STOCK PURCHASE AGREEMENT
STOCK
PURCHASE AGREEMENT made as of the __ day of April, 2007, among Aeroflex
Incorporated, a Delaware corporation having its principal place of business
at
00 Xxxxx Xxxxxxx Xxxx, XX Xxx 0000, Xxxxxxxxx, XX 00000, (the “Purchaser”), and
Xxxxx Xxxxxx residing at 00 Xxxxx Xxx Xxxxxxx, X. H. 03110 (“Xxxxxx”), Xxxx
Xxxxxxxx residing at 000 Xxxx Xxxxxxxx Xxxx, Xxxxxxxxxx, X. H. 03045
(“Xxxxxxxx”), Xxxxx Xxxxxx residing at 0 Xxxxxxx Xxxx, Xxxxxxx, XX 00000
(“Xxxxxx”), Xxxxxx Xxxxxx residing at 000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000
(who, together with Xxxxxxx Xxxxxx and Xxxxx Xxxxxx, family members to whom
he
conveyed an interest in his shares of Micro-Metrics, Inc. common stock,
“Fallon”), Xxxx X.Xxxxxxxx XX Xxx 000, Xxxxxxxx, Xxxxx 00000 (“Xxxxxxxx”), and
Xxxxxx Xxxx, 00000 Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 (“Joly”), as the
actual or putative owners of all of the issued and outstanding capital stock
of
MICRO-METRICS, INC., a New Hampshire corporation having its principal place
of
business at 00 Xxxxxxx Xxxxx Xxxx, Xxxxxxxx X, Xxxxxxxxxxx, XX 00000 (the
“Company”). Langan, Gilligan, Fallon, Xxxxxxxx and Xxxx are collectively
sometimes referred to herein as the “Other Stockholders”, and together with
Xxxxxx, the “Stockholders”.
W
I T N E S S E T H:
A. The
Stockholders are the owners of all of the issued and outstanding capital stock
of the Company (the Stock”). The Company is engaged in the business of
manufacturing and selling microwave diodes and related goods and accessories
(the “Business”).
B. The
Purchaser and Stockholders have agreed to the sale by the Stockholders to the
Purchaser of all of the Stock upon the terms and conditions hereinafter set
forth;
NOW,
THEREFORE, in consideration of the foregoing recitals, which are made a material
part of this Agreement and the covenants, warranties and mutual agreements
herein set forth, and in reliance upon the representations and warranties
contained herein, the parties do hereby agree as follows:
ARTICLE
ONE
|
1.
|
Transfer
of Stock.
|
In
reliance on the representations and warranties contained herein and subject
to
all of the terms and conditions hereof, the Stockholders hereby agree to sell,
assign, transfer and deliver to the Purchaser, and the Purchaser hereby agrees
to purchase from the Stockholders on the Closing Date, all of the Stock.
ARTICLE
TWO
| 2. |
Purchase
Price.
|
2.1. Purchase
Price.
In full
consideration of the sale of the Stock to the Purchaser, and subject to the
terms and conditions hereinafter set forth, at Closing, the Purchaser shall
deliver to the Stockholders the sum of Ten Million ($10,000,000) dollars (the
“Purchase Price”) (less the greater of [x] One Million [$1,000,000] dollars or
[y] 10% of the Purchase Price as adjusted per Section 2.2 hereof, which shall
be
delivered to the Escrow Agents as provided in the Escrow Agreement), by wiring
to the separate accounts of each of the Stockholders, pursuant to a letter
of
instruction signed by the Stockholders and provided to the Purchaser prior
to
the Closing, the pro rata portion of the same to which each Stockholder is
entitled based on his or her equity ownership in the Company on the Closing
Date, as delineated on Schedule 2.1 hereof (the “Stockholder Allocations”).
2.2.
Purchase
Price Adjustment.
(a)
Not
more than two days prior to the Closing Date, the Stockholders shall deliver
to
Purchaser a detailed statement identifying the amount of Bank Debt existing
on
the Closing Date, certified by the President of the Company (the “Bank Debt
Statement”).
(b)
Based
on the Bank Debt Statement, an adjustment to the Purchase Price shall be made
as
follows: (i) the dollar amount by which the Bank Debt on the Closing Date is
less than the Debt Target shall be added to the Purchase Price, and (ii) the
dollar amount by which the Bank Debt is greater than the Debt Target shall
be
subtracted from the Purchase Price. The Purchase Price as adjusted pursuant
to
Section 2.2 is sometimes referred herein as the “Adjusted Purchase
Price.”
ARTICLE
THREE
|
3.
|
The
Closing.
|
3.1. Place
and Date.
The
closing of the transactions provided for in this Agreement shall take place
at
the offices of Moomjian, Waite, Wactlar & Xxxxxxx, LLP (or at such other
place or manner as the parties may agree upon in writing) contemporaneously
with
the execution of this Agreement. The closing is referred to in this Agreement
as
the “Closing” and date of the closing is referred to herein as the “Closing
Date”.
3.2.
Documents
to be Delivered by the Stockholders.
The
Stockholders shall execute and deliver or cause the Company to execute and
deliver to the Purchaser the following:
2
(i)
duly
issued certificates representing all of the Stock duly endorsed in blank, with
blank Stock powers attached and with all required Stock transfer stamps
attached;
(ii)
an
Employment Agreement between Xxxxxx and the Company, effective as of the Closing
Date substantially in the form annexed hereto as Exhibit A (the “Xxxxxx
Employment Agreement”),
(iii)
a
Lease Agreement for the Business Premises between JFD Realty, Inc, (“JFD”),
formed for the purpose by the Stockholders who comprise all of the members
thereof, as Lessor, and the Company as Lessee, substantially in the form annexed
hereto as Exhibit B (the “Lease”);
(iv)
the
Escrow Agreement among the Escrow Agents, Purchaser and the Stockholders and/or
Stockholders Representative substantially in the form annexed hereto as Exhibit
C (the “Escrow Agreement”);
(v)
to
the extent that this Agreement required the Company to take any action in
furtherance of the consummation thereof, a copy of resolutions of the
Stockholders authorizing the execution, delivery and performance of this
Agreement by the Company, and a certificate of the Company’s secretary or
assistant secretary, dated the Closing Date, to the effect that such resolutions
were duly adopted and are in full force and effect;
(vi)
An
Agreement among the Stockholders and the Company, which terminates effectively
as of the Closing Date, any and all outstanding agreements among the
Stockholders and the Company relating to the Stock (collectively, the
“Stockholders Agreements”);
(vii)
appropriate documentation evidencing: (A) the termination of all of the
Company’s stock option agreements and stock option plans; (B) the termination or
liquidation of liability accounts #2205 and #2210; (C) the payment in full
of
all notes receivable from officers of the Company as set forth on Schedule
3.2(vii); (D) the assumption by the Stockholders of a deferred liability for
rent in the approximate amount of $114,000 in connection with the lease of
a
facility by the Company in Rockport, Maine; and (E) the timely and legitimate
exercise by Joly of his right to elect to have Stock reissued to him pursuant
to
a certain Stock Repurchase Agreement dated March 21, 2001 between Joly and
the
Company .
(viii)
written resignations effective as of the Closing Date of such directors,
officers, trustees and bank signatories of the Company as the Purchaser may
request prior to the Closing Date,
(ix)
a
certificate dated the Closing Date executed by the Stockholders confirming
that,
individually and collectively, they have duly performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by them prior to or on the Closing Date.
3
(x)
all
consents required under any of the Scheduled Contracts as a result of the
transactions contemplated herein.
(xi)
all
such receipts, documents and instruments, or copies thereof, certified if
requested, to which the Company is entitled and as may be reasonably requested
by Purchaser or Purchaser’s counsel.
(xii)
all
material licenses, permits, consents, approvals, authorizations, qualifications
and orders of any Governmental Authority which are necessary for the
consummation of the transactions contemplated hereby.
(xiii)
long form certificate as of a date not more than ten (10) days prior to the
Closing Date attesting to the good standing of the Company as a corporation
in
its jurisdiction of incorporation.
(xiv)
all
payoff letters, releases, satisfactions, cancellations, acknowledgements,
statements and other appropriate documentation evidencing the termination,
liquidation or payment of Bank Debt as reflected in the computation of the
Bank
Debt Statement, as well as the termination any security interests in, and rights
to, the Company’s assets and properties in connection therewith.
(xv)
Confidentiality and Non-Competition Agreements by each of the Other
Stockholders, containing terms and conditions not inconsistent with Section
6.5
and Article 7.
(xvi)
such other documents and instruments as may be reasonably requested by the
Purchaser to vest in Purchaser title to the Stock and place Purchaser in
possession and control of the Company and its assets.
3.3 Documents
to be Delivered by the Purchaser.
At
the
Closing, the Purchaser shall execute and deliver or cause to be executed and
delivered to the Stockholders the following:
(i)
a
copy of resolutions of the Board of Directors of Purchaser authorizing the
execution, delivery and performance of this Agreement by Purchaser, and a
certificate of its secretary or assistant secretary, dated the Closing Date,
to
the effect that such resolutions were duly adopted and are in full force and
effect;
(ii)
the
Escrow Agreement;
(iii)
the
Lease;
(iv)
the
Xxxxxx Employment Agreement;
4
(v)
a
certificate by an officer of Purchaser dated the Closing Date confirming that
the Purchaser duly performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
(vi)
all
such receipts, documents and instruments, or copies thereof, certified if
requested, to which the Stockholders are entitled hereunder and as may be
reasonably requested.
(vii)
payment of the Adjusted Purchase Price pursuant to Section 2.1.
(viii)
Employment letters to Xxxxxx and Xxxxxxxx setting forth the severance benefits
to which they would be entitled in the event their employment with the Company
is terminated without just cause after the Closing Date.
3.4 Form
of Documents.
Unless
specifically otherwise provided herein, all documents to be delivered pursuant
to this Article 3 by one party to the other party to this Agreement shall be
in
form and substance reasonably satisfactory to such other party and its or their
counsel.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF STOCKHOLDERS
The
Stockholders jointly and severally represent and warrant to the Purchaser as
of
the date hereof as follows:
4.1. Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Hampshire and has all corporate power and
authority to own, lease and operate its properties and assets and to carry
on
the Business as now being conducted. The Company is duly qualified or licensed
and in good standing in each jurisdiction where the nature of the activities
conducted by it or the character of the property or assets it owns, leases
or
operates, makes such qualification or licensing necessary, except in
jurisdictions where the failure to be so duly qualified or licensed and in
good
standing has not had, and would not have, a Material Adverse Effect.
4.2. Authorization
of Agreements.
The
Stockholders have the requisite legal capacity, power and authority to execute,
deliver and enter into this Agreement and the Related Documents and to perform
their respective obligations under this Agreement and the Related Documents.
This Agreement and each of the Related Documents, respectively, (i) has been
duly executed and delivered by the Stockholders (or the Stockholders’
Representative) and (ii) constitutes the binding obligations of the Stockholders
enforceable against them in accordance with its respective terms, except as
the
enforcement thereof may be subject to or limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors’ rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitably
remedies.
5
4.3. Subsidiaries.
The
Company has no Subsidiaries. The Company owns no interest, directly or
indirectly, and has no commitment to purchase any interest, direct or indirect,
in any other corporation, partnership or enterprise.
4.4. Capital
Stock.
The
Stock constitutes all of the authorized, issued and outstanding capital stock
of
the Company. There are no other equity interests in the Company. There has
not
been any change in the authorized, issued and outstanding capital stock of
the
Company from and after the Balance Sheet Date. All of the outstanding capital
stock of the Company has been duly authorized and is validly issued, fully
paid
and non-assessable and is owned by the Stockholders. All outstanding capital
stock of the Company was issued in compliance with the certificate of
incorporation and by-laws of the Company and with Applicable Law. The
Stockholders have and on the Closing Date will convey to the Purchaser, good,
valid and marketable title to the Stock, free and clear of any Liens. Except
as
set forth on Schedule 4.4, there are no rights (whether by law, preemption,
contracts or otherwise), subscriptions, warrants, options, conversion rights,
commitments, understandings, arrangements or agreements of any kind authorized
or outstanding to purchase or otherwise acquire from the any of the
Stockholders, the Company or any other Person, any capital stock, or other
securities or obligations of any kind convertible into or exchangeable for
any
capital stock of the Company or any other equity interest in the Company. There
is no proxy, or any agreement, arrangement or understanding of any kind
authorized or outstanding which restricts, limits or otherwise affects the
ability to transfer or the right to vote any of the Stock.
4.5 No
Conflicts.
The
execution, delivery and performance of this Agreement and the Related Documents
and any other agreement or document contemplated herein or therein and the
consummation of all of the transactions contemplated hereby and thereby: (i)
do
not and will not, with or without the giving of notice or the passage of time
or
both, violate or conflict with, or result in, a breach of any provision of
the
certificate of incorporation or by-laws of the Company; and (ii) do not and
will
not require the consent, waiver, approval, or authorization of, or registration,
declaration or filing with, any Person or Governmental Authority; and (iii)
do
not and will not, with or without the giving of notice or the passage of time
or
both, violate or conflict with, or result in, a breach or termination of any
provision of, or constitute a default under, or accelerate or permit the
acceleration of, the performance required by the terms of, or result in, or
give
to any Person any right of payment or reimbursement under, or termination,
cancellation, modification or acceleration of, or result in the creation of
any
Liens, except Permitted Liens, upon any of the assets or properties of the
Company pursuant to, or otherwise give rise to any liability or obligation
under, the certificate of incorporation or by-laws of the Company, any agreement
(including, without limitation, any Scheduled Contract, or any other agreement
or instrument or any Order or statute or regulation to which any of the
Stockholders or the Company is a party or by which any of the Stockholders
or
the Company or any of their assets may be bound or governed; and (iv) will
not
terminate or result in the termination of any such agreement or instrument,
or
in any way affect or violate the terms and conditions of, or result in the
cancellation, modification, revocation or suspension of any rights of the
Company.
6
4.6 Financial
Statements.
(a)
Attached hereto as Schedule 4.6(a) are copies of (i) the Balance Sheet and
(ii)
the audited balance sheet and income statements for the Company for the year
ended December 31, 2006, which have been provided to Purchaser (together with
the Balance Sheet, the “Financial Statements”).
