EXHIBIT 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TELEDYNE WIRELESS, INC.
(THE "BUYER")
AND
CELERITEK, INC.
(THE "SELLER")
JULY 8, 2004
EXECUTION COPY
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINITIONS....................................................................................... 1
1.1 Capitalized Terms....................................................... 1
1.2 Additional Capitalized Terms............................................ 8
1.3 Construction............................................................ 9
ARTICLE 2 PURCHASE AND SALE OF ASSETS & ASSUMPTION OF LIABILITIES........................................... 10
2.1 Purchase and Sale of Assets............................................. 10
2.2 Assumption of Liabilities............................................... 11
2.3 Consideration for Transferred Assets.................................... 13
2.4 The Closing............................................................. 17
2.5 Third Party Consents; Non-Transferable Assets........................... 18
2.6 Transfer Taxes.......................................................... 19
2.7 Proration of Certain Liabilities........................................ 19
2.8 Further Assurances...................................................... 19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER...................................................... 20
3.1 Organization; Good Standing; Corporate Power............................ 20
3.2 Authority............................................................... 20
3.3 Conflicts............................................................... 21
3.4 Required Consents....................................................... 21
3.5 Transferred Tangible Property........................................... 21
3.6 Inventory............................................................... 21
3.7 Transferred Contracts; Government Contracts............................. 22
3.8 Transferred IPR and Transferred Technology.............................. 24
3.9 Transferred Accounts Receivable......................................... 24
3.10 Transferred Employees................................................... 24
3.11 Litigation.............................................................. 25
3.12 Taxes................................................................... 25
3.13 Environmental Matters................................................... 25
3.14 Sufficiency of Assets................................................... 26
3.15 Confidential Offering Memorandum........................................ 26
3.16 Reference Working Capital Statement..................................... 26
3.17 Subsequent Events....................................................... 26
3.18 Compliance with Applicable Laws; Permits................................ 26
3.19 Brokers and Intermediaries.............................................. 27
3.20 Product Warranties...................................................... 27
3.21 Problems with Suppliers and Customers................................... 27
3.22 Transactions with Affiliates............................................ 27
3.23 Transactions with Related Persons; Outside Interests.................... 27
3.24 Seller Information...................................................... 28
3.25 Board Recommendation.................................................... 28
-i-
TABLE OF CONTENTS
(Continued)
Page
----
3.26 Opinion of Financial Advisor............................................ 28
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER....................................................... 28
4.1 Organization; Good Standing; Corporate Power............................ 28
4.2 Authority............................................................... 29
4.3 Conflicts............................................................... 29
4.4 Required Consents....................................................... 29
4.5 Sufficiency of Funds.................................................... 29
4.6 Brokers and Intermediaries.............................................. 30
4.7 Buyer Information....................................................... 30
ARTICLE 5 COVENANTS & AGREEMENTS............................................................................ 30
5.1 Interim Operations of the Subject Business.............................. 30
5.2 Proxy Statement and Approval of the Seller's Shareholders............... 31
5.3 Access.................................................................. 32
5.4 Confidentiality......................................................... 32
5.5 Public Disclosure....................................................... 32
5.6 Reasonable Efforts...................................................... 33
5.7 Revised Seller Schedules................................................ 33
5.8 No Solicitation......................................................... 34
5.9 Appropriate Action...................................................... 35
5.10 Mail and Payments....................................................... 35
5.11 Novation of Government Contracts........................................ 35
5.12 Waste Removal........................................................... 36
5.13 Use of Name............................................................. 36
5.14 Transitional Services................................................... 36
5.15 Voting Agreements....................................................... 37
ARTICLE 6 NON-COMPETITION AND NON-SOLICITATION AGREEMENTS................................................... 37
6.1 Seller Non-Competition Agreement........................................ 37
6.2 Non-Solicitation Agreements............................................. 38
ARTICLE 7 EMPLOYEE MATTERS.................................................................................. 38
7.1 Employment Matters...................................................... 38
7.2 401(k) Rollovers........................................................ 40
ARTICLE 8 TAX MATTERS....................................................................................... 41
8.1 Responsibility for Filing Tax Returns................................... 41
8.2 Straddle Period Taxes................................................... 41
ARTICLE 9 CONDITIONS TO THE CLOSING......................................................................... 41
9.1 Conditions to Obligations of Each Party................................. 41
9.2 Additional Conditions to the Obligations of the Buyer................... 42
9.3 Additional Conditions to Obligations of the Seller...................... 43
-ii-
TABLE OF CONTENTS
(Continued)
Page
----
ARTICLE 10 SURVIVAL; INDEMNIFICATION........................................................................ 44
10.1 Survival of Representations, Warranties and Covenants................... 44
10.2 Indemnification by the Seller........................................... 44
10.3 Indemnification by the Buyer............................................ 45
10.4 Limitations on Indemnification.......................................... 45
10.5 Exclusive Remedy........................................................ 48
10.6 Indemnification Procedures.............................................. 48
10.7 Third-Party Claims...................................................... 49
ARTICLE 11 TERMINATION, AMENDMENT AND WAIVER................................................................ 51
11.1 Termination............................................................. 51
11.2 Effect of Termination; Fee.............................................. 52
11.3 Amendment............................................................... 53
11.4 Extension; Waiver....................................................... 53
ARTICLE 12 GENERAL.......................................................................................... 53
12.1 Notices................................................................. 53
12.2 Entire Agreement........................................................ 54
12.3 Assignment.............................................................. 55
12.4 Bulk Transfer Laws...................................................... 55
12.5 Severability............................................................ 55
12.6 Other Remedies.......................................................... 55
12.7 GOVERNING LAW........................................................... 55
12.8 Jurisdiction and Venue.................................................. 55
12.9 Rules of Construction................................................... 55
12.10 WAIVER OF JURY TRIAL.................................................... 56
12.11 Fees and Expenses....................................................... 56
12.12 Counterparts............................................................ 56
12.13 Parties in Interest..................................................... 56
-iii-
EXECUTION COPY
EXHIBITS
Exhibit A - Form of Voting Agreement
Exhibit B - Form of Supply Agreement
Exhibit C - Form of Real Property License
Exhibit D - Reference Working Capital Statement
Exhibit E - Form of Novation Agreement
SCHEDULES
Schedule 1.1(p) - Schedule of Key Employees
Schedule 1.1(q) - Schedule of Knowledge of the Seller
Schedule 1.1(aa) - Schedule of Products
Schedule 1.1(pp) - Schedule of Third Party Consents
Schedule 1.1(vv) - Schedule of Transferred Contracts
Schedule 1.1(ww) - Schedule of Transferred Employees
Schedule 1.1(yy) - Schedule of Certain Transferred Permits
Schedule 1.1(zz) - Schedule of Transferred Prepaid Expenses
Schedule 1.1(aaa) - Schedule of Certain Transferred Tangible Property
Schedule 2.1(a) - Schedule of Certain Other Transferred Assets
Schedule 2.2(a) - Schedule of Certain Other Assumed Liabilities
Schedule 2.2(b) - Schedule of Certain Other Excluded Liabilities
Schedule 7.1(c) - Seller Severance Policy
Schedule 9.2(e) - Schedule of Required Consents
-iv-
EXECUTION COPY
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of July 8, 2004 by and between Teledyne Wireless, Inc. (d/b/a Teledyne
Microwave), a Delaware corporation with its principal place of business at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "BUYER"), and
Celeritek, Inc., a California corporation with its principal place of business
at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "SELLER").
W I T N E S S E T H:
WHEREAS, the Buyer desires to purchase from the Seller, and the Seller
desires to sell to the Buyer, certain of the assets of the Seller relating to
the Seller's defense electronics division, which produces Gallium Arsenide-based
RF and microwave components and subassemblies (the "SUBJECT BUSINESS"), all upon
the terms and subject to the conditions set forth herein.
WHEREAS, concurrently with execution of this Agreement, the directors
and certain shareholders of the Seller are entering into Voting Agreements with
the Buyer, each in the form attached hereto as Exhibit A (each, a "VOTING
AGREEMENT" and collectively, the "VOTING AGREEMENTS").
WHEREAS, concurrently with entering into this Agreement, the Buyer and
the Seller are entering into a Supply Agreement, in the form attached hereto as
Exhibit B (the "SUPPLY AGREEMENT"), to be effective (except as otherwise
contemplated by the terms and conditions thereof) upon the consummation of the
Transactions (as defined herein).
WHEREAS, concurrently with entering into this Agreement, the Buyer and
the Seller are entering into a Real Property License Agreement, in the form
attached hereto as Exhibit C (the "REAL PROPERTY LICENSE AGREEMENT"), to be
effective upon the consummation of the Transactions.
NOW, THEREFORE, in consideration of the foregoing premises,
the representations, warranties and mutual covenants and agreements hereinafter
set forth (including the continuing obligations of the Seller under those
agreements), and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged and accepted, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Capitalized Terms. The following capitalized terms shall have the
respective meanings ascribed thereto below:
EXECUTION COPY
(a) "AFFILIATE" of any Person means any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
(b) "ANCILLARY AGREEMENTS" means, collectively (i) the Voting
Agreements, (ii) the Supply Agreement, (iii) the Real Property License
Agreement, (iv) the Seller Transfer Documents, (v) the Buyer Assumption
Documents, (vi) the Novation Agreement, and (vii) the Transition Services
Agreement.
(c) "BID" means any outstanding quotation bid or proposal by
the Seller which, if accepted or awarded, would lead to a contract with the
United States Government or a prime contractor or a higher tier subcontractor to
the United States Government, for the design, manufacture or sale of products or
the provision of services by the Subject Business directly or indirectly to the
United States Government.
(d) "CLOSING WORKING CAPITAL" means total current assets of
the Subject Business as of Closing (other than (i) cash and cash equivalents and
(ii) any Tax related items), less total current liabilities of the Subject
Business as of the Closing (other than any Tax related items, except payroll
taxes), in each case determined in accordance with accounting methods, policies,
practices and procedures used to calculate Reference Working Capital in the
Reference Working Capital Statement as set forth in Section 3.16 of the Seller
Disclosure Schedule. The parties hereby agree that, for purposes of calculating
Closing Working Capital, any and assets and liabilities relating to Taxes
(including assets and liabilities relating to timing differences between
financial and accounting) other than payroll taxes shall not be taken into
account and shall be disregarded.
(e) "CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute thereto.
(f) "CONTRACT" means any legally binding mortgage, indenture,
lease, license, contract, covenant or other agreement, instrument or commitment,
permit, concession, franchise or license, whether written or oral.
(g) "DAMAGES" means deficiencies, judgments, orders for
compensation, settlements, demands, claims, liabilities, losses, damages,
interest, fines, penalties, costs and expenses (including reasonable legal,
accounting and other costs and expenses incurred in connection with
investigating, defending, settling or satisfying any and all demands, claims,
actions, causes of action, suits, Proceedings, assessments, judgments or
appeals, and in seeking indemnification therefor).
(h) "ENCUMBRANCE" means any mortgage, lien, pledge, charge,
security interest, easement, encroachment, lease, option, purchase right,
adverse claim of ownership or use, restriction on transfer (including a right of
first refusal or offer or other similar right) or defect of title.
(i) "ENVIRONMENTAL LAWS" means all applicable federal, state,
local and foreign laws, rules, regulations and policies, all court orders and
decrees and
-2-
EXECUTION COPY
arbitration awards, and the common law, relating to pollution, contamination or
protection of the environment or exposure of any person to Hazardous Materials,
including laws, rules, regulations and policies relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, registration, distribution, use,
treatment, storage, disposal, generation, transport or handling of Hazardous
Materials.
(j) "EXCHANGE ACT" means the Securities and Exchange Act of
1934, as amended, and the rules and regulations of the SEC promulgated
thereunder.
(k) "GAAP" means Generally Accepted Accounting Principles, as
in effect on the date of any statement, report or determination that purports to
be, or is required to be, prepared or made in accordance with GAAP.
(l) "GOVERNMENT CONTRACT" means any prime contract,
subcontract, purchase order, teaming agreement or arrangement, joint venture,
basic ordering agreement, letter contract, purchase order, delivery order,
change order, arrangement or other commitment of any kind relating to the
Subject Business between the Seller and (i) the United States Government, (ii)
any prime contractor to the United States Government or (iii) any subcontractor
with respect to any contract described in the foregoing clauses (i) and (ii).
(m) "GOVERNMENTAL AUTHORITY" means any federal, state, county,
local or foreign government, governmental entity, department, agency,
administrative agency, commission or board or other governing body, and any
court, tribunal or judicial body of any Governmental Authority.
(n) "HAZARDOUS MATERIALS" means pollutants, contaminants,
pesticides, radioactive substances, solid wastes or hazardous or extremely
hazardous, special, dangerous or toxic wastes, substances, chemicals or
materials within the meaning of any Environmental Law, including any (i)
"hazardous substance" as defined in CERCLA, (ii) "hazardous waste" as defined in
RCRA, and (iii) asbestos, asbestos-containing material, petroleum, petroleum
products, crude oil or any fraction thereof, urea formaldehyde and
polychlorinated biphenyls, but excluding janitorial and office supplies,
properly maintained.
(o) "INTELLECTUAL PROPERTY RIGHTS" means any or all of the
following and all statutory and/or common law rights throughout the world in,
arising out of, or associated therewith: (i) all patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
conversions, continuations and continuations-in-part thereof (collectively,
"PATENTS"); (ii) all inventions (whether patentable or not), invention
disclosures and improvements, all trade secrets, proprietary information, know
how, show how and technology; (iii) all works of authorship, copyrights, mask
works, copyright and mask work registrations and applications, and derivative
works based thereon (collectively "COPYRIGHTS"); (iv) all industrial designs and
any registrations and applications therefor; (v) all databases and data
collections (including knowledge databases, product information, financial
information, customer lists and customer
-3-
EXECUTION COPY
databases); (vi) all rights in Software; (vii) rights to Uniform Resource
Locators, Web site addresses and domain names (collectively "DOMAIN NAMES"); and
(viii) any similar, corresponding or equivalent rights to any of the foregoing.
(p) "KEY EMPLOYEES" means the Transferred Employees listed in
Schedule 1.1(p) hereto.
(q) "KNOWLEDGE OF THE SELLER" means the actual knowledge of
those Persons identified on Schedule 1.1(q) hereto, without independent
investigation.
(r) "LAW" means any federal, state, county, provincial, local
or foreign statute, law, ordinance, regulation, rule, code or rule of common
law.
