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STOCK PURCHASE AGREEMENT
Dated as of November 16, 1998
By and between
Acme-Cleveland Corporation
As Seller
And
Verilink Corporation
As Buyer
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TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT.................................................1
RECITALS.................................................................1
STATEMENT OF AGREEMENT...................................................1
ARTICLE I: TERMS OF PURCHASE AND SALE....................................1
1.1 Sale of the Stock..............................................1
1.2 The Closing....................................................2
1.3 Closing Deliveries.............................................2
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF SELLER.....................3
2.1 Seller's Corporate Power and Authority: Effect of Agreement....3
2.2 Capitalization.................................................3
2.3 Organization: Subsidiaries.....................................4
2.4 Financial Statements...........................................4
2.5 Title to Assets................................................4
2.6 Sufficiency of Assets..........................................5
2.7 Contracts......................................................5
2.8 Patents, Trademarks, Etc. .....................................5
2.9 Litigation.....................................................6
2.10 Compliance with Laws...........................................6
2.11 Employee Benefit Plans.........................................6
2.12 Governmental Consents..........................................7
2.13 Taxes..........................................................7
2.14 Customers and Suppliers........................................8
2.15 Certain Events.................................................8
2.16 Broker's Fees..................................................8
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF BUYER.....................8
3.1 Corporate Power and Authority: Effect of Agreement.............8
3.2 Governmental Consents..........................................9
3.3 Availability of Funds..........................................9
3.4 Litigation.....................................................9
3.5 Purchase for Investment........................................9
3.6 Broker's Fees.................................................10
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ARTICLE IV: COVENANTS OF SELLER........................................10
4.1 Cooperation by Seller........................................10
4.2 Conduct of Business..........................................10
4.3 Access.......................................................11
4.4 Notification of Certain Matters..............................12
4.5 Intercompany Obligations.....................................12
4.6 Further Assurances...........................................12
ARTICLE V: COVENANTS OF BUYER..........................................12
5.1 Cooperation by Buyer.........................................12
5.2 Books and Records; Personnel.................................13
5.3 Notification of Certain Matters..............................13
5.4 Employment Agreements........................................13
5.5 No Additional Representations................................14
5.6 Further Assurances...........................................14
5.7 Huntsville Lease.............................................14
ARTICLE VI: ADDITIONAL COVENANTS AND ACKNOWLEDGMENTS...................14
6.1 Taxes........................................................14
(a) Filing of Returns and Payment of Taxes..................14
(b) Apportionment...........................................15
(c) Tax Refunds and Credits.................................16
(d) Cooperation and Books and Records.......................16
(e) Transfer Taxes..........................................16
6.2 Required Consents............................................16
ARTICLE VII: INDEMNIFICATION...........................................17
7.1 Indemnification by Buyer.....................................17
7.2 Indemnification by Seller....................................17
7.3 Indemnification Amounts......................................18
7.4 Limitation and Expiration....................................18
7.5 Indemnification Procedures...................................19
7.6 Tax Contests.................................................20
7.7 Survival of Representations and Warranties...................21
2.7 Other Indemnity Matters......................................21
ARTICLE VIII: CONDITIONS TO BUYER'S OBLIGATIONS........................22
8.1 Representations, Warranties and Covenants of Seller..........22
8.2 No Prohibition...............................................22
8.3 Governmental Consents........................................22
8.4 Secretary's Certificate of Seller............................22
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ARTICLE IX: CONDITIONS TO SELLER'S OBLIGATIONS............................23
9.1 Representations, Warranties and Covenants of Buyer.............23
9.2 No Prohibition.................................................23
9.3 Governmental Consents..........................................23
9.4 Required Consents..............................................23
9.5 Secretary's Certificate of Buyer...............................23
9.6 Seller's Frustration of Closing Conditions.....................24
9.7 Sublease of Madison, Alabama Facility..........................24
ARTICLE X: TRANSITION MATTERS.............................................24
10.1 WARN Act.......................................................24
10.2 Data Processing System Access..................................24
10.3 Non-Competition: Non-Solicitation..............................24
ARTICLE XI: TERMINATION BEFORE CLOSING....................................25
11.1 Termination....................................................25
11.2 Effect on Obligations..........................................25
ARTICLE XII: MISCELLANEOUS................................................26
12.1 Interpretive Provisions........................................26
12.2 Entire Agreement...............................................26
12.3 Successors and Assigns.........................................27
12.4 Headings.......................................................27
12.5 Amendment, Modification and Waiver.............................27
12.6 Rights of Third Parties........................................27
12.7 Expenses.......................................................27
12.8 Notices........................................................28
12.9 Governing Law..................................................29
12.10 Severability...................................................29
12.11 Public Announcements...........................................29
12.12 Counterparts...................................................29
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the 16th day of November, 1998, by and between ACME-CLEVELAND CORPORATION, an
Ohio corporation ("Seller"), and VERILINK CORPORATION, a Delaware corporation
("Buyer").
RECITALS
A. Seller is the owner of 100% of the issued and outstanding shares of
common stock, par value $1.00 per share (the "Stock") of TxPort Inc., a
Delaware (the "Company").
B. The Company conducts the business of the design, manufacture and sale
of customer premises telecommunications access products (as conducted from time
to time on or prior to the Closing (as defined below), the "Business").
C. Seller desires to sell to Buyer, and Buyer desires to buy from
Seller, the Stock.
D. In consideration of the mutual representations, warranties, covenants
and agreements, and upon the terms and subject to the conditions hereinafter
set forth, the parties, intending to be legally bound, do hereby agree as
follows:
ARTICLE I
TERMS OF PURCHASE AND SALE
1.1 Sale of the Stock
(a) On the Closing Date (as defined in Section 1.2), Seller shall
sell to Buyer, and Buyer shall purchase from Seller, the Stock.
(b) At the Closing (as defined in Section 1.2), in full
consideration for the conveyance, sale, transfer and assignment of the Stock,
Buyer shall deliver and pay to Seller an aggregate purchase price of Ten
Million Dollars ($10,000,000.00) (the "Purchase Price"), payable by wire
transfer of immediately available funds.
1.2 The Closing
The closing of the transactions contemplated hereby (the "Closing")
shall take place at the offices of Xxxxxx, Xxxxxx & Xxxxxxxxx, 0000 X Xxxxxx,
X.X., Xxxxxxxxxx, D.C.
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20037, as of 11:59 p.m., local time, on November 16, 1998, or on such other date
or at such other place as the parties may mutually agree (the "Closing Date").
1.3 Closing Deliveries
(a) At the Closing, Seller shall deliver or cause to be delivered to
Buyer:
(i) certificates representing the Stock (collectively, the
"Stock Certificates"), duly endorsed in blank for transfer or accompanied by
duly executed stock powers assigning the Stock in blank (the "Stock Powers");
(ii) an executed counterpart of cross-receipt acknowledging
receipt of the Purchase Price; and
(iii) the certificates and other documents required to be
delivered pursuant to Article VIII.
(b) At the Closing, Buyer shall deliver to Seller:
(i) the Purchase Price;
(ii) an executed counterpart of cross-receipt acknowledging
receipt of the Stock Certificates and Stock Powers; and
(iii) the certificates and other documents required to be
delivered pursuant to Article IX.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof as follows:
2.1 Seller's Corporate Power and Authority: Effect of Agreement.
(a) Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby.
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(b) The execution, delivery and performance by Seller of this
Agreement and the consummation by Seller of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Seller.
(c) This Agreement has been duly and validly executed and delivered
by Seller and constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except to the extent
that such enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally ("Debtor Relief Laws"), and (ii) is subject to general principles of
equity.
(d) The execution, delivery and performance by Seller of this
Agreement and the consummation by Seller of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both (x) violate any provision of any law, rule or regulation to which Seller
or the Company is subject, (y) violate any order, judgment or decree applicable
to Seller or the Company or (z) violate any provision of the Certificate of
Incorporation or the Bylaws of Seller or the Company; except, in each case, for
violations which in the aggregate would not have a material adverse effect on
the business or the assets, liabilities, results of operations or financial
condition of the Company (a "Material Adverse Effect").
