EXHIBIT 2.0
STOCK PURCHASE AGREEMENT
among
ANADIGICS, INC.
and
TELCOM DEVICES CORP.
and
THE SELLERS NAMED HEREIN
April 2, 2001
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1. Certain Definitions..................................................1
1.2. Other Terms..........................................................5
1.3. Other Definitional Provisions........................................5
1.4. Titles and Subtitles.................................................6
ARTICLE II
PURCHASE AND SALE OF SHARES; THE CLOSING
2.1. Purchase and Sale....................................................6
2.2. The Closing..........................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
3.1. Title to the Shares..................................................7
3.2. Seller Authorization.................................................7
3.3. Seller Consents and Approvals........................................7
3.4. Seller Litigation....................................................8
3.5. Organization, etc....................................................8
3.6. No Subsidiaries......................................................8
3.7. Authorization, etc...................................................8
3.8. No Violations........................................................8
3.9. Organizational Documents; Minutes....................................9
3.10. Capitalization.......................................................9
3.11. Compliance..........................................................10
3.12. Consents and Approvals..............................................10
3.13. Other Shareholders' Agreements......................................10
3.14. Financial Information...............................................10
3.15. Absence of Undisclosed Liabilities..................................10
3.16. Absence of Changes..................................................11
3.17. Litigation..........................................................11
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Page
3.18. Taxes...............................................................11
3.19. Governmental Approvals..............................................13
3.20. Title to Properties; Liens..........................................13
3.21. Intellectual Property...............................................13
3.22. Environmental Matters...............................................15
3.23. Material Contracts..................................................16
3.24. Insurance; Bank Accounts............................................17
3.25. Labor Agreements and Actions; Employee Matters......................17
3.26. Employee Benefit Plans; ERISA.......................................17
3.27. Certain Transactions................................................20
3.28. Disclosure..........................................................20
3.29. Brokers.............................................................20
3.30. Customers and Suppliers.............................................20
3.31. Receivables.........................................................21
3.32. Inventories.........................................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1. Organization, etc...................................................22
4.2. Authorization, etc..................................................22
4.3. No Violations.......................................................22
4.4. Brokers.............................................................23
4.5. Consents and Approvals..............................................23
ARTICLE V
CERTAIN COVENANTS
5.1. Conduct of Business by the Company..................................23
5.2. Access..............................................................25
5.3. Covenant Against Competing Economic Interests.......................25
5.4. Employment Contracts................................................27
5.5. Best Efforts........................................................27
5.6. Filings and Notices; Approvals and Consents.........................27
5.7. Notification of Certain Matters.....................................27
5.8. Director and Officer Resignations...................................28
5.9. Seller and Buyer Covenants with Respect to Earn-Out.................28
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Page
ARTICLE VI
CONDITIONS TO THE CLOSING
6.1. Conditions to Each Party's Obligations..............................28
6.2. Conditions to Obligations of Buyer..................................29
6.3. Conditions to Obligations of the Sellers............................30
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification by Sellers..........................................31
7.2. Indemnification by Buyer............................................33
7.3. Termination of Indemnification......................................34
7.4. Procedure...........................................................34
7.5. Arbitration.........................................................35
7.6. Treatment of Payments...............................................36
7.7. Tax Returns.........................................................36
7.8. Cooperation on Tax Matters..........................................37
7.9. Sales and Transfer Taxes............................................37
7.10. Post Closing Tax Activities.........................................37
ARTICLE VIII
MISCELLANEOUS
8.1. Survival of Representations and Warranties; Severability............38
8.2. Termination.........................................................38
8.3. Waivers and Amendments..............................................38
8.4. Notices, etc........................................................39
8.5. Governing Law.......................................................39
8.6. Successors and Assigns..............................................40
8.7. No Third Party Beneficiaries........................................40
8.8. Delays or Omissions.................................................40
8.9. Publicity...........................................................40
8.10. Expenses............................................................40
8.11. Specific Performance................................................41
8.12. Entire Agreement....................................................41
8.13. Severability........................................................41
8.14. Counterparts........................................................41
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Page
8.15. Descriptive Headings; Interpretation................................41
8.16. No Strict Construction..............................................42
8.17. Appointment of Seller Representative................................42
Schedules
Schedule I - Seller's pro rata portion of Seller's Cap Amount
Schedule II - Exceptions to Representations of Sellers
Schedule 3.14(a) Financial Statements
Schedule 3.14(b) Seller Projections
Schedule 3.16 Changes in Balance Sheet
Schedule 3.18(a)(iii) Tax Returns
Schedule 3.19(a) Government Approvals
Schedule 3.24(a) Insurance
Schedule 3.24(b) Bank Accounts
Schedule 3.25(d) Employment Information
Schedule 3.30 Customers
Exhibits
Exhibit A Escrow Agreement
Exhibit B Earn-Out Payment
Exhibit C Proposed Revenue/Profitability Matrix
Exhibit 5.4(a) Employment Contract of Xxxxxxx Xxxxxx
Exhibit 5.4(b) Employment Contract of Xxxxxxxx Xxxxxxxx
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STOCK PURCHASE AGREEMENT
Stock Purchase Agreement (the "Agreement"), dated April 2, 2001, among
ANADIGICS, INC., a corporation organized and existing under the laws of the
state of Delaware (the "Buyer"), Telcom Devices Corp., a corporation organized
and existing under the laws of California (the "Company"), and the shareholders
of the Company named on Schedule I hereto (individually a "Seller" and,
collectively, the "Sellers");
WHEREAS, the Company develops, manufactures and markets components for
fiber optic applications in telecommunications, data communications, CATV and
test measurement instrumentation in addition offering other related products and
services (the "Business");
WHEREAS, the Sellers are the beneficial and record owners of all of the
issued and outstanding shares of capital stock of the Company (the "Common
Shares"); and
WHEREAS, the Buyer desires to purchase, and the Sellers desire to sell,
such Common Shares upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties set forth herein, and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Certain Definitions. Capitalized terms used in this Agreement shall
have the meanings set forth below:
"Affiliate" shall mean, with respect to any party, any Person that, alone
or together with any other Person, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such party. For the purpose of this definition, "control" (including the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any party, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of such party,
whether through the ownership of voting securities, by contract, agency or
otherwise.
"Agreement" shall have the meaning specified in the recitals hereof.
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"Applicable Law" shall mean, with respect to any Person, any statute, law,
regulation, ordinance, rule, judgment, order, decree, award, Governmental
Approval, concession, grant, franchise, license, agreement, directive,
guideline, policy, requirement, or other governmental restriction or any similar
form of decision of, or determination by, or any interpretation or
administration of any of the foregoing by, any Governmental Authority, whether
in effect as of the date hereof or thereafter and in each case as amended,
applicable to such Person or its subsidiaries or their respective assets.
"Balance Sheet" Shall have the meaning specified in Section 3.14 herein.
"Benefit Plans" shall mean any plan, agreement or arrangement, formal or
informal, whether oral or written, whereby the Company provides any benefit to
any present or former officer, director or employee, or dependent or beneficiary
thereof, including, without limitation, any profit sharing, deferred
compensation, stock option, performance stock, employee stock purchase, bonus,
severance, retirement, health or insurance plans.
"Business" shall have the meaning specified in the recitals hereof.
"Business Day" shall mean any day excluding (i) Saturday, Sunday and any
day which shall be a legal holiday in the City of New York or United States, or
(ii) a day on which commercial banks in the City of New York or United States,
are authorized or required by law or other government actions to close.
"Buyer" shall have meaning specified in the recitals hereof.
"Closing" shall have the meaning specified in Section 2.2 herein.
"Closing Date" shall have the meaning specified in Section 2.2 herein.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Shares" shall have the meaning specified in the recitals hereof.
"Company" shall have the meaning specified in the recitals hereof.
"Earn-Out Payment" shall have the meaning specified in Section 2.1(a)
herein.
"Employment Contracts" shall have the meaning specified in Section 5.4
herein.
"Encumbrance" shall mean any lien, encumbrance, proxy, voting trust or
similar arrangement, pledge, security interest, collateral security agreement,
limitation on voting rights, limitation on rights of ownership, financing
statement (and similar notices) filed with
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any Governmental Authority, claim (including any claim as defined in the Code),
charge, preferential payment arrangement, equity, mortgage, pledge, objection,
title defect, option, restrictive covenant, restriction on transfer,
preferential agreement having the effect of constituting a security interest or
any comparable interest or right created by or arising under Applicable Law, of
any nature whatsoever.
"Environmental Claim" shall mean any notice, claim, demand or other
communication alleging liability for any compliance costs, cleanup costs,
response, corrective action or other costs, or damages to natural resources or
other property, personal injuries, fines or penalties, arising out of or
resulting from (i) the presence, Release or threatened Release in or into the
environment of Hazardous Material at any location or (ii) any violation of
Environmental Law, including, without limitation, any claim seeking damages,
contribution, indemnification, cost recovery, compensation, injunctive relief or
natural resource damages resulting from the presence of Hazardous Material or
arising from alleged injury or threat of injury to health, safety or the
environment.
"Environmental Law" shall mean any law, statute, ordinance, regulation,
rule, decree, order, judgment, consent order, consent decree or other binding
requirement and the common law relating to protection of public health or the
environment, the Release or threatened Release of Hazardous Material, natural
resources damages, or occupational safety or health.
"Environmental Permit" shall mean any permit, license, approval, consent or
other authorization required by a federal, state, local or foreign Governmental
Authority pursuant to Environmental Law.
"Employee Benefit Plans" shall have the meaning specified in Section
3.26(a) herein.
"ERISA" shall have the meaning specified in Section 3.26(a) herein.
"ERISA Affiliate" shall have the meaning specified in Section 3.26(a)
herein.
"Escrow Agent" shall have the meaning specified in Section 2.1(b) herein.
"Escrow Agreement" shall have the meaning specified in Section 2.1(b)
herein.
"Escrow Amount" shall have the meaning specified in Section 2.1(b) herein.
"GAAP" shall mean generally accepted accounting principles, as in effect
from time to time and as adopted by the Company with the consent of its
independent public accountants, consistently applied.
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"Governmental Approval" shall mean any action, order, authorization,
consent, approval, license, lease, ruling, permit, certification, exemption,
filing or registration by or with any Governmental Authority.
"Governmental Authority" shall mean any government or political subdivision
thereof, including without limitation, any governmental department, commission,
board, bureau, agency, regulatory authority, instrumentality, judicial or
administrative body, having jurisdiction over the matter or matters in question.
"Hazardous Material" means any material, substance, waste, constituent,
compound, pollutant or contaminant including, without limitation, petroleum
(including, without limitation, crude oil or any fraction thereof or any
petroleum product) subject to regulation or which can give rise to liability
under Environmental Law.
"Indemnity Notice" shall have the meaning specified in Section 7.4 herein.
"Initial Consideration" shall have the meaning specified in Section 2.1(a)
herein.
"Intellectual Property" shall mean (i) patents, (ii) trademarks, (iii)
copyrights, (iv) trade secrets and (v) software.
"Key Employees" shall have the meaning specified in Section 5.4 herein.
"Loss" shall mean any loss, liability, claim, damage or expense.
"Material Adverse Effect" shall mean, with respect to any Person, an event
or series of events having a material adverse effect on the business, condition
(financial or otherwise), affairs, operations, liabilities, assets or properties
of such Person or any of its subsidiaries, individually or taken as a whole.
"Organizational Documents" shall mean, with respect to any Person, articles
of incorporation, certificate of incorporation, bylaws and any charter,
partnership agreements, joint venture agreements or other organizational
documents of such entity and any amendments thereto.
"Pension Benefit Plans" shall have the meaning specified in Section 3.26(a)
herein.
