AGREEMENT AND PLAN OF MERGER by and among PLANTRONICS, INC., SONIC ACQUISITION CORPORATION AND ALTEC LANSING TECHNOLOGIES, INC. and with respect to Article XI, Article XII and Section 6.7 only, SOUNDCO CAPITAL, INC., MARK E. LUCAS AND EDWARD ANCHEL...
AGREEMENT
AND PLAN OF MERGER
by
and among
PLANTRONICS,
INC.,
SONIC
ACQUISITION CORPORATION AND
ALTEC
LANSING TECHNOLOGIES, INC.
and
with respect to Article XI,
Article XII
and Section 6.7
only,
SOUNDCO
CAPITAL, INC., XXXX X. XXXXX AND XXXXXX XXXXXX
and
with respect to Article XI
and Article XII
only,
XXXXXX
XXXXXXXX, XXXX XXXXX, XXXXXXX XXXXX AND
ANCHEL
FAMILY LIMITED PARTNERSHIP
and
with respect to Section 6.10
only,
XXXXXX
XXXXXX
July 11,
2005
|
Page
|
||
|
2
|
||
|
10
|
||
|
2.1
|
The
Merger
|
10
|
|
2.2
|
Closing
and Effective Time
|
10
|
|
2.3
|
Effect
of the Merger
|
10
|
|
2.4
|
Articles
of Incorporation and Bylaws
|
10
|
|
2.5
|
Directors
and Officers
|
11
|
|
2.6
|
Effect
of Merger on Capital Stock
|
11
|
|
2.7
|
Dissenting
Shares for Holders of Company Capital Stock
|
13
|
|
2.8
|
Surrender
of Certificates
|
13
|
|
2.9
|
No
Further Ownership Rights in Company Capital Stock
|
14
|
|
2.10
|
Lost,
Stolen or Destroyed Certificates
|
14
|
|
2.11
|
Taking
of Necessary Action; Further Action
|
14
|
|
15
|
||
|
3.1
|
Organization
and Good Standing
|
15
|
|
3.2
|
Authority;
No Conflict
|
17
|
|
3.3
|
Capitalization
|
17
|
|
3.4
|
Financial
Statements
|
18
|
|
3.5
|
Books
and Records
|
19
|
|
3.6
|
Title
to Assets; Encumbrances
|
19
|
|
3.7
|
Intellectual
Property Matters
|
19
|
|
3.8
|
Absence
of Material Adverse Change
|
20
|
|
3.9
|
No
Undisclosed Liabilities
|
20
|
|
3.10
|
Taxes
|
20
|
|
3.11
|
Employee
Benefits
|
21
|
|
3.12
|
Compliance
with Legal Requirements; Governmental Authorizations
|
24
|
|
3.13
|
Legal
Proceedings
|
25
|
|
3.14
|
Absence
of Certain Changes and Events
|
25
|
|
3.15
|
Material
Contracts; No Defaults
|
26
|
|
3.16
|
Insurance
|
28
|
|
3.17
|
Environmental
Matters
|
29
|
|
3.18
|
Brokers
or Finders
|
31
|
|
3.19
|
Accounts
Receivable
|
31
|
|
3.20
|
Inventory
|
31
|
|
3.21
|
Sufficiency
of Assets
|
31
|
|
3.22
|
Complete
Copies of Materials
|
31
|
|
3.23
|
Representations
Complete
|
31
|
|
32
|
||
|
4.1
|
Organization
and Good Standing
|
32
|
|
4.2
|
Merger
Sub
|
32
|
|
4.3
|
Authority;
No Conflict
|
32
|
|
4.4
|
Investment
Intent
|
33
|
|
4.5
|
Certain
Proceedings
|
33
|
|
4.6
|
Financial
Ability
|
33
|
|
4.7
|
Parent’s
Investigation
|
33
|
|
4.8
|
Brokers
or Finders
|
33
|
|
4.9
|
Reliance
on Representations
|
34
|
|
34
|
||
|
5.1
|
Access
and Investigations
|
34
|
|
5.2
|
Operation
of the Company
|
34
|
|
5.3
|
Negative
Covenant
|
34
|
|
5.4
|
Required
Approvals
|
35
|
|
5.5
|
Non-Solicitation
|
35
|
|
5.6
|
Excise
Tax
|
36
|
|
5.7
|
Employee
Plans
|
36
|
|
36
|
||
|
6.1
|
Shareholder
Approval
|
36
|
|
6.2
|
Approvals
of Governmental Bodies
|
37
|
|
6.3
|
WARN
Act
|
37
|
|
6.4
|
Tax
Matters
|
37
|
|
6.5
|
Third
Party Expenses and Financial Statements
|
37
|
|
6.6
|
Employee
Matters
|
38
|
|
6.7
|
Nonsolicitation
of Employees
|
38
|
|
6.8
|
Closing
Over By Parent
|
38
|
|
6.9
|
Spreadsheet
|
39
|
|
6.10
|
Environmental
Investigation.
|
39
|
|
40
|
||
|
7.1
|
Accuracy
of Representations
|
40
|
|
7.2
|
Covenants
|
40
|
|
7.3
|
Payment/Cancellation
of Debt Obligations
|
40
|
|
7.4
|
FIRPTA
Certificate
|
41
|
|
7.5
|
Escrow
Agreement
|
41
|
|
7.6
|
Shareholder
Written Consent
|
41
|
|
7.7
|
Consents
|
41
|
|
7.8
|
No
Proceedings
|
41
|
|
7.9
|
Key
Employees
|
42
|
|
7.10
|
Xxxxx
Separation Agreement
|
42
|
|
7.11
|
Xxxxx
Supplemental Release
|
42
|
|
7.12
|
Termination
of Company Employee Plans
|
42
|
|
7.13
|
Section
280G Approval or Disapproval
|
42
|
|
7.14
|
Wholly-Owned
Subsidiaries
|
42
|
|
7.15
|
Financial
Statements
|
42
|
|
7.16
|
Satisfaction
of Environmental Condition
|
43
|
|
7.17
|
Pennsylvania
Properties
|
43
|
|
7.18
|
Spreadsheet
|
43
|
|
44
|
||
|
8.1
|
Accuracy
of Representations
|
44
|
|
8.2
|
Covenants
|
44
|
|
8.3
|
Consents
|
44
|
|
8.4
|
Agreements
and Certificates
|
44
|
|
8.5
|
Side
Letters. .
|
45
|
|
45
|
||
|
9.1
|
Termination
Events
|
45
|
|
9.2
|
Effect
of Termination
|
46
|
|
46
|
||
|
10.1
|
Representations
and Warranties
|
46
|
|
10.2
|
Covenants
|
46
|
|
10.3
|
General
|
46
|
|
47
|
||
|
11.1
|
Indemnification
and Payment of Damages by Company Securityholders
|
47
|
|
11.2
|
Indemnification
and Payment of Damages by Parent
|
47
|
|
11.3
|
Limitations
|
47
|
|
11.4
|
Procedures
for Indemnification — Third Party Claims
|
48
|
|
11.5
|
Procedure
for Indemnification — Other Claims
|
49
|
|
11.6
|
Exclusive
Remedy
|
49
|
|
50
|
||
|
12.1
|
Expenses
|
50
|
|
12.2
|
Public
Announcements
|
50
|
|
12.3
|
Confidentiality
|
50
|
|
12.4
|
Notices
|
50
|
|
12.5
|
Jurisdiction;
Service of Process
|
51
|
|
12.6
|
Further
Assurances
|
51
|
|
12.7
|
Waiver
|
51
|
|
12.8
|
Entire
Agreement and Modification
|
52
|
|
12.9
|
Disclosure
Schedules
|
52
|
|
12.10
|
Assignments,
Successors, and No Third-Party Rights
|
52
|
|
12.11
|
Severability
|
52
|
|
12.12
|
Article
and Section Headings, Construction
|
53
|
|
12.13
|
Time
of Essence
|
53
|
|
12.14
|
Governing
Law
|
53
|
|
12.15
|
Counterparts
|
53
|
|
12.16
|
Shareholders’
Representatives
|
53
|
DISCLOSURE SCHEDULES
|
Schedule 3.1(a)
|
Executive
Officers & Directors of the Company
|
|
Schedule 3.1(b)
|
Subsidiaries;
Executive Officers & Directors
|
|
Schedule 3.2(b)
|
No
Conflicts
|
|
Schedule 3.2(c)
|
Company
Required Consents
|
|
Schedule 3.3(a)
|
Capitalization
and Agreements in respect of Equity Securities
|
|
Schedule 3.3(b)
|
Options,
Warrants and Similar Rights
|
|
Schedule 3.6
|
Real
Property
|
|
Schedule 3.7
|
Intellectual
Property
|
|
Schedule 3.10
|
Taxes
|
|
Schedule 3.11
|
Plans
and Other Benefit Obligations; Retiree Benefits
|
|
Schedule 3.12
|
Compliance
with Legal Requirements
|
|
Schedule 3.13
|
Legal
Proceedings
|
|
Schedule 3.14
|
Absence
of Certain Changes and Events
|
|
Schedule 3.15(a)
|
Material
Contracts
|
|
Schedule 3.15(b)
|
Restrictive
Contracts
|
|
Schedule 3.15(c)
|
Validity
of Material Contracts
|
|
Schedule 3.15(d)
|
No
Violation of Material Contracts
|
|
Schedule 3.16(b)
|
Insurance
|
|
Schedule 3.16(c)
|
Validity
of Insurance
|
|
Schedule 3.17
|
Environmental
Matters
|
|
Schedule
5.7
|
Continuing
Company Benefit Plans
|
|
Schedule
6.9
|
Spreadsheet
|
EXHIBITS
|
Exhibit A
|
Form
of Shareholder Written Consent and Irrevocable Proxy
|
|
Exhibit B
|
Parent’s
Required Consents
|
|
Exhibit C
|
Key
Employees
|
|
Exhibit X
|
Xxxxx
Separation Agreement
|
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”)
is
made on July 11, 2005, by and among Plantronics, Inc., a Delaware
corporation (“Parent”),
Sonic
Acquisition Corporation, a Pennsylvania corporation and a wholly-owned
subsidiary of Parent (“Merger
Sub”)
and
Altec Lansing Technologies, Inc., a Pennsylvania corporation (the “Company”)
and
with respect to Article XI,
Article XII
and
Section 6.7
only,
Soundco Capital, Inc., Xxxx X. Xxxxx and Xxxxxx Xxxxxx and with respect
to
Article XI
and
Article XII
only,
Xxxxxx Xxxxxxxx, Xxxx Xxxxx, Xxxxxxx Xxxxx and Xxxxxx Family Limited Partnership
and with respect to Section 6.10
only,
Xxxxxx Xxxxxx.
RECITALS
A. The
Boards of Directors of each of Parent, Merger Sub and the Company believe it
is
advisable and in the best interests of each company and its respective
stockholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company and, in furtherance thereof, have approved
this Agreement and the transactions contemplated hereby.
B. Pursuant
to the Merger, among other things, and subject to the terms and conditions
of
this Agreement, (i) all of the issued and outstanding capital stock
of the
Company and all issued and outstanding options to purchase capital stock of
the
Company shall be converted into the right to receive cash in the manner set
forth herein and (ii) all issued and outstanding options to purchase
capital stock of the Company, to the extent not exchanged for cash pursuant
to
this Agreement, shall be terminated.
C. Promptly
following the execution and delivery of this Agreement, and as an inducement
to
Parent’s willingness to enter into this Agreement, the Company shall use its
best efforts to cause each of the Majority Shareholders and Minority
Shareholders to execute and deliver to Parent a written consent and irrevocable
proxy substantially in the form attached hereto as Exhibit A (the
“Shareholder
Written Consent and Irrevocable Proxy”)
irrevocably adopting this Agreement and approving the transactions contemplated
hereby.
D. Prior
to
the Closing, and as a material inducement to Parent and Merger Sub to enter
into
this Agreement, (i) each of the Key Employees set forth on Exhibit C
shall have signed an Offer Letter and an Employee Patent, Secrecy and Invention
Agreement (the “Offer
Letters”),
and
(ii) each Person who might receive any payments and/or benefits referred
to
in Section 3.11(c)
hereof
is executing and delivering a 280G Waiver (the “280G
Waivers”),
by
which such Person agrees to waive any right or entitlement to the payments
and/or benefits referred to in Section 3.11(c)
hereof,
unless the requisite stockholder approval of those payments and/or benefits
are
obtained pursuant to the terms of this Agreement.
E. The
Company on the one hand, and Parent and Merger Sub, on the other hand, desire
to
make certain representations, warranties, covenants and other agreements in
connection with the transactions contemplated hereby.
NOW,
THEREFORE, in consideration of the mutual agreements, covenants and other
promises set forth herein, the mutual benefits to be gained by the performance
thereof, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows:
DEFINITIONS
For
purposes of this Agreement, the following terms have the meanings specified
or
referred to in this Article I:
“Accounts
Receivable”
means
all of the Company’s trade accounts receivable, notes receivable, employee
advances and other miscellaneous receivables.
“Agreement”
has the
meaning defined in the first paragraph of this Agreement.
“Anchel
Parcel”
means
that certain real property in Milford, Pennsylvania more specifically described
in Schedule 3.6.
“Anchel
Parcel Promissory Note”
means
that certain promissory note, dated as of a date prior to the Closing Date,
in
the principal amount of $1,032,000 payable by the Company to Xxxxxx Xxxxxx
in
connection with the Company’s purchase of the Anchel Parcel.
“Balance
Sheet”
has the
meaning defined in Section 3.4.
“Basket”
has the
meaning defined in Section 11.3.
“Business
Day”
means
any day other than a Saturday, Sunday or public holiday under the laws of the
Commonwealth of Pennsylvania.
“Cap”
has the
meaning defined in Section 11.3.
“Closing”
has the
meaning defined in Section 2.2(a).
“Closing
Date”
has the
meaning defined in Section 2.2(a).
“Company”
has the
meaning defined in the first paragraph of this Agreement.
“Company
Capital Stock”
means
the Company Voting Common Stock, the Company Non-Voting Common Stock, the
Company Series A Preferred Stock and any other shares of capital stock,
if
any, of the Company taken together.
“Company
Debt Obligations”
means,
as of a particular date, the obligations reflected in the following line items
to be included in the Pre-Closing Balance Sheet and the Company Debt Statement:
ST Debt, ST Capital Leases, LT Debt, Revolving Credit, Shareholder Debt, and
LT
Capital Leases.
“Company
Debt Statement”
means a
statement setting forth the Company’s available cash as well as the aggregate
amount of the Company Debt Obligations, in each case as of the date of the
Company Debt Statement.
“Company
Facility”
shall
have the meaning defined in Section 3.17(e).
“Company
Non-Voting Common Stock”
means
the non-voting common stock of the Company, par value $0.01 per
share.
“Company
Options”
shall
have the meaning defined in Section 3.3(b).
“Company
Securityholder”
means
holders of Company Capital Stock and holders of vested Company Options
immediately prior to the Effective Time.
“Company
Series A Preferred Stock”
means
the Series A Convertible Preferred Stock of the Company, par value $0.01
per share.
“Company
Shareholder”
means
holders of Company Capital Stock.
“Company
Stock Certificates”
means
certificates representing shares of Company Capital Stock.
“Company
Voting Common Stock”
means
the voting common stock of the Company, par value $0.01 per share.
“Company
WEEE Compliance Costs”
means
(a) the amount of any write downs made by the Company or Surviving
Corporation, as applicable, for excess and obsolete inventory resulting from
or
relating to the Company’s compliance or non-compliance with applicable Waste for
Electronics and Electrical Equipment directives and (b) the aggregate
amount of the gross profit (as determined by the Company’s “gross profit plan”)
lost on products that could not be delivered or sold through December 31,
2005, resulting from or relating to the Company’s compliance or non-compliance
with applicable Waste for Electronics and Electrical Equipment
directives.
“Consent”
means
any approval, consent, ratification, waiver, or other authorization (including
any Governmental Authorization).
“Contract”
means
any agreement, contract, license, sublicense, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
“Damages”
means
any and all losses, damages, liabilities, obligations, costs and expenses,
including without limitation, reasonable fees and disbursements of counsel,
sustained or incurred by the applicable Person after deducting therefrom:
(a) any Tax benefit actually recognized by the Person resulting from
such
Damages; (b) any insurance proceeds and any indemnity, contribution
or
other similar payment actually recovered, net of all expenses incurred in
prosecuting such claim, by the Person suffering the Damages from any third
party
with respect thereto; and (c) any provision or reserve provided for
in a
financial statement delivered to Parent prior to the Closing Date with respect
to such matters.
“Disclosure
Schedules”
means,
collectively, those schedules delivered by the Company and attached to this
Agreement that set forth the facts and circumstances that qualify the
representations and warranties of the Company in Article III
of this
Agreement, and “Schedule” means any individual schedule comprising part of the
Disclosure Schedules.
