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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
RAVEN INDUSTRIES, INC.
("BUYER")
STARLINK, INCORPORATED, AND STARLINK SPECIAL ASSETS, INC.
(COLLECTIVELY, JOINTLY AND SEVERALLY, THE "SELLER")
AND
XXXXX X. XXXXXX,
XXXXXXXX X. XXXXXX,
XXXXXXX X. XXXXXX,
XXXXX X. XXXXXXX,
XXXXX X. XXXXXX, AND
XXXXXXX X. XXXXXX,
(COLLECTIVELY, JOINTLY AND SEVERALLY, THE "SHAREHOLDERS")
DATED: DECEMBER 5, 2001
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................................................................1
ARTICLE II BASIC TRANSACTION..................................................................................8
SECTION 2.1 PURCHASE AND SALE OF ASSETS................................................................8
SECTION 2.2 ASSUMPTION OF LIABILITIES..................................................................9
SECTION 2.3 PURCHASE PRICE.............................................................................9
SECTION 2.4 ADJUSTMENT OF CASH CONSIDERATION...........................................................9
SECTION 2.5 ALLOCATION................................................................................11
SECTION 2.6 EMPLOYEE MATTERS..........................................................................11
SECTION 2.7 RELATED AGREEMENTS........................................................................12
SECTION 2.8 NONASSUMPTION OF CERTAIN CONTRACTS........................................................12
SECTION 11.2 INDEMNIFICATION BY BUYER..................................................................13
ARTICLE III THE CLOSING........................................................................................13
SECTION 3.1 THE CLOSING...............................................................................13
SECTION 3.2 DELIVERIES AT THE CLOSING.................................................................13
SECTION 3.3 PRORATIONS................................................................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES.............................................16
SECTION 4.1 ORGANIZATION AND CAPITALIZATION OF SELLER.................................................16
SECTION 4.2 AUTHORIZATION OF TRANSACTION..............................................................16
SECTION 4.3 NO CONFLICT...............................................................................16
SECTION 4.4 BROKERS' FEES.............................................................................17
SECTION 4.5 CERTAIN PROCEEDINGS.......................................................................17
SECTION 4.6 TANGIBLE PERSONAL PROPERTY................................................................17
SECTION 4.7 AFFILIATES................................................................................17
SECTION 4.8 FINANCIAL STATEMENTS......................................................................17
SECTION 4.9 EVENTS SUBSEQUENT TO THE BALANCE SHEET....................................................18
SECTION 4.10 UNDISCLOSED LIABILITIES...................................................................18
SECTION 4.11 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAWS.........................................19
SECTION 4.12 TAX MATTERS...............................................................................19
SECTION 4.13 LEASED AND REAL PROPERTY..................................................................19
SECTION 4.14 INTELLECTUAL PROPERTY.....................................................................20
SECTION 4.15 WA LICENSE................................................................................23
SECTION 4.16 APPROVALS.................................................................................23
SECTION 4.17 CONTRACTS.................................................................................23
SECTION 4.18 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE; INVENTORY..........................................24
SECTION 4.19 CASH AND CASH EQUIVALENTS.................................................................24
SECTION 4.20 POWERS OF ATTORNEY........................................................................24
SECTION 4.21 INSURANCE.................................................................................24
SECTION 4.22 LITIGATION................................................................................25
SECTION 4.23 PRODUCT WARRANTY..........................................................................25
SECTION 4.24 PRODUCT LIABILITY.........................................................................25
SECTION 4.25 EMPLOYEES; LABOR RELATIONS................................................................25
SECTION 4.26 EMPLOYEE BENEFITS.........................................................................26
SECTION 4.27 ENVIRONMENTAL LAWS; HAZARDOUS MATERIALS...................................................28
SECTION 4.28 CERTAIN BUSINESS RELATIONSHIPS WITH SELLER................................................29
SECTION 4.29 SUPPLIERS.................................................................................29
SECTION 4.30 PREDECESSOR...............................................................................29
SECTION 4.31 ALL OF THE ASSETS.........................................................................29
SECTION 4.32 DISCLOSURE................................................................................29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...........................................................30
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SECTION 5.1 ORGANIZATION OF BUYER......................................................................30
SECTION 5.2 AUTHORIZATION OF TRANSACTION...............................................................30
SECTION 5.3 NO CONFLICT................................................................................30
SECTION 5.4 BROKERS' FEES..............................................................................30
SECTION 5.5 CERTAIN PROCEEDINGS........................................................................30
ARTICLE VI PRE-CLOSING COVENANTS.............................................................................30
SECTION 6.1 GENERAL....................................................................................31
SECTION 6.2 NOTICES AND CONSENTS.......................................................................31
SECTION 6.3 OPERATION OF BUSINESS......................................................................31
SECTION 6.4 PRESERVATION OF BUSINESS...................................................................32
SECTION 6.5 FULL ACCESS................................................................................32
SECTION 6.6 NOTICE OF DEVELOPMENTS.....................................................................32
SECTION 6.7 EXCLUSIVITY................................................................................33
SECTION 6.8 INTERIM FINANCIAL STATEMENTS...............................................................33
SECTION 6.9 CONDITIONS.................................................................................33
ARTICLE VII OMITTED...........................................................................................33
ARTICLE VIII POST-CLOSING COVENANTS............................................................................34
SECTION 8.1 GENERAL....................................................................................34
SECTION 8.2 TRANSITION.................................................................................34
SECTION 8.3 COVENANT NOT TO ENGAGE IN BUSINESS.........................................................34
SECTION 8.4 CHANGE OF NAME.............................................................................36
ARTICLE IX CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE..............................................36
SECTION 9.1 REPRESENTATIONS AND WARRANTIES.............................................................36
SECTION 9.2 COVENANTS..................................................................................36
SECTION 9.3 CONSENTS...................................................................................36
SECTION 9.4 LITIGATION.................................................................................36
SECTION 9.5 CLOSING CERTIFICATE........................................................................36
SECTION 9.6 NO ADVERSE CHANGE..........................................................................37
SECTION 9.7 OPINION....................................................................................37
SECTION 9.8 FORM AND SUBSTANCE.........................................................................37
SECTION 9.9 CONSENTS...................................................................................37
SECTION 9.10 LOSS.......................................................................................37
SECTION 9.11 SEARCHES...................................................................................37
SECTION 9.12 CORPORATE AUTHORITY........................................................................37
SECTION 9.13 EMPLOYEES..................................................................................37
SECTION 9.14 SCHEDULES..................................................................................38
SECTION 9.15 SOLVENCY...................................................................................38
SECTION 9.16 OTHER AGREEMENTS...........................................................................38
SECTION 9.17 GOOD STANDING..............................................................................38
SECTION 9.18 LICENSE AGREEMENT..........................................................................38
ARTICLE X CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE..............................................38
SECTION 10.1 REPRESENTATIONS AND WARRANTIES.............................................................38
SECTION 10.2 COVENANTS..................................................................................38
SECTION 10.3 LITIGATION.................................................................................38
SECTION 10.4 CLOSING CERTIFICATE........................................................................38
SECTION 9.9 CONSENTS...................................................................................39
ARTICLE XI INDEMNIFICATION...................................................................................39
SECTION 11.1 INDEMNIFICATION BY THE SELLING PARTIES.....................................................39
SECTION 11.2 INDEMNIFICATION BY BUYER...................................................................43
SECTION 11.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................................................45
ARTICLE XII TERMINATION OF AGREEMENT..........................................................................45
SECTION 12.1 TERMINATION................................................................................45
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SECTION 12.2 EFFECT OF TERMINATION.....................................................................46
ARTICLE XIII MISCELLANEOUS...............................................................................46
SECTION 13.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS..................................................46
SECTION 13.2 NO THIRD PARTY BENEFICIARIES.............................................................47
SECTION 13.3 ENTIRE AGREEMENT.........................................................................47
SECTION 13.4 SUCCESSION AND ASSIGNMENT................................................................47
SECTION 13.5 COUNTERPARTS.............................................................................47
SECTION 13.6 HEADINGS.................................................................................47
SECTION 13.7 NOTICES..................................................................................47
SECTION 13.8 RECORDING WITHOUT CONSENT OF ALL PARTIES.................................................49
SECTION 13.9 GOVERNING LAW............................................................................49
SECTION 13.10 DISPUTE RESOLUTION.......................................................................49
SECTION 13.11 AMENDMENTS AND WAIVERS...................................................................49
SECTION 13.12 SEVERABILITY.............................................................................50
SECTION 13.13 EXPENSES.................................................................................50
SECTION 13.14 CONSTRUCTION.............................................................................50
SECTION 13.15 INCORPORATION OF EXHIBITS AND SCHEDULES..................................................50
SECTION 13.16 SPECIFIC PERFORMANCE.....................................................................50
SECTION 13.17 FORUM....................................................................................50
SECTION 13.18 FURTHER ASSURANCES.......................................................................51
SECTION 13.19 SETOFF...................................................................................51
SECTION 13.20 FACSIMILE EXECUTION......................................................................51
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TABLE OF EXHIBITS
Exhibit A Employment Agreement
Exhibit B Assignment Agreement
Exhibit C Consent and Estoppel
Exhibit D Starlink, Incorporated Xxxx of Sale and Assignment
and Assumption Agreement
Exhibit E Starlink Special Assets, Inc. Xxxx of Sale
Exhibit F Intellectual Property Assignment Agreement
Exhibit G Seller's Opinion
Exhibit H Statement of Tangible Net Worth
Exhibit I WA License
Exhibit J Buyer's Opinion
TABLE OF SCHEDULES
Schedule 1.1(a) Assets
Schedule 1.1(b) Excluded Assets
Schedule 1.1(c) Assumed Liabilities
Schedule 2.5 Section 1060 Price Allocation
Schedule 2.7 Schedule 2.7(a) List of Key Employees of Seller
Schedule 4.1 Seller's Shareholders
Schedule 4.6 Tangible Personal Property
Schedule 4.8(a) Tax Statements
Schedule 4.8(b) Unaudited Financial Statements
Schedule 4.9 Events Subsequent to the Balance Sheet
Schedule 4.11 Government Authority
Schedule 4.13 Real Property Leases
Schedule 4.14(a) Intellectual Property
Schedule 4.14(b) Intellectual Property Exceptions
Schedule 4.14(d) Intellectual Property Licenses
Schedule 4.14(g) Intellectual Property Licenses Granted
Schedule 4.14(i) Intellectual Property Work for Hire
Schedule 4.14(l) Intellectual Property User List
Schedule 4.14(m) Software Specifications
Schedule 4.16 Approvals
Schedule 4.17 Contracts
Schedule 4.18 Accounts Receivable, Accounts Payable, Inventory
Schedule 4.21 Insurance
Schedule 4.22 Litigation
Schedule 4.23(a) Product Warranty Claims
Schedule 4.23(b) Product Terms and Conditions
Schedule 4.25 Employees
Schedule 4.26 Employee Benefits
[THE EXHIBITS AND SCHEDULES TO THIS AGREEMENT HAVE BEEN OMITTED.]
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
December 5, 2001, by and between Starlink, Incorporated, a Texas corporation,
and Starlink Special Assets, Inc., a Delaware corporation (jointly,
collectively, and severally referred to herein as "Seller"), Raven Industries,
Inc., a South Dakota corporation ("Buyer"), and Xxxxx X. Xxxxxx, Xxxxxxxx X.
Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxxx and Xxxxxxx X.
Xxxxxx (Xxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X.
Xxxxxxx, Xxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx shall collectively, jointly and
severally be referred to as the "Shareholders"). Seller, each Shareholder, and
Buyer are sometimes hereinafter referred to individually as a "Party" and
collectively as the "Parties." Shareholders and Seller are referred to herein as
"Selling Parties."
RECITALS
WHEREAS, the Shareholders collectively own all of the outstanding
capital stock of Starlink, Incorporated; and
WHEREAS, Seller is engaged in the business of development, manufacture,
sales (directly or indirectly through third parties) and service of navigation,
timing and location technology (including without limitation GPS technology) and
related equipment (the "Business"); and
WHEREAS, Starlink, Incorporated intends to transfer all of the
intangible assets of the Business to its wholly owned subsidiary Starlink
Special Assets, Inc.; and
WHEREAS, Buyer desires to buy from Seller, and Seller desires to sell
to Buyer, all of Seller's assets relating to the Business; and
WHEREAS, Buyer will not assume any liabilities of Seller except those
specifically set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals (which are
hereby made a part of this Agreement) and the mutual representations,
warranties, and covenants herein contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1(a) DEFINITIONS. As used in this Agreement, the following
terms have the meanings set forth below:
"ACQUIRED ASSETS" means all of the assets, properties and rights of
Seller (other than the Excluded Assets set forth on SCHEDULE 1.1(b)) currently
used in, relating to or connected with the Business of every kind, nature and
description, tangible or intangible, wherever located free of any and all
Security Interests other than the Assumed Liabilities, including but not limited
to:
(1) the Real Property Leases;
(2) all Inventories including, in any event, the Inventories
set forth on SCHEDULE 1.1(a);
(3) all Tangible Personal Property including, in any event,
the Tangible Personal Property set forth on SCHEDULE 1.1(a);
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(4) all Intellectual Property and Software, including, in any
event, the Intellectual Property and Software set forth in SCHEDULE 1.1(a);
(5) the Contract Rights;
(6) all Goodwill;
(7) all Receivables including, in any event, the Receivables
set forth on SCHEDULE 1.1(a);
(8) all of Seller's rights in any insurance policies and
Seller's claims, deposits, prepayments, refunds, causes of action, chooses in
action, rights of recovery, rights of set off, and rights of recoupment (except,
in each case, those relating to a Tax Liability, or to any other Liability or
claim that is not an Assumed Liability);
(9) all sales records, purchase records, customer lists,
supplier lists, advertising and promotional materials, vendor records and
information, production records and other records relating to the Business or
the Acquired Assets; all deeds and other instruments, maps, and profiles
relating to the Business or the Acquired Assets; all records regarding the
Occupational Safety and Health Act ("OSHA") and other governmental examinations
and clearances relating to the Business or the Acquired Assets; and all
personnel records of any Employee that is employed by Buyer following the
Closing; provided, however, that Seller may make and retain copies of any
records transferred to Buyer;
(10) Seller's transferable and assignable non-compete,
non-disclosure, confidentiality and non-solicitation agreements with former and
current Employees of Seller;
(11) to the extent assignable, all of Seller's Governmental
Authorizations;
(12) all of Seller's prepaid expenses; and
(13) all of Seller's books, records, ledgers, lists of
customers and suppliers, files, documents, correspondence, lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials;
provided, however, that the Acquired Assets shall not include (i) any of the
rights of Seller under this Agreement or the Related Agreements (or under any
side agreement between Seller and Buyer entered into on or after the date of
this Agreement), (ii) the original books, records and documents of Seller
relating to any Liability of Seller that is not an Assumed Liability, or (iii)
the Seller's minute book and other general corporate records (including tax
records and personnel files).
An "AFFILIATE" of a specified Person, is a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Person specified. As used in the foregoing
sentence, the term "control" (including the terms "controlling," "controlled by"
and "under common control with") means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by Contract, or
otherwise. Without limiting the generality of the foregoing, with respect to
Seller, the term "Affiliate" includes each of Seller's Shareholders and the
director, officer, spouse, parent, grandparent, sibling, child and grandchild of
any of Seller's Shareholders.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(A).
"ASSET REDUCTION AMOUNT" has the meaning set forth in Section 2.4(g).
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"ASSUMED LIABILITIES" means only those items specifically set forth on
SCHEDULE 1.1(c); provided, however, that Assumed Liabilities shall not include
any other Liability including but not limited to: (i) any Liability of Seller
for Taxes, except as otherwise specifically set forth in this Agreement, (ii)
any Liability of Seller or Seller's Shareholders for Taxes arising in connection
with the consummation of the Contemplated Transactions (including any income
Taxes arising because Seller is transferring the Acquired Assets), except as set
forth in Section 2.4(e), (iii) any obligation of Seller to indemnify any Person
by reason of the fact that such Person was a shareholder, director, officer,
Employee, or agent of Seller or was serving at the request of Seller as a
shareholder, trustee, director, officer, employee, or agent of another entity
(whether such indemnification is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such indemnification is pursuant to any statute, charter document, bylaw,
agreement, or otherwise), (iv) any Liability of Seller for costs and expenses
incurred in connection with this Agreement, the Related Agreements and the
Contemplated Transactions except as expressly set forth herein, (v) any
Liability of Seller under this Agreement or any Related Agreement (or under any
side agreement between Seller and Buyer entered into on or after the date of
this Agreement), (vi) any Liability of Seller with respect to any Employee Plan
or other Liability relating to any Employee of Seller, including, but not
limited to, vacation time or pay, sick time or pay, or any other benefit accrued
or owed to such Employees of Seller, or (vii) any claim, Liability or expense
arising out of wages, salary or other employee benefits due to Seller's
Employees, including vacation pay, sick pay, severance pay, health insurance,
worker's compensation and retiree pension and medical benefits that arise during
or as a result of their employment by Seller prior to the Closing except as
otherwise specifically set forth in this Agreement.
"BALANCE SHEET" means the balance sheet of Seller dated September 30,
2001.
"BALANCE SHEET DATE" means September 30, 2001.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could reasonably be
expected to form the basis for any specified consequence.
"BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement or the Contemplated
Transactions.
"BUSINESS" has the meaning set forth in the Recitals above.
"BUYER" has the meaning set forth in the preface above.
"BUYER SEC REPORTS" has the meaning set forth in Section 5.6.
"CASH CONSIDERATION" has the meaning set forth in Section 2.3(a).
"CLEANUP" means any cleanup, corrective action or other action,
including any investigation, cleanup, removal, containment or other remediation
or response actions required by applicable Environmental Law (whether or not
such action has been required or requested by any Governmental Body or any other
Person).
"CLOSING" has the meaning set forth in Section 3.1 below.
"CLOSING STATEMENT" has the meaning set forth in Section 2.4(a) below.
3
"CLOSING DATE" has the meaning set forth in Section 3.1 below.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
regulations related thereto.
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated
by this Agreement, including but not limited to:
(a) the sale of the Acquired Assets by Seller to Buyer;
(b) the execution, delivery, and performance of this Agreement
and each of the Related Agreements;
(c) Buyer's payment of the Purchase Price and its assumption
of the Assumed Liabilities;
(d) the performance by the Parties of their respective
covenants and obligations under this Agreement and each of the Related
Agreements; and
(e) Buyer's acquisition and ownership of the Acquired Assets
and exercise of control over the Business following closing.
"CONTRACT" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral).
"CONTRACT RIGHTS" means all of Seller's rights and benefits (including
third-party beneficiary rights) under only those specific Contracts listed in
SCHEDULE 1.1(a).
"DEFERRED AMOUNT" has the meaning set forth in Section 2.3 below.
"DISCLOSURE SCHEDULE" has the meaning set forth in Article IV below.
"EFFECTIVE TIME" means 12:01 a.m., Minneapolis, Minnesota local time,
on the Closing Date.
"EMPLOYEE" means, only for purposes of determining the terms of the
Agreement between the Parties, any employee, co-employee, consultant,
representative, or agent of Seller, or any other Person performing services for
Seller which would be considered an "employee" pursuant to the Code or other
Legal Requirement. This definition is not an admission by the Parties to any
other Person of such Employees being considered "employees" under the Code, or
any Legal Requirement.
"EMPLOYEE BENEFIT PLAN" means any (A) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan, (b) defined contribution retirement plan or arrangement qualified
under Section 401(A) of the Code that is an Employee Pension Benefit Plan, (c)
defined benefit retirement plan or arrangement qualified under Section 401(A) of
the Code that is an Employee Pension Benefit Plan (including any Multiemployer
Plan), or (d) Employee Welfare Benefit Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE PLANS" has the meaning set forth in Section 4.26.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
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"ENVIRONMENTAL LAWS" means all past, present and future federal, state,
local, foreign or other statutes, laws, regulations, ordinances, rules, orders,
consent decrees, consent judgments, judicial or administrative decisions,
agreements or directives, issued or enacted relating to: (A) pollution or
protection of the environment, including natural resources; (B) exposure of any
individual, including Employees of Seller, to any Hazardous Material; (C)
protection of human health or welfare from the effects of manufacture, use or
introduction into commerce of Hazardous Material, including, without limitation,
use of or rights with respect to their manufacture, formulation, packaging,
labeling, distribution, transportation, handling, storage and disposal; and (D)
regulation generally of the use of the environment, including, without
limitation, ambient air, surface water, ground water, and surface or subsurface
strata, in each case, as now in effect. For purposes of this definition, the
term "Environmental Laws" shall include, without limitation, the following
statutes: (1) the Clean Air Act, as amended, 42 U.S.C. xx.xx. 7401 et seq.; (2)
the Federal Water Pollution Control Act, as amended, 33 U.S.C. xx.xx. 1251 et
seq.; (3) the Resource Conservation and Recovery Act of 1976, as amended, 42
U.S.C. xx.xx. 6901 et seq. ("RCRA"); (4) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. xx.xx.
