EXHIBIT 2
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ARRIS GROUP, INC.
AND
CADANT, INC.
DECEMBER 8, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS ................................................................................ 1
Section 1.1. Definitions ................................................................................ 1
Section 1.2. Other Definitions .......................................................................... 6
ARTICLE II ASSET ACQUISITION .......................................................................... 6
Section 2.1. Agreement to Acquire Assets ................................................................ 6
Section 2.2. Assets ..................................................................................... 7
Section 2.3. Excluded Assets ............................................................................ 7
Section 2.4. Assumption of Assumed Liabilities .......................................................... 8
Section 2.5. Excluded Liabilities ....................................................................... 9
ARTICLE III ACQUISITION PRICE; ADJUSTMENTS; ALLOCATIONS ................................................ 10
Section 3.1. Purchase Price ............................................................................. 10
Section 3.2. Delivery of Shares ......................................................................... 10
Section 3.3. [Intentionally Left Blank] ................................................................. 10
Section 3.4. Earn Out Shares ............................................................................ 11
ARTICLE IV CLOSING .................................................................................... 12
ARTICLE V COMPANY REPRESENTATIONS AND WARRANTIES ..................................................... 12
Section 5.1. Organization and Capitalization ............................................................ 13
Section 5.2. Authority .................................................................................. 14
Section 5.3. Absence of Restrictions and Conflicts ...................................................... 14
Section 5.4. Financial Statements ....................................................................... 14
Section 5.5. No Undisclosed Liabilities ................................................................. 15
Section 5.6. Absence of Certain Changes ................................................................. 15
Section 5.7. Licenses ................................................................................... 15
Section 5.8. Legal Proceedings .......................................................................... 15
Section 5.9. Inventory .................................................................................. 15
Section 5.10. Title to Assets; Related Matters ........................................................... 15
Section 5.11. Leased Real Property ....................................................................... 16
Section 5.12. Environmental, Health and Safety Matters ................................................... 17
Section 5.13. Compliance With Laws Generally ............................................................. 18
Section 5.14. Officers and Employees ..................................................................... 18
Section 5.15. Company Benefit Plans ...................................................................... 19
Section 5.16. Labor Relations ............................................................................ 20
Section 5.17. Intellectual Properties .................................................................... 22
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Section 5.18 Tax Returns; Taxes ......................................................................... 26
Section 5.19 Assumed Contracts .......................................................................... 27
Section 5.20 Insurance .................................................................................. 28
Section 5.21 Notes; Accounts Receivable; Accounts Payable ............................................... 28
Section 5.22 Supplier Relations ......................................................................... 28
Section 5.23 Nondisclosed Payments ...................................................................... 29
Section 5.24 Bank Accounts .............................................................................. 29
Section 5.25 Transactions with Affiliates ............................................................... 29
Section 5.26 Brokers .................................................................................... 29
Section 5.27 Securities Issuance Representations ........................................................ 29
Section 5.28 Disclosure ................................................................................. 30
Section 5.29 CMTS Functionality ......................................................................... 30
Section 5.30 Tax-Free Reorganization .................................................................... 0
Section 5.31 Reincorporation ............................................................................ 30
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BUYER ................................................ 31
Section 6.1 Organization and Qualification, Subsidiaries ............................................... 31
Section 6.2 Charter Documents .......................................................................... 31
Section 6.3 Capitalization ............................................................................. 31
Section 6.4 Authority Relative to this Agreement ....................................................... 31
Section 6.5 No Conflict, Required Filings and Consents ................................................. 32
Section 6.6 SEC Filings; Financial Statements .......................................................... 32
Section 6.7 Taxes ...................................................................................... 33
Section 6.8 Brokers .................................................................................... 34
Section 6.9 No Undisclosed Liabilities ................................................................. 34
Section 6.10 Absence of Certain Changes ................................................................. 34
Section 6.11 Tax-Free Reorganization .................................................................... 34
ARTICLE VII CERTAIN COVENANTS AND AGREEMENTS ........................................................... 34
Section 7.1 Conduct of Business ........................................................................ 34
Section 7.2 Inspection and Access to Information ....................................................... 37
Section 7.3 Notices of Certain Events .................................................................. 37
Section 7.4 Interim Financials ......................................................................... 38
Section 7.5 No Solicitation of Transactions ............................................................ 38
Section 7.6 Reasonable Efforts; Further Assurances; Cooperation ........................................ 38
Section 7.7 Consents ................................................................................... 39
Section 7.8 Releases ................................................................................... 40
Section 7.9 Public Announcements ....................................................................... 40
Section 7.10 Supplements to Schedules ................................................................... 41
Section 7.11 Employees .................................................................................. 41
Section 7.12 Company Stockholder Approval ............................................................... 44
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Section 7.13 Limitations on Subsequent Transfers of the Shares; Resale Registration Statement; Legends .. 44
Section 7.14 Transfer Taxes ............................................................................. 47
Section 7.15 Insurance .................................................................................. 47
Section 7.16 Non-Disclosure; Non-Competition ............................................................ 48
Section 7.17 Conduct of Business by the Buyer ........................................................... 49
Section 7.18 Risk of Loss ............................................................................... 49
Section 7.19 Consent of the Lenders of Buyer ............................................................ 49
Section 7.20 Tax-Free Reorganization .................................................................... 50
Section 7.21 Company Name ............................................................................... 50
ARTICLE VIII CONDITIONS TO CLOSING ...................................................................... 50
Section 8.1 Conditions to Obligations of the Buyer ..................................................... 50
Section 8.2 Conditions to Obligations of the Company ................................................... 52
ARTICLE IX TERMINATION ................................................................................ 53
Section 9.1 Termination ................................................................................ 53
Section 9.2 Specific Performance and Other Remedies .................................................... 54
Section 9.3 Effect of Termination ...................................................................... 54
ARTICLE X INDEMNIFICATION ............................................................................ 54
Section 10.1 Indemnification Obligations of the Company ................................................. 54
Section 10.2 Indemnification Obligations of the Buyer ................................................... 55
Section 10.3 Indemnification Procedure .................................................................. 55
Section 10.4 Claims Period .............................................................................. 57
Section 10.5 Indemnification by the Company ............................................................. 58
Section 10.6 Indemnification by the Buyer ............................................................... 59
Section 10.7 Exclusive Remedy ........................................................................... 59
Section 10.8 Investigations ............................................................................. 59
ARTICLE XI MISCELLANEOUS .............................................................................. 59
Section 11.1 Notices .................................................................................... 59
Section 11.2 Schedules and Exhibits ..................................................................... 60
Section 11.3 Assignment; Successors in Interest ......................................................... 60
Section 11.4 Interpretation ............................................................................. 61
Section 11.5 Captions ................................................................................... 61
Section 11.6 Controlling Law; Amendment ................................................................. 61
Section 11.7 Severability ............................................................................... 61
Section 11.8 Counterparts ............................................................................... 61
Section 11.9 Enforcement of Certain Rights .............................................................. 61
Section 11.10 Waiver ..................................................................................... 61
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Section 11.11 Integration ................................................................................ 61
Section 11.12 Compliance with Bulk Sales Laws ............................................................ 62
Section 11.13 Cooperation Following the Closing .......................................................... 62
Section 11.14 Transaction Costs .......................................................................... 62
Section 11.15 Consent to Jurisdiction, Etc ............................................................... 62
Section 11.16 Interpretation ............................................................................. 62
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INDEX OF SCHEDULES
Schedule 2.3 Excluded Assets
Schedule 5.1(a) Organization
Schedule 5.1(b) Company Options and Warrants
Schedule 5.1(c) Company Shareholder and Voting Agreements
Schedule 5.3 Absence of Restrictions and Conflicts
Schedule 5.4 Financial Statements
Schedule 5.5 Company Undisclosed Liabilities
Schedule 5.6 Company Absence of Certain Changes
Schedule 5.7 Licenses
Schedule 5.8 Litigation
Schedule 5.10 Title to Assets
Schedule 5.11(b) Leased Real Property
Schedule 5.12 Environmental Matters
Schedule 5.13 Legal Compliance
Schedule 5.14 Company Officers and Employees
Schedule 5.15(a) Company Benefit Plans
Schedule 5.15(b) Company Benefit Plans / Exceptions
Schedule 5.15(b)(v) Company Severance Pay
Schedule 5.16 Labor Relations
Schedule 5.17(e) Intellectual Properties
Schedule 5.17(f) Patents
Schedule 5.17(g) Marks
Schedule 5.17(h) Copyrights
Schedule 5.17(i) Software
Schedule 5.17(j) Trade Secrets
Schedule 5.18(a) Company Tax Matters
Schedule 5.18(b) Company Tax Returns
Schedule 5.19 Assumed Contracts
Schedule 5.20 Insurance
Schedule 5.21(b) Company Accounts Receivable
Schedule 5.22 Supplier Relations
Schedule 5.24 Bank Accounts
Schedule 5.25 Transactions with Affiliates
Schedule 5.26 Brokers
Schedule 5.29 CMTS Functionality
Schedule 6.5(a) Buyer Conflicts
Schedule 6.6(a) Buyer SEC Reports
Schedule 6.7 Buyer Tax Matters
Schedule 6.9 Buyer Undisclosed Liabilities
Schedule 6.10 Buyer Absence of Certain Changes
Schedule 7.1 Conduct of Business
Schedule 7.8 Company Releases
Schedule 7.13 Legend
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LIST OF EXHIBITS
Exhibit A Knowledge of Company
Exhibit B Voting Agreement
Exhibit C Form of Opinion of Counsel for Company
Exhibit D Form of Opinion of Counsel for Buyer
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EXHIBIT 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated December 8,
2001, is made and entered into by and between ARRIS GROUP, INC., a Delaware
corporation (the "Buyer"), and CADANT, INC., a Delaware corporation (the
"Company"). The Buyer and the Company are sometimes individually referred to
herein as a "Party" and collectively as the "Parties".
WITNESSETH:
WHEREAS, the Company is engaged in the Business as defined below;
WHEREAS, the Parties desire to enter into this Agreement pursuant to
which the Company proposes to transfer to the Buyer, and the Buyer proposes to
acquire from the Company (the "Acquisition"), the assets used or held for use
by the Company in the conduct of the Business as of the Closing Date, and the
Buyer proposes to assume certain of the liabilities and obligations of the
Company related to the Business; and
WHEREAS, for federal income tax purposes, it is intended that the
Acquisition qualify as a "reorganization" described in section 368(a)(1)(C) of
the Code; and
WHEREAS, concurrently with the execution of this Agreement, the Buyer
and various security holders of the Company have entered into the Voting
Agreement; and
WHEREAS, the Parties desire to make certain representations,
warranties and agreements in connection with the Acquisition;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following terms, as used herein,
have the following meanings:
"ADA" means the United States Americans with Disabilities Act.
"ADEA" means the United States Age Discrimination in Employment Act.
"Affiliate" of any specified Person means any other Person directly or
indirectly Controlling or Controlled by or under direct or indirect common
Control with such specified Person.
"Arbitrator" means PricewaterhouseCoopers, independent public
accountants.
"Assumed Contracts" means those contracts listed on Schedule 5.19 and
those contracts that relate to the Business and are not required to be listed
on Schedule 5.19.
"Bank Accounts" means all bank accounts, lock box accounts and other
accounts maintained by the Company for the benefit of the Business.
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"Bridge Loan" means that certain agreement, dated as of November 21,
2001, by and between (among others) the Buyer and the Company, as amended as of
the date hereof, whereby the Buyer agreed to loan the Company up to $4,000,000
to finance the Company's continued operations from the date of such agreement
in accordance with its terms.
"Business" means the business conducted by the Company and all assets
and activities related thereto on the Closing Date and during the 12 month
period prior to the Closing Date, including the Company Activities.
"Business Day" means any day except Saturday, Sunday or any day on
which banks are generally not open for business in Atlanta, Georgia.
"Buyer Ancillary Documents" means any certificate, agreement, document
or other instrument, other than this Agreement, to be executed and delivered by
the Buyer in connection with the transactions contemplated by this Agreement.
"Buyer Charter Documents" means the Charter Documents of the Buyer.
"Buyer Common Stock" means the Common Stock of the Buyer.
"Buyer Indemnified Parties" means the Buyer and its Affiliates, each
of their respective officers, directors, employees, agents and representatives
and each of the heirs, executors, successors and assigns of any of the
foregoing.
"Buyer Losses" means the claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and damages of the Buyer Indemnified Parties
as to which the Buyer Indemnified Parties are entitled to indemnification under
Section 10.1.
"CERCLA" means the United States Comprehensive Environmental Response,
Compensation and Liability Act.
"Charter Documents" means the certificate of incorporation and the
bylaws (or equivalent organizational documents), as amended, of a Person.
"Claims Period" means the period during which a claim for
indemnification may be asserted under this Agreement by an Indemnified Party.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Date" means the date on which the Closing occurs.
"CMTS" means (i) the chassis (including all models), network cards,
cable access cards, integrated control cards, fabric control cards, system
control cards and related software comprising a cable modem termination system
(including without limitation the following products: C4 CMTS and associated
modules; C4c CMTS and associated modules; Cornerstone CMTS 1500 and associated
modules; and Cornerstone CMTS 1100 and associated modules), (ii) related
element or network management systems (including without limitation the G2 IMS
system and CPS 2000 system) and (iii) all maintenance or support contracts or
arrangements related to the items set forth in clauses (i) and (ii).
"COBRA Coverage" means continuation coverage required under Section
4980B of the Code and Part 6 of Title I of ERISA or any state law requiring
similar continuation coverage.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Company Activities" means the design and production of CMTS and the
engineering and licensing activities related thereto.
"Company Ancillary Documents" means any certificate, agreement,
document or other instrument, other than this Agreement, to be executed and
delivered by the Company in connection with the transactions contemplated by
this Agreement.
"Company Benefit Plan" means each Employee Benefit Plan sponsored or
maintained or required to be sponsored or maintained at any time by the Company
or to which the Company makes or has made, or has or has had an obligation to
make, contributions at any time.
"Company Charter Documents" means the Charter Documents of the
Company.
"Company Indemnified Parties" means the Company and each of the
Company's officers, directors, employees, agents and representatives and each
of the heirs, executors, successors and assigns of any of the foregoing.
"Company Losses" means the claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and damages of the Company Indemnified
Parties as to which the Company Indemnified Parties are entitled to
indemnification under Section 10.2.
"Confidential Information" means all data or information of the
Company (including, without limitation, trade secrets) which is valuable to the
operation of the Business and not generally known to competitors.
"Control" when used with respect to any specified 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.
"DGCL" means the Delaware General Corporate Law, as amended.
"DOCSIS" means the standards based technology used in the cable
industry known as the Data Over Cable Standards Interface System.
"Employee Benefit Plan" means with respect to any Person each plan,
fund, program, agreement, arrangement or scheme, in each case, that is at any
time sponsored or maintained or required to be sponsored or maintained by such
Person or to which such Person makes or has made, or has or has had an
obligation to make, contributions providing for employee benefits or for the
remuneration, direct or indirect, of the employees, former employees,
directors, officers, consultants, independent contractors, contingent workers
or leased employees of such Person or the dependents of any of them (whether
written or oral), including, without limitation, each deferred compensation,
bonus, incentive compensation, pension, retirement, stock purchase, stock
option and other equity compensation plan, "welfare" plan (within the meaning
of Section 3(1) of ERISA, determined without regard to whether such plan is
subject to ERISA); each "pension" plan (within the meaning of Section 3(2) of
ERISA, determined without regard to whether such plan is subject to ERISA);
each severance plan or agreement, health, vacation, summer hours, supplemental
unemployment benefit, hospitalization insurance, medical, dental, legal and
each other employee benefit plan, fund, program, agreement or arrangement.
"Employment Agreements" means all employment contracts, consulting
agreements, termination or severance agreements, change of control agreements
or any other agreement or understanding (written or oral) respecting the terms
and conditions of employment or of a
3
consulting or independent contractor relationship in respect to any current or
former officer, employee, consultant or independent contractor.
"Environmental Laws" means all local, state and federal laws,
statutes, and regulations relating to protection of the environment, pollution
control, product registration and Hazardous Materials pertaining to the
Business, the Assets or the Real Property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person (whether incorporated or
unincorporated), that together with the Company would be deemed a "single
employer" within the meaning of Section 414 of the Code.
"ERISA Affiliate Plan" means each Employee Benefit Plan sponsored or
maintained or required to be sponsored or maintained at any time by any ERISA
Affiliate, or to which such ERISA Affiliate makes or has made, or has or has
had an obligation to make, contributions at any time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder.
"Financial Statements" means the audited balance sheet of the Company
at December 31, 2000, the unaudited balance sheet of the Company at October 31,
2001, the audited statement of income of the Company for the year ended
December 31, 2000, and the unaudited statement of income for the Company for
the ten months ended October 31, 2001.
"Fiscal Year 2002" means the year which, for financial reporting
purposes, begins January 1, 2002 and ends December 31, 2002.
"FLSA" means the United States Fair Labor Standards Act.
"FMLA" means the United States Family and Medical Leave Act.
"GAAP" means generally accepted accounting principles as applied in
the United States.
"Governmental Entity" means any federal, state or local or foreign
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency.
"Hazardous Materials" means any waste, pollutant, contaminant,
hazardous substance, toxic, ignitable, reactive or corrosive substance,
hazardous waste, special waste, industrial substance, by-product, process
intermediate product or waste, petroleum or petroleum-derived substance or
waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance or waste, the use, handling or disposal of
which by the Company is in any way governed by or subject to any applicable
Environmental Law.
"Indemnified Party" means a Buyer Indemnified Party or a Company
Indemnified Party, as the case may be.
"Knowledge" with respect to the Company means the actual knowledge of
those individuals listed on Exhibit A.
"Labor Laws" means all laws, regulations and orders and all contracts
or collective bargaining agreements governing or concerning labor relations,
unions and collective bargaining,
4
conditions of employment, employment discrimination and harassment, wages,
hours or occupational safety and health, including, without limitation, ERISA,
the Immigration Reform and Control Act of 1986, the National Labor Relations
Act, the Civil Rights Acts of 1866 and 1964, the Equal Pay Act, ADEA, ADA,
FMLA, WARN, the Occupational Safety and Health Act, the Xxxxx Xxxxx Act, the
Xxxxx-Xxxxx Act, the Service Contract Act, Executive Order 11246, FLSA and the
Rehabilitation Act of 1973 and all regulations under such acts.
"Leased Real Property" means the parcel of real property used or held
for use in connection with the Business and leased by the Company located at
0000 Xxxxxxxx Xxxxx, Xxxxx, Xxxxxxxx 00000 (together with all fixtures and
improvements thereon).
"Legal Dispute" means any action, suit or proceeding between or among
the Parties and their Affiliates arising in connection with any disagreement,
dispute, controversy or claim arising out of or relating to this Agreement or
any related document.
"Licenses" means all notifications, licenses, permits (including,
without limitation, environmental, construction and operation permits),
franchises, certificates, approvals, exemptions, classifications, registrations
and other similar documents and authorizations issued by any Governmental
Entity, and applications therefor.
"Liens" mean all mortgages, liens, pledges, security interests,
charges, claims, restrictions and encumbrances of any nature whatsoever.
"Material Adverse Effect" means any fact, occurrence, event or factor
(when taken together with all other facts, occurrences, events or factors) that
is or may be reasonably likely to be materially adverse to the Business or the
Assets. A Material Adverse Effect shall also include any fact, occurrence,
event or factor that shall have occurred or been threatened that (when taken
together with all other facts, occurrences, events or factors) is or would be
reasonably likely to prevent or materially delay the performance by the Company
of any of its obligations under this Agreement or the consummation of the
transactions contemplated hereby; provided, however, that the term "Material
Adverse Effect" shall not include any effect attributable to (i) a change
(after the date hereof) in law or GAAP, (ii) any change or event relating to
the general economy of the United States; (iii) any change or event relating to
the industry in which the Company operates; or (iv) any existing event,
occurrence or circumstance that is detailed or described in this Agreement or
any of the Schedules attached hereto.
"Net Revenue" means gross revenue less returns and allowances, each
determined in accordance with GAAP applied consistently with prior practices.
"NLRB" means the United States National Labor Relations Board.
"Non-Assignable Contracts" means Assumed Contracts which require third
party consents for assignment that have not been obtained by the Company as of
the Closing.
