Exhibit 10.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, is made and entered into as of this
15th day of July, 2005 by and between Spectrum PMI, Inc., a Delaware corporation
(the "Buyer"), on the one hand, and A-Xxxx Holding, Inc. ("A-Xxxx Holding") and
Xxxxxx X. Xxxxxxx ("Xxxxxxx," and together with A-Xxxx Holding, the "Sellers"),
on the other hand.
WHEREAS, A-Xxxx Holding owns all of the issued and outstanding
shares of capital stock of A-Xxxx Precious Metals, Inc., a New York corporation
(the "Company"), and Markoff indirectly owns all of the issued and outstanding
shares of capital stock of A-Xxxx Holding; and
WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer
desires to purchase from the Sellers, all of the issued and outstanding capital
stock of the Company, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each party, the
parties, intending legally to be bound, agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings set forth in this Article I:
1.1 "Affiliate" of any specified Person means any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
1.2 "Agreement" means this Agreement and all Exhibits and Schedules
annexed hereto, as the same may be amended, modified or supplemented from time
to time.
1.3 "AMF" means A-Xxxx Financial Corporation.
1.4 "Business" means the business of the Company as conducted on the
date hereof, including, without limitation, the purchase and sale of precious
metals on a wholesale basis and the provision of collateralized loan products
and trading services related to precious metals as currently conducted by the
Company.
1.5 "Business Day" means any day that is not a Saturday, Sunday or
legal holiday on which banks are authorized or required by Law to be closed in
New York, New York.
1.6 "Code" means the United States Internal Revenue Code of 1986, as
amended from time to time, or any successor statute or any analogous non-United
States Law.
1.7 "Consulting Agreements" means the consulting agreements between the
Company and each of Markoff and Xxxx Xxxxxxxx, which shall be effective as of
the Closing.
1.8 "Contract" means any agreement, contract, lease, obligation,
promise, commitment, license, note, loan, bond, mortgage, indenture, letter of
credit, pledge, binding bid, binding proposal, binding quotation, instrument or
undertaking, or series of the same, whether written or oral and whether express
or implied.
1.9 "Employment Agreements" means the employment agreements between the
Company and each of Xxxx Xxxxxxxx and Xxxx XxXxxx, which shall be effective as
of the Closing.
1.10 "Environment" means soil, surface water, ground water, land stream
sediments, surface or subsurface strata, ambient air, and any environmental
medium.
1.11 "Environmental Laws" means any and all Laws pertaining to the
protection of the Environment.
1.12 "Environmental Permit" means any Permit of any Governmental
Authority required or issued under Environmental Laws.
1.13 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any successor statute.
1.14 "Escrow Agent" means the entity designated to serve as escrow
agent under the Escrow Agreement.
1.15 "Escrow Agreement" means the Escrow Agreement among the Buyer, the
Sellers and the Escrow Agent, which shall be effective as of the Closing.
1.16 "Escrowed Amount" shall mean the sum of One Million Dollars
($1,000,000) to be deposited with the Escrow Agent and held in escrow pursuant
to the Escrow Agreement.
1.17 "Financial Statements" means (i) the 2004 Balance Sheet and the
audited consolidated balance sheet of the Company as of July 31, 2003, and (ii)
the audited consolidated statements of income, cash flow, and stockholders'
equity of the Company for each of the two (2) years ended July 31, 2004 and July
31, 2003, each of the foregoing of which have been prepared in accordance with
GAAP.
1.18 "GAAP" means United States generally accepted accounting
principles, consistently applied.
1.19 "Governmental Authority" means any United States or non-United
States governmental or regulatory entity, agency, authority, commission,
department, board, bureau, political subdivision, court, tribunal, official
arbitrator or arbitral body, or any other entity entrusted by the aforesaid
entities or authorized by Law to exercise administrative power.
2
1.20 "Hazardous Substances" means, without regard to amount or
concentration (a) any element, compound, gas or chemical that is defined, listed
or otherwise classified as a toxic pollutant, toxic or hazardous substance,
extremely hazardous substance or chemical, hazardous material, hazardous waste,
medical waste, biohazardous or infectious waste, or special waste under
applicable Environmental Laws; (b) petroleum, petroleum-based or
petroleum-derived products; and (c) any substance containing polychlorinated
biphenyls, asbestos, lead, urea formaldehyde or radon gas.
1.21 "Interim Financial Statements" means the (i) unaudited balance
sheet of the Company as of April 30, 2005 and (ii) the unaudited statements of
income, cash flow, and stockholders' equity of the Company for the period
commencing on August 1, 2004 and ending on April 30, 2005, each of the foregoing
of which have been prepared in accordance with GAAP.
1.22 "IRS" means the United States Internal Revenue Service.
1.23 "Knowledge" means actual knowledge after reasonable investigation.
The Knowledge of the officers and key employees of the Company shall be deemed
to be attributed to the Sellers for purposes of the representations and
warranties of the Sellers set forth in this Agreement.
1.24 "Law" means any United States or non-United States law (including
common law), statute, code, ordinance, rule, regulation, constitution, treaty,
judgment or decree.
1.25 "Lien" means any mortgage, lien, pledge, charge, claim, interest,
security interest, condition, restriction, option, Tax, liability, obligation or
other encumbrance of any kind or nature (whether matured or unmatured).
1.26 "Material" with respect to any agreement, obligation, liability or
transaction, should be construed to mean any agreement, obligation, liability or
transaction requiring (or potentially requiring) aggregate payments to or from
the Company of $50,000 or more.
1.27 "Material Adverse Change" means any effect or change that would be
materially adverse to the business, assets, properties, results, liabilities,
prospects, operations or condition (financial or otherwise) of the Company or
the Business taken as a whole, or to the ability of any party hereto to
consummate timely the transactions contemplated hereby.
1.28 "Net Book Value" of the Company means the excess of the Company's
total assets over the Company's total liabilities, determined in accordance with
GAAP, as reflected on the applicable balance sheet.
1.29 "Non-Competition Agreement" means the non-competition agreement
between Markoff, the Company and the Buyer, which shall be effective as of the
Closing.
1.30 "Order" means any order, execution, writ, injunction, judgment,
decree, ruling, assessment or arbitration award.
1.31 "Ordinary Course of Business" means the normal business operations
of the Company consistent with its past customs and practice (including with
respect to quantity, quality and frequency).
3
1.32 "Permit" means any permit, license, franchise, certificate,
certification, consent, approval, permission, registration, variance, or other
similar authorization.
1.33 "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization, Governmental Authority or any other entity.
1.34 "Pre-Closing Period" means all taxable periods ending on or before
the Closing Date and the portion ending on or before the Closing Date of any
taxable period that includes (but does not end on) the Closing Date.
1.35 "Proceeding" means any legal, administrative or other action,
arbitration, audit, claim, hearing, investigation, litigation, proceeding or
suit commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Authority.
1.36 "Related Documents" means the Employment Agreements, the
Consulting Agreements, the Non-Competition Agreement, the Release Agreement, the
Escrow Agreement, and all Schedules, certificates and other documents executed
and delivered or to be executed and delivered in connection with this Agreement.
1.37 "Release" means any past or present spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, depositing, escaping,
leaching, dumping, disposing or migration of a Hazardous Substance into the
Environment (including the abandonment or discharging of barrels, containers,
and other closed receptacles containing any Hazardous Substance).
1.38 "Release Agreement" means the release of Markoff in favor of the
Company, which shall be effective as of the Closing.
1.39 "Returns" means returns, reports, and information statements with
respect to Taxes required to be filed by the Company with any United States or
non-United States taxing authority.
1.40 "Taxes" means taxes, fees, levies, duties, tariffs, imposts and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes, payable to any United States or non-United States taxing authority,
including (i) income, franchise, profits, gross receipts, ad valorem, net worth,
value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, including any liability for taxes of any Person under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
Law), and (ii) interest, penalties, additional taxes and additions to tax
imposed with respect thereto.
1.41 "2004 Balance Sheet" means the audited consolidated balance sheet
of the Company as of July 31, 2004, which has been prepared in accordance with
GAAP.
1.42 Other Terms. In addition, definitions of the following terms are
assigned as indicated below:
"A-Xxxx Holding" has the meaning assigned in the introductory
paragraph.
4
"Arbitrated Closing Date Net Book Value" has the meaning assigned
in Section 2.4(b).
"Audited Closing Date Balance Sheet" has the meaning assigned in
Section 2.4(a).
"Audited Closing Date Net Book Value" has the meaning assigned in
Section 2.4(a).
"Bankruptcy Event" has the meaning assigned in Section 9.1(f).
"Basis Step-Up" has the meaning assigned on Schedule 2.2(a).
"Buyers" has the meaning assigned in the introductory paragraph.
"Buyer Indemnified Parties" has the meaning assigned in Section
10.2.
"Buyer Required Consents" has the meaning assigned in Section 4.3.
"Buy-Out Price" has the meaning assigned on Schedule 2.2(a).
"Claim" has the meaning assigned in Section 10.4(a).
"Closing" has the meaning assigned in Section 8.1.
"Closing Date" has the meaning assigned in Section 8.1.
"Closing Payment" has the meaning assigned in Section 2.2(a)(i).
"Company" has the meaning assigned in the recitals.
"Company Customer or Supplier" has the meaning assigned in
Section 6.2(c).
"Company Employee Plans" has the meaning assigned in Section
3.19(a).
"Company Software" has the meaning assigned in Section 3.15(h).
"Company Tax Returns" has the meaning assigned on Schedule 2.2(a).
"Competing Business" has the meaning assigned in Section 6.2(a).
"Copyrights" has the meaning assigned in Section 3.15(a)(i).
"Domain Names" has the meaning assigned in Section 3.15(a)(iv).
"Dispute" has the meaning assigned in Section 12.4(a).
"ERISA Affiliate" has the meaning assigned in Section 3.19(a).
"Estimated Closing Date Net Book Value" has the meaning assigned
in Section 2.3.
"Final Allocation" has the meaning assigned on Schedule 2.2(a).
"Final Closing Date Net Book Value" has the meaning assigned in
Section 2.5.
"Indemnitee" has the meaning assigned in Section 10.4(a).
"Indemnitor" has the meaning assigned in Section 10.4(a).
"Intellectual Property" has the meaning assigned in Section
3.15(a).
"Inventions" has the meaning assigned in Section 3.15(a)(vi).
5
"Know How" has the meaning assigned in Section 3.15(a)(vii).
"Leases" has the meaning assigned in Section 3.18(a).
"Leased Property" has the meaning assigned in Section 3.18(a).
"License" has the meaning assigned in Section 3.15(c).
"Losses" has the meaning assigned in Section 10.2.
"Markoff" has the meaning assigned in the introductory paragraph.
"Net Gross Profit" has the meaning assigned on Schedule 2.6.
"New Business" has the meaning assigned on Schedule 2.6.
"Noncompete Term" has the meaning assigned in Section 6.2(a).
"Owned Property" has the meaning assigned in Section 3.18(a).
"Patents" has the meaning assigned in Section 3.15(a)(ii).
"Payment Account" has the meaning assigned in Section 2.2(a)(i).
"Preliminary Closing Date Balance Sheet" has the meaning assigned
in Section 2.3.
"Purchase Price" has the meaning assigned in Section 2.2(a).
"Real Property" has the meaning assigned in Section 3.18(a)
"Real Property Permits" has the meaning assigned in Section
3.18(d).
"Related Person" has the meaning assigned in Section 3.23.
"Remaining Unutilized Basis Step-Up" has the meaning assigned on
Schedule 2.2(a).
"Required Consents" has the meaning assigned in Section 3.5.
"Restructuring" has the meaning assigned in Section 5.8.
"Securities Act" has the meaning assigned in Section 4.6.
"Sellers" has the meaning assigned in the introductory paragraph.
"Shares" has the meaning assigned in Section 2.1.
"Software" has the meaning assigned in Section 3.15(a)(viii).
"Spectrum" has the meaning assigned in the introductory paragraph.
"Step-Up Tax Benefits" has the meaning assigned on Schedule
2.2(a).
"Straddle Period" has the meaning assigned in Section 11.5.
"Tax Benefit Accountant" has the meaning assigned on Schedule
2.2(a).
"Tax Benefit Dispute Notice" has the meaning assigned on Schedule
2.2(a).
"Tax Benefit Dispute Notice Deadline" has the meaning assigned on
Schedule 2.2(a).
6
"Tax Benefit Report" has the meaning assigned on Schedule 2.2(a).
"Tax Benefit Statement" has the meaning assigned on Schedule
2.2(a).
"Tax Rate" has the meaning assigned on Schedule 2.2(a).
"Territory" has the meaning assigned in Section 6.2(a).
"338(h)(10) Election" has the meaning assigned on Schedule 2.2(a).
"Trademarks" has the meaning assigned in Section 3.15(a)(iii).
"Trade Secrets" has the meaning assigned in Section 3.15(a)(v).
"Unaffiliated Accountants" has the meaning assigned in Section
2.4(b).
"Work Interferences" has the meaning assigned in Section 3.21(b).
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale. Subject to and upon the terms and conditions set
forth in this Agreement, at the Closing, the Sellers shall sell, transfer,
convey, assign and deliver to the Buyer, free and clear of all Liens, and the
Buyer shall purchase and accept from the Sellers, the shares of the Company
listed on Schedule 2.1 (the "Shares"), such Shares constituting all of the
issued and outstanding shares of the Company.
2.2 Purchase Price.
(a) As consideration for the purchase of the Shares and the other
transactions contemplated by this Agreement, the Buyer shall pay to the
Sellers the amount equal to the sum of (i) the Final Closing Date Net Book
Value of the Company, as determined pursuant to this Article II, (ii)
Eleven Million Fourteen Thousand Four Hundred Forty-Nine Dollars
($11,014,449.00), (iii) any payments for New Business described on
Schedule 2.6, and (iv) any payments for Step-Up Tax Benefits described on
Schedule 2.2(a) (collectively, the Purchase Price). At the Closing, the
Buyer shall transfer cash, by wire transfer of federal or immediately
available funds, to an account designated in writing by the Sellers at
least two (2) Business Days prior to the Closing Date (the "Payment
Account"), in an amount (the "Closing Payment") equal to the portion of
the Purchase Price set forth in (i) and (ii) above in this Section 2.2(a),
assuming that the Estimated Closing Date Net Book Value (as defined in
Section 2.3 below) is equal to the Final Closing Date Net Book Value (as
defined in Section 2.5 below), minus the Escrowed Amount. The Closing
Payment shall be subject to adjustment as set forth in Section 2.5 below.
Within fourteen (14) days of the Closing Date, the Buyer shall deliver the
Escrowed Amount to the Escrow Agent pursuant to the terms of the Escrow
Agreement. The parties hereto intend that the Escrowed Amount shall be
available as a nonexclusive means to fulfill Sellers' indemnification
obligations pursuant to Article X hereof.
(b) The parties agree to determine the allocation of the Purchase
Price as set forth in Schedule 2.2(a). The parties agree that, for tax
reporting purposes, they shall each report the transactions contemplated
by this Agreement in accordance with such allocation and shall not
7
take a position for tax purposes inconsistent therewith. The Buyer, on the
one hand, and the Sellers, on the other hand, shall notify and provide the
other with reasonable assistance in the event of an examination, audit or
other proceeding regarding the agreed upon allocation of the Purchase
Price.