2.2 Capitalization.
The authorized capital stock of the Company consists of One Hundred
(100) shares of common stock, par value $1.00 per share, of which One Hundred
(100) shares are issued and outstanding, all of which issued and outstanding
shares of the Company are owned of record and beneficially by Seller. All of the
shares constituting the Stock are validly issued, fully paid and nonassessable.
Except as set forth on Schedule 2.2, there are no outstanding securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of the Company or subscriptions, warrants, options, rights or other
arrangements or commitments obligating the Company to issue or dispose of any of
their respective equity securities or any ownership interest therein. The sale
and delivery of the Stock to Buyer pursuant to Article I will vest in Buyer
legal and valid title to the Stock, free and clear of all liens, security
interests or other encumbrances ("Encumbrances") other than Encumbrances created
or suffered by Buyer.
2.3 Organization: Subsidiaries.
The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as it
is now being conducted. The Company is duly qualified to do business and is in
good standing as a foreign corporation in all jurisdictions, where the nature
of the property owned or leased by it, or the nature of the Business, makes
such qualification necessary and where the absence of such qualification would
have a Material
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Adverse Effect. True and complete copies of the charter and bylaws of the
Company have previously been delivered or made available to Buyer. The Company
owns all of the issued and outstanding capital stock of TxPort Data, Inc., a
Quebec corporation (the "Subsidiary"). Except for the Subsidiary, the Company
has no subsidiaries and does not hold any equity interests in any other entity.
2.4 Financial Statement.
Seller has delivered to Buyer the unaudited consolidated balance
sheet of the Company and Subsidiary as of December 31, 1997 and the unaudited
interim consolidated balance sheet of the Company and Subsidiary as of
September 30, 1998 (the "Balance Sheet Date") and the related unaudited
consolidated statement of income and statement of cash flows for the
twelve-month period ended December 31, 1997 and the unaudited interim
consolidated statement of income and statement of cash flows for the nine
months ended September 30, 1998 (collectively, the "Financial Statements"). The
Financial Statements present fairly in all material respects the financial
position of the Company as of such dates and the results of operations for the
periods then ended in conformity with generally accepted accounting principles
("GAAP"), except that the Financial Statements do not contain a full set of
footnotes and, in the case of interim statements included therein, are subject
to normal year-end-adjustments.
2.5 Title to Assets.
The Company has good title to all of the assets and properties which
it purports to own (including those reflected on the Balance Sheet, other than
assets and properties sold, consumed or otherwise disposed of in the ordinary
course of business since the Balance Sheet Date) and which are material
to the Business or financial condition of the Company, free and clear of all
Encumbrances, except for Permitted Encumbrances. "Permitted Encumbrances" shall
include: (i) liens for taxes, assessments and other governmental charges not
yet due and payable or due but not delinquent or being contested in good faith
by appropriate proceedings, (ii) mechanic's, carrier's, workmen's, repairmen's
or other like liens arising or incurred in the ordinary course of business;
(iii) equipment leases with third parties entered into in the ordinary course
of business; (iv) liens to secure landlords under leases or rental agreements
confined to the premises rented; (v) restrictions on the transfer of securities
imposed by applicable state and federal securities laws; (vi) Encumbrances that
individually or in the aggregate do not have a Material Adverse Effect; and
(vii) Encumbrances set forth on Schedule 2.5.
2.6 Sufficiency of Assets.
Except as set forth on Schedule 2.6, the Company owns, leases, or has
the legal right to use all the material properties and assets used in
the conduct of the Business and, with respect to contract rights, is a party to
and enjoys the right to the benefits of all contracts,
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agreements and other arrangements used in or relating to the conduct of the
Business (all such properties, assets and contract rights being the "Assets").
The Assets constitute all the material properties, assets and rights necessary
to conduct the Business as presently conducted by the Company.
2.7 Contracts.
Except as set forth on Schedule 2.7 (the "Contracts"), neither the
Company nor the Subsidiary is a party to any contract, agreement or commitment
which individually creates an obligation of more than $100,000. Neither the
Company nor the Subsidiary nor, to the knowledge of the Seller, any other
party to any Contract is currently in breach of, has improperly terminated or
is in default under any such Contract, except where such breach, termination or
default would not result in a Material Adverse Effect, and to the knowledge of
the Seller there exists no condition or event which, after notice or lapse of
time or both, would constitute any such breach, termination or default, except
where such breach, termination or default would not result in a Material
Adverse Effect. To the knowledge of the Seller, each of the Contracts is in
full force and effect and is a legal, valid and binding obligation of or
against each of the parties thereto, subject to the Debtor Relief Laws and
except where the lack of effect or legality, validity or enforceability would
not result in a Material Adverse Effect.
2.8 Patents, Trademarks, Etc.
Schedule 2.8 sets forth a list, as of the date hereof, of all
material United States or foreign patents, trademark registrations, copyright
registrations and applications therefor owned by the Company, the Subsidiary or
used in the conduct of the Business (the "Patent and Trademark Rights"). Except
as set forth on Schedule 2.8: (a) the Company owns or possesses adequate
licenses or other valid rights to use all Patent and Trademark Rights and (b)
to Seller's knowledge, the conduct of the Business as now being conducted by
the Company does not conflict with or infringe on any valid patents, trademark
registrations, trade names, trade secrets or copyrights of others in any way
which has a Material Adverse Effect. Neither the Company nor the Seller has
received any written notices of an infringement by any third party with respect
to any Patent and Trademark Rights or trade secrets.
2.9 Litigation.
Except as set forth on Schedule 2.9, there is no action or
proceeding in any court or before any governmental authority ("Litigation")
pending or, to Seller's knowledge, threatened against Seller, the Company or
the Subsidiary, (i) with respect to which there is a reasonable likelihood of a
determination which would have a Material Adverse Effect or (ii) which seeks to
enjoin or obtain damages in respect of the consummation of the transactions
contemplated
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hereby. Except as set forth on Schedule 2.9, neither the Company nor the
Subsidiary is subject to any outstanding orders, rulings, judgments or decrees
that have a Material Adverse Effect.
2.10 Compliance with Laws.
Except as disclosed to Buyer, to Seller's knowledge, the Company is in
compliance with all applicable laws, rules and regulations currently in effect,
except where the failure to comply therewith does not have a Material Adverse
Effect. The Company has all governmental permits, licenses and authorizations
necessary for the conduct of its business as currently conducted, except where
the absence thereof does not have a Material Adverse Effect. All such licenses,
franchises and other permits are in full force and effect, except where the
failure to so be does not have a Material Adverse Effect, and there are no
proceedings pending, or to Seller's knowledge threatened, that seek the
revocation, cancellation, suspension or adverse modification thereof.
2.11 Employee Benefit Plans.
Employees of the Company and its Subsidiary participate in employee
benefit plans of Xxxxxxx Corporation ("Xxxxxxx Plans") and not in plans
maintained by the Company, except as set forth on Schedule 2.11 (the "Company
Plans"). The Company Plans are in material compliance with the requirements of
applicable law and have been operated in accordance with their terms except as
would not, individually or in the aggregate, have a Material Adverse Effect. The
Company has received no written notice of the existence of any material default
or violation of any such laws or terms applicable to any of the Company Plans,
nor has it received notice of any pending material claims or lawsuits relating
to such plans (other than routine claims for benefits). The Company has not
incurred any liability in connection with the termination of or its withdrawal
from a plan subject to Title IV of the Employee Retirement Income Security Act
of 1974 ("ERISA") and has no material liability in connection with its
employees' participation in any Xxxxxxx Plan subject to ERISA's Title IV. The
Company has no union employees and does not participate in any multiemployer
plans (as defined in Section 3(37) of ERISA).
