EXHIBIT 2.1(a)
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
PCTEL, INC.
MAXRAD, INC.
KATHRYN L. HANUS
GEORGE E. HANUS
GERALDINE HANUS CHILDREN'S TRUSTS - KATHRYN L. HANUS
TRUST DATED OCTOBER 31, 2000
GERALDINE HANUS CHILDREN'S TRUSTS - GEORGE E. HANUS
TRUST DATED OCTOBER 31, 2000
GEORGE M. HANUS TRUST DATED JUNE 7, 1986 - MARITAL
TRUST
HARRIS TRUST AND SAVINGS BANK, NOT INDIVIDUALLY BUT AS
TRUSTEE OF AND ON BEHALF OF THE GEORGE M. HANUS
TRUST, AS SHAREHOLDER REPRESENTATIVE
AND
U.S. BANK, NATIONAL ASSOCIATION, AS ESCROW AGENT
DATED AS OF JANUARY 2, 2004
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS......................................................................................... 2
1.1 Certain Defined Terms....................................................................... 2
ARTICLE II THE SHARE PURCHASE................................................................................. 9
2.1 The Share Purchase.......................................................................... 9
2.2 Closing Time and Place...................................................................... 9
2.3 Consideration............................................................................... 10
2.4 Shareholder Waivers......................................................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS................................ 10
3.1 Organization of the Company and the Subsidiary.............................................. 10
3.2 Company Capital Structure................................................................... 11
3.3 Subsidiaries, Joint Ventures, Etc........................................................... 12
3.4 Authority................................................................................... 13
3.5 No Conflict................................................................................. 13
3.6 Consents.................................................................................... 13
3.7 Company Financial Statements................................................................ 13
3.8 No Undisclosed Liabilities; Liability Schedule.............................................. 14
3.9 No Changes.................................................................................. 14
3.10 Tax and Other Returns and Reports........................................................... 17
3.11 Restrictions on Business Activities......................................................... 20
3.12 Title to Properties; Absence of Liens and Encumbrances; Condition of Equipment, Customer
Information................................................................................. 20
3.13 Intellectual Property....................................................................... 22
3.14 Product Warranties; Reserves................................................................ 27
3.15 Agreements, Contracts and Commitments....................................................... 27
3.16 Change of Control Payments.................................................................. 29
3.17 Interested Party Transactions............................................................... 29
3.18 Compliance with Laws; Governmental Authorization............................................ 30
3.19 Litigation.................................................................................. 30
3.20 Insurance................................................................................... 31
3.21 Minute Books; Books and Records............................................................. 31
3.22 Environmental Matters....................................................................... 31
3.23 Brokers' and Finders' Fees; Third Party Expenses; Other Expenses............................ 32
3.24 Employees; Compensation..................................................................... 33
3.25 Employee Matters and Benefit Plans.......................................................... 33
3.26 Bank Accounts............................................................................... 36
3.27 Indemnification Obligations................................................................. 36
3.28 Accounts Receivable......................................................................... 37
3.29 Customers................................................................................... 37
3.30 Spreadsheet................................................................................. 37
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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3.31 Foreign Corrupt Practices Act............................................................... 37
3.32 Complete Copies of Materials................................................................ 37
3.33 Representations Complete.................................................................... 37
3.34 Director Liability.......................................................................... 37
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS................................................. 38
4.1 Ownership of Company Capital Stock.......................................................... 38
4.2 Absence of Claims by the Shareholders....................................................... 38
4.3 No Conflict................................................................................. 38
4.4 Authority................................................................................... 38
4.5 Discussions with Officers................................................................... 39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT............................................................ 39
5.1 Organization of Parent...................................................................... 39
5.2 Authority; No Conflict...................................................................... 39
ARTICLE VI ADDITIONAL AGREEMENTS.............................................................................. 39
6.1 Confidentiality............................................................................. 39
6.2 Public Disclosure........................................................................... 40
6.3 Reasonable Efforts; Additional Documents; and Further Assurances............................ 40
6.4 Closing Date Balance Sheet.................................................................. 40
6.5 Expenses.................................................................................... 40
6.6 Tax Matters................................................................................. 40
6.7 Indemnification............................................................................. 42
6.8 Collection Efforts.......................................................................... 42
ARTICLE VII DELIVERABLES...................................................................................... 42
7.1 Deliveries by Parent, the Company, and the Shareholders..................................... 42
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION AND ESCROW........................... 45
8.1 Survival of Representations, Warranties, and Covenants...................................... 45
8.2 Indemnification............................................................................. 45
8.3 Escrow Arrangements......................................................................... 46
8.4 Shareholder Representative.................................................................. 53
8.5 Maximum Payments; Remedy.................................................................... 53
8.6 Adjustment to Consideration................................................................. 54
ARTICLE IX GENERAL PROVISIONS................................................................................. 56
9.1 Notices..................................................................................... 56
9.2 Interpretation.............................................................................. 58
9.3 Counterparts................................................................................ 58
9.4 Entire Agreement; No Third Party Beneficiaries; Assignment.................................. 58
9.5 Rights Reservation.......................................................................... 59
9.6 Severability................................................................................ 59
9.7 Other Remedies.............................................................................. 59
9.8 Governing Law and Venue..................................................................... 59
9.9 Rules of Construction....................................................................... 59
9.10 Specific Performance........................................................................ 59
9.11 Waiver of Jury Trial........................................................................ 59
9.12 Amendment; Waivers.......................................................................... 60
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Employment Agreement
Exhibit B Form of Non-Competition Agreement
Exhibit C Form of Legal Opinion of Counsel to the Company
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of January 2, 2004 by and among PCTel, Inc., a Delaware
corporation ("Parent"); MAXRAD, Inc., an Illinois corporation (the "Company");
Kathryn L. Hanus; George E. Hanus; Geraldine Hanus Children's Trusts--Kathryn L.
Hanus Trust dated October 31, 2000; Geraldine Hanus Children's Trusts--George E.
Hanus Trust dated October 31, 2000; George M. Hanus Trust dated June 7, 1986 -
Marital Trust (each a "Shareholder" and collectively, the "Shareholders");
Harris Trust and Savings Bank ("Harris Bank"), not individually but as Trustee
of and on behalf of the George M. Hanus Trust, as Shareholder Representative (as
defined in Section 8.4 below); and U.S. Bank, National Association, as Escrow
Agent (as defined below).
RECITALS
A. The Boards of Directors of each of the Company and Parent
believe it to be in the best interests of each such company and each such
company's respective shareholders that Parent acquire all of the outstanding
shares of Company Capital Stock (as defined below), all of which are held by the
Shareholders (the "Share Purchase") and, in furtherance thereof, have approved
the Share Purchase and the other transactions contemplated hereby.
B. The Shareholders desire to sell all of the issued and
outstanding shares of Company Capital Stock owned or held of record by them to
Parent, all upon the terms and subject to the conditions set forth herein.
C. A portion of the consideration otherwise payable by Parent to
the Shareholders in connection with the Share Purchase shall be placed in escrow
by Parent, the release of which amount shall be contingent upon certain events
and conditions, all as set forth in Article VIII hereof.
D. The Company and the Shareholders, on the one hand, and Parent,
on the other hand, desire to make certain representations, warranties,
covenants, and other agreements in connection with the Share Purchase.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
and other promises set forth herein, the mutual benefits to be gained by the
performance thereof, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"401(k) Plan" shall mean a Company Employee Plan intended to include a
Code Section 401(k) arrangement;
"AAA" shall mean the American Arbitration Association;
"Adjusted Balance Sheet" shall mean an unaudited balance sheet of the
Company as of the Closing Date;
"Agent Indemnification Expenses" has the meaning set forth in Section
8.3(i)(vii);
"Agent Interpleader Expenses" has the meaning set forth in Section
8.3(i)(vi);
"Agreed-Upon Loss" has the meaning set forth in Section 8.3(g)(v);
"Agreement" has the meaning set forth in the introductory paragraph;
"Business Facility" shall mean any property including the land, the
improvements thereon, the groundwater thereunder and the surface water thereon,
that is or at any time has been owned, operated, occupied, controlled or leased
by the Company or the Subsidiary in connection with the operation of either or
both of their businesses on or prior to the Closing.
"Charter Documents" shall mean the Articles of Incorporation and the
Bylaws of the Company;
"Closing" has the meaning set forth in Section 2.2;
"Closing Date" has the meaning set forth in Section 2.2;
"Closing Date Balance Sheet" shall mean the estimated consolidated
balance sheet of the Company, that has been prepared in accordance with GAAP
(except that the Closing Date Balance Sheet may omit footnotes and other
presentation items that may be required by GAAP) consistently applied on a basis
consistent with the Company Financials and that fairly presents an estimate by
the Shareholders in good faith based on reasonable assumptions as of the
Closing, after giving effect to the Closing;
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended and as codified in Section 4980B of the Code and Section 601
et. seq. of ERISA;
"Code" shall mean the Internal Revenue Code of 1986, as amended;
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"Company" has the meaning set forth in the introductory paragraph;
"Company Authorizations" has the meaning set forth in Section 3.18;
"Company Balance Sheet" shall mean the Company's unaudited balance
sheet as of September 30, 2003;
"Company Capital Stock" shall mean the Company Common Stock and any
other shares of capital stock, if any, of the Company, taken together;
"Company Common Stock" shall mean shares of common stock, par value
$1.00 per share, of the Company;
"Company Customer Information" shall mean all customer lists, customer
contact information, customer correspondence and customer licensing and
purchasing histories relating to the current and former customers of the Company
and/or the Subsidiary, in each case as prepared or maintained by the Company or
the Subsidiary, including Employees or other agents of the Company and the
Subsidiary;
"Company Employee Plan" shall mean any plan, program, policy, practice,
contract, agreement or other arrangement applicable to the Company or the
Subsidiary providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe benefits
or other employee benefits or remuneration of any kind, whether written or
unwritten or otherwise, funded or unfunded, including without limitation, each
"employee benefit plan," within the meaning of Section 3(3) of ERISA which is or
has been maintained, contributed to, or required to be contributed to, by the
Company or the Subsidiary or any ERISA Affiliate for the benefit of any
Employee, or with respect to which the Company, the Subsidiary, or any ERISA
Affiliate has or may have any liability or obligation, including all
International Employee Plans;
"Company Environmental Liabilities" shall mean any liability,
obligation, judgment, penalty, fine, cost or expense, of any kind or nature, or
the duty to indemnify, defend or reimburse any individual or entity with respect
to: (i) any Pre-Existing Contamination; (ii) the migration at any time prior to
or after the Closing Date of Pre-Existing Contamination to any other real
property, or the soil, groundwater, surface water, air or building materials
thereof; (iii) any Pre-Closing Hazardous Materials Activities; (iv) the exposure
of any person to Pre-Existing Contamination or to Hazardous Materials in the
course of or as a consequence of any Pre-Closing Hazardous Materials Activities,
without regard to whether any health effect of the exposure has been manifested
as of the Closing Date; (v) the violation of any Environmental Laws by the
Company, the Subsidiary or their agents, employees, predecessors in interest,
contractors, invitees or licensees prior to the Closing Date or in connection
with any Pre-Closing Hazardous Materials Activities prior to the Closing Date;
(vi) any actions or proceedings brought or threatened by any third party with
respect to any of the foregoing; and (viii) any of the foregoing to the extent
they continue after the Closing Date.
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"Company Financials" shall mean the Company Year-End Financials and the
Company Interim Financials;
"Company Indemnified Parties" has the meaning set forth in Section 6.7;
"Company Intellectual Property" shall mean any Intellectual Property
and Intellectual Property Rights that are owned by or exclusively licensed to
the Company or the Subsidiary (all of which shall be identified on Schedule
3.13(a) of the Disclosure Schedule, with appropriate disclosure as to whether
such Intellectual Property or Intellectual Property Right is held by the Company
or the Subsidiary);
"Company Interim Financials" shall mean the Company's unaudited balance
sheet as of September 30, 2003 and the related unaudited statements of income
and cash-flows for the nine-month period ended September 30, 2003;
"Company Product" has the meaning set forth in Section 3.14;
"Company Registered Intellectual Property" shall mean all Registered
Intellectual Property owned by, or filed in the name of, the Company or the
Subsidiary;
"Company Sites" has the meaning set forth in Section 3.13(t);
"Company Year-End Financials" shall mean the Company's audited
consolidated balance sheets as of December 31, 2000, December 31, 2001 and
December 31, 2002 and the related audited consolidated statements of income and
cash-flows for the respective twelve-month periods then ended;
"Conflict" has the meaning set forth in Section 3.5;
"Contingent Closing Payments" has the meaning set forth in Section
3.23;
"Contract" has the meaning set forth in Section 3.15;
"Deductible Amount" has the meaning set forth in Section 8.3(b);
"Disclosure Schedule" has the meaning set forth in Article III;
"Disposal Site" shall mean a landfill, disposal site, disposal agent,
waste hauler or recycler of Hazardous Materials, or any real property other than
a Business Facility receiving Hazardous Materials used or generated by a
Business Facility.
"DOL" shall mean the Department of Labor;
"Employee" shall mean any current or former or retired employee,
consultant or director of the Company, the Subsidiary, or any ERISA Affiliate;
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"Employee Agreement" shall mean each management, employment, severance,
consulting, relocation, repatriation, expatriation, visa, work permit or other
agreement, contract or understanding between the Company, the Subsidiary, or any
ERISA Affiliate and any Employee;
"Employment Agreement" shall mean the employment agreement
substantially in the form attached hereto as Exhibit A;
"Environmental Laws" shall mean all applicable laws (including common
laws), directives, guidance, rules, regulations, orders, treaties, statutes, and
codes promulgated by any Governmental Entity which prohibit, regulate or control
any Hazardous Material or any Hazardous Material Activity, or worker health and
safety, including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Resource Recovery and Conservation
Act of 1976, the Federal Water Pollution Control Act, the Clean Air Act, the
Hazardous Materials Transportation Act, the Clean Water Act and the Occupational
Safety and Health Act all as amended at any time.
"Environmental Permits" has the meaning set forth in Section 3.22(c);
"Equipment" has the meaning set forth in Section 3.12(e);
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended;
"ERISA Affiliate" shall mean each subsidiary of the Company and any
other person or entity under common control with the Company or any of its
subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code
and the regulations issued thereunder;
"Escrow Agent" shall mean U.S. Bank, National Association, or another
institution acceptable to Parent and the Shareholder Representative;
"Escrow Amount" shall mean an amount of cash equal to $2,500,000.00;
"Escrow Fund" has the meaning set forth in Section 8.3(a);
"Escrow Period" has the meaning set forth in Section 8.3(c)(i);
"Excess Assets" has the meaning set forth in Section 8.6(a);
"Excess Liabilities" has the meaning set forth in Section 8.6(a);
"FMLA" shall mean the Family Medical Leave Act of 1993, as amended;
"GAAP" shall mean shall mean United States generally accepted
accounting principles;
"Governmental Entity" has the meaning set forth in Section 3.6;
"Hazardous Material" has the meaning set forth in Section 3.22(a);
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"Hazardous Materials Activities" has the meaning set forth in Section
3.22(b);
"Indemnified Parties" has the meaning set forth in Section 8.2;
"Independent Accounting Firm" has the meaning set forth in Section
8.6(c);
"Independent Accounting Firm Expenses" has the meaning set forth in
Section 8.6(c);
"Individuals" has the meaning set forth in Section 3.13(t);
"Intellectual Property" shall mean any or all of the following and all
rights therein, arising therefrom, or associated therewith: (i) all United
States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, and improvements; (iii) Trade Secrets; (iv) all works of
authorship, and copyrights, copyrights registrations and applications therefor
and all other rights corresponding thereto throughout the world, including
"moral" rights; (v) all industrial designs and any registrations and
applications therefor throughout the world; (vi) all mask works, mask work
registrations and applications therefor, and any equivalent or similar rights in
semiconductor masks, layouts, architectures or topology; (vii) all trade names,
logos, common law trademarks and service marks; trademark and service mark
registrations and applications therefor and all goodwill associated therewith
throughout the world; (viii) all databases and data collections and Web
addresses, sites and domain names and all rights therein throughout the world;
(ix) all computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded, all Web addresses, sites and domain names; (x) any
similar, corresponding or equivalent rights to any of the foregoing; and (xi)
all documentation related to any of the foregoing, including all contracts,
licenses and other agreements to which Company or the Subsidiary is a party or
by which it is bound either as licensee or licensor relating to any item and
intellectual property described in clauses (i) through (x) above;
"Intellectual Property Rights" shall mean worldwide common law and
statutory rights associated with any Intellectual Property;
"International Employee Plan" shall mean each Company Employee Plan
that has been adopted or maintained by the Company or any ERISA Affiliate,
whether informally or formally, or with respect to which the Company or any
ERISA Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States;
"IRS" shall mean the Internal Revenue Service;
"Key Employees" shall mean those individuals listed on Schedule 1.1(a);
"Leased Real Property" has the meaning set forth in Section 3.12;
"Liens" has the meaning set forth in Section 3.10(b)(vii);
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"Loss" and "Losses" have the meanings set forth in Section 8.2;
provided, however, that Parent shall not be entitled to claim a Loss pursuant to
the breach of the Company's and the Shareholders' representations and warranties
under Section 3.28 below related to Parent's inability to collect receivables
identified on the Closing Balance Sheet if the amount of receivables collected
by Parent with respect to the Company customers' accounts receivable identified
on the Closing Balance Sheet equals or exceeds the aggregate amount of accounts
receivable on the Closing Balance Sheet, net of reserves; provided further,
however, that Parent's ability to claim a Loss pursuant to the breach of the
Company's and the Shareholders' representations and warranties under Section
3.14 below related to product warranty claims for Company Products sold prior to
the Closing exceeding the product warranty reserve on the Closing Balance Sheet
shall be limited as described in Schedule 1.1(b);
"Material Adverse Effect" when used in connection with an entity means
any change, event, violation, inaccuracy, circumstance, or effect, individually
or when aggregated with other such changes, events, violations, inaccuracies,
circumstances, or effects, that is materially adverse to the business, assets
(whether tangible or intangible), liabilities, financial condition, or results
of operations of such entity and its subsidiaries taken as a whole;
"Multiemployer Plan" shall mean any Pension Plan which is a
"multiemployer plan," as defined in Section 3(37) of ERISA;
"Net Total Consideration" means the Total Consideration, less the total
amounts paid as UAP Payments, Third Party Payments, and Contingent Closing
Payments at the Closing (including the amount of any employer Taxes required to
be paid in connection with such payments);
"Non-Competition Agreement" shall mean the non-competition agreement
substantially in the form attached hereto as Exhibit B;
"Notice of Objection" has the meaning set forth in Section 8.6(b);
"Objection Notice" has the meaning set forth in Section 8.3(f)(i);
"Officer's Certificate" has the meaning set forth in Section 8.3(b);
"Open Source Materials" has the meaning set forth in Section 3.13(s);
"Owned Real Property" has the meaning set forth in Section 3.12;
"Parent" has the meaning set forth in the introductory paragraph;
"Pension Plan" shall mean each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA;
"Pre-Closing Hazardous Materials Activities" shall mean any Hazardous
Materials Activity conducted on any Business Facility prior to the Closing or
otherwise occurring prior to the Closing in connection with or to benefit the
business of the Company or the Subsidiary;
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"Pre-Existing Contamination" shall mean the presence on or before the
Closing of any Hazardous Materials in the soil, groundwater, surface water, air
or building materials of any Business Facility;
"Privacy Statements" has the meaning set forth in Section 3.13(t);
"Pro Rata Portion" shall mean, with respect to each Shareholder, an
amount equal to the quotient obtained by dividing the number of shares of
Company Capital Stock owned by such Shareholder at the Closing by the Total
Outstanding Shares;
"Projected Financials" has the meaning set forth in Section 3.32;
"PTO" shall mean the United States Patent and Trademark Office;
"Real Property" has the meaning set forth in Section 3.12;
"Real Property Agreements" has the meaning set forth in Section 3.12;
"Registered Intellectual Property" shall mean Intellectual Property and
Intellectual Property Rights that have been registered, filed, applied for,
certified or otherwise perfected, issued or recorded with or by any state,
government or other public legal authority;
"Related Agreements" has the meaning set forth in Section 3.4;
"Resolution Date" has the meaning set forth in Section 8.3(c)(iii);
"Returns" has the meaning set forth in Section 3.10(b)(i);
"Section 338(h)(10) Election" has the meaning set forth in Section
6.6(a);
"Securities Act" shall mean the Securities Act of 1933, as amended;
"Share Purchase" has the meaning set forth in the recitals hereto;
"Shareholder" and "Shareholders" shall have the meaning set forth in
the introductory paragraph to this Agreement;
"Shareholder Representative" has the meaning set forth in Section
8.4(a);
"Shareholder Representative Expenses" has the meaning set forth in
Section 8.4(b);
"Spreadsheet" has the meaning set forth in Section 7.1(k);
"Subsidiary" shall mean MAXRAD (Tianjin) Electronics Co., Ltd., a
company organized in the People's Republic of China;
"Survival Date" has the meaning set forth in Section 8.1;
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"Tax" and "Taxes" have the meanings set forth in Section 3.10(a);
"Third Party Claim" has the meaning set forth in Section 8.3(h);
"Third Party Expenses" has the meaning set forth in Section 6.5;
"Third Party Payments" has the meaning set forth in Section 7.1(k);
"Total Consideration" shall mean an amount equal to $20,000,000.00;
"Total Outstanding Shares" shall mean 1,000 shares of Company Common
Stock, subject to the accuracy of the representations and warranties set forth
in Section 3.2(a);
"Trade Secrets" shall mean trade secrets, confidential or proprietary
information, know how, processes, technology, technical data, and customer
lists, and all documentation relating to any of the foregoing.
"UAP Participants" shall mean those persons identified in Schedule
3.2(d) of the Disclosure Schedule as participants in the Unit Appreciation Plan;
"UAP Payments" shall mean the amounts identified in Schedule 3.16 of
the Disclosure Schedule, to be paid to UAP Participants under the UAP
Termination Agreement on the Closing Date;
"UAP Termination Agreement" shall mean the agreement dated and
effective as of December 31, 2003 among the Company and the UAP Participants in
connection with the settlement of the Company's obligations to such UAP
Participants and termination of the Unit Appreciation Plan; and
"Unit Appreciation Plan" shall mean the MAXRAD, Inc. Long Term
Compensation Plan, revised January 17, 2002.
