STOCK PURCHASE AGREEMENT
by and among
JACO ELECTRONICS, INC.
and
All of the Stockholders of
INTERFACE ELECTRONICS CORP.
As of May 4, 2000
TABLE OF CONTENTS
Page
ARTICLE IPURCHASE AND SALE OF THE SHARES..........................................................................2
1.1 Purchase and Sale of Shares............................................................2
1.2 Purchase Price.........................................................................2
1.3 Payment of Purchase Price for Shares...................................................3
1.4 Recovery From General Holdback and Set-Off.............................................5
1.5 Xxxx-Xxxxx-Xxxxxx Act..................................................................5
ARTICLE IIPURCHASE PRICE ADJUSTMENT...............................................................................6
2.1 Purchase Price Adjustment..............................................................6
ARTICLE IIIREPRESENTATIONS AND WARRANTIESOF THE SELLERS...........................................................7
3.1 Ownership of Shares and Execution of Agreement.........................................7
3.2 Organization and Good Standing.........................................................8
3.3 Capitalization.........................................................................8
3.4 Subsidiaries...........................................................................8
3.5 Financial Statements...................................................................9
3.6 No Undisclosed Liabilities.............................................................9
3.7 No Material Adverse Change.............................................................9
3.8 Tax...................................................................................10
3.9 Intellectual Property.................................................................12
3.10 Real Property; Leases of Real Property................................................12
3.11 Personal Property.....................................................................13
3.12 Permits; Compliance with Laws.........................................................13
3.13 Insurance.............................................................................13
3.14 Contracts.............................................................................13
3.15 Litigation............................................................................14
3.16 Restrictions..........................................................................14
3.17 Labor Disputes........................................................................14
3.18 Minute Books..........................................................................15
3.19 Consents..............................................................................15
3.20 Related Party Transactions and Interests..............................................15
3.21 Employee Benefits.....................................................................15
3.22 Employees.............................................................................18
3.23 Banks.................................................................................18
3.24 No Misrepresentation..................................................................18
3.25 Environment, Health, and Safety Matters...............................................19
3.26 Investment Company/Government Regulations.............................................19
3.27 Product Warranties....................................................................19
3.28 No Loss of Business...................................................................19
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3.29 Adverse Contracts.....................................................................20
3.30 Software..............................................................................20
3.31 Year 2000 Compliance..................................................................21
3.32 Accounts and Notes Receivable.........................................................21
3.33 ISG Business..........................................................................22
ARTICLE IVREPRESENTATIONS AND WARRANTIES OF PURCHASER............................................................22
4.1 Organization and Good Standing........................................................22
4.2 Restrictions..........................................................................22
4.3 No Lawsuits...........................................................................22
4.4 Execution and Effect of Agreement.....................................................22
4.5 No Misrepresentation..................................................................22
4.6 Purchase for Investment...............................................................23
4.7 Approvals.............................................................................23
4.8 Bank Loan.............................................................................23
ARTICLE VCONFIDENTIALITY; PUBLICITY..............................................................................23
5.1 Confidentiality.......................................................................23
5.2 Publicity.............................................................................24
ARTICLE VICOVENANTS OF THE SELLERS...............................................................................24
6.1 Representations and Warranties........................................................24
6.2 Updating Schedules, Access to Documents, Opportunity to Ask Questions 24
6.3 Maintenance of Insurance..............................................................25
6.4 Conduct of Business...................................................................25
6.5 Dallas Semiconductor Consent; Other Consents and Conditions Precedent.................25
6.6 No Other Negotiations.................................................................26
6.7 Loans Receivable......................................................................26
ARTICLE VIICOVENANTS OF PURCHASER................................................................................26
7.1 Representations and Warranties........................................................26
7.2 Other Consents; Conditions Precedent..................................................27
ARTICLE VIIICONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION.......................................................27
8.1 Representations and Warranties........................................................27
8.2 Performance of Covenants..............................................................27
8.3 Litigation............................................................................27
8.4 Counsel's Opinion.....................................................................27
8.5 Closing Certificate...................................................................27
8.6 Specimen Signature....................................................................27
8.7 Consents and Government Approvals.....................................................28
8.8 No Material Adverse Change............................................................28
8.9 Dallas Semiconductor..................................................................28
8.10 Organization Documents................................................................28
8.11 Employment Agreement..................................................................28
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8.12 Holdback Escrow Agreement.............................................................28
8.13 Loans Receivable......................................................................28
8.14 Stock Certificates....................................................................28
8.15 Assignment of Leases..................................................................28
8.16 Xxxxxx X. Xxxxxxx Life Insurance......................................................29
8.17 Financial Statements..................................................................29
8.18 Certain Consents......................................................................29
8.19 UCC-3 Terminantion Statements.........................................................29
ARTICLE IXCONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION........................................................29
9.1 Representations and Warranties........................................................29
9.2 Performance of Covenants..............................................................29
9.3 Litigation............................................................................29
9.4 Counsel's Opinion.....................................................................30
9.5 Closing Certificate...................................................................30
9.6 Incumbency and Resolutions............................................................30
9.7 Government Approvals..................................................................30
9.8 Organization Documents................................................................30
9.9 Holdback Escrow Agreement.............................................................30
ARTICLE XCLOSING.................................................................................................30
10.1 The Closing...........................................................................30
10.2 Satisfactory Documents................................................................31
10.3 Deliveries by the Sellers.............................................................31
10.4 Deliveries by the Purchaser...........................................................31
ARTICLE XINO BROKERS.............................................................................................31
ARTICLE XIISURVIVAL OF REPRESENTATIONS, WARRANTIES AND CLAIMS....................................................32
ARTICLE XIIIINDEMNIFICATION AND LIMITATION OF LIABILITY..........................................................32
13.1 Indemnification by Sellers............................................................32
13.2 Indemnification by Purchaser..........................................................33
13.3 Indemnification.......................................................................33
13.4 Limitations...........................................................................34
13.5 Legal Proceedings.....................................................................34
13.6 Payment...............................................................................35
13.7 Nonexclusivity and Survival...........................................................35
ARTICLE XIVTERMINATION...........................................................................................36
14.1 Termination by Consent or Upon Notice.................................................36
14.2 Obligations and Liabilities Upon Termination..........................................36
ARTICLE XVSPECIFIC PERFORMANCE...................................................................................37
ARTICLE XVIFURTHER ASSURANCES; LICENSE; TAX MATTERS..............................................................37
16.1 Further Assurances....................................................................37
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16.2 License...............................................................................37
16.3 Tax Matters...........................................................................37
ARTICLE XVIINON-COMPETITION......................................................................................39
17.1 Non-Competition.......................................................................39
17.2 Nondisclosure of Confidential Material................................................39
17.3 Non-Solicitation; Non-Compete.........................................................39
17.4 Injunctive Relief.....................................................................39
17.5 Reasonable Restrictions...............................................................40
ARTICLE XVIIIMISCELLANEOUS.......................................................................................40
18.1 Notices...............................................................................40
18.2 Entire Agreement......................................................................41
18.3 Successors and Assigns................................................................41
18.4 Section Headings......................................................................41
18.5 Applicable Law........................................................................42
18.6 Jurisdiction..........................................................................42
18.7 Expenses; Transfer Taxes..............................................................42
18.8 Severability..........................................................................43
18.9 Counterparts..........................................................................43
18.10 Books and Records.....................................................................43
18.11 Exhibits and Schedules................................................................43
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Schedules and Exhibits
Schedule 3.2 - Qualification
Schedule 3.3 - Capitalization
Schedule 3.8 - Taxes
Schedule 3.9 - Intellectual Property
Schedule 3.10 - Real Property; Lease
Schedule 3.11 - Personal Property; Liens
Schedule 3.13 - Insurance
Schedule 3.14 - Material Contracts
Schedule 3.15 - Litigation
Schedule 3.16 - Restrictions
Schedule 3.19 - Consents
Schedule 3.20 - Related Party Transactions
Schedule 3.21 - ERISA
Schedule 3.22 - Employees
Schedule 3.23 - Banks
Schedule 3.28 - Loss of Business
Schedule 3.30 - Software
Schedule 6.7 - Loans Receivable
Schedule 8.7 - Consent Waivers
Exhibit A - Form of Holdback Escrow Agreement
Exhibit B - Form of Dallas Escrow Agreement
Exhibit C - Form of Xxxxxx X. Xxxxxxx Employment Agreement
Exhibit D - Form of License Agreement
Exhibit 3.5 - Draft of 1999 Audited Financial Statements
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") dated as of May 4, 2000, by and
among JACO ELECTRONICS, --------- INC., a New York corporation (the
"Purchaser"), and XXXXXXX X. XXXXX and XXXXXX X. XXXXXXX (individually, a
--------- "Seller" and collectively, the "Sellers"). -------
W I T N E S S E T H T H A T :
- - - - - - - - - - - - - -
WHEREAS, the Sellers own all of the issued and outstanding shares of
Common Stock, no par value per share ("Common Stock"), of Interface Electronics
Corp., a Massachusetts corporation (the "Company") set forth on Schedule 3.3
hereto (all of the foregoing shares of Common Stock, collectively the "Shares"),
representing in the aggregate 100% of the equity of the Company on a fully
diluted basis; and
WHEREAS, the Sellers desire to sell all of such Shares to the
Purchaser, and the Purchaser desires to purchase all of such Shares from the
Sellers, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto, each intending to be legally bound,
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
1.1 Purchase and Sale of Shares. On the terms and subject to the conditions set
forth in this Agreement, the Sellers hereby agree to sell, assign and transfer
to the Purchaser, and the Purchaser hereby agrees to purchase from the Sellers,
on the Closing Date, all right, title and interest of the Sellers in and to all
of the Shares.
1.2 Purchase Price. The aggregate purchase price (the "Purchase Price") to be
paid to the Sellers for the Shares shall be (i) the Initial Consideration, as
defined below, plus (ii) the Year One Deferred Payment, as defined below, plus
(iii) the Year Two Deferred Payment, as defined below.
(a) Initial Consideration. The "Initial Consideration" shall be an amount
equal to $15,400,000.
(b) Year One Deferred Payment. If during the 12 month period which begins
with the month following the month which includes the Closing Date ("Year One")
(x) (i) gross sales by the Company's Contract Manufacturing Division ("CM
Division") are at least $20,000,000 and (ii) the Gross Profit, as defined below,
derived by the Company from such sales is at least $3,000,000 (collectively, the
"Minimums"), and (y) the amount of such Gross Profit is at least $5,250,000, the
Purchaser shall pay to the Sellers, subject to Section 1.3(b) and Section 1.4
hereof, an additional amount equal to $3,960,000 (the "Year One Deferred
Payment"). If the Minimums have been achieved for Year One and Gross Profit
during Year One is less than $5,250,000 then the Year One Deferred Payment shall
be equal to the product of $3,960,000 multiplied by a fraction, the numerator of
which is the amount of such Gross Profit and the denominator of which is
$5,250,000. "Gross Profit" for purposes of this Section 1.2 means gross sales by
the CM Division less the cost of goods sold.
(c) Year Two Deferred Payment. If during the last 12 months ("Year Two") of
the 24 month period which begins with the month following the month which
includes the Closing Date (x) the Minimums have been achieved, and (y) the
amount of the Gross Profit for Year Two is at least $8,250,000 the Purchaser
shall pay to the Sellers, subject to Section 1.4 hereof, an additional amount
equal to $2,640,000 (the "Year Two Deferred Payment"). If the Minimums have been
achieved for Year Two and Gross Profit during Year Two is less than $8,250,000
then the Year Two Deferred Payment shall be equal to the product of $2,640,000
multiplied by a fraction, the numerator of which is the amount of such Gross
Profit and the denominator of which is $8,250,000.
(d) Other Sales. Purchaser covenants that if it, directly or indirectly,
prior to the end of Year Two, sells any products or services to any customers of
the CM Division, whether or not through the Company, then such sales shall be
deemed sales by the Company for purposes of this Section 1.2, except for (i)
sales of products by Purchaser which are not offered by the CM Division and (ii)
sales of products which (x) are not procured by employees of the Company and (y)
which Purchaser would have been able to sell to customers of the CM Division
without having acquired the Company.
1.3 Payment of Purchase Price for Shares.
(a) As of the Closing Date, the Purchaser shall pay to the Sellers on
account of the purchase of the Shares, the Initial Consideration less (i) the
Initial Holdback (as defined below) and (ii) the Dallas Deposit (as defined
below).
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(b) As of the Closing Date, the Purchaser shall pay to Xxxxxxxx Xxxxx
Singer & Xxxxxxxxx, LLP, as escrow agent under an escrow agreement substantially
in the form of Exhibit A hereto (the "Holdback Escrow Agreement"), the sum of
$1,450,000 (the "Initial Holdback")and, when the Year One Deferred Payment is
payable, the first $750,000 thereof (or such lesser amount as shall equal the
Year One Deferred Payment) shall be paid to said escrow agent to be held
pursuant to the Holdback Escrow Agreement (the Initial Holdback plus such
additional amount, the "Holdback"). The Holdback Escrow Agreement shall continue
for two (2) years from the Closing Date and for such longer period as there may
exist any unresolved claim against the Holdback. The Holdback Escrow Agreement
shall provide that (i) $1,200,000 (the "Bull Holdback") shall be released to
Sellers upon the satisfaction of the judgment obtained by Bull HN Information
Systems, Inc. against the Company or the delivery to Purchaser of a release,
reasonably satisfactory to Purchaser, by Bull HN Information Systems, Inc. of
the Company from any liability of any kind or nature arising from the action
brought against the Company captioned Bull HN Information Systems, Inc., vs.
