Exhibit 2.1
EXECUTION COPY
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MEMBERSHIP PURCHASE AGREEMENT
AMONG
Sparton Corporation
Parent
Astro Instrumentation, Inc.
Buyer
Astro Instrumentation, LLC
Astro
X. Xxxxxxx Holdings, LLC,
X. Xxxx Holdings, LLC
Sellers
Xxxxxx Xxxxxxx, Individually
Xxxxxxx Xxxx, Individually
May 31, 2006
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TABLE OF CONTENTS
Section 1. Definitions....................................................... 5
Section 2. Purchase and Sale of Target Membership Interest................... 9
(a) Basic Transaction................................................ 9
(b) Purchase Price................................................... 9
(c) Closing.......................................................... 10
(d) Deliveries at Closing............................................ 10
(e) Adjustment to Preliminary Purchase Price......................... 10
Section 3. Representations and Warranties Concerning Transaction............. 12
(a) Sellers' Representations and Warranties.......................... 12
(b) Buyer's Representations and Warranties........................... 13
Section 4. Representations and Warranties Concerning Astro and Its
Subsidiaries...................................................... 13
(a) Organization, Qualification, and Corporate Power................. 14
(b) Capitalization................................................... 14
(c) Non-contravention................................................ 14
(d) Brokers' Fees.................................................... 14
(e) Title to Assets.................................................. 14
(f) Financial Statements............................................. 14
(g) Events Subsequent to Most Recent Fiscal Year End................. 15
(h) Undisclosed Liabilities.......................................... 16
(i) Legal Compliance................................................. 16
(j) Tax Matters...................................................... 16
(k) Real Property.................................................... 17
(l) Intellectual Property............................................ 18
(m) Tangible Assets.................................................. 18
(n) Inventory........................................................ 18
(o) Contracts........................................................ 19
(p) Notes and Accounts Receivable.................................... 19
(q) Powers of Attorney............................................... 19
(r) Insurance........................................................ 20
(s) Litigation....................................................... 20
(t) Employees........................................................ 20
(u) Employee Benefits................................................ 20
(v) Guaranties....................................................... 22
(w) Environmental, Health, and Safety Matters........................ 22
(x) Certain Business Relationships with Astro and Its Subsidiaries... 22
(y) Customers and Suppliers.......................................... 22
(z) Product Warranty................................................. 23
(aa) Product Liability................................................ 23
(bb) Disclosure....................................................... 23
Section 5. Intentionally Omitted............................................. 23
Section 6. Post-Closing Covenants............................................ 23
(a) General.......................................................... 23
(b) Transition....................................................... 23
(c) Confidentiality.................................................. 23
(d) Covenant Not to Compete.......................................... 24
(e) Buyer Notes...................................................... 24
(f) Indemnification.................................................. 24
(g) Employees........................................................ 25
Section 7. Deliveries at Closing............................................. 25
(a) Sellers' Deliveries.............................................. 25
(b) Buyer's Deliveries............................................... 26
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Section 8. Remedies for Breaches of This Agreement........................... 26
(a) Survival of Representations and Warranties....................... 26
(b) Indemnification Provisions for Buyer's Benefit................... 26
(c) Indemnification Provisions for Sellers' Benefit.................. 27
(d) Matters Involving Third Parties.................................. 27
(e) Determination of Adverse Consequences............................ 28
(f) Limitations...................................................... 28
(g) Other Indemnification Provisions................................. 28
(h) Recoupment Against Buyer Notes and Earn-out Payments............. 29
Section 9. Tax Matters....................................................... 29
(a) Tax Indemnification.............................................. 29
(b) Straddle Period.................................................. 29
(c) Responsibility for Filing Tax Returns............................ 29
(d) Cooperation on Tax Matters....................................... 29
(e) Certain Taxes and Fees........................................... 30
(f) Basis Elections.................................................. 30
Section 10. Intentionally Omitted............................................ 30
Section 11. Miscellaneous.................................................... 30
(a) Nature of Sellers' Obligations................................... 30
(b) Press Releases and Public Announcements.......................... 30
(c) No Third-Party Beneficiaries..................................... 30
(d) Entire Agreement................................................. 30
(e) Succession and Assignment........................................ 31
(f) Counterparts..................................................... 31
(g) Headings......................................................... 31
(h) Notices.......................................................... 31
(i) Governing Law.................................................... 31
(j) Amendments and Waivers........................................... 32
(k) Severability..................................................... 32
(l) Expenses......................................................... 32
(m) Construction..................................................... 32
(n) Incorporation of Exhibits, Annexes, and Schedules................ 32
(o) Specific Performance............................................. 32
(p) Submission to Jurisdiction....................................... 32
(q) Governing Language............................................... 33
(r) Parent Guarantee................................................. 33
(s) Xxxxxxx Guarantee................................................ 33
(t) Wood Guarantee................................................... 34
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Exhibit Index:
Exhibit A--Form of Buyer Notes
Exhibit B--Historical Financial Statements
Exhibit C--Security Agreement
Exhibit D--Covenant Not to Compete
Exhibit E--Sample Calculation of Bayer Reduction Formula
Exhibit F--Form of Sellers' Counsel Legal Opinion
Exhibit G--Form of Buyer's Counsel Legal Opinion
Annex I--Exceptions to each Seller's Representations and Warranties Concerning
Transaction
Annex II--Exceptions to Buyer's Representations and Warranties Concerning
Transaction
Disclosure Schedule--Exceptions to Representations and Warranties
Concerning Astro
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MEMBERSHIP PURCHASE AGREEMENT
This Membership Purchase Agreement (this "Agreement") is entered into on
May 31, 2006, by and among Sparton Corporation, an Ohio corporation ("Parent"),
Astro Instrumentation, Inc., a Michigan corporation ("Buyer"), Astro
Instrumentation, LLC, an Ohio limited liability company ("Astro"), X. Xxxxxxx
Holdings, LLC and X. Xxxx Holdings, LLC (each a "Seller" and collectively, the
"Sellers"), Xxxxxx Xxxxxxx ("Xxxxxxx") and Xxxxxxx Xxxx ("Xxxx" and together
with Xxxxxxx, the "Guarantors"). Parent, Guarantors, Buyer, Sellers and Astro
are referred to collectively herein as the "Parties."
X. Xxxxxxx Holdings, LLC and X. Xxxx Holdings, LLC together hold all of the
outstanding membership interests of Astro.
Xxxxxxx holds a controlling interest in X. Xxxxxxx Holdings, LLC and Wood
holds a controlling interest in X. Xxxx Holdings, LLC.
Pursuant to this Agreement, Buyer is purchasing from Sellers, and Sellers
are selling to Buyer, all of the outstanding membership interests of Astro in
return for cash, Buyer Notes and an Earn-out Payment.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
Section 1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, liens, losses, expenses, and fees,
including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Agreement" has the meaning set forth in the preface above.
"Astro" has the meaning set forth in the preface above.
"Bayer" has the meaning set forth in Section 2(e) below.
"Buyer" has the meaning set forth in the preface above.
"Buyer Notes" has the meaning set forth in Section 2(b) below.
"Buyout Amount" means (i) if the sale of Astro or its business occurs on or
prior to June 30, 2007, the amount of $3,503,836, (ii) if the sale of Astro or
its business occurs after June 30, 2007 but on or prior to June 30, 2008, the
amount of $2,786,335, (iii) if the sale of Astro or its business occurs after
June 30, 2008 but on or prior to June 30, 2009, the amount of $1,977,866, and
(iv) if the sale of Astro or its business occurs after June 30, 2009 but on or
before June 30, 2010, the amount of $1,034,807.
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"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
and Code Section 4980B and of any similar state law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of Astro that is not generally available to the public.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Earn-out Payment" means the payments described in Paragraph 2(e) to be
paid by Buyer after Closing.
"EBIT" means the earnings of Astro before deduction of interest and taxes
as determined by the application of GAAP as applied in the United States, but
without any allocation of corporate or other overhead expenses and subject to
the remainder of this definition. For purposes of the calculation of EBIT: (i)
inventory shall be valued at the lower of cost (first-in first-out) or market;
(ii) the depreciation on assets owned by Astro as of the date of the Closing
shall be no greater than the amount shown on the Astro forecasts provided to
Buyer by Sellers; (iii) annual depreciation on the addition to the Strongsville,
Ohio facility shall be the lesser of actual depreciation or $100,000 per year;
(iv) there shall be no deduction from earnings in respect of impairment of
goodwill, if any; and (v) actual third-party costs incurred by Parent in
connection with Astro `s business operations that Astro would have incurred if
not provided by Parent may be taken as an expense.
"Employee Benefit Plan" means any "employee benefit plan" (as such term is
defined in ERISA Section 3(3)).
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Requirements" shall mean, as amended and
as now in effect, all federal, state and local statutes, regulations,
ordinances, and other provisions having the force or effect of law, all judicial
and administrative orders and determinations, and all common law concerning
public health and safety, worker health and safety, pollution, or protection of
the environment, including, without limitation, all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances, or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise, or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single employer
with Astro for purposes of Code Section 414.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
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"Financial Statements" has the meaning set forth in Section 4(f) below.
