EXHIBIT 10.1
Asset Purchase Agreement
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made effective as of December 31, 1997, by and among
Xxxxx Xxxxx ("Xxxxx"), Xxxxxxx Xxxxxxxxxx ("Xxxxxxxxxx"), SensorPulse Corp., a
Massachusetts corporation ("Sensor"), Total Control Products, Inc., an Illinois
corporation ("TCP"), and SPC Acquisition, Inc., an Illinois corporation and the
wholly-owned subsidiary of TCP ("Purchaser"). Xxxxx, Xxxxxxxxxx and Sensor are
collectively referred to herein as the "Contract Parties".
R E C I T A L S
A. Sensor is in the business of designing and developing industrial
signal conditioning products and networked input/output (I/O) devices. The
business of Sensor is referred to herein as the "Business".
B. Sensor desires to sell to Purchaser, and Purchaser desires to purchase
from Sensor, substantially all of Sensor's assets, all on the terms contained in
this Agreement.
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 AGREEMENT TO PURCHASE AND SELL. On the terms contained in this
Agreement, Purchaser hereby purchases from Sensor, and Sensor hereby sells to
Purchaser, all of Sensor's assets, properties, rights and business as a going
concern as of the date hereof, of whatever kind or nature and wherever
situated and located and whether reflected on Sensor's books and records or
previously written-off or otherwise not shown on Sensor's books and records
(other than the items set forth in Section 1.3 (the "Excluded Assets")). All
of said assets, properties, rights and business (other than the Excluded
Assets) are collectively referred to in this Agreement as the "Purchased
Assets". All of the Purchased Assets shall be sold to Purchaser free and
clear of all liens, title claims, encumbrances or security interests
("Claims").
1.2 ENUMERATION OF PURCHASED ASSETS. The Purchased Assets include,
without limitation, the following items of Sensor:
(a) all trade accounts receivable, notes receivable, negotiable
instruments and chattel paper (collectively, the "Accounts Receivable");
(b) all deposits and rights with respect thereto;
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(c) all inventory (including, without limitation, raw materials,
work in process, finished goods, service parts and supplies), including,
without limitation, supplies and parts which have historically been expensed
or have not been valued on Sensor's books and records (collectively, the
"Inventory");
(d) all furniture, art work, fixtures, equipment (including office
equipment), machinery, parts, computer hardware, tools, dies, jigs, patterns,
molds, automobiles and trucks and all other tangible personal property (other
than the Inventory), including, without limitation, any of the foregoing
which has been fully depreciated and including the equipment listed on
EXHIBIT A attached hereto (collectively, the "Equipment");
(e) the contracts, claims and rights (and benefits arising
therefrom) listed on EXHIBIT B attached hereto;
(f) all sales orders and sales contracts, purchase orders and
purchase contracts, quotations and bids;
(g) Sensor's entire leasehold interest as lessee of that certain
real property commonly known as 000 Xxxxxxx Xxxxxx, Xxxxx Xxxxxx,
Xxxxxxxxxxxxx 00000;
(h) all intellectual property rights, including, without
limitation, patents and applications therefor, know-how, unpatented
inventions, trade secrets, secret formulas, business and marketing plans,
copyrights and applications therefor, trademarks and applications therefor,
service marks and applications therefor, trade names and applications
therefor, trade dress, and names and slogans used by Sensor (including,
without limitation, the name "SensorPulse"), and all goodwill and royalties
associated with such intellectual property rights;
(i) all customer lists, customer records and information;
(j) certain books and records, including, without limitation,
blueprints, drawings and other technical papers, accounts receivable and
payable, inventory, maintenance, and asset history records and certain ledgers;
(k) all insurance policies and rights thereunder;
(l) all rights in connection with prepaid expenses with respect to
the assets being sold hereunder;
(m) all letters of credit issued to Sensor;
(n) all computer software, including all documentation and source
codes with respect to such software and licenses and leases of software;
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(o) all sales and promotional materials, catalogues and
advertising literature; and
(p) all telephone numbers of Sensor and all lock boxes to which
Sensor's account debtors remit payments.
1.3 EXCLUDED ASSETS. The Excluded Assets shall consist of the following:
(a) all cash on hand and in banks, cash equivalents and investments;
(b) claims (and benefits to the extent they arise therefrom) and
litigation against third parties to the extent such claims and litigation are
not in any way related to the Purchased Assets or the Assumed Liabilities (as
herein defined), and claims (and benefits to the extent they arise therefrom)
that relate to Excluded Liabilities (as herein defined);
(c) rights arising from prepaid expenses, if any, with respect to the
Excluded Assets;
(d) Sensor's rights under this Agreement;
(e) Sensor's accounting and tax records, books of original entry,
corporate charters, minute and stock record books, and corporate seals; and
(f) all contracts, claims and rights (and benefits arising therefrom)
binding on Sensor other than (i) those contracts, claims and rights listed on
EXHIBIT B attached hereto; and (ii) all sales orders and sales contracts,
purchase orders and purchase contracts, quotations and bids binding on Sensor.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 AGREEMENT TO ASSUME. Purchaser agrees to assume and agrees to
discharge and perform when due, the liabilities of Sensor (and only those
liabilities of Sensor) which are specifically enumerated in Section 2.2 (the
"Assumed Liabilities"). All claims against and liabilities and obligations
of Sensor not specifically assumed by Purchaser pursuant to Section 2.2,
including, without limitation, the liabilities enumerated in Section 2.3, are
collectively referred to herein as the "Excluded Liabilities." The Contract
Parties jointly and severally agree to promptly pay and discharge when due
all of the Excluded Liabilities.
2.2 DESCRIPTION OF ASSUMED LIABILITIES. The Assumed Liabilities shall
consist of the following, and only the following, liabilities of Sensor:
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(a) trade accounts payable for Inventory purchases as of the date
hereof, marketing accruals as of the date hereof, such as advertising and trade
show expenses, facility related expenses as of the date hereof, such as
utilities, telephone, repairs, maintenance and like items, in each case, to the
extent, and only to the extent, set forth on the Closing Balance Sheet (as
defined herein);
(b) liabilities of Sensor under any written purchase order and sales
order and the agreements or commitments listed on EXHIBIT B attached hereto, to
the extent such liabilities relate to performance after the date hereof; and
(c) liabilities of Sensor under any Permits (as defined herein) and
Environmental Permits (as defined herein) which were issued to Sensor in the
ordinary course of business prior to the date hereof and which are assigned or
transferred to Purchaser pursuant to the provisions hereof, to the extent such
liabilities relate to performance after the date hereof.
2.3 EXCLUDED LIABILITIES. Notwithstanding Section 2.2 (and without
implication that Purchaser is assuming any liability not expressly excluded by
this Section 2.3 and, where applicable, without implication that any of the
following would constitute Assumed Liabilities but for the provisions of this
Section 2.3), all liabilities and obligations of Sensor, other than those listed
in Section 2.2 hereof, shall remain the obligations and liabilities of Sensor
and shall not be assumed by Purchaser; such liabilities and obligations include,
without limitation, all trade account payables and accrued and unpaid expenses
not listed on the Closing Balance Sheet, accounts payable, expenses incurred by
Sensor in connection with the transactions contemplated hereby (including legal,
accounting and investment banking expenses), bank indebtedness or indebtedness
for borrowed money, accrued wages, accrued vacation, payroll and withholding tax
liability, contingent liabilities, all liabilities, whether actual or
contingent, associated with Employee Benefits, as that term is defined in
Section 5.23, whether owed to beneficiaries, benefit providers, plans or trusts,
governmental regulations or any other party, liabilities under agreements not
assumed by Purchaser, claims relating to returns of product which were sold by
Sensor prior to the date hereof or which constituted finished goods inventory of
Sensor on the date hereof, environmental liabilities, liabilities owed to
employees, Tax (as defined herein) liabilities, liabilities to any affiliate of
the Contract Parties, any liabilities incurred to the U.S. Government for price
adjustments, any liabilities arising out of or in connection with any violation
of a statute or governmental rule, regulation or directive, and any other
liabilities of Sensor.
2.4 NO EXPANSION OF THIRD PARTY RIGHTS. The assumption by Purchaser of
the Assumed Liabilities shall not expand the rights or remedies of any third
party against Purchaser or Sensor as compared to the rights and remedies which
such third party would have had against Sensor had Purchaser not assumed the
Assumed Liabilities. Without limiting the generality of the preceding sentence,
the assumption by Purchaser of the Assumed Liabilities shall not create any
third party beneficiary rights.
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ARTICLE III
PURCHASE PRICE AND MANNER OF PAYMENT
3.1 PURCHASE PRICE. Subject to the adjustment set forth in Section 3.2
herein, the "Purchase Price" of the Purchased Assets shall be equal to the
sum of (i) $1,250,000 in cash payable at Closing (the "Cash Portion");
(ii) 41,667 shares of common stock ("TCP Common Stock"), no par value per share
(the "Share Portion"), of TCP, to be issued to Sensor at the Closing; and
(iii) the Contingent Consideration (as defined herein) to be paid to Sensor
pursuant to this Article III.
3.2 ADJUSTMENT TO THE PURCHASE PRICE. The Purchase Price shall be reduced
by the amount by which $550,000 exceeds the Net Book Value. The Net Book Value
shall be the amount by which the aggregate book amount of the Purchased Assets
exceeds the aggregate book amount of the Assumed Liabilities, all as determined
in accordance with this Article III and as shown on the Closing Balance Sheet.
3.3 MANNER OF PAYMENT OF THE PURCHASE PRICE. At the Closing,
(a) Purchaser shall assume the Assumed Liabilities; (b) Purchaser shall pay
$1,250,000 to Sensor by wire transfer to the account designated by the Contract
Parties; and (c) Purchaser shall cause TCP to issue and deliver certificates
representing 41,667 shares of TCP Common Stock to Sensor as payment for the
Stock Portion. Following the Closing, the parties shall determine the Net Book
Value, taking into account the adjustments required pursuant to Section 3.2 and
employing the procedures and criteria set forth in Sections 3.4 and 3.5. If the
Net Book Value, as finally determined, is less than $550,000, the Contract
Parties shall, jointly and severally, forthwith pay such deficiency to
Purchaser, 28.6% in shares of TCP Common Stock (valuing each share at $12 and
rounding the number of shares to be so issued to TCP to the nearest whole share)
and 71.4% in cash.
3.4 DETERMINATION OF NET BOOK VALUE. The Net Book Value shall be
determined from a statement of Purchased Assets and the Assumed Liabilities
as of the close of business on the date hereof (the "Closing Balance Sheet").
The Closing Balance Sheet shall be prepared by Sensor, at Sensor's expense.
The Closing Balance Sheet shall be prepared in accordance with generally
accepted accounting principles ("GAAP") applied in a manner consistent with
the accounting principles applied in the preparation of the Financial
Statements (as herein defined). Notwithstanding, or without limitation, as
the case may be, of the foregoing: (a) the Closing Balance Sheet shall
contain pro rata accruals for utilities and like items; (b) Inventory shall
be determined pursuant to a physical count and valued, on an item by item
basis, at the lower of the actual cost thereof or market value (as of the
date hereof) thereof, using the first in, first out method; PROVIDED,
HOWEVER, that obsolete inventories, inventories which are unsalable or
unusable in the ordinary course of business and slow moving inventories shall
be valued at net realizable value; (c) assets and liabilities shall be
reflected without regard to materiality; (d) the Closing Balance Sheet shall
be prepared on the basis that it is being used in the computation of the
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Purchase Price and therefore items may be required to be reflected thereon
that are not normally reflected on a balance sheet of a continuing business;
and (e) reserves for the Purchased Assets shall be determined in accordance
with GAAP. Sensor shall cause the Closing Balance Sheet with documentation
for any adjustments to be delivered to Purchaser not later than thirty (30)
days after the date hereof. Sensor shall make available to Purchaser and
Purchaser's accountants the work papers, and shall permit Purchaser and
Purchaser's accountants to observe the taking of the Inventory.
3.5 DISPUTES REGARDING CLOSING BALANCE SHEET. Disputes with respect to
the Closing Balance Sheet shall be dealt with as follows:
(a) Purchaser shall have thirty (30) days after receipt of the
Closing Balance Sheet (the "Dispute Period") to dispute any of the elements of
or amounts reflected on the Closing Balance Sheet (a "Dispute"). If Purchaser
does not give written notice of a Dispute within the Dispute Period to Sensor
(a "Dispute Notice"), the Closing Balance Sheet shall be deemed to have been
accepted and agreed to by Purchaser in the form in which it was delivered by
Sensor, and shall be final and binding upon the parties hereto. If Purchaser
has a Dispute, Purchaser shall give Sensor a Dispute Notice within the Dispute
Period, setting forth in reasonable detail the elements and amounts with which
it disagrees. Within thirty (30) days after delivery of such Dispute Notice,
the parties hereto shall attempt in good faith to resolve such Dispute and agree
in writing upon the final content of the disputed Closing Balance Sheet.
(b) If Purchaser and Sensor are unable to resolve any Dispute within
the thirty (30) day period after Sensor's receipt of a Dispute Notice, the
Boston office of the certified public accounting firm of Price Waterhouse LLP
(the "Arbitrating Accountant") shall be engaged as arbitrator hereunder to
settle such Dispute as soon as practicable, but in any event, within forty-five
(45) days after its appointment. In the event Price Waterhouse LLP is unwilling
or unable to serve as the Arbitrating Accountant, the parties hereto shall
select by mutual agreement another nationally recognized certified public
accounting firm, who is not rendering (and during the preceding two-year period,
has not rendered) services to any of the Contract Parties, Purchaser or their
respective Affiliates (as defined herein), to serve as the Arbitrating
Accountant. In connection with the resolution of any Dispute, the Arbitrating
Accountant shall have access to all documents, records, work papers, facilities
and personnel necessary to perform its function as arbitrator. The arbitration
before the Arbitrating Accountant shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association. The
Arbitrating Accountant's award with respect to any Dispute shall be final and
binding upon the parties hereto, and judgment may be entered on the award. The
Contract Parties, on the one hand, and Purchaser, on the other hand, shall each
pay one-half of the fees and expenses of the Arbitrating Accountant with respect
to any Dispute.