"Person" shall mean any natural person, company, corporation, association,
partnership, organization, business, firm, joint venture, trust, unincorporated
organization or any other entity or organization, including a government, or any
political subdivision, department or agency of any government.
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"Pre-Closing Tax Liabilities" shall mean all Taxes of the Company to the
extent that such Taxes are attributable to a taxable period (or portion thereof)
ending on or prior to the Closing Date (based on an interim closing of the books
as of the end of the Closing Date), except for property or other ad valorem
Taxes, which shall be pro rated on a daily basis.
"Purchase Price" shall have the meaning specified in Section 2.1 herein.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing or
migrating.
"Rockwell Litigation" shall mean the claim of patent infringement from
Rockwell International Corporation pertaining to its MOCVD wafer process patent
and any future action suit or other proceeding relating thereto.
"Seller" shall have meaning specified in the recitals hereof.
"Shares" shall have the meaning specified in Section 2.1 herein.
"Tax" or "Taxes" shall have the meaning specified in Section 3.18.
"Tax Return" shall have the meaning specified in Section 3.18(c) herein.
"Welfare Plans" shall have the meaning specified in Section 3.26(a) herein.
"Year 2000 Compliant" means that the Company systems provide uninterrupted
millennium functionality in that the systems will record, store, process and
present calendar dates falling on or after January 1, 2000 in the same manner
and with the same functionality as the Company systems record, store, process
and present calendar dates falling on or before December 31, 1999.
1.2. Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning throughout
this Agreement.
1.3. Other Definitional Provisions. The words "hereof", "herein", and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. The terms defined in the
singular shall have a comparable meaning when used in the plural, and vice
versa.
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1.4. Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
ARTICLE II
PURCHASE AND SALE OF SHARES; THE CLOSING
2.1. Purchase and Sale. (a) Upon the terms and subject to the conditions
hereof, at the closing referred to in Section 2.2 hereof, the Sellers are
selling, assigning, transferring and delivering to the Buyer, and the Buyer is
accepting and purchasing from the Sellers, free and clear of all Encumbrances,
all of the outstanding Common Shares (the "Shares") of the Company for an
aggregate purchase price of up to forty-five million dollars ($45.0 million)
(the "Purchase Price"). The number of Common Shares being sold by each of the
Sellers is set forth on Schedule I hereto. The Purchase Price will consist of a
payment of twenty eight million dollars ($28.0 million) on the Closing Date (the
"Initial Consideration") and an earn-out payment (the "Earn-Out Payment") of up
to seventeen million dollars ($17.0 million). The Earn-Out Payment will be paid
based upon and in accordance with formulas and instructions set forth in Exhibit
B attached hereto and as illustrated on Exhibit C attached hereto.
(b) The Purchase Price will be paid pro rata to the Sellers as set forth on
Schedule I hereto, provided that five million dollars ($5.0 million) (the
"Escrow Amount") of the Initial Consideration will be paid into an escrow
account to be held by First Union Corporation, as escrow agent (the "Escrow
Agent") for twenty-four (24) months following the Closing Date and thereafter
released to the Sellers to the extent not previously returned to Buyer as
necessary to satisfy from time to time any indemnification claims that may arise
under Article VII hereof all pursuant to an Escrow Agreement dated the date
hereof in the form annexed hereto as Exhibit A (the "Escrow Agreement").
2.2. The Closing. (a) The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Xxxxxx Xxxxxx & Xxxxxxx, 00
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 as soon as practicable following the
satisfaction or waiver of all of the conditions set forth in Article VI hereof,
but in no event later than the fifth Business Day after such satisfaction or
waiver (or on such other date as shall be mutually agreed upon by the parties in
writing). The time and date upon which the Closing occurs is herein called the
"Closing Date."
(b) At the Closing, (i) the Sellers shall deliver to the Buyer against
payment of the Initial Consideration, less the Escrow Amount, one or more stock
certificates repre-
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senting the Shares accompanied by stock powers duly endorsed in blank or
accompanied by duly executed instruments of transfer; (ii) the Buyer shall
deliver (x) to the Sellers against delivery of the certificates representing the
Shares the Initial Consideration, less the Escrow Amount, by wire transfer of
immediately available funds to accounts designated by the Sellers in writing at
least two Business Days prior to the Closing Date and (y) to the Escrow Agent
the Escrow Amount; and (iii) each party to this Agreement shall deliver to the
other parties such other documents as may be required to be delivered in
accordance with this Agreement or as reasonably requested by such other parties.
ARTICLE III
representATIONS and warrantIES
OF THE SELLERS
Except as set forth on Schedule II attached hereto, the Sellers, jointly
and severally, represent and warrant to the Buyer as follows:
3.1. Title to the Shares. Each of the Sellers has the complete and
unrestricted power and the unqualified right to sell, assign, transfer and
deliver to Buyer the Shares listed opposite such Seller's name on Schedule I
hereto and Buyer will acquire at the Closing good and marketable title to the
Shares free and clear of all Encumbrances.
3.2. Seller Authorization. Each of the Sellers has all requisite right,
power and authority and full legal capacity to enter into this Agreement, to
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each of the
Sellers, and the consummation by each of the Sellers of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of each of the Sellers and no other proceedings (corporate or otherwise) on
the part of any of the Sellers or any other Person are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement constitutes a valid and binding agreement of each of the Sellers,
enforceable in accordance with its terms.
3.3. Seller Consents and Approvals. The execution, delivery and performance
of this Agreement by each Seller does not and will not, require any consent,
approval, authorization, Governmental Approval or other action by, or filing
with or notification to, any third party or any Governmental Authority on the
part of the Company or any Seller.
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3.4. Seller Litigation. There is no action, suit, investigation or
proceeding by or before any court, arbitrator, administrative agency or other
Governmental Authority pending or, to the knowledge of Sellers, threatened
against or affecting any of the Shares or any Seller's ability to consummate the
transactions provided for by this Agreement. There is no injunction, writ,
preliminary restraining order or any order of any nature issued by an
arbitrator, court or other Governmental Authority affecting the Shares or
directing that any of the material transactions provided for in this Agreement
not be consummated as herein provided.
3.5. Organization, etc. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of California and has all
requisite power and authority to own, lease and operate the properties and
assets it now owns, leases and operates and to carry on its business as now
being conducted and as currently proposed to be conducted. The Company is duly
qualified and licensed and is in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except for such failures to be so duly qualified and licensed and in good
standing which will not in the aggregate have a Material Adverse Effect on the
Company.
3.6. No Subsidiaries. There are no direct or indirect subsidiaries of the
Company. The Company does not directly or indirectly own any interest in any
corporation, partnership, limited liability company, joint venture or other
business association or entity.
3.7. Authorization, etc. The Company has all requisite right, power and
authority and full legal capacity to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Company and no other proceedings
(corporate or otherwise) on the part of the Company (or its shareholders) or any
other Person are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. When executed by the Company, this Agreement
will have been duly executed and delivered by the Company and will constitute a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
3.8. No Violations. The execution, delivery and performance of this
Agreement by the Company or the consummation of the transactions contemplated
hereby does not and will not (a) conflict with, or result in a breach of or
default under, any terms or conditions of the Organizational Documents of the
Company,
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(b) conflict with or violate any Applicable Law, (c) result in the creation of
any Encumbrance on the Shares, except any created by the Buyer, (d) result in
the creation of any Encumbrance on any assets of the Company or (e) result in
any breach of, or constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument to which the Company is a party or by which any of
its respective assets or properties may be bound.
3.9. Organizational Documents; Minutes. The Sellers have heretofore
delivered to Buyer true, correct and complete copies of all Organizational
Documents of the Company as in effect on the date hereof, (i) certified by the
office of the Secretary of State of the state of California, to the extent such
certification is available, and (ii) certified by the secretary of the Company
for documents which are not certified by a Governmental Authority. The minute
books of the Company heretofore delivered to Buyer contain true, correct and
complete records of all meetings and actions in lieu of meeting of Boards of
Directors and of its shareholders since the time of its respective organization
and accurately reflect all transactions referred to in such minutes and actions
in lieu of meeting. The stock ledger of the Company is true, correct and
complete.
3.10. Capitalization. (a) The authorized capital stock of the Company
consists solely of two million Common Shares of which 1,120,433 are issued and
outstanding on the date hereof and 420,000 Preferred Shares of which no shares
have been issued. Schedule I hereto sets forth a true and complete list of all
of the Company's Shareholders, the number and class of shares owned by such
Shareholder and such Shareholder's percentage interest in the Company. All of
the issued and outstanding Common Shares are validly issued, fully paid and
non-assessable and free of preemptive rights.
(b) There are no outstanding rights, plans, options, warrants, calls,
conversion rights or any agreements, arrangements or commitments of any
character (either firm or conditional) obligating the Company to issue, deliver
or sell, or cause to be issued, delivered or sold, any Common Shares, or any
securities exchangeable for or convertible into Common Shares or obligating the
Company to grant, extend or enter into any such agreement, arrangement,
requirement or commitment, nor are there any rights to receive dividends or
other distributions in respect of any such securities. Section 3.10(b) of
Schedule II sets forth the names of the holders of all options, warrants and
other securities convertible into Common Shares, the dates granted/issued, the
number of Common Shares subject to such option, warrant or conversion, the
expiration date and the exercise or conversion price. All Common Shares issuable
as set forth in section 3.10(b) of Schedule II shall be duly authorized, validly
issued,
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fully paid and non-assessable and free of preemptive rights, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable.
3.11. Compliance. The Company is not in violation of any term or provision
of (a) its Organizational Documents, (b) any agreement or instrument to which
the Company is a party or by which it or its assets are bound, including any
existing license to conduct business, note, bond, mortgage, indenture, contract,
lease, permit, franchise or other instrument, where such violation would have a
Material Adverse Effect (c) any Applicable Law where such violation would have a
Material Adverse Effect.
3.12. Consents and Approvals. The execution, delivery and performance of
this Agreement by the Company does not and will not require any consent,
approval, authorization, Governmental Approval or other action by, or filing
with or notification to, any third party or any Governmental Authority on the
part of the Company or any Seller.
3.13. Other Shareholders' Agreements. There are no agreements, arrangements
or understandings (whether oral or written) among the shareholders of the
Company with respect to the holding, voting or transfer or otherwise with
respect to any securities of the Company. On the date hereof, no shareholder of
the Company or any other Person has any right of first refusal or preemptive
rights in connection with the sale of the Shares or any other securities of the
Company.
3.14. Financial Information. (a) The audited consolidated balance sheet of
the Company as of December 31, 2000, and the related statements of income,
retained earnings and changes in financial position for the nine months ended
December 31, 2000 , including footnotes thereto, certified by Xxxxxxxxxx,
Melvoin & Xxxxxxx LLP, independent certified public accountants ("AM&G"), (the
"Balance Sheet"), all of which have been delivered to the Buyer, fairly present
the financial condition and results of operations of the Company as of such date
and for such respective periods in accordance with GAAP applied consistently
throughout the periods covered thereby. Copies of such financial statements are
attached hereto as Schedule 3.14(a).
(b) The Company has provided to the Buyer projections of future
consolidated financial condition and results of operations of the Company for
the 2001 and 2002 fiscal years. Copies of such projections are attached hereto
as Schedule 3.14(b). The projections have been prepared in good faith by the
Company and the Sellers.
3.15. Absence of Undisclosed Liabilities. The Company has not incurred any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) subsequent to the Decem-
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ber 31, 2000 except for liabilities or obligations that were incurred in the
ordinary course of business consistent with past practice, which would, in the
aggregate, not have, or be reasonably expected to have, a Material Adverse
Effect on the Company.
