ASSET PURCHASE AGREEMENT by and among Cabot Microelectronics Corporation, a Delaware corporation, QED Technologies International, Inc., a Delaware corporation, QED Technologies, Inc., a New York corporation, Don Golini, and Lowell Mintz Dated June 15,...
Exhibit
10.47
One”),
payable by Buyer within 45 days following the end of the calendar quarter
in
which the Year One Threshold is reached, by wire transfer to an account of
Seller designated by Seller;
Two
Hundred Forty Thousand Dollars ($30,240,000) and Thirty Seven Million Eight
Hundred Thousand Dollars ($37,800,000)) of the Earn-Out Amount, to the extent
not previously earned and paid, within 45 days following the end of Year
Two, by
wire transfer to an account of Seller designated by Seller. In no event will
the
Earn-Out Amount exceed Four Million Five Hundred Thousand Dollars ($4,500,000)
in the aggregate.
Amount
such that Revenues as provided in the Calculation Notice are understated
by five
percent (5%) or more, then Buyer shall pay all fees and expenses of the Agreed
Firm.
independent
public accountants as mutually agreed to (the "Independent
Accountants")
for
resolution applying the principles, policies and practices referred to in
Section 2.8 and this Section 2.9. If issues are submitted to the Independent
Accountants for resolution: (i) Seller, the Shareholders and Buyer shall
furnish
or cause to be furnished to the Independent Accountants such work papers
and
other documents and information relating to the disputed issues as the
Independent Accountants may request and are reasonably available to that
party
or its agents and shall be afforded the opportunity, together with the
respective independent accountants or auditors, as applicable, of Seller
and
Buyer (if different from the Independent Accountants), to present to the
Independent Accountants any material relating to the disputed issues and
to
discuss the issues with the Independent Accountants; (ii) the determination
by
the Independent Accountants, as set forth in a notice to be delivered to
Seller,
the Shareholders and Buyer within sixty (60) days of the submission to the
Independent Accountants of the issues remaining in dispute, shall be final,
binding and conclusive on the parties and shall be used in the calculation
of
the Closing Working Capital; and (iii) Seller and Buyer will each bear fifty
percent (50%) of the fees and costs of the Independent Accountants for such
determination.
Governmental
Authorization that is held by Seller or that otherwise relates to the Purchased
Assets or to the business of Seller, except where such Conflict, individually
or
in the aggregate, would not have a Material Adverse Effect on the ability
of
Buyer to conduct the business of Seller as currently conducted and as currently
proposed by Seller to be conducted and the waiver of which is not otherwise
required in order to consummate the Contemplated
Transactions;
of
Business of Seller, under any Contract with any account debtor of an Account
Receivable relating to the amount or validity of such Account Receivable,
subject to the Reserves. Part
3.11
contains
a complete and accurate list of all Accounts Receivable as of the date of
this
Agreement, which list sets forth the aging of each such Account Receivable
and
which Part
3.11
shall be
updated by Seller as of the Closing Date.
contracts
with third-party administrators, actuaries, investment managers, consultants
and
other independent contractors that relate to any Employee Plan, (v) the last
three years of Form 5500, including all attachments, that have been filed
with
respect to any Employee Plan, and (vi) all summary plan descriptions, summaries
of material modifications and employee handbooks and other material written
communications regarding the Employee Plans.
will
or
could result in a revocation of such exemption. Each Employee Welfare Benefit
Plan (as defined in Section 3(1) of ERISA) that utilizes a funding vehicle
described in Section 501(c)(9) of the Code or is subject to the provisions
of
Section 505 of the Code has been the subject of a notification by the IRS
that
such funding vehicle qualifies for tax-exempt status under Section 501(c)(9)
of
the Code or that the plan complies with Section 505 of the Code, unless the
IRS
does not, as a matter of policy, issue such notification with respect to
the
particular type of plan. With respect to each Employee Plan, to Seller’s and
each Shareholder’s knowledge, no event has occurred or condition exists that
will or could give rise to a loss of any intended tax consequence or to any
Tax
under Section 511 of the Code.
valid
and
enforceable against Seller and, to the Seller’s and each Shareholder’s
Knowledge, the other parties thereto, in accordance with its terms, except
as
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to creditors’ rights generally and subject to general
principles of equity; and
Facility
or any other property or assets (whether real, personal or mixed) in which
Seller has or had an interest except in full compliance with all applicable
Environmental Laws.
the
license, sublicense, agreement or permission will not be terminated or
cancelled, or the Seller’s rights thereunder diminished or impaired, or Seller’s
obligations thereunder increased, as a result of the consummation of the
transactions contemplated by this Agreement.
in
all
material respects, are valid and enforceable, and are not subject to any
maintenance fees or taxes or other action falling due within ninety (90)
days
after the date hereof.
Quatar,
Saudi Arabia, Sudan, Syria, United Arab Emirates, the Republic of Yemen or
Zimbabwe in violation of any Legal Requirement.
Closing
Date, to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which
they
were made, not misleading.
Purchased
Assets, the business of Seller or the Assumed Liabilities in excess of $25,000;
or (e) make any material change in compensation or bonus arrangements (other
than hiring and the termination of employees in the Ordinary Course of
Business); (f) issue or declare any dividends or distributions to any equity
holder (other than tax distributions to equity holders, limited to the amounts
required for payment of income taxes then due and payable solely in connection
with the net income of Seller); (g) make any change in its current accounting
practices (other than as required by GAAP); or (h) issue or authorize the
issuance of any equity security (other than pursuant to the exercise of
outstanding stock options).
clarification,
such efforts shall not require Seller to waive any conditions to close or
any of
its other rights in the course thereof.
to
terminate, reassign, promote or demote any of the Hired Active Employees
at any
time or to change adversely or favorably the title, powers, duties,
responsibilities, functions, locations, salaries, other compensation or terms
or
conditions of employment of such employees.
the
Closing and relating to the business to be operated by Buyer after the Closing,
including relationships with lessors, employees, regulatory authorities,
licensors, customers, suppliers and others, and Seller will satisfy the Retained
Liabilities in a manner that is not detrimental to any of such relationships.
Seller and each Shareholder will refer to Buyer all inquiries relating to
such
business.
consequential
damages except to the extent paid by Buyer Indemnified Person to a third
party),
expense (including costs of investigation and defense and reasonable attorneys'
fees and expenses), whether or not involving a Third-Party Claim (collectively,
"Damages"),
arising, directly or indirectly, from or in connection with:
collect
Damages twice for the same matter) and subject to Sections 11.5
and 11.7(c), Seller and each Shareholder, jointly and severally, will
indemnify and hold harmless Buyer and the other Buyer Indemnified Persons,
and
will reimburse Buyer and the other Buyer Indemnified Persons, for any Damages
(including costs of cleanup, containment or other remediation) arising from
or
in connection with:
Information,
it may, without liability hereunder, furnish that portion of such Confidential
Information that is legally required and will exercise reasonable efforts
to
obtain assurance that confidential treatment will be accorded such Confidential
Information.
whole
or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will
be
applicable except in the specific instance for which it is given; and (c)
no
notice to or demand on one party will be deemed to be a waiver of any obligation
of that party or of the right of the party giving such notice or demand to
take
further action without notice or demand as provided in this Agreement or
the
documents referred to in this Agreement.
distributed
to Seller and the Shareholders. In
the
event that (i) Buyer is required to pay any amount to Elbit under the Letter
of
Credit, (ii) Buyer draws any amount from the escrow referred to above (such
amount, the “LOC
Escrow Draw”)
and
(iii) the product built for Elbit is subsequently sold, then Buyer shall
pay to
Seller or the Shareholders an amount equal to the lesser of the amount of
Revenues from the sale of the product or the LOC Escrow Draw. Any Revenues
received by Buyer from the sale of the product shall be included in Revenues
for
purposes of Section 2.3(b) hereof. The parties agree to reasonably cooperate
to
effect the purposes and intent of this Section 13.15.
by
and
among
Cabot
Microelectronics Corporation,
a
Delaware corporation,
QED
Technologies International, Inc.,
a
Delaware corporation,
QED
Technologies, Inc.,
a
New
York corporation,
Xxx
Xxxxxx,
and
Xxxxxx
Xxxxx
Dated
June 15,
2006
CONFIDENTIAL
Execution
Version
Table
of Contents:
Section Page
Number
| 1. | Definitions and Usage | 1 |
| 2. | Sale and Transfer of Assets; Closing | 13 |
| 3. | Representations and Warranties of Seller and Shareholders | 23 |
| 4. | Representations and Warranties of Buyer | 46 |
| 5. | Covenants of Seller Prior to Closing | 47 |
| 6. | Covenants of Buyer Prior to Closing | 50 |
| 7. | Conditions Precedent to Buyer's Xxxxxxxxxx xx Xxxxx | 00 |
| 0. | Conditions Precedent to Seller's Xxxxxxxxxx xx Xxxxx | 00 |
| 0. | Xxxxxxxxxxx | 00 |
| 00. | Additional Covenants | 55 |
| 11. | Indemnification; Remedies | 59 |
| 12. | Confidentiality | 67 |
| 13. | General Provisions | 69 |
Exhibits:
| 2.5 | Preliminary Allocation of Initial Purchase Price and Consideration |
| 2.7(a)(i) | Xxxx of Sale, Assignment and Assumption Agreement |
| 2.8 | Sample Adjustment Amount Calculation |
-
-CONFIDENTIAL
Execution
Version
This
Asset Purchase Agreement (this “Agreement”)
is
dated June 15,
2006,
by and among, Cabot Microelectronics Corporation, a Delaware corporation
(“CMC”),
QED
Technologies International, Inc., a Delaware corporation and wholly owned
subsidiary of CMC (“Buyer”),
QED
Technologies, Inc., a New York corporation ("Seller"),
Xxx
Xxxxxx, an individual and resident of the State of New York (“Xx.
Xxxxxx”),
and
Xxxxxx Xxxxx, an individual and resident of the State of New York (“Xx.
Xxxxx”
and,
together with Xx. Xxxxxx, the “Shareholders”
and,
each, a “Shareholder”).
RECITALS
Xx.
Xxxxxx, individually and through various Affiliated trusts and immediate family
members, beneficially owns One Million (1,000,000) shares of Class A common
stock of Seller, which constitute Fifty Percent (50%) of the issued and
outstanding shares of voting capital stock of Seller. Xx. Xxxxx, individually
and through various Affiliated trusts, beneficially owns One Million (1,000,000)
shares of Class A common stock of Seller, which constitute Fifty Percent (50%)
of the issued and outstanding shares of voting capital stock of Seller. Seller
and the Shareholders desire to sell, and Buyer desires to purchase, the
Purchased Assets (as defined below) of Seller for the consideration and on
the
terms set forth in this Agreement.
AGREEMENT
The
parties, intending to be legally bound, agree as follows:
1. Definitions
and Usage
1.1 Definitions
For
purposes of this Agreement, the following terms and variations thereof have
the
meanings specified or referred to in this Section 1.1:
"Accounts
Receivable"--(a) all trade accounts receivable and other rights to payment
from
customers of Seller and the full benefit of all security for such accounts
or
rights to payment, including all trade accounts receivable representing amounts
receivable in respect of goods shipped or products sold or services rendered
to
customers of Seller, (b) all other accounts or notes receivable of Seller and
the full benefit of all security for such accounts or notes and (c) any claim,
remedy or other right related to any of the foregoing.
"Active
Employee"--as defined in Section 10.1(a).
"Adjustment
Amount"--as defined in Section 2.8.
"Affiliate"--with
respect to any Person, any other Person that, directly or indirectly through
one
or more intermediaries, controls, or is controlled by, or is under common
control with, such Person. For purposes of this definition "control" (including
"controlling," "controlled by," and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and shall be construed
as such term is used in the rules promulgated under the Securities
Act.
“Agreed
Firm” --as defined in Section 2.3(c).
"Assumed
Liabilities"--as defined in Section 2.4(a).
"Audited
Financial Statements"--as defined in Section 3.4.
“Bid”--any
outstanding quotation bid or proposal by the Seller which, if accepted or
awarded, would lead to a contract with the U.S. government, any other
Governmental Body or a prime contractor or a higher tier subcontractor to the
U.S. government or any other Governmental Body, for the design, manufacture
or
sale of products or the provision of services directly or indirectly to the
U.S.
government or any other Governmental Body.
"Xxxx
of
Sale"--as defined in Section 2.7(a)(i).
"Breach"--any
breach of, or any inaccuracy in, any representation or warranty or any breach
of, or failure to perform or comply with, any covenant or obligation, in or
of
this Agreement or any other Contract, or any event which with the passing of
time or the giving of notice, or both, would constitute such a breach,
inaccuracy or failure.
"BSI"--Byelocorp
Scientific, Inc., a New York corporation.
“BSI
Agreements”--as defined in section 2.7(c).
"BSI
Intellectual Property"--Purchased Assets, as such term is defined in the BSI
Purchase Agreement.
“BSI
License Agreement” --the agreement, dated July 25, 1996, between BSI and MR
Finishing Systems, LLC, a New York limited liability company and the predecessor
of Seller.
“BSI
Purchase Agreement” --the technology asset purchase agreement, dated the date
hereof, among Buyer, Seller, the Shareholders and BSI, in the form executed
by
Buyer and BSI as of the date hereof, pursuant to which Buyer will purchase
the
BSI Intellectual Property on the Closing Date, which purchase shall include
an
assignment by BSI to Buyer of that certain Exclusive License Agreement between
BSI and the University of Rochester dated June 12, 2006 (the “Rochester License
Agreement”), subject to the terms hereof and thereof.
“Business”--as
defined in Section 2.3(b).
"Business
Conducted by Buyer and/or CMC"--all businesses conducted by the Buyer or CMC
as
of the Closing Date (including, but not limited to, the Business), of whatever
kind, within or outside of the United States of America, including, but not
limited to, the development, use, sales, manufacture or incorporation for use,
of products, in or into fine finish polishing and/or chemical mechanical
planarization (CMP) products, applications and/or compositions, and/or the
development, use, sale, and/or manufacture of such fine finish polishing and/or
CMP products, applications or compositions, for the polishing of or use in
connection with magnetic recording structures and/or devices, magnetic recording
media substrates, integrated circuit devices and/or semiconductor wafers,
optical and optical-electronic devices and/or surfaces (e.g., fiber optics
or
other optics), micro-electro mechanical systems (MEMS), flat panel displays,
light emitting diodes, photovoltaic devices, metallic and/or crystalline
surfaces, and/or other industries or products that could benefit from fine
finish polishing applications.
"Business
Day"--any day other than (a) Saturday or Sunday or (b) any other day on which
banks in Illinois are permitted or required to be closed.
"Buyer"--as
defined in the first paragraph of this Agreement.
"Buyer
Group"--as defined in Section 5.1.
"Buyer
Indemnified Persons”--as defined in Section 11.2.
"Buyer’s
Closing Documents"--as defined in Section 4.2(a).
“Calculation
Notice” --as defined in Section 2.3(c).
“Cash
Purchase Price” --as defined in Section 2.3(c).
"Closing”--as
defined in Section 2.6.
"Closing
Date"--the date on which the Closing actually takes place.
"Closing
Financial Statements"--as defined in Section 2.9(b).
"Closing
Working Capital"--as defined in Section 2.9(b).
"CMC"--as
defined in the first paragraph of this Agreement.
"COBRA"--as
defined in Section 3.16(e).
"Code"--the
Internal Revenue Code of 1986, as amended.
"Confidential
Information"--as defined in Section 12.1.
“Conflict”--means
conflict with, or any violation of or default under (with or without notice
or
lapse of time, or both) any obligation or benefit, including, but not limited
to, such conflicts, violations or defaults giving rise to a right of
termination, cancellation, modification or acceleration of any obligation or
benefit.
"Consent"--any
approval, consent, ratification, waiver or other required
authorization.
"Contemplated
Transactions"--all of the transactions contemplated by this
Agreement.
"Contract"--any
agreement, contract, Lease, consensual obligation, promise or undertaking
(whether written or oral and whether express or implied), whether or not legally
binding.
"Copyrights"--as
defined in Section 3.25(a)(iii).
"Damages"--as
defined in Section 11.2.
"Defined
Benefit Plans"--as defined in Section 3.16(a).
"Disclosing
Party"--as defined in Section 12.1.
"Disclosure
Letter"--the disclosure letter delivered by Seller and the Shareholders to
Buyer
concurrently with the execution and delivery of this Agreement.
"Earn-Out
Amount"--as defined in Section 2.3(b).
“Earn-Out
Dispute Notice” --as defined in Section 2.3(c).
"Effective
Time"--the time at which the Closing is consummated on the Closing
Date.
"Employee
Plans"--as defined in Section 3.16(a).
"Employment
Agreements"--as defined in Section 2.7(a)(v).
"Employment
Loss"--as defined in Section 11.2(f).
"Encumbrance"--any
charge, claim, community or other marital property interest, condition,
equitable interest, lien, option, pledge, security interest, mortgage, right
of
way, easement, encroachment, servitude, right of first option, right of first
refusal or similar restriction, including any restriction on use, voting (in
the
case of any security or equity interest), transfer, receipt of income or
exercise of any other attribute of ownership.
"Environment"--soil,
land surface or subsurface strata, surface waters (including navigable waters
and ocean waters), publicly or privately owned treatment works, drains, sewer
systems (including septic systems), wetlands, groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life and any other environmental medium or natural resource.
"Environmental,
Health and Safety Liabilities"--any cost, damages, expense, liability,
obligation or other responsibility arising from or under any Environmental
Law
or Occupational Safety and Health Law, including those consisting of or relating
to:
|
(a)
|
any
environmental, health or safety matter or condition (including on-site
or
off-site contamination, occupational safety and health and regulation
of
any chemical substance or product);
|
|
(b)
|
any
fine, penalty, judgment, award, settlement, legal or administrative
proceeding, damages, loss, claim, demand or response, remedial or
inspection cost or expense arising under any Environmental Law or
Occupational Safety and Health Law, including, but not limited to,
attorney, expert and consultant fees and
costs;
|
|
(c)
|
financial
responsibility under any Environmental Law or Occupational Safety
and
Health Law for cleanup costs or corrective action, including any
cleanup,
removal, containment or other remediation or response actions ("Cleanup")
required by any Environmental Law or Occupational Safety and Health
Law
(whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource
damages; or
|
|
(d)
|
any
other compliance, corrective or remedial measure required under any
Environmental Law or Occupational Safety and Health
Law.
|
The
terms
"removal," "remedial" and "response action" include the types of activities
covered by the United States Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (CERCLA).
"Environmental
Law"--any Legal Requirement, at any time in force or effect, relating
to:
|
(a)
|
emissions,
discharges, spills, Release or Threat of Release of Hazardous Material
into the Environment;
|
|
(b)
|
the
use, treatment, storage, disposal, handling, manufacturing, transportation
or shipment of Hazardous Material;
|
|
(c)
|
the
regulation of storage tanks;
|
|
(d)
|
assuring
that products are designed, formulated, packaged and used so that
they do
not present unreasonable risks to human health or the Environment
when
used or disposed; or
|
|
(e)
|
otherwise
relating to pollution or the protection of human health or the
Environment.
|
"ERISA"--the
Employee Retirement Income Security Act of 1974, as amended.
"ERISA
Affiliate"--as defined in Section 3.16(a).
“Escrow
Agent” --means X.X. Xxxxxx Trust Company, National Association.
"Escrow
Agreement"--as defined in Section 2.7(a)(vi).
"Escrow
Amount"--as defined in Section 2.3(a).
"Escrow
Exclusions"--as defined in Section 11.5.
"Exchange
Act"--the Securities Exchange Act of 1934, as amended.
"Excluded
Assets"--as defined in Section 2.2.
"Facilities"--any
real property, leasehold or other interest in real property currently owned
or
operated by Seller. Notwithstanding the foregoing, for purposes of the
definitions of "Hazardous Activity" and "Remedial Action" and Sections 3.22
("Environmental Matters") and 11.3 ("Indemnification and Reimbursement by Seller
and Shareholders for Environmental Matters"), "Facilities" shall mean any real
property, leasehold or other interest in real property currently or formerly
owned or operated by Seller.
"Family"--as
defined in the defined term “Related Person.”
"GAAP"--generally
accepted accounting principles for financial reporting in the United
States.
"Governing
Documents"--with respect to any particular entity, (a) if a corporation, the
articles or certificate of incorporation and the bylaws; (b) if a general
partnership, the partnership agreement and any statement of partnership; (c)
if
a limited partnership, the limited partnership agreement and the certificate
of
limited partnership; (d) if a limited liability company, the articles of
organization and operating agreement; (e) if another type of Person, any other
charter or similar document adopted or filed in connection with the creation,
formation or organization of the Person; (f) all equityholders' agreements,
voting agreements, voting trust agreements, joint venture agreements,
registration rights agreements or other agreements or documents relating to
the
organization, management or operation of any Person or relating to the rights,
duties and obligations of the equityholders of any Person; and (g) any amendment
or supplement to any of the foregoing.
“Government
Contract”--any prime contract, subcontract, contract modification, teaming
agreement or arrangement, joint venture, basic ordering agreement, letter
contract, purchase order, delivery order, change order, arrangement or other
commitment of any kind between Seller and (A) the U.S. government
or
any
other Governmental Body, (B) any prime contractor to the U.S. government or
any
other Governmental Body or (C) any subcontractor with respect to any contract
described in clause (A) or (B).
"Governmental
Authorization"--any Consent, license, registration or permit issued, granted,
given or otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
"Governmental
Body"--any:
|
(a)
|
nation,
state, county, city, town, borough, village, district or other
jurisdiction;
|
|
(b)
|
federal,
state, local, municipal, foreign or other
government;
|
|
(c)
|
governmental
or quasi-governmental authority of any nature (including any agency,
branch, department, board, commission, court, tribunal or other entity
exercising governmental or quasi-governmental
powers);
|
|
(d)
|
multinational
organization or body;
|
|
(e)
|
body
exercising, or entitled or purporting to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority
or power; or
|
|
(f)
|
official
of any of the foregoing.
|
"Hazardous
Activity"--the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, Release, storage, transfer,
transportation, treatment or use (including any withdrawal or other use of
groundwater) of Hazardous Material in, on, under, about or from any of the
Facilities or any part thereof into the Environment and any other act, business,
operation or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm, to persons or property on or off the
Facilities.
"Hazardous
Material"--at any time, any substance, material or waste which is regulated
by
any Governmental Body, including any material, substance or waste which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "contaminant,"
“pollutant,” "toxic waste" or "toxic substance" under any provision of
Environmental Law, and including radon, petroleum, petroleum products, asbestos
(including, but not limited to, presumed asbestos-containing material or
asbestos-containing material), radioactive material, PCB-containing materials,
urea formaldehyde, polychlorinated biphenyls, trichloroethylene,
perchloroethylene, mineral spirits, kerosene and naptha solvents.
"Hired
Active Employees"--as defined in Section 10.1(b)(i).
"Indemnified
Person"--as defined in Section 11.9(a).
"Indemnifying
Person"--as defined in Section 11.9(a).
"Indemnity
Cap"--as defined in Section 11.5.
"Independent
Accountants"--as defined in Section 2.9(d).
“Initial
Cash Amount” --as defined in Section 2.3(a).
"Initial
Purchase Price"--as defined in Section 2.3(a).
"Intellectual
Property Assets"--as defined in Section 3.25(a).
"Interim
Balance Sheet"--as defined in Section 3.4.
"Inventories"--all
inventories of Seller, wherever located, including all finished goods, work
in
process, raw materials, spare parts and all other materials and supplies to
be
used or consumed by Seller in the production of finished goods.
"IRS"--the
United States Internal Revenue Service and, to the extent relevant, the United
States Department of the Treasury.
"Knowledge"--an
individual will be deemed to have Knowledge of a particular fact or other matter
if:
|
(a)
|
that
individual is actually aware of that fact or matter;
or
|
|
(b)
|
a
prudent individual could be expected to discover or otherwise become
aware
of that fact or matter in the course of conducting a reasonable
investigation regarding the accuracy of any representation or warranty
contained in this Agreement.
|
A
Person
(other than an individual) will be deemed to have Knowledge of a particular
fact
or other matter if any individual who is serving as a director or officer (
for
the purposes of Seller, officers shall be Xxx Xxxxxx, Xxx Xxxxxxxxxx, Xxxx
Xxxxxxx and Xxxxx Xxxxxxxxxx) of that Person has, or at any time had, Knowledge
of that fact or other matter (as set forth in (a) and (b) above), and any such
individual (and any individual party to this Agreement) will be deemed to have
conducted a reasonable investigation regarding the accuracy of the
representations and warranties made herein by that Person or
individual.
"Lease"--means
any real property lease or any lease or rental agreement, license, right to
use
or installment and conditional sale agreement to which Seller is a party and
any
other Seller Contract pertaining to the leasing or use of any Tangible Personal
Property.
"Legal
Requirement"--any federal, state, local, municipal, foreign, international,
multinational or other constitution, law, ordinance, principle of common law,
code, regulation, statute or treaty.
“Letter
of Credit” --as defined in the definition of “M&T Loan Documents”
herein.
"Liability"--with
respect to any Person, any liability or obligation of such Person of any kind,
character or description, whether known or unknown, absolute or contingent,
accrued or unaccrued, disputed or undisputed, liquidated or unliquidated,
secured or unsecured, joint or several, due or to become due, vested or
unvested, executory, determined, determinable or otherwise, and whether or
not
the same is required to be accrued on the financial statements of such
Person.
"Marks"--as
defined in Section 3.25(a)(i).
"Material
Adverse Effect"--any change, event or effect that is or could reasonably be
expected to be materially adverse to (a) the results of operations, financial
condition, business, prospects, rights, properties, assets or liabilities of
Seller, (b) Seller's relations with its management, employees, creditors,
suppliers, customers, regulators, insurers or others having business
relationships with Seller, in each case, taken as a whole, or (c) the ability
of
Seller to consummate the Contemplated Transactions or perform its obligations
hereunder; provided, that none of the following shall be deemed to constitute,
and none of the following shall be taken into account in determining whether
there has been, a Material Adverse Effect: (i) any adverse change or development
relating to the United States financial, banking or securities
markets,
(ii) any adverse change in the economic conditions that generally affect
Seller’s industry, (iii) conditions resulting from the announcement of the
Contemplated Transactions or (iv) any outbreak or escalation of hostilities
or
act of terrorism involving the United States or any declaration of war by the
United States.