2.3 Preliminary Closing Date Balance Sheet. Not less than five (5)
Business Days prior to the scheduled Closing Date, the Sellers shall deliver to
the Buyer (i) a balance sheet of the Company forecasted as of the Closing Date,
to be prepared in a manner consistent with the preparation of the Financial
Statements (the "Preliminary Closing Date Balance Sheet") and (ii) an estimate
of the Net Book Value of the Company as of the Closing Date based upon such
Preliminary Closing Date Balance Sheet (the "Estimated Closing Date Net Book
Value"). Representatives of the Buyer shall be entitled to full access, in a
reasonable manner, to all records and work papers during normal business hours
and shall be entitled to communicate with the Sellers and personnel of the
Company and discuss accounting practices and procedures in connection with the
preparation of the Preliminary Closing Date Balance Sheet and the calculation of
the Estimated Closing Date Net Book Value.
2.4 Audited Closing Date Balance Sheet; Disputes.
(a) The Sellers will instruct the Company's auditors to, promptly
following the Closing Date, conduct a special audit in order to prepare an
audited balance sheet of the Company as of the Closing Date, to be
prepared in a manner consistent with the preparation of the Financial
Statements (the "Audited Closing Date Balance Sheet") and to calculate the
Net Book Value of the Company as of the Closing Date based upon such
Audited Closing Date Balance Sheet (the "Audited Closing Date Net Book
Value"). The Sellers shall give to the Buyer and their representatives,
including the Buyer's auditors, full and complete access in a reasonable
manner to work papers and supporting documentation prepared by the
Company, or otherwise relied upon by the Company's auditors, in connection
with the preparation of the Audited Closing Date Balance Sheet and the
calculation of the Audited Closing Date Net Book Value. The Buyer shall
have the right to have its representatives, including the Buyer's
auditors, present during the observation of the taking of any physical
inventory of the Company as at the Closing Date as may be required by the
Company's auditors. To the extent reserved against on the Preliminary
Closing Date Balance Sheet, the Sellers shall be responsible for the costs
of the Company's auditors in connection with the preparation of the
Audited Closing Date Balance Sheet and the calculation of the Audited
Closing Date Net Book Value. Any such costs in excess of the amount
reserved for on the Preliminary Closing Date Balance Sheet shall be the
responsibility of the Buyer.
(b) The Sellers shall request the Company's auditors to deliver the
Audited Closing Date Balance Sheet and the Audited Closing Date Net Book
Value to the Buyer not more than sixty (60) days following the Closing
Date. The Audited Closing Date Net Book Value shall be deemed accepted by,
and shall be final and binding upon, the parties, unless either the Buyer,
on the one hand, or the Sellers, on the other hand, shall notify the other
in writing, not later than fifteen (15) days from the Buyer's receipt of
the Audited Closing Date Balance Sheet and the Audited Closing Date Net
Book Value, that it disagrees with respect to any of the financial
calculations made with respect to the Audited Closing Date Balance Sheet
and/or the Audited Closing Date Net Book Value. In the event that the
Buyer, on the one hand, or the Sellers, on the other hand, shall timely
notify the other that either or both of them do not agree
8
with respect to any such financial calculations, the parties shall attempt
in good faith to resolve such dispute. In the event the parties are unable
to resolve such dispute within fifteen (15) days from the date of receipt
of notice of such dispute, the Buyer and the Sellers shall mutually select
a "big four" independent accounting firm which has not, for the past five
(5) years, been engaged to render accounting services for the Company, any
Affiliate of the Company, the Buyer or any Affiliate of the Buyer (the
"Unaffiliated Accountants"). The parties shall thereupon promptly submit
to the Unaffiliated Accountants all relevant financial data as well as
this Agreement (including Schedules hereto), and the disputed item or
items shall be submitted for final and binding arbitration and resolution
before a representative of the Unaffiliated Accountants. The Unaffiliated
Accountants shall use their best efforts to reach a determination on the
disputed item or items and to render a determination as to the actual Net
Book Value of the Company as of the Closing Date (the "Arbitrated Closing
Date Net Book Value") not more than five (5) days after such submission.
The decision of the Unaffiliated Accountants shall be final and binding on
the parties and may be enforced in any court of competent jurisdiction.
The fees and costs of the Unaffiliated Accountants shall be borne equally
by the Buyer, on the one hand, and the Sellers, on the other hand.
2.5 Adjustment to Closing Payment. For purposes of this Agreement, the
"Final Closing Date Net Book Value" shall equal one of the following, as
applicable: (i) the Audited Closing Date Net Book Value, if the same shall be
accepted or deemed accepted by the parties as set forth in Section 2.4(b); (ii)
the agreed upon Net Book Value of the Company as of the Closing Date, if the
Buyer and/or the Sellers disputes the Audited Closing Date Net Book Value and
the parties are able to resolve such dispute among themselves as set forth in
Section 2.4(b); or (iii) the Arbitrated Closing Date Net Book Value, if the
Buyer and/or the Sellers disputes the Audited Closing Date Net Book Value and
the parties elect to resort to arbitration as set forth in Section 2.4(b).
Within ten (10) days following the determination of the Final Closing Date Net
Book Value pursuant to the foregoing sentence, (i) the Sellers shall pay to the
Buyer the amount by which the Final Closing Date Net Book Value is less than the
Estimated Closing Date Net Book Value, if applicable, or (ii) the Buyer shall
pay to the Sellers the amount by which the Final Closing Date Net Book Value is
greater than the Estimated Closing Date Net Book Value, if applicable. Any
payment made pursuant to this Section 2.5 shall be made in cash, by wire
transfer of federal or immediately available funds, to an account designated in
writing by the Sellers or the Buyer, as applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers jointly and severally represent and warrant to the
Buyer that:
3.1 Organization and Qualification. The Company is duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
organization and has all requisite power and authority to conduct its business
as presently conducted and to own and lease its property and assets. The Company
is qualified to do business as a foreign company and is in good standing in each
jurisdiction in which the ownership of property or the conduct of its business
requires such qualification. Schedule 3.1-1 contains a complete and accurate
list of the Company's jurisdiction of organization and other jurisdictions in
which it is authorized to do business. The Company has delivered to the Buyer
correct and complete copies of its organizational documents, company minutes,
company records and
9
stock register and transfer records. Except as set forth on Schedule 3.1-2, as
of the Closing Date, the Company will not have any subsidiaries and will not own
any equity interest in any Person whatsoever.
3.2 Capitalization.
(a) The capitalization of the Company is as set forth on Schedule
3.2(a). The Shares have been duly authorized and are validly issued and
outstanding, fully paid and non-assessable and constitute all of the
issued and outstanding capital stock of the Company. A-Xxxx Holding owns,
beneficially and of record, and has good, valid and marketable title to
and the right to transfer to the Buyer, the Shares, free and clear of any
and all Liens. After giving effect to the transactions contemplated
herein, the Buyer will own, and have good, valid, and marketable title to,
subject to applicable state and federal securities laws, the right to
transfer, all of the issued and outstanding shares of capital stock of the
Company, free and clear of any and all Liens. No Person other than the
Buyer has any written or oral agreement, arrangement or understanding or
option to or any right or privilege (whether by Law, preemption, or
contract) for the purchase or acquisition of any shares of capital stock
or other securities of the Company.
(b) Except as set forth on Schedule 3.2(b)-1, there are no
outstanding or authorized options, warrants, purchase agreements,
participation agreements, subscription rights, conversion rights, exchange
rights or other securities, Contracts, arrangements, understandings or
commitments that could require the Company to issue, sell or otherwise
cause to become outstanding any of its respective authorized but unissued
shares of capital stock or any securities convertible into, exchangeable
for or carrying a right or option to purchase shares of capital stock or
to create, authorize, issue, sell or otherwise cause to become outstanding
any new class of capital stock. Except as set forth on Schedule 3.2(b)-2,
there are no outstanding stockholders' agreements, registration rights
agreements, or rights of first refusal pertaining to the capital stock of
the Company. None of the issued and outstanding shares of capital stock of
the Company has been issued in violation of any rights of any Person or in
violation of the registration requirements of any United States or
non-United States securities Law or other Law.
3.3 Capacity. Each of the Sellers has full legal capacity to enter into
and carry out its or his obligations under this Agreement and the other relevant
Related Documents and is not under any prohibition or restriction, contractual,
statutory or otherwise, against doing so. This Agreement and each Related
Document to which either of the Sellers is a party (a) has been duly executed
and delivered by such Seller and (b) constitutes a legal, valid, and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other Laws affecting the rights of
creditors generally and by general principles of equity.
3.4 No Violations or Conflicts. Except as set forth on Schedule 3.4,
neither the execution and delivery of this Agreement or the applicable Related
Documents by the Sellers nor the consummation or performance by the Sellers of
the transactions contemplated by this Agreement or the applicable Related
Documents does or will, directly or indirectly (with or without notice or lapse
of time or both), (a) conflict with or violate any provision of the Company's
organizational documents, (b) result in a violation or breach of, or constitute
a default or an event of default under, or result in the acceleration of any
Material obligations under, or give any Person the right to cancel, terminate or
modify any Material Contract, Material Permit, instrument or other Material
obligation to which the
10
Company or either of the Sellers is a party or by which any of their respective
properties or assets are bound, (c) violate any Law or Order to which the
Company or either of the Sellers is subject or (d) result in the creation or
imposition of any Lien upon or with respect to any of the assets or properties
owned or used by either of the Sellers or the Company, including, without
limitation, the Shares.
3.5 Consents and Approvals. Except as set forth on Schedule 3.5
(collectively, the "Required Consents"), no consent, approval or authorization
of, or declaration or notice to, or filing or registration with, any
Governmental Authority or any other Person is required to be made or obtained by
the Company or the Sellers in connection with the execution, delivery and
performance of this Agreement and the applicable Related Documents by the
Sellers or the Company.
3.6 Financial Statements. The Sellers have previously delivered to the
Buyer true and complete copies of the Financial Statements and the Interim
Financial Statements. The Financial Statements are attached hereto as Schedule
3.6-1 and the Interim Financial Statements are attached hereto as Schedule
3.6-2. The Financial Statements and Interim Financial Statements fairly present
the financial position and results of operations of the Company as of the dates
and for the periods presented therein.
3.7 Tangible Assets. The Company has good and marketable title to, or a
valid leasehold interest in, all tangible assets that it owns, purports to own,
or uses, including those reflected on its books and records and on the Interim
Financial Statement balance sheet (except those sold or disposed of subsequent
to the date thereof in the Ordinary Course of Business consistent with past
practice), free and clear of all Liens except as set forth on Schedule 3.7-1.
Except as set forth on Schedule 3.7-2, none of such assets is subject to any
sublease, sublicense or other Contract granting to any other Person any right to
the use or enjoyment of such assets. All tangible assets owned by the Company or
used by the Company in the operation of the Business are in good operating
condition and in a good state of maintenance and repair and are adequate for the
Business as conducted by the Company and as contemplated to be conducted
following the Closing Date. Other than leased or licensed assets, there are no
assets owned by any third party which are used in the operation of the Business.
3.8 Inventory. All inventory of the Company as of the Closing Date,
whether or not reflected in the Financial Statements or the Interim Financial
Statements, consists of a quality and quantity usable and salable in the
Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value as of the Closing Date. Inventory now on hand that was
purchased after the date of the 2004 Balance Sheet was purchased in the Ordinary
Course of Business. The inventory is of such quality as to meet the quality
control standards of the Company. All finished goods constituting inventory are
saleable as current inventories at the current prices of the Company in the
Ordinary Course of Business. All inventory not written off has been recorded on
the books of the Company at the market value determined in accordance with GAAP.
3.9 No Undisclosed Liabilities; Solvency. The Company does not have any
liabilities or obligations of any nature (whether absolute, accrued, contingent
or otherwise and whether due or to become due) except (i) liabilities and
obligations occurring in the Ordinary Course of Business since April 30, 2005
consistent with past practice, (ii) as disclosed on the Balance Sheet or the
Interim Financial Statements, or (iii) as disclosed on Schedule 3.9. The Company
has at all times been and now
11
is solvent. As of the Closing, the Company will remain solvent. The Company has
never been a debtor in any bankruptcy Proceeding, whether voluntary or
involuntary, actual or threatened, or has made an assignment of its assets for
the benefit of any creditor or otherwise.
3.10 Absence of Certain Changes. Since July 31, 2004, the Company has
conducted its operations and affairs only according to its Ordinary Course of
Business, and the Company has not suffered any Material Adverse Change. Except
as set forth on Schedule 3.10 or as otherwise expressly contemplated by this
Agreement, since July 31, 2004, the Company has not (a) amended or otherwise
modified its organizational documents, (b) sold, transferred or otherwise
disposed of any assets pertaining to or used in the Business except in the
Ordinary Course of Business, (c) created or permitted to exist any Lien on any
asset or property of the Business, (d) issued, sold, disposed of or encumbered,
or authorized the issuance, sale, disposition or encumbrance of, or granted or
issued any option to acquire any shares of its capital stock or any other of its
securities or any security convertible into or exercisable or exchangeable for
any such shares or securities, or altered any term of any of its outstanding
securities or made any change in its outstanding shares of capital stock or its
capitalization, whether by reason of a reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise, (e) declared, set aside, made or paid any dividend or other
distribution to any stockholder with respect to its capital stock, (f) redeemed,
purchased or otherwise acquired any of its capital stock, (g) increased the
compensation or other remuneration or benefits payable or to become payable to
any of its directors, executive officers, employees or agents, except for
increases in the Ordinary Course of Business, or entered into employment,
severance or similar Contracts with any of the foregoing, (h) adopted, amended
or increased the payments to or benefits under any Company Employee Plan, except
for in the Ordinary Course of Business, (i) entered into any Contract or
transaction relating to or affecting the Business, except in the Ordinary Course
of Business, (j) terminated or modified any Company Contracts, except for
termination upon expiration in accordance with the terms thereof, (k) released,
waived, or cancelled any claims or rights relating to or affecting the Business
in excess of $20,000 individually or $50,000 in the aggregate, (l) paid,
discharged or satisfied any claim, obligation or liability in excess of $20,000
individually or $50,000 in the aggregate, except for liabilities incurred prior
to the date of this Agreement in the Ordinary Course of Business, (m) created,
incurred, assumed or otherwise became liable for any indebtedness in excess of
$20,000 in the aggregate, (n) guaranteed or endorsed any obligation or the net
worth of any Person, except for endorsements of negotiable instruments for
collection in the Ordinary Course of Business, (o) made any loan or advance to
any Person other than travel and other routine advances made in the Ordinary
Course of Business, (p) acquired the capital stock or other securities or any
ownership interest in, or substantially all of the assets of, any other business
enterprise, (q) adopted a plan of liquidation or dissolution, (r) changed its
method of accounting or the accounting principles or practices utilized in the
preparation of its financial statements, other than as required by GAAP, (s)
made any material capital investment or expenditure or capital improvement over
$50,000, addition or betterment relating to or affecting the Business, (t)
suffered any damage to or destruction or loss of any asset or property of the
Business, whether or not covered by insurance, (u) instituted or settled any
claim, action, suit or Proceeding involving in excess of $50,000 relating to it
or its assets or properties relating to or affecting the Business, (v) made any
elections with respect to Taxes, or made any changes in current elections with
respect to Taxes, or (w) entered into any Contract to do any of the foregoing.
