Exhibit 10.1
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STOCK PURCHASE AGREEMENT
DATED AS OF OCTOBER 31, 2006
BY AND AMONG
SL INDUSTRIES INC.,
NORBERT D. MILLER,
REVOCABLE LIVING TRUST OF FRED A. LEWIS AND MARGARET LANGE-LEWIS U/A
DATED JANUARY 28, 1993, AS AMENDED AND RESTATED AS OF OCTOBER 31, 2001, AND
EINHORN FAMILY FOUNDATION
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF SHARES............................. 1
1.1 Sale of Shares.............................................. 1
1.2 Closing..................................................... 1
1.3 Payment of the Closing Cash Consideration and Escrow Fund... 1
1.4 Working Capital Adjustment.................................. 2
1.5 Additional Closing Deliveries............................... 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS............... 3
2.1 Corporate Organization, Etc................................. 4
2.2 Capitalization of the Company............................... 4
2.3 Subsidiaries................................................ 4
2.4 Authority; Company Action................................... 4
2.5 Organizational Documents; Books and Records................. 5
2.6 Consents and Approvals; No Violations....................... 5
2.7 Financial Statements; Projections........................... 5
2.8 Absence of Certain Changes.................................. 6
2.9 Compliance with Laws........................................ 6
2.10 Compliance with Contracts and Commitments................... 6
2.11 No Undisclosed Liabilities.................................. 7
2.12 No Default.................................................. 7
2.13 Litigation.................................................. 7
2.14 Taxes....................................................... 7
2.15 Title to Properties......................................... 8
2.16 Real Property............................................... 8
2.17 Intellectual Property....................................... 9
2.18 Insurance................................................... 9
2.19 Environmental Matters....................................... 10
2.20 Employee and Labor Matters.................................. 10
2.21 Employee Plans.............................................. 11
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TABLE OF CONTENTS
(continued)
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2.22 Change of Control Provisions................................ 13
2.23 Customers and Suppliers..................................... 13
2.24 Related Party Transactions.................................. 14
2.25 Product / Service Warranty.................................. 14
2.26 Contracts................................................... 14
2.27 Prepayments and Deposits.................................... 15
2.28 Capital Projects............................................ 15
2.29 Receivables................................................. 15
2.30 Inventories................................................. 16
2.31 Condition and Sufficiency of Assets......................... 16
2.32 Brokers and Finders......................................... 16
2.33 Foreign Corrupt Practices Act, Etc.......................... 16
2.34 No Other Representation or Warranty......................... 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER............. 17
3.1 Corporate Organization; Etc................................. 17
3.2 Authority................................................... 17
3.3 Consents and Approvals; No Violations....................... 17
3.4 Brokers and Finders......................................... 18
ARTICLE IV ........................................................ 18
ADDITIONAL AGREEMENTS ........................................................ 18
4.1 Commercially Reasonable Efforts............................. 18
4.2 Public Announcements........................................ 18
4.3 Indemnification............................................. 19
4.4 Notification of Certain Matters............................. 23
4.5 Third Party Consents........................................ 23
4.6 Certain Tax Covenants and Indemnities....................... 24
4.7 Covenants Not to Compete or Solicit......................... 25
4.8 Seller Representative....................................... 26
4.9 Seller Disclosure Schedule.................................. 26
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TABLE OF CONTENTS
(continued)
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ARTICLE V MISCELLANEOUS........................................... 26
5.1 Entire Agreement; Assignment................................ 26
5.2 Notices..................................................... 27
5.3 Governing Law; Consent to Jurisdiction...................... 27
5.4 Expenses.................................................... 28
5.5 Descriptive Headings........................................ 28
5.6 Parties in Interest......................................... 28
5.7 Severability................................................ 28
5.8 Specific Performance........................................ 28
5.9 Counterparts and Execution.................................. 29
5.10 Further Assurances.......................................... 29
5.11 Interpretation.............................................. 29
5.12 Amendment and Modification; Waiver.......................... 30
5.13 Definitions................................................. 30
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of October 31,
2006, is by and between SL Industries, Inc., a New Jersey corporation
("Purchaser"), and Norbert D. Miller ("Miller"), Revocable Living Trust of Fred
A. Lewis and Margaret Lange-Lewis U/A Dated January 28, 1993, as Amended and
Restated as of October 31, 2001 (the "Trust"), and the Einhorn Family Foundation
(the "Foundation", and together with Miller and the Trust, the "Sellers"), the
sole shareholders of MTE Corporation, a Wisconsin corporation (the "Company").
Certain initially capitalized and non-capitalized terms used herein are defined
in Section 5.13.
RECITALS
WHEREAS, Sellers own all of the issued and outstanding shares (the
"Shares") of common stock, par value $1.00 per share, of the Company (the
"Company Common Stock");
WHEREAS, Purchaser desires to purchase and Sellers desire to sell the
Shares upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Purchaser and Sellers desire to make certain representations,
warranties, covenants and agreements in connection with the Contemplated
Transactions as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Sale of Shares. On the terms and subject to the conditions of this
Agreement, on the date of closing of the transactions contemplated by this
Agreement (the "Closing Date"), Purchaser shall purchase the Shares from
Sellers, and Sellers shall sell the Shares to Purchaser for the Total
Consideration. The Shares shall be conveyed free and clear of all Liens or
Encumbrances of any kind. On the Closing Date, Sellers shall deliver to
Purchaser certificates representing all of the Shares, duly endorsed in blank
for transfer or accompanied by appropriate stock powers duly executed in blank.
1.2 Closing. The purchase and sale of the Shares shall be by electronic
means (the "Closing"). At the Closing, each Seller shall deliver to Purchaser
certificates representing the Shares owned by such Seller, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed, for
transfer to Purchaser.
1.3 Payment of the Closing Cash Consideration and Escrow Fund. On the
Closing Date:
(a) The Purchaser shall pay and deliver to Sellers the Closing Cash
Consideration minus the Escrow Fund, to the account designated by Sellers in
Exhibit A attached hereto.
(b) In addition to the payment described in Section 1.3(a),
Purchaser shall cause the Escrow Fund to be paid, in immediately available
funds, to the Escrow Agent, to be held and disbursed in accordance with the
Escrow Agreement for the purposes of securing any obligations of Sellers to
Purchaser pursuant to this Agreement.
1.4 Working Capital Adjustment.
(a) At least five business days prior to the Closing, the Seller
Representative shall deliver to Purchaser an estimate of the Working Capital of
the Company as of the Effective Time prepared in good faith ("ESTIMATED CLOSING
WORKING CAPITAL"), without giving effect to the transactions contemplated by
this Agreement.
(b) In the event the Estimated Closing Working Capital is more than
the Required Working Capital Amount, then the Closing Cash Consideration shall
be increased on a dollar-for-dollar basis by the amount of such excess. In the
event the Estimated Closing Working Capital is less than the Required Working
Capital Amount, then the Closing Cash Consideration shall be reduced on a
dollar-for-dollar basis by the amount of such deficiency.
(c) Purchaser shall prepare and deliver to the Seller Representative
no later than 60 days following the Closing a certificate of the Chief Financial
Officer of Purchaser (the "WORKING CAPITAL CERTIFICATE"), calculating and
certifying as true and correct the Working Capital of the Company as of the
Effective Time ("CLOSING WORKING CAPITAL"), without giving effect to the
transactions contemplated by this Agreement.
(d) The Seller Representative shall have a period of 30 days after
delivery of the Working Capital Certificate to deliver to the Purchaser a
written statement, with reasonable detail, of any objections that the Seller
Representative may have to the calculation of Closing Working Capital (such
statement, a "WORKING CAPITAL OBJECTION NOTICE"). If the Seller Representative
does not deliver a Working Capital Objection Notice within such 30-day period,
the Working Capital Certificate, and the determination of Closing Working
Capital therein, shall be final, and any required payment pursuant to Section
1.4(g) below shall be paid within five business days following the expiration of
such 30-day period.
(e) If the Seller Representative delivers a Working Capital
Objection Notice within the 30-day period referred to in Section 1.4(d) above,
then the Purchaser and the Seller Representative shall attempt in good faith to
resolve the matter or matters in dispute and, if resolved, such resolution shall
be set forth in writing and the confirmed or revised calculation of Closing
Working Capital shall be final, and any required payment pursuant to Section
1.4(g) below shall be paid within five business days following such resolution.
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(f) If such dispute cannot be resolved within 60 days after the
delivery of the Working Capital Certificate, then the specific matters in
dispute shall be submitted to an accounting firm mutually selected by the Seller
Representative and Purchaser (the "INDEPENDENT WORKING CAPITAL FIRM"), which
firm shall make a final and binding determination as to such matter or matters.
If the Seller Representative and Purchaser are unable to agree on the choice of
an accounting firm, they will select a nationally recognized accounting firm by
lot, after excluding any such firm affiliated with Purchaser, the Company or
Sellers. The Seller Representative and Purchaser shall use their best efforts to
cause the Independent Working Capital Firm to send, as soon as practicable (but
in any event within 30 days after being retained), its written determination as
to such disputed matters to Purchaser and the Seller Representative, whereupon
the Independent Working Capital Firm's determination of such matters shall,
absent manifest error, be binding on the Parties to this Agreement, and any
required payment pursuant to Section 1.4(g) below shall be paid within five
business days following receipt by the parties of the Independent Working
Capital Firm's determination.
(g) The Closing Working Capital determined pursuant to this Section
1.4 is the "FINAL WORKING CAPITAL". If the Final Working Capital is in excess of
the Estimated Closing Working Capital, the Purchaser shall pay the amount of
such excess on a dollar for dollar basis to the Sellers. If the Final Working
Capital is less than the Estimated Closing Working Capital, each of the Sellers
shall pay its Pro Rata Portion of the amount of such deficiency on a dollar for
dollar basis to the Purchaser. Any payment required to be made pursuant to this
Section 1.4(g) shall be paid by wire transfer of immediately available funds to
the account designated in writing by the respective Party.
1.5 Additional Closing Deliveries.
(a) By Sellers. At the Closing, the Sellers shall deliver to
Purchaser the following:
(i) the Escrow Agreement, duly executed by the Sellers;
(ii) the Employment Agreement, duly executed by Norbert D.
Miller; and
(iii) the Amended Lease, duly executed by the lessors
thereunder.