"Noncompete Period" means the period beginning on the Closing Date and
continuing for a period of two (2) years from the Closing Date.
"OSHA" means the Occupational Safety and Health Administration.
"Permitted Liens" means (x) (i) Liens for taxes not yet due and
payable, (ii) statutory Liens of landlords, (iii) Liens of carriers,
warehousemen, mechanics, materialmen and repairmen incurred in the ordinary
course of the Business consistent with past practice and not yet
5
delinquent and (iv) zoning, building, or other restrictions, variances,
covenants, rights of way, encumbrances, easements and other minor
irregularities in title, none of which, individually or in the aggregate, (1)
interfere in any material respect with the present use of or occupancy of the
affected parcel by the Company, (2) have more than an immaterial effect on the
value thereof or its use or (3) would impair the ability of such parcel to be
sold for its present use and (y) those Liens granted by the Company in
connection with Comdisco Loan (as defined in the text of this Agreement) and
Xxxxxx Guarantee (as defined in the text of this Agreement).
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
regulations promulgated thereunder.
"Suppliers" means each supplier related to the Business which
furnishes a component or component of the CMTS system not readily available in
the marketplace.
"Taxes" means all federal, state, local or foreign taxes, assessments,
charges, duties, fees, levies or other charges (including interest, penalties
or additions associated therewith), including income, franchise, capital stock,
real property, personal property, tangible, withholding, employment, payroll,
social security (or similar), social contribution, unemployment compensation,
disability, transfer, sales, use, excise, gross receipts, value-added, license,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, profits,
registration, alternative or add-on minimum, estimated, and all other taxes of
any kind for which the Company may have any liability whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Termination Date" means the date at or prior to the Closing when this
Agreement is terminated in accordance with Article IX.
"Territory" means the United States of America, Canada and Mexico,
such area being where any customer or actively sought prospective customer of
the Company is located.
"Voting Agreement" means that certain agreement, dated as of even date
herewith, among the Company, the Buyer and certain holders of the Company's
Series A Convertible Preferred Stock, certain holders of the Company's debt who
also holds warrants of the Company whereby such parties agree to vote all of
their voting shares of capital stock of the Company (if any) in favor of the
approval of the transactions contemplated by this Agreement.
"WARN" means the United States Worker Adjustment and Retraining
Notification Act.
Section 1.2. Other Definitions. Certain other terms are defined
within the text of the Agreement.
ARTICLE II
ASSET ACQUISITION
Section 2.1. Agreement to Acquire Assets. Subject to the terms
and conditions of this Agreement, at the Closing and except as otherwise
specifically provided in this Article II, the
6
Company will grant, assign, transfer and deliver to the Buyer, and the Buyer
will acquire from the Company, all right, title and interest of the Company as
of the Closing Date in and to (a) the Business and (b) except for the Excluded
Assets, all of the assets, properties and rights of every kind and description,
real, personal and mixed, tangible and intangible, wherever situated of the
Company relating to or used or held for use (in whole or in part) in the
operation of the Business as of the date hereof and at any time following the
date hereof to the Closing Date (which assets, properties and rights are
collectively referred to in this Agreement as the "Assets"), free and clear of
all Liens (except Permitted Liens), and the Buyer will assume the Assumed
Liabilities.
Section 2.2. Assets. Except as otherwise expressly set forth in
Section 2.3, the Assets shall include, without limitation, the following
assets, properties and rights of the Company relating to or used or held for
use in the operation of the Business as of the close of business on the Closing
Date:
(a) all completed CMTS equipment and any components used
in the manufacture of CMTS units and any other inventory used in
connection with the Assets or the Business (the "Inventory");
(b) all machinery, equipment, business machines,
computer hardware, vehicles, furniture, fixtures, parts and other
tangible property;
(c) all rights of the Company under the Assumed
Contracts;
(d) all Company Intellectual Property (as defined in
Section 5.17);
(e) all Licenses to the extent that they are assignable,
including, without limitation, those set forth on Schedule 5.7 (unless
otherwise indicated thereon); and
(f) all other tangible and intangible assets of any kind
or description, wherever located, that are carried on the books of the
Company or which are owned by the Company.
Section 2.3. Excluded Assets. Notwithstanding anything to the
contrary set forth in this Agreement, the Assets will not include the following
assets, properties and rights of the Company (collectively, the "Excluded
Assets"):
(a) all real property;
(b) any License that by its terms is not transferable to
the Buyer, including those indicated on Schedule 5.7 as not being
transferable;
(c) the corporate seal, certificate of incorporation,
bylaws, minute books, stock ledger records, Tax Returns, books of
account or other constituent records relating to the corporate
organization of the Company;
(d) the Company's rights, claims or causes of action
against third parties to the extent that they relate to the assets,
properties, business or operations of the Company arising in
connection with the discharge by the Company of the Excluded
Liabilities and any of the rights that accrue to the Company under
this Agreement;
(e) Tax refunds for periods ending on or prior to the
Closing Date;
(f) subject to Section 7.15, all insurance policies and
insurance contracts of the Company;
7
(g) cash not to exceed $250,000 to be used to pay the
reasonable expenses incurred in connection with the dissolution of the
Company (as contemplated by this Agreement) for expenditures made
between the Closing Date and the date that the Registration Statement
(as defined in Section 7.13) becomes effective; provided, that, (i) if
any of such $250,000 is not used by the Company in accordance with the
immediately preceding clause prior to the date of effectiveness of
such Registration Statement, then such remaining funds shall be
defined as an an "Asset" hereunder and delivered to the Buyer and (ii)
no payments from such $250,000 shall be made to any Affiliates of the
Company; and
(h) those other assets, properties and rights listed on
Schedule 2.3.
Section 2.4. Assumption of Assumed Liabilities.
(a) Except to the extent specified in Section 2.4(b),
the Buyer will not assume, in connection with the transactions
contemplated by this Agreement, any liability or obligation of the
Company whatsoever, and the Company will retain responsibility for all
of its liabilities and obligations and all liabilities and obligations
arising from the operations of the Business or otherwise prior to or
on the Closing Date, whether or not accrued and whether or not
disclosed.
(b) As the sole exception to the provisions in Section
2.4(a), effective as of the close of business on the Closing Date, the
Buyer will assume and agree to pay, discharge or perform, as
appropriate, the following liabilities and obligations of the Company,
(collectively, the "Assumed Liabilities"):
(i) the accounts payable of the Company
existing as of the Closing Date, provided that in no event
shall the aggregate amount of the obligations being assumed
pursuant to this clause (i) exceed $6,400,000, provided
further that in the event the accounts payable of the Company
exceed $6,400,000, the Buyer may select the accounts payable
(equal to $6,400,000) that it will assume;
(ii) the obligations of the Company under the
Master Lease Agreement (the "Equipment Lease") dated
September 8, 2000, by and between Comdisco, Inc., a Delaware
corporation ("Comdisco"), as lessor and the Company as
lessee, provided that (x) the Equipment Lease or the benefits
thereof be assigned by the Company to the Buyer, (y) any
other agreements or the benefits thereof relating to the
Equipment Lease be assigned by the Company to the Buyer, and
(z) in no event shall the obligations assumed hereunder
exceed $3,200,000 plus accrued interest between the date
hereof and the Closing Date;
(iii) all obligations of the Company under the
Assumed Contracts and Licenses and Company Intellectual
Property ("Assumed Commitments") to be paid or performed on
and after the Closing Date, but not including any liabilities
or obligations arising out of or related to nonperformance or
breach by the Company under the Assumed Commitments on or
prior to the Closing Date ("Default Obligations"); provided
that, Default Obligations shall be Assumed Liabilities to the
extend they are solely the result of non-payments of amounts
due and are assumed pursuant to clause (i) or clause (vi) of
this Section 2.4(b);
8
provided for the avoidance of doubt, that the Nextream
Contracts (as defined below) shall not be assumed;
(iv) the obligations of the Company under the
Subordinated Loan and Security Agreement (the "Comdisco
Loan") dated as of September 8, 2000, by and between the
Company as borrower and Comdisco as lender, provided in no
event shall the obligations assumed pursuant to this clause
(iv) exceed $3,940,000 plus accrued interest between the date
hereof and the Closing Date and the Buyer shall have no
obligations under the conversion features of the Comdisco
Loan;
(v) the reimbursement obligation of the Company
under that certain Guaranty of Lease (the "Xxxxxx Guaranty"),
dated as of January 4, 2000, by and between the Company and
Xxxxxx International, Inc., a Maryland corporation
("Xxxxxx"), as guarantor, provided that (y) as of the Closing
Date there are no amounts then due or payable under the
Xxxxxx Guaranty equal zero dollars ($0) and (z) the
obligations assumed pursuant to this clause (v) shall not
exceed $450,000;
(vi) those accrued liabilities and expenses of
the Company, incurred in the normal course of business,
excluding interest accrued under the Bridge Loan, provided
that in no event shall the obligations assumed pursuant to
this clause (vi) exceed $1,500,000;
(vii) the outstanding interest and principal of
the Bridge Loan; and
(viii) all liabilities for Taxes for which Buyer
is liable pursuant to Section 7.14.
Section 2.5. Excluded Liabilities. Specifically, and without in
any way limiting the generality of Section 2.4(a), except to the extent set
forth in Section 2.4(b), the Assumed Liabilities will not include, and in no
event will the Buyer assume, agree to pay, discharge or perform or incur any
liability or obligation under this Agreement or otherwise become responsible in
respect of, the following (together with all other liabilities of the Company
that are not Assumed Liabilities, the "Excluded Liabilities"):
(a) any liability relating to, resulting from or arising
out of (i) claims made in pending or future suits, actions,
investigations, or other legal, governmental or administrative
proceedings or (ii) claims based on violations of law as in effect on
or prior to the Closing, breach of contract, employment practices, or
environmental, health and safety matters or any other actual or
alleged failure of the Company to perform any obligation, in each case
arising out of or relating to events which shall have occurred, or
services performed, or the operation of the Business, prior to the
Closing;
(b) any liability or obligation arising out of or with
respect to any third party or governmental claim pending on the
Closing Date or thereafter initiated based on or arising out of the
operation of the Business prior to or on the Closing Date;
(c) any liability or obligation of the Company arising
or incurred in connection with the negotiation, preparation and
execution of this Agreement and the transactions contemplated by this
Agreement, including any liability or obligation to any security
9
holder, and any fees and expenses of counsel, accountants, brokers,
financial advisors or other experts of the Company;
(d) any liability pertaining to any Excluded Asset;
(e) any Employment Agreements of the Company;
(f) that certain Master Agreement, dated as of October
17, 2001, by and between the Company and Nextream S.A., a French
Company ("Nextream"), and that certain International Distributor
Agreement, dated as of October 17, 2001 between the Company and
Nextream and any other agreements related thereto (the "Nextream
Contracts");
(g) any liability relating to, resulting from or arising
out of any former operations of the Company that have been
discontinued or disposed of prior to the Closing; and
(h) any liability for Taxes for which the Company is
liable pursuant to Section 7.14.
Such Excluded Liabilities shall include all claims, actions, litigations and
proceedings relating to any or all of the foregoing and all costs and expenses
in connection therewith.
ARTICLE III
ACQUISITION PRICE; ADJUSTMENTS; ALLOCATIONS
Section 3.1. Acquisition Price. Subject to adjustment pursuant to
the indemnification obligations under Article X, the aggregate amount to be
paid by the Buyer for the Assets (the "Purchase Price") shall be the sum of:
(a) 5,250,000 shares of Buyer Common Stock (the "Shares"), (b) the Earn Out
Shares, plus (c) the assumption of the Assumed Liabilities.
Section 3.2. Delivery of Shares.
(a) On the Closing Date, the Buyer shall issue and
deliver the Shares, less 525,000 shares of Buyer Common Stock (the
"Holdback Shares"), to the Company. Subject to adjustment pursuant to
the provisions of Article X, the Holdback Shares will be issued at the
Closing but will be retained by the Buyer to be delivered to the
Company on the first anniversary of the Closing Date. The Shares,
including the Holdback Shares, shall be fully paid, validly issued and
registered in the name of the Company and shall contain a legend
consistent with Section 7.13.
(b) Unless and until any Holdback Shares are used to
satisfy any indemnification obligations of the Company in accordance
with Article X, the Company shall be entitled to all voting rights and
rights to receive dividends with respect to such Holdback Shares on
and after the Closing Date.
Section 3.3. [Intentionally Left Blank]
10
Section 3.4. Earn Out Shares.
(a) No later than ninety (90) days after the final day
of Fiscal Year 2002 (the "Earn Out Date"), and in addition to the
Shares, the Buyer shall issue and deliver to the Company (or pursuant
to written instructions from the Company not inconsistent with the
other provisions hereof) 2,000,000 shares of Buyer Common Stock, as
adjusted for stock splits, reverse stock splits and stock dividends
(the "Earn Out Shares") to the Company, determined in accordance with
the following formula:
(i) In the event the Buyer's Net Revenues from
the Buyer's CMTS sales (including, but not limited to,
revenues generated under or pursuant to related maintenance
or support contracts or arrangements to the extent related to
CMTS products) for Fiscal Year 2002 (the "CMTS Sales") are
less than $30,000,000, the Earn Out Shares shall equal zero.
(ii) In the event the CMTS Sales equal or exceed
$30,000,000 but do not equal or exceed $40,000,000, the Earn
Out Shares shall equal 400,000.
(iii) In the event the CMTS Sales equal or exceed
$40,000,000 but do not equal or exceed $50,000,000, the Earn
Out Shares shall equal 600,000.
(iv) In the event the CMTS Sales equal or exceed
$50,000,000 but do not equal or exceed $60,000,000, the Earn
Out Shares shall equal 800,000.
(v) In the event the CMTS Sales equal or exceed
$60,000,000 but do not equal or exceed $70,000,000, the Earn
Out Shares shall equal 1,000,000.
(vi) In the event the CMTS Sales equal or exceed
$70,000,000 but do not equal or exceed $80,000,000, the Earn
Out Shares shall equal 1,250,000.
(vii) In the event the CMTS Sales equal or exceed
$80,000,000 but do not equal or exceed $90,000,000, the Earn
Out Shares shall equal 1,500,000.
(viii) In the event the CMTS Sales equal or exceed
$90,000,000 but do not equal or exceed $100,000,000, the Earn
Out Shares shall equal 1,750,000.
(ix) In the event the CMTS Sales equal or exceed
$100,000,000, the Earn Out Shares shall equal 2,000,000.
If the CMTS Sales equal a dollar value that falls between any two of the dollar
values stated above, the number of Earn Out Shares shall be determined by
applying a straight-line interpolation between the corresponding numbers of
Earn Out Shares. The Earn Out Shares shall be fully paid, validly issued and
registered in the name of the Company and shall contain a legend consistent
with Section 7.13.
(b) For the purposes of Section 3.3(a), the dollar value
of CMTS Sales shall be rounded to the nearest whole dollar and any
fractional Earn Out Shares shall be rounded to the nearest whole
share.
(c) CMTS Sales shall include all Net Revenues of the
Company and/or the Buyer resulting from CMTS Sales for Fiscal Year
2002, regardless of whether the Closing occurs before or after January
1, 2002.
11
(d) No later than thirty (30) days after the final day
of Fiscal Year 2002, the Buyer shall provide to the Company, in
writing, a summary statement of the CMTS Sales (the "CMTS Sales
Statement"). The CMTS Sales Statement shall contain a summary, by
customer and product, of sales of CMTS during Fiscal Year 2002. If the
Company disagrees with the CMTS Sales Statement, it shall be entitled
to contest the CMTS Sales Statement by delivery to the Buyer of a
written notice of the Company's objections to the CMTS Sales Statement
within 30 calendar days of the Company's receipt of the CMTS Sales
Statement (a "CMTS Sales Dispute"). The CMTS Sales Dispute shall be
resolved by the Arbitrator in accordance with such procedure as the
Arbitrator may establish, and the ruling of the Arbitrator shall be
conclusive and binding. The Arbitrator shall award reasonable costs
and expenses (including attorneys' and accountants' fees) as it deems
appropriate.
(e) It shall be a condition to the obligations of the
Buyer to issue the Earn Out Shares and that such issuance comply with
Regulation D of the Securities Act.
ARTICLE IV
CLOSING
The Closing will occur within five (5) Business Days following the
satisfaction or waiver of the conditions set forth in Article VIII, or on such
other date as the Parties may agree. The Closing will take place at the offices
of Xxxxxxxx Xxxxxxx LLP, 600 Peachtree Street, Atlanta, Georgia, or at such
other place as the Parties may agree.
ARTICLE V
COMPANY REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Buyer that:
12
Section 5.1. Organization and Capitalization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, operate
and lease its property and to carry on its business as now being
conducted. The Company is qualified to conduct business as a foreign
corporation in each jurisdiction in which the ownership or leasing of
its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not
have a Material Adverse Effect. Schedule 5.1(a) sets forth (i) a list
of all jurisdictions in which the Company is qualified to do business,
(ii) a list of all jurisdictions in which the Company is operating
under a trade name and (iii) a list of all jurisdictions in which any
such trade name is registered. The Company does not own, directly or
indirectly, any capital stock or any other equity or debt securities
of or in any Person. The Company has furnished or made available to
the Buyer true and complete copies of the Company Charter Documents.
Except as set forth on Schedule 5.1(a), the minutes of directors' and
stockholders' meetings and the stock records of the Company that
previously have been delivered to the Buyer are the complete, true and
correct records of directors' and stockholders' meetings and stock
issuances from the formation of the Company, through and including the
date hereof and constitute all the minutes and stock records in
existence.
(b) The authorized capital stock of the Company consists
of 82,120,448 shares of common stock, par value $.0001 per share, of
which 20,556,756 shares were issued and outstanding as of November 30,
2001 (the "Capitalization Date"), and 37,500,000 shares of preferred
stock, par value $.0001 per share, of which 25,877,610 shares were
designated as Series A Convertible Preferred Stock, of which 7,539,608
shares were issued and outstanding as of the Capitalization Date.
Since the Capitalization Date, there have been no issuances of shares
of the capital stock of the Company. All issued and outstanding shares
of Company common stock have been duly authorized and validly issued,
in compliance with all applicable federal, state and foreign
securities laws, and are fully paid and nonassessable, and, except for
the outstanding shares of the Company's Series A Convertible Preferred
Stock no shares of the Company's capital stock are entitled to
preemptive rights. There were outstanding at the Capitalization Date
no rights, options, warrants or other instruments that are convertible
into equity of the Company ("Company Rights") other than (x) 9,502,198
outstanding options to acquire Company common stock, (y) 12,153,634
outstanding warrants to acquire Company common stock, and (z)
12,703,806 shares of Series A Convertible Preferred Stock that are
reserved for issuance in connection with the conversion features of
the Series A and Series B Lenders under the Company's Amended and
Restated Convertible Secured Bridge Loan Agreement. Schedule 5.1(b)
sets forth all Company Rights outstanding as of the Capitalization
Date a true and complete list of the following: their holders, the
date of grant (or award), the number of shares of Company common stock
for which they are exercisable and their exercise price as currently
in effect. No Company Rights have been awarded since the
Capitalization Date. In the aggregate 256,532 shares are reserved for
future issuance pursuant to the Company's 2000 Stock Plan. All shares
of Company common stock subject to issuance as discussed in this
Section 5.1(b) shall, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, be
duly authorized, validly issued, fully paid and nonassessable.
13
(c) Schedule 5.1(c) contains a true and complete list of
all voting agreements, shareholder agreements and any other agreements relating
to the voting of the shares of Company's common stock, or instruments that are
convertible into shares of the Company common stock, other than the Voting
Agreement.
