STOCK PURCHASE AGREEMENT
BY AND BETWEEN
RAYTHEON E-SYSTEMS, INC.
AND
ADVANCED DIGITAL INFORMATION CORPORATION
DATED AS OF
JULY 21, 1998
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("AGREEMENT"), dated as of July 21,
1998, is by and between Raytheon E-Systems, Inc., a Delaware corporation
("SELLER"), and Advanced Digital Information Corporation, a Washington
corporation ("BUYER").
WHEREAS, EMASS, Inc., a Delaware corporation and a wholly owned
subsidiary of Seller ("COMPANY"), and the Subsidiaries (as hereinafter defined)
conduct the robotic tape libraries and related businesses of Seller;
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, 100% of the outstanding shares of common stock of the Company
upon the terms and subject to the conditions set forth herein (the sale and
purchase of stock of the Company being referred to herein as the "Acquisition");
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
Article I.
CERTAIN DEFINITIONS
As used in this Agreement the following terms shall have the following
respective meanings:
"ACTION" means any actual or threatened action, suit, arbitration,
inquiry, proceeding or investigation by or before any foreign or domestic court,
governmental or other regulatory or administrative agency or commission.
"ADJUSTED PURCHASE PRICE" means the aggregate consideration to be paid
by Buyer pursuant hereto, after adjusting the Initial Purchase Price to give
effect to any adjustments pursuant to Section 2.4.
"ASSETS" means any and all assets, properties and rights, whether
tangible or intangible, whether real, personal or mixed, whether fixed,
contingent or otherwise, and wherever located, including the following:
(a) real property interests (including leases), land, plants,
buildings and improvements;
(b) machinery, equipment, test equipment, test fixtures, vehicles,
furniture and fixtures, leasehold improvements, supplies, repair parts, tools,
plant, laboratory and office equipment and other tangible personal property,
together with any rights or claims arising out of
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the breach of any express or implied warranty by the manufacturers or sellers of
any of such assets or any component part thereof;
(c) inventories, including raw materials, work-in-process, finished
goods, demonstration and evaluation equipment, parts, accessories;
(d) Cash, bank accounts, notes, loans and accounts receivable
(whether current or not current), interests as beneficiary under letters of
credit, advances and performance and surety bonds;
(e) certificates of deposit, banker's acceptances, shares of stock,
securities, bonds, debentures, evidences of indebtedness, certificates of
interest or participation in profit-sharing agreements, collateral-trust
certificates, shares, investment contracts, voting trust certificates, puts,
calls, straddles, interests in joint ventures, partnerships and other entities,
options, swaps, collars, caps and other securities or hedging arrangements of
any kind;
(f) financial, accounting and operating data and records including
books, records, electronic data, notes, sales and sales promotional data,
advertising materials, credit information, cost and pricing information,
customer and supplier lists, reference catalogs, payroll and personnel records,
minute books, stock ledgers, stock transfer records and other similar property,
rights and information;
(g) Company Intellectual Property;
(h) Contracts;
(i) prepaid expenses, deposits and retentions held by third parties;
(j) claims, causes of action, choses in action, rights under
insurance policies, rights under express or implied warranties, rights of
recovery, rights of set-off, and rights of subrogation;
(k) Licenses; and
(l) goodwill and going concern value.
"CASH" means all cash, time deposits, certificates of deposit and
short-term investments.
"CLOSING" means the consummation of the transactions contemplated by
Section 2.1 of this Agreement.
"CLOSING DATE" means the later of (i) the third business day after
expiration or termination of all waiting periods prescribed under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and (ii) the date on which the conditions set
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forth in Articles VIII and IX shall be satisfied or duly waived, or if Seller
and Buyer mutually agree on a different date, the date upon which they have
mutually agreed.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"COMPANY INTELLECTUAL PROPERTY" means all United States and foreign
patents and patent applications, trademark registrations and applications
therefor, registered copyrights and applications therefor owned by the Company
and listed on Schedule 3.6, unregistered trademarks and copyrights, trade
secrets, know how and trade names.
"CONTRACT" means any written note, bond, mortgage, indenture, lease,
contract, license, agreement, sale order, purchase order, open bid or other
obligation or commitment and all rights therein.
"COVERED LIABILITIES" means any and all debts, losses, liabilities,
claims, damages, obligations, payments (including those arising out of any
Action, such as any settlement or compromise thereof or judgment or award
therein, and including any obligation for Taxes), costs and expenses (including
attorneys' fees and expenses incurred in connection with any Action), matured or
unmatured, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, known or unknown, including any of the foregoing arising under,
out of or in connection with any Action, order or consent decree of any
Governmental Authority or award of any arbitrator of any kind, or any law, rule,
regulation, Contract, commitment or undertaking.
"CURRENT PORTION -- LT DEBT" means the outstanding balance under
the Grau Credit Agreements as set forth in the Estimated Balance Sheets.
"EMASS/GRAU LOAN AGREEMENT" means that certain loan agreement
contemplated by Section 5.10(b).
"ENVIRONMENTAL LAWS" means any applicable federal, state, local or
foreign law, treaty, judicial decision, regulation, rule, judgment, order,
decree, injunction, permit, agreement or governmental restriction, each as in
effect on or prior to the Closing Date, relating to the environment or to any
Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESTIMATED BALANCE SHEET" means the Company's Estimated Consolidated
Balance Sheet (June 1998), a copy of which is attached as Exhibit B.
"FINAL DETERMINATION" means (a) with respect to federal Income Taxes,
a "determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
federal Income Taxes, any final determination of liability in respect of a Tax
that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise (including the expiration of a
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statute of limitations or a period for the filing of claims for refunds, amended
returns or appeals from adverse determinations), or (b) the payment of Tax by
Seller, Buyer or any of their affiliates, whichever is responsible for payment
of such Tax liability under applicable law, with respect to any item disallowed
or adjusted by a Taxing Authority, PROVIDED that such responsible party
determines that no action should be taken to recoup such payment and the
indemnifying party, if any, agrees.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any government authority, agency, department, board,
commission, or instrumentality of the United States, or foreign jurisdiction
any State of the United States or political subdivision thereof, and any
tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory
organization.
"GRAU" means EMASS Grau Storage Systems Beteiligungs GmbH, a German
Corporation.
"GRAU CREDIT AGREEMENTS" means, collectively (a) that certain Credit
Agreement in the principal amount of DM20,000,000 dated 20 June 1995 between
Grau and Commerzbank Aktiengesellschaft Filiale Schwabisch Gmnend Branch, and
(b) that certain Credit Agreement dated November 9, 1995 in the principal
amount of DM20,000,000 between Grau and Deutsche Bank Aktiengesellschaft.
"GRAU SHARES" means the shares of capital stock of Grau.
"HAZARDOUS SUBSTANCE" means any substance, pollutant, contaminant,
chemical, waste or material, including petroleum, its derivatives, by-products
and other hydrocarbons, that is listed, identified in, or regulated as hazardous
under any applicable federal, state, local or foreign law, treaty, judicial
decision, regulation, rule, judgment, order, decree, injunction, permit,
agreement or governmental restriction.
"INITIAL PURCHASE PRICE" means $24,336,000, representing the aggregate
consideration to be paid by Buyer pursuant hereto, before giving effect to any
adjustments pursuant to Section 2.4.
"INTELLECTUAL PROPERTY" means all United States and foreign patents
and patent applications, trademark registrations and applications therefor,
registered copyrights and applications therefor unregistered trademarks and
copyrights, trade secrets, know how and trade names.
"LICENSE" means all licenses, permits, franchises and other
authorizations of any federal, state, local or foreign Governmental Authority.
"LIEN" means any adverse claim, restriction on voting or transfer or
pledge, lien, mortgage, hypothecation, collateral assignment, charge,
encumbrance, easement, covenant, restriction, title defect, encroachment or
security interest of any kind.
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"PERMITTED LIENS" means any Liens (i) for Taxes attributable to any
taxable period beginning on or prior to the Closing Date and not yet due or
payable or being contested in good faith, (ii) that are not material and
constitute mechanics', carriers', workers' or like liens incurred in the
ordinary course of business, or (iii) that, individually or in the aggregate,
would not reasonably be expected to have a material adverse effect on the
Business Condition (as defined in Section 3.1(a)) of the Robotic Tape Business.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
"ROBOTIC TAPE BUSINESS" means the businesses heretofore or currently
engaged in by the Company and the Subsidiaries taken as a whole, including the
assets, liabilities, and operations thereof.
"SHARES" means the shares of common stock, par value $200,000 per
share, of the Company.
"SUBSIDIARY" means each subsidiary and partnership listed on Exhibit A
hereto, which includes all direct or indirect subsidiaries of the Company and
all partnerships or other legal entities engaged exclusively in the Robotic Tape
Business in which the Company holds a direct or indirect equity or other
ownership interest.
"THIRD-PARTY CLAIM" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Person other than any party hereto or their respective affiliates
which gives rise to a right of indemnification hereunder.
Article II.
SALE OF STOCK; CLOSING
Section 2.1. PURCHASE AND SALE. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the conditions set forth herein, at the Closing Seller will sell and Buyer
will purchase 90 Shares owned by Seller, which constitute, and will constitute
as of the Closing, 100% of the issued and outstanding Shares.
Section 2.2. CLOSING DOCUMENTS. At the Closing,
(a) Seller will deliver certificates for the Shares, with appropriate
stock powers attached, properly signed, and shall execute and deliver to Buyer
such instruments of transfer, duly prepared and executed in accordance with
relevant law, as may be necessary to effect the transfer of the Shares to Buyer
or such Person as Buyer may designate to hold such Shares.
(b) Buyer shall pay by wire transfer the Adjusted Purchase Price in
immediately available funds to the account specified by Seller;
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(c) Seller and Buyer shall deliver the certificates and other
contracts, documents and instruments required to be delivered under Articles
VIII and IX.
Section 2.3. TIME AND PLACE OF CLOSING. The Closing shall take place
on the Closing Date at 10:00 A.M., Garland, Texas time, at the offices of
Seller, 501 S. Jupiter, Garland, Texas, or such other place or time as the
parties may agree.
Section 2.4 DETERMINATION OF ADJUSTED PURCHASE PRICE.
(a) The Buyer and Seller agree that the purchase price of the Shares
shall be $24,336,000 (the "INITIAL PURCHASE PRICE"), subject to adjustment
as set forth below.
The Initial Purchase Price shall be
(i) increased dollar for dollar to the extent that the "Current
Portion - LT Debt" on the Closing Date prior to the execution of the
EMASS/Grau Loan Agreement exceeds the amount of the Current Portion
- LT Debt on the Estimated Balance Sheet; or
(ii) increased dollar for dollar to the extent that the absolute value
of the "Advance From Corporate" on the Closing Date is less than the
absolute value of such amount (assuming the "Advance from Corporate"
on the Closing Date is a negative number) on the Estimated Balance
Sheet; or
(iii) decreased dollar for dollar to the extent that the "Current
Portion-LT Debt" on the Closing Date prior to the execution of the
EMASS/Grau Loan Agreement less than the amount of the Current Portion
- LT Debt on the Estimated Balance Sheet; or
(iv) decreased dollar for dollar to the extent that the absolute value
of the "Advance From Corporate" on the Closing Date exceeds the
absolute value of such amount (assuming the "Advance from Corporate"
on the Closing Date is a negative number) on the Estimated Balance
Sheet.
The Initial Purchase Price, after taking into account the foregoing adjustments,
if any, shall be the "Adjusted Purchase Price".
(b) Buyer may only dispute those items relating to changes between
the date hereof and the Closing with respect to "Advance From Corporate" or
"Current Portion - LT Debt"on the Estimated Balance Sheet. Unless Buyer
delivers written notice to Seller prior to Closing specifying in detail all
disputed items and the basis therefor, Buyer shall be deemed to have accepted
and agreed to the Adjusted Purchase Price. If Buyer so notifies Seller of its
objection to the Adjusted Purchase Price, Buyer and Seller shall, within thirty
(30) days following such notice (the "RESOLUTION PERIOD"), attempt to resolve
their differences and any resolution by them as to any disputed amounts shall be
final, binding and conclusive
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Article III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 3.1. INCORPORATION; AUTHORIZATION.
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of the Company and the
Subsidiaries is duly organized and validly existing and in good standing, under
the laws of the jurisdiction of its organization and is in good standing and is
duly qualified to transact business in each jurisdiction in which the nature of
property owned or leased by it or the conduct of its business requires it to be
so qualified, except where the failure to be in good standing or to be duly
qualified to transact business, would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business, assets
or financial condition (collectively, the "BUSINESS CONDITION") of the Robotic
Tape Business.
(b) Seller has all requisite corporate power and authority to own the
Shares, to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Each of the Company and, the Subsidiaries has all
requisite corporate or partnership power and authority to own its properties and
assets and to carry on its business as it is now being conducted. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate proceedings on the part of Seller. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not (i) violate any provision of Seller's or the
Company's certificate of incorporation or bylaws, (ii) violate any provision of
any Subsidiary's' charter or bylaws or similar organizational instrument, (iii)
to Seller's knowledge, except as disclosed in Schedule 3.1(b), violate any
provision of, or be an event that is (or with the passage of time will result
in) a violation of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or result in the imposition of any Lien upon any of the Shares
or any of the Company's or any of the Subsidiaries'' assets or properties,
pursuant to, any mortgage, Lien, lease, contract, agreement, instrument, order,
arbitration award, judgment or decree to which Seller, the Company or any of the
Subsidiaries is a party or by which any of them is bound (iv) except as listed
on Schedule 3.1(b), violate or conflict with any other material restriction of
any kind or character to which Seller, the Company or any of the Subsidiaries is
subject, or (v) except as disclosed in Schedule 3.1(b), constitute a violation
(whether after the giving of notice or lapse of time or both) of any provision
of any law, judgment, decree, order, regulation or rule of any court, applicable
to the Company or any of the Subsidiaries that, in the case of any of clauses
(iii), (iv) and (v) would, individually or in the aggregate, reasonably be
expected to (x) have a material adverse effect on the Business Condition of the
Robotic Tape Business, (y) materially impair the ability of Seller to perform
its obligations under this Agreement, or (z) prevent or materially delay the
Acquisition. This Agreement has been duly executed and delivered by Seller,
and, assuming the due execution hereof by Buyer, this Agreement constitutes the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms.
