Exhibit 10.20
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") entered into as of
September 1 , 2004, by and between HERLEY - RSS, INC., a Delaware corporation
("HERLEY") and RELIABLE SYSTEM SERVICES CORP., a Florida Corporation ("RSS").
HERLEY and RSS are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which HERLEY will purchase
certain of the assets of RSS in return for cash.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
Section 1. Definitions
"Acquired Assets" means all right, title, and interest in and to certain of
the assets of RSS, including all of its (a) Leased Real Property, (b) tangible
personal property (such as machinery, equipment, inventories of raw materials
and supplies, manufactured and purchased parts, goods in process and finished
goods, furniture, automobiles, trucks, tractors, trailers, tools, jigs, and
dies), (c) Intellectual Property, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions, (d) leases, subleases, and rights
thereunder, (e) agreements, contracts, indentures, mortgages, instruments,
Liens, guaranties, other similar arrangements, and rights thereunder, (f)
accounts, notes, and other receivables, (g) securities , (h) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery,
rights of set off, and rights of recoupment , (i) franchises, approvals,
permits, licenses, orders, registrations, certificates, variances, and similar
rights obtained from governments and governmental agencies, (j) books, records,
ledgers, files, documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials ; provided,
however, that the Acquired Assets shall not include (i) the corporate charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of RSS as a corporation or limited liability company (ii) Cash, or
(iii) any of the rights of RSS under this Agreement (or under any side agreement
between RSS on the one hand and HERLEY on the other hand entered into on or
after the date of this Agreement).
"Adverse Consequences" with respect to RSS, Powers and Perez-Falcon shall
mean:
(i) any breach or default in the performance by RSS of any covenant or
agreement of RSS contained herein or in any certificate delivered pursuant
hereto at the Closing;
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(ii) any breach of warranty or representation made by RSS contained in
Section 3 of this Agreement or in any certificate delivered pursuant hereto at
the Closing; or
(iii) any Losses arising out of any Excluded Liabilities.
With respect to Herley, Adverse Consequences shall mean any breach of
warranty or representation contained in Section 4 of this Agreement or in any
certificate delivered pursuant hereto at the Closing.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any 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.
"Assumed Liabilities" means (a) all liabilities of RSS set forth on the
face of the Most Recent Balance Sheet , (b) all liabilities of RSS which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business
(other than any liability resulting from, arising out of, relating to, in the
nature of, or caused by any breach of contract, breach of warranty, tort,
infringement, violation of law, or environmental matter, including without
limitation those arising under Environmental, Health, and Safety Requirements),
(c) all obligations of RSS under the agreements, contracts, leases, licenses,
and other arrangements referred to in the definition of Acquired Assets either
(i) to furnish goods, services, and other non-Cash benefits to another party
after the Closing or (ii) to pay for goods, services, and other non-Cash
benefits that another party will furnish to it after the Closing; provided,
however, that, notwithstanding the above, the Assumed Liabilities shall not
include (aa) any liability of RSS for Taxes, (bb) except as provided in Section
8(l) below, any liability of RSS for transfer, sales, use, and other Taxes
arising in connection with the consummation of the transactions contemplated
hereby, or (cc) any liability of RSS for costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby, or(dd)
any liability or obligation of RSS under this Agreement (or under any side
agreement between RSS on the one hand and HERLEY on the other hand entered into
on or after the date of this Agreement).
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Cash" means cash and cash equivalents (including marketable securities and
short term investments) calculated in accordance with GAAP applied on a basis
consistent with the preparation of the Financial Statements.
"CERCLA" has the meaning set forth in Section 3(z).
"Closing" has the meaning set forth in Section 2(e) below.
"Closing Date" has the meaning set forth in Section 2(e) below.
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"Closing Date Balance Sheet" has the meaning set forth in Section 2(d)
below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
and Code Section 4980B and of any similar state law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of RSS that is not already generally available to the public.
"RSS" has the meaning set forth in the preface above.
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Employee Benefit Plan" means any "employee benefit plan" (as such term is
defined in ERISA Section 3(3)) and any other employee benefit plan, program or
arrangement of any kind.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental, Health, and Safety Requirements" shall mean all federal,
state, local, and foreign statutes, regulations, ordinances, and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances,
or wastes, chemical substances, or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise, or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single employer
with RSS for purposes of Code Section 414.
