Exhibit 99.1
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AGREEMENT OF PURCHASE AND SALE
Dated as of June 24, 2004
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ELEKON INDUSTRIES USA, INC.
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Construction and Interpretation . . . . . . . . . . . . . . . . . 10
ARTICLE II SALE AND TRANSFER OF SHARES; CLOSING . . . . . . . . . . . . . . . 11
Section 2.1 Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4 Closing Obligations . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.5 Other Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . 16
Section 3.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . 16
Section 3.2 Authority; No Conflict. . . . . . . . . . . . . . . . . . . . . . 17
Section 3.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.6 Real Property; Title to Properties. . . . . . . . . . . . . . . . 20
Section 3.7 Condition and Sufficiency of Assets . . . . . . . . . . . . . . . 22
Section 3.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.10 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . 22
Section 3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.12 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . 25
Section 3.13 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . 25
Section 3.14 Compliance with Legal Requirements; Governmental Authorizations. 27
Section 3.15 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . 29
Section 3.16 Absence of Certain Changes and Events . . . . . . . . . . . . . . 30
Section 3.17 Contracts; No Defaults. . . . . . . . . . . . . . . . . . . . . . 31
Section 3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.21 Labor Relations; Compliance . . . . . . . . . . . . . . . . . . . 38
Section 3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.23 Certain Payments. . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.24 Relationships with Related Persons. . . . . . . . . . . . . . . . 39
Section 3.25 Product Defects . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 3.26 Product and Service Warranties. . . . . . . . . . . . . . . . . . 40
Section 3.27 Supplies and Equipment. . . . . . . . . . . . . . . . . . . . . . 40
Section 3.28 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . 40
Section 3.29 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.30 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . 41
Section 4.1 Organization And Good Standing. . . . . . . . . . . . . . . . . . 41
Section 4.2 Authority; No Conflict. . . . . . . . . . . . . . . . . . . . . . 41
Section 4.3 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . 42
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Section 4.4 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.5 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.6 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . 42
Section 4.7 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE V [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE . . . . . . . . 44
Section 7.1 Accuracy Of Representations . . . . . . . . . . . . . . . . . . . 44
Section 7.2 Sellers' Performance. . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.4 Additional Documents. . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.5 No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.6 No Claim Regarding Stock Ownership or Sale Proceeds . . . . . . . 45
Section 7.7 No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.8 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.9 Contemporaneous Transaction . . . . . . . . . . . . . . . . . . . 46
Section 7.10 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . 46
Section 7.11 Closing Statement . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.12 Real Property Holding Company Affidavit . . . . . . . . . . . . . 47
Section 7.13 Airplane Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.14 Customer Interviews . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.15 Resignations of Directors . . . . . . . . . . . . . . . . . . . . 47
Section 7.16 Discharge of Liabilities. . . . . . . . . . . . . . . . . . . . . 47
Section 7.17 OCI Supply Agreement. . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.18 OCI Release . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE. . . . . . . . 47
Section 8.1 Accuracy Of Representations . . . . . . . . . . . . . . . . . . . 48
Section 8.2 Buyer's Performance . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.4 Additional Documents. . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.5 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.6 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . 49
ARTICLE IX [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE X INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . . . 49
Section 10.1 Survival; Right to Indemnification Not Affected by Knowledge. . . 49
Section 10.2 Indemnification and Payment of Damages by Sellers . . . . . . . . 49
Section 10.3 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.4 Indemnification and Payment of Damages by Buyer . . . . . . . . . 52
Section 10.5 Time Limitations. . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.6 Limitations on Amount - Sellers . . . . . . . . . . . . . . . . . 52
Section 10.7 Right of Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.8 Procedure For Indemnification - Third Party Claims. . . . . . . . 53
Section 10.9 Procedure for Indemnification - Other Claims. . . . . . . . . . . 54
ARTICLE XI CLOSING STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.1 Closing Statement . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE XII CERTAIN POST-CLOSING MATTERS. . . . . . . . . . . . . . . . . . . . 55
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Section 12.1 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.2 Sellers' Personal Guarantees. . . . . . . . . . . . . . . . . . . 57
Section 12.3 Automobile Titles . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE XIII GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 13.1 Appointment of the Sellers' Representative as Attorney-In-Fact. . 57
Section 13.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 13.3 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . 58
Section 13.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 13.5 Jurisdiction; Service of Process. . . . . . . . . . . . . . . . . 60
Section 13.6 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.7 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.8 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 13.9 Entire Agreement and Modification . . . . . . . . . . . . . . . . 61
Section 13.10 Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . 61
Section 13.11 Assignments, Successors, and No Third-Party Rights. . . . . . . . 61
Section 13.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 13.13 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 13.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 13.15 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
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LIST OF SCHEDULES AND EXHIBITS
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Schedule 2.2 - Joint Projections
Schedule 7.16 - Liabilities to be Discharged
Schedule 12.2 - Sellers' Personal Guarantees
Disclosure Schedule
Exhibit 1 - Form of Shareholder Intangibles Purchase Agreement
Exhibit 2.2(c)(ii) - Form of Sellers' Note
Exhibit 2.2(c)(iii) - Form of Escrow Agreement
Exhibit 2.4(a)(ii) - Form of Release
Exhibit 2.4(a)(iii)(A) - Form of Employment Agreement for Xxx Xxxxx
Exhibit 2.4(a)(iii)(B) - Form of Employment Agreement for Xxxxxx Xxxxxxxx
Exhibit 2.4(a)(iv) - Form of Non-Competition Agreement for Xxx Xxxxx
Exhibit 2.5(a) - Form of Xxxxxxx Note
Exhibit 2.5(b) - Form of Xxxxx Note
Exhibit 7.4(a) - Form of Opinion of Counsel to Sellers
Exhibit 7.4(b) - Form of Estoppel Certificate and Landlord's Consent
Exhibit 7.17 - Form of OCI Supply Agreement
Exhibit 7.18 - Form of Release (OCI)
Exhibit 8.4(a) - Form of Opinion of Counsel to Buyer
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AGREEMENT OF PURCHASE AND SALE
This AGREEMENT OF PURCHASE AND SALE ("Agreement") is made as of June 24,
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2004 by and among Measurement Specialties, Inc., a New Jersey corporation
("Buyer"), and Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxxx (collectively, "Sellers").
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W I T N E S S E T H:
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WHEREAS, Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of Elekon
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Industries USA, Inc., a California corporation (the "Company"), for the
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consideration and on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, and intending to be legally bound, the parties to this
Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
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For purposes of this Agreement, the following terms have the following
meanings:
"2003 Balance Sheet" - the unaudited consolidated balance sheet of the
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Acquired Companies at and as of June 30, 2003.
"AAA" - as defined in Section 13.6.
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"Acquired Companies" - the Company and its Subsidiaries, collectively.
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"Affiliate" - with respect to any Person, another Person that directly or
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indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person, where "control" means the
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possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise;
provided, that (x) any investment account advised or managed by such Person or
one of its Subsidiaries or Affiliates on behalf of third parties, or (y) any
partnership, limited liability company, or other similar investment vehicle or
entity engaged in the business of making investments of which such Person acts
as the general partner, managing member, manager, investment advisor, principal
underwriter or the equivalent shall not be deemed an Affiliate of such Person.
"Agreement" - as defined in the first paragraph of this Agreement.
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"Applicable Contract" - any Contract (a) under which any Acquired Company
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has or may acquire any rights, (b) under which any Acquired Company has or may
become subject to
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any obligation or liability, or (c) by which any Acquired Company or any of the
assets owned or used by it is or may become bound.
"Benefit Plans" - as defined in Section 3.13(a).
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"Best Efforts" - the efforts that a prudent Person desirous of achieving a
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result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible.
"Breach" - Breach of a representation, warranty, covenant, obligation, or
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other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision.
"Buyer" - as defined in the first paragraph of this Agreement.
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"Buyer SEC Reports" - as defined in Section 4.6(a).
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"Buyer's Closing Documents" - as defined in Section 4.2(a).
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"CERCLA" - the United States Comprehensive Environmental Response,
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Compensation, and Liability Act, 42 U.S.C. Sec. 9601 et seq., as amended, or any
successor law, and the rules and regulations thereunder or under any successor
law.
"Cleanup" - as defined in the definition of Environmental, Health, and
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Safety Liabilities below.
"Closing" - as defined in Section 2.3.
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"Closing Cash Payment" - as defined in Section 2.2(c)(i).
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"Closing Date" - the date and time as of which the Closing actually takes
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place.
"Closing Statement" - as defined in Section 11.1.
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"Closing Statement Date" - as defined in Section 11.1.
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"Code" - the Internal Revenue Code of 1986, as amended, or any successor
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law, and the rules and regulations thereunder or under any successor law.
"Company" - as defined in the Recitals of this Agreement.
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"Competing Business" - as defined in Section 3.24.
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"Consent" - any approval, consent, ratification, waiver, or other
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authorization (including any Governmental Authorization).
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"Contemplated Transactions" - all of the transactions contemplated by this
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Agreement, including:
(i) the sale of the Shares by Sellers to Buyer;
(ii) the execution, delivery, and performance of the Escrow
Agreement, the Shareholder Intangibles Purchase Agreement, the Promissory
Notes, the Employment Agreements, the Non-Competition Agreement, and the
Sellers' Release;
(iii) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(iv) Buyer's acquisition and ownership of the Shares.
"Contract" - any agreement, contract, obligation, promise, or understanding
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(whether written or oral and whether express or implied) that is legally binding
and for which all of the obligations thereunder have not been discharged.
"Cost of Sales" - as defined in Section 2.2(c)(iii).
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"Damages" - as defined in Section 10.2.
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"Defined Benefit Plan" - as defined in Section 3.13(i).
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"Disclosure Schedule" - the disclosure schedule delivered by Sellers to
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Buyer concurrently with the execution and delivery of this Agreement.
"Earn-Out Payments" - as defined in Section 2.2(c)(iii).
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"Earn-Out Period" - as defined in Section 2.2(c)(iii).
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"Employment Agreements" - as defined in Section 2.4(a).
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"Encumbrance" - any charge, claim, community property interest, condition,
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equitable interest, mortgage, lien, option, pledge, security interest, right of
first refusal, or other charge or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environment" - soil, land surface or subsurface strata, surface waters
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(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental Authority" - any Governmental Body or any court in each case
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having judicial, regulatory, or administrative authority under Environmental
Laws.
"Environmental Conditions" - any environmental contamination or pollution,
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or threatened contamination or pollution, of, or the Release or threatened
Release of Hazardous Materials into, the Environment.
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"Environmental, Health, and Safety Liabilities" - any cost, damages,
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expense, Liability, obligation, or other responsibility arising from or under
any Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under any
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by any applicable Environmental Law
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or Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for
any natural resource damages; or
(d) any other compliance, corrective, investigative, removal or
remedial measures or response action required under any Environmental Law
or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by CERCLA.
"Environmental Laws" - all Legal Requirements relating to public health or
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safety, pollution, damage to or protection of the Environment, Environmental
Conditions, Releases or threatened Releases of Hazardous Materials into the
Environment, or any Hazardous Activity, whether existing in the past or present.
Environmental Laws shall include, but are not limited to, the following laws,
and the regulations promulgated thereunder, as the same have been amended from
time to time: CERCLA; the Resource Conservation and Recovery Act (42 U.S.C.
6901 et seq.) ("RCRA"); the Clean Air Act (42 U.S.C. 7401 et seq.); and the
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Clean Water Act (33 U.S.C. 1251 et seq.).
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"Environmental Permits" - all permits, authorizations, registrations,
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certificates, licenses, approvals, or consents required under or issued pursuant
to Environmental Laws.
"ERISA" - as defined in Section 3.13(a).
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"ERISA Affiliate" - as defined in Section 3.13(a).
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"ERISA Plans" - as defined in Section 3.13(a).
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"Escrow Agent" - as defined in Section 2.2(c)(iii).
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"Escrow Agreement" - as defined in Section 2.2(c)(iii).
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"Escrow Amount" - the amount deposited by the Buyer with the Escrow Agent
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pursuant to Sections 2.2(c)(iii)(A) and (B).
"Exchange Act" - the Securities Exchange Act of 1934, as amended, or any
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successor law, and the rules and regulations issued thereunder or under any
successor law.
"Facilities" - any real property, leaseholds (including the Leased Real
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Property), or other interests currently or formerly owned, occupied, managed,
controlled, or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned, occupied, managed, controlled, or operated
by any Acquired Company.
"FDA" - the United States Food and Drug Administration or any successor
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agency.
"Financial Statements" - as defined in Section 3.4(b).
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"GAAP" - generally accepted accounting principles in the United States,
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consistently applied.
"Governmental Authorization" - any approval, consent, license, permit,
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waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" - any:
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(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Gross Profit" - as defined in Section 2.2(c)(iii).
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"Gross Profit Amount" - as defined in Section 2.2(c)(iii).
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"Gross Profit Earn-Out Payment" - as defined in Section 2.2(c)(iii).
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"Guaranty" - as defined in Section 7.13.
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"Hazardous Activity" - the distribution, generation, handling, importing,
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management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials
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in, on, under, about, or from the Facilities or any part thereof into the
Environment, and any other act, business, operation, or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Acquired Companies.
"Hazardous Materials" - any substance, material, or waste and any pollutant
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or contaminant, or infectious or radioactive substance or material, regulated
under any Environmental Laws, including petroleum, polychlorinated biphenyls,
and urea formaldehyde.
"Historical Balance Sheets" - as defined in Section 3.4(a)(i).
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"Historical Financial Statements" - as defined in Section 3.4(a).
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"Indemnified Persons" - as defined in Section 10.2.
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"Interim Balance Sheet" - as defined in Section 3.4(b)(i).
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"Interim Financial Statements" - as defined in Section 3.4(b).
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"IRS" - the United States Internal Revenue Service or any successor agency,
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and, to the extent relevant, the United States Department of the Treasury.
"Knowledge" - With respect to any individual, "Knowledge" shall mean the
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actual awareness of a fact or other matter, after conducting a reasonable
investigation concerning the existence of such fact or other matter. With
respect to the Acquired Companies, "Knowledge" shall mean the actual awareness
of such fact or other matter by Xxx Xxxxxxxx, Xxx Xxxxx, or Xxxxxxx Xxxxxxxxx,
after conducting a reasonable investigation concerning the existence of such
fact or other matter.
"Lease" - as defined in Section 3.6(a)(ii).
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"Leased Real Property" - as defined in Section 3.6(a)(ii).
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"Legal Requirement" - any federal, state, local, municipal, foreign,
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international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, decisional law, rule, regulation, statute,
code, decree, directive, judgment, or treaty.