(b) By Purchaser. At the Closing, the Purchaser shall deliver to
Sellers the following:
(i) the Escrow Agreement, duly executed by the Purchaser;
(ii) the Employment Agreement, duly executed by the Purchaser;
and
(iii) the Amended Lease, duly executed by the Company.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the Seller Disclosure Schedule, the Sellers hereby
represent and warrant to Purchaser as follows; provided, however, that the
warranties and representations of the Sellers in Sections 2.2(b), 2.4 and 2.6
below that pertain to a Seller's ownership of Shares, Encumbrances or other
restrictions on a Seller's Shares, authority and power of a Seller to execute
and deliver this Agreement and consummate the Contemplated Transactions, and the
legal enforceability of this Agreement against a Seller (hereinafter referred to
collectively as the "Individual Seller Representations") are made by each Seller
only with respect to itself and not with respect to the other Sellers:
2.1 Corporate Organization, Etc. The Company is a corporation duly
organized, validly existing and, to the extent applicable under the laws of the
relevant jurisdiction of incorporation, in good standing (or its equivalent)
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to conduct its business as it is now being
conducted and to own, lease and operate its property and assets. The Company is
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which ownership of property or the conduct of
its business requires such qualification or license, except where the failure to
be so qualified or licensed will not individually or in the aggregate, either
(i) have a material adverse effect on the business, operations, assets,
prospects, financial condition or results of operations of the Company taken as
a whole or (ii) materially impair the ability of Sellers to perform any of his
or its obligations under this Agreement (either of such effects, a "Company
Material Adverse Effect"). True and complete copies of the organizational and
governing documents of the Company as presently in effect, have been heretofore
delivered to Purchaser.
2.2 Capitalization of the Company. As of immediately prior to the Closing:
(a) The Company is authorized to issue 50,000 shares of Company
Common Stock of which 1,746 -2/3 shares are issued and outstanding. All
outstanding shares of the capital stock of the Company are duly authorized,
validly issued, fully paid and non-assessable and free of any preemptive rights
in respect thereto. Except as set forth in Section 2.2 of the Seller Disclosure
Schedule, there are no outstanding (i) securities convertible into or
exchangeable for the capital stock of the Company, (ii) options, warrants or
other rights to purchase or subscribe for capital stock of the Company or (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of the Company, any such
convertible or exchangeable securities or any such options, warrants or rights,
pursuant to which, in any of the foregoing cases, the Company is subject or
bound.
(b) Each Seller is the owner of, and as of the Closing Date will be
the owner of, that number of the Shares as is set forth in Section 2.2(b) of the
Seller Disclosure Schedule as being owned by it. There are no Encumbrances,
voting trusts, stockholders' agreements or other similar instruments restricting
or relating to the rights of each Seller to vote, transfer or receive dividends
with respect to the Shares owned by such Seller, other than restrictions on
transfer under securities Laws and restrictions set forth in this Agreement and
except as set forth in Section 2.2(b) of the Seller Disclosure Schedule.
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2.3 Subsidiaries. The Company has no Subsidiaries. The Company has no
ownership interest (voting or otherwise) in any business entity, is not a member
of any partnership or joint venture, and is not operating as a Subsidiary or
division of any other business entity.
2.4 Authority; Company Action. Each of the Sellers has all requisite
authority and power to execute and deliver this Agreement and to consummate the
Contemplated Transactions. The execution and delivery of this Agreement and the
consummation of the Contemplated Transactions have been duly and validly
authorized by all required corporate or other action on the part of each of the
Sellers and no other corporate or other proceedings on the part of the Company
or any of the Sellers are necessary to authorize this Agreement or to consummate
the Contemplated Transactions. This Agreement has been duly and validly executed
and delivered by each of the Sellers and, assuming this Agreement has been duly
authorized, executed and delivered by Purchaser, this Agreement constitutes the
valid and binding agreement of each of the Sellers, enforceable against such
Seller in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, including the
effect of statutory and other laws regarding fraudulent conveyances and
preferential transfers and subject to the limitations imposed by general
equitable principles (regardless whether such enforceability is considered in a
proceeding at law or in equity).
2.5 Organizational Documents; Books and Records. The Company has made
available to Purchaser copies of its Organizational Documents, as in effect on
the date of this Agreement. The books of account, minute books, record books and
other records, which have been provided to Purchaser, are complete and correct
in all material respects.
2.6 Consents and Approvals; No Violations. Neither the execution and
delivery of this Agreement by each of the Sellers nor the consummation of the
Contemplated Transactions by each of the Sellers will (i) violate any provision
of the organizational or governing documents of the Company, (ii) require any
consent, waiver, approval, exemption, registration, declaration, license,
authorization or permit of, or filing with or notification to, any Federal,
state, local or foreign government, executive official thereof, governmental or
regulatory authority, agency or commission, including courts of competent
jurisdiction, domestic or foreign (a "Governmental Entity") or of any other
Person, except for such consents, waivers, approvals, exemptions, registrations,
declarations, licenses, authorizations, permits, filings or notifications that
are listed in Section 2.6 of the Seller Disclosure Schedule (the "Company
Consents"), (iii) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration or any obligation to repay) under, any
of the terms, conditions or provisions of any indenture, mortgage, note, bond,
encumbrance, license, government registration, contract, lease, franchise,
permit, agreement or other instrument or obligation to which any Seller or the
Company is a party or by which any Seller or the Company or any of its
properties or assets may be bound, or (iv) violate any order, writ, judgment,
injunction, decree, statute, ordinance, rule or regulation of any Governmental
Entity applicable to any Seller or the Company or by which any of its properties
or assets may be bound.
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2.7 Financial Statements; Projections.
(a) Purchaser has previously been furnished with and attached to
Section 2.7(a) of the Seller Disclosure Schedule (i) the balance sheet of the
Company and the related statements of income, retained earnings and cash flows
of the Company for the fiscal year ended October 31, 2005, and for the period
between November 1, 2005 and May 31, 2006 (the "Company Financial Statements").
Each balance sheet included in the Company Financial Statements, in all material
respects, fairly presents the financial position of the Company as of its date,
and the other related statements included in the Company Financial Statements,
fairly present in all material respects the results of operations and changes in
financial position of Company for the periods presented therein, all in
conformity with GAAP, applied on a consistent basis during the periods involved,
except that the interim Company Financial Statements are subject to normal
year-end adjustments and do not include footnotes, and except as otherwise noted
therein or in Section 2.7(a) of the Seller Disclosure Schedule.
(b) Sellers shall supply at Closing an audited balance sheet of the
Company and related statements of earnings, retained earnings and cash flows of
the Company for the twelve months ended June 30, 2006 (the "Audited Financial
Statements"). Each balance sheet included in the Audited Financial Statements,
fairly presents in all material respects the financial position of the Company
as of its date, and the other related statements included in the Audited
Financial Statements, in all material respects, fairly present the results of
operations and changes in financial position of Company for the periods
presented therein, all in conformity with GAAP, applied on a consistent basis
during the periods involved except as otherwise noted therein.
2.8 Absence of Certain Changes. Since October 31, 2005, except as set
forth on Section 2.8 of the Seller Disclosure Schedule, the Company has not (i)
suffered any change in its business, operations, prospects or financial
position, except such changes that, individually or in the aggregate, are not
reasonably likely to have a Company Material Adverse Effect, (ii) conducted its
business in any material respect not in the ordinary and usual course consistent
with past practice, (iii) declared, set aside for payment or paid any dividend
or other distribution (whether in cash, stock, property or any combination
thereof) in respect of the capital stock of the Company, or redeemed or
otherwise acquired any shares of capital stock of the Company, (iv) incurred any
long-term indebtedness or issued any debt securities or assumed, guaranteed or
endorsed the obligations of any other Person, (v) sold, transferred or otherwise
disposed of, any of its material property or assets, except in the ordinary
course of business and consistent with past practice, (vi) created any material
Encumbrance on any of its material property or assets, (vii) increased in any
manner the rate or terms of compensation of any of its directors, officers or
other employees other than regularly scheduled increases to employees in the
ordinary course of business, (viii) paid or agreed to pay any pension,
retirement allowance or other employee benefit not required by any existing
Company Benefit Plans or other agreement or arrangement to any such director,
officer or employee, whether past or present, (ix) entered into or amended any
employment, bonus, severance or retirement contract, (x) amended the
Organizational Documents of the Company, (xi) purchased or leased (or committed
to purchase or lease) any assets (other than inventory in the ordinary course of
business) in excess of $5,000 individually or $25,000 in the aggregate, (xii)
suffered an adverse change in existing credit arrangements with any bank or
other institution, or (xiii) entered into any agreement (in writing or
otherwise) to
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take any action that, if taken, would render any of the representations set
forth in this Section 2.8 untrue.
2.9 Compliance with Laws. The business of the Company has not been and is
not now being conducted in violation of any applicable order, writ, judgment,
injunction, decree, statute, ordinance, rule or regulation of any Governmental
Entity.
2.10 Compliance with Contracts and Commitments. The Company is not in
breach or default and, to the Knowledge of the Sellers, no other party to any of
the Material Contracts of the Company is as of the date of this Agreement in
breach or default (and no event has occurred which with notice or the lapse of
time or both would constitute a default or violation) under any of the Material
Contracts of the Company. All of the Material Contracts are valid, in full force
and effect and enforceable in accordance with their terms, except as may be
limited by (i) bankruptcy laws and other similar laws affecting creditor's
rights generally and (ii) general principles of equity.
2.11 No Undisclosed Liabilities. Except as set forth in Section 2.11 of
the Seller Disclosure Schedule, to the Knowledge of the Sellers the Company has
not incurred any liabilities (absolute, accrued, contingent or otherwise)
required as of the Closing Date by GAAP to be reflected on the face of (and not
in the footnotes to) its balance sheet, except for (i) liabilities reflected or
reserved for on the Company Financial Statements or on the Audited Financial
Statements, (ii) liabilities that were incurred in the ordinary course of
business since June 30, 2006 and (iii) liabilities specifically disclosed in
this Agreement or specifically set forth in the Seller Disclosure Schedule.
2.12 No Default. The Company is not in default or violation (and no event
has occurred which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) its
organizational or governing documents or (ii) any order, writ, judgment,
injunction, decree, statute, ordinance, rule or regulation of any Governmental
Entity applicable to the Company, except, in the case of clause (ii) only, such
defaults or violations that, individually or in the aggregate, could not have a
Company Material Adverse Effect. The Company has all governmental permits,
licenses and authorizations necessary for the conduct of its business as
presently conducted (the "Permits") and is in compliance with the terms of the
Permits, and has not been informed that the Permits will be revoked and has no
reason to believe that any Permit requiring renewal would not be renewed.