3.11 Conduct of Business. The Sellers have not and do not conduct the
Business other than through the Company. Irrespective of any prohibition on or
relating to the Buyer, the Sellers have
12
no Knowledge of anything that would restrict the Buyer from conducting the
Business following the Closing as it was conducted prior to the Closing.
3.12 Customers and Suppliers. Schedule 3.12 sets forth a list of the
top 25 Company's customers, distributors and suppliers for the twenty-four (24)
months prior to the date hereof. The Company currently obtains all supplies and
services necessary for the conduct of the Business as presently conducted from
readily available sources. There exists no actual, and the Sellers have no
Knowledge of any threatened, termination, cancellation or material limitation
of, or any material change in, the business relationship of the Company with any
customer or supplier. To the Knowledge of the Sellers, no customer or supplier
of the Company intends to reduce or terminate its business dealings with the
Company following the Closing, whether as a result of the transactions
contemplated hereby or otherwise. There are no pending, or, to the Knowledge of
the Sellers, threatened, Material disputes or controversies between the Company
and any of its customers or suppliers. No customer of the Company has any right
to any credit or refund for products sold or services rendered or to be rendered
by the Company pursuant to any Contract, understanding or practice of the
Company other than pursuant to the normal course return policy of the Company.
3.13 Contracts.
(a) Schedule 3.13(a) contains a complete and accurate list, and the
Sellers have delivered to the Buyer true, correct and complete copies (if
written) or written summaries (if oral), of:
(i) each Contract involving outstanding obligations for
payments, or potential payments, to or from the Company of at least
$10,000;
(ii) each lease, license and other Contract affecting any
leasehold or other interest in any real or personal property to which the
Company is a party or by which any of its assets or properties is bound;
(iii) each Contract with respect to confidential or proprietary
information, including, without limitation, agreements with current or
former employees, consultants or contractors;
(iv) each Contract containing covenants that in any way purport
to restrict, prohibit or impair the conduct or any business activity or
practice of the Company or limit the freedom of the Company to engage in
any line of business or to compete with any Person or hire or solicit any
Person;
(v) each employment, severance, independent contractor or
consulting agreement between the Company and its directors, officers,
employees, leased employees and consultants;
(vi) each Contract under which any money has been or may be
borrowed or loaned, any other evidence of indebtedness of the Company, and
each guaranty by the Company;
(vii) each Contract containing a change of control provision;
13
(viii) each other Contract entered into outside of the Ordinary
Course of Business;
(ix) all trading agreements with customers that in the
aggregate represent 90% of the gross profit of the Company; and
(x) each other Material Contract to which the Company is a
party or which relates to the Business or the assets or properties owned
or used by the Company or the Business.
(b) Each Contract identified or required to be identified on
Schedule 3.13(a) is in full force and effect and is valid and enforceable
against the Company, except as enforcement thereof may be limited by
applicable bankruptcy, insolvency, moratorium or other Laws affecting the
rights of creditors generally and by general principles of equity, and, to
the Knowledge of the Sellers, against the other parties thereto in
accordance with its terms. Neither the Company nor the Sellers have
received notice of the pending or threatened cancellation, revocation or
termination of any of the Contracts identified or required to be
identified on Schedule 3.13(a), nor do the Sellers have any Knowledge of
any facts or circumstances which could reasonably lead to any such
cancellation, revocation or termination. The Company has not assigned,
delegated or otherwise transferred any of its rights or obligations with
respect to any such Contracts.
(c) Except as set forth on Schedule 3.13(c), (i) the Company is in
full compliance in all material respects with all terms and requirements
of each Contract under which the Company has any obligation or liability
or by the Company or any of its properties or assets owned or used by the
Company is or was bound; (ii) to the Knowledge of the Sellers, each other
Person that has any obligation or liability under any Contract under which
the Company has any rights is in full compliance with all applicable terms
and requirements of such Contract; and (iii) to the Knowledge of the
Sellers, no event has occurred and no circumstance exists that, with or
without notice or lapse of time or both, is likely to result in a
violation or breach of any such Contract by the Company or by any other
Person.
3.14 Litigation. Except as set forth on Schedule 3.14, there is no
civil, criminal or administrative Proceeding pending, or, to the Knowledge of
the Sellers, threatened against the Company or either of the Sellers in any
court, by any Governmental Authority or before any arbitrator or other tribunal
which may affect or hinder the Business or the consummation of the transactions
contemplated hereby or which otherwise relates to the Business or any of the
assets or properties owned or used by the Company. Neither the Company nor
either of the Sellers is subject to any outstanding action or Order of any court
or Governmental Authority which may affect or hinder the Business or the
consummation of the transactions contemplated hereby or which otherwise relates
to the Business or any of the assets or properties owned or used by the Company.
The Sellers have made available to the Buyer true, correct and complete copies
of all pleadings, correspondence and other documents relating to each Proceeding
listed on Schedule 3.14.
14
3.15 Intellectual Property.
(a) The "Intellectual Property" means all intellectual property
owned, used or licensed (as licensor or licensee) by the Company, or in
any product, service, technology or process currently offered by the
Company, or currently under development by the Company, or by any Person
for use in the Business, including:
(i) all domestic and foreign copyright interests in any
original work of authorship, whether registered or unregistered, including
but not limited to all copyright registrations or foreign equivalent, all
applications for registration or foreign equivalent, all moral rights, all
common-law rights, and all rights to register and obtain renewals and
extensions of copyright registrations, together with all other copyright
interests accruing by reason of international copyright convention
("Copyrights");
(ii) all domestic and foreign patents (including certificates
of invention and other patent equivalents), provisional applications,
patent applications and patents issuing therefrom as well as any division,
continuation or continuation in part, reissue, extension, reexamination,
certification, revival or renewal of any patent, all Inventions (as
hereinafter defined) and subject matter related to such patents, in any
and all forms ("Patents");
(iii) all domestic and foreign trademarks, trade dress, service
marks, trade names, icons, logos, slogans, and any other indicia of source
or sponsorship of goods and services, designs and logotypes related to the
above, in any and all forms, all trademark registrations and applications
for registration related to such trademarks (including, but not limited to
intent to use applications), and all goodwill related to the foregoing
("Trademarks");
(iv) all domain name registrations ("Domain Names");
(v) any formula, design, device or compilation, or other
information which is used or held for use by a business, which gives the
holder thereof an advantage or opportunity for advantage over competitors
which do not have or use the same, and which is not generally known by the
public. Trade Secrets can include, by way of example, formulas,
algorithms, market surveys, market research studies, information contained
on drawings and other documents, and information relating to research,
development or testing ("Trade Secrets");
(vi) novel devices, processes, compositions of matter, methods,
techniques, observations, discoveries, apparatuses, machines, designs,
expressions, theories and ideas, whether or not patentable ("Inventions");
(vii) scientific, engineering, mechanical, electrical,
financial, marketing or practical knowledge or experience useful in the
operation of the Business ("Know How");
(viii) (A) any and all computer programs and/or software
programs (including all source code, object code, firmware, programming
tools and/or documentation), (B) machine readable databases and
compilations, including any and all data and collections of data, and (C)
all content contained on Internet site(s) ("Software");
15
(ix) all documentation and media constituting, describing or
relating to the above, including memoranda, manuals, technical
specifications and other records wherever created throughout the world;
and
(x) the right to xxx for past, present, or future infringement
and to collect and retain all damages and profits related to the
foregoing.
(b) Schedule 3.15(b) sets forth a complete list of all Intellectual
Property owned by the Company or used in the operation of the Company's
Business.
(c) Schedule 3.15(c)-1, lists all licenses, sublicenses, agreements
or instruments involving the Intellectual Property of the Company
including (i) licenses by the Company to any Person of any Intellectual
Property; and (ii) all licenses by any other Person to the Company of any
Intellectual Property (except with respect to generally available
"off-the-shelf" software) (each a "License"). Each License identified in
Schedule 3.15(c)-1, is a valid and binding agreement enforceable in
accordance with its terms. With respect to each License, there is no
material default (or event that with the giving of notice or passage of
time would constitute a material default) by the Company, or, to the
Knowledge of the Sellers, the other party thereto. There are no pending
or, to the Knowledge of the Sellers, threatened claims with respect to any
License. Except as identified on Schedule 3.15(c)-2, no License contains
any indemnity by either of the Company in favor of a third party with
respect to the Intellectual Property.
(d) The Company has good and valid title to, or otherwise possesses
the rights to use, subject to any time limitations set forth in any
licensing or other agreement to use said Intellectual Property, all
Intellectual Property necessary to permit the Company to conduct the
Business and operations of the Company from and after the Closing Date, in
the same manner as it is being conducted as of the date hereof, and, to
the Knowledge of the Sellers, as currently contemplated to be conducted by
the Company. Neither the consummation of the transactions contemplated by
this Agreement nor the Sellers' performance hereunder will result in the
diminution, license, transfer, termination or forfeiture of the Company's
rights in the Intellectual Property or Licenses. Except for Intellectual
Property owned by third parties, no Person other than the Company has any
right or interest of any kind or nature in or with respect to the
Intellectual Property, or any portion thereof, or any rights to sell,
license, lease, transfer or use or otherwise exploit the Intellectual
Property or any portion thereof. All officers, employees and contractors
of the Company who have created Intellectual Property have no ownership
interest or other rights in the Intellectual Property and/or have executed
agreements under which all rights, title and ownership in and to such
Intellectual Property have been assigned to the Company.
(e) Except as disclosed in Schedule 3.15(e), the Company has not
been alleged to have, nor, to the Knowledge of the Sellers, has the
Company infringed upon, misappropriated or misused any intellectual
property or other proprietary information of another Person. Except as
disclosed in Schedule 3.15(e), there are no pending, or, to the Knowledge
of the Sellers, threatened claims or Proceedings contesting or challenging
the Intellectual Property, or the Company's use of the Intellectual
Property owned by another Person. To Knowledge of the Sellers, no third
party including any current or former employee or contractor of the
Company, is infringing upon, misappropriating, or otherwise violating the
Company's rights to the Intellectual Property.
16
(f) The Company has taken commercially reasonable steps to protect
the proprietary nature of the Intellectual Property and to maintain in
confidence all Trade Secrets and confidential Intellectual Property and
information owned or used by the Company. Except as set forth in Schedule
3.15(f), to the Knowledge of the Sellers, no Trade Secret or other
confidential Intellectual Property or information of the Company has been
disclosed or authorized to be disclosed to any Person, including any
employee, agent, contractor, or other entity, other than pursuant to a
non-disclosure agreement or other conditional obligation that protects the
Company's proprietary interests in and to such Trade Secrets or
confidential Intellectual Property or information.
(g) The Company has implemented procedures described on Schedule
3.15(g) to ensure the physical and electronic protection of its websites
and information assets from unauthorized disclosure, use or modification.
To the Sellers' Knowledge, other than as set forth in Schedule 3.15(g),
there has been no breach of security involving the Company's websites or
information assets. To the Sellers' Knowledge all data which has been
collected, stored, maintained or otherwise used by the Company has been
collected, stored, maintained and used in accordance with all applicable
Laws, guidelines and industry standards. Neither the Sellers nor the
Company has received a notice of noncompliance with applicable data
protection Laws, guidelines or industry standards.
(h) Schedule 3.15(h)-1 contains a true and complete list of all of
the Software included, embedded or incorporated in or developed for
inclusion in the Company's products or websites, or used in the delivery
of the Company's services (the "Company Software"). The Company owns full
and unemcumbered right and has good, valid and marketable title or has
valid licenses to such Company Software, and all Company Software owned by
the Company is free and clear of all Liens. The Company has not
incorporated any third party intellectual property into Company Software
not identified in Schedule 3.15(h)-1. Except as identified on Schedule
3.15(h)-2, no open source or public library software, including any
version of any software licensed pursuant to any GNU public license, is,
in whole or in part, embodied or incorporated in any of the Company
Software.
(i) Except as set forth on Schedule 3.15(i), the Company is not
bound by any agreement by which it owes any present or future royalties or
other payments to third parties in respect of Intellectual Property in
excess of $10,000.
3.16 Compliance with Laws. Except as set forth on Schedule 3.16-1, the
Company has been and is in compliance in all material respects with all Laws
applicable to the Company or relating to or affecting the Business or the assets
or properties owned or used by the Company. the Company is not subject to any
judicial, governmental or administrative Order. Attached hereto as Schedule
3.16-2 are true and correct copies of all reports of inspections of the
Company's business and properties which occurred during the past three (3) years
through the date hereof under Laws which resulted in the imposition of a fine,
penalty, or other restriction. Neither the Company nor either of the Sellers has
received notice of any violation (or any investigation, inspection, audit, or
other Proceeding by any Governmental Authority involving an allegation of any
violation) of any Law or Order by or affecting the Company, and, to the
Knowledge of the Sellers, no investigation, inspection, audit, or other
Proceeding by any Governmental Authority involving a allegation of any violation
of any Law or Order is threatened or contemplated. Neither the Company nor the
Business (other than hedging activities
17
engaged in by the Company) is regulated by the Commodities Futures Trading
Commission or any other similar Governmental Authority.
3.17 Permits. Schedule 3.17 sets forth a true, complete and correct
description of each Permit affecting, or relating in any way to, the Business or
any of the properties or assets owned or used by the Company, together with the
names of the Governmental Authorities or other Persons issuing such Permits.
Such Permits are valid and in full force and effect, and none of the Permits
will be terminated or impaired or become terminable as a result of the
transactions contemplated hereby. The Permits listed on Schedule 3.17 constitute
all of the Permits necessary to permit the Company to conduct and operate the
Business lawfully in the manner in which it currently conducts and operates the
Business and to permit the Company to own and use its properties and assets in
the manner in which it currently owns and uses such properties and assets.
Neither the Company nor either of the Sellers has received notice from any
Governmental Authority or any other Person regarding any actual, alleged,
possible or potential contravention, revocation, withdrawal, suspension,
cancellation, termination or modification of any Permit. All applications
required to have been filed for the renewal of such Permits have been duly filed
on a timely basis with the appropriate Persons, and all other filings required
to have been made with respect to such Permits have been duly made on a timely
basis with the appropriate Persons. All such Permits are renewable by their
terms or in the Ordinary Course of Business without the need to comply with any
special qualification procedures or to pay any amounts other than routine fees
or similar charges, all of which have been duly paid.
3.18 Real Property.
(a) The Company does not own any interest or legal title in
ownership, or has any use rights, as applicable, in real property other
than as set forth on Schedule 3.18(a). The Company does not lease or
sublease (as lessee or sublessee) any real property other than as set
forth on Schedule 3.18(a). Schedule 3.18(a) sets forth the street address
of each parcel of real property owned by the Company (the "Owned
Property") or leased or subleased (as lessee or sublessee) by the Company
(the "Leased Property") or in which the Company has use rights (together
with the Owned Property and the Leased Property, the "Real Property"). The
Company enjoys a peaceful and undisturbed possession of the Real Property.
