE UNDER THE GUARANTEED LEASE (THE "LEASE
-----
INDEMNIFICATION OBLIGATION").
----------------------
36
(D) MATTERS INVOLVING THIRD PARTIES.
----------------------------------
(I) IF ANY THIRD PARTY SHALL NOTIFY A PARENT INDEMNIFIED PARTY OR ▇▇▇▇▇▇▇
(EACH, AN "INDEMNIFIED PARTY") WITH RESPECT TO ANY MATTER (A "THIRD PARTY
------------------ -----------
CLAIM") WHICH MAY GIVE RISE TO A CLAIM FOR INDEMNIFICATION AGAINST ▇▇▇▇▇▇▇ OR
PARENT (EACH, AS APPLICABLE, THE "INDEMNIFYING PARTY") UNDER THIS 7, THEN THE
------------------
INDEMNIFIED PARTY SHALL PROMPTLY NOTIFY THE INDEMNIFYING PARTY THEREOF IN
WRITING; PROVIDED, HOWEVER, THAT NO DELAY ON THE PART OF THE INDEMNIFIED PARTY
-------- -------
IN NOTIFYING THE INDEMNIFYING PARTY SHALL RELIEVE THE INDEMNIFYING PARTY FROM
ANY OBLIGATION HEREUNDER UNLESS (AND THEN SOLELY TO THE EXTENT) THE INDEMNIFYING
PARTY THEREBY IS PREJUDICED.
(II) THE INDEMNIFYING PARTY WILL HAVE THE RIGHT TO DEFEND THE INDEMNIFIED
PARTY AGAINST THE THIRD PARTY CLAIM WITH COUNSEL MUTUALLY SATISFACTORY TO THE
INDEMNIFIED PARTY AND THE INDEMNIFYING PARTY SO LONG AS (A) THE INDEMNIFYING
PARTY NOTIFIES THE INDEMNIFIED PARTY IN WRITING WITHIN THIRTY (30) DAYS AFTER
THE INDEMNIFIED PARTY HAS GIVEN NOTICE OF THE THIRD PARTY CLAIM THAT THE
INDEMNIFYING PARTY WILL INDEMNIFY THE INDEMNIFIED PARTY FROM AND AGAINST THE
ENTIRETY OF ANY ADVERSE CONSEQUENCES THE INDEMNIFIED PARTY MAY SUFFER RESULTING
FROM, ARISING OUT OF, RELATING TO, IN THE NATURE OF, OR CAUSED BY THE THIRD
PARTY CLAIM, (B) THE INDEMNIFYING PARTY PROVIDES THE INDEMNIFIED PARTY WITH
EVIDENCE REASONABLY ACCEPTABLE TO THE INDEMNIFIED PARTY THAT THE INDEMNIFYING
PARTY WILL HAVE THE FINANCIAL RESOURCES TO DEFEND AGAINST THE THIRD PARTY CLAIM
AND FULFILL ITS INDEMNIFICATION OBLIGATIONS HEREUNDER, (C) THE THIRD PARTY CLAIM
INVOLVES ONLY MONEY DAMAGES AND DOES NOT SEEK AN INJUNCTION OR OTHER EQUITABLE
RELIEF, (D) SETTLEMENT OF, OR AN ADVERSE JUDGMENT WITH RESPECT TO, THE THIRD
PARTY CLAIM IS NOT, IN THE GOOD FAITH JUDGMENT OF THE INDEMNIFIED PARTY, LIKELY
TO ESTABLISH A PRECEDENTIAL CUSTOM OR PRACTICE ADVERSE TO THE CONTINUING
BUSINESS INTERESTS OF THE INDEMNIFIED PARTY, AND (E) THE INDEMNIFYING PARTY
CONDUCTS THE DEFENSE OF THE THIRD PARTY CLAIM ACTIVELY AND DILIGENTLY.
(III) SO LONG AS THE INDEMNIFYING PARTY IS CONDUCTING THE DEFENSE OF THE
THIRD PARTY CLAIM IN ACCORDANCE WITH 7(D)(II) ABOVE, (A) THE INDEMNIFIED PARTY
MAY RETAIN SEPARATE CO-COUNSEL AT ITS SOLE COST AND EXPENSE AND PARTICIPATE IN
THE DEFENSE OF THE THIRD PARTY CLAIM, (B) THE INDEMNIFIED PARTY WILL NOT CONSENT
TO THE ENTRY OF ANY JUDGMENT OR ENTER INTO ANY SETTLEMENT WITH RESPECT TO THE
THIRD PARTY CLAIM WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFYING PARTY,
AND (C) THE INDEMNIFYING PARTY WILL NOT CONSENT TO THE ENTRY OF ANY JUDGMENT OR
ENTER INTO ANY SETTLEMENT WITH RESPECT TO THE THIRD PARTY CLAIM WITHOUT THE
PRIOR WRITTEN CONSENT OF THE INDEMNIFIED PARTY (NOT TO BE WITHHELD
UNREASONABLY).
(IV) IN THE EVENT ANY OF THE CONDITIONS IN 7(D)(II) ABOVE IS OR BECOMES
UNSATISFIED, HOWEVER, (A) THE INDEMNIFIED PARTY MAY DEFEND AGAINST, AND CONSENT
TO THE ENTRY OF ANY JUDGMENT OR ENTER INTO ANY SETTLEMENT WITH RESPECT TO, THE
THIRD PARTY CLAIM IN ANY MANNER IT MAY DEEM APPROPRIATE, (B) THE INDEMNIFYING
PARTY WILL REIMBURSE THE INDEMNIFIED PARTY PROMPTLY AND PERIODICALLY FOR THE
COSTS OF DEFENDING AGAINST THE THIRD PARTY CLAIM (INCLUDING REASONABLE
ATTORNEYS' FEES AND EXPENSES), AND (C) SUBJECT TO THE LIMITATIONS SET FORTH IN
7(D)(V) BELOW, THE INDEMNIFYING PARTY WILL REMAIN RESPONSIBLE FOR ANY ADVERSE
CONSEQUENCES THE INDEMNIFIED PARTY MAY SUFFER RESULTING FROM, ARISING OUT OF,
RELATING TO, IN THE NATURE OF, OR CAUSED BY THE THIRD PARTY CLAIM TO THE FULLEST
EXTENT PROVIDED IN THIS 7.