Interface Electronics Corporation, Middlesex Superior Courts, Commonwealth of
Massachusetts, Docket No. M1CV1996-01965 (the "Bull Litigation"), and (ii)
subject to Section 1.4 hereof, (x) all amounts in excess of the Bull Holdback
plus $500,000 (or such lesser amount as shall be then held in escrow) shall be
released to Sellers on the first anniversary of the Closing Date, and (y) all
amounts in excess of the Bull Holdback shall be released to Sellers on the
second anniversary of the Closing Date (the amounts held in escrow hereunder
other than the Bull Holdback, the "General Holdback").
(c) As of the date hereof, the Purchaser shall pay to Posternak, Xxxxxxxxxx
& Xxxx, L.L.P., as escrow agent under an escrow agreement substantially in the
form of Exhibit B hereto (the "Dallas Escrow Agreement") the sum of $1,000,000
(the "Dallas Deposit").
(d) The Year One Deferred Payment shall be paid not later than the 15th day
following the end of Year One, or at such earlier time as (i) the Minimums have
been achieved for Year One, and (ii) the Gross Profit for Year One equals at
least $5,250,000.
(e) The Year Two Deferred Payment shall be paid not later than the 15th day
following the end of Year Two, or at such earlier time as (i) the Minimums have
been achieved for Year Two, and (ii) the Gross Profit for Year Two equals at
least $8,250,000.
(f) All amounts payable in respect of the Purchase Price shall be paid to
the Sellers, pro rata based upon their respective ownership of Shares, as set
forth in Schedule 3.3, by means of wire transfers of immediately available
funds, to such accounts as each of the Sellers shall designate.
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(g) If a Change of Control of the Purchaser or the Company should occur
during Year One or Year Two, then the maximum amount of any unpaid Deferred
Payment will be paid at such time, provided that the CM Division has not been
terminated as of the date of the Change of Control, unless such termination is
on account of such Change of Control in which event the Deferred Payments will
be paid if such Change of Control occurs. For purposes hereof, "Change of
Control" shall mean (x) with respect to Purchaser, (a) less than a majority of
the members of the Purchaser's board of directors shall be persons who either
(i) were serving as directors on the Closing Date or (ii) were nominated as
directors and approved by the vote of the majority of the directors who are
directors referred to in clause (i) above or this clause (ii); or (b) the
stockholders of the Purchaser shall approve any plan or proposal for the
liquidation or dissolution of the Purchaser; or (c) a person or group of persons
acting in concert (other than the direct or indirect beneficial owners of the
capital stock of the Company as of the Closing Date) shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended from
time to time) of securities of the Purchaser representing 50% or more of the
combined voting power of the outstanding voting securities for the election of
directors or shall have the right to elect a majority of the board of directors
of Purchaser; or (d) if all or substantially all of the assets of the Purchaser
are sold in a transaction or series of transactions other than sales of
inventory in the ordinary course of business, or (y) with respect to the
Company, if the Purchaser shall cease to own at least 50% of the capital stock
of the Company or if all or substantially all of the assets of the Company are
sold in a transaction or series of transactions other than sales of inventory in
the ordinary course of business.
(h) Interest earned on all escrowed amounts pursuant to this Agreement
shall follow the funds.
1.4 Recovery From General Holdback and Set-Off. If there is a Net Worth
Adjustment as provided in Article II or if there shall exist a Claim for
indemnification under Article XIII hereof and such Claim is not in dispute when
any Deferred Payment is required to be made under this Article I, then Purchaser
may recover such amount from the General Holdback and/or offset the amount of
such Claim, subject to Section 13.4, against the Deferred Payment otherwise
payable at such time to the Sellers. If the Net Worth Adjustment Documents have
not been finalized in accordance with Article II when any portion of the General
Holdback would otherwise be released to Sellers or if there shall exist a Claim
for indemnification under Article XIII hereof and such Claim is in dispute when
any Deferred Payment is required to be made under this Article I, then the
amount of the General Holdback that would otherwise be released shall continue
to be held under the Holdback Escrow Agreement up to the amount of the claim
that is in dispute, or the amount of such Claim that is in dispute shall not be
paid to Sellers as a Deferred Payment and shall be deposited under the Holdback
Escrow Agreement, and such amount shall be released from escrow upon final
resolution thereof.
1.5 Xxxx-Xxxxx-Xxxxxx Act. The parties agree that the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, 15 U.S.C. ss.18a(a) et. Seq. (the
"Xxxx-Xxxxx-Xxxxxx Act") is applicable to the transaction sought to be
consummated by this Agreement. The parties also agree that they will comply with
the filing/notification requirements of the Act, in all respects, promptly
following the execution of this Agreement. The parties also agree that this
transaction is subject to, conditioned upon and cannot be consummated until each
party has received notification (the "Notification") from the Federal Trade
Commission approving the acquisition contemplated by the terms of this
Agreement. The Sellers shall not tender and the Purchaser shall not accept the
consideration to be eventually exchanged to consummate this transaction until
the Purchaser and the Sellers have received such Notification. Both the Sellers
and the Purchaser have received and acknowledge that there has not been a tender
or an acceptance of consideration nor will there be until the parties have
received the Notification. The term "consideration," as used above, shall not
include the escrowed amounts held pursuant to this Agreement.
5
ARTICLE II
PURCHASE PRICE ADJUSTMENT
2.1 Purchase Price Adjustment.
(a) Not more than thirty (30) days after the Closing Date, the Sellers
shall prepare and deliver to the Purchaser (i) an unaudited balance sheet for
the Company as of the Closing Date (the "Closing Date Balance Sheet"), which
Closing Date Balance Sheet shall be prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied and consistent with
the Company's past practice, except that inventory shall be valued in accordance
with Section 2.1(e), and (ii) a schedule calculating the amount of the Company's
Net Worth (as defined below) derived from the Closing Date Balance Sheet (the
"Closing Net Worth"), and the amount, if any, (a "Net Worth Adjustment") by
which the Closing Net Worth is more or less than $(1,134,279) (collectively, the
"Net Worth Adjustment Documents"). The parties shall cooperate in the
preparation of the Net Worth Adjustment Documents in accordance with this
Section 2.1, including such additional documents as may be necessary to
calculate any Net Worth Adjustment. The participation by the Purchaser in the
preparation of the Net Worth Adjustment Documents shall in no way limit the
Sellers' indemnification obligations under Article XIII hereof.
(b) Within forty-five (45) days after delivery of the Closing Date Balance
Sheet, the Purchaser may dispute all or any portion of the Net Worth Adjustment
Documents by giving written notice (a "Notice of Disagreement") to the Sellers
setting forth in reasonable detail the basis for any such dispute (hereinafter
called a "Disagreement"). The parties shall promptly commence good faith
negotiations with a view to resolving all such Disagreements. If the Purchaser
fails to deliver a Notice of Disagreement within said 30-day period, the
Purchaser shall be deemed to have irrevocably accepted the Net Worth Adjustment
Documents in the form delivered to it.
6
(c) If the Purchaser shall deliver a Notice of Disagreement and the Sellers
shall not dispute all or any portion of such Notice of Disagreement by giving
written notice to the Purchaser setting forth in reasonable detail the basis for
such Disagreement within ten (10) days following the delivery of such Notice of
Disagreement, the Sellers shall be deemed to have irrevocably accepted the Net
Worth Disagreement Documents as modified in the manner described in the Notice
of Disagreement. If the Sellers dispute all or any portion of the Notice of
Disagreement within the ten-day period described in the previous sentence, and
within ten (10) days following the delivery to the Purchaser of the notice of
such dispute the Purchaser and the Sellers do not resolve the dispute (as
evidenced by a written agreement among the parties hereto), such dispute shall
be referred to KPMG International or if for any reason KPMG International
declines the engagement, then a "Big-Five" accounting firm jointly selected by
the accountants for Purchaser and the Sellers (the "Independent Accounting
Firm") for a resolution of such dispute in accordance with the terms of this
Agreement. The determinations of such firm with respect to any dispute shall be
final and binding upon the parties and the amount so determined shall be used to
complete the final Net Worth Adjustment Documents. The Purchaser and the Sellers
shall use their best efforts to cause the Independent Accounting Firm to render
their determination as soon as practicable after referral of the dispute to such
firm, and each shall cooperate with such firm and provide such firm with
reasonable access to the books, records, personnel and representatives of it and
its Subsidiaries and such other information as such firm may require in order to
render its determination. The fees and disbursements of any Independent
Accounting Firm shall be allocated between the Purchaser and the Sellers in the
same proportion that the aggregate amount of the disputed items so submitted to
the Independent Accounting Firm that is unsuccessfully disputed by each (as
finally determined by the Independent Accounting Firm) bears to the total amount
of the disputed items so submitted.
(d) If, as a result of this Section 2.1, it is determined that there is a
Net Worth Adjustment, 100% of the amount of any shortfall shall be payable by
the Sellers to the Purchaser, and in the case of any positive adjustment, 70%
thereof shall be payable by the Purchaser to the Sellers, in either case in cash
within ten (10) days of the final determination of the amount of the Net Worth
Adjustment. If Sellers fail to make any payment required to be made under this
Section 2.1(d) within such ten (10) day period then, without limiting
Purchaser's other rights, the amount of such Net Worth Adjustment shortfall
shall be released to Purchaser from the General Holdback. If Purchaser fails to
make any payment required to be made under this Section 2.1(d) within such ten
(10) day period, interest shall accrue at the rate of 12% per annum until paid.
(e) For purposes of determining Closing Net Worth, the following inventory
shall be deemed to have no value and shall be transferred to the Sellers for
$1.00: inventory (i) which the Company does not have the right to return to the
manufacturer thereof at the net cost, or (ii) with respect to which there have
been no sales or an unacceptably low amount of sales, in the Purchaser's
reasonable judgment, during the 6 month period preceding the Closing Date, or
(iii) which is obsolete, damaged, below standard quality or excessive in
quantity in light of the current requirements of the business of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
The Sellers, jointly and severally, hereby represent and warrant to the
Purchaser as follows:
7
3.1 Ownership of Shares and Execution of Agreement. Each of the Sellers is and
will be, on the Closing Date, the record and beneficial owner of the number of
shares of Common Stock set forth on Schedule A next to the name of such Seller,
representing in the aggregate 100% of the issued and outstanding shares of
Common Stock of the Company, which shares will be owned by each Seller, on the
Closing Date, free and clear of any and all liens, pledges encumbrances, charge,
agreements of claims of any kind whatsoever. The Sellers have power and
authority to enter into this Agreement and all other documents contemplated
hereby and to sell, transfer, assign and deliver the shares of Common Stock as
provided in this Agreement, and such delivery will convey to the Purchaser good
and marketable title to the shares of Common Stock free and clear of any and all
liens, pledges, encumbrances, charges, agreements or claims of any kind
whatsoever. The execution and delivery of this Agreement and all other documents
contemplated hereby to which any of the Sellers is a party and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary action of the Sellers. This Agreement and all other agreements
pertaining to the transactions described herein have been, or upon the execution
and delivery thereof will be, duly executed and delivered by the Sellers, and
constitute or will constitute the legal, valid and binding obligation of the
Sellers, enforceable against each of them in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors rights and remedies generally and subject, as to
enforceability, to general principles of equity including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
3.2 Organization and Good Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts, and has full corporate power and authority to own its properties
and carry on its business as it is now being conducted. Schedule 3.2 hereto sets
forth each jurisdiction in which the Company is duly qualified as a foreign
corporation. The Company is duly qualified as a foreign corporation and is in
good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its assets requires such qualification except where
a failure to be so qualified would not have a material adverse effect on the
business, assets, financial condition or prospects of the Company, ("Material
Adverse Effect"). The copies of the Company's Articles of Organization and
By-laws (together with all amendments thereto) which have been previously
delivered or made available to the Purchaser are correct and complete. For
purposes of this Agreement, "material" or "Material" shall mean any claim,
circumstance or state of facts which, individually or in the aggregate, results
in loss, diminution of value or the expenditure or commitment of $5,000 or more,
or when used to qualify a non-monetary matter, any event, circumstance or fact
as would be deemed material by a reasonable person.
3.3 Capitalization. The authorized capital stock and issued shares of the
Company is set forth on Schedule 3.3 hereto. All of such issued and outstanding
shares are fully paid and nonassessable. No shares of capital stock are held by
the Company as treasury stock. There is no existing option, warrant, call,
commitment or other agreement to which the Company is a party requiring, and
there are no convertible securities of the Company outstanding, including
without limitation, any shares of Preferred Stock, which upon conversion would
require, the issuance of any additional shares of capital stock of the Company
or other securities convertible into shares of capital stock or other equity
security of the Company. The Company has withheld from the income of each Seller
who acquired shares of Common Stock upon the exercise of Company granted
options, such amount as is required to be withheld pursuant to applicable law.
The only capital stock of the Company outstanding as of the Closing Date will be
the Shares purchased by Purchaser hereunder.