Section 5.2. Authority. The Company has the requisite corporate
power and authority to execute and deliver this Agreement and the Company
Ancillary Agreements and to fully perform its obligations hereunder and
thereunder, and the execution and delivery of this Agreement and the Company
Ancillary Agreements by the Company and its performance of the transactions
contemplated herein and therein have been duly authorized by all requisite
corporate and stockholder action other than the approval of stockholders
required by DGCL ss. 271 and the Company Charter Documents. This Agreement has
been, and the Company Ancillary Documents will be as of the Closing Date, duly
executed and delivered by the Company and do or will, as the case may be,
constitute the valid and binding agreements of the Company, enforceable against
it in accordance with their respective terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
Section 5.3. Absence of Restrictions and Conflicts. The
execution, delivery and performance of this Agreement and the Company Ancillary
Documents, the consummation of the transactions contemplated by this Agreement
and the Company Ancillary Documents and the fulfillment of and compliance with
the terms and conditions of this Agreement and the Company Ancillary Documents
do not or will not (as the case may be), with the passing of time or the giving
of notice or both, violate, constitute a breach of or default under, result in
the loss of any benefit under, permit the acceleration of any obligation under
or create in any party the right to terminate, modify or cancel, (a) any term
or provision of the Company Charter Documents, (b) except as indicated on
Schedule 5.3 or Schedule 5.19, any Assumed Contract or any other material
contract, will, agreement, permit, franchise, license or other instrument
applicable to the Company or the Business, (c) any material judgment, decree or
order of any court or governmental authority or agency to which the Company or
by which the Company or any of their respective properties are bound or (d) any
statute, law, rule, regulation or arbitration award applicable to the Company
or the Business. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
with respect to the Company in connection with the execution, delivery or
performance of this Agreement or the Company Ancillary Documents or the
consummation of the transactions contemplated thereby.
Section 5.4. Financial Statements. The Company has delivered to
the Buyer the Financial Statements as shown on Schedule 5.4. The Financial
Statements have been prepared from, and are in accordance with, the books and
records of the Company, which books and records are maintained in accordance
with GAAP (except as expressly noted on Schedule 5.4) consistently applied
throughout the periods indicated, and such books and records have been
maintained on a basis consistent with the past practice of the Company. Each of
the balance sheets included in such Financial Statements (including the related
notes and schedules) fairly presents in all material respects the financial
position of the Business as of the date of such balance sheet, and each of the
statements of income and cash flows included in such Financial Statements
(including any related notes and schedules) fairly presents in all material
respects the results of operations and changes in cash flows, as the case may
be, of the Business for the
14
periods set forth therein, in each case in accordance with GAAP (except as
expressly noted therein or on Schedule 5.4) consistently applied during the
periods involved. Since December 31, 1999, there has been no change in any of
the accounting (and Tax accounting) policies, practices or procedures of the
Company.
Section 5.5. No Undisclosed Liabilities. Except as disclosed in
Schedule 5.5, the Company does not have any liabilities or obligations related
to the Business or the Assets (whether absolute, contingent or otherwise),
which are not adequately reflected or provided for in the unaudited balance
sheet of the Business at October 31, 2001, except liabilities and obligations
that have been incurred since the date of such balance sheet in the ordinary
course of the Business and are not (singly or in the aggregate) material to the
Business.
Section 5.6. Absence of Certain Changes. Since October 31, 2001
and except as set forth in Schedule 5.6, there has not been (i) any Material
Adverse Effect, (ii) any damage, destruction, loss or casualty to property or
assets of the Company used in connection with the Business (including the
Assets) with a value in excess of $25,000, whether or not covered by insurance,
or (iii) any action taken of the type described in Section 7.1, which, had such
action occurred after the date hereof without the Buyer's prior approval, would
be in violation of such Section 7.1.
Section 5.7. Licenses. Schedule 5.7 is a true and complete list
of all Licenses held by the Company and used in connection with the Business or
the Assets. The Company owns or possesses all of the material Licenses which
are necessary to enable it to carry on the Business as presently conducted. All
Licenses used in connection with the Business or the Assets are valid, binding,
and in full force and effect on (i) the Company and (ii) to the Knowledge of
the Company and the other parties thereto. The Company has taken all necessary
action to maintain each License used in connection with the Business or the
Assets, except where the failure to so act is not likely to have a Material
Adverse Effect. No loss or expiration of any material License used in
connection with the Business or the Assets is pending or, to the Knowledge of
the Company, reasonably foreseeable (other than expiration upon the end of any
term).
Section 5.8. Legal Proceedings. Except as set forth on Schedule
5.8, there are no suits, actions, claims, arbitration, proceedings or
investigations pending or, to the Knowledge of the Company, threatened against,
relating to or involving the Business or the Assets before any Governmental
Entity. None of such suits, actions, claims, proceedings or investigations, if
finally determined adversely, are reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect. The Company is not subject to any
judgment, decree, injunction, rule or order of any court or arbitration panel
related to the Business or the Assets.
Section 5.9. Inventory. The Inventory (a) is sufficient for the
operation of the Business (as conducted on the date hereof) in the ordinary
course consistent with past practice, (b) consists of items which are good and
merchantable within normal trade tolerances, (c) is of a quality and quantity
presently usable or saleable in the ordinary course of the Business of the
Company (subject to applicable reserves), and (d) has been expensed in
accordance with GAAP (for a development stage company) consistently applied.
Section 5.10. Title to Assets; Related Matters. The Assets
constitute all of the assets necessary and sufficient to conduct the operations
of the Business as conducted as of the date hereof in accordance with the
Company's past practices. Except for assets disposed of in the
15
ordinary course of the Business consistent with past practices, finished goods
that have been sold at customary prices, cash, accounts receivable for which
payment has been received, and as set forth on Schedule 5.10, the Assets
constitute substantially all assets, properties and rights of the Company used
or held for use in connection with the Business at any time since October 31,
2001, and except as indicated on Schedule 5.10, the Company has (and will
convey to the Buyer at the Closing) good and marketable title to the Assets
(owned or purported to be owned by the Company), free and clear of all Liens
(except Permitted Liens). All equipment and other items of tangible personal
property and assets included in the Assets (a) are in good operating condition
and in a state of good maintenance and repair, ordinary wear and tear excepted,
(b) are usable in the regular and ordinary course of the Business (as conducted
on the date hereof) and (c) conform in all material respects to all applicable
laws, ordinances, codes, rules and regulations applicable thereto, and the
Company has no Knowledge of any material defects or material problems with any
of the Assets. No Person other than the Company owns any equipment or other
tangible personal property or assets situated on the premises of the Company
which are necessary to the operation of the Business, except for the leased
items that are subject to personal property leases. Schedule 5.10 sets forth a
true, correct and complete list and general description of each item of
tangible personal property of the Company related to the Business having a book
value of more than $20,000.
Section 5.11. Leased Real Property.
(a) The Company hereby represents that it does not own
any real property and that the only real property held and used in
connection with the Business or the Assets is the Leased Real
Property.
(b) Schedule 5.11(b) sets forth a true and correct legal
description of the Leased Real Property. Except as set forth on
Schedule 5.11(b), the Company has a valid leasehold interest in the
Leased Real Property, and such lease is in full force and effect.
(c) To the Knowledge of the Company, no portion of the
Leased Real Property, or any of the buildings and improvements located
thereon, violates any law, rule, regulation, ordinance or statute,
including those relating to zoning, building, land use, fire, air,
sanitation and noise control. Except for the Permitted Liens, to the
Knowledge of the Company, the Leased Real Property is not subject to
any governmental decree or order or any threatened or proposed order
to be sold or taken by public authority including any condemnation or
expropriation or similar proceedings.
(d) To the Knowledge of the Company, the improvements
and fixtures on the Leased Real Property are in good operating
condition and in a state of good maintenance and repair, ordinary wear
and tear excepted, are adequate and suitable for the purposes for
which they are presently being used. To the Knowledge of the Company,
none of the buildings and improvements utilized by the Company is
constructed of, or contains as a component part thereof, any material
which, either in its present form or as such material could reasonably
be expected to change through aging and normal use and service,
releases any substance, whether gaseous, liquid or solid, which is or
may be, either in a single dose or through repeated and prolonged
16
exposure, injurious or hazardous to the health of any individual who
may from time to time be in or about such buildings or improvements.
Section 5.12. Environmental, Health and Safety Matters. Except as
set forth in Schedule 5.12:
(a) The Company is in full compliance with all
Environmental Laws in connection with the Business or the Assets,
including all applicable limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in those laws or contained in any law,
regulation, code, plan, order, decree, judgment, notice, permit or
demand letter issued, entered, promulgated or approved thereunder in
connection with the Business or the Assets;
(b) The Company has not received notice of actual or
threatened liability under the Federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any similar
state or local statute or ordinance from any Governmental Entity or
any third party in connection with the Business or the Assets, and
there are no facts or circumstances which could reasonably form the
basis for the assertion of any claim against the Company under any
Environmental Laws in connection with the Business or the Assets
including, without limitation, CERCLA or any similar local, state or
foreign law with respect to any on-site or off-site location;
(c) The Company has not entered into or agreed to enter
into and the Company does not contemplate entering into, any consent
decree or order pursuant to Environmental Laws in connection with the
Business or the Assets, and the Company is not subject to any
judgment, decree or judicial or administrative order relating to
compliance with, or the cleanup of Hazardous Materials under, any
applicable Environmental Laws in connection with the Business or the
Assets;
(d) The Company has not been alleged to be in violation
of, and has not been subject to any administrative or judicial
proceeding pursuant to, applicable Environmental Laws or regulations
either now or any time during the past five (5) years in connection
with the Business or the Assets;
(e) The Company is not subject to any claim, obligation,
liability, loss, damage or expense of whatever kind or nature,
contingent or otherwise, incurred or imposed or based upon any
provision of any Environmental Law or arising out of any act or
omission of the Company, or the Company's employees, agents or
representatives or arising out of the ownership, use, control or
operation by the Company of any plant, facility, site, area or
property (including, without limitation, any plant, facility, site,
area or property currently or previously owned or leased by the
Company) from which any Hazardous Materials were released into the
environment, in each such case in connection with the operation of the
Business (the term "release" meaning any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment, and the term
"environment" meaning any surface or ground water, drinking water
supply, soil, surface or subsurface strata or medium, or the ambient
air);
(f) The Company has heretofore made available to the
Buyer true, correct and complete copies of all reports,
correspondence, memoranda, computer data and the
17
complete files relating to environmental matters in connection with
the Business or the Assets. The Company has not paid any fines,
penalties or assessments with respect to environmental matters
relating to the Business, the Assets or the Leased Real Property;
(g) Neither the Leased Real Property, improvements or
equipment included within the Assets contain any asbestos, PCBs,
underground storage tanks or open or closed pits, or under any such
Assets; and
(h) The Company has not imported, manufactured, stored,
used, operated, transported, treated or disposed of any Hazardous
Materials in connection with the Business or the Assets other than in
compliance with all Environmental Laws.
Section 5.13. Compliance With Laws Generally. The Company is in
compliance with all applicable laws, ordinances, regulations and orders of all
Governmental Entities with respect to the Business and the Assets. Except as
set forth in Schedule 5.13, (i) the Company has not been charged with and, to
the Knowledge of the Company, is not now under investigation with respect to, a
violation of any applicable law, regulation, ordinance, order or other
requirement of a Governmental Entity with respect to the Business or the
Assets, (ii) the Company is not a party to or bound by any order, judgment,
decree, injunction, rule or award of any Governmental Entity with respect to
the Business or the Assets and (iii) the Company has filed all reports and has
all licenses and permits required to be filed with any Governmental Entity with
respect to the Business and the Assets on or before the date hereof. The
representations and warranties contained in this Section 5.13 shall not apply
to the matters covered in Sections 5.12, 5.15, 5.16 5.17 or 5.18.
Section 5.14. Officers and Employees. Schedule 5.14 contains a
true and complete list of all of the employees (whether full-time, part-time or
otherwise) and independent contractors of the Company engaged in any respect in
the operations of the Business, specifying their position, status, annual
salary, hourly wages, date of birth, date of hire, social security number, work
location, length of service, Tax withholding history for the calendar year of
the Closing Date and the allocation of amounts paid and other benefits provided
to each of them, respectively, consulting or other independent contractor fees,
together with an appropriate notation next to the name of any officer or other
employee on such list who is subject to any written employment agreement or any
other written term sheet or other document describing the terms and/or
conditions of employment of such employee or of the rendering of services by
such independent contractor and any other information reasonably requested by
the Buyer. Except as set forth on Schedule 5.14, the Company is not a party to
or bound by any Employment Agreements related to the operations of the
Business. The Company has not received a claim from any Governmental Entity to
the effect that the Company has improperly classified as an independent
contractor any person named on Schedule 5.14. Except as indicated on Schedule
5.14, the Company has not made any verbal commitments to any such officers,
employees or former employees, consultants or independent contractors with
respect to compensation, promotion, retention, termination, severance or
similar matters in connection with the transactions contemplated by this
Agreement or otherwise. Except as indicated on Schedule 5.14, all officers and
employees of the Company related to the operations of the Business are active
on the date hereof.
18
Section 5.15. Company Benefit Plans.
(a) Schedule 5.15(a) contains a true and complete list
of each Company Benefit Plan or ERISA Affiliate Plan that currently
provides for employee benefits or the remuneration of the employees,
former employees, directors, officers, consultants, independent
contractors, contingent workers or leased employees engaged in any
respect in the operations of the Business or the dependents of any of
them.
(b) Except as set forth in Schedule 5.15(b),
(i) With respect to each Company Benefit Plan
identified on Schedule 5.15(a), the Company has heretofore
delivered or made available to the Buyer true and complete
summaries of the material provisions of each such plan,
summary plan descriptions, booklets and personnel manuals and
any other summaries of such plans and the most recent
determination letter received from the Internal Revenue
Service with respect to each such plan intended to qualify
under Section 401 of the Code, and such other documentation
with respect to any such plan as is reasonably requested by
the Buyer.
(ii) No Company Benefit Plan or ERISA Affiliate
Plan that provides or provided for employee benefits or the
remuneration of the employees or former employees engaged in
any respect in the operations of the Business or the
dependents of any of them is or was subject to Title IV of
ERISA or Section 412 of the Code, nor is any such Company
Benefit Plan or ERISA Affiliate Plan a "multiemployer pension
plan", as defined in Section 3(37) of ERISA, or subject to
Section 302 of ERISA. The Company does not have an obligation
to reimburse another employer, either directly or indirectly,
including through indemnification or otherwise, for making
contributions to a plan that is or was subject to Title IV of
ERISA. The Company has not incurred, and, to the Knowledge of
the Company, no facts exist that reasonably could be expected
to result in, liability to the Company as a result of a
termination, withdrawal or funding waiver with respect to a
Company Benefit Plan or an ERISA Affiliate Plan.
(iii) Each Company Business Plan which is
intended to qualify under Section 401(a) of the Code
("Qualified Plan") satisfies all of the requirements of such
Code section and related Code sections and has received a
favorable determination letter indicating that is
"qualified," and, to the Knowledge of the Company, no fact or
circumstance exists that could adversely affect the
tax-exempt status of such plan. The assets of each Qualified
Plan are reported at their fair market value on the financial
statements of such plan. There are no pending, threatened or
material anticipated claims, investigations, examinations,
audits or other proceedings or actions by, against, involving
or on behalf of any Qualified Plan by any Governmental
Entities and there exists no state of facts which after
notice or lapse of time or both reasonably could be expected
to give rise to any such material claim, investigation,
examination, audit or other proceeding.
(iv) Any obligation to provide notice of COBRA
Coverage or COBRA Coverage prior to the Closing Date with
respect to the operations of the Business with respect to
qualifying events on or prior to the Closing Date has been
satisfied
19
in all material respects.
(v) Except as set forth on Schedule 5.15(b)(v),
the execution, delivery and performance of, and consummation
of the transactions contemplated by, this Agreement will not
(1) entitle any current or former employee, director,
officer, consultant, independent contractors, contingent
worker or leased employee (or any of their dependents,
spouses or beneficiaries) of the Company to severance pay,
unemployment compensation or any other payment, or (2)
accelerate the time of payment or vesting, or increase the
amount of compensation due any such individual.
Section 5.16. Labor Relations. Except as set forth in Schedule
5.16:
(a) the Company's employees related to the operations of
the Business have not been, and currently are not, represented by a
labor organization or group which was either certified or voluntarily
recognized by any labor relations board, including, without
limitation, the NLRB, or certified or voluntarily recognized by any
other Governmental Entity;
(b) the Company has not been and is not a signatory to a
collective bargaining agreement with any trade union, labor
organization or group related to the operations of the Business;
(c) no representation election petition or application
for certification has been filed by employees of the Company related
to the operations of the Business or is pending with the NLRB or any
other Governmental Entity and no union organizing campaign or other
attempt to organize or establish a labor union, employee organization
or labor organization or group involving employees of the Company
related to the operations of the Business has occurred, is in progress
or, to the Knowledge of the Company, is threatened;
(d) the Company has not engaged in any unfair labor
practice related to the operations of the Business and the Company is
not aware of any pending or, to the Knowledge of the Company,
threatened labor board proceeding of any kind, including any such
proceeding against the Company or any trade union, labor union,
employee organization or labor organization representing the Company's
employees;
(e) no grievance or arbitration demand or proceeding,
whether or not filed pursuant to a collective bargaining agreement,
has been filed or is pending or, to the Knowledge of the Company, is
threatened against the Company related to the operations of the
Business;
(f) no labor dispute, walk out, strike, slowdown, hand
billing, picketing, work stoppage (sympathetic or otherwise), or other
"concerted action" involving the employees of the Company related to
the operations of the Business has occurred, is in progress or, to the
Knowledge of the Company, has been threatened;
(g) no breach of contract and/or denial of fair
representation claim has been filed or is pending or, to the Knowledge
of the Company, threatened against the Company and/or any trade union,
labor union, employee organization or labor
20
organization representing the Company's employees related to the
operations of the Business;
(h) no claim, complaint, charge or investigation for
unpaid wages, bonuses, commissions, employment withholding Taxes,
penalties, overtime, or other compensation, benefits, child labor or
record keeping violations has been filed or is pending or, to the
Knowledge of the Company, threatened under the Fair Labor Standards
Act, Xxxxx-Xxxxx Act, Xxxxx-Xxxxxx Act, or Service Contract Act or any
other federal, state, local or foreign law, regulation or ordinance;
(i) no discrimination and/or retaliation claim,
complaint, charge or investigation has been filed or is pending or, to
the Knowledge of the Company, threatened against the Company related
to the operations of the Business under the 1866 or 1964 Civil Rights
Acts, the Equal Pay Act, the ADEA, the ADA, the FMLA and the FLSA,
ERISA or any other federal law or comparable state fair employment
practices act or foreign law;
(j) the Company is not a federal or state contractor
obligated to develop and maintain an affirmative action plan;
(k) no citation related to the operations of the
Business has been issued by OSHA against the Company and no notice of
contest, claim, complaint, charge, investigation, or other
administrative enforcement proceeding involving the Company and
related to the operations of the Business has been filed or is pending
or, to the Knowledge of the Company, threatened against the Company
under OSHA or any other applicable law relating to occupational safety
and health;
(l) no workers' compensation or retaliation claim,
complaint, charge or investigation has been filed or is pending
against the Company related to the operations of the Business;
(m) no investigation or citation of the Company related
to the operations of the Business has occurred and no enforcement
proceeding has been initiated or is pending or, to the Knowledge of
the Company, threatened under federal or foreign immigration law;
(n) no wrongful discharge, retaliation, libel, slander
or other claim, complaint, charge or investigation that arises out of
the employment relationship between the Company and its respective
employees related to the operations of the Business has been filed or
is pending or, to the Knowledge of the Company, threatened against the
Company under any applicable law;
(o) the Company has maintained and currently maintains
adequate insurance as required by applicable law with respect to
workers' compensation claims and unemployment benefits claims related
to the operations of the Business;
(p) the Company is in compliance with all applicable
Labor Laws related to the operations of the Business;
21
(q) the Company is not liable for any liabilities,
judgments, decrees, orders, arrearage of wages or Taxes, fines or
penalties for failure to comply with any of the Labor Laws related to
the operations of the Business;
(r) the Company has provided the Buyer with a copy of
the policy of the Company for providing leaves of absence under the
FMLA and Schedule 5.16 identifies each employee related to the
operations of the Business who has requested FMLA leave to begin after
the Closing Date; a description of the leave requested; and a copy of
all notices provided to such employee regarding that leave; and
(s) the Company has not taken any action that would
constitute a "mass layoff", "mass termination" or "plant closing"
within the meaning of WARN or otherwise triggered notice requirements
or liability under any federal, local, state or foreign plant closing
notice or collective dismissal law.
Section 5.17. Intellectual Properties.
