Exhibit 2(a)
EXECUTION COPY
STOCK PURCHASE AGREEMENT
AMONG
TRANSMATION, INC.,
ALTEK INDUSTRIES CORP.
AND
FLUKE ELECTRONICS CORP.
DATED AS OF DECEMBER 26, 2001
TABLE OF CONTENTS
page
Article I. DEFINITIONS................................................................1
SECTION 1.1 CERTAIN DEFINITIONS....................................................1
SECTION 1.2 INTERPRETATION.........................................................5
Article II. PURCHASE AND SALE.........................................................7
SECTION 2.1 PURCHASE AND SALE OF BUSINESS AND STOCK OF ALTEK.......................7
SECTION 2.2 PURCHASE PRICE.........................................................7
SECTION 2.3 POST-CLOSING ADJUSTMENT................................................7
SECTION 2.4 PRE-CLOSING ADJUSTMENT.................................................8
SECTION 2.5 CLOSING................................................................9
Article III. REPRESENTATIONS AND WARRANTIES OF SELLER.................................9
SECTION 3.1 ORGANIZATION AND POWER.................................................9
SECTION 3.2 CORPORATE AUTHORIZATION................................................9
SECTION 3.3 APPROVALS.............................................................10
SECTION 3.4 NON-CONTRAVENTION.....................................................10
SECTION 3.5 CAPITALIZATION........................................................10
SECTION 3.6 BINDING EFFECT........................................................11
SECTION 3.7 CERTAIN FINANCIAL STATEMENTS..........................................11
SECTION 3.8 STOCK; ASSETS; TITLE..................................................12
SECTION 3.9 COMPLIANCE WITH LAWS..................................................12
SECTION 3.10 LITIGATION AND CLAIMS................................................12
SECTION 3.11 INTELLECTUAL PROPERTY................................................13
SECTION 3.12 EMPLOYEE BENEFITS....................................................15
SECTION 3.13 ENVIRONMENTAL MATTERS................................................17
SECTION 3.14 CONTRACTS............................................................18
SECTION 3.15 FINDERS' FEES........................................................20
SECTION 3.16 SUBSEQUENT CHANGES...................................................20
SECTION 3.17 LEASES...............................................................21
SECTION 3.18 REAL PROPERTY........................................................22
SECTION 3.19 PRODUCT WARRANTY.....................................................22
SECTION 3.20 TAXES................................................................23
SECTION 3.21 ACCOUNTS RECEIVABLE..................................................24
SECTION 3.22 BOOKS AND RECORDS....................................................24
SECTION 3.23 LICENSES AND PERMITS.................................................24
SECTION 3.24 LIABILITIES..........................................................24
SECTION 3.25 SIGNIFICANT CUSTOMERS AND SUPPLIERS..................................25
SECTION 3.26 INSURANCE............................................................25
SECTION 3.27 BANK ACCOUNTS; POWERS OF ATTORNEY....................................25
SECTION 3.28 INVENTORY............................................................25
SECTION 3.29 BACKLOG..............................................................26
SECTION 3.30 SUBSIDIARIES.........................................................26
SECTION 3.31 CERTAIN BUSINESS PRACTICES...........................................26
SECTION 3.32 ASSIGNMENT OF SELLER INTELLECTUAL PROPERTY...........................26
i
Article IV. REPRESENTATIONS AND WARRANTIES OF BUYER..................................26
SECTION 4.1 ORGANIZATION AND POWER................................................26
SECTION 4.2 CORPORATE AUTHORIZATION...............................................27
SECTION 4.3 APPROVALS.............................................................27
SECTION 4.4 NON-CONTRAVENTION.....................................................27
SECTION 4.5 BINDING EFFECT........................................................28
SECTION 4.6 FINANCING.............................................................28
SECTION 4.7 LITIGATION AND CLAIMS.................................................28
SECTION 4.8 FINDERS' FEES.........................................................28
Article V. CERTAIN COVENANTS.........................................................28
SECTION 5.1 FURTHER ASSURANCES....................................................28
SECTION 5.2 TAX MATTERS...........................................................29
SECTION 5.3 INTENTIONALLY OMITTED.................................................30
SECTION 5.4 ASSIGNED INTELLECTUAL PROPERTY AND LICENSED NAME......................30
SECTION 5.5 CONFIDENTIALITY.......................................................31
SECTION 5.6 PUBLIC DISCLOSURE.....................................................32
SECTION 5.7 NON-COMPETITION.......................................................33
SECTION 5.8 LITIGATION............................................................33
SECTION 5.9 ACCOUNTS RECEIVABLE...................................................33
SECTION 5.10 NOTIFICATION OF CERTAIN MATTERS......................................34
SECTION 5.11 WORKING CAPITAL COMMITMENT...........................................34
SECTION 5.12 EXCLUDED EQUIPMENT...................................................34
Article VI. CERTAIN COVENANTS........................................................35
SECTION 6.1 EMPLOYEES.............................................................35
SECTION 6.2 LEASE AGREEMENT.......................................................35
Article VII. CLOSING Deliveries......................................................35
SECTION 7.1 DELIVERIES BY THE SELLER..............................................35
SECTION 7.2 CLOSING DELIVERIES OF BUYER...........................................37
Article VIII. INDEMNIFICATION; REMEDIES..............................................38
SECTION 8.1 INDEMNIFICATION BY SELLER.............................................38
SECTION 8.2 INDEMNIFICATION BY BUYER..............................................39
SECTION 8.3 SURVIVAL AND EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS..40
SECTION 8.4 INDEMNIFICATION PROCEDURES............................................41
SECTION 8.5 SOLE REMEDY...........................................................42
Article IX. IN GENERAL...............................................................43
SECTION 9.1 NOTICES...............................................................43
SECTION 9.2 AMENDMENT; WAIVER.....................................................44
SECTION 9.3 SUCCESSORS AND ASSIGNS................................................44
SECTION 9.4 EXPENSES..............................................................44
SECTION 9.5 SCHEDULES.............................................................44
SECTION 9.6 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM.........45
SECTION 9.7 INFERENCES............................................................46
SECTION 9.8 SEVERABILITY..........................................................46
SECTION 9.9 ENTIRE AGREEMENT......................................................46
SECTION 9.10 HEADINGS.............................................................46
ii
SECTION 9.11 COUNTERPARTS.........................................................46
SECTION 9.12 BROKERS AND AGENTS...................................................46
SECTION 9.13 SPECIFIC PERFORMANCE; REMEDIES.......................................47
SECTION 9.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS............................47
TABLE OF EXHIBITS AND SCHEDULES......................................................49
INDEX OF DEFINED TERMS...............................................................50
iii
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of December 26, 2001 by and among
TRANSMATION, INC., an Ohio corporation ("SELLER"), ALTEK INDUSTRIES CORP., a New
York corporation ("ALTEK") and FLUKE ELECTRONICS CORP., a Washington corporation
("BUYER").
WHEREAS, Altek is engaged in the business and operations of the
Transmation Products Group as currently conducted ("TPG"), including, variously,
the design, manufacture, marketing, distribution, service and support of
industrial-grade calibration instruments (collectively, the "BUSINESS"); and
WHEREAS, Seller owns the 60,000 issued and outstanding shares of common
stock, par value $0.10 per share, of Altek (the "SHARES"); and
WHEREAS, the parties desire that Seller sell, transfer and assign to
Buyer, and that Buyer purchase and assume from Seller, all of the Shares,
representing the entire equity interests in Altek, all as more specifically
provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1 CERTAIN DEFINITIONS.
In addition to the other definitions contained in this Agreement, the following
terms will, when used in this Agreement, have the following respective meanings:
"AFFILIATES" means, with respect to any Person, any Persons directly or
indirectly through one or more entities, controlling, controlled by, or under
common control with, such other Person at any time during the period for which
the determination of affiliation is being made. For purposes of this definition,
the term "control" means, with respect to any Person, the possession, directly
or indirectly, of the power to direct or cause the direction of management
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT" means this Stock Purchase Agreement, as the same may be
amended or supplemented from time to time in accordance with the terms hereof.
"ANCILLARY AGREEMENTS" means, collectively, those agreements and
instruments, substantially in the forms of Exhibits A and B, to be entered into
at Closing by Buyer and Seller.
"BOOKS AND RECORDS" means with respect to Altek and the Business only,
purchase or sales order files, warranty and repair files, suppliers lists,
customer lists, dealer, representative and distributor lists, studies, surveys,
analyses, strategies, plans, forms, designs, diagrams, technical data, quality
control records, books, ledgers, files, reports, operating records, accounting
records, price lists, correspondence and other forms of information relating in
any manner to the business, operations or financial or statistical history of
Altek or the Business, whether in written, electronic or magnetic form.
"BUYER" has the meaning set forth in the preamble.
"CLAIM" means any pending contest, claim, demand, assessment, action,
cause of action, complaint, litigation, proceeding, hearing or notice involving
any Person.
"CLOSING" means the closing and consummation of the Transaction.
"CLOSING BALANCE SHEET" means the unaudited balance sheet of the
Business as of the Closing Date.
"CLOSING DOCUMENTS" means (a) with respect to Seller, all agreements,
documents and instruments, including the Ancillary Agreements, required to be
delivered by Seller or a Seller Affiliate at Closing, as set forth in Section
7.1, and any other documents contemplated by this Transaction and (b) with
respect to Buyer, all agreements, documents and instruments, including the
Ancillary Agreements, required to be delivered by Buyer at Closing, as set forth
in Section 7.2, and any other documents contemplated by this Transaction.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
5.5(c).
"CONTINUATION COVERAGE" means group health coverage required by section
4980B of the Code.
"DELIVERY" means, as the case may be, (a) the sale, assignment,
transfer, conveyance or delivery to Buyer of the Shares, or (b) the license back
to Seller of any Buyer-Licensed Intellectual Property; and "DELIVER" means to
effect a Delivery.
"ENCUMBRANCES" means liens (statutory or otherwise), mortgages, deeds
of trust, pledges, hypothecation, assignments, charges, encumbrances, easements,
rights of first refusal, deposit arrangements, security interests, options,
conversion, puts, calls or other claims or rights, preferential arrangements of
any kind or nature whatsoever (including without restriction on the transfer of
assets), encroachments, conditional sales or other title retention agreements or
any other restrictions or third party rights.
2
"ENVIRONMENTAL LAW" means any Law relating to (a) the protection of
human health or the environment (including air, water vapor, surface water,
groundwater, drinking water supply, and surface or subsurface land), or (b) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, management, release,
investigation, remediation, removal or disposal of, Materials of Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3.7(a).
"GAAP" means generally accepted accounting principles, methods and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants, and
statements and pronouncements of the Financial Accounting Standards Board or of
such other Person as may be approved by a significant segment of the U.S.
accounting profession, in each case as of the date or period at issue.
"GOVERNMENTAL AUTHORIZATIONS" means all licenses, permits,
certificates, orders, consents and other authorizations and approvals of any
Governmental Entity required under any Law to carry on the Business as currently
conducted in the Ordinary Course.
"GOVERNMENTAL ENTITY" means any local, state, federal, foreign or other
government, including each of their respective branches, departments, agencies,
courts, instrumentalities or other subdivisions, or any bureau, board,
commission, judicial or quasi-judicial body, authority, official, tribunal or
other instrumentality of government.
"INDEMNIFIED PARTIES" means, as appropriate in the context, either the
Buyer Indemnified Parties or the Seller Indemnified Parties.
"INDEMNIFYING PARTY" means a party providing indemnification pursuant
to Article VIII.
"INTERIM BALANCE SHEET" means the unaudited balance sheet of Altek as
of November 30, 2001, including the notes thereto, attached as Schedule 3.7(a).
"INVENTORY" means all of the items of inventory and supplies of Altek,
including without limitation raw materials and supplies, work-in-process,
finished goods, returned products and samples, equipment, parts, labels and
packaging (including all rights and interests in goods in transit, consigned
inventory, inventory sold on approval and rental inventory) and all returned
products, samples and obsolete and nonsalable inventory.
3
"LAW" means any applicable law, statute, ordinance, rule, regulation,
code, order, judgment, injunction, decree or judicial or administrative doctrine
that is legally promulgated or issued by any Governmental Entity.
"LEASED REAL PROPERTY" means with respect to Altek the real property,
fixtures and improvements (inclusive of warranties, guaranties, permits and
licenses in connection therewith) that are the subject of the Leases.
"LIABILITY" means any direct or indirect indebtedness, liability,
Claim, damage, deficiency, obligation or responsibility, fixed or unfixed,
xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, contingent or otherwise.
"LICENSES" means licenses granted to Altek of rights in software and
firmware owned by third parties and used by the Business, which licenses are set
forth on Schedule 3.11(b).
"LOSSES" means Liabilities, losses, Claims, charges, actions, suits,
proceedings, interest (including from date of such damage), penalties, punitive
damages, valid assessments, judgments, audits, demands, settlement payments,
deficiencies, and reasonable costs and expenses associated therewith (including
reasonable attorneys' fees, litigation costs, fines, penalties and expenses of
investigation).
"MATERIAL ADVERSE EFFECT" means any change, event or effect that,
individually when taken together with all other changes, events and effects that
have occurred prior to the date of determination, is or is reasonably likely to
be material and adverse to the operations, prospects, assets, liabilities,
business, financial condition or results of operations of the Business, taken as
a whole.
"MATERIALS OF CONCERN" means any matter or material containing any
substance, whether solid, liquid or gaseous, (a) that is listed, defined,
designated or classified as radioactive, hazardous, toxic or otherwise a danger
under any applicable Environmental Law, including, without limitation, PCBs,
asbestos, petroleum, ureaformaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the Resource Conservation and Recovery Act of 1976, as amended and the
regulations promulgated pursuant to said laws (b) the presence of which may
require investigation or remediation under any Environmental Law, or (c) is
otherwise legally regulated by a Governmental Entity which enforces such
applicable Environmental Laws.
"ORDINARY COURSE" means the conduct of the Business in accordance with
the normal and customary practices and procedures of the Business.
"PERMITTED ENCUMBRANCES" means: (a) liens for Taxes, assessments and
other governmental charges not yet due and payable or due but not delinquent or
being contested in good faith by appropriate proceedings; (b) mechanics',
carriers', workers', repairmen's, statutory or common law liens being contested
in good faith by appropriate proceedings consistent with past practice.
4
"PERSON" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization.
"REAL PROPERTY"means all interests in real property, including without
limitation, fee estates, leaseholds and subleaseholds, purchase options,
easements, licenses, and all buildings and other improvements thereon, together
with any additions thereto or replacements thereof owned, leased or licensed.
"REQUIRED APPROVALS" means, collectively, the consents, approvals,
waivers, authorizations, novations, notices and filings which are necessary for
the consummation of the Transaction and which are set forth on Schedule 3.3.
