STOCK PURCHASE AGREEMENT BY AND AMONG KAMAN CORPORATION KAMAN MUSIC CORPORATION AND FENDER MUSICAL INSTRUMENTS CORPORATION Dated as of October 27, 2007
BY
AND
AMONG
KAMAN
CORPORATION
KAMAN
MUSIC CORPORATION
AND
FENDER
MUSICAL INSTRUMENTS CORPORATION
Dated
as
of October 27, 2007
TABLE
OF CONTENTS
PAGE
ARTICLE
I
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PURCHASE
AND SALE OF THE SHARES
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Purchase
and Sale of the Shares
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1
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1.2
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Purchase
Price.
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1
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1.3
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Closing
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4
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1.4
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Deliveries
by Seller
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5
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1.5
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Deliveries
by Buyer
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6
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ARTICLE
II
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RELATED
MATTERS
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2.1
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Inter-company
Accounts
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6
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2.2
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Resignations
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7
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2.3
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Assignment
of KMC Name; License of Kaman Music Name.
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7
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ARTICLE
III
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REPRESENTATIONS
AND WARRANTIES OF SELLER
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3.1
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Organization
of Seller; Authority
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7
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3.2
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No
Violation; Consents and Approvals.
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8
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3.3
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Title
to Shares
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8
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3.4
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Litigation
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9
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3.5
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Brokers
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9
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ARTICLE
IV
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REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANY
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4.1
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Organization
and Qualification of the Company and each Subsidiary;
Authority
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9
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4.2
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Capitalization
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10
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4.3
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No
Violation; Consents and Approvals
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11
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4.4
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Financial
Statements
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12
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4.5
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Absence
of Certain Changes or Events
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12
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4.6
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Absence
of Undisclosed Liabilities
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13
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4.7
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Title
to Personal Property
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13
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4.8
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Title
to Real Property
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13
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4.9
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Intellectual
Property
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14
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4.10
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Litigation
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17
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i
4.11
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Employee
Benefit Plans
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17
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4.12
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Taxes
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19
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4.13
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Contracts
and Commitments
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22
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4.14
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Compliance
with Laws
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24
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4.15
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Insurance
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24
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4.16
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Labor
Matters
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24
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4.17
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Environmental
Matters
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25
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4.18
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Affiliate
Transactions; Inter-company Transactions
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25
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4.19
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Customers
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26
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4.20
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Suppliers
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26
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4.21
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Product
Liability
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26
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4.22
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Sufficiency
of Assets
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27
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4.23
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Brokers
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27
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ARTICLE
V
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REPRESENTATIONS
AND WARRANTIES OF BUYER
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5.1
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Organization;
Authority
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27
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5.2
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No
Violation; Consents and Approvals
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28
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5.3
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Litigation
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28
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5.4
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Financing
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28
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5.5
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Acquisition
of the Shares for Investment; Securities Act
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28
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5.6
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Brokers
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29
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5.7
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Buyer’s
401(k) Plan
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29
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ARTICLE
VI
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COVENANTS
OF THE PARTIES
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6.1
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Conduct
of the Company's Business
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29
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6.2
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Financial
Statements
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32
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6.3
|
Access
to Information Prior to the Closing; Confidentiality
|
32
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6.4
|
Reasonable
Best Efforts
|
33
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6.5
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Consents;
Filings; Cooperation
|
33
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6.6
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Antitrust
Notification
|
34
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6.7
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Public
Announcements
|
34
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6.8
|
Access
to Books and Records Following the Closing
|
34
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6.9
|
Repayment
of Debt; Release of Liens and Guarantees
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34
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6.10
|
Financing
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35
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6.11
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Certain
Transfers
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35
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ARTICLE
VII
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TAX
MATTERS
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7.1
|
Certain
Definitions
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35
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ii
7.2
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Transfer
and Similar Taxes
|
36
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7.3
|
Real
Property and Personal Property Taxes
|
36
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7.4
|
Return
Filings
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36
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7.5
|
Carrybacks
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38
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7.6
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Tax
Elections
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38
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7.7
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Tax
Indemnification
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38
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7.8
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338(h)(10)
Elections; No 338(g) Election
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41
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7.9
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Survival
of Obligations
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43
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ARTICLE
VIII
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ADDITIONAL
AGREEMENTS
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8.1
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Company
Employees; Employee Contracts and Benefits
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43
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8.2
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Non-Solicitation
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45
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8.3
|
No
Shop
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45
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8.4
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Termination
of Inter-company Commitments
|
46
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8.5
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Dispute
Resolution
|
46
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8.6
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Certain
Accounts and Payments
|
47
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8.7
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Transition
Assistance
|
47
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8.8
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Assumption
of Indemnification Obligations
|
47
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ARTICLE
IX
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CONDITIONS
TO CLOSING
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9.1
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Conditions
to Both Parties' Obligations
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48
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9.2
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Conditions
to Seller's Obligations
|
48
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9.3
|
Conditions
to Buyer's Obligations
|
49
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ARTICLE
X
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TERMINATION
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10.1
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Termination
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50
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10.2
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Procedure
and Effect of Termination
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51
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ARTICLE
XI
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SURVIVAL
OF REPRESENTATIONS AND COVENANTS; INDEMNIFICATION
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11.1
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Survival
of Representations and Covenants
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51
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11.2
|
Seller's
Agreement to Indemnify
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52
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11.3
|
Seller's
Limitation of Liability
|
52
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11.4
|
Buyer's
Agreement to Indemnify
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53
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11.5
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Buyer's
Limitation of Liability
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53
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11.6
|
Procedures
for Indemnification
|
53
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11.7
|
Conditions
of Indemnification With Respect to Third-Party Claims
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53
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iii
11.8
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Net
Payments
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54
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11.9
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Sole
Remedy
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55
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11.10
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Environmental
Indemnification
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55
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11.11
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Exclusive
Remedy for Taxes
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55
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11.12
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Tax
Treatment
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55
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ARTICLE
XII
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MISCELLANEOUS
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12.1
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Further
Assurances
|
56
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12.2
|
Notices
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56
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12.3
|
Amendment,
Modification and Waiver
|
57
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12.4
|
Entire
Agreement
|
57
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12.5
|
Severability
|
57
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12.6
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Binding
Effect; Assignment
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57
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12.7
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No
Third-Party Beneficiaries
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58
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12.8
|
Fees
and Expenses
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58
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12.9
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Counterparts
|
58
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12.10
|
Interpretation
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58
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12.11
|
Forum
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58
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12.12
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Governing
Law
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58
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12.13
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Certain
Defined Terms.
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58
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Exhibit
A Form
of
FIRPTA Certificate
Exhibit
B Form
of
Transition Services Agreement
Exhibit
C Form
of
Bloomfield Real Estate Lease
Exhibit
D Form
of
Trademark Assignment Agreement
Exhibit
E Form
of
Trademark License Agreement
iv
STOCK
PURCHASE AGREEMENT, dated as of October 27, 2007 (the "Agreement"), by and
among
KAMAN CORPORATION, a Connecticut corporation ("Seller"), KAMAN MUSIC
CORPORATION, a Connecticut corporation and a direct wholly owned subsidiary
of
Seller (the "Company"), and FENDER MUSICAL INSTRUMENTS CORPORATION, a Delaware
corporation ("Buyer").
WHEREAS,
Buyer desires to acquire from Seller, and Seller desires to dispose of, the
business, properties and assets of the Company and its Subsidiaries;
WHEREAS,
to effect such transaction, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of the issued and outstanding shares of capital
stock (the "Shares") of the Company, upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS,
simultaneously with the execution of this Agreement, Buyer is entering into
an
employment agreement with each of Xxxx Xxxxxxx, Xxxxxxxx Xxxx and Xxxxxx
Xxxxxx.
NOW,
THEREFORE, in consideration of the foregoing and of the representations,
warranties, covenants and agreements hereinafter set forth, and intending to
be
legally bound hereby, the parties hereto agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF THE SHARES
1.1 Purchase
and Sale of the Shares .
Upon
the terms and subject to the conditions of this Agreement, at the closing
provided for in Section 1.3 hereof (the "Closing"), Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase, acquire
and accept from Seller, all of Seller's right, title and interest in and to
the
Shares free and clear of all Liens.
1.2 Purchase
Price.
(a) Upon
the
terms and subject to the conditions of this Agreement, in consideration of
the
aforesaid sale, conveyance, assignment, transfer and delivery of the Shares,
at
the Closing, Buyer shall pay to Seller an amount equal to $117,000,000
(the "Base Amount"), plus or minus the Estimated Net Working Capital Adjustment
(as adjusted, the "Purchase Price"), by wire transfer of immediately available
funds to a bank account as shall be designated by Seller in writing no later
than two (2) Business Days prior to the Closing Date.
(b) (i)
The Base
Amount shall be adjusted by the amount that the Estimated Closing Net Working
Capital (as defined below) deviates from the Target Net Working Capital (the
"Estimated Net Working Capital Adjustment"). "Target Net Working Capital" is
an
amount equal to $54,279,000. Two Business Days prior to the Closing, Seller
shall deliver to Buyer a statement containing, in reasonable detail, its good
faith estimate of (x) the Net Working Capital (as defined below) as of the
Closing Date (the "Estimated Closing Net Working Capital") and (y) the amount
of
Cash as of 11:59 p.m. on the Closing Date, net of Seller’s good faith estimate
of any tax and currency exchange costs to Seller or the Company attributable
to
repatriating to the United States any portion of such Cash which is held outside
the United States (such net amount, the "Estimated Closing Cash"). If the
Estimated Closing Net Working Capital is greater than the Target Net Working
Capital, then the Base Amount shall be increased by such excess. If the
Estimated Closing Net Working Capital is less than the Target Net Working
Capital, then the Base Amount shall be decreased by such deficiency. In
addition, the Base Amount shall be increased by the amount of the Estimated
Closing Cash. "Net Working Capital" means, on a consolidated basis, the
Company's and its Subsidiaries' (i) current assets minus (ii) current
liabilities, in each case excluding Cash, Inter-company Accounts, Income Taxes
payable or receivable and any deferred Income Tax assets or liabilities, and
shall be determined in accordance with the methodology illustrated in Schedule
1.2(b) and, to the extent not inconsistent with such methodology, in accordance
with GAAP and consistent with the methodology and principles used in the
preparation of the Financial Statements.
The cash
overdraft in accounts payable will be eliminated from the Estimated Closing
Net
Working Capital and the Closing Net Working Capital (as defined below). The
cash
overdraft is included in Target Net Working Capital.
(ii) As
soon
as practicable, but in no event later than 75
days
following the Closing Date, Buyer shall deliver to Seller a statement
containing, in reasonable detail, the Net Working Capital as of the Closing
(the
"Closing Net Working Capital"), together with the workpapers used in the
preparation thereof.
(iii) Seller
shall have 30 days within which to review the statement of the Closing Net
Working Capital after Buyer's delivery thereof. If Seller disputes the Closing
Net Working Capital, Seller shall notify Buyer in writing of its objection
to
the Closing Net Working Capital within such 30-day period, together with a
description of the basis for such dispute in reasonable detail. Buyer and Seller
shall, within 30 days following receipt of such notice (the "Resolution
Period"), attempt to resolve their differences in good faith and any resolution
by them as to any disputed amounts shall be final, binding and conclusive.
If,
at the conclusion of the Resolution Period, any amounts remain in dispute,
then
each of Buyer and Seller shall submit all items remaining in dispute to
Deloitte & Touche LLP or such other nationally recognized firm of
independent accountants mutually agreeable to Buyer and Seller (the "Independent
Accounting Firm") for resolution by delivering to the Independent Accounting
Firm their position with respect to such items. All fees and expenses relating
to the work, if any, to be performed by the Independent Accounting Firm shall
be
borne equally between Seller and Buyer. The Independent Accounting Firm shall
determine, based solely on the submissions by Seller and Buyer, and not by
independent review, only those issues still in dispute. The Independent
Accounting Firm's determination shall be requested to be made within 30 days
of
submission as provided above and shall be set forth in a written statement
delivered to Seller and Buyer and shall be final, binding and conclusive. The
term "Final Net Working Capital", as hereinafter used, shall mean the definitive
Closing Net Working Capital agreed to by Buyer and Seller or the definitive
Closing Net Working Capital resulting from the determinations made by the
Independent Accounting Firm (in addition to those items theretofore agreed
to by
Seller and Buyer).
2
(iv) Within
three Business Days after the Final Net Working Capital is agreed to or any
remaining disputed items are ultimately resolved pursuant to Section
1.2(b)(iii): (y) if the Final Net Working Capital exceeds the Estimated Closing
Net Working Capital, Buyer shall pay Seller the amount of such excess by wire
transfer in immediately available funds to an account specified by Seller;
and
(z) if the Estimated Closing Net Working Capital exceeds the Final Net Working
Capital, Seller shall pay Buyer the amount of such excess by wire transfer
in
immediately available funds to an account specified by Buyer.
(c) (i)
As soon
as practicable, but in no event later than 15 Business Days following the
Closing Date, Buyer shall deliver to Seller a statement containing, in
reasonable detail, the amount of Cash as of 11:59 p.m. on the Closing Date,
net
of Buyer's good faith estimate of any tax and currency exchange costs to Buyer
attributable to repatriating to the United States any portion of such Cash
which
is held outside the United States (such net amount, the "Closing Cash"), and
the
amount of Indebtedness as of the Closing (the "Closing Indebtedness"), together
with the workpapers used in the preparation thereof.
(ii) Seller's
review of the statement of Closing Cash and Closing Indebtedness and the
resolution of any disputes between Seller and Buyer with respect to Closing
Cash
and Closing Indebtedness shall be governed by the same procedure as set forth
in
Section 1.2(b)(iii). The
terms
"Final Closing Cash" and "Final Closing Indebtedness", as hereinafter used,
shall mean the definitive Closing Cash and Closing Indebtedness, respectively,
agreed to by Buyer and Seller or the definitive Closing Cash and Closing
Indebtedness, respectively, resulting from the determinations made by the
Independent Accounting Firm (in addition to those items theretofore agreed
to by
Seller and Buyer).
(iii) Within
three Business Days after the Final Closing Cash and the Final Closing
Indebtedness are agreed to or any remaining disputed items are ultimately
resolved pursuant to Section 1.2(c)(ii): (w) if the Final Closing Cash exceeds
the Estimated Closing Cash, Buyer shall pay Seller such excess by wire transfer
in immediately available funds to an account specified by Seller; (x) if the
Estimated Closing Cash exceeds the Final Closing Cash, Seller shall pay Buyer
such excess by wire transfer in immediately available funds to an account
specified by Buyer; (y) if the Final Closing Indebtedness is a positive amount,
Seller shall pay Buyer such amount by wire transfer in immediately available
funds to an account specified by Buyer; and (z) if the Final Closing
Indebtedness is a negative amount, Buyer shall pay Seller such amount by wire
transfer in immediately available funds to an account specified by Seller.
If
any portion of the Final Closing Cash is denominated in a non-U.S. currency,
Buyer may at its election pay such amount in such currency.
3
(d) (i)
As soon
as practicable, but in no event later than 15 Business Days following the
Closing Date, Seller shall deliver to Buyer a statement containing, in
reasonable detail, the amounts outstanding and not settled under all
Inter-company Accounts as of the Closing (the "Closing Inter-company Balances"),
together with the workpapers used in the preparation thereof.
(ii) Buyer's
review of the statement of Closing Inter-company Balances and the resolution
of
any disputes between Seller and Buyer with respect to Closing Inter-company
Balances shall be governed by the same procedure as set for in Section
1.2(b)(iii). The
term
"Final Closing Inter-company Balances", as hereinafter used, shall mean the
definitive Closing Inter-company Balances agreed to by Buyer and Seller or
the
definitive Closing Inter-company Balances resulting from the determinations
made
by the Independent Accounting Firm (in addition to those items theretofore
agreed to by Seller and Buyer).
(iii) Within
three Business Days after the Final Closing Inter-company Balances are agreed
to
or any remaining disputed items are ultimately resolved pursuant to Section
1.2(d)(ii): (y) if there are any Final Closing Inter-company Balances owing
to
the Company or any Subsidiary by Seller or any of its subsidiaries (other than
the Company or any Subsidiary), Seller shall pay Buyer such amounts by wire
transfer in immediately available funds to an account specified by Buyer; and
(z) if there are any Final Closing Inter-company Balances owing to Seller or
any
of its subsidiaries (other than the Company or any Subsidiary) by the Company
or
any Subsidiary, Buyer shall pay Seller such amounts by wire transfer in
immediately available funds to an account specified by Seller.
(e) Any
adjustment made pursuant to this Section 1.2 shall be deemed an adjustment
to
the Purchase Price.
1.3 Closing
.
The
Closing of the transactions contemplated by this Agreement shall take place
at
the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 0 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, at 10:00 a.m., local time, on the third Business Day
after
the conditions to Closing set forth in Article IX hereof (other than conditions
which by their nature can be satisfied only at the Closing, but subject to
the
satisfaction or waiver of those conditions) have been satisfied or waived,
or at
such other place, date and time as shall be mutually agreed upon by the parties
hereto, except that, if the Closing were in accordance with the foregoing
required to be held before December 31, 2007, the Closing shall be held on
December 31, 2007; provided,
however,
that
the parties hereto intend that such Closing shall be deemed to be effective,
and
the transactions contemplated by this Agreement shall be deemed to occur at
11:59 p.m. on the date on which the Closing actually occurs (the "Closing
Date").
4
1.4 Deliveries
by Seller .
Prior
to or at the Closing, Seller shall deliver or cause to be delivered the
following:
(a) a
stock
certificate or stock certificates representing the Shares, duly endorsed or
accompanied by stock powers duly executed in blank;
(b) the
minute books, stock books, stock ledgers and corporate seals of the Company
and
its Subsidiaries;
(c) the
resignations of directors and officers referred to in
Section 2.2;
(d) the
Transition Services Agreement executed by Seller
and the
Company;
(e) the
Bloomfield Real Estate Lease executed by Seller;
(f) the
Trademark Assignment Agreement executed by Seller and the Company;
(g) the
Trademark License Agreement executed by Seller and the Company;
(h) a
duly
executed certification, substantially in the form of Exhibit A hereof, that
Seller is not a foreign person within the meaning of Treasury Regulation Section
1.1445-2(b)(2)(iv);
(i) the
officer's certificate referred to in Section 9.3(g); and
5
(j) all
other
documents, certificates or written instruments required to be delivered by
Seller prior to or at the Closing pursuant to this Agreement or otherwise
required in connection herewith.
1.5 Deliveries
by Buyer .
Prior
to or at the Closing, Buyer shall deliver or cause to be delivered the
following:
(a) cash
in
an amount equal to the Purchase Price, by wire transfer of immediately available
funds to a bank account designated by Seller in accordance
with Section 1.2(a);
(b) the
Transition Services Agreement executed by Buyer;
(c) the
Bloomfield Real Estate Lease executed by the Company;
(d) the
Trademark Assignment Agreement executed by Buyer;
(e) the
Trademark License Agreement executed by Buyer;
(f) the
officer's certificate referred to in Section 9.2(c) hereof; and
(g) all
other
documents, certificates or written instruments required to be delivered by
Buyer
prior to or at the Closing pursuant to this Agreement or otherwise required
in
connection herewith.
ARTICLE
II
RELATED
MATTERS
2.1 Inter-company
Accounts.
Other
than as provided in Section 8.4 and except as set forth on Section 2.1 of the
Seller Disclosure Schedule, at or prior to the Closing, Seller shall, and shall
cause its subsidiaries to, take all commercially reasonable actions necessary
to
settle as of the Closing all cash balances, inter-company payables and
receivables, indebtedness and other accounts between the Company or any
Subsidiary, on the one hand, and Seller or its other subsidiaries (other than
the Company and the Subsidiaries), on the other hand (the "Inter-company
Accounts"), and shall ensure that none of the Company and the Subsidiaries
shall
owe any Liability relating to the Inter-company Accounts to Seller or any of
its
subsidiaries, or vice versa.
Any
Inter-company Accounts not settled as of the Closing (including those set forth
on Section 2.1 of the Seller Disclosure Schedule) shall result in an adjustment
to the Purchase Price pursuant to Sections 1.2(d) and 1.2(e).
6
2.2 Resignations.
At the
Closing, Seller shall cause each officer and director of the Company to resign
as an officer or a director of the Company and each officer and director of
each
Subsidiary to resign as an officer or a director of each Subsidiary (other
than
any such officer and director of the Company or a Subsidiary identified in
writing by Buyer to Seller at least five Business Days before the Closing),
each
such resignation to be effective as of the Closing.
2.3 Assignment
of KMC Name; License
of Kaman Music Name.
(a) At
and
effective upon the Closing, Seller shall assign to the Company any and all
right, title or interest it has in and to the Trademark "KMC," and any
registrations and pending applications related thereto (all of which are
identified on Section 2.3 of the Seller Disclosure Schedule), along with all
goodwill associated therewith and the rights to prior infringement claims
related thereto, pursuant to the Trademark Assignment Agreement.
(b) At
and
effective upon the Closing, Seller
shall grant (and, if applicable, Seller shall cause its subsidiaries to grant)
to the Company, the Subsidiaries and Buyer (collectively, the "Licensees")
a
license to use the names and Trademarks "Kaman Music Corporation," "Kaman Music"
and any derivation thereof used by Seller in the Music Business prior to the
Closing on
the
terms and subject to the limitations provided in the Trademark License
Agreement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF SELLER
Except
as
set forth with respect to a specifically identified representation and warranty
on the disclosure schedule delivered by Seller to Buyer prior to the execution
of this Agreement (the "Seller Disclosure Schedule"), Seller represents and
warrants to Buyer as follows:
3.1 Organization
of Seller; Authority.
Seller
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Connecticut, and has all requisite corporate power
and
corporate authority to enter into this Agreement and the Ancillary Agreements
to
which it is a party, and to consummate the transactions contemplated hereby
and
thereby. The execution, delivery and performance by Seller of this Agreement
and
the Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Seller. This Agreement has been duly executed and delivered
by
Seller and, assuming that this Agreement constitutes a valid and binding
obligation of Buyer, constitutes a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in effect,
relating to or limiting creditors' rights generally and (ii) general principles
of equity (regardless of whether enforcement is considered in a proceeding
in
equity or at law) (collectively, the "Enforceability Exceptions"). Each of
the
Ancillary Agreements will be duly executed and delivered by Seller as of the
Closing and, assuming that each such Agreement constitutes a valid and binding
obligation of the other parties thereto (other than any subsidiary of Seller),
will constitute a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except that such enforcement may be subject
to the Enforceability Exceptions.
7
3.2 No
Violation; Consents and Approvals.
(a) The
execution and delivery by Seller of this Agreement and the Ancillary Agreements
do not and will not, and the consummation of the transactions contemplated
hereby and thereby and compliance with the terms hereof and thereof will not,
conflict with, or result in any violation of or default under, (i)
any
provision of the certificate of incorporation or bylaws of Seller, (ii) any
judgment, order, injunction or decree (an "Order"), or statute, law, ordinance,
rule or regulation ("Applicable Law"), applicable to Seller or the property
or
assets of Seller or (iii) any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation ("Contracts") to which Seller
is a party or by which Seller or its assets may be bound, except, in the case
of
clauses (ii) and (iii) where any such conflicts, violations or
defaults
as to
which requisite waivers or consents will have been obtained prior to the Closing
and which, individually or in the aggregate, are immaterial and do not and
would
not reasonably be expected to materially impair or materially delay Seller's
ability to consummate the transactions contemplated by this
Agreement.
(b) No
consent, approval, order or authorization of or from, or registration,
declaration or filing with ("Consent"), any court, administrative agency or
commission or other governmental entity, authority or instrumentality, domestic
or foreign ("Governmental Authority"), or any other third person, is required
to
be obtained or made by or with respect to Seller in connection with the
execution and delivery of this Agreement and the Ancillary Agreements or the
consummation by Seller of the transactions contemplated hereby or thereby,
other
than, in each case, (i) compliance with and filings under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any foreign
antitrust laws (the "Foreign Antitrust Approvals") and (ii) compliance with
and
filings under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), except those that the failure to obtain or make, individually or in
the
aggregate, are immaterial and do not and would not reasonably be expected to
materially impair or materially delay Seller's ability to consummate the
transactions contemplated by this Agreement.
3.3 Title
to Shares.
The
sale and delivery of the Shares as contemplated by this Agreement are not
subject to any preemptive right, right of first refusal or other right or
restriction. Seller is the record and beneficial owner of the Shares, free
and
clear of all Liens, except for Liens created by this Agreement, and upon
consummation of the transactions contemplated hereby, Seller will transfer
good
and valid title to the Shares to Buyer, free and clear of all Liens.
Seller
is not party to or bound by (i) any stockholder agreements, voting trusts,
proxies or other agreements or understandings relating to the holding, voting,
sale, purchase, redemption or other acquisition of the Shares or (ii) any
agreements, commitments, arrangements, understandings or other obligations
to
declare, make or pay any dividends or distributions, whether current or
accumulated, or due or payable, on any Shares.
8
3.4 Litigation.
(a) As
of the date hereof, there are no claims, actions, suits, investigations or
proceedings pending or, to the knowledge of Seller, threatened against or
affecting Seller or its assets, at law or in equity, by or before any
Governmental Authority, or by or on behalf of any third person, which,
individually or in the aggregate, if adversely determined, could reasonably
be
expected to materially impair Seller's ability to consummate the transactions
contemplated hereby, and (b) there are no outstanding Orders of any Governmental
Authority affecting Seller or its assets, which, individually or in the
aggregate, could reasonably be expected to materially impair Seller's ability
to
consummate the transactions contemplated hereby.
3.5 Brokers.
No
broker, finder or financial advisor or other person is entitled to any brokerage
fees, commissions, finders' fees or financial advisory fees in connection with
the transactions contemplated hereby by reason of any action taken by Seller
or
any of its directors, officers, employees, representatives or agents, except
for
Lazard Freres & Co. LLC.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANY
Except
as
set forth with respect to a specifically identified representation and warranty
on the disclosure schedule delivered by Seller and the Company to Buyer prior
to
the execution of this Agreement (the "Company Disclosure Schedule"), the Company
and Seller each represents and warrants, jointly and severally, to Buyer as
follows:
4.1 Organization
and Qualification of the Company and each Subsidiary; Authority.
(a) The
Company and each Subsidiary is a corporation or other legal entity duly
organized, validly existing and in good standing, where applicable, under the
laws of the jurisdiction of its incorporation or organization and has all
requisite corporate or other similar power and authority to own, lease and
operate its properties and to conduct its business as conducted on the date
hereof
in all
material respects. The Company and each Subsidiary is duly qualified or licensed
to do business as a foreign corporation or other legal entity and is in good
standing, where applicable, in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except in those jurisdictions where the failure
to
be so duly qualified or licensed and in good standing, where applicable, would
not subject the Company and its Subsidiaries to material Liabilities. Seller
has
heretofore made available to Buyer complete and correct copies of the
certificate of incorporation and bylaws, or other similar organizational
documents, of the Company and each Subsidiary, as in effect as of the date
of
this Agreement. As used in this Agreement, the term "Subsidiary" shall mean
any
person with respect to which the Company holds or controls, directly or
indirectly, (i) voting power to elect a majority of the board of directors
or
others performing similar functions or (ii) at least 50% of the equity
interests. The Company's only Subsidiaries are: Musicorp, LLC, a limited
liability company organized under the laws of the State of Delaware; KMI Europe,
Inc., a corporation incorporated under the laws of the State of Delaware; Genz
Benz Enclosures, Inc., a corporation incorporated under the laws of the State
of
Arizona; and B & J Music Ltd., a company organized under the laws of
Ontario, Canada.
9
(b) The
Company has all requisite corporate power and corporate authority to enter
into
this Agreement, and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement
has
been duly executed and delivered by the Company and, assuming that this
Agreement constitutes a valid and binding obligation of Buyer, constitutes
a
valid and binding obligation of the Company, enforceable against the Company
in
accordance with its terms, except that such enforcement may be subject to the
Enforceability Exceptions.
4.2 Capitalization.
(a) The
authorized capital stock of the Company consists of 5,000 shares of common
stock, $1.00 par value, of which 1,000 shares, constituting the Shares, are
validly issued and outstanding, fully paid and non-assessable. The authorized
and issued capital of each Subsidiary consists of:
· |
Musicorp,
LLC - non-unitized membership
interests;
|
· |
KMI
Europe, Inc. - 1,000 shares of common stock, par value $1.00 per
share, of
which 1,000 shares are issued and
outstanding;
|
· |
Genz
Benz Enclosures, Inc. - 1,000,000 shares of common stock, no par
value, of
which 100 shares are issued and outstanding;
and
|
· |
B
& J Music Ltd. - unlimited shares of common stock, no par value, of
which 5,881 shares are issued and
outstanding.
|
All
issued and outstanding shares of capital stock or other equity securities of
the
Subsidiaries (the "Subsidiary Shares") have been duly authorized and are validly
issued, fully paid and non-assessable and owned by the Company. The Company
has
good and valid title to such shares or other equity securities, free and clear
of any Liens, except for Liens created by this Agreement.
10
(b) Neither
the Shares, nor any Subsidiary Shares, were issued in violation of, or are
subject to, any preemptive, subscription or similar rights. There are no
outstanding warrants, options, agreements, convertible or exchangeable
securities or other commitments pursuant to which Seller, the Company or each
Subsidiary is or may become obligated to issue, sell, purchase, return or redeem
any shares of capital stock or other securities of the Company or each
Subsidiary. None of the Company and its Subsidiaries are party to or bound
by
(i)
any
stockholder agreements, voting trusts, proxies or other agreements or
understandings relating to the holding, voting, sale, purchase, redemption
or
other acquisition of the Shares or the Subsidiary Shares or (ii) any
agreements, commitments, arrangements, understandings or other obligations
to
declare, make or pay any dividends or distributions, whether current or
accumulated, or due or payable, on any Shares or Subsidiary Shares.
(c) Except
for the Subsidiary Shares, the Company and its Subsidiaries do not own, directly
or indirectly, beneficially or of record, any capital stock of or other equity
or voting securities or interests in any other person. There are no outstanding
obligations of the Company or any Subsidiary to make any investment in or
provide funds (whether in the form of a loan, capital contribution or
otherwise), and neither the Company nor any Subsidiary currently has outstanding
any such investment or obligation to provide funds, to any other
person.
4.3 No
Violation; Consents and Approvals.
(a) The
execution and delivery by the Company of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, conflict with, or result in any violation of or default
under, (i)
any
provision of the certificate of incorporation or bylaws or other similar
organizational documents of the Company or any Subsidiary, (ii) any Order or
Applicable Law applicable to the Company or any Subsidiary or the property
or
assets of the Company or any Subsidiary, in any material respect or (iii) any
material Contracts to which the Company or any Subsidiary is a party or by
which
the Company or any Subsidiary or any of the Company's or each Subsidiary's
material assets may be bound, except, in the case of clauses (ii) and (iii)
where any such conflicts, violations or defaults as to which requisite waivers
or consents will have been obtained prior to the Closing and which, in the
aggregate, are immaterial and do not and would not reasonably be expected to
materially impair or materially delay the Company's ability to consummate the
transactions contemplated by this Agreement.
(b) No
Consent of or with any Governmental Authority, or any other third person, is
required to be obtained or made by or with respect to the Company and the
Subsidiaries in connection with the execution and delivery of this Agreement
or
the consummation by the Company of the transactions contemplated hereby, other
than, in each case, (i) compliance with and filings under the HSR Act and any
Foreign Antitrust Approvals and (ii) compliance with and filings under the
Exchange Act,
except
those that the failure to obtain or make such Consent or filing, individually
or
in the aggregate, are immaterial and do not and would not reasonably be expected
to materially impair or materially delay the Company's ability to consummate
the
transactions contemplated by this Agreement.
11
4.4 Financial
Statements.
