Exhibit 2
======================================
ASSET PURCHASE AGREEMENT
DATED AS OF
DECEMBER 14, 1999
BY AND AMONG
ASTRO-MED, INC.,
TELEFACTOR CORP.,
AND
XXXX X. XXXXXXX
===================================
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets
Section 1.2 No Assumption of Liabilities
Section 1.3 Excluded Assets
Section 1.4 Purchase Price and Terms
Section 1.5 Purchase Price Adjustments
Section 1.6 Additional Purchase Price Payments
Section 1.7 Contingent Payment
Section 1.8 Audit Rights
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER
Section 2.1 Corporate Organization and Authority of Seller
Section 2.2 No Conflict
Section 2.3 Capitalization of Seller
Section 2.4 Subsidiaries
Section 2.5 Financial Statements
Section 2.6 Assets
Section 2.7 Customers and Sales
Section 2.8 Material Contracts
Section 2.9 Equipment
Section 2.10 Intellectual Property
Section 2.11 Owned Real Property
Section 2.12 Leased Real Property
Section 2.13 Inventory
Section 2.14 Litigation and Proceedings
Section 2.15 Employee Relations
Section 2.16 Employee Benefit Plans
Section 2.17 Personnel: Identification and Compensation
Section 2.18 Legal Compliance
Section 2.19 Product, Environmental and Toxic Liability
Section 2.20 Taxes
Section 2.21 Authority and Consents
Section 2.22 Licenses, Permits and Authorizations
Section 2.23 Insurance
Section 2.24 Brokers' Fees
Section 2.25 Absence of Certain Changes or Events
Section 2.26 Absence of Undisclosed Liabilities
Section 2.27 Effect of Agreement
Section 2.28 Year 2000 A. D.
Section 2.29 Accuracy of Representations
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3.1 Corporate Organization and Authority of Purchaser
Section 3.2 No Conflict
Section 3.3 Litigation and Proceedings
Section 3.4 Authority and Consents
Section 3.5 Financial Ability
Section 3.6 Brokers' Fees
Section 3.7 Grass Instruments Product Line
ARTICLE IV COVENANTS AND AGREEMENTS OF SELLER
Section 4.1 Termination of Liens
Section 4.2 Business Operating Covenants
Section 4.3 Inspection
Section 4.4 No Solicitations
Section 4.5 Maintenance of Insurance
Section 4.6 Consents of Others
Section 4.7 Accounts Payable
Section 4.8 Payment of Specified Obligations
Section 4.9 Preparation of Financial Statements
ARTICLE V COVENANTS AND AGREEMENTS OF PURCHASER
Section 5.1 Inspection
Section 5.2 Product Warranties, Inventory Obsolescence and
the Warranty and Obsolescence Reserve Account
Section 5.3 Employee Matters
ARTICLE VI JOINT COVENANTS AND AGREEMENTS
Section 6.1 Support of Transaction
Section 6.2 Tax Matters
Section 6.3 Assignment of Contracts
ARTICLE VII CONDITIONS PRECEDENT TO
PURCHASER'S PERFORMANCE
Section 7.1 Truth of Seller's Representations and Warranties
Section 7.2 Seller's Performance of Agreements
Section 7.3 No Material Adverse Change
Section 7.4 Certification by Seller
Section 7.5 Opinion of Seller's Counsel
Section 7.6 Absence of Litigation
Section 7.7 Good Standing and Tax Certificates
Section 7.8 Consents and Approvals
Section 7.9 Approval of Proceedings and Documentation
Section 7.10 Assets
Section 7.11 Employment Agreement
Section 7.12 Leases and Assignment of Lease
Section 7.13 Releases from Creditors
ARTICLE VIII CONDITIONS PRECEDENT TO
SELLER'S PERFORMANCE
Section 8.1 Truth of Purchaser's Representations and Warranties
Section 8.2 Purchaser's Performance of Agreements
Section 8.3 Opinion of Purchaser's Counsel
Section 8.4 Related Agreements
ARTICLE IX CLOSING
Section 9.1 Closing
ii
Section 9.2 Seller Deliveries at Closing
Section 9.3 Purchaser Deliveries at Closing
ARTICLE X INDEMNIFICATION
Section 10.1 Indemnification of Purchaser
Section 10.2 Indemnification of Seller and Shareholder
Section 10.3 Notice of Claim
Section 10.4 Limitation on Time for Presentment of Claim
and Amount of Indemnification
Section 10.5 Survival of Representations and Warranties
Section 10.6 Knowledge of Seller and Shareholder
ARTICLE XI MISCELLANEOUS
Section 11.1 Waiver
Section 11.2 Notices
Section 11.3 Assignment
Section 11.4 Rights of Third Parties
Section 11.5 Expenses
Section 11.6 Captions; Counterparts
Section 11.7 Entire Agreement
Section 11.8 Severability
Section 11.9 Amendment
Section 11.10 Publicity
Section 11.11 Further Assurances
Section 11.12 Tax Treatment
Section 11.13 Set-off
Section 11.14 Non-Exclusivity of Remedies
Section 11.15 Governing Law
iii
EXHIBITS AND SCHEDULES
EXHIBITS:
---------
EXHIBIT A Form of Purchase Price Escrow Agreement
EXHIBIT B Form of Warranty Reserve Escrow Agreement
EXHIBIT C(1) Form of Employment Agreement of Xxxx X. Xxxxxxx
EXHIBIT C(2) Form of Employment Agreement of Xxxxxxxx Xxxxxx
EXHIBIT D Form of Lease of 0000 Xxx XxXxxxx Xxxxxx, Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx
EXHIBIT E Form of Lease of 0000 Xxx XxXxxxx Xxxxxx, Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx
EXHIBIT F Form of Sublease of 0000 Xxx XxXxxxx Xxxxxx, Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx
SCHEDULES:
----------
Schedule 1.2 - Assumed Liabilities
Schedule 1.3 - Excluded Agreements
Schedule 1.5(a) - Previously Expensed Equipment
Schedule 1.5(b) - June 1999 Purchased Asset Listing
Schedule 1.6(a)(i) - Grass Instruments Product Line
Schedule 1.6(a)(ii) - Telefactor Product Line
Schedule 1.6(b) - Additional Purchase Price Payment Calculation
Schedule 2.5 - June 1999 Balance Sheet
Schedule 2.6 - Exceptions to Title/Liens
Schedule 2.7 - Customers and Sales
Schedule 2.8 - Contracts
Schedule 2.9 - Equipment
Schedule 2.10 - Intellectual Property
Schedule 2.11 - Owned Real Property
Schedule 2.12 - Leased Real Property
Schedule 2.13 - Inventory
Schedule 2.14 - Litigation
Schedule 2.16 - Employee Plans
Schedule 2.17 - Personnel Listing
Schedule 2.19(a) - Product Liability
Schedule 2.19(b) - Hazardous Wastes
Schedule 2.19(c) - Exposure to Hazardous Wastes
Schedule 2.21 - Seller Consents
Schedule 2.22 - Seller Material Licenses
Schedule 2.23 - Insurance Policies
Schedule 2.25 - Certain Changes or Events
Schedule 2.26 - Material Liabilities
Schedule 2.28 - Year 2000 A. D.
Schedule 4.6 - Required Seller Consents
Schedule 4.8 - Specified Obligations
Schedule 5.2 - Seller Product Warranties
iv
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into, as of
this 14th day of December, 1999, by and among ASTRO-MED, INC., a Rhode Island
corporation ("PURCHASER"), TELEFACTOR CORP., a Pennsylvania corporation
("SELLER"), and XXXX X. XXXXXXX, major shareholder of Seller ("SHAREHOLDER,"
Shareholder and all other shareholders of Seller being collectively referenced
herein as "SHAREHOLDERS").
W I T N E S S E T H
WHEREAS, Purchaser is engaged in the business of manufacturing and
marketing electronic recording products, label systems and neurophysiologic
products;
WHEREAS, Seller is engaged in the business of designing, manufacturing
and distributing neurophysiologic instrumentation products;
WHEREAS, Shareholder is the major shareholder of Seller;
WHEREAS, upon the terms and subject to the conditions set forth herein,
Seller desires to sell to Purchaser, and Purchaser desires to purchase from
Seller, all of the assets owned by Seller related to the EEG, epilepsy, sleep
monitoring and neuromonitoring technology (the "Business"), except as otherwise
set forth herein; and
WHEREAS, in connection with the purchase and sale of assets described
above, the parties desire that Seller retain all the liabilities of Seller
relating to the Business except as otherwise agreed by Purchaser;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Purchaser, Seller and Shareholder, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1 PURCHASE AND SALE OF ASSETS. Upon the terms and subject to
the conditions contained herein, at the Closing, Seller will sell, convey,
transfer and assign to Purchaser and Purchaser will purchase from Seller, all of
the right, title and interest of Seller in and to the properties and assets,
wherever located, other than the Excluded Assets, as defined in Section 1.3,
used or held for use, fully or in part, in the operation of the Business (the
"PURCHASED ASSETS"). The term, "Purchased Assets", shall include, without
limitation, all of Seller's right, title and interest in and to the following,
if any:
(i) all machinery, equipment and other tangible personal
property used or held for use in full or in part in or by the Business (the
"EQUIPMENT");
(ii) all real property leased by Seller and used or held for
use in the Business (the "LEASED REAL PROPERTY");
(iii) all personal property leased by Seller and used or held
for use in the Business (the "LEASED PERSONAL PROPERTY");
(iv) all contracts, agreements, subcontracts and personal
property leases of Seller (other than those set forth on SCHEDULE 1.3), entered
into in connection with the operation of the Business and not fully performed as
of the Closing (the "CONTRACTS");
(v) all patents, licenses, proprietary rights, service marks,
trademarks and associated good will, tradenames, trade rights, trade secrets,
designs, plans, blueprints, drawings, software, specifications, manuals,
technical documents, quality documents, logos, copyrights, know-how, methods,
concepts, technology, inventions and all other intellectual property rights of
every kind and nature and any disclosures, registrations or applications for
registration of any of the foregoing and any other similar rights used or held
for use, in full or in part, in the operation of the Business ("INTELLECTUAL
PROPERTY");
(vi) all refunds, deposits, and prepaid expenses relating to
the Business, and proceeds of insurance policies or claims pertaining to the
Purchased Assets, excluding, however, cash and cash equivalents of Seller
("OTHER CURRENT ASSETS");
(vii) all items of inventory, including raw materials, work in
process, finished goods, supplies and spare parts held, including any such item
which is in transit or on order as of the Effective Date, owned or held for use
by Seller in connection with the Business (the "INVENTORY");
(viii) all transferable licenses, authorizations and permits
issued or granted by any Federal, state, municipal or local government,
regulatory or administrative agency, governmental commission, department, board,
bureau, court, tribunal, arbitrator or arbitral body ("GOVERNMENTAL AUTHORITY")
or other Person in connection with the operation of the Business ("LICENSES AND
PERMITS");
(ix) all books, records, files, data, graphs, charts,
specifications, diagrams, assessments, reviews, instructions, manuals, marketing
and advertising materials, papers, plans, reports, and other written material of
every kind, and any electronic, film, microfilm, microfiche or computerized form
of any of the foregoing items, wherever located, relating to the Business or the
Purchased Assets ("RECORDS"); and
(x) all accounts receivable of Seller due or recorded in the
respective books and accounts of Seller as being due and owing as of the
Effective Date, as defined in Section 9.1 hereof (the "ACCOUNTS RECEIVABLE").
SECTION 1.2 NO ASSUMPTION OF LIABILITIES.
(A) IT IS UNDERSTOOD AND AGREED THAT PURCHASER DOES NOT ASSUME OR AGREE
TO PAY, PERFORM OR DISCHARGE, AND SHALL NOT BE RESPONSIBLE FOR, ANY LIABILITIES
OR OBLIGATIONS OF SELLER WHETHER ACCRUED, ABSOLUTE, CONTINGENT OR OTHERWISE,
ARISING ON OR BEFORE THE CLOSE OF BUSINESS ON THE EFFECTIVE DATE OTHER THAN AS
LISTED ON SCHEDULE 1.2 HEREOF OR AS AGREED TO IN WRITING BY SELLER SUBSEQUENT TO
THE ADOPTION OF THIS AGREEMENT (the "ASSUMED LIABILITY OR ASSUMED LIABILITIES");
PROVIDED, HOWEVER, THAT THAT CERTAIN TERM PROMISSORY NOTE FROM SELLER TO
PURCHASER DATED SEPTEMBER 17, 1999 (the "PROMISSORY NOTE"), TOGETHER WITH THAT
CERTAIN SOFTWARE LICENSE AGREEMENT OF EVEN DATE THEREWITH (the "LICENSE
AGREEMENT"), SHALL BE DEEMED TO BE AN ASSUMED LIABILITY, AND PROVIDED FURTHER
THAT THE AMOUNT OF $75,000 ASSOCIATED WITH THE DEBIT RELATED TO NON-CUSTOMIZED
SOFTWARE USED BY SELLER SHALL BE ADJUSTED AS FOLLOWS: (i) TO THE EXTENT THAT
PURCHASER DEEMS IT REASONABLY NECESSARY TO PURCHASE SOFTWARE LICENSES WITH
RESPECT TO SUCH SOFTWARE
2
AND THE REASONABLE COSTS ASSOCIATED WITH SUCH PURCHASES IS LESS THAN $75,000,
THEN THE AMOUNT OF SUCH SAVINGS SHALL BE APPLIED AS A CREDIT ON THE FINAL
CLOSING DATE ASSETS LISTING (AS SUCH TERM IS HEREINAFTER DEFINED); AND (ii) TO
THE EXTENT THAT PURCHASER DEEMS IT REASONABLY NECESSARY TO PURCHASE SOFTWARE
LICENSES WITH RESPECT TO SUCH SOFTWARE AND THE REASONABLE COSTS ASSOCIATED WITH
SUCH PURCHASES IS IN EXCESS OF $75,000, THEN THE AMOUNT OF SUCH EXCESS EXPENSE
SHALL BE APPLIED AS A FURTHER DEBIT ON THE FINAL CLOSING DATE ASSETS LISTING.