(s) "LIABILITY" means any direct or indirect debt, obligation
or liability of any kind or nature, whether accrued or fixed, absolute or
contingent, determined or determinable, matured or unmatured, due or to become
due, or asserted or unasserted.
(t) "LIEN" means any mortgage, pledge, lien, security
interest, charge, claim, encumbrance, restriction on transfer, conditional sale
or other title retention device or arrangement (including a capital lease),
transfer for the purpose of subjection to the payment of any indebtedness, or
restriction on the creation of any of the foregoing, whether relating to any
property or right or the income or profits therefrom.
(u) "MATERIAL ADVERSE EFFECT" means a material adverse effect
on (i) the Transferred Assets, taken as a whole or (ii) the ability of the
Seller to perform its obligations under the Transaction Agreements to which it
is a party and to consummate the Transactions.
(v) "NON-TRANSFERABLE ASSET" means any Transferred Contract or
Transferred Claim that would otherwise constitute a Transferred Asset, but that
(i) by its terms is not transferable or assignable to the Buyer pursuant to this
Agreement without the consent, waiver, approval, authorization, qualification or
other order of one or more Persons and such consent, waiver, approval,
authorization, qualification or other order is not obtained prior to the Closing
or (ii) is not transferred or assigned to the Buyer pursuant to this Agreement
for any other reason.
(w) "PERMIT" means any permit, certificate, approval, license,
clearance, authorization, registration or consent issued by a Governmental
Authority pursuant to any Law.
(x) "PERMITTED ENCUMBRANCE" means (i) any Encumbrance for
inchoate mechanics' and materialmen's liens for construction in progress and
workmen's, repairmen's, warehousemen's and carrier's liens arising in the
ordinary course of the business, (ii) any Encumbrance for Taxes not yet due and
payable and (iii) any Encumbrance arising out of, under or in connection with
the Transaction Agreements.
(y) "PERSON" means any individual, partnership, limited
liability company, firm, corporation, association, trust, unincorporated
organization,
-4-
EXECUTION COPY
Governmental Authority or other entity, as well as any syndicate or group of any
of the foregoing.
(z) "PROCEEDING" means any action, suit, litigation,
arbitration, mediation, proceeding, including any civil, criminal,
administrative, investigative or appellate proceeding and any informal
proceeding, prosecution, contest, hearing, inquiry, inquest, audit, examination
or investigation commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Authority or any arbitrator or arbitration
panel.
(aa) "PRODUCTS" means (i) the products listed or described on
Schedule 1.1(aa) hereto and (ii) all documentation in the possession, custody or
control of the Seller related to any of the items listed or described on
Schedule 1.1(aa) hereto. For the avoidance of doubt, for all purposes of and
under this Agreement, the term "Products" excludes any and all Substrates,
Devices and Capacitors set forth in Exhibit A to the Supply Agreement on the
Effective Date thereof, regardless of whether any of the Products listed or
described on Schedule 1.1(aa) hereto include any such Substrates, Devices or
Capacitors as a component or subcomponent thereof.
(bb) "PROPOSAL" means any offer for, or proposed transfer of,
all or a portion of the Transferred Assets or the Subject Business by a Person
other than Buyer, other than any offer for, or proposed transfer of, any
inventory comprising part of the Transferred Assets in the ordinary course of
business.
(cc) "REFERENCE WORKING CAPITAL" means $3,808,013.
(dd) "REFERENCE WORKING CAPITAL STATEMENT" means the
statement of Reference Working Capital attached hereto as Exhibit D.
(ee) "RELATED PARTY" means (i) the Seller, (ii) any Affiliate
of the Seller, or (iii) any officer or director of any Person identified in the
foregoing clauses (i) or (ii).
(ff) "SEC" means the United States Securities and Exchange
Commission.
(gg) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated thereunder.
(hh) "SELLER BENEFIT PLAN" means each "employee benefit plan"
(within the meaning of ERISA section 3(3), including multiemployer plans within
the meaning of ERISA section 3(37), and all severance, change-in-control, fringe
benefit, bonus, profit sharing, incentive, restricted stock, stock purchase,
stock option, stock appreciation right, deferred compensation, loan guarantee,
relocation assistance, employee loan or other extension of credit,
hospitalization, medical, life or disability insurance, sick leave, vacation and
paid holiday, and all other employee benefit or welfare plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA,
whether oral or written under which any Transferred Employee has any present or
future right to
-5-
EXECUTION COPY
compensation or employee benefits or pursuant to which the Subject Business
could have any liability.
(ii) "SOFTWARE" means any and all computer software and code,
including assemblers, applets, compilers, source code, object code, data
(including image and sound data), design tools and user interfaces, in any form
or format, however fixed. Software shall include source code listings and
documentation.
(jj) "SUBSTRATES" has the meaning assigned to such term in the
Supply Agreement on the Effective Date thereof.
(kk) "SUBSTRATE DESIGNS" means any mask works, layouts,
drawings and documents directly related to the design of the Substrates,
excluding, for avoidance of doubt, any documents relating to the Seller's
specifications for the starting materials and processes used in the fabrication
of Substrates.
(ll) "SUPERIOR PROPOSAL" means any bona fide written offer
made by a third Person to consummate a Proposal on terms that the board of
directors of the Seller determines in good faith, after consultation with its
financial advisor and taking into account the purchase price (which shall be
greater than the Consideration) and other terms and conditions of such proposal,
the legal and regulatory aspects of such proposal and the Person making such
proposal, to be more favorable to the Seller's shareholders than the
Transactions.
(mm) "TAX" and "TAXES" means any and all federal, state, local
and non-U.S. taxes, assessments and other governmental charges, duties,
impositions and Liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes as well as public imposts, fees and social security
charges (including health, unemployment and pension insurance), and installments
of estimated taxes, assessments, deficiencies, levies, imports, duties, license
fees, registration fees, withholdings or similar charges of every kind,
character or description imposed by any Governmental Authorities, together with
all interest, penalties and additions imposed with respect to such amounts and
any obligation under any Contract with any other person with respect to such
amounts and including any Liability for taxes of a predecessor entity.
(nn) TAX RETURNS" means all required federal, state, local and
foreign returns, estimates, information statements and reports relating to
Taxes.
(oo) "TECHNOLOGY" means all technology, including all
know-how, show-how, techniques, design rules, trade secrets, inventions (whether
or not patented or patentable), algorithms, routines, Software, files,
databases, works of authorship, processes, devices, prototypes, schematics,
breadboards, netlists, mask works, test methodologies, hardware development
tools, documentation associated with or primarily related to any of the
foregoing, any media on which any of the foregoing is recorded, and any other
tangible embodiments of any of the foregoing.
-6-
EXECUTION COPY
(pp) "THIRD PARTY CONSENTS" means waivers, consents, approvals
and authorizations of third Persons (other than Governmental Authorities)
including those listed on Schedule 1.1(pp) hereto.
(qq) "TRANSACTIONS" means the transactions contemplated by the
Transaction Agreements.
(rr) "TRANSACTION AGREEMENTS" means, collectively, this
Agreement and the Ancillary Agreements.
(ss) "TRANSFERRED ACCOUNTS RECEIVABLE" means all notes,
debentures and accounts receivable that are primarily related to the Subject
Business.
(tt) "TRANSFERRED BOOKS AND RECORDS" means all books and
records (including personnel records for Transferred Employees so long as such
records are used in the ordinary course of business and in compliance with
applicable Law), ledgers, files, documents, correspondence, lists, drawings,
creative, material, advertising and promotional materials, studies, reports,
customer lists, sales data, product documentation and other printed or written
materials that are primarily related to the Subject Business.
(uu) "TRANSFERRED CLAIMS" means all claims, actions or suits,
judgments, demands, deposits, prepayments, refunds, causes of action, choses in
action, rights of recovery, rights of setoff, rights of recoupment or rights of
any nature that are primarily related to the Subject Business (other than tax
refunds), and all rights to recover damages for the breach, infringement or
misappropriation of any Transferred Assets.
(vv) "TRANSFERRED CONTRACTS" means all Contracts to which the
Seller is a party, or by which the Seller may be bound, that are primarily
related to the Subject Business, including the Contracts that are listed on
Schedule 1.1(vv) hereto.
(ww) "TRANSFERRED EMPLOYEES" means the employees of the Seller
who are listed on Schedule 1.1(ww) hereto.
(xx) "TRANSFERRED IPR" means (i) the Intellectual Property
Rights in, to or embodied in the Products and (ii) the Copyrights in, to or
embodied in the Substrate Designs.
(yy) "TRANSFERRED PERMITS" means all permits, concessions,
grants, franchises, licenses, certifications and other governmental
authorizations and approvals, including licenses to export its Products, that
are primarily related to the Subject Business and that are transferable to the
Buyer under applicable Law, including the permits that are listed or described
on Schedule 1.1(yy) hereto.
(zz) "TRANSFERRED PREPAID EXPENSES" means all advance
payments, prepaid items and expenses and deferred charges of the Seller that are
listed on Schedule 1.1(zz) hereto.
-7-
EXECUTION COPY
(aaa) "TRANSFERRED TANGIBLE PROPERTY" means all machinery,
equipment, motor vehicle, tools, dies, molds, test equipment furniture, office
equipment, telephone systems, computer hardware and software, leasehold
improvements, inventories of raw material, work in progress, finished products,
parts, goods, subassemblies, spare parts, replacements and component parts,
office, packaging and other supplies that are primarily related to the Subject
Business, including those that are listed or described on Schedule 1.1(aaa)
hereto.
(bbb) "TRANSFERRED TECHNOLOGY" means (i) the Technology
embodied in the Products and (ii) the Substrate Designs.
1.2 Additional Capitalized Terms. The following capitalized terms shall
have the meanings ascribed thereto in the respective sections of this Agreement
set forth opposite each such term.
Term Section
---- -------
Accounting Firm 2.3(b)
Adjustment Amount 2.3(b)
Adjustment Amount Statement 2.3(b)
Agreement Preamble
Assumed Liabilities 2.2(a)
Buyer Preamble
Buyer Assumption Documents 2.4(c)
Buyer Benefit Plan 7.1(d)
Buyer Indemnified Party(ies) 10.2
Closing 2.4(a)
Closing Date 2.4(a)
Competitive Business Activity 6.1(b)
Conflict 3.3
Consideration 2.3(a)
Copyrights 1.1(o)
Disputed Item 2.3(b)
Domain Names 1.1(o)
Effective Tax Rate 10.4(f)
Excluded Assets 2.1(b)
Excluded Liabilities 2.2(b)
Final Adjustment Amount Statement 2.3(b)
Financial Advisor 3.19
Indemnification Cap 10.4(b)
Indemnification Claim Certificate 10.6(a)
Indemnification Threshold Amount 10.4(a)
Indemnified Party 10.6(a)
Indemnifying Party 10.6(a)
Initial Purchase Price 2.3(a)
Notice of Dispute 2.3(b)
Novation Agreement 5.11
-8-
EXECUTION COPY
Patents 1.1(o)
Proxy Statement 5.2
Purchase Price 2.3(a)
Real Property License Agreement Recitals
Restricted Territory 6.1(b)
Revised Seller Schedule(s) 5.7
Seller Preamble
Seller Disclosure Schedule Article 3 Preamble
Seller Indemnified Party(ies) 10.3
Seller Severance Policy 7.1(c)
Seller Transfer Documents 2.4(b)
Straddle Period Tax 8.2
Subject Business Recitals
Supply Agreement Recitals
Survival Period 10.1
Tax Allocation 2.3(c)
Termination Date 11.1(b)
Termination Fee Amount 11.2(b)
Transfer Taxes 2.6
Transferred Asset(s) 2.1(a)
Transition Services Agreement 5.14
Voting Agreement(s) Recitals
WARN Act 7.1(f)
1.3 Construction.
(a) For all purposes of and under this Agreement, unless the
context otherwise requires (i) the singular number shall include the plural, and
vice versa, (ii) the masculine gender shall include the feminine and neuter
genders, (iii) the feminine gender shall include the masculine and neuter
genders and (iv) the neuter gender shall include the masculine and feminine
genders.
(b) Any rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in the
construction or interpretation of the Transaction Agreements or any certificate,
instrument, agreement or other document entered into or delivered in connection
with the Transactions.
(c) For all purposes of and under this Agreement, the words
"include" and "including" and any variations thereof shall not be deemed to be
terms of limitation, but rather shall be deemed to be followed by the words
"without limitation" in all cases.
(d) Except as otherwise indicated, all references in this
Agreement to "Exhibits," "Schedules," "Articles" and "Sections" are intended to
refer to Exhibits, Schedules, Articles and Sections of or to this Agreement.
-9-
EXECUTION COPY
(e) The headings in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement, and shall
not be referred to in connection with the construction or interpretation of this
Agreement.
(f) For all purposes of and under this Agreement, unless the
context otherwise requires, (i) all references in this Agreement to the "Seller"
shall be deemed to refer to and include the Seller and its subsidiaries, as
applicable, and (ii) all references to the "Buyer" shall be deemed to refer to
and include the Buyer and its subsidiaries, as applicable.
ARTICLE 2
PURCHASE AND SALE OF ASSETS & ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets.
(a) Transferred Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Seller shall
irrevocably sell, convey, transfer, assign and deliver unto Buyer, free and
clear of any and all Encumbrances other than Permitted Encumbrances, and the
Buyer shall purchase and accept from the Seller, all of the right, title and
interest of the Seller as of the Closing in and to the following assets
(collectively, the "TRANSFERRED ASSETS"):
(i) the Transferred Tangible Property;
(ii) the Transferred Contracts;
(iii) Transferred Permits;
(iv) the Transferred IPR, and the right to recover
all past, present and future damages for infringement of such Intellectual
Property Rights;
(v) the Transferred Technology;
(vi) the Transferred Books and Records;
(vii) the Transferred Claims;
(viii) the Transferred Accounts Receivable;
(ix) the Transferred Prepaid Expenses;
(x) the assets reflected on the Reference Working
Capital Statement; and
(xi) the assets set forth on Schedule 2.1(a) hereto;
-10-
EXECUTION COPY
(xii) all goodwill and going concern value of the
Seller with respect to the Subject Business.