"Estoppel Certificates" has the meaning set forth in Section 6(a) below.
"Excess Loss Account" has the meaning set forth in Reg. Section 1.1502-19.
"Excluded Liabilities" shall mean the liabilities set forth in (aa) through
(dd) within the definition of Assumed Liabilities and any liability resulting
from, arising out of, relating to, in the nature of, or caused by the operation
of the business of RSS prior to the Closing and not specifically assumed by
HERLEY in this Agreement.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 3(g) below.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time, consistently applied.
"HERLEY" has the meaning set forth in the preface above.
"Improvements" has the meaning set forth in Section 3(l) below.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Intellectual Property" means all of the following in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related documentation), (g) all material advertising and
promotional materials, (h) all other proprietary rights, and (i) all copies and
tangible embodiments thereof (in whatever form or medium).
"Intercompany Transaction" has the meaning set forth in Reg. Section
1.1502-13.
"Knowledge" means actual knowledge after reasonable investigation.
"Lease Consents" has the meaning set forth in Section 6(a) below.
"Leased Real Property" means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures or other interest in real property held by RSS.
"Leases" means all leases, subleases, licenses, concessions and other
agreements (written or oral), including all amendments, extensions, renewals,
guaranties and other agreements with respect thereto, pursuant to which RSS
holds any Leased Real Property.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, or other
security interest.
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"Material Adverse Effect" or "Material Adverse Change" means any effect or
change that would be materially adverse to the business, assets, condition
(financial or otherwise), operating results, operations, or business prospects
of RSS, taken as a whole, or on the ability of any Party to consummate timely
the transactions contemplated hereby.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
3(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 3(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(c) below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association, or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity's gains or losses or shall
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be or control any managing director or general partner of such business entity
(other than a corporation). The term "Subsidiary" shall include all Subsidiaries
of such Subsidiary.
"Systems" has the meaning set forth in Section 3(aa) below.
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, whether computed on a
separate or consolidated, unitary or combined basis or in any other manner,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Section 2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and conditions
of this Agreement, HERLEY agrees to purchase from RSS, and RSS agrees to sell,
transfer, convey, and deliver to HERLEY, all of the Acquired Assets at the
Closing for the consideration specified below in this Section 2.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, HERLEY agrees to assume and become responsible for all of the
Assumed Liabilities at the Closing. HERLEY will not assume or have any
responsibility, however, with respect to any other obligation or liability of
RSS not included within the definition of Assumed Liabilities.
(c) Purchase Price. HERLEY agrees to pay to RSS at the Closing the sum of
$3,725,000 (the "Purchase Price") payable by wire transfer.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Herley Industries,
Inc. in Lancaster, Pennsylvania, commencing at 9:00 a.m. local time on September
20, 2004.
(e) Deliveries at the Closing. At the Closing, (i) RSS will deliver to
HERLEY the various certificates, instruments, and documents referred to in
Section 6(a) below; (ii) HERLEY will deliver to RSS the various certificates,
instruments, and documents referred to in Section 6(b) below; (iii) RSS will
execute, acknowledge (if appropriate), and deliver to HERLEY or caused to be
delivered to HERLEY such instruments of sale, transfer, conveyance, and
assignment as HERLEY and its counsel reasonably may request; (iv) HERLEY will
execute, acknowledge (if appropriate), and deliver to RSS such instruments of
assumption as RSS and its counsel reasonably may request; and (v) HERLEY will
deliver to RSS the consideration specified in Section 2(c) above.
(f) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and Tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit E.
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Section 3. RSS and Principal Stockholders' Representations and Warranties.
RSS and Emilio Power and Tony Perez-Falcon (hereafter the "Principal
Stockholders"), jointly and severally, represent and warrant to HERLEY that the
statements contained in this Section 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 3), except as set forth in the disclosure
schedule accompanying this Agreement (the "Disclosure Schedule"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 3.
(a) Organization of RSS. RSS is a corporation duly organized, validly
existing, and in good standing under the laws of Florida.
(b) Authorization of Transaction. RSS has full power and authority
(including full corporate or other entity power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. Without
limiting the generality of the foregoing, the board of directors and
shareholders of RSS have duly authorized the execution, delivery, and
performance of this Agreement by RSS. This Agreement constitutes the valid and
legally binding obligation of RSS, enforceable in accordance with its terms and
conditions.