(B) IT IS FURTHER UNDERSTOOD AND AGREED THAT ANY ASSUMED LIABILITY OR
ASSUMED LIABILITIES SHALL REDUCE, SUBJECT TO SUBSECTION (A) OF THIS SECTION 1.2,
THE PURCHASE PRICE, AS DEFINED IN SECTION 1.4 HEREOF, PAID TO SELLER AT THE
CLOSING ON A DOLLAR-FOR-DOLLAR BASIS, AND THAT ANY SUCH ADJUSTMENTS TO THE
PURCHASE PRICE FOR ANY ASSUMED LIABILITY OR ASSUMED LIABILITIES SHALL BE MADE ON
THE BASIS OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED
(collectively, "GAAP PRINCIPLES").
SECTION 1.3 EXCLUDED ASSETS. The parties expressly acknowledge and
agree that the Purchased Assets shall not include the following, collectively
referenced herein as the "EXCLUDED ASSETS":
(a) cash and cash equivalents of Seller;
(b) the land and buildings and building improvements at 1094
and 0000 Xxx XxXxxxx Xxxxxx, Xxxx Xxxxxxxxxxxx, Xxxxxxxxxxxx;
(c) the agreements set forth on SCHEDULE 1.3; and
(d) Seller's minute books, stock ledgers and other corporate
records.
SECTION 1.4 PURCHASE PRICE AND TERMS. Upon the terms and subject to the
conditions contained herein, as consideration for the Purchased Assets,
Purchaser will pay to Seller, in the manner set forth in Section 1.5 hereof, the
Final Closing Date Asset Value, as defined in Section 1.5(f) hereof, reduced by
the amount of the Assumed Liabilities as set forth in Section 1.2 hereof (the
"INITIAL PURCHASE PRICE").
SECTION 1.5 PURCHASE PRICE CALCULATION.
(a) Prior to the Closing, Seller and Purchaser shall cooperate
in preparing a preliminary combined listing of the Purchased Assets of Seller as
of November 30, 1999 (the "PRELIMINARY CLOSING DATE ASSETS LISTING") which shall
be prepared on a basis in all material respects consistent with the June 30,
1999 Purchased Asset Listing attached hereto as SCHEDULE 1.5(b) which has been
prepared through the cooperative efforts of Purchaser and Seller according to
GAAP Principles (the "JUNE 1999 ASSETS LISTING"). It is understood and agreed
that those assets listed on the June 1999 Assets Listing for the purpose of
establishing the Initial Purchase Price consist of the following categories: (i)
Inventory; (ii) Accounts Receivable Net; (iii) Net Equipment; (iv) Other Long
Term Assets; (v) Other Currents Assets; (vi) Loans; (vii) Royalty Receivable;
and (viii) Good Will. Seller shall certify in writing that the Inventory listed
on the Preliminary Closing Date Assets Listing has been prepared on a basis in
all material respects consistent with the Inventory listed on the June 1999
Assets Listing. Seller also shall prepare and deliver to Purchaser, at least two
(2) days prior to the Closing Date, a listing of deposits of customers of Seller
as of the Closing Date. The Preliminary Closing Date Assets Listing shall be
prepared (i) in a combined format consistent with the June 1999 Assets Listing;
and (ii) such that the
3
Preliminary Closing Date Assets Listing shall reflect the
undepreciated cost (based upon seven (7) year straight line depreciation) of
Equipment acquired by Seller prior to 1998, the cost of which was previously
expensed by Seller as set forth on SCHEDULE 1.5(a) and otherwise shall reflect
only changes in assets arising after June 30, 1999 through November 30, 1999.
(b) The "PRELIMINARY ASSET VALUE" shall mean the dollar value
of the Purchased Assets as set forth in the Preliminary Closing Date Assets
Listing as adjusted by cash received and expenses paid by Seller through the
Closing Date.
(c) At the Closing, Purchaser shall pay to Seller, by wire
transfer of immediately available funds to an account designated by Seller in
writing, the Preliminary Asset Value reduced by the Assumed Liabilities (the
"CLOSING PAYMENT"); provided, however, that Purchaser shall deposit $200,000 of
the Closing Payment in the Price Adjustment Reserve Account referenced in
Subsection (g) of this Section 1.5, and also shall deposit $25,000 of the
Closing Payment in the Warranty and Obsolescence Reserve Account as defined in
Section 5.2 hereof (both such escrow deposits by Purchaser being collectively
referenced herein as the "ESCROW DEPOSITS").
(d) As soon as reasonably practicable following the Closing
Date, and in any event within thirty (30) calendar days thereof, Purchaser shall
prepare and deliver to Seller a final combined Purchased Asset Listing of Seller
as of the Effective Date (the "FINAL CLOSING DATE ASSETS LISTING"). Those
Purchased Assets listed on the Final Closing Date Assets Listing for the purpose
of determining the Initial Purchase Price shall be those listed on the
Preliminary Closing Date Assets Listing. The Final Closing Date Assets Listing
shall be prepared: (i) in accordance with GAAP Principles; (ii) such that the
Final Closing Date Assets Listing shall reflect only changes in assets arising
after June 30, 1999 through the Effective Date; (iii) such that the Final
Closing Date Assets Listing shall reflect the undepreciated cost (based upon
seven (7) year straight line depreciation) of Equipment acquired by Seller prior
to 1998, the cost of which was previously expensed by Seller as set forth on
SCHEDULE 1.5(a); and (iv) as adjusted by cash received and expenses paid by
Seller through the Closing Date.
(e) Seller and/or such representatives of Seller as Seller may
reasonably designate may attend and observe the preparation of the Final Closing
Date Assets Listing by Purchaser. During and after preparation of the Final
Closing Date Assets Listing, Seller and/or Seller's representatives shall have
free access to the individual who is preparing the Final Closing Date Assets
Listing and full access to Purchaser's work papers. Purchaser shall clearly
explain to Seller and/or Seller's representatives Purchaser's basis for any item
questioned by Seller and give Seller and/or Seller's representatives full
opportunity to express his comments and observations, which Purchaser's
representative shall reasonably consider. Furthermore, for such amounts in the
Final Closing Date Assets Listing as Seller's representative may identify,
Purchaser shall provide a detailed comparison of the computation and compilation
of such Final Closing Date Assets Listing amount(s) and the equivalent June 1999
Assets Listing amount(s). After the Final Closing Date Assets Listing has been
presented to Seller pursuant to Section 1.5(d), Seller may formally dispute the
calculation of any element of the Final Closing Date Assets Listing, by
notifying Purchaser of such disagreement in writing, setting forth in detail the
particulars of such disagreement, within sixty (60) days after its receipt of
the Final Closing Date Assets Listing. In the event that Seller does not provide
such a notice of disagreement within such sixty (60) day period, Seller shall be
deemed to have accepted the Final Closing Date Assets Listing, which shall be
final, binding and conclusive for all purposes hereunder. In the event any such
notice of disagreement is timely provided, Purchaser and Seller shall use their
reasonable best efforts for a period of thirty (30) days (or such longer period
as they may mutually agree) to resolve any disagreements with respect to the
calculation of the Final Closing Date Assets Listing. If, at the end of such
period, they are unable to resolve such disagreements, then such independent
accounting firm as may be mutually selected by Purchaser and Seller (the
"AUDITOR") shall resolve any remaining disagreements. The Auditor shall
4
receive full cooperation from both Seller and Purchaser and shall be asked to
determine as promptly as practicable, but in any event within thirty (30) days
of the date on which such dispute is referred to the Auditor, whether the Final
Closing Date Assets Listing was prepared in accordance with the standards set
forth in this Section 1.5 and (only with respect to the remaining disagreements
submitted to the Auditor) whether and to what extent (if any) the Final Closing
Date Assets Listing requires adjustment. The fees and expenses of the Auditor
shall be paid one-half by Purchaser and one-half by Seller. The determination of
the Auditor shall be final, conclusive and binding on the parties. The date on
which the Final Closing Date Assets Listing is finally determined in accordance
with this Section 1.5(e) is hereinafter referred to as the "DETERMINATION DATE."
(f) The "FINAL ADJUSTMENT AMOUNT" shall mean the difference
between the Preliminary Asset Value and the value of the Purchased Assets as set
forth in the Final Closing Date Assets Listing as adjusted by Section 1.2 hereof
(the "FINAL CLOSING DATE ASSET VALUE").
(g) On the Closing Date, Purchaser shall deposit $200,000 of
the Closing Payment in an escrow account (the "PRICE ADJUSTMENT ESCROW AMOUNT")
established pursuant to an Escrow Agreement (the "PRICE ADJUSTMENT ESCROW
AGREEMENT"), substantially in the form of EXHIBIT A hereto, dated as of the
Closing Date, among Purchaser, Seller, Shareholder and Xxxxxxxx, Xxxxx & Xxxxxx
LLP, counsel to Purchaser (the "ESCROW AGENT"), as a reserve for payment of the
Final Adjustment Amount (the "PRICE ADJUSTMENT RESERVE ACCOUNT").
(i) If the Preliminary Asset Value was equal to
or less than the Final Closing Date Asset Value, then, promptly, and in any
event within ten (10) days following the Determination Date, by wire transfer of
immediately available funds to an account designated in writing by Seller, (x)
the Escrow Agent shall pay to Seller the Price Adjustment Escrow Amount, and (y)
Purchaser shall pay to Seller the Final Adjustment Amount, if any.
(ii) If the Preliminary Asset Value exceeded the
Final Closing Date Asset Value, then, promptly, and in any event within ten (10)
days following the Determination Date, the Escrow Agent shall pay to Purchaser,
by wire transfer of immediately available funds, to an account designated in
writing by Purchaser, the Final Adjustment Amount and shall pay to Seller, to an
account designated in writing by Seller, the balance of the Price Adjustment
Reserve Account. If the Final Adjustment Amount due to Purchaser exceeds the
Price Adjustment Escrow Amount, then, in addition to the amount Price Adjustment
Escrow Amount, promptly, and in any event within ten (10) days following the
Determination Date, Seller shall pay to Purchaser, by wire transfer of
immediately available funds to an account designated in writing by Purchaser,
the amount by which the Final Adjustment Amount exceeds the Price Adjustment
Escrow Amount.
SECTION 1.6. ADDITIONAL PURCHASE PRICE.
(a) In addition to the Initial Purchase Price as adjusted in
accordance with the terms of this Agreement, for each full fiscal year or
portion thereof within the Payout Period, as hereinafter defined, Purchaser will
pay to Seller a payment equal to seventeen percent (17%) of the total dollar
incremental increase in combined Net Sales Revenues (as hereinafter defined) of
Purchaser's Grass Instruments Product Line and Seller's Telefactor Product Line
(the "COMBINED NET SALES REVENUES") over the Base Amount (as hereinafter
defined) over the term of the Payout Period (as hereinafter defined) in an
aggregate amount not to exceed three million dollars ($3,000,000) in accordance
with the procedures hereinafter set forth (collectively, the "ADDITIONAL
PURCHASE PRICE PAYMENT"). As used herein, "NET SALES REVENUES" shall be an
amount equal to gross sales, less all returns, allowances, cash discounts, and
adjustments.
5
(i) "GRASS INSTRUMENTS PRODUCT LINE" shall mean
those products set forth on SCHEDULE 1.6(a)(i) hereto, together with all
ancillary services in respect thereof, substitutions, replacements,
improvements, enhancements, and future developments thereto and thereof.
(ii) "TELEFACTOR PRODUCT LINE" shall mean those
products set forth on SCHEDULE 1.6(a)(ii) hereto, together with all ancillary
services in respect thereof, substitutions, replacements, improvements,
enhancements, and future developments thereto and thereof.
