EXHIBIT 99.1
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MEXICAN STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 25, 2002
BY AND BETWEEN
CONEXANT SYSTEMS, INC.
AND
ALPHA INDUSTRIES, INC.
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TABLE OF CONTENTS
Page No.
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ARTICLE I DEFINITIONS.....................................................................2
ARTICLE II SALE AND PURCHASE OF STOCK.....................................................11
Section 2.1. Purchase and Sale of Shares and Minority Shares................................11
Section 2.2. Purchase Price.................................................................11
Section 2.3. Liabilities of Maquiladora.....................................................11
ARTICLE III SELLER'S REPRESENTATIONS AND WARRANTIES........................................12
Section 3.1. Corporate Status, Good Standing and Authorization..............................12
Section 3.2. Authority; Enforceability......................................................12
Section 3.3. Consents; No Conflicts or Violations...........................................12
Section 3.4. Stock of Maquiladora...........................................................13
Section 3.5. Permits........................................................................13
Section 3.6. Compliance with Laws...........................................................14
Section 3.7. Financial Statements...........................................................14
Section 3.8. Absence of Certain Changes or Events...........................................14
Section 3.9. Facility.......................................................................15
Section 3.10. Litigation.....................................................................15
Section 3.11. Maquiladora Employee Matters...................................................15
Section 3.12. Maquiladora Labor Relations....................................................16
Section 3.13. Tax Matters....................................................................16
Section 3.14. Environmental Matters..........................................................17
Section 3.15. Material Contracts of Maquiladora..............................................18
Section 3.16. No Brokers.....................................................................19
Section 3.17. Title to Properties............................................................19
Section 3.18. Insurance......................................................................19
Section 3.19. Separate Tax Parcel............................................................20
Section 3.20. Utilities, etc.................................................................20
ARTICLE IV PURCHASER'S REPRESENTATIONS AND WARRANTIES.....................................20
Section 4.1. Organization of Purchaser......................................................20
Section 4.2. Authority; Enforceability......................................................20
Section 4.3. Consents; No Conflicts or Violations...........................................20
Section 4.4. Litigation.....................................................................21
Section 4.5. No Brokers.....................................................................21
ARTICLE V COVENANTS......................................................................22
Section 5.1. Access.........................................................................22
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Page No.
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Section 5.2. Reasonable Best Efforts........................................................23
Section 5.3. Conduct of Business by Seller and Maquiladora..................................25
Section 5.4. Elimination of Intercompany Accounts...........................................26
Section 5.5. Intercompany Agreements........................................................27
Section 5.6. Mutual Release.................................................................27
Section 5.7. Public Announcements...........................................................28
Section 5.8. Supplements to Schedules.......................................................28
Section 5.9. Insurance......................................................................28
Section 5.10. Transition Services Agreement..................................................31
Section 5.11. Post-Closing Adjustment........................................................31
ARTICLE VI CONDITIONS TO SELLER'S AND PURCHASER'S OBLIGATIONS.............................31
Section 6.1. HSR Act........................................................................31
Section 6.2. Mexican Competition Commission Approval........................................31
Section 6.3. No Injunctions or Restraints, Illegality.......................................31
Section 6.4. Completion of the Merger.......................................................32
ARTICLE VII ADDITIONAL CONDITIONS TO SELLER'S AND PURCHASER'S OBLIGATIONS..................32
Section 7.1. Conditions to Seller's Obligations.............................................32
Section 7.2. Conditions to Purchaser's Obligations..........................................32
ARTICLE VIII CLOSING........................................................................33
Section 8.1. Deliveries by Seller...........................................................33
Section 8.2. Deliveries by Minority Shareholder.............................................34
Section 8.3. Deliveries by Purchaser........................................................34
Section 8.4. Deliveries by Minority Purchaser...............................................35
ARTICLE IX INDEMNIFICATION................................................................35
Section 9.1. Indemnification by Seller......................................................35
Section 9.2. Indemnification by Purchaser...................................................35
Section 9.3. Limitations on Indemnification Obligations.....................................36
Section 9.4. Procedures Relating to Indemnification.........................................38
Section 9.5. Sole and Exclusive Remedy......................................................40
Section 9.6. Termination of Indemnification Obligations.....................................40
Section 9.7. Effect of Investigation........................................................40
Section 9.8. Tax Matters....................................................................41
ARTICLE X TAX MATTERS....................................................................41
Section 10.1. Preparation and Filing of Tax Returns..........................................41
Section 10.2. Consistent with Past Practice..................................................41
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Page No.
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Section 10.3. Payment of Taxes...............................................................41
Section 10.4. Allocation of Straddle Period Taxes............................................42
Section 10.5. Tax Refunds and Carrybacks.....................................................42
Section 10.6. Tax Indemnification............................................................43
Section 10.7. Notice of Indemnity............................................................44
Section 10.8. Payments.......................................................................44
Section 10.9. Tax Contests...................................................................45
Section 10.10. Cooperation and Exchange of Information........................................45
Section 10.11. Mexican Income Taxes; Customs Duties; Advanced Pricing
Agreement; Transfer, Sales and Use Taxes..................................... 46
Section 10.12. Tax Records....................................................................47
Section 10.13. Tax Sharing Agreements.........................................................48
Section 10.14. Dispute Resolution.............................................................48
ARTICLE XI TERMINATION....................................................................48
Section 11.1. Voluntary Termination..........................................................48
Section 11.2. Automatic Termination..........................................................48
Section 11.3. Effect of Termination..........................................................48
ARTICLE XII MISCELLANEOUS..................................................................49
Section 12.1. Assignment.....................................................................49
Section 12.2. Notices........................................................................49
Section 12.3. Choice of Law; Dispute Resolution..............................................50
Section 12.4. Survival of Representations and Warranties and Covenants.......................51
Section 12.5. Limitations on Representations and Warranties..................................51
Section 12.6. Entire Agreement; Waivers......................................................52
Section 12.7. Counterparts...................................................................52
Section 12.8. Severability...................................................................52
Section 12.9. Headings.......................................................................52
Section 12.10. Expenses.......................................................................52
Section 12.11. Amendments.....................................................................52
Section 12.12. Parties in Interest............................................................53
Section 12.13. Schedules and Exhibits.........................................................53
Section 12.14. Controlling Agreement..........................................................53
Section 12.15. Compliance with Bulk Sales Laws................................................53
Section 12.16. Cooperation Following the Closing..............................................53
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MEXICAN STOCK PURCHASE AGREEMENT
MEXICAN STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of June
25, 2002, by and between Conexant Systems, Inc., a Delaware corporation
("Seller"), and Alpha Industries, Inc., a Delaware corporation ("Purchaser").
Seller and Purchaser are sometimes hereinafter collectively referred to as the
"Parties" and individually as a "Party."
RECITALS
A. Seller and Purchaser are parties to a Mexican Stock and Asset
Purchase Agreement, dated as of December 16, 2001 (the "Existing Agreement"),
pursuant to which Seller agreed to sell, and Purchaser agreed to purchase, all
of Seller's right, title and interest in and to the Shares (as defined below)
and the Assets (as defined below).
B. Seller and Purchaser wish to amend certain provisions of the
Existing Agreement to, among other things, provide for the sale and purchase of
the Shares.
C. Concurrently herewith, Seller and Purchaser are amending the
Existing Agreement, to, among other things, provide for the sale of the Assets
to Purchaser.
D. Seller owns 108,096,704 shares (the "Shares") of the issued and
outstanding fixed and variable capital stock of Maquiladora (as defined herein),
which represent approximately 99.9999% of the issued and outstanding shares of
capital stock of Maquiladora; and Minority Shareholder (as defined herein) owns
the remaining 25 issued and outstanding shares ("Minority Shares" and, together
with the Shares, the "Purchased Shares") of variable capital stock of
Maquiladora.
E. Maquiladora conducts its business from the Facility (as defined
herein) located in Mexicali, Baja California, Mexico.
F. Seller desires to sell all of Seller's right, title and interest in
and to the Shares, and Purchaser desires to purchase the Shares, all in
accordance with the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the representations, warranties,
mutual covenants and promises contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
given those terms in this ARTICLE I or in the Section of this Agreement
referenced in the definition provided for such term and all references to "the
date of this Agreement", "the date hereof", "a recent date" or similar
references shall refer or relate to the date as of which the Existing Agreement
was originally executed and delivered (December 16, 2001) and not the date as of
which this Agreement was amended and restated (June 25, 2002):
"Actually Realized" shall mean, for purposes of determining the timing
of any Taxes (or related Tax cost or benefit) relating to any payment,
transaction, occurrence or event, the time at which the amount of Taxes
(including estimated Taxes) payable by any Person is increased above or reduced
below, as the case may be, the amount of Taxes that such person would be
required to pay but for the payment, transaction, occurrence or event.
"Advanced Pricing Agreement" means the proposed transfer pricing
agreement among, Seller, Maquiladora, the United States Internal Revenue Service
and certain Mexican Tax authorities for transactions between Seller and
Maquiladora for the annual tax periods of Maquiladora commencing January 1, 2000
through January 1, 2004, which has been submitted to the United States Internal
Revenue Service and the appropriate Mexican Tax authorities.
"Affiliate" of a Person means any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
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"Agreement" is defined in the first paragraph hereof.
"Assembly Agreement" is defined in Section 3.15(i).
"Assets" is defined in the Mexican Asset Purchase Agreement.
"Bailment Agreements" is defined in Section 3.15(ii).
"Benefit Plans" is defined in Section 3.11(b).
"Books and Records" means all documents, information, computer data,
files, books and records (in each case, in whatever form or media, including
electronic media) owned by Seller that relate to Maquiladora and its operations.
"Business Day" means a day other than a Saturday, a Sunday or a day on
which banks are required or authorized to close in the City of New York.
"Charter Document" means any of the certificate of incorporation,
bylaws, agreement of limited partnership, operating agreement or other
organizational or constitutive document of a Person (including, in the case of a
Mexican Person, the acta constitutiva or estatutos of such Person).
"Claim(s)" means any action, suit, litigation, proceeding, arbitration
or other method of settling disputes or disagreements and any grievance,
complaint, claim, charge, demand, investigation or other similar matter.
"Claims Made Policies" is defined in Section 5.9(b).
"Closing" means the consummation of the transactions contemplated by
this Agreement on the Closing Date.
"Closing Material Adverse Effect" means any event, change, circumstance
or development that is materially adverse to (i) the ability of Seller to
consummate the transactions contemplated by this Agreement, the Mexican Asset
Purchase Agreement and the Merger Agreement or (ii) the business, financial
condition or results of operations of Maquiladora, the business, financial
condition or results of operations of the Washington Business and the Assets
taken as a whole, other than, with respect to clause (ii), any event, change,
circumstance or development (A) resulting from any action taken in connection
with the transactions contemplated hereby pursuant to the terms of this
Agreement or the Merger Agreement, (B) relating to the economy or financial
markets in general, (C) relating in general to the industries in which Seller,
Maquiladora and the Washington Business operate and not specifically relating to
Seller, Maquiladora and the Washington Business or (D) relating to any action or
omission of Seller, Maquiladora or
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Washington or any Subsidiary of any of them taken with the express prior written
consent of Purchaser.
"Closing Date" is defined in the first paragraph of ARTICLE VIII.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Consent(s)" means any and all consents, waivers, approvals,
authorizations, declarations, filings, recordings, registrations or exemptions.
"Damages" means any and all losses, Liabilities, claims, damages,
deficiencies, obligations, fines, payments, Taxes, Encumbrances, and costs and
expenses, whether matured or unmatured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, known or unknown, whenever arising and
whether or not resulting from Third Party Claims (including the costs and
expenses of any and all Claims; all amounts paid in connection with any demands,
assessments, judgments, settlements and compromises relating thereto; interest
and penalties with respect thereto; out-of-pocket expenses and reasonable
attorneys', accountants' and other experts' fees and expenses reasonably
incurred in investigating, preparing for or defending against any such Claims or
in asserting, preserving or enforcing an Indemnified Party's rights hereunder;
and any losses that may result from the granting of injunctive relief as a
result of any such Claims).
"Dispute" is defined in Section 12.3(b).
"dollars" or "U.S.$" means United States dollars.
"Effective Time" is defined in the Merger Agreement.
"Employee(s)" means any person employed by Maquiladora, including
persons employed on a full-time or part-time basis.
"Encumbrance" means any lien, pledge, easement, security interest,
mortgage, deed of trust, right-of-way, retention of title agreement or other
encumbrance of whatever nature.
"Environmental Claim" is defined in Section 3.14.
"Environmental Law" means any law, rule or regulation applicable to the
Facility enacted as of the Closing Date issued by any Governmental Authority
that asserts authority over Maquiladora or the Assets regulating or pertaining
to protection of human health or the environment (including soil, surface
waters, ground waters, natural
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resources, land, stream, sediments, surface or subsurface strata and indoor and
ambient air, or relating to the presence, spillage, discharge, release or
emission of, or contamination and damage from, Hazardous Materials, including
those (i) requiring any Permits, or the renewal thereof, (ii) regulating the
amount, form, manner or storage, transport and/or disposal of Hazardous
Materials or (iii) requiring any record keeping, reporting, inspection report or
notification regarding Hazardous Material to a Governmental Authority.
"Existing Agreement" is defined in the recitals hereto.
"Facility" means the Land and Improvements, including all easements,
licenses, options, insurance proceeds and condemnation awards and all other
rights of Maquiladora in or appurtenant thereto.
"Financial Statements" means the balance sheet of Maquiladora as of
November 23, 2001 and the related statement of income of Maquiladora for the
twelve-month period ended November 23, 2001, together with the notes thereto.
"Financing Agreement" means the Financing Agreement to be dated as of
the Closing Date among Purchaser, each of Purchaser's subsidiaries listed
therein (including, upon the Closing, Maquiladora) and Seller, substantially in
the form attached hereto as Exhibit "C".
"Governmental Authority" means any federal, state or local governmental
authority or regulatory body of any nation (including the United States of
America and the United Mexican States ("Mexico")), any subdivision, agency,
commission, board or authority or instrumentality thereof, or any
quasi-governmental or private body asserting, exercising or empowered to assert
or exercise any regulatory authority thereunder and any Person, directly or
indirectly, owned by and subject to the control of any of the foregoing.
"Hazardous Material" means any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance that is regulated under any Environmental Law.