Schedule 3.18(a) lists all of the lease and sublease agreements and all
other instruments granting such leasehold interests, rights, options, or
other interests, as amended to date (the "Leases") relating to the Leased
Property. A true, complete, and correct copy of each of the Leases has
previously been made available to the Buyer. Each Lease is valid, binding
and in full force and effect; all rent and other sums and charges payable
thereunder are current; no notice of default or termination under any of
the Leases is outstanding; no termination event or condition or uncured
default on the part of the Company, to the Knowledge of the Sellers, on
the part of the landlord or sublandlord, as the case may be, thereunder
exists under any of the Leases; and no event has occurred and no condition
exists which, with the giving of notice or the lapse of time or both,
would constitute such a default or termination event or condition. In the
event that any of the Leases is a sublease, the Company, as sublessee or
sublessor, as the case may be, has obtained the required consent of the
prime landlord to such sublease, and such prime lease is in full force and
effect; there are no outstanding uncured notices of default or
termination; and no right of the Company in any such sublease conflicts
with such prime lease. All usage rights for the Real Property, as
applicable, are in full force and effect, and there exists no material
breach of such usage rights by the Company which would cause or permit a
termination of those rights under
18
the relevant usage rights agreements. The Company has paid all land use
rights fees and other required payments in relation to the Real Property,
as applicable. There are no subleases, licenses or other agreements
granting to any Person other than the Company any right to the possession,
use, occupancy or enjoyment of the premises demised by the Leases. All of
the premises are used in the conduct of the Business.
3.19 Employee Benefit Plans; ERISA.
(a) Schedule 3.19(a) sets forth all "employee pension benefit
plans" (as defined in Section 3(2) of ERISA), all medical, disability,
life insurance, and other "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA), and all other employee benefit plans, programs or
arrangements, including, without limitation, any bonus, stock option,
stock purchase or other equity-based compensation arrangements, any
incentive, deferred compensation, supplemental retirement, severance,
disability, vacation, cafeteria and other employee benefit plans,
policies, programs, agreements, arrangements or other Contracts (whether
written or otherwise), including those which contain change of control
provisions or pending change of control provisions, in any case (i) that
are maintained or contributed to (or to which there was or will be an
obligation to contribute) by the Company or any trade or business under
common control with the Company within the meaning of Section 4001(a)(14)
of ERISA (each, an "ERISA Affiliate"), or (ii) with respect to which the
Company has or could have any liability, whether direct or indirect or
actual or contingent (including any liability arising out of an
indemnification, guarantee, hold harmless or similar agreement) (the
"Company Employee Plans").
(b) The Company has made available to the Buyer copies of any
communications or election forms sent to participants in any Company
Employee Plan or employment agreement regarding compliance with Section
409A of the Code, and has made available to the Buyer a written
description of any measures that the Company has taken to address Section
409A compliance.
(c) Except as set forth in Schedule 3.19(c), no entity (whether or
not incorporated) is a member of a controlled group including the Company
is under common control of the Company, within the meaning of Section
414(b), (c) or (m) of the Code.
(d) The Company has made available to the Buyer copies of (i) each
written Company Employee Plan (and a written description of any Company
Employee Plan which is not written) and all related trust agreements,
insurance and other Contracts (including policies), summary plan
descriptions, summaries of material modifications and communications
distributed to plan participants explaining Company Employee Plan benefits
(other than routine statements of accounts), (ii) the three most recent
annual reports on Form 5500 series or other applicable annual reports,
with accompanying schedules and attachments, filed with the applicable
Governmental Authority with respect to each Company Employee Plan required
by applicable Laws to make such a filing, (iii) any reports other than a
Form 5500 report which have been filed with the United States Department
of Labor or other labor related Governmental Authorities within the last
five (5) years with respect to any Company Employee Plan required by
applicable Laws to make such a report, (iv) the most recent actuarial
valuation, if any, for each Company Employee Plan, and (v) the most recent
favorable determination letters issued for
19
each Company Employee Plan and related trust which is intended to be
qualified under Section 401(a) of the Code or other applicable Law (and,
if an application for such determination is pending, a copy of the
application for such determination).
(e) Except as set forth on Schedule 3.19(e), none of the Company
Employee Plans (i) promises or provides retiree medical or other retiree
welfare benefits to any person except as required by Section 601 et seq.
of ERISA (commonly referred to as COBRA coverage); (ii) is or ever was
subject to Section 302 of ERISA, Section 412 of the Code or Title IV of
ERISA; (iii) is or ever was a "multiemployer plan" as defined in Section
3(37) of ERISA or a "multiple employer plan" as defined in Section 3(40)
of ERISA; (iv) is or ever was a defined benefit plan; (v) does now or ever
has invested in stock of the Company or provided benefits in the form of
or based on the value of stock of the Company; or (vi) has incurred any
withdrawal liability that remains unsatisfied. The transactions
contemplated hereby will not result in the assessment of any withdrawal
liability or the creation of any other contingent liabilities relating to
pension, medical or other employee benefits.
(f) (i) All Company Employee Plans have been established,
maintained and operated in accordance with their terms and the
requirements of applicable Law, and may by their terms be amended and/or
terminated at any time; (ii) the Company has performed in all material
respects all obligations required to be performed by it under all Company
Employee Plans; (iii) the Company is not in material default under or
material violation of, and the Sellers have no Knowledge of any material
default or material violation by any other party to, any of the Company
Employee Plans; (iv) each Company Employee Plan which is intended to be
qualified under Section 401(a) of the Code or other applicable Law has
received a favorable determination letter from the IRS and to the
Knowledge of the Sellers, nothing has occurred which may impair such
determination; (v) the premiums for all insurance policies through which
benefits are provided under any Company Employee Plan have been paid in
accordance with the terms of such policies; and (vi) all contributions
required to be made with respect to any Company Employee Plan have been
made on or before their due dates (including any extensions thereof) and
all such amounts accrued but not yet paid have been properly recorded in
the books of the Company and reflected in the financial books of the
Company.
(g) (i) To the Knowledge of the Sellers, no party in interest or
disqualified person (as defined in Section 3(14) of ERISA and Section 4975
of the Code) is either currently engaged or has at any time been engaged
in a transaction with respect to any Company Employee Plan which could
subject the Company, directly or indirectly, to a tax, penalty, or other
liability for prohibited transactions under ERISA or Section 4975 of the
Code, and no such transaction has occurred that could subject the Company
to any such liability; and (ii) to the Knowledge of the Sellers, no
fiduciary (as defined in Section 3(21) of ERISA) with respect to any
Company Employee Plan, or for whose conduct the Company could have any
liability (by reason of indemnities or otherwise), has breached any of the
responsibilities or obligations imposed upon the fiduciary under Title I
of ERISA.
(h) Other than routine claims for benefits made in the ordinary
course of the operation of the Company Employee Plans, there are no
pending or, to the Knowledge of the Sellers, threatened claims,
investigations or causes of action with respect to any Company Employee
Plan, whether made by a participant or beneficiary of such a plan, a
Governmental
20
Authority or otherwise, against the Company, any director, officer or
employee of the Company, any Company Employee Plan or any fiduciary of a
Company Employee Plan; and there have been no communications to any
employee, former employee or any other person who may be entitled to
benefits under any Company Employee Plan that are inconsistent in any
material respect with any provision of any Company Employee Plan.
(i) The Company has no current material liability based upon,
arising out of or relating to the classification of any individual as an
independent contractor, a temporary employee or a leased employee (within
the meaning of Section 414(n) of the Code or comparable non-United States
law) rather than as an employee, and no facts exist as a result of which
the Company could have any such material liability.
(j) Except as set forth on Schedule 3.19(j), the consummation of
the transactions contemplated hereby, either alone or in combination with
another event, with respect to each director, officer, employee and
consultant of the Company, will not result in (i) any payment (including,
without limitation, severance, unemployment compensation or bonus
payments) becoming due from the Company or under any Company Employee
Plan, (ii) any increase in the amount of compensation or benefits payable
to any such individual, or (iii) any acceleration of the vesting or timing
of payment of benefits or compensation payable to any such individual. No
Company Employee Plan provides benefits or payments contingent upon,
triggered by, or increased as a result of a change in the ownership or
effective control of the Company.
3.20 Insurance. Schedule 3.20 sets forth a true, complete and correct
list, and a summary description of the coverage provided thereby (including
expiration dates) of each insurance policy maintained by the Company on its
assets or in relation to the Business. To the Knowledge of the Sellers, such
policies insure the Company in amounts and against losses and risks customary
and sufficient for businesses similar to the Business. All of such policies are
in full force and effect. All premiums due on such insurance policies on or
prior to the date hereof have been paid and there is no ground for cancellation
or avoidance of any such policies or any increase in the premiums thereof, or
for reduction of the coverage provided thereby. There are no Material pending
claims with respect to either of the Company or its properties or assets under
any such insurance policies, and there are no Material claims as to which the
insurers have notified the Company or either of the Sellers that they intend to
deny liability. There is no existing default under any such insurance policies.
3.21 Employees and Labor Matters.
(a) No employee or director of the Company is bound by any Contract
with any other Person that is violated or breached by such employee or
director performing the services he or she is performing for the Company
or that in any way adversely affects or will affect the performance of his
or her duties as an employee or director of the Company. Except as set
forth on Schedule 3.21(a), each employee of the Company is employed on an
at-will basis, and the Company does not have any written or oral agreement
with any of its employees which would interfere with the Company's ability
to discharge such employees. Except as expressly contemplated by this
Agreement and the Related Documents, neither the Company nor either of the
Sellers has promised or represented to the Company's respective
shareholders, directors, officers, employees, consultants, independent
contractors, agents, representatives or other
21
personnel that any of such Persons will be employed or engaged by or
receive any particular benefits from the Company or any of its Affiliates
on or after the Closing Date.
(b) There is no collective bargaining agreement or union Contract
binding on the Company. There is no pending, or, to the Knowledge of the
Sellers, threatened labor strike, dispute, slowdown, picketing, boycott,
organization drive, stoppage or any other interference with the operation
or conduct of the Business or against the Company (collectively, "Work
Interferences"). There are no filed, pending or, to the Knowledge of the
Sellers, threatened injunctions against the Company which would have the
effect of constituting a Work Interference. There have been no Work
Interferences within the past five (5) years.
(c) There are no unfair labor practice charges or complaints,
minimum wage or overtime or equal pay charges or complaints, occupational
safety and health charges or complaints, wrongful discharge charges or
complaints, employee grievances, discrimination claims or workers'
compensation claims pending or, to the Knowledge of the Sellers,
threatened against the Company before any Governmental Authority. Neither
the Company nor either of the Sellers has received notice from any
Governmental Authority of any alleged violation of applicable Law that
remains unresolved respecting employment and employment practices, terms
and conditions of employment, or wage and hours.
(d) Except as set forth on Schedule 3.21(d), neither of the Company
nor any other Person has any obligations for severance or other payments
the Company's employees arising out of the transactions contemplated by
this Agreement or otherwise.
3.22 Brokers and Finders. Except as set forth on Schedule 3.22, no
broker or finder has acted for either the Company or the Sellers in connection
with this Agreement, the Related Documents or the transactions contemplated by
this Agreement or the Related Documents, and no broker or finder is entitled to
any brokerage or finder's fee or other similar payment from either the Company
or the Sellers with respect to this Agreement, the Related Documents or such
transactions.
3.23 Relationships with Related Persons. No shareholder, Affiliate,
officer, director, employee, agent or representative of the Company, nor any
spouse or child of any of them or any Person associated with any of them (each a
"Related Person"), has any interest in any assets or properties used in or
pertaining to the Business, or is a party to any Contract with, or has any claim
or right against, or owes any amounts to, the Company (except for Contracts
listed in Schedule 3.13(a)). No shareholders, Affiliates, officers, directors,
employees, agents or representatives of the Company nor any Related Person owns
or has owned, directly or indirectly, and whether on an individual, joint or
other basis, any equity interest or any other financial or profit interest in a
Person that (i) has had business dealings with the Company or (ii) has engaged
in competition with the Company.
3.24 Taxes.
(a) The Company has timely filed or has caused to be filed with the
appropriate taxing authorities all Returns required to be filed by it or
on its behalf (taking into account any extension of time to file). The
information on such Returns is complete and accurate in all material
respects. The Company has paid or has caused to be paid on a timely basis
all Taxes (whether or not shown on any Return) due and payable by it or on
its behalf,
22
except for Taxes which the Company believes in good faith are not due and
payable because they are being diligently contested by appropriate
Proceedings and for which adequate reserves have been set aside on its
books to the extent required by GAAP. There are no Liens for Taxes (other
than for current Taxes not yet due and payable) upon the assets of the
Company.
(b) No unpaid (or unreserved in accordance with GAAP on the
Financial Statements or Interim Financial Statements) deficiencies for
Taxes have been claimed, proposed or assessed by any taxing or other
Governmental Authority with respect to the Company for any Pre-Closing
Period that have not been finally settled and paid, and, except as set
forth on Schedule 3.24(b), there are no pending or, to the Knowledge of
the Sellers, threatened audits, investigations or claims or issued and
outstanding assessments for or relating to any liability in respect of
Taxes of the Company. The Company has not requested any extension of time
within which to file any currently unfiled Returns in respect of any
Taxes, and no extension or waiver of a statute of limitations relating to
any Taxes is in effect with respect to the Company.
(c) (i) The Company has made provision for all Taxes payable by it
or on its behalf with respect to any Pre-Closing Period which have not
been paid prior to the date hereof consistent with the historic practice
of the Company; (ii) the provisions for Taxes with respect to the Company
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) as set forth in the Financial
Statements and Interim Financial Statements are adequate to cover all
Taxes with respect to the periods covered thereby; (iii) the Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third Person; (iv) there are no
advance tax rulings in respect of any Tax pending between the Company and
any taxing authority; (v) the Company is not liable for Taxes of any other
Person (other than AMF and its subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign
Law), or as transferee or successor, or otherwise (other than withholding
taxes incurred and paid in the Ordinary Course of Business), or is
currently under any contractual obligation to or a party to any tax
sharing agreement or any other Contract providing for payments by the
Company with respect to Taxes; (vi) the Company is not a party to any
joint venture, partnership or other arrangement or Contract which could be
treated as a partnership for income tax purposes; (vii) the Company has
not entered into any sale-leaseback or any leveraged lease transaction;
(viii) the Company is not a party to any Contract or plan that could
result after the Closing (taking into account the transactions
contemplated by this Agreement), separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of section
280G of the Code or would give rise to an excise tax under section 4999 of
the Code (or any corresponding provision of Law); (ix) Schedule 3.24(c)-1
contains a list of all jurisdictions in which the Company has filed a
Return, and no written claim has ever been made by a taxing authority in a
jurisdiction where the Company does not currently file Returns that the
Company is or may be subject to taxation by that jurisdiction; (x) the
Company has not filed or been included in a combined, consolidated or
unitary return (or substantial equivalent thereof) of any Person other
than one of which AMF was the parent; (xi) the Company is not obligated
under any Contract with respect to industrial development bonds or other
obligations with respect to which the excludability from gross income of
the holder for income tax purposes could be affected by the transactions
contemplated hereunder; (xii) the Company is not and has not been a United
States real property holding corporation (as defined in section 897(c)(2)
of the Code) during the applicable period specified in section
897(c)(1)(A)(ii)
23
of the Code; (xiii) the Company is not a "consenting corporation" under
section 341(f) of the Code; (xiv) the Company has not has engaged in any
transaction for which its participation is required to be disclosed under
Treasury Regulation Section 1.6011-4; (xv) the Company nor any predecessor
of the Company by merger or consolidation has within the past three (3)
years been a party to a transaction intended to qualify under Section 355
of the Code or under so much of Section 356 of the Code as relates to
Section 355 of the Code; (xvi) the Company will not be required to include
any item of income in, or exclude any item of deduction from, taxable
income for any Tax period after the Closing Date as a result of any change
in accounting method for any Pre-Closing Period under Section 481 of the
Code (or any analogous or comparable provision of U.S. state or local or
non-U.S. Tax law); (xvii) the Company will not be required to include any
item of income in, or exclude any item of deduction from, taxable income
for any Tax period after the Closing Date as a result of any deferred
intercompany gain or excess loss account described in Treasury Regulations
under Section 1502 of the Code (or any corresponding or similar provision
of state, local or non-U.S. Tax law) arising from any transaction that
occurred prior to the Closing Date; (xviii) the Company will not be
required to include any item of income in taxable income for any Tax
period after the Closing Date as a result of any installment sale or open
transaction disposition made prior to the Closing Date; (xix) the Company
will not be required to include any item of income in taxable income for
any Tax period after the Closing Date as a result of any prepaid amount
received on or prior to the Closing Date; (xx) all material elections with
respect to Taxes affecting the Company as of the date hereof are set forth
in Schedule 3.24(c)-2; and (xxi) the Company has not has made an election
or is required to treat any of its assets as owned by another Person for
income tax purposes or as tax-exempt bond financed property or tax-exempt
use property within the meaning of section 168 of the Code (or any
corresponding provision of Law).