(b) Each Additional Purchase Price Payment shall be made
within thirty (30) days following the end of each fiscal year within the Payout
Period; provided, however, that the final Additional Purchase Price Payment
shall be made within thirty (30) days of the final day of the Payout Period. The
"PAYOUT PERIOD" shall commence on the first day of the month following the
Closing Date (the "COMMENCEMENT DATE") and end seventy-two (72) months
thereafter (the "END DATE"). The initial Additional Purchase Price Payment shall
be based on Combined Net Sales Revenues from the Commencement Date through the
end of the first fiscal year of the Payout Period as compared to the Base Amount
(as hereinafter defined). The final Additional Purchase Price Payment shall be
based on Combined Net Sales Revenues from the end of the final full fiscal year
of the Payout Period through the End Date as compared to the Base Amount. Each
interim Additional Purchase Price Payment shall be based on Combined Net Sales
Revenues for the prior full fiscal year within the Payout Period compared to the
Base Amount. SCHEDULE 1.6(b) hereto sets forth, by way of example, the
methodology to be used in calculating the Additional Purchase Price Payments.
The parties understand and agree that the dollar values presented on said
SCHEDULE 1.6(b) (the "RESULTS") are hypothetical and are used for illustrative
purposes only. Neither party represents nor warrants to the other that the
Results will be achieved.
(c) The "BASE AMOUNT" for the first twelve months of the
Payout Period shall mean the amount for the prior comparable period, and
thereafter shall mean the highest actual Combined Net Sales Revenues for any
prior comparable period during the Payout Period.
SECTION 1.7 CONTINGENT PAYMENT. In the event that during the Payout
Period payment would be due pursuant to Section 1.6 but for the fact that such
payment (or any portion thereof) would cause the aggregate amount of Additional
Purchase Price Payments to exceed three million dollars ($3,000,000), such
amount shall be paid to Seller as a contingent payment (the "CONTINGENT
PAYMENT") which Contingent Payment shall be made at the same time and in the
same manner as if it were an Additional Purchase Price Payment.
SECTION 1.8 AUDIT RIGHTS.
(a) Once each fiscal year, during the Payout Period and for a
period of two (2) years thereafter, Seller shall have the right, at Seller's
expense and upon reasonable notice, to have examined by an independent,
certified public accountant subject to a mutually acceptable non-disclosure
agreement, Purchaser's books and records related to the Grass Instruments
Product Line and the Telefactor Product Line sales revenues in order to
determine and verify the amount of any Additional Purchase Price Payment and/or
Contingent Payment due. Any discrepancy between the Additional Purchase Price
Payment or Contingent Payment paid and the Additional Purchase Price Payment or
Contingent Payment actually due discovered pursuant to such examination shall be
payable within thirty (30) days of completion of the examination. In the event
that an audit discloses underpayment by Purchaser of three percent (3%) or more,
Purchaser shall reimburse Seller for all costs incurred in connection with the
conduct of such audit.
(b) Purchaser acknowledges and agrees that in the event that
following the Closing Date Seller elects to liquidate and distribute its assets,
net of liabilities, to the Shareholders, then and in
6
such event, upon written request of Seller to Purchaser, Purchaser shall
distribute each Additional Purchase Price Payment and Contingent Payment, if
any, to the respective Shareholders of Seller in such amounts as Seller shall
have instructed Purchaser in writing.
(c) It is expressly understood and agreed that the provisions
of SECTION 1.6, SECTION 1.7, and this SECTION 1.8 shall survive the execution
and delivery hereof and the Closing of the transaction hereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Shareholder jointly and severally represent and warrant to
Purchaser, as of the date of this Agreement and as of the Closing, that, except
as has been otherwise disclosed by Seller to Purchaser in any Schedule hereto:
SECTION 2.1 CORPORATE ORGANIZATION AND AUTHORITY OF SELLER. Seller has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the Commonwealth of Pennsylvania. Seller has the corporate
power and authority to own or lease its properties and to conduct the Business
as it is now being conducted, and Seller has the corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. Other
than with respect to the office of the Seller located in the Netherlands (the
"NETHERLANDS OFFICE") which is in the process of being qualified under Dutch
law, Seller is duly licensed or qualified and in good standing as a foreign
corporation in each jurisdiction in which the ownership of its property or the
character of its activities is such as to require it to be so licensed or
qualified, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect (as hereinafter defined). The execution and
delivery of this Agreement by Seller and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Board of Directors of Seller and the Shareholders, and no other corporate
proceeding on the part of Seller is necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Seller and Shareholder and constitutes a legally valid
and binding obligation of Seller and Shareholder, enforceable against Seller and
Shareholder in accordance with its terms, except to the extent that
enforceability is limited by bankruptcy and other similar laws effecting
creditors' rights generally. For the purposes of this Agreement, the term
"MATERIAL ADVERSE EFFECT" shall mean any change in or effect on Seller that is,
or is reasonably likely to be, materially adverse to the assets, business,
financial condition, results of operations or prospects of Seller.
SECTION 2.2 NO CONFLICT. The execution and delivery of this Agreement
by Seller and Shareholder and the consummation of the transactions contemplated
hereby does not, and will not, violate any provision of, or result in the breach
of, the material provisions of any applicable law, rule or regulation of any
Governmental Authority, the Certificate of Incorporation, Bylaws or other
organizational documents of Seller, or any agreement, indenture or other
instrument to which Seller or Shareholder is a party or by which Seller or
Shareholder may be bound, or of any order, judgment or decree applicable to any
of them, or terminate or result in the termination of any such agreement,
indenture or instrument, the result of which would cause a Material Adverse
Event (as hereinafter defined), or result in the creation of any mortgage, deed
of trust, pledge, hypothecation, encumbrance, security interest or lien of any
kind (a "LIEN") upon any of the properties or assets of Seller or Shareholder,
or constitute an event which, after notice or lapse of time or both, would
result in any such violation, breach, acceleration, termination or creation of a
Lien. For the purposes of this Agreement, the
7
term "MATERIAL ADVERSE EVENT" shall mean any change in, or effect on, Seller
that results in, or is reasonably likely to result in, a Material Adverse
Effect.
SECTION 2.3 Intentionally omitted.
SECTION 2.4 SUBSIDIARIES. Seller has no subsidiaries. Seller does not
own, directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any other corporation, partnership, association, trust,
joint venture or other entity.
SECTION 2.5 FINANCIAL STATEMENTS. Attached as SCHEDULE 2.5 is the
Seller's Balance Sheet as of June 30, 1999 (the "JUNE 1999 BALANCE SHEET") and
the Seller's Income Statement for the six (6) months period ending June 30, 1999
(the "JUNE 30, 1999 INCOME STATEMENT" and together with the June 1999 Balance
Sheet, collectively, the "JUNE 1999 STATEMENTS"). The June 1999 Statements were
prepared through the joint cooperation of Seller and Purchaser, derived from the
books and records of Seller, and have been prepared and adjusted in accordance
with GAAP Principles. Seller has made available to Purchaser copies of the
statements of income and balance sheets of Seller for the fiscal years ended and
as of December 31, 1997 and 1998, certain other material financial records of
Seller relating to the fiscal years ended December 31, 1997 and 1998 (the
"FINANCIAL STATEMENTS") and other comparable financial records for the fiscal
years ended December 31, 1994 through December 31, 1996. Seller and Purchaser
have cooperated in adjusting the Financial Statements to reflect GAAP
Principles, and Seller and Shareholder acknowledge and agree that the Financial
Statements fairly present in all material respects the financial condition of
the Business as of the date thereof. Notwithstanding the foregoing, although
Seller and Shareholder represent and warrant that the Financial Statements and
financial information in respect of Seller upon which the June 1999 Statements
are predicated are true and correct in all material respects, neither Seller nor
Shareholder makes any representation as to the applicability of GAAP Principles
or any adjustments made by Purchaser, or Purchaser's agents with respect
thereto.
SECTION 2.6 ASSETS. Except as set forth on SCHEDULE 2.6, the Purchased
Assets are adequate for Purchaser to conduct the Business in the same manner as
currently conducted. Except with respect to the leased Purchased Assets, for
which Seller holds valid leasehold interests, Seller owns and has good and
marketable title to such Purchased Assets free and clear of all Liens other than
(a) the Lien of current taxes and other governmental charges and assessments not
yet due and payable (collectively, the "PERMITTED LIENS"), (b) those disclosed
in SCHEDULE 2.6 to this Agreement, and (c) possible minor matters that, in the
aggregate, are not substantial in amount and do not materially detract from or
interfere with the present intended use or enjoyment of any such property or
assets, the existence of which would not cause the occurrence of a Material
Adverse Event.
SECTION 2.7 CUSTOMERS AND SALES. Set forth in SCHEDULE 2.7 is an
accurate and current listing of the twenty (20) largest customers of Seller
together with summaries of the sales made to each customer during the most
recent fiscal year. Except as set forth in SCHEDULE 2.7, Seller has no
information, nor is it aware of any facts, indicating that any of such customers
intend to cease doing business with Seller, or materially alter the amount of
the business that it is presently doing with Seller.
SECTION 2.8 MATERIAL CONTRACTS. Except as set forth in SCHEDULE 2.8,
Seller has no and is not bound by (a) any agreement, contract or commitment
relating to the employment of any person by Seller, including but not limited to
collective bargaining agreements, or relating to any bonus, deferred
compensation, pension, profit sharing, stock option, employee stock purchase,
retirement or other employee remuneration or benefit plan; (b) any agreement,
contract or commitment relating to capital expenditures; (c) any loan or advance
to, or investment in, any other person or any agreement, contract or commitment
relating to the making of any such loan, advance or investment; (d) any
guarantee or other contingent liability in respect of any indebtedness or
obligation of any other person (other than the
8
endorsement of negotiable instruments for collection in the ordinary course of
business); (e) any management service, consulting or any other similar type
contract; (f) any agreement, contract or commitment limiting the freedom of
Seller to engage in any line of business or to compete with any other person;
(g) any agreement, contract or commitment not entered into in the ordinary
course of business which involves $25,000 or more and is not cancelable without
penalty within thirty (30) days; (h) any distributor's or manufacturer's or
sales representative or agency agreement; (i) any output or requirements
agreement; or (j) any agreement, contract or commitment which might reasonably
be expected to have a Material Adverse Effect upon Seller. Each contract or
agreement set forth in SCHEDULE 2.8 (or required to be set forth in SCHEDULE
2.8) is in full force and effect and there exists no default or event of default
or event, occurrence, condition or act (including but not limited to the
purchase of the Assets hereunder) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become a default or
event of default thereunder. Seller has not violated any of the terms or
conditions of any contract or agreement set forth in SCHEDULE 2.8 (or required
to be set forth in SCHEDULE 2.8) in any material respect, and all of the
covenants to be performed by any other party thereto have been fully performed.
SECTION 2.9 EQUIPMENT. SCHEDULE 2.9 lists all material items of
Equipment of Seller, which have an individual value (as carried on the books and
records of Seller) in excess of two thousand dollars ($2,000). Except as set
forth in SCHEDULE 2.9, the Equipment is suitable in all material respects for
the purposes for which it is presently used and is in good operating condition
with the exception of reasonable wear and tear. Except as set forth in SCHEDULE
2.9, no Equipment used by Seller in connection with the Business is held under
any lease, security agreement, conditional sales contract, or other title
retention or security arrangement, or is other than in the possession and under
the control of Seller. The Equipment listed on SCHEDULE 2.9 constitutes all such
Equipment necessary for the conduct by Seller of the Business as now conducted.
SECTION 2.10 INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE
2.10, Seller has no interest, whether as owner, licensee or otherwise, in any
Intellectual Property, and does not require or use any Intellectual Property in
connection with the conduct of the Business. To the knowledge of Seller and
Shareholder, other than with respect to the trademark, "Neurotrac" (Registration
Number 1,356,285) and patent numbers 5,265,607 and 4,800,895, Seller is not
infringing, violating or otherwise acting adversely to, the rights of any person
under or in respect of any Intellectual Property. Except as set forth in
SCHEDULE 2.10, there are no filed claims, or claims of which Seller has
knowledge, against Seller to the effect that Seller or the operation of Seller's
Business infringes, violates or otherwise is adverse to, the rights of any
person under or in respect of any Intellectual Property or that any employee,
agent or representative of Seller is in violation of any non-competition or
non-disclosure obligation with a third party as a result of their relationship
with Seller. Except as set forth in SCHEDULE 2.10, Seller is not a party to any
license agreement, or arrangement, whether written or oral, express or implied,
or whether as licensee, licensor, or otherwise, with respect to any Intellectual
Property.
SECTION 2.11 OWNED REAL PROPERTY.
(a) SCHEDULE 2.11 lists all owned real property used or held
for use in the Business (the "OWNED REAL PROPERTY"). Seller has obtained and
kept in full force and effect all licenses, permits and approvals necessary for
the use of all Owned Real Property, including but not limited to zoning of each
parcel set forth in SCHEDULE 2.11 (or required to be set forth in SCHEDULE
2.11), which permits the presently existing improvements, equipment and
processes and the continuation of the business presently being conducted on such
parcel.
(b) Seller is not in default under any Lien on the Owed Real
Property and no waiver, indulgence or postponement of Seller's obligations
thereunder has been granted by the holder thereof and
9
there exists no event of default or event, occurrence, condition or act
(including but not limited to purchase of the Purchased Assets hereunder which)
with the giving of notice, lapse of time or the happening of any further event
or condition, would become a default under such conditions under any such Lien.