"SHARES" shall have the meaning set forth in the recitals.
"TAXES" means (A) all foreign, federal, state, local and other income,
gross receipts, sales, use, ad valorem, value-added, intangible, unitary,
transfer, franchise, license, payroll, employment, estimated, withholding,
excise, environmental, stamp, occupation, premium, property, prohibited
transactions, windfall or excess profits, customs, duties or other taxes,
levies, fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto, (B) any liability for payment of amounts described in clause (A) as a
result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (C) any liability for payment of amounts described in
clause (A) or (B) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to indemnify any
other person for Taxes.
"TAX RETURNS" means all reports, returns, declarations, claims for
refund or statements of any kind or nature relating to Taxes, and any schedule
or attachment thereto or any amendment thereof.
"TRANSACTION" means, collectively, the purchase and sale of the Shares
and the execution and delivery of the Closing Documents, and any other
transaction contemplated herein and therein.
"TRANSFER TIME" means 12:01 a.m. local time on the date following the
Closing Date.
"U.S." means the United States of America.
SECTION 1.2 INTERPRETATION.
In this Agreement, unless the express context otherwise requires:
(a) the words "herein," "hereof" and "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular provision of
this Agreement;
5
(b) references to "Article" or "Section" are to the respective Articles
and Sections of this Agreement, and references to "Exhibit" or "Schedule" are to
the respective Exhibits and Schedules annexed hereto;
(c) All Exhibits attached hereto shall be deemed incorporated herein as
if set forth in full herein and, unless otherwise defined therein, all terms
used in any Exhibit shall have the meaning ascribed to such term in this
Agreement.
(d) references to a "party" means a party to this Agreement and include
references to such party's successors and permitted assigns;
(e) references to a "third party" means a Person not party to this
Agreement;
(f) references to a party's "knowledge" or any similar phrase means:
(i) in the case of Seller, the actual knowledge of (A) the senior management
personnel of TPG (which shall include, without limitation, all directors and
executive officers of Altek and Seller) after due inquiry with respect to the
relevant matter, including facts of which any such personnel, in the reasonably
prudent exercise of his or her duties, should be aware, or (B) with respect to
Intellectual Property, the Persons listed on Schedule 1.2(f); or (ii) in the
case of Buyer, the actual knowledge of the Persons listed on Schedule 1.2(f)
after due inquiry with respect to the relevant matter;
(g) the terms "dollars" and "$" means U.S. dollars;
(h) terms defined in the singular have a comparable meaning when used
in the plural, and vice versa;
(i) the masculine pronoun includes the feminine and the neuter, and
vice versa, as appropriate in the context;
(j) wherever the word "include," "includes" or "including" is used in
this Agreement, it will be deemed to be followed by the words "without
limitation";
(k) unless otherwise expressly provided herein, any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein.
6
ARTICLE II. PURCHASE AND SALE
SECTION 2.1 PURCHASE AND SALE OF BUSINESS AND STOCK OF ALTEK.
On the terms and subject to the conditions set forth herein, at Closing Seller
will sell, convey, transfer, assign and deliver to Buyer, and Buyer will
purchase from Seller all of the Shares, free and clear of all Encumbrances.
SECTION 2.2 PURCHASE PRICE.
On the terms and subject to the conditions, representations, warranties and
covenants set forth herein and in full consideration for the sale, assignment,
transfer and delivery of the Shares to Buyer, at Closing Buyer will pay to
Seller the amount of Ten Million Five Hundred Thousand Dollars ($10,500,000)
(the "PURCHASE PRICE") which shall be subject to the adjustments set forth in
Section 2.3.
SECTION 2.3 POST-CLOSING ADJUSTMENT.
(a) The Closing Balance Sheet will be prepared and finally determined
as provided by this Section 2.3, whereupon all references herein to the "CLOSING
BALANCE SHEET" will mean the same as so finally determined. Within sixty (60)
days following Closing, Buyer will prepare the Closing Balance Sheet and deliver
the same to Seller. The Closing Balance Sheet shall set forth the net equity of
Altek as of the Closing Date (the "CLOSING NET EQUITY"). The Closing Balance
Sheet shall be prepared on a basis consistent with the methodology and Ordinary
Course used in the Interim Balance Sheet and, to the extent consistent
therewith, with GAAP consistently applied; provided, that notwithstanding the
foregoing, the Closing Balance Sheet shall exclude all related party and
intracompany transactions, except for those related party and intracompany
transactions (other than those between Altek and Seller) involving the bona fide
provision of goods and services on terms and conditions that are no less
favorable to the Business than could be obtained on an arms-length basis. In the
preparation of the Closing Balance Sheet, Buyer and its authorized
representatives shall have the right to review the workpapers and other
documents and information used by Seller and Altek to prepare the Interim
Balance Sheet.
(b) After the receipt of the Closing Balance Sheet, Seller shall have
ten (10) days to review the Closing Balance Sheet, together with the workpapers
used in preparation thereof. The Closing Balance Sheet shall be final and
binding on Seller, Buyer and Altek and their respective Affiliates unless the
Seller objects, by giving written notice on or prior to the 10th day after
Seller receipt of the Closing Balance Sheet, to any items in the Closing Balance
Sheet or computation of the Closing Net Equity. Such notice shall state in
reasonable detail the item or items in dispute, and shall state the amount, if
any, of any adjustment that should be made to the Closing Balance Sheet
("DISPUTE NOTICE").
7
(c) In the event of a dispute, Buyer and Seller will use their
reasonable efforts to resolve any such objections and any resolution by them
shall be final and binding on them. If Buyer and Seller do not resolve any such
dispute within thirty (30) days after Buyer's receipt of the Dispute Notice,
then Buyer and Seller shall, within five business days, submit the Closing
Balance Sheet, or the resolution of only such item(s) thereof as are in dispute,
to the New York City office of PricewaterhouseCoopers, LLP or such other
nationally recognized firm of independent public accountants agreed upon by
Seller and Buyer (the "NEUTRAL ACCOUNTANT"), for computation, verification or
resolution in accordance with the provisions of this Agreement. Buyer and Seller
will make readily available to such firm all relevant Books and Records
(including work papers of a party's independent public accountants) as such firm
reasonably requests and each party will be afforded the opportunity to present
to the Neutral Accountant any material relating to the determination and to
discuss the determination with the Neutral Accountant provided, however, that
any materials so provided will be provided to all other parties hereto and no
such discussions may take place without all other parties hereto being present,
in person or otherwise, for the same. Such firm's computation or verification of
the Closing Balance Sheet or resolution of such disputed item(s) thereof (as the
case may be), which Buyer and Seller will instruct such firm to deliver to them
within thirty (30) days after submission to such firm, will be final and binding
upon the parties for all purposes, and such firm's fees and expenses therefor
will be borne equally by Buyer and Seller. The Closing Balance Sheet, as so
finally determined, will be annexed hereto as Schedule 2.3 subsequent to the
Closing Date.
(d) If the Closing Net Equity as so finally determined exceeds Eight
Million One Hundred Thirty Two Thousand Dollars ($8,132,000) ("BASELINE NET
EQUITY"), then the amount of such excess (the "INCREASE AMOUNT") will be paid by
Buyer to Seller, within ten (10) days after such final determination.
(e) If the Closing Net Equity is less than the Baseline Net Equity,
then the amount of such deficiency (the "REDUCTION AMOUNT") will be paid by
Seller to Buyer, within ten (10) days after such final determination.
(f) All payments pursuant to Section 2.3 shall be made by wire transfer
of immediately available funds to an account or accounts specified by the
recipient of such payments, and such payments shall accrue no interest prior to
payment on the date specified herein.
SECTION 2.4 PRE-CLOSING ADJUSTMENT.
Buyer and Seller agree and acknowledge that the Purchase Price reflects the
following downward adjustments: (i) $133,000 for obsolete and excessive
inventory, (ii) $136,000 for certain accounts receivables and (iii) $231,000 for
the Application Specified Integrated Circuit identified on the Interim Balance
Sheet relating to capitalized research and development expenses. For the
avoidance of doubt, Buyer and Seller agree and acknowledge that the Interim
Balance Sheet and the Closing Balance Sheet shall include
8
items (i) through (iii) set forth above and that in no event shall any
post-closing adjustment be made for these items whether under Section 2.3 or
otherwise.
SECTION 2.5 CLOSING.
Closing will take place simultaneous with the execution and delivery of this
Agreement by the parties hereto on the date first above written at the offices
of counsel to Seller, Xxxxxx, Xxxxxxx & Xxxxx LLP, 0000 Xxxxxx & Xxxx Xxxxx,
Xxxxxxxxx, Xxx Xxxx 00000. The date in the U.S. on which Closing occurs is
called the "CLOSING DATE". The Closing shall be effective as of the Transfer
Time. The required deliveries at Closing are set forth in Article VII.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter in to this Agreement and consummate the
Transaction, Seller makes the following representations and warranties to Buyer:
SECTION 3.1 ORGANIZATION AND POWER.
Altek is a subsisting corporation duly organized and validly existing under the
laws of New York. Altek has all requisite corporate power and authority to own
or lease and operate its assets and to carry on the Business as currently
conducted. Altek is not qualified to do business in any foreign jurisdiction and
any failure to be so qualified would not, individually or in the aggregate, have
a Material Adverse Effect. Schedule 3.1 contains a list of all jurisdictions in
which Altek is authorized or qualified to do business. Seller has delivered to
Buyer true, complete and correct copies of its certificate of incorporation,
bylaws or comparable charter documents of Altek. Altek is not in violation of,
in conflict with or in default under any of its certificate of incorporation,
bylaws or comparable charter documents, and there exists no condition or event
which, after notice or lapse of time or both, would result in any such
violation, conflict or default.
SECTION 3.2 CORPORATE AUTHORIZATION.
(a) Altek has full legal right and requisite corporate power and
authority to operate and carry on the Business as conducted, and to enter into,
execute and deliver this Agreement and each Closing Document to which it is a
party, and to perform its obligations hereunder and thereunder. The execution,
delivery and performance by Altek of this Agreement and each Closing Document to
which it is a party, have been duly and validly authorized, and no additional
corporate authorization or consent is required in connection therewith.
(b) Seller has full legal right and requisite corporate power and
authority to enter into, execute and deliver this Agreement and each Closing
Document to which it is a party, and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by Seller of this Agreement
and each Closing Document to which it is a
9
party, have been duly and validly authorized, and no additional corporate
authorization or consent is required in connection therewith.
SECTION 3.3 APPROVALS.
All of the Required Approvals are listed on Schedule 3.3. Except for the
Required Approvals, and except for consents, approvals, waivers, authorizations,
novations, notices and filings required under Contracts or instruments
identified in Schedule 3.3 (the "THIRD PARTY APPROVALS"), no consent, approval,
waiver, authorization, registration, declaration or novation is required to be
obtained by Seller or Altek from, and no notice or filing is required to be
given by Seller or Altek to or made by Seller or Altek with, any Governmental
Entity or other Person in connection with (i) the execution, delivery and
performance by Seller and Altek respectively of this Agreement and each Closing
Document to which it is a party and (ii) the consummation by Seller and Altek of
the Transaction. Seller and Altek have obtained, or will obtain prior to
Closing, all Required Approvals and Third Party Approvals.
SECTION 3.4 NON-CONTRAVENTION.
The execution, delivery and performance by each of Seller and Altek of this
Agreement and each Closing Document to which it is a party, and the consummation
of the Transaction, do not and will not, except as set forth on Schedule 3.4 and
except for obtaining all Required Approvals and Third Party Approvals: (a)
violate, conflict with or result in a default under any provision of the
certificate of incorporation, bylaws or other organizational documents of Seller
or Altek; (b) conflict with, or result in the breach of, or constitute a default
under, or result in the termination, cancellation, suspension, revocation or
acceleration (whether after the filing of notice or the lapse of time or both)
of any right or obligation of Seller or Altek under, or a loss of any benefit to
which Seller or Altek is entitled under, any contract, document, agreement,
permit, license or other instrument, or result in the creation of any
Encumbrance (other than a Permitted Encumbrance) upon any of the Shares, the
Business or any of the Assets; (c) violate or result in a breach of or
constitute a default under any Law to which Seller or Altek or any of their
respective properties, rights or assets is subject or by which Seller or Altek
or any of their respective properties, rights or assets are bound; (d) result in
termination or any impairment of, or require any consent, approval or
authorization under, any Material Permit; or (e) constitute an event which,
after notice or lapse of time or both, would result in any conflict, breach,
violation, default, requirement, loss, creation or imposition of any
Encumbrance, termination or impairment or similar event described in Section
3.4(a)-(d).
SECTION 3.5 CAPITALIZATION.
(a) The authorized capital stock of Altek consists of 200,000 shares of
common stock, par value $0.10 per share, of which only the Shares are issued and
outstanding and all of which are owned by the Seller. Except for the Shares, no
capital stock, equity interests or other securities of Altek, and no securities
or other interests directly or indirectly convertible into any such stock,
equity interests or securities, are
10
issued or outstanding. Altek has no treasury shares. All of the outstanding
shares of capital stock of Altek are duly authorized, validly issued, fully paid
and nonassessable, free and clear of all Encumbrances (except insofar as
contemplated by Section 630 of the New York Business Corporation Law). None of
the Shares are subject to or were issued in violation of any purchase option,
call option, right of first refusal, preemptive right, subscription right or any
similar right.
(b) There are no outstanding (i) agreements, arrangements, warrants,
options, puts, calls, rights, options, subscriptions or other commitments to
which Altek is a party or by which it or any of its respective properties or
Assets are bound, relating to the sale, purchase, issuance or voting of any
shares of capital stock of, or other membership or ownership interests in, or
other securities of, Altek, or (ii) securities or other instruments convertible
into, exchangeable for or evidencing the right to purchase any shares of capital
stock of, or other membership or ownership interests in, Altek.
SECTION 3.6 BINDING EFFECT.
This Agreement, each Closing Document and each of the transactions contemplated
herein have been duly approved by the directors of each of Seller and Altek and,
when executed and delivered by Buyer, this Agreement and each Closing Document
will constitute valid and legally binding obligations of each of Seller and
Altek, enforceable against Seller and Altek in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
SECTION 3.7 CERTAIN FINANCIAL STATEMENTS.
(a) Schedule 3.7(a) includes the following financial statements (the
"FINANCIAL STATEMENTS"): (i) true, complete and correct copies of Altek's
unaudited balance sheet and statements of income for the year ended March 31,
2001 and all schedules, and (ii) true, complete and correct copies of Altek's
unaudited balance sheet for the eight month period ended November 30, 2001 (the
"INTERIM BALANCE SHEET") and statements of income for the eight month period
then ended. Each of the Financial Statements (including the notes thereto),
except to the extent that the applicable Financial Statement presents only
summary financial information, fairly presents the financial position and the
results of the operations of the Business for the respective periods therein
stated, and reflects adequate reserves for all known Liabilities, including all
vacation Liability earned, as of the respective dates therein stated, in
accordance with GAAP and, to the extent consistent with GAAP, Seller's policies,
except as noted on Schedule 3.7(a).