(b)
The
Financial Statements (i) are complete, true and correct in all material
respects; (ii) present fairly the financial position and results of operations
of the Company as of the dates thereof and for the periods then ended; and
(iii)
have been prepared in accordance with GAAP, applied on a consistent basis,
except to the extent that the Balance Sheet lacks certain footnotes that would
be required for a complete presentation in accordance with GAAP.
(c)
Other
than to the extent disclosed or reserved for in the Balance Sheet, or otherwise
disclosed in the Schedules to this Agreement, the Company has no Liabilities,
commitments or obligations of any nature whatsoever (whether accrued, absolute,
contingent, known, unknown, asserted, unasserted or otherwise, and whether
due
or to become due) except Liabilities, commitments and obligations incurred
in
the Ordinary Course of Business since the Balance Sheet Date which do not
exceed, in the aggregate, $50,000.
(d)
The
books of account and other financial records of the Company are complete and
accurate in all material respects and have been properly maintained in all
material respects in accordance with Applicable Law.
4.7 Taxes.
(a)
True
and correct copies of the Company’s federal and state corporate income tax
returns, (“Tax Returns”), for the tax years ended December 31, 2003 through
December 31, 2006 have been delivered to, or made available for inspection
by,
the Purchaser. All Tax Returns of the Company have been timely filed, and each
such Tax Return is true, correct and complete in all material
respects.
(b)
All
Liabilities of the Company to any jurisdiction for Taxes, fees or assessments
payable to a Governmental Authority of every kind and nature, including interest
thereon and penalties with respect thereto and Taxes payable under Treasury
Regulation section 1.1502-6 or similar provisions under state, local or foreign
law for the period ended December 31, 2006, have been timely paid by the Company
or are accrued and provided for in accordance with GAAP in the Financial
Statements for the period ended December 31, 2006. The Company has timely paid
all Taxes due during the period from the Balance Sheet Date through the Closing
Date. The Company has paid all franchise Taxes payable in the State of New
Hampshire for the period through the Closing Date.
(c)
Except as otherwise set forth in Schedule 4.7(c), the Tax Returns of the Company
have not been audited by any Governmental Authority during the past three years.
Neither the Internal Revenue Service nor any other Governmental Authority has
proposed any additional Taxes with respect to the Company or for which the
Company may be liable or with respect to the Business. There are no pending
or,
to the Knowledge of the Stockholders, threatened, claims or assessment for
Taxes. There are no pending or, to the Knowledge of the Stockholders,
threatened, examinations with respect to Taxes by any Governmental
Authority.
7
(d)
Except as set forth on Schedule 4.7(d), the Company has not granted any waivers
of any statutes of limitation with respect to any Taxes for any fiscal year.
The
Company has not requested any extension of time within which to file any
currently unfiled Tax Returns.
(e)
There
are no Liens for Taxes (other than for current Taxes not yet due and payable)
upon the properties or assets of the Company.
(f)
The
Company is not liable for Taxes of any other Person and is neither currently
under any contractual obligation nor a party to any tax sharing agreement or
other agreement providing for payments by the Company with respect to
Taxes.
(g)
The
Company, as of the Closing Date, has not agreed, and will not be required,
as a
result of a change in method of accounting or otherwise, to include any
adjustment under Code section 481 (or any corresponding provision of state,
local or foreign law) in taxable income for any period after the Closing
Date.
(h)
To
the Knowledge of Stockholders, Schedule 4.7(h) lists all of the jurisdictions
where the Company has been required or obligated to file Tax Returns, and except
as set forth in Schedule 4.7(h), for the past five years, no written claim
has
been made by a Governmental Authority in a jurisdiction where the Company does
not currently file Tax Returns that the Company may be subject to taxation
by
that jurisdiction.
(i)
The
Company is not a party to any Contract, arrangement or plan that has resulted
or
could result separately, or in the aggregate, in the payment of an excess
parachute payment within the meaning of Code Section 280G (or corresponding
provision of state, local or foreign law).
(j)
Except as set forth on Schedule 4.7 (j), the Company has properly classified
its
workers as either employees or independent contractors for federal, state,
local
and foreign tax purposes and otherwise has provided to them accordingly
appropriate Forms W-2 or 1099 for any payments made to them during the last
5
years.
4.8. Litigation.
Except
as set forth on Schedule 4.8, there is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of Stockholders, threatened by or
against the Company before any Governmental Authority, in each case, (i) that
individually, or in the aggregate, by its existence or as a result of its
outcome could (A) have a Material Adverse Effect, (B) prevent, hinder or delay
the execution and performance of this Agreement or the consummation of the
transactions contemplated hereby, or (C) result in this Agreement being declared
unlawful or cause the rescission of any of the transactions contemplated hereby
or (ii) in which the amount of damages claimed exceeds $25,000, or which could
result in an award or judgment against the Company in an amount greater than
$25,000, and the Stockholders have no knowledge of any circumstances which
reasonably could be expected to result in such a claim, action, suit, proceeding
or investigation against the Company.
8
4.9 Compliance
with Applicable Law.
The
Company hold all permits, licenses, variances, exemptions, Order and approvals
of all Governmental Authorities necessary for the lawful conduct of the Business
in the same manner and extent to which it is currently conducted, except where
failures to hold such permits, licenses, variances, exemptions, orders and
approvals would not, individually or in the aggregate, have a Material Adverse
Effect. Within the last three (3) years, the Company has not been charged with,
or received notice of, any material violation of any Applicable Law, nor, to
the
Knowledge of the Stockholders, is there any threatened claim of such violation
(including any investigation) or any basis therefor. Within the last three
(3)
years, the Company has conducted the Business in compliance in all material
respects with Applicable Law.
4.10.
Labor
Matters.
(a)
There
are no pending or, to the Knowledge of the Stockholders, threatened, charges,
complaints, petitions or written grievances before any Government Authority
relating to, or predicated upon, a violation of Applicable Law by the Company
regarding employment, employment practices and terms and conditions of
employment, including charges of unfair labor practices, unlawful discharge,
discrimination, harassment or hostile work environment with respect to any
of
the Company’s employees, which charges, complaints, petitions or grievances have
had or could have, individually or in the aggregate, a Material Adverse Effect,
nor to the Knowledge of the Stockholders, is there any basis for any such
charges, complaints, petitions or grievances. The Company is not a party to
any
collective bargaining agreement or other labor union contract applicable to
the
Company’s employees. To the Knowledge of the Stockholders, no activities or
proceedings of any labor union to organize any of the Company’s employees have
occurred. Within the last three (3) years, no strikes, slowdowns, work
stoppages, lockouts have occurred nor, to the Knowledge of the Stockholders,
have there been any threats thereof.
(b)
No
key employee, or group of employees or any executive of the Company (A) has
given written notice of his or her intention to resign prior to the Closing
Date
or within 12 months after the Closing Date or, to the Knowledge of the
Stockholders, is intending to do so; or (B) would become entitled to any rights
(including as to compensation) as a result of the Company entering into or
the
consummation of any of transactions contemplated by this Agreement.
(c)
There
are no outstanding Orders or charges against the Company under any occupational
health or safety legislation and, to the Knowledge of the Stockholders, none
has
been threatened. All material levies, assessments and penalties made against
the
Company pursuant to any applicable workers compensation legislation as of the
date hereof have been paid by the Company and the Company has not been
reassessed under any such legislation.
4.11. No
Adverse Changes.
Except
as set forth on Schedule 4.11, since December 31, 2006: (1) the Business of
the
Company has been conducted only in the Ordinary Course of Business; (ii) there
has been no change in the condition (financial or otherwise), assets,
liabilities, business, operations, affairs or prospects of the Company other
than changes in the Ordinary Course of Business, none of which singly, and
no
combination of which in the aggregate, has had, or could reasonably be expected
to have, a Material Adverse Effect (other than any change which has had a
Material Adverse Effect resulting from general market conditions); and (iii)
there has been no damage, destruction or loss or other occurrence or
development, which, either singly or in the aggregate, has had a Material
Adverse Effect, and, to the Knowledge of the Stockholders, there is no
threatened occurrence or development which could reasonably be expected to
have
a Material Adverse Effect.
9
4.12. Conduct
of Business.
Since
the December 31, 2006, except as set forth on Schedule 4.12, the Company has
not: (i) created or incurred any Liability outside of the Ordinary Course of
Business; (ii) mortgaged, pledged or subjected, to any Liens, except Permitted
Liens, any of its properties, real or personal, or assets, tangible or
intangible; (iii) discharged or satisfied any Lien or paid any obligation or
Liability other than current Liabilities shown on the Balance Sheet that were
paid in the Ordinary Course of Business, and Taxes and current Liabilities
incurred since the Balance Sheet Date in the Ordinary Course of Business or
under Contracts entered into in the Ordinary Course of Business; (iv) waived,
released or compromised any claims or rights of material value under, or
terminated or materially modified, any Scheduled Contract; (v) entered into
any
settlement, compromise or consent with respect to any claim, proceeding or
investigation; (vi) sold, assigned, transferred, leased or otherwise disposed
of
any of its assets, tangible or intangible, or canceled any debts or claims
except, in each case, for fair consideration in the Ordinary Course of Business;
(vii) except for the Agreed Dividend, declared or paid any dividends, or made
any other distribution on or in respect of, or directly or indirectly,
purchased, retired, redeemed or otherwise acquired any shares of its capital
stock, paid any notes or open accounts or paid any amount or transferred any
asset to any Stockholder; (viii) made or become a party to, or become bound
by,
any Contract or renewed, extended, amended, modified or terminated any Contract
or which in any one case involved an amount in excess of $10,000 (or in the
aggregate an amount in excess of $50,000, but excluding therefrom the amount
of
Scheduled Contracts entered into in the Ordinary Course of Business); (ix)
adopted or (except as otherwise required by Applicable Law) amended any Employee
Benefit Plans, or paid, agreed to pay or entered into or modified any contract
requiring it to pay, other than pursuant to an existing written agreement,
any
bonus, extra compensation, pension or severance pay to any of its officers
or
employees, or increased the rate or altered the form of compensation, including,
without limitation, salaries, fees, commission rates, bonuses, profit sharing,
incentive, pension, retirement or other similar payments, from that being paid
during the year ended December 31, 2006 to any of its directors, officers or
employees; (x) increased the compensation, fees or other remuneration payable
or
to become payable to any of its independent contractors, consultants or agents;
(xi) issued or sold any shares of the capital stock or securities convertible
into shares of its capital stock; (xii) announced or effected any material
change in the form or manner of distribution of any of its products or services;
(xiii) made deliveries or provided performance of services in connection with
its backlog of orders other than in the Ordinary Course of Business; (xiv)
made
or effected any material change in the Company’s practice of pricing,
discounting for sales of finished goods, ordering supplies and raw materials,
shipping finished goods, accepting returns or honoring warranties, invoicing
customers and collecting receivables; (xv) materially changed any of its
accounting methods or principles used in recording transactions on its books
or
records or in preparing the Financial Statements; (xvi) took or failed to take
any action that could reasonably be expected to have a Material Adverse Effect
except as may have been warranted in the good faith business judgment of the
Company in the Ordinary Course of Business; (xvii) incurred any Indebtedness
for
money borrowed; (xviii) entered into any Contract or commitment to do any of
the
foregoing; (xvii) incurred any Indebtedness for money borrowed; or (xix) entered
into any other transaction or taken any other action not in the Ordinary Course
of Business (except for transactions contemplated by this
Agreement).
10
4.13. Title
to and Condition of Assets.
Except
as set forth on Schedule 4.13, the Company has good, valid and marketable title
to all of the assets and all of the personal and real property owned by it
and
valid leasehold interests in all of the assets and all of the real and personal
property leased by it, free and clear of all Liens except Permitted Liens.
The
Company owns all of its equipment free and clear of all Liens except Permitted
Liens. None of the Company’s assets is subject to any sublease, sublicense or
other agreement granting to any other Person any right to the use or enjoyment
of such assets. Other than those of the Company’s assets which are leased or
licensed as set forth on Schedule 4.13, there are no assets used by the Company
which are owned by any third party. Except as set forth on Schedule 4.13, all
of
the assets, properties and specialized operating systems owned, leased or
licensed by the Company (i) are sufficient and adequate to carry on the Business
of the Company as conducted prior to the Closing Date including the performance
of all of the Scheduled Contracts in effect on the Closing Date, (ii) have
been
maintained in accordance with applicable industry standards or as otherwise
required by any lease of other agreement and currently are in a good state
of
maintenance, repair and operating condition as required for the operation and
use thereof in the Ordinary Course of the Business; and (iii) comply in all
material respects with Applicable Law and with the terms and conditions of
all
leases and other agreements affecting or relating to any such
property.
4.14.
Real
Property.
(a)
Title
to the Business Premises having been conveyed or transferred to JFD on or before
the Closing Date, the Company does not currently own any Real Property. Schedule
4.14(a) contains a list of all real property leased by the Company (“Leased Real
Property” and together with the Business Premises, the “Real Property”).
(b)
Except as set forth in Schedule 4.14(b):
(i)
At
the Closing, having acquired the same from the Stockholders or the Company
in
the manner described on Schedule 4.14(b)(i), JFD will have good and marketable
title to the Business Premises, free and clear of any Liens except Permitted
Liens;
(ii)
there are no condemnation proceedings, lawsuits, or administrative actions
relating to the Business Premises pending or threatened in writing;
(iii)
the
buildings and improvements on the Business Premises are located within the
boundary lines of the described parcels of land, are not in violation of
applicable setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to “permitted
non-conforming use” or “permitted non-conforming structure” classifications),
and do not encroach on any easement, and the land does not serve any adjoining
property for any purpose, and the parcel is not located within any flood plain
or subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained, except in each case as
would not have a Material Adverse Effect.