All of the buildings, structures and appurtenances situated on the Owned Real
Property listed in SCHEDULE 2.11 (or required to be set forth in SCHEDULE 2.11)
necessary to the Business are in good operating condition and in a state of good
maintenance and repair, are adequate and suitable for the purposes for which
they are presently being used. None of such buildings, structures or
appurtenances (or any equipment therein), nor the operation or maintenance
thereof, violates any restrictive covenant or any material provision of any
federal, state or local law, use, ordinance, rule or regulation (including but
not limited to applicable building, land use, subdivision, zoning, wetlands,
Occupational Safety and Health Act rules, air pollution, disposal of effluent
waste, fire code and environmental laws, ordinances, rules and regulations), or
encroaches on any property owned by others, the consequences of which would have
a Material Adverse Effect. Seller has obtained and kept in full force and effect
all licenses, permits and approvals necessary for the use and ownership of all
such property and the business being conducted thereon, including but not
limited to zoning of each parcel set forth in SCHEDULE 2.11 (or required to be
set forth in SCHEDULE 2.11), which permits the presently existing improvements
and the continuation of the business presently being conducted on such parcel.
Except as set forth in SCHEDULE 2.11, no condemnation proceedings is pending or,
to Seller's and Shareholder's best knowledge, information and belief, threatened
which would preclude or impair the use of any such property by Seller for the
purposes for which it is currently used.
SECTION 2.12 LEASED REAL PROPERTY. SCHEDULE 2.12 contains an accurate
and complete list of the Leased Real Property and a description of the terms of
all leases to which Seller is a party pertaining to the Leased Real property.
Each lease set forth in SCHEDULE 2.12 is in full force and effect; all rents and
additional rents due to date on each such lease have been paid; in each case,
the lessee has been in peaceable possession since the commencement of the
original term of such lease and is not in default thereunder and no waiver,
indulgence or postponement of the lessee's obligations thereunder has been
granted by the lessor; and there exists no event of default or event,
occurrence, condition or act (including but not limited to the purchase of the
Purchased Assets hereunder) which, with the giving of notice, the lapse of time
or the happening of any further event or condition, would become a default under
such conditions under any such lease in any material respect by either lessor or
lessee in each instance, and, to Seller's knowledge, all of the material
covenants to be performed by any other party under any such lease have been
fully performed. The Leased Real Property is adequate and suitable for the
purposes for which it is presently being used.
SECTION 2.13 INVENTORY. SCHEDULE 2.13 lists all items of Inventory of
Seller (by category), which have a value (as carried on the books and records of
Seller) in excess of two thousand dollars ($2,000). The Inventory (whether or
not listed on SCHEDULE 2.13) consists of items of a quality and quantity usable
and salable in the ordinary course of business before and after the Closing.
Neither Seller nor Shareholder has any knowledge that any customer of Seller
intends to request that Seller take back or otherwise repurchase or give credit
for any amount of the Inventory, other than in the ordinary and usual course of
the Business as conducted consistent with Seller's past experience. All items
included in the Inventory are the property of Seller. Except as may be pledged
as security for a loan to Seller from PNC Bank National Association pursuant to
a Loan Agreement and Promissory Note dated October, 30, 1997, as amended, no
items included in the Inventory have been pledged as collateral or are held by
Seller on consignment from others. The Inventory shown on the June 1999 Balance
Sheet are based on quantities determined by physical count or measurement, taken
within the preceding twelve (12) months, and are valued at the lower of cost
(determined on a first-in, first-out basis) or market value and on a basis
consistent with that of prior years.
10
SECTION 2.14 LITIGATION AND PROCEEDINGS. Except as set forth in
SCHEDULE 2.14, there is no suit, action, arbitration, investigation or legal,
administrative or other proceeding, or governmental investigation pending or, to
Seller's and Shareholder's knowledge, threatened, against or affecting Seller or
any of Seller's business or condition (financial or otherwise), properties,
assets, rights, results of operations, operations or prospects. The matters set
forth in SCHEDULE 2.14, if decided adversely to Seller, would not result in the
occurrence of a Material Adverse Event. Seller has furnished or made available
to Purchaser relevant court papers and other documents relating to the matters
set forth in SCHEDULE 2.14. Seller is not subject to any judgment, order or
decree entered in any lawsuit or proceeding which may have an adverse effect on
any of the Business or condition (financial or otherwise), properties, assets,
rights, operations, results of operations, prospects or on its ability to
acquire any property or conduct business in any area. Seller is not in default
with respect to any order, writ, injunction or decree of any Governmental
Authority.
SECTION 2.15 EMPLOYEE RELATIONS.
(a) Seller is in material compliance with all Federal, state
or other applicable laws, domestic or foreign, respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and has not engaged and is not engaging in any unfair labor practice; (b) no
unfair labor practice charge or complaint against Seller is pending before the
National Labor Relations Board; (c) there is no labor strike, dispute, slowdown,
stoppage or other labor action actually pending or threatened against or
involving Seller; (d) no question of union representation exists respecting the
employees of Seller and there are no petitions for an election involving
Seller's employees pending before the National Labor Relations Board; (e) no
grievance which might have an adverse effect upon Seller or the conduct of their
respective businesses exists, no arbitration proceeding arising out of or under
any collective bargaining agreement is pending and no claim therefor has been
asserted; (f) no collective bargaining agreement is currently being negotiated
by Seller; (g) Seller has not experienced any material labor difficulty during
the last three years; (h) there exist no claims, charges or complaints, or to
Seller's knowledge, events or conditions that have occurred or existed or are
occurring and existing, which would give rise to such claims, charges or
complaints, with respect to or under any discrimination laws or for wrongful
discharge. There has not been, and to Seller's knowledge, there will not be, any
material adverse change in relations with employees of Seller as a result of any
announcement of the transactions contemplated by this Agreement, the consequence
of which would cause the occurrence of a Material Adverse Event; (i) Seller has
not engaged in a business combination transaction or transfer of control in
violation of any applicable business combination act; (j) Seller has not engaged
in any plant closing or mass layoff in violation of the provisions of the Worker
Adjustment Restraining and Notification Act or any state or local law or
regulation requiring notice prior to a plant closing or layoff; and (k) both
with respect to its employees and its facilities, Seller is in material
compliance with all applicable provisions of the Americans with Disabilities
Act, the Family and Medical Leave Act and the Occupational Safety and Health
Act.
SECTION 2.16 EMPLOYEE BENEFIT PLANS. Set forth on SCHEDULE 2.16 is an
accurate and complete list of all pension, bonus, profit-sharing, stock options
and other agreements or arrangements providing for employees' remuneration or
benefits to which Seller is a party or by which it is bound (the "EMPLOYEE
PLANS"), including but not limited to all employee benefit plans within the
meaning of Section (3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). Seller does not presently maintain any employee benefit
plans or any other pension, welfare or retirement benefit plans other than those
set forth on SCHEDULE 2.16. Seller has complied with all applicable laws for
each of its employee benefit plans, including the provisions of ERISA if and to
the extent applicable. There are no pending, or to Seller's knowledge threatened
claims by or on behalf of any such benefit plan, or by or on behalf of any
employee covered under any such plan, or otherwise involving any such benefit
plan, that
11
allege a breach of fiduciary duties or violations or other applicable federal or
state law, nor is there, to the best knowledge of Seller or Shareholder, any
basis for such a claim.
SECTION 2.17 PERSONNEL: IDENTIFICATION AND COMPENSATION. Set forth in
SCHEDULE 2.17 is an accurate and complete list of the names and addresses of all
(a) officers, directors, agents; and (b) all employees, manufacturer's and sales
representatives of Seller, stating the rates of compensation payable to each.
SECTION 2.18 LEGAL COMPLIANCE. To the knowledge of Seller and
Shareholder, Seller has complied with, is not in violation of, and has received
no notices or communication from any Governmental Authority relative to,
alleged, actual or potential violation of any applicable foreign, federal, state
or local statutes, laws and regulations (including but not limited to any
applicable building, zoning, environmental or other law, ordinance or
regulation) affecting Seller's properties and assets or the operation of
Seller's Business, including but not limited to under the Occupational Safety
and Health Act of 1970, as amended, or the Environmental Protection Act.
SECTION 2.19 PRODUCT, ENVIRONMENTAL AND TOXIC LIABILITY.
(a) Except as set forth in SCHEDULE 2.19(a), there is no
liability, obligation or claim pending or, to the knowledge of Seller,
threatened relating to or based in whole or in part on circumstances, events or
conditions occurring or existing in connection with, or arising out of, services
rendered or goods or products manufactured or sold by Seller, including product
warranty and product liability claims, and claims for refunds, returns, personal
injury and property damage.
(b) Except as set forth in SCHEDULE 2.19(b), (i) Seller has
not caused or permitted its businesses or the properties it owns or occupies to
be used (or has knowledge that such were used) to generate, manufacture, refine,
transport, treat, handle, transfer, produce, process or Release (as defined
below) toxic or hazardous wastes or substances, except in material compliance
with all applicable federal, state and local laws or regulations; (ii) Seller
has not caused or permitted (or has knowledge of) the Release of any toxic or
hazardous substances or wastes at any locations other than the properties owned
or occupied by Seller; (iii) there are no actual or alleged violations of any
permit, license, agreement or approval held by Seller; (iv) there are no
liabilities, obligations or claims pending, or to the knowledge of Seller,
threatened, relating to or based in whole or in part upon circumstances, events
or conditions occurring or existing in connection with or arising out of any of
the foregoing; and (v) all toxic or hazardous wastes or substances have been
handled, stored and disposed of by Seller (and to Seller's best knowledge by any
agents of Seller) materially in accordance with applicable law ("RELEASE" means
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing, dumping or storage).
(c) Except as set forth in SCHEDULE 2.19(c), Seller has not
caused or permitted its employees or agents to be exposed to toxic or hazardous
substances or other serious health risks, and there are no pending or threatened
claims, nor is Seller aware of any facts that would form the basis for any
claims with respect to employee/ agent exposure to toxic or hazardous substances
or other serious health risks.
SECTION 2.20 TAXES. Within the times and in the manner prescribed by
law, Seller has filed or caused to be filed all federal, state, local and
foreign tax returns and tax reports which are required by law and has paid all
taxes, assessments, interest and penalties that are due and payable. Such
returns and reports reflect accurately all liability for taxes of Seller for the
periods covered thereby. All federal, state, local and foreign income, profits,
franchise, sales, use, occupancy, excise and any other taxes and assessments
(including interest and penalties) payable by, or due from, Seller have been
fully paid or
12
adequately disclosed and fully provided for in the books and Financial
Statements of Seller. The provisions for taxes reflected in the June 1999
Balance Sheet are adequate for any and all federal, state and local taxes and
any penalties, interest or other charges for the period reflected and for all
prior periods, whether or not disputed. There are no present disputes as to
taxes of any nature payable by Seller. No examination of any tax return of
Seller is currently in progress. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return of
Seller.
SECTION 2.21 AUTHORITY AND CONSENTS. Except as set forth in SCHEDULE
2.21, Seller and Shareholder have the right, power, legal capacity, and
authority to enter into, and perform the obligations under, this Agreement, and
no approvals or consents of any other persons with respect thereto are necessary
in connection with this Agreement. Except as set forth in SCHEDULE 2.21, neither
Seller nor Shareholder is subject to, or a party to, any charter, by-law,
mortgage, lien, lease, license, permit, agreement, contract, instrument, law,
rule, ordinance, regulation, order, judgment, decree or any other restriction of
any kind or character which adversely affects Seller's business or condition
(financial or otherwise), liabilities, properties, assets, rights, operations,
results of operations, prospects or any of its assets or property, or which
would prevent consummation of the transactions contemplated by this Agreement,
compliance by Seller with the terms, conditions and provisions hereof or the
continued operation of the Business after the date hereof or the Closing Date on
substantially the same basis as heretofore operated, or which would restrict the
ability of Seller to acquire any property or conduct business in any area.
SECTION 2.22 LICENSES, PERMITS AND AUTHORIZATIONS. SCHEDULE 2.22 lists
all material licenses, franchises and other permits held by Seller. Except as
set forth in SCHEDULE 2.22, all material licenses, franchises and other permits
held by Seller are in full force and effect and such licenses, consents,
franchises and permits (i) constitute all of the licenses, consents, franchises
and permits necessary to allow Seller to conduct the Business as currently
conducted and, (ii) after Closing, will, subject to obtaining any necessary
consents, constitute all of the licenses, consents, franchises and permits
reasonably necessary to allow for the conduct of the Business in the same manner
as currently conducted by Seller.
SECTION 2.23 INSURANCE. The Purchased Assets are covered by valid and
currently effective insurance policies or programs of self-insurance
(collectively, the "INSURANCE POLICIES"), of such types, amounts and coverages
consistent with customary practices in the industry in which Seller is engaged.