2.13 Litigation. Except as set forth in Section 2.13 of the Seller
Disclosure Schedule, as of the date of this Agreement, there is no action, suit
or proceeding pending, or, to the Knowledge of the Sellers, threatened, against
the Company or any properties or rights of the Company. As of the date of this
Agreement, the Company has not received notice that it is subject to any
outstanding injunction, writ, judgment, order or decree.
2.14 Taxes. Except as set forth in Section 2.14 of the Seller Disclosure
Schedule:
(a) The Company has, within the time and manner prescribed by Law
(including extensions), (i) filed with the appropriate taxing authorities all
Tax Returns required to
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be filed by it in respect of any Taxes, and each such Tax Return was complete
and accurate in all material respects and (ii) paid in full all Taxes shown to
be due and payable thereon.
(b) No deficiencies for any Taxes have been asserted in writing or,
to the Knowledge of the Sellers, verbally proposed or assessed against the
Company which remain unpaid, or which are not being contested in good faith by
appropriate proceedings; and (ii) as of the dates of the Company Financial
Statements, the Company has adequately reserved, accrued or made charges on its
books for all Taxes payable by the Company in respect of the periods covered by
the Company Financial Statements for which no Tax Return has yet been filed.
(c) The Company has not (i) entered into a closing agreement or
other similar agreement with a taxing authority relating to Taxes of the Company
with respect to a taxable period for which the statute of limitations is still
open, or (ii) granted any waiver of any statute of limitations with respect to,
or any extension of a period for the assessment of, any Tax, in either case,
that is still outstanding. There are no Liens relating to Taxes upon the assets
of the Company other than Liens relating to Taxes not yet due. The Company is
not a party to and is not bound by any Tax sharing agreement, Tax indemnity
obligation or similar agreement in respect of Taxes.
(d) The Company has complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes in connection with
any amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party, including, without limitation, all
information reporting, backup withholding, and maintenance of required records
with respect thereto.
(e) For purposes of this Agreement, (i) "Taxes" shall mean all
federal, state, local or foreign and other taxes, assessments, duties and
similar charges of any kind imposed by any taxing authority, including interest,
penalties and additions thereto and (ii) "Tax Return" shall mean any return,
report, information return or other document (including any related or
supporting information) with respect to Taxes.
2.15 Title to Properties. Except as set forth in Section 2.15 of the
Seller Disclosure Schedule, the Company owns all the properties and assets
(whether personal, intellectual or mixed and whether tangible or intangible)
reflected as assets of the Company in the Company Financial Statements (except
for personal property sold since the date of the Company Financial Statements in
the ordinary course of business) free and clear of all Liens and Encumbrances.
2.16 Real Property. Except as set forth in Section 2.16 of the Seller
Disclosure Schedule, the Company has not previously owned nor does it currently
own any real property. Section 2.16 of the Seller Disclosure Schedule identifies
all real property currently leased, subleased to, or otherwise occupied by, the
Company (collectively, the "Real Property"). The leases relating to the Real
Property currently leased by the Company are referred to as the "Leases." The
Company has provided to Purchaser correct and complete copies of the Leases. The
Leases are valid and in full force and effect, and the Company holds a valid and
existing leasehold interest under the Leases. The Company is not in default
under any Leases, and no events have occurred or circumstances exist which, if
not remedied, and whether with or without notice or the passage of time or both,
would result in such a default, except such violations that,
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are not material, or individually or in the aggregate, could not reasonably be
expected to have a Company Material Adverse Effect. Each such default is set
forth in Section 2.16 of the Seller Disclosure Schedule. The Real Property and
all buildings used by the Company in the conduct of its business are suitable in
all material respects for the operation of its business as currently conducted.
Since November 1, 2005, the Company has not received written notice of any
pending or threatened condemnations, planned public improvements, annexation,
special assessments, zoning or subdivision changes, or other adverse claims
affecting the Real Property. In the past three years, the Company has not
experienced any material interruption in the delivery of adequate service of any
utilities or other public authorities required in the operation of its business.
2.17 Intellectual Property
(a) Section 2.17 of the Seller Disclosure Schedule sets forth a true
and complete list of all Intellectual Property Rights (as defined below) filed
by, or issued or registered to, the Company and all material intellectual
property license agreements to which the Company is a party. With respect to
registered trademarks, such list sets forth a list of all jurisdictions in which
such trademarks are registered or applied for and all registration and
application numbers.
(b) (i) The Company owns or possesses adequate licenses or other
valid rights to use all patents and applications therefor; trademarks and
service marks (registered or unregistered) and applications and registrations
therefor; trade names; domain names; copyrights and applications and
registrations therefor; trade secrets; and other intellectual property and
proprietary rights, whether or not subject to statutory registration or
protection, which are material to the conduct of the business of the Company
(the "Intellectual Property Rights"), (ii) as of the date of this Agreement, the
validity of the Intellectual Property Rights and the title or rights to use
thereof of the Company are not being questioned in any litigation to which the
Company is a party, nor to the Knowledge of the Sellers, is any such litigation
threatened, (iii) as of the date of this Agreement, the Company has not received
notice that it is a party to any litigation in connection with which a Person
has alleged that the conduct of the business of the Company infringed or
infringes with any valid patents, trademarks, trade name, service marks,
copyrights or trade secrets of others, nor, to the Knowledge of the Sellers, is
any such litigation threatened, and (iv) to the Knowledge of the Sellers, (A) no
Person is infringing upon or violating any of the Intellectual Property Rights
and (B) no claim is pending or threatened to that effect.
(c) To the Knowledge of the Sellers, no employee of the Company has
entered into any contract that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the employee to
transfer, assign or disclose information concerning his or her work to anyone
other than the Company.
(d) To the Knowledge of the Sellers, no employee of the Company (i)
has infringed the intellectual property, proprietary, or contractual rights of
any Person in the course of his or her work for the Company or (ii) is, or is
currently expected to be, in default under any term of any Contract of the
Company relating to any Intellectual Property Rights, or any confidentiality
agreement of the Company or any other contract or restrictive covenant of the
Company relating to the Intellectual Property Rights.
-9-
2.18 Insurance. Set forth on Section 2.18 of the Seller Disclosure
Schedule is a description of each policy of fire and casualty, liability and
other forms of insurance purchased by the Company that are currently in force,
setting forth the issuers, amounts, deductibles and coverages of each (the
"Insurance Policies"). All material Insurance Policies with respect to the
property, assets, operations and business of the Company are in full force and
effect and all premiums due and payable thereon have been paid in full, and no
notice of cancellation or termination has been received with respect to any such
policy which has not been replaced on substantially similar terms prior to the
date of such cancellation. As of the date of this Agreement, there are no
pending material claims under the Insurance Policies by the Company as to which
the insurers have denied liability. The Sellers do not make any representation
or warranty that such insurance will be continued or is continuable after the
Closing. Except for amounts deductible under policies of insurance and except as
set forth in Section 2.18 of the Seller Disclosure Schedule, the Company has not
been at any time subject to liability as a self-insurer.
2.19 Environmental Matters. To the Knowledge of the Sellers, the Company
is in compliance with all Environmental Laws. The Company has not received any
written communication, whether from a Governmental Entity, citizens' group,
employee or other individual or entity, that alleges that the Company is not in
compliance with any Environmental Law. Except as described on Section 2.19 of
the Seller Disclosure Schedule, to the Knowledge of the Sellers:
(a) no underground storage tanks are located on (nor have any
underground storage tanks been removed from) the Real Property;
(b) there are no, and have never been any, asbestos-containing
materials or urea formaldehyde-containing materials incorporated into or on the
buildings or any improvements that are a part of the Real Property, or into
other assets or products of the Company, nor is there any electrical
transformer, fluorescent light fixture with ballasts, or other equipment
containing polychlorinated biphenyls on the Real Property; and
(c) the Company has timely prepared, maintained and filed, in all
material respects, all reports required to be prepared, maintained or filed, and
have (or had at all appropriate times) timely obtained all certificates,
approvals, authorizations, registrations and permits including, without
limitation, all air permits, authorizations and registrations, (all of which
certificates, approvals, authorizations, registrations and permits are listed on
Section 2.19 of the Seller Disclosure Schedule and are in full force and effect,
and copies of which have been furnished to Purchaser) and have generated and
maintained all data, documentation and records required under all Environmental
Laws in connection with its business, except where the absence of such permits
or documentation would not reasonably be expected to result in a Company
Material Adverse Effect.
2.20 Employee and Labor Matters. Set forth on Section 2.20 of the Seller
Disclosure Schedule is a list of all current employees of the Company (including
date of hire, applicable base salary or wage, any bonus obligations, domicile,
immigration status, time-off balance and an indication of the existence, if any,
of a signed assignment of invention agreement), and a list of the names and
titles of all employees whose employment terminated since January 1, 2005
-10-
and the reasons therefor. The Company is not a party to any collective
bargaining or other labor union contract applicable to persons employed by it,
no collective bargaining agreement is being negotiated by the Company, and the
Sellers do not Know of any activities or proceedings of any labor union to
organize any of its employees. There has not been since January 1, 2004, and
there is not presently pending or existing, and to the Knowledge of the Sellers
there is not threatened, (i) any strike, slowdown, picketing, work stoppage, or
employee grievance process generally, (ii) any proceeding against or affecting
the Company relating to an alleged violation of the National Labor Relations
Act, or (iii) any application for certification of a collective bargaining
agent. There is no lockout of any employees and, to the Knowledge of the
Sellers, no such action is threatened by the Company. The Company has materially
complied with and each is in material compliance with all Laws relating to
employment and employment practices, terms and conditions of employment,
employment of aliens, employment of individuals with disabilities (including,
without limitation, the requirements of the Americans With Disabilities Act),
equal employment opportunity, nondiscrimination, harassment, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar Taxes, occupational health and safety, and plant closings and is not
engaged in any illegal or unfair labor or employment practice. The Company has
not violated the Worker Adjustment and Retraining Notification Act or any
similar state or local Laws. There are no pending or, to the Knowledge of the
Sellers, threatened, controversies, grievances or claims by any employee or
former employee of the Company with respect to his or her employment or any
compensation or benefits incident thereto, including, but not limited to, claims
of sexual harassment, unlawful discrimination or claims arising under workers'
compensation laws. To the Knowledge of the Sellers, no employee of the Company
intends to resign or seek other employment by reason of the Contemplated
Transactions, or has been convicted of any felony or drug-related criminal
offense. To the Knowledge of the Sellers, all sums due for employee compensation
and benefits, including pension and severance benefits, and all vacation time
owing to any employees of the Company has been duly and adequately accrued in
all material respects on the accounting records of the Company. To the Knowledge
of the Sellers, all Taxes due in connection with the employment of foreign
residents in the United States have been fully paid.
