\n E&Y……………………………………… 2.4.2
\n E&Y Audit………………………………… 2.4.2
\n Adjusted Balance Sheet…………………….. 2.4.2
\n Closing………………………………….. 3.1
\n Closing Date……………………………… 3.1
\n Financial Statements………………………. 4.6
\n Leases…………………………………… 4.10.3
\n Action…………………………………… 4.15
\n Proprietary Rights………………………… 4.20.1
\n Benefit Arrangement……………………….. 4.22.1
\n Employee Plans……………………………. 4.22.1
\n ERISA Affiliate…………………………… 4.22.1
\n Multiemployer Plan………………………… 4.22.1
\n PBGC…………………………………….. 4.22.1
\n Pension Plan……………………………… 4.22.1
\n Welfare Plan……………………………… 4.22.1
\n Title Policy……………………………… 6.3.2
\n Employee Cash Bonus……………………….. 6.4
\n SEC……………………………………… 9.12
\n Damages………………………………….. 11.2.1
\n Claim……………………………………. 11.2.4
\n Claim Notice……………………………… 11.2.4
\n<\/c><\/s><\/table>\n ARTICLE II
\n SALE AND TRANSFER OF SHARES<\/p>\n
2.1 Transfer of Shares. Upon the terms and subject to the conditions
\ncontained herein, at the Closing, Sellers will sell, convey, transfer, assign
\nand deliver to Buyer, and Buyer will acquire from Sellers, the Shares, free and
\nclear of all Encumbrances, for the consideration specified in Section 2.2.<\/p>\n
2.2 Purchase Price.<\/p>\n
2.2.1 Purchase Price. At the Closing, upon the terms and subject to
\nthe conditions set forth herein, Buyer shall pay to Sellers in consideration for
\nand against delivery of the Shares, the sum of Sixteen Million
\nSeven-Hundred-Fifty Thousand Dollars ($16,750,000) (the “Purchase Price”).<\/p>\n
2.2.2 Form of Consideration. The Purchase Price shall be paid to
\nSellers in immediately available funds at the Closing by wire transfer to
\naccounts designated in writing to the Buyer by each Seller, except for $1.0
\nmillion, which shall be paid to Sellers in the form of the Holdback Note as
\ndescribed in Section 2.3.1.<\/p>\n
9
\n 12
\n 2.2.3 Allocation. The Purchase Price and the adjustments thereto
\nshall (subject to Section 2.3) be allocated among the Sellers in accordance with
\nSchedule 2.2.3.<\/p>\n
2.3 Holdback Note \/ Escrow Agreement.<\/p>\n
2.3.1 Holdback Note. Of the Purchase Price, $1.0 million shall be in
\nthe form of a promissory note payable to the Sellers in the form of Exhibit A
\nhereto (the “Holdback Note”). The Holdback Note shall bear interest at 1% below
\nthe floating prime rate of Wells Fargo Bank, N.A. and shall be secured by an
\nirrevocable letter of credit in form reasonably acceptable to the parties and to
\nbe attached as Exhibit G hereto (the “Letter of Credit”), which Letter of Credit
\nshall be renewed annually in the amount of the remaining obligation under the
\nHoldback Note. Disputes related to the delivery of notices of claims and
\ninstructions pursuant to the Letter of Credit shall be resolved in accordance
\nwith Section 13.12 hereof. The Holdback Note shall be due and payable to the
\nSellers as follows: (i) on the first anniversary of the Closing, Buyer shall
\nmake an initial principal payment to the Sellers in an amount equal to Five
\nHundred Thousand Dollars ($500,000), plus interest, and (ii) on the second
\nanniversary of the Closing, Buyer shall make a final principal payment to the
\nSellers in an amount equal to Five Hundred Thousand Dollars ($500,000), plus
\ninterest, in each case subject to any unresolved pending claims made by Buyer in
\naccordance with Article XI hereof, any claims under Article XI ultimately
\nresolved in favor of Buyer, or any Purchase Price adjustments under Article II
\nultimately resolved in favor of Buyer. All accrued and unpaid interest on the
\nHoldback Note on amounts not subject to claims, pending or resolved, shall be
\npaid annually on each anniversary of the Closing. Any amounts held back by Buyer
\nbut ultimately paid to the Sellers shall also include interest at the rate
\nspecified in the Holdback Note through the date of payment. No interest shall be
\ndue on the principal of the Holdback Note to the extent the principal is
\nultimately reduced pursuant to a claim or purchase price adjustment.<\/p>\n
2.4 Purchase Price Adjustments.<\/p>\n
2.4.1 Closing Date Balance Sheet Initial Adjustment. Sellers shall
\ndeliver to Buyer at least five (5) days prior to Closing an estimated balance
\nsheet as of the Closing Date (the Date Balance Sheet”). The Closing Date Balance
\nSheet shall be prepared in good faith and in accordance with generally accepted
\naccounting principles, except for potential adjustments described in this
\nSection 2.4.1 and Section 2.4.2 (“GAAP”). As of the Closing Date, the Company
\nshall have a net worth of not less than $2.2 million (the “Minimum Net Worth”),
\nas shown on the Closing Date Balance Sheet. The Closing Date Balance Sheet will
\ninclude adjustments for accruals of estimated environmental remediation
\nliability of $400,000 and bonuses to certain employees of $250,000. A tax
\nbenefit from these accruals of approximately $260,000 will also be reflected in
\nthe adjustments. The Closing Date Balance Sheet will not reflect any adjustments
\nfor “push-down” accounting described in Section 2.4.2 that may have been
\nrequired under GAAP. In the event the Company’s net worth as shown on the
\nClosing Date Balance Sheet is less than the Minimum Net Worth, there shall be a
\ndollar-for-dollar reduction to the Purchase Price.<\/p>\n
10
\n 13
\n 2.4.2 E&Y Audit. Within 90 days after the Closing, Buyer has the
\nright to cause Ernst & Young LLP (“E&Y”) to review or audit the Company’s
\nClosing Date Balance Sheet (the “E&Y Audit”) to verify the Minimum Net Worth.
\nThe Company shall assist E&Y in its review or audit procedures, which may
\ninclude pre-Closing assistance, such as inventory observation. E&Y shall make
\nonly such adjustments, if any, to the Closing Date Balance Sheet as are
\nnecessary to correct mathematical errors or in the judgment of E&Y to conform
\nthe Closing Date Balance Sheet to GAAP (the”Adjusted Balance Sheet”). Buyer
\nacknowledges that the Sellers did not use “push-down” accounting as may have
\nbeen required under GAAP when Sellers acquired the Company on June 20, 1996. The
\nClosing Date Balance Sheet will not be adjusted to reflect the impact of
\n“push-down” accounting, if any. The Closing Date Balance Sheet will also not be
\nadjusted to reflect any additions that E&Y may deem necessary to the estimated
\nenvironmental remediation liability of $400,000. Buyer will promptly deliver to
\nSellers the Adjusted Balance Sheet, and the Sellers will have the opportunity to
\nengage a reputable and independent accounting firm that they may select to
\nexamine the work papers, schedules and other documents prepared by E&Y. The
\nAdjusted Balance Sheet will become final and binding on the parties unless
\nwithin 20 business days following delivery thereof to Sellers, the Sellers
\nnotify Buyer in writing that the Sellers object thereto, which objection shall
\nbe solely on the basis of mathematical errors in the calculation thereof or the
\nfailure to present the Company’s financial position on a GAAP basis. If the
\nSellers object to the Adjusted Balance Sheet and after good faith consultation
\nwith respect to the objection the parties are unable to reach an agreement
\nwithin 15 days, any unresolved disputed items shall be promptly referred to an
\nindependent accounting firm reasonably acceptable to the parties to resolve the
\ndisputed issues. The resolution of the independent accounting firm will be final
\nand binding on the parties. The fees and expenses of such independent accounting
\nfirm will be borne equally by Buyer and the Sellers. Any payment due shall be
\npaid by the appropriate party within two (2) business days of final
\ndetermination hereunder.<\/p>\n
2.4.3 Final Adjustment. In the event the actual net worth of the
\nCompany, as set forth on the Adjusted Balance Sheet, is less than the Minimum
\nNet Worth, there shall be a dollar for dollar reduction (less any difference
\nalready deducted under Section 2.4.1) in the Holdback Note. If the difference
\nbetween the Minimum Net Worth and the actual net worth of the Company as shown
\non the Adjusted Balance Sheet is less than the difference between the Minimum
\nNet Worth and the net worth reflected on the Closing Date Balance Sheet, Buyer
\nwill pay to Sellers, on a dollar for dollar basis, the difference between the
\nestimated shortfall in net worth as determined by the Closing Date Balance Sheet
\nand the actual shortfall in net worth as determined by the Adjusted Balance
\nSheet. Any payment due shall be paid by the appropriate party within two
\nbusiness days of final determination hereunder. Any required adjustment to the
\nHoldback Note shall be deemed to be made as of the date of resolution of any
\nadjustment and, at Buyer’s request, the Sellers shall return the Holdback Note
\nin exchange for a new note reflecting the adjustment.<\/p>\n
2.5 Transfer Taxes and Fees. The parties contemplate that no documentary
\nor transfer taxes or sales, use, transaction privilege or other similar taxes
\nwill be imposed by reason of the transfer of Shares provided hereunder. If any
\nsuch tax is imposed, however, Sellers shall bear the responsibility for such
\ntax. The Company shall pay the fees and costs of recording or filing all UCC<\/p>\n
11
\n 14
\ntermination statements and other releases of Encumbrances, and any fees or costs
\nin obtaining any necessary consents related thereto, which shall reduce cash
\n(but not the Purchase Price) at Closing for purposes of this Article II.<\/p>\n
ARTICLE III
\n CLOSING<\/p>\n
3.1 Closing. The Closing of the transactions contemplated herein (the
\n“Closing”) shall be held at the offices of Marks & Golia, 3900 Harney Street,
\nFirst Floor, San Diego, California 92110, on September 30, 1998, or at a time
\nand place as the parties shall mutually agree (the “Closing Date”).<\/p>\n
3.2 Conveyances at Closing.<\/p>\n
3.2.1 Sellers’ Delivery Obligations. To effect the sale and transfer
\nof the Shares, Sellers will, at the Closing, execute (or cause to be executed by
\nany other party thereto other than Buyer) and deliver to Buyer:<\/p>\n
3.2.1.1 certificates evidencing the Shares, free and clear of
\nany Encumbrances, duly endorsed in blank for transfer or accompanied by stock
\npowers duly executed in blank;<\/p>\n
3.2.1.2 all Ancillary Agreements, including those required to
\nbe executed by any of the Sellers;<\/p>\n
3.2.1.3 all certificates, opinions of counsel and other
\ndocuments described in Article IX; and<\/p>\n
3.2.1.4 all Permits and any other third party consents
\nrequired for the valid transfer of the Shares as contemplated by this Agreement,
\nor for the continued operation of the business of the Company following such
\ntransfer.<\/p>\n
3.2.2 Buyer’s Delivery Obligations. To effect the sale and transfer
\nof the Shares, Buyer will, at the Closing, execute and deliver to Sellers:<\/p>\n
3.2.2.1 the Purchase Price, including the Holdback Note, and
\nthe Letter of Credit;<\/p>\n
3.2.2.2 all Ancillary Agreements required to be executed by
\nBuyer; and<\/p>\n
3.2.2.3 all certificates, opinions of counsel and other
\ndocuments described in Article VIII.<\/p>\n
12
\n 15
\n 3.2.3 Form of Instruments. To the extent that a form of any document
\nto be delivered hereunder is not attached as an Exhibit hereto, such documents
\nshall be in form and substance, and shall be executed and delivered in a manner,
\nreasonably satisfactory to the recipient.<\/p>\n
ARTICLE IV
\n REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY<\/p>\n
Except as set forth in a letter from Buyer to Sellers and the Company
\ndated the date hereof, Sellers and the Company hereby, jointly and severally,
\nrepresent and warrant to Buyer as follows, which representations and warranties
\nare, as of the date hereof, true and correct:<\/p>\n
4.1 Organization of the Company. The Company is a corporation duly
\norganized, validly existing and in good standing under the laws of the State of
\nCalifornia. Copies of the Articles of Incorporation and Bylaws of the Company,
\nand all amendments thereto, heretofore delivered to Buyer are accurate and
\ncomplete as of the date hereof and are currently in effect without further
\namendment thereto, except as set forth therein. The Company is not duly
\nqualified or licensed to do business as a foreign corporation in good standing
\nin any other State.<\/p>\n
4.2 Subsidiaries. The Company has no Subsidiaries.<\/p>\n
4.3 Authorization. Each of the Sellers and the Company has full power and
\nauthority (corporate or other) to enter into this Agreement and the Ancillary
\nAgreements to which they are a party, as the case may be, and to carry out the
\ntransactions contemplated hereby and thereby, and the board of directors,
\ntrustees, or any governing body or person of the Company and each of the Sellers
\nhas taken all action required by law, its charter or other governing documents,
\nas the case may be, or otherwise, to be taken by it to authorize the execution,
\ndelivery and performance of this Agreement and the Ancillary Agreements, as the
\ncase may be, and the consummation of the transactions contemplated hereby and
\nthereby. This Agreement is, and the Ancillary Agreements, when executed and
\ndelivered by all parties thereto will be, the legal, valid and binding
\nobligations of each of the Sellers and the Company, enforceable against each of
\nthem in accordance with their respective terms. A copy of the resolutions of the
\nCompany’s board of directors authorizing this Agreement and the related
\ntransactions are attached hereto as Schedule 4.3.<\/p>\n
4.4 No Violation; Consents. None of the execution, delivery and
\nperformance of this Agreement and the Ancillary Agreements nor the consummation
\nof the transactions contemplated hereby and thereby will (i) violate any
\nprovision of the Articles of Incorporation or Bylaws of the Company or any
\ngoverning documents of any Seller, (ii) violate, result in a breach of, conflict
\nwith, or constitute a default (or an event which, with the giving of notice or
\nlapse of time or both, would constitute a default) or require any consent under,
\nor give to others any right of termination, amendment, acceleration, suspension,
\nrevocation or cancellation with respect to, any Contract to which any Seller or
\nthe Company is a party or by which any of the Shares or any of the assets or
\nproperties of the Company or any Seller are bound or affected, (iii) result in
\nthe creation or<\/p>\n
13
\n 16
\nimposition of any Encumbrance upon any of the Shares or any property or assets
\nof the Company or any Seller under any agreement, commitment or other Contract
\nto which the Company or any Seller is a party or by which the Company or any
\nSeller is bound or affected, or to which the property of the Company or any
\nSeller is subject, or (iv) violate, conflict with or result in the breach of any
\nstatute or law or any judgment, decree, order, regulation or rule of any court
\nor governmental authority to which any Seller, the Company, or any of their
\nproperties or assets are subject. Except as set forth on Schedule 4.4, no
\naction, consent, approval or authorization by or filing with any person or
\nentity, including, without limitation, any governmental authority, is required
\nin connection with the execution, delivery and performance by each of the
\nSellers and the Company of this Agreement and the Ancillary Agreements, as the
\ncase may be, or the consummation by each of the Sellers and the Company of the
\ntransactions contemplated by each of them herein and therein.<\/p>\n
4.5 Capitalization.<\/p>\n
4.5.1 The authorized equity securities of the Company consist solely
\nof 750 shares of common stock, par value $100 per share, of which 200 shares are
\nissued and 100 shares are issued and outstanding and constitute the Shares.