"HSR Act" means the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Improvements" means all buildings, structures, fixtures and real
property improvements located on the Land.
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"including" means including without limiting the generality of what
precedes that term.
"Indemnified Party" is defined in Section 9.3(a).
"Indemnifying Party" is defined in Section 9.3(a).
"Indemnity Issue" is defined in Section 10.7.
"Indemnity Reduction Amounts" is defined in Section 9.3(a).
"Information" means all records, books, contracts, instruments,
computer data and other data and information (in each case, in whatever form or
medium, including electronic media).
"Injunction" is defined in Section 6.3
"Insurance Proceeds" means monies (a) received by an insured from an
insurance carrier, (b) paid by an insurance carrier on behalf of an insured or
(c) received from any third party in the nature of insurance, contribution or
indemnification in respect of any Liability.
"Land" means that certain parcel of land owned by Maquiladora commonly
known as Ave. Iqnacio Xxxxx Rayon No. 1699, Colonial Xxxxxx, Mexicali, Baja
California, Mexico.
"Law" means all laws, principals of common law, statutes,
constitutions, treaties, rules, regulations, ordinances, codes, ruling, orders
and determinations of any Governmental Authority.
"Liabilities" means any and all claims, debts, liabilities, commitments
and obligations of whatever nature, whether fixed, contingent or absolute,
matured or unmatured, liquidated or unliquidated, accrued or not accrued, known
or unknown, due or to become due, whenever or however arising and whether or not
the same would be required by generally accepted accounting principles to be
reflected as a liability in financial statements or disclosed in the notes
thereto.
"Maquila Decree" is defined in Section 3.6.
"Maquiladora" means Conexant Systems, S.A. de C.V., a sociedad anonima
de capital variable organized under the laws of Mexico.
"Maquiladora Contracts" means all agreements listed in Section 3.15.
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"Material Adverse Change" or "Material Adverse Effect" means any event,
change, circumstance or development that is materially adverse to (i) the
ability of Seller to consummate the transactions contemplated by this Agreement
or the Mexican Asset Purchase Agreement or (ii) the business, financial
condition or results of operations of Maquiladora and the Assets taken as a
whole, other than, with respect to clause (ii), any event, change, circumstance
or development (A) resulting from any action taken in connection with the
transactions contemplated hereby pursuant to the terms of this Agreement, (B)
relating to the economy or financial markets in general, (C) relating in general
to the industries in which Seller and Maquiladora operate and not specifically
relating to Seller and Maquiladora or (D) relating to any action or omission of
Seller or Maquiladora or any Subsidiary of either of them taken with the express
prior written consent of Purchaser.
"Merger" is defined in the recitals of the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Reorganization,
dated as of December 16, 2001, as amended as of April 12, 2002, by and among
Seller, Washington and Purchaser.
"Mexican Asset Purchase Agreement" means the Amended and Restated
Mexican Asset Purchase Agreement, dated as of the date hereof, by and between
Seller and Purchaser.
"Mexican Compensation Requirements" is defined in Section 3.11(a).
"Mexican Competition Commission" means the Mexican Comision Federal de
Competencia established under Chapter IV of the Mexican Economic Competition
Law.
"Mexican Economic Competition Law" means the Mexican Ley Federal de
Competencia Economica published in the Mexican Official Gazette (Diario Oficial
de la Federacion) on December 24, 1992.
"Minority Purchaser" means the Person designated by Purchaser, in a
writing delivered to Seller at least two (2) Business Days prior to the Closing
Date, to purchase the Minority Shares.
"Minority Shareholder" means Xx. Xxxxxxxxxxxx X. Xxxx.
"Minority Shareholder's Contrato de Compra-Venta de Acciones" is
defined in Section 8.2(ii).
"Minority Shares" is defined in the recitals hereto.
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"Occurrence Basis Policies" is defined in Section 5.9(b).
"Party" and "Parties" are defined in the first paragraph of this
Agreement.
"Permits" means licenses, permits, authorizations, consents,
certificates, registrations, variances, franchises and other approvals from any
Governmental Authority, including those relating to environmental matters.
"Permitted Encumbrance" means (i) in respect of real property,
Encumbrances consisting of zoning or planning restrictions, easements, Permits
or other restrictions or limitations on the use of real property or
irregularities in title thereto which do not materially detract from the value
of, or impair the use of, such real property as currently operated, (ii)
Encumbrances for Taxes, assessments or governmental charges or levies on
property not yet due and payable or which are being contested in good faith and
for which appropriate reserves are maintained, (iii) Encumbrances of landlords,
carriers, warehousemen, mechanics and other Encumbrances imposed by law and
incurred in the ordinary course of business, (iv) for personal property,
Encumbrances for purchase money obligations incurred in the ordinary course of
business consistent with past practice, (v) Encumbrances set forth on Schedule
2.2(b) and (vi) other Encumbrances (other than mortgages, deeds of trust, title
retention agreements or similar security interests on the Facility) which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
"Person" means an individual, corporation, limited liability entity,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act), including any Governmental Authority.
"Policies" means all insurance policies, insurance contracts and claim
administration contracts of any kind of Seller relating to Maquiladora which
were or are in effect at any time at or prior to the Closing, including primary,
excess and umbrella, commercial general liability, fiduciary liability, product
liability, automobile, aircraft, property and casualty, business interruption,
directors and officers liability, employment practices liability, workers'
compensation, crime, errors and omissions, special accident, cargo and employee
dishonesty insurance policies and captive insurance company arrangements,
together with all rights, benefits and privileges thereunder.
"Privileged Information" means, with respect to a Party, Information
regarding the Party or Maquiladora, or any of its operations, employees, assets
or Liabilities (whether in documents or stored in any other form or known to its
employees or agents) that is or may be protected from disclosure pursuant to the
attorney-client privilege, the work product doctrine or other applicable
privileges, that a Party has or
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may come into possession of or has obtained or may obtain access to pursuant to
this Agreement or otherwise.
"Promissory Note" means a promissory note issued by Purchaser in favor
of Seller in a principal amount equal to the Purchase Price, substantially in
the form attached hereto as Exhibit "A".
"Purchase Price" is defined in Section 2.2.
"Purchased Shares" is defined in the recitals hereto.
"Purchaser" is defined in the first paragraph of this Agreement.
"Purchaser Indemnified Parties" is defined in Section 9.1.
"Representative" means, with respect to any Person, any of such
Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"Schedules" means the disclosure schedules contained in this Agreement
which schedules are attached hereto and incorporated by reference as if
specifically set forth herein.
"SECOFI" is defined in Section 3.5.
"Seller" is defined in the first paragraph of this Agreement.
"Seller Indemnified Parties" is defined in Section 9.2.
"Seller's Contrato de Compra-Venta de Acciones" is defined in Section
8.1(ii).
"Shares" is defined in the recitals hereto.
"Straddle Period" is defined in Section 10.1.
"Subsidiary" when used with respect to any Person means any corporation
or other organization, whether incorporated or unincorporated, at least a
majority of the securities or other interests of which having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is, directly or indirectly, owned or controlled by such Person or
by any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
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"Supply Agreement" means the Supply Agreement, to be dated as of the
Closing Date, between Seller and Purchaser relating to the provision by
Purchaser to Seller of specified services and the provision by Seller to
Purchaser of other specified services, substantially on the terms attached
hereto as Exhibit "B".
"Tax" and "Taxes" shall mean all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether imposed by a
federal, state, municipal, governmental, territorial, local, foreign or other
body, and without limiting the generality of the foregoing, shall include net
income, gross income, gross receipts, sales, use, value added, ad valorem,
transfer, recording, franchise, profits, license, lease, service, service use,
payroll, wage, withholding, employment, unemployment insurance, workers
compensation, social security, excise, severance, stamp, business license,
business organization, occupation, premium, property, environmental, windfall
profits, customs, duties, alternative minimum, estimated or other taxes, fees,
premiums, assessments or charges of any kind whatever imposed or collected by
any governmental entity or political subdivision thereof, together with any
related interest and any penalties, additions to such tax or additional amounts
imposed with respect thereto by any Tax authority.
"Tax Proceeding" means any audit, examination, Claim or other
administrative or judicial proceeding relating to Taxes or Tax Returns.
"Tax Return" shall mean any return, filing, questionnaire, information
return, election or other document required or permitted to be filed, including
requests for extensions of time, filings made with respect to estimated tax
payments, claims for refund and amended returns that may be filed, for any
period with any Tax authority (whether domestic or foreign) in connection with
any Tax (whether or not a payment is required to be made with respect to such
filing).
"Third Party Claim" is defined in Section 9.4(a).
"To the knowledge of Seller" or words of similar import with respect to
a fact or matter means the actual knowledge of the executive officers of Seller
listed on Schedule 1 after reasonable inquiry.
"Transition Services Agreement" means the Transition Services Agreement
to be entered into between Seller and Purchaser on or prior to the Closing Date,
relating to the provision by Purchaser to Seller of specified services.
"U.S. Asset Purchase Agreement" means the U.S. Asset Purchase
Agreement, dated December 16, 2001, by and between Seller and Purchaser, as may
be amended, modified or supplemented from time to time.
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"U.S. GAAP" means generally accepted accounting principles as applied
in the United States as of the date of this Agreement.
"Washington" means Washington Sub, Inc., a Delaware corporation.
"Washington Business" is defined in the Merger Agreement.
ARTICLE II
SALE AND PURCHASE OF STOCK
Section 2.1. Purchase and Sale of Shares and Minority Shares.
(a) Purchase and Sale of Shares. At the Closing, Seller shall sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser shall purchase,
acquire and accept, the Shares, free and clear of any Encumbrances.
(b) Purchase and Sale of Minority Shares. At the Closing, Seller shall
cause Minority Shareholder to sell, transfer, convey, assign and deliver to
Minority Purchaser, and Purchaser shall cause Minority Purchaser to purchase,
acquire and accept, the Minority Shares, free and clear of any Encumbrances.
Section 2.2. Purchase Price. The purchase price (the "Purchase Price")
to be paid in the aggregate by Purchaser to Seller in consideration for the
Shares and the Minority Shares shall be nineteen million one hundred ten
thousand dollars (U.S.$19,110,000), payable, at the election of Purchaser,
either (A) by wire transfer of immediately available funds at the Closing or (B)
by delivery of the Promissory Note at the Closing; provided, however, that if
Purchaser shall elect to pay the Purchase Price pursuant to clause (B),
Purchaser shall provide written notice of such election to Seller no later than
thirty (30) days prior to the Closing Date.
Section 2.3. Liabilities of Maquiladora. Purchaser acknowledges that
subsequent to the Closing, except as specifically provided in Article X,
Maquiladora will retain and be responsible for all Liabilities and obligations
of Maquiladora, including any and all Liabilities or obligations that relate
back to events prior to the Closing Date.
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ARTICLE III
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby represents and warrants to Purchaser as of the date
hereof and as of the Closing Date the following:
Section 3.1. Corporate Status, Good Standing and Authorization. Seller
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, with all requisite corporate
power and authority to own the Shares, except where the failure to have such
power and authority, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Maquiladora is a sociedad anonima de
capital variable duly incorporated and validly existing under the law of its
jurisdiction of incorporation, with all requisite corporate power and authority
to own and lease its properties and to conduct its business as presently
conducted, except where the failure to have such power and authority,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Seller and Maquiladora are each duly licensed or
qualified to do business as a foreign corporation in all states or jurisdictions
in which the nature of its business requires such license or qualification,
except where the failure to be so licensed or qualified, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Seller has heretofore delivered to Purchaser complete and correct copies of
Maquiladora's Charter Documents.
Section 3.2. Authority; Enforceability. Seller has all requisite
corporate power and authority to enter into this Agreement and perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Seller. This Agreement has been duly authorized, executed and
delivered by Seller and is a legally valid and binding obligation of Seller
(assuming that this Agreement constitutes the valid and binding obligation of
Purchaser) and is enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar Laws relating to
or affecting creditors generally or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 3.3. Consents; No Conflicts or Violations. Except for the
Consents set forth on Schedule 3.3 and Consents which if not obtained and
maintained by Seller, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, there are no Consents of any
Governmental Authority required
12
in connection with (i) Seller's execution and delivery of this Agreement and the
other agreements, documents and instruments to be executed and delivered by
Seller in connection herewith or (ii) the performance by Seller of its
obligations herein or therein or the consummation by Seller of the transactions
contemplated hereby or thereby. Assuming receipt of all of the Consents set
forth on Schedule 3.3 (including any required HSR Act approval, any approval
required by the Mexican Competition Commission under the Mexican Economic
Competition Law and any approval by SECOFI (as defined below) of any change of
any Permits held by Maquiladora), neither the execution or delivery by Seller of
this Agreement nor the consummation by Seller of the transactions contemplated
hereby will, with or without the giving of notice or the lapse of time or both,
conflict with or result in a breach or violation of or give rise to a default or
right of termination, amendment, cancellation or acceleration under (i) any
provision of Seller's or Maquiladora's Charter Documents, (ii) any contract,
agreement, note, bond, mortgage, indenture, lease, license, franchise, permit,
concession, instrument or obligation to which Seller or Maquiladora is a party
or by which any of their respective properties or assets are bound or (iii) any
Law or license or other requirement to which Seller or Maquiladora or their
respective properties or assets is subject, except, in the case of items (ii)
and (iii) above only, for those which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.
Section 3.4. Stock of Maquiladora. Maquiladora's Charter Documents
authorize the issuance of 8,750 shares of fixed capital stock and an unlimited
number of shares of variable capital stock, P$1.00 Mexican Pesos par value, of
which 8,750 shares of fixed capital stock and 108,087,979 shares of variable
capital stock are issued and outstanding. Seller owns directly 8,725 shares of
fixed capital stock and 108,087,979 shares of variable capital stock and
Minority Shareholder owns directly 25 shares of fixed capital stock of
Maquiladora. All of the capital stock of Maquiladora has been duly authorized
and is validly issued, fully paid and nonassessable and is owned by Seller and
Minority Shareholder free and clear of all Encumbrances. There are no
outstanding subscriptions, options, warrants, preemptive or contractual rights,
voting trusts, privileges or any agreements to acquire any shares of capital
stock of Maquiladora, or any securities or obligations of any kind convertible
or exchangeable into any class of capital stock of Maquiladora. Maquiladora has
no Subsidiaries and does not own any shares of capital stock or any other
securities of any corporation and does not have any equity interest in any other
Person.