3.16. Absence of Changes. Since December 31, 2000 (a) the Company has been
operated only in the ordinary course of business consistent with past practice,
(b) there has been no change in the business, condition (financial or
otherwise), affairs, operations, assets or properties of the Company, other than
changes in the ordinary course of business which have not had, or could not
reasonably be expected to have, in the aggregate, a Material Adverse Effect on
the Company, (c) no dividends or other distributions have been declared, paid or
set aside for payment by the Company to its shareholders and, (d) the financial
statements and accounting of the Company have been kept in the ordinary course
of business in accordance with GAAP and there have been no adjustments greater
than $25,000 from the December 31, 2000 Balance Sheet except as set forth on
Schedule 3.16 attached hereto.
3.17. Litigation. There is no action, suit, investigation or proceeding by
or before any court, arbitrator, administrative agency or other Governmental
Authority pending or, to the knowledge of the Sellers, threatened against or
affecting the Company, or any of its properties, revenues or assets, which could
reasonably be expected to have a Material Adverse Effect on the Company or its
ability to consummate the transactions provided for by this Agreement. There is
no injunction, writ, preliminary restraining order or any order of any nature
issued by an arbitrator, court or other Governmental Authority affecting the
Company, any of its properties, revenues or assets that has or could have a
Material Adverse Effect on the Company or directing that any of the material
transactions provided for in any of this Agreement not be consummated as herein
or therein provided.
3.18. Taxes. (a)(i) The Company has prepared and timely filed with the
appropriate governmental agencies all Tax Returns required to be filed on or
prior to the date hereof, taking into account any extension of time to file
granted to or obtained on behalf of the Company, and each such Tax Return is
complete and correct in all material respects; (ii) the Company has timely paid
all Taxes due and payable by it through the date hereof and has made adequate
provision for all Taxes attributable to any taxable period (or portion thereof)
ending on or prior to the date hereof that are not yet due and payable; (iii)
Schedule 3.18(a)(iii) provides a list of those Tax Returns referred to in clause
(i) for which the period for assessment of Taxes has not expired and for which
an audit or examination by the Internal Revenue Service or appropriate state,
local or foreign taxing authority, (1) has been conducted and fully resolved and
(2) has or has not been conducted and has not been fully resolved; (iv) the
Company has withheld and paid to the appropriate governmental authorities in a
timely manner all Taxes required to have been withheld by it through the date
hereof; (v) all deficiencies or assessments asserted in writing against the
Company by any
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taxing authority have been paid or fully and finally settled, and, to the best
knowledge of the Company or any of the Sellers, no issue previously raised in
writing by any such taxing authority reasonably could be expected to result in a
proposed deficiency or assessment for any prior, parallel or subsequent period
(including periods subsequent to the date hereof); (vi) the Company is not
presently under examination or audit by any taxing authority, and the Company
has not received written notice of any pending examination or audit by any
taxing authority; (vii) no extension of the period for assessment or collection
of any Tax is currently in effect and no extension of time within which to file
any Tax Return has been requested, which Tax Return has not since been filed;
(viii) no liens have been filed with respect to any Taxes of the Company, other
than liens in respect of property taxes not yet due and payable; (ix) the
Company has not made or agreed to make, or was or is required to make, any
change in its accounting methods that would result in an adjustment pursuant to
Section 481 of the Code (or any similar provision of state, local or foreign
law); (x) the Company is not a party to any tax sharing, tax matters, tax
indemnification or similar agreement; (xi) from April 1, 2000 through and
including the day before the Closing Date, the Company has qualified as an "S
Corporation," as defined in Section 1361 of the Code and has been taxable as an
S corporation for federal, state and local income tax purposes; (xii) the
Company has not made an election under Section 341(f) of the Code (or any
similar provision of state, local or foreign law); (xiii) the Company has not
ever been a member of any affiliated, consolidated, combined, unitary or similar
group for any Tax purpose; (xiv) the Company has not requested a ruling from, or
entered into a closing agreement with, the IRS or any other taxing authority;
(xv) no claim has ever been made in writing by an authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction; (xvi) the Company does not have any liability for
the Taxes of any person under United States Treasury Regulation ("Treas. Reg.")
ss. 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise; and (xvii) the Company has
never been required to account for any transaction pursuant to Section 467 of
Code.
(b) For all purposes of this Agreement, "Tax" or "Taxes" means (i) all
federal, state, local or foreign taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, alternative minimum,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or
other additional amounts imposed by any taxing authority in connection with any
item described in clause (i) and (iii) all transferee, successor, joint and
several or contractual liability (including, without limitation, liability
pursuant to Treas. Reg. ss. 1.1502-6 (or any similar state, local or foreign
provision)) in respect of any items described in clause (i) or (ii).
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(c) For all purposes of this Agreement, "Tax Return" means all returns,
declarations, reports, estimates, information returns and statements required to
be filed in respect of any Taxes.
3.19. Governmental Approvals. (a) There are no Governmental Approvals that
the Company is required to obtain under Applicable Law in connection with the
carrying on of the Business of the Company as it is presently carried on and is
currently contemplated to be carried on except where the failure to obtain such
would not have a Material Adverse Effect.
(b) Each of the Governmental Approvals set forth in Section 3.19(a) of
Schedule II, has been duly obtained or made, is validly issued, is in full force
and effect, and is free from conditions or requirements compliance with which
could reasonably be expected to have a Material Adverse Effect on the Company or
which the Company could not reasonably be expected to be able to satisfy and
which would have such Material Adverse Effect. The Buyer has received a true and
complete copy of each Governmental Approval that is set forth on section 3.19(a)
of Schedule II.
3.20. Title to Properties; Liens. The Company has good and marketable title
to, or a valid leasehold interest in, all of its properties and assets of every
kind, nature and description, personal, real or mixed, tangible or intangible
and wherever situated, including the properties and assets reflected in the last
audited financial statements for the nine months ended December 31, 2000 (except
properties and assets disposed of since such date in the ordinary course of
business, consistent with past practice), none of such properties or assets is
subject to any Encumbrances except for Encumbrances that do not materially
detract from the current value of the property subject thereto or materially
interfere with the current use by the Company of the property subject thereto or
otherwise materially affect or impair the condition (financial or otherwise) of
the Company, and such properties and assets are all the properties and assets
necessary to operate the Business. No Person other than the Company has any
right to use or have possession of any of the properties or assets used in the
conduct of the business of the Company. The Company enjoys peaceful and
undisturbed possession under all leases used in its operations; and all such
leases are valid and in full force and effect.
3.21. Intellectual Property. (a) Section 3.21 of Schedule II hereto
contains a true and complete list of (i) all patents and patent applications,
registered trademarks and trademark applications, registered copyrights and
copyright applications, and domain names included in the owned Intellectual
Property (excluding the trade secrets), (ii) licenses and (iii) other owned
Intellectual Property material to the Business (excluding trade secrets).
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(b) The operation of the Business as currently conducted or as currently
contemplated to be conducted, the use of the owned Intellectual Property and
licensed Intellectual Property in connection therewith, do not conflict with,
infringe, misappropriate or otherwise violate the Intellectual Property or other
proprietary rights, including rights of privacy, publicity and endorsement, of
any third party, and no actions are pending or threatened against the Company
alleging any of the foregoing.
(c) The Company is the exclusive owner of the entire and unencumbered
right, title and interest in and to the owned Intellectual Property and
licenses, and the Company is entitled to use the owned Intellectual Property and
licensed Intellectual Property in the ordinary course of the Business as
presently conducted or as currently contemplated to be conducted.
(d) The owned Intellectual Property and licensed Intellectual Property
include all of the Intellectual Property used in the ordinary day-to-day conduct
of the Business, and there are no other items of Intellectual Property that are
material to such ordinary day-to-day conduct thereof. The owned Intellectual
Property and, to the knowledge of the Sellers, the licensed Intellectual
Property are subsisting, valid and enforceable and have not been adjudged
invalid or unenforceable in whole or part.
(e) No actions, proceedings or regulatory investigations, including
interferences or opposition proceedings, have been asserted, are pending or, to
the knowledge of the Sellers, are threatened against the Company (i) based upon
or challenging or seeking to deny or restrict the use by the Company of any of
the owned Intellectual Property or licensed Intellectual Property, (ii) alleging
that any services provided by, processes used by or products manufactured or
sold by the Company in connection with the Business infringe or misappropriate
any Intellectual Property right of any third party or (iii) alleging that the
licensed Intellectual Property is being licensed or sublicensed in conflict with
the terms of any license or other agreement.
(f) To the knowledge of the Company and the Sellers, no person is engaging
in any activity that infringes the owned Intellectual Property or licensed
Intellectual Property. The Company has not granted any license or other right to
any third party with respect to the owned Intellectual Property or licensed
Intellectual Property.
(g) To the knowledge of the Company and the Sellers (i) there has been no
misappropriation of any material trade secrets or other material confidential
Intellectual Property used in connection with the Business by any person, (ii)
no employee, independent contractor or agent of the Company has misappropriated
any trade secrets of any other person in the course of performance as an
employee, independent contractor or agent of the Business, and (iii) no
employee, independent contractor or agent of the Company is in default or breach
of any term of any employment agreement, nondisclosure agreement, assignment of
invention
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agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of Intellectual Property.
(h) Except as would not have a Material Adverse Effect, all Company Systems
are Year 2000 Compliant.
3.22. Environmental Matters. (a) The Company and its Business, operations
and real properties are in compliance in all material respects with, and the
Company has no material liability under, Environmental Law. The Company has
obtained all Environmental Permits currently required for the conduct of its
Business and operations, and the ownership, operation and the use of its assets
under Environmental Law. All such Environmental Permits are valid and in good
standing and, under the currently effective business plan of the Company, no
material expenditures or operational adjustments will be required in order to
renew or modify such Environmental Permits in connection with the continued
conduct of the Business as currently conducted during the next five years.
(b) (i) There is no material Environmental Claim pending or, to the
knowledge of the Sellers, threatened, against the Company or relating to the
real property or operations of the Company, (ii) to the knowledge of Sellers,
there are no actions, activities, circumstances, conditions, events or incidents
including, without limitation, the Release, transportation, treatment, storage,
recycling or reclamation of Hazardous Material at any location that could
reasonably be expected to form the basis of any material Environmental Claim
against the Company and (iii) no lien has been recorded under Environmental Law
against any property, asset or facility owned, leased or operated by the
Company.
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not affect the
validity or require the transfer of any Environmental Permit held by the
Company, and will not require any notification, disclosure, registration,
reporting, filing, investigation or remediation under Environmental Law.
(d) (i) No property or facility presently owned, leased or operated by the
Company, (ii) to the knowledge of the Sellers, no property or facility formerly
owned, leased or operated by the Company and (iii) to the knowledge of Sellers
no property or facility at which Hazardous Material of the Company has been
recycled, stored, treated or disposed of has been listed or proposed for listing
on the National Priorities List or on the Comprehensive Environmental Response,
Compensation, and Liability Information System, both promulgated under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or on any comparable list established under Environmental Law
including, without limitation, any such list relating to petroleum.
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(e) There has been no Release of Hazardous Material on, at, under or from
any real property or facility presently or, to the knowledge of the Sellers
formerly owned, leased or operated by the Company or its predecessors in
interest that could reasonably be expected to have a Material Adverse Effect.
(f) The Company is not obligated to perform any action or otherwise incur
any expense under Environmental Law pursuant to any order, decree, judgment or
agreement by which it is bound or has assumed by contract or agreement, in each
case, which could reasonably be expected to have a Material Adverse Effect.