"Material
Consents"--as defined in Section 7.3.
“M&T
Bank” --as defined in the defined term “M&T Loan Documents.”
“M&T
Loan Agreement” --as defined in the defined term “M&T Loan
Documents.”
“M&T
Loan Documents”--the
Loan
Agreement, dated as of June 14, 2002, by and between Seller and Manufacturers
and Traders Trust Company (“M&T
Bank”),
as
amended by Amendment No.1 thereto, dated as of November 13, 2003, Amendment
No.
2 thereto, dated as of June 18, 2004 and Amendment No. 3 thereto, dated as
of
November 24, 2004 (collectively, the “M&T
Loan Agreement”),
together with the $1,500,000 Standard Libor Grid Note, dated June 18, 2004,
made
by Seller, the General Security Agreement, dated June 14, 2002, between Seller
and M&T Bank, the $1,225,000 Demand Grid Note, dated August 26, 2002,
secured by a standby letter of credit in the amount of $1,218,000 to Elbit
Systems Electro-Optics, as beneficiary (the “Letter
of Credit”),
made
by Seller, and any other notes issued under, or documents executed and delivered
in connection with, the M&T Loan Agreement.
“Multiemployer
Plan”--as defined in Section 3.16(a).
"Net
Names"--as defined in Section 3.25(a)(v).
"Notes"--as
defined in Section 12.1.
"Occupational
Safety and Health Law"--any Legal Requirement designed to provide safe and
healthful working conditions and to reduce occupational safety and health
hazards, including the Occupational Safety and Health Act, and any program,
whether governmental or private (such as those promulgated or sponsored by
industry associations and insurance companies), designed to provide safe and
healthful working conditions.
"Order"--any
order, injunction, judgment, decree, ruling, assessment or arbitration award
of
any Governmental Body or arbitrator.
"Ordinary
Course of Business"--an action taken by a Person will be deemed to have been
taken in the Ordinary Course of Business only if that action:
|
(a)
|
is
consistent in nature, scope and magnitude with the past practices
of such
Person and is taken in the ordinary course of the normal, day-to-day
operations of such Person;
|
|
(b)
|
does
not require authorization by the board of directors or shareholders
of
such Person (or by any Person or group of Persons exercising similar
authority) and does not require any other separate or special
authorization of any nature; and
|
|
(c)
|
is
similar in nature, scope and magnitude to actions customarily taken,
without any separate or special authorization, in the ordinary course
of
the normal, day-to-day operations of other Persons that are in the
same
line of business as such Person.
|
“Paid
Earn-Out Amount” --as defined in Section 2.3(c).
"Part"--a
part or section of the Disclosure Letter.
"Patents"--as
defined in Section 3.25(a)(ii).
"PBGC"--as
defined in Section 3.16(b).
"Period"--as
defined in Section 10.7(a).
"Permitted
Encumbrances"--as defined in Section 3.9.
"Person"--an
individual, partnership, corporation, business trust, limited liability company,
limited liability partnership, joint stock company, trust, unincorporated
association, joint venture or other entity or any Governmental
Body.
"Proceeding"--any
action, arbitration, audit, hearing, investigation, litigation or suit (whether
civil, criminal, administrative, judicial or investigative, whether formal
or
informal, whether public or private) commenced, brought, conducted or heard
by
or before, or otherwise involving, any Governmental Body or
arbitrator.
"Purchase
Price"--as defined in Section 2.3(c).
“Purchase
Price Allocation Schedule” --as defined in Section 2.5(a).
“Purchased
Assets”--as defined in Section 2.1.
"Real
Property Leases"--the Leases of the following properties: (i) Seller’s
headquarters located at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000;
(ii)
offices
located at Mitsuru Plaza, 000-0-0-0 Xxxxxx Xxxx, Xxxx-Xx, Xxxxx 000-0000
Xxxxx (each,
a
“Real Property Lease”)
"Receiving
Party"--as defined in Section 12.1.
"Record"--information
that is inscribed on a tangible medium or that is stored in an electronic or
other medium and is retrievable in perceivable form.
"Related
Person"--
With
respect to a particular individual:
|
(a)
|
each
other member of such individual's Family;
and
|
|
(b)
|
any
Person that is an Affiliate of a member of such individual's
Family.
|
With
respect to a specified Person other than an individual:
|
(a)
|
any
Affiliate of such specified Person;
and
|
|
(b)
|
each
Person that serves as a director, officer, partner, executor or trustee
of
such specified Person (or in a similar
capacity).
|
For
purposes of this definition, the "Family" of an individual includes (i) the
individual, (ii) the members of such individual's “immediate family” as such
term is defined in Rule 16a-1 of the Securities Exchange Act of 1934, as
amended, and (iii) any other natural person who is related to the individual
and
resides with such individual.
"Release"--any
release, spill, emission, leaking, pumping, pouring, dumping, emptying,
injection, deposit, disposal, discharge, dispersal, leaching or migration on
or
into the Environment or into or out of any property.
"Remedial
Action"--all actions, including any capital expenditures, required or
voluntarily undertaken (a) to clean up, remove, treat or in any other way
address any Hazardous Material or other substance; (b) to prevent the Release
or
Threat of Release or to minimize the further Release of any Hazardous Material
or other substance so it does not migrate or endanger or threaten to endanger
public health or welfare or the Environment; (c) to perform pre-remedial studies
and investigations or post-remedial monitoring and care; or (d) to bring all
Facilities and the operations conducted thereon into compliance with
Environmental Laws and environmental Governmental Authorizations.
"Representative"--with
respect to a particular Person, any director, officer, manager, employee, agent,
consultant, advisor, accountant, financial advisor, legal counsel or other
representative of that Person.
“Reserves”
--as defined in Section 3.11.
"Restricted
Contracts"--as defined in Section 2.10.
"Retained
Liabilities"--as defined in Section 2.4(b).
“Revenue”
--as defined in Section 2.3(b)(i).
“Rochester
License Agreement” --as defined in the definition of “BSI Purchase
Agreement”.
"SEC"--the
United States Securities and Exchange Commission.
"Securities
Act"--the Securities Act of 1933, as amended.
"Seller"--as
defined in the first paragraph of this Agreement.
"Seller
Contract"--any Contract (a) under which Seller or any of its Subsidiaries has
or
may acquire any rights or benefits; (b) under which Seller or any of its
Subsidiaries has or may become subject to any obligation or liability; or (c)
by
which Seller or any of its Subsidiaries or any of the assets owned or used
by
Seller or any of its Subsidiaries is or may become bound.
"Seller’s
Closing Documents"--as defined in Section 3.2(a).
"Shareholder"
and "Shareholders" --as defined in the first paragraph of this
Agreement.
"Software"--all
computer and other software and subsequent versions thereof, including source
code, object, executable or binary code, objects, comments, screens, user
interfaces, report formats, templates, menus, buttons and icons and all files,
data, materials, manuals, design notes and other items and documentation related
thereto or associated therewith.
"Subsidiary"--with
respect to any Person (the "Owner"), any corporation or other Person of which
securities or other interests having the power to elect a majority of that
corporation's or other Person's board of directors or similar governing body,
or
otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred),
are
held by the Owner or one or more of its Subsidiaries.
"Tangible
Personal Property"--all machinery, equipment (including, but not limited to,
demonstration equipment), tools, furniture, office equipment, computer hardware,
supplies, materials, vehicles and other items of tangible personal property
(other than Inventories) of every kind owned or leased by Seller (wherever
located and whether or not carried on Seller's books), together with any express
or implied warranty by the manufacturers or sellers or lessors of any item
or
component part thereof and all maintenance records and other documents relating
thereto.
"Tax"--any
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental, windfall profit, customs, vehicle,
airplane, boat, vessel or other title or registration, capital stock, franchise,
employees' income withholding, foreign or domestic withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, value added, alternative, add-on minimum and other tax, fee,
assessment, levy, tariff, charge or duty of any kind whatsoever and any
interest, penalty, addition or additional amount thereon imposed, assessed
or
collected by or under the authority of any Governmental Body or payable under
any tax-sharing agreement or any other similar Contract.
"Tax
Return"--any return (including any information return), report, statement,
schedule, notice, form, declaration, claim for refund or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
“Transfer
Taxes” --as defined in Section 2.5(b).
"Third
Party"--a Person that is not a party to this Agreement.
"Third-Party
Claim"--any claim against any Indemnified Person by a Third Party, whether
or
not involving a Proceeding.
"Threat
of Release"--a reasonable likelihood of a Release that may require action in
order to prevent or mitigate damage to the Environment that may result from
such
Release.
"Trade
Secret"--as defined in Section 3.2(a)(iv).
"WARN
Act"--the Worker Adjustment and Retraining Notification Act.
"Working
Capital"--as defined in Section 2.9(a).
"Year
One"--as defined in Section 2.3(b)(i).
"Year
One
Earn Out"--as defined in Section 2.3(b)(iii).
"Year
One
Pro-Rata Earn Out"--as defined in Section 2.3(b)(iii).
"Year
One
Threshold"--as defined in Section 2.3(b)(i).
"Year
One
Threshold Earn Out"--as defined in Section 2.3(b)(i).
"Year
Two"--as defined in Section 2.3(b)(ii).
"Year
Two
Earn Out"--as defined in Section 2.3(b)(iv).
"Year
Two
Pro-Rata Earn Out"--as defined in Section 2.3(b)(iv).
"Year
Two
Threshold"--as defined in 2.3(b)(ii).
"Year
Two
Threshold Earn Out"--as defined in Section 2.3(b)(ii).
1.2 Usage
(a) Interpretation.
In this Agreement, unless a clear contrary intention appears:
(i) the
singular number includes the plural number and vice versa;
(ii) reference
to any Person includes such Person's successors and assigns but, if applicable,
only if such successors and assigns are not prohibited by this Agreement, and
reference to a Person in a particular capacity excludes such Person in any
other
capacity or individually;
(iii) reference
to any gender includes each other gender;
(iv) reference
to any agreement, document or instrument means such agreement, document or
instrument as restated, amended or modified and in effect from time to time
in
accordance with the terms thereof;
(v) reference
to any Legal Requirement means such Legal Requirement as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect from time
to
time, including rules and regulations promulgated thereunder, and reference
to
any section or other provision of any Legal Requirement means that provision
of
such Legal Requirement from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or reenactment
of
such section or other provision;
(vi) "hereunder,"
"hereof," "hereto," “herein,” and words of similar import shall be deemed
references to this Agreement as a whole and not to any particular Article,
Section or other provision hereof;
(vii) "including"
(and with correlative meaning "include") means including without limiting the
generality of any description preceding such term;
(viii) "or"
is
used in the inclusive sense of "and/or";
(ix) with
respect to the determination of any period of time, "from" means "from and
including" and "to" means "to but excluding"; and
(x) references
to documents, instruments or agreements shall be deemed to refer as well to
all
addenda, exhibits, schedules or amendments thereto.
(b) Accounting
Terms and Determinations. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP.
(c) Legal
Representation of the Parties. This Agreement was negotiated by the parties
with
the benefit of legal representation, and any rule of construction or
interpretation otherwise requiring this Agreement to be construed or interpreted
against any party shall not apply to any construction or interpretation hereof,
including, but not limited to, by reason of the drafting thereof.
2. Sale
and
Transfer of Assets; Closing
2.1 Assets
to
be Sold
Upon
the
terms and subject to the conditions set forth in this Agreement, at the Closing,
but effective as of the Effective Time, Seller shall, and shall cause its
Subsidiaries to, sell, convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase and acquire from Seller and its Subsidiaries, free and clear
of
any Encumbrances other than Permitted Encumbrances, all of Seller's and its
Subsidiaries’ respective right, title and interest in and to all of Seller's and
its Subsidiaries’ respective property and assets, real, personal or mixed,
tangible and intangible, of every kind and description, wherever located,
including the following (but excluding the Excluded Assets):
(a) all
cash
and cash equivalents on hand or in banks or other depositories, marketable
securities, or any other similar investments or accounts;
(b) all
Tangible Personal Property, including those items described in Part 2.1(b);
(c) all
Inventories;
(d) all
Accounts Receivable;
(e) all
fixed
assets, including all leasehold improvements (to the extent owned by Seller
and
transferable to Buyer) and those assets listed in Part 2.1(e);
(f) all
Seller Contracts, including any listed in Part
3.20(a),
and all
outstanding offers or solicitations made by or to Seller to enter into any
Contract;
(g) all
Governmental Authorizations of Seller or any of its Subsidiaries and all pending
applications therefor or renewals thereof, in each case to the extent
transferable to Buyer, including those listed in Part
3.17(b);
(h) all
data
and Records related to the operations of Seller and its Subsidiaries, including
client and customer lists and Records, referral sources, research and
development reports and Records, production reports and Records, service and
warranty Records, equipment logs, operating guides and manuals, financial and
accounting Records, creative materials, advertising materials, promotional
materials, studies, reports, correspondence and other similar documents and
Records and, subject to Legal Requirements, copies of all personnel Records
and
other Records described in Section 2.2(c);
(i) all
of
the intangible rights and property of Seller and its Subsidiaries, including
Intellectual Property Assets, going concern value, goodwill, telephone, telecopy
and e-mail addresses and listings and those items listed in Parts
3.25(d), (e), (f), (g) and (h);
(j) all
insurance benefits, including rights and proceeds, arising from or relating
to
the Purchased Assets or the Assumed Liabilities prior to the Effective
Time;
(k) all
claims of Seller or its Subsidiaries against third parties relating to the
Purchased Assets, whether xxxxxx or inchoate, known or unknown, contingent
or
noncontingent, including all such claims listed in Part
2.1(k);
(l) all
rights of Seller or its Subsidiaries relating to deposits and prepaid expenses,
claims for refunds and rights to offset in respect thereof;
(m) all
Software (including, but not limited to, proprietary software) and other
licenses used in the business to the extent such licenses are assignable or
transferable;
(n) costs
and
estimated earnings in excess of xxxxxxxx on uncompleted projects of Seller
or
its Subsidiaries;
(o) platform
deposits paid by Seller or its Subsidiaries;
(p) prepaid
expenses and other current assets of Seller or its Subsidiaries;
and
(q) deposits
paid by Seller or its Subsidiaries related to leased property.
All
of
the property and assets to be transferred to Buyer hereunder are herein referred
to collectively as the "Purchased
Assets."
Notwithstanding
the foregoing, the transfer of the Purchased Assets pursuant to this Agreement
shall not include the assumption of any Liability related to the Purchased
Assets unless Buyer expressly assumes that Liability pursuant to Section
2.4(a).
2.2 Excluded
Assets
Notwithstanding
anything to the contrary contained in Section 2.1 or elsewhere in this
Agreement, the following assets of Seller and/or its Subsidiaries (collectively,
the "Excluded
Assets")
are
not part of the sale and purchase contemplated hereunder, are excluded from
the
Purchased Assets and shall remain the property of Seller after the
Closing:
(a) all
minute books, stock Records and corporate seals;
(b) the
shares of capital stock of Seller held in treasury, if any, and all shares
of
capital stock of any Subsidiary of Seller;
(c) all
personnel records and other Records that Seller and its Subsidiaries are
required by law to retain in its possession; and
(d) all
rights of Seller under this Agreement, the Xxxx of Sale and the Escrow
Agreement.
2.3 Consideration
and
Purchase Price
(a) Initial
Purchase Price. The initial consideration for the Purchased Assets will be
Sixteen Million Seven Hundred Seventy Five Thousand Dollars ($16,775,000)
consisting of the sum of (i) Thirteen Million Seven Hundred Seventy Five
Thousand Dollars ($13,775,000) (the
“Initial
Cash Amount”),
plus
or minus the Adjustment Amount, (ii) Three Million Dollars ($3,000,000) (the
“Escrow
Amount”
and,
together with the Initial Cash Amount, the “Initial
Purchase Price”)
and
(iii) the assumption of the Assumed Liabilities. In accordance with Section
2.7(b), at the Closing Buyer shall deliver, (x) the Initial Cash Amount, prior
to adjustment on account of the Adjustment Amount, to Seller by wire transfer
to
an account of Seller designated by Seller; (y) the Escrow Amount paid to the
Escrow Agent pursuant to the Escrow Agreement; and (z) to Seller, the execution
and delivery of the Xxxx of Sale. The Adjustment Amount, if any, shall be paid
by Buyer or Seller, as applicable, after Closing in accordance with Section
2.8.
(b) Earn-Out
Amount. In addition to the Initial Purchase Price and the assumption of the
Assumed Liabilities, consideration for the Purchased Assets will include the
aggregate amount equal to up to Four Million Five Hundred Thousand Dollars
($4,500,000) (the “Earn-Out
Amount”)
to be
earned and paid as follows:
(i) Five
Hundred Thousand Dollars ($500,000) of the Earn-Out Amount (the “Year
One Threshold Earn Out”)
will
be earned upon the Business achieving at least Fourteen Million Two Hundred
Thousand Dollars ($14,200,000) (the “Year
One Threshold”)
in
total revenue, on an accrual basis in accordance with GAAP consistent with
the
current accounting practices of Seller, net of sales returns and allowances
(“Revenue”),
during the twelve months following the Closing Date (“Year
(ii) Five
Hundred Thousand Dollars ($500,000) of the Earn-Out Amount (the “Year
Two Threshold Earn Out”)
will
be earned upon the Business achieving at least Sixteen Million Dollars
($16,000,000) (the “Year
Two Threshold”)
in
Revenue (in addition to the Revenue of the Business during Year One), during
the
second twelve months following the Closing Date (“Year
Two”),
payable by Buyer within 45 days following the end of the calendar quarter in
which the Year Two Threshold is reached, by wire transfer to an account of
Seller designated by Seller;
(iii) if
the
Revenue of the Business during Year One is at least Fourteen Million Two Hundred
Thousand Dollars ($14,200,000), then Seller shall be entitled to earn up to
Two
Million Dollars ($2,000,000) (the “Year
One Pro-Rata Earn Out”),
in
addition to the Year One Threshold Earn Out, as follows: for Revenue between
Fourteen Million Two Hundred Thousand Dollars ($14,200,000) and Seventeen
Million Eight Hundred Thousand Dollars ($17,800,000) earned during Year One,
Seller shall receive a pro-rata percentage (based
on
the amount by which such Revenue in Year One exceeds Fourteen Million Two
Hundred Thousand Dollars ($14,200,000)) of
the
Year One Pro-Rata Earn Out, payable by Buyer to Seller within 45 days following
the end of Year One, by wire transfer to an account of Seller designated by
Seller (the Year One Threshold Earn Out and the Year One Pro-Rata Earn Out
are
together referred to as the “Year
One Earn Out”);
(iv)
if
the
Revenue of the Business during Year Two is at least Sixteen Million Dollars
($16,000,000), then Seller shall be entitled to earn up to One Million Five
Hundred Thousand Dollars ($1,500,000) (the “Year
Two Pro-Rata Earn Out”),
in
addition to the Year Two Threshold Earn Out, as follows: for Revenue between
Sixteen Million Dollars ($16,000,000) and Twenty Million Dollars ($20,000,000),
Seller shall receive from Buyer a pro-rata percentage (based on the amount
by
which such Revenue in Year Two exceeds Sixteen Million Dollars ($16,000,000))
of
the Year Two Pro Rata Earn Out within 45 days following the end of Year Two,
by
wire transfer to an account of Seller designated by Seller (the Year Two
Threshold Earn Out and the Year Two Pro-Rata Earn Out are together referred
to
as the “Year
Two Earn Out”);
(v)
except
as
set forth in Section 2.3(b)(ix), if Year One Revenue of the Business is less
than the Year One Threshold, no Year One Earn-Out shall be paid;
(vi) in
no
event will the Year One Earn Out exceed Two Million Five Hundred Thousand
Dollars ($2,500,000) in the aggregate;
(vii)
except
as
set forth in Section 2.3(b)(ix), if Year Two Revenue of the Business is less
than the Year Two Threshold, no Year Two Earn-Out shall be paid;
(viii) in
no
event will the Year Two Earn Out exceed Two Million Dollars ($2,000,000) in
the
aggregate;
(ix) At
the
end of Year Two, there shall be a “true up” such that, if the Business achieves
aggregate Revenues of at least Thirty Seven Million Eight Hundred Thousand
Dollars ($37,800,000) in Year One and Year Two, the entire Earn-Out Amount,
to
the extent not previously earned and paid, shall be paid by Buyer to Seller
within 45 days following the end of Year Two, by wire transfer to an account
of
Seller designated by Seller. If aggregate Revenues of the Business for Year
One
and Year Two are between Thirty Million Two Hundred Forty Thousand Dollars
($30,240,000) and Thirty Seven Million Eight Hundred Thousand Dollars
($37,800,000), Seller shall receive from Buyer a pro-rata percentage (based
on
the amount by which such aggregate Revenues are between Thirty Million
For
purposes of the Earn-Out Amount, the “Business”
shall
mean the business operations conducted by Seller on and as of the Closing Date
and the business operations conducted by Buyer following the Closing Date using
the Intellectual Property Assets. It is the intent of the parties that, for
purposes of calculating the Earn-Out Amount, “Revenues” shall include revenue of
the business operations conducted by Buyer following the Closing Date that
is
derived from the core competencies, expertise and skills of the Seller’s
employees employed by Buyer following the Closing Date, as well as the
Intellectual Property Assets and equipment used by Buyer in the Business. If,
after the Closing, (i) Buyer or CMC proposes to undertake or consummate any
acquisition and the acquired business, assets or employees will be integrated
into Buyer and will report into and be under the responsibility of Seller’s
executive officers employed by Buyer following the Closing Date, or (ii) Buyer
or CMC proposes that Buyer engage in any business other than the Business,
each
of Buyer and CMC hereby agree to negotiate in good faith with Seller and the
Shareholders to arrive at a mutually acceptable treatment of any revenue from
the acquired business, assets or employees or the new business, as the case
may
be, for purposes of the Earn-Out Amount. By way of clarification, the Earn-Out
Amount is not contingent upon the continuing employment of any executive
employee or other employee of Seller following the Closing.
(c) Together
with the payment of any Earn-Out Amount or, if no Earn-Out Amount is to be
paid
with respect to Year One or Year Two,
within
45 days after the end of the applicable year, Buyer shall deliver to the
Shareholders a written report setting forth Buyer’s computation of Revenue and
the Earn-Out Amount for the applicable year, if any, together with reasonably
detailed data supporting such calculation (a “Calculation
Notice”).
In
the event that the Shareholders shall dispute the calculation of Revenue or
the
Earn-Out Amount as calculated by Buyer, the Shareholders shall notify Buyer
in
writing (the“Earn-Out
Dispute Notice”),
setting forth in reasonable detail the basis of the dispute, within 30 days
of
receiving the Calculation Notice. If the Shareholders do not provide Buyer
with
an Earn-Out Dispute Notice within such 30-day
period, the Shareholders shall be deemed to have accepted the calculation of
Revenues and the Earn-Out Amount as set forth in the Calculation Notice as
correct and final.
In
the
event that the Shareholders provide Buyer with an Earn-Out Dispute Notice,
then
the Shareholders and Buyer shall confer in good faith for a period of up to
30
days following the delivery of any Earn-Out Dispute Notice concerning the
subject matter of the Earn-Out Dispute Notice in an attempt to resolve the
dispute. If a final resolution of such dispute is reached, the agreed upon
amount of Revenue and Earn-Out Amount shall be deemed final and binding. If,
after such 30-day period, the Shareholders and Buyer cannot resolve such
dispute, then Buyer and the Shareholders shall mutually agree upon a nationally
recognized accounting firm to resolve such dispute, or if they cannot agree
on
such a firm within five (5) days, they shall each designate a nationally
recognized accounting firm, and the two firms shall agree upon a third
nationally recognized accounting firm which third firm shall have the sole
authority to resolve such dispute. The firm so agreed upon (the“Agreed
Firm”)
shall
as promptly as practicable (and in any event within 30 days) make a final
determination of the amount of Revenue and the Earn-Out Amount, if any, which
shall be binding on the parties. Each of Buyer and the Shareholders shall
provide the Agreed Firm with all information and documentation that the Agreed
Firm reasonably requests. The Sellers and Shareholders shall be jointly and
severally responsible for the payment of all fees and expenses of the Agreed
Firm, provided, however, that if the Agreed Firm in its final determination
of
the Earn-Out Amount disagrees with Buyer’s calculation of Revenues or the
Earn-Out
Buyer
shall use its commercially reasonable efforts and act in good faith to make
from
time to time such business decisions and take such actions or refrain from
taking such actions in the conduct of the Business following the Closing so
as
to not materially adversely affect the ability of Seller to earn all or any
portion of the Earn-Out Amount. Neither Seller nor any Shareholder shall have
any right to claim any lost Earn-Out Amount as a result of such decisions or
actions taken in a commercially reasonable manner and in good faith by Buyer.
Notwithstanding the foregoing, the prior written consent of the Shareholders,
which consent shall not be unreasonably withheld, delayed or conditioned, shall
be required in connection with any dissolution, combination or material
contraction of the Business in the period from the Closing Date until the end
of
Year Two if, and only if, in connection with such event (i) the obligations
under this Section 2.3(b) are not assumed by any successor entity, (ii) the
Business does not continue in a substantially similar form following such event
or (iii) the ability of Seller to earn all or any portion of the Earn-Out Amount
is materially adversely impaired. By way of clarification and not limitation,
notwithstanding the foregoing, the consent of the Shareholders shall not be
required in connection with: (i) hiring and termination decisions; (ii) the
failure to qualify or seek qualification as a contractor or subcontractor to
the
U.S. government or any other Governmental Body; (iii) the loss of, or failure
to
enter into, agreements with, customers, suppliers, vendors or other contractual
relationships; or (iv) force majeure. In addition, consent of the Shareholders
shall not be required if the maximum Earn-Out Amount payments are paid on or
before the payment dates set forth in this Section 2.3(b).
The
Initial Purchase Price, as adjusted in accordance with Sections 2.8 and 2.9
below, together with the Earn-Out Amount to the extent actually paid hereunder
(the “Paid
Earn-Out Amount”)
and
the assumption of the Assumed Liabilities, shall be the “Purchase
Price.”
The
Initial Purchase Price, as adjusted in accordance with Sections 2.8 and 2.9
below, together with the Paid Earn-Out Amount shall be the “Cash
Purchase Price”.
