ASSET PURCHASE AGREEMENT
Execution Version
THIS ASSET PURCHASE AGREEMENT (this “Agreement”) dated October 1, 2012, by and between Resistance Temperature Detector Company, Inc., a Minnesota corporation (the “Seller”); Cambridge Technologies, Inc., a Minnesota corporation (“Parent”); Xxxxx Xxxxxxxx (“Xxxxxxxx”), Xxxx Xxxxxxxxxx (“Xxxxxxxxxx”), Xxxxx Xxxxxxx (“Xxxxxxx”), and Xxxx Xxxxx (“Xxxxx”) (collectively the “Shareholders”); and Measurement Specialties, Inc., a New Jersey corporation (the “Purchaser”, and together with all of the foregoing, the “Parties” and each a “Party”).
WHEREAS, the parties hereto desire to enter into this Agreement pursuant to which the Purchaser will acquire from the Seller substantially all of its assets and business operations and the Seller will sell and assign to the Purchaser such assets; and
WHEREAS, the parties shall provide certain representations, warranties, covenants and indemnities, upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises, representations, warranties and covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
As used herein, the following terms shall have the following meanings unless the context otherwise requires:
“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with the first Person. For the purposes of this definition, “control,” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing. With respect to any natural Person, “Affiliate” will include such Person’s grandparents, any descendants of such Person’s grandparents, such Person’s spouse, the grandparents of such Person’s spouse, and any descendants of the grandparents of such Person’s spouse (in each case, whether by blood, adoption or marriage).
“Business” shall mean, collectively, the business now conducted by the Seller related to the research, development, manufacture, distribution, marketing, sale, lease, improvement, repair and service of temperature sensors and related products and services;
“Encumbrance” shall mean any lien, charge, claim, option, forfeiture, right of seizure, community or other marital property interest, condition, equitable interest, pledge, security interest, mortgage, right of way, easement, covenant, encroachment, servitude, right of first option, or right of first refusal.
“Environmental Claim” shall mean any claim; litigation; demand; action; cause of action; suit; loss; cost, including attorneys’ fees, diminution in value, and expert’s fees; Losses; punitive damage, fine, penalty, expense, liability, criminal liability, strict liability, judgment, governmental or private investigation and testing; notification of potential responsibility for clean-up of any facility or for being in violation or in potential violation of any requirement of Environmental Law; proceeding; consent or administrative order, agreement, or decree; Encumbrance; personal injury or death of any Person; or property damage (including diminution in value damages), whether threatened, sought, brought, or imposed, that is related to or that seeks to recover Losses related to, or seeks to impose liability under Environmental Law, including for: (a) improper use or treatment of wetlands, pinelands, or other protected land or wildlife; (b) radioactive materials (including naturally occurring radioactive materials); (c) pollution, contamination, preservation, protection, decontamination, remediation, or clean-up of the indoor or ambient air, surface water, groundwater, soil or protected lands; (d) exposure of Persons or property to any Hazardous Substance and the effects thereof; (e) the release or threatened release (into the indoor or outdoor environment), generation, manufacture, processing, distribution in commerce, use, application, transfer, transportation, treatment, storage, disposal, or remediation of a Hazardous Substance; (f) injury to, death of, or threat to the health or safety of any Person or Persons caused directly or indirectly by any Hazardous Substance; (g) destruction of property caused directly or indirectly by any Hazardous Substance or the release or threatened release of any Hazardous Substance to any property (whether real or personal); (h) the implementation of spill prevention and/or disaster plans relating to any Hazardous Substance; (i) failure to comply with community right-to-know and other disclosure Laws; or (j) maintaining, disclosing, or reporting information to Governmental Authorities or any other third Person under, or complying or failing to comply with, any Environmental Law. The term “Environmental Claim” also includes any Losses incurred in testing related to or resulting from any of the foregoing.
“Environmental Condition” shall mean a condition with respect to the environment or natural resources that has resulted or could result in Losses to the Seller under applicable Environmental Laws.
“Environmental Law” shall mean all applicable Laws, Environmental Permits, and similar items of any Governmental Authority relating to the protection or preservation of the environment, natural resources or human health or safety, including: (a) all requirements pertaining to any obligation or liability for reporting, management, licensing, permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of a Hazardous Substance; (b) all requirements pertaining to the protection of the health and safety of employees or the other Persons; and (c) all other limitations, restrictions, conditions, standards, prohibitions, obligations, and timetables contained therein or in any notice or demand letter issued, entered, promulgated, or approved thereunder. The term “Environmental Law” includes (i) CERCLA, the Federal Water Pollution Control Act (which includes the Federal Clean Water Act), the Federal Clean Air Act, the Federal Solid Waste Disposal Act (which includes the Resource Conservation and Recovery Act), the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and OSHA, each as amended from time to time, any regulations promulgated pursuant thereto, and any state or local counterparts and (ii) any common Law or equitable doctrine (including injunctive relief and tort doctrines such as negligence, nuisance, trespass, strict liability, contribution and indemnification) that may impose liability or obligations for injuries or Losses due to, or threatened as a result of, the presence of, effects of, or exposure to any Hazardous Substance.
“Environmental Permits” shall mean all Permits relating to or required by Environmental Laws and necessary for or held in connection with the conduct of the Business.
“Food and Drug Regulations” shall mean the Laws that have been put into effect by or under the authority of the FDA or pursuant to the U.S. Food, Drug, and Cosmetic Act, as amended, its implementing regulations in Title 21 of the Code of Federal Regulations, and any similar provisions of state law.
“Governmental Authority” means any federal, state, county, city, municipal, or other local or foreign government or any subdivision, authority, commission, board, bureau, court, administrative panel, or other instrumentality thereof.
“Hazardous Substance” shall mean any substance, material or waste (regardless of physical form or concentration) that is or becomes restricted or otherwise regulated under Environmental Laws, including hazardous substance, hazardous waste, hazardous material, pollutant or contaminant, any petroleum hydrocarbon and any degradation product of a petroleum hydrocarbon, asbestos, PCB, airborne mysote, toxic mold spores, or similar substance.
“Intellectual Property” shall mean and includes all patents (including utility and design patents), designs, art work, designs-in-progress, formulations, know-how, prototypes, inventions, trademarks, trade names, trade styles, service marks, trade dress and copyrights, and all registrations and applications for each of the foregoing, both registered and unregistered, foreign and domestic, trade secrets or processes, software products and any related object, source and all other computer programming codes, graphics sources, scripts, user manuals and instructions and all related items, inventions, goodwill, discoveries, technical assistance, technical information, documentation and descriptive materials, internet domain names, formulas and other proprietary know-how, and any other intellectual property or confidential or proprietary information that is either (i) owned by the Seller or any of the Shareholders, (ii) as to which the Seller or any of the Shareholders have rights as a licensee, distributor or sublicensor or (iii) used in connection with the Business.
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“Liability” shall mean, with respect to any Person, any indebtedness, obligations or liabilities of such Person of any kind, character, description, type or nature whatsoever, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.
“Permit” shall mean a license, certificate, permit, authorization, franchise or right held by the Seller.
“Permitted Encumbrances” shall mean all statutory or other liens for current taxes or assessments which are not yet due and payable.
“Person” shall mean an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or Governmental Authority.
“Seller Indebtedness” shall mean any amounts payable by the Seller as of the Closing Date (including accrued interest and applicable prepayment fees or penalties) as debtor, borrower, or issuer pursuant to an agreement or instrument involving or evidencing a capital or operating lease or money borrowed by the Seller (but excluding ordinary course trade accounts payable) or other amounts with respect to which an Encumbrance exists against the Seller or the Assets.
“Transaction Documents” shall mean this Agreement and the other documents, instruments and agreements to be entered into pursuant hereto and thereto.