2.12 Governmental Consents.
Except as set forth on Schedule 2.12, no consent, approval or
authorization of or exemption by, or filing with, any governmental authority is
required to be obtained or made by Seller in connection with the execution,
delivery and performance by Seller of this Agreement or the taking by Seller of
any other action contemplated hereby, except where the failure to obtain such
consent, approval, authorization or exemption or the failure to so file, as
applicable, does not have a Material Adverse Effect.
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2.13 Taxes
Except as set forth on Schedule 2.13 and except as would not, individually
or in the aggregate, have a Material Adverse Effect:
(a) "Taxes" (including with correlative meaning, the terms "Tax"
and "Taxable") means all forms of taxation, whenever created or imposed,
whether imposed by a local, municipal, state, foreign, federal or other
governmental body or authority, and, without limiting the generality of the
foregoing, shall include income, gross receipts, ad valorem, excise,
value-added, sales, use, transfer, franchise, license, stamp, occupation,
withholding, employment, payroll, property and other taxes, together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental body or authority responsible for the imposition of any such tax
(a "Taxing Authority").
(b) All returns, reports or statements ("Tax Returns") required to
be filed with any Taxing Authority on or prior to the date hereof by or with
respect to the Company and the Subsidiary have been filed, except Tax Returns
for which requests for extensions have been timely filed.
(c) Company and the Subsidiary have paid all Taxes shown as due and
payable on Tax Returns that have been filed.
(d) No federal, state, local or foreign audits or other
administrative or court proceedings are presently pending with regard to any
Tax Returns or Taxes of Company or the Subsidiary, and Seller has not received
written notice from any governmental authority of the expected commencement of
such proceedings.
(e) As of the Closing Date, neither the Company nor the Subsidiary
will be a party to or have any obligations under any tax sharing agreement
(other than this Agreement).
(f) Seller has delivered to Buyer complete and correct copies of all
federal income Tax Returns filed by or with respect to the Company for the tax
periods set forth in Schedule 2.13(f) of the Seller Disclosure Schedule.
2.14 Customers and Suppliers
Attached hereto as Schedule 2.14 is (i) a true and correct customer
list showing the top twenty customers of the Company for the twelve month
period preceding the date of this Agreement by the Company, and (ii) a true and
correct supplier list showing the top ten suppliers of the Company for the
twelve month period preceding the date of this Agreement. Other than as set
forth on Schedule 2.14, since the Balance Sheet Date, no customer or supplier
of the
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Company has stopped trading with or supplying the Company, except where such
stoppage did not have a Material Adverse Effect.
2.15 Certain Events
Since the Balance Sheet Date and except as set forth on Schedule
2.15, there has not been any change in the Company or the Business that would
result in a Material Adverse Effect, other than changes in the ordinary course
of business.
2.16 Broker's Fees
Except for Nationsbanc Xxxxxxxxxx Securities LLC, the fees of which
will be paid by Seller, Seller has not taken and will not take any action that
would cause Buyer to have any obligation or liability to any Person for a
finder's or broker's fee.
2.17 Environmental Matters
(a) Definitions. For purposes of this Agreement, the following
definitions shall apply:
(i) "Hazardous Materials" shall include any hazardous
substances, pollutants, contaminants, flammable explosives, radioactive
materials and hazardous, toxic or dangerous wastes and any other chemicals,
materials or substances which are identified, defined or regulated pursuant to
any Hazardous Materials Laws, or the release, discharge or exposure to which is
prohibited, limited or regulated by any federal, state or local government under
Hazardous Materials Laws, and any petroleum, waste oil and petroleum
by-products, asbestos in any form, or urea formaldehyde.
(ii) "Hazardous Materials Laws" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act, as amended (42 U.S.C.
Section 9601, et seq.); the Hazardous Materials Transportation Act (49 U.S.C.
Section 1801, et seq.); Resource Conservation and Recovery Act (42 U.S.C.
Section 6901, et seq.); any so-called "Superfund" law; and any other law
regulating or imposing liability or standards of conduct, concerning protection
of health and safety or the environment.
(iii) "Environmental Claims" shall mean any and all
administrative, regulatory or judicial actions, suits, government demands,
liens, notices of noncompliance or violation, government investigations or
proceedings pursuant to any Hazardous Materials Law or any relating to any
permit issued under any such Law (hereafter "Claims"), including, without
limitation (A) any and all Claims by governmental or regulatory authorities for
enforcement, clean-up, removal, response, remedial or other actions or damages
pursuant to any applicable
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Hazardous Materials Law, and (B) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment from release or
disposal of Hazardous Materials.
(b) to the knowledge of Seller, the Company is in compliance in all
material respects with all Hazardous Material Laws and the requirements of all
environmental permits required for the handling, use, storage and disposition of
Hazardous Materials under Hazardous Materials Laws and are applicable to the
Company's operations as presented conducted.
(c) There are no pending or, to the knowledge of Seller, threatened
Environmental Claims against the Company or any of its subsidiaries.
(d) To the knowledge of Seller, there are no facts, circumstances,
conditions or occurrences regarding the Company, its operations or any property
of the Company that could reasonably be anticipated to form the basis of an
Environmental Claim against the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as of the date hereof as
follows:
3.1 Corporate Power and Authority: Effect of Agreement.
(a) Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby.
(b) The execution, delivery and performance by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Buyer.
(c) This Agreement has been duly and validly executed and delivered
by Buyer and constitutes the valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except to the extent that such
enforceability (i) may be limited by Debtor Relief Laws, and (ii) is subject to
general principles of equity.
(d) The execution, delivery and performance by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated hereby
will not, with or without the
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giving of notice or the lapse of time, or both (x) violate any provision of any
law, rule or regulation to which Buyer is subject, (y) violate any order,
judgment or decree applicable to Buyer or (z) violate any provision of the
Certificate of Incorporation or the Bylaws of Buyer; except, in each case, for
violations which individually or in the aggregate would not have a material
adverse effect on the rights of Seller or the ability of Buyer to perform its
obligations hereunder (a "Buyer Material Adverse Effect").
3.2 Governmental Consents.
Except as set forth Schedule 3.2 and except for filings required by
the HSR Act, no consent, approval or authorization of or exemption by, or
filing with, any governmental authority is required to be obtained or made by
Buyer in connection with the execution, delivery and performance by Buyer of
this Agreement or the taking by Buyer of any other action contemplated hereby,
except where the failure to obtain such consent, approval, authorization or
exemption or the failure to so file, as applicable, does not have a Buyer
Material Adverse Effect.
3.3 Availability of Funds.
Buyer has and will have available on the Closing Date sufficient funds
to enable it to consummate the transactions contemplated by this Agreement.
3.4 Litigation.
There is no Litigation pending or, to Buyer's knowledge, threatened
against Buyer, (i) with respect to which there is a reasonable likelihood of a
determination which would have a Buyer Material Adverse Effect, or (ii) which
seeks to enjoin or obtain damages in respect of the consummation of the
transactions contemplated hereby. Buyer is not subject to any outstanding
orders, rulings, judgments or decrees that would have a Buyer Material Adverse
Effect.
3.5 Purchase for Investment.
Buyer is purchasing the Stock for investment and not with a view to
any public resale or other distribution thereof, except in compliance with
applicable securities laws. Buyer acknowledges that it has received, or has had
access to, all information which it considers necessary or advisable to enable
it to make a decision concerning its purchase of the Stock. Buyer acknowledges
that the transfer hereunder of the Stock will be effected without registration
under the Securities Act of 1933 (the "Act"), as amended, or any Blue Sky laws
of any state which are applicable, in reliance upon the exemptions from
registration afforded by the Act and the appropriate provisions of such Blue
Sky laws, respectively. Buyer acknowledges that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
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the merits and risks of an investment in the Stock and is able to bear the
economic risk and lack of liquidity inherent in holding the Stock.