(b) Excluded Assets. Notwithstanding anything to the contrary
set forth in this Agreement, the Seller shall have no obligation to sell,
convey, transfer, assign or otherwise deliver unto the Buyer pursuant to this
Agreement, and the Buyer shall have no obligation to purchase or otherwise
accept from the Seller pursuant to this Agreement, any of the right, title or
interest of the Seller in or to any of the assets of the Seller other than the
Transferred Assets (collectively, the "EXCLUDED ASSETS"). Without limiting the
generality of the foregoing, the Excluded Assets shall expressly include (and,
therefore, the Transferred Assets shall exclude) the following:
(i) all right, title and interest of the Seller in
and to any real property, whether owned or leased by the Seller (except as
provided in the Real Property License Agreement);
(ii) all right, title and interest of the Seller in
and to any insurance policies, whether or not related to the Subject Business or
the Transferred Assets; and
(iii) all right, title and interest of the Seller in
and to the Seller Benefit Plans and the assets thereof.
2.2 Assumption of Liabilities.
(a) Assumed Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Buyer shall assume
from the Seller, and the Seller shall irrevocably convey, transfer and assign to
Buyer, any and all of the Liabilities arising out of or related to the
Transferred Assets, the Products or the Subject Business on or after the Closing
(other than the Excluded Liabilities), including the following Liabilities
(collectively, the "ASSUMED LIABILITIES"):
(i) any and all Liabilities reflected on or reserved
against in the Closing Working Capital on the Final Adjustment Amount Statement;
(ii) those Liabilities that the Buyer has expressly
agreed to assume pursuant to Article 7 hereof; and
(iii) the other Liabilities set forth on Schedule
2.2(a) hereto.
(b) Excluded Liabilities. Notwithstanding anything to the
contrary set forth in this Agreement, the Buyer shall have no obligation to
assume from the Seller pursuant to this Agreement, and the Seller shall have no
right or obligation to convey, transfer or assign to the Buyer pursuant to this
Agreement, any Liabilities of the Seller other than the Assumed Liabilities
(collectively, the "EXCLUDED LIABILITIES"). Without limiting the generality of
the foregoing, the Excluded Liabilities shall expressly include (and, therefore,
the Assumed Liabilities shall exclude) the following Liabilities:
-11-
EXECUTION COPY
(i) other than any such Liabilities that are
expressly listed or described in Section 2.2(a) hereof as Assumed Liabilities,
any and all of the Liabilities arising out of or related to the Transferred
Assets, the Products or the Subject Business before the Closing, including the
following:
(A) any and all Liabilities arising out of
related to the Transferred Contracts before the Closing;
(B) any and all Liabilities arising out of or
related to the Products before the Closing (including any
Liabilities related to allegations or the presence of asbestos
or asbestos-containing materials contained or incorporated in
such products); and
(C) except as otherwise provided in the Real
Property License Agreement, any and all Liabilities arising
out of or relating to the ownership or use of any facility
owned, leased or operated by the Seller or any predecessor
company, including the facility currently leased by the Seller
at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
(ii) other than any such Liabilities that are
expressly listed or described in Section 2.2(a) hereof as Assumed Liabilities,
(A) any and all Liabilities arising out of or relating to any Transferred
Employees or the employment thereof incurred before the Closing (including
Liabilities for workers compensation claims, disability and occupational
diseases), in each case without regard to whether such Liabilities or the bases
therefor are known or otherwise manifest before the Closing, and (B) subject to
the terms of Article 7 hereof, any and all Liabilities arising out of or related
to the Seller Benefit Plans;
(iii) other than any such Liabilities that are
expressly listed or described in Section 2.2(a) hereof as Assumed Liabilities,
subject to the terms and conditions of Article 8 hereof, any and all Liabilities
for Taxes for any taxable periods, or portions thereof, ending on or before the
Closing;
(iv) any and all Liabilities arising out of or
related to any violation of Law (including any Environmental Law) occurring
before the Closing, whether or not the Seller participated in the act or
omission giving rise to such violation;
(v) any and all Liabilities arising out of or related
to (A) the failure of any report, schedule, form or registration statement
(including all exhibits, schedules and amendments thereto) filed by the Seller
with the SEC to comply with the requirements of the Securities Act and the
Exchange Act, as the case may be, and (B) the fact that any such reports,
schedules, forms or registration statements contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(vi) the other Liabilities set forth on Schedule
2.2(b) hereto.
-12-
EXECUTION COPY
2.3 Consideration for Transferred Assets.
(a) Initial Purchase Price; Consideration. In consideration
for the sale by the Seller to the Buyer of the Transferred Assets, the Buyer
shall (i) subject to the terms of Section 2.3(b) hereof, pay or deliver to the
Seller an aggregate of Thirty Three Million Dollars ($33,000,000) (the "INITIAL
PURCHASE PRICE" and as adjusted pursuant to Section 2.3(b) hereof, the "PURCHASE
PRICE") and (ii) assume the Assumed Liabilities pursuant to Section 2.2(a)
hereof (together, the "CONSIDERATION").
(b) Purchase Price Adjustment.
(i) The Purchase Price shall be adjusted, upward or
downward, by an amount (the "ADJUSTMENT AMOUNT") equal to the difference between
Reference Working Capital and Closing Working Capital, where:
(A) such difference will be reflected as a
positive number if Closing Working Capital is greater
than Reference Working Capital; and
(B) such difference will be reflected as a
negative number if Closing Working Capital is less
than Reference Working Capital.
(ii) Within five (5) days of the Closing Date, the
Seller shall take a physical inventory of the Subject Business. The Buyer may be
present to observe the taking of such physical inventory. Within sixty (60)
calendar days after the Closing, the Buyer shall prepare and deliver to the
Seller a statement (the "ADJUSTMENT AMOUNT STATEMENT") setting forth the Buyer's
calculation of Closing Working Capital and the Adjustment Amount, which
statement shall (A) reflect the physical inventory conducted by the Seller, (B)
be prepared in a manner consistent with the Reference Working Capital Statement
and (C) include a reconciliation showing the differences between Reference
Working Capital and Closing Working Capital.
(iii) The Adjustment Amount Statement shall be final
and binding on the Seller and the Buyer unless the Seller shall notify the Buyer
in writing (a "NOTICE OF DISPUTE"), within thirty (30) calendar days of its
receipt of the Adjustment Amount Statement from the Buyer, that the Seller
wishes to dispute one or more items set forth in the Adjustment Amount Statement
(a "DISPUTED ITEM"). The Notice of Dispute shall set out in reasonable detail
each Disputed Item, the basis for such dispute, the amount in dispute and the
Seller's calculation of Closing Working Capital and the Adjustment Amount. In
the event that the Seller shall fail to notify the Buyer of any dispute with
respect to any items set forth in the Adjustment Amount Statement within such
30-calendar-day period, (A) the Seller shall be deemed to have accepted and
approved the Adjustment Amount Statement (or any items with respect to which the
Seller has not so notified the Buyer of a dispute), and (B) the Adjustment
Amount Statement shall be deemed to be final and binding on the Seller and the
Buyer with
-13-
EXECUTION COPY
respect to any item set forth in the Adjustment Amount Statement that is not a
Disputed Item.
(iv) If the Seller shall notify the Buyer of one or
more Disputed Items in accordance with Section 2.3(b)(iii) hereof, the Seller
and the Buyer shall consult with each other and attempt in good faith to resolve
any and all Disputed Items. If the Seller and the Buyer are unable to resolve
any Disputed Items within thirty (30) calendar days of the delivery of a Notice
of Dispute, such Dispute Items shall be referred, to the Vice President and
Chief Financial Officer of the Buyer and the Chief Financial Officer of the
Seller for resolution. If such officers are unable to resolve all disagreements
within fifteen (15) business days, then, within fifteen (15) days thereafter,
the matter shall be referred for final determination to KPMG LLP or, in the
event that KPMG LLP cannot or will not hear such dispute, to a nationally
recognized, independent auditing firm that is mutually acceptable to the Seller
and the Buyer and is not the independent auditor of either the Seller or the
Buyer (in either case, the "ACCOUNTING FIRM"). The following terms shall apply
to any such determination:
(A) each of the Seller and the Buyer shall
promptly prepare a written statement on the Disputed
Items which (together with the relevant documents)
will be submitted to Accounting Firm for
determination;
(B) the Accounting Firm shall only consider
those items and amounts set forth on the Adjustment
Amount Statement as to which the Seller and the Buyer
have disagreed and in giving its determination, the
Accounting Firm shall state what adjustments (if any)
are necessary to Closing Working Capital and the
Adjustment Amount Statement in respect of the
Disputed Items in order to comply with the
requirements of this Agreement;
(C) the Accounting Firm shall deliver to the
Seller and the Buyer as promptly as possible but in
any event within ninety (90) days after its
appointment a written report setting forth the
resolution of the Disputed Items determined in
accordance with the terms herein; the Accounting Firm
shall act as an expert (and not as an arbitrator) in
making any determination with respect to any Disputed
Items, which shall be final and binding on the Seller
and the Buyer; and
(D) the fees and expenses of the Accounting
Firm shall be paid (i) by the Seller, if the
difference between the Adjustment Amount calculated
based upon any determinations of the Accounting Firm
and the Seller's calculation of the Adjustment Amount
is greater than the difference between the Adjustment
Amount calculated based upon any determinations of
the Accounting Firm and the Buyer's calculation of
the Adjustment Amount, (ii) by the Buyer, if the
difference between the
-14-
EXECUTION COPY
Adjustment Amount calculated based upon any
determinations of the Accounting Firm and the Buyer's
calculation of the Adjustment Amount is greater than
the difference between the Adjustment Amount
calculated based upon any determinations of the
Accounting Firm and the Seller's calculation of the
Adjustment Amount, and (iii) by the Seller and the
Buyer equally if the difference between the
Adjustment Amount calculated based upon any
determinations of the Accounting Firm and Seller's
calculation of the Adjustment Amount is equal to the
difference between the Adjustment Amount calculated
based upon any determinations of the Accounting Firm
and Buyer's calculation of the Adjustment Amount.
(v) If the Seller and the Buyer reach (or pursuant to
Section 2.3(b)(iii) hereof are deemed to reach) agreement on the Adjustment
Amount Statement, or the Adjustment Amount Statement is finally determined at
any stage in the procedures set out in this Section 2.3(b), the Adjustment
Amount Statement as so agreed or determined shall be final and binding on the
Seller and the Buyer and shall be deemed to be the "FINAL ADJUSTMENT AMOUNT
STATEMENT," for all purposes of and under this Agreement.
(vi) The Buyer shall permit the Seller and its
accountants and other advisors reasonable access during normal business hours,
and on reasonable notice, to the premises and personnel of the Subject Business
and to any relevant accounts, documents and records of the Transferred Assets
and Assumed Liabilities within its possession which are reasonably necessary for
the purposes of reviewing the Adjustment Amount Statement, and will permit them
to make copies of such accounts, documents and records at their own cost and
expense.
(vii) In the event that the Seller shall deliver a
Notice of Dispute pursuant to Section 2.3(b)(iii) hereof and the aggregate
dollar amount of all Disputed Items set forth therein (calculated without
setting off any single Disputed Item against any other Disputed Items) is less
than twenty percent (20%) of the aggregate dollar amount of the Adjustment
Amount set forth in the Adjustment Amount Statement delivered by the Buyer
pursuant to Section 2.3(b)(ii) hereof, then for purposes of this Section
2.3(b)(vii) hereof, (A) the Adjustment Amount shall be recalculated by excluding
all Disputed Items, and (B):
(1) if the Adjustment Amount (as so
recalculated) is greater than zero, the Buyer shall
pay to the Seller an amount equal to the Adjustment
Amount (as so recalculated); or
(2) if the Adjustment Amount (as so
recalculated) is less than zero, the Seller shall pay
to the Buyer an amount equal to the absolute value of
the Adjustment Amount (as so recalculated);
-15-
EXECUTION COPY
in either case such amount (i) to also include interest compounded annually,
using a 365-day year from the Closing Date through the date prior to the date of
payment at the prime lending rate of Citibank, N.A. as in effect on the Closing
Date, and (ii) to be payable by wire transfer in immediately available funds to
an account or accounts designated in writing by the recipient of the Adjustment
Amount.
(viii) Within two (2) business days after the
determination of the Final Adjustment Amount Statement, the Adjustment Amount
(after taking into account, and setting off against, any and all amounts
previously paid pursuant to Section 2.3(b)(vii) hereof) shall be paid as
follows:
(1) if the Adjustment Amount is greater than
zero, the Buyer shall pay to the Seller an amount
equal to the Adjustment Amount; or
(2) if the Adjustment Amount is less than
zero, the Seller shall pay to the Buyer an amount
equal to the absolute value of the Adjustment Amount;
in either case such amount (i) to also include interest compounded annually,
using a 365-day year from the Closing Date through the date prior to the date of
payment at the prime lending rate of Citibank, N.A. as in effect on the Closing
Date, and (ii) to be payable by wire transfer in immediately available funds to
an account or accounts designated in writing by the recipient of the Adjustment
Amount.
(c) Tax Allocation of Consideration.
(i) Within one hundred and twenty (120) days after
the Closing, the Buyer shall prepare a proposed allocation of the Consideration
among all of the Transferred Assets. Thereafter, the Seller and the Buyer shall
work together in good faith to agree upon such allocation as soon as reasonably
practicable. In the event that the Seller and the Buyer shall agree upon an
allocation of the Consideration among the Transferred Assets pursuant to this
Section 2.3(c), such allocation shall be deemed to be the "TAX ALLOCATION" for
all purposes of and under this Agreement. The Seller and the Buyer hereby agree
that, for purposes of allocating the appropriate portion of the Consideration to
each of the Transferred Tangible Assets (other than inventory and
work-in-process), the value of each such Transferred Tangible Asset shall be
equal to its net book value, as reflected in the books and records of the
Seller.
(ii) To the extent the parties agree to the Tax
Allocation, each of the Buyer and the Seller shall (i) report the Transactions
for all Tax purposes as a sale of assets in a manner consistent with the Tax
Allocation, (ii) not file any Tax Return or otherwise take a position with any
Tax authority that is inconsistent with the Tax Allocation, (iii) not take any
position before any Governmental Authority or in any judicial proceeding that is
inconsistent with the Tax Allocation. Each of the Buyer and the Seller shall
timely file a Form 8594 with the Internal Revenue Service in accordance with the
requirements of Section 1060 of the Code. If there is a purchase price
adjustment
-16-
EXECUTION COPY
pursuant to Section 2.3(b) hereof, the Tax Allocation shall be revised in
accordance with Section 1060 of the Code (and the treasury regulations
promulgated thereunder), to reflect such purchase price adjustment. In the event
that any Governmental Authority shall make or propose to either the Buyer or the
Seller an allocation of the Consideration that differs from the Tax Allocation,
each of the Buyer and the Seller shall reasonably cooperate in good faith with
the other(s) to contest the determination of such Governmental Authority with
respect to the allocation of the Consideration.