\nSellers are and will be on the Closing Date the only record and beneficial
\nowners and holders of the Shares, as set forth on Schedule 4.5 (which Schedule
\nalso sets forth the address of each such Seller and the certificate numbers of
\nthe certificates representing the Shares), free and clear of all Encumbrances
\n(other than a legend indicating only that the Shares have not been registered
\nunder the Securities Act and any applicable state securities laws).<\/p>\n
4.5.2 There are no shares of capital stock of the Company issued and
\noutstanding (other than the Shares) and there are 100 shares of treasury stock.
\nAll Shares are validly issued, fully paid and nonassessable. None of the issued
\nand outstanding Shares was issued in violation of any preemptive rights. There
\nare no outstanding (i) securities convertible into or exchangeable or
\nexercisable for any of the Company’s capital stock; (ii) options, warrants,
\ncalls or other rights, including, without limitation, rights to demand
\nregistration or to sell securities in connection with any registration by the
\nCompany under the Securities Act, with respect to the capital stock of the
\nCompany, or to purchase or subscribe to capital stock of the Company or
\nsecurities convertible into or exchangeable or exercisable for capital stock of
\nthe Company; (iii) contracts, commitments, agreements, understandings or
\narrangements of any kind relating to the issuance, sale, transfer, or assignment
\nof any capital stock, any convertible or exchangeable securities or any options,
\nwarrants or rights of the Company; or (iv) Shares or other securities of the
\nCompany pledged as collateral to secure any agreement or obligation. Except as
\nset forth on Schedule 4.5, there are no voting trust agreements or other
\ncontracts, agreements, arrangements, commitments, plans, proxies or
\nunderstandings restricting or otherwise relating to conveyance, voting or
\ndividend rights with respect to the Shares. Upon consummation of the
\ntransactions contemplated by this Agreement Buyer will own all of the issued and
\noutstanding equity securities of the Company of every sort whatsoever, free and
\nclear of all Encumbrances.<\/p>\n
4.6 Financial Statements. Attached hereto as Schedule 4.6 are the balance
\nsheet, statement of income, and statement of cash flows for the six months ended
\nJune 30, 1998, and for<\/p>\n
14
\n 17
\neach of the years ended December 31, 1997 and 1996 (collectively the “Financial
\nStatements”). Except for the potential adjustments described in Sections 2.4.1
\nand 2.4.2, the Financial Statements (a) are in accordance with the underlying
\nbooks and records of the Company and (b) fairly present the assets, liabilities
\n(including all reserves) and financial position of the Company as of the
\nrespective dates thereof and the results of operations and changes in cash flows
\nfor the periods then ended. The Financial Statements for the years ended
\nDecember 31, 1997 and 1996 have been reviewed by Max L. Perlatti & Associates,
\nindependent public accountants. At the respective dates of the Financial
\nStatements, there were no liabilities of the Company which, in accordance with
\nGAAP, should have been shown or reflected in the Financial Statements or the
\nnotes thereto, which are not shown or reflected in the Financial Statements or
\nthe notes thereto.<\/p>\n
4.7 No Change in the Assets. Except as set forth in Schedule 4.7, since
\nJune 30, 1998:<\/p>\n
4.7.1 There has been no Material Adverse Change in the Company;<\/p>\n
4.7.2 Except in the ordinary course, there has not been any sale or
\nother disposition of any assets of the Company, or any Encumbrance placed on its
\nassets, or any purchase of assets, including inventory or equipment, of the
\nCompany;<\/p>\n
4.7.3 The Company has operated its business in the ordinary course
\nconsistent with the Company’s past practice so as to preserve its business
\nintact, to keep available to it the services of its employees, and to otherwise
\npreserve the Company’s goodwill and its relationships with suppliers, customers,
\ndistributors and others having business relations with it;<\/p>\n
4.7.4 The Company has not changed its accounting methods or
\npractices (including any change in depreciation or amortization policies or
\nrates) or revalued any of its assets.<\/p>\n
4.7.5 The Company has not taken any action since June 30, 1998, that
\nwould violate Section 7.1.<\/p>\n
4.8 Liabilities. The Company has no liabilities or obligations (absolute,
\naccrued, contingent or otherwise) except (i) liabilities which are reflected on
\nthe Financial Statements or which are not required under GAAP to be reflected on
\nthe Financial Statements as of June 30, 1998; (ii) liabilities incurred or
\narising in the ordinary course of business since June 30, 1998, (iii)
\nliabilities arising in the ordinary course of business under Contracts to which
\nthe Company is a party (excluding specifically any claim for breach of
\ncontract); and (iv) liabilities expressly described in a Schedule hereto.<\/p>\n
4.9 Assets; Absence of Encumbrances. The assets reflected on the Financial
\nStatements and leased or otherwise used by the Company (for which the Company
\npossesses the necessary rights to use the same) constitute all assets necessary
\nfor the conduct of the Company’s business. All of the assets reflected on the
\nFinancial Statements as of June 30, 1998 as owned by the Company and all assets
\nacquired by the Company since June 30, 1998 (other than assets disposed of in
\nthe<\/p>\n
15
\n 18
\nordinary course of business since such date) are owned by the Company free and
\nclear of all Encumbrances, other than (i) Permitted Liens or (ii) Encumbrances
\nreflected or reserved against on the Company’s June 30, 1998 balance sheet
\nincluded in the Financial Statements or set forth on Schedule 4.9.<\/p>\n
4.10 Real Property.<\/p>\n
4.10.1 Description. Schedule 4.10 sets forth complete and accurate
\nlegal descriptions of all Real Property.<\/p>\n
4.10.2 Title. Concurrently with Closing, the Company will have good
\nand marketable title in fee simple to the Real Property free and clear of all
\nEncumbrances, except as disclosed in Schedule 4.10. Except as set forth on
\nSchedule 4.10, with respect to any Contracts, covenants, conditions, deeds,
\ndeeds of trust, rights-of-way, easements, mortgages, restrictions, surveys,
\ntitle insurance policies, and other documents granting to the Company title to
\nor an interest in or otherwise affecting the Owned Real Property (copies of
\nwhich have been delivered to Buyer), no breach or event of default exists on the
\npart of the Company or, to the knowledge of the Company, on the part of any
\nother party, and no condition or event has occurred that with the giving of
\nnotice, the lapse of time, or both would constitute a breach or event of a
\ndefault by the Company or, to the Company’s knowledge, any other person.<\/p>\n
4.10.3 Leases. The Sellers and the Company have delivered to Buyer
\nan accurate copy of the leases and subleases covering the Leased Real Property,
\nincluding all amendments thereto and assignments thereof (“Leases”). All of such
\nLeases are listed on Schedule 4.10.3. All of the Leases are valid and in full
\nforce and effect. The Company has duly performed all of its obligations under
\nthe Leases to the extent those obligations to perform have accrued, and no
\nviolation of or default or breach under any Leases by the Company or, to the
\nCompany’s knowledge, any other party has occurred and neither the Company nor,
\nto the Company’s knowledge, any other party has repudiated any provisions
\nthereof. All of the Leases will be enforceable by the Company after the Closing
\nto the same extent as if the transactions contemplated by this Agreement had not
\nbeen consummated.<\/p>\n
4.10.4 No Unpaid Charges. Except as set forth on Schedule 4.10,
\nthere are no unpaid charges, debts, liabilities, claims, or obligations arising
\nin the normal course from the construction, occupancy, ownership, use, or
\noperation of the Real Property and no charges or assessments arising in the
\nnormal course for public improvements or otherwise made against the Real
\nProperty are unpaid, including, without limitation, those for construction of
\nsewer lines, water lines, storm drainage systems, electric lines, natural gas
\nlines, streets (including perimeter streets), roads and curbs. No Real Property
\nis subject to any condition or obligation to any governmental entity or other
\nperson requiring the owner or any transferee thereof to donate land, money or
\nother property or to make off-site public improvements.<\/p>\n
16
\n 19
\n 4.10.5 Compliance with Laws. Except as set forth on Schedule 4.15,
\nno litigation, arbitration, or similar proceeding is pending or, to the
\nknowledge of the Company, threatened which affects or is reasonably likely to
\naffect the Company’s use or enjoyment of any of the Real Property. All of the
\nReal Property is in compliance with all applicable zoning and subdivision
\nordinances. The Real Property is zoned (if applicable) to permit operation of
\nthe business presently conducted thereon. No condemnation, eminent domain, or
\nsimilar proceeding is pending or, to the knowledge of the Company, is threatened
\nagainst the Real Property.<\/p>\n
4.10.6 Facilities. Except as listed in Schedule 4.10, based upon
\ntheir age and condition, the Facilities and the equipment and other tangible
\nassets owned or leased by the Company at the Facilities, are (i) adequately
\ninsured, (ii) structurally sound with no known defects, (iii) in good operating
\ncondition and repair, subject to ordinary wear and tear in consideration of
\ntheir age, (iv) maintained consistent with past practices and in accordance with
\napplicable leases or other agreements, and (vi) in conformity with all
\napplicable laws, ordinances, orders, regulations and other requirements relating
\nthereto currently in effect. Except as listed in Schedule 4.10, the Facilities
\nare supplied with utilities and other services necessary for the operation of
\nthe business. Except as listed in Schedule 4.10, none of the Facilities or
\nequipment thereat is subject to any commitment or other arrangement for their
\nsale or use by any person. Except as listed in Schedule 4.10, the Company has
\nnot granted to any person any contract or other right to the use of any portion
\nof the Real Property, or to the use of any Facility or amenity on or relating to
\nany such property. The Facilities located on each parcel comprising the Real
\nProperty are located within the boundary lines of such parcel, do not encroach
\non any easement which may burden the parcel land, and are not in violation of
\napplicable setback requirements.<\/p>\n
4.10.7 No Foreign Owners. Neither the Company nor any Seller is
\nother than a “United States person” within the meaning of Section 7701 of the
\nCode.<\/p>\n
4.11 Receivables. The accounts receivable, other receivables and all
\nrestricted funds on deposit reflected in the Financial Statements represent
\nvalid obligations or amounts to which the Company is entitled arising from sales
\nactually made in the ordinary course of business and are due and payable to the
\nCompany, and the accounts receivable, other receivables (and allowance for
\ndoubtful accounts) and restricted funds on deposit reflected on the Company’s
\nfinancial statements have been established in accordance with GAAP.<\/p>\n
4.12 Inventory and Equipment. The inventory of the Company reflected in
\nthe Financial Statements was purchased in the ordinary course of business, and
\nthe inventory (and reserves therefor) reflected in the Financial Statements have
\nbeen established in accordance with GAAP. The equipment of the Company reflected
\non the Financial Statements is in good working condition and suitable for its
\nintended use, normal wear and tear excepted. The equipment reflected on the
\nCompany’s financial statements has been established in accordance with GAAP.<\/p>\n
17
\n 20
\n 4.13 Contracts and Commitments.<\/p>\n
4.13.1 Contracts. Schedule 4.13 sets forth a complete and accurate
\nlist of all written Contracts and, to the knowledge of the Company and Sellers,
\nall oral Contracts, that are not fully performed by all parties thereto, of the
\nfollowing categories:<\/p>\n
4.13.1.1 Contracts not made in the ordinary course of the
\nCompany’s conduct of the business;<\/p>\n
4.13.1.2 Employment contracts, employment handbooks or
\npolicies, bonus plans, programs and agreements, and severance agreements;<\/p>\n
4.13.1.3 Supply, purchase, distribution, franchise, license,
\nsales or commission contracts related to the Company involving payments made by
\nor to the Company of $50,000 or more;<\/p>\n
4.13.1.4 Contracts involving expenditures or liabilities,
\nactual or potential, in excess of $200,000 or otherwise material to the Company,
\nand not cancelable (without liability) within 30 calendar days;<\/p>\n
4.13.1.5 Contracts or commitments relating to commission
\narrangements with others;<\/p>\n
4.13.1.6 Promissory notes, loans, agreements, evidences of
\nindebtedness, letters of credit, guarantees, or other instruments relating to an
\nobligation to pay money, whether the Company shall be the borrower, lender or
\nguarantor thereunder or whereby any assets are pledged (excluding credit
\nprovided by the Company in the ordinary course of business to its customers);<\/p>\n
4.13.1.7 Leases of personal property not cancelable (without
\nliability) within 30 calendar days;<\/p>\n
4.13.1.8 Contracts containing covenants limiting the freedom
\nof the Company or any officer, director or shareholder of the Company to engage
\nin any line of business or compete with any person; and<\/p>\n
4.13.1.9 Contracts relating to the Shares.<\/p>\n
Sellers and Company have delivered to Buyer or have provided Buyer an
\nopportunity to examine, true, correct and complete copies of all of the
\nContracts listed on Schedule 4.13, together with all other material Contracts of
\nthe Company and all contracts and agreements relating to the Shares, including
\nall amendments and supplements thereto.<\/p>\n
18
\n 21
\n 4.13.2 Absence of Breaches or Defaults. All of the Contracts are
\nvalid and in full force and effect. The Company has duly performed all of its
\nobligations under the Contracts to the extent those obligations to perform have
\naccrued; no violation of, or default or breach under any Contracts by the
\nCompany or, to its knowledge, any other party has occurred; no condition or
\nevent has occurred that with the giving of notice or lapse of time, or both,
\nwould constitute a breach or default by the Company or, to the Company’s
\nknowledge, any other person; and neither the Company nor, to its knowledge, any
\nother party has repudiated any provisions thereof. All of the Contracts will be
\nenforceable by the Company after the Closing to the same extent as if the
\ntransactions contemplated by this Agreement had not been consummated.<\/p>\n
4.14 Books and Records. The Company has made and kept (and given Buyer
\naccess to) books and records and accounts, which, in reasonable detail,
\naccurately and fairly reflect the financial transactions and other material
\nactivities of the Company. The minute books of the Company to be delivered to
\nBuyer at Closing accurately and adequately reflect all action previously taken
\nby the shareholders, board of directors and committees of the board of directors
\nof the Company. The stock book records of the Company previously delivered to