3.6 ADDITIONAL PAYOUT.
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(a) DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(i) "Actual Net Income" means the actual net income of Purchaser
before interest expenses, taxes and goodwill amortization expenses related to
the transactions contemplated hereby and future acquisitions by Purchaser for
each Earn Out Period, as calculated in accordance with GAAP applied in a manner
consistent with TCP's past practices and as determined from Purchaser's internal
accounting records; provided, however, that the following expenses during each
Earn Out Period shall be subtracted from Purchaser's net income in order to
calculate the Actual Net Income for such Earn Out Period: (i) any management
bonuses paid by TCP to employees of Purchaser during such Earn Out Period which
are required to be reported on TCP's consolidated financial statements prepared
in accordance with GAAP; (ii) all actual out-of-pocket sales commissions and
distribution fees paid by TCP in connection with the sale of Purchaser's
products through TCP's distribution channel, which amounts shall not be deducted
more than once from the calculation of Actual Net Income; and (iii) with respect
to each Earn-Out-Period, an interest charge equal to (A) the highest rate of
interest charged by TCP's primary lending institution on borrowings made by TCP
under its revolving line of credit during each Earn Out Period; multiplied by
(B) the difference between (I) the average book value of the net assets of
Purchaser (other than cash) as of the last day of each calendar month during
such Earn-Out Period; and (II) the value of Purchaser's net assets as set forth
on the Closing Balance Sheet; provided, however, that under no circumstances
shall the amount calculated in this subparagraph (iii) be less than zero.
(ii) "Base Net Income" for each Earn Out Period shall mean
(A) for calendar year 1998, an amount equal to $0; and (B) for each subsequent
Earn Out Period, the greater of (i) $0; (ii) the greatest Actual Net Income
during any of the previous Earn Out Periods; and (iii) the greatest Base Net
Income during any of the previous Earn Out Periods; provided, however, that
for purposes of determining the Base Net Income for any Earn Out Period, if
the Actual Net Income for the previous Earn Out Period is less than zero,
then the Base Net Income for such Earn Out Period shall be equal to the sum
of the Base Net Income during the previous Earn Out Period plus the amount of
negative Actual Net Income during the previous Earn Out Period. For example,
if Actual Net Income during calendar year 1998 is negative $500,000, no
Contingent Consideration shall be paid for calendar year 1998 and Base Net
Income for calendar year 1999 shall be equal to $500,000. Then, if Actual
Net Income during calendar year 1999 is negative $100,000, no Contingent
Consideration shall be paid for calendar year 1999 and Base Net Income for
calendar year 2000 shall be equal to $600,000.
(iii) "Earn Out Period" means each of the calendar years
1998, 1999, 2000 and 2001. TCP and Purchaser hereby agree that during each
of the Earn Out Periods, Purchaser's books and records shall be maintained
separate and apart from TCP's books and records.
(b) CONTINGENT CONSIDERATION. Subject to the terms of
subparagraph (v) below,
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(i) If Actual Net Income during calendar year 1998 exceeds Base
Net Income for calendar year 1998, TCP and Purchaser shall jointly and
severally pay Sensor an aggregate amount equal to three (3) times such excess.
(ii) If Actual Net Income during calendar year 1999 exceeds Base
Net Income for calendar year 1999, TCP and Purchaser shall jointly and
severally pay Sensor an aggregate amount equal to two and three-quarters
(2 3/4) times such excess.
(iii) If Actual Net Income during calendar year 2000 exceeds Base
Net Income for calendar year 2000, TCP and Purchaser shall jointly and
severally pay Sensor an aggregate amount equal to two (2) times such excess.
(iv) If Actual Net Income during calendar year 2001 exceeds Base
Net Income for calendar year 2001, TCP and Purchaser shall jointly and
severally pay Sensor an aggregate amount equal to one and one-half (1 1/2)
times such excess.
(v) Notwithstanding anything to the contrary contained herein,
the aggregate amount of Contingent Consideration paid or otherwise owed by
TCP and Purchaser to Sensor pursuant to the terms of this Article III shall
not exceed $23,250,000 in the aggregate. At such time as the amount of
Contingent Consideration paid or otherwise owed by TCP and Purchaser to
Sensor pursuant to the terms of this Article III exceeds $23,250,000 in the
aggregate, all obligations of TCP and Purchaser to pay to Sensor any amounts
of Contingent Consideration in excess of such $23,250,000 limitation shall
terminate and be of no further force and effect.
(c) PAYMENT OF CONTINGENT CONSIDERATION. As soon as practicable
after the close of Purchaser's books for each Earn Out Period, but in any
event, no later than sixty (60) days after the end of each such Earn Out
Period, Purchaser will in good faith determine the final aggregate amount of
the Contingent Consideration, if any, for such preceding Earn Out Period
based upon Purchaser's internal accounting records, and shall notify Sensor
in writing of the amount of Contingent Consideration, if any, along with the
methodology of computing such amount (the "Contingent Notice") with respect
to such Earn Out Period. Sensor may, within thirty (30) days after receipt
of the Contingent Notice, deliver to Purchaser written notice (the "Dispute
Notice") identifying any dispute that Sensor may have with respect to the
amount set forth in the Contingent Notice. If a Dispute Notice is not
delivered by Sensor to Purchaser within such thirty (30) day period, the
amount of the Contingent Consideration, if any, set forth in the Contingent
Notice shall be final and binding on the parties hereto and shall be paid as
provided above within five (5) days thereafter. Within fifteen (15) days
following Purchaser's receipt of a Dispute Notice, Purchaser and Sensor shall
in good faith attempt to agree upon the Contingent Consideration, if any, for
such Earn Out Period. If Purchaser and Sensor cannot agree to the amount of
the Contingent Consideration, if any, for such fiscal year within such
fifteen (15) day period, they shall jointly submit their dispute to the
Arbitrating Accountant for final determination, whose determination shall be
made within forty-five (45) days of the date the dispute is submitted to the
Arbitrating Accountant. The fees and expenses of the Arbitrating Accountant
shall be
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shared equally between the Purchaser, on the one hand, and the Contract
Parties, on the other hand. The Arbitrating Accountant's determination as to
the amount of Contingent Consideration for such Earn Out Period shall be
final and binding on the parties hereto. The Contingent Consideration
awarded to Sensor in respect of any particular Earn Out Period shall be paid
by TCP and Purchaser jointly and severally to Sensor within ten (10) days of
the final determination of the Contingent Consideration, if any, without
interest, with respect to such Earn Out Period in accordance with the
provisions of Section 3.6(d) below. In connection with the determination of
the Contingent Consideration, Purchaser shall give Sensor and/or the
Arbitrating Accountant, as applicable, reasonable access (fax if possible) to
the portion of its books and records which are relevant to the calculation of
the Contingent Consideration for such Earn Out Period during normal business
hours upon reasonable advance notice.
(d) PAYMENT OF CONTINGENT CONSIDERATION. Notwithstanding anything
to the contrary contained in this Section 3.6, the Contingent Consideration
for each Earn Out Period, if any, shall be paid by TCP and Purchaser jointly
and severally to Sensor fifty percent (50%) in cash and fifty percent (50%)
in shares of TCP Common Stock; provided, however, that, no more than an
aggregate of 1,531,591 shares of TCP Common Stock shall be issued to Sensor
in connection with the payment of any Contingent Consideration and, to the
extent that Sensor has received an aggregate of 1,531,591 shares of TCP
Common Stock in connection with the payment of Contingent Consideration, all
remaining amounts of Contingent Consideration shall be paid by Purchaser to
Sensor in cash. With respect to each payment of Contingent Consideration
pursuant to this Section 3.6 for each Earn Out Period, each share of TCP
Common Stock to be issued pursuant to this Section 3.6(d) for each respective
Earn Out Period, shall be valued based upon the ten (10) consecutive trading
day average (the "Average Price") of the mid-point of the ask and bid price
at the end of each trading day of a share of TCP Common Stock for each day
during such ten day period ending on the day prior to the end of each Earn
Out Period, as such prices are quoted on the Nasdaq National Market System
(and as reported by The Wall Street Journal or, if not reported thereby, by
another authoritative source); provided, however, that (i) if 110% of the
Average Price for any Earn Out Period is less than the actual closing price
of a share of TCP Common Stock on the last day of such Earn Out Period, as
such prices are quoted on the Nasdaq National Market System (and as reported
by The Wall Street Journal or, if not reported thereby, by another
authoritative source), for purposes of this Agreement, the Average Price for
such Earn Out Period shall be deemed to be equal to 110% of the Average Price
as calculated for such Earn Out Period; and (ii) if 90% of the Average Price
for any Earn Out Period is less than the actual closing price of a share of
TCP Common Stock on the day preceding the last day of such Earn Out Period,
as such prices are quoted on the Nasdaq National Market System (and as
reported by The Wall Street Journal or, if not reported thereby, by another
authoritative source), for purposes of this Agreement, the Average Price for
such Earn Out Period shall be deemed to be equal to 90% of the Average Price
as calculated for such Earn Out Period. Notwithstanding the foregoing, the
number of shares of TCP Common Stock to be issued to Sensor in any Earn Out
Period shall be appropriately adjusted for any stock split, reverse stock
split, stock dividend, subdivision, reclassification, split, combination,
exchange, recapitalization or other similar transaction involving shares of
TCP Common Stock.
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(e) SALE OF PURCHASER. As soon as reasonably practicable after the
closing of a Sale Event (as defined below), TCP and Purchaser shall jointly
and severally pay, or cause to be paid, the following aggregate amount to
Sensor: (i) if the closing of such Sale Event occurs after the date hereof
but prior to the one year anniversary of the date hereof, an amount equal to
fifty percent (50%) of the difference between (A) the aggregate net
consideration paid by the acquiring company who is party to such Sale Event
(the "Acquiring Company") to Purchaser and/or TCP in connection with the
consummation of such Sale Event, after the payment of all of TCP's and/or
Purchaser's costs and expenses directly related to such Sale Event,
including, without limitation, all attorneys, accountants and investment
banking fees and expenses paid by TCP and/or Purchaser in connection with
such Sale Event; provided, however, that all such costs and expenses incurred
in connection with such Sale Event shall be prorated among each of the
persons who are being sold in connection with the Sale Event based upon each
such persons fair market value if more than one person is being sold in
connection with such Sale Event; and (B) the sum of (I) $1,750,000 (reduced
by the amount of any Purchase Price Adjustment in accordance with Section 3.3
and any amounts actually paid by any of the Contract Parties to Purchaser in
accordance with Section 8.3); (II) the amount of all TCP's and/or Purchaser's
costs and expenses directly related to the consummation of the transaction
contemplated by this Agreement, including, without limitation, all attorneys,
accountants and investment banking fees and expenses paid by TCP and/or
Purchaser in connection with consummation of the transaction contemplated
by this Agreement; and (III) all amounts of Contingent Consideration paid by
TCP and Purchaser to Sensor pursuant to this Article III at any time after
the date hereof and prior to the closing of the Sale Event (the difference
between (A) and (B) above being referred to herein as the "Net Sale
Proceeds"); (ii) if the closing of such Sale Event occurs on or after the one
year anniversary of the date hereof but prior to the two year anniversary of
the date hereof, an amount equal to thirty percent (30%) of the Net Sale
Proceeds; (iii) if the closing of such Sale Event occurs on or after the
second year anniversary of the date hereof but prior to the three year
anniversary of the date hereof, an amount equal to twenty percent (20%) of
the Net Sale Proceeds; and (iv) if the closing of such Sale Event occurs on
or after the three year anniversary of the date hereof but prior to the four
year anniversary of the date hereof, an amount equal to ten percent (10%) of
the Net Sale Proceeds. TCP and Purchaser shall fulfill their obligation to
Sensor pursuant to this Section 3.6(e) by delivering the appropriate
percentage of the consideration that TCP and/or Purchaser receives from such
Acquiring Company to Sensor. For example, (x) if TCP and/or Purchaser
receive shares of capital stock in connection with the consummation of the
Sale Event, they shall deliver the appropriate percentage of the capital
stock received by them to Sensor (with the same registration rights as TCP
and/or Purchaser may have); or (y) if TCP and/or Purchaser receive a note or
other form of contingent payment in connection with the consummation of the
Sale Event, they shall assign the appropriate percentage of such note or other
contingent payment to Sensor. For purposes of this Agreement "Sale Event"
shall mean (i) a sale of all or substantially all of the assets of Purchaser;
(ii) a merger or consolidation involving Purchaser, where Purchaser or an
affiliate of TCP is not the surviving entity or in which TCP does not remain
the owner, either directly or indirectly, of a majority of the outstanding
shares of common stock of Purchaser; and (iii) a sale of a majority of the
outstanding capital stock of Purchaser to any person (other than to an
affiliate of TCP); provided, however, that a Sale Event shall not be
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deemed to have occurred if TCP directly (x) sells all or substantially all of
its assets; (y) enters into a transaction involving a merger or
consolidation; or (z) sells a majority of its outstanding capital stock as
long as the acquiring person in connection with such transaction agrees to
assume TCP's obligations pursuant to this Agreement.
(f) TERMINATION OF PAYMENTS. Notwithstanding anything to the
contrary contained in this Section 3.6, Purchaser's and TCP's obligation to
make payments of Contingent Consideration to Sensor pursuant to this Section
3.6 shall immediately terminate upon the consummation of a Sale Event and upon
consummation of such Sale Event, Purchaser and TCP shall only be obligated to
make the payments to Sensor set forth in Section 3.6(e) hereof.