9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of
1986 ("CERCLA"); (5) the Toxic Materials Control Act, as amended, 15 U.S.C.
xx.xx. 2601 et seq.; (6) the Occupational Safety and Health Act, as amended, 29
U.S.C. ss. 651; (7) the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. xx.xx. 801 et seq.; (8) the Mine Safety and Health Act of 1977,
as amended, 30 U.S.C. xx.xx. 801 et seq.; (9) the Safe Drinking Water Act, 42
U.S.C. xx.xx. 3008 et seq.; (10) all comparable United States, state, local and
foreign laws, statutes, rules regulations, judgments, orders, decrees,
stipulations or charges; and (11) each as amended, together with any other Legal
Requirement or Order concerning pollution or protection of the environment,
public health and safety, employee health and safety, or making responsible
parties pay private parties, or groups of them, for damages done to their health
or the environment, or permitting self-appointed representatives of the public
interest to recover for injuries done to public assets, including any Legal
Requirement or Order relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" means those assets set forth on SCHEDULE 1.1(b).
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GOODWILL" means the goodwill associated with the Business and the
trademarks and trade name of Seller, and all rights to continue to use the
Acquired Assets in the operation of a going concern.
"GOVERNMENTAL AUTHORIZATION" means any approval, certificate, consent,
franchise, license, permit, registration, variance, waiver, or other
authorization issued, granted, given, or otherwise made available by or under
the authority of any Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" means any (i) nation, xxxxx, xxxx, xxxx, xxxxxxx,
xxxxxxxx or other jurisdiction of any nature; (ii) federal, state, local,
municipal, foreign, or other government; or (iii) governmental or
quasi-governmental agency, branch, department, official, or entity and any court
or other tribunal; (iv) multi-national organization or body; or (v) body
entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature.
"HAZARDOUS ACTIVITIES" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use
5
(including any withdrawal or other use of groundwater) of Hazardous Materials
in, on, under, about, or from the Leased Real Property or any part thereof into
the environment, and any other act, business, operation, or thing that increases
the danger, or risk of danger, or poses an unreasonable risk of harm to persons
or property on or off the Leased Real Property, or that may affect the value of
the Leased Real Property or the Business.
"HAZARDOUS MATERIALS" means: (A) any "hazardous substance" as defined
in CERCLA, 42 U.S.C. ss. 9601(14); (B) any "pollutant or contaminant" as defined
in CERCLA, 42 U.S.C. ss. 9601(33); (C) any "hazardous waste" as defined in RCRA,
42 U.S.C. ss. 6903(5); (D) any asbestos, dioxins, polychlorinated biphenyls that
exceed regulated levels, uranium, radioactive isotopes and other nuclear
by-products, toxic substances or petroleum products, by-products or derivatives;
(E) any substance, whether liquid, solid or gas that presents a significant risk
of an adverse or harmful effect upon human health, upon animals or upon air,
water, land, natural resources or any other aspects of the environment; (F)
petroleum or petroleum products, polychlorinated biphenyl, radioactive material
or radon gas; and (G) any other substance, material or waste classified as
hazardous, toxic, harmful or dangerous or as a pollutant or contaminant under
any Environmental Law.
"INTELLECTUAL PROPERTY" means: (i) all inventions, discoveries,
improvements, ideas, know-how, methodology, processes, and other proprietary
technology (whether or not patentable), as well as all United States and foreign
patents and patent applications (including all reissues, continuations,
continuations-in-part, divisions, renewals or extensions thereof); (ii) all
copyrights and copyrightable works, including but not limited to mask works,
writings, designs, or other original works of authorship and derivative works
thereof (including those for which registration has been applied, which are
registered, or which are unregistered); (iii) all U.S., state and foreign
trademarks, service marks, trade dress, trade names and other names, slogans and
logos embodying indications of origin, and all goodwill associated therewith
(including those for which registration has been applied, which are registered,
or which are unregistered); (iv) all trade secrets including confidential and
other non-public information for which there exists a right in any jurisdiction
to limit the use or disclosure thereof, (v) all Internet web sites, domain
names, and registrations or applications for registration thereof; (vi) all
licenses, immunities, covenants not to xxx and the like relating to any of the
foregoing; and (vii) all books and records (including electronic) describing,
recording or otherwise used in connection with any of the foregoing.
"INDEMNIFICATION LIMIT" has the meaning set forth in SECTION 11.1(b).
"INVENTORIES" means all of Seller's inventories of raw materials,
work-in-process, and finished goods, as well as its inventories of processing,
packaging, and other supplies.
"KNOWLEDGE" means with respect to an individual that (i) such
individual is actually aware of a particular fact or matter, or (ii) a
reasonable individual could be expected to discover or otherwise become aware of
such fact or other matter in the Ordinary Course of Business. Seller will be
deemed to have Knowledge of a particular fact or other matter if any of Seller's
officers, directors or Shareholders has Knowledge thereof. Buyer will be deemed
to have Knowledge of a particular fact or other matter if any of Buyer's
directors or officers has Knowledge thereof.
"LEASED REAL PROPERTY" means the leased real property subject to the
Real Property Leases, including the real estate, buildings, other improvements
and fixtures located thereon, all other appurtenances thereto, and all of
Seller's rights under and in such Real Property Leases.
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational, or other administrative Order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
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"LIABILITY" means any cost, obligation or liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"LOSSES" has the meaning set forth in SECTION 11.1(a).
"MATERIAL ADVERSE EFFECT" means a material negative effect on the
Acquired Assets, the Business, Buyer, its Affiliates or the financial condition,
results of operations or prospects of Buyer or its Affiliates following
consummation of the Contemplated Transactions.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means the course of business consistent
with past custom and practice (including with respect to quantity and frequency)
of the Person conducting such business.
"PARTY" or "PARTIES" has the meaning set forth in the preface hereto.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"PROMISSORY NOTE" has the meaning set forth in SECTION 2.3(b) below.
"PURCHASE PRICE" means Eight Million Dollars ($8,000,000), subject to
upward or downward adjustment as provided in SECTION 2.4 and 3.3 and as
otherwise set forth in this Agreement.
"REAL PROPERTY LEASES" means those certain Real Property Leases
described on SCHEDULE 4.13 of the Disclosure Schedule which shall include (i)
the leasehold estate and interest created by the Real Property Leases in the
real estate, buildings, other improvements and fixtures subject thereto, and
(ii) all right, title and interest of Seller under or in respect of the Real
Property Leases, whether in its capacity as tenant or otherwise, including any
option to purchase contained in the Real Property Leases and any security and
other deposits, common area cost refunds and adjustments and other amounts now
or hereafter payable to Seller under or in respect of the Real Property Leases.
"RECEIVABLES" means all of Seller's accounts, notes and other
receivables.
"RELATED AGREEMENTS" has the meaning set forth in SECTION 2.7 below.
"RELEASE" means any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
environment, whether intentional or unintentional.
"SECURITY INTEREST" means any interest, lien, option, mortgage, pledge,
security interest, lease, encumbrance, right of first refusal, claims under
bailment and storage agreements, equities, conditional sales contracts, charges
and restrictions of any kind or restriction on ownership, enjoyment, use,
possession, or transfer including any mortgage, lien or pledge granted under
applicable sections of the Uniform Commercial Code or real property law.
"SELLER" has the meaning set forth in the preface above.
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"SELLING PARTIES" means collectively and jointly and severally, the
Seller and the Shareholders.
"SOFTWARE" means all computer software owned, used, or licensed by
Seller, including but not limited to the following: (i) object or
machine-readable code; (ii) source or human-readable code including but not
limited to all source files, listings, uncompiled code, graphics, audio source
files, instructions, control logic, flow charts, internal documentation,
designs, drawings, prints, technical data and such other documentation as is
necessary to recreate, revise, modify or enhance the Software or any portion
thereof, (iii) all materials provided in connection with such Software,
including but not limited to, all diskettes, tapes, and printed, informational
or instructional materials relating to the Software; and (iv) all copies of any
of the foregoing in the possession or control of Seller.
"STATEMENT OF TANGIBLE NET WORTH" has the meaning set forth in SECTION
2.4(b) below.
"SUBSIDIARY" means any corporation, partnership, limited liability
company, association, joint stock company, trust, joint venture, or
unincorporated organization with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the equity ownership or has the power to
vote or direct the voting of sufficient securities or equity to elect a majority
of the directors or other controlling body.
"TANGIBLE NET WORTH" means a calculation of the book value of the
Acquired Assets less the Assumed Liabilities. The calculation of Tangible Net
Worth shall also exclude accounts receivable that Seller and Buyer agree are
unlikely to be paid.
"TANGIBLE PERSONAL PROPERTY" means all machinery and equipment,
furniture, furnishings, leasehold improvements, fixtures (including trade
fixtures), motor vehicles, tools, Internet Web sites, Internet domain names,
phone and facsimile numbers, vehicles and other tangible personal property
(other than Inventories) related to, connected with or used in the Business.
"TAX" OR "TAXES" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, income,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TRACOR AGREEMENT" means the Tracor Research and Development Agreement
for Marine GPS Navigation Receiver between Starlink, Incorporated and Tracor
Instruments Austin, Inc. dated 12 July 1990 and any amendments or extensions
thereto.
"WA LICENSE" means that certain non-exclusive patent license agreement
effective January 1, 2002 between Western Atlas International, Inc. and
Starlink, Incorporated in the form attached hereto as EXHIBIT I.
ARTICLE II
BASIC TRANSACTION
SECTION 2.1 PURCHASE AND SALE OF ASSETS. On and subject to the terms
and conditions of this Agreement, Buyer agrees to purchase from Seller, and
Seller agrees to sell, transfer, convey, and deliver to
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Seller, all of the Acquired Assets at the Closing free of any Security Interest
not included in the Assumed Liabilities for the consideration specified below in
this ARTICLE II.
SECTION 2.2 ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Buyer agrees to assume and become responsible for
the Assumed Liabilities, in such amounts as exist as of the Effective Time.
Buyer will not assume or have any responsibility, however, with respect to any
other Liability of Seller not fully disclosed on SCHEDULE 1.1(c) or elsewhere in
this Agreement.
SECTION 2.3 PURCHASE PRICE. Subject to the terms of this Agreement,
including the adjustment provided by Section 2.4 and 3.3, Buyer will deliver the
Purchase Price as follows:
(a) Cash Consideration. Seven Million Five Hundred Thousand
Dollars ($7,500,000.00) to Seller by wire transfer or delivery of other
immediately available funds at Closing (the "CASH CONSIDERATION"), as reduced or
increased by the adjustments set forth in SECTION 2.4 and 3.3. The adjustments
set forth in SECTIONS 2.4 and 3.3 shall be estimated by the parties at Closing
and finalized thirty (30) days thereafter as provided herein, and the Cash
Consideration shall be adjusted by the Buyer accordingly.
(b) Deferred Amount. At the Closing, Buyer shall reserve Five
Hundred Thousand Dollars ($500,000) (the "DEFERRED AMOUNT"), which amount will
be paid or retained by Buyer pursuant to the terms set forth in SECTIONS 2.4 and
3.3.
SECTION 2.4 ADJUSTMENT OF CASH CONSIDERATION.
(a) Adjustment & Closing.
(i) Closing Statement. The Cash Consideration portion
of the Purchase Price paid at Closing will be reduced or increased on the
Closing Date by all estimates of the prorations and adjustments set forth in
SECTIONS 2.4 (including the Asset Adjustment, Texas Franchise Tax Adjustment and
the Asset Reduction Amount) and 3.3 as set forth on a closing statement agreed
upon and signed by the Buyer and Seller at Closing ("CLOSING STATEMENT").
(ii) Post Closing Statement. Further, the Cash
Consideration portion of the Purchase Price will be reduced or increased again
thirty (30) days after the Closing Date by those prorations and adjustments set
forth in SECTIONS 2.4 (including the Asset Adjustment, Texas Franchise Tax
Adjustment and the Asset Reduction Amount) and 3.3 as set forth in a statement
adjusting the Closing Statement ("POST CLOSING STATEMENT"). Such Post Closing
Statement shall be mutually agreed to in writing by Buyer and Seller or
determined pursuant to SECTION 2.4(c). Buyer shall pay to Seller the increase to
the Cash Consideration, if any, within five business days of its calculation.
Buyer shall deduct the decrease, if any, to the Cash Consideration from the
Deferred Amount.
(b) Tangible Net Worth.
(i) Statement of Tangible Net Worth. Attached hereto
as EXHIBIT H is a calculation of the Tangible Net Worth of Seller on September
30, 2001, prepared in accordance with the Tax Statements applied on a consistent
basis ("STATEMENT OF TANGIBLE NET WORTH").
(ii) Closing Date Statement of Tangible Net Worth.
The calculation of the Tangible Net Worth shall be made on the Closing Date and
estimated as of the Closing Date consistently in accordance with the Tax
Statements and the Statement of Tangible Net Worth in a statement agreed to
between the Buyer and Seller ("CLOSING DATE STATEMENT OF TANGIBLE NET WORTH")
for determination of the Closing Statement.
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(iii) Final Statement of Tangible Net Worth. Further,
the calculation of the Tangible Net Worth as of the Closing Date shall be
adjusted within thirty (30) days of Closing consistently in accordance with the
Tax Statements, the Statement of Tangible Net Worth and the Closing Date
Statement of Tangible Net Worth in a statement agreed to between the Buyer and
Seller ("FINAL STATEMENT OF TANGIBLE NET WORTH") for determination of the Post
Closing Statement.
(c) Disputes. In the event that Buyer and Seller cannot
mutually agree on the Post Closing Statement or Final Statement of Tangible Net
Worth within (30) days after the Closing, such differences shall be submitted by
any affected party for resolution to an independent certified public accounting
firm of national standing that is mutually acceptable to Buyer and Seller or, in
the event that Buyer and Seller cannot agree as to such accounting firm, to a
national independent certified public accounting firm chosen by the President of
the American Arbitration Association on application of such parties. Such
submission shall be within seventy-five (75) days of Closing. Within two
business days of the selection of such national independent accounting firm,
each of Buyer and Seller shall submit to such firm their calculation of the Post
Closing Statement and the Final Statement of Tangible Net Worth. Such firm shall
audit each item in dispute and prepare the Final Statement of Tangible Net Worth
and Post Closing Statement in accordance with this Agreement, and Buyer and
Seller shall adjust the Purchase Price in accordance with such determination.
The determination of such national independent accounting firm shall be final
and binding upon all parties. The fees of any such national independent
accounting firm employed pursuant to this paragraph shall be borne by the party
whose position with respect to the Final Statement of Tangible Net Worth or Post
Closing Statement is accepted by such accounting firm, and if neither party's
position is accepted in its entirety by such accounting firm, then the
accounting firm shall determine the extent of each party's responsibility to pay
such accounting firm's fees.
(d) Net Asset Adjustments to Purchase Price. In the event that
the Tangible Net Worth of Seller is more or less than One Million Five Hundred
Thousand Dollars ($1,500,000) (the "BASE VALUE") on the Closing Date, the
Purchase Price shall be adjusted dollar for dollar by such difference. If
Tangible Net Worth is less than Base Value on the Closing Date, Buyer shall
deduct from the Cash Consideration the difference between the Base Value and
Tangible Net Worth. If Tangible Net Worth is more than Base Value on the Closing
Date, Buyer shall increase the Cash Consideration in an amount equal to the
difference between the Base Value and Tangible Net Worth. Any such adjustment
shall be referred to as the "ASSET ADJUSTMENT."
(e) Franchise Tax. The Purchase Price shall be increased by
the amount of Taxes resulting from the purchase of the Acquired Assets under
this Agreement which exceeds the lesser of (i) seventy five thousand dollars
($75,000) or (ii) fifty percent (50%) of the Texas franchise tax paid or payable
by Seller ("TEXAS FRANCHISE TAX ADJUSTMENT").
(f) Deferred Amount. After deducting any applicable Asset
Adjustment, the Deferred Amount shall be held by the Buyer and paid to the
Seller on the third anniversary date of the Closing Date unless Buyer shall have
made a claim for indemnification pursuant to SECTION 2.9 or SECTION 11 of this
Agreement on or prior to the third anniversary of the Closing Date ("INDEMNITY
ADJUSTMENT"), in which case the disbursement of and rights to the Deferred
Amount shall also be reduced by any such Indemnity Adjustment.
(g) Loss, Destruction, Condemnation or Damage to Assets. If
between the date of this Agreement and the Closing Date, any Acquired Assets are
lost, destroyed, condemned, encumbered, or suffer any material damage and this
Agreement shall not have been terminated pursuant to ARTICLE XII hereof by
Buyer, if applicable, then, at the option of Buyer, either (a) the Cash
Consideration shall be reduced pursuant to SECTION 2.4(b) by the excess (the
"ASSET REDUCTION AMOUNT") of (i) the fair market value of such assets prior to
such loss, destruction, condemnation or damage, over (ii) the salvage value, if
any, of such assets following such loss, destruction, condemnation or damage, or
(b) no adjustment to the Purchase Price shall
10
be made and the Shareholders shall, on the Closing Date, cause Seller to have on
hand all insurance and/or condemnation proceeds on account of such loss,
destruction, condemnation or damage in an amount equal to or greater than the
Asset Reduction Amount.
SECTION 2.5 ALLOCATION. The Parties agree to allocate the sum of (i)
the Purchase Price, as adjusted, and (ii) the Assumed Liabilities (to the extent
required under the Code) among the Acquired Assets in accordance with SCHEDULE
2.5. Such allocation is intended to be in accordance with Code Section 1060 and
to be based upon the fair market value of the Acquired Assets. The Parties shall
each report the federal, state and local and other Tax consequences of the
purchase and sale contemplated hereby in a manner consistent with such Schedule.
SECTION 2.6 EMPLOYEE MATTERS.
(a) Except as specifically set forth in this Agreement, Buyer
shall not assume any employment obligations, wage or salary payment obligations,
including without limitation those arising under any pension, profit sharing,
deferred compensation, severance, welfare, sick leave, accrued or earned
vacation, wage or other employee benefit plan, procedure, policy or practice of
Seller regardless of whether such plan, procedure, policy or practice is
disclosed in this Agreement. Notwithstanding the foregoing, within five business
days prior to the Closing, Buyer shall make offers of employment to all or some
of Seller's Employees pursuant to terms determined by Buyer. Seller and
Shareholders shall, subject to the Indemnification Limit, jointly and severally
be responsible for and indemnify and hold Buyer harmless from any and all costs
(including reasonable attorneys' fees and other legal costs, whether or not suit
is filed), claims or Liabilities arising as a result of any such Employees of
Seller rejecting such offer of employment by Buyer. Buyer agrees that all such
Employees of Seller who are offered and accept employment with Buyer commencing
upon or shortly after the Closing shall, to the extent lawful and permitted
under the appropriate plans, receive credit under Buyer's Employee Benefit Plans
for their years of service with Seller. Seller will furnish to Buyer such
information in its personnel files as Buyer may reasonably request.
(b) Seller will pay, at or prior to the Closing, all unpaid
wages, salaries and bonuses, if any (together with all related payroll items),
of Seller's Employees accrued prior to the effective time of the Closing, and
all severance and other amounts, if any, which may become payable to or
receivable by Seller's Employees (by contract, as a matter of law or otherwise)
as a result of the termination of their employment with Seller (whether or not
such Seller's Employees are offered or accept employment with Buyer). Further,
Seller shall fully satisfy, as of the Closing Date, every Liability relating to
any Employee of Seller, including but not limited to vacation time or pay, sick
time or pay, or any other benefit accrued or owed to such Employees.
(c) Seller shall be responsible and liable to pay or make
provision for pension, profit sharing and welfare benefit amounts under any of
the Employee Plans payable or accrued prior to the effective time of the Closing
with respect to Seller's Employees. Buyer shall succeed to no rights of Seller
under any of the Employee Plans and shall neither assume nor incur any
Liability, including liability under ERISA, with respect to any of the Employee
Plans.