ARTICLE
2
sALE AND TRANSFER OF ASSETS
(a) All products, supplies, and inventory, including raw materials, finished goods, work in progress and prototype sensors under evaluation by third parties, each of which are set forth on Schedule 2.1(a) (collectively, the “Inventory”);
(b) All machinery, equipment, furniture, fixtures, office supplies, vehicles, computer systems, computer printouts, telephone systems, and all related spare, replacement and maintenance parts, each of which (to the extent exceeding $1000 in value) are set forth on Schedule 2.1(b) hereto (collectively, the “Fixed Assets”);
(c) All software products, data processing programs, software programs, data bases, and any other proprietary, related object, source, and all other computer programming codes, graphics sources, scripts, user manuals and instructions, and related items owned by the Seller, each of which are set forth on Schedule 2.1(c);
(d) All technical information, documentation and descriptive materials;
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(e) All patents, trademarks, trade dress, service marks, copyrights, inventions, trade secrets, discoveries, technical assistance, internet domain names, formulas and other proprietary know-how, whether or not patentable, any other Intellectual Property, and all goodwill associated therewith (including, without limitation, Seller’s rights to the name “RTD” or any derivation thereof);
(f) All rights and interests in and to accounts receivable (which accounts receivable is set forth on Schedule 3.28), prepaid expenses, customer deposits, purchase orders, license agreements and maintenance and service agreements, from and with the Seller’s and the Parent’s customers, resellers and service providers and other contracts with the Seller’s and the Parent’s, resellers and service providers, sales orders issued to the Seller’s and the Parent’s suppliers, and other contracts with the Seller’s suppliers and, in addition to the foregoing, any other contracts of the Seller and the Parent which Purchaser expressly elects to assume as set forth on Schedule 2.1(f), provided that in each case, (i) the Seller and the Parent use commercially reasonable efforts to obtain any required consent of third parties to such assignment, or (ii) Purchaser in its sole discretion waives such consent (the “Assigned Contracts”), and further provided that the Seller, the Parent and the Purchaser shall use commercially reasonable efforts to obtain any such required consents as soon as reasonably possible after the Closing or otherwise obtain for Purchaser the practical benefit of such property or rights;
(g) All books and records, including all customer lists, sales and promotional materials, warranty records, sales data, product engineering and development records and research and development records except for corporate and financial records, including tax returns, personnel records, payroll records, minute books and stock records and any records the Seller is required by Law to retain in its possession.
(h) All Permits and applications for Permits issued by any Governmental Authority to the extent the same may be assigned consistent with their terms;
(i) All rights of the Seller and the Parent relating to deposits, prepaid expenses or claims for refunds, and all rights to invoice customers for work performed or transactions occurring through, but not invoiced as of the Closing Date, and all other rights and privileges, including (without limitation) rights to insurance proceeds arising from any casualty relating to the Assets after the Closing Date;
(j) All Owned Real Property (as defined below);
(k) Fifty Thousand Dollars ($50,000) (the “Minimum Cash”), constituting minimal working capital cash of the Seller; and
(l) All of the Seller’s and the Parent’s other properties, assets, goodwill and rights of every kind, nature and description (whether tangible or intangible, wherever located and whether or not reflected on the books and records of the Seller) that are owned, derived from or used or held for use in connection with the Business.
Notwithstanding the foregoing, the transfer of Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Assets except the Assumed Liabilities as defined in Section 2.4 hereof, and the Seller shall pay, perform and discharge all Liabilities of the Seller other than the Assumed Liabilities.
(a) Cash in excess of $50,000;
(b) All Seller-owned cars;
(c) Tax refunds accruing prior to the Effective Time;
(d) Insurance claims accruing prior to the Effective Time;
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(e) Furniture and equipment in the Shareholders’ home offices and Xxxxx Xxxxxxxx’x Ham Lake Company office to the extent set forth on Schedule 2.2(e);
(f) Prepaid expenses and deposits related solely to insurance policies and real estate leases;
(g) All rights of the Seller and the Parent under this Agreement;
(h) A minority equity interest in Sentinel Hydrosolutions, LLC, a California limited liability company (the “Minority Shares”); and
(i) Seller’s equity interest in RTD Sales Corp., a Delaware corporation (“IC-DISC”) and Parent’s equity interest in Seller.
(a) The aggregate consideration (the “Purchase Price”) for the sale, assignment, conveyance and delivery of the Assets and the assumption of the Assumed Liabilities, in full payment for the foregoing, shall be equal to:
(i) Seventeen Million Two Hundred Twenty Five Thousand Dollars ($17,225,000) (the “Initial Purchase Price”), plus
(ii) the amount of the Earn-Out Payment (as defined below), if any, which Earn-Out Payment shall be delivered after Closing in accordance with Section 2.6 hereof, and plus or minus
(iii) the amount of any required post-closing working capital adjustment in accordance with Section 2.7 hereof.
(b) At the Closing, the Purchaser shall pay the Initial Purchase Price as follows:
(i) first, to satisfy all then outstanding Seller Indebtedness on behalf of the Seller Parties (as defined below); and
(ii) after the disbursements required by (i) above, the balance of the Initial Purchase Price less the Minimum Cash amount (which Minimum Cash amount shall be deemed paid to the Seller by the Purchaser as part of the Initial Purchase Price and delivered by the Seller to the Purchaser pursuant to Section 2.1(k)) shall be paid to the Seller by wire transfer of immediately available funds to the account(s) designated by the Seller in writing at least one (1) business day prior to the Closing.
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(a) In addition to the Initial Purchase Price, the Seller may be entitled to receive an additional payment based on Earn-Out Revenue (as defined below) (the “Earn-Out Payment”). If the Earn-Out Revenue is less than $16,000,000, the Seller shall not be entitled to any Earn-Out Payment. If the Earn-Out Revenue is equal to or greater than $17,000,000, the Purchaser shall pay to the Seller $1,500,000 by wire transfer of immediately available funds. If the Earn-Out Revenue is equal to or greater than $16,000,000, but less than $17,000,000, the Purchaser shall pay to the Seller by wire transfer of immediately available funds an amount equal to the sum of $1,500,000 multiplied by the quotient of the amount that the Earn-Out Revenue exceeds $16,000,000 divided by $1,000,000. For example, if the Earn-Out Revenue equals $16,800,000, the Seller would be paid an Earn-Out Payment equal to $1,200,000 (calculated as $1,500,000 x ($800,000/$1,000,000) (the “Earn-Out Period”). For purposes of this Section 2.6, “Earn-Out Revenue” means net revenues (net of returns, discounts, allowances for bad debt and non-recurring engineering charges) for products and services from the Business acquired from the Seller (including past, present and future services and products, and whether sold directly by the Purchaser or by a direct or indirect subsidiary of the Purchaser), shipped during the calendar year ending December 31, 2013, as reasonably calculated by the Purchaser, inclusive of (i) the sale of the products and services of the Business of the Seller to current customers of the Seller or the Purchaser, or to future customers, regardless of where sourced or manufactured, and (ii) the sale of the products and services of the Purchaser to current customers of the Seller as of the date hereof that are not and have not previously been customers of the Purchaser.
(b) Delivery of Reports; Dispute Resolution.
(i) Promptly after (and in any case no later than 10 days after) the approval and sign-off of the Purchaser’s financial statements for the calendar year ending December 31, 2013 by the Purchaser’s management and/or board of directors that have been reviewed by the Purchaser’s auditors, the Purchaser shall prepare or cause to be prepared and shall deliver or cause to be delivered to the Seller (a) a statement (the “Earn-Out Revenue Statement”) setting forth the amount of Earn-Out Revenue, if any, including the supporting data for such calculation. The Seller shall have reasonable access to the books and records of the Purchaser relating to the Earn-Out Revenue to verify the determination and computation made by the Purchaser.