(c) Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which RSS is subject or any provision of the
charter or bylaws of RSS or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which RSS is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Lien upon any of its assets), except
where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Lien would not have a
Material Adverse Effect. RSS does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency or any other third party in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above).
(d) Brokers' Fees. RSS has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which HERLEY could become liable or
obligated.
(e) Title to Assets. RSS has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by them, located on their
premises, or shown on their Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Liens, except for properties and assets disposed
of in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet. Without limiting the generality of the foregoing, RSS has good and
marketable title to all of the Acquired Assets, free and clear of any Lien or
restriction on transfer.
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(f) Subsidiaries. RSS has no subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit F are the following
financial statements (collectively the "Financial Statements"): (i) balance
sheet and statement of income, as of and for the fiscal year ended December 31,
2003 (the "Most Recent Fiscal Year End") for RSS; and (ii) balance sheets and
statements of income (the "Most Recent Financial Statements") as of and for the
six (6) months ended June 30, 2004 (the "Most Recent Fiscal Month End") for RSS.
The Financial Statements present fairly the financial condition of RSS as of
such dates and the results of operations of RSS for such periods; provided,
however, that the Most Recent Financial Statements are subject to normal
year-end adjustments (which will not be material individually or in the
aggregate) and lack footnotes and other presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent
Fiscal Year End, there has not been any Material Adverse Change. Without
limiting the generality of the foregoing, since that date:
(i) RSS has not sold, leased, transferred, or assigned any material
assets, tangible or intangible, outside the Ordinary Course of Business;
(ii) RSS has not entered into any material agreement, contract, lease,
or license outside the Ordinary Course of Business;
(iii) RSS has not accelerated, terminated, made material modifications
to, or cancelled any material agreement, contract, lease, or license to
which RSS is a party or by which they are bound;
(iv) RSS has not imposed any Lien upon any of its assets, tangible or
intangible;
(v) RSS has not made any material capital expenditures outside the
Ordinary Course of Business;
(vi) RSS has not made any material capital investment in, or any
material loan to, any other Person outside the Ordinary Course of Business;
(vii) RSS has not transferred, assigned, or granted any license or
sublicense of any material rights under or with respect to any Intellectual
Property; (viii) there has been no change made or authorized in the charter
or bylaws of RSS;
(ix) RSS has not issued, sold, or otherwise disposed of any of its
capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock;
(x) RSS has not experienced any material damage, destruction, or loss
(whether or not covered by insurance) to its property;
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(xi) RSS has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xii) RSS has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xiii) RSS has not granted any increase in the base compensation of
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(xiv) RSS has not adopted, amended, modified, or terminated any bonus,
profit sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees
(or taken any such action with respect to any other Employee Benefit Plan);
(xv) RSS has not made any other material change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xvi) RSS has not changed its normal business practices or taken any
other action outside the Ordinary Course of Business in order to generate
Cash;
(xvii) RSS has not made any loans or advances of money; and
(xviii) RSS has not committed to any of the foregoing.
(i) Undisclosed Liabilities. RSS has no material liability (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), except for (i) liabilities set forth on the face of the
Most Recent Balance Sheet and (ii) liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business.
(j) Legal Compliance. RSS has complied in all material respects with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder and including the
Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1, et. seq.) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply.
(k) Real Property.
(i) RSS owns no real property.
(ii) Section 3(k)(ii) of the Disclosure Schedule sets forth the
address of each parcel of Leased Real Property, and a true and complete
list of all Leases for each such Leased Real Property (including the date
and name of the parties to such Lease document). RSS has delivered to
HERLEY a true and complete copy of each such Lease document.
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(iii) The Leased Real Property identified in Section 3(k)(ii) of the
Disclosure Schedule (the "Real Property") comprises all of the real
property used or intended to be used in the business of RSS; and RSS is not
a party to any agreement or option to purchase any real property or
interest therein.
(iv) All buildings, structures, fixtures, building systems and
equipment, and all components thereof, included in the Real Property (the
"Improvements") are in good condition and repair and sufficient for the
operation of the business of RSS as historically operated. There are no
facts or conditions affecting any of the Improvements which would,
individually or in the aggregate, interfere in any material respect with
the use or occupancy of the Improvements or any portion thereof in the
operation of the business of RSS as currently conducted thereon.