ARTICLE II
THE SHARE PURCHASE
2.1 The Share Purchase. At the Closing, and upon the terms and subject
to the conditions of this Agreement, Parent shall purchase from the
Shareholders, and each Shareholder shall sell, convey, transfer, assign, and
deliver to the Parent, free and clear of all liens, encumbrances, or other
defects of title, all of the issued and outstanding shares of the Company
Capital Stock now beneficially owned or held of record by each such Shareholder
at the Closing, including all property or rights issued by the Company with
respect to such shares of Company Capital Stock.
2.2 Closing Time and Place. The closing of the Share Purchase (the
"Closing") shall take place at the offices of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill
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Road, Palo Alto, California 94304-1050, simultaneously with the execution of
this Agreement by the parties hereto. The date upon which the Closing occurs is
referred to herein as the "Closing Date."
2.3 Consideration. Based on the Spreadsheet:
(a) Closing Payment. At the Closing, each Shareholder shall
receive such Shareholder's Pro Rata Portion of the Net Total Consideration less
such Shareholder's Pro Rata Portion of the Escrow Amount; and
(b) Escrow Amount. Parent will deposit with the Escrow Agent
the Escrow Amount in accordance with Section 8.3 below.
2.4 Shareholder Waivers. Each Shareholder hereby waives and releases
any and all rights, claims, and causes of action that may be asserted against
the Company in respect of its ownership of any securities of the Company and any
and all agreements related to its interest as a securityholder of the Company
between such Shareholder and the Company, which agreements shall terminate
effective as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS
The Company and each of the Shareholders hereby jointly and severally
represent and warrant to Parent, subject to such exceptions as are specifically
disclosed in the disclosure letter or schedules thereto supplied by the Company
and the Shareholders to Parent and dated as of the date hereof (the "Disclosure
Schedule"), on the date hereof, as follows below; provided, however, all
representations and warranties made by the Shareholders under this Article III
that pertain to the Company and its operations shall be deemed to be made to the
knowledge of the Shareholders; provided, further, that nothing in the preceding
clause shall limit or modify in any way the Shareholders' indemnification
obligations under Article VIII below with respect any breach or inaccuracy in
the representations and warranties made by the Company under this Agreement. The
Disclosure Schedule shall be deemed to qualify and to be a part of the
representations and warranties in this Article III, shall be arranged in
sections corresponding to the numbered sections of this Article III, and each
disclosure item in the Disclosure Schedule shall reference the specific section
and paragraph numbers of this Agreement to which such disclosure applies.
3.1 Organization of the Company and the Subsidiary.
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Illinois. The
Company has the corporate power to own, lease, and operate its properties and to
carry on its business as now being conducted and as currently contemplated to be
conducted. The Company is duly qualified or licensed to do business and is in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified could have a Material Adverse Effect on the Company. The
Company has delivered to counsel for
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Parent true and correct copies of its Charter Documents. Schedule 3.1(a) of the
Disclosure Schedule lists the directors and officers of the Company immediately
prior to the Closing. Except as provided in the Charter Documents, the
operations now being conducted by the Company are not now and have never been
conducted by the Company under any other name. Schedule 3.1(a) of the Disclosure
Schedule also lists every state or foreign jurisdiction in which the Company has
employees or facilities or otherwise carries on business.
(b) The Subsidiary is a corporation duly organized, validly
existing, and in good standing under the laws of Tianjin, China. The Subsidiary
has the corporate power to own, lease, and operate its properties and to carry
on its business as now being conducted and as currently contemplated to be
conducted. The Subsidiary is duly qualified or licensed to do business and is in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified could have a Material Adverse Effect on the Subsidiary. The
Subsidiary has delivered to counsel for Parent true and correct copies of its
formation documents. Schedule 3.1(b) of the Disclosure Schedule lists the
directors and officers of the Subsidiary immediately prior to the Closing. The
operations now being conducted by the Subsidiary are not now and have never been
conducted by the Subsidiary under any other name. Schedule 3.1(b) of the
Disclosure Schedule also lists every state or foreign jurisdiction in which the
Subsidiary has employees or facilities or otherwise carries on business.
3.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
100,000 shares of Company Common Stock. As of the date of this Agreement, the
Company has issued and outstanding 1,000 shares of Company Common Stock. As of
the date hereof, the capitalization of the Company is as set forth on Schedule
3.2(a) of the Disclosure Schedule. The Company Capital Stock is held by the
Shareholders with the domicile addresses as set forth on Schedule 3.2(a) of the
Disclosure Schedule. All outstanding shares of Company Capital Stock are duly
authorized, validly issued, fully paid, and non-assessable and not subject to
any preemptive rights created by statute, the Charter Documents, or any
agreement to which the Company or any Shareholder is a party or by which the
Company or any Shareholder is bound. All outstanding Company Capital Stock has
been issued in compliance with all applicable statutes, laws, rules, and
regulations, including federal and state securities laws. No shares of Company
Capital Stock are subject to a right of repurchase or other condition of
forfeiture. The Company has not, and will not have, suffered or incurred any
liability (contingent or otherwise) or claim, loss, liability, damage,
deficiency, cost, or expense relating to or arising out of the issuance or
repurchase of any Company Capital Stock, or out of any agreements or
arrangements relating thereto. There are no declared or accrued but unpaid
dividends with respect to any shares of Company Capital Stock. No vesting
provisions applicable to any shares of Company Capital Stock, or to any rights
to purchase Company Capital Stock, will accelerate as a result of the Share
Purchase.
(b) The Company has never adopted, sponsored or maintained any
stock option plan or agreement providing for equity compensation to any person.
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(c) The Company has no (and has never had any) commitment or
obligation of any character, either firm or conditional, written or oral, to
issue, deliver or sell, or repurchase or redeem, or cause to be issued,
delivered, sold, repurchased, or redeemed, under offers, stock option
agreements, stock bonus agreements, stock purchase plans, incentive compensation
plans, warrants, calls, conversion rights, or otherwise, any shares of the
capital stock or other securities of the Company. There are no voting trusts,
proxies, or other agreements or understandings to which the Company is a party
with respect to the shares of Company Capital Stock. There are no securities of
the Company issued, reserved for issuance, or outstanding. Except as set forth
in the Unit Appreciation Plan, there are no (and have never been any)
outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to the Company. Following
the Closing, there will be no outstanding or authorized stock appreciation,
phantom stock, profit participation, or other similar right with respect to the
Company.
(d) Schedule 3.2(d) sets forth the names of all UAP
Participants and the amounts of all UAP Payments to be made to the UAP
Participants under the UAP Termination Agreement. The Company has delivered to
Parent a true and complete copy of the Unit Appreciation Plan and the UAP
Termination Agreement. The Unit Appreciation Plan was terminated in accordance
with the UAP Termination Agreement effective immediately prior to the Closing.
Under the terms of the Unit Appreciation Plan, the UAP Participants will receive
the UAP Payments at the Closing. Following the Closing, the Company will have no
obligation, contingent or otherwise, to any UAP Participant under the Unit
Appreciation Plan.
(e) The payment of the Net Total Consideration as set forth in
Section 2.3 hereof does not conflict with the Articles of Incorporation of the
Company as amended and in effect immediately prior to the Closing.
(f) At or before the Closing, any rights of any holder or
prospective holder of the Company's securities to cause such securities to be
registered under the Securities Act, and any information rights, voting rights,
rights of co-sale, rights to maintain equity percentage, rights of first
refusal, and the like that may exist for the benefit of any such holder or
prospective holder shall have been terminated.
3.3 Subsidiaries, Joint Ventures, Etc.
(a) Other than the Subsidiary, the Company does not have, and
has never had, any subsidiary or affiliated company and does not otherwise own,
and has never otherwise owned, any equity, debt, or other ownership interest in,
and does not control and has never controlled, directly or indirectly, any other
corporation, partnership, limited liability company, joint venture, business
trust or association, or other entity.
(b) The registered capital of the Subsidiary consists of
$200,000, all of which were contributed by the Company. All such registered
capital of the Subsidiary has been duly authorized and validly issued, is fully
paid and nonassessable, is wholly owned directly by the Company, free and clear
of any lien, adverse claim, security interest, equity interest, or other
encumbrance. There are no, and never have been any, options, warrants, calls,
rights, commitments, or agreements of any
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character, written or oral, to which the Company, the Subsidiary, or any
Shareholder is or was a party, or by which either of the Company, the
Subsidiary, or any Shareholder is or was bound, obligating the Subsidiary (i) to
issue, deliver, sell, repurchase, or redeem, or cause to be issued, delivered,
sold, repurchased, or redeemed, any shares of the Subsidiary's capital stock, or
(ii) to register additional capital.
3.4 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and any related agreements to which it is
a party ("Related Agreements") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and any Related
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Company. The Company's Board of Directors has unanimously approved the
Share Purchase and this Agreement. This Agreement and the Related Agreements
have been duly executed and delivered by the Company and constitute valid and
binding obligations of the Company, enforceable in accordance with their terms.
3.5 No Conflict. The execution and delivery of this Agreement and any
Related Agreement by the Company do not, and the consummation of the
transactions contemplated hereby does not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation, or acceleration of
any obligation or loss of any benefit under (any such event, a "Conflict") (a)
any provision of the Charter Documents or the formation documents of the
Subsidiary; (b) any mortgage, indenture, lease, contract, or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to the Company, the
Subsidiary, or their respective properties or assets (whether tangible or
intangible); (c) any judgment, order, or decree applicable to the Company, the
Subsidiary, or their respective properties or assets (whether tangible or
intangible); or (d) any statute, law, ordinance, rule, or regulation applicable
to the Company, the Subsidiary, or their properties or assets.
3.6 Consents. No consent, notice, waiver, approval, order, or
authorization of, or registration, declaration, or filing with, any court,
administrative agency, or commission or other federal, state, county, local, or
foreign governmental authority, instrumentality, agency, or commission
("Governmental Entity") or any third party, including a party to any agreement
with the Company or the Subsidiary (so as not to trigger any Conflict) is
required by or with respect to the Company, the Subsidiary, or any Shareholder
in connection with the execution and delivery of this Agreement, the Related
Agreements, or the consummation of the transactions contemplated hereby or
thereby, except for such other consents, waivers, authorizations, filings,
approvals, and registrations as are set forth on Schedule 3.6 of the Disclosure
Schedule.
3.7 Company Financial Statements. Schedule 3.7 of the Disclosure
Schedule sets forth true and correct copies of the Company Financials. The
Company Financials are complete and correct in all material respects and have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods indicated, and consistent with each other, except for the absence of
footnotes in the case of the Company Interim Financials. The Company Financials
present fairly the financial condition and operating results of the Company as
of the respective dates and for the periods
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indicated therein, subject in the case of the unaudited consolidated financial
statements to normal year-end adjustments, which will not in any event be
material in amount or significance in any individual case or in the aggregate.
3.8 No Undisclosed Liabilities; Liability Schedule.
(a) Neither of the Company nor the Subsidiary has any
liability, indebtedness, obligation, expense, claim, deficiency, guaranty, or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured, or otherwise (whether or not required to be reflected in financial
statements in accordance with GAAP), except (i) liabilities provided for in the
Company Balance Sheet, (ii) liabilities incurred since September 30, 2003 in the
ordinary and usual course of business, consistent with past practice, and (iii)
liabilities identified on Schedule 3.8(a) of the Disclosure Schedule.
(b) Schedule 3.8(b) of the Disclosure Schedule separately
identifies any liability, indebtedness, obligation, expense, claim, deficiency,
guarantee, or endorsement of the Company or the Subsidiary of any type, whether
accrued, absolute, contingent, matured, unmatured, or otherwise, greater than
$25,000 (or that would reasonably be expected to be greater than such amount in
the case of contingent liabilities), whether or not reflected in the Company
Financials.
(c) The Company has not made any draw against its line of
credit with Bank of America dated October 31, 2003, and there are no outstanding
obligations under such facility.
3.9 No Changes. Except as set forth on Schedule 3.9 of the Disclosure
Schedule, since December 31, 2002 (or such other date specifically set forth
below), the Company and the Subsidiary have (i) conducted business only in the
ordinary and usual course, consistent with past practices, and (ii) without
limiting the generality of the foregoing:
(a) There has not occurred any event, change, or circumstance
that, individually or in the aggregate, has resulted or could reasonably be
expected to result in a Material Adverse Effect on the Company or the
Subsidiary.
(b) Neither the Company nor the Subsidiary has issued, or
authorized for issuance, any equity security, bond, note, or other security of
the Company or the Subsidiary, or accelerated the vesting of any employee stock
benefits (including vesting under stock purchase agreements or stock
appreciation rights). Neither the Company nor the Subsidiary has granted or
entered into any commitment or obligation to issue or sell any such equity
security, bond, note, or other security of the Company or the Subsidiary,
whether pursuant to offers, stock option agreements, stock bonus agreements,
stock purchase plans, incentive compensation plans, warrants, calls, conversion
rights, stock appreciation rights or otherwise.
(c) Neither the Company nor the Subsidiary has incurred any
debt for borrowed money, nor incurred any obligation or liability (fixed,
contingent, or otherwise), except in the ordinary and usual course of the
business of the Company or the Subsidiary, as the case may be, consistent with
past practices.
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(d) Neither the Company nor the Subsidiary has paid any
obligation or liability (fixed, contingent, or otherwise), or discharged or
satisfied any lien or encumbrance, or settled any liability, claim, dispute,
proceeding, suit, or appeal, pending, or threatened against it or any of its
assets or properties, except for current liabilities included in the Company
Balance Sheet and current liabilities incurred since the date of the Company
Balance Sheet in the ordinary and usual course of business of the Company or the
Subsidiary, as the case may be, consistent with past practices.
(e) Neither the Company nor the Subsidiary has declared, set
aside for payment, or paid any dividend, or made any payment or other
distribution on or with respect to any share of its capital stock.
(f) Neither the Company nor the Subsidiary has purchased,
redeemed, or otherwise acquired or committed itself to acquire, directly or
indirectly, any share or shares of its capital stock.
(g) Neither the Company nor the Subsidiary has mortgaged,
pledged, or otherwise encumbered any of its assets or properties, tangible or
intangible, nor are such assets and properties subject to any Lien, nor has
either committed itself to do any of the foregoing, except for Liens for current
Taxes which are not yet due and payable and purchase money liens arising out of
the purchase or sale of products or services made in the ordinary and usual
course of business, consistent with past practice.
(h) Neither the Company nor the Subsidiary has disposed of, or
agreed to dispose of, any asset or property, tangible or intangible, except in
the ordinary and usual course of business, consistent with past practice, and in
each case for a consideration at least equal to the fair value of such asset or
property, nor has either of the Company or the Subsidiary leased or licensed to
others (including officers and directors of the Company or the Subsidiary), or
agreed so to lease or license, any asset or property, except for the licensing
of the Company's software to the customers of the Company or the Subsidiary
(including resellers, independent software vendors, and original equipment
manufacturers) in the ordinary course of business consistent with past practice,
nor has either of the Company or the Subsidiary discontinued any product line or
the production, sale or other disposition of any of its products or services.
(i) Neither the Company nor the Subsidiary has purchased or
agreed to purchase or otherwise acquire any debt or equity securities of any
corporation, partnership, joint venture, firm or other entity. Since September
30, 2003, neither the Company nor the Subsidiary has made any expenditure or
commitment for the purchase, acquisition, construction or improvement of a
capital asset, except in the ordinary and usual course of business, consistent
with past practice, and the aggregate amount of all such expenditures and
commitments made in the ordinary and usual course of business has not exceeded
$200,000.
(j) Neither the Company nor the Subsidiary has entered into
any transaction or contract, or made any commitment to do the same, except in
the ordinary and usual course of business consistent with past practice and not
involving an amount in any case in excess of $25,000 (excluding agreements under
which the obligation of payment or performance has been satisfied in full).
Neither the Company nor the Subsidiary has waived any right of substantial value
or cancelled
-15-
any debts or claims or voluntarily suffered any losses other than in the
ordinary and usual course of business, consistent with past practice.
(k) Neither the Company nor the Subsidiary has sold, assigned,
transferred, or conveyed, or committed itself to sell, assign, transfer or
convey, any Company Intellectual Property, except for the licensing of the
Company's software to the customers of the Company or the Subsidiary (including
resellers, independent software vendors, and original equipment manufacturers)
in the ordinary and usual course of business, consistent with past practice, and
neither the Company nor the Subsidiary has entered into any product development,
technology or product sharing, or similar strategic arrangement with any other
party.
(l) Neither the Company nor the Subsidiary has effected or
agreed to effect any amendment or supplement to any employee profit sharing,
stock option, stock purchase, pension, bonus, incentive, retirement, medical
reimbursement, life insurance, deferred compensation, or any other employee
benefit plan or arrangement (except as contemplated by this Agreement).
(m) Neither the Company nor the Subsidiary has paid or
committed itself to pay to or for the benefit of any of its directors, officers,
employees, advisors, or shareholders any compensation of any kind other than
wages, salaries, bonuses, and benefits at times and rates in effect prior to
December 31, 2002.
(n) Neither the Company nor the Subsidiary has effected or
agreed to effect any change, including by way of hiring or involuntary
termination, in its directors, executive officers, or Key Employees.
(o) Neither the Company nor the Subsidiary has incurred any
work stoppage, labor strike, or other labor trouble, or any action, suit, claim,
labor dispute, or grievance relating to any labor, safety or discrimination
matter involving the Company or the Subsidiary, including, without limitation,
charges of wrongful discharge or other unlawful labor practices or actions.
(p) The Company has not effected or committed itself to effect
any amendment or modification of the Charter Documents (except as contemplated
by this Agreement), and the Subsidiary has not effected or committed itself to
effect any amendment or modification of its charter documents.
(q) Neither the Company nor the Subsidiary has changed its
accounting methods or practices (including any change in depreciation or
amortization policies or rates, any changes in policies in making or reversing
accruals, or any change in capitalization of software development costs).
(r) Neither the Company nor the Subsidiary has revalued any of
their respective assets, other than in the ordinary and usual course of
business, consistent with past practice.
(s) Neither the Company nor the Subsidiary has made any loan
to any person or entity, and has not guaranteed the payment of any loan or debt
of any person or entity, except for (i) travel or similar advances made to
employees in connection with their employment duties in the
-16-
ordinary and usual course of business, consistent with past practice, and (ii)
accounts receivable incurred in the ordinary and usual course of business,
consistent with past practice.
(t) Neither the Company nor the Subsidiary has changed in any
material respect the prices or royalties set or charged by it.
(u) Neither the Company nor the Subsidiary has commenced or
received any notice of threat or commencement of any lawsuit or proceeding
against or investigation of the Company, the Subsidiary, or their respective
affairs.
(v) Neither the Company nor the Subsidiary has lost any
material customer or material business or suffered the loss of, damage to or
destruction of any material asset (whether tangible or intangible).
(w) Neither the Company nor the Subsidiary has negotiated or
agreed to do any of the things described in the preceding clauses (a) through
(v) (other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
3.10 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes," means (i) any and all federal, state, local,
and foreign taxes, assessments and other governmental charges, duties,
impositions, and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties, and additions
imposed with respect to such amounts, (ii) any liability for the payment of any
amounts of the type described in clause (i) of this Section 3.10(a) as a result
of being a member of an affiliated, consolidated, combined, or unitary group for
any period, and (iii) any liability for the payment of any amounts of the type
described in clause (i) or (ii) of this Section 3.10(a) as a result of any
express or implied obligation to indemnify any other person or as a result of
any obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
or transferor entity.
(b) Tax Returns and Audits.
(i) The Company and the Subsidiary have each
prepared and timely filed all required federal, state, local, and foreign
returns, estimates, information statements and reports ("Returns") relating to
any and all Taxes concerning or attributable to the Company or the Subsidiary or
its operations as required to be filed prior to the Closing and such Returns are
true and correct and have been completed in accordance with applicable law.
(ii) The Company and the Subsidiary have each
timely paid all Taxes it is required to pay and paid or withheld with respect to
its employees (and paid over to the appropriate Taxing authority) all federal
and state income taxes, Federal Insurance Contribution Act, Federal Unemployment
Tax Act, and other Taxes required to be paid or withheld.
-17-
(iii) Neither the Company nor the Subsidiary has
been delinquent in the payment of any Tax, nor is there any Tax deficiency
outstanding, assessed, or proposed against the Company or the Subsidiary, nor
has the Company or the Subsidiary executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return
of the Company or the Subsidiary is presently in progress, nor has the Company
or the Subsidiary been notified of any request for such an audit or other
examination.
(v) Neither the Company nor the Subsidiary has
any liabilities for unpaid Taxes which have not been accrued or reserved on the
Company Balance Sheet, whether asserted or unasserted, contingent, or otherwise,
and neither the Company nor the Subsidiary has incurred any liability for Taxes
since the date of the Company Balance Sheet other than in the ordinary course of
business.
(vi) The Company has made available to Parent or
its legal counsel, copies of all Tax Returns for the Company and the Subsidiary
filed for all periods since their respective inceptions.
(vii) There are (and immediately following the
Closing there will be) no liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests, or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company or the Subsidiary relating
to or attributable to Taxes other than Liens for Taxes not yet due and payable.
There is no basis for the assertion of any claim relating or attributable to
Taxes, which, if adversely determined, would result in any Lien for Taxes on the
assets of the Company or the Subsidiary.
(viii) None of the Company's consolidated assets is
treated as "tax-exempt use property," within the meaning of Section 168(h) of
the Code.
(ix) The Company has not filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(x) The Company is not, and has not been at any
time, a "United States Real Property Holding Corporation" within the meaning of
Section 897(c)(2) of the Code.
(xi) No adjustment relating to any Return filed
by the Company or the Subsidiary has been proposed formally or, to the knowledge
of the Company and each Shareholder, informally by any tax authority to the
Company, the Subsidiary, or any representative thereof.
(xii) Neither the Company nor the Subsidiary has
(A) ever been a member of an affiliated group (within the meaning of Code
Section 1504(a)) filing a consolidated federal income Tax Return (other than a
group the common parent of which was Company), (B) ever been a party to any Tax
sharing, indemnification or allocation agreement, nor does the Company or the
Subsidiary owe any amount under any such agreement, (C) any liability for the
Taxes of any person (other than Company or the Subsidiary) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local or
-18-
foreign law), as a transferee or successor, by contract, or otherwise; or (D)
ever been a party to any joint venture, partnership or other agreement that
could be treated as a partnership for Tax purposes.
(xiii) The Company has not constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code.
(xiv) Neither the Company nor the Subsidiary has
engaged in a transaction that is the same as or substantially similar to one of
the types of transactions that the Internal Revenue Service has determined to be
a tax avoidance transaction and identified by notice, regulation, or other form
of published guidance as a listed transaction, as set forth in Treas. Reg.