SCHEDULE 2.23 sets forth the following information with respect to each
insurance policy which covers the Purchased Assets or of which Seller is a named
insured or otherwise a beneficiary of coverage: (a) the name of the insurer, (b)
the period of coverage and (c) the scope of coverage.
SECTION 2.24 BROKERS' FEES. No broker, finder, investment banker or
other person or entity is entitled to any brokerage fee, finders' fee or other
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by Seller or Shareholder.
SECTION 2.25 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in SCHEDULE 2.25, since June 30, 1999 and other than as reflected in the June
30, 1999 Balance Sheet, there has not been any (a) transaction by Seller except
in the ordinary course of business as conducted during the twelve (12) month
period ending on that date; (b) individual capital expenditure exceeding
$10,000, nor capital expenditures in the aggregate exceeding $25,000; (c)
material adverse change in the business or condition (financial or otherwise),
liabilities, properties, assets, rights, operations, results of operations or
prospects of Seller whether as a result of any legislative or regulatory change,
revocation of any license or rights to do business, fire, explosion, accident,
casualty, labor, trouble, flood, drought, riot, storm, condemnation or act of
God or other public force or otherwise; (d) change in the business or condition
(financial or otherwise), liabilities, properties, assets, rights, operations,
results of operations or prospects of Seller,
13
except in the ordinary course of business; (e) destruction, damage to or loss of
any asset (whether or not covered by insurance) that materially and adversely
affects the financial condition, business or prospects of Seller; (f) labor
trouble or other event or condition of any character materially and adversely
affecting the financial condition, business, assets or prospects of Seller; (g)
change in accounting methods or practices (including, without limitation, any
change in depreciation or amortization policies or rates) by Seller; (h)
revaluation of any of Seller's assets; (i) declaration, setting aside or payment
of a dividend or other distribution in respect to the capital shares of Seller,
or any direct or indirect redemption, purchase or other acquisition by Seller of
any of Seller's capital shares; (j) material increase in the salary or other
compensation payable or to become payable to any of Seller's officers,
directors, employees or agents, or the declaration, payment or obligation for
the payment of a bonus or other additional salary or compensation to any such
person; (k) sale or transfer of any asset of Seller, except in the ordinary
course of business; (l) amendment or termination of any contract, agreement or
license to which Seller is a party, except in the ordinary course of business;
(m) loan by Seller to any person or entity, or guaranty of any loan; (n)
mortgage, pledge or other encumbrance of any asset of Seller; (o) waiver or
release of any material right or claim of Seller, except in the ordinary course
of business; (p) issuance or sale of any capital shares of Seller of any class,
or of any other of Seller's securities; (q) change in Seller's status under the
corporate laws of Pennsylvania; or (r) other event or condition existing or, to
Seller's and Shareholder's knowledge, contemplated or threatened, of any
character that has resulted or might be expected in the future to result in the
occurrence of a Material Adverse Event.
SECTION 2.26 ABSENCE OF UNDISCLOSED LIABILITIES. Seller has no material
claims against it, indebtedness, liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, that are not reflected or reserved against in the June 1999 Balance Sheet
except for: (a) those that are set forth in SCHEDULE 2.26; and (b) those that
may have been incurred subsequent to June 30, 1999 in the ordinary and usual
course of business but not involving borrowings and are usual and normal in
amount both individually and in the aggregate. Other than as set forth at
SCHEDULE 2.26, Seller is not in default in respect of the terms and conditions
of any material indebtedness.
SECTION 2.27 EFFECT OF AGREEMENT. Except with respect to those items
for which consents and/or waivers will be obtained on or before the Closing
Date, the consummation of the transactions contemplated by this Agreement will
not result in or constitute any of the following: (a) a default or an event
that, with notice or passage of time or both, would be a default, breach or
violation of the articles of incorporation or bylaws of Seller, any lease,
license, promissory note, conditional sales contract, commitment, indenture,
mortgage, lien or other agreement, instrument or arrangement to which Seller is
a party or by which Seller or its property is bound; (b) an event that would
permit any party to terminate any agreement or to accelerate the maturity of any
indebtedness or other obligation of Seller; or (c) the creation or imposition of
any lien, charge, pledge, security interest or other encumbrance on any of the
properties of Seller.
SECTION 2.28 YEAR 2000 A. D. Except as provided on SCHEDULE 2.28
hereto, all internal operating hardware and software systems of Seller and all
software and hardware products sold by Seller (the "TECHNOLOGY") are designed to
be used prior to, during and after the calendar year 2000 A. D., and the
Technology has been designed or modified, as applicable, to operate during such
time period without error concerning date data relating to, or the product of,
date data which represents or references different centuries or more than one
century (the "YEAR 2000 PERFORMANCE"). Seller also has conducted a review and
assessment of all aspects of the Business that could be adversely affected by
the computer applications of suppliers, vendors or customers and reasonably
believes that such applications will be able to recognize and perform properly
date-sensitive functions for all dates before and after January 1, 2000, except
to the extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect. Notwithstanding the foregoing, Purchaser acknowledges
and agrees that the use of the Technology by Seller's customers will be
dependent upon and interface with the technology of others,
14
about which Seller has no knowledge and over which Seller has no control;
accordingly, despite Seller's best efforts to achieve Year 2000 Performance, the
preceding circumstance might, notwithstanding Seller's efforts, cause the
Technology not to achieve Year 2000 Performance.
SECTION 2.29 ACCURACY OF REPRESENTATIONS. To the knowledge of Seller
and Shareholder, no representation or warranty of Seller contained in this
Agreement and in any certificate delivered to Purchaser contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller and Shareholder, as of the
date of this Agreement and as of the Closing, that, except as has otherwise been
disclosed by Purchaser to Seller and Shareholder, their agents or
representatives:
SECTION 3.1 CORPORATE ORGANIZATION AND AUTHORITY OF PURCHASER.
Purchaser has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Rhode Island and has the corporate
power and authority to enter into and perform its obligations under this
Agreement. The execution and delivery of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors of Purchaser, and no other
corporate proceeding on the part of Purchaser is necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes a legally valid
and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
SECTION 3.2 NO CONFLICT. The execution and delivery of this Agreement
by Purchaser and the consummation of the transactions contemplated hereby does
not and will not violate any provision of, or result in the breach of any
applicable law, rule or regulation of any Governmental Authority, the Articles
of Incorporation, Bylaws, or other organizational documents of Purchaser or any
agreement, indenture or other instrument to which Purchaser is a party or by
which Purchaser may be bound, or of any order, judgment or decree applicable to
Purchaser, or terminate or result in the termination of any such agreement,
indenture or instrument, or result in the creation of any lien, charge or
encumbrance upon any of the properties or assets of Purchaser or constitute an
event which, after notice or lapse of time or both, would result in any such
violation, breach, acceleration, termination or creation of a lien, except to
the extent that the occurrence of the foregoing would not have a material
adverse effect on the ability of Purchaser to enter into and perform its
obligations under this Agreement.
SECTION 3.3 LITIGATION AND PROCEEDINGS. There are no lawsuits, actions,
suits, claims or other proceedings at law or in equity, or, to the knowledge of
Purchaser, investigations, before or by any court or Governmental Authority or
before any arbitrator pending or, to the knowledge of Purchaser, threatened,
against Purchaser which, if determined adversely, could reasonably be expected
to have a material adverse effect on the ability of Purchaser to enter into and
perform its obligations under this Agreement. There is no unsatisfied judgment
or any open injunction binding upon Purchaser, which could reasonably be
expected to have a material adverse effect on the ability of Purchaser to enter
into and perform its obligations under this Agreement.
15
SECTION 3.4 AUTHORITY AND CONSENTS. Assuming the truth and completeness
of the representations and warranties of Seller contained in this Agreement, no
consent, approval or authorization of, or designation, declaration or filing
with, any Governmental Authority or other third party is required on the part of
Purchaser with respect to Purchaser's execution or delivery of this Agreement or
the consummation of the transactions contemplated hereby.
SECTION 3.5 FINANCIAL ABILITY. Purchaser has the financial resources
necessary to consummate the transactions contemplated by this Agreement,
including, without limitation, the ability to pay the Purchase Price.
SECTION 3.6 BROKERS' FEES. No broker, finder, investment banker or
other person is entitled to any brokerage fee, finders' fee or other commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by Purchaser.
SECTION 3.7 GRASS INSTRUMENTS PRODUCT LINE.
(a) There are no filed claims, or claims of which Purchaser
has knowledge, against Purchaser to the effect that the intellectual property
employed by Purchaser in connection with the Grass Instruments Product Line
infringes, violates or otherwise is adverse to, the rights of any person in
respect of any such intellectual property, and (b) the information concerning
the historical performance of Purchaser with respect to sales of the Grass
Instruments Product Line which previously has been furnished to Seller in
writing is true, correct and complete in all material respects. Notwithstanding
the foregoing, Seller and Shareholder acknowledge and agree that Purchaser makes
no representation, warranty or guaranty concerning the future performance of the
Grass Instruments Product Line or the future Combined Net Sales Revenues of the
Grass Instruments Product Line and the Telefactor Product Line.
ARTICLE IV
COVENANTS AND AGREEMENTS OF SELLER
SECTION 4.1 TERMINATION OF LIENS. Other than the Permitted Liens, prior
to or concurrent with the Closing, Seller shall cause all Liens encumbering the
Purchased Assets to be terminated. Upon request of Purchaser at the Closing,
Seller shall deliver to Purchaser pay-off letters and Lien discharges (or
agreements therefor) from any person or entity with a Lien on any of the
Purchased Assets.
SECTION 4.2 BUSINESS OPERATING COVENANTS.
(a) CONDUCT OF THE BUSINESS. From the date hereof through
Closing, Seller will, except to the extent consented to by Purchaser, which
consent shall not be unreasonably withheld, delayed or denied: (i) conduct the
Business only in the ordinary and usual course and in all material respects in a
manner consistent with past practices (including, without limitation, the timely
payment of accounts payable and other obligations of the Business); (ii)
maintain in good repair consistent with past practices, at its expense, all of
the material tangible personal property which is part of the Purchased Assets
(ordinary wear and tear excepted); (iii) comply in all material respects with
all laws, regulations, policies, guidelines, orders, judgments or decrees of any
federal, state, local or foreign court or Governmental Authority applicable to
the Purchased Assets or the Business; (iv) use reasonable efforts to keep
available (in the ordinary and usual course of business consistent with past
practice and without any obligation to spend money other than in the ordinary
and usual course of business) the services of the employees of the Business and
take all reasonable actions to preserve contracts and other business
16
relationships with licensors, suppliers, dealers, customers and others having
contracts or business relationships with the Business; (v) dispose of all solid
waste in accordance, in all material respects, with applicable law and Seller's
past practices; and (vi) promptly notify Purchaser of any extraordinary or
material change in the normal conduct of the Business.
(b) FORBEARANCE BY SELLER. Seller will not, after the date
hereof and prior to Closing, without the prior written consent of Purchaser
which consent will not be unreasonably withheld, delayed or denied: (i) sell or
dispose of any Purchased Assets, except sales of finished goods in the ordinary
course of business; (ii) other than (a) the termination of all credit facilities
extended to Seller by PNC Bank National Association and the payment of all
indebtedness thereunder, and (b) the termination of an agreement with, and the
payment of all sums, if any, due, or claimed to be due to, Forty-Four Financial
in connection with the procurement of certain financial opportunities for the
benefit of Seller, amend, modify or cancel, or waive any material right of
Seller under any Contract; (iv) enter into any new contract or agreement, other
than in the ordinary course of business consistent with past practices; (v)
alter in any way the manner in which Seller has regularly and customarily
maintained the books of account and records of the Business; (vi) make any
material income tax election which could cause Seller to lose its qualification
as an "S" Corporation for federal and state law purposes; or (vii) increase the
compensation payable to employees employed in the Business, other than
compensation increases made in the ordinary and usual course of business,
consistent with past practices and existing policies.
SECTION 4.3 INSPECTION. From the date hereof through the Closing,
Seller shall afford to Purchaser and its accountants, counsel and other
representatives reasonable access during normal business hours, to the
properties, books, contracts, commitments, tax returns, records and appropriate
officers and employees of Seller and shall furnish such representatives with all
financial and operating data and other information concerning the affairs of
Seller as they may reasonably request in connection with this Agreement or for
any reasonable business purpose relating to the Business.
SECTION 4.4 NO SOLICITATIONS.
(a) From the date hereof through the Closing, neither Seller
nor Shareholder shall, or knowingly permit its officers, directors, employees,
representatives and agents to, directly or indirectly: (i) take any action to
solicit, initiate submission of or encourage, proposals or offers from any
person or entity relating to any acquisition or purchase of all or (other than
in the ordinary course of business) a portion of the assets of, or any equity
interest in, Seller, any merger or business combination with Seller or any
public or private offering of shares of the capital stock of Seller (an
"ACQUISITION PROPOSAL"); (ii) participate in any discussions or negotiations
regarding an Acquisition Proposal with any person or entity other than Purchaser
and its representatives; (iii) furnish any information or afford access to the
properties, books or records of Seller or any person or entity that may consider
making or has made an offer with respect to an Acquisition Proposal, other than
Purchaser and its representatives; or (iv) otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other person or entity to do any of the foregoing.