3.6 Broker's Fees.
Buyer has not taken and will not take any action that would cause
Seller to have any obligation or liability to any Person for a finder's or
broker's fee.
ARTICLE IV
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
4.1 Cooperation by Seller.
From the date hereof until the Closing, Seller will cooperate with
Buyer to secure all necessary consents, approvals, authorizations, exemptions
and waivers from third parties as shall be required in order to enable Seller
to effect the transactions contemplated hereby and will otherwise use its
reasonable efforts to cause the consummation of such transactions in accordance
with the terms and conditions hereof.
4.2 Conduct of Business.
Except as may be otherwise contemplated by this Agreement or required
by any of the documents listed on the attached Schedules or except as Buyer may
otherwise consent in writing (which consent shall not be unreasonably
withheld), from the date hereof until the Closing, Seller will cause the
Company: (i) to operate its business in all material respects only in the
ordinary course consistent with past practice; (ii) to maintain its properties,
machinery and equipment in sufficient operating condition and repair to enable
it to operate its Business in all material respects in the manner in which such
Business is currently operated, except for maintenance or replacements required
by reason of fire, flood, earthquake or other acts of God; (iii) to use its
reasonable efforts to continue all material existing insurance policies (or
comparable insurance) of or relating to it in full force and effect, (iv) not
to enter into any intercompany transaction, other than in the ordinary course
of business consistent with past practice; (v) not to amend its bylaws or other
organizational documents in any manner, (vi) not to sell, lease, license or
otherwise dispose of, or agree to sell, lease, license or otherwise dispose of
any interest in, any of its material assets, except for sales in the ordinary
course of business; (vii) not to permit or allow any of its material assets to
become subject to any Encumbrance, except for Permitted Encumbrances; (viii)
except in the ordinary course of business or as required by law or contractual
obligations or other agreement existing on the date hereof or as would not be
accrued as an expense, not to increase in any manner the compensation of or
enter into any new
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bonus or incentive agreement or arrangement with any of its officers, (ix) not
to change accounting methods, principles or policies, except as required by
GAAP; (x) not to acquire or agree to acquire, by merging or consolidating with,
or acquiring by purchasing, a substantial portion of the assets of, or in any
other manner, any business or any corporation, partnership, association or
business organization or division thereof; or (xi) not to enter into any
legally binding commitment to do any of the foregoing.
4.3 Access.
(a) From the date hereof until the Closing, Seller shall provide
Buyer with such information as Buyer may, from time to time, reasonably request
with respect to the Company and the transactions contemplated by this Agreement
and shall provide Buyer and its representatives reasonable access during
regular business hours and upon reasonable notice to the properties, books and
records of the Company as Buyer may, from time to time, reasonably request;
provided, however, that Seller shall not be obligated to provide Buyer with any
information which would violate any law, rule or regulation or term of any
agreement or contract, or if the provision thereof would adversely affect the
ability of Seller or any of its Affiliates (including the Company) to assert
any attorney-client, attorney workproduct or other similar privilege. Any
disclosure whatsoever during any due diligence investigation by Buyer shall
not constitute an enlargement of or additional representations or warranties of
Seller beyond those specifically set forth in this Agreement.
(b) For the period from the date hereof through the date of the
Closing, Buyer agrees not to initiate or cause to be initiated any
communication with any customer, supplier or employee of the Company without
such communication being directed through the persons specified on Schedule
4.3. Buyer acknowledges and agrees that any breach by it of the provisions of
this Section 4.3(b) will cause Seller irreparable injury and damage, for which
Seller cannot be adequately compensated in damages. Buyer, therefore, expressly
agrees that Seller shall be entitled to obtain injunctive relief and other
equitable relief to prevent any anticipatory breach or continuing breach of the
provisions of this Section 4.3(b), or any part thereof, and to secure the
enforcement of such relief. Nothing herein shall be construed as a waiver by
Seller of any right it may now have or hereafter acquire to monetary damages by
reason of any injury to its property, business or reputation or otherwise
arising out of any wrongful act or omission of Buyer under the provisions of
this Section 4.3(b).
4.4 Notification of Certain Matters.
From the date hereof through the Closing, Seller shall give prompt
notice to Buyer of (i) the occurrence, or failure to occur, of any event which
occurrence or failure to occur would be likely to cause Seller's
representations or warranties contained in this Agreement to be
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untrue or inaccurate in any material respect and (ii) any material failure of
Seller to comply with or satisfy any of its respective covenants, conditions or
agreements under this Agreement
4.5 Intercompany Obligations.
Seller shall cause or shall have caused all outstanding intercompany
obligations between Seller and its Affiliates (other than the Company) on the
one hand, and the Company on the other hand, to be settled or terminated at or
prior to Closing, other than obligations that reflect amounts owed for actual
services performed or goods delivered in the ordinary course or pursuant to
contracts or agreements that will survive the Closing.
4.6 Further Assurances.
At any time or from time to time after the Closing, Seller shall, at the
request of Buyer and at Buyer's expense, execute and deliver any further
instruments or documents and take all such further action as Buyer may
reasonably request in order to evidence or effect the consummation of the
transactions contemplated hereby.
ARTICLE V
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.1 Cooperation by Buyer.
From the date hereof up to and including the Closing Date, Buyer
shall use its reasonable efforts, and shall cooperate with Seller, to secure all
necessary consents, approvals, authorizations, exemptions and waivers from
third parties as are required in order to enable Buyer to take any actions
contemplated hereby and shall otherwise use its reasonable efforts to cause the
consummation of such transactions in accordance with the terms and conditions
hereof.
5.2 Books and Records: Personnel.
For a period of seven years from the Closing Date and subject to the
provisions of Section 6.1(d) related to Taxes:
(a) Buyer shall not, and shall cause the Company not to, dispose of
or destroy any of the books and records of the Company relating to periods
before the Closing ("Books and Records") without first offering to turn over
possession thereof to Seller by written notice to Seller at least thirty (30)
days before the proposed date of such disposition or destruction.
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(b) Buyer shall, and shall cause the Company to, allow Seller and
its agents reasonable access to all Books and Records during normal working
hours at Buyer's principal place of business or at any location where any Books
and Records are stored, and Seller shall have the right, at its own expense, to
make copies of any Books and Records; provided, however, that any such access
or copying shall be made or done in such a manner so as not to interfere with
the normal conduct of Buyer's or the Company's business, as applicable.
(c) In the event that a claim is asserted against Seller or any of
its Affiliates relating to the Company, this Agreement or the transactions
contemplated hereby, Buyer, on its own behalf and on behalf of the Company,
agrees to cooperate (at no expense to the Buyer or the Company, except as
otherwise set forth herein) with Seller in the defense of such claim.
5.3 Notification of Certain Matters.
From the date hereof through the Closing, Buyer shall give prompt
written notice to Seller of (i) the occurrence, or failure to occur, of any
event which occurrence or failure to occur would be likely to cause the Buyer's
respective representations or warranties contained in this Agreement to be
untrue or inaccurate in any material respect and (ii) any material failure of
the Buyer to comply with or satisfy any of its respective covenants, conditions
or agreements to be complied with or satisfied by it under this Agreement.
5.4 Employment Agreements.
Buyer acknowledges that the Company will retain responsibility for
the employment and retention agreements set forth on Schedule 5.4 and Buyer
covenants and agrees to cause the Company to perform its obligations under
those agreements following the Closing.
5.5 No Additional Representations.
Buyer acknowledges that neither Seller nor any of its Affiliates nor
any other Person has made any representation or warranty, expressed or implied,
as to the accuracy or completeness of any information regarding the Company
furnished or made available to Buyer and its representatives, except as
expressly set forth in Article II of this Agreement or in the Schedules
attached hereto, and neither Seller nor any of its Affiliates nor any other
Person shall have or be subject to any liability to Buyer or any other Person
resulting from the distribution to Buyer, or Buyer's use of, any such
information, including any information, documents or material made available to
Buyer in certain "data rooms," management presentations or in any other form in
expectation of the transactions contemplated hereby.