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(c) Upon consummation of the Acquisition, at the Closing, as
contemplated by this Agreement, Seller will deliver to Buyer good title to the
Shares.
Section 3.2. CAPITALIZATION; STRUCTURE. The authorized capital stock
of the Company consists of 100 Shares, 90 of which are validly issued,
outstanding, fully paid and nonassessable and owned by Seller. All of the
outstanding shares of capital stock or other equity interests of each of the
Company's Subsidiaries have been validly issued and are fully paid and
nonassessable and are owned by the Company and/or one or more of the
Subsidiaries free and clear of all Liens, including preemptive rights. There are
no outstanding options, warrants or other rights of any kind relating to the
sale, issuance or voting of any shares of capital stock of any class of, or
other equity interests in, the Company or any of the Subsidiaries which have
been issued, granted or entered into by Seller, the Company, or any of the
Subsidiaries.
Section 3.3. FINANCIAL STATEMENTS. Attached hereto as Schedule 3.3
are true and complete copies of the following: (i) the combined balance sheets
of the Company and the Subsidiaries , as of December 31, 1994 and 1995 and the
related combined statements of income, operations and cash flows and (ii) the
unaudited combined balance sheet of the Company and the Subsidiaries as of
December 31, 1996 and December 31, 1997 and the related combined statements of
income and operations (collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements include the accounts of the Company and all of the Subsidiaries. As
of the respective dates thereof, the Financial Statements have been presented
in each case in accordance with internal accounting policies consistently
applied during the periods involved.
Section 3.4. UNDISCLOSED LIABILITIES. Except as disclosed herein, in
Schedules 3.3 and 3.4 or in the other schedules hereto, and except as reflected,
reserved against or otherwise disclosed in the Estimated Balance Sheet, neither
the Company nor any Subsidiary had, at June 25, 1998, any liabilities or
obligations that would be required to be reflected on a balance sheet (including
the notes thereto) prepared in accordance with the Company's internal
accounting policies and would reasonably be expected to individually or in the
aggregate (x) have a material adverse effect on the Business Condition of the
Robotic Tape Business, (y) materially impair the ability of Seller to perform
its material obligations under this Agreement, or (z) prevent or materially
delay the consummation of the Acquisition.
Section 3.5. ASSETS.
(a) With the exception of properties disposed of since the date of
the Estimated Balance Sheet, the Company or one of the Subsidiaries has good
title to, or holds by valid and existing lease or license, free and clear of all
Liens, all real and personal property capitalized on or included in the
Estimated Balance Sheet and to all real and personal property acquired by the
Company or any of the Subsidiaries since the date of the Estimated Balance Sheet
that would, had it been acquired prior to such date, be capitalized on or
included in the Estimated Balance Sheet, except in any of the foregoing cases
for Permitted Liens and such other Liens as are reflected or reserved against in
the Estimated Balance Sheet.
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(b) The Assets of the Company and the Subsidiaries will, at the
Closing Date, include all right, title and interest in and to all Assets that
are used primarily in or that are being held primarily for use in the operation
of the Robotic Tapes Business as heretofore conducted.
Section 3.6. INTELLECTUAL PROPERTY. Schedule 3.6 lists, as of the
date hereof, patents, trademarks and copyrights that are owned by the Company or
any of the Subsidiaries and are material to the Robotic Tape Business of the
Company. One or more of the Company or the Subsidiaries is the owner or joint
owner of all right, title and interest in and to all Company Intellectual
Property, free and clear of all Liens and has the right to use, in the manner
used in the operation of the Robotic Tape Business as heretofore conducted, the
Company Intellectual Property without payment to a third party. The Company has
a joint ownership interest with Ampex Corporation in those patents on Schedule
3.6 where Ampex Corporation is a listed inventor. The Company Intellectual
Property includes all material Intellectual Property that is used primarily in
or that is held primarily for use in the operation of the Robotic Tape Business.
To Seller's knowledge, as of the date hereof, there are no existing OR
threatened claims of any third party based on the use by, or challenging the
ownership of, the Company or any Subsidiary of any of the Company Intellectual
Property that would, individually or in the aggregate, reasonably be expected to
(x) have a material adverse effect on the Business Condition of the Robotic Tape
Business, (y) materially impair the ability of Seller to perform its material
obligations under the Agreement, or (z) prevent or materially delay the
consummation of the Acquisition. Neither the Company nor any Subsidiary has
made any claim in writing of a violation, infringement, misuse or
misappropriation by others of rights of the Company or the Subsidiaries to or in
connection with any material Company Intellectual Property.
Section 3.7. ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Schedule 3.7, since June 25, 1998,
(a) there has been no material adverse change in the Business
Condition of the Robotic Tape Business except for any change resulting solely
from general economic, financial or market conditions and for any change
resulting solely from conditions or circumstances generally affecting the
businesses in which the Company and the Subsidiaries operate,
(b) there has been no physical damage, destruction or loss, after
taking into account any insurance recoveries payable in respect thereof, and
(c) the Company or any of the Subsidiaries has not entered into or
agreed to enter into any transaction, agreement or commitment or suffered the
occurrence of any event or events that would reasonably be expected to (x) have
a material adverse effect on the Business Condition of the Robotic Tape
Business, (y) materially impair the ability of Seller to perform its material
obligations under the Agreement, or (z) prevent or materially delay the
consummation of the Acquisition.
Section 3.8. LITIGATION; ORDERS. Except as disclosed in Schedule
3.8, there are no Actions pending or, to Seller's knowledge, threatened against
the Company or, to the Seller's knowledge, any of the Subsidiaries that would,
individually or in the aggregate, reasonably be
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expected to (x) have a material adverse effect on the Business Condition of the
Robotic Tape Business, (y) materially impair the ability of Seller to perform
its material obligations under this Agreement, or (z) prevent or materially
delay the consummation of the Acquisition. Except as disclosed in Schedule 3.8,
as of the date hereof, there are no judgments or outstanding orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency, or by arbitration) against the Company or any of the
Subsidiaries or any of their respective properties or businesses that would,
individually or in the aggregate, reasonably be expected to (x) have a material
adverse effect on the Business Condition of the Robotic Tape Business, (y)
materially impair the ability of Seller to perform its material obligations
under this Agreement, or (z) prevent or materially delay the consummation of the
transactions contemplated hereby. Except as disclosed in Schedule 3.8, to
Seller's knowledge, there are no events or conditions which would reasonably be
expected to result in an Action against the Company or any of the Subsidiaries
that would, individually or in the aggregate, reasonably be expected to (x) have
a material adverse effect on the Business Condition of the Robotic Tape
Business, (y) materially impair the ability of Seller to the ability of Seller
to perform its material obligations under this Agreement, or (z) prevent or
materially delay the consummation of the transactions contemplated hereby.
Section 3.9. LICENSES, APPROVALS, OTHER AUTHORIZATIONS, CONSENTS,
REPORTS, ETC.
To Seller's knowledge:
(a) One of the Company or the Subsidiaries has all Licenses relating
to the Robotic Tape Business that are required in order to permit it to carry on
its business as it is presently conducted, except where the failure to have such
Licenses would not, individually or in the aggregate, reasonably be expected to
(x) have a material adverse effect on the Business Condition of the Robotic Tape
Business, (y) materially impair the ability of Seller to perform its material
obligations under this Agreement, or (z) prevent or materially delay the
consummation of the Acquisition, and to the best of Seller's knowledge, all such
Licenses are in full force and effect, and the Company or the Subsidiaries , as
the case may be, is in compliance with the terms of such Licenses, except where
the failure of such Licenses to be in full force and effect, or of the Company
or the Subsidiaries , as the case may be, to be in compliance with such Licenses
would not, individually or in the aggregate, reasonably be expected to (x) have
a material adverse effect on the Business Condition of the Robotic Tape
Business, (y) materially impair the ability of Seller to perform its material
obligations under this Agreement, or (z) prevent or materially delay the
consummation of the Acquisition. No proceeding is pending, or, to Seller's
knowledge, threatened, seeking the revocation or limitation of any such License
that would, individually or in the aggregate, reasonably be expected to (x) have
a material adverse effect on the Business Condition of the Robotic Tape
Business, (y) materially impair the ability of Seller to perform its material
obligations under this Agreement, or (z) prevent or materially delay the
consummation of the Acquisition.
(b) Schedule 3.9(b) contains a list of all registrations, filings,
applications, notices, consents, approvals, orders, qualifications and waivers
required to be made, filed, given or obtained by any of Seller, the Company or
any of the Subsidiaries, with, to or from any
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Persons or Governmental Authorities or private agencies in connection with the
consummation of the Acquisition, except for those (i) that become applicable
solely as a result of the specific regulatory status of Buyer or its affiliates,
or (ii) the failure to make, file, give or obtain which would not, individually
or in the aggregate, reasonably be expected to (x) have a material adverse
effect on the Business Condition of the Robotic Tape Business, (y) materially
impair the ability of Seller to perform its material obligations under this
Agreement, or (z) prevent or materially delay the consummation of the
Acquisition.
Section 3.10. LABOR MATTERS. Other than the German Workers' Council
at Grau in Germany, there are no agreements with labor unions or associations
representing employees of the Company or any of the Subsidiaries. No material
work stoppage against the Company or any of the Subsidiaries is pending or, to
Seller's knowledge, threatened. None of the Company or any of the Subsidiaries
is involved in or, to Seller's knowledge, threatened with, any labor dispute,
arbitration, lawsuit or administrative proceeding relating to labor matters
involving the employees of the Company or any of the Subsidiaries (excluding
routine workers' compensation claims) that would, individually or in the
aggregate, reasonably be expected to (x) have a material adverse effect on the
Business Condition of the Robotic Tape Business , (y) materially impair the
ability of Seller to perform its material obligations under this Agreement, or
(z) prevent or materially delay the consummation of the Acquisition.
Section 3.11. COMPLIANCE WITH LAWS. To the Seller's knowledge,
except as may be indicated in the Schedules hereto, the conduct of the business
of each of the Company and the Subsidiaries substantially complies with all
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto, except for violations or failures so to comply, if any, that
would not reasonably be expected to (x) have a material adverse effect on the
Business Condition of the Robotic Tape Business, (y) materially impair the
ability of Seller to perform its material obligations under this Agreement, or
(z) prevent or materially delay the consummation of the Acquisition. This
Section 3.11 does not relate to Employee Benefits matters (for which Section 6.1
is applicable), Tax Matters (for which Section 7.1 is applicable) or
Environmental Matters (for which Section 3.16 is applicable).
Section 3.12. INSURANCE. Each of the Company and the Subsidiaries is
covered by valid and currently effective insurance policies issued in favor of
Seller or one or more wholly owned subsidiaries of Seller and/or the Company or
a Subsidiary or is covered by self-insurance programs through Seller that, in
the reasonable judgment of Seller, are customary for companies of similar size
in the industry and locale in which it operates. All such policies are in full
force and effect, all premiums due thereon have been paid and Seller, the
Company, and the Subsidiaries have complied with the provisions of such
policies, except for failures to be in full force and effect, to pay premiums
and to comply which, individually or in the aggregate, would not reasonably be
expected to (x) have a material adverse effect on the Business Condition of the
Robotic Tape Business, (y) materially impair the ability of Seller to perform
its material obligations under this Agreement, or (z) prevent or materially
delay the consummation of the Acquisition.
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Section 3.13. CONTRACTS. To Seller's knowledge, Schedule 3.13
contains a complete and accurate list of all material contracts with a value
in excess of $ 400,000 which the Company is a party or by which the Company
is bound, (the "Material Contracts"). Except as set forth on Schedule 3.13
or 6.1(a), none of the Company or any of the Subsidiaries is a party to any
employment or consulting agreement requiring payments of base compensation in
excess of $ 200,000 per year. Except as set forth on Schedule 3.13, the
Company is not party to any material contract that (a) is a distributor or
manufacturer's representative contract which is not terminable on six months'
(or less) notice, (b) is a joint venture or similar contract or agreement,
(c) is a contract that is material to the Robotic Tape Business which is
terminable by the other party thereto upon a change of control of the
Company, (d) is a note, mortgage, indenture, other obligation, agreement or
other instrument for or relating to any lending or borrowing (including
assumed debt) of $1,000,000 or more relating to any properties or assets of
the Robotic Tape Business, or (e) is any other type of contract, agreement or
arrangement, entered into other than in the ordinary course of business,
involving an estimated total future payment or payments in excess of
$400,000. With respect to the Material Contracts, except as set forth on
Schedule 3.13(c), to the Seller's knowledge, all of the Material Contracts
are valid, binding and enforceable in accordance with their term against each
party thereto and are in full force and effect, neither to Seller's
knowledge, any other party to any Material Contract, is in material breach
thereof or material default thereunder, and there does not exist under any
provision thereof, as of the date hereof, any event that, with the giving of
notice or the lapse of time or both, would constitute such a breach or
default, and, to the Seller's knowledge, the Company has not received
notice, that any party to any Material Contract intends to terminate such
Material Contract except for such breaches, defaults and events as to which
requisite waivers or consents have been or are obtained or which would not,
individually or in the aggregate, reasonably be expected to (x) have a
material adverse effect on the Business Condition of the Robotic Tape
Business, (y) materially impair the ability of Seller to perform its material
obligations under this Agreement, or (z) prevent or materially delay the
consummation of the Acquisition. Other than employment agreements disclosed
on Schedule 3.13, no representation or warranty is made with respect to any
contract to which any Subsidiary is a party.
Section 3.14. BROKERS, FINDERS, ETC. Neither Seller or its wholly
owned subsidiaries nor the Company or any Subsidiary has employed any broker,
finder, consultant or other intermediary in connection with the transactions
contemplated by this.
Section 3.15. TRANSACTIONS WITH AFFILIATES. Except as set forth in
the notes to the Financial Statements and the subcontracts with Seller or those
Internal Work Agreements with Seller that are to be converted to purchase orders
as contemplated by this Agreement, none of the Company or any of the
Subsidiaries (a) has any outstanding contract, agreement or other arrangement
with Seller or any of its affiliates which will continue in effect subsequent to
the Closing or (b) other than the movement of monetary assets pursuant to
Seller's cash management system, has engaged in any transaction outside the
ordinary course of business consistent with past practice, except as
contemplated by Section 5.7 and Section 5.9, with Seller or its affiliates
(other than the Company and the Subsidiaries) since March 30, 1998 which was (x)
material to
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the Robotic Tape Business taken as a whole or (y) undertaken in contemplation of
any of the transactions contemplated by this Agreement.