(b) The Business does not have any Liability of any nature that is not
reflected or reserved against on the Interim Balance Sheet except for: (i)
Liabilities of a similar nature as those reflected or reserved against on the
Interim Balance Sheet that were incurred in the Ordinary Course since the date
of the Interim Balance Sheet; (ii) Liabilities of any nature that are not
required by GAAP to be so reflected or reserved
11
against; and (iii) those Liabilities set forth on Schedule 3.7(b). Accounts
payable reflected in the Financial Statements and the Interim Balance Sheet have
arisen from bona fide transactions. Except as set forth on Schedule 3.7(b), all
Liabilities of the Business incurred after the date of the Interim Balance Sheet
were incurred in the Ordinary Course, arose from bona fide transactions, and are
usual and normal in amount both individually and in the aggregate. Except as set
forth in the Financial Statements or the Interim Balance Sheet, all Liabilities
of the Business can be prepaid without penalty at any time.
SECTION 3.8 STOCK; ASSETS; TITLE.
(a) Except as set forth on Schedule 3.8, Altek has and will have at
Closing: (i) good, marketable and valid title to, or a valid leasehold interest
in, all of its tangible property, free and clear of all Encumbrances except for
Permitted Encumbrances; and (ii) good, marketable and valid right, title and
interest in and to all intangible property, free and clear of all Encumbrances
except for Permitted Encumbrances and, in the case of the Contracts and the
licenses, subject to the rights of third parties thereunder (the "ASSETS"). The
Assets are all of the assets and properties necessary to conduct the Business.
All of the tangible Assets have been maintained in a reasonably prudent manner,
are in good operating condition and repair (ordinary wear and tear excepted),
and no required maintenance with respect thereto has been deferred or delayed.
(b) Except as set forth on Schedule 3.8, Seller has, and will have at
the Closing, good title to all of the Shares, free and clear of all
Encumbrances. As a result of the Transaction, Buyer will be the record and
beneficial owner of all outstanding capital stock of Altek and all rights to
acquire capital stock of Altek.
SECTION 3.9 COMPLIANCE WITH LAWS.
Except as set forth on Schedule 3.9, the Business has been and is being
conducted in compliance with all Laws, and the Business has all Governmental
Authorizations necessary for the conduct of the Business as currently conducted
except for the failures of compliance or lack of Governmental Authorizations
that would not have a Material Adverse Effect (it being understood that nothing
in this Section 3.9 is intended to address any matter of compliance that is the
subject of any other representation or warranty set forth herein).
SECTION 3.10 LITIGATION AND CLAIMS.
Except as set forth on Schedule 3.10(a), there is no civil, criminal or
administrative Claim or other proceeding or investigation pending or, to the
knowledge of Seller, threatened against or affecting Seller or Altek with
respect to or relating to the Business or any of the Assets or Intellectual
Property, and no notice of any Claim or investigation involving or relating to
Altek, the Business or any of the Assets, whether pending or threatened, has
been received by the Seller or Altek. Except as set forth on Schedule 3.10(b),
neither the Business nor any of the Assets or Intellectual Property is subject
to any order, writ, judgment, award, injunction or decree of any Governmental
Entity of competent
12
jurisdiction or any arbitrator. Seller does not have any Claims against Altek
except for certain intercompany charges which will be eliminated at or
immediately prior to Closing.
SECTION 3.11 INTELLECTUAL PROPERTY.
(a) "INTELLECTUAL PROPERTY" means (i) all registered and unregistered
trademarks, trademark registrations, trademark rights and renewals thereof,
trade names, trade name rights, trade dress, servicemarks, servicemark
registrations and renewals thereof, servicemark rights, and all applications to
register the same (the "TRADEMARKS"); (ii) all issued foreign and domestic
patents, patent rights, patent applications (the "PATENTS"); (iii) all
registered and unregistered copyrights, copyright registrations, renewals
thereof, and applications to register the same (the "COPYRIGHTS"); (iv) all
software, computer programs, computer systems, modules and related data (the
"SOFTWARE"); (v) all Internet domain names ("DOMAIN NAMES") and Internet
web-sites and the content thereof ("INTERNET SITES" ); (vi) all licenses,
sublicenses and agreements pursuant to which any Person has acquired rights in
or to any of the Trademarks, Patents, Copyrights, Software, Domain Names or
Proprietary Rights ("LICENSES-IN"); (vii) all licenses, sublicenses and
agreements pursuant to which any Person has licensed or transferred any rights
to any of the Trademarks, Patents, Copyrights, Software, Domain Names or
Proprietary Rights ("LICENSES-OUT"); (viii) all Proprietary Rights (including in
each case of (i) through (vii) above, all copies and embodiments thereof, in
electronic, written or other media, owned, used, or contemplated for use by any
Person). As used herein, the term "PROPRIETARY RIGHTS" means all categories of
confidential and proprietary information, including, without limitation, trade
secrets, know-how, inventions, invention disclosures (whether or not patentable
and whether or not reduced to practice), inventor rights, reports, quality
records, engineering notebooks, models, processes, procedures, drawings,
specifications, designs, ingredient or component lists, formulae, plans,
proposals, technical data, copyrightable works, financial, marketing, customer
and business data, pricing and cost information, business and marketing plans,
and customer and supplier lists and information, and all other confidential and
proprietary information.
(b) Schedule 3.11(b) sets forth a complete and accurate list of each
and all domestic and foreign Trademarks, Patents, Copyrights, Software, Domain
Names, and Internet Sites (including (i) for each Patent, the number, normal
expiration date and title for each country in which such Patent has issued, or,
if applicable, the application number, date of filing and title for each
country; (ii) for each Trademark, the application serial number or registration
number, the class of goods covered and the expiration date for each country in
which a Trademark has been registered; and (iii) for each copyright, the number
and date of filing for each country in which a copyright has been filed) that
are licensed or sublicensed, created by or for, applied for, used by or on
behalf of, owned by, controlled by, or registered in the name of, Altek or
Seller (as relates to the Business) or in which Altek or Seller (as relates to
the Business) has any rights or interests, and all
13
Licenses-In (excluding software and databases licensed to Altek or Seller (as
relates to the Business) under standard, non-exclusive software licenses granted
to end-user customers by third parties in the ordinary course of such third
parties' business) and Licenses-Out, together with a brief description of each.
(c) Except as set forth on Schedule 3.11(c), to the knowledge of
Seller, Altek or Seller (as relates to the Business) owns, or possesses good,
insurable, marketable and valid title or adequate licenses or other rights to
use, all Intellectual Property necessary to conduct the business and operations
of Altek, and to perform under any contracts, as currently being conducted
(collectively, the "INTELLECTUAL PROPERTY RIGHTS"). The Intellectual Property
Rights are valid, in full force and effect and are enforceable. Except as set
forth on Schedule 3.11(c), no Intellectual Property Right has been cancelled,
adjudicated invalid, lapsed or is subject to any outstanding judgment, order,
decree, ruling, injunction, writ or consent restricting its use or adversely
affecting Altek's or Seller's (as relates to the Business) rights thereto. No
claim is pending or, to Seller's knowledge threatened, and no notice or
invitation to license has been received that questions Altek's or Seller's (as
relates to the Business) title to, claims any ownership of or any rights to any
Intellectual Property Rights, or claims or at all indicates that the present or
past operations of Altek or Seller (as relates to the Business) infringes upon
or conflicts with the rights of any third party intellectual property, except as
set forth on Schedule 3.11(c). Except as set forth on Schedule 3.11(c), no claim
is pending, or to Seller's knowledge, threatened, to the effect that any
Intellectual Property is invalid or unenforceable. There are no pending, or, to
Seller's knowledge threatened, interferences, re-examinations, oppositions,
cancellation proceedings, or the foreign equivalent thereof involving any
Patents or Trademarks of Altek, or Seller (as relates to the Business). There is
no breach or violation by Altek or Seller (as relates to the Business) of, and,
to the Seller's knowledge, there is no breach, violation, or threatened breach
by any third party of any Intellectual Property Rights, except as set forth on
Schedule 3.11(c). Except as set forth on Schedule 3.11(c), to Seller's
knowledge, there has been no unauthorized disclosure or use of Proprietary
Rights of Altek. To the knowledge of Seller, none of the operations of Altek
(including any and all products and services of Altek or Seller (as relates to
the Business)), as now or presently contemplated to be conducted, or performance
under any contract as it has been, or as is currently being, conducted,
infringes or, to Seller's knowledge, will infringe, upon any third party
intellectual property. No license, contract, agreement or understanding between
or among Altek or Seller (as relates to the Business) and any third party exists
that would impede or prevent the continued use by Altek or Seller (as relates to
the Business) of the entire right, title and interest of Altek or Seller (as
relates to the Business) in and to the Intellectual Property Rights. The
consummation of the transactions contemplated by this Agreement and any related
document will not result in the loss or impairment of any Intellectual Property
Right. Except as set forth on Schedule 3.11(c), all directors, officers,
employees and consultants who have access to Confidential Information have
executed appropriate nondisclosure agreements, copies of which have been
provided to the Buyer. Other than as set forth on Schedule 3.11(c), Altek and
Seller (as relates to the Business) have no obligation to compensate any third
party for any Intellectual Property Rights. Altek and Seller (as relates to the
Business) have not agreed to indemnify any
14
Person for or against any interference, infringement, misappropriation or other
violation with respect to the Intellectual Property.
SECTION 3.12 EMPLOYEE BENEFITS.
(a) With respect, as applicable, to Benefit Plans and Benefit
Arrangements maintained by Seller.
(i) Seller has delivered the following documents to Buyer with
respect to each Benefit Plan and Benefit Arrangement: (A) all Benefit Plan or
Benefit Arrangement documents, including but not limited to, trust agreements,
insurance policies, service agreements and formal and informal amendments to
each; (B) the most recent Internal Revenue Service ("IRS") Forms 5500 or 5500C/R
or other comparable documents and any attached financial statements and those
for the prior three years; (C) the last IRS determination or opinion letter that
covered the qualification of the entire plan; (D) summary plan descriptions and
summaries of material modifications; (E) all notices the IRS, Department of
Labor, or any other U.S. or non-U.S. governmental agency or entity issued to
Altek or Seller within the three years preceding the date of this Agreement; and
(F) all employee manuals or handbooks containing personnel or employee relations
policies;
(ii) Neither Altek nor its ERISA Affiliates have maintained or
contributed to any plan intended to qualify under Section 401(a) of the Code
other than as listed on Schedule 3.12(a) (the "QUALIFIED PLANS"). The Qualified
Plans qualify for exemption under Section 401(a) of Code, and, to the Seller's
knowledge, nothing has occurred with respect to the operation of any Qualified
Plans that could cause the loss of such qualification or exemption or the
imposition of any material liability, lien, penalty or tax under ERISA or the
Code; each Benefit Plan has been tested for compliance with the qualification
requirements under the Code in a manner that takes into account the affiliations
among Altek and its ERISA Affiliates; each Benefit Plan and each Benefit
Arrangement has been maintained in material compliance with its constituent
documents and with all applicable provisions of U.S. Laws, including federal and
state securities laws and any reporting and disclosure requirements; and no
Benefit Plan has ever held as an asset any security issued by Altek or Seller.
(iii) Neither Altek nor any ERISA Affiliate has ever sponsored
or maintained or had any liability (whether actual or contingent) with respect
to any Benefit Plan subject to Code Section 412 or ERISA Section 302 or Title IV
(including any multiemployer plan), including any benefit plan that would have
been a Benefit Plan if it covered employees of Altek or the Business;
(iv) There are no pending claims (other than routine benefit
claims) or lawsuits that have been asserted or instituted in writing by,
against, or relating to, any Benefit Plans or Benefit Arrangements, nor to the
Seller's knowledge, is there any basis for any such claim or lawsuit; No Benefit
Plans or Benefit Arrangements are or have been under audit or examination (nor
has notice been received of a potential audit or
15
examination) by any U.S. or non-U.S. governmental agency or entity (including
the IRS and Department of Labor);
(v) No Benefit Plan or Benefit Arrangement contains any
provision that would accelerate or vest any benefit or require severance,
termination or other payments or trigger any liabilities as a result of the
transactions this Agreement contemplates; Neither Altek nor Seller has declared
or paid any bonus or incentive compensation related to the transactions this
Agreement contemplates; and no payments or benefits promised or owed to any
employee of Altek will, individually or collectively, be nondeductible under
Code Section 280G; and
(vi) All group health plans of Altek and its ERISA Affiliates
materially comply and have complied with the requirements of Part 6 of Title I
of ERISA ("COBRA"); no current or former employee of Altek (or beneficiary of
such employee) is entitled to receive any benefits, including, without
limitation, death or medical benefits (whether or not insured) beyond retirement
or other termination of employment, other than as applicable law requires.
(b) Schedule 3.12(b) of the Disclosure Schedule sets forth an accurate
list, as of the date hereof, of all employees of Altek and all employment
agreements with such employees, and the rate of compensation (and the portions
thereof attributable to salary, bonus, and other compensation respectively) of
each such person as of the date of this Agreement. The schedule also shows
totals accrued for vacation, sick leave, and incentive bonuses for all
employees.
(c) With respect to employees of the Business and service providers to
the Business:
(i) Altek has complied with all applicable U.S. and non-U.S.
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, including without limitation any such laws
respecting employment discrimination, employee classification, unfair labor
practices, workers' compensation, family and medical leave, the Immigration
Reform and Control Act, and occupational safety and health requirements and has
complied with all employment agreements, and no claims, controversies,
investigations, or suits are pending or, to the Seller's knowledge, threatened
with respect to such laws or agreements, either by private individuals or by
governmental agencies; and all employees are at-will;
(ii) No labor union represents or has ever represented the
employees of the Business, no collective bargaining agreement is or has been
binding against the Business with respect to the employees, and to Seller's
knowledge, no organizational efforts have ever occurred with respect to the
employees. No grievance or arbitration proceeding arising out of or under
collective bargaining agreements or employment relationships is pending, and no
claims therefore exist or have, to the Seller's knowledge, been threatened; no
labor strike, lock-out, slowdown, or work stoppage is or has ever been pending
or threatened against or directly affecting Altek;
16
(iii) All persons who are or were performing services for
Altek and are or were classified as independent contractors do or did satisfy
and have satisfied the requirements of law to be so classified, and Altek fully
and accurately reported their compensation on IRS Forms 1099 or other applicable
tax forms for independent contractors when required to do so.