“Dongguan
Co”
means
Altec Lansing Electronics (Dongguan) Company Limited, a wholly foreign owned
enterprise established in the People’s Republic of China with its registered
address at Xxxx 000, Xxxxx Xxxxxx, Xxxx Xxx Xxxx, Xxxx Xxxx.
“Employee”
means
any current or former or retired employee, consultant or director of the
Company, any Subsidiary or their respective ERISA Affiliates.
“Encumbrance”
means
any mortgage, easement, right of way, charge, claim, equitable interest, lien,
option, pledge, security interest, right of first refusal, or restriction of
any
kind, including any restriction on use, voting, transfer, receipt of income,
or
exercise of any other attribute of ownership.
“Environmental
Claim”
has the
meaning defined in Section 3.17.
“Environmental
Laws”
has the
meaning defined in Section 3.17.
“Environmental
Permits”
has the
meaning defined in Section 3.17.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
“ERISA
Affiliate”
has the
meaning defined in Section 3.11(a).
“Escrow
Account”
has the
meaning defined in Section 2.8(c).
“Escrow
Agent”
has the
meaning defined in Section 2.8(c).
“Escrow
Agreement”
has the
meaning defined in Section 2.8(c)
“Escrow
Amount”
has the
meaning defined in Section 2.8(c).
“Excess
Restricted Payments”
has the
meaning defined in Section 11.1.
“Excess
Third Party Expenses”
has the
meaning defined in Section 11.1.
“Excluded
Environmental Liabilities”
shall mean all Damages to the extent arising as a consequence of or in
connection with either or both of (i) the Release to, on or from the
Pennsylvania Properties or any other Company Facility (whether originating
on
such real properties or real properties in the vicinity of such real properties)
before or as of the Closing Date of any Hazardous Material on the Pennsylvania
Properties or any other Company Facility before or as of the Closing Date (other
than Hazardous Materials required for the conduct of the business of the Company
or any of its Subsidiaries as currently conducted and
which
are being stored and disposed of by
the
Company or any
of its Subsidiaries
in accordance with applicable
Environmental
Laws) in a concentration or an amount which it is or may be the contractual
or
legal responsibility of the Company or any of its Subsidiaries to investigate,
monitor, remediate or otherwise respond to under any applicable Environmental
Law or (ii) any matter described in the reports referenced in Schedule 3.17
to
this Agreement, whether or not known or discovered by the Parent prior to the
Closing Date or thereafter. For the purpose of Article XI,
the first One Hundred Fifty Thousand Dollars ($150,000) of costs that would
otherwise be Excluded Environmental Liability Damages that are incurred by
the
Company to investigate, remediate, or monitor any of the Hazardous Material
Releases described in any document in Schedule 3.17 for the Pennsylvania
Properties (“Pennsylvania
Property Exclusion”)
shall not be included in Excluded Enviromental Liabilities, but each dollar
of
Damages defined above that may be incurred after the Pennsylvania Property
Exclusion shall be an Excluded Environmental Liability.
“GAAP”
means
United States generally accepted accounting principles.
“Governmental
Authorization”
means
any approval, consent, license, permit, certification, registration, waiver,
or
other authorization issued, granted, given, or otherwise made available by
or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
“Governmental
Body”
means
any:
(a) nation,
state, county, city, town, village, district, or other jurisdiction of any
nature;
(b) federal,
state, local, municipal, foreign, or other government;
(c) governmental
or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other
tribunal); or
(d) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any
nature.
“Hazardous
Materials”
has the
meaning defined in Section 3.17.
“HK
Co”
means
Altec Lansing (Hong Kong) Limited, a company incorporated in Hong Kong with
registered number 534203 whose registered office is at 3409-12 34th
Floor,
The Xxxxxxx Xxxxx XX, 00 Xxxxxx Xxxx XXX XXX, Xxxx Xxxx.
“Hong
Kong Transaction”
means
the sale of all of the assets and business of HK Co to Newco and the transfer
of
the equity in Dongguan Co.
“HSR
Act”
means
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, together
with the rules and regulations promulgated thereunder.
“Intellectual
Property Assets”
has the
meaning defined in Section 3.7(a).
“Interim
Balance Sheet”
has the
meaning defined in Section 3.4.
“Inventory”
means
all inventory of the Company’s business held for resale and all raw materials,
work in process, finished products, shipments in transit, wrapping and supply
and packaging items exclusively used or held for use in the Company’s
business.
“IRC”
means
the Internal Revenue Code of 1986, as amended, or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
“IRS”
means
the United States Internal Revenue Service or any successor agency, and, to
the
extent relevant, the United States Department of the Treasury.
“Key
Employees”
has the
meaning defined in Section 7.6.
“Knowledge”
with
respect to the Company, means actual knowledge of Xxxx X. Xxxxx or
Xxxxxxx X. Xxxxxx, provided
that
such persons shall have made reasonable inquiry of the Company’s senior
executives and director level employees regarding the matters
represented.
“Legal
Requirement”
means
any federal, state, local, municipal, foreign, international, multinational,
or
other administrative order, constitution, law, ordinance, principle of common
law, court order, consent, decree, regulation, license, permit, statute, or
treaty.
“Xxxxx
Separation Agreement”
means
the Separation and Release Agreement to be executed concurrently herewith,
by
and between Xxxx X. Xxxxx and the Company in the form attached hereto
as
Exhibit D.
“Xxxxx
Supplemental Release”
means
the Supplemental Release Agreement to be executed at the Closing by and between
Xxxx X. Xxxxx and the Company in the form included in Exhibit D which
is
attached hereto.
“Majority
Shareholders”
means
Soundco Capital, Inc., Xxxxxx Xxxxxx and Anchel Family Limited
Partnership.
“Material
Adverse Effect (or Change)”
means,
with respect to a particular Person, (a) a material adverse effect on
the
business, results of operations, assets or financial condition of such Person
and its subsidiaries (if any), taken as a whole, or (b) a material
impairment of such Person’s ability to consummate the transactions contemplated
hereby; provided,
however,
that
the term “Material
Adverse Effect (or Change)”
shall
not include any effect attributable to the identity of Parent; the existence
of
or the public announcement of this Agreement; general economic changes or
changes in the general industry of the Company; acts of terrorism or war; or
political or civil instability, disturbance or unrest.
“Material
Contracts”
has the
meaning defined in Section 3.15(a).
“Merger”
has the
meaning defined in Section 2.1.
“Merger
Consideration”
means
one hundred sixty-six million U.S. dollars ($166 million), less the sum of
(a) the amount of the Company’s Third Party Expenses, as reflected on the
Statement of Third Party Expenses, (b) the amount of the Company Debt
Obligations reflected on the Company Debt Statement, including any termination
or other fees, expenses or costs associated with terminating such obligations,
(c) the amount of any remediation or other fines, fees, expenses or
costs
associated with the environmental assessment of the Company’s facilities in
excess of $150,000, (d) the aggregate amount of Restricted Payments,
if
any, (e) the amount of any cash payment made by the Company with respect
to
the Company’s purchase of the Anchel Parcel and (f) any costs, including
insurance premiums, associated with the purchase by Parent of the Environmental
Policy in accordance with Section 7.17.
“Minority
Shareholders”
means
Xxxxxx Xxxxxxxx, Xxxx Xxxxx, Xxxxxxx Xxxxx and Xxxx X. Xxxxx, or each
individually a “Minority
Shareholder.”
“Multi-Employer
Plan”
has the
meaning defined in Section 3.11(a).
“Newco”
means
Altec Lansing Manufacturing Limited, a company to be incorporated in Hong
Kong.
“Organizational
Documents”
means:
(a) the articles or certificate of incorporation and the bylaws of a
corporation; (b) the partnership agreement and any statement of partnership
of a general partnership; (c) the limited partnership agreement and
the
certificate of limited partnership of a limited partnership; (d) the
certificate of organization or formation and limited liability company agreement
of a limited liability company, including, without limitation, an operating
agreement; (e) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and
(f) any amendment to any of the foregoing.
“Other
Benefit Obligation”
has the
meaning defined in Section 3.11(a).
“Payment
Agent”
has the
meaning defined in Section 2.6(a).
“Pennsylvania
Law”
means
the Business Corporation Law of 1988 of the Commonwealth of Pennsylvania, as
amended.
“Pennsylvania
Properties”
means
the Anchel Parcel and the Company Facility located at 000
Xxxxxx 0 & 000 Xxxxxxx, Xxxxxxxxxxxx 00000-0000.
“Pension
Plan”
has the
meaning defined in Section 3.11(a).
“Per
Share Merger Consideration”
means
the quotient obtained by dividing (A) the Merger Consideration by (B)
the
sum of (i) the total number of shares of Company Capital Stock outstanding
immediately prior to the Effective Time
and (ii)
shares underlying Company Options vested as of the Effective Time.
“Person”
means
any individual, corporation (including any non-profit corporation), general
or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental
Body.
“Plan”
has the
meaning defined in Section 3.11(a).
“Pre-Closing
Balance Sheet”
has the
meaning defined in Section 6.5(c).
“Pre-Closing
Statements”
has the
meaning defined in Section 6.5(c).
“Proceeding”
means
any action, arbitration, audit, hearing, investigation, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal) commenced,
brought, conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
“Projections”
has the
meaning as defined in Section 4.6.
“Pro
Rata Share”
means
the pro rata portion of the Escrow Amount contributed by each Majority
Shareholder and Minority Shareholder.
“Purchase
Rights”
has the
meaning defined in Section 3.3(b).
“Qualified
Plan”
has the
meaning defined in Section 3.11(a).
“Release”
has the same meaning given to the word by Section 101(22) of the federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. § 9601(22).
“Representative”
means
with respect to a particular Person, any director, officer, employee, agent,
consultant, advisor, or other representative of such Person, including legal
counsel, accountants, and financial advisors.
“Restricted
Payment”
means
(i) any acceleration, payment or other compensation made to Xxxx X.
Xxxxx, including, but not limited to any acceleration, payment or other
compensation by the Company in connection with the Xxxxx Separation Agreement;
(ii) any acceleration, payment or increase by the Company of any bonuses,
salaries, or other compensation, severance or similar payments to any service
provider, stockholder, director or officer since the Interim Balance Sheet,
and
(iii) any payments made by the Company to any minority shareholder of
a
Subsidiary to satisfy the conditions of Section 7.13
hereof,
except, in each case, for (x) payments made in the ordinary course of
the
Company’s business that are consistent with past practices and disclosed in
writing to Parent, (y) any payment or prepayment of any Company Debt
Obligations or (z) any payment of Merger Consideration to Company
Securityholders in accordance with Section 2.6
hereof.
“Shareholders’
Representatives”
has the
meaning defined in Section 12.16(a).
“Shares”
means
the issued and outstanding shares of Company Voting Common Stock, Company
Non-Voting Common Stock and Company Series A Preferred Stock, immediately
prior to the Effective Time.
“Statement
of Third Party Expenses”
has the
meaning defined in Section 6.5(b).
“Subsidiary”
has the
meaning defined in Section 3.1(b).
“Tax”
and
“Taxes”
means
all income, gross receipts, franchise, excise, transfer, severance, value added,
ad
valorem,
sales,
use, wage, payroll, workmen’s compensation, employment, occupation, and real and
personal property taxes; taxes measured by or imposed on capital; levies,
imposts, duties, (license and legislation fees); other taxes imposed by any
Governmental Body, including assessments in the nature of taxes; interest,
penalties, fines, assessments and deficiencies relating to any tax or taxes;
and
transferee or secondary liability for taxes and any taxes due as a result of
being a member of any affiliated, consolidated, combined or unitary group or
any
liability in respect of taxes under a tax sharing, tax allocation, tax indemnity
or other agreement.
“Tax
Return”
means
any return (including any information return), report, statement, schedule,
notice, form, or other document or information filed with or submitted to,
or
required to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
“Third
Party Expenses”
has the
meaning defined in Section 6.5(a).
“Title IV
Plan”
has the
meaning defined in Section 3.11(a)
“Xxxxx
Fargo”
shall
mean Xxxxx Fargo Business Credit, Inc.
“Xxxxx
Fargo Obligations”
shall
mean all indebtedness and obligations owed by the Company to Xxxxx Fargo arising
under or in connection with that certain Loan and Security Agreement dated
March 29, 2004 by and between the Company and Xxxxx Fargo, as amended,
modified or supplemented.
THE
MERGER
2.1 The
Merger.
At the
Effective Time and subject to and upon the terms and conditions of this
Agreement and the applicable provisions of Pennsylvania Law, Merger Sub shall
be
merged with and into the Company (the “Merger”),
the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger is sometimes referred to herein as the “Surviving
Corporation.”
2.2 Closing
and Effective Time.
(a) Closing.
Unless
this Agreement is earlier terminated pursuant to Article IX
hereof,
the closing of the Merger (the “Closing”)
will
take place at the offices of Xxxx Xxxxx LLP at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, at 10:00 a.m. (local time) on the later of (“Closing
Date”):
(a) August 15, 2005 or (b) the date that is five Business
Days
following the satisfaction of the closing conditions set forth in Article VII
and
Article VIII,
or at
such other date, time and place as Parent and the Company may agree. Subject
to
the provisions of Article IX,
failure
to consummate the purchase and sale provided for in this Agreement on the date
and time and at the place determined pursuant to this Section 2.2(a)
will not
result in the termination of this Agreement and will not relieve any party
of
any obligation under this Agreement.
(b) Effective
Time.
On the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing with the Department of State of the Commonwealth of Pennsylvania
articles
of merger in customary form and substance for the Merger (the “Articles
of Merger”)
in
accordance with the applicable provisions of Pennsylvania Law. The time of
filing of the Articles of Merger is referred to herein as the “Effective
Time.”
2.3 Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided by the applicable
provisions of Pennsylvania Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest
in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
2.4 Articles
of Incorporation and Bylaws.
(a) Articles
of Incorporation of Surviving Corporation.
Unless
otherwise determined by Parent prior to the Effective Time, the articles of
incorporation of the Surviving Corporation shall be amended and restated as
of
the Effective Time in its entirety to be identical to the articles of
incorporation of Merger Sub as in effect immediately prior to the Effective
Time
until thereafter amended in accordance with Pennsylvania Law and as provided
in
such articles of incorporation; provided,
however,
that at
the Effective Time, Article I of the articles of incorporation of the
Surviving Corporation shall be amended and restated in its entirety to read
as
follows: “The name of the corporation is Altec Lansing Technologies,
Inc.”
(b) Bylaws
of the Surviving Corporation.
Unless
otherwise determined by Parent prior to the Effective Time, the bylaws of the
Surviving Corporation shall be amended and restated as of the Effective Time
in
their entirety to be identical to the bylaws of Merger Sub as in effect
immediately prior to the Effective Time, until thereafter amended in accordance
with Pennsylvania Law and as provided in the articles of incorporation of the
Surviving Corporation and such bylaws; provided,
however,
that at
the Effective Time, all references in the bylaws to “Sonic Acquisition
Corporation” shall be amended to refer to Altec Lansing Technologies,
Inc.”
2.5 Directors
and Officers
(a) Directors
of the Surviving Corporation.
Unless
otherwise determined by Parent prior to the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of
the
Surviving Corporation immediately after the Effective Time, each to hold the
office of a director of the Surviving Corporation in accordance with the
provisions of Pennsylvania Law, the articles of incorporation and bylaws of
the
Surviving Corporation until their successors are duly elected and qualified,
or
until their earlier death, resignation or removal.
(b) Officers
of the Surviving Corporation.
Unless
otherwise determined by Parent prior to the Effective Time, the officers of
Merger Sub immediately prior to the Effective Time shall be the officers of
the
Surviving Corporation immediately after the Effective Time, each to hold office
in accordance with the provisions of the bylaws of the Surviving
Corporation.
2.6 Effect
of Merger on Capital Stock
(a) Merger
Sub Capital Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
any of the parties hereto, each share of capital stock of Merger Sub issued
and
outstanding immediately prior to the Effective Time shall be converted
automatically into one validly issued, fully paid and non assessable share
of
common stock, par value $0.01 per share, of the Surviving Corporation. From
and
after the Effective Time, each stock certificate of Merger Sub evidencing
ownership of any shares of Merger Sub shall evidence ownership of shares of
capital stock of the Surviving Corporation.
(c) Company
Owned Company Capital Stock.
Notwithstanding anything to the contrary set forth in this Agreement, at the
Effective Time, by virtue of the Merger and without any action on the part
of
any of the parties hereto, each share of Company Capital Stock owned by the
Company immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
(d) Company
Options.
(i) Each
holder of a Company Option that is vested as of the Effective Time and that
is
not exercised prior to the Effective Time shall be entitled to receive (promptly
after the Effective Time) an amount of cash determined by multiplying (A) the
excess, if any, of the Per Share Merger Consideration over the exercise price
of
such Company Option by (B) the number of shares of Company Common Stock subject
to such vested Company Option, less any applicable withholding taxes and any
other amounts to be withheld pursuant to agreements between the holder and
Parent.