Section 3.16. ENVIRONMENTAL MATTERS. To the Seller's knowledge,
(a) The Robotic Tape Business and any property now owned, leased or
operated by Seller are in compliance with all applicable Environmental Laws
except where the failure to be in compliance would not, individually or in the
aggregate, reasonably be expected to (x) have a material adverse effect on the
Business Condition of the Robotic Tape Business, (y) materially impair the
ability of Seller to perform its material obligations under this Agreement, or
(z) prevent or materially delay the consummation of the Acquisition.
(b) The Robotic Tape Business has or has applied for all Licenses
required under Environmental Laws for the operation of the Robotic Tape Business
as presently conducted (the "ENVIRONMENTAL PERMITS") and there are no
violations, and no pending, or, to the knowledge of Seller, threatened,
investigations or proceedings with respect to such Environmental Permits except
where the failure to have such Environmental Permits or where the violation,
investigation or proceeding relating thereto would not, individually or in the
aggregate, reasonably be expected to (x) have a material adverse effect on the
Business Condition of the Robotic Tape Business, (y) materially impair the
ability of Seller to perform its material obligations under this Agreement, or
(z) prevent or materially delay the consummation of the Acquisition.
(c) No written notice, notification, demand, request for information,
citation, summons, complaint or order has been received by, is pending, or, to
the knowledge of Seller, threatened by any Person against, any part of the
Robotic Tape Business nor has any material penalty been assessed against any of
the Robotic Tape Business with respect to (1) any alleged violation of any
Environmental Law or liability thereunder or (2) Seller's potential
responsibility for the Release of Hazardous Substance at any site, other than
where such notice, notification, demand, request for information, citation,
summons, complaint or order has been fully resolved, or where resolution would
not, individually or in the aggregate, reasonably be expected to (x) have a
material adverse effect on the Business Condition of the Robotic Tape Business,
(y) materially impair the ability of Seller to perform its material obligations
under this Agreement, or (z) prevent or materially delay the consummation of the
Acquisition.
(d) Except as set forth on Schedule 3.16, (1) no Release of Hazardous
Substance has occurred from, upon, below, into or on at any property now or
previously owned, leased or operated by any part of the Robotic Tape Business,
(2) no Hazardous Substance has been discharged, generated, treated,
manufactured, handled, stored, transported, emitted, released or is present at
any property now or previously owned, leased or operated by any part of the
Robotic Tape Business in violation of any Environmental Law and (3) Seller has
not generated, transported, treated, stored, disposed of, or arranged for the
disposal of any Hazardous Substance which has resulted in or contributed to a
violation of any Environmental Laws or a Release of Hazardous Substance at any
site, which circumstance, individually or in the aggregate, would reasonably be
expected to (x) have a material adverse effect on the Robotic Tape Business, (y)
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materially impair the ability of Seller to perform its material obligations
under this Agreement, or (z) prevent or materially delay the consummation of the
Acquisition.
Except as set forth in Schedule 3.16, there has been no environmental
investigation conducted of which Seller has knowledge in relation to the Robotic
Tape Business or any property or facility now or previously owned or leased with
respect to the Robotic Tape Business with respect to any matter which has had or
would, individually or in the aggregate, reasonably be expected to (x) have a
material adverse effect on the Robotic Tape Business, (y) materially impair the
ability of Seller to perform its material obligations under this Agreement, or
(z) prevent or materially delay the consummation of the Acquisition.
Section 3.17. YEAR 2000. The Company has adopted and implemented a
commercially reasonable plan to investigate and correct any "year 2000 problems"
associated with (i) the operation of the Company's business; and (ii) the
products manufactured and distributed by the Company. The Seller, however, does
not represent and warrant that this plan will find and correct all "year 2000
problems" which may arise in connection with the operation of the Company's
business or the products manufactured by the Company.
Section 3.18. SECURITY CLEARANCES. Except as set forth in Schedule
3.18, (a) since January 1, 1998, the US Department of Defense has not terminated
or refused to renew any security clearance of an employee of the Company and (b)
all employees have the appropriate level of security clearance for the tasks
they are asked to perform for the Company.
Section 3.19 NO IMPLIED REPRESENTATION. Notwithstanding anything
contained in this Article III or any other provision of this Agreement, it is
the explicit intent of each party hereto that Seller is making no representation
or warranty whatsoever, express or implied, beyond those expressly given in this
Agreement, including any implied warranty or representation as to condition,
merchantability, or suitability as to any of the properties or assets of the
Robotic Tape Business and it is understood that, except for the representations
and warranties explicitly given in this Agreement, Buyer takes the Robotic Tape
Business as is and where is. It is understood that any cost estimates,
projections or other predictions contained or referred to in the Schedules or in
the offering materials that have been provided to Buyer are not and shall not be
deemed to be representations or warranties of Seller.
Section 3.20 PROPRIETARY INFORMATION AGREEMENTS. Set forth on
Schedule 3.20 is the form Confidentiality Intellectual Property and
Non-Competition "Confidentiality Agreement" used by the Company. To Seller's
knowledge, the failure of any employee of the Company to execute any such
Confidentiality Agreement would not, individually or in the aggregate,
reasonably be expected to (x) have a material adverse effect on the Business
Condition of the Robotic Tape Business, (y) materially impair the ability of
Seller to perform its material obligations under this Agreement, or (z) prevent
or materially delay the consummation of the Acquisition. To Seller's knowledge,
none of its employees is in violation of such confidentiality agreements.
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Section 3.21. INTERPRETATION OF SCHEDULES. (a) Any matter set forth
in any Schedule shall be deemed to be referred to on all other Schedules to
which such matter logically relates and where such reference would be
appropriate and can reasonably be inferred from the matters disclosed on the
first Schedule as if set forth on such other Schedules.
(b) The inclusion of any item on any Schedule to this Agreement shall
not be construed as an indication that such item is material in any respect to
the party with respect to which such Schedule relates.
Section 3.22 CONSTRUCTION OF CERTAIN PROVISIONS. It is understood
and agreed that the specification of any dollar amount in the representations
and warranties contained in this Agreement or the inclusion of any specific item
in the Schedules or Exhibits is not intended to imply that such amounts or
higher or lower amounts, or the items so included or other items, are or are not
material, and neither party shall use the fact of the setting of such amounts or
the fact of the inclusion of any such item in the Schedules in any dispute or
controversy between the parties as to whether any obligation, item or matter not
described herein or included in a Schedule or Exhibit is or is not material for
purposes of this Agreement.
Article IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 4.1. INCORPORATION; AUTHORIZATION; ETC. Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of Washington. Buyer has full corporate power to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance of Buyer's obligations hereunder and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Buyer and no other corporate proceedings or actions on the
part of Buyer, its Board of Directors or stockholders are necessary therefor.
The execution, delivery and performance of this Agreement will not (i) violate
any provision of the charter or bylaws or similar organizational instrument of
Buyer or any of its affiliates, (ii) violate any provision of, or be an event
that is (or with the passage of time will result in) a violation of, or result
in the acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under, or result in
the imposition of any lien upon or the creation of a security interest in any of
Buyer's or any of its affiliates' assets or properties pursuant to, any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which Buyer or any of its affiliates is a party or by which Buyer
or any of its affiliates is bound, or (iii) violate or conflict with any other
material restriction of any kind or character to which Buyer or any of its
affiliates is subject, that, in the case of clauses (ii) and (iii), would,
individually or in the aggregate, reasonably be expected to (x) have a material
adverse effect on the Business Condition of the Robotic Tape Business of Buyer
and its subsidiaries, taken as a whole, (y) materially impair Buyer's ability to
perform its obligations under this Agreement, or (z) prevent or materially delay
the consummation of the Acquisition. This Agreement has been duly executed and
delivered by
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Buyer, and, assuming the due execution hereof by Seller, this Agreement
constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
Section 4.2. BROKERS, FINDERS, ETC Buyer has not employed, any
broker, finder, consultant or other intermediary in connection with the
transactions contemplated by this Agreement.
Section 4.3. LICENSES, APPROVALS, OTHER AUTHORIZATIONS, CONSENTS,
REPORTS, ETC Other than the HSR Act, no filing with, notice to or
authorization, consent or approval of, any Governmental Authority is required to
be made, filed, given or obtained by Buyer or any of its affiliates, in
connection with the consummation of the Acquisition except for (i) those that
become applicable solely as a result of the specific regulatory status of
Seller, the Company and the Subsidiaries or (ii) the failure to make, file, give
or obtain which would not, individually or in the aggregate, reasonably be
expected either to (x) have a material adverse effect on the Business Condition
of Buyer and its subsidiaries, taken as a whole, (y) materially impair Buyer's
ability to perform its obligations under this Agreement, or (z) prevent or
materially delay the consummation of the Acquisition.
Section 4.4. ACQUISITION OF SHARES FOR INVESTMENT. Buyer has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its purchase of the Shares. Buyer confirms
that Seller has made available to Buyer the opportunity to ask questions of the
officers and management employees of the Company and to acquire additional
information about the business and financial condition of the Robotic Tape
Business. Buyer is acquiring the Shares for investment and not with a view
toward or for sale in connection with any distribution thereof, or with any
present intention of distributing or selling the Shares. Buyer agrees that the
Shares may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), except pursuant to an exemption from
registration under the Securities Act, and without compliance with foreign
securities laws, in each case, to the extent applicable.
Section 4.5. FINANCIAL CAPABILITY. Buyer has immediately available
cash or financing available in the amount of the Adjusted Purchase Price and
Buyer will have available as of the Closing Date from its immediately available
cash funds sufficient to pay the Purchase Price. As of the Closing Date, Buyer
will have common shareholders' equity, computed in accordance with GAAP, of not
less than $ 50,000,000.
Article V.
COVENANTS OF SELLER AND BUYER
Section 5.1. INVESTIGATION OF BUSINESS; ACCESS TO PROPERTIES, RECORDS
AND EMPLOYEES.
(a) After the date hereof, Seller shall cause the Company and the
Subsidiaries to afford to representatives of Buyer reasonable access to their
respective offices, plants, properties,
-16-
books and records during normal business hours, in order that Buyer may have
full opportunity to make such investigations as it desires of the affairs of the
Company and the Subsidiaries; PROVIDED, HOWEVER, that such investigation shall
not unreasonably disrupt the personnel and operations of any of Seller, the
Company or any of the Subsidiaries. If, in the course of any investigation
pursuant to this Section 5.1, Buyer discovers any breach of any representation
or warranty contained in this Agreement or any circumstance or condition that
upon Closing would constitute such a breach, Buyer covenants that it will
promptly so inform Seller.
(b) Any information provided to Buyer or its representatives pursuant
to this Agreement shall be held by Buyer and its representatives in accordance
with, and shall be subject to the terms of the Confidentiality Agreement dated
June 11, 1998 by and between Seller and Buyer, which is hereby incorporated in
this Agreement as though fully set forth herein.
(c) Buyer agrees to (i) hold all of the books and records of the
Company and the Subsidiaries existing on the Closing Date and not to destroy or
dispose of any thereof for a period of five (5) years from the Closing Date or
such longer time as may be required by law, and thereafter, if it desires to
destroy or dispose of such books and records, to offer first in writing at least
sixty (60) days prior to such destruction or disposition to surrender them to
Seller and (ii) following the Closing Date to afford Seller, its accountants and
counsel, during normal business hours, upon reasonable request, full access to
such books, records and other data and to the employees of the Company and any
of the Subsidiaries to the extent that such access may be requested for any
legitimate purpose at no cost to Seller (other than for reasonable out-of-pocket
expenses); PROVIDED, HOWEVER, that nothing herein shall limit any of Seller's
rights of discovery. Buyer shall have the same rights, and Seller the same
obligations, as are set forth above in this Section 5.1(c) with respect to any
material non-privileged records of Seller pertaining to the Company and any of
the Subsidiaries that are retained by Seller, with the exception of Returns
relating to Taxes that, pursuant to Article VII, are not the responsibility of
Buyer.
Section 5.2. BEST EFFORTS; OBTAINING CONSENTS.
(a) Subject to the terms and conditions herein provided, Seller and
Buyer each agrees to use its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable, the
transactions contemplated by this Agreement and to cooperate with the other in
connection with the foregoing, including using its best efforts (i) to obtain
all necessary waivers, consents and approvals from other parties to material
loan agreements, leases and other contracts, (ii) to obtain all consents,
approvals and authorizations that are required to be obtained under any federal,
state, local or foreign law or regulation, (iii) to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties hereto to consummate the Acquisition, (iv) to effect all
necessary registrations and filings including filings under the HSR Act and
submissions of information requested by Governmental Authorities, and (v) to
fulfill all conditions to this Agreement (it being understood that such efforts
shall not include any requirement of Seller or any to expend material sums of
money or grant any material
-17-
financial or other accommodation). Seller and Buyer further covenant and agree,
with respect to a threatened or pending preliminary or permanent injunction or
other order, decree or ruling or statute, rule, regulation or executive order
that would adversely affect the ability of the parties hereto to consummate the
Acquisition, to use their respective reasonable best efforts to prevent the
entry, enactment or promulgation thereof, as the case may be (it being
understood that such efforts shall not include any requirement of Seller to
expend material sums of money or grant any material financial or other
accommodation).
(b) Subject to Section 5.2(c), Buyer agrees to use its best efforts to
resolve such objections, if any, as the Antitrust Division of the Department of
Justice (the "ANTITRUST DIVISION") or the Federal Trade Commission (the "FTC"),
the German Cartel Authority ("Cartel Authority") or the EU Competition
Commission ("EU Commission") may assert with respect to the Acquisition under
any antitrust law prior to the expiration of any applicable waiting period under
the HSR Act or applicable governmental law or regulation, as the case may be.
(c) Without limiting the generality of Section 5.2(b), Buyer and
Seller agree as follows:
(i) in the event a suit is threatened or instituted by any Person or
Governmental Authority challenging the Acquisition as violative of any federal
or state antitrust law, Buyer shall use its best efforts to resist or resolve
such suit; in the event any injunction, temporary restraining order or other
order is issued in any such suit which has the effect of preventing the
consummation of the Acquisition, Buyer will advise the court hearing such suit
of Buyer's willingness to effect the sales, transfers, divestitures or other
dispositions of businesses, properties, product lines or assets that are
described in this Section 5.2(c).