(d) Definitions:
(i) "BENEFIT ARRANGEMENT" means any Benefit Arrangement Altek
or Seller sponsors or maintains or with respect to which Seller has or may have
any current or future liability (whether actual, contingent, with respect to any
of its assets or otherwise), in each case with respect to any present or former
employees of Altek or Seller, or with respect to the Business, including any
benefit arrangement, obligation, or practice, whether or not legally
enforceable, to provide benefits (other than merely as salary or under a Benefit
Plan), as compensation for services rendered, to present or former directors,
employees, agents, or independent contractors, including, but not limited to,
employment or consulting agreements, severance agreements or pay policies, stay
or retention bonuses or compensation, executive or incentive compensation
programs or arrangements, sick leave, vacation pay, plant closing benefits,
salary continuation for disability, workers' compensation, retirement, deferred
compensation, bonus, stock option or purchase plans or programs, tuition
reimbursement or scholarship programs, employee discount programs, meals,
travel, or vehicle allowances, any plans subject to Code Section 125, and any
plans providing benefits or payments in the event of a change of control, change
in ownership or effective control or sale of a substantial portion (including
all or substantially all) of the assets of any business or portion thereof, in
each case with respect to any present or former employees, directors, or agents.
(ii) "BENEFIT PLAN" means any Benefit Plan that Altek [or
Seller] maintains or has previously maintained or to which Altek or Seller is
obligated to make payments or has or may have any liability, in each case with
respect to any present or former employees of the Business or Altek. "Benefit
Plan" has the meaning given in ERISA Section 3(3), together with plans or
arrangements that would be so defined if they were not (i) otherwise exempt from
ERISA by that or another section, (ii) maintained outside the United States, or
(iii) individually negotiated or applicable only to one person.
(iii) "ERISA AFFILIATE" means any person or entity that,
together with the entity referenced, would be or was at any time treated as a
single employer under Code Section 414 or ERISA Section 4001 and any general
partnership of which the entity is or has been a general partner.
SECTION 3.13 ENVIRONMENTAL MATTERS.
(a) The Business has complied in all material respects with all
Environmental Laws, and no Claim or, to Seller's knowledge, investigation has
been
17
filed or commenced against or in connection with the Business alleging any
failure to comply with any Environmental Law.
(b) Except as set forth in Schedule 3.13, neither Altek nor the
Business has any Liability (and Altek and the Business has not handled, used,
stored, recycled or disposed of any Material of Concern, arranged for the
disposal of any Material of Concern, exposed any employee or other Person to any
Material of Concern or hazardous condition, or owned or operated any property or
facility in any manner that could be expected to form the basis for any present
or future Claim or investigation giving rise to any such Liability) for damage
or remediation to any site, location or body of water (surface or subsurface),
or for any illness of or personal injury to any employee or other Person, under
any Environmental Law.
(c) All properties and equipment owned by Altek and used in the
Business are free of any amounts of Materials of Concern the presence of which
could be expected to result in Losses after the Closing Date in amounts in
excess of $10,000 individually or in the aggregate.
(d) There are not in service or out of service underground storage
tanks, and Altek has not released any Materials of Concern, in or on the Leased
Real Property or other Real Property.
(e) Altek holds all environmental Permits (the "ENVIRONMENTAL PERMITS")
necessary for the conduct of the Business as such activities and business are
currently being conducted. All Environmental Permits are in full force and
effect. Altek (i) is in compliance in all material respects with all terms and
conditions of the Environmental Permits and (ii) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in all applicable Environmental Laws. Neither Altek nor Seller has
knowledge of any circumstances that may prevent or interfere with such
compliance in the future. Schedule 3.13 includes a listing and description of
all Environmental Permits currently held by Altek or Seller (relating to the
Business), and all orders, decrees, judgments, notice or demand letters issued
to or against Altek or Seller (relating to the Business) relating to pollution
or protection of health or the environment.
SECTION 3.14 CONTRACTS.
Schedule 3.14 sets forth an accurate list of:
(i) all contracts and agreements, whether written or oral, to
which Altek is a party or by which the Business, Altek or any of the
Assets are bound which may give rise to obligations, liabilities or
benefits exceeding $5,000 or which are material to the Business as a
whole;
18
(ii) all contracts, commitments, leases, instruments,
agreements, loans, licenses and Permits, written or oral, between Altek
and any current or former officer, director, stockholder, manager,
member, employee or Affiliate thereof or of Altek;
(iii) each loan or credit agreement, security agreement,
guaranty, indenture, mortgage, pledge, conditional sale or title
retention agreement, equipment obligation, lease purchase agreement or
other instrument evidencing indebtedness of Altek, or to which Altek is
a party or by which Altek or any of the Assets are bound (including
without limitation all guarantees by Seller relating to Altek);
(iv) all contracts, commitments, leases, instruments,
agreements, licenses or permits, written or oral, relating to Altek, or
to which Altek is a party or by which any of the Assets are bound,
which relate to any intellectual or intangible property (including
without limitation the Intellectual Property);
(v) all agreements, contracts and understandings, whether
written or oral, relating to Altek, or to which Altek is a party or by
which any of the Assets are bound, which contain any non-solicitation,
non-competition, confidentiality or similar obligations or which
otherwise prohibit Altek from freely providing services or supplying
products to any customer or potential customer;
(vi) any contract, agreement or understanding for the cleanup,
abatement or other actions in connection with any Material of Concern,
the remediation of any existing environmental liabilities, violation of
any Environmental Laws or relating to the performance of any
environmental audit or study;
(vii) any joint venture, partnership or similar contract or
agreement; and
(viii) any contract under which real property is licensed,
leased or subleased.
Each of these contracts (other than purchase orders and product
warranties incurred in the Ordinary Course) are referred to as the "CONTRACTS".
Except for those which expired by their terms prior to the date hereof or prior
to the Closing Date, each Contract is a valid and binding obligation of Altek
and is in full force and effect. Except as set forth on Schedule 3.14, there is
no default by Altek under any Contract that has not been cured or waived and
neither Seller nor Altek is party to any written or, to Seller's knowledge, oral
agreement or arrangement that would modify or affect the economic terms of any
Contract, except for those modifications or effects which, individually or in
the aggregate, would not have a Material Adverse Effect. To the knowledge of
Seller, no other party to any Contract is in default thereunder, nor does any
condition exist that with notice or lapse of time or both would constitute such
a default. Neither Seller nor Altek has received a notice of default under any
Contract.
19
SECTION 3.15 FINDERS' FEES.
Except as set forth on Schedule 3.15, there is no investment banker, broker,
finder or other intermediary who has been retained by or is authorized to act on
behalf of Seller or Altek who has been paid, or might be entitled to, any fee or
commission from Seller, Altek or Buyer in connection with the Transaction. No
engagement letter was entered into by Seller or Altek with any broker, finder or
other adviser which obligates Seller or Altek to continue to use the services of
such Person or pay any fees or expenses, in each case in connection with any
future transaction with respect to Altek or the Business.
SECTION 3.16 SUBSEQUENT CHANGES.
Since the date of the Interim Balance Sheet, there has not been any
change in the Business, or in the financial condition, operations or results of
operations of the Business, that has had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. Without
limiting the generality of the foregoing, since the date of the Interim Balance
Sheet, except as set forth on Schedule 3.16, the Business has not:
(a) sold, leased, transferred or assigned any of the Assets outside the
Ordinary Course;
(b) entered into any agreement, contract, lease or license (or series
of related agreements, contracts, leases, and licenses) other than Ordinary
Course sales and purchase orders;
(c) accelerated, terminated, modified or canceled any Contract except
in the Ordinary Course, or materially modified the Business's backlog; and, to
the knowledge of Seller, no other party has done so as a result of any default
by Seller or Altek;
(d) made any capital expenditure (or series of related capital
expenditures) either involving more than $25,000 or outside the Ordinary Course;
(e) made any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other Person;
(f) issued any note, bond or other debt security or created, incurred,
assumed or guaranteed any indebtedness for borrowed money or capitalized lease
obligation;
(g) delayed or postponed the payment of accounts payable or other
Liabilities outside of the Ordinary Course;
(h) canceled, compromised, waived or released any material right or
Claim (or series of related rights and Claims) outside the Ordinary Course;
(i) granted any license or sublicense of any rights under or with
respect to any Intellectual Property Rights;
20
(j) experienced any material damage, destruction or loss to the Assets
not covered by insurance;
(k) granted any increase in the base compensation of any of the
Employees or made any other material change in employment terms for any of the
Employees, except for normal compensation increases made in the Ordinary Course;
or
(l) entered into any commitment to do any of the foregoing.
SECTION 3.17 LEASES.
Schedule 3.17 sets forth a list of each oral or written sublease, lease,
license, contract or other agreement (including all amendments, renewals,
extensions, modifications or supplements thereto) relating to the Assets or Real
Property used in connection with the Business and each amendment or modification
thereto (individually, a "LEASE" and collectively, the "LEASES"). Seller has
made available to Buyer correct and complete copies of the Leases (as amended to
date). With respect to each Lease:
(a) the Leases are legal, valid, binding and enforceable on Altek, and
in full force and effect in accordance with their respective terms;
(b) the Leases constitute all of the leases (including subleases) under
which Altek holds leasehold interests in real estate;
(c) neither Seller nor Altek is, and to the knowledge of Seller, no
other party to the Lease is, in breach or default thereof, and no event has
occurred and is continuing which, with notice or lapse of time, would constitute
a breach or default thereof or permit termination, modification or acceleration
thereunder;
(d) neither the Seller nor Altek has received notice of default by any
party to the Leases;
(e) to the knowledge of Seller, there are no disputes, oral agreements
or forbearance programs in effect as to any Lease that would have a Material
Adverse Effect;
(f) Except as set forth on Schedule 3.17, Seller has not assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest
under the Leases; and
(g) Seller or Altek has obtained all Governmental Authorizations
(including licenses and permits) required to be obtained by it in connection
with its operation of the Business at the premises leased under the Lease, and
has operated and maintained such premises in all material respects in accordance
with applicable Laws.
21
SECTION 3.18 REAL PROPERTY.
Altek possesses legally enforceable and transferable rights to use under a valid
and subsisting oral sublease with the Seller all Real Property necessary for the
conduct of the Business after the Closing Date substantially in the same manner
as conducted by Altek prior to the Closing Date (the "BUSINESS REAL PROPERTY")
free and clear of any and all Encumbrances. Altek does not own and never has
owned any Real Property. There are no Persons other than Altek or Seller in
possession of the Business Real Property or any portion thereof. Neither Seller
nor Altek has received any notice claiming any violation of any Law, or
requiring or calling attention to the need for any work, repairs, maintenance,
construction, alterations, or installations on or in connection with the
Business Real Property that has not been complied with. All buildings,
structures, appurtenances, mechanical, plumbing electrical and other
improvements and building systems situated on the Business Real Property are in
good operating condition and have no patent structural defects.
SECTION 3.19 PRODUCT WARRANTY.
Seller has heretofore made available to Buyer copies of the standard terms and
conditions of sale or lease of the Business (containing applicable guaranty,
warranty and indemnity provisions). Except to the extent of the warranty reserve
set forth on the Interim Balance Sheet, each of the products and services sold,
leased or delivered by the Business meets all standards for quality and
workmanship prescribed by law or regulation, industry standard, contractual
agreements, written commitments, express and implied warranties and/or the
product literature of Seller or Altek relating to the Business. Except as
described on Schedule 3.19, (i) no claims have been made or are threatened under
the product warranties of Seller or Altek thereof with respect to the Business,
(ii) there exists no event or circumstance, which after notice or the passage of
time or both, might create or result in Liabilities or obligations under any of
the product warranties of Seller or Altek with respect to the Business in excess
of the Liabilities and obligations incurred under such product warranties on
average, during the past two years, (iii) there are no statements, citations or
decisions by any Governmental Authority or any product testing laboratory
stating that any product of Altek is unsafe or fails to meet any standards
promulgated by such Governmental Authority or testing laboratory, (iv) to
Seller's knowledge, there is no design, manufacturing or other defect in any
model or type of product or product specification of Seller of Altek relating to
the Business and (v) there have not been any mandatory or voluntary product
recalls with respect to any products of Altek and, to the Seller's knowledge,
there is no fact relating to any product of Altek that may impose a duty on
Seller or Altek to recall any product or warn customers of a defect in any
product. As of the date of the Interim Balance Sheet, the Business had no
Liability for replacement or repair of such products or other damages in
connection therewith, except to the extent of the warranty reserve set forth on
the Interim Balance Sheet.
22
SECTION 3.20 TAXES.
(a) Altek has timely filed all income Tax Returns required to be filed
by it (subject to any applicable extensions). Each affiliated group (within the
meaning of Section 1504(a) of the Code) with which Altek files a consolidated,
combined or unitary Tax Return has timely filed all such income Tax Returns that
it was required to file (subject to any applicable extensions) for each taxable
period during which Altek was a member of the group.
(b) Altek has duly paid in full (or there has been paid on its behalf)
or will have established (or there will have been established on its behalf) an
adequate reserve on the Closing Balance Sheet (excluding reserves for deferred
Taxes) for all Taxes that are payable or may become payable by Altek (i) in
respect of any taxable period ending on or before the Closing Date and (y) for
any taxable period that begins before the Closing Date and ends thereafter, to
the extent such Taxes are attributable to the portion of such period ending on
the Closing Date under the terms of Section 5.2(b).
(c) Altek has withheld and paid over all Taxes required to have been
withheld and paid over on or before the Closing Date, and complied with all
information reporting and backup withholding requirements required to be
complied with on or before the Closing Date, including maintenance of required
records with respect thereto, in connection with amounts paid or owing to any
employer, creditor, independent contractor or other third party. There are no
Encumbrances on any of the assets of Altek with respect to Taxes, other than
liens for Taxes not yet due and payable or for Taxes being contested in good
faith through appropriate proceedings and for which reserves have been or will
be established on the Closing Balance Sheet in accordance with GAAP (excluding
reserves for deferred Taxes).
(d) Altek has not waived any law or regulation fixing, or consenting to
the extension of, any period of time for assessment of any Taxes which waiver or
consent is currently in effect. Seller has not waived any law or regulation
fixing, or consenting to the extension of, any period of time for assessment of
any Taxes of Altek which waiver or consent is currently in effect. There is no
pending examination or proceeding by any authority or agency with respect to
Altek relating to the assessment or collection of Taxes.
(e) As of the Closing Date, Altek will not have any obligation or will
have any obligation that could arise under any Tax sharing agreement between it
and another entity.
(f) Altek has not made any payments and is not obligated to make any
payments, that would constitute an "excess parachute payment" within the meaning
of Section 280G of the Code.
(g) Seller has delivered or otherwise made available to Buyer correct
and complete copies of all income, franchise and other material Tax Returns
filed by or with respect to Altek for taxable periods ending after December 31,
1998.