2.21 Employee Plans.
(a) Section 2.21 of the Seller Disclosure Schedule sets forth a
true, correct and complete list of:
(i) all "employee benefit plans," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
with respect to which the Company has any obligation or liability, contingent or
otherwise (the "Company Benefit Plans"); and
(ii) all employment, consulting, termination, profit sharing,
severance, change of control, individual compensation or indemnification
agreements, and all bonus or other incentive compensation, deferred
compensation, salary continuation, disability, severance, stock award, stock
option, stock purchase, educational assistance, legal assistance, club
membership, employee discount, employee loan, credit union or vacation
agreements, policies or arrangements under which the Company has any obligation
or liability (contingent or otherwise)
-11-
in respect of any current or former officer, director, employee, or consultant
of the Company, other than Company Benefit Plans (the "Company Employee
Arrangements").
(b) All Company Benefit Plans and Company Employee Arrangements that
cover current or former employees, consultants, officers, or directors (or their
equivalent) of the Company are separately identified on Section 2.21 of the
Seller Disclosure Schedule.
(c) In respect of each Company Benefit Plan and Company Employee
Arrangement, a complete and correct copy of each of the following documents (if
applicable) has been made available to Purchaser: (i) the most recent plan and
related trust documents, and all amendments thereto; (ii) the most recent
summary plan description, and all related summaries of material modifications
thereto; (iii) the most recent Form 5500 (including, schedules and attachments);
(iv) the most recent Internal Revenue Service ("IRS") determination, opinion or
notification letter; (v) each of the stock option grant agreements used to make
grants under any stock option plan of the Company, and all amendments thereto;
(vi) each written employment, consulting or individual severance or other
compensation agreement, and all amendments thereto; and (vii) the most recent
actuarial reports (including for purposes of Financial Accounting Standards
Board report nos. 87, 106 and 112).
(d) None of the Company Benefit Plans or Company Employee
Arrangements is subject to Title IV of ERISA, constitutes a defined benefit
retirement plan or is a multiemployer plan described in Section 3(37) of ERISA,
and the Company has no obligation or liability (contingent or otherwise) in
respect of any such plans. The Company is not a member of a group of trades or
businesses under common control or treated as a single employer pursuant to
Section 414 of the Code.
(e) The Company Benefit Plans and their related trusts intended to
qualify under Sections 401 and 501(a) of the Code, respectively, have either
received a favorable determination, opinion or notification letter from the IRS
with respect to each such Company Benefit Plan as to its qualified status under
the Code, or has remaining a period of time under applicable U.S. Treasury
regulations or IRS pronouncements in which to apply for such a letter and make
any amendments necessary to obtain a favorable determination as to the qualified
status of each such Company Benefit Plan. Any voluntary employee benefit
association that provides benefits to current or former employees of the
Company, or their beneficiaries, is and has been qualified under Section
501(c)(9) of the Code.
(f) All contributions or other payments required to have been made
by the Company to or under any Company Benefit Plan or Company Employee
Arrangement by applicable Law or the terms of such Company Benefit Plan or
Company Employee Arrangement (or any agreement relating thereto) have been
timely and properly made.
(g) The Company Benefit Plans and Company Employee Arrangements have
been maintained and administered in all material respects in accordance with
their terms and applicable Laws. In particular, to the Knowledge of the Sellers,
no individual who has performed services for the Company has been improperly
excluded from participation in any Company Benefit Plan or Company Employee
Arrangement.
-12-
(h) There are no pending or, to the Knowledge of the Sellers,
threatened actions, claims, or proceedings against or relating to any Company
Benefit Plan or Company Employee Arrangement (other than routine benefit claims
by persons entitled to benefits thereunder), and, to the Knowledge of the
Sellers, there are no facts or circumstances which could form the basis for any
of the foregoing.
(i) The Company has no obligation or liability (contingent or
otherwise) to provide post-retirement life insurance or health benefits coverage
for current or former officers, directors, employees, consultants or contractors
of the Company except (i) as may be required under Part 6 of Title I of ERISA,
(ii) a medical expense reimbursement account plan pursuant to Section 125 of the
Code or (iii) through the last day of the calendar month in which the
participant terminates employment with the Company.
(j) None of the assets of any Company Benefit Plan is stock of the
Company or any of its affiliates, or property leased to or jointly owned by the
Company or any of its affiliates.
(k) Except as set forth in Section 2.21 of the Seller Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the Contemplated Transactions will (i) result in any payment
becoming due to any employee, consultant or contractor (current, former, or
retired) of the Company, (ii) increase any benefits under any Company Benefit
Plan or Company Employee Arrangement or (iii) result in the acceleration of the
time of payment of, vesting of, or other rights in respect of any such benefits
(except as which may be required by the partial or full termination of any
Benefit Plan intended to be qualified under Section 401 of the Code).
(l) All employees of the Company who are not U.S. citizens but who
are assigned to the U.S. operations of the Company or otherwise travel, from
time to time, to the United States on behalf of the Company, possess all
applicable passports, visas and other authorizations required by the Laws of the
United States and have otherwise complied with all applicable immigration and
similar Laws of the United States.
(m) All employees of the Company assigned to work outside the United
States possess all applicable passports, visas and other authorizations required
by the Laws of the respective countries to which they are assigned.
2.22 Change of Control Provisions. Except as set forth in Section 2.22 of
the Seller Disclosure Schedule, none of the arrangements, agreements or
understandings set forth in this Agreement and none of the Company's employee
benefit plans, programs or arrangements contain any provision that would become
operative as a result of a change of control of the Company or that will become
operative as a result of the consummation of the Contemplated Transactions.
2.23 Customers and Suppliers. Except as set forth on Section 2.23 of the
Seller Disclosure Schedule, no supplier which accounted for more than five
percent (5%) of the purchases of the Company for the fiscal year ended October
31, 2005 or the eleven-months ended September 30, 2006, no customer which
accounted for more than five percent (5%) of the
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annual sales of the Company for the fiscal year ended October 31, 2005 or the
eleven-months ended September 30, 2006, and no other supplier or customer
material to the current or prospective business of the Company (including, but
not limited to, any supplier who is a sole source of supply of any product or
service), has terminated or, to the Knowledge of the Sellers, threatened to
terminate its relationship with the Company, nor has it during the preceding
twelve (12) months decreased or delayed materially, or to the Knowledge of the
Sellers, threatened to decrease or delay materially, its services or supplies to
the Company or its usage of the services or products of the Company. To the
Knowledge of the Sellers, the Contemplated Transactions will not adversely
affect the business relationship heretofore maintained by the Company with any
of its suppliers or customers. The Company is not required to provide any
bonding or any other financial security arrangements in connection with any
transactions with any customers or suppliers.
2.24 Related Party Transactions. Except as disclosed in Section 2.24 of
the Seller Disclosure Schedule, no officer, shareholder, director of the Company
or member of his or her immediate family (each a "Related Party) is indebted to
the Company, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Company, and (iii) for other standard employee benefits made generally
available to all employees. Except as set forth in Section 2.24 of the Seller
Disclosure Schedule, no officer, director of the Company has any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that officers or directors of
the Company and members of their immediate families may own up to 5% of any
freely-tradable stock in publicly traded companies that may compete with the
Company. Except as set forth in Section 2.24 of the Seller Disclosure Schedule,
no officer or shareholder or any member of their immediate families is, directly
or indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's ownership of capital stock or
other securities of the Company and other than employment agreements).
2.25 Product / Service Warranty. Other than set forth in Section 2.25 of
the Seller Disclosure Schedule, there (a) have been no product or service
warranty claims made by customers of the Company since January 1, 2005; (b) have
been no product or service recalls by the Company since January 1, 2005; and (c)
are no product or service warranties outstanding or currently being offered by
the Company to its respective customers. Copies of any warranties provided by
the Company on any products or services sold, leased or otherwise provided to
customers are provided in Section 2.25 of the Seller Disclosure Schedule.
2.26 Contracts. Section 2.26 of the Seller Disclosure Schedule contains a
complete and accurate list (or, in the case of oral contracts required to be
disclosed, a written summary thereof), of all Contracts to which the Company is
a party or by which it is bound which fall into one or more of the following
categories (collectively, the "Material Contracts"):
(a) all Contracts involving amounts in excess of $25,000 or which
are cancelable by the Company only after giving more than thirty (30) days'
notice (other than
-14-
purchase orders from customers or to vendors of the Company received or issued
in the ordinary course of business);
(b) all loan, financing, security, credit or other Contracts
evidencing or relating to indebtedness or Liens;
(c) all Contracts with distributors, dealers or sales
representatives;
(d) all management, employment or agency Contracts and collective
bargaining Contracts;
(e) all Contracts providing employee benefits not listed on Section
2.21 of the Seller Disclosure Schedule;
(f) all Contracts which contain an obligation of confidentiality
with respect to information furnished by the Company to a third party or
received by the Company from a third party;
(g) all Contracts containing covenants limiting the freedom of the
Company to compete in any line of business or with any Person or in any
geographic area or market;
(h) all Contracts other than those identified in Section 2.17 of the
Seller Disclosure Schedule relating to Intellectual Property Rights;
(i) all reports, studies, audits or notices received by or prepared
for the Company relating or pertaining to environmental matters, and all
Contracts for the past or present disposal of Hazardous Materials;
(j) all Contracts by the Company with any shareholder, member,
officer, director, manager, consultant or employee of the Company or any member
of the immediate family of any of the foregoing (other than Contracts relating
to employment and employee benefits).
(k) all other Contracts entered into other than in the ordinary
course of business including, but not limited to, Contracts (i) with suppliers
for the purchase of goods or services in excess of normal requirements or at
prices in excess of the current market price, (ii) for the sale by the Company
of goods or services at prices not reasonably calculated to produce gross profit
margins consistent with those achieved by the Company during its three prior
fiscal years or (iii) which contain terms or conditions which the Company or, to
the Knowledge of the Sellers, any other party thereto or bound thereby cannot
reasonably expect to fulfill in their entirety.
The Company has delivered to Purchaser accurate and complete copies of each such
written Material Contract, and an accurate and complete written description of
each such oral Material Contract, in each case with all modifications and
amendments thereto. Since January 1, 2005, there has been no modification or
termination of any Material Contract under circumstances that has or which could
reasonably be expected to result in a Company Material Adverse Effect.
-15-
2.27 Prepayments and Deposits. Except as set forth on Section 2.27 of the
Seller Disclosure Schedule, the Company has not received any prepayments or
deposits from customers for products to be shipped, or services to be performed,
in the future that have not as of the date hereof been shipped or performed.