(ii) Notwithstanding
anything else to the contrary set forth in this Agreement, no Company Options,
whether vested or unvested, shall be assumed or otherwise replaced by Parent
at
the Effective Time, and each Company Option, to the extent unexercised, shall
by
virtue of the Merger, effective at the Effective Time, and without any further
action on the part of any holder thereof, be cancelled and
extinguished.
Prior
to
the Effective Time, the Company shall use commercially reasonable efforts to
effect the transactions anticipated by this Section 2.6(d)
under
the Company’s stock option plans all Company Option agreements and any other
plan or arrangement of the Company, including by giving any required notice
and
obtaining any required consent contemplated thereby.
(e) Withholding
Taxes.
Parent
and the Company shall be entitled to deduct and withhold from any amounts
payable pursuant to this Agreement to any Person such amounts as are required
to
be deducted or withheld therefrom under any applicable provision of federal,
state, local or foreign tax law or under any applicable Legal Requirement.
Parent and the Company shall calculate and mutually agree upon any such amount
required to be deducted or withheld no later than two (2) Business Days prior
to
the Effective Time. To the extent such amounts are so deducted or withheld
(i) such amounts shall be treated for all purposes under this Agreement
as
having been paid to the Person to whom such amounts would otherwise have been
paid and (ii) the Person deducting and withholding any such amounts
shall
be solely responsible for the timely payment of such agreed upon amounts to
the
applicable Governmental Body responsible for the collection of such
amounts.
2.7 Dissenting
Shares for Holders of Company Capital Stock
(a) Notwithstanding
anything to contrary set forth in this Agreement, any shares of Company Capital
Stock that are held by a holder who has not effectively withdrawn or lost such
holder’s appraisal, dissenters’ or similar rights for such shares under
Pennsylvania Law (“Dissenting
Shares”)
shall
not be converted into or represent a right to receive cash payable in respect
of
such shares of Company Capital Stock pursuant to this Agreement, but the holder
thereof shall only be entitled to such rights as are granted by Pennsylvania
Law.
(b) Notwithstanding
the provisions of Section 2.7(a),
if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his, her or its appraisal or dissenter’s rights, then,
as of the later of the Effective Time and the occurrence of such event, such
holder’s shares shall automatically be converted into and represent only the
right to receive cash payable in respect of such shares of Company Capital
Stock
pursuant to this Agreement, without interest thereon, upon surrender of such
shares in accordance with the provisions of this Agreement.
(c) The
Company shall give Parent (i) prompt notice of any written demand for
dissenters’ rights received by the Company pursuant to the applicable provisions
of Pennsylvania Law, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any such demands or offer to settle
or settle any such demands.
2.8 Surrender
of Certificates
(a) Payment
Agent.
Parent,
or a Person selected by Parent, shall serve as the Payment Agent (the
“Payment
Agent”)
for
the Merger.
(b) Parent
to Provide Cash.
Promptly following the Effective Time, (i) Parent shall make available to the
Payment Agent for exchange in accordance with this Agreement, an amount of
cash
equal to the cash portion of the Merger Consideration payable to Company
Securityholders pursuant to this Agreement (less the Escrow Amount and
any
other
amounts to be withheld pursuant to agreements between the Company
Securityholders and Parent), and (ii) Parent shall deposit with the Escrow
Agent
the Escrow Amount and any other amounts to be withheld from the Merger
Consideration pursuant to agreements between the Company Securityholders and
Parent.
(c) Exchange
Procedures.
Prior
to the Closing Date, Parent shall provide a letter of transmittal (the
“Letter
of Transmittal”)
to
each Company Securityholder, in such form as Parent may reasonably determine
including (i) information that the delivery shall be effected, and risk
of
loss and title to the shares of Company Capital Stock shall pass, only upon
proper delivery of the Company Stock Certificates, or other evidence of the
ownership of such shares, to the Payment Agent, and (ii) instructions
for
use in effecting the surrender of the Company Stock Certificates, or other
evidence of the ownership of such shares or Company Options, in exchange for
cash payable to each Company Securityholder pursuant to this Agreement. Subject
to the terms of this Agreement, upon the surrender of a Company Stock
Certificate for cancellation, or other evidence of the ownership of Company
Options, to the Payment Agent, together with such Letter of Transmittal, duly
completed and validly executed in accordance with the instructions thereto,
the
holder of such Company Stock Certificate shall be entitled to receive from
the
Payment Agent in exchange therefor, cash payable pursuant to
Section 2.6(b)
and
Section 2.6(d),
as
applicable,(without interest), and the Company Stock Certificate so surrendered
shall be canceled.
(d) Escrow.
At the
Closing, Parent shall withhold $10,000,000 (the “Escrow
Amount”)
and
shall deliver the Escrow Amount to JPMorgan Trust Company, N.A. who shall act
as
escrow agent (the “Escrow
Agent”),
for
deposit into escrow (the “Escrow
Account”).
Each
Majority Shareholder and Minority Shareholder shall be deemed to have
contributed its Pro Rata Share. The Escrow Amount shall be held pursuant to
the
provisions of an escrow agreement in a form agreed to by the parties (the
“Escrow
Agreement”).
The
Escrow Amount will be available to compensate Parent for the Majority
Shareholders’ and Minority Shareholders’ indemnity obligations as provided in
Article XI,
and any
recovery made by Parent or any Parent Indemnitee against the Escrow Amount
shall
be made pro rata among the Majority Shareholders and Minority Shareholders
in
accordance with their Pro Rata Shares. To the extent that there is an Escrow
Amount remaining in the Escrow Account which has not been reserved for claims
under the Escrow Agreement on the date that is 12 months after the Closing
Date,
such Escrow Amount will be released to the Majority Shareholders and Minority
Shareholders,
in
accordance with their Pro Rata Shares.
2.9
No Further Ownership rights in Company Capital
Stock.
The
cash issued in respect of the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof shall be deemed to be in
full
satisfaction of all rights pertaining to such shares of Company Capital Stock,
and there shall be no further registration or transfers on the records of the
Surviving Corporation of shares of Company Capital Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates representing Company Capital Stock are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in
this Agreement.
2.10 Lost,
Stolen or Destroyed Certificates.
In the
event that any Company Stock Certificate shall have been lost, stolen or
destroyed, the Payment Agent shall issue in exchange for such lost, stolen
or
destroyed certificate, upon the making of an affidavit of that fact by the
holder thereof, the amount of cash into which the shares of Company Capital
Stock represented by such Company Stock Certificate were converted pursuant
to
this Agreement; provided,
however,
that
Parent may, in its sole discretion and as a condition precedent to the issuance
thereof, require the Company Securityholder who is the owner of such lost,
stolen or destroyed certificates to provide an indemnification agreement in
a
form and substance acceptable to Parent, against any claim that may be made
against Parent or the Payment Agent with respect to the certificates alleged
to
have been lost, stolen or destroyed.
2.11 Taking
of Necessary Action; Further Action.
If at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company, Parent, Surviving
Corporation, and the officers and directors of the Company, Parent and the
Surviving Corporation are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANY
The
Company represents and warrants to Parent as follows:
3.1 Organization
and Good Standing
(a) The
Company is a corporation duly organized and validly subsisting under the laws
of
Pennsylvania, with full corporate power and authority to conduct its business
as
it is now being conducted and to own or use the properties and assets that
it
purports to own or use. Schedule 3.1(a)
sets
forth the current directors and executive officers of Company. The Company
is
duly qualified and authorized to transact business as a foreign corporation
and
is in good standing in California, Nevada, North Carolina, Oklahoma, Tennessee
and Texas.
(b) Subsidiaries.
Except
as listed in Schedule 3.1(b),
the
Company does not own any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, limited liability company,
partnership, association, joint venture or other business entity.
Schedule 3.1(b)
lists
each corporation, limited liability company, partnership, association, joint
venture or other business entity of which the Company owns, directly or
indirectly, more than 50% of the stock or other equity interest entitled to
vote
on the election of the members of the board of directors or similar governing
body (each, a “Subsidiary”).
Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. Each Subsidiary has the corporate power to own its properties
and
to carry on its business as currently conducted and as currently contemplated
to
be conducted. Each Subsidiary is duly qualified or licensed to do business
and
in good standing as a foreign corporation in each jurisdiction in which the
character or location of its assets or properties (whether owned, leased or
licensed) or the nature of its business make such qualifications necessary.
Except as listed on Schedule 3.1(b),
all
Subsidiaries are wholly-owned by the Company. Schedule 3.1(b)
lists
the directors and officers of each Subsidiary as of the date of this Agreement.
The operations now being conducted by each Subsidiary are not now and have
never
been conducted under any other name, except as referenced in
Schedule 3.1(b).
Except
as referenced in Schedule 3.1(b),
all of
the outstanding shares of capital stock of each Subsidiary are owned of record
and beneficially by the Company. All outstanding shares of stock of each
Subsidiary are duly authorized, validly issued, fully paid and non-assessable
and, except as referenced in Schedule 3.1(b),
not
subject to preemptive rights created by statute, the Organizational Documents
of
such Subsidiary, or any agreement to which such Subsidiary is a party or by
which it is bound, and have been issued in compliance with all applicable legal
requirements. There are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which each Subsidiary is a
party or by which it is bound obligating the Subsidiary to issue, deliver,
sell,
repurchase or redeem, or cause to be issued, sold, repurchased or redeemed,
any
shares of the capital stock of each Subsidiary or obligating each
Subsidiary
to grant, extend, accelerate the vesting of, change the price of, otherwise
amend or enter
into
any
such option, warrant, call right, commitment or agreement, except as referenced
in Schedule 3.1(b).
There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to any of the Subsidiaries.
Except as set forth in Schedule 3.1(b), neither the Company nor any Subsidiary
has agreed or is obligated to make any future investment in or capital
contribution to any Person.
(c) The
Company has made available to Parent copies of the Organizational Documents
of
the Company and each of the Subsidiaries, as currently in effect.
(d) With
respect to the Hong Kong Transaction:
(i) it
was in
the best interests of HK Co and Newco to enter into, perform and complete the
Hong Kong Transaction, and each obligation, contract, agreement or arrangement
in relation thereto;
(ii) the
purchase price for the assets and business of HK Co was paid in full by Newco,
and reflects the market value of the assets and business as determined by an
independent valuer;
(iii) the
terms
of the Hong Kong Transaction, and each obligation, contract, agreement or
arrangement in relation thereto were approved unanimously pursuant to a written
resolutions of the board of directors of HK Co duly adopted pursuant to Article
97 the Articles of Association of HK Co and the Companies Ordinance
(Chapter 32 of the Laws of Hong Kong);
(iv) the
terms
of the Hong Kong Transaction, and each obligation, contract, agreement or
arrangement in relation thereto were approved by special resolution of the
members of HK Co at an extraordinary general meeting of HK Co duly convened
in
accordance with the Articles of Association of HK Co and the Companies Ordinance
(Chapter 32 of the Laws of Hong Kong);
(v) as
of the
date of this Agreement, no member has applied to the court for an order to
inspect the records of HK Co;
(vi) as
of the
date of this Agreement, no member has applied to the Financial Secretary to
appoint one or more competent inspectors to investigate the affairs of HK
Co;
(vii) the
Hong
Kong Transaction constitutes a legal, valid, binding obligation between HK
Co
and Newco and has been duly authorized and requires no government approvals
or
registration, except for the PRC approvals required in connection with the
transfer of the equity interest in Dongguan Co;
(viii) each
of
HK Co and Newco has duly performed and complied in all material respects with
each of its obligations relating thereto (including contract, agreement or
arrangement in relation thereto); and
3.2 Authority;
No Conflict
(a) This
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The Company has
all corporate right, power and authority to execute and deliver this Agreement
and the other documents to be executed in connection herewith and, subject
to
the Requisite Shareholder Approval (as defined below), to perform its
obligations under this Agreement and the documents to be executed in connection
herewith.
(b) Except
as
set forth in Schedule 3.2(b),
the
execution, delivery and performance of this Agreement will not, directly or
indirectly (with or without notice or lapse of time):
(i) contravene,
conflict with, or result in a violation of (A) any provision of the
Organizational Documents of the Company or the Subsidiaries, or (B) any
resolution of the Company adopted by its board of directors or stockholders,
subject only to the affirmative approval of the Company Series A Preferred
Stock, voting as a single class (the “Requisite
Shareholder Approval”);
(ii) to
the
Knowledge of the Company, contravene, conflict with, or result in a violation
of
any of the terms or requirements of, or give any Governmental Body the right
to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company; or
(iii) to
the
Knowledge of the Company, contravene, conflict with, or result in a violation
or
breach of any provision of, or give any Person the right to declare a default
or
exercise any remedy under, or to accelerate the maturity or performance of,
or
to cancel, terminate, or modify, any Material Contract.
(c) Except
as
set forth in Schedule 3.2(c),
the
Company is and will not be required to give any notice to or obtain any Consent
from any Person in connection with the execution, delivery or performance of
this Agreement.
3.3 Capitalization
(a) The
total
authorized capital stock of the Company consist of 65,000,000 shares, which
consist of (i) 50,000,000 shares of voting common stock, $0.01 par value
per share, of which
6,000,000
shares are issued and outstanding, (ii) 5,000,000 shares of non-voting
common stock, $0.01 par value per share, of which 500,000 shares are issued
and
outstanding, and (iii) 10,000,000 shares of preferred stock, $0.01 par
value per share, of which 5,766,000 shares have been designated Series A
Convertible Preferred Stock, of which 5,766,000 shares are issued and
outstanding. The Company Series A Preferred Stock is convertible on a one-share
for one-share basis into Company Voting Common Stock. The Shares have been
duly
authorized and are validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Organizational Documents
of
the Company or any Contract. Except as referenced in Schedule 3.3(a),
there
are no Contracts for the issuance, sale or transfer of any equity securities
or
other securities of the Company. The Shares are held of record by the Persons
with the addresses of record and in the amounts and pro rata percentages set
forth in Schedule 3.3(a).
(b) Schedule 3.3(b)
contains
a list of equity incentive plans that are currently in effect. Except for the
transactions contemplated by this Agreement and except as otherwise set forth
in
Schedule 3.3(b),
there
are no options, warrants, calls, rights, exchangeable or convertible securities,
commitments or agreements of any character, written or oral, to which the
Company is a party or by which it is bound (collectively, “Purchase
Rights”)
obligating the Company to (i) issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any equity
securities or (ii) grant, extend, accelerate the vesting of, change
the
price of, otherwise amend or enter into any such option, warrant, call, right,
exchangeable or convertible securities, commitment or agreement. All issued
and
outstanding options (“Company
Options”)
to
purchase equity securities have been offered, sold and delivered by the Company
in material compliance with applicable federal and state securities laws.
Schedule 3.3(b)
sets
forth for each outstanding Company Option, the name of the holder of such
option, the grant date, the cancellation date, the exercise price, the vesting
period, including the extent vested, the number of shares of Company Capital
Stock issuable upon the exercise of such option, and whether such option is
intended to qualify as an incentive stock option as defined in Section 422
of the Code. Schedule 3.3(b)
sets
forth all outstanding Shares that constitute unvested restricted stock or that
are otherwise subject to a repurchase or redemption right, indicating the name
of the applicable Share holder, the vesting schedule (including any acceleration
provisions with respect thereto), and the Merger Consideration payable by the
Company, if any. Schedule 3.3(b)
sets
forth all outstanding long-term incentive units, the name of the holder of
such
units, the grant date, the vesting period and the number shares, cash or other
property otherwise payable upon vesting of such awards.
3.4 Financial
Statements.
The
Company has delivered or made available to Parent: (a) audited consolidated
balance sheets of the Company as of December 31 in each of the years
2002
through 2004 (including the notes thereto), and the related audited consolidated
statements of income, changes in stockholders’ equity, and cash flow for each of
the fiscal years then ended, together with the notes thereto and the report
thereon of Ernst & Young LLP, independent certified public accountants
(the December 31, 2004 consolidated balance sheet together with notes
is
referred to herein as the “Balance
Sheet”)
and
(b) an
unaudited
consolidated balance sheet of the Company as of May 31, 2005 (the “Interim
Balance Sheet”)
and
the related unaudited consolidated statements of income, changes in
stockholders’ equity, and cash flow for the five months then ended. Such
consolidated financial statements and notes fairly present in all material
respects the financial condition and the results of operations, changes in
stockholders’ equity, and cash flows of the Company as at the respective dates
of and for the periods referred to in such consolidated financial statements,
all in accordance with GAAP, subject, in the case of interim consolidated
financial statements, to normal recurring year-end adjustments (including,
but
not limited to, normal year-end current and deferred income tax adjustments)
and
the absence of notes. The consolidated financial statements referred to in
this
Section 3.4
reflect
the consistent application of GAAP throughout the periods involved, except
as
disclosed in the notes to such consolidated financial statements.
3.5 Books
and Records.
The
books of account, minute books, stock record books, and other records of the
Company, all of which have been made available to Parent, are complete and
correct in all material respects.