(ii) Buyer shall take all reasonable actions and enter into all
reasonable agreements and generally act in a reasonable manner as may be
necessary to obtain timely governmental or regulatory action or nonaction,
waiver, consent, extension or approval to the consummation of the Acquisition;
in this regard, Buyer shall, if, and only if, it deems it reasonable offer and
agree to the sale, transfer, divestiture or other disposition (and to such other
action in connection therewith as may be reasonably required) of any or all
businesses, properties, product lines or assets of Buyer or any of its
affiliates, or of any of the Company, or the Subsidiaries, that are required to
be divested (on such terms and conditions as may be reasonably required and to
such purchaser as is approved),
(A) by the Antitrust Division or the FTC in order to resolve
such objections as either such agency may have to the Acquisition under any
antitrust law, or
(B) by any federal or state court in any suit threatened or
brought by a private party or Governmental Authority challenging the
Acquisition as violative of any antitrust law, or in order to avoid the
entry of, or to effect the dissolution of, any injunction, temporary
restraining order or other order which has the effect of preventing the
consummation of the Acquisition or otherwise to resolve and settle any such
suit (it being
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understood and agreed that in any such suit Buyer and Seller shall at the
outset thereof, and at all times thereafter, continue to offer and urge the
entry of an order permitting the Acquisition to be consummated).
(d) The entry by a court, in any suit brought by a private party or
Governmental Authority challenging the Acquisition as violative of any antitrust
law, of an order or decree permitting the Acquisition but requiring that any of
the businesses, properties, product lines or assets of Buyer or any of its
affiliates, or any of the Company or the Subsidiaries be held separate
thereafter, shall be, if such requirement is deemed unreasonable by Buyer,
deemed to be a ground for termination under Section 8.2 or 8.3 of the Agreement.
(e) In connection with any sale, transfer, divestiture or other
disposition to be made by either Buyer or the Company or the Subsidiaries in
accordance with this Section 5.2, Buyer and Seller shall provide each other full
access in the manner and of the nature contemplated by Section 5.1 of this
Agreement in order to enable each of such parties to effect such sales,
transfers, divestitures or other dispositions.
(f) In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Section 5.2, the proper
officers and/or directors of Buyer or any of its affiliates, or any of the
Company and the Subsidiaries, shall take all such necessary action.
(g) Either party hereto shall promptly inform the other of any
material communication from the Antitrust Division, the FTC or any other
Governmental Authority regarding any of the transactions contemplated hereby.
If either party or any affiliate thereof receives a request for additional
information or documentary material from any such Governmental Authority with
respect to the transactions contemplated hereby, then such party will endeavor
in good faith to make, or cause to be made, as soon as reasonably practicable
and after consultation with the other party, an appropriate response in
compliance with such request. Buyer will advise Seller promptly in respect of
any understandings, undertakings or agreements (oral or written) which Buyer
proposes to make or enter into with the Antitrust Division, the FTC or any other
Governmental Authority in connection with the transactions contemplated hereby.
Section 5.3. FURTHER ASSURANCES. Seller and Buyer agree that, from
time to time, whether before, at or after the Closing Date, each of them will
execute and deliver such further instruments of conveyance and transfer and take
such other action as may be reasonably required or desirable to carry out the
purposes and intents of this Agreement, including (i) allocating rights and
obligations under contracts, agreements and other arrangements, if any, of
Seller, on the one hand, and of the Company or the Subsidiaries, on the other
hand, that relate to both the Robotic Tape Business and the other businesses of
Seller and (ii) determining whether to enter into any service or other sharing
agreements on a mutually acceptable arm's-length basis that may be necessary to
assure a smooth and orderly transition. In case at any time after the Closing
Date any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary or desirable action.
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Section 5.4. CONDUCT OF BUSINESS. From the date hereof through the
Closing, except as disclosed on Schedule 5.4 or otherwise provided for in, or
contemplated by, this Agreement, and, except as consented to or approved by
Buyer in writing, Seller covenants and agrees that:
(a) each of the Company and the Subsidiaries shall operate its
business in the ordinary and usual course in all material respects in accordance
with past practices;
(b) none of the Company or any of the Subsidiaries shall issue, sell
or agree to issue or sell (i) any shares of its capital stock or other equity
interests, or (ii) any securities convertible into or evidencing the right to
purchase, or options with respect to, or warrants to purchase or rights to
subscribe for, any shares of its capital stock or other equity interests;
(c) except in the ordinary course of business or as required by law
or contractual obligations or other understandings or arrangements existing on
the date hereof, none of the Company or any of the Subsidiaries shall (i)
increase in any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its directors, officers or other
employees; (ii) pay or agree to pay any pension, retirement allowance or other
employee benefit to any such director, officer or employee, whether past or
present; (iii) enter into any new employment, severance, consulting or other
compensation agreement with any existing director, officer or employee; or (iv)
commit itself to any additional pension, profit sharing, deferred compensation,
group insurance, severance pay, retirement or other employee benefit plan, fund
or similar arrangement or amend or commit itself to amend any of such plans,
funds or similar arrangements in existence on the date hereof; PROVIDED,
HOWEVER, that bonuses or other incentives in connection with this sale (other
than severance payments) as set forth on Schedule 5.4(c) may be paid by the
Company on or prior to the Closing;
(d) except as otherwise provided for in or contemplated by this
Agreement, none of the Company or any of the Subsidiaries shall (i) declare,
except in the ordinary course of business consistent with past practice, any
dividend or make any distribution with respect to its stock, (ii) assume, incur
or guarantee, except in the ordinary course of business consistent with past
practice, any obligation for borrowed money, (iii) cancel or compromise, except
in the ordinary course of business consistent with past practice, any debts owed
to it, (iv) waive or release any rights of material value, or (v) close any
plants or any other material facilities; provided, however, that the transfer of
Company operations from Garland, Texas to Englewood, Colorado and the transfer
of the Grau Sales and Marketing headquarters from Boehmenkirch, Germany to
Frankfurt, Germany, shall expressly be permitted;
(e) except in the ordinary course of business or as otherwise
provided for in or contemplated by this Agreement, none of the Company or any of
the Subsidiaries shall (i) sell, transfer, distribute as a dividend in kind or
otherwise dispose of any of its material assets (other than inventory in the
ordinary course of business consistent with past practice, (ii) create or permit
to exist any new material security interest, lien or encumbrance on its
properties or assets, (iii) enter into any joint venture, partnership or other
similar arrangement or form any other new
-20-
material arrangement for the conduct of its business, or (iv) purchase any
assets or securities of any Person;
(f) Seller or one of its wholly owned subsidiaries (with respect to
matters relating to the Company or any of the Subsidiaries), and the Company and
each of the Subsidiaries shall (i) process insurance claims, pay insurance
premiums and otherwise administer the risk management system and (ii) process
receipts, process and pay bills, in each case in the ordinary course of business
consistent with past practice except as otherwise provided for in or
contemplated by this Agreement; and
(g) none of the Company or any of the Subsidiaries shall enter into
any agreement to take any action prohibited by this Section 5.4.
Section 5.5 PRESERVATION OF BUSINESS. From the date hereof to the
Closing Date, subject to the terms and conditions of this Agreement, Seller
shall, and shall cause the Company and the Subsidiaries, to use reasonable
efforts, to the extent consistent with past practices, to preserve the
businesses of the Company and the Subsidiaries intact, to keep available to the
Company and the Subsidiaries and Buyer the services of the employees of the
Company (other than those employees terminating employment with Company in
conjunction with or as a result of the transfer of the Company's operations to
Colorado and Frankfurt, Germany) and the Subsidiaries to preserve the good will
of customers and others having business relations with the Company or any of the
Subsidiaries and to maintain consistent with past practice and good business
judgment insurance in full force and effect with responsible companies,
comparable in amount to that in effect on the date of this Agreement, subject to
the availability thereof at costs not materially greater than at present.
Section 5.6 CONFIDENTIALITY The parties acknowledge and agree that
this Agreement and the transactions contemplated herein are confidential.
Accordingly, prior to Closing, neither party shall, without the prior written or
oral consent of the other party, disclose to third parties (other than their
respective directors, officers, employees, representatives, financiers and
advisors) this Agreement, the contents hereof, negotiations with respect thereto
or the transactions contemplated hereby. Furthermore, Seller shall not, prior
to or following Closing, without the prior written consent of Buyer, disclose to
third parties any confidential information of Buyer acquired in connection with
the negotiation and consummation of the transaction contemplated herein except
as required by operation of law.
Section 5.7 INTERCOMPANY ACCOUNTS; GUARANTIES.
(a) Other than the EMASS/Grau Loan, which shall expressly be
permitted, effective as of the Closing, all intercompany receivables or payables
and loans then existing between Seller, on the one hand, and the Company or any
of the Subsidiaries, on the other hand, shall be settled by way of capital
contribution (with respect to intercompany payables or loans due to Seller or
any Non-Robotic Tape affiliate) or by way of adjustment to the Initial Purchase
Price as set forth in Section 2.4.
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(b) Buyer shall cause itself or one or more of its affiliates to be
substituted in all respects for Seller, effective as of the Closing, in respect
of all obligations of Seller under each of the guaranties, letters of credit,
letters of comfort and surety bonds obtained by Seller or any of Seller's
subsidiaries or affiliates for the benefit of the Company or any of the
Subsidiaries, which guaranties, letters of credit, letters of comfort, and
surety bonds are set forth in Schedule 5.7 (the "GUARANTIES"). If Buyer is
unable to effect such a substitution with respect to any Guaranty after using
its best efforts to do so, then, (i) if the aggregate obligation underlying such
Guaranties is less than $5,000,000, then Buyer shall execute a guarantee in
favor of Seller or any Subsidiary, as the case may be, which guaranty shall be
secured by the assets of the Company or the Subsidiaries, as the case may be,
satisfactory to Seller, and (ii) if the aggregate obligation underlying such
Guaranties exceeds $5,000,000, Buyer shall obtain letters of credit, on terms
and from financial institutions satisfactory to Seller, with respect to the
obligations covered by each of the Guaranties for which Buyer does not effect
such substitution.
(c) As a result of the substitution contemplated by the first
sentence of Section 5.7(b) and/or the letter or letters of credit contemplated
by the second sentence thereof, Seller shall from and after the Closing cease to
have any obligation whatsoever arising from or in connection with the Guaranties
except for obligations, if any, for which will be fully indemnified pursuant to
a letter of credit obtained by Buyer.
Section 5.8. PERFORMANCE OF COMPANY OBLIGATIONS. Buyer agrees from
and after the Closing Date to cause the Company and the Subsidiaries to perform
and fulfill all of their respective obligations and commitments whether existing
as of the Closing Date or arising or incurred thereafter.
Section 5.9. INSURANCE.
(a) From and after the Closing, Seller shall use commercially
reasonable efforts (which shall not require acceptance of adverse changes in its
existing insurance policies or other unreasonably adverse effects on Seller),
subject to the terms of the Seller's Insurance Policies (as hereinafter
defined), to retain the right to make claims and receive recoveries, subject to
subsection 5.9(e), for the benefit of the Company and the Subsidiaries as well
as for the benefit of Seller and its affiliates, under any insurance policies
(except for "claims-made" policies which provide for coverage only if that
policy is in effect and/or the Company is a subsidiary of Seller at the time a
claim is made to the related insurer) maintained at any time prior to the
Closing by Seller and its predecessors and its affiliates and their predecessors
(collectively, the "SELLER'S INSURANCE POLICIES"), covering any loss, liability,
claim, damage or expense relating to the assets, business, operations, conduct,
products and employees (including former employees) of the Company, the
Subsidiaries, and each of their respective predecessors that relates to or
arises out of occurrences prior to the Closing (a "CLAIM"). Seller agrees to
use commercially reasonable efforts (which shall not require acceptance of
adverse changes in its existing insurance policies or other unreasonably adverse
effects on Seller) so that the Company and the Subsidiaries shall have the
right, power and authority, subject to any required consent of the carriers
under the Seller's Insurance Policies, in the name of Seller or any of its
affiliates to make directly any Claims under the Seller's Insurance Policies and
to receive directly recoveries thereunder.
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(b) Buyer agrees to reimburse, indemnify and hold Seller and its
affiliates harmless for out-of-pocket costs and expenses (including any
retroactive premiums and current or prospective premium increases imposed on
Seller or any of its affiliates identifiable as to Claims, but not including
normal internal administrative expenses) incurred after the Closing Date to
carry out any obligations pursuant to this Section 5.9 or as a result of Claims
being made. Buyer will pay and bear all amounts relating to any self retention
or deductible and any gaps in or limits on coverage applicable to a Claim
asserted at any time (but not with respect to any claim made by Seller and the
Subsidiaries that is not a Claim); PROVIDED THAT such amount shall be reduced to
the extent of any prior claim payments made in respect of a deductible under
such Seller Insurance Policy whether made by Seller or the Company or the
Subsidiaries. In the event that any legal action, arbitration, negotiation or
other proceedings are required for any of the Company or the Subsidiaries to
assert coverage against any insurer or to perfect its Claim, (i) Buyer shall, to
the extent possible, do so at its own expense or (ii) if Buyer is not permitted
to assert coverage or perfect a Claim, Seller shall do so, and, in either event,
Buyer shall hold harmless and indemnify Seller and its affiliates for any costs
and expenses that they might incur because of such action (other than the
incurrence of normal internal administrative expenses).
(c) Seller shall use commercially reasonable efforts (i) to cooperate
fully and to cause its affiliates to cooperate fully with Buyer, the Company and
the Subsidiaries in submitting good faith Claims on behalf of the Company and
the Subsidiaries under the Seller's Insurance Policies, (ii) to execute any and
all agreements and other documents, including maintaining and reporting
quarterly the amount of the aggregate limits under such insurance policies and
including limited powers of attorney, on behalf of the Company and the
Subsidiaries which are reasonably necessary or appropriate in connection with
any of the foregoing, including the assignment to the Company and the
Subsidiaries of any right to receive payments under all such policies in the
event consent to such assignment can be or is obtained from any insurer, and
(iii) to pay promptly over to Buyer any and all amounts received by Seller or
its affiliates under such policies with respect to Claims.