3.25 Environmental and Safety Matters. Except as set forth on Schedule
3.25:
(a) The Company is in compliance in all material respects with all
Environmental Laws and Environmental Permits in connection with the
ownership, use, maintenance or operation of the Business and, to the
Knowledge of the Sellers, there are no circumstances related to the
current or former operations of the Company that could give rise to
liability under any Environmental Laws.
(b) There are no pending or to the Knowledge of the Sellers
threatened actions by any Person claiming that the Company's current or
former properties or assets are not, or that the Company's operations have
not been conducted, in compliance in all material respects with all
Environmental Laws.
3.26 Warranties; Product Liability; Etc.
(a) The Sellers have provided to the Buyer complete and correct
copies of all standard terms and conditions of sale (including applicable
guaranty, warranty and indemnity provisions) made by the Company covering
or relating to each of the products supplied or sold by, and services
provided by, the Company. Except as set forth on Schedule 3.26(a) or
otherwise required by Law, no product supplied or sold by, or service
provided by, the Company is subject to any guaranty, warranty or other
indemnity, express or implied, beyond such standard terms and conditions.
24
(b) To the Knowledge of the Sellers, there are no losses, claims,
damages, expenses or liabilities (whether absolute, accrued, contingent or
otherwise) of the Company asserted and arising out of or based upon
incidents occurring on or prior to the Closing Date with respect to: (i)
any product liability or any similar claim that relates to any of the
products supplied or sold by the Company to others; (ii) the delivery of
faulty services by the Company; or (iii) any claim for the breach of any
express or limited product warranty, or any similar claim that relates to
any product supplied or sold, or any service delivered, by the Company,
and the Sellers have no Knowledge of any product or service defects which
could give rise to any such losses, claims, damages, expenses or
liabilities.
(c) To the Knowledge of the Sellers, there exists no basis for the
withdrawal or suspension of any approval or consent of any Governmental
Authority, if any, with respect to any product supplied or sold by the
Company. Schedule 3.26(c) sets forth a list and brief description of all
correspondence received or sent by or on behalf of the Company during the
past five (5) years from or to any Governmental Authority with respect to
a contemplated or actual recall, withdrawal, or suspension from the market
of any product supplied or sold by the Company. Copies of all such
correspondence have previously been made available to the Buyer.
3.27 Receivables and Payables. All accounts and notes receivable of the
Company reflected on the Financial Statements or Interim Financial Statements or
on the accounts receivable ledger of the Company as of the date hereof have
arisen in the Ordinary Course of Business, represent valid obligations to the
Company arising from bona fide transactions in the Ordinary Course of Business,
are fully collectible subject to potential write-offs not in excess of reserves
therefor set forth on the 2004 Balance Sheet and, except as set forth on
Schedule 3.27, are not subject to claims or setoff or other defenses or
counterclaims. The Sellers have disclosed to the Buyer all material relevant
information regarding the outstanding accounts and notes receivable of the
Company, including, without limitation, the relationship between the Company and
the relevant debtors, the identity and contact information of such debtors, the
amount of the debt outstanding, the date such amounts are due and payable, and
the time period for which the debts have remained unpaid. All accounts and notes
payable by the Company reflected on the Financial Statements or Interim
Financial Statements or on the accounts payable ledger of the Company as of the
date hereof arose in bona fide transactions in the Ordinary Course of Business.
All items which are required by GAAP to be reflected as receivables and payables
on the Financial Statements and Interim Financial Statements and on the books
and records of the Company are so reflected and have been recorded in accordance
with GAAP in a manner consistent with past practice.
3.28 Absence of Certain Business Practices. The Company and its
Affiliates or any other Person acting with authority on behalf of any of them,
or for which any of them would have liability, acting alone or together, has not
with respect to the Business: (i) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, trading
company, shipping company, Governmental Authority, governmental employee or
other Person with whom the Company has done business directly or indirectly in
violation of any Law; or (ii) directly or indirectly in violation of any Law
given or agreed to give any gift or similar benefit to any customer, supplier,
trading company, shipping company, Governmental Authority, governmental employee
or other Person who is or may be in a position to help or hinder the Business
(or assist the Company in connection with any actual or proposed transaction)
which (A) may subject the Company to any damage or penalty in any civil,
25
criminal or governmental litigation or Proceeding, (B) if not given in the past,
may have resulted in a damage or penalty to the Company, or (C) if not continued
in the future, may result in a damage or penalty to the Company or subject the
Company to suit or penalty in any private or governmental litigation or
Proceeding. The Company has conducted the Business in a manner that complies
with the United States Foreign Corrupt Practices Act and any other applicable
Law relating to corruption or prohibited business practices.
3.29 Books and Records. The books of account, stock books, minute books
and other records of the Company with respect to the Company and the Business,
including with respect to its operations, employees and properties, are true,
complete and correct, have been maintained in the usual, regular and ordinary
manner, all entries with respect thereto have been accurately made, and all
transactions have been accurately accounted for therein.
3.30 Bank Accounts and Powers of Attorney. Schedule 3.30-1 sets forth
the name of each bank in which the Company has an account, lock box or safe
deposit box, the number and type of each such account, lock box and safe deposit
box, and the names of all Persons authorized to draw thereon or who have access
thereto. Except as set forth on Schedule 3.30-2, no Person holds any power of
attorney the Company.
3.31 Restrictions on Business Activities. Except as set forth on
Schedule 3.31, there is no Order binding upon the Company or either Seller or,
to the Knowledge of the Sellers, threatened that has or could reasonably be
expected to have the effect of restricting, prohibiting or impairing the conduct
or any business practice of the Company or the Business as presently conducted
or as proposed to be conducted, including any supply or sale of any product or
provision of any service by the Company, any acquisition of property by the
Company, or the hiring of employees by the Company.
3.32 Knowledge and Sophistication of the Sellers. The Sellers
understand and agree with the terms and conditions under which the Shares are
being sold to the Buyer and under which the Purchase Price will be paid to the
Sellers including the valuation of the Shares and determination of the Purchase
Price, the Sellers' indemnification obligations and the Buyer's rights set forth
in this Agreement and the Related Documents. The Sellers have had the
opportunity to consult with counsel and tax, accounting and other advisors
regarding this Agreement and the Related Documents to which the Sellers are a
party and the transactions contemplated hereby and thereby and have undertaken
such consultations as the Sellers deem necessary or appropriate in connection
therewith.
3.33 Disclosure. To the Sellers' Knowledge, no representation or
warranty by the Sellers contained in this Agreement or any other Related
Document to which either Seller is a party, nor any statement or certificate
furnished by the Sellers or the Company to the Buyer or their representatives in
connection herewith or therewith or pursuant hereto or thereto, contains any
untrue statement of a material fact, or omits to state any material fact
required to make the statements contained herein or therein not misleading. The
Sellers have disclosed to the Buyer in writing all material facts Known to the
Sellers which would have or reasonably could result in a Material Adverse
Change.
26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Sellers that:
4.1 Organization and Qualification. The Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and has all requisite power and authority to
conduct its business as presently conducted and to own and lease its property
and assets.
4.2 Authorization. The Buyer has full legal power and authority to
enter into and carry out its obligations under this Agreement and the other
relevant Related Documents and is not under any prohibition or restriction,
contractual, statutory or otherwise, against doing so. Each of the Agreement and
each Related Document to which the Buyer is a party (i) has been duly executed
and delivered by the Buyer and (ii) constitutes a legal, valid, and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other Laws affecting the rights of creditors generally
and by general principles of equity.
4.3 Consents and Approvals. Except as set forth on Schedule 4.3
(collectively, the "Buyer Required Consents"), no consent, approval or
authorization of, or declaration or notice to, or filing or registration with,
any Governmental Authority or any other Person is required to be made or
obtained by the Buyer in connection with the execution, delivery and performance
of this Agreement and the Related Documents by the Buyer.
4.4 No Violations or Conflicts. Neither the execution and delivery of
this Agreement or the Related Documents by the Buyer nor the consummation by the
Buyer of the transactions contemplated by this Agreement or the Related
Documents does or will, directly or indirectly (with or without notice or lapse
of time or both), (i) violate any provision of the Buyer's organizational
documents, (ii) result in a violation or breach of, or constitute a default or
an event of default under, any Material Contract, Material Permit, instrument or
other Material obligation to which the Buyer is a party or by which any of its
properties or assets is bound, or (iii) violate any Law or Order to which the
Buyer is subject.
4.5 Brokers and Finders. Except as set forth on Schedule 4.5, no broker
or finder has acted for such Buyer in connection with this Agreement, the
Related Documents or the transactions contemplated by this Agreement or the
Related Documents, and no broker or finder is entitled to any brokerage or
finder's fee or other similar payment from such Buyer with respect to this
Agreement, the Related Documents or such transactions.
4.6 Investment Intent. The Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the United States Securities Act of 1933, as amended (the "Securities
Act"). The Buyer acknowledges that the Shares are not registered under the
Securities Act or any securities Laws, and are being offered and sold in
reliance on exemptions for transactions not involving any public offering.
27
4.7 Knowledge and Sophistication of Buyer. The Buyer understands and
agrees with the terms and conditions under which Shares are being purchased by
the Buyer. The Buyer has had the opportunity to consult with counsel and tax,
accounting and other advisors regarding this Agreement and the Related Documents
to which the Buyer is a party and the transactions contemplated hereby and
thereby and has undertaken such consultations as the Buyer deems necessary or
appropriate in connection therewith.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Access to Information. From the date hereof until the Closing, the
Buyer and its counsel, accountants, and other representatives shall have full
reasonable access during normal business hours to all properties and facilities
of the Company and to the books, accounts, records, Contracts, and documents of
or relating to the Company and the Business. During such period, the Sellers
shall promptly furnish or cause to be furnished to the Buyer and its
representatives all data and information concerning the business, finances,
properties, facilities, assets and personnel of the Company and the Business
that may reasonably be requested by the Buyer or its representatives, and the
Sellers shall make available to the Buyer and its representatives the
appropriate individuals (including officers, employees, accountants, counsel and
other professionals) for discussion of the business, finances, properties,
facilities, assets and personnel of the Company and the Business.
Notwithstanding the foregoing, the Buyer and the Sellers agree that (i) without
the consent of the Sellers, the Buyer shall not seek any information during
interviews with key employees of the Company that will reveal trade secrets or
the identification of any customers of the Subsidiary unless a representative of
the Sellers is present at such interview as contemplated by clause (ii) below;
and (ii) at the reasonable request of the Sellers, interviews with key employees
of the Company shall be conducted in the presence of a representative of the
Sellers designated by the Sellers.
5.2 Conduct of Business.
(a) From the date hereof until the Closing Date, the Sellers shall
cause the Company to in all material respects conduct the Business only in
the Ordinary Course Business and, without limiting the foregoing, to use
its commercially reasonable efforts to (i) maintain its corporate
existence in good standing, (ii) maintain the general character of the
Business, (iii) preserve the present business relationships of the Company
with its customers, suppliers, employees, independent contractors and
other Persons with which it has business relations, (iv) maintain in
effect all of its presently existing insurance coverage (or substantially
equivalent insurance coverage) in respect of or relating to the Business,
and (v) perform all Contracts or other obligations to which it is a party
or to which its properties or assets are bound.
(b) Without limiting the provisions of Section 5.2(a), from the
date hereof until the Closing Date, the Sellers shall not, and shall cause
the Company not to, directly or indirectly, without the prior written
consent of the Buyer, take, or propose to take, any affirmative action, or
fail to take any reasonable action within their control, the likely result
of which would be any of the changes or events listed in Section 3.10
28
hereof.
5.3 Required Consents and Approvals. As promptly as practicable after
the date of this Agreement, the Sellers shall, and shall cause the Company to,
make all filings required to consummate the transactions contemplated hereby,
and will cooperate with the Buyer with respect to all filings that the Buyer
elects to make or that are required to consummate the transactions contemplated
hereby. Between the date of this Agreement and the Closing Date, the Sellers
shall, and shall cause the Company to, and the Buyer shall, use commercially
reasonable efforts to obtain the Required Consents identified in Schedule 3.5
and the Buyer Required Consents identified in Schedule 4.3, as applicable, and
any other authorization, consent, approval or waiver of any other Person whose
authorization, consent, approval or waiver shall be required for the
consummation of the transactions contemplated by this Agreement and the Related
Documents or for the conduct of the Business by the Buyers immediately after
giving effect to the Closing. Each of the Sellers, on the one hand, and the
Buyer, on the other hand, shall cooperate, to the extent reasonably requested by
the other, in connection with the foregoing.
5.4 Notification of Certain Matters. Between the date of this Agreement
and the Closing Date, the Sellers shall promptly notify the Buyer in writing if
the Sellers become aware of any breach at any time of any of the Sellers'
representations, warranties or covenants contained herein. Should any such
breach require any change to the Schedules being delivered concurrently with the
execution of this Agreement, the Sellers shall promptly deliver to the Buyer a
supplement to the Schedules specifying such change; provided, however, that such
delivery shall not affect any rights of the Buyer set forth herein. Without
limiting the foregoing, between the date hereof and the Closing Date, the
Sellers shall promptly notify the Buyer of any known change that could have a
material adverse effect on the business, operations, results, properties,
assets, liabilities, prospects or condition (financial or otherwise) of the
Business, or of the institution of or, if Known by the Sellers, the threat of
institution of Proceedings against the Company or the Sellers related to the
Business, or the occurrence or existence of unasserted Proceedings Known to the
Sellers that are probable of assertion.