3.6 Title
to Assets; Encumbrances.
Schedule 3.6
contains
a complete and accurate list of all real property, leaseholds, or other real
property interests reflected as assets on the Balance Sheet and the Interim
Balance Sheet, as well as the Anchel Parcel. The Company has delivered or made
available to Parent copies of the deeds and other instruments (as recorded)
by
which the Company acquired such real property and interests, and copies of
all
title insurance policies, opinions, abstracts, and surveys in the possession
of
the Company and relating to such property or interests. The Company owns all
its
material properties and assets (whether real, personal, or mixed and whether
tangible or intangible) that are reflected as owned in the books and records
of
the Company, including all of the properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet (except for assets held under capitalized
leases and personal property sold since the date of the Balance Sheet and the
Interim Balance Sheet, as the case may be, in the ordinary course of business).
Except as set forth in Schedule 3.6,
all
material properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet, as well as the Anchel Parcel, are free and clear of all
Encumbrances except:
(a) the
Xxxxx
Fargo Obligations and the Xxxxx Bank Obligations;
(b) mortgages
or security interests shown on the Balance Sheet or the Interim Balance Sheet
as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists;
(c) mortgages
or security interests incurred in connection with the purchase of property
or
assets after the date of the Interim Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect
to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists;
(d) liens
for
current taxes not yet due;
(e) other
defects of title or encumbrances which do not materially impair the Company’s
use of such assets in the ordinary course of business; and
(f) the
Anchel Parcel Promissory Note.
3.7 Intellectual
Property Matters.
Except
as set forth in Schedule 3.7:
(a) all
licenses, royalty agreements, patents, patent applications, inventories,
trademarks, trade names, trade secrets, copyrights, service marks and know-how
of the Company used by, necessary for, or which would otherwise be infringed
by,
the Company in the conduct of its business (the “Intellectual
Property Assets”),
to
the extent owned by the Company, are not subject to any pending or, to the
Knowledge of the Company, threatened claim, judgment or dispute of any
nature;
(b) the
Company has not: (i) consented to or otherwise knowingly acquiesced
in the
use by another Person of the Company’s name, trademarks, trade names or service
marks or a name that is substantially similar thereto; or (ii) entered
into
any license, agreement, or granted any other permission by which the Company
has
granted to any third party rights with respect to any of its Intellectual
Property Assets;
(c) the
Company has no Knowledge of any conflict with the asserted rights of others
with
respect to any of the Intellectual Property Assets;
(d) the
conduct of the Company’s business as currently conducted, including the
manufacture and sale of the Company’s products and the provision of the
Company’s services as such activities are currently conducted, does not
infringe, misappropriate or violate the intellectual property rights of any
other Person; and
(e) with
respect to the Company’s registered trademarks, trade names and service marks
used by the Company in connection with its current products and services and
the
Company’s unregistered trademarks and trade names for the product names of the
Company’s current products and product families (i) all such marks are
valid and enforceable and in compliance with all formal legal requirements,
(ii) no such xxxx has been or is currently involved in any opposition
or
cancellation proceeding in the United States Patent or Trademark Office or
the
corresponding trademark authority of any foreign jurisdiction, (iii) there
has been no prior use of any such xxxx by any third party which would confer
upon such third party superior rights in such xxxx, and (iv) Company
has
received no written notice or claim contesting Company’s ownership of such marks
or the validity or enforceability thereof.
3.8 Absence
of Material Adverse Change.
Since
the Interim Balance Sheet date, there has not been any Material Adverse Change
with respect to the Company.
3.9 No
Undisclosed Liabilities.
The
Company has no material liabilities or obligations of any nature (whether
absolute, accrued, contingent, or otherwise) that are required to be disclosed
on the financial statements referenced in Section 3.4
hereof,
except for the Xxxxx Fargo Obligations, the Xxxxx Bank Obligations, liabilities
or obligations reflected or reserved against in the Interim Balance Sheet and
current liabilities incurred in the ordinary course of business since the
respective dates thereof.
3.10 Taxes
(a) Except
where failure to file would not have a Material Adverse Effect, the Company
has
filed or caused to be filed all Tax Returns that are or were required to be
filed by or with respect to the Company pursuant to applicable Legal
Requirements and all such Tax Returns are true, correct, and complete in all
material respects. The Company has timely paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by the Company,
except such Taxes, if any, as are listed in Schedule 3.10
and are
being contested in good faith and as to which adequate reserves (determined
in
accordance with GAAP) have been provided in the Interim Balance Sheet. The
Company has not incurred any liability for Taxes since the date of the Interim
Balance Sheet other than in the ordinary course of business.
(b) Except
as
described in Schedule 3.10,
the
Company has not given or been requested to give waivers or extensions (or is
or
would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company or for
which the Company may be liable.
(c) No
audit
or other examination of any Tax Return of the Company is presently in progress,
nor has the Company been notified of any request for such an audit or other
examination or adjustment.
(d) The
Company has timely paid or withheld with respect to its employees and other
third parties (and timely paid over any withheld amounts to the appropriate
Tax
authority) all federal and state income taxes, Federal Insurance Contribution
Act, Federal Unemployment Tax Act and other Taxes required to be withheld or
paid.
(e) The
Company is not, and has not been at any time, a “United States Real Property
Holding Corporation” within the meaning of Section 897(c)(2) of the
Code.
(f) The
Company is not, and has not within the past ten years, elected to be taxed
as an
S corporation under the provisions of United States federal or state
law.
3.11 Employee
Benefits
(a) As
used
in this Section 3.11,
the
following terms have the meanings set forth below.
“ERISA
Affiliate”
means,
with respect to the Company, any other person that, together with the Company,
would be treated as a single employer under IRC § 414.
“International
Employee Plan”
shall
mean each Plan that has been adopted or maintained by the Company or any ERISA
Affiliate, whether informally or formally, or with respect to which the Company
or any ERISA Affiliate will or may have any liability, for the benefit of
Employees who perform services outside the United States.
“Multi-Employer
Plan”
has the
meaning given in ERISA § 3(37)(A).
“Other
Benefit Obligations”
means
all obligations, arrangements, policies, programs, contracts, agreements, or
practices, whether or not legally enforceable, which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any ERISA
Affiliate to provide benefits or remuneration of any kind, other than salary,
to
Employees, other than obligations, arrangements, and practices that are Plans.
Other Benefit Obligations include consulting agreements, sabbatical policies,
severance payment policies which are not Plans, fringe benefits within the
meaning of IRC § 132, performance awards, stock or stock related
awards.
“Pension
Plan”
has the
meaning given in ERISA § 3(2)(A).
“Plan”
has the
meaning given in ERISA § 3(3) whether written or unwritten or otherwise,
funded or unfunded, which is or has been maintained, contributed to, or required
to be contributed to, by the Company or any ERISA Affiliate for the benefit
of
any of their respective Employees.
“Qualified
Plan”
means
any Pension Plan that meets or purports to meet the requirements of IRC
§ 401(a).
“Title IV
Plans”
means
all Pension Plans that are subject to Title IV of ERISA, 29 U.S.C.
§ 1301 et
seq.,
other
than Multi-Employer Plans.
(b) Schedule 3.11
contains
a complete and accurate list of all Plans and Other Benefit Obligations. Neither
the Company nor any ERISA Affiliate has any plan or commitment to establish
any
new Plan or Other Benefit Obligation, to modify any Plan or Other Benefit
Obligation (except to the
extent required by law or to conform any such Plan or Other Benefit Obligation
to the requirements of any applicable law, in each case as previously disclosed
to Parent in writing, or as required by this Agreement), or to adopt or enter
into any Plan. The Company has delivered or made available to Parent a true
and
correct copy of the governing plan document for each Plan (including all
amendments thereto), its summary plan description and the three (3) most recent
Form 5500 with all schedules and attachments (if applicable), if the
Plan
is funded, the most recent annual and periodic accounting of Plan assets, all
correspondence to or from any governmental agency relating to any Plan, the
three (3) most recent plan years discrimination tests for each Plan, and any
trust agreement, insurance contract or other document under which Plan assets
are held and invested or benefits provided. The Company has further delivered
or
made available to Parent a written description of each Other Benefit Obligation,
and a copy of any document generally furnished to participants which summarizes
or describes each Other Benefit Obligation. The Company and its ERISA Affiliates
have performed in all material respects all material obligations required to
be
performed by them under any Plan, are not in default or violation of, and have
no knowledge of any default or violation by any other party, to each Plan and
Other Benefit Obligation, and each Plan and Other Benefit Obligation complies
in
form and operation in all material respects with the applicable requirements
of
ERISA, the IRC and other applicable Legal Requirements. Any Plan intended to
be
qualified under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code (i) has either applied
for,
prior to the expiration of the requisite period under applicable Treasury
Regulations or IRS pronouncements, or obtained a favorable determination,
notification, advisory and/or opinion letter, as applicable, as to its qualified
status from the IRS or still has a remaining period of time under applicable
Treasury Regulations or IRS pronouncements in which to apply for such letter
and
to make any amendments necessary to obtain a favorable determination, and
(ii) incorporates or has been amended to incorporate all provisions
required to comply with the Tax Reform Act of 1986 and subsequent legislation.
Neither the Company nor any ERISA Affiliate has at any time through the date
hereof sponsored, maintained, contributed to or been obligated to contribute
to
any Title IV Plan or Multi-Employer Plan, or any “funded welfare plan”
within the meaning of Section 419 of the Code. Neither the Company or,
to
the knowledge of the Company, any fiduciary with respect to any Plan has engaged
in any material nonexempt prohibited transaction under ERISA § 406 or
§ 407, or incurred any liability for breach of fiduciary duty or any
other
failure to comply with any Legal Requirement in connection with the
administration or investment of assets of any Plan. No action, suit, proceeding,
hearing, audit or investigation with respect to the administration or investment
of assets of any Plan (other than routine claims for benefits) is pending or,
to
the knowledge of the Company, threatened. Except as otherwise disclosed on
Schedule 3.11,
the
Company does not provide health or other welfare benefits for any Employee
and
is not obligated to provide health or welfare benefits to any active Employee,
following such individual’s retirement or other termination of service (other
than “COBRA” continuation coverage required under ERISA §§ 601 et
seq.
and IRC
§ 4980B).
(c) Effect
of Transaction.
(i) Except
as
disclosed on Schedule 3.11,
the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the
occurrence
of any additional or subsequent events) constitute an event under any Plan,
Other Benefit Obligation, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund
benefits with respect to any present or former employee, director or consultant
of the Company or any ERISA Affiliate.
(ii) No
payment or benefit which will or may be made by the Company or its ERISA
Affiliates with respect to any Employee or any other “disqualified individual”
(as defined in IRC Section 280G and the regulations thereunder) will
be
characterized as a “parachute payment,” within the meaning of
Section 280G(b)(2) of the IRC.
(d) The
Company is in compliance in all material respects with all applicable foreign,
federal, state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours,
in
each case, with respect to Employees and has withheld and reported all amounts
required by law or by agreement to be withheld and reported with respect to
wages, salaries and other payments to Employees, including, without limitation,
applicable withholding obligations under the laws of the People’s Republic of
China. There are no pending, or, to the Knowledge of the Company, threatened
or
reasonably anticipated claims or actions against the Company under any worker’s
compensation policy or long-term disability policy. Neither the Company nor
any
its Subsidiaries has Knowledge of any direct or indirect liability with respect
to any misclassification of any person as an independent contractor rather
than
as an employee, or with respect to any employee leased from another employer,
except as would not have a Material Adverse Effect on the Company.
(e) No
work
stoppage or labor strike against the Company or any Subsidiaries is pending,
or
to the Knowledge of the Company, threatened or reasonably anticipated. The
Company does not know of any activities or proceedings of any labor union to
organize any of employees of the Company or its Subsidiaries. Except as set
forth in Schedule 3.11(e), the Company is not presently, nor has it been in
the
past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to its Employees and no collective bargaining agreement
is
being negotiated with respect to such Employees. There are no actions, suits,
claims, labor disputes or grievances pending, or, to the Knowledge of the
Company, threatened or reasonably anticipated relating to any labor, safety
or
discrimination matters involving any Employee, which, if adversely determined,
would, individually or in the aggregate, result in any material liability to
the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries have incurred any material liability or material obligation under
the Worker Adjustment and Retraining Notification Act or any similar state
or
local law which remains unsatisfied.
(f) Neither
the Company nor any ERISA Affiliate currently, nor has it ever had the
obligation to, maintain, establish, sponsor, participate in, or contribute
to
any International Employee Plan.
3.12 Compliance
with Legal Requirements; Governmental Authorizations.
(a) Except
as
set forth in Schedule 3.12
or
Schedule 3.17
or
except where any failure to comply or any violation would not, and would not
be
reasonably expected to, have a Material Adverse Effect on the
Company:
(i) the
Company is in material compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no
event
has occurred or circumstance exists that (with or without notice or lapse of
time) may constitute or result in a violation by the Company of, or a failure
on
the part of the Company to comply with, any Legal Requirement; and
(iii) the
Company has not received any written notice or other communication from any
Governmental Body regarding: (A) any actual or alleged violation of,
or
failure to comply with, any Legal Requirement, or (B) any actual or
alleged, obligation on the part of the Company to undertake, or to bear all
or
any portion of the cost of, any remedial action of any nature.
(b) Schedule 3.12
and
Schedule 3.17,
taken
together, contain a list that is complete and accurate in all material respects
of each Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or to any of the assets owned or used by, the
Company. Each Governmental Authorization listed in Schedule 3.12
or
Schedule 3.17
is valid
and in full force and effect. Except as set forth in Schedule 3.12
or
Schedule 3.17
or
except where any failure to comply, violation or other event or circumstances
would not have a Material Adverse Effect on the Company:
(i) the
Company is in compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in
Schedule 3.12
or
Schedule 3.17;
(ii) no
event
has occurred or circumstance exists that may (with or without notice or lapse
of
time): (A) constitute or result directly or indirectly in a violation
of or
a failure to comply with any term or requirement of any Governmental
Authorization listed in Schedule 3.12
or
Schedule 3.17,
or
(B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, any material Governmental
Authorization listed in Schedule 3.12
or
Schedule 3.17;
(iii) the
Company has not received any written notice or other communication from any
Governmental Body regarding: (A) any actual or alleged violation of
or
failure
to comply with any term or requirement of any Governmental Authorization, or
(B) any actual or threatened revocation, withdrawal, suspension,
cancellation, termination of any material Governmental Authorization;
and
(iv) all
applications required to have been filed for the renewal of any material
Governmental Authorizations listed or required to be listed in
Schedule 3.12
or
Schedule 3.17
have
been duly filed on a timely basis with the appropriate Governmental Bodies,
and
all other filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.
3.13 Legal
Proceedings.
Except
as set forth in Schedule 3.13,
there
is no pending Proceeding:
(a) that
has
been commenced by or against the Company or any of the material assets owned
or
used by the Company; or
(b) that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the transactions contemplated by this
Agreement.
To
the
Knowledge of the Company, no such Proceeding has been threatened.
3.14 Absence
of Certain Changes and Events
.
Except
as set forth in Schedule 3.14
or as
contemplated by this Agreement, since the date of the Interim Balance Sheet,
the
Company has conducted its business only in the ordinary course of business
and
there has not been any:
(a) change
in
the Company’s authorized or issued capital stock; grant of any stock option or
right to purchase shares of capital stock of the Company; issuance of any
security convertible into such capital stock; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by the Company of any
shares of any such capital stock;
(b) amendment
to the Organizational Documents of the Company;
(c) payment
or increase by the Company of any bonuses, salaries, or other compensation
to
any stockholder, director, officer, or employee (except in the ordinary course
of business consistent with past practice or) or entry into any employment,
severance, or similar Contract with any director, officer, or
employee;
(d) grant
of
any severance or termination pay (cash, equity or otherwise) to any officer
or
employee except pursuant to written agreements outstanding, or policies
existing, on the
(e) date
hereof and as previously disclosed in writing or made available to Parent,
or
adopt any new severance plan, or amend or modify or alter in any respect any
severance plan, agreement or arrangement existing on the date hereof, or grant
any equity-based compensation;
(f) adoption
or amendment of any employee benefit plan, policy or arrangement, or employee
stock purchase or stock option plan, or enter into any employment contract
or
collective bargaining agreement, pay any special bonus or special remuneration
(cash, equity or otherwise) to any director or employee, or increase the
salaries or wage rates or fringe benefits (cash, equity or otherwise) (including
rights to severance or indemnification) of its directors, officers, employees
or
consultants;
(g) waiver
of
any stock repurchase rights, accelerate, amend or change the period of
exercisability of options, restricted stock or any other equity or similar
incentive awards (including without limitation any long term incentive awards),
or reprice options granted under any employee, consultant, director or other
stock plans or authorize cash payments in exchange for any options granted
under
any of such plans;
(h) damage
to
or destruction or loss of any asset or property of the Company, whether or
not
covered by insurance, which would have a Material Adverse Effect on the
Company;
(i) sale
(other than sales of Inventory in the ordinary course of business), lease,
or
other disposition of any material asset or property of the Company or mortgage,
pledge, or imposition of any lien or other encumbrance on any material asset
or
property of the Company except as noted in Schedule 3.6
or
except as permitted under Section 6.2
or any
other provision of this Agreement;
(j) material
change in the accounting methods used by the Company; or
(k) agreement,
whether oral or written, by the Company to do any of the foregoing.