(a) Seller
has heretofore delivered to Buyer true and correct copies of the audited
consolidated balance sheets of the Company and its Subsidiaries as of
December 31, 2005 and 2006
and the
related consolidated income and cash flow statements for the years ended
December 31, 2004, 2005 and 2006 and the unaudited consolidated balance sheets
of the Company and its Subsidiaries as of December 31, 2004, March 30,
2007, June 29, 2007 and September 28, 2007 and the related consolidated
income and cash flow statements for the three months ended March 31, 2006 and
March 30, 2007, the three months ended June 30, 2006 and June 29, 2007 and
the
three months ended September 29, 2006 and September 28, 2007 (collectively,
and
together with the financial statements required to be delivered pursuant to
Section 6.2, the "Financial Statements"). The consolidated balance sheet of
the
Company and its Subsidiaries as of June 29, 2007 is hereinafter referred to
as
the "Balance Sheet." The Financial Statements (a) fairly present, or will fairly
present, in all material respects the financial condition and the results of
operations and cash flows of the Company and each Subsidiary as of the dates
and
for the periods indicated and (b) have been prepared, or will be prepared,
in
accordance with generally accepted accounting principles ("GAAP") applied
consistently throughout the periods involved, except as disclosed therein and
for the absence of footnotes and, in the case of interim financial statements,
for normal year-end adjustments which are not material.
(b) At
all
times since December 31, 2003, the Company has had in effect internal accounting
controls that provide reasonable assurance (i) that assets of the Company and
each of its Subsidiaries are protected and transactions are properly recorded
and (ii) regarding the reliability of financial reporting and the preparation
of
financial statements for external purposes in accordance with GAAP. No
reportable conditions or material weaknesses (each as defined in AU 325 of
the
AICPA Professional Standards) have been discovered in connection with the audits
of the Company's consolidated financial statements referred to in
Section 4.4(a).
4.5 Absence
of Certain Changes or Events.
Except
as expressly contemplated by this Agreement, at all times from December 31,
2006
through the date of this Agreement, (i) the Company and each Subsidiary has
operated their respective businesses in the ordinary course of business
consistent with past practice, (ii) the Company and each Subsidiary have not
engaged in any of the activities prohibited to be taken by the Company or each
Subsidiary during the period from the date of this Agreement to the Closing
Date
by Section 6.1, and (iii) there have occurred no changes or events which,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect.
"Company
Material Adverse Effect" means such event, change or effect which is materially
adverse to (a) the business, properties, financial condition or results of
operations of the Company and the Subsidiaries taken as a whole or (b) the
ability of the Company to consummate the transactions contemplated hereby;
provided however,
that
economic or market conditions which do not disproportionately impact the Company
and the Subsidiaries taken as a whole or the industry in which they operate
shall not constitute events, changes or effects for this purpose.
12
4.6 Absence
of Undisclosed Liabilities.
Neither
the Company nor any Subsidiary has any Liabilities other than
(i) Liabilities which are accrued or reserved against on the Balance Sheet
consistent with GAAP, (ii) Liabilities incurred in the ordinary course of
business consistent with past practice, (iii) Liabilities under Contracts
existing as of the date of this Agreement which are not required by GAAP to
be
reflected on the Balance Sheet and which are not attributable to any breach
by
the Company or any Subsidiary prior to the Closing and (iv) immaterial
Liabilities.
"Liabilities" means any debt, liability or obligation, whether matured or
unmatured, fixed, determined or determinable, absolute or contingent, accrued
or
unaccrued and whether due or to become due.
4.7 Title
to Personal Property.
The
Company and each Subsidiary has good and valid title to all personal property,
whether tangible or intangible, owned by it, and a valid and enforceable right
to use all personal property leased by or licensed to it, other than personal
property that is not material in the aggregate to the Company and the
Subsidiaries, taken as a whole, which is used in or, in the opinion of the
Company, necessary to the conduct of the business of the Company and the
Subsidiaries (the "Personal Property") (except for (w) inventory subsequently
sold in the ordinary course of business, (x) obsolete property sold or otherwise
disposed of in the ordinary course of business, (y) any lease or license which
shall have terminated in accordance with its terms, and (z) accounts, bills
and
notes receivables subsequently collected), in each case, free and clear of
all
Liens, imperfections of title or encumbrances of any nature whatsoever, other
than (i) Liens relating to personal property leases which are not required
to be
listed in Section 4.13 of the Company Disclosure Schedule, (ii) mechanics',
carriers', workmen's, repairmen's or similar Liens arising or incurred in the
ordinary course of business, (iii) Liens for taxes, assessments and other
governmental charges which are not due and payable or which may hereafter be
paid without penalty or which are being contested in good faith and (iv) other
Liens or imperfections of title, individually or in the aggregate, that do
not
materially impair the use or value of the property to which they relate (the
Liens and imperfections of title described in clauses (ii), (iii) and (iv),
collectively, the "Permitted Liens").
4.8 Title
to Real Property.
(a) Section
4.8(a)
of the Company Disclosure Schedule lists all real property and interests in
real
property owned in fee or leased by the Company or a Subsidiary (collectively,
"Real Property"). The Real Property constitutes all real property and leasehold
interests in real property used in or, in the opinion of the Company, necessary
for the conduct of the business of the Company and each Subsidiary.
(b) As
used
in this Agreement, the term "Real Estate Permitted Liens" shall
mean:
13
(1)
All
building codes and zoning ordinances and other laws, ordinances, regulations,
rules, orders or determinations of any federal, state, county, municipal or
other governmental authority heretofore, now or hereafter enacted, made or
issued by any such governmental authority affecting the Real Property, which
in
the opinion of the Company do not materially impair the use by or value to
the
Company and the Subsidiaries of the Real Property;
(2)
All
easements, rights-of-way, covenants, conditions, restrictions, reservations,
licenses, agreements and other similar matters which do not impair the use
of
the Real Property to which they relate;
(3)
All
encroachments, overlaps, boundary line disputes, shortages in area, drainage
and
other similar easements, rights of persons in possession and other matters
not
of record which would be disclosed by title reports relating to the Real
Property;
(4)
All
electric power, telephone, gas, sanitary sewer, storm sewer, water, steam,
compressed air and other utility lines, pipelines, service lines and similar
facilities now located on, over or under the Real Property, and all licenses,
easements, flowage rights, rights-of-way and other similar agreements relating
thereto granted in the ordinary course of business; and
(5)
All
existing public and private roads and streets (whether dedicated or
undedicated), and all railroad lines and rights-of-way affecting the Real
Property.
(c) The
Company and each Subsidiary have (i) good and
valid
title and are record owners to all Real Property owned by each of them, and
(ii)
valid leasehold interests in all Real Property leased by each of them, in each
case, free and clear of all Liens, except for (1) in the case of (ii) above
only, Liens that may have been created or suffered by the lessor thereto, (2)
Permitted Liens and (3) Real Estate Permitted Liens.
(d) (i)
The Real
Property is in good and usable condition, subject to normal wear and tear and
normal industry practice with respect to maintenance, and is adequate and
suitable for the purposes for which it is presently being used, (ii) the Company
and the Subsidiaries have rights of egress and ingress with respect to each
Real
Property that are sufficient for them to conduct their business and (iii) there
are no defects in or other adverse conditions affecting any Real Property that,
individually or in the aggregate, do not materially impair the use or value
of
such Real Property.
4.9 Intellectual
Property.
(a) Section
4.9(a)
of the Company Disclosure Schedule, as it may be amended, added to or updated
pursuant to the immediately succeeding sentence, sets forth a complete list
as
of the date hereof of all: (i) registered Patents and pending Patent
applications, (ii) registered and material unregistered Trademarks and pending
Trademark applications, and (iii) material registered and material unregistered
Copyrights; in each case that are owned by the Company or its Subsidiaries
("Scheduled Intellectual Property") and, with respect to each item, the owner
of
such item, and with respect to each registered item and each item subject to
an
application for registration, the registration or application number and all
jurisdictions in which such item is registered or an application for
registration is pending.
Until
the Closing Date Seller reserves the right to amend, add to and update Section
4.9(a) of the Company Disclosure Schedule and any such amendment, addition
or
update shall be deemed to be retroactive to the date of this Agreement,
including without limitation for purposes of Section 9.3 and Article XI. Except
for the Licensed Marks and the Intellectual Property used by Company and its
Subsidiaries pursuant to the Transition Services Agreement, none of the Seller
nor any of its Affiliates (other than the Company and its Subsidiaries) own,
license, maintain rights in or otherwise provide any Intellectual Property
used
in the business of the Company and its Subsidiaries. Except the Copyrights
listed on Section 4.9(a) of the Company Disclosure Schedule, the Copyright
registrations owned by the Company or any of its Subsidiaries are not material
to their respective businesses. None of the Company nor any of its Subsidiaries
uses any Trade Secrets that are material to their business and that will not
be
available to the Company or its Subsidiaries after the Closing and after the
expiration or termination of the Transition Services Agreement, on the same
terms as such Trade Secrets were available to the Company and its Subsidiaries
prior to the Closing.
14
(b) (i)
Each
of the Company and its Subsidiaries owns: (y) to the knowledge of Seller,
Copyright registrations not listed on Section 4.9(a) of the Company Disclosure
Schedule, and (z) all other Intellectual Property registrations, in each of
(y)
and (z) that are registered in the name of the Company or its Subsidiaries
and
are used in the conduct of their respective businesses as conducted on the
date
hereof in the jurisdictions in which such Intellectual Property is registered
on
the date hereof, all of which rights shall survive unchanged by the consummation
of the transactions contemplated by this Agreement; (ii) to the knowledge of
the
Seller, each of the Company and its Subsidiaries owns or has the right to use
all of the Intellectual Property used in the conduct of their respective
businesses as conducted on the date hereof in the jurisdictions in which such
Intellectual Property is used by them on the date hereof but is unregistered,
all of which rights shall survive unchanged by the consummation of the
transactions contemplated by this Agreement; (iii) with respect to Scheduled
Intellectual Property and all other Intellectual Property owned by the Company
and its Subsidiaries (the "Owned Intellectual Property"), the Company or a
Subsidiary exclusively owns (beneficially, and of record where applicable)
all
such Intellectual Property, free and clear of all Liens, exclusive licenses
and
non-exclusive licenses not granted in the ordinary course of business except
where the failure to have such ownership is immaterial; and (iv) to the
knowledge of Seller, all Owned Intellectual Property is valid, subsisting and
enforceable, and is not subject to any outstanding order, judgment, decree
or
agreement adversely affecting the Company's or its Subsidiaries' use of, or
its
rights to, such Intellectual Property.
(c) As
of the
date hereof, there is no material litigation, opposition, cancellation,
proceeding, objection or claim pending, asserted or, to the knowledge of Seller,
threatened against the Company or the Subsidiaries concerning the ownership,
validity, registerability, enforceability, infringement or use of, or licensed
right to use any Owned Intellectual Property, and to the knowledge of Seller,
any other Intellectual Property. To the knowledge of Seller, no valid basis
for
any such litigation, opposition, cancellation, proceeding, objection or claim
exists. To the knowledge of Seller, no person is violating any Owned
Intellectual Property.
15
(d) The
Company and the Subsidiaries have taken reasonable measures to protect the
material Owned Intellectual Property, and to protect the confidentiality of
all
material Trade Secrets that are owned by the Company or the Subsidiaries, or
that are used or held by the Company or the Subsidiaries to the extent used
or
held by them, and, to the knowledge of Seller, such Trade Secrets have not
been
used, disclosed to or discovered by any person except pursuant to valid and
appropriate non-disclosure and/or license agreements which have not been
breached. The Company and its Subsidiaries have taken commercially reasonable
steps to protect their material Owned Intellectual Property and, with immaterial
exceptions, any employees, consultants, contractors and agents that made a
contribution to any Owned Intellectual Property have executed or are subject
to
agreements under which such Intellectual Property rights are assigned to and
owned exclusively by the Company or the Subsidiaries and such employees,
consultants, contractors and agents are bound to maintain the confidentiality
of
all confidential information of any material value to the Company and the
Subsidiaries.
(e) To
the
knowledge of Seller, no person has gained unauthorized access to the IT Assets
within twelve months prior to the date hereof. The Company and its Subsidiaries
have implemented reasonable backup and disaster recovery technology consistent
with industry practices. The IT Assets owned, used or held for use by the
Company or any of its Subsidiaries have not materially malfunctioned within
the
three years prior to the date hereof, or if they have, such malfunctions have
been resolved to enable the Company's operations to continue. The consummation
of the transactions contemplated by this Agreement shall have no adverse effect
on the Company's and its Subsidiaries' access to and use of any material IT
Assets, except to the extent that services provided under the Transition
Services Agreement will no longer be available to the Company or its
Subsidiaries following the termination or expiration of such
agreement.
(f) Section
4.9(f) of the Company Disclosure Schedule sets forth (i) all material agreements
under which the Company or any of its Subsidiaries is licensed or otherwise
permitted by a third party to use any Intellectual Property (other than "shrink
wrap" or "click through licenses), (ii) all material agreements under which
a
third party is licensed or otherwise permitted to use any Owned Intellectual
Property, and (iii) any other material agreements to which the Company or any
of
its Subsidiaries is a party and which involve Intellectual Property (including
without limitation non-assertion agreements, settlement agreements, trademark
coexistence agreements and trademark consent agreements) (collectively,
"Intellectual Property Contracts").
16
(g) Seller
has provided to Buyer complete copies of all of the Intellectual Property
Contracts that are in writing. Each Intellectual Property Contract is in full
force and effect and is valid and binding on the Company or its Subsidiary,
as
applicable, in accordance with its terms, subject to the Enforceability
Exceptions, and will continue to be so immediately following the consummation
of
the transactions contemplated by this Agreement. None of the Company, any
Subsidiary or, to the knowledge of Seller, any other person who is a party
thereto is in material breach or violation of, or default under, any
Intellectual Property Contract and to the knowledge of Seller, no event has
occurred which would result in a breach of or default under, require any consent
or other action by any person under, or give rise to any penalty or right of
termination, cancellation or acceleration of any right or obligation of the
Company or any Subsidiary or to a loss of any benefit to which the Company
or
any Subsidiary is entitled under (in each case, with or without notice or lapse
of time, or both) any Intellectual Property Contract. No Intellectual Property
Contract is subject to any outstanding order, judgment, decree or agreement
adversely affecting the Company's or its Subsidiaries' use thereof or its rights
thereto. No claim has been threatened or asserted in writing that the Company
or
its Subsidiaries, or to the knowledge of the Company, another person has
breached any Intellectual Property Contract. No party to any Intellectual
Property Contract has given notice of its intention to cancel, terminate, change
the scope of rights under, or fail to renew such contract. None of the Company
or its Subsidiaries, nor to the knowledge of the Seller any other party to
any
Intellectual Property Contract, has repudiated in writing any material provision
thereof. Consummation of the transactions contemplated by this Agreement will
not place the Company or its Subsidiaries in breach or default of any material
Intellectual Property Contract, or trigger any modification, termination or
acceleration thereunder, or create any license under or Lien on Intellectual
Property owned or held by the Company.
4.10 Litigation.
As of
the date hereof, there are no material claims, actions, suits, investigations
or
proceedings pending or, to the knowledge of Seller, threatened against or
affecting the Company or any Subsidiary or any of their respective assets,
at
law or in equity, by or before any Governmental Authority, or by or on behalf
of
any third person.
As of
the date hereof, to the knowledge of Seller, no event has occurred or
circumstance exists that would reasonably be likely to serve as a basis for
the
commencement of any material claims, actions, suits, investigations or
proceedings that would challenge the validity of this Agreement or the
transactions contemplated hereby.
4.11 Employee
Benefit Plans.
(a) Section
4.11(a)
of the Company Disclosure Schedule sets forth a true and complete list of all
benefit and compensation plans, contracts, policies or arrangements, including,
but not limited to, "employee benefit plans," within the meaning of Section
3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and deferred compensation, severance, employment, stock option, stock purchase,
stock appreciation rights, stock-based, incentive and bonus plans and
arrangements, in
any
case, which are or have since January 1, 2002, been sponsored, maintained,
contributed to or required to be contributed to by Seller or the Company or
by
any trade or business, whether or not incorporated (an "ERISA Affiliate"),
that
together with Seller or the Company would be deemed a "single employer" within
the meaning of Section 4001(b) of ERISA, providing
benefits to current or former employees of the Company and any of its
Subsidiaries and current or former directors of the Company, other than such
plans, contracts, policies or arrangements not subject to the laws of the United
States or that were in place at Subsidiaries or businesses prior to their
acquisition by the Company and not continued after such acquisition and for
which each such Subsidiary or business had no continuing liabilities or
obligations following such acquisition (individually, a "Plan" and, together,
the "Plans"); and Seller has made available to Buyer true and complete copies
of
all such written Plans, including, but not limited to, any trust instruments,
insurance contracts and all amendments thereto. Section 4.11(a) of the Company
Disclosure Schedule sets forth a true and complete list of each employee benefit
plan sponsored,
maintained, contributed to or required to be contributed to by the Company
or by
any ERISA Affiliate, providing
benefits to current or former employees of the Company, that is not subject
to
the laws of the United States and are maintained outside of the United States
primarily for the benefit of employees working outside of the United States
(the
"Non-U.S. Plans"). Section 4.11(a) of the Company Disclosure Schedule
identifies each Plan and each Non-U.S. Plan that is sponsored, maintained,
contributed to, or required to be contributed to by the Company or any of its
Subsidiaries (individually, a "Company Plan" and, together, the "Company
Plans").
17
(b) No
Company Plan is a multiemployer plan (within the meaning of Section 4001(a)(3)
of ERISA), and no withdrawal liability has been incurred by or asserted against
the Company or any ERISA Affiliate with respect to any multiemployer plan that
has not been satisfied in full.
(c) (i)
With
respect to each Plan that is intended to satisfy the provisions of Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), Seller
or
the Company has obtained a favorable determination letter from the Internal
Revenue Service (the "IRS") to such effect, covering all tax law changes prior
to the Economic Growth and Tax Relief Reconciliation Act of 2001, (ii) to the
knowledge of Seller, none of the determination letters has been revoked by
the
IRS nor has the IRS given any written notice to Seller or the Company that
it
intends to revoke any such determination letter and neither Seller nor the
Company is aware of any circumstances likely to result in the loss of the
qualification of any such Plan under Section 401(a) of the Code, (iii) neither
Seller, the Company nor any of their ERISA Affiliates has incurred any liability
under Title IV of ERISA that has not been satisfied in full, other than
liability for premiums (which have been paid when due), and no condition exists
that presents a material risk to the Buyer of incurring any such liability,
(iv)
no Plan and no trust established thereunder has any accumulated funding
deficiency within the meaning of Section 302(a) of ERISA and Section 412 of
the
Code and no ERISA Affiliate has an outstanding funding waiver, (v) no notice
of
a "reportable event" within the meaning of Section 4043 of ERISA for which
the reporting requirement has not been waived or extended has been required
to
be filed for any Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof or will be required to be filed in connection with
the
transaction contemplated by this Agreement and no notices have been required
to
be sent to participants and beneficiaries or the PBGC under Section 302 or
4011
of ERISA or Section 412 of the Code, (vi) no material tax has been imposed
pursuant to Section 502 of ERISA, Section 4975 or Section 4976 of the Code
in
respect of any Company Plan which has not been satisfied.
18
(d) As
of the
date hereof, there are no material pending or, to the knowledge of Seller
threatened, litigation or claims by or on behalf of any of the Company Plans,
by
any employee or beneficiary covered under any such Company Plan , or otherwise
involving any such Company Plan or Non-U.S. Plan (other than routine claims
for
benefits). Neither the Company nor any of its Subsidiaries has any obligations
for retiree health and life benefits under any Plan or collective bargaining
agreement.
(e) Each
Plan
has been operated in all material respects in accordance with its terms and
the
requirements of ERISA, the Code and other Applicable Law.
(f) There
has
been no amendment to, announcement by Seller or its subsidiaries or the Company
or the Subsidiaries relating to, or change in employee participation or coverage
under, any Company Plan which would increase materially the expense of
maintaining such Company Plan above the level of the expense incurred therefor
for the most recent fiscal year. Neither the execution of this Agreement,
shareholder approval of this Agreement nor the consummation of the transactions
contemplated hereby will (w) entitle any employees of the Company or any of
Subsidiaries to severance pay or any increase in severance pay upon any
termination of employment after the date hereof, (x) accelerate the time of
payment or vesting or result in any payment or funding (through a grantor trust
or otherwise) of compensation or benefits under, increase the amount payable
or
result in any other material obligation pursuant to, any of the Plans, (y)
limit
or restrict the right of the Company or, after the consummation of the
transactions contemplated hereby, Buyer to merge, amend or terminate any of
the
Plans or (z) result in payments under any of the Plans which would not be
deductible under Section 280G of the Code.
(g) Since
January 1, 2005, all Plans that are "nonqualified deferred compensation plans"
(within the meaning of Section 409A of the Code) have been operated in good
faith compliance with Section 409A of the Code, the proposed or final
regulations or other guidance issued thereunder.
(h) All
Non-U.S. Plans have been operated in all material respects in compliance with
Applicable Law. As of the date hereof, there is no material pending or, to
the
knowledge of Seller, threatened litigation relating to Non-U.S.
Plans.
4.12 Taxes.
(a) Seller
or
one of Seller's affiliates has (i) timely filed with the appropriate taxing
authorities all Income
Tax and other material Tax Returns (as hereinafter defined) required to be
filed
by or with respect to the Company and each Subsidiary and such Tax Returns
are
true, correct and complete in all material respects, (ii) timely paid (or
has had paid on its behalf) or made adequate provision, to the extent described
in Section 4.12(a) of the Seller Disclosure Schedule, in accordance with
accepted accounting standards for the payment of all Taxes (as hereinafter
defined) of the Company and each Subsidiary shown to be due on such filed Tax
Returns, (iii) established on its balance sheet, in accordance with GAAP,
consistently applied in accordance with the Company's historical practices
insofar as such practices are consistent with GAAP, reserves that are adequate
for the payment of any Taxes of the Company or any Subsidiary through the
Closing Date, (iv) complied with all Applicable Laws relating to the withholding
of Taxes, the payment thereof and any information reporting requirements
(including, without limitation, withholding of Taxes under Sections 1441 and
1442 of the Code, or similar provisions under any foreign laws) and (v) timely
withheld from individual employee wages and paid over to the proper Governmental
Authority all amounts required to be so withheld and paid over under all
Applicable Laws. Neither Seller, the Company nor any Subsidiary has received
any
written notice of deficiency or assessment from any federal, state, local or
other taxing authority with respect to material liabilities for Taxes of the
Company or any Subsidiary which have not been fully paid or finally settled.
None of Seller, the Company and the Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency with respect to the Company or any
Subsidiary.
19
(b) There
are
no Liens for Taxes upon any assets of the Company or of any Subsidiary, except
Liens for Taxes not yet due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established
in
accordance with GAAP. There has been no Tax audit or other administrative
proceeding or court proceeding with regard to any Taxes or Tax Returns of the
Company or any Subsidiary with respect to any taxable year or period (or portion
thereof) beginning after December 31, 2003, nor is any Tax audit or other
proceeding currently pending, nor has there been any written notice by any
taxing authority or other Governmental Authority regarding any audit or other
proceeding, nor, to the knowledge of Seller, is any Tax audit or other
proceeding threatened with regard to any Taxes or Tax Returns.
(c) No
extension of time within which to file any Tax Returns of the Company or any
Subsidiary has been requested; however, if an extension has been requested
for
any Tax Returns of the Company or any Subsidiary, such Tax Returns have been
or
will be filed by the extended due date.
(d) Neither
the Company nor any Subsidiary is required to include in income any adjustment
under Section 481(a) of the Code or under any similar provision of state, local
or foreign law and neither the Company nor any Subsidiary has knowledge that
any
Governmental Authority has proposed in writing any such adjustment or change
in
accounting method.
20
(e) To
the
knowledge of Seller, no jurisdiction where the Company or any of the
Subsidiaries do not file Tax Returns has made a written claim that any of the
Company or its Subsidiaries is or may be subject to taxation by that
jurisdiction.
(f) Neither
the Company nor any of the Subsidiaries has been part of any combined,
consolidated, unitary or other affiliated group for Tax purposes with any person
other than a group of which Seller is a parent. Neither the Company nor any
Subsidiary is a party to any Tax allocation or sharing agreement. Neither the
Company nor any Subsidiary has any liability for the Taxes of any other Person
(i) under Treasury Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign law), (ii) as a transferee or successor, (iii) by
contract, or (iv) otherwise.
(g) Each
Subsidiary has been and is properly characterized by Seller as a corporation
for
U.S. federal income tax purposes, except for Musicorp, LLC, which has been
and
is properly characterized by Seller as a disregarded entity for U.S. federal
income tax purposes.
(h) Neither
the Company nor any of the Subsidiaries has participated in (i) any reportable
or listed transaction as defined under Code Section 6011 or (ii) any other
transaction for which it is required to disclose to the IRS to avoid penalties.
If the Company or any of the Subsidiaries has participated in a transaction
described in the preceding sentence, such entity has properly disclosed such
transaction in accordance with the applicable Tax regulations.
(i) The
Company has not made any payments, is not obligated to make any payments, and
is
not a party to any agreement that under certain circumstances could obligate
it
to make any payments that will not be deductible under Section 280G of the
Code.
(j) As
used
in this Agreement:
(i) "Tax"
or
"Taxes" means all taxes, levies or other like assessments, charges, fees or
other assessments or impositions of any kind (including estimated taxes, charges
and fees), including, without limitation, income, corporation, gross receipts,
transfer, excise, property, sales, use, value-added, license, payroll, pay
as
you earn, withholding, social security and franchise or other governmental
taxes
or charges, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof; and such term shall include any
interest, penalties or additions to tax attributable to such taxes.
(ii) "Tax
Return" means any report, return, statement or other written information
required to be supplied to a taxing authority in connection with
Taxes.
21
(iii) "Income
Tax" shall mean any federal, state, local or foreign Tax based upon, measured
by, or calculated with respect to (A) net income or profits (including capital
gains Taxes, alternative minimum Taxes and Taxes on items of Tax preference,
but
not including sales, use, real or personal property transfer or other similar
Taxes), or (B) multiples bases (including corporate franchise Taxes), if one
or
more of the principal bases on which such Tax may be based, measured by, or
calculated with respect to is described in (A).
(iv) "Income
Tax Return" shall mean any Tax Return prepared in connection with Income
Taxes.
(v) "Non-Income
Tax" means any Tax other than Income Tax.
4.13 Contracts
and Commitments.
(a) Section
4.13 of the Company Disclosure Schedule sets forth a list as
of the
date hereof of all material Contracts to which the Company or each Subsidiary
is
a party or by which the Company, each Subsidiary or any of their respective
assets are bound, except Intellectual Property Contracts, (each, a "Material
Contract"), including, without limitation:
(i) any
Contract that contains a change of control clause with respect to the Company
or
any Subsidiary;
(ii) any
Contract that restricts the ability of the Company or any Subsidiary to
(x)
engage
in any business anywhere in the world, (y) solicit or retain any customer or
other party to do business, or (z) solicit or hire any person to become an
employee;
(iii) Contracts
with Seller or any of its affiliates (other than the Company or any Subsidiary)
or any officer, director or employee of Seller, the Company or any Subsidiary
or
any of such affiliates;
(iv) Contracts
under which the Company or any Subsidiary has borrowed or loaned money or
granted any Liens, or any note, bond, indenture or other evidence of
indebtedness for borrowed or loaned money or any guarantee of such indebtedness,
in each case, relating to amounts in excess of $100,000;
(v) Contracts
relating to the acquisition or disposition of any business or assets outside
the
ordinary course of business consistent with past practice since January 1,
2004
(whether by merger, sale of stock, sale of assets or otherwise);
22
(vi) joint
venture agreements or other Contracts involving the sharing of
profits;
(vii) indemnification
agreements other than in the ordinary course of business;
(viii) any
Contract of the Company or any Subsidiary with any labor union or any collective
bargaining agreement;
(ix) any
stockholders agreement, registration rights agreement, voting agreement or
other
similar agreement to which the Company or any Subsidiary is
subject;
(x) leases
pursuant to which personal property or Real Property is leased to or from the
Company or any Subsidiary;
(xi) powers
of
attorney from the Company or any Subsidiary;
(xii) guaranties,
suretyships or other contingent agreements of the Company or any
Subsidiary;
(xiii) Contracts
pursuant to which the Company or any Subsidiary expects to receive or expend
in
excess of $150,000 over the life of the Contract or $50,000 annually;
and
(xiv) any
outstanding written or otherwise binding commitment to enter into any agreement
of the type described in subsections (i) through (xiii) of this Section
4.13(a).
(b) Seller
has provided to Buyer complete copies of all of the Material
Contracts.
Each
Material Contract is in full force and effect and is valid and binding on the
Company or its Subsidiary, as applicable, in accordance with its terms, subject
to the Enforceability Exceptions, other than Material Contracts that by their
terms have expired consistent with the terms thereof and Section 6.1 since
the date hereof.
(c) None
of
the Company, any Subsidiary or, to the knowledge of Seller, any other person
who
is a party thereto is in material breach or violation of, or default under,
any
Material Contract and to the knowledge of Seller, no event has occurred which
would result in a material breach of or default under, require any material
consent or other action by any person under, or give rise to any material
penalty or right of termination, cancellation or acceleration of any material
right or obligation of the Company or any Subsidiary or to a loss of any
material benefit to which the Company or any Subsidiary is entitled under (in
each case, with or without notice or lapse of time, or both) any Material
Contract.
23
4.14 Compliance
with Laws.
The
Company and each Subsidiary are in material compliance with all Applicable
Laws
and all Orders of any Governmental Authority applicable to the Company or such
Subsidiary, as the case may be, or any of their respective assets, except for
(a) ERISA and other laws applicable to the Plans or the Non-U.S. Plans, which
are addressed in Section 4.11; (b) laws regarding the payment of Taxes,
which are addressed in Section 4.12; (c) laws regarding labor matters which
are addressed in Section 4.16; and (d) environmental laws, which are
addressed in Section 4.17. The Company and each Subsidiary have all
material permits, certificates, licenses, approvals and other authorizations
required in connection with the conduct of their business (other than those
referred to in clauses (a)-(d) above).
4.15 Insurance.
As of
the date hereof, the Company and each Subsidiary maintain, through themselves
or
Seller, policies of fire and casualty, liability and other forms of insurance
in
such amounts, with such deductibles and retained amounts, and against such
risks
and losses, as are reasonably adequate for the conduct of their business.
Section 4.15 of the Company Disclosure Schedule sets forth a list as of the
date hereof of such insurance policies. Such policies are in full force and
effect as of the date of this Agreement and will remain in full force and effect
during the period from the date of this Agreement through the Closing Date,
except for policies that expire under their terms in the ordinary course and
that are replaced with substantially equivalent policies.
As of
the date hereof, there are no outstanding unpaid claims under any such policies
in excess of $50,000 per claim or $100,000 in the aggregate. To the knowledge
of
Seller, none of the Company and the Subsidiaries have received notice of
cancellation, termination or non-renewal of any such policy or have been denied
insurance coverage.
4.16 Labor
Matters.
(a) The
Company and the Subsidiaries are in material compliance with all Applicable
Laws
regarding labor, employment, employment practices, wages and hours, (b) as
of
the date hereof, there is no unfair labor practice charge or complaint against
the Company or any Subsidiary pending or, to the knowledge of Seller, threatened
before the National Labor Relations Board or any other Governmental Authority
nor is there any material grievance nor any material arbitration proceeding
arising out of or under collective bargaining agreements pending with respect
to
the business of the Company and the Subsidiaries, (c) there is no labor strike
or material disputes, slowdown, lock-out or work stoppage pending or, to the
knowledge of Seller, threatened against the Company or any Subsidiary and (d)
there is no material charge or complaint pending or, to the knowledge of Seller,
threatened against the Company or any Subsidiary before the Equal Employment
Opportunity Commission or any other Governmental Authority responsible for
the
prevention of unlawful employment practices. As of the date hereof, none of
the
Company and the Subsidiaries have received written notice of the intent of
any
Governmental Authority responsible for the enforcement of employment laws to
conduct an investigation of or relating to the Company or any Subsidiary, and
no
such investigation is in progress.