(g) The Sellers have made available to Buyer all material records and files
including, without limitation, all assessments, reports, studies, audits,
analyses, tests and data, in the possession, custody or control of, or otherwise
reasonably available to, the Sellers concerning compliance with or liability
under Environmental Law including, without limitation, those concerning the
existence of Hazardous Material at facilities or properties currently or
formerly owned, operated or leased by the Company.
3.23. Material Contracts. (a) The Company is not a party to or bound by:
(i) any contract which could reasonably be likely to result in
liability of more than $25,000 beyond December 31, 2000;
(ii) any consignment, distributor, dealer, manufacturers
representatives, sales agency, advertising representative or advertising or
public relations contract;
(iii) any guarantee of the obligations of customers, suppliers,
officers, directors, employees, Affiliates or others;
(iv) any agreement which provides for, or relates to, the incurrence
by the Company of debt for borrowed money (including, without limitation,
any interest rate or foreign currency swap, collar, hedge or insurance
agreements, or options or forwards on such agreements, or other similar
agreements for the purpose of managing the interest rate and/or foreign
exchange risk associated with its financing); or
(v) any agreement containing competitive restraints on the ability of
the Company to purchase supplies or to sell any products.
(b) All agreements, arrangements, understandings and contracts listed on
Section 3.23 of Schedule II are valid and binding obligations, in full force and
effect in all respects and are being performed in accordance with their terms in
all material respects. The
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parties to the agreements, arrangements, understandings and contracts listed on
Schedule 3.23 are in compliance in all material respects with the terms thereof.
3.24. Insurance; Bank Accounts. (a) The Company is insured with the
insurers listed on Schedule 3.24(a) with respect to the matters set forth on
Schedule 3.24(a). All such insurance is in full force and effect. The Company is
not in default thereunder and all claims thereunder have been correctly filed in
a due and timely manner. A list of all insurance policies held by the Company is
set forth on Schedule 3.24(a).
(b) Bank Accounts. Schedule 3.24(b) sets forth a complete list of the name
and address of each bank and brokerage firm with which the Company has any
accounts, safe deposit boxes, lock boxes or vaults, the account numbers relating
thereto, and the names of all persons authorized to deal with such accounts or
to have access to such boxes or vaults.
3.25. Labor Agreements and Actions; Employee Matters. (a) There is no
complaint, grievance, strike or other collective labor dispute, slowdown or
stoppage involving the Company pending or, to the knowledge of Sellers,
threatened. The Company has been and is in compliance with all applicable laws
including, without limitation, those laws respecting employment and employment
practices, child labor, terms and conditions of employment, pay equity and wages
and hours and has not engaged in any unfair labor practices.
(b) There are no employment, consulting or severance agreements in effect.
Neither the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or upon
the occurrence of any additional or further acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from the Company to
any director, officer, consultant, employee or shareholder thereof.
(c) There are no collective bargaining, severance or similar agreements
with any labor union. No action is pending or threatened with respect to union
representation of the employees of the Company. No collective bargaining
agreement is currently being negotiated by the Company.
(d) Schedule 3.25(d) sets forth the name, place of employment, current
annual salary rate and bonuses, and benefits, payable to each salaried employee,
officer, director or consultant to the Company.
3.26 Employee Benefit Plans; ERISA. (a) There are no "employee pension
benefit plans" as defined in Section
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3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("Pension Benefit Plans"), "welfare benefit plans" as defined in
Section 3(1) of ERISA ("Welfare Plans") or stock bonus, stock option, restricted
stock, stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance, or vacation plans, employment or consulting agreement,
or any other employee benefit plan, program, policy or arrangement, covering
employees (or former employees) employed in the United States, maintained or
contributed to by the Company or any of their ERISA Affiliates (as hereinafter
defined), or as to which the Company or any of its ERISA Affiliates otherwise
may have any material liability (collectively, the "Employee Benefit Plans").
For purposes of this Agreement, "ERISA Affiliate" shall mean any person (as
defined in Section 3(9) of ERISA) that is or has been a member of any group of
persons described in Section 414(b), (c), (m), (o) or (t) of the Code including
the Company.
(b) The Company and each of the Pension Benefit Plans and Welfare Plans,
are in compliance in all material respects with the applicable provisions of
ERISA, the Code and other applicable laws in connection with the Employee
Benefit Plans.
(c) All material amounts of contributions to, and payments from, the
Pension Benefit Plans that are required to have been made in accordance with the
Pension Benefit Plans have been timely made.
(d) Any Pension Benefit Plans intended to qualify under Section 401 of the
Code have been determined by the Internal Revenue Service ("IRS") to be so
qualified and no event has occurred and no condition exists with respect to the
form or operation of such Pension Benefit Plans that would reasonably be
expected to cause the loss of such qualification or exemption or the imposition
of any material liability, penalty or tax under ERISA or the Code.
(e) There are (i) no investigations pending by any governmental entity
(including the Pension Benefit Guaranty Corporation ("PBGC")) involving the
Pension Benefit Plans or Welfare Plans of which the Company has been notified or
has knowledge, and (ii) no pending or, to the knowledge of Sellers, threatened
claims (other than routine claims for benefits or relating to Qualified Domestic
Relations Orders as defined in Section 414(p) of the Code), suits or proceedings
against any Pension Benefit or Welfare Plan, against the assets of any of the
trusts under any Pension Benefit or Welfare Plan or against any fiduciary of any
Pension Benefit or Welfare Plan with respect to the operation of such plan or
asserting any rights or claims to benefits under any Pension Benefit Plan or
against the assets of any trust under such plan, nor, to the best of the
Company's knowledge, are there any facts that would reasonably be expected to
give rise to any material liability.
(f) Neither the Company nor, to the knowledge of Sellers, any employee of
the Company, nor any trustee, administrator, other fiduciary or any other "party
in interest" or "disqualified person" with respect to the Pension Benefit Plans
or Welfare Plans, has engaged
-19-
in a "prohibited transaction" (as such term is defined in Section 4975 of the
Code or Section 406 of ERISA) that could result in a material tax or penalty on
the Company or any of its Subsidiaries under Section 4975 of the Code or Section
502(i) of ERISA.
(g) Neither of the Company nor any of its ERISA Affiliates maintains or
contributes to, nor have they ever maintained or contributed to, any pension
plan subject to Title IV of ERISA or Sections 412 of the Code or 302 of ERISA.
(h) Neither the Company nor any ERISA Affiliate has incurred, or is
reasonably likely to incur any material amount of liability under Title IV of
ERISA.
(i) Neither the Company nor any of its ERISA Affiliates has material
liability (including any contingent liability under Section 4204 of ERISA) with
respect to any multiemployer plan, within the meaning of Section 3(37) of ERISA,
covering employees (or former employees) employed in the United States.
(j) Each of the Employee Benefit Plans, true, correct and complete copies
of the following documents have been made available to the Buyer: (i) the plan
document and any related trust agreement, including amendments thereto, (ii) any
current summary plan descriptions and Material Modifications, (iii) the most
recent Forms 5500, if applicable, (iv) the most recent IRS determination letter,
if applicable and (v) the most recent actuarial report or valuation with respect
to each Pension Benefit Plan subject to Title IV of ERISA.
(k) The Welfare Plans maintained by the Company do not provide for
continuing benefits or coverage for any participant or any beneficiary of a
participant following termination of employment, except as may be required under
applicable state law or Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA ("COBRA"), or except at the expense of the participant or the
participant's beneficiary. The Company and any ERISA Affiliates which maintain a
"group health plan" within the meaning of Section 5000(b)(1) of the Code have
complied in all material respects with the "COBRA" notice and continuation
requirements.
(l) No liability under any Pension Benefit or Welfare Plan has been funded
nor has any such obligation been satisfied with the purchase of a contract from
an insurance company as to which the Company has received notice that such
insurance company is in rehabilitation or a comparable proceeding.
(m) The consummation of the transactions contemplated by this Agreement
will not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable to or in respect of any employee of the Company.
-20-
(n) The consummation of the transactions contemplated by this Agreement
will not result in or satisfy a condition to the payment of compensation that
would, in combination with any other payment, result in an "excess parachute
payment" within the meaning of Section 280G(b) of the Code.
(o) The Company does not maintain or contribute to any plan, program,
policy, arrangement or agreement with respect to employees (or former employees)
employed outside the United States.
3.27. Certain Transactions. The Company is not a party to any agreement,
arrangement or understanding (whether oral or written), directly or indirectly
(including, without limitation, any purchase, sale, lease, investment, loan,
service or management agreement or other transaction), with any Person in which
any Affiliate, shareholder, officer or director of the Company owns directly or
indirectly, or controls any equity interest.
3.28. Disclosure. Neither this Agreement nor any other agreement, document,
certificate or instrument delivered to the Buyer by or on behalf of the Sellers
or the Company pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained in this Agreement or any other document delivered pursuant
hereto, not misleading.
3.29. Brokers. Except for Powerscourt Partners, the Sellers represent that
neither the Company nor any of its Affiliates nor the Sellers have engaged any
broker or finder in connection with this Agreement and the transactions
contemplated hereby; the Sellers will hold Buyer harmless from any claim, demand
or liability for any broker's, finder's or similar fees alleged to have been
incurred by the Company or any of its officers, directors or employees or
Affiliates or the Sellers in connection with this Agreement or the transactions
contemplated hereby (including but not limited to any fees owed by the Sellers,
the Company and their Affiliates to Powerscourt Partners).
3.30. Customers and Suppliers. (a) The attached Schedule 3.30 lists those
customers of the Company that each comprise 5% or more of the Company's net
sales for each of the two most recent fiscal years and sets forth opposite the
name of each such customer the percentage of net sales of the Company's business
attributable to such customer.
(b) Since December 31, 2000, (i) no material supplier of the Company has
informed the Company that it shall stop, or materially decrease the rate of,
supplying materials, products or services to the Company, and (ii) no customer
listed on Schedule 3.30 has in-
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formed the Company that it shall stop, or materially decrease the rate of,
buying materials, products or services from the Company.
3.31. Receivables. Except to the extent, if any, reserved for on the
December 31, 2000, Balance Sheet or listed on Schedule 3.16 attached hereto, all
receivables reflected on such Balance Sheet or Schedule 3.16 arose from, and the
receivables existing on the Closing Date will have arisen from, the sale of
Inventory or services to Persons not affiliated with the Sellers, the Company
and in the ordinary course of business consistent with past practice and, except
as reserved against on such Balance Sheet or listed on Schedule 3.16, constitute
or will constitute, as the case may be, only valid, undisputed and collectible
claims of the Company not subject to valid claims of setoff or other defenses or
counterclaims other than normal cash discounts accrued in the ordinary course of
business consistent with past practice. All receivables reflected on such
Balance Sheet except as listed Schedule 3.16 arising from the date thereof are
collectible, without resort to litigation or extraordinary collection activity,
within 120 days of the Closing Date.
3.32. Inventories. (a) Subject to amount reserved therefor on the December
31, 2000 Balance Sheet or listed on Schedule 3.16 attached hereto, the values at
which all inventories are carried on such Balance Sheet reflect the historical
inventory valuation policy of the Company of stating such inventories at the
lower of cost (determined on the first-in, first-out method) or market value.
The Company has good and marketable title to the inventories free and clear of
all Encumbrances. The inventories do not consist of any items held on
consignment to the Company. The Company is not under any obligation or liability
with respect to accepting returns of items of inventory or merchandise in the
possession of their customers other than in the ordinary course of the Business
consistent with past practice. No clearance or extraordinary sale of the
inventories has been conducted since such Balance Sheet Date. The Company has
not acquired or committed to acquire or manufacture inventory for sale which is
not of a quality and quantity usable in the ordinary course of the Business
within a reasonable period of time and consistent with past practice, nor has
the Company changed the price of any inventory except for (i) price reductions
to reflect any reduction in the cost thereof to the Company, (ii) reductions and
increases responsive to normal competitive conditions and consistent with the
Company's past sales practices, (iii) increases to reflect any increase in the
cost thereof to the Company and (iv) increases and reductions made with the
written consent of the Buyer. The Company maintains no warehouses and other
facilities in which the inventories are located other than its manufacturing
facility in Camarillo, California.