3.15 Material
Contracts; No Defaults
(a) Schedule 3.15(a)
contains
a complete and accurate list, and the Company has delivered or made available
to
Parent true and complete copies, of the following Contracts to which the Company
or a Subsidiary is a Party (the “Material
Contracts”):
(i) each
employment, consulting or severance agreement, contract or
commitment;
(ii) each
Contract that involves performance of services or delivery of
goods
or
materials by the Company of an amount or value in excess of $300,000 during
any
twelve-month period prior to the date hereof, except for purchase orders for
components or finished goods in the ordinary course of business, consistent
with
past practices;
(iii) each
Contract that involves performance of services or delivery of goods or materials
to the Company of an amount or value in excess of $300,000 during any
twelve-month period from the date hereof, except for purchase orders for
components or finished goods in the ordinary course of business, consistent
with
past practices;
(iv) each
Contract entered into by the Company during the preceding twelve months outside
the ordinary course of business involving expenditures or receipts of the
Company in excess of $150,000;
(v) each
lease, rental or occupancy agreement, license, installment and conditional
sale
agreement, and other Contract affecting the ownership of, leasing of, title
to,
use of, or any leasehold or other interest in, any real or personal property
(except personal property leases and installment and/or conditional sales
agreements having a value per item or aggregate payments of less than $50,000)
during any twelve-month period from the date hereof;
(vi) each
joint venture, partnership, and other similar Contract (however named) involving
a sharing of profits, losses, costs, or liabilities by the Company with any
other Person during any twelve-month period from the date hereof;
(vii) each
Contract containing covenants that restrict the business activity of the Company
or limit the freedom of the Company to engage in any line of business or to
compete with any Person;
(viii) each
power of attorney that is currently effective and outstanding;
(ix) each
Contract for capital expenditures in excess of $300,000;
(x) each
agreement between the Company and any of its customers, manufacturer’s
representatives and distributors; and
(xi) each
amendment, supplement, and modification (whether oral or written) in respect
of
any of the foregoing.
(b) Except
as
set forth in Schedule 3.15(b):
(i) no
Company Securityholder has or may acquire any rights under, and no Company
Securityholder has or may become subject to any obligation or liability under,
any Contract that relates to the business of, or any of the assets owned or
used
by, the Company; and
(ii) to
the
Knowledge of the Company, no officer, director, agent, employee, consultant,
or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor
to: (A) engage in or continue any conduct, activity, or practice relating
to the business of the Company; or (B) assign to the Company or to any
other Person any rights to any invention, improvement, or
discovery.
(c) Except
as
set forth in Schedule 3.15(c),
to the
Knowledge of the Company, each Material Contract identified or required to
be
identified in Schedule 3.15(a)
is in
full force and effect and is valid and enforceable in accordance with its
terms.
(d) Except
as
set forth in Schedule 3.15(d):
(i) the
Company is in material compliance with all applicable terms and requirements
of
each Material Contract;
(ii) to
the
Knowledge of the Company, each other Person that has any obligation or liability
under any Material Contract is in material compliance with all applicable terms
and requirements of such Material Contract;
(iii) to
the
Knowledge of the Company, no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Material
Contract; and
(iv) the
Company has not given to or received from any other Person, at any time since
the date of the Interim Balance Sheet any notice or other communication (whether
oral or written) regarding any actual, alleged, possible, or potential violation
or breach of, or default under, any Material Contract.
3.16 Insurance.
(a) The
Company has delivered or made available to Parent:
(i) true
and
complete copies or coverage abstracts or summaries of all policies of insurance
to which the Company is a party or under which the Company, or any officer
or
director of the Company, is or has been covered at any time within the two
years
preceding the date of this Agreement; and
(ii) true
and
complete copies of all pending applications for policies of
insurance.
(b) Schedule 3.16(b)
describes:
(i) any
self-insurance arrangement by or affecting the Company, including any reserves
established thereunder;
(ii) any
contract or arrangement, other than a policy of insurance, for the transfer
or
sharing of any risk by the Company; and
(iii) all
obligations of the Company to third parties with respect to insurance (including
such obligations under leases and service agreements) and identifies the policy
under which such coverage is provided.
(c) Except
as
set forth on Schedule 3.16(c):
(i) the
Company has not received: (A) any refusal of coverage or any notice
that a
defense will be afforded with reservation of rights, or (B) any notice
of
cancellation or any other indication that any material insurance policy is
no
longer in full force or effect or will not be renewed or that the issuer of
any
policy is not willing or able to perform its obligations thereunder;
and
(ii) the
Company has paid all premiums due (or has accrued for such on its financial
statements), and has otherwise performed all of its obligations, under each
policy to which the Company is a party or that provides coverage to the Company
or any director thereof.
3.17 Environmental
Matters
.
Except
as set forth in Schedule 3.17:
(a) the
Company and each of its Subsidiaries holds and is in compliance with all
Environmental Permits, and has been and is otherwise in compliance with all
applicable Environmental Laws, and there is no condition that is reasonably
likely to prevent or materially interfere with compliance by the Company or
any
Subsidiary with Environmental Laws , except to the extent that the inaccuracy
of
any of the foregoing, individually or in the aggregate, would not have a
Material Adverse Effect on the Company;
(b) no
modification, revocation, issuance, reissuance, alteration, transfer or
amendment of any Environmental Permit, or any review by, or approval of, any
third party of any Environmental Permit is required in connection with the
execution or delivery of this Agreement or the consummation by the Company
and
its Subsidiaries of the transactions contemplated hereby or the operation of
the
business of the Company and its Subsidiaries on the date of the
Closing;
(c) the
Company and its Subsidiaries have not received any Environmental Claim, nor,
to
the Knowledge of the Company, has any Environmental Claim been threatened
against the Company or any of its Subsidiaries;
(d) the
Company and its Subsidiaries have not entered into, agreed to and are not
subject to any outstanding judgment, decree, agreement, order or consent
arrangement with any Governmental Body under any Environmental Laws, including
without limitation those relating to compliance with any Environmental Laws
or
to the investigation, cleanup, remediation or removal of Hazardous
Materials;
(e) Set
forth
in attached Schedule 3.17(e)
are all
of the parcels of real property that are now or have been owned or leased by
the
Company or its Subsidiaries, or otherwise used by the Company or its
Subsidiaries for the conduct of the Company’s business (a “Company
Facility”),
or to
which any Hazardous Materials generated by the Company or its Subsidiaries
have
been delivered during the last 10 years by a third party.
(f) Except
for Hazardous Materials which are required for the conduct of the business
of
the Company or any of its Subsidiaries as currently conducted and
which
are
being stored and
disposed of by
the
Company
or
any
of
its Subsidiaries
in
accordance with applicable
Environmental
Laws, no
Hazardous Materials have been Released (i) on, or, to Knowledge of the Company
or its Subsidiaries, are migrating onto or from, the Anchel Parcel or any other
Company Facility currently leased or owned by the Company or any Subsidiary
(including, without limitation, the soil, groundwater, surface water, or ambient
air, or building materials thereof),
and/or,
(ii) to the knowledge of the Company, on any Company Facility previously leased
or owned by the Company. Except for Hazardous Materials stored and disposed
of
in accordance with applicable Environmental Laws, to the Knowledge of the
Company, no Hazardous Material which was
generated, discarded, transported, released, emitted, or disposed of by the
Company or its Subsidiaries prior to the Closing Date is present, in a
concentration or amount exceeding legally allowable limits applicable
to the use of the property in question
or
in a
manner which violates any applicable
Environmental
Law or that is reasonably likely to require any investigation, removal or
response activity under any
applicable
Environmental Law, on any other real property, including, without limitation
any
disposal site to which Hazardous Materials generated or transported by the
Company have been delivered.
(g) The
Company has delivered to Parent (or made available for Parent’s inspection) all
reports, records, tests, evaluations, governmental agency and third party
correspondence, and other documents relating to the storage, use, Release,
emission, manufacture, disposal, remediation, investigation, or removal of
Hazardous Materials by the Company or any of its Subsidiaries or the presence
of
any Hazardous Material on or about the Anchel Parcel or any other Company
Facility.
(h) No
person
has been exposed to any Hazardous Material stored, used, disposed of, released,
generated, or transported by or for the Company or any Subsidiary in a manner
which has caused, or is reasonably likely to cause, an adverse health
effect.
For
purposes of this Agreement, the terms below shall have the following
meanings:
“Environmental
Claim”
means
any written complaint, notice, claim, demand, action, suit or judicial,
administrative or arbitral proceeding by any Person to the Company asserting
liability or potential liability (including without limitation, liability or
potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resource damages,
property damage, personal injury, fines or penalties) arising out of, relating
to, based on or resulting from: (i) the presence, discharge, emission,
release or threatened release of any Hazardous Materials at any location,
(ii) circumstances forming the basis of any violation or alleged violation
of any Environmental Laws or Environmental Permits, or (iii) otherwise
relating to obligations or liabilities under any Environmental Law.
“Environmental
Laws”
means
all applicable foreign, federal state and local statutes, rules, regulations,
ordinances, orders and decrees relating in any manner to pollution or protection
of the environment or human health, including any amendment thereto to the
extent and in the form that such exist at the date hereof.
“Environmental
Permits”
means
all permits, licenses, registrations, exemptions and other governmental
authorizations required under Environmental Laws for the Company to conduct
its
operations as presently conducted.
“Hazardous
Materials”
means
all hazardous or toxic substances, wastes, materials or chemicals, petroleum
and
petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants and all other materials and substances, including but not limited
to radiologically contaminated materials regulated pursuant to any Environmental
Laws that could result in liability under any Environmental Laws.
3.18 Brokers
or Finders.
The
Company has incurred no obligation or liability, contingent or otherwise, for
brokerage or finders’ fees or agents’ commissions or other similar payment in
connection with this Agreement, other than to Xxxxxxxx Xxxxx Xxxxxx &
Xxxxx Capital, Inc.
3.19 Accounts
Receivable.
All
Accounts Receivable of the Company are reflected properly on its books and
records, are valid receivables and, to the Knowledge of the Company, are
collectible in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth in the Interim Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the
Company.
3.20 Inventory.
All
Inventory, taken as a whole, is useable and saleable in the ordinary course
of
business, except for obsolete items of below-standard quality, all of which
have
been written off or written down to estimated net realizable value (or reserves
have been established for such Inventory) in the books and records of the
Company.
3.21 Sufficiency
of Assets.
The
Company owns, or has a valid and sufficient leasehold interest in or license
for, all assets (including intellectual property) materially necessary for
the
conduct of its business as presently conducted.
3.22 Complete
Copies of Materials.
The
Company has delivered or made available to Parent all Contracts and other
documents listed on the Disclosure Schedules delivered by the
Company.
3.23 Representations
Complete.
None of
the representations or warranties made by the Company (as modified by the
Schedules delivered by the Company) in this Agreement, and none of the
statements made in any Schedule or certificate furnished by the Company pursuant
to this Agreement contains any untrue statement of a material fact or omits
to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent
represents and warrants to the Company as follows:
4.1 Organization
and Good Standing.
Parent
is a Delaware corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware. The Articles of Incorporation of Merger
Sub have been filed with the Pennsylvania Department of State Corporation Bureau
and is pending approval.
4.2 Merger
Sub.
Merger
Sub was formed solely for the purpose of the Merger and engaging in the
transactions contemplated hereby and has no assets or liabilities except as
necessary for such purposes. Merger Sub has not engaged, and will not engage,
in
any other business activity of any kind or type whatsoever and has conducted
and
will conduct its operations only as contemplated hereby.
4.3 Authority;
No Conflict
(a) This
Agreement constitutes the legal, valid, and binding obligation of Parent and
Merger Sub, enforceable against each of them in accordance with its terms.
Each
of Parent and Merger Sub has all corporate right, power and authority to execute
and deliver this Agreement and
(b) the
other
documents to be executed in connection herewith and to perform its obligations
under this Agreement and the documents to be executed in connection
herewith.
(c) Except
as
set forth in Exhibit B, neither the execution and delivery of this Agreement
by
Parent and Merger Sub nor the consummation or performance of any of the
transactions contemplated by this Agreement by Parent and Merger Sub will give
any Person the right to prevent, delay, or otherwise materially interfere with
any of the transactions contemplated by this Agreement pursuant to:
(i) any
provision of Parent’s or Merger Sub’s Organizational Documents;
(ii) any
resolution adopted by the board of directors or the stockholders of Parent
or
Merger Sub;
(iii) any
Legal
Requirement to which Parent or Merger Sub may be subject; or
(iv) any
material Contract to which Parent or Merger Sub is a party or by which Parent
or
Merger Sub may be bound.
Except
as
set forth in Exhibit B, neither Parent nor Merger Sub will be required to obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the transactions
contemplated in this Agreement.
(d) Except
as
expressly set forth in this Agreement or in the attachments hereto, neither
Parent nor Merger Sub is a party to any other agreement or understanding with
the Company or any of the Company’s employees.
4.4 Investment
Intent.
Parent
is acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(a)(11) of the Securities
Act
of 1933, as amended.
4.5 Certain
Proceedings.
There
is no pending Proceeding that has been commenced against Parent and that
challenges, or may have the effect of preventing, delaying, making illegal,
or
otherwise interfering with the performance of this Agreement or the transactions
contemplated herein. To Parent’s knowledge, no such Proceeding has been
threatened.
4.6 Financial
Ability.
Parent
has the funds necessary to consummate the transactions contemplated by this
Agreement and the obligations of Parent hereunder are not conditioned upon
the
availability of third party financing to Parent.
4.7 Parent’s
Investigation.
Parent
hereby acknowledges that Parent and its Representatives have been given access
to the premises, properties, books, contracts and records of the Company and
have been furnished with all additional financial and operational data and
other
information concerning the Company’s assets as Parent and its Representatives
have requested in connection with Parent’s determination to enter into this
Agreement. Parent further acknowledges that it is sophisticated in all aspects
of the general industry of the Company and has sufficient knowledge and
expertise to evaluate an investment in the Company.
In
connection with Parent’s investigation of the Company, Parent may have received
and may hereafter receive from the Company or its Representatives estimates,
projections and other forecasts relating to the Company and its business, and
plan and budget information with respect thereto (collectively, “Projections”).
Parent acknowledges that there are uncertainties inherent in attempting to
make
Projections, that Parent is familiar with such uncertainties, and that Parent
is
taking full responsibility for making its own evaluation of the adequacy and
accuracy of any Projections and that none of the Company or Xxxxxxxx Xxxxx
Xxxxxx & Xxxxx Capital, Inc. is making any representation or warranty
with respect to any Projections. The parties hereby acknowledge and agree that
nothing in this Section 4.7
shall
limit or otherwise affect the representations and warranties of the Company
in
Article III
hereof.
4.8 Brokers
or Finders.
Parent
and its officers and agents have incurred no obligation or liability, contingent
or otherwise, for brokerage or finders’ fees or agents’ commissions or other
similar payment in connection with this Agreement and will indemnify and hold
the Company harmless from any such payment alleged to be due by or through
Parent as a result of the action of Parent or its officers or
agents.
4.9 Reliance
on Representations.
Parent
acknowledges and agrees that:
(a) The
Company is not making any representation or warranty whatsoever, express or
implied, except those made by the Company, set forth in Article III;
and
(b) any
claims Parent may have for breach of representation or warranty shall be based
solely on the representations and warranties of the Company set forth in
Article III
hereof.
COVENANTS
OF COMPANY PRIOR TO CLOSING DATE
5.1 Access
and Investigations.
Between
the date of this Agreement and the Closing Date, the Company and its
Representatives will cooperate with Parent and, during normal business hours,
will: (a) afford Parent and its Representatives reasonable access to
the
Company’s personnel, properties, contracts, books and records, and other
documents and data, (b) furnish Parent and Parent’s Representatives with
copies of all such contracts, books and records, and other existing documents
and data as Parent may reasonably request, and (c) furnish Parent and
Parent’s Representatives with such additional financial, operating, and other
data and information as Parent may reasonably request so long as such request
does not interfere with the operation of the Company’s business in the ordinary
course.
5.2 Operation
of the Company.