5.5 No Transfers by Sellers or Company. From and after the date hereof
and until the earlier of the Closing Date or the termination of this Agreement
in accordance with its terms, the Sellers shall not, and shall cause the Company
not to, assign, transfer, mortgage, pledge or otherwise dispose of or grant or
suffer to exist any Lien on any or all of the capital stock of the Company (or
any interest therein).
5.6 No Negotiation. Until such time, if any, that this Agreement is
terminated in accordance with its terms, the Sellers shall not, and shall cause
the Company and its respective representatives not to, directly or indirectly,
solicit, initiate, encourage or entertain any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any inquiries or proposals from, any Person (other than the Buyer)
relating to any business combination transaction of the Company, including the
sale of any of the shares of capital stock of the Company, any merger or
consolidation, or the sale of the Business or of the assets or capital stock of
the Company. In the event that the Sellers, the Company, or a representative of
any of them receives any such unsolicited inquiry or proposal, or obtains
information that such is likely to be made, the Sellers shall provide the Buyer
with immediate notice thereof.
5.7 Confidentiality (through Closing Date). Except as otherwise
required in the performance of obligations under this Agreement or as otherwise
required by Law, any non-public information received by a party or its advisors
from another party shall be kept confidential and shall not
29
be used or disclosed for any purpose other than in furtherance of the
transactions contemplated by this Agreement. Upon any termination of this
Agreement, the parties shall promptly return any non-public information in their
possession. The covenants contained in this Section 5.7 shall survive any
termination of this Agreement until the earlier of (i) three (3) years] from the
date hereof or (ii) the date when such information becomes generally available
to the public other than as a result of an unauthorized disclosure by any
Person, but shall terminate at the Closing, if it occurs, with respect to the
Buyer's obligation to keep confidential and to not use or disclose any
non-public information concerning the Company or the Business.
5.8 Transfer of Excluded Assets. Prior to the Closing Date, the Sellers
shall cause the transfer of certain assets of the Company as set forth on
Schedule 5.8 to Markoff or an Affiliate of Markoff (other than the Company).
5.9 Closing Conditions. From the date hereof until the Closing Date,
the Sellers, on the one hand, and the Buyer, on the other hand, shall use
commercially reasonable efforts to cause the closing conditions in Section 7.1
and 7.2, respectively, to be satisfied.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 Proprietary Information, Confidential Records, Intellectual
Property Rights.
(a) Proprietary Information. Markoff acknowledges that in
connection with his employment with and/or control of the Company, of
necessity he has regularly developed and had access to, and use of,
proprietary information and confidential records (as each such term is
defined below). Markoff covenants that he shall not, and shall cause his
Affiliates not to, at any time after the Closing Date, directly or
indirectly, use for his or its own purpose or for the benefit of any
Person other than the Buyer at the Buyer's request, or disclose, any
proprietary information to any Person, unless such use or disclosure has
been authorized in writing by the Buyer. For purposes of this Agreement,
the term "proprietary information" shall include all Intellectual Property
as well as all information that has or could have commercial value or
other utility in the business in which the Company is currently engaged or
is contemplating engaging, and all information the unauthorized disclosure
of which could be detrimental to the interests of the Company, whether or
not specifically labeled as confidential or proprietary by the Company. By
way of example, "proprietary information" includes, without limitation,
the following: (i) the name and address of any customer, vendor or
Affiliate of the Company and any information concerning the transactions
or relations of any customer, vendor or Affiliate of the Company with the
Company or any of its shareholders, directors, officers, employees,
agents, consultants, representatives and/or personnel; (ii) any
information concerning any product, technology or procedure employed by
the Company but not generally known to its customers, vendors or
competitors, or under development by or being tested by the Company but
not at the time offered generally to its customers or vendors; (iii) any
information relating to computer software or systems used by the Company
other than off-the-shelf software and systems furnished by third party
vendors; (iv) any business plans, budgets, advertising or marketing plans,
pricing or marketing methods, sales margins, cost of goods, cost of
material, capital structure, operating results, or borrowing arrangements;
(v) any information belonging to customers, vendors or
30
Affiliates of the Company or any other Person which the Company has agreed
to hold in confidence; (vi) any Intellectual Property covered by Section
6.1(c); (vii) any other information which is generally regarded as
confidential or proprietary (including, without limitation, records of
sales and profits); (viii) salary, staffing and employment information;
(ix) information contained in any of the Company's written or oral
policies and procedures or manuals; and (x) all materials relating to any
of the foregoing, whether in a handwritten, printed, graphic, video,
audio, electronic or other medium. Information that is not novel or
copyrighted or patented may nonetheless be proprietary information. The
term "proprietary information" shall not include information generally
available to and known by the public (other than by reason of a breach of
Markoff or other Persons who were under confidentiality obligations as to
such information).
(b) Confidentiality and Surrender of Records. The Sellers shall not
at any time directly or indirectly publish, make known or in any fashion
disclose any material confidential records to, or permit any inspection or
copying of confidential records by, any Person, except for the Sellers'
independent attorneys on a need to know basis, provided that such
attorneys agree to be bound by the provisions of this Section 6.1. For
purposes hereof, "confidential records" means the following items that
relate to or are connected with the Business: all correspondence,
memoranda, files, manuals, books, lists, financial records, operating or
marketing records, magnetic tape, or electronic or other media or
equipment of any kind which may be in the possession of or accessible to
the Sellers or the Company or under any of their control which contain any
proprietary information. All confidential records shall be and remain the
sole property of the Buyer or the applicable Company from and after the
Closing Date.
(c) Markoff Intellectual Property. All Intellectual Property
related to or used (currently or in the past) by the Business owned,
conceived or made by Markoff on or prior to the Closing Date, either alone
or jointly with others, including any Licensed Rights, shall be, as of the
Closing Date, assigned to and shall belong to the Company. Markoff hereby
agrees to promptly perform all actions reasonably requested by the Buyer
to establish and confirm the ownership of such Intellectual Property by
the Company. Any Intellectual Property not related to or used (currently
or in the past) by the Business owned, conceived or made by Markoff shall
remain the property of Markoff.
(d) Certain Permitted Disclosures and Uses. Sections 6.1(b) and (c)
shall not prevent any disclosure required by Law or Order of a court or
Governmental Authority provided that the relevant Seller shall, prior to
any such disclosure, give the Buyer and the Company prompt notice of any
such requirement, shall cooperate with the Buyer and the Company in
obtaining a protective order or other means of protecting the
confidentiality of the Company's proprietary information and confidential
records, and shall disclose only that information that is legally required
to be disclosed.
6.2 Non-Competition/Non-Solicitation.
(a) From the date of this Agreement until the sooner of (1) the
fourth (4th) anniversary of the date of this Agreement, and (2) the date
that none of the Buyer, the Company and their Affiliates is any longer
engaged in the business of the purchase and sale of precious metals on a
wholesale basis (the "Noncompete Term"), Markoff may not, and shall cause
his
31
Affiliates not to, in the Territory, directly or indirectly own, manage,
operate, join, control, participate in, invest in or otherwise provide
assistance, in any manner, including, without limitation, as an officer,
director, employee, independent contractor, partner, manager, member,
principal, consultant, advisor, agent, proprietor, trustee or investor,
any Competing Business, except that ownership of five percent (5%) or less
of the stock or other securities of a corporation, the stock of which is
listed on a national securities exchange or is quoted on the Nasdaq
National Market will not constitute a breach of this Section 6.2(a), so
long as Markoff does not in fact have the power to control, or direct the
management of, or is not otherwise an active, direct or indirect
participant in the business of such entity, including, without limitation,
as an officer, director, employee, independent contractor, partner,
manager, member, principal, consultant, advisor, agent, proprietor or
trustee, and provides no services nor gives any business advice to such
entity. For purposes hereof, "Competing Business" shall mean any Person
engaged directly or indirectly, in the Territory, in any business engaged
in by the Company as of the date hereof, which is the purchase and sale of
precious metals on a wholesale basis and related services, and "Territory"
shall mean the United States of America, Austria, Belgium, Denmark,
France, Germany, Italy, Luxembourg, Norway, Switzerland, the Netherlands
and the United Kingdom. For purposes of Section 6.2 only, "Affiliate"
shall mean, with respect to any Person, (1) any other Person at the time
directly or indirectly controlling, controlled by or under common control
with that Person, (2) any other Person of which that Person at the time
owns or has the right to acquire, directly or indirectly, ten percent
(10%) or more on a consolidated basis of any class of the capital stock or
other ownership interest, or (3) any other Person which at the time owns
or has the right to acquire, directly or indirectly, ten percent (10%) or
more of any class of the capital stock or other ownership interest of that
Person. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of
voting securities, by contract or otherwise.
(b) During the Noncompete Term, Markoff shall not, directly or
indirectly, and shall cause his Affiliates not to directly or indirectly
(i) solicit or encourage any employee or agent of the Company or the Buyer
to terminate his or her employment with the Company or the Buyer, or to
seek or accept employment or any other affiliation with any other Person,
or (ii) divert, employ or hire away or attempt to divert, employ or hire
away any employee or agent of the Company or the Buyer, nor assist a
Competing Business or any other Person in doing any of the foregoing,
provided, however, that this restriction shall not apply to general
employment solicitations made through newspapers or periodicals of general
circulation, or to the hiring of any former employee of the Company who,
after such employee's termination of employment with the Company (without
breaching any employment agreement, if any), independently seeks
employment with Markoff or any of his Affiliates without being solicited
by Markoff or any of his Affiliates.
(c) During the Noncompete Term, Markoff shall not, directly or
indirectly, and shall cause his Affiliates not to directly or indirectly,
(i) solicit, divert or appropriate to or for a Competing Business any
Person that is a customer or supplier of the Company as of the date hereof
or was a customer or supplier of the Company at any time during the twelve
(12) month period prior to the date hereof (each a "Company Customer or
Supplier"), (ii) attempt to influence, persuade or induce any Company
Customer or Supplier to cease doing business with, or to reduce the amount
of business customarily done with, or not to commence a business
32
relationship with, the Company, or (iii) otherwise interfere in any manner
in the relationship of the Company with any Company Customer or Supplier,
in each case whether or not the relationship between the Company and such
Company Customer or Supplier was originally established in whole or in
party through the efforts of Markoff.
(d) Notwithstanding any other provision in this Section 6.2, this
Section shall not limit Markoff's right to have an ownership or other
interest (whether as principal, shareholder, member, partner, director,
officer, agent, employee, consultant or otherwise) in or provide
assistance to the legal entities and businesses involving precious metals
in which Markoff has a direct or indirect interest as of the date hereof
(a list of which is attached hereto as Schedule 6.2(d)), which Markoff
represents and warrants, except as described on Schedule 6.29d), do not
presently conduct and will not conduct in the future a Competing Business;
provided, however, that in the event that any of the entities or
businesses set forth on Schedule 6.2(d) hereto shall at any time during
the Noncompete Term change the scope or magnitude of any of their existing
business that constitutes a Competing Business, or in fact begin to
conduct a Competing Business, Markoff's interest in such entity or
business (whether direct or indirect) shall be deemed a breach by Markoff
of the terms of Section 6.2(a) above. The parties further acknowledge and
agree that: (A) (1) Markoff is a director, creditor and shareholder of
Goldline Holdings, Inc., (2) Goldline Holdings, Inc. is the parent company
of Goldline International, Inc., (3) Markoff is a director of Goldline
International, Inc., and (4) Markoff is a minority shareholder and does
not control Goldline Holdings, Inc. or Goldline International, Inc. in
Goldline Holdings, Inc, and (B) Markoff holds a minority interest in and
does not control Aurumet Trading, LLC. Provided Markoff is not in breach
of his obligations under Section 6.1 above and recuses himself from any
discussion or vote concerning Goldline Holdings, Inc.'s or Goldline
International Inc.'s, or Aurumet Trading, LLC's, entry into or conduct of
a Competing Business, as applicable, this Section 6.2 shall not limit,
restrict, prohibit or otherwise limit Markoff's involvement as a
shareholder, member, creditor or director of Goldline Holdings, Inc. or
Goldline International, Inc., or of Aurumet Trading, LLC, as applicable,
and so long as Markoff does not have a controlling interest in those
entities, any action taken by Goldline Holdings, Inc. or Goldline
International, Inc., or by Aurumet Trading, LLC, as applicable, shall not
constitute a violation of this Section 6.2.
6.3 Buyer Non-Compete. Neither the Buyer nor any Affiliate of the Buyer
shall, at any time following the Closing, enter into any new business under the
name "A-Xxxx Precious Metals, Inc." which competes directly or indirectly with
the business of Goldline International, Inc. as conducted on the date hereof.
6.4 Use of Business Name.
(a) Neither the Buyer nor any Affiliate of the Buyer shall, at any
time following the Closing, operate any business using the term "A-Xxxx"
(i) the corporate name of which does not begin with the words "A-Xxxx
Precious Metals," and (ii) which is not in the business of the purchase
and sale of precious metals or the provision of collateralized loan
products and trading services related to precious metals. Furthermore,
neither the Buyer nor any Affiliate of the Buyer shall, at any time
following the Closing, use more than one derivative of the name "A-Xxxx
Precious Metals, Inc."
33
(b) In the event that the Buyer and its Affiliates cease to use the
business name "A-Xxxx Precious Metals, Inc." or any derivative of such
name in any of their operations, the Buyer shall promptly offer to
transfer such name and any derivative thereof, including any related
trademarks, to the Sellers for a purchase price of Two Hundred Thousand
Dollars ($200,000.00) cash, on terms and conditions otherwise satisfactory
to the Buyer and the Sellers.
(c) Neither the Sellers nor any Affiliate of the Sellers shall, at
any time following the Closing, conduct any business using the name
"A-Xxxx" (whether alone or in combination with other words) which (i)
competes directly or indirectly with the Business of the Company as
conducted on the date hereof; or (ii) in any way would or would reasonably
be expected to tarnish, disparage or adversely impact the goodwill
associated with the names "A-Xxxx," "A-Xxxx Precious Metals" or any
related trademarks.
6.5 Space Sublease. Following the Closing, the Sellers shall cause AMF
to sublease to the Company that portion of the floor space at 000 Xxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx 00000 being occupied and used by the Company
immediately prior to the Closing Date. In connection therewith, the Sellers
shall, and shall cause AMF to, use all commercially reasonable efforts to aid
the Buyer in obtaining the consent of the landlord of such premises to such
sublease. In the event that the consent of the landlord to such sublease cannot
be obtained, the Sellers shall, and shall cause AMF to, use their commercially
reasonable efforts to secure to the Buyer the benefits of such sublease in some
other manner reasonably acceptable to the Buyer. So long as the Sellers shall,
and shall cause AMF to, use all commercially reasonable efforts to do the
foregoing, the failure of the landlord to consent to the Company's sublease
shall not be deemed a breach by the Sellers of this Section 6.5. Any of AMF, the
Sellers or Goldline International, Inc. shall have the right to terminate the
use of that floor space upon 180 days' prior written notice to the Buyer and the
Company, and the payment of Fifty Thousand Dollars ($50,000.00) cash to the
Company or as otherwise directed by the Company.