(b) The inventories are in good and merchantable condition in all material
respects, are suitable and usable for the purposes for which they are intended
and are in a condition such that they can be sold in the ordinary course of the
Business consistent with past practice. The inventories reflected on such
Balance Sheet were as of the date of such Balance Sheet
-22-
salable at values not less than the respective book value amounts shown on such
Balance Sheet. The value of all items of obsolete, damaged and slow-moving
materials and of materials of below standard quality has been written down to
realizable market value or has been adequately reserved for on such Balance
Sheet.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as follows:
4.1. Organization, etc. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware and has all requisite
power and authority to own, lease and operate the properties and assets it now
owns, leases and operates and to carry on its business as now being conducted.
Buyer is duly qualified and licensed and is in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except for such failures to be so duly qualified and licensed and in
good standing which will not in the aggregate have a Material Adverse Effect on
Buyer.
4.2. Authorization, etc. Buyer has all requisite right, power and authority
and full legal capacity to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Buyer, and the consummation by
Buyer of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of Buyer and, no other proceedings (corporate or
otherwise) on the part of Buyer or the Sellers or any other Person are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby by Buyer. This Agreement will have been duly executed and delivered by
Buyer and will constitute the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium, restructuring
or similar laws affecting creditors' rights and remedies generally and by
general equitable principles (regardless of whether enforceability is considered
in a proceeding in equity or at law).
4.3. No Violations. The execution, delivery and performance of this
Agreement by Buyer or the consummation of the transactions contemplated hereby
do not and will not (a) conflict with, or result in a breach of or default
under, any terms or conditions of the Organizational Documents of Buyer, (b)
conflict with or violate any Applicable Law, or (c) result in any breach of, or
constitute a default (or
-23-
event which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument to
which Buyer is a party or by which its assets or properties may be bound,
excluding from such clauses (b) and (c), such violations, conflicts, breaches
and defaults that, in the aggregate, would not have a Material Adverse Effect or
that would not adversely affect, in a material respect, the ability of the Buyer
to consummate the transactions provided for by this Agreement.
4.4. Brokers. Buyer represents that it has not nor have any of its
Affiliates engaged any broker or finder in connection with this Agreement and
the transactions contemplated hereby, and Buyer will hold Sellers harmless from
any claim, demand or liability for any broker's, finder's or similar fees
alleged to have been incurred by Buyer or any of its officers, directors or
employees or Affiliates in connection with this Agreement or the transactions
contemplated hereby.
4.5. Consents and Approvals. The execution, delivery and performance of
this Agreement by the Buyer does not and will not require any consent, approval,
authorization, Governmental Approval or other action by, or filing with or
notification to, any third party or any Governmental Authority, except with
respect to any third party as would not have a Material Adverse Effect.
ARTICLE V
CERTAIN COVENANTS
The Buyer and the Company agree and the Sellers, as the case may be, agree
to take all actions to cause the Company to act in the following manner:
5.1. Conduct of Business by the Company. Prior to the Closing Date, except
as agreed to in writing by Buyer, Sellers and the Company covenant that:
(a) the business of the Company shall be conducted only in the
ordinary and usual course and in a manner consistent with past practice and
the Company and the Sellers shall use their reasonable efforts to (i)
preserve the Company's present business organization intact; (ii) keep
available to the Buyer the services of the Company's present officers and
employees; and (iii) preserve present relationships with the Company's
customers and suppliers;
-24-
(b) the Company shall not: (i) sell or pledge or agree to sell or
pledge any stock, partnership interests or other equity interests owned by
it; (ii) amend any Organizational Document; or (iii) split, combine or
reclassify any Common Shares or (iv) declare, set aside or pay any dividend
or other distribution payable in cash, stock or property or redeem or
otherwise acquire any Common Shares;
(c) the Company shall not authorize for issuance, issue or sell any
additional shares of, or rights of any kind to acquire any shares of, its
capital stock, partnership interests or other equity interests of any class
(whether through the issuance or granting of options, convertible
securities, warrants, commitments, subscriptions, rights to purchase or
otherwise);
(d) other than in the ordinary course of business consistent with past
practice, the Company shall not: (i) sell, dispose of, transfer, lease,
license, mortgage, pledge or encumber any fixed or other assets other than
(A) sales or dispositions of immaterial personal property and (B) any other
individual sale or disposition or series of related sales or dispositions
involving assets with book values of $5,000 or less in the aggregate; (ii)
acquire or enter into an agreement to acquire additional assets involving
the payment of consideration of $5,000 or more; (iii) assume, endorse,
guarantee or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person; (iv)
make any loans, advances or capital contributions to, or investments in,
any other Person; or (v) fail to maintain adequate insurance consistent
with past practices for their businesses and properties;
(e) the Company shall not: (i) enter into any other contract or
agreement other than in the ordinary course of business consistent with
past practice which would be material to the Company; (ii) enter into any
agreement or series of related agreements which may result in total
payments or liability by or to it of $25,000 or more except in the ordinary
course of business; or (iii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent audited financial
statements (or the notes thereto) of the Company or incurred in the
ordinary course of business consistent with past practice (including in
connection with the settlement of any claims arising out of litigation for
which reserves have been established);
(f) the Company shall not acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other
business organization or division thereof or any equity interest therein;
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(g) the Company shall not change its accounting methods, principles or
practices except as required by GAAP;
(h) the Company shall not settle or compromise any federal, state,
local or foreign Tax liability, make any new Tax election, revoke or modify
any existing Tax election, or make, request or consent to a change in any
method of Tax accounting, except as otherwise expressly required or
permitted elsewhere in this Agreement;
(i) the Company shall not make or grant pay raises, bonuses or awards
or severance to any officer, director or employee.
5.2. Access. (a) The Company shall permit any authorized representatives
designated by the Buyer, without expense to the Company, to visit and inspect
any of the assets or properties of the Company, including books of account, and
to make copies and take extracts therefrom, and to discuss its affairs, finances
and accounts with its officers and independent public accountants (and by this
provision the Company authorizes such accountants to discuss with such
representatives of Buyer the affairs, finances and accounts of the Company,
whether or not a representative of the Company is present), all at such
reasonable times and as often as may be reasonably requested.
(b) Buyer agrees that it shall not use for its own benefit in a manner
adverse to the Company and shall take reasonable steps to prevent disclosure of,
any confidential information that it receives, and shall use at least the same
degree of care to avoid disclosure of such information as it uses with respect
to its own confidential information; provided, however, that Buyer shall have no
obligations hereunder with respect to information which (i) is known by Buyer on
a non-confidential basis at the time of disclosure by the Company, (ii) is at
the time of disclosure, or comes thereafter, publicly available other than
pursuant to a breach of this subsection by Buyer, (iii) is received from a third
party without restriction on further disclosure, (iv) is independently developed
by Buyer, or (v) is requested or required to be disclosed by self-regulatory
organizations or by Applicable Law on request of any Governmental Authority. In
the event of clause (v) of this subsection, Buyer will give prior notice to the
Company of such disclosure in order to enable the Company to seek a protective
order or other remedy or to waive compliance with this subsection.
5.3. Covenant Against Competing Economic Interests. (a) In partial
consideration of the payments made to the Sellers hereunder, for a period of two
(2) years following the Closing Date, the Sellers shall not, directly or
indirectly, as principal, agent, advisor, consultant, trustee, director or
employee, own, manage, operate, control, participate in or render services for
any business, firm, sole proprietorship, or other entity engaged in a business
competing with the Business conducted by the Company prior to the Closing (a
"Restricted Business") nor will any Seller, in any matter related to a
Restricted Business, call upon, solicit, advise, or attempt
-26-
to do business with any customer of the Company or interfere with the business
of the Company with respect to any customers or suppliers of the Company,
provided, however, that the foregoing restriction shall not apply to the Key
Employees (as defined below) in the event of their involuntary termination
"without cause" (as defined in the Employment Contracts (as defined below)).
Nothing in this Section 5.3 shall prohibit Sellers and their Affiliates from
acquiring or holding (beneficially or of record) as a passive investor not more
than an aggregate of 1% of any class of publicly traded equity securities of any
entity engaged in a Restricted Business. In addition, each Seller shall neither
directly nor indirectly, through an Affiliate or otherwise, except with the
prior written consent of Buyer, knowingly employ or solicit the employment of
any employee of the Company or Buyer or any of their Affiliates for a period of
two (2) years following the Closing Date. The term "solicit the employment"
shall not be deemed to include general solicitations of employment not
specifically directed toward employees of the Company or Buyer.
(b) If any provision of this Section 5.3 is held to be unenforceable
because of the scope, duration or area of its applicability, the court making
such determination shall have the power to modify such scope, duration or area
or all of them, and such provision shall then be applicable in such modified
form.
(c) Since a violation of this Section 5.3 will result in irreparable harm
to the Business and Buyer, for which money damages alone would not adequately
compensate, if the Sellers or an Affiliate of the Sellers violate any of the
provisions of this Section 5.3, Buyer shall be entitled to (i) an injunction
restraining the commission or continuation of any violation of this Section 5.3
by such Person, or any other appropriate decree of specific performance; and
(ii) after written notice of such alleged violation has been provided to such
Seller and Seller has failed to cure such violation within ten business days
after receipt of such notice, an automatic forfeiture to the Buyer of the
breaching Seller's pro rata portion of the Escrow Account pursuant to the terms
of the Escrow Agreement. Such remedies shall not be exclusive and shall be in
addition to any other remedy which Buyer may have as provided for in this
Agreement.
(d) For purposes of this Section 5.3, each of the law practice of Anderson,
Krehbiel, XxXxxxxx & Xxxxx and the certified public accountant and financial
planning practice of X. Xxxxxxx Xxxxx shall not be a Restricted Business and the
rendering of services to or the doing of business with a Restricted Business or
any customers or suppliers of the Company in connection therewith shall not be a
violation of this Section 5.3. Notwithstanding the foregoing, the rendering of
financial planning services by X. Xxxxxxx Xxxxx to any Restricted Business which
would have the effect of directly assisting such Restricted Business to compete
with the Business of the Company as conducted prior to the Closing Date shall be
a violation of this Section 5.3.
-27-
(e) For the purposes of this Section 5.3, Opto Diode Corporation of
Thousand Oaks, California which is owned and operated by Xx. Xxxxx X. Xxx and
which is engaged in the manufacture and sale of LED products which are
non-competitive with the Business of the Company shall not be a Restricted
Business and the rendering by Opto Diode Corporation of services to or the doing
business with a Restricted Business or any customers or suppliers of the Company
shall not be a violation of this Section 5.3 unless and until Opto Diode
Corporation shall engage in the manufacture and/or sale of products which
compete in the marketplace with the products or Business conducted by the
Company prior to the Closing Date.
5.4. Employment Contracts. On the Closing Date, Buyer will enter into
employment contracts (the "Employment Contracts") in the form annexed hereto in
Exhibits 5.4(a) and 5.4(b), with Xxxxxxx Xxxxxx ("Xxxxxx") and Xxxxxxxx Xxxxxxxx
("Xxxxxxxx," and together with Xxxxxx, the "Key Employees"), respectively.