\nBuyer are true, correct and complete, and accurately reflect all transactions
\neffected in the Company’s stock through and including the date hereof.<\/p>\n
4.15 Litigation. Except as set forth on Schedule 4.15, there is no action,
\norder, writ, injunction, judgment or decree outstanding or any claim, suit,
\nlitigation, proceeding, labor dispute, or arbitral action pending (i.e., the
\nCompany has been timely and properly served) or, to the Company’s knowledge, any
\ngovernmental audit or investigation (collectively, with items listed above, an
\n“Action”) threatened (a) against the Company or its assets; (b) against any
\nofficer, director or employee in their capacity as such, or (c) seeking to
\ndelay, limit, enjoin or obtain damages in respect of the transactions
\ncontemplated by this Agreement. The Company is not in default with respect to or
\nsubject to any judgment, order, writ, injunction or decree of any court or
\ngovernmental agency, and there are no unsatisfied judgments against the Company.<\/p>\n
4.16 Labor Matters. The Company is not a party to any labor agreement with
\nrespect to its employees with any labor organization, union, group or
\nassociation and no employees of the Company are represented by a labor
\norganization, union, group or association in connection with their employment by
\nthe Company. Within the last seven (7) years, the Company has not experienced
\nany attempt by organized labor or its representatives to make the Company
\nconform to demands of organized labor relating to its employees or to enter into
\na binding agreement with organized labor that would cover the employees of the
\nCompany. Schedule 4.16 (i) contains a list of all employees of the Company and
\ntheir wage rates or salaries as of the date of this Agreement, (ii) sets forth
\nthe dates of employment for such employees and (iii) accurately characterizes
\nthem as exempt or non-exempt. Except as set forth on Schedule 4.16, the
\nemployment of all persons presently employed or retained by the Company is
\nterminable at will by the Company, as allowed under California law.<\/p>\n
19
\n 22
\n 4.17 Compliance with Law. Except as disclosed on Schedule 4.17, the
\nCompany, the conduct of its business and the operation of its Facilities have
\nnot violated (except where such violation has been fully cured as of the date
\nhereof), and are in compliance with all laws, statutes, ordinances, regulations,
\nrules and orders of any foreign, federal, state or local government and any
\nother governmental department or agency, and any judgment, decision, decree or
\norder of any court or governmental agency, department or authority. Except as
\ndisclosed on Schedule 4.17, the Company and the conduct of its business and the
\noperation of the Facilities are in conformity with all energy, public utility,
\nand health codes, regulations and ordinances, the Americans with Disabilities
\nAct, OSHA and all other foreign, federal, state, and local governmental and
\nregulatory requirements. Except as disclosed on Schedule 4.17, the Company has
\nnot received any notice to the effect that, or otherwise been advised that, it
\nis in violation of any such statutes, regulations, rules, judgments, decrees,
\norders, ordinances or other laws (except where such violation has been fully
\ncured as of the date hereof). The Company has all Permits required to conduct
\nits business. All material Permits are listed on Schedule 4.17. All Permits will
\nbe enforceable by the Company after the Closing to the same extent as if the
\ntransactions contemplated by this Agreement had not been consummated.<\/p>\n
4.18 No Brokers. None of the Sellers, the Company or any of the Company’s
\nofficers, directors, employees or Affiliates has employed or made any agreement
\nwith any broker, finder or similar agent or any person or firm which will result
\nin an obligation on the part of the Buyer or, except as set forth in Schedule
\n4.18, the Company, to pay any finder’s fee, brokerage fees or commission or
\nsimilar payment in connection with the transactions contemplated hereby.<\/p>\n
4.19 No Other Agreements to Sell the Company. Except for stock and
\nmembership interest cross-purchase and related agreements, which will be
\nterminated by or concurrently with the Closing, and are set forth on Schedule
\n4.19, neither any Seller nor the Company has any commitment or legal obligation,
\nabsolute or contingent, to any other person or firm other than the Buyer to
\nsell, assign, transfer or effect a sale of any of the Shares or any other shares
\nof the Company’s capital stock (authorized or unauthorized), or to effect any
\nmerger, consolidation, liquidation, dissolution or other reorganization of the
\nCompany, or to effect any sale of the Company’s assets (other than the sale of
\ninventory of the Company in the ordinary course of business).<\/p>\n
4.20 Proprietary Rights.<\/p>\n
4.20.1 Proprietary Rights. Schedule 4.20 lists all of the Company’s
\nfederal, state and foreign registrations of patents, trademarks, service marks
\nand trade names, and all pending applications for any such registrations and all
\nother trademarks and trade names which the Company uses. Such rights, together
\nwith all trade secrets and other proprietary rights, whether or not registered,
\nand all computer software created by or on behalf of the Company are hereinafter
\nreferred to collectively as “Proprietary Rights”.<\/p>\n
20
\n 23
\n 4.20.2 Royalties and Licenses. No person has a right to receive a
\nroyalty or similar payment in respect of any Proprietary Rights. Except as set
\nforth on Schedule 4.20, the Company is not a party to any licenses granted, sold
\nor otherwise transferred by or to it or other agreements to which it is a party,
\nrelating in whole or in part to any of the Proprietary Rights other than object
\ncode end-user licenses granted to it in the ordinary course of business that
\npermit use of software products without a right to modify, distribute or
\nsublicense the same.<\/p>\n
4.20.3 Ownership and Protection of Proprietary Rights. The Company
\nowns or licenses, and has the sole right to use or (if it so elects) to
\nsublicense each of the Proprietary Rights. None of the Proprietary Rights is
\ninvolved in any pending or, to the Company’s knowledge, threatened Action. The
\nCompany has not received any notice of invalidity with respect to such
\nProprietary Rights. The Company has taken all reasonable and prudent steps to
\nprotect the Proprietary Rights from infringement by any other person. To the
\nknowledge of the Company, the Company’s use of the Proprietary Rights is not
\ninfringing upon or otherwise violating the rights of any third party in or to
\nsuch Proprietary Rights. No such infringement has been alleged by any third
\nparty. All of the Proprietary Rights are validly owned by or licensed to the
\nCompany and will not cease to be validly owned or licensed and in full force and
\neffect by reason of the execution, delivery and performance of this Agreement or
\nthe consummation of the transactions contemplated by this Agreement.<\/p>\n
4.21 Tax Matters.<\/p>\n
4.21.1 Filing of Tax Returns, Payment of Taxes. Except as set forth
\nin Schedule 4.21.1, the Company has filed all Tax Returns that the Company was
\nrequired to file prior to the date hereof. All such Tax Returns were correct and
\ncomplete and were prepared and filed in accordance with applicable law. Except
\nas set forth in Schedule 4.21.1, all Taxes due and payable by or with respect to
\nthe Company (whether or not shown on any Tax Return) with respect to all taxable
\nperiods ending prior to the date hereof have been paid. All other Taxes due and
\npayable by the Company with respect to periods ending on or before the Closing
\nDate (whether or not a Tax Return is due on such date) or in respect of
\ntransactions entered into or any state of facts existing as of the Closing Date
\nhave been or will be paid on or before Closing Date or will be accrued as
\nliabilities on the Closing Date Balance Sheet. For purposes of the preceding
\nsentence, in determining the amount of Taxes due and payable by the Company with
\nrespect to periods ending on or before the Closing Date or in respect of
\ntransactions entered into or any state of facts existing as of the Closing Date,
\nthe Closing Date shall be deemed to be the last day of any applicable tax
\nperiod. Except as set forth in Schedule 4.21.1, all Tax Returns the due date of
\nwhich (determined without extensions) is on or after the date hereof but on or
\nbefore the Closing Date will be correct and complete and filed in accordance
\nwith applicable law.<\/p>\n
4.21.2 Taxing Jurisdictions. Schedule 4.21.2 lists (i) all
\ncountries, states, cities, or other jurisdictions in which the Company is
\ncurrently subject to an obligation to file Tax Returns or to collect sales or
\nuse Taxes, (ii) all elections for income Taxes made by the Company that are
\ncurrently in force or to which the Company is bound, and (iii) (x) all
\ncountries, states, cities, or other<\/p>\n
21
\n 24
\njurisdictions in which the Company is a beneficiary of any real or personal
\nproperty Tax exemptions or concessions, reduced rates, or Tax credits (y) the
\nannual benefit of each such item, and (z) the terms governing expiration or
\nphase-out of each such item.<\/p>\n
4.21.3 General Tax Matters. Except as set forth in Schedule 4.21.3,
\nwith respect to each taxable period for the Company ending on or before the
\nClosing Date (or as of such other date as set forth below), (i) either such
\ntaxable period has been audited by the relevant taxing authority or the time for
\nassessing or collecting Taxes with respect to each such taxable period has
\nclosed and each taxable period is not subject to review by a relevant taxing
\nauthority; (ii) no deficiency or proposed adjustment that has not been settled
\nor otherwise resolved for any amount of Taxes has been asserted or assessed by
\nany taxing authority against the Company; (iii) the Company has not consented to
\nextend the time in which any Taxes may be assessed or collected by any taxing
\nauthority; (iv) the Company has not requested or been granted an extension of
\nthe time for filing any Tax Return; (v) there is no action, suit, taxing
\nauthority proceeding, or audit or claim for refund now in progress, pending, or
\nthreatened against or with respect to the Company regarding Taxes; (vi) the
\nCompany has not made an election or filed a consent under Section 341(f) of the
\nCode (or any corresponding provision of state, local or foreign law) or agreed
\nto have Section 341(f)(2) of the Code (or any corresponding provision of state,
\nlocal or foreign law) apply to any disposition of subsection (f) assets (as
\ndefined in Section 341(f)(4) of the Code) owned by the Company; (vii) there are
\nno Encumbrances on the assets of the Company relating or attributable to Taxes
\n(other than liens for Taxes not yet due and payable) and the Company has no
\nknowledge of any reasonable basis for the assertion of any claim relating or
\nattributable to Taxes, which, if adversely determined, would result in any lien,
\npledge, charge, claim, security interest, or other Encumbrance on the assets of
\nthe Company; (viii) the Company will not be required (A) as a result of a change
\nin method of accounting for a taxable period ending on or prior to the Closing
\nDate, to include any adjustment under Section 481 of the Code (or any
\ncorresponding provision of state, local, or foreign law) in taxable income for
\nany taxable period (or portion thereof) beginning after the Closing Date or (B)
\nas a result of any “closing agreement,” as described in Section 7121 of the Code
\n(or any corresponding provision of state, local, or foreign law) to include any
\nitem of income or exclude any item of deduction from any taxable period (or
\nportion thereof) beginning after the Closing Date; (ix) the Company has not been
\na member of an affiliated group (as defined in Section 1504 of the Code) or
\nfiled or been included in a combined, consolidated, or unitary income Tax
\nReturn; (x) the Company is not a party to or bound by any tax allocation or tax
\nsharing agreement and, has no current or potential contract or other obligation
\nto indemnify any other person with respect to any Tax or pay the Taxes of any
\nother person under Treasury Regulations Section 1.1502-6 (or any similar
\nprovisions of state, local, or foreign law) as a transferee or successor, by
\ncontract or otherwise; (xi) to the Company’s knowledge, no claim has ever been
\nmade by a taxing authority in a jurisdiction where the Company does not file Tax
\nReturns that the Company is or may be subject to Taxes assessed by such
\njurisdiction; (xii) the Company does not have a permanent establishment in any
\nforeign country, as defined in the relevant tax treaty between the United States
\nof America and such foreign country; (xiii) the Company has not been a “U.S.
\nreal property holding corporation” (within the meaning of Code Section
\n897(c)(2)) during the applicable period specified in Code Section
\n897(c)(1)(A)(ii); (xiv) the Company has disclosed on each Tax Return filed by
\nthe Company<\/p>\n
22
\n 25
\nall positions taken thereon that could give rise to a substantial understatement
\nof penalty of federal income Taxes within the meaning of Code Section 6662; (xv)
\nthe Company was not acquired in a qualified stock purchase under Code Section
\n338(d)(3) and no elections under Code Section 338(g), protective carryover basis
\nelections, or offset prohibition elections are applicable to the Company; (xvi)
\nthe Company has made no payments, is not obligated to make any payments, and is
\nnot a party to any agreement that under any circumstances could obligate it to
\nmake any payments, that will not be deductible under Code Section 280G or 162;
\n(xvii) no sales or use tax will be payable by the Company as a result of the
\ntransactions contemplated by this Agreement, and there will be no non-recurring
\nintangible tax, documentary stamp tax, or other excise tax (or comparable tax
\nimposed by an governmental entity) imposed upon the Company as a result of the
\ntransactions contemplated by this Agreement; (xviii) Buyer will not be required
\nto deduct and withhold any amount with respect to Taxes imposed upon the Sellers
\nupon consummation of the transactions contemplated by this Agreement; (xix) none
\nof the Company’s assets is property required to be treated as being owned by any
\nother person under the “safe harbor lease” provisions of former Section
\n168(f)(8) of the Internal Revenue Code of 1954, as amended, or (B) has been
\nfinanced with or directly or indirectly secures any bond or debt the interest of
\nwhich is tax-exempt under Section 103(a) of the Code; (xx) the Company has
\nwithheld and paid all Taxes required to have been withheld and paid in
\nconnection with amounts paid or owing to an employee, independent contractor,
\nshareholder, or other third party; (xxi) no income under any arrangement or
\nunderstanding to which the Company is a party will be attributed to the Company
\nwhich is not represented by income to which the Company is legally entitled; and
\n(xxii) the Company owns no interest in any “controlled foreign corporation”
\n(within the meaning of Code Section 957), “passive foreign investment company”
\n(within the meaning of Code Section 1296) or other entity the income of which is
\nrequired to be included in the income of the Company whether or not distributed.
