Exhibit 99.2
ASSET PURCHASE AGREEMENT
This asset purchase agreement is made as of February 8, 2000 by and
among MMW ACQUISITION, LLC, a Massachusetts limited liability company, (the
"Buyer"), and TELAXIS COMMUNICATIONS CORPORATION, a Massachusetts corporation,
(the "Seller"). The Buyer and the Seller are referred to collectively herein as
the "Parties".
Recitals:
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The Seller desires to sell the business of development, manufacture,
testing, and worldwide sales of millimeter wave products, including components,
assemblies, instrumentation, test equipment and end use applications that cover
the range of frequencies from 18 GHz to beyond 300 GHz for commercial,
industrial and military applications, and other activities, all as from time to
time engaged in by the Seller's Millitech division, but excluding the business
of its so-called "Special Programs Group" (the "Business").
The Buyer wishes to acquire certain assets of the Seller utilized in
the operation of the Business, and the Seller is willing to sell such assets to
the Buyer, on the terms and conditions set forth in this agreement.
The Buyer shall initially be owned 90% by Xxxxxxx X. Xxxxxx and Xxxxx
X. Xxxxxxx, and 10% by the Seller or its nominee.
Agreement:
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In consideration of this agreement and the mutual promises herein made
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by each of the Parties, the Parties agree as follows:
1. Definitions.
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"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller used exclusively in the Business including (a)
tangible personal property, including Equipment and Inventory, (b)
Intellectual Property, (c) leases, subleases, and rights thereunder,
(d) agreements, contracts, indentures, mortgages, instruments, Security
Interests, guaranties, other similar arrangements, and rights
thereunder, (e) current assets (as that term is used under GAAP), (f)
claims, deposits, prepayments, refunds, causes of action, choses in
action, rights of recovery, rights of set off, and rights of
recoupment, (g) franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, and similar rights obtained
from governments and governmental agencies, and (h) books, records,
ledgers, files, documents, correspondence, lists, plats, architectural
plans,
drawings, and specifications, creative materials, advertising and
promotional materials, studies, reports, and other printed or written
materials; and all right title, and interest of the Seller in the
assets of the Seller listed on Schedule 1 hereto; provided, however,
that Acquired Assets shall exclude cash, any tax refunds due the
Seller, corporate minute books, stock transfer records, and any assets
listed on Schedule 2 hereto. Acquired Assets shall include the assets
listed on Schedules 2(b)(x) and 2(b)(xi) hereto, even though title to
such assets will be transferred to the Buyer as provided in Sections
2(b)(x) and (xi) below.
"Adjustment Net Current Assets" has the meaning set forth in Section
2(b)(vi).
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement or contribution, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court
costs and attorneys' fees and expenses.
"Assumed Debt" means the Debt described on Schedule 2(a)(2).
"Assumed Liabilities" means Assumed Debt and the executory obligations
described on Schedule 2(a)(1).
"Business" has the meaning set forth in the preface above.
"Buyer" has the meaning set forth in the preface above.
"Buyer Affiliate" shall mean any Person (a) of which the Buyer is a
direct or indirect subsidiary of any tier, or that directly or
indirectly controls the Buyer, (b) that is a direct or indirect
subsidiary of any tier of the Buyer or that Buyer directly or
indirectly controls, or (c) that is under direct or indirect common
control with the Buyer.
"Buyer Indemnitees" means the Buyer and the Buyer Affiliates and their
respective directors, officers, stockholders, affiliates, employees,
agents, successors and assigns.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
Business that is not already generally available to the public.
"Covenant Not to Compete" shall mean the covenants not to compete
described in Section 5(b) below.
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"Debt" means (a) indebtedness or liability for borrowed money; (b)
obligations evidenced by bonds, debentures, notes, or other similar
instruments; (c) obligations for the deferred purchase price of
property or services (including trade obligations); (d) obligations as
lessee under capital leases; (e) current liabilities in respect of
unfunded vested benefits under plans covered by ERISA; (f) obligations
under letters of credit and acceptance facilities; (g) all guaranties,
endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any person or
entity, or otherwise to assure a creditor against loss; (h) obligations
secured by any liens, whether or not the obligations have been assumed;
(i) the remaining contract values for service or rental fees pre-paid
by any customers of the Seller, and (j) any other Liabilities, whether
or not incurred in the Ordinary Course of Business, including any
prepayment penalties and charges resulting from prepayment of any Debt
and any accrued interest on any Debt.
"Disclosure Schedule" means the disclosure schedule delivered by the
Seller to the Buyer on the date hereof pursuant to Section 4 below.
"Employee Benefit Plan" has the meaning set forth in Section 4(u)
below.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act of 1976, and OSHA, each as amended from
time to time, together with all other laws, including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder, as amended from time to time, of
federal, state, local, and foreign governments and all agencies thereof
concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials,
substances or wastes to the environment, including to ambient air,
surface water, ground water, or lands, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials, substances or
wastes.
"Environmental Site Loss" shall mean the entire amount of any Adverse
Consequences any of the Buyer Indemnities may suffer directly or
indirectly, however arising, as a result of actions or omissions taken
or omitted prior to the Closing, and that in any way relate to any site
(i) to or at which the Seller, a Seller Affiliate, or any predecessor
to the Seller or a Seller Affiliate generated, handled, manufactured,
treated, stored, used, transported, caused the transportation of,
transferred, or disposed of, or allowed or arranged by agreement or
otherwise for any third party to generate, handle, manufacture, treat,
store, use, transport, cause the transport of, transfer, or dispose of,
any Hazardous Substance, and which pursuant to any Environmental,
Health, and Safety Laws has been placed or which in the future may be
placed on the National Priorities List or its state
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equivalent, or (ii) with respect to which the Seller, a Seller
Affiliate, or any predecessor to the Seller or a Seller Affiliate or,
as the result of the acquisition described in this agreement, any Buyer
Indemnitee may be named a potentially responsible party or otherwise is
or is alleged to be or held to be liable or responsible for corrective
action to such site under any Environmental, Health, and Safety Laws on
account of any act or omission that occurred prior to the Closing.
"Equipment" means all tangible personal property that is not (i)
Inventory, (ii) supplies consumed in the Ordinary Course of Business,
(iii) office furniture or furnishings, or (iv) records of the Business
on paper.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statement" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Permits" has the meaning set forth in Section 4(j) below.
"Hazardous Substance" has the meaning set forth in Section 4(w) below.
"Indemnified Party" has the meaning set forth in Section 7(c) below.
"Indemnifying Party" has the meaning set forth in Section 7(c) below.
"Intellectual Property" means all inventions, patents, copyrights,
trademarks, service marks, trade dress, logos, trade names and
corporate names, trade secrets and confidential business information
(including customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), computer software,
other proprietary rights, and all copies and tangible embodiments
thereof, in whatever form or medium, including the exclusive right to
use the name "Millitech Corporation", "Millitech" or any derivative
thereof, any other name under which the Seller operates the Business,
goodwill associated therewith and with the Business, licenses and
sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions,
but excluding the right to use the name "Telaxis" or "Telaxis
Communications Corporation" or any derivative thereof and the logo
illustrated on Appendix 1 hereto, but without regard to colors.
"Inventory" means all (a) tangible personal property held by the Seller
for sale or lease in the ordinary course of operating the Business, or
furnished or to be furnished under contracts of service, or (b) raw
materials, goods in process or materials used or consumed in the
Business.
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"Knowledge" means actual knowledge after reasonable investigation;
provided, that with respect to the Seller, Knowledge shall be limited
to the Knowledge of any of its officers or managers, including managers
of the Seller's Millitech division, and with respect to the Buyer,
Knowledge shall be limited to the Knowledge of Xxxxxxx Xxxxxx or Xxxxx
Xxxxxxx.
"Liability" means any liability, whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, or due or to become due, including any liability for
Taxes.
"Note" has the meaning set forth in Section 2(b)(ii) below.
November 27, 1999 Balance Sheet has the meaning set forth in Section
4(g) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice, including with respect to
quantity and frequency.
"OSHA" means the Occupational Health and Safety Act of 1970, as amended
from time to time.
"Other Agreement" means each and any other agreement, document,
instrument, certificate, exhibit, appendix or schedule containing
representations, warranties or covenants, executed by the Seller or by
any Seller Affiliate, and delivered to the Buyer or any Buyer Affiliate
pursuant to the provisions of this agreement.
"Parties" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political
subdivision thereof), or any other entity recognized under the laws of
any state.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"Seller" has the meaning set forth in the preface above.
"Seller Affiliate" shall mean any Person (a) of which the Seller is or
at any time was a direct or indirect subsidiary of any tier, or that
directly or indirectly controls or at any time controlled the Seller,
(b) that is or at any time was a direct or indirect subsidiary of any
tier of the Seller or that the Seller directly or indirectly controls
or at any time
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controlled, or (c) that is or at any time was under direct or indirect
common control with the Seller.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimate, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Amount" has the meaning set forth in Section 7(b)(iii) below.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 7(c) below.
"Zoning Hold-back" has the meaning set forth in Section 2(b)(ix).
2. Purchase and Sale of Assets.
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(a) Purchase of Assets and Assumption of Certain Liabilities. On and
subject to the terms and conditions of this agreement, (i) the Buyer
shall acquire from the Seller, and the Seller shall sell to the Buyer,
all of the Seller's right, title and interest in the Acquired Assets,
including the assets listed on Schedules 2(b)(x) and 2(b)(xi) hereto,
for the consideration specified below in this Section 2; and (ii) the
Buyer shall assume only those executory obligations of the Seller that
relate exclusively to periods of operation after the Closing and that
are specifically identified in Schedule 2(a)(1) hereto and shall assume
only such Debt as is identified on Schedule 2(a)(2) hereto. The Buyer
shall not assume or have any other liability whatsoever for any other
Liability or obligation of the Seller. The Seller shall not represent
to any Person that the Buyer will assume or has assumed liability for
any Debt, obligation or Liability other than those specifically assumed
by the Buyer under this agreement.
(b) Acquisition Price. The Buyer shall pay to the Seller the sum of
$2,790,000, subject to adjustments and reductions described herein,
(the "Purchase Price") for the Acquired Assets, including the assets
listed on Schedules 2(b)(x) and 2(b)(xi) hereto, and the Covenant Not
to Compete, as follows:
i) The sum of $1,604,000 further adjusted as follows, shall be
paid to the Seller in cash at the Closing.