Between
the date of this Agreement and the Closing Date, the Company will:
(a) conduct
the business of the Company only in the ordinary course of
business;
(b) not
amend
any of its Organization Documents;
(c) not
issue
any shares of its stock or rights to acquire shares of its stock, other than
in
connection with the exercise of outstanding Company Options;
(d) not
make
any Restricted Payment;
(e) not
enter
into any Contract that involves obligations of the Company in an aggregate
amount greater than $300,000, except for purchase orders for components or
finished goods in the ordinary course of business, consistent with past
practices; and
(f) use
commercially reasonable efforts to maintain the goodwill of the Company’s
customers, suppliers, distributors and employees.
5.3 Negative
Covenant.
Except
as otherwise expressly permitted by this Agreement, between the date of this
Agreement and the Closing Date, the Company will not, without the prior consent
of Parent, take any affirmative action, or fail to take any reasonable action
within its control, as a result of which any of the changes or events listed
in
Section 3.14
is
likely to occur.
5.4 Required
Approvals.
The
Company will make all filings required by Legal Requirements to be made by
them
in order to consummate the transactions contemplated herein as promptly as
practicable after the date of this Agreement and in any event prior to, in
the
case of filings required in the U.S. pursuant to such Legal Requirements, the
tenth Business Day, and in the case of non-U.S. filings required by such Legal
Requirements, the fifteenth Business Day, following execution of this Agreement.
Between
the date of this Agreement and the Closing Date, the Company will:
(a) cooperate with Parent with respect to all filings that Parent elects
to
make or is required by Legal Requirements to make in connection with the
transactions contemplated herein, and (b) cooperate with Parent and
will
exercise commercially reasonable efforts to obtain all consents identified
in
Schedule 3.2
and
Exhibit B.
5.5 Non-Solicitation
(a) From
and
after the date of this Agreement until the earlier to occur of the Closing
or
termination of this Agreement pursuant to Article X,
the
Company will not, and the Company will not permit its Representatives to,
directly or indirectly (a) initiate, solicit, encourage or entertain
any
inquiries, offers or proposals for any “Acquisition
Proposal”
(as
defined below) by any Person (other than Parent or its Representatives), or
(b) participate in any discussions or negotiations with, or disclose
any
non-public information not customarily disclosed consistent with the Company’s
past practices concerning the Company to, or afford access to the properties,
books, or records of the Company to, or otherwise assist or facilitate, or
enter
into any agreement or understanding with, any Person (other than Parent and
its
affiliates and Representatives) for the purpose of making, or take any other
action to facilitate the making of, an Acquisition Proposal; or (c) agree
to, approve or recommend any Acquisition Proposal.
(b) For
the
purposes of this Agreement, “Acquisition
Proposal”
shall
mean any one of the following (other than the transactions among the Company,
Merger Sub and Parent contemplated hereunder) involving the Company: (i) a
proposal for any transaction pursuant to which any Person or its affiliates
(a
“Third
Party”)
proposes to acquire beneficial ownership of at least 10% of the outstanding
equity securities of the Company, whether from the Company or pursuant to a
tender offer, exchange offer, recapitalization, reorganization or otherwise,
(ii) a proposal for any merger, consolidation or other business combination
involving the Company pursuant to which any Third Party proposes to acquire
beneficial ownership of at least 10% of the outstanding equity securities of
the
Company, or the entity surviving such merger, consolidation or other business
combination, (iii) a proposal for any other transaction or series of
related transactions (including any license) pursuant to which any Third Party
proposes to acquire control of assets of the Company having a fair market value
equal to or greater than 10% of the fair market value of all of the assets
of
the Company, taken as a whole, immediately prior to such transaction, or
(iv) any public announcement of a proposal, plan or intention to do
any of
the foregoing or any agreement to engage in any of the foregoing.
(c) The
Company will, and the Company will cause its Representatives to, promptly cease
any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. The Company
or
the Majority Shareholders will promptly notify Parent if it receives any
proposal, inquiry or request for information in connection with an Acquisition
Proposal or potential Acquisition Proposal.
(d) Notwithstanding
the foregoing, no provision of this Section 5.5
shall be
construed (i) to prohibit any of the Company or their Representatives
from
responding to any proposal, inquiry or request for information in connection
with an Acquisition Proposal or potential Acquisition Proposal for the sole
purpose of advising the Person making such proposal, inquiry or request of
the
Company’s obligations under this Section 5.5
or
(ii) to require any of the Company or their Representatives to disclose
to
Parent any terms and conditions of any such proposal, inquiry or request,
including the identity of the party making an Acquisition Proposal.
5.6 Excise
Tax.
Prior
to the Closing, the Company shall deliver to Parent evidence reasonably
satisfactory to Parent that either (i) with respect to any payments
of cash
or sales and purchases of stock or vesting of Shares or other payment or
benefits that may be deemed to constitute “parachute payments” pursuant to
Section 280G of the Code (“Potential 280G Benefits”), the Company’s
stockholders shall have approved by the requisite vote (which is more than
75%
of disinterested shareholders as defined in the proposed regulations promulgated
under Section 280G) all such Potential 280G Benefits with respect to
any
disqualified individual, or (ii) that such requisite stockholder approval
has been sought and the stockholders did not approve a Potential 280G Benefits,
and therefore such Potential 280G Benefits shall not be made or provided to
any
disqualified individual. The procedures for obtaining such shareholder approval
as described in Section 280G and the proposed regulations issued thereunder
shall be subject to the reasonable approval of Parent.
5.7 Employee
Plans.
The
Company and its Subsidiaries, as applicable, shall each terminate, effective
as
of the day immediately preceding the Closing Date: (i) any and all group
severance, separation or salary continuation plans, programs or arrangements,
and (ii) any and all other plans, except with respect to such other plans as
set
forth on Schedule 5.7.
Parent
shall receive from the Company evidence that the Company’s and each of its
Subsidiary’s, as applicable, plan(s) and/or program(s), as applicable, have been
terminated pursuant to resolutions of each such entity’s Board of Directors (the
form and substance of such resolutions shall be subject to review by and
reasonable approval of Parent), effective as of the day immediately preceding
the Closing Date. The Company shall also take such other actions in furtherance
of terminating such plans, policies and arrangements as Parent may reasonably
require.
ADDITIONAL
AGREEMENTS
6.1 Shareholder
Approval. Immediately
after the signing hereof, and as a material inducement to Parent and Merger
Sub
to enter into this Agreement, the Company shall obtain and deliver to Parent
the
Shareholder Written Consent and Irrevocable Proxy from each Majority Shareholder
and Minority Shareholder.
6.2 Approvals
of Governmental Bodies.
Parent
will make all filings required by Legal Requirements to be made by it to
consummate the transactions contemplated by this Agreement as promptly as
practicable after the date of this Agreement and in any event prior to, in
the
case of filings required in the U.S. pursuant to such Legal Requirements, the
tenth Business Day, and in the case of non-U.S. filings required by such Legal
Requirements, the fifteenth Business Day, following execution of this Agreement.
Between the date of this Agreement and the Closing Date, the Parent will
cooperate with the Company with respect to all filings that are required by
Legal Requirements to be made in connection with the transactions contemplated
herein. Parent will cooperate with the Company and will exercise commercially
reasonable efforts to obtain all consents identified in
Schedule 3.2
and
Exhibit B; provided,
however,
that
nothing in this Agreement shall require Parent to agree to any divestiture
material to Parent or the Company by Parent or the Company or any of Parent’s
subsidiaries or affiliates of shares of capital stock or of any business, assets
or property of Parent or its subsidiaries or affiliates or the Company or its
subsidiaries or affiliates or the imposition of any material limitation on
the
ability of any of them to conduct their businesses or to own or exercise control
of such capital stock, assets or properties.
6.3 WARN
Act.
In the
event Parent discontinues all or part of the operations of the Company and/or
fails to employ or discontinues the employment permanently or temporarily of
any
Company employees on and after the Closing Date, Parent shall be liable and
responsible for compliance with and liability under the Federal Worker
Adjustment and Retraining Act by the Company and any similar state or local
law
or ordinance.
6.4 Tax
Matters.
The
Company will file all Tax Returns with the final due date on or prior to Closing
consistent with past practice. Parent will, or will cause Company to, file
Company’s Tax Returns with the final due date after the Closing Date. Following
the Closing, Parent shall give the Shareholders’ Representatives reasonable
access to the books and records of the Company for all periods ending on or
before the Closing Date as may be required for filing applicable Tax
Returns.
6.5 Third
Party Expenses and Financial Statements
(a) Subject
to provisions of Section 9.2
and
Article XI
of this
Agreement, whether or not the transactions contemplated hereby are consummated,
all fees and expenses incurred in
(b) connection
with this Agreement and the transactions contemplated hereby, including all
investment banking, legal, accounting, financial advisory, consulting and all
other fees and expenses of third parties incurred by a party in connection
with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby (“Third
Party Expenses”),
shall
be the obligation of the respective party incurring such fees and
expenses.
(c) At
least
five Business Days prior to the Closing Date, the Company shall provide Parent
with a statement of its estimated Third Party Expenses as of the Closing Date,
such statement showing detail of both the previously paid and currently unpaid
Third Party Expenses of the Company incurred in connection with this Agreement
and the transactions contemplated hereby, as well as the Third Party Expenses
that have been incurred or are expected to be incurred by the Company in
connection with this Agreement and the transactions contemplated hereby, all
in
form reasonably satisfactory to Parent and certified as true and correct in
all
material respects by the Company’s chief financial officer (the “Statement
of Third Party Expenses”).
(d) Not
later
than five Business Days prior to the Closing Date, the Company shall prepare
and
deliver to Parent an unaudited balance sheet of the Company as of a date not
later than the last day of the most recently completed month (the “Pre-Closing
Balance Sheet”
and
together with the Statement of Third Party Expenses, the “Pre-Closing
Statements”).
The
Pre-Closing Statements shall be accompanied by (i) the Company’s supporting
worksheets and data, (ii) a certificate from the chief executive officer
and the chief financial officer of the Company to the effect that (A) the
Pre-Closing Balance Sheet has been prepared consistently and properly with
the
principles, methodology and assumptions used to prepare the Interim Balance
Sheet and (B) the amounts included in the line items set forth on the
Pre-Closing Balance Sheet were determined in accordance with GAAP consistently
applied in accordance with past practices, and (iii) any other information
that Parent may reasonably request in order to verify the amounts reflected
on
the Pre-Closing Statements.
(e) Not
later
than two Business Days prior to the Closing Date, the Company shall prepare
and
deliver to Parent the Company Debt Statement.
6.6 Employee
Matters
(a) On
and
after the Closing Date, Parent shall ensure that each of the Employees are
eligible to participate in benefit plans, programs, policies and arrangements
similar to those that are made available to similarly situated employees of
Parent or as are currently in effect at the Company and its
Subsidiaries.
(b) Parent
shall recognize all service of the Employees with the Company prior to the
Closing Date for purposes of accrual of vacation time, for vesting and
eligibility purposes under the Company’s 401(k) plan and for all benefit plans,
programs, policies and arrangements of Parent for which Employees are
eligible.
6.7 Nonsolicitation
of Employees.
From
the Closing Date to the second anniversary thereof, Soundco Capital., Inc.,
Xxxx X. Xxxxx and Xxxxxx Xxxxxx shall not, directly or knowingly, either
on
their own account or for any Person (including, without limitation, through
any
existing affiliate), solicit any employee of Parent or the Surviving Corporation
or of any of their respective existing affiliates, to leave his or her
employment, and, if applicable, shall not induce or attempt to induce any such
employee to terminate or breach his or her employment agreement with Parent,
the
Surviving Corporation or any of their existing affiliates.
6.8 Closing
Over By Parent.
If
Parent elects to close over the knowledge that there has been commenced against
the Company, or against any Person affiliated with the Company, between the
date
hereof and the Closing Date, a Proceeding that, in the reasonable, good faith
judgment of Parent, based on the advice of outside counsel, would have a
reasonable prospect of surviving a motion for summary judgment before any
Governmental Body of competent jurisdiction seeking to (a) enjoin, restrain
or otherwise prohibit the consummation of the transactions contemplated hereby;
(b) impose criminal penalties in connection with the consummation of
the
transactions contemplated hereby; or (c) impose a Material Adverse Effect,
including, without limitation, preventing, delaying, making illegal, or
otherwise interfering with the consummation of any of the transactions
contemplated hereby, then Parent shall have no right to seek an adjustment
to
the Merger Consideration and waives any and all rights to be indemnified for
or
otherwise seek recovery of any and all Damages sustained, incurred or suffered
by or asserted against any of the Parent Indemnitees (as defined below) directly
or indirectly, as a result of or relating to or arising out of any
Proceeding.
6.9 Spreadsheet.
The
Company shall deliver to Parent and the Payment Agent a spreadsheet (the
“Spreadsheet”)
substantially in the form attached hereto as Schedule 6.9,
which
Spreadsheet shall be certified as complete and correct in all material respects
on behalf of the Company by the Chief Executive Officer and Chief Financial
Officer of the Company as of the Closing and which shall include, among other
things, as of the Closing, all Company Securityholders (including holders of
Company Options that will exercise immediately prior to the Closing Date) and
their respective addresses, wiring instructions, if any, the number of shares
of
Company Capital Stock (including whether such shares are Company Common Stock
or
the Company Series A Preferred Stock) and Company Options held by such
persons, the Pro Rata Share applicable to each Majority Shareholder and Minority
Shareholder, the portion of the Merger Consideration payable to each Company
Securityholder, and such other information relevant thereto or which the Payment
Agent may reasonably request, including any amounts to be withheld pursuant
to
agreements between the Company Securityholder and Parent. The Company shall
deliver the Spreadsheet no less than (3) three Business Days prior to the
Closing Date, or such later time as Parent may agree in writing.
6.10 Environmental
Investigation. Within
fourteen (14) days of the execution of this Agreement, Parent and Parent’s
environmental consultant shall prepare and submit to the Company and Xxxxxx
Xxxxxx a plan for investigation, sampling, well installation and the like by
the
Parent into, of, and on the Pennsylvania Properties (the “Evaluation Plan”).
Parent and Parent’s environmental consultant shall not execute the Evaluation
Plan unless and until the Company and Xxxxxx Xxxxxx consent to such execution.
Such consent shall not be unreasonably withheld. Upon giving such consent,
the
Company and Xxxxxx Xxxxxx shall fully cooperate with Parent and Parent’s
environmental consultant to assist in execution by the Parent of the Evaluation
Plan. Costs reasonably incurred by Parent to prepare and execute the Evaluation
Plan shall be borne exclusively by Parent if either (A) no Hazardous Materials
are found by executing the Evaluation Plan or (B) any Hazardous Material which
is found by executing the Evaluation Plan is found in a concentration or amount
which (i) does not exceed the limit applicable to the use of the Pennsylvania
Property in question and legally allowable for such Hazardous Material under
any
applicable Environmental Law, (ii) does not violate, or require any
investigation, removal or other response under, any applicable Environmental
Law, and (iii) if found in either surface water or ground water, is not
attributable to the use of the Pennsylvania Properties by the Company and its
existence is not known to Xxxxxx Xxxxxx or the Company prior to the date of
this
Agreement. In all other instances, the Company shall reimburse Parent the costs
of preparing and executing the Evaluation Plan. Parent shall indemnify and
hold
harmless the Company and Xxxxxx Xxxxxx against any Unreasonable Interference,
and Parent shall further indemnify and hold harmless the Company and Xxxxxx
Xxxxxx against any losses or liability caused by exacerbating, through negligent
execution of the Evaluation Plan, any contamination of the environment existing
before execution of the Evaluation Plan at either of the Pennsylvania
Properties. The mere discovery of contamination of the environment at either
of
the Pennsylvania Properties shall not, by itself, be deemed to require Parent
to
indemnify and hold the Company and Xxxxxx Xxxxxx harmless under the indemnity
given Company and Xxxxxx Xxxxxx in this Section 6.10. For the purposes of any
execution of the Evaluation Plan pursuant to this Section 6.10, the term
“Unreasonable Interference” shall mean (i) any damage to any electrical conduit,
pipe, pipeline, septic system, wire, natural gas supply, or underground
conveyance at any of the Pennsylvania Properties, without regard to fault,
and
(ii) any closure, relocation, or suspension of any business of the Company
on
either of the Pennsylvania Properties to which the Company has not given its
prior consent, which is not to be unreasonably withheld, during either
preparation or execution of the Evaluation Plan by Parent or Parent’s
environmental consultant.
CONDITIONS
PRECEDENT TO PARENT’S OBLIGATION TO CLOSE
The
obligation of Parent
and Merger Sub to consummate the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
7.1 Accuracy
of Representations.
Each of
the representations and warranties of Company contained in this Agreement shall
be true and correct when made and as of the Closing (except where the failure
of
a representation or warranty to be so true and correct would not be reasonably
likely to have a Material Adverse Effect on the Company, or the ability of
Parent, or the Company to consummate the transactions contemplated in this
Agreement), with the same force and effect as if made as of the Closing, (it
being understood, that for purposes of determining the accuracy of such
representations and warranties, (a) all “Material
Adverse Effect”
qualifications or qualifications based on the word “material” contained in such
representations and warranties shall be disregarded, and (b) any update
or
modification to the Company’s Disclosure Schedules made or purported to have
been made without the written approval of Parent shall be disregarded). Parent
shall have received certificates signed on behalf of the Company by each of
the
chief executive officer and chief financial officer with respect to the
foregoing.