2.4 Liabilities
(a) Assumed
Liabilities. On the Closing Date, but effective as of the Effective Time, Buyer
shall assume and agrees to discharge only the following Liabilities of Seller
(the "Assumed
Liabilities"):
(i) current
liabilities (including bona fide trade accounts payable, but excluding the
current portion of long-term debt and outstanding balances of Seller’s line of
credit with M&T Bank) incurred by Seller in the Ordinary Course of Business
(which shall not include any account payable to Xxxxxxx & Company LLC or its
Affiliates or any Shareholder or any other equity holder or Affiliate of Seller,
other than the current liabilities of Seller to BSI incurred in the Ordinary
Course of Business under the BSI License Agreement, or any Subsidiary of Seller
or any other advisor (including legal and financial advisors) engaged in
connection with the Contemplated Transactions), reflected on the Closing
Financial Statements and used in the calculation of the Closing Working
Capital;
(ii) subject
to Section 2.10 below, any Liability arising after the Closing Date under any
Seller Contract or the operation of the Business after the Effective Time (other
than any Liability that arises out of or relates to any Breach or Conflict
that
occurred prior to the Effective Time);
(iii) Buyer’s
portion of the liability for transfer, sales and similar Taxes that will arise
as a result of the sale of the Purchased Assets pursuant to this Agreement
in
accordance with Section 2.5(b) hereof;
(iv) any
obligation to provide service under any product warranty of Seller arising
in
the Ordinary Course of Business, including, without limitation, those relating
to the installed base of machines sold by Seller;
(v)
payment
obligations of Seller to Xxxxxxxxx GmbH & Co. KG incurred in the Ordinary
Course of Business relating to machines in Seller’s inventory, in Xxxxxxxxx GmbH
& Co. KG’s possession, under assembly by Xxxxxxxxx GmbH & Co. KG or on
order from Xxxxxxxxx GmbH & Co. KG;
(vi) current
liabilities of Seller to BSI incurred in the Ordinary Course of Business under
the BSI License Agreement.
(b) Retained
Liabilities. The Retained Liabilities shall remain the sole responsibility
of
and shall be retained, paid, performed and discharged solely by Seller.
"Retained Liabilities" shall mean every Liability of Seller or any of its
Subsidiaries other than the Assumed Liabilities, including, but not limited
to:
(i) any
obligation or accrual (as should be accrued under GAAP) to pay any account
payable or amount owed to any Shareholder or any other equity holder or
Affiliate of Seller, any Subsidiary of Seller (other than current liabilities
owed to BSI under the BSI License Agreement) or Xxxxxxx & Company LLC or its
Affiliates or any other advisor (including legal and financial advisors) engaged
in connection with the Contemplated Transactions;
(ii) any
Liability arising out of or relating to products of Seller or any Subsidiary
of
Seller to the extent manufactured or sold prior to the Effective Time other
than
specifically assumed under Section 2.4(a)(iv);
(iii) any
Liability under any Contract assumed by Buyer pursuant to Section 2.4(a) that
arises after the Effective Time but that arises out of any Breach or Conflict
that occurred prior to the Effective Time;
(iv) other
than Liabilities for Taxes included in the Closing Working Capital, any
Liability for Taxes arising as a result of Seller's operation of its business,
ownership of the Purchased Assets or the employment of its employees on or
prior
to the Effective Time, except as set forth in Section 2.5(b) with respect to
Transfer Taxes;
(v) any
Liability under any Contract not assumed by Buyer under Section 2.4(a),
including any Liability arising out of or relating to Seller's or any Subsidiary
of Seller’s credit facilities or indebtedness for borrowed money or any security
interest related to any of the foregoing;
(vi) any
Environmental, Health and Safety Liabilities arising out of or relating to
the
operation of Seller's or any Subsidiary of Seller’s business or Seller's or any
Subsidiary of Seller’s leasing, or operation of real property prior to the
Effective Time;
(vii) any
Liability under the Employee Plans or relating to payroll, vacation, sick leave,
workers' compensation, unemployment benefits, pension benefits, employee stock
option or profit-sharing plans, health care plans or
benefits or any other employee plans or benefits of any kind for Seller's or
any
Subsidiary of Seller’s employees or former employees or both, other than any
such Liabilities included in the Closing Working Capital;
(viii) any
Liability under any employment, severance, retention or termination agreement
with any employee of Seller of any Subsidiary of Seller or any of its respective
Related Persons, including, but not limited to, any vacation pay or accrued
vacation pay (as should be accrued in accordance with GAAP) owed to employees
or
former employees of Seller or any Subsidiary of Seller, other than any such
Liabilities included in the Closing Working Capital;
(ix) any
Liability arising out of or relating to any employee grievance by any employee
or former employee of Seller, against Seller whether or not the affected
employees or former employees of Seller are hired by Buyer;
(x)
any
Liability to indemnify, reimburse or advance amounts to any officer, director,
employee or agent of Seller or any Subsidiary of Seller;
(xi) any
Liability to distribute to any of Seller's or any Subsidiary of Seller’s
shareholders or otherwise apply all or any part of the consideration received
hereunder;
(xii) any
Liability arising out of any Proceeding pending as of the Effective
Time;
(xiii) any
Liability arising out of any Proceeding commenced after the Effective Time
and
arising out of any occurrence or event happening prior to the Effective
Time;
(xiv) any
Liability arising out of or resulting from Seller's or any Subsidiary of
Seller’s compliance or noncompliance with any Legal Requirement or Order of any
Governmental Body;
(xv) any
Liability of Seller, any Subsidiary of Seller’s or any Shareholder under this
Agreement or any other document executed in connection with the Contemplated
Transactions; and
(xvi) any
Liability of Seller, any Subsidiary of Seller or any Shareholder based upon
Seller's, such Subsidiary’s or any Shareholder’s (as such) acts or omissions
occurring after the Effective Time.
2.5 Allocation
and
Transfer Taxes
(a) A
preliminary allocation of the Initial Purchase Price (and Assumed Liabilities
and other relevant items) and an allocation of the consideration among the
Purchased Assets are shown on Exhibit 2.5 attached hereto. Within thirty (30)
days of the determination of the Closing Working Capital, Buyer shall provide
to
Seller a schedule allocating the Initial Purchase Price (and Assumed Liabilities
and other relevant items) and an allocation of the consideration among the
Purchased Assets and the covenants set forth in Section 10.7 (the “Purchase
Price Allocation Schedule”).
The
Purchase Price Allocation Schedule will be prepared in accordance with the
applicable provisions of the Code and shall reflect appropriate adjustments
to
the preliminary allocation of the Initial Purchase Price to reflect changes
in
the Purchase Price as provided herein.
Seller
shall have a period of thirty (30) days after the delivery of the Purchase
Price
Allocation Schedule during which to present in writing to Buyer notice of any
objections Seller may have to the allocations set forth in the Purchase Price
Allocation Schedule. In the event that Seller does not provide such notice
within such thirty (30) day period, the Purchase Price Allocation Schedule
shall
be binding on the parties without further adjustment. If Seller shall raise
any
objections within such thirty (30) day period, Buyer and Seller shall negotiate
in good faith and use best efforts to resolve such dispute. If Buyer and Seller
fail to agree upon the Purchase Price Allocation Schedule within thirty (30)
days after the delivery of the notice of objections by Seller, then the disputed
items shall be resolved in accordance with the procedure set forth in Section
2.9(d).
Buyer,
Seller and each Shareholder agree for all tax reporting purposes (including,
but
not limited to, the reports required to be filed under Section 1060 of the
Code)
to report the Contemplated Transactions in accordance with the Purchase Price
Allocation Schedule, unless otherwise required by law. Buyer shall prepare
and
deliver IRS Form 8594 to Seller to be filed with the IRS. In any Proceeding
related to the determination of any Tax, neither Buyer, Seller nor any
Shareholder shall contend or represent that the Purchase Price Allocation
Schedule is not a correct allocation.
(b) Any
and
all transfer, sales, use, purchase, value added, excise, property, withholding,
stamp, or similar taxes ("Transfer
Taxes")
imposed on, or resulting from, the transfer of any Purchased Assets pursuant
to
this Agreement (including those Transfer Taxes imposed on the Buyer or the
Purchased Assets) that result from the transfer of the Purchased Assets to
the
Buyer pursuant to the terms of this Agreement shall be allocated equally between
Seller and Buyer and fifty percent (50%) of such Transfer Taxes shall be paid
by
the Seller and fifty percent (50%) of such Transfer Taxes shall be paid by
the
Buyer. Accordingly, (i) to the extent any Transfer Taxes are imposed on, or
incurred by, the Buyer, the Seller shall promptly reimburse the Buyer for fifty
percent (50%) of such Transfer Taxes or expenses and (ii) to the extent any
Transfer Taxes are imposed on, or incurred by, the Seller, the Buyer shall
promptly reimburse the Seller for fifty percent (50%) of such Transfer Taxes
or
expenses. Each party shall, at its own expense, file all necessary Tax Returns
and other documentation with respect to all relevant Transfer Taxes imposed
on
or incurred by it and, if required by applicable Law, will join the other party
in the execution of any such Tax Returns and other documentation.
2.6 Closing
The
purchase and sale provided for in this Agreement (the "Closing")
will
take place at the offices of Buyer at 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx,
commencing at 10:00 a.m. (local time) on July 6, 2006, unless Buyer and Seller
otherwise agree. Subject to the provisions of Article 9, failure to consummate
the purchase and sale provided for in this Agreement on the date and time and
at
the place determined pursuant to this Section 2.6 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement. In such a situation, the Closing will occur as soon as
practicable, subject to Article 9.
2.7 Closing
Obligations
In
addition to any other documents to be delivered under other provisions of this
Agreement, at the Closing:
(a) Seller
shall deliver to Buyer:
(i) a
xxxx of
sale and assignment and assumption for all of the Purchased Assets that are
Tangible Personal Property in the form of Exhibit 2.7(a)(i)
(the
"Xxxx
of Sale")
executed by Seller;
(ii) [intentionally
omitted];
(iii) assignments
of all Intellectual Property Assets owned by Seller and separate assignments
of
all registered, issued or applied for Marks, Patents and Copyrights owned by
Seller;
(iv) such
other bills of sale, assignments, certificates of title, documents and other
instruments of transfer and conveyance as may reasonably be requested by Buyer,
each in form and substance satisfactory to Buyer and its legal counsel and
executed by Seller;
(v) (A)
that
certain employment agreement executed by Buyer and Xx. Xxxxxx on date hereof
and
(B) an employment agreement executed between Buyer and Xxxx Xxxxxx, to be
substantially in form and substance as presented by the Buyer as of the date
hereof (collectively, the "Employment
Agreements"
and,
each, an “Employment
Agreement”);
(vi) an
escrow
agreement executed among Seller, the Shareholders, Buyer and the Escrow Agent,
in form and substance as agreed upon among Seller, the Shareholders, Buyer
and
the Escrow Agent as of the date hereof (the "Escrow
Agreement");
(vii) the
legal
opinion of Fulbright & Xxxxxxxx L.L.P., counsel to the Seller, dated as of
the Closing Date, in form and substance as agreed upon by Buyer as of the date
hereof;
(viii) a
certificate executed by Seller and the Shareholders as to the accuracy of their
representations and warranties as of the date of this Agreement and as of the
Closing in accordance with Section 7.1 and as to their compliance with and
performance of their covenants and obligations to be performed or complied
with
at or before the Closing in accordance with Section 7.2;
(ix) a
certificate, duly completed and executed by the Seller pursuant to Section
1.1445-2(b)(2) of the Treasury Regulations, certifying that the Seller is not
a
"foreign person" within the meaning of Section 1445 of the Code; and
(x) a
certificate of the Secretary of Seller certifying, as complete and accurate
as
of the Closing, attached copies of the Governing Documents of Seller, certifying
and attaching all requisite resolutions or actions of Seller's board of
directors and shareholders approving the execution and delivery of this
Agreement and the consummation of the Contemplated Transactions and the change
of name contemplated by Section 5.9 and certifying to the incumbency and
signatures of the officers of Seller executing this Agreement and any other
document relating to the Contemplated Transactions and accompanied by the
requisite documents for amending the relevant Governing Documents of Seller
required to effect such change of name in form sufficient for filing with the
appropriate Governmental Body.
(b) Buyer
shall deliver to Seller:
(i) Thirteen
Million Seven Hundred Seventy Five Thousand Dollars ($13,775,000) by wire
transfer to an account specified by Seller in a writing;
(ii) the
Escrow Agreement, executed by Buyer and the Escrow Agent, together with the
delivery of Three Million Dollars ($3,000,000) to the Escrow Agent thereunder,
by wire transfer to an account specified by the Escrow Agent;
(iii) the
Xxxx
of Sale executed by Buyer; and
(iv) the
Employment Agreements executed by Buyer and CMC, as applicable; and
(v)
a
certificate of the Secretary of Buyer and CMC certifying, as complete and
accurate as of the Closing, attached copies of the Governing Documents of Buyer,
certifying and attaching all requisite resolutions or actions of Buyer's board
of directors approving the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions, certifying all requisite
resolutions or actions of CMC's board of directors approving the execution
and
delivery of this Agreement and the consummation of the Contemplated
Transactions, and certifying to the incumbency and signatures of the officers
of
Buyer and CMC executing this Agreement and any other document relating to the
Contemplated Transactions.
(c) Xx.
Xxxxx
shall cause BSI to sell the BSI Intellectual Property to Buyer as of the Closing
Date pursuant to the BSI Purchase Agreement, the Rochester License Agreement
and
the assignment agreement, xxxx of sale and all deliverables required under
the
BSI Purchase Agreement (collectively, the “BSI
Agreements”),
as
executed among Buyer, BSI and CMC as of the date hereof.
(d) None
of
the Purchased Assets shall be owned by, nor shall title to any Purchased Asset
be held by, any Subsidiary of Seller and no Subsidiary of Seller shall have
any
right, title or interest to any of the Purchased Assets.2.8 Adjustment
Amount and Payment
The
"Adjustment
Amount"
(which
may be a positive or negative number) will be equal to the amount determined
as
follows:
(a) If
Closing Working Capital is between $4.5 million and $5.5 million, the Adjustment
Amount will equal zero and no adjustment of the Initial Purchase Price based
on
the Closing Working Capital shall occur.
(b) If
Closing Working Capital is less than $4.5 million or greater than $5.5 million,
the Initial Purchase Price shall be adjusted as follows: (i) if Closing Working
Capital is greater than $5.5 million, the Adjustment Amount will equal the
amount by which Closing Working Capital exceeds $5.5 million and shall be
payable by Buyer by wire transfer to an account designated by Seller within
10
days after the date that the Closing Working Capital is binding and conclusive
on the parties hereto as determined pursuant to Section 2.9 hereof and (ii)
if
Closing Working Capital is less than $4.5 million, the Adjustment Amount will
equal the difference between $4.5 million and the actual Closing Working Capital
amount and shall be payable by Seller by wire transfer to an account designated
by Buyer within 10 days after the date that the Closing Working Capital is
binding and conclusive on the parties hereto as determined pursuant to Section
2.9 hereof.
By
way of
example and not limitation, a sample calculation of the Adjustment Amount is
attached as Exhibit 2.8 hereto.
2.9 Adjustment
Procedure
(a) "Working
Capital"
as of a
given date shall mean the amount of total current assets minus total current
liabilities (excluding the current portion of long-term debt and other
indebtedness for borrowed money), each as reflected on the balance sheet of
the
same date. For purposes of calculating Working Capital on any date the Retained
Liabilities of Seller shall not be considered.
(b) Within
forty-five (45) days following the Closing Date, Seller shall prepare and
deliver to Buyer financial statements of Seller as of the Effective Time and
for
the period from the date of the Interim Balance Sheet through the Effective
Time
in accordance with GAAP and on a basis consistent with current accounting
practices of Seller. Buyer shall then, within sixty (60) following its receipt
of such financial statements from Seller, audit such financial statements (as
audited, the "Closing
Financial Statements")
and
determine the Working Capital as of the Effective Time (the "Closing
Working Capital")
based
upon the Closing Financial Statements. Buyer shall deliver the Closing Financial
Statements and its determination of the Closing Working Capital to Seller and
the Shareholders within sixty (60) days following its receipt of the Closing
Financial Statements from Seller.
(c) If,
within thirty (30) days following delivery of the Closing Working Capital
calculation to Seller from Buyer, Seller and the Shareholders have not given
Buyer written notice of its or their objection as to the Closing Working Capital
calculation (which notice shall state the basis of Seller's and the
Shareholders’ objection), then the Closing Working Capital calculated by Buyer
shall be binding and conclusive on the parties and be used in computing the
Adjustment Amount.
(d) If
Seller
or any Shareholder duly gives Buyer such notice of objection, and if Seller,
the
Shareholders and Buyer fail to resolve the issues outstanding with respect
to
the Closing Financial Statements and the calculation of the Closing Working
Capital within thirty (30) days of Buyer's receipt of Seller's or any
Shareholder’s objection notice, Seller, the Shareholders and Buyer shall submit
the issues remaining in dispute to KPMG, independent public accountants, or
such
other
2.10 Consents;
Assignments
If,
as of
the Closing, there are any consents that have not yet been obtained (or
otherwise are not in full force and effect) or if any Seller Contract has not
been assigned to Buyer which is required to be assigned hereunder, in the case
of each Seller Contract as to which such consents were not obtained (or
otherwise are not in full force and effect) or any Seller Contract which has
not
been assigned to Buyer as required hereunder (the "Restricted
Contracts"),
Buyer
may waive the closing conditions as to any such consent or assignment and,
in
the event that Buyer elects, in its sole discretion, to waive any such closing
condition as to any such consent or assignment, Buyer may either:
(a) elect
to
have Seller continue all commercially reasonable efforts to obtain the consent
or assignment, as applicable; or
(b) elect
to
have Seller retain that Restricted Contract and all Liabilities arising
therefrom or relating thereto.
If
Buyer
elects to have Seller continue its efforts to obtain any consents or assignments
and the Closing occurs, notwithstanding Sections 2.1, 2.2 and 2.4, neither
this
Agreement nor the Xxxx of Sale nor any other document related to the
consummation of the Contemplated Transactions shall constitute a sale,
assignment, assumption, transfer, conveyance or delivery or an attempted sale,
assignment, assumption, transfer, conveyance or delivery of the Restricted
Contracts, and following the Closing, the parties shall use best efforts, and
cooperate with each other, to obtain the consent or assignment, as applicable,
relating to each Restricted Contract as quickly as practicable. Pending the
obtaining of such consents or assignments relating to any Restricted Contract,
the parties shall cooperate with each other in any reasonable and lawful
arrangements designed to provide to Buyer the benefits of use of the Restricted
Contract for its term (or any right or benefit arising thereunder, including
the
enforcement for the benefit of Buyer of any and all rights of Seller against
a
third party thereunder).
3. Representations
and Warranties of Seller and the Shareholders
Seller
and the Shareholders each represent and warrant, jointly and severally, to
Buyer
and CMC that the statements contained in this Section 3 are true, correct and
complete, subject in each case to those exceptions set forth in the Disclosure
Letter delivered by Seller and the Shareholders. The Disclosure Letter will
be
arranged in Parts corresponding to the numbered and lettered paragraphs
contained in this Section 3. Any reference herein to any “Part” shall be a
reference to that Part of the Disclosure Letter.
3.1 Organization
and Good Standing
Seller
is
a corporation duly organized, validly existing and in good standing under the
laws of the State of New York, with full corporate power and authority to
conduct its business as it is now being conducted, to own, lease or use the
properties and assets that it purports to own, lease or use, and to perform
all
its obligations under the Seller Contracts. Seller is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which such qualification is necessary under applicable law as a result of
the
conduct of its business or the ownership of the Purchased Assets, except where
the failure to be so qualified or in good standing would not, individually
or in
the aggregate, have a Material Adverse Effect on Seller or the Purchased Assets.
Seller has no Subsidiary and does not own any shares of capital stock or other
securities of any other Person, other than QED Technologies Japan, Inc., a
New
York corporation and wholly owned subsidiary of Seller. Except as set forth
in
Part
3.1,
none of
the Purchased Assets is owned by, nor is title to any Purchased Asset held
by,
any Subsidiary of Seller. Except as set forth in Part
3.1,
no
Subsidiary of Seller has any right, title or interest to any of the Purchased
Assets.
3.2 Enforceability;
Authority; No Conflict
(a) This
Agreement has been duly executed and delivered by Seller and each Shareholder
and constitutes the legal, valid and binding obligation of Seller and each
Shareholder, enforceable against each of them in accordance with its terms,
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting or relating to creditors’ rights generally and is subject to
general principles of equity. Upon the execution and delivery by Seller and
each
Shareholder of the Escrow Agreement and each other agreement to be executed
or
delivered by any or all of Seller, Shareholders or any Shareholder at the
Closing (collectively, the "Seller's
Closing Documents"),
each
of Seller's Closing Documents will constitute the legal, valid and binding
obligation of each of Seller and each Shareholder, as applicable, enforceable
against each of them in accordance with its terms, except as may be limited
by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors’ rights generally and are subject to general principles of equity.
Seller has the absolute and unrestricted right, power and authority to execute
and deliver this Agreement and the Seller's Closing Documents to which it is
a
party and to perform its obligations under this Agreement and the Seller's
Closing Documents, and such action has been duly authorized by all necessary
action by Seller's shareholders and board of directors. Each Shareholder has
all
necessary legal capacity to enter into this Agreement and the Seller's Closing
Documents to which such Shareholder is a party and to perform its obligations
hereunder and thereunder.
(b) Except
as
set forth in Part
3.2(b),
neither
the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with
or
without notice or lapse of time):
(i) Conflict
with (A) any provision of any of the Governing Documents of Seller or (B) any
resolution adopted by the board of directors of Seller;
(ii) Conflict
with or give any Governmental Body or other Person the right to challenge any
of
the Contemplated Transactions, or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Seller or any Shareholder,
or
any of the Purchased Assets, may be subject, except where any such Conflicts,
individually or in the aggregate, would not have a Material Adverse Effect
on
the ability of Buyer to conduct the business of Seller as currently conducted
and as currently proposed by Seller to be conducted and the waiver of which
is
not otherwise required in order to consummate the Contemplated
Transactions;
(iii) Conflict
with any Governmental Authorization that is held by Seller or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate
or
modify any
(iv) Breach
any provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or payment
under, or to cancel, terminate or modify, any Seller Contract;
(v) result
in
the imposition or creation of any Encumbrance upon or with respect to any of
the
Purchased Assets; or
(vi) except
in
accordance with the Business Corporation Law of the State of New York, result
in
any shareholder of the Seller having the right to exercise dissenters' appraisal
rights.
(c) Except
as
set forth in Part
3.2(b) or Part 3.2(c),
Seller
is not required to give any notice to or obtain any Consent from any Person
in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
3.3 Capitalization
The
authorized equity securities and capitalization table of Seller and each
Subsidiary of Seller is as set forth in Part
3.3.
All
issued and outstanding shares of equity securities of the Seller and each
Subsidiary of Seller are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Encumbrances other than restrictions under
the applicable organizational documents of Seller and each Subsidiary of Seller.
3.4 Financial
Statements
Seller
has delivered to Buyer: (a) an unaudited balance sheet of Seller as at
March 31, 2006 (the "Interim
Balance Sheet")
and
the related unaudited statement of income for the one (1) month and three (3)
months then ended; and (b) the audited financial statements of Seller as at
December 31, 2005 (the “Audited
Financial Statements”).
All
of such financial statements fairly present (and the financial statements
delivered pursuant to Section 5.8 will fairly present) the financial condition
and the results of operations of Seller as at the respective dates of and for
the periods referred to in such financial statements, all in accordance with
GAAP except, in the case of the Interim Balance Sheet and the related unaudited
statement of income for the one (1) month and three (3) months then ended,
for
the absence of footnote disclosure, and subject to normal year-end adjustments.
The financial statements referred to in this Section 3.4 and delivered pursuant
to Section 5.8 reflect and will reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed
in
any notes to such financial statements, subject, in the case of unaudited
financial statements, to normal year-end adjustments. The financial statements
have been and will be prepared from and are in accordance with the accounting
Records of Seller in all material respects. Seller has also delivered to Buyer
copies of all letters from Seller's auditors to Seller's board of directors
during the thirty-six (36) months preceding the execution of this Agreement,
together with copies of all responses thereto.
3.5 Books
and
Records
The
books
of account and other financial Records of Seller, all of which have been made
available to Buyer, are complete and correct in all material respects and
represent actual, bona fide transactions and have been maintained in accordance
with sound business practices.
3.6 Sufficiency
of Assets
The
Purchased Assets (a) together with the BSI Intellectual Property, constitute
all
of the assets, tangible and intangible, of any nature whatsoever, necessary
to
operate Seller's business in the manner presently operated by Seller and (b)
include all of the operating assets of Seller.
3.7 Description
of Owned Real Property
Seller
does not have any ownership interest in any tracts or parcels of
land.
3.8 Description
of Leased Real Property
Part
3.8
contains
a correct legal description and street address of all tracts, parcels and
subdivided lots in which Seller has a leasehold interest and an accurate
description (by location, name of lessor, date of Lease and term expiry date)
of
all Real Property Leases.
3.9 Title
to
Assets; Encumbrances
Seller
owns good and marketable title to all Purchased Assets free and clear of any
Encumbrances other than (i) statutory liens for Taxes which are not yet due
and
payable, (ii) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or
other similar liens arising in the Ordinary Course of Business or (iii) those
which are described in Part
3.9.
Seller
warrants to Buyer that, at the time of Closing, all Purchased Assets shall
be
free and clear of all Encumbrances other than (i) statutory liens for Taxes
which are not yet due and payable, (ii) mechanics’, workmen’s, repairmen’s,
warehousemen’s, carriers’ or other similar lines arising in the Ordinary Course
of Business and (iii) those identified on Part
3.9
as
acceptable to Buyer (collectively, "Permitted Encumbrances").
3.10 Condition
of Facilities
All
property subject to the Real Property Leases and each item of material Tangible
Personal Property are each in good repair and good condition, ordinary wear
and
tear excepted, are each suitable for immediate use in the Ordinary Course of
Business and, to the Seller’s and the Shareholders’ Knowledge, are each free
from latent and patent defects. To Seller’s and the Shareholders’ Knowledge, no
item of Tangible Personal Property is in need of repair or replacement other
than as part of routine maintenance in the Ordinary Course of Business. Except
as described in Part
3.10,
all
material Tangible Personal Property used in Seller's business is in the
possession of Seller.
