ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of the 19th day of
May, 2003 (the "Agreement"), by and between Jaco Electronics, Inc, a New York
corporation (the "Purchaser") and Reptron Electronics, Inc., a Florida
corporation (the "Seller").
W I T N E S S E T H:
WHEREAS, subject to the terms and conditions of this Agreement, the
Purchaser wishes to purchase, and the Seller wishes to sell certain of the
assets of the Seller relating to or used or useful in the Business (as defined
below), for the aggregate consideration set forth below and Seller wishes to
assign to the Purchaser and the Purchaser wishes to assume certain of the
Seller's liabilities arising out of the conduct of the Business as set forth
below.
NOW THEREFORE, in consideration of the premises and the mutual
covenants made herein, the parties hereto, each intending to be legally bound,
do hereby agree as follows:
1. Definitions. Except as otherwise expressly provided in this Agreement or
unless the context otherwise requires, the following terms, for all purposes of
this Agreement, have the respective meanings hereinafter specified:
"Accounts Receivable" means all trade and other accounts
receivable and notes and loans receivable or any other similar instruments of
the Seller arising out of the conduct of the Business by the Seller and all
rights in respect thereof.
"Acquired Assets" means all right, title and interest in and
to all of the assets, properties, rights and business of every kind, nature and
description, wherever located, whether real, personal, tangible or intangible,
of the Seller existing as of the Closing Date relating to, or used or useful in
the Business, excluding however all Excluded Assets, including without
limitation:
(a) all inventories, other than the inventories listed on Schedule B-1, whether
on hand or in transit, including but not limited to, finished goods, raw
materials, work in process, supplies, packing material, and similar items as
listed on Schedule A-1 (collectively, the "Inventories");
(b) all unfilled purchase orders;
(c) all machinery, equipment, hand tools, computers and other data processing
hardware (and all software related thereto or used therewith as set forth on
Schedule A-2) and other tangible personal property of similar nature located at
any of the premises leased to or owned by the Seller and used in the conduct of
the Business, including premises which will not be sublet or assigned to
Purchaser hereunder, including but not limited to all items set forth on the
Seller's fixed asset ledgers for the Business attached to this Agreement on
Schedule A-2 (collectively, the "Machinery and Equipment");
(d) all office furniture, office equipment, fixtures and other tangible personal
property of similar nature, located at any of the premises leased to or owned by
the Seller and used in the conduct of the Business, including premises which
will not be sublet or assigned to Purchaser hereunder all of which is listed on
Schedule A-2 (collectively, the "Furniture and Fixtures");
(e) all rights of the Seller under any contracts, agreements, options,
commitments, understandings, licenses, leases and instruments, including,
without limitation, franchises, customer and supplier contracts, sales
representative and distributor contracts and commission contracts with respect
thereto, and licenses related to Intellectual Property, which, if material to
the Business (which for purposes hereof shall mean any of the foregoing which
requires payments to or from the Seller of more than $25,000 individually or in
the aggregate, other than purchase orders) are listed on Schedule A-3
(collectively, and including the leases and other items described in subsections
(h) and (s) of this definition, but excluding those items described in Schedules
B-1 through B-3, the "Assigned Contracts");
(f) all customer and supplier lists, mailing lists, catalogs, brochures and
handbooks;
(g) all Books and Records (or copies thereof) including, but not limited to,
files, plans, notebooks, production and sales data and other data of the Seller,
whether or not in tangible form or in the form of intangible computer storage
media such as optical disks, magnetic disks, tapes and all similar storage
media;
(h) all personal property or operating leases, other than the leases set forth
on Schedule B-2, agreements and other rights to use, occupy or possess, or
otherwise, with respect to machinery, equipment, vehicles and other tangible
personal property of similar nature to which the Seller is a party, and all
rights arising under or pursuant to such leases, agreements and rights, all of
which are set forth on Schedule A-4;
(i) the trademarks, service marks and trade names, listed on Schedule A-5 and
all variations thereof and all similar names and the goodwill associated
therewith;
(j) all telephone and telecopier numbers owned or leased by the Seller including
all such numbers listed on Schedule A-6;
(k) all domain names and websites as identified on Schedule A-7.
(l) all rights related to any portion of the Acquired Assets, including third
party warranties and guarantees and other similar contractual rights, held by or
in favor of the Seller, and arising out of, resulting from or relating to the
Acquired Assets;
(m) all rights to insurance and condemnation proceeds relating to any damage,
destruction, taking or other similar impairment of any of the Acquired Assets
occurring prior to Closing;
(n) all intangible properties and rights, including but not limited to, UPC
codes and Intellectual Property;
(o) all claims, security deposits (other than security deposits for Leases for
premises other than the San Xxxx Office and the Warehouse, provided that in the
case of the Warehouse any security deposit may be reduced or eliminated in
connection with Seller's negotiations with the landlord thereof), prepayments,
refunds, causes of action, choses in action, rights of recovery, rights of
setoff and rights of recoupment and all rights under warranties, except as set
forth on Schedule B-3;
(p) to the extent assignable, all Permits issued by or obtained from any
Governmental Body;
(q) all rights to enforce any confidentiality, invention assignment and/or
non-competition agreements between the Seller and its employees of the Business
except as set forth on Schedules B-1 through B-3;
(r) all claims and defenses relating to any of the foregoing or to the Assumed
Liabilities;
(s) the Lease for the San Xxxx Office and any security deposit under such Lease,
and all Leasehold Improvements at the San Xxxx Office, the Norcross Office or
the Warehouse, all as set forth on Schedule A-8; and
(t) except for Excluded Assets, all other assets and properties of the Seller
that are related to or are used or useful in the Business, tangible and
intangible, wherever located and whether or not carried on the Seller's Books
and Records, including all goodwill, know-how and trade secrets of the Seller.
Notwithstanding anything to the contrary contained herein, under no
circumstances shall the Acquired Assets include (i) any Excluded Assets or (ii)
any Non-Business Assets.
"Affiliate" means a Person, directly or indirectly, under the
control of, controlled by or under common control with another Person.
"Affiliated Group" means any affiliated group within the
meaning of Section 1504(a) of the Code or any similar group defined under a
similar provision of state, local or foreign law.
"Assigned Contracts" has the meaning set forth in subsection
(e) in the definition of Acquired Assets.
"Assumed Liabilities" means the following liabilities of the
Seller and no other liabilities:
(a) the liabilities of the Seller in respect of
accounts payable and specified accrued expenses
incurred in connection with the Acquired Assets and the conduct of the Business
only as and to the extent set forth in (and not solely in any notes to) the
balance sheet for the Business included in the preparation of the Interim
Financial Statements, provided that the foregoing shall only include such
accounts payable as of May 7, 2003 and such accrued expenses as of April 30,
2003 as are listed in Schedule A-9, to the extent they have not been paid or
discharged prior to the Closing Date;
(b) the liabilities of the Seller in respect of
accounts payable and any additional accrued expenses
in accordance with the proviso in the definition of "Cash Portion" incurred in
connection with the Acquired Assets and the conduct of the Business which have
arisen after May 7, 2003 and on or prior to the Closing Date in the Ordinary
Course of Business of Seller which are of the same type as those set forth in
Schedule A-9, to the extent such liabilities have not been paid or discharged
prior to the Closing Date; and
(c) the liabilities and obligations of the Seller arising after the Closing Date
under the Assigned Contracts that relate to benefits thereunder that are
realized or delivered or that otherwise arise on or after the Closing Date.
Notwithstanding anything to the contrary contained herein, under no
circumstances shall the Assumed Liabilities include any Retained Liabilities.
"Assumed Payables" means such accounts payable and such
accrued expenses as are included in subsections (a) and (b) of the definition of
Assumed Liabilities.
"Books and Records" means all records, invoices and other
documents and information (be it in paper or electronic data form) necessary to
the current or future operation of the Business or the ownership and current or
future operation of the Acquired Assets including, without limitation, all
employment records and files (with respect only to those employees of Seller
hired by Purchaser), titles, registrations, contracts, customer and open vendor
purchase orders, unpaid invoices, marketing and statistical information
pertaining to the products of the Seller, its licenses, permits and leases
assigned to Purchaser, and, to the extent in its possession, all bills of sale
and warranties received by the Seller upon its acquisition of Machinery and
Equipment, and Furniture and Fixtures.
"Business" means the business of the Seller as conducted on
the date hereof and as conducted on the Closing Date in respect of the
distribution of electronic components including without limitation
semiconductors, passive products and electromechanical components, excluding
however (i) the Computer Products (module) Business and (ii) the Seller's
distribution business conducted in Singapore.
"Cash Portion" means $10,400,000 (i) reduced by (x) the
Closing Date Assumed Payables, (y) the Escrow Amount and (z) the amount by which
the Current Inventories Valuation exceeds the Closing Date Inventories
Valuation, and (ii) increased by the amount of Excess Severance Cost, if any,
provided that if the sum of the Cash Portion so determined plus the Escrow
Amount exceeds $5,800,000, then the Cash Portion shall be reduced by the amount
of such excess, and, in such event, the accrued expenses included in Assumed
Liabilities shall be correspondingly increased.
"Closing" means the consummation of the transactions
contemplated by this Agreement.
"Closing Date" means May 28, 2003 or such later date on which
the conditions specified in Section 7 are satisfied (subject to waiver of such
conditions as provided in Section 7) and on which the Closing takes place, but
in no event later than May 30, 2003.
"Closing Date Assumed Payables" has the meaning set forth in
Section 2(e)(ii).
"Closing Date Inventories Valuation" has the meaning set forth
in Section 2(e)(ii).
"COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computer Products (module) Business" means the purchase,
configuration and resale of memory modules by Seller.
"Current Assumed Payables" has the meaning set forth in
Section 2(e)(i).
"Current Inventories Valuation" has the meaning set forth in
Section 2(e)(i).
"Default" means an event of default, as defined in any
contract or other agreement or instrument, or any event which, with the passage
of time or the giving of notice or both, would constitute an event of default or
other breach under such contract or other agreement or instrument.
"Employment Agreements" means, in respect of the Business,
agreements, understandings, arrangements or contracts (written or oral) with any
Person to which the Seller is a party relating to employment, non-competition,
management, agency or consulting including with respect to the payment of
salary, bonuses, severance benefits, retirement benefits, or incentives.
"Encumbrances" means all claims, mortgages, pledges, liens,
encumbrances, security interests and adverse interests of every nature
whatsoever, other than rights of landlords under the Leases for the Warehouse,
the San Xxxx Office and the Norcross Office.
"Environmental Claim" means any actions, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims,
liabilities and demands whatsoever, in law or equity or written notice (or, to
the Knowledge of the Seller, oral notification or an investigation) by any
Person alleging potential liability (including, without limitation, potential
liability for investigatory costs, response, remedial, or cleanup costs,
governmental response or oversight costs, natural resources damages, property
damages, personal injuries or fatalities, or penalties) arising out of, based on
or resulting from (a) the presence, release or threatened release into the
environment of, or human exposure to, any Hazardous Substance at any location,
whether or not owned or operated by the Seller, or (b) activities or conditions
forming the basis of any violation, or alleged violation of, or liability or
alleged liability under, any Environmental Law.
"Environmental Laws" means, any federal, state, local or
foreign laws (including without limitation the common law), ordinance, rule,
regulation, decree, judgment, injunction, demand letter, Order, request for
information, or schedule or time table set forth in any federal, state, local or
foreign law (including without limitation the common law), ordinance, rule,
regulation, order, decree, judgment, injunction, demand letter or request for
information issued, promulgated, approved or entered thereunder relating to
pollution or protection of the environment or to occupational health or safety,
including without limitation laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land, surface or
subsurface strata), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means a corporation that is or was a member
of a controlled group of corporations with the Seller within the meaning of
Section 4001(a) or (b) of ERISA or Section 414(b) of the Code, a trade or
business (including a sole proprietorship, partnership, trust, estate or
corporation) that is under common control with the Seller within the meaning of
Section 414(m) of the Code, or a trade or business which, together with the
Seller, is treated as a single employer under Section 414(o) of the Code.
"Escrow Agent" means Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP.
"Escrow Agreement" means an agreement among the Purchaser, the
Seller and the Escrow Agent, in form and substance reasonably acceptable to such
parties, which Escrow Agreement shall continue for one year from the Closing
Date and shall provide a fund with respect to (x) any amount payable to
Purchaser pursuant to Section 2(e)(viii) (y) any Purchaser Losses, and (z) any
amount payable to Purchaser pursuant to Section 3(k).
"Escrow Amount" means $350,000.
"Excess Severance Cost" means the amount, if any, by which the
Severance Cost exceeds $400,000.
"Excluded Assets" means:
(a) all cash and Accounts Receivable of the Seller arising out of the conduct of
the Business;
(b) the inventories of the Seller used in the conduct of the Business listed in
Schedule B-1;
(c) the Leases for the Leased Real Property, all security deposits thereunder
and all related Leasehold Improvements, and such of the personal property leases
which are used in the conduct of the Business as are listed in Schedule B-2;
(d) the claims and causes of action described in Schedule B-3; and
(e) all assets, properties and rights of the Seller used solely in connection
with the Computer Products (module) Business, the Singapore component
distribution business, the electronic manufacturing and engineering services
business, and the display and system integration business and not relating to or
used in the Business.
(f) Seller's data lines.
(g) Seller's websites:
(i) Xxxxxxx.xxx
(ii) xxxxx.xxx
(iii) xxxxxxx.xxx
(iv) xxxxxxxxxxxxx.xxx
(v) xxxxxxxxxx.xxx
(vi) xxxxxxxxxxxxxxxxxxxx.xxx
(h) Phone and fax numbers:
(i) 65-6556255
(ii) 00-0000000
(iii) 603-8986522
(iv) 603-8986907
"Financial Statements" means the balance sheet for the
Business of the Seller extrapolated from Seller's audited balance sheet as at
December 31, 2001 and December 31, 2002 and the unaudited interim balance sheet
for the Business of the Seller as at March 31, 2003, and the statement of income
and statement of cash flows for the Business of the Seller for each of the
twelve month and three month periods, respectively, then ended, (the Financial
Statements for the three month period ended on and as at March 31, 2003 are
hereinafter referred to as the "Interim Financial Statements"), in each case,
prepared in accordance with GAAP consistently applied.
"Florida Act" means the Florida Business Corporation Act,
including specifically Section 607.1202 thereof.
"Generally Accepted Accounting Principles" (or "GAAP") has the
meaning ascribed to it from time to time by the American Institute of Certified
Public Accountants.
"Governmental Body" means any federal, state, provincial,
municipal or other governmental department, commission, board, bureau,
authority, court, agency or instrumentality, domestic or foreign.
"Hazardous Substance" means any substance or material
regulated by any Environmental Law, or in the regulations adopted and
publications promulgated pursuant thereto and include, without limitation, any
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, toxic substances, asbestos or any material containing asbestos.
"Indebtedness" means with respect to any Person, all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind (including amounts by reason of overdrafts and amounts owed
by reason of letters of credit), all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person, all obligations of such Person issued or assumed as
the deferred purchase price of property or services (other than accounts payable
to creditors for goods and services incurred in the Ordinary Course of Business
of such Person), all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any lien or security interest on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, all
obligations of such Person under leases required to be accounted for as capital
leases under GAAP, and all guaranties by such Person. Trade payables and check
endorsements of a Person arising in the Ordinary Course of Business shall not be
deemed to be Indebtedness.
"Intellectual Property" means all trademarks, service marks,
trade names, Internet domain names, designs, logos, slogans, and general
intangibles of like nature, together with all goodwill, registrations and
applications related to the foregoing (collectively, "Trademarks"); patents and
industrial design registrations or applications (including any continuations,
divisionals, continuations-in-part, renewals, reissues and applications for any
of the foregoing); copyrights (including any registrations and applications
therefor); computer software programs or applications (in both source and object
code form) ("Software Programs"); technical documentation relating to the
Software Programs ("Technical Documentation"); "mask works" (as defined under 17
U.S.C. ss. 901) and any registrations and applications for "mask works";
technology, trade secrets and proprietary or other confidential information,
know-how, proprietary processes, formulae, algorithms, models, technical and
engineering data, computer discs and tapes, plans, diagrams and schematics and
methodologies (collectively, "Trade Secrets").
"Interim Financial Statements" has the meaning set forth in
the definition of Financial Statements.
"Key Employee" shall mean Xxxxxxx X. Xxxxx.
"Key Employee Agreement" means an agreement between Purchaser
and the Key Employee in form and substance reasonably acceptable to Purchaser,
providing that during the two (2) year period beginning on the Closing Date the
Key Employee will not be engaged, directly or indirectly, alone or in
association with any other Person, firm, corporation or other business
organization in the electronics distribution business, other than by lending
funds to family members for the non-franchised electronics distribution
business.
"Law" or "Laws" means statutes, rules, regulations and
ordinances of any Governmental Body.
"Leased Real Property" means all leaseholds or subleasehold
estates and other rights to use or occupy any land, buildings, structures,
improvements, fixtures or other interest in real property held or used by the
Seller in the conduct of the Business.