Section 3.5. Permits. Seller and Maquiladora have or will have as of
the Closing all Permits which are required in order to allow Seller to own the
Shares or which are required in order to allow Maquiladora to own its assets and
properties and to conduct its business as conducted as of the date hereof,
including all Permits required from the Mexican Ministry of Commerce and
Industrial Promotion ("SECOFI") or its successor, the Mexican Ministry of the
Economy, except, in any such case, for such
13
Permits, which if not obtained or maintained, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect. Each of
Seller and Maquiladora is and will be in compliance with each such Permit,
except where the failure to so comply, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. No suspension or
cancellation of any such Permits is or will be pending or, to the knowledge of
Seller, threatened, except for suspensions or cancellations which, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Seller will have delivered to Purchaser at or prior to Closing a list of
all such Permits held or obtained as of the Closing Date, except for such
Permits, which if not held or obtained, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.
Section 3.6. Compliance with Laws. Except as disclosed on Schedule 3.6,
(i) Maquiladora is in compliance in all material respects with all applicable
Laws, including the Decree for the Development and Operation of Maquiladora
Export Industry, as amended (the "Maquila Decree"), (ii) Seller is in compliance
in all material respects with all Laws applicable with respect to the Shares,
except in the case of (i) or (ii) above, where the failure to so comply,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect, and (iii) to the knowledge of Seller, Maquiladora has
not received within the past twelve (12) months any written notice or
correspondence from any Governmental Authority to the effect that it is not in
compliance with any such applicable Laws, except for such violations which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
Section 3.7. Financial Statements. Annexed hereto as Schedule 3.7 are
true and correct copies of the Financial Statements. The Financial Statements
fairly present the tangible assets and liabilities of Maquiladora in all
material respects as of November 23, 2001 and the results of operations for the
period indicated. Except as set forth on Schedule 3.7, since November 23, 2001,
Maquiladora has not incurred any liabilities that are of a nature that would be
required to be disclosed on a statement of assets and liabilities of Maquiladora
or in the footnotes thereto prepared in conformity with U.S. GAAP, other than
liabilities incurred in the ordinary course of business or that, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
Section 3.8. Absence of Certain Changes or Events. Except as set forth
on Schedule 3.8, since November 23, 2001, there has not been any Material
Adverse Change or any event, change, circumstance or development which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Change. Without limiting the generality of the foregoing,
except as set forth on Schedule 3.8, Maquiladora
14
has been operated since November 23, 2001 in the ordinary course of business
consistent with past practice (except as may be expressly contemplated by this
Agreement).
Section 3.9. Facility.
(a) Facility. Maquiladora owns good and marketable title to the
Facility, free and clear of any Encumbrances, except for Permitted Encumbrances.
To Seller's knowledge, there are no condemnation actions pending against the
Facility. There are no material leases, licenses, concessions or occupancy
agreements affecting the Facility. No interest of Seller or Maquiladora in the
Facility is subject to any right of first refusal or right or option to
purchase, lease or license the Facility or any portion therein.
(b) Zoning. Neither Seller nor, to the knowledge of Seller, Maquiladora
has received notification or correspondence within the past twelve (12) months
that it is in violation of any applicable building, zoning, health or other law,
ordinance or regulation in respect to its stores, plants or structures or their
operations of the Facility, except for such violations that, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
Section 3.10. Litigation. Except as set forth on Schedule 3.10, there
is no action, suit or proceeding or regulatory investigation pending or, to the
knowledge of Seller, threatened against Seller, Minority Shareholder or
Maquiladora or its business or operations affecting (i) Maquiladora or its
business or operations, (ii) the Purchased Shares or (iii) this Agreement before
any court or arbitrator or any governmental body, agency or official, except for
those which, if adversely determined, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. None of Seller,
Minority Shareholder or Maquiladora is a party to or subject to any judgment,
order, rule, writ, injunction, or decree of any Governmental Authority or
arbitrator which relates to or affects Maquiladora or the Purchased Shares,
except as, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
Section 3.11. Maquiladora Employee Matters.
(a) Maquiladora Employees; Mexican Compensation Requirements. Schedule
3.11(a) contains a list of all current Employees of Maquiladora as of the date
hereof. To the knowledge of Seller, Maquiladora is in compliance with all
Mexican laws, rules and regulations with respect to severance, profit-sharing,
Christmas bonus, vacation pay, vacation bonus, retirement, pension and other
employee benefit matters (collectively "Mexican Compensation Requirements")
applicable to its current and former Employees, except where the failure to so
comply, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
15
(b) Benefit Plans. Schedule 3.11(b) lists all material employee pension
benefit plans, employee welfare benefit plans, bonus, stock option, stock
purchase, other equity compensation, deferred compensation, incentive
compensation, severance, employee assistance plans and other employee fringe
benefit plans (collectively, the "Benefit Plans") maintained, or contributed to,
by Maquiladora or Seller for the benefit of any present or former Employees
except for those Benefit Plans (i) required by any Mexican Governmental
Authority and (ii) providing de minimis benefits.
(c) Compliance. To the knowledge of Seller, all employer and employee
contributions to each Benefit Plan required by the terms of such Benefit Plan
have been made, or, if applicable, accrued, in accordance with Seller's normal
accounting practices.
Section 3.12. Maquiladora Labor Relations. Except as stated on Schedule
3.12, Maquiladora is not a signatory to any collective bargaining agreement with
any trade union or labor organization. Except as, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect,
(i) to the knowledge of Seller, Maquiladora is not engaged in any unfair labor
practice, (ii) there is no pending labor board proceeding of any kind with
respect to Maquiladora and (iii) no walk out, strike or work stoppage by the
Employees is in progress nor, to the knowledge of Seller, has notice of any such
walk out, strike or work stoppage been filed or received by Maquiladora within
the past twelve (12) months.
Section 3.13. Tax Matters.
(a) Tax Returns. All material Tax Returns required to be filed by
Maquiladora have been timely filed. All such Tax Returns are true, correct and
complete, except as, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. All Taxes shown as due and payable
by or with respect to such Tax Returns have been timely paid in full.
(b) No Tax Proceedings. Except as set forth on Schedule 3.13(b), there
are no Tax Proceedings presently pending with regard to any Tax Returns or Taxes
of Maquiladora, and no notice has been received from any Governmental Authority
of the expected commencement of such a Tax Proceeding.
(c) No Tax Liens. There are no Encumbrances for any Tax on the assets
of Maquiladora, except for Permitted Encumbrances.
(d) No Consolidated Filings. Seller has not made an election under Code
Section 1504(d) to treat Maquiladora as a member of Seller's affiliated group of
16
corporations filing a consolidated income tax return for United States income
Tax purposes. No liability has been asserted against Maquiladora with respect to
Taxes of any affiliated group within the meaning of Section 1504(a) of the Code
of which Maquiladora has been a member.
(e) No Tax Liability. No liability has been asserted against
Maquiladora with respect to Taxes of any other Person pursuant to any Tax
allocation or sharing agreement with any such Person, or any agreement to
indemnify any such Person with respect to Taxes.
(f) Tax Audits. Schedule 3.13(f) sets forth all income Tax Returns of
Maquiladora that are under audit by the relevant taxing authority.
(g) No Trade or Business. Maquiladora is not engaged in the conduct of
a "trade or business within the United States" within the meaning of Code
Section 864(b).
(h) IRC Code Sections 956, 956A. Maquiladora does not have any of
its earnings invested in United States property within the meaning of Code
Section 956 and does not have "excess passive assets" within the meaning of Code
Section 956A.
Section 3.14. Environmental Matters. Except as disclosed on Schedule
3.14 and except as, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, (i) Maquiladora and the Facility
comply with all Environmental Laws, (ii) Maquiladora and the Facility are not
subject to any action, cause of action, or other proceeding alleging the
violation of any Environmental Law or relating to the presence, or release into
the environment, of any Hazardous Material (collectively, "Environmental
Claim"), (iii) Maquiladora has not received any notice or claim (A) that it is
or has been in violation (or potential violation) of any Environmental Law or
(B) alleging that Maquiladora is or may be responsible for any response,
cleanup, or corrective action, including any remedial investigation/feasibility
studies, under any Environmental Law, which notice is not resolved or otherwise
remains pending, (iv) to Seller's knowledge, Maquiladora and the Facility are
not the subject of any investigation by a Governmental Authority pursuant to an
Environmental Law evaluating whether any remedial action or other response is
needed to respond to spillage, disposal or release or threatened release into
the environment of any Hazardous Material, (v) Maquiladora has not filed any
notice under or relating to any such Environmental Law indicating or reporting
any past or present spillage, disposal or release into the environment of, or
treatment, storage or disposal of, any Hazardous Material which spill, release,
treatment, storage or disposal has not been performed and/or addressed in
accordance with Environmental Laws and (vi) to the knowledge of Seller as of the
date hereof, there has been no release of Hazardous Materials at the Facility
that would be reasonably likely to
17
form the basis of any Environmental Claim against Maquiladora. The
representations and warranties in this Section 3.14 constitute the sole
representations and warranties of Seller concerning environmental matters in
this Agreement.
Section 3.15. Material Contracts of Maquiladora. Schedule 3.15 sets
forth all of the following written agreements, commitments or contracts of
Maquiladora as of the date of this Agreement (collectively, the "Maquiladora
Contracts"):
(i) the assembly agreement with Seller whereby Seller
transfers raw materials, components, parts and other inputs to
Maquiladora and Maquiladora assembles, tests and ships finished
products to Seller (the "Assembly Agreement");
(ii) all gratuitous bailment agreements with Seller whereby
Seller gratuitously transfers equipment, machinery, tools and other
similar capital equipment to be used by Maquiladora to assemble and
test products (the "Bailment Agreements");
(iii) all agreements evidencing indebtedness for borrowed
money in an amount in excess of two hundred fifty thousand dollars
(U.S.$250,000) and all instruments constituting guarantees, sureties or
indemnities of obligations of third parties in an amount in excess of
two hundred fifty thousand dollars (U.S.$250,000);
(iv) all agreements restricting Maquiladora from conducting
any business in any geographic location;
(v) all agreements for construction of improvements on the
Facility in excess of two hundred fifty thousand dollars
(U.S.$250,000), individually, or five hundred thousand dollars
(U.S.$500,000), in the aggregate;
(vi) all agreements for the purchase, sale or lease of capital
assets in excess of one hundred thousand dollars (U.S.$100,000),
individually, or five hundred thousand dollars (U.S.$500,000), in the
aggregate;
(vii) all agreements under which termination, severance or
change in control payments may result due to a change of control of
Maquiladora in an amount in excess of fifty thousand dollars
(U.S.$50,000);
(viii) all agreements for the purchase or sale of any business
or any division, material assets or operating unit thereof;
18
(ix) all agreements with individual Employees providing for
payment in excess of fifty thousand dollars (U.S.$50,000) in any given
year;
(x) all powers of attorney granted by Maquiladora;
(xi) all agreements evidencing loans made by Maquiladora to
any Person, other than Employee advances in the ordinary course of
business consistent with past practice or loans made to Affiliates;
(xii) all agreements committing Maquiladora to use the
services of any vendor, supplier, licensor or licensee providing for
payments in excess of five hundred thousand dollars (U.S.$500,000) in
any given year; and
(xiii) all agreements (other than as set forth in (i)-(xii)
above) that are not cancelable by Seller on notice of ninety (90)
calendar days or less, without any material liability, penalty or
premium or acceleration of any material benefits, and which require
payment by Seller after the date hereof of more than five hundred
thousand dollars (U.S.$500,000) in any given year.
True and correct copies of all Maquiladora Contracts have been
made available to Purchaser. None of Maquiladora or, to the knowledge of Seller,
any other party to any Maquiladora Contract, is in default under any Maquiladora
Contract, except for such defaults that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. To the knowledge
of Seller, no event has occurred with respect to any Maquiladora Contract which,
with the lapse of time or the giving of notice or both, would constitute a
default or give rise to any right of termination, amendment, cancellation or
acceleration under any Maquiladora Contract, except for such as, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
Section 3.16. No Brokers. Neither this Agreement nor the sale
of the Shares or the Minority Shares was induced or procured through any Person
acting on behalf of or representing Seller and no commissions or any other
payment is due to any intermediary in connection therewith.
Section 3.17. Title to Properties. Maquiladora has good and
valid title to all of its tangible properties and assets, except, in each case,
where the failure to have such good and valid title, or valid leasehold
interest, would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
Section 3.18. Insurance. Seller maintains insurance coverage
in respect of Maquiladora with reputable insurers in such amounts and covering
such risks as is
19
deemed reasonably appropriate for its business (taking into account the cost and
availability of such insurance).
Section 3.19. Separate Tax Parcel. To the knowledge of Seller,
the Facility is designated as one or more separate tax parcels.
Section 3.20. Utilities, etc. The Facility has rights of
access to public ways and is served by water, sewer, sanitary sewer and storm
drain facilities adequate to service the Facility for its current uses.
ARTICLE IV
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser hereby represents and warrants to Seller as of the
date hereof and as of the Closing Date the following:
Section 4.1. Organization of Purchaser. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation.
Section 4.2. Authority; Enforceability. Purchaser has all
requisite corporate power and authority to enter into this Agreement and perform
its obligations under this Agreement. The execution, delivery and performance of
this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly
authorized, executed and delivered by Purchaser and is a legally valid and
binding obligation of Purchaser (assuming that this Agreement constitutes the
valid and binding obligation of Seller) and is enforceable against Purchaser in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar Laws relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 4.3. Consents; No Conflicts or Violations. Except for
the Consents set forth on Schedule 4.3 and the Consents which if not obtained
and maintained by Purchaser, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on Purchaser's ability
to consummate the transactions contemplated by this Agreement, there are no
Consents of any Governmental Authorities required in connection with (i)
Purchaser's execution and delivery of this
20
Agreement and the other agreements, documents and instruments to be executed and
delivered by Purchaser in connection herewith or (ii) the performance by
Purchaser of its obligations herein or therein or the consummation by Seller of
the transactions contemplated hereby or thereby. Assuming receipt of all of the
Consents set forth on Schedule 4.3 (including, any required HSR Act approval and
any approval required by the Mexican Competition Commission under the Mexican
Economic Competition Law), neither the execution or delivery by Purchaser of
this Agreement nor the consummation by Purchaser of the transactions
contemplated hereby will, with or without the giving of notice or the lapse of
time or both, conflict with or result in a breach or violation of or give rise
to a default or right of termination, amendment, cancellation or acceleration
under (i) any provision of Purchaser's Charter Documents, (ii) any material
contract, agreement, note, bond, mortgage, indenture, lease, license, franchise,
permit, concession, instrument or obligation to which Purchaser is a party or by
which any of its properties or assets are bound or (iii) any Law or license or
other requirement to which Purchaser or its properties or assets is subject,
except, in the case of items (ii) and (iii) above only, for those which,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on Purchaser's ability to consummate the transactions
contemplated by this Agreement.