11
(iv)
each
facility located on the Business Premises has received all approvals of the
appropriate Governmental Authorities (including licenses and permits) required
in connection with the ownership or operation thereof, and has been operated
and
maintained in accordance with Applicable Law;
(v)
each
facility located on the Business Premises is supplied with utilities and other
services necessary for the operation of such facility, including gas,
electricity, water, telephone, sanitary sewer, and storm sewer, all of which
services are adequate in accordance with all Applicable Law and are provided
via
public roads or via permanent, irrevocable, appurtenant easements benefiting
such parcel; and
(vi)
the
Business Premises has the benefit of all necessary rights and easements required
for the continued use of the same for the business purposes of the Company
and
such rights are not subject to any restriction, limitation or the right of
any
other Person to determine the same.
(c)
The
Stockholders have delivered to Purchaser true and correct and complete copies
of
the leases and subleases listed in Schedule 4.14(a) (as amended to date), which
such leases and subleases have not been amended or modified since the amendments
furnished. With respect to each lease and sublease listed on Schedule
4.14(a):
(i)
The
Company enjoys quiet possession under all such leases or subleases;
(ii)
each
lease or sublease will continue to be legal, valid, binding, enforceable, and
in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii)
all
of the terms and conditions of each lease or sublease have been observed or
performed in all material respects and, to the Knowledge of the Stockholders,
no
party to any such lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time or both, would constitute a breach
or default or permit termination, modification, or acceleration
hereunder.
(iv)
The
Company has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or
encumbered any interest in any of the identified leaseholds or
subleaseholds;
(v)
all
facilities leased or subleased by the Company, (A) to the Knowledge of the
Stockholders, have received all material approvals of Governmental Authorities
required in connection with the operation thereof and (B) have been operated
and
maintained by the Company in all material respects in accordance with Applicable
Law; and
12
(vi)
all
facilities leased or subleased thereunder are supplied with utilities and other
services necessary for the operation of said facilities in the Ordinary Course
of Business of the Company.
(vii)
all
improvements or alterations on Leased Real Property have been made in accordance
with the terms of the pertinent Leases and Applicable Law and, except as set
forth on Schedule 4.14(c) (vii), there is no obligation on the part of the
Company to remove any of such alterations or improvements at the conclusion
of
the term of such Lease or otherwise.
(d)
Except as would not, individually or in the aggregate, have a Material Adverse
Effect, there are no structural, electrical, mechanical, plumbing, roof, paving
or other defects in any improvements located on any Real Property currently
owned, leased or otherwise occupied, by the Company.
(e)
Except as set forth on Schedule 4.14(e), all of the Real Property is occupied
solely by the Company and is being used exclusively for, and in connection
with,
the Business. None of the Real Property is subject to any Contract or
understanding for its use by any Person other than the Company.
4.15.
Environmental
Compliance.
Except
as
set forth in Schedule 4.15:
(i)
The
Business Premises and all of the Leased Real Property (while owned, leased,
occupied or operated by the Company) have been and currently are in compliance
with all Environmental Laws;
(ii)
There has been no Release or Hazardous Discharge into, on, from or under any
of
the Real Property or any real property formerly owned, leased or operated by
the
Company.
(iii)
There are no pending or, to the Knowledge of the Stockholders, threatened,
Environmental Actions against the Company or against any of the owners or
operators of any facilities that received solid waste or Hazardous Substances
generated by the Company.
(iv)
No
Real Property that has been or currently is being leased, occupied, or operated
by the Company has been, or is being used now by the Company for the generation,
storage, manufacture, use, transportation, disposal or treatment of Hazardous
Substances, except in material compliance with Environmental Laws;
(v)
The
Company currently maintains all Environmental Permits necessary for the
operation of the Business and the Company has been and is in compliance with
such Environmental Permits, and there are no legal proceedings pending or
threatened to revoke such Environmental Permits;
13
(vi)
The
Company is not subject to any outstanding Order or a party to any agreement
with
any Governmental Authority or third party with respect to Environmental Laws
or
Remedial Action;
(vii)
There are no claims, actions or proceedings by any of the Company’s current or
former employees pending, or to the Knowledge of the Stockholders, threatened,
based on alleged injury to such employee’s health caused by exposure to any
Hazardous Substance; and
(viii)
Neither this Agreement nor the consummation of the transactions contemplated
by
this Agreement will impose any obligations for site investigation or cleanup,
or
to notify or obtain the consent of any Governmental Authority or third parties
under any Environmental Laws (including any so-called “transaction-triggered” or
“responsible property transfer” laws and regulations).
4.16. Intellectual
Property and Information Technology.
(a)
All
Intellectual Property currently used by the Company in the conduct of the
Business is either owned by or validly licensed to the Company and is listed
in
Schedule 4.16(a).
(i)
the
Company has not been alleged to have infringed upon, misappropriated or misused
any Intellectual Property or proprietary information of another Person and,
to
the Knowledge of the Stockholders, the Company is not doing so.
(ii)
to
the Knowledge of the Stockholders, no Person is infringing upon,
misappropriating, misusing or otherwise violating the Company’s rights to the
Intellectual Property or its proprietary information.
(b)
The
Intellectual Property is sufficient and appropriate for the Business as
conducted currently by the Company. No Intellectual Property other than that
owned or licensed by the Company is required for the Business as presently
conducted. The Intellectual Property owned by the Company is free and clear
of
any Liens except Permitted Liens. No Intellectual Property that is material
to
the Business has been (i) licensed by the Company to any third party or (ii)
if
a Trade Secret, disclosed to any third party other than pursuant to a
non-disclosure or confidentiality agreement or such other agreement intended
to
protect the Company’s proprietary rights therein.
(c)
All
Information Technology used by the Company in the conduct of the Business and
all material agreements or arrangements relating to the maintenance and support,
security, disaster recovery management and utilization (including facilities
management and computer bureau services agreements) of the Information
Technology are described on Schedule 4.16(b).
14
(d)
All
Information Technology currently used by or required to carry on the Business
and fulfill the Scheduled Contracts is either owned by or validly leased or
licensed to the Company.
(e)
The
Information Technology owned or used by the Company in the conduct of the
Business has the capacity and performance necessary to fulfill the requirements
it currently performs.
(f)
The
consummation of the transactions contemplated by this Agreement will not result
in the diminution, license, transfer, termination or forfeiture of the Company’s
rights in and to any of the Intellectual Property or the Information Technology
currently used by the Company in the conduct of the Business.
4.17. Brokers.
Except
as set forth on Schedule 4.17, no broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of the Stockholders.
4.18. Material
Contracts.
(a)
Schedule 4.18(a) the lists all Contracts as of March 31, 2007 having a value
of
$100,000 or more to which the Company is a party or its assets or properties
are
bound and which have not, as of the date hereof, been terminated or fully
performed (“Material Contracts”). A true, correct and complete copy of each such
Material Contract has been made available to Purchaser. To the Knowledge of
the
Stockholders, all of such Material Contracts are fully performable by the
Company in accordance with their terms.
(b)
Except as disclosed on Schedule 4.18(b), regardless of whether oral or written,
the Company is not a party to, or bound by, any of the following:
(i)
any
Contracts providing for employment or consultation services with or by the
Company;
(ii)
any
license, franchise or royalty Contracts;
(iii)
any
Contracts pursuant to which any Lien (other than Permitted Liens) has been
imposed on any of the Company’s properties or assets;
(iv)
any
Contracts (other than this Agreement) providing for (A) the future disposition
or acquisition of any of the Company’s properties or assets other than
dispositions or acquisitions of Inventory in the Ordinary Course of Business
or
of assets having a fair market value of $50,000 or less, and (B) any merger
or
other business combination involving the Company or the Stock;
(v)
any
Contract that limits or contains restrictions on the ability of the Company
to
incur or suffer to exist any Lien, to purchase or sell any assets, to change
the
lines of business in which it participates or engages or to engage in any merger
or other business combination;
15
(vi)
any
Contracts (excluding outstanding warranty obligations of the Company) that
(A)
involve the payment, pursuant to the terms of any such Contract, (1) by the
Company of more than $25,000 annually or (2) to the Company of more than $25,000
annually and (B) cannot be terminated within ninety (90) days after giving
notice of termination without resulting in any material cost or penalty to
the
Company;
(vii)
any
bid, tender, proposal or offer which, if accepted, will result in the Company
becoming a party to any agreement or arrangement in which the aggregate payments
to be received or paid by the Company would exceed $100,000;
(viii)
a
lease or lease purchase agreement, mortgage, conditional sale or title retention
agreement, indenture, security agreement, credit agreement, pledge or option
with respect to any property, real or personal (tangible or intangible), in
any
capacity;
(ix)
Contracts for the purchase, provision or use of services, materials, supplies,
inventory, machinery or equipment involving more than $50,000 in the
aggregate;
(x)
a
note, loan, credit or financing agreement or other Contract for money borrowed
or other evidence of Indebtedness of the Company, all related security
agreements and collateral documents, including any agreement for any commitment
for future loans, credit or financing, and all other agreements that create
a
Lien other than Permitted Liens on any property or asset;
(xi)
a
guarantee involving the Company or any of the Stockholders relating to the
Company’s obligations;
(xii)
any
distribution, brokerage (including, without limitation, any brokerage or
finder’s agreement or arrangement with respect to any of the transactions
contemplated by this Agreement) or advertising Contracts;
(xiii)
Contracts with investment bankers, accountants, attorneys, consultants or other
independent contractors, including those relating to this
Agreement;
(xiv)
agreements or Contracts with or among any of the Stockholders, former
stockholders, current or former directors or officers of the Company or any
Affiliates of such Persons;
(xv)
Contracts or arrangements which restrict the Company from engaging or competing
in any business or in any location or from soliciting clients, employees or
other service providers or which requires the Company to maintain the
confidentiality of any material matter.
(xvi)
any
sales or agency agreements not cancelable within 60 days;
16
(xvii)
Partnership or joint venture agreements;
(xviii)
Contracts containing a change of control or acceleration of performance
provision that would be triggered by the closing of the transactions
contemplated by this Agreement.
(xix)
a
Tax sharing arrangement with any Person pursuant to which the Company or the
Purchaser will have to make any payments based on the transactions contemplated
by this Agreement and
(xx)
Contracts not made in the Ordinary Course of Business;
(c)
The
Stockholders have made available for inspection by the Purchaser, a copy of
each
written contract, agreement and other document (and has described each oral
commitment or arrangement) listed in Schedule 4.18(a) or 4.18(b) hereto and
all
amendments thereto and any waivers granted thereunder, correct and complete
in
all material respects (collectively, the “Scheduled Contracts”). Except as
specifically set forth on Schedules 4.18(a) and 4.18(b), the sale of the Stock
to the Purchaser and the consummation of the other transactions contemplated
by
this Agreement are not a violation of, or grounds for, the modification or
cancellation of any of the Scheduled Contracts or for the imposition of any
penalty or the default of any security interests thereunder.
(d)
Except as described in Schedule 4.18(d) hereto, to the Knowledge of the
Stockholder, all Scheduled Contracts are valid and binding agreements, in full
force and effect and enforceable in accordance with their respective terms,
except as the enforcement thereof may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors’ rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable remedies.
Except as described in Schedule 4.18(d), there is not, under any Scheduled
Contract or any obligation, or covenant or condition contained therein, any
existing default or breach by the Company, or, to the Knowledge of the
Stockholders, by any other party, or any event, condition or act (including
the
consummation of the transactions contemplated by this Agreement) which, with
the
giving of notice, the lapse of time, or the happening of any other event or
condition, (i) would constitute a default under, or a breach of, any provision
of any Scheduled Contract or (ii) would permit the acceleration of any
obligation of any party to any Scheduled Contract or the creation of a Lien
other than Permitted Liens upon any of the Company’s assets. The Company has not
assigned, delegated or otherwise transferred any of its rights or obligations
with respect to any Scheduled Contract except in the Ordinary Course of
Business. Except as set forth on Schedule 4.18(d), no party thereto has notified
the Company of its intention to terminate or cancel any Scheduled
Contract.
4.19. Inventory.
Schedule 4.19 hereto sets forth a summary of the entire inventory of the Company
as of the Balance Sheet Date, as reflected on the Balance Sheet (the
“Inventory”). The Inventory summarized in Schedule 4.19 and all additions
thereto acquired since the Balance Sheet Date and on hand as of the Closing
(not
having been disposed of since the Balance Sheet Date in the Ordinary Course
of
Business) are in all material respects of a quantity and quality usable or
saleable in the Ordinary Course of the Business, except as set forth on Schedule
4.19, subject to the applicable reserve on the Balance Sheet. All additions
to
the Inventory acquired since the Balance Sheet Date were acquired in the
Ordinary Course of Business. Finished goods in Inventory and the additions
thereto conform to published specifications, are free from material defects
and
are marketable and saleable in the Ordinary Course of Business. All Inventory
not written off or reserved against has been recorded on the books of the
Company at the lower of cost or market value determined in accordance with
GAAP,
except as set forth on Schedule 4.19.
17
4.20. Accounts
and Notes Receivable/Payable.
Except
as set forth on Schedule 4.20, all accounts and notes receivable of the Company
as of the Balance Sheet Date or thereafter acquired by the Company have arisen
in the Ordinary Course of Business, represent valid obligations to the Company
arising from bona fide transactions in the Ordinary Course of Business and,
except as set forth on Schedule 4.20, are not subject to claims or set-offs
or
other defenses or counterclaims. All accounts and notes payable by the Company
as of the Balance Sheet Date arose in bona fide transactions in the Ordinary
Course of Business. All items which are required by GAAP to be reflected as
receivables and payables on the books and records of the Company are so
reflected in a manner consistent with past practice.
4.21. Insurance.
Immediately prior to the Closing, the assets, properties and operations of
the
Company were insured under various policies of insurance. The Stockholders
have
delivered or otherwise made available to Purchaser previously complete and
correct copies of such insurance policies. All such policies are in full force
and effect, no notice of cancellation has been received, and there is no
existing material default, or event which with the giving of notice or lapse
of
time or both, would constitute a material default, by any insured hereunder.
To
the Knowledge of the Stockholders, there currently is no basis for an insurance
claim by the Company, under any of such policies.
4.22. Product
Warranties, Defects and Liabilities.
There
exists no pending or, to the Knowledge of the Stockholders, threatened, action,
suit, inquiry, proceeding or investigation by or before any Governmental
Authority relating to any product alleged to have been manufactured, distributed
or sold by the Company, and alleged to have been defective or improperly
designed or manufactured or in breach of any express or implied product
warranty, and, to the Knowledge of the Stockholders, there exists no latent
defect in the design or manufacture of any of the products of the Business.