(v) The Leased Real Property is in material compliance with all
applicable building, zoning, subdivision, health and safety and other land
use laws, including the Americans with Disabilities Act of 1990, as
amended.
(vi) A portion of the Real Property is subleased to the United States
Air Force.
(l) Intellectual Property.
(i) RSS has not interfered with, infringed upon, misappropriated, or
violated any material Intellectual Property rights of third parties in any
material respect, and none of the directors and officers of RSS has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that RSS must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of the directors and officers
of RSS, no third party has interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights of
RSS in any material respect.
(ii) Section 3(l)(ii) of the Disclosure Schedule identifies each
patent or registration which has been issued to RSS with respect to any of
its Intellectual Property, identifies each pending patent application or
application for registration which RSS has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other
permission which RSS has granted to any third party with respect to any of
its Intellectual Property (together with any exceptions). RSS has delivered
to HERLEY correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended to date).
Section 3(l)(ii) of the Disclosure Schedule also identifies each trade name
or unregistered trademark, service mark, corporate name, Internet domain
name, copyright, and computer software item used by RSS in connection with
any of its businesses. With respect to each item of Intellectual Property
required to be identified in Section 3(l)(ii) of the Disclosure Schedule:
(A) RSS possesses all right, title, and interest in and to the item,
free and clear of any Lien, license, or other restriction;
(B) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
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(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of the
directors and officers of RSS, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(D) RSS has not agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with
respect to the item, except in the Ordinary Course of Business.
(iii) Section 3(l)(iii) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that RSS uses
pursuant to license, sublicense, agreement, or permission. RSS has
delivered to HERLEY correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect
to each such item of used Intellectual Property required to be identified
in Section 3(l)(iii) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect in
all material respects;
(B) no party to the license, sublicense, agreement, or permission 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;
(C) no party to the license, sublicense, agreement, or permission has
repudiated any material provision thereof;
(D) RSS has not granted any sublicense or similar right with respect
to the license, sublicense, agreement, or permission; and
(E) no loss or expiration of the item is threatened, pending, or
reasonably foreseeable, except for patents expiring at the end of their
statutory terms (and not as a result of any act or omission by RSS,
including without limitation, a failure by RSS to pay any required
maintenance fees).
(m) Tangible Assets. The buildings, machinery, equipment, and other
tangible assets that RSS owns and leases are free from material defects (patent
and latent), have been maintained in accordance with normal industry practice,
and are in good operating condition and repair (subject to normal wear and
tear).
(n) Inventory. The inventory of RSS consists of raw materials and supplies,
manufactured and processed parts, work in process, and finished goods, all of
which is merchantable and fit for the purpose for which it was procured or
manufactured and RSS has provided a reserve for obsolete, damaged or defective
inventory as set forth on the face of the Most Recent Balance Sheet.
(o) Contracts. Section 3(o) of the Disclosure Schedule lists the following
contracts and other agreements to which RSS is a party:
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(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year or
involve consideration in excess of $10,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $10,000 or under
which it has imposed a Lien on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or non-competition;
(vi) any agreement involving any RSS Affiliates (other than RSS);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing material severance benefits;
(x) any agreement under which it has advanced or loaned any amount to
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(xi) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect.
(xii) any agreement under which it has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(xiii) any agreement under which RSS has advanced or loaned any other
Person amounts in the aggregate exceeding $10,000; or
(xiv) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
RSS has delivered to HERLEY a correct and complete copy of each written
agreement listed in Section 3(o) of the Disclosure Schedule (as amended to date)
and a written summary setting forth the material terms and conditions of each
oral agreement referred to in Section 3(o) of the Disclosure Schedule. With
12
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (B) no party
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, under the agreement; and (C) no
party has repudiated any material provision of the agreement.
(p) Accounts Receivable. All accounts receivable of RSS are reflected
properly on their books and records, are valid receivables subject to no setoffs
or counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Balance Sheet.
(q) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of RSS.