"Liability" - any liability, obligation, or commitment of any kind or
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nature, whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, or due or to
become due.
"Non-Competition Agreement" - as defined in Section 2.4(a)(iv).
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"Occupational Safety and Health Law" - any Legal Requirement designed to
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provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
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"OCI" - Opto Circuits India, Ltd.
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"Order" - any award, decision, injunction, judgment, order, ruling,
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subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" - an action taken by a Person will be deemed
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to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person.
"Organizational Documents" - (a) the articles or certificate of
------------------------
incorporation and the bylaws of a corporation; (b) the certificate of formation
and operating agreement (or similar document) of a limited liability company;
(c) the partnership agreement and any statement of partnership of a general
partnership; (d) the limited partnership agreement and the certificate of
limited partnership of a limited partnership; (e) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"Xxxxx Note" - as defined in Section 2.5(b).
----------
"Person" - any individual, corporation (including any non-profit
------
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Philips" - as defined in Section 7.18.
-------
"Pre-Closing Tax Period" - any Taxable period that includes (but does not
----------------------
end on) the Closing Date.
"Proceeding" - any action, arbitration, audit, hearing, investigation,
----------
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Promissory Notes" - collectively, the Sellers' Note, the Xxxxxxx Note, and
----------------
the Xxxxx Note.
"Proprietary Rights" - (i) all patents and patent applications (including
------------------
all provisional, divisions, continuations, continuations in part, and reissues),
patentable inventions, and business methods; (ii) all registered and
unregistered fictional business names, trade names, trademarks, service marks,
and registered domain names and all applications with respect to any of the
foregoing; (iii) registered and unregistered copyrights in both published works
and unpublished works and copyrightable subject matter, including software; and
(iv) all know-how, trade secrets,
7
customer lists, confidential information, software, technical information, data,
process technology, plans, drawings, and blueprints.
"Proprietary Rights Agreement" - as defined in Section 3.20(c).
----------------------------
"Purchase Price" - as defined in Section 2.2(a).
--------------
"Xxxxxxx Note" - as defined in Section 2.5(a).
------------
"Related Person" - With respect to a particular individual: (a) each other
--------------
member of such individual's Family; (b) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family; (c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and (d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity). With respect to a specified Person other
than an individual: (a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person; (b) any Person that holds a Material
Interest in such specified Person; (c) each Person that serves as a director,
officer, partner, executor, or trustee of such specified Person (or in a similar
capacity); (d) any Person in which such specified Person holds a Material
Interest; (e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and (f) any Related
Person of any individual described in clause (b) or (c). For purposes of this
definition: (a) the "Family" of an individual includes (i) the individual, (ii)
------
the individual's spouse and former spouses, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual; and
(b) "Material Interest" means direct or indirect beneficial ownership (as
-----------------
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Release" - any intentional or unintentional release, discharge, spill,
-------
leaking, pumping, pouring, emitting, emptying, injection, disposal, or dumping
into the Environment.
"Representative" - with respect to a particular Person, any director,
--------------
officer, member, manager, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"Restricted Sale" - as defined in Section 4(b) of the Escrow Agreement.
---------------
"Revenue" - as defined in Section 2.2(c)(iii).
-------
"Revenue Amount" - as defined in Section 2.2(c)(iii).
--------------
"Revenue Earn-Out Payment" - as defined in Section 2.2(c)(iii).
------------------------
"SEC" - as defined in Section 4.6(a).
---
8
"Securities Act" - the Securities Act of 1933, as amended, or any successor
--------------
law, and the rules and regulations issued thereunder or under any successor law.
"Sellers" - as defined in the first paragraph of this Agreement.
-------
"Sellers' Closing Documents" - as defined in Section 3.2(a).
--------------------------
"Sellers' Note" - as defined in Section 2.2(c)(ii).
-------------
"Sellers' Personal Guarantees" - as defined in Section 12.2
----------------------------
"Sellers' Release" - as defined in Section 2.4(a)(ii).
----------------
"Sellers' Representative" - as defined in Section 13.1.
-----------------------
"Shareholder Intangibles" - as defined in the Shareholder Intangibles
-----------------------
Purchase Agreement.
"Shareholder Intangibles Purchase Agreement" - the Shareholder Intangibles
------------------------------------------
Purchase Agreement, substantially in the form attached hereto as Exhibit 1, that
---------
Buyer and Xxxxxx Xxxxxxxx shall enter into at the Closing.
"Shareholder Intangibles Purchase Price" - the purchase price for the
--------------------------------------
Shareholder Intangibles, as determined in accordance with the Shareholder
Intangibles Purchase Agreement.
"Shares" - as defined in the Recitals of this Agreement.
------
"Straddle Period" - as defined in Section 12.1(b).
---------------
"Subject Proprietary Rights" - as defined in Section 3.22(a).
--------------------------
"Subsidiary" - with respect to any Person (the "Owner"), any corporation or
---------- -----
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Supply Agreement" - as defined in Section 7.17.
----------------
"Tax" - as defined in Section 3.11(a)(i).
---
"Taxable" - as defined in Section 3.11(a)(i).
-------
"Taxes" - as defined in Section 3.11(a)(i).
-----
"Taxing" - as defined in Section 3.11(a)(i).
------
9
"Tax Return" - as defined in Section 3.11(a)(ii).
----------
"Threatened" - a claim, Proceeding, dispute, action, or other matter will
----------
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing).
Section 1.2 Construction and Interpretation.
-------------------------------
(a) The parties have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
(b) Each definition in this Agreement includes the singular and the
plural, and references to any gender include the other genders where
appropriate.
(c) Any reference to any federal, state, local, or foreign statute or
law shall be deemed to also refer to all rules and regulations promulgated
under such statute or law, unless the context requires otherwise.
References to any statute or regulation mean such statute or regulation as
amended at the time and include any successor legislation or regulation.
(d) The word "including" means "including without limitation". The
---------
word "or" is not exclusive.
--
(e) References to Articles, Sections, Exhibits and Schedules mean the
Articles, Sections, Exhibits and Schedules of this Agreement (unless
otherwise indicated). The Exhibits and Schedules (including the Disclosure
Schedule) are incorporated by reference into and shall be deemed a part of
this Agreement.
(f) The captions appearing herein are for the convenience of the
parties only and shall not be construed to affect the meaning of the
provisions of this Agreement.
(g) Any and all accounting terms utilized in this Agreement shall,
unless the context otherwise requires, be construed in accordance with
GAAP.
(h) All references to dollar amounts in this Agreement shall be
references to United States Dollars unless otherwise provided.
(i) In computing any time period provided for in this Agreement, the
first day of the time period shall not be counted but the last day of the
time period shall be counted. Any action required to be taken on a
particular day must be taken before 5:00 pm, Pacific Standard Time, on that
day. For example, if an action were required to be taken within ten (10)
days after the Closing Date, and the Closing Date were June 30, 2004, the
first day to be counted would be July 1, 2004 and the action would be
required to be taken before 5:00 pm, Pacific Standard Time, on July 10,
2004.
10
ARTICLE II
SALE AND TRANSFER OF SHARES; CLOSING
Section 2.1 Shares.
------
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the Shares to Buyer, and Buyer will purchase the
Shares from Sellers.
Section 2.2 Purchase Price.
--------------
(a) Subject to Section 2.2(b), the purchase price (the "Purchase
--------
Price") for the Shares shall be equal to the sum of: (i) the Closing Cash
-----
Payment; plus (ii) the Sellers' Note; plus (iii) the Earn-Out Payments, if
any; provided, that the Earn-Out Payments, if any, shall, subject to
Section 2.2(c)(iii)(D) and Section 10.7, be deposited in escrow with the
Escrow Agent to be held, invested, and disbursed as specified in and
pursuant to the terms and conditions of the Escrow Agreement and Article X
of this Agreement.
(b) The Purchase Price shall be reduced on a Dollar-for-Dollar basis
by the amount of the Shareholder Intangibles Purchase Price. Such reduction
to the Purchase Price shall take place immediately upon determination of
the amount of the Shareholder Intangibles Purchase Price and shall be
effected by reducing the amount of the Closing Cash Payment attributable to
the Purchase Price and the amounts of the elements of the Purchase Price
described in Sections 2.2(c)(ii) and (iii) attributable to the Purchase
Price in the following order:
(i) first, the amount of the Closing Cash Payment
attributable to the Purchase Price shall be reduced by the amount of
the Shareholder Intangibles Purchase Price or, if the Shareholder
Intangibles Purchase Price is greater than the Closing Cash Payment,
the entire Closing Cash Payment shall be deemed payment in respect of
the Shareholder Intangibles Purchase Price;
(ii) second, to the extent that the Purchase Price has not
been fully reduced by the Shareholder Intangibles Purchase Price after
the reduction provided for in clause (i) immediately preceding, the
amount of the principal balance of the First Promissory Note
attributable to the Purchase Price shall be reduced by the amount of
any remaining Shareholder Intangibles Purchase Price; and
(iii) third, to the extent that the Purchase Price has not
been fully reduced by the Shareholder Intangibles Purchase Price after
the reductions provided for in clauses (i) and (ii) immediately
preceding, the amount of the Earn-Out Payments, if any, attributable
to the Purchase Price shall be reduced until the total of all
reductions provided for in this Section 2.2(b) equals the Shareholder
Intangibles Purchase Price.
11
To the extent that a payment (or any portion of a payment) made pursuant to
Section 2.2(c) would be attributable to the Purchase Price but for this
Section 2.2(b) (including payments of principal under the Sellers' Note),
such payment (or portion thereof) will be deemed a payment in respect of
the Shareholder Intangibles Purchase Price.
(c) The Purchase Price shall be payable as follows:
(i) Closing Cash Payment. At the Closing, Buyer shall pay
--------------------
to Sellers $4.5 million (the "Closing Cash Payment").
--------------------
(ii) Promissory Note. At the Closing, Buyer shall deliver
---------------
to Sellers a 6% promissory note payable to Sellers in the principal
amount of $2.4 million in the form of Exhibit 2.2(c)(ii) (the
------------------
"Sellers' Note").
-------------
(iii) Escrow Payments.
---------------
(A) Revenue Earn-Out Payment. If the aggregate
------------------------
Revenue from July 1, 2004 through June 30, 2005 (the "Earn-Out
--------
Period") (such amount, the "Revenue Amount") is greater than
------ --------------
$11.0 million, Buyer shall, subject to Section 2.2(c)(iii)(D) and
Section 10.7, deposit with The Capital Trust Company of Delaware,
as escrow agent (the "Escrow Agent"), in accordance with the
------------
provisions of an escrow agreement (the "Escrow Agreement") in the
----------------
form of Exhibit 2.2(c)(iii), an amount (the "Revenue Earn-Out
----------------
Payment") determined in accordance with the following:
-------
(I) if the Revenue Amount is greater than $11.0
million but less than $13.8 million, the Revenue Earn-Out
Payment shall be equal to the amount obtained by multiplying
(a) $1.5 million, by (b) the quotient obtained by dividing
(i) the amount by which the Revenue Amount exceeds $11.0
million, by (ii) $2.8 million; or
(II) if the Revenue Amount is greater than or equal
to $13.8 million, the Revenue Earn-Out Payment shall be
equal to $1.5 million.
The amount of the Revenue Earn-Out Payment, if any, to be
deposited by Buyer with the Escrow Agent is subject to the
condition set forth in Section 2.2(c)(iii)(D) and to Buyer's
right of set-off provided in Section 10.7 and such deposit shall
be made no later than September 1, 2005.
(B) Gross Profit Earn-Out. If the aggregate Gross
---------------------
Profit during the Earn-Out Period (such amount, the "Gross Profit
------------
Amount") is greater than $3.9 million, Buyer shall, subject to
------
Section 2.2(c)(iii)(D) and Section 10.7, deposit with the Escrow
Agent, in accordance with the terms of the Escrow Agreement, an
amount (the "Gross Profit Earn-Out Payment" and, together with
-----------------------------
the Revenue Earn-Out Payment (if any), the "Earn-Out Payments")
-----------------
determined in accordance with the following:
12
(I) if the Gross Profit Amount is greater than $3.9
million but less than $4.6 million, the Gross Profit
Earn-Out Payment shall be equal to the amount obtained by
multiplying (a) $1.5 million, by (b) the quotient obtained
by dividing (i) the amount by which the Gross Profit Amount
exceeds $3.9 million, by (ii) $700,000; or
(II) if the Gross Profit Amount is greater than or
equal to $4.6 million, the Gross Profit Earn-Out Payment
shall be equal to $1.5 million.
The amount of the Gross Profit Earn-Out Payment, if any, to be
deposited by Buyer with the Escrow Agent is subject to the
condition set forth in Section 2.2(c)(iii)(D) and to Buyer's
right of set-off provided in Section 10.7 and such deposit shall
be made no later than September 1, 2005.
(C) For purposes of this Section 2.2(c)(iii): (x)
"Gross Profit" means Revenue less Cost of Sales; (y) "Revenue"
------------ -------
means the sum of the "Group 600" accounts in the Elekon General
Ledger system as of the date hereof; and (z) "Cost of Sales"
means the sum of the "Group 700" accounts in the Elekon General
Ledger system as of the date hereof.
(D) Anything to the contrary in this Agreement
notwithstanding, if, at any time prior to the earlier of (x) the
deposit by Buyer of the Earn-Out Payments into escrow pursuant to
Section 2.2(c)(iii), (y) the date the Supply Agreement is
terminated (other than a termination by Buyer pursuant to Section
6.1(c) thereof), and (z) three (3) years from the date hereof,
OCI makes a Restricted Sale, the amount of the Revenue Earn-Out
Payment and the amount of the Gross Profit Earn-Out Payment shall
each be deemed to be $0.00 and Buyer shall not deposit any money
into escrow pursuant to Section 2.2(c)(iii).
(E) The Escrow Amount shall be held, invested, and
disbursed as specified in and pursuant to the terms and
conditions of the Escrow Agreement and Article X of this
Agreement.