(b) Seller and Shareholder agree that Purchaser would not have
an adequate remedy at law for money damages in the event that the covenants
contained in this Section 4.4 are not performed in accordance with their terms,
and further agree that Purchaser will be entitled to specified performance of
the terms of this Section 4.4 in addition to any other remedy to which Purchaser
may be entitled at law or in equity.
SECTION 4.5 MAINTENANCE OF INSURANCE. Between the date hereof and
Closing, Seller shall maintain the Insurance Policies in full force and effect.
17
SECTION 4.6 CONSENTS OF OTHERS. SCHEDULE 4.6 lists all persons or
entities whose consents are necessary to permit Seller to carry out it
obligations under this Agreement. As soon as reasonably possible after the
execution and delivery of this Agreement, and in any event on or before the
Closing Date, Seller will obtain the written consents of all persons or entities
listed on SCHEDULE 4.6 and will furnish to Purchaser executed copies of such
consents.
SECTION 4.7 ACCOUNTS PAYABLE. With the exception of those accounts
payable included in the Assumed Liabilities, Seller agrees that it shall settle
its accounts payable, in a manner which will not affect the day-to-day business
operations of Purchaser related to the Business within ninety (90) days of
Closing. In the event that after 90 days Purchaser notifies Seller that an
account payable to a vendor, the non-payment of which is disruptive to
Purchaser's business because of Seller's failure to pay, Purchaser may set off
the amount of the account as provided in Section 11.13 if the account is not
settled by Seller within ten (10) days of said notice.
SECTION 4.8 PAYMENT OF SPECIFIED OBLIGATIONS. Within ten (10) days of
the Closing, Seller shall repay in full those obligations set forth on SCHEDULE
4.8 (the "SPECIFIED OBLIGATIONS"). In the event that Seller fails to repay the
Specified Obligations within such ten-day period, Purchaser may set-off the
amount of the unpaid Specified Obligations against amounts due to Seller under
this Agreement, including, without limitation, amounts payable to Seller under
the Price Adjustment Escrow Agreement.
SECTION 4.9. PREPARATION OF FINANCIAL STATEMENTS. Seller agrees that it
will cooperate fully with Purchaser to prepare and have audited, at the expense
of Purchaser, all applicable and required financial statements relating to the
Business and the Purchased Assets for the purposes of the reporting of the
transaction by Purchaser to the Securities and Exchange Commission on Form 8-K.
ARTICLE V
COVENANTS AND AGREEMENTS OF PURCHASER
SECTION 5.1 INSPECTION. Purchaser shall afford to Seller, Shareholder
and their respective accountants, counsel and other representatives reasonable
access, after Closing, during normal business hours, to the properties, books,
contracts, commitments, tax returns, records and appropriate officers and
employees of Purchaser, and shall furnish such representatives with all
financial and operating data and other information concerning the Business as
they may reasonably request in connection with this Agreement or for any
reasonable business purpose relating to the Business, including but not limited
to the preparation of tax returns and responding to tax audits and other
governmental filings and proceedings, and any and all matters arising out of, or
relating to the business associated with the Business prior to the Closing Date.
SECTION 5.2 PRODUCT WARRANTIES, INVENTORY OBSOLESCENCE AND THE WARRANTY
AND OBSOLESCENCE RESERVE ACCOUNT.
(a) Purchaser shall honor product warranty claims, subject to
the terms and conditions of Seller's existing product warranties, attached
hereto as SCHEDULE 5.2, with respect to goods or products manufactured or sold
by Seller shipped before the Effective Date, and also will honor claims
concerning the Year 2000 Performance of Seller's Technology arising after the
Effective Date (collectively, "WARRANTY CLAIMS"). Warranty Claims shall be
subject to the provisions of the Warranty and Obsolescence Escrow Agreement
referenced in Subsection (c) of this Section 5.2. Any labor provided by
Purchaser in satisfaction of the Warranty Claims, and which shall be charged to
the Warranty
18
and Obsolescence Reserve Account described in Section (c) of this Section 5.2,
shall be billed at a rate of $100.00 per hour.
(b) After the Closing Date, Inventory which is found to be
obsolete by Purchaser (the "OBSOLESCENCE CLAIMS") shall be charged against the
Warranty and Obsolescence Reserve Account established herein and the value of
such Inventory remitted to Purchaser by the Warranty Escrow Agent described in
Section (c) of this Section 5.2. Each such charge shall be billed at Seller's
standard cost as such cost existed as of the Closing Date.
(c) On the Closing Date, Purchaser shall place twenty-five
thousand dollars ($25,000) of the Closing Payment in an escrow account (the
"WARRANTY ESCROW AMOUNT") established pursuant to an Escrow Agreement, (the
"WARRANTY AND OBSOLESCENCE ESCROW AGREEMENT") substantially in the form of
EXHIBIT B hereto, dated as of the Closing Date, among Purchaser, Seller,
Shareholder, and Escrow Agent as a reserve to satisfy any Warranty Claims and
Obsolescence Claims (the "WARRANTY AND OBSOLESCENCE RESERVE ACCOUNT"). Seller's
aggregate liability for Warranty and Obsolescence Claims shall be limited to the
Reserve (as hereinafter defined) and the sum of twenty-five thousand dollars
($25,000) deposited by Purchaser in the Warranty and Obsolescence Reserve
Account. The provisions of this Subsection 5.2(c) shall survive the Closing of
the transaction hereunder.
(d) It is understood and agreed that any Warranty Claims first
shall be charged against the $21,000 warranty reserve maintained on the books of
Seller as of the November 30, 1999 (the "RESERVE"), and that only Warranty
Claims arising after the depletion of the Reserve shall be charged against the
Warranty Escrow Amount.
SECTION 5.3 EMPLOYEE MATTERS.
(a) IN GENERAL. Notwithstanding any other provision of this
Agreement to the contrary, Purchaser shall not have any liability with respect
to any claim of any former employee of Seller, including, without limitation,
Continued Employees (as hereinafter defined), for cash wages or salary or other
remuneration and/or for pension, welfare and fringe benefits, including without
limitation, any such claim under the Plans, which is attributable to or accrued
prior to the Closing Date. Purchaser shall offer employment on and after the
Closing Date to the employees of Seller as Purchaser may designate. All such
employees who accept an offer of employment are referred to as "CONTINUED
EMPLOYEES". Continued Employees shall be employed by Purchaser under the terms
of employment contracts as shall be agreed upon by Purchaser and each Continued
Employee. Seller agrees that following the Closing Date, other than Shareholder
and such of Seller's employees, as agreed to by Purchaser, as are reasonably
necessary to wind-up the affairs of Seller, Seller shall not retain or employ
any of the Continued Employees as an employee or consultant.
(b) LIMITATIONS. Notwithstanding anything in subsection (a) to
the contrary and subject to the terms of such employment agreements as may be
executed by and between Purchaser and the Continued Employees, if any, any such
offer of continued employment shall not be construed to limit the ability of
Purchaser to terminate Continued Employees at any time for any reason, or to
change their terms and conditions of employment, including, but not limited to,
the levels of compensation and employee benefits in effect at the Closing.
(c) NON-RETAINED EMPLOYEES. Notwithstanding any other
provision hereof, Seller expressly acknowledges and agrees that Seller shall
retain all liability for (and shall pay or make provision for payment of) and
Seller expressly agrees that Purchaser shall have no liability for amounts that
are due or that may become due to current or former employees of Seller or their
dependents and beneficiaries, or amounts or benefits that become due under any
of the Plans (as defined in Section 2.16
19
hereof) or under any other employee benefit plan, program or arrangement at any
time maintained by Seller. Except as provided in this Section 5.3, Purchaser
shall have no obligation whatsoever to hire, retain or employ any current or
former employee of, or consultant to, Seller. Seller shall take all actions that
are necessary or appropriate to ensure that Purchaser shall have no obligation
or liability under the Worker Adjustment and Retraining Notification Act
("WARN") with respect to any employees or former employees of Seller whose
employment is terminated on or prior to the Closing Date or who are not
Continued Employees as a result of the transactions contemplated by this
Agreement and the related documents, and Purchaser shall take all such actions
to ensure that Seller has no such liability with respect to Continued Employees
who are terminated by Purchaser after the Closing Date, including, without
limitation, providing to such employees and former employees any notifications
required by WARN in a timely manner. Seller shall indemnify Purchaser from and
against any liability incurred by, or alleged to be an obligation of, Purchaser
arising out of the termination of employment of any of Seller's employees on or
prior to the Closing Date or who are not Continued Employees and Purchaser shall
indemnify Seller from and against any liability incurred by or alleged to be an
obligation of Seller arising out of the termination of employment of any
Continued Employees by Purchaser or its subsidiaries or affiliates after the
Closing Date.
(d) SELLER 401K PLAN. Seller agrees to terminate its 401k Plan (the
"PLAN") and to submit the Plan to the Internal Revenue Service for a favorable
determination as to its qualification in connection with its termination. Seller
maintains responsibility for completing and filing all documentation in
connection with the Plan termination including the final Form 5500 for the Plan.
ARTICLE VI
JOINT COVENANTS AND AGREEMENTS
SECTION 6.1 SUPPORT OF TRANSACTION. Purchaser and Seller shall each (i)
use reasonable best efforts to assemble, prepare and file any information (and,
as needed, to supplement such information) as may be reasonably necessary to
obtain as promptly as practicable any and all consents required to be obtained
in connection with the transactions contemplated hereby, (ii) use its reasonable
commercial efforts to obtain all consents and approvals of third parties that
any of Purchaser or Seller are required to obtain in order to consummate the
transactions contemplated hereby, and (iii) take such other action as may
reasonably be necessary or as another party may reasonably request to satisfy
the conditions of Articles VII and VIII or otherwise to comply with this
Agreement.
SECTION 6.2 TAX MATTERS.
(a) Seller and Purchaser shall reasonably cooperate, and shall
cause their respective affiliates, officers, employees, agents, auditors and
representatives reasonably to cooperate, in preparing and filing all returns,
reports and forms relating to taxes, including maintaining and making available
to each other all records necessary in connection with the Purchased Assets and
in resolving all disputes and audits with respect to taxes.
(b) All taxes imposed on account of or resulting from the sale
of the Purchased Assets to Purchaser, including all sales and other similar
transfer taxes and all filing or recording fees, shall be paid by Seller.
SECTION 6.3 ASSIGNMENT OF CONTRACTS. Until Purchaser has been assigned
all Contracts necessary or appropriate for Purchaser's operation of the Business
consistent with Seller's past practices, to the extent permitted thereunder,
Purchaser shall operate, manage and supervise the Business that is the
20
subject of any such unassigned Contract (the "SUBJECT BUSINESS") in the name of
Seller. Purchaser shall pay all costs and expenses relating to or arising out
of, Purchaser's management of the Subject Business. Unless otherwise required by
law, all personnel involved in Purchaser's operation of the Subject Business
shall be on Purchaser's payroll. Seller shall pay Purchaser a management fee
equal to all profits, which Seller would otherwise earn from Purchaser's
temporary operation of the Subject Business, and Purchaser shall reimburse
Seller for all losses from such temporary operation of the Subject Business.
Purchaser's temporary operation of the Subject Business shall result in Seller
making no profit or loss from such temporary operation, except as otherwise
required by law. Seller shall cooperate with Purchaser to facilitate Purchaser's
temporary operation of the Subject Business and to obtain the assignment to
Purchaser of any unassigned Contracts.
ARTICLE VII
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The obligations of Purchaser under this Agreement are subject to the
satisfaction, at or before the Closing, of all the conditions set forth below.
Purchaser may waive any or all of such conditions in whole or in part without
prior notice; provided, however, that no such waiver shall constitute a waiver
by Purchaser of any of Purchaser's other rights or remedies, at law or in
equity, if Seller and Shareholder are in default of any of the representations,
warranties or covenants contained in this Agreement.
SECTION 7.1 TRUTH OF SELLER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller and Shareholder contained in this
Agreement or in any Schedule or Exhibit delivered pursuant hereto shall be true
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and Seller
and Shareholder shall have delivered to Purchaser on the Closing Date a
certificate, dated the Closing Date, to such effect.
SECTION 7.2 SELLER'S PERFORMANCE OF AGREEMENTS. Seller and Shareholder
shall have performed, satisfied and complied will all covenants, agreements and
conditions required by this Agreement to be performed or complied with by Seller
and Shareholder on or before the Closing Date and Seller and Shareholder shall
have delivered to Purchaser a certificate, dated the Closing Date, to such
effect.
SECTION 7.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date,
there shall be no material adverse change in the liabilities, the business or
condition (financial or otherwise), the properties, assets, rights, operations,
results of operations or prospects of Seller, whether as a result of any
legislative or regulatory change, revocation of any license or rights to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or other public force or otherwise, and
Seller shall have delivered to Purchaser a certificate, dated the Closing Date,
to such effect.