3.7 TIME OF CLOSING. Subject to the terms of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of X'Xxxxxx & Xxxxxx, 00 Xxxxx XxXxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000 at 10:00 a.m. The Closing shall
be deemed to be effective as of 12:01 a.m. on the date hereof at Chicago,
Illinois.
3.8 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Purchased Assets in the manner required by Section 1060 of the Code
(as herein defined) and in accordance with Schedule 3.8 hereto.
Notwithstanding the foregoing, nothing in this Agreement shall be construed
to mean that a party hereto or other person must: (a) use, for any one or
more purposes, any price or other allocation set forth or provided for in
this Agreement if such party or person reasonably believes or reasonably is
advised that such use is not in accordance with law; or (b) make or file, or
cooperate in the making or filing of, any return or report to any
governmental authority in any manner that such party or person reasonably
believes or is reasonably advised is not in accordance with law.
ARTICLE IV
TCP'S AND PURCHASER'S REPRESENTATIONS AND WARRANTIES
All of the representations and warranties contained in this Article IV
and all representations and warranties which are set forth elsewhere in this
Agreement and in any financial statement, exhibit or document delivered by TCP
or Purchaser to the Contract Parties pursuant to this Agreement or in
connection herewith shall survive the Closing (and none shall merge into any
instrument of conveyance), regardless of any investigation or lack of
investigation by the Contract Parties. No specific representation or
warranty shall limit the generality or applicability of a more general
representation or warranty. Representations and warranties of TCP and
Purchaser are made as of the date hereof. TCP and Purchaser jointly and
severally represent and warrant to the Contract Parties as of the date of
this Agreement as follows:
11
4.1 EXISTENCE, GOOD STANDING, CORPORATE AUTHORITY. Each of TCP and
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of TCP and
Purchaser has all requisite corporate power and authority to own or lease, and
operate its properties and assets, and to carry on its business as now
conducted and as currently proposed to be conducted.
4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The execution and
delivery of this Agreement and the other documents executed or to be executed
in connection herewith to which TCP or Purchaser is a party (collectively,
"Purchaser's Ancillary Documents"), have been duly authorized by the Board of
Directors and shareholders, if necessary, of TCP and Purchaser, to the extent
each is a party thereto, and no other proceedings on the part of TCP or
Purchaser or their shareholders are necessary to authorize the execution,
delivery or performance of this Agreement or any of Purchaser's Ancillary
Documents. This Agreement and each of Purchaser's Ancillary Documents have
been duly executed by a duly authorized officer of TCP or Purchaser, to the
extent each is a party thereto. This Agreement and all Purchaser's Ancillary
Documents constitute the valid and legally binding obligations of TCP and
Purchaser, to the extent each is a party thereto, enforceable against TCP and
Purchaser, to the extent each is a party thereto, in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general principles of
equity (regardless of whether enforcement is considered in a proceeding at
law or in equity).
4.3 NO VIOLATION. Neither the execution and delivery by TCP or
Purchaser of this Agreement and the Purchaser's Ancillary Documents, nor the
consummation by TCP and Purchaser of the transactions contemplated hereby in
accordance with the terms hereof, will (a) conflict with or result in a
breach of any provisions of the Articles of Incorporation or Bylaws of TCP or
Purchaser; (b) violate, conflict with, result in a breach by TCP or Purchaser
of any provision of, constitute a default by TCP or Purchaser (or an event
which, with notice or lapse of time or both, would constitute a default by
TCP or Purchaser) under, result in the termination, or in a right of
termination or cancellation of, accelerate the performance by TCP or
Purchaser required by, result in the triggering of any material payment or
other material obligations by TCP or Purchaser pursuant to, result in the
creation of any lien, security interest, charge or encumbrance upon any of
the material properties of TCP or Purchaser under, or result in being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
deed of trust or any material license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which TCP or
Purchaser is a party, or by which TCP or Purchaser or any of their
respective properties is bound or affected, except for any of the foregoing
matters which would not have a material adverse effect on the business,
results of operations or financial condition of TCP, Purchaser and their
respective subsidiaries, taken as a whole (a "Purchaser Material Adverse
Effect"); (c) to the knowledge of TCP or Purchaser, contravene or conflict
with or constitute a violation of any provision of any law, regulation,
judgement, injunction, order or decree binding upon or applicable to TCP or
Purchaser which would have a Purchaser Material Adverse Effect; or (d) to the
knowledge of TCP or Purchaser, other than the filings under applicable
federal, state
12
and local regulatory filings, the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "Exchange
Act"), the Securities Act of 1933, as amended (the "Securities Act"), or
applicable state securities and "Blue Sky" laws or filings in connection with
the maintenance of qualification to do business in other jurisdictions
(collectively, the "Regulatory Filings"), require any material consent,
approval or authorization of, or declaration, of or registration with, any
domestic governmental or regulatory authority, the failure to obtain or make
which would have a Purchaser Material Adverse Effect.
4.4 SEC DOCUMENTS. TCP has delivered or made available to the Contract
Parties each registration statement, report, proxy statement or information
statement (as defined in Regulation 14C under the Exchange Act) prepared by it
since March 11, 1997, which reports constitute all of the documents required
to be filed by TCP with the Securities and Exchange Commission ("SEC") since
such date, each in the form (including exhibits and any amendments thereto)
filed with the SEC (collectively, the "TCP Reports"). As of their respective
dates, the TCP Reports (a) complied as to form in all material respects with
the applicable requirements of the Securities Act, the Exchange Act, and the
rules and regulations thereunder; and (b) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of TCP included in or incorporated by reference
into the TCP Reports (including the related notes and schedules) fairly
present in all material respects the consolidated financial position of TCP
as of its date, and each of the consolidated statements of income, retained
earnings and cash flows of TCP included in or incorporated by reference into
the TCP Reports (including any related notes and schedules) fairly present in
all material respects the results of operations, retained earnings or cash
flows, as the case may be, of TCP for the periods set forth therein (subject,
in the case of unaudited statements, to normal year-end audit adjustments
which would not be material in amount or effect), in each case in accordance
with GAAP consistently applied during the periods involved, except as may be
noted therein.
4.5 NO BROKERS. Neither Purchaser nor TCP has entered into any
contract, arrangement or understanding with any person or firm which may
result in the obligation of the Contract Parties, TCP or Purchaser to pay any
finder's fee, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, except that TCP has
retained Xxxxxxx Xxxxxxx Associates as its financial advisor. Other than the
foregoing arrangement, neither TCP nor Purchaser is aware of any claim for
payment of any finder's fees, brokerage or agent's commission or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transaction contemplated hereby. Purchaser and TCP agree
to be solely responsible for the payment of all fees and commissions due and
payable to Xxxxxxx Xxxxxxx Associates.
4.6 TCP COMMON STOCK. The issuance and delivery of shares of TCP Common
Stock in connection with this Agreement have been duly and validly authorized by
all necessary
13
corporate action. The shares of TCP Common Stock to be issued in connection
with this Agreement, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable.
4.7 CAPITALIZATION. The total authorized capital stock of TCP consists
of (i) 22,500,000 shares of TCP Common Stock, 7,866,291 shares of which are
issued and outstanding as of December 1, 1997; and (ii) 1,000,000 shares of
blank check preferred stock, none of which are issued and outstanding as of
the date hereof. The authorized capital stock of Purchaser consists of
1,000 shares of Common Stock, $0.01 par value per share, 100 shares of which
are issued and outstanding as of the date hereof and are owned by TCP. There
are no shares of capital stock of TCP or Purchaser of any other class
authorized, issued or outstanding.
4.8 MATERIAL ADVERSE CHANGE. Since September 30, 1997 to the date of
hereof, other than what has been disclosed by TCP in Form 8-K's filed by TCP
with the SEC (copies of which have been previously provided to the Contract
Parties), TCP and its subsidiaries, taken as a whole, have not suffered any
change in their businesses, operations, assets, liabilities, financial
condition or prospects which would have a Purchaser Material Adverse Effect.
ARTICLE V
THE CONTRACT PARTIES' REPRESENTATIONS AND WARRANTIES
All of the representations and warranties contained in this Article V and
all representations and warranties which are set forth elsewhere in this
Agreement and in any financial statement, exhibit or document delivered by the
Contract Parties to Purchaser pursuant to this Agreement or in connection
herewith shall survive the Closing (and none shall merge into any instrument
of conveyance), regardless of any investigation or lack of investigation by
Purchaser. No specific representation or warranty shall limit the generality
or applicability of a more general representation or warranty.
Representations and warranties of the Contract Parties are made as of the
date hereof. All representations and warranties of the Contract Parties are
made subject to the exceptions noted in the schedule delivered by the
Contract Parties to Purchaser concurrently herewith attached hereto and
incorporated herein by reference and identified as the "Disclosure
Statement". All exceptions noted in the Disclosure Statement shall be
numbered to correspond to the applicable sections to which such exception
refers. Except as otherwise set forth in the Disclosure Statement, the
Contract Parties jointly and severally hereby represent and warrant to
Purchaser and TCP as follows:
5.1 ORGANIZATION, STANDING AND QUALIFICATION. Sensor (a) is an entity
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts; (b) has all requisite power and authority to
own or lease, and operate its properties and assets, and to carry on its
business as now conducted and as proposed to be conducted; (c) is duly
qualified or licensed to do business and is in good standing in all
jurisdictions in which it owns or leases
14
property or in which the conduct of its business requires it to so qualify or
be licensed, which states are listed in the Disclosure Statement; and (d) to
the best knowledge of the Contract Parties, has obtained all material
licenses, permits, franchises and other governmental authorizations necessary
to the ownership or operation of its properties or the conduct of its
business.
5.2 CAPITALIZATION.
(a) The total authorized capital stock of Sensor consists of
200,000 shares of common stock, no par value per share, 13,916 shares of
which are issued and outstanding as of the date hereof and are owned of
record as set forth in the Disclosure Statement. There are no shares of
capital stock of Sensor of any other class authorized, issued or outstanding.
(b) Each share of common stock of Sensor is (i) duly authorized and
validly issued; and (ii) fully paid and nonassessable.
(c) There are currently no outstanding, and as of the Closing,
there will be no outstanding (i) securities convertible into or exchangeable
for any capital stock of Sensor, (ii) options, warrants or other rights to
purchase or subscribe to capital stock of Sensor or securities convertible
into or exchangeable for capital stock of Sensor, or (iii) contracts,
commitments, agreements, understandings, arrangements, calls or claims of any
kind to which any of the Contract Parties is a party or is bound relating to
the issuance of any capital stock of Sensor.
(d) Sensor has no obligation or liability of any nature whatsoever
(direct or indirect, matured or unmatured, absolute, accrued, contingent or
otherwise), whether or not required by GAAP to be provided or reserved against
on a balance sheet (all the foregoing herein collectively being referred to as
the "Liabilities") except for: (i) Liabilities provided for or reserved
against in the Financial Statements or the Interim Financial Statements (as
defined herein); (ii) Liabilities which have been incurred by Sensor
subsequent to November 30, 1997 in the ordinary course of Sensor's business
and consistent with past practices; (iii) Liabilities under the executory
portion of any written purchase order, sales order, lease, agreement or
commitment of any kind by which Sensor is bound and which was entered into in
the ordinary course of Sensor's business and consistent with past practices;
and (iv) liabilities and obligations of Sensor disclosed in the Disclosure
Statement.
5.3 OWNERSHIP INTERESTS. Sensor does not have any subsidiaries and does
not own any direct or indirect interest in any corporation, joint venture,
limited liability company, partnership, association or other entity. Since
January 1, 1997, Sensor has not (i) disposed of the capital stock or assets of
any ongoing business (or portion thereof), or (ii) purchased the business
and/or assets of another person, firm or corporation (whether by purchase of
stock, assets, merger or otherwise).
15
5.4 CONSTITUENT DOCUMENTS. True and complete copies of the Articles of
Organization and all amendments thereto, the Bylaws as amended and currently
in force, all stock records, and all corporate minute books and records of
Sensor have been furnished by the Contract Parties to Purchaser for
inspection. Said stock records accurately reflect all stock transactions and
the current stock ownership of Sensor. The corporate minute books and
records of Sensor contain true and complete copies of all resolutions adopted
by the stockholders or the board of directors of Sensor and any other action
formally taken by them respectively as such.
5.5 AUTHORIZATION OF AGREEMENT AND OTHER DOCUMENTS. The execution and
delivery of this Agreement and the other documents executed in connection
herewith to which any of the Contract Parties is a party (collectively, the
"Ancillary Documents"), have been duly authorized by the Board of Directors
and stockholders of Sensor and no other proceedings on the part of Sensor or
its affiliates are necessary to authorize the execution, delivery or
performance of this Agreement or any Ancillary Document. Each of Xxxxx and
Xxxxxxxxxx have all the requisite power and authority to enter into this
Agreement and each of the Ancillary Documents, to the extent each is a party
thereto. This Agreement and each of the Ancillary Documents to which Sensor
is a party, has been duly executed by a duly authorized officer of Sensor.
This Agreement and each of the Ancillary Documents to which any of the
Contract Parties is a party is a valid and binding obligation of such
Contract Party, to the extent each is a party thereto, enforceable against
such Contract Party in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting enforcement
of creditors' rights generally, and by general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
5.6 NO VIOLATION. Neither the execution and delivery of this Agreement
or the Ancillary Documents by the Contract Parties nor the consummation by the
Contract Parties of the transactions contemplated hereby and thereby in
accordance with their respective terms, will (a) conflict with or result in a
breach of any provisions of the Articles of Organization or Bylaws of Sensor;
(b) violate, conflict with, result in a breach by any Contract Party of any
provision of, constitute a default by any Contract Party (or an event which,
with notice or lapse of time or both, would constitute a default by any
Contract Party) under, result in the termination, or in a right of
termination or cancellation of, accelerate the performance by any Contract
Party required by, result in the triggering of any material payment or other
material obligations by any Contract Party pursuant to, result in the
creation of any lien, security interest, charge or encumbrance upon any of
the material properties of Sensor under, or result in being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, deed of trust or
any material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Sensor is a party, or by which
Sensor or any of its properties is bound or affected; (c) to the Contract
Parties' knowledge, contravene or conflict with or constitute a violation of
any provision of any law, regulation, judgement, injunction, order or decree
binding upon or applicable to Sensor; or (d) to the Contract Parties'
knowledge, other than the Regulatory Filings, require any material consent,
16
approval or authorization of, or declaration, of or registration with, any
domestic governmental or regulatory authority.