37
(V) IN THE EVENT THAT AN INDEMNIFIED PARTY DOES NOT PERMIT THE INDEMNIFYING
PARTY TO DEFEND THE INDEMNIFIED PARTY AGAINST A THIRD PARTY CLAIM DUE TO THE
FAILURE OF A CONDITION IN CLAUSE (C) OR (D) OF 7(D)(II) ABOVE, THE PARTIES
AGREE THAT (A) THE INDEMNIFIED PARTY WILL CONDUCT THE DEFENSE WITH COUNSEL
MUTUALLY SATISFACTORY TO THE INDEMNIFYING PARTY AND THE INDEMNIFIED PARTY, AND
(B) THE INDEMNIFYING PARTY SHALL ONLY BE REQUIRED TO INDEMNIFY SUCH INDEMNIFIED
PARTY FOR FIFTY PERCENT (50%) OF THE AMOUNT OF ANY ADVERSE CONSEQUENCES
RESULTING FROM SUCH THIRD PARTY CLAIM. NOTWITHSTANDING THE FOREGOING, ONLY THE
AMOUNT OF THE ADVERSE CONSEQUENCES ACTUALLY PAID BY THE INDEMNIFYING PARTY SHALL
BE CONSIDERED FOR PURPOSES OF APPLYING THE INDEMNITY DEDUCTIBLE AND THE MAXIMUM
INDEMNIFICATION AMOUNT FOR SUCH INDEMNIFYING PARTY.
(VI) WITH RESPECT TO ANY THIRD PARTY CLAIM SUBJECT TO INDEMNIFICATION UNDER
THIS SECTION 7: (I) BOTH THE INDEMNIFIED PARTY AND THE INDEMNIFYING PARTY, AS
THE CASE MAY BE, SHALL KEEP THE OTHER PARTY FULLY INFORMED OF THE STATUS OF SUCH
THIRD PARTY CLAIM AND ANY RELATED PROCEEDINGS AT ALL STAGES THEREOF WHERE SUCH
PARTY IS NOT REPRESENTED BY ITS OWN COUNSEL, AND (II) THE PARTIES AGREE (AT THE
EXPENSE OF THE INDEMNIFYING PARTY) TO RENDER TO EACH OTHER SUCH ASSISTANCE AS
THEY MAY REASONABLY REQUIRE OF EACH OTHER AND TO COOPERATE IN GOOD FAITH WITH
EACH OTHER IN ORDER TO ENSURE THE PROPER AND ADEQUATE DEFENSE OF ANY THIRD PARTY
CLAIM. IN FURTHERANCE THEREOF, THE PARTY NOT CONDUCTING THE DEFENSE OF THE
THIRD PARTY CLAIM SHALL MAKE AVAILABLE TO THE PARTY THAT IS CONDUCTING THE
DEFENSE ALL BOOKS, RECORDS AND OTHER DOCUMENTS AND MATERIALS THAT ARE UNDER THE
DIRECT OR INDIRECT CONTROL OF SUCH PARTY OR ANY OF ITS AFFILIATES AND THAT THE
PARTY CONDUCTING THE DEFENSE REASONABLY CONSIDERS NECESSARY OR DESIRABLE FOR THE
DEFENSE OF THE THIRD PARTY CLAIM; PROVIDED, HOWEVER, THAT THE PARTY NOT
CONDUCTING THE DEFENSE MAY WITHHOLD BOOKS, RECORDS OR OTHER DOCUMENTS AND
MATERIALS THAT ARE SUBJECT TO ATTORNEY-CLIENT OR OTHER SIMILAR PRIVILEGE.
(E) DETERMINATION OF ADVERSE CONSEQUENCES
----------------------------------------
. ALL INDEMNIFICATION PAYMENTS UNDER THIS 7 SHALL BE DEEMED ADJUSTMENTS
TO THE PURCHASE PRICE.
(F) LIMITATIONS ON INDEMNIFICATION.
--------------------------------
(I) EXCEPT AS SET FORTH BELOW, ▇▇▇▇▇▇▇ SHALL NOT HAVE ANY LIABILITY UNDER
7(B)(I) ABOVE FOR ADVERSE CONSEQUENCES TO THE EXTENT THAT THE AGGREGATE AMOUNT
OF ADVERSE CONSEQUENCES INDEMNIFIED BY ▇▇▇▇▇▇▇ HEREUNDER EXCEEDS $10,683,750
(THE "MAXIMUM INDEMNIFICATION AMOUNT"). EXCEPT AS SET FORTH BELOW, ▇▇▇▇▇▇▇ SHALL
------------------------------
NOT HAVE ANY LIABILITY UNDER 7(B)(I) ABOVE FOR ANY ADVERSE CONSEQUENCES
UNTIL THE AGGREGATE AMOUNT OTHERWISE DUE TO ALL PARENT INDEMNIFIED PARTIES
EXCEEDS AN ACCUMULATED TOTAL OF THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000)
(THE "INDEMNITY DEDUCTIBLE") AND THEN ONLY FOR THE AMOUNT BY WHICH THE AGGREGATE
--------------------
AMOUNT OF ALL SUCH ADVERSE CONSEQUENCES OTHERWISE DUE TO ALL PARENT INDEMNIFIED
PARTIES EXCEEDS THE INDEMNITY DEDUCTIBLE. NOTWITHSTANDING THE FOREGOING, THE
LIMITATIONS IMPOSED BY THE MAXIMUM INDEMNIFICATION AMOUNT AND THE INDEMNITY
DEDUCTIBLE SHALL NOT APPLY WITH RESPECT TO (I) ANY CLAIM FOR INDEMNIFICATION
UNDER 7(B)(II) ABOVE, (II) ANY ADVERSE CONSEQUENCES ARISING OUT OF FRAUD OR
INTENTIONAL VIOLATION OF ANY REPRESENTATION, WARRANTY OR COVENANT OR (III) ANY
ADVERSE CONSEQUENCES ARISING OUT OF A BREACH OF ANY REPRESENTATION, WARRANTY OR
COVENANT CONTAINED IN 4(A)(I), 4(A)(IV), 4(A)(VI), 5(B), 5(C), 5(F), 5(H),
5(M), 5(Z), 5(BB), 6(D), 6(E), 6(F) AND 8.