"Leases" means all leases, subleases, licenses, concessions,
and other agreements (written or oral) and all amendments thereof pursuant to
which the Seller holds any Leased Real Property, including the right to all
security deposits and other amounts and instruments deposited by or on behalf of
the Seller thereunder.
"Leasehold Improvements" means all buildings, structures,
improvements and fixtures located on any Leased Real Property which are owned by
the Seller, regardless of whether title to such buildings, structures,
improvements or fixtures are subject to reversion to the landlord or other third
party upon the expiration or termination of the Lease for such Leased Real
Property.
"Lemelson Matter" means that certain action pending in the
District Court for Arizona in which Seller along with numerous defendants are
being sued by Lemelson Medical, Education and Research Foundation for alleged
infringement of various patents.
"Material Adverse Effect" means a material adverse effect on
(i) the business, assets, operations, properties, results of operations or
financial condition of the Business, the Acquired Assets or the Assumed
Liabilities, taken with respect to the Business as a whole when compared to the
condition of the Business as of April 9, 2003 or (ii) the ability of Seller to
perform its material obligations hereunder or under any agreement related
hereto; provided, however, that any effect, change or event relating to or
arising out of the following shall not constitute a Material Adverse Effect: (x)
a change (after the date hereof) in law, rule or regulation or generally
accepted accounting principles or interpretations thereof that applies to the
Purchaser, the Seller or the Business; or (y) a change (after the date hereof)
in the economy of any nation or region in which the Business operates, business
conditions or securities markets in general.
"Non-Business Assets" means:
(a) all assets, properties, rights and businesses of the Seller of any kind,
nature and description, wherever located, whether real, personal, tangible or
intangible, which are not related to and are not used in the Business;
(b) the Purchase Price; and
(c) the name "Reptron" and the trademark related thereto (and all designs, logos
and slogans using such name) and the certificate of incorporation, corporate
seals, minute books, stock books, Tax and supporting data prepared expressly in
connection therewith, and other records prepared directly in connection with the
corporate organization and capitalization of the Seller and/or its respective
operation as a corporation under applicable Laws.
"Norcross Office" shall mean the office premises at Norcross,
Georgia identified in Schedule A-8.
"Notes" shall mean Seller's 6 3/4% Convertible Subordinated
Notes due August 1, 2004 issued pursuant to Indenture dated on or about August
1997 with Reliance Trust Company as Trustee.
"Order" means any order, writ, injunction, decree,
stipulation, judgment, award, determination, direction or demand of a
Governmental Body.
"Ordinary Course of Business" means, the ordinary course of
conduct of the Business consistent with Seller's past custom and practice
(including with respect to frequency and amount).
"OSHA Laws" shall mean any applicable past, present or future
federal, state, territorial, provincial, foreign or local law, common law
doctrine, rule, order, decree, judgment, injunction, license, Permit or
regulation relating to public or employee health or safety or any other like
matter, together with any other laws (federal, state, territorial, provincial,
foreign or local) including, without limitation, the Occupational Safety and
Health Act (29 U.S.C. 651 et seq.), as such laws have been, or are, amended,
modified or supplemented heretofore or from time to time hereafter and any
analogous future federal, or present or future state or local laws, statutes and
regulations promulgated thereunder.
"Owned Real Property" means all land, together with all
buildings, structures, improvements, and fixtures located thereon, and all
easements and other rights and interests appurtenant thereto owned by the Seller
and used in the conduct of the Business.
"PBGC" means Pension Benefit Guaranty Corporation.
"Permits" means all licenses, clearances, ratings, permits,
orders, approvals, authorizations and franchises, and all rights with respect
thereto.
"Person" means any natural person, sole proprietorship,
corporation, limited liability company, partnership, joint venture,
unincorporated association, firm, trust or other entity.
"Post-Closing Periods" means (i) all tax periods beginning
after the Closing Date and (ii) with respect to a tax period that includes, but
does begin after, the Closing Date, the portion of such period which begins on,
but does not include, the Closing Date.
"Pre-Closing Periods" means (i) all tax periods ending on or
before the Closing Date and (ii) with respect to a tax period that includes, but
does not end on, the Closing Date, the portion of such period which ends on and
includes the Closing Date.
"Purchase Price" means $10,400,000, subject to (i) reduction
as and to the extent that the Cash Portion is reduced as a result of the Current
Inventories Valuation exceeding the Closing Date Inventories Valuation, (ii)
increase for any Excess Severance Cost, and (iii) increase or decrease as
provided in Section 2(e)(viii); provided however that notwithstanding anything
to the contrary provided in this Agreement, in no event shall the Purchase Price
exceed $10,400,000 plus the Excess Severance Cost, if any.
"Purchaser" has the meaning specified in the opening paragraph
of this Agreement.
"Real Property" means the Owned Real Property, the Leased Real
Property and the Leasehold Improvements.
"Retained Liabilities" shall mean any and all liabilities or
obligations (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated, whether accrued or unaccrued, whether due or to be
come due, and whether claims with respect thereto are asserted before or after
the Closing Date) of the Seller which are not Assumed Liabilities including,
without limitation, the following:
(a) all liabilities and obligations which arise out of or are based upon the
ownership by Seller of any of the Excluded Assets or Non-Business Assets or the
conduct of any business other than the Business;
(b) any obligation or liability of the Seller arising under the Transaction
Documents or from a breach of any representation, warranty, covenant or
agreement contained in any of the Transaction Documents;
(c) all liabilities and obligations of the Seller for costs and expenses
incurred in connection with the preparation and negotiation of the Transaction
Documents or the consummation of the transactions contemplated by the
Transaction Documents;
(d) all liabilities and obligations of the Seller which arise out of the
ownership and operation of the Acquired Assets or the conduct of the Business on
or prior to the Closing Date, including without limitation all liabilities and
obligations which arise out of any claim, suit, action, arbitration proceeding,
investigation or other similar matter which commenced prior to or is commenced
after the Closing Date which is based upon, relates to or arises out of the
foregoing, whether or not disclosed herein;
(e) all liabilities and obligations of the Seller for any Taxes (including
without limitation those attributable to the Acquired Assets) for Pre-Closing
Periods;
(f) all obligations of the Seller arising and due to be performed prior to the
Closing Date under the Assigned Contracts and all liabilities and obligations
arising out of any breach by the Seller or Seller's failure to perform any
obligation under any Assigned Contract in accordance with its terms prior to the
Closing Date;
(g) all liabilities and obligations arising out of events, conduct or conditions
existing or occurring prior to the Closing Date that constitute a violation of
or noncompliance with any Law, any Order, or Permit;
(h) all liabilities and obligations (including without limitation costs of
cleanup and remediation) resulting from any violation of any Environmental Law
arising from conduct prior to the Closing Date;
(i) all liabilities and obligations of the Seller with respect to, and claims
of, any acts of negligence or tort including libel and slander, occurring prior
to the Closing Date, including without limitation any workers compensation
claim;
(j) all claims against, or liabilities or obligations of or in connection with,
any Employee Benefit Plans, including without limitation any excise Taxes,
penalties or other liabilities imposed under ERISA or the Code based upon facts
which existed prior to the Closing Date;
(k) all liabilities and obligations of the Seller to pay severance, termination
pay, redundancy pay, pay in lieu of notice, accrued vacation pay or other
similar benefits to any current or former employee of the Seller whose
employment is terminated (or treated as terminated) or who is not hired by
Purchaser in connection with the consummation of the transactions contemplated
by this Agreement and the intended conduct of the Business by the Purchaser
after the Closing Date with substantially fewer employees than the number of
employees used by Purchaser in the conduct of the Business, and for all
compensation and benefits accrued or incurred prior to the Closing Date in favor
of employees of the Seller, including without limitation, personal time and
accrued vacation, and personal time, premiums or benefits under any Employee
Benefit Plan and severance pay;
(l) all liabilities and obligations of the Seller under any agreements relating
to the disposition of assets, businesses or companies (whether by sale of
assets, sale of stock, merger or otherwise) entered into at any time prior to
the Closing Date;
(m) all liabilities and obligations of the Seller arising out of any events,
conduct or conditions existing or occurring prior to the Closing Date that
constitute or allegedly constitute an infringement or violation of, or
constitute or allegedly constitute a misappropriation of, any Intellectual
Property rights of any other Person, including without limitation the Lemelson
Matter;
(n) all obligations for refunds, returns, rebates, discounts, promotional
credits, warranty claims, indemnification claims and the like in respect of
transactions occurring prior to the Closing Date;
(o) all of the Transaction Taxes, which shall be duly and timely paid by the
Seller.
(p) all Indebtedness of the Seller;
(q) all accounts payable and all accrued expenses incurred by Seller in
connection with the Acquired Assets and the Business, which are not Assumed
Payables, and
(r) any other liabilities or obligations of the Seller not included in the
definition of Assumed Liabilities.
"San Xxxx Office" shall mean the office premises at San Jose,
California identified in Schedule A-8.
"Seller" has the meaning set forth in the opening paragraph of
this Agreement.
"Seller's Knowledge" or "Knowledge of Seller" means after
reasonable inquiry no information has come to the attention of Xxxxxxx X. Xxxxx,
Chief Executive Officer, Xxxx Xxxxxx, President or Xxxx Xxxx, Manager of
Financial Reporting, which information has given or should reasonably have given
such Persons knowledge of facts contrary to the existence of or absence of such
facts indicated.
"Severance Cost" shall mean the amount of severance payments
payable by Seller, up to $643,581, to those employees of Seller set forth in
Schedule 4(u), who Purchaser elects to not hire as of the Closing Date,
calculated in accordance with such Schedule.
"Software Programs" has the meaning included in the definition
of Intellectual Property.
"Subsidiary" means any Person, more than 50% of the voting
stock or other voting power of which is owned, directly or indirectly, by
another Person, or which is otherwise directly or indirectly controlled by such
other Person.
"Tampa Bay Premises" means such portion of Seller's premises
located in Tampa Bay, Florida as has heretofore been used in the Business, which
Purchaser determines to occupy for its conduct of the Business.
"Tax" means any and all taxes, charges, fees, levies,
deficiencies or other assessments of whatever kind or nature including, without
limitation, all net income, gross income, profits, gross receipts, excise, real
or personal property, sales, ad valorem, withholding, social security,
retirement, excise, employment, unemployment, minimum, estimated, severance,
stamp, property, occupation, environmental, windfall profits, use, service, net
worth, payroll, franchise, license, gains, customs, transfer, recording and
other taxes, customs duty, fees assessments or charges of any kind whatsoever,
imposed by any Governmental Body, including any liability therefor as a
transferee (including without limitation under Section 6901 of the Code or any
similar provision of applicable Law), as a result of Treasury Regulation
ss.1.1502-6 or any similar provision of applicable Law, or as a result of any
Tax sharing or similar agreement, together with any interest, penalties or
additions to Tax relating thereto.
"Tax Return" means any return, declaration, report,
information return or statement, and any amendment thereto, including without
limitation any consolidated, combined or unitary return or other document
(including any related or supporting information), filed or required to be filed
with any Taxing Authority in connection with the determination, assessment,
collection, payment, refund or credit of any federal, state, local or foreign
Tax or the administration of any Laws relating to any Tax or ERISA.
"Taxing Authority" means the United States Internal Revenue
Service or any other applicable Governmental Body.
"Technical Documentation" has the meaning included in the
definition of Intellectual Property.
"Trademarks" has the meaning included in the definition of
Intellectual Property.
"Trade Secrets" has the meaning included in the definition of
Intellectual Property.
"Transaction Documents" means this Agreement, the Escrow
Agreement, the Transition Services Agreement, a Xxxx of Sale, an Assignment and
Assumption Agreement, the Key Employee Agreement, a Sublease for the Warehouse,
an Assignment of Lease for the San Xxxx Office, a Sublease for the Norcross
Office, a Lease for the Tampa Bay Premises at a cost of $9.00 per square foot
per year plus 7% sales tax, for three (3) years, subject to earlier termination
by Purchaser on thirty (30) days notice to Seller, and a joint letter of
instructions to account debtors of the Business, each of which shall be in form
and substance reasonably satisfactory to Purchaser and Seller, and all other
agreements, instruments, documents, schedules, exhibits and other writings
contemplated by or delivered in connection with this Agreement.
"Transition Services Agreement" shall mean an agreement
between Purchaser and Seller dated the Closing Date, pursuant to which (i)
Purchaser shall provide Seller and its successors and assigns a fully paid up
non-exclusive license to use certain computer hardware and software included in
the Acquired Assets, consisting of Phoenix, Progress and Sales Logix software,
the mainframe used in the Computer Products (module) Business and the phone
switch and related equipment, (ii) Seller shall provide Purchaser a fully paid
up non-exclusive license to use the name "Reptron" as follows: "Jaco/Reptron
Distribution" in the conduct of the Business for one (1) year, without charge,
(iii) Seller shall enable Purchaser to bid on sales of merchandise and inventory
similar to the Inventory represented by Purchaser's and Seller's franchised
lines, as a core supplier to Seller, for use in Seller's electronic
manufacturing services business, on a "last look" basis for a period of two
years following the Closing Date, (iv) Seller shall assist Purchaser in
establishing its electronics components distribution business in Singapore,
including recommending appropriate personnel, and (v) Seller shall enable
Purchaser to use its MCI data lines, telephone lines, telephone equipment and
system and Purchaser shall reimburse Seller for a pro rated portion of Seller's
cost related thereto.
"WARN Act" means the Worker Adjustment and Restraining
Notification Act, 29 U.S.,ss.ss.2101-2109.
"Warehouse" means the leased warehouse premises in Reno,
Nevada, presently used by Seller in the conduct of the Business.
2. Purchase of Acquired Assets.
(a) Purchase and Sale of the Acquired Assets. Subject to the terms and
conditions of this Agreement, the Purchaser shall purchase and acquire from the
Seller, and the Seller shall sell, transfer, convey, assign and deliver to the
Purchaser, for the consideration specified below in this Article 2 at the
Closing, all of the Acquired Assets.
(b) Payment of the Purchase Price; Escrow Amount. At the Closing, the Purchaser
shall pay: (i) to the Seller or such other Persons as the Seller shall direct in
writing, an amount equal to the Cash Portion for the Acquired Assets in cash or
by wire transfer of immediately available funds to such account(s) as Seller
shall so indicate; and (ii) to the Escrow Agent, the Escrow Amount to be held by
the Escrow Agent subject to the terms and conditions of the Escrow Agreement.
(c) Assignment and Assumption of Liabilities.
(i) Subject to the terms and conditions of this Agreement, the Seller shall
assign and the Purchaser shall assume and become responsible for, from and after
the Closing Date, the Assumed Liabilities. On and after the Closing Date, and
subject to the provisions in Section 9 regarding indemnification, the Purchaser
shall have complete control over the payment, settlement, or other disposition
of, or any dispute involving, any of the Assumed Liabilities, and the Purchaser
shall conduct and control all negotiations and proceedings with respect to the
Assumed Liabilities. The Purchaser's assumption of the Assumed Liabilities shall
in no way expand the rights or remedies of any third party against the Seller or
the Purchaser as compared to the rights and remedies which such third party
would have had against either of them if the Purchaser had not assumed the
Assumed Liabilities pursuant to this Agreement, except to the extent of
Purchaser becoming liable for same as provided herein, as they exist immediately
prior to the Closing.
(ii) Notwithstanding anything to the contrary set forth herein, the Purchaser
shall not assume or become responsible for, and the Seller shall remain
exclusively liable for all Retained Liabilities.
(d) Allocation of Purchase Price. The parties agree to allocate the Purchase
Price and the Assumed Liabilities among the Acquired Assets in accordance with
GAAP, which allocation shall comply with Section 1060(b) of the Code (the
"Allocation Schedule"). The parties agree to file all Tax Returns and other
statements for Tax purposes consistently with the allocation set forth on the
Allocation Schedule and in particular to report the information required by
Section 1060(b) of the Code in a manner consistent with such allocation. Neither
the Purchaser nor the Seller shall take a position in any Tax proceeding, Tax
audit or otherwise inconsistent with the allocation set forth on the Allocation
Schedule; provided, however, that (i) nothing contained herein shall require the
Purchaser or the Seller to contest any challenge to such allocation, and (ii)
nothing contained herein shall prevent the Purchaser or the Seller from filing
protective amended Tax Returns or claims for refunds after a Taxing Authority
has challenged such allocation. Each of the Purchaser and the Seller shall
notify the other if it receives notice that any Taxing Authority proposes any
allocation different from the Allocation Schedule.
(e) Measurement of Assumed Payables and Inventories.
(i) The Seller has provided to the Purchaser on Schedule A-9 the accounts
payable (as of May 7, 2003) and the accrued expenses (as of April 30, 2003)
included in the Assumed Payables and the Inventories (as of May 7, 2003), which
the Seller represents and warrants to the Purchaser has been prepared in
accordance with GAAP consistently applied. Seller represents and warrants to
Purchaser that as of such dates, the Assumed Payables, so determined, were
$4,675,324 (the "Current Assumed Payables") and the Inventories, so determined,
based on Seller's cost, before reserves, were valued at $17,731,000 (the
"Current Inventories Valuation").