"First Bayer Threshold" has the meaning set forth in Section 2(e) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time, consistently applied.
"Guarantors" has the meaning set forth in the preface above.
"Improvements" has the meaning set forth in Section 4(k) below.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Intellectual Property" means all of the following in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related documentation), (g) all other proprietary rights, and (h)
all copies and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge of any Seller, Xxxxxxx or Xxxx after
reasonable investigation.
"Liability" means any liability or obligation of whatever kind or nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due).
"Lien" means any mortgage, pledge, lien, encumbrance, charge, or other
security interest, other than (a) liens for Taxes not yet due and payable or for
Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (b) purchase money liens and liens securing rental payments under
capital lease arrangements, and (c) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Material Adverse Effect" or "Material Adverse Change" means any effect or
change that would be (or could reasonably be expected to be) materially adverse
to the business, assets, condition (financial or otherwise), operating results
or operations of Astro or to the ability of Sellers to consummate timely the
transactions contemplated hereby, excluding any adverse change, event,
development, or effect arising from or relating to (a) general business or
economic conditions, including such conditions related to the business of Astro,
(b) changes in GAAP, (c) changes in laws, rules, regulations, orders, or other
binding directives issued
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by any governmental entity, and (d) the taking of any action contemplated by
this Agreement and the other agreements contemplated hereby.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 4(f) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Owned Real Property" means all land, together with all buildings,
structures, improvements, and fixtures located thereon, together with all
easements and other rights and interests appurtenant thereto, owned by Astro.
"Parent" has the meaning set forth in the preface above.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" means with respect to each parcel of Real
Property: (a) real estate taxes, assessments and other governmental levies,
fees, or charges imposed with respect to such Real Property that are (i) not due
and payable as of the Closing Date or (ii) being contested in good faith and for
which appropriate reserves have been established in accordance with GAAP; (b)
zoning, building codes and other land use laws regulating the use or occupancy
of such Real Property or the activities conducted thereon which are imposed by
any governmental authority having jurisdiction over such Real Property; (c)
easements, covenants, conditions, restrictions, and other similar matters of
record affecting title to such Real Property; and (d) all liens, encumbrances,
guaranties and similar matters in favor of the Ohio Department of Development.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Pre-Closing Tax Period" has the meaning set forth in Section 9(a) below.
"Preliminary Purchase Price" has the meaning set forth in Section 2(b)
below.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(e) below.
"Real Property" has the meaning set forth in Section 4(k) below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Second Bayer Threshold" has the meaning set forth in Section 2(e) below.
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"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Seller" has the meaning set forth in the preface above.
"Straddle Period" has the meaning set forth in Section 9(b) below.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association, or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons own a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity's gains or losses or shall
be or control any managing director or general partner of such business entity
(other than a corporation). The term "Subsidiary" shall include all Subsidiaries
of such Subsidiary.
"Target Membership Interest" means any unit membership interest held in
Astro.
"Tax" or "Taxes" 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, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto.
"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.
"Third-Party Claim" has the meaning set forth in Section 8(d) below.
"Xxxxxxx" has the meaning set forth in the preface above.
"Xxxxx Agreement" has the meaning set forth in Section 8(b)(iv) below.
"Wood" has the meaning set forth in the preface above.
Section 2. Purchase and Sale of Target Membership Interests.
(a) Basic Transaction. On and subject to the terms of this Agreement, Buyer
agrees to purchase from each Seller, and each Seller agrees to sell to Buyer,
all of its Target Membership Interest for the consideration specified below in
this Section 2.
(b) Purchase Price. Buyer agrees to pay to Sellers at the Closing
$26,150,000.00 (the "Preliminary Purchase Price") by delivery of (i) its
promissory notes (the "Buyer Notes") in the form of Exhibit A attached hereto in
the aggregate principal amount of $7,500,000.00 and (ii) cash for the balance of
the Preliminary
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Purchase Price payable by wire transfer or delivery of other immediately
available funds. The Preliminary Purchase Price shall be allocated among Sellers
in proportion to their respective holdings of Target Membership Interests as set
forth in Section 4(b) of the Disclosure Schedule. The Preliminary Purchase Price
shall be subject to post-Closing adjustment as set forth below in Section 2(e).
The Buyer Notes shall be guaranteed by Parent and secured by the Target
Membership Interests pursuant to a security agreement in the form as attached as
Exhibit C.
(c) Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxxx & Xxxxxxx, P.C., in
Pittsburgh, Pennsylvania commencing at 9:00 a.m. local time on May 31, 2006 (the
"Closing Date").
(d) Deliveries at Closing. At the Closing, (i) Sellers will deliver to
Buyer the various certificates, instruments, and documents referred to in
Section 7(a) below, (ii) Buyer will deliver to Sellers the various certificates,
instruments, and documents referred to in Section 7(b) below, (iii) each Seller
will deliver to Buyer certificates representing all of its Target Membership
Interest, endorsed in blank or accompanied by duly executed assignment
documents, and (iv) Buyer will deliver to each Seller the consideration
specified in Section 2(b) above.
(e) Adjustment to Preliminary Purchase Price. The Preliminary Purchase
Price shall be adjusted as follows:
(i) The Buyer shall pay an amount equal to twenty (20%) percent of
Astro's EBIT, which Buyer shall pay to Sellers by means of wire transfer or
delivery of other immediately available funds within three (3) business
days of the earlier to occur of the completion of the audit of the
applicable fiscal year by Parent's accountants or the date the Parent's
Annual Report on Form 10-K for the relevant fiscal year is required to be
filed (without giving effect to any extension of such deadline that may be
available under Rule 12b-25 promulgated under the Exchange Act). In
addition to an audited financial statement, Buyer shall provide Sellers
with a copy of the unaudited monthly and annual financial statements of
Astro upon request. This additional amount shall be allocated among Sellers
in proportion to their respective holdings of Target Membership Interests
as set forth in Section 4(b) of the Disclosure Schedule. Following the
Closing and until June 30, 2010, Buyer shall conduct the business of Astro
in a commercially reasonable manner and shall sufficiently fund and support
Astro in furtherance of its business. Until June 30, 2010, Buyer shall
cause the business of Astro to be principally managed by those individuals
who manage such business as of the date of this Agreement unless such
individuals terminate their employment, voluntarily or involuntarily, with
Astro prior to such date or otherwise with the prior consent of Sellers,
which shall not be unreasonably withheld. In the event Buyer sells Astro or
all or substantially all of its business, either (A) the purchaser thereof
shall assume all of Buyer's obligations hereunder or (B) in lieu of such
assumption, Buyer shall pay to Sellers in proportion to their respective
holdings of Target Membership Interests the Buyout Amount which shall be in
full satisfaction of Buyer's obligations with regard to the Earn-out
Payment.
(ii) Buyer shall pay the amount provided for above [Paragraph (e)(i)]
for each of the fiscal years ending on June 30, 2007, 2008, 2009 and 2010.
(iii) In connection with the determination of the Purchase Price, the
Parties have assumed that Astro will continue its relationship with Xxxxx
XX or its Affiliates (collectively, "Bayer") at certain historical sales
levels. To the extent that there is a material reduction in Bayer related
revenues, the Parties have agreed to reduce the Earn-out Payments and the
payments of principal and interest due under the Buyer Notes as follows:
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1) Reduction for the first 12 month period from the Closing Date.
If (A) the total revenue due to Astro from Bayer in respect of the
period between the Closing Date and the last day of the twelfth month
after the Closing Date is less than $14,437,000 (the "First Bayer
Threshold") and (B) total revenue due to Astro from all sources
(including Bayer) for the same period is less than $39,000,000, then
notwithstanding anything to the contrary contained in this Agreement
or in the Buyer Notes, the total principal and interest payable on
each Buyer Note for the next succeeding 12 months shall be reduced to
the amount obtained by multiplying (1) the total principal and
interest payable for such next succeeding 12 months on each Buyer Note
(without regard to the adjustment contemplated by this Section) by (2)
a fraction, the numerator of which is the total revenue due to Astro
from Bayer in respect of the period between the Closing Date and the
last day of the 12th month thereafter and the denominator of which is
equal to the First Bayer Threshold. Notwithstanding the foregoing, if
a reduction of the principal and interest payable on the Buyer Notes
is required by the provisions of this Section and an Earn-out Payment
is payable in respect of the fiscal year ending on June 30, 2007, then
notwithstanding the foregoing, the amount of the reduction in
principal and interest that would otherwise be made in accordance with
this Section shall instead be deducted from such Earn-out Payment to
the extent possible, and any amount of such reduction that is not
satisfied by an offset against such Earn-out Payment shall be deducted
from the payments of principal and interest due on each Buyer Note as
provided above.