(r) Insurance. Section 3(r) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) which will be assumed by HERLEY:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage is on
a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
material loss- sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all material respects; (B)
RSS, nor any other party to the policy is in material breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a material breach or default, or permit termination,
modification, or acceleration, under the policy; and (C) no party to the policy
has repudiated any material provision thereof. Section 3(r) of the Disclosure
Schedule describes any material self-insurance arrangements affecting RSS.
(s) Litigation. Section 3(s) of the Disclosure Schedule sets forth each
instance in which RSS (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or, to the Knowledge of the
directors and officers of RSS, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
13
(t) Product Warranty. All of the products manufactured, sold, leased, and
delivered by RSS have conformed in all respects with all applicable contractual
commitments and all express and implied warranties, and RSS has no liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) for replacement or repair thereof or other
damages in connection therewith, that will exceed $50,000 in the aggregate. Each
agreement for products manufactured, sold, leased and delivered by RSS is the
subject of contractual negotiation related to warranty and as such, no standard
terms and conditions, including that related to warranty, are used.
(u) Product Liability. RSS has no material liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by RSS.
(v) Guaranties. RSS is not a guarantor or otherwise responsible for any
liability or obligation (including indebtedness) of any other Person.
(w) Environmental, Health, and Safety Matters.
(i) RSS, and its predecessors have complied and are in compliance, in
each case in all material respects, with all Environmental, Health, and
Safety Requirements.
(ii) Without limiting the generality of the foregoing, RSS has
obtained, has complied, and is in compliance with, in each case in all
material respects, all material permits, licenses and other authorizations
that are required pursuant to Environmental, Health, and Safety
Requirements for the occupation of its facilities and the operation of its
business; a list of all such material permits, licenses and other
authorizations is set forth on Section 3(w)(ii) of the Disclosure Schedule.
(iii) RSS has not received any written or oral notice, report or other
information regarding any actual or alleged material violation of
Environmental, Health, and Safety Requirements, or any material liabilities
or potential material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any material investigatory, remedial
or corrective obligations, relating to its facilities arising under
Environmental, Health, and Safety Requirements.
(iv) Except as set forth on Section 3(w)(iv) of the Disclosure
Schedule, none of the following exists at any property or facility owned or
operated by RSS: (1) underground storage tanks, (2) asbestos-containing
material in any friable and damaged form or condition, (3) materials or
equipment containing polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.
(v) Neither RSS, nor any of its predecessors has treated, stored,
disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation any
hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a
14
manner that has given or would give rise to material liabilities, including
any material liability for response costs, corrective action costs,
personal injury, property damage, natural resources damages or attorney
fees, pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA") or the Solid Waste
Disposal Act, as amended or any other Environmental, Health, and Safety
Requirements.
(vi) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any material
obligations for site investigation or cleanup, or notification to or
consent of government agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible property transfer"
Environmental, Health, and Safety Requirements.
Section 4. HERLEY's Representations and Warranties. HERLEY represents and
warrants to RSS that the statements contained in this Section 4 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as
set forth in the Disclosure Schedule. The Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
(a) Organization of HERLEY. HERLEY is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware.
(b) Authorization of Transaction. HERLEY has full power and authority
(including full corporate power or other entity and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of HERLEY, enforceable in
accordance with its terms and conditions. HERLEY need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance of this
Agreement and all other agreements contemplated hereby have been duly authorized
by HERLEY.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which HERLEY is subject or any provision of its
charter, or other governing documents or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which HERLEY is a party or by which it is bound or to which any
of its assets is subject. HERLEY does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 2 above).
15
(d) Brokers' Fees. HERLEY has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which RSS could become liable or obligated.
Section 5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the Closing conditions set forth in
Section 6 below).
(b) Notices and Consents. RSS will give any notices to third parties, and
RSS will use its reasonable best efforts to obtain any third party consents
referred to in Section 3(c) above, and any other items set forth in Section 5(b)
of the Disclosure Schedule. Each of the Parties will give any notices to, make
any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 3(c) and Section 4(c)
above.
(c) Operation of Business. RSS will not engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of Business.
(d) Preservation of Business. RSS will keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, insurance policies, and relationships with lessors,
licensors, suppliers, customers, and employees.
(e) Full Access. RSS will permit representatives of HERLEY (including legal
counsel and accountants) to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of RSS, to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to RSS. HERLEY will treat and hold as
such any Confidential Information it receives from RSS, in the course of the
reviews contemplated by this Section 5(e), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, will return to RSS , all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession.