7.2 Covenants.
Each of
the covenants contained in this Agreement to be complied with by the Company
on
or before the Closing shall have been complied with (other than with respect
to
the covenants in Section 5.2
which
shall have been complied with in all respects, except where the failure to
so
comply with a covenant would not be reasonably likely to have a Material Adverse
Effect on the Company or Parent, or the ability of the Company or Parent to
consummate the transactions contemplated in this Agreement).
(a) The
Company shall have delivered payoff letters signed by Xxxxx Fargo and UCC-3
termination statements, evidencing that all of the Xxxxx Fargo Obligations
have
been fully satisfied and the credit facilities terminated;
(b) The
Company shall have delivered a payoff letter signed by Xxxxx Bank, as well
as
releases or satisfactions of mortgages and UCC-3 termination statements,
evidencing that all of the Xxxxx Bank Obligations have been fully satisfied
and
credit facilities terminated; and
(c) The
Company shall have delivered the cancelled notes of Soundco Capital Inc., Xxxxxx
Xxxxxx and Xxxxxx Xxxxxx, evidencing that all amounts outstanding under the
subordinated notes issued to them by the Company pursuant to that certain Note
Purchase Agreement dated October 9, 2003 have been fully
satisfied;
provided,
however,
that
the payoff amounts set forth in such letters shall anticipate the Company’s
payment of available cash to such lenders to reduce the amount of the Company
Debt Obligations.
7.4 FIRPTA
Certificate.
The
Company shall have delivered a properly executed notice in a form reasonably
acceptable to Parent for purposes of satisfying Parent’s obligations under
Sections 897 and 1445 of the IRC, together with written authorization
for
Parent to deliver such notice to the IRS on behalf of the Company after the
Closing.
7.5 Escrow
Agreement.
The
Company shall have executed and delivered the Escrow Agreement and all other
agreements, certifications, and other documents required to be executed and
delivered by the Company and Company Securityholders hereunder at the
Closing.
7.6 Shareholder
Written Consent.
The
Company shall have delivered Shareholder Written Consent and Irrevocable Proxies
representing the Requisite Shareholder Approval.
7.7 Consents.
Each of
the Consents identified in Schedule 3.2
and
Exhibit B as a pre-condition to Closing must have been obtained and must be
in
full force and effect, except where the failure to obtain such consents:
(a) was not due to breach of the Company of their obligations to obtain
such consents under the standard outlined by Section 6.4;
and
(b) would not be reasonably likely to have a Material Adverse Effect
on the
ability of Parent or the Company to consummate the transactions contemplated
by
this Agreement.
7.8 No
Proceedings.
Since
the date of this Agreement, there must not have been commenced against Parent,
or against any Person affiliated with Parent, any Proceeding that, in the
reasonable good faith judgment of Parent, based on the advice of outside
counsel, would have a reasonable prospect of surviving a motion for summary
judgment by Parent before any Governmental Body of competent jurisdiction
seeking to (a) enjoin, restrain or otherwise prohibit the consummation
of
the transactions contemplated hereby; (b) impose criminal penalties
in
connection with the consummation of the transactions contemplated hereby; or
(c) impose a Material Adverse Effect, including, without limitation,
preventing, delaying, making illegal, or otherwise interfering with the
consummation of any of the transactions contemplated hereby. All waiting
periods, if any, under the HSR Act relating to the transactions contemplated
hereby will have expired or terminated early and all material foreign antitrust
approvals required to be obtained in connection with the transactions
contemplated hereby shall have been obtained.
7.9 Key
Employees.
Each
employee set forth on Exhibit C (“Key
Employees”)
shall
have remained continuously employed with the Company or a Subsidiary from the
date of this Agreement through the Closing, other than those Key Employees
whose
employment with the Company ends due to death or disability, and shall have
signed an Offer Letter on terms mutually acceptable to the Parent and each
of
the Key Employees, respectively, together with an executed Employee Patent,
Secrecy and Invention Agreement, in each case in substantially the form attached
as an exhibit to the applicable Offer Letter, executed by each of the Key
Employees, and no action shall have been taken by any such Key Employee to
rescind any such document.
7.10 Xxxxx
Separation Agreement.
Xxxx X. Xxxxx shall have executed the Xxxxx Separation Agreement, any
rescission period required by law shall have expired prior to or as of the
Effective Time and no action shall have been taken by Xx. Xxxxx to rescind
or revoke such agreement.
7.11 Xxxxx
Supplemental Release.
Xxxx X. Xxxxx shall have executed the Xxxxx Supplemental Release, any
rescission period required by law shall have expired prior to or as of the
Effective Time and no action shall have been taken by Xx. Xxxxx to rescind
or revoke such release.
7.12 Termination
of Company Employee Plans.
The
Company shall have provided Parent with evidence, reasonably satisfactory to
Parent, as to the termination of the Company plans, programs and arrangements
referred to in Section 5.7.
7.13 Section 280G
Approval or Disapproval.
The
stockholders of the Company shall (i) have approved by the requisite
vote
any Potential 280G Benefits or (ii) shall have voted upon such Potential
280G Benefits and the requisite vote was not obtained with respect to the
Potential 280G Benefits such that any disqualified individual (as such term
is
defined in the proposed regulations promulgated under Section 280G)
shall
forfeit any Potential 280G Benefits.
7.14 Wholly-Owned
Subsidiaries.
The
Company shall have provided Parent with evidence, reasonably satisfactory to
Parent that, effective as of immediately prior to the Effective Date, the Hong
Kong Transaction shall have been consummated in accordance with the terms of
this Agreement.
-42-
7.15 Financial
Statements. The Company shall have delivered to Parent
(a) consolidated financial statements of the Company that meet the
requirements of Item 9.01 of Form 8-K for the period required
by
Rule 3-05(b) of Regulation S-X, (b) reviewed consolidated
balance
sheet of the Company as of March 31, 2005 and as of June 30,
2005 and
the related consolidated statements of income, changes in stockholders’ equity,
and cash flow for the three months then ended prepared in accordance with
GAAP
consistently applied, subject to normal recurring year-end adjustments
(including, but not limited to, normal year-end current and deferred income
tax
adjustments) and the absence of notes and in each case with detailed reviews
of
all reserves including reserve roll-forwards, (c) prepare a detailed
analysis of working capital as of June 30, 2005 and
(d) Ernst & Young shall have consented to Parent’s use of the
Company’s audited consolidated financial statements for the fiscal year ended
December 31, 2004.
7.17 Satisfaction
of Environmental Condition.
The
Company shall complete its environmental evaluations of each of the Pennsylvania
Properties and shall deliver the complete Phase I and II reports to Parent
in a
form which allows Parent to rely on such reports. Upon execution of the
Evaluation Plan, Parent shall be deemed to have obtained and investigated all
investigations, sampling, reports, and information concerning the presence
of
Hazardous Materials on or about the Company Facilities, at which point Parent
shall determine, based on the results obtained by such investigations, whether
Parent is satisfied that no Hazardous Materials have been Released to, on,
or
from any Company Facility in concentrations or amounts which exceed limits
legally allowable under any applicable Environmental Law for the use of the
property in question , require any investigation, removal or response activity
under any applicable Environmental Law, or otherwise violate any Environmental
Law.
7.17 Pennsylvania
Properties.
Prior
to the Closing, (a) Parent shall prepare, obtain the consent of the Company
and
Xxxxxx Xxxxxx to, and execute the Evaluation Plan, and (b) the Company, as
a
Third Party Expense, shall obtain an environmental insurance policy which
insures Parent and the Company, for ten years after the Closing Date, against
the cost of remediating, monitoring, or
investigating any
Hazardous Material
which is contaminating,
or emanating from, any
of the
Pennsylvania Properties
as of the Closing Date in a concentration or amount which requires remediation,
monitoring, or investigation under applicable Environmental Laws (the
“Environmental Policy”). The Environmental Policy shall contain a coverage
amount of no less than $10 million. The terms of the Environmental Policy shall
be terms found in pollution legal liability policies of environmental insurance
commonly used in the insurance industry, and the Parent shall have the right
to
review and suggest changes to such terms prior to issuance of the Environmental
Policy. The identity of the insurance company issuing the Environmental Policy
shall be
acceptable to Parent in its
sole discretion. If
the Environmental Policy is not delivered to Parent and the Company at the
Close
of Escrow, then, in addition to its other rights and remedies, Parent may extend
the Closing for so long as may be necessary for Parent to obtain the
Environmental Policy and the cost of such Environmental Policy reasonably
incurred by
Parent shall be reimbursed to Parent by the Company and included as a Third
Party Expense. The cost of any deductible under the Environmental Policy shall
be borne by the Company.
7.17 Spreadsheet.
Parent
shall have received the Spreadsheet pursuant to Section 6.9,
which
shall have been certified as of the Closing Date as complete and correct in
all
material respects on behalf of the Company by the Chief Executive Officer and
the Chief Financial Officer of the Company.
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATION TO CLOSE
The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, exclusively
by the Company:
8.1 Accuracy
of Representations.
Each of
the representations and warranties of Parent contained in this Agreement shall
be true and correct when made and as of the Closing (except where the failure
of
a representation or warranty to be so true and correct would not be reasonably
likely to have a Material Adverse Effect on Parent, or the ability of Parent,
or
the Company to consummate the transactions contemplated in this Agreement),
with
the same force and effect as if made as of the Closing (it being understood,
that for purposes of determining the accuracy of such representations and
warranties all “Material
Adverse Effect”
qualifications or qualifications based on the word “material” contained in such
representations and warranties shall be disregarded and any update or
modification to Parent’s schedule or exhibits made or purported to be made
without written approval of the Company shall be disregarded). Parent shall
have
delivered a certificate signed on behalf of Parent by each of the chief
executive officer and chief financial officer with respect to the
foregoing.
8.2 Covenants
(a) Each
of
the covenants contained in this Agreement to be complied with by the Parent
on
or before the Closing shall have been complied with (except where the failure
of
a representation or warranty to be so true and correct would not be reasonably
likely to have a Material Adverse Effect on the Parent or the ability of Parent
to consummate the transactions contemplated in this Agreement).
(b) Parent
must have made the cash payments required to be made by Parent pursuant to
Section 2.6.
8.3 Consents.
Each of
the Consents identified in Schedule 3.2
and
Exhibit B as a pre-condition to Closing must have been obtained and
must be
in full force and effect, except where the failure to obtain such consents:
(a) was not due to breach of the Parent of its obligation to cooperate
with
the Company to obtain such consents under the standard outlined by the last
sentence of Section 7.2;
and
(b) would not be reasonably likely to have a Material Adverse Effect
on the
Parent or a Material Adverse Effect on the ability of Parent or the Company
to
consummate the transactions contemplated by this Agreement.
8.4 Agreements
and Certificates.
Parent
shall have delivered the Escrow Agreement and all other agreements,
certifications, and other documents required to be executed and delivered by
Parent and Merger Sub hereunder at the Closing.
8.5 Side
Letters.
Parent
shall have executed and delivered side letters to each of the Employees who
has
long-term incentive units under the Company’s Long Term Incentive Plan or who is
eligible to receive bonuses under the Company’s cash bonus plan.
TERMINATION
9.1 Termination
Events.
This
Agreement may be terminated, as follows:
(a) by
either
Parent or the Company if a material breach of any provision of this Agreement
has been committed by the other party and such breach has not been waived,
provided
that
written notice has been given to the other party of the intention to terminate
under this Section 9.1(a)
due to
such breach and the other party has not cured such breach within 30 days of
receipt of such notice, or if such breach is unable to be cured within such
30-day period, the breaching party has made commercially reasonable efforts
to
cure such breach and such breach is cured not later that 60 days after notice
thereof;
(b) (i)by
Parent
if any of the conditions in Article VII
have not
been satisfied as of the Closing Date or if satisfaction of such a condition
is
or becomes impossible (other than through the failure of Parent to comply with
its obligations under this Agreement) and Parent has not waived such condition
on or before the Closing Date;
(ii) by
the
Company, if any of the conditions in Article VIII
have not
been satisfied as of the Closing Date or if satisfaction of such a condition
is
or becomes impossible (other
(iii) than
through the failure of the Company to comply with their obligations under this
Agreement) and the Company has not waived such condition on or before the
Closing Date;
provided
that
in
each case written notice has been given to the other party of the intention
to
terminate under this Section 9.1(b)
for
failure to satisfy a specified condition and the other party has not cured
such
failure within 30 days of receipt of such notice, or if such breach is unable
to
be cured within such 30-day period, the breaching party has made commercially
reasonable efforts to cure such breach and such breach is cured not later that
60 days after notice thereof;
(c) By
either
Parent or the Company if a Governmental Body of competent jurisdiction shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement, which order, decree, ruling
or
other action is final and nonappealable;
(d) by
mutual
written consent of Parent and the Company; or
(e) by
either
Parent or the Company if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply fully with
its obligations under this Agreement) on or before the date that is three (3)
months following the date of this Agreement (which date shall be extended to
the
date that is five (5) months following the date of this Agreement if the
transactions contemplated hereby shall not have been consummated as a result
of
a failure to satisfy the conditions set forth in Section 7.8),
or
such later date as the parties may agree upon.
9.2 Effect
of Termination.
Each
party’s right of termination under Section 9.1
is in
addition to any other rights it may have under this Agreement or otherwise,
and
the exercise of a right of termination will not be an election of remedies.
If
this Agreement is terminated pursuant to Section 9.1,
all
further obligations of the parties under this Agreement will terminate, except
that the provisions of Article XII
will
survive after such termination; provided
that if
this Agreement is terminated by a party because of the breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party’s obligations under this Agreement is not satisfied as a result of the
other party’s failure to comply with its obligations under this Agreement, the
terminating party’s right to pursue all legal remedies will survive such
termination unimpaired for a period of six months after such
termination.
SURVIVAL
OF REPRESENTATIONS,
WARRANTIES,
COVENANTS AND AGREEMENTS
10.1 Representations
and Warranties.
All
representations and warranties in this Agreement, the certificates delivered
pursuant to Section 7.1,
Section 8.1
and any
other certificate or document delivered pursuant to this Agreement shall expire
on the date which is twelve months after the Closing Date, except that
(i) the representations and warranties set forth in
Section 3.3,
Section 3.10
and any
representation or warranty of Parent, Merger Sub or the Company that were
fraudulently breached shall survive the Closing for the applicable statute
of
limitations, (ii) the representations and warranties set forth in
3.1(d)
shall
survive the Closing for the applicable statute of limitations or five (5) years,
whichever is longer, and (iii) the representations and warranties in
Section 3.17
shall
survive the Closing and remain in full force and effect forever.
10.2 Covenants.
Except
as set forth in the next sentence, claims with respect to any breach of a
covenant or obligation in this Agreement must be brought within twelve months
of
such breach coming to the attention of the other party. If the Closing occurs,
no party will have any liability (for indemnification or otherwise) with respect
to any covenant or obligation to be performed and complied with by it prior
to
the Closing Date.
10.3 General.
Neither
Parent nor the Company shall have any liability whatsoever with respect to
any
representation, warranty, covenant or obligation after the respective expiration
dates set forth in this Article X.
Each of
the parties agrees that no claims or causes of action may be brought against
the
other party arising out of, or based upon, any such representation, warranty,
covenant or obligation after the respective expiration dates set forth in this
Article X.
INDEMNIFICATION
11.1 Indemnification
and Payment of Damages by Company Securityholders.
Except
as limited by Article X
hereof,
and subject to Section 11.4,
Majority Shareholders shall (jointly and severally) and Minority Shareholders
shall (severally and not jointly, and to the extent of such Minority
Shareholder’s Pro Rata Share as set forth on the Spreadsheet) protect, defend,
indemnify, and hold Parent and its officers, directors, affiliates, employees,
agents and representatives, including the Surviving Corporation (“Parent
Indemnitees”)
harmless from and against any and all Damages sustained, incurred or suffered
by
or asserted against any of them, directly or indirectly, as a result of or
relating to or arising out of: (a) any breach of any representation
or
warranty made by the Company in this Agreement, (b) any breach by any
Majority Shareholder or Minority Shareholder of any post-Closing covenant or
post-Closing obligation of any Majority Shareholder or Minority Shareholder
in
this Agreement, (c) the implementation of the Hong Kong Transaction,
(d) any Company WEEE Compliance Costs, (e) any Third Party Expenses
not already deducted from the Merger Consideration (“Excess
Third Party Expenses”),
(f) any Restricted
Payments
not already deducted from the Merger Consideration (“Excess
Restricted Payments”)
and
(g) any Excluded Environmental Liability. Except as otherwise provided
herein, any assertion by Parent Indemnitees (or any of them) of any right to
indemnification under the terms of this Section 11.1
must be
made in writing and must be sent to the Shareholders’ Representatives on or
prior to the expiration of the survival period of the particular representation,
warranty or covenant as provided in Article X
hereof.