23
(h) Altek is not a U.S. real property holding company within the
meaning of section 897 of the Code.
SECTION 3.21 ACCOUNTS RECEIVABLE.
The accounts receivable reflected in the Interim Balance Sheet represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course. No portion of such accounts receivable is to be paid to any
Person or entity other than to Altek or to Seller for Altek's account. The
reserves relating to the accounts as shown on the Interim Balance Sheet are
calculated in accordance with GAAP and consistent with past practice. There is
no contest, claim, or right of set-off under any Contract or otherwise with any
maker of any such accounts receivable relating to the amount or validity of such
accounts receivable. All intracompany charges and payables between Seller and
Altek accrued prior to the Closing Date, whether or not reflected on the Interim
Balance Sheet, will be terminated and released on or before the Closing Date.
SECTION 3.22 BOOKS AND RECORDS.
Altek thereof has maintained Books and Records which, in reasonable detail,
accurately and fairly reflect all material transactions entered into by Altek,
or to which Altek is a party. Altek has not engaged in any transaction,
maintained any bank account or used any corporate funds, except for
transactions, bank accounts and funds which have been and are reflected in its
normally maintained books and records. Complete copies of the Books and Records
of Altek have been made available to Buyer.
SECTION 3.23 LICENSES AND PERMITS.
Altek owns or holds all permits, licenses, variances, exemptions, government
orders, approvals and authorizations (collectively, "PERMITS") except for any
Permits the absence or loss of any of which, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect (the "MATERIAL
PERMITS"). Each of the Material Permits is set forth on Schedule 3.23. The
Material Permits are valid and, to the Seller's knowledge, no Governmental
Authority intends to modify, cancel, terminate or not renew any of the Material
Permits, as a result of the Transaction.
SECTION 3.24 LIABILITIES.
Altek is not liable for or subject to any Liabilities of any kind or nature
whatsoever, whether known, absolute, accrued, contingent or otherwise, or
whether due or to become due, except for (i) those Liabilities reflected on the
Interim Balance Sheet and not previously paid or discharged and (ii) those
Liabilities incurred since the date of the Interim Balance Sheet in the Ordinary
Course which are not, individually or in the aggregate, material to Altek.
24
SECTION 3.25 SIGNIFICANT CUSTOMERS AND SUPPLIERS.
Schedule 3.25 is a true and correct list showing (i) the ten largest customers
of Altek on a consolidated basis by gross purchases during the twelve month
period ending as of the date of the Interim Balance Sheet (the "SIGNIFICANT
CUSTOMERS"), (ii) the ten largest vendors and suppliers of Altek on a
consolidated basis by gross purchases during the twelve month period ending as
of the date of the Interim Balance Sheet, and (iii) vendors and suppliers of
Altek who are the sole available source of such supply, ((ii) and (iii)
collectively, the "Significant Vendors"). Except as set forth on Schedule 3.25,
since January 1, 2001, no Significant Customer or Significant Vendor has,
whether as a result of the transactions contemplated hereby or otherwise, (a)
stopped or indicated an intention to stop trading with or supplying Altek, (b)
indicated its intention to materially reduce its trading with or provision of
goods and services to Altek, or (c) changed, or indicated an intention to
change, materially the terms and conditions on which it is prepared to trade
with or supply Altek.
SECTION 3.26 INSURANCE.
Schedule 3.26 sets forth an accurate list of all insurance policies carried by
Altek or relating to the Business. All insurance loss runs or workmen's
compensation claims for the past three policy years have been delivered to
Buyer. Seller has made available to Buyer true, complete and correct copies of
all such insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and Altek or Seller, as
applicable are otherwise in full compliance with the terms of such policies.
Such policies of insurance are of the type and in amounts customarily carried by
Persons conducting businesses similar to the Business. There have been no
threatened terminations of, or material premium increases with respect to, any
of such policies.
SECTION 3.27 BANK ACCOUNTS; POWERS OF ATTORNEY.
Schedule 3.27 sets forth a true and complete list of all bank accounts, safe
deposit boxes and lock boxes of Altek, including the names in which such
accounts or boxes are held and identification of all Persons authorized to draw
thereon or have access thereto.
SECTION 3.28 INVENTORY.
All of the Inventory reflected as an asset on the Interim Balance Sheet is
usable or salable in the Ordinary Course. There are no damaged, excess or
obsolete items which are included in the value of the inventory shown on the
Interim Balance Sheet (net of write-offs and reserves reflected therein). The
values at which the Inventory is carried on the Interim Balance Sheet set forth
on Schedule 3.28 include gross inventory (valued at $1,200,000) over 12 months
old, all as more specifically set forth on Schedule 3.28, and reflect the
inventory valuation policy of stating inventories at cost or market, whichever
is lower on a first-in, first-out basis.
25
SECTION 3.29 BACKLOG.
Schedule 3.29 lists all pending customer orders for Altek as of the date set
forth on Schedule 3.29. All such customer orders were entered into in the
Ordinary Course. No such customer orders are at prices which, based on the past
experience of the Altek and current and anticipated costs, are or can reasonably
be expected to result in a material loss to Altek.
SECTION 3.30 SUBSIDIARIES.
Altek has no subsidiaries and does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any Person, whether active or
dormant, nor is Altek, directly or indirectly, a participant in any joint
venture, partnership, limited liability company, trust, association or other
noncorporate entity. There are no trusts or similar entities or instruments of
guardianship or custodianship, whether enforceable or not, in existence for the
benefit of Altek.
SECTION 3.31 CERTAIN BUSINESS PRACTICES.
Neither Altek nor any officer, employee, stockholder, agent or representative of
Altek, nor any Person associated with or acting for or on behalf of Altek, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of what form, whether in money, property, or services (i) to obtain
favorable treatment for business or Contracts secured, (ii) to pay for favorable
treatment for business or Contracts secured, (iii) to obtain special concessions
or for special concessions already obtained, or (iv) in violation of any legal
requirement, or (b) established or maintained any fund or asset that has not
been recorded in the Books and Records.
SECTION 3.32 ASSIGNMENT OF SELLER INTELLECTUAL PROPERTY.
Seller represents to Buyer that the Intellectual Property Rights constitute all
of the intellectual property assets necessary for the conduct of the Business
after the Closing Date in the same manner as conducted prior to the Closing Date
and that all patents, trademarks or other Intellectual Property Rights owned or
licensed by Seller that are used in connection with the Business as presently
conducted by Altek and in the development, sale or manufacture of Altek's goods,
products and services have been properly assigned to Altek prior to or at the
Closing.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
To induce the Seller and Altek to enter into this Agreement and to
consummate the Transaction, Buyer makes the following representations and
warrants to Seller:
SECTION 4.1 ORGANIZATION AND POWER.
26
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of Washington and has all requisite corporate power and authority
to own or lease and operate its properties and assets and to carry on its
business as currently conducted. Buyer is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction where its
ownership or operation of its properties and assets or the conduct of its
business requires such qualification, except for failures to be so qualified or
in good standing, as the case may be, that would not prevent consummation of the
Transaction or materially impair the ability of Buyer to perform its obligations
hereunder.
SECTION 4.2 CORPORATE AUTHORIZATION.
Buyer has full corporate power and authority to execute and deliver this
Agreement and each Closing Document, and to perform its obligations hereunder
and thereunder. The execution, delivery and performance by Buyer of this
Agreement and each Closing Document have been duly and validly authorized and no
additional corporate authorization or consent is required in connection
therewith.
SECTION 4.3 APPROVALS.
No consent, approval, waiver, authorization or novation is required to be
obtained by Buyer from, and no notice or filing is required to be given by Buyer
to or made by Buyer with, any Governmental Entity or other Person in connection
with (i) the execution, delivery and performance by Buyer of this Agreement and
each Closing Document; and (ii) the consummation by Buyer of the Transaction.
SECTION 4.4 NON-CONTRAVENTION.
The execution, delivery and performance by Buyer of this Agreement and each
Closing Document, and the consummation of the Transaction, do not and will not:
(a) violate, conflict with or result in a default under any provision of the
articles of incorporation, bylaws or other organizational documents of Buyer;
(b) conflict with, or result in the breach of, or constitute a default under, or
result in the termination, cancellation, suspension, revocation or acceleration
(whether after the filing of notice or the lapse of time or both) of any right
or obligation of Buyer under, any agreement, document, permit, contract, lease,
sublease, arrangement, commitment, license or other instrument to which Buyer is
a party or by which any of its assets is bound; (c) violate or result in a
breach of or constitute a default under any Law; or (d) constitute an event
which after notice or lapse of time, or both, would result in any conflict,
breach, violation, default, requirement, loss or similar event described in
Section 4.4(a) - (c) to which Buyer is subject; except for, in the cases of the
foregoing clauses (b) through (d), conflicts, breaches, terminations, defaults,
cancellations, accelerations, or violations that would not prevent consummation
of the Transaction or materially impair the ability of Buyer to perform its
obligations hereunder.
27
SECTION 4.5 BINDING EFFECT.
This Agreement, each Closing Document and the Transaction have been duly
approved by the board of directors of Buyer and when executed and delivered by
Buyer this Agreement and each Closing Document will constitute valid and legally
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
SECTION 4.6 FINANCING.
On the Closing Date, Buyer will have sufficient funds to consummate the
Transaction and to perform its obligations hereunder.
SECTION 4.7 LITIGATION AND CLAIMS.
There is no civil, criminal or administrative Claim or other proceeding or
investigation pending or, to the knowledge of Buyer, threatened, against Buyer
except for those that would not prevent consummation of the Transaction or
materially impair the ability of Buyer to perform its obligations hereunder.
Buyer is not subject to any order, writ, judgment, award, injunction or decree
of any Governmental Entity of competent jurisdiction or any arbitrator, except
for those that would not prevent consummation of the Transaction or materially
impair the ability of Buyer to perform its obligations hereunder.
SECTION 4.8 FINDERS' FEES.
There is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of Buyer or any Affiliate of
Buyer who might be entitled to any fee or commission from Seller or any
Affiliate of Seller in connection with the Transaction.
ARTICLE V. CERTAIN COVENANTS
SECTION 5.1 FURTHER ASSURANCES.
From time to time after the Closing Date, upon request of any party and without
further consideration, each party hereto shall execute, acknowledge and deliver
all such other reasonable instruments and documents and shall take all such
other reasonable actions required to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the foregoing,
Seller shall use commercially reasonable efforts to have the now current
officers, directors and employees of Altek and Seller cooperate with Buyer on
and after the Closing Date, at times reasonably convenient for Seller and its
staff and for no more than a reasonable number of hours, in furnishing
information, evidence, testimony and other reasonable assistance in connection
with any Tax Return filing obligations, actions, proceedings, arrangements or
disputes of any
28
nature with respect to matters pertaining to any and all periods beginning prior
to the Closing Date.
SECTION 5.2 TAX MATTERS.
The following provisions shall govern the allocation of responsibility as
between Buyer and Buyer and Seller for certain Tax matters following the Closing
Date:
(a) Seller shall prepare and file (or cause to be prepared and
filed) in a timely manner all Tax Returns for Altek that relate to tax periods
that end on or before the Closing Date. All such Tax Returns shall be prepared
in a manner consistent with past practices. Buyer shall prepare and file (or
cause to be prepared and filed) in a timely manner all other Tax Returns for
Altek. All Tax Returns prepared by Buyer for any taxable period which begins
before and ends after the Closing Date (a "STRADDLE PERIOD") shall be prepared
in a manner consistent with past practices.
(b) In order to apportion any Taxes that relate to a Straddle
Period, the parties hereto will, to the extent permitted by applicable law,
elect with the relevant taxing authorities to treat for all purposes the Closing
Date as the last day of a taxable period of Altek, and such period shall be
treated as a "SHORT PERIOD" and a "PRE-CLOSING PERIOD" for purposes of this
Agreement. In any case where applicable law does not permit the Closing Date to
be treated as the last day of a Short Period, then for purposes of this
Agreement, the portion of such Taxes that is attributable to the operation of
Altek for the Pre-Closing Partial Period (as defined below) shall be (i) in the
case of Taxes that are not based on income gross receipts, the total amount of
such Taxes for the period in question multiplied by a fraction, the numerator of
which is the number of days in the Pre-Closing Partial Period and the
denominator of which is the number of days in the entire period in question and
(ii) in the case of any Taxes that are based on income or gross receipts, the
Taxes that would be due with respect to the Straddle Period, if such Straddle
Period were a Short Period. "PRE-CLOSING PARTIAL PERIOD" means with respect to
any Taxes imposed on Altek for which the Closing Date is not the last day of the
Short Period, the period of time beginning on the first day of the actual
taxable period that includes (but does not end on) the Closing Date and ending
on and including the Closing Date.
(c) Seller shall be liable for and shall pay all Taxes (i) of
Altek in respect of any taxable period ending on or before the Closing Date;
(ii) of Altek in respect of any Straddle Period to the extent such Taxes are
attributable to the Pre-Closing Partial Period as determined in Section 5.2(b);
(iii) that are imposed on Altek under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign law) as a transferee or
successor with respect to any taxable period ending on or before the Closing
Date or with respect to any Pre-Closing Partial Period; (iv) imposed on Altek
pursuant to any Tax sharing agreement existing as of the Closing Date; and (v)
all transfer documentary, sales, use, stamp, registration and other similar
Taxes ("CONVEYANCE TAXES") incurred solely as a result of and occurring upon
consummation of this Agreement; provided, however, that in each case Seller
shall not be
29
liable for and shall not be required to pay such Taxes to the extent such Taxes
are accrued on the Closing Balance Sheet (excluding reserves for deferred
Taxes).
(d) Buyer and Seller agree to give prompt notice to each other
of any proposed adjustment to Taxes for periods for which the other may have
liability under this Agreement. Buyer and Seller shall cooperate with each other
in the conduct of any audit or other proceedings involving Altek for such
periods and each may participate at its own expense. Buyer shall cause powers of
attorney authorizing Seller or its representative to represent Altek before the
relevant taxing authority and such other documents as are reasonably necessary
for Seller or its representative to control the conduct of any such audit;
provided, however, that Seller shall not compromise or settle any such audit
without obtaining Buyer's consent, which consent shall not be unreasonably
withheld, if such compromise or settlement would result in an increased Tax
liability or a reduction in any Tax assets or have the effect of increasing any
Tax liability of Altek or Buyer in each case for any taxable period ending after
the Closing Date.