2) Reduction for the 12 month period commencing on the first day
of the 13th month through the last day of the 24th month from the
Closing Date. If (A) the total revenue due to Astro from Bayer in
respect of the period between the first day of the 13th month and the
last day of the 24th month after the Closing Date is less than
$12,075,000(the "Second Bayer Threshold") and (B) total revenue due to
Astro from all sources (including Bayer) for the same period is less
than $42,000,000, then notwithstanding anything to the contrary
contained in this Agreement or in the Buyer Notes, the total principal
and interest payable on each Buyer Note for the next succeeding 12
months shall be reduced to the amount obtained by multiplying (1) the
total principal and interest payable for such next succeeding 12
months on each Buyer Note (without regard to the adjustment
contemplated by this Section) by (2) a fraction, the numerator of
which is the total revenue due to Astro from Bayer in respect of the
period between the beginning of the 13th month and the end of the 24th
month from the Closing Date and the denominator of which is equal to
the Second Bayer Threshold. Notwithstanding the foregoing, if a
reduction of the principal and interest payable on the Buyer Notes is
required by the provisions of this Section and an Earn-out Payment is
payable in respect of the fiscal year ending on June 30, 2008, then
notwithstanding the foregoing, the amount of the reduction in
principal and interest that would otherwise be made in accordance with
this Section shall instead be deducted from such Earn-out Payment to
the extent possible, and any amount of such reduction that is not
satisfied by an offset against such Earn-out Payment shall be deducted
from the payments of principal and interest due on each Buyer Note as
provided above.
An example of the application of such formula is set forth in Exhibit
E.
3) No Additional Reductions. Amounts due under the Buyer Notes
for the annual periods beginning in the 25th and 37th month shall not
be subject to further reduction on account of reductions in the level
of business Astro conducts with Bayer or otherwise following the 24th
month after the Closing Date.
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4) Bayer Reduction Due To Nonperformance of Astro.
Notwithstanding the foregoing, if the total revenues due to Astro from
Bayer are reduced as a result of the actions or inactions, directly or
indirectly, of Astro or its Affiliates, the amounts payable under the
Buyer Notes shall not be reduced as described above.
The Preliminary Purchase Price as so adjusted is referred to herein as the
"Purchase Price."
Section 3. Representations and Warranties Concerning Transaction.
(a) Sellers' Representations and Warranties. Each Seller severally
represents and warrants with respect to itself to Buyer that the statements
contained in this Section 3(a) are correct and complete as of the date of this
Agreement, except as set forth in Annex I attached hereto.
(i) Organization of Sellers. Seller is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
formation.
(ii) Authorization of Transaction. Seller has full power and authority
(including full corporate or other entity power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.
Assuming the due authorization, execution and delivery of this Agreement by
the other Parties, this Agreement constitutes the valid and legally binding
obligation of Seller, enforceable in accordance with its terms and
conditions, except as enforcement may be limited by general principles of
equity and by bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights and remedies generally, regardless of whether asserted in
a proceeding in equity or at law. Seller need not give any notice to, make
any filing with, or obtain any authorization or approval of any government
or governmental agency in order to consummate the transactions contemplated
by this Agreement. The execution, delivery, and performance of this
Agreement and all other agreements contemplated hereby have been duly
authorized by Seller.
(iii) Non-contravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any material constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Seller is subject
or any provision of its governing documents, (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
any material agreement, contract, lease, license, instrument, or other
arrangement to which Seller is a party or by which it is bound, or (C)
result in the imposition or creation of a Lien upon or with respect to the
Target Membership Interest.
(iv) Brokers' Fees. Seller has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(v) Investment. Seller (A) understands that the Buyer Notes have not
been, and will not be, registered under the Securities Act, or under any
state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public
offering, (B) is acquiring the Buyer Notes solely for his, her, or its own
account for investment purposes, and not with a view to the distribution
thereof, (C) is a sophisticated investor with knowledge and experience in
business and financial matters, (D) has received certain information
concerning the Buyer and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks
inherent in holding the Buyer Notes, (E) is able to bear the economic risk
and lack of liquidity inherent in holding the Buyer Notes, and (F) is an
Accredited Investor.
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(vi) Target Membership Interest. Seller holds of record and owns
beneficially the Target Membership Interest set forth next to its name in
Section 4(b) of the Disclosure Schedule, and such Target Membership
Interest is free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), Liens,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. Seller is not a party to any option, warrant, purchase
right, or other contract or commitment (other than this Agreement) that
could require Seller to sell, transfer, or otherwise dispose of its Target
Membership Interest in Astro. Other than its limited liability company
agreement, Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any its Target
Membership Interest in Astro.
(b) Buyer's Representations and Warranties. Buyer represents and warrants
to Sellers that the statements contained in this Section 3(b) are correct and
complete as of the date of this Agreement, except as set forth in Annex II
attached hereto.
(i) Organization of Buyer. Buyer is a corporation (or other entity)
duly organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation (or other formation).
(ii) Authorization of Transaction. Buyer has full power and authority
(including full corporate or other entity power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable in accordance with its terms and conditions. Buyer need not
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement. The execution,
delivery, and performance of this Agreement and all other agreements
contemplated hereby have been duly authorized by Buyer.
(iii) Non-contravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Buyer is subject or any
provision of its charter, bylaws, or other governing documents or (B)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Buyer
is a party or by which it is bound or to which any of its assets are
subject.
(iv) Brokers' Fees. Buyer has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(v) Investment. Buyer is not acquiring the Target Membership Interest
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(vi) Investigation by Buyer. In entering into this Agreement, Buyer
has relied solely upon its own investigation and analysis, and only on
those specific representations and warranties set forth in this Agreement.
Buyer is relying on no other information furnished to it by Sellers, Astro
or any of their respective directors, officers, members, partners,
employees, Affiliates, controlling persons, agents, advisors or
representatives.
Section 4. Representations and Warranties Concerning Astro. Sellers and
Astro represent and warrant to
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Buyer that the statements contained in this Section 4 are correct and complete
as of the date of this Agreement, except as set forth in the disclosure schedule
delivered by Astro to Buyer on the date hereof and initialed by the Parties (the
"Disclosure Schedule").
(a) Organization, Qualification, and Power. Astro has no Subsidiaries.
Astro is a limited liability company duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its formation. Astro is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the failure to
be so qualified has not had a Material Adverse Effect. Astro has full power and
authority and all licenses, permits, and governmental authorizations necessary
to carry on the business in which it is engaged and to own and use the
properties owned and used by it. Astro has delivered to Buyer correct and
complete copies of its Articles of Organization and operating agreement (as
amended to date). Astro is not in default under or in violation of any provision
of its Articles of Organization or operating agreement. The records of the
meetings of the members and board of directors (if any) of Astro provided to
Buyer correctly memorialize, in all material respects, the matters set forth in
such records.
(b) Capitalization. The entire equity interest of Astro consists of Ten
Thousand (10,000) Target Membership Interests, of which 200 Target Membership
Interests are issued and outstanding. All of the Target Membership Interests
have been duly authorized and fully paid and are held of record by the
respective Sellers as set forth in Section 4(b) of the Disclosure Schedule.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Astro to issue, sell, or otherwise cause to
become outstanding any additional Target Membership Interests. There is no
outstanding or authorized profit participation, or similar rights with respect
to Astro. Other than the operating agreements of the Sellers, there are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the Target Membership Interests of Astro.
(c) Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any material constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Astro is subject or any provision of the
governing documents of Astro or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, any material agreement,
contract, lease, license, instrument, or other material arrangement to which
Astro is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Lien upon any of its assets). Astro
is not required to give any notice to, make any filing with, or obtain any
authorization or approval of any government or governmental agency in order for
Sellers to consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. Astro has no Liability to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
(e) Title to Assets. Astro has title to, or a valid leasehold interest in,
the properties and assets owned or leased by it, free and clear of all Liens.
(f) Financial Statements. Attached hereto as Exhibit B are the following
financial statements (collectively the "Financial Statements"): (i) audited
balance sheets and statements of income, changes in members' equity, and cash
flow as of and for the fiscal year ended December 31, 2005, (the "Most Recent
Fiscal Year End") for Astro; and (ii) unaudited balance sheets and statements of
income, changes in members' equity, and cash flow (the "Most Recent Financial
Statements") as of and for the month ended April 30, 2006. The Financial
Statements as of the Most Recent Fiscal Year End (including the notes thereto)
have been prepared in accordance with GAAP throughout the periods covered
thereby, are correct and complete,
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consistent with the books and records, and present fairly the financial
condition of Astro as of December 31, 2005 and the results of operations of
Astro for such period. The Most Recent Financial Statements are correct and
complete in all material respects, are consistent with the books and records,
and present fairly the financial condition of Astro as of April 30, 2006 and the
results of operations of Astro for such period. Astro has made available to
Buyer the unaudited balance sheets and statements of income as of and for the
years ended December 31, 2002, 2003 and 2004.