(a) Definition of Intellectual Property. The term
"Intellectual Property" means:
(i) the name "Cadant," all fictitious business
names, trading names, registered and unregistered trademarks
(including common law marks), trade dress, service marks, and
Internet domain names (including all U.S. federal, state and
foreign registrations with respect to any of the foregoing,
and applications for registration of any of the foregoing)
(collectively, the "Marks") and their associated goodwill;
(ii) all United States and foreign patents
(including all reissues, divisions, continuations,
continuations in part, and extensions thereof), United States
and foreign patent applications, and inventions and
discoveries that may be patentable (collectively, the
"Patents");
(iii) all copyrights in both published and
unpublished works (including all U.S. and foreign
registrations and applications for registration of the
foregoing) (collectively, the "Copyrights");
(iv) all computer software (in both source code
and object code), including (A) any and all software
implementations of algorithms, models and methodologies,
whether in source code or object code, (B) databases and
compilations, including any and all data and collections of
data, whether machine readable or otherwise, (C)
descriptions, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, (D)
the technology supporting any Internet site(s) operated by or
on behalf of the Company, (E) all Worldwide Web addresses,
URLs, and sites, and (F) all documentation, including system
documentation, user manuals and training materials, relating
to any of the foregoing (collectively, "Software");
(v) all rights in mask works and registrations
and applications for registration thereof (collectively,
"Mask Works"); and
(vi) all know-how, trade secrets, confidential
information, customer lists, technical documentation,
technical information, data, technology, plans,
22
drawings, schematics, compilations, devices, formulas,
designs, prototypes, methods, techniques, processes,
procedures, programs, or codes, whether tangible or
intangible (collectively, "Trade Secrets");
in each case, owned by the Company, used (or intended to be used) by the
Company, or licensed by the Company as licensee or licensor.
(b) Ownership of Intellectual Property. The Company
owns, or has the right to use pursuant to license, sublicense,
agreement, or permission, all Intellectual Property necessary for the
operation of the Business (the "Company Intellectual Property").
Assuming that the Parties obtain all consents set forth on Schedule
5.19, the consummation of the transactions provided for under this
Agreement will not result in the loss or impairment of any of the
Company Intellectual Property, and each item of Company Intellectual
Property owned or used by the Company immediately prior to the Closing
will be owned or available for use by the Company on identical terms
and conditions immediately subsequent to the Closing. The Company has
taken all commercially customary action to maintain and protect each
material item of Company Intellectual Property owned or used by it,
including the making of all filings and recordations with respect to
the Company Intellectual Property required in order to maintain and
protect its interests in the Company Intellectual Property.
(c) Infringement of Third Party Intellectual Property
Rights. Neither the Company nor the operation of the Business has
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of third parties.
The Company has not ever received any written charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation in connection with the operation of the
Business (including any claim that the Company must license or refrain
from using any Intellectual Property rights of any third party).
(d) Infringement of Company Intellectual Property
Rights. To the Knowledge of the Company, no third party (including any
present or former employee, consultant, or stockholder) has interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Company Intellectual Property.
(e) Owned Intellectual Property. Schedule 5.17(e) lists
each registration that has been issued to the Company with respect to
any Company Intellectual Property owned or purported to be owned by
the Company, and identifies each application for registration that the
Company has made with respect to any of its Company Intellectual
Property owned or purported to be owned by the Company (including
registrations of Marks, Patents, Copyrights and Mask Works and all
applications for any such registrations). The Company has delivered to
the Buyer correct and complete copies of all such registrations, and
applications (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. Schedule 5.17(e) also identifies (A) each trade name or
unregistered trademark used by the Company in connection with the
Business, and (B) all Software owned by the Company (whether
23
or not the Copyright therein has been registered). With respect to
each item of Intellectual Property required to be identified in
Schedule 5.17(e):
(i) The Company possesses all right, title, and
interest in and to the item, free and clear of any Lien
except Permitted Liens.
(ii) The item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge.
(iii) No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of the Company, threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item.
(iv) The Company has not ever agreed to
indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with
respect to the item.
(v) The Company is not under any obligation to
grant any right, license or permission to use, or with
respect to, any of the Company Intellectual Property.
(f) Patents. Except as set forth on Schedule 5.17(f),
with respect to the Patents required to be disclosed on Schedule
5.17(e):
(i) All Patents that have been registered with
the United States Patent and Trademark Office or foreign
patent office are valid, subsisting and enforceable, and are
not subject to any maintenance fees or Taxes or actions
falling due within one year after the Closing.
(ii) No Patent is now involved in any
invalidation proceeding and, to the Knowledge of the Company,
no such action or proceeding is threatened with respect to
any of the Patents.
(iii) There is no potentially interfering Patent
or Patent application of any third party.
(iv) All pending patent applications both before
the United States Patent and Trademark Office or foreign
patent office are active and the Company shall promptly
notify the Buyer of any response deadlines due within the six
(6) months following the Closing Date.
(g) Marks. Except as set forth on Schedule 5.17(g), with
respect to the Marks required to be disclosed on Schedule 5.17(e):
(i) All Marks that have been registered with
the United States Patent and Trademark Office are currently
in compliance with all formal legal requirements (including
the timely post-registration filing of affidavits of use and
incontestability and renewal applications), and are not
subject to any Taxes or actions falling due within one year
after the Closing.
24
(ii) No Xxxx is now involved in any opposition,
invalidation, or cancellation proceeding and no such action
or proceeding is threatened with respect to any of the Marks.
(iii) All pending trademark applications are
active and the Company shall promptly notify the Buyer of any
response deadlines due within the six (6) months following
the Closing Date.
(h) Copyrights. Except as set forth in Schedule 5.17(h),
with respect to the Copyrights required to be disclosed in Schedule
5.17(e), the Company is in compliance with all legal requirements
applicable to all registrations of the Copyrights, and all such
registrations of the Copyrights are valid, subsisting and enforceable,
and are not subject to any maintenance fees or Taxes or actions
falling due within one year after the Closing. All works have been
marked with appropriate copyright notices.
(i) Software. Except as set forth in Schedule 5.17(i):
(i) The Software owned or purported to be owned
by the Company and used or held for use in connection with
the Business (the "Company Software") was either (A)
developed by employees of the Company within the scope of
their employment, (B) developed by independent contractors or
consultants who have assigned all of their rights in and to
the Company Software to the Company pursuant to written
agreements, or (C) otherwise acquired by the Company from a
third party pursuant to a written assignment of rights to the
Company.
(ii) The Company has no obligation to provide
maintenance or support services with respect to any Company
Software to any third party.
(iii) The Company has not entered into any source
code escrow or similar arrangement under which a third party
would have the right to obtain the source code for any of the
Company Software.
(iv) The system documentation for the Company
Software owned by the Company is complete and accurate except
as would not have a Material Adverse Effect. The source code
and system documentation relating to that Company Software
(A) has at all times been maintained in strict confidence,
(B) has been disclosed only to employees who have a need to
know in connection with the performance of their duties to
the Company, and who have executed appropriate nondisclosure
agreements as contemplated in Section 5.17(j)(3), and (C) has
not been disclosed to any third party not under an obligation
to maintain the confidential nature of such information.
25
(j) Trade Secrets. Except as set forth on Schedule
5.17(j):
(i) Except as would not have a Material Adverse
Effect, the documentation relating to each Trade Secret used
or held for use in connection with the Business (the "Company
Trade Secrets") is current, accurate, and sufficient in
detail and content to identify and explain it and to allow
the full and proper use of the Company Trade Secrets without
reliance upon the knowledge or memory of any individual.
(ii) The Company has taken all reasonable
precautions to protect the secrecy, confidentiality, and
value of each Trade Secret owned or purported to be owned by
the Company and used in connection with the Business (the
"Company Trade Secrets").
(iii) The Company has obtained or entered into
written agreements with its employees and with third parties
in connection with the disclosure to, or use or appropriation
by, employees and third parties, of Company Trade Secrets
owned by the Company, restricting the use, disclosure or
appropriation of the Company Trade Secrets, and the Company
does not know of any situation involving such employee or
third party use, disclosure or appropriation of any such
Company Trade Secrets in which the lack of such written
agreement is likely to materially and adversely affect the
right of the Company to protect the Company Trade Secrets
from unauthorized use or disclosure under applicable Law.
(k) Royalties and other Payment Obligations. The Company
is not obligated to make any payments by way of any royalties, fees or
otherwise to any owner, licensor or other claimant to any Company
Intellectual Property rights for the ownership, transfer or use
thereof other than as expressly required under any license,
sublicense, agreement or permission expressly disclosed on Schedule
5.19.
(l) Agreements with Employees. To the Knowledge of the
Company, no employee of the Company has entered into any agreement
that restricts or limits in any way the scope or type of work in which
the employee may be engaged or requires the employee to transfer,
assign or disclose information concerning his work to anyone other
than Company.
Section 5.18. Tax Returns; Taxes.
(a) Except as otherwise disclosed in Schedule 5.18(a):
(i) all Tax Returns due to have been filed through the date hereof in
accordance with any applicable law have been duly filed and are
correct and complete in all respects; (ii) all Taxes shown to be due
on such Tax Returns have been paid in full or are accrued as
liabilities for Taxes on the books and records of the Company; (iii)
the amounts so paid on or before the date hereof, together with any
amounts accrued as liabilities for Taxes (including Taxes accrued as
currently payable but excluding any liability accrued for deferred
Taxes to reflect timing differences between book and Tax income) on
the balance sheet of the Company as of October 31, 2001, will be
adequate based on the Tax rates, applicable laws and regulations in
effect on the date hereof to satisfy all liabilities for Taxes of the
Company in any jurisdiction as of the date thereof; (iv) there are not
now any extensions of time in effect with respect to the dates on
which any Tax Returns
26
were or are due to be filed; (v) all deficiencies asserted as a result
of any examination of any Tax Return have been paid in full, accrued
on the books of the Company, or finally settled, and no issue has been
raised in any such examination which, by application of the same or
similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined; (vi) no
claims for Taxes have been or are currently being asserted, no audit
or investigation of any Tax Return is currently underway, and no
written notice or announcement of any claim, audit or investigation
has been received or, to the Knowledge of the Company, is pending or
threatened; (vii) no claim has been made within the past three (3)
years by any Governmental Entity in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation;
(viii) the Company has withheld and paid all Taxes required to have
been paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party;
(ix) there are no outstanding waivers or agreements by the Company for
the extension of time for the assessment of any Taxes or deficiency
thereof, nor are there any requests for rulings, outstanding subpoenas
or requests for information, written notice of proposed reassessment
of any property owned or leased by the Company or any other matter
pending between the Company and any Tax authority; (x) there are no
Liens for Taxes other than Liens for Taxes which are not yet due and
payable, nor are there any Liens which are pending or threatened; (xi)
the Company has not been a member of an affiliated group filing a
consolidated federal income tax return; (xii) the Company does not
have any liability for the Taxes of any Person (other than for itself)
under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by
contract or otherwise; (xiii) none of the Assumed Liabilities is an
obligation to make a payment that will not be deductible under Code
Section 280G; and (xiv) the Company is not a party to any Tax
allocation or sharing agreement.
(b) Except as set forth in Schedule 5.18(b), the Company
has delivered to the Buyer true and complete copies of all income Tax
Returns (together with any agent's reports, statements of deficiencies
assessed against or agreed to by the Company and any accountants' work
papers) for all Tax periods ending on or after December 31, 2000.
Schedule 5.18(b) also lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Company for Tax periods
ended on or after December 31, 2000, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are
the subject of audit.
(c) Schedule 5.10 lists (as described on such schedules)
the U.S. federal income tax basis of each Asset as of the Company's
Tax Return for the year 2000.
Section 5.19. Assumed Contracts.
(a) Schedule 5.19 sets forth a true, correct and
complete list of the contracts related to or utilized in the Business
which the Buyer will assume under the terms of this Agreement and the
Company hereby represents that such contracts constitute all the
material contracts of the Company (other than the Employment
Agreements set forth on Schedule 5.14 and the Company Benefit Plans
set forth on Schedule 5.15(a)).
27
(b) True, correct and complete copies of all Assumed
Contracts have been made available to the Buyer. The Assumed Contracts
are legal, valid, binding and enforceable in accordance with their
respective terms with respect to the Company and, to the Knowledge of
the Company, each other party to such Assumed Contracts, subject to
bankruptcy, creditors' rights and general principles of equity. There
are no existing defaults or breaches of the Company under any Assumed
Contract (or events or conditions which, with notice or lapse of time
or both would constitute a default or breach) and, to the Knowledge of
the Company, there are no such defaults (or events or conditions
which, with notice or lapse of time or both, would constitute a
default or breach) with respect to any third party to any Assumed
Contract. Except as set forth on Schedule 5.19, the Company is not
participating in any discussions or negotiations regarding
modification of or amendment to any Assumed Contract or entry in any
new material contract applicable to the Business or the Assets.
Schedule 5.19 identifies with an asterisk each Assumed Contract set
forth therein that requires the consent of or notice to the other
party thereto to avoid any breach, default or violation of such
contract, agreement or other instrument in connection with the
transactions contemplated hereby, including the assignment of such
Assumed Contract to the Buyer and identifies with an exclamation xxxx
each such consent that will be required to be received prior to
Closing.
Section 5.20. Insurance. Schedule 5.20 contains a complete and
correct list of all insurance policies carried by or for the benefit of the
Company related to the Business or the Assets, specifying the insurer, amount
of and nature of coverage, the risk insured against, the deductible amount (if
any) and the date through which coverage will continue by virtue of premiums
already paid. The Company maintains insurance with reputable insurers for the
business and assets of the Company against all risks normally insured against,
and in amounts normally carried, by corporations of similar size engaged in
similar lines of business and to the Knowledge of the Company, such coverage is
sufficient. All insurance policies and bonds with respect to the Business and
Assets are in full force and effect and will be maintained by the Company in
full force and effect as they apply to any matter, action or event relating to
the Company occurring through the Closing Date and the Company has not reached
or exceeded its policy limits for any insurance policies in effect at any time
during the past five (5) years.
Section 5.21. Notes; Accounts Receivable; Accounts Payable.
(a) Notes. All notes receivable of the Company owing by
any director, officer, stockholder or employee of the Company have
been paid in full prior to the date hereof or shall be paid in full
prior to the Closing Date.
(b) Accounts Receivable. The Company has delivered to
the Buyer a true and complete schedule of the accounts receivables, to
the extent the Company has accounts receivable, showing the amount of
each receivable and an aging of amounts due thereunder, which schedule
is true and complete as of that date. Schedule 5.21(b) contains a
complete and acceptable list of the Company's customers, including the
name, address and amounts of accounts receivables attributable to each
customer.
Section 5.22. Supplier Relations. Schedule 5.22 contains a
complete and accurate list of the names and addresses of the Company's
Suppliers. Except as set forth on Schedule 5.22, the Company has not received
any notice and has no Knowledge to the effect that any current
28
Supplier may terminate or materially alter its business relations with the
Company, either as a result of the transactions contemplated by this Agreement
or otherwise.
Section 5.23. Nondisclosed Payments. Neither the Company nor the
officers or directors of the Company, nor anyone acting on behalf of any of
them, has made or received any payments not correctly categorized and fully
disclosed in the Company's books and records in connection with or in any way
relating to or affecting the Business.
Section 5.24. Bank Accounts. Schedule 5.24 sets forth a true,
correct and complete list and description of the Bank Accounts.
Section 5.25. Transactions with Affiliates. Except as set forth in
Schedule 5.25, no officer or director of the Company, or any person with whom
any such officer or director has any direct or indirect relation by blood,
marriage or adoption, or any entity in which any such person, owns any
beneficial interest (other than a publicly held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than five percent (5%) of the stock of which is beneficially owned by all
such Persons in the aggregate) or any Affiliate of any of the foregoing or any
current or former Affiliate of the Company has any interest in: (a) any
contract, arrangement or understanding with, or relating to, the Business, the
Assets or the Assumed Liabilities; (b) any loan, arrangement, understanding,
agreement or contract for or relating to the Business or the Assets; or (c) any
property (real, personal or mixed), tangible or intangible, used or currently
intended to be used by the Company in connection with the Business. Schedule
5.25 also sets forth a complete list of all accounts receivable, notes
receivable and other receivables and accounts payable owed to or due from any
Affiliate to the Company related to the Business.
Section 5.26. Brokers. Schedule 5.26 contains a summary of all
agreements entered into by the Company engaging a broker, finder or investment
banker which could cause the Company to incur liability for any investment
banking fees, financial advisory fees, brokerage fees or finders' fees in
connection with the transactions contemplated by this Agreement.
Section 5.27. Securities Issuance Representations. The Company
represents and warrants with respect to the Shares as follows:
(a) It understands that the Shares have not been, and,
until the effectiveness of the registration statement contemplated by
Section 7.13, will not be registered under the Securities Act and that
in issuing the Shares to Company hereunder Buyer is relying on the
private offering exemption from the registration requirements of the
Securities Act afforded by Section 4(2) thereof and Regulation D
promulgated thereunder.
(b) It is an "accredited investor" within the meaning of
Rule 501 of the Securities Act or that it has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Shares.
(c) It is acquiring the Shares for its own account for
investment and not with a view to any public distribution or public
offering within the meaning of the Securities Act except as
contemplated by Section 7.13 hereof.
29
(d) It understands that the receipt of the Shares
hereunder is a speculative investment which involves a high degree of
risk of loss of its investment therein. It is able to bear the
economic risk of its investment in the Shares for an indefinite period
of time, including the risk of a complete loss of its investment in
such securities.
(e) It acknowledges that it has received and has had an
opportunity to review prior to executing this Agreement the Buyer SEC
Reports (as defined herein).
(f) It acknowledges that Buyer has made available to it
at a reasonable time prior to its execution of this Agreement the
opportunity to ask questions and receive answers concerning the terms
and conditions of this Agreement and to obtain any additional
information which Buyer possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the
information referred to in (e) above.
Section 5.28. Disclosure.
(a) No representation, warranty or covenant made by the
Company in this Agreement or the Schedules contains an untrue
statement of a material fact or omits to state a material fact
required to be stated herein or therein or necessary to make the
statements contained herein or therein not misleading.
(b) Prior to the execution of this Agreement, the
Company has delivered to the Buyer true and complete copies of the
Assumed Contracts, documents evidencing any of the Company
Intellectual Property, and all Liens on the Assets, and any other
documents or instruments identified or referred to in the Schedules.
Such delivery will not alone constitute adequate disclosure of those
facts required to be disclosed on any Schedule to this Agreement, and
notice of their contents (other than by express reference on a
Schedule) will in no way limit the Company's other obligations or the
Buyer's other rights under this Agreement.
Section 5.29. CMTS Functionality. Except as set forth on Schedule
5.29, all of the Company's CMTS products and designs (i) are free from material
defects in design, (ii) comply with their published specifications in all
material respects, (iii) are merchantable and fit for their intended purposes,
and (iv) comply with Version 1.1 of the DOCSIS standards established by
CableLabs(R).
Section 5.30. Tax-Free Reorganization. To the Knowledge of the
Company, neither it nor any of its Affiliates has taken any action or failed to
take any action, which action or failure would jeopardize the qualification of
the Acquisition as a reorganization within the meaning of section 368(a)(1)(C)
of the Code.
Section 5.31. Reincorporation. The Company's reincorporation (the
"Reincorporation"), whereby it changed its state of incorporation from the
State of Maryland to the State of Delaware by effectuating a merger between the
Company and Cadant, Inc., as incorporated in Maryland ("Cadant-Maryland"), (i)
was duly and validly approved by the directors and stockholders of
Cadant-Maryland and the Company, (ii) was done in accordance with the laws of
the State Maryland and the State of Delaware, (iii) was valid and effective as
of December 27, 2000, and not subject to revocation or other avoidance and (iv)
taken together with the documents delivered at that time, was effective to
transfer the title to Cadant-Maryland's assets to the Company. The
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proxy statement, soliciting votes from the stockholders of Cadant-Maryland in
favor of the Reincorporation, complied with all applicable federal and state
securities and corporate law.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 6.1. Organization and Qualification; Subsidiaries. Each
of Buyer and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has the requisite corporate power and authority and is in possession of all
approvals necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and approvals would not have a
Material Adverse Effect. The Buyer and each of its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not have a Material
Adverse Effect.