(ii) No later than three business days prior to the Closing, the Seller shall
deliver to the Purchaser the Seller's reasonable, good faith estimate (the
"Estimate") of the Assumed Payables and Inventories as of the Closing Date (the
"Closing Date Assumed Payables" and the "Closing Date Inventories Valuation",
respectively). No later than three business days prior to the Closing the Seller
shall make available to the Purchaser its work papers and provide the Purchaser
with reasonable access at reasonable times to its records used in determining
the Estimate.
(iii) The Seller covenants that the Estimate shall be prepared in good faith by
the Seller and that the Closing Date Assumed Payables and the Closing Date
Inventories Valuation will be prepared in accordance with GAAP on a consistent
basis with that used in the preparation of the Financial Statements and the
valuation of the Assumed Payables and Inventories as set forth on Schedule A-9
and consistent with past practice.
(iv) As soon as reasonably practicable after the Closing Date, but not more than
sixty (60) days after the Closing Date, the Purchaser shall prepare and deliver
to the Seller as of the close of business on the Closing Date a report sheet
(the "Adjustment Report") showing its computation of the Closing Date Assumed
Payables and the Closing Date Inventories Valuation, which shall be prepared
based on Seller's cost, before reserves consistent with the preparation of the
Current Inventories Valuation. If the Purchaser does not timely deliver an
Adjustment Report, then the Purchaser shall be deemed to have accepted the
calculation of the Closing Date Assumed Payables and the Closing Date
Inventories Valuation, as set forth in the Estimate.
(v) If an Adjustment Report is timely delivered, then within ten (10) days after
receipt of the Adjustment Report, the Seller, by written notice to the
Purchaser, may object to the Closing Date Assumed Payables and the Closing Date
Inventories Valuation, as set forth in the Adjustment Report, setting forth in
such notice (the "Objection Notice"), its objection in reasonable detail and the
Seller's proposal or proposals with respect to the calculation of such items. If
the Seller does not timely deliver an Objection Notice, then the Seller shall be
deemed to have accepted the calculation of such items as set forth in the
Adjustment Report.
(vi) If an Objection Notice is timely delivered, then within fifteen (15) days
following the delivery of the Objection Notice, the Seller and the Purchaser
shall attempt, in good faith, to resolve all disputes between them concerning
the Objection Notice. If the Purchaser and the Seller cannot resolve such
disputes within such fifteen (15) day period, then the matters in dispute shall
be determined by PricewaterhouseCoopers or such other nationally recognized
accounting firm, as is mutually acceptable to the Purchaser and the Seller
(either PricewaterhouseCoopers or such other accounting firm, the "Arbitrator").
Promptly, but not later than thirty (30) days after acceptance of this
appointment, the Arbitrator shall determine (based solely on presentation by the
Seller and the Purchaser to the Arbitrator, and not by independent review) those
items in dispute and will render its report as to its resolution of such terms
and resulting calculations of the Closing Date Assumed Payables and the Closing
Date Inventories Valuation. In determining each disputed item, the Arbitrator
may not assign a value to such item greater than the greatest value for such
item claimed by either Party or less than the lowest value for such term claimed
by either Party. For the purposes of the Arbitrator's calculation of the Closing
Date Assumed Payables and the Closing Date Inventories Valuation, the amounts to
be included shall be the appropriate amounts from the Adjustment Report as to
items that are not in dispute, and the amounts determined by the Arbitrator as
to items from the Objection Notice that are submitted for resolution by the
Arbitrator. The Seller and the Purchaser shall cooperate with the Arbitrator in
making its determination and such determination shall be conclusive and binding
upon the parties. The Seller and the Purchaser shall share equally all costs and
fees related to such determination by the Arbitrator, including without
limitation, the costs relating to any negotiations with the Arbitrator with
respect to terms and conditions of such Arbitrator's engagement, and the
Purchaser, and the Seller shall be severally liable for one-half (1/2) of any
amounts paid as a result of any indemnification required by the Arbitrator as a
condition to its engagement or the performance of such engagement.
(vii) The term "Final Assumed Payables" shall mean the Closing Date Assumed
Payables (a) as set forth in the Estimate if the Purchaser accepts the Estimate
as delivered or does not timely deliver an Adjustment Report, or (b) as set
forth in the Adjustment Report if the Seller accepts the Adjustment Report as
delivered or does not timely deliver an Objection Notice, or (c) as determined
pursuant to Section 2(e)(vi) above, if the Seller timely delivers an Objection
Notice. The term "Final Inventories Valuation" shall mean the Closing Date
Inventories Valuation (a) as set forth in the Estimate if the Purchaser accepts
the Estimate as delivered or does not timely deliver an Adjustment Report, or
(b) as set forth in the Adjustment Report if the Seller accepts the Adjustment
Report as delivered or does not timely deliver an Objection Notice, or (c) as
determined pursuant to Section 2(e)(vi) above, if the Seller timely delivers an
Objection Notice.
(viii) If for any reason (a) the amount of the Final Assumed Payables shall
exceed the Closing Date Assumed Payables, then Purchaser shall receive a credit
for the amount of such excess, or (b) the amount of the Final Assumed Payables
shall be less than the amount of the Closing Date Assumed Payables, then Seller
shall receive a credit for the amount of such reduction, or (c) the amount of
the Final Inventories Valuation shall be less than the amount of the Closing
Date Inventories Valuation, then Purchaser shall receive a credit for the amount
of such reduction, or (d) the amount of the Final Inventories Valuation shall
exceed the amount of the Closing Date Inventories, then Seller shall receive a
credit for the amount of such excess, limited to the extent that Final
Inventories Valuation does not exceed the Current Inventories Valuation. The net
effect of the foregoing credits, all of which shall be calculated on a
dollar-for-dollar basis, shall be paid to Purchaser (in which event the Purchase
Price shall be deemed decreased by such amount to the extent of credits under
clause (c)) or to Seller (in which event the Purchase Price shall be deemed
increased by such amount to the extent of credits under clause (d)); provided
that in no event shall the Purchase Price be greater than $10,400,000 plus the
Excess Severance Cost, if any), as the case may be, by the other party within
five (5) days after written demand, together with interest thereon at the rate
of 5% per annum from the Closing Date to the day of payment; provided further
that Purchaser shall not be required to pay more than an aggregate of $5,800,000
of cash as a result of (i) payment of the Cash Portion, plus (ii) payment of the
Escrow Amount, plus (iii) payment of any amount otherwise required to be paid
pursuant to this Section 2(e). If such payment is due to Purchaser, Purchaser
shall first demand payment of such amount pursuant to the Escrow Agreement to
the extent of the Escrow Amount, and may thereafter, at Purchaser's option, (i)
assign to Seller such of the Final Assumed Payables as Purchaser determines to
the extent that Purchaser is not paid, in which event such assigned items shall
not constitute Assumed Liabilities or Assumed Payables and shall constitute
Retained Liabilities, or (ii) demand payment from Seller, together with interest
as provided above.
(f) Transaction Taxes. Any and all federal, state, county or local excise,
stamp, transfer, sale, registration and other Taxes, fees and duties (including
any interest, additions to tax and penalties with respect thereto) and any and
all transfer, registration, recording or similar fees and charges imposed in
connection with the transfer of the Acquired Assets and the consummation of the
transactions contemplated by this Agreement shall be paid by the Seller, except
as provided above in the definition of Transaction Documents for the 7% sales
tax on the Tampa Bay Premises Lease. The Seller shall give a copy of each such
Tax Return to the Purchaser for its review with sufficient time for
incorporation of the Purchaser's reasonable comments prior to filing, and shall
give the Purchaser copies of the Tax Return as filed, together with proof of
payment of the Tax shown thereof, promptly after filing. Seller and Purchaser
agree to cooperate with each other and to comply with all applicable laws, rules
and regulations governing sales and use taxes, including those concerning
exemption for property purchased for resale (e.g., inventory); occasional or
isolated sales or transactions involving tangible personal property and any
other available exemption in order to maximize any lawful exemption from such
tax that may be available thereunder, provided that any out-of-pocket costs and
expenses related thereto shall be borne by Seller and Purchaser shall not be
required to register in any jurisdiction in which it is not now registered.
(g) Excess Severance Cost. At or prior to Closing, Purchaser and Seller shall
confirm the amount of Excess Severance Cost, if any.
(h) Certain Costs. The parties confirm that the Cash Portion includes certain
amounts which the parties have negotiated and agreed upon in respect of
estimated lease termination costs and expenses and estimated employee severance
costs and expenses which Seller will or may incur as a result of the
transactions contemplated hereby, the actual amounts of which may be greater or
less than the estimated amounts. Regardless of the actual amount of such costs
and expenses which Seller incurs, Purchaser shall have no obligation to pay any
of Seller's costs or expenses incurred (i) in terminating any leases for any of
the premises used by Seller in the conduct of the Business, including without
limitation, the Warehouse or (ii) in connection with terminating any employees
of Seller (except to the extent of any Excess Severance Cost or to the extent of
any severance costs which are included in the Assumed Payables) and Purchaser
shall not be entitled to a reduction of the Cash Portion if such costs are less
than the negotiated amounts therefore included in the Cash Portion.
3. The Closing and Certain Conduct Prior to and Subsequent to the Closing.
(a) The Closing. The Closing shall take place on the Closing Date, at 10:00
A.M., New York time, at the offices of Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000.
(b) Conduct of Business. From the date hereof through the Closing Date, the
Seller shall conduct the Business in the Ordinary Course of Business, and in
such manner that (i) would not be reasonably likely to result in a Material
Adverse Effect, (ii) there shall not be included in the accounts payable and
accrued expenses of the Seller in respect of the Business as of the Closing Date
any items which would not have been attributed to the Business consistent with
past practices, (iii) the Inventories shall not include any inventories which
would not have been included in the inventories of the Business consistent with
past practices, or (iv) the Leasehold Improvements at the Warehouse, the San
Xxxx Office and the Norcross Office which may be removed in accordance with the
provisions of the Leases therefor, and all other fixed assets included in the
Acquired Assets and all Machinery and Equipment and Furniture and Fixtures, will
have on and as of the Closing Date an aggregate net book value on Seller's Books
and Records determined on the same basis and in the same manner as the Financial
Statements, of not less than the amount indicated on Schedule A-2. Without
limiting the generality of, and in addition to, the foregoing, prior to the
Closing Date, the Seller shall not, except as the Purchaser may otherwise
consent to in writing, do any of the following:
(i) other than in the Ordinary Course of Business, enter into or materially
modify any policy or procedure with respect to credit to customers or collection
of receivables with respect to the Business or any of the Acquired Assets;
(ii) fail to pay any claim, cost, expense or liability, including any account
payable or trade payable, of the Seller with respect to the Business or the
Acquired Assets in a timely manner, given the Seller's prior practices with
respect to the Business or any of the Acquired Assets and in accordance with the
normal payment periods for such payables;
(iii) except in the Ordinary Course of Business, amend, waive, surrender or
terminate or agree to the amendment, waiver, surrender or termination of any
Assigned Contract;
(iv) settle, cancel, compromise, waive or release any right, claim, action or
proceeding of substantial value to the Seller with respect to the Business or
the Acquired Assets, not in the Ordinary Course of Business involving (either
singly or in the aggregate) more than $10,000 other than the negotiation of
lease terminations of the Leased Real Property identified in Schedule B-2, the
termination of the distribution agreement between Seller and Vishay and the
termination of employees of the Business; or
(v) enter into any transactions by and between or among any divisions of the
Seller or between the Business and any other business of the Seller except for
purchases of inventory in the Ordinary Course of Business in amounts, on terms
and for the particular items purchased, consistent with past practices, and
except for other transactions consistent with past practices.
(c) Access and Information. From the date hereof through the Closing Date, the
Seller shall, and shall cause the Seller's officers, directors, employees,
agents, accountants and counsel, upon the appropriate waiver of the attorney
client privilege for the specific matter requested, to, upon reasonable notice,
(i) afford the officers, employees and authorized agents, accountants, counsel
and representatives of the Purchaser and its lenders reasonable access, during
normal business hours, to (A) the offices, properties, facilities, books,
contracts and records of the Seller in respect of the Business or the Acquired
Assets, and (B) those officers, directors, employees, agents, accountants and
counsel of the Seller who have any knowledge relating to the Business or the
Acquired Assets, and (ii) make available to the officers, employees and
authorized agents, accountants, counsel and representatives of the Purchaser and
its lenders such additional financial and operating data and other information
regarding the Business and the Acquired Assets (including, without limitation,
any contracts, licenses and patents in effect as of the date hereof and any
contracts or licenses being negotiated or entered into between the date hereof
and the Closing Date) and the properties and goodwill of the Business as the
Purchaser or its lenders may from time to time reasonably request.
(d) Notice of Developments. From the date hereof through the Closing Date, the
Seller, to the extent of Seller's Knowledge, shall promptly notify the Purchaser
in writing of (i) all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement that are reasonably likely to result in
any material breach of a representation or warranty or covenant of the Seller in
this Agreement or which could have the effect of making any representation or
warranty of the Seller in this Agreement untrue or incorrect in any material
respect, and (ii) all other material developments affecting the Acquired Assets,
liabilities, financial condition, operations, results of operations, customer or
supplier relations, employee relations or projections of the Seller.
(e) Non-Disclosure of Confidential Information. From and after the date hereof,
the Seller agrees not to divulge, communicate, use to the detriment of the
Purchaser or for the benefit of any other Person, or misuse in any way, and the
Seller will use its commercially reasonable efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents ("Representatives") not to divulge, communicate, use to the detriment of
the Purchaser or for the benefit of any other Person, or misuse in any way, any
confidential documents or information concerning the Business or the Acquired
Assets including, without limitation, any Trade Secrets or other proprietary
information forming a part of the Intellectual Property and any personnel
information, customer lists or other technical data. The foregoing shall not
apply to such public disclosures as Seller is required by law or agreement to
make, communications as between Seller and its secured lenders, and its
representatives and agents, and the holders of the Seller's Notes and their
respective representatives and agents.
(f) Public Statements. From and after the date hereof and until the Closing
Date, neither the Purchaser, nor the Seller shall, and each of the Purchaser and
the Seller shall use its commercially reasonable efforts not to, permit any
Affiliate thereof to, either make, issue or release any press release, or any
oral or written public announcement or statement concerning or with respect to,
or acknowledgment of the existence of, or reveal the terms, conditions and
status of, the Transaction Documents or the transactions contemplated thereby,
without the prior written consent of the other party hereto (which consent shall
not be unreasonably withheld or delayed), unless such announcement is required
by Law or a Governmental Body, or under an agreement to which either is a party,
in which case the other party shall be given notice of such requirement prior to
such announcement and the parties shall consult with each other as to the scope
and substance of such disclosure.
(g) Other Actions; Tax Notices. Each of the parties hereto shall use all
reasonable efforts to (i) take, or cause to be taken, all actions, (ii) do, or
cause to be done, all things, and (iii) execute and deliver all such documents,
instruments and other papers, as in each case may be necessary, proper or
advisable under applicable Laws, or reasonably required in order to carry out
the terms and provisions of this Agreement and to consummate and make effective
the transactions contemplated hereby and, in furtherance of the foregoing, at or
prior to the Closing, the Seller shall cause the Acquired Assets to be released
from all Encumbrances. Each party shall give all notices of the transfer of the
Acquired Assets when and as required to be given by such party to applicable
Taxing Authorities. If all appropriate tax clearance certificates are not
available with respect to Taxes for which the Seller is or would be liable
hereunder, the Closing shall not be delayed, but the Seller shall retain any
liability for such Taxes.
(h) Exclusivity. From and after the date hereof and unless and until this
Agreement is terminated as provided in Section 12, the Seller shall not, and
shall not knowingly permit any of the Seller's Affiliates, officers, directors,
employees, agents or representatives, directly or indirectly, to encourage,
solicit, initiate or participate in discussions or negotiations with, provide
any information to, receive any proposals or offers from, or enter into any
agreement with, any third party, in each case other than the Purchaser and/or
its Affiliates, that involves the sale, joint venture or the other disposition
of all or any portion of the Business or Acquired Assets (other than sales of
inventory in the Ordinary Course of Business) or any merger, consolidation,
recapitalization or other business combination of any kind which would effect,
if consummated, the transactions contemplated hereby. Seller represents that it
is not now and it has not been during at least the two-week period preceding the
date hereof, engaged in any such discussions or negotiations, other than
discussions terminating prior negotiations. Notwithstanding the foregoing, in
the event Seller should hereafter receive an unsolicited offer for the purchase
of assets including some or all of the Acquired Assets, which in fulfillment of
its fiduciary responsibilities as a public company it would otherwise consider,
Seller shall immediately notify the Purchaser by providing Purchaser with a copy
of the unsolicited offer. If Purchaser does not agree in writing to
substantially match the terms of said unsolicited offer within ten (10) days of
its receipt, Seller shall be free to terminate this Agreement by notice thereof
given to Purchaser and to thereafter negotiate and execute said offer and
related agreements without restriction provided however that upon the closing of
the transaction described in such unsolicited offer (or any transaction similar
thereto) Seller shall pay to Purchaser $250,000 in consideration of, among other
things, the expenses which Purchaser has incurred and the time and energy which
Purchaser has invested in the transaction contemplated hereby.