(d) Without limiting the generality of SECTION 2.6(c), Seller
shall pay or cause the applicable Employee Plan to pay, as the case may be, all
amounts payable in the form of health, dental, sick pay, disability, life
insurance or workers' compensation benefits, or otherwise, by reason of or in
connection with (i) any claims filed or expenses incurred at any time with
respect to injuries, disabilities, illnesses or conditions suffered by any of
Seller's Employees or their dependents prior to the effective time of the
Closing, (ii) any claims filed at any time with respect to the death of any of
Seller's Employees or their dependents prior to the Effective Time of the
Closing, or (iii) any claims subject to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), or any comparable state law
relating to continuation of such benefits filed at any time with respect to any
of Seller's Employees or other individuals entitled to such benefits as a result
of their relationship or former relationship with any of Seller's Employees who
had a
11
"qualifying event" as defined in COBRA prior to the Effective Time of the
Closing. Seller shall pay all such amounts when due (before or after the
effective time of the Closing) in accordance with the provisions of any such
Employee Plans and the prior practices of Seller. For purposes of this SECTION
2.6(d), an injury, disability, illness or condition shall be deemed to have been
"suffered" on the date of occurrence of the injury or on the date of onset of
the illness, disability or condition, as the case may be, and any disputes
concerning the date of such an occurrence or onset shall be resolved by
determination of a medical expert knowledgeable and qualified as to such matters
acceptable to both Seller and Buyer and confirmed by a medical certificate.
(e) Seller acknowledges that in making offers of employment to
any of Seller's Employees, Buyer is not assuming any of the Liability of Seller
to such Seller's Employees.
SECTION 2.7 RELATED AGREEMENTS. At the Closing, the Parties will enter
into the following agreements (collectively, the "Related Agreements"):
(a) Employment Agreements between Buyer and the Employees of
Seller set forth on SCHEDULE 2.7(a), substantially in the form attached hereto
as EXHIBIT A;
(b) Assignment and Assumption of Lease in form attached hereto
as EXHIBIT B.
(c) Landlord Consent and Estoppel in the form attached hereto
as EXHIBIT C.
(d) Bills of Sale and Assignment and Assumption Agreements in
the forms attached hereto as EXHIBITS D and E, respectively.
(e) Intellectual Property Assignment Agreement in the form
attached hereto as EXHIBIT F.
(f) A Closing Statement, including the Closing Date Statement
of Tangible Net Worth.
(g) Other transfer documents which shall be sufficient to vest
good and marketable title to the Acquired Assets and to transfer the Assumed
Liabilities in the name of Seller or its assignees.
(h) Such other agreements which further the performance of all
covenants and satisfy all conditions required of Selling Parties by this
Agreement, at or prior to the Closing, as Buyer or its counsel may reasonably
require.
SECTION 2.8 NONASSUMPTION OF CERTAIN CONTRACTS. Notwithstanding
anything to the contrary stated in this Agreement, if (i) the sale, assignment,
transfer or conveyance of any Contract Right without the approval, consent or
waiver of another party thereto would violate, conflict with, result in a breach
or termination of, or constitute a default or event of default under (or an
event which with due notice or lapse of time, or both, would constitute a
default or event of default under) the terms of such Contract giving rise to the
Contract Right or result in the creation of any Security Interest on any of the
Acquired Assets under such Contract or enable another party to such Contract to
terminate such Contract or impose a penalty or additional payment obligations or
accelerate any obligation of Seller or Buyer under such Contract, and (ii) all
necessary approvals, consents and waivers of all parties to such Contract have
not been obtained at or prior to the Closing, then (A) this Agreement shall not
constitute an agreement to assign or assume such Contract Right and such
Contract Right shall not be assigned to or assumed by Buyer or included in the
Acquired Assets or the Assumed Liabilities, (B) Seller and Buyer shall,
following the Closing, use all reasonable efforts to assist the other in
attempting to obtain such necessary approvals, consents and waivers, (C) Seller
and Buyer shall, following the Closing, promptly execute all documents necessary
to complete the assignment and assumption of such Contract Right if such
approvals, consents and waivers are obtained, and (D) unless and until such
approvals, consents and waivers are obtained and such assignment and assumption
occurs, Seller and Buyer
12
shall cooperate in entering into any reasonable arrangement designed to obtain
for Buyer all benefits and privileges of such Contract Right including the
holding by Seller of such benefits and privileges in trust for Buyer) while
protecting Seller from the obligations of Seller first accruing after the
Closing Date under such Contract (in which event such benefits and privileges
will be deemed to be included in the Acquired Assets). Nothing stated in this
SECTION 2.8 shall affect the right of Buyer to elect not to consummate the
transactions contemplated by this Agreement in the event the conditions set
forth in ARTICLE IX hereof are not satisfied in full at or before the Closing.
SECTION 2.9. ASSUMPTION OF CERTAIN WARRANTY OBLIGATIONS BY BUYER. Buyer
reserves the right (but shall not be obligated) to satisfy warranty claims
arising from products or services of Seller sold or provided by Seller prior to
the Closing Date (the "WARRANTY CLAIMS"). For purposes of this Agreement,
"Warranty Claims" shall mean claims to repair or replace products or services
sold or provided by Seller prior to the Closing Date and shall exclude any
claims for personal injuries or torts resulting from such products or services.
Buyer may deduct the amount for any costs of Warranty Claims from the Deferred
Amount and shall provide notice to Seller of same on a quarterly basis;
provided, however, that such amounts shall not be deducted from the Deferred
Amount unless and until such amounts exceed an aggregate of Twenty Five Thousand
Dollars ($25,000) (the "WARRANTY THRESHOLD AMOUNT"); provided further, however,
that Buyer is entitled to deductions for Warranty Claims from the Warranty
Threshold Amount and then the Deferred Amount only if Buyer satisfies such
claims (i) by first attempting to repair or replace the subject product or
service to the extent reasonably practicable (in which case the amount of such
Warranty Claim shall be the actual cost to Buyer to repair or replace without
any markup) and (ii) in accordance with the terms and conditions of the warranty
policies and procedures followed by Seller immediately prior to the Closing
Date. Subject to the Indemnification Limit, the Selling Parties shall be fully
liable for payment to Buyer of any amounts above the Warranty Threshold Amount
paid by Buyer for any Warranty Claims, which Buyer decides to satisfy. In the
event any Warranty Claims are asserted against Seller, then Seller shall give
prompt notice thereof to Buyer in order to permit Buyer the necessary time to
exercise its rights hereunder, evaluate the merits and defend, settle or
compromise such Warranty Claim. Buyer may only settle or compromise a single
Warranty Claim which exceeds ten thousand dollars ($10,000) with the prior
consent of the Seller, which shall not be unreasonably withheld or delayed.
Within ten (10) days after the end of each month following the Closing, Buyer
shall provide an invoice to Seller for such excess over the Warranty Threshold
Amount. Such invoice will identify the product that is the basis of the Warranty
Claim, the date the product was sold, and the purchaser of the product and will
specify Warranty Claim payments, adjustments, returns, and replacements. Once
the Deferred Amount has been depleted, the Selling Parties shall pay such
invoices within 30 days. In the event a Warranty Claim is made to Buyer that
Buyer determines not to satisfy, Buyer shall provide notice to Seller of such
claim and will cooperate with Seller so that Seller can evaluate the claim and
determine how it should be satisfied.
ARTICLE III
THE CLOSING
SECTION 3.1 THE CLOSING. The closing of the Contemplated Transactions
(the "Closing") shall take place at the offices of Xxxxxx Xxxxxxx Xxxxxx &
Brand, LLP in Minneapolis, Minnesota, commencing at 9:00 a.m. local time on
December ___, 2001, unless Buyer and Seller shall mutually determine a different
date (the "Closing Date"), provided all conditions to the closing contained
herein have been satisfied or waived in writing on or prior to the Closing Date.
Except as provided in ARTICLE XII, failure to consummate the purchase and sale
provided for in this Agreement on the date and time and at the place determined
pursuant to this SECTION 3.1 will not result in the termination of this
Agreement and will not relieve any Party of any obligation under this Agreement.
The Closing, if completed, will be effective for all purposes (including the
risk of loss to property and Buyer's assumption of the Assumed Liabilities) as
of the Effective Time.
SECTION 3.2 DELIVERIES AT THE CLOSING. At the Closing, (i) the Selling
Parties will deliver to Buyer the various certificates, instruments, and
documents referred to in ARTICLE IX below and all other Related
13
Agreements; (ii) Buyer will deliver to Seller the various certificates,
instruments, and documents referred to in ARTICLE X below and all other Related
Agreements; (iii) the Selling Parties will execute, acknowledge (if
appropriate), and deliver to Buyer a general assignment and warranty xxxx of
sale (including all Intellectual Property transfer documents requested by Buyer)
and such other instruments of sale, transfer, conveyance, and assignment in such
form as Buyer and its counsel reasonably may request; (iv) Buyer will execute,
acknowledge (if appropriate), and deliver to Seller an assumption agreement in
such form as Seller and its counsel reasonably may request; and (v) Buyer will
deliver to Seller the consideration in accordance with ARTICLE II above.
SECTION 3.3 PRORATIONS.
(a) Property Taxes. All real estate Taxes and personal
property Taxes assessed against the Acquired Assets or, to the extent the Seller
is obligated to pay the same under the Real Property Leases, the Leased Real
Property, or any unpaid amounts assessed against the Acquired Assets or the Real
Property Leases in lieu thereof (collectively the "Property Taxes"), with
respect to the tax year (of the applicable taxing authority) in which the
Closing occurs shall be apportioned between Seller and Buyer at the Closing, so
that Seller shall be responsible for that portion of such Property Taxes
determined by multiplying the full amount of such Property Taxes times a
fraction, the numerator of which is the number of days in such tax year
occurring on or prior to the Closing Date and the denominator of which is the
total number of days in such tax year, and Buyer shall be responsible for the
remainder of such Property Taxes. In the event Property Tax statements are sent
directly to Seller, Seller shall cause such statements to be forwarded promptly
to Buyer. Seller shall also be responsible for all Property Taxes, including all
penalties and interest thereon, assessed by taxing authorities with respect to
any tax years prior to the tax year in which the Closing occurs and all
installments of special assessments assessed or pending prior to the Closing and
payable in any tax year (whether such tax year commences or ends before, on or
after the Closing Date) with respect to the Real Property Leases (in each case
to the extent the tenant is obligated to pay the same at any time under the Real
Property Leases).
(b) Agreements. Rent and other payments based on performance
over a period of time which are due and payable with respect to a period in
which the Closing occurs under the Real Property Leases or any other lease,
service agreement, maintenance agreement or similar contract included in the
Acquired Assets shall be prorated between Seller and Buyer at the Closing (based
on the number of days in such period occurring on or before and after the
Closing Date).
(c) Utilities. Seller and Buyer will use reasonable efforts so
that all providers of utility services to the Leased Real Property, to the
extent the tenant under the Real Property Leases is being billed directly
therefor, will xxxx Seller for all costs incurred on or prior to the Closing
Date and will xxxx Buyer for all costs incurred after the Closing Date. If the
providers do not submit separate bills, there will be such prorations at the
Closing respecting such utility costs as are equitable. Notwithstanding anything
to the contrary contained in this SECTION 3.3(c), Seller shall be responsible
for all costs of utility services to the Leased Real Property, to the extent the
tenant under the Real Property Leases is billed directly therefor, incurred on
or prior to the Closing Date. Should the actual costs for such period be
different from the sum of the utility prorations made at the Closing, Seller
shall promptly reimburse Buyer, or Buyer shall promptly reimburse Seller for any
overpayment made thereby, as appropriate.
(d) Transfer, Sales, Use Taxes. Except as expressly set forth
in this Agreement, Seller shall pay all transfer (including real estate and
motor vehicle transfer), sales and use Taxes, if any, and all fees, costs, deed
Taxes and recording fees, if any, applicable to the sale and transfer of the
Real Property Leases and the other Acquired Assets to Buyer, regardless of
whether such fees and taxes are payable by Buyer under any state, local or
federal law, including, but not limited to bulk transfer laws. Each of the
parties shall cooperate with the other to the extent reasonably required and
permitted by any Legal Requirement in order to eliminate or minimize any such
Tax. Without limiting the foregoing, to the extent any such Tax is imposed,
Seller shall
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prepare and file any required Tax Returns in connection therewith and Seller
shall pay and promptly discharge when due the entire amount of any such Tax.
(e) Adjustments to Purchase Price. All Property Taxes,
charges, payments or costs the proration or apportionment of which is provided
for in this SECTION 3.3 that Seller is responsible for, as provided above,
shall, to the extent the same has not been paid by Seller at or prior to the
Closing, reduce the amount Buyer would otherwise be obligated to pay hereunder
in cash for the Acquired Assets, and Buyer shall thereafter be obligated to pay,
in a timely manner, such amounts to the appropriate authorities or other persons
to whom the same are due and owing when the same become due and owing. All
Property Taxes, charges, payments or costs the proration or apportionment of
which is provided for in this SECTION 3.3 that Buyer is responsible for, as
provided above, shall, to the extent the same has been paid by Seller at or
prior to the Closing, increase the amount Buyer would otherwise be obligated to
pay hereunder in cash for the Acquired Assets.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES
As an inducement to Buyer to enter into this Agreement and to
consummate the Contemplated Transactions, each of the Selling Parties, jointly
and severally, represents and warrants to Buyer that the statements contained in
this Article IV are correct and complete as of the date of this Agreement and as
of the Closing Date, except as set forth in that certain disclosure schedule
prepared by Seller and delivered to Buyer simultaneously with the execution of
this Agreement (the "Disclosure Schedule"). The Disclosure Schedule is arranged
in separate and distinct "schedules" corresponding to the lettered and numbered
sections contained in this ARTICLE IV; the disclosures set forth in one schedule
shall not be deemed to be a disclosure in any other schedule of the Disclosure
Schedule; and in no event shall the mere listing in any schedule of the
Disclosure Schedule hereto of a document or other item be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself).
SECTION 4.1 ORGANIZATION AND CAPITALIZATION OF SELLER. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas and has all requisite power and authority to carry on
its business as it is now, and has since its formation been, conducted and is
duly authorized to own the properties and assets it now owns. Seller is duly
qualified to do business as a foreign entity and is in good standing in each
jurisdiction in which such qualification is necessary under the applicable law
as a result of the conduct of its business or the ownership of its properties
except where the failure to be so qualified and in good standing would not have
a Material Adverse Effect. All of the Seller's shareholders are listed on
SCHEDULE 4.1 of the Disclosure Schedule. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, exchange rights or
other Contracts or commitments that require Seller to issue, sell or otherwise
cause to become outstanding any of its shares or other interests. All of the
issued and outstanding shares and other ownership or equity interests or rights
are owned of record and beneficially by Seller's shareholders.
SECTION 4.2 AUTHORIZATION OF TRANSACTION. Seller has full power and
authority (including full partnership power and authority) to execute, deliver
and perform this Agreement and the Related Agreements and to consummate the
Contemplated Transactions. Seller's shareholders have duly authorized the
execution, delivery, and performance of this Agreement and the consummation of
the Contemplated Transactions by Seller. This Agreement constitutes the valid
and legally binding obligation of each of the Selling Parties, enforceable in
accordance with its terms and conditions.
SECTION 4.3 NO CONFLICT. Neither the execution and the delivery of this
Agreement or the Related Agreements, nor the consummation or performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time): (i) contravene, conflict with, or result in a
violation of or default under (a) any provision of the articles of incorporation
or by-laws of the Seller or (b) any resolution adopted by any of Seller's
shareholders or directors; (ii) contravene, conflict with, or result in a
violation of or default under, or give any Governmental Body or other Person the
right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
any of the Selling Parties or any of the Acquired Assets is subject; (iii)
contravene, conflict with, or result in a violation of or default under any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by Seller or that otherwise relates to the Business; or (iv)
contravene, conflict with, or result in a violation or breach of or default
under any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Contract or other arrangement to which
Seller is a party or by which Seller is bound or to which any of the Acquired
Assets is subject (or result in the imposition of any Security Interest upon any
of the Acquired Assets), except for, as to any of the matters covered by clauses
(ii), (iii) or (iv) above, such conflicts, violations or breaches which could
not, individually or in the aggregate, reasonably be expected to have a Material
16
Adverse Effect. Seller is not and will not be required to give any notice to or
obtain any consent from any Person in order for the Parties to consummate the
Contemplated Transactions.
SECTION 4.4 BROKERS' FEES. Neither Seller nor any of Seller's
Shareholders has any Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the Contemplated Transactions.
SECTION 4.5 CERTAIN PROCEEDINGS. No litigation or proceeding is pending
or, to the Knowledge of Seller, threatened against or related to Seller, that
challenges or could reasonably be expected to have the effect of delaying,
making illegal, or otherwise preventing or hindering any of the Contemplated
Transactions.
SECTION 4.6 TANGIBLE PERSONAL PROPERTY. Except as set forth in SCHEDULE
4.6:
(a) Seller has good title to each item of Tangible Personal
Property and each item of the Acquired Assets owned by it free and clear of any
and all Security Interests;
(b) Each item of Tangible Personal Property not owned by
Seller is in such condition that upon the return of such property to its owner
in its present condition at the end of the relevant lease term or as otherwise
contemplated by the applicable agreement between Seller and the owner or lessor
thereof, the obligations of Seller to such owner or lessor will be discharged;
(c) The Tangible Personal Property owned or used by Seller is
sufficient for the proper conduct of its business as heretofore conducted;
(d) Seller has maintained the Tangible Personal Property owned
or leased by it in a manner consistent with the ongoing requirements of the
Business and has not altered such maintenance practices in anticipation of the
Contemplated Transactions;
(e) Seller owns or otherwise has the right to use all of the
Tangible Personal Property currently in the operation of the business;
(f) All of the Tangible Personal Property is free from defects
and is in good operating condition and repair (subject to normal wear and tear);
and
(g) Seller has no Contract, letter of intent or proposal
relating to the acquisition or divestiture of any Tangible Personal Property.
SECTION 4.7 AFFILIATES. Each of Starlink, Incorporated and Starlink
Special Assets, Inc. have no other Affiliates except the Shareholders and do not
own, directly or indirectly, any shares of the capital stock or other equity
interests of any other Person.
SECTION 4.8 TAX STATEMENTS. SCHEDULE 4.8(a) contains the federal income
tax returns of Seller as of December 31, 1998, 1999 and 2000, and any related
consolidated statements of earnings, equity and cash flows for the fiscal years
then ended which Seller has prepared related thereto (the "TAX STATEMENTS").
SCHEDULE 4.8(b) contains the unaudited consolidated and consolidating balance
sheets of Seller as of September 30, 2001, and the related consolidated and
consolidating statements of earnings, equity and cash flows for the period then
ended and SCHEDULE 4.8(b) shall be updated within twenty (20) days after the end
of each calendar month preceding Closing. The September 30, 2001 financial
statements and all subsequent financial statements of Seller through Closing,
including the Statement of Tangible Net Worth, shall collectively be referred to
as the "INTERIM FINANCIAL STATEMENTS". The Tax Statements and, subject to the
exceptions hereinafter set forth in this SECTION 4.8, the Interim Financial
Statements (i) were prepared in accordance with the books and records of Seller;
(ii) were prepared in a fair and accurate manner to reflect the
17
economic and financial health of the Seller; (iii) fairly present Seller's
financial condition, assets and Liabilities and results of operations of Seller
at the relevant dates thereof and for the periods covered thereby. The foregoing
representation and warranty regarding Interim Financial Statements is subject to
the following exceptions (which, in the aggregate, do not have a Material
Adverse Effect): Interim Financial Statements (i) are subject to normal
recurring year-end adjustments, and (ii) do not contain all footnote disclosures
required by GAAP.