Section 1.6011-4(b)(2).
(xv) No power of attorney relating to any Tax
matters has been granted with respect to the Company or the Subsidiary.
(xvi) Each of the Company and any predecessor of
the Company has been a valid electing S corporation, within the meaning of
Sections 1361 and 1362 of the Code and for state Tax law purposes, at all times
since it elected S corporation status effective on January 1, 1987 and has filed
all forms and taken all actions necessary to maintain such status.
(xvii) The Subsidiary is not a "qualified
subchapter S subsidiary" within the meaning of Section 1361(b)(3)(B) of the
Code.
(xviii) The Company shall not be liable for any Tax
under Section 1374 of the Code in connection with the deemed sale of the
Company's assets caused by a Section 338(h)(10) election, if such an election is
made pursuant to Section 6.6 below. The Company has not in the past 10 years,
(A) acquired assets from another corporation in a transaction in which the
Company's Tax basis of the acquired assets (or any other property) was
determined, in whole or in part, by reference to the Tax basis of the acquired
assets (or any other property) in the hands of the transferor, or (B) acquired
the stock of any corporation which is a qualified subchapter S subsidiary.
(xix) All tax sharing agreements or similar
agreements with respect to or involving the Company or the Subsidiary have been
terminated, and after the Closing, neither the Company nor the Subsidiary shall
be bound thereby or have any liability thereunder
(xx) Each of the Company and the Subsidiary is in
full compliance with all terms and conditions of any Tax exemption, Tax holiday
or other Tax reduction agreement or order of a territorial or non-U.S.
government, and the consummation of the transactions contemplated by this
Agreement will not have any adverse effect on the continued validity and
effectiveness of any such Tax exemption, Tax holiday or other Tax reduction
agreement or order.
(c) Executive Compensation Tax. There is no contract,
agreement, plan, or arrangement to which the Company is a party, including,
without limitation, the provisions of this Agreement, covering any employee or
former employee of the Company, which, individually or
-19-
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 404 or 162(m) of the Code.
3.11 Restrictions on Business Activities. Except as provided in
Schedule 3.11 of the Disclosure Schedule, there is no agreement
(non-competition, field of use, "most favored nation," or otherwise),
commitment, judgment, injunction, order, or decree to which the Company or the
Subsidiary is a party or otherwise binding upon the Company or the Subsidiary
which has or could be expected to have the effect of prohibiting or impairing
any business practice of the Company or the Subsidiary, any acquisition of
property (tangible or intangible) by the Company or the Subsidiary, the conduct
of business by the Company or the Subsidiary or otherwise limiting the freedom
of the Company or the Subsidiary to engage in any line of business or to compete
with any person. Without limiting the foregoing, neither the Company nor the
Subsidiary has entered into any agreement under which the Company or the
Subsidiary (a) is restricted from selling, licensing, manufacturing, or
otherwise distributing any of the technology or products of the Company or from
providing services to customers or potential customers, any class of customers,
in any geographic area, during any period of time, or in any segment of the
market; (b) is required to offer or sell its products or services to any person
or entity on terms that are not less favorable than the terms under which such
products or services are sold to other parties; or (c) triggers any business or
commercial restriction as a result of the transactions contemplated hereby.
3.12 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment, Customer Information.
(a) Other than the Company's assembly facility located at 4350
Chandler Drive, Hanover Park, Illinois (the "Owned Real Property"), neither the
Company nor the Subsidiary owns any real property, nor has the Company or the
Subsidiary ever owned any real property. Schedule 3.12(a) of the Disclosure
Schedule sets forth a list of all real property currently leased, subleased or
licensed by or from the Company or the Subsidiary or otherwise used or occupied
by the Company or the Subsidiary for the operation of its business (the "Leased
Real Property"), the name of any lessor, licensor, sublessor, master lessor
and/or lessee, the date and term of any lease, license, sublease or other
occupancy right and each amendment thereto and, with respect to any current
lease, license, sublease or other occupancy right, the aggregate annual rental
payable thereunder. The Owned Real Property and Leased Real Property shall be
referred to herein collectively as the "Real Property". The Company has provided
Parent true, correct and complete copies of all leases, lease guaranties,
subleases, agreements for the leasing, use or occupancy of, or otherwise
granting a right in or relating to the Real Property, including all amendments,
terminations and modifications thereof ("Real Property Agreements"); and there
are no other Real Property Agreements for real property affecting the Real
Property or to which Company is bound, other than those identified in Schedule
3.12(a) of the Disclosure Schedule. All such Real Property Agreements are valid
and effective in accordance with their respective terms, and there is not, under
any of such Real Property Agreements, any existing default, no rentals are past
due, or event of default (or event which with notice or lapse of time, or both,
would constitute a default). Neither the Company nor the Subsidiary has received
any notice of a default, alleged failure to perform, or any offset or
counterclaim with respect to any such Real Property Agreement, which has not
been fully remedied and withdrawn. The Closing will not affect the
enforceability against any person of any such Real
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Property Agreement or the rights of the Company or the Subsidiary to the
continued use and possession of the Real Property for the conduct of business as
presently conducted. The Company currently occupies all of the Owned Real
Property for the operation of its business and no other parties occupy, or have
a right to occupy, the Owned Real Property. The Subsidiary currently occupies
all of the Leased Real Property for the operation of its business, and no other
parties occupy, or have a right to occupy, the Leased Real Property during the
term of the leases for such Leased Real Property. The Real Property is in good
operating condition and repair, free from structural, physical, and mechanical
defects, is maintained in a manner consistent with standards generally followed
with respect to similar properties, and is structurally sufficient and otherwise
suitable for the conduct of the business as presently conducted. To the
knowledge of the Company and each of the Shareholders, there are no natural or
artificial conditions upon the Owned Real Property or any other facts or
conditions which could, in the aggregate, have a material and adverse effect on
the transferability, financeability, ownership, leasing, use, development,
occupancy, or operation of any such real property. Neither the Company nor the
Subsidiary has received any written or oral notice from any insurance company of
any defects or inadequacies in any Real Property or any part thereof which could
materially and adversely affect the insurability of such property or the
premiums for the insurance thereof, nor has any notice been given by any insurer
of any such property requesting the performance of any repairs, alterations, or
other work with which compliance has not been made. There currently exists
water, sewer, gas, electrical, telephone and telecommunication lines and surface
drainage systems serving the Owned Real Property which have been licensed,
permitted, completed, installed, and paid for and which are sufficient as
licensed and permitted to service the operations of the Owned Real Property as
currently occupied and operated. The Owned Real Property has adequate direct
access to and from public roads and there are no pending or (to the knowledge of
Company) threatened actions or proceedings which could impair or curtail such
access. There are no pending, or, to the knowledge of the Company and each of
the Shareholders, threatened assessments, improvements or activities of any
public or quasi-public body either planned, in the process of construction or
completed which may give rise to any assessment against the Real Property.
(b) Neither the operation of the Company or the Subsidiary on
the Real Property nor, to the knowledge of the Company and each of the
Shareholders, such Real Property, including the improvements thereon, violate in
any material respect any applicable building code, ordinance, zoning
requirement, or statute relating to such property or operations thereon, and any
such non-violation is not dependent on so-called non-conforming use exceptions.
(c) To the knowledge of the Company and each of the
Shareholders, there are no laws, statutes, rules, regulations or orders now in
existence or under active consideration by any Governmental Entity which could
require the Company or the Subsidiary to make any expenditure in excess of
$5,000 to modify or improve the Real Property to bring it into compliance
therewith.
(d) The Company or the Subsidiary, as applicable, has good and
valid title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of their respective tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any
Liens, except (i) as reflected in the Current Balance Sheet, (ii) for Liens for
Taxes not yet due and payable, and (iii) such imperfections of title and
encumbrances, if any, which do not detract in
-21-
any material way from the value, or interfere with the present use, of the
property subject thereto or affected thereby.
(e) Schedule 3.12(e) of the Disclosure Schedule lists all
items of equipment (the "Equipment") owned or leased by the Company or the
Subsidiary, except individual pieces of equipment with a net book value of less
than $25,000. All facilities, machinery, equipment, fixtures, vehicles, and
other properties owned, leased or used by the Company or the Subsidiary are (i)
adequate for the conduct of the business of the Company and the Subsidiary, as
the case may be, as currently conducted and as proposed by the Company to be
conducted and (ii) in good operating condition, maintained in the ordinary
course of business, subject to normal wear and tear, and reasonably fit and
usable for the purposes for which they are being used.
(f) The Company has sole and exclusive ownership, free and
clear of any Liens, of the Company Customer Information. No person other than
the Company possesses any claims or rights with respect to use of the Company
Customer Information.
3.13 Intellectual Property.
(a) Schedule 3.13(a) of the Disclosure Schedule lists (i) all
Company Registered Intellectual Property and identifies whether such Company
Registered Intellectual Property is owned by or filed in the name of the Company
or the Subsidiary and (ii) any proceedings or actions before any court, tribunal
(including the PTO) or equivalent authority anywhere in the world) related to
any of the Company Registered Intellectual Property or Company Intellectual
Property.
(b) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property listed on Schedule 3.13(a) of the
Disclosure Schedule, and all Intellectual Property licensed to the Company or
the Subsidiary, is free and clear of any Liens. The Company is the exclusive
owner or exclusive licensee of all Company Intellectual Property. The Subsidiary
does not own or license any Company Intellectual Property.
(c) To the extent that any Intellectual Property has been
developed or created independently or jointly by any person other than the
Company for which the Company or the Subsidiary has, directly or indirectly,
provided consideration, the Company has a written agreement with such person
with respect thereto, and the Company thereby has obtained ownership of, and is
the exclusive owner of, all such Intellectual Property therein and associated
Intellectual Property Rights by operation of law or by valid assignment, and has
required the waiver of all non-assignable rights, including but not limited to,
all author or moral rights.
(d) Neither the Company nor the Subsidiary has transferred
ownership of, or granted any exclusive license of or exclusive right to use, or
authorized the retention of any exclusive rights to use or joint ownership of,
any Intellectual Property or Intellectual Property Rights that is or was Company
Intellectual Property, to any other person.
(e) The Company Intellectual Property constitutes all the
Intellectual Property and Intellectual Property Rights used in or necessary to
the conduct of the business of the Company or
-22-
the Subsidiary as currently is conducted or planned to be conducted, including,
without limitation, the design, development, distribution, marketing,
manufacture, use, import, license and sale of the products, technology and
services of the Company or the Subsidiary (including products, technology or
services currently under development).
(f) Other than (i) "shrink-wrap" and similar widely available
binary code and commercial end-user licenses, but not including public or open
technology, and (ii) other non-exclusive licenses and related agreements with
respect thereto of the Company's products to end-users pursuant to written
agreements that have been entered into in the ordinary course of business that
do not materially differ in substance from the Company's standard form(s) of
end-user license including attachments (which is or are included on Schedule
3.13(f) of the Disclosure Schedule), Schedule 3.13(f) of the Disclosure Schedule
sets forth a true and complete list of all contracts, licenses and agreements to
which the Company or the Subsidiary is a party with respect to any Intellectual
Property and Intellectual Property Rights. Neither the Company nor the
Subsidiary is in breach of, nor has the Company or the Subsidiary failed to
perform under, any of the foregoing contracts, licenses or agreements and, to
the Company's and each Shareholder's knowledge, no other party to any such
contract, license or agreement is in breach thereof or has failed to perform
thereunder. No third party who has licensed Intellectual Property or
Intellectual Property Rights to the Company or the Subsidiary has ownership
rights or license rights to improvements made by the Company or the Subsidiary
in such Intellectual Property which has been licensed to the Company or the
Subsidiary.
(g) Other than (i) "shrink-wrap" and similar widely available
binary code and commercial end-user licenses, but not including public or open
technology, and (ii) other non-exclusive licenses and related agreements with
respect thereto of the Company's products to end-users pursuant to written
agreements that have been entered into in the ordinary course of business that
do not materially differ in substance from the Company's standard form(s) of
end-user license including attachments (which is or are included on Schedule
3.13(f) of the Disclosure Schedule), Schedule 3.13(g) of the Disclosure Schedule
sets forth a true and complete list of all contracts, licenses and agreements
between the Company or the Subsidiary and any other person wherein or whereby
the Company or the Subsidiary has agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or the Subsidiary or such
other person of the Intellectual Property Rights of any person other than the
Company or the Subsidiary.
(h) The operation of the business of the Company and the
Subsidiary as currently conducted or as currently contemplated to be conducted,
including but not limited to the design, development, distribution, marketing,
use, import, manufacture, license, and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company or the Subsidiary, has not, does not and will not
infringe or misappropriate the Intellectual Property Rights of any person,
violate the rights of any person (including rights to privacy or publicity), or
constitute unfair competition or trade practices under the laws of any
jurisdiction. Neither the Company nor the Subsidiary has received any notice
from any person claiming that such operation or any act, product, technology or
service (including products,
-23-
technology or services currently under development) of the Company or the
Subsidiary infringes or misappropriates the Intellectual Property Rights of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction, nor does the Company or any Shareholder have knowledge of any
basis therefor.
(i) Each item of Company Registered Intellectual Property is
valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Company Registered Intellectual Property have been
paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark, or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. There are no actions that must be taken by the
Company or the Subsidiary within 60 days of the Closing Date, including the
payment of any registration, maintenance or renewal fees or the filing of any
documents, applications or certificates for the purposes of obtaining,
maintaining, perfecting, or preserving or renewing any Registered Intellectual
Property. For each product, technology or service of the Company or the
Subsidiary that constitutes or includes Intellectual Property, the Company or
the Subsidiary has taken appropriate measures to make all such Intellectual
Property Registered Intellectual Property. In each case in which the Company or
the Subsidiary has acquired any Intellectual Property or Intellectual Property
Rights from any person, the Company or the Subsidiary, as applicable, has
obtained a valid and enforceable assignment sufficient to irrevocably transfer
all rights in such Intellectual Property and the associated Intellectual
Property Rights (including the right to seek past and future damages with
respect thereto) to the Company or the Subsidiary, as applicable, and, to the
maximum extent provided for by, and in accordance with, applicable laws and
regulations, the Company or the Subsidiary has recorded each such assignment
with all relevant governmental authorities, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be.
(j) Neither the Company nor any Shareholder has any knowledge
of any facts or circumstances that would render any Company Intellectual
Property invalid or unenforceable. Without limiting the foregoing, neither the
Company nor any Shareholder knows of any information, materials, facts, or
circumstances, including any information or fact that would constitute prior
art, that would render any of the Company Registered Intellectual Property
Rights invalid or unenforceable, or would adversely effect any pending
application for any Company Registered Intellectual Property Right and neither
the Company nor the Subsidiary has misrepresented, or failed to disclose, and
has no knowledge (and none of the Shareholders have any knowledge) of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Company Registered Intellectual Property Right that would
constitute fraud or a misrepresentation with respect to such application or that
would otherwise affect the validity or enforceability of any Company Registered
Intellectual Property Right.
(k) There are no contracts, licenses or agreements between the
Company or the Subsidiary and any other person with respect to Company
Intellectual Property or other Intellectual Property used in and/or necessary to
the conduct of the business as it is currently conducted or planned to be
conducted under which there is any dispute regarding the scope of such
agreement, or
-24-
performance under such agreement including with respect to any payments to be
made or received by the Company or the Subsidiary thereunder.
(l) Neither this Agreement nor the transactions contemplated
by this Agreement, including the assignment to Parent or the Company by
operation of law or otherwise of any contracts or agreements to which the
Company is a party, will result in: (i) Parent, the Company, or the Subsidiary
granting to any third party any right to or with respect to any Intellectual
Property owned by, or licensed to, any of them; (ii) Parent, the Company, or the
Subsidiary being bound by, or subject to, any non-compete or other material
restriction on the operation or scope of their respective businesses; or (iii)
Parent, the Company, or the Subsidiary being obligated to pay any royalties or
other material amounts to any third party in excess of those payable by any of
them, respectively, in the absence of this Agreement or the transactions
contemplated hereby.
(m) Neither the Company nor the Subsidiary has any currently
pending claim against any third party for infringing or misappropriating any
Company Intellectual Property and, to the knowledge of the Company and each
Shareholder, no person or entity has or is infringing or misappropriating any
Company Intellectual Property.
(n) There have been, and are, no claims asserted against the
Company or the Subsidiary, related to any product or service of Company or the
Subsidiary (including products or services currently under development).
(o) The Company and the Subsidiary have each taken those steps
set forth on Schedule 3.13(o) of the Disclosure Schedule to protect the
Company's and/or the Subsidiary's rights in confidential information and trade
secrets of the Company and/or the Subsidiary or provided by any other person to
the Company and/or the Subsidiary. Without limiting the foregoing, the Company
included proprietary information, confidentiality and assignment agreements in
the Employee Agreements. All Employees who have made any contribution to the
Company Intellectual Property have executed agreements containing proprietary
information, confidentiality and assignment agreements. The form of such
provisions are identified or included in Schedule 3.13(a) of the Disclosure
Schedule.
(p) There are no proceedings or actions before any court,
tribunal or other governmental authority (including the PTO or equivalent
authority anywhere in the world) related to the Company Intellectual Property.
No Company Intellectual Property, Intellectual Property Rights, product,
technology or service of the Company or the Subsidiary is subject to any
proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by the Company or the Subsidiary or may affect the validity, use or
enforceability of such Company Intellectual Property.
(q) To the knowledge of the Company and each Shareholder, no
(i) product, technology, service or publication of the Company or the
Subsidiary, (ii) material published or distributed by the Company or the
Subsidiary, or (iii) conduct or statement of the Company or the Subsidiary
constitutes obscene material, a defamatory statement or material, false
advertising or otherwise violates any law or regulation.
-25-
(r) No government funding, facilities or resources of a
university, college, other educational institution or research center or funding
from third parties was used in the development of the Company Intellectual
Property, and no Governmental Entity, university, college, other educational
institution or research center has any claim or right in or to any Company
Intellectual Property. No current or former employee, consultant or independent
contractor of the Company or the Subsidiary who was involved in, or who
contributed to, the creation or development of any Company Intellectual
Property, has performed services for the government, a university, college or
other educational institution, or a research center, during a period of time
during which such employee, consultant or independent contractor was also
performing services for the Company or the Subsidiary.
(s) Neither the Company nor the Subsidiary uses (in any way)
any software or other material that is distributed as "free software," "open
source software" or under a similar licensing or distribution model (including
but not limited to the GNU General Public License (GPL), GNU Lesser General
Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic
License, the Netscape Public License, the Sun Community Source License (SCSL),
the Sun Industry Standards License (SISL) and the Apache License) ("Open Source
Materials"). Neither the Company nor the Subsidiary has (a) incorporated Open
Source Materials into, or combined Open Source Materials with, the Company
Intellectual Property; (b) distributed Open Source Materials in conjunction with
any Company Intellectual Property; or (c) used Open Source Materials that
create, or purport to create, obligations for the Company or the Subsidiary with
respect to Company Intellectual Property or grant, or purport to grant, to any
third party, any rights or immunities under Company Intellectual Property
(including, but not limited to, using any Open Source Materials that require, as
a condition of use, modification and/or distribution of such Open Source
Materials that other software incorporated into, derived from or distributed
with such Open Source Materials be (i) disclosed or distributed in source code
form, (ii) be licensed for the purpose of making derivative works, or (iii) be
redistributable at no charge).
(t) For purposes of this section:
"Company Sites" means the following sites of the
Company or the Subsidiary on the World Wide Web: http://www.maxrad.com;
http://www.maxrad.org; http://www.maxrad.net; and the sites identified on
Schedule 3.13(t) of the Disclosure Schedule; and
"Privacy Statements" means, collectively, any and all
of the Company's or the Subsidiary's privacy policies published on the Company
Sites or otherwise made available by the Company or the Subsidiary regarding the
collection, retention, use and distribution of the personal information of
individuals, including, without limitation, from visitors of any of the Company
Sites ("Individuals").
(i) The Company and the Subsidiary each (a)
complies in all material respects with the Privacy Statements as applicable to
any given set of personal information collected by the Company or the Subsidiary
from Individuals; (b) complies in all material respects with all applicable
United States and foreign privacy laws and regulations regarding the collection,
retention, use and disclosure of personal information; and (c) takes reasonable
measures to protect and
-26-
maintain the confidential nature of the personal information provided to the
Company or the Subsidiary by Individuals, in accordance with the terms of the
applicable Privacy Statements.
(ii) The collection, retention, use and
distribution by the Company or the Subsidiary of all personal information
collected by the Company or the Subsidiary from Individuals is governed by the
Privacy Statement pursuant to which the data was collected. All versions of the
Privacy Statements are substantially in the form attached hereto in Schedule
3.13(t)(ii) of the Disclosure Schedule.
(iii) To the knowledge of the Company and each
Shareholder, no claims or controversies have arisen regarding the Privacy
Statements or the implementation thereof.
3.14 Product Warranties; Reserves. Except as set forth on Schedule
3.14 of the Disclosure Schedule, each product manufactured, sold, licensed,
leased, or delivered by the Company or the Subsidiary ("Company Product") is
delivered subject to the Company's standard terms and conditions of sale,
license, or lease set forth on Schedule 3.14 of the Disclosure Schedule, subject
to such reasonable variations therein that are not individually materially
adverse to the Company, or beyond that implied or imposed by applicable law).
The reserve on the Closing Balance Sheet for the Company's and the Subsidiary's
replacement or repair liability and obligations with respect to the Company's
Products is sufficient to cover such liabilities for Company products sold prior
to the Closing. Schedule 3.14 of the Disclosure Schedule lists all warranty
claims made with respect to Company Products prior to the Closing that remained
outstanding as of the Closing (including the type and amounts of such claims for
each customer who has submitted such a claim prior to the Closing).