11.2 Indemnification
and Payment of Damages by Parent.
Parent
will indemnify and hold harmless Majority Shareholders and Minority Shareholders
from and against any Damages, directly or indirectly, as a result of or relating
to or arising out of any (a) any breach of any representation made by
Parent or Merger Sub in this Agreement and (b) any breach by Parent
or the
Surviving Corporation of any post-Closing covenant or post-Closing obligation
of
Parent or the Surviving Corporation pursuant to this Agreement.
11.3 Limitations
(a) No
claims
for breaches of representations, warranties, covenants or obligations may be
brought after the time limitations set forth in Article X.
No
party shall have any obligation to indemnify the other, unless the amount of
Damages sustained or incurred with respect to a particular claim (or a series
of
related claims) exceeds $25,000 and unless the aggregate amount of Damages
sustained or incurred with respect to all such claims exceeds 1% of the Merger
Consideration (“Basket”).
Notwithstanding the prior sentence, with respect to (a) Excess Third
Party
Expenses, (b) Excess Restricted Payments, (c) a breach of the
representations and warranties contained in Section 3.3
or
Section 3.7,
(d) all losses, costs, damages, claims, demands, actions, proceedings,
liabilities and expenses whatsoever (including all uncompensated reasonable
legal fees and expenses) Parent incurs or is liable for in respect of or in
connection with the implementation of the Hong Kong Transaction, and/or
(e) any Excluded Environmental Liability and/or any Damages arising
from
any misrepresentation arising under Section 3.17
of this
Agreement, to which no Basket shall apply, Parent shall be entitled to recover
all Damages so identified (including the Basket) up to (but not in excess of)
a
maximum aggregate indemnity for such Damages of an amount equal to 25% of the
Merger Consideration (“Cap”).
Notwithstanding the preceding sentence, the Cap shall not apply to Excess
Restricted Payments, Excess Compliance Costs or Damages sustained as a result
of
the Hong Kong Transaction, a breach of Section 3.3,
Section 3.7,
or
fraud, and in such instances the limitation shall be the Merger
Consideration.
(b) The
indemnity, defense, and hold harmless obligations of Majority Shareholders
and
Minority Shareholders set forth in Section 11.1 above which may arise for a
breach of any representation or warranty made by the Company or any Subsidiary
under Section 3.17 of this Agreement (i) shall also extend to any Damages
arising out of the continuation, from before the Closing Date to after the
Closing Date, of any circumstance which violates such Section, and shall extend
after the Closing Date only to the date on which the continuation has been
discovered by
(c) Parent,
or with reasonable diligence should have been discovered by Parent, and Parent
has had a reasonable time to correct the condition presented by such
continuation (the “Continued Condition Termination Date”). If any such
continuing condition results in an adverse health effect to an individual
exposed before the Closing Date, by the Company or any Subsidiary, to a
Hazardous Material stored, used, disposed of, released, generated, or
transported by the Company or any Subsidiary, the liability for the adverse
health effect shall be allocated between the Parent and the Company (or its
Subsidiary) based on the length of the exposure of such individual from the
point in time before the Closing Date when such exposure is deemed to have
began
to the Continued Condition Termination Date, and such other factors as either
party can prove which may be relevant to the degree and duration of the
exposure.
11.4 Procedures
for Indemnification — Third Party Claims
(a) Promptly
after receipt by an indemnified party under Section 11.1
or
11.2
of
notice of the commencement of any Proceeding against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give written notice to the indemnifying party of the commencement of such claim,
but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such action is prejudiced by the indemnifying party’s failure to give such
notice.
(b) If
any
Proceeding referred to in Section 11.4(a)
is
brought against an indemnified party and it gives written notice to the
indemnifying party of the commencement of such Proceeding, the indemnifying
party will be entitled to participate in such Proceeding and, to the extent
that
it wishes (unless the indemnifying party is also a party to such Proceeding
and
the indemnified party determines in good faith that joint representation would
be inappropriate), to assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under
this
Article XI
for any
fees of other counsel or any other expenses with respect to the defense of
such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs
of
investigation. If the indemnifying party assumes the defense of a
Proceeding:
(i) it
will
be conclusively established for purposes of this Agreement that the claims
made
in that Proceeding are within the scope of and subject to
indemnification;
(ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party’s consent unless: (A) there is no
finding or admission of any violation of Legal Requirements or any violation
of
the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and
(iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent, other than reasonable,
documented costs of investigation.
(c) Notwithstanding
the foregoing, if (i) the indemnifying party does not, within ten Business
Days after the indemnified party’s notice is given pursuant to this
Section 11.4,
give
written notice to the indemnified party of its election to assume the defense
of
such Proceeding as permitted under Section 11.4(b),
or
(ii) the indemnified party determines in good faith that there is a
reasonable probability that a Proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, then in either case the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or
any
compromise or settlement effected without its consent unless such determination,
compromise or settlement: (A) results in no finding or admission of
any
violation of Legal Requirements or any violation of the rights of any Person
and
no effect on any other claims that may be made against the indemnifying party,
and (B) does not obligate the indemnifying party to pay monetary
damages.
11.5 Procedure
for Indemnification — Other Claims
.
A claim
for indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is
sought.
11.6 Exclusive
Remedy
.
Parent,
the Majority Shareholders and the Minority Shareholders herby agree that, after
the Closing, the rights and remedies of Parent and the Surviving Corporation,
the Majority Shareholders and the Minority Shareholders contained in this
Article XI
to
recover Damages (subject to the limitations set forth herein) shall be the
sole
and exclusive rights and remedies that they shall have against Parent or any
Majority Shareholder or Minority Shareholder, as applicable, arising out of,
relating to or resulting from this Agreement or the transactions contemplated
hereby, except in the case of fraud, with respect to which the limitations
set
forth in this Section 11.6
shall
not apply.
GENERAL
PROVISIONS
12.1 Expenses.
Parent
will bear its expenses incurred in connection with the preparation, execution,
and performance of this Agreement and the transactions contemplated herein,
including all fees and expenses of its agents, Representatives, counsel, and
accountants. Additionally, Parent shall be responsible to pay when due all
transfer, documentary, sales, use, value added, stamp, registration, goods
and
services taxes, as well as all conveyance fees, recording charges and other
fees
and
charges,
incurred in connection with the transactions contemplated by this Agreement,
regardless of whether the obligation to pay any such taxes, fees or charges
would otherwise be the obligation of the Company under applicable law or by
custom or practice. The parties hereto acknowledge that the Company shall pay
all Third Party Expenses of the Company, including all amounts payable to
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Capital, Inc. in connection with this
Agreement and the transactions contemplated herein incurred in connection with
the preparation, execution and performance of this Agreement and the
transactions contemplated herein and that such Third Party Expenses will be
deducted from the Merger Consideration pursuant to Section 2.2(a)
hereof.
12.2 Public
Announcements.
Prior
to the Effective Time, any public announcement or similar publicity with respect
to this Agreement or the transactions contemplated herein will be issued, if
at
all, at such time and in such manner as Parent and the Company shall reasonably
determine. Prior to the Effective Time, any public announcement or similar
publicity, the Company and Parent will consult with each other concerning the
means by which the public and the Company’s employees, distributors, customers,
and suppliers and others having dealings with the Company will be informed
of
the transactions contemplated herein and no announcement shall be made by any
party without the prior written consent of (a) Parent, in the case
of a
proposed announcement by any Majority Shareholder, Minority Shareholder or
the
Company or (b) the Company, in the case of a proposed announcement by
Parent; provided,
however,
that
any Company consent required under this Section 12.2
shall
not apply to Parent’s obligations to comply with applicable securities laws and
the rules and regulations of the New York Stock Exchange, if Parent has made
reasonable efforts to notify the Company in advance of making any such
disclosures.
12.3 Confidentiality.
The
provisions of the Confidentiality Agreement between the Company and the Parent
dated January 31, 2005 (“Confidentiality
Agreement”)
will
continue in full force and effect and will survive the execution and delivery
of
this Agreement.
12.4 Notices.
All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given when:
(a) delivered by hand (with written confirmation of receipt), (b) sent
by facsimile (with written confirmation of receipt), provided
that a
copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by written notice to the other
parties):
|
If
to the Company:
|
With
a copy to:
|
|
Altec
Lansing Technologies, Inc.
|
Xxxx
Xxxxx LLP
|
|
000
Xxxxxx 0 & 209
|
000
Xxxxxxxxx Xxxxxx
|
|
Xxxxxxx,
XX 00000-0000
|
00xx
Xxxxx
|
|
Xxxxxxxxx:
Xxxxxxxxx
|
Xxx
Xxxx, XX 00000
|
|
Facsimile
No.: (000) 000-0000
|
Attention:
Xxxxxx X. XxXxxxx, Esq.
|
|
Telephone
No.: (000) 000-0000
|
|
|
Facsimile
No.: (000) 000-0000
|
|
|
If
to Parent:
|
With
a copy to:
|
|
Plantronics,
Inc.
|
Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx
|
|
000
Xxxxxxx Xxxxxx
|
Professional
Corporation
|
|
Xxxxx
Xxxx, XX 00000
|
000
Xxxx Xxxx Xxxx
|
|
Attention:
Xxxxxx X. Xxxxxx
|
Xxxx
Xxxx, XX 00000
|
|
Associate
General Counsel
|
Attention:
Xxxxxxxxx X. Xxxxxx, Esq.
|
|
Telephone
No.: (000) 000-0000
|
Xxxxx
X. Xxxxx, Esq.
|
|
Facsimile
No.: (000) 000-0000
|
Telephone
No.: (000) 000-0000
|
|
Facsimile
No.: (000) 000-0000
|
If
to the
Shareholders’ Representatives, at the address and fax number set forth on the
Spreadsheet, with a copy to Xxxx Xxxxx LLP (set forth above).
or,
in
each case, at such other address as the Company, the Shareholders’
Representatives, and/or Parent may designate by advance written notice to the
other parties hereto.
12.5 Jurisdiction;
Service of Process.
Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of the parties in
the
courts of the Commonwealth of Pennsylvania, County of Philadelphia, or, if
it
has or can acquire jurisdiction, in the United States District Court for the
Eastern District of Pennsylvania, 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.
12.6 Further
Assurances.
The
parties agree before and after Closing: (a) to furnish upon request
to each
other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such
other
acts and things, all as the other party may reasonably request for the purpose
of carrying out the intent of this Agreement and the documents referred to
in
this Agreement.
12.7 Waiver.
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to
in
this Agreement will operate as a waiver of such right, power, or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law: (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged
by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that
may
be given by a party will be applicable except in the specific instance for
which
it is given; and (c) no notice to or demand on one party will be deemed
to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this
Agreement.
12.8 Entire
Agreement and Modification.
This
Agreement supersedes all prior agreements between the parties with respect
to
its subject matter (other than the Confidentiality Agreement, which shall
survive the execution and/or termination of this Agreement in accordance with
its terms) and constitutes (along with the documents referred to in this
Agreement and the Confidentiality Agreement) a complete and exclusive statement
of the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by all parties.
12.9 Disclosure
Schedules.
(a) If
and to
the extent any information required to be furnished in any Schedule is contained
in another Schedule, such information will be deemed to be included in all
Schedules in which such information is required to be included, to the extent
such disclosure is reasonably apparent on its face to be applicable to such
other Schedule.
(b) In
the
event of any inconsistency between the statements in the body of this Agreement
and those in the Schedules, the statements in the Schedules will
control.
12.10 Assignments,
Successors, and No Third-Party Rights.
No
party may assign any of its rights or delegate its obligations under this
Agreement without the prior consent of the other parties, except that Parent
may
assign its rights or delegate itsobligations
hereunder to its affiliates so long as Parent remains ultimately liable for
all
of Parent’s obligations hereunder. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for
the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
12.11 Severability.
If any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
12.12 Article
and Section Headings, Construction.
The
headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to
“Article,”“Articles,”“Section” or “Sections” refer to the corresponding Article,
Articles, Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word “including” does not
limit the preceding words or terms.
12.13 Time
of Essence.
With
regard to all dates and time periods set forth or referred to in this Agreement,
time is of the essence.
12.14 Governing
Law.
This
Agreement will be governed by the laws of the State of New York without regard
to conflicts of laws principles.
12.15 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
12.16 Shareholders’
Representatives
(a) By
virtue
of their approval of this Agreement, the Majority Shareholders and Minority
Shareholders shall have constituted and appointed Xxxxx Xxxxxxxx, Xxxxxxx
Xxxxxxx and Xxxxxx Xxxxxx, either acting alone or together, to serve as the
shareholders’ representatives (collectively, “Shareholders’
Representatives”)
for
and on behalf of the Majority Shareholders and Minority Shareholders, to give
and receive notices and communications, to agree to, negotiate, enter into
settlements and compromises of, and comply with orders of courts with respect
to
such claims, to take all other actions on behalf of the Majority Shareholders
and Minority Shareholders as is explicitly contemplated by this Agreement or
the
Escrow Agreement and to take all actions necessary or appropriate in the
judgment of the Shareholders’ Representatives for the accomplishment of the
foregoing. No bond shall be required of the Shareholders’ Representatives, and
the Shareholders’ Representatives shall receive no compensation for their
services. Notices or communications to or from the Shareholders’ Representatives
shall constitute notice to or from each Company Securityholder.
(b) The
Shareholders’ Representatives shall not be liable to any Company Securityholder
for any act done or omitted hereunder as Shareholders’ Representatives while
acting in good faith and in the exercise of reasonable judgment and any act
done
or omitted pursuant to the advice of counsel or with the consent of two-thirds
in interest of the Majority Shareholders and Minority Shareholders, which shall
be conclusive evidence of such good faith. The Majority Shareholders and
Minority Shareholders shall severally indemnify the Shareholders’ Representative
and hold each of them harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of such Shareholders’
Representatives and arising out of or in connection with the acceptance or
administration of his duties hereunder.
[Signatures
Follow]
IN
WITNESS WHEREOF,
the
parties have executed and delivered this Agreement as of the date first written
above.
|
PLANTRONICS,
INC.
|
|
|
By:
/s/ Xxx
Kannappan___________________________________________
Name:
Xxx Xxxxxxxxx
Title:
President and Chief Executive Officer
|
|
|
ALTEC
LANSING TECHNOLOGIES, INC
|
|
|
By:
/s/ Xxxx X.
Lucas____________________________________________
Name: Xxxx
X. Xxxxx
Title:
Chief Executive Officer
|
|
|
SONIC
ACQUISITION CORPORATION
|
|
|
By:
/s/ Xxx
Kannappan____________________________________________________________
Name:
Xxx Xxxxxxxxx
Title:
President and Chief Executive
Officer
|
The
undersigned Company Shareholders hereby join this Agreement for the limited
purpose regarding their obligations under Article XI,
Article XII
and
Section 6.7
hereof.
|
SOUNDCO
CAPITAL, INC.
|
XXXXXX
XXXXXX
|
|
|
By:
/s/ Xxxxx Xxxxxxxx
|
/s/ Xxxxxx Xxxxxx | |
|
Name:
Xxxxx Xxxxxxxx
|
||
|
Title:
|
||
|
XXXX X.
XXXXX
|
||
| /s/ Xxxx X. Xxxxx | ||
The
undersigned Company Shareholders hereby join this Agreement for the limited
purpose regarding their obligations under Article XI
and
Article XII
hereof.
| XXXXXX XXXXXXXX | XXXX XXXXX | |
| /s/ Xxxxxx Xxxxxxxx | /s/ Xxxx Xxxxx | |
| XXXXXXX XXXXX | ANCHEL FAMILY LIMITED PARTNERSHIP | |
| /s/ Xxxxxxx Xxxxx | /s/ Xxxxxx Xxxxxx | |
| Name: Xxxxxx Xxxxxx | ||
| Title: | ||
The
undersigned Company Shareholder hereby joins this Agreement for the limited
purpose regarding his obligations under Section 6.10 hereof.
|
XXXXXX
XXXXXX
|
EXHIBIT A
FORM
OF SHAREHOLDER WRITTEN CONSENT AND IRREVOCABLE PROXY
[Form
of Shareholder Written Consent and Irrevocable Proxy has
been omitted. A copy of this exhibit will be furnished supplementally to the
Commission upon request]
EXHIBIT
B
PARENT’S
REQUIRED CONSENTS
[Parent's
Required Consents has been omitted. A copy of this exhibit will be
furnished supplementally to the Commission upon request.]
EXHIBIT
C
KEY
EMPLOYEES
[Key Employees
has been omitted. A copy of this exhibit
will be furnished supplementally to the Commission upon request.]
EXHIBIT
X
XXXXX
SEPARATION AGREEMENT
[Xxxxx
Separation Agreement has been omitted. A copy of this
exhibit will be furnished supplementally to the Commission upon request.