(ii) In the event that the Seller objects to the Purchaser’s calculation of Earn-Out Revenue or requires further information in order to verify such calculation, then within 30 days after the delivery to the Seller of the Earn-Out Revenue Statement (the “Initial Response Period”), the Seller shall deliver to the Purchaser a notice (the “Objection Notice”): (i) describing in reasonable detail the Seller’s objections to the Purchaser’s calculation of Earn-Out Revenue and containing a statement setting forth the calculation of Earn-Out Revenue determined by the Seller to be correct; or (ii) requesting additional information from the Purchaser that the Seller requires in order to verify such calculation (which information, to the extent reasonably necessary in order to perform such calculations, shall be provided by the Purchaser within 10 days after the Purchaser’s receipt of such request). If the Seller does not deliver an Objection Notice to the Purchaser during the Initial Response Period, or prior to the end of such period delivers a written notice to the Purchaser accepting the calculation of Earn-Out Revenue, the Purchaser’s calculation of Earn-Out Revenue shall be conclusive and binding on the Purchaser and the Seller, and the Purchaser shall immediately make any Earn-Out Payment required with respect to such calculation.
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(iii) If the Seller delivers an Objection Notice to the Purchaser accompanied by a request for additional information from the Purchaser as described above during the Initial Response Period, then the Purchaser shall not immediately make the Earn-Out Payment, and the Seller shall have an additional 10 days after receiving the requested information from the Purchaser (the “Final Response Period”) to deliver to the Purchaser a written notice (a “Final Objection Notice”) describing in reasonable detail the Seller’s objections to the Purchaser’s calculation of Earn-Out Revenue, accompanied by a statement setting forth the basis for the calculation of the Earn-Out Revenue amount determined by the Seller to be correct. If the Seller does not deliver a Final Objection Notice to the Purchaser during the Final Response Period, or prior to the end of such period delivers a written notice to the Purchaser accepting the calculation of Earn-Out Revenue, then the Purchaser’s calculation of Earn-Out Revenue shall be conclusive and binding on the Purchaser and the Seller, and the Purchaser shall immediately make any Earn-Out Payment required with respect to such calculation.
(iv) If the Seller delivers an Objection Notice not requesting additional information or a Final Objection Notice, as the case may be, accompanied by a statement setting forth the basis for the calculation of Earn-Out Revenue determined by the Seller to be correct to the Purchaser during either the Initial Response Period or the Final Response Period in accordance with this Section 2.6(b), and if the Seller and the Purchaser are unable to agree on the calculation of Earn-Out Revenue within 10 days after such Objection Notice or Final Objection Notice, as the case may be, is delivered to the Purchaser, the dispute shall be finally settled by an independent accounting firm mutually selected by the Purchaser and the Seller (the “Designated Accounting Firm”), or, in the absence of agreement on such firm, to a panel of three public accounting firms, one designated by the Seller, one designated by the Purchaser and one jointly designated by the other two firms (collectively, the “Designated Accounting Firms”). The determination by the Designated Accounting Firm(s) of the calculation of Earn-Out Revenue shall be conclusive and binding on the Purchaser and the Seller, absent manifest error or fraud, and the Purchaser shall immediately make any Earn-Out Payment required with respect to such calculation. The costs of the Designated Accounting Firm(s) shall be borne (A) by the Purchaser if the absolute value of the difference between the Earn-Out Revenue determined by the Designated Accounting Firm and the Purchaser’s calculation of the Earn-Out Revenue is greater than the absolute value of the difference between the Earn-Out Revenue determined by the Designated Accounting Firm and the Seller’s calculation of Earn-Out Revenue, (B) by the Seller if the absolute value of the difference between the Earn-Out Revenue determined by the Designated Accounting Firm and the Purchaser’s calculation of Earn-Out Revenue is less than the absolute value of the difference between Earn-Out Revenue determined by the Designated Accounting Firm and the Seller’s calculation of Earn-Out Revenue and (C) otherwise equally by the Purchaser and the Seller.
(c) Following the Closing and through the end of the calendar year 2013, the Purchaser shall (i) cause the Business’s books and records to be kept in a manner similar to that used for divisional accounting purposes, that will facilitate the separate recording, compiling and analysis of all information relevant to the determination and calculation of the Earn-Out Revenue, and by including services and products of the Business wherever sourced or manufactured.
(d) Purchaser agrees to use commercially reasonable efforts and good faith during the Earn-Out Period to: (i) continue to operate the Business in the ordinary course of business consistent with past practice; (ii) provide the Business with adequate capital, personnel, and other necessary support consistent with past practices; and (iii) market and promote sales of services and products of the Business to existing and new customers.
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(e) Purchaser shall pay interest at the rate of 0.5% per month on any payment which is not made by Purchaser when due under this Section, plus any legal fees or expenses reasonably incurred by Seller in collecting such payments.
(f) The Purchaser shall be entitled, in addition to any other rights or remedies that it may have, to deduct from any Earn-Out Payment that subsequently becomes due and payable by the Purchaser to the Seller in accordance with this Agreement the amount of any and all Losses (as defined below) which Purchaser has sustained for which it is entitled to indemnification from the Seller pursuant to Article 8 hereof, subject to the procedure set forth in Section 8.4 of this Agreement.
Section 2.7 Post-Closing Working Capital Adjustment.
(i) the mutual acceptance by Seller and Purchaser of the Preliminary Adjustment Statement, with such changes thereto, if any, as may be proposed by Seller and consented to by Purchaser;
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(ii) the expiration of twenty-one (21) days after Seller’s receipt of the Preliminary Adjustment Statement, without timely written objection by Seller in accordance with Section 2.7(b); or
(iii) the delivery to Seller and Purchaser by the Accounting Referee of the report of its determination of all disputed matters submitted to the Accounting Referee pursuant to Section 2.7(c).
(e) Adjustment of Purchase Price.
(i) If the Working Capital at Closing based on the Final Adjustment Statement is more than $25,000 less than the Baseline Working Capital, Seller shall pay to Purchaser an amount in cash equal to the entire difference between the Working Capital at Closing and the Baseline Working Capital.
(ii) If the Working Capital at Closing based on the Final Adjustment Statement exceeds the Baseline Working Capital by more than $25,000, Purchaser shall pay to the Seller an amount equal to the entire difference between the Working Capital at Closing and the Baseline Working Capital.
(iii) If the Working Capital at Closing based on the Final Adjustment Statement is not more than $25,000 greater or $25,000 less than the Baseline Working Capital, there shall be no adjustment to the Purchase Price pursuant to this Section 2.7.
(iv) Any such amount required to be paid pursuant to this Section 2.7(e) shall be due and payable no later than three (3) business days after the Preliminary Adjustment Statement becomes the Final Adjustment Statement. For tax purposes, any payment by Purchaser or Seller under this Section 2.7(e) shall be treated as an adjustment to the Purchase Price.
ARTICLE
3
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller, Parent, and the Shareholders (collectively, the “Seller Parties”), jointly and severally represent and warrant to the Purchaser as of the date hereof and as of the Closing Date as follows:
Section 3.1 Organization and Standing. The Seller and the Parent are corporations duly organized, validly existing, and in good standing under the laws of the state of Minnesota and have the full power and authority (corporate and otherwise) to carry on their businesses in the places and in the manner and as they are now being conducted.