(F) Buyer and Sellers agree and acknowledge that from
the Closing Date through June 30, 2005, Buyer will operate the
Company in a manner that is consistent with past practices and
with the assumptions underlying, and reasonably necessary to
attain, the jointly prepared projections attached hereto as
Schedule 2.2, including but not limited to product lines,
------------
pricing, sales and marketing, and working capital (the "Joint
-----
Projections"). In addition, except as may be required by
-----------
prevailing market and economic conditions outside of Buyer's
control, Buyer hereby agrees not to materially change the cost
structure, including the cost and margins, of the products as set
forth on Schedule 2.2, such that the changes would adversely
------------
affect the Gross Profit. If for the period commencing on the
Closing Date through June 30, 2005,
13
Buyer's actions or inactions deviate in any material way from the
manner the Company was operated prior to the Closing or in a
manner that is materially different from that contemplated by the
Joint Projections, Sellers shall have the right to object in
writing to such actions or inactions, which objection shall
describe the deviation and request a means of correction. Upon
receipt of such objection, Buyer shall have five (5) business
days to either conform its conduct to the means set forth in the
objection and provide Sellers written notice of the same, or
notify Sellers in writing that it disagrees with the objection
(or the basis therefor), and the rationale for its disagreement.
If the Buyer does the latter, the parties will use their Best
Efforts to mutually resolve the dispute within ten (10) business
days of the Buyer's most recent notice to Sellers. If they are
not able to reach a mutually acceptable resolution to the dispute
within such time, the maximum amount of the Earn-Out Payments are
not earned and such dispute is not otherwise resolved prior to
the expiration of the Earn-Out Period, the parties will submit to
binding arbitration (in accordance with Section 13.6) immediately
after the Earn-Out Period with respect to the dispute. Within
fifteen (15) business days after the end of each calendar month
during the Earn-Out Period, Buyer shall provide Sellers with a
report detailing the Revenue for such month.
(d) Any payment required to be made to Sellers pursuant to this
Section 2.2 shall be made to the Sellers' Representative on behalf of both
Sellers. All such payments shall be made by wire transfer of immediately
available funds to the account designated by the Sellers' Representative to
Buyer in writing at least ten (10) days prior to the date on which such
payment is required to be made.
Section 2.3 Closing.
-------
The purchase and sale (the "Closing") provided for in this Agreement will
-------
take place at the offices of XxXxxxxx & English, LLP at Four Gateway Center, 000
Xxxxxxxx Xxxxxx, Xxxxxx, Xxx Xxxxxx 00000 at 10:00 a.m. (local time) on the date
hereof, or at such other time and place as the parties may agree in writing.
Section 2.4 Closing Obligations.
-------------------
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to Buyer;
(ii) a release in the form of Exhibit 2.4(a)(ii) executed by
------------------
each Seller (the "Sellers' Release");
----------------
14
(iii) an employment agreement in the form of Exhibit
-------
2.4(a)(iii)(A) executed by Xxx Xxxxx and an employment agreement in
--------------
the form of Exhibit 2.4(a)(iii)(B) executed by Xxxxxx Xxxxxxxx
----------------------
(collectively, the "Employment Agreements");
---------------------
(iv) a non-competition agreement in the form of Exhibit
-------
2.4(a)(iv) executed by Xxx Xxxxx (the "Non-Competition Agreement");
---------- -------------------------
(v) the Shareholder Intangibles Purchase Agreement executed
by Xxxxxx Xxxxxxxx;
(vi) a certificate, dated the Closing Date, executed by
Sellers representing and warranting to Buyer that:
(A) each of Sellers' representations and warranties in
this Agreement is accurate in all material respects (except for
representations and warranties that contain an express
materiality qualification, which must have been accurate in all
respects) as of the Closing Date (except to the extent expressly
made as of an earlier date, in which case as of such date);
(B) each Seller has complied with all of its covenants
and agreements contained in this Agreement; and
(C) each Seller has performed all of its obligations
required to be performed by it on or prior to the Closing Date
hereunder;
(vii) the Escrow Agreement executed by Sellers; and
(viii) a real property holding company affidavit on behalf of
each Acquired Company, as provided in Section 7.12; and
(b) Buyer will deliver to Sellers:
(i) the Closing Cash Payment, as provided in Section
2.2(c);
(ii) the Sellers' Note;
(iii) a certificate executed by Buyer to the effect that:
(A) each of Buyer's representations and warranties in
this Agreement is accurate in all material respects (except for
representations and warranties that contain an express
materiality qualification, which must have been accurate in all
respects) as of the Closing Date (except to the extent expressly
made as of an earlier date, in which case as of such date);
15
(B) Buyer has complied with all of its covenants and
agreements contained in this Agreement; and
(C) Buyer has performed all of its obligations
required to be performed by it on or prior to the Closing Date
hereunder;
(iv) the Employment Agreements, executed by Buyer;
(v) the Non-Competition Agreement, executed by Buyer;
(vi) the Shareholder Intangibles Purchase Agreement executed
by Buyer; and
(vii) the Escrow Agreement executed by Buyer.
Section 2.5 Other Payments.
--------------
At the Closing, Buyer shall:
(a) deliver to Xxxxx Xxxxxxx a 6% promissory note payable to Xxxxx
Xxxxxxx in the principal amount of $400,000 in the form of Exhibit 2.5(a)
(the "Xxxxxxx Note"); and
------------
(b) deliver to Xxx Xxxxx a 6% promissory note payable to Xxx Xxxxx in
the principal amount of $200,000 in the form of Exhibit 2.5(b) (the "Xxxxx
-----
Note").
----
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
Section 3.1 Organization and Good Standing.
------------------------------
(a) Section 3.1 of the Disclosure Schedule contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction of
incorporation, other jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each
stockholder and the number of shares held by each). Each Acquired Company
is a corporation duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to conduct its business as it is now being conducted,
to own or use the properties and assets that it purports to own or use, and
to perform all its obligations under Applicable Contracts. Each Acquired
Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties and assets owned or used by
it, or the nature of the activities conducted by it, requires such
qualification.
16
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of each Acquired Company, as currently in effect.
Section 3.2 Authority; No Conflict.
----------------------
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its
terms, except insofar as enforcement may be limited by bankruptcy,
insolvency, or other laws affecting generally the enforceability of
creditors' rights and by limitations on the availability of equitable
remedies. Upon the execution and delivery by Sellers of the Escrow
Agreement, the Shareholder Intangibles Purchase Agreement, the Employment
Agreements, the Sellers' Release, and the Non-Competition Agreement
(collectively, the "Sellers' Closing Documents"), the Sellers' Closing
--------------------------
Documents will constitute the legal, valid, and binding obligations of
Sellers, enforceable against Sellers in accordance with their respective
terms, except insofar as enforcement may be limited by bankruptcy,
insolvency, or other laws affecting generally the enforceability of
creditors' rights and by limitations on the availability of equitable
remedies. Each Seller (i) has the full power and authority to own the
Shares owned by it and (ii) has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and each of
the Sellers' Closing Documents to which it is a party and to perform its
obligations under this Agreement and each of the Sellers' Closing Documents
to which it is a party.
(b) Except as set forth in Section 3.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement by Sellers nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the Acquired
Companies, or (B) any resolution adopted by the board of directors or
the stockholders of any Acquired Company;
(ii) contravene, conflict with, or result in a violation of
any Legal Requirement or any Order to which any Acquired Company or
any Seller, or any of the assets or properties owned or used by any
Acquired Company, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or any of the assets owned
or used by, any Acquired Company;
(iv) cause Buyer or any Acquired Company to become subject
to, or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by any Acquired Company
to be reassessed or revalued by any Taxing authority or other
Governmental Body;
17
(vi) contravene, conflict with, or result in a violation or
Breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets or properties owned or used
by any Acquired Company.
(c) Except as set forth in Section 3.2 of the Disclosure Schedule, no
Seller or Acquired Company is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
(d) Sellers are acquiring the Sellers' Note for their own account and
not with a view to its distribution within the meaning of Section 2(11) of
the Securities Act. Each Seller is an "accredited investor" as such term is
defined in Rule 501(a) under the Securities Act.
Section 3.3 Capitalization.
--------------
The authorized equity securities of the Company consist of 100,000 shares
of common stock, without par value, of which 76,500 shares are issued and
outstanding and constitute the Shares. Sellers are and will be on the Closing
Date the record and beneficial owners and holders of the Shares, free and clear
of all Encumbrances and each Seller has the right to sell and transfer the
Shares owned by it to Buyer hereunder. Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxxx
jointly own all of the Shares. With the exception of the Shares (all of which
are owned by Sellers), all of the outstanding equity securities and other
securities of each Acquired Company are owned of record and beneficially by one
or more of the Acquired Companies, free and clear of all Encumbrances. No
legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of any Acquired Company. All of the
outstanding equity securities of each Acquired Company have been duly authorized
and validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of any Acquired Company. None of the outstanding equity securities
or other securities of any Acquired Company was issued in violation of the
Securities Act or any other Legal Requirement. No Acquired Company owns, or has
any Contract to acquire, any equity securities or other securities of any Person
(other than Acquired Companies) or any direct or indirect equity or ownership
interest in any other business.
Section 3.4 Financial Statements.
--------------------
(a) Historical Financial Statements. Sellers have delivered to Buyer
-------------------------------
the following financial statements, certified by Xxxxxx Xxxxxxxx and
including in each case the related schedules and notes to the extent same
exist (collectively, the "Historical Financial Statements"):
-------------------------------
18
(i) the unaudited consolidated balance sheets of the
Acquired Companies at and as of June 30, 2001, 2002, and 2003 (the
"Historical Balance Sheets"); and
-------------------------
(ii) the related unaudited statements of operations,
stockholders' equity, and cash flows for each of the three consecutive
fiscal years ended June 30, 2003.
The Historical Financial Statements are true, correct, and complete in all
respects and have been prepared in conformity with GAAP throughout the
periods to which such financial statements relate. The Historical Financial
Statements fully and fairly present, in all respects, the financial
position and results of operations of the Acquired Companies, and the
changes in their cash flows, at the dates shown and for the periods therein
specified. The Historical Balance Sheets constituting a part of the
Historical Financial Statements fully and fairly present, in all respects,
all liabilities of the Acquired Companies of the types which are required
to be set forth therein as at the date thereof. All normal year-end
adjustments necessary to present fully and fairly the financial position
and results of operations of the Acquired Companies, and the changes in
their cash flows, for the periods covered by the Historical Financial
Statements have been made and are reflected therein.
(b) Interim Financial Statements. Sellers have delivered to Buyer
----------------------------
the following financial statements, certified by Xxxxxx Xxxxxxxx and
including in each case the related schedules and notes to the extent same
exist (collectively, the "Interim Financial Statements" and, together with
----------------------------
the Historical Financial Statements, the "Financial Statements"):
--------------------
(i) the unaudited consolidated balance sheet of the
Acquired Companies at and as of April 30, 2004 (the "Interim Balance
---------------
Sheet"); and
-----
(ii) the related unaudited statements of operations,
stockholders' equity, and cash flows for the ten months then ended.
The Interim Financial Statements are true, correct, and complete in all
respects, and have been prepared in conformity with GAAP throughout the
period to which such financial statements relate, and in all respects on a
basis consistent with the Historical Financial Statements, except as
otherwise indicated therein. The Interim Financial Statements fully and
fairly present, in all respects, the financial position and results of
operations of the Acquired Companies and the changes in their cash flows,
at the dates shown and for the periods therein specified. The Interim
Balance Sheet constituting a part of the Interim Financial Statements fully
and fairly presents, in all respects, all liabilities of the Acquired
Companies of the types which are required to be set forth therein as and at
the dates thereof. All adjustments necessary to present fully and fairly
the financial position and results of operations of the Acquired Companies,
and the changes in cash flows, have been included in the Interim Balance
Sheet, subject to normal year-end adjustments which would not reasonably be
expected to be materially adverse to (x) any Acquired Company's business,
properties, assets, liabilities, operations, condition (financial or
19
otherwise), or results of operations or (y) the business, properties,
assets, liabilities, operations, condition (financial or otherwise), or
results of operations of the Acquired Companies taken as a whole.
Section 3.5 Books and Records.
-----------------
The books of account, minute books, stock record books, and other records
of the Acquired Companies, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with sound business
practices, taking into account the size and ownership and management structure
of the Acquired Companies. Each Acquired Company has devised and maintains a
system of internal accounting controls which the Sellers believe are sufficient
to provide reasonable assurances regarding the reliability of financial
reporting and the preparation of financial statements. The minute books of the
Acquired Companies contain accurate and complete records of all meetings held
of, and corporate action taken by, the stockholders, the Boards of Directors,
and committees of the Boards of Directors of the Acquired Companies, and no
meeting of any such stockholders, Board of Directors, or committee has been held
for which minutes have not been prepared and are not contained in such minute
books. At the Closing, all of those books and records will be in the possession
of the Acquired Companies.
Section 3.6 Real Property; Title to Properties.
----------------------------------
(a) Real Property.
-------------
(i) The Acquired Companies do not own any real property.
(ii) With respect to each Acquired Company, Section 3.6(a)
of the Disclosure Schedule lists all of the real property and
interests therein leased, subleased, or otherwise occupied or used by
such Acquired Company (with all easements and other rights appurtenant
to such property, the "Leased Real Property"). For each item of Leased
--------------------
Real Property, Section 3.6(a) of the Disclosure Schedule also lists
the lessor and the lease, sublease, or other agreement pursuant to
which the applicable Acquired Company holds a possessory interest in
the Leased Real Property and all amendments, renewals, or extensions
thereto (each, a "Lease"). Sellers have provided Buyer with a true and
-----
correct copy of each Lease. Each Lease is in full force and effect and
constitutes a legal, valid, and binding obligation of the respective
parties thereto, except as may be limited by bankruptcy, insolvency,
or other laws affecting generally the enforceability of creditors'
rights and by limitations on the availability of equitable remedies.
None of the Acquired Companies is in default under any Lease nor, to
Sellers' or the Acquired Companies' Knowledge, is any other party to
any Lease in default thereunder; and, to Sellers' and the Acquired
Companies' Knowledge, no event has occurred, or is alleged to have
occurred, which constitutes (or with lapse of time or giving of notice
or both would constitute) a default by any other party to any Lease or
a basis for a claim of force majeure or other claim of excusable delay
or non-performance thereunder. Except as set forth in Section 3.6(a)
of the Disclosure Schedule, the leasehold interest of the
20
applicable Acquired Company with respect to each item of Leased Real
Property is free and clear of any Encumbrances. No Acquired Company is
a sublessor of, or has assigned any lease covering, any item of Leased
Real Property. Leasing commissions or other brokerage fees due from or
payable by any Acquired Company with respect to any Lease have been
paid in full. The Leased Real Property constitutes all interests in
real property currently used in connection with the Acquired
Companies' businesses. To Sellers' Knowledge, the Leased Real Property
is not subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any kind or
nature, except: (y) those that in the aggregate do not impair the
current use or occupancy of the Leased Real Property; and (z) as set
forth in the Lease relating to such item. To Sellers' Knowledge, all
buildings, plants, structures, and other improvements owned or used by
any Acquired Company lie wholly within the boundaries of the Leased
Real Property and do not encroach upon the property, or otherwise
conflict with the property rights, of any other Person. Except as set
forth in Section 3.6(a) of the Disclosure Schedule, and to Sellers'
Knowledge, the Leased Real Property complies with all applicable Legal
Requirements of any Governmental Entity, and no Acquired Company has
received any notifications from any Governmental Entity or insurance
company recommending improvements to the Leased Real Property or any
other actions relative to the Leased Real Property.