3.4 Subsidiaries. The Company does not own any shares of capital stock,
partnership interest or any other direct or indirect equity interest in any
corporation, partnership or other entity.
8
3.5 Financial Statements. The Company has delivered to Purchaser a draft
(attached hereto as Exhibit 3.5) of the 1999 Audited Financials (as defined
below) and will deliver to Purchaser the 1999 Audited Financials on or before
May 12, 2000. For purposes hereof, the term "Financial Statements" means a
balance sheet and the related statements of income, stockholders equity and cash
flow, together with the notes thereto, (i) audited by Xxxxxx & Xxxxxxxx and
accompanied by their unqualified report thereon (except for a "going concern"
qualification) for the year ended and as of December 31, 1999 (the "1999 Audited
Financials"), and (ii) unaudited for the three month period ended and as of
March 31, 2000, and the "Balance Sheet Date" means March 31, 2000, which is the
date of the most recent balance sheet (the "Balance Sheet") for the Company. The
Financial Statements fairly present, and the Closing Date Balance Sheet will
fairly present, in all material respects, the financial position of the Company
as of the respective dates thereof, and the results of operations and cash flows
of the Company as of the respective dates or for the respective periods set
forth therein, all in conformity with GAAP consistently applied during the
periods involved, except as otherwise set forth in the notes thereto and
subject, in the case of other than year-end Financial Statements to normal
year-end audit adjustments, the absence of notes thereto and the absence of
statements of cash flow.
3.6 No Undisclosed Liabilities. As of the Balance Sheet Date and as the Closing
Date, the Company had or will have, as the case may be, no obligation,
indebtedness or liability of any nature (whether known or unknown and whether
accrued, absolute, contingent or otherwise, and whether due or to become due)
which is not shown on the Balance Sheet or the Closing Date Balance Sheet, as
applicable, or the notes thereto. Except as included in the Balance Sheet or the
Closing Date Balance Sheet the Company does not have outstanding on the date
hereof and will not have outstanding on the Closing Date, any obligation,
indebtedness or liability, and there is no basis for the assertion of any such
obligation, indebtedness or liability of any nature, whether accrued, absolute,
contingent or otherwise and whether or not such obligation, indebtedness or
liability would have been required to be disclosed on a balance sheet prepared
in accordance with GAAP other than those incurred since the Balance Sheet Date
in the ordinary course of business, none of which in the aggregate, would have a
Material Adverse Effect. The Closing Balance Sheet will not include any
liabilities for any business operations of the Company, other than the business
operations of the Company as of the Closing Date and the liabilities of the
Company's ISG Business.
9
3.7 No Material Adverse Change. Since the Balance Sheet Date there has been no
material adverse change in the business, assets or financial condition of the
Company. Since the Balance Sheet Date, the Company has not (i) issued any stock,
bonds or other corporate securities, (ii) borrowed any amount or incurred any
liabilities (absolute or contingent), other than in the ordinary course of
business, (iii) discharged or satisfied any lien or incurred or paid any
obligation or liability (absolute or contingent), other than in the ordinary
course of business, (iv) declared or made any payment or distribution to
stockholders (except for distributions to the Sellers in an amount not in excess
of the tax liabilities (45% State and Federal combined) of the Sellers based on
the Company's income from January 1, 2000 to the Closing Date resulting from the
Company being an "S" corporation during 2000 ("Permitted Distributions") or
purchased or redeemed any shares of its capital stock or other securities, (v)
mortgaged, pledged or subjected to lien any of its assets, tangible or
intangible, (vi) sold, assigned or transferred any of its tangible assets, or
canceled any debts or claims, (vii) sold, assigned or transferred any patents,
trademarks, trade names, copyrights, trade secrets or other intangible assets,
(viii) suffered any losses of property, or waived any rights of substantial
value, (ix) suffered any adverse change in, or effect on, its assets, business,
properties, or financial condition, (x) expended any material amount, granted
any bonuses or extraordinary salary increases, (xi) entered into any transaction
not in the ordinary course of business except as otherwise contemplated hereby
or (xii) entered into any agreement or transaction, or amended or terminated any
agreement, with an affiliate. For purposes of this Agreement, an "affiliate" of
any particular entity shall mean any entity directly or indirectly controlling,
controlled by, or under common control with such entity. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and under "common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an entity, whether through the
ownership of voting securities, by contract or otherwise.
3.8 Taxes.
(a) Definitions: For purposes of this Agreement (A) "Affiliated Group"
means any affiliated group within the meaning of Code Section 1504(a) or any
similar group defined under a similar provision of state, local or foreign law,
(B) "Code" means the Internal Revenue Code of 1986, as amended, and rules and
regulations promulgated thereunder, (C) "Taxes" means any federal, state, local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59), customs duties, capital stock,
franchise, profits, withholding (including without limitation all Taxes required
to be paid as a result of any distributions of any assets of the Company made at
any time on or prior to the Closing Date), social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and (D) "Tax Return" means any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto and
any amendment thereof, and any information returns or reports with respect to
back-up withholding and other payment to third parties.
10
(b) Except as disclosed on Schedule 3.8: (A) all Tax Returns that are due
to have been filed in accordance with any applicable law have been duly filed
and are true, correct and complete in all respects; (B) all Taxes (as defined
herein) (including, without limitation, all Tax deposits) for which the Company
has any liability that are required to have been paid (whether or not shown on
any Tax Return) have been paid in full; (C) the unpaid Taxes of the Company (x)
did not, as of December 31, 1999, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Financial Statements
(rather than in any notes thereto) and (y) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company in filing its Tax Returns; (D) there are
no extensions of time in effect with respect to the date on which any Tax Return
was or is due to be filed by the Company; (E) all deficiencies asserted as a
result of any examination of any Tax Return filed by the Company have been paid
in full, accrued on the books of the Company or finally settled, and no issue
has been raised in any such examination which, by application of the same or
similar principles, reasonably could be expected to result in a proposed
deficiency for any other period through the date hereof not so examined; (F) no
claims for Taxes for which the Company is or may be liable have been or are
being asserted or proposed, and, to the knowledge of the Sellers and the
Company, no proposals or deficiencies for any such Taxes are being threatened or
are expected, and no audit or investigation of any Tax Return filed by the
Company is currently underway, pending or threatened; (G) the Company has not
entered into, or is otherwise subject to, any waiver of any statute of
limitation in respect of, or agreement for the extension of time for the
assessment of, any Taxes for which the Company is or may be liable or
deficiencies thereof, nor are there any requests for rulings in respect of such
Taxes, and there are no outstanding subpoenas or requests for information,
notices of proposed reassessment of any property owned or leased by the Company
or any other matter pending between the Company and any taxing authority; and
(H) there are no liens for Taxes upon any property or assets of the Company,
except liens for current Taxes not yet due.
(c) The Company has delivered to the Purchaser true and complete copies of
all Tax Returns requested by Purchaser (together with any related examination
reports and statements of deficiencies) filed by the Company for at least the
last three taxable years ending December 31, 1998, and for all other taxable
periods as indicated on Schedule 3.8. No power of attorney is currently in
effect with respect to any Tax matter relating to the Company.
(d) The Company has not filed a consent pursuant to Section 341(f) of the
Code.
(e) The Company has not made nor is it required to make any payment which
constitutes an "excess parachute payment" within the meaning of Section 280G of
the Code, and no payment required to be made by the Company under any contract
or otherwise will, if made, constitute an "excess parachute payment" within the
meaning of Section 280G of the Code or subjects the recipient thereof to an
excise tax under Section 4999 of the Code.
(f) Except as disclosed on Schedule 3.8, the Company has never been, and
currently is not, bound by or subject to any obligation under any agreement
relating to the sharing of any liability for, or payment of, Taxes with any
other person or entity. The Company does not have any liability for the Taxes of
any other person (A) under Treas. Reg. ss. 1.1502-6 (or any similar provision of
state, local or foreign law), (B) as a transferee or successor, (C) by contract,
or (D) otherwise.
11
(g) Schedule 3.8 (A) sets forth all jurisdictions in which the Company has
filed within the last seven (7) years or lesser period where applicable based
upon the Company's incorporation date, or will file, a Tax Return for any
taxable period, or portion thereof, ending on or before the Closing Date; (B)
lists all such Tax Returns that were not filed; and (C) indicates those Tax
Returns that have been audited or currently are the subject of audit. No claim
has ever been made by an authority in a jurisdiction where the Company does not
file a Tax Return that it is or may be subject to taxation by that jurisdiction.
(h) Except as set forth on Schedule 3.8, the Company has withheld or will
withhold, and has paid over or will pay over on a timely basis to applicable
taxing authorities all Taxes required to be withheld and paid over in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and has filed or will file all required Tax
Returns and has complied or will comply with all record maintenance requirements
with respect to such withholding, for all periods (or portions thereof) ending
on or before the Closing Date, in compliance with the provisions of the Code and
other applicable federal, foreign, state and local laws.
(i) The Company is not a United States Real Property Holding Corporation
(within the meaning of the Code Section 897 (c) (2)) nor has the Company been so
at any time during the five-year period preceding the Closing Date.
(j) The Company has not been a member of any Affiliated Group.
(k) The Company (and any predecessor of the Company) has been a validly
electing "S" corporation within the meaning of Code ss.ss.1361 and 1362 since
January 17, 1999 and the Company will be an "S" corporation up to the Closing
Date.
(l) The Company has not, in the past ten (10) years, (A) acquired assets
from another corporation in a transaction in which the Company's Tax basis for
the acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (B) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.
3.9 Intellectual Property. Schedule 3.9 hereto contains a complete and correct
list of each patent, trademark, trade name, service xxxx and copyright owned or
licensed by the Company as well as all registrations thereof and pending
applications therefor, and each license or other agreement relating thereto.
Except as set forth on Schedule 3.9 hereto, each of the foregoing is owned or
licensed by the Company, free and clear of all mortgages, claims, liens,
security interests, charges and encumbrances and is in good standing and not the
subject of any challenge. There have been no claims made and the Company has not
received any notice or otherwise knows that any of the foregoing is invalid or
conflicts with the asserted rights of others.
12
3.10 Real Property; Leases of Real Property. Schedule 3.10 hereto sets forth a
list of all real properties owned in fee by the Company. Except as set forth on
Schedule 3.10, the Company has good title to all such real properties, free and
clear of all liens, charges, security interests, mortgages, or other
encumbrances of any nature whatsoever, except for encumbrances or title
exceptions which, individually or in the aggregate, do not have a Material
Adverse Effect. Schedule 3.10 hereto contains a complete and correct list of all
leases of real property to which the Company is a party and of all assignments
relating thereto, all of which leases and assignments are in full force and
effect and all easements of which the Company is a beneficiary and that are
material to the conduct of the business thereof. All such leases and easements
are valid and binding, have not been amended or modified, and upon consummation
of the transactions contemplated hereby, will continue to entitle the Company to
the use and possession of such real property. Except as set forth in such
Schedule, the Company is not in default and has not received written notice of
default under any such lease, and, to the Sellers' Knowledge, after due and
diligent inquiry ("Knowledge") there has been no default thereunder by any third
party.
3.11 Personal Property. The Company leases or owns all tangible personal
property used to conduct its business and operations as presently conducted.
Except as disclosed in Schedule 3.11, the Company has valid title or a valid
lease with respect to all of its properties and assets reflected on the Balance
Sheet (except for assets disposed of in the ordinary course of business since
the Balance Sheet Date) or shown on any schedule hereto, free and clear of any
and all liens, mortgages, pledges, security interests, restrictions, prior
assignments, claims and encumbrances of any kind whatsoever. All leases of
tangible personal property are in full force and effect according to their terms
and there are no outstanding defaults by the Company thereunder (nor to the
Knowledge of the Sellers are any other parties thereto in default), which
default in either case could have a Material Adverse Effect. The personal
property described in Schedule 3.11, which is presently located on the Company's
premises, is not owned by the Company. Substantially all of the fixtures and
equipment included in such tangible personal property are in good operating
condition, subject to ordinary wear and tear and the need for routine
maintenance, provided that no claim for breach of such representation may be
brought more than 120 days following the Closing Date.
3.12 Permits; Compliance with Laws. The Company has all necessary permits,
licenses and governmental authorizations required for the ownership or occupancy
of its properties and assets and the carrying on of its businesses, except for
such of the foregoing, the absence of which would not have a Material Adverse
Effect. The Company is in compliance with all laws, regulations and orders, the
violation of which could have a Material Adverse Effect.
3.13 Insurance. Schedule 3.13 hereto contains a complete and correct list of all
policies of insurance of any kind or nature covering the Company, including,
without limitation, policies of life, fire, theft, employee fidelity and other
casualty and liability insurance indicating the type of coverage, name of
insured, the policy number, the insurer, the premium, the expiration date of
each policy and the amount of coverage, and such policies are in full force and
effect. Complete and correct copies of each such policy or proof of existence of
coverage (i.e., binder) have been furnished or made available to the Purchaser.