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(a) any collective bargaining arrangement with any labor union;
(b) any contract for capital expenditures or the acquisition or construction of fixed assets in excess of $25,000 in the aggregate;
(c) any contract for the purchase or sale of inventory, materials, supplies, merchandise, machinery, equipment, parts or other property, assets, or services requiring aggregate future payments in excess of $25,000, and any Government Contract;
(d) any contract relating to the borrowing of money or the guaranty of another Person’s borrowing of money;
(e) any contract granting any Person an Encumbrance on all or any part of the Assets (other than a Permitted Encumbrance);
(f) any contract relating to (i) the purchase, sale, lease or disposal of any equity interest or other securities of the Seller or (ii) the purchase, sale, lease or disposal of any assets of the Seller other than in the ordinary and usual course of business consistent with past custom and practice (including any contract granting to any Person a first refusal, first offer or similar preferential right to purchase or acquire any of the Assets);
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(g) any contract under which the Seller is (i) a lessee or sublessee of any machinery, equipment, vehicle or other tangible personal property having an original value in excess of $25,000, (ii) a lessor of any property having an original value in excess of $10,000, or (iii) a lessee or lessor of any real property;
(h) any contract limiting, restricting or prohibiting Seller from conducting the Business anywhere in the United States or elsewhere in the world or any contract limiting the freedom of the Seller to engage in any line of business or to compete with any other Person or to solicit any Person for employment;
(i) any joint venture or partnership contract;
(j) any employment contract with any employee with annual total compensation in excess of $25,000;
(k) any management service, consulting, maintenance or any other similar contracts (including any employee lease or outsourcing arrangement) providing for annual aggregate payments of more than $25,000;
(l) any license (including inbound and outbound licenses) or other agreements (including, without limitation, royalty agreements and maintenance agreements) relating in whole or in part to any Intellectual Property (excluding, however, licenses of off-the-shelf desktop computer application software having a license fee per user of less than $1,000);
(m) any contract (including, without limitation, broker, distributor, vendor, customer or maintenance agreements) or series of such contracts which involve aggregate payments of $25,000 or more and which is not cancelable without penalty within ninety (90) days;
(n) any contract that provides any customer of the Seller or the Business with pricing, discounts or benefits that change based on the pricing, discounts or benefits offered to other customers of the Seller or the Business;
(o) any warranty agreement with any supplier to the Business with respect to products sold or indemnity agreement with any supplier to the Business under which the Seller is obligated to indemnify such supplier against product warranty or infringement or similar claims;
(p) any contract with any affiliate, equityholder or employee of the Seller (including any officer, manager, member, partner, director, agent or consultant);
(q) any contract or other arrangement regarding nondisclosure or confidentiality; and
(r) any other contract not made in the ordinary course of the Seller’s business.
The Seller has delivered to the Purchaser a true and complete copy of each written Material Contract, including all amendments or other modifications thereto, and a true and complete description of the terms of each oral Material Contract. Except as set forth on Schedule 3.8, each Material Contract is a valid and binding obligation of the Seller and, to the Seller Parties’ knowledge, of each other party thereto, is enforceable in accordance with its terms, and is in full force and effect and not subject to any claims, charges, setoffs or defenses with respect to material breaches or defaults. Each Material Contract was made on market terms in arm’s-length negotiations. Except as set forth on Schedule 3.8, the Seller has performed all material obligations required to be performed by it prior to the date hereof under the Material Contracts and is in material compliance therewith, and to the Seller Parties’ knowledge, no event has occurred which, with the giving of notice or the passage of time or both, would constitute a material breach or default in any Material Contract. The Parent is not a party to any Contract.
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Section 3.10 Employee Benefit Plans and Arrangements.
(a) Schedule 3.10 sets forth a complete list of all “employee benefit plans,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and all other compensation and benefit plans, contracts, programs, funds or arrangements established, maintained, or contributed to by the Seller for the benefit of the Seller’s employees and independent contractors (all of the foregoing being hereinafter individually or collectively referred to as an “Employee Plan” or “Employee Plans,” respectively). The Seller has provided to Purchaser true and complete copies of all Employee Plans and written summaries of any unwritten Employee Plans.
(b) Each Employee Plan has been maintained, operated, and administered in compliance with its terms and all applicable Laws in all material respects. Each Employee Plan that is intended to be qualified under Section 401(a) of the Code is so qualified, and the Seller has delivered to Purchaser a currently effective IRS determination or opinion letter covering such plan. No Employee Plan is subject to Section 409A of the Code.
(c) No action or failure to take an action by the Seller or any affiliate that is treated as one employer with the Seller pursuant to Sections 414(b), (c), (m), or (o) of the Code (“ERISA Affiliate”), and no facts or circumstances exist, that could directly or indirectly subject Purchaser, any of its affiliates, or any of their assets (including the acquired assets) or employee benefit plans to any Encumbrance, tax, penalty, or any other liability of any nature with respect to any compensation or benefit plans, contracts, programs, funds or arrangements established, maintained, contributed to, or required to be contributed to by the Seller or any ERISA Affiliate. The Seller has no Liability relating to any Employee Plan that could become a Liability of Purchaser or any of its Affiliates. Neither the Seller nor any ERISA Affiliate has ever sponsored, maintained, contributed to or had any obligation to contribute to any plan subject to Section 412 of the Code or Title IV of ERISA.
(d) No Employee Plan contains any provision which could prohibit the transactions contemplated by this Agreement. No Employee Plan has terms requiring assumption thereof by Buyer or any of its Affiliates. The execution of this Agreement and the consummation of the transactions contemplated hereby will not constitute a triggering event under any Employee Plan, which (either alone or upon the occurrence of any additional or subsequent event) may result in any payment, acceleration, vesting or increase in benefits to any person.
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Section 3.12 Solvency. The Seller is not now insolvent, and will not be rendered insolvent by any of the transactions contemplated herein. As used in this Section, “insolvent” has the meaning ascribed to such term under applicable Laws of the State of Minnesota.
Section 3.15 Suppliers; Customers.
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(b) Schedule 3.15(b) is a complete and correct list of the twenty (20) largest customers and other similar business relations of the Business (the “Material Customers”) for the twelve (12) month period ending December 31, 2011 and sets forth opposite the name of each Material Customer the amount paid to such customer during such period. Except as set forth in Schedule 3.15(b), in the last twelve (12) months, no Material Customer has cancelled or otherwise terminated, or threatened to cancel or terminate, its relationship with the Business. The Seller has not received any written notice nor has any knowledge that any Material Customer intends to cancel or otherwise modify (including, without limitation, price increases or any adverse modification to the availability of parts or materials) its relationship with the Business.
(c) The Seller has complied with all Laws relating to the Government Contracts and Government Contract Bids or Proposals. All representations and certifications of the Seller set forth in or pertaining to the Government Contracts and Government Contract Bids or Proposals were complete and accurate in all material respects as of their effective date. Schedule 3.15(c) lists all Government Contracts with respect to which the Seller claimed or otherwise conveyed to any Governmental Authority or other third party, or received in part as a result of, any certification or status of the Seller or any business partner of the Seller (including, without limitation, any small business or minority business enterprise, or other disadvantaged business status or certification), the amount of purchases or sales under each such Government Contract, and a description of each such certification or status. No termination notice, cure notice or show-cause notice is in effect with respect to any Government Contract or Government Contract Bid or Proposal. Neither the Seller nor any of its officers, directors, employees or agents is or has during the last three (3) years been the subject of a formal investigation or indictment with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Government Contract Bid or Proposal. Neither the Seller nor any of its officers, directors, employees or agents is suspended or debarred from federal contracting or has been the subject of a finding of non-responsibility or ineligibility regarding federal contracting. During the last three (3) years, the Seller has not conducted or initiated an internal investigation or made a voluntary disclosure to a Governmental Authority regarding its actions or omissions vis-à-vis the Government Contracts or Government Contract Bids or Proposals. All test and inspection results that the Seller has provided pursuant to any Government Contract were complete and correct in all material respects as of the date so provided. The Seller has not received any government-furnished property or equipment in connection with any Government Contract.
Section 3.16 Financial Statements.