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ii) The sum of $824,000, further adjusted as provided in
Section 8(r) below shall be payable pursuant to a note in the
form set forth in Appendix 2(b)(ii) (the "Note"), which shall
be delivered to the Seller at the Closing.
iii) Unless the Parties agree on a different method of
payment, all cash payments due the Seller shall be paid by
wire as instructed by the Seller or by certified or cashier's
check.
iv) The Purchase Price payable at the Closing shall be
decreased by the amount of any Debt of the Seller (but only to
the extent that such Debt would be considered debt for
purposes of GAAP) that is paid by the Buyer at or prior to the
Closing, except Assumed Debt. The Purchase Price shall further
be reduced by, and the Buyer may set off against amounts due
under the Note, the amount of any Debt of the Seller paid or
assumed by the Buyer after the Closing with the approval of
the Seller.
v) By the tenth business day following the Closing, the Buyer
and the Seller shall complete a physical inventory and
inspection of all items of Equipment listed on Section 4(n)(i)
of the Disclosure Schedule. The Purchase Price shall be
reduced by the fair market value of each item of Equipment so
listed that is missing. By the 90th day following the Closing,
the Buyer shall in writing notify the Seller of the amount of
any proposed reduction pursuant to this Section 2(b)(v). If
within 10 days after the Buyer delivers such notice the Seller
has not by a writing received by the Buyer contested such
proposed reduction, the Seller shall be deemed to have agreed
thereto. If the Seller timely delivers a writing contesting
such proposed reduction, the Buyer or the Seller may invoke
the following dispute resolution provisions by giving the
other written notice of its or their intent to do so:
(A) The parties shall attempt in good faith to
resolve promptly any such dispute by negotiations
among executives of the Buyer and Seller who have
authority to settle the dispute. Within 10 days after
delivery of such notice, such executives shall meet
at mutually acceptable times and places, and as often
as they reasonably deem necessary, to attempt to
resolve the dispute. Such meeting may be held in
person, by telephone conference, or in any other
mutually acceptable manner. All negotiations pursuant
to this paragraph shall be confidential and shall be
treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state
rules of evidence. If the dispute has not been
resolved within 30 days after the delivery of such
notice, or if the parties have not met within 10 days
as provided in this paragraph, either party to the
dispute may initiate mediation of the dispute as
provided in the next paragraph by delivery of written
notice to the other party to the dispute.
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(B) Upon delivery of such notice initiating
mediation, the Buyer and the Seller shall endeavor in
good faith to settle the dispute by mediation in
accordance with this paragraph. A neutral mediator
shall be selected by mutual agreement of the Buyer
and the Seller. If they cannot agree on a mediator,
they shall seek the assistance of CPR Institute for
Dispute Resolution to aid them in the selection
process. The entire mediation process shall be
confidential and neither the parties to the mediation
nor the mediator shall disclose to any person who is
not directly involved in the mediation process on
behalf of a party any information regarding the
process, contents, settlement terms or outcome of the
proceeding. The mediation shall be non-binding and
shall be treated as compromise and settlement
negotiations for purposes of the Federal Rules of
Evidence and state rules of evidence.
(C) If the dispute has not been resolved within 45
days after the delivery of the notice initiating
mediation, then the Buyer and the Seller may pursue
any dispute resolution methods available to them,
including litigation. If either the Buyer or the
Seller will not participate in the mediation, the
other party may initiate litigation before expiration
of the above period. While this Section 2(b)(v)
describes the methods for resolution of disputes
arising under this Section 2(b)(v), nothing herein
shall prevent a party from seeking equitable or other
judicial relief to avoid irreparable damage or to
preserve the status quo. The Buyer and the Seller
shall participate in good faith in the procedures
described in this Section 2(b)(v) despite the
existence or outcome of any action to seek such
equitable or other judicial relief.
(D) All applicable statutes of limitation and
defenses based upon the passage of time shall be
tolled while the procedures set forth in paragraphs
(A) and (B) of this Section 2(b)(v) are pending. The
parties shall take such action, if any, required to
effectuate such tolling.
vi) The Acquisition Price shall be adjusted on account of
Adjustment Net Current Assets as follows:
(A) At the Closing, the Seller shall deliver to the
Buyer an estimate of the Adjustment Net Current
Assets of the Business as of the Closing ("Estimated
Adjustment Net Current Assets"). If (x) the Estimated
Adjustment Net Current Assets of the Business minus
(y) the amount of the Adjustment Net Current Assets
of the Business as shown on the November 27, 1999
Balance Sheet attached hereto as a part of Appendix
4(g) is a positive amount in excess of $50,000, then
the amount payable to the Seller at the Closing shall
be increased by such excess (such increase is
hereinafter referred to as the "Tentative Increase").
If such difference is a
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negative amount in excess of $50,000, then the amount
payable to the Seller at the Closing shall be
decreased by such excess (such decrease is
hereinafter referred to as the "Tentative Decrease").
(B) Within 120 days after the Closing, the Buyer
shall deliver to the Seller a final schedule and
calculation of the Adjustment Net Current Assets as
of the Closing and a copy of the Buyer's work papers
utilized in making such calculation (the "Final
Calculation"). The provisions of Section 8(p) shall
apply in resolving any differences concerning the
Final Calculation.
(C) If (x) the Adjustment Net Current Assets of the
Business as so determined minus (y) the amount of the
Adjustment Net Current Assets of the Business as
shown on the November 27, 1999 Balance Sheet attached
hereto as a part of Appendix 4(g) is a positive
amount in excess of $50,000, then the Purchase Price
shall be increased by such excess. If such difference
is a negative amount in excess of $50,000, then the
Purchase Price shall be decreased by such excess. If
(x) the amount of any such increase in the Purchase
Price exceeds the Tentative Increase or (y) the
amount of the Tentative Decrease exceeds the amount
of any such decrease in the Purchase Price, then, in
either case, the Buyer shall within 10 business days
after delivery of the Final Calculation pay to the
Seller the amount of such excess in immediately
available funds. If (x) the amount of the Tentative
Increase exceeds the amount of such increase in the
Purchase Price, or (y) the amount of any such
decrease in the Purchase Price exceeds the Tentative
Decrease, then the Seller shall pay the amount of
such excess to the Buyer within 10 business days
after delivery of the Final Calculation.
(D) For purposes hereof, "Adjustment Net Current
Assets" shall mean, as of the applicable date,
accounts receivable included in the Acquired Assets
(net of any reserves for bad debts) plus Inventory
included in the Acquired Assets minus accounts
payable of the Business assumed by the Buyer, all as
accrued in accordance with GAAP and appropriately
prorated on a daily basis through the applicable
date. All accounts receivable which have been
referred to a collection agency prior to the Closing
shall be excluded from the computation of Adjustment
Net Current Assets as of the Closing and shall be
retained by the Seller.
(E) Any account receivable included in the Acquired
Assets with respect to which payment has not been
received by the Buyer within 120 days following the
Closing shall be excluded in making the Final
Calculation. Any amounts received by the Buyer after
the 120th day following the Closing in payment on
such accounts receivable shall be paid over promptly
to the Seller. If the Seller so requests, accounts
receivable
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included in the Acquired Assets that are uncollected
as of 120th day following the Closing shall be
assigned to the Seller.
vii) Neither the existence of the Note nor the payment of any
portion or all thereof to the Seller shall have any effect on
the liability of, or the remedies that the Buyer Indemnitees
may seek from, or with respect to, the Seller.
viii) If the Buyer's net income as defined pursuant to GAAP
(excluding income from dividends, interest or royalties and
the Buyer's taxes payable with respect thereto), plus interest
and taxes deducted in arriving at net income, for the Buyer's
fiscal year ending December 31, 2001 equals or exceeds
$1,800,000, then the Buyer shall use its commercially
reasonable best efforts to pay off the Note during the Buyer's
fiscal year ending December 31, 2002. If the Buyer fails to so
pay off the Note, then the Seller shall have an option to
purchase an additional 10% equity interest in the Buyer for
the sum of $1.00, exercisable by no later than March 31, 2003.
If the Seller wishes to exercise such option, it shall so
notify the Buyer by a writing received by the Buyer no later
than February 28, 2003.
ix) The sum of $240,000 ("Zoning Hold-back") shall be held
back from the Purchase Price payable at the Closing and
deposited with an escrow agent mutually acceptable to the
Parties pursuant to an escrow agreement mutually acceptable to
the Parties. The Buyer shall be entitled to the Zoning
Hold-back, and the Purchase Price shall be reduced by the
amount thereof, if either (A) no special permit for zoning
purposes has been issued by the Town of Deerfield,
Massachusetts permitting the use of the real estate described
on Section 4(l)(ii) of the Disclosure Schedule at 0 Xxxxx
Xxxxxx xx Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx ("0 North Street")
for the purposes for which it was used by the Seller just
prior to the Closing ("Special Permit") by the first
anniversary of the Closing (the "Permit Deadline"), provided
that if a Special Permit has been granted, the Permit Deadline
shall be extended until all appeals of the issuance of the
Special Permit have been resolved with no further appeal
having been taken, or (B) prior to the issuance of a Special
Permit and if the Buyer has not materially changed its use of
the premises at 0 Xxxxx Xxxxxx, the Buyer is definitively
required by the Town of Deerfield to discontinue its
operations at 0 Xxxxx Xxxxxx due to a failure to comply with
applicable zoning laws. Otherwise, when all conditions
pursuant to which the Buyer could be entitled to the Zoning
Hold-back pursuant to the preceding sentence have lapsed, the
Seller shall be entitled to the Zoning Hold-back. The party
receiving the Zoning Hold-back shall be entitled to all
interest earned thereon, but the escrow agent shall utilize
the Seller's taxpayer identification number on any account it
opens to hold the Zoning Hold-back. The Buyer and the Seller
shall each pay one-half of the fees of the escrow agent, if
any.
The Buyer shall use its best efforts to obtain the
Special Permit and to defend any appeals of the issuance of
the Special Permit. The Buyer shall provide
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to the Seller copies of all petitions and applications filed
after the Closing with respect to the Special Permit a
reasonable time prior to filing them, and shall provide to the
Seller copies of all notices and correspondence sent to and
received from the Town of Deerfield regarding the Special
Permit.
(x) Notwithstanding any other provision of this agreement, the
Seller shall retain title to $302,000 of finished goods
Inventory included in the Acquired Assets that was
manufactured by the Seller for Raytheon, and that is
identified on Schedule 2(b)(x) hereto. Possession of such
Inventory shall be delivered to the Buyer at the Closing. The
Buyer shall maintain such Inventory at a location within its
premises where such Inventory will not be mixed with Inventory
of the Buyer and shall indicate with signage that such
Inventory belongs to the Seller. As the Buyer ships any item
of such Inventory to fulfill an order from Raytheon, it may
withdraw such Inventory from such location, and ship such
Inventory to or upon the order of Raytheon. Such shipment
shall constitute a purchase by the Buyer of such item of
Inventory for the price set forth next to such item on
Schedule 2(b)(x), and the Buyer shall pay the purchase price
for such item to the Seller on the first to occur of (A) 90
days after shipment of such item to Raytheon or (B) receipt
from Raytheon of payment therefor.