SECTION 4.9 EVENTS SUBSEQUENT TO THE BALANCE SHEET. Except as set forth
in SCHEDULE 4.9 of the Disclosure Schedule, except as required by this
Agreement, since the Balance Sheet Date, Seller has conducted its business in
the Ordinary Course of Business and there has not been (i) any declaration or
payment of distributions or dividends by Seller; (ii) any transaction not in the
Ordinary Course of Business; (iii) any change in the business, results of
operations, condition (financial or otherwise), assets, Liabilities or business
of Seller that has had or is reasonably likely to have, with the passage of time
or otherwise, a Material Adverse Effect; (iv) any damage, destruction or loss,
whether or not covered by insurance, which has had or is reasonably likely to
have, with the passage of time or otherwise, a Material Adverse Effect; (v) any
sale or transfer of any of its assets or any cancellation of any debts, rights
or claims, except sales in the Ordinary Course of Business of inventory or
immaterial amounts (not in excess of $10,000 in the aggregate) of other Tangible
Personal Property not required in its Business; (vi) any Security Interest of
any kind, except liens for Taxes not due, in any of its properties or assets;
(vii) any material amendment, modification or termination of any material
Contract or agreement to which Seller is a party; (viii) any increase in, or
commitment to increase, the compensation payable or to become payable to any
Employee or agent of Seller or any bonus payment or similar arrangement made to
or with any of such Employees or agents, other than those undertaken in the
Ordinary Course of Business in connection with annual salary reviews consistent
with past practices which, in the aggregate, have not increased annual payroll
by more than $100,000 and, individually, with respect to any Employee, has not
increased annual compensation by more than $10,000; (ix) any incurrence of,
assumption of, or taking of any property subject to, any Liability, except for
liabilities incurred or assumed or property taken subsequent to the Balance
Sheet Date in the Ordinary Course of Business; (x) any alteration in the manner
of keeping the books, accounts or records of Seller, or in the accounting
practices therein reflected; (xi) any issuance or sale of any interests,
including but not limited to equity and debt, in or of Seller, or any issuance
or sale of securities convertible into, or options with respect to, or warrants
to purchase or rights to subscribe to, any interests in or of Seller, or any
agreements entered into obligating Seller to issue, sell, redeem, repurchase or
acquire any such interests; (xii) any labor dispute or any activity or
proceeding by a labor union or representative thereof to organize any Employees
of Seller or any lockouts, strikes, slowdowns, work stoppages, or threats
thereof by or with respect to such Employees; (xiii) any notice from any
customer or customers or supplier or suppliers, as to such customer or
supplier's intention not to conduct business with Seller, the results of which
loss or losses of business or supplies, individually or in the aggregate, has
had, or may reasonably be expected to have, with the passage of time or
otherwise, a Material Adverse Effect; (xiv) any adoption of, amendment to or
termination of any Employee Plan; (xv) any license or sublicense of any rights
under or with respect to any Intellectual Property or Software; (xvi) any other
event or condition of any character which has had or may reasonably be expected
to have, with the passage of time or otherwise, a Material Adverse Effect; or
(xvii) any commitment by Seller to do any of the foregoing.
SECTION 4.10 UNDISCLOSED LIABILITIES. Seller has no Liability (and none
of the Selling Parties have Knowledge of any Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Seller giving rise to any Liability), except for (i) Liabilities
set forth on the face of the Balance Sheet, (ii) Liabilities that have arisen
after the date of the Balance Sheet in the Ordinary Course of Business which are
disclosed in SCHEDULE 4.9 of the Disclosure Schedule (none of which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of Contract, breach of warranty, tort, infringement, or violation of law
and none of which has or will have a Material Adverse Effect), and (iii)
Liabilities that have arisen in the Ordinary Course of Business and that are
reasonably expected to be fully covered by Seller's insurance.
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SECTION 4.11 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAWS. Seller,
and the conduct of the Business and ownership and use of the Acquired Assets,
are in material compliance with all Legal Requirements. None of the Selling
Parties has received during the past five years any written notice to the effect
that, or to the knowledge of each of the Selling Parties, otherwise been advised
by a Governmental Body, that, Seller is not in compliance with any Legal
Requirement. Seller has all Governmental Authorizations and approvals, each of
which is currently valid and in full force and effect, material to the conduct
of the Business, all of which Governmental Authorizations and approvals are set
forth in SCHEDULE 4.11 of the Disclosure Schedule. Without limiting the
generality of the preceding representation and warranty, Seller has not (i) made
or agreed to make any contribution, payment or gift to any government official,
Employee, or agent where either the contribution, payment or gift or the purpose
thereof was illegal under the Legal Requirements of any Governmental Body, (ii)
established or maintained any unrecorded fund or asset for any purpose or made
any false entries on the books and records of Seller for any reason, or (iii)
made or agreed to make any contribution, or reimbursed any political gift or
contribution made by any other person, to any candidate for, federal, state,
local or foreign public office. In addition, Seller (a) has complied with all
applicable laws relating to employee and civil rights and relating to employment
opportunities, (b) filed in a timely manner all reports and documents it was
required to file (and the information contained therein was correct and complete
in all respects) under all applicable laws, (c) has possession of all records
and documents it was required to retain under all applicable law, and (d) has
not violated in any material respect or received a notice or charge asserting
any violation of and there are no current, nor have there been any in the past
five (5) years, government investigations, including but not limited to any
civil investigative demand or similar request, related to the Xxxxxxx Act, the
Xxxxxxx Act, the Xxxxxxxx-Xxxxxx Act, the Federal Trade Commission Act, the
Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended,
except where such violation would not have a Material Adverse Effect.
SECTION 4.12 TAX MATTERS.
(a) Seller has filed all Tax Returns that it was required to
file with respect to the Business and Seller. All such Tax Returns were correct
and complete in all material respects. All Taxes owed by Seller (whether or not
shown on any Tax Return) have been paid or accrued. Seller is not currently the
beneficiary of any extension of time within which to file any Tax Return. Seller
has not received any notice and does not otherwise have Knowledge of any claim
currently being made by an authority in a jurisdiction where Seller files Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the Acquired Assets that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any Employee,
creditor, stockholder or other third party.
(c) There is no dispute or claim concerning any Tax Liability
of Seller either (i) claimed or raised by any authority in writing or (ii) as to
which Seller has Knowledge.
(d) Seller has not agreed to any extension of the statute of
limitations and has not agreed to any extension of time with respect to a Tax
assessment or deficiency.
SECTION 4.13 LEASED AND REAL PROPERTY.
(a) Seller has never owned any interest in any land or real
estate, except for its leasehold interests in the Leased Real Property.
(b) Other than the Leased Real Property described on SCHEDULE
4.13 of the Disclosure Schedule, Seller does not lease or sublease any real
property or real property interest from any Person. With respect to the Real
Property Leases:
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(1) Seller, through the Real Property Leases, has
valid written leasehold interests in all of the Leased Real Property;
(2) the Real Property Leases are legal, valid,
binding, enforceable, and in full force and effect;
(3) assuming Buyer assumes the Real Property Leases
according to applicable law and the terms thereof, the Real Property Leases will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the Transactions Contemplated;
(4) Except as set forth on SCHEDULE 4.13, no action
of any kind is necessary or required by Seller (or any other person, entity or
government body), including but not limited to obtaining consent, with respect
to such Leased Real Property or the Real Property Leases, in connection with the
Contemplated Transactions;
(5) no party to the Real Property Leases are in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(6) no party to the Real Property Leases has
repudiated any provision thereof;
(7) there are no disputes, oral agreements, or
forbearance programs in effect as to the Real Property Leases;
(8) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in or granted a Security
Interest in the Real Property Leases or the Leased Real Property;
(9) all facilities leased under the Real Property
Leases are supplied with utilities and other services necessary or appropriate
for the operation of said facilities; and
(10) Seller has delivered to Buyer correct and
complete copies of the Real Property Leases.
SECTION 4.14 INTELLECTUAL PROPERTY AND SOFTWARE.
(a) SCHEDULE 4.14(a) hereto lists and describes correctly the
Intellectual Property and Software used in any manner, or otherwise developed,
sold or conceived by the Business, Seller, or its Affiliates.
(b) All registered Intellectual Property is in full force and
effect and will not expire or require renewal until the date (if any) set forth
in SCHEDULE 4.14(a). The Software and Intellectual Property set forth on
SCHEDULE 4.14(a) are the only intellectual property needed to conduct the
business of Seller. Except as set forth in SCHEDULE 4.14(b), Seller does not own
or have any interest in or to any other copyrights, patents, trademarks, service
marks, trade names, master works, logos, trade secrets, designs, and other
intellectual property (or applications therefor) and does not license from
others the right to use any industrial or intellectual property rights. Except
as set forth on SCHEDULE 4.14(b), Seller owns or possesses, is licensed under,
or otherwise has lawful access to, all copyrights, patents, trademarks, service
marks, trade names, master works, logos, trade secrets, designs, and other
intellectual property (or applications therefor) necessary for the lawful
conduct of the Business as now conducted, without any infringement of or
conflict with the industrial or intellectual property rights of others.
20
(c) There have been no unauthorized use or disclosure or
misappropriation of any Intellectual Property or Software, and Seller has taken
reasonable steps to protect against the unauthorized use or disclosure of its
Intellectual Property and Software. Except as disclosed in SCHEDULE 4.14(b),
none of the Selling Parties has reason to believe that (i) any of the
Intellectual Property listed in SCHEDULE 4.14(a) is invalid or unenforceable
(whether due to the existence of prior art, inequitable conduct such as patent
fraud or misuse, prior use or creation, or otherwise), (ii) any payments to
governmental agencies required to maintain the effectiveness of any of such
registered Intellectual Property have not been timely paid, or (iii) any of such
pending applications will be denied or will be materially restricted or
conditioned or any prior art exists which would cause such denial, restriction
or condition.
(d) Except as set forth on SCHEDULE 4.14(b), Seller either:
(i) exclusively owns the entire right, title and interest in and to the
Intellectual Property and Software used by Seller in the conduct of its
business, free and clear of any encumbrance, and Seller has not, expressly or by
implication, licensed, sold, assigned or transferred any rights to such
Intellectual Property, Software or any rights to copies of the Software or other
copyrightable materials; (ii) has the perpetual royalty-free right to use the
same; or (iii) in the case of Software owned by and/or licensed from a third
party vendor as set forth on SCHEDULE 4.14(d), Seller is in compliance with such
third party's licenses or other agreements as set forth on SCHEDULE 4.14(d).
(e) Except as set forth on SCHEDULE 4.14(b), (i) all
Intellectual Property (including registrations therefor), which is identified in
SCHEDULE 4.14(a) as being owned by Seller, is valid and in force, and all
registration applications so identified are pending and in good standing, all
without challenge of any kind; (ii) Seller has the sole and exclusive right to
bring actions for infringement or unauthorized use of the Intellectual Property
and Software owned by or licensed to Seller and, to the knowledge of Seller,
there is no basis for any such action; (iii) Seller has taken all actions
reasonably necessary to protect the Intellectual Property and Software owned by
Seller, including by pursuing registration where necessary.
(f) Except as set forth on SCHEDULE 4.14(b), Seller is not in
breach of any agreement affecting any of the Intellectual Property and Software
owned by Seller, and has not directly or indirectly taken any action which would
impair or otherwise adversely affect its rights in such Intellectual Property
and Software. Correct and complete copies of registrations for all registered
Intellectual Property in SCHEDULE 4.14(a) as being owned by Seller; and all
pending applications to register unregistered Intellectual Property identified
in SCHEDULE 4.14(a) as being owned by Seller (together with any subsequent
correspondence or filings relating to the foregoing) have heretofore been
delivered by Seller to the Buyer.
(g) Except as set forth on SCHEDULE 4.14(b), (i) no
infringement of any Intellectual Property of any other person or entity has
occurred or results in any way from the operations of the Business of Seller as
previously or currently conducted or from the use of any of the Intellectual
Property or Software owned by or licensed to Seller; (ii) no claim of any
infringement of any Intellectual Property of any other Person has been made or
asserted in respect of the operations of the business of Seller or the use of
any of the Intellectual Property or Software used by Seller; (iii) Seller has
not received notice of any claim of invalidity of any Intellectual Property
owned by Seller; (iv) no proceedings are pending or, to the knowledge of Seller,
threatened which challenge the validity, ownership or use or continued use by
Seller or its assignees of any of the Intellectual Property or Software used by
Seller; (v) Seller has not had notice of, or knowledge of any basis for, a claim
against Seller that the operations, activities, products, Software, equipment,
machinery or processes of the business of Seller infringe any Intellectual
Property of any other Person; and (vi) Seller has not granted to any other
Person any license or rights to use the Intellectual Property or Software except
as set forth on SCHEDULE 4.14(g).
(h) Except as set forth on SCHEDULE 4.14(b), (i) the
Intellectual Property and Software owned by Seller is not subject to any
transfer, assignment, source code escrow agreement, reversion, site, equipment,
or operational limitations; (ii) Seller has maintained and protected the
Intellectual Property and Software owned by Seller (including, without
limitation, all source code and system specifications) with
21
appropriate proprietary notices (including, without limitation, the notice of
copyright in accordance with the requirements of 17 U.S.C. ss. 401),
confidentiality and non-disclosure agreements and such other measures as are
necessary to protect the proprietary, trade secret or confidential information
contained therein; (iii) the Software owned by Seller is protectable under
applicable copyright law and has not been forfeited to the public domain and has
been registered with the U.S. Copyright Office or is eligible for registration;
(iv) Seller has copies of all releases or separate versions of the Software
owned by Seller and source code thereto, so that the same may be subject to
registration in the United States Copyright Office; (v) Seller has complete and
exclusive right, title and interest in and to the Software owned by Seller; (vi)
Seller has exclusively developed the Software owned by Seller through its own
efforts and for its own account without the aid or use of any consultants,
agents, independent contractors or other persons (other than persons that are
Employees of Seller); (vii) the Software owned by Seller does not infringe any
Intellectual Property rights of any other Person; (viii) any Software owned by
Seller includes the source code, system documentation, statements of principles
of operation and schematics, as well as any pertinent commentary and explanation
used for the development, maintenance, implementation and use thereof, so that a
trained computer programmer could develop, maintain, enhance, modify, support,
compile and use all releases or separate versions of the same that are currently
subject to maintenance obligations by Seller; and (ix) there are no agreements
or arrangements in effect with respect to marketing, distribution, licensing,
sale, resale or promotion of the Software owned by Seller by any other Person.
(i) Except as set forth on SCHEDULE 4.14(b), all agents,
consultants or contractors who have contributed to or participated in the
creation or, development of any Intellectual Property or Software on behalf of
Seller or any predecessor in interest thereto (including but not limited to all
employees and consultants of Administaff Companies, Inc.) either: (i) are a
party to an enforceable "work-for-hire" agreement under which Seller is agreed
to by the parties to be the original exclusive owner/author of all intellectual
property rights therein in the form attached hereto as SCHEDULE 4.14(i); or (ii)
have executed an assignment or an agreement to assign in favor of Seller (or
such predecessor in interest, as applicable) of all right, title and interest in
such material in the form attached hereto as SCHEDULE 4.14(i).
(j) Except as set forth on SCHEDULE 4.14(b), the Software and
all components thereof will be fully compatible and shall operate in an
integrated manner. The Software owned by Seller and all portions or components
thereof shall be and are free of material defects, malfunctions or
nonconformities. The Software owned by Seller, or any portion thereof, does not
contain any timer, virus, copy protection device, disabling code, clock, counter
or other limiting design or routine which causes the Software (or any portion
thereof) to become erased, inoperable, impaired, or otherwise incapable of being
used in the full manner for which it was designed and contemplated under this
Agreement.
(k) Except as set forth on SCHEDULE 4.14(b), the Software
owned by Seller complies with all applicable requirements of laws relating to
the export or reexport of the same and may be exported or reexported to all
countries without the necessity of any license, other than to those countries
specified as prohibited destinations pursuant to applicable regulations of the
U.S. Department of Commerce and/or the United States State Department.
(l) To the best of Seller's Knowledge, the list of all Persons
who have any copy, whether full, partial, or an embedded copy, of any Software
attached hereto as SCHEDULE 4.14(l) ("User List") is a substantially complete
list of the customers of product sold or provided by Seller. The only recipients
of alpha and beta versions of the Software distributed by or on behalf of Seller
have been those on SCHEDULE 4.14(l).
(m) The Software performs in accordance with the
specifications set forth in SCHEDULE 4.14(m), and there are currently no claims
or assertions pending or, to the best of Selling Parties' knowledge, threatened
alleging a failure of the product to so perform.
(n) The Selling Parties acknowledge that all intellectual
property developed under the
22
Tracor Agreement vested in Tracor Instruments Austin, Inc., with Seller
retaining a license to exploit a portion of such intellectual property. The
Selling Parties acknowledge and agree that Buyer is purchasing the Assets of the
Seller upon the Selling Parties representation that no intellectual property
developed by the Selling Parties under the Tracor Agreement is currently used or
needed in the Business, other than such as is provided to Seller under the WA
License. The current or prospective business of Buyer will not be adversely
effected in any way whatsoever by the absence of an assignment of the Tracor
Agreement (including the intellectual property developed thereunder) to Buyer.
SECTION 4.15 WA LICENSE. At Closing, Buyer shall have all rights,
privileges, and licenses that Starlink, Incorporated has under the WA License,
as though Buyer is Starlink, Incorporated under the WA License. Seller
represents that the WA License is valid and enforceable against Western Atlas
International, Inc.
SECTION 4.16 APPROVALS. Except as set forth in SCHEDULE 4.16 of the
Disclosure Schedule, no consent, approval, authorization or order of or
registration, declaration or filing with any Person is required in connection
with (a) the execution, performance and delivery of this Agreement and the
Related Agreements, (b) the consummation of the Contemplated Transactions; or
(c) use, ownership and possession of the Acquired Assets by Buyer following the
Closing.
SECTION 4.17 CONTRACTS. Except as disclosed in SCHEDULE 4.17 of the
Disclosure Schedule, Seller is not a party or subject to any of the following
Contracts: (i) any union or collective bargaining agreements and any employment
contracts; (ii) any Contracts with agents, consultants, advisors, salespersons,
sales representatives, distributors or dealers; (iii) any Contracts or
commitments for capital expenditures or the acquisition of fixed assets
providing for payments of $5,000 in the aggregate; (iv) any Contracts relating
to the rental or use of equipment, other personal property or fixtures involving
payment of fixed or contingent annual rentals or sums in excess of $5,000; (v)
any Contracts relating in any way to indebtedness for borrowed money or
evidenced by a bond, debenture, note or other evidence of indebtedness (whether
secured or unsecured) including but not limited to, indebtedness by way of lease
or installment purchase arrangement, guarantee, undertaking on which others rely
in extending credit, or otherwise, and any conditional sales contracts, chattel
and purchase money mortgages and other security arrangements with respect to any
equipment, other personal property or fixtures; (vi) any Contracts limiting the
freedom of Seller to engage in or to compete in any line of business or with any
person or in any area or to use or disclose any information in its possession;
(vii) any license or franchise agreements, either as licensor or licensee or as
franchisee or franchisor; (viii) any Contracts or commitments not made in the
Ordinary Course of Business; (ix) any joint venture or partnership contracts;
(x) any contracts or agreements for the purchase of any materials or supplies or
services in the Ordinary Course of Business and involving more than $5,000 in
consideration in each such case; (xi) any contracts or agreements under which
Seller has agreed to indemnify any person or entity with respect to, or to
share, any Liability of any Person; and (xii) any other Contract or commitment
which is material to Seller or that, if terminated, could reasonably be expected
to have, with the passage of time or otherwise, a Material Adverse Effect. The
contracts and agreements which are required to be identified in SCHEDULE 4.17
are each hereinafter referred to individually as a "SELLER CONTRACT" and
collectively as the "SELLER CONTRACTS." Except as set forth on SCHEDULE 4.17:
(a) Each of the Seller Contracts is a valid and binding
agreement of Seller, and, to the Knowledge of each of the Selling Parties, all
other parties thereto (subject to general principles of equity and bankruptcy,
insolvency, reorganization or other similar laws);
(b) Seller has fulfilled all material obligations required
pursuant to each of the Seller Contracts to have been performed by it prior to
the date hereof and none of the Selling Parties has reason to believe that
Seller will not be able to fulfill, when due, all of its obligations under the
Seller Contracts which remain to be performed after the date hereof;
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(c) There has not occurred a default under any of the Seller
Contracts on the part of Seller, or to the Knowledge of each of the Selling
Parties, on the part of any other party thereto nor has any event occurred which
with the giving of notice or the lapse of time, or both, would constitute a
default on the part of Seller under any of the Seller Contracts nor, to the
Knowledge of each of the Selling Parties, has any event occurred which with the
giving of notice or the lapse of time, or both, would constitute any default on
the part of any other party to any of the Seller Contracts; and
(d) No consent of any party to any of the Seller Contracts is
required by the execution, delivery or performance of this Agreement, the
Related Agreements or the consummation of the Contemplated Transactions.