3.15 Agreements, Contracts and Commitments. Except as contemplated
by this Agreement or as set forth on Schedule 3.15 of the Disclosure Schedule,
neither the Company nor the Subsidiary is a party to, nor is either of them
bound by:
(a) any agreements or arrangements with any current employee
or consultant that contains any severance pay or post-employment liabilities or
obligations;
(b) any collective bargaining agreements;
(c) any employment or consulting agreement, contract, or
commitment with any officer, employee, individual consultant or salesperson, or
consulting or sales agreement, contract, or commitment with a firm or other
organization;
(d) any bonus, deferred compensation, pension, profit sharing,
severance, or retirement plans or agreements, or any other employee benefit
plans or arrangements;
(e) any stock option or stock purchase plan or arrangement,
stock appreciation, bonus, deferred compensation, pension, profit sharing, or
retirement plans, or any other employee benefit plans or arrangements;
-27-
(f) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan, or stock purchase plan, any
of the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(g) any fidelity or surety bond or completion bond;
(h) any agreement, contract, or commitment for the lease of
personal property having a value individually in excess of $5,000;
(i) any agreement, contract, or commitment of indemnification
or guaranty other than as set forth on Schedule 3.14, subject to such reasonable
variations therein that are not individually materially adverse to the Company
or the Subsidiary, as the case may require;
(j) any agreement, contract, or commitment containing any
covenant limiting the freedom of the Company or the Subsidiary to engage in any
line of business or to compete with any person or entity;
(k) any agreement, contract, or commitment relating to capital
expenditures and involving future payments in excess of $25,000 in the
aggregate;
(l) any agreement, contract, or commitment relating to the
disposition or acquisition of assets (other than in the ordinary and usual
course of business) or any interest in any business enterprise;
(m) any mortgages, indentures, guarantees, loans, or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money by the Company or the Subsidiary or extension of credit
to the Company or the Subsidiary;
(n) any agreement, contract, or commitment concerning
confidentiality (other than those entered in the ordinary and usual course of
business);
(o) any agreement, contract, or commitment pursuant to which
the Company or the Subsidiary has granted or may grant in the future, to any
party, a source-code license or option or other right to use or acquire
source-code, including any agreements which provide for source code escrow
arrangements;
(p) any sales representative, original equipment manufacturer,
value added, remarketer, or other agreement for distribution of the products,
technology, or services of the Company or the Subsidiary, or the products or
services of any other person or entity or any dealer, joint marketing (including
any pilot program), or development agreement;
(q) any agreement, contract, or commitment pursuant to which
the Company or the Subsidiary has advanced or loaned any amount to any
shareholder of the Company or the Subsidiary or any director, officer, employee,
or consultant of the Company or the Subsidiary other than
-28-
business travel advances in the ordinary and usual course of business,
consistent with past practice; or
(r) any other agreement, contract, or commitment that involves
payment by the Company or the Subsidiary of $25,000 or more or which is not
cancelable without penalty within 30 days.
Neither the Company nor the Subsidiary has breached, violated, or
defaulted under, or received notice that it has breached, violated, or defaulted
under, any of the terms or conditions of any agreement, contract or commitment
required to be set forth on any schedule relating to the representations and
warranties set forth in Schedule 3.13 or on Schedule 3.15 of the Disclosure
Schedule (any such agreement, contract or commitment, a "Contract"). Each of the
Contracts is legal, valid and binding on the Company or the Subsidiary, as the
case may require, and, to the knowledge of the Company and the Shareholders, the
respective other parties thereto and is in full force and effect, and to the to
the knowledge of the Company and the Shareholders, is enforceable against each
party thereto in accordance with its terms. Neither the Company nor any
Shareholder has knowledge of any event that would constitute such a breach,
violation or default with the lapse of time, giving of notice, or both under any
Contract. Each Contract is in full force and effect and is not subject to any
default, of which the Company or any Shareholder has knowledge, by any party
obligated to the Company pursuant thereto. Following the Closing, the Company or
the Subsidiary, as the case may require, shall have the right to exercise all of
its rights under the Contracts without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments that the Company or
the Subsidiary would otherwise be required to pay pursuant to the terms of such
Contracts had the transaction contemplated by this Agreement not occurred.
Without limiting the foregoing, upon consummation of the transactions
contemplated by this Agreement, each Contract shall continue in full force and
effect in accordance with its terms without penalty or other adverse
consequence.
3.16 Change of Control Payments. Schedule 3.16 of the Disclosure
Schedule sets forth each plan or agreement pursuant to which any amounts may
become payable in cash or otherwise (whether currently or in the future) to
current or former officers, directors, employees of, or consultants to the
Company or the Subsidiary as a result of or in connection with the Share
Purchase, including the amounts payable to each UAP Participant under the UAP
Termination Agreement and any amount payable (contingent or otherwise) under the
Employee Agreements.
3.17 Interested Party Transactions. Except as set forth on Schedule
3.17 of the Disclosure Schedule, no officer, director, or shareholder of the
Company or the Subsidiary (nor any ancestor, sibling, descendant or spouse of
any of such persons, or any trust, partnership or corporation in which any of
such persons has or has had an interest), has or has had, directly or
indirectly, (a) an interest in any entity which has furnished or sold, or
furnishes or sells, services, products, technology, or Intellectual Property
that the Company or the Subsidiary furnishes or sells, or proposes to furnish or
sell; (b) an interest in any entity that purchases from or sells or furnishes to
the Company or the Subsidiary any goods or services; or (c) a beneficial
interest in any Contract; provided, however, that ownership of no more than one
percent (1%) of the outstanding voting stock of a publicly traded corporation on
the New York Stock Exchange or The Nasdaq National Market
-29-
shall not be deemed to be an "interest in any entity" for purposes of this
Section 3.17. There are no receivables of the Company or the Subsidiary owing by
any director, officer, employee of, or consultant to, or shareholder of the
Company or the Subsidiary (or any ancestor, sibling, descendant, or spouse of
any such persons, or any trust, partnership, or corporation in which any of such
persons has an economic interest), other than advances in the ordinary and usual
course of business for reimbursable business expenses (as determined in
accordance with the established employee reimbursement policies of the Company
and consistent with past practice). None of the Shareholders has agreed to, or
assumed, any obligation or duty to guaranty or otherwise assume or incur any
obligation or liability of the Company or the Subsidiary. There are no
agreements, contracts, or commitments with regard to contribution or
indemnification between or among any of the Shareholders.
3.18 Compliance with Laws; Governmental Authorization. The Company
and the Subsidiary have complied in all respects with, are not in violation of,
and have not received any notices of violation with respect to, any foreign,
federal, state or local statute, law or regulation. Schedule 3.18 of the
Disclosure Schedule lists each material federal, state, county, local, or
foreign governmental consent, license, permit, grant, or other authorization
issued to the Company or the Subsidiary (a) pursuant to which the Company or the
Subsidiary currently operates or holds any interest in any of its properties or
(b) which is required for the operation of the Company's or the Subsidiary's
business as currently conducted or contemplated to be conducted or the holding
of any such interest (collectively, the "Company Authorizations"), which Company
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company or the Subsidiary to operate or
conduct their respective businesses or hold any interest in their respective
properties or assets. The Company and the Subsidiary, as applicable, are each in
material compliance with the terms of each of the Company Authorizations.
3.19 Litigation. Except as set forth on Schedule 3.19 of the
Disclosure Schedule, there is no claim, dispute, action, suit, or appeal, or
proceeding of any nature pending or, to the Company's and each Shareholder's
knowledge, threatened against the Company or the Subsidiary, their respective
properties, or any of their respective officers, directors, or employees (in
their capacities as such), nor, to the knowledge of the Company and each
Shareholder, is there any reasonable basis therefor or threat thereof. To the
knowledge of the Company and each Shareholder, there is no investigation or
other proceeding pending or threatened against the Company or the Subsidiary,
their respective properties (tangible or intangible) or any of their respective
officers, directors or employees (in their capacities as such) by or before any
Governmental Entity. Neither the Company nor the Subsidiary is subject to any
order, writ, injunction, or decree of any court, agency, authority, arbitration
panel, or other tribunal, and is not in default with respect to any such notice,
order, writ, injunction, or decree. To the knowledge of the Company and
Subsidiary, no Governmental Entity has at any time challenged or questioned the
legal right of the Company or the Subsidiary to conduct its operations as
presently or previously conducted or as currently contemplated to be conducted.
3.20 Insurance. Schedule 3.20 of the Disclosure Schedule lists all
material insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, software errors and omissions, employees,
officers, and directors of the Company and the Subsidiary, as well as claims
made by the Company or the Subsidiary under any insurance policy in the two
years prior
-30-
to the date of this Agreement. There is no claim by the Company or the
Subsidiary currently pending under any of such policies or bonds as to which
coverage has been questioned, denied, or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been paid, and the Company or the Subsidiary, as the case may
require, is otherwise in compliance in all material respects with the terms of
such policies and bonds. Neither the Company nor any Shareholder has any
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies. Neither the Company nor the Subsidiary has
ever been denied insurance coverage nor has any insurance policy of the Company
or the Subsidiary ever been cancelled for any reason. The Company has renewed
such insurance policies through May 5, 2004, but no longer.
3.21 Minute Books; Books and Records. The minute books of the
Company and the Subsidiary provided to counsel for Parent are the only minute
books of the Company and the Subsidiary and contain an accurate summary of all
meetings of directors (or committees thereof) and its shareholders or actions by
written consent since the time of incorporation of the Company or the
Subsidiary, as the case may require. The books and records of the Company and
the Subsidiary (a) are accurate in all material respects and (b) are in the
Company's possession or under its control.
3.22 Environmental Matters.
(a) Hazardous Material. Neither of the Company or the
Subsidiary has (i) operated any underground storage tanks at any property that
either the Company or Subsidiary has at any time owned, operated, occupied or
leased or (ii) released in violation of any Environmental Laws any substance
that has been designated by any Governmental Entity or by applicable federal,
state, foreign or local law to be radioactive, toxic, hazardous, or otherwise a
danger to health, reproduction, or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde, and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the Resource Conservation and Recovery Act of 1976,
as amended, and the regulations promulgated pursuant to said laws (a "Hazardous
Material"), but excluding office and janitorial supplies properly and safely
maintained. No Hazardous Materials are present in, on or under any property,
including the land and the improvements, ground water, and surface water
thereof, that the Company or its Subsidiary has at any time owned, operated,
occupied, or leased.
(b) Hazardous Materials Activities. Neither of the
Company or the Subsidiary has transported, stored, used, manufactured, disposed
of, released, or exposed its employees or others to Hazardous Materials in
violation of any Environmental Law or in any manner that would result in
liability to the Company or Subsidiary, nor has the Company or Subsidiary
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (any or all of the foregoing being collectively referred to
as "Hazardous Materials Activities") in violation of any Environmental Laws.
(c) Permits. The Company and Subsidiary currently hold
all environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the business of the
Company and Subsidiary as such activities and businesses are currently being
conducted and as are currently contemplated to be conducted. All such
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Environmental Permits are valid and in full force and effect. The Company and
Subsidiary have complied in all material respects with all covenants and
conditions of any Environmental Permit that is or has been in force with respect
to its Hazardous Materials Activities. No circumstances exist which could cause
any Environmental Permit to be revoked, modified, or rendered non-renewable upon
payment of the permit fee.
(d) Offsite Hazardous Material Disposal. Neither the
Company nor the Subsidiary has transferred or released Hazardous Materials to
any Disposal Site.
(e) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction, or claim is
pending or, to the knowledge of the Company and each Shareholder, threatened
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Company or Subsidiary. Neither the Company nor any
Shareholder is aware of any fact or circumstance which could involve the Company
or Subsidiary in any environmental litigation or impose upon the Company or the
Subsidiary any environmental liability. Neither the Company nor any Subsidiary
has entered into any agreement that may require it to guarantee, reimburse,
pledge, defend, hold harmless or indemnify any other party with respect to
liabilities arising out of Environmental Laws or the Hazardous Materials
Activities of the Company or the Subsidiary.
(f) Reports and Records. The Company has delivered to
Parent all environmental audits and environmental assessments of any Real
Property conducted at the request of, or otherwise in possession of the Company
or the Subsidiary. The Company has no records in its possession concerning any
Hazardous Materials Activities of the Company or the Subsidiary. Each of the
Company and the Subsidiary has complied with all environmental disclosure
requirements (including with respect to environmental disclosure concerning the
Subsidiary) imposed by applicable law with respect to this transaction.
3.23 Brokers' and Finders' Fees; Third Party Expenses; Other
Expenses. Except as set forth on Schedule 3.23 of the Disclosure Schedule,
neither the Company nor the Subsidiary has incurred, nor will either of the
Company or the Subsidiary incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions, fees related to investment
banking or similar advisory services, or any similar charges in connection with
this Agreement or any transaction contemplated hereby. Schedule 3.23 of the
Disclosure Schedule sets forth all Third Party Expenses incurred by the Company
and the Subsidiary in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby.
In addition, Schedule 3.23 of the Disclosure Schedule sets forth all other
liabilities and obligations of the Company or the Subsidiary that are contingent
upon, or will occur or accelerate as a result of, the Closing, including, but
not limited to, payments to employees for agreed severance, facility lease
termination payments and other potential closure costs, equipment and other
lease termination payments and any payments resulting from agreed upon early
termination of contracts (including non-cancelable purchase commitments)
contemplated by this Agreement (the "Contingent Closing Payments") other than
the liabilities for (i) the UAP Payments and (ii) any payments required to be
made under the Employee Agreements on the first anniversary of the Closing Date
(which are
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detailed in Schedule 3.16 of the Disclosure Schedule). The UAP Payments shall
not be considered Contingent Closing Payments for purposes of this Agreement.
3.24 Employees; Compensation. Schedule 3.24 of the Disclosure
Schedule constitutes a full and complete list of all current directors,
officers, employees, and consultants of the Company and the Subsidiary,
specifying their names and job designations, the total amount paid or payable to
such director, officer, employee, or consultant in the prior fiscal year and
from January 1, 2003 through September 30, 2003, and the basis of such
compensation, whether fixed or commission or a combination thereof.
3.25 Employee Matters and Benefit Plans.
(a) Schedule. Schedule 3.25(a) of the Disclosure Schedule
contains an accurate and complete list of each Company Employee Plan and each
Employee Agreement. Other than as set forth on Schedule 3.25(a) of the
Disclosure Schedule, there are no Employment Agreements. Neither the Company,
the Subsidiary, nor any ERISA Affiliate has any plan or commitment to establish
any new Company Employee Plan or Employee Agreement, to modify any Company
Employee Plan or Employee Agreement (except to the extent required by law or to
conform any such Company Employee Plan or Employee Agreement to the requirements
of any applicable law, in each case as previously disclosed to Parent in
writing, or as required by this Agreement), or to adopt or enter into any
Company Employee Plan or Employee Agreement.
(b) Documents. The Company has provided to Parent correct and
complete copies of: (i) all documents embodying each Company Employee Plan and
each Employee Agreement including (without limitation) all amendments thereto
and all related trust documents, administrative service agreements, group
annuity contracts, group insurance contracts, and policies pertaining to
fiduciary liability insurance covering the fiduciaries for each Company Employee
Plan; (ii) the most recent annual actuarial valuations, if any, prepared for
each Company Employee Plan; (iii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Employee
Plan; (iv) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets; (v) the most recent summary
plan description together with the summary(ies) of material modifications
thereto, if any, required under ERISA with respect to each Company Employee
Plan; (vi) all IRS determination, opinion, notification and advisory letters,
and all applications and correspondence to or from the IRS or the DOL with
respect to any such application or letter; (vii) all communications material to
any Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company; (viii) all correspondence to or from any governmental agency
relating to any Company Employee Plan; (ix) all COBRA forms and related notices
(or such forms and notices as required under comparable law); (x) the three (3)
most recent plan years discrimination tests for each Company Employee Plan; and
(xi) all registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with each Company Employee
Plan.
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(c) Employee Plan Compliance.
(i) The Company, the Subsidiary, and the ERISA
Affiliates have performed in all material respects all obligations required to
be performed by them under, are not in default or violation of, and have no
knowledge (and no Shareholder has knowledge) of any default or violation by any
other party to each Company Employee Plan, and each Company Employee Plan has
been established and maintained in all material respects in accordance with its
terms and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code.
(ii) Any Company Employee Plan intended to be
qualified under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code (i) has either applied for, prior to the
expiration of the requisite period under applicable Treasury Regulations or IRS
pronouncements, or obtained a favorable determination, notification, advisory
and/or opinion letter, as applicable, as to its qualified status from the IRS or
still has a remaining period of time under applicable Treasury Regulations or
IRS pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has been
amended to incorporate all provisions required to comply with the Tax Reform Act
of 1986 and subsequent legislation. For each Company Employee Plan that is
intended to be qualified under Section 401(a) of the Code there has been no
"partial termination" within the meaning of Section 411(d) of the Code for which
any liability or obligation remains unsatisfied, or any event, condition or
circumstance that has adversely affected or is likely to adversely affect such
qualified status.
(iii) No "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan. There are no actions, suits or claims pending, or, to the
knowledge of the Company and each Shareholder, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan. Each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
Closing in accordance with its terms, without liability to Parent, Company or
any of its ERISA Affiliates (other than ordinary administration expenses).
(iv) There are no audits, inquiries or
proceedings pending or, to the knowledge of the Company, each Shareholder, and
any ERISA Affiliate, threatened by the IRS or DOL, or any other Governmental
Entity with respect to any Company Employee Plan.
(v) The Company, the Subsidiary, and any ERISA
Affiliate are not subject to any penalty or tax with respect to any Company
Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the
Code. The Company, the Subsidiary, and each ERISA Affiliate have timely made all
contributions and other payments required by and due under the terms of each
Company Employee Plan.
(d) No Pension or Welfare Plans. The Company, the Subsidiary,
and any ERISA Affiliate have never maintained, established, sponsored,
participated in, or contributed to, any
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(i) Pension Plan which is subject to Title IV of ERISA or Section 412 of the
Code, (ii) Multiemployer Plan, (iii) "multiple employer plan" as defined in
ERISA or the Code, or (iv) a "funded welfare plan" within the meaning of Section
419 of the Code. No Company Employee Plan provides health benefits that are not
fully insured through an insurance contract.
(e) No Post-Employment Obligations. No Company Employee Plan
provides, or reflects or represents any liability to provide post-termination or
retiree welfare benefits to any person for any reason, except as may be required
by COBRA or other applicable statute, and the Company, the Subsidiary, and any
ERISA Affiliate have never represented, promised or contracted (whether in oral
or written form) to any Employee (either individually or to Employees as a
group) or any other person that such Employee(s) or other person would be
provided with post-termination or retiree welfare benefits, except to the extent
required by statute.
(f) Health Care Compliance. The Company, the Subsidiary, and
any ERISA Affiliate have never in any material respect, violated any of the
health care continuation requirements of COBRA, the requirements of FMLA, the
requirements of the Health Insurance Portability and Accountability Act of 1996,
the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law applicable to
its Employees.
(g) Past Acquisitions. The Company, the Subsidiary, and any
ERISA Affiliate are not currently obligated to provide an Employee with any
compensation or benefits pursuant to an agreement (e.g., an acquisition
agreement) with a former employer of such Employee.
(h) Effect of Transaction. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Company Employee Plan, Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
(i) Termination of 401(k) Plan. The Company has terminated the
401(k) Plan pursuant to resolutions of the Board of Directors of the Company
(the form and substance of which have been reviewed and approved by Parent),
effective no later than the day immediately preceding the Closing Date. The
Company has also taken such other actions in furtherance of terminating the
401(k) Plan as Parent reasonably required.
(j) Employment Matters. The Company, the Subsidiary, and each
ERISA Affiliate: (i) is in compliance in all material respects with all
applicable foreign, federal, state, and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing; and (iv) is not liable for any payment to
any trust or other fund governed by or maintained by or on behalf of any
governmental
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authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees (other than routine payments to
be made in the normal course of business and consistent with past practice).
There are no pending, threatened or reasonably anticipated claims or actions
against the Company under any worker's compensation policy or long-term
disability policy. The Company, the Subsidiary, and any ERISA Affiliate have no
direct or indirect liability with respect to any misclassification of any person
as an independent contractor rather than as an employee, or with respect to any
employee leased from another employer.
(k) Labor. No work stoppage or labor strike against the
Company, the Subsidiary, or any ERISA Affiliate is pending, threatened or
reasonably anticipated. Neither the Company nor any Shareholder knows of any
activities or proceedings of any labor union to organize any Employees. Except
as set forth in Schedule 3.25(k) of the Disclosure Schedule, there are no
actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of the Company and each Principal Shareholder, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to the
Company. The Company has not engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. Except as set forth in Schedule
3.25(k) of the Disclosure Schedule, the Company is not presently, nor has it
been in the past, a party to, or bound by, any collective bargaining agreement
or union contract with respect to Employees and no collective bargaining
agreement is being negotiated with respect to Employees. The Company has not
incurred any material liability or material obligation under the Worker
Adjustment and Retraining Notification Act or any similar state or local law
which remains unsatisfied.
(l) International Employee Plan. The Company, the Subsidiary,
and any ERISA Affiliate have no (nor have they ever had any) obligation to,
maintain, establish, sponsor, participate in, or contribute to any International
Employee Plan.
3.26 Bank Accounts. Schedule 3.26 of the Disclosure Schedule
constitutes a full and complete list of all the bank accounts and safe deposit
boxes of the Company and the Subsidiary, the number of each such account or box,
and the names of the persons authorized to draw on such accounts or to access
such boxes. All cash in such accounts is held in demand deposits and is not
subject to any restriction or documentation as to withdrawal.
3.27 Indemnification Obligations. There are no actions,
proceedings, or other events pending or threatened against any officer,
director, or employee of the Company or the Subsidiary which could reasonably be
expected to give rise to any indemnification obligation of the Company or the
Subsidiary to their respective officers and directors under their respective
charter documents or any agreement between the Company and the Subsidiary and
any of their respective officers, directors, or employees.
3.28 Accounts Receivable. The accounts receivable shown on the
Closing Date Balance Sheet (a) arose in the ordinary course of business
consistent with past practice, (b) represent bona fide claims against debtors
for sales and other charges, and (c) net of reserves, are collectible in the
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book amounts thereof. The amounts carried for doubtful accounts and allowances
disclosed in the Closing Date Balance Sheet were calculated in accordance with
GAAP and in a manner consistent with prior periods and are sufficient to provide
for any losses that may be sustained on realization of the receivables. No
material amount of receivables are contingent upon the performance by the
Company or the Subsidiary of any obligation or contract other than normal
warranty repair and replacement. Schedule 3.28 of the Disclosure Schedule sets
forth an aging of accounts receivable of the Company in the aggregate and by
customer and indicates the amounts of allowances for doubtful accounts.
3.29 Customers. Schedule 3.29 of the Disclosure Schedule contains
an accurate and complete list of the top ten customers (by dollar amount of
sales) of the Company or the Subsidiary during the nine months ended September
30, 2003. None of the customers of the Company or the Subsidiary listed on
Schedule 3.29 of the Disclosure Schedule have given notice to the Company or the
Subsidiary that it has terminated or will terminate or not renew its contract
with the Company or the Subsidiary before the scheduled expiration date of such
contract, or otherwise terminate its relationship with the Company or the
Subsidiary.