(e) Buyer and Seller agree to furnish or cause to be furnished
to each other, upon request, as promptly as practicable, such information and
assistance (including access to books and records) relating to Altek as is
reasonably necessary for the preparation of any Tax Return, claim for refund or
audit, and the prosecution or defense of any claim, suit or proceeding relating
to any proposed adjustment
(f) After the Closing, Purchaser shall pay to Seller any
refunds of or credits for Taxes (net of any income Tax liability incurred as a
result of receiving such refund or credit) relating to Altek for periods ending
on or before the Closing Date and for Pre-Closing Partial Periods except to the
extent any such refund or credit is reflected as an asset on the Closing Balance
Sheet (excluding reserves for deferred Taxes).
SECTION 5.3 INTENTIONALLY OMITTED.
SECTION 5.4 ASSIGNED INTELLECTUAL PROPERTY AND LICENSED NAME.
(a) Prior to or at Closing, Seller will assign to Buyer, and
neither Seller nor any of its Affiliates will have, whether by virtue of this
Agreement or otherwise, any right, title or interest in or to, or any right to
use, any of Seller's assigned intellectual property set forth on Schedule 5.4(a)
(the "ASSIGNED INTELLECTUAL PROPERTY"). All costs associated with the such
assignment (including filings fee) shall be borne by Seller. Seller acknowledges
that, except as expressly provided by this Agreement, no right, interest,
ownership or privilege of use in or to any of trade dress, trade names,
trademarks, service marks, logos, identification, names, slogans or internet
domain names set forth on Schedule 5.4(a) is accorded to Seller or any of its
Affiliates by reason of this Agreement. Neither Seller nor any of its Affiliates
will at any time use or attempt to register any trade dress, trade name,
trademark or service xxxx confusingly similar to any trade dress, trade name,
trademark,
30
service xxxx, logo, identification, name, slogan or internet domain name
identified herein as Assigned Intellectual Property.
(b) Notwithstanding anything to the contrary contained herein,
Seller and its Affiliates will retain at all times after Closing its right,
title and interest in or to, and the non-exclusive right to use, all trade
secrets, know-how, processes and proprietary information, and copies of
documents incorporating any similar rights, constituting Intellectual Property
and existing on the Closing Date which is or has been used by Seller or any of
its Affiliates in business operations other than the Business.
(c) As used herein, the term "LICENSED XXXX" means the name
and trademark "Transmation". Buyer hereby grants to Seller a non-exclusive,
royalty free, terminable, limited right and license to use the Licensed Xxxx,
for a period of one year following the Closing Date in connection with Seller's
corporate name and identity and in connection with the sale of the products set
forth on Schedule 5.4(c). If at any time Buyer notifies Seller that Seller's use
of the Licensed Xxxx or that the quality of any product bearing a Licensed Xxxx
is objectionable to Buyer, Seller will, within fifteen business days of Buyer's
written request, cease use of the Licensed Xxxx and remove all Licensed Marks
from such product. For the purposes of Section 5.4(c), "objectionable" shall
mean Seller's use of the Licensed Xxxx in a manner or in connection with goods
or services that do not meet Buyer's established quality standards.
(d) Seller will seek stockholder approval to change its
corporate name and identity at Seller's next annual meeting of stockholders. If
Seller's stockholders fail to approve of such name change, Seller will file and
operate under an assumed name and will continue to use its best efforts to
affect a change of its corporate name and identity as soon as practicable.
(e) Buyer hereby grants to Seller a non-exclusive, royalty
free, terminable, limited right and license to use the "xxxxxxxxxxx.xxx" domain
name ("TRANSMATION DOMAIN NAME") for a period of one year following the Closing
Date. If at any time Buyer notifies Seller that Seller's use of the Transmation
Domain Name is objectionable to Buyer, Seller will, within fifteen business days
of Buyer's written request, cease use of the Transmation Domain Name. For the
purposes of Section 5.4(e), "objectionable" shall mean Seller's use of the
Transmation Domain Name in a manner or in connection with goods or services that
do not meet Buyer's established quality standards. Seller acknowledges that it
intends to establish a new domain name in connection with its intended corporate
name change. After the Seller has transferred its web site to a new domain name
("SELLER'S WEB SITE") and in the event Buyer operates a web site under the
Transmation Domain Name, Buyer will for a period of one year maintain a
hypertext link on such site that links customers directly to Seller's Web Site.
SECTION 5.5 CONFIDENTIALITY.
(a) Seller recognizes that, by reason of its ownership of
Altek, and by reason of the fact that information is being provided by Buyer to
Seller in connection with the
31
transactions contemplated hereby, it may have acquired and/or may acquire
Confidential Information, the use or disclosure of which could cause Buyer,
Altek or their Affiliates or subsidiaries substantial loss and damages that
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, the Seller covenants and agrees with Buyer and Altek that
it will not at any time, except in performance of its obligations to Buyer or
Altek, directly or indirectly, use, disclose or publish, or permit other Persons
(including without limitation Affiliates of Seller) to use, disclose or publish,
any Confidential Information except as set forth in Section 5.5(b). Nothing
contained in this Section 5.5(a) will prevent any use of Intellectual Property
as contemplated by Section 5.4(c).
(b) Nothing contained in this Section 5.5 will in any way
restrict or impair the right of Seller to use, disclose or otherwise deal with
information of Buyer or its Affiliates which: (i) is or becomes a matter of
public knowledge through no fault of Seller or its agents or representatives or
breach of this Agreement; (ii) is disclosed pursuant applicable Law, court or
governmental order after prior notice to Buyer; or (iii) is disclosed by Seller
with Buyer's prior written consent. Seller will have the burden of proving the
applicability of any provision of this Section 5.5(b) to any particular set of
facts.
(c) The term "CONFIDENTIAL INFORMATION" means information that
the Seller or Altek have not disclosed to the public or to the trade with
respect to Altek's present or future business, operations, services, products,
research, inventions, discoveries, drawings, designs, plans, processes, models,
technical information, facilities, methods, trade secrets, copyrights, software,
source code, systems, patents, procedures, manuals, specifications, any other
intellectual property, confidential reports, price lists, pricing formulas,
customer lists, financial information (including the revenues, costs, or profits
associated with any of Buyer's or Altek's products or services), business plans,
lease structure, projections, prospects, opportunities or strategies,
acquisitions or mergers, advertising or promotions, personnel matters, legal
matters, any other confidential and proprietary information, and any other
information not generally known outside Altek that may be of value to Altek but
excludes any information already properly in the public domain. "CONFIDENTIAL
INFORMATION" also includes confidential and proprietary information and trade
secrets that third parties entrust to Seller or Altek in confidence.
SECTION 5.6 PUBLIC DISCLOSURE.
Notwithstanding anything herein to the contrary, each of the parties agrees
that, except as may be required to comply with the requirements of any Law and
the rules and regulations of any stock exchange or automated quotation system
upon which the securities of either of the parties is listed, any press release
or similar public announcement or communication to be made at or after Closing
made concerning the execution or performance of this Agreement will be
specifically approved in advance by Seller and Buyer and, after Closing, none of
the parties hereto shall make any other disclosure or permit any of their
respective Affiliates to make any disclosure of the subject matter of this
Agreement unless previously approved by Buyer.
32
SECTION 5.7 NON-COMPETITION.
As further consideration for the purchase and sale of the Shares and the other
transactions contemplated by this Agreement, Seller covenants and agrees with
Buyer that it shall not:
(a) until the later of: (i) five (5) years following the
Closing Date or (ii) the date the Distribution Agreement is terminated, for any
reason whatsoever, directly or indirectly, for itself or on behalf of or in
conjunction with any other Person engage, in the areas of the world where Altek
is engaged in the Business in any capacity on the Closing Date (the
"TERRITORY"), as a stockholder, owner, partner, member, joint venturer or
investor in any business that manufactures any product, or in manufacturing any
product, that competes directly or indirectly or is reasonably likely to compete
directly or indirectly with any product of the Business of Altek as the same
exists on the Closing Date; and
(b) for a period of two (2) years after Closing, call upon,
solicit, employ or hire away any Person who is, at that time, within the
Territory, or was on the Closing Date, an employee, contractor, subcontractor,
independent consultant, sales representative or vendor of Altek or Buyer for the
purpose or with the intent of enticing such employee away from Altek or Buyer,
provided, however, that the limitations contemplated by this Section 5.7 shall
not apply to any employee of Altek or Buyer who is terminated by Altek or Buyer
or is not a Retained Employee (hereinafter defined in Section 6.1).
For purposes of this Section 5.7, the term "Buyer" means Buyer and all current
and future Affiliates of Buyer directly or indirectly engaged in the Business.
SECTION 5.8 LITIGATION.
Seller shall consult with Buyer regarding the defense of any proceedings or
litigation against Seller, Altek and/or any of Altek's directors relating to the
transactions contemplated by this Agreement. In the event that a Claim is
asserted against any of the parties hereto or any of their respective
Affiliates, relating to, based in whole or in part on events or conditions
occurring or existing in connection with, or arising out of the Transaction.
Each party hereto agrees to cooperate in all reasonable manners with the other
parties hereto in the defense of any such Claim.
SECTION 5.9 ACCOUNTS RECEIVABLE.
(a) Buyer agrees to use commercially reasonable efforts for thirty (30) days
following the Closing Date to collect the accounts receivable listed on Schedule
5.9(a). In the event that all accounts receivable set forth on Schedule 5.9(a)
are not collected in full within thirty (30) days after the Closing, then Buyer
shall assign to Seller all of Buyer's rights with respect to such receivables
not so collected and shall also thereafter promptly remit to Seller any excess
collections received by it with respect to such assigned receivables; provided,
however, that, at the end of the thirty (30) day period,
33
Buyer shall retain all rights to the account for Xxxxx Instruments listed on
Schedule 5.9(a).
(b) In the event that all accounts receivable of Altek as of
the Closing Date other than those accounts receivable listed on Schedule 5.9(a)
are not collected in full within ten months after the Closing then, at Buyer's
request, Seller shall pay to Buyer an amount equal to the receivables not so
collected (net of reserves specifically applicable thereto and set forth on the
Closing Balance Sheet), and upon receipt of such payment Buyer shall assign to
the Seller all of Buyer's rights with respect to the uncollected accounts
receivable giving rise to the payment and shall also thereafter promptly remit
any excess collections received by it with respect to such assigned receivables.
SECTION 5.10 NOTIFICATION OF CERTAIN MATTERS.
Each party hereto shall give prompt notice to the other parties hereto of (a)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing, or which, individually or in the aggregate, could result in a Material
Adverse Effect, and (b) any material failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
such party hereunder. The delivery of any notice pursuant to this Section 5.10
shall not, without the express written consent of each of the other parties
hereto (which consent may be withheld in their respective sole discretion) be
deemed to (x) modify the representations, warranties, covenants or agreements
hereunder of the party delivering such notice, (y) cure or prevent any such
inaccuracy or failure, or (z) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 5.11 WORKING CAPITAL COMMITMENT.
For a period of two years after the Closing Date, Seller shall maintain a new or
existing line of credit extended by a lender or lenders acceptable to Buyer in
the minimum amount of Ten Million Dollars ($10,000,000). This line of credit
shall be available for use as working capital to fund the ongoing business and
operations of Seller.
SECTION 5.12 EXCLUDED EQUIPMENT.
Prior to or at the Closing, Altek shall assign to Seller its valid title to, and
rights in, the equipment listed and described on Schedule 5.12 ("EXCLUDED
EQUIPMENT" ). Buyer acknowledges such assignment and agrees that the Purchase
Price set forth herein reflects the value of the Business excluding the Excluded
Equipment.
34
ARTICLE VI. CERTAIN COVENANTS
SECTION 6.1 EMPLOYEES.
Buyer and Seller agree and acknowledge that Seller will lease the employees
currently working in the Business to Buyer after Closing under the terms and
conditions set forth in the Transition Agreement attached hereto as Exhibit A.
SECTION 6.2 LEASE AGREEMENT.
Buyer and Seller hereby acknowledge that the Buyer does not intend to use or
occupy the space that the Business currently occupies beyond the period
described in the Transition Agreement attached hereto as Exhibit A and which
space is currently subleased to Altek by the Seller pursuant to an oral lease
the terms of which are described on Schedule 3.17 ("SUBLEASE"). Buyer hereby
agrees, because it does not intend to occupy such space other than as set forth
in the Transition Agreement, to pay the Seller Five Hundred Thousand Dollars
($500,000) at the Closing. Upon receipt and in consideration for such funds,
Seller will release, indemnify, defend and hold Buyer and Altek harmless under
Article 8 of this Agreement from all current and future obligations relating to
the Sublease and the Leases for the Business Real Property described on Schedule
3.17.
ARTICLE VII. CLOSING DELIVERIES
SECTION 7.1 DELIVERIES BY THE SELLER.
Upon the terms and subject to the conditions contained herein, Seller shall
deliver to Buyer the following at the Closing, the delivery of any of which may
be waived in writing by Buyer:
(a) one or more certificates or other instruments evidencing
all of the Shares, duly endorsed in blank for transfer or duly executed stock
powers, assignments, in form and substance reasonably acceptable to Buyer and
Seller, and any other documents that are necessary to Deliver to Buyer good and
marketable title to the Shares free and clear of all Encumbrances;
(b) all minute books, certificates and corporate records and
documents relating to the Business, including all Books and Records (which shall
only include the Books and Records of Altek and not of the Seller, or any of its
divisions or affiliates, licenses and Permits;
(c) certified copies of resolutions duly adopted by the board
of directors of each of Altek and Seller authorizing the execution, delivery and
performance of this Agreement and all other agreements contemplated hereby;
(d) a certificate executed by the Secretary of Altek
certifying that attached thereto are (A) a true and complete copy of the
certificate of incorporation of Altek, as in
35
effect on the Closing Date, (B) a true and complete copy of the bylaws of Altek,
as in effect on the Closing Date, and (C) specimen signatures of the officers
Altek authorized to sign this Agreement and the other documents contemplated
hereby;
(e) a subsistence certificate of Altek certified by the
Secretary of State of the State of New York as of the date not more than five
(5) days prior to the Closing Date;
(f) a duly executed copy of the Transition Agreement
describing the agreement of Seller and Buyer regarding the operation of the
Business during the transition period, in the form of Exhibit A;
(g) a duly executed copy of the Distribution Agreement
describing the distribution of Seller and its Affiliates of products of the
Business, in the form of Exhibit B;
(h) the opinion of counsel of Seller and Altek dated as of the
Closing Date and in the form of Exhibit C;
(i) satisfactory evidence of the resignation of any directors
or officers of Altek as may be requested by Buyer;
(j) duly executed assignments or, where necessary,
subcontracts, subleases or sublicenses, in form and substance reasonably
acceptable to Buyer and Seller, Delivering to Buyer all Contracts, Licenses and
Leases;
(k) all UCC-3 termination statements for all filed UCC-1
financing statements related to indebtedness of Altek or the Assets, each duly
executed by the applicable lienholder and in a form proper to be filed with the
appropriate Governmental Entity, and all other necessary release documents for
all Encumbrances on the Assets and the Shares, each duly executed by the
appropriate lienholder;
(l) if requested by Buyer, evidence that, to the extent
requested by Buyer, Altek has terminated its participation in any Benefit Plan,
Benefit Arrangement or other such contract substantially contemporaneously with
the Closing;
(m) except as otherwise contemplated by this Agreement and the
Closing Documents, properly executed agreements or other documentation
transferring the patents, trademarks, licenses and other Intellectual Property
used by Altek in the Business from Seller to Altek;
(n) evidence that any contracts to which any current or former
officer, director, stockholder, member, manager, employee or Affiliate of Altek
is a party, which Buyer requests Altek to terminate, have in fact been
terminated at no cost or expense to Altek;
36
(o) evidence that all consents of and filings with any Person
(including Required Consents), necessary and advisable in connection with the
Transaction have been obtained or made, as applicable;
(p) evidence that the oral lease between Altek and Seller for
the Business Real Property has in fact been terminated at no cost or expense to
Buyer and Altek other than as provided in Section 6.2 herein; and
(q) such other instruments or documents, in form and substance
reasonably acceptable to Buyer and Seller, as may be necessary to effect Closing
or to vest in Buyer good, valid, insurable and marketable title in and to the
Shares free and clear of all Encumbrances.