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5.6 Further Assurances.
At any time or from time to time after the Closing Buyer shall, at
the request of Seller and at Seller's expense, execute and deliver any further
instruments or documents and take all such further action as Seller may
reasonably request in order to evidence or effect the consummation of the
transactions contemplated hereby.
5.7 Discharge of Company Obligations.
Buyer shall to cause all obligations and liabilities of the Company,
whether arising from facts existing or events occurring prior to or after the
Closing Date, to be paid, satisfied or discharged when due following the
Closing Date.
5.8 Madison, Alabama Lease.
The Buyer covenants and agrees to use its reasonable efforts and to
cooperate with the Seller and the landlord for the Company's Madison, Alabama
premises to enter into a sublease for the portion of the premises used by
Communications Technology Corporation ("CTC") for a minimum of twenty-four
months from the Closing Date on terms that reflect the proportionate share of
the premises occupied by CTC and the Company; provided, however, that such
sublease shall contain a provision requiring physical separation of CTC's
portion of the premises on or before April 1, 1999.
ARTICLE VI
ADDITIONAL COVENANTS AND ACKNOWLEDGMENTS
6.1 Taxes.
(a) Filing of Returns and Payment of Taxes.
(i) Seller shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns that are required to be filed with respect to
the Company for any taxable year or any other period that is treated as a
taxable year with respect to which any Tax may be imposed under any applicable
statute, rule or regulation (a "Taxable Period") ending on or before the
Closing Date, including such Tax Returns as are due after the Closing Date.
Seller shall pay or cause to be paid all Taxes reported on such Tax Returns
that have not already been paid to the Taxing Authority; provided, however,
that upon the latter of (i) Buyer's receipt of a reasonably documented request
therefor or (ii) five business days prior to the due date of any payment to the
relevant governmental authority, Buyer shall pay to Seller
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any such Taxes accrued on the Closing Balance Sheet that have not already been
paid to the Taxing Authority.
(ii) Buyer shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns that are required to be filed with respect to
Company for any Taxable Period that begins on or before and ends after the
Closing Date ("Straddle Periods"). Seller shall have the right to review and
consent to the filing on the Tax Returns prepared by Buyer pursuant to the
preceding sentence. To make possible such review and consent, Buyer shall
deliver copies of such Tax Returns to Seller at least thirty (30) days prior to
the due date for filing such Tax Returns. Buyer shall pay or cause to be paid
all Taxes shown as due on such Tax Returns. Upon the latter of (i) Seller's
receipt of a reasonably documented request therefor, (ii) five business days
prior to the due date of any payment to the relevant governmental authority, or
(iii) five days following the resolution of any dispute pursuant to the next
succeeding sentence, Seller shall pay to Buyer any Taxes shown as due on such
Tax Returns that relate to the portion of the applicable Straddle Period ending
on the Closing Date, except to the extent such Taxes are accrued on the Closing
Balance Sheet. In the event that there is a dispute with respect to any position
to be taken on any Straddle Period Tax Return or the apportionment of Taxes
reported on a Straddle Period Tax Return to the portion of the Straddle Period
ending on the Closing Date, such dispute shall be resolved by the Chicago,
Illinois office of PricewaterhouseCoopers LLC or such other independent
accountant as the parties hereto mutually agree upon (the "Neutral
Accountant") pursuant to the procedures described in Section 1.3(c) of this
Agreement. The resolution of such dispute by the Neutral Accountant shall be
final, binding and conclusive.
(iii) All Tax Returns prepared and filed with respect to the
Company pursuant to this Section 6.1(a) shall be prepared on a basis consistent
with the last previous such Tax Returns filed in respect of the Company, unless
Seller or Buyer, as the case may be, reasonably determines that there is no
reasonable basis for such position.
(iv) Buyer shall not (i) file any amended Tax Return with respect
to the Company with respect to any Taxable Period that began on or before the
Closing Date; (ii) carry back any loss of the Company or any other Tax attribute
to a period that began on or before the Closing Date; or (iii) take or advocate
any position with respect to Taxes that reasonably could be expected to
adversely affect Seller.
(b) Apportionment. For purposes of apportioning Taxes for any Straddle
Period, the parties hereto shall treat the Closing Date as the last day of such
period (i.e. the parties shall "close the books" as of close of business on such
date) and shall elect to do so if permitted by applicable law. Notwithstanding
the foregoing, in the case of (i) franchise taxes based on capitalization, debt,
or shares of stock authorized, issued, or outstanding and (ii) ad valorem taxes,
in either case attributable to any Straddle Period, the portion of such Taxes
attributable to the Taxable Period or portion thereof that ends on or before the
Closing Date (the
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"Pre-Closing Period") shall be the amount of such Taxes for the entire Taxable
Period, multiplied by a fraction the numerator of which is the number of days in
such Taxable Period ending on and including the Closing Date and the denominator
of which is the entire number of days in such Taxable Period; provided, however,
that if the capitalization, debt, shares, property or other basis on which such
Taxes are computed changes materially during such Taxable Period, separate
allocations shall be made with respect to the portion of the Taxable Period
ending on and including such change and the portion of the Taxable Period after
such change.
(c) Tax Refunds and Credits. Any Tax refunds that are received by
Buyer or by the Company and any amounts credited against Tax to which Buyer or
the Company become entitled that relate to Pre-Closing Periods of Company
shall be for the account of Seller. Buyer shall pay over to Seller any such
refund or the amount of any such credit within ten (10) days after receipt
thereof or entitlement thereto by Buyer or the Company.
(d) Cooperation and Books and Records. After the Closing Date,
Seller and Buyer shall (a) provide, and shall cause their Affiliates to
provide, to the other party and its Affiliates (at the expense of the
requesting party) such information relating to the Company as the other party
may reasonably request with respect to Tax matters; (b) cooperate with each
other in connection with the preparation and filing of Tax Returns pursuant to
Section 6.1(a) and in the conduct of any audit or other proceedings with
respect to any Tax involving the Company; and (c) retain or cause to be
retained all books and records pertinent to the Company for all Pre-Closing
Periods until the expiration of the applicable statute of limitations (giving
effect to any and all extensions and waivers).
(e) Transfer Taxes. All transfer, documentary, sales, use,
registration and other such Taxes, and any penalties, interest and additions to
such Taxes, that are incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid one-half by Seller and one-half
by Buyer, except to the extent that, under applicable law, such Taxes are the
sole obligation of Seller, in which event Seller shall pay any such Tax and
Buyer shall reimburse Seller for one-half of such Taxes. The parties to this
Agreement shall cooperate in the timely making of all filings, returns, reports
and forms as may be required in connection therewith.
6.2 Required Consents.
Buyer agrees that Seller shall not have any liability whatsoever to
Buyer arising out of or relating to any failure to obtain any consent, approval
or authorization from any party to any Contract which is or may be required to
be obtained in connection with the execution, delivery or performance by Seller
of this Agreement or the taking by Seller of any other action contemplated
hereby (a "Required Consent") or because of the termination of any such
contract as a result thereof. The Required Consents are set forth on Schedule
6.2 attached hereto. Buyer
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further agrees that no representation, warranty or covenant of Seller contained
herein shall be breached or deemed breached as a result of (i) the failure to
obtain any such Required Consent, (ii) any such termination or (iii) any
lawsuit, action, proceeding or investigation commenced or threatened by or on
behalf of any Person arising out of or relating to the failure to obtain any
such Required Consent or any such termination.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by Buyer. From and after the Closing Date, Buyer
shall indemnify, defend and hold Seller and each of its Affiliates (other than
the Company) and each of their respective directors, officers and employees
(collectively, the "Seller Group") harmless from and against any and all
claims, losses, liabilities, damages, costs and expenses (including reasonable
attorney's fees) (collectively, "Losses") that may be suffered or incurred by,
or asserted against, the Seller Group, arising from or related to:
(a) any inaccuracy in or breach of any representation or warranty of
Buyer contained herein or in any certificate, document or instrument delivered
by or on behalf of the Buyer in connection with the transactions contemplated
hereby;
(b) any breach of any covenant, obligation or agreement of Buyer
contained herein or in any certificate, document or instrument delivered by or
on behalf of the Buyer in connection with the transactions contemplated hereby;
(c) any and all losses incident to the foregoing or to the
enforcement of this Section 7.1.