3.11 Accounts
Receivable
All
Accounts Receivable that are reflected on the Audited Financial Statements
or
the Interim Balance Sheet or on the accounting Records of Seller as of the
Closing Date represent or will represent valid obligations arising from sales
actually made or services actually performed by Seller in the Ordinary Course
of
Business. Except to the extent paid prior to the Closing Date, such Accounts
Receivable are or will be as of the Closing Date current in all material
respects and collectible net of the respective reserves shown on the Audited
Financial Statements or the Interim Balance Sheet or on the Closing Financial
Statements (collectively, the “Reserves”) (which
Reserves are adequate and calculated consistent with past practice and, in
the
case of the reserve on the Closing Financial Statements, will
not
represent a greater percentage of the Accounts Receivable reflected on the
Closing Financial Statement than the reserve reflected on the Interim Balance
Sheet represented of the Accounts Receivable reflected thereon and will not
reflect any Material Adverse Effect in the composition of such Accounts
Receivable in terms of aging). There is no contest, claim, defense or right
of
setoff, other than returns in the Ordinary Course
3.12 Inventories
Except
as
set forth in Part
3.12,
all
items included in the Inventories consist of a quality and quantity usable
and,
with respect to finished goods, saleable, in the Ordinary Course of Business
of
Seller except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in the
Audited Financial Statements or the Interim Balance Sheet or on the accounting
Records of Seller as of the Closing Date, as the case may be. Except as set
forth in Part 3.12,
Seller
is not in possession of any inventory not owned by Seller, including goods
already sold. The quantities of each item of Inventories (whether raw materials,
work-in-process or finished goods) are not excessive but are reasonable in
the
present circumstances of Seller. Work-in-process Inventories are now valued,
and
will be valued on the Closing Date, in accordance with GAAP.
3.13 No
Undisclosed Liabilities
Except
as
set forth in Part
3.13,
Seller
has no Liability except for Liabilities reflected or reserved against in the
Audited Financial Statements or the Interim Balance Sheet, current liabilities
incurred in the Ordinary Course of Business of Seller since the date of the
Interim Balance Sheet and those Liabilities incurred in connection with the
execution of this Agreement. Part
3.13
contains
a complete and accurate list of all open purchase orders and accounts payable
as
of the date of this Agreement, which list also sets forth the due date and
age
of each such account payable and which Part
3.13
shall be
updated by Seller as of the Closing Date.
3.14 Taxes
(a) Tax
Returns Filed and Taxes Paid. Seller has filed or caused to be filed on a timely
basis all material Tax Returns that were required to be filed pursuant to
applicable Legal Requirements. All Tax Returns filed by Seller are true, correct
and complete in all material respects. Seller has paid all Taxes shown to be
due
on such Tax Returns. Except as set forth in Part 3.14, Seller currently is
not
the beneficiary of any extension of time within which to file any Tax Return.
No
claim has ever been made by any Governmental Body in a jurisdiction where Seller
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Encumbrances on any of the Purchased Assets that
arose in connection with any failure (or alleged failure) to pay any Tax, and
neither Seller nor any Shareholder has Knowledge that any Governmental Body
is
likely to assert a claim attributable to Taxes of Seller which, if adversely
determined, would result in any such Encumbrance.
(b) Delivery
of Tax Returns and Information Regarding Audits and Potential Audits. No Tax
Returns of Seller have ever been audited or, to Seller’s and each Shareholder’s
Knowledge, are currently under audit. Neither Seller nor any Shareholder has
any
Knowledge that any Governmental Body is likely to assess any additional Taxes
against Seller for any period for which Tax Returns have been filed. There
is no
dispute or claim concerning any Taxes of Seller claimed or raised by any
Governmental Body in writing.
(c) Proper
Accrual. The charges, accruals and reserves with respect to Taxes on the Records
of Seller are adequate (as determined in accordance with GAAP).
(d) Specific
Potential Tax Liabilities and Tax Situations.
(i) All
material Taxes that Seller is or was required by Legal Requirements to withhold,
deduct or collect have been duly withheld, deducted and collected and, to the
extent required, have been paid to the proper Governmental Body or other
Person.
(ii) Seller
(A) has not been a member of an affiliated group within the meaning of Code
Section 1504(a) (or any similar group defined under a similar provision of
state, local or foreign law) and (B) has no liability for Taxes of any person
(other than Seller and its Subsidiaries) under Treas. Reg. sect. 1.1502-6 (or
any similar provision of state, local or foreign law), as a transferee or
successor by contract or otherwise.
(iii) Seller
is
an S corporation as defined in Code Section 1361.
(iv) Seller
has disclosed on its federal income Tax Returns all positions taken therein
that
could give rise to a substantial understatement of federal income Tax within
the
meaning of Code Section 6662.
3.15 No
Material Adverse Effect
Since
the
date of the Audited Financial Statements, there has not been any Material
Adverse Effect and no event has occurred or circumstance exists that is
reasonably likely to result in a Material Adverse Effect.
3.16 Employee
Benefits
(a) Set
forth
in Part
3.16(a)
is a
complete and correct list of all "employee benefit plans" as defined by Section
3(3) of ERISA, all specified fringe benefit plans as defined in Section 6039D
of
the Code, and all other bonus, incentive-compensation, deferred-compensation,
profit-sharing, stock-option, stock-appreciation-right, stock-bonus,
stock-purchase, employee-stock-ownership, savings, severance, change-in-control,
supplemental-unemployment, layoff, salary-continuation, retirement, pension,
health, life-insurance, disability, accident, group-insurance, vacation,
holiday, sick-leave, fringe-benefit or welfare plan, and any other material
employee compensation or benefit plan, agreement, policy, practice, commitment,
contract or understanding (whether qualified or nonqualified written or
unwritten) and any trust, escrow or other agreement related thereto that (i)
is
maintained or contributed to by Seller or any other corporation or trade or
business controlled by, controlling or under common control with Seller (within
the meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of
ERISA) ("ERISA
Affiliate"),
or
with respect to which Seller or any ERISA Affiliate has or may have any
liability, and (ii) provides benefits to any current or former director,
officer, employee or service provider of Seller or any ERISA Affiliate, or
the
dependents of any thereof, regardless of how (or whether) liabilities for the
provision of benefits are accrued or assets are acquired or dedicated with
respect to the funding thereof (collectively the "Employee
Plans").
No
Employee Plan is (w) a "Defined Benefit Plan" (as defined in Section 414(j)
of
the Code or Section 3(35) of ERISA); (x) a "Multiemployer Plan" (as defined
in
Section 3(37) of ERISA); or (y) a plan subject to Title IV of ERISA, other
than
a Multiemployer Plan. Also set forth on Part
3.16(a)
is a
complete and correct list of all ERISA Affiliates, if any, of Seller during
the
last six (6) years.
(b) Seller
has delivered to Buyer true, accurate and complete copies of (i) the documents
comprising each Employee Plan (or, with respect to any Employee Plan which
is
unwritten, a written summary thereof); (ii) all trust agreements, insurance
contracts or any other funding instruments related to the Employee Plans; (iii)
all rulings, determination letters, no-action letters or advisory opinions
from
the IRS, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation
("PBGC")
or any
other Governmental Body that pertain to each Employee Plan and any open requests
therefor; (iv) all
(c) Except
as
disclosed in Part
3.16(c),
full
payment has been made of all amounts that are required to be paid as
contributions under the terms of each Employee Plan and, if applicable, under
the terms of any agreement requiring the Seller or any ERISA Affiliate to pay
contributions to such Employee Plan, with respect to all periods prior to and
including the last day of the most recent fiscal year of such Employee Plan
ended on or before the date of this Agreement and all periods thereafter prior
to the Closing Date have been paid or will be paid on a timely basis, and no
accumulated funding deficiency or liquidity shortfall (as those terms are
defined in Section 302 of ERISA and Section 412 of the Code) has been incurred
with respect to any such Employee Plan, whether or not waived. The value of
the
assets of each Employee Plan subject to Title IV of ERISA exceeds the amount
of
all benefit liabilities (determined on a plan termination basis using the
actuarial assumptions established by the PBGC as of the Closing Date) of such
Employee Plan. Seller is not required to provide security to an Employee Plan
under Section 401(a)(29) of the Code. Seller has paid in full all required
insurance premiums, subject only to normal retrospective adjustments in the
ordinary course, with regard to the Employee Plans for all policy years or
other
applicable policy periods ending on or before the Closing Date.
(d) No
Employee Plan is subject to Title IV of ERISA or is a multiemployer plan within
the meaning of the Code or ERISA and neither Seller nor any ERISA Affiliate
has
any direct or indirect liability under Title IV or Section 302 of ERISA or
Section 412 of the Code or with respect to any such multiemployer
plan.
(e) Seller
has, at all times since January 1, 2002, complied, and currently complies,
in
all material respects with the applicable continuation coverage requirements
for
its group health plans, including (1) Section 4980B of the Code and Sections
601
through 608, inclusive, of ERISA, which provisions are hereinafter referred
to
collectively as "COBRA" and (2) any applicable state statutes mandating health
insurance continuation coverage for employees.
(f) The
form
of all Employee Plans is in all material respects in compliance with the
applicable terms of ERISA, the Code, and any other applicable laws, including
the Americans with Disabilities Act of 1990, the Family Medical Leave Act of
1993 and the Health Insurance Portability and Accountability Act of 1996, and
such plans have been operated in all material respects in compliance with such
laws and the written Employee Plan documents since January 1, 2002. To the
knowledge of the Seller and the Shareholders’, neither Seller nor any fiduciary
of an Employee Plan has violated the requirements of Section 404 of ERISA which
could result in a material liability to Buyer. To the knowledge of the Seller
and the Shareholders’, all material reports and descriptions of the Employee
Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary
Annual Reports and Summary Plan Descriptions and Summaries of Material
Modifications) have been (when required) timely filed with the IRS, the U.S.
Department of Labor or other Governmental Body and distributed as required,
and
all material notices required by ERISA or the Code or any other Legal
Requirement with respect to the Employee Plans have been appropriately
given.
(g) Each
Employee Plan that is intended to be qualified under Section 401(a) of the
Code
has received a favorable determination or opinion letter from the IRS, and
Seller has no Knowledge of any circumstances that will or could reasonably
be
expected to result in revocation of any such favorable determination letter.
Each trust created under any Employee Plan has been determined to be exempt
from
taxation under Section 501(a) of the Code, and Seller is not aware of any
circumstance that
(h) There
is
no material pending or, to Seller’s and each Shareholder’s Knowledge, threatened
Proceeding relating to any Employee Plan, nor to Seller’s and each Shareholder’s
Knowledge, is there any basis for any such Proceeding. To Seller’s and each
Shareholder’s knowledge, neither Seller nor any fiduciary of an Employee Plan
has engaged in a prohibited transaction with respect to any Employee Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
could subject Buyer to a Tax or penalty imposed by either Section 4975 of the
Code or Section 502(l) of ERISA or a violation of Section 406 of ERISA.
(i) Seller
has maintained workers' compensation coverage as required by applicable state
law through purchase of insurance and not by self-insurance or otherwise except
as disclosed to Buyer on Part
3.16(i).
(j) Except
as
required by Legal Requirements and as set forth in Part
3.16(j),
the
consummation of the Contemplated Transactions will not accelerate the time
of
vesting or the time of payment, or increase the amount, of compensation due
to
any director, employee, officer, former employee or former officer of Seller.
There are no contracts or arrangements with Seller providing for payments that
could subject any person to liability for tax under Section 4999 of the
Code.
(k) Except
for the continuation coverage requirements of COBRA or applicable Legal
Requirements, Seller has no obligations or potential liabilities for benefits
to
employees, former employees or their respective dependents following termination
of employment or retirement under any of the Employee Plans that are Employee
Welfare Benefit Plans.
(l) Except
as
provided in Section 10.1(d), none of the Contemplated Transactions will result
in an amendment, modification or termination of any of the Employee Plans.
No
written or oral representations have been made to any employee or former
employee of Seller promising or guaranteeing any employer payment or funding
for
the continuation of medical, dental, life or disability coverage for any period
of time beyond the end of the current plan year (except to the extent of
coverage required under COBRA). No written or oral representations have been
made to any employee or former employee of Seller concerning the employee
benefits of Buyer.
3.17 Compliance
with Legal Requirements; Governmental Authorizations
(a) Except
as
set forth in Part
3.17(a):
(i) Seller
is, and at all times since January 1, 2002, has been, in full compliance in
all material respects with each Legal Requirement that is or was applicable
to
it or to the conduct or operation of its business or the ownership or use of
any
of its assets; and
(ii)
Seller
has not received, at any time since January 1, 2002, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, or potential violation of, or failure
to
comply with, any Legal Requirement.
(b) Part
3.17(b)
contains
a complete and accurate list of each Governmental Authorization that is held
by
Seller or that otherwise relates to Seller's business or the Purchased Assets.
Each Governmental Authorization listed or required to be listed in Part
3.17(b)
is valid
and in full force and effect. Except as set forth in Part
3.17(b):
(i) Seller
is, and at all times since January 1, 2002, has been, in full compliance in
all material respects with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in
Part
3.17(b);
(ii)
Seller
has not received, at any time since January 1, 2002, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible or potential violation of
or
failure to comply with any term or requirement of any Governmental Authorization
or (B) any actual, proposed, possible or potential revocation, withdrawal,
suspension, cancellation, termination of or modification to any Governmental
Authorization; and
(iii) all
applications required to have been filed for the renewal of the Governmental
Authorizations listed or required to be listed in Part
3.17(b)
have
been duly filed on a timely basis with the appropriate Governmental Bodies,
and
all other filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies, except such failure as would not be expected to have a
material adverse effect on such Government Authorization.
The
Governmental Authorizations listed in Part
3.17(b)
collectively constitute all of the Governmental Authorizations necessary to
permit Seller to lawfully conduct and operate its business in the manner in
which it currently conducts and operates such business and to permit Seller
to
own, lease and use its assets in the manner in which it currently owns, leases
and uses such assets.
3.18 Legal
Proceedings; Orders
(a) Except
as
set forth in Part
3.18(a),
there
is no pending or, to Seller's and each Shareholder’s Knowledge, threatened
Proceeding:
(i) by
or
against Seller or that otherwise relates to or may affect the business of,
or
any of the assets owned or used by, Seller; or
(ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Contemplated
Transactions.
To
the
Knowledge of Seller and each Shareholder, no event has occurred or circumstance
exists that is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding. Seller has delivered to Buyer copies of
all
pleadings, correspondence and other documents relating to each Proceeding listed
in Part
3.18(a).
There
are no Proceedings listed or required to be listed in Part
3.18(a)
that
could have a Material Adverse Effect.
(b) Except
as
set forth in Part
3.18(b):
(i) there
is
no Order to which Seller, its business or any of the Purchased Assets is
subject; and
(ii) to
the
Knowledge of Seller and each Shareholder, no executive officer or director
of
Seller is subject to any Order that prohibits such executive officer or director
from engaging in or continuing any conduct, activity or practice relating to
the
business of Seller.
3.19 Absence
of Certain Effects and Events
Except
as
set forth in Part
3.19,
since
the date of the Audited Financial Statements, Seller has conducted its business
only in the Ordinary Course of Business (other than in connection with the
Contemplated Transactions) and there has not been any:
(a) change
in
Seller's authorized or issued capital stock, grant of any stock option or right
to purchase shares of capital stock of Seller or issuance of any security
convertible into such capital stock;
(b) amendment
to the Governing Documents of Seller;
(c) payment
(except in the Ordinary Course of Business) or increase by Seller of any
bonuses, salaries or other compensation to any shareholder, director, officer
or
employee or entry into any employment, severance or similar Contract with any
director, officer or employee;
(d) except
as
required by Legal Requirements, adoption of, amendment to or increase in the
payments to or benefits under, any Employee Plan;
(e) material
damage to or destruction or loss of any Purchased Asset, whether or not covered
by insurance;
(f) entry
into (other than the entry into the supply agreement with Xxxxxxxxx GmbH &
Co. KG), termination (other than termination of the BSI License Agreement as
contemplated hereunder) of or receipt of notice of termination of (i) any
license, distributorship, dealer, sales representative, joint venture, credit
or
similar Contract to which Seller is a party, or (ii) any Contract or transaction
involving a total remaining commitment by Seller of at least Twenty Five
Thousand Dollars ($25,000);
(g) sale
(other than pursuant to the Contemplated Transactions and sales of Inventories
in the Ordinary Course of Business), lease or other disposition of any Purchased
Asset or property of Seller (including the Intellectual Property Assets) or
the
creation of any Encumbrance on any Purchased Asset other than pursuant to the
M&T Loan Documents;
(h) cancellation
or waiver of any claims or rights with a value to Seller in excess of Twenty
Five Thousand Dollars ($25,000);
(i) indication
by any customer or supplier of an intention to discontinue or change the terms
of its relationship with Seller in any manner that is adverse to Seller (other
than the termination of the BSI License Agreement as contemplated hereunder);
(j) except
as
required by GAAP or Legal Requirements, change in the accounting methods used
by
Seller; or
(k) Contract
by Seller to do any of the foregoing.
3.20 Contracts;
No Defaults
(a) Part
3.20(a)
contains
an accurate and complete list, and Seller has delivered, or disclosed and made
available, to Buyer accurate and complete copies, of:
(i) each
Seller Contract that involves performance of services or delivery of goods
or
materials by Seller of an amount or value in excess of Twenty Five Thousand
Dollars ($25,000);
(ii) each
Seller Contract that involves performance of services or delivery of goods
or
materials to Seller of an amount or value in excess of Twenty Five Thousand
Dollars ($25,000);
(iii) each
Seller Contract that was not entered into in the Ordinary Course of Business
and
that involves expenditures or receipts of Seller in excess of Twenty Five
Thousand Dollars ($25,000);
(iv) each
Seller Contract affecting the ownership of, leasing of, title to, use of or
any
leasehold or other interest in any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than Twenty Five Thousand Dollars
($25,000) and with a term of less than one year);
(v) each
Seller Contract with any labor union or other employee representative of a
group
of employees relating to wages, hours and other conditions of
employment;
(vi) each
Seller Contract (however named) involving a sharing of profits, losses, costs
or
liabilities by Seller with any other Person;
(vii) each
Seller Contract containing covenants that in any way purport to restrict
Seller's business activity or limit the freedom of Seller to engage in any
line
of business or to compete with any Person;
(viii) each
Seller Contract providing for payments to or by any Person based on sales,
purchases or profits, other than direct payments for goods;
(ix) each
power of attorney of Seller that is currently effective and
outstanding;
(x) each
Seller Contract entered into other than in the Ordinary Course of Business
that
contains or provides for an express undertaking by Seller to be responsible
for
consequential damages;
(xi) each
Seller Contract for capital expenditures in excess of Twenty Five Thousand
Dollars ($25,000);
(xii) each
Seller Contract not denominated in U.S. Dollars;
(xiii) each
written warranty, guaranty and/or other similar undertaking with respect to
contractual performance extended by Seller other than in the Ordinary Course
of
Business;
| (xiv) |
each
foreign exchange hedging or similar agreement or
arrangement;
|
| (xv) |
each
guaranty by Seller of the indebtedness of any third party;
and
|
(xv) each
amendment, supplement and modification (whether oral or written) in respect
of
any of the foregoing.
(b) Except
as
set forth in Part
3.20(b),
no
Shareholder has or can acquire any rights under, and no Shareholder has or
can
become subject to any obligation or liability under, any Contract that relates
to the business of Seller or any of the Purchased Assets.
(c) Except
as
set forth in Part
3.20(c):
(i) each
Contract identified or required to be identified in Part
3.20(a)
and
which is to be assigned to or assumed by Buyer under this Agreement is in full
force and effect and is
(ii) each
Contract identified or required to be identified in Part
3.20(a)
and
which is being assigned to or assumed by Buyer is assignable by Seller to Buyer
without the consent of any other Person.
(d) Except
as
set forth in Part
3.20(d):
(i) Seller
is, and at all times has been, in compliance in all material respects with
all
applicable terms and requirements of each Seller Contract which is being assumed
by Buyer;
(ii) to
Seller’s and each Shareholder’s Knowledge, each other Person that has or had any
obligation or liability under any Seller Contract which is being assigned to
Buyer is, and at all times has been, in full compliance in all material respects
with all applicable terms and requirements of such Contract;
(iii) to
Seller’s and each Shareholder’s Knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene, conflict
with or result in a Breach of, or give Seller or any other Person the right
to
declare a default or exercise any remedy under, or to accelerate the maturity
or
performance of, or payment under, or to cancel, terminate or modify, any Seller
Contract that is being assigned to or assumed by Buyer;
(iv) to
Seller’s and each Shareholder’s Knowledge, no event has occurred or circumstance
exists under or by virtue of any Contract that (with or without notice or lapse
of time) would cause the creation of any Encumbrance affecting any of the
Purchased Assets; and
(v) neither
Seller nor any Shareholder has given to or received from any other Person any
notice or other communication (whether oral or written) regarding any actual,
alleged, possible or potential violation or Breach of, or default or Conflict
under, any Contract which is being assigned to or assumed by Buyer.
(e) There
are
no renegotiations of, attempts to renegotiate or outstanding rights to
renegotiate any material amounts paid or payable to Seller under current or
completed Contracts with any Person having the contractual or statutory right
to
demand or require such renegotiation and no such Person has made written demand
for such renegotiation.
(f) Each
Contract relating to the sale, design, manufacture or provision of products
or
services by Seller has been entered into in the Ordinary Course of Business
of
Seller and has been entered into without the commission of any act alone or
in
concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal
Requirement.
3.21 Insurance
(a) Seller
has delivered to Buyer:
(i) accurate
and complete copies of all policies of insurance (and correspondence relating
to
coverage thereunder) to which Seller is a party or under which Seller is or
has
been covered at any time since January 1, 2003 a list of which is included
in Part
3.21(a);
(ii) accurate
and complete copies of all pending applications by Seller for policies of
insurance; and
(iii) any
written statement by the auditor of Seller's financial statements or any
consultant or risk management advisor with regard to the adequacy of Seller's
coverage or of the reserves for claims.
(b) Part
3.21(b)
describes:
(i) any
self-insurance arrangement by or affecting Seller, including any reserves
established thereunder;
(ii) any
Contract or arrangement, other than a policy of insurance, for the transfer
or
sharing of any risk to which Seller is a party or which involves the business
of
Seller; and
(iii) all
obligations of Seller to provide insurance coverage to Third Parties (for
example, under Leases or service agreements) and identifies the policy under
which such coverage is provided.
(c) Part
3.21(c)
sets
forth, by year, for the current policy year and each of the three (3) preceding
policy years:
(i) a
summary
of the loss experience under each policy of insurance;
(ii) a
statement describing each claim under a policy of insurance for an amount in
excess of Five Thousand dollars ($5,000), which sets forth:
|
(A)
|
the
name of the claimant;
|
|
(B)
|
the
amount and a brief description of the claim;
and
|
|
(C)
|
the
status of each claim;
|
(iii) a
statement describing the loss experience for all claims that were self-insured,
including the number and aggregate cost of such claims.
(d) Except
as
set forth in Part
3.21(d):
(i) all
policies of insurance to which Seller is a party or that provide coverage to
Seller:
|
(A)
|
are
valid, outstanding and enforceable;
|
|
(B)
|
taken
together, provide adequate insurance coverage for the Purchased Assets
and
the operations of Seller of the kind and in the amount as is customarily
obtained by entities engaged in the same or similar business as Seller
and
are similarly situated; and
|
|
(C)
|
are
sufficient for compliance with all Legal Requirements and Seller
Contracts;
|
(ii) Seller
has not received (A) any refusal of coverage or any notice that a defense will
be afforded with reservation of rights or (B) any notice of cancellation or
any
other indication that any policy of insurance is no longer in full force or
effect or that the issuer of any policy of insurance is not willing or able
to
perform its obligations thereunder;
(iii) Seller
has paid all premiums due, and has otherwise performed all of its obligations,
under each policy of insurance to which it is a party or that provides coverage
to Seller; and
(iv) Seller
has given notice to the insurer of all claims that may be insured
thereby.
3.22 Environmental
Matters
(a) To
the
Seller’s and the Shareholders’ Knowledge, Seller is, and at all times has been,
in full compliance in all material respects with, and has not been and is not
in
violation of or liable under, any Environmental Law. To the Seller’s and the
Shareholders’ Knowledge, neither Seller nor any Shareholder has any basis to
expect, nor has any of them or any other Person for whose conduct they are
or
may be held to be responsible received, any actual or threatened Order, notice,
letter of inquiry, claim or other material communication from (i) any
Governmental Body or private citizen acting in the public interest or (ii)
the
current or prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual
or
threatened obligation to undertake or bear the cost of any Environmental, Health
and Safety Liabilities with respect to any Facility or other property or asset
(whether real, personal or mixed) in which Seller has or had an interest, or
with respect to any property or Facility at or to which Hazardous Materials
were
generated, manufactured, refined, transferred, imported, used or processed
by
Seller or any other Person for whose conduct it is or may be held responsible,
or from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled or received, including any
communication as a potentially responsible party under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601
et. seq., any amendments thereof, or any state or local counterpart
thereof.
(b) There
are
no pending or, to the Knowledge of Seller or any Shareholder, threatened claims,
Encumbrances, or other restrictions of any nature resulting from any
Environmental, Health and Safety Liabilities or arising under or pursuant to
any
Environmental Law with respect to or affecting any Facility or any other
property or asset (whether real, personal or mixed) in which Seller has or
had
an interest.
(c) Neither
Seller nor any Shareholder has any Knowledge of or any basis to expect, nor
has
any of them, or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health and Safety
Liabilities with respect to any Facility or property or asset (whether real,
personal or mixed) in which Seller has or had an interest, or with respect
to
any property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used or processed by Seller or any other Person
for whose conduct it is or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled or
received.
(d) To
the
Seller’s and the Shareholders’ Knowledge, neither Seller nor any other Person
for whose conduct it is or may be held responsible has any Environmental, Health
and Safety Liabilities with respect to any Facility or, to the Knowledge of
Seller or any Shareholder, with respect to any other property or asset (whether
real, personal or mixed) in which Seller (or any predecessor) has or had an
interest or at any property geologically or hydrologically adjoining any
Facility or any such other property or asset.