(xi) Notwithstanding any other provision of this agreement,
the Seller shall retain title to the Equipment listed on
Schedule 2(b)(xi), which is included in the Acquired Assets.
Possession of such Equipment shall be delivered to the Buyer
at the Closing. The Buyer shall indicate with signage that
such Equipment belongs to the Seller. Within 5 business days
after the Buyer receives releases of all liens with respect to
an item of Equipment listed on Schedule 2(b)(xi) and title
thereto, the Buyer shall pay to the Seller in cash the net
book value of such item as shown on such schedule.
(c) The Closing. The closing of the transactions contemplated by this
agreement (the "Closing") shall take place on the effective date of
execution hereof, as specified at the beginning of this agreement (the
"Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Seller shall
deliver to the Buyer bills of sale, assignments and such other
instruments of sale, transfer and assignment as the Buyer and its
counsel may request, transferring to the Buyer or its designee all of
the Acquired Assets free of any liens, claims and encumbrances and
shall deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 5 below to be delivered by the Seller,
and (ii) the Buyer shall deliver to the Seller the consideration as
specified in Section 2(b) above and the various certificates,
instruments, and documents referred to in Section 5 below to be
delivered by the Buyer.
3. Representations, Warranties and Covenants Concerning the Buyer. The
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Buyer represents and warrants to the Seller that the statements
contained in this Section 3 are correct and complete as of the Closing
Date.
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(a) Organization of Buyer. The Buyer is a limited liability company
duly organized, validly existing, and in good standing under the laws
of Massachusetts, and has all requisite power and authority to own,
operate and lease its properties and to carry on its business as it is
now being conducted.
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this agreement, to perform its
obligations hereunder and to operate the Business after the Closing.
All appropriate actions by the Buyer to authorize the execution and
delivery of this agreement and the consummation of the transactions
contemplated hereby have been taken, and no other proceedings are
necessary to authorize the execution and delivery of this agreement and
the consummation of the transactions contemplated hereby. This
agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions, except
as such enforcement may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' and secured
parties' rights and remedies generally and subject to the exercise of
judicial discretion in accordance with general equitable principles.
(c) Noncontravention. Neither the execution and the delivery of this
agreement, nor the consummation of the transactions contemplated
hereby: (i) violates or will violate any provision of the Buyer's
organizational documents; (ii) violates or will violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject; or (iii)
results in a breach of, constitutes a default under, results in the
acceleration of, creates in any party the right to accelerate,
terminate, modify, or cancel, or requires any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which the Buyer is a party or by which it is bound or to which any
of its assets is subject, except as would individually and in the
aggregate not have a material adverse effect on the financial
condition, operations, or business or properties of the Buyer taken as
a whole.
(d) Government Approvals. The Buyer is not required, by any agreement,
applicable statute, rule or regulation or other law, or otherwise, to
give any notice to, make any filing with, or obtain any authorization,
consent, approval of or waiver by any Person in order for the Parties
to consummate the transactions contemplated by this agreement, except
for any filings required pursuant to any securities law.
(e) Litigation. There is no action, suit, investigation (formal or
informal), subpoena or proceeding pending, or to the Buyer's Knowledge
threatened against the Buyer, nor has any order, writ, injunction,
subpoena or decree been issued by any court or governmental agency to
the Buyer which, in either case, prohibits or seeks to enjoin the
transactions contemplated by this agreement.
12
(f) Brokers' Fees. There is no Liability or obligation on account of
any agreement, act or failure to act of the Buyer to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this agreement for which the Seller could
become liable or obligated.
(g) Disclosure. The representations and warranties hereinbefore
contained in this Section 3 do not contain any untrue statement of a
fact or omit to state any fact necessary in order to make the
statements and information contained in this Section not misleading.
(h) Knowledge of Buyer Concerning Seller's Representations and
Warranties. Except for any information (i) disclosed in writing by the
Buyer to the Seller, (ii) disclosed by the Seller to the Buyer or its
agents or advisors orally or in writing, or (iii) derived or derivable
by the Buyer from any written documents or instruments originals or
copies of which (A) were made available to the Buyer by the Seller in
conjunction with the Buyer's due diligence investigation of the Seller,
the Business, the Acquired Assets or the Assumed Liabilities or (B) are
attached to or otherwise disclosed in this agreement or any Other
Agreement: the Buyer is not aware of any information that would cause
any of the representations or warranties of the Seller in this
agreement or any Other Agreement to be inaccurate or incomplete.
4. Representations and Warranties Concerning the Seller. The Seller
----------------------------------------------------
represents and warrants to the Buyer that the statements contained in
this Section 4 are correct and complete as of the Closing Date.
(a) Organization, Qualification. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts. The Seller is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where such qualification is required with respect to the Business; has
full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the Business as presently carried
on and to engage and to own and use the properties owned and used by it
in conjunction with the Business. Section 4(a) of the Disclosure
Schedule lists the directors and officers of the Seller. The Seller
will not, as a result of consummating the transactions described in
this agreement, be in default under or in violation of any provision of
its charter or bylaws.
(b) Corporate Power and Authority. The Seller has full power and
authority, including full corporate power and authority to execute and
delivery this agreement and to perform its obligations hereunder.
Without limiting the generality of the foregoing, the board of
directors of the Seller has duly authorized the execution, delivery,
and performance of this agreement by the Seller. This agreement
constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions, except as such
enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' and secured
parties' rights and remedies generally
13
and subject to the exercise of judicial discretion in accordance with
general equitable principles.
(c) Noncontravention; Third Party Approvals. Except as set forth in
Section 4(c) of the Disclosure Schedule, neither the execution and the
delivery of this agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, law,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Seller is subject or any provision of the charter or
bylaws of the Seller, or (ii) result in a breach of, constitute a
material default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument,
or other arrangement regarding the Business, the Acquired Assets or the
Assumed Liabilities to which the Seller is a party or by which the
Seller is bound or to which any of the Acquired Assets is subject (or
result in the imposition of any Security Interest upon any of the
Acquired Assets). Except as set forth in Section 4(c) of the Disclosure
Schedule, the Seller need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of or waiver by any
government or governmental agency or any other Person in order for the
Seller to consummate the transactions contemplated by this agreement,
including transfer and assignment to the Buyer of all of the Acquired
Assets, and including all permits and licenses necessary and material
to the operation of the Business.
(d) Broker's Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this agreement for which the Buyer or any
Buyer Affiliate could become liable or obligated.
(e) Title to Assets and Sufficiency of Assets. The Seller has good and
marketable title to, or a valid leasehold interest in all of the
Acquired Assets, free and clear of all Security Interests, except as
set forth in Section 4(e) of the Disclosure Schedule and except for
properties and assets disposed of in the Ordinary Course of Business
since November 27, 1999. Except as set forth on Section 4(e) of the
Disclosure Schedule, the Acquired Assets constitute all of the assets
necessary for the operation of the Business as it was conducted in
calendar year 1999.
(f) [Reserved.]
(g) Financial Statements. Attached hereto as Appendix 4(g) are the
following financial statements of the Seller (collectively the
"Financial Statements"): the internally prepared balance sheet for the
Business for the period ended November 27, 1999 ("November 27, 1999
Balance Sheet") and the internally prepared income statement for the
Business for the period beginning January 1, 1999 and ending November
27, 1999 (the "Financial Statements"). The Financial Statements present
fairly the financial condition of the Business as of such date and the
results of operations of the Business for such period,
14
have been prepared on a basis consistent with the Seller's audited
financial statements, are correct and complete and consistent with the
books and records of the Seller, which books and records are correct
and complete.
(h) Events Subsequent to November 27, 1999. Since November 27, 1999,
there has not been any material adverse change in the business,
financial condition, operations, or results of operations of the Seller
with respect to the Business, except as disclosed in Section 4(h) of
the Disclosure Schedule, and since that date the Seller has operated
the Business only in the Ordinary Course of Business, except as
disclosed in Section 4(h) of the Disclosure Schedule.
(i) Undisclosed Liabilities. The Seller has no Liability that could
affect the Buyer or the Business, and there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Seller giving rise to any
Liability that could affect the Buyer or the Business, except for (i)
Liabilities set forth on the face of the November 27, 1999 Balance
Sheet and (ii) Liabilities that could affect the Buyer or the Business
which have arisen after November 27, 1999 in the Ordinary Course of
Business, none of which results from, arises out of, relates to, is in
the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law. Section 4(i) of the
Disclosure Schedule sets forth all Liabilities of the Seller that could
affect the Buyer or the Business in the following format:
(A) Part I of Section 4(i) lists, as of the date hereof, all
fixed and uncontested Liabilities of any kind and character
and description, whether or not reflected on the November 27,
1999 Balance Sheet and whether accrued, absolute or
contingent, and states as to each such Liability, the amount
of such Liability and to whom payable.
(B) Part II of Section 4(i) sets forth, as of the date hereof,
all Liabilities that are not fixed as to amount or that are
contested, including all claims, suits and proceedings which
are pending, threatened or anticipated against the Seller.
(j) Legal Compliance. The Seller and its predecessors, if any, have
complied with all applicable laws, statutes and ordinances, rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges of federal, state, local, and foreign governments,
and all agencies thereof in the operation of the Business, and have
otherwise complied therewith to the extent that failure to so comply
could give rise to any Liability of the Buyer; and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against any of them during the
three years preceding the Closing Date alleging any failure so to
comply. Except as set forth in Section 4(j) of the Disclosure Schedule,
the Seller has all governmental licenses, permits, orders, approvals
and authorizations of, and required registrations with, each and every
Federal, state and local government or regulatory authority necessary
for the ownership, operation or conduct of the Business as conducted
15
on the Closing Date (collectively, "Governmental Permits"), and each of
the Governmental Permits is described in Section 4(j) of the Disclosure
Schedule and is in full force and effect. Without limiting the
generality of the foregoing, the Seller has received, and at all times
operated pursuant to, all local approvals necessary for the operation
of its business. True and complete copies of all Governmental Permits
and any modification thereof, as requested by the Buyer, have been
delivered to Buyer. No violations exist or have been asserted in
respect of any of the Governmental Permits, and no proceeding to
cancel, revoke or limit any of the Governmental Permits is pending or
threatened, nor has the Seller received any notice of noncompliance
thereunder. The Seller has made available to the Buyer, as requested by
the Buyer, substantially all records, notifications, reports, permit
and license applications, engineering studies, and environmental impact
reports or assessments that are material to the operation of the
Business or the ownership of the Acquired Assets and that were filed
with or submitted to appropriate governmental agencies during the past
five years by the Seller or its agents, together with all material
notifications from such governmental agencies to the Seller or its
agents in response to or relating to any of such records,
notifications, reports or applications. Except as set forth in Section
4(j) of the Disclosure Schedule, each of the Government Permits is
fully assignable by the Seller to the Buyer, without the need for the
consent of any Person.