7.2 Indemnification by Seller. From and after the Closing Date, Seller
shall indemnify, defend and hold Buyer and each of its directors, officers and
employees (collectively, the "Buyer Group") harmless from and against any and
all Losses that may be suffered or incurred by, or asserted against, the Buyer
Group, arising from or related to:
(a) any inaccuracy in or breach of any representation or warranty of
Seller contained herein or in any certificate, document or instrument delivered
by or on behalf of Seller in connection with the transactions contemplated
hereby;
(b) any breach of any covenant, obligation or agreement of Seller
contained herein or in any certificate, document or instrument delivered by or
on behalf of Seller in connection with the transactions contemplated hereby;
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(e) any unpaid Taxes of the Company for the Pre-Closing Period
(determined consistently with Section 6.2 hereof).
(d) any and all losses incident to the foregoing or to the
enforcement of this Section 7.2.
7.3 Indemnification Amounts. Any Tax or other Loss for which
indemnification is provided under this Agreement shall be (i) increased to take
account of any net Tax Cost incurred by the indemnified party arising from the
receipt of indemnity payments hereunder (i.e., grossed-up for any Tax incurred
on such increase) and (ii) reduced to take account of any net Tax Benefit
realized by the indemnified party arising from the incurrence or payment of any
such Tax or other amount. Any indemnity payment under this Agreement shall
be treated as an adjustment to the Purchase Price for Tax purposes unless a
final determination with respect to the indemnified party or any of its
Affiliates causes such payment not to be treated as an adjustment to the
Purchase Price for U.S. federal income tax purposes. For purposes of this
Section 7.3, "Tax Cost" means the amount of the actual increase in an
indemnified party's liability for Taxes, as a result of the payment or accrual
of any loss, expense or Tax, for the Taxable Period in which such payment or
accrual occurs; and "Tax Benefit" means the amount of the reduction in an
indemnified party's liability for Taxes actually realized, as a result of the
payment or accrual of any loss, expense or Tax, for the Taxable Period in which
such payment or accrual occurs.
7.4 Limitation and Expiration.
There shall be no liability for indemnification under Section 7.1
unless, and solely to the extent that, the aggregate amount of Losses of the
Seller Group exceeds one percent of the Purchase Price. There shall be no
liability for indemnification under Section 7.2 unless, and solely to the
extent that, the aggregate amount of Losses of the Buyer Group exceeds one
percent of the Purchase Price. The aggregate amount of Seller's liability under
this Agreement shall not exceed one-half of the Purchase Price. The rights of
Seller Group or Buyer Group, as applicable, to indemnification under Section
7.1 or Section 7.2, respectively, shall apply only to those claims for
indemnification which are delivered pursuant hereto on or before the expiration
of the relevant representation, warranty or covenant to which such claim
relates, as set forth in Section 7.7.
7.5 Indemnification Procedures.
(a) Except for matters related to Taxes, which shall be governed by
Section 7.6, if any third party shall notify any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other party (the "Indemnifying
Party") under this Section 7.5, then the Indemnified Party shall promptly
notify the Indemnifying Party thereof in writing; provided, however, that no
delay on
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the part of the Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced by such
delay.
(b) The Indemnifying Party shall have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as the Indemnifying
Party notifies the Indemnified Party in writing within 30 days after receipt
of notice from the Indemnified Party regarding such claim. So long as the
Indemnifying Party is diligently conducting the defense of such claim as
provided in the immediately preceding sentence, the Indemnified Party may
retain separate co-counsel at its sole cost and expense and may participate in
defense of such claim, and the Indemnifying Party will not consent to the entry
of judgment or enter into any settlement with respect to such claim unless such
judgment or settlement contains an unconditional term providing that the
claimant in question release the Indemnified Party of and from all liability in
respect of such claim.
(c) In the event the Indemnifying Party does not assume defense of
such claim or diligently defend such claim as so provided, (x) the Indemnified
Party shall defend against such claim (provided that the Indemnified Party
shall not settle such claim unless such judgment or settlement contains an
unconditional term providing for a release to be given by the claimant in
question to the Indemnifying Party of and from all liability with respect to
such claim) and (y) the Indemnifying Party will remain responsible for any
Losses the Indemnified Party may suffer as a result of such claim to the full
extent provided in this Section 7.5(c). Regardless of which party shall
assume the defense of such claim, each party shall provide to the other parties
on request all information and documentation reasonably necessary to support
and verify any Losses which give rise to such claim for indemnification and
shall provide reasonable access to all books, records and personnel in their
possession or under their control which would have a bearing on such claim.
(d) In the event that any Indemnified Party has a claim against any
party obligated to provide indemnification pursuant to Section 7.1 or 7.2
hereof which does not involve a Third Party Claim, the Indemnified Party shall
with reasonable promptness notify the Indemnifying Party of such claim,
specifying the nature of such claim and the amount or the estimated amount
thereof to the extent then feasible (the "Claim Notice"). If the Indemnifying
Party does not notify the Indemnified Party within thirty (30) days after the
date of delivery of the Claim Notice that the Indemnifying Party disputes such
claim, with a detailed statement of the basis of such position, the amount of
such claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in accordance with this
Section 7.5(d), the Indemnified Party shall respond in a written statement to
the objection within fifteen (15) days and, for sixty (60) days thereafter, the
parties shall attempt in good faith to agree upon the rights of the respective
parties with respect to each of such claims (and, if the parties should so
agree, a memorandum setting forth such agreement shall be prepared and signed by
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both parties). If the parties do not so agree, then either party may pursue its
remedies under law following the aforesaid 60-day period.
7.6 Tax Contests.
(a) If any party (or any of their Affiliates) receives any written
notice from any governmental authority of any proposed adjustment, adjustment,
notice of deficiency, assessment, audit, examination, suit, or other claim or
administrative or judicial proceeding relating to Taxes or Tax Returns (a "Tax
Claim") with respect to any Tax or Taxable Period for which the other party may
be obligated to provide indemnification under this Agreement, such party shall
(i) give prompt written notice thereof to the other party, and (ii) furnish the
other party with copies of all relevant correspondence received from the
governmental authority. The failure to give such notice shall eliminate the
indemnification obligations of the other party hereunder if and to the extent
that such failure materially prejudices the rights of the other party.
(b) Seller and its duly appointed representatives shall have the
sole right to control and make all decisions with respect to any Tax Claim
relating to (i) a Taxable Period of the Company ending on or before the Closing
Date, or (ii) any other issue that could result in Seller being obligated to
provide indemnification under this Agreement. Without limiting the generality
of the foregoing, Seller may in its sole discretion pursue or forego any and
all administrative appeals, proceedings, hearings and conferences with any Tax
authority with respect to such Tax Claim, and may in its sole discretion either
pay any Tax asserted to be due and xxx for a refund where applicable law
permits or contest or settle the Tax Claim in any legally permissible manner.
Buyer or Company, as appropriate, shall execute or cause to be executed such
powers of attorney or other documents as may be necessary to enable Seller to
take all actions it deems appropriate with respect to such Tax Claim. Seller
shall keep Buyer reasonably informed of the nature of all actions taken with
respect to such Tax Claim, shall consult in good faith with Buyer with respect
to the contest of such Tax Claim and shall permit Buyer to review and comment
on all material written submissions with respect to such Tax Claim. If Seller
does not assume the defense of any Tax Claim described in this Section 7.6(b),
Buyer or Company may defend the same in such manner as it may deem appropriate,
including but not limited to settling such Tax Claim with the consent of
Seller, which consent shall not be unreasonably withheld.