SECTION 4.18 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE; INVENTORY. Except
as set forth in SCHEDULE 4.18 of the Disclosure Schedule:
(a) The Receivables on the Balance Sheet and arising after the
date thereof (i) arose from the bona fide sale of inventory, assets or services,
in each case, in the Ordinary Course of Business, (ii) constitute only valid and
undisputed claims, (iii) are not subject to counterclaims or setoffs, and (iv)
are collectible in full, net of the applicable reserve for doubtful accounts, in
the Ordinary Course of Business without resort to litigation (but in no event
more than 90 days from the date they became due).
(b) The inventory of Seller reflected on its books and records
is in good and marketable condition, first quality material and is saleable in
the Ordinary Course of Business, and the quantities of all such inventory are
reasonable and warranted in the present circumstances of the business of Seller.
Seller's inventory of raw materials, work in process and finished goods
reflected on its books and records consists of items of a quality and quantity
usable and, with respect to finished goods only, salable at their respective
normal profit levels, in each case, in the Ordinary Course of Business. Seller's
inventory of finished goods reflected on its books and records is not obsolete
or damaged and is merchantable and fit for its particular use. Seller has, and
will have as of the Closing Date, on hand or has ordered and expects timely
delivery of such quantities of raw materials and has on hand such quantities of
work in process and finished goods as are reasonably required timely to fill
current orders on hand at its normal level of operations. The values at which
such inventory is carried on the Tax Statements and the Interim Financial
Statements have been determined in accordance with the normal valuation policy
of Seller, consistently applied, and in accordance with fair and accurate
business tax accounting. The costs of disposing of any and all obsolete
inventory have been reserved for or accrued in the Tax Statements or the Interim
Financial Statements. Seller has not changed the method for valuing its
inventory since its inception. SCHEDULE 4.18(b) of the Disclosure Schedule lists
all inventory, goods and products of Seller that have been billed and are still
in the possession of Seller.
SECTION 4.19 OMITTED.
SECTION 4.20 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of Seller.
SECTION 4.21 INSURANCE. SCHEDULE 4.21 of the Disclosure Schedule sets
forth a true and correct list of all insurance policies of any nature
whatsoever, including self-insurance plans, currently maintained by Seller or
maintained by any of the Shareholders and covering any of the Acquired Assets,
and the annual or other premiums payable from time to time thereunder. SCHEDULE
4.21 also lists any other insurance policies of any nature whatsoever maintained
by Seller over the past five (5) years. All such policies of Seller (i) are
issued by insurance companies reasonably believed by each of the Selling Parties
to be financially sound and reputable and are in full force and effect; (ii) are
sufficient (in form, amount and otherwise) for compliance with all Legal
Requirements and of all applicable Contracts; (iii) are valid, outstanding and
enforceable policies; and (iv) in the reasonable judgment of each of the Selling
Parties provide reasonable insurance coverage for the assets and operations of
Seller for all risks normally insured against by persons carrying on
24
the same business as Seller. SCHEDULE 4.21 also contains a description of all
contingent liability that Seller may be subject as a result of retrospective
insurance premium obligations, and describes the extent of any self-insurance
reserves which are actuarially determinable but not accrued as liabilities on
the Tax Statements. There are no outstanding claims by Seller under the
insurance coverages listed in SCHEDULE 4.21. Seller has not failed to give any
notice or present any outstanding claim under any insurance policy in a timely
and complete manner. No claims are being handled by an insurer of Seller under a
reservation of rights letter. There are no outstanding requirements or
recommendations by any insurance company that issued any policy listed in
SCHEDULE 4.21 or by any Board of Fire Underwriters or other similar body
exercising similar functions or by any governmental authority exercising similar
functions which requires or recommends any changes in the conduct of the
business of, or any repairs or other work to be done on or with respect to any
of the properties or assets of Seller. Seller has not received any notice or
other communication from any such insurance company within the three years
preceding the date hereof canceling or materially amending or materially
increasing the annual or other premiums payable under any of said insurance
policies, and no such cancellation, amendment or increase of premiums is
threatened.
SECTION 4.22 LITIGATION. Except as set forth in SCHEDULE 4.22 of the
Disclosure Schedule, there is no charge, complaint, action, Order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action or, to the Knowledge of each of the Selling Parties,
threatened or anticipated against or an investigation pending concerning
(collectively, "ACTIONS"): (i) Seller or its assets or operations as currently
operated, (ii) any Employee Plan or any trust or other funding instrument,
fiduciary or administrator thereof, (iii) the Contemplated Transactions, or (iv)
the Acquired Assets. Seller is not in default with respect to any judgment,
Order, writ, injunction or decree of any court or governmental agency, and there
are no unsatisfied judgments against Seller or the business of Seller. To the
knowledge of each of the Selling Parties, there is not a reasonable likelihood
of an adverse determination of any pending Actions that would, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 4.23 PRODUCT WARRANTY. Except as set forth on SCHEDULE 4.23(a),
Seller has no Liability for replacement of any products or services sold, or
delivered by Seller or other damages in connection therewith. No product or
services sold, or delivered by Seller is subject to any guaranty, warranty, or
other indemnity that differs materially from the applicable standard terms and
conditions of sale. SCHEDULE 4.23(b) of the Disclosure Schedule includes copies
of Seller's standard terms and conditions of sale (containing all applicable
guaranty, warranty, and indemnity provisions).
SECTION 4.24 PRODUCT LIABILITY. Seller has no Liability (and the
Selling Parties have no Knowledge of any Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against Seller giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, or delivered or services provided by Seller.
SECTION 4.25 EMPLOYEES; LABOR RELATIONS.
(a) SCHEDULE 4.25 of the Disclosure Schedule contains a
complete and accurate list of the following information for each Employee of
Seller related to the Business, including each Employee on leave of absence or
layoff status: name; job title; current compensation paid or payable and any
change in compensation since December 31, 2000; vacation accrued as of the
Balance Sheet Date or later; and service credited as of the Balance Sheet Date
or later, for purposes of vesting and eligibility to participate under any of
the Employee Plans.
(b) To the Knowledge of Seller, no Employee of Seller is a
party to, or is otherwise bound by, any Contract or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
Employee and any other Person that in any way adversely affects or will affect
(i) the performance of his duties as an Employee, or (ii) the ability of the
Business to conduct its business,
25
including any such Contract or arrangement with Seller by any such Employee. To
the Knowledge of Seller, no officer or other Employee of Seller intends to
terminate his or her employment with the Business within the next 12 months.
(c) Seller is not a party to or bound by any collective
bargaining agreement, nor has Seller experienced any strikes, grievances or
claims of unfair labor practices within the past three years. To the Knowledge
of Seller, Seller has not committed any unfair labor practice within the past
three years. Seller has no Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
Seller's Employees. No Equal Employment Opportunity Commission charges or other
claims of employment discrimination have been made against Seller within the
past three years. No Wage and Hour Department investigation has been made of
Seller within the past three years. In addition to the above, Seller is not now
nor has it been, within the past three years, in violation of the Fair Labor
Standards Act, the Service Contract Act, the Work Hours Safety Act, or the
Occupational Safety and Health Act in any material respect.
(d) Seller is in compliance in all material respects with its
obligations under the Worker Adjustment and Retraining Notification Act of 1988,
as amended, and all other notification and bargaining obligations arising under
any collective bargaining agreement or statute.
SECTION 4.26 EMPLOYEE BENEFITS.
(a) SCHEDULE 4.26(a) of the Disclosure Schedule lists and
generally describes:
(1) each Employee Benefit Plan that is maintained or
contributed to by Seller or the Shareholders for the benefit of Seller's
Employees; and each trust fund maintained by Seller or the Shareholders in
connection with any of such Employee Benefit Plans; and
(2) all other plans providing compensation (other
than salaries or wages), benefits or perquisites to any class of Employees of
Seller, including without limitation any incentive, bonus, stock option,
restricted stock, vacation pay, sick pay and severance plans ("COMPENSATION
PLANS"); and any "cafeteria plan" ("125 PLAN") governed by Section 125 of the
Code. The Employee Benefit Plans, the Compensation Plans and any 125 Plan may be
collectively referred to as the "EMPLOYEE PLANS."
(b) The Selling Parties have furnished to Buyer a true,
correct and complete copy of each of the Employee Benefit Plans and any related
trust agreements or other funding vehicles; true, correct and complete copies of
the Compensation Plans and 125 Plan (or summaries of any unwritten Compensation
Plans or 125 Plan) and true, correct and complete copies of any employment
policy manuals distributed to any class of Employees of Seller. With respect to
each of the Employee Benefit Plans and any 125 Plan, the Selling Parties have
also furnished to Buyer the most recent summary plan description and the last
three most recently filed annual reports required to be made on Form 5500. As to
each of the Employee Benefit Plans that is funded, Seller has delivered or made
available to Buyer a true, correct and complete copy of the most recent annual
financial report (including any auditor's report) with respect to such plan, and
any subsequent interim report. Each such financial report and interim report is
an accurate description of the financial status of the subject Employee benefit
plan, and to the knowledge of each of the Selling Parties, there have been no
adverse changes in the financial status of any such funded Employee Benefit
Plans since the date of the most recent report provided with respect thereto.
(c) SCHEDULE 4.26(c) of the Disclosure Schedule specifically
identifies each of the Employee Benefit Plans that is represented to be a
qualified plan under Code Section 401(a) (a "QUALIFIED PLAN"). With respect to
each Qualified Plan, the following are true: (a) the plan, in form and
operation, currently satisfies, and for all years subsequent to the
establishment of such plan, has satisfied, the qualification requirements of
Section 401(a) of the Code; and (b) the Internal Revenue Service (the "IRS") has
issued a
26
favorable letter of determination with respect to the plan (including without
limitation the provisions of the Tax Reform Act of 1986 and related
regulations), and all amendments required by the Code as a condition of
retention of such qualified status as of the date hereof have been adopted
within time limits required to maintain such status or such time limits have not
expired. Each of the Qualified Plans is and has been operating in compliance
with all amendments required by the Tax Reform Act of 1986 and subsequent
legislation and regulations. Seller has furnished to Buyer a true, correct and
complete copy of the most recent letter of determination issued with respect to
each such Qualified Plan.
(d) Seller does not maintain or contribute to any Qualified
Plan that is subject to Title IV of ERISA, nor has Seller terminated or
withdrawn from participation in any such plan. Except as set forth in SCHEDULE
4.26(d)of the Disclosure Schedule, none of the Qualified Plans is a
Multiemployer Plan, as defined in ERISA Section 4001(a)(3). All contributions
payable by Seller to any of the Employee Benefit Plans for any plan year ending
prior to the date hereof have been paid in full on a timely basis and no
accumulated funding deficiency (as defined in Section 302(a)(2) of ERISA) has
been incurred with respect to any Qualified Plan subject to Code Section 412.
Except as set forth in SCHEDULE 4.26(d), (i) Seller has not maintained,
contributed to or been required to contribute to a Multiemployer Plan, (ii) no
amount is due by Seller to any Multiemployer Plan on account of any withdrawal
therefrom, (iii) no withdrawal events triggering liability have occurred with
respect to any Multiemployer Plan (and no material risk of such event exists),
(iv) no contingent liability exists with respect to any Multiemployer Plan in
respect of an asset sale by Seller or any ERISA Affiliate made in the prior five
(5) years, and (v) SCHEDULE 4.26(d), lists and described the current liability
of Seller under each Multiemployer Plan if a withdrawal liability occurred on
the date of this Agreement.
(e) Seller has not engaged in, nor entered into any
arrangement pursuant to which Seller is contractually bound to enter into, any
transaction which could result in imposition upon Seller, Buyer or Buyer's
subsidiaries, of any excise tax under Sections 4971 through 4980B, inclusive,
and Section 5000 of the Code or civil liability under Section 502(i) or 502(l)
of ERISA or otherwise incurred a liability for any excise tax with respect to
any of the Employee Plans, other than excise taxes that have heretofore been
paid or have been accrued, and, in either case are fully reflected in the
Balance Sheet.
(f) Seller has (a) filed or caused to be filed on a timely
basis each and every return, report, statement, notice, declaration and other
document required to be filed with any governmental agency, federal, state and
local (including, without limitation, the IRS, the Department of Labor, the
Pension Benefit Guaranty Corporation and the SEC) with respect to each of the
Employee Plans; and Seller has maintained on its premises (or have caused to be
maintained by a service provider) all records with respect to such plans as are
required for their proper administration and proper continued reporting and
disclosure; (b) timely complied with all applicable participant disclosure
requirements of ERISA; and (c) maintained in full force and effect any bond
required under ERISA in connection with the Employee Benefit Plans.
(g) Seller is not and has never been a member of a controlled
group of corporations, an unincorporated trade or business under common control,
or a member of an affiliated service group (as such terms are defined in
Sections 414(b), 414(c) and 414(m) of the Code), that includes any entity other
than Seller.
(h) Except as set forth on SCHEDULE 4.26(h) hereto, Seller has
not utilized to any material extent, the services of "leased employees" (as
defined in Section 414(n) of the Code) within the four (4) year period ending on
the Closing Date, nor are there any persons now working for Seller who are
anticipated to become such leased employees with the passage of time, except to
the extent such status would not have a Material Adverse Effect on any of the
Employee Plans.
(i) Except as described in SCHEDULE 4.26(i) of the Disclosure
Schedule, Seller does not maintain any group life insurance or health benefit
coverage for former Employees or directors of Seller, other
27
than group life insurance or health benefit coverage mandated by applicable law.
Seller has timely complied with all of its "COBRA" obligations under ERISA
Section 602, Code Section 4980B and applicable state insurance laws, with
respect to group life insurance or health benefit continuation coverage to be
provided by those of its Employee Plans that provide such benefits.
(j) With respect to the Employee Plans, there are no claims,
actions, suits or proceedings pending or, to the knowledge of each of the
Selling Parties, threatened against Seller or any other fiduciaries thereof,
respecting their duties or obligations to any such plan, its assets, any trust
thereunder or any participant or beneficiary thereof, except claims made in the
ordinary course for benefits or compensation provided by such plans.
(k) Neither Seller, nor any of its directors, partners,
officers, Employees or other "fiduciaries," as that term is defined in Section
3(21) of ERISA, has committed any breach of fiduciary responsibility imposed by
ERISA or any other applicable law with respect to the Employee Benefit Plans,
that would subject Seller, Buyer, Buyer's subsidiaries or any of their
respective directors, officers or Employees to any liability under ERISA or any
other applicable law and that is reasonably expected to have a Material Adverse
Effect.
SECTION 4.27 ENVIRONMENTAL LAWS; HAZARDOUS MATERIALS.
(a) Seller is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law.
(b) Seller has no Knowledge of any Basis for (and Seller has
not received) any Order, notice, citation, directive, inquiry, notice, summons,
warning or other communication from any Governmental Body, any private citizen
acting in the public interest, or any current or prior owner or operator of any
of the Leased Real Property regarding (i) any alleged, actual or potential
violation or failure by Seller to comply with any Environmental Law, or (ii) any
alleged, actual or potential obligation of Seller to undertake or bear the cost
of any Liabilities under any Environmental Law with respect to any of the Leased
Real Property or any other properties or assets (whether real, personal, or
mixed) in which Seller has had an interest at any time.
(c) There are no pending or, to the Knowledge of Seller,
threatened claims, investigations, proceedings, encumbrances or other
restrictions of any nature, resulting from any Liability arising under or
pursuant to any Environmental Law, with respect to or affecting Seller or
Seller's use of any of the Leased Real Property.
(d) Except for cleaning, pest control, weed control, office
and maintenance supplies used, generated and stored in strict compliance with
the applicable Environmental Laws and ordinary and necessary quantities of
Hazardous Materials contained in or de minimis quantities discharged from the
ordinary operation of motor vehicles on the Leased Real Property: (i) there have
been no Releases of Hazardous Materials in, on, under, at or migrating to or
from the Leased Real Property in quantities requiring investigation, remediation
or notification to Governmental Bodies under applicable Environmental Laws or
regulations promulgated thereunder; (ii) there has been no Release or threat of
Release of any such Hazardous Materials in quantities requiring investigation,
remediation or notification to Governmental Bodies under applicable
Environmental Laws or regulations promulgated thereunder; (iii) none of the
Leased Real Property is subject to enforcement action by any Governmental Body
as a result of the presence or former presence of leaked or spilled petroleum
products, aboveground or underground storage tanks, or an accumulation of
rubbish, debris or other solid waste in violation of applicable Environmental
Laws, no environmental condition exists on any of the Leased Real Property that
either (A) requires the owner of such Leased Real Property to report such
condition to any Governmental Body or (B) requires the owner of such Leased Real
Property to make a notation of such condition in any public records or
conveyancing instrument upon the conveyance of any of such Leased Real Property.
Seller has not generated any Hazardous Materials that have been disposed
28
of, whether lawfully or unlawfully, in any offsite facility (as defined in ss.
101(9) of the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601(9)) that could subject Buyer to Liability under any
Environmental Law.
(e) Seller has not engaged and the Selling Parties are not
aware of any Hazardous Activities.
SECTION 4.28 CERTAIN BUSINESS RELATIONSHIPS WITH SELLER. None of the
Shareholders or Seller's Affiliates have been involved in any material business
arrangement or relationship with Seller within the past 12 months other than as
an employee. No Shareholder, Affiliate, officer, director, leased employee,
Employee, agent, consultant, or representative of Seller owns any asset,
tangible or intangible, that is used in the Business.
SECTION 4.29 SUPPLIERS. To the Knowledge of each of the Selling
Parties, there has been no adverse change in the business relationship with any
supplier material to the Business and no threat or indication that any such
change is reasonably foreseeable which is reasonably likely to have a Material
Adverse Effect.
SECTION 4.30 PREDECESSOR ENTITIES. No facts or circumstances exist
whereby Seller or Buyer has or will incur any Liability, costs or damages, or
which could result in a Material Adverse Effect, related to, connected with or
resulting from any (i) entity that is a direct or indirect predecessor to
Seller, or (ii) an entity that is currently owned or was previously owned,
directly or indirectly, by any of the Shareholders, or their predecessors.
SECTION 4.31 ALL OF THE ASSETS. The Acquired Assets constitute all of
the assets, properties and rights of Seller of every kind, nature and
description associated or connected with the Business, and include (i) all of
the assets, properties and rights that are necessary to conduct or are used or
held for use by Seller or any of its Affiliates in the operation of the Business
and (ii) all of the assets shown or otherwise consumed in the Business or
reflected on the Balance Sheet, except for Inventories, Receivables, and other
assets that have been sold, converted to cash, or otherwise consumed or disposed
of by Seller since the Balance Sheet Date in the Ordinary Course of Business.
All of the Acquired Assets are comprised within and owned by Seller. Following
the consummation of the Contemplated Transactions, Buyer will own all of the
Acquired Assets and rights necessary to conduct the Business in the same manner
as conducted during the periods covered by the Tax Statements and the Interim
Financial Statements and no Person other than Buyer, directly or indirectly,
will own or have any interest in any real or personal property, tangible or
intangible, used in or useful for the Business.
SECTION 4.32 THIRD PARTY CONFIDENTIAL INFORMATION. The prohibition
against disclosing or using third party information in Seller's possession
subject to non-disclosure or confidentiality agreements between Seller and
Valmont Industries, Inc. and Omni Star will not have a Material Adverse Effect
on Buyer's ability to operate the Business following the Closing.
SECTION 4.33 DISCLOSURE. No representations or warranties by any of the
Selling Parties, whether made on behalf of the Shareholders or the Seller, in
this Agreement, the Related Agreements, any document, exhibit, statement,
certificate or schedule furnished or to be furnished to Buyer pursuant hereto,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements or facts
contained therein not misleading. There is no material fact that has not been
disclosed in writing to Buyer which has a Material Adverse Effect or could
reasonably be anticipated to have a Material Adverse Effect.
29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the Contemplated Transactions, Buyer represents and warrants to
Seller that the statements contained in this ARTICLE V are correct and complete
as of the date of this Agreement.
SECTION 5.1 ORGANIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
SECTION 5.2 AUTHORIZATION OF TRANSACTION. Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to consummate the Contemplated Transactions. The execution
and delivery of this Agreement and the consummation of the Contemplated
Transactions have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement constitutes, and the Related Agreements when
executed and delivered will constitute, valid and legally binding obligations of
Buyer, enforceable in accordance with their terms and conditions.