Section 4.4. Litigation. Except as set forth on Schedule 4.4,
there is no action, suit or proceeding or regulatory investigation pending or,
to the knowledge of Purchaser, threatened against Purchaser or Minority
Purchaser affecting this Agreement before any court or arbitrator or any
governmental body, agency or official, except for those which, if adversely
determined, individually or in the aggregate, would not reasonably be expected
to have a material adverse effect on Purchaser's ability to consummate the
transactions contemplated by this Agreement. Neither Purchaser nor Minority
Purchaser is a party to or subject to any judgment, order, writ, injunction, or
decree of any Governmental Authority or arbitrator, except as, individually or
in the aggregate, would not reasonably be expected to have a material adverse
effect on Purchaser's ability to consummate the transactions contemplated by
this Agreement.
Section 4.5. No Brokers. Neither this Agreement nor the
purchase of the Shares or the Minority Shares was induced or procured through
any Person acting on behalf of or representing Purchaser and no commissions or
any other payment is due to any intermediary in connection therewith.
21
ARTICLE V
COVENANTS
The Parties hereby covenant as follows:
Section 5.1. Access.
(a) Access to Information by Purchaser Prior to Closing. Prior
to Closing, subject to compliance with applicable laws, Seller and Maquiladora
shall, upon reasonable request, afford to Purchaser and its Representatives
reasonable access during normal business hours to all Books and Records and all
books and records of Maquiladora. Purchaser shall coordinate its requests and
activities under this Section 5.1 with Seller's need for security and will
assist Seller in minimizing disruption to Maquiladora's normal business
operations.
(b) Access to Information by Purchaser After Closing. From and
after the Closing, Seller will afford to Purchaser and its Representatives (at
Purchaser's expense) reasonable access and duplicating rights during normal
business hours and upon reasonable advance notice to all Books and Records and
all books and records within Seller's possession or control relating to
Maquiladora, insofar as such access is reasonably required by Purchaser.
(c) Access to Books and Records by Seller. Purchaser shall,
following the Closing, give Seller and its Representatives such access, during
normal business hours and upon reasonable prior notice, to the Books and
Records, the books and records of Maquiladora relating to periods prior to the
Closing and such other documents as shall be reasonably necessary for Seller in
connection with its performance of its obligations hereunder and for any other
reasonable purposes, and Purchaser will allow Seller and its Representatives to
make extracts and copies thereof as may be necessary for such purposes at
Seller's expense. Purchaser shall preserve and protect the Books and Records and
the books and records of Maquiladora relating to periods prior to the Closing in
its possession and control for the period required by the applicable records
retention policy of Seller in effect immediately prior to the Closing. Purchaser
shall offer to deliver the Books and Records and the books and records of
Maquiladora relating to periods prior to the Closing to Seller prior to their
destruction or other disposition.
(d) Production of Witnesses. Subject to Section 5.1(e), after
the Closing, each Party will, and Purchaser will cause Maquiladora to, make
available to the other Party, upon written request and at the cost and expense
of the Party so requesting, its directors, officers, employees and agents as
witnesses to the extent that any such Person may reasonably be required (giving
consideration to business demands of such
22
directors, officers, employees and agents) in connection with any Claims or
administrative or other proceedings in which the requesting party may from time
to time be involved and relating to Maquiladora's business or operations prior
to the Closing or arising in connection with the relationship between the
Parties and/or Maquiladora on or prior to the Closing Date, provided that the
same shall not unreasonably interfere with the conduct of business by the Party
of which the request is made.
(e) Confidentiality. From and after the Closing, each of
Seller and Purchaser shall hold, and shall use reasonable efforts to cause its
Affiliates and Representatives to hold, in strict confidence all Information
concerning the other Party or Maquiladora in its possession or control prior to
the Closing or furnished to it by another Party pursuant to the Merger and the
transactions contemplated thereby and will not release or disclose such
Information to any other Person, except its Affiliates and its and their
Representatives, who will be bound by the provisions of this Section 5.1(e);
provided, however, that any Person may disclose such Information to the extent
that (a) disclosure is compelled by judicial or administrative process or, in
the opinion of such Person's counsel, by other requirements of law (in which
case the Party required to make such disclosure will notify the other Party as
soon as practicable of such obligation or requirement and cooperate with the
other Party to limit the Information required to be disclosed and to obtain a
protective order or other appropriate remedy with respect to the Information
ultimately disclosed) or (b) such Person can show that such Information was (i)
available to such Person on a nonconfidential basis (other than from a Party)
prior to its disclosure by such Person, (ii) in the public domain through no
fault of such Person or (iii) lawfully acquired by such Person from another
source after the time that it was furnished to such Person by the other Party or
its Affiliates, Representatives or Subsidiaries, and not acquired from such
source subject to any confidentiality obligation on the part of such source
known to the acquiror, or on the part of the acquiror. Each Party acknowledges
that it will be liable for any breach of this Section 5.1(e) by its Affiliates,
Representatives and Subsidiaries. Notwithstanding the foregoing, each Party will
be deemed to have satisfied its obligations under this Section 5.1(e) with
respect to any Information (other than Privileged Information) if it exercises
the same care with regard to such Information as it takes to preserve
confidentiality for its own similar Information.
Section 5.2. Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement,
each Party will use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, and to assist and cooperate with the
other Party in doing or causing to be done, all things necessary, proper or
advisable under this Agreement and applicable laws to consummate the
transactions contemplated by this Agreement as soon as practicable after the
date hereof, including (i) taking all reasonable actions to cause the
23
conditions set forth in ARTICLES VI and VII to be satisfied as promptly as
practicable, (ii) preparing and filing as promptly as practicable all
documentation to obtain as promptly as practicable all Consents set forth on
Schedules 3.3 and 4.3 and (iii) taking all reasonable steps as may be necessary
to obtain all Consents set forth on Schedules 3.3 and 4.3. In furtherance and
not in limitation of the foregoing, each Party hereto agrees to make (i) an
appropriate filing (if applicable) of a Notification and Report Form pursuant to
the HSR Act and any comparable filings (if applicable) pursuant to the Mexican
Economic Competition Act with respect to the transactions contemplated hereby as
promptly as practicable after the date hereof and (ii) all other necessary
filings with other Governmental Authorities relating to the transactions
contemplated herein, and, in each case, to supply as promptly as practicable any
additional information and documentary material that may be requested pursuant
to such applicable laws or by such Governmental Authorities and to use
reasonable best efforts to cause the expiration or termination of the applicable
waiting periods under the HSR Act and the Mexican Economic Competition Act and
the receipt of the Consents set forth on Schedules 3.3 and 4.3 under such other
applicable laws or from such Governmental Authorities as soon as practicable.
(b) Each of Seller and Purchaser shall, in connection with the
efforts referenced in Section 5.2(a) to obtain all Consents set forth on
Schedules 3.3 and 4.3, use its reasonable best efforts to (i) cooperate in all
respects with each other in connection with any filing or submission and in
connection with any investigation or other inquiry, including any proceeding
initiated by a private party, (ii) promptly inform the other Party of any
communication received by such Party from, or given by such Party to, the
Antitrust Division of the Department of Justice (the "DOJ"), the Federal Trade
Commission (the "FTC"), the Mexican Competition Commission or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the transactions contemplated hereby, and (iii) permit the other Party to review
any communication given by it to, and consult with each other in advance of any
meeting or conference with, the DOJ, the FTC, the Mexican Competition Commission
or any such other Governmental Authority or, in connection with any proceeding
by a private party, with any other Person, and to the extent appropriate or
permitted by the DOJ, the FTC, the Mexican Competition Commission or such other
applicable Governmental Authority or other Person, give the other Party the
opportunity to attend and participate in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of
the Parties contained in Section 5.2(a) and Section 5.2(b), if any
administrative or judicial action or proceeding, including any proceeding by a
private party, is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any applicable laws,
or if any statute, rule, regulation, executive order, decree, injunction or
administrative order is enacted, entered, promulgated or enforced by a
Governmental
24
Authority which would make transactions contemplated hereby illegal or would
otherwise prohibit or materially impair or delay the consummation of the
transactions contemplated hereby, each of the Parties shall cooperate in all
respects with each other and use its respective reasonable best efforts to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents or restricts consummation of the transactions contemplated by this
Agreement and to have such statute, rule, regulation, executive order, decree,
injunction or administrative order repealed, rescinded or made inapplicable so
as to permit the consummation of the transactions contemplated by this
Agreement.
(d) Notwithstanding the foregoing or any other provision of
this Agreement, nothing in this Section 5.2 shall create an obligation by the
Parties to take any action in addition to the actions required to be taken
pursuant to the Merger Agreement to consummate the Merger.
Section 5.3. Conduct of Business by Seller and Maquiladora.
From the date hereof until the Closing Date, Seller shall (and shall cause
Maquiladora to), except as expressly required or permitted by this Agreement and
except as otherwise consented to in writing by Purchaser:
(i) conduct the business and operations of Maquiladora in the
ordinary course of business consistent with past practice, subject to
Maquiladora's right to declare and pay cash dividends to its
stockholders in respect of its capital stock prior to the Closing in
accordance with applicable Law;
(ii) not engage Maquiladora in any new material line of
business;
(iii) use its commercially reasonable efforts to preserve
intact the business organization of Maquiladora and preserve the
relationships of Maquiladora with its suppliers and others having
business relations with Maquiladora;
(iv) maintain Maquiladora's existence in Mexico;
(v) not amend or modify Maquiladora's Charter Documents in any
material respects;
(vi) not permit Maquiladora to declare, pay or set aside for
payment any dividend or other distribution to its stockholders in
respect of its capital stock, other than the declaration and payment of
cash dividends by Maquiladora to its
25
stockholders in respect of its capital stock prior to the Closing in
accordance with applicable Law;
(vii) not permit Maquiladora to create any subsidiary, acquire
any capital stock or other equity securities of any corporation or
acquire any equity or ownership interest in any business or entity;
(viii) not (A) permit Maquiladora to grant, create, incur, or
suffer to exist any Encumbrance (other than a Permitted Encumbrance
granted, created, incurred or suffered to exist in the ordinary course
of business consistent with past practice) on the assets of Maquiladora
which did not exist on the date hereof or (B) permit Maquiladora to
create, incur or assume any indebtedness for borrowed money (other than
indebtedness to Affiliates);
(ix) not permit Maquiladora to increase in any manner the base
compensation of, or enter into any new bonus or incentive agreement or
arrangement with, any Employees, directors or consultants other than in
the ordinary course of business consistent with past practice;
(x) not permit Maquiladora to adopt or amend any Benefit Plan
or to increase the benefits provided under any Benefit Plan other than
in the ordinary course of business consistent with past practice;
(xi) not permit Maquiladora to make any material Tax election
or settle or compromise any material Tax liability, other than in the
ordinary course of business consistent with past practice or in
accordance with Section 10.11(c) of this Agreement; and
(xii) not authorize, or commit or agree to take, any of the
foregoing actions.
Section 5.4. Elimination of Intercompany Accounts. Except as
set forth on Schedule 5.4, Seller (on behalf of itself and each of its
Subsidiaries, other than Maquiladora), on the one hand, and Maquiladora, on the
other hand, shall settle and eliminate, by cancellation or transfer to the other
(in a manner to be determined by Seller), effective as of the Closing, all
intercompany receivables, payables and other balances existing immediately prior
to the Closing between Seller and/or any of Seller's Subsidiaries (other than
Maquiladora), on the one hand, and Maquiladora, on the other hand. This Section
5.4 shall not affect any rights of any Party arising under this Agreement or any
document, agreement or instrument entered into pursuant hereto.
26
Section 5.5. Intercompany Agreements. Effective as of the
Closing, Seller and Maquiladora shall terminate (and, in the case of Seller,
Seller shall cause all of Seller's Subsidiaries to terminate) all agreements
between Seller and/or any of Seller's Subsidiaries, on the one hand, and
Maquiladora, on the other hand, including the Assembly Agreement and the
Bailment Agreements. This Section 5.5 shall not affect any rights of any Party
arising under this Agreement or any document, agreement or instrument entered
into pursuant hereto.
Section 5.6. Mutual Release. Effective as of the Closing and
except as otherwise specifically set forth in this Agreement, each of Seller, on
behalf of itself and each of Seller's Subsidiaries (other than Maquiladora), on
the one hand, shall, and Seller shall cause Maquiladora, on the other hand, to,
release and forever discharge the other Party and its Subsidiaries, and its and
their respective officers, directors, agents, record and beneficial security
holders (including trustees and beneficiaries of trusts holding such
securities), advisors and Representatives (in each case, in their respective
capacities as such) and their respective heirs, executors, administrators,
successors and assigns, of and from all debts, demands, actions, causes of
action, suits, accounts, covenants, contracts, agreements, damages, claims and
Liabilities whatsoever of every name and nature, both in law and in equity,
which the releasing party has or ever had or ever will have, which arise out of
or relate to events, circumstances or actions taken by such other party
occurring or failing to occur or any conditions existing at or prior to the
Closing; provided, however, that the foregoing general release shall not apply
to (i) any Liabilities or other obligations (including Liabilities with respect
to payment, reimbursement, indemnification or contribution) under this Agreement
or any other document, agreement or instrument entered into pursuant to this
Agreement or assumed, transferred, assigned, allocated or arising under this
Agreement or any other document, agreement or instrument entered into pursuant
to this Agreement (including any Liability that the Parties may have with
respect to payment, performance, reimbursement, indemnification or contribution
pursuant to this Agreement or any other document agreement or instrument entered
into pursuant to this Agreement for claims brought against the Parties by third
Persons or any Indemnified Party), and the foregoing release will not affect any
Party's right to enforce this Agreement or any other document agreement or
instrument entered into pursuant to this Agreement in accordance with their
respective terms or (ii) any Liability the release of which would result in the
release of any Person other than a Person released pursuant to this Section 5.6
(provided, that the Parties agree not to bring suit or permit any of their
Subsidiaries to bring suit against any Party, its Subsidiaries or Affiliates
with respect to any Liability to the extent such Party, its Subsidiaries and
Affiliates would be released with respect to such Liability by this Section 5.6
but for this clause (ii)).