(g) Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent
Fiscal Year End, there has not been any Material Adverse Change. Without
limiting the generality of the foregoing, since that date:
(i) Astro has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than in the Ordinary Course of
Business;
(ii) Astro has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
either involving more than $50,000 or outside the Ordinary Course of
Business;
(iii) no party (including Astro) has accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving
more than $50,000 to which Astro is a party or by which it is bound;
(iv) Astro has not imposed any Liens upon any of its assets, tangible
or intangible;
(v) Astro has not made any capital expenditure (or series of related
capital expenditures) involving more than $50,000;
(vi) Astro has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions) either involving more
than $50,000 or outside the Ordinary Course of Business;
(vii) Astro has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more than $50,000
singly or $100,000 in the aggregate;
(viii) Astro has not delayed or postponed the payment of accounts
payable and other Liabilities outside the Ordinary Course of Business;
(ix) Astro has not cancelled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving
more than $50,000 or outside the Ordinary Course of Business;
(x) there has been no change made or authorized in the articles of
organization or operating agreement of Astro;
(xi) Astro has not declared, set aside, or made any distribution with
respect to its membership interests (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its membership interests;
(xii) Astro has not experienced any material damage, destruction, or
loss (whether or not covered by insurance) to its property;
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(xiii) Astro not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xiv) Astro has not granted any increase in the base compensation of
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(xv) Astro has not made any change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;
(xvi) Astro has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business;
(xvii) no Material Adverse Change has occurred;
(xviii) Astro has not issued, sold, or otherwise disposed of any of
its membership interests, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise)
any of its membership interests;
(xix) Astro has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xx) Astro has not granted any increase in the base compensation of
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving Astro;
(xxii) Astro has not discharged a material Liability or Lien outside
the Ordinary Course of Business;
(xxiii) Astro has not made any loans or advances of money;
(xxiv) Astro has not disclosed any material Confidential Information
to a recipient that is not bound by an obligation of confidentiality in
respect thereof; and
(xv) Astro has not committed to any of the foregoing.
(h) Undisclosed Liabilities. Astro has no Liability except for (i)
Liabilities set forth in the Most Recent Balance Sheet or the notes thereto,
(ii) Liabilities that have arisen after the Most Recent Balance Sheet in the
Ordinary Course of Business, and (iii) Liabilities not required to be set forth
in financial statements prepared in accordance with GAAP or the notes thereto.
(i) Legal Compliance. Astro is in compliance with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder and including the Foreign Corrupt
Practices Act, 15 U.S.C. 78dd-1 et seq.) of federal, state and local governments
(and all agencies thereof) except where the failure to be in such compliance
would not have a Material Adverse Effect, and to the Knowledge of Astro no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against it alleging any failure to
be in such compliance.
(j) Tax Matters.
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(i) Astro has filed all Tax Returns that it was required to file under
applicable laws and regulations. All such Tax Returns were correct and complete
in all material respects and all Taxes shown as due and owing by Astro on any
such Tax Returns have been paid. Astro is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where Astro does not file Tax Returns
that Astro 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 Astro.
(ii) Astro has withheld and paid all Taxes required to have been withheld
and paid in connection with any amounts paid or owing to any employee or
independent contractor.
(iii) No federal, state, or local tax audits or administrative or judicial
Tax proceedings are pending or, to the Knowledge of Astro, being conducted with
respect to Astro. To the Knowledge of Astro, Astro has not received from any
federal, state, or local taxing authority (including jurisdictions where Astro
has not filed Tax Returns) any (i) written notice indicating an intent to open
an audit or other review, (ii) written request for information related to Tax
matters, or (iii) written notice of deficiency or proposed adjustment for any
amount of Tax proposed, asserted, or assessed by any taxing authority against
Astro. Section 4(j)(iii) of the Disclosure Schedule lists all federal, state and
local income Tax Returns filed with respect Astro for taxable periods ended on
or after December 31, 2002, and Astro has delivered or made available to Buyer
correct and complete copies thereof.
(iv) Astro has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
(v) Astro is not a party to any agreement, contract, arrangement or plan
that has resulted or could 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) and
(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).
Astro has not 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). Astro is not a party to or bound by any Tax allocation
or sharing agreement. Astro (A) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return or (B) has no Liability for the
Taxes of any other Person under Reg. Section 1.1502-6 (or any similar provision
of state or local), as a transferee or successor, by contract, or otherwise.
(k) Real Property.
(i) Section 4(k)(i) of the Disclosure Schedule sets forth the address and
description of each parcel of Owned Real Property. With respect to each parcel
of Owned Real Property:
(A) Astro has good and marketable indefeasible fee simple title, free
and clear of all Liens, except Permitted Encumbrances;
(B) Astro has not leased or otherwise granted to any Person the right
to use or occupy such Owned Real Property or any portion thereof; and
(C) there are no outstanding options, rights of first offer or rights
of first refusal to purchase such Owned Real Property or any portion
thereof or interest therein.
(ii) The Owned Real Property identified in Section 4(k)(i) of the
Disclosure Schedule (the "Real Property") comprises all of the real property
used or intended to be used in, or otherwise related to,
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Astro's business; and Astro is not a party to any agreement or option to
purchase any real property or interest therein.
(iv) All buildings, structures, fixtures, building systems and equipment,
and all components thereof, including the roof, foundation, load-bearing walls
and other structural elements thereof, included in the Real Property (the
"Improvements") are in good condition and repair (normal wear and tear excepted)
and sufficient for the operation of Astro's business.
(v) There is no condemnation, expropriation or other proceeding in eminent
domain, pending or to the Knowledge of Astro threatened, affecting any parcel of
Real Property or any portion thereof or interest therein.
(vi) All certificates of occupancy and all material permits, licenses,
franchises, approvals and authorizations (collectively, the "Real Property
Permits") of governmental authorities having jurisdiction over the Real Property
that are required to use or occupy the Real Property or operate Astro's business
as currently conducted thereon, have been issued and are in full force and
effect. Astro has received no written notice from any governmental authority
threatening a suspension, revocation, modification or cancellation of any Real
Property Permit.
(vii) The classification of the Real Property under applicable zoning laws,
ordinances and regulations permit the current use and occupancy of the Real
Property.
(l) Intellectual Property.
(i) Astro owns and possesses or has the right to use all Intellectual
Property necessary or desirable for the operation of the business of Astro
as presently conducted. Each item of Intellectual Property owned or used by
Astro immediately prior to the Closing will be owned or available for use
by Astro immediately subsequent to the Closing.
(ii) To the Knowledge of Astro, Astro has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and Astro has never received
any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that Astro must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of Astro, no third
party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of Astro.
(iii) Astro does not currently, nor has it owned in the past, any
registered Intellectual Property.
(m) Tangible Assets. Astro owns or leases all assets necessary for the
conduct of its business as presently conducted. Such tangible assets have been
maintained in accordance with normal industry practice, are in good operating
condition and repair (subject to normal wear and tear), and are suitable for the
purposes for which it presently is used.
(n) Inventory. The inventory of Astro consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured. Other than inventory that has been purchased in bulk
(so called "life time" buys) and other than inventory that has been paid for by
a customer or other third party, no material portion of the inventory of Astro
is slow-moving, obsolete, damaged, or defective, subject only to the reserve
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for inventory writedown set forth on the face of the Most Recent Balance Sheet
as adjusted for the passage of time through the Closing Date in the Ordinary
Course of Business.
(o) Contracts. Section 4(o) of the Disclosure Schedule lists the following
contracts and other agreements (including oral contracts and agreements) to
which Astro is a party:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than 1 year or
involve consideration in excess of $200,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $50,000 or under
which it has imposed a Lien on any of its assets, tangible or intangible;
(v) any agreement concerning non-competition or the primary purpose of
which is to prohibit Astro from disclosing proprietary information of a
Third Party;
(vi) any agreement with any of Sellers and their Affiliates (other
than Astro);
(vii) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(viii) any agreement under which it has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(ix) any settlement, conciliation or similar agreement, the
performance of which will involve payment after the Closing Date of
consideration in excess of $50,000;
(x) any agreement under which Astro has advanced or loaned any other
Person amounts in the aggregate exceeding $50,000; or
(xi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $50,000 (other
than purchase orders).
Astro has delivered or made available to Buyer a correct and complete copy of
each written agreement (as amended to date) listed in Section 4(o) of the
Disclosure Schedule. With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) to the
Knowledge of Astro, no party is in breach or default, and no event has occurred
that with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and (C)
to the Knowledge of Astro no party has repudiated any provision of the
agreement.
(p) Notes and Accounts Receivable. All notes and accounts receivable
of Astro arose from bona fide transactions and are collectible in the
Ordinary Course of Business.
(q) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of Astro.
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(r) Insurance. Section 4(r) of the Disclosure Schedule sets forth each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) to which
Astro is, or has been since the commencement of its business, a party, a named
insured, or otherwise the beneficiary of coverage. With respect to each such
insurance policy that has not expired by its terms: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) neither Astro
nor, to the Knowledge of Astro, any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred that, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (C) to the Knowledge of Astro no party to
the policy has repudiated any provision thereof.
(s) Litigation. Astro is not (i) subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) a party or, to the Knowledge
of Astro, threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state or local jurisdiction or before any
arbitrator.
(t) Employees.