Each of
the Company and the Subsidiaries is in material compliance with their
obligations pursuant to the Worker Adjustment and Retraining Notification Act
of
0000 (xxx "XXXX Xxx").
24
4.17 Environmental
Matters.
(a) (i)
The
Company and each Subsidiary is in material compliance with all applicable
Environmental Laws (which compliance includes, but is not limited to, the
possession by the Company and each Subsidiary of all material permits and other
governmental authorizations required under applicable Environmental Laws, and
material compliance with the terms and conditions thereof).
(ii) As
of the
date hereof, there
is no
Environmental Claim pending or, to the knowledge of Seller, threatened against
the Company or any Subsidiary or any circumstances that Seller knows of or
reasonably should know of that could reasonably be expected to result in an
Environmental Claim, in each case involving material liability to the Company
or
any Subsidiary.
(iii) None
of
the Company, any Subsidiary, or any other person that Seller knows of or
reasonably should know of has placed, stored, deposited, discharged, buried,
dumped, disposed of, arranged for the transport or disposal of, or released
any
Hazardous Substances including those produced by, or resulting from, any of
the
Company's or the Subsidiaries' operations, at any Real Property or at any other
property that Seller knows of or reasonably should know of, in a manner that
could reasonably be expected to result in material liability to the Company
or
any Subsidiary.
(b) Seller
has delivered or otherwise made available for inspection to Buyer complete
and
correct copies of material studies, audits, assessments, memoranda and
investigations pertaining to Hazardous Substances at the Real Property or
regarding the Company's or any Subsidiary's compliance with or
liability under applicable Environmental Laws that are in the possession of
Seller, the Company or any Subsidiary.
4.18 Affiliate
Transactions; Inter-company Transactions.
(a) Except
for compensation and benefits provided to employees in the ordinary course
of
business, or disclosed on the Balance Sheet, (i) no officer, director, manager,
partner, employee or other Affiliate of the Company or any Subsidiaries or
Seller or its subsidiaries or any Affiliate or family member of any such
officer, director, manager, employee or partner is a party to any Contract
with
the Company or any of the
Subsidiaries or has any interest in any property used by the Company or any
of
the Subsidiaries, (ii) there is no indebtedness owing to the Company or any
of
the Subsidiaries by any such officer, director, manager, partner or other
Affiliate or any Affiliate or family member of any such officer, director,
manager, employee or partner of the Company or any of the Subsidiaries and
(iii)
there are no current or accrued Liabilities of the Company or any of the
Subsidiaries to any such officer, director, manager, partner or other Affiliate
or any Affiliate or family member of any such officer, director, manager,
employee or partner that would survive the Closing Date.
25
(b) Other
than the Ancillary Agreements and any Inter-company Accounts to be settled
prior
to or as of the Closing, there are no Contracts between Seller or any of its
subsidiaries (other than the Company and its Subsidiaries), on the one hand,
and
the Company or any of its Subsidiaries, on the other hand, that will remain
in
effect following the Closing.
4.19 Customers.
Section
4.19 of the Company Disclosure Schedule lists the Company's and its
Subsidiaries' 20 largest customers measured by volume of sales for the year
ended December 31, 2006. To the knowledge of Seller and as of the date hereof,
neither the Company nor any of its Subsidiaries has received any notice that
any
such customer intends to terminate, materially reduce or materially change
the
pricing, terms or amount of business with the Company or any of its Subsidiaries
and, to the knowledge of Seller and as of the date hereof, no such customer
intends to terminate or materially reduce or change the pricing terms of its
business with the Company or any of its Subsidiaries, and no such customer
has
terminated or materially reduced or changed the pricing terms of its business
with the Company or any of its Subsidiaries since January 1, 2006.
4.20 Suppliers.
Section
4.20 of the Company Disclosure Schedule lists the Company's and its
Subsidiaries' 20 largest vendors measured by volume of purchases for the year
ended December 31, 2006. To the knowledge of Seller and as of the date hereof,
neither the Company nor any of its Subsidiaries has received any notice that
any
such supplier intends to terminate, materially reduce or materially change
the
pricing, terms or amount of business with the Company or any of its Subsidiaries
and, to the knowledge of Seller and as of the date hereof, no such vendor
intends to terminate or materially reduce or change the pricing terms of its
business with the Company or any of its Subsidiaries, and no such vendor has
terminated or materially reduced or changed the pricing terms of its business
with the Company or any of its Subsidiaries since January 1, 2006.
4.21 Product
Liability.
The
products that have been manufactured, shipped, sold or delivered by the Company
and its Subsidiaries (i) conform and comply in all material respects with the
terms and requirements of any applicable warranty or other Contract and with
all
Applicable Laws and (ii) are free in all material respects of any design
defects, construction defects, manufacturing defects, materials defects, warning
defects or other defects at the time of sale. The products that have been
manufactured, shipped, sold or delivered by the Company or any Subsidiary have
not been the subject of any recall, or recurring material claim of breach of
representation or warranty (express or implied) or other similar action, and,
to
the knowledge of Seller, no event has occurred, and no condition or circumstance
exists, that might reasonably be expected to (with or without notice or lapse
of
time) give rise to or serve as a basis for any such recall, claim of breach
or
other similar action relating to the products. No Governmental Authority
regulating the marketing, testing or advertising of any of the products
manufactured, sold, distributed or used in connection with the Company's and
its
Subsidiaries' business has requested that any such product be removed from
the
market, that substantial new product testing be undertaken as a condition to
the
continued manufacturing, selling, distribution or use of any such product,
or
that such products be modified. Except as fully accrued for or reserved against
on the Balance Sheet, the Company and its Subsidiaries have no material
Liability arising out of any injury to individuals or property as a result
of
the ownership, possession, or use of any product manufactured, sold, leased,
or
delivered by the Company or any of its Subsidiaries.
26
4.22 Sufficiency
of Assets.
The
assets of the Company and the Subsidiaries, after giving effect to the
transactions contemplated by this Agreement, the Transition Services Agreement,
the Trademark Assignment Agreement, the Trademark License Agreement and the
Bloomfield Real Estate Lease, constitute all the assets that are used to conduct
the business of the Company and the Subsidiaries as currently conducted and
currently contemplated to be conducted.
4.23 Brokers.
No
broker, finder or financial advisor or other person is entitled to any brokerage
fees, commissions, finders' fees or financial advisory fees in connection with
the transactions contemplated hereby by reason of any action taken by the
Company or any Subsidiary or any of their respective directors, officers,
employees, representatives or agents, except for Lazard Freres & Co. LLC,
the fees and expenses of which shall be borne by Seller.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to Seller as follows:
5.1 Organization;
Authority.
Buyer
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite corporate power and
corporate authority to enter into this Agreement and the Ancillary Agreements
to
which it is a party, and to consummate the transactions contemplated hereby
and
thereby. The execution, delivery and performance by Buyer of this Agreement
and
the Ancillary Agreements to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by
all
necessary corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and, assuming that this Agreement constitutes
a
valid and binding obligation of Seller, constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except that such enforcement may be subject to the Enforceability Exceptions.
Each
of
the Ancillary Agreements to which Buyer is a party will be duly executed and
delivered by Buyer as of the Closing and, assuming that each such Agreement
constitutes a valid and binding obligation of the other parties thereto, will
constitute a valid and binding obligation of Buyer, enforceable against Buyer
in
accordance with its terms, except that such enforcement may be subject to the
Enforceability Exceptions.
27
5.2 No
Violation; Consents and Approvals.
(a) The
execution and delivery by Buyer of this Agreement and the Ancillary Agreements
to which it is a party do not and will not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the terms
hereof and thereof will not, conflict with, or result in any violation of or
default under, (i)
any
provision of the certificate of incorporation or bylaws of Buyer, (ii) any
Order
or Applicable Law applicable to Buyer or the property or assets of Buyer or
(iii) any Contracts to which Buyer is a party or by which Buyer or its assets
may be bound, except, in the case of clauses (ii) and (iii) where any such
conflicts, violations or defaults which, in the aggregate, are immaterial and
do
not and would not reasonably be expected to materially impair or materially
delay Buyer's ability to consummate the transactions contemplated by this
Agreement.
(b) No
Consent of or filing with any Governmental Authority, or any other third person,
is required to be obtained or made by or with respect to Buyer in connection
with the execution and delivery of this Agreement and the Ancillary Agreements
to which it is a party or the consummation by Buyer of the transactions
contemplated hereby or thereby, other than, in each case, (i) compliance with
and filings under the HSR Act and any Foreign Antitrust Approvals and (ii)
compliance with and filings under the Exchange Act, except those that the
failure to obtain or make, individually or in the aggregate, do not and would
not reasonably be expected to materially impair or materially delay Buyer's
ability to consummate the transactions contemplated by this
Agreement.
5.3 Litigation.
(a) As
of the date hereof, there are no claims, actions, suits, investigations or
proceedings pending or, to the knowledge of Buyer, threatened against or
affecting Buyer or its assets, at law or in equity, by or before any
Governmental Authority, or by or on behalf of any third party, which,
individually or in the aggregate if adversely determined, could reasonably
be
expected to materially impair Buyer's ability to consummate the transactions
contemplated hereby, and (b) there are no outstanding Orders of any Governmental
Authority affecting Buyer or its assets, which, individually or in the
aggregate, could reasonably be expected to materially impair Buyer's ability
to
consummate the transactions contemplated hereby.
5.4 Financing.
Buyer
has or will have available sufficient funds to pay the Purchase Price on the
Closing Date and all its related fees and expenses.
5.5 Acquisition
of the Shares for Investment; Securities Act.
Buyer
is acquiring the Shares for investment purposes only and not with a view toward,
or for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the Shares in violation of federal, state
or other securities laws.
28
5.6 Brokers.
No
broker, finder or financial advisor or other person is entitled to any brokerage
fees, commissions, finders' fees or financial advisory fees in connection with
the transactions contemplated hereby by reason of any action taken by Buyer
or
any of its directors, officers, employees, representatives or
agents.
5.7 Buyer’s
401(k) Plan.
Buyer’s
401(k) Plan (as defined in Section 8.1(c)) has been operated in all material
respects in accordance with its terms and the requirements of ERISA, the Code
and other Applicable Law. Buyer has obtained a favorable determination letter
from the IRS for Buyer’s 401(k) Plan covering all tax law changes prior to the
Economic Growth and Tax Relief Reconciliation Act of 2001.
ARTICLE
VI
COVENANTS
OF THE PARTIES
6.1 Conduct
of the Company's Business.
Except
as expressly contemplated by this Agreement, or as set forth in Section 6.1
of the Company Disclosure Schedule, during the period from the date hereof
to
the Closing Date, the Company will and will cause each Subsidiary, and Seller
will cause each of them, to conduct the Company's and the Subsidiaries' business
and operations in the ordinary course of business consistent with past practice
and to use reasonable best efforts to preserve their respective assets, current
business and goodwill and relationships with employees, customers, suppliers,
Governmental Authorities and others with which they have significant business
dealings. Without limiting the generality of the foregoing, except as expressly
contemplated by this Agreement, or as set forth in Section 6.1 of the
Company Disclosure Schedule, during the period from the date hereof to the
Closing Date, without the prior written consent of Buyer, the Company will
not
and will not permit any Subsidiary, and Seller will not permit the Company
or
any Subsidiary, to:
(a) amend
or
modify its certificate of incorporation or other organizational
documents;
(b) adopt
a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization;
(c) create,
incur, assume or guarantee any indebtedness for borrowed money (including,
without limitation, obligations in respect of capital leases),
other
than in the ordinary course of business consistent with past
practice;
(d) (i)
issue, sell, deliver, pledge, dispose of or otherwise encumber any shares of
its
capital stock or any securities exercisable for, convertible into or
exchangeable for any shares of its capital stock, or grant or enter into any
options, warrants, rights, agreements or commitments with respect to the
issuance of its capital stock or such securities, or amend any terms of any
such
capital stock or securities, (ii) other than cash dividends made by the Company
or any of the Subsidiaries to the Company or a Subsidiary, declare, set aside
or
pay any dividends or distributions on, or make any other distributions in
respect of, any shares of its capital stock or any securities exercisable for,
convertible into or exchangeable for any shares of its capital stock, (iii)
split, combine or reclassify any shares of its outstanding equity securities
or
(iv) purchase, redeem or otherwise acquire or dispose of any shares of its
capital stock or any securities exercisable for, convertible into or
exchangeable for any shares of its capital stock;
29
(e) increase
the rate of compensation, bonus opportunity or otherwise increase the pension,
welfare, severance or other benefits of, or pay or agree to pay any benefit
or
bonus to, its directors, officers or employees, except in the ordinary course
of
business or as may be required by any existing agreement, practice, arrangement
or plan, including, without limitation, any Plan or Non-U.S. Plan, agreement
or
arrangement; provided,
however,
that
nothing contained herein shall prevent the Company from making the special
payments listed on Section 6.1(e) of the Company Disclosure Schedule to the
individuals listed thereon;
(f) (i)
enter
into, adopt or amend any employment or severance agreement, Plan or Non-U.S.
Plan, in each case, to any director, officer or employee of the Company or
any
of its Subsidiaries, (ii) take any action to accelerate the vesting or payment,
or fund or in any other way secure the payment, of compensation or benefits
under any Company Plan, to the extent not already provided in any such Company
Plan, (iii) materially change any actuarial or other assumptions used to
calculate funding obligations with respect to any Company Plan or to change
the
manner in which contributions to such plans are made or the basis on which
such
contributions are determined, except as may be required by GAAP or other
Applicable Law, including the requirements of Section 409A of the
Code
or (iv)
forgive any loans to any directors, officers or employees of the Company or
any
of its Subsidiaries;
(g) (i)
make
any written or oral communications generally to the officers or employees of
the
Company or any Subsidiary relating to the transactions contemplated by this
Agreement or (ii) make any written or oral communications to the officers or
employees of the Company or any Subsidiary which may create or establish
obligations with respect to Buyer's compensation and benefit policies or
arrangements, in each case without first having provided to Buyer a copy of
the
intended communication, giving Buyer a reasonable period of time to review
and
comment on the communication, and cooperating with Buyer in providing any such
mutually agreeable communication;
(h) sell,
lease, transfer, mortgage, encumber, or dispose of any properties or assets,
real, personal or mixed, of the Company or its Subsidiaries other than (i)
sales
of inventory in the ordinary course of business consistent with past practice,
(ii) sales of excess or obsolete assets or (iii) Permitted Liens;
30
(i) (i)
acquire
or agree to acquire by merging or consolidating with, or by purchasing any
stock
of or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, (ii) acquire or agree to acquire any assets
that are material, individually or in the aggregate, to the Company or any
of
its Subsidiaries, taken as a whole, except for purchases of inventory and raw
materials in the ordinary course of business (or as permitted by Section 6.1(h))
or (iii) make any investment in, or make any loan, advance or capital
contribution to, any person (other than the Company or a
Subsidiary);
(j) enter
into, materially modify or amend or terminate any Material Contract outside
the
ordinary course of business consistent with past practice;
(k) (i)
grant,
extend, amend (except as required in the diligent prosecution of the Owned
Intellectual Property subject to a pending application), waive or modify any
rights in or to, nor sell, assign, lease, transfer, license, let lapse, abandon,
cancel, or otherwise dispose of, or extend or exercise any option to sell,
assign, lease, transfer, license, or otherwise dispose of, any material
Intellectual Property used in the business of the Company or its Subsidiaries
or
any material Intellectual Property Contracts, (ii) fail to diligently prosecute
the Company's and its Subsidiaries' patent applications, or (iii) fail to
exercise a right of renewal or extension under any material Intellectual
Property Contract;
(l) cancel
any debts or waive any material claims or rights of substantial value (including
the cancellation, compromise, release or assignment of any indebtedness owed
to,
or material claims held by, the Company or any Subsidiary), except for those
listed in Section 6.1(l) of the Company Disclosure Schedule;
(m) fail
to
pay its trade accounts payable in the ordinary course of business consistent
with past practice or extend the terms of payment, whether by contract,
amendment or course of dealing, of any trade account payable other than in
the
ordinary course of business consistent with past practice;
(n) incur,
authorize or commit to make any capital expenditure, other than (i) maintenance,
repair and upkeep in the ordinary course of business consistent with past
practice, (ii) in accordance with the Company's capital budget a copy of which
shall have been provided to Buyer, or (iii) up to $50,000 in aggregate capital
expenditures that may be incurred, authorized or committed but not otherwise
permitted by either clause (i) or (ii);
(o) fail
to
maintain its financial books and records in accordance with GAAP or make any
material change to any of its methods of accounting or Tax, pension or
accounting practice, policy, principle or procedure, except as required by
any
changes in GAAP or Applicable Law;
31
(p) make
or
rescind any material Tax election other than in the ordinary course of business
consistent with past practice, amend any material Tax Return or settle or
finally resolve any material Tax controversy;
(q) commence,
compromise or settle any material legal proceedings, other than in connection
with the enforcement of the Company's rights under this Agreement and other
than
in the ordinary course of business consistent with past practice, except for
matters disclosed in Section 6.1(q) of the Company Disclosure Schedule;
or
(r) agree,
whether in writing or otherwise, to do any of the items prohibited in the
foregoing paragraphs (a) through (q) in this Section 6.1.
6.2 Financial
Statements.
Seller
has delivered to Buyer audited consolidated balance sheets of the Company and
its Subsidiaries as of December 31, 2005 and 2006 and the related audited
consolidated income and cash flow statements for the years ended December 31,
2004, 2005 and 2006, together with the audit report thereon by KPMG LLP
(together, the "Audited Financial Statements"). Seller shall cause KPMG LLP
to
provide Buyer access to KPMG LLP's work papers in connection with its audit
of
the Audited Financial Statements, subject to Buyer executing an access and
release agreement with KPMG LLP in customary form. In addition, Seller and
the
Company shall deliver to Buyer unaudited consolidated balance sheets of the
Company and the Subsidiaries and the related unaudited consolidated income
and
cash flow statements as of and for each monthly period and each quarterly period
ending since the date of the Balance Sheet through the Closing Date, in each
case within 15 days after the end of such period. Such financial statements
shall be prepared on a basis materially consistent with the methodology and
principles used in the preparation of the Financial Statements.
6.3 Access
to Information Prior to the Closing; Confidentiality.
(a) During
the period from the date of this Agreement through the Closing Date, Seller
and
the Company shall
(and the Company shall cause each Subsidiary to) give Buyer, its lenders and
their respective representatives reasonable access during regular business
hours
throughout the period prior to the Closing Date (or the earlier termination
of
this Agreement pursuant to Article X hereof) to all plants, offices, warehouses,
facilities, employees and books and records of the Company and the Subsidiaries
as they may reasonably request; provided,
however,
(i)
that Buyer, its lenders and their respective representatives shall schedule
such
access and visits through a designated officer of the Company and in such a
way
as to avoid disrupting the normal business of the Company and the Subsidiaries,
(ii) the Company shall not be required to take any action which would, in the
Company's judgment, constitute a waiver of the attorney-client or other
privilege, and (iii) the Company need not supply any information which the
Company or any Subsidiary is under a contractual or legal obligation not to
supply; provided,
that
the Company and such Subsidiary shall first use reasonable best efforts to
obtain a waiver of any such contractual obligation.
32
(b) Buyer
will hold and will cause its employees, agents, affiliates, consultants,
lenders, representatives and advisors to hold any information which it or they
receive in connection with the activities and transactions contemplated by
this
Agreement in strict confidence in accordance with and subject to the terms
of
the Confidentiality Agreement dated as of January 12, 2007 and supplemented
on
June 19, 2007 among Buyer, Seller and the Company (the "Confidentiality
Agreement").
6.4 Reasonable
Best Efforts.
Subject
to the terms and conditions of this Agreement, each of the parties hereto will
use its reasonable best efforts to take, or cause to be taken, all actions,
and
to do, or cause to be done, all things necessary, proper or advisable under
Applicable Laws to consummate the transactions contemplated by this
Agreement.
For
purposes of this Agreement, the parties agree that use of "reasonable best
efforts" by a party shall not require that party to make payments, other than
nominal payments, to, or agree to contractual or other concessions with, any
third parties.
6.5 Consents;
Filings; Cooperation.
(a) Without
limiting the generality of Section 6.4, each of the parties hereto will use
its reasonable best efforts to obtain all Consents of all third parties and
Governmental Authorities required
to be obtained by such party in order to consummate the transactions
contemplated by this Agreement prior to the Closing.
(b) Each
of
the parties hereto will make or cause to be made all filings and submissions
under Applicable Laws as required for the consummation of the transactions
contemplated by this Agreement. Subject
to (i) Applicable Laws relating to the exchange of information and the direction
of any Governmental Authority and (ii) matters that Seller or the Company
reasonably determines should not be disclosed due to confidentiality concerns,
Buyer, on the one hand, and Seller and the Company, on the other hand, shall
have the right to review in advance, and to the extent practicable each will
consult the other on, all the information relating to Buyer or Seller and the
Company, as the case may be, and any of their respective subsidiaries, that
appears in any filing made with, or written materials submitted to, any
Governmental Authority in connection with the transactions contemplated by
this
Agreement.
(c) Subject
to Applicable Laws relating to the exchange of information and the direction
of
any Governmental Authority, (i) each of Seller and the Company, on the one
hand,
and Buyer, on the other hand, shall keep the other apprised of the status of
material matters relating to completion of the transactions contemplated by
this
Agreement, including promptly notifying the other party, and if in writing,
furnishing the other with copies of notices or other communications received
from any third party or any Governmental Authority, in connection with the
transactions contemplated by this Agreement (including any notice or
communication alleging that the consent of such person is or may be required
in
connection with the transactions contemplated by this Agreement and any
approvals required under the HSR Act); (ii) Seller and the Company shall give
prompt notice to Buyer of any change, development, event or circumstance that,
in the opinion of Seller, could reasonably be expected to result in a Company
Material Adverse Effect or prevent, materially delay or materially impair the
ability of Seller or the Company to consummate the transactions contemplated
by
this Agreement; (iii) Buyer shall give prompt notice to Seller and the Company
of any change, development, event or circumstance that prevents, materially
delays or materially impairs the ability of Buyer to consummate the transactions
contemplated by this Agreement; and (iv) neither Seller and the Company, on
the
one hand, nor Buyer, on the other hand, shall permit any of its officers,
directors or any other representatives or agents to participate in any meeting
with any Governmental Authority in respect of any filings, investigation or
other inquiry relating to the transactions contemplated by this Agreement,
unless it consults with the other party in advance and gives the other party
the
opportunity to attend and participate thereat.
33
6.6 Antitrust
Notification.
Buyer
and Seller will use their respective reasonable best efforts to obtain all
authorizations or waivers required under the HSR Act and any applicable foreign
antitrust laws to consummate the transactions contemplated hereby, including,
without limitation, making all filings with the Antitrust Division of the
Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC")
required in connection therewith and responding as promptly as practicable
to
all inquiries received from the DOJ or FTC for additional information or
documentation; provided,
however,
that no
party shall be required to agree that it, the Company or any Subsidiary (i)
divest any asset or business or (ii) be restricted from acquiring any asset
or
engaging in any business.
6.7 Public
Announcements.
Seller
and the Company, on the one hand, and Buyer, on the other hand, shall not issue
any report, statement or press release or otherwise make any public statement
with respect to this Agreement or any Ancillary Agreement and the transactions
contemplated hereby or thereby without prior consultation with and approval
of
the other party, except as may be required by law or securities exchange
regulations or as may be necessary in order to discharge the disclosure
obligations of any such party, in which case such party shall advise the other
party and discuss the contents of the disclosure before issuing any such report,
statement or press release.
6.8 Access
to Books and Records Following the Closing.
Following the Closing, Buyer shall permit Seller and its authorized
representatives, during normal business hours and upon reasonable notice, to
have reasonable access to, and examine and make copies of, all books and records
of the Company and each Subsidiary which relate to transactions or events
occurring prior to the Closing or transactions or events occurring subsequent
to
the Closing which are related to or arise out of transactions or events
occurring prior to the Closing. Buyer agrees that it shall retain all such
books
and records for a period of seven years following the Closing or for such longer
period following the Closing as may be required by law.
6.9 Repayment
of Debt; Release of Liens and Guarantees.
Except
as disclosed in Section 6.9 of the Company Disclosure Schedule, at or prior
to
the Closing, Seller and the Company will cause all Indebtedness to be repaid
and
Seller and the Company will obtain the release of all Liens on assets of the
Company and each Subsidiary securing, and all guarantees by the Company and
each
Subsidiary of, any indebtedness, other than any indebtedness, or any Liens
securing or guarantees of, any indebtedness owing to the Company or a
Subsidiary.
Any
Indebtedness not repaid as of the Closing (including those set forth on Section
6.9 of the Company Disclosure Schedule) shall result in an adjustment to the
Purchase Price pursuant to Section 1.2(c).
34
6.10 Financing.
From
the date of this Agreement until the Closing, Seller and the Company shall
permit Buyer's lenders and their representatives reasonable access as
contemplated by Section 6.3 and requested by Buyer that is necessary, proper
or
advisable in connection with the financing of the Purchase Price, the pledging
of the Company's and the Subsidiaries' assets as collateral for such financing,
and the other transactions contemplated by this Agreement (in each case,
provided
that
such requested access does not unreasonably interfere with the ongoing
operations of Seller, the Company or the Subsidiaries), including:
(a) cooperating with Buyer's lenders in connection with their due diligence
and other review (including a field examination) of the assets of the Company
and the Subsidiaries and (b) assisting with Buyer's preparation of
certificates and other documents required in connection with such financing
and
pledge under Buyer's credit agreement; provided,
that
the foregoing shall not require Seller (or, prior to the Closing, the Company)
to execute any agreements, certificates or other documents in connection with
such financing.
6.11 Certain
Transfers.
Prior
to
the Closing, Seller shall, and shall cause its subsidiaries to, assign and
transfer to the Company or a Subsidiary, as applicable, all interests held
by
Seller or any of its subsidiaries in any and all assets, properties and rights
which are used primarily in the business of the Company or any of the
Subsidiaries, other than any such assets, properties and rights which will
be
licensed or otherwise made available for use by Buyer, the Company and the
Subsidiaries, as applicable, pursuant to the Transition Services Agreement
or
the Trademark License Agreement.
ARTICLE
VII
TAX
MATTERS
7.1 Certain
Definitions.
As used
in this Agreement:
(a) "Pre-Closing
Period" means any taxable period ending on or prior to the Closing Date,
including that portion of any Straddle Period (as hereinafter defined) which
ends on and includes the Closing Date.
(b) "Seller
Group" means any "affiliated group" within the meaning of Section 1504(a) of
the
Code (without regard to the limitations in Section 1504(b) of the Code), that
includes Seller or any predecessor or successor to Seller (or another such
predecessor or successor).
35
(c) "Straddle
Period" means any taxable period that includes (but does not end on) the Closing
Date.
(d) "Tax
Benefit" means (A) a loss, deduction or credit for any Tax purpose or (B) a
carry forward or carry back of a loss, deduction or credit for any Tax
purpose.
7.2 Transfer
and Similar Taxes.
Notwithstanding any other provisions of this Agreement to the contrary, Buyer
shall file all necessary Tax Returns and other documentation with respect to
all
sales, use, transfer, gains, stamp, value added, duties, recording and similar
Taxes incurred in connection with the transactions contemplated by this
Agreement. Buyer and Seller shall each be responsible for one half of the taxes
covered under this Section 7.2 and any expenses incurred in complying with
this Section 7.2. If requested by Buyer, Seller will join in the execution
of
any such Tax Returns or such other documentation.
7.3 Real
Property and Personal Property Taxes.
Notwithstanding any provision in this Agreement to the contrary, real property
taxes subject to Section 164(d) of the Code, if any, imposed with respect to
the
Real Property of the Company or any Subsidiary shall be allocated between Buyer
and Seller in accordance with Section 164(d) of the Code.
7.4 Return
Filings.
(a) Seller
shall prepare, or cause to be prepared, and file, or cause to be filed, on
a
timely basis (in each case, at its sole cost and expense) all Income
Tax Returns with respect to the Company or any Subsidiary for taxable periods
ending on or prior to the Closing Date (the "Prior Period Income Tax Returns").
Seller shall pay, or cause to be paid, all Income Taxes with respect to the
Company shown to be due on the Prior Period Income Tax Returns. In addition,
except to the extent of any reserves for Non-Income Taxes included on the
Closing Date Balance Sheet, Seller shall pay, or cause to be paid, all Non
Income Taxes with respect to the Company for taxable periods ending on or prior
to the Closing Date shown to be due on Tax Returns prepared by the Buyer
pursuant to Section 7.4(b).
(b) Buyer
shall prepare, or cause to be prepared, and shall file, or cause to be filed,
on
a timely basis (in each case, at its sole cost and expense) all Tax Returns
with
respect to the Company or any Subsidiary (other than Tax Returns described
in
Section 7.4(a)), including Tax Returns, if any, for the Straddle Period (the
"Straddle Period Returns") as well as all Tax Returns for taxable periods
beginning on or after the Closing Date. Except as provided in Section 7.4(a)
and
7.4(c), Buyer shall pay, or cause to be paid, all Taxes shown to be due on
such
Tax Returns.
36
(c) Buyer
shall provide Seller with copies of any Straddle Period Returns at least thirty
(30) Business Days prior to the due date thereof (giving effect to any
extensions thereto), accompanied by a statement calculating in reasonable detail
the portion of any Taxes shown due on such return for which Seller is
responsible pursuant to Section 7.7(b)(1) hereof. Seller shall have the right
to
review such Straddle Period Returns and the calculation of its share of any
Taxes shown due thereon prior to the filing of such Straddle Period Returns.
If
Seller disputes the amount calculated, Seller and Buyer shall consult and
resolve in good faith any issues arising as a result of the review of such
Straddle Period Return. If Seller agrees to the amount, Seller shall pay to
Buyer an amount equal to Seller's portion of the Taxes shown on such Straddle
Period Return not later than three Business Days before the due date (including
any extensions thereof) for payment of Taxes with respect to such Straddle
Period Return. If the parties are unable to resolve any dispute within fifteen
Business Days after Seller's receipt of such Straddle Period Return, such
dispute shall be resolved by the Independent Accounting Firm which shall resolve
any issue in dispute as promptly as practicable and whose cost shall be borne
by
the parties in proportion to their proportionate liability for Taxes with
respect to such Straddle Period Return pursuant to Section 7.7. If the
Independent Accounting Firm is unable to make a determination with respect
to
any disputed issue prior to the due date (including any extensions) for the
filing of the Straddle Period Return in question, (A) Buyer shall file, or
shall
cause to be filed, such Straddle Period Return without such determination having
been made and (B) Seller shall pay to Buyer, not later than five days before
the
due date (including any extensions thereof) for the payment of Taxes with
respect to such Straddle Period Return, an amount determined by Seller as the
proper amount chargeable to Seller pursuant to this Section 7.4. Upon delivery
to Seller and Buyer by the Independent Accounting Firm of its determination,
appropriate adjustments shall be made to the amount paid by Seller in accordance
with the immediately preceding sentence in order to reflect the decision of
the
Independent Accounting Firm. The determination by the Independent Accounting
Firm shall be final, conclusive and binding on the parties.