13
3.14 Contracts. Except as listed in Schedule 3.14 hereto, the Company is not a
party to any material contract of any kind whatsoever, including, without
limitation, (i) any contract not made in the ordinary course of business; (ii)
any contract for the employment of any officer or employee; (iii) any
advertising agreement; (iv) any franchise, distributorship or sales agency
agreement; (v) any contract for the future purchase of materials, supplies,
services, merchandise, or equipment; (vi) any agreement for the sale or lease of
any of the assets of the Company; (vii) any contract or commitment for capital
expenditures; (viii) any mortgage, pledge, conditional sales contract, security
agreement, factoring agreement, or other similar agreement with respect to any
real or personal property of the Company; (ix) any lease of machinery, fixtures
or equipment; (x) any agreement with a labor union or labor association; (xi)
any loan agreement, promissory note issued by it, guarantee, subordination or
similar type of agreement; (xii) any stock option, retirement, severance,
pension, bonus, profit sharing, group insurance, medical or other fringe benefit
plan or program providing employee benefits; or (xiii) any consulting agreement.
Complete and correct copies of each such agreement have been furnished or made
available to the Purchaser. Except as set forth in Schedule 3.14 hereto, the
Company has performed all of the material obligations required to be performed
by it to date and is not in default under any of the material agreements,
leases, contracts or other documents to which it is a party, other than for
those failures to perform and defaults which would not have a Material Adverse
Effect. Except as set forth in Schedule 3.14 hereto, no party with whom the
Company has an agreement which is of material importance to the business of the
Company is in default thereunder. Except as contemplated hereby or as disclosed
in Schedule 3.14 hereto, the Company is not a party to any noncompete or similar
agreement which in any way restricts the operation of its business.
3.15 Litigation. Except as listed in Schedule 3.15 hereto, there are no actions,
suits, proceedings (including, without limitation, arbitration proceeding),
claims or investigations (in which the Company is a target or subject thereof)
before or pending or, to the knowledge of the Sellers, threatened or proposed
against the Company. There is no outstanding order, injunction or decree of any
court or governmental agency against or naming the Company. Neither any of the
Sellers nor the Company has received notice of any pending or threatened
condemnation, taking or similar proceeding affecting any properties owned or
used by the Company or pending public improvements in or about any of such
properties, nor has any of the Sellers or the Company received any special
assessments or extraordinary reassessments against or affecting any such
properties.
3.16 Restrictions. Except as set forth in Schedule 3.16, neither the execution
or delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with or result in a breach of, or give rise
to a right of termination of, or accelerate the performance required by, any
terms of any agreement to which any of the Sellers or the Company is a party, or
constitute a default thereunder, or result in the creation of any lien, claim or
encumbrance upon any of the assets of any of the Company, nor will it violate
any of the provisions of the Company's Certificate of Incorporation or By-laws.
Except as set forth in Schedule 3.16, the Company is not named in any judgment,
order, writ, award, injunction or decree, which materially and adversely affects
or reasonably might materially and adversely affect, its business, assets,
financial condition or prospects or which would be violated by the execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
3.17 Labor Disputes. There are no strikes or other labor disputes against the
Company pending or, to the Knowledge of any of the Sellers, threatened.
14
3.18 Minute Books. The minute books of the Company, as previously made available
to the Purchaser, contain complete and accurate records of all meetings and
accurately reflect all other corporate action of the stockholders and board of
directors or any committees of the Company. The stock certificate books and
stock transfer ledgers of the Company are true and complete. All stock transfer
taxes levied or payable with respect to all transfers of shares of the Company
prior to the date hereof have been paid and the appropriate transfer tax stamps
affixed.
3.19 Consents. Except for the termination or expiration of the waiting period
under the Xxxx-Xxxxx-Xxxxxx Act, no consent, approval or authorization of any
governmental authority or of any third party on the part of the Company is
required in connection with the execution and delivery of this Agreement or any
instrument contemplated hereby.
3.20 Related Party Transactions and Interests. Except as disclosed in Schedule
3.20, none of the Sellers, or any spouse or family member of any Seller, or any
officer or director of the Company, owns any direct or indirect interest of any
kind in, or controls or is a director, officer, employee or partner of, or
consultant to, or lender to or borrower from or has the right to participate in
the profits of, any person, firm, or corporation which is (A) a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the Company, (B)
engaged in a business related to the business of the Company or (C)
participating in any transaction to which the Company is a party. Investments by
any of the Sellers, or any officer or director of the Company, in a company or
companies whose stock is listed on a national securities exchange or actively
traded in the over-the-counter market, which investment does not give the
Sellers or such officer or director the right to control or influence the policy
decisions of any such company, shall not constitute a breach of the
representation and warranty set forth in this Section 3.20.
3.21 Employee Benefits.
(a) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. "ERISA Affiliate" means all trades or businesses (whether or not
incorporated) which are or were members of a group of which the Company is a
member and which are or were under common control within the meaning of Code
Section 414(b), (c), (m), (o) or (t) or which are treated, together with the
Company, as a single corporation under Section 414(o) of the Code.
15
(b) Schedule 3.21 contains a list of each pension, profit sharing, thrift
or other retirement plan, employee stock ownership plan, deferred compensation,
stock option, stock purchase, performance share, bonus or other incentive plan,
severance plan, health, group insurance or other welfare plan, or other similar
plan, agreement, policy or understanding, including without limitation, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA under which
the Company or any ERISA Affiliate (as defined herein) has any current or future
actual or contingent obligation or liability or under which any employee or
former employee of the Company or any ERISA Affiliate has any current or future
right to benefits (each such plan, agreement, policy or understanding being
hereinafter referred to individually as a "Plan"). Except as described on
Schedule 3.21, the Company has delivered to Purchaser true and complete copies
of (A) each Plan and related trust documents and amendments thereto, (B) the
latest actuarial report, if any, prepared for each Plan, (C) the summary plan
description, if any, for each Plan, (D) the most recent Internal Revenue Service
determination letter with respect to each Plan, if applicable, and (E) the
latest annual report (Form 5500 or 5500-C) for the past three (3) years, if any,
which has been filed with the Internal Revenue Service for each Plan, together
with any schedules thereto.
(c) Each Plan is in compliance in all material respects with the provisions
of ERISA, the Code and all other applicable federal and state laws and the rules
and regulations promulgated thereunder interpreting or applying these laws.
(d) Except as set forth in Schedule 3.21, with respect to each Plan
intended to be qualified under Section 401(a) of the Code, each such Plan is so
qualified and a favorable determination letter has been received from the
Internal Revenue Service stating that the Plan is so qualified and that the
related trust is exempt from federal income taxation under Section 501 of the
Code.
(e) With respect to each Plan, except as disclosed on Schedule 3.21, all
reports required under ERISA or any other law or regulation to be filed by the
Company or any ERISA Affiliate with the relevant Governmental Body, the failure
of which to file would have a Material Adverse Effect on the Company or such
ERISA Affiliate, have been duly filed, and all such reports, to the extent they
are not entirely true and correct as of the date given, such inaccuracy or
incompleteness has not and will not have a Material Adverse Effect.
(f) Except as set forth on Schedule 3.21, no Plan has failed to meet the
minimum funding standards of Code Section 412 nor has any accumulated funding
deficiency (as defined in Code Section 412(a)) been incurred (whether or not
waived), nor has any funding waiver from the Internal Revenue Service been
received or requested.
(g) The Company or its ERISA Affiliate, as the case may be, have made or
shall make all contributions required to be made by the Company and all of its
ERISA Affiliates under each Plan for all periods through and including the
Closing Date, or adequate accruals therefor have been or shall be provided
therefor and reflected on the Financial Statements.
(h) As of the Balance Sheet Date, the fair market value of the assets of
each Plan equaled or exceeded the present value of the vested accrued benefits
of each such Plan as of the most recent valuation date using Plan actuarial
assumptions as in effect for such Plan year.
16
(i) There are no pending or, to the Knowledge of Sellers any threatened
claims, lawsuits or actions (other than routine claims for benefits in the
ordinary course) asserted or instituted, and, to the Sellers' knowledge, there
exists no basis in fact for a claim, suit or action, against the assets of any
Plan or trust or any fiduciary of any Plan with respect to the operation of such
Plan, or the assets of any employee welfare benefit plan within the meaning of
ERISA Section 3(a) or any fiduciary thereof with respect to the operation of any
such Plan which, if adversely determined, would have a Material Adverse Effect
on the Company or any ERISA Affiliate. Except as set forth in Schedule 3.21, any
bonding required by ERISA with respect to any Plan has been obtained and is in
full force and effect, and Schedule 3.21 set forth such bonds.
(j) Except as set forth on Schedule 3.21, neither the Company nor any
ERISA Affiliate (A) has ever participated in or been required to contribute to
any plan subject to Title IV of ERISA, (B) has incurred, or shall incur, any
liability under Title IV of ERISA to the Pension Benefit Guarantee Corporation,
to any Plan subject to Title IV of ERISA or to any other Person, or (C)
contributed to any multiemployer plan as defined in Section 4001 (a)(3) of
ERISA.
(k) Neither the Company nor any ERISA Affiliate maintains or has
established any welfare benefit plan within the meaning of ERISA Section 3(1)
which provides for continuing benefits or coverage for any participant or
beneficiary of a participant after such participant's termination of employment,
except as may be required by the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA") and the regulations thereunder and at the expense
of the participant or the beneficiary of the participant.
(l) The Company and each ERISA Affiliate which maintains a welfare benefit
plan within the meaning of ERISA Section 3(1) have complied with (A) the notice
and continuation coverage requirements of COBRA and the regulations thereunder
and (B) the Family and Medical Leave Act of 1994 and the regulations thereunder.
(m) This Agreement will not involve, and neither the Company nor any ERISA
Affiliate has ever engaged in or been a party to any prohibited transaction
within the meanings of ERISA Section 406, as modified by ERISA Section 408, or
Code Section 4975.
(n) There has been no mass layoff or plant closing as defined by the
Worker Adjustment and Retraining Notification Act or any similar state or local
"plant closing" law with respect to the employees of the Company.
(o) No amounts paid or payable by the Company nor any ERISA Affiliate will
fail to be deductible for federal income tax purposes by reason of Section 280G
of the Code.
(p) No current or former employee of the Company nor any ERISA Affiliate
is or may become entitled to post employment benefits of any kind other than
coverage mandated by section 4980B of the Code.
(q) The consummation of the transactions contemplated by this Agreement
will not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable to or in respect of any employee of the Company nor any ERISA Affiliate.
17
(r) The Financial Statements properly and adequately reflect any and all
liabilities and obligations of the Company and any ERISA Affiliate with respect
to any period ending on or prior to the Closing Date to or in respect of the
employees of the Company and any ERISA Affiliates or the Plans, for (A) unpaid
compensation, salaries, wages, disability payments and other payroll items
(including, without limitation, bonus, incentive or deferred compensation), (B)
unpaid contributions, costs and expenses to or in respect of any Plans, and (C)
severance or other termination benefits relating to, resulting from or arising
in respect of any termination of employment occurring on or prior to the Closing
Date.
(s) No event has occurred with respect to any Plan intended to be
qualified under Section 401(a) of the Code which presents a material risk of a
partial termination within the meaning of Code Section 411 (d)(3).
3.22 Employees. Schedule 3.22 hereto contains a complete and correct list of all
persons who are employed by the Company together with their rate of compensation
and title. There is no outstanding commitment (whether or not legally binding)
to increase the remuneration of any such employee and the Company has not
received any notice of termination from any of such persons, nor is the Company
or any of the Sellers aware that any such employee intends to terminate his
(her) employment. The Company has not committed and is not engaged in any unfair
labor practice in violation of the National Labor Relations Act. There is (i) no
unfair labor practice complaint pending or, to the knowledge of the Company,
threatened against the Company before the National Labor Relations Board and no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements is so pending or, to the knowledge of the Company,
threatened, (ii) no strike, labor dispute, slowdown or stoppage pending or
threatened against the Company, (iii) no union representation question existing
with respect to the employees of the Company and no union organizing activities
are taking place, and (iv) no employment contract with any employee or
independent contractor or the Company not terminable at will other than as set
forth in Schedule 3.22. No employee is entitled to any severance or termination
payments in the event of termination of his employment for any lawful reason.
The Company is in compliance in all material respects with all federal, state or
other applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours. The Company is not a party to any
collective bargaining agreement.
3.23 Banks. Schedule 3.23 hereto contains a complete and correct list of the
names and locations of all banks in which the Company has accounts or safe
deposit boxes. Except as set forth on Schedule 3.23 hereto, no person holds a
power of attorney to act on behalf of the Company.
18
3.24 No Misrepresentation. This Agreement, together with all exhibits and
schedules hereto, and the agreements, certificates and other documents furnished
to the Purchaser by the Company or the Sellers at the Closing, do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading. There is
no fact known to any of the Sellers, which the Sellers have not disclosed to the
Purchaser in writing which has, or could have, a Material Adverse Effect or
could materially affect the ability of the Company or the Sellers to perform
their respective obligations under this Agreement, or any agreement or other
document contemplated hereby to which it is a party.
3.25 Environment, Health, and Safety Matters.
(a) The Company is in compliance with Environment, Health, and Safety
Requirements (as defined below), except for such noncompliance as would not have
a Material Adverse Effect.