(i) With respect to the business of Astro:
(A) there is no collective bargaining agreement or relationship
with any labor organization;
(B) to the Knowledge of Astro, no executive or managerial
employee of Astro has any present intention to terminate his or her
employment with Astro;
(C) no labor organization or group of employees has filed any
representation petition or made any written or oral demand for
recognition;
(D) to the Knowledge of Astro no union organizing or
decertification efforts are underway or threatened and no other
question concerning representation exists;
(E) no labor strike, work stoppage, slowdown, or other material
labor dispute has occurred, and none is underway or, to the Knowledge
of Astro, threatened;
(F) there is no workmans compensation claim pending or, to the
Knowledge of Astro, threatened; and
(G) there is no employment-related charge, complaint, grievance,
investigation, or inquiry of any kind, pending or, to the Knowledge of
Astro, threatened in any forum, relating to an alleged violation or
breach by Astro (or its officers or directors) of any law, regulation
or contract.
(ii) Except as set forth in Section 4(t) of the Disclosure Schedule,
(A) there are no employment contracts or severance agreements with any
employees of Astro, and (B) there are no written personnel policies, rules
or procedures applicable to employees of Astro.
(iii) Within the past 3 years, Astro has not implemented any plant
closing or layoff of employees that could implicate the Worker Adjustment
and Retraining Notification Act of 1988, as amended, or any similar
foreign, state, or local law, regulation, or ordinance.
(u) Employee Benefits.
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(i) Section 4(u) of the Disclosure Schedule lists each Employee
Benefit Plan that Astro maintains or to which Astro contributes or has any
obligation to contribute.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) has been maintained, funded and
administered in accordance with the terms of such Employee Benefit
Plan and complies in form and in operation in all material respects
with the applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All required reports and descriptions (including Form 5500
annual reports, summary annual reports, and summary plan descriptions)
have been timely filed and/or distributed in accordance with the
applicable requirements of ERISA and the Code with respect to each
such Employee Benefit Plan.
(C) All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been made
within the time periods prescribed by ERISA and the Code to each such
Employee Benefit Plan that is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date that
are not yet due have been made to each such Employee Pension Benefit
Plan or accrued in accordance with the past custom and practice of
Astro.
(D) Each such Employee Benefit Plan that is intended to meet the
requirements of a "qualified plan" under Code Section 401(a) has
received a determination from the Internal Revenue Service that such
Employee Benefit Plan is so qualified (or is a standardized plan for
which the prototype plan sponsor has received a favorable
determination letter from the Internal Revenue Service as to the
qualification of the standardized plan), and nothing has occurred
since the date of such determination that could reasonably be expected
to adversely affect the qualified status of any such Employee Benefit
Plan.
(E) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to the administration or the investment
of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of Astro,
threatened. To the Knowledge of Astro, no Fiduciary has any Liability
for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
such Employee Benefit Plan.
(F) Astro has delivered or made available to Buyer correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal
Revenue Service, the most recent annual report (Form 5500, with all
applicable attachments), and all related trust agreements, insurance
contracts, and other funding arrangements that implement each such
Employee Benefit Plan.
(ii) Astro does not contribute to, have any obligation to contribute
to, or have any Liability under or with respect to any Employee Pension
Benefit Plan that is a "defined benefit plan" (as defined in ERISA
Section 3(35)).
(iii) Astro does not contribute to, have any obligation to contribute
to, or have any Liability (including withdrawal liability as defined in
ERISA Section 4201) under or with respect to any Multiemployer Plan.
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(iv) Astro does not maintain, contribute to or have an obligation to
contribute to, or have any Liability with respect to, any Employee Welfare
Benefit Plan providing health or life insurance or other welfare-type
benefits for current retired or future retired or terminated directors,
officers or employees (or any spouse or other dependent thereof) of Astro
or of any other Person other than in accordance with COBRA.
(v) Guaranties. Astro is not guarantor for any Liability (including
indebtedness) of any other Person.
(w) Environmental, Health, and Safety Matters.
(i) Astro has complied and is in compliance, in each case in all
material respects, with all Environmental, Health, and Safety Requirements.
(ii) Without limiting the generality of the foregoing, Astro has
obtained and substantially complied with, and is in substantial compliance
with, all material permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its business; and a list
of all such permits, licenses and other authorizations is set forth on
Section 4(w) of the Disclosure Schedule.
(iii) Astro has not received any written notice regarding any actual
or alleged violation of Environmental, Health, and Safety Requirements, or
any Liabilities, including any investigatory, remedial or corrective
obligations, relating to it or its facilities arising under Environmental,
Health, and Safety Requirements.
(iv) Astro has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, manufactured, distributed,
or released any substance, including without limitation any hazardous
substance, in violation of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Solid Waste
Disposal Act, as amended, or any other Environmental, Health, and Safety
Requirements.
(v) Astro has not designed, manufactured, sold, marketed, installed,
or distributed products or other items containing asbestos.
(vi) Astro has not assumed any Liability, including without limitation
any obligation for corrective or remedial action, of any other Person
relating to Environmental, Health and Safety Requirements.
(vii) Astro has furnished or made available to Buyer all environmental
audits, reports and other material environmental documents relating to
Astro's properties, facilities, or operations that are in its possession or
under its reasonable control.
(x) Certain Business Relationships with Astro. None of Sellers, their
Affiliates, Sellers' members, directors, officers and employees and Astro's
members, directors, officers and employees, has been involved in any business
arrangement or relationship with Astro within the past 12 months (other than its
relationship as an employee, member, director or officer), and none of Sellers,
their Affiliates, Seller's members, directors, officers and employees and
Astro's members, directors, officers, and employees owns any asset, tangible or
intangible, that is used in the business of Astro.
(y) Customers and Suppliers.
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(i) Section 4(y) of the Disclosure Schedule lists the 10 largest
customers of Astro for each of the 2 most recent fiscal years and sets
forth opposite the name of each such customer the percentage of net sales
attributable to such customer.
(ii) Since the date of the Most Recent Balance Sheet, no significant
supplier of Astro has notified Astro that it shall stop, or decrease the
rate of, supplying materials, products or services to Astro, and no
customer listed on Section 4(y) of the Disclosure Schedule has notified
Astro that it shall stop, or decrease the rate of, buying materials,
products or services from Astro.
(z) Product Warranty. To the Knowledge of Astro, each product manufactured,
sold, leased, or delivered by Astro has been in conformity with all applicable
contractual commitments and all express and implied warranties. The standard
terms and conditions for the manufacture and sale of products under the
contracts listed in Section (ii) on Schedule Section 4(o) include a 12 month
warranty against defects in workmanship and process materials, except that the
contract with Aastrom Biosciences Inc. has a term of 18 months, the contract
with ImageGuide has a term of 24 months after shipment by Astro or 12 months
after shipment to the end user, and the contract with Xxxxxxx Kodak has a term
of 90 days from the Receipt Date (as that term is defined in such contract).
aa) Product Liability. There are no claims pending or, to the Knowledge of
Astro, threatened alleging injury to individuals or property as a result of the
ownership, possession, or use of any product manufactured, sold, leased, or
delivered by Astro prior to the Closing, and to the Knowledge of Astro, there is
no basis for any such claim.
(bb) Disclosure. To the Knowledge of Astro, the representations and
warranties contained in this Section 4 do not contain any untrue statement of a
material fact or omit to state any fact necessary in order to make such
representations and warranties not misleading in any material respect.
Section 5. Intentionally Omitted.
Section 6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing:
(a) General. In case at any time after the Closing any further actions are
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further actions (including the execution and delivery of
such further instruments and documents) as any other Party may reasonably
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8 below).
Without limiting the generality of the foregoing, the Parties shall cooperate in
the conduct or defense of any proceeding involving the transaction contemplated
by this Agreement or the business of Astro. Sellers acknowledge and agree that
from and after the Closing Astro will be entitled to possession of all
documents, books, records (including Tax records), agreements, and financial
data of any sort relating to Astro with the sole exception of the personal
records of Wood and Xxxxxxx.
(b) Transition. None of Sellers will take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Astro from maintaining the same
business relationships with Astro after the Closing as it maintained with Astro
prior to the Closing. Until June 30, 2010, Guarantors and Sellers shall refer
all customer inquiries relating to the business of Astro to Buyer.
(c) Confidentiality. Each Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to Buyer or
destroy, at the request and option of Buyer, all tangible embodiments (and all
copies) of
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the Confidential Information that are in its possession. In the event that any
Seller is requested or required pursuant to written or oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process to disclose any Confidential
Information, such Seller will notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(c). If, in the absence of a
protective order or the receipt of a waiver hereunder, any of Sellers is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal, such Seller may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Seller shall use its reasonable best
efforts to obtain, at the reasonable request and at the expense of Buyer, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as Buyer shall
designate. The foregoing provisions shall not apply to any Confidential
Information that is generally available to the public immediately prior to the
time of disclosure.
(d) Covenant Not to Compete. At the Closing, each of the Sellers is
entering into a covenant not to compete in the form as attached as Exhibit E.