Section 6.2. Charter Documents. Buyer has heretofore furnished to
Company a complete and correct copy of the Buyer Charter Documents as most
recently restated and subsequently amended to date. The Buyer Charter Documents
are in full force and effect. The Buyer is not materially in violation of any
of the provisions of the Buyer Charter Documents.
Section 6.3. Capitalization. The authorized capital stock of the
Buyer consists of (i) 320,000,000 shares of Buyer Common Stock and (ii)
5,000,000 shares of preferred stock, $1.00 par value per share, none of which
is issued and outstanding. As of October 31, 2001, (i) 75,150,498 shares of
Buyer Common Stock were issued and outstanding, all of which are validly
issued, fully paid and no assessable, and no shares were held in treasury, (ii)
no shares of Buyer Common Stock were held by subsidiaries of Buyer, and (iii)
10,346,122 shares in the aggregate are reserved for future issuance pursuant to
each of the Buyer's (w) 2001 Stock Incentive Plan, (x) Management Incentive
Plan, (y) Employee Stock Purchase Plan and (z) Employee Savings Plan. No
material change in such capitalization has occurred between November 30, 2001
and the Closing Date. All shares of Buyer Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable.
Section 6.4. Authority Relative to this Agreement. Buyer has all
necessary corporate power and authority to execute and deliver this Agreement
and the Buyer Ancillary Agreements and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Buyer Ancillary Agreements
by Buyer and the consummation by Buyer of the transactions contemplated hereby
and thereby (including, without limitation, the issuance of the Shares and the
Earn Out Shares) have been duly and validly authorized by all necessary
corporate action on the part of Buyer, and no other corporate proceedings on
the part of Buyer are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement and the
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Buyer Ancillary Agreements have been duly and validly executed and delivered by
the Buyer and, assuming the due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of the Buyer,
enforceable in accordance with its terms. The Shares and Earn Out Shares (if
any) to be issued pursuant to this Agreement have been duly authorized and
reserved, and when issued in accordance with the terms of this Agreement shall
be validly issued, fully paid and nonassessable.
Section 6.5. No Conflict, Required Filings and Consents.
(a) Except as set forth in Schedule 6.5(a), the
execution and delivery of this Agreement and the Buyer Ancillary
Agreements by the Buyer do not, and the performance of this Agreement
by the Buyer will not, (i) conflict with or violate the Buyer Charter
Documents, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Buyer or any of its
subsidiaries or by which its or their respective properties are bound
or affected, or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or impair the Buyer's or any of its subsidiaries'
rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the
properties or assets of the Buyer or any of its subsidiaries pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
the Buyer or any of its subsidiaries is a party or by which the Buyer
or any of its subsidiaries or its or any of their respective
properties are bound or affected, except in any such case for any such
conflicts, violations, breaches, defaults or other occurrences that
would not have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Buyer does not, and the performance of this Agreement by the Buyer
will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, the
Blue Sky Laws, the Xxxx-Xxxxx-Xxxxxx Act, and the filing and
recordation of appropriate documents as required by law, and (ii)
where the failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not
prevent or delay consummation of the transactions contemplated by this
Agreement, or otherwise prevent the Buyer or the Company from
performing their respective obligations under this Agreement, and
would not have a Material Adverse Effect.
Section 6.6. SEC Filings; Financial Statements.
(a) The Buyer or its predecessor corporation has filed
all forms, reports and documents required to be filed with the SEC and
has made available to the Company (i) its Annual Reports on Form 10-K
for the fiscal years ended December 31, 1998, 1999 and 2000,
respectively, (ii) its Quarterly Reports on Form 10-Q for the periods
ended March 31, 2001, June 30, 2001, September 30, 2001, (iii) all
proxy statements relating to the Buyer's meetings of stockholders
(whether annual or special) held since January 1, 1998, (iv) all other
reports or registration statements (other than Reports on Form 10-Q
not referred to in clause (ii) above) filed by the Buyer with the SEC
since
32
January 1, 1998, and (v) all amendments and supplements to all such
reports and registration statements filed by the Buyer with the SEC
since January 1, 1998 (collectively, the "Buyer SEC Reports"). Except
as disclosed in Schedule 6.6(a), the Buyer SEC Reports (i) were
prepared in all material respects in accordance with the requirements
of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded
by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the
Buyer's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the
Buyer SEC Reports was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), and each fairly presents in all
material respects the consolidated financial position of the Buyer and
its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were
not or are not expected to be material in amount.
Section 6.7. Taxes.
(a) Other than as disclosed in Schedule 6.7, the Buyer
and its subsidiaries (for such periods as each subsidiary was owned,
directly or indirectly, by the Buyer) have filed all United States
federal income Tax Returns and all other material Tax Returns required
to be filed by them, and the Buyer and its subsidiaries have paid and
discharged all Taxes due in connection with or with respect to the
periods or transactions covered by such Tax Returns and have paid all
other Taxes as are due, except such as are being contested in good
faith by appropriate proceedings (to the extent that any such
proceedings are required) and except as may be determined to be owed
upon completion of any Tax Return not yet filed based upon an
extension of time to file, and there are no other Taxes that would be
due if asserted by a taxing authority, except with respect to which
the Buyer is maintaining reserves to the extent currently required
except to the extent the failure to do so would not have a Material
Adverse Effect. Except as does not involve or would not result in
liability to the Buyer or any of its subsidiaries that would have a
Material Adverse Effect, (i) there are no Tax liens on any assets of
the Buyer or any subsidiary thereof; and (ii) neither the Buyer nor
any of its subsidiaries has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the
assessment of, any Tax. The accruals and reserves for Taxes (including
deferred Taxes) reflected in the balance sheet of the Buyer included
in the Buyer SEC Filings are in all material respects adequate to
cover all Taxes required to be accrued through the date thereof
(including interest and penalties, if any, thereon and Taxes being
contested) in accordance with generally accepted accounting
principles.
33
Section 6.8. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Buyer.
Section 6.9. No Undisclosed Liabilities. Except as disclosed in
Schedule 6.9, the Buyer does not have any liabilities or obligations (whether
absolute, contingent or otherwise), which are not adequately reflected or
provided for in the unaudited balance sheet of the Business at September 30,
2001, except liabilities and obligations that have been incurred since the date
of such balance sheet in the ordinary course of the Business and are not
(singly or in the aggregate) material to the Buyer.
Section 6.10. Absence of Certain Changes. Since September 30, 2001
and except as set forth in Schedule 6.10, there has not been (i) any material
adverse effect on the financial condition, results of operations, properties,
assets or liabilities of the Buyer or (ii) any damage, destruction, loss or
casualty to property or assets of the Buyer with a value in excess of
$10,000,000 whether or not covered by insurance.
Section 6.11. Tax-Free Reorganization. To the knowledge of the
Buyer, neither it nor any of its Affiliates has taken any action or failed to
take any action, which action or failure would jeopardize the qualification of
the Acquisition as a reorganization within the meaning of section 368(a)(1)(C)
of the Code.
ARTICLE VII
CERTAIN COVENANTS AND AGREEMENTS
Section 7.1. Conduct of Business. From the date hereof until the
Closing Date, the Company shall, except as (i) set forth on Schedule 7.1, or
(ii) expressly required by this Agreement and except as otherwise consented to
in advance in writing by the Buyer (which consent shall not be unreasonably
withheld):
(a) conduct the Business (as conducted immediately prior
to the date hereof) in the ordinary course on a basis consistent with
past practice and not engage in any new line of business or enter into
any agreement, transaction or activity or make any commitment with
respect to the Business or the Assets except those in the ordinary
course of Business and not otherwise prohibited under this Section
7.1;
(b) use its best efforts to preserve intact the goodwill
and business organization of the Business, keep the officers and
employees of the Company available to the Buyer and preserve the
relationships and goodwill of the Business with potential customers,
distributors, suppliers, employees and others having business
relations with the Company related to the Business;
(c) maintain its existence and good standing in its
jurisdiction of organization and in each jurisdiction in which the
conduct of the Business requires such qualification;
(d) duly and timely file or cause to be filed all
reports and returns relating to the Business or the Assets required to
be filed with any governmental body, agency or authority and promptly
pay or cause to be paid when due all Taxes, assessments and
34
governmental charges relating to the Business or the Assets, including
interest and penalties levied or assessed, unless diligently contested
in good faith by appropriate proceedings;
(e) maintain in existing condition and repair (ordinary
wear and tear excepted), consistent with past practices, all
buildings, offices, shops and other structures located on the Real
Property relating to the Business or the Assets, and all equipment,
fixtures and other tangible personal property located on the Real
Property relating to the Business or the Assets;
(f) not dispose of or permit to lapse any rights to the
use of any patent, trademark, trade name, service xxxx, license or
copyright used in connection with the Business as conducted on the
date hereof, including, without limitation, any of the Company
Intellectual Property, or dispose of or disclose to any Person, any
trade secret, formula, process, technology or know-how of the Company
used in connection with the Business as conducted on the date hereof
not heretofore a matter of public knowledge;
(g) not (i) sell or transfer any assets related to or
used or held for use in the Business as conducted on the date hereof,
other than finished goods sold in the ordinary course of the Business,
(ii) create, incur or assume any indebtedness secured by any of the
Assets, except for the Bridge Loan or any additional indebtedness
created in favor of the Buyer for the specific purpose of financing
the Company's continued operations during the period between the date
hereof and the Closing Date, (iii) grant, create, incur or suffer to
exist any Liens on any of the Assets which did not exist on the date
hereof, except for Liens incurred in connection with the Bridge Loan
or any additional indebtedness created in favor of the Buyer for the
specific purpose of financing the Company's continued operations
during the period between the date hereof and the Closing Date, (iv)
incur any material liability or obligation related to the Business or
the Assets (absolute, accrued or contingent) except in the ordinary
course of the Business consistent with past practice, (v) write-off
any guaranteed checks, notes or accounts receivable related to the
Business except in the ordinary course of the Business consistent with
past practice, (vi) voluntarily write-down the value of any asset or
investment related to the Business (including, without limitation, any
of the Assets) on the books or records of the Company, except for
depreciation and amortization in the ordinary course of the Business
and consistent with past practice, (vii) cancel any debt or waive any
claims or rights related to the Business, (viii) make any commitment
related to the Business for any capital expenditure to be made on or
after the Closing Date in excess of $10,000 in the case of any single
expenditure or $20,000 in the case of all capital expenditures or (ix)
enter into any material contract or agreement related to the Business;
(h) not increase in any manner the base compensation of,
or enter into any new bonus or incentive agreement or arrangement
with, any of its employees, directors or consultants used in
connection with the Business, except in the ordinary course of the
Business consistent with the past practice of the Company;
(i) not pay or agree to pay any additional pension,
retirement allowance or other employee benefit under any Company
Benefit Plan to any employee used in
35
connection with the Business, whether past or present, except (y)
pursuant to commitments existing on the date hereof, or (z) in the
ordinary course of the Business to the extent consistent with the past
practice of the Company;
(j) not adopt, amend or terminate any Company Benefit
Plan or increase the benefits provided under any Company Benefit Plan,
or promise or commit to undertake any of the foregoing in the future;
(k) not amend any existing collective bargaining
agreement or enter into a new collective bargaining agreement;
(l) not amend or terminate any existing employment,
severance, consulting, or other compensation agreement relating to the
Business or enter into any new employment, severance, consulting or
other compensation agreement relating to the Business, except (y)
pursuant to commitments existing on the date hereof, or (z) in the
ordinary course of the Business consistent with the past practice of
the Company;
(m) maintain in all material respects supplies and
inventory relating to the Business at levels that are consistent with
the levels existing on the date hereof;
(n) perform its obligations under all, and not default
or suffer to exist any event or condition which with notice or lapse
of time or both would constitute a default under, any Assumed Contract
(except those being contested in good faith) and not enter into,
assume or amend any contract or commitment that is or would be an
Assumed Contract other than in the ordinary course of the Business
consistent with past practice;
(o) not pay, discharge or satisfy any claim, liability
or obligation (absolute, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of the
Business consistent with past practice of claims, liabilities and
obligations reflected or reserved against in the unaudited balance
sheet of the Company at October 31, 2001 or incurred in the ordinary
course of the Business consistent with past practice;
(p) not increase any reserves for contingent liabilities
related to the Business (excluding any adjustment to bad debt reserves
made in the ordinary course of the Business consistent with past
practice);
(q) maintain in full force and effect and in the same
amounts policies of insurance comparable in amount and scope of
coverage to that now maintained by or on behalf of the Company and
related to the Business;
(r) continue to maintain its books and records in
accordance with GAAP consistently applied and on a basis consistent
with the Company's past practice;
(s) continue its cash management practices in the
ordinary course of the Business consistent with past practice;
(t) not declare any dividends for the capital stock of
the Company; and
(u) not authorize, or commit or agree to take, any of
the foregoing actions.
36
In connection with the continued operation of the Business between the date
hereof and the Closing Date, the Company will confer in good faith on a regular
and frequent basis with the Buyer regarding operational matters and the general
status of on-going operations of the Company promptly. The Company acknowledges
that the Buyer does not and will not waive any rights it may have under this
Agreement as a result of such consultations. The Company shall not take any
action that would, or that could reasonably be expected to, result in any of
the representations and warranties of the Company set forth in this Agreement
becoming untrue.
Section 7.2. Inspection and Access to Information. From the date
hereof to the Closing Date or until this Agreement is terminated as provided in
Article IX, the Company will (and will cause its respective officers,
directors, employees, auditors and agents to) provide the Buyer and its
accountants, investment bankers, counsel, environmental consultants and other
authorized representatives full access, during reasonable hours and under
reasonable circumstances, to any and all of its premises, employees (including
executive officers), properties, contracts, commitments, books, records and
other information related to the Business (including Tax Returns filed and
those in preparation) and will cause its officers to furnish to the Buyer and
its authorized representatives, promptly upon request therefor, any and all
financial, technical and operating data and other information pertaining to the
Company and the Business and otherwise fully cooperate with the conduct of due
diligence by the Buyer and its representatives. Buyer agrees that any such due
diligence investigation shall be conducted in a manner so not to interfere
unreasonably with the operations of the Company.
Section 7.3. Notices of Certain Events. The Company shall
promptly notify the Buyer of:
(a) any changes or events which, individually or in the
aggregate, have had or could reasonably be expected to have a Material
Adverse Effect or otherwise result in any representation or warranty
of the Company under this Agreement being inaccurate in any material
respect;
(b) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(c) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated
by this Agreement;
(d) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened against,
relating to or involving or otherwise affecting the Company or the
Business that, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 5.8 or that
relate to the consummation of the transactions contemplated by this
Agreement; and
(e) the damage or destruction by fire or other casualty
of any of the Assets or part thereof or in the event that any of the
Assets or part thereof becomes the subject of any proceeding or, to
the Knowledge of the Company, threatened proceeding for the taking
thereof or any part thereof or of any right relating thereto by
condemnation, eminent domain or other similar governmental action.
37
The Company acknowledges that the Buyer does not and will not waive any rights
it may have under this Agreement as a result of such notifications.
Section 7.4. Interim Financials. As promptly as practicable after
each regular accounting period subsequent to the end of the most recent fiscal
year and prior to the Closing Date, the Company will deliver to the Buyer
periodic financial reports in the form which it customarily prepares for its
internal purposes concerning the Business and, if available, unaudited
statements of the financial position of the Business as of the last day of each
accounting period and statements of income and changes in financial position of
such entities for the period then ended. The Company covenants that such
interim statements (i) will present fairly in all material respects the
financial condition of the Business as of their respective dates and the
related results of their respective operations for the respective periods then
ended, and (ii) will be prepared on a basis consistent with prior interim
periods.
Section 7.5. No Solicitation of Transactions. Neither the Company
nor any of its Affiliates will, directly or indirectly, through any officer,
director or agent of any of them or otherwise, initiate, solicit or encourage
(including by way of furnishing non-public information or assistance), or enter
into negotiations of any type, directly or indirectly, or enter into a
confidentiality agreement, letter of intent or purchase agreement, merger
agreement or other similar agreement with any Person, firm or corporation other
than the Buyer with respect to a sale of all or any substantial portion of the
Assets, or a merger, consolidation, business combination, sale of all or any
substantial portion of the capital stock of the Company, or the liquidation or
similar extraordinary transaction with respect to the Company. After Knowledge
thereof, the Company will notify the Buyer orally (within two (2) Business
Days) and in writing (as promptly as practicable) of all relevant terms of any
proposals by a third party to do any of the foregoing which the Company or any
of its Affiliates or any of their respective officers, directors, partners,
employees, investment bankers, financial advisors, attorneys, accountants or
other representatives may receive relating to any of such matters and, if such
proposal is in writing, the Company will deliver to the Buyer a copy of such
inquiry or proposal.
Section 7.6. Reasonable Efforts; Further Assurances; Cooperation.
Subject to the other provisions of this Agreement, the Parties will each use
their reasonable, good faith efforts to perform their obligations under this
Agreement and to take, or cause to be taken, and do, or cause to be done, all
things necessary, proper or advisable under applicable law to obtain all
consents required as described on Schedule 5.19 and all regulatory approvals
and to satisfy all conditions to their respective obligations under this
Agreement and to cause the transactions contemplated in this Agreement to be
effected as soon as practicable in accordance with the terms of this Agreement
and will cooperate fully with each other and their respective officers,
directors, employees, agents, counsel, accountants and other designees in
connection with any steps required to be taken as a part of their respective
obligations under this Agreement, including, without limitation:
(a) Each of the Parties promptly will make their
respective filings and submissions and will take all actions
necessary, proper or advisable under applicable laws and regulations
to obtain any required approval of any Governmental Entity with
jurisdiction over the transactions contemplated by this Agreement
(except that the Buyer shall have no obligation to take or consent to
the taking of any action required by any such Governmental Entity that
could materially and adversely affect the
38
Business, the Assets or the transactions contemplated by this
Agreement or the Buyer Ancillary Documents). Each of the Parties will
furnish all information required for any application or other filing
to be made pursuant to the rules and regulations of any applicable law
in connection with the transactions contemplated by this Agreement.
(b) In the event any claim, action, suit, investigation
or other proceeding by any Governmental Entity or other Person is
commenced which questions the validity or legality of the Acquisition
or any of the other transactions contemplated by this Agreement or
seeks damages in connection therewith, the Parties agree to cooperate
and use all reasonable efforts to defend against such claim, action,
suit, investigation or other proceeding and, if an injunction or other
order is issued in any such action, suit or other proceeding, to use
all reasonable efforts to have such injunction or other order lifted
and to cooperate reasonably regarding any other impediment to the
consummation of the transactions contemplated by this Agreement.
(c) The Company will give any notices to third parties
and use its reasonable efforts (in consultation with the Buyer) to
obtain any third party consents (i) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, (ii)
disclosed or required to be disclosed in the Schedules to this
Agreement, including, without limitation, the consents described in
Schedule 5.19, (iii) required to avoid a breach of or default under
any Assumed Contracts in connection with the consummation of the
transactions contemplated by this Agreement or (iv) required to
prevent a Material Adverse Effect, whether prior to or after the
Closing Date.
(d) The Parties will give prompt notice to the other
Party or Parties of (i) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any
representation or warranty of the Company or the Buyer, as the case
may be, contained in this Agreement to be untrue or inaccurate at any
time from the date hereof to the Closing Date or that will or may
result in the failure to satisfy any of the conditions specified in
Article VIII of this Agreement and (ii) any failure of the Company or
the Buyer, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by any of them
under this Agreement. The Company acknowledges that the Buyer does not
and will not waive any rights it may have under this Agreement as a
result of such notifications.