(iii) No Acquired Company is a party to or bound by any
contract or other agreement (including any option) for the purchase or
sale of any real estate interest or any contract or other agreement
for the lease to or from such Acquired Company of any real estate
interest not currently in possession of such Acquired Company.
(b) Title to Tangible Property. Except as set forth in Section
--------------------------
3.6(b) of the Disclosure Schedule, each of the Acquired Companies has good
and marketable title to all of its tangible assets and properties, in each
case free and clear of all Encumbrances. Each of the Acquired Companies
leases or owns all tangible properties and assets necessary for the
operation of its businesses as currently conducted, and such assets and
properties include all of the tangible assets and properties, of every kind
and nature, and wherever located, which are utilized by each of the
Acquired Companies in the conduct of its business; and all of such tangible
properties and assets are located on the Leased Real Property. None of the
Acquired Companies has received notice of any violation of, or default
under, any Legal Requirement or contractual requirement relating to its
owned or leased tangible properties and assets which remains uncured or has
not been dismissed. All leases and licenses pursuant to which any of the
Acquired Companies leases or licenses tangible property from others are in
good standing, valid, and effective in accordance with their respective
terms, and there is not, with respect to any of the Acquired Companies, and
to Sellers' Knowledge with respect to any other party, under any of such
leases or licenses, any existing material default or event of default (or
event which with notice or lapse of time, or both, would constitute a
material default, or would constitute a basis for a claim of force majeure
or other claim of excusable delay or non-performance).
21
Section 3.7 Condition and Sufficiency of Assets.
-----------------------------------
All of the assets and properties owned or leased by each Acquired Company
are structurally sound, free from material defects, in good operating condition
and repair, and adequate for the uses to which they are being put. None of such
assets or properties is in need of maintenance or repairs, except for ordinary,
routine maintenance and repairs that are not material in nature or cost,
individually or in the aggregate, to such assets or properties. All of such
assets and properties are located on the Leased Real Property. The assets and
properties owned or leased by the Acquired Companies are sufficient for the
continued conduct of the Acquired Companies' businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
Section 3.8 Accounts Receivable.
-------------------
All accounts receivable of the Acquired Companies that are reflected on the
2003 Balance Sheet or the Interim Balance Sheet or on the accounting records of
the Acquired Companies as of the Closing Date (collectively, the "Accounts
--------
Receivable") represent or will represent valid obligations arising from sales
----------
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the reserve shown on the
Closing Adjustment Statement. Subject to such reserve, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within one hundred and twenty (120) days after the day on which it first becomes
due and payable. There is no contest, claim, or right of set-off, other than
returns in the Ordinary Course of Business, under any Contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Section 3.8 of the Disclosure Schedule contains a complete and
accurate list of all Accounts Receivable as of the date of the Interim Balance
Sheet, which list sets forth the aging of such Accounts Receivable.
Section 3.9 Inventory.
---------
All inventory of the Acquired Companies, whether or not reflected in the
2003 Balance Sheet or the Interim Balance Sheet, consists of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the 2003 Balance Sheet or
the Interim Balance Sheet or on the accounting records of the Acquired Companies
as of the Closing Date, as the case may be. All inventories not written off
have been priced at the lower of cost or market value on a first in, first out
basis. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Acquired Companies.
Section 3.10 No Undisclosed Liabilities.
--------------------------
Except as set forth in Section 3.10 of the Disclosure Schedule, the
Acquired Companies have no liabilities or obligations (whether known or unknown
and whether absolute, accrued, contingent, or otherwise) of a nature required to
be disclosed on a balance sheet pursuant to GAAP, except for liabilities or
obligations reflected or reserved against in the 2003 Balance
22
Sheet or the Interim Balance Sheet and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
Section 3.11 Tax Matters.
-----------
(a) For purposes of this Agreement:
(i) "Tax" (or "Taxes" or "Taxable" or "Taxing" where the
--- ----- ------- ------
context requires) means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including
taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not and
including any obligations to indemnify or otherwise assume or succeed
to the Tax liability of any other person.
(ii) "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.
(b) The Acquired Companies have filed all Tax Returns that they were
required to file under applicable laws and regulations prior to the Closing
Date. All such Tax Returns were correct and complete in all material
respects and have been prepared in substantial compliance with all
applicable laws and regulations. All Taxes due and owing by the Acquired
Companies (whether or not shown on any Tax Return) have been paid. No
Acquired Company currently is the beneficiary of any extension of time
within which to file any Tax Return. With respect to each Acquired Company,
no claim has ever been made by an authority in a jurisdiction where such
Acquired Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no liens for Taxes (other than
Taxes not yet due and payable) upon any of the assets of any of the
Acquired Companies.
(c) The Acquired Companies have withheld and paid all Taxes required
to have been withheld and paid in connection with any amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other
third party.
(d) Neither Seller, and no director or officer (or employee
responsible for Tax matters) of any Acquired Company, expects any authority
to assess any additional Taxes for any period for which Tax Returns have
been filed with respect to the Acquired Companies. No foreign, federal,
state, or local tax audits or administrative or judicial Tax proceedings
are pending or being conducted with respect to any Acquired Company. No
Acquired Company has received from any foreign, federal, state, or local
Taxing authority (including jurisdictions where the Acquired Companies have
not filed Tax Returns) any (i) notice indicating an intent to open an audit
or other review, (ii) request for information related to Tax matters, or
(iii) notice of deficiency or proposed
23
adjustment for any amount of Tax proposed, asserted, or assessed by any
Taxing authority against any Acquired Company. Section 3.11(d) of the
Disclosure Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Acquired Companies for taxable 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. Sellers have delivered (or have caused the Acquired
Companies to deliver) to Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any Acquired Company filed or received
since December 31, 1999.
(e) No Acquired Company has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(f) No Acquired Company has filed a consent under Code Section 341(f)
concerning collapsible corporations. No Acquired Company is a party to any
agreement, contract, arrangement, or plan that has resulted or would
result, separately or in the aggregate, in the payment of (i) any "excess
parachute payment" within the meaning of Code Section 280G (or any
corresponding provision of state, local, or foreign Tax law) or (ii) any
amount that will not be fully deductible as a result of Code Section 162(m)
(or any corresponding provision of state, local, or foreign Tax law). No
Acquired Company has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). The Acquired Companies have
disclosed on their federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income Tax
within the meaning of Code Section 6662. No Acquired Company is a party to
or bound by any Tax allocation or sharing agreement. No Acquired Company
(i) has been a member of an affiliated group (within the meaning Code
Section 1504(a) or any similar provision of state, local, or foreign law)
filing a consolidated federal income Tax Return (other than a group the
common parent of which was the Company) or (ii) has, to Sellers' Knowledge,
any liability for the Taxes of any person under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(g) The unpaid Taxes of the Acquired Companies (i) did not, as of the
date of the Interim Balance Sheet, exceed the reserve for Tax liabilities
(other than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
Interim Balance Sheet (other than in any notes thereto) and (ii) do not
exceed that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Acquired
Companies in filing their Tax Returns. Since the date of the Interim
Balance Sheet, no Acquired Company has incurred any liability for Taxes
arising from extraordinary gains or losses, as that term is used in GAAP,
outside the Ordinary Course of Business of such Acquired Company consistent
with past custom and practice.
(h) No Acquired Company will be required to include any item of
income in, or exclude any item of deduction from, Taxable income for any
Taxable period (or portion thereof) ending after the Closing Date as a
result of any (i) change in method of
24
accounting for a taxable period ending on or prior to the Closing Date;
(ii) "closing agreement" as described in Code Section 7121 (or any
corresponding or similar provision of state, local, or foreign income Tax
law) executed on or prior to the Closing Date; (iii) intercompany
transactions or any excess loss account described in Treasury Regulations
under Code Section 1502 (or any corresponding or similar provision of
state, local, or foreign income Tax law); (iv) installment sale or open
transaction disposition made on or prior to the Closing Date; or (v)
prepaid amount received on or prior to the Closing Date.
(i) No Acquired Company has distributed stock of another person, or
has had its stock distributed by another person, in a transaction that was
purported or intended to be governed in whole or in part by Code Section
355 or Code Section 361.
Section 3.12 No Material Adverse Change.
--------------------------
Since the date of the 2003 Balance Sheet, there has not been any material
adverse change in the business, operations, properties, assets, liabilities, or
condition (financial or otherwise) of any Acquired Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
Section 3.13 Employee Benefit Plans.
----------------------
(a) Section 3.13(a) of the Disclosure Schedule contains a true and
complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance or termination pay, hospitalization
or other medical, life, or other insurance, supplemental unemployment
benefits, profit-sharing, 401(k) pension or retirement plan, program,
agreement, or arrangement, and each other employee benefit plan, program,
agreement, or arrangement, sponsored, maintained, or contributed to or
required to be contributed to by any of the Acquired Companies or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), that
---------------
together with the Acquired Companies would be deemed a "single employer"
within the meaning of Section 4001(b) (l) of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder ("ERISA"), for the benefit of any employee or former employee of
-----
the Acquired Companies, whether formal or informal and whether legally
binding or not (the "Benefit Plans"). Section 3.13(a) of the Disclosure
-------------
Schedule identifies each of the Benefit Plans that is an "employee welfare
benefit plan" or "employee pension benefit plan" as such terms are defined
in Sections 3(1) and 3(2) of ERISA (such plans being hereinafter referred
to collectively as the "ERISA Plans").
-----------
(b) Except as set forth in Section 3.13(b) of the Disclosure
Schedule, with respect to each of the Benefit Plans, the Company has
provided to Buyer true, current, and complete copies of each of the
following documents: (i) a copy of each Benefit Plan (including all
amendments, insurance and annuity contracts, funding media, and all other
documents relating thereto) or, in the case of unwritten Benefit Plans,
descriptions thereof; (ii) the annual report on Form 5500 (and accompanying
schedules attached thereto), for each of the last three years; (iii) the
financial statements with respect to each such Benefit Plan for the last
three years; (iv) the most recent summary plan description
25
for each Benefit Plan for which a summary plan description is required; (v)
the most recent determination letter received from the IRS with respect to
each Benefit Plan that is intended to be qualified under Section 401 of the
Code, and any outstanding requests for determination letters; and (vi) each
trust agreement relating to any Benefit Plan.
(c) None of the Acquired Companies, any ERISA Affiliate, any of the
ERISA Plans, any trust created thereunder, nor any trustee or administrator
thereof or any Seller has engaged in a transaction or has taken or failed
to take action in connection with which the Acquired Companies, any ERISA
Affiliate, any of the ERISA Plans, any such trust, any trustee or
administrator thereof, or any party dealing with the ERISA Plans or any
such trust could be subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or
4980B of the Code.
(d) Each of the Benefit Plans has been and is operated and
administered in accordance with its terms and in material compliance with
applicable requirements of the Code, ERISA, and other applicable Legal
Requirements and may in accordance with its terms be amended or terminated
at any time.
(e) Each ERISA Plan intended to qualify under the Code has received a
favorable determination letter as to its qualification under the Code, and
to the Knowledge of Sellers and the Acquired Companies, no such
determination letter has been revoked and nothing has occurred, whether
action or failure to act, which would cause the loss of such qualification
or which would result in costs to the Acquired Companies under the IRS's
Employee Plans Compliance Resolution System. All ERISA Plans have been
amended to comply with the recent tax legislation commonly known as "GUST"
and "EGTRRA" within the applicable remedial amendment period and each ERISA
Plan has filed or will file for a favorable determination letter with the
IRS covering the changes required by GUST within the applicable remedial
amendment period.
(f) None of the Acquired Companies nor any ERISA Affiliate
contributes, is obligated to contribute, or has ever been obligated to
contribute to a "multiemployer plan" within the meaning of Section 3(37) of
ERISA.
(g) None of the Acquired Companies maintains, contributes to, or has
any liability or obligation with respect to an employee welfare benefit
plan that provides health or life insurance or other benefits for current
or future retired or terminated employees or directors (or any spouse or
dependents thereof).
(h) Except as set forth in Section 3.13(h) of the Disclosure
Schedule, no plans, agreements, understandings, or arrangements exist that
could result in the payment to any employee of the Acquired Companies of
any money or other property rights or accelerate or provide any other
rights or benefits to any such employee as a result of (i) the transactions
contemplated by this Agreement (whether or not such payment, acceleration,
or provision would constitute a "parachute payment" (within the meaning of
Section 280G of the Code) or whether or not some other subsequent action or
event would be required to cause such payment, acceleration, or provision
to be triggered) or (ii) the severance, termination, or resignation of any
such employee.
26
(i) No Benefit Plan is (i) a "defined benefit plan" (within the
meaning of Section 3(35) of ERISA) (the "Defined Benefit Plans") or (ii)
---------------------
subject to the minimum funding requirements of Section 412 of the Code or
Part 3 of Title I or ERISA;
(j) None of the Acquired Companies nor any ERISA Affiliate has ever
withdrawn (partially or totally within the meaning of ERISA) from any
Benefit Plan; and, without limitation by reference to any other provision
of the Agreement or any Schedule annexed hereto, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated herein will result in the withdrawal (partial or total within
the meaning of ERISA) from any Benefit Plan, or in any withdrawal or other
liability of any nature to any of the Acquired Companies, any ERISA
Affiliate, or Buyer under any Benefit Plan;
(k) There are no contributions which are, or hereafter will be,
required to have been made to trusts in connection with "defined
contribution plans" (within the meaning of section 3(34) of ERISA) with
respect to services rendered by employees of any of the Acquired Companies
prior to the Closing Date;
(l) Other than claims in the ordinary course for benefits with
respect to the Benefit Plans, there are no actions, suits, or claims, or
any investigation or audit by a Governmental Body, pending or, to the
Knowledge of Sellers and the Acquired Companies, threatened with respect to
any Benefit Plan or Multiemployer Plan, or to the Knowledge of Sellers and
the Acquired Companies, any circumstances which might give rise to any
liability of the Acquired Companies, or any of them, under any such action,
suit, or claims; and
(m) No Benefit Plan provides welfare benefits subsequent to the
termination of employment to employees or their dependents, except to the
extent required by applicable state laws or Part 6 of Title I of ERISA.