(e) To
the
Seller’s and the Shareholders’ Knowledge, except as set forth in Part
3.22(e),
there
are no Hazardous Materials present on or in the Environment at any Facility,
including any Hazardous Materials contained in barrels, aboveground or
underground storage tanks, landfills, land deposits, dumps, equipment (whether
movable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, xxxxx or septic systems or any
other
part of the Facility, or incorporated into any structure therein or thereon.
Neither Seller nor any Person for whose conduct it is or may be held
responsible, or to the Knowledge of Seller or any Shareholder, any other Person,
has permitted or conducted, or is aware of, any Hazardous Activity conducted
with respect to any
(f) To
the
Seller’s and the Shareholders’ Knowledge, there has been and is no Release or,
to the Knowledge of Seller or any Shareholder, Threat of Release, of any
Hazardous Materials at or from any Facility or at any other location where
any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by any Facility, or from any
other property or asset (whether real, personal or mixed) in which Seller has
or
had an interest, or to the Knowledge of Seller or any Shareholder, any
geologically or hydrologically adjoining property, whether by Seller or any
other Person.
(g) Neither
Seller nor any Shareholder has received any notice of potential responsibility
or letter of inquiry.
(h) Seller
has delivered to Buyer true and complete copies and results of any reports,
studies, analyses, tests, or monitoring possessed or initiated by Seller
pertaining to Hazardous Materials or Hazardous Activities in, on, or under
the
Facilities, or concerning compliance, by Seller or any other Person for whose
conduct it is or may be held responsible, with Environmental Laws.
3.23 Employees,
etc.
(a) Part
3.23(a)
contains
a complete and accurate list of the following information for each employee,
independent contractor, consultant and sales agent of Seller, including each
employee on leave of absence or layoff status: employer; name; job title; date
of hiring or engagement; date of commencement of employment or engagement;
current compensation paid or payable; sick and vacation leave that is accrued
but unused; and service credited for purposes of vesting and eligibility to
participate under any Employee Plan, or any other employee benefit
plan.
(b) Except
with regard to obligations under Seller’s 401(k) Plan or as required by COBRA or
applicable Legal Requirements, Seller has no continuing obligations to retired
employees or directors of Seller, or their dependents, with respect to benefits,
including, but not limited to, retiree medical insurance coverage or pension
benefits.
(c) Seller
has not violated the WARN Act or any similar state or local Legal
Requirement.
(d) No
officer, director nor, to the Seller’s or the Shareholders’ Knowledge, any sales
agent or employee of Seller is bound by any Contract that purports to limit
the
ability of such officer, director, sales agent or employee (i) to engage in
or
continue or perform any conduct, activity, duties or practice relating to the
business of Seller or (ii) to assign to Seller or to any other Person any rights
to any invention, improvement, or discovery.
3.24 Labor
Disputes; Compliance
(a) Seller
has complied in all material respects with all Legal Requirements relating
to
employment practices, terms and conditions of employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, the payment
of social security and similar Taxes and occupational safety and health. To
Seller’s and each Shareholder’s Knowledge, Seller is not liable for the payment
of any Taxes, fines, penalties, or other amounts, which have become due and
payable, however designated, for failure to comply with any of the foregoing
Legal Requirements.
(b) Except
as
disclosed in Part
3.24(b),
(i)
Seller has not been, and is not now, a party to any collective bargaining
agreement; (ii) Seller has not been, there is not presently pending or existing,
and to Seller's or any Shareholder’s Knowledge there is not threatened, any
strike, slowdown, picketing, work stoppage or employee grievance process
involving Seller; (iii) to Seller's or any Shareholder’s Knowledge no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute; (iv) there is not pending or, to Seller's
or
any Shareholder’s Knowledge, threatened against or affecting Seller any
Proceeding relating to the alleged violation of any Legal Requirement pertaining
to labor relations or employment matters, including any charge or complaint
filed with the National Labor Relations Board or any comparable Governmental
Body, and, to Seller’s and each Shareholder’s Knowledge, there is no
organizational activity or other labor dispute against or affecting Seller
or
the Facilities; (v) no application or petition for an election of or for
certification of a collective bargaining agent is pending; (vi) no grievance
or
arbitration Proceeding exists that is reasonably likely to have an adverse
effect upon Seller or the conduct of its business; (vii) there is no lockout
of
any employees by Seller, and no such action is contemplated by Seller; and
(viii) there has been no charge of discrimination filed against or, to Seller’s
and each Shareholder’s Knowledge, threatened against Seller with the Equal
Employment Opportunity Commission or similar Governmental Body.
3.25 Intellectual
Property Assets.
The
representations and warranties and required disclosures set forth in this
Section 3.25 shall not include or apply to the BSI Intellectual Property. The
parties acknowledge that the representations and warranties and required
disclosures regarding the BSI Intellectual Property shall be as set forth in
the
BSI Purchase Agreement.
(a) The
term
"Intellectual
Property Assets"
means
all intellectual property, on a worldwide basis, whether or not included in
Part
3.25(b)
below,
that is (i) owned or co-owned by Seller and related to Seller's business; or
(ii) used in or necessary to the operation of Seller's business as operated,
or
proposed to be operated, on the Closing Date, including, but not limited
to:
(i) business
name(s), all assumed fictional business names, trade names, registered and
unregistered trademarks, service marks, trade dress and product configurations,
logos, and all other indicia of source, together with all goodwill associated
with any of the foregoing, and all registrations and applications therefor
including all extensions, modifications, and renewals of the same (collectively,
"Marks");
(ii) all
inventions, developments, discoveries, concepts and ideas (whether or not
patentable and whether or not reduced to practice) and all patents and patent
applications, patent disclosures, and all related continuations, divisionals,
continuations-in-part, reissues, reexaminations, utility models, certificates
of
invention, industrial designs, and design patents, as well as the rights to
file
for, and to claim priority to, any such patent rights (collectively,
"Patents");
(iii) all
registered and unregistered copyrights in both published works and unpublished
works, and all moral rights and all applications for registration thereof
(collectively, "Copyrights");
(iv) all
trade
secrets and confidential or proprietary business information, whether patentable
or unpatentable and whether or not reduced to practice, including know-how,
formulas, drawings and technical plans and information, schematics, prototypes,
designs, models, unpublished works of authorship, data and databases,
manufacturing and production processes and techniques, research and development
information, other copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information, and Software and documentation therefor
(collectively, "Trade
Secrets");
(v) all
rights in internet web sites, internet domain names and registration rights,
uniform resource locators, protocol addresses, and all related content and
programming, and related security passwords or codes used by Seller
(collectively "Net
Names");
(vi)
all
other
proprietary rights relating to any of the foregoing; and
(vii)
all
copies and tangible embodiments thereof (in whatever form or medium), in each
case including without limitation the items set forth in Part
3.25(b)
below.
(b) Part
3.25(b)
contains
a complete and accurate list, of (i) each registered, issued, or applied for
item of the Intellectual Property Assets that is owned or co-owned by Seller;
and (ii) each Seller Contract through which any item of the Intellectual
Property Assets owned by a third party is licensed to Seller or owned by Seller
is licensed to a third party, including any royalties since January 1, 2004
received by or paid to Seller, but in each case excluding any license implied
by
the sale of a product and perpetual, paid-up licenses for commonly available
Software programs with a value of less than Five Thousand Dollars ($5,000)
under
which Seller is the licensee ("Off
the Shelf Licenses").
Further, Seller has delivered to Buyer accurate and complete copies of all
Seller Contracts relating to the Intellectual Property Assets, except for any
Off the Shelf Licenses. There are no outstanding and, to Seller's and any
Shareholder’s Knowledge, no threatened disputes or disagreements with respect to
any such Seller Contract. As of the Closing Date, the Seller owns, or validly
licenses in or otherwise possesses valid rights to use, each item of the
Intellectual Property Assets listed in Part
3.25(b).
There
is no other item of the Intellectual Property Assets that is necessary for
the
conduct of the Seller’s business as presently operated, except those (i) owned
by the Seller, (ii) included in Parts 3.25(b), 3.25(d), 3.25(e), 3.25(f) and
3.25(h), (iii) items of intellectual property owned by Xxxxxxxxx GmbH & Co.
KG and (iv) the BSI Intellectual Property.
(c) Intellectual
Property Assets Generally.
(i)
With
respect to each item of the Intellectual Property Assets, including the
Intellectual Property Assets listed as “owned” in Part
3.25(b):
(i) the
Seller possesses exclusive right, title and interest in and to the item, free
and clear of any Encumbrances and any obligation to make payment to a Third
Party; (ii) the item is in good standing and is not subject to any outstanding
order, decree, judgment, stipulation, award, past due payment, decision,
injunction or agreement in any restricting manner, including restricting the
transfer, commercialization, enforcement or licensing thereof; (iii) no
Proceeding is pending or, to the Seller’s or any Shareholder’s Knowledge,
threatened, that challenges the legality, validity, enforceability of, or
Seller's ownership of or right to use or otherwise exploit, the item; (iv)
there
is no reason that any item would be considered invalid or unenforceable; and
(v)
each such item is presently pending or in force in accordance with its terms.
Except as set forth in Part
3.25(b),
no
license, sublicense, covenant, agreement or permission has been granted or
entered into by Seller in respect of any item of the Intellectual Property
Assets which is owned by Seller or represented to be owned by Seller
hereunder.
(ii) With
respect to each item of the Intellectual Property Assets that any third party
owns that is used in, or necessary to, the Seller's business as conducted,
or
proposed by Seller to be conducted, as of the Closing Date, and that is used
by
Seller pursuant to license, sublicense, agreement, or permission, including
the
Intellectual Property Assets listed as “licensed” in Part
3.25(b) and
“Off
the Shelf Licenses," (i) the rights covering the item are legal, valid, binding,
enforceable and in full force and effect in all material respects against Seller
and, to the Knowledge of Seller and each Shareholder, the other parties thereto;
(ii) no party thereto is in material breach or default and no event has occurred
which with notice or lapse of time would constitute a material breach or default
or permit termination, modification or acceleration thereunder; (iii) Seller
has
not received written notice that any party to the license, sublicense, agreement
or permission intends to cancel, not renew, or terminate the license,
sublicense, agreement or permission or to exercise or not exercise an option
thereunder; and (iv)
(iii)
Seller
has the exclusive right to file, prosecute and maintain each registered, issued,
or applied for item of the Intellectual Property Assets listed as "owned" in
Part
3.25(b),
and to
register or apply for each such item of the Intellectual Property Assets owned
by it, including any inventions or ideas that have not yet been the subject
of
such an application, and has the exclusive right to maintain exclusive ownership
of each such item of Intellectual Property, and is not aware of any claim by
any
third party regarding title to the same or derivative works of the same.
Further, Seller has taken all commercially reasonable actions to maintain and
protect each item of Intellectual Property Assets in Part
3.25(b),
including use of non-disclosure and related agreements to retain control over
certain Intellectual Property Assets, payment of all fees, annuities and all
other payments that have heretofore become due to any Governmental Authority
or
third party licensor with respect to the Intellectual Property Asset(s), and
have taken all commercially reasonable steps necessary to prosecute, maintain,
protect and enforce the same, up to and including the Closing Date, in addition
to the actions noted below for specific types of the Intellectual Property
Assets. Moreover, Seller has not authorized any third party to use or otherwise
exploit any Intellectual Property Assets owned by or licensed to the Seller's
business except pursuant to a binding, written license and except any implied
licenses granted as the result of commercial sales of products or services
incorporating such Intellectual Property Assets.
(iv) Except
as
set forth in Part
3.25(c)(iv),
all
former and current employees and independent contractors of Seller have executed
written Contracts with Seller that (i) assign to Seller all rights to any
inventions, improvements, discoveries, works of authorship, or information
developed while conducting the business of Seller, or necessary to the business
of Seller whether or not an application for patent or other Intellectual
Property Asset protection has not yet been filed, and (ii) impose
confidentiality obligations in favor of Seller as to the assigned rights. No
current or former employee or independent contractor of Seller has any interest
in any Intellectual Property Assets used by Seller in connection with Seller's
business. Seller has paid to its respective employees and independent
contractors all fees due, if any, for the assignment of such rights pursuant
to
individual agreements or applicable legal provisions.
(v)
None
of
the rights in or to any Intellectual Property Assets used in connection with
or
necessary to the Business as conducted, or proposed by Seller to be conducted,
as of the Closing Date shall be adversely affected by the execution or delivery
of this Agreement by Seller, nor by the full performance by Seller of any of
its
obligations hereunder.
(d) Patents.
(i) Part
3.25(d)
contains
a complete and accurate list and summary description of each applied for or
issued item of the Patents owned by Seller, and a schedule of all maintenance
fees or taxes of actions falling due within ninety (90) days after the date
hereof.
(ii) All
of
the applied for and issued Patents owned by Seller or represented to be owned
by
Seller hereunder are currently in compliance in all material respects with
all
formal Legal Requirements (including, as applicable, payment of filing,
examination, search, publication, issue, and maintenance fees and proofs of
working or use), are not invalid or unenforceable and neither Seller nor any
Shareholder knows of any reason that any Patents would be invalid or
unenforceable.
(iii) No
Patent
owned by Seller or represented to be owned by Seller hereunder has been or
is
now involved in any interference, reissue, reexamination, opposition or other
Proceeding. To Seller's and each Shareholder’s Knowledge, there is no
potentially interfering patent or patent application of any Third
Party.
(iv) Except
as
set forth in Part
3.25(d),
(A) to
Seller’s and each Shareholder’s Knowledge, there has been, and presently is, no
unauthorized use, interference, disclosure, infringement, misappropriation
or
violation by any Third Party of any of the Patents owned by Seller or
represented to be owned by Seller hereunder. Seller has not brought or
considered bringing against any Third Party any Proceeding for infringement
of
any of the Patents or for breach of any license, sublicense or agreement
involving Patents owned or used by Seller; and (B) to Seller’s and each
Shareholder’s Knowledge, there is not now, and has not been, any infringement
(including inducing, contributory or vicarious infringement), misuse, or
misappropriation by Seller of any Patent(s) owned or licensed by any Third
Party, such as by Seller's operation of the business; and Seller is not and
has
not been the subject of any Proceeding concerning Patents belonging to any
Third
Party (or received any notice, charge, complaint, claim or demand), and, to
Seller's and each Shareholder's Knowledge, there is not now existing any
threatened claim against any Seller for such a violation.
(v) All
products sold or offered for sale under the Patents owned by Seller or
represented to be owned by Seller hereunder have been marked with the proper
patent notice.
(e) Marks.
(i) Part
3.25(e)
contains
a complete and accurate list and summary description of all applied for and
registered Marks owned by Seller.
(ii) All
Marks
set forth on Part
3.25(e)
have
been registered, or an application for registration is currently pending, with
the United States Patent and Trademark Office and, to the extent registered,
are
currently in compliance in all material respects with all formal Legal
Requirements (including the timely post-registration filing of affidavits of
use
and incontestability and renewal applications).
(iii) No
Xxxx
set forth on Part
3.25(e)
has been
or is now involved in any opposition, invalidation, cancellation or other
Proceeding and, to Seller’s and each Shareholder’s Knowledge, no such action has
been or is threatened or asserted with respect to any of the Marks set forth
on
Part
3.25(e).
(iv) To
Seller’s and the Shareholders’ Knowledge, there is no potentially interfering
trademark or trademark application of any other Person.
(v) (A)
To
Seller’s and each Shareholder’s Knowledge, there has been, and presently is, no
unauthorized use, infringement, misappropriation or violation by any Third
Party
of any of the Marks owned by Seller or represented to be owned by Seller
hereunder. Seller has not brought or considered bringing against any Third
Party
any Proceeding for infringement of any of the Marks owned by Seller or
represented to be owned by Seller hereunder or for breach of any license,
sublicense or agreement involving Marks owned, or represented to be owned,
or
used by Seller; and (B) to Seller’s and each Shareholder’s Knowledge, there is
not now, and has not been, any type of infringement, misuse, or misappropriation
by Seller of any Marks owned or licensed by any Third Party, such as by Seller's
operation of the business; and Seller is not and has not been the subject of
any
Proceeding concerning any Marks belonging to any Third Party (and has not
received any notice, charge, complaint, claim or demand regarding a claim to
such Third Party Xxxx(s)), and, to Seller's and each Shareholder's Knowledge,
there is not now existing any threatened claim against any Seller for such
a
violation.
(f) Copyrights.
(i) Part
3.25(f)
contains
a complete and accurate list and summary description of all registered and
applied for Copyrights owned by Seller.
(ii) All
of
the registered or applied for Copyrights owned by Seller or represented to
be
owned by Seller hereunder are currently in compliance with formal Legal
Requirements
(iii) (A)
To
Seller’s and each Shareholder’s Knowledge, there has been, and presently is, no
unauthorized use, infringement, misappropriation or violation by any Third
Party
of any of the Copyrights owned by Seller or represented to be owned by Seller
hereunder. Seller has not brought or considered bringing against any Third
Party
any Proceeding for infringement of any of the Copyrights owned by Seller or
represented to be owned by Seller hereunder or for breach of any license,
sublicense or agreement involving Copyrights owned, or represented to be owned,
or used by Seller; and (B) to Seller’s and each Shareholder’s Knowledge, there
is not now, and has not been, any type of infringement, misuse, or
misappropriation by Seller of any Copyright(s) owned or licensed by any Third
Party, such as by Seller's operation of the business; and Seller is not and
has
not been the subject of any Proceeding concerning Copyrights belonging to any
Third Party (or received any notice, charge, complaint, claim or demand), and,
to Seller's and each Shareholder's Knowledge, there is not now existing any
threatened claim against any Seller for such a violation.
(g) Trade
Secrets.
(i) With
respect to each material Trade Secret owned by Seller or represented to be
owned
by Seller hereunder, the documentation relating to such Trade Secret owned
by
Seller or represented to be owned by Seller hereunder is current, accurate
and
sufficient in detail and content to identify and explain it and to allow its
full and proper use without reliance on the knowledge or memory of any
individual.
(ii) Seller
has taken all reasonable precautions, and in no event less than commercially
reasonable precautions, to protect the secrecy, confidentiality and value of
all
Trade Secrets owned by Seller or represented to be owned by Seller hereunder
(including the enforcement by Seller of a policy requiring each employee or
contractor to execute proprietary information and confidentiality agreements
substantially in Seller's standard form, and all current and former employees
and contractors of Seller have executed such an agreement). The Trade Secrets
owned by Seller or represented to be owned by Seller hereunder have not been
intentionally divulged to a Third Party except under a sufficient obligation
of
confidentiality.
(iii) To
Seller’s and each Shareholder’s Knowledge, Seller has good title to, and an
absolute right to use, the Trade Secrets owned by Seller or represented to
be
owned by Seller hereunder. To Seller’s and each Shareholder’s Knowledge, the
Trade Secrets owned by Seller or represented to be owned by Seller hereunder
are
not part of the public knowledge or literature and, to Seller's and each
Shareholder’s Knowledge, have not been used, divulged, or appropriated either
for the benefit of any Person (other than Seller) or to the detriment of Seller.
(iv)
To
Seller’s and each Shareholder’s Knowledge, there has been, and presently is, no
unauthorized use, misappropriation or violation by any Third Party of any of
the
Trade Secrets owned by Seller or represented to be owned by Seller hereunder.
Seller has not brought or considered bringing against any Third Party any
Proceeding for infringement of any of the Trade Secrets owned by Seller or
represented to be owned by Seller hereunder or for breach of any license,
sublicense or agreement involving Trade Secrets owned or used by Seller.
Additionally, to Seller’s and each Shareholder’s Knowledge, there is not now,
and has not been, any type of infringement, misuse, or misappropriation by
Seller of any Trade Secret(s) owned or licensed by any Third Party, such as
by
Seller's operation of the business; and Seller is not and has not been the
subject of any Proceeding concerning Trade Secrets belonging to any Third Party
(or received any notice, charge, complaint, claim or demand from any Third
Party), and, to Seller's and each Shareholder's Knowledge, there is not now
existing any threatened claim against any Seller for such a
violation.
(h) Net
Names.
(i) Part
3.25(h)
contains
a complete and accurate list and summary description of all Net Names owned
by
Seller and used by Seller or necessary in its business as conducted, or as
proposed by Seller to be conducted, as of the Closing Date.
(ii) All
material Net Names are set forth on Part
3.25(h)
and have
been registered in the name of Seller and are in compliance with all formal
Legal Requirements.
(iii) No
Net
Name set forth on Part
3.25(h)
has
been, or is now involved in, any dispute including any Proceeding and, to
Seller's and each Shareholder’s Knowledge, no action has been or is threatened
or asserted with respect to any Net Name set forth on Part
3.25(h).
3.26 Compliance
with the Foreign Corrupt Practices Act and Export Control and Antiboycott
Laws
(a) Seller
and each Subsidiary of Seller and, to Seller’s and each Shareholder’s Knowledge,
its respective Representatives have not, to obtain or retain business, directly
or indirectly offered, paid or promised to pay, or authorized the payment of,
any money or other thing of value (including any fee, gift, sample, travel
expense or entertainment with a value in excess of Two Hundred Dollars ($200)
in
the aggregate to any one individual in any year) or any commission payment
of
any amount payable, to:
(i) any
person who is an official, officer, agent, employee or representative of any
Governmental Body or of any existing or prospective customer (whether government
owned or nongovernment owned);
(ii) any
political party or official thereof;
(iii) any
candidate for political or political party office; or
(iv) any
other
individual or entity;
while
knowing or having reason to believe that all or any portion of such money or
thing of value would be offered, given, or promised, directly or indirectly,
to
any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual, or any entity affiliated with
such customer, political party or official or political office.
(b) To
Seller’s and each Shareholder’s Knowledge, each transaction is properly and
accurately recorded on the books and Records of Seller, and each document upon
which entries in Seller's books and Records are based is complete and accurate
in all respects. Seller maintains a system of internal accounting controls
adequate to insure that Seller maintains no off-the-books accounts and that
Seller's assets are used only in accordance with Seller's management
directives.
(c) Seller
has at all times been in compliance with all Legal Requirements relating to
export control and trade embargoes. No product sold or service provided by
Seller during the last five (5) years has been, directly or, to Seller’s and
each Shareholder’s knowledge, indirectly, sold to or performed on behalf of
Burma (Myanmar), Cuba, Iran, Iraq, Liberia, Libya, North Korea, Sudan, Syria
or
Zimbabwe in violation of any Legal Requirement.
(d) Seller
has not violated the antiboycott prohibitions contained in 50 U.S.C. sect.
2401
et seq. or taken any action that can be penalized under Section 999 of the
Code. During the last five (5) years, Seller has not been a party to, is not
a
beneficiary under and has not performed any service or sold any product under
any Seller Contract under which a product has been sold to customers in Bahrain,
Burma (Myanmar), Cuba, Iran, Iraq, Jordan, Kuwait, Lebanon, Liberia, Libya,
North Korea, Oman,
3.27 Relationships
with Related Persons
(a) Neither
Seller nor any Shareholder, nor any Related Person of any of them owns, or
has
owned, of record, or as a beneficial owner, an equity interest or any other
financial or profit interest in any Person that has engaged in competition
with
Seller with respect to any line of the products or services of Seller, except
for passive ownership of less than one percent (1%) of the outstanding capital
stock of any publicly traded company.
(b) Except
as
set forth in Part 3.27,
neither
Seller nor any Shareholder nor any Related Person of any of them is a party
to
any Contract with, or has any claim or right against, Seller.
(c) Except
as
set forth in Part 3.27,
no
Shareholder or any Related Person of any Shareholder is a party to any loan
agreement with Seller or owes any amount to Seller under a promissory note
or
any other instrument.
3.28 Brokers
or Finders
Except
for Seller’s arrangement with Xxxxxxx & Company LLC, neither Seller nor any
of its Representatives have incurred any obligation or liability, contingent
or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar fees, expenses, commissions or payments to any investment banker,
financial advisor, broker, or other intermediary in connection with the sale
of
Seller's business or the Purchased Assets or the Contemplated Transactions.
Seller shall pay any and all such fees, expenses and commissions in full and
Buyer will not become liable or obligated for all or any portion of such fees
expenses or commissions.
3.29 Solvency
(a) Seller
is
not now insolvent and will not be rendered insolvent by any of the Contemplated
Transactions. As used in this section, "insolvent" means that the sum of the
debts and other probable Liabilities of Seller exceeds the present fair saleable
value of Seller's assets.
(b) Immediately
after giving effect to the consummation of the Contemplated Transactions: (i)
Seller will be able to pay its Liabilities as they become due in the usual
course of its business; (ii) Seller will not have unreasonably small capital
with which to conduct its present or proposed business; (iii) Seller will have
assets (calculated at fair market value) that exceed its Liabilities; and (iv)
taking into account all pending and threatened litigation, final judgments
against Seller in actions for money damages are not reasonably anticipated
to be
rendered at a time when, or in amounts such that, Seller will be unable to
satisfy any such judgments promptly in accordance with their terms (taking
into
account the maximum probable amount of such judgments in any such actions and
the earliest reasonable time at which such judgments might be rendered) as
well
as all other obligations of Seller. The cash available to Seller, after taking
into account all other anticipated uses of the cash, will be sufficient to
pay
all such debts and judgments promptly in accordance with their
terms.