There exists no pending or, to the Knowledge of the Stockholders, threatened,
product liability or warranty claims against the Company, except to the extent
reserved for specifically on the Balance Sheet, and to the Knowledge of the
Stockholders, there is no reasonable basis for any such suit, inquiry, action,
proceeding, investigation or claim. Except as set forth in Schedule 4.22, there
are no express product or service warranties relating to the Company’s products
or services.
4.23. Affiliate
Transactions.
The
Company is not a party to, or bound by, any Contract with any of its Affiliates,
other than on arms-length terms which are no less favorable to the Company
than
those which could be obtained with a third party which is not an Affiliate.
No
Affiliate of the Company owns or otherwise has any rights to or interests in
any
of the Company’s properties and assets.
18
4.24. Distributors,
Customers and Suppliers.
Except
as
described in Schedule 4.24(b), there are no Contracts to which the Company
is a
party under the terms of which (i) the Company is obligated to purchase any
product or services from, or sell any product or services to, any other Person
on an exclusive basis with respect to any geographic area or group of potential
customers; or (ii) any other Person is similarly obligated to the
Company.
4.25. Employees.
(a)
Except as set forth on Schedule 4.25(a), each employee of the Company is
employed on an at-will basis. Except as set forth on Schedule 4.25(a), the
Company has not promised or represented or distributed any written material
to
any of the directors, officers, employees, consultants, agents or
representatives of the Company that any of such Persons will be employed or
engaged by or receive any particular benefits from (i) the Company or any of
its
Affiliates or (ii) the Purchaser or any of its Affiliates, in each case on
or
after the Closing Date. To the Knowledge of the Stockholders, no key employee
and no group of employees of the Company has any plans to terminate or modify
their status as an employee or employees of the Company (including upon
consummation of the transactions contemplated hereby).
(b)
Schedule 4.25(b) sets forth a true, complete and correct list of all,
independent contractors and consultants of the Company as of the Closing Date.
Schedule 4.25(b) also set forth a true, complete and correct list of all
outstanding loans to officers or employees. All income taxes, social security,
unemployment and other taxes due and payable have been timely withheld by the
Company from its employees for all periods in compliance with Applicable Law.
Federal, state, local and foreign Tax Returns, as required by Applicable Law,
have been filed by the Company for all periods for which returns were due with
respect to employee income tax withholding, social security and unemployment
taxes, and the amounts shown thereon to be due and payable have been paid,
together with any interest and penalties that are due as a result of the
Company’s failure to file such returns when due, and pay, when due, the amounts
shown thereon to be due.
(c)
Except as set forth on Schedule 4.25(c), all obligations to individuals who
are
or have been directors, officers, employees, independent contractors,
consultants, agents or representatives of the Company for wages, reimbursements,
fees, commissions, bonuses, retirement, severance, deferred compensation,
incentive, stock option, vacation, unemployment and other payments,
distributions and benefits, and all contributions (voluntary or otherwise)
to
any payments under all employee benefit plans, have been paid in the Ordinary
Course of Business through the Closing Date.
4.26.
Benefit
Plans.
(a)
Schedule 4.26(a) hereto sets forth a true and complete list of each
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
maintained by the Company, or any trade or business under common control with
the Company within the meaning of Section 4001(a)(14) of ERISA (each, an “ERISA
Affiliate”) or to which the Company or an ERISA Affiliate contributes or is
required to contribute, in each case in which the Company’s employees
participate (such employee welfare benefit plans being hereinafter collectively
referred to as the "Welfare Benefit Plans"). With respect to each Welfare
Benefit Plan, all contributions or premiums due by, or attributable to the
period ending on, the Closing Date have been paid. Except for COBRA coverage,
there are no Welfare Benefit Plans, Benefit Arrangements or other agreements
that provide medical or death benefits to current or former employees of the
Company beyond their retirement or termination of employment. The Stockholders
have furnished or made available to Purchaser copies of each Welfare Benefit
Plan, Pension Benefit Plan and Benefit Arrangement, the most recent annual
report and summary plan description for each Welfare Benefit Plan, Pension
Benefit Plan and Benefit Arrangement, where applicable, and a written summary
of
each other Welfare Benefit Plan, Pension Benefit Plan and Benefit Arrangement
where no formal plan or summary exists.
19
(b)
Schedule 4.26(b) hereto sets forth a true and complete list of each
"employee pension benefit plan" (as defined in Section 3(2) of ERISA)
maintained by the Company or any ERISA Affiliate or to which the Company or
an
ERISA Affiliate contributes or is required to contribute, including any
multiemployer employee welfare benefit plan, on behalf of officers and employees
of the Company, or to which the Company or an ERISA Affiliate contributes or
is
required to contribute, including any multiemployer employee pension benefit
plan, on behalf of officers and employees of the Company (such multiemployer
and
other employee pension benefit plans being hereinafter collectively referred
to
as the "Pension Benefit Plans"). No Pension Benefit Plan is a "defined benefit
plan" (as defined in Section 3(35) of ERISA). Neither the Company nor any
of its ERISA Affiliates has any liability or potential liability under Title
IV
of ERISA. With respect to each Pension Benefit Plan, all contributions due
by or
attributable to the period ending on the Closing Date have been made or accrued
on the Latest Balance Sheet.
(c)
Except as set forth on Schedule 4.26(c), to the Knowledge of the
Stockholders, each Pension Benefit Plan, each Welfare Benefit Plan, each Benefit
Arrangement and each related trust agreement and annuity contract and insurance
policy, where applicable, complies currently and has complied for the past
three
(3) years, in each case in all material respects, both as to form and operation,
with the provisions of (A) the Code and, with respect to each Pension
Benefit Plan, such provisions to be tax qualified under Section 401(a) or
403(a) of the Code; (B) ERISA; and (C) all other Applicable Laws; all
necessary Government Approvals for the Pension Benefit Plans have been obtained;
and favorable determination letters, copies of which have been made available
to
the Purchaser, as to the qualification under the Code of each of the Pension
Benefit Plans, as amended, have been received from the Internal Revenue
Service.
(d)
No
Welfare Benefit Plan or Pension Benefit Plan or trustee or administrator thereof
has engaged in any transaction that might subject the Company to a tax or
penalty under Section 4975 of the Code or a penalty under Section 502 of ERISA.
Except as set forth on Schedule 4.26(d), each Welfare Benefit Plan and each
Pension Benefit Plan and, where applicable, each Benefit Arrangement has been
administered to date in material compliance with its terms, the requirements
of
the Code for favorable tax treatment, ERISA and all other Applicable Laws and
all reports required by any Government Authority with respect to each Welfare
Benefit Plan, each Pension Benefit Plan and each Benefit Arrangement have been
timely filed.
20
(e)
Schedule 4.26(e) lists each material salary practice or arrangement and
each deferred compensation plan, bonus plan, stock option plan, incentive
compensation plan, employee stock purchase plan and any other employee benefit,
retirement savings, insurance, sick pay, vacation pay or severance pay plan,
agreement, arrangement or commitment or other compensatory plan or program,
whether formal or informal, which is applicable to any employee of the Company
in his or her capacity as an employee of the Company and not required under
a
previous subsection to be listed on Schedule 4.26(a) or 4.26(b)
maintained by the Company or an Affiliate with respect to any of the Company’s
employees (collectively, the “Benefit Arrangements” and together with Welfare
Benefit Plans and Pension Benefit Plans sometimes referred to herein as
“Employee Benefit Plans”).
(f)
Except as set forth on Schedules 4.26(a), 4.26(b) and 4.26(e), there is no
Welfare Benefit Plan, Pension Benefit Plan or Benefit Arrangement which is
sponsored or maintained by the Company.
(g)
There
are no actions, suits or claims (other than routine claims for benefits) pending
or, to the Knowledge of the Stockholders, threatened against the Company in
connection with, or against, any Pension Benefit Plan, Welfare Benefit Plan
or
Benefit Arrangement, and there are no civil or criminal actions pending or,
to
the Stockholder’s Knowledge, threatened against any fiduciary, Pension Benefit
Plan, Welfare Benefit Plan or Benefit Arrangement.
(h)
Other
than as set forth on Schedule 4.26(h), neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will
result in (a) any payment or transfer of money, property or other consideration
(including, without limitation, severance, unemployment compensation or bonus
payments) (whether or not such payment would constitute a “parachute payment” or
“excess parachute payment” within the meaning of Section 280G of the Code)
becoming due to any employee or former employee of the Company; (b) any increase
in the amount of compensation, benefits or fees payable to any such individual;
(c) the acceleration of the accrual, vesting or timing of payment of any
benefits, compensation or fees payable to any such individual; or (d) the
acceleration or creation of any other additional rights, under any Benefit
Arrangement, severance, parachute, employment, change in control or other
agreement or arrangement by or to which the Company is a party.
4.27 Illegal
Payments.
Neither
the Company nor any of its directors, officers, employees or agents, has (a)
directly or indirectly given or agreed to give any illegal gift, contribution,
payment or similar benefit to any supplier, customer, governmental official
or
employee or other person to assist in connection with any actual or proposed
transaction or made or agreed to make any illegal contribution, or reimbursed
any illegal political gift or contribution made by any other Person, to any
candidate for federal, state, local or foreign public office (i) which violates
any Applicable Law, including but not limited to, the Foreign Corrupt Practices
Act of 1977, as amended, or might subject the Purchaser to any Damages or
penalties in any civil, criminal or governmental litigation or proceeding or
(ii) the non-continuation of which has had or might have a Material Adverse
Effect (b) established or maintained any unrecorded fund or asset or made any
false entries on any books or records for any purpose.
21
4.28. Books
and Records.
The
books and all corporate and financial records of the Company are complete and
correct in all material respects and have been maintained by the Company in
accordance with sound business practices and Applicable Law and other
requirements and no notice has been received or allegation made that a register
or book is incorrect or should be rectified.
4.29. Bank
Debt Representation.
The
Bank Debt Statement is true and correct in all respects and, as of the Closing
Date, the Bank Debt is not greater than the amount stated (the “Bank Debt
Representation”).
4.30 Backlog.
Schedule 4.30 sets forth, truly and accurately, the backlog of orders for the
products and services of the Company as of April 11, 2007. The backlog is based
on valid and existing orders received from customers of the Company. None of
the
orders included in the backlog have been cancelled, and, to the Knowledge of
the
Stockholders, no customer is intending to cancel any of such orders.
4.31 Disclosure.
The
representations and warranties contained in this Article 4 (including the
schedules and exhibits required to be delivered by the Stockholders to Purchaser
pursuant to this Agreement) and any certificate furnished by Stockholders to
Buyer pursuant to this Agreement do not contain any untrue statement of a
material fact or omit to state any material fact necessary,
in
light of the circumstances in which they were made and taking into account
the
express limitations set forth in each such representation and warranty, in
order
to make such representations and warranties not misleading.
ARTICLE 5
REPRESENTATIONS
AND WARRANTIES OF BUYER
Purchaser
hereby represents and warrants to Stockholders as follows:
5.1. Organization
and Qualification.
Purchaser is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its
businesses as now being conducted. Purchaser is duly qualified or licensed
and
in good standing to do business in those jurisdictions in which the property
owned, leased or operated by it or the nature of the business conducted by
it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing
would
not have a Purchasers Material Adverse Effect.
5.2. Authority
Relative to this Agreement.
Purchaser
has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of
Purchaser and no other corporate proceedings on the part of Purchaser are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Purchaser and constitutes a valid, legal and binding agreement
of
Purchaser enforceable against Buyer in accordance with its terms.
22
5.3. Consents
and Approvals: No Violations.
(a)
No
filing with or notice to, and no permit, authorization, consent or approval
of,
any Governmental Authority is necessary for the execution and delivery by
Purchaser of this Agreement or the consummation by Purchaser of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Purchaser Material Adverse Effect.
(b)
Neither the execution, delivery and performance of this Agreement by Purchaser
nor the consummation by Purchaser of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of Purchaser, (ii) result in a
violation or breach of or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms conditions or
provisions of any Contract to which Purchaser is a party or by which Purchaser
or any of its properties or assets may be bound or (iii) violate any
Applicable Law binding on or applicable to Purchaser or any of its properties
or
assets except, in the case of (ii) or (iii), for violations, breaches or
defaults which would not have a Purchaser Material Adverse Effect or an adverse
effect on the ability of Purchaser to enter into and perform its obligations
under this Agreement or any of the Related Documents.
5.4. Litigation. There
are
no judicial or administrative actions, proceedings or investigations relating
to
Purchaser or its Affiliates pending or, to Purchaser’s knowledge, threatened,
that question the validity of this Agreement or any Related Documents or any
action to be taken by Purchaser in connection with this Agreement or any such
Related Documents or that if adversely determined, would have a Material Adverse
Effect.
5.5. Brokers. No
broker, finder or investment banker is entitled to any brokerage, finders or
other fee or commission from Purchaser in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of
Purchaser, or any of its Affiliates.
5.6. Purchase
of Stock for Investment.
Purchaser represents that it is acquiring the Stock for its own account for
investment purposes only and not with a view to, or for sale or resale in
connection with any public distribution thereof, nor with any present intention
of distributing or selling the same. Purchaser is an “accredited investor” as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933, as amended.
5.7. Disclosure.
The
representations and warranties contained in this Article 5 (including any
schedules and exhibits required to be delivered by Purchaser to the Stockholders
pursuant to this Agreement) and any certificate furnished or to be furnished
by
Purchaser to the Stockholders pursuant to this Agreement do not contain and
will
not contain any untrue statement of a material fact or omit to state any
material fact necessary,
in
light of the circumstances in which they were made and taking into account
the
express limitations set forth in each such representation and warranty, in
order
to make such representations and warranties not misleading.
23
ARTICLE 6
COVENANTS
6.1. Additional
Agreements; Reasonable Best Efforts.