Section 7.7. Consents. The Company shall, during the remaining
term of the Non-Assignable Contracts, use all commercially reasonable efforts
to (a) obtain the consent of the applicable third party, (b) make the benefit
of such Non-Assignable Contracts available to the Buyer so long as the Buyer
fully cooperates with the Company and promptly reimburses the Company for all
payments made by the Company in connection therewith and indemnify the Company
with respect thereto, and (c) enforce at the request of the Buyer and at the
expense and for the account of the Buyer, any rights of the Company arising
from such Non-Assignable Contracts against the other party or parties thereto
(including the right to elect or terminate any such Non-Assignable Contracts in
accordance with the terms thereof). The Company will not take any action or
suffer any omission which would limit or restrict or terminate in any material
respect the benefits to the Buyer of such Non-Assignable Contracts unless, in
good faith and after consultation with and prior written notice to the Buyer,
the Company is ordered orally or in writing to do so by a Governmental Entity
of competent jurisdiction or the Company is otherwise
39
required to do so by law; provided that if any such order is appealable, the
Company will, at the Buyer's cost and expense, take such actions as are
requested by the Buyer to file and pursue such appeal and to obtain a stay of
such order. With respect to any such Non-Assignable Contract as to which the
necessary approval or consent for the assignment or transfer to the Buyer is
obtained following the Closing, the Company shall transfer such Non-Assignable
Contract to the Buyer by execution and delivery of an instrument of conveyance
reasonably satisfactory to the Buyer and the Company within three (3) Business
Days following receipt of such approval or consent. Notwithstanding the
foregoing, the Company shall not be indemnified to the extent of any losses
which result from (i) the Company's repeated and willful failure to take any
lawful action in accordance with the Buyer's reasonable instructions or (ii)
the Company's gross negligence or willful misconduct.
Section 7.8. Releases. Schedule 7.8 lists each Person from which
the Company shall use commercially reasonable efforts to obtain a release
(collectively, the "Releases") prior to the Closing. Each Release shall (i)
without limitation, release each of the Parties regarding any Liens and other
security interests, and all other right, title and interest that such releasing
party may have in any of the Assets or the Business, (ii) be in a form that is
satisfactory to the Buyer, (iii) be delivered at the Closing and (iv) be
satisfied exclusively out of the Purchase Price. The Company shall obtain a
Release or Releases, as the case may be, from each Person having an interest or
claim related to any of the following:
(a) any fees that any Person may be entitled to in
connection with the termination of any proposed but uncompleted
financing of the Company;
(b) any finder's, brokerage or other fee or commission
that any broker, finder or investment banker is entitled, in
connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company;
(c) any cash amount that any employee of the Company may
be entitled to under any deal bonus plan of the Company;
(d) any amounts owed by the Company to any employee
thereof in connection with any Employment Agreement or other
arrangement relating to (i) severance benefits or (ii) any monies or
benefits that may be triggered by the transactions contemplated by
this Agreement;
(e) any fees or expenses owed by the Company to its
legal counsel, accountants, financial advisors, investment bankers or
any other Person who has generated fees in connection with and
preparation for (i) the transactions contemplated by this Agreement or
(ii) any proposed but uncompleted financing of the Company; and
(f) any Lien encumbering any of the Assets, except for
the Assumed Liabilities.
Section 7.9. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement to the financial
community, government agencies, employees or the general public shall be
mutually agreed upon in advance (unless either party is advised by counsel in
writing that any such announcement or other disclosure not mutually agreed upon
in advance is required to be made by law or applicable rule of the Nasdaq
National Market System, and then only after consulting with the other party and
making reasonable efforts to comply with the provisions of this Section).
40
Section 7.10. Supplements to Schedules. At least two (2) Business
Days prior to the Closing Date, the Company will supplement or amend the
Schedules which they have delivered pursuant to this Agreement with respect to
any matter occurring after the date hereof which, if existing or occurring at
or prior to the date hereof, would have been required to be set forth or
described in such Schedules or which is necessary to correct any information to
in such Schedules which has been rendered inaccurate thereby. No supplement or
amendment to any Schedule will have any effect for determining liability for a
prior breach of a representation or warranty; provided, however, any such
supplements or amendments to any Schedules will only affect the satisfaction of
the conditions set forth in Section 8.1 if the matters disclosed in any such
supplements or amendments, individually or in the aggregate, would constitute a
Material Adverse Effect.
Section 7.11. Employees.
(a) Transferred Employees. On the Closing Date, Buyer
will offer employment, on an at will basis, to no fewer than ninety
(90) of the Company's employees (the "Business Employees") who are
actively at work on the Closing Date (the "Offeree Employees") upon
substantially the same terms and conditions (other than
benefit plans, as addressed below) and with substantially the same
duties and responsibilities as in effect on the Closing Date while
such individuals were employed by the Company, and at such time the
employment by the Company of each Offeree Employee shall terminate.
The Offeree Employees who accept employment with Buyer are referred to
herein as the "Transferred Employees", provided that any Offeree
Employee who accepts employment with the Buyer but is
terminated within thirty (30) days of the Closing Date shall be deemed
not to be a Transferred Employee solely for the purposes of
subparagraph (f) of this Section. On and after the Closing Date, the
Company will not take any actions to retain the services of any
Offeree Employee. The Buyer shall have no obligation of any kind to
offer employment or otherwise with respect to any Business Employee
who is not actively at work on the Closing Date, and each such
Business Employee shall remain an employee of the Company unless
otherwise agreed in writing by the Buyer. For these purposes "actively
at work" includes any Business Employee who is (i) absent on the
Closing Date due to the FMLA or similar state laws; (ii) absent on the
Closing Date due to maternity leave under the Company's maternity
leave policy; (iii) absent on the Closing Date due to military duty;
(iv) absent on the Closing Date due to jury duty; (v) absent on the
Closing Date due to vacation or personal days consistent with the
Company's employment policies; (vi) absent on the Closing Date due to
workers' compensation leave or short-term disability leave; and (vii)
absent on the Closing Date due to any other authorized absences, but
not including any employee who is on a long-term disability leave of
absence as of the Closing Date.
(b) Wages and Benefits. For a period ending no earlier
than the first anniversary of the Closing Date, Buyer shall not reduce
the cash compensation (including but not limited to wages, salaries
and commissions, if applicable) for any Transferred Employees
(although the Transferred Employees will be at will employees and
therefore subject to termination at any time). Buyer and the Company
shall jointly give notice to all Transferred Employees that all
benefits previously provided under the Company Benefit Plans will
terminate on the Closing Date and the Transferred Employees will
41
commence participation in the Buyer's Employee Benefit Plans (the
"Buyer Benefit Plans") as of the Closing Date. In no event shall any
Transferred Employee be entitled to accrue any benefits under the
Company Benefits Plans, if any, after the Closing. The Transferred
Employees shall be credited for length of service with the Company for
all purposes under the Buyer's Benefit Plans, including but not
limited to, determining eligibility to participate in, vesting of, and
entitlement to, such benefits. Any preexisting condition clause in any
of the health coverage (including medical, dental and disability
coverage) included in the Buyer Benefit Plans shall be waived for the
Transferred Employees and the Transferred Employees shall receive
credit under the Buyer Benefit Plans for any co-payments, deductibles
and out-of-pocket maximums paid by such Transferred Employees in the
Plan Years in which the Closing Date occurs under the corresponding
Buyer Benefit Plans.
(c) Severance. Buyer shall assume all liability for
severance pay and similar obligations (in accordance with the Buyer's
standard severance policies, it being understood that the Transferred
Employees will receive credit for time and service with the Company)
payable to any Transferred Employee who is terminated by Buyer after
the Closing, except to the extent that such payment arises under an
Employment Agreement entered into on or prior to the Closing Date.
After the Closing Date, Buyer shall have the liability and obligation
for, and neither the Company nor any of its Affiliates shall have any
liability or obligation for, short-term disability benefits, long-term
disability benefits, sick pay or salary continuation for those
Transferred Employees who are entitled to such benefits.
(d) Transferred Employee Options. The Buyer shall grant,
in the aggregate, 2,000,000 stock options for Buyer Common Stock to
the Transferred Employees (the "Transferred Employee Options"). The
grant of the Transferred Employee Options shall (i) be made under the
Buyer's 2001 Stock Incentive Plan or another comparable plan of the
Buyer, and (ii) comply in all respects with the respective
requirements of the Securities Act and the Exchange Act. Individual
grants of Transferred Employee Options will be made at a meeting of
Buyer's board of directors, which shall occur no later than one (1)
week after the Closing Date, and such grants shall be consistent with
the Buyer's past practices. The grants of Transferred Employee Options
shall be made considering the following factors, both of which shall
be given equal weight (i) the number of stock options of the Company
that the Transferred Employee possessed as of the Closing Date and
(ii) the assessment of the Transferred Employee by the management of
the Buyer or its Affiliate made in consultation with the management of
the Company. The Transferred Employee Options will vest annually in
two equal installments, the first of which being the first anniversary
of the Closing Date, provided that if Buyer should terminate any
Transferred Employee, without cause, within one year of the Closing
Date, then one-half (1/2) of such employee's Transferred Employee
Options shall immediately vest and the remainder of such options shall
expire.
(e) Transferred Employee Restricted Stock. The Buyer
shall grant, in the aggregate, 250,000 shares of Buyer Common Stock to
the Transferred Employees (the "Transferred Employee Restricted
Stock"). The grant of the Transferred Employee Restricted Stock shall
(i) be made under the Buyer's 2001 Stock Incentive Plan or
42
another comparable plan of the Buyer, and (ii) comply in all respects
with the respective requirements of the Securities Act and the
Exchange Act, including, without limitation the transfer restrictions
imposed by the Securities Act. Individual grants of Transferred
Employee Restricted Stock will be made at a meeting of Buyer's board
of directors, which shall occur no later than one (1) week after the
Closing Date. The grants of Transferred Employee Restricted Stock
shall be made based upon the assessment of the Transferred Employee by
the management of the Buyer or its Affiliate made in consultation with
the management of the Company. The Transferred Employee Restricted
Stock will vest annually in two equal installments, the first of which
being the first anniversary of the Closing Date, provided that if
Buyer should terminate any Transferred Employee, without cause, within
one year of the Closing Date, then one-half (1/2) of such employee's
shares of Transferred Employee Restricted Stock shall immediately vest
and all restrictions thereon shall immediately lapse and the remainder
of such shares shall be cancelled.
(f) COBRA Coverage. The Company shall be solely
responsible for offering and providing any COBRA Coverage with respect
to any "qualified beneficiary" who is covered by a Company Benefit
Plan that is a "group health plan" and who experiences a qualifying
event (other than as a result of the Closing) on or prior to the
Closing Date. The Buyer shall be solely responsible for offering and
providing any COBRA Coverage required with respect to any Transferred
Employees (or other "qualified beneficiaries") who become covered by a
group health plan sponsored or contributed to by the Buyer and who
experience a "qualifying event" after the Closing Date. With respect
to any employee of the Company who is (i) a "qualified beneficiary"
and is covered under a Company Benefit Plan that is a "group health
plan," and (ii) not a Transferred Employee, the Buyer shall be solely
responsible for offering and providing such non-Transferred Employee
either (x) health insurance coverage consistent with either what the
Buyer generally provides its employees upon receipt of the payments
that would be required under COBRA for the period that would be
required by COBRA, or (y) employment with the Buyer, for a period not
to exceed thirty (30) days, such that the non-Transferred Employee
will become eligible to receive COBRA Coverage as a "qualified
beneficiary" under a Buyer Benefit Plan that is a "group health plan";
provided that the Buyer shall retain full discretion as to whether the
offer extended to any such non-Transferred Employee shall be made
under clause (x) or (y) of the foregoing sentence. "Qualified
beneficiary," "group health plan" and "qualifying event" are as
defined in Section 4980B of the Code.
(g) Information. The Company shall provide the Buyer all
information relating to each Transferred Employee as the Buyer may
reasonably require in connection with its employment of such persons,
including, without limitation, initial employment dates, termination
dates, reemployment dates, hours of service, compensation and Tax
withholding history and such information shall be true and correct in
all respects.
(h) 401(k) Plan. On or prior to the Closing Date, the
Company shall take whatever action is necessary to cause the Business
Employees who are participants in the Company's 401(k) plan to
terminate their active participation in the Company's 401(k) plan, and
to cause the Company's 401(k) Plan to permit a distribution to such
43
participants of their vested account balances as soon as practicable
after the Closing (subject to the repayment of any loans from the
Company's 401(k) plan to any such participants to the extent required
to be repaid under the terms of the Company's 401(k) plan). The
Buyer's 401(k) plan shall accept rollover contributions, attributable
to distributions from the Company's 401(k) plan, made by or on behalf
of Transferred Employees eligible to participate in the Company's
401(k) plan; provided, however, that such rollover contributions are
made in cash and do not include loans or amounts attributable to
employee after-tax contributions and that the Company provides
reasonable evidence, as determined by the Buyer, of the qualified
status of the Company's 401(k) plan.
Section 7.12. Company Stockholder Approval. As promptly as
practicable, the Company shall, in its discretion, undertake commercially
reasonable actions to either (a) give the required notices and take all other
action necessary to convene a meeting of the stockholders of the Company (the
"Company Stockholder Meeting") to consider and, in accordance with DGCL ss.
271, adopt a resolution approving of the sale of the Assets as contemplated by
this Agreement, or (b) obtain written consents from sufficient stockholders to
approve the sale in accordance with the DGCL. Without limiting the foregoing,
the Company shall take all other actions necessary to obtain, and shall timely
obtain, stockholder approval of the transactions contemplated hereby. In
connection with seeking stockholder approval as required by this Section 7.12,
except with respect to Xxxxxxxx Xxxxxx and the Bhavgava Xxxxxx Xxxxxx Trust,
the Company shall solicit proxies or consents only from stockholders who
qualify as "accredited investors" as such term is defined under Rule 501 under
the Securities Act.
Section 7.13. Limitations on Subsequent Transfers of the Shares;
Resale Registration Statement; Legends.
(a) In addition to the provisions of Section 10.5(e),
the Company agrees that it will not sell, distribute or otherwise
transfer (or consent to any sale, distribution or transfer of), or
enter into any agreement or commitment to undertake any of the
foregoing (any such event, a "Transfer"), any of the shares of Buyer
Common Stock received pursuant to this Agreement and the transactions
contemplated thereunder, unless:
(i) a registration statement on an appropriate
form under the Securities Act covering the proposed Transfer
of the Shares or Earn Out Shares shall be in effect under the
Securities Act and such Shares or Earn Out Shares or the
proposed Transfer shall have been registered under applicable
securities laws of any jurisdiction; or
(ii) the Company shall have advised the Buyer in
writing that it intends to dispose of such Shares or Earn Out
Shares in a manner to be described in such advisement;
provided that such manner of disposal is reasonably
acceptable to the Buyer and, provided that at the request of
the Buyer, the Company shall have delivered to the Buyer an
opinion reasonably acceptable to the Buyer and its counsel
that registration is not required under the Securities Act or
under any applicable securities laws of any jurisdiction.
44
(b) Buyer agrees to file with the SEC, no later than
forty-five (45) days after the Closing Date, a registration statement
(the "Registration Statement") under the Securities Act with respect
to the resale or distribution of the Shares or Earn Out Shares by the
Company and/or accredited investors (including creditors of the
Company) that the Company may distribute the Shares to in accordance
with the terms hereof. The registration provided by this Section 7.13
shall be effected by the filing of a registration statement on Form
S-3 or such other form as the Buyer in its sole discretion determines
to be available and appropriate for the registration of resale or
distribution of the Shares or Earn Out Shares, which shall provide for
sales to be made on a continuous basis pursuant to Rule 415 under the
Securities Act (or any similar rule that may be adopted by the
Commission). The Buyer agrees to keep the Registration Statement filed
pursuant to this Section 7.13 effective and current for a period to
expire upon the earlier of (i) the date that all of the shares covered
by the Registration Statement have been sold or distributed
thereunder, (ii) one-hundred-eighty (180) days after the Earn Out
Date, or (iii) the Earn Out Date if, in accordance with Section 3.4,
no Earn Out Shares are to be paid, or such date that it becomes
reasonably apparent, upon agreement of the Parties, that no Earn Out
Shares are to be paid. The Buyer also agrees that it will undertake to
maintain its status as a company that is listed on the Nasdaq National
Market System for all periods during which the Registration Statement
is effective. In connection with the preparation of the Registration
Statement, the Company agrees to provide any and all information
regarding the Company and the resale or distribution of the Shares or
Earn Out Shares required to be included in the Registration Statement.
(c) If Buyer, in its good faith judgment, determines
that the sales of Buyer Common Stock made under the Registration
Statement filed pursuant to this Section 7.13 should be suspended
because such sales would adversely affect any business transaction
involving Buyer or one of its Affiliates (a "Valid Business Reason"),
Buyer may suspend the use of such a Registration Statement until such
Valid Business Reason no longer exists, but in no event for more than
sixty (60) days (such period being the "Suspension Period"); provided,
that Buyer shall give written notice of its determination to suspend
the use of the Registration Statement and of the fact that the Valid
Business Reason for such suspension no longer exists, in each case,
promptly after the occurrence thereof; provided further, that the
Buyer shall not be entitled to suspend the use of the Registration
Statement within the first forty-five (45) calendar days after the
date that such Registration Statement is declared effective by the
SEC; provided further, that Buyer shall not be permitted, without the
consent of the Company (or if the Company has dissolved, the consent
of the holders of a majority of the registered securities), to suspend
the use of a Registration Statement more than two (2) times in any
twelve (12) month period. If Buyer shall give any notice of the
suspension of a Registration Statement, Buyer shall, at such time as
the Valid Business Reason that necessitated such suspension no longer
exists (but in no event later than sixty (60) days after the date of
the suspension), use its reasonable best efforts to make such
suspended Registration Statement effective and current, to the extent
necessary. In the event that the Company shall exercise its rights
hereunder, the applicable time period during which the Registration
Statement is to remain effective shall be extended by a period of time
equal to the duration of any such Suspension Period.
45
(d) All expenses incident to the Buyer's performance of
or compliance with Section 7.13(b), including without limitation all
registration and filling fees, fees for listing the securities on
Nasdaq, fees and expenses of compliance with securities or blue sky
laws, printing expenses, fees and disbursements of custodians, and
fees and disbursements of counsel for the Company and all independent
certified public accountants, and other Persons retained by the
Company, shall, except as otherwise agreed by the Parties, be borne by
the Buyer.
(e) (i) The Buyer agrees to indemnify, to the extent
permitted by law, each Person selling or distributing securities under
the Registration Statement, such Person's officers and directors and
each other Person that controls such Person (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and
expenses caused by (x) any untrue or alleged untrue statement of
material fact contained in the Registration Statement (or any
prospectus included therein) or any amendment thereof or supplement
thereto, (y) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (z) any violation or alleged violation by
the Buyer of the Securities Act or Exchange Act, except in each case
insofar as the same are caused by or contained in any information
furnished in writing to the Buyer by such Person expressly for use
therein or by such Person's failure to deliver a copy of the
Registration Statement (or prospectus included therein) or any
amendments or supplements thereto after the Buyer has furnished such
Person with a sufficient number of copies of the same.
(ii) Each Person (including, without limitation,
the Company) that is selling or distributing securities under the
Registration Statement shall furnish to the Buyer in writing such
information and affidavits as the Buyer reasonably requests for use in
connection with such Registration Statement and, to the extent
permitted by law, shall indemnify the Buyer, its directors and officers
and each Person who controls the Buyer (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and
expenses resulting from (x) any untrue or alleged untrue statement of
material fact contained in the Registration Statement (or any
prospectus included therein) or any amendment thereof or supplement
thereto, (y) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (z) any violation or alleged violation by
the Buyer of the Securities Act or Exchange Act, but only to the extent
that such untrue statement, omission or violation is contained in or
directly results from any information or affidavit so furnished in
writing by such Person; provided that the obligation to indemnify shall
be individual, not joint and several, for each such Person and shall be
limited to the net amount of proceeds received by such Person from the
sale or distribution of securities pursuant to such Registration
Statement.
(iii) The indemnification provided for under this
Section 7.13(d) shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and
shall survive the transfer of securities. The Buyer also agrees to make
such provisions, as are reasonably requested by any indemnified party,
for contribution to such party in the event the Buyer's indemnification
is unavailable for any reason such that such provisions
46
provide the same obligations and benefits to the indemnified party
as those which would have been applicable had the indemnification
provisions set forth above had been available.
(f) The Company agrees and acknowledges that the
certificates representing the Shares, and any other securities issued
in respect thereto or any other securities not registered under the
Securities Act, shall be stamped or otherwise imprinted with legends in
the form as listed on Schedule 7.13.
(g) At least two (2) business days prior to any
anticipated sale of any shares of Buyer Common Stock which are
registered under the Registration Statement (including sales made any
Person to whom the Company has distributed shares of Buyer Common
Stock), the Company shall advise Buyer in writing of the anticipated
date on which such sale will commence, the expected number of the
shares to be sold and the intended manner of sale. The Company also
shall inform Buyer when each distribution of such shares is complete.