(II) EXCEPT AS SET FORTH BELOW, PARENT SHALL NOT HAVE ANY LIABILITY UNDER
7(C) ABOVE FOR ADVERSE CONSEQUENCES TO THE EXTENT THAT THE AGGREGATE AMOUNT OF
ADVERSE CONSEQUENCES INDEMNIFIED BY PARENT HEREUNDER EXCEEDS THE MAXIMUM
INDEMNIFICATION AMOUNT. EXCEPT AS SET FORTH BELOW, PARENT SHALL NOT HAVE ANY
LIABILITY UNDER 7(C) ABOVE FOR ANY ADVERSE CONSEQUENCES UNTIL THE AGGREGATE
AMOUNT OTHERWISE DUE TO ▇▇▇▇▇▇▇ EXCEEDS THE INDEMNITY DEDUCTIBLE AND THEN ONLY
FOR THE AMOUNT BY WHICH THE AGGREGATE AMOUNT OF ALL SUCH ADVERSE CONSEQUENCES
OTHERWISE DUE TO ▇▇▇▇▇▇▇ EXCEEDS THE INDEMNITY DEDUCTIBLE. NOTWITHSTANDING THE
FOREGOING, THE LIMITATIONS IMPOSED BY THE MAXIMUM INDEMNIFICATION AMOUNT AND THE
INDEMNITY DEDUCTIBLE SHALL NOT APPLY WITH RESPECT TO (I) ANY ADVERSE
CONSEQUENCES ARISING OUT OF FRAUD OR INTENTIONAL VIOLATION OF ANY
REPRESENTATION, WARRANTY OR COVENANT, (II) ANY ADVERSE CONSEQUENCES ARISING OUT
OF A BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN 4(B)(II),
4(B)(III), OR 4(B)(VII) OR (III) ANY ADVERSE CONSEQUENCES ARISING OUT OF THE
LEASE INDEMNIFICATION OBLIGATION DESCRIBED IN 7(C).
38
(G) OTHER INDEMNIFICATION PROVISIONS
----------------------------------
. THE FOREGOING INDEMNIFICATION PROVISIONS ARE IN ADDITION TO, AND NOT IN
DEROGATION OF, ANY STATUTORY, EQUITABLE, OR COMMON LAW REMEDY ANY PARTY MAY HAVE
FOR BREACH OF REPRESENTATION, WARRANTY, OR COVENANT; PROVIDED, HOWEVER, THAT THE
FOREGOING INDEMNIFICATION PROVISIONS SHALL BE THE SOLE REMEDY FOR MONETARY
DAMAGES FOR ANY SUCH BREACH OF REPRESENTATION, WARRANTY OR COVENANT. ▇▇▇▇▇▇▇
HEREBY AGREES THAT HE WILL NOT MAKE ANY CLAIM FOR INDEMNIFICATION AGAINST THE
TARGET BY REASON OF THE FACT THAT HE OR IT WAS A DIRECTOR, OFFICER, EMPLOYEE, OR
AGENT OF TARGET OR WAS SERVING AT THE REQUEST OF TARGET AS A PARTNER, TRUSTEE,
DIRECTOR, OFFICER, EMPLOYEE, OR AGENT OF ANOTHER ENTITY (WHETHER SUCH CLAIM IS
FOR JUDGMENTS, DAMAGES, PENALTIES, FINES, COSTS, AMOUNTS PAID IN SETTLEMENT,
LOSSES, EXPENSES, OR OTHERWISE AND WHETHER SUCH CLAIM IS PURSUANT TO ANY
STATUTE, CHARTER DOCUMENT, BYLAW, AGREEMENT, OR OTHERWISE) WITH RESPECT TO ANY
ACTION, SUIT, PROCEEDING, COMPLAINT, CLAIM, OR DEMAND BROUGHT BY THE PARENT
AGAINST ▇▇▇▇▇▇▇ (WHETHER SUCH ACTION, SUIT, PROCEEDING, COMPLAINT, CLAIM, OR
DEMAND IS PURSUANT TO THIS AGREEMENT, APPLICABLE LAW, OR OTHERWISE).
8. TAX MATTERS
------------
. THE FOLLOWING PROVISIONS SHALL GOVERN THE ALLOCATION OF RESPONSIBILITY
AS BETWEEN PARENT AND ▇▇▇▇▇▇▇ FOR CERTAIN TAX MATTERS FOLLOWING THE CLOSING
DATE:
(A) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE
--------------------------------------------------------
. PARENT SHALL PREPARE OR CAUSE TO BE PREPARED AND FILE OR CAUSE TO BE
FILED ALL TAX RETURNS FOR THE TARGET FOR ALL PERIODS ENDING ON OR PRIOR TO THE
CLOSING DATE WHICH ARE FILED AFTER THE CLOSING DATE. PARENT SHALL PERMIT
▇▇▇▇▇▇▇ TO REVIEW AND COMMENT ON EACH SUCH TAX RETURN DESCRIBED IN THE PRECEDING
SENTENCE PRIOR TO FILING. ▇▇▇▇▇▇▇ SHALL REIMBURSE PARENT FOR ANY TAXES OF THE
TARGET WITH RESPECT TO SUCH PERIODS WITHIN FIFTEEN (15) DAYS AFTER PAYMENT BY
PARENT OR THE TARGET OF SUCH TAXES TO THE EXTENT SUCH TAXES ARE NOT REFLECTED IN
THE RESERVE FOR TAX LIABILITY (RATHER THAN ANY RESERVE FOR DEFERRED TAXES
ESTABLISHED TO REFLECT TIMING DIFFERENCES BETWEEN BOOK AND TAX INCOME) SHOWN ON
THE FACE OF THE MOST RECENT BALANCE SHEET (RATHER THAN IN ANY NOTES THERETO).