(d) Seller
and Buyer shall reasonably cooperate, and shall cause their respective
affiliates, officers, employees, agents, auditors and representatives reasonably
to cooperate, in preparing and filing all Tax Returns (including amended returns
and claims for refund) pursuant to this Section 7.4, including maintaining
and
making available to each other all records necessary in connection with Taxes
reported on such Tax Returns and in resolving all disputes and audits with
respect to all taxable periods relating to such Tax Returns. Buyer and Seller
recognize that Seller will need access, from time to time, after the Closing
Date, to certain accounting and Tax records and information held by the Company
to the extent such records and information pertain to events occurring prior
to
the Closing Date; therefore, Buyer agrees that for a period of the later to
occur of (i) seven years from the Closing Date or (ii) the expiration of the
applicable statute of limitations (taking into account any applicable extensions
or tollings), (A) Buyer shall not, and shall cause the Company not to,
dispose of or destroy any of the business records and files of the Company
relating to Taxes in existence on the Closing Date without first offering to
turn over possession thereof to Seller by written notice to Seller at least
thirty days prior to the proposed date of such disposition or destruction and
(B) Buyer shall, in its reasonable discretion, allow Seller and its agents
and
representatives (and agents and representatives of its affiliates) to inspect,
review and make copies of such records as Seller requests from time to time,
such activities to be conducted during normal business hours and at Seller's
cost and expense.
37
(e) Except
to
the extent reflected in the Final Net Working Capital, any refunds and credits
of Taxes of the Company with respect to (A) any taxable period ending on or
before the Closing Date shall be for the account of Seller, and if received
or
utilized by Buyer or the Company, shall be paid to Seller within five Business
Days after Buyer or the Company receives such refund or utilizes such credit,
net of any out-of-pocket costs to Buyer incurred in recovering such refund
and
net of any Tax detriment incurred by Buyer as a result of claiming such refund,
(B) any taxable period beginning after the Closing Date shall be for the account
of Buyer, and if received or utilized by Seller or any of its affiliates shall
be paid by Seller to Buyer within five Business Days after Seller or any of
its
affiliates receives such refund or utilizes such credit and (C) except as
provided in the next sentence, any Straddle Period shall be apportioned between
Seller and Buyer on the basis of an "interim closing of the books." In the
case
of a refund or credit attributable to any Taxes that are imposed on a periodic
basis and are attributable to the Straddle Period, other than Taxes based upon
or related to income, the refund or credit of such Taxes of the Company for
the
Pre-Closing Period shall be deemed to be the amount of such refund or credit
for
the Straddle Period multiplied by a fraction the numerator of which is the
number of days in the Straddle Period ending on the Closing Date and the
denominator of which is the number of days in the Straddle Period.
7.5 Carrybacks.
Buyer
shall not be entitled to carry back any Tax Benefit of the Company arising in
any taxable period beginning after the Closing Date or to amend any Pre-Closing
Period or Straddle Period Tax Return without the prior written consent of Seller
(such consent not to be unreasonably withheld).
7.6 Tax
Elections.
Buyer
shall not, and shall cause the Company not to, make, amend or revoke any Tax
election without the prior written consent of the Seller (such consent not
to be
unreasonably withheld) if such action could reasonably be expected to have
a
material adverse effect on any member of the Seller Group with respect to any
taxable period ending on or before the Closing Date or for the Pre-Closing
Period or any Tax refund with respect thereto. Notwithstanding the foregoing,
Buyer shall not, and shall cause the Company not to, revoke Seller’s election
with respect to B & J Music Ltd. to close its tax year on the close of
business on the Closing Date.
7.7 Tax
Indemnification.
(a) Notwithstanding
anything in this Agreement to the contrary, except to the extent treated as
an
asset in the calculation of the Closing Net Working Capital, Buyer shall
indemnify, defend and hold harmless Seller and its affiliates, at any time
after
the Closing, from and against any liability for Taxes of the Company or any
Subsidiary (i) for any taxable year or period beginning after the Closing Date
and with respect to any taxable year or period beginning before and ending
after
the Closing Date, the portion of such taxable year or period beginning after
the
Closing Date (except for Taxes governed by Section
7.2 or
7.3) and (ii) Taxes paid by Seller for which Buyer is liable under Section
7.2.
Notwithstanding the foregoing, Buyer shall indemnify, defend and hold harmless
Seller and its affiliates from and against any liability for Taxes of the
Company arising on the Closing Date (and after the Closing) that are
attributable to activities of Buyer outside of the ordinary course of
business.
38
(b) Notwithstanding
anything in this Agreement to the contrary, except to the extent treated as
a
liability in the calculation of the Closing Net Working Capital, Seller shall
pay, indemnify, defend and hold harmless Buyer and its affiliates from and
against any liability for (i) Taxes for any taxable year or period ending on
or
before the Closing Date and with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable year
or
period ending on or before the Closing Date, including, without limitation,
any
obligation to contribute to the payment of a tax determined on a consolidated,
combined, unitary or affiliated basis with respect to a group of corporations
that includes or included the Company or any of its Subsidiaries, (ii) Taxes
resulting from the Company or any of its Subsidiaries ceasing to be a member
of
the Seller's Group or attributable to the election to be made under Section
338(h)(10) of the Code and any state or foreign law equivalents, (iii) Taxes
paid by Buyer for which Seller is liable under Section 7.2
and (iv)
in the event that the Sales Tax Certificate Target is not met as of the Closing
Date, any Covered Sales Taxes; provided, however, that Seller shall be liable
to
indemnify Buyer for Non-Income Taxes only after the aggregate amount of all
Buyer’s claims for indemnification for Non-Income Taxes for which Seller would
otherwise be liable pursuant to this Section 7.7(b) ("Non-Income Tax Claims")
exceeds $100,000 (the “Deductible”), and then only to the extent that such
Non-Income Tax Claims exceed the Deductible. For purposes of the foregoing,
(x)
the "Sales Tax Certificate Target" shall be deemed to be met if, as of the
Closing Date, the Company or a Subsidiary, as applicable, shall have valid
Sales
Tax Certificates from a sufficient number of its U.S. customers so that the
Company's sales to such customers shall have been at least 50% of the Company's
sales to all of its U.S. customers ending with the most recent twelve full
months for which sales information is then available, (y) "Covered Sales Taxes"
means any sales Taxes with respect to transactions occurring during the period
beginning on the day after the Closing Date and ending at the end of the
180th
day
after the Closing Date, but only to the extent that any such sales Tax is
attributable to a failure of the Company or a Subsidiary, as applicable, to
possess a valid Sales Tax Exemption Certificate as of the Closing Date and
assessed at any time after the Closing Date by the relevant state authority
responsible for collecting sales Taxes, and (z) “Sales Tax Exemption
Certificate” means any certificate or other documentation that would entitle the
holder under applicable law to sell property without collecting sales Tax from
the purchaser thereof in a transaction in which the holder would otherwise
be
required to collect sales Tax. Seller agrees that it shall cause the Company
to
use commercially reasonable efforts to meet the Sales Tax Certificate Target
prior to the Closing Date.
(c) In
the
case of any Straddle Period, except as provided in subparagraph (d) below and
in
Section 7.4, the liability for Taxes of the Company for the Pre-Closing Period
shall be computed as if such taxable period ended on and included the Closing
Date.
(d) In
the
case of any Taxes that are imposed on a periodic basis and are payable for
the
Straddle Period, other than Taxes based upon or related to income or Taxes
described in Section 7.3, the liability for such Taxes of the Company for the
Pre-Closing Period shall be deemed to be the amount of such Taxes for the
Straddle Period multiplied by a fraction the numerator of which is the number
of
days in the Straddle Period ending on and including the Closing Date and the
denominator of which is the number of days in the Straddle Period.
39
(e) Buyer
shall promptly notify Seller in writing upon receipt by Buyer, the Company
or
any Subsidiary of notice of any pending or threatened federal, state, local
or
foreign income or franchise tax audits or assessments which may materially
affect the Tax liabilities for which Seller would be required to indemnify
Buyer
pursuant to Section 7.7(b), provided
that
failure to comply with this provision shall not affect Buyer's right to
indemnification hereunder unless and to the extent Seller is materially
adversely prejudiced as a consequence of such failure. Seller shall have the
right to represent the Company's or any Subsidiary's interests in any tax audit
or administrative or court proceeding relating solely to taxable periods ending
on or before the Closing Date or with respect to any Covered Sales Taxes, and
to
employ counsel of its choice at its expense. Notwithstanding the foregoing,
Buyer shall be entitled to participate in any such proceeding and Seller shall
not be entitled to settle, either administratively or after the commencement
of
litigation, any claim for Taxes which would adversely affect the liability
for
Taxes of the Buyer, the Company or any Subsidiary for any period after the
Closing Date to any extent (including, but not limited to, the imposition of
income tax deficiencies, the reduction of asset basis or cost adjustments,
the
lengthening of any amortization or depreciation periods, the denial of
amortization or depreciation deductions, or the reduction of loss or credit
carryforwards) without the prior written consent of Buyer. Such consent shall
not be unreasonably withheld, and shall not be necessary to the extent that
Seller has indemnified the Buyer against the effects of any such
settlement.
(f) Seller
shall be entitled to participate at its expense in the defense of any claim
for
Taxes for a year or period ending after the Closing Date which may be the
subject of indemnification by Seller pursuant to Section 7.7(b) (other than
any
claim under Section 7.7(b)(iv), which shall be governed by Section 7.7(e)),and,
with the written consent of Buyer, and at its sole expense, may assume the
entire defense of such tax claim. None of the Buyer, the Company or any
Subsidiary may agree to settle any tax claim for the portion of the year or
period ending on the Closing Date which may be the subject of indemnification
by
Seller under Section 7.7(b) without the prior written consent of Seller, which
consent shall not be unreasonably withheld.
(g) Each
of
Buyer and Seller shall (and shall cause their affiliates and agents to)
cooperate with the other in contesting any tax controversy (without charge),
which cooperation shall include, without limitation, the retention and the
provision of records and information which are reasonably relevant to such
controversy, and making employees available to provide additional information
or
explanation of any material provided hereunder or to testify at proceedings
relating to such controversy.
(h) Any
indemnity payment payable by Seller to Buyer or by Buyer to Seller pursuant
to
this Section 7.7 shall be paid within thirty days after the indemnifying party's
written request therefor (or, if later, ten days prior to the date such Tax
is
required to be paid), provided
that
such request shall be accompanied by a copy of the applicable Tax Return or
a
final audit determination and, if necessary, a statement reflecting the
calculation of the amount for which the indemnifying party is liable. Within
thirty days following the receipt of a request for any indemnity payment
hereunder, together with a computation by the indemnified party of the indemnity
amount payable hereunder, the indemnifying party shall either (i) pay such
amount in immediately available funds in the manner designated by the
indemnified party to the indemnifying party or (ii) if such amount is payable
with respect to a Tax Return filed pursuant to Section 7.4(a) or 7.4(b) (other
than Straddle Period Returns), request in writing the Independent Accounting
Firm to determine whether such computation and amount are correct. After each
party has had the opportunity to consult with the Independent Accounting Firm,
upon receipt thereof, the indemnified party shall deliver to the indemnifying
party a statement from the Independent Accounting Firm setting forth the
determination by the Independent Accounting Firm of such computation and the
amount payable hereunder as an indemnity. The determination by the Independent
Accounting Firm in conformity with the provisions of this Agreement shall be
final, conclusive and binding on the parties hereto. Within five Business Days
after delivery to the indemnifying party of the statement of determination
by
the Independent Accounting Firm of such amount, the indemnifying party shall
pay
such amount in immediately available funds to the indemnified party in the
manner designated by the indemnified party.
40
(i) Any
tax
allocation or sharing agreement or arrangement, whether or not written, that
may
have been entered into by Seller or any member of Seller's Group and the Company
or any of the Subsidiaries shall be terminated as to the Company or the relevant
Subsidiary as of the Closing Date, and no payments which are owed by or to
the
Company or any Subsidiary pursuant thereto shall be made thereunder, except
to
the extent such obligation is reflected in the Closing Net Working
Capital.
7.8 338(h)(10)
Elections; No 338(g) Election.
(a) Buyer
and
Seller shall jointly make a timely election with respect to the purchase and
sale of the Shares (and the deemed purchase of each Subsidiary for which such
election may validly be made) under Section
338(h)(10) of the Code and any similar provisions of state and local laws (all
such elections being referred to collectively as the "Section 338(h)(10)
Elections"). Seller shall deliver to Buyer, at or prior to the Closing, a
properly executed IRS Form 8023 containing information then available, which
Buyer shall file or cause to be filed with the Internal Revenue Service not
later than thirty (30) days prior to the date such Section 338(h)(10) Elections
are required to be filed. Buyer and Seller shall, as promptly as practicable
following the Closing Date, cooperate with each other to take all other actions
necessary and appropriate (including filing such forms, returns, elections,
schedules and other documents as may be required) otherwise to effect, perfect
and timely preserve the Section 338(h)(10) Elections.
41
(b) Buyer
shall prepare and deliver to Seller as soon as practicable after the Closing
Date, but in no event later than 150 days after the Closing Date (i) a schedule
allocating the "aggregate deemed sales price," as defined in Treasury Regulation
Section 1.338-4, among the assets of the Company (and of each Subsidiary for
which a 338(h)(10) Election has been made), and (ii) a complete set of IRS
Forms
8883 (and any comparable forms required to be filed under Applicable Law) and
any additional data or materials required to be attached thereto pursuant to
the
Treasury Regulations promulgated under Section 338 of the Code (the "Allocation
Schedules"). The Allocation Schedules shall be prepared in accordance with
Section 338(h)(10) of the Code and the Treasury Regulations thereunder.
Allocation to depreciable fixed assets, inventory and receivables shall be
no
more than the amounts set forth on Section 7.8(b) of the Company Disclosure
Schedule.
(c) Seller
shall have thirty (30) days following receipt by it of the Allocation Schedules
during which to dispute any item contained in the Allocation Schedules. If
Seller fails to notify Buyer of any such dispute within such 30-day period,
the
Allocation Schedules shall be deemed to have been accepted by Seller. If Seller
timely notifies Buyer of any such dispute, and Buyer and Seller cannot resolve
any such dispute within twenty (20) days of receipt by Buyer of such notice,
such dispute shall be resolved by the Independent Accounting Firm; the
determination of the Independent Accounting Firm with respect to such dispute
shall be made as promptly as practicable and shall be final and binding on
Buyer
and Seller. The fees and expenses of the Independent Accounting Firm shall
be
borne equally by Buyer and Seller.
(d) Buyer
and
Seller shall report the purchase of the Shares pursuant to this Agreement
consistent with the Section 338(h)(10) Elections and the Allocation Schedules,
and shall take no position to the contrary thereto in any Tax Return, or in
any
proceeding before any Governmental Authority or otherwise, except as required
otherwise by any judgment or any settlement or closing agreement with any
Governmental Authority. Neither Buyer nor Seller shall take any action to modify
any of the forms or reports (including any corrections, amendments or
supplements thereto) that are required for the making of the Section 338(h)(10)
Elections after their execution or to modify or revoke any of the Section
338(h)(10) Elections following the filing of the Form 8023 without the written
consent of the other party, which consent shall not be unreasonably delayed
or
withheld.
(e) Buyer
shall not make an election under Section 338(g) of the Code (or comparable
provision of state, local or foreign law) without the prior consent of Seller,
which consent may be withheld in Seller's sole and absolute discretion. From
and
after the Closing Date and until the end of Seller's short taxable year that
begins after the Closing Date, Buyer shall not take any action which would
result in the dividend or other distribution by B & J Music Ltd. of any of B
& J Music Ltd.'s earnings and profits to Buyer, any affiliate of Buyer or of
B & J Music Ltd. or to any other person.
42
7.9 Survival
of Obligations.
The
obligations of the parties set forth in this Article VII shall survive until
30
days following the expiration of the applicable statute of
limitations.
ARTICLE
VIII
ADDITIONAL
AGREEMENTS
8.1 Company
Employees; Employee Contracts and Benefits.
(a) Employees.
Buyer
intends that (i) each person employed by the Company (including such employees
who are not actively at work on account of (A) leave of absence or (B) any
disability, meaning any illness or injury, of less than six months duration
as
of the Closing Date, but excluding such employees who are totally and
permanently disabled under the terms of the Kaman Pension Plan (as hereinafter
defined)) as of the Closing Date (such employees, "Kaman Employees") and (ii)
each person employed by each Subsidiary (including such employees who are not
actively at work on account of (A) leave of absence or (B) any disability,
meaning any illness or injury, of less than six months duration as of the
Closing Date, but excluding such employees who are totally and permanently
disabled under the terms of the Kaman Pension Plan) as of the Closing Date
(a
"Subsidiary Employee") shall continue as an employee of the Company, or each
Subsidiary, as the case may be, following the Closing Date. Buyer and Seller
agree that the foregoing sentence shall not require Buyer, the Company, or
any
Subsidiary to continue the employment of any particular such employee after
the
Closing Date. Buyer agrees (i) that effective immediately as of the Closing
Date, the employees of the Company and its Subsidiaries shall be provided with
medical, dental and other welfare benefits that are substantially comparable
in
the aggregate to the medical, dental and other benefits (which benefits in
effect as of the date hereof are set forth on Schedule 8.1(a)) provided to
employees of Buyer (including, but not limited to, Buyer's applicable severance
pay plans and policies), in each case, as in effect from time to time, on
substantially the same terms and conditions as similarly situated employees
of
Buyer and with a waiver of any preexisting condition or delayed eligibility
or
participation restrictions (to the extent any such restrictions were satisfied
under a similar Company Plan), and will provide such Kaman Employees and their
dependents credit for any deductibles and co-insurance incurred under Seller's
medical and dental benefit plans during the current plan year before the Closing
Date, (ii) to recognize for all purposes under Buyer's severance pay plans
or
policies the service of Kaman Employees or Subsidiary Employees with Seller,
the
Company or each Subsidiary before the Closing Date, (iii) that each Kaman
Employee and Subsidiary Employee whose employment with Buyer and its Affiliates
is terminated within nine (9) months following the Closing Date shall be
provided with severance payments and benefits in accordance with the terms
of
Schedule 8.1(a)(iii) hereto, and (iv) to permit Kaman Employees to take vacation
during 2007 to the extent of any unused vacation entitlement under Seller's
vacation plans, or reimburse such Kaman Employees for the loss thereof at the
rate of pay not less than that in effect at Closing.
43
(b) Assumption
of Agreements.
Buyer
agrees to honor, and to cause the Company to honor, in accordance with their
terms, each of the severance agreements with those individuals identified in
Section 8.1(b) of the Company Disclosure Schedule,
and
shall be solely responsible for any WARN Act obligations or similar obligations
under applicable state laws that may be applicable in connection with the
termination of employment on or after the date hereof of any Kaman Employees
or
Subsidiary Employees.
(c) Defined
Contribution Plans.
(i)
Following the Closing Date, the Kaman Employees and the Subsidiary Employees
shall be eligible to immediately participate in Buyer's 401(k) plan ("Buyer's
401(k) Plan"), as in effect from time to time, on substantially the same terms
and conditions as similarly situated employees of Buyer, (ii) Kaman Employees
and Subsidiary Employees shall be eligible to make direct rollovers of their
applicable account balances in the Kaman Corporation Thrift and Retirement
Plan
("Seller's Thrift Plan") into Buyer's 401(k) Plan, (iii) Kaman Employees and
Subsidiary Employees shall be eligible to make direct rollover of any loan
that
is outstanding under Seller’s Thrift Plan as of the Closing Date to Buyer’s
401(k) Plan, provided that, in each case, (A) such employee has submitted a
completed and signed rollover form to the Buyer’s Benefits Department no later
than 30 days following the Closing Date, and (B) at the same time as such
employee rolls over his or her outstanding loan(s), such employee also rolls
over his or her entire account balance under Seller’s Thrift Plan to Buyer’s
401(k) Plan, and (iv) Buyer's 401(k) Plan shall recognize for all purposes
all
service of the Kaman Employees and the Subsidiary Employees that was recognized
under Seller's Thrift Plan as if it were service rendered to Buyer. At the
Closing, in accordance with the terms of Seller's Thrift Plan, the Company
and
each applicable Subsidiary shall cease being a participating company in Seller's
Thrift Plan and both employer and employee contributions to such plan shall
cease at the Closing Date for all Kaman Employees and Subsidiary Employees;
provided, however, that as soon as practicable following the Closing Date,
the
Company shall make a final matching contribution to Seller’s Thrift Plan for
each participating Kaman Employee and Subsidiary Employee for the portion of
the
payroll period that occurs prior to the Closing Date. In addition, each of
Seller and Buyer agrees to take any actions reasonably necessary (including
any
necessary plan amendment) to effect direct rollover to Buyer’s 401(k) Plan of
any loans outstanding under Seller’s Thrift Plan.
(d) Incentive
Bonus Plans.
Buyer
will establish an incentive bonus plan for all Kaman Employees for 2008 that
is
substantially comparable in the aggregate (including target bonus opportunity
and the difficulty of achieving performance targets) to the annual incentive
bonus plan in place for such employees with respect to calendar year 2007.
Buyer
agrees that it shall pay to Kaman Employees and Subsidiary Employees, no later
than March 15, 2008, annual incentive bonuses with respect to calendar year
2007
to the extent such amounts are accrued as of the Closing Date, and otherwise
in
accordance with Section 8.1(d) of the Company Disclosure Schedule.
(e) Severance.
Buyer
shall be responsible for, and shall indemnify Seller and its Affiliates from
and
against, any Liabilities incurred by Seller or any of its Affiliates directly
resulting from the termination of services of any Kaman Employees as of or
prior
to the Closing Date, which termination of services is at the written request
of
Buyer. Buyer shall be responsible for, and shall indemnify Seller and its
Affiliates from and against, any Liabilities incurred by Seller or any of its
Affiliates directly resulting from the employment or discharge of any Kaman
Employee or Subsidiary Employees by the Buyer or any of its Affiliates following
the Closing Date.
44
(f) No
Amendment, Third Party Beneficiary Rights or Agreement to Maintain Plans or
Retain Employees.
Notwithstanding the foregoing, nothing contained herein shall (i) be treated
as
an amendment of any particular Company Plan or employee benefit plan of Buyer,
(ii) give any third party any right to enforce the provisions of this Section
8.1 or (iii) obligate Buyer or any of their Affiliates to (x) maintain any
particular Company Plan or employee benefit plan of Buyer or (y) retain the
employment of any particular employee.
(g) Authority
over Certain Insured Claims
Buyer
agrees that Seller shall have the sole authority over administering and settling
any claims constituting Buyer Claims under Section 11.2(v) (it being understood
that settlement of any such Buyer Claims is subject to the last sentence of
Section 11.2) and Buyer agrees to reasonably cooperate with Seller in connection
therewith.
8.2 Non-Solicitation.
Seller
agrees that, for a period of two years from and after the Closing Date, it
shall
not, and shall cause its Affiliates not to, without the prior written consent
of
Buyer, directly or indirectly through another person, (i) solicit to hire,
(ii)
hire, (iii) enter into a consulting agreement with or (iv) encourage, entice
or
induce to terminate an employment relationship with any employee of or any
consultant to the Company or the Subsidiaries at the Closing Date; provided,
that, for purposes of this Section 8.2, "consultants" shall be limited to
individuals or to firms whose consulting services have been limited to the
Music
Business. The foregoing restrictions shall not preclude (a) general
solicitations or hiring pursuant to general solicitations in newspapers or
similar mass media not targeted toward employees or consultants of the Company
or its Subsidiaries or (b) soliciting any person who has left the employment
of
the Company or its Subsidiaries prior to Seller soliciting such person (which
person is not in breach of his or her contract of service with the Company
or
Subsidiary, as applicable).
8.3 No
Shop.
During
the period from the date hereof through the earlier to occur of (i) the Closing
Date and (ii) the termination of this Agreement in accordance with Section
10.1,
Seller and the Company will not, nor will they permit their respective officers,
directors, representatives, subsidiaries (including, without limitation, the
Subsidiaries), Affiliates or agents to, directly or indirectly, (a) initiate
contact with, solicit, encourage or respond to any inquiries or proposals by,
(b) enter into any discussions, negotiations, agreements, arrangements or
understandings with, (c) disclose, directly or indirectly, any non-public
information concerning the Company's or any Subsidiary's business or properties
to, except as may be required by law, or (d) afford any access to the Company's
or any Subsidiary's properties, books and records to, any person in connection
with any possible proposal for the acquisition of all or any substantial portion
of the Shares, other capital stock of the Company or any Subsidiary, or the
assets or business of the Company or any Subsidiary (whether through a purchase,
merger, consolidation, share exchange, recapitalization, business combination
or
other similar transaction). If
the
Closing shall occur, Seller shall promptly thereafter notify Buyer of the
receipt of any such proposal or any request for information relating to the
Company or any of the Subsidiaries by any person who has informed Seller that
such person is considering making, or has made, such a proposal. Such notice
shall identify the person making, or considering making, such proposal and
shall
set forth the material terms of any such proposal received, and Seller will
inform the Buyer in reasonable detail of the terms, status and other pertinent
details of any such proposal or request.
45
8.4 Termination
of Inter-company Commitments.
Except
as contemplated in Section 2.1 and (a) the transition services agreement,
substantially in the form of Exhibit B hereto, to be entered into by Buyer,
the
Company and Seller at the Closing (the "Transition Services Agreement"), (b)
the
lease with respect to the Bloomfield Real Estate, substantially in the form
of
Exhibit C hereto, to be entered into by the Company and Seller at the Closing
(the "Bloomfield Real Estate Lease"), (c) the trademark assignment agreement,
substantially in the form of Exhibit D hereto, to be entered into by Buyer,
the
Company and Seller at the Closing (the "Trademark Assignment Agreement") and
(e)
the trademark license agreement, substantially in the form of Exhibit E hereto,
to be entered into by Buyer, the Company and Seller at the Closing (the
"Trademark License Agreement"), all of the agreements and commitments (whether
written or oral) between the Company or any Subsidiary, on the one hand, and
Seller or any of its subsidiaries, on the other hand, and all products and
services provided to the Company or any Subsidiary by Seller or any of its
subsidiaries will terminate without any further action or liability on the
part
of the parties thereto.
The
provision of any services by Seller or any of its subsidiaries to the Company
or
any Subsidiary from and after the Closing shall be for the convenience, and
at
the expense, of Buyer only and shall be furnished without any liability on
the
part of Seller or any of its subsidiaries with respect thereto, provided
that the
provision of any services in connection with any Ancillary Agreement shall
be
governed by the terms of such Ancillary Agreement.
8.5 Dispute
Resolution.
(a) Negotiations.
Buyer
and Seller shall attempt in good faith to resolve any dispute arising out of
or
relating to this Agreement (a "Dispute") within thirty days after one party
notifies the other of such Dispute (the "Negotiation Period"). All such
negotiations shall be confidential, and shall be treated as compromise and
settlement negotiations for all evidentiary purposes, including but not limited
to for purposes of the Federal Rules of Evidence and any state rules of
evidence.
(b) Other
Remedies.
Buyer
and Seller shall not, and shall not permit their respective Affiliates to,
initiate litigation with respect to any Dispute unless the Dispute has not
been
resolved within the Negotiation Period; provided
that
Buyer or Seller may at any time and without notice file a complaint or seek
an
injunction or provisional judicial relief, if in its sole judgment such action
is necessary to avoid irreparable damage or to preserve the status quo
(including, but not limited to, for statute of limitations reasons or to
preserve any defense based upon the passage of time). Despite such action,
Buyer
and Seller will continue to participate in the procedures specified in this
Section 8.5 for so long and to the extent so specified.
46
8.6 Certain
Accounts and Payments.
(a) Disbursement
Accounts.
Buyer
acknowledges and agrees that all U.S. disbursement accounts of Seller that
contain both Cash of the Company and the Subsidiaries and Cash of Seller's
other
subsidiaries will be retained by Seller.
(b) Notices.
Prior
to the Closing, Seller shall, and shall cause the Company and the Subsidiaries
to, notify in writing all customers, vendors and other persons doing business
with the Company and the Subsidiaries who customarily make payments, to which
the Company or any Subsidiary is entitled, to an account retained by Seller
pursuant to Section 8.6(a). All such notices shall contain information relating
to where payments from such persons should be directed following the Closing,
which shall be provided by Buyer, and shall otherwise be in form and substance
reasonably satisfactory to Buyer. Any such notices given prior to the Closing
may state that the new payment account direction shall only take effect once
a
further written notice is given by the Company to confirm that the Closing
has
occurred.
(c) Payments.
If at
any time following the Closing Seller or any of its subsidiaries receives
payment to which the Company or any Subsidiary is entitled, Seller shall, and
shall cause its subsidiaries to, promptly forward such payment to
Buyer.
8.7 Transition
Assistance.
Seller
shall use its commercially reasonable efforts to assist and cooperate with
Buyer
following the Closing, from time to time upon Buyer's reasonable request and
at
Buyer's expense, in its efforts to transition and integrate the business of
the
Company and the Subsidiaries, including functions such as tax, employee
benefits, human resources, supply chain and legal (but excluding information
technology, which shall be subject to the Transition Services Agreement). The
parties agree that the foregoing undertaking shall not require Seller to provide
assistance other than during normal working hours by its then current employees
or to a degree that is disruptive to Seller's conduct of its own
business.
8.8 Assumption
of Indemnification Obligations.
If
Seller enters into any transaction, or a series of related transactions,
resulting in a sale of Seller or all or substantially all of the assets of
Seller and its respective subsidiaries taken as a whole (whether through a
purchase, merger, consolidation, share exchange, recapitalization, business
combination or other similar transaction), Seller shall cause the acquiring
entity of such assets or, in the case of a merger, the surviving entity in
such
transaction to directly assume and be jointly and severally responsible for
the
obligations of Seller under Article XI, provided that the foregoing requirement
shall only apply should such sale occur within ten years after the Closing
Date.
Notwithstanding the foregoing, in the event any such sale is negotiated with
a
private equity firm or firms, it is understood that the acquiring entity or
surviving entity that would be responsible for the obligation described in
the
previous sentence shall mean the acquisition vehicle or vehicles formed for
purposes of the acquisition and not the private equity firms or the funds that
would provide the equity financing for such acquisition.
47
ARTICLE
IX
CONDITIONS
TO CLOSING
9.1 Conditions
to Both Parties' Obligations.
The
obligations of the parties to consummate the transactions contemplated by this
Agreement are subject to the fulfillment prior to or at the Closing of each
of
the following conditions (any or all of which may be waived in writing by the
parties):
(a) No
Injunction.
On the
Closing Date, there shall not be in effect any Order issued by a court of
competent jurisdiction, or any Applicable Law, restraining or prohibiting
consummation of the transactions contemplated by this Agreement.
(b) Antitrust
Approval.
All
waiting periods applicable to the transactions contemplated by this Agreement
under the HSR Act shall have expired or been terminated and all Foreign
Antitrust Approvals, if any, shall have been obtained.
9.2 Conditions
to Seller's Obligations.
The
obligations of Seller and the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to
the
Closing of each of the following conditions (any or all of which may be waived
in writing in whole or in part by Seller):
(a) Representations
and Warranties.
The
representations and warranties of Buyer in this Agreement shall be true and
correct in all material respects as of the date when made and at and as of
the
Closing Date as though such representations and warranties were made at, and
as
of, the Closing Date, except for changes permitted by the terms of this
Agreement.
(b) Performance.
Buyer
shall have, in all material respects, performed and complied with all
agreements, obligations, covenants and conditions required by this Agreement
to
be so performed or complied with by Buyer at or prior to the Closing, including
without limitation the delivery at the Closing of the items contemplated by
Section 1.5.
(c) Officer's
Certificate.
Buyer
shall have delivered to Seller a certificate, dated as of the Closing Date,
executed by an officer of Buyer, certifying the fulfillment of the conditions
specified in Sections 9.2(a) and 9.2(b).
48
9.3 Conditions
to Buyer's Obligations.
The
obligations of Buyer to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Closing of each
of
the following conditions (any or all of which may be waived in writing in whole
or in part by Buyer):
(a) Representations
and Warranties.
The
representations and warranties of Seller and the Company in this Agreement
which
are not qualified by materiality shall be true and correct in all material
respects as of the date when made and at and as of the Closing Date as though
such representations and warranties were made at and as of the Closing Date
and
the representations and warranties of Seller and the Company in this Agreement
which are qualified by materiality shall be true and correct in all respects
as
of the date when made and at and as of the Closing Date as though such
representations and warranties were made at and as of the Closing Date, in
each
case, except for changes permitted by the terms of this Agreement.