(b) The Company has not received any written notice, report, or other
information regarding any actual or alleged violation of Environment, Health,
and Safety Requirements, or any material liabilities or potential material
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, relating to the
Company or its facilities arising under Environment, Health, and Safety
Requirements, the subject of which could have a Material Adverse Effect
For purposes of this Agreement, "Environment, Health, and
Safety Requirements" means all federal, state, local and foreign statutes,
regulations, and ordinances ("Laws") concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
as such Laws are enacted and in effect on or prior to the Closing Date.
3.26 Investment Company/Government Regulations. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and the Company is not subject to regulation under the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act, or any federal or state statute or regulation limiting
its ability to incur indebtedness.
3.27 Product Warranties. The Company has not sold or supplied any equipment,
goods, material or systems which, to the Knowledge of the Sellers, were, are or
are likely to become faulty or defective or which do not comply in all material
respects with all warranties expressly or impliedly made by the Company or which
contain any software for which any required license has not been obtained or
which infringes upon, violates or misappropriates or conflicts with any patent,
copyright, trade secret or other proprietary right of any third party, except
for any of the foregoing which are either covered by insurance or for which any
warranty expressly or impliedly made by the Company, on such goods, materials,
systems and intellectual property rights is no broader than the warranty
provided by the respective manufacturer.
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3.28 No Loss of Business. Except as set forth in Schedule 3.28, there exists no
actual or, to the Knowledge of the Sellers, threatened termination, cancellation
or limitation of, or any adverse modification or change in, the business
relationship between the Company and any material supplier or customer of the
Company, provided, however, that the Sellers make no representation or warranty
that any supplier or customer will continue to do business with the Company in
the future.
3.29 Adverse Contracts. The Company is not a party or subject to any agreement,
transaction, obligation, commitment, understanding, arrangement or liability
(collectively, a "Transaction") which: (i) is incapable of complete performance
in accordance with the terms thereof within six (6) months after the date on
which it was entered into or undertaken save for technical service outsource
contracts and maintenance contracts entered into in the ordinary course of
business; (ii) is known by the Sellers to be likely to result in a loss to the
Company on completion of performance together with all other such losses from
Transactions in the aggregate in excess of Fifty Thousand Dollars ($50,000); or
(iii) cannot readily be fulfilled or performed by the Company on time and
without expenditure of money and effort other than in the ordinary course of
business; or (iv) involves or is likely to involve obligations, restrictions,
expenditures or receipts which are not in the ordinary course of the Company's
business; or (v) is a lease or contract for hire or rent, hire purchase or
purchase by way of credit sale or periodical payment; or (vi) involves or is
likely to involve the supply of goods by or to the Company (other than in the
ordinary course of business) the aggregate sales value of which will represent
in excess of ten percent (10%) of the net sales of the Company for its last
fiscal year; or (vii) in any way materially restricts the Company's freedom to
carry on the whole or any part of its business in any part of the world in such
manner as it thinks fit; or (viii) involves liabilities which may fluctuate in
accordance with an index or rate of currency exchange; or (ix) is in any way
otherwise than in the ordinary course of the Company's business.
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3.30 Software. Schedule 3.30 sets forth a complete description of all software
which is owned, developed or used by, or licensed to, the Company in the
operation of or necessary for the operation of the business of the Company and
all software which is licensed by the Company to third parties or otherwise
distributed by the Company or which the Company otherwise has rights to sell,
modify, incorporate in other software, market, license, sublicense or otherwise
use (collectively "Software"). Except as set forth on Schedule 3.30, the Company
owns the entire right, title and interest in and to its Software, or licenses
the Software from third parties or has the right to sell Software to third
parties, which third parties accept a license for such Software from a copyright
holder of the Software other than the Company. The Company has taken all steps
necessary to maintain the Software which it owns as a trade secret or as its
copyrighted material. No third party has access to the documentation, source
code or similar material for the Software owned by the Company or is otherwise
in a position to duplicate or make any unauthorized use of any such Software,
except for (i) licensees of the Company who have access to such source code in
the ordinary course of business and who have agreed in their license agreements
with the Company to maintain such source code in strict confidence, (ii) OEM or
other purchasers who have certain rights following default by the Company and
(iii) parties under technology development agreements. All such licensees, OEM's
and technology development parties are, to the Knowledge of the Sellers in full
compliance with such confidentiality obligations and there are no defaults or
breaches thereunder. Current and complete documentation and source code are in
the possession of the Company with respect to all Software owned by the Company.
The Software owned by the Company is not subject to any legal or contractual
restriction which would prevent such Software from being licensed, sublicensed,
marketed, incorporated in other software, modified, or otherwise used or sold by
such Company without restriction. The consummation of this Agreement and the
transactions contemplated hereby will not alter any of the rights described in
the preceding sentence. The Company has acted and continues to act in a
commercially reasonable manner to maintain its proprietary, copyright and other
rights in the Software which it owns. Except as set forth on Schedule 3.30, no
one has disputed the Company's right, title or interest in or any of the
Software owned by it. With respect to the Software owned by the Company, to the
Sellers' Knowledge, neither such Software nor such Company's use or licensing to
third parties thereof infringes upon, violates, misappropriates or conflicts
with any patent, copyright, trade secret or other proprietary right or right of
exclusion of any third party. None of the Sellers is aware of any breach of any
confidentiality agreement in favor of the Company relating to the Software
either by its employees or consultants. None of the Software has manifested any
significant operating problems, other than any such problems that have been
corrected or are correctable in the ordinary course of business. Such problems
will not in the aggregate result in a material amount of losses or expenses for
the Company. All royalties due and payable to licensors by the Company on or
prior to the date hereof have been paid in full.
3.31 Year 2000 Compliance. All computer software or hardware owned or used by
the Company, or licensed by the Company as licensor or as licensee, other than
any shrinkwrap software available to retail customers generally, is "Year 2000
Compliant" (as hereinafter defined). For purposes of this Agreement, "Year 2000
Compliant" shall mean (i) all such software or hardware shall operate without
errors in the recognition, calculation and processing of date data relating to
century recognition, leap years, single and multi-century formulae, date values
and interfaces of date-related functionalities; and (ii) any date arithmetic
programs or calculators in the software or hardware shall operate in accordance
with the related user documentation in the Year 2000, and the years following,
without degrading functionality or performance.
3.32 Accounts and Notes Receivable. All accounts and notes receivable of the
Company, reflected on the Balance Sheet and as will be reflected on the Closing
Date Balance Sheet represent and will represent sales actually made in the
ordinary course of business, are and will be valid obligations of the respective
debtors without any claims or defenses and are and will be fully collectible net
of reserves shown and described in detail in the Balance Sheet and Closing Date
Balance Sheet (which reserves are and will be adequate and calculated in
accordance with GAAP consistent with past practices) within one hundred and
twenty (120) days of the Closing. Sellers shall pay to Purchaser within thirty
(30) days after the end of such 120 day period the remaining amount of any such
uncollected accounts and notes receivable in excess of the aforesaid reserves
and the Minimum Limitation (as defined in Section 13.4, in which event the
Minimum Limitation shall be fully or partially used, as the case may be), and
Purchaser shall simultaneously assign such excess uncollected receivables,
without recourse, to Sellers. The first monies received by the Company from a
customer shall be applied to the earliest account receivable, except if the
customer identifies the payment to a particular later invoice, or if the earlier
account receivable is specifically disputed by the customer.
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3.33 ISG Business. The ISG Business (as described in Schedule 3.20) was not
commenced prior to 1999 and had no assets, liabilities or income prior to 1999.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Sellers as follows:
4.1 Organization and Good Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of New York, and has full
corporate power and authority to own its properties and carry on its business as
it is now being conducted.
4.2 Restrictions. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, will not conflict with or
result in the breach of any agreement to which Purchaser is a party, nor will it
violate any of the provisions of the Purchaser's Certificate of Incorporation or
By-laws.
4.3 No Lawsuits. There is no lawsuit, proceeding or investigation pending or,
to the Knowledge of the Purchaser, threatened against the Purchaser which might
question the validity or propriety of this Agreement or the consummation of any
of the transactions contemplated hereby.
4.4 Execution and Effect of Agreement. The Purchaser has the corporate power
and authority to enter into this Agreement and all other documents contemplated
hereby and the execution and delivery of this Agreement and such documents and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by the necessary corporate action of the Purchaser. This
Agreement and all other agreements pertaining to the transactions described
herein have been duly executed and delivered by the Purchaser, and constitute
the legal, valid and binding obligation of the Purchaser, enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
22
4.5 No Misrepresentation. This Agreement, together with all exhibits and
schedules hereto, and the agreements, certificates and other documents furnished
to the Sellers by the Purchaser at the Closing, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading. There is no fact known
to the Purchaser, which the Purchaser has not disclosed to the Sellers in
writing which has, or could have a Material Adverse Effect or could materially
affect the ability of the Purchaser to perform its obligations under this
Agreement, or any agreement or other document contemplated hereby to which it is
a party.
4.6 Purchase for Investment. The Purchaser acknowledges that the Shares are not
being registered by the Sellers under the Securities Act of 1933, as amended
(the "Securities Act"), on the ground that the sale of the Shares to the
Purchaser would be exempt from the registration requirements of the Securities
Act; that the Sellers' reliance on such exemption is predicated in part on the
representations made by the Purchaser in this Section 4.6; that the Purchaser is
an "accredited investor" within the meaning of Regulation D promulgated under
the Securities Act; that the Purchaser is acquiring the Shares for investment
for its own account with no present intention of re-selling all or any portion
of the Shares in violation of federal or state securities laws, subject,
nevertheless, to any requirement of law that the disposition of its property
shall at all times be within its control; and that the Shares must be held
indefinitely unless any transfer is subsequently registered under the Securities
Act and qualified under applicable state securities laws or exemptions from such
registration and qualification requirements are available.
4.7 Approvals. Except for termination or expiration of the waiting period under
the Xxxx-Xxxxx-Xxxxxx Act, no approval, consent, waiver, notice to or filing
with any governmental entity or any party to any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument to which
the Purchaser is a party or to which any of its properties are subject, is
required and has not been obtained or will not have been obtained on or prior to
the Closing, for the execution, delivery and performance by the Purchaser of
this Agreement and the other agreements and instruments referred to herein to be
executed and delivered by the Purchaser in connection with the consummation of
the transactions contemplated hereby and thereby.
4.8 Bank Loan. Sellers will not be required to subordinate or otherwise make
any agreements with Purchaser's banks who are financing this transaction with
respect to Sellers' ability to timely receive the Deferred Payments.
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ARTICLE V
CONFIDENTIALITY; PUBLICITY
5.1 Confidentiality. The parties hereto agree to keep the terms and conditions
of this Agreement confidential and not to disclose its existence or content
other than to their respective employees, attorneys and accountants on a need to
know basis or as otherwise provided in this Section 5.1. Information will not be
deemed confidential under this Section 5.1 if it (i) is or becomes available in
the public domain on or after the date hereof (other than as a result of a
disclosure by any party hereto), (ii) is acquired from a person who is not known
to be in breach of an obligation of confidentiality to the Company, or (iii) is
disclosed pursuant to a subpoena, civil investigative demand (or similar
process), order, statute, rule or other legal requirement promulgated or imposed
by a court or by a judicial, regulatory, self-regulatory or legislative body,
organization, agency or committee or otherwise in connection with any judicial
or administrative proceeding (including, without limitation, in response to oral
questions, interrogatories or requests for information or documents). Each party
hereto shall instruct its attorneys, accountants, authorized representatives,
officer and directors to observe the covenants contained in this Article V.
5.2 Publicity. Except as otherwise required by law, none of the Purchaser, the
Sellers or the Company shall issue any press releases, employee communication,
industry notice or similar communication, or otherwise make public statements
with respect to the transactions contemplated hereby, unless approved in advance
by the Purchaser and the Company. Notwithstanding the foregoing, the parties
confirm that Purchaser may make such press release and other disclosure as it
considers appropriate following satisfaction of the condition set forth in
Section 6.5(a) hereof.
ARTICLE VI
COVENANTS OF THE SELLERS
From and after the date hereof and until the Closing Date, the Sellers
hereby covenant and agree that:
6.1 Representations and Warranties. Neither the Company nor the Sellers will
take any action which would cause any of the representations and warranties made
by each of them in this Agreement not to be true and correct on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
24
6.2 Updating Schedules, Access to Documents, Opportunity to Ask Questions. If
there shall be any development in the business of the Company or any change in
conditions after the date hereof and prior to the Closing Date which would
render any of the information contained on any Schedules delivered to the
Purchaser pursuant to Article III hereof incorrect or incomplete as of the date
of such development or change, the Company shall promptly deliver to the
Purchaser an amendment or supplement to such Schedule correcting or updating
such information. Upon not less than forty-eight (48) hours' notice to the
Company (unless the Company shall otherwise agree), the Company shall give or
cause to be given to the Purchaser or its representatives (including parties
proposing to provide financing to the Purchaser in connection with this
Agreement and their respective counsel, auditors, environmental consultants and
other advisers), during normal business hours, full access to all the premises,
books, records, contracts and other documents of the Company, as reasonably
requested by the Purchaser and its representatives in order to permit the
Purchaser and such representatives to make reasonable inspection and examination
of the business and affairs of the Company. The Company shall further cause its
chief financial officer, counsel and regular certified public accountants of the
Company to be available upon reasonable notice to answer questions of the
Purchaser's representatives concerning the business and affairs of the Company,
and shall further cause them to make available all relevant books, contracts,
records and other documents in connection with such inspection and examination.