Subject
to the terms and conditions herein provided, each of the parties hereto agrees
to use its commercially reasonable best efforts to take or cause to be taken
all
action and to do or cause to be done all things reasonably necessary, proper
or
advisable under Applicable Law to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation,
(a) contesting any legal proceeding challenging the transactions
contemplated hereby, and (b) executing any additional instruments necessary
to consummate the transactions contemplated hereby and thereby. If at any time
after the Closing Date any further action is necessary to carry out the purpose
of the Agreement then the Stockholders and proper officers and directors of
the
Purchaser, as the case may be, shall take all such necessary
action.
6.2. Expenses.
Except
as otherwise may be expressly provided in this Agreement, the Stockholders
shall
bear the fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and in connection with all obligations required
to be performed by them or the Company under this Agreement including, but
not
limited to, all of the fees and expenses of the Company incurred prior to the
Closing Date for legal, accounting and investment advice in connection with
the
transactions contemplated hereby, as well as the conveyance or transfer of
the
ownership of the Business Premises to the Stockholders or an entity in which
they are members or shareholders prior to the Closing Date and the Lease. Except
as otherwise may be expressly provided in this Agreement, the Purchaser shall
bear its fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and in connection with all obligations required
to be performed by it under this Agreement.
6.3
Tax
Matters.
(a)
The
Stockholders shall pay any federal, state, local or foreign sales, transfer,
stamp or similar taxes payable in connection with the sale and transfer of
the
Stock pursuant to this Agreement.
(b)
The
Stockholders and Purchaser hereby agree that the tax year of the Company for
federal income tax purposes will end on the Closing Date and that the Company’s
Subchapter S status for federal income tax purposes will terminate as of the
Closing Date, in each case as required in accordance with rules applicable
to a
Subchapter S corporation making an election under Section 338(h)(10) of the
Code.
24
(c)
(i)
At
the request of the Purchaser, the Stockholders shall timely make
a joint
election under Section 338(h)(10) of the Code (a “338(h)(10) Election”) with the
Purchaser with respect to the purchase of the Stock. The Purchaser and the
Stockholders shall, at the request of the Purchaser, make
any
analogous election with respect to state, local or foreign Taxes, to the extent
that such election is separately available. The Purchaser and the Stockholders
shall exchange completed and executed copies of (i) IRS Form 8023 and required
schedules thereto, and (ii) to the extent required, any similar forms with
respect to state, local or foreign Taxes, which shall in each case be completed
in a manner consistent with the Final Allocation, as soon after the preparation
of the Final Allocation as is reasonably practicable.
(ii)
Unless the Purchaser determines it will not make a 338(h)(10) Election, the
Purchaser shall, within sixty (60) days of the Closing Date, determine and
provide to the Stockholders
the
allocation of the Adjusted Purchase Price, as determined for United States
federal income tax purposes, among the assets deemed acquired for United States
federal income tax purposes assuming a 338(h)(10) Election were made (the “Final
Allocation”). The Final Allocation shall be made in accordance with the Code and
any applicable Treasury Regulations. The Final
Allocation may be redetermined
by
Purchaser upon the happening of any event reasonably requiring such
redetermination, including a breach of the Bank Debt Representation. The Final
Allocation, once determined, shall be annexed to this Agreement as Exhibit
D,
and any redetermination of the Final Allocation pursuant to the preceding
sentence shall likewise be annexed to this Agreement with an appropriate
designation. The Final Allocation (and any redetermination thereof) shall be
binding on the Purchaser and the Stockholder for all Tax reporting
purposes.
(d)
The
Stockholders shall be liable for all Taxes of the Company for the period prior
to and ending on the Closing Date (“the Pre-Closing Period”), other than sales,
payroll and real property taxes to the extent not yet due and payable in the
Ordinary Course of Business. Prior to the Closing, the Stockholders have
received from the Company by way of a dividend, a distribution of thirty eight
(38%) percent of the taxable income of the Company for calendar year 2006 to
approximate the Stockholders’ liability for taxes for that year (the “Agreed
Dividend”). In addition, the Stockholders, and not the Company, shall be liable
for all Taxes or other liabilities arising from or in connection with the
transfer, conveyance or dividending of the Business Premises to the Stockholders
or an entity in which some or all of the stockholders are members or
shareholders, as the case may be, including, but not limited to, real estate
transfer taxes and mortgage recording fees and taxes.
(e)
The
Purchaser shall prepare the final Subchapter S Corporation federal and state
corporation tax return for the Company. The Stockholders will be given a
reasonable opportunity to review and comment upon such Tax Returns and
amendments thereto prior to the filing of such Tax Returns. The Purchaser shall
prepare and file all other Tax Returns of the Company as well as sales, payroll
and similar type tax returns.
(f)
The
Purchaser shall have control over the Audit of any Tax Return of the Company
for
any period (or portion thereof) ending on or before the Closing Date at the
Stockholder’s expense; provided, that the Purchaser shall not compromise, settle
or otherwise resolve any such Audit without the prior written consent of the
Stockholders (which consent shall not be unreasonably delayed or withheld).
The
Stockholders, at the Stockholders’ expense, shall cooperate with the Purchaser
with respect of any such Audit. For purposes hereof, "Audit" shall mean any
audit, examination or investigation of a Tax Return or with respect to Taxes,
including any administrative appeal therefrom and any litigation before any
tribunal relating thereto.
25
6.4. Access
to Books and Records of the Company.
After
the Closing Date, the Purchaser shall permit the Stockholders and their
professional representatives reasonable access, at reasonable intervals, during
normal business hours and in a manner so as not to unreasonably interfere with
the normal business operations of the Company, to relevant books, records
(including tax records), contracts and documents of or pertaining to the Company
and shall cooperate with the Stockholders in connection with tax audits and
investigations of the Stockholders conducted by any Governmental Authority,
and
the preparation of Tax Returns by the Stockholders relating to periods of time
prior to the Closing Date. The Stockholders will keep strictly confidential
all
such material and information that it receives from the Company and will not
use
such information except in connection with Audits, investigations and other
tax
related matters.
6.5.
Confidentiality.
(a)
The
Stockholders acknowledge that they have had access to, and use of, Confidential
Information of the Company prior to the Closing. The Stockholders covenant
that,
without written authorization from the Company, none of them shall at any time
hereafter, directly or indirectly, use for his, her or their own purposes or
for
the benefit of any Person other than the Company, any Confidential Information,
or disclose any Confidential Information to any Person.
(b)
Nothing herein shall prevent any disclosure required by Applicable Law or an
Order of a Governmental Authority, provided
that the
Stockholders involved, prior to any such disclosure, shall give the Company
prompt notice of any such requirement, shall cooperate with the Company in
obtaining a protective order or other means of protecting the confidentiality of
the Confidential Information at the Company’s cost, and shall disclose only that
Confidential Information that is legally required to be disclosed.
(c)
To
the extent that the same may be appropriate, notwithstanding Section 8.7 hereof,
the Company shall be entitled to seek injunctive relief without the necessity
of
posting a bond from any court of competent jurisdiction restraining any
threatened or further violation of the covenant contained in Section 6.5(a)
in
addition to any other rights or remedies to which the Company may be entitled,
including the recovery of damages from the Stockholders involved.
6.6. Resignations
of Directors and Officers.
The
Stockholders shall provide to the Purchaser written resignations effective
as of
the Closing Date of such directors, officers, trustees and bank signatories
of
the Company as the Purchaser may request prior to the Closing Date. In the
event
that the Purchaser requests any bank signatory or trustee resignations, the
Stockholders shall cause to be delivered to Purchaser written instructions
to
each bank at which the Company has an account or credit facility or at which
the
Company rents a safe deposit box informing such bank of the said resignations
and revoking the authority of said persons to act with respect to said account,
credit facility or trust and to have access to said safe deposit box. The
Stockholders shall also cause to be delivered to Purchaser, effective the
Closing Date, the written surrender by all Persons holding powers of attorney
from the Company of their authority and power to act under such powers of
attorney.
26
6.7 Minute
Books, Stock Books and Corporate Records.
The
complete and correct minute books, certificate of incorporation, bylaws, stock
ledgers, financial and other corporate records and the corporate seal of the
Company shall be delivered to the Purchaser by the Stockholders on or before
the
Closing Date.
ARTICLE
7
NON-COMPETITION;
NON-SOLICITATION
7.1. (a)
Each
of the Stockholders agrees that, as more fully set forth in the Xxxxxx
Employment Agreement and the Confidentiality and Non-Competition Agreements,
in
consideration of the payments made to him or her in connection with the sale
of
the Stock to the Company pursuant to this Agreement, for a period commencing
on
the Closing Date and continuing, at a minimum, (x) for Xxxxxx, until the five
(5) year anniversary of the Closing Date (the “Xxxxxx Restrictive Period”) and
(y) for the Other Stockholders, until the greater of (A) the three year
anniversary of the Closing Date or (B) eighteen (18) months from the termination
of any employment with any Affiliate of the Purchaser (the “Stockholder
Restricted Period”), he or she shall not, directly or indirectly (A) offer or
sell any products or services, or participate in any business which offers
or
sells any products or services, which compete in any geographic area of the
Territory (as defined in Section 7.1(c) below) with the products or services
offered or sold by the Company now or in the future, or (B) induce or attempt
to
induce, directly or indirectly, any customer of the Company to cease doing
business, in whole or in part, with the Company or solicit the business of
any
such customer for any products or services which compete with any of the
products or services offered or sold by the Company. Participation in a business
shall include, but not be limited to, serving as a director, officer, employee,
agent or representative or having a direct and indirect interest in the business
as a stockholder, partner, joint venturer or any other financial interest;
provided, however, that (i) ownership by the Stockholders of not more than
two
(2%) percent of the outstanding shares of stock of any such business listed
on
any national stock exchange or listed and actively traded on NASDAQ shall not
be
a violation of this covenant.
Nothing
herein shall preclude the Company at any time after the Closing from electing,
in its sole discretion, to modify in any way the restriction in this Section
7.1(a) with respect to any one or more of the Stockholders who are then
currently employed by the Company.
(b)
Xxxxxx and each of the Other Stockholders agree that in consideration of the
payments to him or her in connection with the sale of the Stock in the Company
pursuant to this Agreement, for the Xxxxxx Restrictive Period or the Stockholder
Restrictive Period, as the case may be, he or she shall not either on his or
her
own account or for any Person, solicit, interfere with, or endeavor to cause
any
employee of the Company to leave his employment or induce or attempt to induce
any such employee to breach his or her employment agreement with the
Company.
27
(c)
For
purposes of this Article 7, ATerritory@
shall
mean the United States and Canada and any other country or place where the
Company is engaging or has engaged in business in any material respect at any
time during the Xxxxxx Restricted Period or the Stockholder Restricted Period,
as the case may be.
(d)
Xxxxxx and each of the Other Stockholders acknowledge that both the geographic
scope and length of the restrictions imposed, respectively, on Xxxxxx and the
Other Stockholders hereunder are fair and reasonable in the circumstances and
are necessary and fundamental to the protection of the Business of the
Company.
7.2. Remedies.
Notwithstanding Section 8.7 hereof, nothing herein contained shall be construed
as prohibiting the Company from pursuing remedies available to it for any
violation of the covenants in Section 7.1(a) and (b), including, but not limited
to, any injunctive or other equitable relief hereinafter provided in Section
7.3
or the recovery of Damages from the Stockholders involved.
7.3. Equitable
Relief.
The
Stockholders acknowledge that the covenants contained in this Article 7 are
a
material and necessary inducement for the Purchaser to agree to the transactions
contemplated hereby, that the Stockholders realized significant monetary benefit
from these transactions, that violation of any of the covenants contained in
this Article 7 will cause irreparable and continuing damage to the Purchaser,
that the Purchaser shall be entitled to injunctive or other equitable relief
from any court of competent jurisdiction (without the necessity of posting
a
bond) restraining any further violation of such covenants, and that such
injunctive relief shall be cumulative and in addition to any other rights or
remedies to which the Purchaser may be entitled.
7.4. Severability.
In case
any one or more of the terms or provisions contained in this Article 7 shall
for
any reason be held invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other terms or provisions
hereof, but such term or provision shall be deemed modified or deleted as or
to
the extent required by applicable law, and such modification or deletion shall
not affect the validity of the other terms or provisions of this Article 7.
In
addition, if any one or more of the restrictions contained in this Article
7
shall for any reason be held to be unreasonable with regard to time, duration,
geographic scope or activity, the parties contemplate and hereby agree that
such
restrictions shall be modified and shall be enforced to the full extent
compatible with Applicable Law.
ARTICLE
8
SURVIVAL
OF REPRESENTATIONS & WARRANTIES;
INDEMNIFICATION
|
8.
|
Survival
of Representations and Warranties; Indemnification.
|
28
8.1. Survival
of Representations and Warranties.
Except
as otherwise expressly provided in this Agreement, all representations and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall not terminate, but shall survive the
Closing and continue in effect until two (2) years following the Closing Date,
except that: (a) the representations and warranties contained in Section 4.4
and
shall continue indefinitely; (b) the representations and warranties contained
in
Section 4.7 shall continue for so long as permitted by Applicable Law; and
(c)
the representations and warranties contained in Sections 4.15 and 4.16 shall
continue for six (6) years; provided
that, in
each case, any such representation or warranty as to which a claim shall have
been asserted during such survival period shall continue in effect until such
time as such claim shall have been resolved or settled.
8.2. Survival
of Covenants and Agreements.
Except
as expressly provided in this Agreement, all covenants and agreements made
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall not terminate but shall survive the Closing indefinitely, limited
only by the applicable statutes of limitation governing the assertion of a
claim
for a breach thereof.
8.3.
Indemnification
by Stockholders.
Subject
to Section 8.8 hereof, the Stockholders, jointly and severally, agree to
indemnify and hold harmless the Company, the Purchaser, its Affiliates, their
respective officers, directors, employees and agents and their respective
successors and assigns (collectively, the “Purchaser Indemnified Parties”), from
and against any claims, liabilities, losses, damages, costs and expenses
(including, without limitation, reasonable expenses of investigation and
attorneys’ fees and expenses) (any one such item being herein called a “Loss”
and all such items being herein collectively called “Losses”) which are caused
by or arise out of: (a) any breach or default in the performance by the
Stockholders of any covenant or agreement of the Stockholders contained herein,
or in any certificate delivered pursuant hereto; (b) any breach of warranty
or representation made by the Stockholders contained herein, or in any
certificate delivered pursuant hereto, without regard to materiality other
than
under Section 4.11; (c) any breach of the Bank Debt Representation; (d) any
defects in any product designed, developed, manufactured or sold by the Company
prior to the Closing Date which result in the recall, withdrawal, or suspension
from the market of any such products or which result in injury to Persons or
property; (e) any Liability resulting from the Company’s payments of fees to
consultants or independent contractors without proper tax documentation; (f)
any
Liability resulting from claims by Ohio for Commercial Activity Tax and
Washington State for Business Occupation Tax (g) any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal fees) incident to any of the foregoing.