(c) Seller and Buyer shall jointly control and participate in all
proceedings taken in connection with any Tax Claim relating to Taxes of Company
for any Straddle Period. Neither Seller nor Buyer shall settle any such Tax
claim without the prior written consent of the other.
(d) Seller and Buyer shall each bear its own expenses incurred in
connection with the contest by such party of any Tax Claims.
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7.7 Survival of Representations and Warranties. The representations and
warranties of the parties hereto made herein and in any other certificates,
documents and instruments delivered in connection herewith shall survive for
one year after the Closing Date. All covenants of the parties that are to be
performed after Closing shall continue in effect and expire in accordance with
their respective terms.
7.8 Other Indemnity Matters.
(a) From and after the Closing, Buyer's sole and exclusive remedy
with respect to any and all claims relating to the subject matter of this
Agreement shall be pursuant to the indemnification provisions set forth in this
Article VII. In furtherance of the foregoing, Buyer hereby waives, on its own
behalf and on behalf of the Buyer Group, to the fullest extent permitted under
applicable law, and agrees not to assert in any action or proceeding of any
kind, any and all rights, claims and causes of action it or the Buyer Group may
now or hereafter have against Seller other than claims for indemnification
asserted as permitted by and in accordance with the provisions set forth in
this Article VII.
(b) No party shall be liable, and no claim for indemnification may
in any event be asserted under this Article VII, for any loss of profits or
consequential, punitive or similar damages.
(c) Notwithstanding anything to the contrary contained in this
Agreement, if the Closing occurs, (i) no claim for indemnification may be
asserted by the Buyer Group against Seller under this Article VII with respect
to any matter discovered by or known to Buyer Group on or before the Closing
Date, and (ii) no claim for indemnification may be asserted by the Seller Group
against Buyer under this Article VII with respect to any matter discovered by or
known to Seller Group on or before the Closing Date.
(d) Upon making any payment to an Indemnified Party for any
indemnification claim pursuant to this Article VII, the Indemnifying Party
shall be subrogated, to the extent of such payment, to any rights which the
Indemnified Party may have against any other Persons with respect to the
subject matter underlying such indemnification claim.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligation of Buyer to purchase the Stock shall be subject to the
satisfaction (or waiver by Buyer) on or before the Closing Date of all of the
following conditions:
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8.1 Representations, Warranties and Covenants of Seller.
All representations and warranties of Seller contained in this
Agreement shall be true and accurate in all material respects as of the Closing
Date as if made on the Closing Date, except for changes permitted or
contemplated by this Agreement, and Seller shall have complied in all material
respects with its agreements and covenants contained herein to be performed on
or before the Closing Date. Buyer shall have received a certificate of Seller,
dated as of the Closing Date and signed by an officer of Seller, certifying as
to the fulfillment of the conditions set forth in this Section 8.1 (the
"Seller's Certificate").
8.2 No Prohibition.
No statute, rule or regulation or order of any court or
administrative agency shall be in effect which prohibits Buyer from
consummating the transactions contemplated hereby.
8.3 Governmental Consents.
All consents, approvals, authorizations, exemptions and waivers
from governmental agencies necessary for Buyer to purchase the Stock shall have
been obtained, (except for such consents, approvals, authorizations, exemptions
and waivers, the absence of which would not prohibit such purchase or render
such purchase illegal or have a Material Adverse Effect).
8.4 Secretary's Certificate of Seller.
Buyer shall have received a Secretary's Certificate of Seller
dated as of the Closing Date certifying as to the incumbency and signatures of
the officers of Seller and that attached to such certificate is a true and
complete copy of (i) the Certificate of Incorporation of Seller, (ii) the
By-laws of Seller, and (iii) the resolutions of the Board of Directors of
Seller authorizing the execution and delivery of this Agreement and the
transactions contemplated hereby.
8.5 Buyer's Frustration of Closing Conditions.
Buyer may not rely upon the failure of any condition set forth in
this Article XIII to be satisfied if such failure was caused by Buyer's failure
to act in good faith or to use its reasonable efforts to cause the Closing to
occur as required pursuant to Section 5.1.
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8.6 Opinion of Counsel.
Buyer shall have received an opinion of Xxxxxx, Xxxxxx &
Xxxxxxxxx, counsel to the Seller in a form customary for comparable
transactions.
ARTICLE IX
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of Seller to sell the Stock shall be subject to the
satisfaction (or waiver by Seller) on or before the Closing Date of all of the
following conditions:
9.1 Representations, Warranties and Covenants of Buyer.
All representations and warranties of Buyer contained in this
Agreement shall be true and accurate in all material respects as of the Closing
Date as if made on the Closing Date, except for changes permitted or
contemplated by this Agreement, and Buyer shall have complied in all material
respects with its agreements and covenants contained herein to be performed on
or before the Closing Date. Seller shall have received a certificate of Buyer,
dated as of the Closing Date and signed by an officer of Buyer, certifying as
to the fulfillment of the conditions set forth in this Section 9.1 (the
"Buyer's Certificate").
9.2 No Prohibition.
No statute, rule or regulation or order of any court of
administrative agency shall be in effect which prohibits Seller from
consummating the transactions contemplated hereby.
9.3 Governmental Consents.
All consents, approvals, authorizations, exemptions and waivers
from governmental agencies necessary for Seller to sell the Stock to Buyer,
shall have been obtained (except for such consents, approvals, authorizations,
exemptions and waivers, the absence of which would not prohibit such sale or
render such sale illegal).
9.4 Required Consents.
All Required Consents the absence of which would have a material
adverse effect on Seller shall have been obtained.
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9.5 Secretary's Certificate of Buyer.
Seller shall have received a Secretary's Certificate of Buyer dated
as of the Closing Date certifying as to the incumbency and signatures of the
officers of Buyer and that attached to such certificate is a true and complete
copy of (i) the Certificate of Incorporation of Buyer, (ii) the By-laws of
Buyer, and (iii) the resolutions of the Board of Directors of Buyer authorizing
the execution and delivery of this Agreement and the transactions contemplated
thereby.
9.6 Seller's Frustration of Closing Conditions.
Seller may not rely upon the failure of any condition set forth in
this Article IX to be satisfied if such failure was caused by Seller's failure
to act in good faith or to use its reasonable efforts to cause the Closing to
occur as required pursuant to Section 4.1.
9.7 Sublease of Huntsville, Alabama Facility.
CTC, the Company and the landlord of the Madison Alabama premises
leased by the Company shall have entered into a sublease for a portion of the
premises leased by the Company on terms satisfactory to the Seller and the
Buyer.
9.8 Opinion of Buyer's Counsel.
Seller shall have received an opinion of Xxxxxx Tennis, Esq., Vice
President and General Counsel of Buyer, in a form customary for comparable
transactions.
ARTICLE X
TRANSITION MATTERS
10.1. WARN Act.
The Buyer shall indemnify the Seller and its Affiliates and defend and
hold each of them harmless from and against all Losses which may be incurred by
any of them under the Worker Adjustment and Retraining Notification Act of 1988
("WARN") or any state plant closing or notification law or otherwise, arising
out of, or relating to, any actions taken by the Buyer or the Company on or
after the Closing Date.
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10.2 Data Processing System Access.
CTC shares the Company's data processing and accounting systems. CTC
is in the process of migrating its accounting and data processing systems to a
separate system. This process shall be completed on or prior to August 1, 1999.
The Buyer covenants and agrees that it will cause the Company to continue to
provide CTC access to the Company's accounting and data processing systems and
any necessary personnel for the purpose of migrating such systems and data to a
separate CTC system.