39
(B) STRADDLE PERIODS
-----------------
. PARENT SHALL PREPARE AND TIMELY FILE OR SHALL CAUSE TO BE PREPARED AND
TIMELY FILED, WITH THE APPROPRIATE AUTHORITIES ALL TAX RETURNS OF THE TARGET FOR
ALL STRADDLE PERIODS, AND SHALL PAY ALL TAXES DUE WITH RESPECT TO SUCH TAX
RETURNS; PROVIDED, HOWEVER, THAT ▇▇▇▇▇▇▇ SHALL REIMBURSE PARENT FOR ANY TAXES OF
THE TARGET TO THE EXTENT ALLOCABLE TO ANY PRE-CLOSING PARTIAL PERIOD OF A
STRADDLE PERIOD WITHIN FIFTEEN (15) DAYS AFTER PAYMENT BY PARENT OR THE TARGET
OF SUCH TAXES TO THE EXTENT SUCH TAXES ARE NOT REFLECTED IN THE RESERVE FOR TAX
LIABILITY (RATHER THAN ANY RESERVE FOR DEFERRED TAXES ESTABLISHED TO REFLECT
TIMING DIFFERENCES BETWEEN BOOK AND TAX INCOME) SHOWN ON THE FACE OF THE MOST
RECENT BALANCE SHEET (RATHER THAN IN ANY NOTES THERETO). FOR PURPOSES OF
ALLOCATING TAXES BETWEEN A PRE-CLOSING PARTIAL PERIOD AND A POST-CLOSING PARTIAL
PERIOD, TO THE EXTENT PERMITTED BY LAW AND ADMINISTRATIVE PRACTICE, THE STRADDLE
PERIOD SHALL BE TREATED AS CLOSING ON (AND INCLUDING) THE CLOSING DATE. IN THE
CASE OF ANY TAXES THAT ARE PAYABLE FOR A STRADDLE PERIOD THAT IS NOT TREATED
UNDER THE PRECEDING SENTENCE AS CLOSING ON THE CLOSING DATE, THE PORTION OF SUCH
TAX RELATED TO THE PRE-CLOSING PARTIAL PERIOD: (I) IN THE CASE OF REAL, PERSONAL
AND INTANGIBLE PROPERTY TAXES ("PROPERTY TAXES") OF THE TARGET FOR THE
---------------
PRE-CLOSING PARTIAL PERIOD, SHALL BE EQUAL TO THE AMOUNT OF SUCH PROPERTY TAXES
FOR THE ENTIRE STRADDLE PERIOD MULTIPLIED BY A FRACTION, THE NUMERATOR OF WHICH
IS THE NUMBER OF DAYS DURING THE STRADDLE PERIOD THAT ARE IN THE PRE-CLOSING
PARTIAL PERIOD AND THE DENOMINATOR OF WHICH IS THE NUMBER OF DAYS IN THE
STRADDLE PERIOD, AND (II) IN THE CASE OF ANY TAXES OF THE TARGET OTHER THAN
PROPERTY TAXES, SHALL BE COMPUTED AS IF SUCH TAXABLE PERIOD ENDED AS OF THE
CLOSE OF THE BUSINESS ON THE CLOSING DATE.
(C) COOPERATION ON TAX MATTERS.
-----------------------------
(I) PARENT, THE TARGET AND ▇▇▇▇▇▇▇ SHALL COOPERATE FULLY, AS AND TO THE
EXTENT REASONABLY REQUESTED BY THE OTHER PARTY, IN CONNECTION WITH THE FILING OF
TAX RETURNS PURSUANT TO THIS AGREEMENT AND ANY AUDIT, LITIGATION OR OTHER
PROCEEDING WITH RESPECT TO TAXES. SUCH COOPERATION SHALL INCLUDE THE RETENTION
AND (UPON THE OTHER PARTY'S REQUEST) THE PROVISION OF RECORDS AND INFORMATION
WHICH ARE REASONABLY RELEVANT TO ANY SUCH AUDIT, LITIGATION OR OTHER PROCEEDING
AND MAKING EMPLOYEES AVAILABLE ON A MUTUALLY CONVENIENT BASIS TO PROVIDE
ADDITIONAL INFORMATION AND EXPLANATION OF ANY MATERIAL PROVIDED HEREUNDER. THE
TARGET AND ▇▇▇▇▇▇▇ AGREE (A) TO RETAIN ALL BOOKS AND RECORDS IN THEIR RESPECTIVE
POSSESSION WITH RESPECT TO TAX MATTERS PERTINENT TO THE TARGET RELATING TO ANY
TAXABLE PERIOD BEGINNING BEFORE THE CLOSING DATE UNTIL THE EXPIRATION OF THE
STATUTE OF LIMITATIONS (AND, TO THE EXTENT NOTIFIED BY PARENT OR ▇▇▇▇▇▇▇, ANY
EXTENSIONS THEREOF) OF THE RESPECTIVE TAX PERIODS, AND TO ABIDE BY ALL RECORD
RETENTION AGREEMENTS ENTERED INTO WITH ANY TAX AUTHORITY, AND (B) TO GIVE THE
OTHER PARTY REASONABLE WRITTEN NOTICE PRIOR TO TRANSFERRING, DESTROYING OR
DISCARDING ANY SUCH BOOKS AND RECORDS AND, IF THE OTHER PARTY SO REQUESTS, THE
TARGET OR ▇▇▇▇▇▇▇, AS THE CASE MAY BE, SHALL ALLOW THE OTHER PARTY TO TAKE
POSSESSION OF SUCH BOOKS AND RECORDS
40
(II) PARENT AND ▇▇▇▇▇▇▇ FURTHER AGREE, UPON REQUEST, TO USE THEIR REASONABLE
BEST EFFORTS TO OBTAIN ANY CERTIFICATE OR OTHER DOCUMENT FROM ANY GOVERNMENTAL
AUTHORITY 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 HEREBY).