(k) Tax Matters.
i) The Seller has filed all federal, state, county, local and
foreign Tax Returns required to have been filed wherein any
income, gains, deductions or credits relating to the Business,
the Acquired Assets or the Assumed Liabilities were reportable
or applicable, and such returns are complete, true and correct
in all material respects. The Seller has paid all taxes,
interest, penalties, assessments or deficiencies owed by the
Seller, whether or not shown on any such Tax Return. There are
no present, or to the Knowledge of the Seller, material
disputes as to Taxes payable by the Seller. The Seller is not
currently the beneficiary of any extension of time within
which to file any such Tax Return or waived any statute of
limitations in respect of any Taxes relating in any way to the
Business. No claim has ever been made by an authority in a
jurisdiction where the Seller does not file Tax Returns that
the Seller is or may be subject to taxation by that
jurisdiction with respect to the Business or the Acquired
Assets. There are no Security Interests on the Acquired Assets
that arose in connection with any failure or alleged failure
to pay any Tax.
ii) The Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or
owing to any employee of the Seller employed in the Business,
any independent contractor hired to work for the Seller on any
aspect of the Business, any creditor of the Seller owed money
with respect to the Business, or any third party who dealt in
any manner with the Business.
16
iii) The Seller has not made and is not and could not be
obligated to make any payments to a present or former employee
employed in the Business that would not be deductible under
Section 280G of the Code concerning golden parachute payments.
(l) Real Property.
(i) Owned Real Property. The Seller owns no real property
-------------------
that is used in conjunction with the Business.
(ii) Leased Real Property. Section 4(l)(ii) of the Disclosure
Schedule contains a complete description of all real property
leased by the Seller for use in conjunction with the Business.
With respect to each lease and sublease listed on Section
4(l)(ii) of the Disclosure Schedule:
(A) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect, and will
continue to be so following the consummation of the
transactions contemplated hereby.
(B) No party to the lease or sublease is in breach or
default, and no event has occurred which, with notice
or lapse of time, would constitute a breach or
default or permit termination, modification, or
acceleration thereunder.
(C) No party to the lease or sublease has repudiated
any provision thereof.
(D) There are no disputes, oral agreements, or
forbearance programs in effect relating to the lease
or sublease, except as disclosed on Section 4(l) of
the Disclosure Schedule.
(E) With respect to each sublease, the
representations and warranties set forth in (A)
through (D) above are true and correct with respect
to the underlying lease.
(F) The Seller has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered
any interest in the leasehold or subleasehold.
(G) Except as disclosed on Section 4(l) of the
Disclosure Schedule, all facilities leased or
subleased thereunder have received all approvals,
licenses, and permits from government authorities
required in connection with the operation thereof and
have been operated and maintained in accordance with
applicable laws, rules, and regulations.
(H) Except as disclosed on Section 4(l) of the
Disclosure Schedule, all buildings and facilities
leased or subleased thereunder are supplied with
17
utilities and other services necessary for the
operation of such facilities, including gas,
electricity, water, telephone, sanitary sewer, and
storm sewer, all of which services are adequate in
accordance with all applicable laws, ordinances,
rules, and regulations.
(I) Except as disclosed on Section 4(l) of the
Disclosure Schedule, the present use of the parcel
subject to such lease or sublease is in compliance
with all applicable zoning ordinances and laws.
(J) To the Seller's Knowledge, no permits or other
approvals are required in connection with any
drainage on or from any parcel subject to such lease
or sublease.
(L) To the Seller's Knowledge, building systems in
the building subject to such lease, including
plumbing, electrical lines and equipment, heating,
ventilation and air conditioning systems, boilers,
and elevators, if any, are in good mechanical and
operating condition.
(m) Intellectual Property. The Seller owns or has the right to use
pursuant to law, license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the Business of
the Seller as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by the
Seller in conjunction with the Business immediately prior to the
Closing hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing
hereunder. The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Seller or the
directors, officers or employees with responsibility for Intellectual
Property of the Seller has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation, including any claim that the Seller
must license or refrain from using any Intellectual Property rights of
any third party. To the Knowledge of the Seller and the employees of
the Seller with responsibility for Intellectual Property of the Seller,
no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
the Seller that in any way relate to the Business. Except as set forth
in Section 4(m) of the Disclosure Schedule, the Seller has taken all
necessary action to maintain and protect each item of Intellectual
Property that it owns or uses in conjunction with the Business. Section
4(m) of the Disclosure Schedule identifies each item of Intellectual
Property used by the Seller in connection with its Business.
(n) Tangible Assets. The Seller has delivered to the Buyer a list,
attached as Section 4(n)(i) of the Disclosure Schedule, of all
Equipment of the Seller included in the Acquired Assets (including
Equipment that is the subject of Section 2(b)(xi) of this agreement), a
list, attached as Section 4(n)(ii) of the Disclosure Schedule, of all
18
Inventory of the Seller included in the Acquired Assets (including
Inventory that is the subject of Section 2(b)(x) of this agreement),
and a list, attached as Section 4(n)(iii) of the Disclosure Schedule,
of all other tangible personal property of the Seller included in the
Acquired Assets, in each case whether owned or leased. Each such list
identifies all items by type, amount, and to the extent applicable,
make and model; indicates leased items; and for all items (including
vehicles) on which the manufacturer has inscribed a serial number, by
serial number. All vehicles and items of Equipment and Inventory
required to be inspected and licensed have passed all required
inspections, bear current inspection stickers, and have all licenses
and other approvals, stickers and certificates which evidence that such
vehicles and Equipment are duly licensed. Inventory (including
Inventory that is the subject of Section 2(b)(x) of this agreement)
consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is
merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is slow-moving, obsolete, damaged, or
defective, subject only to the reserve for inventory writedown set
forth on the face of the November 27, 1999 Balance Sheet, as adjusted
for the passage of time through the Closing Date in accordance with the
past custom and practice of the Seller. Subject to such reserve, no
item of raw materials included in Inventory exceeds the quantity
thereof utilized by the Seller in conjunction with the Business in the
manufacture of goods in process and finished goods during the 12 month
period preceding the Closing Date. All Equipment and other items of
tangible personal property that are not Inventory are in good working
order and condition, normal wear and tear excepted, and to the
Knowledge of the Seller, are free from defects which would cause such
Equipment or tangible personal property to fail. Each item of Equipment
is substantially fit for the purposes for which it is utilized. With
respect to those items listed in Sections 4(n)(i), (ii) or (iii) of the
Disclosure Schedule as being leased, the leases covering such items are
in full force and effect and free from default by the parties thereto.
(o) Contracts, Customers, Bank Accounts.
i) Section 4(o)(i) of the Disclosure Schedule lists and
accurately describes the following agreements to which the
Seller is party and which in any way affect or involve the
Business: insurance policies, employment agreements, leases
with respect to which the Seller is a lessee, dealership,
agency, franchise, license, sales or commission agreements,
any agreements not in the Ordinary Course of Business, and
agreements involving expenditures or Liability, actual or
potential, in excess of $5,000, or otherwise material to the
Business to which the Seller is a party or by which it or any
of its property is bound. Copies of all forms of sales or
lease agreements used by the Seller in the Business have been
delivered to the Buyer prior to the Closing.
ii) Section 4(o)(ii) of the Disclosure Schedule lists the 20
customers of the Business who have incurred the largest
charges with the Seller during calendar year 1999. Except as
set forth in Section 4(o)(ii) of the Disclosure Schedule,
19
after January 1, 1999 there have not been any losses or
threatened losses of any such customers or material changes in
the Seller's contractual relationships with any such
customers. Within the 12 month period prior to the Closing,
there has been no change in the contractual relationships
between the Seller and its customers or suppliers, which
individually or in the aggregate would have an adverse impact
on the Business. To the Knowledge of the Seller, neither the
Seller nor any of its officers, agents, or employees has
engaged in transactions or relationships with customers or
representatives of customers that breaches any business
policies of such customers, including policies with respect to
relationships with vendors, of which the Seller has Knowledge.
iii) The Seller has delivered to the Buyer a correct and
complete copy of each written agreement listed in Section
4(o)(i) of the Disclosure Schedule. All agreements required by
the Seller to operate the Business are listed on Section
4(o)(i) of the Disclosure Schedule. With respect to each such
agreement:
(A) the agreement is legal, valid, binding,
enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on
identical terms, except for the substitution of the
Buyer for the Seller, following the consummation of
the transactions contemplated hereby;
(C) no party is in breach or default, and no event
has occurred which with notice or lapse of time would
constitute a breach or default, or permit
termination, modification, or acceleration, under the
agreement; and
(D) no party has repudiated any provision of the
agreement.
Without limiting the generality of the foregoing with respect
to the Business, the Seller has never been in breach or
default, and no event has ever occurred which with notice or
lapse of time would constitute a breach or default, of or
under any covenant not to compete or any agreement providing a
right of first refusal to any Person, or any other agreement
restricting the business activities of the Seller.
iv) No property or services leased or sold by the Seller or
any predecessor to the Seller is subject to any warranty,
guaranty or indemnity that is not included in the standard
terms of sale or lease of the Seller. Section 4(o)(iv) of the
Disclosure Schedule includes true and complete copies of all
standard terms of sale or lease used by the Seller.
v) All Inventory or products of the Business sold or leased
prior to the Closing, and all Business services provided by
the Seller prior to the Closing conform in
20
all material respects to contractual commitments, express or
implied warranties, specifications, and quality standards
established by the Seller and, to the extent the Seller has
Knowledge thereof, any other manufacturers of the Inventory.