SECTION 5.3 NO CONFLICT. Neither the execution and the delivery of this
Agreement, nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time): (i) contravene, conflict with, or result in a violation of (A) any
provision of the Articles of Incorporation or Bylaws of Buyer or (B) any
resolution adopted by the board of directors or the stockholders of Buyer; (ii)
contravene, conflict with, or result in a violation of, or give any Governmental
Body or other Person the right to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any Legal Requirement or
any Order to which Buyer is subject; or (iii) contravene, conflict with, or
result in a violation or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Contract or
other arrangement to which Buyer is a party or by which Buyer is bound, except
for, as to any of the matters covered by clauses (ii) or (iii) above, such
conflicts, violations or breaches which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 5.4 BROKERS' FEES. Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
Contemplated Transactions for which Seller could become liable or obligated.
SECTION 5.5 CERTAIN PROCEEDINGS. No litigation or proceeding is pending
or, to the Knowledge of Buyer, threatened against or related to Buyer, that
challenges or could reasonably be expected to have the effect of delaying,
making illegal, or otherwise preventing or hindering any of the Contemplated
Transactions.
SECTION 5.6 DISCLOSURE. Since January 1, 2001, Buyer has filed with the
Securities and Exchange Commission (the "SEC") all reports and other filings
required to be filed by Buyer in accordance with the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder (the "BUYER
SEC Reports"). As of their respective dates, except to the extent that
information contained in any Buyer SEC Report has been revised or superseded by
a later Buyer SEC Report filed and publicly available prior to the date of this
Agreement, none of Buyer SEC Reports contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE VI
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
30
SECTION 6.1 GENERAL. Each of the Parties will use its Best Efforts to
take all action and to do all things necessary, in order to consummate and make
effective the Contemplated Transactions, and to bring about the satisfaction of
the Closing conditions set forth in ARTICLES IX and X below.
SECTION 6.2 NOTICES AND CONSENTS. Seller will give any notices to other
Persons and use its Best Efforts to obtain any consents of other Persons that
Buyer reasonably requests in connection with the consents listed in SCHEDULE
4.16 of the Disclosure Schedule. Each of the Parties will give any notices to,
make any filings with, and use its Best Efforts to obtain any authorizations,
consents, and approvals of Governmental Bodies in connection with the matters
referred to in SCHEDULE 4.11 of the Disclosure Schedule and SECTION 4.11 above.
SECTION 6.3 OPERATION OF BUSINESS. The Shareholders agree to cause
Seller and Seller agrees to observe each term set forth in this SECTION 6.3 and
agree that, from the date hereof until the Closing Date, unless otherwise
consented to in advance by Buyer in writing:
(a) The Business shall be conducted only in, and neither
Shareholders, nor Seller shall take any action except in, the Ordinary Course of
Business, on an arm's-length basis and in accordance with all Legal
Requirements;
(b) Seller shall not, directly or indirectly, do or permit to
occur any of the following: (i) issue or sell any additional interest in, or any
options, warrants, conversion privileges or rights of any kind to acquire any
interest in, Seller, (ii) sell, pledge, dispose of or encumber any of its
assets, except in the Ordinary Course of Business; (iii) amend or propose to
amend its articles of incorporation or by-laws; (iv) split, combine or
reclassify any outstanding interest of Seller; (v) redeem, purchase or acquire
or offer to acquire any equitable interest of Seller; (vi) acquire (by merger,
exchange, consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership, joint venture or other business organization or
division or material assets thereof; (vii) incur any indebtedness for borrowed
money (except for advances taken in the Ordinary Course of Business under
Seller's existing ordinary line of credit for working capital) or issue any debt
securities; (viii) except in the case of a bona fide dispute, permit any
accounts payable owed to trade creditors to remain outstanding more than 60
days; (ix) enter into any capital commitment or operating lease having an
aggregate or annual commitment in excess of $5,000 per transaction; (x) xxxx or
record as sold any inventory prior to its actual shipment and delivery to the
customer; or (xi) sell or otherwise dispose of or remove equipment or other
personal property (excluding inventory sold in the Ordinary Course of Business)
owned by or in the possession of Seller, whether or not recorded in the Tax
Statements or the Interim Financial Statements.
(c) Seller shall not, directly or indirectly, (i) enter into
or modify any employment, severance or similar agreements or arrangements with,
or grant any salary increases to, any officers or directors or consultants; (ii)
in the case of Employees, officers or consultants who earn in excess of $25,000
per year, take any action with respect to the grant of any salary increases or
any increase of benefits payable in effect on the date hereof; or (iii)
increase, or make a commitment to increase, the compensation payable or to
become payable to any Employee or agent of Seller;
(d) Except as may be approved in writing in advance by Buyer,
which approval shall not be unreasonably withheld, Seller shall not adopt or
amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other Employee benefit plan,
trust, fund or group arrangement for the benefit or welfare of any Employees or
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or arrangements for the benefit or welfare of any director, officer
or partner;
(e) Seller shall not cancel or terminate its current insurance
policies or cause any of the
31
coverage thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to or
greater than the coverage under the canceled, terminated or lapsed policies for
substantially similar premiums are in full force and effect;
(f) Each of the Selling Parties shall (i) use his, her or its
best efforts to preserve intact Seller's business organization and goodwill,
keep available the services of Seller's officers and Employees and maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with Seller; (ii) confer on a regular and frequent
basis with representatives of Buyer to report operational matters and the
general status of ongoing operations; (iii) not intentionally take any action
which would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at the Closing;
and (iv) notify Buyer of any emergency or other change in the normal course of
Seller's business or in the operation of Seller's properties and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such emergency,
change, complaint, investigation or hearing would be material, individually or
in the aggregate, to the business, operations or financial condition of Seller
or to Seller's or Shareholders' or Buyer's ability to consummate the
Contemplated Transactions; and
(g) The Shareholders shall cause Seller to and Seller shall
(i) file any Tax Returns, elections or information statements with respect to
any Liabilities for Taxes of Seller or other matters relating to Taxes of Seller
which pursuant to applicable law must be filed prior to the Closing Date; (ii)
promptly pay all Taxes, assessments and governmental charges levied or assessed
upon any of them or any of its properties when due (unless contesting such in
good faith and adequate provision has been made therefor); (iii) promptly upon
filing provide copies of any such Tax Returns, elections or information
statements to Buyer; (iv) make any such Tax elections or other discretionary
positions with respect to Taxes taken by or affecting Seller only upon prior
consultation with and consent of Buyer; and (v) not amend any Tax Return.
(h) The Shareholders shall not, directly or indirectly, sell,
offer to sell, assign, pledge, hypothecate, dispose of or otherwise transfer any
of their respective shares of Starlink, Incorporated capital stock.
SECTION 6.4 PRESERVATION OF BUSINESS. Each of the Selling Parties will
use its Best Efforts to keep the Business and the Acquired Assets substantially
intact, as well as its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers, and
Employees, except for changes in the Ordinary Course of Business and proposed
changes expressly set forth in the Disclosure Schedule.
SECTION 6.5 FULL ACCESS. Seller will permit representatives of Buyer to
have full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of Seller, to all premises, properties,
personnel, books, records (including Tax records), Contracts, and documents of
or pertaining to Seller, the Acquired Assets, the Assumed Liabilities, or the
Business; provided, however, that Buyer shall not be entitled to review
confidential third-party information that Seller's possesses subject to a
non-disclosure agreement. Seller will confer with Buyer regarding operational
changes of a material nature and will report periodically to Buyer concerning
the status, interim performance, and other material aspects of the Business.
SECTION 6.6 NOTICE OF DEVELOPMENTS. If any representation, warranty or
statement of any of the Selling Parties in this Agreement, the Related
Agreements, the Disclosure Schedule or any other statement or instrument of the
Selling Parties contemplated to be delivered in respect of such representations,
warranties or statements shall be incorrect, the Selling Parties shall deliver
to Buyer a supplement in order that said representation, warranty, Schedule or
statement or instrument, as so supplemented, shall be true and correct to the
extent provided in this Agreement unless otherwise stated therein. It is
understood that the only effect of such supplements is to avoid a breach of the
certificate to be delivered to Buyer by the Selling Parties
32
pursuant to Section 9.5. It is further understood and agreed that the delivery
of such supplement to Buyer shall not in any manner constitute a waiver by Buyer
of any of its rights under this Agreement, including but not limited to Buyer's
right to terminate this Agreement for breach or require an adjustment to the
Purchase Price.
SECTION 6.7 NOTICE OF BUYER ANNOUNCEMENTS. Buyer covenants to keep the
Selling Parties apprised of developments in Buyer's business and shall provide
to the Selling Parties copies of all press releases or any other material public
disclosures issued by Buyer prior to Closing, but in no event shall Buyer be
obligated to provide the Selling Parties with any material, non-public
information concerning Buyer or its business operations.
SECTION 6.8 EXCLUSIVITY. From the date hereof and until the Closing
Date, each of the Selling Parties agrees, that neither they nor any of their
Affiliates shall, and each of them shall cause their Employees, agents and
representatives (including, without limitation, any investment banking, legal or
accounting firm retained by any of the foregoing or any of their subsidiaries
and any individual member or employee of the foregoing) not to (a) initiate,
solicit or seek, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its owners) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or a portion of the assets or any equity
securities of, or interest in, Seller (any such proposal or offer being
hereinafter referred to as an "ACQUISITION PROPOSAL"), or (b) engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
(c) otherwise cooperate in any effort or attempt to make, implement or accept an
Acquisition Proposal. In the event that any of the Selling Parties mentioned
herein receives an Acquisition Proposal, the Seller or Shareholder, as
applicable, shall immediately (but not more than twenty-four (24) hours
following receipt or knowledge of the Acquisition Proposal) notify Buyer of the
existence of such Acquisition Proposal.
SECTION 6.9 INTERIM FINANCIAL STATEMENTS. Prior to the Closing Date,
the Shareholders will cause Seller to and Seller shall maintain its books and
records consistent with the Tax Statements and the Interim Financial Statements
and in the usual, regular and ordinary manner and promptly advise Buyer in
writing of any material adverse change in the condition (financial or
otherwise), assets, liabilities, earnings or business of Seller. Within twenty
(20) days after the end of each calendar month until the Closing Date,
Shareholders will cause Seller to and Seller shall deliver to Buyer unaudited
summaries of earnings and unaudited balance sheets of Seller for the period from
January 1, 2001 through the end of such calendar month consistent with the
accounting used in the Tax Statements, and the Interim Financial Statements,
accompanied by a certificate signed by the Chief Financial Officer of Seller.
The aforementioned certificate shall state that such unaudited financial
statements comply with the representation and warranty regarding Interim
Financial Statements contained in SECTION 4.8.
SECTION 6.10 CONDITIONS. Each of the Selling Parties shall take all
commercially reasonable actions necessary or desirable to cause the conditions
set forth in ARTICLE IX to be satisfied and Buyer shall take all commercially
reasonable actions necessary or desirable to cause the conditions set forth in
ARTICLE X to be satisfied.
ARTICLE VII
OMITTED
This Article has been intentionally omitted.
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ARTICLE VIII
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
SECTION 8.1 GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement or
any of the Related Agreements, each of the Selling Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as Buyer reasonably may request, at the sole cost and expense of
the Buyer (unless the Buyer is entitled to indemnification therefor under
ARTICLE XI below). Seller acknowledges and agrees that from and after the
Closing, Buyer will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to the Business (however
excluding the records of Seller specifically excluded from the definition of
Acquired Assets by SECTION 1.1(a) hereof).
SECTION 8.2 TRANSITION. Selling Parties agree that they will not take
any action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of Seller from
maintaining the same business relationships with Buyer after the Closing as it
maintained with Seller prior to the Closing. Selling Parties will refer all
customer inquiries relating to the Business to Buyer from and after the Closing
and otherwise use its Best Efforts, at Buyer's expense, to assist Buyer in
preserving the value of the Business.
SECTION 8.3 COVENANT NOT TO ENGAGE IN BUSINESS.
(a) Noncompetition. Selling Parties acknowledge and agree that
the business of Seller and Buyer is conducted (through distributorships and
customer relationships) throughout North America (the "TERRITORY") and that
Seller's reputation and goodwill are an integral part of its business success
throughout the Territory, which is being purchased pursuant to this Agreement.
If the Selling Parties deprive Buyer of any of Seller's goodwill or in any
manner utilizes Seller's' reputation and goodwill in competition with Buyer,
Buyer will be deprived of the benefits it has bargained for pursuant to this
Agreement. In furtherance thereof, none of the Selling Parties will, without the
prior written consent of Buyer (which Buyer may withhold with or without reason)
for the period commencing on the Closing Date and ending five (5) years from
such date (the "NONCOMPETE PERIOD"), engage or be interested, directly or
indirectly, whether alone or together with or on behalf of or through any other
Person, firm, association, trust, venture or corporation whether as partner,
stockholder, agent, officer, director, employee, technical adviser, lender,
trustee, beneficiary, or otherwise, in any phase of the "RESTRICTED BUSINESS" as
hereinafter defined in the Territory.
(b) Nonsolicitation. During the Noncompete Period, none of the
Selling Parties, individually or on behalf of or through any other person or
entity, will employ, solicit, raid, entice, induce or contact, or attempt to
employee, solicit, raid, entice, induce or contact, or otherwise engage, or
offer to otherwise engage, any person or entity who has been an employee,
consultant, independent contractor, sales representative or agent of Seller, or
Buyer or its Affiliates at any time within the two year period prior to the date
hereof or during the term of the Noncompete Period (the "NONSOLICITATION TIME
PERIOD"), nor during the Noncompete Period will any of the Selling Parties,
individually or on behalf of or through any other person or entity, solicit,
raid, entice, induce or contact, or attempt to solicit, raid, entice, induce or
contact, any Restricted Business (as defined herein) from any person or entity
that has been or is a customer, client, supplier or potential customer or client
of Seller, its Affiliates or Buyer at any time during the Nonsolicitation Time
Period; provided, however, this paragraph shall not apply to persons who were
employees of Seller but who do not become employees of Buyer following the
Closing and persons who have not been employed or engaged by Seller or Buyer for
more than one year.
(c) Restricted Business. The term "RESTRICTED BUSINESS" means
the Business as presently conducted, any business utilizing GPS technology, and
any business any part of which competes
34
with, directly or indirectly, the Business.
(d) Engage or Be Interested, Directly or Indirectly. The term
"ENGAGE OR BE INTERESTED, DIRECTLY OR INDIRECTLY" as used herein, includes, but
shall not be limited to, giving advice or technical or financial assistance, by
loan, guarantees, stock transactions or in any other manner to any person, firm,
association, trust, venture or corporation doing or proposing to undertake such
Restricted Business in the Territory. Provided, however, that the Selling
Parties, collectively, shall be permitted to own equity interests of not more
than three percent (3%) of the outstanding stock of any company whose shares are
traded on a national securities exchange.
(e) Injunctive Relief. In the event that any portion of this
SECTION 8.3 is considered by a court of competent jurisdiction to be excessive
in its duration, scope or in the area to which it applies, it shall be
considered modified and valid for such scope, duration and for such area as said
court may determine reasonable under the circumstances. In recognition of the
irreparable harm that a violation of said covenant would cause to Buyer, each of
the Selling Parties agree that Buyer shall have the right to enforce this
agreement by specific remedies, which shall include, among other things,
temporary restraining orders and temporary and permanent injunctions. In the
event of any such violation, each of the Selling Parties agree to be liable for,
jointly and severally, and pay the reasonable attorneys' fees incurred by Buyer
in pursuing any of its rights with respect to such violation or violations in
addition to the actual damages sustained by Buyer as a result thereof.
(f) Extension for Breach. The duration of the Noncompete
Period and the Nonsolicitation Time Period shall be extended beyond the time
period set forth herein for a period equal to the duration of any breach or
default of either such covenant by any of the Selling Parties.
(g) Confidential Information. Each of the Selling Parties
acknowledges that he, she or it has, will or may have access to and become
informed of Confidential Information which is a competitive asset of Seller,
Buyer or its Affiliates. As used herein, "CONFIDENTIAL INFORMATION" shall mean
information that is proprietary to Seller, Buyer or its Affiliates or the
Restricted Business or proprietary to others and entrusted to Seller, Buyer or
its Affiliates, whether or not trade secrets, and such information as acquired
from the Seller hereunder. Confidential Information includes, but is not limited
to, information relating to business plans and to business as conducted or
anticipated to be conducted by Seller, Buyer and its Affiliates and to their
past, current or anticipated businesses (including without limitation
information relating to the Restricted Business). Confidential Information also
includes, without limitation, customer lists and information concerning
purchasing, accounting, marketing, selling, products and services of Seller,
Buyer, and its Affiliates and shall further include the same aforementioned
Confidential Information with respect to the Acquired Assets purchased by Buyer
pursuant to the Agreement. Confidential Information shall not include any
information that (i) is known to receiving party prior to receipt from
disclosing party, (ii) is or becomes available to the public without a breach of
this Agreement or rights of the disclosing party, (iii) is lawfully obtained
from a third party without breach of this Agreement or any other agreement; or
(iv) is required by law to be disclosed in response to a valid order of a court
or a government agency, if the disclosing party receives prompt notice of such
order and the receiving party reasonably cooperates with attempts to obtain a
protective order. Each of the Selling Parties agrees that he, she or it will
keep all Confidential Information in strict confidence and to never directly or
indirectly make known, divulge, reveal, furnish, make available, or use any
Confidential Information, except that the Shareholders shall be allowed to
disclose Confidential Information in connection with carrying out their duties
as employees of Buyer.
(h) Public Statements. During the Noncompete Period, the
Selling Parties shall not make any statement or other communication that impugns
or attacks the reputation or character of the other Parties or Seller, its
Affiliates or their respective affiliates or directors, officers or employees,
or damages the goodwill of any other Party or their respective Affiliates, take
any action that would interfere with any contractual or customer relationships
of any other Party or their respective affiliates, including but not limited to
any action
35
that would result in a diminution of business, or otherwise take any action that
is detrimental to the best interests of any other Party or its affiliates,
excluding legal action by a Party under this Agreement and/or any agreement
contemplated herein or hereby and excluding any required truthful statements
made to Governmental Bodies or in connection with litigation.
SECTION 8.4 CHANGE OF NAME. Immediately following the Closing, Seller
will at its own expense prepare and file appropriate documents to change its
name from "Starlink, Incorporated" and Starlink Special Assets, Inc. to
dissimilar names which are not confusingly similar and do not contain the words
"star" or "link" (and prepare and file such other documents as may be necessary
for filing in jurisdictions in which Seller has qualified to transact business
as a foreign corporation) to facilitate the adoption of such names and all names
derived therefrom by Buyer. Seller shall transfer (or cancel at Buyer's request)
any and all assumed names containing the word "star" or "link" to Buyer.
SECTION 8.5 ACCESS TO RECORDS OF BUSINESS. Following the Closing, Buyer
shall provide the Selling Parties with access to the records of the Business
reasonably necessary to prepare Tax Returns, respond to claims concerning the
Business or for other legitimate business purposes. Following the Closing, the
Selling Parties shall provide the Buyer with access to the records of the
Business reasonably necessary to prepare Tax Returns, respond to claims
concerning the Business or for other legitimate business purposes.
ARTICLE IX
CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE
The obligations of Buyer to consummate the Closing shall be subject to
the satisfaction, on or before the Closing Date, of each and every one of the
following conditions in this ARTICLE IX.
SECTION 9.1 REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties set forth in ARTICLE IV above (i) shall have been true and
correct when made, and (ii) shall be true and correct at and as of the Closing
Date, as if made on and as of the Closing Date (except for representations and
warranties expressly referring to a specific date), taking into account changes
in the Ordinary Course of Business as contemplated by this Agreement.
SECTION 9.2 COVENANTS. Seller shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing and
the Shareholders shall have performed and complied with all of their covenants
hereunder in all material respects through the Closing.
SECTION 9.3 CONSENTS. Seller shall have procured all of the consents of
other Persons required by SECTION 6.2 and 4.16 above.
SECTION 9.4 LITIGATION. No legal action or proceeding shall have been
instituted or threatened by, any entity or person seeking to (i) restrain,
prohibit, invalidate, or otherwise affect the consummation of the Contemplated
Transactions; or (ii) impose any material limitation upon the ability of Buyer
to own, hold or vote the interest or operate, manage or conduct the Business or
the business of Buyer.