(b) Performance.
Seller
and the Company shall have, in all material respects, performed and complied
with all their respective agreements, obligations, covenants and conditions
required by this Agreement to be so performed or complied with by them at or
prior to the Closing,
including without limitation the delivery at the Closing of the items
contemplated by Section 1.4.
(c) Consents
and Approvals.
Seller
and the Company shall have obtained the consents, approvals and licenses set
forth in Section 9.3(c) of the Company Disclosure Schedule required of third
parties in connection with the consummation of the transactions contemplated
hereby.
(d) Debt
and Liens.
Except
as disclosed in Section 6.9 of the Company Disclosure Schedule, all Indebtedness
of the Company and the Subsidiaries shall have been repaid and all Liens on
assets of the Company and each Subsidiary securing, and all guarantees by the
Company and each Subsidiary of, any indebtedness shall have been released,
in
each case other than with respect to any indebtedness owing to the Company
or a
Subsidiary.
(e) Absence
of Certain New Claims.
There
shall not have occurred any event which would have caused Section 3.4, 4.5,
4.10, 4.16 or 4.17(a)(ii) to have been breached had such representation and
warranty been brought down to the Closing Date and which, individually or in
the
aggregate, would reasonably be expected to result in a Company Material Adverse
Effect.
(f) No
Company Material Adverse Effect.
There
shall not have occurred a Company Material Adverse Effect since the date of
this
Agreement.
49
(g) Certain
Relationships.
Neither
Seller nor the Company shall have received any notice that any of the parties
identified in Section 9.3(g) of the Company Disclosure Schedule has terminated
or intends to terminate or materially reduce by more than 50% its dollar volume
of business with the Company and the Subsidiaries from the dollar volume of
business with the Company during the period of twelve (12) months ending on
the
date of this Agreement and such termination or material reduction shall be
solely for reasons related to the prior business performance of the Company
or
Subsidiary and not in any part due to existence of this Agreement and the
Ancillary Agreements or any of the transactions contemplated by such Agreements
or to actions by Buyer.
(h) Officer's
Certificate.
Seller
and the Company shall have delivered to Buyer a certificate, dated as of the
Closing Date, executed by officers of Seller and the Company, certifying the
fulfillment of the conditions specified in Sections 9.3(a) through
9.3(g).
ARTICLE
X
TERMINATION
10.1 Termination.
This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned:
(a) at
any
time, by mutual written agreement of Seller and Buyer;
(b) at
any
time after February 29, 2008, by either Seller or Buyer upon three Business
Days' prior written notice to the other party, if the Closing shall not have
occurred for any reason other than a breach of this Agreement by the terminating
party;
(c) by
Buyer,
if there has been a violation or breach by Seller or the Company of any
agreement, representation or warranty contained in the Agreement, which has
rendered the satisfaction of the conditions in Section 9.3(a) or 9.3(b)
impossible and such violation or breach has not been waived by
Buyer;
(d) by
Seller, if there has been a violation or breach by Buyer of any agreement,
representation or warranty contained in the Agreement, which has rendered the
satisfaction of the conditions in Section 9.2(a) or 9.2(b) impossible and such
violation or breach has not been waived by Seller; or
(e) by
either
Buyer or Seller if a court of competent jurisdiction shall have issued an Order
permanently restraining or prohibiting the transactions contemplated by the
Agreement, and such Order shall have become final and
non-appealable.
50
10.2 Procedure
and Effect of Termination.
In the
event of the termination of this Agreement and the abandonment of the
transactions contemplated hereby pursuant to Section 10.1, this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned
without further action by Seller, the Company or Buyer. If this Agreement is
terminated pursuant to Section 10.1:
(a) Buyer
shall return all documents, work papers and other materials (and all copies
thereof) obtained from Seller or the Company relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same, and all confidential information received
by
Buyer with respect to the Company shall be treated in accordance with
Section 6.3 and the Confidentiality Agreement referred to in such
Section;
(b) The
obligations provided for in Section 6.7,
this
Section 10.2 and Section 12.8, the confidentiality provision contained
in Section 6.3 and the Confidentiality Agreement referred to in such
Section shall survive any such termination of this Agreement; and
(c) Notwithstanding
anything in this Agreement to the contrary, the termination of this Agreement
shall not relieve any party from liability for willful breach of this
Agreement.
ARTICLE
XI
SURVIVAL
OF REPRESENTATIONS AND COVENANTS; INDEMNIFICATION
11.1 Survival
of Representations and Covenants.
The
representations and warranties and covenants in this Agreement shall survive
the
Closing as follows:
(a) the
representations and warranties in Sections
3.1,
3.3, 4.1, 4.2, and 5.1 shall survive the Closing indefinitely;
(b) the
representations and warranties in Section 4.12 shall survive the Closing and
will not terminate until 30 calendar days after the expiration of the statute
of
limitations applicable to the matters covered thereby;
(c) the
representations and warranties in Section 4.9, 4.11 and 4.17 shall survive
the
Closing and will not terminate until the fifth anniversary after the Closing
Date;
(d) all
other
representations and warranties contained in this Agreement shall survive the
Closing and will not terminate for 18 months following the Closing Date;
and
51
(e) the
covenants and agreements of the parties hereto contained in this Agreement
shall
survive until they are fully performed or, if earlier, until the expiration
thereof set forth in the terms of such covenant and agreement.
Notwithstanding
the foregoing, if on or prior to the expiration of the applicable survival
period described above a notice of claim shall have been given to the
indemnifying party pursuant to Section 11.6 or 11.7, the indemnified party
shall
continue to have the right to be indemnified with respect to the matter or
matters to which such claim relates until such claim for indemnification has
been satisfied or otherwise resolved.
11.2 Seller's
Agreement to Indemnify.
Upon
the terms and subject to the conditions of this Article XI, Seller shall
indemnify, defend and hold harmless Buyer and its officers, directors,
employees, agents and affiliates (including the Company, from and after the
Closing) at any time after the Closing, from and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities,
dimunition in value, lost profits, costs and expenses, including, without
limitation, interest, penalties and reasonable attorneys' fees and expenses
(collectively, "Damages") asserted against, resulting to, imposed upon or
incurred by Buyer or such other persons by reason of or resulting from (i)
(A) a
breach of any representation or warranty of Seller or the Company contained
in
or made pursuant to this Agreement (other than those contained in Section 4.12
in respect of Taxes) or (B) a breach of any representation or warranty of Seller
or the Company contained in Sections 3.4, 4.5, 4.10, 4.16 or 4.17(a)(ii),
modified for purposes of this clause (B) to be brought down to the Closing
Date
(i.e., all references to "as of the date hereof" in any such section shall
be
ignored for purposes of determining whether the representation or warranty
in
such section has been breached for purposes of this Section 11.2 and Section
11.3); (ii) (A) any financial penalty, monetary penalty or monetary liability
(whether or not imposed solely on the Company and the Subsidiaries) or (B)
any
business conduct restriction that is imposed solely on the Company and the
Subsidiaries, in each case arising from or relating to the matters identified
in
Section 11.2(ii) of the Company Disclosure Schedule, and in each case whether
imposed by a Governmental Authority, voluntarily agreed to as part of a
settlement with any person or rendered as a judgment in any civil action, but,
in the case of settlements only to the extent that Seller has consented in
writing to such settlement, such consent not to be unreasonably withheld; (iii)
the conduct of the individuals set forth in Section 11.2(iii) of the Company
Disclosure Schedule while they were employees of the Company or any Subsidiaries
and the termination of employment of such individuals by the Company; (iv)
other
than such for which indemnification is provided in Section 7.6, non-fulfillment
of any agreement or covenant of Seller or the Company contained in or made
pursuant to this Agreement; or (v) any worker's compensation claim or action
or
any other claim or action in respect of insured losses solely to the extent
such
claim or action relates to or arises out of events occurring prior to the
Closing Date (collectively, "Buyer Claims").
The
parties agree that Buyer Claims under Section 11.2(v) shall constitute
Third-Party Claims for purposes and subject to the requirements of Section
11.7(c)(B).
11.3 Seller's
Limitation of Liability.
Any
provision in this Agreement to the contrary notwithstanding, the liability
of
Seller to indemnify Buyer pursuant to Section 11.2(i) against any Damages
sustained by reason of any Buyer Claim shall be limited to Buyer Claims as
to
which Buyer has given Seller written notice in accordance with Section 11.6
or
11.7 on or prior to the date on which the related survival period expires under
Section 11.1; provided,
however,
that
such indemnification pursuant to Section 11.2(i) shall be effective only after
the aggregate amount of all such Buyer Claims for which Seller is liable
pursuant to such indemnification exceeds $1,000,000 (the "Threshold"), in which
case Seller shall indemnify Buyer from the first dollar; provided further that
in no event shall the aggregate amount of all Buyer Claims for which Seller
is
liable pursuant to any indemnification pursuant to Article XI hereof exceed
30%
of the Purchase Price.
52
11.4 Buyer's
Agreement to Indemnify.
Upon
the terms and subject to conditions of this Article XI, Buyer shall indemnify,
defend and hold harmless Seller and its officers, directors, employees, agents
and affiliates, at any time after the Closing, from and against all Damages
asserted against, resulting to, imposed upon or incurred by Seller or such
other
persons by reason of or resulting from (i) a breach of any representation or
warranty of Buyer contained in or made pursuant to this Agreement; or (ii)
other
than such for which indemnification is provided in Section 7.7, non-fulfillment
of any agreement or covenant of Buyer (collectively, "Seller
Claims").
11.5 Buyer's
Limitation of Liability.
Any
provision in this Agreement to the contrary notwithstanding, the liability
of
Buyer to indemnify Seller pursuant to Section 11.4 against any Damages sustained
by reason of any Seller Claim shall be limited to Seller Claims as to which
Seller has given Buyer written notice thereof in accordance with Section 11.6
or
11.7 on or prior to the date on which the related survival period expires under
Section 11.1.
11.6 Procedures
for Indemnification.
If an
indemnified party shall desire to assert any claim for indemnification provided
for under this Article XI other than a claim in respect of, arising out of
or
involving a Third-Party Claim, such indemnified party shall notify the
indemnifying party in writing in reasonable detail (taking into account the
information then available to such indemnified party) of such claim promptly
after becoming aware of the existence of such claim; provided
that the
failure to give such notification shall not affect the indemnification provided
for hereunder except to the extent the indemnifying party shall have been
materially and actually prejudiced by such failure. If the indemnifying party
does not respond to such notice within 30 days after its receipt, it will have
no further right to contest the validity of such claim.
11.7 Conditions
of Indemnification With Respect to Third-Party Claims.
The
obligations and liabilities of Seller and Buyer with respect to Buyer Claims
and
Seller Claims, respectively, which arise or result from claims for Damages
made
by third parties ("Third-Party Claims") shall be subject to the following terms
and conditions:
(a) The
indemnified party will give the indemnifying party prompt notice of any such
Third-Party Claim, setting forth therein in reasonable detail the basis for
such
Third-Party Claim, and the indemnifying party shall have the right to undertake
the defense thereof by counsel chosen by it and reasonably satisfactory to
the
indemnified party, provided,
that
failure to provide such prompt notice shall not affect the indemnifying party's
obligations hereunder, except to the extent that the indemnifying party is
materially and actually prejudiced by such failure; and provided,
further,
that
the indemnified party will reasonably cooperate with the indemnifying party
in
defending such Third Party Claim. If the indemnifying party undertakes such
defense, the indemnified party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense.
53
(b) If
the
indemnifying party, within a reasonable time after notice of any such
Third-Party Claim, fails to defend the indemnified party against which such
Third-Party Claim has been asserted, the indemnified party shall (upon further
notice to the indemnifying party) have the right to undertake the defense,
compromise or settlement of such Third-Party Claim for the account and risk
of
the indemnifying party; and
(c) Any
provision in this Article XI to the contrary notwithstanding, (A) if there
is a
reasonable probability that a Third-Party Claim may materially and adversely
affect the indemnified party other than as a result of money damages or other
money payments, the indemnified party shall have the absolute right, at its
own
cost and expense, to defend, compromise or settle such Third-Party Claim;
provided,
however,
that if
such Third-Party Claim is settled without the indemnifying party's consent,
the
indemnified party shall be deemed to have waived all rights hereunder against
the indemnifying party for money damages arising out of such Third-Party Claim;
and (B) the indemnifying party shall not, without the written consent of the
indemnified party, settle or compromise any Third-Party Claim or consent to
the
entry of any judgment which (i) does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the indemnified party
a
release from all liability in respect to such Third-Party Claim, (ii) subjects
the indemnified party to any injunctive relief or other equitable remedy or
(iii) includes a statement or admission of fault, culpability or failure to
act
by or on behalf of any indemnified party.
11.8 Net
Payments.
(a) Any
indemnification payable pursuant to this Article XI shall be net of any amounts
actually recovered (after deducting related costs and expenses) by the
indemnified party for the Damages for which such indemnification payment is
made, under any warranty or indemnity from any third party.
(b) If
the
indemnified party determines not to pursue any such recovery, the indemnified
party shall promptly so notify the indemnifying party, and the indemnifying
party (in its name or in the name of the indemnified party) shall be entitled
to
pursue such recovery directly and the indemnified party shall use reasonable
efforts to cooperate with the indemnifying party in its pursuit of such
recovery, provided
that (x)
such recovery shall not unreasonably interfere with the operation of the
business of the indemnified party and (y) the indemnifying party shall defend,
indemnify and hold harmless the indemnified party from and against, and shall
pay or reimburse the indemnified party for, any Damages which it may incur
or to
which it may be subjected, resulting from or arising out of or otherwise based
upon the indemnifying party's efforts to pursue any such recovery.
54
11.9 Sole
Remedy.
Buyer
acknowledges and agrees that its sole and exclusive remedy with respect to
any
and all claims, including, without limitation, Buyer Claims (whether Third-Party
Claims or otherwise), relating to the subject matter of this Agreement shall
be
pursuant to the provisions set forth in this Article XI other than in the event
of actual fraud. In furtherance of the foregoing, Buyer hereby waives, to the
fullest extent permitted under Applicable Law, any and all rights, claims and
causes of action it may have against Seller or the Company arising under any
federal, state, local or foreign statute, law, ordinance, rule or regulation
(including, without limitation, any such right, claim or cause of action arising
under or based upon common law or otherwise) other than in the event of actual
fraud.
11.10 Environmental
Indemnification.
In
addition to Seller's obligations set forth in Section 11.2, Seller shall defend,
indemnify and hold harmless Buyer and its officers, directors, employees, agents
and affiliates (including the Company, from and after the Closing) at any time
after the Closing, from any (i) actions required under applicable Environmental
Laws (including the Connecticut State Transfer Act) relating to the
investigation, remediation, monitoring, closure and post-closure obligations
for
environmental conditions existing prior to the Closing Date at the Barkhamsted
Site, the Bloomfield Warehouse, the Ovation Site, or any property that Seller,
the Company or any Subsidiary formerly owned or operated (collectively, the
"Environmental Indemnity Sites"), (ii) fines, charges, penalties or other
regulatory assessments incurred for any non-compliance with any Environmental
Laws resulting from any environmental conditions at the Environmental Indemnity
Sites that existed as of the Closing Date, and (iii) Damages arising from
alleged human exposure to Hazardous Substances at the Environmental Indemnity
Sites prior to the Closing Date. Notwithstanding the foregoing, claims made
under this Section 11.10 shall be subject to the provisions of Article XI,
including, without limitation, Sections 11.3, 11.6 and 11.7, except that the
Threshold described in Section 11.3 shall not apply. Any remedial or other
actions conducted hereunder shall employ the most cost-effective, commercially
reasonable methods which may include, where applicable, commercial or industrial
cleanup standards, deed restrictions, institutional controls, natural
attenuation and risk assessments.
11.11 Exclusive
Remedy for Taxes.
The
foregoing provisions of this Article XI shall not apply to indemnification
with
respect to Taxes, which shall be governed solely by Article VII.
11.12 Tax
Treatment.
All
indemnity payments made pursuant to Article VII and this Article XI shall be
treated as an adjustment to Purchase Price for all tax purposes. Any such
payment made to an indemnified party pursuant to this Agreement shall be
reduced, but not below zero, by an amount equal to the present value of any
tax
benefits net of the present value of any tax detriments realized by such
indemnified party by reason of the liability giving rise to the payment or
by
reason of such indemnity payment. The present value of tax benefits or tax
detriments projected to be allowed in years subsequent to such liability shall
be determined by discounting such tax benefits or tax detriments, as the case
may be, back from the end of each year in which such benefits or detriments
are
projected to be allowed (or incurred) to the end of the year of such liability,
using an annual discount rate of 6.5%.
55
ARTICLE
XII
MISCELLANEOUS
12.1 Further
Assurances.
From
time to time after the Closing Date, at the request of the other party hereto
and at the expense of the party so requesting, Seller and Buyer shall execute
and deliver to such requesting party such documents and take such other action
as such requesting party may reasonably request in order to consummate the
transactions contemplated hereby.
12.2 Notices.
All
notices, requests, demands, waivers and communications required or permitted
to
be given under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered (i) by hand (including by reputable overnight
courier), (ii) by mail (certified or registered mail, return receipt requested)
or (iii) by telecopy facsimile transmission (receipt of which is
confirmed):
(a) If
to
Buyer, to:
Fender
Musical Instruments Corporation
0000
X.
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxxx
with
a
copy (which shall not constitute notice) to:
Xxxxxxxx
& Xxxxxxxx LLP
0000
Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxxx, Esq.
(b) If
to
Seller, to:
Kaman
Corporation
0000
Xxxx
Xxxxx Xxxxxx
Xxxxxxxxxx,
Xxxxxxxxxxx 00000
Email:
Xxxxxxx.Xxxxx@xxxxx.xxx
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxx, Esq.
56
with
a
copy (which shall not constitute notice) to:
Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx
Xxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Email:
XXxxx@xxxxxxx.xxx
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxx, Esq.
or
to
such other person or address as any party shall specify by notice in writing
to
the other party. All such notices, requests, demands, waivers and communications
shall be deemed to have been given (i) on the date on which so hand-delivered,
(ii) on the third Business Day following the date on which so mailed and (iii)
on the date on which telecopied and confirmed, provided
that a
copy is also sent by certified or registered mail, except for a notice of change
of address, which shall be effective only upon receipt thereof.
12.3 Amendment,
Modification and Waiver.
This
Agreement may be amended, modified or supplemented at any time by written
agreement of the parties hereto. Any failure of Seller or the Company, on the
one hand, or Buyer, on the other hand, to comply with any term or provision
of
this Agreement may be waived by the Buyer or Seller, respectively, at any time
by an instrument in writing signed by or on behalf of such party, but such
waiver shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure to comply. No delay on the part of Seller or Buyer
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
12.4 Entire
Agreement.
This
Agreement, the Seller Disclosure Schedule, the Company Disclosure Schedule
and
the exhibits, schedules and other documents referred to herein which form a
part
hereof (including, without limitation, the Confidentiality Agreement referred
to
in Section 6.3 hereof) contain the entire understanding of the parties hereto
with respect to the subject matter hereof. This Agreement supersedes all prior
agreements and understandings, oral and written, with respect to the subject
matter hereof.
12.5 Severability.
Should
any provision of this Agreement for any reason be declared invalid or
unenforceable, such decision shall not affect the validity or enforceability
of
any of the other provisions of this Agreement, which other provisions shall
remain in full force and effect and the application of such invalid or
unenforceable provision to persons or circumstances other than those as to
which
it is held invalid or unenforceable shall be valid and be enforced to the
fullest extent permitted by law.
12.6 Binding
Effect; Assignment.
This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the parties hereto and their respective heirs, executors,
successors and permitted assigns, but except as contemplated herein, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned, directly or indirectly, by Seller or the Company, on the one hand,
and Buyer, on the other hand, without the prior written consent of Buyer or
Seller, respectively, except that Buyer may assign its right to purchase the
Shares to any wholly owned subsidiary of Buyer, but no such assignment shall
relieve Buyer of its obligations hereunder.
57
12.7 No
Third-Party Beneficiaries.
Except
as expressly provided otherwise in this Agreement, this Agreement is not
intended and shall not be deemed to confer upon or give any person except the
parties hereto and their respective successors and permitted assigns any remedy,
claim, liability, reimbursement, cause of action or other right under or by
reason of this Agreement.
12.8 Fees
and Expenses.
Except
as otherwise specifically provided in this Agreement or whether or not the
transactions contemplated hereby are consummated pursuant hereto, each of
Seller, the Company and Buyer shall pay all fees and expenses incurred by it
or
on its behalf in connection with this Agreement, and the consummation of the
transactions contemplated hereby.
12.9 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
12.10 Interpretation.
The
Article and Section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the parties and shall
not
in any way affect the meaning or interpretation of this Agreement.
12.11 Forum.
Any
legal suit, action or proceeding brought by Seller or Buyer, or any of their
respective Affiliates, arising out of or based upon this Agreement shall be
instituted in any federal or state court in New York, and each of Seller and
Buyer (on its behalf and on behalf of its subsidiaries) waives any objection
which it may now or hereafter have to the laying of venue of any such
proceeding, and irrevocably submits to the jurisdiction of such courts in any
such suit, action or proceeding.
12.12 Governing
Law.
This
Agreement shall be governed by the laws of the State of New York, without regard
to the principles of conflicts of law thereof.
12.13 Certain
Defined Terms.
(a) As
used
in this Agreement, the following terms shall have the following respective
meanings:
"affiliate"
or "Affiliate" means, with respect to any person, a person that directly or
indirectly through one or more intermediaries, controls, is controlled by,
or is
under common control with such person.
58
"Agreement"
shall have the meaning ascribed to such term in the Preamble
hereof.
"Allocation
Schedules" shall have the meaning ascribed to such term in Section
7.8(b).
"Ancillary
Agreement" means each of the Transition Services Agreement, the Bloomfield
Real
Estate Lease, the Trademark Assignment Agreement and the Trademark License
Agreement.
"Applicable
Law" shall have the meaning ascribed to such term in Section
3.2(a).
"Audited
Financial Statements" shall have the meaning ascribed to such term in Section
6.2.
"Balance
Sheet" shall have the meaning ascribed to such term in Section
4.4(a).
"Base
Amount" shall have the meaning ascribed to such term in Section
1.2(a).
"Barkhamsted
Site" means the Barkhamsted-New Hartford Landfill Superfund Site located in
Barkhamsted, Connecticut.
"Bloomfield
Real Estate" means the land and buildings located at Old Windsor Road in
Bloomfield, Connecticut.
"Bloomfield
Real Estate Lease" shall have the meaning ascribed to such term in Section
8.4.
"Business
Day" means any day other than Saturday, Sunday or any other day on which banks
in the City of New York are required or permitted to close.
"Buyer"
shall have the meaning ascribed to such term in the Preamble
hereof.
59
"Buyer
Benefits" shall have the meaning ascribed to such term in Section
7.6.
"Buyer
Claims" shall have the meaning ascribed to such term in Section
11.2.
"Buyer
Indemnified Parties" shall have the meaning ascribed to such term in Section
2.3(d).
"Buyer's
401(k) Plan" shall have the meaning ascribed to such term in Section
8.1(c).
"Cash"
shall mean the cash, cash equivalents and marketable securities of the Company
and the Subsidiaries on a consolidated basis, excluding in each case amounts
representing Inter-company Accounts.
"Changes"
shall have the meaning ascribed to such term in Section 7.7.
"Closing"
shall have the meaning ascribed to such term in Section 1.1.
"Closing
Cash" shall have the meaning ascribed to such term in Section
1.2(c)(i).
"Closing
Date" shall have the meaning ascribed to such term in Section 1.3.
"Closing
Indebtedness" shall have the meaning ascribed to such term in Section
1.2(c)(i).
"Closing
Inter-company Balances" shall have the meaning ascribed to such term in Section
1.2(d)(i).
"Closing
Net Working Capital" shall have the meaning ascribed to such term in Section
1.2(b)(ii).
"Code"
shall have the meaning ascribed to such term in Section 4.11(c).
60
"Company"
shall have the meaning ascribed to such term in the Preamble
hereof.
"Company
Disclosure Schedule" shall have the meaning ascribed to such term in Article
IV
hereof.
"Company
Material Adverse Effect" shall have the meaning ascribed to such term in Section
4.5.
"Company
Plan" and "Company Plans" shall have the meaning ascribed to such terms in
Section 4.11(a).
"Confidentiality
Agreement" shall have the meaning ascribed to such term in Section
6.3(b).
"Connecticut
State Transfer Act" shall mean Sections 22a-134 through 22a-134e of the
Connecticut General Statutes.
"Consent"
shall have the meaning ascribed to such term in Section 3.2(b).
"Contracts"
shall have the meaning ascribed to such term in Section 3.2(a).
"control"
(including the terms "controlled by" and "under common control with") means
the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract or credit arrangement, as trustee or executor,
or otherwise.
"Copyrights"
means published and unpublished works of authorship, whether copyrightable
or
not (including without limitation databases and other compilations of
information, mask works and semiconductor chip rights, computer and electronic
data processing programs, operating programs and software, both source code
and
object code, flow charts, diagrams, descriptive texts and programs, computer
print-outs, underlying tapes, computer databases and similar items), copyrights
therein and thereto, and registrations and applications therefor, and all
renewals, extensions, restorations and reversions thereof.
"Damages"
shall have the meaning ascribed to such term in Section 11.2.
61
"Deductible"
shall have the meaning ascribed to such term in Section 7.7(b).
"Dispute"
shall have the meaning ascribed to such term in Section 8.5(a).
"DOJ"
shall have the meaning ascribed to such term in Section 6.6.
"Enforceability
Exceptions" shall have the meaning ascribed to such term in Section
3.1.
"Environmental
Claim" means any claim, action, investigation or written notice by any person
or
entity alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, personal injuries, or penalties) arising out of,
based
on, or resulting from (a) the alleged presence, or release into the environment,
of any Hazardous Substance (as hereinafter defined) at any location, whether
or
not owned or operated by the Company or any Subsidiary or (b) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.
"Environmental
Indemnity Site" shall have the meaning ascribed to such term in Section
11.10(a).
"Environmental
Law" means all federal, state, local and foreign laws, regulations and common
law standards of conduct relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of, or any exposure to, Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances; provided, that for purposes
of
Section 4.17, the foregoing shall only be as in effect and as interpreted by
the
relevant Governmental Authority as of the date hereof.
"ERISA"
and "ERISA Affiliate" shall have the meanings ascribed to such terms in Section
4.11(a).
"Estimated
Closing Cash" shall have the meaning ascribed to such term in Section
1.2(b)(i).
"Estimated
Closing Net Working Capital" shall have the meaning ascribed to such term in
Section 1.2(b)(i).
62
"Estimated
Net Working Capital Adjustment" shall have the meaning ascribed to such term
in
Section 1.2(b)(i).
"Exchange
Act" shall have the meaning ascribed to such term in Section
3.2(b).
"Final
Closing Cash" shall have the meaning ascribed to such term in Section
1.2(c)(ii).
"Final
Closing Indebtedness" shall have the meaning ascribed to such term in Section
1.2(c)(ii).
"Final
Closing Inter-company Balances" shall have the meaning ascribed to such term
in
Section 1.2(d)(ii).
"Final
Net Working Capital" shall have the meaning ascribed to such term in Section
1.2(b)(iii).
"Financial
Statements" shall have the meaning ascribed to such term in Section
4.4(a).
"Foreign
Antitrust Approvals" shall have the meaning ascribed to such term in Section
3.2(b).
"FTC"
shall have the meaning ascribed to such term in Section 6.6.
"GAAP"
shall have the meaning ascribed to such term in Section 4.4(a).
"Governmental
Authority" shall have the meaning ascribed to such term in Section
3.2(b).
"Hazardous
Substance" means chemicals, pollutants, contaminants, hazardous wastes, toxic
substances, hazardous substance, and oil and petroleum products, the use of
which by the Company or any Subsidiary is regulated under applicable
Environmental Laws.
"HSR
Act"
shall have the meaning ascribed to such term in Section 3.2(b).
63
"Immaterial
Copyrights" shall have the meaning ascribed to such term in Section
4.9(b).
"Income
Tax" shall have the meaning ascribed to such term in Section
4.12(j)(iii).
"Income
Tax Return" shall have the meaning ascribed to such term in Section
4.12(j)(iv).
"Indebtedness"
shall mean the indebtedness for borrowed money of the Company and the
Subsidiaries on a consolidated basis, excluding any amounts representing
Inter-company Accounts.
"Indemnification
Statement" shall have the meaning ascribed to such term in Section
7.4(c).
"Independent
Accounting Firm" shall have the meaning ascribed to such term in Section
1.2(b)(iii).
"Intellectual
Property" means Trademarks, Patents, Copyrights, Trade Secrets and all other
intellectual property, industrial or proprietary rights, and all copies and
tangible embodiments of any or all of the foregoing (in whatever form or medium,
including electronic media).
"Inter-company
Accounts" shall have the meaning ascribed to such term in Section
2.1.
"IRS"
shall have the meaning ascribed to such term in Section 4.11(c).
"IT
Assets" means the computers, computer software, firmware, middleware, servers,
workstations, routers, hubs, switches, data communications lines, and all other
information technology equipment, and all associated documentation used in
the
business of the Company and the Subsidiaries.
"Kaman
Employees" shall have the meaning ascribed to such term in Section
8.1(a).
64
"Kaman
Pension Plan" means the Kaman Corporation Employees' Pension Plan as in effect
on the Closing Date.
"knowledge
of Seller" means the actual knowledge, after reasonable inquiry of the employees
of the Company, of the following individuals: Xxxxxx Xxxxxx, Xxxxxxxx Xxxx,
Xxxx
Xxxxxxx, Xxxx Xxxxx, Xxxx Xxxxx, Xxxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxx,
Xxx
Xxxxxxxxxxx, Xxxxxx Xxxxxx, Xxxx Xxxxxxxxx, Xxxxxx Xxxx, Xxxx Xxxx, Xxx Xxxxxxx,
Xxxxxxx Xxxxx, Xxxxxx Xxxxx and Xxxxx Xxxxxxxx.
"Liabilities"
shall have the meaning ascribed to such term in Section 4.6.
"License"
shall have the meaning ascribed to such term in Section 2.3(b).
"Licensed
Xxxx" shall have the meaning ascribed to such term in Section
2.3(b).
"Licensee"
shall have the meaning ascribed to such term in Section 2.3(b).
"Lien"
means any mortgage, pledge, deed of trust, lien (including, without limitation,
environmental and tax liens), hypothecation, charge, claim, security interest,
title defect, encumbrance, burden, charge or other similar restriction, lease,
sublease, claim, title retention agreement, preferential arrangement, option,
easement, covenant, encroachment or other adverse claim of any kind, including
without limitation any restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership.
"Material
Contract" shall have the meaning ascribed to such term in Section
4.13(a).
"Music
Business" means the business heretofore conducted by the Company and the
Subsidiaries, as such business may develop in the ordinary course, including
without limitation the wholesale and retail businesses of marketing, promoting,
designing, manufacturing, selling, buying and distributing music, musical
instruments and accessories, and the products and services ancillary or related
thereto.
"Negotiation
Period" shall have the meaning ascribed to such term in Section
8.5(a).
65
"Net
Working Capital" shall have the meaning ascribed to such term in Section
1.2(b)(i).
"Non
Income Tax" shall have the meaning ascribed to such term in Section
4.12(j)(v).
"Non-Income
Tax Claims" shall have the meaning ascribed to such term in Section
7.6(b).
"Non-U.S.
Plans" shall have the meaning ascribed to such term in Section
4.11(a).
"Order"
shall have the meaning ascribed to such term in Section 3.2(a).
"Ovation
Site" shall mean the leased property at 00 Xxxxxxxxxx Xxxx in New Hartford,
Connecticut.
"Owned
Intellectual Property" shall have the meaning ascribed to such term in Section
4.9(c).