27
Each of Seller and Purchaser acknowledges that it has been
advised by its legal counsel and is familiar with the provisions of California
Civil Code Section 1542, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Being aware of said Code section, each of Seller, on behalf of itself and
Seller's Subsidiaries, and Purchaser, on behalf of itself and Maquiladora,
hereby expressly waives any rights it may have under California Civil Code
Section 1542, as well as any other statutes or common law principles of similar
effect.
Section 5.7. Public Announcements. The Parties shall use
reasonable best efforts to develop a joint communications plan and each Party
shall use reasonable best efforts (i) to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan, and (ii) unless
otherwise required by applicable laws or by obligations pursuant to any listing
agreement with or rules of any securities exchange or automated quotation
system, to consult with each other before issuing any press release or, to the
extent practicable, otherwise making any public statement with respect to this
Agreement or the transactions contemplated hereby.
Section 5.8. Supplements to Schedules. From time to time up to
the Closing, Seller and Purchaser may supplement or amend the Schedules after
they have been delivered pursuant to this Agreement with respect to any matter
first existing or occurring on or after the date hereof which, if existing or
occurring at or prior to the date hereof, would have been required to be set
forth or described in such Schedules or which is necessary to correct any
information in such Schedules which has been rendered inaccurate thereby;
provided, however, that if any facts that give rise to such matter existed or
occurred on or before the date hereof, no such supplement or amendment may be
made under this Section 5.8 with respect thereto. Any such supplement or
amendment to any Schedule shall not, following Closing, constitute a basis for
any Claim for indemnification pursuant to 0; provided, however, that no such
supplement or amendment shall be deemed to cure any breach of any
representations or warranties made pursuant to this Agreement for purposes of
Section 7.1(a) or Section 7.2(a).
Section 5.9. Insurance.
28
(a) Coverage. Subject to the provisions of this Section 5.9,
coverage of Maquiladora under all Policies shall cease as of the Closing. From
and after the Closing, Purchaser will be responsible for obtaining and
maintaining all insurance coverages for Maquiladora. All Policies will be
retained by Seller and Seller's Subsidiaries, together with all rights, benefits
and privileges thereunder (including the right to receive any and all return
premiums with respect thereto), except that Purchaser will have the rights in
respect of Policies to the extent described in Section 5.9(b).
(b) Rights Under Policies. From and after the Closing,
Purchaser and Maquiladora will have no rights with respect to any Policies,
except that (i) Purchaser will have the right to assert claims (and Seller will
use commercially reasonable efforts to assist Purchaser in asserting claims) for
any loss, liability or damage with respect to the assets of Maquiladora under
Policies with third-party insurers which are "occurrence basis" insurance
policies ("Occurrence Basis Policies") arising out of insured incidents
occurring from the date coverage thereunder first commenced until the Closing to
the extent that the terms and conditions of any such Occurrence Basis Policies
and agreements relating thereto so allow and (ii) Purchaser will have the right
to continue to prosecute claims with respect to the assets of Maquiladora
properly asserted with an insurer prior to the Closing (and Seller will use
commercially reasonable efforts to assist Purchaser in connection therewith)
under Policies with third-party insurers which are insurance policies written on
a "claims made" basis ("Claims Made Policies") arising out of insured incidents
occurring from the date coverage thereunder first commenced until the Closing to
the extent that the terms and conditions of any such Claims Made Policies and
agreements relating thereto so allow, provided, that in the case of both clauses
(i) and (ii) above, (A) all of Seller's reasonable out-of-pocket costs and
expenses incurred in connection with the foregoing are promptly paid by
Purchaser, (B) Seller may, at any time, without liability or obligation to
Purchaser (other than as set forth in Section 5.9(c)), amend, commute,
terminate, buy-out, extinguish liability under or otherwise modify any
Occurrence Basis Policies or Claims Made Policies (and such claims shall be
subject to any such amendments, commutations, terminations, buy-outs,
extinguishments and modifications), (C) such claims will be subject to (and
recovery thereon will be reduced by the amount of) any applicable deductibles,
retentions or self-insurance provisions, (D) such claims will be subject to (and
recovery thereon will be reduced by the amount of) any payment or reimbursement
obligations of Seller, any of Seller's Subsidiaries or any Affiliate of Seller
or any of Seller's Subsidiaries in respect thereof and (E) such claims will be
subject to exhaustion of existing aggregate limits. Seller's obligation to use
commercially reasonable efforts to assist Purchaser in asserting claims under
applicable Policies will include using commercially reasonable efforts in
assisting Purchaser to establish its right to coverage under such Policies (so
long as all of Seller's reasonable out-of-pocket costs and expenses in
connection therewith are promptly paid by Purchaser). None of Seller or Seller's
Subsidiaries will bear any
29
Liability for the failure of an insurer to pay any claim under any Policy. It is
understood that any Claims Made Policies will not provide any coverage to
Purchaser for incidents occurring prior to the Closing but which are asserted
with the insurance carrier after the Closing.
(c) Seller Actions. In the event that after the Closing,
Seller proposes to amend, commute, terminate, buy-out, extinguish liability
under or otherwise modify any Policies under which Purchaser has rights to
assert claims pursuant to Section 5.9(b) in a manner that would adversely affect
any such rights of Purchaser, (i) Seller will give Purchaser prior notice
thereof and consult with Purchaser with respect to such action (it being
understood that the decision to take any such action will be in the sole
discretion of Seller) and (ii) Seller will pay to Purchaser its equitable share
(which shall be determined by Seller in good faith based on the amount of
premiums paid by or allocated to Purchaser or Maquiladora in respect of the
applicable Policy) of any net proceeds actually received by Seller from the
insurer under the applicable Policy as a result of such action by Seller (after
deducting Seller's reasonable costs and expenses incurred in connection with
such action).
(d) Administration. From and after the Closing:
(i) Seller or a Subsidiary of Seller, as appropriate,
will be responsible for the Claims Administration with respect to
claims of Seller and Seller's Subsidiaries under Policies; and
(ii) Purchaser will be responsible for the Claims
Administration with respect to claims of Purchaser under Policies.
(e) Insurance Premiums. From and after the Closing, Seller
will pay all premiums (retrospectively-rated or otherwise) as required under the
terms and conditions of the respective Policies in respect of periods prior to
the Closing, whereupon Purchaser will upon the request of Seller, forthwith
reimburse Seller for that portion of such premiums paid by Seller as are
reasonably determined by Seller to be attributable to Maquiladora.
(f) Agreement for Waiver of Conflict and Shared Defense. In
the event that a Policy provides coverage for both Seller and/or a Subsidiary of
Seller, on the one hand, and Purchaser, on the other hand, relating to the same
occurrence, Seller and Purchaser agree to defend jointly and to waive any
conflict of interest necessary to the conduct of that joint defense. Nothing in
this Section 5.9(f) will be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
30
Section 5.10. Transition Services Agreement. Promptly
following the date hereof, Purchaser and Seller will discuss the scope, nature,
term and pricing of the transition services to be provided by Seller to
Purchaser following the Closing pursuant to the Transition Services Agreement.
Purchaser and Seller will negotiate in good faith with respect thereto and prior
to the Effective Time will enter into the Transition Services Agreement in a
form reasonably satisfactory to Purchaser and Seller. The Transition Services
Agreement will provide that either Party may terminate any services provided
under the Transition Services Agreement upon such prior written notice as the
Parties shall mutually agree prior to the Closing.
Section 5.11. Post-Closing Adjustment. Within seven Business
Days following the Closing, Purchaser shall pay or cause Maquiladora to pay to
Seller, by wire transfer of immediately available funds to an account designated
by Seller in writing, an amount equal to the bank cash of Maquiladora as
reported by Maquiladora's bank as of the close of business on the Closing Date
as an adjustment to the Purchase Price. All payments made under this Section
5.11 shall be made in United States dollars. For purposes of calculating the
United States dollar amount due under this Section 5.11, Mexican peso amounts
will be converted at the noon buying rate for Mexican pesos on the date of the
payment as reported by the Federal Reserve Bank of New York.
ARTICLE VI
CONDITIONS TO
SELLER'S AND PURCHASER'S OBLIGATIONS
The obligations of Seller and Purchaser to complete the
transactions contemplated by this Agreement are subject to the satisfaction, on
or prior to the Closing, of each of the following conditions precedent;
provided, however, that upon consummation of the Merger, all conditions
precedent contained in this ARTICLE VI shall be deemed fully satisfied for
purposes of this ARTICLE VI:
Section 6.1. HSR Act. The waiting period (and any extension
thereof) applicable to the transactions contemplated by this Agreement under the
HSR Act shall have been terminated or shall have expired.
Section 6.2. Mexican Competition Commission Approval. Seller
and Purchaser shall have received the required consent or approval of the
Mexican Competition Commission.
Section 6.3. No Injunctions or Restraints, Illegality. No Laws
shall have been adopted, promulgated or enforced by any Governmental Authority,
and no
31
temporary restraining order, preliminary or permanent injunction or other order
issued by a court or other Governmental Authority of competent jurisdiction (an
"Injunction") shall be in effect, having the effect of making the transactions
contemplated under this Agreement illegal or otherwise prohibiting such
transactions. No proceeding initiated by any Governmental Authority seeking, and
which is reasonably likely to result in the granting of, an Injunction shall be
pending.
Section 6.4. Completion of the Merger. The Merger shall have
been consummated.
ARTICLE VII
ADDITIONAL CONDITIONS TO
SELLER'S AND PURCHASER'S OBLIGATIONS
Section 7.1. Conditions to Seller's Obligations. The
obligations of Seller to complete the transactions contemplated by this
Agreement are subject to the satisfaction, on or prior to the Closing, of each
of the following conditions precedent; provided, however, that upon consummation
of the Merger, all conditions precedent contained in this Section 7.1 shall be
deemed fully satisfied for purposes of this ARTICLE VII:
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of Purchaser contained in this Agreement shall be
true and correct (without giving effect to any qualification or limitation as to
materiality or material adverse effect set forth therein) in each case as of the
date hereof and (except to the extent that such representations and warranties
speak solely as to another date) as of the Closing Date as though made on and as
of the Closing Date, except where the failure of such representations and
warranties to be true and correct, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated in this Agreement.
(b) Performance of Obligations of Purchaser. Purchaser (i)
shall have performed or complied with all agreements and covenants required to
be performed by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality or material adverse effect and (ii) shall have
performed or complied in all material respects with all other agreements and
covenants required to be performed by it under this Agreement at or prior to the
Closing Date that are not so qualified.
Section 7.2. Conditions to Purchaser's Obligations. The
obligations of Purchaser to complete the transactions contemplated by this
Agreement are subject to the
32
satisfaction, on or prior to the Closing, of each of the following conditions
precedent; provided, however, that upon consummation of the Merger, all
conditions precedent contained in this Section 7.2 shall be deemed fully
satisfied for purposes of this ARTICLE VII:
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of Seller contained in this Agreement shall have
been true and correct (without giving effect to any qualification or limitation
as to materiality or Material Adverse Effect set forth therein) in each case as
of the date hereof and (except to the extent that such representations and
warranties speak solely as to another date) as of the Closing Date as though
made on and as of the Closing Date, except where the failure of such
representations and warranties to be true and correct, individually or in the
aggregate, would not reasonably be expected to have a Closing Material Adverse
Effect.
(b) Performance of Obligations of Seller. Seller (i) shall
have performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality or Material Adverse Effect and (ii) shall have
performed or complied in all material respects with all other agreements and
covenants required to be performed by it under this Agreement at or prior to the
Closing Date that are not so qualified.
ARTICLE VIII
CLOSING
The Closing shall, unless another time and date is agreed to
in writing by the Parties, take place immediately following the Closing (as
defined in the Merger Agreement) under the Merger Agreement and will be
effective immediately following the Effective Time (the time and date of such
Closing being herein called the "Closing Date"). The Closing will take place at
the offices of Xxxxxxxxxx & Xxxxx LLP, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, or such other place as the Parties may agree. On the Closing Date, the
Parties hereto shall deliver the following:
Section 8.1. Deliveries by Seller. At the Closing, Seller
shall deliver to Purchaser (or shall cause the delivery to Purchaser of) the
following which in the case of documents shall be reasonably satisfactory to
Purchaser:
(i) a stock certificate or certificates representing the
Shares, duly endorsed by Seller to Purchaser sufficient to transfer to
Purchaser good and marketable title to the Shares, and evidence that
such transfer to Purchaser of the Shares has been recorded on the
Maquiladora's stock registry book;
33
(ii) the Seller's Contrato de Compra-Venta de Acciones, duly
executed by Seller, in form and substance reasonably satisfactory to
Purchaser;
(iii) the Supply Agreement, duly executed by Seller, in form
and substance reasonably satisfactory to Purchaser;
(iv) the Transition Services Agreement, duly executed by
Seller, in form and substance reasonably satisfactory to Purchaser; and
(v) a duly sworn affidavit of Seller, dated as of the Closing
Date, stating that Seller is not a "foreign person" as that term is
defined in the Code, setting forth Seller's tax identification numbers
and otherwise meeting the requirements of Section 1445(b)(2) of the
Code and the Treasury Regulations promulgated thereunder.
Section 8.2. Deliveries by Minority Shareholder. At the
Closing, Seller shall cause Minority Shareholder to deliver to Minority
Purchaser the following documents, which shall be reasonably satisfactory to
Purchaser:
(i) a stock certificate or certificates representing the
Minority Shares, duly endorsed by Minority Shareholder sufficient to
transfer to Purchaser good and marketable title to the Minority Shares
to Minority Purchaser, and evidence that such transfer of the Minority
Shares has been recorded on the Maquiladora's stock registry book;
(ii) the Minority Shareholder's Contrato de Compra-Venta de
Acciones, duly executed by Minority Shareholder, in form and substance
reasonably satisfactory to Purchaser; and
(iii) a duly sworn affidavit of Minority Shareholder, dated as
of the Closing Date, stating that Minority Shareholder is not a
"foreign person" as that term is defined in the Code, setting forth
Minority Shareholder's tax identification numbers and otherwise meeting
the requirements of Section 1445(b)(2) of the Code and the Treasury
Regulations promulgated thereunder.