Except as set forth on Section 4(o)(v) of the Disclosure
Schedule, to the Knowledge of the Seller, the Seller has no
liability, and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Seller giving rise to
any Liability for damages on account of products sold or
leased by the Seller other than for repair or replacement of
such products under the terms of applicable warranties. No
product manufactured, sold, leased, or delivered by the Seller
in conjunction with the Business is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard
terms and conditions of sale or lease. No property leased or
sold to the Seller or any predecessor to the Seller in
conjunction with the Business is subject to any written or
oral agreement by the Seller to indemnify the lessor or seller
thereof for product liability with respect thereto. The Seller
is not party to any agreement to rent Inventory or Equipment
to another party that gives to such party any right to
purchase such Inventory.
(p) Notes and Accounts Receivable. The Seller has delivered to the
Buyer an accurate list and aging of the Seller's accounts and notes
receivable included in the Acquired Assets, which list is attached
hereto as Section 4(p) of the Disclosure Schedule. All such notes and
accounts receivable are reflected properly on its books and records,
and all such accounts receivable are valid accounts receivable, subject
to no setoffs or counterclaims. To the Knowledge of the Seller, all of
such accounts receivable are current and collectible, and all such
notes and accounts receivable will be collected in accordance with
their terms at their recorded amounts, subject to any reserve for
doubtful accounts set forth on the face of the November 27, 1999
Balance Sheet.
(q) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Seller with respect to any matter that could
in any manner affect the Business.
(r) Insurance. The Seller has been covered during the past three years
by the insurance policies listed on Section 4(o) of the Disclosure
Schedule. No such policy was terminated for any reason prior to the
normal expiration date thereof. Each such insurer has been properly and
timely notified of all claims and other contingent liabilities
involving the Seller, no reservation of rights letters have been
received by the Seller from any such insurer, and each such insurer has
assumed defense of each suit or proceeding of a nature covered by that
policy of insurance issued by it. Section 4(r) of the Disclosure
Schedule lists all claims submitted by the Seller to any insurer within
the past three years. The insurance coverage maintained by the Seller
is adequate in amount to fully cover all losses resulting from the
claims identified in Section 4(r) of the Disclosure Schedule. Section
4(r) of the Disclosure Schedule lists as to each such insurance policy:
(i) the name, address, and telephone number of the agent; (ii) the name
of the insurer, policyholder, and each covered insured; (iii) the
policy number and period of
21
coverage; (iv) the scope (including whether on a claims made or
occurrence basis) and amount (including the amount and manner of
calculation of deductibles and ceilings) of coverage; and (v) a
description of any retroactive premium adjustments or other
loss-sharing arrangements. Each such insurance policy is legal, valid,
binding, enforceable, and in full force and effect, and will continue
to be so on identical terms following the consummation of the
transactions contemplated hereby, no party to the policy is in breach
or default, no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination,
modification, or acceleration thereunder, and no party to the policy
has repudiated any provision thereof. The Seller has been covered since
its incorporation by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged.
(s) Litigation. Section 4(s) of the Disclosure Schedule sets forth each
instance in which the Seller (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator, in each case that in
any way relates to the Business, the Acquired Assets or the Assumed
Liabilities. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 4(s) of the Disclosure Schedule
could result in any adverse change in the business, financial
condition, operations, results of operations, or future prospects of
the Business, or of the Buyer after the Closing. None of the Seller, or
any of the officers of the Seller has any reason to believe that any
other action, suit, proceeding, hearing, or investigation may be
brought or threatened against the Seller, including on account of any
injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or
delivered by the Seller, in each case that in any way would relate to
the Business, the Acquired Assets or the Assumed Liabilities . Without
limiting the generality of the foregoing, no action, suit, or
proceeding is pending or, to Seller's Knowledge, threatened before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this agreement, (B) cause any of the transactions contemplated by
this agreement to be rescinded following consummation, (C) affect
adversely the right of the Buyer to own the Acquired Assets, or (D)
affect adversely the right of the Buyer to own its assets and to
operate the Business, and no such injunction, judgment, order, decree,
ruling, or charge is in effect. No products liability claim has been
asserted against the Seller during the five years prior to the date of
this agreement with respect to any product manufactured by the
Business.
(t) Employees. The Seller has delivered to the Buyer a list setting
forth the names of all employees (by classification or type) of the
Seller employed in the Business and their respective rates of
compensation, including the portions thereof attributable to bonuses,
and any other salary, bonus or other payment arrangement made with or
promised to any of them. The Seller is not party to or bound by any
collective bargaining agreement, nor
22
has the Seller experienced any strikes, grievances, claims of unfair
labor practices, or other labor disputes. The Seller has not committed
any unfair labor practice. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Seller, or
of any intention by any employee of the Seller hired by the Buyer on or
after the Closing to discontinue his or her relationship with the Buyer
after Closing.
(u) Employee Benefits.
i) Except as listed in Section 4(u) of the Disclosure
Schedule, the Seller has not at any time maintained,
sponsored, adopted, made contributions to or obligated itself
to make contributions to or to pay any benefits or grant
rights under or with respect to (A) any pension, profit
sharing or other plan of deferred compensation (whether or not
qualified under the Code), any medical plan, life insurance
plan, short-term or long-term disability plan, severance plan,
dental plan or other employee benefit plan or employee welfare
benefit plan within the meaning of ERISA; (B) any personnel
policy, excess benefit, bonus or incentive plan (including
stock options, restricted stock, stock bonus, and deferred
bonus plans), salary reduction agreements, change-of-control
agreements, employment agreements or consulting agreements; or
(C) any other plan, policy, program, agreement, contract or
custom, whether or not written or pursuant to a collective
bargaining agreement, which provides for the welfare of any of
the employees, former employees, or independent contractors of
the Seller, beneficiaries thereof or other persons, and which
could give rise to or result in Buyer or the Seller (whether
directly or indirectly) having any debt, liability, claim or
obligation of any kind or nature, (hereinafter all such plans,
policies, arrangements, programs and agreements, whether or
not set forth in Section 4(u) of the Disclosure Schedule, are
called "Employee Benefit Plans"). Each Employee Benefit Plan
of the Seller, including related trust agreements, insurance
contracts, and other funding agreements which implement each
such Employee Benefit Plan, and all related summary plan
descriptions, are described in Section 4(u) of the Disclosure
Schedule, and true and correct copies thereof and of the most
recent Form 5500 Annual Report therefor have been delivered to
the Buyer.
ii) The Seller has never been required to contribute to any
Multiemployer Plan as described in ss.3(37) of ERISA
("Multiemployer Plan") and has no Liability, including
withdrawal Liability, under any Multiemployer Plan.
iii) The requirements of Section 4980B of the Code and of Part
6 of Subtitle B of Title I of ERISA ("COBRA") have been met
with respect to each employee welfare benefit plan (as defined
in ERISA) maintained by the Seller.
iv) The Seller does not maintain and, except as set forth in
Section 4(u) of the Disclosure Schedule, has never maintained
any employee welfare benefit plan (as
23
defined in ERISA) providing medical, health or life insurance
or other welfare-type benefits for current or future retired
or terminated employees, their spouses, or their dependents
(other than in accordance with COBRA).
v) All reports, returns, ruling requests and descriptions of
any nature required with respect to each Employee Benefit Plan
of the Seller, including ruling requests to obtain tax
exemption for qualified Employee Benefit Plans, as amended
from time to time, have been timely prepared and filed or
delivered, as appropriate.
vi) Each Employee Benefit Plan of the Seller, and each related
trust, insurance contract, or fund, complies and at all times
has complied in form and in operation in all respects with the
applicable requirements of ERISA, the Code, and other
applicable laws.
vii) Except with respect to changes required by (A) the
Uniformed Services Employment and Reemployment Rights Act of
1994, (B) the Pension Protection Act provisions of the General
Agreement on Tariffs Act of 1994, (C) the Small Business Jobs
Protections Act of 1996 and (D) the Taxpayer Relief Act of
1997, the Internal Revenue Service has affirmatively ruled
with respect to the qualified plan status of all tax exempt
qualified Employee Benefit Plans of the Seller.
viii) All contributions due have been made to each Employee
Benefit Plan of the Seller which is an employee pension
benefit plan, as defined in section 3(2) of ERISA. The market
value of the assets under each such Employee Benefit Plan
which is an employee pension benefit plan (as defined in
ERISA), equals or exceeds the present value of all vested and
nonvested Liabilities thereunder determined in accordance with
PBGC methods, factors, and assumptions applicable to an
employee pension benefit plan terminating on the date for
determination.
ix) With respect to each Employee Benefit Plan that the
Seller, and any Person which is treated as a single employer
with the Seller for purposes of ss.414 of the Code, maintains
or ever has maintained or to which any of them contributes,
ever has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan as described in ss.3(2)
of ERISA (other than any Multiemployer Plan) has been
completely or partially terminated or been the
subject of a Reportable Event as to which notices
would be required to be filed with the Pension
Benefit Guaranty Corporation ("PBGC"). No proceeding
by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has
been instituted or, to the
24
Knowledge of any of the Seller or the directors or
officers or employees with responsibility for
employee benefits matters of the Seller, threatened.
(B) There have been no Prohibited Transactions (as
described in (S)406 of ERISA or (S)4975 of the Code)
with respect to any such Employee Benefit Plan. No
fiduciary as described in (S)3(21) of ERISA has any
Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the
administration or investment of the assets of any
such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to
the administration or the investment of the assets of
any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge
of any of the Seller, or the directors or officers or
employees with responsibility for employee benefits
matters of Seller, threatened. None of the Seller or
the directors or officers or employees with
responsibility for employee benefits matters of the
Seller has any Knowledge of any basis for any such
action, suit, proceeding, hearing, or investigation.
(C) The Seller has not incurred, and none of the
Seller or the directors or officers or employees with
responsibility for employee benefits matters of the
Seller has any reason to expect that the Seller will
incur, any Liability to the PBGC, other than PBGC
premium payments, or otherwise under Title IV of
ERISA, including any withdrawal liability as defined
in ERISA (S)4201, or under the Code with respect to
any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(v) [Reserved.]
(w) Environment, Health, and Safety.
i) The Seller is and has been in compliance with all
applicable Environmental, Health, and Safety Laws.
ii) The Seller has never generated, handled, transported,
caused the transportation of, treated, stored, used,
transferred, or disposed of any Hazardous Substances (as
hereinafter defined), except in accordance with all applicable
Environmental, Health and Safety Laws, and no Hazardous
Substances are present on, in or under any real property now
or previously owned or leased by the Seller or any predecessor
to the Seller or any asset now or previously owned or leased
by the Seller. No other asset owned or leased by the Seller or
a predecessor to the Seller contains (including containment by
means of any underground storage tank) any Hazardous
Substances. The Seller has not sent, transported, caused the
transportation of or disposed of any waste materials that are
not Hazardous Substances, at any site, location or facility
(whether or not such site, location or
25
facility is or was owned or leased by the Seller), except in
compliance with all Environmental, Health, and Safety Laws.
iii) "Hazardous Substances" shall include (A) hazardous
substances, hazardous wastes or hazardous materials, as those
terms are defined by Environmental, Health, and Safety Laws;
(B) petroleum, including crude oil or any fraction thereof;
(C) any radioactive material, including any source, special
nuclear, or by-product material as defined in 42 U.S.C.