(a) The Seller has delivered to Purchaser (i) the unaudited consolidated balance sheet of the Seller, IC-DISC and and RTD HK as of December 31, 2011, together with the related statements of income and cash flows for the twelve (12) month period then ended, copies of which are attached as Schedule 3.16(a) and (ii) the unaudited balance sheet of the Seller, IC-DISC and and RTD HK as of August 31, 2012 (the “Balance Sheet Date”), together with the related statements of income and cash flows for the eight-month period then ended, copies of which are attached as Schedule 3.16(b) (all of the foregoing described in (i) and (ii), the “Financial Statements”). Except as set forth on Schedule 3.16(a), the Financial Statements have been prepared in accordance with GAAP and are correct and complete in all material respects and reflect the consistent application of accounting principles throughout the periods involved. The Financial Statements (i) are derived from the books and records (including the general ledgers) of the Seller, (ii) accurately reflect such books and records (including the general ledgers) and (iii) fairly present in all material respects the consolidated financial position of the Seller at the dates thereof and the results of the operations and cash flows of the Seller for the periods indicated.
(b) The Seller has established and presently maintains a system of internal accounting procedures sufficient to provide reasonable assurances (i) that transactions, receipts and expenditures of the Seller are being executed and made only in accordance with appropriate policies, procedures and authorizations of management and the board of directors or managers of the Seller and (ii) that transactions related to the business of the Seller are recorded as necessary (A) to permit preparation of materially accurate financial statements and (B) to maintain accountability for assets.
(a) changed any salaries or other compensation of, or paid any bonuses to, any employee or entered into any employment, severance, or similar agreement with any employee;
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(b) adopted, amended, or increased any benefits under any Plan or policy;
(c) sold, leased, or otherwise disposed of any material asset or property except in the ordinary course;
(d) (i) wrote-off as uncollectible any notes or accounts receivable except write-offs in the ordinary course charged to reserves, (ii) wrote-off, wrote-up, or wrote-down any other material asset of the Seller, or (iii) altered the customary time periods for collection of accounts receivable or payments of accounts payable;
(e) paid, discharged, settled, or satisfied any claims, liabilities, or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) in excess of $10,000, other than the payment, discharge, or satisfaction of (i) liabilities reflected or reserved against on the August 31, 2012 balance sheet or (ii) liabilities incurred since the Balance Sheet Date in the ordinary course;
(f) entered into any compromise or settlement of, or taken any other action with respect to, any Proceeding;
(g) terminated or closed any material facility, line of business, or operation;
(h) caused or suffered any material damage, destruction, or other casualty loss (whether or not covered by insurance) affecting the Business or the Assets;
(i) accelerated the generation of accounts receivable, including by accelerating shipments of product relative to ordinary course;
(j) delayed the generation of accounts payable, including by delaying the receipt of inventory and raw materials relative to ordinary course;
(k) suffered any material adverse change in its business, operations, or financial condition or become aware of any event which may result in any such adverse change; or
(l) committed, agreed to, or contracted to do any of the foregoing.
Section 3.19 Properties; Sufficiency of Assets.
(a) Schedule 3.19(a) sets forth a list of all real property and improvements owned, leased, used, operated, or occupied (whether for storage, disposal, or otherwise) by the Seller and/or the Parent (“Seller Real Property”), including all Seller Real Property presently leased by the Seller or for which the Seller holds a possessory interest (the “Leased Real Property”) and all Seller Real Property presently owned by the Seller and/or the Parent (“Owned Real Property”).
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(b) Except as set forth on Schedule 3.19(b), the Parent owns good and marketable title to the Owned Real Property which, as of the Closing, will be free and clear of any Encumbrance other than Permitted Encumbrances. True and complete copies of (A) all deeds, existing title insurance policies and surveys of or pertaining to the Owned Real Property and (B) all instruments, agreements and other documents evidencing, creating or constituting any Encumbrance on Owned Real Property have been delivered to the Purchaser.
(c) All leases of Leased Real Property are valid, binding, and enforceable against the Seller and each other party thereto in accordance with their respective terms, the Seller is a tenant or possessor in good standing thereunder, and all rents currently due under such leases have been paid. There does not exist under any such lease any default or any event which with notice or lapse of time or both would constitute a default by Seller, or to the Seller Parties’ knowledge, by any other person.
(d) The Seller is in peaceful and undisturbed possession of the Seller Real Property and has good and valid rights of ingress and egress to and from all such Seller Real Property and to the public street systems for all usual street, road and utility purposes. No Shareholder or Affiliate of a Shareholder is a landlord under any lease relating to Leased Real Property. The Seller has not received any notice of any appropriation, condemnation, or like proceeding, or of any violation of any applicable zoning Law relating to or affecting the Seller Real Property, and to the Seller Parties’ knowledge, no such proceeding has been threatened or commenced. The Owned Real Property (including, without limitation, all water, sewer, gas, electrical, HVAC systems and other utilities servicing the same) is in good repair and operating condition in all material respects in light of the age and use thereof, ordinary wear and tear excepted, and constitutes all real property, buildings and other improvements necessary for the Seller to conduct the business as currently conducted. To the Seller Parties’ knowledge, no person or improvement is encroaching upon any of the Seller Real Property, and none of the activities of the Seller on the Company Real Property or any of the improvements thereon are encroaching upon the property of others or easements or rights-of-way in favor of others.
(e) Schedule 3.19(e)(i) sets forth a list of all personal property (including equipment) necessary for the conduct of the Business that is owned or leased by the Seller and was originally purchased by the Seller at a cost of more the $1000, and indicates whether each such item of personal property is owned or leased. Except as set forth on Schedule 3.19(e)(ii), the Seller has good and marketable title to all of its properties and assets in each case free and clear of all Encumbrances except for Permitted Encumbrances. All machinery and equipment owned or leased by the Seller is in good operating condition and state of repair, subject only to ordinary wear and tear which is not such as to materially affect adversely the operation of the Business as presently conducted.
Section 3.20 Interests in Counterparties and Others. Except as disclosed on Schedule 3.20, no stockholder, officer or director of the Seller or any of their respective Affiliates possesses, directly or indirectly, any ownership or pecuniary interest in, or is a trustee, director, manager, officer, Affiliate, or employee of, any Person that is a seller to, or supplier, lessor, lessee, licensor, or competitor of the Seller, including any counterparty to any Material Contract. The Seller has not transferred any of its respective assets or properties to, or bought any assets or properties from, any stockholder, officer or director of the Seller or any of their respective Affiliates, except for compensation, dividends, usual and customary benefits, perquisites, and reimbursements of business expenses in the ordinary course.
Section 3.21 Relationships; Employees.
(a) The relationships of the Seller with its lessors, suppliers, customers, vendors, and employees are, in the good faith opinion of the Seller, good commercial working relationships. There has not been, and the Seller has no reason to believe there will be, any change in relations with lessors, suppliers or vendors of the Seller, as a result of the transactions contemplated by this Agreement.
(b) Schedule 3.21(b) lists all employees of the Seller (the “Business Employees”) and each Business Employee’s annual salary, bonus and the amount of any accrued paid time off as of the Closing Date.
(c) Except for the employment agreements specifically set forth on Schedule 3.21(c), no shareholder, officer, employee or director of the Seller is a party to, or is otherwise bound by, any Contract, including any confidentiality, non-competition, or proprietary rights Contract that in any way adversely affects or will affect (i) the performance of his duties as an employee of the Business or (ii) the ability of the Business to conduct its businesses consistent with past practice.
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(d) Except as disclosed on Schedule 3.21(d), (i) there is no labor strike, dispute, slowdown, or stoppage pending or threatened against or involving the Seller, (ii) the Seller is not a party to any collective bargaining agreement and no collective bargaining agreement is currently being negotiated by the Seller, and (iii) no claim in respect of the employment of any employee of the Seller has been asserted and is currently pending or, to the Seller Parties’ knowledge, threatened, against the Seller.
(e) To the Seller Parties’ knowledge, all employees, agents, and contractors of the Seller are legally authorized to work in the United States. The Seller has properly completed all reporting and verification requirements pursuant to Laws relating to immigration control for all of its employees, agents and contractors including the Form I-9.