"Patents"
means inventions and discoveries (whether patentable or unpatentable and whether
or not reduced to practice), all improvements thereto, all patents (including
utility and design patents, industrial designs and utility models),
registrations, invention disclosures and applications therefor, including
divisions, revisions, supplementary protection certificates, continuations,
continuations-in-part and renewal applications, and including renewals,
extensions, reissues and re-examinations thereof.
"PBGC"
means the Pension Benefits Guaranty Corporation.
"Permitted
Liens" shall have the meaning ascribed to such term in Section 4.7.
"person"
means an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization or a government
or
any department or agency thereof.
66
"Personal
Property" shall have the meaning ascribed to such term in Section
4.7.
"Plan"
and "Plans" shall have the meaning ascribed to such terms in Section
4.11(a).
"Pre-Closing
Period" shall have the meaning ascribed to such term in Section
7.1(a).
"Prior
Period Income Tax Returns" shall have the meaning ascribed to such term in
Section 7.4(a).
"Purchase
Price" shall have the meaning ascribed to such term in Section
1.2(a).
"Real
Estate Permitted Liens" shall have the meaning ascribed to such term in Section
4.8(b).
"Real
Property" shall have the meaning ascribed to such term in
Section4.8(a).
"Resolution
Period" shall have the meaning ascribed to such term in Section
1.2(b)(iii).
"Scheduled
Intellectual Property" shall have the meaning ascribed to such term in Section
4.9(a).
"Section
338(h)(10) Elections" shall have the meaning ascribed to such term in Section
7.8(a).
"Seller"
shall have the meaning ascribed to such term in the Preamble
hereof.
"Seller
Claims" shall have the meaning ascribed to such term in Section
11.4.
67
"Seller
Disclosure Schedule" shall have the meaning ascribed to such term in Article
III
hereof.
"Seller
Group" shall have the meaning ascribed to such term in Section
7.1(b).
"Seller
Indemnified Parties" shall have the meaning ascribed to such term in Section
2.3(c).
"Seller's
Thrift Plan" shall have the meaning ascribed to such term in Section
8.1(c).
"Shares"
shall have the meaning ascribed to such term in the Recitals
hereof.
"Straddle
Period" shall have the meaning ascribed to such term in Section
7.1(c).
"Straddle
Period Returns" shall have the meaning ascribed to such term in Section
7.4(b).
"Subsidiary"
shall have the meaning ascribed to such term in Section 4.1(a).
"Subsidiary
Employee" shall have the meaning ascribed to such term in Section
8.1(a).
"Subsidiary
Shares" shall have the meaning ascribed to such term in Section
4.2(a).
"Target
Net Working Capital" shall have the meaning ascribed to such term in Section
1.2(b)(i).
"Tax"
and
"Taxes" shall have the meaning ascribed to such terms in Section
4.12(j)(i).
68
"Tax
Benefit" shall have the meaning ascribed to such term in Section
7.1(d).
"Tax
Return" shall have the meaning ascribed to such term in Section
4.12(j)(ii).
"Third-Party
Claims" shall have the meaning ascribed to such term in Section
11.7.
"Threshold"
shall have the meaning ascribed to such term in Section 11.3.
"Trademark
Assignment Agreement" shall have the meaning ascribed to such term in Section
8.4.
"Trademark
License Agreement" shall have the meaning ascribed to such term in Section
8.4.
"Trademarks"
means trademarks, service marks, certification marks, collective marks, Internet
domain names, logos, product names and slogans, symbols, trade dress, assumed
names, fictitious names, trade names, d/b/a's, brand names, business names,
and
any and every other form of trade identity and other indicia of origin, all
applications and registrations for the foregoing, and all goodwill associated
therewith and symbolized thereby, including all renewals of same.
"Trade
Secrets" means trade secrets, confidential business and technical information
and any other confidential information (including ideas, research and
development, know-how, formulae, drawings, prototypes, models, designs,
technology, compositions, manufacturing, production and other processes and
techniques, schematics, technical data, engineering, production and other
designs, drawings, engineering notebooks, industrial models, software and
specifications, business methods, customer lists and supplier lists, and any
other information meeting the definition of a trade secret under the Uniform
Trade Secrets Act).
"Transition
Services Agreement" shall have the meaning ascribed to such term in Section
8.4.
"URL"
shall have the meaning ascribed to such term in Section 2.3(e).
00
"XXXX
Xxx" shall have the meaning ascribed to such term in Section 4.16.
(b) Other
terms may be defined elsewhere in this Agreement and, unless otherwise
indicated, shall have such meanings throughout this Agreement.
[SIGNATURE
PAGE FOLLOWS]
70
IN
WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement
as of the day and year first above written.
KAMAN CORPORATION | ||
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By: | ||
Name: |
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Title: |
KAMAN MUSIC CORPORATION | ||
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By: | ||
Name: |
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Title: |
FENDER MUSICAL INSTRUMENTS CORPORATION | ||
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By: | ||
Name: |
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Title: |
71
EXHIBIT
A
KAMAN
MUSIC CORPORATION’S
CERTIFICATION OF NON-FOREIGN STATUS
Section
1445 of the Internal Revenue Code of 1986, as amended (the “Code”),
provides that a transferee of a U.S. real property interest must withhold tax
if
the transferor is a foreign person. For U.S. tax purposes (including section
1445 of the Code), the owner of a disregarded entity (which has legal title
to a
U.S. real property interest under local law) will be the transferor of the
property and not the disregarded entity. To inform the transferee, Fender
Musical Instruments Corporation, a Delaware corporation (the “Transferee”),
that
withholding of tax is not required upon the disposition of a U.S. real property
interest by Kaman Music Corporation, a Connecticut corporation (the
“Transferor”),
the
undersigned hereby certifies the following on behalf of Transferor:
1.
|
Transferor
is not a foreign corporation, foreign partnership, foreign trust
or
foreign estate (as those terms are defined in the Code and U.S. Treasury
Regulations (the “Income
Tax Regulations”));
|
2.
|
Transferor
is not a disregarded entity as defined in §1.1445-2(b)(2)(iii) of the
Income Tax Regulations;
|
3.
|
The
U.S. employer identification number of Transferor is 00-0000000;
and
|
4. |
The
office address of Transferor is:
Kaman
Music Corporation
00
Xxx Xxxxxxx Xxxx
Xxxxxxxxxx,
XX 00000
|
Transferor understands
that this certification may be disclosed to the Internal Revenue Service by
the
Transferees and that any false statement contained herein could be punished
by
fine, imprisonment, or both.
Under
penalties of perjury I declare that I have examined this certification and
to
the best of my knowledge and belief it is true, correct, and complete, and
I
further declare that I have authority to sign this document on behalf of
Transferor.
By:
|
||
|
||
Name:
|
||
|
||
Title:
|
||
|
||
Date:
|
||
|
EXHIBIT
B
TRANSITION
SERVICES AGREEMENT
THIS
TRANSITION
SERVICES AGREEMENT (this “Agreement”) is made and entered into this _______ day
of __________, 2007, between KAMAN CORPORATION, a Connecticut corporation
(“Seller”), FENDER MUSICAL INSTRUMENTS CORPORATION, a Delaware corporation
(“Buyer”), and KAMAN MUSIC CORPORATION, a Connecticut corporation (the
“Company”).
WITNESSETH:
WHEREAS,
Seller and Buyer have entered into a Stock Purchase Agreement, dated as of
October 27, 2007 (the “Purchase Agreement”), pursuant
to which, at the Closing, Seller has agreed to sell and transfer the Shares
of
the Company to Buyer, and Buyer has agreed to purchase the Shares of the
Company;
WHEREAS,
Seller currently provides certain services to the Company;
WHEREAS,
in order to assist in the transition of the Music Business to Buyer after
the
Closing, upon the terms and subject to the conditions set forth in this
Agreement, Buyer desires to have the Company receive from Seller, and Seller
shall provide, or shall cause to be provided, certain transition services
as set
forth herein to the Company; and,
WHEREAS,
Buyer and the Company acknowledge that Seller is not in the business of
providing the transition services set forth in this Agreement to third parties
and that such services shall be provided by Seller at Buyer's request and
solely
to accommodate Buyer and the Company during the transitional period after
the
Closing so as to maintain the continuity of the business of the Company and
to
enable to the Company to establish stand-alone status without continued reliance
upon the services of the Seller (“Transition”).
NOW
THEREFORE, in consideration of the foregoing
and the representations, warranties, covenants and agreements
herein
contained, the Parties, intending to be legally bound, hereby agree as
follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Definitions.
Capitalized
terms used but not defined in this Agreement shall have the respective meanings
ascribed to such terms in the Purchase Agreement, except as expressly provided
herein.
Section
1.2 "Disengagement
Assistance" means the reasonable assistance provided by Seller to facilitate
the
orderly transfer of the Services to Buyer or its designee.
ARTICLE
II
SERVICES
Section
2.1 Scope
of Services.
During
the Term (as defined below) and subject to the provisions of this
Agreement,
Seller
will
provide to the Company, or cause to be provided to the Company, the services
listed in Schedule 2.1 hereto (the "Services" and each of them, individually,
a
"Service").
Section
2.2 Service
Standards; Level of Service.
Seller
shall perform the Services with at least the same degree and at the same
level
of accuracy, quality, completeness, responsiveness and efficiency as provided
before the Closing Date (the "Service Standards").
Section
2.3 Means
of Providing Services.
(a) Subject
to Sections 2.1 and 2.2, Seller shall, in its reasonable discretion, determine
the means and resources used to provide the Services in accordance with its
reasonable business judgment. Seller may modify or replace: (i) its policies
and
procedures; (ii) any Affiliates and/or third parties that provide any Services;
(iii) the location from which any Service is provided; or (iv) the Intellectual
Property rights, IT Assets, systems, products and services used to provide
the
Services; provided that all of the foregoing is done in a manner consistent
with
past practice, including with respect to consultation with affected
users.
(b) Subject
to Sections 2.1 and 2.2, Seller shall not be obligated to: (i) maintain the
employment of any specific employee or number of employees; (ii) hire any
employees in addition to the employees who are currently employed by Seller
for
the provision of Services for the benefit of the Music Business; or (iii)
acquire, lease or license additional systems, equipment or software in order
to
provide the Services, provided the foregoing are in accordance with past
practice.
(c) Buyer
acknowledges and agrees that the Services provided by a third party on Seller's
behalf, and the assets licensed from a third party and used in connection
with
providing the Services, remain subject to the terms and conditions of any
applicable contracts with the providers of such Services and the Company
shall
continue to adhere to such terms and conditions to the extent consistent
with
its past practices, and provided that the Company has been made aware in
writing
of such terms and conditions, Seller shall obtain any necessary consent from
such third parties in order to provide such Services subject to the following.
To the extent that any of Seller’s third party providers requests an additional
fee for such a consent, then the parties agree as follows:
(1)
With
regard to the FlexForm, Informix, Cognos, VSI-Fax and Fourgen software products
listed in row 11 of Schedule 2.1, as soon as reasonably feasible after the
Closing, to the extent not already done, Seller shall, or shall cause
its
Affiliates to, ensure that the agreements for such software are validly assigned
to the Buyer or its designees, and where necessary to effectuate such
assignments, Seller shall obtain the requisite consents, approvals,
authorizations or other agreements from the counterparties, as well as any
consents approvals, authorizations or other agreements that are necessary
for
Seller to provide the Services in respect of these software products under
this
Agreement, and to the extent that any additional fees are requested by these
providers for such consents, approvals, authorizations or other agreements,
or
for Seller to otherwise provide the Services in respect of such software
pursuant to this Agreement, Seller will pay all such fees.
2
(2)
With
regard to the ATG, WebMethods, Attunity and ClearCommerce software products,
Buyer will negotiate with the respective third party providers to obtain
its own
licensing agreements for the respective software, and to the extent that
consents are necessary for Seller to provide the Services in respect of such
software pursuant to this Agreement, Seller will use reasonable best efforts
to
obtain such consents, and to the extent that any additional fees are requested
by these providers for such consents, Buyer will pay all such fees; provided
that Seller involves Buyer in the negotiations for such fees and Buyer consents
to the fees to be paid; provided further that if Buyer does not consent to
paying a particular fee, then Seller shall be relieved of its obligation
to
provide the Services with respect to that particular software.
(3)
With
regard to any other software products as to which Seller has agreed to provide
Services pursuant to this Agreement, to the extent that consents are necessary
for Seller to provide the Services in respect of such software pursuant to
this
Agreement, Seller will use reasonable best efforts to obtain such consents,
and
to the extent that any additional fees are requested by these providers for
such
consents, Buyer will pay all such fees; provided that Seller involves Buyer
in
the negotiations for such fees and Buyer consents to the fees to be paid;
provided further that if Buyer does not consent to paying a particular fee,
then
Seller shall be relieved of its obligation to provide the Services with respect
to that particular software.
In
the
event that any such consent referred to above where Seller is required to
use
reasonable best efforts to obtain such consent, is not obtained despite Seller
using such efforts to obtain the consent, the parties shall discuss in good
faith, as applicable, alternative arrangements or modifications to the Services
in order to meet a mutually agreed alternative standard. All costs associated
with such consents, alternative arrangements and modifications shall be borne
by
Buyer solely, provided that Seller shall obtain Buyer’s consent prior to
agreeing to any consent fees to be paid to a third party and shall afford
Buyer
the opportunity to procure alternative arrangements.
(d) Subject
to Sections 2.1 and 2.2, Seller reserves the right, upon giving prior written
notice to Buyer and the Company, to subcontract with third parties to provide
all or part of any Service or the Services. In the event of any subcontracting,
Seller shall remain liable for (i) the provision of the Services in accordance
with this Agreement, and (ii) all conduct of the subcontractors, and Buyer
shall
retain all its rights under this Agreement in relation to such Services,
on the
same basis as if such subcontracted Services were being provided directly
by
Seller.
Section
2.4 Certain
Limitations.
Subject
to Sections 2.1 and 2.2, the
Services shall be subject to the following limitations (the "Limitations")
unless otherwise agreed by the parties:
(a) Seller
shall only be required to provide the Services to or for the benefit of the
Music Business as conducted prior to the Closing Date. In particular, without
limiting the generality of the foregoing, Seller shall not be obligated to
provide Services: (i) in a volume or quantity which exceeds the historical
volumes or quantities of the services provided by the Seller to the Company
and
the Subsidiaries for the benefit of the Music Business other than to account
for
reasonable business growth (which growth shall not obligate Seller to provide
any additional functionality through the Services); and/or
(ii) in locations other than the current premises of the Company and the
Subsidiaries.
3
(b) Seller
shall only be required to allocate the means and resources to provide Services
necessary for the continued operation of the Music Business as was conducted
prior to the Closing Date so that the Service Standards remain consistent
with
past practice.
(c) Seller
shall not be obligated to devote its sole attention to the provision of the
Services or to provide Services in periods shorter than those usually required
by Affiliates of Seller or to provide Services outside the Seller's normal
business days and hours unless necessary to support the Services Standards
or
such practice was performed prior to Closing.
(d) Seller
shall not be obligated to provide any Services to any entity other than the
Company and the Subsidiaries.
(e) Seller
shall provide Disengagement Assistance to support Buyer in transitioning
the
Services to Buyer or its designee. The full scope and details of such
Disengagement Assistance are set forth in Schedule 2.4 hereto. For the avoidance
of doubt, Seller shall not be required to convert Service(s) to technology
platforms other than that supported by Seller in providing the Services,
but
Seller will remain available to respond to Buyer’s reasonable inquiries in any
efforts by Buyer to effectuate such conversions on its behalf.
(f) Seller
shall not be obligated to provide any Services to the Company and/or any
of the
Subsidiaries, if they cease being Affiliates of Buyer.
(g) Consistent
with past practice Seller shall not be obligated to provide any Services
to the
extent prohibited by applicable Law
(h) Buyer
shall not use the Services other than in a manner related to the operation
of
the Music Business.
Section
2.5 Temporary
Suspension of Services. Upon notice to Buyer,
Seller
may, in its reasonable discretion consistent with past practice, suspend
the
provision of the Services (or any part thereof), from time to time, to enable
it
to perform routine or emergency maintenance to those parts or components
of
buildings, plant, machinery, information technology systems, or other assets
of
Seller required to provide the Services, provided that: (i) Seller shall
perform
such routine maintenance outside of the normal business hours of Buyer, the
Company and the Subsidiaries; (ii) Seller shall provide Buyer and the Company
with reasonable prior notice of such suspension and the anticipated duration
of
the suspension, in each case to the extent practicable; (iii) Seller shall
use
commercially reasonable efforts to carry out the applicable maintenance and
resume provision of the relevant Services efficiently and promptly; and (iv)
Seller shall use commercially reasonable efforts to avoid any unnecessary
interruption or disruption to the Company’s business. Any suspension to enable
Seller to provide routine maintenance shall be consistent with past practice
of
Seller with respect to the Services.
4
Section
2.6 Failures
to Meet the Service Standards: It shall not be deemed to be a breach of this
Agreement if Seller fails to meet the Service Standards because of:
(a) Changes
in technology used to provide a Service, which technology is also used by
Seller
in connection with its provision of a service to itself or to one or more
of its
Affiliates, provided that such impact on the Service Standards is not otherwise
reasonably avoidable by Seller. In the event that Seller anticipates such
a
change in technology that would reasonably be expected to degrade the quality
and level of Services below the Service Standards, Seller shall use reasonable
best efforts to maintain the quality and level of Services in accordance
with
the Service Standards by either: (i) securing the technology from another
third
party provider, or (ii) securing alternative technology. If Seller is
nonetheless unable to maintain the quality and level of Services in accordance
with the Service Standards, it shall inform Buyer of such change and the
parties
shall discuss in good faith modifications to the Services in order to meet
a
mutually agreed alternative standard. If such changes in technology were
initiated by Seller (other than in response to requirements of Buyer, the
Company or a third party), then Seller shall bear all costs associated with
such
alternative arrangements. If such changes in technology were not initiated
by
Seller (or were initiated by Seller in response to requirements of Buyer,
the
Company or a third party), then Buyer shall bear all costs associated with
such
alternative arrangements as follows: (i) to the extent feasible, Buyer will
purchase the technology itself for its own benefit, and will pay to the third
party technology provider directly the costs for and retain said technology;
or
(ii) if given the nature of the technology it is not feasible or desirable
for
Buyer to purchase the technology itself for its own benefit, then Seller
shall
negotiate for the purchase of the technology at favorable rates and may pass
on
to Buyer any and all costs charged by the third party technology provider
for
such purchase, to the extent that Seller would not otherwise have incurred
such
costs for its own business or the business of its Affiliates, provided that
Seller shall first obtain Buyer’s consent, not to be unreasonably withheld,
prior to incurring any costs to be passed on to Buyer; and (iii) if Seller
is
required by a third party vendor to implement the change in technology for
itself or any of its Affiliates, then the cost passed on to Buyer will be
prorated accordingly.
(b) Emergencies
or other exceptional circumstances affecting Seller's own business or the
business of its Affiliates which require the allocation of resources normally
used for the provision of the Services, provided that such emergencies or
exceptional circumstances could not have been reasonably foreseen or avoidable,
and limited to the duration of the emergency. In the event that such emergency
or exceptional circumstance occurs, Seller shall inform Buyer and the Company
of
such emergency or exceptional circumstance in accordance with past practice
and
the parties shall discuss in good faith the manner in which the Services
will be
provided until the emergency or exceptional circumstance is solved. During
such
discussions Seller shall, consistent with past practices, use reasonable
best
efforts to resume providing the Services in accordance with the Service
Standards as soon as reasonably practicable. All costs associated with such
arrangements shall be borne by Seller solely.
(c) Force
Majeure Events described
in Section 9.1,
which
do not give rise to the termination of this Agreement under Section 4.3(c).
Section
2.7 Cooperation
(a) Each
party will perform all obligations under this Agreement in good faith and
use
reasonable efforts to cooperate with the other in order to facilitate the
provision and receipt of the Services.
5
(b) Without
limiting the foregoing, and subject to Section
7.2,
(i)
Buyer and the Company shall follow the reasonable workplace, security and
data
privacy policies, procedures and practices of Seller as applicable to the
Services to the extent that the Company was obligated to follow such policies,
procedures and practices prior to the Closing, and (ii) Seller shall follow
the
reasonable workplace, security and data privacy policies, procedures and
practices of the Company as applicable to the Services to the extent that
Seller
was obligated to follow such policies, procedures and practices prior to
the
Closing; provided in the case of (i) and (ii) above, that none of the foregoing
parties shall be obligated to follow any policies, procedures and practices
to
the extent in doing so it would be in violation of Applicable Law, provided
that
the foregoing shall in no way limit a party’s obligations to obtain consents
pursuant to Section 2.3(c). Seller represents and warrants that, to the
knowledge of Seller, none of the foregoing policies, procedures and practices
violate any Applicable Law.
(c) Buyer
and
the Company shall provide Seller and its employees, agents, consultants and
contractors reasonable access at reasonable times to facilities, hardware,
equipment, systems, Intellectual Property and related items and personnel
of
Buyer and the Company, at no cost to any Seller, as is reasonably necessary
in
order for such Seller to provide such Services pursuant to the terms hereof;
provided, however, that (i) Seller shall ensure that all such employees,
agents,
consultants and contractors comply with the Company’s reasonable workplace,
security and data privacy policies, procedures and practices to the extent
that
Seller was obligated to follow such policies, procedures and practices prior
to
the Closing; (ii) Seller shall ensure that all commercially reasonable efforts
are made to avoid and mitigate any interruption of or interference with Buyer's
and the Company’s business activities; and (iii) all such access shall be
subject to any legal or contractual obligations of the Company.
(d) A
failure
of Seller, on the one hand, or Buyer or the Company, on the other hand, to
act
in accordance with this Section 2.7 that prevents or materially inhibits
the
other party(s) ability to provide a Service or meet its obligations hereunder,
including the failure to comply with security policies, practices or procedures
with which it is obligated to comply hereunder, shall relieve such party(s)
from
such obligation until such time as the failure has ceased, provided that
the
foregoing shall not apply to relieve Seller of an obligation to provide a
Service to the extent that such failure existed immediately prior to Closing
and
Seller provided such Service notwithstanding such failure.
(e) Seller
shall, or shall cause its relevant Affiliates to, provide Seller with
introductions to its contacts at Seller’s or its Affiliates’ third party
providers from which Buyer or the Company will procure services in connection
with the transition of Services to the Music Business after Closing, and
will,
subject to applicable confidentiality obligations, provide information to
Buyer
and the Company regarding the services it receives from such third parties,
and
will use reasonable good faith efforts to facilitate Buyer’s negotiations with
such providers for such Services.
Section
2.8 Divestiture,
Sale or Transfer of Assets.
Nothing
in this Agreement shall be deemed to limit Seller's ability to divest, sell
or
otherwise transfer any of its assets, including contracts and Intellectual
Property licenses, necessary to provide the Services; provided, that Seller's
obligation to provide or cause to be provided the Services to Buyer in
accordance with this Agreement for the duration of the Term shall not be
abrogated or affected thereby.
6
Section
2.9 Compliance
with Law.
Each
party shall perform all of its obligations hereunder in accordance with
applicable Law.
ARTICLE
III
PRICING
Section
3.1 Payment
for Services.
As
compensation for the Services and the Disengagement Assistance, Buyer shall
pay
Seller (a) a resource unit fee, as further described in Schedule 3.1, (b)
an
amount equal to Seller’s out-of-pocket expenses incurred that are directly
attributable to providing the foregoing (including pro-rata shares of expenses
incurred in connection with providing the foregoing as well as providing
services to other Seller businesses), and (c) to the extent that the level
of
effort exerted by Seller in connection with providing the foregoing exceeds
the
level of effort exerted by Seller to provide the same service to the Company
immediately prior to the Closing as explained in Schedule 3.1, an incremental
charge as shown in Schedule 3.1, ((a), (b) and (c), collectively, the
"Fees"). In the event that Buyer terminates any Service, the applicable
fee for that Service will be prorated on the next invoice for the actual
time
the Service was provided, and such fee will be eliminated from all future
invoices. If Buyer exercises its option to renew this Agreement in accordance
with Section 4.1, the Fees may be increased for the renewal term by an amount
not to exceed ten percent (10%) over the existing Fees.
Section
3.2 Taxes.
In
addition to the other amounts payable under this Agreement, for any Services
for
which Seller charges Fees hereunder, Buyer and/or the Company, as the case
may
be, shall be obligated to pay, or reimburse Seller for, the amount of any
present or future Taxes levied against, upon or in respect of the Services
and/or payable by Seller on amounts earned (if any, including the full amount
of
any interest or penalties levied upon any such amounts, to the extent the
interest or penalties result from the failure by Buyer and/or the Company,
to
pay Seller any amounts pursuant to this Section 3.2 when due) in connection
with
the provision of any Services or to the use of such Services by Buyer, other
than Taxes associated with Seller’s income, property or employment. Invoices
issued pursuant to Section 3.3 shall separately state any taxes payable by
Buyer
and/or the Company, as the case may be. Seller shall ensure that all Taxes
withheld by it are timely and properly paid to the relevant taxing authority,
and shall indemnify and hold harmless Buyer and the Company for any failure
to
do so (if any, including the full amount of any interest or penalties levied
upon any such amounts).
Section
3.3 Billing
and Cash Settlement.
Any
amounts due under this Agreement shall be billed and paid for in the following
manner: (i) Seller shall invoice the Company on a monthly basis for all Services
delivered during the preceding month, including one twelfth of any amounts
expressed in Schedule 3.1 as annual charges, and all Taxes incurred in the
preceding month; (ii) each such undisputed invoice shall be payable within
thirty (30) days of the Company's receipt thereof; and (iii) payment of all
invoices in respect of the Services provided hereunder shall be made in U.S.
Dollars ($) payable by wire transfer of immediately available funds to such
account or accounts as may be designated from time to time by Seller. In
the
event that Buyer and/or the Company fails to pay in full any invoice when
due,
interest shall accrue daily on the unpaid and undisputed amount, as well
as any
disputed amounts that subsequently are determined to have been properly invoiced
and due to Seller, until such amounts are paid. The applicable interest rate
shall be 12% per annum.
7
ARTICLE
IV
TERM;
TERMINATION
Section
4.1 Term;
Renewal Option.
The
initial term of this Agreement shall commence on the Closing Date and shall
end
on the one year anniversary date thereafter, provided that, Buyer shall have
the
option to renew the term for one additional year exercisable by written notice
to Seller not less than 30 days before the expiration of the initial term
(the
initial and renewal terms are collectively referred to as the "Term").
Notwithstanding the foregoing, the Term of this Agreement will end before
the
term described in the previous sentence with respect to any particular system
application on that date that it has been installed in the Buyer's system
hardware (a "Migration") and all Seller's responsibilities under this Agreement
shall end with respect to such system application on each such date, so long
as
the Company no longer needs such assistance from Seller and has informed
Seller
of the same in writing. The Fees charged by Seller shall then be reduced
by the
amount applicable to such Services that end, and if Buyer and/or the Company
had
prepaid any such amounts, those amounts shall be credited towards future
invoices or refunded at Buyer’s discretion.
Section
4.2 Partial
Termination of the Services: To the extent that a portion of the Services
can be terminated without requiring termination of all Services, without
causing
a material disruption to the services provided by a third party, Seller will,
at
a mutually agreeable time no less than 10 days or more than 30 days after
Buyer
gives written notice, cease performance of any Service or Services as to
which
Buyer has given notice that it no longer wants to use. As from the moment
such
Service(s) cease, the Fees shall be appropriately reduced, and if Buyer and/or
the Company had prepaid any such amounts, those amounts shall be credited
towards future invoices or refunded at Buyer’s discretion.
Section
4.3 Termination
of the Agreement.
This
Agreement or any Service hereunder may also be terminated:
(a) By
either
Seller or Buyer upon written notice to the other party if
the
other party is in material breach of this Agreement or the Purchase Agreement;
provided, however, that the breaching party shall have thirty days from receipt
of written notice thereof to cure such breach, at which time this Agreement
or
Service, as applicable, shall terminate upon written notice if the breach
has
not been cured;
(b) By
the
party not relying upon Section 9.1 to excuse performance, upon written notice
to
the other party, if
performance of this Agreement or any Service has been rendered impossible
or
impracticable for a period of sixty (60) days as a direct result of the
occurrence of any Force Majeure Event described in Section 9.1;
(c) By
Buyer
with regard to a portion of the Services as provided under Section
4.2.
Section
4.4 Effect
of Termination.
Upon
any termination of this Agreement, neither party will have any further
obligation to the other (including with respect to the provision of any
Services), except:
(a) No
termination of this Agreement will prejudice any claim either party may have
under this Agreement that arises prior to the effective date of such
termination;
8
(b) Such
termination will not terminate or otherwise affect (i) any obligations to
pay
monies due or which become due for Services performed prior to the date of
expiration or termination; (iii) the provisions of Articles V, VI, VII, VIII
and
IX; and/or (iii) any other obligations under this Agreement which specifically
survive or are to be performed after the date of expiration or
termination.
ARTICLE
V
INDEMNIFICATION
OBLIGATIONS
Section
5.1 Indemnification.
Seller (in such capacity, the “Indemnifying Party”) shall indemnify, defend and
hold harmless Buyer and the Company and their respective Affiliates (and
their
respective successors, officers, directors, shareholders, employees, agents,
representatives and members) (each, an "Indemnified Party") from and against
all
Damages arising out of or relating to any third party claim relating to breach
by Seller of this Agreement, except to the extent such Damages result from
the
gross negligence or willful misconduct of Buyer or the Company Indemnified
Party. Buyer (in such capacity, also the “Indemnifying Party”) shall indemnify,
defend and hold harmless Seller and their Affiliates (and their respective
successors, officers, directors, shareholders, employees, agents,
representatives and members) (each, also an "Indemnified Party") from and
against all Damages arising out of or relating to any third party claim relating
to a breach by Buyer or the Company of this Agreement, except to the extent
such
Damages result from the gross negligence or willful misconduct of Seller
or any
Seller Indemnified Party.
Section
5.2 Indemnification
Procedures
(a) Each
Indemnified Party shall provide the Indemnifying Party with timely notice
of any
claim or liability subject to indemnification pursuant to Section 5.1; provided,
that any failure by any Indemnified Party to so notify the Indemnifying Party
shall relieve the Indemnifying Party of its obligations under Section 5.1
only
if and to the extent that the Indemnifying Party is materially prejudiced
thereby.
(b) An
Indemnified Party shall (i) give the Indemnifying Party prompt notice of
an
indemnifiable claim so as to afford the Indemnifying Party the opportunity
to
defend or negotiate a settlement of such indemnifiable claim hereunder at
the
Indemnifying Party’s expense; provided that the Indemnifying Party shall not
settle any such claim without the Indemnified Party’s prior written consent, not
to be unreasonably withheld or delayed, and (ii) reasonably cooperate with
the
Indemnifying Party, at the Indemnifying Party’s expense, in defending or
settling such claim.
9
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES; LIABILITY
Section
6.1 Representations
and Warranties. Seller represents and warrants as follows: (i) the Services
will be provided in material compliance with all applicable Laws, rules and
regulations, including without limitation all requirements of applicable
privacy
and security laws and the Xxxxxxxx-Xxxxx Act; and (ii) none of the Services
nor
any materials or information used in the providing the Services, or the
Company’s or its Subsidiaries’ use thereof as permitted herein, will violate,
infringe or misappropriate the rights of any third party.
Section
6.2 Disclaimer
of Warranties.
Except
as expressly set forth in this Agreement, Seller makes no, and expressly
disclaims any and all, representations or warranties whatsoever to the extent
permissible by law, whether express, implied or statutory, with respect to
the
Services, software or hardware provided hereunder, including warranties with
respect to merchantability, or suitability or fitness for a particular purpose,
title and non-infringement, and any warranties arising from course of dealing,
course of performance or trade usage.
Section
6.3 Limitation
of Liability.