2.28 Capital Projects. Section 2.28 of the Seller Disclosure Schedule
contains a description of all capital projects committed for or authorized by
the Company involving the expenditure of $25,000 or more per project since
January 1, 2005.
2.29 Receivables. All accounts receivable of the Company shown on the
balance sheet of the Company included in the Audited Financial Statements or in
the Estimated Closing Working Capital or thereafter acquired were or (to the
extent not heretofore collected) are valid and genuine, were acquired in the
ordinary course of business, and represent bona fide obligations arising in the
ordinary course of business. Except as set forth in Section 2.29 of the Seller
Disclosure Schedule, such accounts receivable are current (consistent with the
Company's policies and practices) and collectible net of the respective reserves
shown on the balance sheets of the Company (which reserves are adequate and
calculated consistent with past practice). There is no pending contest, claim or
right of set-off with respect to any such account receivable other than returns,
credits, discounts and customer rebates established in the ordinary course of
business consistent with past practice.
2.30 Inventories. Except as set forth in Section 2.30 of the Seller
Disclosure Schedule, all inventory has been valued on the balance sheets of the
Company and on the Company's records and books of account at the lower of cost
(determined on a FIFO basis) or market value on a consistent basis subject to
appropriate reserves to reflect discontinued, excess, obsolete or damaged
inventory at a net realizable market value. Except as set forth in Section 2.30
of the Seller Disclosure Schedule, each item of inventory reflected on the
balance sheets of the Company was, as of the date thereof, salable in the normal
course of business at or above its net carrying value on the balance sheets of
the Company. Since January 1, 2005, there has been no change in the amount of
inventory, except for changes as a result of the purchase and sale of (or
adjustment to) inventory in the ordinary course of business consistent with past
practice.
2.31 Condition and Sufficiency of Assets. Except as set forth in Section
2.31 of the Seller Disclosure Schedule, the assets owned or leased by the
Company are in good operating condition, normal wear and tear excepted, do not
require any special or extraordinary expenditures to remain in such condition
beyond maintenance and repairs in the ordinary course of business, constitute
all of the tangible assets necessary to operate the businesses currently carried
on and operated by the Company in the manner operated by the Company in
accordance with past practices, and include, collectively, all of the material
operating assets of the Company.
2.32 Brokers and Finders. Except as set forth in Section 2.32 of the
Seller Disclosure Schedule, each Seller represents that neither such Seller nor
any of its respective Representatives has employed any investment banker, broker
or finder or incurred any liability for any investment banking fees, brokerage
fees, commissions or finders' fees in connection with the Contemplated
Transactions.
-16-
2.33 Foreign Corrupt Practices Act, Etc. Since January 1, 2000, the
Company has not committed a material violation of the United States Foreign
Corrupt Practices Act or any Law of any other jurisdiction to the same effect.
Neither the Company nor any director, manger, officer, agent, or employee of the
foregoing, or any other Person associated with or acting for or on behalf of the
foregoing, has, directly or indirectly (a) in violation of any Law, made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, or (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company or any Affiliate thereof, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Company.
2.34 No Other Representation or Warranty. Except for the representations
and warranties set forth in this Article II of this Agreement (as qualified by
the Seller Disclosure Schedule), the Sellers make no representation or warranty,
express or implied, of any kind whatsoever, including without limitation any
representation or warranty regarding the condition, quality, merchantability or
fitness for any particular purpose of any asset of the Company and such
representation or warranty is hereby expressly disclaimed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Except as set forth in Purchaser's disclosure schedule provided herewith
(the "Purchaser Disclosure Schedule"), Purchaser represents and warrants to
Sellers as follows:
3.1 Corporate Organization; Etc. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to conduct its business as it is now being conducted and to own, lease
and operate its property and assets. Purchaser is qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which ownership of property or the conduct of its business requires such
qualification or license, except where the failure to be so qualified or
licensed will not individually or in the aggregate, either (i) have a material
adverse effect on the business, operations, assets, financial condition or
results of operations of Purchaser taken as a whole or (ii) impair, hinder or
adversely affect the ability of Purchaser to perform any of its obligations
under this Agreement or to consummate the Contemplated Transactions. True and
complete copies of the organizational and governing documents of Purchaser as
presently in effect, have been heretofore delivered to the Sellers.
3.2 Authority. Purchaser has all requisite corporate authority and power
to execute and deliver this Agreement and to consummate the Contemplated
Transactions. The execution and delivery of this Agreement and the consummation
of the Contemplated Transactions have been duly and validly authorized by all
required corporate action on the part of Purchaser and no other corporate
proceedings on the part of Purchaser are necessary to authorize this Agreement
or to consummate the Contemplated Transactions. This Agreement has been duly and
validly executed and delivered by Purchaser and, assuming this Agreement has
been duly authorized, executed and delivered by each of the other Parties
hereto, this Agreement constitutes a valid and
-17-
binding agreement of Purchaser, enforceable against Purchaser in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and preferential
transfers and subject to the limitations imposed by general equitable principles
(regardless whether such enforceability is considered in a proceeding at law or
in equity).
3.3 Consents and Approvals; No Violations. Neither the execution and
delivery of this Agreement by Purchaser nor the consummation of the Contemplated
Transactions by Purchaser will (a) violate any provision of the certificate of
incorporation or by-laws of Purchaser, (b) require any consent, waiver,
approval, exemption, registration, declaration, license, authorization or permit
of, or filing with or notification to, any Governmental Entity, (c) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration or any obligation to repay) under, any of the terms, conditions or
provisions of any indenture, mortgage, note, bond, encumbrance, license,
government registration, contract, lease, franchise, permit, agreement or other
instrument or obligation to which Purchaser is a party or by which Purchaser or
any of its respective properties or assets may be bound, or (d) violate any
order, writ, judgment, injunction, decree, statute, ordinance, rule or
regulation of any Governmental Entity applicable to Purchaser or by which any of
its properties or assets may be bound.
3.4 Brokers and Finders. Neither Purchaser nor any of its respective
Representatives has employed any investment banker, broker or finder or incurred
any liability for any investment banking fees, brokerage fees, commissions or
finders' fees in connection with the Contemplated Transactions, other than
Acquest International L.P.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Commercially Reasonable Efforts.
(a) Subject to the terms and conditions of this Agreement, each
Party will use commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to consummate the Contemplated Transactions.
None of the Purchaser or Sellers will take, agree to take or knowingly permit to
be taken any action or do or knowingly permit to be done anything in the conduct
of the business of the Company, or otherwise, which would be contrary to or in
breach of any of the terms or provisions of this Agreement.
(b) Purchaser and Sellers agree that in connection with any
litigation that may be brought against the Company or its directors or Purchaser
or its directors relating to the Contemplated Transactions, the party subject to
such litigation will keep the others, and any counsel which the others may
retain at their own expense, informed of the course of such litigation, to the
extent the others are not also party thereto. The Parties agree that they will
consult with each other prior to entering into any settlement or compromise of
any such
-18-
litigation, and that no such settlement or compromise will be entered into by
any Party without the prior written consent of the other Parties, which consent
shall not be unreasonably withheld.
4.2 Public Announcements. Purchaser and the Sellers will consult with one
another before issuing any press release or otherwise making any public
statements in respect of the Contemplated Transactions, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable Law, a copy of which shall be sent
simultaneously to the other Parties upon such release.
4.3 Indemnification.
(a) Indemnification by the Sellers.
(i) Each Seller shall indemnify Purchaser and hold Purchaser
harmless from and against and in respect of any and all actual Losses incurred
directly by Purchaser (hereinafter "Purchaser Losses") which arise out of any
breach by such Seller of any of the Individual Seller Representations of such
Seller. With respect to a claim for indemnification by Purchaser under this
Section 4.3(a)(i) relating to a breach by a Seller of an Individual Seller
Representation, such Seller shall be solely responsible for 100% of any claim by
Purchaser with respect to such breach and the other Sellers shall not be
responsible therefor.
(ii) Each Seller shall indemnify Purchaser and hold Purchaser
harmless from and against and in respect of such Seller's Pro Rata Portion of
any and all actual Purchaser Losses which arise out of any breach of the
representations and warranties of Sellers contained in Article II of this
Agreement, except Section 2.14, which is subject to the indemnification
provisions of Section 4.6 hereof, and the Individual Seller Representations,
which are covered by Section 4.3(a)(i) hereof; provided, however, that the
aggregate indemnification obligations of any Seller pursuant to this Section
4.3(a)(ii) shall be limited to an amount equal to: (A) 50% of such Seller's Pro
Rata Portion of the Total Consideration for bona fide claims made by Purchaser
within six (6) months following the Closing Date; with such limitation reducing
to (B) for bona fide claims made by Purchaser after six (6) months following the
Closing Date, 25% of such Seller's Pro Rata Portion of the Total Consideration,
reduced (not below zero) by the aggregate amount of bona fide claims made by
Purchaser within six (6) months following the Closing Date for which such Seller
was responsible pursuant to the immediately preceding clause (A).
(iii) The Escrow Fund shall be withheld from the Closing Cash
Consideration and placed in escrow at Closing for the purpose of providing funds
to satisfy the Sellers' indemnification obligations under Sections 4.3(a)(i) and
(ii) and Section 4.6 and all indemnity payments to Purchaser by any Seller
pursuant thereto shall be paid first from the principal of the Escrow Fund and
then from such Seller individually.
(iv) Purchaser shall give Sellers prompt written notice of any
third party claim which may give rise to any indemnity obligation under this
Section 4.3(a), together with the estimated amount of such claim, and Sellers
shall have the right to assume the defense of any such claim through counsel of
their own choosing, by so notifying Purchaser within 30 days of receipt of
Purchaser's written notice; provided, however, that Sellers' counsel shall be
reasonably satisfactory to Purchaser. Failure to give prompt notice shall not
affect the
-19-
indemnification obligations hereunder in the absence of actual prejudice. If
Purchaser desires to participate in any such defense assumed by Sellers, it may
do so at its sole cost and expense; provided, however, the Sellers shall not be
entitled to assume the defense or control of a third party claim if (i) such
third party claim seeks an order, injunction or other equitable relief against
the Company, (ii) such third party claim involves any criminal proceeding,
action, indictment, allegation or investigation, or (iii) counsel to the
Purchaser shall have reasonably concluded that (a) there is a conflict of
interest between the Purchaser and the Sellers in the conduct of the defense of
such third party claim or (b) the Purchaser has one or more defenses not
available to the Sellers; provided, further, in the event any third party claim
is brought or asserted which, if adversely determined, would not entitle the
Purchaser to full indemnity pursuant to this Article V by reason of any of the
limitations set forth in Section 4.3 or otherwise, the Sellers may elect to
participate in a joint defense of such third party claim for which the expenses
of such joint defense will be shared equally by such parties and the retention
of counsel shall be reasonably satisfactory to both parties. Neither Party
shall, without the prior written consent of the other Party, which shall not be
unreasonably withheld, settle, compromise or offer to settle or compromise any
such claim or demand on a basis which would result in the imposition of a
consent order, injunction or decree which would restrict the future activity or
conduct of the other party or any Subsidiary or any Affiliate thereof or if such
settlement or compromise does not include an unconditional release of the other
Party for any liability arising out of such claim or demand or any related claim
or demand.