Section 3.14 Compliance with Legal Requirements; Governmental
------------------------------------------------
Authorizations.
(a) Except as set forth in Section 3.14 of the Disclosure
Schedule:
(i) each Acquired Company is, and at all times since
January 1, 1999 has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its assets
or properties, except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to result in
a material adverse effect on the business, properties, assets,
liabilities, operations, or condition (financial or otherwise) of such
Acquired Company;
(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time): (A) may constitute or result in a
violation by any Acquired Company of, or a failure on the part of any
Acquired Company to comply with, any Legal Requirement; or (B) may
give rise to any obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
27
(iii) no Acquired Company has received, at any time since
January 1, 1999, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding: (A)
any actual, alleged, possible, or potential violation of, or failure
to comply with, any Legal Requirement; or (B) any actual, alleged,
possible, or potential obligation on the part of any Acquired Company
to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Section 3.14 of the Disclosure Schedule contains a complete and
accurate list of each Governmental Authorization that is held by any
Acquired Company or that otherwise relates to the business of, or to any of
the assets or properties owned or used by, any Acquired Company. Each
Governmental Authorization listed or required to be listed in Section 3.14
of the Disclosure Schedule is valid and in full force and effect. Except as
set forth in Section 3.14 of the Disclosure Schedule:
(i) each Acquired Company is, and at all times since
January 1, 1999 has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required
to be identified in Section 3.14 of the Disclosure Schedule, except
where the failure to be in compliance would not, individually or in
the aggregate, reasonably be expected to result in a material adverse
effect on the business, properties, assets, liabilities, operations,
or condition (financial or otherwise) of such Acquired Company;
(ii) to Sellers' and the Acquired Companies' Knowledge, no
event has occurred or circumstance exists that may (with or without
notice or lapse of time): (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be
listed in Section 3.14 of the Disclosure Schedule; or (B) result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Section
3.14 of the Disclosure Schedule;
(iii) no Acquired Company has received, at any time since
January 1, 1999, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding: (A)
any actual, alleged, possible, or potential violation of or failure to
comply with any term or requirement of any Governmental Authorization;
or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification
to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Section 3.14 of the Disclosure Schedule have been duly filed
on a timely basis with the appropriate Governmental Bodies, and all
other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with
the appropriate Governmental Bodies.
28
To Sellers' Knowledge, the Governmental Authorizations listed in Section
3.14 of the Disclosure Schedule collectively constitute all of the
Governmental Authorizations necessary to permit the Acquired Companies to
lawfully conduct and operate their businesses in the manner they currently
conduct and operate such businesses and to permit the Acquired Companies to
own and use their assets and properties in the manner in which they
currently own and use such assets.
Section 3.15 Legal Proceedings; Orders.
-------------------------
(a) Except as set forth in Section 3.15(a) of the Disclosure
Schedule, there is no pending Proceeding:
(i) that has been commenced by or against any Acquired
Company or that otherwise relates to or may affect the business of, or
any of the assets or properties owned or used by, any Acquired Company
or any Seller; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Sellers and the Acquired Companies, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. Sellers have delivered to Buyer copies
of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Section 3.15(a) of the Disclosure Schedule. The
Proceedings listed in Section 3.15(a) of the Disclosure Schedule are not
reasonably expected to have a material adverse effect on the business,
operations, properties, assets, or condition (financial or otherwise) of
any Acquired Company.
(b) Except as set forth in Section 3.15(b) of the Disclosure
Schedule:
(i) there is no Order to which any of the Acquired
Companies, or any of the assets or properties owned or used by any
Acquired Company, is subject;
(ii) no Seller is subject to any Order that relates to the
business of, or any of the assets or properties owned or used by, any
Acquired Company; and
(iii) no officer, director, or employee of any Acquired
Company is subject to any Order that prohibits such officer, director,
or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of any Acquired Company.
(c) Except as set forth in Section 3.15(c) of the Disclosure
Schedule:
(i) each Acquired Company is, and at all times since
January 1, 1999 has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets or
properties owned or used by it, is or has been subject;
29
(ii) to Sellers' and the Acquired Companies' Knowledge, no
event has occurred or circumstance exists that may constitute or
result in (with or without notice or lapse of time) a violation of or
failure to comply with any term or requirement of any Order to which
any Acquired Company, or any of the assets or properties owned or used
by any Acquired Company, is subject; and
(iii) no Acquired Company has received, at any time since
January 1, 1999, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or failure to
comply with, any term or requirement of any Order to which any
Acquired Company, or any of the assets or properties owned or used by
any Acquired Company, is or has been subject.
Section 3.16 Absence of Certain Changes and Events.
-------------------------------------
Except as set forth in Section 3.16 of the Disclosure Schedule, since the
date of the 2003 Balance Sheet, the Acquired Companies have conducted their
businesses only in the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of any Acquired Company; issuance of any security convertible into
such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares of
any such capital stock;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment by any Acquired Company of any bonuses, or increase by
any Acquired Company of any salaries, or payment by any Acquired Company of
any other compensation to any stockholder, director, or (except in the
Ordinary Course of Business) officer or employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of any Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, or financial
condition, of the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to any Acquired Company of at
least $3,000;
30
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any
Acquired Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of any Acquired Company,
including the sale, lease, or other disposition of any of the Subject
Proprietary Rights;
(h) cancellation or waiver of any claims or rights with a value to
any Acquired Company in excess of $5,000;
(i) material change in the accounting methods used by any Acquired
Company; or
(j) agreement, whether oral or written, by any Acquired Company to do
any of the foregoing.
Section 3.17 Contracts; No Defaults.
----------------------
(a) Section 3.17(a) of the Disclosure Schedule contains a complete
and accurate list, and Sellers have delivered to Buyer true and complete
copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by one or more Acquired
Companies of an amount or value in excess of $3,000.
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to one or more Acquired
Companies of an amount or value in excess of $3,000.
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or
receipts of one or more Acquired Companies in excess of $3,000.
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$1,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, service marks, copyrights, or
other intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Subject Proprietary
Rights;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
31
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of any Acquired
Company or any Affiliate of an Acquired Company or limit the freedom
of any Acquired Company or any Affiliate of an Acquired Company to
engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct
payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by any Acquired Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures in
excess of $1,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any
Acquired Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except with respect to the Contemplated Transactions, or as
otherwise set forth in Section 3.17(b) of the Disclosure Schedule:
(i) no Seller (and no Related Person of any Seller) has or
may acquire any rights under, and no Seller has or may become subject
to any obligation or liability under, any material Contract that
relates to the business of, or any of the assets or properties owned
or used by, any Acquired Company; and
(ii) to the Knowledge of Sellers and the Acquired Companies,
no officer, director or employee of any Acquired Company is bound by
any Contract that purports to limit the ability of such officer,
director or employee to: (A) engage in or continue any conduct,
activity, or practice relating to the business of any Acquired
Company; or (B) assign to any Acquired Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Section 3.17(c) of the Disclosure
Schedule, each Contract identified or required to be identified in Section
3.17(a) of the Disclosure Schedule is in full force and effect and is valid
and enforceable in accordance with its terms.
32
(d) Except as set forth in Section 3.17(d) of the Disclosure
Schedule:
(i) each Acquired Company is, and at all times since
January 1, 1999 has been, in full compliance with all material terms
and requirements of each Contract under which such Acquired Company
has or had any obligation or liability or by which such Acquired
Company or any of the assets or properties owned or used by such
Acquired Company is or was bound;
(ii) to Sellers' Knowledge, each other Person that has or
had any obligation or liability under any Contract under which an
Acquired Company has or had any rights is, and at all times since
January 1, 1999 has been, in compliance with all material terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or
result in a violation or Breach of, or give any Acquired Company or,
to Sellers' or the Acquired Companies' Knowledge, other Person the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any
other Person, at any time since January 1, 1999, any notice or other
communication (whether oral or written) regarding any actual, alleged,
possible, or potential violation or Breach of, or default under, any
Contract.
(e) Except as set forth in Section 3.17(e) of the Disclosure
Schedule, there are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
any Acquired Company under current or completed Contracts with any Person
and no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Acquired Companies have been
entered into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or would
be in violation of any Legal Requirement.
Section 3.18 Insurance.
---------
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance
to which any Acquired Company is a party or under which any Acquired
Company, or any director of any Acquired Company, is covered as of the
date of this Agreement;
(ii) true and complete copies of all pending applications
for policies of insurance; and
33
(iii) any statement by the auditor of any Acquired Company's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Section 3.18(b) of the Disclosure Schedule describes:
(i) any self-insurance arrangement by or affecting any
Acquired Company, including any reserves established thereunder; and
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by any Acquired
Company.
(c) Section 3.18(c) of the Disclosure Schedule sets forth, by year,
for the current policy year and each of the preceding policy years a
summary of the loss experience under each policy.
(d) Except as set forth in Section 3.18(d) of the Disclosure
Schedule:
(i) All policies to which any Acquired Company is a party
or that provide coverage to any Seller, any Acquired Company, or any
director or officer of an Acquired Company:
(A) are valid, outstanding, and enforceable;
(B) taken together, provide adequate insurance
coverage for the assets and the operations of the Acquired
Companies;
(C) are sufficient for compliance with all Legal
Requirements and Contracts to which any Acquired Company is a
party or by which any of them is bound;
(D) will continue in full force and effect following
the consummation of the Contemplated Transactions; and
(E) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of
any Acquired Company.
(ii) To Sellers' and the Acquired Companies' Knowledge, no
Seller or Acquired Company has received:
(A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights; or
(B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
34
(iii) The Acquired Companies have paid all premiums due, and
have otherwise performed all of their respective obligations, under
each policy to which any Acquired Company is a party or that provides
coverage to any Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to the insurer
of all claims that may be insured thereby.
Section 3.19 Environmental Matters.
---------------------
(a) Environmental Permits. Each Acquired Company possesses all
---------------------
Environmental Permits which it has reasonably determined to be necessary in
order to conduct its business as it is now being conducted. A true and
complete copy of each Environmental Permit issued to each Acquired Company
has been delivered to Buyer. Each Environmental Permit issued to the
Acquired Companies is in full force and effect. Each Acquired Company is in
compliance with all material requirements, terms, and provisions of the
Environmental Permits issued to such Acquired Company and has filed on a
timely basis (and updated as required) all reports, notices, applications,
or other documents required to be filed pursuant to the Environmental
Permits. Section 3.19(a) of the Disclosure Schedule lists all of the
Environmental Permits issued to or held by the Acquired Companies. The
Acquired Companies shall utilize commercially reasonable efforts to have
any Environmental Permits that will expire or otherwise become ineffective
on or before the Closing Date to be renewed or reissued prior to the
Closing Date so as to allow Buyer to continue the Business without
interruption after the Closing Date.
(b) Compliance With Environmental Laws. Each Acquired Company is,
----------------------------------
and at all times has been, in compliance with all Environmental Permits and
Environmental Laws applicable to its business, assets, or any of the
Facilities, except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to result in a
material adverse effect on the Facilities or on the business, properties,
assets, liabilities, operations, condition (financial or otherwise), or
results of operations of such Acquired Company or the Acquired Companies
taken as a whole.
(c) Reports, Disclosures, and Notifications. Since January 1, 1999,
---------------------------------------
each Acquired Company has filed on a timely basis (and updated as required)
all reports, disclosures, notifications, applications, pollution
prevention, stormwater prevention or discharge prevention or response plans
or other emergency or contingency plans required to be filed under
Environmental Laws, including Title III of the Superfund Amendments and
Reauthorization Act, 00 X.X.X. Xxx.00000 et seq., except where such failure
-- ---
to do so would not, individually or in the aggregate, result in, or
reasonably be expected to result in, a material adverse effect on the
Facilities or on the business, properties, assets, liabilities, operations,
condition (financial or otherwise), or results of operations of such
Acquired Company or the Acquired Companies taken as a whole. Section
3.19(c) of the Disclosure Schedule lists all such reports, disclosures,
notifications, applications, and plans filed by each Acquired Company under
Environmental Laws. All such reports,
35
disclosures, notifications, applications, and plans are true, accurate, and
complete in all material respects.
(d) Notices. None of the Acquired Companies has received any written
-------
or oral notice from any Governmental Body that any of the Acquired
Companies or any of the Facilities:
(i) is in violation of the requirements of any
Environmental Permit or Environmental Laws;
(ii) is the subject of any suit, claim, proceeding, demand,
order, investigation, or request or demand for information arising
under any Environmental Permit or Environmental Laws; or
(iii) has actual or potential Liability under any
Environmental Laws, including CERCLA, RCRA, or any comparable state or
local Environmental Laws.
(e) No Reporting or Remediation Obligations. There are no
---------------------------------------
Environmental Conditions arising out of or relating to any of the Acquired
Companies, any of their respective businesses, or the use, operation, or
occupancy by any of the Acquired Companies of any of the Facilities that
result or reasonably could be expected to result in: (i) any obligation of
any Acquired Company to file any report or notice, to conduct any
investigation, sampling or monitoring, or to effect any environmental
cleanup or remediation, whether on-site or offsite; or (ii) liability,
either to Governmental Bodies, including Environmental Authorities, or
third parties, for damages (whether to person, property or natural
resources), cleanup costs, or remedial costs of any kind or nature
whatsoever.
(f) Encumbrances. None of the Acquired Companies has received any
------------
written or oral notice from any Governmental Body that a federal, state,
local, or municipal governmental agency or authority, including any
Environmental Authority, has obtained or asserted an Encumbrance upon any
of the Facilities or any other property of any Acquired Company as a result
of any Release, use, or cleanup of any Hazardous Material for which any
Acquired Company is legally responsible, nor has any such Release, use, or
cleanup occurred which would be likely to result in the assertion or
creation of such an Encumbrance.
(g) Storage, Transport, or Disposal of Hazardous Materials.
------------------------------------------------------
(i) To Sellers' and the Acquired Companies' Knowledge,
there is not now located on any of the Facilities any areas or vessels
used or intended for the treatment, storage, or disposal of Hazardous
Materials, including drum storage areas, surface impoundments,
incinerators, landfills, tanks, lagoons, ponds, waste piles, or deep
well injection systems.
(ii) With respect to each Acquired Company, Section
3.19(g)(ii) of the Disclosure Schedule sets forth a list of all
arrangements by such Acquired
36
Company since January 1, 1999 of transport for storage, treatment or
disposal, by contract, agreement, or otherwise, of any Hazardous
Material at or to any location, including any location used for the
treatment, storage, or disposal of Hazardous Materials. To Sellers'
and the Acquired Companies' Knowledge, none of the locations
identified in Section 3.19(g)(ii) of the Disclosure Schedule is listed
on the National Priorities List or the Comprehensive Environmental
Response Compensation and Liability Information System list or any
equivalent or analogous federal or state list of contaminated
properties.