2.4 The Closing.
(a) Closing. The consummation of the Transactions shall take
place at a closing (the "CLOSING") to be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, effective as of 12:01 a.m., local time, on the date that
is two (2) business days following the satisfaction or valid written waiver of
all the conditions set forth in Article 9 hereof (other than conditions which by
their terms are to be satisfied at the Closing), or at such other location, time
and date as the parties hereto shall mutually determine (the actual date on
which the Closing shall occur pursuant hereto being referred to herein as the
"CLOSING DATE").
(b) Closing Deliveries of the Seller. At the Closing, the
Seller shall deliver or cause to be delivered to Buyer ownership, possession and
control of all of the Transferred Assets, free and clear of all Encumbrances
other than Permitted Encumbrances, including by executing and delivering those
documents identified in Section 9.2 hereof and all such other instruments,
certificates and other documents that are reasonably necessary to effect the
valid transfer from the Seller to Buyer of, and vest in Buyer valid title or
rights in and to, the Transferred Assets or to complete the Transactions
(collectively, the "SELLER TRANSFER DOCUMENTS").
(c) Closing Deliveries of the Buyer. At the Closing, the Buyer
shall deliver to the Seller (i) an amount in cash equal to the Initial Purchase
Price, payable by wire transfer in immediately available funds to an account or
accounts designated in writing by the Seller, (ii) all such instruments,
certificates and other documents of assumption, in form and substance reasonably
acceptable to the Seller, dated as of the Closing Date and validly executed or
acknowledged (as applicable) for and on behalf of Buyer and in its name by a
duly authorized officer thereof, that are reasonably necessary to effect the
valid assumption by the Buyer of the Assumed Liabilities, in each case effective
as of the Closing and (iii) such other agreements or documents reasonably
necessary to complete the Transactions (collectively, the "BUYER ASSUMPTION
DOCUMENTS").
(d) Title to Transferred Assets. Title to all Transferred
Assets shall pass from the Seller to the Buyer at the Closing, subject to the
terms and conditions of this Agreement. The Buyer assumes no risk of loss to the
Transferred Assets prior to the Closing.
-17-
EXECUTION COPY
2.5 Third Party Consents; Non-Transferable Assets.
(a) The Seller and the Buyer shall use their respective
commercially reasonable efforts to obtain all Third Party Consents, in a form
and substance reasonably acceptable to the Buyer and the Seller, that are
reasonably necessary to effect the valid transfer from the Seller to the Buyer
of, and vest in the Buyer valid title or rights in and to, the Transferred
Assets, in each case effective as of the Closing; provided, however, that solely
for purposes of this Section 2.5(a), the exercise of commercially reasonable
efforts by the Buyer or the Seller shall not consist of making payments to third
Persons to obtain any such Third Party Consents, commencing any litigation or
offering or granting any accommodation (financial or otherwise) to any third
Persons, in each case in order to obtain any such Third Party Consents.
(b) Notwithstanding anything in this Agreement or in any
Ancillary Agreement to the contrary, nothing in this Agreement or in any
Ancillary Agreement shall be construed as, or constitute, an attempt, agreement
or other undertaking to transfer or assign to the Buyer any Non-Transferable
Assets.
(c) From and after the Closing and until such time as any
Non-Transferable Asset shall be properly and lawfully transferred or assigned to
the Buyer pursuant to Section 2.5(d) hereof (i) the Non-Transferable Assets
shall be held by the Seller in trust exclusively for the benefit of Buyer and
(ii) the Seller and the Buyer shall cooperate in any good faith, reasonable
arrangement designed to provide or cause to be provided for the Buyer the
material benefits intended to be transferred or assigned to the Buyer under the
applicable Non-Transferable Asset and, in furtherance thereof, to the extent
permitted under the terms of each such Non-Transferable Asset and under
applicable Law (A) the Buyer shall use commercially reasonable efforts to
perform and discharge all of the Liabilities of the Seller under the terms of
such Non-Transferable Assets in effect as of the Closing and (B) the Seller
shall use commercially reasonable efforts to provide or cause to be provided to
the Buyer, at the request of and under the direction of the Buyer, all of the
benefits of the Seller under the terms of the Non-Transferable Asset in effect
as of the Closing, including the enforcement of any rights under the
Non-Transferable Assets (including the right to terminate in accordance with the
terms thereof upon the advice of the Buyer) and promptly paying to the Buyer any
monies received by the Seller after the Closing under any Non-Transferable
Assets attributable to the performance of the Buyer thereunder. Nothing in this
Section 2.5(c) shall in any way diminish the Seller's obligations hereunder to
obtain all consents and approvals and to take all such other actions prior to or
at Closing as are necessary to enable Seller to convey or assign valid title to
all of the Transferred Assets to the Buyer. The Seller and the Buyer hereby
acknowledge and agree that the relationship, if any, among the parties
established by the terms of this Section 2.5(c) is that of independent
contractors, and nothing in this Section 2.5(c) shall be construed to create a
relationship of agency or partnership between the parties hereto or to create
any obligation to, or provide any benefit for, any other Person.
(d) For the period commencing on the Closing Date and ending
on the first (1st) anniversary of the Closing Date, the Seller and the Buyer
shall use their
-18-
EXECUTION COPY
respective commercially reasonable efforts to obtain all such Third Party
Consents, in a form and substance reasonably acceptable to the Buyer and the
Seller, that are reasonably necessary to effect the valid transfer from the
Seller to the Buyer of, and vest in the Buyer valid title or rights in and to,
the Non-Transferable Assets; provided, however, that solely for purposes of this
Section 2.5(d), the exercise of commercially reasonable efforts by the Buyer and
the Seller shall not consist of making payments to third Persons to obtain such
Third Party Consents, commencing any litigation or offering or granting any
accommodation (financial or otherwise) to any third Persons, in each case in
order to obtain any such Third Party Consents. Upon the receipt of any such
Third Party Consents under any Non-Transferable Asset after the Closing Date and
prior to the first (1st) anniversary of the Closing Date, such Non-Transferable
Asset shall be transferred and assigned to the Buyer, and thereafter deemed to
be a Transferred Asset for all purposes of and under this Agreement and any
applicable Ancillary Agreements, effective as of the date of such consent,
waiver, approval or authorization.
2.6 Transfer Taxes. The Buyer and Seller shall equally share the
payment of, and shall pay when due, any and all documentary, stamp, sales, use,
excise, value-added, gross receipts or similar transfer taxes ("TRANSFER TAXES")
that are or may be payable in connection with the sale or purchase of the
Transferred Assets. Each party shall prepare and timely file all Tax Returns
relating to Transfer Taxes that such party is required to file under applicable
law (subject to the other party's review and consent, which shall not be
unreasonably withheld) and shall timely pay all Transfer Taxes required to be
paid by such party under applicable law. Each party shall indemnify the other
for fifty percent (50%) of all such Transfer Taxes paid by the other in
accordance with Section 10.2 and Section 10.3 hereof. The Buyer shall provide to
the Seller a valid California resale certificate for the inventory items
purchased by the Buyer. The parties shall cooperate with one another to the
extent reasonably requested and legally permitted to minimize any Transfer
Taxes.
2.7 Proration of Certain Liabilities. Any and all Liabilities for
property Taxes payable in respect of Transferred Tangible Property shall be
prorated as of the Closing between the Seller, on the one hand, and the Buyer,
on the other hand. The net proration payment for the items of Liability set
forth in this Section 2.7 hereof that are determinable as of the Closing shall
be made within sixty (60) calendar days of the Closing. Any net proration
payment for the items of Liability set forth in this Section 2.7 hereof that are
not determinable as of the Closing shall be paid by the Buyer to the Seller or
by the Seller to the Buyer, as the case may be, within thirty (30) calendar days
after the party or parties directly incurring such Liability shall notify the
other party hereto in writing that such item of Liability has become
determinable.
2.8 Further Assurances.
(a) Of the Seller. At any time and from time to time after the
Closing, at the Buyer's reasonable request and without further consideration
therefor, the Seller shall execute and deliver to the Buyer such other documents
or instruments of sale, transfer, conveyance, assignment and confirmation,
provide such materials and information and take such other actions, as may
reasonably be requested in order more
-19-
EXECUTION COPY
effectively to transfer, convey and assign to the Buyer, or confirm the title or
rights of the Buyer in or to, all of the Transferred Assets, to put the Buyer in
actual possession and control of the Transferred Assets to the full extent
permitted by applicable Law, and otherwise to cause the Seller to fulfill its
obligations under the Transaction Agreements to which it is a party.
(b) Of the Buyer. At any time and from time to time after the
Closing, at the Seller's reasonable request and without further consideration
therefor, the Buyer shall execute and deliver to the Seller such other documents
or instruments of assumption, provide such materials and information and take
such other actions, as may reasonably be requested in order more effectively to
assume from the Seller, or confirm the obligations of the Buyer under, all of
the Assumed Liabilities, and otherwise to cause the Buyer to fulfill its
obligations under the Transaction Agreements to which it is a party.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Subject to the exceptions and other information set forth in disclosure
schedules delivered by the Seller to the Buyer as of the date hereof (the
"SELLER DISCLOSURE SCHEDULE"), the Seller hereby represents and warrants to the
Buyer as follows:
3.1 Organization; Good Standing; Corporate Power. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Seller is licensed or qualified to transact
business as a foreign corporation, and is in good standing, under the laws of
all states in the United States where the Subject Business would require it to
be so licensed or qualified, except where the failure to be so licensed or
qualified would not reasonably be expected to have a Material Adverse Effect.
The Seller has all requisite corporate power and authority to own, hold and use
the Transferred Assets, and to sell, license or otherwise distribute any of the
Products to, or provide services to, customers or potential customers or any
class of customers, in the manner currently being conducted by it.
3.2 Authority. The Seller has all requisite power and authority to
enter into the Transaction Agreements to which it is a party, to perform its
obligations under the Transaction Agreements, and to consummate the
Transactions. The execution and delivery by the Seller of the Transaction
Agreements to which it is a party, the performance by the Seller of its
obligations under the Transaction Agreements, and the consummation by the Seller
of the Transactions, have been duly authorized by all necessary corporate action
on the part of the Seller, and except for shareholder approval which the Seller
shall seek pursuant to Section 5.2 hereof, no further action is required on the
part of the Seller to authorize the execution and delivery by the Seller of the
Transaction Agreements to which it is a party, the performance by the Seller of
its obligations under the Transaction Agreements, or the consummation by the
Seller of the Transactions. This Agreement has been (and as of the Closing each
of the Ancillary
-20-
EXECUTION COPY
Agreements to which the Seller is a party will be) duly executed and delivered
by the Seller, and this Agreement constitutes (and upon the execution and
delivery thereof by the Seller as of the Closing, each of the Ancillary
Agreements to which the Seller is a party will constitute) the valid and binding
obligation of the Seller, enforceable against the Seller in accordance with
their respective terms.
3.3 Conflicts. Assuming that the authorizations, approvals and consents
referred to in Section 3.4 hereof are duly obtained, the execution and delivery
by the Seller of the Transaction Agreements to which it is a party, the
performance by the Seller of its obligations under the Transaction Agreements,
and the consummation by the Seller of the Transactions, will not directly or
indirectly (with or without notice or lapse of time) conflict with or result in
any violation of, or result in the imposition of any lien upon or create a
security interest under, or default under, or give rise to a right of
termination, cancellation, modification or acceleration of any obligation or
loss of any benefit under (any such event, a "CONFLICT") (i) any provision of
the Articles of Incorporation or Bylaws of the Seller, (ii) any of the
Transferred Assets, (iii) any judgment, order, award, decree applicable to the
Seller or (iv) to the Knowledge of the Seller, any Law that is applicable to the
Seller or any of its properties or assets (tangible and intangible), including
the Transferred Assets, except in the case of this clause (iv) for any such
Conflicts that would not reasonably be expected to have a material adverse
effect on the ability of the Seller to perform its obligations under the
Transaction Agreements to which it is a party and to consummate the
Transactions.
3.4 Required Consents. Except for (a) filings with the SEC of the Proxy
Statement, (b) the approval of the Seller's shareholders and (c) filings,
permits, authorizations, consents and approvals as may be required under the
rules and regulations of NASDAQ, no material consent, waiver, license, approval,
authorization or order of, or material registration, declaration or filing with
any Person (including a party to any agreement with the Seller) is required by
or with respect to the Seller in connection with or as a result of the execution
and delivery by the Seller of the Transaction Agreements to which the Seller is
a party, the performance by the Seller of its obligations under the Transaction
Agreements, or the consummation by the Seller of the Transactions.
3.5 Transferred Tangible Property. The Seller has good and valid title
to all of the Transferred Tangible Property, in each case free and clear of any
and all Encumbrances other than Permitted Encumbrances, and each item of
Transferred Tangible Property is in good operating condition, regularly and
properly maintained, subject to normal wear and tear.
3.6 Inventory. All of the inventories of the Seller included among the
Transferred Tangible Property were purchased, acquired or produced in the
ordinary and regular course of business and in a manner consistent with the
Seller's regular inventory practices and are set forth on the Reference Working
Capital Statement in accordance with the practices and principles of the Seller
consistent with the method of treating such items in prior periods. None of the
inventory that is included among the Transferred Tangible Property has been
consigned from any third party or is on consignment from any third party.
-21-
EXECUTION COPY
3.7 Transferred Contracts; Government Contracts.
(a) The Seller has made available to the Buyer a true and
correct copy of each of the Transferred Contracts (including all currently
effective modifications, amendments and supplements thereto), each of which
contains all of the material terms thereof. Each of the Transferred Contracts is
in full force and effect, is valid and effective against the Seller and the
other party or parties thereto in accordance with its terms, and to the
Knowledge of the Seller, there is no existing material default or event of
material default (or event that with notice or lapse of time, or both, would
constitute a default) thereunder by the Seller or any other party or parties
thereto. The Seller is in compliance with and has neither breached, violated or
defaulted under, nor received notice that the Seller has breached, violated or
defaulted under, any of the terms or conditions of each of the Transferred
Contracts, except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(b) Section 3.7(b) of the Seller Disclosure Schedule contains
a complete and accurate list of any Transferred Contract that is a, or that
contains provisions that include any of the following:
(i) Contract relating to the borrowing of money or
under which it has imposed a security interest on any of the Transferred Assets;
(ii) guarantee of any obligation;
(iii) letter of credit, bond or other indemnity,
except endorsements of instruments for collection in the ordinary course of
operation of the Subject Business;
(iv) Contract requiring the payment by the Seller of
more than $50,000 in any twelve (12) month period for the purchase or lease of
any machinery, equipment or other capital assets;
(v) collective bargaining agreement, employment,
international sales agent, representative, distributor or consulting Contract;
(vi) Contract providing for severance payments or
other additional similar rights or benefits (whether or not optional) in the
event of the sale of the Subject Business;
(vii) joint venture or partnership Contract;
(viii) Contract requiring the payment by the Seller
to any Person of more than $50,000 in the aggregate in any twelve (12) month
period for the purchase of goods or services;
-22-
EXECUTION COPY
(ix) Contract between the Seller and any Affiliate of
the Seller (which shall be separately identified as such in Section 3.7(b) of
the Seller Disclosure Schedule);
(x) lease of personal property under which the Seller
is the lessor, except equipment leases entered into the ordinary course of
business;
(xi) Contract under which the Seller has agreed to
indemnify any party; or
(xii) Contract concerning non-competition.