Section 8.3. Deliveries by Purchaser. At the Closing,
Purchaser shall deliver to Seller the following, which in the case of documents
shall be reasonably satisfactory to Seller:
(i) (A) cash payment of the portion of the Purchase Price (via
wire transfer of immediately available funds), pursuant to Section 2.2,
or (B) the Promissory Note, duly executed by Purchaser, in which case,
Purchaser shall
34
deliver to Seller at Closing, in addition to the other deliveries
required hereby, (I) the Financing Agreement, duly executed by
Purchaser, and (II) such notices, recordings, mortgages, statements,
filings, instruments or other agreements and documents as shall be
required pursuant to the terms of the Financing Agreement;
(ii) the Seller's Contrato de Compra-Venta de Acciones, duly
executed by Purchaser, in form and substance reasonably satisfactory to
Seller;
(iii) the Supply Agreement, duly executed by Purchaser, in
form and substance reasonably satisfactory to Seller; and
(iv) the Transition Services Agreement, duly executed by
Purchaser, in form and substance reasonably satisfactory to Seller.
Section 8.4. Deliveries by Minority Purchaser. At the Closing,
Purchaser shall cause Minority Purchaser to deliver to the Minority Shareholder
the following, which in the case of documents shall be reasonably satisfactory
to Minority Shareholder:
(i) the Minority Shareholder's Contrato de Compra-Venta de
Acciones duly executed by Minority Purchaser, in form and substance
reasonably satisfactory to Seller.
ARTICLE IX
INDEMNIFICATION
Section 9.1. Indemnification by Seller. Subject to the
limitations on and procedures for indemnification set forth in this 0, Seller
shall indemnify, defend and hold harmless Purchaser and its Representatives and
Affiliates and each of the heirs, executors, successors and assigns of any of
the foregoing (the "Purchaser Indemnified Parties") from and against, and pay or
reimburse, as the case may be, the Purchaser Indemnified Parties for, any
Damages, as incurred, suffered by any Purchaser Indemnified Parties to the
extent based upon, arising out of or relating to the following:
(i) the breach of any representation or warranty of Seller
contained in this Agreement; or
(ii) the breach by Seller of any covenant or agreement of
Seller contained in this Agreement.
Section 9.2. Indemnification by Purchaser. Subject to the
limitations on and procedures for indemnification set forth in this ARTICLE IX,
Purchaser shall
35
indemnify, defend and hold harmless Seller and its Representatives and
Affiliates and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the "Seller Indemnified Parties") from and against,
and pay or reimburse, as the case may be, the Seller Indemnified Parties for,
any Damages, as incurred, suffered by any Seller Indemnified Parties to the
extent based upon, arising out of or relating to the following:
(i) the breach of any representation or warranty of Purchaser
contained in this Agreement;
(ii) the breach by Purchaser of any covenant or agreement of
Purchaser contained in this Agreement; or
(iii) any Liabilities of Maquiladora, except to the extent
that Seller is or would be required to indemnify an Indemnified Party
for such Liability under Section 9.1(i) (assuming for purposes of the
determination of whether such indemnification is or would be required
that (A) the indemnification obligation has not terminated under
Section 9.6 and (B) any relevant representations or warranties have not
expired under Section 12.4).
Section 9.3. Limitations on Indemnification Obligations. (a)
The amount which any Party (an "Indemnifying Party") is or may be required to
pay to any Person (an "Indemnified Party") in respect of Damages or other
Liability for which indemnification is provided under this Agreement shall be
reduced by any amounts actually received (including Insurance Proceeds actually
received) by or on behalf of such Indemnified Party (net of increased insurance
premiums and charges to the extent related to Damages and costs and expenses
(including reasonable legal fees and expenses) incurred by such Indemnified
Party in connection with seeking to collect and collecting such amounts) in
respect of such Damages or other Liability (such net amounts are referred to
herein as "Indemnity Reduction Amounts"). If any Indemnified Party receives any
Indemnity Reduction Amounts in respect of Damages for which indemnification is
provided under this Agreement after the full amount of such Damages has been
paid by an Indemnifying Party or after an Indemnifying Party has made a partial
payment of such Damages and such Indemnity Reduction Amounts exceed the
remaining unpaid balance of such Damages, then the Indemnified Party shall
promptly remit to the Indemnifying Party an amount equal to the excess (if any)
of (A) the amount theretofore paid by the Indemnifying Party in respect of such
Damages, less (B) the amount of the indemnity payment that would have been due
if such Indemnity Reduction Amounts in respect thereof had been received before
the indemnity payment was made.
(b) In determining the amount of any indemnity payment under
this Agreement, such amount shall be (i) reduced to take into account any net
Tax benefit realized by the Indemnified Party and its Affiliates arising from
the incurrence or
36
payment by the Indemnified Party or its Affiliates of any amount in respect of
which such payment is made and (ii) increased to take into account any net Tax
cost incurred by the Indemnified Party and its Affiliates as a result of the
receipt or accrual of payments hereunder (grossed-up for such increase), in each
case determined by treating the Indemnified Party and its Affiliates as
recognizing all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt of accrual of any payment
hereunder. In determining the amount of any such Tax benefit or Tax cost, the
Indemnified Party and its Affiliates shall be deemed to be subject to the
applicable Taxes at the maximum statutory rate then in effect. It is the
intention of the Parties to this Agreement that payments made pursuant to this
Agreement are to be treated as relating back to the Closing Date as a purchase
price adjustment, and the Parties shall not take any position inconsistent with
such intention before any Tax authority, except to the extent that a final
determination (as defined in Section 1313 of the Code) with respect to the
recipient party causes any such payment not to be so treated.
(c) No monetary amount will be payable by Seller to any
Purchaser Indemnified Party with respect to the indemnification of any claims
pursuant to Section 9.1(i) until the aggregate amount of Damages actually
incurred by the Purchaser Indemnified Parties with respect to such claims,
together with the aggregate amount of Damages (as defined in the Mexican Asset
Purchase Agreement) actually incurred by the Purchaser Indemnified Parties (as
defined in the Mexican Asset Purchase Agreement) with respect to indemnification
claims pursuant to Section 9.1(i) of the Mexican Asset Purchase Agreement, shall
exceed on a cumulative basis an amount equal to one million dollars
(U.S.$1,000,000), in which event Seller shall be responsible only for the amount
of such Damages in excess of one million dollars (U.S.$1,000,000). No monetary
amount will be payable by Seller to any Purchaser Indemnified Party with respect
to the indemnification of any claims pursuant to Section 9.1(i) after the
aggregate amount of Damages actually paid by Seller with respect to such claims,
together with the aggregate amount of Damages (as defined in the Mexican Asset
Purchase Agreement) actually paid by Seller with respect to indemnification
claims pursuant to Section 9.1(i) of the Mexican Asset Purchase Agreement, shall
equal on a cumulative basis an amount equal to ten million dollars
(U.S.$10,000,000).
(d) No monetary amount will be payable by Purchaser to any
Seller Indemnified Party with respect to the indemnification of any claims
pursuant to Section 9.2(i) until the aggregate amount of Damages actually
incurred by the Seller Indemnified Parties with respect to such claims, together
with the aggregate amount of Damages (as defined in the Mexican Asset Purchase
Agreement) actually incurred by the Seller Indemnified Parties (as defined in
the Mexican Asset Purchase Agreement) with respect to indemnification claims
pursuant to Section 9.2(i) of the Mexican Asset Purchase Agreement, shall exceed
on a cumulative basis an amount equal to one million dollars (U.S.$1,000,000),
in which event Purchaser shall be responsible only for the
37
amount of such Damages in excess of one million dollars (U.S.$1,000,000). No
monetary amount will be payable by Purchaser to any Seller Indemnified Party
with respect to the indemnification of any claims pursuant to Section 9.2(i)
after the aggregate amount of Damages actually paid by Purchaser with respect to
such claims, together with the aggregate amount of Damages (as defined in the
Mexican Asset Purchase Agreement) actually paid by Purchaser with respect to
indemnification claims pursuant to Section 9.2(i) of the Mexican Asset Purchase
Agreement, shall equal on a cumulative basis an amount equal to ten million
dollars (U.S.$10,000,000).
Section 9.4. Procedures Relating to Indemnification. (a) If a
claim or demand is made against an Indemnified Party, or an Indemnified Party
shall otherwise learn of an assertion, by any Person who is not a party to this
Agreement (or an Affiliate thereof) as to which an Indemnifying Party may be
obligated to provide indemnification pursuant to this Agreement (a "Third Party
Claim"), such Indemnified Party will notify the Indemnifying Party in writing,
and in reasonable detail, of the Third Party Claim reasonably promptly after
becoming aware of such Third Party Claim; provided, however, that failure to
give such notification will not affect the indemnification provided hereunder
except to the extent the Indemnifying Party shall have been actually prejudiced
as a result of such failure. Thereafter, the Indemnified Party will deliver to
the Indemnifying Party, promptly after the Indemnified Party's receipt thereof,
copies of all material notices and documents (including court papers) received
or transmitted by the Indemnified Party's relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party will be entitled to participate in or to assume
the defense thereof (in either case, at the expense of the Indemnifying Party)
with counsel selected by the Indemnifying Party and reasonably satisfactory to
the Indemnified Party. Should the Indemnifying Party so elect to assume the
defense of a Third Party Claim, the Indemnifying Party will not be liable to the
Indemnified Party for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof; provided, however,
that if in the Indemnified Party's reasonable judgment a conflict of interest
exists in respect of such claim or if the Indemnifying Party shall have assumed
responsibility for such claim with any reservations or exceptions, such
Indemnified Party will have the right to employ separate counsel reasonably
satisfactory to the Indemnifying Party to represent such Indemnified Party and
in that event the reasonable fees and expenses of such separate counsel (but not
more than one separate counsel for all Indemnified Parties similarly situated)
shall be paid by such Indemnifying Party. If the Indemnifying Party assumes the
defense of any Third Party Claim, the Indemnified Party will have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party will control such defense. The
Indemnifying Party will be liable for the reasonable fees and expenses of
counsel
38
employed by the Indemnified Party for any period during which the Indemnifying
Party has failed to assume the defense thereof. If the Indemnifying Party
assumes the defense of any Third Party Claim, the Indemnifying Party will
promptly supply to the Indemnified Party copies of all material correspondence
and documents relating to or in connection with such Third Party Claim and keep
the Indemnified Party fully informed of all material developments relating to or
in connection with such Third Party Claim (including providing to the
Indemnified Party on request updates and summaries as to the status thereof). If
the Indemnifying Party chooses to defend a Third Party Claim, the Parties will
cooperate in the defense thereof (such cooperation to be at the expense,
including reasonable legal fees and expenses, of the Indemnifying Party), which
cooperation shall include the retention in accordance with this Agreement and
(upon the Indemnifying Party's request) the provision to the Indemnifying Party
of records and information which are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
(c) No Indemnifying Party will consent to any settlement,
compromise or discharge (including the consent to entry of any judgment) of any
Third Party Claim without the Indemnified Party's prior written consent (which
consent will not be unreasonably withheld); provided, however, that if the
Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified
Party will agree to any settlement, compromise or discharge of such Third Party
Claim which the Indemnifying Party may recommend and which by its terms
obligates the Indemnifying Party to pay the full amount of Damages in connection
with such Third Party Claim and unconditionally and irrevocably releases the
Indemnified Party and its Affiliates completely from all Liability in connection
with such Third Party Claim; provided, however, that the Indemnified Party may
refuse to agree to any such settlement, compromise or discharge (x) that
provides for injunctive or other non-monetary relief affecting the Indemnified
Party or any of its Affiliates or (y) that, in the reasonable opinion of the
Indemnified Party, would otherwise materially adversely affect the Indemnified
Party or any of its Affiliates. Whether or not the Indemnifying Party shall have
assumed the defense of a Third Party Claim, the Indemnified Party will not
(unless required by law) admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying Party's
prior written consent (which consent will not be unreasonably withheld).
(d) Any claim on account of Damages which does not involve a
Third Party Claim will be asserted by reasonably prompt written notice given by
the Indemnified Party to the Indemnifying Party from whom such indemnification
is sought. The failure by any Indemnified Party to so notify the Indemnifying
Party will not relieve the Indemnifying Party from any liability which it may
have to such Indemnified Party
39
under this Agreement, except to the extent that the Indemnifying Party shall
have been actually prejudiced by such failure.
(e) In the event of payment in full by an Indemnifying Party
to any Indemnified Party in connection with any Third Party Claim, such
Indemnifying Party will be subrogated to and shall stand in the place of such
Indemnified Party as to any events or circumstances in respect of which such
Indemnified Party may have any right or claim relating to such Third Party Claim
against any claimant or plaintiff asserting such Third Party Claim or against
any other Person. Such Indemnified Party will cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such Indemnifying
Party, in prosecuting any subrogated right or claim.
Section 9.5. Sole and Exclusive Remedy. The indemnities
contained in this ARTICLE IX and ARTICLE X shall be the sole and exclusive
remedies of the Parties hereto, their Affiliates, successors and assigns with
respect to any and all claims arising out of or relating to this Agreement, the
transactions contemplated hereby, any provision hereof or the breach or
performance thereof.
Section 9.6. Termination of Indemnification Obligations.
Except as set forth in the following sentence, the indemnification obligations
of each of Seller and Purchaser hereunder will survive the Closing, including
surviving the sale or other transfer by any party to this Agreement of any
assets or businesses or the assignment by any party of any Liabilities. The
obligations of each Party to indemnify, defend and hold harmless Indemnified
Parties (i) pursuant to Sections 9.1(i) and 9.2(i), shall terminate when the
applicable representation or warranty expires pursuant to Section 12.4, (ii)
pursuant to Sections 9.1(ii) and 9.2(ii) shall terminate upon the expiration of
all applicable statutes of limitation (giving effect to any extensions thereof,
other than extensions caused by the applicable Indemnified Party) and (iii)
pursuant to Section 9.2(iii) shall continue without time limitation and shall
not terminate at any time; provided, however, that as to clauses (i) and (ii)
above, such obligations to indemnify, defend and hold harmless shall not
terminate with respect to any individual claim as to which the Indemnified Party
shall have, before the expiration of the applicable period, previously delivered
a notice (stating in reasonable detail the basis of such claim) to the
Indemnifying Party.