3.30 Spreadsheet. The information contained in the Spreadsheet is
complete and correct.
3.31 Foreign Corrupt Practices Act. Neither the Company nor the
Subsidiary has (nor has any of their respective officers, directors, or
employees) taken any action which would cause it to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations
thereunder.
3.32 Complete Copies of Materials. Except as set forth on Schedule
3.32 to the Disclosure Schedule, the Company has delivered or made available
true and complete copies of each document (or summaries of same) that has been
requested by Parent or its counsel or other advisors.
3.33 Representations Complete. None of the representations or
warranties made by the Company or the Shareholders (as modified by the
Disclosure Schedule) in this Agreement and none of the statements made in any
exhibit, schedule or certificate furnished by the Company or the Shareholders
pursuant to this Agreement contains any untrue statement of material fact, or
omits to state any material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which made, not
misleading.
3.34 Director Liability. No fact or circumstance exists or has
existed, nor has there been any act or failure to act, that could (i) give rise
to a claim of liability or for damages by any Shareholder or the Company or the
Subsidiary against any director of the Company or (ii) result in a claim against
the Company for indemnification by any director of the Company.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby, severally and not jointly, represents and
warrants to Parent on the date hereof, as follows:
4.1 Ownership of Company Capital Stock. Such Shareholder is the sole
record and beneficial owner of the Company Capital Stock designated as being
owned by such Shareholder opposite such Shareholder's name on Schedule 3.2(a) of
the Disclosure Schedule. Such Company Capital Stock is not subject to any Lien
or to any right of first refusal of any kind, and such Shareholder has not
granted any right to purchase such Company Capital Stock to any other person or
entity. Such Shareholder has the sole right to transfer such Company Capital
Stock to Parent. Such Company Capital Stock constitutes all of the Company
Capital Stock owned, beneficially or of record, by such Shareholder, and such
Shareholder has no options, warrants, or other rights to acquire Company Capital
Stock. Other than the Shareholders, no person or entity is the holder of any
outstanding shares of Company Capital Stock or any option, warrant, or other
right to acquire any shares of Company Capital Stock.
4.2 Absence of Claims by the Shareholders. Such Shareholder does not
have any claim against the Company, the Subsidiary, or any officer or director
of the Company or the Subsidiary, whether present or future, contingent or
unconditional, fixed or variable, under any contract or on any other basis
whatsoever, whether in equity or at law. No fact or circumstance exists or has
existed, nor has there been any act or failure to act, that could give rise to a
claim of liability or for damages by such Shareholder against the Company, the
Subsidiary, or any officer or director of the Company or the Subsidiary.
4.3 No Conflict. The execution and delivery by such Shareholder of this
Agreement and any Related Agreement to which it is a party and the consummation
of the transactions contemplated hereby and thereby will not, conflict with (a)
any provision of the formation documents of such Shareholder if such Shareholder
is an entity, (b) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise or license to which such
Shareholder or any of its properties or assets is subject, or (c) any judgment,
order, decree, statute, law, ordinance, rule, or regulation applicable to such
Shareholder or its properties or assets.
4.4 Authority. If such Shareholder is an entity, it has all requisite
power and authority to enter into this Agreement and any Related Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. If such Shareholder is an individual, such Shareholder has the capacity
to enter into this Agreement and any Related Agreement to which such Shareholder
is a party and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and any Related Agreements to which
such Shareholder is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action on the part of such Shareholder and no further
action is required on the part of such Shareholder to authorize the Agreement
and any Related Agreements to which it is a party and the transactions
contemplated hereby and thereby.
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This Agreement and each of the Related Agreements to which such Shareholder is a
party has been duly executed and delivered by such Shareholder, and assuming the
due authorization, execution and delivery by the other parties hereto and
thereto, constitute the valid and binding obligations of such Shareholder,
enforceable against such Shareholder in accordance with their respective terms.
4.5 Discussions with Officers. Such Shareholder has had an opportunity
to review this Agreement and consult with such legal or financial advisors as it
has deemed necessary or appropriate in connection with the execution and
delivery hereof. Such Shareholder has further had sufficient opportunity to ask
such questions of the officers or directors of the Company and the officers of
the Parent as such Shareholder has deemed necessary or appropriate, and all such
questions have been answered to the satisfaction of such Shareholder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company that on the date
hereof:
5.1 Organization of Parent. Parent is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Parent has all requisite corporate power to own, lease, and operate its
properties and to carry on its business as now being conducted.
5.2 Authority; No Conflict. Parent has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent. This Agreement has been
duly executed and delivered by Parent and constitutes valid and binding
obligations of Parent, enforceable against Parent in accordance with its terms.
The execution and delivery of this Agreement by Parent does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of any provision of the Certificate of Incorporation or
Bylaws of Parent. No consent, approval, order or authorization of, or
registration, declaration, or filing with, any Governmental Entity, is required
by or with respect to Parent in connection with the execution and delivery of
this Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Confidentiality. Each Shareholder agrees not to disclose the
Company's confidential proprietary information to any third party. The foregoing
requirements of confidentiality shall not apply to information that is or in the
future becomes freely available to the public through no fault of or action by
such Shareholders or their agents.
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6.2 Public Disclosure. No Shareholder shall issue any statement or
communication to any third party (other than their respective agents which shall
be bound by similar restrictions with respect to issuing any such statements or
communications) regarding the subject matter of this Agreement or the
transactions contemplated hereby.
6.3 Reasonable Efforts; Additional Documents; and Further Assurances.
Subject to the terms and conditions provided in this Agreement, each of the
parties hereto shall use commercially reasonable efforts to take promptly, or
cause to be taken, all actions, and to do promptly, or cause to be done, all
things necessary, proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents, and approvals, to provide requisite notices and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement.
Each party hereto, at the request of the other party hereto, shall execute, and
deliver such other instruments and do and perform such other acts and things as
may be reasonably necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
6.4 Closing Date Balance Sheet. The Shareholders shall prepare and
deliver the Closing Date Balance Sheet, which shall include the adjustments set
forth in Schedule 6.4 hereof, within three business days after the Closing Date.
To the extent not paid prior to Closing, all Third Party Expenses and Contingent
Closing Payments shall be identified on the Closing Balance Sheet as liabilities
of the Company as of the Closing.
6.5 Expenses. All fees and expenses incurred in connection with the
Share Purchase including, without limitation, all legal, accounting, financial
advisory, consulting, and all other fees and expenses of third parties incurred
by a party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby ("Third
Party Expenses"), shall be the obligation of the respective party incurring such
fees and expenses.
6.6 Tax Matters.
(a) Section 338(h)(10) Election. The Company and each
Shareholder shall join with Parent in making an election under Section
338(h)(10) of the Code (and any corresponding election under state, local and
foreign tax law) with respect to the purchase and sale of the Company Capital
Stock hereunder (collectively, a "Section 338(h)(10) Election") to allocate a
value for each asset of Company equal to such asset's net book value as of the
Closing Date, with the remainder of the Total Consideration, allocated to
goodwill. Each Shareholder shall include any income, gain, loss, deduction or
other tax item resulting from the Section 338(h)(10) Election on such
Shareholder's Tax Returns to the extent required by applicable law. Holders of
Company Capital Stock (including the Shareholders) shall also pay any tax
imposed on the Company attributable to the making of the Section 338(h)(10)
Election, including (i) any tax imposed under Section 1374 of the Code, (ii) any
tax imposed under Treas. Regs. Sec. 1.338(h)(10)-1(e)(5), or (iii) any state,
local or foreign Tax imposed on the Company's gain, and each Shareholder shall
indemnify Parent and the Company against any adverse consequences arising out of
any failure to pay any such Taxes. If Parent
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exercises its option to make a Section 338(h)(10) Election, neither the Company
nor any Shareholder (or any of their respective affiliates) shall take any
action or fail to take any action which would cause the Section 338(h)(10)
Election not to be made with regard to the transactions specifically
contemplated this Agreement.
(b) Purchase Price Allocation. Subject to Section 6.6(a)
above, Parent, the Company and each of the Shareholders agree that the Total
Consideration paid by Parent (plus any other relevant items) will be allocated
among the assets of the Company for all purposes (including Tax and financial
accounting) as shown on an allocation schedule to be provided by Parent within
60 days following the Closing. Parent, the Company, and each of the Shareholders
shall file all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation.
(c) Tax Periods Ending Before Closing Date. Each of the
Shareholders shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Company for all periods ending on or prior to the
Closing Date that are filed after the Closing Date. Parent shall approve each
such Tax Return prior to its filing, which approval shall not be unreasonably
withheld. The Shareholder Representative shall provide Parent with a copy of
each such Tax Return no later than 30 days prior to the date it must be filed,
and Parent shall provide notice to the Shareholder Representative within 10 days
of any objections to such Tax Return. Parent's failure to provide such notice
shall be deemed approval of such Tax Return. The parties shall work together in
good faith to resolve any objections Parent may have to such Tax Return prior to
filing. To the extent permitted by applicable law, each of the Shareholders
shall include any income, gain, loss, deduction or other tax items for such
periods on their Tax Returns in a manner consistent with the Schedule K-1s
prepared for such periods.
(d) Cooperation on Tax Matters. Parent, the Company and each
of the Shareholders shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns, a
Section 338(h)(10) Election and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information reasonably
relevant to any such audit, litigation, or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Company, each of the
Shareholders, and Parent agree (i) to retain all books and records with respect
to Tax matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until expiration of the statute of limitations (and, to
the extent notified by Parent or the Shareholders, any extensions thereof) of
the respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Company or the
Shareholders, as the case may be, shall allow the other party to take possession
of such books and records.
(e) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration, and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the
Shareholders when due, and the Shareholders shall, at their own
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expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, Parent shall, and shall cause its
affiliates to, join in the execution of any such Tax Returns and other
documentation. Each of the Shareholders shall pay when due all federal, state,
local or foreign Taxes attributable to the consideration payable or otherwise
deliverable to it under this Agreement.
6.7 Indemnification. From and after the Closing, Parent will cause the
Company to fulfill and honor in all respects the obligations of the Company
pursuant to the indemnification provisions under the Charter Documents as in
effect on the date hereof. Such provisions of the Charter Documents will not be
amended, repealed, or otherwise modified for a period of six years from the
Closing Date in any manner that would adversely affect the rights thereunder of
individuals who, immediately prior to the Closing Date, were directors or
officers of the Company ("Company Indemnified Parties"), unless such
modification is required by law.
6.8 Collection Efforts. Parent shall use commercially reasonable
efforts, consistent with its current collection policies for accounts receivable
collection, to collect the accounts receivable identified on the Closing Balance
Sheet. To the extent that Parent is indemnified under Article VIII below for a
Loss related to the breach of the Company's and the Shareholders' representation
and warranty under Section 3.28 above related to a particular accounts of a
Company customer, then, at the request of the Shareholders Representative,
Parent shall assign over the Loss amount of such account receivable to the
Shareholder Representative.
ARTICLE VII
DELIVERABLES
7.1 Deliveries by Parent, the Company, and the Shareholders.
Concurrently herewith, Parent, the Company, the Shareholders, and certain other
individuals or parties as detailed below, shall deliver the following:
(a) Certificates of Company Capital Stock. Each Shareholder
shall deliver to Parent certificate(s) representing the shares of Company
Capital Stock held by such Shareholder as set forth on Schedule 3.2(a) to the
Disclosure Schedule duly endorsed or accompanied by stock powers duly endorsed
in blank, with any required transfer stamps affixed thereto; and
(b) W-9 Statements. Each Shareholder shall deliver to Parent a
duly executed and completed Form W-9.
(c) Non-Competition and Employment Agreements. Each Key
Employee shall deliver to parent a duly executed Non-Competition Agreement and a
duly executed Employment Agreement. Parent shall deliver a duly executed
Non-Competition Agreement and a duly executed Employment Agreement to each Key
Employee.
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(d) Legal Opinion. Holland & Knight, LLP, legal counsel to the
Company, shall deliver to Parent the legal opinion in substantially the form
attached hereto as Exhibit C.
(e) Certificate of Secretary of Company. The Company shall
deliver to Parent a certificate duly executed by the Secretary of the Company,
certifying as to (i) the terms and effectiveness of the Charter Documents and
(ii) the valid adoption of resolutions of the Board of Directors of the Company
whereby this Agreement, the Share Purchase, and the transactions contemplated
hereby were unanimously approved by the Board of Directors.
(f) Certificate of Good Standing. The Company shall deliver to
Parent a certificate of good standing from the Secretary of State of the State
of Illinois with respect to the Company which is dated within a reasonable
period prior to Closing.
(g) Certificates of Status of Foreign Corporation. The Company
shall deliver to Parent a Certificate of Status of Foreign Corporation of the
Company issued by the Secretary of States of Indiana, which shall be dated
within a reasonable period prior to the Closing. The Company shall deliver
documentation reasonably satisfactory to Parent that the Subsidiary is in good
standing under the laws of the People's Republic of China.
(h) Termination of 401(k) Plan. The Company shall deliver to
Parent evidence reasonably satisfactory that its 401(k) Plan has been terminated
pursuant to resolution of the Board of Directors of the Company (the form and
substance of which shall have been subject to review and approved by Parent),
effective as of the day immediately preceding the Closing Date.
(i) Resignation of Officers and Directors. The Company shall
deliver to Parent a written resignation from each of the officers and directors
of the Company effective as of the Closing.
(j) Termination/Modification of Agreements. The Company shall
deliver to Parent evidence that each of those agreements listed on Schedule
7.1(j) has been terminated and that each of those agreements listed on Schedule
7.1(j) has been terminated in the manner set forth on such schedule.
(k) Spreadsheet. The Company shall deliver to Parent a
spreadsheet (the "Spreadsheet") signed by the President and Chief Executive
Officer of the Company, the Chief Financial Officer of the Company, and each
Shareholder, which shall separately list, (i) all Third Party Expenses to be
paid out of the Total Consideration, listing each person separately that shall
receive a payment of Third Party expenses at Closing, the address (and contact
person) for such payment, the amount to be paid to such person, and copies of
all invoices regarding such Third Party expenses owing to such person shall be
attached to the Spreadsheet (the "Third Party Payments"); (ii) all Contingent
Closing Payments to be paid at closing, listing each person who shall receive a
Contingent Closing Payment separately, the address (and contact person) for such
payment; wire instructions for such person, the amount to be paid to such
person, and a description of the nature of the contingent payment (provided that
for purposes of this Agreement, the items identified on the Spreadsheet as
employee bonus payments shall be treated as Contingent Closing Payments
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hereunder); (iii) all UAP Participants who shall receive a UAP Payment at
Closing, the amount of such UAP Payment, the address of the UAP Participant;
(iv) the amount of any employer Taxes required to be paid in connection with the
Contingent Closing Payments or the payments to the UAP Participants; (v) the
amount of Net Total Consideration; and (vi) for each Shareholder, such
Shareholder's address, the number of shares of Company Capital Stock held by
such Shareholder, the certificate numbers for the shares held by such
Shareholder, the date of acquisition of such shares, the amount of cash to be
issued to each holder, the amount of cash to be deposited into the Escrow Fund
on behalf of each Shareholder, and such Shareholder's Pro Rata Portion
percentage.
(l) Section 338(h)(10) Election. The Company shall deliver to
Parent an IRS Form 8023 indicating that a Section 338(h)(10) Election is being
made for the Company, and such form shall have been signed by each of the
Shareholders.
(m) Payments by Parent. Parent shall deliver, based on the
Spreadsheet delivered by the Company and the Shareholders as described in
Section 7.1(k) above, the Total Consideration as follows:
(i) An aggregate of $504,404.80 shall be paid to
the persons entitled to receive the Third Party Payments in accordance with wire
or other instructions provided to Parent by the Company;
(ii) An aggregate of $146,461.97 shall be paid to
the persons entitled to receive the Contingent Closing Payments payable at
Closing as detailed in the Spreadsheet in accordance with wire or other
instructions previously provided to Parent by the Company (Parent shall be
entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Section 7.1(m)(ii) to any person entitled to
receive a Contingent Closing Payment such amounts as may be required to be
deducted or withheld therefrom under any provision of federal, state, local, or
foreign tax law or under any other applicable legal requirement; to the extent
such amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the person entitled to
receive the Contingent Closing Payment hereunder to whom such amounts would
otherwise have been paid);
(iii) An aggregate of $1,715,724.00 shall be paid
to the UAP Participants as detailed in the Spreadsheet in accordance with the
Company standard payroll practices (Parent shall be entitled to deduct and
withhold from any consideration payable or otherwise deliverable pursuant to
this Section 7.1(m)(iii) to any UAP Participant such amounts as may be required
to be deducted or withheld therefrom under any provision of federal, state,
local, or foreign tax law or under any other applicable legal requirement; to
the extent such amounts are so deducted or withheld, such amounts shall be
treated for all purposes under this Agreement as having been paid to the UAP
Participant to whom such amounts would otherwise have been paid);
(iv) An aggregate of $27,001.70 shall be paid or
set aside for payment to the appropriate tax authorities for employer Taxes
required to be paid in connection with the payments under clauses (ii) and (iii)
above;
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(v) An amount equal to the Escrow Amount shall
be deposited with the Escrow Agent in accordance with wire instructions
previously provided to Parent; and
(vi) An amount equal to the Net Total
Consideration minus the Escrow Amount will be paid to the Shareholders in
accordance with wire instructions previously provided to Parent.
(n) Receipts/Releases. Each of the persons receiving a portion
of the Total Consideration, other than the Escrow Agent, shall have delivered to
Parent a receipt relating to such payment, and in the case of a person receiving
a Third Party Payment, Contingent Closing Payment, or UAP Payment, each such
person shall have delivered a release to Parent in form reasonably satisfactory
to Parent of the Company's obligations with respect to such persons relating to
such payments have been satisfied in full and releasing the Company and Parent
from any additional obligation with respect thereto.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION AND ESCROW
8.1 Survival of Representations, Warranties, and Covenants. The
representations and warranties of the Company and the Shareholders contained in
this Agreement or in any certificate or other instruments delivered pursuant to
this Agreement, shall survive for a period of 12 months following the Closing
Date; provided, however, that the representations and warranties contained in
Section 3.1(b) (Company Capital Structure), Section 3.4 (Authority), Section
3.10 (Tax Matters), Section 3.29 (Spreadsheet), and Article IV (Representations
and Warranties of the Shareholders) shall survive for a period of 60 months
following the Closing Date, and that any breach of a covenant or representation
or warranty resulting from common law fraud shall survive indefinitely (the
expiration of such 12 month or longer period, as applicable, the "Survival
Date"). The representations and warranties of Parent contained in this
Agreement, or in any certificate or other instrument delivered pursuant to this
Agreement, shall terminate at the Closing.
8.2 Indemnification. The Shareholders hereby agree to indemnify and
hold Parent and its officers, directors, and affiliates, including the Company
(the "Indemnified Parties"), harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses of investigation and defense (hereinafter individually a "Loss" and
collectively "Losses") incurred or sustained by the Indemnified Parties, or any
of them (including the Company), directly or indirectly, as a result of (a) any
breach or inaccuracy of a representation or warranty of the Company or any
Shareholder contained in this Agreement or in any certificate or other
instruments delivered pursuant to this Agreement (without giving effect to any
limitation as to "materiality," "Material Adverse Effect" or similar
qualification set forth therein), (b) any failure by the Company or the
Shareholders to perform or comply with any covenant applicable to any of them
contained in this Agreement, if any, (c) any inaccuracy in the Spreadsheet, (d)
the Company Environmental Liabilities or (e) those matters set forth on Schedule
8.2(e).
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8.3 Escrow Arrangements.
(a) Escrow Fund. By virtue of this Agreement and as security
for the indemnity provided for in Section 8.2 hereof, promptly after the
Closing, Parent will deposit with the Escrow Agent the Escrow Amount without any
act of the Shareholders to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth herein. The Escrow Amount shall be available to
compensate the Indemnified Parties for any claims by such parties for any Losses
suffered or incurred by them and for which they are entitled to recovery under
this Article VIII.
(b) Deductible Amount. Notwithstanding any provision of this
Agreement to the contrary, and except as set forth in the second sentence of
this Section 8.3(b), Parent may not recover any Losses under Section 8.2(a)
unless and until one or more Officer's Certificates identifying such Losses
under Section 8.2(a) in excess of $325,000 in the aggregate (the "Deductible
Amount") has or have been delivered to the Escrow Agent and the Shareholder
Representative as provided in Section 8.3(e) hereof and such Losses are (i)
agreed to by the Shareholder Representative, (ii) not subject to an Objection
Notice, validly delivered in accordance with the provisions of Section 8.3(f)
hereof or (iii) determined to be subject to indemnification pursuant to Section
8.3(g) hereof, in which case Parent shall be entitled to recover all Losses so
identified in excess of the Deductible Amount. Notwithstanding the foregoing,
Parent shall be entitled to recover for, and the Deductible Amount shall not
apply as a threshold to, any and all claims or payments made with respect to (A)
all Losses incurred pursuant to clauses (b), (c), or (d) of Section 8.2 hereof,
(B) Losses resulting from any inaccuracy, breach or misrepresentation contained
in the representations and warranties contained in Section 3.1(b) (Company
Capital Structure), Section 3.4 (Authority), Section 3.10 (Tax Matters), Section
3.29 (Spreadsheet), or Article IV (Representations and Warranties of the
Shareholders), (C) Losses resulting from the failure of any Shareholder to pay
Agent Interpleader Expenses or Agent Indemnification Expenses pursuant to
clauses (vi) and (vii) of Section 8.3(i) hereof or Independent Accounting Firm
Expenses pursuant to Section 8.6(c) hereof, and (D) any amounts payable to
Parent pursuant to the provisions of Section 8.6 below. For the purposes hereof,
"Officer's Certificate" shall mean a certificate signed by any officer of
Parent: (1) stating that Parent has paid, sustained, incurred, or properly
accrued, or reasonably anticipates that it will have to pay, sustain, incur, or
accrue Losses, and (2) specifying in reasonable detail the individual items of
Losses included in the amount so stated, the date each such item was paid,
sustained, incurred, or properly accrued, or the basis for such anticipated
liability, and the nature of the misrepresentation, breach of warranty or
covenant to which such item is related.
(c) Escrow Period; Distribution of Remaining Escrow Funds.