Section 2011 et seq.; and (D) asbestos in any form or
condition.
iv) The Seller has not received any notice of any private,
administrative or judicial action, or notice of any intended
private, administrative or judicial action, relating to the
presence or alleged presence of Hazardous Substances in, under
or upon any real property or other asset now or previously
owned or leased by the Seller, or any predecessor to the
Seller, and there is no basis for any such notice or action.
Further, there are no pending or threatened actions or
proceedings against, or notices of potential actions or
proceedings to, the Seller from any governmental agency or any
other third party regarding any matter relating to any
Environmental, Health, and Safety Laws, except as set forth in
Schedule 4(w)(iv) of the Disclosure Schedule.
v) The Seller has not been subject to, or received any notice
of, any private, administrative or judicial action, or notice
of any intended private, administrative or judicial action,
relating to the transportation or alleged transportation of
Hazardous Substances or the disposition thereof.
vi) There are and have been no past or present events,
conditions, circumstances, activities, practices, incidents or
actions which interfere with or prevent the continued
compliance with any Environmental, Health, and Safety Laws by
the Buyer in the operation of the Business or by the Seller.
vii) There are no underground storage tanks located under any
land currently used or leased by the Seller.
viii) Section 4(w)(viii) of the Disclosure Schedule identifies
(A) all environmental audits, assessments or occupational
health studies undertaken by the Seller, an agent of the
Seller, any governmental agency, or any third party concerning
the Seller or any of the real property described in Schedule
4(l)(ii) of the Disclosure Schedule within the last five
years; (B) the results of any ground, water, soil, air, or
asbestos monitoring undertaken by the Seller, an agent of the
Seller, any governmental agency, or any third party concerning
the Seller or any of such real property within the last ten
years; (C) all written communications between the Seller and
any governmental agency within the last five years arising
under or related to Environmental, Health, and Safety Laws;
and (D) all citations
26
issued under OSHA, or similar state or local statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or
decrees, concerning the Seller or any of such real property.
ix) Section 4(w)(ix) of the Disclosure Schedule contains a
list of the assets of the Seller which contain "asbestos" or
"asbestos-containing material" (as such terms are identified
under the Environmental, Health, and Safety Laws). Section
4(w)(ix) of the Disclosure Schedule also identifies all
actions taken by the Seller, directly or indirectly, or by any
of the agents, employees, representatives, or contractors of
the Seller with respect to asbestos or asbestos-containing
materials, including but not limited to all documentation of
the Seller concerning methods and manner of abatement,
removal, containment, encapsulation, repair, maintenance,
renovation, demolition, salvage, installation, storage,
transportation, disposal, monitoring, spill/emergency
clean-up, protective health and safety measures, and training
of personnel, whether employees or independent contractors or
otherwise.
x) Neither this agreement nor the consummation of the
transactions that are the subject of this agreement will
result in any obligations for site investigation or cleanup,
or notification to or consent of government agencies or third
parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer"
Environmental, Health, and Safety Laws.
(x) [Reserved.]
(y) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a fact or omit to
state any fact necessary in order to make the statements and
information contained in this Section 4 not misleading. The Seller has
no Knowledge of any change or proposed change in any applicable law or
governmental policy which materially and adversely affects or may
affect the Business following the Closing.
5. Additional Deliveries at Closing. The following shall be delivered or
--------------------------------
done at Closing immediately after the execution hereof:
(a) [Reserved.]
(b) Covenant Not To Compete. The Seller shall deliver to the Buyer a
Covenant Not to Compete in the form attached as Appendix 5(b), executed
by all of the parties set forth thereon.
(c) Seller's Interest in Buyer. The Buyer shall grant to the Seller,
and by its execution of this agreement the Seller shall accept, a 10%
Class C membership interest in the Buyer.
27
(d) Third Party Consents. The Seller shall deliver to the Buyer all
third party consents it has obtained prior to the Closing needed to
permit the Buyer to operate the Business as contemplated by this
agreement after the Closing, including consents to agreements included
in the Acquired Assets that are not by their terms freely assignable to
the Buyer.
(e) Payoff Letters. The Seller shall deliver to the Buyer payoff
letters from each Person to whom the Seller owes any Debt secured by a
Security Interest in the Acquired Assets in substantially the form
attached as Appendix 5(e).
(f) Good Standing Certificates. The Seller shall deliver to the Buyer a
certificate from the Massachusetts Secretary of State regarding the
good corporate standing of the Seller in such state, and a certificates
from each state in which the Seller conducts the Business and in which
qualification to do business is required as to the due qualification of
the Seller to do business in such state.
(g) Clerk's Certificate. The Seller shall deliver to the Buyer a
certificate from the Seller's Clerk in a form acceptable to the Buyer
concerning the adoption of votes authorizing the transactions
contemplated by this agreement and the incumbency of those officers of
the Seller authorized to act pursuant to such votes as of the Closing.
(h) Lease. The Buyer shall have entered into a sublease for the real
property at Industrial Drive East in South Deerfield, Massachusetts,
described on Section 4(l)(ii) of the Disclosure Schedule, in form
reasonably acceptable to the Buyer, and shall have entered into a new
lease for the real property at 0 Xxxxx Xxxxxx, Xxxxx Xxxxxxxxx,
Xxxxxxxxxxxxx, described on Section 4(l)(ii) of the Disclosure
Schedule, in form reasonably acceptable to the Buyer.
(i) [Reserved.]
(j) [Reserved.]
(k) Agreement of Members of Buyer Concerning Board Representation and
Dilution. The members of the Buyer as of the Closing shall have
delivered to the Seller their agreement to comply with the provisions
of Section 6(g) below and to cause the Buyer to perform its obligations
under Section 6(h) below.
(l) Stock Options of Carryover Employees. The Seller shall use its best
efforts, within the limits of what is permitted by law, to preserve the
stock options for stock of the Seller held by employees of the Seller
who become employees of the Buyer as of the Closing.
(m) Estoppel Agreement and Nondisturbance Agreement. The Buyer shall
have received from the landlord of the 0 Xxxxx Xxxxxx, Xxxxx Xxxxxxxxx,
Xxxxxxxxxxxxx property leased by the Seller an estoppel agreement,
consent to assignment, lease modification
28
agreement, and mortgagee nondisturbance agreement, all on such terms as
the Buyer reasonably deems acceptable.
(n) Noncompetition Agreement from Buyer. The Buyer shall have entered
into an agreement not to compete with the Seller in the form set forth
in Appendix 5(n).
29
6. Post-Closing Covenants. With respect to the period following the Closing:
----------------------
(a) Cooperation; Retention of Data. The Seller shall use its best
efforts to assist the Buyer in obtaining any governmental permits or
licenses and third party consents to the assignment to the Buyer of
such permits or licenses as may be required by the Buyer to own and
operate the Business on and after the Closing and which may not be
transferrable or might terminate with consummation of the transactions
contemplated by this agreement, which new governmental permits and
licenses shall be substantially similar in scope to those heretofore
issued to or used by the Seller. The Seller and the Buyer shall also
each use its best efforts to obtain all third party consents not
obtained prior to the Closing that are necessary to permit to the Buyer
to operate the Business as contemplated by this agreement after the
Closing, including consents to all agreements included in the Acquired
Assets that are not by their terms freely assignable to the Buyer. If
during the first 90 days following the Closing any material customer or
supplier of the Seller ceases or threatens to cease to do business with
the Buyer, and if the Buyer so requests, such Seller's employee as the
Buyer may request shall meet with such customer or supplier, either
alone or with a representative of the Buyer, at reasonably convenient
times as suggested by the Buyer, in an attempt to cause such customer
or supplier to remain a customer or supplier, as the case may be, of
the Buyer. If, after the Closing any other action is necessary or
desirable to carry out the purposes of this agreement, each of the
Parties shall take such further action, including the execution and
delivery of such further instruments and documents, as any other Party
reasonably may request for such purpose. From and after the Closing,
the Buyer will be entitled to possession of all documents, books and
records (excluding minute books, stock transfer records, and Tax
records), agreements, and financial data of any sort relating to the
Acquired Assets or the Assumed Liabilities, provided, that the Seller
may retain a copy thereof. The Buyer and the Seller shall each provide
to the other at its request from time to time reasonable access to or
copies of such books and records in order for the Seller and the Buyer
to comply with Tax reporting duties. If, after the Closing, the Buyer
believes that the Seller has not transferred an asset that should have
been included in the Acquired Assets, executives with decision making
authority from the Buyer and the Seller shall negotiate in good faith
to determine whether that asset should have been included in the
Acquired Assets, and if such asset is determined to have been
includible in the Acquired Assets, the Seller shall transfer and convey
that asset to the Buyer. The Seller shall retain, for seven years after
Closing, and make available to the Buyer upon its request from time to
time, all records and other data generated, maintained or used in the
Business, including such records and other data that any law or
contract with any governmental agency requires to be maintained or as
may be necessary or appropriate to respond to any audit by any
governmental agency from time to time.
(b) Litigation Cooperation. If and for so long as a Party is actively
contesting or defending any matter in connection with (i) any
transaction contemplated under this agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on
or prior to the
30
Closing involving the Seller, the other Party shall cooperate with such
Party and such Party's counsel in the contest or defense, make
available their personnel, and provide such testimony and access to
their books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting
or defending Party, unless the contesting or defending Party would at
any time have been entitled to indemnification therefor under this
agreement.
(c) Transition. The Seller shall not take any action that is designed
or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Seller from
maintaining the same business relationships with the Buyer after the
Closing as it maintained with the Seller prior to the Closing. The
Seller shall refer to the Buyer all customer inquiries relating to the
Business.
(d) Confidentiality. The Seller shall keep confidential, and shall
cause its employees, agents and contractors to keep confidential, and
shall not use, any of the Confidential Information except in connection
with this agreement, except as required by law, or except to the extent
that such Confidential Information becomes publicly available through
no fault of the Seller or any shareholder, director, employee, agent or
contractor of the Seller.
(e) Allocation of Acquisition Price. The Buyer and the Seller shall
allocate the Purchase Price and other relevant items among the Acquired
Assets and the Covenant Not to Compete for all purposes, including Tax
and financial accounting, as shown on Schedule 6(e) attached hereto.