(d) Seller and its affiliates shall retain ownership and custody of
the Seller's Insurance Policies and any and all service contracts, claim
settlements and all other insurance records relating thereto and Buyer, the
Company and the Subsidiaries shall have access to and the right to make copies
of all such documents and records upon the reasonable request to Seller or its
affiliates. If Seller desires to destroy any such policies or records it shall
first notify Buyer which shall have the right to cause the same to be delivered
to it upon reimbursing Seller for reasonable out-of-pocket handling and shipping
expenses.
(e) Seller agrees that, with respect to coverage of occurrences prior
to the Closing, it shall use commercially reasonable efforts to prevent any of
Seller's Insurance Policies or the coverage provided to the Company and the
Subsidiaries thereunder from being terminated or voided or reduced in any way
(which shall not include agreeing to payments or changes in terms or conditions
which are commercially unreasonable). If Seller receives notice of any such
termination, voiding or reduction of any such policy or any written notice
regarding any material Claim, Seller shall advise Buyer promptly.
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(f) Buyer acknowledges that Seller and its affiliates shall have no
responsibility for obtaining any insurance or bearing any loss, liability,
claim, damage or expense relating to the assets, business, operations, conduct,
products and employees (including former employees) of the Company and the
Subsidiaries that relates to or arises out of occurrences on or subsequent to
the Closing Date. Except for its obligations to perform the covenants set forth
in this Section 5.9, nothing herein shall create any obligation on the part of
Seller to provide any insurance coverage for any loss, liability, Lien, damage
or expense of Buyer, the Company and the Subsidiaries.
(g) Nothing contained herein to the contrary shall prohibit Seller
from managing its risk management program with respect to post-Closing periods,
including the cancellation or reduction of the amount or scope of insurance
coverage with respect to post-Closing periods, in a manner consistent with its
reasonable business judgment as applied to the continuing operations of Seller
and its affiliates (other than the Company and the Subsidiaries). Seller shall
endeavor to consult with and cooperate with Buyer to minimize the cost or
expense of any such action to Buyer, PROVIDED THAT Seller shall not bear any
additional costs as a result of any such cooperation.
Section 5.10 GRAU CREDIT AGREEMENTS; EMASS GRAU CREDIT AGREEMENT.
Prior to Closing, Seller covenants and agrees to
(a) discharge or cause to be discharged all obligations outstanding
under the Grau Credit Agreements and to terminate the Grau Credit
Agreements, and
(b) to cause the Company and Grau to enter into a 48-month term loan
agreement in the principal amount of the obligations discharged under the
Grau Credit Agreements (the "EMASS/Grau Loan Agreement"), such EMASS/Grau
Loan Agreement to be in form mutually acceptable to Buyer and Seller.
Section 5.11 RELOCATION EXPENSES. Seller shall assume all reasonable
expenses related to the relocation of the Company's U.S. headquarters from
Garland, Texas to Englewood Colorado, as set forth on Exhibit C. Buyer shall
submit invoices to Seller on a monthly basis for such expenses incurred by Buyer
subsequent to Closing.
Section 5.12 TRANSITION SERVICES. Seller shall provide transition
services to Buyer in accordance with Transition Services Agreement set forth as
Exhibit D.
Section 5.13 POST-CLOSING CONSIDERATION OF COMPANY.
(a) Buyer acknowledges and agrees that selection of suppliers for the
Seller's business is in Seller's sole discretion. Seller, however, agrees that,
in the absence of contractual or legal requirements, Seller will not, without
cause, discontinue consideration of Buyer as a supplier to Seller for products
relating to the Robotic Tape Business.
(b) Buyer and Seller agree to cause the Company to deposit the source
code for AMASS, FileServ, VolServ, DAS and AMU ("Escrowed Source Code") with an
approved Escrow Agent ("Escrow Agent") pursuant to an Escrow Agreement ("Escrow
Agreement"), such
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Escrow Agreement to be executed and such Escrowed Source Code to be deposited
not later than the Closing Date. The Buyer shall cause the Company to deposit
with the Escrow Agent in accordance with the Escrow Agreement any and all
updates, enhancements and modifications to the Escrowed Source Code. In
addition, the Buyer shall be responsible for causing the Company to deposit with
the Escrow Agent the following additional documentation in the Company's
possession as Seller may request: License String Algorithm; interface control
documents for ER 90 recorders, HIPPI interface and IPI interface; firmware,
drawings and technical specifications for DataTower, AML/2, AML/E and AML/J (the
foregoing, combined with the Escrowed Source Code, may be referred to herein as
"Escrowed Material") in accordance with the Escrow Agreement. As soon as
commercially reasonable after the Closing Date, and without undue disruption to
the Company's operations, Buyer shall cause the Company to deposit all Escrowed
Material (other than Escrowed Source Code, which shall be deposited prior to
Closing) with the Escrow Agent in accordance with the Escrow Agreement. All
such expenses related to copying Escrowed Material as well as maintenance of the
Escrow Agreement and compensation of the Escrow Agent shall be for the account
of the Seller. The Escrow Agent shall release Escrow Material to Seller
immediately upon such notice from Seller. Seller shall have the right to access
Escrow Material upon written notice to the Escrow Agent that the Company has
failed to perform or is no longer able to perform its maintenance contract
obligations to Seller or Seller's customers or end-users under subcontracts or
purchase orders between Seller and the Company existing on the Closing Date
("Existing Contracts"). If the Company fails or is no longer able to perform
its maintenance contract obligations to Seller or Seller's customers or end
users, then Seller will be entitled to a grant from the Company to utilize such
intellectual property as is necessary to support Seller's customers or end-users
for the sole purpose of providing support for such customers or end users under
Existing Contracts and such other support as may be reasonably required.
Disputes between Buyer or Company and Seller regarding the Company's failure or
inability to perform its maintenance contract obligations shall not delay the
Escrow Agent from releasing the Escrow Material. In the event that it is
ultimately determined that Seller improperly performed services that would
otherwise have been performed by the Company under Existing Contracts and it is
ultimately determined that the Company actually performed, or was ready, willing
and able to perform, its obligations under such Existing Contracts, then
Seller's damages under this Section 5.13 shall be limited to lost profits under
the Existing Contracts under which Seller performed services and the Company's
reasonable costs of pursuing such claim (including reasonable attorney's fees
and expenses).
Section 5.14. LICENSE TO COMPANY; PROSECUTION RIGHTS.
(a) LICENSE FROM SELLER TO COMPANY. Seller hereby grants to Company
a non-exclusive, irrevocable, worldwide, non-transferable (except as provided in
Section 5.14(b) below) royalty free, fully paid-up license under and to the
Licensed Patents to the extent necessary to make, have made, use, develop, have
developed, sell, offer for sale, distribute, export and import all mass data
storage products.
(b) TRANSFERABILITY. The license granted in Section 5.14(a) is not
transferable except to any successor in interest (whether by sale merger,
consolidation or otherwise) to all or
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substantially all of Company's business to which the subject matter of the
license relates, provided that any successor in interest agrees in writing to be
bound by all applicable provisions of this Agreement in the same way and to the
same extent that Company is bound.
(c) COMPANY'S DUTY TO ADVISE. The Buyer shall cause Company to use
its best efforts to discern any infringements on the Licensed Patents and to
report any event thereof promptly to the Seller. The Buyer and Company shall
assume no responsibility for discerning any acts of infringement which may occur
or of determining that acts which may or may not be infringement are
infringement. However, the Buyer shall cause Company to use commercially
reasonable efforts to notify the Seller of any instances of seeming infringement
by third parties.
(d) PARTIES' RIGHT TO SUE.
(i) In the event that the Seller shall not, within three (3)
years of the notice provided at section 5.14(c) regarding perceived
third-party infringement of the Licensed Patents, commence and
vigorously pursue an action to enjoin such infringement or resolve
such dispute through the execution of a License Agreement with such
third party, the Company shall be entitled, at its expense and for its
sole benefit, to commence the action in its name against such third
party or to sub-license it's rights under the Licensed Patents to the
third party. Any recoveries which shall be gained in any such action
or license agreement commenced by the Company shall be entirely the
Company's. Seller shall have the right, at its option, to grant to
the Company such a right to pursue legal action against the third
party or sub-license its patent rights to the third party at any time
prior to three (3) years from the notice provided in section 5.14(c).
(ii) At any time after giving such notice to Seller in Section
5.14(d)(i), the Company may request in writing ("Immediate Pursuit
Notice") that Seller immediately pursue alleged infringement of
Licensed Patents by any third party with annual sales in the Robotic
Tape segment of mass data storage products of less than $100,000,000
("Small Infringer"). Within ninety (90) days of receiving an
Immediate Pursuit Notice (the "Small Infringer Retention Decision
Period"), the Seller must decide whether to retain the right to
commence an action or sublicense such Small Infringer or to grant such
rights to the Company. If, on or before the expiration of the Small
Infringer Retention Decision Period Seller decides to retain such
rights of suit and licensing, then Seller shall be entitled to receive
seventy percent (70%) of the Net Licensing Royalty that the Seller
receives from the Small Infringer for any license to the Licensed
Patents, remitting thirty percent (30%) of such Net Licensing Royalty
to the Company. If, on or before the expiration of the Small Infringer
Retention Decision Period, Seller grants such rights to the Company,
then the Company shall be entitled to retain seventy percent (70%) of
the Net Licensing Royalty and the Seller shall be entitled to receive
thirty percent (30%) of the Net Licensing Royalty that the Buyer
receives from the Small Infringer for any sub-license to the
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Licensed Patents. If Seller decides to retain such rights with
respect to a Small Infringer as aforesaid, and at the earlier (A) of
twenty-one (21) months after Seller had informed the Company of such
foregoing decision Seller is not vigorously pursuing an action
against, or involved in good faith licensing negotiations with, such
Small Infringer, or (B) any time at which the Seller decides to cease
vigorous prosecution or licensing negotiations with such Small
Infringer, then the Company shall be entitled, at its expense and for
its sole benefit, to commence an action in its name against such Small
Infringer or to sub-license its rights under the Licensed Patents to
the Small Infringer, with any recoveries gained in any such action or
license agreement commenced by the Company belonging entirely to the
Company. The Seller undertakes to inform the Company promptly after
ultimately determining to cease pursuit of an action or sub-licensing
negotiations.
(e) SELLER'S RIGHT TO LICENSE THE LICENSED PATENTS TO A THIRD PARTY.
Seller shall have the right to grant a royalty bearing license under and to the
Licensed Patents to any third party so long as such license requires the third
party to pay to the Seller a license fee of at least five percent (5%) of the
gross sales price of the licensed products. The Seller must have the written
approval of the Buyer before granting any license under and to the Licensed
Patents if such license is in exchange for a royalty payment which is less than
five percent (5%) of the gross sales price of the licensed products. The Buyer
shall be entitled to receive thirty percent (30%) of the Net Licensing Royalty
that the Seller receives from any license that the Seller grants to a third
party under and to the Licensed Patents pursuant to this Section 5.14(e).
(f) DEFINITIONS. For the purposes of Sections 5.14 and 5.15, the
following terms shall have the following meanings:
"NET LICENSING ROYALTY" means the total royalty collected for any license
or sub-license under and to the Licensed Patents after a reduction of all
costs (including all litigation costs) associated with the procurement of
such license or sub-license.
"LICENSED PATENTS" means U.S. patents 5,214,768, U.S. patent 5,412,791,
U.S. patent 5,504,873, and all foreign counterparts thereof.
(g) REVERSION. On the third anniversary of the Closing Date, all
rights with respect to licensing and infringement actions as set forth in
Section 5.14(a) through 5.14(f) shall cease and all such rights with respect to
the Licensed Patents shall be vested in the Company; unless, prior to such third
anniversary Seller shall have taken and have ongoing on such date any
substantive action with respect to pursuit of an infringement action or
licensing third parties with respect to the Licensed Patents, in which case
Sections 5.14(a) through 5.14(f) shall survive indefinitely. For purposes of
this Agreement, "substantive action" shall include collecting royalties or
collection of payments under the settlement of an infringement agreement, filing
an action, or research or preparation therefor, including retention of counsel
for preparation of an infringement opinion with regard to a third-party's
product or conduct, or ongoing negotiations with an alleged infringer of such
Licensed Patents or their authorized representative.
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Section 5.15. RETENTION OF CERTAIN PATENT RIGHTS. With respect to
the patents listed on Schedule 3.6 ("Transferred Patents"), Buyer and Seller
agree that, prior to Closing, the Seller will cause the Company to grant to
Seller a non-exclusive, irrevocable, worldwide, non-transferable (except as
provided in the next sentence) royalty free, fully paid-up license under and to
the Transferred Patents to the extent necessary to make, have made, use,
develop, have developed, sell, offer for sale, distribute, export and import
products that Seller makes, or to continue businesses in which Seller is
engaged, as of the Closing Date (other than the business of the Company). Such
license granted in the previous sentence may be transferred to a buyer or
assignee of Seller's business or any product line.
Article VI.
EMPLOYEE BENEFITS
Section 6.1. EMPLOYEE BENEFIT PLANS.
Seller represents and warrants to Buyer as follows:
(a) Schedule 6.1(a) lists all material Employee Benefit Plans.
(b) All of the Employee Benefit Plans are, in all material respects,
in compliance with and have been administered in compliance with all applicable
requirements of law, including the Code and ERISA, and all contributions
required to be made to each such plan under the terms of such plan, ERISA or the
Code for all periods of time prior to the date hereof and the Closing Date have
been or will be, as the case may be, made or accrued.
(c) Neither the Company nor any of the Subsidiaries is required to
contribute to, or during the 5-year period ending on the Closing Date will have
been required to contribute to, any "multi-employer plan" as such term is
defined in Section 4001(a)(3) of ERISA.
(d) Except as otherwise set forth in Schedule 3.13 or Schedule
6.1(d), neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including severance, unemployment compensation, golden
parachute or otherwise) becoming due from the Company or any of the Subsidiaries
under any Employee Benefit Plan, (ii) materially increase any benefits otherwise
payable to any Company Employee under any Employee Benefit Plan or (iii) result
in the acceleration of the time of payment or vesting of any such benefits to
any material extent.
Section 6.2. COVENANTS.