(D) CERTAIN TAXES
--------------
. ALL TRANSFER, DOCUMENTARY, SALES, USE, STAMP, REGISTRATION AND OTHER
SUCH TAXES AND FEES (INCLUDING ANY PENALTIES AND INTEREST) INCURRED IN
CONNECTION WITH THIS AGREEMENT SHALL BE PAID BY ▇▇▇▇▇▇▇ WHEN DUE, AND ▇▇▇▇▇▇▇
WILL, AT ITS OWN EXPENSE, FILE ALL NECESSARY TAX RETURNS AND OTHER DOCUMENTATION
WITH RESPECT TO ALL SUCH TRANSFER, DOCUMENTARY, SALES, USE, STAMP, REGISTRATION
AND OTHER TAXES AND FEES, AND, IF REQUIRED BY APPLICABLE LAW, PARENT WILL, AND
WILL CAUSE ITS AFFILIATES TO, JOIN IN THE EXECUTION OF ANY SUCH TAX RETURNS AND
OTHER DOCUMENTATION.
(E) CHARACTERIZATION OF PAYMENTS
------------------------------
. ANY PAYMENTS MADE TO THE MERGER SUB OR PARENT PURSUANT TO THE
INDEMNIFICATION PROVISIONS OF THIS AGREEMENT SHALL CONSTITUTE AN ADJUSTMENT OF
THE CONSIDERATION PAID FOR THE STOCK OF THE TARGET FOR TAX PURPOSES AND SHALL BE
TREATED AS SUCH BY PARENT, MERGER SUB, THE TARGET AND ▇▇▇▇▇▇▇ ON THEIR TAX
RETURNS TO THE EXTENT PERMITTED BY LAW.
(F) S CORPORATION STATUS
----------------------
. NEITHER ▇▇▇▇▇▇▇ NOR THE TARGET WILL REVOKE THE TARGET'S ELECTION TO BE
TAXED AS AN S CORPORATION WITHIN THE MEANING OF 1361 AND 1362 OF THE CODE.
NEITHER ▇▇▇▇▇▇▇ NOR THE TARGET WILL TAKE, CAUSE TO BE TAKEN, OR ALLOW ANY ACTION
THAT WOULD RESULT IN THE TERMINATION OF THE TARGET'S STATUS AS A VALIDLY
ELECTING S CORPORATION WITHIN THE MEANING OF 1361 AND 1362 OF THE CODE AT ANY
TIME PRIOR TO THE CLOSING.
9. REORGANIZATION MATTERS.
-----------------------
(A) INTENDED TREATMENT
-------------------
. THE PARTIES INTEND THE MERGER TO QUALIFY AS A REORGANIZATION UNDER
368(A) OF THE CODE. HOWEVER, NONE OF PARENT, MERGER SUB, ▇▇▇▇▇▇▇ OR THE TARGET
MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER REGARDING THE TAX TREATMENT OF
THE MERGER OR WHETHER THE MERGER WILL QUALIFY AS A REORGANIZATION UNDER THE
CODE. EACH OF ▇▇▇▇▇▇▇, THE TARGET, MERGER SUB AND PARENT ACKNOWLEDGES THAT IT
IS RELYING ON ITS OWN ADVISORS IN CONNECTION WITH THE TAX TREATMENT OF THE
MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF
▇▇▇▇▇▇▇, THE TARGET, MERGER SUB AND PARENT AGREE TO USE THEIR RESPECTIVE
REASONABLE BEST EFFORTS TO CAUSE THE MERGER TO QUALIFY, AND WILL NOT TAKE ANY
ACTIONS WHICH WOULD REASONABLY BE EXPECTED TO PREVENT THE MERGER FROM
QUALIFYING, AS A REORGANIZATION UNDER 368(A) OF THE CODE.
(B) REPORTING
---------
. EACH OF ▇▇▇▇▇▇▇, THE TARGET, MERGER SUB AND PARENT SHALL REPORT THE
MERGER AS A REORGANIZATION WITHIN THE MEANING OF 368(A) OF THE CODE, UNLESS
OTHERWISE REQUIRED PURSUANT TO A "DETERMINATION" WITHIN THE MEANING OF 1313(A)
OF THE CODE.
10. MISCELLANEOUS.
-------------
(A) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS
-------------------------------------------
. NO PARTY SHALL ISSUE ANY PRESS RELEASE OR MAKE ANY PUBLIC ANNOUNCEMENT
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT WITHOUT THE PRIOR WRITTEN
APPROVAL OF THE OTHER PARTY; PROVIDED, HOWEVER, THAT ANY PARTY MAY MAKE ANY
-------- -------
PUBLIC DISCLOSURE IT BELIEVES IN GOOD FAITH IS REQUIRED BY APPLICABLE LAW OR ANY
LISTING OR TRADING AGREEMENT CONCERNING ITS PUBLICLY-TRADED SECURITIES (IN WHICH
CASE THE DISCLOSING PARTY WILL USE ITS REASONABLE BEST EFFORTS TO PROVIDE A COPY
OF SUCH DISCLOSURE TO THE OTHER PARTY PRIOR TO MAKING THE DISCLOSURE).
41
(B) NO THIRD-PARTY BENEFICIARIES
------------------------------
. THIS AGREEMENT SHALL NOT CONFER ANY RIGHTS OR REMEDIES UPON ANY PERSON
OTHER THAN THE PARTIES AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS.
(C) ENTIRE AGREEMENT
-----------------
. THIS AGREEMENT (INCLUDING THE DOCUMENTS REFERRED TO HEREIN) CONSTITUTES
THE ENTIRE AGREEMENT AMONG THE PARTIES AND SUPERSEDES ANY PRIOR UNDERSTANDINGS,
AGREEMENTS, OR REPRESENTATIONS BY OR AMONG THE PARTIES, WRITTEN OR ORAL, TO THE
EXTENT THEY RELATED IN ANY WAY TO THE SUBJECT MATTER HEREOF.
(D) SUCCESSION AND ASSIGNMENT
---------------------------
. THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE
PARTIES NAMED HEREIN AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS. NO
PARTY MAY ASSIGN EITHER THIS AGREEMENT OR ANY OF HIS OR ITS RIGHTS, INTERESTS,
OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN APPROVAL OF THE OTHER PARTY;
PROVIDED, HOWEVER, THAT THE PARENT MAY (I) ASSIGN ANY OR ALL OF ITS RIGHTS AND
-------- -------
INTERESTS HEREUNDER TO ONE OR MORE OF ITS AFFILIATES AND (II) DESIGNATE ONE OR
MORE OF ITS AFFILIATES TO PERFORM ITS OBLIGATIONS HEREUNDER (IN ANY OR ALL OF
WHICH CASES THE PARENT NONETHELESS SHALL REMAIN RESPONSIBLE FOR THE PERFORMANCE
OF ALL OF ITS OBLIGATIONS HEREUNDER).