(f) Notice of Developments. Each Party will give prompt written notice to
the other Party of any material adverse development causing a breach of any of
its own representations and warranties in Section 3 and Section 4 above. No
disclosure by any Party pursuant to this Section 5(f), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. RSS will not (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of RSS (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
16
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing.
Section 6. Conditions to Obligation to Close.
(a) Conditions to HERLEY 's Obligation. The obligation of HERLEY to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in Section 3 above
shall be true and correct in all respects at and as of the Closing Date;
(ii) RSS shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iii) RSS shall have procured (or made reasonable arrangements to
procure) all of the third party consents specified in Section 5(b) above;
(iv) No action, suit, or proceeding shall be pending before any court
or quasi- judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of
HERLEY to own the Acquired Assets and to operate the former businesses of
RSS;
(v) RSS shall have delivered to HERLEY a certificate to the effect
that each of the conditions specified above in Section 6(a)(i)-(iv) is
satisfied in all respects;
(vi) HERLEY shall have received from counsel to RSS an opinion in form
and substance as set forth in Exhibit G attached hereto, addressed to
HERLEY , and dated as of the Closing Date;
(vii) All actions to be taken by RSS in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to HERLEY ;
(viii) HERLEY shall have entered into a lease agreement for the
premises located at 91 East Drive, Melbourne, Florida on the terms set
forth as Exhibit 6(a).
(ix) HERLEY shall have entered into a non-competition agreement with
Antonio J. Perez-Falcon in the form annexed hereto as Exhibit 6(b).
(x) HERLEY shall have entered into a non-competition agreement with
Emilio J. Power in the form annexed hereto as Exhibit 6(c).
17
(xi) RSS shall have delivered to HERLEY copies of the certificates of
good standing of RSS, issued on or soon before the Closing Date by the
Secretary of State (or comparable officer) of the jurisdiction of RSS'
organization and of each jurisdiction in which RSS is qualified to do
business; and
HERLEY may waive any condition specified in this Section 6(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to RSS's Obligation. The obligation of RSS to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) HERLEY shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending before any court
or quasi- judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(iv) HERLEY shall have delivered to RSS a certificate to the effect
that each of the conditions specified above in Section 6(b)(i)-(iii) is
satisfied in all respects;
(v) RSS, and HERLEY shall have received all material authorizations,
consents, and approvals of governments and governmental agencies referred
to in Section 3(c) and Section 4(c) above;
(vi) RSS shall have received from counsel to HERLEY an opinion in form
and substance as set forth in Exhibit H attached hereto, addressed to RSS,
and dated as of the Closing Date; and
(vii) RSS shall have entered into a lease agreement for the premises
located at 91 East Drive, Melbourne, Florida in the form annexed hereto as
Exhibit 6(a).
(viii) all actions to be taken by HERLEY in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to RSS.
RSS may waive any condition specified in this Section 6(b) if it executes a
writing so stating at or prior to the Closing.
18
Section 7. Termination.
(a) Termination of Agreement. The Parties may terminate this Agreement as
provided below:
(i) The parties may terminate this Agreement by mutual written consent
at any time prior to the Closing;
(ii) HERLEY may terminate this Agreement by giving written notice to
RSS at any time prior to the Closing (A) in the event RSS has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, HERLEY has notified RSS of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach
or (B) if the Closing shall not have occurred on or before October 1, 2004,
by reason of the failure of any condition precedent under Section 6(a)
hereof (unless the failure results primarily from HERLEY itself breaching
any representation, warranty, or covenant contained in this Agreement); and
(iii) RSS may terminate this Agreement by giving written notice to
HERLEY at any time prior to the Closing (A) in the event HERLEY has
breached any representation, warranty, or covenant contained in this
Agreement in any material respect, RSS has notified HERLEY of the breach,
and the breach has continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have occurred on or before
October 1, 2004, by reason of the failure of any condition precedent under
Section 6(b) hereof (unless the failure results primarily from RSS itself
breaching any representation, warranty, or covenant contained in this
Agreement).
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7(a) above, all rights and obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party; provided,
however, that the confidentiality provisions contained in Section 5(e) above
shall survive termination and RSS shall have liability for breach of Section
5(g).