(e) Buyer Notes. Each Buyer Note is being imprinted with a legend
substantially in the following form:
The payment of principal and interest on this Note is subject to certain
recoupment provisions set forth in a Membership Purchase Agreement dated as
of May 31, 2006 (the "Purchase Agreement") among the issuer of this Note,
the person to whom this Note originally was issued, and certain other
persons. This Note was originally issued on May 31, 2006, and has not been
registered under the Securities Act of 1933, as amended, or any state
securities act, and may not be sold or transferred in the absence of such
registration or qualification or an exemption therefrom under the
securities act or any such state securities laws that may be applicable.
The sale or transfer of this Note is subject to certain restrictions set
forth in the Purchase Agreement. The issuer of this Note will furnish a
copy of these provisions to the holder hereof without charge upon written
request.
Each holder desiring to transfer a Buyer Note first must furnish Buyer with (i)
a written opinion satisfactory to Buyer in form and substance from counsel
satisfactory to Buyer by reason of experience to the effect that the holder may
transfer the Buyer Note as desired without registration under the Securities Act
and (ii) a written undertaking executed by the desired transferee satisfactory
to Buyer in form and substance agreeing to be bound by the recoupment provisions
and the restrictions on transfer contained herein.
(f) Indemnification. Buyer agrees that all rights to indemnification or
exculpation now existing in favor of the directors or officers of Astro relating
to claims against such directors or officers by Third Parties as provided in the
Articles of Organization or Operating Agreement of Astro (and specifically
excepting any claim arising out of this Agreement and any agreement contemplated
herein) shall continue in full force and effect for a period of not less than
four years from the Closing Date; provided, however that in the event any claim
or claims are asserted or made within such four-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims. Any determination required to be made
with respect to whether the conduct of any director or officer of Astro complies
with the standards set forth in the Articles of Organization or Operating
Agreement shall be made by independent counsel selected by such director or
officer and reasonably satisfactory to Buyer (whose fees and expenses shall be
paid by Buyer). Buyer agrees to cause Astro to fully perform all obligations to
be performed by Astro under its Articles of Organization or Operating Agreement.
In the event the foregoing indemnities become unavailable or unenforceable for
any reason, Buyer agrees to indemnify and hold harmless such directors and
officers to the same extent as if such indemnities were available and in full
force and effect. In the event Astro or any of its successors or assigns (i)
consolidates with or mergers into any Person and shall not be the continuing or
surviving
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corporation or entity of such consolidation or merger, or (ii) transfers all or
substantially all of its properties, assets or stock to any Person, then and in
each such case, proper provision shall be made so that the successors and
assigns of Astro (or its successors and assigns) shall assume the obligations
set forth in this Section.
(g) Employees. For purposes of determining eligibility to participate or
vesting where length of service is relevant under any employee benefit plan or
arrangement of Buyer, Astro employees shall receive service credit for service
with Astro prior to the Closing Date. Buyer shall cause Astro to (a) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to Astro employees
under any welfare benefit plans that such employees may be eligible to
participate in after the Closing Date and (b) provide each Astro employee with
credit for any co-payments and deductibles paid prior to the Closing Date in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans in which such employees are eligible to participate after the
Closing Date. Nothing in this Section is intended nor shall be construed to
provide any employee of Astro with guaranteed employment after the Closing, and
all such employees (other than those who have written employment agreements with
Astro providing otherwise) shall be at-will employees of Astro after the Closing
Date.
Section 7. Deliveries at Closing.
(a) Sellers' Deliveries. Sellers are delivering the following to Buyer:
(i) the resignations, effective as of the Closing, of each director
and officer of Astro other than those whom Buyer shall have specified in
writing at least 5 business days prior to the Closing;
(ii) a non-foreign affidavit, dated as of the Closing Date, sworn
under penalty of perjury and in form and substance required under the
Treasury Regulations issued pursuant to Code Section 1445 stating that each
Seller is not a "Foreign Person" as defined in Code Section 1445;
(iii) copies of the certificate of organization (or formation) of each
Seller and Astro certified on or soon before the Closing Date by the
Secretary of State (or comparable officer) of the jurisdiction of each such
Person's formation;
(iv) copies of the certificate of good standing of each Seller and
Astro issued on or soon before the Closing Date by the Secretary of State
(or comparable officer) of the jurisdiction of each such Person's
organization and of each jurisdiction in which each such Person is
qualified to do business;
(v) a certificate of the manager of each of Sellers, dated the Closing
Date, in form and substance reasonably satisfactory to Buyer, as to: (i) no
amendments to the certificate of organization of such Seller since the date
specified in clause (iii) above; (ii) the operating agreement (or other
governing documents) of such Seller; and (iii) the resolutions of the
manager and members of such Seller authorizing the execution, delivery, and
performance of this Agreement and the transactions contemplated hereby;
(vi) a certificate of the manager of Astro, dated the Closing Date, in
form and substance reasonably satisfactory to Buyer, as to: (i) no
amendments to the articles of organization of Astro since the date
specified in clause (iii) above; (ii) the operating agreement of Astro; and
(iii) the resolutions of the manager and members of Astro relating to this
Agreement and the transactions contemplated hereby; and
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(vii) an opinion from counsel to the Sellers in form and substance as
set forth in Exhibit F attached hereto, addressed to Buyer and dated as of
the Closing Date.
(b) Buyer's Deliveries. Buyer is delivering the following to the Sellers:
(i) releases of the Guarantors and the Sellers from the guarantee of
Astro's mortgage on the Owned Real Property;
(ii) copies of the articles of incorporation of Buyer and Parent
certified on or soon before the Closing Date by the Secretary of State (or
comparable officer) of the jurisdiction of each such Person's
incorporation;
(iii) copies of the certificate of good standing of Buyer and Parent
issued on or soon before the Closing Date by the Secretary of State (or
comparable officer) of the jurisdiction of each such Person's organization;
(iv) a certificate of the secretary of each of Buyer and Parent, dated
the Closing Date, in form and substance reasonably satisfactory to Sellers,
as to: (i) no amendments to the articles of incorporation of Buyer and
Parent since the date specified in clause (ii) above; (ii) the resolutions
of the board of directors and, if necessary, the shareholders, of Buyer and
Parent authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and (iii) the
incumbency and signatures of the officer or officers of the Buyer and
Parent executing this Agreement and the other agreements contemplated
hereby; and
(v) an opinion from counsel to Buyer in form and substance as set
forth in Exhibit G attached hereto, addressed to Sellers and dated as of
the Closing Date.
Section 8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder for a period of 18 months and any
claim for indemnification hereunder must first be made prior to the expiration
of such period, except that the representations and warranties of the Sellers
contained in Section 3(a)(vi) regarding title to the Target Membership Interest
owned by the Sellers shall survive the Closing indefinitely.
(b) Indemnification Provisions for Buyer's Benefit.
(i) In the event any Seller or Astro breaches (or in the event any
third party alleges facts that, if true, would mean any Seller or Astro has
breached) any of its representations, warranties, and covenants contained
herein (other than the covenants in Section 2(a) above and the
representations and warranties in Section 3(a) above) and, provided that
Buyer makes a written claim for indemnification against the Sellers
pursuant to Section 11(h) below within the survival period, then each
Seller shall be obligated, jointly and severally, to indemnify Buyer from
and against the entirety of any Adverse Consequences Buyer suffers
(including any Adverse Consequences Buyer suffers after the end of the
survival period) resulting from, arising out of, relating to, or caused by
the breach (or the alleged breach).
(ii) In the event a Seller breaches (or in the event any third party
alleges facts that, if true, would mean a Seller breached) any of its
covenants in Section 2(a) above or any of its representations and
warranties in Section 3(a) above, and provided that Buyer makes a written
claim for indemnification against
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such Seller pursuant to Section 11(h) below within the survival period,
then such Seller shall indemnify Buyer from and against the entirety of any
Adverse Consequences Buyer may suffer (including any Adverse Consequences
Buyer may suffer after the end of any applicable survival period) resulting
from arising out of, relating to, or caused by the breach (or the alleged
breach).
(iii) Each Seller shall be obligated jointly and severally to
indemnify Buyer from and against the entirety of any Adverse Consequences
Buyer suffers resulting from, arising out of, relating to, or claimed to
have been caused by the defective design or manufacture of products prior
to the Closing, the failure of express or implied product warranties given
by Astro prior to the Closing, or the negligent provision of engineering
services by Astro prior to the Closing, but only to the extent such Adverse
Consequences exceed any reserve in respect thereof on the Most Recent
Balance Sheet.
(iv) Sellers hereby assume and agree to pay, perform and discharge all
Liabilities of Astro under that certain letter agreement among Astro, Wood,
Xxxxxxx and Xxxxxxx Xxxxx, Jr. dated May 22, 2002 (the "Xxxxx Agreement").