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ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Seller as follows:
Section 4.1 Organization and Standing. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the state of New Jersey and has the full power and authority (corporate and otherwise) to carry on its business in the places and in the manner and as it is now being conducted. At or before the Closing, Purchaser will be qualified to conduct business in Minnesota.
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(a) Effective as of 11:59 p.m. on the day immediately before the Closing Date, the Seller shall have terminated the employment of each of the Business Employees. The Seller shall retain, pay, satisfy and discharge all liabilities to the Business Employees including (without limitation), prior to the Closing, paying to each of the Business Employees all benefits, including severance, vacation, paid time off, and COBRA benefits, to which such Business Employees are entitled pursuant to their employment by, or termination from, the Seller, and shall pay to the Business Employees an aggregate amount of no less than $150,000 in respect of the Seller’s profit sharing plan. Except as agreed to by Seller, Purchaser shall make offers of employment to all of the Business Employees (such employees who accept the terms and conditions of such offer and who are employed by Purchaser are hereinafter referred to as “Hired Employees”) Nothing herein, expressed or implied, will confer upon any Business Employee or any former employee of Seller any rights or remedies (including any right to employment or continued employment for any specified period) of any nature or kind whatsoever, under or by reason of this Agreement. The provisions of this Section 5.2 are not intended to be for the benefit of or otherwise be enforceable by, any Business Employee or other third party or to be treated as an amendment to any employee benefit plan.
(b) Purchaser shall pay the Hired Employees the same salary and wage rates they were earning immediately prior to the Effective Time immediately after the Closing. The Hired Employees shall be covered by Purchaser’s standard benefit plans, programs, policies, and procedures beginning on January 1, 2013, except for participation in the Purchaser’s 401(k) plan, which shall begin at the Effective Time. The Seller shall adopt plan amendments (subject to reasonable advance review by Purchaser) and take such other actions as are required to continue its Health Reimbursement Arrangement plan (the “HRA Plan”) and Flexible Benefits Plan (the “Flex Plan”) as active plans through December 31, 2012, under which the Hired Employees shall continue to accrue and receive benefits as if the Hired Employees remained employed by the Seller through December 31, 2012. The HRA Plan and the Flex Plan shall provide for reimbursement for eligible expenses incurred during the 2012 calendar year that are submitted by March 31, 2013 by the Hired Employees. The Seller will provide COBRA notices and elections to all qualified beneficiaries due to loss of coverage under the HRA Plan and the Flex Plan (which would not include Hired Employees who remain employed with the Purchaser past December 31, 2012) and continue to maintain the HRA Plan and the Flex Plan through December 31, 2012, to provide COBRA coverage to the extent required by law. The Purchaser shall reimburse the Seller for all benefits accruing and/or paid under the HRA Plan with respect to the Hired Employees through December 31, 2012, but in no event in excess of an aggregate of $44,000. The Purchaser shall deduct from the paychecks of Hired Employees a pro rata portion of their elected contribution to the Flex Plan and shall transfer such amounts to the Seller through December 31, 2012. The Purchaser shall have no responsibility or Liability for COBRA notices or coverage relating to the HRA Plan or the Flex Plan and Seller shall indemnify and hold the Purchaser harmless from and against any and all damages, Liabilities, claims or expenses incurred by the Purchaser as a result of or otherwise arising out of the failure of Seller to comply with the requirements of COBRA. Hired Employees shall be given credit under all of the Purchaser’s benefit plans, programs, and policies for all years of service with the Seller for purposes of eligibility, vesting, benefit accrual, and other benefits under such plans, programs and policies. Except as provided herein, the Hired Employees shall become immediately eligible under such plans, programs and policies, with no waiting period and no pre-existing condition exclusions or limitations. The Hired Employees may elect to take paid time off immediately after the Effective Time in accordance with the Purchaser’s PTO plan, which allows Employees to “go negative.”
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ARTICLE
6
cOVENANTS OF Purchaser
Section 7.2 Transactions at Closing. At the Closing, each of the following transactions shall occur:
(a) The Seller’s Performance. At the Closing, the Seller shall deliver to Purchaser the following:
(i) | this Asset Purchase Agreement executed by the Seller; |
(ii) | a xxxx of sale in the form set forth as Exhibit A (the “Xxxx of Sale”) for all of the Assets that are tangible personal property duly executed by the Seller, and such other good and sufficient instruments of conveyance, transfer and assignment (in form and substance reasonably acceptable to Purchaser) as shall be necessary to transfer the Assets to the Purchaser; |
(iii) | an assignment and assumption of the Assumed Liabilities in the form set forth as Exhibit B, duly executed by the Seller (the “Assignment and Assumption Agreement”); |
(iv) | an assignment of the Intellectual Property in the form set forth as Exhibit C (the “IP Assignment”) executed by the Seller; |
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(v) | a certificate of an officer of the Seller and Parent (a) certifying, as complete and accurate as of the Closing, attached copies of the governing documents of such entity, (b) certifying and attaching all requisite resolutions or actions of such entity’s board of directors and shareholders approving the execution and delivery of this Agreement, the consummation of the transactions contemplated herein and (c) certifying to the incumbency and signatures of the officers of such entity executing the Transaction Documents; |
(vi) | physical possession of the Assets where located; |
(vii) | restrictive covenants agreements between (a) the Purchaser, on the one hand, and (b) the Seller and each Shareholder, on the other hand, substantially in the form set forth as Exhibit D (the “Restrictive Covenants Agreements”); |
(viii) | employment agreements between the Purchaser, on the one hand, and (a) Xxxx Xxxxx, substantially in the form set forth as Exhibit E-1 (the “Xxxxx Employment Agreement”), (b) Xxxxx Xxxxxxxx, substantially in the form set forth as Exhibit E-2 (the “Xxxxxxxx Employment Agreement”), (c) Xxxx Xxxxxxxxxx, substantially in the form set forth as Exhibit E-3 (the “Xxxxxxxxxx Employment Agreement”), and (d) Xxxxx Xxxxxxx, substantially in the form set forth as Exhibit E-4 (the “Xxxxxxx Employment Agreement” and together with the Xxxxx Employment Agreement, the Xxxxxxxx Employment Agreement and the Xxxxxxxxxx Employment Agreement, the “Employment Agreements”); |
(ix) | unanimous written consent of the Board of Directors and stockholders of the Seller approving the transactions set forth in this Agreement, ratifying the current members of the Board of Directors, and delegating to the appropriate officer of the Seller authority to negotiate and execute on behalf of the Seller each Transaction Document; |
(x) | a certificate of good standing for the Seller from the Secretaries of State of the State of Minnesota, as of a date within five (5) days prior to the Closing Date; |
(xi) | (a) each consent, authorization, approval, exemption, filing, registration or qualification, if any, listed on Schedule 3.11 and (b) with respect to all the Seller Indebtedness, payoff letters and evidence of arrangements for the holders of such the Seller Indebtedness to provide upon payment thereof releases of Encumbrances, receipts, termination statements, cancelled notes and all other documents necessary to evidence the payment of such the Seller Indebtedness and release of the Encumbrances upon the Seller and its Assets; |
(xii) | conveyance documents acceptable to the Purchaser and a title agent selected by Purchaser in connection with the transfer of the Owned Real Property, including (without limitation) a limited warranty deed, owners affidavit and title commitment; |
(xiii) | an opinion of Best and Xxxxxxxx LLP, legal counsel to the Seller, dated the Closing Date, in form and substance acceptable to Purchaser; and |
(xiv) | such other evidence of the performance of all covenants and satisfaction of all conditions required of the Seller by this Agreement, at or prior to the Closing, as the Purchaser or its counsel may reasonably require. |
(i) | this Asset Purchase Agreement executed by the Purchaser; |
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(ii) | cash, by wire transfer, payable in accordance with Section 2.3(b), for an amount equal to the Initial Purchase Price less Minimum Cash; |
(iii) | the Assignment and Assumption Agreement, Employment Agreements, Restrictive Covenants Agreements and the IP Assignment, each executed by the Purchaser; |
(iv) | a certificate of an officer of the Purchaser (a) certifying, as complete and accurate as of the Closing, attached copies of the governing documents of the Purchaser, (b) certifying and attaching all requisite resolutions or actions of the Purchaser’s board of directors approving the consummation of the transactions contemplated herein and (c) certifying to the incumbency and signatures of the officers of the Purchaser executing the Transaction Documents; and |
(v) | such other evidence of the performance all covenants and satisfaction of all conditions required of the Purchaser by this Agreement, at or prior to the Closing, as the Seller or its counsel may reasonably require. |
ARTICLE
8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
(a) any breach of any representations, warranties or covenants made by the Seller in or pursuant to this Agreement or any Transaction Document, or the failure of such representations and warranties to be true and correct;
(b) any Liability arising out of the ownership or operation of the Assets prior to the Effective Time other than the Assumed Liabilities;
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(c) any Retained Liability;
(d) the assertion by any taxing authority against the Assets or the Business of any liability for taxes, assessments, fees, charges, additions to tax, interest or penalties, federal, state, local, foreign or other relating to a period or event prior to and through the Effective Time, or the imposition of any Encumbrance (other than a Permitted Encumbrance) arising therefrom against the Assets or the Business or which attach thereto; and
(e) any past, present or future claim with respect to, and any obligation or Liability or loss relating to: (i) any activity or transaction by the Seller that is or was, or is or was alleged to be, prohibited by or in violation of any U.S. Export Control or Import Law, including the failure to register or renew any registration required by the International Traffic in Arms Regulations and (ii) the matters identified on Schedule 3.6 or required by Section 3.6 to be identified thereon, and all current or future matters reasonably related thereto or an extension thereof.