3.30 Disclosure
No
representation or warranty or other statement made by Seller or any Shareholder
in this Agreement, the Disclosure Letter, any supplement to the Disclosure
Letter, the certificates delivered pursuant to Section 2.7(a) or in any written
statement furnished to Buyer pursuant hereto or in connection with the
Contemplated Transactions, when all such documents are read together in their
entirety, contains, or will contain at the Closing Date, any untrue statement
of
a material fact, or omits, or will omit at the
3.31 Government
Contract Rights. Except as set forth in Part
3.31:
(a) The
Seller has no outstanding Bid which has been submitted to the U.S. government
or
any other Governmental Body or any proposed prime contractor under an existing
or proposed prime Government Contract;
(b) The
Seller has complied in all material respects with all statutory and regulatory
requirements affecting its contracts with the U.S. government, any other
Governmental Body or any prime contractor under a Government Contract or Bid
and
with all certificates and representations executed in connection therewith
(which certificates and representations were current, accurate and complete
in
all material respects as of their effective date). With respect to each
Government Contract or Bid, (i) no termination for convenience, termination
for
default, cure notice or show cause notice has been issued, (ii) no cost incurred
by the Seller has been questioned or disallowed and (iii) no money due to the
Seller has been or, to the knowledge of Seller, has been threatened to be,
withheld or set off. Except as disclosed on Part
3.31,
the
Seller has no offset obligations with respect to any Government Contract or
Bid;
(c) Neither
the Seller nor any of its directors, officers or, to Seller’s and each
Shareholder’s Knowledge, employees is (or for the last six years has been)
debarred or suspended from doing business with the U.S. government or any other
Governmental Body. The Seller has not been informed in writing or threatened
that it will be subject to the institution of debarment or suspension
proceedings against it. To the Knowledge of Seller, there exist no circumstances
that would warrant the institution of suspension or debarment proceedings with
respect to the Seller in the future;
(d) The
Seller has not received any written show cause notices, cure notices or default
determinations on any Government Contracts or with any prime contractor under
a
prime Government Contract;
(e) The
Seller has not received any written negative determinations of responsibility
or
been declared ineligible by the U.S. government or any other Governmental Body
with respect to any Bid submitted by the Seller. To the Knowledge of Seller
and
each Shareholder, there exist no circumstances that would warrant the finding
of
nonresponsibility or ineligibility with respect to the Seller in the future;
(f) None
of
Seller, its directors or officers, or, to Seller’s Knowledge, its employees is
or has been under any administrative, civil or criminal investigation,
indictment or information, audit or internal investigation with respect to
any
alleged irregularity, misstatement or omission arising out of or in any way
relating to any of its Government Contracts or Bids. The Seller has not made
any
voluntary disclosure to the U.S. government or any other Governmental Body
with
respect to any alleged irregularity, misstatement or omission arising under
or
relating to any Government Contract or Bid;
(g) The
Seller is not involved in any qui tam actions;
(h) The
Seller possesses all necessary security clearances for the performance of its
obligations under each of its Government Contracts and Bids with the U.S.
government or with the prime contractor under a prime Government Contract,
which
security clearances are set forth on in Part
3.31(h);
(i)
There
exist (i) no financing arrangements with respect to performance of any current
Government Contract; (ii) no outstanding claims against the Seller, either
by
the U.S. government, any other Governmental Body or by any prime contractor,
subcontractor, vendor or other third party, arising under or relating to any
Government Contract or Bid; (iii) to the Knowledge of Seller, no facts upon
which such a claim could reasonably be based in the future; (iv) no disputes
between the Seller and the U.S. government, any other Governmental Body or
any
prime contractor, subcontractor or vendor arising under or relating to any
Government Contract or Bid; and (v) to the Knowledge of Seller, no facts over
which such a dispute could reasonably arise in the future; and
(j) The
Seller has no interest in any pending or potential claim against the U.S.
government, any other Governmental Body or any prime contractor, subcontractor
or vendor arising under or relating to any Government Contract or
Bid.
4. Representations
and Warranties of Buyer
and
CMC
Buyer
and
CMC each represent and warrant, jointly and severally, to Seller and the
Shareholders as follows:
4.1 Organization
and Good Standing
Buyer
is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct its business as it is now conducted. CMC is a corporation duly
organized, validly existing and in good standing under the laws of the State
of
Delaware, with full corporate power and authority to conduct its business as
it
is now conducted.
4.2 Authority;
No Conflict
(a) This
Agreement has been duly executed and delivered by each of Buyer and CMC and
constitutes the legal, valid and binding obligation of each of Buyer and CMC,
enforceable against Buyer and CMC in accordance with its terms, except as may
be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
or
relating to creditors’ rights generally and is subject to general principles of
equity. The execution and delivery by Buyer of the Xxxx of Sale, the Escrow
Agreement, the Employment Agreements and each other agreement to be executed
or
delivered by Buyer at Closing (collectively, the "Buyer's
Closing Documents"),
each
of the Buyer's Closing Documents will constitute the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors’ rights generally and are
subject to general principles of equity. Each of Buyer and CMC has the absolute
and unrestricted right, power and authority to execute and deliver this
Agreement and the Buyer's Closing Documents to which it is a party and to
perform its obligations under this Agreement and the Buyer's Closing Documents
to which it is a party, and such action has been duly authorized by all
necessary corporate action.
(b) Neither
the execution and delivery of this Agreement by Buyer or CMC nor the
consummation or performance of any of the Contemplated Transactions by Buyer
or
CMC will give any Person the right to prevent, delay or otherwise interfere
with
any of the Contemplated Transactions pursuant to:
(i) any
provision of Buyer's or CMC’s Governing Documents;
(ii) any
resolution adopted by the board of directors or the shareholders of Buyer or
CMC; or
(iii) any
Legal
Requirement or Order to which Buyer or CMC may be subject.
4.3 Certain
Proceedings
There
is
no pending Proceeding that has been commenced against Buyer and that challenges,
or may have the effect of preventing, delaying, making illegal or otherwise
interfering with, any of the Contemplated Transactions. To Buyer's Knowledge,
no
such Proceeding has been threatened.
4.4 Brokers
or Finders
Neither
Buyer nor any of its Representatives have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar fees, expenses, commissions or payments to any investment
banker, financial advisor, broker, or other intermediary in connection with
the
Contemplated Transactions.
5. Covenants
of Seller Prior to Closing
5.1 Access
and Investigation
Between
the date of this Agreement and the Closing Date, and upon reasonable advance
notice received from Buyer, Seller shall (and each Shareholder shall cause
Seller to): (a) afford Buyer and its Representatives (collectively,
"Buyer
Group")
reasonable access, during regular business hours, to Seller's personnel,
properties, Contracts, Governmental Authorizations, books and Records and other
documents and data, such rights of access to be exercised in a manner that
does
not unreasonably interfere with the operations of Seller; (b) furnish Buyer
Group with copies of all such Contracts, Governmental Authorizations, books
and
Records and other existing documents and data as Buyer may reasonably request;
(c) furnish Buyer Group with such additional financial, operating and other
relevant data and information as Buyer may reasonably request; and (d) otherwise
cooperate and assist, to the extent reasonably requested by Buyer, with Buyer's
investigation of the properties, assets and financial condition related to
Seller. In addition, Buyer shall have the right to have the Facilities and
Tangible Personal Property inspected by Buyer Group, at Buyer's sole cost and
expense, for purposes of determining the physical condition and legal
characteristics of the Facilities and Tangible Personal Property.
5.2 Operation
of the Business of Seller
Between
the date of this Agreement and the Closing, Seller shall (and each Shareholder
shall cause Seller to):
(a) conduct
its business only in the Ordinary Course of Business;
(b) except
as
otherwise directed by Buyer in writing, and without making any commitment on
Buyer's behalf, use its best efforts to preserve intact its current business
organization, keep available the services of its officers, key employees and
agents and maintain its relations and good will with suppliers, customers,
landlords, creditors, key employees, agents and others having business
relationships with it;
(c) confer
with Buyer prior to implementing operational decisions of a material
nature;
(d) otherwise
report periodically to Buyer concerning the status of its business, operations
and finances;
(e) maintain
the Purchased Assets in a state of repair and condition that complies with
Legal
Requirements in all material respects and is consistent with the requirements
and normal conduct of Seller's business including maintaining the level of
inventory in accordance with Seller’s past practices;
(f) keep
in
full force and effect, without amendment, all material rights relating to
Seller's business;
(g) comply
in
all material respects with all Legal Requirements and contractual obligations
applicable to the operation of Seller's business;
(h) continue
in full force and effect the insurance coverage under the policies set forth
in
Part
3.21
or
substantially equivalent policies;
(i) except
as
required to comply with ERISA or to maintain qualification under Section 401(a)
of the Code, not amend, modify or terminate any Employee Plan without the
express written consent of Buyer, and except as required under the provisions
of
any Employee Plan, not make any contributions to or with respect to any Employee
Plan without the express written consent of Buyer;
(j) cooperate
with Buyer and assist Buyer in identifying the Governmental Authorizations
required by Buyer to operate the business from and after the Closing Date and
either transferring existing Governmental Authorizations of Seller to Buyer,
where permissible, or obtaining new Governmental Authorizations for
Buyer;
(k) except
as
required by GAAP, maintain all books and Records of Seller relating to Seller's
business in the Ordinary Course of Business;
(l) cause
all
Purchased Assets owned by any Subsidiary of Seller as of the date hereof to
be
transferred to and owned by Seller at Closing;
(m) use
reasonable commercial efforts to cause each Government Contract to which Seller
is a party as of the date hereof to be assigned to Buyer pursuant to a novation
or similar assignment agreement;
(n) use
commercially reasonable efforts to assist Buyer to negotiate and finalize the
Employment Agreement with Xxxx Xxxxxx; and
(o) use
commercially reasonable efforts to assist Buyer to negotiate and finalize
employment agreements, substantially in the form of the Employment Agreements,
with each of Xxxx Xxxxxxx, Xxxxx Xxxxxxxxxx, Xxxxxxx Xxxxxxxxx, Xxxx Xxxxx
and
Xxx Xxxxxxxxxx..
5.3 Negative
Covenant
Except
as
otherwise expressly permitted herein, between the date of this Agreement and
the
Closing Date, Seller shall not, and each Shareholder shall not permit Seller
to,
without the prior written Consent of Buyer: (a) take any affirmative action,
or
fail to take any reasonable action within its control, as a result of which
any
of the changes or events listed in Sections 3.15 or 3.19 would be likely to
occur; (b) make any modification to any material Contract or Governmental
Authorization; (c) allow the levels of raw materials, supplies, finished goods
or other materials included in the Inventories to vary materially from the
levels customarily maintained in the Ordinary Course of Business; (d) enter
into
any compromise or settlement of any litigation, proceeding or governmental
investigation relating to the
5.4 Required
Approvals
As
promptly as practicable after the date of this Agreement, Seller shall make
all
filings required by Legal Requirements to be made by it prior to the Closing
in
order to consummate the Contemplated Transactions. Seller and each Shareholder
also shall cooperate with Buyer and its Representatives with respect to all
filings that Buyer elects to make or, pursuant to Legal Requirements, shall
be
required to make in connection with the Contemplated Transactions. Seller and
each Shareholder also shall cooperate with Buyer and its Representatives in
obtaining all Material Consents.
5.5 Notification
Between
the date of this Agreement and the Closing, Seller and each Shareholder shall
promptly notify Buyer in writing if any of them becomes aware of (a) any fact
or
condition that causes or constitutes a Breach of any of Seller's or any
Shareholder’s representations and warranties made as of the date of this
Agreement or (b) the occurrence after the date of this Agreement of any fact
or
condition that would or would be reasonably likely to cause or constitute a
Breach of any such representation or warranty had that representation or
warranty been made as of the time of the occurrence of, or Seller's or
Shareholder’s discovery of, such fact or condition. Should any such fact or
condition require any change to the Disclosure Letter, Seller shall promptly
deliver to Buyer a supplement to the Disclosure Letter specifying such change.
Such delivery shall not affect any rights of Buyer under Section 9.2 and Article
11. During the same period, Seller and each Shareholder also shall promptly
notify Buyer of the occurrence of any Breach of any covenant of Seller or any
Shareholder in this Article 5 or of the occurrence of any event that may make
the satisfaction of the conditions in Article 7 impossible or
unlikely.
5.6 No
Negotiation
Until
such time as this Agreement shall be terminated pursuant to Section 9.1: (a)
neither Seller nor any Shareholder shall directly or indirectly, through any
Representative or otherwise, solicit or entertain offers from, negotiate with
or
in any manner encourage, discuss, accept or consider any proposal of any other
person or entity relating to the acquisition of, purchase or sale of assets
or
stock of, or other transaction relating to any merger, consolidation, business
combination or similar transaction involving, Seller; and (b) Seller and each
Shareholder will immediately notify CMC regarding any contact between Seller
or
any Shareholder and any other person regarding any such solicitation, offer
or
proposal or any related inquiry.
5.7 Best
Efforts
Subject
to the terms and conditions of this Agreement, Seller and each Shareholder
will
use their reasonable best efforts in good faith to take, or cause to be taken,
all actions and to do, or cause to be done, and to assist and cooperate with
the
other parties in doing, all things necessary, proper or advisable under
applicable Legal Requirements to cause the conditions in Article 7 and Section
8.3 to be satisfied and otherwise to consummate the Contemplated Transactions;
provided, however, that for purposes of
5.8 Interim
Financial Statements
Until
the
Closing Date, Seller shall deliver to Buyer within thirty (30) days after the
end of each month a copy of the unaudited balance sheet and income statement
for
such month prepared in a manner and containing information consistent with
Seller's current practices for preparing such financial statements.
5.9 Change
of
Name
On
or
before the Closing Date, Seller shall amend its Governing Documents and take
all
other actions necessary to change its name to one sufficiently dissimilar to
Seller's present name, in Buyer's judgment, to avoid confusion.
5.10 Payment
of Liabilities
Seller
shall pay or otherwise satisfy in the Ordinary Course of Business its
Liabilities and obligations.
5.11 Payment
of Debt
Prior
to,
or contemporaneous with the Closing, all secured debt of the Seller shall be
repaid, including, but not limited to, all senior and subordinate debt, and
all
security interests attached to the Purchased Assets released.
6. Covenants
of Buyer Prior to Closing
6.1 Required
Approvals
As
promptly as practicable after the date of this Agreement, Buyer shall make,
or
cause to be made, all filings required by Legal Requirements to be made by
it to
consummate the Contemplated Transactions. Buyer also shall cooperate, and cause
its Related Persons to cooperate, with Seller (a) with respect to all filings
Seller shall be required by Legal Requirements to make and (b) in obtaining
all
Consents identified in Part
3.2(c),
provided, however, that Buyer shall not be required to dispose of or make any
change to its business or expend any material funds in order to comply with
this
Section 6.1.
6.2 Best
Efforts
Subject
to the terms and conditions of this Agreement, Buyer will use its reasonable
best efforts in good faith to take, or cause to be taken, all actions and to
do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable under applicable Legal
Requirements to cause the conditions in Article 8 to be satisfied and otherwise
to consummate the Contemplated Transactions; provided, however, that for
purposes of clarification, such efforts shall not require Buyer to waive any
conditions to close or any of its other rights in the course
thereof.
7. Conditions
Precedent to Buyer's Obligation to Close
Buyer's
obligation to purchase the Purchased Assets and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction,
at
or prior to the Closing, of each of the following conditions (any of which
may
be waived by Buyer, in whole or in part):
7.1 Accuracy
of Representations
All
of
Seller's and each Shareholder’s representations and warranties in this Agreement
that are qualified by materiality (considered collectively), and each of these
representations and warranties qualified by materiality (considered
individually), shall have been accurate in all respects as of the date of this
Agreement, and shall be accurate in all respects as of the time of the Closing
as if then made, except for representations and warranties in this Agreement
which address matters only as of a particular date (which representations and
warranties shall have been accurate in all respects as of such particular date)
and all of Seller's and each Shareholder’s representations and warranties in
this Agreement that are not qualified by materiality (considered collectively),
and each of these representations and warranties not qualified by materiality
(considered individually), shall have been accurate in all material respects
as
of the date of this Agreement, and shall be accurate in material all respects
as
of the time of the Closing as if then made, except for representations and
warranties in this Agreement which address matters only as of a particular
date
(which representations and warranties shall have been accurate in all material
respects as of such particular date).
7.2 Performance
All
of
the covenants and obligations that Seller and Shareholders are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), shall have been duly performed and complied
with.
7.3 Consents
Seller
shall have obtained each Consent required under any Seller Contract (other
than
the Government Contracts) necessary for the consummation of the Contemplated
Transactions and each such Consent shall be in full force and effect, except
where the failure to obtain such Consent would not have a Material Adverse
Effect, individually or in the aggregate (the "Material
Consents").
Such
Material Consents are set forth on Part
7.3.
7.4 Additional
Documents
Seller
and the Shareholders shall have caused the documents and instruments required
by
Sections 2.7(a) and 2.7(c) and the following documents to be delivered (or
tendered subject only to Closing) to Buyer:
(a) the
articles of incorporation and all amendments thereto of Seller, duly certified
as of a recent date by the Secretary of State of the jurisdiction of Seller's
incorporation;
(b) releases
of all Encumbrances on the Purchased Assets, other than Permitted
Encumbrances;
(c) Certificates
dated as of a date not earlier than the fifth business day prior to the Closing
as to the good standing of Seller, executed by the appropriate officials of
the
State of New York;
(d) that
certain definitive supply agreement between Seller and Xxxxxxxxx GmbH & Co.
KG dated June 12, 2006, as of the date hereof ; and
(e) Such
other documents as Buyer may reasonably request for the purpose of:
(i) evidencing
the accuracy of any of Seller's and any Shareholder’s representations and
warranties;
(ii) evidencing
the performance by Seller and Shareholders of, or the compliance by Seller
and
Shareholders with, any covenant or obligation required to be performed or
complied with by Seller and Shareholders;
(iii) evidencing
the satisfaction of any condition referred to in this Article 7; or
(iv) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.5 No
Proceedings
Since
the
date of this Agreement, there shall not have been commenced or threatened
against Buyer, or against any Related Person of Buyer, any Proceeding (a)
involving any challenge to, or seeking Damages or other relief in connection
with, any of the Contemplated Transactions or (b) that may have the effect
of
preventing, delaying, making illegal, imposing limitations or conditions on
or
otherwise interfering with any of the Contemplated Transactions.
7.6 Simultaneous
Closing of BSI Agreements.
The
Closing shall be contingent upon the simultaneous closing of the transactions
contemplated by the BSI Agreements, all in form and substance as agreed upon
among Buyer, BSI and Xx. Xxxxx as of the date hereof.
7.7 Governmental
Authorizations
Buyer
shall have received such Governmental Authorizations as are necessary or
desirable to allow Buyer to operate the Purchased Assets from and after the
Closing.
7.8 No
Material Adverse Effect
Since
the
date of this Agreement, there shall not have been any Material Adverse Effect
and no event shall have occurred or circumstance exist that may result in a
Material Adverse Effect.
7.9 Seller
Contracts
All
Seller Contracts (other than the Government Contracts) shall be assigned to
Buyer without restriction, upon the same or more favorable terms, provided,
however, that this condition shall be deemed to have been waived by Buyer with
respect to the Restricted Contracts to the extent Buyer has elected to waive
any
such assignment as a closing condition as set forth in Section
2.10.
8. Conditions
Precedent to Seller's Obligation to Close
Seller's
obligation to sell the Purchased Assets and to take the other actions required
to be taken by Seller at the Closing is subject to the satisfaction, at or
prior
to the Closing, of each of the following conditions (any of which may be waived
by Seller in whole or in part):
8.1 Accuracy
of Representations
All
of
Buyer's and CMC’s respective representations and warranties in this Agreement
that are qualified by materiality (considered collectively), and each of these
representations and warranties qualified by materiality (considered
individually), shall have been accurate in all respects as of the date of this
Agreement, and shall be accurate in all respects as of the time of the Closing
as if then made, except for representations and warranties in this Agreement
which address matters only as of a particular date (which representations and
warranties shall have been accurate in all respects as of such particular date)
and all of Buyer's and CMC’s respective representations and warranties in this
Agreement that are not qualified by materiality (considered collectively),
and
each of these representations and warranties not qualified by materiality
(considered individually), shall have been accurate in all material respects
as
of the date of this Agreement, and shall be accurate in material all respects
as
of the time of the Closing as if then made, except for representations and
warranties in this Agreement which address matters only as of a particular
date
(which representations and warranties shall have been accurate in all material
respects as of such particular date).
8.2 Buyer’s
Performance
All
of
the covenants and obligations that Buyer is required to perform or to comply
with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), shall have been performed and complied with.
8.3 Additional
Documents
Buyer
shall have caused the documents and instruments required by Section 2.7(b)
to be
delivered (or tendered subject only to Closing) to Seller.
8.4 No
Injunction
There
shall not be in effect any Legal Requirement or any injunction or other Order
that (a) prohibits the consummation of the Contemplated Transactions and (b)
has
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
8.5 Simultaneous
Closing of BSI Agreements.
The
Closing shall be contingent upon the simultaneous closing of the transactions
contemplated by the BSI Agreements, all in form and substance as agreed upon
among Buyer, BSI and Xx. Xxxxx as of the date hereof.
9. Termination
9.1 Termination
Events
By
notice
given prior to or at the Closing, subject to Section 9.2, this Agreement may
be
terminated as follows:
(a) by
Buyer
if a material Breach of any provision of this Agreement has been committed
by
Seller or any Shareholder and such Breach has not been waived by Buyer;
provided, however, that if any such Breach is curable by Seller or any
Shareholder through the exercise of reasonable efforts, then Buyer may not
terminate this Agreement under this Section 9.1(a) prior to the end of a 30-day
period following written notice of such Breach being given to Seller and each
Shareholder, provided that Seller and each Shareholder, as applicable, continues
to exercise reasonable efforts to cure such Breach (it being understood that
Buyer may not terminate this Agreement pursuant to this Section 9.1(a) if such
Breach has been cured prior to the end of such period);
(b) by
Seller
if a material Breach of any provision of this Agreement has been committed
by
Buyer and such Breach has not been waived by Seller; provided, however, that
if
any such Breach is curable by Buyer through the exercise of reasonable efforts,
then Seller may not terminate this Agreement under this Section 9.1(b) prior
to
the end of a 30-day period following written notice of such Breach being given
to Buyer, provided that Buyer continues to exercise reasonable efforts to cure
such Breach (it being understood that Seller may not terminate this Agreement
pursuant to this Section 9.1(b) if such Breach has been cured prior to the
end
of such period);
(c) by
Buyer
if any condition in Article 7 has not been satisfied as of September 15, 2006
or
if satisfaction of such a condition by such date is or becomes impossible (other
than through the failure of Buyer to comply with its obligations under this
Agreement), and Buyer has not waived such condition on or before such
date;
(d) by
Seller
if any condition in Article 8 has not been satisfied as of September 15, 2006
or
if satisfaction of such a condition by such date is or becomes impossible (other
than through the failure of Seller or Shareholders to comply with their
obligations under this Agreement), and Seller has not waived such condition
on
or before such date;
(e) by
mutual
consent of Buyer and Seller;
(f) by
Buyer
if the Closing has not occurred on or before September 15, 2006, or such later
date as the parties may agree upon, unless the Buyer is in material Breach
of
this Agreement; or
(g) by
Seller
if the Closing has not occurred on or before September 15, 2006, or such later
date as the parties may agree upon, unless the Seller or any Shareholder is
in
material Breach of this Agreement.
9.2 Effect
of
Termination
Each
party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of such
right of termination will not be an election of remedies. If this Agreement
is
terminated pursuant to Section 9.1, all obligations of the parties under this
Agreement will terminate, except that the obligations of the parties in this
Section 9.2 and Articles 12 and 13 (except for those in Section 13.5) will
survive, provided, however, that, if this Agreement is terminated because of
a
Breach of this Agreement by the nonterminating party or because one or more
of
the conditions to the terminating party's obligations under this Agreement
is
not satisfied as a result of the non-terminating
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired. If this Agreement is terminated and the Closing does
not
occur, Buyer shall promptly amend its Governing Documents to exclude “QED” from
its name. Buyer acknowledges that Seller grants no license to Buyer for the
xxxx
“QED” prior to the Closing.
10. Additional
Covenants
10.1 Employees
and Employee Benefits
(a) For
the
purpose of this Agreement, the term "Active
Employees"
shall
mean all employees employed on the Closing Date by Seller for its business
who
are employed exclusively in Seller's business as currently conducted, including
employees on temporary leave of absence, including family medical leave,
military leave, temporary or short-term disability or sick leave, but excluding
employees on long-term disability leave.
(b) Employment
of Active Employees by Buyer.
(i) Buyer
is
not obligated to hire any Active Employee but may interview all Active
Employees. Buyer will provide Seller with a list of Active Employees to whom
Buyer has made an offer of employment that has been accepted to be effective
on
the Closing Date (the "Hired
Active Employees").
Subject to Legal Requirements, Buyer will have reasonable access to the
Facilities and personnel Records (including performance appraisals, disciplinary
actions and grievances) of Seller for the purpose of preparing for and
conducting employment interviews with all Active Employees and will conduct
the
interviews as expeditiously as possible prior to the Closing Date. Access will
be provided by Seller upon reasonable prior notice during normal business hours.
Effective immediately before the Closing, Seller will terminate the employment
of all of its Hired Active Employees effective as of the close of business
on
the Closing Date.
(ii) Neither
Seller nor any Shareholder nor their respective Related Persons shall solicit
the continued employment of any Active Employee (unless and until Buyer has
informed Seller in writing that the particular Active Employee will not receive
any employment offer from Buyer) or the employment of any Hired Active Employee
after the Closing. Buyer shall inform Seller promptly of the identities of
those
Active Employees to whom it will not make employment offers.
(iii) Except
for the Employment Agreements, it is understood and agreed that (A) Buyer's
expressed intention to extend offers of employment as set forth in this section
shall not constitute any commitment, Contract or understanding (expressed or
implied) of any obligation on the part of Buyer to a post-Closing employment
relationship of any fixed term or duration or upon any terms or conditions
other
than those that Buyer may establish pursuant to individual offers of employment,
and (B) employment offered by Buyer is "at will" and may be terminated by Buyer
or by an employee at any time for any reason (subject to any written commitments
to the contrary made by Buyer or an employee and Legal Requirements). Except
for
any terms and conditions contained in an executed Employment Agreement, nothing
in this Agreement shall be deemed to prevent or restrict in any way the right
of
Buyer
(c) Salaries
and Benefits
(i) Seller
shall be responsible for: (A) the payment of any termination or severance
payments and the provision of health plan continuation coverage in accordance
with the requirements of COBRA and Sections 601 through 608 of ERISA; and (B)
any and all payments to employees required under the WARN Act.
(ii) Seller
shall be liable for any claims made or incurred by Active Employees and their
beneficiaries through the Closing Date under the Employee Plans. For purposes
of
the immediately preceding sentence, a claim will be deemed incurred, in the
case
of hospital, medical or dental benefits, when the services, treatments,
procedures, prescriptions or other supplies that are the subject of the claim
are performed or provided and, in the case of other benefits (such as disability
or life insurance), when an event has occurred or when a condition has been
diagnosed that entitles the employee to the benefit.
(d) No
Transfer of Purchased Assets. Neither Seller nor any Shareholder nor their
respective Related Persons will make any transfer of pension or other employee
benefit plan assets to Buyer.