8.4 Indemnification
by Purchaser.
Subject
to Section 8.8, Purchaser agrees to indemnify and hold harmless the Stockholders
and their respective successors and assigns (“Stockholder Indemnified Parties”)
from and against any Losses which are caused by or arise out of: (a) any
breach or default in the performance by Purchaser or the Company of any covenant
or agreement of the Purchaser contained herein or in any certificate delivered
pursuant hereto; (b) any breach of warranty or representation made by
Purchaser contained herein or in any certificate delivered pursuant hereto;
(c)
any Liabilities arising out of the operation of the Business by the Company
after the Closing Date; (d) any and all actions, suits, proceedings, claims,
demands, judgments, costs and expenses (including reasonable legal fees)
incident to any of the foregoing.
29
8.5
Procedure;
Notice of Claims.
(a)
Any
indemnified party (the “Indemnified Party”) seeking indemnification hereunder
shall,
within the relevant limitation period provided for in Section 8.1, give to
the
party obligated to provide indemnification to such Indemnified Party (the
“Indemnifying Party”) a notice (a “Claim Notice”) describing in reasonable
detail the facts giving rise to any claims for indemnification hereunder and
shall include in such Claim Notice (if then known) the amount or the method
of
computation of the amount of such claim, and a reference to the provision of
this Agreement, or any agreement, certificate or instrument executed pursuant
hereto or in connection herewith upon which such claim is based; provided
that a
Claim Notice in respect of any action at law or suit in equity by or against
a
third party as to which indemnification will be sought shall be given promptly
after the action or suit is commenced; and provided further
that
failure to give such notice promptly shall not relieve the Indemnifying Party
of
its obligations hereunder except to the extent it shall have been prejudiced
by
such failure.
(b)
The
Indemnifying Party shall have thirty (30) days after the giving of any Claim
Notice pursuant hereto to (i) agree to the amount or method of determination
set
forth in the Claim Notice and to pay such amount to such Indemnified Party
in
immediately available funds or (ii) provide such Indemnified Party with written
notice that it disagrees (and the reasons therefor) with the amount or method
of
determination set forth in the Claim Notice (the “Dispute Notice”). The
Indemnified Party may commence at any time thereafter such legal action or
proceedings as it deems appropriate to enforce the indemnification obligation
of
the Indemnifying Party pursuant to the provisions of Article 8. The failure
to
file a Dispute Notice within the time permitted shall be deemed to constitute
an
acknowledgement by the Indemnifying Party of its acquiescence to the amount
and
method of determination of the claim in the Claim Notice.
8.6 Procedure
- Third Party Claims.
(a)
Promptly after receipt by an Indemnified Party of notice of the commencement
of
any proceeding against it by a third party (“Third Party Claim”), such
Indemnified Party will, if a claim for indemnification is to be made against
an
Indemnifying Party, provide to the Indemnifying Party written notice of the
commencement of such claim (together with copies of any legal papers served),
provided,
however
that the
failure to promptly notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability that it may have to any Indemnified Party,
except to the extent that the Indemnifying Party demonstrates that the defense
of such action is prejudiced or made more expensive by the Indemnified Party’s
failure to give such notice.
30
(b)
If
any Third Party Claim is brought against an Indemnified Party and such
Indemnified Party gives notice to the Indemnifying Party of the commencement
of
such Third
Party Claim,
the
Indemnifying Party shall have the right to assume the defense of any such
Third
Party
Claim at
its expense, provided that (x) in the reasonable judgment of the Indemnified
Party, the Indemnifying Party has adequate resources to undertake such defense
and satisfy any indemnifiable Losses arising from such Third
Party
Claim
and (y) the selection of counsel is approved by the Indemnified Party, which
approval will not be unreasonably withheld. If the Indemnified Party so
determines that the Indemnifying Party does not have adequate resources, or
the
Indemnifying Party shall elect not to assume the defense of any such
Third
Party
Claim,
or fails to make such an election within twenty (20) days after it receives
notice pursuant to Section 8.6(a), the Indemnified Party shall have the right
to
defend such Third
Party
Claim at
the expense of the Indemnifying Party, and the
Indemnifying Party will be bound by any determination made in such proceeding
or
any good faith compromise or settlement effected by the Indemnified Party to
which the Indemnifying Party consents, which consent may not be unreasonably
withheld, delayed or conditioned.
The
Indemnified Party shall have the right to participate in (but not control)
the
defense of a Third
Party
Claim
defended by the Indemnifying Party hereunder and to retain its own counsel
in
connection with such Third
Party
Claim,
but the fees and expenses of such counsel shall be at the Indemnified Party’s
expense unless (i) the Indemnifying Party and the Indemnified Party have
mutually agreed in writing to the retention of such counsel or (ii) the named
parties in any Third
Party
Claim
(included impleaded parties) include the Indemnifying Party and the Indemnified
Party, and representation of the Indemnifying Party and the Indemnified Party
by
the same counsel would create a conflict (in which case the Indemnifying Party
shall not be permitted to assume the defense of such Third
Party
Claim).
Unless otherwise agreed by the Indemnifying Party, if the Indemnifying Party
is
obligated to pay the fees and expenses of counsel to the Indemnified Party
with
respect to a Third Party Claim, the Indemnifying Party shall be obligated to
pay
only the fees and expenses associated with one attorney or law firm (plus local
counsel as required), as applicable, for the Indemnified Party.
(c)
If
the Indemnifying Party assumes the defense of a Third Party Claim and
subsequently determines that the Third Party Claim is not subject to
indemnification by the Indemnifying Party hereunder, the Indemnifying Party
shall give prompt notice of such fact to the Indemnified Party, after which
the
Indemnified Party shall have the right to reassume control of the defense of
such Third Party Claim; provided
that the
failure by the Indemnifying Party to promptly notify the Indemnified Party
of
any such determination shall not result in any liability to the Indemnifying
Party except to the extent that the Indemnified Party demonstrates that the
defense of such action has been prejudiced or made more costly by the
Indemnifying Party’s failure to give such notice. If the Indemnifying Party
assumes the defense of a Third Party Claim and subsequently determines that
such
claim is not subject to indemnification by the Indemnifying Party hereunder,
the
Indemnifying Party shall have the right, following its delivery of the notice
contemplated by the immediately preceding sentence, to withdraw from such
defense, and such withdrawal shall not result in any liability to the
Indemnifying Party except to the extent that the Indemnified Party demonstrates
that the defense of such action has been prejudiced or made more costly by
the
timing of the Indemnifying Party’s withdrawal.
(d)
If
the Indemnifying Party assumes the defense of a Third Party Claim, (x) no
compromise or settlement of such Third Party Claim may be effected by the
Indemnifying Party without the Indemnified Party’s consent (which consent will
not be unreasonably withheld, delayed or conditioned) unless (i) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party,
(ii) the compromise or settlement includes a complete release of the Indemnified
Party, (iii) there is no finding or admission of any violation of law or any
violation of the rights of any Person by the Indemnified Party, and (iv) there
is no effect on any other Third Party Claims that may be made against the
Indemnified Party; and (y) the Indemnified Party will have no liability with
respect to any compromise or settlement of such claims effected without its
consent as may be required pursuant to clause (x) above.
31
(e)
Notwithstanding the foregoing, if the exclusive remedy sought under a Third
Party Claim is for injunctive relief for which an Indemnified Party may be
liable, the Indemnified Party may, by notice to the Indemnifying Party, assume
the exclusive right to defend, compromise, or settle such proceeding, but the
Indemnifying Party, although still liable for the payment of all reasonable
legal fees, costs and expenses incurred in connection therewith, will not be
bound by any determination of a proceeding so defended or any compromise or
settlement effected without its consent which may not be unreasonably withheld,
delayed or conditioned. In addition, if a Third Party Claim seeks both
injunctive or other non-monetary relief and monetary damages, the Indemnified
Party may, by notice to the Indemnifying Party, participate in the defense
of
such proceeding at its own cost.
(f)
With
respect to any obligations of an Indemnifying Party and an Indemnified Party
which arise pursuant to the provisions of this Article 8, the Indemnifying
Party
and the Indemnified Party agree to cooperate with each other as reasonably
requested by the other.
8.7
Remedies.
Subject
to Section 6.5(c) and 7.2 hereof and except as otherwise may be specifically
provided in this Agreement, the sole and exclusive remedy of the parties for
breach of this Agreement shall be restricted to the indemnification rights
set
forth in this Article 8; provided,
however,
that no
party hereto shall be deemed to have waived any rights, claims, causes of action
or remedies if and to the extent such rights, claims, causes of action or
remedies may not be waived under Applicable Law.
8.8
Certain
Limitations.
(a)
Notwithstanding any other provision in this Agreement to the contrary, the
parties to this Agreement shall only be liable to indemnify each other for
compensatory damages, and, accordingly, in the absence of actual fraud, neither
party shall be entitled to recover from the other special, indirect, punitive
or
consequential damages pursuant to this Article 8 unless, and then only to the
extent that, the same are components of a Third Party Claim for which an
Indemnified Party is seeking indemnification hereunder.
(b)
Each
party’s aggregate liability for indemnification under Section 8.3 and 8.4 (b)
respectively, as applicable, shall not exceed an amount equal to $5,000,000
(the
“Liability Cap”); provided,
however,
the
Liability Cap shall not apply to (i) any Losses of any Indemnified Party
resulting from fraud on the part of the Indemnifying Party; (ii) any Losses
of
the Purchaser resulting from a breach of the representations and warranties
contained in Section 4.4, which shall have a separate cap limitation of
$10,000,000.
(c)
The
Stockholders shall not be liable for Losses under Section 8.3 unless and until
such Losses exceed $150,000 in the aggregate, without taking into account
materiality other than under Section 4.11 (the “Purchaser Basket Amount”), it
being understood that the Stockholders shall not be liable, in any event, for
the aggregate amount of Losses equal to the Purchaser Basket Amount;
provided,
however,
that
the Purchaser Basket Amount shall not apply to (i) any Losses of the Purchaser
Indemnified Parties resulting from fraud on the part of the Stockholders; (ii)
any breach of the Bank Debt Representation; (iii) any expenses to be paid by
the
Stockholders pursuant to Section 6.2 and/or any Liabilities expressly assumed
by
the Stockholders pursuant to any section of this Agreement; and (iv) any
liability of the Company for payroll taxes that were due and payable during
the
Pre-Closing Period but not paid; and (v) any of the Liabilities described in
Sections 8.3 (e) and (f).
32
(d)
The
Purchaser shall not be liable under Section 8.4(b) for Losses under such section
unless and until such Losses exceed $150,000 in the aggregate (the
“Stockholder Basket Amount”), it being understood that the Purchaser shall not
be liable, in any event, for that portion of the aggregate amount of such Losses
which is equal to the Stockholder Basket Amount; provided,
however,
that
the Stockholder Basket Amount shall not apply to any Losses of the Stockholder
Indemnified Parties resulting from fraud on the part of the Purchaser.
(e)
It is
agreed that for the purpose of making a claim for indemnification, the
expiration of any one survival period, as set forth in Section 8.1, of certain
representations and warranties, shall not affect the ability to make any claim
for indemnification hereunder under any other representations and warranties
still surviving; provided
that no
party shall be entitled to make a claim for indemnification more than once
on
account of the same facts and circumstances or to aggregate the same for
purposes of the Stockholder or Purchaser Basket Amounts.
8.9.
Knowledge.
An
Indemnified Party’s knowledge of facts that would make any warranty or
representation made to such Indemnified Party untrue or inaccurate in any way
as
of the Closing Date, nevertheless shall not constitute a defense to, or
otherwise estop such party from asserting subsequently, any claim for
indemnification for breach of such warranty or representation on the basis
of
those facts.
ARTICLE
9
DEFINITIONS
9.1 Certain
Definitions.
The
following terms, as used herein, have the following meanings:
“Adjusted
Purchase Price”,
as
defined in Section 2.2.
“Agreed
Dividend”, as defined in Section 6.3(d).
"Affiliate”
means, in respect of any Person, a Person that, directly or indirectly, through
one or more intermediaries controls, is controlled by or is under common control
with the first-mentioned Person.
"Applicable
Law" means, with respect to any Person, any domestic or foreign, federal, state
or local statute, law, ordinance, policy, guidance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority applicable to such Person
or
any of its Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents (in connection with such officer’s,
director’s, employee’s, consultant’s or agent’s activities on behalf of such
Person or any of its Affiliates).
33
"Audit",
as defined in Section 6.3(c).
"Balance
Sheet" means the balance sheet of the Company dated April 11, 2007.
"Balance
Sheet Date" means April 11, 2007.
"Bank
Debt" means the sum of (i) any long or short term Indebtedness to any lending
institutions (ii) cash overdrafts; and (iii) deferred rent.
"Benefit
Arrangement", as defined in Section 4.26 (e).
"Business",
as defined in the Recitals.
"Business
Day" means any day that is not a Saturday, Sunday or a day on which the banks
in
New York, New York are required or permitted to be closed.
"Business
Premises" means the land and improvements formerly owned by the Company located
at 00 Xxxxxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxx Xxxxxxxxx.
"Closing
Date", as defined in Section 3.1.
"Code"
means the Internal Revenue Code of 1986, as amended.
"Confidential
Information" means information not generally available to the public, including,
without limitation, all computer software and database information, personnel
information, financial information, customer lists, supplier lists, trade
secrets, patented proprietary information, forms, information regarding
operations, systems, services, know how, computer and any other processed or
collated data, computer programs, pricing, marketing and advertising data,
methods, forms, systems, services, designs, marketing ideas, products or
processes (whether or not capable of being trademarked, copyrighted or
patented).