(a) CONTINUATION OF EMPLOYMENT AND BENEFITS. Buyer agrees to
continue the employment of all Robotic Tape Employees on substantially the same
terms as those enjoyed by such Robotic Tape Employees immediately prior to the
Closing Date (all Robotic Tape Employees who continue as employees of the
Company, Buyer or any of their respective affiliates, "CONTINUING EMPLOYEES").
Buyer agrees, for a period of six (6) months after the Closing: (i) to provide
all Continuing Employees with incentive compensation programs,
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severance pay and welfare benefits, in each case no less favorable than the
incentive compensation programs, severance pay and welfare benefits provided to
them immediately before the Closing; (ii) to provide Continuing Employees with
other employee benefits that are no less favorable in the aggregate than those
provided to them immediately before the Closing Date; (iii) to waive any
limitations regarding pre-existing conditions under any welfare or other
employee benefit plan maintained by Buyer, the Company and/or any of their
respective affiliates for the benefit of Continuing Employees or in which
Continuing Employees participate after the Closing Date; and (iv) for all
purposes under all compensation and benefit plans and policies applicable to
employees of Buyer, the Company and their respective affiliates, including those
referred to in this Section 6.2, to treat all service before the Closing Date by
Continuing Employees with the Buyer and any of its affiliates, including the
Company and its Subsidiaries, as service with Buyer and its affiliates, except
to the extent such treatment would result in duplication of benefits.
(b) EMPLOYMENT OF CERTAIN EMPLOYEES. In furtherance of the covenant
set forth in the first sentence of Section 6.2(a), Buyer shall offer, or shall
cause one of its affiliates to offer, to each Robotic Tape Employee who is, as
of the Closing Date, employed in the Robotic Tape Businesses conducted by
Seller, continued employment on substantially the same terms and conditions as
applied to such Robotic Tape Employee as of the Closing Date. Buyer shall
reimburse Seller for all costs of severance pay and benefits if any, to which an
employee of the Company is entitled, which are incurred with respect to any such
Robotic Tape Employee who fails for any reason to become an employee of Buyer or
one of its affiliates as of the Closing Date (whether through a failure of Buyer
to make an offer complying with the foregoing, a refusal of such Robotic Tape
Employee to accept such offer, or otherwise). Effective as of the Closing Date,
the Robotic Tape Employees listed on Schedule 6.2(b) shall be transferred from
the payroll of Seller to the payroll of Buyer or one of its affiliates, and
Buyer or one of its affiliates shall assume and be responsible for all
liabilities and obligations of Seller under the memoranda of understanding
governing the terms and conditions of employment of such Robotic Tape Employees.
Section 6.3. WARN ACT Buyer agrees to pay and be responsible for all
liability, cost, expense and sanctions resulting from the failure to comply with
the Worker Adjustment and Retraining Notification Act ("WARN Act"), and the
regulations thereunder, in connection with the consummation of the transactions
described in or contemplated by this Agreement or resulting from the actions of
Buyer following the Closing Date that cause WARN to apply.
Section 6.4 DEFINITIONS. For purposes of this Article VI, the
following terms shall have the meanings ascribed to them below:
(a) "COMPANY EMPLOYEE" means any individual who is, as of the Closing
Date, employed by Seller, the Company or any of the Subsidiaries in the Robotic
Tape Business, including any individual who is actively at work or on approved
leave of absence (including sick leave, family and medical leave, short-term
disability leave, vacation or holiday, or jury duty), but excluding any
individual who is on long-term disability leave.
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(b) "EMPLOYEE BENEFIT PLANS" means the compensation or benefit plans,
contracts and arrangements of the Seller and its affiliates (including the
Company and the Subsidiaries), other than routine administrative procedures or
government-required programs, in effect as of the date hereof, including all
pension, profit-sharing, savings and thrift, bonus, incentive or deferred
compensation, severance pay and medical and life insurance plans, in which any
Robotic Tape Employees participate.
Article VII.
TAX MATTERS
Section 7.1. TAX RETURNS OF THE COMPANY, THE SUBSIDIARIES . Seller
represents and warrants that (i) all Income Tax Returns required to be filed for
taxable periods ending on or prior to the Closing Date by, or with respect to
any activities of, the Company or the Subsidiaries have been or will be filed in
accordance with all applicable laws, and all Taxes shown to be due on such
Returns have been or will be paid, and (ii) all other material Returns required
to be filed before the Closing Date by, or with respect to any activities of the
Company or the Subsidiaries have been or will be filed in accordance with all
applicable laws and all Taxes shown as due on such Returns have been or will be
paid.
Section 7.2. TAX INDEMNIFICATION BY SELLER. Seller shall be liable
for, and shall hold Buyer, the Company, the Subsidiaries, and any successor
corporations thereto or affiliates thereof harmless from and against, the
following Taxes with respect to the Company and the Subsidiaries:
(a) any and all Income Taxes for any taxable period ending (or
deemed, pursuant to Section 7.4 hereof, to end) on or before the Closing Date
due or payable by the Company, and the Subsidiaries, other than Income Taxes
resulting from any election made by Buyer or the state or local equivalent
thereof; and
(b) to the extent not reserved for on the Adjusted Closing Date
Balance Sheet, any Other Taxes payable with respect to Returns filed or required
to be filed (taking into account extensions), or otherwise properly accruable,
prior to the Closing Date.
(c) Seller shall also be liable for, and shall pay, indemnify, defend
and hold Buyer, the Company, the Subsidiaries, and any successor corporations
thereto or affiliates thereof harmless from and against, all Taxes with respect
to the operations of Seller, other than those operations conducted by the
Company and the Subsidiaries including any liability of the Company or the
Subsidiaries under Treasury Regulations section 1.1502-6 or under any comparable
or similar provision under state, local or foreign laws or regulations, and from
and against any liability for Taxes with respect to any gain realized by the
Seller upon the sale of the Company.
Section 7.3 TAX INDEMNIFICATION BY BUYER. Buyer shall be liable for,
and shall pay, indemnify, defend and hold Seller harmless from and against, the
following Taxes with respect to the Company, the Subsidiaries: (i) any and all
Income Taxes for any taxable period
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beginning on or after the Closing Date, due or payable by the Company, the
Subsidiaries (ii) any and all Other Taxes (other than Taxes described in Section
7.2 for which Seller is liable) for all taxable periods (whether beginning
before, on or after the Closing Date), (iii) any and all Taxes not incurred in
the ordinary course of business attributable to the acts or omissions of Buyer,
Buyer's affiliates, the Company, the Subsidiaries or the Affiliates after the
Closing on the Closing Date, (iv) (v) any Taxes due and payable by the Company
or any of the Subsidiaries, or Affiliates. or Buyer resulting from any election
made by Buyer or imposed on Buyer by the IRS under Section 338 of the Code other
than Section 338(h)(10) or the state or local equivalent thereof.
Section 7.4 ALLOCATION OF CERTAIN TAXES.
(a) Buyer and Seller agree that if the Company or any of the
Subsidiaries is permitted but not required under applicable state or local
Income Tax laws to treat the day before the Closing Date or the Closing Date as
the last day of a taxable period, Buyer and Seller shall treat such day as the
last day of a taxable period.
(b) Any Taxes for a taxable period beginning before the Closing Date
and ending after the Closing Date with respect to the Company or the
Subsidiaries shall be apportioned for purposes of Section 7.2 and Section 7.3
between Seller and Buyer based on the actual operations of the Company and the
Subsidiaries, as the case may be, during the portion of such period ending on
the Closing Date and the portion of such period beginning on the day following
the Closing Date, and for purposes of the provisions of Sections 7.2, 7.3, 7.4
and 7.6, each portion of such period shall be deemed to be a taxable period
(whether or not it is in fact a taxable period); PROVIDED, HOWEVER, that to the
extent estimated Income Taxes have been paid prior to the Closing Date with
respect to a taxable period beginning before the Closing Date and ending after
the Closing Date, Seller's liability with respect thereto shall be reduced by
that amount; PROVIDED FURTHER, that if such payment of estimated Income Taxes
exceeds Seller's liability as calculated pursuant to this Section 7.4, Buyer
shall promptly pay Seller the amount of such excess. Upon timely notice from
Buyer, Seller shall pay to Buyer at least ten (10) days prior to the date any
payment for Income Taxes as described in this Section 7.4 is due, Seller's share
of such Income Taxes as described in this Section 7.4.
(c) All real property taxes, personal property taxes and similar AD
VALOREM obligations levied with respect to the Company for a taxable period
which includes (but does not end on) the Closing Date (collectively, the
"APPORTIONED OBLIGATIONS") shall be apportioned between Seller and Buyer based
on the number of days of such taxable period which fall on or before the Closing
Date (this and any other tax period which includes one or more days falling on
or before the Closing Date, a PRE-CLOSING TAX PERIOD") and the number of days of
such taxable period after the Closing Date (a "POST-CLOSING TAX PERIOD). Seller
shall be liable for the proportionate amount of such taxes that is attributable
to the Pre-Closing Tax Period, and Buyer shall be liable for the proportionate
amount of such taxes that is attributable to the Post-Closing Tax Period. Upon
receipt of any bill for real or personal property taxes relating to the Company,
each of Seller and Buyer shall present a statement to the other setting forth
the amount of reimbursement as is reasonably necessary to calculate the
proration amount. The proration
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amount shall be paid by the party owing it to the other within 30 days after
delivery of such statement. In the event that either Seller or Buyer shall
make any payment for which it is entitled to reimbursement under this
Section, the other party shall make such reimbursement promptly but in no
event later than ten (10) days after the presentation of a statement setting
forth the amount or reimbursement to which the presenting party is entitled
along with such supporting evidence as is reasonably necessary to calculate
the amount of reimbursement.
(d) With respect to any state or local Income Taxes:
(i) the "HYPOTHETICAL PRE-CLOSING PERIOD INCOME TAX" means the Income
Tax that would have been due for the taxable period ending on the Closing Date
if the Closing Date were the last day of the taxable period;
(ii) fifteen days after the Adjusted Closing Date Balance Sheet is
agreed to by Buyer and Seller, Buyer shall present Seller with a schedule
detailing the computation of the Hypothetical Pre-Closing Period Income Tax;
(iii) ten days after Buyer presents Seller with the schedule
described in clause (ii) above, (x) Seller shall pay the Company the amount by
which the Hypothetical Pre-Closing Period Income Tax exceeds the sum of any
estimated tax payments made prior to the Closing Date with respect to such
Income Tax for the current taxable year plus any amount reserved on the Adjusted
Closing Date Balance Sheet with respect to such Income Tax for the current
taxable year, or (y) the Company shall pay Seller the amount by which the sum of
any estimated tax payments made prior to the Closing Date with respect to such
Income Tax for the current taxable year plus any amount reserved on the Adjusted
Closing Date Balance Sheet with respect to such Income Tax for the current
taxable year exceeds the Hypothetical Pre-Closing Period Income Tax; and
(iv) in the event Seller disputes Buyer's computation of the
Hypothetical Pre-Closing Period Income Tax or any of the payments described in
clause (iii) above, Seller shall nevertheless pay any amounts requested pending
adjustment after the resolution of such dispute, which shall be resolved by the
neutral auditors or, if none, a "big six" accounting firm mutually agreed upon
by Buyer and Seller having no material relationship with either Buyer or Seller.
The costs, expenses and fees of such accounting firm shall be borne equally by
Buyer and Seller.
Section 7.5 FILING RESPONSIBILITY.
(a) Seller shall prepare and file or shall cause the Company and the
Subsidiaries to prepare and file all Returns with respect to Taxes for which
Seller has liability pursuant to Section 7.2.
(b) Buyer shall prepare and file, or shall cause the Company and the
Subsidiaries to prepare and file, (i) subject to Seller's review and approval,
(x) all Returns for taxable periods beginning before the Closing Date and ending
after the Closing Date, and (y) Foreign Returns for taxable periods beginning
before the Closing Date which are subject to group relief or a similar
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Tax system and (ii) all other Returns for which Seller does not have filing
responsibility pursuant to Section 7.5(a).
(c) Buyer, the Company and the Subsidiaries agree that, except to the
extent contrary to law or applicable regulation, they will take no position in
the Returns referred to in clause (b)(i) above inconsistent with that taken in a
Return for which Seller has filing responsibility pursuant to this Article VII.
Section 7.6 REFUNDS AND CARRYBACKS.
(a) Seller shall be entitled to any refunds or credits of Income
Taxes attributable to or arising in taxable periods ending on or before the
Closing Date and for which it has liability under this Article VII.
(b) Buyer, the Company or the Subsidiaries as the case may be, shall
be entitled to any refunds or credits of Income Taxes attributable to or arising
in taxable periods beginning on or after the Closing Date.
(c) Seller shall be entitled to any refunds or credits of Other Taxes
for which Seller is liable pursuant to Section 7.2(b). Buyer, the Company or
the Subsidiaries as the case may be, shall be entitled to any refunds or credits
of Other Taxes not referred to in the preceding sentence attributable to or
arising in any taxable period (whether beginning before or after the Closing
Date).
(d) Each party agrees that if as the result of any audit adjustment
made by any taxing authority against it with respect to a taxable period ending
on or prior to the Closing Date, such party or any of its affiliates, receives
a Tax Benefit, then the party receiving such Tax Benefit shall pay to the other
party the amount of such Tax Benefit within 15 days of filing the Return in
which such Tax Benefit is realized or utilized..
(e) Buyer shall cause the Company, the Subsidiaries and the
Affiliates promptly to forward to Seller or to reimburse Seller for any refunds
or credits due Seller (pursuant to the terms of this Article VII) after receipt
thereof, and Seller shall promptly forward to Buyer (pursuant to the terms of
this Article VII) or reimburse Buyer for any refunds or credits due Buyer after
receipt thereof.
(f) Buyer, the Company and the Subsidiaries agree that, with respect
to any Income Tax, neither the Company nor the Subsidiaries shall carry back any
item of loss, deduction or credit which arises in any taxable period ending
after the Closing Date ("SUBSEQUENT LOSS") into any taxable period ending on or
before the Closing Date. If a Subsequent Loss with respect to any Income Tax is
carried back into any taxable period ending on or before the Closing Date,
Seller shall be entitled to any refund or credit of Taxes realized as a result
thereof.