Each Seller shall be obligated jointly and severally to indemnify, without
limitation as to time or amount, the Buyer from and against the entirety of
any Adverse Consequences Buyer suffers resulting from, arising out of,
relating to, or claimed to have been caused by the failure of Sellers to
satisfy any Liabilities of Astro, Wood or Xxxxxxx to Xxxxx Holdings, LLC
and/or Xxxxxxx Xxxxx, Jr. under the Xxxxx Agreement. Prior to May 31, 2007,
Sellers shall provide Buyer with evidence satisfactory to Buyer that the
Xxxxx Agreement has been fully performed and that Xxxxx Holding, LLC and
Xxxxxxx Xxxxx, Jr. have no claims against Astro thereunder. If Sellers fail
to provide Buyer with such evidence by May 31, 2007, Buyer shall be
permitted, but not required, to obtain a release from Xxxxx Holding, LLC
and Xxxxxxx Xxxxx, Jr. on such terms and conditions as it deems appropriate
in its reasonable discretion, and Sellers shall jointly and severally
indemnify Buyer against any Adverse Consequences suffered by Buyer in
connection with obtaining such release and/or transfer.
(c) Indemnification Provisions for Sellers' Benefit. In the event Buyer
breaches (or in the event any third party alleges facts that, if true, would
mean Buyer has breached) any of its representations, warranties, and covenants
contained herein and, provided that any Seller makes a written claim for
indemnification against Buyer pursuant to Section 11(h) below within the
survival period, then Buyer shall indemnify each Seller from and against the
entirety of any Adverse Consequences suffered (including any Adverse
Consequences suffered after the end of any applicable survival period) resulting
from, arising out of, relating to, or caused by the breach (or the alleged
breach).
(d) Matters Involving Third Parties.
(i) If any third party notifies any Party (the "Indemnified Party")
with respect to any matter (a "Third-Party Claim") that may give rise to a
claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided, however, that
no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party is thereby
prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third-Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third-Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, or caused by the
Third-Party
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Claim and the Indemnifying Party conducts the defense of the Third-Party
Claim actively and in good faith.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third-Party Claim, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of
the Third-Party Claim, (B) the Indemnified Party will not consent to the
entry of any judgment on or enter into any settlement with respect to the
Third-Party Claim without the prior written consent of the Indemnifying
Party (not to be unreasonably withheld), and (C) the Indemnifying Party
will not consent to the entry of any judgment on or enter into any
settlement with respect to the Third-Party Claim without the prior written
consent of the Indemnified Party (not to be unreasonably withheld).
(iv) In the event the Indemnifying Party is not conducting the defense
of the Third-Party Claim, (A) the Indemnified Party may defend against the
Third-Party Claim in any manner it may reasonably deem appropriate, but the
Indemnified Party shall not consent to the entry of any judgment on or
enter into any settlement with respect to the Third-Party Claim without the
prior written consent of the Indemnifying Party (not to be unreasonably
withheld), (B) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the
Third-Party Claim (including reasonable attorneys' fees and expenses), and
(C) the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, or caused by the Third-Party Claim to the fullest extent
provided in this Section 8.
(e) Determination of Adverse Consequences. All indemnification payments
under this Section 8 and Section 9(a) shall be deemed adjustments to the
Purchase Price. The amount of any Adverse Consequences for which indemnification
is provided under this Section 8 shall be reduced by any amounts recovered by
the Indemnified Party under insurance policies with respect to such Adverse
Consequences and shall also be reduced to take into account any tax benefit
realized or realizable by the Indemnified Party arising from the incurrence or
payment of any such Adverse Consequences. If any such reduction is determined
after payment by the Indemnifying Party of any amounts otherwise required to be
paid pursuant to this Section 8, the Indemnified Party shall repay to the
Indemnifying Party, within ten business days of such determination, any amount
the Indemnifying Party would not have had to pay pursuant to this Section had
such determination been made at the time of such payment. The Indemnified Party
shall use its commercially reasonable best efforts to mitigate the amount of any
Adverse Consequences that it may suffer, and shall make insurance claims
relating to any Adverse Consequences for which indemnification is provided under
this Section 8.
(f) Limitations. The Sellers shall have no obligation to indemnify the
Buyer under Section 8(b) unless and until the aggregate of all Adverse
Consequences suffered or incurred by Buyer thereunder exceeds Three Hundred
Thousand Dollars ($300,000), and then only for the excess over such amount. The
aggregate amount of Adverse Consequences that Sellers shall be obligated to pay
hereunder (including any amount of Adverse Consequences that is satisfied by
offset or recoupment) shall not exceed Seven Million Five Hundred Thousand
Dollars ($7,500,000). Sellers' indemnification obligations under Section
8(b)(iii) shall terminate on the third anniversary of the Closing Date.
(g) Exclusive Remedy. After the Closing, except as provided in Section 9
below and except for equitable relief contemplated by Section 11(o), the
remedies provided in this Section 8 (subject to the limitations set forth in
this Agreement) shall be the exclusive remedies available to a Party for any and
all Adverse Consequences resulting from breaches of the representations,
warranties, covenants and agreements in or contemplated by this Agreement and
shall be the exclusive remedy of Buyer and its Affiliates (including Astro) with
respect to any
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rights, causes of action, remedies, or damages that they may have or assert
against Sellers arising from or related to the business of Astro or any law,
including environmental, securities and trade regulation laws.
(h) Recoupment Against Buyer Notes and Earn-out Payments. Any sums that are
finally determined to be due to Buyer pursuant to Sections 8 or 9 of this
Agreement shall be satisfied first by offsetting the amounts so due against
amounts payable under the Buyer Notes and then the Earn-Out Payment. Subject to
the other provisions hereof, any sums that are finally determined to be due to
Buyer pursuant to Sections 8 or 9 of this Agreement in excess of the amounts
then payable under the Buyer Notes and the Earn-Out Payment shall be paid by
Sellers.
Section 9. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Sellers for certain tax
matters following the Closing Date:
(a) Tax Indemnification. Each Seller shall jointly and severally indemnify
Astro and Buyer and hold them harmless from and against without duplication, any
loss, claim, liability, expense, or other damage attributable to Taxes (or the
non-payment thereof) of Astro for all taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any taxable
period that includes (but does not end on) the Closing Date ("Pre-Closing Tax
Period").
(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 Astro 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 the amount of other Taxes of Astro for
a Straddle Period that relates 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 Astro that are
filed after the Closing Date. Buyer shall permit Sellers to review and comment
on Tax Returns applicable to tax periods occurring prior to the Closing Date
described in the preceding sentence prior to filing.
(d) Cooperation on Tax Matters.
(i) Buyer, Astro and Sellers 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 9(c) 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 that 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. Astro and Sellers agree (A) to retain all books and
records with respect to Tax matters pertinent to Astro 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, Astro 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 their
commercially reasonable efforts to obtain any certificate or other document
from any governmental authority or any other Person as
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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 either Party may be required to
report pursuant to Code Section 6043 and all Treasury Regulations
promulgated thereunder.
(e) Certain Taxes and Fees. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, including taxes imposed on Sellers as a
result of the transactions contemplated by this Agreement, (including any
penalties and interest) incurred in connection with consummation of the
transactions contemplated by this Agreement shall be paid by Sellers when due,
and Sellers will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, and, if required by applicable
law, Buyer will, and will cause its Affiliates to, join in the execution of any
such Tax Returns and other documentation.
(f) Basis Elections. At Buyer's option, Astro and each Seller shall join
with Buyer in making an election under Code Section 754 (and any corresponding
election under state and local tax law) with respect to the purchase and sale of
the Target Membership Interests. Sellers shall include any income, gain, loss or
deduction, or other tax item resulting from the election on their tax returns to
the extent required by applicable law.
Section 10. Intentionally Omitted.
Section 11. Miscellaneous.
(a) Nature of Sellers' Obligations.
(i) The covenants of each Seller in Section 2(a) above concerning the
sale of its Target Membership Interests to Buyer and the representations
and warranties of each Seller in Section 3(a) above concerning the
transaction are individual, and not joint and several, obligations. This
means that the particular Seller making the representation, warranty, or
covenant shall be solely responsible to the extent provided in Section
8(b)(ii) above for any Adverse Consequences Buyer may suffer as a result of
any breach thereof.
(ii) The remainder of the representations, warranties, and covenants
in this Agreement are joint and several obligations. This means that each
Seller shall be responsible to the extent provided in Section 8(b)(i) and
(iii) above for the entirety of any Adverse Consequences Buyer may suffer
as a result of any breach thereof, subject to the other provisions of this
Agreement.
(b) Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement without the prior written approval of Buyer and Sellers; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Parties prior to making the
disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
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(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign this Agreement or any of its
obligations hereunder without the prior written approval of Buyer and Sellers;
provided, however, that Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases Buyer nonetheless shall remain responsible for the performance of
all of its obligations hereunder); provided further, that Sellers may assign any
or all of their rights to receive Earn-out Payments or payments on the Buyer
Notes with the prior written consent of the Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed), except that Sellers may assign
any or all of their rights to receive Earn-out Payments to or for the benefit of
some or all of the employees of Astro as of the Closing Date without the written
consent of Buyer.