(E) COUNTERPARTS
------------
. THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS, EACH OF
WHICH SHALL BE DEEMED AN ORIGINAL BUT ALL OF WHICH TOGETHER WILL CONSTITUTE ONE
AND THE SAME INSTRUMENT.
(F) HEADINGS
--------
. THE SECTION HEADINGS CONTAINED IN THIS AGREEMENT ARE INSERTED FOR
CONVENIENCE ONLY AND SHALL NOT AFFECT IN ANY WAY THE MEANING OR INTERPRETATION
OF THIS AGREEMENT.
(G) NOTICES
-------
. ALL NOTICES, REQUESTS, DEMANDS, CLAIMS, AND OTHER COMMUNICATIONS
HEREUNDER WILL BE IN WRITING. ANY NOTICE, REQUEST, DEMAND, CLAIM, OR OTHER
COMMUNICATION HEREUNDER SHALL BE DEEMED DULY GIVEN IF (AND THEN TWO BUSINESS
DAYS AFTER) IT IS SENT BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, AND ADDRESSED TO THE INTENDED RECIPIENT AS SET FORTH
BELOW:
IF TO ▇▇▇▇▇▇▇:
---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
TELECOPY: (▇▇▇) ▇▇▇-▇▇▇▇
COPY TO:
--------
FULBRIGHT & ▇▇▇▇▇▇▇▇ L.L.P.
865. ▇. ▇▇▇▇▇▇▇▇ STREET, 29TH FLOOR
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
42
ATTN: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ESQ.
TELECOPY: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE PARENT OR MERGER SUB:
------------------------------------
RESMED INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTN: LEGAL DEPARTMENT
TELECOPY: (▇▇▇) ▇▇▇-▇▇▇▇
COPY TO:
--------
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ESQ.
TELECOPY: (▇▇▇) ▇▇▇-▇▇▇▇
ANY PARTY MAY SEND ANY NOTICE, REQUEST, DEMAND, CLAIM, OR OTHER COMMUNICATION
HEREUNDER TO THE INTENDED RECIPIENT AT THE ADDRESS SET FORTH ABOVE USING ANY
OTHER MEANS (INCLUDING PERSONAL DELIVERY, EXPEDITED COURIER, MESSENGER SERVICE,
TELECOPY, TELEX, ORDINARY MAIL, OR ELECTRONIC MAIL), BUT NO SUCH NOTICE,
REQUEST, DEMAND, CLAIM, OR OTHER COMMUNICATION SHALL BE DEEMED TO HAVE BEEN DULY
GIVEN UNLESS AND UNTIL IT ACTUALLY IS RECEIVED BY THE INTENDED RECIPIENT. ANY
PARTY MAY CHANGE THE ADDRESS TO WHICH NOTICES, REQUESTS, DEMANDS, CLAIMS, AND
OTHER COMMUNICATIONS HEREUNDER ARE TO BE DELIVERED BY GIVING THE OTHER PARTIES
NOTICE IN THE MANNER HEREIN SET FORTH.
(H) GOVERNING LAW
--------------
. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
(I) AMENDMENTS AND WAIVERS
------------------------
. NO AMENDMENT OF ANY PROVISION OF THIS AGREEMENT SHALL BE VALID UNLESS
THE SAME SHALL BE IN WRITING AND SIGNED BY THE PARENT AND ▇▇▇▇▇▇▇. NO WAIVER BY
ANY PARTY OF ANY DEFAULT, MISREPRESENTATION, OR BREACH OF WARRANTY OR COVENANT
HEREUNDER, WHETHER INTENTIONAL OR NOT, SHALL BE DEEMED TO EXTEND TO ANY PRIOR OR
SUBSEQUENT DEFAULT, MISREPRESENTATION, OR BREACH OF WARRANTY OR COVENANT
HEREUNDER OR AFFECT IN ANY WAY ANY RIGHTS ARISING BY VIRTUE OF ANY PRIOR OR
SUBSEQUENT SUCH OCCURRENCE. NO FAILURE OR DELAY ON THE PART OF ANY PARTY IN
EXERCISING ANY RIGHT, POWER OR PRIVILEGE HEREUNDER SHALL OPERATE AS A WAIVER
THEREOF, NOR SHALL ANY WAIVER ON THE PART OF ANY PARTY OF ANY RIGHT, POWER OR
PRIVILEGE HEREUNDER OPERATE AS A WAIVER OF ANY OTHER RIGHT, POWER OR PRIVILEGE
HEREUNDER, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, POWER OR
PRIVILEGE HEREUNDER PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR THE
EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE HEREUNDER.
(J) SEVERABILITY
------------
. ANY TERM OR PROVISION OF THIS AGREEMENT THAT IS INVALID OR UNENFORCEABLE
IN ANY SITUATION IN ANY JURISDICTION SHALL NOT AFFECT THE VALIDITY OR
ENFORCEABILITY OF THE REMAINING TERMS AND PROVISIONS HEREOF OR THE VALIDITY OR
ENFORCEABILITY OF THE OFFENDING TERM OR PROVISION IN ANY OTHER SITUATION OR IN
ANY OTHER JURISDICTION.
43
(K) EXPENSES
--------
. EACH OF THE PARTIES WILL BEAR HIS OR ITS OWN COSTS AND EXPENSES
(INCLUDING LEGAL FEES AND EXPENSES) INCURRED IN CONNECTION WITH THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY. ▇▇▇▇▇▇▇ REPRESENTS AND AGREES THAT THE
TARGET HAS NOT BORNE AND SHALL NOT BEAR ANY OF ▇▇▇▇▇▇▇'▇ COSTS AND EXPENSES
(INCLUDING ANY OF HIS LEGAL FEES AND EXPENSES) IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND TARGET HAS NOT BORNE AND
SHALL NOT BEAR MORE THAN $50,000 IN COSTS AND EXPENSES (INCLUDING ANY OF ITS
LEGAL FEES AND EXPENSES) IN AGGREGATE IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND THAT ANY COSTS AND EXPENSES BEYOND
$50,000 IN AGGREGATE INCURRED BY TARGET IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BORNE BY ▇▇▇▇▇▇▇.