Section 9.7. Effect of Investigation. The right to
indemnification pursuant to Sections 9.1(i) and 9.2(i) shall not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement.
40
Section 9.8. Tax Matters. Notwithstanding anything in Sections
9.1, 9.2, 9.4 or 9.5 to the contrary, ARTICLE X will be the exclusive agreement
among the Parties with respect to indemnification, procedures and remedies with
respect to Tax matters.
ARTICLE X
TAX MATTERS
Section 10.1. Preparation and Filing of Tax Returns. Seller
shall prepare and file or cause to be prepared and filed all Tax Returns
(including amendments thereto) which are required to be filed in respect of
Maquiladora for any taxable period ending on or before the Closing Date and any
taxable period that includes (but does not end on) the Closing Date (a "Straddle
Period"). Purchaser hereby irrevocably designates, and agrees to cause each of
its Affiliates to designate, Seller as its agent to take any and all actions
necessary or incidental to the preparation and filing of such Tax Returns. All
Tax Returns (including amendments thereto) required to be filed in respect of
Maquiladora for taxable periods beginning after the Closing Date shall be the
responsibility of Purchaser.
Section 10.2. Consistent with Past Practice. Unless Seller and
Purchaser otherwise agree in writing, all Tax Returns (including amendments
thereto) described in Section 10.1 filed after the Closing Date for taxable
periods ending on or before the Closing Date or Straddle Periods, in the absence
of a controlling change in law or circumstances, shall be prepared on a basis
consistent with the elections, accounting methods, conventions and principles of
taxation used for the most recent taxable periods for which Tax Returns
involving similar matters have been filed. Upon request of Purchaser, Seller
shall make available a draft of such Tax Return (or relevant portions thereof)
for review and comment by Purchaser. Subject to the provisions of this
Agreement, all decisions relating to the preparation of Tax Returns shall be
made in the sole discretion of the party responsible under this Agreement for
such preparation.
Section 10.3. Payment of Taxes. Except as otherwise provided
in this Agreement, Seller shall pay or cause to be paid, on a timely basis, all
Taxes due with respect to the Tax liability of Maquiladora for taxable periods
ending on or before the Closing Date or Straddle Periods provided, however, that
Purchaser, on behalf of Maquiladora, hereby assumes and agrees to pay directly
to or at the direction of Seller, at least five days prior to the date payment
(including estimated payment) thereof is due, the portion of such Taxes for that
portion of any Straddle Period which begins on the day after the Closing Date
(calculated pursuant to Section 10.4) which relates to Maquiladora or its
business, assets or activities. Purchaser shall pay or cause to be paid, on a
timely basis, all Taxes due with respect the Tax liability of Maquiladora for
any taxable period beginning after the Closing Date.
41
Section 10.4. Allocation of Straddle Period Taxes. In the case
of any Straddle Period:
(a) Periodic Taxes. (i) The periodic Taxes of Maquiladora or
its business, assets or activities for the portion of any Straddle Period which
ends on the Closing Date shall be computed based on the ratio of the number of
days in such portion of the Straddle Period and the number of days in the entire
taxable period, and (ii) the periodic taxes of Maquiladora or its business,
assets or activities for the portion of any Straddle Period beginning on the day
after the Closing Date shall be computed based on the ratio of the number of
days in such portion of the Straddle Period and the number of days in the entire
taxable period
(b) Non-Periodic Taxes. (i) The Taxes of Maquiladora or its
business, assets or activities for that portion of any Straddle Period ending on
the Closing Date (other than Taxes described in Section 10.4(a) above), shall be
computed on a "closing-of-the-books" basis as if such taxable period ended as of
the close of business on the Closing Date, and (ii) the Taxes of Maquiladora or
its business, assets or activities for that portion of any Straddle Period
beginning after the Closing Date (other than Taxes described in Section 10.4(a)
above), shall be computed on a "closing-of-the-books" basis as if such taxable
period began on the day after the Closing Date.
Section 10.5. Tax Refunds and Carrybacks.
(a) Retention and Payment of Tax Refunds. Except as otherwise
provided in this Agreement, Seller shall be entitled to retain, and to receive
within ten days after Actually Realized by Purchaser and its Affiliates, the
portion of all refunds or credits of Taxes for which Seller is liable pursuant
to Section 10.3 or Section 10.6(a), and Purchaser shall be entitled to retain,
and to receive within ten days after Actually Realized by Seller and its
Affiliates, the portion of all refunds or credits of Taxes for which Purchaser
is liable pursuant to Section 10.3 or Section 10.6(b). The amount of any refund
or credit of Taxes to which Seller or Purchaser is entitled to retain or receive
pursuant to the foregoing sentence shall be reduced to take account of any Taxes
incurred by Purchaser and its Affiliates, in the case of a refund or credit to
which Seller is entitled, or Seller and its Affiliates, in the case of a refund
or credit to which Purchaser is entitled, upon the receipt of such refund or
credit.
(b) Carrybacks. Unless the parties otherwise agree in writing,
Purchaser shall elect where permitted by law, to carry forward any net operating
loss, net capital loss, charitable contribution or other item arising after the
Closing Date that could, in the absence of such election, be carried back to a
taxable period ending on or before the Closing Date. Except as otherwise
provided in this Agreement, notwithstanding the provisions of Section 10.5(a),
(i) any refund or credit of Taxes resulting from the
42
carryback of any item of Taxes attributable to Purchaser or its Affiliates
arising in a taxable period beginning after the Closing Date to a taxable period
ending on or before the Closing Date or that portion of any Straddle Period that
ends on the Closing Date shall be for the account and benefit of Purchaser and
its Affiliates, and (ii) any refund or credit of Taxes resulting from the
carryback of any item of Taxes attributable to Seller or its Affiliates arising
in a taxable period beginning after the Closing Date to a taxable period ending
on or before the Closing Date or that portion of any Straddle Period that ends
on the Closing Date shall be for the account and benefit of Seller and its
Affiliates.
(c) Refund Claims. Seller shall be permitted to file at
Seller's sole expense, and Purchaser shall reasonably cooperate with Seller in
connection with, any claims for refund of Taxes to which Seller is entitled
pursuant to this Section 10.5 or any other provision of this Agreement. Seller
shall reimburse Purchaser for any reasonable out-of-pocket costs and expenses
incurred by Purchaser and its Representatives or Affiliates in connection with
such cooperation. Purchaser shall be permitted to file at Purchaser's sole
expense, and Seller shall reasonably cooperate with Purchaser in connection
with, any claims for refunds of Taxes to which Purchaser is entitled pursuant to
this Section 10.5 or any other provision of this Agreement. Purchaser shall
reimburse Seller for any reasonable out-of-pocket costs and expenses incurred by
Seller and its Representatives and Affiliates in connection with such
cooperation.
Section 10.6. Tax Indemnification.
(a) Seller Indemnification. Seller shall be liable for, and
shall indemnify, defend and hold harmless the Purchaser Indemnified Parties from
and against:
(i) all Taxes of Maquiladora for any taxable period that ends
on or before the Closing Date and the portion of any Straddle Period
ending on the Closing Date;
(ii) all Taxes for any Tax period (whether beginning before,
on or after the Closing Date) attributable to the breach by Seller or
its Affiliates of any representation, warranty, covenant or obligation
under this Agreement;
(iii) all liability for a breach by Seller of any
representation, warranty, covenant, or obligation under this Agreement
with respect to Tax matters; and
(iv) all liability for any reasonable legal, accounting,
appraisal, consulting or similar fees and expenses relating to the
foregoing.
Notwithstanding the foregoing, Seller shall not indemnify, defend
or hold harmless the Purchaser Indemnified Parties from any liability for Taxes
attributable to a
43
Purchaser Tax Act. A Purchaser Tax Act shall mean any action specified in
Schedule 10.6 attached hereto. Seller's obligations under this Section 10.6(a)
shall not be subject to the limitations in Section 9.3 of this Agreement.
(b) Purchaser Indemnification. Purchaser shall be liable for,
and shall indemnify, defend and hold harmless the Seller Indemnified Parties
from and against:
(i) all Taxes of Maquiladora (other than Taxes for which
Seller is obligated to provide indemnification for pursuant to Section
10.6(a)(i));
(ii) all Taxes for any Tax period (whether beginning before,
on or after the Closing Date) attributable to the breach by Purchaser
or its Affiliates of any representation, warranty, covenant or
obligation under this Agreement;
(iii) all liability for a breach by Purchaser of any
representation, warranty, covenant, or obligation under this Agreement
with respect to Tax matters;
(iv) all Taxes attributable to a Purchaser Tax Act; and
(v) all liability for any reasonable legal, accounting,
appraisal, consulting or similar fees and expenses relating to the
foregoing.
Purchaser's obligation under this Section 10.6(b) shall not be
subject to the limitations in Section 9.3 of this Agreement.
Section 10.7. Notice of Indemnity. Whenever an Indemnified
Party becomes aware of the existence of an issue raised by any Tax authority
which could reasonably be expected to result in a determination that would
increase the liability for any Tax of the other Party hereto or any of its
Representatives or Affiliates for any Tax period or require a payment hereunder
by the other party (hereinafter an "Indemnity Issue"), the Indemnified Party
shall in good faith promptly give notice to an Indemnifying Party of such
Indemnity Issue. The failure of the Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations under this Agreement,
except to the extent such Indemnifying Party or any of its Representatives or
Affiliates is actually prejudiced by such failure to give notice.
Section 10.8. Payments.
(a) Timing Adjustments. In the event that a final
determination (which shall include the execution of a Form 870-AD or successor
form) results in a timing difference (e.g., an acceleration of income or delay
of deductions) that would increase Seller's liability for Taxes pursuant to
ARTICLE IX or this ARTICLE X or
44
results in a timing difference (e.g., an acceleration of deductions or delay of
income) that would increase Purchaser's liability for Taxes pursuant to ARTICLE
IX or this ARTICLE X, Purchaser or Seller, as the case may be, will promptly
make payments to Seller or Purchaser as and when Purchaser or Seller (or its
Affiliates), as the case may be, actually realizes any Tax benefits as a result
of such timing difference (or under such other method for determining the
present value of any such anticipated Tax benefits as agreed to by the Parties).
(b) Time for Payment. Any indemnity payment required to be
made pursuant to this Agreement shall be paid within thirty days after the
Indemnified Party makes written demand upon the Indemnifying Party, provided
that in no event shall such payment be required to be made earlier than five
business days prior to the date on which the relevant Taxes (including estimated
Taxes) are required to be paid (or would be required to be paid if no such Taxes
are due) to the relevant Tax authority.
Section 10.9. Tax Contests. The Indemnifying Party and its
Representatives, at the Indemnifying Party's expense, shall be entitled to
participate (a) in all conferences, meetings and proceedings with any Tax
authority, the subject matter of which is or includes an Indemnity Issue and (b)
in all appearances before any court, the subject matter of which is or includes
an Indemnity Issue. The Party who has responsibility for filing the Tax Return
under this Agreement with respect to which there could be an increase in
liability for any Tax or with respect to which a payment could be required
hereunder shall have the right to decide as between the Parties hereto how such
matter is to be dealt with and finally resolved with the appropriate Tax
Authority and shall control all audits and similar proceedings, provided,
however, that if such contest would be reasonably expected to result in a
material increase in the tax liability of Maquiladora for which Purchaser would
be liable, Purchaser may participate in the conduct of such contest and Seller
shall not settle any such contest without the consent of Purchaser, which
consent shall not be unreasonably withheld. If no Tax Return is or was required
to be filed in respect of an Indemnity Issue, the Indemnifying Party shall be
treated as the responsible party with respect thereto. The responsible party
agrees to cooperate in the settlement of any Indemnity Issue with the other
Party and to take such other Party's interests into account.
Section 10.10. Cooperation and Exchange of Information. Each
Party hereto agrees to provide, and to cause each of its Affiliates to provide,
such cooperation and information as such other Party shall request, on a timely
basis, in connection with the preparation or filing of any Tax Return or claim
for Tax refund not inconsistent with this Agreement or in conducting any Tax
audit, Tax dispute, or otherwise in respect of Taxes or to carry out the
provisions of this Agreement, provided, however, that neither Party shall be
obligated to provide the other Party with Tax Returns, documentation or other
information of a proprietary or confidential nature for purposes of verifying
any
45
calculation, and provided further, that in any such case where one Party does
not provide the other Party with Tax Returns, documentation or information
because it is proprietary or confidential, both Parties shall cooperate in
developing mutually acceptable procedures including retaining a mutually
agreeable accounting firm to review such Tax Returns, documentation or
information for purposes of verifying such calculation.
Section 10.11. Mexican Income Taxes; Customs Duties; Advanced
Pricing Agreement; Transfer, Sales and Use Taxes.
(a) Mexican Income Taxes. Seller shall, and shall cause
Minority Shareholder to, and Purchaser shall, and shall cause Minority Purchaser
to, fully comply with all Mexican Tax laws and with the Convention between the
United States of America and the United Mexican States for Avoidance of Double
Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income in
connection with the sale of the Shares and the Minority Shares such that
Purchaser shall not be required to, and Purchaser shall not, deduct or withhold
any amount from the Purchase Price. Seller agrees to indemnify and hold
Purchaser and Minority Purchaser harmless from and against any Taxes imposed on
Seller, Minority Shareholder, Purchaser or Minority Purchaser with respect to
any gain from the sale by Seller or Minority Shareholder, respectively, of the
Shares and the Minority Shares under this Agreement due to any Governmental
Authority, including any obligation Purchaser or Minority Purchaser may have to
withhold or remit to Mexican Governmental Authorities Taxes levied on Seller or
Minority Shareholder, respectively, as a result of any gain from the sale of the
Shares or Minority Shares under this Agreement. The Parties agree that the
Spanish language Contrato de Compra-Venta de Acciones with respect to the Shares
and the Spanish language Contrato de Compra-Venta de Acciones with respect to
the Minority Shares to be delivered at the Closing as provided in Section
8.1(ii), Section 8.2(ii), Section 8.3(ii) and Section 8.4(i), shall be used by
the Parties, Minority Shareholder and Minority Purchaser for Mexican Tax
reporting purposes and that the consideration set forth in such documents shall
be the same as and not in addition to the Purchase Price.