Section 7.14. Taxes.
(a) The Company shall be liable for and shall pay all
Taxes (whether assessed or unassessed) applicable to the Business or
the Assets attributable to periods (or portions thereof) ending prior
to the Closing Date. Buyer shall be liable for and shall pay all Taxes
(whether assessed or unassessed) applicable to the Business or the
Assets attributable to periods (or portions thereof) beginning on or
after the Closing Date. For purposes of this paragraph (a), any period
beginning before and ending after the Closing Date shall be treated as
two partial periods, one ending on the day prior to the Closing Date
and the other beginning on the Closing Date except that Taxes (such as
property Taxes) imposed on a periodic basis shall be allocated on a
daily basis.
(b) Notwithstanding Section 7.14(a), any Tax
attributable to the sale or transfer of the Assets shall be paid by
the Company. Buyer agrees to timely sign and deliver such certificates
or forms as may be necessary or appropriate to establish an exemption
from (or otherwise reduce), or make a report with respect to, such
Taxes.
(c) The Company or Buyer, as the case may be, shall
provide reimbursement for any Tax paid by one party all or a portion
of which is the responsibility of the other party in accordance with
the terms of this Section 7.14. Within a reasonable time prior to the
payment of any said Tax, the party paying such Tax shall give notice
to the other party of the Tax payable and the portion which is the
liability of each party, although failure to do so will not relieve
the other party from its liability hereunder.
(d) Any payments made pursuant to this Section 7.14
shall be treated by Buyer and the Company as an adjustment to the
Purchase Price.
Section 7.15. Insurance. If requested by the Buyer, the Company
shall in good faith cooperate with the Buyer and take all actions reasonably
requested by the Buyer that are necessary or desirable to permit the Buyer to
have available to it following the Closing the benefits (whether direct or
indirect) of the insurance policies maintained by or on behalf of the Company
related to the Business or the Assets that are currently in force, excluding
directors'
47
and officers' insurance policies. All costs relating to the actions described
in this Section 7.15 shall be borne by the Buyer.
Section 7.16. Non-Disclosure; Non-Competition.
(a) Confidential Information. The Company agrees that it
shall hold in confidence at all times after the date hereof all
Confidential Information, and shall not disclose, publish or make use
of Confidential Information at any time after the date hereof without
the prior written consent of the Buyer and the Company shall use
reasonable efforts to cause its Affiliates to hold all Confidential
Information in confidence and not to disclose, publish or make use of
Confidential Information after the date hereof without the prior
written consent of the Buyer.
(b) Noncompetition.
(i) The Company hereby acknowledges that the
Business conducts Company Activities throughout the
Territory. The Company acknowledges that to protect
adequately the interest of the Buyer in the Business, it is
essential that any noncompete covenant with respect thereto
cover all Company Activities and the entire Territory.
(ii) The Company hereby agrees that it shall
not, during the Noncompete Period, in any manner, directly or
indirectly or by assisting others, engage in any of the
Company Activities within the Territory or have an equity or
profit interest in, or render services (of an executive,
marketing, manufacturing, research and development,
administrative, financial or consulting nature) to any
business that conducts any of the Company Activities in the
Territory.
(c) Employee Nonsolicitation. The Company hereby agrees
that it shall not, prior to the second (2nd) anniversary of the
Closing Date, in any manner, directly or indirectly or by assisting
others, recruit or hire away or attempt to recruit or hire away, on
its behalf or on behalf of any other Person, any Transferred Employee
who is hired by the Buyer or its Affiliate pursuant to this Agreement.
(d) Customer Nonsolicitation. The Company hereby agrees
that for a period of two (2) years following the date of the Closing,
it shall not for its own benefit or the benefit of others, other than
for the Buyer and its Affiliates, solicit a customer of the Business
for the purpose of supplying such customer goods or services that are
similar to the goods or services provided by the Business.
(e) Supplier Non-Interference. The Company hereby agrees
that it shall not, directly or indirectly or by assisting others,
interfere with the relationship between the suppliers of the Business
and the Buyer or its Affiliates following the Closing except in a
manner consistent with the best interests of the Buyer and its
Affiliates.
(f) Severability. If a judicial or arbitral
determination is made that any of the provisions of this Section 7.16
constitutes an unreasonable or otherwise unenforceable restriction
against the Company, the provisions of this Section 7.16 shall be
rendered void only to the extent that such judicial or arbitral
determination finds such provisions to be unreasonable or otherwise
unenforceable with respect to the Company. In this regard, the Parties
hereby agree that any judicial authority construing this Agreement
48
shall be empowered to sever any portion of the Territory, any
prohibited business activity or any time period from the coverage of
this Section 7.16 and to apply the provisions of this Section 7.16 to
the remaining portion of the Territory, the remaining business
activities and the remaining time period not so severed by such
judicial or arbitral authority. Moreover, notwithstanding the fact
that any provision of this Section 7.16 is determined not to be
specifically enforceable, the Buyer shall nevertheless be entitled to
recover monetary damages as a result of the breach of such provision
by the Company. The time period during which the prohibitions set
forth in this Section 7.16 shall apply shall be tolled and suspended
for a period equal to the aggregate time during which the Company
violates such prohibitions in any respect.
(g) Injunctive Relief The Company hereby agrees that any
remedy at law for any breach of the provisions contained in this
Section 7.16 shall be inadequate and that the Buyer shall be entitled
to injunctive relief in addition to any other remedy the Buyer might
have under this Agreement.
Section 7.17. Conduct of Business by the Buyer. During Fiscal
2002, the Buyer shall, except as expressly required by this Agreement and/or as
otherwise consented to in advance in writing by the Company:
(a) account for all CMTS sales and Net Revenues in a
manner consistent with past practice; and
(b) not delay or postpone any CMTS sales or the receipt
of Net Revenues in respect thereof in any manner designed or intended
to reduce the number of Earn Out Shares to be distributed pursuant to
Section 3.4, it being acknowledged that there are valid business
reasons -- e.g. the stage of product development or manufacturing
considerations -- that might cause a delay or postponement independent
of such interest.
Section 7.18. Risk of Loss. The risk of loss with respect to the
Assets shall remain with the Company until the Closing. Until the Closing, the
Company shall maintain in force all the policies of property damage insurance
under which any of the Assets is insured. If before the Closing any of the
Assets are lost, damaged or destroyed and the loss, damage or destruction would
likely result in a Material Adverse Effect, then:
(a) the Buyer may terminate this Agreement in accordance
with the provisions of Section 9.1(d); or
(b) to the extent that the Buyer wished to proceed with
the Closing, the Buyer may require the Company to assign to the Buyer
the proceeds of any insurance payable as a result of the occurrence of
such loss, damage or destruction and to reduce the Purchase Price by
the amount of the replacement cost of the Assets which were lost,
damaged or destroyed less the amount of any proceeds of insurance
payable as a result of the occurrence.
Section 7.19. Consent of the Lenders of Buyer. The Buyer hereby
agrees that it will use all reasonable efforts to obtain any consents or
approvals of this Agreement and the transactions contemplated hereby that may
be required pursuant to the Credit Agreement dated as of August
49
3, 2001, among Arris International, Inc., Arris Interactive LLC, CIT
Group/Business Credit, Inc., Credit Suisse First Boston, and the other parties
thereto, and the related guaranties and other agreements (collectively, the
"Credit Agreement").
Section 7.20. Tax-Free Reorganization. The Buyer and the Company
shall prepare and file all Tax Returns consistently with the treatment of the
Acquisition as a reorganization within the meaning of section 368(a)(1)(C) of
the Code, and each of the Buyer, the Company and their respective Affiliates
shall use all reasonable efforts not to take or fail to take any action, unless
the other party shall otherwise agree in writing, which action or failure would
jeopardize the qualification of the Acquisition as such reorganization. The
Company shall liquidate and dissolve pursuant to such reorganization, and from
and after the Closing Date the Company shall undertake no business or other
activities, except as necessary to complete such liquidation and dissolution in
an orderly manner. For the avoidance of all doubt, any action or failure to
take action contemplated or required by this Agreement shall not be treated as
a breach or violation of Section 6.11 or this Section 7.20.
Section 7.21. Company Name. The Company hereby covenants and
agrees that no later than thirty (30) days after the Closing Date, it shall
change its name from Cadant, Inc. to another name to be determined by the
Company (the "New Name"); provided that the New Name shall not contain the word
"Cadant" and the New Name shall in no way approximate, imitate or infringe upon
the word "Cadant" or any of the other Intellectual Property acquired by the
Buyer pursuant to the terms of this Agreement.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1. Conditions to Obligations of the Buyer. The
obligations of the Buyer to consummate the transactions contemplated by this
Agreement will be subject to the fulfillment at or prior to the Closing of each
of the following conditions:
(a) Injunction. There will be no effective injunction,
writ or preliminary restraining order or any order of any nature
issued by a Governmental Entity of competent jurisdiction to the
effect that the Acquisition may not be consummated as provided in this
Agreement, no proceeding or lawsuit will have been commenced by any
Governmental Entity for the purpose of obtaining any such injunction,
writ or preliminary restraining order and no written notice will have
been received from any Governmental Entity indicating an intent to
restrain, prevent, materially delay or restructure the transactions
contemplated by this Agreement, in each case where the Closing would
(or would be reasonably likely to) result in a material fine or
penalty payable by the Buyer or any of its Affiliates or impose any
restraint or restriction on Buyer's operation of the Business
following the Closing;
(b) Governmental Consents. All consents, approvals,
orders or authorizations of, or registrations, declarations or filings
with, any Governmental Entity required in connection with the
execution, delivery or performance of this Agreement, including,
without limitation, any such approvals under the Xxxx-Xxxxx-Xxxxxx
Act, will have been obtained or made, except where the failure to have
obtained or made any such consent, approval, order, authorization,
declaration or filing would not result in a
50
material fine or penalty payable by the Buyer or any of its Affiliates
or any Material Adverse Effect;
(c) Representations and Warranties. The representations
and warranties of the Company set forth in Article V shall have been
true and correct in all material respects as of the date hereof and
shall be true and correct in all material respects as of the Closing
Date as though made on and as of the Closing Date (or such other date
as may be specifically referenced as the "as of" date in a
representation or warranty), except that those representations and
warranties that by their terms are qualified by materiality shall be
true and correct in all respects;
(d) Performance of Obligations of the Company. The
Company shall have performed in all material respects all covenants
and agreements required to be performed by it under this Agreement on
or prior to the Closing Date;
(e) No Material Adverse Effect. Between the date hereof
and the Closing Date, there shall not have occurred (nor shall the
Buyer have become aware of) any Material Adverse Effect or any
development reasonably likely to result in a Material Adverse Effect;
(f) Company Certificate. Each the President and Chief
Financial Officer of the Company shall have executed and delivered to
the Buyer a certificate as to compliance with the conditions set forth
in Sections 8.2(c), (d) and (e);
(g) Shares. The issuance of the Shares to the Company
shall comply with the requirements of Regulation D of the Securities
Act;
(h) Consents. The Company shall have obtained and
delivered to the Buyer the written consents (or waivers with respect
thereto) as identified on Schedule 5.19 with an exclamation xxxx and
all such consents and waivers shall be in full force and effect;
(i) Release of Liens. The Company shall have delivered
to the Buyer satisfactory evidence that all Liens (other than
Permitted Liens) affecting the Assets have been released;
(j) Estoppel and Consent Certificates. The Company shall
have delivered to the Buyer an Estoppel and Consent Certificate,
executed by the landlord of each Leased Real Property;
(k) Shareholder Approval. The shareholders of the
Company shall have approved of this Agreement and all the transactions
contemplated thereby and the Company shall deliver a certificate to
the Buyer certifying this fact;
(l) Bank Accounts. Each person requested by the Buyer
will have been removed as a signatory on the Bank Accounts;
(m) Opinion of Company's Counsel. The Buyer shall have
received an opinions of Sidley Xxxxxx Xxxxx & Xxxx and Venture Law
Group, counsel to the Company, dated the Closing Date, in the forms
attached as Exhibit C-1 and C-2, respectively;
51
(n) Ancillary Documents. The Company shall have
delivered, or caused to be delivered, to the Buyer the following
documents duly executed by all parties other than Buyer and its
Affiliates:
(i) executed deeds, bills of sale, instruments
of assignment, certificates of title and other conveyance
documents, dated the Closing Date, transferring to the Buyer
all of the Company's right, title and interest in and to the
Assets, together with possession of the Assets;
(ii) documents evidencing the assignment of the
Assumed Contracts and the assignment of any assignable
Licenses;
(iii) a certificate by the Secretary or any
Assistant Secretary of the Company, dated the Closing Date,
as to (1) the good standing of the Company in its
jurisdiction of incorporation and in each other jurisdiction
where it is qualified to do business, (2) no amendments to
the Company Charter Documents and (3) the effectiveness of
the resolutions of the board of directors and the
stockholders of the Company authorizing the execution,
delivery and performance of this Agreement by the Company
passed in connection with this Agreement and the transactions
contemplated hereby; and
(iv) all other documents required to be entered
into by the Company pursuant to this Agreement or reasonably
requested by the Buyer to convey the Assets to the Buyer or
to otherwise consummate the transactions contemplated by this
Agreement.
Section 8.2. Conditions to Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated by this
Agreement will be subject to the fulfillment at or prior to the Closing of each
of the following conditions:
(a) Injunction. There will be no effective injunction,
writ or preliminary restraining order or any order of any nature
issued by a Governmental Entity of competent jurisdiction to the
effect that the Acquisition may not be consummated as provided in this
Agreement, no proceeding or lawsuit will have been commenced by any
Governmental Entity for the purpose of obtaining any such injunction,
writ or preliminary restraining order and no written notice will have
been received from any Governmental Entity indicating an intent to
restrain, prevent, materially delay or restructure the transactions
contemplated by this Agreement, in each case where the Closing would
(or would be reasonably likely to) result in a material fine or
penalty payable by the Company or impose any restraint or restriction
on the Company, the Business or the Assets as a result of such matter;
(b) Governmental Consents. All consents, approvals,
orders or authorizations of, or registrations, declarations or filings
with, any Governmental Entity required in connection with the
execution, delivery or performance of this Agreement, including,
without limitation, any such approvals under the Xxxx-Xxxxx-Xxxxxx
Act, will have been obtained or made, except where the failure to have
obtained or made any such consent, approval, order, authorization,
declaration or filing would not result in a material fine or penalty
payable by the Company or any of its Affiliates or any Material
Adverse Effect;
52
(c) Representations and Warranties. The representations
and warranties of the Buyer set forth in Article VI shall have been
true and correct in all material respects as of the date hereof and
shall be true and correct in all material respects as of the Closing
Date as though made on and as of the Closing Date (or such other date
as may be specifically referenced as the "as of" date in a
representation or warranty), except that those representations and
warranties that by their terms are qualified by materiality shall be
true and correct in all respects;
(d) Performance of Obligations by the Buyer. The Buyer
shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement on or
prior to the Closing Date;
(e) No Material Adverse Effect. Between the date hereof
and the Closing Date, there shall not have occurred (nor shall the
Company have become aware of) any material adverse effect on the
Buyer's financial condition, results of operations, properties, assets
or liabilities, or any development reasonably likely to result in a
such a material adverse effect.
(f) Certificates. The Buyer shall have delivered to the
Company a certificate of an authorized officer as to compliance with
the conditions set forth in Sections 8.2(c), (d) and (e); and
(g) Opinion of Buyer's Counsel. The Company shall have
received an opinion of Xxxxxxxx Xxxxxxx LLP, counsel to the Buyer,
dated the Closing Date, in the form attached as Exhibit D.
(h) Ancillary Documents. The Buyer shall have delivered,
or caused to be delivered, to the Company the following documents duly
executed by the Buyer or its Affiliates:
(i) documents evidencing the assumption of the
Assumed Contracts and the Assumed Liabilities;
(ii) a certificate by the Secretary or any
Assistant Secretary of the Buyer, dated the Closing Date, as
to (1) the good standing of the Buyer in its jurisdiction of
incorporation and (2) the effectiveness of the resolutions of
the board of directors of the Buyer or committee thereof
authorizing the execution, delivery and performance of this
Agreement by the Buyer passed in connection with this
Agreement and the transactions contemplated hereby; and
(iii) all other documents required to be entered
into or delivered by the Buyer at or prior to the Closing
pursuant to this Agreement or reasonably requested by the
Company for the assumption of the Assumed Liabilities by the
Buyer.
ARTICLE IX
TERMINATION
Section 9.1. Termination. This Agreement may be terminated:
(a) in writing by mutual consent of the Parties;
53
(b) by written notice from the Company to the Buyer, if
the Buyer (i) fails to perform in any material respect any of its
agreements contained in this Agreement required to be performed by it
on or prior to the Closing Date or (ii) materially breaches any of its
representations and warranties contained in this Agreement, which
failure or breach is not cured within ten (10) days after the Company
has notified the Buyer of its intent to terminate this Agreement
pursuant to this subparagraph (b);
(c) by written notice from the Buyer to the Company, if
the Company (i) fails to perform in any material respect any of its
agreements contained in this Agreement required to be performed by it
on or prior to the Closing Date or (ii) materially breaches any of its
representations and warranties contained in this Agreement, which
failure or breach is not cured within ten (10) days after the Buyer
has notified the Company of its intent to terminate this Agreement
pursuant to this subparagraph (c); or
(d) by written notice by the Company to the Buyer or the
Buyer to the Company, as the case may be, if the Closing has not
occurred on or prior to January 31, 2002 for any reason other than
delay or nonperformance of the Party seeking such termination;
provided, that such date may be extended for up to sixty (60) days by
either party if the transactions contemplated hereby would have been
consummated but for the absence of one or more required approvals of
Government Entities, and such approvals can reasonably be expected to
be obtained within such sixty (60) day period.
Section 9.2. Specific Performance and Other Remedies. The Parties
each acknowledge that the rights of each Party to consummate the transactions
contemplated by this Agreement are special, unique and of extraordinary
character and that, in the event that any Party violates or fails or refuses to
perform any covenant or agreement made by it in this Agreement, the
non-breaching Party may be without an adequate remedy at law. The Parties
agree, therefore, that in the event that any Party violates or fails or refuses
to perform any covenant or agreement made by such Party in this Agreement, the
non-breaching Party or Parties may, subject to the terms of this Agreement and
in addition to any remedies at law for damages or other relief, institute and
prosecute an action in any court of competent jurisdiction to enforce specific
performance of such covenant or agreement or seek any other equitable relief.
Section 9.3. Effect of Termination. In the event of termination
of this Agreement pursuant to this Article IX, this Agreement will forthwith
become void and there will be no liability on the part of any Party or its
respective partners, officers, directors or stockholders, except for
obligations under Section 7.8 (Public Announcements), Section 11.1 (Notices),
Section 11.6 (Controlling Law; Amendment), Section 11.14 (Transaction Costs),
Section 11.15 (Consent to Jurisdiction, Etc.) and this Section 9.3, all of
which will survive the Termination Date. Notwithstanding the foregoing, nothing
contained in this Agreement will relieve any Party from liability for any
breach of this Agreement.
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification Obligations of the Company. The
Company will indemnify, defend and hold harmless the Buyer Indemnified Parties
from, against and in respect of any and all claims, liabilities, obligations,
losses, costs, expenses, penalties, fines and
54
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to:
(a) any liability or obligation of the Company of any
nature whatsoever, except the Assumed Liabilities;
(b) any breach or inaccuracy of any representation or
warranty made by the Company in this Agreement or in the Company
Ancillary Documents;
(c) any breach of any covenant, agreement or undertaking
made by the Company in this Agreement or in the Company Ancillary
Documents;
(d) any fraud, willful misconduct or bad faith of the
Company in connection with this Agreement or the Company Ancillary
Documents;
(e) any violation of any Environmental Law and arising
out of or relating to (i) any act or omission of the Company, or its
employees, agents or representatives on or prior to the Closing Date
or (ii) the ownership, use, control or operation on or prior to the
Closing Date of the real property or any plant, facility, site, area
or property used in the business of the Company (whether currently or
previously owned or leased by the Company), including, without
limitation, any liability arising from any release of any Hazardous
Materials or off-site shipment of any Hazardous Materials at or from
such real property or any such plant, facility, site, area or property
on or prior to the Closing Date; or
(f) non-compliance by the Parties with any applicable
bulk sales law.