5.5. Best Efforts. Each of the Sellers, the Company and Buyer shall use
their respective best efforts to consummate the transactions contemplated by
this Agreement, subject to the terms and conditions set forth herein, including
cooperating to obtain all necessary governmental and other consents.
5.6. Filings and Notices; Approvals and Consents. (a) Each party hereto
shall, as promptly as practicable after the execution and delivery of this
Agreement, make or give all governmental filings and governmental and
third-party notices required to be made or given by each party, if any, in order
for such party to consummate the transactions contemplated by this Agreement.
Any such filing, and any supplemental information requested by the relevant
Governmental Authority in connection therewith, shall be in substantial
compliance with the requirements of such Governmental Authority. Each party
hereto will keep each other party hereto apprised of the status of the
governmental approval process and of any communications with, and any inquiries
or requests for additional information from, the relevant governmental
authority, and the Company will comply promptly with any such inquiry or
request. The Company will use its reasonable best efforts to obtain all such
Governmental Approvals and third-party consents.
(b) Sellers shall, and shall cause the Company to, furnish to Buyer such
necessary information and reasonable assistance as Buyer may request in
connection with its preparation of any filing or submission to be made by Buyer.
5.7. Notification of Certain Matters. Sellers shall, and shall cause the
Company to give prompt notice to Buyer and Buyer shall give prompt notice to
Sellers and the Company of the occurrence, or non-occurrence, of any event, the
occurrence or non-occurrence of which would be reasonably
-28-
likely to cause (i) any representation or warranty of Sellers, the Company or
Buyer, as the case may be, contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing as the case may
be, or (ii) Sellers, the Company or Buyer, as the case may be, to fail to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder.
5.8. Director and Officer Resignations. The Company will deliver signed
resignations of its then directors and officers to the Buyer at the Closing.
5.9. Seller and Buyer Covenants with Respect to Earn-Out.
(a) Sellers shall not, directly or indirectly, influence, affect or
otherwise interfere with the Company's sales to artificially inflate the
Company's Revenue and Gross Margin calculations (each as defined in Exhibit B
hereto) in connection with the Earn-Out Payment; and
(b) Buyer shall use its best efforts without order pull-ins to comply with
the covenants of Buyer set forth under the "Proposed Revenue/Profitability
Matrix" attached hereto as Exhibit C.
ARTICLE VI
CONDITIONS TO THE CLOSING
6.1. Conditions to Each Party's Obligations. The respective obligations of
each party to effect the transactions to be effected by it at the Closing shall
be subject to the satisfaction, or waiver, at or prior to the Closing Date of
the following conditions:
(a) Consents, Approvals. Each party shall have received all consents,
approvals, authorizations, or other actions by, or filings with or
notifications to, any third party or any Governmental Authority set forth
in sections 3.12 and 3.19(a) of Schedule II and made all such filings and
declarations, as may be required to consummate the transactions
contemplated by this Agreement.
(b) No Injunctions. There shall not be in effect any statute,
regulation, order, decree or judgment of any Governmental Authority which
makes illegal or enjoins or prevents the consummation of the transactions
contemplated by this Agreement.
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6.2. Conditions to Obligations of Buyer. The obligations of Buyer to effect
the transactions to be effected by it at the Closing shall be subject to the
satisfaction, or waiver, on or prior to the Closing Date of the following
further conditions:
(a) Sellers' Obligations Performed. The Sellers shall have performed
in all material respects their respective obligations under this Agreement
required to be performed by them on or prior to the Closing Date;
(b) Sellers' Representations and Warranties True. Each of the
representations and warranties of the Sellers contained in this Agreement
which is qualified as to materiality shall be true and correct and each
such representation and warranty that is not so qualified shall be true and
correct in all material respects in each case as of the date hereof and on
and as of the Closing Date as if made on and as of such time (except for
representations and warranties expressly stated herein to be applicable
solely as to a specified date which were true and correct as of such date);
(c) Company's Obligations Performed. The Company shall have performed
in all material respects its obligations under this Agreement required to
be performed by it on or prior to the Closing Date;
(d) Key Employees. Key Employees shall have entered into the
Employment Contracts.
(e) Opinion of Counsel. Buyer shall have received an opinion of
counsel to the Sellers, addressed to the Buyer, dated as of the Closing
Date, in form and substance reasonably satisfactory to Buyer;
(f) Officers Certificate. The Company shall have delivered to Buyer
the resolutions of the Company's Board of Directors, certified by the
Secretary of the Company authorizing it to enter into this Agreement, and
the documents evidenced by the Exhibits and Schedules hereto, and to
consummate the transactions and perform the obligations contemplated
hereunder and thereunder. In addition, the Company shall have delivered to
the Buyer a certificate, dated the Closing Date, certified by the chief
executive officer of the Company to the effect that all conditions set
forth in this Section 6.2 that have not otherwise been waived by the Buyer
have been satisfied;
(g) Directors and Officers Resignations. Buyer shall have received
resignation letters from the existing directors and officers of the
Company;
(h) Shareholder Agreements. All shareholder agreements among the
Sellers shall have been terminated.
-30-
(i) FIRPTA Certificate. Each Seller shall have provided a certificate
to the Buyer stating, under penalty of perjury, such Seller's United States
taxpayer identification number and that such Seller is not a foreign person
(within the meaning of Treas. Reg. 1.1445-2(b)).
(j) Environmental Audit. Buyer shall have received an environmental
assessment conducted by an independent environmental consultant reasonably
acceptable to the Seller and concerning the real property, facilities and
operations of the Company, the findings and conclusions of which are
satisfactory in all material respects to the Buyer (the "Environmental
Assessment"). The Sellers shall provide the Buyer and its agents and
representatives reasonable access to the real property and facilities for
this purpose. The costs of such Environmental Assessment shall be paid for
by the Company. The Environmental Assessment may include, without
limitation, a visual inspection of the said real property, facilities and
operations; interviews with representatives of the Company and, with the
consent of the Sellers, representatives of environmental regulatory
authorities knowledgeable about the said real property, facilities and
operations, both current and historic, and knowledgeable about
Environmental Law, Environmental Permits and Hazardous Material; review of
Company records, correspondence and other documents concerning matters of
Environmental Law, Environmental Permits and Hazardous Material; review of
publicly available information; and to the extent deemed necessary or
appropriate in the Buyer's judgment to evaluate the environmental condition
of the Company's operations and properties and with the consent of the
Sellers, such consent not to be unreasonably withheld, sampling and
laboratory analysis of soil and/or groundwater at, about or emanating from
the said real property. Such audit shall reflect no material potential
Environmental liability for the Company and/or its facilities.
6.3. Conditions to Obligations of the Sellers. The obligation of the
Sellers to effect the transactions to be effected by them at the Closing shall
be subject to the satisfaction, or waiver, on or prior to the Closing Date of
the following further conditions:
(a) Buyer's Obligations Performed. Buyer shall have performed in all
material respects its obligations under this Agreement required to be
performed by it on or prior to the Closing Date;
(b) Key Employees. Buyer shall have entered into the Employment
Contracts;
(c) Officer's Certificate. Buyer shall have delivered to the Seller
Representative the resolutions of Buyer's Board of Directors, certified by
the Secretary of Buyer authorizing it to enter into this Agreement, and the
agreements or documents
-31-
evidenced by the Exhibits and Schedules hereto and to consummate the
transactions and perform the obligations contemplated hereunder and
thereunder. In addition, Buyer shall have delivered to the Company a
certificate, dated the Closing Date, certified by the chief executive
officer of Buyer to the effect that all conditions set forth in this
Section 6.3 that have not otherwise been waived by the Company have been
satisfied;
(d) Opinion of Counsel. The Sellers shall have received an opinion of
counsel to the Buyer, addressed to the Sellers, dated as of the Closing
Date, in form and substance satisfactory to the Sellers; and
(e) No Legal Impediment. No legal impediment to the consummation of
the transactions contemplated by this Agreement shall have arisen in the
judgment of the Sellers.
(f) Buyer's Representations and Warranties True. Each of the
representations and warranties of the Buyer contained in this Agreement
which is qualified as to materiality shall be true and correct and each
such representation and warranty that is not so qualified shall be true and
correct in all material respects in each case as of the date hereof and on
and as of the Closing Date as if made on and as of such time (except for
representations and warranties expressly stated herein to be applicable
solely as to a specified date which were true and correct as of such date).
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification by Sellers. (a) The Sellers jointly and severally,
hereby agree to indemnify, defend and hold Buyer and its Affiliates and their
respective officers, directors and employees (the "Buyer Indemnified Parties")
harmless, from and against any Loss to the extent such Loss arises from or in
connection with:
(i) any breach by Sellers or the Company of any representation or
warranty contained in this Agreement or any other agreement or documents
delivered in connection herewith, which representations and warranties
shall for purposes of this subsection 7.1(a) be deemed to have been made at
and as of the Closing Date;
-32-
(ii) any breach by Sellers or the Company of any of its covenants
contained in this Agreement (including, but not limited to, a breach of
Section 5.3 hereof) or any other agreement or documents delivered in
connection herewith;
(iii) any litigation, proceeding or claim by any third party relating
to events that occurred prior to the Closing Date; provided however, there
shall be no indemnification for any Losses arising out of any such
litigation, proceeding or claim based on a representation and warranty of
the Company or the Sellers contained in this Agreement that are not
breached; and
(iv) any Pre-Closing Tax Liabilities, other than those Taxes that are
specifically accrued on the December 31, 2000 balance sheet.
An indemnification payment under this clause (a) shall be reduced by any net Tax
benefits actually realized in the year of payment of the indemnification payment
by the Company or Buyer as a result of amounts paid pursuant to this Section 7.1
(as reasonably determined by the Buyer); it being understood that (I) Buyer
shall provide a written description setting forth its methodology for computing
any net Tax benefits actually realized and (II) nothing in this clause (a) shall
give the Sellers or their representatives the right to review any Tax Returns,
work papers or books and records of Buyer.
(b) Notwithstanding the foregoing, the indemnifications in favor of the
Buyer Indemnified Parties contained in Section 7.1(a); (x) shall not be
effective until the aggregate dollar amount of all Losses indemnified under this
Section 7.1 exceeds $125,000 (the "Sellers' Threshold Amount"), (y) shall not
cover aggregate Losses indemnified against under this Section 7.1 in excess of
the Initial Consideration plus any payments made by Buyer to Sellers pursuant to
the Earn-Out Payments (the "Sellers' Cap Amount"), with no Seller being liable
for an amount in excess of such Seller's pro rata portion of the Sellers' Cap
Amount as set forth on Schedule I hereto and (z) shall not be effective with
respect to claims in connection with the Rockwell Litigation for amounts of
Losses up to the reserved amount on the Balance Sheet specified in Section 3.17
of Schedule II and said Losses up to such specified amount shall not be charged
against Sellers' Threshold Amount; provided, however, that any Losses relating
to the Rockwell Litigation in excess of such specified amount shall be subject
to indemnification claims and chargeable against Sellers' Threshold Amount.
(c) Notwithstanding the foregoing, no Seller shall be liable for any
aggregate Losses in excess of the Escrow Amount ("Excess Losses") except to the
extent of such Seller's pro rata portion of such Excess Losses.
-33-
(d) Buyer acknowledges and agrees that its sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Section
7.1, except for equitable remedies available to Buyer for a breach by the
Sellers of Section 5.3 hereof.
(e) Notwithstanding the provisions of section 7.1(b)(X), Seller's Threshold
Amount of $125,000 shall be increased (x) by the amount by which the actual
Losses incurred in connection with the Rockwell Litigation, if any, are less
than the reserved amount on the Balance Sheet specified in Section 3.17 of
Schedule II and (y) by 50% of the amount of any tax refunds received by the
Company with respect to any taxable period (or portion thereof) ending on or
before the Closing Date.