\nFor purposes of clause (xvi) the term “payments” means payments in the nature of
\ncompensation.<\/p>\n
4.21.4 Tax Attributes. Set forth in Schedule 4.21.4 is a list
\nreflecting the following information with respect to the Company as of the date
\nhereof as well as on an estimated pro forma basis as of the Closing: (i) the
\nbasis of the Company in its assets, (ii) the amount of any net operating loss,
\nnet capital loss, unused investment or other tax credit, unused foreign tax or
\ntax credit, or excess charitable contribution allocable to the Company assets,
\nand (iii) with respect to the preceding clause (ii) any limitations on use of
\nany of such attributes including any limitations arising by reason of the
\ntransactions contemplated by this Agreement.<\/p>\n
4.21.5 Copies of Tax Returns. Except as otherwise set forth in
\nSchedule 4.21.5 the Company has furnished to Buyer copies of all income and
\nsales Tax Returns filed by or with respect to the Company relating to the period
\nencompassing the three taxable years of the Company preceding the date hereof.<\/p>\n
4.21.6 Retention of Tax Credits, Etc. The Sellers acknowledge and
\nagree that in connection with the sale of the Shares, all tax attributes of the
\nCompany including but not limited to tax net operating losses, tax credits and
\nother similar items generated through and subsequent to the Closing Date will
\nremain as tax attributes of the Company. Accordingly, any refunds or benefits<\/p>\n
23
\n 26
\nobtained from any Tax carryback or carryforward or other realization of such Tax
\nattributes of Company or its successors shall remain as sole property of the
\nCompany.<\/p>\n
4.21.7 Definition. Any reference to the term “the Company” in this
\nSection 4.21 shall refer to the Company, any predecessor entity, and any
\nSubsidiary of the Company (whether or not such Subsidiary entity qualifies as a
\n“qualified subchapter S subsidiary” within the meaning of Code Section
\n1361(b)(3)(B) or any other entity disregarded or intended to be disregarded for
\nTax purposes under the Code or under any provision of state, local, or foreign
\nlaw). Further, any reference to any action of “the Company” in this Section 4.21
\nshall encompass any action or actions taken by or at the direction of the
\nCompany whether or not such actions taken by or at the direction of the Company
\nwere properly authorized.<\/p>\n
4.22 Employees and Employee Benefits.<\/p>\n
4.22.1 As used in this Section 4.22 and in Section 4.23, the
\nfollowing terms have the meanings set forth below.<\/p>\n
“Benefit Arrangement” shall mean any employment, consulting,
\nseverance or other similar contract, arrangement or policy and each plan,
\narrangement (written or oral), program, agreement or commitment providing for
\ninsurance coverage (including, without limitation, any self-insured
\narrangements), workers’ compensation, disability benefits, supplemental
\nunemployment benefits, vacation benefits, retirement benefits, life, health,
\ndisability or accident benefits (including, without limitation, any “voluntary
\nemployees’ beneficiary association” as defined in Section 501(c)(9) of the Code
\nproviding for the same or other benefits) or for deferred compensation, profit
\nsharing bonuses, stock options, stock appreciation rights, stock purchases or
\nother forms of incentive compensation or postretirement insurance, compensation
\nor benefits which (A) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
\n(B) is entered into, maintained, contributed to or required to be contributed
\nto, as the case may be, by the Company or an ERISA Affiliate or under which the
\nCompany or any ERISA Affiliate may incur any liability, and (C) covers any
\nemployee or former employee of the Company or any ERISA Affiliate (with respect
\nto their relationship with such entities).<\/p>\n
“Employee Plans” shall mean all Benefit Arrangements, Multiemployer
\nPlans, Pension Plans and Welfare Plans.<\/p>\n
“ERISA Affiliate” shall mean any entity which is (or at any relevant
\ntime was) a member of a “controlled group of corporations” with, under “common
\ncontrol” with, or a member of an “affiliated service group” with, the Company as
\ndefined in Section 414(b), (c), (m) or (o) of the Code, or under “common
\ncontrol” with the Company, within the meaning of Section 4001(b)(1) of ERISA.<\/p>\n
24
\n 27
\n “Multiemployer Plan” shall mean any “multiemployer plan,” as defined
\nin Section 4001(a)(3) of ERISA, under which the Company or any ERISA Affiliate
\nhas or may incur any liability.<\/p>\n
“PBGC” shall mean the Pension Benefit Guaranty Corporation.<\/p>\n
“Pension Plan” shall mean any “employee pension benefit plan” as
\ndefined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the
\nCompany or any ERISA Affiliate has or may incur any liability; (B) covers any
\nemployee or former employee of the Company or any ERISA Affiliate (with respect
\nto their relationship with such entities); and (C) is not a Multiemployer Plan.<\/p>\n
“Welfare Plan” shall mean any “employee welfare benefit plan” as
\ndefined in Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate
\nhas or may incur any liability; (B) covers any employee or former employee of
\nthe Company or any ERISA Affiliate (with respect to their relationship with such
\nentities); and (C) is not a Multiemployer Plan.<\/p>\n
4.22.2 Disclosure; Delivery of Copies of Relevant Documents and
\nOther Information. Schedule 4.22 contains a complete list of all Employee Plans.
\nTrue and complete copies of each of the following documents have been delivered
\nor made available by the Company to Buyer: (i) each Welfare Plan and Pension
\nPlan (and, if applicable, related trust agreements) and all amendments thereto,
\nall written interpretations thereof and written descriptions thereof which have
\nbeen distributed to the Company’s employees and all annuity contracts or other
\nfunding instruments; (ii) each Benefit Arrangement including written
\ninterpretations thereof and written descriptions thereof which have been
\ndistributed to the Company’s employees (including descriptions of the number and
\nlevel of employees covered thereby) and a brief description of any Benefit
\nArrangement which is not in writing; (iii) the most recent determination or
\nopinion letter, if any, issued by the Internal Revenue Service with respect to
\neach Pension Plan; (iv) for the three most recent plan years, Annual Reports on
\nForm 5500 Series required to be filed with any governmental agency for each
\nPension Plan and each Welfare Plan; (v) all actuarial reports prepared for the
\nlast three plan years for each Pension Plan; (vi) all correspondence with the
\nInternal Revenue Service, the Department of Labor or the PBGC regarding each
\nEmployee Plan; and (xiii) all correspondence regarding any pending or threatened
\nclaim against any Employee Plan or the Company or any ERISA Affiliate regarding
\nany matter related to any Employee Plan.<\/p>\n
4.23 ERISA Representations.<\/p>\n
4.23.1 Pension Plans. Except for the money-purchase plan sponsored
\nby the Company, no Pension Plan is a defined benefits plan as defined in Section
\n414 of the Code and no Pension Plan is subject to the minimum funding
\nrequirements of Title IV of ERISA or Section 412 of the Code. Each Pension Plan
\nwhich is intended to be qualified (and each related trust agreement, annuity
\ncontract or other funding instrument) satisfies in all material respects
\nrequirements for qualified and tax-exempt status under the provisions of Code
\nSections 401(a) (or 403(a), as<\/p>\n
25
\n 28
\nappropriate) and 501(a) and has so satisfied such requirement during the period
\nfrom its adoption to date.<\/p>\n
4.23.2 Multiemployer Plans. Neither the Company nor any ERISA
\nAffiliate has ever had any obligation to contribute to any Multiemployer Plans.<\/p>\n
4.23.3 Welfare Plans. Each Welfare Plan which is a “group health
\nplan,” as defined in Section 607(1) of ERISA, has been operated in compliance in
\nall material respects with the health care continuation provisions of Part 6 of
\nTitle I, Subtitle B of ERISA and Section 4980B of the Code at all times and, but
\nfor compliance with such provisions, no Welfare Plan provides post-retirement
\nbenefits for employees.<\/p>\n
4.23.4 Compliance with Law. Each Employee Plan has been maintained
\nin all material respects in compliance with its terms and with the requirements
\nprescribed by any and all statutes, orders, rules and regulations which are
\napplicable to such Employee Plan, including, without limitation, ERISA and the
\nCode.<\/p>\n
4.23.5 Unrelated Business Taxable Income. No Employee Plan (or trust
\nor other funding vehicle pursuant thereto) has any liability for Tax imposed
\nunder Code Section 511.<\/p>\n
4.23.6 Deductibility of Payments. There is no contract, agreement,
\nplan or arrangement covering any employee or former employee of the Company
\n(with respect to its relationship with such entities) that, individually or
\ncollectively, provides for the payment by the Company of any amount (i) for
\nwhich the deduction by the Company would be disallowed under Section 162(m) of
\nthe Code, or (ii) that is or would be an “excess parachute payment” pursuant to
\nSection 280G of the Code.<\/p>\n
4.23.7 Fiduciary Duties and Prohibited Transactions. Neither the
\nCompany nor, to the knowledge of the Company, any plan fiduciary or party in
\ninterest (as such terms are defined in Section 3(21) and 3(14) of ERISA) of any
\nWelfare Plan or Pension Plan has engaged in any transaction in violation of
\nSections 404 or 406 of ERISA or any “prohibited transaction,” as defined in
\nSection 4975(c)(1) of the Code, for which no exemption exists under Section 408
\nof ERISA or Section 4975(c)(2) or (d) of the Code, or has otherwise violated the
\nprovisions of Part 4 of Title I, Subtitle B of ERISA. The Company has not
\nknowingly participated in a violation of Part 4 of Title I, Subtitle B of ERISA
\nby any plan fiduciary of any Welfare Plan or Pension Plan (or other employee
\nbenefit plan subject to ERISA) and has not been assessed any civil penalty under
\nSection 502(i) or Section 502(l) of ERISA.<\/p>\n
4.23.8 Validity and Enforceability. Each Welfare Plan, Pension Plan,
\nrelated trust agreement, annuity contract or other funding instrument and
\nBenefit Arrangement is legally valid and binding and in full force and effect.<\/p>\n
26
\n 29
\n 4.23.9 Litigation. There is no action, order, writ, injunction,
\njudgment or decree outstanding or claim, suit, litigation, proceeding, arbitral
\naction, governmental audit or investigation relating to or seeking benefits
\nunder any Employee Plan have been filed, or to the Company’s knowledge,
\nthreatened or anticipated against the Company, any ERISA Affiliate or any
\nEmployee Plan, the sponsor or administrator of any Employee Plan or against any
\nfiduciary of any of the Employee Plans with respect to the operation of any such
\nplan.<\/p>\n
4.23.10 No Amendments. Neither the Company nor any ERISA Affiliate
\nhas any announced plan or legally binding commitment to create any additional
\nEmployee Plans or to amend or modify any existing Employee Plan, except as
\nrequired by the 1996 and 1997 amendments to the Code.<\/p>\n
4.23.11 No Other Liability. No event has occurred in connection with
\nwhich the Company or any ERISA Affiliate or any Employee Plan, directly or
\nindirectly, that could be subject to any liability (A) under any statute,
\nregulation or governmental order relating to any Employee Plans or (B) pursuant
\nto any obligation of the Company to indemnify any person against liability
\nincurred under any such statute, regulation or order as they relate to the
\nEmployee Plans.<\/p>\n
4.23.12 Unpaid Contributions. Neither the Company nor any ERISA
\nAffiliate has any liability for unpaid contributions under Section 515 of ERISA
\nwith respect to any Pension Plan or Welfare Plan, other than contributions
\naccrued but not yet payable under the Company’s money-purchase pension plan for
\nthe current plan year.<\/p>\n
4.23.13 Insurance Contracts. Neither the Company nor any Employee
\nPlan holds as an asset of any Employee Plan any interest in any annuity
\ncontract, guaranteed investment contract or any other investment or insurance
\ncontract issued by an insurance company that is the subject of bankruptcy,
\nconservatorship or rehabilitation proceedings.<\/p>\n
4.23.14 No Acceleration or Creation of Rights. Neither the execution
\nand delivery of this Agreement by the Company nor the consummation of the
\ntransactions contemplated hereby will result in the acceleration or creation of
\nany rights of any person to benefits under any Employee Plan (other than the
\nacceleration of the vesting or exercisability of any stock options, the
\nacceleration of the vesting of any restricted stock or the acceleration or
\ncreation of any rights under any severance, parachute or change in control
\nagreement).<\/p>\n
4.23.15 Termination. Except as set forth on Schedule 4.22, each
\nWelfare Plan and Benefit Arrangement may be terminated by the Company without
\npenalty upon 30 days advance notice and without causing the Company to incur any
\nadditional liability.<\/p>\n
4.23.16 Funding of Money Purchase Pension Plan. There does not exist
\nany accumulated funding deficiency within the meaning of either Section 412 of
\nthe Code or Section 302 of ERISA as to the money-purchase pension plan sponsored
\nby the Company, nor would there exist any such deficiency but for the
\napplication of an alternate minimum funding standard. There has<\/p>\n
27
\n 30
\nnot been issued any waiver of the minimum funding standards imposed by the Code
\nwith respect to such plan. All contributions payable to the money-purchase
\npension plan sponsored by the Company for any plan year or fiscal year of the
\nCompany ending prior to the Closing have been paid in full, or are fully
\nreflected on the financial statements of the Company that have been provided to
\nthe Buyer.<\/p>\n
4.24 Compliance With Environmental Laws.<\/p>\n
4.24.1 Definitions. The following terms, when used in this Section
\n4.24, shall have the following meanings. Unless the context otherwise requires,
\nany of these terms may be used in the singular or the plural depending on the
\nreference.<\/p>\n
4.24.2 “Company” and “Facility” or “Facilities”. For purposes of
\nthis Section 4.24 only, the term (i) “Company” shall include (A) the Company and
\nthe Subsidiaries and all of their Affiliates, and the Sellers and their
\nAffiliates, (B) all partnerships, joint ventures and other entities or
\norganizations in which the Company was at any time or is a partner, joint
\nventurer, member or participant and (C) all predecessor or former corporations,
\npartnerships, joint ventures, organizations, trusts, businesses or other
\nentities, whether in existence as of the date hereof or at any time prior to the
\ndate hereof, the assets or obligations of which have been acquired or assumed by
\nthe Company or to which the Company has succeeded; and (ii) for purposes hereof,
\n“Facilities” or “Facility” shall mean all facilities and real property, owned,
\nleased or otherwise used by the Company, now or in the past.<\/p>\n
4.24.3 “Release” shall mean and include any spilling, leaking,
\npumping, pouring, emitting, emptying, discharging, injecting, escaping,
\nmigrating, leaching, dumping or disposing into the environment or the work place
\nof any Hazardous Substance, and otherwise as defined in any Environmental Law.<\/p>\n
4.24.4 “Hazardous Substance” shall mean any material, element,
\ncompound, or mixture, whether solid, liquid, or gaseous:<\/p>\n
(i) the presence of which requires investigation or remediation under any
\nEnvironmental Law or pursuant to the unappealed decision of any governmental
\nauthority; or<\/p>\n
(ii) which is defined as “hazardous waste,” “hazardous substance,” “toxic
\nsubstance,” “toxic material,” “pollutant,” or “contaminant” under any
\nEnvironmental Law including, without limitation, the Comprehensive Environmental
\nResponse, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
\nSections 9601, et seq., the Clean Water Act, 33 U.S.C. Section 1251 et
\nseq., the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et
\nseq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
\nseq., the Federal Insecticide, Fungicide and Rodenticide Act, any laws
\nregulating the transportation of such materials, any analogous state or local
\nlaws, and any rules, regulations, policies, and guidances promulgated
\nthereunder; or<\/p>\n
28
\n 31
\n (iii) Which is or is suspected to be, pursuant to the determination of any
\ngovernmental authority, toxic, explosive, corrosive, flammable, infectious,
\nradioactive, carcinogenic, mutagenic, or is currently subject to regulation by
\nany governmental authority; or<\/p>\n
(iv) the presence of which causes or threatens to cause a nuisance as
\ndefined by an applicable Environmental Law, to property owned, leased,
\nsubleased, operated, managed, occupied or otherwise controlled by Company or a
\nSubsidiary, or to adjacent or impacted properties; or<\/p>\n
(v) which contains or in which has been detected in violation of an
\nEnvironmental Law, gasoline, diesel fuel or other petroleum hydrocarbons or
\nvolatile organic compounds; or<\/p>\n
(vi) which contains or in which has been detected in violation of an
\nEnvironmental Law, PCBs or asbestos or asbestos-containing materials or urea
\nformaldehyde foam insulation or lead or lead-containing paint; or<\/p>\n
(vii) which is radon gas.<\/p>\n
4.24.5 Compliance With Environmental Laws. Except as set forth on
\nSchedule 4.24, the Facilities have been owned, leased, operated and maintained
\nin compliance with all federal, state, local or foreign laws, statutes,
\nordinances, regulations, rules, judgments, orders, notice requirements, court
\ndecisions, agency guidelines or principles of law (including common law),
\nrestrictions or licenses, which (i) regulate or relate to the protection or
\nclean-up of the environment, the use, treatment, storage, transportation,
\nhandling or disposal of Hazardous Substances or other hazardous, toxic or
\notherwise dangerous substances, wastes or materials (whether gas, liquid or
\nsolid), the preservation or protection of waterways, groundwater, drinking
\nwater, air, wildlife, plants or other natural resources, or the health and
\nsafety of persons or property, including without limitation protection of the
\nhealth and safety of employees or (ii) impose liability with respect to any of
\nthe foregoing, including without limitation the Federal Water Pollution Control
\nAct (33 U.S.C. Section 1251 et seq.), Resource Conservation & Recovery Act (42
\nU.S.C. Section 6901 et seq.) (“RCRA”), Safe Drinking Water Act (21 U.S.C.