(g) If any Subsidiary carries back any Subsequent Loss with respect
to any foreign Tax into any taxable period ending on or before the Closing Date,
Buyer shall hold Seller
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harmless from and against any increase in United States federal Income Taxes,
after using any available excess foreign tax credits of Seller, resulting from
such carryback.
Section 7.7 COOPERATION AND EXCHANGE OF INFORMATION
(a) Each party shall provide the other with such cooperation and
shall deliver to such other party such information and data concerning the
pre-Closing operations of the Company and the Subsidiaries and make available
such knowledgeable employees of the Company and the Subsidiaries as such party
may reasonably request, including providing the information and data required by
the requesting party's customary tax and accounting questionnaires, in order to
enable the requesting party to complete and file all Returns which it may be
required to file with respect to the operations and business of the Company and
the Subsidiaries during its respective period of ownership or to respond to
audits by any Taxing Authorities with respect to such operations and to
otherwise enable requesting party to satisfy its internal accounting, tax and
other legitimate requirements. Such cooperation and information shall include
provision of powers of attorney for the purpose of signing Returns and defending
audits and promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any Taxing Authority which relate to the
Company and the Subsidiaries and providing copies of all relevant Returns,
together with accompanying schedules and related workpapers, documents relating
to rulings or other determinations by any Taxing Authority and records
concerning the ownership and tax basis of property, which Buyer, the Company or
the Subsidiaries may possess. Each of Buyer, Seller, the Company or the
Subsidiaries shall make its respective employees and facilities available on a
mutually convenient basis to provide explanation of any documents or information
provided hereunder.
(b) For a period of five (5) years after the Closing Date, each party
shall, and Buyer shall cause the Company and the Subsidiaries to, retain all
Returns, books and records (including computer files) of, or with respect to the
activities of, the Company and the Subsidiaries for all taxable periods ending
on or prior to the Closing Date. Thereafter, each party shall not dispose of
any such Returns, books or records unless it first offers such Returns, books
and records to the other party and such other party fails to accept such offer
within sixty (60) days of its being made.
(c) Buyer and Seller shall cooperate in the preparation of all
Returns relating in whole or in part to taxable periods ending on or before the
Closing Date that are required to be filed after such date, PROVIDED THAT Seller
shall have the sole authority to determine the manner in which such returns are
prepared to the extent such determination affects the amount of Taxes for which
Seller is liable.
(d) Whenever any Taxing Authority asserts a claim, makes an
assessment, or otherwise disputes the amount of Taxes for which Seller is
liable, Buyer shall promptly inform Seller, and Seller shall have the right at
its cost to request that Buyer contest such claim and Buyer shall permit Seller
to control any resulting meetings, conferences or proceedings and to determine
whether and when to settle any such claim, assessment or dispute to the extent
such proceedings or determinations affect the amount of Taxes for which Seller
is liable.
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(e) If either party, as the case may be, fails to provide any
information requested by the other party in the time specified herein, or if no
time is specified pursuant to this Section 7.7, within a reasonable period, or
otherwise fails to do any act required of it under this Section 7.7, then such
failing party shall be obligated, notwithstanding any other provision of this
Agreement, to indemnify the other party and such failing party shall so
indemnify the other party and hold it and harmless from and against any and all
costs, claims or damages, including all Taxes or deficiencies thereof, payable
as a result of such failure.
Section 7.8 PURCHASE PRICE. Buyer and Seller agree that the
consideration provided for pursuant to this Agreement is being paid solely to
acquire the Shares, and neither party will (or will permit any affiliate to)
report or treat any part of such consideration as allocable to anything other
than payment for the Shares.
Section 7.9. NET OPERATING LOSS ELECTION. Neither Seller nor the
parent of the consolidated tax return group that includes Seller shall elect to
retain any net operating losses or credit carryforwards attributable to the
Company or the Subsidiaries.
Section 7.10 TAX SHARING AGREEMENTS. All tax sharing agreements or
similar agreements between the Seller and the Company, the Subsidiaries or the
Affiliates shall be terminated as of the Closing and have no further effect for
any period.
Section 7.11. DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them below:
(a) "DETERMINATION" means a "determination" as defined by Section
1313(a) of the Code.
(b) "DOMESTIC RETURNS" means returns, reports and forms required to
be filed with any taxing authority of the United States of America, any state
thereof or the District of Columbia and any local governmental subdivision
thereof (a "U.S. TAXING AUTHORITY").
(c) "FOREIGN RETURNS" means all Returns that are not Domestic
Returns.
(d) "INCOME TAXES" means federal, state or local income or franchise
taxes or other taxes measured by income and all other taxes reported on Domestic
Returns which include federal, state or local income or franchise taxes or other
taxes measured by income, together with any interest or penalties imposed with
respect thereto.
(e) "INCOME TAX RETURNS" means federal, state or local Income Tax
Returns required to be filed with any U.S. Taxing Authority that include any of
the Company, the Subsidiaries or the Affiliates.
(f) "IRS" means the Internal Revenue Service.
(g) "OTHER TAXES" means all Taxes which are not Income Taxes.
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(h) "RETURNS" means returns, reports and forms required to be filed
with any U.S. Taxing Authority or foreign taxing authority.
(i) "TAX BENEFIT" means the tax effect of any item of loss, deduction
or credit or any other item which decreases Taxes paid or payable or increases
tax basis including any interest with respect thereto or interest that would
have been payable but for such item.
(j) "TAXES" means all taxes (whether federal, state, local or
foreign) based upon or measured by income and any other tax whatsoever,
including gross receipts, profits, sales, use, occupation, value added, ad
valorem, transfer, franchise, withholding, payroll, employment, excise or
property taxes, together with any interest or penalties imposed with respect
thereto.
(k) "TAX LAWS" means the Code, federal, state, county, local or
foreign laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
(l) "TAXING AUTHORITY" means any Governmental Authority, domestic or
foreign, having jurisdiction over the assessment, determination, collection or
other imposition of Tax.
Article VIII.
CONDITIONS OF BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to consummate the Acquisition shall be subject to
the satisfaction on or prior to the Closing Date of all of the following
conditions:
Section 8.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER.
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date (except for representations and warranties that speak as of a specific
date or time, which need only be true and correct as of such date or time),
except, in the case of any representations or warranties other than those that
contain a qualification as to "material adverse effect," for such inaccuracies
which have not had or would not reasonably be expected to have a material
adverse effect on the Business Condition of the Robotic Tape Business.
(b) Seller shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects with
each covenant to be performed and complied with by it hereunder at or prior to
the Closing (other than Seller's covenants pursuant to Section 2.2 (a) with
respect to delivery of certificates for the Shares and of documents of transfer
of the Shares at the Closing, which shall be performed in all respects).
(c) Buyer shall receive at or prior to the Closing a certificate as
to the matters set forth in paragraphs (a) and (b), dated the Closing Date, and
validly executed by an officer of Seller on behalf of Seller.
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Section 8.2. FILINGS; CONSENTS; WAITING PERIODS. All waiting periods
applicable under the HSR Act shall have expired or been terminated, and all
registrations, filings, applications, notices, consents, approvals, orders,
qualifications and waivers required to be obtained or made as of the Closing
Date shall have been filed, made or obtained, except for such registrations,
filings, notices, consents, approvals, orders, qualifications and waivers which
would not reasonably be expected to (x) have a material adverse effect on the
Business Condition of the Robotic Tape Business, (y) materially impair the
ability of Seller to perform its material obligations under this Agreement, or
(z) prevent or materially delay the consummation of the transactions
contemplated hereby.
Section 8.3. GRAU CREDIT AGREEMENTS The Company shall have, or shall
have caused (a), all of Grau's obligations under the Grau Credit Agreements to
be discharged and such Grau Credit Agreements to have been terminated, and (b)
the EMASS/Grau Credit Agreement to have been duly authorized, executed and
delivered.
Section 8.4. CONVERSION OF IWA'S. The Company shall convert all
existing Internal Work Agreements to standard Seller purchase orders.
Section 8.5. NO INJUNCTION. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of all or any portion of the
Acquisition, and no statute, rule or regulation shall have been enacted by any
Governmental Authority which prevents consummation of the Acquisition.
Article IX.
CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to consummate the Acquisition is subject to the
satisfaction on or prior to the Closing Date of all of the following conditions:
Section 9.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.
(a) The representations and warranties of Buyer contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date (except for representations and warranties that speak as of a specific
date or time, which need only be true and correct as of such date or time),
except, in the case of any representations or warranties other than those that
contain a qualification as to "material adverse effect," for such inaccuracies
which have not had or would not reasonably be expected to have a material
adverse effect on the Business Condition of Buyer or Buyer and its subsidiaries,
taken as a whole.
(b) Buyer shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects with
each covenant to be performed and complied with by it hereunder at or prior to
the Closing (other than Buyer's covenants pursuant to Section 2.2 (b) with
respect to payment at Closing of the Adjusted Purchase Price by wire
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transfer in immediately available funds to the account specified by Seller,
which shall be performed in all respects).
(c) Seller shall receive at or prior to the Closing a certificate as
to the matters set forth in paragraphs (a) and (b), dated the Closing Date, and
validly executed by an executive officer of Buyer on behalf of Buyer.
Section 9.2. FILINGS; CONSENTS; WAITING PERIODS. All waiting periods
applicable under the HSR Act shall have expired or been terminated, and all
registrations, filings, applications, notices, consents, approvals, orders,
qualifications and waivers required to be obtained or made as of the Closing
Date shall have been filed, made or obtained, except for such registrations,
filings, notices, consents, approvals, orders, qualifications and waivers which
would not reasonably be expected to (x) have a material adverse effect on the
Business Condition of Buyer or any of its affiliates, (y) materially impair the
ability of Buyer to perform its material obligations under this Agreement, or
(z) prevent or materially delay the consummation of the transactions
contemplated hereby.
Section 9.3. NO INJUNCTION. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of all or any portion of the
Acquisition, and no statute, rule or regulation shall have been enacted by any
Governmental Authority which prevents consummation of the Acquisition.
Article X.
SURVIVAL; INDEMNIFICATION
Section 10.1. SURVIVAL PERIODS. All representations and warranties
contained or made in, or in connection with, this Agreement or in any Schedule,
or any certificate, document or other instrument delivered in connection
herewith, shall survive for a period of one (1) year following the consummation
of the Closing except that the representations and warranties in Section 3.16
[environmental] shall survive for three (3) years, the representations and
warranties in Section 3.17 [Year 2000] and Article VI [Employee Benefits] shall
survive for two (2) years and the representations and warranties in Article VII
[Tax Matters] shall survive until the lapse of the applicable statute of
limitations.
Section 10.2. INDEMNIFICATION BY SELLER. From and after the
Closing Date, Seller shall indemnify and hold harmless Buyer, its affiliates,
each of their respective directors, officers, employees and agents, and each
of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "BUYER INDEMNIFIED PARTIES") from and against any and all
Covered Liabilities resulting from any breach of any representation or
warranty, covenant or agreement of Seller contained herein; PROVIDED,
HOWEVER, that, except with respect to the representations made in Sections
3.1 or 3.2, or with respect to any fraud or intentional misstatement or
omission without regard to materiality, Seller shall not be required to
indemnify the Buyer Indemnified Parties with respect to any claim for
indemnification pursuant to this Section 10.2, other than claims made under
Section 3.1 or 3.2, or with respect to any fraud or intentional misstatement
or
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omission without regard to materiality unless and until the aggregate amount
of all claims against Seller under this Section 10.2 exceeds two (2) percent
of the Adjusted Purchase Price and then only to the extent such aggregate
amount exceeds such amount, and PROVIDED, FURTHER, that in no event shall
Seller be required to pay or otherwise be liable for an amount in excess of
fifteen (15) percent of the Adjusted Purchase Price with respect to claims
made under this Section. The indemnification obligations of Seller under
this Section 10.2 shall only apply with respect to claims arising out of
matters occurring prior to closing.
Section 10.3. INDEMNIFICATION BY BUYER. From and after the Closing
Date, Buyer shall indemnify and hold harmless Seller, its affiliates, each of
their respective directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "SELLER INDEMNIFIED PARTIES") from and against any and all Covered
Liabilities incurred by or asserted against any of the Seller Indemnified
Parties arising out of or in connection with any of the businesses, assets,
operations or activities of the Company or any of the Subsidiaries (including
any predecessor of the Company or any Subsidiary, and any former business,
asset, operation, activity or subsidiary of any of the foregoing) heretofore,
currently or hereafter owned or conducted, as the case may be, including any
Covered Liability based on negligence, gross negligence, strict liability or any
other theory of liability, whether in law (whether common or statutory) or
equity; PROVIDED, HOWEVER, that there shall be excluded from the foregoing
indemnity obligation those Covered Liabilities specified in Sections 7.3 and
7.4, that Seller has agreed to assume pursuant hereto; and PROVIDED, FURTHER,
Buyer shall not be required to indemnify the Seller Indemnified Parties with
respect to any claim made for indemnification pursuant to this Section 10.3
unless and until the aggregate amount of all claims against Buyer under this
Section 10.3 exceeds two (2) percent of the Adjusted Purchase Price. The
Company and each Subsidiary shall be jointly and severally liable for Buyer's
indemnification obligations pursuant to this Agreement, including pursuant to
this Section 10.3 and Section 10.4, and Buyer shall, if so requested by
Seller, cause the Company and each Subsidiary to sign such instruments
evidencing the foregoing obligations as Seller may reasonably request.
Section 10.4. INDEMNIFICATION PROCEDURES.
(a) If any indemnified party receives notice of the assertion of any
Third-Party Claim with respect to which an indemnifying party is obligated under
this Agreement to provide indemnification, such indemnified party shall give
such indemnifying party written notice thereof (together with a copy of such
Third-Party Claim, process or other legal pleading) promptly after becoming
aware of such Third-Party Claim; PROVIDED, HOWEVER, that any claim by a Buyer
Indemnified Party pursuant to Section 10.2 must be received by Seller on or
before expiraton of the period defined in Section 10.1 relating to such claim.
The failure of a Buyer Indemnified Party to give notice within the applicable
period above shall relieve the Seller of all indemnification obligations. Any
such notice shall describe such Third-Party Claim in reasonable detail.