(i) Subject to the following requirements, the
Escrow Fund shall be in existence immediately following the Closing and shall
terminate at 5:00 p.m., local time at Parent's headquarters, on the date 12
months following the Closing Date (the "Escrow Period"); provided, however, that
the Escrow Period shall not terminate with respect to any amount which, in the
reasonable judgment of Parent, is necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate delivered to the Escrow Agent and the
Shareholder Representative prior to the Escrow Period termination date. As soon
as all such claims have been resolved, the Escrow Agent shall deliver to the
Shareholders the remaining portion of the Escrow Fund, if any, not required to
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satisfy such claims. Deliveries of the Escrow Amount out of the Escrow Fund to
the Shareholders pursuant to this Section 8.3(c)(i) shall be made in proportion
to their respective Pro Rata Portions of the remaining Escrow Fund.
(ii) Notwithstanding the provisions of clause (i)
above, within 10 days of the date six months following the Closing Date, the
Escrow Agent shall deliver to the Shareholders an amount equal to the amount
obtained by subtracting (A) the amount necessary to satisfy any unsatisfied
claims specified in any Officer's Certificate delivered to the Escrow Agent and
the Shareholder Representative prior to the date six month following the Closing
Date from (B) $666,666.67 (if such figure is positive). Any deliveries of a
portion of the Escrow Amount out of the Escrow Fund to the Shareholders pursuant
to this Section 8.3(c)(ii) shall be made in proportion to their respective Pro
Rata Portions of such portion of the Escrow Fund.
(iii) Notwithstanding the provisions of clauses
(i) and (ii) above, (A) in the event that there are no Excess Liabilities, or
there are Excess Liabilities and the amount of Excess Liabilities is less than
$500,000.00, then within 10 days after the time Parent has made the calculations
set forth in Section 8.6 below and any disputes regarding such calculations have
been finally resolved as provided in Section 8.6 (the "Resolution Date"), the
Escrow Agent shall deliver to the Shareholders an amount equal to the difference
between (A) $500,000.00 and (B) the amount of the Excess Liabilities. Any
deliveries of a portion of the Escrow Amount out of the Escrow Fund to the
Shareholders pursuant to this Section 8.3(c)(iii) shall be made in proportion to
their respective Pro Rata Portions of such portion of the Escrow Fund.
(d) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard
the Escrow Fund during the Escrow Period, shall treat such fund as a trust fund
in accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
of this Article VIII.
(ii) The Escrow Amount shall be invested in U.S.
Treasury bills with maturities of not more than 30 days, and any interest paid
on such Escrow Amount shall be added to the Escrow Fund and deemed part thereof.
For any period of time before such U.S. Treasury bills can be purchased by the
Escrow Agent or after such bills mature, the Escrow Amount shall be invested in
a U.S. Bank money market account of the Escrow Agent, and any interest paid on
such Escrow Amount during such time shall be added to the Escrow Fund and deemed
part thereof. Each Shareholder shall be liable and responsible for any Taxes due
with respect to income earned on such Shareholder's Pro Rata Portion of the
Escrow Fund.
(e) Claims for Indemnification.
(i) Upon receipt by the Escrow Agent at any time
on or before the last day of the Escrow Period of an Officer's Certificate, the
Escrow Agent shall, subject to the provisions of Section 8.3(f), Section 8.3(g)
and Section 8.6 hereof, deliver to Parent, as promptly as practicable, the
remaining cash, if any, held in the Escrow Fund equal to such Losses identified
in such Officer's
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Certificate; provided, however, Parent agrees that it shall not deliver an
Officer's Certificate for a Loss pursuant to the breach of the Company's and the
Shareholders' representations and warranties under Section 3.28 above with
respect to Parent's inability to collect a receivable identified on the Closing
Balance Sheet prior to December 1, 2004.
(ii) If the Shareholder Representative does not
object in writing within the 30-day period after delivery by the Parent of the
Officer's Certificate, such failure to so object shall be an irrevocable
acknowledgment by the Shareholder Representative and the Shareholders that the
Indemnified Party is entitled to the full amount of the claim for Losses set
forth in such Officer's Certificate.
(f) Objections to Claims against the Escrow Fund.
(i) At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Shareholder Representative, and for a period of 30 days after
such delivery, the Escrow Agent shall make no delivery to Parent of any Escrow
Amount pursuant to Section 8.3(e) (other than Agreed-Upon Losses) hereof unless
the Escrow Agent shall have received written authorization from the Shareholder
Representative to make such delivery. After the expiration of such 30-day
period, subject to the limitations set forth below, the Escrow Agent shall make
delivery of cash from the Escrow Fund equal to the amount of Losses claimed in
the Officer's Certificate, provided that no such payment or delivery may be made
if the Shareholder Representative shall object in a written statement to the
claim made in the Officer's Certificate (an "Objection Notice"), and such
Objection Notice shall have been delivered to the Escrow Agent prior to the
expiration of such 30-day period. Notwithstanding the foregoing, the Shareholder
Representative hereby waives the right to object to any claims against the
Escrow Fund in respect of any Agreed-Upon Loss. The Shareholder Representative
hereby authorizes the Escrow Agent to deliver cash from the Escrow Fund equal to
the amount of Losses claimed in any Officer's Certificate in respect of any
Agreed-Upon Loss upon receipt of such Officer's Certificate without regard to
the 30-day period set forth in this Section 8.3(f).
(ii) Notwithstanding the foregoing, the
calculation of Excess Liabilities at the Closing in accordance with the terms of
Section 8.6 below shall be conclusive and binding on all parties to this
Agreement, and neither the Parent nor the Shareholder Representative shall have
any further right to challenge such calculation of Net Liabilities at Closing,
whether pursuant to the terms of this Section 8.3 or otherwise.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Shareholder Representative
delivers an Objection Notice in accordance with Section 8.3(f) hereof (other
than Agreed-Upon Losses), the Shareholder Representative and Parent shall
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such claims. If the Shareholder Representative and Parent
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties and, in the case of a claim against the Escrow Fund,
shall be furnished to the Escrow Agent. The Escrow
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Agent shall be entitled to rely on any such memorandum and make distributions
from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after
good faith negotiation and prior to 30 days after delivery of an Objection
Notice, either Parent or the Shareholder Representative may demand arbitration
of the matter unless the amount of the Loss is at issue in pending litigation
with a third party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration, and in either such
event the matter shall be settled by arbitration conducted by one arbitrator
mutually agreeable to Parent and the Shareholder Representative. In the event
that, within 30 days after submission of any dispute to arbitration, Parent and
the Shareholder Representative cannot mutually agree on one arbitrator, then,
within 15 days after the end of such 30-day period, Parent and the Shareholder
Representative shall each select one arbitrator. The two arbitrators so selected
shall select a third arbitrator. If either or both of the Shareholder
Representative or Parent fails to select an arbitrator during this 15-day
period, then the parties agree that the arbitration will be conducted by a
single arbitrator selected by the Chicago, Illinois office of the AAA pursuant
to the AAA's rules for selecting a neutral arbitrator where the parties do not
reach agreement on the selection of an arbitrator.
(iii) Any such arbitration shall be held in Cook
County, Illinois, under the rules then in effect of the AAA. The arbitrator(s)
shall determine how all expenses relating to the arbitration shall be paid,
including without limitation, the respective expenses of each party, the fees of
each arbitrator and the administrative fee of the American Arbitration
Association. The arbitrator or arbitrators, as the case may be, shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery while allowing the parties an opportunity, adequate in the
sole judgment of the arbitrator or majority of the three arbitrators, as the
case may be, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrator, or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including attorneys'
fees and costs, to the same extent as a competent court of law or equity, should
the arbitrators or a majority of the three arbitrators, as the case may be,
determine that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification. The
decision of the arbitrator or a majority of the three arbitrators, as the case
may be, as to the validity and amount of any claim in such Officer's Certificate
shall be final, binding, and conclusive upon the parties to this Agreement. Such
decision shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrator(s), and the Escrow Agent shall be entitled to rely on, and
make distributions from the Escrow Fund in accordance with, the terms of such
award, judgment, decree or order as applicable. Within 30 days of a decision of
the arbitrator(s) requiring payment by one party to another, such party shall
make the payment to such other party.
(iv) Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. The forgoing
arbitration provision shall apply to any dispute among the Shareholders and an
Indemnified Party under this Article VIII hereof, whether relating to claims
upon the Escrow Fund or to the other indemnification obligations set forth in
this Article VIII.
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(v) This Section 8.3(g) shall not apply to
claims against the Escrow Fund made in respect of (A) Agent Interpleader
Expenses or Agent Indemnification Expenses pursuant to clauses (vi) and (vii) of
Section 8.3(i) hereof, (B) Independent Accounting Firm Expenses pursuant to
Section 8.6(c) hereof, or (C) the payments due Parent relating to Excess
Liabilities which will instead be resolved pursuant to the procedures in Section
8.6 (each, an "Agreed-Upon Loss").
(h) Third-Party Claims. In the event Parent becomes aware of a
third party claim (other than a claim that is the subject of an Agreed-Upon
Loss) (a "Third Party Claim") which Parent reasonably believes may result in a
demand against the Escrow Fund or for other indemnification pursuant to this
Article VIII, Parent shall notify the Shareholder Representative of such claim,
and the Shareholder Representative shall be entitled on behalf of the
Shareholders, at its expense, to participate in, but not to determine or
conduct, the defense of such Third Party Claim. Parent shall have the right in
its sole discretion to conduct the defense of, and to settle, any such claim;
provided, however, that except with the consent of the Shareholder
Representative, no settlement of any such Third Party Claim with third party
claimants shall be determinative of the amount of Losses relating to such
matter. In the event that the Shareholder Representative has consented to any
such settlement, the Shareholders shall have no power or authority to object
under any provision of this Article VIII to the amount of any Third Party Claim
by Parent against the Escrow Fund or against the Shareholders directly, as the
case may be, with respect to such settlement. Notwithstanding anything in this
Agreement to the contrary, this Section 8.3(h) shall not apply to any third
party claim that is the subject of an Agreed-Upon Loss. Claims against the
Escrow Fund made in respect of any Agreed-Upon Loss shall be resolved in the
manner described in Section 8.3(g)(v) above.
(i) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for
the performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Shareholder Representative, and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of legal counsel shall be
conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly
authorized to disregard any and all warnings given by any of the parties hereto
or by any other person, excepting only orders or process of courts of law, and
is hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case the Escrow Agent obeys or complies with any such
order, judgment or decree of any court, the Escrow Agent shall not be liable to
any of the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment, or decree being subsequently reversed,
modified, annulled, set aside, vacated, or found to have been entered without
jurisdiction.
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(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under this
Agreement, the Escrow Agent shall not be liable to any party for damages,
losses, or expenses, except for gross negligence or willful misconduct on the
part of the Escrow Agent. The Escrow Agent shall not incur any such liability
for (A) any act or failure to act made or omitted in good faith, or (B) any
action taken or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Agreement that the Escrow Agent
shall in good faith believe to be genuine, nor will the Escrow Agent be liable
or responsible for forgeries, common law fraud, impersonations, or determining
the scope of any representative authority. In addition, the Escrow Agent may
consult with legal counsel in connection with performing the Escrow Agent's
duties under this Agreement and shall be fully protected in any act taken,
suffered, or permitted by him/her in good faith in accordance with the advice of
counsel. The Escrow Agent is not responsible for determining and verifying the
authority of any person acting or purporting to act on behalf of any party to
this Agreement.
(vi) If any controversy arises between the
parties to this Agreement, or with any other party, concerning the subject
matter of this Agreement, its terms or conditions, the Escrow Agent will not be
required to determine the controversy or to take any action regarding it. The
Escrow Agent may hold all documents and the Escrow Amount and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, may be required, despite what
may be set forth elsewhere in this Agreement. In such event, the Escrow Agent
will not be liable for damages. Furthermore, the Escrow Agent may at its option,
file an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to deposit
with the clerk of the court all documents and the Escrow Amounts held in escrow,
except all costs, expenses, charges, and reasonable attorney fees incurred by
the Escrow Agent due to the interpleader action (the "Agent Interpleader
Expenses") and which the parties agree to pay as follows: fifty percent (50%) to
be paid by Parent and fifty percent (50%) to be paid by the Shareholders on the
basis of the Shareholders' Pro Rata Portions; provided, however, that in the
event any Shareholder fails to timely pay such Shareholder's Pro Rata Portion of
the Agent Interpleader Expenses, the parties agree that Parent may at its option
pay such Shareholder's Pro Rata Portion of the Agent Interpleader Expenses and
recover an equal amount (which shall be deemed a Loss) from such Shareholder's
Pro Rata Portion of the Escrow Fund. Upon initiating such action, the Escrow
Agent shall be fully released and discharged of and from all obligations and
liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors
and assigns agree jointly and severally to indemnify and hold Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, including allocated
costs of in-house counsel and disbursements that may be imposed on Escrow
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Agent or incurred by Escrow Agent in connection with the performance of his/her
duties under this Agreement, including but not limited to any litigation arising
from this Agreement or involving its subject matter, other than those arising
out of the gross negligence or willful misconduct of the Escrow Agent (the
"Agent Indemnification Expenses") as follows: fifty percent (50%) to be paid by
Parent and fifty percent (50%) to be paid by the Shareholders on the basis of
the Shareholders' Pro Rata Portions; provided, however, that in the event any
Shareholder fails to timely pay such Shareholder's Pro Rata Portion of the Agent
Indemnification Expenses, the parties agree that Parent may at its option pay
such Shareholder's Pro Rata portion of the Agent Indemnification Expenses and
recover an equal amount (which shall be deemed a Loss) from such Shareholder's
Pro Rata Portion of the Escrow Fund.
(viii) The Escrow Agent may resign at any time upon
giving at least 30 days written notice to the Parent and the Shareholder
Representative; provided, however, that no such resignation shall become
effective until the appointment of a successor escrow agent which shall be
accomplished as follows: Parent and the Shareholder Representative shall use
their commercially reasonable efforts to mutually agree on a successor escrow
agent within 30 days after receiving such notice. If the parties fail to agree
upon a successor escrow agent within such time, the Escrow Agent shall have the
right to appoint a successor escrow agent authorized to do business in the State
of California. The successor escrow agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
(j) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent in accordance with the standard fee
schedule of the Escrow Agent. It is understood that the fees and usual charges
agreed upon for services of the Escrow Agent shall be considered compensation
for ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any service not provided for in this Agreement but that has been
requested by an officer of Parent, or if the parties request a substantial
modification of the terms of the Agreement, or if any controversy arises, or if
the Escrow Agent is made a party to, or intervenes in, any litigation pertaining
to the Escrow Fund or its subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all reasonable
costs, attorney's fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy, or litigation.
(k) Successor Escrow Agents. Any corporation into which the
Escrow Agent in its individual capacity may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger,
conversion, or consolidation to which the Escrow Agent in its individual
capacity shall be a party, or any corporation to which substantially all the
corporate trust business of the Escrow Agent in its individual capacity may be
transferred, shall be the Escrow Agent under this Agreement without further act.
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8.4 Shareholder Representative.
(a) Each of the Shareholders hereby appoints Harris Bank, not
individually but as Trustee of and on behalf of the George M. Hanus Trust, as
its agent and attorney-in-fact, as the "Shareholder Representative" for and on
behalf of the Shareholders to give and receive notices and communications, to
authorize payment to any Indemnified Party from the Escrow Fund in satisfaction
of claims by any Indemnified Party, to object to such payments, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, to assert, negotiate, enter into settlements and compromises of, and
demand arbitration and comply with orders of courts and awards of arbitrators
with respect to, any other claim by any Indemnified Party against any
Shareholder or by any such Shareholder against any Indemnified Party or any
dispute between any Indemnified Party and any such Shareholder, in each case
relating to this Agreement or the transactions contemplated hereby, and to take
all other actions that are either (i) necessary or appropriate in the judgment
of the Shareholder Representative for the accomplishment of the foregoing or
(ii) specifically mandated by the terms of this Agreement. Such agency may be
changed by the Shareholders from time to time upon not less than 30 days prior
written notice to Parent; provided, however, that the Shareholder Representative
may not be removed unless holders of a majority in interest of the Escrow Fund
agree to such removal and to the identity of the substituted agent. A vacancy in
the position of Shareholder Representative may be filled by the holders of a
majority in interest of the Escrow Fund. No bond shall be required of the
Shareholder Representative, and the Shareholder Representative shall not receive
any compensation for its services. Notices or communications to or from the
Shareholder Representative shall constitute notice to or from the Shareholders.
(b) The Shareholder Representative shall not be liable for any
act done or omitted hereunder as Shareholder Representative while acting in good
faith and in the exercise of reasonable judgment. The Shareholders on whose
behalf the Escrow Amount was contributed to the Escrow Fund shall indemnify the
Shareholder Representative and hold the Shareholder Representative harmless
against any loss, liability, or expense incurred without gross negligence or bad
faith on the part of the Shareholder Representative and arising out of or in
connection with the acceptance or administration of the Shareholder
Representative's duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Shareholder Representative ("Shareholder
Representative Expenses"). A decision, act, consent, or instruction of the
Shareholder Representative, including but not limited to an amendment or waiver
of this Agreement pursuant to Section 9.12 hereof, shall constitute a decision
of the Shareholders and shall be final, binding and conclusive upon the
Shareholders; and the Escrow Agent and Parent may rely upon any such decision,
act, consent or instruction of the Shareholder Representative as being the
decision, act, consent, or instruction of the Shareholders. The Escrow Agent and
Parent are hereby relieved from any liability to any person for any acts done by
them in accordance with such decision, act, consent or instruction of the
Shareholder Representative.
8.5 Maximum Payments; Remedy.
(a) Except as set forth in Section 8.5(b), Section 8.5(c) and
Section 8.5(d) hereof, the maximum amount an Indemnified Party may recover from
a Shareholder individually pursuant to the
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indemnity set forth in Section 8.2 above for Losses shall be limited to an
amount equal to such Shareholder's Pro Rata Portion of $2,000,000 of the Escrow
Amount. An Indemnified Party's ability to recover for Excess Liabilities
pursuant to Section 8.6 below shall not be limited in such manner.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, nothing in this Agreement shall limit the liability of any
Shareholder (and the Escrow Fund shall not be the exclusive remedy) in respect
of Losses arising out of any common law fraud on the part of such Shareholder.
The parties further acknowledge that Parent shall recover any Losses resulting
from any common law fraud by any Shareholder, either from the Escrow Fund or
directly from such Shareholders, at Parent's sole election.
(c) Notwithstanding anything to the contrary set forth in this
Agreement, the liability of any Shareholder shall not be limited to and the
Escrow Fund shall not be the exclusive remedy for any common law fraud committed
by the Company prior to the Closing. The parties further acknowledge that Parent
shall recover any Losses resulting from any common law fraud committed by the
Company prior to the Closing, either from the Escrow Fund or directly from such
Shareholder, at Parent's sole election (the Shareholder shall be jointly and
severally liable for any common law fraud by the Company).
(d) Notwithstanding anything to the contrary set forth in this
Agreement, nothing in this Agreement shall limit the liability of the Company or
the Shareholders for (i) any breach or inaccuracy of the representations and
warranties set forth in Section 3.1(b) (Company Capital Structure), Section 3.4
(Authority), Section 3.10 (Tax Matters), Section 3.22 (Environmental Matters),
Section 3.29 (Spreadsheet), and Article IV (Representations and Warranties of
the Shareholders); or (ii) any indemnity obligations arising under clauses (b) -
(d) of Section 8.2 above; or (iii) any payments due Parent under Section 8.6
below; provided, however, that with regard to any non-common law fraud and
non-knowing and intentional breach or inaccuracy the representations and
warranties set forth in Section 3.1(b) (Company Capital Structure), Section 3.4
(Authority), Section 3.10 (Tax Matters), Section 3.29 (Spreadsheet), and Article
IV (Representations and Warranties of the Shareholders), any indemnification
obligations arising under clauses (b) - (d) of Section 8.2 above, or any
liability for Excess Liabilities under Section 8.6 below, Parent shall recover
any such Losses first from the Escrow Fund and then directly from the
Shareholders (the Shareholders shall be jointly and severally liable for all
such liabilities).
8.6 Adjustment to Consideration.
(a) Within 60 days following the Closing Date, Parent shall
determine whether there are any Excess Liabilities or Excess Assets as of the
Closing and give the Shareholder Representative notice of such determination.
For purposes of making such calculation, Parent may use either the Closing
Balance Sheet or the Adjusted Balance Sheet. For purposes of this Agreement, the
amount by which (i) the Company's total assets (as defined by and determined in
accordance with GAAP and consistent with past practices) as of the Closing Date
minus (ii) the Company's total liabilities (as defined by and determined in
accordance with GAAP and consistent with past practices) as of the Closing Date
is less than or exceeds $7,000,000.00 shall be the "Excess
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Liabilities" or "Excess Assets," as the case may be; provided, however, that to
the extent not paid prior to or at the Closing, all Third Party Expenses and
Contingent Closing Payments shall be considered as liabilities of the Company as
of the Closing for purposes of the above calculation. As noted above, instead of
using the Closing Balance Sheet for purposes of making the Excess
Liabilities/Excess Assets calculation, Parent may, at its election, cause to be
prepared an Adjusted Balance Sheet. If Parent elects to prepare the Adjusted
Balance Sheet, such document shall be prepared in accordance with GAAP on a
basis consistent with the most recent regularly prepared financial statements of
the Company. If there are any Excess Liabilities, then the amount equal to such
Excess Liabilities shall be paid to Parent out of the Escrow Fund in accordance
with the terms of Section 8.3 hereof. If there are Excess Assets, within 10 days
after the date Parent has made the calculations set forth in this Section 8.6
and any disputes regarding such calculations have been finally resolved as
provided below, Parent shall pay to each Shareholder who has surrendered such
Shareholder's Certificates as provided in Section 7.1(a) above such
Shareholder's Pro Rata Portion of the amount of Excess Assets. If Parent
calculates whether there are any Excess Liabilities or Excess Assets using the
Adjusted Balance Sheet, then Parent shall deliver to the Shareholder
Representative such Adjusted Balance Sheet within 60 days following the Closing
Date. Following delivery by Parent to the Shareholder Representative of the
Adjusted Balance Sheet, Parent shall give the Shareholder Representative
reasonable access during Parent's regular Illinois business hours to those books
and records of the Company in the possession of Parent and any personnel which
relate to the preparation of the Adjusted Balance Sheet for purposes of
resolving any disputes concerning the Adjusted Balance Sheet and the calculation
of any Excess Liabilities or Excess Assets. If Parent uses the Closing Balance
Sheet for purposes of making such calculation, subsections 8.6(b) -- (d) shall
not be applicable.