(c) With respect to each Government Contract that is a
Transferred Contract or any Bid (i) to the Knowledge of the Seller, the Seller
has complied with all material terms and conditions and all requirements of Law
applicable thereto, (ii) no written notice has been received alleging that the
Seller is in breach or violation of any requirement of Law applicable thereto,
(iii) no written notice of termination, cure notice or show-cause notice has
been received by the Seller with respect thereto, or (iv) to the Knowledge of
the Seller, no notice of breach, violation or termination, cure notice or
show-cause notice has been threatened with respect thereto.
(d) The Seller is not with respect to the Subject Business
(and for the last three (3) years has not been) (i) to the Knowledge of the
Seller, under administrative, civil or criminal investigation, indictment or
information by the United States Government with respect to any alleged
irregularity, misstatement or omission regarding a Government Contract that is a
Transferred Contract or any Bid, or (ii) suspended or debarred from doing
business with the United States Government or declared nonresponsible or
ineligible for government contracting. Within the past three (3) years, the
Seller has not made a voluntary disclosure under the United States Department of
Defense voluntary disclosure program or under any voluntary disclosure program
of another Governmental Authority with respect to any alleged irregularity,
misstatement or omission arising under or relating to any Government Contract
that is a Transferred Contract or any Bid.
(e) To the Knowledge of the Seller, there are no circumstances
that would warrant the United States Department of Defense or any other
Governmental Authority suspension or disbarment proceedings or the finding of
nonresponsibility or ineligibility on the part of the Subject Business or any
other damage or penalty assessment or recoupment of payment. To the Knowledge of
the Seller, neither the United States Government nor any prime contractor,
subcontractor or vendor is asserting in writing any claim or initiating any
dispute proceeding against the Seller relating to any Government Contract that
is a Transferred Contract or any Bid, nor is the Seller asserting any claim or
initiating any dispute proceeding directly or indirectly against any such party
concerning any such Government Contract or Bid.
-23-
EXECUTION COPY
(f) To the Knowledge of the Seller, there is no proposed or
overtly threatened termination of any facility or personnel security clearances
applicable to the Subject Business.
3.8 Transferred IPR and Transferred Technology. The Seller owns, and
has the right to transfer to the Buyer under this Agreement, free and clear of
Third Party Consents and all Encumbrances other than Permitted Encumbrances, the
Transferred IPR and the Transferred Technology. To the Knowledge of the Seller,
(a) the Seller's current conduct of the Subject Business does not infringe on
the Intellectual Property Rights of any third Person and (b) the Seller has not
received any written notice from a third Person alleging that the Seller has or
may have in the past, or is or may be currently, infringing upon the
Intellectual Property Rights of any third Person. To the Knowledge of the
Seller, no third party is infringing or misappropriating any of the Transferred
IPR.
3.9 Transferred Accounts Receivable. The Transferred Accounts
Receivable arose from bona fide transactions in the ordinary course of business,
consistent with past practices, and represent valid and enforceable claims
against debtors for sales and other charges. No material amount of the
Transferred Accounts Receivable is contingent upon the performance by the Seller
of any obligation or contract other than normal warranty repair and replacement.
3.10 Transferred Employees.
(a) Except for any persons who resign from the Seller's
employment following the date hereof and prior to the Closing or whose
employment with the Seller is terminated following the date hereof and prior to
the Closing, the Transferred Employees are all of the employees of the Seller
who currently work primarily for the Subject Business.
(b) With respect to the Transferred Employees, the Seller is
not a party to, or bound by, any collective bargaining agreement, shop floor
agreement contract or other agreement or understanding with a labor union or
labor organization. No proceeding regarding any unfair labor practice is pending
before the National Labor Relations Board or similar domestic or foreign
governmental agency. No application or petition requiring the Seller with
respect to the Subject Business to bargain with any labor organization as to
wages or conditions of employment involving the Subject Business has been
commenced nor is any such application or petition, to the Knowledge of the
Seller, threatened. To the Knowledge of the Seller, there are no campaigns being
conducted to solicit cards from the Transferred Employees to authorize
representation by any labor organization.
(c) Section 3.10(c) of the Seller Disclosure Schedule contains
a complete and accurate list of the accrued severance of each Transferred
Employee as of July 31, 2004 under the Seller Severance Policy.
(d) The Seller's 401(k) plan is intended to meet the
requirements of Section 401(a) of the Code and has been subject to a
determination letter from the
-24-
EXECUTION COPY
Internal Revenue Service to the effect that such plan is qualified and the
related trust is exempt from Federal income taxes under Section 401(a) and
Section 501(a), respectively, of the Code.
3.11 Litigation. There is no Proceeding pending or, to the Knowledge of
the Seller, threatened relating to the Transferred Assets, the Products or the
Subject Business. There is no investigation or other proceeding pending or, to
the Knowledge of the Seller, threatened relating to the Transferred Assets, the
Products or the Subject Business by or before any Governmental Authority. There
are no judgments, orders, decrees, citations, fines or penalties heretofore
assessed against the Seller relating to the Transferred Assets, the Products or
the Subject Business under any applicable Law. Since January 1, 2001, the Seller
has not been a party to any litigation and has had no litigation pending against
a third party, in each case involving or affecting the Subject Business.
3.12 Taxes.
(a) To the extent that failure to do so would adversely impact
the Transferred Assets or the Buyer's ownership of the Transferred Assets, the
Seller (i) has paid all Taxes it is required to pay to the appropriate
Governmental Authority and (ii) has filed all material Tax Returns it is
required to file. With respect to the Subject Business, all Taxes that the
Seller is required to withhold or collect have been withheld or collected.
(b) There is no action, suit, proceeding, audit, investigation
or claim pending or, to the Knowledge of the Seller, threatened in respect of
any Taxes relating to the Subject Business for which the Seller is or may become
liable, nor has any deficiency or claim for any such Taxes been proposed,
asserted or, to the Knowledge of the Seller, threatened. Seller does not know of
any basis for the assertion of any claim for any liabilities for unpaid Taxes
for which Buyer would become liable as a result of the Transactions contemplated
by this Agreement or that would result in any Lien on any of the Transferred
Assets.
(c) There are no Liens with respect to any Taxes upon any of
the Transferred Assets, other than Permitted Encumbrances.
(d) None of the Transferred Assets is "tax exempt use
property" within the meaning of Section 168(h) of the Code.
3.13 Environmental Matters. The Seller (a) is, to the Knowledge of the
Seller, in compliance with all Environmental Laws that are applicable to the
Subject Business, (b) has not, with respect to the Seller's operation of the
Subject Business, received any written notice of any alleged claim, violation
of, or liability under, any Environmental Law that has not heretofore been cured
or for which there is any remaining liability and (c) has not transferred
Hazardous Materials generated by the Subject Business to any facility listed or
proposed for listing under CERCLA or any state equivalent, except in the case of
the foregoing clauses (a) - (c) as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. None of the real
property currently owned or leased by the Seller for the operation of the
Subject Business is listed
-25-
EXECUTION COPY
or proposed for listing on the National Priorities List or CERCLIS (or any state
equivalent), and there are no claims pending, or to the Knowledge of the Seller,
threatened against the Seller for any (i) personal injury as a result of
employee exposure to Hazardous Materials or (ii) property damage as a result of
Hazardous Materials present on any real property currently owned or leased by
the Subject Business.
3.14 Sufficiency of Assets. The Transferred Assets constitute, as of
the date hereof, all of the assets, rights and properties that the Seller
currently uses or holds for use in connection with the operation of the Subject
Business as currently conducted.
3.15 Confidential Offering Memorandum. The Confidential Offering
Memorandum provided by the Financial Advisor (on behalf of the Seller) to the
Buyer in connection with the Buyer's consideration of the Transactions does not,
as of the date hereof, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading,
3.16 Reference Working Capital Statement. The Reference Working Capital
Statement presents the total current assets of the Subject Business as of March
31, 2004 (other than (i) cash and cash equivalents, and (ii) any Tax related
items), less the total current liabilities of the Subject Business as of March
31, 2004 (other than any Tax related items, except payroll taxes), in each case
derived from the books and records of the Seller and determined in accordance
with the accounting methods, policies, practices and procedures set forth in
Section 3.16 of the Seller Disclosure Schedule.
3.17 Subsequent Events. Since March 31, 2004 until the date hereof, (a)
the Seller has conducted its operations related to the Subject Business in the
ordinary course of business, has used commercially reasonable efforts to
maintain the Subject Business, the Transferred Assets, its relations with
employees, customers, suppliers, licenses and operations related to the Subject
Business as an ongoing business in accordance with past practice and (b) there
has not been any Material Averse Effect.
3.18 Compliance with Applicable Laws; Permits.
(a) The Subject Business is being conducted in compliance with
all applicable Laws, except as would not reasonably be expected to have a
Material Adverse Effect. Without limiting the foregoing, to the Knowledge of the
Seller, the Seller has not, within the past three (3) years, in connection with
the Subject Business (including any Transferred Contract that is a Government
Contract or any Bid), (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity; or (ii)
made any unlawful payment to foreign or domestic governmental officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
(b) The Seller has duly obtained all material permits,
concessions, grants, franchises, licenses, certifications and other governmental
authorizations and
-26-
EXECUTION COPY
approvals (including any licenses to export its Products) that are necessary for
the conduct of the Subject Business as it is currently conducted. Each
Transferred Permit is in full force and effect, and there are no proceedings
pending or, to the Knowledge of the Seller, threatened that would result in the
revocation, cancellation, suspension or modification of any Transferred Permit.
3.19 Brokers and Intermediaries. Except for ▇▇▇▇▇▇▇▇▇ Quarterdeck, a
division of ▇▇▇▇▇▇▇▇▇ & Company, Inc. (the "FINANCIAL ADVISOR"), the Seller has
not employed any broker, finder, advisor or intermediary in connection with the
Transactions who would be entitled to a broker's, finder's, adviser's,
intermediary's or similar fee or commission in connection therewith or upon the
consummation thereof from the Buyer.
3.20 Product Warranties. There are no outstanding product warranty for
the Products for a period greater than eighteen (18) months. Section 3.20 of the
Seller Disclosure Schedule contains a complete and accurate list of all pending
or, to the Knowledge of the Seller, threatened product liability claims with
respect to the Subject Business or the Products. Section 3.20 of the Seller
Disclosure Schedule contains a complete and accurate list of all product
liability claims or recalls with respect to the Subject Business or the Products
that have occurred since January 1, 2000. None of the products manufactured or
sold by the Seller with respect to the Subject Business, including the Products,
contains or incorporates asbestos, asbestos-containing materials or presumed
asbestos-containing materials.
3.21 Problems with Suppliers and Customers. Since January 1, 2004, (a)
no supplier or customer to or of the Subject Business has canceled or otherwise
terminated its relationship with the Seller with respect to the Subject
Business, except cancellations or termination which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
(b) to the Knowledge of the Seller, no supplier or customer to or of the Subject
Business has overtly threatened to cancel or otherwise terminate its
relationship with the Seller with respect to the Subject Business or its usage
of the services of the Seller with respect to the Subject Business, except
cancellations that would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect and (c) to the Knowledge of the Seller,
no supplier to the Subject Business has become unable to continue to supply the
products or services supplied to the Subject Business by such supplier. The
Seller does not have any direct or indirect ownership interest in any supplier
or customer of the Subject Business.
3.22 Transactions with Affiliates. Section 3.22 of the Seller
Disclosure Schedule contains a complete and accurate list of all existing
material contractual or business relationships between the Seller, with respect
to the Subject Business, any other divisions of the Seller or any Affiliate of
the Seller.
3.23 Transactions with Related Persons; Outside Interests. No Related
Party is, or has been since January 1, 2003, a party to any Contract or
transaction with the Seller. No Related Party uses any of the Transferred Assets
except directly in connection with the Subject Business, and no Related Party
owns or has any interest in any of the Transferred Assets. No Related Party has
any claim of any nature, including any
-27-
EXECUTION COPY
inchoate claim, against any of the Transferred Assets or the Subject Business.
Except as expressly provided herein or in any other agreement or as otherwise
may be mutually agreed after the Closing, (a) no Related Party will at any time
after the Closing for any reason, directly or indirectly, be or become entitled
to receive any payment or transfer of money or other property of any kind from
the Buyer and (b) the Buyer will not at any time after the Closing for any
reason, directly or indirectly, be or become subject to any obligation to any
Related Party.
3.24 Seller Information. The information relating to the Seller and its
subsidiaries to be provided by the Seller for inclusion in the preliminary proxy
statement, the Proxy Statement, or in any other document filed with any other
Governmental Authority in connection herewith, at the respective times filed
with the SEC or such other Governmental Authority and first published, sent or
given to the shareholders of the Seller and, with respect to the Proxy
Statement, at the date any amendment is mailed to the shareholders and at the
time of the special shareholders meeting, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make there
statement therein, in light of the circumstances in which they are made, not
misleading (except that no representation or warranty is made by the Seller as
to such portions thereof that relate only to the Buyer for inclusion or
incorporation by reference therein). The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act.
3.25 Board Recommendation. Subject to the right of the board of
directors of the Seller under Section 5.8(b) hereof, the board of directors of
the Seller, at a meeting duly called and held, has (a) unanimously adopted this
Agreement (including all terms and conditions set forth herein) and approved the
Transactions, (b) determined that the Transaction is advisable and that the
terms of the Transaction are fair to, and in the best interests of, the Seller
and its shareholders and (c) subject to the terms of Section 5.8 hereof,
resolved to submit this Agreement to the Seller's shareholders and recommend
that the Seller's shareholders approve this Agreement and the Transactions.