(a) any breach of any representations, warranties or covenants made by Purchaser in or pursuant to this Agreement or any of Transaction Documents, or the failure of such representations and warranties to be true and correct;
(b) any Liability which is an Assumed Liability; and
(c) any Liability arising out of the ownership or operation of the Assets after the Effective Time (other than in connection with a matter with respect to which the Purchaser is entitled to indemnification from the Seller pursuant to Section 8.2).
Section 8.4 Mechanism for Indemnification.
(a) The party seeking indemnification hereunder (“Indemnified Party”) shall give written notice to the indemnifying party (“Indemnifying Party”) of its indemnification claims hereunder, specifying the amount and factual basis of the claim; provided that the failure to so notify the Indemnifying Party shall relieve such party from liability hereunder with respect to such claim only if, and only to the extent that, such failure directly results in a Loss by Indemnifying Party or the forfeiture by the Indemnifying Party of the rights and defenses otherwise available to the Indemnifying Party with respect to such claim. In the event the Indemnifying Party does not notify the Indemnified Party within thirty (30) days following its receipt of such notice that the Indemnifying Party disputes its liability to the Indemnified Party under this Article or the amount thereof, the claim specified by the Indemnified Party in such notice shall be conclusively deemed a liability of the Indemnifying Party under this Article, and the Indemnifying Party shall pay the amount of such liability to the Indemnified Party on demand or, in the case of any notice in which the amount of the claim (or any portion of the claim) is estimated, on such later date when the amount of such claim (or such portion of such claim) becomes finally determined. In the event the Indemnifying Party has timely disputed its liability with respect to such claim as provided above, as promptly as possible, such Indemnified Party and the appropriate Indemnifying Party shall establish the merits and amount of such claim (by mutual agreement, litigation, arbitration or otherwise) and, within five (5) business days following the final determination of the merits and amount of such claim, the Indemnifying Party shall pay to the Indemnified Party in immediately available funds in an amount, if any, equal to such claim as determined hereunder.
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(b) If any such claim is made hereunder by the Indemnified Party and such claim arises from the claims of a third party against the Indemnified Party, the Indemnified Party shall give such written notice to the Indemnifying Party promptly after receiving notice of the assertion of such claim. Provided that the Indemnifying Party unconditionally acknowledges in writing its obligation to indemnify and hold the Indemnified Party harmless with respect to such third party claim, the Indemnifying Party shall have the right to assume the defense and contest any such claim represented by counsel of its choice, and compromise or settle such claim with the written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed, and which consent shall not be required in the event (i) such settlement, compromise or consent includes an unconditional release of the Indemnified Party and its officers, directors, employees and affiliates from all liability arising out of such claim, (ii) does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the Indemnified Party and (iii) does not contain any equitable order, judgment or term that in any manner materially and adversely affects, restrains or interferes with the business of the Indemnified Party or any of the Indemnified Party’s affiliates. The Indemnified Party shall cooperate fully with the Indemnifying Party in the defense of such claim, including making available to the Indemnifying Party and its counsel such documents, information, or other materials as they may from time to time reasonably request. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such third-party claim, the Indemnifying Party shall not, so long as it diligently conducts such defense, be liable to the Indemnified Party under this Section 8.4 for any fees of other counsel or any other expenses with respect to the defense of such third-party claim, in each case subsequently incurred by the Indemnified Person in connection with the defense of such third-party claim, other than reasonable costs of investigation, and the Indemnified Party shall be entitled to indemnity hereunder only if, and to the extent that, such defense is unsuccessful, as determined by a final judgment of a court of competent jurisdiction or is settled with the consent of the Indemnified Party as provided herein. If the Indemnifying Party does not elect to undertake the defense thereof by written notice within thirty (30) days after receipt of the original notice from the Indemnified Party, the Indemnified Party will (upon delivering notice to such effect to the Indemnifying Party) have the right to undertake, at the Indemnifying Party’s expense, the defense, compromise or settlement of such claim, and shall have the right to choose its own counsel; provided, however, that such claim shall not be compromised or settled without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed; and provided further, that the Indemnifying Party shall not be required to pay the fees and disbursements of more than one counsel for all Indemnified Parties in any jurisdiction in any single Proceeding. In any Proceeding for which indemnification is being sought hereunder the Indemnified Party or the Indemnifying Party, whichever is not assuming the defense of such action, shall have the right to participate in such matter and to retain its own counsel at such party’s own expense. The Indemnifying Party or the Indemnified Party (as the case may be) shall at all times use reasonable efforts to keep the Indemnifying Party or Indemnified Party, as the case may be, reasonably apprised of the status of the defense of any matter the defense of which it is maintaining and to cooperate in good faith with each other with respect to the defense of any such matter. In the event a party fails to meet its indemnification obligations hereunder, the other party shall have the option to recover damages from such party.
Section 8.5 Limitations on Liability of the Seller and the Shareholders.
(a) The aggregate liability of the Seller, Parent, and the Shareholders under Section 8.2(a) (other than with respect to a breach of a Fundamental Rep or matters arising in respect of fraud or any knowing misrepresentation) shall be limited to $2,000,000. The aggregate liability of the Seller, Parent, and the Shareholders under Section 8.2(a) with respect to a breach of a Fundamental Rep shall be limited to the Purchase Price.
(b) The Purchaser Indemnitees shall have no right to recover any amounts under Section 8.2(a) (other than with respect to a breach of a Fundamental Rep or matters arising in respect of fraud or any knowing misrepresentation) unless (i) the aggregate amount of Losses incurred by the Purchaser Indemnitees with respect to the matter that is indemnifiable under Section 8.2(a) exceeds $5,000, provided that individual claims or matters arising out of the same act or omission or series of related acts or omissions shall be aggregated for this purpose, and (ii) the amount of all Losses incurred by the Purchaser Indemnitees in respect of any and all matters that are indemnifiable under any subsection(s) of Section 8.2 exceeds $150,000 in the aggregate (the “Basket”), in which event the Purchaser Indemnitees shall be entitled to recover all such Losses inclusive of the amount of the Basket.