Section 8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
(i) The representations and warranties made pursuant to Section 3 of
this Agreement shall not terminate, but shall survive the Closing and
continue in effect until following the Closing Date as follows:
(A) the representations and warranties under Section 3(l)
(Intellectual Property) and Section 3(w) (Environmental) shall remain
in effect until three (3) years following the Closing Date; and
(B) the representations and warranties under Sections 3(a) and 4
shall remain in effect until two (2) years following the Closing Date.
provided, however, that any such representation or warranty as to which a claim
shall have been asserted during such survival period shall continue in effect
until such time as such claim shall have been resolved or settled.
19
(b) Survival of Covenants and Agreements. Except as expressly provided in
this Agreement, all covenants and agreements made hereunder or pursuant hereto
or in connection with the transactions contemplated hereby shall not terminate
but shall survive the Closing.
(c) Indemnification Provisions for HERLEY's Benefit.
(i) In the event of a breach of any of the representations,
warranties, and covenants contained in this Agreement, and provided that
HERLEY makes a written claim for indemnification against RSS and the
Principal Shareholders pursuant to Section 8(f) below within the survival
period, then RSS and each of the Principal Shareholders, jointly and
severally, shall be obligated to indemnify HERLEY from and against the
entirety of any Adverse Consequences HERLEY may suffer (including any
Adverse Consequences HERLEY may suffer after the end of any applicable
survival period) directly resulting from, arising out of, relating to, or
caused by the breach; provided, however, that RSS and the Principal
Shareholders, shall not have any obligation to indemnify HERLEY from and
against any Adverse Consequences resulting from, arising out of, relating
to, or caused by the breach of any representation or warranty of RSS or the
Principal Shareholders if such breach involves Adverse Consequences of less
than $10,000 and until HERLEY has suffered Adverse Consequences in excess
of a $25,000 aggregate deductible (after which point RSS and the Principal
Shareholders will be obligated only to indemnify HERLEY from and against
further such Adverse Consequences) by reason of all breaches in excess of
$10,000.
(d) Indemnification Provisions for RSS's Benefit.
(i) In the event HERLEY breaches any of its representations,
warranties, and covenants contained in this Agreement, and, provided that
any RSS Stockholder makes a written claim for indemnification against
HERLEY pursuant to Section 8 within the survival period, (if there is an
applicable survival period pursuant to Section 8(a) above), then HERLEY
shall indemnify RSS from and against the entirety of any Adverse
Consequences suffered (including any Adverse Consequences suffered after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
(ii) HERLEY agrees to indemnify RSS from and against the entirety of
any Adverse Consequences RSS may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Assumed Liability.
(e) Intentionally left blank.
(f) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing.
(ii) Any Indemnifying Party will have the right to assume the defense
of the Third Party Claim with counsel of his or its choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after the
Indemnified Party has given notice of the Third Party Claim; provided,
however, that the Indemnifying Party must conduct the defense of the Third
20
Party Claim actively and diligently thereafter in order to preserve its
rights in this regard; and provided further that the Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is conducting
the defense of the Third Party Claim in accordance with Section 8(d) (ii)
above, (A) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be
withheld unreasonably) unless the judgment or proposed settlement involves
only the payment of money damages by one or more of the Indemnifying
Parties and does not impose an injunction or other equitable relief upon
the Indemnified Party and (B) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnifying
Party.
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third Party Claim in accordance with Section
8(e)(ii) above, however, (A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner he or it reasonably may
deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection therewith)
and (B) the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this Section 8.
(g) Determination of Adverse Consequences. The Parties shall make
appropriate adjustments for insurance coverage in determining Adverse
Consequences for purposes of this Section 8. Indemnification payments under this
Section 8 shall be paid by the Indemnifying Party without reduction for any Tax
Benefits available to the Indemnified Party. However, to the extent that the
Indemnified Party recognizes Tax Benefits as a result of any Adverse
Consequences, the Indemnified Party shall pay the amount of such Tax Benefits
(but not in excess of the indemnification payment or payments actually received
from the Indemnifying Party with respect to such Adverse Consequences) to the
Indemnifying Party as such Tax Benefits are actually recognized by the
Indemnified Party. For this purpose, the Indemnified Party shall be deemed to
recognize a tax benefit ("Tax Benefit") with respect to a taxable year if, and
to the extent that, the Indemnified Party's cumulative liability for Taxes
through the end of such taxable year, calculated by excluding any Tax items
attributable to the Adverse Consequences and the receipt of indemnification
payments under this Section 8 from all taxable years, exceeds the Indemnified
Party's actual cumulative liability for Taxes through the end of such taxable
year, calculated by taking into account any Tax items attributable to the
Adverse Consequences and the receipt of indemnification payment under this
Section 8 for all taxable years (to the extent permitted by relevant Tax law and
treating such Tax items as the last items taken into account for any taxable
year). All indemnification payments under this Section 8 shall be deemed
adjustments to the Purchase Price.