(e) Terms
of
Employment. Buyer will set its own terms and conditions of employment for the
Hired Active Employees and others it may hire, including work rules, benefits
and salary and wage structure, all as permitted by law, provided, however,
that:
(i) the base salary provided by Buyer to each Hired Active Employee shall be
at
least equivalent to the base salary provided by Seller to such Hired Active
Employee immediately prior to the Closing Date (provided that Seller has
complied with Section 5.3(e)); (ii) the material benefits provided by Buyer
to
Hired Active Employees from the Closing Date through December 31, 2006 shall
be
a continuation of the benefits provided by Seller to the Hired Active Employees
immediately prior to the Closing Date (provided that Seller has complied with
Section 5.3(e)); and (iii) the benefits provided by Buyer to Hired Active
Employees employed by Buyer as of January 1, 2007 shall be substantially
equivalent to the benefits provided by CMC to its domestic employees generally.
In connection with the benefits to be provided to the Hired Active Employees
by
CMC or Buyer hereunder (other than with respect to personal time off (PTO)
accrual rates and accrual limitations, severance policies, if any, and any
retirement or pension plans CMC or Buyer may adopt or define after the date
hereof), the Hired Active Employees shall receive credit for the years of their
employment with Seller as if they had been employed by Buyer during such period,
subject to the terms of and to the extent permitted by the existing governing
terms of the applicable benefit plans and documents and applicable law. Buyer
is
not obligated to assume any collective bargaining agreements under this
Agreement. Subject to Section 2.4(a), Seller shall be solely liable for any
severance, change-of-control, “golden parachute” or other payments required to
be made to its employees due to the Contemplated Transactions.
(f) General
Employee Provisions.
(i) Seller
and Buyer shall give any notices required by Legal Requirements and take
whatever other actions with respect to the plans, programs and policies
described in this Section 10.1 as may be reasonably necessary or desirable
to
carry out the arrangements described in this Section 10.1.
(ii) Seller
and Buyer shall provide each other with such plan documents and summary plan
descriptions, employee data or other information as may be reasonably required
to carry out the arrangements described in this Section 10.1.
(iii) If
any of
the arrangements described in this Section 10.1 are determined by the IRS or
other Governmental Body to be prohibited by law, Seller and Buyer shall modify
such arrangements to as closely as possible reflect their expressed intent
and
retain the allocation of economic benefits and burdens to the parties
contemplated herein in a manner that is not prohibited by law.
(iv) Seller
shall provide Buyer with completed I-9 forms and attachments with respect to
all
Hired Active Employees, except for such employees as Seller certifies in writing
to Buyer are exempt from such requirement.
(v) Buyer
shall not have any responsibility, liability or obligation, whether to Active
Employees, former employees, their beneficiaries or to any other Person, with
respect to any employee benefit plans, practices, programs or arrangements
(including the establishment, operation or termination thereof and the
notification and provision of COBRA coverage extension) maintained by
Seller.
10.2 Taxes
Except
as
otherwise expressly provided in this Agreement, all Taxes in respect of the
Purchased Assets (including fifty percent (50%) of any transfer, sales, use,
stamp or other Taxes, if any, arising from the sale of the Purchased Assets
and
any deferred Taxes of Seller of any nature) and arising in connection with
the
conduct of Seller’s business for the period prior to the Closing Date shall be
borne by Seller. Except as otherwise provided in this Agreement, all Taxes
in
respect of the Purchased Assets (including fifty percent (50%) of any transfer,
sales, use, stamp or other Taxes, if any, arising from the sale of the Purchased
Assets) and arising in connection with the conduct of the Business for the
period after the Closing Date shall be borne by Buyer.
10.3 Payment
of Other Retained Liabilities
In
addition to payment of Taxes pursuant to Section 10.2, Seller shall pay, or
make
adequate provision for the payment, in full all of the Retained Liabilities
of
Seller.
10.4 Restrictions
on Seller Dissolution and Distributions;
Insurance
Seller
shall not dissolve, or make any distribution of the proceeds received pursuant
to this Agreement, until the later of: (a) thirty (30) days after the completion
of all adjustment procedures contemplated by Section 2.9; (b) Seller's payment,
or adequate provision for the payment, of all of its obligations pursuant to
Sections 10.2 and 10.3; or (c) the lapse of more than nine (9) months after
the
Closing Date, unless, with respect to the distribution of proceeds, after giving
effect to any such distribution, Seller has cash and cash equivalents equal
to
at least One Million Dollars ($1,000,000) in the aggregate. Seller shall
maintain and not terminate its existing insurance coverages until at least
six
(6) months after the Closing Date. Seller and Shareholders shall provide at
least ten (10) Business Days’ prior written notice to Buyer and CMC prior to
effecting any dissolution of the Seller.
10.5 Reports
and Returns
Seller
shall after the Closing prepare and timely file all reports and returns required
by Legal Requirements relating to the business of Seller as conducted using
the
Purchased Assets, to and including the Effective Time.
10.6 Intentionally
Omitted
10.7 Noncompetition,
Nonsolicitation and Nondisparagement
(a) Noncompetition.
For a period of five (5) years after the Closing Date (the "Period"),
neither Seller nor any Shareholder shall, without the prior written consent
of
the Chairman of the Buyer’s board of directors, or the President of CMC,
participate or engage in, directly or indirectly (as an owner, shareholder
(other than passive ownership of up to two percent (2%) of the outstanding
stock
of any class that is publicly traded), partner, independent contractor,
consultant, advisor or in any other capacity calling for the rendition of
services, advice, or acts of management, operation or control), any business
(other than on behalf of Buyer or CMC) that, during the Period, is competitive
with the Business sold by Seller to Buyer hereunder or is competitive with
the
Business Conducted by Buyer and/or CMC within the United States, France, the
United Kingdom, the Netherlands, Germany, Italy, Japan, Taiwan, the People’s
Republic of China, Korea, Malaysia, and Singapore.
(b) Nonsolicitation.
During the Period, neither Seller nor any Shareholder shall, directly or
indirectly:
(i) cause,
induce or attempt to cause or induce any customer, supplier, licensee, licensor,
employee, consultant or other business relation of Buyer or CMC to cease doing
business with Buyer or CMC, to deal with any competitor of Buyer or CMC or
in
any way interfere with its relationship with Buyer or CMC;
(ii) cause,
induce or attempt to cause or induce any customer, supplier, licensee, licensor,
employee, consultant or other business relation of Seller on the Closing Date
or
within the year preceding the Closing Date to cease doing business with Buyer
or
CMC, to deal with any competitor of Buyer or CMC or in any way interfere with
its relationship with Buyer or CMC; or
(iii) hire,
retain or attempt to hire or retain any employee or independent contractor
of
Buyer or CMC or in any way interfere with the relationship between Buyer or
CMC
and any of its respective employees or independent contractors. For purposes
of
clarity, Buyer in this Section 10.7(b)(iii) includes the employees and
contractors of Seller up to and including the Closing Date, as well as those
retained by Buyer during the Period.
(c) Nondisparagement.
After the Closing Date, none of the parties hereto will disparage any other
party hereto or such party’s shareholders, directors, officers, employees or
agents publicly or to any third party, other than in connection with any
Proceeding.
(d) Modification
of Covenant. If a final judgment of a court or tribunal of competent
jurisdiction determines that any term or provision contained in Section 10.7(a)
through (c) is invalid or unenforceable, then the parties agree that the court
or tribunal will have the power to reduce the scope, duration or geographic
area
of the term or provision, to delete specific words or phrases or to replace
any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of
the
invalid or unenforceable term or provision. This Section 10.7 will be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed. Seller and each Shareholder expressly agrees that
this
Section 10.7 is reasonable and necessary to protect and preserve Buyer's
legitimate business interests and the value of the Purchased Assets and to
prevent any unfair advantage conferred on Seller or any
Shareholder.
10.8 Customer
and Other Business Relationships
After
the
Closing, Seller and each Shareholder will reasonably cooperate with Buyer in
its
efforts to continue and maintain for the benefit of Buyer those business
relationships of Seller existing prior to
10.9 Retention
of and Access to Records
After
the
Closing Date, each of Seller and Buyer shall provide the other and its
respective Representatives and, in the case of Buyer, the Shareholders,
reasonable access to Records that are Excluded Assets or Purchased Assets,
as
the case may be, during normal business hours and on at least three (3) days'
prior written notice, for any reasonable business purpose specified by Buyer,
the Shareholders or Seller, as the case may be, in such notice.
10.10 Further
Assurances
Subject
to the proviso in Section 6.1, the parties shall cooperate reasonably with
each
other and with their respective Representatives in connection with any steps
required to be taken as part of their respective obligations under this
Agreement, and shall: (a) furnish upon request to each other such further
information; (b) execute and deliver to each other such other documents; and
(c)
do such other acts and things, all as the other party may reasonably request
for
the purpose of carrying out the provisions of this Agreement and the
Contemplated Transactions.
10.11 Guarantee
of Payment.
Notwithstanding
anything in this Agreement to the contrary, CMC unconditionally guarantees
Buyer’s obligation to make payments to Seller under Article 2 to the extent
earned and otherwise due and payable and unpaid by Buyer.
11. Indemnification;
Remedies
11.1 Survival
All
representations, warranties, covenants and obligations in this Agreement, the
Disclosure Letter, the supplements to the Disclosure Letter, the certificates
delivered pursuant to Section 2.7 and any other certificate or document
delivered pursuant to this Agreement shall survive the Closing and the
consummation of the Contemplated Transactions, subject to Section 11.7. The
right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected
by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with any such representation, warranty, covenant
or obligation. The waiver of any condition based upon the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification,
reimbursement or other remedy based upon such representations, warranties,
covenants and obligations.
11.2 Indemnification
and Reimbursement by Seller and Shareholders
From
and
after the Closing Date, Seller and each Shareholder, jointly and severally,
will
indemnify and hold harmless Buyer and CMC and their Representatives,
shareholders, subsidiaries and Related Persons (collectively, the "Buyer
Indemnified Persons")
against, and will reimburse the Buyer Indemnified Persons for any loss,
liability, claim, damage (excluding incidental, punitive and
(a) any
Breach of any representation or warranty made by Seller or any Shareholder
in
(i) this Agreement (without giving effect to any supplement to the Disclosure
Letter unless expressly consented to in writing by Buyer), (ii) the Disclosure
Letter, (iii) the supplements to the Disclosure Letter, (iv) the certificates
delivered pursuant to Section 2.7, (v) any transfer instrument or (vi) any
other
certificate, document, writing or instrument delivered by Seller or any
Shareholder pursuant to this Agreement;
(b) any
Breach of any covenant or obligation of Seller or any Shareholder in this
Agreement or in any other certificate, document, writing or instrument delivered
by Seller or any Shareholder pursuant to this Agreement;
(c) any
Liability arising out of the ownership or operation of the Purchased Assets
prior to the Effective Time other than the Assumed Liabilities;
(d) any
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding made, or alleged to have been made, by any Person
with Seller or any Shareholder (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions;
(e)
any
matter disclosed in Parts 7.3
and
3.18
of the
Disclosure Letter; provided, that Damages recoverable hereunder for matters
disclosed in Part 3.18 shall not exceed $25,000, other than Damages resulting
of
the gross negligence or willful misconduct of Seller;
(f) any
liability under the WARN Act or any similar state or local Legal Requirement
that may result from an "Employment Loss", as defined by 29 U.S.C. sect.
2101(a)(6), caused by any action of Seller prior to the Closing or by Buyer's
decision not to hire previous employees of Seller;
(g) any
Retained Liabilities; or
(h) any
Excess Damages under and as defined in the BSI Purchase Agreement.
Notwithstanding
anything to the contrary contained herein, to the extent that any Damages have
been included in the calculation of Closing Working Capital and taken into
account in determining whether any adjustment is required under Sections 2.8
and
2.9 hereof, and the amount of the adjustment, if any, then a claim for
indemnification cannot be brought by Buyer or any Buyer Indemnified Person
against Seller and/or the Shareholders under this Article 11 to the extent
of
such adjustment or amount actually included in the calculation of Closing
Working Capital and such included and adjusted amounts shall not be applied
to
any limitation under Section 11.5 hereof.
11.3 Indemnification
and Reimbursement by Seller and Shareholders for Environmental
Matters
From
and
after the Closing Date, in addition to the other indemnification provisions
in
this Article 11 (provided that, to the extent that indemnification is sought
under this Section 11.3 and any other Section of this Article 11 with respect
to
any matter, the Buyer Indemnified Parties shall not be entitled to
(a) any
Environmental, Health and Safety Liabilities arising out of or relating to:
(i)
the ownership or operation by any Person at any time on or prior to the Closing
Date of any of the Facilities, Purchased Assets or the business of Seller;
or
(ii) any Hazardous Materials or other contaminants that were present on the
Facilities or Purchased Assets at any time on or prior to the Closing Date;
or
(b) any
bodily injury (including illness, disability and death, regardless of when
any
such bodily injury occurred, was incurred or manifested itself), personal
injury, property damage (including trespass, nuisance, wrongful eviction and
deprivation of the use of real property) or other damage of or to any Person
or
any Purchased Assets in any way arising from or allegedly arising from any
Hazardous Activity conducted by any Person with respect to the business of
Seller or the Purchased Assets prior to the Closing Date or from any Hazardous
Material that was (i) present or suspected to be present on or before the
Closing Date on or at the Facilities (or present or suspected to be present
on
any other property, if such Hazardous Material emanated or allegedly emanated
from any Facility and was present or suspected to be present on any Facility,
on
or prior to the Closing Date) or (ii) Released or allegedly Released by any
Person on or at any Facilities or Purchased Assets at any time on or prior
to
the Closing Date.
Buyer
will be entitled to control any Remedial Action, any Proceeding relating to
an
Environmental Claim and, except as provided in the following sentence, any
other
Proceeding with respect to which indemnity may be sought under this
Section 11.3, provided, however, that Buyer shall not enter into any
settlement with respect to such Proceeding without a release of Seller and
the
Shareholders included as a provision in such settlement and providing the Seller
and the Shareholders with five (5) days’ prior written notice of such
settlement, which shall provide the Seller and the Shareholders a reasonable
opportunity to object thereto and discuss the reasons for such objection with
Buyer. The procedure described in Section 11.9 will apply to any claim
solely for monetary damages relating to a matter covered by this Section
11.3.
11.4 Indemnification
and Reimbursement by Buyer
From
and
after the Closing Date, Buyer will indemnify and hold harmless Seller and/or
the
Shareholders, and will reimburse Seller and/or the Shareholders, for any Damages
arising from or in connection with:
(a) any
Breach of any representation or warranty made by Buyer in this Agreement or
in
any certificate, document, writing or instrument delivered by Buyer pursuant
to
this Agreement;
(b) any
Breach of any covenant or obligation of Buyer in this Agreement or in any other
certificate, document, writing or instrument delivered by Buyer pursuant to
this
Agreement;
(c) any
claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on Buyer's behalf) in connection with
any of the Contemplated Transactions;
(d) any
Assumed Liabilities;
(e) any
Environmental, Health and Safety Liabilities arising out of: (i) the ownership
or operation by Buyer or CMC, directly or indirectly, at any time after the
Closing Date of any of the Facilities, Purchased Assets or the Business; or
(ii)
any Hazardous Materials or other contaminants that are present on the Facilities
(to the extent such Facility is owned, leased or operated by Buyer or CMC,
directly or indirectly, after the Closing Date) or Purchased Assets at any
time
after the Closing Date to the extent that such Hazardous Materials or other
contaminants were not present on the Facilities or Purchased Assets prior to
the
Closing Date and are not otherwise the subject of indemnification by Seller
and
the Shareholders in favor of Buyer Indemnified Persons pursuant to Section
11.2
or Section 11.3 above; or
(f) any
bodily injury (including illness, disability and death), personal injury,
property damage (including trespass, nuisance, wrongful eviction and deprivation
of the use of real property) or other damage of or to any Person or any
Purchased Assets in any way arising from or allegedly arising from any Hazardous
Activity conducted by Buyer or CMC, directly or indirectly, with respect to
the
Business or the Purchased Assets after the Closing Date or from any Hazardous
Material that was (i) present or suspected to be present after the Closing
Date
on or at the Facilities (or present or suspected to be present on any other
property, if such Hazardous Material emanated or allegedly emanated from any
Facility and was present or suspected to be present on any Facility, after
the
Closing Date) or (ii) Released or allegedly Released by any Person on or at
any
Facilities or Purchased Assets at any time after the Closing Date; provided,
however, that, for all purposes under this subsection (f): (x) such Facility
is
owned, leased or operated by Buyer or CMC, directly or indirectly, after the
Closing Date, (y) such Hazardous Material or Hazardous Activity was not present
on or at the Facilities or Purchased Assets prior to the Closing Date and (z)
such claim or event is not otherwise the subject of indemnification by Seller
and the Shareholders in favor of Buyer Indemnified Persons pursuant to Section
11.2 or Section 11.3 above.
11.5 Limitation
on Amount—Seller and Shareholders
Neither
Seller nor any Shareholder shall have liability (for indemnification or
otherwise) with respect to claims under Section 11.2 and 11.3 until the total
of
all Damages with respect to such matters exceeds Two Hundred Thousand Dollars
($200,000.00) and then for all amounts of such Damages in excess of One Hundred
Thousand Dollars ($100,000.00); provided,
however,
that
the total aggregate amount of Damages recoverable by Buyer and the other Buyer
Indemnified Persons pursuant to the provisions of this Section 11 shall be
limited to the Escrow Amount, other than for Damages arising in respect of
Sections 3.14 (“Taxes”), 3.16 (“Employee Benefits”), 3.22 or 11.3
(“Environmental Matters”), 3.25 (“Intellectual Property”) and 3.31 (“Government
Contract Rights”) and Sections 8.01(g)(i), (ii) and (iii), 8.01(i) and 8.01(k)
of the BSI Purchase Agreement, (collectively, the “Escrow
Exclusions”).
Damages for the Escrow Exclusions, together with Damages under any other
provision of this Section 11 which are subject to the limitation of the Escrow
Amount as set forth in the proviso in the preceding sentence, shall be limited
to an indemnity cap of Eight Million Five Hundred Thousand Dollars
($8,500,000.00) (the
“Indemnity
Cap”).
Subject to the foregoing limitations, Seller and Shareholders will be jointly
and severally liable for all Damages recoverable hereunder, including, but
not
limited to, Excess Damages under the BSI Purchase Agreement as provided in
Section 11.2(h) and this Section 11.5. Seller and Shareholders acknowledge
and
agree that upon execution of this Agreement and at Closing, the Seller and
Shareholders will directly benefit from the BSI Purchase Agreement. Seller
and
Shareholders acknowledge and agree that the benefit conferred upon them in
connection with the BSI Purchase Agreement constitutes adequate consideration
for their indemnification obligations hereunder related to the BSI Purchase
Agreement. Seller and Shareholders further acknowledge and agree that the BSI
Purchase Agreement is a Contemplated Transaction.
11.6 Limitation
on Amount--Buyer
Buyer
will have no liability (for indemnification or otherwise) with respect to claims
under Section 11.4(a) until the total of all Damages with respect to such
matters exceeds Fifty Thousand Dollars ($50,000) and then for the entire amount
of such Damages; provided,
however,
that
the total aggregate amount of Damages recoverable by Seller and the other Seller
Indemnified Persons pursuant to the provisions of this Section 11 shall be
limited to Damages not exceeding an indemnity cap Eight Million Five Hundred
Thousand Dollars ($8,500,000.00). For purposes of clarity, this Section 11.6
will not apply to claims under Section 11.4(b) through (d) or matters arising
in
respect of Section 4.4 (“Brokers or Finders”).
11.7 Time
Limitations
(a) If
the
Closing occurs, Seller and Shareholders will have liability (for indemnification
or otherwise) with respect to any Breach of (i) a covenant or obligation to
be
performed or complied with prior to the Closing Date (other than those in
Sections 2.1 (“Assets to be Sold”) and 2.4(b) (“Retained Liabilities”) and
Articles 10 (“Additional Covenants”) and 12 (“Confidentiality”), as to which a
claim may be made at any time) or (ii) a representation or warranty (other
than
those relating to the Escrow Exclusions, as to which a claim may be made at
any
time within three (3) years after the Closing Date), only if on or before the
date that is eighteen (18) months after the Closing Date, Buyer notifies Seller
and the Shareholders of a claim specifying the factual basis of the claim in
reasonable detail to the extent then known by Buyer.
(b) If
the
Closing occurs, Buyer will have liability (for indemnification or otherwise)
with respect to any Breach of (i) a covenant or obligation to be performed
or
complied with prior to the Closing Date (other than those in Article 12
(“Confidentiality”), as to which a claim may be made at any time) or (ii) any
representation or warranty (other than that set forth in Section 4.4 (“Brokers
or Finders”), as to which a claim may be made at any time within three (3) years
of the Closing Date), only if on or before eighteen (18) months following the
Closing Date, Seller or any Shareholder notifies Buyer of a claim specifying
the
factual basis of the claim in reasonable detail to the extent then known by
Seller or such Shareholder.
(c) The
indemnification and reimbursement obligations of Seller and Shareholders set
forth in Section 11.3 hereof shall survive the Closing for a period of
three (3) years.
11.8 Escrow
Upon
notice to Seller and the Shareholders specifying in reasonable detail the basis
therefor, Buyer may give notice of a claim in any amount to which it may be
entitled under this Article 11 against the amount held in escrow under the
Escrow Agreement. To the extent that Seller or any Shareholder has any
obligation or liability pursuant to this Article 11 other than matters arising
in respect of the Escrow Exclusions, such obligation or liability shall be
discharged solely from the Escrow Amount in accordance with the Escrow Agreement
and, with respect to matters arising from the Escrow Exclusions, first from
the
Escrow Amount (to the extent then available) in accordance with the Escrow
Agreement and thereafter by the Seller and the Shareholders on a joint and
several basis, up to the Indemnity Cap. Neither the exercise of nor the failure
to exercise such right to give a notice of a claim under the Escrow Agreement
will constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
11.9 Third-Party
Claims
(a) Promptly
after receipt by a Person entitled to indemnity under Section 11.2, 11.3 (to
the
extent provided in the last sentence of Section 11.3) or 11.4 (an "Indemnified
Person")
of
notice of the assertion of a Third-Party Claim against it, such Indemnified
Person shall give notice to the Person obligated to indemnify under such Section
(an "Indemnifying
Person")
of the
assertion of such Third-Party Claim, provided that the failure to notify the
Indemnifying Person will not relieve the Indemnifying Person of any liability
that it may have to any Indemnified Person, except to the extent that the
Indemnifying Person demonstrates that the defense of such Third-Party Claim
is
prejudiced by the Indemnified Person's failure to give such notice.
(b) If
an
Indemnified Person gives notice to the Indemnifying Person pursuant to Section
11.9(a) of the assertion of a Third-Party Claim, the Indemnifying Person shall
be entitled to participate in the defense of such Third-Party Claim and, to
the
extent that it wishes (unless (i) the Indemnifying Person is also a Person
against whom the Third-Party Claim is made and the Indemnified Person determines
in good faith that joint representation would be inappropriate or (ii) the
Indemnifying Person fails to provide reasonable assurance to the Indemnified
Person of its financial capacity to defend such Third-Party Claim and provide
indemnification with respect to such Third-Party Claim), to assume the defense
of such Third-Party Claim with counsel reasonably satisfactory to the
Indemnified Person. After notice from the Indemnifying Person to the Indemnified
Person of its election to assume the defense of such Third-Party Claim, the
Indemnifying Person shall not, so long as it diligently conducts such defense,
be liable to the Indemnified Person under this Article 11 for any fees of other
counsel or any other expenses with respect to the defense of such Third-Party
Claim, in each case subsequently incurred by the Indemnified Person in
connection with the defense of such Third-Party Claim, other than reasonable
costs of investigation. If the Indemnifying Person assumes the defense of a
Third-Party Claim, no compromise or settlement of such Third-Party Claims may
be
effected by the Indemnifying Person without the Indemnified Person's Consent
unless (A) there is no finding or admission of any violation of Legal
Requirement or any violation of the rights of any Person; (B) subject to
Sections 11.5 and 11.6, the sole relief provided is monetary damages that are
paid in full by the Indemnifying Person; and (C) the Indemnified Person shall
have no liability with respect to any compromise or settlement of such
Third-Party Claims effected without its Consent, which Consent shall not be
unreasonably withheld, delayed or conditioned. Subject to Section 11.11 hereof,
if notice is given to an Indemnifying Person of the assertion of any Third-Party
Claim and the Indemnifying Person does not, within thirty (30) days after the
Indemnified Person's notice is given, give notice to the Indemnified Person
of
its election to assume the defense of such Third-Party Claim, the Indemnifying
Person will be bound by any determination made in such Third-Party Claim or
any
compromise or settlement effected by the Indemnified Person.
(c) Notwithstanding
the foregoing, if an Indemnified Person determines in good faith that there
is a
reasonable probability that a Third-Party Claim may adversely affect it or
its
Related Persons other than as a result of monetary damages for which it would
be
entitled to indemnification under this Agreement, the Indemnified Person may,
by
notice to the Indemnifying Person, assume the exclusive right to defend,
compromise or settle such Third-Party Claim, but the Indemnifying Person will
not be bound by any determination of any Third-Party Claim so defended for
the
purposes of this Agreement or any compromise or settlement effected without
its
Consent (which may not be unreasonably withheld).
(d) Notwithstanding
the provisions of Section 13.4, each party hereto hereby consents to the
nonexclusive jurisdiction of any court in which a Proceeding in respect of
a
Third-Party Claim is brought against any Indemnified Person for purposes of
any
claim that an Indemnified Person may have under this Agreement with respect
to
such Proceeding or the matters alleged therein and agree that process may be
served on each such party with respect to such a claim anywhere in the
world.
(e) With
respect to any Third-Party Claim subject to indemnification under this Article
11: (i) both the Indemnified Person and the Indemnifying Person, as the case
may
be, shall keep the other Person fully informed of the status of such Third-Party
Claim and any related Proceedings at all stages thereof where such Person is
not
represented by its own counsel; and (ii) the parties agree (each at its own
expense) to render to each other such assistance as they may reasonably require
of each other and to cooperate in good faith with each other in order to ensure
the proper and adequate defense of any Third-Party Claim.