(i) Notices to Employees, Customers and Vendors. The Seller shall deliver such
notices to such of its employees when and as reasonably requested by Purchaser
and when and as required of the Seller by any applicable Laws, including without
limitation the WARN Act, or by any agreements (including any notices required to
be given to any union, or similar representative body). The Seller shall deliver
such notices to customers and vendors of the Seller, if and as reasonably
requested by the Purchaser, in such form and substance as reasonably requested
by the Purchaser, informing such customers and/or vendors of the sale of the
Business and the Acquired Assets as contemplated hereunder.
(j) Updated Schedules. Within 2 days prior to the Closing Date, Seller shall
provide updated Schedules A1-9 and B1-3 prepared as of a date as close to the
Closing Date as practicable.
(k) Return Material Authorizations.
(i) As used in this Section, the following terms shall have the following
meanings:
"Standard Product" means those electronic components which are
returnable by Purchaser under franchise distribution agreements.
"Non-Standard Product" means those electronic components which had been
sold by Seller in the Ordinary Course of Business prior to Closing which are not
Standard Product, and includes both Documented Non-Standard Product and
Undocumented Non-Standard Product.
"Documented Non-Standard Product" means Non-Standard Product for which
Seller has received from the customer and delivered to Purchaser a written
acknowledgment that the goods were non-cancelable and non-returnable.
"Undocumented Non-Standard Product" means Non-Standard Product which is
not Documented Non-Standard Product.
"Seller RMA For Standard Product" means a return materials
authorization issued by Seller to a customer before the Closing Date for
Standard Product sold by Seller in the Ordinary Course of Business prior to the
Closing Date and included in Schedule 3(k)which shall be prepared by Seller as
of and delivered to Purchaser on the day which precedes the Closing Date.
"Seller RMA For Non-Standard Product" means a return materials
authorization issued by Seller to a customer before the Closing Date for
Non-Standard Product sold by Seller in the Ordinary Course of Business prior to
the Closing Date.
"Purchaser RMA For Standard Product" means a return materials
authorization issued by Purchaser after the Closing Date for Standard Product
sold by Seller in the Ordinary Course of Business prior to the Closing Date.
"Purchaser RMA For Non-Standard Product" means a return materials
authorization issued by Purchaser after the Closing Date for Non-Standard
Product sold by Seller in the Ordinary Course of Business prior to the Closing
Date.
(ii) Seller shall not receive any credit from Purchaser for Non-Standard Product
returned by a customer to Purchaser under a Seller RMA For Non-Standard Product.
Seller shall receive a credit from Purchaser for Standard Product returned by a
customer to Purchaser under a Seller RMA For Standard Product in an amount equal
to Seller's cost thereof. Seller shall receive a credit from Purchaser for the
debit taken by a customer against an Account Receivable for any Purchaser RMA
For Standard Product if such Standard Product is returned to Purchaser, or for
any Purchaser RMA For Non-Standard Product in respect of Documented Non-Standard
Product which is returned to Purchaser, but Seller shall not receive a credit
for any Undocumented Non-Standard Product.
(iii) Purchaser shall receive a credit from Seller equal to the debit taken by a
customer against Purchaser attendant to the customer's return of Non-Standard
Product authorized under a Seller RMA For Non-Standard Product. Purchaser shall
receive a credit from Seller for a debit taken by a customer against Purchaser
attendant to the customer's return to Purchaser of Standard Product authorized
under a Seller RMA For Standard Product, which credit shall equal the difference
between Seller's sales price and its cost for such Standard Product. Purchaser
shall receive a credit in an amount equal to Seller's cost for Undocumented
Non-Standard Product returned to Purchaser under a Purchaser RMA for
Non-Standard Product issued by Purchaser in the Ordinary Course of Business.
(iv) The credits described in this Section 3(k) shall be reconciled at the end
of each month until the first anniversary of the Closing Date, and the Purchaser
or the Seller, as the case may be, shall pay to the other the amount so
determined within five (5) days of such determination. Any amount not paid
within five (5) days after written demand shall bear interest at the rate of 5%
per annum from the date of determination.
4. Representations, Warranties and Covenants of the Seller. Except as set forth
on the Schedules attached hereto, the Seller hereby represents, warrants and
covenants to the Purchaser as follows:
(a) Organization; Governing Instruments. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all requisite power and authority to enter into this Agreement
and the other Transaction Documents to be delivered by the Seller and to
consummate the transactions contemplated hereby and thereby. The Seller is
qualified to do business and in good standing in each state where the character
of the Leased Real Property or the conduct of the Business makes qualification
therein by Seller as a foreign corporation necessary, except where the failure
to be so qualified or to be in good standing therein would not be reasonably
likely to have a Material Adverse Effect. True and complete copies of the
certificate of incorporation and By-laws of the Seller, have been made available
to the Purchaser.
(b) Enforceable Obligation. The execution, delivery and performance of this
Agreement and the other Transaction Documents to be executed and delivered by
the Seller and the consummation of the transactions contemplated hereby and
thereby (i) are within the power and authority of the Seller, (ii) do not
require the consent or approval of or filing by Seller with any Governmental
Body or any other Person, including without limitation the holders of Seller's
Notes except for such consents or approvals from Seller's secured lenders as
have been obtained, with copies thereof having heretofore been delivered to
Purchaser, and other than as otherwise provided herein, (iii) will not conflict
with, result in the breach of, or constitute a Default under the certificate of
incorporation or by-laws of the Seller or under any indenture (including without
limitation the Indenture for the Notes), mortgage, deed of trust, lease,
agreement, contract or other instrument to which Seller is a party or by which
Seller or any of its properties are bound, (iv) will not violate any Laws or
Order of any Governmental Body, and (v) will not result in the creation or
imposition of any Encumbrance upon any of the property of the Seller, other than
as contemplated by this Agreement and the other Transaction Documents.
(c) Due Authorization. This Agreement has been and the other Transaction
Documents to be delivered by Seller upon their delivery will be, duly authorized
by all necessary corporate and shareholder action, executed and delivered by the
Seller, and constitute and will constitute the legal, valid and binding
obligations of the Seller enforceable in accordance with their terms, except
that (x) such enforcement may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (y) the remedy
of specific performance and injunctive and other forms of equitable or legal
remedies may be subject to equitable defenses, equitable principles and to the
discretion of the court before which any proceeding therefor may be brought.
This Agreement and the other Transaction Documents to be delivered by Seller do
not need to be authorized by, approved by or consented to by the shareholders of
Seller under applicable Laws, including without limitation, the Florida Act.
(d) Litigation; Observance of Laws.
(i) Litigation. Except as set forth on Schedule 4(d), and except for the
Lemelson Matter, there is no litigation, at law or in equity, or any proceeding
before any Governmental Body or any arbitration pending or, to the Seller's
Knowledge, threatened against or relating to the Seller, which involves or is
likely to involve any material risk of any judgment or liability not fully
covered by insurance, which, if adversely decided, would have a Material Adverse
Effect on the Business or the Seller, or which seeks to enjoin the consummation
of, or questions the validity of, any of the transactions contemplated hereby,
or which questions the validity or enforceability or impairs the ability of
Seller to perform its obligations under this Agreement or any of the other
Transaction Documents, and no Order of any Governmental Body or arbitrator has
been issued against or binds Seller which has, or could have, a Material Adverse
Effect on Seller's ability to consummate the transactions contemplated hereby,
and no basis exists for the commencement of any such litigation, proceeding or
arbitration.
(ii) Governmental Order Violations. The Seller is not in violation of or Default
with respect to any Order of any arbitrator or Governmental Body where such
violation or default is likely to have a Material Adverse Effect on Seller's
ability to consummate the transactions contemplated hereby, and to the Seller's
Knowledge there is no basis for there to be declared any such violation or
default which is likely to have a Material Adverse Effect on the Seller's
ability to consummate the transactions contemplated hereby.
(iii) Violations of Laws. The Seller is not in violation of any Laws (including,
without limitation, Environmental Laws), the violation of which would have a
Material Adverse Effect on the Seller's ability to conduct the Business.
(e) Title to Acquired Assets; Condition; Leased Equipment; Inventory.
(i) The Seller has good and marketable title to, or valid leasehold interests
in, all of the Acquired Assets and on the Closing Date title to the Acquired
Assets will be conveyed to Purchaser free and clear of all Encumbrances, other
than statutory landlord's liens on certain of the Leasehold Improvements.
(ii) The Acquired Assets constitute all of the assets necessary for and used in
the operation of the Business as conducted by the Seller, except for any
Excluded Assets, any employees not hired by Purchaser and such license or
authorization to use patents as asserted in the Lemelson Matter, and no third
party has any rights to purchase any of the Acquired Assets or any interest
therein or any portion thereof, including rights of first offer or refusal. No
Acquired Asset is owned by any Person other than the Seller, other than personal
property leased to Seller constituting part of the Acquired Assets.
(iii) The Machinery and Equipment and Furniture and Fixtures are in good order
and proper repair (ordinary wear and tear excepted) and are adequate for their
present uses thereof and meet all required standards, clearances and ratings in
effect on the date hereof in respect of those Laws applicable thereto, except
for Machinery and Equipment and Furniture and Fixtures which will require
replacement or repair in the Ordinary Course of Business, the temporary lack of
use of which will not materially disrupt normal production, and defects which do
not interfere in a material way with the continued use thereof. The Leasehold
Improvements at the Warehouse, the Norcross Office and the San Xxxx Office which
may be removed in accordance with the provisions of the Leases therefor and all
other fixed assets included in the Acquired Assets and all Machinery and
Equipment and Furniture and Fixtures, will have on and as of the Closing Date an
aggregate net book value on Seller's Books and Records determined on the same
basis and in the same manner as the Financial Statements, of not less than the
amount indicated on Schedules A-2 and A-8 as attached hereto on the date hereof.
(iv) Each lease or license of an Acquired Asset is a valid and subsisting
obligation enforceable in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect, or to legal or equitable principles,
relating to or limiting creditors' rights; and that the remedy of specific
performance and injunctive and other forms of equitable or legal relief are
subject to certain equitable defenses or equitable principles and to the
discretion of the court before which any proceeding therefor may be brought.
(v) The Seller has complied with all obligations under all such leases or
licenses and all such leases or licenses are in full force and effect and no
Default exists thereunder. The Seller enjoys peaceful and undisturbed possession
under all such leases and licenses and to the Seller's Knowledge no other party
to any such lease or license is in Default thereunder. The financial terms of
all operating leases are accurately described in Schedule A-4.
(vi) The Seller has good and marketable title to the Machinery and Equipment and
Furniture and Fixtures, merchandise, materials, supplies and other property of
every kind, tangible or intangible, which are Acquired Assets except for
Encumbrances which will be satisfied and discharged on or prior to the Closing
Date, and except for statutory landlord's liens on certain of the Leasehold
Improvements which will not be discharged at Closing.
(vii) As of April 30, 2003, all of the Inventories were located at the Warehouse
and as otherwise indicated on Schedule A-1-A and when Schedule A-1 is updated as
provided in Section 3(j), such location information will be included therein.
(f) Real Property.
(i) Owned Real Property. There is no Owned Real Property included in the
Acquired Assets.
(ii) Leased Real Property. The Seller has made available to the Purchaser a true
and complete copy of each Lease included in the Acquired Assets. Each such Lease
is legal, valid, binding, enforceable and in full force and effect. Except for
the consent of the landlord to the Warehouse Sublease, consent of the landlord
to the San Xxxx Office Lease, consent of the landlord to the Norcross Office
Sublease, and the consent of the mortgagee of the Tampa Bay Premises to the
Lease thereof contemplated hereby, the transactions contemplated by this
Agreement do not require the consent of any other party to such Lease except for
such consents as have been obtained, will not result in a breach of or Default
under such Lease, or otherwise cause such Lease to cease to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the Closing. To the Knowledge of the Seller, neither the Seller nor any other
party to such Lease is in breach or Default under such Lease, and, to the
Seller's Knowledge, no event has occurred or circumstance exists which, with the
delivery of notice, the passage of time or both, would constitute such a breach
or Default, or permit the termination, modification or acceleration of rent
under such Lease. To the Seller's Knowledge, no security deposit or portion
thereof deposited with respect to such Lease has been applied in respect of a
breach or Default under such Lease which has not been redeposited in full. The
Seller does not owe and will not owe in the future, any brokerage commissions or
finder's fees with respect to any such Lease. The other party to any such Lease
is not an Affiliate of, and otherwise does not have any economic interest in,
the Seller. The Seller has not subleased, licensed or otherwise granted any
Person the right to use or occupy such Leased Real Property or any portion
thereof. The Seller has not collaterally assigned or granted any other security
interest in such Lease or any interest therein. Seller enjoys peaceful and
undisputed possession under such Lease.
(iii) Leasehold Improvements. The Seller has good and marketable title to all
Leasehold Improvements, free and clear of all Encumbrances and no other Person
has any interest therein.
(g) Licenses, Permits, Etc. The Seller possesses adequate Permits for the Seller
to conduct the Business substantially as now and heretofore conducted, all of
which are listed on Schedule 4(g) and, to Seller's Knowledge, except as
otherwise set forth on Schedule 4(g) hereto, such Permits may be transferred or
assigned to Purchaser, are in full force and effect and are without any conflict
with the rights of others in any such Permits. Except for instances previously
remedied, the Seller has no knowledge and has not received notice of
termination, revocation or limitation of, or of the pendency or threatened
commencement of any proceeding to terminate, revoke or limit any such Permits by
the Governmental Body issuing same.
(h) Tax Matters.
(i) Except as set forth in Schedule 4(h):
(a) the Seller has (A) duly and timely filed or caused to be filed with the
Internal Revenue Service or other applicable Taxing Authority all material Tax
Returns that are required to be filed by or on behalf of the Seller or that
include or relate to the Acquired Assets, which Tax Returns are true, correct
and complete, and (B) duly and timely paid in full or caused to be paid in full,
all Taxes that are due and payable on or before the date hereof (whether or not
shown on any such Tax Return) and (C) recorded a reserve for Tax liability for
such payment on the face of the December 31, 2002 balance sheet of the Seller
forming a part of the Financial Statements (rather than in any notes thereto) to
the extent required by GAAP for the payment of all Taxes that are not due and
payable on or before the date hereof;
(b) the Seller has duly and timely complied with all applicable Laws relating to
the collection or withholding of Taxes (whether with respect to employees,
independent contractors, creditors, stockholders or other third parties), and
the reporting and remittance thereof to the applicable Taxing Authorities;
(c) no audit, examination, investigation, reassessment or other administrative
or court proceeding (collectively, a "Tax Proceeding") with respect to or
concerning the operations of the Seller is pending or, to the Knowledge of the
Seller, proposed or threatened;
(d) there is no Encumbrance for any Tax upon any of the Acquired Assets except
for Encumbrances relating to Taxes not yet due and payable;
(e) there is no outstanding or pending (i) request by the Seller for a waiver or
extension of the statute of limitations on the assessment or collection of any
Taxes, (ii) request by the Seller for a ruling from any Tax Authority, (iii)
subpoena or request for information directed at or concerning the operations of
the Seller by any Taxing Authority, (iv) closing agreement (within the meaning
of Section 7121 of the Code or any analogous provision of applicable Law) that
is being negotiated by the Seller relating to any Tax for which the Seller is or
may be liable or with respect to the Acquired Assets, or (v) power of attorney
related to or in connection with any Tax of the Seller other than net income
taxes or which relates to the Acquired Assets;
(f) the Seller has never been a member of an Affiliated Group (other than with
respect to wholly-owned subsidiaries) filing a consolidated, combined or unitary
Tax Return, and has no liability for Taxes of any other person or entity under
Treasury Regulation 1-1502-6 (or similar provision of state local or foreign
law), as trustee or successor, by contract, or otherwise; and
(g) to the Knowledge of the Seller no claim has ever been made by a Taxing
Authority in a jurisdiction in which the Seller has not paid any Tax or filed
any Tax Return asserting that the Seller is or may be subject to Tax in such
jurisdiction.
(i) Financial Statements of the Seller. The Financial Statements for the periods
ended on and as of December 31, 2001 and December 31, 2002 have been audited by
Xxxxx Xxxxxxxx LLP, and are accompanied by their related opinions. The Financial
Statements present fairly the financial condition of the Seller as of the dates
thereof and their results of operations for the periods indicated in accordance
with GAAP applied on a basis consistent with past practices, and are true,
correct and complete. The Financial Statements, as of the dates thereof, include
all the assets of the Seller owned by them and the amounts reflected with
respect to such assets are stated in accordance with GAAP and reflect all assets
that are required, in accordance with such principles, to be reflected in such
Financial Statements. Since December 31, 2002 there has been no material adverse
change in the business, assets, properties, customers or condition (financial or
otherwise) of the Seller.