\nSection 349, 42 U.S.C. Sections 201, 300f), Toxic Substances Control Act
\n(15 U.S.C. Section 2601 et seq.), Clean Air Act (42 U.S.C. Section 7401 et
\nseq.), the Comprehensive Environmental Response, Compensation and Liability Act
\n(42 U.S.C. Section 9601 et seq.) (“CERCLA”), or any other similar federal, state
\nor local law of similar effect, each as amended (collectively, “Environmental
\nLaws”). The Real Property does not contain wetlands or a level of radon above
\naction levels of the U.S. Environmental Protection Agency and it is not located
\nwithin a “critical,” “preservation,” “conservation” or similar type of area.<\/p>\n
4.24.6 Permits. Except as set forth on Schedule 4.24, the Company
\nhas, and at all times has had, and has timely renewed, all Permits required
\nunder any Environmental Law and the Facilities are, and at all times have been,
\nin compliance with all such Permits.<\/p>\n
4.24.7 Permits Required. The consummation of any of the transactions
\ncontemplated by this Agreement will not require an application for issuance,
\nrenewal, transfer or<\/p>\n
29
\n 32
\nextension of, or any other administrative action regarding, any Permit required
\nunder any Environmental Law.<\/p>\n
4.24.8 Notice of Violation. The Company has not received any notice
\nat any time that it or the Facilities is or were claimed to be in violation of
\nthe provisions of any Environmental Law or in non-compliance with the conditions
\nof any Permit, and there is no pending, or to the Company’s knowledge,
\nthreatened lawsuit, governmental or other legal action to that effect.<\/p>\n
4.24.9 Pending Actions. There is not now pending, or to the
\nCompany’s knowledge, threatened, nor is there or has there been any basis for,
\nnor has there ever been, any Action against the Company under any Environmental
\nLaw or otherwise with respect to any Release or mishandling of any Hazardous
\nSubstance.<\/p>\n
4.24.10 Judgments. There are no consent decrees, judgments, judicial
\nor administrative orders or agreements with, or liens by, any governmental
\nauthority or quasi-governmental entity relating to any Environmental Law which
\nregulate, obligate, bind or in any way affect the Company or the Facilities.<\/p>\n
4.24.11 Hazardous Substances. There is not and has not been any
\nHazardous Substance used, generated, treated, stored, transported, disposed of,
\nhandled or otherwise existing on, under, about or from any Facility, except for
\nquantities of any such Hazardous Substances stored or otherwise held on, under
\nor about any such Facility in full compliance with all Environmental Laws and
\nnecessary for the operation of the business.<\/p>\n
4.24.12 Handling of Hazardous Substances. The Company has at all
\ntimes used, generated, treated, stored, transported, disposed of or otherwise
\nhandled Hazardous Substances in compliance with all Environmental Laws and in a
\nmanner that will not result in liability of the Company or Buyer under any
\nEnvironmental Law.<\/p>\n
4.24.13 Environmental Conditions. Except as set forth on Schedule
\n4.24, there are no present or past Environmental Conditions (as defined below)
\nin any way relating to Company, its business or the Facilities. “Environmental
\nConditions” means the introduction into the soil, groundwater or environment of
\nor near the Facilities (through leak, spill, release, discharge, escape,
\nemission, dumping, disposal or otherwise) of any pollution, including without
\nlimitation any contaminant, irritant or pollutant or Hazardous Substance
\n(whether or not upon the property of the business and whether or not such
\npollution constituted at the time thereof a violation of any Environmental Law)
\nas a result of which either the Company or, after the Closing, Buyer has or may
\nbecome liable to any federal, state, or local governmental authority or person
\nor by reason of which any of the assets may suffer or be subjected to any lien.<\/p>\n
4.24.14 CERCLA or RCRA. No current or past use, generation,
\ntreatment, transportation, storage, disposal or handling practice of the Company
\nwith respect to any Hazardous<\/p>\n
30
\n 33
\nSubstance has or will result in any liability under the CERCLA or RCRA or any
\nstate or local law of similar effect.<\/p>\n
4.24.15 Storage Tank or Pipeline. Except as set forth on Schedule
\n4.24, there is not now and has not been at any time in the past any underground
\nor above-ground storage tank or pipeline at any Facility where the installation,
\nuse, maintenance, repair, testing, closure or removal of such tank or pipeline
\nwas not in compliance with all Environmental Laws and there has been no Release
\nfrom or rupture of any such tank or pipeline, including without limitation any
\nRelease from or in connection with the filling or emptying of such tank or
\npipeline.<\/p>\n
4.24.16 Environmental Audits or Assessments. True, complete and
\ncorrect copies of the written reports, and all parts thereof, including any
\ndrafts of such reports if such drafts are in the possession or control of the
\nCompany, of all environmental audits or assessments which have been conducted at
\nany Facility within the past five years, either by the Company or any attorney,
\nenvironmental consultant or engineer engaged for such purpose, have been
\ndelivered to Buyer and a list of all such reports, audits and assessments and
\nany other similar report, audit or assessment of which the Company or Sellers
\nhave knowledge is included on Schedule 4.24.<\/p>\n
4.24.17 Indemnification Agreements. The Company is not a party,
\nwhether as a direct signatory or as successor, assign or third party
\nbeneficiary, or, to the Company’s knowledge, otherwise bound, to any lease or
\nother Contract under which the Company is obligated by or entitled to the
\nbenefits of, directly or indirectly, any representation, warranty,
\nindemnification, covenant, restriction or other undertaking concerning
\nEnvironmental Conditions.<\/p>\n
4.24.18 Releases or Waivers. The Company has not released any other
\nperson from any claim under any Environmental Law or waived any rights
\nconcerning any Environmental Condition.<\/p>\n
4.24.19 Notices, Warnings and Records. Except as discussed on
\nSchedule 4.24.19, the Company has given all notices and warnings, made all
\nreports, and has kept and maintained all records required by and in compliance
\nwith all Environmental Laws.<\/p>\n
4.25 Insurance.<\/p>\n
4.25.1 Schedule 4.25 describes all policies of insurance (including
\nthe insurer, type of insurance and period of coverage) to which the Company is a
\nparty or under which the Company or any employee, officer or director of the
\nCompany (in his or her capacity as such) is insured. All such policies, together
\nwith such self-insurance, (i) provide adequate insurance coverage for the
\nCompany, its business, assets and operations for all risks normally insured
\nagainst by a person or entity carrying on the same business or businesses as the
\nCompany, (ii) are sufficient for compliance with all legal requirements and
\nContracts to which the Company is a party or by which it is bound, and (iii)
\nwill continue in full force and effect following the Closing in accordance with
\ntheir terms.<\/p>\n
31
\n 34
\n 4.25.2 Schedule 4.25 sets forth, by year, for the current policy
\nyear and each of the three preceding policy years, a summary of the loss
\nexperience under each policy, and a summary of the loss experience for all
\nclaims that were self-insured, including the number and aggregate cost of such
\nclaims;<\/p>\n
4.25.3 Except as set forth on Schedule 4.25, the Company has not
\nreceived (i) with respect to any insurance claims made in the past three years,
\nany denial of coverage or any notice that a defense will be afforded with
\nreservation of rights, or (ii) any notice of cancellation or any other
\nindication that any insurance policy is no longer in full force or effect or
\nwill not be renewed or that the issuer of any policy is not willing or able to
\nperform its obligations thereunder.<\/p>\n
4.25.4 The Company has paid all premiums due, and has otherwise
\nperformed in all material respects all of its obligations under each insurance
\npolicy described above.<\/p>\n
4.26 Affiliate Transactions. Except as set forth on Schedule 4.19, no
\nofficer or director of the Company, or any Seller, or any member of the
\nimmediate family of any such officer, director, or Seller, or any entity in
\nwhich any of such persons owns any beneficial interest (other than a publicly
\nheld corporation whose stock is traded on a national securities exchange or in
\nthe over-the-counter market and less than 1% of the stock of which is
\nbeneficially owned by any of such persons) has any agreement with the Company or
\nany interest in any agreement of the Company or in any property (real, personal,
\nor mixed, tangible or intangible) owned or used by the Company or otherwise
\npertaining to the Company or its business or assets. For purposes of the
\npreceding sentence, the members of the immediate family of an officer or
\ndirector of the Company or Seller shall consist of the spouse, parents,
\nchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and
\nbrothers- and sisters-in-law of such officer, director or Seller.<\/p>\n
4.27 Disclosure. Neither this Agreement nor any of the Schedules or
\nExhibits hereto contains or shall contain when delivered at Closing any untrue
\nstatement of a material fact or shall omit to state a material fact necessary to
\nmake the statements contained herein or therein, in light of the circumstances
\nin which they were made, not misleading, and there is no fact which has not been
\ndisclosed in writing to Buyer that has had or is reasonably likely to have a
\nMaterial Adverse Effect on the Company. Any projections provided to Buyer on
\nbehalf of the Company were made in good faith and the Company had a reasonable
\nbasis for making such projections.<\/p>\n
ARTICLE V
\n REPRESENTATIONS AND WARRANTIES OF BUYER<\/p>\n
5.1 Representations and Warranties of Buyer. Buyer hereby represents and
\nwarrants to Sellers as follows, which representations and warranties are, as of
\nthe date hereof, and will be, as of the Closing Date, true and correct:<\/p>\n
32
\n 35
\n 5.1.1 Organization of Buyer. Buyer is a corporation duly organized,
\nvalidly existing and in good standing under the laws of the State of Delaware.<\/p>\n
5.1.2 Authorization. Buyer has full power and authority, and has
\ntaken all actions necessary and required by law and its governing instruments,
\nto execute, enter into, perform and deliver this Agreement and each of the
\nAncillary Agreements to which it is a party, to consummate the transactions
\ncontemplated hereby and thereby and to perform its obligations hereunder and
\nthereunder. This Agreement and the Ancillary Agreements have been duly
\nauthorized, executed and delivered by Buyer and is (and following their
\nexecution and delivery by Buyer and the other parties thereto and, as
\napplicable, each of the Ancillary Agreements to which Buyer is a party will be)
\na legal, valid and binding obligation of Buyer, enforceable against Buyer in
\naccordance with their terms. A copy of Buyer’s board of directors’ resolutions,
\ncertified by Buyer’s corporate secretary, authorizing this Agreement, the
\nAncillary Agreements and related transactions are attached as Schedule 5.1.2.<\/p>\n
5.1.3 No Conflict or Violation. Neither the execution, delivery or
\nperformance of this Agreement or the Ancillary Agreements, nor the consummation
\nof the transactions contemplated hereby or thereby, nor compliance by Buyer with
\nany of the provisions hereof or thereof, will (i) violate or conflict with any
\nprovision of the Certificate of Incorporation, Bylaws or any governing
\ninstrument of Buyer, (ii) violate, conflict with or result in the breach of any
\nstatute, rule, regulation, ordinance, code, order, judgment, ruling, writ,
\ninjunction, decree or award of any court or governmental authority to which
\nBuyer is subject, or (iii) violate any contract or agreement to which Buyer is a
\nparty, in each case to the extent that such violation or conflict would prevent
\nBuyer from consummating the transactions contemplated hereby or result in any
\nliability to Sellers.<\/p>\n
5.1.4 Consents and Approvals. No notice to, declaration, filing or
\nregistration with, or authorization, consent or approval of, or permit from, any
\ngovernmental or regulatory body or authority, or any other person or entity, is
\nrequired to be made or obtained by Buyer in connection with the execution,
\ndelivery and performance of this Agreement or the Ancillary Agreements and the
\nconsummation of the transactions contemplated hereby or thereby, except (i) as
\nmay be required by Buyer to operate the Company’s business after the Closing,
\n(ii) as has been obtained on or prior to the date hereof, provided such has been
\ndelivered to Sellers, (iii) as required under the HSR Act, for which all costs,
\nexpenses and filing fees shall be exclusively paid by Buyer without offset
\nagainst the Purchase Price or reimbursement from Sellers, or (iv) as required
\nunder the Company’s credit facilities, provided such has been delivered to
\nSellers prior to the date hereof.<\/p>\n
5.1.5 No Brokers. Neither Buyer nor any of its respective officers,
\ndirectors, or employees or Affiliates have employed or made any agreement with
\nany broker, finder or similar agent or any person or firm which will result in
\nan obligation to pay any finders fees, brokerage fees or commission or similar
\npayment in connection with the transactions contemplated hereby for which
\nSellers or the Company will bear any responsibility.<\/p>\n
33
\n 36
\n 5.1.6 Litigation. No legal action, governmental audit or
\ninvestigation is pending or, to the knowledge of Buyer, threatened against Buyer
\nwhich seeks to delay, limit, enjoin or obtain damages with respect to the
\ntransactions contemplated by this Agreement.<\/p>\n
ARTICLE VI
\n GENERAL COVENANTS OF BUYER, THE COMPANY AND SELLERS<\/p>\n
Buyer, the Company and Sellers each covenant with the others as follows:<\/p>\n
6.1 Further Assurances. Upon the terms and subject to the conditions
\ncontained herein, each of the parties hereto agrees, both before and after the
\nClosing, (i) to use all reasonable efforts to take, or cause to be taken, all
\nactions and to do, or cause to be done, all things necessary, proper or
\nadvisable to consummate and make effective the transactions contemplated by this
\nAgreement, (ii) to execute any documents, instruments or conveyances of any kind
\nwhich may be reasonably necessary or advisable to carry out any of the
\ntransactions contemplated hereunder, and (iii) to cooperate with each other in
\nconnection with the foregoing, including using their respective reasonable
\nefforts (A) to obtain all necessary waivers, consents and approvals from third
\nparties; provided, however, that neither party shall be required to make any
\nmaterial payments, commence litigation or agree to modifications of the terms of
\nContracts in order to obtain any such waivers, consents or approvals, (B) to
\nobtain all necessary Permits as are required to be obtained under any federal,
\nstate, local or foreign law or regulations, (C) to effect all necessary
\nregistrations and filings, including, without limitation, required filings under
\nthe HSR Act and all other submissions of information requested by governmental
\nauthorities, and (D) to fulfill all conditions to this Agreement.<\/p>\n
6.2 Environmental Matters. At Closing, Sellers and Buyer shall enter into
\nan Environmental Agreement in form and substance reasonably acceptable to each
\nof them.<\/p>\n
6.3 Conveyances of Leased Real Property to the Company.<\/p>\n
6.3.1. At or prior to the Closing, Company shall acquire good and
\n marketable title in fee simple to all Leased Real Property, free and clear
\n of all Encumbrances, except as disclosed in Schedule 4.10, upon such
\n reasonable terms and conditions as are satisfactory to Buyer. The Leased
\n Real Property shall be conveyed to Company by a duly executed and
\n acknowledged grant deed or deeds recorded in the Office of the County
\n Recorder of San Diego County, California, concurrently with the Closing.<\/p>\n
6.3.2. A CLTA owner’s policy or policies of title insurance (“Title
\n Policy”) for the Leased Real Property shall be issued at the Closing by
\n Chicago Title Company together with a letter from Chicago Title Company
\n acceptable to Buyer stating that the Title Policy may be converted to an
\n ALTA owner’s extended coverage policy or policies provided that a survey