3.26 Opinion of Financial Advisor. The Financial Advisor has delivered
to the Seller's board of directors its opinion (in writing or to be confirmed in
writing) to the effect that, as of the date hereof and based upon and subject to
the factors and assumptions set forth therein, the consideration to be received
by the Seller for the Transferred Assets pursuant to the Transaction is fair,
from a financial point of view, to the Seller.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
4.1 Organization; Good Standing; Corporate Power. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the
-28-
EXECUTION COPY
State of Delaware. The Buyer has all requisite corporate power and authority to
own, hold and use the Transferred Assets that are owned or held by the Seller,
or in its name, as of the date hereof.
4.2 Authority. The Buyer has all requisite power and authority to enter
into the Transaction Agreements to which it is a party, to perform its
obligations under the Transaction Agreements, and to consummate the
Transactions. The execution and delivery by the Buyer of the Transaction
Agreements to which it is a party, the performance by the Buyer of its
obligations under the Transaction Agreements and the consummation by the Buyer
of the Transactions, have been duly authorized by all necessary corporate action
on the part of the Buyer, and no further action is required on the part of the
Buyer or its stockholders to authorize the execution and delivery by the Buyer
of the Transaction Agreements to which it is a party, the performance by the
Buyer of its obligations under the Transaction Agreements or the consummation by
the Buyer of the Transactions. This Agreement has been (and as of the Closing
each of the Ancillary Agreements to which the Buyer is a party will be) duly
executed and delivered by the Buyer, and this Agreement constitutes (and upon
the execution and delivery thereof by the Buyer as of the Closing, each of the
Ancillary Agreements to which the Buyer is a party will constitute) the valid
and binding obligation of the Buyer, enforceable against the Buyer in accordance
with their respective terms.
4.3 Conflicts. The execution and delivery by the Buyer of the
Transaction Agreements to which it is a party, the performance by the Buyer of
its obligations under the Transaction Agreements, and the consummation by the
Buyer of the Transactions, will not Conflict with or result in any Conflict
under (i) any provision of the certificate of incorporation or bylaws (or the
equivalent organizational documents) of the Buyer, (ii) any material Contract to
which the Buyer is a party or by which the Buyer or any of its properties or
assets may be bound or (iii) any judgment, order, decree or, to the knowledge of
the Buyer, any material Law that is applicable to the Buyer or any of its
properties or assets (tangible and intangible), except in the case of this
clause (iii) for any such Conflicts that would not reasonably be expected to
have a material adverse effect on the ability of the Buyer to perform is
obligations under the Transaction Agreements to which it is a party and to
consummate the Transactions.
4.4 Required Consents. No material consent, waiver, license, approval,
authorization or other order of, or material registration, declaration or filing
with, any Person (including a party to any agreement with the Buyer) is required
by or with respect to the Buyer in connection with or as a result of the
execution and delivery by the Buyer of the Transaction Agreements to which the
Buyer is a party, the performance by the Buyer of its obligations under the
Transaction Agreements or the consummation by the Buyer of the Transactions.
4.5 Sufficiency of Funds. The Buyer has, or has access through one or
more of its Affiliates, to sufficient funds to deliver the Purchase Price to the
Seller in accordance with the terms and conditions of this Agreement.
-29-
EXECUTION COPY
4.6 Brokers and Intermediaries. Except for ▇▇▇▇▇▇▇ & Company, the Buyer
has not employed any other broker, finder, advisor or intermediary in connection
with the Transactions who would be entitled to a broker's, finder's, adviser's,
intermediary's or similar fee or commission in the connection therewith or upon
consummation thereof from the Seller.
4.7 Buyer Information. The information relating to Buyer to be provided
by Buyer to be contained in the preliminary proxy statement, the Proxy
Statement, or in any other document filed with any other Governmental Authority
in connection herewith, at the respective time filed with the SEC or such other
Governmental Authority and, in addition, in the case of the Proxy Statement, at
the date it or any amendment or supplement is mailed to shareholders of the
Seller and at the time of the special meeting, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading.
ARTICLE 5
COVENANTS & AGREEMENTS
5.1 Interim Operations of the Subject Business.
(a) The Seller shall (i) carry on the Subject Business in the
usual, regular and ordinary course and in substantially the same manner as
currently conducted and in material compliance with all applicable Laws, pay all
debts that would otherwise constitute Assumed Liabilities when due, subject to
good faith disputes over such liabilities and (ii) use commercially reasonable
efforts, consistent with past practices and policies, to (A) preserve intact the
present business organization of the Subject Business, (B) keep available the
services of the Transferred Employees and (C) preserve its relationships with
customers, suppliers, distributors, licensors, licensees and other persons with
which it has significant business dealings relating to the Subject Business.
(b) Except as set forth in Section 5.1 of the Seller
Disclosure Schedule or consented to in writing by Buyer, Seller shall not:
(i) divest, sell, transfer, mortgage, pledge or
otherwise dispose of, or encumber, or agree to divest, sell, transfer, mortgage,
pledge or otherwise dispose of, or encumber, any Transferred Assets other than
(A) Transferred Tangible Property in the ordinary course of business or (B)
Permitted Encumbrances;
(ii) increase the compensation or employee benefits
of any officers or employees of the Seller who will become Transferred
Employees;
(iii) modify, amend or terminate any Transferred
Contract or enter into any new contracts or agreements with respect to the
Subject Business involving payments in excess of $100,000 in the aggregate,
other than in the ordinary course of
-30-
EXECUTION COPY
business (provided, that the Seller shall be permitted to convert certain
intra-company work orders into third-party contracts on reasonable terms subject
to Buyer's consent);
(iv) make any change to the accounting methods,
principles or practices of the Subject Business, except as may be required by
GAAP;
(v) enter into any settlement agreements involving
payments in excess of $50,000 in the aggregate or which would restrict the
Subject Business with respect to any litigation or any claim (whether pending or
threatened) relating to the Subject Business;
(vi) make any capital expenditure related to the
Subject Business in excess of $100,000 in the aggregate;
(vii) make any material change in the methods of
manufacture, management or operation of the Subject Business;
(viii) make any capital investment in, any loan to,
or any acquisition of the securities or assets of any other Person which would
be included in the Transferred Assets;
(ix) to the extent related to the Subject Business or
Transferred Assets, incur or assume any long-term or short-term debt or assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person; or
(x) authorize, or commit or agree to take any of the
foregoing actions.
5.2 Proxy Statement and Approval of the Seller's Shareholders. As
promptly as practicable, but no later than ten (10) business days after the
execution and delivery of this Agreement, the Seller shall prepare and file with
the SEC a preliminary proxy statement to be used in connection with the Seller's
solicitation of proxies from its shareholders to approve and adopt this
Agreement and the Transactions. The Buyer shall promptly provide to the Seller
such information concerning its business and financial statements and affairs as
may be required or appropriate for inclusion in the proxy statement, or in any
amendments or supplements thereto, and the Buyer will cause its counsel and
auditors to cooperate with the Seller's counsel and auditors in the preparation
of the preliminary proxy statement. The preliminary proxy statement and the
Proxy Statement will comply in all material respects with all applicable Laws
and the Seller will, after consultation with the Buyer, promptly respond to any
comments made by the SEC with respect to such preliminary proxy statement and,
as soon as possible, cause a definitive proxy statement (the "PROXY STATEMENT")
to be mailed to its shareholders. The Proxy Statement shall contain (A) the
recommendation of the board of directors of the Seller that shareholders of the
Seller vote in favor of the approval of this Agreement and the Transactions
contemplated herein, and (B) the opinion of the Financial Advisor described in
Section 3.26 hereof (if the Financial Advisor authorizes such inclusion, which
authorization the Seller will request). Whenever any event occurs which is
-31-
EXECUTION COPY
required to be set forth in an amendment or supplement to the Proxy Statement,
the Seller shall promptly consult with the Buyer of such occurrence and the
Seller shall use its commercially reasonable efforts to obtain and furnish any
information, promptly provide comments to the SEC or its staff, and file such
amendment or supplement. The Seller shall duly call, give proper notice of,
convene, and hold a special meeting of the shareholders as soon as reasonably
practicable following the execution of this Agreement for the purpose of
considering and taking action upon this Agreement and the Transactions. The
Seller shall use its commercially reasonable efforts (including by retaining an
outside proxy solicitation firm at its own cost and expense) to solicit from the
shareholders of the Seller proxies in favor of the approval of this Agreement
and the Transactions and shall take all other action necessary or advisable to
secure the vote or consent of its shareholders required to effect the
Transactions.
5.3 Access. Except as prohibited by applicable Law or by the agreements
of the Seller with third Persons, during the period commencing with the
execution and delivery of this Agreement and ending on the Closing Date, the
Seller shall afford to the Buyer and its representatives, subject to reasonable
advance notice and at all reasonable times during normal business hours,
reasonable access to the personnel, professional advisors, properties,
contracts, Books and Records and other documents and data of the Seller relating
to the Subject Business, the Transferred Assets or the Products, in each case
only to the extent that such material relates to the Subject Business,
Transferred Assets or the Products.
5.4 Confidentiality. Whether or not the Transactions shall be
consummated, any information obtained during the course of any investigation
conducted pursuant to the provisions of Section 5.3 hereof or in connection with
the negotiation and execution of the Transaction Agreements and/or the
consummation of the Transactions (including the Transferred Books and Records),
as well as the terms and provisions of the Transaction Agreements (including the
Purchase Price and any other amounts payable pursuant to any Transaction
Agreement), shall be governed by the terms and conditions of that certain
Confidential Disclosure Agreement, dated March 19, 2004, by and between the
Seller and the Buyer; provided, however, that if the Transactions shall be
consummated, nothing set forth in the Confidential Disclosure Agreement or this
Section 5.4 shall restrict the Buyer's use of or disclosures regarding the
Transferred Assets.
5.5 Public Disclosure. Without limiting any other provision of this
Agreement or any of the Ancillary Agreements, the Seller and the Buyer shall
consult with each other before issuing, and shall provide the other with an
opportunity to review, comment upon and concur with, and shall use commercially
reasonable efforts to agree upon, any press release or other disclosure,
statement or communication in respect of the Transaction Agreements and/or the
Transactions, and, except as required by applicable Law (including applicable
securities Laws) or any listing agreement with the New York Stock Exchange, The
Nasdaq Stock Market, Inc. or other applicable national or regional securities
exchange, neither the Seller nor the Buyer shall issue any press release, make
any public disclosure or make any statement or communication to any third party
(other than their respective agents and representatives) regarding the
Transaction Agreements and/or the Transactions (including, if applicable, the
termination of any Transaction
-32-
EXECUTION COPY
Agreement and the reasons therefor) without the prior written consent of the
other party hereto.
5.6 Reasonable Efforts. On the terms and subject to the conditions set
forth in this Agreement, the Seller and the Buyer shall use their respective
commercially reasonable efforts to take promptly, or cause to be taken, all
actions, and to do promptly, or cause to be done, all things necessary, proper
or advisable under applicable Laws to consummate and make effective the
Transactions, as promptly as possible, to obtain all necessary Third Party
Consents and consents of Government Authorities, to effect or make all necessary
registrations, qualifications and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, required to be obtained, made or
removed in order to consummate and make effective the Transactions for the
purpose of securing to the parties hereto the benefits contemplated by this
Agreement. All filing fees payable to Government Authorities shall be shared
equally between the Seller and the Buyer, with the exception of any fees
incurred in connection with the preliminary proxy statement or the Proxy
Statement, all of which shall be paid by the Seller.
5.7 Revised Seller Schedules. At any time and from time to time after
the execution and delivery of this Agreement, the Seller may amend, modify,
update or supplement the information set forth in the Schedules to this
Agreement or in the Seller Disclosure Schedule, in whole or in part, by delivery
to the Buyer of an amended and restated copy of one or more Schedules to this
Agreement or the Seller Disclosure Schedule (each, a "REVISED SELLER SCHEDULE"),
clearly marked to reflect all of the Seller's proposed amendments,
modifications, updates and supplements thereto. In the event and to the extent
that the Buyer shall fail to object in writing to a Revised Seller Schedule
within five (5) business days following its receipt thereof, such Revised Seller
Schedule shall be deemed (i) to replace and supersede in its entirety the
corresponding Schedule to this Agreement or the Seller Disclosure Schedule, as
applicable (and any and all corresponding Revised Seller Schedules previously
delivered by the Seller to the Buyer pursuant to this Section 5.7) and (ii) to
be the definitive corresponding Schedule to this Agreement or Seller Disclosure
Schedule, as applicable, for all purposes of and under this Agreement, including
for purposes of (A) determining the Transferred Assets to be purchase and sold
pursuant to Article 2 hereof, (B) determining whether the conditions to the
obligations of the Buyer set forth in Section 9.2(a) hereof have been satisfied
and (C) establishing the indemnification obligations of the Seller pursuant to
Section 10.2 hereof. In the event that the Buyer shall object in writing to any
amended, modified, updated or supplemented information set forth in a Revised
Seller Schedule within five (5) business days following its receipt thereof,
such amended, modified, updated or supplemented information (x) shall not be
deemed to amend the corresponding Schedule to this Agreement for purposes of
determining the Transferred Assets to be purchased and sold pursuant to Article
2 hereof, and (y) shall not be deemed to qualify the representations and
warranties of the Seller set forth in this Agreement for purposes of determining
whether the conditions to the obligations of the Buyer set forth in Section
9.2(a) hereof have been satisfied; provided, however, that notwithstanding the
Buyer's objection in writing to any such amended, modified, updated or
supplemented information set forth in a Revised Seller Schedule that purports to
amend or modify the Seller Disclosure Schedule within such five (5) business day
period, in the event that the Transactions shall
-33-
EXECUTION COPY
be consummated, such amended, modified, updated or supplemented information
shall be deemed to replace and supersede in its entirety the corresponding
information set forth in the Seller Disclosure Schedule (and in any and all
Revised Seller Schedules (to the extent that any such Revised Seller Schedule
amended and superseded the Seller Disclosure Schedule) previously delivered by
the Seller to the Buyer pursuant to this Section 5.7) for purposes of
establishing the indemnification obligations of the Seller pursuant to Section
10.2 hereof.