7.2. Indemnification by Buyer. (a) Buyer hereby agrees to indemnify
Sellers, the Company and their respective Affiliates and their respective
officers, directors and employees (the "Seller Indemnified Parties") against,
and agrees to hold them harmless from, any Loss to the extent such Loss arises
from or in connection with:
(i) any breach by Buyer of any representation or warranty contained in
this Agreement or any other agreement or document delivered in connection
herewith;
(ii) any breach by Buyer of any covenant contained in this Agreement
or any other agreement or document delivered in connection therewith; and
(iii) any litigation, proceeding or claim by any third party relating
to events that occurred subsequent to the Closing Date.
An indemnification payment under this clause (a) shall be reduced by any net Tax
benefits actually realized by the Sellers as a result of amounts paid pursuant
to this Section 7.1 (as reasonably determined by the Sellers); it being
understood that (I) the Sellers shall provide a written description setting
forth their methodology for computing any net Tax benefits actually realized and
(II) nothing in this clause (a) shall give Buyer or its representatives the
right to review the Tax Returns, work papers or books and records of the
Sellers.
(b) Sellers acknowledge and agree that their sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Section
7.2.
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7.3. Termination of Indemnification. (a) Buyer Indemnified Parties shall
not be entitled to indemnification from the Sellers under Section 7.1 hereof
with respect to an indemnity claim by Buyer, if Buyer shall not have delivered
to Seller Representative (in accordance with the notice requirement in Section
7.4 hereof) written notice of such indemnity claim for an indemnified Loss
(x) in the case of a claim under Section 7.1(a)(i) hereof resulting
from a breach of a representation or warranty contained in Sections 3.1
through 3.17, 3.19, 3.20, 3.21, 3.23 through 3.32 or a claim under Section
7.1(a)(ii), on or before the second anniversary of the Closing Date;
notwithstanding the foregoing, in the case of a breach of a representation
or warranty contained in Section 3.21 relating to the Rockwell Litigation,
on or before the fifth anniversary of the Closing, or
(y) in the case of a claim under Section 7.1(a)(i) hereof resulting
from a breach of a representation or warranty contained in Section 3.22, or
a claim under 7.1(a)(iii) on or before the fifth anniversary of the Closing
or
(z) in case of a claim under Section 7.1(a) hereof resulting from a
breach of a representation or warranty contained in Section 3.18 or a claim
under Section 7.1(a)(iv) until fifteen days after the applicable statute of
limitations relating to such tax claim at issue has expired.
(b) Seller Indemnified Parties shall not be entitled to indemnification
from the Buyer under Section 7.2 hereof with respect to an indemnity claim by
Sellers, if Seller Representative shall not have delivered to Buyer (in
accordance with the notice requirement in Section 7.4 hereof) written notice of
such indemnity claim for an indemnified Loss in the case of a claim under
Section 7.2(a)(i), (ii) or (iii), before the second anniversary of the Closing
Date.
7.4. Procedure. (a) For an indemnified party (the "Indemnified Party") to
be entitled to any indemnity provided for under this Agreement, such Indemnified
Party shall, following the discovery of the matters giving rise to any Loss,
notify the indemnifying party (i.e. the Buyer or Seller Representative, as the
case may be) (the "Indemnifying Party") in writing of its claim for
indemnification for such Loss, specifying in reasonable detail the nature of
such Loss and the amount of the liability estimated to accrue therefrom (the
"Indemnity Notice") provided, however, that, subject to Section 7.3, failure to
give such notification shall not affect the indemnification provided hereunder
except to the extent that the Indemnifying Party shall have been actually
prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within five business days after the
Indemnifying Party's receipt of such notice, all information and documentation
reasonably requested by the Indemnifying Party with respect to such Loss.
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If the Indemnifying Party fails to agree in writing with the Indemnified
Party as to the amount of the indemnified Loss within twenty (20) Business Days
of the date that the Indemnifying Party receives the Indemnity Notice, the claim
for indemnity shall be submitted to arbitration pursuant to Section 7.5 hereof.
Failure to timely submit a claim to Arbitration shall in no way prejudice either
party's rights hereunder.
(b) If an event for which indemnification is claimed involves a claim by a
third party against an Indemnified Party and if such Indemnified Party intends
to seek indemnity with respect thereto under Section 7.1 or Section 7.2, such
Indemnified Party shall promptly notify the Indemnifying Party in writing of
such claim setting forth such claim in reasonable detail. The Indemnifying Party
shall have thirty (30) days after receipt of such notice to undertake, through
counsel of its own choosing and at its own expense, the settlement or defense
thereof, and the Indemnified Party shall cooperate with the Indemnifying Party
in connection therewith; provided, however, that the Indemnified Party shall be
entitled to participate in (but not control) such settlement or defense through
counsel chosen by such Indemnified Party, provided that the fees and expenses of
such counsel shall be borne by such Indemnified Party. The Indemnified Party
shall not pay or settle any claim which the Indemnifying Party is contesting.
Notwithstanding the foregoing, the Indemnified Party shall have the right to pay
or settle any such claim, provided that in such event it shall waive any right
to indemnity therefor by the Indemnifying Party. If the Indemnifying Party does
not notify the Indemnified Party within thirty (30) days after the receipt of
the Indemnified Party's notice of a claim of indemnity hereunder that it elects
to undertake the defense thereof, the Indemnified Party shall have the right to
defend the claim but shall not thereby waive any right to indemnity therefor
pursuant to this Agreement.
(c) No payment for an indemnified Loss shall be payable by an Indemnifying
Party unless and until either (i) Buyer and Seller Representative have agreed in
writing to the validity of such indemnity claim and the amount of the cash
payment or (ii) an arbitration decision pursuant to Section 7.5 shall have been
finally rendered as to the validity of such indemnity claim and the amount of
the cash payment.
(d) In the event that (x) the Buyer and the Seller Representative shall
have agreed upon the Buyer's indemnity claim or (y) the arbitration decision
pursuant to Section 7.5 upheld the Buyer's indemnity claim, a copy of the
written agreement or the arbitration decision shall be delivered to the Escrow
Agent for payment by the Escrow Agent pursuant to the Escrow Agreement.
7.5. Arbitration. Any controversy or claim arising out of or relating to
the indemnification provisions of this Agreement, including the right to or
amount of indemnity, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the AAA by three (3) arbitrators. The Sellers
and Buyer
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shall appoint one arbitrator, who shall be an impartial person. If a party fails
to appoint an arbitrator within thirty (30) days from the date a Demand to
Arbitrate was made under Rule 6, the AAA shall make the appointment of the
arbitrator. The two (2) arbitrators thus appointed shall appoint the third
arbitrator, who shall be an impartial person. If said two (2) arbitrators fails
to appoint the third arbitrator within sixty (60) days from the date a Demand to
Arbitrate was made under Rule 6, the AAA shall make the appointment of the third
arbitrator, who shall be an impartial person. Should any of the arbitrators
appointed die, resign, refuse or become unable to act before a decision is
given, the vacancy shall be filled by the method set forth in this clause for
the original appointment. The arbitration shall be held in New York, New York
and shall be conducted in the English language. Prior to such arbitration, each
party shall have reasonable access to the pre-Closing Date documents and records
of the Company relating to the subject of the arbitration. A decision by the
arbitrators on the validity and amount of any indemnification claim shall be
final and binding on al the parties. The arbitrators shall execute and deliver
to the respective parties the arbitration panel's decision in writing. Judgment
upon the award, if any, rendered by the arbitrators (which must be expressed in
United States Dollars) may be entered in any court having jurisdiction thereof.
In any award, the arbitrators shall assess the arbitration costs and expenses,
including, without limitation, attorneys fees of the parties, in a manner deemed
equitable by the arbitrators, taking into account the arbitration decision,
provided, however, that if (i) the arbitration award rendered to the Indemnified
Party is equal to or in excess of the amount demanded in the Indemnity Notice,
all costs shall be assessed against the Indemnifying Party and (ii) the
arbitrator totally disallows the claim, all costs shall be assessed against the
party seeking such indemnity.
7.6. Treatment of Payments. Any amounts paid pursuant to this Section VII
shall be treated by the parties for all income tax purposes as adjustments to
the Purchase Price of the Common Shares as of the time such amounts are paid,
except as otherwise required by law.
7.7. Tax Returns. (a) The Company shall prepare or cause to be prepared and
timely file or cause to be timely filed all S corporation income or franchise
Tax Returns of the Company for all periods ending on or prior to the Closing
Date ("Pre-Closing Periods") which are due after the Closing Date. The Company
shall include any income, gain, loss, deduction or other tax items for such
period on their Tax Returns in a manner consistent with the foregoing S
corporation Tax Returns. All Taxes attributable to the periods covered by the
foregoing S corporation Tax Returns shall be the sole responsibility of the
Sellers. Sellers shall pay or cause to be paid over to Buyer, prior to the due
date for the Tax Returns in respect of which such Taxes are owed, all Taxes
described in this Clause (b) that are the responsibility of Sellers.
(b) All other Tax Returns of the Company for Pre-Closing Periods that are
due after the Closing Date and all Tax Returns in respect of all periods
beginning prior to and
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ending after the Closing Date ("Straddle Periods") shall be prepared by the
Company, and if requested in writing by the Sellers, be made available to the
Sellers for their review, comment and consent, which consent shall not be
unreasonably withheld. All Taxes that relate to the Tax Returns for Pre-Closing
Periods described in this Clause (b) and all Taxes that relate to the foregoing
Tax Returns for Straddle Periods and that are attributable to the portion of
such Straddle Period ending on the Closing Date (based on an interim closing of
the books) shall be the sole responsibility of the Sellers, other than those
Taxes that are specifically accrued on the December 31, 2000 balance sheet or
otherwise listed in Schedule 3.16 attached hereto. Within five (5) Business Days
following receipt of a written request from Buyer, the Sellers shall promptly
pay Buyer for any tax for which they are liable under this Section 7.7(b).
7.8. Cooperation on Tax Matters. Buyer, the Company and Sellers shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company and Sellers agree (a) to retain all
books and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the expiration
date of the statute of limitations (and, to the extent notified by Buyer or
Sellers, any extensions thereof) of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing authority, and
(b) to give to the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, the Company and Sellers, as the case may be, shall allow the other
party to take possession of such books and records.
7.9. Sales and Transfer Taxes. Any transfer, documentary, sales, use, real
estate transfer or other similar Taxes, other than taxes due soley because Buyer
is a Delaware corporation with its principal facilities located in New Jersey,
assessed upon or with respect to the transfer of the Shares to Buyer and any
recording or filing fees with respect thereto shall be paid by the Sellers.
7.10. Post Closing Tax Activities. After the Closing Date, except as agreed
to in writing by the Seller Representative (whose consent shall not be
unreasonably withheld), neither the Company nor Buyer shall settle or compromise
any federal, state, local or foreign Tax liability, make or change any Tax
election, adopt or change any accounting method, file any amended Tax Return,
enter into any closing agreement or settle any Tax claim or assessment relating
to the Company that
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would have the effect of increasing the Tax liability of the Company or the
Sellers with respect to any Tax period ending on or before the Closing Date.
ARTICLE VIII
MISCELLANEOUS
8.1. Survival of Representations and Warranties; Severability. All
representations and warranties made by any party contained in this Agreement,
any Schedule, Exhibit or certificate delivered pursuant hereto or made in
writing by or on behalf of the Sellers in connection with the transactions
contemplated by this Agreement shall survive through the date prescribed by the
applicable statute of limitations, regardless of any investigation made by the
Buyer or on its behalf, subject to the time limitations of Article VII. All
statements contained in any Schedule, Exhibit, certificate or other agreement or
instrument delivered by or on behalf of the Sellers pursuant to this Agreement
or in connection with the transactions contemplated by this Agreement shall be
deemed representations and warranties of the Sellers under this Agreement. The
covenants and agreements of the parties shall survive the Closing, subject to
the time limitations of Article VII.