SECTION 9.5 CLOSING CERTIFICATE. Seller and Shareholders shall have
each delivered to Buyer a certificate, dated as of the Closing Date certifying
that: (i) the representations and warranties of Seller and Shareholder in this
Agreement are true and complete at and as of the Closing Date (except for
representations and warranties that by their terms are made as of a specified
date and except for changes that are contemplated by this Agreement or occur in
the ordinary course of business which do not singly or in the aggregate have a
Material Adverse Effect) and (ii) Selling Parties have performed all their
obligations and have complied in all
36
material respects with all of its covenants set forth in this Agreement to be
performed or complied with on or prior to the Closing Date.
SECTION 9.6 NO ADVERSE CHANGE. There shall not have occurred between
the date hereof and the Closing Date any material adverse changes in the
consolidated results of operations, condition (financial or otherwise), assets,
liabilities (whether absolute, accrued, contingent or otherwise) or Business of
Seller or the Acquired Assets.
SECTION 9.7 OPINION. Buyer shall have received from counsel to Seller
an opinion in a form of EXHIBIT F and otherwise satisfactory to Buyer.
SECTION 9.8 FORM AND SUBSTANCE. All actions to be taken by Seller or
the Shareholders in connection with consummation of the Contemplated
Transactions and all certificates, opinions, instruments, and other documents
required to effect the Contemplated Transactions shall be reasonably
satisfactory in form and substance to Buyer.
SECTION 9.9 CONSENTS. The Selling Parties shall have obtained or, to
the satisfaction of Buyer obviated the need to obtain, all consents, approvals
or waivers from Governmental Bodies or agencies, regulatory authorities and
third parties necessary for the execution, delivery and performance of this
Agreement, the Related Agreements and the transactions contemplated hereby,
including without limitation, those consents of Persons required by SECTIONS
4.16 and 6.2. Buyer shall have obtained all consents, approvals or waivers from
Governmental Bodies or agencies, regulatory authorities and third parties
necessary for the execution, delivery and performance of this Agreement, the
Related Agreements and the transactions contemplated hereby.
SECTION 9.10 LOSS. There shall have been no damage, destruction or loss
of or to any of the Acquired Assets, whether or not covered by insurance, which,
in the aggregate, has, or would be reasonably likely to have, a Material Adverse
Effect.
SECTION 9.11 SEARCHES. Buyer shall have received, as of a date no more
than five (5) days prior to the Closing Date, Uniform Commercial Code Searches
against Seller from the Secretaries of State of Texas and from such other
states, countries and/or counties as Buyer shall reasonably request, together
with tax lien and judgment lien searches, in each case certified by a reporting
service reasonably satisfactory to Buyer, and disclosing no Security Interests
against the Acquired Assets.
SECTION 9.12 CORPORATE AUTHORITY. Seller shall have delivered to Buyer
a certificate, dated as of the Closing Date, executed by the Secretary of Seller
certifying (i) as to the Articles of Incorporation of Seller, (ii) as to the
Bylaws of Seller, (iii) that the resolutions, as attached to such certificate,
were duly adopted by the Board of Directors and all Shareholders of the Seller,
authorizing and approving the consummation of the Contemplated Transactions and
that such resolutions remain in full force and effect and (iv) as to the
incumbency of the officers of Seller duly authorized to execute and deliver this
Agreement and the Related Agreements.
SECTION 9.13 EMPLOYEES. If offered employment by Buyer on substantially
the same terms and conditions as their present employment by Seller, each of the
Employees listed in SCHEDULE 2.7(A) of the Disclosure Schedule hereto shall have
accepted such offers of employment and executed non-compete agreements to the
satisfaction of Buyer. Further, Seller will have fully satisfied, as of the
Closing Date, every Liability relating to any Employee, agent, consultant or
representative of Seller, including but not limited to vacation time or pay,
sick time or pay, or any other benefit accrued or owed to such Employees,
agents, consultants or representatives of Seller.
37
SECTION 9.14 SCHEDULES. On the Closing Date, the Selling Parties shall
update the schedules of the Disclosure Schedule which require updating or
completion to make such disclosure schedules true and accurate and Buyer shall
be satisfied with the content of such updated and completed disclosure schedules
in its sole discretion.
SECTION 9.15 SOLVENCY. Buyer shall have determined using reasonable
judgment that Seller, following consummation of the Contemplated Transaction,
shall be solvent and able to pay its debts in the ordinary course of business.
SECTION 9.16 OTHER AGREEMENTS. The relevant Parties shall have entered
into the Related Agreements and the same shall be in full force and effect and
the Selling Parties shall have executed such other agreements and certificates
reasonably requested by Buyer.
SECTION 9.17 GOOD STANDING. Seller shall deliver to Buyer a certificate
as to the good standing of Seller, issued by the Secretary of State of the State
of Texas, dated no more than ten (10) days prior to the Closing.
SECTION 9.18 LICENSE AGREEMENT. Seller shall have executed the WA
License and covenant not to xxx relating thereto, which are fully assignable to
Buyer, in the form and substance of EXHIBIT I attached hereto.
SECTION 9.19 ASSET TRANSFER. All of the Acquired Assets shall have been
transferred from Starlink, Incorporated to Starlink Special Assets, Inc. to the
reasonable satisfaction of Buyer.
Buyer may waive any condition specified in this ARTICLE IX for the
purpose of consummating the Closing only if it executes a writing so stating at
or prior to the Closing.
ARTICLE X
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
The obligation of Seller to consummate the Closing shall be subject to
the satisfaction, on or before the Closing Date, of each and every one of the
following conditions.
SECTION 10.1 REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties set forth in ARTICLE V above (i) shall have been
true and correct when made, and (ii) shall be true and correct at and as of the
Closing Date as if made on and as of the Closing Date (except for
representations and warranties expressly referring to a specific date), taking
into account changes in the Ordinary Course of Business as contemplated by this
Agreement.
SECTION 10.2 COVENANTS. Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing.
SECTION 10.3 LITIGATION. No action, suit, or proceeding shall be
pending or threatened before any Governmental Body or before any arbitrator
wherein an unfavorable Order would (i) prevent consummation of any of the
Contemplated Transactions or (ii) cause any of the Contemplated Transactions to
be rescinded following consummation (and no such Order shall be in effect).
SECTION 10.4 CLOSING CERTIFICATE. Buyer shall have delivered to Seller
a certificate, dated as of the Closing Date, certifying that: (i) the
representations and warranties of Buyer in this Agreement are true and complete
at and as of the Closing Date (except for representations and warranties that by
their terms are made as of a specified date and except for changes that are
contemplated by this Agreement or occur in the ordinary course of business which
do not singly or in the aggregate have a Material Adverse Effect) and (ii) Buyer
has
38
performed all its obligations and has complied in all material respects with all
of its covenants set forth in this Agreement to be performed or complied with on
or prior to the Closing Date.
SECTION 10.5 NO ADVERSE CHANGE. There shall not have occurred between
the date hereof and the Closing Date any material adverse changes in the
consolidated results of operations, condition (financial or otherwise), assets,
liabilities (whether absolute, accrued, contingent or otherwise) or business of
Buyer.
SECTION 10.6 OPINION. The Selling Parties shall have received from
counsel to Buyer an opinion in a form of EXHIBIT J and otherwise satisfactory to
Seller.
SECTION 10.7 FORM AND SUBSTANCE. All actions to be taken by Buyer in
connection with the consummation of the Contemplated Transactions and all
certificates, opinions, instruments, and other documents required to effect the
Contemplated Transactions shall be reasonably satisfactory in form and substance
to Seller.
SECTION 10.8 CONSENTS. Seller shall have procured all of the consents
of other Persons required by SECTION 6.2 and 4.16 above. The Selling Parties
shall have obtained or, to the satisfaction of Buyer obviated the need to
obtain, all consents, approvals or waivers from Governmental Bodies or agencies,
regulatory authorities and third parties necessary for the execution, delivery
and performance of this Agreement, the Related Agreements and the transactions
contemplated hereby, including without limitation, those consents of Persons
required by SECTIONS 4.16 and 6.2. Buyer shall have obtained or, to the
satisfaction of Seller obviated the need to obtain, all consents, approvals or
waivers from Governmental Bodies or agencies, regulatory authorities and third
parties necessary for the execution, delivery and performance by Buyer of this
Agreement, the Related Agreements and the transactions contemplated hereby.
SECTION 10.9 CORPORATE AUTHORITY. Buyer shall have delivered to Seller
a certificate, dated as of the Closing Date, executed by the Secretary of Buyer
certifying (i) as to the Articles of Incorporation of Buyer, (ii) as to the
Bylaws of Buyer, (iii) that the resolutions, as attached to such certificate,
were duly adopted by the Board of Directors of the Buyer, authorizing and
approving the consummation of the Contemplated Transactions and that such
resolutions remain in full force and effect and (iv) as to the incumbency of the
officers of Buyer duly authorized to execute and deliver this Agreement and the
Related Agreements.
SECTION 10.10 OTHER AGREEMENTS. The relevant Parties shall have entered
into the Related Agreements and the same shall be in full force and effect and
Buyer shall have executed such other agreements and certificates reasonably
requested by Seller.
SECTION 10.11 GOOD STANDING. Buyer shall deliver to Seller a
certificate as to the good standing of Buyer, issued by the Secretary of State
of South Dakota, dated no more than ten (10) days prior to the Closing.
Seller may waive any condition specified in this ARTICLE X for the purpose of
consummating the Closing if it executes a writing so stating at or prior to the
Closing.
ARTICLE XI
INDEMNIFICATION
SECTION 11.1 INDEMNIFICATION BY THE SELLING PARTIES.
(a) Generally. Each of the Selling Parties, jointly and
severally, shall indemnify, defend and hold harmless Buyer and its Affiliates,
and their directors, officers, employees, agents, consultants, representatives,
successors, transferees and assigns (individually a "BUYER INDEMNIFIED PARTY";
and collectively the "BUYER'S INDEMNIFIED PARTIES"), promptly upon demand, at
any time and from time to time, from, against, and in respect of any and all
demands, claims, losses, Taxes, damages, injuries, deficiencies,
39
assessments, judgments, Liabilities, assessments, suits, actions, proceedings,
interest, penalties, and expenses (including, without limitation, settlement
costs and any legal, accounting and other expenses for investigating or
defending any actions or threatened actions or for enforcing such rights of
indemnity and defense), whether or not involving a third-party claim
(collectively, "LOSSES") incurred or suffered by any of the Buyer's Indemnified
Parties, in connection with, arising out of or as a result of each and all of
the following:
(1) any breach of any representation or warranty made
by any of the Selling Parties in this Agreement or the Related Agreements;
(2) the breach of any covenant, agreement or
obligation of any of the Selling Parties contained in this Agreement or the
Related Agreements;
(3) any broker, finder or investment banker engaged
by any of the Selling Parties in connection with this Agreement or the Related
Agreements;
(4) any and all Losses directly or indirectly
resulting or arising from (i) products liability or similar claims in respect of
products manufactured or sold or services provided by Seller prior to the
Closing, or (ii) any claim, action, suit, proceeding or investigation disclosed
in SCHEDULE 4.22 hereto;
(5) any and all Losses directly or indirectly
resulting or arising from (i) claims by Employees, former Employees, agents or
representatives of Seller with respect to their employment or engagement by
Seller prior to or after the Closing or the termination thereof by Seller,
whether at, prior to or after the Closing (including any such termination that
occurs immediately before the hiring, of any such person by Buyer), and (ii)
claims for contributions, benefits, withdrawal liability or other amounts by or
with respect to any of the Employee Plans or any other "employee benefit plan"
as defined in Section 3(3) of ERISA maintained or contributed to by Seller or
any entity affiliated with Seller for purposes of the Code or ERISA;
(6) all liabilities and obligations of Seller for
Taxes, except as otherwise expressly set forth in this Agreement;
(7) any and all Losses directly or indirectly
resulting or arising from any claims (including product liability, auto
liability and general liability claims) in respect of products sold or services
provided by Seller prior to, on or after the Closing;
(8) any and all Liabilities of Seller of any nature
whatsoever that are not expressly assumed by Buyer as an Assumed Liability;
(9) without limiting the generality of the foregoing,
any and all Losses directly or indirectly resulting or arising from any failure
of the parties in connection with the transactions contemplated hereby to comply
fully with any applicable bulk transfer laws or any similar tax laws relating to
the obligations of buyers of assets in bulk transfers;
(10) (A) the Release, emission, discharge, storage,
generation, transportation, treatment, placement or disposal of Hazardous
Materials or threatened Release, emission or discharge of Hazardous Materials
prior to the Closing (xx) by Seller or any Person which is a predecessor of
Seller, directly or indirectly (such Person hereinafter shall be referred to as
"PREDECESSOR) or (yy) on, under or near the Leased Real Property or any property
previously owned, leased or used by Seller or any Predecessor (all such real
property shall be collectively referred to as the "INDEMNIFIED REAL PROPERTY");
(B) the violation by Seller or any Predecessor of any Environmental Law; or (C)
the failure of any Indemnified Real Property to comply with any Environmental
Law prior to the Closing; in each case regardless of whether such matter
constitutes a breach of any representation, warranty or covenant contained in
this Agreement or is disclosed in any schedule to this Agreement; and for the
purpose of this Section, Losses shall include, without limitation,
40
investigatory costs, Clean-up costs, monitoring costs, governmental response
costs, natural resource damages, property damages, Liability for nuisance or
damage to property values, personal injuries and penalties; and
(11) (A) operation or condition of Seller's or a
Predecessor's respective business, prior to the Closing, (B) ownership,
condition or control of the Acquired Assets prior to the Closing Date, (C)
incidents, conditions, occurrences or omissions related to Seller or a
Predecessor, the Leased Real Property, the Acquired Assets or the Business
commencing or in existence prior to the Closing, (D) any and all Losses directly
or indirectly resulting or arising from the occupancy or condition of the Leased
Real Property prior to the Closing, or incidents, occurrences or conditions
relating thereto except to the extent they have been expressly assumed by Buyer
as an Assumed Liability.
Notwithstanding anything to the contrary contained herein, for purposes
of this SECTION 11.1, the term "Losses" shall not include amounts incurred by a
Buyer Indemnified Party if such amounts are reimbursed by insurance and shall
include Warranty Claims only to the extent provided for in SECTION 2.9 hereof.
(b) Deductible and Limitation Amount. No claim for
indemnification under SECTION 11.1 shall be made by a Buyer Indemnified Party
unless and until the aggregate amount of such Losses by all Buyer's Indemnified
Parties shall exceed Eighty Thousand Dollars ($80,000) (the "THRESHOLD AMOUNT"),
and when the Threshold Amount is reached the Selling Parties shall be liable for
all such Losses including the Threshold Amount. The Selling Parties' aggregate
liability under the provisions of this ARTICLE XI shall not exceed the amount of
Five Million Five Hundred Thousand Dollars ($5,500,000) (the "INDEMNIFICATION
LIMIT"); provided, however, that notwithstanding anything to the contrary
contained herein, the maximum individual liability of each Shareholder under
this SECTION 11.1 shall not exceed the product resulting from multiplying (i)
the Indemnification Limit by (ii) such Shareholder's percentage share of the
outstanding capital stock of Starlink, Incorporated as of the Effective Date.
(c) Limitation on Indemnification. The right to
indemnification under SECTION 11.1 shall terminate on the third (3rd)
anniversary of the Closing Date, except that the right to indemnity and the
obligation for indemnification shall have no limit as to time or amount for the
following: (i) for any pending claim for indemnity hereunder which shall have
been made prior to such termination date, such claim shall not terminate until
the final determination and satisfaction of such claim; (ii) claims for
indemnification based upon fraud or intentional misrepresentation by Seller or
the Shareholders or intentional breach of this Agreement or the Related
Agreements; (iii) claims for indemnification based upon breach of any
representation or warranty of Seller or the Shareholders pertaining to
unencumbered title to the Acquired Assets, Taxes or the Employee Plans; or (iv)
claims for indemnification pursuant to paragraph (4) of SECTION 11.1(a).
(d) Third-Party Claims.
(1) Procedures. In the event any demands or claims
are asserted against a Buyer Indemnified Party or any actions, suits or
proceedings are commenced against a Buyer Indemnified Party for which the
Selling Parties are obligated to indemnify a Buyer Indemnified Party under this
SECTION 11.1, then the Buyer Indemnified Party shall give prompt notice thereof
to Seller in order to permit the Selling Parties the necessary time to evaluate
the merits of such demand, claim, action, suit or proceeding and defend, settle
or compromise the same so that the Selling Parties' interests are not materially
prejudiced. Within thirty (30) calendar days after such notice, either the
Selling Parties shall give written notice of their objection to such claim, in
which event such dispute will be settled pursuant to SECTION 13.10 of this
Agreement, or the Selling Parties shall assume the defense thereof by written
notice to the Buyer Indemnified Party with counsel chosen by the Selling Parties
and reasonably acceptable to the Buyer Indemnified Party. The Selling Parties
shall not be liable for any costs or expenses incurred by a Buyer Indemnified
Party in connection with any demand, claim, action, suit or proceeding for which
the Selling Parties are obligated to indemnify the Buyer Indemnified Party under
this SECTION 11.1, provided that the Selling Parties shall have assumed the
defense thereof in accordance with this SECTION 11.1. The Buyer Indemnified
Parties shall be entitled to participate in (but not
41
control) the defense of any such action, with its counsel and at its own
expense. If the Selling Parties do not assume the defense of any such claim or
litigation resulting therefrom in a timely fashion or shall not diligently
pursue such defense in the reasonable opinion of such Buyer Indemnified Party,
(a) a Buyer Indemnified Party may defend against such claim or litigation, in
such manner as it may deem appropriate, at the Selling Parties' expense,
including, but not limited to, settling such claim or litigation, after giving
notice of the same to Seller, on such terms as such Buyer Indemnified Party may
deem appropriate, and (b) the Selling Parties shall be entitled to participate
in (but not control) the defense of such action, with their own counsel and at
their own expense. If the Selling Parties elect to assume the defense of any
such third-party claim, the Selling Parties shall conclusively be deemed to have
acknowledged their obligations under this SECTION 11.1 to indemnify the Buyer
Indemnified Parties in accordance with the terms hereof in respect of such claim
and shall be obligated to take all steps necessary in the diligent defense or
settlement of such claim.
(2) Settlement and Compromise. The Selling Parties
shall not settle or compromise any demands, claims, actions, suits or
proceedings for which a Buyer Indemnified Party has sought indemnification from
the Selling Parties unless they shall have given the Buyer Indemnified Party not
less than 15 days prior written notice of the proposed settlement or compromise
and afforded the Buyer Indemnified Party an opportunity to consult with the
Selling Parties regarding the proposed settlement or compromise. Such notice
shall contain a copy of all documents related to the proposed settlement or
compromise.
(3) Special Claims. Notwithstanding SECTIONS
11.1(d)(1) and 11.1(d)(2), the following claims will be subject to the
provisions of this SECTION 11.1(d)(3): any claims which Buyer determines in its
reasonable discretion would likely have a significant effect on the ongoing
business, operations, or condition (financial or otherwise) of Buyer or its
Affiliates, including but not limited to (a) government regulation on an ongoing
basis, including employment matters, working conditions and environmental
matters, (b) relations with major suppliers and customers, (c) product liability
claims and (d) injunctive or other equitable relief (collectively the "SPECIAL
CLAIMS"). No Special Claim shall be settled without Buyer's prior written
consent, which consent shall not be unreasonably withheld. Such consent shall
not be deemed to be unreasonably withheld if such settlement would have a
Material Adverse Effect on Buyer's ongoing business. In the event Buyer is not
willing to provide its consent to a settlement pursuant to which the Selling
Parties and the claimant are willing to completely settle the claim for a fixed
amount of money, the Selling Parties' indemnification obligation pursuant to
SECTION 11.1 shall be satisfied by the payment of such fixed amount contained in
such settlement documents.