5.8 No Solicitation.
(a) The Seller shall immediately cease any discussions or
negotiations with any Persons other than Buyer that may be ongoing with respect
to the proposed Transactions and shall seek to have returned to the Seller any
confidential information that has been provided in any such discussions or
negotiations. From the date hereof, the Seller shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any of its
officers, directors, or employees or any Affiliate, investment banker, financial
advisor, attorney, accountant, or other representative retained by it or any of
its Subsidiaries to, directly or indirectly, (i) solicit, initiate or knowingly
encourage discussions (including by way of furnishing information which has not
been previously publicly disseminated), or take any other action intended to
facilitate any inquiries or the making of any Proposal or (ii) participate in
any discussions or negotiations regarding any Proposal.
(b) Except as specially permitted under the terms of this
Section 5.8(b), neither the board of directors of the Seller nor any committee
thereof shall, in a manner adverse to the Buyer, privately or publicly, (i)
withhold, withdraw, amend or modify its recommendation in favor of the approval
of this Agreement and the Transactions, (ii) approve or recommend any Proposal
or (iii) cause the Seller to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Proposal; provided, however, that notwithstanding the foregoing or anything in
this Agreement to the contrary, nothing in this Agreement shall prevent the
board of directors of the Seller or any committee thereof from withholding,
withdrawing, amending or modifying its recommendation in favor of the approval
of this Agreement and the Transactions at any time prior to the time at which
the Seller's shareholders have duly approved this Agreement and the Transactions
under California Law, if (i) the Seller receives an unsolicited Superior
Proposal after the execution of this Agreement under circumstances that does not
arise out of a breach of the terms of this Section 5.8, and such Superior
Proposal has not been withdrawn, and (ii) the board of directors of the Seller
determines in good faith, after considering applicable Law and after
consultation with its outside counsel, that, in light of such Superior Proposal,
the withholding, withdrawing, amending or modifying such recommendation is
consistent with the fiduciary duties of the board of directors of the Seller to
the Seller's shareholders under applicable Law. In addition, nothing in this
Agreement shall prohibit the board of directors of the Seller from (i) taking
and disclosing to the Seller's shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act, (ii) complying with the provisions
of Rule 14d-9 promulgated under the Exchange Act or (iii) making any disclosure
that is required to comply with the board's fiduciary duty of candor (including,
without limitation, a
-34-
EXECUTION COPY
change of recommendation in favor of the approval of this Agreement and the
Transactions) to the Seller's shareholders under applicable Law.
(c) The Seller shall promptly advise the Buyer, both orally
and in writing, of any (i) any Proposal, whether or not a Superior Proposal, and
the material terms and conditions thereof, including the identity of the Persons
making it, and (ii) any request for confidential information of the Company,
whether in connection with a Proposal or otherwise.
5.9 Appropriate Action. The Seller and the Buyer shall promptly notify
each other in writing of any pending or, to the Knowledge of the Seller or the
Buyer, as applicable, threatened action, proceeding or investigation by any
Governmental Authority or any other Person (i) challenging or seeking damages in
connection with the Transactions or (ii) seeking to restrain or prohibit the
consummation of the Transactions or otherwise limit the right of the Buyer to
own or operate all or any portion of the Subject Business. The Seller and the
Buyer shall cooperate with each other and use commercially reasonable efforts in
defending any such action, proceeding or investigation, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Authority vacated or reversed.
5.10 Mail and Payments.
(a) The Seller authorizes and empowers the Buyer on and after
the Closing Date to receive and open all mail and other communications received
by the Buyer relating to the Subject Business and to deal with the contents of
such communications in good faith and in a proper manner. The Seller shall
promptly deliver to the Buyer any mail or other communication received by the
Seller after the Closing Date pertaining to the Subject Business.
(b) The Seller shall promptly pay or deliver to the Buyer any
monies or checks relating to the Subject Business which have been mistakenly
sent after the Closing Date by customers or others to the Seller and which
should have been sent to the Buyer.
(c) The Seller agrees that the Buyer has the right and
authority to endorse, without recourse, any check or other evidence of
indebtedness received by the Buyer in respect of any note or account receivable
transferred to the Buyer pursuant to this Agreement and the Seller shall furnish
the Buyer such evidence of this authority as the Buyer may request.
(d) The Buyer shall promptly pay or deliver to the Seller any
monies or checks which have been mistakenly sent after the Closing Date to the
Buyer and which should have been sent to the Seller.
5.11 Novation of Government Contracts. As soon as reasonably
practicable following the Closing, the Buyer shall prepare (with the Seller's
assistance), in accordance with Federal Acquisition Regulations Part 42, Section
42.12 and any applicable agency regulations or policies, a written request
consistent with the
-35-
EXECUTION COPY
requirements of the Federal Acquisition Regulations Part 42, as reasonably
interpreted by the Responsible Contracting Officer (as such term is defined in
Federal Acquisition Regulations Part 42, Section 42.1202(a)), which shall be
submitted by the Seller to each Responsible Contracting Officer, for the United
States Government to (i) recognize the Buyer as the Seller's successors in
interest to all the Government Contracts that are Transferred Contracts, and
(ii) to enter into a novation agreement, in the form attached hereto as Exhibit
E (the "NOVATION AGREEMENT"), pursuant to which, subject to the requirements of
the Federal Acquisition Regulations Part 42, all of the Seller's rights, titles
and interests in and to, and all of the Seller's obligations and liabilities
under, each such Government Contract that are Transferred Contracts shall be
validly conveyed, transferred and assigned and novated to the Buyer by all
parties thereto. The Buyer shall provide to the Seller promptly any information
regarding the Buyer required in connection with such request. The Seller and the
Buyer shall each use commercially reasonable efforts to obtain all consents,
approvals and waivers required for the purpose of processing, entering into and
completing the Novation Agreement, including responding to any requests for
information by the United States Government with regard to such Novation
Agreement; provided, however, that neither the Seller nor the Buyer shall be
required to commence any litigation or offer or grant any accommodation
(financial or otherwise) to any third-party.
5.12 Waste Removal. Prior to the Closing, the Seller shall, at its sole
cost and expense, transport and dispose off-site (or cause to be transported and
disposed off-site) any hazardous wastes that have been generated by the Subject
Business prior to the Closing Date and accumulated or stored at the premises
that is the subject of the Real Property License Agreement.
5.13 Use of Name. The Buyer shall be permitted to sell Products and
inventory that bear the Seller's name and/or marks, provided that such Products
and inventory are unmodified and the Buyer's sale of such Products and inventory
are not done in a manner that is derogatory to the Seller's name and/or marks.
Nothing in this Section 5.13 shall prohibit the Buyer from referring to the
Seller solely for purposes of indicating the prior ownership history of the
Subject Business, such as the phrase "formerly part of Celeritek" or reasonable
variations thereof.
5.14 Transitional Services. As soon as practicable following the
execution of this Agreement, the Seller and the Buyer shall negotiate in good
faith a transition services agreement (the "TRANSITION SERVICES AGREEMENT")
pursuant to which the Seller shall provide to the Buyer certain transition
services (including financial, IT and facilities support) to be negotiated in
good faith for a period of up to six (6) months following the Closing Date in
exchange for certain fees and expenses to be negotiated in good faith, which
fees and expenses shall reflect the following principles: (i) any components of
the services provided under the Transition Services Agreement with respect to
which a third party charges the Seller shall be provided to the Buyer on a
pass-through basis at the rates charged by such third party, and (ii) any
components of the services provided under the Transition Services Agreement with
respect to which a third party does not charge the Seller shall be provided to
the Buyer at rates that reflect the Seller's internalized cost to provide such
services.
-36-
EXECUTION COPY
5.15 Voting Agreements. As soon as practicable following the execution
of this Agreement (and in any event within one (1) business day thereafter), the
Seller shall notify its transfer agent for shares of common stock of the Seller
of the restrictions set forth in the Voting Agreements and instruct such
transfer agent to implement control procedures to enforce such transfer
restrictions in accordance with its customary practices.
ARTICLE 6
NON-COMPETITION AND NON-SOLICITATION AGREEMENTS
6.1 Seller Non-Competition Agreement.
(a) Subject to the Closing, and without limiting the Seller's
ability to prosecute antitrust claims against third parties, beginning on the
Closing Date and ending on the fourth (4th) anniversary of the Closing Date, the
Seller shall not directly or indirectly (other than on behalf of the Buyer),
without the prior written consent of the Buyer, engage in a Competitive Business
Activity (as defined below) anywhere in the Restricted Territory (as defined
below).
(b) For all purposes of and under this Agreement, the term
"COMPETITIVE BUSINESS ACTIVITY" shall mean: (i) engaging in, managing or
directing persons engaged in any business competitive with or directly related
to the Subject Business or any Products; (ii) acquiring or having an ownership
interest in any entity which derives revenues from any business in competition
with the Subject Business (except for ownership of one percent (1%) or less of
any entity whose securities have been registered under the Securities Act, or
Section 12 of the Exchange Act); or (iii) participating in the operation,
management or control of any firm, partnership, limited liability company,
corporation, entity or business which derives revenues from any business in
competition with the Subject Business. For avoidance of doubt, "Competitive
Business Activity" shall (A) include the sale of connectorized and/or hermetic
modules that are functionally equivalent to those Products in the defense
portfolio including for example power amplifiers, low noise amplifiers and
multifunctional modules, and (B) shall not include connectorless, non-hermetic
modules that are not functionally equivalent to those Products in the defense
portfolio, including, for example, Gallium-Arsenide chips on a carrier. For all
purposes of and under this Agreement, the term "RESTRICTED TERRITORY" shall mean
each and every country, province, state, city or other political subdivision of
the world, including those in which the Seller is currently engaged in business
or otherwise distributes, licenses or sells any Products (including the United
States, the European Union, Israel, Japan and Korea).
(c) The parties hereto agree that the duration and area for
which the covenant not to compete set forth in this Section 6.1 is to be
effective is reasonable. In the event that any court determines that the time
period or the area or both of them are unreasonable and such covenant is to that
extent unenforceable, the parties hereto agree that the covenant shall remain in
full force and effect for the greatest time period and in
-37-
EXECUTION COPY
the greatest area that would not render it unenforceable. The parties hereto
agree that damages are an inadequate remedy for any breach of this covenant and
that the Buyer shall, whether or not it is pursuing any potential remedies at
law, be entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this covenant. No waiver of any breach of the foregoing covenant shall be
implied from the forbearance or failure of the Buyer to take action thereon.
6.2 Non-Solicitation Agreements.
(a) In the event that this Agreement is terminated prior to
the Closing, prior to the second (2nd) anniversary of such termination, the
Buyer shall not hire, or directly or indirectly solicit, encourage or take any
other action that is intended to induce or encourage any of the Transferred
Employees or any other employees of the Seller with whom the Buyer has had
contact in connection with the negotiation of this Agreement and the
Transactions to terminate his or her employment relationship with the Seller;
provided, however that this prohibition shall not apply to solicitations or
employment resulting from general advertisements appearing in newspapers,
periodicals, trade journals or other media not targeted toward Seller's
employees.
(b) In the event that the Closing shall occur, prior to the
second (2nd) anniversary of the Closing, the Seller shall not hire, or directly
or indirectly solicit, encourage or take any other action that is intended to
induce, influence or encourage any of the Transferred Employees who accept
employment with the Buyer pursuant to the employment offers made pursuant to
Section 7.1 hereof to terminate his or her employment relationship with the
Buyer; provided, however that this prohibition shall not apply to solicitations
or employment resulting from general advertisements appearing in newspapers,
periodicals, trade journals or other media not targeted toward Buyer's
employees. Notwithstanding the foregoing or anything in this Agreement to the
contrary, if the Buyer shall terminate the employment of any such Transferred
Employee following the Closing, then Seller shall not be prohibited from hiring,
or directly or indirectly soliciting, encouraging or taking any other action
that is intended to induce, influence or encourage any of the Transferred
Employees who accept employment with the Buyer pursuant to the employment offers
made pursuant to Section 7.1 hereof.
ARTICLE 7
EMPLOYEE MATTERS
7.1 Employment Matters.
(a) Concurrently with the execution of this Agreement, the
Buyer and the Key Employee marked with an asterisk on Schedule 1.1(p) hereto
have entered into a employment agreement which will be effective as of, and
contingent upon, the consummation of the Transactions. Prior to the Closing
Date, the Buyer shall make offers of employment to all of the other Transferred
Employees, such employment to be
-38-
EXECUTION COPY
effective as of, and subject to, the Closing. Nothing in this Agreement shall
limit the right of the Buyer to terminate the employment of any Transferred
Employee following the Closing Date.
(b) On the Closing Date, in accordance with applicable Law,
the Seller shall pay each Transferred Employee who accepts employment with the
Buyer any and all wages that such Transferred Employee has earned or accrued,
but which remains unpaid, through the Closing Date, including, at the request of
any such Transferred Employee, any earned wages in respect of accrued vacation.
The Buyer hereby acknowledges and agrees that the Closing Working Capital (i)
shall not reflect any accrued payroll or accrued payroll taxes that are paid or
withheld by the Seller pursuant to this Section 7.1(b) and (ii) shall not
reflect any accrued vacation that is paid by the Seller pursuant to this Section
7.1(b).
(c) The Buyer shall assume and be responsible for the
severance obligations of the Seller under the Seller's severance policy set
forth in Schedule 7.1(c) hereto (the "SELLER SEVERANCE POLICY") as of the
Closing with respect to the Key Employees. In the event that the Buyer fails to
make offers of employment to any Transferred Employee (other than the Key
Employees), the Buyer shall be responsible for any severance obligations of the
Seller under the Seller Severance Policy with respect to the termination of such
Transferred Employee. In the event that, after receiving an offer of employment
from the Buyer pursuant to Section 7.1(a) hereof, any Transferred Employee
(other than the Key Employees) shall refuse to accept the Buyer's offer for any
reason, then (i) the Buyer shall assume and be responsible for the severance
obligations of the Seller as of the Closing under the Seller Severance Policy
with respect to the Seller's termination of such Transferred Employee's
employment following the Closing, up to Fifty Thousand Dollars ($50,000) in the
aggregate, and (ii) the Seller shall be responsible for any severance
obligations of the Seller as of the Closing under the Seller Severance Policy
with respect to the Seller's termination of such Transferred Employee's
employment following the Closing, for any and all severance amounts in excess of
the first Fifty Thousand Dollars ($50,000) in the aggregate.