(b) Advanced Pricing Agreement. Seller, at its own expense,
shall have the sole and exclusive right, power and authority to negotiate with
the appropriate Mexican Governmental Authorities and enter into the Advanced
Pricing Agreement on or prior to the Closing. Seller shall keep Purchaser
informed of the status of such negotiations and shall not enter into the
Advanced Pricing Agreement without the written consent of Purchaser, which
consent shall not be unreasonably withheld. Purchaser, Maquiladora, and Seller
shall cooperate with each other in negotiating and finalizing the Advanced
Pricing Agreement after the Closing. Purchaser shall, and shall cause
Maquiladora, not to amend, supplement or modify the Advanced Pricing Agreement
as it would relate to periods prior to the Closing without the written consent
of Seller, which consent shall not be unreasonably withheld.
46
(c) Mexican Customs Duties. Purchaser will cause Maquiladora
at its own expense after the Closing to timely prepare and execute any and all
customs documents required to reflect the change of ownership of the Assets in
Mexico and to timely file a virtual exportation and virtual importation pediment
to reconcile the open pediments of Maquiladora as required by Mexican law.
Seller shall reasonably cooperate with Purchaser and/or Maquiladora in preparing
the Mexican customs duties-related filings. Seller shall be responsible for any
customs duties or fees relating to periods prior to the Closing. Purchaser and
Maquiladora will be responsible for any customs duties or fees relating to
periods from and after the Closing. Purchaser and Seller share equally customs
duties or fees, if any, incurred in connection with the transactions
contemplated by this Agreement.
(d) Transfer, Sales, Use and Value Added Taxes.
Notwithstanding anything to the contrary in this Agreement, all transfer,
documentary, sales, use, stamp, registration, value added and other similar
Taxes and fees (including any penalties and interest) incurred in connection
with the transactions contemplated by this Agreement shall be shared equally by
Seller and Purchaser. Each Party hereto agrees to file all necessary
documentation (including all Tax Returns) with respect to such Taxes in a timely
manner.
Section 10.12. Tax Records.
(a) The Parties agree to (and to cause each of their
Affiliates to) (i) retain all Tax Returns, related schedules and work papers,
and all material records and other documents as required under Section 6001 of
the Code and the regulations promulgated thereunder relating thereto existing on
the date hereof or created through the Closing Date, for a period of at least
ten years following the Closing Date and (ii) allow the Party to this Agreement,
at times and dates reasonably acceptable to the retaining Party, to inspect,
review and make copies of such records, as the Parties may reasonably deem
necessary or appropriate from time to time. In addition, after the expiration of
such ten-year period, such Tax Returns, related schedules and workpapers, and
material records shall not be destroyed or otherwise disposed of at any time,
unless, prior to such destruction or disposal, (A) the Party proposing to
destroy or otherwise dispose of such records shall provide no less than 30 days'
prior written notice to the other Party, specifying in reasonable detail the
records proposed to be destroyed or disposed of and (B) if a recipient of such
notice shall request in writing prior to the scheduled date for such destruction
or disposal that any of the records proposed to be destroyed or disposed of be
delivered to such requesting Party, the Party proposing the destruction or
disposal shall promptly arrange for the delivery of such requested records at
the expense of the Party requesting such records.
47
(b) Notwithstanding anything in this Agreement to the
contrary, if any Party fails to comply with the requirements of Section 10.12(a)
hereof, the Party failing so to comply shall be liable for, and shall hold the
other Party, harmless from, any Taxes (including without limitation, penalties
for failure to comply with the record retention requirements of the Code) and
other costs resulting from such Party's failure to comply.
Section 10.13. Tax Sharing Agreements. On the Closing Date,
all Tax sharing agreements and arrangements between (a) Maquiladora, on the one
side, and (b) Seller or any of its Subsidiaries or Affiliates, on the other
side, will be terminated and have no further effect for any taxable year or
period (whether a past, present or future year or period), and no additional
payments will be made thereunder on or after the Closing Date in respect of a
redetermination of Tax liabilities or otherwise.
Section 10.14. Dispute Resolution. Any dispute, claim or
controversy arising out of or relating to any provision of ARTICLE X of this
Agreement will be resolved in accordance with the procedures set forth in
Section 12.3(b) of this Agreement, provided that each such mediator or
arbitrator selected pursuant to such procedures shall have an expertise in Tax
matters.
ARTICLE XI
TERMINATION
Section 11.1. Voluntary Termination. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to the Closing Date by the mutual written consent of Purchaser and Seller.
Section 11.2. Automatic Termination. In the event of a
termination of the Merger Agreement, this Agreement shall automatically and
immediately terminate.
Section 11.3. Effect of Termination. In the event of the
termination of this Agreement, all further obligations of the Parties hereunder
shall terminate, and the transactions contemplated hereby shall be abandoned
without further action or liability by any of the Parties hereto, except that
(i) Section 11.3 ("Effect of Termination"), Section 12.2 ("Notices"), Section
12.3 ("Choice of Law, Dispute Resolution"), Section 12.6 ("Entire Agreement;
Waivers"), Section 12.8 ("Severability"), Section 12.10 ("Expenses"), Section
12.12 ("Parties in Interest") and Section 12.14 ("Controlling Agreement") shall
survive such termination and (ii) nothing shall relieve any Party hereto from
liability for any breach of this Agreement prior to such termination.
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ARTICLE XII
MISCELLANEOUS
Section 12.1. Assignment. No Party to this Agreement will
convey, assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the other Party in its sole and
absolute discretion. Notwithstanding the foregoing, any Party may (without
obtaining any consent) assign, delegate or sublicense all or any portion of its
rights and obligations hereunder to (i) the surviving entity resulting from a
merger or consolidation involving such Party, (ii) the acquiring entity in a
sale or other disposition of (A) all or substantially all of the assets of such
Party as a whole, (B) any line of business or division of such Party, or (C), in
the case of Purchaser, the Facility, (iii) any other Person that is created as a
result of a spin-off from, or similar reorganization transaction of, such Party
or any line of business or division of such Party or (iv) an Affiliate. In the
event of an assignment pursuant to (ii) or (iii) above, the non-assigning Party
shall, at the assigning Party's request, use good faith commercially reasonable
efforts to enter into separate agreements with each of the resulting entities
and take such further actions as may be reasonably required to assure that the
rights and obligations under this Agreement are preserved, in the aggregate, and
divided equitably between such resulting entities. Any conveyance, assignment or
transfer requiring the prior written consent of another Party pursuant to this
Section 12.1 which is made without such consent will be void ab initio. No
assignment of this Agreement will relieve the assigning Party of its obligations
hereunder.
Section 12.2. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed duly given (a) on the date of
delivery if delivered personally, (b) upon confirmation of receipt if delivered
by telecopy or telefacsimile, (c) on the first Business Day following the date
of dispatch if delivered by a recognized next-day courier service, or (d) on the
fifth Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the Party to receive such notice:
If to Purchaser, to:
Alpha Industries, Inc.
00 Xxxxxx Xxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
Chief Financial Officer
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With copies to (not effective for purposes of
notice):
Alpha Industries, Inc.
00 Xxxxxx Xxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
General Counsel
or if to Seller, to:
Conexant Systems, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. X'Xxxxxx
Senior Vice President, General
Counsel and Secretary
With a copy to (not effective for purposes of
notice):
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Section 12.3. Choice of Law; Dispute Resolution.
(a) Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (without giving
effect to choice of law principles).
(b) Dispute Resolution. In the event that from and after the
Closing, any dispute, claim or controversy (collectively, a "Dispute") arises
out of or relates to any provision of this Agreement or the breach, performance,
enforcement or validity or invalidity thereof, the designees of Seller's Chief
Executive Officer and Purchaser's Chief Executive Officer will attempt a good
faith resolution of the Dispute within thirty (30) days after either Party
notifies the other Party in writing of the Dispute. If the Dispute is not
resolved within thirty (30) days of the receipt of the notification, or within
such other time as they may agree, the Dispute will be referred for resolution
to Seller's Chief Executive Officer and Purchaser's Chief Executive Officer.
Should they be unable
50
to resolve the Dispute within thirty (30) days following the referral to them,
or within such other time as they may agree, Seller and Purchaser will then
attempt in good faith to resolve such Dispute by mediation in accordance with
the then-existing CPR Mediation Procedures promulgated by the CPR Institute for
Dispute Resolution, New York City. If such mediation is unsuccessful within
thirty (30) days (or such other period as the Parties may mutually agree) after
the commencement thereof, such Dispute shall be submitted by the Parties to
binding arbitration, initiated and conducted in accordance with the
then-existing American Arbitration Association Commercial Arbitration Rules,
before a single arbitrator selected jointly by Seller and Purchaser, who shall
not be the same person as the mediator appointed pursuant to the preceding
sentence. If Seller and Purchaser cannot agree upon the identity of an
arbitrator within ten (10) days after the arbitration process is initiated, then
the arbitration will be conducted before three arbitrators, one selected by
Seller, one selected by Purchaser and the third selected by the first two. The
arbitration shall be conducted in San Francisco, California and shall be
governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and
judgment upon the award may be entered by any court having jurisdiction thereof.
The arbitrators shall have case management authority and shall resolve the
Dispute in a final award within one hundred eighty (180) days from the
commencement of the arbitration action, subject to any extension of time thereof
allowed by the arbitrators upon good cause shown.
Section 12.4. Survival of Representations and Warranties and
Covenants. The respective representations and warranties of the Parties
contained in this Agreement (other than those set forth in the following
sentence) will survive the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the Closing and will
continue in full force and effect until six (6) months after the Closing Date
and will then expire. The representations and warranties of the Parties
contained in Section 3.1, Section 3.2, Section 3.3, Section 3.4, Section 3.9(a),
Section 3.13, Section 3.17, Section 4.1, Section 4.2, and Section 4.3 will
survive the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the Closing and will continue in full force
and effect until all applicable statutes of limitation (including any extensions
thereof) have expired and will then expire. All covenants of the Parties
contained in this Agreement will remain in full force and effect after, and
survive, the Closing (other than those to be performed at or prior to the
Closing).
Section 12.5. Limitations on Representations and Warranties.
Except for the representations and warranties set forth in this Agreement, the
Shares and the Minority Shares are being sold "AS IS, WHERE IS, AND WITH ALL
FAULTS." EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER CONCERNING
THE FACILITY, THE BUSINESS
51
OR OPERATIONS OF MAQUILADORA OR ANY OTHER MATTER, EXPRESS OR IMPLIED, ORAL, OR
WRITTEN. SELLER HEREBY SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTY OF
MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
Section 12.6. Entire Agreement; Waivers. This Agreement,
together with all exhibits and Schedules hereto, and the other agreements and
instruments of the Parties delivered in connection herewith constitute the
entire agreement and supersede all prior agreements and understandings both
written and oral, among the Parties with respect to the subject matter hereof.
The failure of any Party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
Section 12.7. Counterparts. This Agreement may be executed in
separate counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts will together constitute the same
agreement. This Agreement may be executed and delivered by telecopier with the
same force and effect as if it were a manually executed and delivered
counterpart.
Section 12.8. Severability. If any provision of this Agreement
or the application thereof to any Person or circumstance is determined by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and will in no way be
affected, impaired or invalidated thereby. If the economic or legal substance of
the transactions contemplated hereby is affected in any manner adverse to any
Party as a result thereof, the Parties will negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the Parties.
Section 12.9. Headings. The headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 12.10. Expenses. Except as otherwise provided in this
Agreement, each of the Parties shall be liable for its own expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Agreement prior to Closing.
Section 12.11. Amendments. This Agreement cannot be amended,
modified or supplemented except by a written agreement executed by Seller and
Purchaser.
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Section 12.12. Parties in Interest. This Agreement is binding
upon and is for the benefit of the Parties hereto and their respective
successors and permitted assigns. This Agreement is not made for the benefit of
any Person not a Party hereto, and no Person other than the Parties hereto or
their respective successors and permitted assigns will acquire or have any
benefit, right, remedy or claim under or by reason of this Agreement, except
that the provisions of Sections 9.1, 9.2 and 10.6 hereof shall inure to the
benefit of the Persons referred to therein.
Section 12.13. Schedules and Exhibits. Inclusion of an item or
matter on any of the Schedules or Exhibits attached hereto shall not be deemed
to be an admission by any Party that such item or matter is required to be
disclosed in such Schedule or Exhibit. Each disclosure on each Schedule, to the
extent specified therein, qualifies the correspondingly numbered representation
and warranty or covenant contained herein and, to the extent it is apparent on
the face of such disclosure that such disclosure qualifies another
representation or warranty contained herein, such other representation and
warranty.
Section 12.14. Controlling Agreement. In the event of any
inconsistency between the provisions of this Agreement and those of either
Seller's Contrato de Compra-Venta de Acciones or Minority Shareholder's Contrato
de Compra-Venta de Acciones, this Agreement shall be controlling (other than
with respect to the governing law).
Section 12.15. Compliance with Bulk Sales Laws. The Parties
hereby waive compliance with the bulk sales laws and any other similar laws in
any applicable jurisdiction in respect of the transactions contemplated by this
Agreement.
Section 12.16. Cooperation Following the Closing. Following
the Closing, the Parties shall each deliver to the other such further
information and documents and shall execute and deliver to the other such
further instruments and agreements as the other shall reasonably request to
consummate or confirm the transactions provided for in this Agreement, to
accomplish the purpose of this Agreement or to assure to the other the benefits
of this Agreement.
[The remainder of this page is left intentionally blank; signature page follows]
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IN WITNESS WHEREOF, each of the Parties listed below has
executed this Mexican Stock Purchase Agreement as of the day and year first
above written.
CONEXANT SYSTEMS, INC.
By: /s/ Xxxxxx X. X'Xxxxxx
-----------------------------------------
Name: Xxxxxx X. X'Xxxxxx
Title: Senior Vice President, General
Counsel and Secretary
ALPHA INDUSTRIES, INC.
By: /s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President, Chief Financial
Officer, Treasurer and Secretary