SECTION 7.2 CLOSING DELIVERIES OF BUYER.
Upon the terms and subject to the conditions contained herein, Buyer shall
deliver to Seller the following at the Closing, the delivery of any of which may
be waived in writing by Seller:
(a) the Purchase Price to be delivered to Seller at Closing in
federal funds by wire transfer to an account or accounts designated by Seller
prior to Closing;
(b) evidence that all consents of and filings with any Person,
necessary and advisable in connection with the Transaction have been obtained or
made, as applicable;
(c) a duly executed copy of the Transition Agreement
describing the agreement of Seller and Buyer regarding the operation of the
Business during the transition period, in the form of Exhibit A;
(d) a duly executed copy of the Distribution Agreements
describing the distribution of Seller and its Affiliates of products of the
Business, in the form of Exhibit B; and
(e) certified copies of resolutions duly adopted by the board
of directors of Buyer authorizing the execution, delivery and performance of
this Agreement and all other agreements contemplated hereby;
(f) a good standing certificate of Buyer certified by the
Secretary of State of the State of Washington as of the date not more than five
(5) days prior to the Closing Date; and
(g) such other instruments or documents, in form and substance
reasonably acceptable to Seller and Buyer, as may be necessary to effect the
Closing.
37
ARTICLE VIII. INDEMNIFICATION; REMEDIES
SECTION 8.1 INDEMNIFICATION BY SELLER.
(a) Subject to the further provisions of this Article VIII,
Seller shall indemnify, defend, protect and hold harmless Buyer, Buyer's
Affiliates, and their respective directors, officers, shareholders, partners,
attorneys, accountants, agents and employees, and their heirs, successors and
assigns (collectively, the "BUYER INDEMNIFIED PARTIES"), from, against and in
respect of all Losses imposed on, sustained, incurred or suffered by or asserted
against any of the Buyer Indemnified Parties, directly or indirectly relating to
or arising out of any of the following (collectively, "BUYER LOSSES"):
(i) any fact or circumstance that constitutes a
misrepresentation, breach or inaccuracy of any representation or warranty of
Seller contained herein or in any Schedule, agreement, certificate or other
document delivered by or on behalf of Seller in connection herewith;
(ii) any act or omission that constitutes a
nonfulfillment or breach of any covenant or agreement of Seller contained herein
or in any Schedule, agreement, certificate or other document delivered by or on
behalf of Seller in connection herewith;
(iii) any act or omission of Seller prior to Closing
that constituted a violation, conflict, breach of or default under (or omission
or commission of any action, condition or event which, after notice or lapse of
time or both, would result in any violation, conflict or breach of or default
under) any Contract or License or Law;
(iv) any obligations associated with the Dresser,
Washnis and Clarridge disputes disclosed on Schedule 3.10(a) attached hereto
before, on or after the Closing Date;
(v) all obligations associated with the lease and
sublease for the Business Real Property as described in Section 6.2;
(vi) any obligations owed to any broker, finder or
investment bank under any written or oral arrangement or agreement for any
brokerage, finders or other fee or commission in connection with the negotiation
or consummation of the Transaction before, on or after the Closing Date;
(vii) any of the operations, assets, actions or
omissions of any of Seller's businesses, other than the Business, before, on or
after the Closing Date;
(viii) for Taxes or any Liability of Altek to make
payments to or indemnify any other person with respect to Taxes, in each case:
(a) for any taxable period or portion thereof ending on or before the Closing
Date, except to the extent of any Taxes reserved for on the Closing Balance
Sheet, or (b) as a transferee or successor, by contract, or
38
otherwise as a result of transactions, contracts or arrangements occurring or
entered into on or before the Closing Date;
(ix) any act or omission of Seller prior to Closing
that creates Liability to a third party or Buyer other than as contemplated by
Section 8.1(a)(iii).
(b) As used herein, "SPECIAL BUYER LOSS" means a Buyer Loss
that arises out of (i) breaches of the covenants of Seller set forth in this
Agreement or any documents, agreement instrument or certificate delivered by
Seller or Altek in connection herewith, or (ii) the misrepresentation, breach or
inaccuracy of the representations and warranties contained in Sections 3.1
(Organization and Power), 3.2 (Corporate Authorization), 3.5 (Capitalization),
3.8 (Stock, Assets, Title), 3.12 (Employee Benefits), 3.13 (Environmental
Matters) and 3.20 (Taxes) (but not any other representation or warranty) or (ii)
described in Section 8.1(a)(iii)-(ix). Notwithstanding the provisions of Section
8.1(a):
(i) Seller will not be liable for any Buyer Loss,
including a Special Buyer Loss, unless a Buyer Indemnified Party gives Seller
notice of a claim for indemnification therefor within the applicable survival
period provided by Section 8.3;
(ii) Seller will not be liable for any Buyer Losses
other than Special Buyer Losses, unless and until the aggregate amount of Buyer
Losses shall exceed $200,000 ("INDEMNIFICATION THRESHOLD"), and then Seller (or
Altek, as applicable) will be liable for all Buyer Losses incurred by the Buyer
Indemnified Parties;
(iii) in no event will Seller's aggregate Liability
for all Buyer Losses that are not Special Buyer Losses exceed $5,000,000
("INDEMNIFICATION CAP") (it being understood that the limitation provided by
this Section 8.1(b)(iii) does not apply to Special Buyer Losses);
(iv) Seller will not be liable for any Buyer Loss,
including a Special Buyer Loss, to the extent that such Buyer Loss is reflected
in the Reduction Amount.
SECTION 8.2 INDEMNIFICATION BY BUYER.
(a) Subject to the further provisions of this Article VIII,
Buyer will indemnify, defend and hold harmless Seller, Seller's Affiliates, and
their respective directors, officers, shareholders, partners, attorneys,
accountants, agents and employees, and their heirs, successors and assigns
(collectively, the "SELLER INDEMNIFIED PARTIES"), from, against and in respect
of any Losses imposed on, sustained, incurred or suffered by or asserted against
any of the Seller Indemnified Parties, directly or indirectly relating to or
arising out of any of the following (collectively, "SELLER LOSSES"):
39
(i) any fact or circumstance that constitutes a
misrepresentation, breach or inaccuracy of any representation or warranty of
Buyer contained herein or in any Schedule, agreement, certificate or other
document delivered by or on behalf of Seller in connection herewith; and
(ii) any act or omission that constitutes a
nonfulfillment or breach of any covenant or agreement of Seller contained herein
or in any Schedule, agreement, certificate or other document delivered by or on
behalf of Seller in connection herewith any fact or circumstance that
constitutes a breach of any representation or warranty of Buyer contained
herein.
(b) Notwithstanding the provisions of Section 8.2(a):
(i) Buyer will not be liable for any Seller Loss
unless a Seller Indemnified Party gives Buyer notice of a claim for
indemnification therefor within the applicable survival period provided by
Section 8.3;
(ii) Buyer will not be liable for any Buyer Losses
unless and until the aggregate amount of Buyer Losses exceeds the
Indemnification Threshold and then Buyer will be liable for all Seller Losses
incurred by the Seller Indemnified Parties; and
(iii) in no event will Buyer's aggregate Liability
for all Buyer Losses exceed the Indemnification Cap.
(iv) Buyer will not be liable for any Seller Loss to
the extent that such Seller Loss is reflected in the Increase Amount.
SECTION 8.3 SURVIVAL AND EXPIRATION OF REPRESENTATIONS, WARRANTIES AND
COVENANTS.
(a) All representations, warranties and covenants made by
Buyer and Seller in or pursuant to this Agreement or in any agreement, Schedule
or certificate delivered pursuant hereto shall be deemed to have been made on
the date of this Agreement (except as otherwise provided herein) and, if a
Closing occurs, as of the Closing Date.
(b) The representations and warranties of Buyer shall survive
the Closing and shall expire on the second anniversary of the Closing Date;
provided, however, that if the Seller makes a claim within such applicable
survival period as contemplated by Section 8.2(b)(i), the Buyer will still be
obligated to indemnify the Seller with respect to such claim and the specific
representation and warranty subject to such claim shall survive until the final
resolution of such pending claim, but only for such claim and no others not made
before the applicable survival period. The representations and warranties of
Seller shall survive the Closing and shall expire on the applicable dates
specified in clause (i) or (ii) of this Section 8.3(b):
40
(i) (1) except as to representations and warranties
specified in clause (i)(2) or (i)(3) of this Section 8.3(b),
the second anniversary of the Closing Date; provided, however,
that if the Buyer makes a claim within such applicable
survival period as contemplated by Section 8.1(b)(i), the
Seller will still be obligated to indemnify the Buyer with
respect to such claim and the specific representation and
warranty subject to such claim shall survive until the final
resolution of such pending claim, but only for such claim and
no others not made before the applicable survival period; and
(2) with respect to Sections 3.1
(Organization and Power), 3.2 (Corporate Authorization) 3.5 (Capitalization) and
3.8 (Stocks, Assets and Title) or other provisions relating to the title to the
Shares, indefinitely; and
(3) with respect to representations and
warranties contained in Sections 3.13 (environmental matters), 3.12 (employee
benefit plans) and 3.20 (taxes), the lesser of the date that is three (3) months
after the expiration of the statute of limitations applicable to such claim, or
ten (10) years after the Closing Date;
(c) All covenants and indemnification obligations of the
parties (whether made herein or in any other agreement or document contemplated
hereby) that are to be performed in whole or in part after Closing shall survive
the Closing, continue in effect and expire in accordance with their respective
terms.
(d) Notwithstanding anything to the contrary herein, the right
of any party hereto to indemnification, payment of Losses or other remedies will
not be affected in any way by any investigation conducted or knowledge acquired
at any time by such party with respect to the accuracy or inaccuracy of or
compliance with or performance of, any representation, warranty, covenant,
agreement or obligation or by waiver of any condition.
SECTION 8.4 INDEMNIFICATION PROCEDURES.
(a) All Claims for indemnification by any Indemnified Party
will be asserted and resolved as set forth in this Section 8.4. In the event
that any written Claim or demand for which an Indemnifying Party would be liable
to any Indemnified Party hereunder is asserted against or sought to be collected
from any Indemnified Party by a third party, such Indemnified Party will
promptly, but in no event more than fifteen (15) days following such Indemnified
Party's receipt of such Claim or demand, notify the Indemnifying Party of such
Claim or demand and the amount or the estimated amount thereof to the extent
then feasible (which estimate will not be conclusive of the final amount of such
Claim or demand) (the "CLAIM NOTICE").
(b) The Indemnifying Party will have thirty (30) days from the
personal delivery or mailing of the Claim Notice (the "NOTICE PERIOD") to notify
the Indemnified Party (a) whether or not the Indemnifying Party disputes the
liability of the Indemnifying Party to the Indemnified Party hereunder with
respect to such claim or demand and (b) whether or not it desires to defend the
Indemnified Party against such claim
41
or demand. All reasonable costs and expenses incurred by the Indemnifying Party
in defending such claim or demand will be a Liability of, and will be paid by,
the Indemnifying Party, subject to the respective limitations set forth in
Sections 8.1(b) and 8.2(b). In the case an objection is made in writing in
accordance with this Section 8.4(b), the Indemnified Party shall have thirty
(30) days to respond in a written statement to the objection. If after such
thirty (30) day period there remains a dispute as to any Claims, the parties
shall attempt in good faith for thirty (30) days to agree upon the rights of the
respective parties with respect to each of such Claims.
(c) Except as provided in Section 8.4(d), in the event that
the Indemnifying Party notifies the Indemnified Party within the Notice Period
that it desires to defend the Indemnified Party against such claim or demand,
the Indemnifying Party will have the right to defend the Indemnified Party by
appropriate proceedings with counsel of the Indemnifying Party's choosing, and
will have the sole power to direct and control such defense. If any Indemnified
Party desires to participate in any such defense it may do so at its sole cost
and expense.
(d) If the Indemnifying Party elects not to defend the
Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided by Section 8.4(a) or otherwise, then
the portion of any such claim or demand as to which the defense by the
Indemnified Party is unsuccessful (and the reasonable costs and expenses
pertaining to such defense) will be the Liability of the Indemnifying Party
hereunder, subject to the respective limitations set forth in Sections 8.1(b)
and 8.2(b). The Indemnified Party will use commercially reasonable efforts in
the defense of all such claims.
(e) The Indemnified Party will not settle a claim or demand
without the consent of the Indemnifying Party, which consent will not be
unreasonably withheld. The Indemnifying Party will not, without the prior
written consent of the Indemnified Party, settle, compromise or offer to settle
or compromise any such claim or demand on a basis that would result in the
imposition of a consent order, injunction or decree that would restrict the
future activity or conduct of the Indemnified Party or any Affiliate thereof.
(f) To the extent that the Indemnifying Party directs,
controls or participates in the defense or settlement of any third party claim
or demand, the Indemnified Party will give the Indemnifying Party and its
counsel, during normal business hours, access to the relevant business records
and other documents, and will permit them to consult with the employees and
counsel of the Indemnified Party.
(g) All amounts paid by Seller or Buyer, as the case may be,
under this Article VIII will be treated as adjustments to the Purchase Price for
Tax purposes.
SECTION 8.5 SOLE REMEDY.