(h) Future Laws. To Sellers' and the Acquired Companies' Knowledge,
-----------
there are no Environmental Laws currently enacted or promulgated, but as to
which compliance is not yet required, that would require any Acquired
Company or Buyer to take any action at any of the Facilities within one (1)
year from the effective date of this Agreement in order to bring the
Acquired Companies' businesses or the operations at the Facilities as
presently conducted into compliance with such Environmental Laws.
Section 3.20 Employees.
---------
(a) Section 3.20(a) of the Disclosure Schedule contains a complete
and accurate list of all Contracts and other agreements and arrangements
(whether written or oral) between any Acquired Company and any employee or
director, or former employee or director, of such Acquired Company with
regard to compensation or severance, including any agreement with regard to
salary, wages, bonuses, commissions, change-of-control, pension, options,
retirement, or profit-sharing, whether individually or collectively.
(b) Sellers have provided to Buyer a complete and accurate list of
the following information for each employee or director of the Acquired
Companies, including each employee on leave of absence or layoff status:
name; employer; job title; current compensation paid or payable; vacation
accrued; and service credited for purposes of vesting and eligibility to
participate under any Acquired Company's pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Benefit Plan, ERISA Plan, or Defined Benefit Plan, or
any other employee, executive, or director benefit plan.
(c) No employee or director of any Acquired Company is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between
such employee or director and any other Person ("Proprietary Rights
------------------
Agreement") that in any way adversely affects or will affect (i) the
---------
performance of his duties as an employee or director of the Acquired
Companies, or (ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with Sellers or the
Acquired Companies by any such employee or director. To Sellers' Knowledge,
except as set forth in Section 3.20(c) of the Disclosure Schedule, no
director, officer, or other key employee of any Acquired Company intends to
terminate his employment with such Acquired Company.
37
(d) Section 3.20(d) of the Disclosure Schedule contains a complete
and accurate list of the following information for each retired employee or
director of the Acquired Companies, or their dependents, receiving benefits
or scheduled to receive benefits in the future: name; pension benefit;
pension option election; retiree medical insurance coverage; retiree life
insurance coverage; and other benefits.
Section 3.21 Labor Relations; Compliance.
---------------------------
Since January 1, 1999, no Acquired Company has been or is a party to any
collective bargaining or other labor Contract. Since January 1, 1999, there has
not been, there is not presently pending or existing, and to Sellers' Knowledge
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting any Acquired
Company relating to the alleged violation of any Legal Requirement pertaining to
labor relations or employment matters, including any charge or complaint filed
by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. To Sellers' and
the Acquired Companies' Knowledge, no event has occurred or circumstance exists
that could provide the basis for any work stoppage or other labor dispute.
There is no lockout of any employees by any Acquired Company, and no such action
is contemplated by any Acquired Company. Each Acquired Company has complied in
all material respects with all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing. No Acquired Company is
liable for the payment of any compensation, damages, taxes, fines, penalties, or
other amounts, however designated, for failure to comply with the foregoing
sentence.
Section 3.22 Intellectual Property.
---------------------
(a) Section 3.22 of the Disclosure Schedule contains a complete
and correct list and brief description of all Proprietary Rights owned by
the Acquired Companies and the Sellers (separately listed for each Acquired
Company and each Seller) (collectively, the "Subject Proprietary Rights").
--------------------------
The Acquired Companies or Xxxxxx Xxxxxxxx owns the entire right, title, and
interest in and to all of the Subject Proprietary Rights. Except as set
forth in Section 3.22 of the Disclosure Schedule, no Acquired Company or
Xxxxxx Xxxxxxxx is a party to any agreement by which it is granted a
license or by which it grants a license on proprietary property owned by it
or by which it agrees to maintain the secrecy or confidentiality of any
proprietary information. The Subject Proprietary Rights and the agreements
listed in Section 3.22 of the Disclosure Schedule are all rights material
to the operation and conduct of the business of each of the Acquired
Companies as currently operated and conducted. None of the Subject
Proprietary Rights set forth in such Section 3.22 of the Disclosure
Schedule are subject to any pending or, to Sellers' Knowledge, threatened
challenge nor have the Acquired Companies or Sellers received any notice or
otherwise been advised that the foregoing are invalid or conflict with or
infringe the asserted rights of others. No Acquired Company and no Seller
has any Knowledge that any third party is infringing any of the Subject
Proprietary Rights. No
38
Acquired Company and no Seller has any liability for, or has given
indemnification for, patent infringement as to any equipment, materials, or
supplies manufactured, used, or sold by it, other than in the Ordinary
Course of Business. To the Knowledge of the Acquired Companies and Sellers,
no Acquired Company and no Seller has caused or allowed any of its trade
secrets, know-how, or other confidential intellectual or intangible
property rights to enter into the public domain.
(b) The Acquired Companies and Xxxxxx Xxxxxxxx have good and
marketable title to all intangible property described in Section 3.22 of
the Disclosure Schedule, subject to no Encumbrances except as set forth in
Section 3.22 of the Disclosure Schedule.
(c) No Acquired Company and no Seller has granted to any other
persons or businesses the right to use any trademarks or service marks set
forth in Section 3.22 of the Disclosure Schedule, or any variant thereof,
singly or in combination with any other term, and no persons or businesses
otherwise using any such trademark or service xxxx, or any variant thereof,
singly or in combination with any other term, have ever attempted to
restrain any of the Acquired Companies or either Seller from using such
trademark or service xxxx or any variant thereof, singly or in combination
with any other term.
Section 3.23 Certain Payments.
----------------
Since January 1, 1999, no Acquired Company or director, officer, or
employee of any Acquired Company has directly or indirectly:
(a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kick-back, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of any Acquired
Company or any Affiliate of an Acquired Company, or (iv) in violation of
any Legal Requirement; or
(b) established or maintained any fund or asset that has not been
recorded in the books and records of the Acquired Companies.
Section 3.24 Relationships with Related Persons.
----------------------------------
No Seller or any Related Person of Sellers or of any Acquired Company has,
or since January 1, 2002 has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Acquired Companies' businesses. No Seller or any Related Person of Sellers
or of any Acquired Company is, or since January 1, 2002 has owned (of record or
as a beneficial owner) an equity interest or any other financial or profit
interest in, a Person that has (i) had business dealings or a material financial
interest in any transaction with any Acquired Company other than business
dealings or transactions conducted in the Ordinary Course of Business with the
Acquired Companies at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with any
Acquired Company with respect to any line of the products or services of such
Acquired Company (a "Competing Business") in any market presently served by such
------------------
Acquired Company
39
(except for the ownership of less than one percent of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market). Except as set forth in Section
3.24 of the Disclosure Schedule, no Seller or any Related Person of Sellers or
of any Acquired Company is a party to any Contract with, or has any claim or
right against, any Acquired Company.
Section 3.25 Product Defects.
---------------
To Sellers' and the Acquired Companies' Knowledge, there are no defects in
the design, construction, or manufacture of any of the products or accessories
manufactured, distributed, sold, leased or delivered by any Acquired Company
which would adversely affect the performance and quality of such products or
accessories. The Acquired Companies maintain sufficient documentation with
respect to the foregoing products and accessories to permit the repeatable
manufacture of such products and accessories and to permit adequate quality
control and assurance. To the Knowledge of the Sellers and the Acquired
Companies, the foregoing documentation does not infringe upon the rights of any
Persons other than the Acquired Companies.
Section 3.26 Product and Service Warranties.
------------------------------
Each product manufactured, distributed, sold, leased, or delivered, and
each service provided by, each Acquired Company has been in conformity with all
applicable contractual commitments. No Acquired Company has had any Liability
for replacement or repair of any such product or service or other damages in
connection therewith, subject only to any reserve for warranty claims set forth
on the face of the Interim Balance Sheet, as adjusted for the passage of time in
accordance with the past custom and practice of such Acquired Company. Section
3.26 of the Disclosure Schedule contains copies of the standard terms and
conditions of sale for each Acquired Company (containing applicable guaranty,
warranty, and indemnity provisions). No Acquired Company has had any Liability
arising out of any injury to any individual or property as a result of the
ownership, possession, or use of any product manufactured, distributed, sold,
leased, or delivered, or any service provided, by any Acquired Company.
Section 3.27 Supplies and Equipment.
----------------------
No Acquired Company has any material problem in obtaining, in a timely
manner and at market prices, any and all materials, supplies, equipment, and
services used in its business and no Acquired Company currently anticipates it
will incur problems with respect to the availability of such materials,
supplies, equipment, and services after the Closing. No customer or supplier of
any Acquired Company has, within the previous twelve (12) months, cancelled or
threatened to cancel or otherwise modify its relationship with such Acquired
Company.
Section 3.28 Customers and Suppliers.
-----------------------
With respect to the last fiscal year and the current fiscal year to date,
Section 3.28 of the Disclosure Schedule lists (i) the ten largest (by dollar
volume) customers of the Acquired Companies during each such period (showing the
volume in dollars for each such period) and (ii) the ten largest (by dollar
volume) product generators or other suppliers of the Acquired Companies during
each such period (showing the volume in dollars for each such period). Since
40
the date of the Interim Balance Sheet, no customer or supplier listed in Section
3.28 of the Disclosure Schedule has notified any Acquired Company or any Seller,
orally or in writing, of a likely decrease in the volume of purchases from or
sales to any Acquired Company, or a decrease in the price that any such customer
is willing to pay for products or services of any Acquired Company, or an
increase in the price that any such supplier will charge for products or
services sold to any Acquired Company, or of the bankruptcy or liquidation of
any such customer or supplier.
Section 3.29 Bank Accounts.
-------------
With respect to each Acquired Company, Section 3.29 of the Disclosure
Schedule sets forth a complete and accurate list of all bank and/or brokerage
accounts maintained in the name of such Acquired Company and a brief description
of Persons having a power to sign on behalf of such Acquired Company with
respect to each such account.
Section 3.30 Brokers or Finders.
------------------
Other than fees payable to EMA Partners, LLC (which are the sole
responsibility of Sellers), neither Sellers nor any Acquired Company, nor any of
their respective agents or representatives, have incurred any obligation or
liability, contingent or otherwise, for any brokerage or finders' fees, agents'
commissions, or any other similar payment in connection with this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
Section 4.1 Organization And Good Standing.
------------------------------
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of New Jersey.
Section 4.2 Authority; No Conflict.
----------------------
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms, except insofar as enforcement may be limited by bankruptcy,
insolvency, or other laws affecting generally the enforceability of
creditors' rights and by limitations on the availability of equitable
remedies. Upon the execution and delivery by Buyer of the Escrow Agreement,
the Shareholder Intangibles Purchase Agreement, the Employment Agreements,
Noncompetition Agreements, and the Sellers' Note (collectively, the
"Buyer's Closing Documents"), the Buyer's Closing Documents will constitute
-------------------------
the legal, valid, and binding obligations of Buyer, enforceable against
Buyer in accordance with their respective terms, except insofar as
enforcement may be limited by bankruptcy, insolvency, or other laws
affecting generally the enforceability of creditors' rights and by
limitations on the availability of equitable remedies. Buyer has the
absolute and unrestricted right, power,
41
and authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the
Buyer's Closing Documents. Buyer's financial resources are sufficient to
purchase the Shares pursuant to the terms and conditions set forth in this
Agreement.
(b) Neither the execution and delivery of this Agreement by Buyer nor
the consummation or performance of any of the Contemplated Transactions by
Buyer will, directly or indirectly (with or without notice or lapse of
time):
(i) give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions;
(ii) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of Buyer, or (B) any
resolution adopted by the board of directors of the Buyer;
(iii) contravene, conflict with, or result in a violation of
any Legal Requirement or any Order to which Buyer may be subject; or
(iv) contravene, conflict with, or result in a violation of
any of the terms or requirements of, any Governmental Authorization
that is held by Buyer.
(c) Buyer is not and will not be required to give any notice to or
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions, except such Consents as have been obtained prior
to the date hereof.
Section 4.3 Investment Intent.
-----------------
Buyer is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
Section 4.4 Certain Proceedings.
-------------------
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
Section 4.5 Brokers or Finders.
------------------
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees, agents' commissions, or
any other similar payment in connection with this Agreement.
Section 4.6 SEC Filings; Financial Statements.
---------------------------------
42
(a) Buyer has filed all required reports and all required schedules,
forms, statements, and other documents with the Securities and Exchange
Commission ("SEC") since May 31, 2003 (the "Buyer SEC Reports"). With the
--- -----------------
exceptions of any Forms 3, 4, and 5 and any Schedule 13D filed by Buyer on
behalf of Buyer's stockholders, the Buyer SEC Reports (i) were prepared in
compliance 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 light of the circumstances
under which they were made, not misleading.
(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
except as unaudited statements do not contain footnotes in substance or
form required by GAAP, as is permitted by Form 10-Q of the Exchange Act)
and each fairly presents the consolidated financial position of Buyer at
the respective dates thereof and the results of its operations and cash
flows for the periods indicated, except that the unaudited consolidated
interim financial statements were or are subject to normal adjustments
which were not or are not expected to be material in amount.
Section 4.7 Compliance.
----------
Buyer is not in violation of any material terms or provision of its
Organizational Documents, or of any material term of any instrument, indenture,
loan agreement, other agreement, judgment, decree, order, or Legal Requirement
applicable to Buyer where the failure of compliance would have a material
adverse effect on the business, properties, assets, liabilities, operations,
condition (financial or otherwise), or results of operations of Buyer, or which,
to Buyer's Knowledge, could reasonably be expected to cause Buyer to be unable
to satisfy its obligations under the agreements and documents entered into by it
in connection with the Contemplated Transactions.
43
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
[INTENTIONALLY OMITTED]
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
Section 7.1 Accuracy Of Representations.
---------------------------
(a) All of Sellers' representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects
as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date (except to
the extent expressly made as of an earlier date, in which case as of such
date), without giving effect to any supplement to the Disclosure Schedule.
(b) Each of Sellers' representations and warranties that contains an
express materiality qualification, must have been accurate in all respects
as of the date of this Agreement, and must be accurate in all respects as
of the Closing Date as if made on the Closing Date (except to the extent
expressly made as of an earlier date, in which case as of such date),
without giving effect to any supplement to the Disclosure Schedule.
Section 7.2 Sellers' Performance.