5.7 COMPLIANCE WITH LAWS.
(a) To the best of the Contract Parties' knowledge, Sensor holds
all material permits, licenses, variances, exemptions, orders and approvals
of any court, arbitral, tribunal, administrative agency or commissioner or
other governmental or other regulatory authority or agency ("Governmental
Entities") necessary for the lawful conduct of its business (the "Permits").
(b) To the best of the Contract Parties' knowledge, Sensor is in
substantial compliance with the terms of its Permits.
(c) Sensor is in substantial compliance with all laws, ordinances
or regulations of all Governmental Entities, including, but not limited to,
those related to occupational health and safety, controlled substances or
employment and employment practices.
(d) As of the date hereof, no investigation, review, inquiry or
proceeding by any Governmental Entity with respect to Sensor are pending or,
to the best knowledge of the Contract Parties, threatened.
(e) Sensor is currently not subject to any agreement, contract or
decree with any Governmental Entities arising out of any current or previously
existing violations.
5.8 BOOKS AND RECORDS. Sensor's books, accounts and records are, and
have been, maintained in Sensor's usual, regular and ordinary manner, in
accordance with GAAP, and all material transactions to which Sensor is or has
been a party are properly reflected therein.
5.9 FINANCIAL STATEMENTS. The Disclosure Statement contains complete and
accurate copies of the internally prepared balance sheet, statement of income
and retained earnings of Sensor as of and for the year ended December 31,
1996. The financial statements described in the preceding sentence are
hereinafter referred to as the "Financial Statements". The Disclosure
Statement also contains complete and accurate copies of the internally
prepared (subject to year end adjustments) balance sheet and statement of
income and retained earnings of Sensor as of and for the eleven (11) month
period ended November 30, 1997. The financial statements described in the
preceding sentence are referred to herein as the "Interim Financial
Statements". The Financial Statements and the Interim Financial Statements
present accurately and completely the financial position of Sensor as of the
dates thereof and the results of operations of Sensor for the periods covered
by said statements, in accordance with GAAP in all material respects.
5.10 ACCOUNTS RECEIVABLES. None of the trade receivables and notes
receivable which are reflected on the Financial Statements, the Interim
Financial Statements or which arose subsequent to the date of the Interim
Financial Statements, is or was subject to any counterclaim
17
or set off. All of such trade receivables arose out of bona fide,
arms-length transactions for the sale of goods or performance of services,
and all such trade receivables and notes receivable are good and collectible
(or have been collected) in the ordinary course of business using normal
collection practices at the aggregate recorded amounts thereof, less the
amount of applicable reserves for doubtful accounts and for allowances and
discounts. All such reserves, allowances and discounts, were and are
adequate and consistent in extent with reserves, allowances and discounts
previously maintained by Sensor in the customary practice of its business as
historically conducted. Sensor has no outstanding sales on consignment,
sales on approval, sales on return or guaranteed sales.
5.11 INVENTORY. All Inventory of Sensor consists of items of a quantity
and quality historically useable and/or saleable in the normal course of
business, except for items of obsolete and slow-moving material and materials
which are below standard quality, all of which have been written down to
estimated net realizable value on an item by item basis. With the exception of
items of below standard quality which have been written down to their
estimated net realizable value, the Inventory is free from defects in
materials and/or workmanship. All Inventory reflected in the Financial
Statements or the Interim Financial Statements is valued at the lower of cost
or market with cost determined by the first in first out accounting method.
Since November 30, 1997, there has not been a material adverse change in the
level of the Inventory. All Inventory is, and all tools, dies, jigs,
patterns, molds, equipment, supplies and other materials used in the
production of Inventory are, located at the Leased Premises. To the Contract
Party's knowledge, all Inventory has been produced in material compliance
with applicable laws.
5.12 INTENTIONALLY OMITTED
5.13 INTELLECTUAL PROPERTY.
(a) The Disclosure Statement identifies all of the following which
are used in the Business or in which Sensor claims any ownership rights: (i)
all trademarks, service marks, slogans, trade names, trade dress and the like
(collectively with the associated goodwill of each, "Trademarks"), together
with information regarding all registrations and pending applications to
register any such rights; (ii) all common law Trademarks; (iii) all
proprietary formulations, manufacturing methods, know-how and trade secrets
which are material to the Business; (iv) all patents on and pending
applications to patent any technology or design; (v) all registrations of
and applications to register copyrights; and (vi) all licenses or rights in
computer software, Trademarks, patents, copyrights, unpatented formulations,
manufacturing methods and other know-how, whether to or by Sensor. The
rights required to be so identified are referred to herein collectively as
the "Intellectual Property".
(b) (i) Sensor is the owner of or duly licensed to use each
Trademark and its associated goodwill; (ii) each Trademark registration exists
and has been maintained in good standing; (iii) each patent and application
included in the Intellectual Property exists, is owned by or licensed to
Sensor, and has been maintained in good standing; (iv) each copyright
registration
18
exists and is owned by Sensor; (v) no Contract Party has received any notice
that any other firm, corporation, association or person claims the right to
use in connection with similar or closely related goods and in the same
geographic area, any xxxx which is identical or confusingly similar to any of
the Trademarks; (vi) the Contract Parties have no knowledge of any claim or
any reason to believe that any third party asserts ownership rights in any of
the Intellectual Property; (vii) the Contract Parties have no knowledge of
any claim or any reason to believe that Sensor's use of any Intellectual
Property infringes any right of any third party; (viii) the Contract Parties
have no knowledge or any reason to believe that any third party is infringing
on any of Sensor's rights in any of the Intellectual Property; and (ix) the
Contract Parties have no knowledge or any reason to believe that any of its
actions or the actions of Sensor have infringed or is infringing on any third
party's Intellectual Property rights.
5.14 TITLE TO PROPERTIES. Attached to the Disclosure Statement is a
list and description of each item of real or tangible personal property owned
by Sensor which has a salable value in excess of $1,000. Sensor (i) has good,
marketable, legal and valid title to such property free and clear of all
liens, claims, encumbrances or security interests (collectively, "Liens");
and (ii) has not received any notice or become aware of any condition which
would materially and adversely affect its peaceful and undisturbed possession
under all leases to which it is a party as lessee. All of the leases to
which Sensor is a party are legal, valid and binding and in full force and
effect, and no default by Sensor, or, to the knowledge of the Contract
Parties, by any other party thereto has occurred or is continuing thereunder.
No property or asset used by Sensor in connection with the operation of the
Business is held under any lease or under any conditional sale or other title
retention agreement. Except for such assets and facilities as are immaterial
to the Business, all tangible assets and facilities of Sensor being purchased
by Purchaser hereunder or to be used by Purchaser following Closing are in
good operating condition and repair (ordinary wear and tear excepted) and are
sufficient to conduct the Business as previously conducted prior to the date
hereof.
5.15 REAL ESTATE.
(a) Sensor does not own any real estate and does not have the
option to acquire any real estate.
(b) Sensor does not lease any real estate other than the premises
identified in the Disclosure Statement as being so leased (the "Leased
Premises"). The Leased Premises are leased to Sensor pursuant to written
leases, true, correct and complete copies of which are attached to the
Disclosure Statement. None of the improvements comprising the Leased
Premises, or the businesses conducted or proposed to be conducted by Sensor
thereon, are in violation of any building line or use or occupancy
restriction, limitation, condition or covenant of record or any zoning or
building law, code or ordinance, public utility or other easements or other
applicable law, except for violations which do not have a material adverse
effect upon or materially interfere with the conduct of the Business. No
material expenditures are required to be made for the repair or maintenance
of any improvements on the Leased Premises or for the
19
Leased Premises to be used for its intended purpose. Sensor is not in default
under any agreement relating to the Leased Premises nor, to the best
knowledge of the Contract Parties, is any other party thereto in default
thereunder.
(c) The Leased Premises and each facility located on the Leased
Premises are currently served by gas, electricity, water, sewage and waste
disposal and other utilities adequate to operate such Leased Premises in
accordance with the operations that have been historically conducted thereon
and, to the Contract Parties' knowledge, none of the utility companies serving
any such Leased Premises has threatened any of the Contract Parties with any
reduction in service. All of said utilities are installed and operating on
the Leased Premises and all installation and connection charges have been
paid for in full or are accrued on the Interim Financial Statements.
(d) None of the Contract Parties nor any Governmental Authority has
asserted any challenges or appeals regarding the amount of the taxes on, or
the assessed valuation of, the Leased Premises, and none of the Contract
Parties has any special arrangements or agreements with any governmental
authority with respect thereto (the representations and warranties contained
in this Section 5.15(e) shall not be deemed to be breached by any prospective
general increase in real estate tax rates).
(e) There are no condemnation proceedings pending or, to the best
of the Contract Parties' knowledge, threatened with respect to any portion of
the Leased Premises.
(f) There is no tax assessment (in addition to the normal, annual
general real estate tax assessment) pending or, to the best of the Contract
Parties' knowledge, threatened with respect to any portion of the Leased
Premises to the extent Sensor is liable for payment therefor.
(g) The buildings and other facilities located on the Leased
Premises are free of any latent structural or engineering defects known to
the Contract Parties or any patent structural or engineering defects.
5.16 CONTRACTS.
(a) Except as disclosed in the Disclosure Statement, Sensor is not
a party to, or bound by, or the issuer or beneficiary of, any undischarged
written or oral: (i) agreement or arrangement obligating Sensor to pay or
receive, or pursuant to which Sensor has previously paid or received, an
amount in excess of $5,000; (ii) agreement or arrangement which by its terms
cannot be terminated by Sensor for a period in excess of thirty (30) days
without payment or penalty; (iii) employment or consulting agreement; (iv)
collective bargaining agreement; (v) plan or contract or arrangement
providing for bonuses, options, deferred compensation, retirement payments,
profit sharing, medical and dental benefits or the like covering employees of
Sensor; (vi) agreement restricting in any manner Sensor's right to compete
with any other person or entity, Sensor's right to sell to or purchase from
any other person or entity, the right of any other
20
party to compete with Sensor or the ability of such person or entity to employ
any of Sensor's employees; (vii) secrecy or confidentiality agreement; (viii)
guaranty, performance, bid or completion bond, or surety or indemnification
agreement; (ix) requirements contract; (x) loan or credit agreement, pledge
agreement, note, security agreement, mortgage, debenture, indenture, factoring
agreement or letter of credit; (xi) agreement for the treatment or disposal of
Materials of Environmental Concern; (xii) power of attorney; or (xiii)
partnership or joint venture agreement.
(b) All agreements, leases, subleases and other instruments
referred to in this Section 5.16, are in full force and binding upon Sensor
and, to the Contract Parties' knowledge, upon the other parties thereto.
Sensor is not, and to the Contract Parties' knowledge, none of the other
parties thereto are in default under any such agreement, lease, sublease or
other instrument. No event, occurrence or condition exists which, with the
lapse of time, the giving of notice, or both, or the happening of any further
event or condition, would become a default under any such agreement, lease,
sublease or other instrument by Sensor, or, to the Contract Parties'
knowledge, the other contracting party. To the best of the Contract Parties'
knowledge, Sensor has not released or waived any material right under any
such agreement, lease, sublease or other instrument.
5.17 INSURANCE. The Disclosure Statement contains a true and correct
list of all insurance policies which are owned by Sensor or which name Sensor
as an insured (or loss payee), including without limitation those which
pertain to Sensor's assets, employees or operations. All such insurance
policies are in full force and effect and Sensor has not received notice of
cancellation of any such insurance policies.
5.18 LITIGATION. Except as disclosed on the Disclosure Statement,
there is no litigation or proceeding, in law or in equity, and there are no
proceedings or governmental investigations before any commission or other
administrative authority, pending or, to the best of the Contract Parties'
knowledge, threatened against Sensor, or any of Sensor's officers, directors
or Affiliates (as defined herein), with respect to or affecting Sensor's
operations, business, products, sales practices or financial condition, or
related to the consummation of the transaction contemplated hereby or the
Ancillary Documents. Except as disclosed on the Disclosure Statement, there
are no facts known to the Contract Parties which, if known by a potential
claimant or governmental authority, would give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to Sensor, would
have a material adverse effect on the business, operations, assets,
liabilities, financial condition or prospects of Sensor before or after
the Closing.
5.19 WARRANTIES. Except as disclosed on the Disclosure Statement,
Sensor has not made any oral or written warranties with respect to the
quality or absence of defects of its products or services which it has sold
or performed which are in force as of the date hereof. Except as disclosed
on the Disclosure Statement, there are no material claims pending, or to the
Contract Parties' knowledge, anticipated or threatened against Sensor with
respect to the quality of or absence of defects in any of its products or
services. The Disclosure Statement sets forth a summary, which is accurate
in all material respects, of all returns of defective products during the
21
period beginning January 1, 1996 and ending on the date hereof, and all
credits and allowances for defective products given to customers during said
period, and said summary in each case accurately describes the defect which
resulted in the return, allowance or credit. Except as disclosed on the
Disclosure Statement, Sensor has not paid or been required to pay direct,
incidental, or consequential damages to any person in connection with any of
such products or services.