The Buyer and the Seller shall file all Tax Returns, including amended
returns and claims for refund, and information reports in a manner
consistent with such allocation.
(f) Qualified Plans of Seller. The Seller shall retain sponsorship of
all of Seller's Employee Pension Benefit Plans as described in ss.3(2)
of ERISA ("Employee Benefit Pension Plans") on and after the Closing
Date. The Buyer shall not assume sponsorship or otherwise be obligated
to administer, operate or contribute to any Employee Pension Benefit
Plan of the Seller on or after the Closing Date. The Seller shall be
responsible for all costs, expenses and liabilities incurred in
connection with the Seller's Employee Pension Benefit Plans, whether
incurred before or after the Closing Date. The Seller shall take such
actions as may be necessary, including adoption of any necessary plan
amendments, to (i) distribute, within a reasonable period of time
following the Closing Date, the account balances in the Seller's
Employee Pension Benefit Plans of the participants who become employees
of the Buyer or any Buyer Affiliate ("Affected Participants"); (ii)
except to the extent inconsistent with the plans, allow the Affected
Participants to continue repay their plan loans pending the
distribution of their account balances under such plans, and (iii)
allow the Affected Participants who become eligible to participate in
any Employee Pension Benefit Plan of the Buyer to elect to roll over
their outstanding plan loans directly to an Employee Pension Benefit
Plan of the Buyer, to the extent that the same may be accomplished
pursuant to the terms of an Employee
31
Pension Benefit Plan of the Buyer. The Seller shall cooperate, and
cause the trustee of each of the an Employee Pension Benefit Plan of
the Seller to cooperate, with the Buyer and its agents and qualified
plan consultants in taking such actions as shall assure a smooth
transition and transfer into an Employee Pension Benefit Plan of the
Buyer of the accrued benefits of the Seller's employees who become
employees of the Buyer or any Buyer Affiliate.
(g) Board Representation. For a period of three years following the
Closing or until the Seller no longer owns any equity interest in the
Buyer, whichever first occurs, the Seller may designate one person to
serve on the management advisory board of the Buyer. The Buyer shall
cause such board to meet at least quarter annually, and at such
meetings the financial and business condition of the Buyer and the
business and financial projections of the Buyer shall be discussed.
(h) Dilution. If compensation of any employee or manager of the Buyer
would reduce the percentage interest of the Seller in the equity of the
Buyer, the Buyer's members shall cause Buyer to issue a sufficient
additional equity interest in the Buyer to the Seller to eliminate such
dilution.
(i) Warranty Work on account of Assumed Agreements. For one year
following the Closing, the Buyer shall perform warranty work with
respect to products of the Business sold prior to the Closing by the
Seller, provided that at such time as the total cost of such warranty
work exceeds 5% of the sales price of all products of the Business sold
during calendar year 1999, the Seller shall thereafter pay to the Buyer
Buyer's customary rates for each hour of services, and for the total
cost of the parts, required to perform warranty work on such products
sold prior to the Closing. With respect to any work performed by the
Buyer pursuant to this Section 6(i), the Buyer's sole remedy shall be
payment by the Seller as provided in this paragraph, and the Buyer
shall not be entitled to indemnification for breach, if any, of the
Seller's representations in Section 4(o) hereof with respect thereto.
(j) Solicitation of Employees. For 18 months following the Closing,
neither the Seller nor the Buyer shall solicit or encourage any person
to leave the employ of the Seller.
(k) Access to Computer Systems. The Seller shall, for a period of 120
days after Closing, provide the Buyer with access to all computer
files, software and other systems of the Seller on the Growth Power
machine and used in the operation of the Business including, without
limitation, accounts receivable, accounts payable and work in process
and inventory control systems, so that all records and other data on
the Growth Power machine used in the operation of the Business may be
maintained, accessed and otherwise used by the Buyer after Closing in
the same manner and with the same response times as were available to
the Seller prior to Closing. The Seller shall provide the Buyer such
consulting services as the Buyer may request from an individual
designated by the Seller who is knowledgeable of the Seller's computer
systems, to assist the Buyer in the use of
32
the Seller's computer systems and in a transition to a separate
computer system for use in the Buyer's business.
(l) Etching and Plating Services. For a period of 120 days after the
Closing, the Seller shall provide the Buyer at no cost with such
etching and plating services from the Seller's machine shop as the
Buyer may require for use in the operation of the Business.
7. Remedies for Breaches of This Agreement.
---------------------------------------
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this
agreement, and any covenant or other provision herein whose context so
permits, shall survive the Closing hereunder, even if the damaged Party
knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing, and continue in full force and effect
forever thereafter except to the extent limited by applicable statutes
of limitation, or except as provided in Section 7(b).
(b) Indemnification Provisions.
i) If the Seller breaches, or if any third party alleges facts
that if true would mean the Seller has breached any of its
representations, warranties, and covenants contained herein or
in any Other Agreement, then the Seller shall indemnify and
hold harmless the Buyer and the Buyer Affiliates and their
respective directors, officers, stockholders, members,
managers, affiliates, employees, agents, successors and
assigns (collectively "Buyer Indemnitees") from and against
the entirety of any Adverse Consequences any Buyer Indemnitee
may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to,
or caused by, the breach or the alleged breach, only if any
Buyer Indemnitee has (A) notified the Seller of a claim with
respect thereto or (B) commenced litigation with respect
thereto against the Seller within three years after the
Closing; provided, however, that a claim for breach of the
representations and warranties set forth in Sections 4(a),
(b), (e) and (u) of this agreement may be asserted or
litigation with respect thereto commenced against the Seller
until not later than six months after the expiration of the
applicable statutes of limitation with respect thereto.
Notwithstanding the foregoing, if the Seller is in breach of
any representation, warranty, or covenant as a result of the
fraud or intentional act or omission of the Seller, the Seller
shall indemnify the Buyer Indemnitees with respect thereto,
and a claim with respect thereto may be asserted or litigation
with respect thereto commenced against the Seller without
limitation as to time. With respect to any matter for which a
limit is imposed pursuant to this Section 7(b)(i) on the time
within which a claim may be asserted and litigation commenced,
the obligation to indemnify shall survive until such claim or
such litigation is finally resolved, including, in the case of
any claim, by litigation.
33
ii) The Seller shall indemnify and hold harmless each Buyer
Indemnitee from and against the entirety of any Adverse
Consequences such Buyer Indemnitee may suffer resulting from
(A) any litigation against the Seller or any Buyer Indemnitee
from any act or omission of the Seller that occurred or is
alleged to have occurred prior to the Closing, or any
circumstance that existed or is alleged to have existed at or
prior to the Closing, including the litigation identified in
Section 4(s) of the Disclosure Schedule, and any other matter
disclosed in Section 4(s) of the Disclosure Schedule, but only
if any Buyer Indemnitee has (i) notified the Seller of a claim
with respect thereto or (ii) commenced litigation with respect
thereto against the Seller within three years after the
Closing; provided that in any event such obligation to
indemnify shall survive until such claim or such litigation is
finally resolved, including, in the case of any claim, by
litigation, and that notwithstanding the foregoing such
obligation to indemnify shall survive without limitation as to
time as to matters disclosed in Section 4(s) of the Disclosure
Schedule.
iii) The Seller shall indemnify and hold harmless the Buyer
Indemnitees from and against the entire amount of any Taxes,
of any type, including, without limitation, income, excise,
franchise, gains, transfer and sales and use taxes, and any
interest or penalties with respect thereto, owed by the Seller
or any shareholder of the Seller under federal, state, county
or local laws for any period prior to Closing or that arise as
a result of the sale or other transactions described in this
agreement, (hereinafter referred to as "Tax Amounts").
Notwithstanding any other provision of this agreement, such
obligation to indemnify pursuant to this Section 7(b)(iii)
shall survive for six months after the last date on which any
Tax Amount may be assessed by any taxing authority if any
Buyer Indemnitee within such period has (A) notified the
Seller of a claim with respect thereto or (B) commenced
litigation with respect thereto, and in any event until such
claim or such litigation is finally resolved, including, in
the case of any claim, by litigation.
iv) The Seller shall indemnify and hold harmless the Buyer
Indemnitees from and against any Environmental Site Loss.
Notwithstanding any other provision of this agreement, such
obligation to indemnify pursuant to this Section 7(b)(iv)
shall survive without limitation as to time.
v) The Seller shall indemnify and hold harmless each Buyer
Indemnitee from and against the entirety of any Adverse
Consequences any Buyer Indemnitee may suffer as a result of or
arising from any claim by any broker or finder for commissions
or other amounts on account of any of the transactions
described in this agreement, which is attributable to any act
or omission of the Seller or any Seller Affiliate, but only if
any Buyer Indemnitee has (A) notified the Seller of a claim by
any such broker or finder or (B) commenced litigation with
respect thereto against the Seller within three years after
the Closing, provided that in any
34
event such obligation to indemnify shall survive until such
claim or such litigation is finally resolved, including, in
the case of any claim, by litigation.
vi) The Seller shall indemnify and hold harmless the Buyer
Indemnitees from and against the entirety of any Adverse
Consequences any Buyer Indemnitee may suffer resulting from
(A) any failure prior to the Closing by the Seller or any
Seller Affiliate to comply with any Environmental, Health, and
Safety Law, or (B) any Hazardous Substance present on or prior
to the Closing Date on, in, or under any real property or any
other property owned, leased, or used at any time by the
Seller or any Seller Affiliate. Notwithstanding any other
provision of this agreement, such obligation to indemnify
pursuant to this Section 7(b)(vi) shall survive without
limitation as to time. The Seller shall have the burden of
proving that any Hazardous Substance was not so present on or
prior to the Closing Date.
vii) If the Buyer breaches, or if any third party alleges
facts that if true would mean the Buyer has breached any of
its representations, warranties, and covenants contained
herein or in any Other Agreement, then the Buyer shall
indemnify and hold harmless the Seller and its directors,
officers, stockholders, affiliates, employees, agents,
successors and assigns (collectively "Seller Indemnitees")
from and against the entirety of any Adverse Consequences any
Seller Indemnitee may suffer through and after the date of the
claim for indemnification resulting from, arising out of,
relating to, or caused by, the breach or the alleged breach,
only if any Seller Indemnitee has (A) notified the Buyer of a
claim with respect thereto or (B) commenced litigation with
respect thereto against the Buyer within three years after the
Closing.
viii) The Buyer shall indemnify and hold harmless the Seller
Indemnitees from or against any Adverse Consequences any
Seller Indemnitee may suffer arising out of the operation,
ownership or use of the Business or the Acquired Assets by the
Buyer after the Closing, except Liabilities that existed prior
to the Closing and that were not assumed by the Buyer pursuant
to this agreement, and except as arise as a result of any
breach by the Seller of any of its representations, warranties
or covenants hereunder.