(j) Conduct of the Business. From and after December 31, 2002, and until the
date hereof:
(i) The Seller has continued to operate the Business in the usual and ordinary
manner in which the Business has been conducted in the past; and during such
period, the Seller has not made any expenditures or entered into any commitments
which, when compared to past operations of the Business are unusual or
extraordinary or outside the scope of the normal course of routine operations
other than commitments made by Seller to close the Business if a sale of the
Acquired Assets is not completed by May 31, 2003 and other than Seller's
contraction of the Business during such period, which contraction subsequent to
April 9, 2003 has not had a Material Adverse Effect;
(ii) The Seller has kept in a current state of repair and operating efficiency
(ordinary wear and tear excepted) all tangible personal property used in the
operation of the Business;
(iii) The Seller has used commercially reasonable efforts to maintain the
goodwill associated with the Business, and the existing business relationships
with their agents, customers, key employees, suppliers and other Persons having
relations with it other than those activities directed toward terminating its
franchised distributor arrangement with Vishay, terminating designated employees
who Purchaser does not wish to hire and terminating leases for the Leased Real
Property not included in the Acquired Assets;
(iv) Other than those activities directed toward terminating its franchised
distributor arrangement with Vishay, terminating designated employees who
Purchaser does not wish to hire and terminating leases for the Leased Real
Property not included in the Acquired Assets, the Seller has not entered into
any contract, agreement or transaction, or relinquished or released any rights
or privileges under any contracts or agreements, the performance, violation,
relinquishment or release of which would, on the date on which such contract or
agreement was entered into, or such rights or privileges were relinquished or
released, be reasonably foreseen to have a Material Adverse Effect on the
operation of the Business or the Acquired Assets by the Purchaser;
(v) The Seller has notified the Purchaser in writing and prior to the Closing
will notify the Purchaser in writing of any material adverse change in Acquired
Assets or the Business;
(vi) The Seller has kept Books and Records with respect to the Business in a
manner (A) in which entries have been made of all transactions on a basis
consistent with past practices, (B) which are true, correct and complete and (C)
in which entries have been made only in accordance with GAAP, except for normal
year end adjustments;
(vii) The Seller has paid current liabilities attributable to the Business as
and when such liabilities became due;
(viii) Except for purchases of Inventory in the Ordinary Course of Business and
in amounts, on terms and for the particular items purchased by the Seller from
its other divisions consistent with past practices and no less favorable to the
Business than the prices and terms which would be obtained from unrelated third
parties, the Seller has not entered into any transactions by and between the
Business and any of its other divisions or businesses;
(ix) The Seller has not instituted any sales incentive programs amongst its
employees, sales representatives or distributors which has resulted in greater
than average inventories of the Inventories being held by distributors or
customers; and
(x) The Seller has not entered into any arrangements or understandings with any
Person with respect to the Business, not in the Ordinary Course of Business, in
respect of: (A) rebate, price protection and volume discount practice and
obligations, (B) allowance and customer return practices and obligations, (C)
co-op advertising and other promotional practices.
(k) Liabilities.
(i) The Seller has no liabilities or obligations, whether known or unknown, due
or not yet due, fixed or variable, absolute or contingent, or otherwise, other
than the liabilities and obligations which are stated or provided for in the
Financial Statements and which continue to exist on the date hereof, liabilities
and obligations under Leases and under personal property operating leases,
liabilities and obligations incurred by the Seller in the Ordinary Course of
Business subsequent to the date of the Financial Statements and prior to the
date hereof which, individually or in the aggregate do not and will not have a
Material Adverse Effect on the operation of the Business or the Acquired Assets
by the Purchaser. All obligations of the Seller pursuant to allowances,
certificates or other promotional materials obligating the Seller to perform
services or supply product at prices below their normal prices or at no cost
have been adequately reserved for and disclosed in accordance with GAAP
(consistently applied) in the Financial Statements.
(ii) Since December 31, 2002, the Seller has not:
(A) subjected to Encumbrance, or agreed to do so, any of the Acquired Assets
other than purchase money liens on equipment used in the conduct of the
Businesses and incurred to finance the purchase price of the equipment involved
and which do not cover any other asset of the Seller, and other than the
continuing security interest granted to Congress Financial Corporation, which
will be released at Closing in respect of the Acquired Assets; or
(B) engaged in any transaction not in the Ordinary
Course of Business which would result in a Material
Adverse Effect on the Business or the Acquired Assets, or waived any rights of
substantial value not in the Ordinary Course of Business which would result in a
Material Adverse Effect on the Business or the Acquired Assets.
(l) Security Deposits. As of the Closing Date, there shall be transferred to
Purchaser as part of the Acquired Assets, all prepaid expenses and the security
deposits for the Warehouse, the Norcross Office and the San Xxxx Office, in
amounts not less than the amounts set forth in Schedule 4(l) as attached hereto
on the date hereof, provided that any security deposit for the Warehouse and the
Norcross Office may be reduced or eliminated in connection with Seller's Lease
termination negotiations for the Warehouse and the Norcross Office.
(m) No Default or Event of Default. There exists no event or condition which
constitutes, or which, as a consequence of the execution and performance of this
Agreement or with the passage of time or giving of notice, or both, could
constitute, a Default or event of termination under any Assigned Contracts which
could result in a Material Adverse Effect. To the Seller's Knowledge, the Seller
has not received any notice from any party to any such Assigned Contract with
respect to such party's unwillingness or inability to perform thereunder.
(n) No Right of Action. To the Knowledge of the Seller, the execution of this
Agreement and the other agreements, instruments and documents contemplated
hereby and the completion of the transactions contemplated hereby and thereby,
shall not cause the Purchaser or any of its Subsidiaries or Affiliates to be
liable for damages to any other Person, or give such Person any equitable right
against any of them or the Seller, or any of its assets by reason of any
agreement or arrangement to which Seller is a party.
(o) Employee Benefits and other Employee Matters.
(i) For purposes hereof, "Plan" means each employee benefit plan (as defined in
Section 3(3) of ERISA) that provides benefits for employees or former employees
of the Seller or any of their respective direct or indirect subsidiaries, or for
which the Seller could reasonably be expected to have any direct or indirect,
actual or contingent liability.
(ii) With respect to each Plan which is subject to the minimum funding standards
of Section 412 of the Code, there has occurred no failure to meet the minimum
funding standards of Section 412 of the Code, and no such Plan has incurred an
"accumulated funding deficiency" within the meaning of such Section, whether or
not waived.
(iii) With respect to each Plan which is subject to Title IV of ERISA: (i) no
such Plan has terminated, or has filed a notice of intent to terminate in the
last six years; (ii) there is no outstanding liability under Section 4062 of
ERISA; (iii) neither the Seller nor any of its Subsidiaries nor any member of
its controlled group under Section 414 of the Code that is a substantial
employer has made a withdrawal (or has deemed to do so under Section 4062(e) of
ERISA) that could reasonably be expected to result in liability under section
4063 of ERISA or otherwise; (iv) the PBGC has not instituted proceedings to
terminate any such Plan; (v) no reportable event, as described in Section 4043
of ERISA has occurred.
(iv) Neither the Seller nor any member of its controlled group under Code
section 414 contributes to any "multiemployer plan," as defined in Section
4001(a)(3) of ERISA, and neither the Seller nor a member of its controlled group
has in the past six years withdrawn in a complete or partial withdrawal from any
multiemployer plan or incurred any actual or contingent liability under section
4204 of ERISA.
(v) No Plan is a "multiple employer plan" within the meaning of Section 4063 or
4064 of ERISA.
(vi) With respect to each Plan, the Seller has made all payments due from it to
date and will make each payment due from it for all periods through and
including the Closing Date on or prior to the Closing Date.
(p) Investment Company Act; Public Utility Holding Company Act. The Seller is
not directly or indirectly controlled by, or acting on behalf of, any Person
which is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended. None of the Seller is a "holding company" as that term
is defined in or is otherwise subject to regulation under, the Public Utility
Holding Company Act of 1935.
(q) Agreements. Seller is not a party to any material written or oral agreement,
sublease, franchise, license, contract, commitment or instrument or subject to
any corporate restriction that has or the performance or violation of which
could, on the date hereof, reasonably be foreseen to have a Material Adverse
Effect on the Acquired Assets or the Business.
(r) Environmental and OSHA Matters. With respect to the Business and the
Acquired Assts:
(i) (a) The Seller has obtained all Permits which are required with respect to
each of its operations under Environmental Laws;
(b) the Seller is in compliance with the terms and conditions of the Permits
required by the Environmental Laws;
(c) there is no civil, criminal or administrative action, suit, demand, claim,
hearing, notice of violation, proceeding, notice or demand letter pending
relating to Seller or, to Seller's Knowledge, threatened against the Seller
relating in any way to any Environmental Laws or any regulation, code, plan,
order, decree, judgment or injunction issued, entered, promulgated or approved
thereunder;
(d) to the Seller's Knowledge, there are no investigations or internal or
non-public agency proceedings pending regarding the Seller relating in any way
to any Environmental Laws or any regulation, code, plan, order, decree, judgment
or injunction issued, entered, promulgated or approved thereunder; and
(e) as of the Closing Date there have been no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Hazardous Substance (as hereinafter defined) or petroleum or petroleum
by-product on, in or under such of the assets of the Seller constituting Real
Property during the use and/or ownership by the Seller of the Real Property, or,
to Seller's Knowledge, prior thereto, which would be reasonably likely to
subject the owner or operator of the Real Property or Business to liability for
any Environmental Claim against the Seller, the Purchaser or against any Person
whose liability for any Environmental Claim the Seller has or may have retained
or assumed either contractually or by operation of law. The Seller shall have
delivered to the Purchaser true and complete copies of all environmental
sampling results, studies and reports in the possession of Seller prepared in
connection with the locations at which the Business is operated;
(ii) (A) Seller (i) has not violated any OSHA Laws to the Knowledge of the
Seller, and (ii) has not received any notice or claim, nor are there pending or
to the Knowledge of the Seller, threatened, lawsuits or proceedings against the
Seller with respect to violations of an OSHA Law; (B) the Seller has delivered
to Purchaser all copies of Permits in connection with OSHA Laws, reports and
other Books and Records related to OSHA matters; and (C) the Seller has all
controls, programs, policies, guards, protections and plans required under the
OSHA Laws except where failure to do so would not have a Material Adverse
Effect.
(s) Insurance. Schedule 4(s) hereto includes a true and correct list of all
policies or binders of insurance of the Seller in force as of the date hereof,
with respect to the Business and the Acquired Assets specifying the insurer,
policy number (or covering note number with respect to binders) and amount
thereof.
(t) Employment Agreements. There are no Employment Agreements between the Seller
and any Person which will be binding on Purchaser. All written Employment
Agreements between the Seller and any Person who is employed by or performs
services for the Business are described in Schedule 4(t).
(u) Employees and Labor Disputes.
(i) Schedule 4(u) hereto contains a complete and correct list as of the date
hereof of all persons who were employed by the Seller in the conduct of the
Business as of April 16, 2003, together with separate line entries setting forth
with respect to each such person their title, annual salary, and all severance
obligations or termination payments payable to each such person. Other than as
listed on Schedule 4(u), (x) there are no outstanding commitments (whether or
not legally binding) to increase the remuneration of any employee listed on
Schedule 4(u) and (y) there are no severance obligations or termination payments
to such employees, and the Seller has not received any notice of termination
from any of such persons, nor is Seller aware that any such employee intends to
terminate his/her employment.
(ii) There is no pending or to the Knowledge of the Seller, threatened labor
dispute, strike, work stoppage or lockout involving employees of the Seller or
against the Seller which affects or which may affect the Business or which may
interfere with its continued operation. With respect to the Business, there are
no existing unions in which any employee or the Seller is a member, and there
are no union organization efforts relating to employees of the Seller or any
representation question involving recognition as a collective bargaining agent
for any employees of the Seller. There is not pending or, to the Seller's
Knowledge, threatened any charge or complaint against the Seller by the National
Labor Relations Board or any representative thereof. There have been no strikes,
walkouts, work stoppages or lockouts involving employees of the Seller or
against the Seller in the last five years. The Seller has no Knowledge of any
facts indicating that any of the employees of the Seller intends to terminate
his or her employment with the Seller or refuse to accept employment with the
Purchaser, if offered. The Seller employs in the Business in the United States
only U.S. citizens or U.S. residents who are in the United States in compliance
with U.S. immigration laws and possess "green cards". The Seller is in
compliance with all Laws respecting employment and employment practices, terms
and conditions of employment, immigration laws and wages and hours.
(v) Collective Bargaining Agreements. The Seller is not a party to any
collective bargaining agreements in respect of any of the employees of the
Business.
(w) Related Party Transactions and Interests. No Affiliate of the Seller owns
any direct or indirect interest of any kind in, or controls or is a director,
officer, employee or partner of, or consultant to, or lender to or borrower from
or has the right to participate in the profits of, any person, firm, corporation
or other entity which is (i) a competitor, supplier, customer, landlord, tenant,
creditor or debtor of the Seller in connection with the Business, (ii) engaged
in a business related to the Business, or (iii) participating in any transaction
to which the Seller in connection with the Business is a party.
(x) Intellectual Property. With respect to the Business and the Acquired Assets:
(i) The Seller does not own any Intellectual Property except as set forth in
Schedule A-5.
(ii) The conduct of the Business as conducted in the past did not infringe (when
conducted) and as currently conducted or as currently contemplated to be
conducted does not infringe (either directly or indirectly, such as through
contributory infringement) any Intellectual Property right owned or controlled
by any third party. Other than the Lemelson Matter, there is no pending or, to
the Knowledge of the Seller, threatened claim, suit, arbitration or other
adversarial proceeding before any court, agency, arbitral tribunal, or
registration authority in any jurisdiction (A) involving the Intellectual
Property owned by the Seller, or, to the Knowledge of the Seller, Intellectual
Property licensed to the Seller or (B) alleging that the activities or the
conduct of the Business does or will infringe upon, violate or constitute the
unauthorized use of the intellectual property rights of any third party or
challenging the ownership, use, validity, enforceability or registrability of
any Intellectual Property. There are no settlements, forbearances to xxx,
consent judgments or orders or similar obligations other than license agreements
in the Ordinary Course of Business which (a) restrict the Seller's rights to use
the Intellectual Property, (b) restrict the Business in order to accommodate a
third party's intellectual property rights or (c) permit third parties to use
any Intellectual Property. To the Knowledge of the Seller (x) all registered,
granted or issued patents, mask works, Trademarks and copyrights held by the
Seller are valid, enforceable and subsisting and (y) there has been no denial,
refusal or similar action by any governmental authority with respect to any
patent, copyright or Trademark application filed by or on behalf of the Seller.
To the Knowledge of the Seller, there is no unauthorized use, infringement or
misappropriation of any of Intellectual Property by any third party, employee or
former employee.
(iii) There are no royalties, fees, honoraria or other payments payable by the
Seller or to any person or entity by reason of the ownership, development, use,
license, sale or disposition of Intellectual Property, other than salaries and
sales commissions paid to employees and sales agents in the Ordinary Course of
Business.
(iv) There are no licenses or other agreements which Seller has granted to or
entered into with any third party with respect to the Intellectual Property and
has not licensed any Intellectual Property from a third party, other than
licenses for off the shelf software. The Seller is not, nor as a result of the
execution or delivery of this Agreement, or performance of the Seller's
obligations hereunder, will the Seller be, in violation of any material license,
sublicense, agreement or instrument to which the Seller is a party or otherwise
bound, nor will execution or delivery of this Agreement, or performance of the
Seller's obligations hereunder, cause the diminution, termination or forfeiture
of any of the Seller's rights in Intellectual Property or require the consent of
any governmental authority or third party in respect of any such Intellectual
Property. To the Knowledge of the Seller, each such license, sublicense,
agreement or instrument constitutes the valid and binding obligation of all
parties thereto, enforceable in accordance with its terms, and, to the Knowledge
of the Seller, there exists no breach by any party thereto and no event or
circumstance which will result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a Default by the Seller
thereunder.
(v) The Seller has taken reasonable measures to protect the confidentiality of
its Trade Secrets. Except as indicated on Schedule B-3, to the Knowledge of the
Seller, there has been no misuse or misappropriation of any Trade Secret by any
person or entity. Without limitation of the foregoing, the Trade Secrets
relating to Seller in their products and the source code and system
documentation relating to the Software Programs relating to the internal systems
used by the Seller (A) have at all times been maintained in strict confidence,
(B) have been disclosed by the Seller only to employees who have had a "need to
know" the contents thereof in connection with the performance of their duties to
the Seller and who have executed appropriate nondisclosure agreements, (C) have
not been licensed or disclosed to any third party, and (D) are not the subject
of any escrow or similar agreement giving any third party rights in such
formulas, source code and/or system documentation upon the occurrence of certain
events.
(vi) Except as set forth on Schedule 4(x), the Seller has not taken any action
(or failed to take any action), conducted the Business or used or enforced its
Trademarks, in each case, in a manner that would result in the abandonment,
cancellation, forfeiture, relinquishment or unenforceability of any of the
Trademarks and the Seller has taken all reasonable steps to protect its rights
in and to each of such Trademarks and to prevent the unauthorized use thereof by
a third party.
(y) Books of Account; Investigations. The Seller has maintained its books of
account in accordance with GAAP applied on a consistent basis and the same are
true, correct and complete.
(z) Governmental Consents. No consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Body on the part of the
Seller is necessary in connection with the execution, delivery and performance
of this Agreement or any other agreement contemplated hereunder to which the
Seller is a signatory.