8.2. Termination. (a) This Agreement may be terminated at any time prior to
the Closing (i) by the mutual written consent of Buyer and the Seller
Representative, or (ii) by either Buyer or the Seller Representative if the
Closing shall not have occurred by April 15, 2001; provided, however, that the
right to terminate this Agreement under this Section 8.2 shall not be available
to any party whose willful failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur on or prior to such date, or (iii) by either Buyer or
the Seller Representative, if the party other than the terminating party has
materially breached a representation, warranty, covenant or agreement under this
Agreement, or (iv) by either Buyer or the Seller Representative, if there occurs
a change in Applicable Law which results in, or could reasonably be expected to
result in a Material Adverse Effect on the Company.
(b) In the event of a termination as provided in subsection (a) above, this
Agreement shall terminate other than Sections 8.9 and 8.10 and, provided,
however, no such termination shall relieve any party from liability for any
breach of this Agreement.
8.3. Waivers and Amendments. This Agreement may be modified only with the
written consent of the parties hereto. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or ter-
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minated orally, but only by a statement in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought.
8.4. Notices, etc. Except as otherwise provided in this Agreement, all
notices and other communications pursuant to this Agreement shall be in writing
and shall be delivered in person, by courier, by facsimile transmission (with
oral confirmation of receipt) or by certified mail (postage prepaid, return
receipt requested, if available). All such notices shall be sent to the
facsimile number or address (as the case may be) specified for the intended
recipient in as set forth below, or to such other number or address as such
recipient may have last specified by notice to the other parties. All such
notices shall be effective upon receipt.
(a) if to the Buyer:
Anadigics, Inc.
000 Xx. Xxxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
with copy to
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(b) if to the Company or the Sellers:
Xxxxxxx X. Xxxxxxxx, Esq.
Anderson, Krehbiel, XxXxxxxx & Xxxxx
31351 Xxx Xxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
with a copy to
Xxxxxxx & XxXxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
8.5. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE
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WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
8.6. Successors and Assigns. (a) No party to this Agreement may assign any
of its rights or obligations under this Agreement, without the prior written
consent of the other parties hereto, except that Buyer may assign its rights,
but not its obligations, to one or more Affiliates of Buyer, which shall agree
to be bound by the terms hereof. Any attempted assignment in contravention
hereof shall be null and void.
(b) This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto or their successors and permitted assigns.
8.7. No Third Party Beneficiaries. Except as otherwise expressly provided,
nothing in this Agreement shall convey any rights upon any person or entity
which is not a party or permitted designee of a party to this Agreement.
8.8. Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy on the part of any party upon any breach or
default of any party to this Agreement shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach or default,
or any acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. It is
further agreed that any waiver, permit, consent or approval of any kind or
character on any party of any breach or default under this Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing and that all remedies either under this Agreement, or by law otherwise
afforded to any party, shall be cumulative and not alternative.
8.9. Publicity. Except as required by law, none of the parties shall issue
any press release or make any other public statement or announcement relating to
or connected with or arising out of this Agreement or the matters contained
herein without obtaining the prior written approval of the other parties with
respect to the contents and the manner of presentation and publication thereof.
If disclosure is required by Applicable Law, the disclosing party shall consult
in advance with the other parties and attempt in good faith to reflect such
other parties' concerns in the required disclosure.
8.10. Expenses. Except as otherwise expressly stated herein, each party to
this Agreement will bear all fees, costs and expenses that are incurred by it in
connection with the preparation, execution and delivery of this Agreement
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and the transactions contemplated hereby. Notwithstanding the foregoing, Sellers
shall pay for the fees and expenses of Powerscourt Partners and all their legal
fees in connection with the drafting and negotiation of this Agreement, the
Escrow Agreement and all other ancillary documents and the Company shall bear
the cost of the financial audit, the IRS audit and the environmental audit. In
addition, concurrently with the Closing, the Sellers shall make a payment of
fifty thousand dollars ($50,000) in the aggregate representing the cost of legal
fees incurred and paid by the Company prior to the Closing.
8.11. Specific Performance. Without limiting the rights of each party
hereto to pursue all other legal and equitable rights available to such party
for the other parties' failure to perform their obligations under this
Agreement, the parties hereto acknowledge and agree that the remedy at law for
any failure to perform their obligations hereunder would be inadequate and that
each of them, respectively, shall be entitled to specific performance,
injunctive relief or other equitable remedies in the event of any such failure.
8.12. Entire Agreement. This Agreement, the Exhibits and Schedules to this
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties, and supersede all
prior understandings, negotiations and prior agreements between the parties with
regard to the subjects hereof and thereof.
8.13. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the parties
shall negotiate in good faith with a view to the substitution therefor of a
suitable and equitable solution in order to carry out, so far as may be valid
and enforceable, the intent and purpose of such invalid provision, provided,
however, that the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained herein shall not
be in any way impaired thereby, it being intended that all of the rights and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.
8.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.15. Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word `including' in this
Agreement shall be by way of example rather than by limitation.
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8.16. No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
8.17. Appointment of Seller Representative. (a) The Sellers do hereby
constitute and appoint Xxxxxxx X. Xxxxxxxx (and each successor appointed in
accordance with Section 8.17(c) of this Agreement) (the "Seller Representative")
the agent and true and lawful attorney-in-fact of them and each of them, in the
name, place and stead of them and each of them, in connection with and to
facilitate the consummation of the transactions contemplated by this Agreement,
and in connection with the performance of the various actions required or
permitted to be performed on behalf of the Seller under this Agreement, which
shall include the following purposes and with the following powers, all of which
shall be exercised by the Seller Representative to the same extent as if the
Sellers themselves were acting, and Xxxxxxx X. Xxxxxxxx (and any successor)
hereby accepts such appointment and agrees to use his best efforts to exercise
such powers in accordance with the terms hereof:
(i) to agree to, and to execute and deliver, such agreements, documents and
instruments as the Seller Representative, in his or her sole discretion,
may deem necessary and advisable, and act for and on behalf of each of the
Sellers, in each case solely in connection with (i) the Escrow Amount and
(ii) the matters set forth in Sections 5.3, 7.1, 7.4 and 7.5 of this
Agreement insofar as they affect the Escrow Amount; and
(ii) to exercise any and all rights granted to the Seller Representative on
behalf of the Sellers under the terms of this Agreement, the ancillary
agreements and any and all collateral documents delivered by the Buyer or
any other Person, firm or corporation during the term of this Agreement.
(b) The grant of authority provided for in Section 8.17(a): (i) is coupled
with an interest and shall be irrevocable and survive the death, incompetency,
bankruptcy or liquidation of any Seller; (ii) may be exercised by the Seller
Representative either by signing separately as attorney-in-fact for each Seller
or, after listing all of the Sellers executing an instrument, by the signature
of the Seller Representative acting as attorney-in-fact for all of them; and
(iii) shall survive the delivery of an assignment by a Seller of the whole or
any fraction of his interest hereunder.
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(c) The Seller Representative shall have the right to resign by notice in
writing (the "Resignation Notice"), mailed by certified mail, return receipt
requested, to each of the Buyer and the Sellers as follows:
(i) If Xxxxxxx X. Xxxxxxxx resigns, dies, becomes incapacitated or
otherwise fails or ceases to act as the Seller Representative, then X.
Xxxxxxx Xxxxx shall serve as the Seller Representative. If X. Xxxxxxx Xxxxx
resigns, dies, becomes incapacitated or otherwise fails or ceases to act as
the Seller Representative, then Xxxxxxx Xxxxxx shall serve as the Seller
Representative. If Xxxxxxx Xxxxxx resigns, dies, becomes incapacitated or
otherwise fails or ceases to act as the Seller Representative, the Sellers
shall designate and appoint a new representative to act as the Seller
Representative.
(ii) A resignation of a Seller Representative and appointment of a
successor representative shall become effective only upon the successor
representative's acceptance of appointment as provided in this Section
8.17(c).
(iii) If a new representative shall act as successor or substitute
representative hereunder, the new representative shall agree in writing to
accept the terms of this Agreement, subject, if applicable, to any
additional terms to, or different terms from, this Agreement consented to
under Section 8.17(c)(i) and promptly thereafter shall receive all monies,
instruments, collateral security and other property and records held by his
or her predecessors hereunder. No substitute or successor representative
shall be liable for or obligated to examine the accounts, records or
actions of any predecessor representative.
(iv) Each substitute or successor representative acting hereunder
shall be vested with all of the rights, powers, indemnities and immunities
of the Seller Representative initially acting hereunder, and the Sellers
agree to do each and every act and thing necessary and appropriate to vest
the same in each such substitute or successor representative.
(v) The Sellers may, by majority vote of the Sellers, remove the
Seller Representative at any time and appoint a new representative as
provided in this Section 8.17(c).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written.
ANADIGICS, INC.
By:
-----------------------------------------------
Name:
Title:
TELCOM DEVICES CORP.
By:
-----------------------------------------------
Name:
Title:
SELLERS:
By:
-------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Trustee of the
Xxxxxxxx Properties, Inc. Profit
Sharing Plan Trust
By:
-------------------------------------------------
Name: X. Xxxxxxx Xxxxx
By:
-------------------------------------------------
Name: Xxxxxxx Xxxxxx
By:
-------------------------------------------------
Name: Xxxxx X. Xxx
By:
-------------------------------------------------
Name: Xxxxxxxx Xxxxxxxx
GUARANTY
The undersigned (the "Guarantor") hereby personally and unconditionally
guaranties (the "Guaranty"), as primary obligor and not as a surety, all
obligations, covenants, warranties and representations of, and conditions
binding upon the Xxxxxxxx Properties, Inc. Profit Sharing Plan Trust (the
"Trust") under this Stock Purchase Agreement (collectively, the "Obligations"),
regardless of whether the Trust has the corporate power or authority to enter
into this Agreement.
This Guaranty is an absolute, present and continuing guaranty of
performance, not of collection, and is in no way conditional or contingent upon
any attempt to collect from or bring an action against the Trust.
If for any reason any Obligation to be performed or observed by the Trust
shall not be observed or performed, or if the amount of any Obligation payable
by the Trust shall not be paid promptly when due and payable, the Guarantor
shall pay, perform or observe, or cause to be paid, performed or observed, each
such Obligation, regardless of whether Buyer (as defined in the Stock Purchase
Agreement) or anyone on behalf of Buyer has instituted any suit, action or
proceeding or exhausted its remedies or taken any steps to enforce any rights
against the Trust pursuant to the Stock Purchase Agreement or at law or in
equity or otherwise, regardless of any other condition or contingency.
This Guaranty shall be governed by, and construed and enforced in
accordance with, the laws of the state of New York without giving effect to
principles of conflicts of law.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly
executed.
By:
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Schedule I
----------
Name of Seller Number of Shares Owned Percentage of Ownership
-------------- ---------------------- -----------------------
Xxxxxxx X. Xxxxxxxx, Trustee of the 60,000 5.3551%
Xxxxxxxx Properties, Inc. Profit
Sharing Plan Trust
X. Xxxxxxx Xxxxx 60,000 5.3551%
Xxxxxxx Xxxxxx 125,000 11.1564%
Xxxxx X. Xxx 750,433 66.9770%
Xxxxxxxx Xxxxxxxx 125,000 11.1564%