The results of any inspection made pursuant to this Section 6.2 shall be subject
to the confidentiality provisions of Article V hereof.
6.3 Maintenance of Insurance. The Company shall maintain in full force and
effect through the Closing Date all of its presently existing insurance
coverage, or insurance comparable to such existing coverage.
6.4 Conduct of Business. The business of the Company shall be conducted through
the Closing Date in the ordinary course, consistent with the present conduct of
its business, and the Company will use its commercially reasonable efforts to
maintain, preserve and protect the assets and good will of the Company. During
such period of time, except upon the prior written consent of the Purchaser, the
Company shall not (1) amend its Articles of Organization or By-laws, (2) issue
any additional shares of capital stock, or issue, sell or grant any option or
right to acquire or otherwise dispose of any of its authorized but unissued
capital stock or other corporate securities, (3) except for Permitted
Distributions declare or pay any dividends or make any other distribution in
cash or property on its capital stock, (4) incur any obligation or liability
(absolute or contingent), except obligations and liabilities incurred in the
ordinary course of business, (5) enter into or amend any employment agreement or
become liable for any bonus, profit-sharing or incentive payment to any of its
officers or directors, except pursuant to presently existing plans, arrangements
or agreements disclosed herein or in a schedule hereto, (6) mortgage, pledge, or
otherwise encumber any material part of its assets, tangible or intangible, (7)
sell, transfer or acquire any material properties or assets, tangible or
intangible, other than in the ordinary course of business, (8) modify, amend or
cancel any of its existing material leases or enter into any material contracts,
agreements, leases or understandings other than in the ordinary course of
business or enter into any loan agreements, (9) make any investments other than
in certificates of deposit or short-term commercial paper, (10) repurchase or
redeem any shares of its stock, (11) enter into any collective bargaining
agreement, (12) merge or consolidate with any corporation, acquire control or
acquire any capital stock or other securities of any other corporation or
business entity, or take any steps incident to or in furtherance of any such
actions whether by entering into an agreement providing therefor or otherwise,
(13) make any alteration in the manner of keeping its books, accounts or records
or in the accounting practices therein reflected, or (14) take any other action
which would cause any of the representations and warranties made by the Company
and the Sellers in this Agreement not to be true and correct on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date; provided, however, that
nothing herein shall prevent the Company from paying the fees of its attorneys
and accountants in connection with this transaction.
25
6.5 Dallas Semiconductor Consent; Other Consents and Conditions Precedent.
(a) The Company and the Sellers shall use commercially reasonable efforts
to obtain either (i) the written consent, in form and substance reasonably
satisfactory to the Purchaser (the "Dallas Semiconductor Consent"), of Dallas
Semiconductor to the change in majority ownership of the Company as a result of
this transaction or (ii) a new contract for the Company in form and substance
reasonably satisfactory to the Purchaser, for a term not less than the existing
contract and on terms no less favorable to the Company. The Dallas Deposit shall
be refunded to the Purchaser if this Agreement is terminated for any reason
other than by the Sellers pursuant to Section 14.1(c) hereof. In the event of
termination by Sellers pursuant to Section 14.1(c) hereof, the forfeiture of its
deposit shall constitute liquidated damages in lieu of any other remedies or
recoveries against the Purchaser by the Sellers. Upon the Closing, the Dallas
Deposit shall be released from the Dallas Escrow Agreement and paid to Sellers.
(b) The Company, the Purchaser and the Sellers shall use commercially
reasonable efforts to obtain all other required consents to the transactions
contemplated hereby and to cause the conditions precedent to the consummation of
the transactions contemplated hereby to be satisfied.
6.6 No Other Negotiations. Until this Agreement shall have been terminated
pursuant to its terms, neither the Company nor any of its officers, directors or
affiliates, nor the Sellers shall, directly or indirectly, solicit, institute,
initiate, pursue or respond to any inquiries or enter into any discussions,
proposals or stock or similar transaction involving the Company or any of its
assets or disclose, directly or indirectly, other than to the Company, or except
as required by law, afford to any third party access to the properties, books or
records of the Company without the consent of the Purchaser, or otherwise assist
any third party preparing to make or who has made such an offer, or enter into
any agreement with any third party providing for a business combination
transaction, equity investment or sale of significant amount of assets of the
Company or recommend to its shareholders any of the foregoing.
6.7 Loans Receivable. On or prior to the Closing Date the Sellers shall cause
all of the loans set forth in Schedule 6.7 to be repaid, in cash, to the
Company, and as of the Closing Date the Company shall have no receivable from
any Seller, any other employee of the Company or any spouse or family member of
any of the foregoing (exclusive of $25,000 in the aggregate of non-officer
loans).
ARTICLE VII
COVENANTS OF PURCHASER
From and after the date hereof and until the Closing Date, the
Purchaser hereby covenants and agrees that:
7.1 Representations and Warranties. The Purchaser will not take any action
which would cause any of the representations and warranties made by it in this
Agreement not to be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
26
7.2 Other Consents; Conditions Precedent. The Purchaser shall use commercially
reasonable efforts to obtain any required consents to the transactions
contemplated hereby and to cause the conditions precedent to the consummation of
the transactions contemplated hereby to be satisfied.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION
The obligation of the Purchaser to consummate the transactions
contemplated hereby on the Closing Date is, at the option of the Purchaser,
subject to the satisfaction of the following conditions:
8.1 Representations and Warranties. Each of the representations and warranties
of the Sellers contained in Article III hereof shall be true and correct as of
the Closing Date with the same force and effect as though the same had been made
on and as of the Closing Date, except for changes therein permitted or
contemplated hereby.
8.2 Performance of Covenants. The Sellers shall have performed and complied
with the covenants and provisions in this Agreement required herein to be
performed or complied with by the Sellers, between the date hereof and the
Closing Date.
8.3 Litigation. No action or proceeding shall have been instituted or
threatened or claim or demand made against the Purchaser, the Sellers or the
Company before any court or other governmental body, seeking to restrain or
prohibit or to obtain damages with respect to the consummation of the
transactions contemplated hereby, or which might affect the business, assets,
financial condition or prospects of the Company, which in the reasonable opinion
of the Purchaser makes it inadvisable to consummate such transactions.
8.4 Counsel's Opinion. The Purchaser shall have received an opinion of
Posternak, Xxxxxxxxxx & Xxxx, L.L.P. counsel to the Sellers, dated the Closing
Date with respect to the matters set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.14
and 3.15 hereof. As to all matters except those set forth in Section 3.1,
Posternak, Xxxxxxxxxx & Xxxx, L.L.P. shall be entitled to rely upon the opinion
of Xxxxxxx X. Xxxxx & Associates, P.C., as counsel to the Company, which opinion
shall also be addressed to and delivered to Purchaser.
8.5 Closing Certificate. The Purchaser shall have received a certificate to the
effect set forth in Sections 8.1, 8.2, 8.3, 8.9 and 8.14, dated the Closing
Date, signed by the Sellers.
8.6 Specimen Signature. The Purchaser shall have received a specimen signature
of each Seller.
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8.7 Consents and Government Approvals. Except as set forth in Schedule 8.7 the
consents of all persons who are parties to agreements with the Company which are
required so that neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will conflict with or
result in a breach of, or give rise to a right of termination of, or accelerate
the performance required by, any terms of any such agreement, or constitute a
default thereunder, or result in the creation of any lien, claim or encumbrance
upon any of the assets of the Company, shall have been obtained, and signed
copies thereof satisfactory to the Purchaser shall have been delivered to the
Purchaser. All applicable waiting periods (and any extensions thereof) under the
Xxxx-Xxxxx-Xxxxxx Act shall have expired or otherwise been terminated and the
Purchaser and the Company shall have received all other material authorizations,
consents and approvals of governments and governmental agencies.
8.8 No Material Adverse Change. There shall not have been any material adverse
change in the business, assets, properties or financial condition of the Company
since the Balance Sheet Date.
8.9 Dallas Semiconductor. The Dallas Semiconductor Consent shall have been
obtained and a signed copy thereof shall have been delivered to Purchaser.
8.10 Organization Documents. The Sellers shall have delivered to the Purchaser
as of the Closing Date a Articles of Organization of the Company and corporate
[and tax] good standing certificates for the Company for its jurisdiction of
incorporation and all other jurisdictions where the Company does business, dated
a recent date and certified by the Secretary of State (or comparable government
official), and By-laws of the Company, certified as of the Closing Date as true
and complete by the Clerk of the Company.
8.11 Employment Agreement. An Employment Agreement between the Company and
Xxxxxx X. Xxxxxxx, in the form attached hereto as Exhibit C, shall have been
executed and delivered to the Purchaser.
8.12 Holdback Escrow Agreement. The Holdback Escrow Agreement shall have been
executed and delivered by the Sellers.
8.13 Loans Receivable. The Company shall have received repayment of all loans
described in Section 6.7
hereof.
8.14 Stock Certificates. The Purchaser shall have received certificates for all
of the Shares duly endorsed for transfer to Purchaser.
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8.15 Assignment of Leases. The Sellers shall either (i) have caused the Company
to assign the leases for premises known as Xxxxx 000, 000 Xxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxxxxxx and 00 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxxxx (the
"Excluded Leases") to such party or parties as Sellers shall determine and the
landlords thereof shall have released the Company from any obligation
thereunder, or (ii) indemnify the Company from any liability under the Excluded
Leases arising from and after the Closing Date and without regard to the Minimum
Limitation.
8.16 Xxxxxx X. Xxxxxxx Life Insurance. The keyman life insurance policies on the
life of Xxxxxx Xxxxxxx owned by and the beneficiaries of which are the Company
having an aggregate death benefit in the amount of $1,500,000 shall be in full
force and effect.
8.17 Financial Statements. The Purchaser shall have received the manually signed
1999 Audited Financial
Statements which satisfy the requirements of Section 3.5.
8.18 Certain Consents. After the Dallas Semiconductor Consent has been obtained,
Sellers shall use reasonable efforts to obtain the consent of all parties to
contracts and leases described in Schedule 8.7, provided, however, that the
obtaining of such consents, except in the case of Dallas Semiconductor, shall
not be conditions precedent to Purchaser's obligation to close.
8.19 UCC-3 Termination Statements. The Purchaser shall have received UCC-3
Termination Statements for all UCC-1 filings described in Schedule 3.11 with a
"Pay-off Letter" from Citizens Bank of Massachusetts (which UCC-3 Termination
Statements in the case of Citizens Bank of Massachusetts shall be delivered
subject to payment in accordance with such Pay-off Letter).
ARTICLE IX
CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION
The obligation of the Sellers to consummate the transactions
contemplated hereby on the Closing Date is, at the option of the Sellers,
subject to the satisfaction of the following conditions:
9.1 Representations and Warranties. Each of the representations and warranties
of the Purchaser contained in Article IV hereof shall be true and correct as of
the Closing Date with the same force and effect as though the same had been made
on and as of the Closing Date, except for changes permitted or contemplated
hereby.
9.2 Performance of Covenants. The Purchaser shall have performed and complied
with the covenants and provisions in this Agreement required herein to be
performed or complied with by the Purchaser between the date hereof and the
Closing Date.
9.3 Litigation. No action or proceeding shall have been instituted or
threatened or claim or demand made against the Purchaser, the Sellers or the
Company before any court or other governmental body, seeking to restrain or
prohibit or to obtain damages with respect to the consummation of the
transactions contemplated hereby, which in the reasonable opinion of the Company
makes it inadvisable to consummate such transactions.
29
9.4 Counsel's Opinion. The Sellers shall have received an opinion of Xxxxxxxx
Xxxxx Singer & Xxxxxxxxx, LLP, counsel for the Purchaser, dated the Closing Date
as to the matters set forth in Sections 4.1, 4.2, 4.3 and 4.4 in respect of the
Purchaser.
9.5 Closing Certificate. The Sellers shall have received a certificate to the
effect set forth in Sections 9.1 and 9.2 above, dated the Closing Date, signed
by a duly authorized officer or signatory of the Purchaser.
9.6 Incumbency and Resolutions. The Sellers shall have received a certificate
of a duly authorized officer of the Purchaser, dated the Closing Date as to (i)
the incumbency and specimen signature of each officer of the Purchaser executing
any document to which it is a party or any other document delivered in
connection herewith, (ii) setting forth the resolutions of the Board of
Directors of the Purchaser authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, and
(iii) certifying that such resolutions were duly adopted and have not been
rescinded or amended as of the Closing Date.
9.7 Government Approvals. All applicable waiting periods (and any extensions
thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or otherwise been
terminated and the Sellers and the Purchaser shall have received all other
material authorizations, consents and approvals of governments and governmental
agencies.
9.8 Organization Documents. The Purchaser shall have delivered to the Sellers
as of the Closing Date a Certificate of Incorporation and a good standing
certificate for the Purchaser for the State of New York, dated a recent date and
certified by the Secretary of State.
9.9 Holdback Escrow Agreement. The Holdback Escrow Agreement shall have been
executed and delivered by the Purchaser and the escrow agent thereunder.