(aa) Customers. Schedule 4(aa) provides an accurate and complete breakdown of
the revenues received from the top customers who accounted for more than 80% of
the gross revenues of the Business in fiscal year 2002, or more than 80% of the
gross revenues of the Business for the first three months of fiscal year 2003.
Except as set forth on Schedule 4(aa), the Seller does not have any Knowledge
that, and has not received any notice or other communication (in writing or
otherwise) that any customer or other Person identified in Schedule 4(aa) will
cease dealing with the Seller or, following the Closing, the Purchaser or will
otherwise reduce the volume of business transacted by such Person with the
Seller or, following the Closing, the Purchaser below historical levels, nor
does the Seller have any Knowledge, except as set forth on Schedule 4(aa), that
the prospects for the Business will be adversely affected as a result of any
change in a customer relationship. During the 12 months ended March 31, 2003,
net sales of the Business were not less than $80,000,000.
(bb) Backlog and Returns. The backlog, compiled consistent with past practice
and in the Ordinary Course of Business, as of March 31, 2003 for all accepted
and unfulfilled orders for the sale of goods by the Business is included on
Schedule 4(bb). Merchandise has not been sold on a "sale on approval" basis, and
there is no general understanding that merchandise in a material amount, in the
aggregate, in the hands of any customer or customers would be returnable to
Seller. Seller is not aware of any reason for the future returns experience of
Purchaser to be materially different from prior experiences.
(cc) Product Warranties.
(i) With respect to the Business, the Seller has not sold or supplied any
equipment, goods, material or systems which, to the Knowledge of the Seller,
were, are or are likely to become faulty or defective or which do not comply in
all material respects with all warranties expressly or impliedly made by the
Seller or which contain any software for which any required license has not been
obtained or which infringes upon, other than as alleged in the Lemelson Matter,
violates or misappropriates or conflicts with any patent, copyright, trade
secret or other proprietary right of any third party, except for any of the
foregoing which are either covered by insurance or for which any warranty
expressly or impliedly made by the Seller, on such goods, materials, systems and
intellectual property rights is no broader than the warranty provided by the
respective manufacturer. No recall or post-sale notice or warning is pending or,
to the Knowledge of the Seller, threatened in connection with any product sold
by the Business and, to the Knowledge of Seller, no basis exists for such a
recall, notice or warning. With respect to the Business, to the Seller's
Knowledge, each product sold by the Seller is and has been, free of any design
defect or failure to warn and complies in all material respects with any
applicable (i) Laws or (ii) certification from any industry, testing, or
standard setting organization.
(dd) Full Disclosure. No financial statement, Exhibit or Schedule or document
required by this Agreement to be prepared or furnished by or on behalf of the
Seller to the Purchaser in connection with this Agreement or any agreement
contemplated hereby or delivered pursuant hereto contained or contains any
misstatement of a material fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Seller shall notify the Purchaser promptly of the
occurrence of any event or the discovery of any fact that would make any of the
foregoing incorrect.
5. Representations, Warranties and Covenants of the Purchaser. The Purchaser
represents, warrants and covenants to the Seller as follows:
(a) Organization. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
all requisite power and authority to enter into this Agreement and the
Transaction Documents to be delivered by the Purchaser and to consummate the
transactions contemplated hereby and thereby.
(b) Enforceable Obligation; Due Authorization. The execution, delivery and
performance of this Agreement and the other Transaction Documents to be executed
and delivered by the Purchaser and the consummation of the transactions
contemplated hereby and thereby: (i) are within the power and authority of the
Purchaser, (ii) do not require the consent or approval of or filing by Purchaser
with any Governmental Body or any other Person except for such consents or
approvals from Purchaser's lenders as have been obtained, with copies thereof
having heretofore been delivered to Seller, and other than as otherwise provided
herein, (iii) will not conflict with, result in the breach of, or constitute a
Default under the certificate of incorporation or the by-laws of the Purchaser,
or under, any indenture, mortgage, deed of trust, lease, agreement, or other
instrument to which the Purchaser is a party or by which it or any of its
property is bound; (iv) will not violate any Laws or Order of any Governmental
Body and (v) will not result in the creation of any Encumbrances upon any of the
Purchaser other than as contemplated by this Agreement and the other Transaction
Documents and such financing documents as Purchaser shall determine and do not
require the consent or approval of or filing with any Governmental Body, or any
other Person other than as otherwise specifically provided herein. This
Agreement has been, and the other Transaction Documents to be delivered by
Purchaser upon their delivery will be, duly authorized, executed and delivered
by the Purchaser, and constitute and will constitute the legal, valid and
binding obligations of the Purchaser enforceable against the Purchaser in
accordance with their terms, except as (x) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles, relating to or
limiting creditors' rights, and (y) the remedy of specific performance and
injunctive and other forms of equitable or legal relief are subject to certain
equitable defenses, equitable principles and to the discretion of the court
before which any proceeding therefor may be brought.
(c) Litigation; Observance of Orders.
(i) Litigation. There is no litigation, at law or in equity, or any proceeding
before any Governmental Body or any arbitration pending against or relating to
the Purchaser, which involves or is likely to involve any material risk of any
judgment or liability not fully covered by insurance, which, if adversely
decided, would materially adversely effect the Purchaser, or which seeks to
enjoin the consummation of, or questions the validity of, any of the
transactions contemplated hereby, or which questions the validity or
enforceability or impairs the ability of the Purchaser to perform its
obligations under this Agreement or any of the other Transaction Documents, and
no Order of any Governmental Body or arbitrator has been issued against or binds
the Purchaser which has or could have an adverse effect on the Purchaser's
ability to consummate the transactions contemplated hereby.
(ii) Governmental Order Violations. The Purchaser is not in violation of or
Default with respect to any Order of any arbitrator or Governmental Body where
such violation or Default is likely to have an adverse effect on the Purchaser's
ability to consummate the transactions contemplated hereby.
(d) Government Consents. No consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Body on the part of the
Purchaser in connection with the execution, delivery and performance of this
Agreement or any other agreement contemplated hereunder to which it is a
signatory is required.
6. Post-Closing Covenants.
(a) Sharing of Data.
(i) The Seller shall grant to the Purchaser for four (4) years following the
Closing Date reasonable access during normal business hours upon reasonable
notice and in a manner reasonably intended to minimize the disruption to the
Seller, access to the work papers of the Seller's accountants relating to the
operation of the Business and the Acquired Assets prior to the Closing Date, to
the extent that any of the foregoing is needed by the Purchaser in order to
comply with its obligations under applicable securities, Tax, environmental,
employment or other Laws. The Seller shall not destroy any such items identified
in this Section 6(a)(i) without first providing the other Parties with the
opportunity to obtain or copy such items.
(ii) In addition to all files and documents required to be provided pursuant to
this Agreement or any other agreement to be entered into in accordance herewith,
upon the reasonable request by the Purchaser made at a reasonable time following
the Closing Date, Seller shall authorize the release to the Purchaser of all
files pertaining to the Business or the Acquired Assets held by any federal,
state, country or local authorities, agencies or instrumentalities.
(b) Enforcement of Insurance Claims. The Seller hereby assigns to the Purchaser
the right to pursue and enforce, and hereby irrevocably appoints the Purchaser
as its respective true and lawful attorney-in-fact with full power in the name
of and on behalf of the Seller for the purpose of pursuing and enforcing any and
all rights of the Seller under any insurance policies of the Seller (other than
those assigned to the Purchaser) with respect to any occurrence, claim or loss
which is the subject of an indemnity obligation by the Seller to the Purchaser
under Section 9(a) of this Agreement; provided, that the Purchaser may not
exercise such right or power unless (i) the Seller fails to promptly and
expeditiously pursue and enforce its rights under their respective insurance
policies with respect to such occurrence, claim or loss, and (ii) Purchaser
provides the Seller with written notice of such failure to pursue and enforce
Seller's rights, and a five (5) business day opportunity to cure such failure,
provided that such five (5) business day period shall not be required if the
Purchaser's rights would be adversely affected by such delay. The power of
attorney conferred upon the Purchaser by the Seller pursuant to this Section
6(b) is an agency coupled with an interest and all authority conferred hereby
shall be irrevocable, and shall not be terminated by the dissolution or the
liquidation of the Seller or any other act of the Seller.
(c) Cooperation.
(i) The Seller shall use its commercially reasonable efforts to cooperate with
the Purchaser after the Closing and shall cause its officers, employees, agents,
auditors and representatives to use commercially reasonable efforts to cooperate
with the Purchaser after the Closing to ensure the orderly transition of the
Business to the Purchaser and to minimize any disruption to the Business that
might result from the transactions contemplated hereby.
(ii) From and after the Closing Date, each party shall reasonably cooperate with
the other in the defense or prosecution of any litigation or proceeding already
instituted or which may be instituted hereafter against or by such other party
relating to or arising out of the conduct of the Business prior to or after the
Closing Date (other than litigation between the Seller and the Purchaser or
their respective Affiliates arising out of the transactions contemplated by this
Agreement or any other Transaction Document). The party requesting such
cooperation shall pay the reasonable out-of-pocket expenses incurred in
providing such cooperation (including legal fees and disbursements) by the party
providing such cooperation and by its officers, directors, employees and agents,
but shall not be responsible for reimbursing such party or its officers,
directors, employees and agents for their time spent in such cooperation.
(iii) At the Closing and at any time and from time to time thereafter, at the
request of the Purchaser and without further consideration, the Seller shall
promptly execute and deliver such instruments of sale, transfer, conveyance and
assignment and take all such other action as the Purchaser may reasonably
determine to be necessary to more effectively transfer, convey and assign to the
Purchaser, and to evidence and confirm the Purchaser's rights to, title in and
ownership of, the Acquired Assets, to place the Purchaser (through its ownership
of the Acquired Assets) in actual possession and operating control of the
Business and the Acquired Assets being purchased by the Purchaser hereunder, to
assist the Purchaser in exercising all rights with respect thereto and to carry
out the purpose and intent of this Agreement.
(d) Collection of Accounts Receivable.
(i) The Purchaser shall promptly forward any monies, checks or instruments
received by the Purchaser after the Closing Date with respect to the Accounts
Receivable to Wachovia Bank Reptron Distribution X.X. Xxx Xxxxxx 000000 xx
Xxxxxxx, Xxxxxxx 00000-0000. If a remittance advice received by Purchaser from
any such account debtor shall fail to identify the invoice number (s) for which
payment is being made, Purchaser shall contact the account debtor and request
written notification from the account debtor as to which invoice(s) are being
paid with the remittance. If the remittance is in payment of an Account
Receivable, Purchaser shall promptly forward the remittance as directed in the
previous sentence. If the remittance advice for a payment received by the
Purchaser identifies payment of a combination of an Account Receivable on the
one hand, and an amount in payment of funds with respect to the Business or in
payment of an invoice issued to the account debtor by the Purchaser on the
other, Purchaser shall deposit said remittance with its bank and promptly issue
a check payable to Seller in an amount equal to that portion of the remittance
attributable to Accounts Receivable and forward the same to the Reptron
Distribution P.O. Box Number noted above along with a summary of the invoices
paid attributable to Accounts Receivable. Except for the foregoing, Purchaser
shall have no obligations with respect to the Accounts Receivable. The Seller
shall forward promptly to the Purchaser any monies, checks or instruments
received by the Seller after the Closing with respect to the Business but not in
respect of the Accounts Receivable. If a remittance advice received by Seller
shall fail to identify the invoice number (s) for which payment is being made,
Seller shall contact the account debtor and request written notification from
the account debtor as to which invoice(s) are being paid with the remittance. If
the remittance is in payment of funds with respect to the Business but not in
respect of the Accounts Receivable, Seller shall promptly forward the remittance
to Purchaser. If the remittance advice for a payment received by the Seller
identifies payment of a combination of an Account Receivable on the one hand,
and an amount in payment of funds with respect to the Business or in payment of
an invoice issued to the account debtor by the Purchaser on the other, Seller
shall deposit said remittance with its bank and promptly issue a check payable
to Purchaser in an amount equal to that portion of the remittance attributable
to amounts in payment of funds with respect to the Business or in payment of an
invoice issued to the account debtor by the Purchaser and forward the same to
the Purchaser along with a summary of the invoices paid attributable to the
Business or an invoice of the Purchaser. From and after the Closing, the Seller
shall refer all customer inquiries relating to the Business and the Acquired
Assets to the Purchaser.
(ii) Seller shall not retain a collection agency or an attorney or take other
similar outside collection action to collect any Accounts Receivables if the
Purchaser sell goods or provides services to the applicable account debtor after
the Closing Date unless (A) such Accounts Receivables is unpaid at least 60 days
past the Closing Date, and (B) Seller shall have offered to sell such Accounts
Receivables to Purchaser at not more than face value and Purchaser shall not
have elected to purchase same within ten (10) days of such offer. With respect
to any Accounts Receivables which Purchaser elects to purchase, payment therefor
shall be made to Seller in cash concurrently with Seller's assignment of the
same to Purchaser and same shall be assigned free and clear of all Encumbrances.
(e) Employees. Seller acknowledges that Purchaser has no obligation to offer
employment to any of Seller's employees in the Business and if Purchaser
determines to offer employment to any of such employees, such employment shall
be on such terms and conditions as the Purchaser shall determine. Seller further
acknowledges that except to the extent included in Assumed Payables, Purchaser
has no obligation to pay any severance or termination benefit of any kind to any
Person who Purchaser does not hire.
(f) Employee Benefit Matters.
(i) Certain Welfare Plan Matters.
(a) Benefits Continuation. The Purchaser shall have no obligation to hire any
employee of Seller, or, if hired by Purchaser, to cover any employee in any of
Purchaser's welfare benefit plans, except as otherwise provided in such plans.
(b) Disability and Certain Other Benefits. The Seller and the Plans shall be
liable for claims for benefits (other than for short-term disability, workers'
compensation and medical (including vision care and prescription drugs) and
dental benefits, which are addressed below) by employees of the Business (active
or inactive) and by terminated employees previously employed in the Business
that are covered or are payable under the Seller's Plans arising out of
occurrences prior to the Closing Date. Purchaser shall not be so liable, whether
or not such claims are covered or payable under the Plans. In this regard, but
not by way of limiting the foregoing, the Seller (and not the Purchaser) shall
be liable for the long-term disability benefits for those employees of the
Business receiving or qualified to receive long-term disability benefits under
the Seller's disability programs as of the Closing Date, including without
limitation those employees of the Business in the long-term disability
elimination period who become eligible to receive long-term disability benefits
under the Plan that provides long-term disability benefits.
(c) Workers' Compensation Benefits. The Purchaser shall not be liable for claims
for Worker's Compensation made or based on occurrences prior to Closing or with
respect to payments due on or prior to the Closing Date except for payment of
such amounts in respect of the foregoing, as are included in Final Assumed
Payables.
(d) Short-Term Disability Benefits. The Purchaser shall not be liable for, and
the Seller shall indemnify the Purchaser against, claims for short-term
disability benefits under the Seller's Plans by employees of the Business
(active or inactive) whose disability claims have been asserted as of the
Closing or with respect to payments due on or prior to the Closing Date except
for payment of such amounts in respect of the foregoing, as are included in
Final Assumed Payables.
(e) Medical and Dental Benefits. The Purchaser shall not be liable for, and the
Seller shall indemnify the Purchaser against, claims for medical (including
vision care and prescription drugs) and dental benefits incurred by employees of
the Business (active or inactive) and their respective covered dependents with
respect to services and treatment rendered on or prior to the Closing Date
whether or not covered under the terms of the Seller's welfare benefit plans
except for payment of such amounts in respect of the foregoing, as are included
in Final Assumed Payables.
(f) COBRA. The Seller shall be responsible for providing any benefits required
to be provided pursuant to Section 4980B of the Code to employees of the
Business who cease to be employed by the Seller on or prior to the Closing Date.
(g) Limitation on the Purchaser's Liability. The Seller shall be responsible for
providing all benefits under all Plans, with respect to all of their employees
(except for employees who are hired by Purchaser, from and after the date such
persons become so hired) which shall be Retained Liabilities. The Purchaser
shall have no liability with respect to any claims for benefits payable under
any of the Seller's Plans, and the Seller shall indemnify and hold the Purchaser
harmless from any claims payable under any of the Seller's Plans, for Worker's
Compensation except for payment of such amounts in respect of the foregoing, as
are included in Final Assumed Payables, or as otherwise described in this
Section 6(f).
(ii) Multiemployer Plans. Neither the Purchaser nor any of its Affiliates shall
assume any obligation or liability imposed on the Seller or any of its
Subsidiaries under Section 4201 of ERISA.
(iii) No Third Party Beneficiaries. The parties hereto do not intend to create
any third-party beneficiary rights respecting any current or former employee as
a result of the provisions set forth in this Section 6(g) and specifically
hereby negate any such intention except only to the extent of the accrued
expenses included in the Assumed Payables. No provision in this Section 6(g)
shall increase the rights, benefits or remedies of any employee under any Plan
of the Seller or the Purchaser.
(g) Tax Matters.