--------------------
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered.
Section 7.3 Consents.
--------
All consents, approvals, permits, and orders necessary or desirable for the
consummation of the transactions contemplated by this Agreement or to ensure
that, subsequent to the Closing, Buyer shall continue to realize the material
benefits of the assets and properties of the Acquired
44
Companies, shall have been obtained, and all applicable mandated waiting periods
in respect of the transactions contemplated hereby shall have expired without
adverse action.
Section 7.4 Additional Documents.
--------------------
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Xxxxxx Xxxxx Xxxxx Xxxxxxxxx & Xxxxxx, LLC, counsel
to Sellers, dated the Closing Date, in the form of Exhibit 7.4(a);
--------------
(b) an Estoppel Certificate and Landlord's Consent in the form of
Exhibit 7.4(b), duly executed by the Company and Madison Avenue North and
--------------
dated as of a date not more than fifteen (15) days prior to the Closing
Date; and
(c) such other documents as Buyer may reasonably request for the
purpose of:
(i) enabling its counsel to provide the opinion referred to
in Section 8.4(a);
(ii) evidencing the accuracy of any of Sellers'
representations and warranties;
(iii) evidencing the performance by any Seller of, or the
compliance by any Seller with, any covenant or obligation required to
be performed by or complied with by such Seller;
(iv) evidencing the satisfaction of any condition referred
to in this Article VII; or
(v) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
Section 7.5 No Proceedings.
--------------
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding:
(a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions; or
(b) that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the Contemplated Transactions.
Section 7.6 No Claim Regarding Stock Ownership or Sale Proceeds.
---------------------------------------------------
There must not have been made or Threatened by any Person any claim
asserting that such Person:
45
(a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Acquired Companies; or
(b) is entitled to all or any portion of the Purchase Price payable
for the Shares.
Section 7.7 No Prohibition.
--------------
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under:
(a) any applicable Legal Requirement or Order; or
(b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
Section 7.8 Certified Resolutions.
---------------------
Buyer shall have received a certificate of the Secretary of each of the
Acquired Companies, in form and substance satisfactory to Buyer, with respect to
all corporate proceedings and authorizations with respect to this Agreement and
the Contemplated Transactions, their respective Organizational Documents, and
the incumbency of the officers executing this Agreement or any certificate or
document contemplated hereby.
Section 7.9 Contemporaneous Transaction.
---------------------------
All of the Shares shall contemporaneously be purchased hereunder.
Section 7.10 No Material Adverse Change.
--------------------------
Since the date hereof, there shall not have occurred any material adverse
change in the businesses, properties, assets, liabilities, operations, condition
(financial or otherwise), or results of operations of the Acquired Companies,
taken as a whole.
Section 7.11 Closing Statement.
-----------------
Buyer shall have accepted the Closing Statement.
46
Section 7.12 Real Property Holding Company Affidavit.
---------------------------------------
Each Acquired Company shall have delivered to Buyer an affidavit, under
penalties of perjury, stating that such Acquired Company is not and has never
been a United States real property holding corporation, dated as of the date of
the Closing and in form and substance required under Treasury Regulation Section
1.897-2(h) so that Buyer is exempt from withholding any portion of the Purchase
Price thereunder.
Section 7.13 Airplane Guaranty.
-----------------
The Company shall have been released from any and all obligations under the
Guaranty, dated as of July 27, 2001, by the Company in favor of U.S. Bancorp
Equipment Finance, Inc. (formerly known as U.S. Bancorp Leasing & Financial)
(the "Guaranty") such that the Guaranty is not an obligation of the Acquired
--------
Companies as of or subsequent to the Closing.
Section 7.14 Customer Interviews.
-------------------
Buyer shall have completed, and shall be reasonably satisfied with, its
customer interviews.
Section 7.15 Resignations of Directors.
-------------------------
All members of each Board of Directors of each Acquired Company immediately
prior to the Closing shall have duly resigned.
Section 7.16 Discharge of Liabilities.
------------------------
Sellers shall have caused the Acquired Companies to fully discharge all of
the Liabilities of the Acquired Companies set forth on Schedule 7.16 such that
-------------
these Liabilities are not obligations of the Acquired Companies as of or
subsequent to the Closing.
Section 7.17 OCI Supply Agreement.
--------------------
Buyer and OCI shall have entered into a supply agreement substantially in
the form of Exhibit 7.17 (the "Supply Agreement").
------------ ----------------
Section 7.18 OCI Release.
-----------
The Company and OCI shall have entered into a Release substantially in the
form of Exhibit 7.18.
------------
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
47
Section 8.1 Accuracy Of Representations.
---------------------------
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all respects as of the date of this
Agreement and must be accurate in all respects as of the Closing Date as if made
on the Closing Date.
Section 8.2 Buyer's Performance.
-------------------
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered by Buyer.
(c) Buyer must have made the Closing Cash Payment required to be made
by Buyer pursuant to Section 2.4(b)(i).
Section 8.3 Consents.
--------
All consents, approvals, permits, and orders necessary or desirable for the
consummation of the transactions contemplated by this Agreement, shall have been
obtained, and all applicable mandated waiting periods in respect of the
transactions contemplated hereby shall have expired without adverse action.
Section 8.4 Additional Documents.
--------------------
Buyer must have caused the following documents to be delivered to Sellers:
(a) an opinion of XxXxxxxx & English, LLP, counsel to Buyer, dated
the Closing Date, in the form of Exhibit 8.4(a); and
--------------
(b) such other documents as Sellers may reasonably request for the
purpose of:
(i) enabling their counsel to provide the opinion referred
to in Section 7.4(a);
(ii) evidencing the accuracy of any representation or
warranty of Buyer;
(iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed by or complied with by Buyer;
48
(iv) evidencing the satisfaction of any condition referred
to in this Article VIII; or
(v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
Section 8.5 No Injunction.
-------------
There must not be in effect any Legal Requirement or any injunction or
other Order that:
(a) prohibits the sale of the Shares by Sellers to Buyer; and
(b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
Section 8.6 No Material Adverse Change.
--------------------------
Since the date hereof, there shall not have occurred any material adverse
change in the business, properties, assets, liabilities, operations, or
financial condition of the Buyer, taken as a whole.
ARTICLE IX
[INTENTIONALLY OMITTED]
ARTICLE X
INDEMNIFICATION; REMEDIES
Section 10.1 Survival; Right to Indemnification Not Affected by
--------------------------------------------------
Knowledge.
---------
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule,
the certificate delivered pursuant to Section 2.4(a)(vi), and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing.
Section 10.2 Indemnification and Payment of Damages by Sellers.
-------------------------------------------------
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
-------------------
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage, expense (including costs of investigation and defense and
reasonable attorneys' fees), or diminution of value, whether or not involving a
third party claim (collectively, "Damages"), arising from:
-------
(a) subject to Section 10.6, any Breach of any representation or
warranty made by Sellers in this Agreement, the Disclosure Schedule, or any
other certificate or document delivered by Sellers pursuant to this
Agreement;
49
(b) any Breach by any Seller of any covenant or obligation of such
Seller in this Agreement;
(c) any matter disclosed in Section 3.10 or Section 3.15 of the
Disclosure Schedule;
(d) the Guaranty;
(e) any Liability of the Acquired Companies set forth on Schedule
7.16;
(f) any severance obligations of the Acquired Companies arising prior
to the Closing or within one (1) year of the Closing under the Company's
existing severance policy; provided, however, that Sellers' indemnification
obligation under this Section 10.2(f) shall not exceed an aggregate of
$30,000;
(g) any claim by any Person (including, without limitation, EMA
Partners, LLC) for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been
made by any such Person with any Seller or any Acquired Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions;
(h) any claim by any Person for any legal, accounting, or other
professional fees incurred by either Seller or any Acquired Company in
connection with any of the Contemplated Transactions; or
(i) (i) all Taxes (or the non-payment thereof) of the Acquired
Companies for all Taxable periods ending on or before the Closing Date and
the portion through the end of the Closing Date for any Pre-Closing Tax
Period, (ii) all Taxes of any member of an affiliated, consolidated,
combined, or unitary group of which any Acquired Company (or any
predecessor of any of the foregoing) is or was a member on or prior to the
Closing Date, including pursuant to Treasury Regulation Section 1.1502-6 or
any analogous or similar state, local, or foreign law or regulation, and
(iii) any and all Taxes of any Person (other than the Acquired Companies)
imposed on the Acquired Companies as a transferee or successor, by contract
or pursuant to any law, rule or regulation, which Taxes relate to an event
or transaction occurring before the Closing; provided, however, that in the
case of clauses (i), (ii), and (iii) above, Sellers shall be liable only to
the extent that such Taxes exceed the amount, if any, reserved for such
Taxes (excluding any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) on the face of the Closing
Adjustment Statement and taken into account in determining the Purchase
Price. Notwithstanding any other provision of this Agreement to the
contrary, the obligation of Sellers set forth in this Section 10.2(i) shall
be unconditional and absolute and shall remain in effect without limitation
as to time or amount.
The remedies provided in this Section 10.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons.
Any indemnification obligation hereunder shall be treated by the parties as an
adjustment to the Purchase Price.
Section 10.3 Environmental Matters.
---------------------
50
In addition to the provisions of Section 10.2, Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the Acquired Companies, and
the other Indemnified Persons for, and will pay to Buyer, the Acquired
Companies, and the other Indemnified Persons the amount of, any Damages
(including costs of cleanup, containment, or other remediation) arising,
directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of
or relating to:
(i) (A) the ownership, operation, or condition at any time
on or prior to the Closing Date of any of the Facilities or any other
properties and assets (whether real, personal, or mixed and whether
tangible or intangible) in which Sellers or any Acquired Company has
or had an interest, or (B) any Hazardous Materials or other
contaminants that were present on, at, under, or emanating from any of
the Facilities or such other properties and assets at any time on or
prior to the Closing Date; or
(ii) (A) any Hazardous Materials or other contaminants,
wherever located, that were, or were allegedly, generated,
transported, stored, treated, Released, or otherwise handled in
connection with the operation of the Acquired Companies or by Sellers
or any Acquired Company or by any other Person for whose conduct they
are or may be held responsible at any time on or prior to the Closing
Date, or (B) any Hazardous Activities that were, or were allegedly,
conducted in connection with the operation of the Acquired Companies
or by Sellers or any Acquired Company or by any other Person for whose
conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property),
damage to natural resources, or other damage of or to any Person, including
any employee or former employee of Sellers or any Acquired Company or any
other Person for whose conduct they are or may be held responsible, in any
way arising from or allegedly arising from any Hazardous Activity conducted
or allegedly conducted with respect to the Facilities or the operation of
the Acquired Companies prior to the Closing Date, or from Hazardous
Material that was (i) present or suspected to be present on or before the
Closing Date on, at, under, or emanating from any of the Facilities (or
present or suspected to be present on any other property, if such Hazardous
Material emanated or allegedly emanated from any of the Facilities and was
present or suspected to be present on, at, under, or emanating from any of
the Facilities on or prior to the Closing Date) or (ii) Released or
allegedly Released in connection with the operation of the Acquired
Companies or by Sellers or any Acquired Company or any other Person for
whose conduct they are or may be held responsible, at any time on or prior
to the Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought
51
under this Section 10.3. The procedure described in Section 10.8 will apply to
any claim solely for monetary damages relating to a matter covered by this
Section 10.3.
Section 10.4 Indemnification and Payment of Damages by Buyer.
-----------------------------------------------
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement or in any certificate or other document delivered by Buyer
pursuant to this Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement;
(c) any obligation of the Sellers pursuant to the Sellers' Personal
Guarantees;
(d) any liability or obligation for which Buyer has reduced the
Purchase Price or asserted a right of set-off, to the extent of such
reduction or set-off, in accordance with Section 2.2 or Section 10.7,
respectively; and
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting
on its behalf) in connection with any of the Contemplated Transactions.
Section 10.5 Time Limitations.
----------------
Sellers will have no liability under Section 10.2(a) for indemnification
for breach of any representation or warranty, other than those in Sections 3.3,
3.11, 3.13, and 3.19, unless on or before the second (2nd) anniversary of the
Closing Date Buyer notifies Sellers of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Buyer. A claim with
respect to representations and warranties contained in Section 3.3, 3.13, or
3.19, or a claim for indemnification based upon any provision of Section 10.2
(other than Sections 10.2(a) and 10.2(i)) or upon Section 10.3, may be made at
any time on or before the expiration of the statute of limitations applicable to
the underlying matter. A claim with respect to representations and warranties
contained in Section 3.11, or a claim for indemnification based upon Section
10.2(i), may be made at any time.
Section 10.6 Limitations on Amount - Sellers.
-------------------------------
Sellers will have no liability (for indemnification or otherwise) with
respect to the matters described in Section 10.2(a) (except with respect to
breaches of representations and warranties contained in Sections 3.3, 3.11,
3.13, and 3.19) until the total of all Damages with respect to such matters
exceeds $125,000, and then only for the amount by which such Damages exceed
$125,000. Except with respect to any and all Damages resulting or arising from
or in connection with the breach of any of the representations and warranties
set forth in Sections 3.3, 3.10, 3.11, 3.13, and 3.19, the aggregate amount of
all Damages for breaches of representations and
52
warranties for which Buyer shall be entitled to be indemnified under Section
10.2(a) shall not exceed the sum of $2.0 million. The aggregate amount of all
Damages for breaches of representations and warranties set forth in Sections
3.3, 3.10, 3.13, and 3.19 for which Buyer shall be entitled to be indemnified
under Section 10.2(a) shall not exceed the sum of $6.0 million. There shall be
no limit to the amount of Damages for breaches of representations and warranties
set forth in Section 3.11 for which Buyer shall be entitled to be indemnified
under Section 10.2(a) and nothing contained in this Agreement shall limit any
obligation of Sellers with respect to the payment of Taxes in accordance with
the applicable provisions of this Agreement. However, the limitations set forth
in this Section 10.6 will not apply to (a) any Breach of any of Sellers'
representations and warranties of which any Seller had actual knowledge at the
time such representation and warranty is made or (b) any intentional Breach by
any Seller of any covenant or obligation, and Sellers will be jointly and
severally liable for all Damages with respect to any such Breaches described in
clause (a) or (b) immediately preceding.
Section 10.7 Right of Set-Off.