\n is submitted to Chicago Title Company along with a $750 conversion fee,
\n which Title<\/p>\n
34
\n 37
\n Policy shall name the Company as insured and shall show fee simple title
\n to the Leased Real Property as vested on the Closing date in the Company
\n free and clear of all Encumbrances, except as are customary or disclosed
\n in Schedule 4.10. The Title Policy shall be issued in an aggregate
\n coverage amount of $1,500,000.<\/p>\n
6.3.3. All escrow fees, Title Policy premiums, recording fees,
\n transfer taxes and other closing costs and expenses of any kind whatsoever
\n in connection with the conveyance of the Leased Real Property to the
\n Company shall be paid by Buyer, and shall not constitute a reduction
\n against the Purchase Price or in any way be offset against the Purchase
\n Price.<\/p>\n
6.4 Cash Bonus to Certain Employees. Concurrently with the Closing, the
\nCompany shall pay a cash bonus to certain employees in accordance with Schedule
\n6.4 (the “Employee Cash Bonus”). The aggregate of the Employee Cash Bonus,
\nincluding all required withholdings and associated benefits, shall not exceed
\n$250,000. The Company’s payment of the Employee Cash Bonus and any other Company
\nrelated taxes or expenses arising therefrom shall not constitute a reduction
\nagainst the Purchase Price or in any way be offset against the Purchase Price.<\/p>\n
ARTICLE VII
\n CONDUCT OF COMPANY AND BUYER PENDING THE CLOSING<\/p>\n
7.1 Company and Seller Covenants. The Company and Sellers hereby jointly
\nand severally covenant and agree that from the date hereof to the Closing Date:<\/p>\n
7.1.1 Conduct of Business Pending the Closing. Except as
\nspecifically contemplated in this Agreement or as disclosed in any schedule
\nhereto, the business of the Company shall be conducted only in, and the Company
\nshall take no action except in, the ordinary course, on an arm’s length basis,
\nand in accordance with past custom and practice and all applicable laws, rules,
\nand regulations; and the Company shall maintain its Facilities and equipment in
\ngood operating condition, ordinary wear and tear accepted; and the Company will
\nnot, directly or indirectly, and Sellers will not cause or permit the Company
\nto:<\/p>\n
(i) Cancel or terminate or permit to be canceled or
\nterminated its current insurance (or reinsurance) policies or permit any of the
\ncoverage thereunder to lapse, unless simultaneous with such termination,
\ncancellation, or lapse, replacement policies providing coverage equal to or
\ngreater than the coverage under the canceled, terminated, or lapsed policies are
\nin full force and effect;<\/p>\n
(ii) Default under any material contract, agreement,
\ncommitment, or undertaking;<\/p>\n
(iii) Violate or fail to comply with any laws applicable to
\nit;<\/p>\n
35
\n 38
\n (iv) Fail to maintain its assets and properties in accordance
\nwith good standards of maintenance and as required in any leases or other
\nagreements pertaining thereto;<\/p>\n
(v) Enter into or modify any employment, severance, or
\nsimilar agreements or arrangements with, or grant any bonuses, salary increases,
\nor severance or termination pay to, any officers, directors, consultants or,
\nexcept in the ordinary course of business consistent with historical practices,
\nemployees, or adopt or amend any bonus, profit sharing, compensation, stock
\noption, pension, retirement, deferred compensation, employment, or other benefit
\nplan, trust, fund, or group arrangement for the benefit or welfare of any
\nofficers, directors, or employees;<\/p>\n
(vi) Directly or indirectly enter into or modify any material
\ncontract, agreement, or understanding or enter into any transaction not in the
\nordinary course of business;<\/p>\n
(vii) Cancel, without full payment, any note, loan, or other
\nobligation owing to the Company, or waive or compromise any right or claim
\nexcept the write-off of accounts receivable in the ordinary course of business;<\/p>\n
(viii) Acquire (by merger, exchange, consolidation,
\nacquisition of stock or assets, or otherwise) any corporation, partnership,
\njoint venture, or other business organization or division or assets thereof;<\/p>\n
(ix) Issue any shares of its capital stock, issue or create
\nany warrants, obligations, subscriptions, options, convertible securities, or
\nother commitments under which any additional shares of capital stock or other
\nsecurities may be issued, or effect any transfer of outstanding shares of its
\ncapital stock, including shares of any class that might be directly or
\nindirectly authorized, issued, or transferred from treasury, or otherwise permit
\nthe transfer of any outstanding shares of capital stock or declare any dividends
\nor distributions whether in cash, stock or other property;<\/p>\n
(x) Incur any indebtedness for borrowed money or issue any
\ndebt securities except the borrowing of working capital in the ordinary course
\nof business and consistent with past practice;<\/p>\n
(xi) Pay any obligation or liability, fixed or contingent,
\nexcept in the ordinary course of business;<\/p>\n
(xii) Enter into any transactions with any Seller or any
\nother Affiliate of the Company;<\/p>\n
(xiii) Except for sales Tax returns filed in the ordinary
\ncourse of business, file any Tax Return without the consent of Buyer;<\/p>\n
36
\n 39
\n (xiv) Commit any act or permit the occurrence of any event or
\nthe existence of any condition of the type described in Section 4.7 hereof;<\/p>\n
(xv) Commit or otherwise permit to occur any of the actions
\ndescribed in the preceding clauses (i) through (xiv).<\/p>\n
7.1.2 Business Relationships. The Company will exercise its
\nreasonable efforts to preserve intact its business organization and goodwill,
\nkeep available the services of its officers and employees as a group, and
\nmaintain satisfactory relationships with suppliers, distributors, customers, and
\nothers having business relationships with it.<\/p>\n
7.1.3 Notification of Certain Matters. The Company shall (i) confer
\non a regular basis with representatives of Buyer as reasonably requested by
\nBuyer, (ii) promptly notify Buyer of any Material Adverse Change in the normal
\ncourse of its business or in the operation of its properties and of any Actions
\nor other governmental or third party complaints, investigations, or hearings (or
\ncommunications indicating that the same may be contemplated) not previously
\ndisclosed, and (iii) promptly notify Buyer if the Company shall discover that
\nany representation or warranty made by it or the Sellers in this Agreement was
\nwhen made, or has subsequently become, untrue in any material respect or if it
\nor they have failed to or will fail to satisfy or perform in any material
\nrespect any covenant or agreement of the Company or Sellers contained herein.<\/p>\n
7.2 Certain Closing Covenants.<\/p>\n
(a) Company and Buyer Covenants. Company shall use its reasonable
\nefforts to cause the conditions specified in Article IX hereof, and Buyer shall
\nuse its reasonable efforts to cause the conditions specified in Article VIII
\nhereof, to be satisfied at or prior to the Closing Date.<\/p>\n
(b) Sellers’ Covenants. Sellers shall use their respective
\nreasonable efforts to (i) cause the conditions to Closing applicable to them to
\nbe satisfied and (ii) to cause the Company to satisfy the conditions to Closing
\napplicable to it, in each case on or before the Closing Date.<\/p>\n
7.3 No Negotiations. Neither the Company nor any Seller shall, directly or
\nindirectly, through any officer, director, agent, or otherwise, solicit,
\ninitiate, or encourage submission of any proposal or offer from any person or
\nentity (including any of its or their officers or employees) relating to the
\nsale or other transfer or disposition of the Shares or any liquidation,
\ndissolution, recapitalization, merger, consolidation, or acquisition or purchase
\nof all or a portion of the assets (except sales of inventory in the ordinary
\ncourse of business) of, or any equity interest in, the Company or other similar
\ntransaction or business combination involving the Company, or participate in any
\nnegotiations regarding, or furnish to any other person any information with
\nrespect to, or otherwise cooperate in any way with, or assist, participate in,
\nfacilitate, or encourage, any effort or attempt by any other person or entity to
\ndo or seek any of the foregoing. The Company and Sellers shall promptly notify
\nBuyer if any such proposal or offer, or any inquiry from or contact with any<\/p>\n
37
\n 40
\nperson with respect thereto, is made and shall promptly provide Buyer with such
\ninformation regarding such proposal, offer, inquiry, or contact as Buyer may
\nrequest.<\/p>\n
7.4 Public Announcements. The parties hereto shall not issue any press
\nrelease or public announcement, including announcements by any party for general
\nreception by or dissemination to employees, agents, or customers, with respect
\nto this Agreement and the other transactions contemplated by this Agreement
\nwithout the prior written consent of the other parties hereto (which consent
\nshall not be withheld unreasonably); provided, however, that Buyer may make any
\ndisclosure or announcement of information it is obligated to make pursuant to
\napplicable law or regulation, including any applicable law or regulation of the
\nNasdaq Stock Market or any other national securities exchange or self regulatory
\norganization, as applicable; provided, further, however, that the Company will
\nhave the opportunity to review and provide comments on any such disclosure or
\nannouncement prior to its release; and provided further, that Sellers and the
\nCompany acknowledge that Buyer may make disclosures to lenders, investment
\nbankers, rating agencies and their agents regarding the transaction and the
\nCompany.<\/p>\n
7.5 Confidentiality. The parties shall continue to be bound by that
\nConfidentiality Agreement dated February 4, 1998. Sellers and the Company may
\nmake disclosures to their consultants and representatives regarding this
\ntransaction, the Agreement and the Buyer. Notwithstanding the foregoing, the
\nSellers and the Company consent to the dissemination of relevant information
\nregarding the Company to facilitate financing the transaction contemplated
\nhereby, provided the recipients thereof are bound by appropriate obligations of
\nconfidentiality. Subject to limitations above, nothing herein or in the
\nConfidentiality Agreement shall preclude a party from developing or offering
\nproducts or services competitive with those of the other party.<\/p>\n
ARTICLE VIII
\n CONDITIONS TO SELLERS’ OBLIGATIONS<\/p>\n
The obligations of Sellers to consummate the transactions provided for
\nhereby are subject, in the discretion of Sellers, to the satisfaction, on or
\nprior to the Closing Date, of each of the following conditions, any of which may
\nbe waived by Sellers:<\/p>\n
8.1 Representations, Warranties and Covenants. All representations and
\nwarranties of Buyer contained in this Agreement shall be true and correct in all
\nmaterial respects at and as of the date of this Agreement and at and as of the
\nClosing Date, except as and to the extent that the facts and conditions upon
\nwhich such representations and warranties are based are expressly required or
\npermitted to be changed by the terms hereof, and Buyer shall have performed and
\nsatisfied in all material respects all agreements and covenants required hereby
\nto be performed by it prior to or on the Closing Date.<\/p>\n
8.2 No Proceedings, Litigation or Laws. No Action by any governmental
\nauthority or other person shall have been instituted or threatened which
\nquestions the validity or legality of the<\/p>\n
38
\n 41
\ntransactions contemplated hereby and which could reasonably be expected to
\nmaterially damage Sellers if the transactions contemplated hereunder are
\nconsummated. The waiting period under the HSR Act shall have expired or been
\nterminated.<\/p>\n
8.3 Certificates. Buyer shall furnish Sellers with such certificates of
\nBuyer to evidence compliance with the conditions set forth in this Article VIII
\nas may be reasonably requested by Sellers.<\/p>\n
8.4 Ancillary Agreements. Buyer shall have executed and delivered the
\nAncillary Agreements to which it is a party.<\/p>\n
8.5 Buyer Corporate Documents. Buyer shall have delivered to Sellers a
\ncopy of its Certificate of Incorporation certified by the Delaware Secretary of
\nState, a good standing certificate dated not more than ten days prior to Closing
\nby the Delaware Secretary of State and a copy of the resolutions adopted by
\nBuyer in connection with this Agreement, certified by its corporate secretary.<\/p>\n
ARTICLE IX
\n CONDITIONS TO BUYER’S OBLIGATIONS<\/p>\n
The obligations of Buyer to consummate the transactions provided for
\nhereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
\nto the Closing Date, of each of the following conditions, any of which may be
\nwaived by Buyer:<\/p>\n
9.1 Representations, Warranties and Covenants. All representations and
\nwarranties of Sellers and the Company contained in this Agreement shall be true
\nand correct in all material respects at and as of the date of this Agreement and
\nat and as of the Closing Date, except as and to the extent that the facts and
\nconditions upon which such representations and warranties are based are
\nexpressly required or permitted to be changed by the terms hereof, and Sellers
\nand the Company shall have performed and satisfied in all material respects all
\nagreements and covenants required hereby to be performed by them prior to or on
\nthe Closing Date.<\/p>\n
9.2 Consents. All Permits and waivers necessary to the consummation of the
\ntransactions contemplated hereby and for the continued operation of the business
\nafter the Closing by Buyer shall have been obtained including, without
\nlimitation (i) all required third party consents, (ii) all required approvals of
\nBuyer’s lenders, and (iii) the waiting period under the HSR Act shall have
\nexpired or been terminated.<\/p>\n
9.3 No Proceedings or Litigation. No Action by any governmental authority
\nor other person shall have been instituted or threatened which questions the
\nvalidity or legality of the transactions contemplated hereby and which could
\nreasonably be expected to damage Buyer if the transactions contemplated hereby
\nare consummated, including, without limitation, any limitation or restriction on
\nthe right or ability of the Buyer to own or transfer the Shares or of the
\nCompany to<\/p>\n
39
\n 42
\nown, possess or transfer its assets after the Closing. There shall not be any
\nstatute, rule or regulation that makes the purchase and sale of the Shares or
\nthe Company contemplated hereby illegal or otherwise prohibited.<\/p>\n
9.4 Opinions of Counsel. The Company and the Sellers shall have delivered
\nto Buyer opinions of Marks & Golia, dated as of the Closing Date, in form and
\nsubstance reasonably satisfactory to Buyer, to the effect that:<\/p>\n
9.4.1 Incorporation. The Company has been duly incorporated and is
\nvalidly existing and in good standing under the laws of its state of
\nincorporation and is qualified to do business and is in good standing in each
\nstate in which the ownership or lease of its properties, the employment of its
\npersonnel or character of its business requires it to do so, except where the
\nfailure to be so qualified would not have a Material Adverse Effect.<\/p>\n
9.4.2 Corporate Power and Authority. The Company has the necessary
\ncorporate power and authority to enter into this Agreement and the Ancillary
\nAgreements to which it is a party and to consummate the transactions
\ncontemplated hereby and thereby and to own, lease and operate its assets and
\nproperties and to conduct its businesses as presently conducted.<\/p>\n
9.4.3 Corporate Action. The execution, delivery and performance of
\nthis Agreement and the Ancillary Agreements to which the Company is a party have
\nbeen duly authorized by all necessary corporate or other action, and this
\nAgreement and the Ancillary Agreements have been duly executed and delivered by
\nthe Company or the Sellers, as applicable.<\/p>\n
9.4.4 Obligation of the Company or Sellers. This Agreement and each
\nAncillary Agreement constitutes a legally valid and binding obligation of the
\nCompany or the Sellers, as applicable, enforceable against the Company or the
\nSellers in accordance with its terms, except as limited by (i) bankruptcy,
\ninsolvency, reorganization, moratorium or other similar laws relating to