SECTION 7.4 CERTIFICATION BY SELLER. Purchaser shall have received a
certificate, dated the Closing Date, signed by each Seller's president or vice
president and treasurer or assistant treasurer, certifying, in such detail as
Purchaser and Purchaser's counsel may reasonably request, that the conditions
specified in Sections 4.2, 4.4, 4.5 and 4.6 have been fulfilled.
SECTION 7.5 OPINION OF SELLER'S COUNSEL. Purchaser shall have received
from Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, LLP, counsel to Seller, a favorable
opinion dated the Closing Date, in form and substance reasonably satisfactory to
Purchaser and Xxxxxxxx, Xxxxx and Xxxxxx, LLP, counsel to Purchaser, subject to
reasonable limitations and qualifications of Seller's counsel, that with regard
to
21
Seller: (a) (1) Seller is a corporation duly organized and validly subsisting
under the laws of the Commonwealth of Pennsylvania and has all necessary
corporate power to own its properties as now owned and operate its business as
now operated, and (2) Seller is duly licensed or qualified and in good standing
as a foreign corporation in each jurisdiction in which the ownership of its
property or the character of its activities is such as to require it to be so
licensed or qualified, except where failure to be so licensed or qualified would
not have a Material Adverse Effect; (b) Seller has no subsidiaries; (c) Seller
has the corporate power and authority to enter into, deliver and perform its
obligations under this Agreement; (d) this Agreement has been duly approved by
all requisite corporate and shareholder action on the part of Seller, has been
duly executed and delivered on behalf of Seller and is valid and binding on
Seller and enforceable in accordance with its terms, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally; (e) Seller has full power to transfer the Purchased Assets
to Purchaser without obtaining the consent or approval of, or providing notice
to, any other person or Governmental Authority; (f) except as set forth in
SCHEDULE 2.14 to this Agreement, counsel has no knowledge of any suit, action,
arbitration or legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Seller or any of its
businesses or properties, or financial or other condition; and (g) neither the
execution nor the delivery of this Agreement nor the consummation of the
transactions contemplated in this Agreement will constitute a default, or an
event that would with notice or passage of time or both constitute a default
under, or violation or breach of, Seller's certificate of incorporation, bylaws;
or, to such counsel's knowledge (1) constitute a default, or an event that would
with notice or passage of time or both constitute a default under, or violation
or breach of any indenture, license, lease, franchise, mortgage, instrument or
other agreement to which Seller is a party or by which the properties of Seller
may be bound, or (2) an event that would permit any party to any agreement or
instrument to terminate it or to accelerate the maturity of any indebtedness or
other obligation of Seller, or (3) an event that would result in the creation or
imposition of any lien, charge or encumbrance on any asset of Seller.
SECTION 7.6 ABSENCE OF LITIGATION. No action, suit or proceeding before
any court or any governmental body or authority, or by any public authority,
pertaining to the transaction contemplated by this Agreement will have been
instituted or threatened on or before the Closing Date, and Seller shall have
delivered to Purchaser a certificate, dated the Closing Date, to such effect.
SECTION 7.7 GOOD STANDING AND TAX CERTIFICATES. Seller shall have
delivered to Purchaser (a) copies of Seller's charters, including all amendments
thereto, certified by the Secretary of the Commonwealth of Pennsylvania, and (b)
a certificate from the Secretary of State or other appropriate official in each
state in which Seller is qualified to do business to the effect that Seller is
in good standing in such state, and (c) certificates as to the tax good standing
of Seller in the Commonwealth of Pennsylvania and each state in which Seller is
qualified to do business.
SECTION 7.8 CONSENTS AND APPROVALS. All governmental and other consents
and approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received, including but not
limited to those listed on SCHEDULE 4.6.
SECTION 7.9 APPROVAL OF PROCEEDINGS AND DOCUMENTATION. All proceedings
to be taken in connection with the transactions contemplated by this Agreement
and all documents incident thereto, and all certificates, instruments, opinions
and other documents delivered to Purchaser under this Agreement, shall be
satisfactory in form and substance to Purchaser and its counsel, and Purchaser
shall have received copies of all such documents and other evidences as it or
its counsel may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.
22
SECTION 7.10 ASSETS. Purchaser shall be satisfied that the nature and
character of the Purchased Assets and the Business as of the Closing Date are
substantially the same as reflected on the June 30, 1999 Balance Sheet.
SECTION 7.11 EMPLOYMENT AGREEMENTS. Xxxx X. Xxxxxxx, President and
Chief Executive Officer of Seller, shall have entered into an employment
agreement with Purchaser substantially in the form of EXHIBIT C(1) hereto, and
Xxxxxxxx Xxxxxx, employee of Seller, shall have entered into an employment
agreement with Purchaser substantially in the form of EXHIBIT C(2) hereto (each,
an "EMPLOYMENT AGREEMENT," collectively, the "EMPLOYMENT AGREEMENTS").
SECTION 7.12 LEASES AND SUBLEASE. As of the Closing Date Purchaser
shall have entered into with Seller separate two (2) year leases, with two (2)
one (1) year options to renew, of the land and buildings owned by Seller located
at 1094 and 0000 Xxx XxXxxxx Xxxxxx, Xxxx Xxxxxxxxxxxx, Xxxxxxxxxxxx,
respectively, substantially in the forms of EXHIBITS D and E hereto (the
"LEASES"). Purchaser and Seller shall have obtained the landlord's consent to a
sublease of Seller's lease of the land and buildings located at 0000 Xxx XxXxxxx
Xxxxxx, Xxxx Xxxxxxxxxxxx, Xxxxxxxxxxxx, on the terms and conditions of Seller's
present lease of said land and buildings and substantially in the form of
EXHIBIT F hereto (the "SUBLEASE").
SECTION 7.13 RELEASES FROM CREDITORS. Purchaser shall have received all
Lien discharges, UCC termination statements and similar instruments required to
comply with Seller's obligations under Section 4.1 hereof.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Seller under this Agreement are subject to the
satisfaction, at or before the Closing, of the conditions set forth below.
Seller may waive any or all of such conditions in whole or in part without prior
notice.
SECTION 8.1 TRUTH OF PURCHASER'S REPRESENTATIONS AND WARRANTIES. All
representations and warranties by Purchaser contained in this Agreement or in
any written statement delivered by Purchaser under this Agreement will be true
on and as of the Closing as though such representations and warranties were made
on and as of that date, and Purchaser shall have delivered to Seller on the
Closing Date a certificate, dated the Closing Date, to such effect.
SECTION 8.2 PURCHASER'S PERFORMANCE OF AGREEMENTS. Purchaser will have
performed and complied with all covenants and agreements and satisfied all
conditions which Purchaser is required by this Agreement to perform, comply
with, or satisfy, before or at the Closing, and Purchaser shall have delivered
to Seller a certificate, dated the Closing Date, to such effect. .
SECTION 8.3 OPINION OF PURCHASER'S COUNSEL. Purchaser will have
received from Xxxxxxxx, Xxxxx & Xxxxxx LLP, counsel to Purchaser, an opinion
dated the Closing Date, in form and substance satisfactory to Seller and counsel
for Seller, to the effect that: (a) Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Rhode
Island and has all requisite corporate power to perform its obligations under
this Agreement; (b) this Agreement has been duly approved by all requisite
corporate action on the part of Purchaser, has been duly executed and delivered
on behalf of Purchaser and is valid and binding on Purchaser and enforceable in
accordance with its terms, except as may be limited by bankruptcy and insolvency
laws and by other laws affecting
23
the rights of creditors generally; and (c) all corporate proceedings required by
law or by the provisions of this Agreement and the transactions contemplated
hereby to be taken by Purchaser on or before the Closing Date, in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement, have been duly and validly taken.
SECTION 8.4 RELATED AGREEMENTS. Purchaser shall have executed and
delivered the Employment Agreements, the Leases and the Sublease.
ARTICLE IX
CLOSING
SECTION 9.1 CLOSING. The consummation of the purchase and sale of the
Purchased Assets (the "CLOSING") shall take place at 10:00 am., Eastern Time, at
the offices of Xxxxxxxx, Xxxxx & Xxxxxx LLP, 0000 Xxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxx Xxxxxx 00000-0000, counsel for Purchaser, on such date as is mutually
agreeable to the parties or at such other time and place as the parties may
agree (the "CLOSING DATE"). Notwithstanding this Section 9.1, the effective date
of the transactions contemplated by this Agreement shall be as of the close of
business on November 30, 1999 (the "EFFECTIVE DATE").
SECTION 9.2 SELLER DELIVERIES AT CLOSING. At the close of business on
the Closing Date, Seller shall deliver possession of the Purchased Assets free
and clear of all Liens and at the Closing shall execute and deliver, or cause to
be executed and delivered, to Purchaser:
(a) one or more bills of sale conveying to Purchaser all of
Seller's interest in and to the Equipment;
(b) one or more instruments of assignment assigning to
Purchaser all of Seller's interest in the Contracts and consents to such
assignments as are necessary to assure Purchaser of the full benefit of the
same;
(c) one or more instruments of assignment assigning to
Purchaser all Intellectual Property, which, to the extent necessary to assign
such rights, shall be in recordable form;
(d) one or more instruments of transfer providing for the
assignment to and assumption by Purchaser of the Assumed Liabilities (the
"ASSUMPTION OF LIABILITIES");
(e) such other bills of sale and instruments of conveyance and
consents as shall be necessary, or reasonably requested by Purchaser, in order
effectively to convey to Purchaser all of Seller's right, title and interest in
and to the Purchased Assets;
(f) as requested by Purchaser, pay-off letters and Lien
discharges (or agreements therefor) from any person or entity with a Lien on any
of the Purchased Assets;
(g) all of Seller's business records, books and other data
relating to the Purchased Assets and Assumed Liabilities;
(h) the Leases and the Sublease;
(i) the opinion of counsel as provided in Article VII;
24
(j) the certificates, dated the Closing Date, as provided in
Article VII;
(k) certified corporate votes of Seller, in form satisfactory
to counsel to Purchaser, authorizing the execution and performance of this
Agreement and all actions to be taken by Seller and Shareholder under this
Agreement;
(l) the Price Adjustment Escrow Agreement;
(m) the Warranty and Obsolescence Escrow Agreement; and
(n) the Employment Agreements.
SECTION 9.3. PURCHASER DELIVERIES AT CLOSING. At the Closing,
Purchaser shall execute and deliver, or cause to be executed and delivered, to
Seller,
(a) the Closing Payment reduced by the Escrow Deposits;
(b) the opinion of the counsel as provided in Article VIII;
(c) the certificates, dated the Closing Date, as provided in
Article VIII; and
(d) certified votes of Purchaser's board of directors, in form
satisfactory to counsel for Seller, authorizing the execution and performance of
this Agreement and all actions to be taken by Purchaser under this Agreement;
(e) the Assumption of Liabilities;
(f) the Leases and the Sublease;
(g) the Price Adjustment Escrow Agreement;
(h) the Warranty and Obsolescence Escrow Agreement; and
(i) the Employment Agreements;
(j) the Stock Option Agreements, as defined in the Employment
Agreements; and
(k) the canceled Promissory Note and License Agreement.
At the Closing, Purchaser also shall deliver the Price Adjustment
Escrow Amount and the Warranty Escrow Amount to the Escrow Agent.
ARTICLE X
INDEMNIFICATION
SECTION 10.1 INDEMNIFICATION OF PURCHASER. Seller and Shareholder shall
jointly and severally indemnify, defend and hold harmless Purchaser (its
Affiliates and their respective successors and assigns, and their respective
officers, directors, employees, Affiliates, agents and shareholders)
(collectively, the "PURCHASER'S INDEMNIFIED PARTIES") from and against and in
respect of any and all
25
claims, demands, losses, costs, expenses (including but not limited to expenses
for site assessments and remediation), obligations, liabilities, damages,
recoveries and deficiencies (including but not limited to interest, penalties
and reasonable fees of attorneys, consultants, engineers and accountants)
(collectively, "CLAIMS") imposed upon, asserted against, incurred, suffered or
paid by Purchaser's Indemnified Parties and their respective affiliates,
successors or assigns, or others (including but not limited to those asserted or
imposed by third parties, including but not limited to governmental agencies or
instrumentalities ("THIRD PARTIES"), which arise from, result from or relate to:
(a) other than the Assumed Liabilities, any and all claims accruing prior to the
Closing Date (i) for indebtedness, liabilities or obligations of Seller, or the
Business or relating to the Purchased Assets of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, whether
known or unknown to Seller, (ii) arising from Seller's actions contrary to, in
violation of, or as non-compliance with, applicable law, regulation or
ordinance, including but not limited to Bulk Sales laws and those of an
environmental (including but not limited to generation, storage and disposal of
hazardous or toxic materials or wastes), safety (including but not limited to
exposure to toxic or hazardous substances or other serious health risks) or
employment (including but not limited to employee relations, employee benefit
and welfare plans and arrangements, unemployment, reemployment or plant closing
laws) nature (including but not limited to those which resulted from activities
of Seller, its predecessor(s) in interest, or occupancy of properties), or (iii)
arising from or related to Seller's violation of the rights of any other person
(including but not limited to warranty or product liability claims) or any
condition of employment; (b) any breach of, or failure by Seller or Shareholder
to perform, any of the representations, warranties, covenants or agreements in
this Agreement or in any schedule, certificate, exhibit or other instruments
attached hereto or furnished pursuant to this Agreement; (c) any and all Claims
arising out of, relating to or with respect to (i) assets retained by Seller,
and (ii) anything described in Sections 2.18 or 2.19 (including but not limited
to those which resulted from activities of Seller, its predecessor(s) in
interest, or occupancy of properties); and (d) any and all Claims arising out
of, relating to or with respect to Seller's failure to qualify the Netherlands
Office under Dutch law on or prior to Closing Date ("QUALIFICATION CLAIMS").