(v) The obligations of Sellers to indemnify Purchaser set
forth in this Section 4.3(a) and in Section 4.6 below shall be subject to each
of the following limitations:
(A) The Sellers' indemnification obligation for any
breach of their representations and warranties contained in this Agreement shall
survive for only a period of eighteen (18) months after the Closing Date;
provided, however, that indemnification obligations for any breach of the
representations and warranties contained in Section 2.14 of this Agreement shall
survive until the expiration of the applicable Tax statute of limitations;
provided, further, that indemnification obligations for any breach of the
representations and warranties contained in Sections 2.1 and 2.2 shall survive
for a period of thirty-six (36) months after the Closing Date. After the
expiration of the respective survival period, all such representations and
warranties of Sellers under this Agreement shall be extinguished. No claim for
the recovery of such Purchaser Losses may be asserted by Purchaser after such
18-month, 36-month or statutory period, as applicable; provided, however, that
claims for Purchaser Losses occurring within such period that are first asserted
in writing with specificity within such period shall not thereafter be barred.
(B) Purchaser shall not be entitled to indemnification:
(1) in connection with any claim for
indemnification hereunder with respect to which the Purchaser has an enforceable
right of indemnification or right of set-off against any third party, unless the
Purchaser assigns such right of indemnification or right of set-off to Sellers
to the extent of the indemnification amount received by Purchaser from Sellers
on account of such claim;
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(2) in connection with any claim for
indemnification based upon a claim, assessment or deficiency for any Tax which
arises from adjustments having the effect only of shifting income, credits
and/or deductions from one fiscal period to another;
(3) to the extent of the value of any net Tax
benefit realized (by reason of a Tax deduction, basis reductions, shifting of
income, credits and/or deductions or otherwise) by the Purchaser in connection
with the Purchaser Losses that form the basis of the Purchaser's claim for
indemnification hereunder, provided, however, that in the event that Purchaser
provides Sellers with confidential information to determine the value of such
net Tax benefit realized, such confidential information provided by Purchaser
shall be confidential and Sellers shall enter into a confidentiality agreement
reasonably acceptable to Purchaser;
(4) with respect to any claim for indemnification
hereunder, unless Purchaser has given the Seller Representative written notice
of such claim, setting forth in reasonable detail the facts and circumstances
pertaining thereto, prior to the end of the applicable survival period of the
provision of this Agreement to which such claim relates;
(5) to the extent of any insurance proceeds
actually received by the Purchaser in connection with the facts giving rise to
such indemnification;
(6) to the extent the Purchaser Loss is
specifically and clearly reserved for, or otherwise taken into account, in the
determination of the Final Working Capital.
(vi) In addition, after application of the limitations on
indemnification set forth in Sections 4.3(a)(i), 4.3(a)(ii) and 4.3(a)(v) above,
the Purchaser shall not be entitled to indemnification:
(A) for any Purchaser Losses as to which Purchaser
otherwise may be entitled to indemnity hereunder (without giving effect to this
clause (A)), until such Purchaser Losses exceed $100,000, and then only for such
Purchaser Losses in excess of $100,000; and
(B) for any Purchaser Losses (including for the
avoidance of doubt any claims for indemnification under Section 4.6 below) from
any Seller, in the aggregate, in excess of that Seller's Pro Rata Portion of the
Total Consideration; provided that
(C) the limitation in Section 4.3(a)(vi)(A) above shall
not apply to the obligations of Sellers to indemnify Purchaser under Section
4.3(a)(i) above and Section 4.6 below.
(vii) The indemnities provided in this Section 4.3(a) shall survive
the Closing, subject to the limitations on survival set forth in Section
4.3(a)(v)(A) above and Section 4.6(h) below.
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(viii) Certain Procedures for Environmental Matters. With respect to
Sellers' indemnification obligation under Section 4.3(a)(ii) as a result of a
breach of a representation or warranty set forth in Section 2.19 hereof,
Purchaser shall:
(A) if such claim relates to the Real Property, provide the
Seller Representative access to the Real Property so that the Seller
Representative may conduct its own investigation, testing or corrective action
with respect to the matter;
(B) provide the Seller Representative with the results,
including analytical data, of any investigation or testing conducted by
Purchaser or, if available to Purchaser, any third party;
(C) except as may otherwise be required by Law on advice of
legal counsel, not contact any Governmental Entity without prior notice to, and
consultation with the Seller Representative;
(D) give the Seller Representative a reasonable opportunity to
participate in any discussions or negotiations with any Governmental Entity
concerning such matter;
(E) if corrective action is required in any such matter, give
the Seller Representative a reasonable opportunity to develop and implement a
plan of corrective action, such plan to be subject to Purchaser's approval (not
to be unreasonably withheld), and, if requested by the Seller Representative,
reasonably cooperate with the Seller Representative in the development and
implementation of such plan on a cost effective basis. Any such plan of action
shall, to the extent permitted under Environmental Laws, be based on the
industrial use of the property and may rely on and utilize institutional
controls (such as deed notices or restrictions) and shall contain reasonable
steps so as to minimize disruption of or adverse effect on the ongoing
operations of the Company's business;
(F) cooperate fully and in good faith with the Seller
Representative in performing such tasks as the Seller Representative and its
technical professionals and representatives may reasonably request as being
necessary to complete any environmental investigations or environmental
remediation being undertaken by the Seller Representative pursuant to this
Agreement, provided, that to the extent there is any disruption to Purchaser's
business, the Parties will work in good faith to insure that such disruption is
not material to Purchaser, with Purchaser being compensated for any
out-of-pocket expenses incurred in connection therewith. Without limiting the
scope of the foregoing, Purchaser shall cause its employees to cooperate fully
with the Seller Representative and to afford the Seller Representative, its
agents, employees and technical professionals access to relevant records
relating to the matters which may be the Seller Representative's responsibility
under this Agreement; and
(G) with respect to any environmental remediation undertaken
by the Seller Representative, the Seller Representative shall be responsible for
completing such remediation only to the extent required under Environmental Laws
in effect as of the Closing Date.
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(b) Indemnification by Purchaser.
(i) Purchaser shall defend, indemnify and hold Sellers
harmless from and against and in respect of any and all actual Losses incurred
directly by Sellers (hereinafter "Sellers Losses") arising out of any breach of
any of the representations and warranties of Purchaser contained herein.
(ii) The Sellers shall give Purchaser prompt written notice of
any third party claim which may give rise to any indemnity obligation under this
Section 4.3(b), together with the estimated amount of such claim, and Purchaser
shall have the right to assume the defense of any such claim through counsel of
its own choosing, by so notifying Sellers within 30 days of receipt of
Purchaser's written notice; provided, however, that Purchaser's counsel shall be
reasonably satisfactory to Sellers. Failure to give prompt notice shall not
affect the indemnification obligations hereunder in the absence of actual
prejudice. If any Seller desires to participate in any such defense assumed by
Purchaser such Seller may do so at their own individual sole cost and expense.
Neither Party shall, without the prior written consent of the other Party, which
shall not be unreasonably withheld, settle, compromise or offer to settle or
compromise any such claim or demand on a basis which would result in the
imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the other party or any Subsidiary or any Affiliate
thereof or if such settlement or compromise does not include an unconditional
release of the other Party for any liability arising out of such claim or
demand.
(iii) The indemnities provided in this Section 4.3(b) shall
survive the Closing; provided, however, that Purchaser's indemnification
obligation for any breach of the representations and warranties described herein
shall survive for only a period of eighteen (18) months from the Closing Date;
after the expiration of the respective survival period, such representations and
warranties of Purchaser under this Agreement shall be extinguished. No claim for
the recovery of such Sellers Losses may be asserted after such 18-month period;
provided, however, that claims for Sellers Losses occurring within such period
that are first asserted in writing with specificity within such period shall not
be thereafter barred.
(c) Exclusive Remedy. The indemnification obligations of Purchaser
and Sellers under this Section 4.3 and Section 4.6 below shall constitute the
sole and exclusive remedies (other than a remedy for actual fraud) of Sellers
and Purchaser, respectively, for the breach of any representation or warranty in
this Agreement by the Sellers or the Purchaser, as the case may be, and the
Sellers and the Purchaser shall not be entitled to rescission of this Agreement
or to any further indemnification rights or claims of any nature whatsoever in
respect thereof, all of which the Purchaser and the Sellers waive.
Notwithstanding anything to the contrary in this Agreement, neither Party shall
be entitled to indemnification under this Agreement for consequential, punitive
or other special damages.
4.4 Notification of Certain Matters. Sellers shall give prompt notice to
Purchaser, and Purchaser shall give prompt notice to Sellers, of (a) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Closing Date, (b) any material failure of Purchaser or Sellers, as the case may
be, to
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comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder, (c) any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the Contemplated Transactions, or (d) any facts or
circumstances that could reasonably be expected to result in a Purchaser
Material Adverse Effect or a Company Material Adverse Effect.
4.5 Third Party Consents.
(a) Each of Purchaser and Sellers shall use his or its commercially
reasonable efforts to obtain at the earliest practicable date all consents of
third parties and Governmental Entities necessary to the consummation of the
Contemplated Transactions (the "Third Party Consents") and will provide to the
other parties hereto copies of each such Third Party Consent promptly after it
is obtained. Each of Purchaser and Sellers agrees to cooperate fully with the
other parties hereto in connection with the obtaining of the Third Party
Consents; provided, however, that no party shall be required to pay any
additional sums to secure such Third Party Consents of the other parties hereto.
(b) In furtherance and not in limitation of the covenants of the
Parties contained in Section 4.5(a), if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any Contemplated Transaction, Purchaser
and Sellers shall cooperate in all respects with each other and use his or its
respective commercially reasonable efforts to contest and resist any such action
or proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the Contemplated Transactions.