\ncreditors’ rights generally or by equitable principles (whether considered in an
\naction at law or in equity), (ii) limitations imposed by federal or applicable
\nstate law or equitable principles upon the availability of specific performance,
\ninjunctive relief or other equitable remedies, and (iii) other customary
\nexceptions to enforceability.<\/p>\n
9.4.5 No Breach. Neither the execution and delivery of this
\nAgreement or the Ancillary Agreements by the Company or the Sellers, as
\napplicable, nor the consummation of the transactions contemplated hereby or
\nthereby will (i) violate or conflict with any provision of the Articles of
\nIncorporation or Bylaws of the Company, or (ii) breach, or cause a default
\nunder, any term or provision of any Contract listed on any Schedule to this
\nAgreement relating to the Company or any Seller.<\/p>\n
9.4.6 No Permits Required. No Permit or filing with or consent of
\nany governmental authority or any other person is required for the execution and
\ndelivery of this Agreement or the Ancillary Agreements by the Company or the
\nSellers, as applicable, or the<\/p>\n
40
\n 43
\nconsummation by the Company or the Sellers of the transactions contemplated
\nhereby or thereby, except such as have been obtained or the failure to obtain
\nwould not materially adversely affect the Company’s or the Sellers’ ability to
\nconsummate the transactions contemplated hereby or thereby.<\/p>\n
9.4.7 No Actions Pending. To the knowledge of such counsel, except
\nas set forth in the Schedules hereto, no Action is pending or threatened (i)
\nagainst the Company, or (ii) against any of the officers or directors of the
\nCompany as such, or (iii) seeks to delay, limit, enjoin or obtain damages in
\nrespect of the transactions contemplated hereby.<\/p>\n
9.4.8 No Violation of Law. Neither the execution and delivery of
\nthis Agreement or any Ancillary Agreement by the Company or the Sellers, as
\napplicable, nor the consummation of the transactions contemplated hereby or
\nthereby will violate or result in a failure to comply with any statute, law,
\nordinance, regulation, rule or, to the knowledge of such counsel, order of any
\nfederal or state government or any other federal or state governmental
\ndepartment or agency, or any judgment, decree or order of any court known to
\nsuch counsel to be applicable to the Company or the Sellers.<\/p>\n
9.4.9 Title to Shares. The authorized capital stock of the Company
\nconsists solely of 750 shares of common stock, $100 par value per share, and the
\nissued and outstanding common stock of the Company consists solely of the
\nShares, all of which are owned of record and beneficially by the Sellers free
\nand clear of all Encumbrances other than restrictions on transfer imposed by the
\nfederal and state securities laws. To the knowledge of such counsel, there are
\nno outstanding warrants, options or other rights to acquire, or securities
\nconvertible into or exercisable or exchangeable for, shares of capital stock of
\nthe Company, nor any commitments or agreements by the Company to issue any such
\nrights or securities or shares of capital stock. Upon Closing, Buyer will
\nacquire good and valid title to all of the Shares, free and clear of all
\nEncumbrances.<\/p>\n
9.4.10 Other Opinions. Such other opinions as any lender to Buyer
\nmay reasonably request and as are customarily provided in transactions of this
\nnature, and such persons shall be entitled to rely upon the opinions of Sellers’
\ncounsel hereunder.<\/p>\n
9.5 Certificates. Sellers and the Company shall furnish Buyer with such
\ncertificates of Sellers, the officers of the Company and others to evidence
\ncompliance with the conditions set forth in this Article IX as may be reasonably
\nrequested by Buyer.<\/p>\n
9.6 Ancillary Agreements. Each of the Sellers and the Company, as
\nappropriate, shall have entered into the Ancillary Agreements.<\/p>\n
9.7 Release of Encumbrances. The Company shall have filed or recorded
\n(where necessary) and delivered to Buyer all documents necessary to release the
\nShares and assets of the Company from all Encumbrances (except for Encumbrances
\npermitted under Section 4.9), which documents shall be in a form reasonably
\nsatisfactory to Buyer’s counsel.<\/p>\n
41
\n 44
\n 9.8 No Material Changes. Except as otherwise approved by Buyer, there
\nshall not have been any Material Adverse Change in the Company since the date of
\nthis Agreement, except those having an industry-wide effect.<\/p>\n
9.9 Corporate Documents. Buyer shall have received from the Company
\nresolutions adopted by its board of directors as it reasonably deems appropriate
\napproving this Agreement and the Ancillary Agreements to which it is a party,
\nand the transactions contemplated hereby and thereby.<\/p>\n
9.10 Financing. Seller, the Company, their counsel and accountants shall
\nhave provided such materials, opinions or certificates as reasonably requested
\nby Buyer and as are customarily provided in transactions of this nature to
\nfacilitate financing of the transaction contemplated hereby or to facilitate
\nreceipt of any consents of lenders to Buyer reasonably required in connection
\nwith the transactions contemplated hereby.<\/p>\n
9.11 Financial Statement Deliveries. The Company shall have provided Buyer
\nwith (a) the Financial Statements, and (b) the Closing Date Balance Sheet. The
\nFinancial Statements shall be subject to the representations and warranties of
\nSection 4.6 of this Agreement.<\/p>\n
9.12 Affiliate Loans. All indebtedness owed to the Company by any Seller,
\nor Affiliates of the Company or Sellers, shall have been paid and satisfied in
\nfull.<\/p>\n
9.13 Resignations. Except as provided in the Ancillary Agreements, the
\nofficers and directors of the Company shall have resigned from such offices.<\/p>\n
9.14 Repayment of Indebtedness. All long-term debt of the Company shall
\nhave been repaid and all pledges and guaranties related thereto shall have been
\nreleased, or will be repaid and released concurrently with the Closing.<\/p>\n
9.15 Due Diligence. Buyer shall have completed a customary due diligence
\ninvestigation of the Company and shall be satisfied with the status thereof,
\nincluding the status of title to and zoning of the Real Property.<\/p>\n
9.16 Board Approval. The Board of Directors of Buyer shall have approved
\nthis Agreement and the transactions contemplated hereby.<\/p>\n
9.17 Title to Real Property. Buyer shall receive at Closing a proforma or
\nother confirmation of the issuance after Closing of the Title Policy, or similar
\ndocument, evidencing good and marketable title to the Real Property. The grant
\ndeed or deeds referred to in Section 6.3.1 shall have been recorded concurrently
\nwith the Closing.<\/p>\n
9.18 The Company shall have provided evidence of the termination of any
\nand all stock and membership interest cross-purchase and related agreements set
\nforth on Schedule 4.19.<\/p>\n
42
\n 45<\/p>\n
*Confidential information has been omitted and filed separately with the
\nSecurities and Exchange Commission pursuant to a confidential treatment request.<\/p>\n
ARTICLE X
\n RISK OF LOSS; CONSENTS TO ASSIGNMENT<\/p>\n
10.1 Risk of Loss. From the date hereof through the Closing, all risk of
\nloss or damage to the Company, its business or assets shall be borne by the
\nCompany. If any material portion of the property is destroyed or damaged by fire
\nor any other cause on or prior to the Closing, other than use, wear or loss in
\nthe ordinary course of business, the Company shall give written notice to Buyer
\nas soon as practicable after discovery of such damage or destruction, the amount
\nof insurance, if any, covering such property and the amount, if any, which the
\nCompany is otherwise entitled to receive as a consequence.* If, notwithstanding
\nsuch damage or destruction, Buyer acquires the Shares, then after the Closing
\nany insurance or other proceeds shall belong to the Company.<\/p>\n
ARTICLE XI
\n REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION<\/p>\n
11.1 Survival of Representations, Etc. The representations, warranties,
\ncovenants and agreements of Sellers, the Company, and Buyer contained in this
\nAgreement and the certificates delivered hereunder shall survive the
\nconsummation of the transactions contemplated hereby and the Closing Date,
\nwithout regard to any investigation made by any of the parties hereto; provided,
\nhowever, the representations and warranties of the Company shall terminate as of
\nthe Closing.<\/p>\n
11.2 Indemnification.<\/p>\n
11.2.1 By Sellers. Sellers shall indemnify, defend, save and hold
\nharmless Buyer, its Affiliates and subsidiaries (including the Company from and
\nafter the Closing Date), and its and their respective Representatives, from and
\nagainst any and all claims, damages, costs, losses (including, without
\nlimitation, diminution in value), Taxes, liabilities, judgments, penalties,
\nfines, obligations, lawsuits, deficiencies, demands and expenses (whether or not
\narising out of third-party claims), including, without limitation, interest,
\npenalties, costs of mitigation, clean-up or remedial action), lost profits and
\nother losses resulting from any shutdown or curtailment of operations,
\nattorneys’ fees, experts’ fees and all amounts paid in investigation, defense,
\naudit or settlement of any of the foregoing (except those arising from Hazardous
\nMaterials, Environmental Laws, and Environmental Conditions) (as such terms are
\ndefined in the Environmental Agreement referred to in Section 6.2) (herein,
\n“Damages”), incurred in connection with, arising out of, resulting from or
\nincident to (i) any breach or inaccuracy of any representation or warranty, made
\nby the Company or Sellers in this Agreement or in any agreement or certificate
\ndelivered hereunder; (ii) any breach of any covenant or agreement made by the
\nCompany or Sellers in this Agreement or in any agreement or certificate
\ndelivered hereunder; and (iii) any claim or contingent liability disclosed in
\nSchedule 4.15.<\/p>\n
43
\n 46
\n 11.2.2 By Buyer. Buyer and the Company (from and after the Closing)
\nshall indemnify, defend, save and hold harmless Sellers, their Affiliates (other
\nthan the Company) and their Representatives from and against any and all Damages
\nincurred in connection with, arising out of, resulting from or incident to (i)
\nthe breach or inaccuracy of any representation or warranty made by Buyer in this
\nAgreement or in any agreement or certificate delivered hereunder; or (ii) any
\nbreach of any covenant or agreement made by Buyer in this Agreement or any
\nagreement or certificate delivered hereunder.<\/p>\n
11.2.3 Cooperation. In connection with third party Actions, the
\nindemnified party shall cooperate in all reasonable respects with the
\nindemnifying party and such attorneys in the investigation, trial and defense of
\nsuch Action and any appeal arising therefrom; provided, however, that the
\nindemnified party may, at its own cost (except as provided in Section 11.2.5
\nhereof), participate in the investigation, trial and defense of such Action and
\nany appeal arising therefrom. The parties shall cooperate with each other in any
\nnotifications to insurers.<\/p>\n
11.2.4 Defense of Claims. If a claim for Damages (a “Claim”) is to
\nbe made by a party entitled to indemnification hereunder against the
\nindemnifying party, the party claiming such indemnification shall give written
\nnotice (a “Claim Notice”) to the indemnifying party as soon as practicable after
\nthe party entitled to indemnification becomes aware of any fact, condition or
\nevent which may give rise to Damages for which indemnification may be sought
\nhere under. The Claim Notice shall include the amounts the indemnified party
\nbelieves in good faith are subject to indemnification and a brief basis of the
\nclaim. The indemnified party may revise its estimate of any claim by notice to
\nthe other party.<\/p>\n
11.2.5 Third Party Claims. If any Action is filed against any party
\nentitled to the benefit of indemnity hereunder, written notice thereof shall be
\ngiven to the indemnifying party as promptly as practicable (and in any event
\nwithin fifteen (15) calendar days after the service of the citation or summons).
\nThe failure of any indemnified party to give timely notice hereunder shall not
\naffect rights to indemnification hereunder, except to the extent that the
\nindemnifying party demonstrates actual damage caused by such failure. After such
\nnotice, if the indemnifying party shall acknowledge in writing to the
\nindemnified party that the indemnifying party shall be obligated under the terms
\nof its indemnity hereunder in connection with Action, then the indemnifying
\nparty shall be entitled, if it so elects, (i) to take control of the defense and
\ninvestigation of Action, (ii) to employ and engage attorneys of its own choice
\n(which shall be reasonably acceptable to the indemnified party) to handle and
\ndefend the same, at the indemnifying party’s cost, risk and expense unless the
\nnamed parties to such Action include both the indemnifying party and the
\nindemnified party and the indemnified party has been advised in writing by
\ncounsel that there may be one or more legal defenses available to such
\nindemnified party that are different from or additional to those available to
\nthe indemnifying party, in which case the indemnified party shall be able to
\nretain its own counsel at the reasonable expense of the indemnifying party), and
\n(iii) to compromise or settle such Action, which compromise or settlement shall
\nbe made only with the written consent of the indemnified party, such consent not
\nto be unreasonably withheld; provided, however, if the remediation or resolution
\nof any such Action will occur on or at any Facility or is reasonably<\/p>\n
44
\n 47<\/p>\n
*Confidential information has been omitted and filed separately with the
\nSecurities and Exchange Commission pursuant to a confidential treatment request.<\/p>\n
expected to have a Material Adverse Effect on the indemnified party’s business
\noperations, then, notwithstanding the foregoing, the indemnified party shall be
\nentitled to control such remediation or resolution, including, without
\nlimitation, to take control of the defense and investigation of such Action, to
\nemploy and engage attorneys of its own choice to handle and defend the same, at
\nthe indemnifying party’s cost, risk and expense, and to compromise or settle
\nsuch Action. If the indemnifying party fails to assume the defense of such
\nAction within fifteen (15) calendar days after receipt of the written notice,
\nthe indemnified party against which such Action has been asserted will (upon
\ndelivering notice to such effect to the indemnifying party) have the right to
\nundertake, at the indemnifying party’s cost and expense, the defense, compromise
\nor settlement of such Action on behalf of and for the account and risk of the
\nindemnifying party. In the event the indemnified party assumes the defense of
\nthe Action, the indemnified party will keep the indemnifying party reasonably
\ninformed of the progress of any such defense, compromise or settlement. Pursuant
\nto Sections 11.2.1 or 11.2.2, as applicable, the indemnifying party shall be
\nliable for any settlement of any Action effected pursuant to and in accordance
\nwith this Section 11.2.5 and for any final judgment (subject to any right of
\nappeal), and the indemnifying party agrees to indemnify and hold harmless an
\nindemnified party from and against any Damages by reason of such settlement or
\njudgement.<\/p>\n
11.2.6 Rights of Offset. All Purchase Price adjustments and amounts
\nas to which the Sellers are obligated to indemnify Buyer shall be satisfied
\nfirst by set off against the outstanding principal amount of the Holdback Note.<\/p>\n
11.2.7 *<\/p>\n
11.3 Sellers Representative.<\/p>\n
11.3.1 Appointment. The Sellers irrevocably make, constitute and
\nappoint Ted R. Rossin as their agent (the “Seller Representative”) and authorize
\nand empower him to fulfill the role of Seller Representative hereunder. In the
\nevent of the resignation, death or incapacity of a Seller Representative, his
\nsuccessor shall be appointed within 21 days of his death or incapacity by mutual
\nagreement of the remaining Sellers, and such successor either shall be a Seller
\nor a Representative of a Seller or shall otherwise be reasonably acceptable to
\nBuyer. If the Sellers fail to appoint a successor within such 21-day period,
\nthen Buyer shall have the right to appoint the successor from among the Sellers.