"Contracts"
means all oral and written contracts, agreements, options, leases, licenses,
mortgages, covenants, orders, commitments and other instruments of any kind.
"Damages"
means all demands, claims, actions or causes of action, assessments, losses,
damages, costs, expenses, liabilities, judgments, awards, fines, sanctions,
penalties, charges and amounts paid in settlement, including reasonable costs,
fees and expenses of attorneys, accountants, consultants and other agents or
independent contractors incurred in investigating, preparing for and defending
any thereof.
34
"Debt
Target" means six hundred thousand ($600,000) dollars of Bank Debt on the part
of the Company as of the Closing Date.
"Employee
Benefit Plans", as defined in Section 4.26(e).
"Environmental
Actions" refers to any complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, proceeding, judgment, letter or other
communication from any federal, state, local or municipal agency, department,
bureau, office or other authority or any third party involving a Hazardous
Discharge or any violation of any order, permit or Environmental Laws.
"Environmental
Law" means
any
applicable federal, state, local and foreign law, statute, ordinance,
regulation, rule, judicial or administrative order or decree, permit license,
approval, authorization or similar requirement of each and every federal, and
pertinent state, local and foreign governmental agency or other governmental
authority, pertaining to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9601 et set,
the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et seq.,
the
Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., the Water
Pollution Control Act (FWPCA), 33 U.S.C. 1251 et seq., and the Occupational
Safety and Health Act (OSHA), 42 U.S.C. 655.
"Environmental
Permit" means any Permit required under any applicable Environmental
Law.
"Environmental
Liabilities" means any Losses, including the fees and expenses of environmental
engineers and consultants, and the costs of investigation, feasibility studies
and remediation arising from, out of or under any Environmental Law, Order,
or
Environmental Action.
"ERISA"
means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow
Agents" means Moomjian, Waite, Wactlar & Xxxxxxx, LLP and Xxxxx & Xxxxx.
"Escrow
Agreement" means the Escrow Agreement, dated as of the date hereof, by and
among
the Stockholders, Purchaser and the Escrow Agents.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended.
"Final
Allocation”, as defined in Section 6.3(c)(ii).
"Financial
Statements", as defined in Section 4.6(a).
"GAAP"
means generally accepted accounting principles in the United States as in effect
from time to time and applied consistently throughout the periods
involved.
35
"Governmental
Authority" means any foreign, domestic, federal, territorial, state or local
governmental authority, quasi-governmental authority, instrumentality, court,
government or self-regulatory organization, commission, tribunal or organization
or any regulatory, administrative or other agency, or any political or other
subdivision, department or branch of any of the foregoing.
"Hazardous
Discharge" means
any
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping of Hazardous Substances
which violates Environmental Laws.
"Hazardous
Substances"
means
any substances, compounds, chemicals or elements which are (i) defined or
classified on the Closing Date as a hazardous substance, hazardous material,
toxic substance, hazardous waste, pollutant or contaminant under any
Environmental Law, or (ii) a petroleum hydrocarbon, including crude oil or
any
fraction thereof, (iii) hazardous, toxic, corrosive, flammable, explosive,
radioactive, carcinogenic or a reproductive toxicant, or (iv) regulated pursuant
to any Environmental Law.
"Indebtedness"
of any Person means all obligations of such Person (a) for borrowed money,
(b) evidenced by notes, bonds, debentures or similar instruments and
(c) in the nature of guarantees of the obligations described in
clauses (a) and (b) above of any other Person.
"Indemnified
Party", as defined in Section 8.5(a).
"Indemnifying
Party”, as defined in Section 8.5(a).
"Information
Technology" means all computer hardware, software, networks, microprocessors,
firmware and other information technology and communications equipment used
in
the operation of the Information Technology (“IT”) systems.
"Intellectual
Property" means any patent, patent application (or renewal) and docketed
invention, trademark, trade name, trademark or trade name registration or
application (or renewal), copyright or copyright registration or application
(or
renewal) for copyright registration, servicemark, brand xxxx or brand name
or
any pending application (or renewal) related thereto, or any trade secret,
proprietary know-how, programs or processes or any similar rights, and each
license or licensing agreement for any of the foregoing.
"Inventory",
as defined in Section 4.19.
"Knowledge
of Stockholders" means the actual knowledge of any Stockholder as well as the
actual knowledge of the collective group of Stockholders, and shall be deemed
to
include a representation that each of such individuals has made all usual and
reasonable inquiries and all inquiries that would be reasonable in light of
such
individual’s knowledge.
"Lease",
as defined in Section 3.2(iii).
36
"Liability
Cap", as defined in Section 8.8(b).
"Liability"
means, with respect to any Person, any liability or obligation of such Person
of
any kind, character or description, whether known or unknown, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, secured or
unsecured, joint or several, due or to become due, vested or unvested,
executory, determined, determinable or otherwise.
"Lien"
means, with respect to any asset, any mortgage, title defect or objection,
lien,
pledge, charge, security interest, hypothecation, restriction, encumbrance
or
charge of any kind in respect of such asset.
"Material
Adverse Effect" means any material adverse change in the business, properties,
assets, liabilities, results of operations, condition (financial or otherwise)
or prospects of the Company or its Business taken as a whole.
"Material
Contracts", as defined in Section 4.18(a).
"Xxxxxx
Employment Agreement", as defined in Section 3.2(ii).
"Order"
means any order, execution, writ, injunction, judgment, decree, ruling,
assessment or award.
"Ordinary
Course of Business" means the ordinary course of business consistent with past
custom and practice (including, without limitation, with respect to quantity,
quality and frequency.
"Other
Stockholders", as defined in the Preamble to this Agreement.
"Pension
Benefit Plan", as defined in Section 4.26(b).
"Permitted
Liens" means (i) Liens for any Tax or governmental assessments, charges or
claims the payment of which is not yet due, or for any Tax the validity of
which
is being contested in good faith by appropriate proceedings and for which
adequate reserves are maintained on the Financial Statements in accordance
with
GAAP; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by Applicable Law incurred in the Ordinary Course of Business for sums
not yet delinquent or being contested in good faith and for which adequate
reserves are maintained on the Financial Statements in accordance with GAAP;
(iii) Liens relating to deposits made in the Ordinary Course of Business in
connection with workers' compensation, unemployment insurance and other types
of
social security or to secure the performance of leases, trade contracts or
other
similar agreements; and (iv) Liens securing executory obligations under
any Lease that constitutes an "operating lease" under GAAP.
"Person"
means an individual, corporation, partnership, limited liability company,
association, trust, unincorporated organization or other legal
entity.
37
“Pre-Closing
Period”, as defined in Section 6.3(d).
"Purchase
Price", as defined in Section 2.1.
"Purchaser’s
Basket Amount", as defined in Section 8.8(c).
"Purchaser
Indemnified Parties", as defined in Section 8.3.
"Purchaser
Material Adverse Effect” means any material adverse change in the business,
properties, assets, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Purchaser or its business, taken as a whole.
"Related
Documents" means the Escrow Agreement and the Lease.
"Release"
means
any
release, spill, emission, leaking, pumping, pouring, dumping, emptying,
injection, deposit, disposal, discharge, dispersal, leaching, or migration
on or
into the indoor or outdoor environment or in, on, under, into or out of any
property, including any property currently or at any time previously owned,
leased or operated by the Company.
"Remedial
Action" means
those response actions,
including any investigation, testing or monitoring activities required by
Environmental Law or by any Governmental Authority to clean up, remove, contain,
treat, investigate or xxxxx any Hazardous Substance on or in connection with
any
property (including, without limitation, actions to address Releases of
Hazardous Substances to the environment as of the Closing Date, such as, for
example, measures to address vapor intrusion from sub-surface contamination
into
indoor air.
"Scheduled
Contracts", as defined in Section 4.18(c).
"Stock",
as defined in the Recitals.
"Stockholders",
as defined in the Preamble to this Agreement.
"Stockholder
Basket Amount", as defined in Section 8.8(d).
"Stockholders’
Agreements", as defined in Section 3.2(vi).
"Stockholders
Allocation", as defined in Section 2.1.
"Stockholder
Indemnified Parties", as defined in Section 8.4.
"Stockholders
Representative”, as defined in Section 10.1
"Subsidiary"
means, with respect to any Person, (i) any corporation as to which more
than 10% of the outstanding stock having ordinary voting rights or power (and
excluding stock having voting rights only upon the occurrence of a contingency
unless and until such contingency occurs and such rights may be exercised)
is
owned or controlled, directly or indirectly, by such Person and/or by one or
more of such Person's Subsidiaries and (ii) any partnership, joint venture
or other similar relationship between such Person (or any Subsidiary thereof)
and any other Person (whether pursuant to a written agreement or
otherwise).
38
"Tax"
means all taxes imposed of any nature including federal, state, local or foreign
net income tax, alternative or add-on minimum tax, profits or excess profits
tax, franchise tax, gross income, adjusted gross income or gross receipts tax,
employment related tax (including employee withholding or employer payroll
tax,
FICA or FUTA), real or personal property tax or ad valorem tax, sales or use
tax, excise tax, stamp tax or duty, any withholding or back up withholding
tax,
value added tax, severance tax, prohibited transaction tax, premiums tax,
environmental tax, intangibles tax or occupation tax, together with any interest
or any penalty, addition to tax or additional amount imposed by any Governmental
Authority (domestic or foreign) responsible for the imposition of any such
tax.
"Tax
Return" means all returns, reports, forms or other information required to
be
filed with respect to any Tax.
"Territory",
as defined in Section 7.1(c).
"Third
Party Claim", as defined in Section 8.6(a).
"Trade
Secret" any formula, design, device, complication or other information which
is
used or held for use by a Business, which gives the holder thereof an advantage
or opportunity for advantage over competitors which do not have or use the
same,
and which is not generally known by the public.
"338(h)(10)
Election", as defined in Section 6.3(c)(i).
"Welfare
Benefit Plans", as defined in Section 4.26(a).
ARTICLE
10
STOCKHOLDERS’
REPRESENTATIVE
10.1. Appointment.
By
their execution of this Agreement, the Stockholders irrevocably appoint Xxxxxx
to act as the true and lawful agent of the Stockholders and attorney-in-fact
with respect to all matters arising in connection with this Agreement and the
Escrow Agreement (the “Stockholders Representative”). By his execution of this
Agreement, Xxxxxx accepts such appointment.
10.2. Powers
and Authority.
The
Stockholders’ Representative shall have full power and authority to represent
all of the Stockholders and their respective successors with respect to matters
arising under this Agreement and the Escrow Agreement as hereinafter provided
and all actions taken by the Stockholders’ Representative hereunder and
thereunder shall be binding upon all such Stockholders and their successors
as
if expressly confirmed and ratified in writing by each of them and no
Shareholder shall have the right to object, dissent, protest or otherwise
contest the same. The Stockholders’ Representative shall take any and all
actions which he believes are necessary or appropriate under this Agreement
and
the Escrow Agreement for and on behalf of the Stockholders, as fully as if
the
Stockholders were acting on their own behalf, including, without limitation,
giving and receiving any notice or instruction permitted or required under
this
Agreement or the Escrow Agreement by the Stockholders’ Representative or any
Stockholder, interpreting all of the terms and provisions of this Agreement
and
the Escrow Agreement, defending all Claims against the Stockholders pursuant
to
Article 8 hereof and the Escrow Agreement, consenting to, compromising or
settling all Claims, conducting negotiations with Purchaser and its
representatives regarding such Claims, dealing with Purchaser and the Escrow
Agents under this Agreement and the Escrow Agreement with respect to all matters
arising under this Agreement and the Escrow Agreement, taking any and all other
actions specified in or contemplated by this Agreement and the Escrow Agreement,
and engaging counsel, accountants or other Representatives of the Stockholders’
Representative in connection with the foregoing matters.
39
10.3. Authorization.
The
Stockholders’ Representative has been appointed to act as the true and lawful
agent of the Stockholders and attorney-in-fact with respect to the following
matters arising in connection with this Agreement and the Escrow Agreement,
including but not limited to the power and authority on behalf of each
Stockholder (other than in his or her own right) to do any one or all of the
following:
(i) Receive
all notices or documents given or to be given to any of the Stockholders by
Purchaser pursuant hereto or to the Escrow Agent or in connection herewith
or
therewith and to receive and accept service of legal process in connection
with
any suit or proceeding arising under this Agreement or the Escrow
Agreement;
(ii) Deliver
to Purchaser at the Closing all certificates and documents to be delivered
to
Purchaser by any of the Stockholders pursuant to this Agreement, together with
any other certificates and documents executed by any of the Stockholders and
deposited with the Stockholders’ Representative for such purpose;
(iii) Engage
counsel, and such accountants and other advisors for any of the Stockholders
and
incur such other expenses on behalf of any of the Stockholders in connection
with this Agreement or the Escrow Agreement and the transactions contemplated
hereby or thereby as may be appropriate; and
(iv) Take
such
action on behalf of any of the Stockholders as the Stockholders’ Representative
may in its sole discretion deem appropriate in respect of:
(A)
taking such action as the Stockholders’ Representative or any of the
Stockholders is authorized to take under this Agreement or the Escrow
Agreement;
(B)
receiving all documents or certificates and making all determinations, on behalf
of any of the Stockholders, required under this Agreement or the Escrow
Agreement;
40
(C)
all
such other matters as the Stockholders’ Representative may deem necessary or
appropriate to consummate this Agreement or the Escrow Agreement and the
transactions contemplated hereby and thereby; and
(D)
all
such action as may be necessary after the Closing Date to carry out any of
the
transactions contemplated by this Agreement, including, without limitation,
the
defense and/or settlement of any claims for which indemnification is sought
pursuant to Article 8 of this Agreement and any waiver of any obligation of
the
Purchaser.
All
actions, decisions and instructions of the Stockholders’ Representative shall be
conclusive and binding upon all of the Stockholders and no Stockholder nor
any
other Person shall have any claim or cause of action against the Stockholders’
Representative, and the Stockholders’ Representative shall have no liability to
any Stockholder or any other Person, for any action taken, decision made or
instruction given by the Stockholders’ Representative in connection with the
Escrow Agreement or this Agreement, except in the case of his own gross
negligence or willful misconduct.