4.6 Certain Tax Covenants and Indemnities.
(a) Each Seller shall indemnify and hold harmless Purchaser with
respect to such Seller's Pro Rata Portion of (i) any and all Taxes of the
Company that may be imposed on or suffered by Purchaser, if any, in connection
with a final determination (as such term is defined in Section 1313(c) of the
Code) of any Tax liability of the Company with respect to all taxable periods of
the Company ending on or prior to the Closing Date and (ii) any Purchaser Losses
resulting from a breach of any representation or warranty set forth in Section
2.14.
(b) Each Seller shall make any payment under this Section 4.6 within
thirty (30) days after the final determination (as such term is defined in
Section 1313(a) of the Code) of any Tax liability provided that whenever a
taxing authority asserts a claim, makes an assessment or otherwise disputes the
amounts of Taxes payable with respect to tax periods ending on or before the
Closing Date, Purchaser shall notify Sellers within ten (10) days and thereafter
Sellers shall have the right to control any resulting proceedings and to
determine when, whether and to what extent to settle any such claim, assessment
or dispute. Notwithstanding the foregoing, the failure of Purchaser to give
notice under the preceding sentence shall not relieve Sellers of any obligations
hereunder except to the extent such failure shall actually prejudice the defense
of such claim. Purchaser agrees that it and the Company will cooperate with
Sellers in the course of any such proceedings (including without limitation
complying with all requests for production of or access to documents and
information and making personnel available for depositions,
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interviews or testimony) and will not cause any action to be taken with respect
to any Tax period ending on or before the Closing Date without the prior written
consent of Sellers, which consent shall not be unreasonably withheld. Sellers
shall agree to no adjustment or adjustments that would have the effect of
increasing the Tax liability with respect to any period after the Closing Date
without obtaining the prior written consent of Purchaser, which consent shall
not be unreasonably withheld. Any payments made pursuant to this Section 4.6(b)
shall be treated as an adjustment to the consideration received for the Shares.
(c) If, for Tax purposes, the taxable period of the Company does not
terminate on the Closing Date, Taxes, if any, attributable to the taxable period
of the Company that includes the Closing Date shall be allocated to (i) Sellers
for the period up to and including the Closing Date, and (ii) Purchaser for the
period subsequent to the Closing Date. For purposes of the preceding sentence,
Taxes for the period up to and including the Closing Date and for the period
subsequent to the Closing Date shall be determined by the Sellers with the
written consent of Purchaser, which consent shall not be unreasonably withheld,
on the basis of an interim closing of the books as of the close of business on
the Closing Date as if such taxable period consists of one taxable period ending
on the Closing Date followed by a taxable period beginning on the day following
the Closing Date. For purposes of this subparagraph (c), exemptions, allowances
or deductions that are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned on a daily basis. Any payments made pursuant
to this Section 4.6(c) shall be treated as an adjustment to the consideration
received for the Shares.
(d) Sellers shall prepare or cause to be prepared, and file or cause
to be filed, all Tax Returns of the Company for all taxable periods of the
Company that end on or prior to the Closing Date. All such returns shall be
prepared on a basis that is consistent with the manner in which the Company has
prepared or filed such Tax Returns for prior periods. Purchaser shall prepare or
cause to be prepared, and file or cause to be filed, all other Tax Returns of
the Company.
(e) Any Tax refunds that are received by the Company or Purchaser,
and any amounts credited against Taxes to which the Company or Purchaser becomes
entitled, that relate to taxable periods or portions thereof of the Company
ending on or before the Closing Date shall be paid by the Purchaser to the
Sellers within 15 days after receipt or entitlement thereto. Furthermore, to the
extent that a claim for refund or other adjustment results in a payment or
credit against Taxes to the Company or Purchaser of any amount accrued on the
Closing Balance Sheet, Purchaser shall pay such amount to Sellers within 15 days
after receipt or entitlement thereto. Any payments made or received pursuant to
this Section 4.6(e) shall be treated as an adjustment to the consideration
received for the Shares.
(f) Purchaser shall not amend a Tax Return with respect to the
Company for a taxable period beginning prior to the Closing Date without the
prior written consent of Sellers, which consent shall not be unreasonably
withheld.
(g) After the Closing Date, Purchaser and Sellers shall provide each
other with reasonable cooperation in connection with the preparation of Tax
Returns of the Company and shall make available to the other and to any taxing
authority, as reasonably requested, all
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information, records or documents relating to Tax liabilities or potential Tax
liabilities of the Company for all periods prior to or including the Closing
Date and shall preserve all such information, records and documents until the
expiration of any statute of limitations or extensions thereof.
(h) Sellers' indemnification obligations set forth in this Section
4.6 shall survive until the expiration of the applicable Tax statute of
limitations and shall not be subject to the eighteen-month time limitation set
forth in Section 4.3(a)(v)(A).
4.7 Covenants Not to Compete or Solicit. As part of the consideration for
the sale of the Company, Sellers agrees as follows:
(a) No Seller will, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder, corporate officer,
director or in any other capacity, engage in the business of providing
information technology services or offering software products which is
competitive with the business of the Company, except for acquiring or holding
less than 5% ownership interests in such companies whose common stock is
publicly-traded, for five years following the Closing Date.
(b) No Seller, for a period of five years following the Closing
Date, will directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or in any
other capacity, solicit, assist in the solicitation of or render to any Person
who is a customer of the Company, any services that are competitive with the
business of the Company. This provision does not apply if Sellers are acting on
behalf of the Company, Purchaser or its subsidiaries or any of their respective
affiliates.
(c) No Seller, for a period of five years following the Closing
Date, will directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or in any
other capacity, solicit for hire or assist in the solicitation for hire of any
employee of the Company. This provision does not apply if Sellers are acting on
behalf of the Company, Purchaser or any of their affiliates.
4.8 Seller Representative. By signing this Agreement, the Sellers hereby
irrevocably make, constitute and appoint Norbert D. Miller as their true and
lawful attorney-in-fact to take all actions required under this Agreement on
behalf of the Sellers (including, without limitation, the resolution or dispute
of any claims) in their name and stead and further ratify and approve all such
actions as their own. In the event of the death, inability to act or declination
to act of Norbert D. Miller, then a successor Seller Representative shall be
selected by the Sellers (and, in the event of the death or inability to act of
Norbert D. Miller, his personal representative) by majority in interest vote.
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4.9 Seller Disclosure Schedule. Contemporaneously with the execution and
delivery of this Agreement, Sellers are delivering to Purchaser the Seller
Disclosure Schedule. The Seller Disclosure Schedule is deemed to constitute an
integral part of this Agreement and all representations and warranties of
Sellers are made subject to the exceptions which are noted in the Seller
Disclosure Schedule and in any other schedules attached to this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Entire Agreement; Assignment.
(a) This Agreement (including the exhibits hereto, the Purchaser
Disclosure Schedule and the Seller Disclosure Schedule) constitute the entire
agreement among the parties hereto in respect of the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the Parties in respect of the subject matter hereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of Law (including, by
merger or consolidation) or otherwise. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the Parties and their respective successors and permitted assigns.
5.2 Notices. All notices, requests, demands, instructions or other
documents or communications to be given under this Agreement shall be in writing
and shall be deemed given, (a) when sent if sent by facsimile; provided,
however, that the facsimile is promptly confirmed by telephone confirmation
thereof by the intended recipient, (b) when delivered, if delivered personally
to the intended recipient, and (c) one business day following sending by
overnight delivery via a national courier service, and in each case, addressed
to a party at the following address for such party:
if to Purchaser: SL Industries, Inc.
520 Fellowship Road, Suite A-114
Mount Laurel, New jersey 08054
Attention: David Nuzzo
Facsimile: (856) 7271683
with a copy to: Olshan Grundman Frome Rosenzweig
& Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: Adam W. Finerman, Esq.
Facsimile: (212) 755-1467
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if to Sellers: Norbert D. Miller
W6524 CTH B
Jefferson, WI 53549
with a copy to: Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Patrick J. Goebel
Facsimile: (414) 978-8994
and: Luke E. Sims, Trustee
Foley & Lardner LLP
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Facsimile: (414) 297-4900
5.3 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the Laws of the State of Wisconsin,
without giving effect to the choice of Law principles thereof to the extent that
the application of the laws of another jurisdiction would be required thereby.
Each of the parties hereto irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the federal and state courts in Milwaukee County,
Wisconsin (the "Wisconsin Courts") in any action or proceeding arising out of or
relating to this Agreement, any other agreement executed in connection with this
Agreement or the Contemplated Transactions (and agrees not to commence any
litigation relating thereto except in such courts), waives any objection to the
laying of venue of any such litigation in the Wisconsin Courts and agrees not to
plead or claim in any Wisconsin Court that such litigation brought therein has
been brought in an inconvenient forum. Final judgment in any suit, action or
proceeding brought in any such court shall be conclusive and binding upon each
party duly served with process therein and may be enforced in the courts of the
jurisdiction of which either party or any of their property is subject, by a
suit upon such judgment. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO
SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
5.4 Expenses. Except as contemplated by this Agreement, including this
Section 5.4, all costs and expenses incurred in connection with this Agreement
and the consummation of the Contemplated Transactions shall be paid by the Party
incurring such expenses. At Closing, each of the Sellers, on the one hand, and
Purchaser, on the other hand, shall pay their respective legal counsel any and
all of the fees and expenses incurred by them in connection with the
Contemplated Transactions.
5.5 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
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5.6 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each Party hereto and its successors and permitted
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
5.7 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
5.8 Specific Performance. The Parties hereto agree that irreparable damage
would occur to Purchaser or Sellers, as applicable, in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached by Sellers or Purchaser, as
applicable. It is accordingly agreed that each Party (Purchaser, on the one
hand, or Sellers, on the other) shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by the other Party and to
enforce specifically the terms and provisions of this Agreement in any Wisconsin
Court, this being in addition to any other remedy to which they are entitled at
Law or in equity.
5.9 Counterparts and Execution. This Agreement may be executed in multiple
counterparts by original or facsimile or other electronic transmission, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties. Any executed counterpart may be delivered by
facsimile or other electronic transmission and such facsimile or other
electronic transmission shall be deemed an original; provided, however, that
such executing party shall deliver an originally executed signature page in due
course if requested by another party hereto.
5.10 Further Assurances. Each party to this Agreement agrees (a) to
furnish upon request to the other party such further information, (b) to execute
and deliver to the other party such other documents and (c) to do such other
acts and things as the other party reasonably requests for the purpose of
carrying out the intent of this Agreement and the documents and instruments
referred to herein including, without limitation, providing information
necessary for preparation of any filings needed to obtain the regulatory
approvals required to consummate the Contemplated Transactions.