(b) If Parent has elected to use the Adjusted Balance Sheet to
calculate whether there are any Excess Liabilities of Excess Assets, the
Shareholder Representative shall have 30 days following delivery of the Adjusted
Balance Sheet during which to notify Parent in writing (the "Notice of
Objection") of any good faith objections to the calculation of Excess
Liabilities or Excess Assets, setting forth a reasonably specific and detailed
description of its objections and, if known, the dollar amount of each
objection. If the Shareholder Representative objects to the calculation of
Excess Liabilities or Excess Assets, Parent and the Shareholder Representative
shall attempt to resolve any such objections within 30 days of the receipt by
Parent of the Notice of Objection.
(c) If Parent and the Shareholder Representative are unable to
resolve any such dispute within the 10 day period following receipt of the
Notice of Objection referred to in Section 8.6(b) hereof, Parent and the
Shareholder Representative shall submit the dispute to a partner in the audit
practice of any nationally recognized accounting firm that is mutually agreeable
to both parties (the "Independent Accounting Firm"). Each of the parties to this
Agreement shall, and shall cause their respective affiliates and representatives
to, provide full cooperation to the Independent Accounting Firm. The Independent
Accounting Firm shall (x) act in its capacity as an expert and not as an
arbitrator, (y) consider only those matters as to which there is a dispute
between the parties and (z) be instructed to reach its conclusions regarding any
such dispute within 30 days after its appointment and provide a written
explanation of its decision. In the event that Parent and the Shareholder
Representative submit any dispute to an Independent Accounting Firm, each such
party may submit a "position paper" to the Independent Accounting Firm setting
forth the position of such
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party with respect to such dispute, to be considered by such Independent
Accounting Firm as it deems appropriate. All expenses relating to the engagement
of the Independent Accounting Firm ("Independent Accounting Firm Expenses")
shall be paid fifty percent (50%) by Parent and fifty percent (50%) of such
expenses shall be paid by the Shareholders; provided, however, that in the event
any Shareholder fails to timely pay his or her Pro Rata Portion of the
Independent Accounting Firm Expenses, the parties agree that Parent may at its
option pay such Shareholder's Pro Rata Portion of the Independent Accounting
Firm Expenses and recover an equal amount (which shall be deemed a Loss) from
such Shareholder's Pro Rata Portion of the Escrow Fund.
(d) If the Shareholder Representative does not deliver a
Notice of Objection in accordance with Section 8.6(b) hereof (i.e., within a 10
day period), the Adjusted Balance Sheet (together with Parent's calculation of
Excess Liabilities or Excess Assets reflected thereon), shall be deemed to have
been accepted by all of the parties to this Agreement. In the event that the
Shareholder Representative delivers a Notice of Objection in accordance with the
provisions above and Parent and the Shareholder Representative are able to
resolve such dispute by mutual agreement, the Adjusted Balance Sheet, together
with Parent's calculation of Excess Liabilities or Excess Assets reflected
thereon, to the extent modified by mutual agreement of such parties, shall be
deemed to have been accepted by all of the parties to this Agreement. In the
event that the Shareholder Representative delivers a Notice of Objection in
accordance with the provisions set forth above and Parent and the Shareholder
Representative are unable to resolve such dispute by mutual agreement, the
determination of the Independent Accounting Firm shall be final and binding on
the parties, and the Adjusted Balance Sheet, together with Parent's calculation
of Excess Liabilities or Excess Assets reflected thereon, to the extent modified
by the Independent Accounting Firm, shall be deemed to have been accepted by all
of the parties to this Agreement. Subject to the foregoing provisions, the
calculation of Excess Liabilities or Excess Assets reflected on any such
Adjusted Balance Sheet shall be conclusive and binding on all of the parties to
this Agreement for purposes of this Section 8.6, no further adjustments shall be
made thereto and none of Parent, the Shareholder Representative or the
Shareholders shall have any further right to challenge such calculation of
Excess Liabilities or Excess Assets, whether pursuant to the terms of Section
8.3 hereof or otherwise.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. Any request, communication, or other notice required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent by facsimile or delivered by recognized overnight or international
courier service or personal delivery (as the situation may require) at the
respective address or facsimile number of the party receiving notice as set
forth below. Any party hereto may by notice so given change its address or
facsimile number for future notice hereunder. All such notices and other
communications hereunder shall be deemed given (a) upon confirmation of
delivery, if sent by facsimile and (b) upon delivery, if sent by recognized
overnight or international courier service or personal delivery:
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(i) if to Parent, to:
PCTEL, Inc.
8725 West Higgins Road, Suite 400
Chicago, Illinois 60631
Attention: General Counsel
Telephone: (773) 243-3013
Facsimile: (773) 243-3050
with a copy to (which shall not constitute notice):
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Douglas H. Collom
Mark Baudler
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
(ii) if to the Shareholder Representative, as set
forth on Schedule 9.1 with respect to the Shareholder
Representative.
(iii) if to the Shareholders, to the respective
addresses of the Shareholders set forth on Schedule
9.1
with a copy to (which shall not constitute notice):
Holland & Knight, LLC
131 South Dearborn Street
30th Floor
Chicago, IL 60603
Attention: Elias M. Matsakis
Telephone: 312-263-3600
Facsimile: 312-578-6666
(iv) if to the Escrow Agent:
U.S. Bank, National Association
Corporate Trust Services
One California Street
San Francisco, California 94111
Attention: Sheila Soares
Telephone No.: (415) 273-4582
Facsimile No.: (415) 273-4591
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9.2 Interpretation.
(a) The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation".
(b) The word "agreement" when used herein shall be deemed in
each case to mean any contract, commitment, or other agreement, whether oral or
written, that is legally binding.
(c) The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(d) For purposes of this Agreement, (i) references to the
"knowledge" of the Company refer to the actual knowledge of John Cosmas, Steven
Deppe, Larry Bess, Jay Maple, Martin Mannion or Robert Amberg; and (ii)
references to the "knowledge" of a Shareholder refer to the actual knowledge of
such Shareholder or, if such Shareholder is other than an individual, the actual
knowledge of such Shareholder's officers, directors, trustees, or other
decision-making persons who are individuals; provided, however, that in the case
of subsection (i) above, such persons shall have made reasonable investigation
and inquiry of those employees, consultants, advisors, and other representatives
who have or could reasonably be expected to have knowledge of such fact or
matter.
(e) For purposes of this Agreement, the term "person" means
any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm, or other enterprise, association, organization, entity, or
Governmental Entity.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; No Third Party Beneficiaries; Assignment. Other
than the Confidentiality Agreement, this Agreement, the schedules and exhibits
hereto, and the documents and instruments and other agreements among the parties
hereto referenced herein: (a) constitute the entire agreement among the parties
with respect to the subject matter hereof, supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and no party shall be liable by any warranties or
representations except as set forth herein or as expressly contemplated hereby;
(b) are not intended to confer upon any other person any rights or remedies
hereunder (except as provided with respect to Company Indemnified Persons in
Section 6.7 (Indemnification)); and (c) shall not be assigned by operation of
law or otherwise except as otherwise specifically provided, except that,
subsequent to the Closing, Parent may assign its rights and delegate its
obligations hereunder. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
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9.5 Rights Reservation. Notwithstanding anything to the contrary set
forth in this Agreement, the representations and warranties made by the Company
and the Shareholders under this Agreement or in any certificate or other
instruments delivered pursuant to this Agreement, and any obligation of the
Company and the Shareholders to indemnify the Indemnified Parties for breaches
thereof under Section 8.2 above, will not be affected by any investigation of
Parent or by Parent's knowledge that any such representation or warranty is or
may be untrue or inaccurate. Furthermore and without limiting the foregoing, any
waiver of the rights of Parent under this Agreement must be express and in
writing.
9.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void, or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.7 Other Remedies. Except as otherwise set forth herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.8 Governing Law and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within Cook County, State of Illinois, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, and agrees that process may be served upon them in
any manner authorized by the laws of the State of Illinois for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue, and such process.
9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
9.11 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION,
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PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE, OR ENFORCEMENT HEREOF.
9.12 Amendment; Waivers. This Agreement may be amended and enforcement
of any provision hereof may be waived by the Parent and the Shareholder
Representative hereto at any time by execution of an instrument in writing
signed on behalf of the party against whom enforcement is sought. For purposes
of this Section 9.12, the Shareholders agree that any amendment or waiver of
this Agreement signed by the Shareholder Representative shall be binding upon
and effective against the Shareholders whether or not such Shareholders have
signed such amendment.
* * * * *
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IN WITNESS WHEREOF, Parent, the Company, each of the Shareholders, the
Shareholder Representative, and the Escrow Agent have caused this Agreement to
be signed by their duly authorized respective officers, all as of the date first
written above.
MAXRAD, INC. PCTEL, INC.
an Illinois corporation a Delaware corporation
By: /s/ Steven L. Deppe By: /s/ Martin H. Singer
------------------------------ ------------------------------
Steven L. Deppe Martin H. Singer
Chief Executive Officer Chairman and Chief Executive
Officer
SHAREHOLDER REPRESENTATIVE:
HARRIS TRUST AND SAVINGS BANK,
NOT INDIVIDUALLY BUT AS TRUSTEE
AND ON BEHALF OF GEORGE M.
HANUS TRUST DATED JUNE 7, 1986 -
MARITAL TRUST,
AS SHAREHOLDER REPRESENTATIVE
By: /s/ Stanley A. Kunecki
------------------------------
Name: Stanley A. Kunecki
Title: Vice President
SHAREHOLDERS:
KATHRYN L. HANUS GEORGE E. HANUS
By: /s/ Kathryn L. Hanus By: /s/ George E. Hanus
------------------------------ ------------------------------
GERALDINE HANUS CHILDREN'S GERALDINE HANUS CHILDREN'S
TRUSTS--KATHRYN L. HANUS TRUSTS--GEORGE E. HANUS
TRUST DATED OCTOBER 31, 2000 TRUST DATED OCTOBER 31, 2000
Not individually but solely as Trustee Not individually but solely as Trustee
By: /s/ Stanley A. Kunecki By: /s/ Stanley A. Kunecki
------------------------------ ------------------------------
Name: Stanley A. Kunecki Name: Stanely A. Kunecki
Title: Vice President Title: Vice President
GEORGE M. HANUS TRUST
DATED JUNE 7, 1986 - MARITAL TRUST
Not individually but solely as Trustee
By: /s/ Stanley A. Kunecki
------------------------------
Name: Stanley A. Kunecki
Title: Vice President
ESCROW AGENT
(as to the provisions of Article VIII only)
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Sheila Soares
------------------------------
Name: Sheila Soares
Title: Vice President
EXHIBIT A
PCTEL, INC.
EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is entered into as of January 2, 2004
by and between PCTEL, Inc. ("Parent") and _________________ ("Employee"). All
capitalized terms used but not defined herein shall have the respective meanings
ascribed thereto in the Purchase Agreement (as defined below).
1. EFFECTIVENESS; EFFECTIVE DATE. This Agreement is being entered
into contemporaneously with the consummation of the transactions contemplated by
the Securities Purchase Agreement, dated as of an even date herewith, by and
among Parent, MAXRAD, Inc., an Illinois corporation ("Maxrad"), and the other
parties thereto (the "Purchase Agreement"). This Agreement shall become
effective immediately subsequent to the Closing (as such term is defined in the
Purchase Agreement) (the "Effective Date").
2. DUTIES AND SCOPE OF EMPLOYMENT.
(a) Positions and Duties. As of the Effective Date,
Employee will serve as ______________________________ of Maxrad. Employee's
initial duties and responsibilities are described on Exhibit A hereto. Employee
will render such business and professional services in the performance of his
duties, consistent with Employee's position within Maxrad, as shall reasonably
be assigned to him by Parent's and Maxrad's management. The period of Employee's
employment under this Agreement is referred to herein as the "Employment Term".
(b) Obligations. During the Employment Term, Employee
will perform his duties faithfully and to the best of his ability and will
devote his full business efforts and time to Parent (for purposes of this
Agreement, the term "Parent" shall be deemed to include Maxrad and any other
subsidiary or parent entities of Parent). For the duration of the Employment
Term, Employee agrees not to actively engage in any other employment,
occupation, or consulting activity for any direct or indirect remuneration
without the prior approval of the President of Parent.
3. AT-WILL EMPLOYMENT. The parties agree that Employee's
employment with Parent will be "at-will" employment and may be terminated at any
time with or without cause or notice. Employee understands and agrees that
neither his job performance nor promotions, commendations, bonuses or the like
from Parent give rise to or in any way serve as the basis for modification,
amendment, or extension, by implication or otherwise, of his employment with
Parent.
4. COMPENSATION.
(a) Base Salary. During the Employment Term, Parent will
pay Employee as compensation for his services a base salary at the annualized
rate of $________ (the "Base Salary"), which salary shall be reviewed annually
for possible increases. The Base Salary will be paid periodically in accordance
with Parent's normal payroll practices and be subject to the usual, required
withholdings.
(b) Bonus. Employee shall be eligible to receive an
annual bonus of up to __% of Employee's annual salary, based upon Employee's
performance and Parent's attainment of objectives to be determined by the Board
of Directors of Parent (the "Board"), consistent with Parent's standard
executive bonus policy as described in Exhibit C attached to this agreement.
Employee must be employed by Parent on the payment date of a given bonus to
receive such bonus. The determination of whether Employee has attained the
objectives, and the timing and amount, if any, of each annual bonus shall be
determined by the Board in its sole discretion. Any bonus payments will be
subject to required withholdings.
(c) Stock Option. As of the Effective Date, Employee will
be granted a stock option, which will be, to the extent permitted by Section
422(d) of the Internal Revenue Code of 1986, as amended (the "Code"), an
"incentive stock option" (as defined in Section 422 of the Code), to purchase
_______ shares of Parent's Common Stock at an exercise price equal to the
closing sales price on the date of grant (the "Option"). The shares subject to
the Option will vest over 48 months beginning on the Effective Date, with 25% of
the shares subject to the Option vesting on the 12-month anniversary of the
Effective Date, and 1/48th of the shares subject to the Option vesting on each
monthly anniversary thereafter, subject to Employee's continued service to
Parent on the relevant vesting dates. The Option will be subject to the terms,
definitions and provisions of Parent's Amended and Restated 1997 Stock Plan (the
"1997 Plan") and the stock option agreement between Employee and Parent (the
"Option Agreement"), both of which documents are incorporated herein by
reference.
(d) Retention Bonus. As of the Effective Date, Employee
will be granted ________ restricted shares of Parent's Common Stock (the
"Restricted Shares"). The Restricted Shares will vest on the 24-month
anniversary of the Effective Date (the "Retention Date"), subject to Employee's
continued service to Parent on the Retention Date. Vesting of the shares will
constitute ordinary income to Employee at the fair market value of the shares on
the Retention Date, under the IRS regulations then in effect, and will be
subject to required withholdings. The Restricted Shares will be subject to the
terms, definitions and provisions of the 1997 Stock Plan and the restricted
stock agreement between Employee and Parent, both of which documents are
incorporated herein by reference.
(e) Vacation. Employee shall be entitled to such vacation
time, with full pay, as Maxrad customarily provides to its key management
employees, subject to the approval of Parent, (but in no event less than four
(4) weeks per year), provided that unused vacation may be used by Employee in
the following year only in accordance with, and as permitted by, Maxrad's then
current vacation policies, as the same may be amended from time to time, which
policies are subject to the approval of Parent. Vacation shall be taken in due
consideration of Employee's duties and responsibilities under this Agreement.
(f) Reimbursement of Expenses. Employee shall be entitled
to reimbursement of all reasonable and customary travel, entertainment and other
business expenses incurred in the performance of his duties and responsibilities
for Parent, upon submission of an itemized expense report accompanied by all
receipts and vouchers evidencing the expenses, in accordance with Maxrad's then
current business expense reimbursement policies, as the same may be amended from
the time to time, which policies are subject to the approval of Parent.
5. EMPLOYEE BENEFITS. During the Employment Term, Employee will
be entitled to participate in the employee benefit plans currently and hereafter
maintained by Maxrad of general applicability to other employees of Maxrad,
including, without limitation, Maxrad's group medical, dental, and life
insurance plans, all of which are subject to the approval of Parent. A listing
of such Maxrad employee benefit plans is attached hereto as Exhibit B. Employee
will also be entitled to participate in Parent's 401(k) plan. Parent reserves
the right to cancel or change the benefit plans and programs it offers to its
employees at any time.
6. SEVERANCE.
(a) Involuntary Termination. If, prior to the Retention
Date, Employee's employment with Parent is terminated (1) by Parent for reasons
other than Cause (as defined below) or (2) by Employee pursuant to a Voluntary
Termination for Good Reason (as defined below), and, in either case, Employee
signs and does not revoke a standard release of claims with Parent in Parent's
then-current standard form, then:
(i) Employee shall be entitled to receive
continuing payments of severance pay at a rate equal to his Base Salary rate, as
then in effect, for a period from such termination date through the Retention
Date or twelve (12) months from such termination date, whichever is longer, to
be paid periodically in accordance with Parent's normal payroll policies and
subject to required withholdings;
(ii) Employee shall be entitled to (A) receive
any bonus compensation earned through the date of termination in accordance with
the terms of the applicable bonus compensation plans, (B) receive expense
reimbursements and any accrued benefits (including, but not limited to, vacation
and retirement benefits) through the date of termination in accordance with the
terms of the applicable policies or plans, and (C) continue to participate in
the applicable insurance, retirement and other fringe benefit plans through the
date of termination and thereafter only to the extent required under the terms
of such plans or programs;
(iii) Parent shall pay the group health, dental
and vision plan continuation coverage premiums for Employee and covered
dependents under Title X of the Consolidated Budget Reconciliation Act of 1985,
as amended, through the earlier to occur of (A) the Retention Date or twelve
(12) months from the termination date, whichever is longer, or (B) the date upon
which Employee and his eligible dependents are covered by similar plans of
Employee's new employer; and
(iv) the vesting of all outstanding equity awards
granted by Parent to Employee shall accelerate (or, as applicable, Parent's
rights of repurchase shall lapse) so that Employee is vested in all such awards
to the same extent Employee would have been vested had Employee's employment
with Parent continued through the Retention Date.
(b) Other Termination. If Employee's employment with
Parent terminates (1) voluntarily by Employee (other than pursuant to a
Voluntary Termination for Good Reason prior to the Retention Date), (2) for
Cause by Parent (at any time subsequent to the Effective Date), (3) by death or
disability or (4) involuntarily (whether or not for Cause) by Parent subsequent
to the Retention Date (provided, however, that the Noncompetition Agreement (as
defined below) provides for certain severance benefits if Employee's employment
with Parent is terminated under certain circumstances subsequent to the
Retention Date as specifically provided therein), then
(i) all vesting under Employee's outstanding
equity awards will cease immediately and all payments of compensation by Parent
to Employee hereunder will cease immediately (except as to amounts already
earned), and
(ii) Employee will only be eligible for severance
benefits in accordance with Parent's established policies as then in effect.
7. CONFIDENTIAL INFORMATION. Employee has entered into a
Confidential Information and Invention Assignment Agreement, dated as of an even
date herewith, with Parent (the "Proprietary Information Agreement"), which
agreement shall remain in full force and effect.
8. NONCOMPETE AGREEMENT. Contemporaneously with Employee entering
into this Agreement, Employee is executing and delivering a Noncompetition
Agreement, dated as of an even date herewith, in favor of Parent (the
"Noncompetition Agreement"), which agreement shall remain in full force and
effect.
9. MANAGEMENT RETENTION AGREEMENT. Contemporaneously with
Employee entering into this Agreement, Employee is executing and delivering a
Management Retention Agreement, dated as of an even date herewith, in favor of
Parent, substantially in the form attached hereto as Exhibit D (the "Management
Retention Agreement"), which agreement shall become effective upon the two year
anniversary of the Effective Date, subject to Employee's continued service to
Parent on such date.
10. DEFINITIONS.
(a) Cause. "Cause" shall mean (1) Employee's conviction
or commission of any act of embezzlement, theft, misappropriation, fraud or
dishonesty in connection with Employee's employment by Parent, which results in,
or could reasonably be expected to result in, (A) a material gain for Employee
or others calculated by Employee to receive such gain or (B) a material loss for
Parent or any of its officers, employees, suppliers, customers or agents; (2)
Employee's conviction of, or plea of nolo contendere to, a felony, or, any crime
involving an act of moral turpitude, (3) Employee's continuous failure to
substantially perform Employee's duties under this Agreement
(other than any such failure resulting from Employee's inability to perform such
duties as a result of a physical or mental impairment), which if susceptible to
cure is not substantially cured by Employee within thirty (30) days after a
written demand for substantial performance is given to Employee by Parent, which
demand reasonably identifies the manner in which Parent believes that Employee
has not substantially performed Employee's duties or (4) any material breach of
any applicable invention assignment and confidentiality agreement or similar
agreement between Parent and Employee, including the Proprietary Information
Agreement.
(b) Voluntary Termination for Good Reason. "Voluntary
Termination for Good Reason" shall mean Employee voluntarily resigns after the
occurrence of any of the following (1) without Employee's express written
consent, a material reduction of Employee's duties, title, authority or
responsibilities, relative to Employee's duties, title, authority or
responsibilities as in effect immediately prior to such reduction, or the
assignment to Employee of such reduced duties, title, authority or
responsibilities; provided, however, that a reduction in duties, title,
authority or responsibilities solely by virtue of Parent being acquired and made
part of a larger entity (as, for example, when the Senior Vice-President of a
business unit of Parent remains as such following a Change of Control) shall not
by itself constitute grounds for a "Voluntary Termination for Good Reason;" (2)
without Employee's express written consent, a material reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to Employee immediately prior to such reduction; (3) a
reduction by Parent in the base salary of Employee as in effect immediately
prior to such reduction; (4) a material reduction by Parent in the aggregate
level of employee benefits, including bonuses, to which Employee was entitled
immediately prior to such reduction with the result that Employee's aggregate
benefits package is materially reduced (other than a reduction that generally
applies to Parent Employees); (5) the relocation of Employee to a facility or a
location more than thirty-five (35) miles from Employee's then present location,
without Employee's express written consent; (6) the failure of Parent to obtain
the assumption of this agreement by any successors contemplated in Section 11
below; or (7) any act or set of facts or circumstances which would, under
Illinois case law or statute constitute a constructive termination of Employee.