(c) Except with respect to a breach of a Fundamental Rep or matters arising in respect of fraud or any knowing misrepresentation, the aggregate liability of a Shareholder under Section 8.2 shall not exceed the product of the Purchase Price multiplied by such Shareholder’s percentage ownership of the capital stock of the Seller set forth on Schedule 3.2.
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If to the Seller, Parent, a Shareholder, or the | Cambridge Technologies, Inc. |
Shareholders’ Representative: | 00000 Xxxxxxx Xxxxxx Xxxxx Xxxx |
Xxx Xxxx, XX 00000 | |
Attention: Xxxxx Xxxxxxxx | |
with a copy to (which shall not constitute notice): | Best and Xxxxxxxx LLP |
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 | |
Xxxxxxxxxxx, XX 00000 | |
Attention: Xxxxxxx X. Xxxxxxxx, Esq. | |
If to Purchaser: | Measurement Specialties, Inc. |
0000 Xxxxx Xxx | |
Xxxxxxx, XX 00000 | |
Attention: Xxxxx Xxxxxxx, CEO | |
with a copy to (which shall not constitute notice): | DLA Piper LLP (US) |
One Atlantic Center, Suite 2800 | |
0000 Xxxx Xxxxxxxxx Xxxxxx | |
Xxxxxxx, XX 00000-0000 | |
Attention: Xxxxxx X. Xxxxxxxxx, Xx., Esq. |
(a) If delivered personally, the date on which a notice, request, instruction or document is delivered shall be the date on which such delivery is made and, if delivered by mail, the date on which such notice, request, instruction or document is received shall be the date of delivery.
(b) Any party hereto may change its address specified for notices herein by designating a new address by notice in accordance with this Section 9.1.
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Section 9.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Minnesota without giving effect to any choice or conflict of law provision or rule.
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Section 9.14 Interpretive Matters.
(a) Unless the context requires otherwise, (a) the terms “including” and “includes” mean “including or includes without limitation,” (b) reference to, and the definition of, any document shall be deemed a reference to such document as it may be amended, supplemented, revised, or modified, in writing, from time to time but disregarding any amendment, supplement, replacement or novation made in breach of this Agreement, (c) reference to any Law shall be construed as a reference to such Law as re-enacted, redesignated, amended or extended from time to time, (d) the information contained in the Schedules is disclosed solely for the purposes of this Agreement, and no information contained in any Schedule shall be deemed to be an admission by any party hereto to any third Person of any matter whatsoever, including an admission of any violation of any Laws or breach of any agreement, and (e) each of the Schedules and the disclosures therein will apply and consist of disclosures only to the corresponding section or subsection of this Agreement.
(b) The Parties intend that each representation, warranty and covenant contained in this Agreement 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 such Party has not breached, shall not detract from or mitigate the fact that such party is in breach of the first representation, warranty or covenant.
(c) No provision of this Agreement will be interpreted in favor of, or against, any of the Parties by reason of the extent to which any such Party or its counsel participated in the drafting of this Agreement or by reason of the extent to which any such provision is inconsistent with any prior draft of this Agreement or any provision of this Agreement.
(d) All references to the knowledge of the Seller Parties or to words of similar import will be deemed to be references to the actual knowledge of any Shareholder and such knowledge that would reasonably be expected to be known by such Shareholder in the ordinary and usual course of the performance of their professional responsibility, including each such Shareholder’s role as an employee of the Seller, in each case after reasonable due inquiry.
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Section 9.16 Shareholders’ Representative.
(a) Except as otherwise provided in this Agreement, any right or action that may be taken at the election of the Seller, Parent, the Shareholders or a Shareholder will be taken by a representative of the Seller, Parent, and the Shareholders (the “Shareholders’ Representative”) on behalf thereof. The initial Shareholders’ Representative will be Xxxxx Xxxxxxxx. Upon his resignation, the holders of a majority of the Seller’s capital stock as set forth on Schedule 3.2 may designate a successor Shareholders’ Representative. Any Shareholders’ Representative so designated must be reasonably acceptable to the Purchaser.
(b) Any change in the Shareholders’ Representative will become effective upon notice in accordance with Section 9.1. The Seller, Parent, and the Shareholders, jointly and severally, will indemnify and hold the Purchaser Indemnitees and their representatives harmless from any claim of the Seller, Parent, or any Shareholder arising out of any act or omission by the Shareholders’ Representative in connection with the transactions contemplated by this Agreement.
(c) Except as otherwise provided in this Agreement, any right or action that may be taken at the election of the Seller, Parent, the Shareholders or a Shareholder will be taken by the Shareholders’ Representative on behalf thereof. The Seller, Parent, and each of the Shareholders hereby irrevocably appoints the Shareholders’ Representative the agent and attorney-in-fact of the Seller, Parent and each of the Shareholders for the purposes of acting in the name and stead of the Seller, Parent, and such Shareholder in: (a) receiving, holding and distributing the Purchase Price and paying any associated costs and expenses of the transactions hereunder required to be paid by the Seller, Parent, or such Shareholder; (b) giving and receiving all notices permitted or required by this Agreement and acting on the Seller’s, Parent, and any Shareholder’s behalf hereunder for all purposes specified herein; (c) agreeing with the Purchaser as to any amendments to this Agreement which the Shareholders’ Representative may deem necessary or advisable; (d) employing legal counsel; (e) paying any legal and any other fees and expenses incurred by the Shareholders’ Representative in consummating the transactions contemplated by this Agreement; (f) defending or settling claims arising under this Agreement or any Transaction Document; and (g) making, executing, acknowledging, and delivering all such contracts, orders, receipts, notices, requests, instructions, certificates, letters, and other writings, and in general doing all things and taking all actions which the Shareholders’ Representative, in its sole discretion, may consider necessary or proper in connection with or to carry out the terms of this Agreement, as fully as if the Seller, Parent, and/or such Shareholders were personally present and acting. This power of attorney and all authority conferred hereby is granted and conferred subject to the interests of the other Parties to this Agreement, and in consideration of those interests and for the purpose of completing the transactions contemplated hereby, this power of attorney and all authority conferred hereby shall be irrevocable and shall not be terminated by the Seller, Parent, or any Shareholder or by operation of Law, whether by the termination of the Shareholders’ Representative or by the occurrence of any other event. If any Shareholder should die or become incompetent or incapacitated, all actions taken by the Shareholders’ Representative pursuant to this Agreement shall be as valid as if such death, incompetence, or incapacity had not occurred, regardless of whether the Purchaser or the Shareholders’ Representative, or any of them, shall have received notice of such death, incompetence, incapacity, or other event. The Shareholders’ Representative will be promptly reimbursed by the Shareholders for all reasonable expenses, disbursements and advances incurred by the Shareholders’ Representative in such capacity upon demand. The Shareholders, severally and not jointly, agree to indemnify and hold harmless the Shareholders’ Representatives for and from any loss, liability, expense, charge, damages, claims or other obligations he may incur as a result of his duties hereunder or any of his actions or inactions as such, except as may result from his willful misconduct or gross negligence.
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IN WITNESS WHEREOF, each party hereto has executed or caused this Asset Purchase Agreement to be executed on its behalf, all on the day and year first above written.
PURCHASER: | ||
MEASUREMENT SPECIALTIES, INC. | ||
By: | ||
Name: | ||
Title: | ||
SELLER: | ||
RESISTANCE TEMPERATURE DETECTOR COMPANY, INC. | ||
By: | ||
Name: | Xxxxx Xxxxxxxx | |
Title: | President and Chief Executive Officer | |
PARENT: | ||
CAMBRIDGE TECHNOLOGIES, INC. | ||
By: | ||
Name: | ||
Title: |
SHAREHOLDERS: | |
XXXXX XXXXXXXX | |
XXXX XXXXXXXXXX | |
XXXXX XXXXXXX | |
XXXX XXXXX |
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