5.20 PRODUCTS LIABILITY. Sensor has received no notice nor do the
Contract Parties have any knowledge relating to any claim involving any
product manufactured, produced, distributed or sold by or on behalf of Sensor
resulting from an alleged defect in design, manufacture, materials or
workmanship, or any alleged failure to warn, or from any breach of implied
warranties or representations.
5.21 ARBITRATION. Sensor is not a party to, or bound by, any decree,
order or arbitration award (or agreement entered into in any administrative,
judicial or arbitration proceeding with any governmental authority) with
respect to or affecting the properties, assets, personnel or business
activities of Sensor.
5.22 TAXES.
(a) As used in this Agreement, (i) "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, social security,
Medicare or other health program, excise, severance, stamp, occupation,
premium, property (including property Taxes assessed against a landlord of
any Contract Party, but borne by such Contract Party pursuant to a lease),
windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatever of a nature similar to taxes, together with any
interest and any penalties, additions to tax or other additional amounts with
respect thereto; (ii) "Tax" means any one of the foregoing Taxes; (iii)
"Returns" means all returns, information returns or statements, declarations,
reports, statements and other documents (including any related or supporting
information) filed or required to be filed with any taxing authority with
respect to Taxes; and (iv) "Return" means any one of the foregoing Returns.
(b) Sensor has filed or has properly filed extensions of all
required Tax Returns for all Tax periods in all jurisdictions where Returns
have been required and, except with respect to matters set forth in the
Disclosure Statement, all such Returns were correct and complete and not
susceptible to adjustment by any taxing authority. Except as disclosed in
the Disclosure Statement, all Taxes owed by Sensor have been paid for each
taxable period for which such Returns have been filed or were required to be
filed. Sensor has not filed any Returns in any state or local jurisdiction
other than Massachusetts which is not listed on the Disclosure Statement, nor
has Sensor failed to file a Return in any state or local jurisdiction which,
under the laws, rules and regulations of such jurisdiction, is or was
required to be filed. Purchaser cannot be assessed or otherwise held liable
for any Tax obligation of Sensor.
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(c) Except as otherwise stated in the Disclosure Statement: (i) no
extension of time, within which to file any Return which has not been filed,
has been requested by Sensor or granted by any Tax authority; (ii) Sensor has
not waived or extended any statute of limitations with respect to any Tax or
agreed to any extension of time with respect to any Tax assessment or
deficiency, which waiver or extension is still in effect; (iii) no
examinations of any Returns are pending, and the Disclosure Statement sets
forth those years since 1987 for which examinations have been completed and
the results of such examinations; (iv) no issues have been raised in writing
(and are currently pending) by any taxing authority in connection with any of
the Tax Returns filed by Sensor, and Sensor has not received any written
notice of deficiency or assessment from any taxing authority, other than
deficiencies or assessments which have been paid or finally settled, or which
are disclosed in the Disclosure Statement and are being contested in good
faith through appropriate proceedings; and (v) there are no liens filed
against, or threatened to be filed against, any asset of Sensor resulting
from the failure to pay any Tax when due.
(d) Sensor: (i) has never been a member of an affiliated group of
corporations, within the meaning of section 1504 of the Internal Revenue Code
of 1986, as amended (the "Code"); (ii) has never had any liability, whether
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise, for
the Taxes of any person other than itself; (iii) is not and has never at any
time been a party to or bound by any Tax indemnity, Tax sharing or Tax
allocation agreement; (iv) is not or has never been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code; or (v) is not or has never been a person other than a United States
person within the meaning of the Code (and the transaction contemplated
herein is not subject to the withholding provisions of section 3406 or
subchapter a of Chapter 3 of the Code).
(e) None of the assets of Sensor (i) are "tax-exempt use property"
within the meaning of Section 168(h) of the Code; (ii) is property that
Sensor is required to treat as being owned by any other person pursuant to
the "safe harbor lease" provisions of former section 168(f)(8) of the Code;
or (iii) directly or indirectly secures any debt the interest on which is
tax-exempt under section 103(a) of the Code.
5.23 EMPLOYEE BENEFITS. Except as stated in the Disclosure Statement,
neither Sensor nor any corporation or business which is now or at the
relevant time was an affiliate of Sensor as determined under the Code section
414(b), (c), (m) or (o) ("ERISA Affiliate") maintains, administers,
contributes to or has any liability under, or has maintained, administered,
contributed to or had any liability under, nor do the employees of Sensor or
any ERISA Affiliate receive or have any reason to expect to receive as a
condition of employment or this transaction, benefits pursuant to any: (i)
employee pension benefit plan (as defined in Section 3(2) of ERISA) ("Plan"),
including, without limitation, any multi-employer plan as defined in Section
3(37) of ERISA ("Multi-Employer Plan"); (ii) any non-qualified deferred
compensation plan or retirement plan; (iii) employee welfare benefit plan (as
defined in Section 3(1) of ERISA) ("Welfare Plan"), including (iv) any other
plan, program, agreement or arrangement under which former employees of
Sensor or an ERISA Affiliate (or their beneficiaries) are entitled, or
current employees of
23
Sensor or an ERISA Affiliate will be entitled, following termination of
employment, to medical, health or life insurance or other benefits other than
pursuant to benefit continuation rights granted by state or federal law; or
(v) any bonus, stock, stock purchase, or stock option plan, severance plan,
salary continuation, vacation, sick leave, fringe benefit, incentive,
insurance, welfare or similar plan or arrangement ("Employee Benefit Plan")
other than those Plans, Multi-Employer Plans, Welfare Plans and Employee
Benefit Plans described in the Disclosure Statement (all such plans, programs
or arrangements described above being referred to as "Employee Benefits");
(a) There is no provision in any Plan, Welfare Plan or Employee
Benefit Plan, and neither Sensor nor its ERISA Affiliates or any officer or
agent of the same has made any promise or representation, to the effect that
any employee or former Employee of Sensor or any ERISA Affiliate may look to
Purchaser or its affiliates or any other "successor-in-interest" (by whatever
manner defined) to Sensor to provide or be obligated to provide or arrange
for the provision of any benefit promised, whether actually or contingently,
under any Plan, Multi-Employer Plan, Welfare Plan or Employee Benefit Plan.
(b) True and complete copies of each Plan, Welfare Plan and
Employee Benefit Plan, related trust agreements, insurance contracts, annuity
contracts or other funding vehicles, determination letters, summary plan
descriptions, copies of any pending applications, filings or notices with
respect to any of the Plans, Welfare Plans or Employee Benefit Plans with the
IRS, the PBGC, the Department of Labor or any other governmental agency,
copies of all corporate resolutions or other documents pertaining to the
adoption of the Plans, Multi-Employer Plans, Welfare Plans or Employee
Benefit Plans or any amendments thereto or to the appointment of any
fiduciaries thereunder and copies of any investment management agreements
thereunder and of any fiduciary insurance policies, surety bonds, rules,
regulations or policies, of the trustees or of any committee thereunder, all
communications and notices to employees regarding any Plan, Multi-Employer
Plan, Welfare Plan, or Employee Benefit Plan, annual reports on Form 5500,
Form 990 financial statements and actuarial reports for the most recent five
Plan years, and each plan, agreement, instrument and commitment referred to
herein, have been furnished or made available to Purchaser and are attached
to the Disclosure Statement. All of the foregoing are legally valid,
binding, in full force and effect as to Sensor or its ERISA Affiliates or any
officer or agent of the same, as the case may be, and there are no defaults
thereunder by Sensor or its ERISA Affiliates or any officer or agent of the
same, as the case may be. The annual reports on Form 5500 and Form 990 and
actuarial statements furnished to Purchaser fully and accurately set forth
the financial and actuarial condition of each Plan and each trust funding any
Welfare Plan. With respect to each Plan, Welfare Plan and Employee Benefit
Plan, the Disclosure Statement sets forth the name and address of the
administrator and trustees and the policy number and insurer under all
insurance policies;
(c) None of the Plans, Welfare Plans or Employee Benefit Plans has
any material unfunded liabilities which are not reflected on the Financial
Statements or, in the case of any Plan, on the latest actuarial report and with
respect to the Plans. None of the Plans is a "top-heavy" plan, as defined in
Section 416 of the Code. Except as disclosed in the Disclosure
24
Statement, Sensor has no plans, programs, arrangements or made any other
commitments to its employees, former employees or their beneficiaries under
which it has any obligation to provide any retiree or other employee benefit
payments which are not adequately funded through a trust or other funding
arrangement. There have been no material changes in the operation or
interpretation of any of the Plans, Welfare Plans or Employee Benefit Plans
since the most recent annual report or actuarial report which would have any
material effect on the cost of operating or maintaining such Plans Welfare
Plans on Employee Benefit Plans; and
(d) There are no pending or, to the Contract Parties' knowledge,
threatened claims, lawsuits, arbitrations, or governmental audits,
examinations or inquiries asserted or instituted against or by any of the
Plans, Multi-Employer Plans (to the extent Sensor or an ERISA Affiliate is or
may be a party), Welfare Plans, or Employee Benefit Plans, or any fiduciaries
thereof, except in the case of Multi-Employer Plans, fiduciaries that are
officers, employees, directors, agents or owners of Sensor or its ERISA
Affiliates, with respect to their duties to the Plan, Welfare Plans or
Employee Benefit Plan or the assets of any trusts thereunder, by any employee
or beneficiary covered under any Plans, Welfare Plans or Employee Benefit
Plans or otherwise involving any Plan, Welfare Plan or Employee Benefit Plan
(other than routine claims for benefits); and the Contract Parties have no
knowledge of any facts which would give rise to or could reasonably be
expected to give rise to any such claims, lawsuits or arbitrations. Neither
Sensor nor any of its ERISA Affiliates, nor any of their directors, officers,
employees or any other "fiduciary", as such term as defined in Section 3(21)
of ERISA, knows of or has received any notice of any liability for failure to
comply with ERISA or the Code or failure to act in connection with the
administration or investment of any Plan.
5.24 LABOR MATTERS. Except as set forth in the Disclosure Statement,
(a) there is no labor strike, dispute, slowdown, work stoppage or lockout
pending or, to the knowledge of the Contract Parties, threatened against or
affecting Sensor, and during the past three years, there has not been any
such action; (b) to the Contract Parties' knowledge, there are no union
claims or petitions to represent the employees of Sensor; (c) Sensor is not a
party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of Sensor;
(d) none of the employees of Sensor are represented by any labor organization
and none of the Contract Parties have any knowledge of any current union
organizing activities among the employees of Sensor, nor to their knowledge
does any question concerning representation exist concerning such employees;
(e) Sensor is, and has at all times been, in material compliance with all
applicable employment laws and practices, including, without limitation, any
such laws relating to employment discrimination, occupational safety and
health and unfair labor practices; (f) there is no unfair labor practice
charge or complaint against Sensor pending or, to the best knowledge of the
Contract Parties, threatened before the National Labor Relations Board or any
charges or complaints, or facts which could give rise to a charge or
complaint, pending or threatened with any Governmental Entity who has
jurisdiction over unlawful employment practices; (g) there is no grievance or
arbitration proceeding arising out of any collective bargaining agreement or
other grievance procedure pending relating to Sensor; (h) Sensor is not
delinquent in payments to any
25
of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them to the Closing or
amounts required to be reimbursed to such employees; (i) except as disclosed
in the Disclosure Statement, upon termination of the employment of any of the
employees of Sensor after the Closing, Sensor will not be liable to any of
its employees for severance pay; (j) the employment of each of Sensor's
employees is terminable at will without cost to Sensor except for payments
required under the Plans, Welfare Plans and Employee Benefit Plans and
payment of accrued salaries or wages and vacation pay; (k) no employee or
former employee of Sensor has any right to be rehired by Sensor prior to
Sensor hiring a person not previously employed by Sensor; and (l) the
Disclosure Statement contains a true and complete list of all employees who
are employed by Sensor as of the date hereof, and said list correctly
reflects their salaries, wages, other compensation (other than benefits under
the Plans, Welfare Plans and Employee Benefit Plans), dates of employment and
positions. Except as disclosed on the Disclosure Statement, Sensor does not
owe any past or present employee any sum in excess of $5,000 individually or
$20,000 in the aggregate other than for accrued wages or salaries for the
current payroll period, and amounts payable under Plans, Welfare Plans or
Employee Benefit Plans. Except as disclosed on the Disclosure Statement, no
employee owes any sum to Sensor in excess of $5,000, and all employees
together do not owe Sensor in excess of $20,000.
5.25 ENVIRONMENTAL MATTERS.
(a) Sensor and its assets and business are in substantial
compliance with all Environmental Laws and Environmental Permits (as herein
defined). A copy of any notice, citation, inquiry or complaint which Sensor
has received in the past three years of any alleged violation of any
Environmental Law or Environmental Permit is contained in the Disclosure
Statement, and all violations alleged in said notices have been or are being
corrected. A description of all such violations currently being corrected is
contained in the Disclosure Statement. To the best of the Contract Parties'
knowledge, Sensor possesses all material Environmental Permits which are
required for the operation of the Business, and is in substantial compliance
with the provisions of all such Environmental Permits. Copies of all
Environmental Permits issued to Sensor are contained in the Disclosure
Statement. The Contract Parties have delivered to Purchaser copies of all
environmental reports with respect to the Leased Premises in its possession
which were conducted during the last five years.
(b) The Disclosure Statement sets forth a complete list of all
Materials of Environmental Concern stored, treated, generated, used,
transported or Released (as herein defined) in connection with the operation
of the Business. There has been no storage, treatment, generation,
transportation or Release of any Materials of Environmental Concern by Sensor
or its predecessors in interest, or by any other person or entity for which
Sensor is or may be held responsible, at any Facility (as herein defined) or
any Offsite Facility (as herein defined) in violation of, or which could give
rise to any obligation under, Environmental Laws.
26
(c) The Disclosure Statement sets forth a complete list of all
Containers (as herein defined) that are now present at, or have heretofore been
removed from the Leased Premises. All Containers which have been heretofore
removed from the Leased Premises have been removed in accordance with all
applicable Environmental Laws.