10.3 Non-Competition: Non-Solicitation.
(a) Seller covenants and agrees that for a two-year period following the
Closing Date, it will not (a) directly engage in a Competitive Business (as
defined below); and (b) not knowingly solicit or attempt to hire any employee
of the Company or the Subsidiary; provided, however, that the foregoing shall
not preclude Seller from hiring any employee of the Company or the Subsidiary
who responds to any publicly advertised employment opportunity with Seller;
provided further, that the provisions of this Section 10.3(a) shall in no way
bind or restrict Xxxxxxx Corporation or any of its present or future Affiliates
other than Seller. As used herein, the term "Competitive Business" shall mean
any business engaged in the sale of products that directly compete with the
products of the Company listed on Schedule 10.3.
(b) Notwithstanding the foregoing, Seller may, without violating the
provisions of Section 10.3(a), (i) own as a passive investment not in excess of
five percent (5%) of the outstanding capital stock of a corporation which
engages in a Competitive Business, and (ii) acquire any entity or business
whose operations would be deemed a Competitive Business, provided that (x) the
competing operations of such entity or business represent less than twenty-five
percent (25%) of the total annual sales of such entity or business, or (y) the
Seller divests such competing operations within one year after such acquisition.
ARTICLE XI
TERMINATION BEFORE CLOSING
11.1 Termination
This Agreement may be terminated at any time before the Closing:
(a) By the manual written consent of Buyer and Seller; or
(b) By either Seller or Buyer by written notice to the other if the
Closing has not occurred by November 20, 1998 by reason of the failure of any
condition precedent under
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Section 8 hereof with respect to Buyer or Section 9 hereof with respect to
Seller (unless the failure results primarily from such terminating party's
material breach of any representation, warranty or covenant contained in this
Agreement); or
(c) By either Seller or Buyer prior to Closing by written notice to
the other if there has been a material breach (for which written notice and a
reasonable opportunity to cure has been provided) by the other party of any of
its representations, warranties, covenants or agreements contained herein and
such breach results in a failure to satisfy a condition to the terminating
party's obligation to consummate the transactions provided herein.
11.2 Effect on Obligations.
Termination of this Agreement pursuant to this Article XI shall
terminate all obligations of the parties hereunder, except for the obligations
under Sections 4.3(b), 12.7, 12.9 and 12.11; provided, however, that nothing
herein shall relieve any party from liability for, or be deemed to waive any
rights of specific performance of this Agreement available by reason of, any
willful breach of its representations, warranties, covenants or agreements set
forth in this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Interpretive Provisions
(a) Whenever used in this Agreement, "to Seller's knowledge" or "to
the knowledge of Seller" or words of similar import shall mean the actual
knowledge of those officers of Seller and of the Company who are listed on
Schedule 12.1 and "to Buyer's knowledge" or "to the knowledge of Buyer" or
words of similar import shall mean the actual knowledge of those officers of
Buyer who are listed on Schedule 12.1.
(b) The words "hereof," "herein," "hereby" and "hereunder" and words
of similar import refer to this Agreement as a whole and not to any particular
article, section or other subdivision thereof.
(c) For purposes of this Agreement, the Company shall be deemed to
be an Affiliate of Seller before the Closing and an Affiliate of Buyer from and
after the Closing.
(d) For purposes of this Agreement, (1) "Affiliate" means, with
respect to any specified Person, any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such specified Person; (ii) "control"
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(including the terms "controlled by" and "under common control with"), with
respect to the relationship between or among two or more Persons, means the
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the affairs or management of a Person, whether
through the ownership of voting securities, as trustee or executor, by contract
or otherwise, including, without limitation, the ownership directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person; and (iii)
"Person" means any individual, partnership, limited liability Company, firm,
corporation, association, trust, unincorporated organization or other entity,
as well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
12.2 Entire Agreement.
This Agreement (including the Schedules attached hereto) and the
documents executed in connection with the transactions contemplated hereby
constitute the sole understanding of the parties with respect to the subject
matter hereof.
12.3 Successors and Assigns.
The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
hereto; provided, however, that this Agreement may not be assigned by either
party without the prior written consent of the other party, unless such
assignment by either party is to an Affiliate of such party (it being
understood, however, that no such assignment will limit such party's
obligations hereunder).
12.4 Headings.
The heading of the articles, sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
12.5 Amendment, Modification and Waiver.
No amendment, modification or alteration of the terms or provisions
of this Agreement shall be binding unless the same shall be in writing and duly
executed by the parties hereto, except that any of the terms or provisions of
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits of such waived terms or provisions. No waiver of any
of the provisions of this Agreement shall be deemed to or shall constitute a
waiver of any other provision hereof (whether or not similar). No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
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12.6 Rights of Third Parties.
Nothing expressed or implied in this Agreement is intended or shall be
construed to confer upon or give any Person, other than the parties hereto, any
rights or remedies under or by reason of any provision of this Agreement.
12.7 Expenses.
Except as otherwise provided herein, Seller and Buyer shall each pay
all costs and expenses incurred by it or on its behalf in connection with this
Agreement and the transactions contemplated hereby, including, without limiting
the generality of the foregoing, fees and expenses of its own financial
consultants, accountants and counsel.
12.8 Notices.
Any notice, request, instruction or other document to be given
pursuant hereto by any party hereto to any other party shall be in writing and
shall be given by delivery in person, by electronic facsimile transmission, by
overnight courier or by registered or certified mail, postage prepaid,
if to Seller to:
Acme-Cleveland Corporation
0000 00xx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxx
Fax: 000-000-0000
With a required copy (which shall not constitute notice) to:
Xxxxxx, Curler & Xxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxx X. Xxxxxx, Esq.
000-000-0000
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If to Buyer to:
Verilink Corporation
000 Xxxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx, Chief Financial Officer
With a required copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice, request, instruction or other document to be given hereunder shall be
deemed given upon delivery, if delivered in person, upon machine confirmation
if delivered by electronic facsimile transmission, upon the next business day
if delivered by overnight courier and on the fifth business day after mailing
if mailed by registered or certified mail.
12.9 Governing Law.
This Agreement shall be construed in accordance with and governed
by the laws of the State of Delaware without regard for the choice of law
provisions thereof.
12.10 Severability.
The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of any other provision hereof. If any provision of
this Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (i) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (ii) the remainder of this Agreement and the application of such provision
to other Persons, entities or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
12.11 Public Announcements.
Neither Seller nor Buyer shall make any public statements,
including, without limitation, any press releases, with respect to this
Agreement and the transactions contemplated
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hereby without the prior written consent of the other party (which consent
shall not be unreasonably withheld) except as may be required by law. If a
public statement is required to be made by law, the parties shall consult with
each other in advance as to the contents and timing thereof.
12.12 Counterparts.
This Agreement may be executed in two or more counterparts, each
of which shall for all purposes be deemed an original and all of which shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf as of the date first above written.
ACME-CLEVELAND CORPORATION
By: /s/ XXXXX X. XXXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxxx
------------------------------
Title: Vice President
----------------------------
VERILINK CORPORATION
By: /s/ XXXXX X. XXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxx
-------------------------------
Title: President
-------------------------------
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LIST OF DISCLOSURE SCHEDULES
Schedule Name
-------- ----
2.2 Convertible Securities
2.5 Permitted Encumbrances
2.6 Exceptions to Ownership of or Right to Use Material Assets
2.7 Material Contracts
2.8 Intellectual Property
2.9 Litigation
2.11 Company Benefit Plans
2.12 Seller Governmental Consents
2.13 Taxes
2.13(f) Federal Income Tax Returns
2.14 Top Customers and Suppliers
2.15 Material Adverse Changes Since Balance Sheet Date
3.2 Buyer Governmental Consents
4.3 Contact Person for Contacts with Customers
5.4 Employment and Retention Agreements
6.2 Required Consents
10.3 Products of the Company
12.1 Definition of Knowledge