(i) The Seller shall duly and timely file or cause to be filed with the
applicable Taxing Authorities all Tax Returns that are required to be filed by
or on behalf of the Seller or that include or relate to the Acquired Assets or
the Business for Pre-Closing Periods, which Tax Returns shall be true, complete
and correct, and shall duly and timely pay in full or cause to be paid in full
all Taxes that are due and payable on or before the Closing Date and could
result in an Encumbrance on any Acquired Asset, and shall record a provision on
the Books and Records of the Seller to the extent required by GAAP for the
payment of all such Taxes that are not due and payable on or before the Closing
Date. The Seller shall duly and timely comply with all applicable Laws relating
to the allocation or withholding of such Taxes and the reporting and remittance
thereof to the applicable Taxing Authorities.
(ii) The Seller shall indemnify and hold harmless the Purchaser and its
Affiliates, on an after-Tax basis, from and against any (x) Taxes which relate
to the Acquired Assets or the Business with respect to any Pre-Closing Periods
for which the Purchaser or its Affiliates is liable, (y) the effect, if any, on
the Purchaser and its Affiliates in any period that ends after the Closing Date
of an adjustment with respect to a period on or before the Closing Date and (z)
fees and expenses (including, without limitation, reasonable attorneys' fees)
incurred by the Purchaser or its Affiliates in connection therewith or in
enforcing its rights or collecting any amounts due hereunder. This indemnity
shall apply notwithstanding any investigation made by the Purchaser in
connection with the transactions contemplated by this Agreement or, its receipt,
examination, filing of or commenting on any Tax Return, and shall be separate
and independent of any other indemnity between the Parties hereto.
(iii) The Purchaser shall promptly forward to the Seller a copy of all written
communications from any Governmental Body received by the Taxpayer relating to
any Pre-Closing Periods. The Seller shall promptly forward to the Purchaser a
copy of all written communications from any Governmental Body received by the
Seller relating to any Pre-Closing Periods for which the Taxpayer is or may be
liable or which would become a claim on the Business or on any of the Acquired
Assets.
(iv) Any Taxes which relate to the Acquired Assets or the Business for a period
which includes but does not end on the Closing Date shall be allocated between
the period before the Closing Date and the balance of the period in accordance
with this Section 6(g)(iv). To the extent permitted under applicable Law, the
parties shall elect to treat the Tax period as ending at the close of business
on the Closing Date. Where applicable Law does not permit such an election to be
made, the taxable income or other Tax base for the entire period shall be
allocated between the period on or before the Closing Date and the balance of
the period on the basis of an interim closing of the books at the close of the
Closing Date, except that exemptions, allocations and deductions calculated on
an annual basis shall be apportioned on the basis of the relative number of days
in the period on or before the Closing Date and in the balance of the period.
(v) Each of the Seller and the Purchaser shall reasonably cooperate with each
other by executing or causing to be executed any required documents and by
making available to the other, all books and records relating to the Acquired
Assets (including work papers, records and notes of any kind) at all reasonable
times, for the purpose of allowing the appropriate party to complete its Tax
Returns, respond to, defend or prosecute any Tax Proceeding, make any
determination required under this Agreement (including, but not limited to,
determinations as to which period any asserted Tax liability is attributable)
and verify issues.
(h) Use of Name. The Seller agrees, on its own behalf and on behalf of its
Affiliates, from and after the Closing Date, not to use any trademark or name
previously or currently used by the Seller in the conduct of the Business (other
than "Reptron"), or any derivation thereof.
(i) Bulk Sales. The Purchaser hereby waives compliance by the Seller with the
provisions of the "bulk sales" laws or any similar provision of law of any state
insofar as the same may be applicable to the transactions contemplated by this
Agreement. The Seller agrees to indemnify and hold the Purchaser harmless from
and against any and all liability or claims arising out of such waiver, and,
upon receipt of written notice from the Purchaser of the existence thereof,
promptly to take all necessary action to satisfy such claim or liability,
including but not limited to removing or causing to be removed any Encumbrance
which may be placed on any of the Acquired Assets by a creditor of the Seller by
reason of such waiver.
(j) No Solicitation of Employees, Suppliers or Customers. From and after the
Closing Date and until such date that is two (2) years after the Closing Date,
the Seller shall not, directly or indirectly, for itself or on behalf of any
other Person, solicit, employ, engage or retain any Person who, at any time
during the preceding 12-month period (which period shall include the Closing
Date), shall have been an employee of the Purchaser (except for such employees
who have been terminated by Purchaser or who have quit Purchaser's employ for
reasons other than Seller's solicitation), or contact any supplier, customer or
employee of the Purchaser for the purpose of soliciting or diverting any such
supplier, customer or employee from the Purchaser. Notwithstanding the
foregoing, Seller may contact Purchaser's suppliers for the sole purpose of
purchasing components for use in Seller's Computer Products (module) Business
and its electronic manufacturing and engineering services business, subject to
Purchaser's right to sell such components to Seller as provided in the
Transition Services Agreement. From and after the Closing Date and until such
date that is two (2) years after the Closing Date, the Purchaser shall not,
directly or indirectly, for itself or on behalf of any other Person, solicit,
employ, engage or retain any Person who, at any time during the preceding
12-month period (which period shall include the Closing Date), shall have been
an employee of the Seller's Computer Products (module) Business or electronic
manufacturing and engineering services business, or corporate staff (except for
such employees who have been terminated by Seller or who have quit Seller's
employ for reasons other than Purchaser's solicitation).
(k) Non-Competition.
(i) From and after the Closing Date and until such date that is two (2) years
after the Closing Date (the "Non-Compete Period"), neither the Seller nor any
subsidiary of the Seller shall, anywhere in the area where the Business
(including the business of Purchaser) has been conducted during the two (2)
years preceding the Closing Date, or is conducted during the Non-Compete Period
directly or indirectly, alone or in association with any other Person, firm,
corporation or other business organization (x) acquire or own in any manner, any
interest in any Person that is engaged in any facet of the Business as presently
conducted by the Seller or the similar business as presently conducted by the
Purchaser (together, the "Restricted Business") or, (y) engage in any facet of
any business which competes in any way with the Restricted Business; provided,
however, that notwithstanding the foregoing, the Seller, and its subsidiaries
(collectively and not individually) may own up to 5% of the voting securities of
any publicly-traded company, the Computer Products (module) Business, and the
Seller's electronic manufacturing and engineering services business, as
conducted on the date hereof, shall not be deemed to compete with the Restricted
Business and the Seller may, during the ninety (90) days following the Closing
Date distribute from its Singapore operations inventory in fulfillment of
backlog existing on the date hereof.
(ii) The parties hereto intend that the covenant contained in Section 6(k)(i)
above shall be construed as a series of separate covenants, one for each
applicable state or country. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in Section
6(k)(i) above. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in Section 6(k)(i) above, then
such unenforceable covenant shall be deemed reduced in scope or, if necessary,
eliminated from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be enforced.
(iii) The Seller acknowledges that the provisions of this Section 6(k), and the
period of time, geographic area and scope and type of restrictions on their
activities set forth herein, are reasonable and necessary for the protection of
the Purchaser and are an essential inducement to the Purchaser's entering into
the Transaction Documents to which it is a party and consummating the
transactions contemplated thereby.
(l) SEC Filing. Seller shall provide to Purchaser as soon as possible, such
information with respect to the Business and the Acquired Assets, as Purchaser
reasonably requires in order for Purchaser to be able to timely file with the
Securities and Exchange Commission a Current Report on Form 8-K reporting the
transactions contemplated hereby, including without limitation audited financial
statements for the Seller's last 3 fiscal years and unaudited financial
statements for periods after December 31, 2002. Seller shall, at its cost and
expense, make available such information and personnel as needed for such
purpose and Purchaser shall pay the reasonable cost of auditors engaged by
Purchaser for such purpose.
7. Conditions to Closing; Closing Deliveries.
(a) Conditions to Both Parties' Obligations. The respective obligations of the
parties hereto to consummate the Closing shall be subject to the satisfaction
(or waiver by each party) as of the Closing of the following conditions:
(i) Governmental and Certain Other Approvals. Any notice to or approvals of any
federal, state or foreign governmental authority with respect to the
transactions contemplated hereby shall have been either filed or received and
Seller shall have received the consent of its mortgagee to the Lease of the
Tampa Bay Premises contemplated hereby.
(ii) No Order. No federal, state or foreign governmental authority or other
agency or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) after
the date of this Agreement which remains in effect, and which has the effect of
making the transactions contemplated hereby illegal or otherwise prohibiting
consummation of the transactions contemplated by this Agreement.
(b) Conditions to the Purchaser's Obligations. The obligations of the Purchaser
to consummate the Closing are subject to the satisfaction (or waiver by the
Purchaser) as of the Closing of the following conditions:
(i) Representations, Warranties and Covenants. The representations and
warranties of the Seller made in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and, except as specifically
contemplated by this Agreement, on and as of the Closing Date, as though made on
and as of the Closing Date, and the Seller shall have performed or complied
with, or shall have caused to be performed or complied with, in all material
respects all obligations and covenants required by this Agreement to be
performed or complied with by the Seller or any Affiliate by the time of the
Closing; and the Purchaser shall have received from the Seller, a certificate
dated the Closing Date and signed by an authorized officer of the Seller
confirming the foregoing.
(ii) No Material Adverse Change Since April 9, 2003. There have been no changes
since April 9, 2003 with respect to the Seller or the Business that would be
reasonably likely to have a Material Adverse Effect on the Seller or the
Business.
(iii) Other Documents and Instruments to be delivered by the Seller. The Seller
shall have delivered all certificates, agreements and other documents and
instruments required to be delivered by it on or before the Closing pursuant to
this Agreement, and such other documents and instruments as the Purchaser may
reasonably request, including, without limitation, the following:
(A) Good Standing Certificate. A certificate of the appropriate official, dated
within ten (10) days of the Closing Date, certifying as to (A) the due
organization and good standing (including tax good standing (to the extent
obtainable with proper notice to the applicable jurisdiction)) of Seller in its
jurisdiction of organization and (B) the qualification to do business and the
good standing (including tax good standing (to the extent obtainable with proper
notice to the applicable jurisdiction)) of the Seller in each jurisdiction
wherein the conduct of the Business or the ownership or operation of the
Acquired Assets requires such Seller to maintain qualification as a foreign
corporation.
(B) Opinion of the Seller's Counsel. A favorable opinion from Xxxxxxx X. Xxxxx,
P.C., counsel for the Seller, dated as of the Closing Date, with respect to the
matters set forth in Sections 4(a), 4(b), 4(c) (other than in respect of
shareholder action) and 4(d), reasonably satisfactory to Purchaser.
(C) Franchisor Consents. Written consents, in form and
substance reasonably satisfactory to Purchaser from not less than nine (9) of
the eleven (11) franchisors identified in Schedule 7(b)(iii)(C) (the "Primary
Franchisors") to the assignment to Purchaser of the respective franchise
agreements, provided that the net sales of the consenting Primary Franchisors
shall represent not less than eight-five percent (85%) of the Seller's net sales
of the Business for the year ended December 31, 2002, or new agreements between
Purchaser and such of the Franchisors, in form and substance, reasonably
satisfactory to Purchaser.
(D) Warehouse, San Xxxx Office, Norcross Office and Other
Consents to Transaction. A sublease of the Warehouse and the written estoppel
and consent of the landlord of the Warehouse with respect to Purchaser's use and
occupancy of the Warehouse, on a month-to-month basis for up to six months from
the Closing Date upon payment of the rent, additional rent and common area
charges, but not more than $28,250 per month and permitting Purchaser's removal
therefrom of such of the Inventories, removable Leasehold Improvements and other
Acquired Assets as are located therein which Purchaser determines to remove,
which sublease, estoppel and consent shall be in form and substance satisfactory
to Purchaser. An assignment of the Lease for the San Xxxx Office and the written
estoppel and consent of the landlord under such Lease, in form and substance
satisfactory to Purchaser. A sublease at Seller's cost of the Norcross Office on
a month-to-month basis for up to six months from the Closing Date with the
consent of the landlord, which sublease and consent shall be in form and
substance satisfactory to Purchaser. Written consents, in form and substance
reasonably satisfactory to the Purchaser, to the execution and consummation of
this Agreement or waivers of Default with respect to software license agreements
for the Progress and Sales Logix programs used by the Seller and other material
Assigned Contracts, if such Assigned Contract would otherwise be breached as a
result of the transactions contemplated hereby.
(E) Resolutions. Certified copies of resolutions duly adopted
by the Boards of Directors of the Seller authorizing the execution, delivery and
performance of this Agreement and each of the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby and such
resolutions shall not have been amended or revoked and shall remain in full
force and effect.
(F) Xxxx of Sale and other Transfer Documents. A xxxx of sale
for the Acquired Assets, Assignments of patents, trade names, trademarks,
copyrights and other Intellectual Property, and such other transfer documents as
are reasonably requested by the Purchaser, each in form and substance reasonably
acceptable to the Purchaser.
(G) Transaction Documents. The Seller and the Key Employee
shall have executed and delivered each of the Transaction Documents required to
be executed by each of them.
(c) Conditions to the Seller's Obligations. The obligations of the Seller to
consummate the Closing are subject to the satisfaction (or waiver by the Seller)
as of the Closing of the following conditions:
(i) Representations, Warranties and Covenants. The representations and
warranties of the Purchaser made in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and, except as
specifically contemplated by this Agreement, on and as of the Closing Date, as
though made on and as of the Closing Date, and the Purchaser shall have
performed or complied with, or shall have caused to be performed or complied
with, in all material respects all obligations and covenants required by this
Agreement to be performed or complied with by the Purchaser or any of its
Affiliates by the time of the Closing; and the Seller shall have received from
the Purchaser a certificate dated the Closing Date and signed by an authorized
officer of the Purchaser confirming the foregoing.
(ii) Other Documents and Instruments to Be Delivered by the Purchaser. The
Purchaser shall have delivered all certificates, agreements and other documents
and instruments required to be delivered by it on or before the Closing pursuant
to this Agreement, and such other Documents and instruments as the Seller may
reasonably request, including, without limitation, the following:
(A) Certificate of Good Standing. A certificate of the
appropriate officials, dated within ten (10) days of the Closing Date,
certifying as to the due organization and good standing (including tax good
standing (to the extent obtainable with proper notice to the applicable
jurisdiction)) of the Purchaser in its jurisdiction of organization.
(B) Opinion of Purchaser's Counsel. A favorable opinion from
Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP, counsel for the Purchaser, dated as of
the Closing Date, with respect to the matter set forth in Sections 5(a), 5(b)
and 5(c), reasonably satisfactory to Seller.
(C) Resolutions. Certified copies of resolutions duly adopted
by the Board of Directors of the Purchaser authorizing the execution, delivery
and performance of this Agreement and each of the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby and
such resolutions shall not have been amended or revoked and shall remain in full
force and effect.
(D) Transaction Documents. The Purchaser shall have executed
and delivered all Transaction Documents required to be executed by it.
(iii) Payment. The Purchaser shall have paid the Cash Portion of the Purchase
Price to the Seller, and the Escrow Amount to the Escrow Agent, each as
contemplated by Section 2(b) hereof.
8. Simultaneous Transactions. All transactions to be effected under this
Agreement at the Closing shall be deemed to occur in the order herein specified,
if any, but shall occur nearly simultaneously, and no such transaction shall be
deemed to have occurred unless all such transactions have occurred. All
documents required to be delivered at the Closing by any party hereunder,
including this Agreement, shall be deemed initially delivered in escrow and no
such document shall be released therefrom until all documents have been
delivered in escrow and payment received, whereupon all shall be deemed released
together.
9. Indemnification.
(a) Indemnification by the Seller. The Seller shall indemnify and hold harmless
the Purchaser from and against, all costs, fees, liabilities, losses, Taxes,
charges, claims, expenses and damages, including, without limitation, reasonable
legal fees and expenses (both those incurred in connection with the defense or
prosecution of the indemnifiable claim and those incurred in connection with the
enforcement of this provision) and costs of investigation, actually incurred or
as and when actually paid by the Purchaser, its agents or Affiliates, or any of
their respective subsidiaries or Affiliates, or any of their respective
officers, directors or employees, (collectively, "Purchaser Losses") as a result
of:
(i) any misrepresentation contained in or breach of or failure to perform any
representation, warranty, covenant or agreement of the Seller contained in this
Agreement or any other Transaction Document, provided, however, that
notwithstanding the foregoing, if at Closing, Purchaser's Chief Executive
Officer or Chief Financial Officer has actual knowledge based upon any document
given by Seller to such Chief Executive Officer or Chief Financial Officer prior
to Closing that Seller has breached a representation or warranty or failed to
perform a covenant or agreement. Purchaser's election to complete the
transaction herein contemplated shall act as a waiver of Purchaser's right to
claim indemnity by Seller for said breach or failure, provided that under no
circumstance shall the foregoing waiver apply to any indemnity claim based upon
breach of the representation and warranty contained in Section 4(c);
(ii) any Taxes of the Seller in respect of the Business with respect to any Tax
year or portion thereof for any Pre-Closing Period; as well as the unpaid Taxes
of any Person (other than the Seller) under Treasury Regulation ss.1.1502-6 (or
any similar provision of state, local, or foreign law) as a transferee or
successor, by contract, or otherwise;
(iii) any Retained Liabilities, Non-Business Assets and Excluded Assets;
(iv) the actual or threatened commencement of any proceeding, suit or action
against the Seller, the Purchaser or any Affiliate thereof, or any director,
officer or employee of any of them, arising out of actions taken or omitted to
be taken prior to the Closing by the Seller or its agents in respect of the
Business or the Acquired Assets, which, if determined adversely (regardless of
the actual determination thereof) would result in a Purchaser Loss which is
indemnifiable under the provisions of this Section 9(a) (any such pending or
threatened proceeding, suit or action being a "Purchaser Covered Action");
and/or
(v) any and all actions, suits, proceedings, claims or demands incident to any
of the foregoing or such indemnifications.