(e) Independent Claims. In the event that a Buyer Indemnified
Party believes it is entitled to indemnification under this SECTION 11.1 by the
Selling Parties and such Loss does not involve a third-party as contemplated by
SECTION 11.1(D) above, then such Buyer Indemnified Party shall give prompt
notice thereof to the Selling Parties in order to permit the Selling Parties
time to evaluate the merits of such demand. If the Buyer has not received
written notice of an objection to the payment of such amounts from the Selling
Parties (a copy of which shall be sent by the Selling Parties to each Buyer
Indemnified Party disclosed on the original notice) within thirty (30) calendar
days after receipt of the Buyer Indemnified Party's notice, Buyer Indemnified
Party or Parties may deduct such Loss from the Deferred Amount or, if the
Deferred Amount has been depleted, the Selling Parties shall pay such Buyer
Indemnified Party or Parties such amounts demanded. If the Selling Parties
object to such indemnification demand within the 30 day period set forth herein,
such dispute shall be settled pursuant to SECTION 13.10 of this Agreement.
(f) Manner of Indemnification. All indemnification by the
Selling Parties after the Deferred Amount has been depleted shall be effected by
the payment of cash or delivery of a certified or official bank check within ten
(10) days of the resolution of any such claim. Any and all indemnification
payments shall be deemed an adjustment to the Purchase Price.
(g) Non-Waiver. Failure of the Buyer Indemnified Parties to
give reasonably prompt
42
notice of any claim or claims shall not release, waive or otherwise affect any
of the Selling Parties' obligations with respect thereto except to the extent
that the Selling Parties can demonstrate actual loss and prejudice as a result
of such failure.
(h) Nonexclusive Remedy. The indemnification provisions
contained in this Section 11.1 are in addition to, and not in derogation of, any
statutory, common law or equitable rights or remedies any party may have for
breach of any representation, warranty, covenant or agreement.
SECTION 11.2 INDEMNIFICATION BY BUYER.
(a) Generally. Buyer shall indemnify, defend and hold harmless
the Selling Parties, their Affiliates, and their directors, officers, employees,
agents, consultants, representatives, successors, transferees and assigns
(individually a "SP INDEMNIFIED PARTY"; and collectively the "SP INDEMNIFIED
PARTIES"), promptly upon demand, at any time and from time to time, from,
against, and in respect of any and all demands, claims, losses, damages,
injuries, deficiencies, assessments, judgments, liabilities, assessments, suits,
actions, proceedings, interest, penalties, and expenses (including, without
limitation, settlement costs and any legal, accounting and other expenses for
investigating or defending any actions or threatened actions or for enforcing
such rights of indemnity and defense) incurred or suffered by the SP Indemnified
Parties, in connection with, arising out of or as a result of each and all of
the following:
(1) any breach of any representation or warranty made
by Buyer in this Agreement or the Related Agreements;
(2) the breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or the Related Agreements;
(3) any broker, finder or investment banker engaged
by Buyer;
(4) any and all Losses directly or indirectly
resulting or arising from products liability or similar claims in respect of
products manufactured or sold or services provided by Buyer after the Closing;
(5) any and all Losses directly or indirectly
resulting or arising from (i) claims by Employees, former Employees, agents or
representatives of Seller with respect to their employment or engagement by
Buyer on or after the Closing or the termination thereof by Buyer following the
Closing, and (ii) claims for contributions, benefits, withdrawal liability or
other amounts by or with respect to any of the Employee Plans or any other
"employee benefit plan" as defined in Section 3(3) of ERISA maintained or
contributed to by Buyer following Closing for purposes of the Code or ERISA;
(6) all liabilities and obligations of Buyer for
Taxes, except as otherwise expressly set forth in this Agreement;
(7) any and all Losses directly or indirectly
resulting or arising from any claims (including product liability, auto
liability and general liability claims) in respect of products sold or services
provided by Buyer prior to, on or after the Closing;
(8) (A) the Release, emission, discharge, storage,
generation, transportation, treatment, placement or disposal of Hazardous
Materials or threatened Release, emission or discharge of Hazardous Materials
after the Closing (xx) by Buyer or any Person which is a successor to Buyer,
directly or indirectly (such Person shall be referred to in this SECTION 11.2 as
"SUCCESSOR") or (yy) on, under or near the Leased Real Property or any property
previously owned, leased or used by Seller or any Successor (for purposes of
this SECTION 11.2 all such real property shall be collectively referred to as
the "INDEMNIFIED REAL PROPERTY"); (B) the violation by Buyer or any Predecessor
of any Environmental Law; or (C) the failure of
43
any Indemnified Real Property to comply with any Environmental Law following the
Closing; in each case regardless of whether such matter constitutes a breach of
any representation, warranty or covenant contained in this Agreement or is
disclosed in any schedule to this Agreement; and for the purpose of this
Section, Losses shall include, without limitation, investigatory costs, Clean-up
costs, monitoring costs, governmental response costs, natural resource damages,
property damages, Liability for nuisance or damage to property values, personal
injuries and penalties; and
(9) (A) operation or condition of the Business
following the Closing, (B) ownership, condition or control of the Acquired
Assets following the Closing Date, (C) incidents, conditions, occurrences or
omissions related to Buyer or a Successor, the Leased Real Property, the
Acquired Assets or the Business commencing or in existence following the
Closing, (D) any and all Losses directly or indirectly resulting or arising from
the occupancy or condition of the Leased Real Property following the Closing, or
incidents, occurrences or conditions relating thereto, and (E) any and all
Losses relating to the Assumed Liabilities.
Notwithstanding anything to the contrary contained herein, no SP Indemnified
Party shall be entitled to indemnification hereunder to the extent any Loss is
caused by a breach of any representation, warranty, covenant, agreement or
obligation of any Selling Party under this Agreement or the Related Agreements.
(b) Deductible and Limitation Amount. No claim for
indemnification under Sections 11.2(a)(1) through 11.2(a)(3) shall be made by an
SP Indemnified Party unless and until the aggregate amount of such claims by all
SP Indemnified Parties shall exceed Eighty Thousand Dollars ($80,000) (the
"THRESHOLD Amount"), and when the Threshold Amount is reached the Buyer shall be
liable for all such Losses including the Threshold Amount. Buyer's aggregate
liability under such provisions of this SECTION 11.2 shall not exceed the
Indemnification Limit.
(c) Limitation on Indemnification. The right to
indemnification under Section 11.2 shall terminate on the third (3rd)
anniversary of the Closing Date, except that the right to indemnity and the
obligation for indemnification shall have no limit as to time or amount for the
following: (i) for any pending claim for indemnity hereunder which shall have
been made prior to such termination date, such claim shall not terminate until
the final determination and satisfaction of such claim; (ii) claims for
indemnification based upon fraud or intentional misrepresentation by Buyer or
intentional breach of this Agreement or the Related Agreements or (iii) claims
for indemnification pursuant to paragraph (4) of SECTION 11.2(a).
(d) Third-Party Claims.
(1) Procedures. In the event any demands or claims
are asserted against the SP Indemnified Parties or any actions, suits or
proceedings are commenced against any SP Indemnified Party for which Buyer is
obligated to indemnify a SP Indemnified Party under this Section 11.2, then the
SP Indemnified Party shall give prompt notice thereof to Buyer in order to
permit Buyer the necessary time to evaluate the merits of such demand, claim,
action, suit or proceeding and defend, settle or compromise the same so that
Buyer's interest is not materially prejudiced. Within 30 calendar days after
such notice, Buyer shall assume the defense thereof by written notice to the
Selling Parties with counsel chosen by Buyer and reasonably acceptable to the SP
Indemnified Party. Buyer shall not be liable for any costs or expenses incurred
by the SP Indemnified Party in connection with any demand, claim, action, suit
or proceeding for which Buyer is obligated to indemnify the SP Indemnified Party
under this Section 11.2, provided that Buyer shall have assumed the defense
thereof in accordance with this Section 11.2. The SP Indemnified Parties shall
be entitled to participate in (but not control) the defense of any such action,
with its counsel and at its own expense. If the Buyer does not assumes the
defense of any such claim or litigation resulting therefrom in a timely fashion,
(a) the SP Indemnified Party may defend against such claim or litigation, in
such manner as it may deem appropriate, including, but not limited to, settling
such claim or litigation, after giving notice of the same to Buyer on such terms
as the SP Indemnified Party may deem appropriate, and (b) Buyer shall be
entitled to
44
participate in (but not control) the defense of such action, with their own
counsel and at its own expense.
(2) Settlement and Compromise. Buyer shall not settle
or compromise any demands, claims, actions, suits or proceedings for which the
SP Indemnified Parties have sought indemnification from Buyer unless it shall
have given the SP Indemnified Parties not less than 15 days prior written notice
of the proposed settlement or compromise and afforded the SP Indemnified Parties
an opportunity to consult with Buyer regarding the proposed settlement or
compromise. Such notice shall contain a copy of all documents related to the
proposed settlement or compromise.
(e) Independent Claims. In the event that an SP Indemnified
Party believes it is entitled to indemnification under this Section 11.2 by the
Buyer and such Loss does not involve a third-party as contemplated by Section
11.2(d) above, then such SP Indemnified Party shall give prompt notice thereof
to the Buyer in order to permit the Buyer time to evaluate the merits of such
demand. Within thirty (30) calendar days after such notice, the Buyer shall pay
such SP Indemnified Party or Parties such amounts demanded or object to such
demand by delivering written notice thereof to Seller or to each SP Indemnified
Party disclosed on the original notice. If the Buyer objects to such demand
within the 30 day period set forth herein, such dispute shall be settled
pursuant to Section 13.10 of this Agreement.
(f) Manner of Indemnification. All indemnification by the
Buyer shall be effected by the payment of cash or delivery of a certified or
official bank check within ten (10) days of the resolution of any such claim.
Any and all indemnification payments shall be deemed an adjustment to the
Purchase Price.
(g) Non-Waiver. Failure of the SP Indemnified Parties to give
reasonably prompt notice of any claim or claims shall not release, waive or
otherwise affect any of the Buyer's obligations with respect thereto except to
the extent that the Buyer can demonstrate actual loss and prejudice as a result
of such failure.
(h) Nonexclusive Remedy. The indemnification provisions
contained in this Section 11.2 are in addition to, and not in derogation of, any
statutory, common law or equitable rights or remedies any party may have for
breach of any representation, warranty, covenant or agreement.
SECTION 11.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer and Seller contained in this Agreement
shall survive the Closing and terminate on the third (3rd) anniversary of the
Closing Date.
ARTICLE XII
TERMINATION OF AGREEMENT
SECTION 12.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned as follows:
(a) By mutual written consent of Buyer and the Seller;
(b) By Buyer if there is a breach of any representation or
warranty of any of the Selling Parties set forth herein or any covenant or
agreement to be complied with or performed by the Selling Parties pursuant to
the terms of this Agreement or the Related Agreements or the failure of a
condition set forth in Article IX to be satisfied on or prior to the Closing
Date, or the occurrence of any event that results or would result in the failure
of a condition set forth in Article IX to be satisfied on or prior to the
Closing Date;
(c) By the Seller if there is a breach of any representation
or warranty of Buyer set forth herein or of any covenant or agreement to be
complied with or performed by Buyer pursuant to the terms of this Agreement or
the Related Agreements or the failure of a condition set forth in Article X to
be satisfied on or prior to the Closing Date, or the occurrence of any event
which results or would result in the failure of a
45
condition set forth in Article X to be satisfied on or prior to the Closing
Date; or
(d) By Buyer or the Seller if any court of competent
jurisdiction in the United States or other governmental body shall have issued
an order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement or the Related Agreements and such order, decree, ruling or other
action shall have become final and non-appealable; or
(e) By Buyer in its sole discretion if any condition set forth
in Article IX is not fully satisfied within sixty (60) days of the signing of
this Agreement by Buyer.
SECTION 12.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement:
(a) Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) No confidential information received by any party with
respect to the business of any other party or its Affiliates shall be disclosed
to any third party, unless required by law; and
(c) In the event that this Agreement shall be terminated
pursuant to Section 12.1(a) hereof, all obligations of the parties hereto under
this Agreement shall terminate and there shall be no liability of any party
hereto to any other party and each party hereto shall bear its own expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement. The termination of this Agreement except pursuant
to Section 12.1(a) shall not affect the right of any party to bring an action
for breach of this Agreement.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of Buyer and Seller; provided, however,
(a) Any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its Best Efforts to seek the consent and approval of the other Parties
as to the form and substance of the disclosure prior to making such disclosure;
it being understood that nothing contained herein shall be intended to prevent
Buyer from complying with all applicable federal, state and Nasdaq
requirements). The Parties agree that all such press releases issued by Buyer
prior to the signing of this Agreement are required by applicable law.
(b) Buyer may issue press releases regarding the execution of
this Agreement, the form of which shall be approved by the Buyer and Seller
prior to execution.
(c) On or before the Closing, Seller and Buyer shall issue a
mutually agreed upon public statement of direction for the integration and
migration of the Seller's customers to Buyer.
46
(d) Each of the parties agrees that until six (6) months
following the Closing, no press release or other disclosures by either company
representatives shall conflict with the initial press releases approved by the
parties pursuant to Section 13.1(c) hereof without the prior written consent of
Buyer and Seller, such consent not to be unreasonably withheld or delayed.
Approval shall be deemed to have been given if there is a written response to a
proposed release or disclosure is not delivered to the requesting party within
two (2) business days after delivery of a request for such approval.
SECTION 13.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
SECTION 13.3 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they have related in any way
to the subject matter hereof, but excluding any Confidentiality Agreement, which
shall remain in effect.
SECTION 13.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties; provided however, that Buyer may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations
hereunder.
SECTION 13.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
SECTION 13.6 HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 13.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
shall be effective on the next business day after) it is sent by recognized
overnight courier service, prepaid for next-day delivery, addressed to the
intended recipient as set forth below:
If to Purchaser Raven Industries, Inc.
000 Xxxx 0xx Xxxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxx, Chief Executive
Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
3300 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to Seller: Starlink, Incorporated
c/o Xxxxxx Xxxxxxx, CPA
0000 Xxx Xxxxxx Xx.
Xxxxxxxx Xxxxxxx, Xxxxx 00000-0000
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Attention: President
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to Shareholders:
Xxxxx X. Xxxxxx
000 Xxxxxx Xxxx
Xxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.:
Xxxxxxxx X. Xxxxxx
000 Xxxxx Xxxxx Xxxx
Xxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.:
Xxxxxxx X. Xxxxxx
000 Xxxxx Xxxxx Xxxx
Xxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.:
Xxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxx Xxxx
Xxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.:
Xxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.:
Xxxxxxx X. Xxxxxx
0000 Xxxxx Xxx
Xxxxx Xxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.:
With a copy to: Fulbright & Xxxxxxxx, LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx, Xx., Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telefax, telex, ordinary mail, or electronic mail), but no such notice, request,
demand, claim,
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or other communication shall be deemed to have been duly given
unless given in accordance with the first sentence of this Section 13.7, or
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving each other Party notice
in the manner herein set forth.
SECTION 13.8 RECORDING WITHOUT CONSENT OF ALL PARTIES. This Agreement
shall not be recorded in the public records of any governmental entity without
the written consent of Buyer and Seller, except as may be required by law.
SECTION 13.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of South Dakota
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction).
SECTION 13.10 DISPUTE RESOLUTION. All disputes arising under this
Agreement shall be resolved by arbitration pursuant to the commercial rules of
the American Arbitration Association ("AAA") then in effect before a single
arbitrator. The arbitrator must be a retired judge of a state or federal court
of the United States or a licensed lawyer with at least ten (10) years of
corporate or commercial law experience from a law firm with at least 10
attorneys and at least an AV rating by Martindale Xxxxxxx. A list of ten (10)
potential arbitrators shall be obtained from the AAA. Each party to the dispute
shall rank the potential arbitrators from one to ten with ten being the most
desirable. The arbitrator who receives the most points shall be the arbitrator
for such dispute. If there is a tie, a random drawing shall be held and the
first arbitrator chosen shall be the arbitrator for such dispute. All disputes
shall be arbitrated in Sioux Falls, South Dakota. The award rendered by the
arbitrator shall be final and binding on the parties and may be entered in any
court having jurisdiction thereof.
(a) Each party shall have discovery rights as provided by the
Federal Rules of Civil Procedure within the limits imposed by the arbitrator;
provided, however, that all such discovery shall be commenced and concluded
within ninety (90) days of the selection of the arbitrator.
(b) It is the intent of the parties that any arbitration shall
be concluded as quickly as reasonably practicable. Unless the parties otherwise
agree, once commenced, the hearing on the disputed matters shall be held four
days a week until concluded, with each hearing date to begin at 9:00 a.m. and to
conclude at 5:00 p.m. The arbitrator shall use all reasonable efforts to issue
the final award or awards within a period of five (5) business days after
closure of the proceedings. Failure of the arbitrator to meet the time limits of
this Section shall not be a basis for challenging the award.
(c) The arbitrator shall instruct the non-prevailing parties
to pay and the non-prevailing party shall pay all costs of the proceedings,
including the fees and expenses of the arbitrators and the reasonable attorneys'
fees and expenses of the prevailing parties. If the arbitrator determine that
there is not a prevailing party, each party shall be instructed to bear its own
costs and to pay one-half of the fees and expenses of the arbitrators.
(d) Nothing contained herein shall bar any party hereto from
seeking equitable relief in a court of competent jurisdiction.
SECTION 13.11 AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
each of the Parties. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
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SECTION 13.12 SEVERABILITY. If any provision or portion thereof of this
Agreement is held to be illegal, invalid or unenforceable under any present or
future law in any jurisdiction, (a) such provision or portion thereof will be
fully severable in such jurisdiction, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision or portion
thereof had never comprised a part hereof, (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or portion thereof or by its
severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision or portion thereof, there will be added automatically as a part of
this Agreement a legal, valid and enforceable provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible to the
maximum extent allowable by law.
SECTION 13.13 EXPENSES. Buyer, Seller and Shareholders shall bear their
own costs and expenses (including legal and accounting fees and expenses)
incurred in connection with this Agreement and the Contemplated Transactions,
except as otherwise expressly provided herein.
SECTION 13.14 CONSTRUCTION. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. As
used herein, the word "including" has the same meaning as "including without
limitation," and the auxiliary verbs "will" and "shall" are used interchangeably
to express determination, compulsion, obligation, and necessity. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
SECTION 13.15 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
SECTION 13.16 SPECIFIC PERFORMANCE. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed substantially in
accordance with their specific terms. Accordingly, each of the Parties agrees
that the other Parties shall be entitled to an injunction or injunctions to
prevent material breaches of the provisions of this Agreement and to enforce
specifically the substantial performance of this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which it may be entitled, at law or in equity.
SECTION 13.17 FORUM. Subject to Section 13.10, any action or proceeding
seeking to enforce any provision of, or based upon any right arising out of,
this Agreement may be brought against any of the Parties in the district courts
of the State of South Dakota (sitting at Sioux Falls, South Dakota) or, if it
has or can acquire jurisdiction, in the United States District Court, and each
of the Parties consents to the jurisdiction of such courts (and the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any Party anywhere in the world in any
manner authorized by law. The Parties agree that a final judgment in any such
action or proceeding will be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
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SECTION 13.18 FURTHER ASSURANCES. If, at any time after the Closing
Date, any party shall consider or be advised that any further assignments,
conveyances, certificates, filings, instruments or documents or any other things
are necessary or desirable to vest, perfect or confirm in Buyer title to the
Acquired Assets, or to consummate any of the Contemplated Transactions, the
appropriate other party(ies) shall, upon request, promptly execute and deliver
all such proper deeds, assignments, certificates, filings, instruments and
documents and do all things reasonably necessary and proper to vest, perfect or
confirm title to the Acquired Assets in Buyer and to otherwise carry out the
purpose of this Agreement.
SECTION 13.19 SETOFF. If any of the Selling Parties fails to pay any
amounts it or they owe Buyer or any Affiliate of Buyer pursuant to this
Agreement or any other agreement (oral or written) between any of such parties,
Buyer shall have the right to offset such amounts which have not been paid
against all amounts which are owed by Buyer or an Affiliate of Buyer to any of
the Selling Parties pursuant to any and all obligations.
SECTION 13.20 FACSIMILE EXECUTION. This Agreement may be executed by
one or more of the parties by facsimile transmitted signature and all parties
agree that the reproduction of signatures by way of telecopying device will be
treated as though such reproductions were executed originals.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
RAVEN INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
STARLINK, INCORPORATED
By: /s/ Xxxx Xxxxxxxx
---------------------------------------
Its: President
---------------------------------------
SHAREHOLDERS
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
By: /s/ Xxxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxxx X. Xxxxxx
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxx
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
52