(f) With
respect to any Third-Party Claim subject to indemnification under this Article
11, the parties agree to cooperate in such a manner as to preserve in full
(to
the extent possible) the confidentiality of all Confidential Information and
the
attorney-client and work-product privileges. In connection therewith, each
party
agrees that: (i) it will use its best efforts, in respect of any Third-Party
Claim in which it has assumed or participated in the defense, to avoid
production of Confidential Information (consistent with applicable law and
rules
of procedure), and (ii) all communications between any party hereto and counsel
responsible for or participating in the defense of any Third-Party Claim shall,
to the extent possible, be made so as to preserve any applicable attorney-client
or work-product privilege.
11.10 Other
Claims
Within
thirty (30) Business Days after a party obtains Knowledge that it has sustained
any Damages not involving a Third-Party Claim or action which such party
reasonably believes may give rise to a claim for indemnification from another
party hereunder, such Indemnified Person shall deliver notice of such claim
to
the Indemnifying Person, together with a brief description of the facts and
data
which support the claim for indemnification; provided,
however,
that
failure to so notify the Indemnifying Person shall not relieve the Indemnifying
Person of its indemnification obligations hereunder, except to the extent that
the Indemnifying Person is actually prejudiced thereby. Any such notice must
be
made to the Indemnifying Person not later than the expiration of the applicable
survival period specified in Sections 11.1 and 11.7 above. If the Indemnifying
Person does not notify the Indemnified Person within thirty (30) Business Days
following its receipt of such notice that the Indemnifying Person disputes
its
liability to the Indemnified Person under this Article 11, such claim specified
by the Indemnified Person in such notice shall be conclusively deemed a
Liability of the Indemnifying Person under this Article 11 and the Indemnifying
Person shall pay the amount of such claim to the Indemnified Person on demand
or, in the case of any notice in which the amount of the claim (or any portion
thereof) is estimated, on such later date when the amount of such claim (or
such
portion thereof) becomes finally determined. If the Indemnifying Person has
timely disputed its liability with respect to such claim, as provided above,
the
Indemnifying Person and the Indemnified Person shall proceed in good faith
to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved pursuant to Section 11.11
below.
11.11 Resolution
of Conflicts.
(a) For
purposes of Article 11, if no agreement can be reached after good faith
negotiation between the parties, either Buyer, Seller or the Shareholders may,
by written notice to the other parties, request that appropriate representatives
of each party with decision-making authority, together with their respective
counsel, meet in New York, New York (if such request is made by Buyer) or in
Chicago, Illinois (if such request is made by Seller or the Shareholders) for
one (1) day in an effort to directly resolve the dispute. In the event such
a
meeting or subsequent meetings fail to resolve the dispute, the parties agree
that they shall submit the claim to the following alternative dispute resolution
process: The parties first agree to submit the claim and attempt in good faith
to resolve the claim pursuant to non-binding mediation or non-binding
arbitration of the dispute by a neutral third-party mediator or arbitrator,
as
applicable, mutually agreed upon and selected in good faith by the parties
(in
either
case, the party conducting such mediation or arbitration shall be referred
to
herein as a “mediator”) and conducted on terms and conditions to be determined
by agreement of the parties and such mediator. The mediator shall set a limited
time period and establish procedures designed to reduce the cost and time
expended by the parties while allowing the parties an opportunity, adequate
in
the reasonable judgment of the mediator, to discover relevant information from
the opposing parties about the subject matter of the dispute. In the case of
non-binding arbitration, such mediator may render findings and such findings
may
be admissible in court, but neither party shall be deemed to have stipulated
or
agreed to such findings or otherwise be bound by such findings. In the event
that non-binding mediation or non-binding arbitration fails to resolve the
dispute, then either party may resort to litigation, provided, however, that
the
party who does not prevail in such litigation will be responsible for all costs,
expenses and attorneys’ fees related to such litigation both for and on behalf
of itself and the prevailing party.
(b) It
is the
intent of the parties hereto that all claims between the parties, except those
seeking equitable relief, shall be settled by the procedures as set forth in
this Section 11.11.
11.12 INDEMNIFICATION
IN CASE OF STRICT LIABILITY OR INDEMNITEE NEGLIGENCE
THE
INDEMNIFICATION PROVISIONS IN THIS ARTICLE 11 SHALL BE ENFORCEABLE
REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS,
CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE
ENVIRONMENTAL LAW, OCCUPATIONAL SAFETY AND HEALTH LAW OR PRODUCTS LIABILITY,
SECURITIES OR OTHER LEGAL REQUIREMENT) AND REGARDLESS OF WHETHER ANY PERSON
(INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES
THE
SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING
INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON THE
PERSON SEEKING INDEMNIFICATION.
11.13 Knowledge
and Materiality Qualifiers
Any
Knowledge or materiality qualifiers in Seller’s, any Shareholder’s, CMC’s or
Buyer’s representations and warranties shall be disregarded for purposes of
determining Seller’s, such Shareholder’s, CMC’s or Buyer’s indemnification
obligations, as applicable (including the extent of Damages) under Sections
11.2, 11.3 and 11.4.
11.14 Exclusive
Remedy
In
the
absence of fraud and except as provided in Section 13.5, the
indemnification provisions set forth in this Article 11 shall provide the
exclusive remedy for breach of any covenant, agreement, representation or
warranty of Seller, the Shareholders, CMC or Buyer, as the case may be, set
forth in this Agreement or any of the Disclosure Letter, the supplements to
the
Disclosure Letter, the certificates delivered pursuant to Section 2.7, any
transfer instrument or any other certificate, document, writing or instrument
delivered by Seller, any Shareholder, CMC or Buyer, as the case may be, pursuant
to this Agreement. In the case of fraud and as provided in Section 13.5, the
remedies provided in this Article 11 will not be exclusive of or limit any
other
remedies that may be available to Seller, the Shareholders, CMC or Buyer and
the
other Indemnified Persons, as the case may be.
11.15 Tax
Treatment of Indemnification Payments and Escrow
Unless
otherwise required by applicable law, Seller, the Shareholders and Buyer agree
to treat any payment made pursuant to this Article 11 as an adjustment to the
Purchase Price for federal, state and local income Tax purposes. All interest
earned on the Escrow Amount shall be treated as earned by the Seller for all
income tax purposes.
11.16 Effect
of
Tax and Insurance Benefits
Notwithstanding
anything to the contrary contained herein, for purposes of this Article 11,
the
amount of Damages for a particular claim for which indemnification is provided
under this Article 11 shall be offset by (i) any Tax benefits actually realized
by an Indemnified Person pursuant to Section 11.15 as a result of payments
made
under such claim or otherwise directly as a result of such claim and (ii) the
amount of any insurance proceeds received by an Indemnified Person by reason
or
in respect of such Damages (exclusive of deductibles, retrospective premiums
and
self-insured retentions under such insurance policies and any costs associated
with making or pursuing any claims); provided, however that neither Buyer nor
CMC shall be required or obligated to make or pursue any claims under any
insurance policies as a condition to indemnification pursuant to this Article
11
or otherwise and any such claims actually made shall be in the sole discretion
of Buyer or CMC, as applicable, provided, however, that Buyer and CMC shall
accept any such insurance proceeds resulting from any such claim in offset
under
this Section 11.16, subject only to the commercially reasonable requirements
or
conditions of its insurer.
12. Confidentiality
12.1 Definition
of Confidential Information
As
used
in this Article 12, and except as noted in Section 12.3, the term "Confidential
Information"
means
non-public confidential and proprietary information of each party and includes
all non-public information, whether written or oral, (whatever the form or
storage medium) or gatherable by inspection of tangible objects, or other means
that is disclosed by one party (Buyer on the one hand or Seller and
Shareholders, collectively, on the other hand) or its Representatives
(collectively, a "Disclosing
Party")
to the
other party or its Representatives (collectively, a "Receiving
Party")
in
connection with the Contemplated Transactions including certain information
concerning the business, financial condition, operations, assets and
liabilities, or any other non-public information that derives value by virtue
of
being non-public, of the Disclosing Party which is designated as “Confidential”,
“Proprietary”, or similar designation when disclosed. Information communicated
orally shall be considered Confidential Information if it is disclosed as
confidential. All notes, analyses, compilations, studies, interpretations or
other documents prepared by the Receiving Party or its Representatives that
contain or are based upon non-public information furnished to the Receiving
Party or its Representatives pursuant hereto (the “Notes”)
shall
also be deemed to included in the term “Confidential Information.”
12.2 Restricted
Use of Confidential Information
(a) Except
as
otherwise required by applicable law or regulatory authority, each Receiving
Party agrees to keep confidential and not disclose, and cause its
Representatives to keep confidential and not disclose, to any person the
Confidential Information it or its Representatives receives from the Disclosing
Party or its Representatives without the Disclosing Party’s prior written
consent, except as provided below. The Receiving Party or its Representatives
shall be entitled to disclose the Confidential Information of the Disclosing
Party and provide copies of the same, without the Disclosing Party’s prior
written consent, to those Representatives of the Receiving Party who need to
know such Confidential Information to evaluate and consummate the Contemplated
Transactions. The Receiving Party shall be responsible for any violations of
the
provisions of this Agreement caused by any of the Receiving Party’s
Representatives.
(b) Except
as
otherwise required by applicable law or regulatory authority, the Receiving
Party will not, and will direct the Receiving Party’s Representatives not to,
disclose to any other person that such Confidential Information has been made
available, that discussions or negotiations are taking place concerning the
Contemplated Transactions, or any of the terms, conditions or other facts with
respect to the Contemplated Transactions, including the status thereof, or
the
terms of this Agreement, without the prior written consent of the Disclosing
Party.
(c) Unless
and until this Agreement is terminated, Seller and each Shareholder shall
maintain as confidential any Confidential Information of the Seller or
Shareholders relating to any of the Purchased Assets or the Assumed Liabilities.
Notwithstanding the preceding sentence, Seller may use any Confidential
Information of Seller, to the extent that Seller possessed such Confidential
Information before any disclosure by Buyer, before the Closing in the Ordinary
Course of Business in connection with the transactions permitted by Section
5.2
(“Operation of the Business of Seller”).
(d) From
and
after the Closing, the provisions of Sections 12.2(a) and 12.2(b) above shall
not apply to or restrict in any manner Buyer's use of any Confidential
Information of Seller or the Shareholders relating to any of the Purchased
Assets or the Assumed Liabilities. In the event this Agreement is terminated
pursuant to Section 9.1, Buyer and Seller hereby agree that, notwithstanding
Section 13.7, the Confidentiality Letter Agreement, dated August 3, 2005,
between Buyer and Seller shall remain in full force and effect.
12.3 Exceptions
The
term
“Confidential Information” does not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by
the
Receiving Party or its Representatives in violation of this Agreement, (ii)
was
within the Receiving Party’s possession prior to its being furnished to the
Receiving Party by or on behalf of the Disclosing Party pursuant hereto,
provided that the source of such information was not known by the Receiving
Party to be bound by a confidentiality agreement with, or other contractual,
legal or fiduciary obligation of confidentiality to, the Disclosing Party or
any
other party with respect to such information, (iii) becomes available to the
Receiving Party on a non-confidential basis from a source other than the
Disclosing Party or any of its Representatives, provided that such source is
not
bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Disclosing Party or any other
party with respect to such information or (iv) is independently developed by
the
Receiving Party or any of its Representatives as demonstrated by the written
records of the Receiving Party or Representatives which have not had access
to
the Disclosing Party’s Confidential Information. Neither Seller nor any
Shareholder shall disclose any Confidential Information of Seller or any
Shareholder relating to any of the Purchased Assets or the Assumed Liabilities
in reliance on the exceptions in clauses (ii), (iii) or (iv) above.
12.4 Legal
Proceedings
In
the
event that a Receiving Party or anyone to whom the Receiving Party transmits
such Confidential Information pursuant to this Agreement is legally requested
(by oral questions, interrogatories, request for information or documents,
subpoena, civil investigative demand or similar process) or otherwise required
to disclose any Confidential Information of a Disclosing Party, the Receiving
Party will provide the Disclosing Party with prompt notice, prior to disclosing
such Confidential Information, so that the Disclosing Party may seek an
appropriate protective order or waive compliance with this Agreement. Receiving
Party will additionally use commercially reasonable efforts to resist or
otherwise oppose such legally requested or required disclosure, including
seeking to narrow the scope of any such required disclosure. If, in the absence
of a protective order or the receipt of a waiver hereunder, the Receiving Party
is nonetheless legally compelled to disclose such Confidential
12.5 Return
or
Destruction of Confidential Information
If
this
Agreement is terminated, the Receiving Party shall upon the written request
of
the Disclosing Party either: (i) return to the Disclosing Party all Confidential
Information of the Disclosing Party (other than the Notes) including drawings,
data, memoranda and other written materials together with any tapes and computer
stored information, including any copies thereof, in the possession of the
Receiving Party or its Representatives and destroy the Notes; or (ii) destroy
and cause each of its Representatives to destroy all Confidential Information
(including the Notes); provided, however, that one (1) copy of such Confidential
Information may be retained by the Receiving Party on a confidential basis
for
purposes of verification and the Receiving Party and its Representatives will
not be required to destroy any copies stored on backup tapes or media as part
of
its regular email system backup procedures. Upon written request of the
Disclosing Party, any destruction pursuant to (i) or (ii) in the preceding
sentence shall be confirmed in writing.
12.6 Attorney-Client
Privilege
The
Disclosing Party is not waiving, and will not be deemed to have waived or
diminished, any of its attorney work product protections, attorney-client
privileges or similar protections and privileges as a result of disclosing
its
Confidential Information (including Confidential Information related to pending
or threatened litigation) to the Receiving Party, regardless of whether the
Disclosing Party has asserted, or is or may be entitled to assert, such
privileges and protections. The parties: (a) share a common legal and commercial
interest in all of the Disclosing Party's Confidential Information that is
subject to such privileges and protections; (b) are or may become joint
defendants in Proceedings to which the Disclosing Party's Confidential
Information covered by such protections and privileges relates; (c) intend
that
such privileges and protections remain intact should either party become subject
to any actual or threatened Proceeding to which the Disclosing Party's
Confidential Information covered by such protections and privileges relates;
and
(d) intend that after the Closing the Receiving Party shall have the right
to
assert such protections and privileges. No Receiving Party shall admit, claim
or
contend, in Proceedings involving either party or otherwise, that any Disclosing
Party waived any of its attorney work-product protections, attorney-client
privileges or similar protections and privileges with respect to any
information, documents or other material not disclosed to a Receiving Party
due
to the Disclosing Party disclosing its Confidential Information (including
Confidential Information related to pending or threatened litigation) to the
Receiving Party.
13. General
Provisions
13.1 Expenses
Except
as
otherwise provided in this Agreement, each party to this Agreement will bear
its
respective fees and expenses incurred in connection with the preparation,
negotiation, execution and performance of this Agreement and the Contemplated
Transactions, including all fees and expense of its Representatives, brokers
or
finders. Buyer will pay one-half and Seller will pay one-half of the fees and
expenses of the escrow agent under the Escrow Agreement.
13.2 Public
Announcements
Following
the date hereof and prior to the Closing, any public announcement, press release
or similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued at such time and in such manner as Buyer and CMC
determine, provided, however, that the text of any press release shall be
subject to the prior review and comment of Seller. From and after the Closing,
any public announcement, press release or similar publicity with respect to
this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines. Except with the prior consent
of
Buyer or as permitted by this Agreement, neither Seller nor any Shareholder
nor
any of their Representatives shall disclose to any Person (a) the fact that
any
Confidential Information of Seller or any Shareholder has been disclosed to
Buyer or its Representatives, that Buyer or its Representatives have inspected
any portion of the Confidential Information of Seller or any Shareholder, that
any Confidential Information of Buyer has been disclosed to Seller, Shareholders
or their Representatives or that Seller, Shareholders or their Representatives
have inspected any portion of the Confidential Information of Buyer or (b)
any
information about the Contemplated Transactions, including the status of such
discussions or negotiations, the execution of any documents (including this
Agreement) or any of the terms of the Contemplated Transactions or the related
documents (including this Agreement). Seller and Buyer will consult with each
other concerning the means by which Seller's employees, customers, suppliers
and
others having dealings with Seller will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
13.3 Notices
All
notices, Consents, waivers and other communications required or permitted by
this Agreement shall be in writing and shall be deemed given to a party when:
(a) delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid); (b) sent by facsimile with
confirmation of transmission by the transmitting equipment; or (c) received
or
rejected by the addressee, if sent by certified mail, return receipt requested,
in each case to the following addresses or facsimile numbers and marked to
the
attention of the person (by name or title) designated below (or to such other
address, facsimile number or person as a party may designate by notice to the
other parties):
Seller
(before the Closing):
QED
Technologies, Inc.
Attention:
Xxx Xxxxxx, President
0000
Xxxxxxxxxx Xxxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
Fax
no.:
Seller
(after the Closing):
QED
Technologies, Inc.
x/x
Xxx
Xxxxxx
00
Xxxxxxxxxx Xxxx
Xxxxxxxxx,
XX 00000Xxx no.: None
Shareholders:
Xxx
Xxxxxx
00
Xxxxxxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Fax
no.:
None
Xxxxxx
Xxxxx
c/o
Mintz
& Co.
00
Xxxx
Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
XX 00000
Fax
no.:
(000)
000-0000
Buyer
or
CMC:
Cabot
Microelectronics Corporation
Attention:
H. Xxxxx Xxxxxxxxx, General Counsel
000
Xxxxx
Xxxxxxx Xxxxx
Xxxxxx,
Xxxxxxxx 00000
Fax
no.:
(000) 000-0000
13.4 Jurisdiction;
Service of Process
Any
Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction may be brought in the courts of the State of Illinois, County of
DuPage, or, if it has or can acquire jurisdiction, in the United States District
Court for the Northern District of Illinois, Eastern Division, and each of
the
parties irrevocably submits to the exclusive jurisdiction of each such court
in
any such Proceeding, waives any objection it may now or hereafter have to venue
or to convenience of forum, agrees that all claims in respect of the Proceeding
shall be heard and determined only in any such court and agrees not to bring
any
Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction in any other court. The parties agree that either or both of them
may file a copy of this paragraph with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably
to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in the first sentence of this section may be served
on
any party anywhere in the world.
13.5 Enforcement
of Agreement
Seller
and each Shareholder acknowledge and agree that Buyer would be irreparably
damaged if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any Breach of this Agreement
by
Seller or any Shareholder could not be adequately compensated in all cases
by
monetary damages alone. Accordingly, in addition to any other right or remedy
to
which Buyer may be entitled, at law or in equity, it shall be entitled to
enforce any provision of this Agreement by a decree of specific performance
and
to temporary, preliminary and permanent injunctive relief to prevent Breaches
or
threatened Breaches of any of the provisions of this Agreement, without posting
any bond or other undertaking.
13.6 Waiver;
Remedies Cumulative
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither any failure nor any delay by any party in exercising any
right, power or privilege under this Agreement or any of the documents referred
to in this Agreement will operate as a waiver of such right, power or privilege,
and no single or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or privilege or
the
exercise of any other right, power or privilege. To the maximum extent permitted
by applicable law: (a) no claim or right arising out of this Agreement or any
of
the documents referred to in this Agreement can be discharged by one party,
in
13.7 Entire
Agreement and Modification
This
Agreement supersedes all prior agreements, whether written or oral, between
the
parties with respect to its subject matter (including, except as set forth
in
Section 12.2(d), that certain Confidentiality Letter Agreement dated August
3,
2005 between Buyer and Seller and that certain Letter of Intent dated February
24, 2006 by and among Buyer, Seller and the Shareholders) and constitutes (along
with the Disclosure Letter, Exhibits and other documents delivered pursuant to
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
not
be amended, supplemented, or otherwise modified except by a written agreement
executed by the party to be charged with the amendment.
13.8 Assignments,
Successors and No Third-Party Rights
No
party
may assign any of its rights or delegate any of its obligations under this
Agreement without the prior written consent of the other parties, except that
Buyer may assign any of its rights and delegate any of its obligations under
this Agreement to CMC or any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects, including
Buyer’s obligation to pay the Earn-Out Amount, to the extent earned or otherwise
owing, pursuant to Section 2.3 hereof, upon and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement, except such rights
as shall inure to a successor or permitted assignee pursuant to this Section
13.8.
13.9 Severability
If
any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
13.10 Construction
The
headings of Articles and Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references
to
"Articles," "Sections" and "Parts" refer to the corresponding Articles, Sections
and Parts of this Agreement and the Disclosure Letter.
13.11 Governing
Law
This
Agreement will be governed by and construed under the laws of the State of
Illinois without regard to conflicts-of-laws principles that would require
the
application of any other law.
13.12 Execution
of Agreement
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. The exchange
of copies of this Agreement and of signature pages by facsimile transmission
shall constitute effective execution and delivery of this Agreement as to the
parties and may be used in lieu of the original Agreement for all purposes.
Signatures of the parties transmitted by facsimile shall be deemed to be their
original signatures for all purposes.
13.13 WAIVER
OF
TRIAL BY JURY
EACH
PARTY HERETO HEREBY, TO THE EXTENT PERMITTED BY LAW, KNOWINGLY, VOLUNTARILY,
AND
INTENTIONALLY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR OTHER LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS
IT
CONTEMPLATES. THIS WAIVER APPLIES TO ANY ACTION OR LEGAL PROCEEDING, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE.
13.14 Obligations
of Seller and Shareholders
The
liability of the Shareholders or any Shareholder and Seller shall be joint
and
several. Where in this Agreement provision is made for any action to be taken
or
not taken by Seller, the Shareholders jointly and severally undertake to cause
Seller to take or not take such action, as the case may be. Without limiting
the
generality of the foregoing, the Shareholders shall be jointly and severally
liable with Seller for the indemnities set forth in
Article 11.
| 13.15 |
Pre-Closing
Undertaking of Seller, Buyer and
CMC
|
Immediately
following the date hereof, Seller shall contact Elbit-Systems Electro-Optics,
the beneficiary under the Letter of Credit, and M&T Bank, the issuer of the
Letter of Credit, in order to renegotiate and restructure the commercial
relationship with Elbit, in an effort to cause M&T Bank and Elbit to release
the liens securing the Letter of Credit, terminate the Letter of Credit and
consent to the Contemplated Transactions. Such negotiations and discussions
shall be conducted by Seller in good faith, with all diligence using
commercially reasonable efforts. Likewise, Buyer and CMC each covenant and
agree
to use their good faith, diligent and commercially reasonable efforts to
negotiate with Elbit and M&T Bank and structure a mutually acceptable
commercial relationship with Elbit, in an effort to cause M&T Bank and Elbit
to release the liens securing the Letter of Credit, terminate the Letter of
Credit and consent to the Contemplated Transactions. If, despite these efforts,
the liens securing the Letter of Credit are not released prior to Closing,
Buyer
shall assume the Letter of Credit (subject to the consent of Elbit and M&T
Bank) and, simultaneously with such assumption, Seller and the Shareholders
shall (i) establish an escrow in favor of Buyer (separate from the Escrow)
pursuant to a mutually agreeable and customary escrow agreement, in the amount
of $800,000 in order to reimburse Buyer in the event the Letter of Credit is
drawn upon by Elbit (provided, however, that if such liens are released, Seller
and the Shareholders shall not be required to establish such an escrow) and
(ii)
to the extent not already assigned hereunder, assign to Buyer the commercial
letter of credit in the amount of $812,000 under which Seller is a beneficiary
(as described in Part 3.2 of the Disclosure Letter). Thereafter, in the event
the Letter of Credit is terminated and the liens securing the Letter of Credit
are released, the escrow proceeds shall be immediately released and
[Signature
Page Follows]
-
-CONFIDENTIAL
Execution
Version
IN
WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement as
of
the date first written above.
QED
TECHNOLOGIES INTERNATIONAL, INC.,
a
Delaware corporation QED
TECHNOLOGIES, INC., a New York corporation
By: By:
Name: Xxx
Xxxxxx
Title: President
CABOT
MICROELECTRONICS CORPORATION
By:
Name:
Title: _______________________
By: By:
Xxx
Xxxxxx, as an individual Xxxxxx
Xxxxx, as an individual
Pursuant
to Item 601(b)(2) of Regulation S-K, Cabot Microelectronics Corporation hereby
agrees to furnish supplementally to the Securities and Exchange Commission
a
copy of the following schedules to the QED Asset Purchase Agreement, which
have
been omitted from this filing:
|
Schedule
|
Contents
|
|
Exhibit
2.5
|
Preliminary
Allocation of Initial Purchase Price and Consideration
|
|
Exhibit
2.7(a)(i)
|
Xxxx
of Sale, Assignment and Assumption Agreement
|
|
Exhibit
2.8
|
Sample
Adjustment Account Calculation
|
|
Disclosure
Letter:
|
Contains
disclosure information from parties
|
|
Part
2.1(b)
|
List
of tangible personal property transferred
|
|
Part
2.1(e)
|
List
of fixed assets transferred
|
|
Part
2.1(k)
|
List
of claims against third parties
|
|
Part
3.1
|
List
of interests of subsidiaries of Seller in purchased
assets
|
|
Part
3.2(b)
|
List
of execution and delivery conflicts
|
|
Part
3.2(c)
|
List
of required consents
|
|
Part
3.3
|
Capitalization
table of Seller and subsidiaries
|
|
Part
3.8
|
List
of real property leased interests
|
|
Part
3.9
|
List
of Seller encumbrances
|
|
Part
3.10
|
List
of tangible personal property not in Seller’s
possession
|
|
Part
3.11
|
List
of Seller’s accounts receivable
|
|
Part
3.12
|
List
of non-conforming inventory
|
|
Part
3.13
|
List
of additional liabilities
|
|
Part
3.14
|
List
of tax exceptions
|
|
Part
3.16
|
List
of employee benefit plans and information
|
|
Part
3.17
|
List
of exceptions to legal compliance representations and government
authorizations
|
|
Part
3.18
|
List
of legal proceedings and orders
|
|
Part
3.19
|
List
of exceptions to ordinary course of business
representation
|
|
Part
3.20
|
List
of Seller contracts and exceptions
|
|
Part
3.21
|
List
of insurance matters
|
|
Part
3.22
|
List
of environmental matters
|
|
Part
3.23
|
List
of employee information
|
|
Part
3.24
|
List
of employment and labor exceptions
|
|
Part
3.25
|
List
of Intellectual Property items
|
|
Part
3.26
|
List
of related party matters
|
|
Part
3.31
|
List
of governmental contract matters
|
|
Part
7.3
|
List
of material consents
|