ARTICLE X
CLOSING
10.1 The Closing. Except as hereinafter provided, the closing hereunder (herein
called the "Closing") shall take place at the offices of Xxxxxxxx Xxxxx Singer &
Xxxxxxxxx, LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 A.M.
on, or if possible prior to the tenth business day after Xxxx-Xxxxx-Xxxxxx Act
approval is obtained, provided that by such date all conditions precedent set
forth in Articles VIII and IX have been satisfied, or at such other place and at
such other time and date as may be mutually agreed upon in writing by the
Purchaser and Sellers. The date of the Closing is referred to in this Agreement
as the "Closing Date".
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10.2 Satisfactory Documents. All proceedings to be taken and all documents to be
executed and delivered by the Company or the Sellers in connection with the
consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the Purchaser. All proceedings to be taken
and all documents to be executed and delivered by the Purchaser in connection
with the consummation of the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to the Company and the Sellers.
All proceedings to be taken and all documents to be executed and delivered by
all parties at the Closing shall be deemed to have been taken and executed
simultaneously and no proceedings shall be deemed taken nor any documents
executed or delivered until all have been taken, executed and delivered.
10.3 Deliveries by the Sellers. At the Closing, the Company and the Sellers
shall deliver, or shall cause to be delivered, to the Purchaser all
certificates, opinions, documents, agreements, schedules, exhibits, financial
information and filings referred to in Article VIII hereof.
10.4 Deliveries by the Purchaser. At the Closing, the Purchaser shall deliver to
or cause to be delivered the following:
(a) To the Sellers, wire transfer of the Initial Consideration less the
Initial Holdback, in immediately available funds to the Seller's accounts
designated pursuant to Section 1.3.
(b) To Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP, as escrow agent under the
Holdback Escrow Agreement, wire transfer of the Initial Holdback in immediately
available funds, to be held and paid as provided in the Holdback Escrow
Agreement.
(c) To the Sellers, all certificates, opinions, documents and agreements
referred to in Article IX hereof.
ARTICLE XI
NO BROKERS
The Sellers represent to Purchaser, and the Purchaser represents to the
Sellers, that they respectively have had no dealings with any broker or finder
in connection with the transactions contemplated by this Agreement. The Sellers
jointly and severally agree to indemnify and hold the Purchaser harmless from
and against any and all liability to which the Purchaser may be subjected by
reason of any broker's, finder's or similar fee with respect to the transactions
contemplated by this Agreement to the extent such fee is attributable to any
action undertaken by or on behalf of the Company or the Sellers. The Purchaser
agrees to indemnify and hold the Sellers harmless from and against any and all
liability to which the Sellers may be subjected by reason of any broker's,
finder's or similar fee with respect to the transactions contemplated by this
Agreement to the extent such fee is attributable to any action undertaken by or
on behalf of the Purchaser.
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ARTICLE XII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND CLAIMS
The parties hereto agree that the representations and warranties
contained in this Agreement or in any Schedule hereto or in any certificate
delivered by any party hereto at the Closing pursuant to Article X hereof shall
survive the execution and delivery of this Agreement, and the Closing hereunder,
regardless of any investigation made by the parties hereto; provided, however,
that any claims or actions with respect thereto and any other Claim, as defined
in Section 13.3, shall terminate twenty-four (24) months after the Closing Date
unless a Notice of Claim, as defined in Section 13.3, is given within such
twenty-four (24) month period; provided, however, that such twenty-four (24)
month period shall not apply and the respective statutes of limitations shall
apply to Sections 3.1, 3.3, 3.8, 3.21, 3.25 and 4.4.
ARTICLE XIII
INDEMNIFICATION AND LIMITATION OF LIABILITY
13.1 Indemnification by Sellers. Subject to the provisions of Article XII and
Section 13.4 hereof, the Sellers, jointly and severally, agree to indemnify and
hold harmless the Purchaser, its affiliates and assigns and their respective
directors, officers, employees and agents, as provided in this Article XIII,
from and against any loss, damage, fine, cost or expense, including counsel fees
and disbursements, reasonably incurred in connection with the investigation,
defense or settlement of any claim (collectively, a "Loss"), arising out of:
(a) any and all liabilities of the Company of any kind, nature or
description, absolute or contingent, which arise with respect to or relate to
any period or periods ending on or prior to the Closing Date, or exist as
against the Company prior to or on the Closing Date or thereafter come into
being or arise by reason of any state of facts existing, or any action taken or
failure to take any required action, on or prior to the Closing Date, including
without limitation any and all liabilities of the Company related to the Bull
Litigation and any severance or other termination benefits relating to,
resulting from or arising in respect of the termination of Xxxx Xxxxx or any
other employee of the Company prior to the Closing Date ("Severance Liability"),
except to the extent that the same (A) were fully provided for (and accrued and
applied as a current liability) in the Balance Sheet, or (B) were disclosed in
this Agreement or in any Schedule hereto or any document referred to in such a
Schedule; provided, however, that the exceptions contained in clauses (A) and
(B) shall not apply to the Bull Litigation or to any Severance Liability;
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(b) any breach of warranty or misrepresentation by any of the Sellers under
Article III of this Agreement, or any misrepresentation in or omission from any
certificate or other instrument delivered to the Purchaser by the Company or the
Sellers pursuant to this Agreement or nonfulfillment of any covenant or
agreement on the part of the Company or the Sellers under the terms of this
Agreement; and
(c) all actions, suits, proceedings, claims, demands, assessments,
penalties and judgments incident to the foregoing.
13.2 Indemnification by Purchaser. Subject to the provisions of Article XII and
Section 13.4 hereof, the Purchaser agrees to indemnify and hold harmless the
Company and the Sellers, their respective affiliates, assigns, directors,
officers, employees and agents, as provided in this Article XIII, from and
against any Loss arising out of:
(a) any and all liabilities of the Company of any kind, nature or
description, absolute or contingent, which arise with respect to or relate
to any period or periods commencing following the Closing Date;
(b) any breach of warranty or misrepresentation by the Purchaser under
Article IV of this Agreement or any misrepresentation in or omission from
any certificate or other instrument delivered to the Company or the Sellers
by the Purchaser pursuant to this Agreement or nonfulfillment of any
covenant or agreement on the part of the Purchaser under the terms of this
Agreement; and
(c) all actions, suits, proceedings, claims, demands, assessments,
penalties and judgments incident to the foregoing.
13.3 Indemnification.
(a) A party seeking indemnification under Section 13.1 or 13.2 (the
"Indemnitee") shall give the party from which indemnification is being claimed
(the "Indemnitor") in connection with any such claim for indemnification (the
"Claim") written notice of the Claim (the "Notice of Claim"), which shall
contain the following information to the extent it is reasonably available to
the Indemnitee:
(i) The Indemnitee's good faith estimate of the reasonably foreseeable
maximum amount of the Claim.
(ii) A brief description in reasonable detail of the facts
circumstances or events giving rise to the Claim based on the Indemnitee's
knowledge or good faith belief thereof.
(b) The Indemnitee shall provide written notice of any third party claim
which could result in a Notice of Claim promptly after the Indemnitee becomes
aware of such third party claim, as provided in and subject to the provisions of
Section 13.5.
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(c) Any Notice of Claim received will be resolved as follows:
(i) In the event that the Indemnitor does not contest a Notice of
Claim in writing to the Indemnitee within thirty (30) calendar days after
such Notice of Claim is received by the Indemnitor, such Claim shall be
paid in accordance with the provisions of Section 13.6.
(ii) In the event that the Indemnitor gives written notice to the
Indemnitee contesting all or a portion of a Notice of Claim (a "Contested
Claim") within the thirty (30) day period provided above, the contested
portion of such Notice of Claim shall be paid upon final resolution
thereof. Any portion of the Notice of Claim which is not contested shall be
paid as set forth in Section 13.6. The final resolution of any Contested
Claim will constitute a conclusive determination of the Claim binding upon
the Indemnitor and the Indemnitee and shall not be contested by either of
them.
13.4 Limitations. With respect to the indemnification provisions set forth in
Sections 13.1 and 13.2, (i) such provisions shall be effective only after the
aggregate amount of Loss for which the party entitled to indemnification
hereunder exceeds $150,000 (the "Minimum Limitation"), and in such event, such
indemnification provisions shall apply to all Losses and not only to Losses in
excess of such Minimum Limitation, provided, however, that the Minimum
Limitation shall not apply to any Loss in respect of the Bull Litigation or any
Severance Liability, (ii) the aggregate liability of the Purchaser, on the one
hand, and Sellers, on the other hand, for all Claims for indemnification under
this Article XIII or otherwise under any other provision of this Agreement,
whether based in contract or tort, shall not exceed $8,000,000 for Claims made
during the first 12 months following the Closing, or if less than $5,000,000 of
Claims are made during the first 12 months following the Closing Date (the
"First Year Claims") the maximum liability for Claims made during the second 12
months following the Closing Date shall be $5,000,000 less the amount of the
First Year Claims (the "Maximum Limitation"), and (iii) the liability of any
Seller for indemnification under this Article XIII shall not exceed the
aggregate amount of the portion of the Purchase Price received or receivable by
such Seller under this Agreement. With respect to liability for the
representations and warranties made in Section 3.1, each Seller shall only be
liable for the representations and warranties in Section 3.1 made by such Seller
with respect to himself and neither Seller shall have any liability relating to
the representations and warranties made in Section 3.1 by the other Seller. No
claim for indemnification shall be made to the extent of any insurance proceeds
received by the party seeking indemnification (net of self-insured retention or
deductible amounts). If the party seeking indemnification receives any such
insurance proceeds after a claim shall have been paid, the party seeking
indemnification shall promptly return such payment to the extent of such
insurance proceeds received. In no event will Xxxxxxx X. Xxxxx have any
liability to the Company or the Purchaser in connection with the Employment
Agreement referenced in Section 8.11 hereto.
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13.5 Legal Proceedings. In the event that any legal proceedings shall be
instituted or that any claim or demand shall be asserted by any person in
respect of which payment may be sought by an Indemnitee, regardless of the
Minimum Limitation, the Indemnitee shall promptly cause written notice of the
assertion of any claim of which it has Knowledge which is covered by this
indemnity to be forwarded to the Indemnitor (provided that the Indemnitor shall
remain liable for indemnification hereunder except to the extent a failure to
give notice prejudices Indemnitor's rights with regard to such liability
hereunder but in any event subject to the time limitation set forth in Article
XII hereof), and the Indemnitor shall have the right, at its option and at its
own expense, to be represented by counsel of its choice, which must be
reasonably satisfactory to the Indemnitee, and to defend against, negotiate,
settle or otherwise deal with any proceeding, claim or demand which relates to
any loss, liability, damage or deficiency indemnified against hereunder;
provided, however, that no settlement shall be made without the prior written
consent of the Indemnitee, which consent shall not be unreasonably withheld (in
view of, among other things, the Indemnitee's desire to maintain business
relationships); and provided, further, that the Indemnitee may participate in
any such proceeding with counsel of its choice and at its expense. To the extent
the Indemnitor elects not to defend such proceeding, claim or demand and the
Indemnitee defends against, settles or otherwise deals with any such proceeding,
claim or demand, which settlement may be made without the consent of the
Indemnitor, the Indemnitee will act reasonably and in accordance with its good
faith business judgment and the Indemnitor shall reimburse the Indemnitee for
reasonable fees and expenses relating thereto (subject to the Minimum and
Maximum Limitations). The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
legal proceeding, claim or demand.
13.6 Payment. After any final judgment or award shall have been rendered by a
court of competent jurisdiction and the expiration of the time in which to
appeal therefrom, or a settlement shall have been consummated, or the Indemnitor
and the Indemnitee shall have arrived at a mutually binding agreement with
respect to each separate matter indemnified by the Indemnitor hereunder, the
Indemnitee shall forward to the Indemnitor notice of any sums due and owing by
it pursuant to this Agreement with respect to such matter and the Indemnitor
shall be required to pay all of the sums so owing to the Indemnitee by wire
transfer or by check payable in immediately available funds to the order of the
Indemnitee within thirty (30) days after the date of such notice. If Sellers
fail to make any payment required to be made hereunder, then without limiting
Purchaser's other rights, the amount of such payment shall be released to the
Purchaser from the General Holdback or, without duplication, shall reduce the
amount of any Deferred Payment. Any payment made under this Article XIII or for
any Claim under this Agreement, including under Section 1.4, shall be treated by
the parties hereto as a Purchase Price adjustment and the parties agree to
report such payments consistent therewith for financial reporting and for income
tax purposes.
13.7 Nonexclusivity and Survival. The covenants and obligations contained in
this Section 13 are in addition to, and not in lieu of, any covenants and
obligations which each party hereto may have with respect to the subject matter
hereof, whether by contract, as a matter of law or otherwise, and such covenants
and obligations, and their enforceability will survive any investigation made
with respect to the breach thereof by any party at any time.