\nThe choice of a successor Seller Representative appointed in any manner
\npermitted above shall be final and binding upon all of the Sellers. The
\ndecisions and actions of any successor Seller Representative shall be, for all
\npurposes, those of a Seller Representative as if originally named herein.<\/p>\n
45
\n 48
\n 11.3.2 Authority. Each Seller has made, constituted and appointed
\nand by the execution of this Agreement hereby irrevocably makes, constitutes and
\nappoints the Seller Representative as such person’s true and lawful attorney in
\nfact and agent, for such person and in such person’s name, (i) to receive all
\nnotices and communications directed to such Seller under this Agreement and to
\ntake any action (or to determine to take no action) with respect thereto, as he
\nmay deem appropriate as effectively as such Seller could act for himself or
\nherself, including, without limitation,, the settlement or compromise of any
\ndispute or controversy, and (ii) to execute and deliver all instruments and
\ndocuments of every kind incident to the foregoing to all intents and purposes
\nand with the same effect as such Seller could do personally, and each such
\nSeller hereby ratifies and confirms as his or her own act, all that the Seller
\nRepresentative shall do or cause to be done pursuant to the provisions hereof.<\/p>\n
11.3.3 Death; Incapacity. The death or incapacity of any Seller
\nshall not terminate the authority and agency of the Seller Representative.<\/p>\n
ARTICLE XII
\n ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING<\/p>\n
12.1 Cooperation and Records Retention. Sellers, the Company and Buyer
\nshall (i) each provide the other with such assistance as may reasonably be
\nrequested by any of them in connection with the preparation of any Tax Return,
\naudit, or other examination by any taxing authority or judicial or
\nadministrative proceedings relating to liability for Taxes, (ii) each retain and
\nprovide the other with any records or other information that may be relevant to
\nany such Tax Return, audit or examination, proceeding or determination, and
\n(iii) each provide the other with any final determination of any such audit or
\nexamination, proceeding, or determination that affects any amount required to be
\nshown on any Tax Return of the other for any period.<\/p>\n
ARTICLE XIII
\n MISCELLANEOUS<\/p>\n
13.1 Termination. This Agreement may be terminated at any time prior to
\nClosing:<\/p>\n
13.1.1 By mutual written consent of Buyer and the Seller
\nRepresentative;<\/p>\n
13.1.2 By Buyer or Sellers if the Closing shall not have occurred on
\nor before October 31, 1998; provided, however, that this provision shall not be
\navailable to Buyer if Sellers have the right to terminate this Agreement under
\nSection 13.1.4, and this provision shall not be available to Sellers if Buyer
\nhas the right to terminate this Agreement under Section 13.1.3;<\/p>\n
13.1.3 By Buyer if there is a material breach of any representation
\nor warranty of Sellers or the Company of any covenant or agreement to be
\ncomplied with or performed by Sellers<\/p>\n
46
\n 49
\nor the Company pursuant to the terms of this Agreement or the failure of a
\ncondition set forth in Article IX to be satisfied (and such condition is not
\nwaived in writing by Buyer) on or prior to the Closing Date, or the occurrence
\nof any event which results or would result in the failure of a condition set
\nforth in Article IX to be satisfied on or prior to the Closing Date, provided
\nthat Buyer may not terminate this Agreement prior to the Closing if Sellers or
\nthe Company have not had an adequate opportunity to cure such failure by such
\ntime; or<\/p>\n
13.1.4 By Sellers if there is a material breach of any
\nrepresentation or warranty set forth in Article V hereof or of any covenant or
\nagreement to be complied with or performed by Buyer pursuant to the terms of
\nthis Agreement or the failure of a condition set forth in Article VIII to be
\nsatisfied (and such condition is not waived in writing by Sellers) on or prior
\nto the Closing Date, or the occurrence of any event which results or would
\nresult in the failure of a condition set forth in Article VIII to be satisfied
\non or prior to the Closing Date; provided that Sellers may not terminate this
\nAgreement prior to the Closing Date if Buyer has not had an adequate opportunity
\nto cure such failure by such time.<\/p>\n
13.2 In the Event of Termination. In the event of termination of this
\nAgreement:<\/p>\n
13.2.1 Each party will redeliver all documents, work papers and
\nother material of any other party relating to the transactions contemplated
\nhereby, whether so obtained before or after the execution hereof, to the party
\nfurnishing the same; and<\/p>\n
13.2.2 No party hereto shall have any liability or further
\nobligation to any other party to this Agreement, except as stated in Sections
\n7.5 or this Section 13.2.2, and except for any willful breach of this Agreement
\noccurring prior to the proper termination of this Agreement. The foregoing
\nprovisions shall not limit or restrict the availability of specific performance
\nor other injunctive or other equitable relief to the extent that specific
\nperformance or such other relief would otherwise be available to a party
\nhereunder.<\/p>\n
13.3 Assignment. Neither this Agreement nor any of the rights or
\nobligations hereunder may be assigned by any party without the prior written
\nconsent of the other parties; except that Buyer may, without such consent,
\nassign all such rights to any lender as collateral security, and Buyer may
\nassign all such rights and obligations to a wholly-owned subsidiary or
\nsubsidiaries of Buyer (or a partnership controlled by Buyer) which shall assume
\nall obligations and liabilities of Buyer under this Agreement; provided,
\nhowever, that any such assignment is subject to Buyer’s execution of a guaranty
\nof payment of the Purchase Price and of the Holdback Note in form and substance
\nreasonably acceptable to Buyer and Sellers. Subject to the foregoing, this
\nAgreement shall be binding upon and inure to the benefit of the parties hereto
\nand their respective successors and permitted assigns, and, except pursuant to
\nArticle XI, no other person shall have any right, benefit or obligation under
\nthis Agreement as a third party beneficiary or otherwise.<\/p>\n
13.4 Notices. All notices, requests, demands and other communications
\nwhich are required or may be given under this Agreement shall be in writing and
\nshall be deemed to have been<\/p>\n
47
\n 50
\nduly given when received if personally delivered; when transmitted if
\ntransmitted by telecopy, electronic or digital transmission method; the day
\nafter it is sent, if sent for next day delivery to a domestic address by
\nrecognized overnight delivery service (e.g., Federal Express); and upon receipt,
\nif sent by certified or registered mail, return receipt requested. In each case
\nnotice shall be sent to:<\/p>\n
If to the Company, addressed to:<\/p>\n
Bannister Steel Inc.
\n 3202 Hoover Avenue
\n National City, CA 91950<\/p>\n
with a copy to:<\/p>\n
Murray M. Helm, Jr.
\n Marks & Golia, LLP
\n 3900 Harney Street, First Floor
\n San Diego, CA. 92110<\/p>\n
If to Sellers, addressed to:<\/p>\n
Mr. Ted F. Rossin
\n 1515 Willow Bend Drive
\n El Cajon, CA 92019<\/p>\n
with a copy to:<\/p>\n
Murray M. Helm, Jr.
\n Marks & Golia, LLP
\n 3900 Harney Street, First Floor
\n San Diego, Calif. 92110<\/p>\n
If to Buyer, addressed to:<\/p>\n
Mr. Scott A. Schuff
\n President and Chief Executive Officer
\n Schuff Steel Company
\n 420 South 19th Avenue
\n Phoenix, Arizona 85009<\/p>\n
with a copy to:<\/p>\n
Steven D. Pidgeon, Esq.
\n Snell & Wilmer L.L.P.
\n One Arizona Center<\/p>\n
48
\n 51
\n Phoenix, Arizona 85004<\/p>\n
or to such other place and with such other copies as either party may designate
\nas to itself by written notice to the others.<\/p>\n
13.5 Choice of Law. This Agreement shall be construed, interpreted and the
\nrights of the parties determined in accordance with the laws of the State of
\nCalifornia (without reference to the choice of law provisions thereof), except
\nwith respect to matters of law concerning the internal affairs of any person
\n(other than a natural person) which is a party to or the subject of this
\nAgreement, and as to those matters the law of the jurisdiction under which the
\nrespective person derives its powers shall govern.<\/p>\n
13.6 Entire Agreement; Amendments and Waivers. This Agreement, together
\nwith all exhibits and schedules hereto and the Ancillary Agreements, constitutes
\nthe entire agreement among the parties pertaining to the subject matter hereof
\nand supersedes all prior agreements, understandings, negotiations and
\ndiscussions, whether oral or written, of the parties. This Agreement may not be
\namended except by an instrument in writing signed on behalf of each of the
\nparties hereto. No amendment, supplement, modification or waiver of this
\nAgreement shall be binding unless executed in writing by the party to be bound
\nthereby. No waiver of any of the provisions of this Agreement shall be deemed or
\nshall constitute a waiver of any other provision hereof (whether or not
\nsimilar), nor shall such waiver constitute a continuing waiver unless otherwise
\nexpressly provided.<\/p>\n
13.7 Multiple Counterparts. This Agreement may be executed in one or more
\ncounterparts, each of which shall be deemed an original, but all of which
\ntogether shall constitute one and the same instrument.<\/p>\n
13.8 Expenses. Except as otherwise specified in this Agreement, each party
\nhereto shall pay its own legal, accounting, out-of-pocket and other expenses
\nincident to this Agreement and to any action taken by such party in preparation
\nfor carrying this Agreement into effect.<\/p>\n
13.9 Invalidity. In the event that any one or more of the provisions
\ncontained in this Agreement or in any other instrument referred to herein,
\nshall, for any reason, be held to be invalid, illegal or unenforceable in any
\nrespect, then to the maximum extent permitted by law, such invalidity,
\nillegality or unenforceability shall not affect any other provision of this
\nAgreement or any other such instrument.<\/p>\n
13.10 Titles. The titles, captions or headings of the Articles, Sections
\nand subsections herein are inserted for convenience of reference only and are
\nnot intended to be a part of or to affect the meaning or interpretation of this
\nAgreement.<\/p>\n
13.11 Cumulative Remedies. Subject to provisions of Section 13.12, all
\nrights and remedies of either party hereto are cumulative of each other and of
\nevery other right or remedy such party may<\/p>\n
49
\n 52
\notherwise have at law or in equity, and the exercise of one or more rights or
\nremedies shall not prejudice or impair the concurrent or subsequent exercise of
\nother rights or remedies. Nothing herein shall limit a party’s rights to seek
\nequitable relief, including specific performance or injunctive relief.<\/p>\n
13.12 Arbitration. Except as specifically provided herein, any controversy
\narising after the Closing out of or relating to this Agreement (excluding for
\npurposes of this Section 13.12, the Employment Agreements, forms of which are
\nattached as Exhibits hereto), or relating to the breach hereof, shall be settled
\nby arbitration conducted in San Francisco, California in accordance with the
\nCommercial Arbitration Rules of the American Arbitration Association then in
\neffect (except as otherwise expressly provided in this Agreement). The award
\nrendered by the arbitrator(s) shall be final and judgment upon the award
\nrendered by the arbitrator(s) may be entered upon it in any court having
\njurisdiction thereof. The arbitrator(s) shall possess the powers to issue
\nmandatory orders and restraining orders in connection with such arbitration. The
\nexpenses of the arbitration shall be borne by the losing party unless otherwise
\nallocated by the arbitrator(s). The agreement to arbitrate shall be specifically
\nenforceable under the prevailing arbitration law. During the continuance of any
\narbitration proceedings, the parties shall continue to perform their respective
\nobligations under this Agreement.<\/p>\n
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]<\/p>\n
50
\n 53
\n IN WITNESS WHEREOF, the parties hereto have executed or caused this
\nAgreement to be duly executed on their respective behalf, where appropriate by
\ntheir respective officers or fiduciaries thereunto duly authorized, all as of
\nthe day and year first above written.<\/p>\n
(the “Company”)<\/p>\n
Bannister Steel Inc.<\/p>\n
By:
\n ———————————————
\n Name: Ted F. Rossin
\n ——————————————
\n Its: President
\n ——————————————<\/p>\n
(“Buyer”)<\/p>\n
Schuff Steel Company<\/p>\n
By:
\n ———————————————
\n Name:
\n ——————————————
\n Its:
\n ——————————————<\/p>\n
(“Seller Representative”)<\/p>\n
————————————————
\n Ted F. Rossin<\/p>\n
(“Sellers”)<\/p>\n
————————————————
\n Ted F. Rossin, as Co-Trustee U.T.D. 4\/22\/98<\/p>\n
————————————————
\n Connie A. Rossin, as Co-Trustee U.T.D. 4\/22\/98<\/p>\n
————————————————
\n John N. Achuff, II, as Co-Trustee U.T.D. 6\/11\/98<\/p>\n
51
\n 54
\n ————————————————
\n Mary P. Achuff, as Co-Trustee U.T.D. 6\/11\/98<\/p>\n
————————————————
\n Arnold Baumgartner<\/p>\n
————————————————
\n Jeffrey Clinkscales<\/p>\n
————————————————
\n Kimberly Clinkscales<\/p>\n
————————————————
\n Ronald Bowers<\/p>\n
————————————————
\n Tonie L. Bowers<\/p>\n
————————————————
\n Guadalupe Nunez<\/p>\n
————————————————
\n Graciela Nunez<\/p>\n
52<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8773],"corporate_contracts_industries":[9481],"corporate_contracts_types":[9622,9627],"class_list":["post-43708","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-schuff-international-inc","corporate_contracts_industries-construction__specialty","corporate_contracts_types-planning","corporate_contracts_types-planning__purchase"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43708","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43708"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43708"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43708"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43708"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}