6.6 Net Worth Notification. The Buyer shall notify the Sellers in
writing if the tangible net worth of the Company shall fall below $10,000,000
within three (3) Business Days of becoming aware of the same; provided, however,
that the Buyer shall not be required to provide such notification if at such
time the Buyer shall have no outstanding obligations to, and no potential future
obligations to, the Sellers pursuant to this Agreement or any of the Related
Documents.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of the Buyer. The obligations of the
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Sellers set forth in this Agreement or in any Schedule
or certificate delivered pursuant hereto shall be true and correct in all
respects as of the date of this Agreement (except to the extent a
representation or warranty is expressly limited by its terms to another
date) and shall be deemed
34
repeated as of the Closing Date and shall then be true and correct in all
respects (except to the extent a representation or warranty is expressly
limited by its terms to another date), without giving effect to any
supplement to the Schedules delivered after the date hereof.
(b) Agreements and Covenants. The Sellers and the Company shall
have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with
by them on or prior to the Closing Date.
(c) No Material Adverse Change. There shall not have been any
Material Adverse Change.
(d) Compliance with Law. There shall be no Order by any
Governmental Authority or threat thereof, or any Law enacted, entered,
enforced or deemed applicable which would prohibit or render illegal the
transactions contemplated by this Agreement or the Related Documents.
(e) Consents and Approvals. The Sellers shall have obtained the
Required Consents.
(f) No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other Order preventing the
consummation of the transactions contemplated by this Agreement shall have
been issued by any Governmental Authority and remain in effect, nor shall
any Proceeding seeking any of the foregoing be pending.
(g) Secretary's Certificates. The Buyer shall have received a
certificate signed by the Secretary of the Company, certifying that full
and complete copies of the organizational documents of the Company are
attached thereto.
(h) FIRPTA Certificate. The Buyer shall have received from A-Xxxx
Holding a certification, meeting the requirements of Section 1445 of the
Code, dated as of the Closing Date, that A-Xxxx Holding is not a foreign
person as defined in the Code and Treasury Regulations.
(i) Legal Opinion. The Buyer shall have received the opinion of
Xxxxxx Xxxxxxx Xxxxx & Xxxxxx, counsel for the Sellers and the Company, to
be dated the Closing Date and addressed to the Buyer.
(j) Related Documents. Each of the Related Documents shall have
been duly executed by and delivered to all parties thereto.
(k) Additional Documents. The Sellers shall have delivered to the
Buyer each additional document as the Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any of the Sellers'
representations and warranties, (ii) evidencing the performance by the
Sellers and the Company of, or the compliance by the Sellers and the
Company with, any covenant or agreement required to be performed or
complied with by the Sellers or the Company, (iii) evidencing the
satisfaction of any condition referred to in this Section 7.1, or (iv)
otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement and the Related Documents.
35
(l) No Claim. There must not have been made or threatened by any
Person any claim asserting that such Person (i) is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of any shares of capital stock of, or any other voting, equity
or ownership interest in, the Company, or (ii) is entitled to all or any
portion of the Purchase Price.
(m) Resignation of Directors. All of the directors of the Company
shall have resigned from their positions effective upon Closing, and shall
have waived all possible claims against the Company and their shareholders
arising from their service as directors. The Sellers shall have delivered
to the Buyer resignation letters duly executed by each such director, each
in form and substance satisfactory to the Buyer.
(n) Due Diligence. The Buyer shall have completed its due diligence
investigation of the Company to the satisfaction of the Buyer and its
counsel.
(o) Company's Credit Lines. The existing credit lines of the
Company shall have been continued with such amendments as shall have been
consented to by the lenders party thereto.
7.2 Conditions to the Obligations of Sellers. The obligations of the
Sellers to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Buyer set forth in this Agreement or in any Schedule or
certificate delivered pursuant hereto shall be true and correct in all
respects as of the date of this Agreement (except to the extent a
representation or warranty is expressly limited by its terms to another
date) and shall be deemed repeated as of the Closing Date and shall then
be true and correct in all aspects (except to the extent a representation
or warranty is expressly limited by its terms to another date).
(b) Agreements and Covenants. The Buyer shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Closing Date.
(c) Compliance with Law. There shall be no Order by any
Governmental Authority or threat thereof, or any Law enacted, entered,
enforced or deemed applicable which would prohibit or render illegal the
transactions contemplated by this Agreement or the Related Documents.
(d) Consents and Approvals. The Buyer shall have obtained the Buyer
Required Consents.
(e) No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other Order preventing the
consummation of the transactions contemplated by this Agreement shall have
been issued by any Governmental Authority and remain in effect, nor shall
any Proceeding seeking any of the foregoing be pending.
36
(f) Related Documents. Each of the Related Documents shall have
been duly executed by and delivered to all parties thereto.
(g) Additional Documents. The Buyer shall have delivered to the
Sellers each additional document as the Sellers may reasonably request for
the purpose of (i) enabling its or his counsel to provide the opinion
referred to in Section 7.1(j), (ii) evidencing the accuracy of any of the
Buyer's representations and warranties, (ii) evidencing the performance by
the Buyer of, or the compliance by the Buyer with, any covenant or
agreement required to be performed or complied with by the Buyer, (iii)
evidencing the satisfaction of any condition referred to in this Section
7.2, or (iv) otherwise facilitating the consummation or performance of any
of the transactions contemplated by this Agreement and the Related
Documents.
ARTICLE VIII
CLOSING
8.1 Closing. The consummation of the transactions contemplated pursuant
to this Agreement (the "Closing") shall be held at the offices of AMF at 10:00
a.m. local time on the date hereof, or on such other date or at such other time
or place as may be agreed to in writing by the Sellers and the Buyer. The date
on which the Closing actually occurs is herein referred to as the "Closing
Date."
8.2 Deliveries at Closing.
(a) At the Closing, the Sellers will deliver or caused to be
delivered to the Buyer:
(i) certificates representing the Shares, duly endorsed in
blank or accompanied by duly executed stock powers in blank, together with
evidence that all stamp, duty and other Taxes associated with the transactions
contemplated hereby have been paid by the Sellers; and
(ii) all certificates, deliveries and other documents required
by Section 7.1 and not previously delivered.
(b) At the Closing, the Buyer will deliver or cause to be
delivered:
(i) the Closing Payment to the Payment Account; and
(ii) all certificates, deliveries and other documents required
by Section 7.2 and not previously delivered to the Sellers.
(c) Within fourteen (14) days of the Closing Date, the Buyer will
deliver or cause to be delivered the Escrowed Amount to the Escrow
Account.
37
ARTICLE IX
TERMINATION
9.1 Events of Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of the Buyer, on the one hand, and
the Sellers, on the other hand;
(b) by the Buyer, on the one hand, or the Sellers, on the other
hand, if the Closing shall not have occurred by August 31, 2005; provided,
however, that the right to terminate this Agreement under this Section
shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall
have resulted in, the failure of the Closing to occur by such date;
(c) by the Buyer, on the one hand, or the Sellers, on the other
hand, if any Governmental Authority shall have issued an Order or taken
any other action restraining, enjoining or otherwise preventing the
consummation of, or imposing conditions upon, the transactions
contemplated by this Agreement, and such Order shall have become final and
nonappealable;
(d) by the Buyer, on the one hand, or the Sellers, on the other
hand (provided that the terminating party is not then in breach in any
material respect of any representation, warranty, covenant or other
agreement contained herein), if there shall have been a breach in any
material respect of any of the covenants or agreements or any of the
representations or warranties set forth in this Agreement on the part of
the Buyer, if the Sellers are the terminating party, or on the part of the
Sellers, if the Buyer is the terminating party, such that the conditions
in Article VII would not be satisfied, which breach is not cured within
thirty (30) days following the delivery of a written notice of termination
under this clause by the other party, or which breach, by its nature or
timing, cannot be cured prior to the Closing;
(e) by the Buyer, on the one hand, or the Sellers, on the other
hand, if a Bankruptcy Event shall occur with respect to the Company, if
the Buyer is the terminating party, or with respect to the Buyer, if the
Sellers are the terminating party. The Buyer may also terminate this
Agreement if a Bankruptcy Event or a Proceeding shall occur with respect
to A-Xxxx Holding which results in the inability of such Seller to freely
transfer to the Buyers all of the Shares. A "Bankruptcy Event" shall occur
if a party makes a general assignment for the benefit of creditors, or any
Proceeding shall be instituted against such party seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition
of its debts under any Law relating to bankruptcy, insolvency or
reorganization and any such Proceeding is not dismissed within ninety (90)
days, provided that the Buyer or the Sellers, as applicable, shall not be
required to consummate the transactions contemplated by this Agreement
until such Proceeding has been dismissed.
9.2 Effects of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no liability hereunder on
38
the part of any party hereto except that (i) the provisions of Section 5.7
("Confidentiality (through Closing Date)") shall survive as set forth therein,
(ii) the provisions of Article XII ("General Provisions") shall survive
indefinitely and (iii) nothing herein shall relieve any party from liability for
any breach of this Agreement.
9.3 Waiver. At any time prior to the Closing, any of the parties hereto
may (i) extend the time for the performance of any obligation or other act of
any other party hereto or (ii) waive any condition set forth herein, but any
such extension or waiver shall be limited only to the specific matters and with
the effect set forth therein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
ARTICLE X
SURVIVAL; INDEMNIFICATION
10.1 Survival.
(a) All representations, warranties, covenants, and obligations in
this Agreement, the Schedules and any other certificate or document
delivered pursuant to this Agreement will survive the Closing and the
consummation of the transactions contemplated hereby, subject to the
limitations set forth in Section 10.1(b) below. The waiver of any
condition based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of damages, or other remedy
based on such representation, warranty, covenant, or obligation.
(b) The parties' representations and warranties in this Agreement
or in any document or instrument delivered pursuant to this Agreement
shall survive the Closing and shall continue in full force and effect (i)
in the case of the representations and warranties of the Sellers and the
Buyer contained in Sections 3.19, 3.22, 3.24 and 4.5 until thirty (30)
days following the expiration of the applicable statutory period of
limitations with respect to the matter to which such claim relates, (ii)
in the case of the representations and warranties of the Sellers and the
Buyer contained in Sections 3.1, 3.2, 3.3, 4.1 and 4.2, until ten (10)
years following the Closing Date, and (iii) in the case of all other
representations and warranties of the parties, until eighteen (18) months
following the Closing Date. Notwithstanding the preceding sentence, any
representation or warranty in respect of which indemnity may be sought
under Section 10.2 or 10.3 or Article XI shall survive the time at which
it would otherwise terminate pursuant to this Section 10.1(b) if notice of
the breach thereof shall have been given to the party against whom such
indemnity may be sought prior to the expiration of the applicable survival
period. The parties' covenants and agreements under this Agreement shall
survive the Closing for a period of eighteen (18) months unless a shorter
or longer period of performance is specified with respect to such covenant
or agreement.
10.2 Indemnification by the Sellers. The Sellers shall indemnify the
Buyer and its Affiliates (including the Company after the Closing) and their
respective stockholders, directors, officers, partners, members, managers,
employees, consultants, agents, representatives and personnel, in their
capacities as such, and the successors, heirs, personal representatives and
Affiliates of any of them (collectively, the "Buyer Indemnified Parties")
against and hold them harmless from any and all
39
damages, claims, losses, liabilities, costs and expenses (including reasonable
expenses of investigation and attorneys' fees and expenses) (collectively,
"Losses") incurred or suffered by any Buyer Indemnified Party arising out of or
relating to (i) a breach by the Sellers of any representation or warranty made
by the Sellers in this Agreement or in any Related Document, or in any Schedule
or certificate delivered pursuant hereto or thereto, (ii) a failure by the
Sellers to perform or comply with any covenant or agreement on the part of the
Sellers contained herein or in any Related Document, (iii) the operation of the
Business prior to the Closing Date, (iv) the business of any current or former
Affiliate of Markoff other than the Company, (v) any Taxes of the Company for
any Pre-Closing Period, (vi) the occupation and use by the Company of any office
or storage space located at 000 Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx, or
(vii) any claim made by Moda Italia in connection with the matters set forth on
Schedule 3.14.
10.3 Indemnification by the Buyer. The Buyer shall indemnify the
Sellers against and hold them harmless from any and all Losses incurred or
suffered by the Sellers arising out of or relating to (i) a breach by the Buyer
of any representation or warranty made by the Buyer in this Agreement or in any
Related Document, or in any Schedule or certificate delivered pursuant hereto or
thereto, (ii) a failure by the Buyer to perform or comply with any covenant or
agreement on the part of the Buyer contained herein or in any Related Document,
(iii) the operation of the Business from and after the Closing Date, to the
extent such Loss is not indemnifiable by the Sellers pursuant to Section 10.2,
or (iv) any Taxes of the Company for any Post-Closing Period to the extent that
such Taxes are not a liability of the Sellers pursuant to Section 10.2.
10.4 Indemnification; Notice and Settlements.
(a) Whenever any third Person claim shall arise or be asserted for
which indemnification may be sought hereunder (a "Claim"), the party
entitled to indemnification (the "Indemnitee") shall promptly give written
notice to the party obligated to provide indemnity (the "Indemnitor") of
the nature of the Claim, after the receipt by the Indemnitee of reliable
information as to the facts constituting the basis for the Claim and the
amount of the Claim, and shall provide the Indemnitor with copies of all
information provided to the Indemnitee by the third Person making the
Claim with respect thereto; but the failure to timely give such notice or
such information shall not relieve the Indemnitor from any obligation
under this Agreement, except to the extent, if any, that the Indemnitor is
materially prejudiced thereby.
(b) Upon delivery of notice from the Indemnitee of a Claim, the
Indemnitor shall have the right to assume the defense of any such Claim at
its expense, provided that (x) in the reasonable judgment of the
Indemnitee, the Indemnitor has adequate resources to undertake such
defense and satisfy any indemnifiable Losses arising from such Claim and
(y) the selection of counsel is approved by the Indemnitee, which approval
shall not be unreasonably withheld. If the Indemnitee so determines that
the Indemnitor does not have adequate resources, or the Indemnitor shall
elect not to assume the defense of any such Claim, or fails to make such
an election within twenty (20) days after it receives notice pursuant to
Section 10.4(a), or the named parties in any Claim (included impleaded
parties) include the Indemnitor and the Indemnitee, and representation of
the Indemnitor and the Indemnitee by the same counsel would create a
conflict (in which case the Indemnitor shall not be permitted to assume
the defense of such Claim), the Indemnitee shall have the right to defend
such Claim at the expense of the Indemnitor. The Indemnitee shall have the
right to participate in (but not control) the defense of a Claim defended
40
by the Indemnitor hereunder and to retain its own counsel in connection
with such Claim, but the fees and expenses of such counsel shall be at the
Indemnitee's expense unless the Indemnitor and the Indemnitee have
mutually agreed in writing to the retention of such counsel. Unless
otherwise agreed by the Indemnitor, if the Indemnitor is obligated to pay
the fees and expenses of counsel to the Indemnitee, the Indemnitor shall
be obligated to pay only the fees and expenses associated with one
attorney or law firm (plus local counsel as required), as applicable, for
all Indemnitees in any action or series of actions arising out of
substantially the same set of facts and circumstances.