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ARTICLE XIV
TERMINATION
14.1 Termination by Consent or Upon Notice. This Agreement may be terminated at
any time prior to the Closing Date:
(a) by the mutual consent of the Sellers and the Purchaser;
(b) subject to the provisions of Section 14.2 hereof, by the Purchaser, by
written notice to the Sellers, if (i) the Company and the Sellers shall have
failed to obtain the Dallas Semiconductor Consent within ten (10) days after the
date hereof, or (ii) there has been a material violation or breach of any of the
Sellers' representations, warranties, covenants, or agreements or if there has
been a material failure of satisfaction of any of the Purchaser's conditions
precedent set forth in Article VIII hereof;
(c) subject to the provisions of Section 14.2 hereof, by the Sellers, by
written notice to the Purchaser, if there has been a material violation or
breach of any of the Purchaser's representations, warranties, covenants, or
agreements or if there has been a material failure of satisfaction of any of the
Sellers' conditions precedent set forth in Article IX hereof;
(d) by either party if the Closing has not occurred on or before June 30,
2000; and
(e) by Purchaser, without recourse to Sellers, if the 1999 Audited
Financial Statements are not delivered by May 12, 2000 or if the 1999 Audited
Financial Statements are not accompanied by an unqualified report (except for a
"going concern" qualification) of the auditors thereon or in Purchaser's
reasonable judgment any item included therein, or such 1999 Financial Statements
as a whole, reflect any material differences from the drafts thereof furnished
to Purchaser.
14.2 Obligations and Liabilities Upon Termination. Upon termination of this
Agreement pursuant to the provisions of Section 14.1 above, the covenants,
agreements, representations and warranties of the parties (except for the
obligations of the parties pursuant to Articles V and XI made in this Agreement)
shall terminate, and parties shall have no continuing obligations or liabilities
with respect thereto; provided, however, that if either party terminates this
Agreement on account of a breach of representation, warranty, covenant or
agreement of the other party, each party hereto shall remain liable for the
breach of such representation, warranty, covenant or agreement, except as
otherwise provided in Section 6.5(a).
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ARTICLE XV
SPECIFIC PERFORMANCE
The parties hereto acknowledge that irreparable damage would result if
this Agreement is not specifically enforced. Therefore, the rights and
obligations of the parties under the Agreement shall be enforceable by a decree
of specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not exclusive and
shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.
ARTICLE XVI
FURTHER ASSURANCES; LICENSE; TAX MATTERS
16.1 Further Assurances. The parties hereto each agree to execute such other
documents or agreements as may be necessary or desirable for the implementation
of this Agreement and the consummation of the transactions contemplated hereby.
16.2 License. Effective as of the Closing, the Sellers covenant and agree that
they shall cause to be granted to the Purchaser the license or licenses, in the
form attached hereto as Exhibit D.
16.3 Tax Matters.
(a) Tax Returns for Tax Periods Ending on or Before the Closing Date. The
Sellers shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company for all periods ending on or prior to the Closing
Date which are filed after the Closing Date. The Sellers shall permit the
Purchaser to review and comment on each such Tax Return described in the
preceding sentence prior to filing. The Sellers shall pay the Taxes of the
Company with respect to such periods and shall indemnify the Purchaser and the
Company against any cost, loss, liability or expense arising out of any failure
to pay any such Taxes.
37
(b) Tax Returns for Tax Periods Beginning Before and Ending After the
Closing Date. The Purchaser shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Company for Tax periods which begin on
or before the Closing Date and end after the Closing Date. The Purchaser shall
provide a copy of each such Tax Return to the Sellers within five (5) days after
the date the Purchaser transmits such Tax Return for filing. The Sellers shall
pay to the Purchaser within fifteen (15) days after the date on which Taxes are
paid with respect to such periods an amount equal to the portion of such Taxes
which relates to the portion of such Taxable period ending on the Closing Date
to the extent such Taxes are not reflected as a reserve on the Closing Date
Balance Sheet. The Purchaser shall pay to the Sellers within fifteen (15) days
after the date on which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such Taxable
period ending on the Closing Date to the extent the reserve for such Taxes as
reflected on the Closing Date Balance Sheet exceeds the amount of such Taxes.
For purposes of this Section, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates to the portion
of such Taxable period ending on the Closing Date shall (x) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. Any credits relating to a Taxable
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Company.
(c) Cooperation on Tax Matters.
(i) The Purchaser and the Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's reasonable request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder.
(ii) The Purchaser and the Sellers further agree, upon request, to use
their reasonable best efforts to obtain any certificate or other document
from any Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).
(iii) The Purchaser and the Sellers further agree, upon request,to
provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
(d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as
of the Closing Date and, after the Closing Date, the Company shall not be
bound thereby or have any liability thereunder.
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ARTICLE XVII
NON-COMPETITION
17.1 Non-Competition. Each Seller covenants and agrees that during the five (5)
years following the Closing Date (the "Restriction Period") such Seller shall
not, individually or jointly with others, directly or indirectly, own, manage,
operate, join, control, participate in, invest in, or otherwise be connected
with, in any manner, whether as an officer, director, employee, partner,
investor or otherwise, any business entity that is engaged or otherwise involved
in any business which is the same as or similar to the business of the Company
or Purchaser as presently conducted, whether through ownership, leasing or other
operations, within the United States and Canada; provided, however, nothing
contained herein shall be deemed to prohibit (i) either Seller from holding
securities of an issuer if the securities of such issuer are listed for trading
on a national securities exchange or are traded in the over-the-counter market
and such Seller's holdings therein represent less than 5% of the total number of
shares or principal amount of the securities of such issuer outstanding or (ii)
Xxxxxx X. Xxxxxxx from engaging in any activities involving the design,
development, production and distribution of software.
17.2 Nondisclosure of Confidential Material. In the course of operation of the
business of the Company, each Seller has received, and may continue to receive
information that gives the Company an advantage over its competitors, and which
is confidential and proprietary, relating to names and preferences of customers,
the costs and profits of particular lines, products and markets, technological
data, computer programs, know-how, potential acquisitions, sources of financing,
corporate operating and financing strategies, expansion plans and similar
related information (together, the "Confidential Material"). At no time shall
Seller individually or jointly with others, publish, disclose, use, or authorize
anyone else to publish, disclose or use any Confidential Material. Seller
acknowledges that any disclosure of the Confidential Material would cause
material and irreparable harm to the Company and Purchaser. Confidential
Material does not include information which (i) becomes generally available to
the public other than as a result of a disclosure by Seller or Seller's
affiliates, or (ii) becomes available to Seller on a non-confidential basis from
a source who has the right to provide such information.
17.3 Non-Solicitation; Non-Compete. At no time prior to the end of the
Restrictive Period shall Seller, for Seller or on behalf of any other person,
firm, corporation or other entity, directly or indirectly, through an agent or
otherwise, (i) contact any present employee, or person who was an employee
within the year prior to such contact, of the Purchaser or the Company for the
purpose of hiring, diverting or otherwise soliciting such employee; or (ii)
contact any present or former customer, client or business partner of the
Purchaser or the Company for the purpose of soliciting, diverting or taking away
any customer, client or business partner from Purchaser or the Company.
39
17.4 Injunctive Relief. Each Seller acknowledges and agrees that Purchaser and
the Company would be irreparably harmed by such Seller's violation of this
Section 17 and that Purchaser's and the Company's remedy at law for any breach
of any of such Seller's obligations under this Section 17 would be inadequate,
and agrees and consents that temporary and permanent injunctive relief may be
granted in a proceeding which may be brought to enforce any provision of this
Section 17 without the necessity of proof of actual damage.
17.5 Reasonable Restrictions. Each Seller has carefully considered the nature
and extent of the restrictions upon him and the rights and remedies conferred
upon Purchaser and the Company under this Section 17, and hereby acknowledges
and agrees that the same are reasonable in time and territory, are designed to
eliminate competition which otherwise would be unfair to Purchaser and the
Company, do not stifle the inherent skill and experience of such Seller, would
not operate as a bar to such Seller's sole means of support, are fully required
to protect the legitimate interests of Purchaser and the Company and do not
confer a benefit upon Purchaser and the Company disproportionate to the
detriment to such Seller, taking into account the amount payable directly or
indirectly to such Seller pursuant to this Agreement and the transactions
described herein. If, however, the provisions of this Section 17 are found by a
court of competent jurisdiction to contain unreasonable or unnecessary
limitations as to time, geographic area or scope of activity, then such court is
hereby directed to reform such provisions to the minimum extent necessary to
cause the limitations contained therein as to time, geographical area and scope
activity to be reasonable and enforceable.
ARTICLE XVIII
MISCELLANEOUS
18.1 Notices. Any notices or other communications required or permitted
hereunder, shall be sufficiently given if in writing and (a) personally
delivered (including delivery by messenger), (b) sent by facsimile provided that
"answer-back" confirmation is received by the sender, or (c) sent by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows or to such other address as the parties shall have given notice of
pursuant hereto:
(a) if to the Purchaser,
addressed to it at: Jaco Electronics, Inc.
X.X. Xxx 00000
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: President
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with a copy to: Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
if to Sellers,
addressed to
Xxxxxxx X. Xxxxx at: Xxxxxxx X. Xxxxx & Associates, P.C.
00 Xxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
and addressed to
Xxxxxx X. Xxxxxxx at: 00 Xxxxx Xxxx
Xxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
with a copy to: Posternak, Xxxxxxxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx, P.C.
18.2 Entire Agreement. This Agreement, including the Schedules, Exhibits,
certificates and instruments delivered pursuant hereto, represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought.
18.3 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement and all rights and obligations
hereunder may not be assigned or transferred without the prior written consent
of the other party hereto, provided, further, that following the Closing
Purchaser may assign its rights and delegate its duties and obligations
hereunder to any wholly-owned subsidiary to which it transfers the outstanding
shares of the Company if, in conjunction therewith, Purchaser guarantees
performance by such subsidiary of all such duties and obligations.
18.4 Section Headings. The Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. 1.1
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18.5 Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York, without regard to
the principles, provisions or policies thereof relating to conflict of laws.
18.6 Jurisdiction. (a) ANY CONTROVERSY OR CLAIM ARISING OUT OF THIS CONTRACT,
OR THE BREACH THEREOF, SHALL BE INITIALLY SUBMITTED TO NON-BINDING ARBITRATION
ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION IN ACCORDANCE WITH ITS
APPLICABLE RULES OR SUCH OTHER ARBITRATORS WHO ARE EXPERIENCED IN ALTERNATIVE
DISPUTE RESOLUTION AS THE PARTIES MAY AGREE UPON, PROVIDED THAT JUDGMENT UPON
THE AWARD RENDERED BY THE ARBITRATOR MAY NOT BE ENTERED IN ANY COURT. ANY SUCH
ARBITRATION SHALL BE BROUGHT IN NEW YORK, NEW YORK IF BROUGHT BY SELLERS, OR IN
BOSTON, MASSACHUSETTS IF BROUGHT BY PURCHASER. IF THE PARTIES TO SUCH
ARBITRATION DO NOT AGREE UPON A RESOLUTION THEREOF IN THE COURSE OF OR UPON
CONCLUSION OF SUCH ARBITRATION THEN SUCH CONTROVERSY OR CLAIM MAY BE ADJUDICATED
AS PROVIDED IN SECTION 18.6(b).
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES
THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY (EXCLUDING NON-BINDING
ARBITRATION PURSUANT TO SECTION 18.6(a))MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE
OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF
IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH
PARTY HEREBY IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS
SET FORTH IN SECTION 18.1, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH
MAILING.
18.7 Expenses; Transfer Taxes. Whether or not the transactions contemplated
hereby are consummated, the parties hereto shall pay their own respective
expenses. Except as provided in Section 6.4, the fees and expenses hereunder of
the Company's and the Sellers' accountants and attorneys relating to this
transaction shall be paid by the Sellers; those of the Purchaser's accountants
and attorneys shall be paid by the Purchaser. All transfer taxes and other taxes
payable as a result of the transactions contemplated hereby shall be paid by the
Sellers from the Initial Consideration. All filing fees under the
Xxxx-Xxxxx-Xxxxxx Act shall be paid 50% by the Purchaser and 50% by the Sellers,
regardless of whether or not the transactions contemplated hereby are
consummated.
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18.8 Severability. If at any time subsequent to the date hereof, any provision
of this Agreement shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, such provision shall be of no force and effect,
but the illegality or unenforceability of such provision shall have no effect
upon and shall not impair the enforceability of any other provision of this
Agreement.
18.9 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
18.10 Books and Records. Purchaser shall retain after the Closing Date all books
and records pertaining to the business of the Company prior to the Closing for
at least 3 years. After the Closing, the Sellers shall be entitled to all
reasonable times to have access to and to make copies of all such books and
records to the extent necessary in connection with the preparation and filing or
any audit of the Company's or the Sellers' tax returns. In the event Purchaser
desires to destroy within three years after Closing any of such books and
records that may be required in connection with the preparation or audit of the
tax returns of the Company or the Sellers, Purchaser shall first give the
Sellers 90 days written notice and the Sellers shall within 90 days of such
notice have the right to remove and retain said books and records, and any books
and records not so removed by the Sellers may thereafter be destroyed by
Purchaser.
18.11 Exhibits and Schedules. Each Exhibit and Schedule referred to herein is
incorporated into this Agreement. Any fact or item in any portion of the
Company's Schedules or Exhibits shall be deemed to be disclosed with respect to
any other relevant Schedule, or Exhibit, whether or not an explicit
cross-reference appears.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the day and year first above written.
PURCHASER:
JACO ELECTRONICS, INC.
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: President
SELLERS:
By: /s/ Xxxxxxx X. Xxxxx
XXXXXXX X. XXXXX
By: /s/ Xxxxxx X. Xxxxxxx
XXXXXX X. XXXXXXX
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
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