5.11 Interpretation.
(a) The words "hereof," "herein," "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit, and schedule
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references are to the articles, sections, paragraphs, exhibits, and schedules of
this Agreement unless otherwise specified. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." All terms defined in this
Agreement shall have the defined meanings contained herein when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms. References to a person
are also to its permitted successors and assigns.
(b) The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date first written above.
(c) 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 provisions of this
Agreement.
5.12 Amendment and Modification; Waiver.
(a) This Agreement may be amended, modified and supplemented in any
and all respects, by written agreement of the Parties hereto, at any time prior
to the Closing Date with respect to any of the terms contained herein.
(b) At any time prior to the Closing Date, any Party hereto may (i)
waive any inaccuracy in the representations and warranties of the other Parties
contained herein or in any document, certificate or writing delivered by the
other Parties pursuant hereto and (ii) subject to applicable Law, waive
compliance with any agreement or condition to its obligations; provided that any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the Party or Parties to be bound thereby.
5.13 Definitions. Accounting terms used herein and not otherwise defined
herein shall have the meanings given to them under GAAP. As used herein,
"Affiliate" has the meaning given to it in Rule 12b-2 of Regulation 12B
under the Exchange Act.
"Agreement" shall have the meaning set forth in the preamble hereof.
"Amended Lease" shall mean the amended lease for the Company's
manufacturing facility in the form of Exhibit B attached hereto.
"Audited Financial Statements" shall have the meaning set forth in Section
2.7(b)hereof.
"Closing" shall have the meaning set forth in Section 1.2 hereof.
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"Closing Cash Consideration" means an amount equal to Fifteen Million Five
Hundred Thousand Dollars ($15,500,000).
"Closing Date" shall have the meaning set forth in Section 1.2 hereof.
"Closing Working Capital" shall have the meaning set forth in Section
1.4(c) hereof.
"Code" refers to the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder.
"Company Benefit Plans" shall have the meaning set forth in Section
2.21(a)(i) hereof.
"Company Common Stock" shall have the meaning set forth in the recitals
hereto.
"Company Consents" shall have the meaning set forth in Section 2.6 hereof.
"Company Employee Arrangements" shall have the meaning set forth in
Section 2.21(a)(ii) hereof.
"Company Financial Statements" shall have the meaning set forth in Section
2.7(a) hereof.
"Company Material Adverse Effect" shall have the meaning set forth in
Section 2.1 hereof.
"Contemplated Transactions" means the transactions contemplated by this
Agreement and the exhibits hereto.
"Contract" means any commitment, understanding, instrument, lease, pledge,
mortgage, indenture, note, license, agreement, employee benefit plan, purchase
or sale order, contract, promise or similar arrangement evidencing or creating
any obligation, whether written or oral.
"Effective Time" shall mean the close of business on the Closing Date,
subject to the occurrence of the Closing.
"Employment Agreement" shall mean the Employment Agreement between Norbert
D. Miller and Purchaser in the form attached hereto as Exhibit C.
"Encumbrances" means any lien, encumbrance, security interest, charge,
surety, mortgage, option, pledge or restriction on Transfer of any nature
whatsoever other than liens for Taxes not yet due or payable.
"Environmental Claim" means any claim, action, demand, order, or written
notice by or on behalf of, any Governmental Entity or Person alleging potential
liability arising out of, based on or resulting from the violation of any
Environmental Law or permit.
"Environmental Laws" means all Laws relating to releases or threatened
releases of Hazardous Materials or otherwise relating to the generation,
treatment, storage, transport or handling of Hazardous Materials.
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"ERISA" shall have the meaning set forth in Section 2.21(a)(i) hereof.
"Escrow Agent" means U.S. Bank, N.A., Milwaukee, Wisconsin.
"Escrow Agreement" means that certain agreement between the Escrow Agent
and the Parties hereto dated as of the Closing Date in the form of Exhibit D
attached hereto.
"Escrow Fund" means an amount equal to $2,000,000.
"Estimated Closing Working Capital" shall have the meaning set forth in
Section 1.4(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Working Capital" shall have the meaning set forth in Section 1.4(g)
hereof.
"GAAP" means United States generally accepted accounting principles as in
effect on the date or for the period with respect to which such principles are
applied.
"Governmental Entity" shall have the meaning set forth in Section 2.6
hereof.
"Hazardous Materials" means all substances defined or listed as
"hazardous" or "toxic" under Environmental Laws.
"Independent Working Capital Firm" shall have the meaning set forth in
Section 1.4(f) hereof.
"Individual Seller Representations" shall have the meaning set forth in
the introductory sentence of Article II of this Agreement.
"Insurance Policies" shall have the meaning set forth in Section 2.18
hereof.
"Intellectual Property Rights" shall have the meaning set forth in Section
2.17(b) hereof.
"IRS" shall have the meaning set forth in Section 2.21(c) hereof.
"Knowledge of the Sellers" and terms of similar import shall mean the
actual knowledge of Norbert D. Miller, Karl Hink, Hank Nechvatal and Dan Read.
"Laws" means federal, state or local ordinance, statute, rule and
regulation.
"Leases" shall have the meaning set forth in Section 2.16 hereof.
"Lien" means, in respect of any asset (including, any security) any
mortgage, lien, pledge, charge, security interest, or encumbrance of any kind in
respect of such asset.
"Losses" means actual losses, liabilities, damages, judgments, settlements
and expenses, including reasonable attorneys' fees; provided, however, that
Losses shall not include loss of profits, consequential, punitive or other
special damages, and shall not be calculated using a
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multiple of earnings, book value or other measure which may have been used to
determine or which may be reflective of the Total Consideration.
"Material Contracts" shall have the meaning set forth in Section 2.26
hereof.
"Organizational Documents" means (i) the articles or certificate of
incorporation and the bylaws or code of regulations of a corporation; (ii) the
partnership agreement and any statement of partnership of a general partnership;
(iii) the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (iv) the articles of organization or
certificate of formation and the operating agreement or limited liability
company agreement of any limited liability company; (v) any charter or similar
document adopted or filed in connection with the creation, formation or
organization of a Person; or (vi) any amendment to any of the foregoing.
"Party" or "Parties" shall mean Purchaser and Sellers, individually or
collectively as the case may be.
"Permits" shall have the meaning set forth in Section 2.12 hereof.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
"Pro Rata Percentage" means, as to each Seller, the percentage determined
by dividing the number of Shares owned by such Seller by the total number of
Shares owned by all of the Sellers.
"Pro Rata Portion" of an obligation or benefit means, as to any Seller,
the product of (i) the total amount of the obligation or benefit, times (ii) the
Pro Rata Percentage of such Seller.
"Purchaser Losses" shall have the meaning set forth in Section 4.3(a)(i)
hereof.
"Real Property" shall have the meaning set forth in Section 2.16 hereof.
"Related Party" shall have the meaning set forth in Section 2.24 hereof.
"Release" shall have the meaning set forth in the Environmental Laws.
"Representative" means, with respect to any Person, each of such Person's
Affiliates, directors, officers, employees, partners, members, representatives
and agents, and each of the heirs, executors and assigns of any of the
foregoing.
"Required Working Capital Amount" shall mean $4,813,000.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Disclosure Schedule" shall mean the Seller Disclosure Schedule,
dated the date of this Agreement, delivered by Sellers to Purchaser
contemporaneously with the execution and delivery of this Agreement.
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"Seller Representative" shall mean the Person appointed to that position
as provided in Section 4.8 of this Agreement.
"Sellers Losses" shall have the meaning set forth in Section 4.3(b)(i)
hereof.
"Shares" shall have the meaning set forth in the recitals hereof.
"Software" means any computer software products, in object and source code
form, which are used, developed, sold, distributed or marketed by the Company,
other than off-the-shelf Software, that is owned by, used by or licensed to the
Company in connection with the conduct of its business of any nature whatsoever,
including all operating systems, all work-for-hire owned by customers, all
applications software, all firmware, all middleware, all development tools, all
Internet software, all digital content, and any and all documentation in print
or digital form related to any of the foregoing, including programming manuals,
user manuals, online help, technical support manuals or instructions, and source
code comments."
"Subsidiary" means, in respect of any party, any corporation, partnership
or other entity or organization, whether incorporated or unincorporated, of
which (i) such other party or any other subsidiary of such party is a general
partner (excluding such partnerships where such party or any subsidiary of such
party does not have a majority of the voting interest in such partnership) or
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions in respect of such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries, or by such party and one or more of its
subsidiaries. Solely for purposes of Section 2.14, the term "Subsidiary" shall
also include any trade or business that is required to be aggregated with the
Company under Section 414(b), (c), (m) or (o) of the Code.
"Tax Return" shall have the meaning set forth in Section 2.14 hereof.
"Taxes" shall have the meaning set forth in Section 2.14 hereof.
"Third Party Consents" shall have the meaning set forth in Section 4.5(a)
hereof.
"Total Consideration" means the Closing Cash Consideration (i) as adjusted
pursuant to Section 1.4(b) of this Agreement and (ii) plus or minus, as
applicable, any payment pursuant to Section 1.4(g) of this Agreement.
"Transfer" means any sale, assignment, pledge, hypothecation, or other
disposition or Encumbrances.
"Working Capital" means the amount by which (i) the sum of cash and cash
equivalents, accounts receivable, inventory and prepaid expenses exceeds (ii)
the sum of accounts payable, accrued salaries and payables, accrued commissions
and customer deposits (excluding, however, for the avoidance of doubt any
liabilities for Taxes and any other liabilities for which Sellers remain
responsible under this Agreement); provided that the assets and liabilities of
the Company (including, without limitation, inventory valuation), shall be
computed on a basis consistent with the Company Financial Statements.
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"Working Capital Certificate" shall have the meaning set forth in Section
1.4(c) hereof.
"Working Capital Objection Notice" shall have the meaning set forth in
Section 1.4(d) hereof.
[signature pages follow]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the date first above written.
PURCHASER:
SL INDUSTRIES, INC.
By: _______________________________
Name:
Title:
SELLERS:
NORBERT D. MILLER
___________________________________
REVOCABLE LIVING TRUST OF FRED A. LEWIS AND
MARGARET LANGE-LEWIS U/A DATED JANUARY 28, 1993,
AS AMENDED AND RESTATED AS OF OCTOBER 31, 2001
By: _______________________________
Name: _____________________________
Title: ____________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
EINHORN FAMILY FOUNDATION
By: _______________________________
Name: _____________________________
Title: ____________________________
Exhibit A
[Wire Instructions]
Exhibit B
[Form of Amended Lease]
Exhibit C
[Form of Employment Agreement]
Exhibit D
[Form of Escrow Agreement]