(L) CONSTRUCTION
------------
. THE PARTIES HAVE PARTICIPATED JOINTLY IN THE NEGOTIATION AND DRAFTING OF
THIS AGREEMENT. IN THE EVENT AN AMBIGUITY OR QUESTION OF INTENT OR
INTERPRETATION ARISES, THIS AGREEMENT SHALL BE CONSTRUED AS IF DRAFTED JOINTLY
BY THE PARTIES AND NO PRESUMPTION OR BURDEN OF PROOF SHALL ARISE FAVORING OR
DISFAVORING ANY PARTY BY VIRTUE OF THE AUTHORSHIP OF ANY OF THE PROVISIONS OF
THIS AGREEMENT. ANY REFERENCE TO ANY FEDERAL, STATE, LOCAL, OR FOREIGN STATUTE
OR LAW SHALL BE DEEMED ALSO TO REFER TO ALL RULES AND REGULATIONS PROMULGATED
THEREUNDER, UNLESS THE CONTEXT REQUIRES OTHERWISE. THE WORD "INCLUDING" SHALL
MEAN INCLUDING WITHOUT LIMITATION. THE PARTIES INTEND THAT EACH REPRESENTATION,
WARRANTY, AND COVENANT CONTAINED HEREIN SHALL HAVE INDEPENDENT SIGNIFICANCE. IF
ANY PARTY HAS BREACHED ANY REPRESENTATION, WARRANTY, OR COVENANT CONTAINED
HEREIN IN ANY RESPECT, THE FACT THAT THERE EXISTS ANOTHER REPRESENTATION,
WARRANTY, OR COVENANT RELATING TO THE SAME SUBJECT MATTER (REGARDLESS OF THE
RELATIVE LEVELS OF SPECIFICITY) WHICH THE PARTY HAS NOT BREACHED SHALL NOT
DETRACT FROM OR MITIGATE THE FACT THAT THE PARTY IS IN BREACH OF THE FIRST
REPRESENTATION, WARRANTY, OR COVENANT.
(M) INCORPORATION OF EXHIBITS AND SCHEDULES
-------------------------------------------
. THE EXHIBITS, ANNEXES, AND SCHEDULES IDENTIFIED IN THIS AGREEMENT ARE
INCORPORATED HEREIN BY REFERENCE AND MADE A PART HEREOF.
(N) SPECIFIC PERFORMANCE
---------------------
. EACH OF THE PARTIES ACKNOWLEDGES AND AGREES THAT THE OTHER PARTIES WOULD
BE DAMAGED IRREPARABLY IN THE EVENT ANY OF THE PROVISIONS OF THIS AGREEMENT ARE
NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR OTHERWISE ARE BREACHED.
ACCORDINGLY, EACH OF THE PARTIES AGREES THAT THE OTHER PARTIES SHALL BE ENTITLED
TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THE PROVISIONS OF THIS
AGREEMENT AND TO ENFORCE SPECIFICALLY THIS AGREEMENT AND THE TERMS AND
PROVISIONS HEREOF IN ANY ACTION INSTITUTED IN ANY COURT OF THE UNITED STATES OR
ANY STATE THEREOF HAVING JURISDICTION OVER THE PARTIES AND THE MATTER (SUBJECT
TO THE PROVISIONS SET FORTH IN 10(P) BELOW), IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY MAY BE ENTITLED, AT LAW OR IN EQUITY.
(O) SUBMISSION TO JURISDICTION
----------------------------
. SUBJECT TO COMPLIANCE WITH 10(P) BELOW, EACH OF THE PARTIES SUBMITS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN ORANGE COUNTY,
CALIFORNIA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH PARTY ALSO AGREES NOT TO BRING
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
OTHER COURT. EACH OF THE PARTIES WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY,
OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT
THERETO. ANY PARTY MAY MAKE SERVICE ON ANY OTHER PARTY BY SENDING OR DELIVERING
A COPY OF THE PROCESS TO THE PARTY TO BE SERVED AT THE ADDRESS AND IN THE MANNER
PROVIDED FOR THE GIVING OF NOTICES IN 10(G) ABOVE. NOTHING IN THIS 10(O),
HOWEVER, SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AT EQUITY. EACH PARTY AGREES THAT A FINAL JUDGMENT IN
ANY ACTION OR PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE ENFORCED BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW OR AT EQUITY.
44
(P) ALTERNATIVE DISPUTE RESOLUTION.
--------------------------------
(I) THE PARTIES WILL ATTEMPT IN GOOD FAITH TO RESOLVE THROUGH NEGOTIATION
ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT.
ANY PARTY MAY INITIATE NEGOTIATIONS BY PROVIDING WRITTEN NOTICE TO THE OTHER
PARTIES, SETTING FORTH THE SUBJECT OF THE DISPUTE AND THE RELIEF REQUESTED. THE
RECIPIENT OF SUCH NOTICE WILL RESPOND IN WRITING WITHIN FIVE DAYS WITH A
STATEMENT OF ITS POSITION ON AND RECOMMENDED SOLUTION TO THE DISPUTE. IF THE
DISPUTE IS NOT RESOLVED BY THIS EXCHANGE OF CORRESPONDENCE, THEN REPRESENTATIVES
OF EACH PARTY WITH FULL SETTLEMENT AUTHORITY WILL MEET AT A MUTUALLY AGREEABLE
TIME AND PLACE WITHIN TEN (10) DAYS OF THE DATE OF THE INITIAL NOTICE IN ORDER
TO EXCHANGE RELEVANT INFORMATION AND PERSPECTIVES, AND TO ATTEMPT TO RESOLVE THE
DISPUTE. IF THE DISPUTE IS NOT RESOLVED BY THESE NEGOTIATIONS, THE MATTER WILL
BE SUBMITTED TO JAMS, OR ITS SUCCESSOR, FOR MEDIATION IN ACCORDANCE WITH
10(P)(II) BELOW.