(h) Exclusive Remedy. HERLEY, RSS and the Principal Shareholders
acknowledge and agree that the foregoing indemnification provisions in this
Section 8 shall be the exclusive remedy of HERLEY with respect to the
representations, warranties and covenants contained in this Agreement, including
21
but not limited to claims of breaches of the representations and warranties
contained in Section 3, and the transactions contemplated by this Agreement.
(i) Limitation of Liability. Notwithstanding anything contained herein to
the contrary, the liability of RSS and the Principal Shareholders shall be
limited in the aggregate for any and all claims related to this Agreement to a
sum not to exceed the amount of the Purchase Price.
Section 9. Miscellaneous.
(a) Exclusivity. No RSS Stockholder will (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of RSS (including any acquisition structured
as a merger, consolidation, or share exchange) or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. No RSS Stockholders
will vote their RSS Shares in favor of any such acquisition structured as a
merger, consolidation, or share exchange.
(b) Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement without the prior written approval of the other Party, which approval
shall not be unreasonably withheld or delayed, except that no such approval
shall be necessary to the extent disclosure is required by Applicable Law or
applicable stock exchange rules or any listing agreement of any party hereto.
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that HERLEY may (i) assign any or all of
its rights and interests hereunder to one or more of its Affiliates, however any
such assignment shall not be construed to expand the responsibilities of any
party to an Employment Agreement or Consulting Agreement entered into in
connection with the closing of this Agreement, and (ii) designate one or more of
its Affiliates to perform its obligations hereunder (in any or all of which
cases HERLEY nonetheless shall remain liable and responsible for the performance
of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
22
(g) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) when delivered
personally to the recipient, (ii) one business day after being sent to the
recipient by reputable overnight courier service (charges prepaid), (iii) one
business day after being sent to the recipient by facsimile transmission or
electronic mail, or (iv) four business days after being mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid,
and addressed to the intended recipient as set forth below:
If to HERLEY:
------------
Herley - RSS, Inc.
101 North Point Boulevard
Lancaster, Pennsylvania 17601-4133
Fax: 717-397-9503
Copy to:
David H. Lieberman, Esq.
Beckman, Lieberman & Barandes, LLP
100 Jericho Quadrangle, Suite 329
Jericho, New York 11753
Fax: 516-433-5858
If to RSS:
---------
Reliable System Services Corp.
91 East Drive
Melbourne, Florida 32904
Fax: (321) (321) 255-6500
Copy to:
James M. O'Brien, Esq.
O'Brien Riemenschneider, P.A.
1686 West Hibiscus Boulevard
Melbourne, Florida 32901
23
Antonio J. Perez-Falcon
4805 Sweet Gum Place
Melbourne, Florida 32904
Emilio J. Power
4812 Union Cypress Place
Melbourne, Florida 32904
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of Delaware without giving effect to any
choice or conflict of law provision or rule (whether of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than Delaware.
(j) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by HERLEY and RSS.
No waiver by any Party of any provision of the Agreement or any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear his, her, or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby (except as otherwise provided
herein).
(m) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
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(n) Governing Language. This Agreement has been negotiated and executed by
the Parties in English. In the event any translation of this Agreement is
prepared for convenience or any other purpose, the provisions of the English
version shall prevail.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
HERLEY - RSS, INC.
By: /s/
---------------------------------
Title:______________
RELIABLE SYSTEM SERVICES CORP.
By: /s/
---------------------------------
Title:______________
ACCEPTED AND AGREED TO BY;
/s/____________________________
Emilio J. Power
/s/____________________________
Antonio Perez-Falcon