Notwithstanding anything set forth herein to the contrary, neither party
shall
have any liability whatsoever to the other party in connection with this
Agreement, except with respect to claims arising out of the party’s breach of
this Agreement, gross negligence or willful misconduct. Except
as
otherwise provided in this Agreement, Seller is responsible only for the
performance of the Services and will not undertake responsibility for the
performance of any other service, obligation or function of Buyer or the
Company.
Section
6.4 Consequential
Damages.
In no
event shall either party be liable to the other party, except with regard
to the
party’s indemnification obligations for third party claims as set forth in
Article V, or Damages to the extent resulting from its gross negligence or
willful misconduct, its intentional breach of this Agreement with bad faith,
or
its breach of Article VII, for (i) any damages incurred as a result of third
party claims, (ii) any indirect or consequential damages, or (iii) any special
or punitive damages, including lost or anticipated revenues, loss of profits,
lost or anticipated savings, loss of business opportunity or injury to goodwill,
in connection with, or related to the performance of, this Agreement or arising
out of the Services rendered hereunder, whether such liability is asserted
on
the basis of contract (including the breach or any termination of this
Agreement), tort (including negligence or strict liability), misrepresentation
or otherwise, even if the party has been warned of the possibility of any
such
loss or damage in advance.
Section
6.5 Remedies.
In the
event of any errors, inconsistencies, loss or Damage arising out of Seller's
performance or nonperformance of any Services pursuant to this Agreement
Seller
shall (i) correct errors or inconsistencies of which it becomes aware or
(ii) if
such errors or inconsistencies cannot be corrected after Seller has used
commercially reasonable efforts to do so, refund Buyer for the charge for
that
particular Service and provide Buyer reasonable assistance in mitigating
any
problems associated with such errors or inconsistencies.
Section
6.6 Incorporation
of Purchase Agreement. Seller’s liability under this Agreement shall be
subject to Section 11.3 of the Purchase Agreement, and claims by the Company
or
Buyer hereunder shall be included as Buyer Claims for the purposes of that
Section; provided, however, that the Threshold shall not apply to any such
Buyer
Claims made hereunder.
10
ARTICLE
VII
CONFIDENTIALITY;
SECURITY
Section
7.1 Confidentiality.
The
parties hereto acknowledge that they will have access to confidential and
proprietary information concerning the other party, its customers, employees,
Affiliates and its business, which information is not readily available to
the
public (“Confidential Information”).
(a) Confidential
Information.
For
purposes of this Agreement, “Confidential Information” of a party means
information, ideas, materials or other subject matter of such party, whether
disclosed orally, in writing or otherwise, that is provided under circumstances
reasonably indicating that it is confidential or proprietary. “Confidential
Information” of a party shall include, without limitation, any and all trade
secrets, processes, techniques, drawings, models, customer-related information
and data, computer programs, databases, business plans, technical data, product
ideas, marketing data and plans, contracts and financial information disclosed
or otherwise provided by the disclosing party (“Disclosing Party”) to the
receiving party (“Receiving Party”). Confidential Information shall not include
any information or material that: (i) is or becomes part of public knowledge
other than as a result of any action or inaction of the Receiving Party;
(ii) is
disclosed to the Receiving Party without confidential or proprietary restriction
by a third party who rightfully possesses the information (without confidential
or proprietary restriction); (iii) is independently developed by the Receiving
Party, or (iv) is properly known by the Receiving Party before receipt thereof
from the Disclosing Party, provided, however, that the foregoing subsection
(iv)
shall not apply to the Confidential Information of the Company or its
Subsidiaries known to Seller prior to Closing, or the Confidential Information
of Seller known to the Company or its Subsidiaries prior to Closing.
(b) Restrictions
on Use.
Confidential Information of the Disclosing Party shall not be used for any
purpose other than as expressly permitted under this Agreement, and shall
not be
disclosed to any third party without the prior written consent of the Disclosing
Party. Each party agrees to limit access to the other party’s Confidential
Information to those of its Affiliates, directors, officers, employees,
contractors and other representatives who: (i) have a need to know such
Confidential Information for purposes of such party performing its obligations
hereunder; and (ii) are obligated to protect the confidentiality of such
Confidential Information. The Receiving Party shall treat the Confidential
Information of the Disclosing Party with at least the same degree of care
and
protection as it would use with respect to its own confidential and proprietary
information (and in no event less than a reasonable degree of care). Subject
to
Sections 6.3 and 6.4, the Receiving Party shall be responsible and liable
to the
Disclosing Party for any breach of this Article VII by the Receiving Party’s
employees or other third parties receiving access to the Disclosing Party’s
Confidential Information through or on behalf of the Receiving
Party.
11
(c) Exclusions.
Notwithstanding the foregoing, this Agreement shall not prevent the Receiving
Party from disclosing Confidential Information of the Disclosing Party to
the
extent required by a judicial order or other legal obligation, provided that,
in
such event, the Receiving Party shall promptly notify the Disclosing Party
to
allow intervention (and shall cooperate with the Disclosing Party) to contest
or
minimize the scope of the disclosure (including application for a protective
order). Further, each party may disclose the terms and conditions of this
Agreement: (i) as required by the applicable securities laws or self-regulatory
bodies, including, without limitation, requirements to file a copy of this
Agreement (redacted to the extent reasonably permitted by applicable law)
or to
disclose information regarding the provisions hereof or performance hereunder
to
applicable regulatory authorities; (ii) in confidence, to legal counsel;
(iii)
in confidence, to accountants, banks and financing sources and their advisors;
and (iv) in connection with the enforcement of this Agreement or any rights
hereunder.
Section
7.2 Security.
If a party is given access to any of the other party’s computer systems or
software (collectively, "Systems") or physical facilities in connection with
receipt of the Services, the accessing party shall not tamper with, compromise
or circumvent any security or audit measures employed by the other party.
The
accessing party shall access and use only those Systems of the other party
for
which they have been granted the right to access and use, and to access and
use
such Systems only to the extent reasonably necessary to provide or to receive
the Services, as the case may be.
Section
7.3 Remedies.
The parties acknowledge, understand and agree that a breach of this Article
VII
may cause irreparable injury to the non-breaching party and that there may
be no
adequate or complete remedy at law is available for such breach. Accordingly,
the parties (i) agree that the non-breaching party will be entitled to seek
enforcement of this Article VII by injunction and (ii) irrevocably waive
any
defense based on the adequacy of the remedy at law which might be asserted
as a
bar to such injunctive relief.
ARTICLE
VIII
INTELLECTUAL
PROPERTY
Section
8.1 Ownership
of Intellectual Property.
(a) Except
as
otherwise expressly provided herein or in the Purchase Agreement, each of
Seller
and Buyer shall retain all right, title and interest in and to their respective
Intellectual Property rights and any and all improvements, modifications
and
derivative works thereof, and no other license (other than to the extent
necessary for the provision or receipt of the Services) or other right, express
or implied, is granted hereunder by either party to its intellectual property
rights.
(b) In
the
event that any Intellectual Property rights are created in the performance
of
the Services exclusively for or on behalf of the Company, the Company shall
exclusively own all right, title and interest throughout the world in and
to all
such Intellectual Property rights, and Seller hereby assigns, and shall cause
all others to assign, to the Company all right, title or interest it may
have in
any such Intellectual Property rights.
12
(c) Each
party shall from time to time execute any documents and take any other actions
reasonably requested by the other party to effectuate the purposes of this
Section 8.1.
Section
8.2 Reservation
of Rights.
Except
as expressly provided in this Agreement, no party shall have any rights or
licenses with respect to any hardware or facility of the other party. All
rights
and licenses not expressly granted in this Agreement are expressly reserved
by
the relevant party.
ARTICLE
IX
MISCELLANEOUS
Section
9.1 Force
Majeure.
In the
event that Buyer or the Company is wholly or partially prevented from, or
delayed in, fulfilling any obligation under this Agreement, or Seller is
wholly
or partially prevented from, or delayed in, providing one or more Services,
or
one or more Services are interrupted or suspended, by reason of events beyond
its reasonable control (which may include without limitation acts of God,
fire,
explosion, accident, floods, embargoes, epidemics, war, acts of terrorism,
nuclear disaster or riot) (each, a "Force Majeure Event"), Buyer shall be
excused from performance during such period, and Seller shall not be obligated
to deliver (or timely deliver, as applicable) the affected Services during
such
period, as the case may be, and Buyer and the Company shall not be obligated
to
pay for any Services not delivered. Upon the occurrence of a Force Majeure
Event, the affected party promptly shall give written notice to the other
of the
Force Majeure Event upon which it intends to rely to excuse its performance
and
of the expected duration of such Force Majeure Event. The duties and obligations
of the Buyer, and the duties and obligations of Seller with regard to the
Services hereunder, that are directly affected by such Force Majeure Event
shall
be tolled for the duration of the Force Majeure Event, but only to the extent
that the Force Majeure Event prevents the affected party from performing
its
duties and obligations hereunder and in no event shall such duties and
obligations be tolled beyond expiration of the Term. During the duration
of the
Force Majeure Event, Each party shall use its commercially reasonable efforts
to
avoid or remove such Force Majeure Event and shall use its commercially
reasonable efforts to resume its performance under this Agreement with the
least
practicable delay. From and during the occurrence of a Force Majeure Event,
Buyer or the Company may replace the affected Services by providing such
Services for itself or engaging a third party to provide such Services at
Buyer's sole cost and expense.
Section
9.2 Interpretation
(a) Whenever
the words "include," "includes" or "including" are used in this Agreement
they
shall be deemed to be followed by the words "without limitation."
(b) Words
denoting any gender shall include all genders. Where a word or phrase is
defined
herein, each of its other grammatical forms shall have a corresponding
meaning.
(c) A
reference to any party to this Agreement or any other agreement or document
shall include such party's successors and permitted assigns.
13
(d) All
references to "$" and dollar shall be deemed to refer to United States currency
unless otherwise specifically provided.
(e) All
references to "person" shall be deemed to refer to any individual, sole
proprietorship, partnership, joint venture, corporation, estate, trust,
unincorporated organization, association, limited liability company, institution
or other entity, including any that is a Governmental Authority
Section
9.3 Preparation
of this Agreement.
The
Parties hereby acknowledge that (a) Buyer and Seller jointly and equally
participated in the drafting of this Agreement, (b) Buyer and Seller have
been
adequately represented and advised by legal counsel with respect to this
Agreement and the transactions contemplated hereby, and (c) no presumption
shall
be made that any provision of this Agreement shall be construed against either
party by reason of such role in the drafting of this Agreement and any other
agreement contemplated hereby.
Section
9.4 Relationships
of the Parties.
The
parties hereto are and shall remain independent contractors and not employees
or
agents of each other. Except as expressly granted by the other party in writing,
none of Buyer, the Company or Seller shall have any authority, express or
implied, to act as an agent of the other parties or their subsidiaries or
Affiliates under this Agreement. It is not the intent of the parties hereto
to
create, nor should this Agreement be construed to create, a partnership,
joint
venture or employment relationship among or between the parties (including
their
respective officers, employees, agents or representatives).
Section
9.5 Employees
of the Parties; Non-solicitation.
(a)
The
employees, agents or representatives of any Seller providing services to
the
Buyer under this Agreement shall not be deemed employees, agents or
representatives of the Buyer, the Company or the Subsidiaries. Similarly,
the
employees, agents or representatives of the Buyer, the Company or the
Subsidiaries shall not be deemed employees, agents or representatives of
any
Seller.
(b)
Each
party agrees
that, for period of twelve (12) months from and after the expiration or
termination of this Agreement the Term of this Agreement, it shall not, and
shall cause its Affiliates not to, without the prior written consent of the
other party, directly or indirectly through another person, (a) solicit to
hire, (b) hire or (c) encourage, entice or induce to terminate an
employment relationship with any employee of the other party involved in
any
manner with providing the Services or performance under this Agreement. The
foregoing restrictions shall not preclude (i) general solicitations or hiring
pursuant to general solicitations in newspapers or similar mass media not
targeted toward such employees of the other party or (ii) soliciting any
person
who has left the employment of a party prior to the other party soliciting
such
person (which person, to the knowledge of the other party, is not in breach
of
his or her contract of service with the former employer). The foregoing
notwithstanding, Buyer shall be entitled to solicit the employment of and
to
employ the following individuals: Xxxx Xxxxx.
Section
9.6 Reasonable
Efforts. Subject to the terms and conditions of this Agreement, each of the
parties hereto will use its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper
or
advisable under Applicable Laws for the provision of the Services and consummate
the transactions contemplated.
14
Section
9.7 Entire
Agreement.
This
Agreement, the Purchase Agreement
and the
Confidentiality Agreement set forth the entire understanding and agreement
between the parties as to the matters covered in this Agreement and supersede
and replace any prior understanding, agreement or statement of intent, in
each
case, written or oral, of any and every nature with respect to the subject
matter hereof.
Section
9.8 No
Third Party Beneficiaries. Except as expressly provided otherwise in this
Agreement, this Agreement is not intended and shall not be deemed to confer
upon
or give any person except the parties hereto and their respective successors
and
permitted assigns any remedy, claim, liability, reimbursement, cause of action
or other right under or by reason of this Agreement.
Section
9.9 Governing
Law.
This
Agreement shall be governed by the laws of the State of New York, without
regard
to the principles of conflicts of law thereof.
Section
9.10 Forum.
Any
legal
suit, action or proceeding brought by Seller or Buyer, or any of their
respective Affiliates, arising out of or based upon this Agreement shall
be
instituted in any federal or state court in New York, and each of Seller
and
Buyer (on its behalf and on behalf of the Company) waives any objection which
it
may now or hereafter have to the laying of venue of any such proceeding,
and
irrevocably submits to the jurisdiction of such courts in any such suit,
action
or proceeding.
Section
9.11 Notices.
All notices, requests, demands, waivers and communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed
to have
been duly given if delivered by hand (including by reputable overnight courier),
by mail (certified or registered mail, return receipt requested) or by telecopy
facsimile transmission (receipt of which is confirmed):
(a) If
to
Buyer, to:
Fender
Musical Instruments Corporation
0000
X.
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxxx
with
a
copy (which shall not constitute notice) to:
Xxxxxxxx
& Xxxxxxxx LLP
0000
Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxxx, Esq.
15
(b) If
to
Seller, to:
Kaman
Corporation
0000
Xxxx
Xxxxx Xxxxxx
Xxxxxxxxxx,
Xxxxxxxxxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxx, Esq.
with
a
copy (which shall not constitute notice) to:
Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx
Xxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxx, Esq.
or
to
such other person or address as any party shall specify by notice in writing
to
the other party. All such notices, requests, demands, waivers and communications
shall be deemed to have been given (i) on the date on which so hand-delivered,
(ii) on the third Business Day following the date on which so mailed and
(iii)
on the date on which telecopied and confirmed, provided
that a
copy is also sent by certified or registered mail, except for a notice of
change
of address, which shall be effective only upon receipt thereof.
Section
9.12 Descriptive
Headings.
The
descriptive headings of the several Articles and Sections of this Agreement
are
inserted for convenience only and do not constitute a part of this
Agreement.
Section
9.13 Extension,
Waiver.
Either
party to this Agreement may (a) extend the time for the performance of any
of
the obligations or other acts of the other party to this Agreement; or (b)
waive
compliance with any of the agreements, or satisfaction of any of the conditions,
contained herein by the other party to this Agreement. Any agreement on the
part
of a party to this Agreement to any such extension or waiver shall be valid
only
if set forth in an instrument in writing signed by such party and will not
restrict subsequent enforcement of any of the obligations of this
Agreement.
Section
9.14 Amendment
and Modification.
This
Agreement may not be amended except by an instrument in writing signed by
Buyer,
the Company and Seller.
Section
9.15 Assignment .
Neither
party may assign, transfer or delegate (subject to Section 2.3(d)), whether
by
merger or other operation of Law or otherwise, any rights or obligations
under
this Agreement without the other party’s prior written consent, except that a
party may assign its rights and obligations under this Agreement to any person
controlling or in common control with it, or in the event of a merger,
acquisition, consolidation or restructuring or a sale of all or substantially
all of its assets. This Agreement is binding upon the parties and their
respective successors and assigns and inures to the benefit of the parties
and
their respective permitted successors and assigns.
16
Section
9.16 Severability.
Should
any provision of this Agreement for any reason be declared invalid or
unenforceable, such decision shall not affect the validity or enforceability
of
any of the other provisions of this Agreement, which other provisions shall
remain in full force and effect and the application of such invalid or
unenforceable provision to persons or circumstances other than those as to
which
it is held invalid or unenforceable shall be valid and be enforced to the
fullest extent permitted by law.
Section
9.17 Counterparts;
Effect.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
Section
9.18 Administrative
Contacts. Buyer designates
Xxxxxxx
Xxxxxxx (contact information above) as its administrative contact for purposes
of this Agreement, and Seller designates Xxxxxx
Xxxxx (contact information above) as its administrative contact for purposes
of
this Agreement. All initial contacts between the parties regarding issues
and
matters arising under this Agreement or any other administrative matters
in
connection with the transactions contemplated hereby shall be directed to
each
Party’s administrative contact.
Section
9.19 Dispute
Resolution. Buyer
and
Seller shall attempt in good faith to resolve any dispute arising out of
or
relating to this Agreement amicably and promptly by good faith negotiations
between executives who have authority to settle such dispute. Either party
may
give the other party written notice of any dispute not resolved in the normal
course of business. Within five (5) business days after delivery of such
notice,
the administrative contacts of the parties shall agree to meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to use their respective reasonable efforts to resolve the dispute.
If
the matter has not been resolved within five (5) business days of the first
meeting of such administrative contacts (or, if the parties are unable to
mutually agree upon an acceptable time and place to meet, within five (5)
business days of the sending of such notice of dispute), either party may,
by
notice to the other party, refer the matter to executives of the parties.
Such
executives shall negotiate in good faith to resolve the matter in an amicable
manner within five (5) business days of such second notice. In the event
the
matter is not resolved within such 5-day period, either party may, by notice
to
the other party, refer the matter to the parties’ chief executive officers. Such
officers shall negotiate in good faith to resolve the matter in an amicable
manner within five (5) business days of such third notice. In the event the
matter is not resolved within such 5-day period, either party may pursue
all
other means available to it to resolve the dispute.
Section
9.20 Remedies
Cumulative. Unless expressly stated otherwise, all remedies set forth in
this Agreement are cumulative and not exclusive of any other remedies available
to the party.
[Remainder
of Page Intentionally Left Blank.]
17
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers on the day and year first
above
written.
KAMAN CORPORATION | ||
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By: | ||
Name:
Title:
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KAMAN MUSIC CORPORATION | ||
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By: | ||
Name:
Title:
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FENDER MUSICAL INSTRUMENTS CORPORATION | ||
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By: | ||
Name:
Title:
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18
LEASE
AGREEMENT
LEASE
AGREEMENT
made on
the ___ day of _______,
200_
(this “Lease”),
between KAMAN CORPORATION,
a
Connecticut corporation, having an office at 0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxxx 00000 (together with its successors and assigns, “Landlord”),
and
KAMAN MUSIC CORPORATION, a Connecticut corporation having an office at 00 Xxx
Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000 (together with its successors and
assigns “Tenant”).
WHEREAS,
Landlord is the sole owner of certain land, improvements and other facilities
located at 20 and 00 Xxx Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxx, and more fully
described below, which it desires to lease to Tenant; and
WHEREAS,
Tenant
is a corporation that desires and is empowered to lease said property;
and
WHEREAS,
Landlord and Tenant desire to enter into a lease agreement to define their
respective rights, duties, and liabilities concerning such a lease;
NOW,
THEREFORE,
for and
in consideration of the mutual covenants contained in this agreement, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1.
|
Description
of Premises and
Purpose
|
Landlord
hereby leases to Tenant certain property located at 20 and 00 Xxx Xxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxxxxx, comprised of (i) the real property more particularly
described in Exhibit
A
(the
"Land"),
which
is attached to and made a part of this Lease, which includes the parking lots
depicted as 'Lot "A"', consisting of approximately 50 parking spots
("Lot
A")
and
'Lot "B"', consisting of approximately 90 parking spots (collectively, the
"Parking
Lots")
on
Exhibit
B,
which
is attached to and made a part of this Lease, (ii) all buildings, structures
and
other improvements of every kind presently or hereafter situated upon the Land,
including the "Warehouse" (the "Warehouse")
and
the "Office" (the "Office")
depicted on Exhibit
B,
as well
as that certain enclosed passageway connecting the Warehouse and the Office
(collectively, the "Leased
Improvements"),
and
(iii) all easements, rights and appurtenances relating to the Land and the
Leased Improvements, including, without limitation, a non-exclusive easement
for
ingress and egress to and from the Land over that certain portion of the
existing right of way known as "Old Iron Ore Road" that is currently owned
by
Landlord or its affiliates (collectively, the “Easements”).
The
demised premises described in the immediately preceding sentence are hereinafter
referred to as the "Premises".
2.
|
Term
|
The
term
of the Lease shall be one (1) year, commencing on the [___] day of [ ],
200_,
and terminating on the [___] day of [ ],
200_,
unless sooner terminated under the provisions of this Lease. Notwithstanding
the
foregoing, Tenant shall have the right, exercisable upon at least 60 days’
notice to Landlord, to extend the term of the Lease with respect to the Office
and Lot B for up to two additional periods of six months each; provided,
that
during any such extension period, Tenant shall have access to and shall be
permitted to use, solely in connection with its continued operations at the
Office, up to 35 parking spaces located in Lot A at no additional charge.
3.
|
Rent;
Net Lease
|
During
the term of this Lease, Tenant shall pay to Landlord rental of $41,250.00 per
month (“Base
Rent”),
allocable to the various portions of the Premises as set forth in Exhibit
C
payable
in advance due on the 1st
day of
each month (the “Rent
Payment Date”),
except that the first installment of $41,250.00, will be due and payable upon
the execution of this Lease. During the renewal terms of this Lease with respect
to the Office and Lot B, Tenant shall pay to Landlord Base Rent of $23,333.33
per month. Rent checks shall be made payable Landlord and mailed to Kaman
Corporation, X.X. Xxx 0, Xxxxxxxxxx, Xxxxxxxxxxx 00000, or to such other address
as Landlord shall notify Tenant of in writing at 00 Xxx Xxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxxxxx 00000.
Except
as
otherwise set forth herein, this Lease is a net lease and it is agreed and
intended that all rent and any other amounts payable hereunder by Tenant shall
be paid without notice or demand, absolutely net to Landlord and without
counterclaim, setoff, deduction or defense, recoupment, abatement, diminution,
reduction or suspension whatsoever and that Tenant’s obligation to pay all such
amounts throughout the term of the Lease is absolute and unconditional so that
this Lease shall yield net to Landlord under all circumstances and conditions
whether now or hereinafter existing and whether or not within the contemplation
of the parties. Tenant shall pay or cause to be paid all expenses related to
the
operation, management, development, use, occupancy, maintenance and repair
of
the Premises, including, without limitation, the costs of utilities and real
estate taxes, which arise or become due or payable during or after (but only
to
the extent attributable to a period falling within) the term of the Lease.
Tenant shall indemnify Landlord against, and hold Landlord harmless from, such
expenses, and Tenant’s liability for the payment of any of the same which shall
become payable after the term of the Lease shall survive the term of the Lease.
Notwithstanding anything to the contrary contained herein, Landlord and not
Tenant shall be liable and obligated for the repair and maintenance or
replacement of the structural components of the Premises, the roof and for
all
items that are considered “capital” in nature as determined in accordance with
generally accepted accounting principles; provided,
that
Landlord shall not be obligated for the repair, maintenance or replacement
of
any such "capital" items that are installed or replaced at the Premises by
Tenant, its agents or its employees.
2
4.
|
Taxes
|
Tenant
shall pay all real estate taxes and assessments on the Premises during the
full
term of this Lease. Landlord shall cooperate with Tenant in seeking a reduction
from the taxing authorities in any real estate tax increase during the lease
term and any renewals thereof. Furthermore, Tenant shall pay all special or
local assessments that may be levied against the Premises by reason of
improvements made thereon or of the street or sidewalks surrounding the
Premises.
The
taxes, assessments and impositions for the first and last years of the term
hereof, will be prorated between Landlord and Tenant so that Tenant will only
be
responsible for any such tax, assessment or imposition attributable to the
period during which this Lease is in effect.
Notwithstanding
anything to the contrary herein, Tenant shall not be required to pay any
franchise, corporate, estate, inheritance, succession, transfer, gift, income,
profits or revenue or capital levy taxes of Landlord or any similar taxes that
may be imposed upon Landlord.
If
Landlord obtains a refund or a reduction of any tax, imposition or other amount
paid or reimbursed by Tenant (in whole or in part), Landlord shall promptly
pay
to Tenant the amount of such refund or reduction.
Tenant
may elect to pay any special assessment in installments under the maximum
allowable time period permitted by law in which event Tenant shall be obligated
to pay only those installments becoming due during the term.
5.
|
Fire,
Hazard and Liability
Insurance
|
A. Landlord
agrees to maintain (i) insurance against loss or damage to the Premises by
fire
and such other risks and hazards as are generally insurable under available
forms of “all risk” insurance policies in Connecticut as are consistent with the
insurance maintained by Landlord in connection with (1) the Premises immediately
prior to the date hereof and/or (2) the remainder of the business campus of
which the Premises is a part at any given time and (ii) a policy of commercial
general liability insurance with minimum limits of liability in amounts
comparable to insurance maintained by Landlord in connection with (1) the
Premises immediately prior to the date hereof and/or (2) the remainder of the
business campus of which the Premises is a part at any given time. Tenant shall,
as additional rent hereunder and on each Rent Payment Date, reimburse Landlord
for all insurance premiums that Landlord has paid in connection with the
insurance coverage described in this paragraph, excepting premiums which have
previously been reimbursed by Tenant.
3
B. During
the term of this Lease, Tenant shall have the right to maintain, or cause to
be
maintained, policies of insurance against loss or damage to Tenant’s personal
property by fire and the risks embraced by extended coverage, vandalism and
malicious mischief endorsements and from such other hazards as may be covered
by
then standard all risk insurance (including specifically flood insurance if
available and if carried for similar properties under The National Flood
Insurance Program as it may be changed or replaced, and, if the same shall
be
available from a governmental agency or corporation and is carried for similar
properties, damage by war or nuclear action or reaction end radioactive
contamination, and supplementary perils with backup of sewer and drains and
water main breaks) all in an amount sufficient to cover full replacement cost
(without depreciation) of Tenant’s personal property and fixtures but in any
event, in an amount not less than 100% of the then replacement
cost.
C. Tenant
shall furnish Landlord with certificates evidencing the aforesaid insurance
coverage (including evidence of waivers of subrogation), and renewal
certificates shall be furnished to Landlord at least thirty (30) days (or ten
(10) days’ in the case of termination for non-payment of premium) prior to the
expiration date of each policy for which a certificate was theretofore
furnished.
D. Tenant
shall not cause or permit any action or condition that would (i) invalidate
or
conflict with Landlord’s insurance policies or specific binding recommendations
of Landlord's insurers regarding the Premises, (ii) violate applicable rules,
regulations and binding guidelines of any authority having jurisdiction over
the
Premises, (iii) cause an increase in the premiums of insurance for the Premises,
or (iv) result in Landlord’s insurance companies’ refusing to insure the
Premises or any property therein in amounts and against risks as reasonably
determined by Landlord. If insurance premiums increase as a result of Tenant’s
failure to comply with the provisions of this paragraph, Tenant shall promptly
cure such failure and shall reimburse Landlord for the increased insurance
premiums paid by Landlord as a result of such failure by Tenant.
E. Tenant
shall procure and maintain in force and effect an appropriate clause in, or
endorsement on, any property insurance covering the Premises and/or any of
the
personal property, fixtures and equipment located therein or thereon and any
business interruption insurance carried by Tenant, pursuant to which the
insurance companies waive subrogation. Tenant and Landlord each hereby releases
and will not make any claims against or seek to recover from the other party
for
any loss or damage to its property (including personal property) resulting
from
fire or other hazards customarily covered by general liability or available
forms of “all risk” insurance policies. The waiver of subrogation in this
paragraph shall extend to all affiliates of Landlord and Tenant.
F. At
Landlord’s request, Tenant shall provide Landlord and/or Landlord’s insurance
carrier access to the Premises to conduct such inspections of the Premises
as
Landlord’s insurance carrier may require. Such access shall be provided to
Landlord during normal business hours upon reasonable advance notice. Landlord
shall use
commercially reasonable efforts to minimize interference with Tenant’s permitted
use of the Premises.
4
6.
|
Destruction
of Premises
|
A. If
the
Premises or a substantial portion thereof necessary for Tenant’s occupancy is
damaged or destroyed by fire, earthquake, act of God, the elements or other
casualty, Landlord shall at its sole discretion determine if repairs to the
Premises will be made. If Landlord elects not to proceed with repairs or
restoration then the Lease will terminate as of the date of the
casualty.
B. Landlord
shall not be liable for any loss of business, inconvenience or annoyance arising
from any repair or restoration of any portion of the Premises as a result of
any
damage from fire or other casualty.
7.
|
Condemnation
|
If
the
whole of the Premises is lawfully taken by condemnation or in any other manner
for any public or quasi-public purpose, this Lease shall terminate as of the
date of such taking, and rent shall be prorated to such date.
8.
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Subletting
or Assignment
|
A. Tenant
shall not assign this Lease or any interest in this Lease, or sublet the
Premises or any part of thereof or any right or privilege appurtenant to the
Premises, or allow any person other than Tenant and Tenant’s agents, employees
and invitees to occupy or use the Premises or any part thereof, without first
obtaining Landlord’s written consent; provided, however, that Tenant may assign
this Lease or sublet the Premises to an Affiliate of Tenant without the consent
of Landlord. For the purposes of this Lease, (1) "Affiliate"
shall
mean any person(s) or entity(ies) directly or indirectly, through one or more
intermediaries, Controlling, Controlled by or under Common Control with the
person(s) or entity(ies) in question; and (2) "Control"
shall
mean (i) the possession, directly or indirectly, of the power to direct or
cause
the direction of the management and policies of a person(s) or entity(ies),
whether through ownership of voting securities, by contract or otherwise and
(ii) the ownership, direct or indirect, of no less than 51% of the voting
securities of such person(s) or entity(ies).
B. Landlord's
consent to one assignment, sublease, or occupancy or use shall not be deemed
to
be a consent to any subsequent assignment or sublease, or to any occupancy
or
use by any other person.
C. Any
unauthorized assignment or sublease shall be void, and shall terminate this
Lease at Landlord's option.
9.
|
Default
|
In
the
event Tenant shall be in default in the payment of rentals hereunder or if
Tenant shall default in any of the covenants contained herein which default
continues for ten (10) days after receipt of written notice by Tenant from
Landlord, it shall be lawful for Landlord to enter upon and take possession
of
the Premises and to terminate Tenant’s right, title and interest in and to the
Parking Lots and/or the Easements; provided, however, that if the default by
Tenant relates to any covenant other than one respecting the payment of rent,
then Landlord may not enter upon and take possession of said Premises or
terminate Tenant’s right, title and interest in and to the Parking Lots and/or
the Easements or exercise any other remedy provided by law unless Tenant fails
within said 10-day period to begin to remedy the default complained of and
thereafter fails to make diligent efforts to complete the remedy.
5
10.
|
Encumbrances
and Restrictions; Condition of
Premises
|
Landlord
covenants and warrants that Landlord has the lawful right to lease the Premises
and that said Premises are free and clear of any and all liens, easements,
restrictions and encumbrances except those of public record.
Landlord
represents and warrants that, as of the date hereof, the Premises and all
systems material to the operation of the Premises located thereon are in good
working order and repair in all material respects.
11.
|
Waste
|
Tenant,
its assignees or sublessees shall not commit waste upon the Premises and at
the
expiration of this Lease will peaceably surrender possession of the Premises
and
relinquish all right, title and interest in and to the Parking Lots and the
Easements to the then owners of said real estate in safe condition.