(II) THE PARTIES AGREE THAT ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE SUBMITTED TO JAMS, OR ITS
SUCCESSOR, FOR MEDIATION, AND IF THE MATTER IS NOT RESOLVED THROUGH MEDIATION,
THEN IT SHALL BE SUBMITTED TO JAMS, OR ITS SUCCESSOR, FOR FINAL AND BINDING
ARBITRATION IN ORANGE COUNTY, CALIFORNIA. ANY PARTY MAY COMMENCE MEDIATION BY
PROVIDING TO JAMS AND THE OTHER PARTIES A WRITTEN REQUEST FOR MEDIATION, SETTING
FORTH THE SUBJECT OF THE DISPUTE AND THE RELIEF REQUESTED. THE PARTIES WILL
COOPERATE WITH JAMS AND WITH ONE ANOTHER IN SELECTING A MEDIATOR FROM JAMS'
PANEL OF NEUTRALS, AND IN SCHEDULING THE MEDIATION PROCEEDINGS. THE PARTIES
COVENANT THAT THEY WILL PARTICIPATE IN THE MEDIATION IN GOOD FAITH, AND THAT
▇▇▇▇▇▇▇ AND PARENT WILL SHARE EQUALLY IN ITS COSTS. ALL OFFERS, PROMISES,
CONDUCT AND STATEMENTS, WHETHER ORAL OR WRITTEN, MADE IN THE COURSE OF THE
MEDIATION BY ANY OF THE PARTIES, THEIR AGENTS, EMPLOYEES, EXPERTS AND ATTORNEYS,
AND BY THE MEDIATOR OR ANY JAMS EMPLOYEES, ARE CONFIDENTIAL, PRIVILEGED AND
INADMISSIBLE FOR ANY PURPOSE, INCLUDING IMPEACHMENT, IN ANY ARBITRATION OR OTHER
PROCEEDING INVOLVING THE PARTIES, PROVIDED THAT EVIDENCE THAT IS OTHERWISE
ADMISSIBLE OR DISCOVERABLE SHALL NOT BE RENDERED INADMISSIBLE OR
NON-DISCOVERABLE AS A RESULT OF ITS USE IN THE MEDIATION. ANY PARTY MAY
INITIATE ARBITRATION WITH RESPECT TO THE MATTERS SUBMITTED TO MEDIATION BY
FILING A WRITTEN DEMAND FOR ARBITRATION AT ANY TIME FOLLOWING THE INITIAL
MEDIATION SESSION OR 45 DAYS AFTER THE DATE OF FILING THE WRITTEN REQUEST FOR
MEDIATION, WHICHEVER OCCURS FIRST. THE MEDIATION MAY CONTINUE AFTER THE
COMMENCEMENT OF ARBITRATION IF THE PARTIES SO DESIRE. UNLESS OTHERWISE AGREED
BY THE PARTIES, THE MEDIATOR SHALL BE DISQUALIFIED FROM SERVING AS ARBITRATOR IN
THE CASE. THE PROVISIONS OF THIS CLAUSE MAY BE ENFORCED BY ANY COURT OF
COMPETENT JURISDICTION, AND THE PARTY SEEKING ENFORCEMENT SHALL BE ENTITLED TO
AN AWARD OF ALL COSTS, FEES AND EXPENSES, INCLUDING ATTORNEYS FEES, TO BE PAID
BY THE PARTY AGAINST WHOM ENFORCEMENT IS ORDERED.
45
(III) THE PARTIES AGREE THAT ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES
ARISING OUT OF OR RELATING TO THIS AGREEMENT THAT ARE NOT RESOLVED BY THEIR
MUTUAL AGREEMENT THROUGH MEDIATION PURSUANT TO 10(P)(II) ABOVE SHALL BE
SUBMITTED TO FINAL AND BINDING ARBITRATION BEFORE JAMS, OR ITS SUCCESSOR, IN
ORANGE COUNTY, CALIFORNIA, PURSUANT TO THE UNITED STATES ARBITRATION ACT, 9
U.S.C. SEC. 1 ET SEQ. ANY PARTY MAY COMMENCE THE ARBITRATION PROCESS CALLED FOR
IN THIS AGREEMENT BY FILING A WRITTEN DEMAND FOR ARBITRATION WITH JAMS, WITH A
COPY TO THE OTHER PARTY. THE ARBITRATION WILL BE CONDUCTED IN ACCORDANCE WITH
THE PROVISIONS OF JAMS' COMPREHENSIVE ARBITRATION RULES AND PROCEDURES IN EFFECT
AT THE TIME OF FILING OF THE DEMAND FOR ARBITRATION. THE PARTIES WILL COOPERATE
WITH JAMS AND WITH ONE ANOTHER IN SELECTING AN ARBITRATOR FROM JAMS' PANEL OF
NEUTRALS, AND IN SCHEDULING THE ARBITRATION PROCEEDINGS. THE PARTIES COVENANT
THAT THEY WILL PARTICIPATE IN THE ARBITRATION IN GOOD FAITH, AND THAT ▇▇▇▇▇▇▇
AND PARENT WILL SHARE EQUALLY IN ITS COSTS. THE PROVISIONS OF THIS CLAUSE MAY
BE ENFORCED BY ANY COURT OF COMPETENT JURISDICTION, AND THE PARTY SEEKING
ENFORCEMENT SHALL BE ENTITLED TO AN AWARD OF ALL COSTS, FEES AND EXPENSES,
INCLUDING ATTORNEYS FEES, TO BE PAID BY THE PARTY AGAINST WHOM ENFORCEMENT IS
ORDERED.
*****
46
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AND
PLAN OF MERGER ON THE DATE FIRST ABOVE WRITTEN.
RESMED INC.,
A DELAWARE CORPORATION
BY: /S/ ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇
----------------------
NAME: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TITLE: CEO
SERVO MAGNETICS ACQUISITION, INC.,
A DELAWARE CORPORATION
BY: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------
NAME: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
TITLE: CEO
SERVO MAGNETICS INCORPORATED,
A CALIFORNIA CORPORATION
BY: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------
NAME: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
TITLE: CEO
▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
AN INDIVIDUAL
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------