(f) Counterparts. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) 1 business day after being sent to
the recipient by reputable overnight courier service (charges prepaid), (iii) 1
business day after being sent to the recipient by facsimile transmission or
electronic mail, or (iv) 4 business days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid, and
addressed to the intended recipient as set forth below:
If to Sellers: Copy to:
c/o Xxx Xxxxxxx Xxxxx & Xxxxxxx, P.C.
000 Xxxxxxx Xxxxxx 11 Stanwix Street, 15th Floor
Pittsburgh, PA 15222 Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000 Attn: Xxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to Buyer: Copy to:
c/o Sparton Corporation Xxxxxxx Xxxxx P.C.
0000 Xxxx Xxxxxx Xxxxxx 000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000 X.X. Xxx 000
Attn: Xxxxx X. Xxxxxxxxxxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000 Attn: Xxxxxx X. Xxxxxxx, III, Esq.
Fax: (000) 000-0000
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Ohio without giving effect to
any choice or conflict of law provision or rule (whether of the State of Ohio or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Ohio.
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(j) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by Buyer and
Sellers. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such default, misrepresentation, or breach of warranty or
covenant.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of Buyer, Sellers and Astro shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby; provided, however, that
Sellers shall also bear the legal costs and expenses of Astro in connection with
this Agreement and the transactions contemplated hereby; provided, further, that
Astro shall bear the accounting fees and expenses incurred in connection with
the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event 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. Any reference to any federal, state, or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. The Parties intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) that the Party
has not breached shall not detract from or mitigate the fact that the Party is
in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Specific Performance. Each Party acknowledges and agrees that the other
Parties would be damaged irreparably in the event any provision of this
Agreement is not performed in accordance with its specific terms or otherwise is
breached, so that a Party shall be entitled to injunctive relief to prevent
breaches of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in addition to any other remedy to which such Party
may be entitled, at law or in equity. In particular, the Parties acknowledge
that the business of Astro is unique and recognize and affirm that in the event
Sellers breach this Agreement, money damages would be inadequate and Buyer would
have no adequate remedy at law, so that Buyer shall have the right, in addition
to any other rights and remedies existing in its favor, to enforce its rights
and the other Parties' obligations hereunder not only by action for damages but
also by action for specific performance, injunctive, and/or other equitable
relief.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Cleveland, Ohio, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or
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proceeding may be heard and determined in any such court. Each Party also agrees
not to bring any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Any Party may make service on any other Party by
sending or delivering a copy of the process (i) to the Party to be served at the
address and in the manner provided for the giving of notices in Section 11(h)
above. Nothing in this Section 11(p), however, shall affect the right of any
Party to serve legal process in any other manner permitted by law or at equity.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
(q) Governing Language. This Agreement has been negotiated and executed by
the Parties in English. In the event any translation of this Agreement is
prepared for convenience or any other purpose, the provisions of the English
version shall prevail.
(r) Parent Guarantee. Parent hereby absolutely, unconditionally and
irrevocably guarantees the full and timely payment and performance of Buyer of
all provisions of this Agreement, including Section 2(e) hereof, and each other
agreement or instrument contemplated hereby, including the Buyer Notes. Parent
hereby waives notice of the acceptance hereof, presentment, demand for payment,
protest, notice of protest, or any and all notice of non-payment,
non-performance or non-observance, or other proof, or notice or demand. Parent
waives any right to require Sellers to proceed against Buyer or pursue any other
remedy in Sellers' power whatsoever. The obligation of Parent hereunder will not
be discharged (to the extent permitted by law) by: (i) any extension or renewal
with respect to any obligation hereunder or under any agreement or instrument
contemplated hereby; (ii) any modification, or amendment to, this Agreement or
any other agreement or instrument contemplated hereby; (iii) any
conservatorship, receivership, insolvency, bankruptcy, reorganization,
arrangement, composition, liquidation, dissolution or similar proceedings with
respect to Buyer; or (iv) any other occurrence whatsoever, except payment and
performance in full of all obligations covered by this guarantee, without regard
to any rejection or termination thereof by reason of any proceeding in
bankruptcy or reorganization or the exercise of remedies thereunder. Parent
represents and warrants to Sellers that Parent is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, that it has full power and authority to execute, deliver and
perform this Agreement, and that this Agreement constitutes the valid and
legally binding obligation of Parent, enforceable in accordance with its terms
and conditions, except as enforcement may be limited by general principles of
equity and by bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights and remedies generally, regardless of whether asserted in a
proceeding in equity or at law.
(s) Xxxxxxx Guarantee. Xxxxxxx hereby absolutely, unconditionally and
irrevocably guarantees the full and timely payment and performance of X. Xxxxxxx
Holdings, LLC of all provisions of this Agreement, and each other agreement or
instrument contemplated hereby. Xxxxxxx hereby waives notice of the acceptance
hereof, presentment, demand for payment, protest, notice of protest, or any and
all notice of non-payment, non-performance or non-observance, or other proof, or
notice or demand. Xxxxxxx waives any right to require Buyer to proceed against
X. Xxxxxxx Holdings, LLC or pursue any other remedy in Buyer's power whatsoever.
The obligation of Xxxxxxx hereunder will not be discharged (to the extent
permitted by law) by: (i) any extension or renewal with respect to any
obligation hereunder or under any agreement or instrument contemplated hereby;
(ii) any modification, or amendment to, this Agreement or any other agreement or
instrument contemplated hereby; (iii) any conservatorship, receivership,
insolvency, bankruptcy, reorganization, arrangement, composition, liquidation,
dissolution or similar proceedings with respect to X. Xxxxxxx Holdings, LLC; or
(iv) any other occurrence whatsoever, except payment and performance in full of
all obligations covered by this guarantee, without regard to any rejection or
termination thereof by reason of any proceeding in bankruptcy or reorganization
or the exercise of remedies thereunder. Xxxxxxx represents and warrants to Buyer
that Xxxxxxx has the capacity to execute, deliver and perform this Agreement,
and that this Agreement constitutes the valid and legally binding obligation of
Xxxxxxx, enforceable in accordance with its terms and conditions, except as
enforcement may be limited by general principles of equity and by
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bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights
and remedies generally, regardless of whether asserted in a proceeding in equity
or at law.
(t) Wood Guarantee. Wood hereby absolutely, unconditionally and irrevocably
guarantees the full and timely payment and performance of X. Xxxx Holdings, LLC
of all provisions of this Agreement, and each other agreement or instrument
contemplated hereby. Wood hereby waives notice of the acceptance hereof,
presentment, demand for payment, protest, notice of protest, or any and all
notice of non-payment, non-performance or non-observance, or other proof, or
notice or demand. Wood waives any right to require Buyer to proceed against X.
Xxxx Holdings, LLC or pursue any other remedy in Buyer's power whatsoever. The
obligation of Wood hereunder will not be discharged (to the extent permitted by
law) by: (i) any extension or renewal with respect to any obligation hereunder
or under any agreement or instrument contemplated hereby; (ii) any modification,
or amendment to, this Agreement or any other agreement or instrument
contemplated hereby; (iii) any conservatorship, receivership, insolvency,
bankruptcy, reorganization, arrangement, composition, liquidation, dissolution
or similar proceedings with respect to X. Xxxx Holdings, LLC; or (iv) any other
occurrence whatsoever, except payment and performance in full of all obligations
covered by this guarantee, without regard to any rejection or termination
thereof by reason of any proceeding in bankruptcy or reorganization or the
exercise of remedies thereunder. Wood represents and warrants to Buyer that Wood
has the capacity to execute, deliver and perform this Agreement, and that this
Agreement constitutes the valid and legally binding obligation of Wood,
enforceable in accordance with its terms and conditions, except as enforcement
may be limited by general principles of equity and by bankruptcy, insolvency,
moratorium and similar laws affecting creditors' rights and remedies generally,
regardless of whether asserted in a proceeding in equity or at law.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
ASTRO INSTRUMENTATION, INC.
/s/ Xxxxx X. Xxxxxxxxxxxx
----------------------------------------
By: Xxxxx X. Xxxxxxxxxxxx
Its: President
SPARTON CORPORATION
/s/ Xxxxx X. Xxxxxxxxxxxx
----------------------------------------
By: Xxxxx X. Xxxxxxxxxxxx
Its: CEO & President
X. XXXXXXX HOLDINGS, LLC.
/s/ Xxx X. Xxxxxxx
----------------------------------------
By: Xxx X. Xxxxxxx
Its: Manager
X. XXXX HOLDINGS, LLC.
/s/ Xxxxxxx X. Xxxx
----------------------------------------
By: Xxxxxxx X. Xxxx
Its: Manager
ASTRO INSTRUMENTATION, LLC.
/s/ Xxx X. Xxxxxxx
----------------------------------------
By: Xxx X. Xxxxxxx, Manager
/s/ Xxxxxxx X. Xxxx
----------------------------------------
By: Xxxxxxx X. Xxxx, Manager
/s/ Xxx X. Xxxxxxx
----------------------------------------
Xxx X. Xxxxxxx, individually
/s/ Xxxxxxx Xxxx
----------------------------------------
Xxxxxxx Xxxx, individually
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