(c) The Indemnitor shall have the right to elect to settle any
Claim in respect of which indemnity may be sought hereunder for which it
has duly assumed the defense without the Indemnitee's written consent only
if the settlement involves only the payment of money damages by the
Indemnitor and includes a complete release of the Indemnitee. Any other
settlement will be subject to the written consent of the Indemnitee, which
consent shall not be unreasonably withheld. The Indemnitee shall have the
right to elect to settle any Claim in respect of which indemnity may be
sought hereunder, for which it has duly assumed the defense, with the
Indemnitor's written consent, which consent shall not be unreasonably
withheld.
(d) With respect to any obligations of the Indemnitor and
Indemnitee which arise pursuant to the provisions of this Article X, the
Indemnitor and Indemnitee agree to cooperate with each other as reasonably
requested by the other.
10.5 Limitations. Notwithstanding the provisions set forth above, the
Sellers shall not be liable to the Buyer for any Loss under Section 10.2(i) or
(iii) unless and until the total of all Losses sustained or incurred by the
Buyer pursuant to Sections 10.2(i) and (iii) (excluding amounts received from
the Company's insurers for all such Losses), shall equal or exceed $200,000;
provided, however, that once this threshold is met, (w) all Losses from dollar
one up to $4,000,000 (excluding amounts received from the Company's insurers for
all such Losses) shall be the liability of the Sellers and shall be recoverable
by the Buyer from the Sellers, (x) the next $4,000,000 worth of Losses
(excluding amounts received from the Company's insurers for all such Losses)
shall be the liability of the Buyer and shall not be recoverable from the
Sellers, (y) the next $4,000,000 worth of Losses (excluding amounts received
from the Company's insurers for all such Losses) shall be the liability of the
Sellers and shall be recoverable by the Buyer from the Sellers, and (z) any
Losses in excess of $12,000,000 (excluding amounts received from the Company's
insurers for all such Losses) shall be the liability of the Buyer and shall not
be recoverable from the Sellers. Notwithstanding the provisions set forth above,
the Buyer shall not be liable to the Sellers for any Loss under Section 10.3(i)
or (iii) unless and until the total of all Losses sustained or incurred by the
Sellers pursuant to Sections 10.3(i) and (iii) (excluding amounts received from
the Sellers' insurers for all such Losses), shall equal or exceed $200,000;
provided, however, that once this threshold is met, (w) all Losses from dollar
one up to $4,000,000 (excluding amounts received from the Sellers' insurers for
all such Losses) shall be the liability of the Buyer and shall be recoverable by
the Sellers from the Buyer, (x) the next $4,000,000 worth of Losses (excluding
amounts received from the Sellers' insurers for all such Losses) shall be the
liability of the Sellers and shall not be recoverable from the Buyer, (y) the
next $4,000,000 worth of Losses (excluding amounts received from the Sellers'
insurers for all such Losses) shall be the liability of the Buyer and shall be
recoverable by the Sellers from the Buyer, and (z) any Losses in excess of
$12,000,000 (excluding amounts received from the Sellers' insurers for all such
Losses) shall be the liability of the Sellers and shall not be recoverable from
the Buyer. The limitations set forth in this Section 10.5 shall
41
not apply with respect to: (i) fraud or intentional misrepresentation by the
Sellers or the Buyer; or (ii) any breach by the Sellers or the Buyer, as
applicable, of the representations and warranties set forth in Sections 3.1,
3.2, 3.3, 4.1 and 4.2.
10.6 Sole and Exclusive Remedy The indemnification obligations of the
Sellers and the Buyer under this Article X shall constitute the sole and
exclusive remedies of Buyer and Sellers, respectively, for the recovery of money
damages with respect to the matters described in Sections 10.2 and 10.3,
respectively. The terms of this Section 10.6 shall not be construed as limiting
in any way whatsoever any remedy other than for the recovery of money damages to
which the Buyer and the Sellers may be entitled.
ARTICLE XI
TAX MATTERS
11.1 Transfer Taxes. The Sellers shall be responsible for the payment
of all stock transfer, stamp, duties, recording and related Taxes, if any,
required to be paid in connection with the transactions contemplated by this
Agreement. The Sellers shall make any required filing with respect to such Taxes
under applicable Law.
11.2 Returns. The Sellers shall cause the Company to file when due all
Returns that are required to be filed by the Company which have a due date on or
before the Closing Date, and the Buyer shall file or cause to be filed when due
all other Returns that are required to be filed by or with respect to the
Company. Returns shall be prepared in a manner consistent with practices
followed in prior years with respect to similar Returns, except as otherwise
required by changes in Law or fact.
11.3 Cooperation. The Sellers, on the one hand, and the Buyer, on the
other hand, shall cooperate fully with each other and make available to each
other in a timely fashion such Tax data and other information and personnel as
may be reasonably required for the payment of any Taxes and the preparation of
any Returns required to be prepared. The Sellers, on the one hand, and the
Buyer, on the other hand, shall make available to the other, as reasonably
requested, all information, records or documents in their possession relating to
Taxes of the Company for all taxable periods thereof ending on, before or
including the Closing Date and shall preserve all such information, records and
documents until the expiration of any applicable Tax statute of limitations or
extensions thereof; provided, however, that in the event a Proceeding has been
instituted for which the information, records or documents are required prior to
the expiration of the applicable statute of limitations, such information,
records or documents shall be retained until there is a final determination with
respect to such Proceeding.
11.4 Purchase Price Adjustment for Tax Purposes. The Sellers and the
Buyer agree to treat any indemnity payment under this Agreement as an adjustment
to the Purchase Price for all Tax purposes and shall take no position contrary
thereto unless required to do so by applicable Tax law pursuant to a
determination as defined in Section 1313(a) of the Code.
11.5 Straddle Periods. In the case of any taxable period that includes
(but does not begin or end on) the Closing Date (a "Straddle Period"), the
portion of the Taxes of the Company for
42
such Straddle Period attributable to the period prior to the close of the
Closing Date shall be treated as Taxes of a Pre-Closing Period for purposes of
Section 10.2. The amount of Straddle Period Taxes of the Company that are
treated as Taxes of a Pre-Closing Period shall be computed (a) in the case of
income, franchise, sales, or similar taxes, pursuant to an interim closing of
the books method by assuming that the Company had a taxable year or period which
ended on the Closing Date, except that exemptions, allowances or deductions that
are calculated on an annual basis, such as the deduction for depreciation, shall
be apportioned on a per-diem basis and (b) in the case of real property Taxes,
personal property Taxes and similar ad valorem obligations, by prorating such
Taxes owed for the Straddle Period on a per-diem basis.
11.6 338(h)(10) Election and Step-Up Tax Benefits. The Sellers, on the
one hand, and the Buyer, on the other hand, agree to comply with, and to
cooperate with the other in furtherance of, the various covenants, agreements
and procedures set forth on Schedule 2.2(a), as applicable.
ARTICLE XII
GENERAL PROVISIONS
12.1 Confidentiality. The Buyer and the Sellers agree that they shall
hold in confidence and shall not disclose to any Person, whether by public
announcement or otherwise, any information with respect to this Agreement or any
Related Document or the transactions contemplated hereby and thereby, including
with respect to the price and terms thereof, without the consent of the other
party. Notwithstanding the foregoing, (i) nothing in this Agreement shall
preclude the Buyer or the Sellers from making any public announcement or filing
required pursuant to any securities Laws or United States or non-United States
stock exchange rules, provided that prior to such announcement or filing, the
filing party shall, to the extent practicable, give the other party a reasonable
opportunity to review and comment on such public announcement or filing, and
(ii) upon consummation of the transactions contemplated by this Agreement, the
Buyer or its Affiliates may make public announcements thereof consistent with
usual and customary practice.
12.2 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by fax (with written confirmation of receipt), or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses or fax numbers
set forth below (or to such other address, attention or fax number as a party
may designate by notice to the other parties given in accordance with this
Section 12.2):
(a) If to the Buyer:
c/o Spectrum Numismatics International, Inc.
00000 Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Telecopier No.:(000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
43
With a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.:(000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
(b) If to the Sellers:
Xxxxxx Xxxxxxx
000 Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopier No.:
Telephone No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
12.3 Governing Law. This Agreement will be governed by the Laws of the
State of California without regard to principles of conflict of laws.
12.4 Jurisdiction and Venue; WAIVER OF JURY TRIAL.
(a) In the event of any controversy or claim arising out of or
relating to this Agreement or the breach or alleged breach hereof, each of
the parties hereto irrevocably (a) submits to the non-exclusive
jurisdiction of the state courts of the State of California, County of Los
Angeles, or the federal district court in and for the Central District of
California located in Los Angeles, (b) waives any objection which it may
have at any time to the laying of venue of any action or proceeding
brought in any such court, and (c) waives any claim that such action or
proceeding has been brought in an inconvenient forum.
(b) THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.5 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed
44
to be a waiver of, or acquiescence in, any breach of any representation,
warranty, covenant or agreement herein, nor shall any single or partial exercise
or waiver of any such right preclude other or further exercise thereof or of any
other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available
to the parties, whether by contract, at Law, in equity or otherwise.
12.6 Entire Agreement; Modification. This Agreement, together with the
Related Documents, supersede all prior agreements, whether written or oral,
between the parties (including, without limitation, the Confidentiality
Agreement dated September 22, 2004 and the Letter of Intent dated May 17, 2005)
with respect to the subject matter hereof and thereof, and constitute the entire
agreement among the parties with respect to the subject matter hereof and
thereof. This Agreement may not be amended, and no provision of this Agreement
may be waived, except by a written agreement executed by each party hereto.
12.7 Assignments; Successors; No Third Party Rights. Neither the Buyer,
on the one hand, or the Sellers, on the other hand, may assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the other party, except that the Buyer may assign this Agreement to
any Affiliate of the Buyer or to any successor to the Business. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors, heirs, personal
representatives, executors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement and the Persons contemplated by Article
X any legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement.
12.8 Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstance shall be
determined by any court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement, or the application of such
provision to any party or circumstance other than those to which it is so
determined to be invalid or unenforceable, shall not be affected thereby, and
each provision hereof shall be enforced to the fullest extent permitted by Law.
If the final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the parties hereto agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration or area of the term or provision,
or to delete specific words or phrases, and to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
12.9 Headings; Construction. The headings in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. In this Agreement (i) words denoting the singular include the
plural and vice versa, (ii) "it" or "its" or words denoting any gender include
all genders, (iii) the word "including" shall mean "including without
limitation," whether or not expressed, and (iv) any reference herein to a
Section, Article, Schedule or Exhibit refers to a Section or Article of, or a
Schedule or Exhibit to, this Agreement, unless otherwise stated. Each party
acknowledges that it has been advised and represented by counsel in the
negotiation, execution and delivery of this Agreement and accordingly agrees
that if an ambiguity exists with respect to any provision of this Agreement,
such provision shall not be construed against any party because such party or
its representatives drafted such provision.
45
12.10 Counterparts. This Agreement may be executed by facsimile and in
two or more counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to
constitute one and the same original instrument.
12.11 Fees and Expenses. Except as otherwise expressly set forth herein
or, with respect to a Related Document, in such Related Document, all fees,
costs and expenses incurred in connection with the negotiation, execution and
delivery of this Agreement, the Related Documents and the performance of the
transactions contemplated hereby and thereby shall be paid by the party
incurring such fees, costs or expenses. Notwithstanding the foregoing, the
prevailing party in any proceeding brought against the other party to enforce
the terms of this Agreement or any rights or obligations hereunder shall be
entitled to receive reimbursement of its reasonable costs, expenses and
attorneys' fees (internal and external) and disbursements, including the
reasonable costs and expenses of experts and internal resources expended,
actually incurred in connection with such proceeding.
12.12 Right of Setoff. Notwithstanding any provision of this Agreement
or any Related Document to the contrary, the parties hereby acknowledge and
agree that, in addition to any other right hereunder or under any Related
Document or otherwise, the Buyer shall be entitled from time to time to set off
against any amounts otherwise required to be paid by the Buyer to the Sellers
pursuant to this Agreement or any Related Document (including, without
limitation, any amounts required to be paid by the Buyer to the Sellers pursuant
to Schedule 2.2(a) or Schedule 2.6 hereof) any amounts owed at such time by the
Sellers to the Buyer or any other Buyer Indemnified Party under this Agreement
or any Related Document by following the procedures set forth in this Section
12.12. Buyer shall notify Sellers in writing specifying in reasonable detail the
reason for and amount of the set off being claimed by Buyer. In the event
Sellers dispute the amount of the set off claimed within ten (10) business days
of receipt of that notice, the amount being claimed as a setoff shall be held in
suspense by Buyer (or, if the Company's tangible net worth shall be less than
$10,000,000 at the time of such dispute, the amount being claimed as a setoff
shall be held in escrow) until the claim asserted by Buyer has been resolved in
accordance with any final judgment resolving that claim or the Buyer and the
Sellers agree to a resolution. It the Sellers fail to dispute the set-off within
the ten (10) day period, the set-off shall be conclusive and binding on the
Sellers and the Buyer's obligation to make such payment (or any portion thereof)
pursuant to this Agreement or the relevant Related Document shall be deemed
fully satisfied and discharged to the extent of such setoff. The exercise of
such right of setoff by the Buyer in good faith, whether or not ultimately
determined to be justified, will not constitute a breach under this Agreement or
any Related Document. This right of set-off shall be in addition to and not in
substitution of any other rights that the Buyer shall have against the Sellers
under Article X of this Agreement.
12.13 Remedies. The Sellers expressly acknowledge and agree that it
would be difficult to measure the damages that might result from any actual or
threatened breach of this Agreement, and that any actual or threatened breach by
the Sellers of any of the provisions of this Agreement might result in
immediate, irreparable and continuing injury to the Buyer and that a remedy at
Law for any such actual or threatened breach by the Sellers of the provisions of
this Agreement might be inadequate. The Sellers therefore agree that the Buyer
may be entitled to temporary, preliminary and permanent injunctive relief or
other equitable relief, issued by a court of competent jurisdiction, in case of
any such actual or threatened breach by the Sellers, without the posting of a
bond.
46
12.14 Further Assurances. At and from time to time following the
Closing, the Buyer, on the one hand, and the Sellers, on the other hand, agree
to cooperate with the other and to execute, deliver, file and record any and all
agreements, instruments, certificates or other documents, and take such other
actions, as may be reasonably necessary or desirable to evidence, consummate or
implement expeditiously the transactions contemplated by this Agreement and to
carry into effect the intent and purposes of this Agreement. Without limiting
any other right or remedy of the Buyer, at and from time to time following the
Closing, the Sellers shall, and shall cause their respective Affiliates to, in
the case of Contracts or arrangements which cannot be transferred or assigned
effectively to, or continued effectively by, the Company without the consents of
other Persons which consents have not been obtained prior to the Closing,
cooperate with the Buyer at its request in endeavoring to obtain such consents
promptly, and if any such consent is not obtained, use their commercially
reasonable efforts to secure to the Buyer the benefits thereof in some other
manner reasonably acceptable to the Buyer.
[SIGNATURE PAGE FOLLOWS]
47
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date first above written.
The Buyer:
Spectrum PMI, Inc.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------
Name: Xxxxxxx Xxxxxxx
Title: CEO
The Sellers:
/s/ Xxxxxx Xxxxxxx
-------------------------------
Xxxxxx Xxxxxxx
A-Xxxx Holding, Inc.
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxx
Title: Chairman