12.
|
Peaceful
Use
|
Landlord
covenants that Landlord will put Tenant into complete and exclusive possession
of the Premises as hereinbefore provided, and that, so long as Landlord has
not
delivered a notice of termination with respect to this Lease, the Tenant shall
during the term demised, freely, peaceably and quietly occupy and enjoy the
full
possession of the Premises, and the rights and privileges herein granted,
without molestation or hindrance, lawful or otherwise.
13.
|
Notices
|
All
notices required under this Lease shall be deemed to be properly served if
delivered in writing personally or sent by certified mail with return receipt
requested, to Tenant at 00 Xxx Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000,
to
Landlord at 0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000, or to any
subsequent address which Tenant or Landlord designate in writing to the other
parties for such purposes. Date of service of a notice served by mail shall
be
the date on which such notice is deposited in a post office of the United States
Postal Service.
6
14.
|
Repairs
|
Except
as
otherwise set forth herein, Tenant, at Tenant’s sole expense, shall maintain the
Premises in good repair and in at least as good condition as that in which
they
were delivered, allowing for ordinary wear and tear and damage by casualty
and
condemnation.
15.
|
Utilities
and Other Services
|
Tenant
shall pay all charges for services rendered (whether by Landlord or third party)
for the benefit of, or in connection with, the Premises, including those
measured by consumption or use for water, sewage disposal, telephone, gas,
electricity, any other utility or commodity, maintenance of the Premises, or
other service furnished to or used by Tenant, whether such services are
furnished by Landlord or are submetered by Landlord or furnished directly from
the utility company, governmental body or agency or other applicable third
party; provided,
that
unless Tenant has requested that a particular service be provided, Tenant shall
not be obligated to pay for such service unless such service is consistent
with
the services rendered in connection with (1) the Premises immediately prior
to
the date hereof and/or (2) the remainder of the business campus of which the
Premises is a part at any given time. Landlord shall continue to provide, at
Tenant’s cost, the same scope and frequency of basic maintenance services (such
as snow plowing and lawn mowing) provided to the Premises as Landlord is then
providing to the remainder of the business campus of which the Premises is
a
part. Tenant agrees that Landlord shall not in any event have liability to
Tenant for any loss of, or interruption in, any of the services described in
this paragraph or any other services provided to Tenant by Landlord
except
in
the
case of Landlord’s (or any of Landlord’s employee’s or agent’s) gross negligence
or willful misconduct.
16.
|
Alterations
and Improvements
|
A. Tenant
shall not improve or alter the Premises in any manner without the prior,
express, and written consent of Landlord (which consent shall not be
unreasonably withheld, conditioned or delayed), but shall, before making any
improvements or alterations, submit plans and designs for such improvements
or
alterations to Landlord for its approval. In the event that the plans and
designs are disapproved, the improvements or alterations shall be made only
with
such changes as may be consented to by Landlord.
B. Furnishings,
trade fixtures, and equipment installed by Tenant shall be the property of
Tenant and may be removed by Tenant at any time during the term of this Lease
provided that Landlord has not delivered a notice of termination with respect
to
this Lease. On termination of this Lease, Tenant shall remove any such property
at Landlord's request. Tenant shall repair any damage to the Premises resulting
from the installation or removal of such property.
17.
|
Permitted
Uses
|
The
Premises shall be used for office and warehouse use, storage use and ancillary
uses and for all purposes related thereto, and any other use as existing as
of
the date hereof, subject to and in accordance with all rules, regulations,
laws,
ordinances, statutes and requirements of all governmental authorities having
jurisdiction thereof, and Tenant covenants and agrees that it shall use the
Premises for such purposes (and for no other purposes). Anything herein
contained to the contrary notwithstanding, Tenant shall not use or permit the
use of the Premises or any part thereof for any unlawful or illegal purposes
or
in violation of any certificate of occupancy, or for any extra-hazardous purpose
or in such manner as to create or constitute a nuisance of any
kind.
7
18.
|
Environmental
Indemnity
|
Tenant
hereby agrees to hold harmless Landlord, any successors to their respective
interests in this Lease, and the respective directors, officers, employees
and
agents of any of the foregoing from and against any losses, claims, damages,
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and expenses (including reasonable expenses of
litigation and reasonable attorneys’ fees) incurred by Landlord or assessed
against the Premises by virtue of any claim or lien by any governmental or
quasi-governmental unit, body, or agency, or any third party, for any
environmental cleanup or other costs (including, without limitation, costs
of
investigation, remediation, monitoring, closure and post-closure obligations)
pursuant to any Environmental Laws (an "Environmental
Event")
to the
extent arising out of any action by Tenant, its agents, employees or invitees
or
any third party under the direction or control of Tenant in, on, under, about
or
affecting the Premises during the term of this Lease. Tenant’s indemnity
obligation shall survive the termination of this Lease, provided,
however,
Tenant
shall have no indemnity obligation with respect to (i) Hazardous Materials
first
introduced to Premises prior to the commencement of Tenant’s occupancy of the
Premises or subsequent to the date that Tenant’s occupancy of the Premises shall
have fully terminated or (ii) Hazardous Materials introduced to the Premises
by
Landlord, its successors, assigns or invitees or any third party under the
direction or control of Landlord. For the avoidance of doubt, any references
to
repair in this Lease shall not refer to the repair, maintenance, investigation,
remediation or monitoring of any preexisting environmental conditions on the
Premises which obligations, if any, shall remain the responsibility of the
Landlord. Notwithstanding anything to the contrary contained herein, if Landlord
first delivers notice of an Environmental Event to Tenant after the termination
of this Lease, then Tenant's liability in connection with such Environmental
Event shall, together with any other such Environmental Event for which notice
shall first have been delivered after termination of this Lease, be limited
to
an amount equal to the aggregate rent payable by Tenant during the term of
this
Lease.
For
the
purposes of this Lease, (1) "Environmental
Law"
means
all federal, state, local and foreign laws and regulations, as in effect and
as
interpreted on the date hereof, relating to pollution or protection of the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without limitation, laws
and regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials; and (2) "Hazardous
Materials"
means
chemicals, pollutants, contaminants, hazardous wastes, toxic substances,
hazardous substance, and oil and petroleum products, the use of which is
regulated under applicable Environmental Laws.
8
19.
|
Miscellaneous
|
A. Nothing
contained herein shall be deemed or construed by the parties hereto, nor by
any
third party, as creating a relationship of principal and agent or of partnership
or of joint venture between the parties hereto.
B. No
waiver
of any condition or covenant of this Lease by either party shall be deemed
to
imply or constitute a further waiver of the same or any other condition or
covenant of this Lease.
C. A
Memorandum of this Lease may be recorded in the Town Clerk's office for the
Town
of Bloomfield, Hartford County, Connecticut, by any party hereto.
20.
|
Discharge
of Liens
|
Tenant
shall not create, permit to be created or to remain, and covenants to discharge
any lien, encumbrance or charge upon the Premises or any part thereof or the
income therefrom having any priority or preference over this Lease or ranking
on
a parity with the estate, right and interest of Landlord in the Premises, or
any
part thereof, or the income therefrom, and Tenant will not suffer any matter
or
thing whereby the estate, right and interest of Landlord might be impaired
except as expressly provided in this Lease.
21.
|
Surrender
and Holding Over
|
Tenant
will, upon the expiration or prior termination of the term of this Lease, vacate
and surrender the Premises and relinquish all right, title and interest in
and
to the Parking Lots and the Easements to Landlord in the condition in which
the
same was originally received from Landlord allowing for ordinary wear and tear
and damage by casualty and condemnation. After the expiration of the term of
this Lease, if Tenant shall continue in possession thereafter, such possession
shall be on a month-to-month basis upon the same terms of this Lease (except
that the rent payable by Tenant shall be at a rate equal to 125% of the rent
paid during the expired term) until terminated at the end of a month by either
party upon thirty (30) days’ advance written notice to the other
party.
22.
|
Governing
Law
|
This
Lease shall be governed by, construed, and enforced in accordance with the
laws
of the state of Connecticut.
9
23.
|
Entire
Agreement
|
This
Agreement, including the Exhibits attached hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all previous proposals, both oral and written, negotiations,
representations, commitments, writings and all other communications between
the
parties. This Agreement may not be released, discharged, changed or modified
except by an instrument in writing signed by a duly authorized representative
of
each of the parties.
24.
|
Landlord
Liability
|
It
is
specifically understood and agreed that there shall be no personal liability
on
Landlord (or any of the partners or principals (disclosed or undisclosed) of
Landlord) in respect of any of the covenants, conditions or provisions of this
Lease. In the event of a breach or default by Landlord of any of its obligations
under this Lease, Tenant shall look solely to the equity of Landlord in the
Premises for the satisfaction of Tenant’s remedies.
25.
|
Counterparts
|
This
Lease may be executed in one or more counterparts, each of which shall
constitute an original and all of which when taken together shall constitute
one
binding agreement.
26.
|
Landlord
Access
|
Notwithstanding
anything to the contrary contained in this Lease, Landlord shall have the right,
upon reasonable prior notice to Tenant, to enter the Premises to (i) perform
site investigations, make improvements and/or perform remediation at the
Premises or (ii) take any other action reasonably required by Landlord in
connection with Landlord's operation and maintenance of the business campus
of
which the Premises is a part; provided,
that in
no event shall Landlord's access to the Premises in connection with taking
such
actions unreasonably interfere with Tenant's occupancy of or business operations
at the Premises in any material respect. In connection with any access permitted
under this paragraph, Landlord shall be permitted to use a number of parking
spaces in the Parking Lots reasonably necessary for the particular activities
being carried out by Landlord on the Premises provided that at all times during
the term of this Lease Tenant has not less than 125 parking spaces in the
Parking Lots. In connection with any access or the performance of any work
or
the use of the Parking Lots permitted under this paragraph, Landlord shall
use
commercially reasonable efforts to ensure that Landlord's exercise of such
rights shall not interfere with Tenant's occupancy of or business operations
at
the Premises in any material respect.
27.
|
Termination
Option; Warehouse
|
A. Notwithstanding
the foregoing and subject to the satisfaction of the conditions set forth in
clause B below, upon thirty (30) days prior written notice (the “Warehouse
Termination Notice”)
to
Landlord, Tenant shall have the right to terminate this Lease (the “Warehouse
Termination Option”)
on the
date specified in the Warehouse Termination Notice (the “Warehouse
Termination Date”)
solely
with respect to the Warehouse and Tenant's license to use Lot A. The portion
of
the Premises that is not so terminated shall be referred to herein as the
“Non-Terminated
Premises”.
This
Lease shall remain in full force and effect with respect to the Non-Terminated
Premises on and after the Warehouse Termination Date.
10
B. In
connection with Tenant's exercising the Warehouse Termination
Option:
(i)
|
from
and after the Warehouse Termination Date, Tenant shall have access
to and
shall be permitted to use, solely in connection with its continued
operations at the Non-Terminated Premises, up to 35 parking spaces
located
in Lot A at no additional charge;
|
(ii) |
except
as set forth in subparagraph (i) above, from and after the Warehouse
Termination Date, the definition of Premises hereunder shall be deemed
to
exclude all right, title and interest in and to the Warehouse and
Lot A
and Landlord shall be free to use the Warehouse and Lot A for any
purpose
whatsoever; provided that Landlord does not interfere in any material
respect with Tenant’s occupancy of or business operations at the
Non-Terminated Premises;
|
(iii)
|
from
and after the Warehouse Termination Date, the definition of Base
Rent
hereunder shall be deemed to be an amount equal to $23,333.33 per
month;
|
(iv)
|
promptly
after the Warehouse Termination Date, Landlord and Tenant shall execute
an
amendment to this Lease in a form reasonably acceptable to Landlord
and
Tenant, confirming the terms of the contraction;
|
(v)
|
if
Tenant fails to vacate and surrender the Warehouse and/or discontinue
its
use of Lot A on or before the Warehouse Termination Date in the condition
required pursuant to the terms of this Lease, Tenant shall be deemed
to be
holding over with respect thereto, entitling Landlord to exercise
all of
its rights and remedies under the Lease, as amended hereby, at law
or in
equity with respect thereto.
|
11
WITNESS
our signatures as of the day and date first above stated.
LANDLORD:
|
||
KAMAN
CORPORATION
|
||
|
|
|
By: | ||
Name: |
||
Title |
TENANT:
|
||
KAMAN
MUSIC CORPORATION
|
||
|
|
|
By: | ||
Name: |
||
Title |
12
EXHIBIT
D
TRADEMARK
ASSIGNMENT
TRADEMARK
ASSIGNMENT AGREEMENT ("Agreement"), made as of this ______ day of _______,
200__
by and between Kaman Corporation, a Connecticut corporation ("Assignor"), and
Kaman Music Corporation, a Connecticut corporation ("Assignee").
WHEREAS,
Assignee, Assignor and Fender Musical Instruments Corporation (“Fender”) have
entered into a Stock Purchase Agreement, dated as of October 27, 2007 (the
“Purchase Agreement”), pursuant to which Fender agreed to acquire from Assignor
all of the issued and outstanding shares of capital stock of the Assignee,
and
WHEREAS,
pursuant to the Purchase Agreement, Assignor agreed to assign to Assignee any
and all right, title and interest it has in and to the trademark, service xxxx
and name “KMC” (the “Trademark”) and any registrations and pending applications
thereto, along with the goodwill associated therewith and the rights to prior
infringement claims related thereto.
NOW,
THEREFORE, effective as of the date hereof, by this document, and for good
and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Assignor does hereby sell, assign, and transfer to Assignee,
and
its successors and assigns, the entire right, title and interest in and to
the
Trademark and (i) all applications and registrations which have been or may
be
filed or issued in respect thereto and any and all extensions and renewals
thereof, (ii) all common-law rights related to the Trademark, (iii) all goodwill
symbolized by and associated with the business conducted under the Trademark,
(iv) all income, royalties, damages, and payments now or hereafter due or
payable in respect thereto, (v) all causes of action (either in law or in
equity) and the right to xxx, counterclaim, and recover for past, present,
or
future infringement, dilution or other violations of the Trademark or other
rights transferred and assigned to Assignee under this Agreement, and (vi)
all
rights corresponding to the foregoing throughout the world.
The
assignment set forth in this Agreement is subject to the terms of the Purchase
Agreement and Assignor makes no other representations or warranties with respect
to the Trademark or the assignment described herein.
IN
WITNESS WHEREOF, the undersigned has caused this Trademark Assignment to be
duly
executed by its authorized officer as of ________ ___, 200__.
Kaman
Corporation
|
||
|
|
|
By: | ||
Name: |
||
Title: |
STATE
OF
____________:
COUNTY
OF
___________,
On
this
_____ day of ______, 200_, before me, a Notary Public in and for the County
of
_________________ in the State of ___________, personally appeared
____________________, to me known to be the ____________________________ of
________________________, and being duly sworn, averred that, being duly
authorized, (s)he executed the foregoing Assignment as the free act and deed
of
said corporation for the uses and purposes set forth.
NOTARY PUBLIC |
EXHIBIT
E
TRADEMARK
LICENSE AGREEMENT
This
TRADEMARK
LICENSE AGREEMENT (“Agreement”)
is
made and entered into as of [●],
October 2007 (“Effective Date”), by and between Kaman Corporation, a Connecticut
corporation (“Licensor”),
and
Kaman Music Corporation, a Connecticut corporation (the “Company”).
RECITALS
WHEREAS,
Licensor and Fender Musical Instruments Corporation (“Fender”),
a
Delaware corporation, are parties to a certain Stock Purchase Agreement (the
“SPA”),
dated
as of October [27], 2007, pursuant to which Fender has agreed to acquire all
of
the issued and outstanding shares of the Company, a wholly-owned subsidiary
of
Licensor, and Licensor has agreed to license to the Company and its Affiliates
and Subsidiaries (collectively, “Licensee”; Licensor and Licensee each a
“Party”
and
collectively the “Parties”)
the
Marks (as defined below) used by the Company and the Subsidiaries in their
respective businesses;
WHEREAS,
Licensor owns all right, title and interest in and to the Marks;
and
WHEREAS,
Licensor desires to grant to Licensee, and Licensee desires to obtain, a license
to use the Marks, consistent with the terms and conditions of this
Agreement.
NOW
THEREFORE,
in
consideration of the premises and mutual promises contained herein and for
other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:
1. Definitions.
When
used in this Agreement, the following terms have the meanings set forth below.
Capitalized terms used herein that are not defined below shall have the meanings
ascribed to them in the SPA.
(a) “Marks”
means
the trademarks, service marks, logos and names set forth on Schedule
A
attached
hereto.
(b) “Music
Business”
means
the business heretofore conducted by the Company and the Subsidiaries, as such
business may develop in the ordinary course, including without limitation the
wholesale and retail businesses of marketing, promoting, designing,
manufacturing, selling, buying and distributing music, musical instruments
and
accessories, and the products and services ancillary or related
thereto.
(c) “Term”
has
the
meaning ascribed to it in Section 8(a).
2. License.
(a) Subject
to the terms and conditions of this Agreement, Licensor hereby grants to
Licensee a worldwide, royalty-free, exclusive, non-transferable (except as
set
forth in Section 11(a))
right
and license during the Term (subject to Section 8(c)), to use, reproduce and
display the Marks in a manner substantially consistent with how such Marks
were
used in connection with the Music Business prior to Closing.
(b) For
the
avoidance of doubt, except for the license granted in Section 2(a), none of
Licensee, the Company or any of their respective Affiliates shall, following
the
Closing, have any right to use the name “Kaman” in their respective
businesses.
3. Restrictions.
(a) During
the Term, Licensee (i) shall not knowingly do or permit to be done, and shall
cause its Affiliates not to knowingly do or permit to be done, any act which
will in any way adversely affect, in any material manner, the rights of Licensor
in and to the Marks, or any registrations therefore; (ii) shall not knowingly
do
or permit to be done, and shall cause its Affiliates not to knowingly do or
permit to be done, any act which could reasonably be expected in any way to
adversely affect, in any manner, the rights of Licensor in and to the Marks,
or
any registrations therefor; (iii) shall not, and shall cause its Affiliates
not
to, without Licensor’s express written authorization, use any Trademark
confusingly similar to any of the Marks or file or prosecute a Trademark
application or other application to register the Marks or adopt or seek to
register or take any other action to use or establish rights in any name,
Trademark, word (in English or any other language), domain name or design
anywhere in the world which are confusingly similar to any of the Marks,
provided that Licensor acknowledges that “KMC” is not confusingly similar to any
of the Marks; and (iv) shall not, and shall cause its Affiliates not to, attack
or challenge, directly or indirectly, Licensor’s ownership or rights in or the
validity of the Marks, or any application for registration or registration
therefor, or any rights of Licensor therein.
(b) Licensee
shall not, and shall cause its Affiliates not to, without the express prior
written consent of Licensor, use the Marks in combination with any name,
Trademark, word (in English or any other language), symbol, domain name, email
address, letter or design in such a manner as could create a joint or
combination Trademark that incorporates any of the Marks, provided that Licensor
acknowledges that “KMC” is not confusingly similar to any of the
Marks.
(c) Licensee
shall not, and shall cause its Affiliates not to, in connection with its use
of
the Marks or otherwise hold itself out as having any affiliation with Licensor
or any of its Affiliates, except to the extent required for informational
purposes and in no event in connection with any marketing or other commercial
activities. Licensor acknowledges and agrees that, subject to Licensee’s
compliance with Section 3(d),
Licensee’s use of the Marks in connection with products and services and the
marketing thereof consistent with the terms of the license granted in Section
2(a) will not violate this clause.
(d) All
uses
of the Marks by Licensee shall, where reasonably practicable, be accompanied
by
the following legend: “Kaman Music Corporation and the Kaman name are Trademarks
of Kaman Corporation and are used under limited license. Kaman Music Corporation
is not affiliated with Kaman Corporation.” The foregoing sentence shall not
apply to any existing inventory, which may be depleted as is, provided that
Licensee shall, in its reasonably prudent business judgment, use commercially
reasonable efforts to disclaim any affiliation with Licensor in such other
manner as is suitable under the circumstances.
-2-
(e) Licensee
agrees to use all commercially reasonable efforts to deplete within the Term
the
inventory of materials existing as of the Closing Date that bear the
Marks.
4. Domain
Name.
During
the Term, Licensor shall maintain on its Internet website at
xxxx://xxx.xxxxx.xxx a reference to “Kaman Music” in substantially the
equivalent manner and format as the reference that has appeared on that website
prior to the Closing, along with (i) an explanation mutually agreeable to
Licensor and Licensee stating that the Company is a separate company no longer
affiliated with Licensor; and that Licensor is not responsible for the content
of any website operated by the Licensee or the Company; and (ii) a hyperlink
to
xxxx://xxx.xxxxxxxxxx.xxx and/or such other domain name or Uniform Resource
Locator (“URL”) that may be provided by Licensee to Licensor in writing from
time to time.
5. Ownership;
Effect of Use.
(a) As
between the Parties, Licensor is the sole and exclusive owner of all right,
title and interest in and to the Marks. Licensee acknowledges that, other than
the rights and licenses granted herein, Licensee, the Company and the
Subsidiaries acquire no right, title or interest in and to the
Marks.
(b) All
goodwill associated with use of the Marks by Licensee, the Company and the
Subsidiaries shall inure to the benefit of Licensor. To the extent that any
rights in and to the Marks are deemed to accrue to Licensee pursuant to this
Agreement or otherwise, Licensee hereby assigns any and all such rights, at
such
time as they may be deemed to accrue, to Licensor.
6. Representations
and Warranties.
(a) Licensor
hereby represents and warrants that: (i) it has registered the name “Kaman Music
Corporation” as the Company’s corporate name in the jurisdiction in which the
Company is incorporated; (ii) it is the owner of all right, title and interest
in and to any registrations for the Marks, “Kaman Music” and “Kaman” in the
jurisdictions in which such Marks are registered; and (iii) in any jurisdictions
in which the Marks “Kaman Music” and “Kaman” are not registered, but in which
such marks are used by the Company or its Subsidiaries as of the date hereof,
Licensor is not aware of any third party claim that the use of such Marks
infringes a third party’s rights, and has no reason to believe there is a valid
basis for such claim.
(b) EXCEPT
AS
EXPRESSLY SET FORTH HEREIN THE MARKS ARE LICENSED ON AN "AS IS" BASIS WITHOUT
WARRANTY OR CONDITION OF ANY KIND, AND NO PARTY MAKES ANY REPRESENTATIONS OR
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
-3-
7. Maintenance.
To
the
extent that any of the Marks are registered trademarks of Licensor as of the
Effective Date, Licensor shall in accordance with past practice maintain such
trademark registrations during the Term. At Licensor’s reasonable request and at
Licensor’s sole cost and expense, Licensee shall, and shall cause its Affiliates
to, execute any documents reasonably requested by Licensor to confirm Licensor’s
ownership of its rights in and to the Marks. Licensee shall, and shall cause
its
Affiliates to, reasonably cooperate with Licensor’s reasonable requests in
connection with the filing, maintenance, renewal, enforcement and protection
of
all applications and registrations for the Marks, at Licensor’s sole cost and
expense. Notwithstanding the foregoing and without in any way obligating
Licensor to make such filings (but Licensor will in good xxxxx xxxxxx with
Licensee on such matters), should Licensor at Licensee’s request agree to make
filings in connection with the Marks in jurisdictions or classes for which
registrations of the Marks were not in effect at the Closing, then the costs
of
making and maintaining such filings during the Term shall be at Licensee’s sole
cost and expense.
8. Term
and Termination.
(a) The
term
of this Agreement shall commence on the Effective Date and shall continue for
a
period of three (3) years (the “Term”).
(b) Licensor
may terminate this Agreement upon written notice to Licensee in the event that
Licensee materially breaches any of its obligations under this Agreement and:
(i) fails to cure such breach within forty-five (45) days after Licensee’s
receipt of written notice thereof, or (ii) fails to commence a commercially
reasonable program under which to cure in the event of a breach which may not
reasonably be cured within such forty-five (45) day period, provided that
Licensee shall take commercially reasonable efforts to cure such breach as
expeditiously as possible, and that in the case of paragraph (ii) Licensor
may
terminate this Agreement if Licensee fails to cure such breach within sixty
(60)
days after Licensee’s receipt of written notice thereof. Licensee may terminate
this Agreement upon no less than ten (10) days prior written notice to
Licensor.
(c) Notwithstanding
Section 8(a), Licensee is permitted to use the name "Kaman" on a standalone
basis: (i) only in conjunction with inventory existing as of the Closing Date,
and (ii) for no longer than twelve (12) months after the date hereof, providing
that if such existing inventory is depleted prior to the date that is twelve
(12) months after the date hereof, Licensee's right to use the name "Kaman"
on a
standalone basis shall expire on the date that such existing inventory was
depleted.
-4-
9. Effect
of Termination.
Upon
expiration of the license granted in Section 2(a) or termination of this
Agreement as provided above: (i) any and all rights to the Marks granted to
Licensee hereunder shall cease and without further act or instrument revert
to
Licensor; and (ii) Licensee shall terminate all further use of the
Marks.
10. Indemnification
and Liability.
(a) Licensor
shall defend, indemnify and hold harmless Licensee, its Affiliates and their
respective officers, directors, employees and agents (“Licensee Indemnified
Parties”) from and against any and all Damages asserted against, resulting to,
imposed upon or incurred by a Licensee Indemnified Party by reason of or
resulting from any claim, action, cause of action, suit, proceeding or
investigation brought or threatened by any third party arising out of or
resulting from (i) Licensee’s use of the Marks in compliance with the license
set forth in Section 2(a) hereof, including any claims that such use infringes,
violates or misappropriates the rights of any third party, or (ii) from any
product or service sold prior to, or inventory existing as of, the Closing
Date,
provided
that
Licensor shall have no obligation to indemnify any Licensee Indemnified Party
for any Damages arising out of (x) facts or circumstances that constitute a
breach of any of the representations or warranties of Licensee set forth in
Article IV of the SPA, (y) any claim arising out of Licensee’s material breach
of the license granted in Section 2(a), or (z) defects in any new product or
service offered by Licensee after the Closing Date that bears the Marks. The
foregoing indemnity shall not apply, and Licensor shall not be obliged to
defend, indemnify or hold harmless, any of the Licensee Indemnified Parties
from
or against any Damages asserted against, resulting to, imposed upon or incurred
by them that arises out of or results from Licensee's use of any Xxxx in any
territory that the Company and the Subsidiaries have not used such Xxxx xxxxx
to
the Effective Date.
(b) Licensee
shall defend, indemnify and hold harmless Licensor, its Affiliates and their
respective officers, directors, employees, and agents (“Licensor Indemnified
Parties”) from and against any and all Damages asserted against, resulting to,
imposed upon or incurred by a Licensor Indemnified Party by reason of or
resulting from any claim, action, cause of action, suit, proceeding or
investigation brought or threatened by any third party arising out of or
resulting from (i) Licensee’s use of the Marks in violation of the license
granted in Section 2(a), or (ii) any new product or service offered by Licensee
after the Closing Date that bears the Marks, provided that Licensee shall have
no obligation to indemnify any Licensor Indemnified Party for any Damages
arising out of (x) facts or circumstances that constitute a breach of any of
the
representations or warranties of Licensor set forth in Article III of the SPA,
(y) any claim that Licensee’s and its Subsidiaries’ use of the Marks after the
Closing, in the same territories and in connection with the same goods and
services offered as Licensee and its Subsidiaries used the Marks prior to the
Closing, infringes the Intellectual Property rights of a third party, or (z)
defects in products or services sold prior to, or inventory existing as of,
the
Closing Date.
-5-
(c) Indemnification
claims shall be governed by the procedure in Sections 11.6 and 11.7 of the
SPA.
11. Miscellaneous.
(a) Assignment.
Except
as expressly set forth in this Agreement, neither Party may assign any of its
rights or obligations hereunder without the other Party’s prior written consent.
Notwithstanding the foregoing, a Party may assign this Agreement in connection
with a merger, acquisition, restructuring, consolidation or a sale of all or
substantially all of its assets. Any purported assignment in violation of this
Agreement shall be null and void ab
initio
and of
no force and effect. In the event of a permitted assignment, this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
Parties hereto and their respective permitted successors, assigns and
transferees.
(b) Survival.
Notwithstanding any termination of this Agreement, the following provisions
shall survive and remain in full force and effect: Sections 8
through
11.
(c) Severability.
Should
any provision of this Agreement for any reason be declared invalid or
unenforceable, such decision shall not affect the validity or enforceability
of
any of the other provisions of this Agreement, which other provisions shall
remain in full force and effect and the application of such invalid or
unenforceable provision to persons or circumstances other than those as to
which
it is held invalid or unenforceable shall be valid and be enforced to the
fullest extent permitted by law.
(d) Notices.
All
notices, requests, demands, waivers and communications required or permitted
to
be given under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered (i) by hand (including by reputable overnight
courier), (ii) by mail (certified or registered mail, return receipt requested)
or (iii) by telecopy facsimile transmission (receipt of which is
confirmed):
If
to
Licensor:
Kaman
Corporation
0000
Xxxx
Xxxxx Xxxxxx
Xxxxxxxxxx,
Xxxxxxxxxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxx, Esq.
with
a
copy (which shall not constitute notice) to:
Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx
Xxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxx, Esq.
-6-
If
to
Licensee:
Kaman
Music Corporation
_______________________________
_______________________________
_______________________________
with
a
copy (which shall not constitute notice) to:
Fender
Musical Instruments Corporation
0000
X.
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxxx
with
a
copy (which shall not constitute notice) to:
Xxxxxxxx
& Xxxxxxxx LLP
0000
Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopy:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxxx, Esq.
(e) Governing
Law and Venue.
This
Agreement shall be governed by the laws of the State of New York, without regard
to the principles of conflicts of law thereof. Any legal suit, action or
proceeding brought by a Party, or any of their respective Affiliates, arising
out of or based upon this Agreement shall be instituted in any federal or state
court in New York, and each Party (on its behalf and on behalf of its
subsidiaries) waives any objection which it may now or hereafter have to the
laying of venue of any such proceeding, and irrevocably submits to the
jurisdiction of such courts in any such suit, action or proceeding.
(f) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, and all of which shall constitute one and the same
instrument.
(g) Entire
Agreement.
This
Agreement (along with the SPA, to the extent referenced herein) contains the
entire understanding of the Parties hereto with respect to the subject matter
hereof. This Agreement supersedes all prior agreements and understandings,
oral
and written, with respect to the subject matter hereof.
(h) Nonwaiver.
Any
failure of a Party to comply with any term or provision of this Agreement may
be
waived at any time by an instrument in writing signed by or on behalf of such
Party, but such waiver shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure to comply. No delay on the part
of a
Party in exercising any right, power or privilege hereunder shall operate as
a
waiver thereof.
-7-
(i) Headings.
The
Article and Section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the Parties and shall
not
in any way affect the meaning or interpretation of this Agreement.
(j) Relationship.
The
Parties hereto are and shall remain independent contractors. Nothing herein
shall be deemed to establish a partnership, joint venture or agency relationship
between the Parties. Neither Party shall have the right to obligate or bind
the
other Party in any manner to any third party.
(k) Injunctive
Relief.
There
may be no adequate remedy at law for Licensee’s failure to comply with Section
2
or
3
of this
Agreement and in the event of such failure, Licensor shall be entitled to seek
equitable relief by way of temporary restraining order, preliminary injunction
and permanent injunction and such other and further relief as any court having
competent jurisdiction may deem just and proper, without the necessity of
posting bond or proving actual damages.
(l) Further
Assurances.
From
time to time at the request of and at the expense of the Party so requesting,
Licensor and Licensee shall execute and deliver to such requesting Party such
documents and take such other action as such requesting Party may reasonably
request in order to consummate the transactions contemplated
hereby.
[Remainder
of page intentionally left blank; next page is signature
page]
-8-
IN
WITNESS WHEREOF,
this
Agreement has been executed by each Party hereto through a duly authorized
representative as of the day and year first above written.
Kaman
Corporation
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