The rights and remedies expressly provided by this Article VIII will constitute
the sole and exclusive basis for and means of recourse between the parties with
respect to the subject matter hereof, and Buyer and Seller each expressly waives
any and all other rights
42
or causes of action with respect to the subject matter hereof that it may have
against the other party now or in the future under any Law; provided, however,
that equitable relief, including the remedies of specific performance and
injunction, will be available with respect to the breach of any covenant or
agreement to be performed after Closing insofar as and to the extent that such
relief would be available under any Law. Without limiting the generality of the
foregoing, each party acknowledges that this Article VIII provides its sole
remedy with respect to any Losses arising under or in connection with this
Agreement or the Transaction. Notwithstanding the foregoing, the remedies and
means of recourse between the parties with respect to the subject matter of each
Ancillary Agreement is provided by such Ancillary Agreement and not by this
Agreement.
ARTICLE IX. IN GENERAL
SECTION 9.1 NOTICES.
All notices or other communications given hereunder will be deemed to have been
duly given and made if in writing and if served by personal delivery upon the
party for whom it is intended, if delivered by registered or certified mail,
postage prepaid, or by a national courier service, or if sent by telecopier
(with confirmation of receipt), to the party at the address set forth below, or
such other address as may be designated in writing hereafter, in the same
manner, by such party:
If to Seller: Transmation, Inc.
00 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxxx, President and CEO
Fax: (000) 000-0000
with a copy to: Xxxxxx, Xxxxxxx & Xxxxx LLP
0000 Xxxxxx & Xxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to Buyer: Fluke Electronics Corp.
c/x Xxxxxxx Corporation
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
00xx Xxxxx
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
with copies to: Fluke Electronic Corp.
0000 Xxxxxx Xxxx.
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxx, Esq.
Fax: (000) 000-0000
43
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx Xxxxxx, Esq.
Fax: (000) 000-0000
SECTION 9.2 AMENDMENT; WAIVER.
Any provision of this Agreement may be amended or waived if such amendment or
waiver is in writing and signed, in the case of an amendment, by Buyer and
Seller, or in the case of a waiver, by the party against whom the waiver is to
be effective. No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided will be cumulative and, except as otherwise expressly provided herein,
not exclusive of any rights or remedies provided by Law.
SECTION 9.3 SUCCESSORS AND ASSIGNS.
Neither party may assign any of its rights or delegate any of its obligations
under this Agreement, by operation of law or otherwise, without the prior
written consent of the other party, and any attempt to assign this Agreement
without such consent will be void and of no force or effect. Such Assignment
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, heirs and legal representatives; provided, however,
that Buyer may assign any or all of its rights, obligations or liabilities
hereunder to any of its Affiliates, and provided further that Buyer may assign
any or all of its rights and obligations under this Agreement to any party that
merges with or acquires all or substantially all of the stock or assets of
Buyer. Without limiting the generality of the foregoing, nothing in this
Agreement creates any rights in any employees or groups of employees.
SECTION 9.4 EXPENSES.
Buyer will pay and be solely responsible for all of the fees, expenses and
disbursements of Buyer and its agents, representatives, accountants and counsel
incurred in connection with this Agreement and the transactions contemplated
hereby, including without limitation negotiation, legal, travel and due
diligence expenses. Seller (and not Altek) will pay and be solely responsible
for all of the fees, expenses and disbursements of the Seller and Altek and
their agents, representatives, financial advisers, accountants and counsel
incurred in connection with this Agreement and the transactions contemplated
hereby, including without limitation negotiation, legal, travel and due
diligence expenses.
SECTION 9.5 SCHEDULES.
(a) Any matter disclosed on any Schedule will only be deemed
to be disclosed in connection with (i) the specific representations and
warranties to which such
44
Schedule is expressly referenced, (ii) any specific representations and
warranties that expressly cross-reference such Schedule, and (iii) any specific
representations and warranties or other Schedules to which such Schedule is
expressly referenced. The disclosure of any matter in any Schedule will
expressly not be deemed to constitute an admission by Seller or Buyer, or
otherwise to imply, that any such matter is material for the purposes of this
Agreement.
(b) The contents of the Schedules will not vary, change or
alter the language or substance of the representations and warranties contained
in this Agreement.
(c) Seller will promptly update each Schedule as necessary on
or before the Closing Date and deliver the same to Buyer.
(d) Buyer's rights to indemnification or other remedy provided
by Article VIII based on any breach by Seller of its representations,
warranties, covenants and agreements will not be affected by any investigation
conducted with respect to, or any knowledge acquired (or capable of being
acquired) by Buyer at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant or
agreement. The due diligence review conducted by Buyer and/or its
representatives will not relieve Seller of any duties concerning its
representations, warranties, covenants or agreements contained in this Agreement
or in any Ancillary Agreement.
SECTION 9.6 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM.
This Agreement will be governed by and construed in accordance with the Laws of
New York without regard to its principles of conflicts of laws. Each party
agrees that it will bring any action or proceeding in respect of any Claim
arising out of or related to this Agreement, the Transaction or any Ancillary
Agreement, whether in tort or contract or at law or in equity, exclusively in
the U.S. District Court for the Southern District of New York, sitting in New
York County, New York (the "CHOSEN COURT") and, solely in connection with Claims
arising out of or related to this Agreement, the Transaction or any Ancillary
Agreement, (a) irrevocably submits to the exclusive jurisdiction of the Chosen
Court, (b) waives any objection to laying venue in any such action or proceeding
in the Chosen Court, (c) waives any objection that the Chosen Court is an
inconvenient forum or do not have jurisdiction over any party, and (d) agrees
that service of process in person or by certified or registered U.S. mail to its
address set forth in Section 9.1 will constitute valid in personam service upon
such party and its successors and assigns in any action or proceeding with
respect to any matter as to which it has submitted to jurisdiction hereunder.
EACH PARTY HEREBY ACKNOWLEDGES THAT THIS IS A COMMERCIAL TRANSACTION, THAT THE
FOREGOING PROVISIONS FOR CONSENT TO JURISDICTION AND SERVICE OF PROCESS HAVE
BEEN READ, UNDERSTOOD AND VOLUNTARILY AGREED TO BY SUCH PARTY AND THAT BY
AGREEING TO SUCH PROVISIONS SUCH PARTY IS WAIVING IMPORTANT LEGAL RIGHTS.
45
SECTION 9.7 INFERENCES.
Inasmuch as this Agreement is the result of negotiations between sophisticated
parties of equal bargaining power represented by counsel, no inference in favor
of or against either party will be drawn from the fact that any portion of this
Agreement has been drafted by or on behalf of such party.
SECTION 9.8 SEVERABILITY.
The provisions of this Agreement will be deemed severable and the invalidity or
unenforceability of any provision will not affect the validity or enforceability
of the other provisions hereof. If any provision of this Agreement, or the
application thereof to any Person or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision will be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision, and (b) the
remainder of this Agreement and the application of such provision to other
Persons or circumstances will not be affected by such invalidity or
unenforceability, nor will such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
SECTION 9.9 ENTIRE AGREEMENT.
This Agreement, including the Exhibits, the Schedules, the Ancillary Agreements
and the other Closing Documents, contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such matters.
SECTION 9.10 HEADINGS.
The heading references herein and the tables hereto are for convenience purposes
only, do not constitute a part of this Agreement and will not be deemed to limit
or affect any of the provisions hereof.
SECTION 9.11 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which will
be deemed an original, and all of which will constitute one and the same
Agreement.
SECTION 9.12 BROKERS AND AGENTS.
Except as set forth on Schedule 3.15, Buyer and Seller each represent and
warrant to the other that it has not employed any broker, finder or agent in
connection with the transactions contemplated by this Agreement and agrees to
indemnify the other against all Losses relating to or arising out of claims for
fees or commission of any broker, finder or agent employed or alleged to have
been employed by such indemnifying party.
46
SECTION 9.13 SPECIFIC PERFORMANCE; REMEDIES.
Each party hereto acknowledges that the other parties will be irreparably harmed
and that there will be no adequate remedy at law for any violation by any of
them of any of the covenants or agreements contained in Sections 5.5, 5.6 or 5.7
of this Agreement. It is accordingly agreed that, in addition to any other
remedies which may be available upon the breach of any such covenants or
agreements, each party hereto shall have the right to obtain injunctive relief
to restrain a breach or threatened breach of, or otherwise to obtain specific
performance of, the other parties, covenants and agreements contained in this
Agreement.
SECTION 9.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS.
No provision of this Agreement is intended, nor will be interpreted, to provide
or to create any third party beneficiary rights or any other rights of any kind
in any client, customer, Affiliate, stockholder, officer, director, employee,
partner of any party hereto or any other Person, other than the parties hereto.
[signature page follows]
47
IN WITNESS WHEREOF, the parties have duly executed this Stock Purchase
Agreement as of the date first above written.
TRANSMATION, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxxxxx
President
ALTEK INDUSTRIES CORP.
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxxxxx
President
FLUKE ELECTRONICS CORP.
By: /s/ Xxxxxxxxxxx X. XxXxxxx
--------------------------------
Xxxxxxxxxxx X. XxXxxxx
Vice President and Secretary
48
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Transition Agreement
Exhibit B Form of Distribution Agreement
EXHIBIT C FORM OF LEGAL OPINION OF COUNSEL TO SELLER
Schedule 1.2(f) Persons Having Knowledge of Seller and Altek IP;
Persons having knowledge on Behalf of Buyer
Schedule 2.3 Closing Balance Sheet
Schedule 3.1 Qualifications To Do Business
Schedule 3.3 Required and Third Party Approvals
Schedule 3.4 No Conflicts
Schedule 3.7 Financial Statements
Schedule 3.7(a) Certain Liabilities
Schedule 3.8 Stock; Assets; Title
Schedule 3.9 Compliance with Laws
Schedule 3.10(a) Litigation and Claims
Schedule 3.10(b) Orders and Judgments
Schedule 3.11(b) Intellectual Property
Schedule 3.11(c) IP Infringement
Schedule 3.12(a) Employee Benefits: Plans
Schedule 3.12(b) Employees
Schedule 3.13 Environmental Matters
Schedule 3.14 Contracts
Schedule 3.15 Finders' Fees
Schedule 3.16 Subsequent Changes
Schedule 3.17 Leases
Schedule 3.19 Product Warranty
Schedule 3.23 Material Permits
Schedule 3.25 Significant Customers and Suppliers
Schedule 3.26 Insurance
Schedule 3.27 Bank Accounts
Schedule 3.29 Backlog
Schedule 5.4(a) Assigned Intellectual Property
Schedule 5.4(c) Licensed Marks
Schedule 5.9(a) Assigned Accounts Receivable
Schedule 5.12 Excluded Equipment
49
INDEX OF DEFINED TERMS
AFFILIATES ...................................................... 1
AGREEMENT ....................................................... 1
Altek ........................................................... 1
ANCILLARY AGREEMENTS ............................................ 1
Article ......................................................... 5
Assets .......................................................... 12
Assigned Intellectual Property .................................. 30
BASELINE NET EQUITY ............................................. 8
Benefit Arrangement ............................................. 16
Benefit Plan .................................................... 17
BOOKS AND RECORDS ............................................... 2
BUSINESS ........................................................ 1
Business Real Property .......................................... 21
Buyer ........................................................... 2
BUYER INDEMNIFIED PARTIES ....................................... 37
BUYER LOSSES .................................................... 00
Xxxxxx Xxxxx .................................................... 45
Claim ........................................................... 2
CLAIM NOTICE .................................................... 41
CLOSING ......................................................... 2
Closing Balance Sheet ........................................... 2, 7
CLOSING DATE .................................................... 8
CLOSING DOCUMENTS ............................................... 2
CLOSING NET EQUITY .............................................. 7
CODE ............................................................ 2
CONFIDENTIAL INFORMATION ........................................ 2
CONTINUATION COVERAGE ........................................... 2
CONTRACTS ....................................................... 19
Conveyance Taxes ................................................ 29
Copyrights ...................................................... 12
Deliver ......................................................... 2
DELIVERY ........................................................ 2
DISPUTE NOTICE .................................................. 7
dollars, $ ...................................................... 6
Domain Name ..................................................... 12
ENCUMBRANCES .................................................... 2
ENVIRONMENTAL LAW ............................................... 2
Environmental Permits ........................................... 18
ERISA ........................................................... 3
ERISA Affiliate ................................................. 17
Excluded Equipment .............................................. 34
Exhibit ......................................................... 5
FINANCIAL STATEMENTS ............................................ 3, 11
50
GAAP ............................................................ 3
GOVERNMENTAL AUTHORIZATIONS ..................................... 3
GOVERNMENTAL ENTITY ............................................. 3
herein, hereof, hereunder ....................................... 5
include, includes, including .................................... 6
Increase Amount ................................................. 8
Indemnification Cap ............................................. 38
Indemnification Threshold ....................................... 38
INDEMNIFIED PARTIES ............................................. 3
INDEMNIFYING PARTY .............................................. 3
Interim Balance Sheet ........................................... 11
Internet Sites .................................................. 13
Inventory ....................................................... 3
IRS ............................................................. 14
KNOWLEDGE ....................................................... 6
Law ............................................................. 3
Lease ........................................................... 20
Leased Real Property ............................................ 3
Leases .......................................................... 20
Liability ....................................................... 4
Licensed Xxxx ................................................... 30
Licenses ........................................................ 4
Licenses-In ..................................................... 13
Licenses-Out .................................................... 13
LOSSES .......................................................... 4
MATERIAL ADVERSE EFFECT ......................................... 4
Material Permits ................................................ 24
MATERIALS OF CONCERN ............................................ 4
NEUTRAL ACCOUNTANT .............................................. 7
NOTICE PERIOD ................................................... 41
ORDINARY COURSE ................................................. 4
Parent .......................................................... 1
party ........................................................... 6
Patents ......................................................... 12
Permits ......................................................... 24
PERMITTED ENCUMBRANCES .......................................... 4
PERSON .......................................................... 4
Pre-Closing Partial Period ...................................... 29
Pre-Closing Period .............................................. 28
Proprietary Rights .............................................. 13
Purchase Price .................................................. 7
Qualified Plans ................................................. 15
REAL PROPERTY ................................................... 4
Reduction Amount ................................................ 8
REQUIRED APPROVALS .............................................. 5
Schedule ........................................................ 5
51
Section ......................................................... 5
Seller .......................................................... 1
SELLER INDEMNIFIED PARTIES ...................................... 39
SELLER LOSSES ................................................... 39
September BALANCE SHEET ......................................... 3
Shares .......................................................... 5
Short Period .................................................... 28
Significant Customers ........................................... 24
Software ........................................................ 12
Special Buyer Loss .............................................. 38
Straddle Period ................................................. 28
TAX RETURNS ..................................................... 5
TAXES ........................................................... 5
Territory ....................................................... 32
third party ..................................................... 6
Third Party Approvals ........................................... 9
TPG ............................................................. 1
Trademarks ...................................................... 12
TRANSACTION ..................................................... 5
TRANSFER TIME ................................................... 5
Transmation Domain Name ......................................... 30
U.S ............................................................. 5
52