11. ASSIGNMENT. This Agreement will be binding upon and inure to
the benefit of (a) the heirs, executors, and legal representatives of Employee
upon Employee's death and (b) any successor of Parent. Any such successor of
Parent will be deemed substituted for Parent or, as the case may be, under the
terms of this Agreement for all purposes. For this purpose, "successor" means
any person, firm, corporation or other business entity which at any time,
whether by purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of Parent. None of the rights of
Employee to receive any form of compensation payable pursuant to this Agreement
may be assigned or transferred except by will or the laws of descent and
distribution. Any other attempted assignment, transfer, conveyance, or other
disposition of Employee's right to compensation or other benefits will be null
and void.
12. NOTICES. All notices, requests, demands and other
communications called for hereunder shall be in writing and shall be deemed
given (a) on the date of delivery if delivered personally, (b) one (1) day after
being sent by a well established commercial overnight service, or (c) four (4)
days after being mailed by registered or certified mail, return receipt
requested, prepaid
and addressed to the parties or their successors at the following addresses, or
at such other addresses as the parties may later designate in writing:
If to Parent:
PCTEL, Inc.
8725 West Higgins Road
Suite 400
Chicago, IL 60631
Telephone No.: (773) 243-3000
Facsimile No.: (773) 243-3049
Attn: Martin H. Singer, President
If to Employee:
to the address for notice set forth on the last page hereof.
13. SEVERABILITY. In the event that any provision hereof becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement will continue in full force and effect without said
provision.
14. ARBITRATION.
(a) General. In consideration of Employee's service to
Parent, its promise to arbitrate all employment related disputes and Employee's
receipt of the compensation, pay raises and other benefits paid to Employee by
Parent, at present and in the future, Employee agrees that any and all
controversies, claims, or disputes with anyone (including Parent and any
employee, officer, director, shareholder or benefit plan of Parent in their
capacity as such or otherwise) arising out of, relating to, or resulting from
Employee's service to Parent under this Agreement or otherwise or the
termination of Employee's service with Parent, including any breach of this
Agreement, shall be subject to binding arbitration. Disputes which Employee
agrees to arbitrate, and thereby agrees to waive any right to a trial by jury,
include any statutory claims under state or federal law, including, but not
limited to, claims under Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act of 1990, the Age Discrimination in Employment
Act of 1967, the Older Workers Benefit Protection Act, any applicable provisions
of Illinois law, claims of harassment, discrimination or wrongful termination
and any statutory claims. Employee further understands that this Agreement to
arbitrate also applies to any disputes that Parent may have with Employee.
(b) Procedure. Employee agrees that any arbitration will
be administered by the American Arbitration Association ("AAA") and that a
neutral arbitrator will be selected in a manner consistent with its National
Rules for the Resolution of Employment Disputes. The arbitration shall be held
in Cook County, Illinois. The arbitration proceedings will allow for discovery
according to the rules set forth in the National Rules for the Resolution of
Employment Disputes. Employee agrees that the arbitrator shall have the power to
decide any motions brought by any party to the arbitration, including motions
for summary judgment and/or adjudication and motions to dismiss and demurrers,
prior to any arbitration hearing. Employee agrees that the arbitrator shall
issue a written decision on the merits. Employee also agrees that the arbitrator
shall have the power to award any remedies, including attorneys' fees and costs,
available under applicable law. Employee understands Parent will pay for any
administrative or hearing fees charged by the arbitrator or AAA except that
Employee shall pay the first $200.00 of any filing fees associated with any
arbitration Employee initiates.
(c) Remedy. Arbitration shall be the sole, exclusive and
final remedy for any dispute between Employee and Parent. Accordingly, neither
Employee nor Parent will be permitted to pursue court action regarding claims
that are subject to arbitration. Notwithstanding, the arbitrator will not have
the authority to disregard or refuse to enforce any lawful Parent policy, and
the arbitrator shall not order or require Parent to adopt a policy not otherwise
required by law, which Parent has not adopted.
(d) Availability of Injunctive Relief. Employee agrees
that any party may petition the court for injunctive relief where either party
alleges or claims a violation of this Agreement or the Proprietary Information
Agreement or any other agreement regarding trade secrets, confidential
information, nonsolicitation, or applicable provisions of Illinois law. In the
event either party seeks injunctive relief, the prevailing party shall be
entitled to recover reasonable costs and attorneys fees.
(e) Administrative Relief. Employee understands that this
Agreement does not prohibit Employee from pursuing an administrative claim with
a local, state, or federal administrative body such as the Department of Human
Rights, the Equal Employment Opportunity Commission, or the workers'
compensation board. This Agreement does, however, preclude Employee from
pursuing court action regarding any such claim.
(f) Voluntary Nature of Agreement. Employee acknowledges
and agrees that Employee is executing this Agreement voluntarily and without any
duress or undue influence by Parent or anyone else. Employee further
acknowledges and agrees that Employee has carefully read this Agreement and that
Employee has asked any questions needed for Employee to understand the terms,
consequences, and binding effect of this Agreement and fully understand it,
including that Employee is waiving Employee's right to a jury trial. Finally,
Employee agrees that Employee has been provided an opportunity to seek the
advice of an attorney of Employee's choice before signing this Agreement.
15. INTEGRATION. This Agreement, together with the 1997 Plan, the
Option Agreement, the Restricted Stock Agreement, the Proprietary Information
Agreement, the Noncompetition Agreement and the Management Retention Agreement,
represents the entire agreement and understanding between the parties as to the
subject matter herein and supersedes all prior or contemporaneous agreements
whether written or oral. No waiver, alteration, or modification of any of the
provisions of this Agreement will be binding unless in writing and signed by
duly authorized representatives of the parties hereto.
16. TAX WITHHOLDING. All payments made pursuant to this Agreement
will be subject to withholding of applicable taxes.
17. GOVERNING LAW. This Agreement will be governed by the laws of
the State of Illinois (with the exception of its conflict of laws provisions).
18. ACKNOWLEDGMENT. Employee acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
*****
IN WITNESS WHEREOF, each of the parties has executed this Employment
Agreement, in the case of Parent by its duly authorized officers, as of the day
and year first above written.
"EMPLOYEE" By: _____________________________________
Print Name: _____________________________
Address: _____________________________
_____________________________
Telephone: _____________________________
Fax: ____________________________________
"PARENT" PCTEL, INC.
a Delaware corporation
By: _____________________________________
Martin H. Singer
Chairman and Chief Executive Officer
EXHIBIT A
Description of Initial Duties and Responsibilities
EXHIBIT B
Listing of Employee Benefit Plans
The following is a list of the employee benefits, subject to change
from time to time by Parent, to which Employee is entitled under this Agreement:
1. Health Insurance: Blue Cross Blue Shield Blue Print (both an HMO and
PPO are offered)
2. Dental Insurance: Delta Dental (both an HMO and PPO are offered)
3. Life Insurance: MetLife Life Insurance
a. $25,000/employee
b. $5,000/spouse
c. $2,500/dependent child
4. Parent 401(k) Plan
5. Parent Deferred Compensation Plan
EXHIBIT C
Employee will participate in Parent's annual Bonus Plan and, during
Parent's fiscal 2004 only, Maxrad's Annual Incentive Plan, as approved by
Parent, as listed below:
PARENT`S BONUS PLAN MAXRAD'S ANNUAL INCENTIVE PLAN
EXHIBIT D
Form of Management Retention Agreement
See form of management retention agreement for registrant's vice
presidents filed as Exhibit 10.18 to the registrant's Annual Report on Form 10-k
for its fiscal year ended December 31, 2001.
EXHIBIT B
PCTEL, INC.
NONCOMPETITION AGREEMENT
This Noncompetition Agreement is being executed and delivered as of
January 2, 2004 by [__________] (the "Employee") in favor of and for the benefit
of PCTEL, Inc., a Delaware corporation ("Parent"). All capitalized terms used
but not defined herein shall have the respective meanings ascribed thereto in
the Purchase Agreement (as defined below).
RECITALS
A. Parent, MAXRAD, Inc., an Illinois corporation (the "Company"),
and certain other parties have entered into a Securities Purchase Agreement
dated as of an even date herewith (the "Purchase Agreement"), which provides for
the purchase of all of the outstanding capital stock of the Company by Parent
(the "Share Purchase").
B. As a key employee of the Company, Employee has obtained and
will obtain extensive and valuable knowledge and information concerning the
Company (including confidential information relating to the operations, assets,
contracts, customers, personnel, plans, and prospects of the Company).
C. In connection with the Share Purchase, Parent intends to
employ Employee as an employee of Parent (with the understanding that such
employment may be with a subsidiary or parent entity of Parent, including the
Company) and upon the commencement of Employee's employment with Parent, Parent
shall make available to Employee confidential information of Parent that will
enable Employee to optimize the performance of his duties to Parent
(notwithstanding the preceding clause, Employee agrees that Parent will have no
obligation to make available to Employee any of its confidential information
after the termination of Employee's employment with Parent).
D. Contemporaneously with the execution and delivery of this
Noncompetition Agreement, Parent and Employee are entering into an Employment
Agreement (the "Employment Agreement") that is conditioned upon, among other
matters, Employee's execution and delivery of this Noncompetition Agreement and
execution and delivery of a Confidential Information and Invention Assignment
Agreement in favor of Parent.
E. To more fully secure unto Parent the benefits of the Share
Purchase (including the goodwill and business value of the Company) and to help
restrict Employee's potential use of Parent's confidential information to the
activities associated with Employee's employment with Parent following the
consummation of the Share Purchase, Parent has required, as a condition to its
willingness to enter into the Purchase Agreement and the Employment Agreement
and to make available Parent's confidential information to Employee during
Employee's employment with Parent, that Employee enter into this Noncompetition
Agreement; and Employee is entering into this Noncompetition Agreement in order
to induce Parent to enter into the Purchase Agreement and to
induce Parent to make available Parent's confidential information to Employee
during Employee's employment with Parent.
F. Parent and the Company have each conducted, and Parent and the
Company will continue to conduct, its businesses on a worldwide basis.
AGREEMENT
In order to induce Parent to consummate the Share Purchase, and in
consideration of Parent's willingness to enter into the Employment Agreement
with Employee and to make available Parent's confidential information during
Employee's employment with Parent, Employee agrees as follows:
1. ACKNOWLEDGMENTS BY EMPLOYEE. Employee acknowledges that the
promises and restrictive covenants that Employee is providing in this
Noncompetition Agreement are reasonable and necessary to (a) the protection of
Parent's and the Company's business and Parent's and the Company's legitimate
interests in the transactions contemplated by the Purchase Agreement and (b) the
protection of Parent's legitimate business interests in making available
Parent's confidential information to Employee during the term of Employee's
employment with Parent.
2. NONCOMPETITION. During the Restriction Period (as defined
below), Employee shall not (other than in connection with its employment
services to Parent or its successors or assigns):
(a) engage in the designing, developing, manufacturing,
marketing, selling, licensing or servicing of products, technology or services
competitive with the Company's business or engage in the designing, developing,
manufacturing, marketing, selling, licensing or servicing of products,
technology or services competitive with any business unit of Parent to which
Employee is transferred with Employee's consent after the date of this Agreement
(the "Restricted Business");
(b) be or become an officer, director, shareholder,
owner, affiliate, salesperson, co-owner, partner, trustee, promoter, technician,
engineer, analyst, employee, agent, representative, supplier, consultant,
advisor, or manager of or to, or otherwise acquire or hold any interest in, any
person or entity that competes in the markets for the Restricted Businesses; or
(c) provide any service (as an employee, consultant, or
otherwise), support, product or technology to any person or entity, if such
service, support, product, or technology involves or relates to product or
software development in the markets for the Restricted Businesses;
provided, however, that nothing in this Section 2 shall prevent
Employee from owning as a passive investment less than one percent (1%) of the
outstanding shares of the capital stock of a publicly-held company if (i) such
shares are actively traded on the New York Stock Exchange or The Nasdaq National
Market and (ii) Employee is not otherwise associated directly or indirectly with
such corporation or any affiliate of such corporation.
"Restriction Period" as used herein shall mean the period commencing on
the Effective Date and ending on the later to occur of (i) the second
anniversary of the Closing Date and (ii) the first anniversary of the
termination date of Employee's employment with Parent (the "Release Date").
- 2 -
3. NONSOLICITATION. Employee further agrees that Employee will
not during the Restriction Period:
(a) personally or through others, encourage, induce,
attempt to induce, solicit, or attempt to solicit (on Employee's own behalf or
on behalf of any other person or entity) any employee of Parent or any of
Parent's subsidiaries to leave his or her employment with Parent or any of
Parent's subsidiaries;
(b) employ, or permit any entity over which Employee
exercises voting control to employ any person who shall have terminated his or
her employment with Parent or any of Parent's subsidiaries; or
(c) personally or through others, interfere, or attempt
to interfere with the relationship or prospective relationship of Parent or any
of Parent's subsidiaries with any person or entity that is, was or is expected
to become a customer or client of Parent or any of Parent's subsidiaries.
4. TERMINATION OF EMPLOYMENT AFTER THE RESTRICTION PERIOD.
(a) In the event that Employee's employment with Parent
is terminated subsequent to the end of the Restriction Period either (1) by
Parent for reasons other than Cause (as defined in the Employment Agreement) or
(2) by Employee pursuant to a Voluntary Termination for Good Reason (as defined
in the Employment Agreement), and, in either case, Employee signs and does not
revoke a standard release of claims with Parent in Parent's then-current
standard form, then Parent may elect to:
(i) enforce the provisions of Sections 2 and 3
of this Agreement, in which case Employee will be subject to the covenants and
obligations set forth therein and will be entitled to receive the benefits set
forth in Sections 6(a)(i), 6(a)(ii) and 6(a)(iii) of the Employment Agreement;
or
(ii) not enforce the provisions of Sections 2 and
3 of this Agreement, in which case Employee will not be subject to the covenants
and obligations set forth therein and will only be eligible for severance
benefits in accordance with Parent's established policies as then in effect.
(b) In the event that Employee's employment with Parent
is terminated subsequent to the end of the Restriction Period either (1)
voluntarily by Employee or (2) involuntarily by Parent for Cause, then Employee
will be subject to the provisions of Sections 2 and 3 of this Agreement.
(c) Notwithstanding the foregoing, Employee will not be
entitled to receive any duplicative benefits under this Agreement and the
Management Retention Agreement (as defined in the Employment Agreement). In the
event that Employee's employment with Parent is terminated within twelve (12)
months of a Change of Control (as defined in the Management Retention
Agreement), Employee will remain subject to the provisions of Sections 2 and 3
of this Agreement
- 3 -
and will only be entitled to receive the benefits to which Employee is entitled
under the Management Retention Agreement.
5. INDEPENDENCE OF OBLIGATIONS. The covenants and obligations of
Employee set forth in this Noncompetition Agreement shall be construed as
independent of any other agreement or arrangement between Employee, on the one
hand, and Parent on the other.
6. SPECIFIC PERFORMANCE. Employee agrees that in the event of any
breach by Employee of any covenant, obligation, or other provision contained in
this Noncompetition Agreement, Parent shall be entitled to (in addition to any
other remedy that may be available to it including but not limited to a claim
for damages based on the consideration paid to Employee by Parent), to the
extent permitted by applicable law, (a) a decree or order of specific
performance to enforce the observance and performance of such covenant,
obligation or other provision and (b) an injunction restraining such breach or
threatened breach.
7. NON-EXCLUSIVITY. The rights and remedies of Parent hereunder
are not exclusive of or limited by any other rights or remedies that Parent may
have, whether at law, in equity, by contract or otherwise, all of which shall be
cumulative (and not alternative). Without limiting the generality of the
foregoing, the rights and remedies of Parent hereunder, and the obligations, and
liabilities of Employee hereunder, are in addition to their respective rights,
remedies, obligations and liabilities under the law of unfair competition,
misappropriation of trade secrets and the like. This Noncompetition Agreement
does not limit Employee's obligations or the rights of Parent (or any affiliate
of Parent) under the terms of any other agreement between Employee and Parent or
any affiliate of Parent.
8. NOTICES. All notices, requests, demands, and other
communications called for hereunder shall be in writing and shall be deemed
given (a) on the date of delivery if delivered personally, (b) one (1) day after
being sent by a well established commercial overnight service, or (c) four (4)
days after being mailed by registered or certified mail, return receipt
requested, prepaid, and addressed to the parties or their successors at the
following addresses, or at such other addresses as the parties may later
designate in writing:
(a) if to Parent to:
PCTEL, Inc.
8725 West Higgins Road, Suite 400
Chicago, Illinois 60631
Attention: General Counsel
Telephone No.: (773) 243-3001
Facsimile No.: (773) 243-3050
- 4 -
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Douglas H. Collom
Telephone No.: (650) 493-9300
Facsimile No.: (650) 845-5000
(b) if to Employee, to the address for notice set forth
on the last page hereof;
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
9. SEVERABILITY. If any provision of this Noncompetition
Agreement or any part of any such provision is held under any circumstances to
be invalid or unenforceable in any jurisdiction, then (a) such provision or part
thereof shall, with respect to such circumstances and in such jurisdiction, be
deemed amended to conform to applicable laws so as to be valid and enforceable
to the fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction and (c) such
invalidity of enforceability of such provision or part thereof shall not affect
the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Noncompetition
Agreement. Each provision of this Noncompetition Agreement is separable from
every other provision of this Noncompetition Agreement, and each part of each
provision of this Noncompetition Agreement is separable from every other part of
such provision.
10. GOVERNING LAW. This Noncompetition Agreement shall be
construed in accordance with, and governed in all respects by, the laws of the
State of Illinois, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
11. WAIVER. No failure on the part of Parent to exercise any
power, right, privilege, or remedy under this Noncompetition Agreement, and no
delay on the part of Parent in exercising any power, right, privilege, or remedy
under this Noncompetition Agreement, shall operate as a waiver of such power,
right, privilege, or remedy; and no single or partial exercise of any such
power, right, privilege, or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege, or remedy. Parent shall not be
deemed to have waived any claim arising out of this Noncompetition Agreement, or
any power, right, privilege, or remedy under this Noncompetition Agreement,
unless the waiver of such claim, power, right, privilege, or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
12. CAPTIONS. The captions contained in this Noncompetition
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Noncompetition Agreement and shall not be referred to in connection
with the construction or interpretation of this Noncompetition Agreement.
- 5 -
13. FURTHER ASSURANCES. Employee shall execute and/or cause to be
delivered to Parent such instruments and other documents and shall take such
other actions as and Parent may reasonably request to effectuate the intent and
purposes of this Noncompetition Agreement.
14. ENTIRE AGREEMENT. This Noncompetition Agreement, the other
agreements referred to herein, and the Employment Agreement and Management
Retention Agreement contemporaneously executed by the Employee set forth the
entire understanding of Employee and Parent relating to the subject matter
hereof and thereof and supersede all prior agreements and understandings between
any of such parties relating to the subject matter hereof and thereof.
15. AMENDMENTS. This Noncompetition Agreement may not be amended,
modified, altered, or supplemented other than by means of a written instrument
duly executed and delivered on behalf of Parent and Employee.
16. ASSIGNMENT. This Noncompetition Agreement and all obligations
hereunder are personal to Employee and may not be transferred or assigned by
Employee at any time. Parent may assign its rights under this Noncompetition
Agreement to any entity in connection with any merger or sale or transfer of all
or substantially all of Parent's assets.
17. BINDING NATURE. Subject to Section 15, this Noncompetition
Agreement will be binding upon Employee and Employee's representatives,
executors, administrators, estate, heirs, successors, and assigns, and will
inure to the benefit of Parent and its respective successors and assigns.
*****
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IN WITNESS WHEREOF, each of the parties has executed this
Noncompetition Agreement, in the case of Parent by its duly authorized officers,
as of the date first above written.
"EMPLOYEE" By: ____________________________________
Print Name: ____________________________
Address: ____________________________
____________________________
Telephone: ____________________________
Fax: ___________________________________
"PARENT" PCTEL, INC.
a Delaware corporation
By: ____________________________________
Martin H. Singer
Chairman and Chief Executive Officer
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EXHIBIT C
FORM OF LEGAL OPINION FOR LEGAL COUNSEL TO THE COMPANY
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois. The Company has
the corporate power and authority to own, lease, and operate its assets and
property and to carry on its business as now being conducted. The Company is
qualified to do business as a foreign corporation in the State of Indiana.
2. The authorized capital stock of the Company consists of
100,000 shares of Common Stock, 1,000 shares of which are issued and
outstanding. All such issued and outstanding shares of Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable. There
are no options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of capital stock or other securities of the Company, or any other written
agreements of the Company to issue any such securities or rights.
3. The Company has all requisite corporate power and authority to
enter into the Purchase Agreement and each of the other Transaction Documents to
which the Company is a party, and to consummate the transactions contemplated
thereby. The execution and delivery of the Purchase Agreement and each of the
other Transaction Documents to which the Company is a party and the consummation
of the transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company. The Purchase Agreement
and each of the other Transaction Documents to which the Company is a party has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with their respective terms. The Purchase Agreement and the Section 338(h)(10)
Election have been duly authorized, executed and delivered by each Shareholder,
and the Purchase Agreement and the Section 338(h)(10) Election constitute valid
and binding obligations of such Shareholder, enforceable against such
Shareholder in accordance with their terms.
4. The execution and delivery of the Purchase Agreement and the
consummation of the transactions contemplated therein by the Company and the
Shareholders do not violate (i) any provision of the Charter Documents, (ii) any
provision of the formation documents of the Shareholders that are entities,
(iii) any Contract or, (iv) any judgment, order or decree, or statute, law,
ordinance, rule or regulation that is applicable to the Company or the
Shareholders.
5. No consent, permit, approval or authorization of or
designation, declaration or filing with any Governmental Entity on the part of
the Company or the Shareholders is required in connection with the valid
execution and delivery of the Purchase Agreement or the consummation of the
Share Purchase or the other transactions contemplated by the Purchase Agreement,
other than the Section 338(h)(10) Election.
6. To our knowledge, there is no action, suit, proceeding, claim,
arbitration, or investigation pending before any court or administrative agency
against the Company or any of its assets or properties, except as disclosed in
Schedule 3.19 of the Purchase Agreement.
7. Upon delivery of and payment for the Shares sold by the
Shareholders as contemplated in the Purchase Agreement, Parent will be the
registered owner of the Shares purchased by it from the Shareholders, free and
clear of any mortgage, pledge, security interest, lien, claim or other
encumbrance or restriction on transferability or any adverse claim, assuming
Parent purchase such Shares for value, in good faith and without notice of any
adverse claim, as such terms are defined in the Uniform Commercial Code in
effect in the State of Illinois.
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