(d) For the purposes of this Agreement: (i) "Environmental Laws"
means all federal, state and local statutes, regulations, ordinances, rules,
regulations and policies, all court orders and decrees and arbitration
awards, and the common law, which pertain to environmental matters or
contamination of any type whatsoever. Environmental Laws include, without
limitation, those relating to: manufacture, processing, use, distribution,
treatment, storage, disposal, generation or transportation of Materials of
Environmental Concern; air, surface or ground water or noise pollution;
Releases; protection of wildlife, endangered species, wetlands or natural
resources; Containers; health and safety of employees and other persons; and
notification requirements relating to the foregoing; (ii) "Environmental
Permits" means licenses, permits, registrations, governmental approvals,
agreements and consents which are required under or are issued pursuant to
Environmental Laws; (iii) "Materials of Environmental Concern" means
(A) pollutants, contaminants, pesticides, radioactive substances, solid wastes
or hazardous or extremely hazardous, special, dangerous or toxic wastes,
substances, chemicals or materials within the meaning of any Environmental
Law, including without limitation any (i) "hazardous substance" as defined in
CERCLA, and (ii) any "hazardous waste" as defined in the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C., Sec. 6902 ET. SEQ., and
all amendments thereto and reauthorizations thereof; and (B) even if not
prohibited, limited or regulated by Environmental Laws, all pollutants,
contaminants, hazardous, dangerous or toxic chemical materials, wastes or any
other substances, including without limitation, any industrial process or
pollution control waste (whether or not hazardous within the meaning of RCRA)
which could pose a hazard to the environment or the health and safety of any
person, or impair the use or value of any portion of the Leased Premises;
(iv) "Release" means any spill, discharge, leak, emission, escape, injection,
dumping, or other release or threatened release of any Materials of
Environmental Concern into the environment, whether or not notification or
reporting to any governmental agency was or is, required, including without
limitation any Release which is subject to CERCLA; (v) "Facility" means any
facility as defined in the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. 9601, ET. SEQ., as amended and reauthorized
("CERCLA"); (vi) "Offsite Facility" means any Facility which is not
presently, and has not heretofore been, owned, leased or occupied by Sensor;
and (vii) "Containers" means above-ground and under-ground storage tanks,
vessels and related equipment and containers.
5.26 INTERIM CONDUCT OF BUSINESS. Except as otherwise contemplated by
this Agreement or as disclosed in the Disclosure Statement, since November 30,
1997, Sensor has not:
(a) sold, assigned, leased, exchanged, transferred or otherwise
disposed of any material portion of its assets or property, except for sales of
Inventory and cash applied in the payment of its Liabilities, in the usual and
ordinary course of business in accordance with its past practices;
27
(b) suffered any material casualty, damage, destruction or loss, or
interruption in use, of any material asset, property or portion of Inventory
(whether or not covered by insurance), on account of fire, flood, riot, strike
or other hazard or Act of God;
(c) written off any material asset as unusable or obsolete or for any
other reason;
(d) made or suffered any material change in the conduct or nature of
any aspect of its business, whether or not made in the ordinary course of
business or whether or not such change had a material adverse effect of the
financial condition or operations of Sensor;
(e) waived any material right arising out of the conduct of, or with
respect to, its business;
(f) made (or committed to make) capital expenditures in an amount
which exceeds $5,000 for any item or $20,000 in the aggregate;
(g) discharged any material liability except in the usual and
ordinary course of business in accordance with past practices, or prepaid any
liability;
(h) made any material change in accounting methods or principles;
(i) entered into any material transaction with, or made any payment
to, or incurred any liability to, any Related Party;
(j) made any material payments or distributions to its employees,
officers or directors except such amounts as constitute currently effective
compensation for services rendered, or reimbursement for reasonable ordinary and
necessary out-of-pocket business expenses;
(k) paid or incurred any management or consulting fees, or engaged
any consultants;
(l) adopted any new Plan, Welfare Plan or Employee Benefit Plan;
(m) issued or sold any securities of any class;
(n) paid, declared or set aside any dividend or other distribution on
its securities of any class or purchased, exchanged or redeemed any of its
securities of any class; or
(o) without limitation by the enumeration of any of the foregoing,
entered into any transaction other than in the ordinary course of business
consistent with past practices.
28
Notwithstanding the foregoing, Sensor shall not be deemed to have breached the
terms of this Section 5.26 by entering into this Agreement or by consummating
the transactions contemplated hereby.
5.27 AFFILIATED TRANSACTIONS. Since January 1, 1997, Sensor has not
been a party to any transaction (other than employee compensation and other
ordinary incidents of employment) with a "Related Party". For purposes of
this Agreement, the term "Related Party" shall mean: any present or former
officer, director, stockholder or affiliate of Sensor, any present or former
known spouse, ancestor or descendant of any of the aforementioned persons,
any entity in which a majority of the outstanding ownership interests are
owned by the aforementioned persons, either individually or as a group, or
any trust or other similar entity for the benefit of any of the foregoing
persons. No property or interest in any property (including, without
limitation, designs and drawings concerning machinery) which relates to and
is or will be necessary or useful in the present or currently contemplated
future operation of the Business, is presently owned by or leased or licensed
by or to any Related Party. All amounts due and owing to or from Sensor by
or to any of the Related Parties (excluding employee compensation and other
incidents of employment) have been paid in full. Except for the ownership of
securities representing less than a 2% equity interest in various publicly
traded companies, none of the Contract Parties, nor to the Contract Parties'
knowledge, any Related Party has an interest, directly or indirectly, in any
business, corporate or otherwise, which is in competition with the Business.
5.28 SIGNIFICANT CUSTOMERS, SUPPLIERS, DISTRIBUTORS AND EMPLOYEES. The
Disclosure Statement sets forth an accurate list of Sensor's Significant
Customers (as defined herein), Significant Suppliers (as defined herein),
Significant Distributors (as defined herein) and Significant Employees (as
defined herein). None of the Contract Parties have any knowledge of any
intention or indication of intention by a (a) Significant Customer to
terminate its business relationship with Sensor or to limit or alter its
business relationship with Sensor in any material respect; (b) Significant
Supplier to terminate its business relationship with Sensor or to limit or
alter its business relationship with Sensor in any material respect;
(c) Significant Distributor to terminate its business relationship with Sensor
or to limit or alter its business relationship with Sensor in any material
respect; or (d) Significant Employee intends to terminate or has terminated
his employment with Sensor. As used herein, (w) "Significant Customer" means
the 10 largest customers of Sensor measured in terms of sales volume in
dollars for the eleven month period ended November 30, 1997, (x) "Significant
Supplier" means any supplier of Sensor from whom Sensor has purchased $45,000
or more of goods during the eleven month period ended November 30, 1997 for
use in the Business; (y) "Significant Distributor" means any distributor
that, on Sensor's behalf, has distributed to other distributors, wholesalers,
retailers or end users, Sensor's products with a value in excess of $45,000
during the eleven month period ended November 30, 1997; and (z) "Significant
Employee" means the Chief Executive Officer, the Chief Operating Officer, the
President, any Vice President, the Treasurer, any sales representative or
sales manager or any other executive officer of Sensor.
29
5.29 MATERIAL ADVERSE CHANGE. Since December 31, 1996 and except as
otherwise disclosed in the Interim Financial Statements, Sensor has not
suffered or been threatened with (and none of the Contract Parties have
knowledge of any facts which may cause or result in) any material adverse
change in the business, operations, assets, liabilities, financial condition
or prospects of Sensor, including, without limiting the generality of the
foregoing, the existence or threat of a labor dispute, or any material
adverse change in, or loss of, any relationship between Sensor and any of its
key employees.
5.30 BRIBES. None of the Contract Parties nor, to the Contract Parties'
knowledge, any of Sensor's former or current officers, directors, employees,
agents or representatives has made, directly or indirectly, with respect to
Sensor or the Business, any bribes or kickbacks, illegal political
contributions, payments from corporate funds not recorded on the books and
records of Sensor, payments from corporate funds to governmental officials,
in their individual capacities, for the purpose of affecting their action or
the action of the government they represent, to obtain favorable treatment in
securing business or licenses or to obtain special concessions, or illegal
payments from corporate funds to obtain or retain business. Without limiting
the generality of the foregoing, none of the Contract Parties have directly
or indirectly made or agreed to make (whether or not said payment is lawful)
any payment to obtain, or with respect to, sales other than usual and regular
compensation to its employees and sales representatives with respect to such
sales.
5.31 ABSENCE OF INDEMNIFIABLE CLAIMS, ETC. Sensor has not received any
notice of, or has no knowledge of any losses, claims, damages, costs,
expenses, liabilities or judgements which would entitle any director, officer
or employee of Sensor to indemnification by Sensor under applicable law, the
articles of incorporation or bylaws of Sensor or any insurance policy
maintained by Sensor.
5.32 BROKERS. Except as set forth in the Disclosure Statement, none of
the Contract Parties is under any obligation to pay any financial advisory,
broker's, finder's or similar fee or commission in connection with the
transactions provided for in this Agreement.
5.33 ACCURACY AND COMPLETENESS OF INFORMATION. The representations and
warranties of the Contract Parties in this Agreement, and all
representations, warranties and statements of the Contract Parties contained
in any schedule, financial statement, exhibit, list or document delivered
pursuant hereto or in connection herewith, do not contain or will not contain
any untrue statement of material fact or do not omit to state a material fact
necessary in order to make the representations, warranties or statements
contained herein or therein not misleading. The copies of all documents
furnished by the Contract Parties to Purchaser pursuant to or in connection
with this Agreement are complete and accurate. To the best of the Contract
Parties' knowledge, the information contained in the Disclosure Statement is
complete and accurate.
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ARTICLE VI
POST-CLOSING AGREEMENTS
6.1 POST-CLOSING AGREEMENTS. From and after the Closing, the parties
shall have the respective rights and obligations which are set forth in the
remainder of this Article VI.
6.2 INSPECTION OF RECORDS. The Contract Parties, Purchaser and their
respective Affiliates shall each retain and make their respective books and
records (including work papers in the possession of their respective
accountants) available for inspection by the other party, or by its duly
accredited representatives, for reasonable business purposes at all
reasonable times during normal business hours, for a seven (7) year period
after the date hereof, upon reasonable advance written notice, with respect
to all transactions of Sensor occurring prior to and those relating to the
Closing, and the historical financial condition, assets, liabilities,
operations and cash flows of Sensor. In the case of records owned by the
Contract Parties or any of its Affiliates, such records shall be made
available at Sensor's executive offices, and in the case of records owned by
Purchaser, such records shall be made available at Purchaser's executive
office or its Massachusetts location if maintained by TCP. As used in this
Section 6.2, the right of inspection includes the right to make extracts or
copies. The representatives of a party inspecting the records of the other
party shall be reasonably satisfactory to the other party.
6.3 CERTAIN ASSIGNMENTS. Any other provision of this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
transfer or assign, or a transfer or assignment of, any claim, contract, lease,
Permit, Environmental Permit, commitment, sales order or purchase order, or any
benefit arising thereunder or resulting therefrom, if an attempt at transfer or
assignment thereof without the consent required or necessary for such
assignment, would constitute a breach thereof or in any way adversely affect the
rights of Purchaser or Sensor thereunder. If (w) any required consent to the
transfer or assignment to Purchaser of any claim, contract, lease, Permit,
Environmental Permit, commitment, sales order or purchase order is not obtained,
(x) an attempted transfer or assignment would be ineffective or would adversely
affect the rights of Purchaser or Sensor thereunder so that Purchaser would not
receive substantially all of such rights, (y) a contract is assigned to
Purchaser pursuant to the provisions hereof and the other contracting party
thereafter raises objections to the assignment and refuses to allow Purchaser to
perform the contract on the terms therein provided, or threatens to terminate
the contract or xxx for damages, or (z) a surety company issuing a bond to
Sensor objects to the completion of a sales order or contract included among the
Purchased Assets by Purchaser, Purchaser and the Contract Parties shall
cooperate in any arrangement Purchaser may reasonably request to provide for
Purchaser the benefits under such claim, contract, lease, Permit, Environmental
Permit, commitment or order. Cooperation may include, without limitation, and
at Purchaser's request shall include, an arrangement (a so-called "Seconding
Arrangement"), to be entered into between Purchaser and Sensor pursuant to which
Sensor shall nominally perform an order or contract, Purchaser shall retain the
economic benefits or detriments of the order or contract and Sensor shall
perform the order or contract with employees lent to Sensor by
31
Purchaser (which employees shall be treated as employees of Sensor during the
period of performance) and with inventory, equipment and supplies of
Purchaser necessary to complete the order or contract transferred from
Purchaser to Sensor as required. Notwithstanding the foregoing, TCP agrees
to indemnify and hold the Contract Parties harmless from any and all Damages
(as defined herein) incurred by any Contract Party in connection with any
such Seconding Arrangement, unless such Damages were caused by any Contract
Party's gross negligence or wilful misconduct.
6.4 USE OF TRADEMARKS; REFERENCES TO SENSOR. The Contract Parties
shall cease to use and shall not license or permit any third party to use the
name "SensorPulse", or any name, slogan, logo or trademark which is similar
or deceptively similar to any of the Trademarks. Purchaser may refer to its
business as formerly being Sensor's. Immediately after the Closing, the
Contract Parties shall cause Sensor to change its corporate name to a name
which is not similar or deceptively similar to "SensorPulse".
6.5 EMPLOYEES. Purchaser shall not be obligated to offer employment to
any employee of Sensor, but Purchaser shall have the right to employ
employees of Sensor as of the date hereof, on terms and conditions
established by Purchaser in its sole discretion. For a period of two (2)
years commencing on the date hereof, neither the Contract Parties nor any of
their respective Affiliates shall take any actions which are calculated to
persuade any salaried, technical or professional employees, representatives
or agents of Purchaser to terminate their association with Purchaser. In the
event that any employee of Sensor hired by Purchaser after the date hereof is
terminated by Purchaser, Purchaser shall be solely responsible for payment of
any unemployment compensation or other claims related to the termination of
such employment.