----------------
Upon notice to Sellers specifying in reasonable detail the basis for such
set-off, Buyer may set off any amount to which it is, based on Buyer's
reasonable determination after a comprehensive investigation (with copies of any
relevant information (other than privileged documentation) being provided to
Sellers), entitled under this Article X (taking into account any applicable
limitations set forth in Section 10.6, including the $125,000 threshold) against
(i) amounts otherwise payable under the Promissory Notes, (ii) the Earn-Out
Payments, or (iii) the Escrow Amount; provided that such set-off amount be
limited to such amount and all other amounts due to Sellers be paid in
accordance with the applicable terms. The exercise of such right of set-off by
Buyer in good faith and in accordance herewith, whether or not ultimately
determined to be justified, will not constitute an event of default under this
Agreement or the Promissory Notes. Neither the exercise of nor the failure to
exercise such right of set-off will constitute an election of remedies or limit
Buyer in any manner in the enforcement of any other remedies that may be
available to it.
Section 10.8 Procedure For Indemnification - Third Party Claims.
--------------------------------------------------
(a) Promptly after receipt by an indemnified party under Section
10.2, 10.4, or (to the extent provided in the last sentence of Section
10.3) Section 10.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying
party of the commencement of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.8(a) is brought
against an indemnified party and it gives notice to the indemnifying party
of the commencement of such Proceeding, the indemnifying party will, unless
the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is
also a party to such Proceeding and the indemnified party
53
determines in good faith that joint representation would be inappropriate,
or (ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the
defense of such Proceeding with counsel satisfactory to the indemnified
party and, after notice from the indemnifying party to the indemnified
party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under this Article X for any
fees of other counsel or any other expenses with respect to the defense of
such Proceeding, in each case subsequently incurred by the indemnified
party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding: (i) it will be conclusively established for
purposes of this Agreement that the claims made in that Proceeding are
within the scope of and subject to indemnification; (ii) no compromise or
settlement of such claims may be effected by the indemnifying party without
the indemnified party's consent unless (A) there is no finding or admission
of any violation of Legal Requirements or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages
that are paid in full by the indemnifying party; and (iii) the indemnified
party will have no liability with respect to any compromise or settlement
of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound
by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such
Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this
Agreement with respect to such Proceeding or the matters alleged therein,
and agree that process may be served on Sellers with respect to such a
claim anywhere in the world.
Section 10.9 Procedure for Indemnification - Other Claims.
--------------------------------------------
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
54
ARTICLE XI
CLOSING STATEMENT
Section 11.1 Closing Statement.
-----------------
As of June 23, 2004 (the "Closing Statement Date"), Sellers shall prepare,
----------------------
based upon Sellers' good faith estimates and assumptions and in accordance with
GAAP and using the same practices, principles, and methodologies used in
preparing the Historical Financial Statements, a statement showing thereon: (i)
the aggregate amount of accounts receivable, net of a reserve mutually agreed
upon by the Sellers and Buyer, of the Acquired Companies (other than accounts
receivable owing from OCI) as of the Closing Statement Date; (ii) the aggregate
amount of accounts payable of the Acquired Companies (other than accounts
payable owed to OCI) as of the Closing Statement Date; (iii) the aggregate
amount of accounts receivable of the Acquired Companies owing from OCI as of the
Closing Statement Date; (iv) the aggregate amount of accounts payable of the
Acquired Companies owed to OCI as of the Closing Statement Date; and (v) the
aggregate amount of inventory of the Acquired Companies as of the Closing
Statement Date. The foregoing statement shall, consistent with this Agreement,
be reasonably acceptable to Buyer and is referred to herein as the "Closing
-------
Statement". Prior to Closing, Sellers shall afford Buyer the opportunity to
---------
receive and review any information and any calculation relating to the
preparation of the Closing Statement.
ARTICLE XII
CERTAIN POST-CLOSING MATTERS
Section 12.1 Taxes.
-----
(a) Tax Indemnification. The indemnification obligations of Sellers
-------------------
with respect to Taxes are provided in Article X of this Agreement.
(b) Straddle Period. In the case of any Taxable period that includes
---------------
(but does not end on) the Closing Date (a "Straddle Period"), the amount of
---------------
any Taxes based on or measured by income or receipts of the Acquired
Companies for the Pre-Closing Tax Period shall be determined based on an
interim closing of the books as of the close of business on the Closing
Date (and for such purpose, the Taxable period of any partnership or other
pass-through entity in which any Acquired Company holds a beneficial
interest shall be deemed to terminate at such time) and the amount of other
Taxes of the Acquired Companies for a Straddle Period which relate to the
Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the
entire Taxable period multiplied by a fraction the numerator of which is
the number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in such Straddle Period.
(c) Responsibility for Filing Tax Returns. Buyer shall prepare or
-------------------------------------
cause to be prepared and file or cause to be filed all Tax Returns for the
Acquired Companies which are filed after the Closing Date.
55
(d) Cooperation on Tax Matters.
--------------------------
(i) The parties hereto shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to Section 12.1(c) above and any audit,
litigation, or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation, or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. The Acquired Companies and Sellers agree (A) to retain all
books and records with respect to Tax matters pertinent to the
Acquired Companies relating to any Taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Buyer or Sellers, any extensions thereof) of
the respective Taxable periods, and to abide by all record retention
agreements entered into with any Taxing authority, and (B) to give the
other party reasonable written notice prior to transferring,
destroying, or discarding any such books and records and, if the other
party so requests, the Acquired Companies or Sellers, as the case may
be, shall allow the other party to take possession of such books and
records.
(ii) Buyer and Sellers further agree, upon request, to use
commercially reasonable efforts to obtain any certificate or other
document from any Governmental Body or any other Person as may be
necessary to mitigate, reduce, or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(iii) Buyer and Sellers further agree, upon request, to
provide the other party with all information that any party may be
required to report pursuant to Code Section 6043 and all Treasury
Regulations promulgated thereunder.
(e) Tax Sharing Agreements. All Tax sharing agreements or similar
----------------------
agreements with respect to or involving the Acquired Companies shall be
terminated as of the Closing Date and, after the Closing Date, the Acquired
Companies shall not be bound thereby or have any liability thereunder.
(f) Certain Taxes and Fees. All transfer, documentary, sales, use,
----------------------
stamp, registration, and other such Taxes, and all conveyance fees,
recording charges, and other fees and charges (including any penalties and
interest) incurred in connection with consummation of the transactions
contemplated by this Agreement shall be paid by the party on whom such tax
is levied pursuant to applicable law, and such party will, at their own
expense, file all necessary Tax Returns and other documentation with
respect to all such Taxes, fees, and charges, and, if required by
applicable law, the other party will, and will cause its Affiliates to,
join in the execution of any such Tax Returns and other documentation.
56
(g) Survival of Obligations. Notwithstanding any other provision in
-----------------------
this Agreement to the contrary, the obligations of the parties set forth in
this Section 12.1 shall be unconditional and absolute and shall remain in
effect without limitation as to time or amount.
Section 12.2 Sellers' Personal Guarantees.
----------------------------
Buyer shall use its Best Efforts to cause the release of Sellers' personal
guarantees described on Schedule 12.2 attached hereto (the "Sellers' Personal
------------- -----------------
Guarantees") as soon as possible after the date hereof. Buyer hereby
----------
acknowledges and agrees that from and after the date hereof, any obligations of
the Sellers pursuant to the Sellers' Personal Guarantees shall be subject to the
indemnification obligations of Buyer as set forth in Section 10.4 hereof.
Section 12.3 Automobile Titles.
-----------------
Within six (6) weeks after the Closing, the Sellers' Representative shall
submit to the Buyer all necessary documents for the purpose of transferring the
leasehold interests to the Sellers of the two automobiles listed on Schedule
12.2 (and as indicated on Schedule 12.2). In connection therewith, the Sellers
will pay off the aggregate lease obligations and the parties will cooperate to
cause title to such vehicles to be conveyed to the Sellers; provided that
between the date hereof and the date such leases are paid off in full, the
Sellers shall pay, and hold the Buyer and the Company harmless against, all
lease payments due under such leases and any other Liabilities arising from or
in connection with such leases or the use by Sellers of such automobiles.
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1 Appointment of the Sellers' Representative as
---------------------------------------------
Attorney-In-Fact.
----------------
Each of the Sellers for themselves and their personal representatives and
other successors, hereby jointly and severally constitute and appoint Xxxxxx
Xxxxxxxx as their agent and attorney-in-fact (the "Sellers' Representative"),
-----------------------
with full power and authority in the name of and for and on behalf of each of
the Stockholders, to serve as the Sellers' Representative under this Agreement
and the Escrow Agreement and to exercise the power and authority granted to or
required by the Sellers' Representative hereunder or thereunder. The Sellers'
Representative is hereby granted the power and authority by each Seller, for
himself and on behalf of Sellers collectively, to (i) negotiate and enter into
amendments to this Agreement, (ii) give and receive notices and communications
on behalf of Sellers, (iii) negotiate and enter into the Escrow Agreement and
negotiate and enter into any amendments to the Escrow Agreement, (iv) agree to,
negotiate, enter into settlements and compromises of, and comply with orders of
courts with respect to claims for indemnification hereunder and claims under the
Escrow Agreement, (v) receive and distribute any amounts payable to Sellers as
contemplated by this Agreement or the Escrow Agreement, and (vi) take all
actions necessary or appropriate in the judgment of the Sellers' Representative
for the accomplishment of the foregoing. In the event of the death, physical or
mental incapacity, or resignation of the Sellers' Representative or any
successor
57
Sellers' Representative, Sellers (including the personal representative of any
deceased or disabled Seller in the event of their death or disability) shall
promptly appoint a substitute Sellers' Representative reasonably acceptable to
Buyer. As between the Sellers' Representative and Sellers, the Sellers'
Representative shall not be liable for, and shall be indemnified by Sellers
against any good faith error of judgment on his part or for any other act done
or omitted by him in good faith in connection with his duties as the Sellers'
Representative, except for willful misconduct. All expenses incurred by the
Sellers' Representative in performing his duties hereunder (including legal fees
and expenses of counsel thereto), and any indemnification to be provided to the
Sellers' Representative, shall be jointly and severally borne by Sellers. The
authority conferred under this Section 13.1 is an agency coupled with an
interest and, to the extent permitted by applicable laws, all authority
conferred hereby is irrevocable and not subject to termination by the
undersigned or by operation of law, whether by the death or incapacity of any of
Sellers, the termination of any trust or estate, or the occurrence of any other
event. If any Seller should die or become incapacitated, if any trust or estate
of any of the above should be terminated, or if any other event shall occur, any
action taken by the Sellers' Representative pursuant to this Section 13.1 shall
be valid as if such death or incapacity, termination, or other event had not
occurred, regardless of whether or not the Sellers' Representative or Buyer
shall have received notice of such death, incapacity, termination, or other
event.
Section 13.2 Expenses.
--------
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
Section 13.3 Public Announcements.
--------------------
Any public announcement or similar publicity with respect to this Agreement
or the Contemplated Transactions will be issued, if at all, at such time and in
such manner as mutually agreed to by Buyer and Sellers. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing Sellers
shall, and shall cause the Acquired Companies to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Sellers and Buyer will consult with each other concerning the means by which the
Acquired Companies' employees, customers, and suppliers and others having
dealings with the Acquired Companies will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
Section 13.4 Notices.
-------
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in
58
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties, provided that any such change shall be effective
only upon receipt by the other parties):
If to Buyer or the Acquired Companies, to:
Measurement Specialties, Inc.
000 Xxxxx 00 Xxxx, #000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxxx, Chief Executive Officer
Telephone: 000-000-0000
Fax: 000-000-0000
With a copy to:
XxXxxxxx & English, LLP
Four Gateway Center
000 Xxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Fax: 000-000-0000
If to Sellers, to:
Xxxxxx Xxxxxxxx
0000 Xxx Xxx Xxxx.
Xxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
and to:
Xxxxx Xxxxxxxx
0000 Xxx Xxx Xxxx.
Xxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxxx Xxxxx Xxxxx Xxxxxxxxx & Xxxxxx, LLC
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Tel: (000) 000-0000
59
Fax: (000) 000-0000
Section 13.5 Jurisdiction; Service of Process.
--------------------------------
Any action or proceeding brought by Buyer seeking to enforce any provision
of, or based on any right arising out of, this Agreement may be brought against
any of the parties exclusively in the courts of the State of California, County
of Los Angeles, or, if it has or can acquire jurisdiction, in the United States
District Court for the district in California in which the Company's operations
are located, and each of the parties consents to the exclusive jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Any action or
proceeding brought by Sellers seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties exclusively in the courts of the State of New Jersey, County of Essex,
or, if it has or can acquire jurisdiction, in the United States District Court
for the District of New Jersey, and each of the parties consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts)
in any such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
Section 13.6 Binding Arbitration.
-------------------
Any dispute between the parties to this Agreement relating to the subject
matter set forth in Section 2.2(c)(iii)(F) shall be (a) subject to binding
arbitration with the American Arbitration Association ("AAA"), in Essex County,
---
New Jersey, and (b) shall be governed by New York law. Except as modified
herein, the AAA commercial dispute arbitration rules and procedures shall apply
to any proceeding. In selecting an arbitrator, if the parties to this Agreement
shall not agree on an arbitrator they shall each select an arbitrator and such
arbitrators shall select a third arbitrator, whose determinations shall be final
and binding as to all disputed matters. Judgment upon an award rendered by the
arbitrator must be entered by a court having competent jurisdiction.
Section 13.7 Further Assurances.
------------------
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
Section 13.8 Waiver.
------
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in
60
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents referred
to in this Agreement.
Section 13.9 Entire Agreement and Modification.
---------------------------------
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
Section 13.10 Disclosure Schedule.
-------------------
(a) The disclosures in the Disclosure Schedule must relate only to
the representations and warranties in the Section of the Agreement to which
they expressly relate and not to any other representation or warranty in
this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Schedule (other than an
exception expressly set forth as such in the Disclosure Schedule with
respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
Section 13.11 Assignments, Successors, and No Third-Party Rights.
--------------------------------------------------
No party may assign any of its rights under this Agreement without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
Section 13.12 Severability.
------------
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
Section 13.13 Headings.
--------
The headings of the Articles and Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation.
All references in this
61
Agreement to "Article", "Articles", "Section", or "Sections" refer to the
corresponding Article, Articles, Section, or Sections, respectively, of this
Agreement.
Section 13.14 Governing Law.
-------------
This Agreement will be governed by the laws of the State of New York
without regard to its conflicts of laws principles.
Section 13.15 Counterparts.
------------
This Agreement may be executed by facsimile and in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
62
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
MEASUREMENT SPECIALTIES, INC.
By:________________________________
Name:
Title:
SELLERS:
___________________________________
Xxxxxx Xxxxxxxx
___________________________________
Xxxxx Xxxxxxxx
63