(b) Indemnification by the Purchaser. The Purchaser shall indemnify and hold
harmless the Seller from and against, all costs, fees, losses, liabilities,
Taxes, charges, claims, expenses and damages, including without limitation,
reasonable legal fees and expenses (both those incurred in connection with the
defense or prosecution of the indemnifiable claim and those incurred in
connection with the enforcement of this provision) and costs of investigation,
actually incurred or as and when actually paid by the Seller, their agents or
Affiliates, or any of their respective subsidiaries or Affiliates, or any of
their respective officers, directors or employees (collectively, "Seller
Losses") as a result of:
(i) any misrepresentation contained in or breach of or failure to perform any
representation, warranty, covenant or agreement of the Purchaser contained in
this Agreement or any other Transaction Document provided, however, that
notwithstanding the foregoing, if at Closing, Seller's Chief Executive Officer
or Chief Financial Officer has actual knowledge based upon any document given by
Purchaser to such Chief Executive Officer or Chief Financial Officer prior to
Closing that Purchaser has breached a representation or warranty or failed to
perform a covenant or agreement, Seller's election to complete the transaction
herein contemplated shall act as a waiver of Seller's right to claim indemnity
by Purchaser for said breach or failure;
(ii) the actual or threatened commencement of any proceeding, suit or action
against the Seller, or any Affiliate thereof or any director, officer or
employee of any of them, arising out of actions taken, or omitted to be taken
after the Closing by the Purchaser or its agents in respect of the Business or
the Acquired Assets, which if determined adversely (regardless of the actual
determination thereof) would result in a Seller Loss which is indemnifiable
under the provisions of this Section 9(b) (regardless of the actual
determination thereof) (any such pending or threatened proceeding suit or action
being a "Seller Covered Action" and together with a "Purchaser Covered Action",
a "Covered Action"); and/or
(iii) any and all actions, suits, proceedings, claims or demands incident to any
of the foregoing or such indemnifications.
(c) Loss Indemnity Procedure.
(i) Upon learning of the commencement of a Covered Action or the actual receipt
by the party claiming a right of indemnification of information relating to the
purported existence of facts or circumstances which could result in the
commencement of a Covered Action or other incurrence of a Purchaser Loss or
Seller Loss, the party claiming the right of indemnification (the "Indemnified
Party") shall promptly, but no later than fifteen (15) days after learning of
such commencement or receipt, give notice thereof, with reasonable specificity
of the facts as then known, to the party having the indemnification obligation
(the "Indemnifying Party"); provided, however, failure to give timely notice
shall not release the Indemnifying Party of its obligations hereunder except if,
and only to the extent that, the Indemnifying Party suffers actual prejudice as
a proximate result of such failure.
(ii) The Indemnifying Party shall have the right to assume the defense of any
such Covered Action only by giving written notice (the "Assumption Notice") to
the Indemnified Party within 20 days after notice given pursuant to Section
9(c)(i) above, which Assumption Notice shall state that (A) it agrees that the
claimant is entitled to indemnification hereunder; and (B) it agrees to assume
the defense thereof in the name and on behalf of the Indemnified Party with
counsel reasonably satisfactory to the Indemnified Party, in either event at the
sole cost and expense of the Indemnifying Party; provided, however,
(x) all such costs and expenses of
the foregoing counsel, if not paid by the Indemnifying
Party and instead paid by the Indemnified Party shall constitute Purchaser or
Seller Losses indemnifiable by the Indemnifying Party under Section 9(a) or (b),
as the case may be;
(y) the Indemnified Party, notwithstanding the timely delivery of an
Assumption Notice, may participate in such Covered Action through counsel
separately selected and paid for by the Indemnified Party; and
(z) if no Assumption Notice complying with subclauses (A) and (B) above is
timely given, or despite the giving of the Assumption Notice the defendants in
any Covered Action, include both the Indemnified Party and the Indemnifying
Party, and the Indemnified Party shall have reasonably concluded that there may
be legal defenses available to it which are different from or additional to
those available to the Indemnifying Party, or if there is a conflict of interest
which would prevent counsel for the Indemnifying Party from also representing
the Indemnified Party, or if the amount claimed in the Purchaser Covered Action
or Seller Covered Action, as the case may be, is subject to the Indemnification
Cap and, together with all other claims previously made for indemnification
hereunder to which the Indemnification Cap may apply, such claims, in the
aggregate, exceed the Indemnification Cap, or if the amount claimed in the
Covered Action is subject to the Basket, and together with all other claims for
indemnification previously made hereunder to which the Basket may apply such
claims in the aggregate are less than the Basket, then the Indemnified Party in
each of the foregoing cases shall have the right to select one separate counsel
to conduct the defense of such action on its behalf, and all such costs and
expenses shall be paid by the Indemnifying Party and, if paid by the Indemnified
Party, shall be Purchaser Losses or Seller Losses indemnifiable by the
Indemnifying Party under Subsection 9(a) or (b), as the case may be. The
Indemnified Party may take such action with respect to a Covered Action as it
may deem appropriate to protect against further damage or default, including
obtaining an extension of time to answer the complaint or other pleading or
filing an answer thereto.
(iii) The Indemnifying Party shall not consent to the entry of any judgment or
enter into any settlement without the written consent of the Indemnified Party,
which shall not be unreasonably withheld or delayed.
(d) Payment by Indemnified Party. The Indemnifying Party shall be entitled to
receive payment from the Indemnified Party of an amount equal to the Tax
reduction or refund actually realized, or insurance proceeds actually paid to
the Indemnified Party, solely as a result of the Indemnified Party having
incurred such Seller Loss or Purchaser Loss, provided that the Indemnifying
Party shall have paid to the Indemnified Party the full amount of such Purchaser
Loss or Seller Loss. Nothing herein shall obligate the Indemnified Party, in the
exercise of its good faith reasonable business judgment, to make any claim for a
Tax reduction or refund or insurance recovery.
(e) Duration of Indemnification. Liability for indemnification hereunder shall
expire as provided in Section 9(g) below unless, prior to such date, the
Indemnified Party has given to the Indemnifying Party written notice of a
Purchaser Loss or a Seller Loss (setting forth in reasonable detail the specific
facts and circumstances then known and pertaining thereto). In such event, such
liability shall survive until such Purchaser Loss or Seller Loss is finally
determined and any indemnification payment due with respect thereto or with
respect to the Covered Loss is made.
(f) Limitations.
(i) Notwithstanding anything to the contrary contained in this Section 9, (i)
the Seller shall not be obligated to pay in the aggregate any amounts in respect
of Purchaser Losses in excess of $2,000,000 and (ii) the Purchaser shall not be
obligated to pay in the aggregate any amounts in respect of Seller Losses in
excess of $2,000,000 (in each case, the "Indemnification Cap"). Notwithstanding
the foregoing and Section 9(f)(ii), the Indemnification Cap and the Basket (as
hereinafter defined) shall not apply to Seller's obligation to pay Purchaser
Losses or Purchaser's obligation to pay Seller Losses in respect of Unlimited
Obligations (as hereinafter defined). For purposes hereof, "Unlimited
Obligations" shall mean Purchaser Losses or Seller Losses attributable to or
resulting from (i) fraud of the other party, (ii) intentional failure by the
other party to perform any of the covenants, agreements or obligations to be
performed by it under this Agreement, (iii) failure of Seller to satisfy any
Retained Liability or failure of Purchaser to satisfy any Assumed Payables, (iv)
any intentional or knowing breach or misrepresentation of a representation or
warranty contained in Section 4 or Section 5 or elsewhere contained in this
Agreement or (v) any breach or alleged breach or misrepresentation of the
representation in Section 4(c), whether or not knowing or intentional. The
Basket shall also not apply to any adjustment to the Purchase Price pursuant to
Section 2(e) or any payment under the Escrow Agreement in respect of any RMA's
notwithstanding anything to the contrary provided in Section 9(f)(i).
(ii) Notwithstanding anything to the contrary contained in this Section 9, the
Seller shall not be obligated to make any payment in respect of a Purchaser Loss
which is not in respect of an Unlimited Obligation or any matter referred to in
the last sentence of Section 9(f)(i) until the aggregate of such Purchaser
Losses exceeds $50,000 (the "Basket"), after which such Basket and all other
Purchaser Losses shall be immediately payable.
(iii) Notwithstanding anything to the contrary contained in this Section 9, the
Purchaser shall not be obligated to make any payment in respect of a Seller Loss
which is not in respect of an Assumed Liability until the aggregate of such
Seller Losses exceeds the Basket, after which such Basket and all other Seller
Losses shall be immediately payable.
(g) Survival. All covenants that by their terms contemplate actions by the
parties after the Closing shall survive the Closing for the maximum duration of
the longest statute of limitations applicable with respect to such covenant plus
sixty (60) days. Except as otherwise specifically provided herein, all
representations and warranties shall survive the Closing, regardless of any
inspection or discovery, whether by reason of due diligence or otherwise, for a
period of twenty-four (24) months from the Closing, except that the
representations and warranties contained in Sections 4(b), 4(c) and 5(b)
(Enforceable Obligations; Due Authorization), 4(e)(i) (Title), 4(h) (Taxes),
4(r) (Environmental and OSHA Matters), and 4(o) (Employee Benefits) shall
survive the maximum duration of the longest statute of limitations applicable
with respect to such respective representation or warranty plus sixty (60) days.
10. Public Announcements. Neither party hereto shall issue any press release or
announcement, or make any reference to the Closing or to the transactions
contemplated hereby to any third Person without the prior written consent of the
other party hereto unless otherwise required by law. Both parties shall work
cooperatively to coordinate any such announcements of the Closing, as to both
the manner and content thereof.
11. Brokers. Except for fees and expenses payable to Bear Xxxxxxx & Co., Inc.,
which fees and expenses shall be the responsibility of and paid by the Seller,
each of the parties hereto represents and warrants to the others that he/she or
it has not employed or dealt with any broker in connection with any transactions
contemplated by this Agreement and shall save the other harmless from any and
all other claims at any time hereafter made for brokers' or finders' fees or
commissions, which claim or claims arise out of any agreement alleged to have
been made or action taken by the other, concerning or relating to the subject
matter of this Agreement.
12. Termination.
(a) This Agreement may be terminated at any time prior to the Closing:
(i) by the mutual written agreement of the Purchaser and the Seller; or
(ii) by either the Purchaser or the Seller in the event of a material breach by
or Default of the other Party hereto but not before ten (10) days after giving
written notice to such effect to the other Party; provided, however, that
delivery of such notice shall not affect the right of the other Party to cure
the Default during such ten-day period; or
(iii) by May 30, 2003, if the transaction herein contemplated has not closed by
said date.
(b) In the event of the termination of this Agreement as provided in Section
12(a), this Agreement shall be of no further force or effect; provided, however,
that (i) this Section 12(b), and Section 14 and the terms and conditions of that
certain "Confidentiality Letter" dated as of February 6, 2002 executed by the
Purchaser and relating to the transactions contemplated hereby, shall survive
the termination of this Agreement and shall remain in full force and effect, and
(ii) the termination of this Agreement shall not relieve any party from any
liability for any breach of any representation, warranty or covenant contained
in this Agreement which results in such termination.
13. Notices.
(a) All notices and other communications hereunder will be in writing and will
be given by delivery in person, facsimile or other standard form of
telecommunications, by overnight courier, or by registered or certified mail,
return receipt requested, to the parties at their respective addresses set forth
below, with copies as follows:
If to the Purchaser:
Jaco Electronics, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx, President
with copy to:
Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
If to the Seller:
Reptron Electronics, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx, President
with copy to:
Xxxxxxx X. Xxxxx, Esq.
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx, XX 00000
Fax: (000) 000-0000
Notice given by mail shall be deemed given four business days after deposit with
the United States Postal Service; Notice given by overnight courier shall be
deemed given one business day after delivery into the custody and control of
such overnight courier service for next day delivery and notice delivered in
person or by facsimile shall be deemed given one business day after such
delivery or receipt.
(b) Any party hereto may change the address to which any notice or other
communication shall be given by a notice to such effect complying with this
Section 13.
14. Miscellaneous.
(a) Rights Confined to Parties. Nothing expressed or implied herein is intended
or shall be construed to confer upon or give to any Person, other than the
parties hereto, and their respective successors and assigns as permitted
hereunder, any right, remedy, or claim under or by reason of this Agreement or
of any term, covenant, or condition hereto, and all the terms, covenants,
conditions, promises, and agreements contained herein shall be for the sole and
exclusive benefit of the parties hereto and their successors and assigns as
permitted hereunder.
(b) Entire Agreement. This Agreement, together with the other Transaction
Documents constitute the entire understanding between the parties hereto with
respect to the subject matter hereof and thereof and supersede any and all prior
agreements between the parties hereto with respect to the subject matter hereof
and thereof, including, without limitation, the letter of intent dated April 9,
2003 between the parties hereto, but excluding that Confidentiality Agreement
dated February 6, 2003 which shall not be superceded or otherwise merged into
this Agreement, but shall be automatically terminated without further action and
of no further force or effect effective as of the Closing.
(c) Assignment. This Agreement is not assignable by either party hereto and any
purported assignment shall be null and void and of no effect, provided, however,
that the Purchaser may assign its rights and/or obligations hereunder to any
Affiliate.
(d) Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not affect the validity or
enforceability of any other provision in such jurisdiction or the validity or
enforceability of such provision in any other jurisdiction.
(e) Effect of Headings. The Article, Section and subsection headings contained
herein are for convenience only and shall not affect the construction hereof.
(f) Arbitration and Jurisdiction. Any dispute hereunder shall be resolved
through arbitration before a panel of arbitrators sitting in New York, New York.
If the parties cannot agree upon a single arbitrator within fifteen (15) days
after written notice forwarded by one of the parties to the other demanding
arbitration, each of Seller and Purchaser shall choose an arbitrator, who,
within ten (10) days following the last designation of an arbitrator, shall in
turn choose a third and neutral arbitrator. The arbitration shall be conducted
pursuant to the commercial rules of arbitration then promulgated by the American
Arbitration Association. The decision of the arbitrator(s) shall be binding upon
the parties hereto for all purposes, and judgment to enforce any such binding
decision may be entered in a either the State or Federal court having
jurisdiction in the City of New York, State of New York or the City of Tampa,
Florida. For these purposes, each party hereby expressly and irrevocably
consents to the jurisdiction and venue of any of said courts. The arbitrator(s)
shall have the authority to award any remedy or relief that a State or Federal
court, having jurisdiction in the City of New York, could grant in conformity to
applicable law, including the authority to award attorney's fees. The
arbitration panel shall have the same subpoena powers and shall manage discovery
as if the panel were either the state or Federal court having jurisdiction in
the City of New York. In the event discovery with third parties is inhibited in
any way, or said discovery or the presence of witnesses for either deposition or
hearing can not be compelled by the panel, the party seeking said discovery, or
the attendance of witnesses, may commence an action in either the state of
Federal court having jurisdiction in the City of New York, seeking the subpoena
powers of said court to so compel discovery or the attendance of witnesses.
(g) Governing Law. The provisions of this Agreement, and all the rights and
obligations of the parties hereunder, shall be governed by, and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed wholly within such State without regard to
such State's conflicts of law principles.
(h) Counterparts. Telefacsimile transmissions of any executed original document
and/or retransmission of any executed telefacsimile transmission shall be deemed
to be the same as the delivery of an executed original. At the request of any
party hereto, the other parties hereto shall confirm telefacsimile transmissions
by executing duplicate original documents and delivering the same to the
requesting party or parties. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Construction. Each of the Seller and the Purchaser acknowledges that it has
been represented by counsel in connection with this Agreement and the other
Transaction Documents contemplated hereby. Accordingly, any rule of law or any
legal decision that would require interpretation of any claimed ambiguities in
this Agreement or any other Transaction Document against a party that drafted it
has no application and is explicitly waived.
(j) Amendments and Waivers. No amendment, modification, waiver or course of
conduct shall be effective unless the same is approved in writing and duly
executed by both of the parties hereto and then such amendment, modification or
waiver shall be effective only with respect to the specific instance and for the
specific purpose for which it was given.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused same to be executed by their respective officers or other representatives
thereunto duly authorized, as of the date first above written.
PURCHASER:
JACO ELECTRONICS, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------
Name: Xxxxxxx X. Xxxx
Title: EVP
SELLER:
REPTRON ELECTRONICS. INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------
Name:Xxxxxxx X. Xxxxx
Title: President