6.6 PAYMENTS OF ACCOUNTS RECEIVABLE. In the event the Contract Parties
shall receive any instrument of payment of any of the Accounts Receivable,
the Contract Parties shall forthwith deliver it to Purchaser, endorsed where
necessary, without recourse, in favor of Purchaser.
6.7 PRODUCT WARRANTIES. Purchaser will accept returns of products of
the Business shipped by Sensor on and prior to the date hereof, or which
constitute finished goods inventory on the date hereof, which are defective
or which fail to conform to the customer's order in accordance with the
following provisions (but Purchaser does not hereby assume any liability to
any third party claimant or, except as provided in this Section 6.7, to the
Contract Parties). Purchaser shall notify the Contract Parties of each such
return, specifying the customers, products and shipment orders involved and
stating whether any consequential damages are claimed to have been suffered.
If such products are defective or fail to conform to the customer's order,
Purchaser shall, at its option, repair or replace the defective or
nonconforming products in accordance with Sensor's practices in effect at the
time of shipment. Purchaser will repair, rather than replace, such products
whenever it is economically and technically practical to do so. To the
extent that the costs incurred by Purchaser to repair or replace such
products exceed any reserve for returns set forth on the Interim Financial
Statements, the reasonable costs and expenses incurred by Purchaser with
respect to such repair or replacement (which costs shall include (a) in
32
the case of repair, Purchaser's direct costs therefor, an allocable share of
manufacturing and general and administrative overhead, and shipping costs
from and to the customer; and (b) in the case of replacement, Purchaser's
direct manufacturing cost for the replaced item, including an allocable share
of manufacturing and general and administrative overhead in connection
therewith, and shipping costs to and from the customer) shall be treated as a
claim for indemnification subject to the limitations on the Contract Parties'
indemnification obligations set forth in Section 8.3(f) hereof. Payments
with respect to products which can be resold by Purchaser shall be made to
the Contract Parties not later than thirty (30) days after the date of
resale. The Contract Parties shall reimburse Purchaser for its reasonable
out-of-pocket costs (including freight out) of handling and disposing of such
defective or nonconforming products which are unsuitable for repair or sale
to other customers. At the Contract Parties' request, Purchaser shall
provide the Contract Parties with all reasonable information and
documentation in Purchaser's possession that would be helpful to the Contract
Parties in filing damage claims with any shipper of such products.
6.8 SALES AND TRANSFER TAXES AND FEES. The Contract Parties shall pay
when due from assets other than the Purchased Assets, all sales taxes and/or
use taxes, recording fees, personal property title application fees, patent
and trademark assignment registration fees, real property transfer taxes and
fees and all other taxes and fees on transfer of the Purchased Assets arising
by virtue of the sale of the Purchased Assets to Purchaser, regardless of
whether the liability for said taxes or fees is imposed by law upon the
Contract Parties or upon Purchaser.
6.9 COVENANT NOT TO COMPETE. As an inducement for Purchaser to enter into
this Agreement, each of Sensor and Xxxxxxxxxx agree that:
(a) from and after the Closing and continuing for the lesser of
five (5) years from the date hereof or the longest time permitted by
applicable law, neither Sensor or Xxxxxxxxxx nor any of their respective
Affiliates shall do any one or more of the following, directly or indirectly:
(i) engage or participate, anywhere in the continental United
States, as an owner, partner, shareholder, consultant or (without
limitation by the specific enumeration of the foregoing) otherwise in any
business which is competitive with the Business as conducted on the date
hereof or as proposed to be conducted by Sensor on the date hereof; or
(ii) solicit any customer of Purchaser which has been a customer
of Sensor within the past two (2) years, to purchase from any source other
than Purchaser any product or service of the Business.
(iii) in the event of any breach of paragraph (a) of this
Section 6.9, the time period of the breached covenant shall be extended for
the period of such breach. Each of Sensor and Xxxxxxxxxx recognizes that
the territorial, time and scope limitations set
33
forth in this Section 6.9 are reasonable and are required for the
protection of Purchaser and in the event that any such territorial, time
or scope limitation is deemed to be unreasonable by a court of competent
jurisdiction, Purchaser and each of Sensor and Xxxxxxxxxx agree to the
reduction of either or any of said territorial, time or scope limitations
to such an area, period or scope as said court shall deem reasonable under
the circumstances. Notwithstanding the foregoing, the ownership of up to
5% of the issued capital stock of any publicly traded company by itself
shall not constitute a violation of any provision of this Section 6.9.
For purposes of this Agreement, the term "Affiliate" shall mean and include
any person or entity which controls a party, which such party controls or
which is under common control with such party and, in the case of any
individual, such individual's spouse, ancestors, decedents and siblings.
"Control" means the power, direct or indirect, to direct or cause the
direction of the management and policies of a person or entity through voting
securities, contract or otherwise.
6.10 DISCLOSURE OF CONFIDENTIAL INFORMATION. As a further inducement
for Purchaser to enter into this Agreement, each Contract Party agrees that
for a period of five (5) years after the date hereof, each Contract Party
shall, and shall cause their respective Affiliates to, hold in strictest
confidence, and not, without the prior written approval of Purchaser, use for
their own benefit or the benefit of any party other than Purchaser or
disclose to any person, firm or corporation other than Purchaser (other than
as required by law) any Confidential Information. For purposes of this
Agreement, intending that the term shall be broadly construed to include
anything protectible as a trade secret or confidential information under
applicable law, "Confidential Information" shall mean all information, and
all documents and other tangible items which record information relating to
or useful in connection with Purchaser's business (including the business of
any of Purchaser's Affiliates), which at the time or times concerned is
protectible as a trade secret or confidential information under applicable
law which has not otherwise entered the public domain through no fault of any
Contract Party and which has been or is from time to time disclosed to or
known by each Contract Party either before or after the date hereof.
6.11 INJUNCTIVE RELIEF. Each Contract Party specifically recognizes
that any breach of Sections 6.4, 6.5, 6.9 or 6.10 will cause irreparable
injury to Purchaser and that actual damages may be difficult to ascertain,
and in any event, may be inadequate. Accordingly (and without limiting the
availability of legal or equitable, including injunctive, remedies under any
other provisions of this Agreement), each Contract Party agrees that in the
event of any such breach, Purchaser shall be entitled to injunctive relief in
addition to such other legal and equitable remedies that may be available.
Each Contract Party and Purchaser agree that in the event that the time
limitations set forth in Sections 6.09 and 6.10 is deemed to be unreasonable
by a court of competent jurisdiction, each Contract Party agrees and submits
to the imposition of such a limitation as said court shall deem reasonable.
6.12 FURTHER ASSURANCES. The parties shall execute such further documents,
and perform such further acts, as may be reasonably necessary to transfer and
convey the Purchased
34
Assets to Purchaser, on the terms herein contained, and to otherwise comply
with the terms of this Agreement and consummate the transaction contemplated
hereby.
ARTICLE VII
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
7.1 EMPLOYEES. Effective as of the date hereof, employees of Sensor
who accept employment with Purchaser (the "Employees") shall cease to be
employees of Sensor and shall thereafter become employees of Purchaser. The
Contract Parties shall bear the full cost and expense of any entitlement to
benefits due to Employees under the Plans, Welfare Plans or Employee Benefit
Plans of Sensor. The Contract Parties shall bear the full cost and expense
(including the costs of defense, administration, audit and response to
inquiries or allegations of governmental regulators and/or aggrieved
participants, employees or beneficiaries), fines, taxes, excise taxes, awards
of compensatory, actual or punitive damages or plaintiffs' legal fees,
attributable to actual or alleged legal noncompliance, mismanagement,
misadministration, fiduciary or contractual breach, error or omissions under
any of Sensor's Plans, Welfare Plans or Employee Benefit Plans.
7.2 PLAN ASSUMPTION/TERMINATION. Purchaser shall not undertake to
assume the sponsorship of or liabilities under any of Sensor's Plans, Welfare
Plans or Employee Benefit Plans. Purchaser will attempt, subject to
availability, cost considerations and other material business considerations
identified at the Purchaser's discretion, to establish for Employees a
commercially insured medical benefits plan similar to Sensor's commercially
insured medical benefits plan, but it is not intended by the parties that any
such plan established or previously maintained by Purchaser will be a
continuation or assumption of the plan of Sensor or that Purchaser will be a
successor in interest to Sensor with respect to such a plan. At Purchaser's
request, Sensor will use all necessary or appropriate efforts to accomplish
the assignment of the medical benefits insurance policy owned by Sensor to
Purchaser. The Employees are not intended to be third party beneficiaries of
Purchaser's obligations under this Section 7.2.
7.3 CLAIM ASSUMPTION. With respect to all claims which have been
incurred prior to the date hereof, regardless whether reported, such claims
shall be processed through and paid under Sensor's Welfare Plans (including
for this purpose, any educational reimbursement or assistance program). For
this purpose, a claim shall be deemed incurred (i) with respect to medical
benefits, other than as described in (ii) below, at the time services or
materials are received; (ii) with respect to benefits for hospital or nursing
home confinement, including doctors' visits, nursing services and other
services and supplies furnished in conjunction with the confinement, at the
time the confinement commenced; (iii) with respect to life or survivor
benefits, at the time of the death; (iv) with respect to short- or long-term
disability or accident and sickness benefits, at the time the disability
commenced; (v) with respect to amounts payable under workers' compensation or
other similar laws, at the time the disability, accident or illness
35
commenced; and (vi) with respect to tuition or educational reimbursements, at
the time the class or program commenced. With respect to any employee of
Sensor who is not actively at work on the date hereof (for reasons other than
normal scheduling or vacation), including former employees who terminated or
retired prior to the date hereof, employees on leave of absence for medical
or other reasons, and employees on layoff, Sensor shall remain responsible
for and continue any applicable welfare benefit plan coverage until such
time, if any, as such employee returns to active service with Purchaser.
Sensor shall also remain responsible for and continue to provide any
applicable health care continuation coverage under section 4980B of the Code
to employees or their dependents if the "qualifying event" (as defined in
section 4980B(f)(3) of the Code) occurred prior to Closing.
7.4 SEVERANCE TREATMENT. Sensor shall be responsible for any severance
or other similar benefit payable to any Employee on account of the
transaction contemplated hereby under any severance plans, programs or
arrangements which Sensor may have maintained. Sensor agrees to indemnify
Purchaser for and against any and all claims, expenses and losses for
severance or other similar benefit which it might incur as a result of this
transaction.
ARTICLE VIII
INDEMNIFICATION
8.1 GENERAL. From and after the Closing, the parties shall indemnify
each other as provided in this Article VIII. No specifically enumerated
indemnification obligation with respect to a particular subject matter as set
forth below shall limit or affect the applicability of a more general
indemnification obligation as set forth below with respect to the same
subject matter.
8.2 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the indicated meanings:
(a) "Damages" shall mean all liabilities, demands, claims, actions
or causes of action, regulatory, legislative or judicial proceedings or
investigations, assessments, levies, losses, fines, penalties, damages, costs
and expenses (net of any income tax benefits), including, without limitation,
reasonable attorneys', accountants', investigators', and experts' fees and
expenses, sustained or incurred in connection with the defense or
investigation of any such claim; provided, however, that the term Damages
shall specifically exclude any consequential damages, including consequential
damages consisting of business interruption or lost profits, or punitive
damages;
(b) "Indemnified Party" shall mean a party hereto who is entitled
to indemnification from another party hereto pursuant to this Article VIII;
(c) "Indemnifying Party" shall mean a party hereto who is required to
provide indemnification under this Article VIII to another party hereto; and
36
(d) "Third Party Claims" shall mean any claims for Damages which
are asserted or threatened by a party other than the parties hereto, their
successors and permitted assigns, against any Indemnified Party or to which
an Indemnified Party is subject.
8.3 INDEMNIFICATION OBLIGATIONS OF THE CONTRACT PARTIES. The Contract
Parties shall, jointly and severally, indemnify, save and keep harmless
Purchaser and TCP and each of their respective successors and permitted
assigns against and from all Damages sustained or incurred by any of them
resulting from or arising out of or by virtue of:
(a) any inaccuracy in or breach of any representation and warranty
made by any Contract Party in this Agreement or in any of the Ancillary
Documents;
(b) any breach by any Contract Party of, or failure by any
Contract Party to comply with, any of its respective covenants or obligations
under this Agreement (including, without limitation, their respective
obligations under this Article VIII);
(c) the failure to discharge when due any liability or obligation
of any of the Contract Parties other than the Assumed Liabilities, or any
claim against Purchaser or TCP with respect to any such liability or
obligation or alleged liability or obligation;
(d) any Third Party Claims to the extent caused by the acts or
omissions of the Contract Parties prior to the date hereof and not
constituting an Assumed Liability, including, without limitation, Damages
which arise out of the Contract Parties' operation of the Business prior to
the date hereof; and
(e) without being limited by paragraphs (a), (b), (c) or (d) of this
Section 8.3 (and without regard to the fact that any one or more of the items
referred to in this Section 8.3(e) may be disclosed in the Disclosure Statement
or in any documents included or referred to therein or may be otherwise known to
Purchaser or TCP at the date hereof), (i) any action or failure to act, in whole
or in part, on or prior to the date hereof, with respect to any Plan, Welfare
Plan or Employee Benefit Plan which Sensor or any ERISA Affiliate of Sensor has
at any time maintained or administered or to which Sensor or any ERISA Affiliate
of Sensor has at any time contributed; (ii) the violation of any Environmental
Law or the presence or release of any Hazardous Materials upon, about or beneath
the Leased Premises or any other real property used in connection with the
conduct of the Business at any time prior to the date hereof or the migration to
or from the Leased Premises or any other real property used in connection with
the conduct of the Business at any time prior to the date hereof, or arising in
any manner whatsoever out of the violation of any Environmental Law pertaining
to the Leased Premises or any other real property used in connection with the
conduct of the Business at any time prior to the date hereof and the activities
thereon, whether foreseeable or unforeseeable, provided such violation commenced
prior to the date hereof; (iii) any liability for Taxes owed by any Contract
Party (whether or not shown on any Return) or any Affiliate of any Contract
Party that were due and payable on or prior to the date
37
hereof; (iv) any inaccuracy in the representations set forth in Section 5.14
hereof; or (v) any violation of, or delinquency in respect to, any decree,
order or arbitration award or law, statute, or regulation in effect on or
prior to the date hereof of, or agreement of any Contract Party with, or any
license or Permit granted to any the Contract Parties from, any Governmental
Authority to which the Purchased Assets are subject, including, without
limitation, laws, statutes and regulations relating to occupational health
and safety, equal employment opportunities, fair employment practices and
discrimination.