(c) Matters Involving Third Parties.
i) If any third party shall notify any indemnitee (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for
indemnification against any Party (the "Indemnifying Party")
under this Section 7, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless, and then solely to the extent, the Indemnifying Party
thereby is prejudiced.
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ii) An Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party
so long as (A) the Indemnifying Party notifies the Indemnified
Party in writing, within 15 days after the Indemnified Party
has given notice of the Third Party Claim, that the
Indemnifying Party will indemnify the Indemnified Party from
and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party
Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice adverse
to the continuing business interests of the Indemnified Party
and (E) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section
7(c)(ii) above, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (B) the Indemnified Party
will not consent to the entry of any judgment or stipulation
of dismissal or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party, not to be withheld unreasonably, and (C)
the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party, not to be withheld unreasonably.
iv) If any of the conditions in Section 7(c)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party
Claim in any manner it may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Party will reimburse the Indemnified Party
promptly and periodically for the costs of defending against
the Third Party Claim (including attorneys' fees and
expenses), and (C) the Indemnifying Party will remain
responsible for any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the
nature of or caused by the Third Party Claim to the fullest
extent provided in this Section 7.
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v) Notwithstanding the foregoing, if with respect to any Third
Party Claim involving only the payment of money, either a firm
written offer is made to settle by all Persons asserting such
claim or the Indemnifying Party and all Persons asserting such
Third Party Claim agree on a settlement of such claim
involving only the payment of money, and the Indemnified Party
refuses to accept such settlement, then the Indemnifying Party
shall be excused from, and the Indemnified Party shall be
responsible for, all further defense of such Third Party
Claim, and the maximum liability of the Indemnifying Party on
account of such Third Party Claim shall be the amount of the
proposed settlement plus the costs and expenses incurred with
respect to such Third Party Claim through the date of such
refusal.
(d) Right of Set-Off. The Buyer may recoup or withhold all or any part
of any Adverse Consequences it may suffer or that it reasonably
believes it is likely to suffer on account of any breach by the Seller
of any of its warranties, representations or covenants contained in the
agreement, any Tax Amounts any Buyer Indemnitee may pay or be required
to pay, or any other amounts that may be due the Buyer or any Buyer
Affiliate pursuant to this agreement or any Other Agreement from any
amount that the Buyer or any Buyer Affiliate may owe the Seller from
time to time.
(e) Limitations on Claims by Buyer Indemnitees. Notwithstanding any
other provision of this agreement or any Other Agreement, in no event
shall the aggregate liability of the Seller to the Buyer and the Buyer
Indemnitees collectively exceed the amount of the Purchase Price as
adjusted pursuant to this agreement, whether such liability arises at
law or in equity, as a result of claims for indemnification, breach of
contract, tort or otherwise, or on any other basis. The Seller may
deduct $50,000 from the Seller's total indemnification obligations
under this agreement; provided, that such deduction shall not apply to
(i) breach of any of the representations and warranties set forth in
Sections 4(a), (b), (e), (r) or (u) or matters disclosed or that should
have been disclosed on Section 4(s) of the Disclosure Schedule; (ii)
Tax Amounts; (iii) fraud or any intentional misrepresentation or breach
by the Seller; (iv) any indemnification pursuant to Sections 7(b)(ii),
7(b)(iii) or 7(b)(v) or (v) any adjustment to the Purchase Price.
(f) Breach of Multiple Representations, Warranties or Covenants.
Neither the Buyer Indemnitees as a group nor the Seller Indemnitees as
a group shall be entitled with respect to any Adverse Consequences they
may suffer to recover more than once from the Indemnifying Party even
though such Adverse Consequences may have resulted from the breach or
inaccuracy of more than one representation, warranty or covenant.
(g) Other Remedies. The foregoing indemnification remedies set forth in
this Section 7 shall not derogate from any remedy in equity any Buyer
Indemnitee or any Seller Indemnitee may have for breach of any
representation, warranty, or covenant. However, the sole remedy of the
Buyer Indemnitees for breach of the representations, warranties
37
and covenants set forth in Section 4 of this agreement shall be
indemnification pursuant to this Section 7.
8. Miscellaneous.
-------------
(a) [Reserved.]
(b) Confidentiality of Documents. Neither the Seller or the Buyer shall
disclose this agreement or any other documents executed in connection
with the Closing except as required by law or to employees, directors,
advisors, attorneys, and accountants as appropriate to perform their
services and responsibilities for the Seller or the Buyer, as the case
may be.
(c) No Third-Party Beneficiaries. Except as specifically set forth in
this agreement, this agreement shall not confer any rights or remedies
upon any Person other than the Parties and their respective successors
and permitted assigns.
(d) Entire Agreement. This agreement, including the documents referred
to herein, constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements or representations by
or among the Parties, written or oral, to the extent they related in
any way to the subject matter hereof.
(e) Succession and Assignment. This agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. The Seller may not assign either this
agreement or any of its rights, interests or obligations hereunder
without the prior written approval of the Buyer. The Buyer may assign
any or all of its rights and interests hereunder to one or more Buyer
Affiliates, including by merger or consolidation, provided that the
Buyer shall remain liable under this agreement following any such
assignment. No assignment by any Party shall relieve such Party of its
obligations and responsibilities under this agreement.
(f) Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same agreement.
(g) Headings. The section headings contained in this agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and will be deemed duly
given 48 hours after being sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
38
If to the Seller: Copy to:
Telaxis Communications Corporation Telaxis Communications Corporation
00 Xxxxxxxxxx Xxxxx Xxxx 00 Xxxxxxxxxx Xxxxx Xxxx
X.X. Xxx 000 P.O. Box 109
South Deerfield, MA 01373-0109 Xxxxx Xxxxxxxxx, XX 00000-0000
Attention: President Attention: Xxxxx X. Xxxxxxx, Esq.
If to the Buyer: Copy to:
MMW Acquisition, LLC Xxxxxx X. Xxxxx, Esq.
0 Xxxxx Xxxxxx Xxxxxxx, Xxxxxxxxxx and Xxxxxxx, LLP
Xxxxx Xxxxxxxxx, XX 00000 Suite 2700
0000 Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(i) Amendments and Waivers. No amendment of any provision of this
agreement shall be valid unless it is in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(j) Severability. Any term or provision of this agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear his or its own costs and
expenses, including legal fees and expenses, incurred in connection
with this agreement and the transactions contemplated hereby.
(l) Governing Law and Construction. This agreement shall be governed by
the laws of the Commonwealth of Massachusetts without giving effect to
any choice or conflict of law principle, provision or rule, whether of
the Commonwealth of Massachusetts or any other jurisdiction, that would
cause the application of the laws of any jurisdiction other than the
Commonwealth of Massachusetts. The Parties have participated jointly in
the negotiation and drafting of this agreement. In the event an
ambiguity or question of intent or interpretation arises, this
agreement shall be construed as if drafted jointly by the
39
Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this agreement. Any reference to any federal, state,
local or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. The Parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject
matter, regardless of the relative levels of specificity, which the
Party has not breached shall not detract from or mitigate the fact that
the Party is in breach of the first representation, warranty or
covenant.
(m) Incorporation of Appendices, Exhibits and Schedules. The
Appendices, Exhibits and Schedules identified in this agreement are
incorporated herein by reference and made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of
the provisions of this agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of
the Parties agrees that the other Party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
agreement and to enforce specifically this agreement and the terms and
provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Party and the
matter, in addition to any other remedy to which they may be entitled,
at law or in equity.
(o) Submission to Jurisdiction. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this
agreement may be brought against either of the Parties in the courts of
the Commonwealth of Massachusetts, or in the United States District
Court for the District of Massachusetts if it has or can acquire
jurisdiction, and each of the Parties consents to the jurisdiction of
such courts and of the appropriate appellate courts in any such action
or proceeding and waives any objection to venue laid therein. Process
in any action or proceeding referred to in the preceding sentence may
be served on any party anywhere in the world. Each of the Parties
waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought. Nothing in this Section 8(p) shall
affect the right of any Party to serve legal process in any other
manner permitted by law or at equity. A final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or at equity.
(p) Resolution of Disputes. If a dispute arises following the Closing
between the Parties relating to this agreement or any of the Other
Agreements or the transactions contemplated hereby, the Parties, prior
to pursuing any legal shall negotiate in good faith in an attempt to
resolve the dispute, including at least one meeting in person between
40
individuals representing each Party who have decision making authority
with respect to the matter in dispute, provided, however, that the
Parties need not engage in such negotiation prior to pursuing any
equitable remedy.
(q) Notwithstanding any other provision of this agreement, any amounts
due to the Buyer or any Buyer Indemnitee pursuant to Section 7 shall be
payable by the Seller as follows:
(i) as to all such amounts due pursuant to Section 7 prior to
the first anniversary of the Closing (A) the first $1,000,000
shall be payable in cash, and (B) the balance shall be payable
first by reduction of the outstanding amount due under the
Note until there is no amount outstanding under the Note, and
then in cash; and
(ii) as to all such amounts due pursuant to Section 7 on or
after the first anniversary of the Closing (A) 50% shall be
payable in cash, and (B) 50% shall be payable first by
reduction of the outstanding amount due under the Note until
there is no amount outstanding under the Note, and then in
cash.
(r) Notwithstanding any other provision of this agreement, any
adjustments to the Purchase Price, except on account of the Zoning
Hold-back, (i) if on account of increases to the Purchase Price, shall
be payable by the Buyer (x) 50% in cash, and (y) 50% by increasing the
outstanding amount due under the Note, and (ii) if on account of a
reduction in the Purchase Price, shall be payable by the Seller (x) 50%
in cash and (y) 50% first by decreasing the amount payable under the
Note until there is no amount outstanding under the Note, and then in
cash.
(Balance of page intentionally left blank.)
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Witnessed By: Buyer:
MMW ACQUISITION, LLC
/s/ Xxxxx X. Xxxxxx By /s/ Xxxxxxx X. Xxxxxx
------------------------- ------------------------------
Xxxxxxx X. Xxxxxx, Manager
Seller:
TELAXIS COMMUNICATIONS CORPORATION
/s/ Xxxxx Xxxxx By /s/ Xxxxx X. Xxxxxxx
------------------------- -----------------------------
Xxxxx X. Xxxxxxx, Vice President