(b) An indemnifying party, at such indemnifying party's own expense
and through counsel chosen by such indemnifying party (which counsel shall be
reasonably accept-
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able to the indemnified party), may elect to defend any Third-Party Claim. If
an indemnifying party elects to defend a Third-Party Claim, then, within ten
(10) business days after receiving notice of such Third-Party Claim (or sooner,
if the nature of such Third-Party claim so requires), such indemnifying party
shall notify the indemnified party of its intent to do so, and such indemnified
party shall cooperate in the defense of such Third-Party Claim. Such
indemnifying party shall pay such indemnified party's reasonable out-of-pocket
expenses incurred in connection with such cooperation. Such indemnifying party
shall keep the indemnified party reasonably informed as to the status of the
defense of such Third-Party Claim. After notice from an indemnifying party to
an indemnified party of its election to assume the defense of a Third-Party
Claim, such indemnifying party shall not be liable to such indemnified party
under this Section 10.4 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than those
expenses referred to in the preceding sentence; PROVIDED, HOWEVER, that such
indemnified party shall have the right to employ one law firm as counsel,
together with a separate local law firm in each applicable jurisdiction
("SEPARATE COUNSEL"), to represent such indemnified party in any action or group
of related actions (which firm or firms shall be reasonably acceptable to the
indemnifying party) if, in such indemnified party's reasonable judgment at any
time, either a conflict of interest between such indemnified party and such
indemnifying party exists in respect of such claim, or there may be defenses
available to such indemnified party which are different from or in addition to
those available to such indemnifying party and the representation of both
parties by the same counsel would be inappropriate, and in that event (i) the
reasonable fees and expenses of such Separate Counsel shall be paid by such
indemnifying party (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one Separate Counsel
(excluding local counsel) with respect to any Third-Party Claim (even if against
multiple indemnified parties)) and (ii) each of such indemnifying party and such
indemnified party shall have the right to conduct its own defense in respect of
such claim. If an indemnifying party elects not to defend against a Third-Party
Claim, or fails to notify an indemnified party of its election as provided in
this Section 10.4 within the period of ten (10) business days described above,
the indemnified party may defend, compromise, and settle such Third-Party Claim
and shall be entitled to indemnification hereunder (to the extent permitted
hereunder); PROVIDED, HOWEVER, that no such indemnified party may compromise or
settle any such Third-Party claim without the prior written consent of the
indemnifying party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the indemnifying party shall not, without the
prior written consent of the indemnified party, (i) settle or compromise any
Third-Party Claim or consent to the entry of any judgment which does not include
as an unconditional term thereof the delivery by the claimant or plaintiff to
the indemnified party of a written release from all liability in respect of such
Third-Party Claim or (ii) settle or compromise any Third-Party Claim in any
manner that would reasonably be expected to have a material adverse effect on
the indemnified party.
Section 10.5. CERTAIN LIMITATIONS. (a) The amount of any
indemnifiable losses or other liability for which indemnification is provided
under this Agreement shall be net of any amounts actually recovered by the
indemnified party from third parties (including amounts actually recovered under
insurance policies) with respect to such indemnifiable losses or other
liability. Any indemnifying party hereunder shall be subrogated to the rights
of the indemnified party
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upon payment in full of the amount of the relevant indemnifiable loss. An
insurer who would otherwise be obligated to pay any claim shall not be relieved
of the responsibility with respect thereto or, solely by virtue of the
indemnification provision hereof, have any subrogation rights with respect
thereto. If any indemnified party recovers an amount from a third party in
respect of an indemnifiable loss for which indemnification is provided in this
Agreement after the full amount of such indemnifiable loss has been paid by an
indemnifying party or after an indemnifying party has made a partial payment of
such indemnifiable loss and the amount received from the third party exceeds the
remaining unpaid balance of such indemnifiable loss, then the indemnified party
shall promptly remit to the indemnifying party the excess of (A) the sum of the
amount theretofore paid by such indemnifying party in respect of such
indemnifiable loss plus the amount received from the third party in respect
thereof, less (B) the full amount of such indemnifiable loss or other liability.
(b) The amount of any loss or other liability for which
indemnification is provided under this Agreement shall be (i) increased to take
account of any net Tax cost incurred by the indemnified party arising from the
receipt or accrual of an indemnification payment hereunder (grossed up for such
increase) and (ii) reduced to take account of any net Tax benefit realized by
the indemnified party arising from incurring or paying such loss or other
liability. In computing the amount of any such Tax cost or Tax benefit, the
indemnified party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
or accrual of any indemnification payment hereunder or incurring or paying any
indemnified loss. Any indemnification payment hereunder shall initially be made
without regard to this Section 10.5(b) and shall be increased or reduced to
reflect any such net Tax cost (including gross-up) or net Tax benefit only after
the indemnified party has actually realized such cost or benefit. For purposes
of this Agreement, an indemnified party shall be deemed to have "actually
realized" a net Tax cost or a net Tax benefit to the extent that, and at such
time as, the amount of Taxes payable by such indemnified party is increased
above or reduced below, as the case may be, the amount of Taxes that such
indemnified party would be required to pay but for the receipt or accrual of the
indemnification payment or the incurrence or payment of such Loss, as the case
may be. The amount of any increase or reduction hereunder shall be adjusted to
reflect any Final Determination with respect to the indemnified party's
liability for Taxes, and payments between such indemnified parties to reflect
such adjustment shall be made if necessary.
(c) The amount of any or other liability for which indemnification is
provided under this Agreement shall be treated by Buyer and Seller as an
adjustment to the Purchase Price, and Seller and Buyer agree, and Buyer agrees
to cause the Company and the Subsidiaries and the Affiliates, not to take any
position inconsistent therewith for any purpose.
Section 10.6. EXCLUSIVITY OF INDEMNIFICATION. This Article X shall
not relate to indemnification for Tax Matters (for which Section 7.3 is
applicable).
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Article XI.
TERMINATION
Section 11.1. TERMINATION. This Agreement may be terminated at any
time prior to the Closing by:
(a) The mutual written consent of Seller and Buyer; or
(b) Either Seller or Buyer if the Closing has not occurred by the
close of business on September 30, 1998, and if the failure to consummate the
Acquisition on or before such date did not result from the failure by the party
seeking termination of this Agreement to fulfill any undertaking or commitment
provided for herein that is required to be fulfilled prior to Closing.
(c) Seller, provided it is not then in breach of any of its
obligations hereunder, if Buyer fails to perform any covenant in this Agreement
when performance thereof is due or Buyer shall have breached in any material
respect any of the representations or warranties contained in this Agreement and
does not cure the failure or breach within thirty (30) business days after
Seller delivers written notice thereof; or
(d) Buyer, provided it is not then in breach of any of its
obligations hereunder, if Seller fails to perform any covenant in this Agreement
when performance thereof is due or Seller shall have breached in any material
respect any of the representations and warranties contained in this Agreement
and does not cure the failure or breach within thirty (30) business days after
Buyer delivers written notice thereof.
Section 11.2. PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination of this Agreement by either or both of Seller and Buyer pursuant to
Section 11.1, written notice thereof shall forthwith be given by the terminating
party to the other party hereto, and this Agreement shall thereupon terminate
and become void and have no effect, and the transactions contemplated hereby
shall be abandoned without further action by the parties hereto, except that the
provisions of Sections 5.1(b) and 12.4 shall survive the termination of this
Agreement; PROVIDED, HOWEVER, that such termination shall not relieve any party
hereto of any liability for any breach of this Agreement. If this Agreement is
terminated as provided herein all filings, applications and other submissions
made pursuant to Sections 3.9 and 4.3 shall, to the extent practicable, be
withdrawn from the agency or other persons to which they were made.
Article XII.
MISCELLANEOUS
Section 12.1 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, 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 party.
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Section 12.2. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware without reference to the choice of law principles thereof. Buyer and
Seller consent to and hereby submit to the exclusive jurisdiction of any state
or federal court located in the State of Delaware in connection with any action,
suit or proceeding arising out of or relating to this Agreement, and each of the
parties hereto irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
Section ENTIRE AGREEMENT. This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. Except for
Sections 10.2, 10.3, 10.4 and 10.5, which are intended to benefit, and to be
enforceable by, any of the Buyer Indemnified Parties or the Seller Indemnified
Parties, as the case may be, this Agreement is not intended to confer upon any
Person not a party hereto (and their successors and assigns permitted by Section
12.6) any rights or remedies hereunder.
Section 12.4. EXPENSES. Except as set forth in this Agreement,
whether the Acquisition is or is not consummated, all legal and other costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses; PROVIDED THAT Buyer shall pay all German notarial fees and any German
real estate transfer taxes payable in connection with the transfer to Buyer of
any interest in real property in Germany.
Section 12.5. NOTICES. All notices hereunder shall be sufficiently
given for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to Seller shall be addressed to:
Raytheon E-Systems, Inc.
501 S. Jupiter Rd.
Garland, TX 75042
Attention: General Counsel
Telecopy No: 972-205-7290
with a copy to:
Raytheon Company
141 Spring Street
Lexington, Massachusetts 02173
Attention: General Counsel
Telecopy No: (617) 860-2924
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or at such other address and to the attention of such other Person as Seller may
designate by written notice to Buyer. Notices to Buyer shall be addressed to:
Advanced Digital Information Corporation
11431 Willows Road N.E.
P.O. Box 97057
Redmond, WA 98073-9757
Attn: Peter Van Oppen
Telecopy No. (425) 881-2296
with a copy to:
Perkins Coie, LLP
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Attention: Stephen M. Graham
Telecopy No: (206) 583-8500
or at such other address and to the attention of such other Person as Buyer may
designate by written notice to Seller.
Section 12.6. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that no party hereto will assign its
rights or delegate its obligations under this Agreement without the express
prior written consent of each other party hereto.
Section 12.7. HEADINGS; DEFINITIONS. The section and article
headings contained in this Agreement are inserted for convenience of reference
only and will not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined herein
are equally applicable to both the singular and plural forms of such terms.
Section 12.8. AMENDMENT. This Agreement may not be amended,
modified, superseded, cancelled, renewed or extended except by a written
instrument signed by the party to be charged therewith.
Section 12.9. WAIVER; EFFECT OF WAIVER. No provision of this
Agreement may be waived except by a written instrument signed by the party
waiving compliance. No waiver by any party hereto of any of the requirements
hereof or of any of such party's rights hereunder shall release the other
parties from full performance of their remaining obligations stated herein. No
failure to exercise or delay in exercising on the part of any party hereto any
right, power or privilege of such party shall operate as a waiver thereof, nor
shall any single or partial exercise of
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any right, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege by such party.
Section 12.10. INTERPRETATION; ABSENCE OF PRESUMPTION.
(a) For the purposes hereof, (i) words in the singular shall be held
to include the plural and VICE VERSA and words of one gender shall be held to
include the other gender as the context requires, (ii) the terms "hereof,"
"herein," and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Schedules, Exhibits and Annexes hereto) and not to any particular provision of
this Agreement, and Article, Section, paragraph, Exhibit, Schedule and Annex
references are to the Articles, Sections, paragraphs, Exhibits, Schedules and
Annexes to this Agreement unless otherwise specified, (iii) the word "including"
and words of similar import when used in this Agreement means "including,
without limitation," unless the context otherwise requires or unless otherwise
specified, (iv) the word "or" shall not be exclusive, (v) provisions shall
apply, when appropriate, to successive events and transactions, and (vi) all
references to any period of days shall be deemed to be to the relevant number of
calendar days.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
(c) For the purposes of this Agreement, (a) a "subsidiary" of a
corporation means any corporation more than 50% of whose outstanding voting
securities are directly or indirectly owned by such other corporation, and (ii)
"to Seller's knowledge" means the actual knowledge of Mel Biggs and Thomas
Wofford.
Section 12.11. SPECIFIC PERFORMANCE. The parties hereto each
acknowledge that, in view of the uniqueness of the subject matter hereof, the
parties hereto would not have an adequate remedy at law for money damages in the
event that this Agreement were not performed in accordance with its terms, and
therefore agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
Section 12.12. EXCLUSION OF CERTAIN DAMAGES. Except as expressly
permitted by Section 5.14 with respect to lost profits, in no event shall either
party hereunder be liable for consequential, incidental, punitive or special
damages in connection with this Agreement or the transactions contemplated
herein.
Section 12.13. REMEDIES CUMULATIVE. Except as otherwise provided in
Article 12, all rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the day first above written.
RAYTHEON E-SYSTEMS, INC.
By: /s/ Brian D. Cullen
----------------------------------------------
Name: Brian D. Cullen
Title: Chairman of the Board and President
ADVANCED DIGITAL INFORMATION CORPORATION
By: /s/ Peter H. van Oppen
----------------------------------------------
Name: Peter H. van Oppen
Title: Chairman of the Board
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Exhibit A
Subsidiaries
Indented Subsidiaries are Subsidiaries of the Subsidiary under which they
are indented. Percentages shown indicate the exact percentage of voting
securities owned by Seller or its subsidiary, as the case may be.
Country of
Name Incorporation % Owned
- ---------------------------------------------- --------------- -------------
Advanced Archival Products, Inc. United States 100%
EMASS Technical Assistance Center GmbH Germany 100%
EMASS Grau Storage Systems Beteiligungs GmbH Germany 80%
EMASS Grau Storage Systems SARL France 100%
EMASS Grau Storage Systems Ltd England 100%
[Grau Storage Systems Beteiligungs GmbH is a Germany
General Partner of EMASS Grau Storage Systems
GmbH & Co KG.]
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EXHIBITS AND SCHEDULES OMITTED FROM STOCK PURCHASE AGREEMENT
EXHIBIT
- -------
B Estimated Balance Sheet
C Relocation Expenses
D Transition Services Agreement
SCHEDULE
- --------
3.1(b) Contracts That Will Result in Imposition of Certain Liens.
3.3 Financial Statements
3.4 Undisclosed Liabilities
3.6 Intellectual Property
3.7 Absence of Certain Changes
3.8 Material Litigation
3.9(b) Filings and Restrictions
3.13 Contracts
3.16 Environmental Matters
3.18 Security Clearance Matters
3.20 Form of Confidentiality and Invention Agreements
5.4 Deviations in Conduct of Business Between Signing and Closing
5.7 Guaranties, Letters of Comfort, Letters of Credit, and Surety Bonds
6.1(a) Employee Benefit Plans
6.1(d) Changes in Benefits Caused by Acquisition
6.2(b) Transfer of Certain Employees
7.1 Tax Matters
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