(f) notwithstanding anything to the contrary contained in this
Section 8.3, (i) TCP and Purchaser shall only be entitled to indemnification
pursuant to Section 8.3 hereof once their aggregate claims for
indemnification exceed $25,000, but after such claims exceed such amount, TCP
and Purchaser shall be entitled to seek indemnification for all
indemnification claims from the first dollar of Damages; and (ii) the
Contract Parties' aggregate indemnification obligations pursuant to Section
8.3(a) shall be limited to the sum of $1,750,000 (reduced by the amount of
the Purchase Price Adjustment set forth in Section 3.5, if any) plus the
aggregate amount of Contingent Consideration, if any, paid or otherwise owed
by Purchaser to Sensor pursuant to the terms of Article III hereof (the
"Indemnification Limit").
8.4 TCP'S AND PURCHASER'S INDEMNIFICATION COVENANTS. TCP and Purchaser
jointly and severally shall indemnify, save and keep harmless the Contract
Parties and their respective successors and permitted assigns against and
from all Damages sustained or incurred by any of them resulting from or
arising out of or by virtue of:
(a) any inaccuracy in or breach of any representation and warranty
made by TCP or Purchaser in this Agreement or in any Purchaser Ancillary
Document;
(b) any breach by TCP or Purchaser of, or failure by TCP or
Purchaser to comply with, any of their respective covenants or obligations
under this Agreement (including, without limitation, their respective
obligations under this Article VIII);
(c) Purchaser's failure to pay, discharge and perform any of the
Assumed Liabilities when due; or
(d) any Third Party Claims to the extent caused by the acts or
omissions of Purchaser after the date hereof and not constituting an Excluded
Liability, including, without limitation, Damages which arise out of
Purchaser's operation of the Business after the date hereof.
(e) notwithstanding anything to the contrary contained in this
Section 8.4, (i) the Contract Parties shall only be entitled to indemnification
pursuant to Section 8.4 hereof once their aggregate claims for indemnification
exceed $25,000, but after such claims exceed such amount, the Contract Parties
shall be entitled to seek indemnification for all indemnification claims
38
from the first dollar of Damages; and (ii) TCP's and Purchaser's aggregate
indemnification obligation pursuant to Section 8.4(a) shall be limited to the
amount of the Indemnification Limit.
8.5 COOPERATION. Subject to the provisions of Section 8.8, the
Indemnifying Party shall have the right, at its own expense, to participate
in the defense of any Third Party Claim, and if said right is exercised, the
parties shall cooperate in the investigation and defense of said Third Party
Claim.
8.6 SUBROGATION. The Indemnifying Party shall not be entitled to
require that any action be brought against any other person before action is
brought against it hereunder by the Indemnified Party but shall be subrogated
to any right of action to the extent that it has paid or successfully
defended against any Third Party Claim.
8.7 THIRD PARTY CLAIMS SUBJECT TO INDEMNIFICATION.
(a) Promptly following the receipt of notice of a Third Party
Claim, the party receiving the notice of the Third Party Claim shall notify
the other party hereto of such Third Party Claim. The failure to give such
notice shall not relieve the Indemnifying Party of its obligations under this
Agreement except to the extent that the Indemnifying Party is materially
prejudiced as a result of the failure to give such notice. Within fifteen
business days after receipt of the notice by the Indemnifying Party pursuant
to the preceding sentence, the Indemnifying Party shall notify the
Indemnified Party whether it elects to control the defense of the Third Party
Claim. If the Indemnifying Party elects to undertake the defense of such
Third Party Claim, it shall do so at its own expense with counsel of its own
choosing and it shall acknowledge in writing without qualification its
indemnification obligations as provided in this Agreement to the Indemnified
Party as to such Third Party Claim. If the Indemnifying Party elects not to
defend the Third Party Claim or does not diligently pursue such Third Party
Claim, the Indemnified Party shall have the right to undertake, conduct and
control the defense of such Third Party Claim through counsel of its own
choosing. The party that litigates or contests the Third Party Claim shall
keep the other party fully advised of the progress and disposition of such
claim.
(b) In the event the Indemnifying Party elects not to undertake
the defense of the Third Party Claim or fails to pursue diligently the
defense of such a claim and the Indemnified Party litigates or otherwise
contests or settles the Third Party Claim, then, provided that a final
determination has been made that the Indemnified Party is entitled to
indemnification hereunder, the Indemnifying Party shall promptly reimburse
the Indemnified Party for all amounts paid to settle such claim or all
amounts paid in satisfaction of a judgment against the Indemnified Party in
contesting such claim and in providing its right to indemnification
hereunder, all in accordance with the provisions of this Article VIII.
(c) No Third Party Claim will be settled by the Indemnifying Party or
by any Indemnified Party without the written consent of the other party hereto,
which consent will not be unreasonably withheld; provided, however, that if the
Indemnified Party shall be fully released
39
from all liability relating to such Third Party Claim in connection with such
settlement, the Indemnifying Party shall not be required to obtain the
consent of the Indemnified Party prior to settling any such claim. If,
however, the Indemnified Party refuses to consent to a bona fide offered
settlement which the Indemnifying Party wishes to accept, the Indemnified
Party may continue to pursue such Third Party Claim free of any participation
by the Indemnifying Party, at the sole expense of the Indemnified Party. In
such event, the Indemnifying Party shall pay to the Indemnified Party the
amount of the offer of settlement which the Indemnified Party refused to
accept, plus the reasonable costs and expenses incurred by the Indemnified
Party prior to the date the Indemnifying Party notifies the Indemnified Party
of the offer of settlement, all in accordance with the terms of this Article
VIII, and, upon the payment or receipt of such amount, as the case may be,
the Indemnifying Party shall have no further liability with respect to such
Third Party Claim. The Indemnifying Party shall be entitled to recover from
the Indemnified Party any additional expenses incurred by such Indemnifying
Party as a result of the decision of the Indemnified Party to pursue the
matter.
8.8 THIRD PARTY CLAIMS NOT SUBJECT TO INDEMNIFICATION. Each Contract
Party, Purchaser and TCP shall cooperate with each other with respect to the
defense of any claims or litigation made or commenced by third parties
subsequent to the date hereof which are not subject to the indemnification
provisions contained in this Article VIII, provided that the party requesting
cooperation shall reimburse the other party for the other party's reasonable
out-of-pocket costs and expenses of furnishing such cooperation.
8.9 SET-OFF. Upon the final resolution of a claim for indemnification
pursuant to this Article VIII, TCP and/or Purchaser may, in their sole
election, set off either of their right to receive payment under this
Agreement from any Contract Party, whether for a Contract Parties' breach or
otherwise, against amounts owed by TCP and/or Purchaser to such Contract
Party pursuant to the terms of this Agreement, on a dollar for dollar basis,
with any such set off being effective upon the final resolution of such claim
for indemnification.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by
mail shall be deemed given three (3) business days after being deposited in
the United States mail, postage prepaid, registered or certified mail.
Notices delivered by hand by facsimile, or by nationally recognized private
carrier shall be deemed given on the first business day following receipt;
provided, however, that a notice delivered by facsimile shall only be
effective if such notice is also delivered by hand, or deposited in the
United States mail, postage prepaid, registered or certified mail, on or
before two (2) business days after its delivery by facsimile. All notices
shall be addressed as follows:
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If to any Contract Party:
SensorPulse Corp.
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxxxxxx & XxXxxxxxxx, P.C.
50 Braintree Hill Office Park
P.O. Box 850699
Braintree, Massachusetts 02185-0699
Attn: Xxxxxxx X. Xxxxxxxxxxx
Fax: (000) 000-0000
If to Purchaser or TCP:
Total Control Products, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxx
Attention: Xxxxxxxx Xxxx, President
Fax: (000) 000-0000
with a copy to:
X'Xxxxxx & Xxxxxx
00 Xxxxx XxXxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Fax: (000) 000-0000
and/or to such other respective addresses and/or addressees as may be
designated by notice given in accordance with the provisions of this
Section 9.1.
9.2 EXPENSES; TRANSFER TAXES. Except as otherwise provided herein,
each party hereto shall bear all fees and expenses incurred by such party in
connection with, relating to or arising out of the negotiation, preparation,
execution, delivery and performance of this Agreement and the consummation of
the transaction contemplated hereby, including, without limitation,
attorneys', accountants' and other professional fees and expenses.
41
9.3 ENTIRE AGREEMENT. This Agreement and the instruments to be
delivered by the parties pursuant to the provisions hereof constitute the
entire agreement between the parties and shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns. Each Exhibit, Schedule and the Disclosure
Statement, shall be considered incorporated into this Agreement. Any
amendments, or alternative or supplementary provisions to this Agreement must
be made in writing and duly executed by an authorized representative or agent
of each of the parties hereto.
9.4 SURVIVAL; NON-WAIVER. All representations and warranties shall
survive the Closing for a period of three years regardless of any
investigation or lack of investigation by any of the parties hereto;
provided, however, that the representations and warranties contained in
Sections 5.1, 5.5, 5.14, 5.22 and 5.25 shall survive the Closing forever.
The failure in any one or more instances of a party to insist upon
performance of any of the terms, covenants or conditions of this Agreement,
to exercise any right or privilege in this Agreement conferred, or the waiver
by said party of any breach of any of the terms, covenants or conditions of
this Agreement, shall not be construed as a subsequent waiver of any such
terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or
waiver had occurred. No waiver shall be effective unless it is in writing
and signed by an authorized representative of the waiving party. A breach of
any representation, warranty or covenant shall not be affected by the fact
that a more general or more specific representation, warranty or covenant was
not also breached.
9.5 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
9.6 SEVERABILITY. The invalidity of any provision of this Agreement
or portion of a provision shall not affect the validity of any other
provision of this Agreement or the remaining portion of the applicable
provision.
9.7 APPLICABLE LAW. This Agreement shall be governed and controlled
as to validity, enforcement, interpretation, construction, effect and in all
other respects by the internal laws of the State of Massachusetts applicable
to contracts made in that State.
9.8 BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto, and their
respective successors and permitted assigns any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
9.9 ASSIGNABILITY. This Agreement shall not be assignable by either
party without the prior written consent of the other party.
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9.10 AMENDMENTS. This Agreement shall not be modified or amended
except pursuant to an instrument in writing executed and delivered on behalf
of each of the parties hereto.
9.11 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
9.12 REPRESENTATION. Each of the parties acknowledges that (i) each
party has had an opportunity to consult with independent legal counsel
concerning the terms of this Agreement before executing it; (ii) it fully
understands all of the terms and conditions of this Agreement; and (iii) it
is entering into this Agreement knowingly and voluntarily and without
coercion, promises or representations not expressly contained herein.
9.13 ARBITRATION. Except as otherwise provided in Sections 3.5, 3.6
and 6.11 hereof, all disputes, differences, or questions arising out of or
relating to this Agreement, or the validity, interpretation, breach,
violation or termination thereof (including disputes arising under this
Clause), shall be finally and solely determined and settled by arbitration in
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. Such arbitration shall be conducted by
a panel of three arbitrators, one of which shall be selected by Sensor and
one of which shall be selected by Purchaser. The two arbitrators so selected
shall mutually appoint a third arbitrator. If any Party hereto fails to
appoint an arbitrator within twenty (20) days of its receipt of notice of a
dispute, the other Party hereto shall select the arbitrator that was to be
selected by such delinquent party. In any such arbitration proceedings, the
arbitrators shall adopt and apply the provisions of the Federal Rules of
Civil Procedure relating to discovery so that each party shall allow and may
obtain discovery of any matter not privileged which is relevant to the
subject matter involved in the arbitration to the same extent as if such
arbitration were a civil action pending in a United States District Court.
The arbitrators may proceed to an award notwithstanding the failure of any
Party to participate in such proceedings. The prevailing Party in the
arbitration proceeding shall be entitled to an award of reasonable attorney
fees incurred in connection with the arbitration in such amount as may be
determined by the arbitrators. The award of the arbitrators shall be (i) the
sole and exclusive remedy of the Parties, (ii) enforceable in any court of
competent jurisdiction and (iii) final and binding on the Parties. Each
Party irrevocably consents to personal jurisdiction and to ex parte action
should any Party refuse to participate in such proceedings. Notwithstanding
the foregoing, nothing herein shall preclude a Party from seeking appropriate
injunctive or other interlocutory relief in any court of competent
jurisdiction to enforce its rights hereunder.
43
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SENSORPULSE CORP. SPC ACQUISITION, INC.
By:_______________________________ By:_______________________________
Title:____________________________ Title:____________________________
TOTAL CONTROL PRODUCTS, INC.
__________________________________
Xxxxx Xxxxx
By:_______________________________
Title:____________________________
___________________________________
Xxxxxxx Xxxxxxxxxx
44