("AFFILIATE" shall mean, with respect to any specified person or entity, any
person or entity that, directly or indirectly, controls, is controlled by, or is
under common control with, such specified person or entity, through one or more
intermediaries or otherwise.)
SECTION 10.2 INDEMNIFICATION OF SELLER. Purchaser shall indemnify,
defend and hold harmless Seller, the shareholders of Seller, including, but not
limited to, Shareholder and their officers, directors, employees, agents and
their respective Affiliates together with their respective successors and
assigns (collectively, the "SELLER'S INDEMNIFIED PARTIES") from and against and
in respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies (including but not limited to
reasonable fees of attorneys) that any of Seller's Indemnified Parties may incur
or suffer, which arise, result from or relate to: (a) any breach of, or wrongful
failure by Purchaser to perform, any of Purchaser's representations, warranties,
covenants or agreements in this Agreement, or any of the agreements entered into
pursuant hereto, including, but not limited to, the Warranty and Obsolescence
Escrow Agreement, and the Price Adjustment Escrow Agreement; (b) the use of the
Purchased Assets and the conduct of the Business in connection therewith
accruing at any time from and after the Closing Date; and (c) the failure to
timely pay and perform each and all of the Assumed Liabilities.
SECTION 10.3 NOTICE OF CLAIM. Each party to this Agreement shall give
prompt written notice to the other party or parties to this Agreement under each
claim for indemnification under this ARTICLE X, specifying the amount and nature
of the claim, and of any matter which is likely to give rise to an
indemnification claim. If the claim involves a claim made by a Third Party, each
party to this Agreement has the right to participate at its own expense in the
defense of any such matter or its settlement, or the indemnified party may
authorize the indemnifying party to take over the defense of such matter so long
as such defense is expeditious. Failure to give timely notice of a matter which
may given rise to an
26
indemnification claim shall not affect the rights of the indemnified party to
collect such claims from the indemnifying party so long as such failure to so
notify does not materially adversely affect the indemnifying party's ability to
defend such claim against a third party. No indemnifying party, in the defense
of any claim or litigation, shall, except with the consent of an indemnified
party, which consent shall not be unreasonably withheld, delayed or denied,
consent to entry of any judgment or enter into any settlement by which such
indemnified party is to be bound and which judgment or settlement does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
SECTION 10.4 LIMITATION ON TIME FOR PRESENTMENT OF CLAIMS AND AMOUNT OF
INDEMNIFICATION. Notwithstanding any provision in this Article X to the
contrary: (a) other than in respect of the obligations under SECTION 1.6,
SECTION 1.7, SECTION 1.8 and SECTION 5.2 hereof and the obligations under the
Employment Agreements for which the time period hereunder described will be for
a period of twenty-four (24) months after the performance of the last respective
obligations thereunder, any Claim not presented by the indemnified party
respectively to the Purchaser's Indemnified Parties or the Seller's Indemnified
Parties, within twenty-four (24) months of the Closing Date shall be deemed
irrevocably barred and waived by the party who or which otherwise would have
been entitled to indemnification hereunder; and (b) with the exception of (i)
Warranty Claims; (ii) Qualification Claims, (iii) Claims arising out of the
conduct of the Business by the Purchaser from and after the Closing Date; (iv)
Claims of employees under the Employment Agreements; (v) Claims of the holders
of the Stock Options under the Stock Option Agreements; (vi) Claims of the
lessor under the Leases; and (vi) Claims of the Sublessor or any party claiming
under the lease between the owner of the fee estate and Seller, no party shall
be entitled to present or pursue any Claim which individually is in an amount
less than five thousand dollars ($5,000), or in the aggregate with all other
Claims less than twenty-five thousand dollars ($25,000).
SECTION 10.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Unless
otherwise expressly provided herein in respect to the Additional Purchase Price,
the Warranty and Obsolescence Escrow Account, the Employment Agreements, the
Stock Option Agreements, the Leases, and the Sublease, all representations,
warranties, covenants and agreements of the parties contained in this Agreement,
or in any other instrument, certificate or opinion provided for herein, shall
survive the Closing, and shall continue in full force and effect for a period of
twenty-four (24) months thereafter.
SECTION 10.6 KNOWLEDGE OF SELLER AND SHAREHOLDER. Where any
representation or warranty contained in this Agreement is expressly qualified by
reference to Seller's and Shareholder's knowledge, information and belief,
Seller and Shareholder confirm that they have made due and diligent inquiry as
to the matters that are the subject of such representations and warranties.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 WAIVER. Either party to this Agreement may, at any time
prior to the Closing, waive any of the terms or conditions of this Agreement or
agree to an amendment or modification to this Agreement by an agreement in
writing executed in the same manner as this Agreement.
SECTION 11.2 NOTICES. All notices and other communications among the
parties shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) five (5) days after posting in the United States
mail having been sent registered or certified mail return receipt requested, or
(iii) two (2) days after being sent by a reputable, nationally recognized
overnight courier, or
27
(iv) delivered by telecopy and promptly confirmed by delivery in person or in
first class mail in each case, with postage prepaid, addressed as follows:
(a) If to Purchaser, to:
Astro-Med, Inc.
Astro-Med Industrial Park
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxx Xxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxxx X. X'Xxxxxxx, Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxxx, Xxxxx & Xxxxxx LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esquire
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) If to Seller, to:
Telefactor Corporation
0000 Xxx XxXxxxx Xxxxxx
Xxxx Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx,
President & Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, Esquire
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(c) If to Shareholder, to:
Xxxx X. Xxxxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone No.: (000) 000-0000
with a copy to:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, LLP
28
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, Esquire
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
or to such other address or addresses as the parties may from time to time
designate in writing.
SECTION 11.3 ASSIGNMENT. Neither party hereto shall assign this
Agreement or any part hereof without the prior written consent of the other
party, except that Purchaser may assign all or a portion hereof to any
subsidiary or Affiliate of Purchaser. This Agreement shall be binding upon and
inure to the benefit of the heirs, legal representatives, successors and assigns
of each party hereto.
SECTION 11.4 RIGHTS OF THIRD PARTIES. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give any
person or entity, other than the parties hereto, any right or remedies under or
by reason of this Agreement.
SECTION 11.5 EXPENSES. Each party hereto shall bear its own expenses
incurred in connection with this Agreement and the transactions herein
contemplated whether or not such transactions shall be consummated, including,
without limitation, all fees of its legal counsel, financial advisers and
accountants; provided, however, that (i) the fees and expenses of the Auditor
(as defined in SUBSECTION 1.5(e) HEREOF), if any, shall be paid one-half by
Purchaser and one-half by Seller and (ii) all transfer, conveyance and similar
taxes imposed as a result of the sale of the Purchased Assets shall be paid by
Seller. In the event the transactions contemplated hereby are not consummated
each party hereto shall pay its own costs and expenses including, without
limitation, all fees of its legal counsel, financial advisors and accountants.
SECTION 11.6 CAPTIONS; COUNTERPARTS. The captions in this Agreement are
for convenience only and shall not be considered a part of or affect the
construction or interpretation provision of this Agreement. This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 11.7 ENTIRE AGREEMENT. This Agreement (together with the
Schedules and Exhibits to this Agreement, and the agreements, documents and
instruments referenced herein and pursuant to which the transaction contemplated
hereby will be effectuated, which, although they may be bound separately,
constitute part of this Agreement) and that certain Confidentiality Agreement
between the parties dated as of May 26, 1999 (the "CONFIDENTIALITY AGREEMENT")
constitute the entire agreement the parties and supersede any other agreements,
whether written or oral, that may have made or entered into by or among any of
the parties hereto relating to the transactions contemplated hereby. No
representations, warranties, understandings, agreements, oral or otherwise,
relating to the transactions contemplated by this Agreement exist between the
parties except as expressly set forth in this Agreement.
SECTION 11.8 SEVERABILITY. If any term of provision of this Agreement,
or the application thereof to any person or under any circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms to the persons or under circumstances other than those
as to which it is invalid or unenforceable, shall be considered severable and
shall not be affected thereby, and each term of this Agreement shall be valid
and enforceable to the fullest permitted by law. The invalid or unenforceable
provisions shall, to the extent permitted by law, be deemed amended and given
such interpretation as to achieve the economic intent of this Agreement.
29
SECTION 11.9 AMENDMENT. This Agreement may be amended or modified in
whole or in part, only by a duly authorized agreement in writing executed in the
same manner as this Agreement and which makes reference to this Agreement.
SECTION 11.10 PUBLICITY. Except to the extent required otherwise by any
securities laws, rules or regulations, all press releases or other public
communications of any nature whatsoever relating to the transactions
contemplated by this Agreement issued prior to or concurrent with the Closing,
and `the method of the release for publication thereof, shall be subject to the
prior mutual approval of Purchaser and Seller, which approval shall not be
unreasonably withheld by any party.
SECTION 11.11 FURTHER ASSURANCES. Each of Seller and Purchaser
covenants that at any time, and from time to time, after the Closing Date, it
will execute such additional instruments and take such actions as may be
reasonably requested by another party to confirm or perfect or otherwise to
carry out the conveyances, intent and purposes of this Agreement.
SECTION 11.12 TAX TREATMENT. Purchaser and Seller shall use reasonable
efforts to agree on an allocation of the Purchase Price in accordance with the
requirements of Section 1060 of the Internal Revenue Code. Purchaser and Seller
shall treat and report the transactions contemplated by this Agreement in all
respects consistently for purposes of any federal, state or local tax, including
without limitation with respect to calculation of gain, loss and basis with
reference to the allocations of the Purchase Price made pursuant to this Section
11.12. The parties hereto shall not take any actions or positions inconsistent
with the obligations set forth herein. Both Purchaser and Seller agree to file
with the Internal Revenue Service an IRS Form 8594 (Asset Acquisition Statement
under Section 1060) with respect to the acquisition by Purchaser of the
Purchased Assets, with their respective federal income tax returns for the year
in which the Closing Date occurs, consistent with the allocations made pursuant
to this Section 11.12.
SECTION 11.13 SET-OFF. Without limiting the rights of Purchaser at law
or in equity, Purchaser shall have the right to set-off against payments due by
it or any Affiliate to Seller hereunder, or under any agreement contemplated
hereby and delivered at the Closing or otherwise, the amount of any obligations
due from Seller, Shareholder or Shareholders under this Agreement or otherwise,
including interest on such obligations due from Seller or Shareholders (to be
calculated from the due date to the date payments of such sums were made or used
to setoff).
SECTION 11.14 NON-EXCLUSIVITY OF REMEDIES. The remedies specifically
provided for in this Agreement are intended to be cumulative and shall not be
deemed to exclude any other right ore remedy that the parties may have at law or
in equity.
SECTION 11.15 GOVERNING LAW. This Agreement has been made in and its
validity, interpretation, construction and performance shall be governed by and
be in accordance with the laws of the State of Rhode Island, without reference
to its laws governing conflicts of law. Each party irrevocably agrees that any
legal action or proceedings against with respect to this Agreement may be
brought in the courts of the State of Rhode Island, or in any United States
District Court of Rhode Island, and, by its execution and delivery of this
Agreement, each party hereby irrevocably submits to each such jurisdiction and
hereby irrevocably waives any and all objections which it may have as to venue
in any of the above courts. Each party further consents and agrees that any
process or notice of motion or other application to either of said Courts or any
judge thereof, or any notice in connection with any proceedings hereunder, may
be served inside or outside the State of Rhode Island or the District of Rhode
Island by registered or certified mail, return receipt requested, postage
prepaid, and be effective as of the receipt thereof, or in such other manner as
may be permissible under the rules of said Courts. Each party hereby waives
trial by jury in any action or proceeding in connection with this Agreement.
30
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to
be duly executed as of the date first above written.
ASTRO-MED, INC. TELEFACTOR CORP.
By: /s/ XXXXXX X. XXXXX By: /s/ XXXX X. XXXXXXX
--------------------------------------- -------------------------------------------------
Name: Xxxxxx X. Xxxxx Name: Xxxx X. Xxxxxxx
Title: Chairman and Chief Executive Officer Title: President and Chief Executive Officer
XXXX X. XXXXXXX
/s/ XXXX X. XXXXXXX
-------------------------------------
Xxxx X. Xxxxxxx
Major Shareholder of Telefactor Corp.
31