10.4. Indemnification
of Stockholders’ Representative.
The
Stockholders’ Representative shall incur no liability to the Stockholders or the
Escrow Agents or any other person with respect to any action taken or suffered
by him in reliance upon any note, direction, instruction, consent, statement
or
other documents reasonably believed by the Stockholders’ Representative to be
genuinely and duly authorized by at least a Majority in Interest of the
Stockholders (or the successors or assigns thereto), nor for other action or
inaction taken or omitted in good faith in connection herewith or with the
Escrow Agreement, in any case except for liability to the Stockholders for
its
own gross negligence or willful misconduct. The Stockholders’ Representative
shall be indemnified by the Stockholders for and shall be held harmless against
any loss, liability or expense incurred without gross negligence or willful
misconduct on the part of the Stockholders’ Representative as the Stockholders’
Representation and not as a Stockholder arising out of or in connection with
his
performance under this Agreement and the Escrow Agreement. This indemnification
shall survive the termination of this Agreement. For all purposes hereunder,
a
“Majority in Interest” of the Stockholders shall be determined on the basis of
the Stockholder Allocations. The Stockholders’ Representative may, in all
questions arising under this Agreement and the Escrow Agreement, rely on the
advice of counsel and for anything done, omitted or suffered in good faith
by
the Stockholders’ Representative in accordance with such advice, the
Stockholders’ Representative shall not be liable to the Stockholders or the
Escrow Agents or any other Person.
10.5. Access
to Information.
The
Stockholders’ Representative shall have reasonable access to information of and
concerning any Claim and which is in the possession, custody or control of
Purchaser and the reasonable assistance of Purchaser’s officers and employees
for purposes of performing the Stockholders’ Representative’s duties under this
Agreement or the Escrow Agreement and exercising his rights under this Agreement
and the Escrow Agreement, including for the purpose of evaluating any Claim
to
the Escrow Fund by Purchaser; provided
that
the
Stockholders’ Representative shall treat confidentially and not disclose any
nonpublic information from or concerning any Claim to anyone (except to the
Stockholders’ or in connection with any litigation relating to a dispute
pursuant to this Agreement or the Escrow Agreement, and on a need-to-know basis
to other individuals who agree to keep such information
confidential).
41
10.6. Reasonable
Reliance.
In the
performance of his duties hereunder, the Stockholders’ Representative shall be
entitled to rely upon any document or instrument reasonably believed by him
to
be genuine, accurate as to content and signed by any Shareholder or Purchaser.
The Stockholders’ Representative may assume that any person purporting to give
any notice in accordance with the provisions hereof has been duly authorized
to
do so.
10.7. Attorney-in-Fact.
(a)
The
Stockholders’ Representative is hereby appointed and constituted the true and
lawful attorney-in-fact of each Stockholder, with full power in his or her
name
and on his, or her behalf to act according to the terms of this Agreement and
the Escrow Agreement; and in general to do all things and to perform all acts
including, without limitation, executing and delivering notices contemplated
by
in connection with this Agreement and the Escrow Agreement.
(b)
This
power of attorney and all authority hereby conferred is granted and shall be
irrevocable and shall not be terminated by any act of any Stockholder, by
operation of law, whether by such Stockholder’s death, disability protective
supervision or any other event. Without limitation to the foregoing, this power
of attorney is to ensure the performance of a special obligation and,
accordingly, each Stockholder hereby renounces its, his or her right to renounce
this power of attorney unilaterally any time before all rights of
indemnification on the part of either the Stockholder Indemnified Parties and
Purchaser Indemnified parties have terminated.
(c)
Notwithstanding the power of attorney granted in this Article 10, no agreement,
instrument, acknowledgement or other act or document shall be ineffective by
reason only of the Stockholders having signed or given such directly instead
of
the Stockholders’ Representative.
10.8. Orders.
The
Stockholders’ Representative is authorized, in his sole discretion, to comply
with final, nonappealable orders or decisions issued or process entered by
any
court of competent jurisdiction with respect to the Escrow Fund. If any portion
of the Escrow Fund is disbursed to the Stockholders’ Representative and is at
any time attached, garnished or levied upon under any Order, or in case the
payment, assignment, transfer, conveyance or delivery of any such property
shall
be stayed or enjoined by any Order, or in case any Order, shall be made or
entered by any court affecting such property or any part thereof, then and
in
any such event, the Stockholders’ Representative is authorized, in his sole
discretion, but in good faith, to rely upon and comply with any such Order,
which he is advised by legal counsel selected by him is binding upon him without
the need for appeal or other action; and if the Stockholders’ Representative
complies with any such order, writ, judgment or decree, he shall not be liable
to any Stockholder or to any other Person by reason of such compliance even
though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
42
10.9. Removal
or Resignation of Stockholders’ Representative; Authority of Successor
Stockholders’ Representative.
(a)
Stockholders who in the aggregate hold at least a Majority in Interest in the
Escrow Fund shall have the right at any time during the term of the Escrow
Agreement to remove the then-acting Stockholders’ Representative and to appoint
a successor Stockholders’ Representative; provided,
however, that
neither
such removal of the then acting Stockholders’ Representative nor such
appointment of a successor Stockholders’ Representative shall be effective until
the delivery to the Escrow Agents of executed counterparts of a writing signed
by each such Stockholder with respect to such removal and appointment, together
with an acknowledgment signed by the successor Stockholders’ Representative
appointed in such writing that he or she accepts the responsibility of successor
Stockholders’ Representative and agrees to perform and be bound by all of the
provisions of this Agreement applicable to the Stockholders’ Representative. The
removed Stockholders’ Representative shall thereafter be discharged from any
further duties and liability under this Agreement.
(b)
The
Stockholders’ Representative may resign at any time upon giving at least thirty
(30) days written notice to the other parties hereto and to the Stockholders;
provided,
however, that
no such
resignation shall become effective until the appointment of a successor
Stockholders’ Representative in accordance with this Section. Stockholders who
in the aggregate hold at least a Majority in Interest in the Escrow Fund shall
appoint a successor Stockholders’ Representative and shall use their
commercially reasonable efforts to make such appointment within thirty (30)
days
after receiving such notice. Such appointment of a successor Stockholders’
Representative shall not be effective until the delivery to the Escrow Agent
of
executed counterparts of a writing signed by each such Stockholder with respect
to such removal and appointment, together with an acknowledgment signed by
the
successor Stockholders’ Representative appointed in such writing that he or she
accepts the responsibility of successor Stockholders’ Representative and agrees
to perform and be bound by all of the provisions of this Agreement applicable
to
the Stockholders’ Representative. The resigned Stockholders’ Representative
shall thereafter be discharged from any further duties and liability under
this
Agreement.
(c)
Each
successor Stockholders’ Representative shall have all of the power, authority,
rights and privileges conferred by this Agreement upon the original
Stockholders’ Representative, and the term “Stockholders’ Representative” as
used herein and in the Escrow Agreement shall be deemed to include any interim
or successor Stockholders’ Representative.
10.10. Expenses
of Stockholders’ Representative.
The
Stockholders’ Representative shall be entitled to recover from the Stockholders
reimbursement for out-of-pocket fees and expenses (including legal, accounting
and other advisors’ fees and expenses, if applicable) incurred by the
Stockholders’ Representative in performing under this Agreement and the Escrow
Agreement in his capacity as Stockholders’ Representative and not as a
Stockholder. The Stockholders’ Representative shall be entitled to recover from
any distribution made to the Stockholders from the Escrow Fund from time to
time
the amount of any such unpaid fees and expenses.
43
10.11. Purchaser’s
Reliance.
Purchaser shall be entitled to rely on any and all action taken by the
Stockholders Representative, without any liability to, or obligation to inquire
of, any Shareholder, even if Purchaser or such party were aware of any actual
or
potential dispute among the Stockholders. Purchaser shall not be obliged to
inquire into the authority of the Stockholders’ Representative or the
genuineness of his signature on any writing, and Purchaser otherwise shall
be
fully protected in dealing with the Stockholders’ Representative in all
respects.
ARTICLE 11
MISCELLANEOUS
11.1. Entire
Agreement; Assignment; Amendments and Waivers.
(a)
This
Agreement (including the Schedules), the Related Documents and such other
certificates, documents and agreements executed and delivered at the Closing
constitute the entire agreement between the parties hereto with respect to
the
subject matter hereof and thereof and supersede all other prior agreements
and
understandings, both written and oral, between the parties with respect to
the
subject matter hereof and thereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party that is not
embodied in this Agreement or such other documents, and none of the parties
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or
therein.
(b)
This
Agreement may not be assigned by operation of law or otherwise without the
prior
written consent of the other party.
(c)
This
Agreement may not be amended or modified, and any of the terms, covenants,
representations, warranties, or conditions hereof may not be waived, except
by a
written instrument executed by all of the parties hereto, or in the case of
a
waiver, by the party waiving compliance. Any waiver by any party of any
condition, or of the breach of any provision, term, covenant, representation,
or
warranty contained in this Agreement, in any one or more instances, shall not
be
deemed to be nor construed as further or continuing waiver of any such
condition, or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
11.2. Validity. If
any
provision of this Agreement or the application thereof to any person or
circumstance is held invalid or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and
to
such end the provisions of this Agreement are agreed to be
severable.
11.3.
Notices.
All
notices, requests, claims, demands and other communications hereunder shall
be
in writing and shall be given (and shall be deemed to have been duly given
upon
receipt) by delivery in person, by facsimile or by registered or certified
mail
(postage prepaid, return receipt requested) to each other party as
follows:
44
|
if
to Purchaser:
|
Aeroflex
Incorporated
|
|
00
Xxxxx Xxxxxxx Xxxx
|
|
|
XX
Xxx 0000
|
|
|
Xxxxxxxxx,
Xxx Xxxx 00000
|
|
|
Telecopier:
(000) 000-0000
|
|
|
Attention:
Xxxx Xxxxxxxxx, Senior Vice President
|
|
|
and
Chief Financial Officer
|
|
|
with
a copy to:
|
Moomjian,
Waite, Wactlar & Xxxxxxx, LLP.
|
|
000
Xxxxxxx Xxxxxxxxxx
|
|
|
Xxxxxxx,
Xxxx, XX 00000
|
|
|
Telecopier:
(000) 000-0000
|
|
|
Attention:
Xxxxxx X. Xxxxxxx, Esq.
|
|
|
if
to Stockholders:
|
x/x
Xxxxx X. Xxxxxx
|
|
00
Xxxxx Xxx
|
|
|
Xxxxxxx,
X.X 00000
|
|
|
|
|
|
with
a copy to:
|
Xxxxx
& Xxxxx
|
|
Xxxx
Xxxxxx
|
|
|
Xxxxxx,
XX 00000
Telecopier:
(000) 000-0000
Attention:
Xxxxxxx Xxxxx
|
or
to
such other address as the person to whom notice is given may have previously
furnished to the others in writing in the manner set forth above.
11.4.
Governing
Law.
This
Agreement shall be deemed to have been made in New York and shall be governed
by, and construed in accordance with, the laws of the State of New York without
regard or giving effect to the principles of conflicts of law
thereof.
11.5.
WAIVER
OF JURY TRIAL.
TO THE
EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE
PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER
AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN RESPECT OF
ANY
ISSUE OR ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY RELATED
AGREEMENT OR THE SUBJECT MATTER HEREOF, OR THEREOF OR IN ANY WAY CONNECTED
WITH
OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING. ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 11.5 WITH ANY COURT AS WRITTEN EVIDENCE
OF
THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
45
11.6. Descriptive
Headings. The
descriptive headings herein are inserted for convenience of reference only
and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
11.7. Parties
in Interest. This
Agreement shall be binding upon, and shall inure solely to the benefit of each
party hereto and its successors and permitted assigns and nothing in this
Agreement express or implied is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
11.8. Specific
Performance. The
parties hereby acknowledge and agree that the failure of any party to perform
its agreements and covenants hereunder, including its failure to take all
actions as are necessary on its part to the consummation of the transactions
contemplated hereby, will cause irreparable injury to the other parties, for
which damages, even if available, will not be an adequate remedy. Accordingly,
each party hereby consents to the issuance of injunctive relief by any court
of
competent jurisdiction to compel performance of such party's obligations and
to
the granting by any court of the remedy of specific performance of its
obligations hereunder (without the requirement of posting a bond).
11.9. Disclosure
Generally. If
and to
the extent any information required to be furnished in any Schedule is disclosed
in any other Schedule, such information shall be deemed to be included in such
other Schedule to the extent that such disclosure is specifically identified.
The inclusion of any information in any Schedule shall not be deemed to be
an
admission or acknowledgement by the Stockholders, in and of itself, that such
information is material.
11.10 Construction.
Reference to “Stockholders” herein, unless otherwise indicated, shall mean each
Stockholder as well as the Stockholders collectively. The use of the masculine
form of any word includes the feminine version and vice versa, and the singular
form of any word includes the plural and vice versa.
11.11. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which shall constitute one and the same
agreement.
46
IN
WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.
| AEROFLEX INCORPORATED | ||
| By: |
/s/
Xxxxxxx Xxxxx
|
|
| Name: Xxxxxxx Xxxxx | ||
| Title: President and CEO | ||
| /s/ Xxxxx Xxxxxx | ||
| Xxxxx Xxxxxx | ||
| /s/ Xxxx Xxxxxxxx | ||
| Xxxx Xxxxxxxx | ||
| /s/ Xxxxx Xxxxxx | ||
| Xxxxx Xxxxxx | ||
| /s/ Xxxxxx Xxxxxx | ||
| Xxxxxx Xxxxxx | ||
| /s/ Xxxxxxx Xxxxxx | ||
| Xxxxxxx Xxxxxx | ||
| /s/ Xxxxx Xxxxxx | ||
| Xxxxx Xxxxxx | ||
| /s/ Xxxx X. Xxxxxxxx | ||
| Xxxx X. Xxxxxxxx | ||
| /s/ Xxxxxx Xxxx | ||
| Xxxxxx Xxxx | ||
| /s/ | ||
| Stockholder’s Representative | ||
47