Section 10.2. Indemnification Obligations of the Buyer. The Buyer
will indemnify and hold harmless the Company Indemnified Parties from, against
and in respect of any and all claims, liabilities, obligations, losses, costs,
expenses, penalties, fines and judgments (at equity or at law, including
statutory and common) and damages whenever arising or incurred (including,
without limitation, amounts paid in settlement, costs of investigation and
reasonable attorneys' fees and expenses) arising out of or relating to:
(a) the Buyer's failure to perform, discharge or satisfy
any Assumed Liability;
(b) any breach or inaccuracy of any representation or
warranty made by the Buyer in this Agreement or in any of the Buyer
Ancillary Documents;
(c) any breach of any covenant, agreement or undertaking
made by the Buyer in this Agreement or in any of the Buyer Ancillary
Documents;
(d) any fraud, willful misconduct or bad faith of the
Buyer in connection with this Agreement or the Buyer Ancillary
Documents; or
(e) any liability or obligation related to the Business
or the Assets occurring or arising after the Closing Date (other than
Excluded Liabilities).
Section 10.3. Indemnification Procedure.
(a) Promptly after receipt by an Indemnified Party of
notice by a third party (including any Governmental Entity) of any
complaint or the commencement of any audit, investigation, action or
proceeding with respect to which such Indemnified Party
55
may be entitled to receive payment from the other Party for any Buyer
Losses or Company Losses (as the case may be), such Indemnified Party
will notify the Buyer or the Company, as the case may be (the
"Indemnifying Party"), promptly following the Indemnified Party's
receipt of such complaint or of notice of the commencement of such
audit, investigation, action or proceeding; provided, however, that
the failure to so notify the Indemnifying Party will relieve the
Indemnifying Party from liability under this Agreement with respect to
such claim only if, and only to the extent that, such failure to
notify the Indemnifying Party results in the forfeiture by the
Indemnifying Party of rights and defenses otherwise available to the
Indemnifying Party with respect to such claim. The Indemnifying Party
will have the right, upon written notice delivered to the Indemnified
Party within ten (10) days thereafter assuming full responsibility for
any Buyer Losses or Company Losses (as the case may be) resulting from
such audit, investigation, action or proceeding, to assume the defense
of such audit, investigation, action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Party
and the payment of the fees and disbursements of such counsel. In the
event, however, that the Indemnifying Party declines or fails to
assume the defense of the audit, investigation, action or proceeding
on the terms provided above or to employ counsel reasonably
satisfactory to the Indemnified Party, in either case within such ten
(10)-day period, then such Indemnified Party may employ counsel to
represent or defend it in any such audit, investigation, action or
proceeding and the Indemnifying Party will pay the reasonable fees and
disbursements of such counsel as incurred. In any audit,
investigation, action or proceeding for which the Indemnifying Party
has assumed the defense, the Indemnified Party will have the right to
participate in such matter and to retain its own counsel at the
Indemnified Party's own expense. The Indemnifying Party will at all
times use reasonable efforts to keep the Indemnified Party reasonably
apprised of the status of the defense of any matter the defense of
which the Indemnifying Party has assumed and to cooperate in good
faith with the Indemnified Party with respect to the defense of any
such matter.
(b) No Indemnified Party may settle or compromise any
claim or consent to the entry of any judgment with respect to which
indemnification is being sought hereunder without the prior written
consent of the Indemnifying Party, unless (i) the Indemnifying Party
fails to assume and maintain the defense of such claim pursuant to
Section 10.3(a) or (ii) such settlement, compromise or consent
includes an unconditional release of the Indemnifying Party and its
officers, directors, employees and Affiliates from all liability
arising out of such claim. An Indemnifying Party may not, without the
prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld), settle or compromise any claim or
consent to the entry of any judgment with respect to which
indemnification is being sought hereunder unless (x) such settlement,
compromise or consent includes an unconditional release of the
Indemnified Party and its officers, directors, employees and
Affiliates from all liability arising out of such claim, (y) does not
contain any admission or statement suggesting any wrongdoing or
liability on behalf of the Indemnified Party and (z) does not contain
any equitable order, judgment or term which in any manner affects,
restrains or
56
interferes with the business of the Indemnified Party or any of the
Indemnified Party's Affiliates.
(c) (i) Any Indemnified Party seeking indemnification
hereunder shall give to the Indemnifying Party a notice (a "Claim
Notice") describing in reasonable detail the facts giving rise to any
claim for indemnification hereunder and shall include in such Claim
Notice (if then known) the amount or the method of computation of the
amount of such claim, and a reference to the provision of this
Agreement or any other agreement, document or instrument executed
hereunder or in connection herewith upon which such claim is based;
provided, that a Claim Notice in respect of any action at law or suit
in equity by or against a third Person as to which indemnification
will be sought shall be given promptly after the action or suit is
commenced; provided further, that failure to give such notice shall
not relieve the Indemnifying Party of its obligations hereunder except
to the extent it shall have been prejudiced by such failure.
(ii) In calculating any Buyer Losses or Company
Losses there shall be deducted (i) any insurance recovery in respect
thereof (and no right of subrogation shall accrue hereunder to any
insurer) and (ii) the amount of any Tax benefit to the Indemnified
Party (or any of its Affiliates) with respect to such Losses (after
giving effect to the Tax effect of receipt of the indemnification
payments).
(iii) After the giving of any Claim Notice
pursuant hereto, the amount of indemnification to which an Indemnified
Party shall be entitled under this Article X shall be determined
(i) by the written agreement between the Indemnified Party and the
Indemnifying Party; (ii) by a final judgment or decree of any court of
competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnifying Party shall agree. The judgment
or decree of a court shall be deemed final when the time for appeal, if
any, shall have expired and no appeal shall have been taken or when all
appeals taken shall have been finally determined. The Indemnified Party
shall have the burden of proof in establishing the amount of Losses
suffered by it.
Section 10.4. Claims Period. The Claims Periods under this
Agreement shall begin on the date hereof and terminate as follows:
(a) the Claims Period shall continue indefinitely,
except as limited by law (including any applicable statutes of
limitation), with respect to Buyer Losses attributable to (i) any
fraud on the part of the Company as it relates to the Agreement, the
Acquisition, the Ancillary Agreements, the Business or the Assets or
(ii) willful misconduct or bad faith by the Company giving rise to any
violation of the terms of this Agreement or any of the Ancillary
Documents;
(b) the Claims Period shall continue indefinitely,
except as limited by law (including any applicable statutes of
limitation), with respect to Company Losses attributable to (i) any
fraud on the part of the Buyer as it relates to the Agreement, the
Ancillary Agreements or the Acquisition or (ii) willful misconduct or
bad faith by the Buyer giving rise to any violation of the terms of
this Agreement or any of the Ancillary Documents or; and
57
(c) with respect to all other Buyer Losses or Company
Losses arising under this Agreement (including Reincorporation Claims,
as defined below), the Claims Period shall terminate on the first
anniversary of the Closing Date.
Notwithstanding the foregoing, if, prior to the close of business on the last
day of the applicable Claims Period, an Indemnifying Party shall have received
a Claim Notice, in accordance with Section 10.3, of a claim for indemnity
hereunder and such claim shall not have been finally resolved or disposed of at
such date, such claim shall continue to survive and shall remain a basis for
indemnity hereunder until such claim is finally resolved or disposed of in
accordance with the terms hereof.
Section 10.5. Indemnification by the Company.
(a) Except for claims described under Section 10.4(a)
and claims challenging the validity or effectiveness of the
Reincorporation (as defined in Section 5.31) or any of the
transactions (including board of directors and shareholder approvals)
associated therewith or the accuracy of the representations and
warranties contained in Section 5.31 ("Reincorporation Claims"), the
Buyer shall not be entitled to indemnification under this Article X
for Buyer Losses, in the aggregate, in excess of the sum of (i) the
Holdback Shares, valued in accordance with the provisions of Section
10.5(c), and (ii) an amount equal to the aggregate value of 525,000
shares of Buyer Common Stock, valued at the lesser of either (x) the
closing price per share of Buyer Common Stock as quoted on the
National Nasdaq Market System on the Closing Date or (y) the closing
price per share of Buyer Common Stock as quoted on the National Nasdaq
Market System on the date the Registration Statement is declared
effective by the SEC (the "Buyer Cash Limitation" and collectively
with the Holdback Shares, the "Buyer Indemnification Limitation").
(b) The Company shall have no liability under this
Article X until the aggregate amount of Buyer Losses exceeds $200,000
(the "Buyer Basket"), in which event the Buyer shall be entitled to
recover only the Buyer Losses exceeding the Buyer Basket.
(c) For purposes of satisfying Buyer Losses, (i) first,
the Buyer shall charge such losses against the Holdback Shares, (ii)
second, the Company shall pay the Buyer up to the Buyer Cash
Limitation, and (iii) with respect to claims described under Section
10.4(a) and Reincorporation Claims, the Company shall pay the Buyer in
cash or, at the option of the Buyer, in shares of Buyer Common Stock
held by the Company (including shares of Buyer Common Stock returned
to the Company and/or the Buyer pursuant to any Reimbursement
Undertaking, defined below). For these purposes, the Holdback Shares
shall be valued by the average closing price per share of Buyer Common
Stock as quoted on the National Nasdaq Market System for the ten (10)
trading days ending on the trading day immediately preceding the date
a Company Indemnified Party delivers a written claim for damages
against the Buyer. The Buyer shall not be required to deliver the
Holdback Shares against which Buyer Losses are charged.
(d) To the extent the Buyer is entitled to
indemnification pursuant to (i) a claim described in Section 10.4(a)
or (ii) a Reincorporation Claim, the Company shall indemnify and hold
harmless the Buyer and the Buyer Indemnified Parties and reimburse
such parties for liabilities arising from or in connection with any
such Buyer Losses on a first dollar basis and without regard to the
Buyer Indemnification
58
Limitation; provided, that the Buyer shall not be entitled to
indemnification under this Article X for Buyer Losses attributable to
Reincorporation Claims to the extent that such Buyer Losses exceed the
value of the Purchase Price; provided further, that the Buyer may, but
shall not be required to, apply any Buyer Losses attributable to
Reincorporation Claims or claims described under Section 10.4(a)
against the Buyer Indemnification Limitation.
(e) The Company hereby agrees that, for a period
beginning on the Closing Date and ending on the first anniversary
thereof, it will not distribute any (i) shares of Buyer Common Stock
received pursuant to this Agreement or (ii) any cash or other assets
of the Company, to (x) any stockholder of the Company or (y) any
lender of the Company, unless the Company first receives a signed
writing (a "Reimbursement Undertaking"), whereby the recipient of
Buyer Common Stock or cash or other assets of the Company agrees to
return to the Buyer any or all of such assets or shares of Buyer
Common Stock (or the cash equivalent thereof, valued by the average
closing price per share of Buyer Common Stock as quoted on the
National Nasdaq Market System for the ten (10) trading days ending on
the trading day upon which the distribution to such Person occurred)
as are required to satisfy any claims made by the Buyer under this
Article X. Each Reimbursement Undertaking shall name the Buyer as an
interested third party beneficiary such that the Buyer is empowered to
enforce the Reimbursement Undertaking.
Section 10.6. Indemnification by the Buyer. The Buyer shall
indemnify and hold harmless the Company and the Company Indemnified Parties and
reimburse such parties for liabilities arising from or in connection with any
Company Losses on a first dollar basis. All indemnification obligations of the
Buyer shall be paid in shares of Buyer Common Stock (valued at the average
closing price per share of Buyer Common Stock as quoted on the Nasdaq National
Market System for the five (5) trading days immediately preceding the date of
payment of such indemnity obligation).
Section 10.7. Exclusive Remedy.The Parties hereby agree that,
from and after the Closing, except for any claim and the related
indemnification described in Section 7.13, their sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Article
X. The Parties hereby further agree that no Buyer Losses shall be satisfied by
charging such losses against any of the Earn Out Shares (if any).
Section 10.8. Investigations. The respective representations and
warranties of the Parties contained in this Agreement or in any certificate or
other document delivered by any Party prior to the Closing and the rights to
indemnification set forth in Article X will not be deemed waived or otherwise
affected by any investigation made by a Party to this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by or on behalf of the party making
the same, shall specify the Section hereunder pursuant to which it is given or
being made, and shall be delivered personally
59
or by telecopy transmission or sent by registered or certified mail (return
receipt requested) or by any national overnight courier service (with postage
and other fees prepaid) as follows:
If to the Buyer: Arris Group, Inc.
00000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: X. Xxxxxxxx Xxxxxxxxx, Jr.
Telecopy No.: (000) 000-0000
If to the Company: Cadant, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
With a copy to: Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxx
Telecopy No.: (000) 000-0000
and: Sidley Xxxxxx Xxxxx & Xxxx
Bank Xxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxxxx
Telecopy No.: (000) 000-0000
or to such other address or to such other person or persons designated in
writing by such party or counsel, as the case may be. Any such notice,
communication or delivery shall be deemed given or made (a) on the date of
delivery if delivered in person, (b) on the first business day after delivery
to a national overnight courier service, (c) upon transmission by facsimile if
receipt is confirmed by telephone or (d) on the fifth business day after it is
mailed by registered or certified mail.
Section 11.2. Schedules and Exhibits. The Schedules and Exhibits
to this Agreement are hereby incorporated into this Agreement and are hereby
made a part of this Agreement as if set out in full in this Agreement.
Section 11.3. Assignment; Successors in Interest. No assignment or
transfer by any Party of such Party's rights and obligations under this
Agreement will be made except with the prior written consent of the other
Parties to this Agreement; provided that the Buyer shall, without the
obligation to obtain the prior written consent of any other Party to this
Agreement, be entitled to assign this Agreement or all or any part of its
rights or obligations hereunder to one (1) or more Affiliates of the Buyer and
further provided that, in such event, the Buyer shall not be released from its
obligations hereunder. This Agreement will be binding upon and will inure
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to the benefit of the Parties and their successors and permitted assigns, and
any reference to a Party will also be a reference to a successor or permitted
assign.
Section 11.4. Interpretation. Whenever the context so requires,
the singular number will include the plural and the plural will include the
singular, and the gender of any pronoun will include the other genders.
Whenever used in this Agreement, the words "including", "includes" or
"included" shall be deemed to be followed by the words "without limitation."
Section 11.5. Captions. The titles, captions and table of contents
contained in this Agreement are inserted in this Agreement only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision of this Agreement.
Unless otherwise specified to the contrary, all references to Articles and
Sections are references to Articles and Sections of this Agreement and all
references to Schedules or Exhibits are references to Schedules and Exhibits,
respectively, to this Agreement.
Section 11.6. Controlling Law; Amendment. This Agreement will be
governed by and construed and enforced in accordance with the internal laws of
the State of Illinois without reference to its choice of law rules. This
Agreement may not be amended, modified or supplemented except by written
agreement of the Parties.
Section 11.7. Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
will not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by law, the Parties waive any provision
of law which renders any such provision prohibited or unenforceable in any
respect.
Section 11.8. Counterparts. This Agreement may be executed in two
(2) or more counterparts, each of which will be deemed an original, and it will
not be necessary in making proof of this Agreement or the terms of this
Agreement to produce or account for more than one (1) of such counterparts.
Section 11.9. Enforcement of Certain Rights. Except as set forth
in Section 7.11 and 7.13, nothing expressed or implied in this Agreement is
intended, or will be construed, to confer upon or give any Person other than
the Parties, and their successors or permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, or result in
such Person being deemed a third party beneficiary of this Agreement.
Section 11.10. Waiver. Any agreement on the part of a Party to any
extension or waiver of any provision of this Agreement will be valid only if
set forth in an instrument in writing signed on behalf of such Party. A waiver
by a Party of the performance of any covenant, agreement, obligation,
condition, representation or warranty will not be construed as a waiver of any
other covenant, agreement, obligation, condition, representation or warranty. A
waiver by any Party of the performance of any act will not constitute a waiver
of the performance of any other act or an identical act required to be
performed at a later time.
Section 11.11. Integration. This Agreement and the documents
executed pursuant to this Agreement supersede all negotiations, agreements and
understandings among the Parties with
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respect to the subject matter of this Agreement, except for any written
Confidentiality Agreement by and between the Buyer and the Company, and
constitutes the entire agreement between the Parties.
Section 11.12. Compliance with Bulk Sales Laws. The Parties hereby
waive compliance by the Parties with the bulk sales laws and any other similar
laws in any applicable jurisdiction in respect of the transactions contemplated
by this Agreement.
Section 11.13. Cooperation Following the Closing. Following the
Closing, each of the Parties shall deliver to the others such further
information and documents and shall execute and deliver to the others such
further instruments and agreements as the other Party shall reasonably request
to consummate or confirm the transactions provided for in this Agreement, to
accomplish the purpose of this Agreement or to assure to the other Party the
benefits of this Agreement.
Section 11.14. Transaction Costs. Except as provided above or as
otherwise expressly provided herein, (a) the Buyer will pay its own fees, costs
and expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement, including the fees, costs and expenses of its
financial advisors, accountants and counsel, and (b) the Company will pay the
fees, costs and expenses of the Company incurred in connection with this
Agreement and the transactions contemplated by this Agreement, including the
fees, costs and expenses of its financial advisors, accountants and counsel.
Section 11.15. Consent to Jurisdiction, Etc. Each of the Parties
hereby irrevocably consents and agrees that judicial proceedings with respect
to a Legal Dispute shall be brought only to the exclusive jurisdiction of the
courts of the State of Georgia or the federal courts located in the State of
Georgia. The Parties agree that, after a Legal Dispute is before a court as
specified in this Section 11.15 and during the pendency of such Legal Dispute
before such court, all actions, suits or proceedings with respect to such Legal
Dispute or any other Legal Dispute, including, without limitation, any
counterclaim, cross-claim or interpleader, shall be subject to the exclusive
jurisdiction of such court. Each of the Parties hereby waives, and agrees not
to assert, as a defense in any legal dispute, that such Party is not subject
thereto or that such action, suit or proceeding may not be brought or is not
maintainable in such court or that such Party's property is exempt or immune
from execution, that the action, suit or proceeding is brought in an
inconvenient forum or that the venue of the action, suit or proceeding is
improper. Each Party hereto agrees that a final judgment in any action, suit or
proceeding described in this Section 11.15 after the expiration of any period
permitted for appeal and subject to any stay during appeal shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by applicable laws.
Section 11.16. Interpretation.
(a) Articles, titles and headings to sections herein are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement. The Schedules referred
to herein shall be construed with and as an integral part of this Agreement to
the same extent as if they were set forth verbatim herein. Neither the
specification of any dollar amount in any representation or warranty contained
in this Agreement nor the inclusion of any specific item in any Schedule hereto
is intended to vary the definition of "Material Adverse Effect" or to imply that
such amount, or higher or lower amounts, or the item so included or other items,
are or are not material, and no party shall use the fact of the setting
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forth of any such amount or the inclusion of any such item in any dispute or
controversy between the parties as to whether any obligation, item or matter not
described herein or included in any Schedule is or is not material for purposes
of this Agreement. Unless this Agreement specifically provides otherwise,
neither the specification of any item or matter in any representation or
warranty contained in this Agreement nor the inclusion of any specific item in
any Schedule hereto is intended to imply that such item or matter, or other
items or matters, are or are not in the ordinary course of Business, and no
Party shall use the fact of the setting forth or the inclusion of any such item
or matter in any dispute or controversy between the Parties as to whether any
obligation, item or matter not described herein or included in any Schedule is
or is not in the ordinary course of Business for purposes of this Agreement.
(b) For the purposes of this Agreement, (i) words in the singular
shall be held to include the plural and vice versa and words of one gender shall
be held to include the other gender as the context requires, (ii) the terms
"hereof", "herein" and "herewith" and words of similar import shall be construed
to refer to this Agreement in its entirety and to all of the Schedules and not
to any particular provision, unless otherwise stated, and (iii) the term
"including" shall mean "including without limitation."
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IN WITNESS WHEREOF, the Parties have executed or caused to be executed
this Agreement effective as of the day and year first above written.
ARRIS GROUP, INC.
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Name:
Office:
CADANT, INC.
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Name:
Office:
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