(d) Subject to the terms of Section 7.1(e) hereof, as of the
first (1st) day following the Closing Date, all Transferred Employees shall be
permitted to participate in the plans, programs and arrangements of the Buyer or
its Affiliates, subject to eligibility requirements, relating to compensation
and employee benefits (each, a "BUYER BENEFIT PLAN"), except none of the
Transferred Employees shall be entitled to participate or shall participate in
(i) the Teledyne Technologies Incorporated Pension Plan, as amended, or (ii)
until otherwise determined by the Buyer, the severance policy applicable to
Teledyne Technologies Incorporated's Electronic and Communications Segment's
current employees.
(e) For purposes under the Buyer Benefit Plans, each
Transferred Employee shall be credited with all years of service for which such
Transferred Employee was credited before the Closing Date under any comparable
Benefit Plans to the extent permitted under such Benefit Plans for purposes of
eligibility and vesting only, except to the extent such credit would result in a
duplication of benefits and except for
-39-
EXECUTION COPY
participation in the Teledyne Technologies Incorporated Employee Stock Purchase
Plan (The Stock Advantage Plan).
(f) The Buyer shall make any filings and shall deliver any
notices required in connection with the Transactions under the Worker Adjustment
and Retraining Notification Act ("WARN ACT"), or any similar state law, so that
Seller shall have no liability under the WARN Act or other similar law as a
result of the Transactions with respect to Transferred Employees. The Buyer
shall be solely responsible for and agrees to indemnify, hold harmless and, at
the option of the Seller to defend, the Seller from and against any Liability
under the WARN Act or similar state law in connection with any Transferred
Employee who is found to have suffered an "employment loss" under the WARN Act.
(g) The Seller and the Buyer agree that the Buyer has
purchased substantially all of the property in the Subject Business and in
connection therewith the Buyer will employ individuals who immediately prior to
the Closing were employed in such trade or business by the Seller. Accordingly,
the Seller shall on or before December 15, 2004 provide the Buyer will all
necessary and reasonably requested payroll records for the calendar year which
includes the Closing Date, the Buyer will furnish a Form W-2 to each employee
employed by the Buyer who had been employed by the Seller disclosing all wages
and other compensation paid for such calendar year and Taxes withheld therefrom,
and provided that the Seller has delivered to the Buyer all necessary and
reasonably requested payroll records, the Seller will be relieved of the
responsibility to do so.
7.2 401(k) Rollovers. Following the Closing, the Seller shall use
commercially reasonable efforts to permit the direct rollover (pursuant to the
rollover provisions of Section 401(a)(31) of the Code) of cash account balances
of the Transferred Employees who accept employment with the Buyer under the
Seller's 401(k) plan to the Buyer's 401(k) plan in which any such Transferred
Employees is eligible to participate, upon the request of any such Transferred
Employee (including, if requested by any such Transferred Employee, the rollover
of any notes evidencing an outstanding plan loan or loans). Provided that any
such amendment shall not cause the Seller's 401(k) plan to fail to be qualified,
and the related trust to fail to be exempt, from Federal income taxes under
Section 401(a) and Section 501(a), respectively, of the Code, the Seller agrees
to amend its 401(k) plan to permit any loan of any Transferred Employee who
accepts employment with the Buyer to be rolled over with such Transferred
Employee's account balance to the Buyer's 401(k) plan in accordance with the
Code and solely for the purpose of this Transaction if such Transferred Employee
so elects.
-40-
EXECUTION COPY
ARTICLE 8
TAX MATTERS
8.1 Responsibility for Filing Tax Returns.
(a) Subject to Section 8.1(b) hereof, Seller will be
responsible for the preparation and filing of all Tax Returns of Seller
(including Tax Returns required to be filed after the Closing Date), to the
extent such Tax Returns include or relate to Seller's operation of the Subject
Business or Seller's use or ownership of the Transferred Assets on or prior to
the Closing Date. Such Tax Returns, to the extent they relate to the operation
of the Subject Business or the Transferred Assets, shall be true, complete and
correct in all material respects. Seller will be responsible for and make all
payments of Taxes shown to be due on such Tax Returns to the extent they relate
to the operation of the Subject Business or the Transferred Assets.
(b) Buyer will be responsible for the preparation and filing
of all Tax Returns that it is required to file with respect to Buyer's operation
of the Subject Business or Buyer's ownership or use of the Transferred Assets
attributable to taxable periods (or portions thereof) commencing after the
Closing Date. Buyer's Tax Returns, to the extent they relate to the operation of
the Subject Business or the Transferred Assets, shall be true, complete and
correct in all material respects. Buyer will make all payments of Taxes shown to
be due on such Tax Returns to the extent they relate to the operation of the
Subject Business or the Transferred Assets.
8.2 Straddle Period Taxes. In the case of any real or personal property
taxes or any similar taxes attributable to the Transferred Assets that are
reported on a Tax Return covering a period commencing before the Closing Date
and ending thereafter (a "STRADDLE PERIOD TAX"), any such Straddle Period Tax
shall be prorated between the Seller and the Buyer on a per diem basis.
Notwithstanding anything else set forth in this Agreement, the party required by
law to pay any such Straddle Period Tax shall provide the other party with a
proof of payment, and within ten (10) days of receipt of such proof of payment,
such other party shall reimburse the party that paid the Straddle Period Tax for
its share of such Straddle Period Tax. The party required to file a Tax Return
with respect to Straddle Period Taxes shall do so within the time period
prescribed by law.
ARTICLE 9
CONDITIONS TO THE CLOSING
9.1 Conditions to Obligations of Each Party. The respective obligations
of the Buyer and the Seller to consummate the Transactions shall be subject to
the satisfaction or fulfillment, at or prior to the Closing, of each of the
following conditions:
-41-
EXECUTION COPY
(a) Shareholder Approval. This Agreement and the Transactions
shall have been approved and adopted by the requisite vote of the Seller's
shareholders under California Law.
(b) Governmental Approvals. All waivers, consents, approvals,
authorizations, qualifications or other orders issued by, or declarations or
filing made with, and waiting periods imposed by, any Governmental Authority
reasonably deemed necessary or appropriate by the Buyer and the Seller to
consummate the Transactions shall have been timely obtained, made or expired.
(c) Illegality. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Transactions illegal or otherwise prohibiting the consummation of the
Transactions.
(d) Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Transactions shall be in effect, nor shall any proceeding
brought by a Governmental Authority seeking any of the foregoing be pending.
9.2 Additional Conditions to the Obligations of the Buyer. The
obligation of the Buyer to effect the Transactions shall be subject to the
satisfaction or fulfillment, at or prior to the Closing, of each of the
following conditions, any or all of which may be waived in whole or in part
exclusively by the Buyer (in the Buyer's sole discretion) pursuant to a written
instrument:
(a) Representations and Warranties. The representations and
warranties of the Seller set forth in Article 3 hereof (as modified by any
Revised Seller Disclosure Schedule pursuant to Section 5.7 hereof) that are
qualified by reference to materiality or a Material Adverse Effect (i) shall
have been true and correct on and as of the date hereof and (ii) shall be true
and correct on and as of the Closing Date as though such representations and
warranties had been made on and as of the Closing Date, except in the case of
this clause (ii) for those representations or warranties that address matters
only as of a particular date, which representations and warranties shall have
been true and correct only as of such particular date. The representations and
warranties of the Seller set forth in Article 3 hereof (as modified by any
Revised Seller Disclosure Schedule pursuant to Section 5.7 hereof) that are not
qualified by reference to materiality or a Material Adverse Effect (i) shall
have been true and correct on and as of the date hereof in all material respects
and (ii) shall be true and correct in all material respects on and as of the
Closing Date as though such representations and warranties had been made on and
as of the Closing Date, except in the case of this clause (ii) for those
representations or warranties that address matters only as of a particular date,
which representations and warranties shall have been true and correct in all
material respects only as of such particular date.
-42-
EXECUTION COPY
(b) Covenants. The Seller shall have performed and complied in
all material respects with all covenants and obligations under this Agreement
required to be performed and complied with by the Seller at or before the
Closing.
(c) Certificate of the Seller. The Buyer shall have received a
certificate, validly executed for and on behalf of the Seller and in its name by
a duly authorized officer thereof, to the effect that, as of the Closing, the
conditions to the obligation of the Buyer to consummate the Transaction set
forth in Section 9.2(a) and Section 9.2(b) hereof have been satisfied or
fulfilled (unless otherwise waived by the Buyer in accordance with the terms
hereof).
(d) Ancillary Documents. The Seller shall have executed and
delivered to the Buyer the Seller Transfer Documents, the Novation Agreement and
the Transition Services Agreement.
(e) Consents. All approvals, consents, waivers and
authorizations set forth in Schedule 9.2(e) hereto shall have been obtained and
in full force and effect.
9.3 Additional Conditions to Obligations of the Seller. The obligation
of the Seller to effect the Transactions shall be subject to the satisfaction or
fulfillment, at or prior to the Closing, of each of the following conditions,
any or all of which may be waived in whole or in part exclusively by the Seller
(in the Seller's sole discretion) pursuant to a written instrument:
(a) Representations and Warranties. The representations and
warranties of the Buyer set forth in Article 4 hereof that are qualified by
reference to materiality or a Material Adverse Effect (i) shall have been true
and correct on and as of the date hereof and (ii) shall be true and correct on
and as of the Closing Date as though such representations and warranties had
been made on and as of the Closing Date, except in the case of this clause (ii)
for those representations or warranties that address matters only as of a
particular date, which representations and warranties shall have been true and
correct only as of such particular date. The representations and warranties of
the Buyer set forth in Article 4 hereof that are not qualified by reference to
materiality or a Material Adverse Effect (i) shall have been true and correct on
and as of the date hereof in all material respects and (ii) shall be true and
correct in all material respects on and as of the Closing Date as though such
representations and warranties had been made on and as of the Closing Date,
except in the case of this clause (ii) for those representations or warranties
that address matters only as of a particular date, which representations and
warranties shall have been true and correct in all material respects only as of
such particular date.
(b) Covenants. The Buyer shall have performed and complied in
all material respects with all covenants and obligations under this Agreement
required to be performed and complied with by the Buyer at or before the
Closing.
(c) Certificate of the Buyer. The Seller shall have received a
certificate, validly executed for and on behalf of the Buyer and in its name by
a duly
-43-
EXECUTION COPY
authorized officer thereof, to the effect that, as of the Closing, the
conditions to the obligation of the Seller to consummate the Transaction set
forth in Section 9.3(a) and Section 9.3(b) hereof have been satisfied or
fulfilled (unless otherwise waived by the Seller in accordance with the terms
hereof).
(d) Ancillary Documents. The Buyer shall have executed and
delivered to the Buyer the Buyer Assumption Documents, the Novation Agreement
and the Transition Services Agreement.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
10.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of the Seller and the Buyer set forth in this
Agreement, or in any certificate, instrument or other document delivered by the
Seller or the Buyer in connection with the Transactions (and any right to
indemnification for breach thereof), shall survive the Closing until twenty four
(24) months after the Closing Date and all rights to indemnification with
respect thereto shall then terminate; provided, however, that the
representations and warranties set forth in Section 3.2 (Authority), Section 3.5
(Transferred Tangible Property), Section 3.8 (Transferred IPR and Transferred
Technology), Section 3.12 (Taxes) and Section 3.13 (Environmental Matters)
hereof shall survive until the fourth (4th) anniversary of the Closing Date (the
"SURVIVAL PERIOD"). The covenants of the Seller and the Buyer set forth in this
Agreement shall survive the Closing until thirty (30) days after the expiration
of the statute of limitations applicable thereto, or thirty (30) days after the
date at which the relevant tax notice has become unappealable and binding under
the relevant jurisdictions, whichever period is shorter.
10.2 Indemnification by the Seller. From and after the Closing Date,
subject to the provisions of Section 10.4 hereof, the Seller shall indemnify,
defend (subject to the provisions of Section 10.6 hereof) and hold harmless the
Buyer and its direct and indirect subsidiaries, their respective successors and
assigns, and their respective officers, directors and employees (each, a "BUYER
INDEMNIFIED PARTY" and collectively, the "BUYER INDEMNIFIED PARTIES") from and
against any and all Damages imposed upon, suffered or incurred by any Buyer
Indemnified Party resulting from, arising out of, relating to, or by reason of
(i) the inaccuracy of any representation or warranty made by the Seller in this
Agreement (as modified by any Revised Seller Disclosure Schedule pursuant to
Section 5.7 hereof) or any certificate, instrument or other document delivered
in connection herewith or therewith, (ii) the failure by the Seller to perform
or comply in all material respects (or in all respects in the case of the
obligations set forth in Section 5.4 (Confidentiality), Section 5.8 (No
Solicitation), Section 6.1 (Seller Non-Competition Agreement) and Section 6.2(b)
(Non-Solicitation Agreements) hereof) with any obligation, covenant or agreement
of the Seller set forth in this Agreement or any certificate, instrument or
other document delivered in connection herewith or therewith, (iii) any and all
Excluded Liabilities and (iv) any Transfer Taxes and Straddle Period Taxes
payable by the Seller pursuant to Section 2.6 and Article 8 hereof,
respectively.
-44-
EXECUTION COPY
10.3 Indemnification by the Buyer. From and after the Closing Date,
subject to the provisions of Section 10.4 hereof, the Buyer shall indemnify,
defend (subject to the provisions of Section 10.6 hereof) and hold harmless the
Seller and its direct and indirect subsidiaries, their respective successors and
assigns, and their respective officers, directors and employees (each, a "SELLER
INDEMNIFIED PARTY" and collectively, the "SELLER INDEMNIFIED PARTIES") from and
against any and all Damages imposed upon, suffered or incurred by any Seller
Indemnified Party resulting from, arising out of, relating to, or by reason of
(i) the inaccuracy of any representation or warranty made by the Buyer in this
Agreement or any material schedule, certificate, instrument or other document
delivered in connection herewith or therewith, (ii) the failure by the Buyer to
perform or comply in all material respects (or in all respects in the case of
the obligations set forth in Section 5.4 (Confidentiality) and Section 6.2(a)
(Non-Solicitation Agreements) hereof) with any obligation, covenant or agreement
of the Buyer set forth in this Agreement or any material schedule, certificate,
instrument or other document delivered in connection herewith or therewith,
(iii) any and all Assumed Liabilities and (iv) any Transfer Taxes and Straddle
Period Taxes payable by the Buyer pursuant to Section 2.6 and Article 8 hereof,
respectively.
10.4 Limitations on Indemnification.
(a) Indemnification Claim Threshold. The Buyer Indemnified
Parties shall not be entitled to recover any amounts in respect of claims for
indemnification pursuant to Section 10.2(i) hereof, and the Seller Indemnified
Parties shall not be entitled to recover any amounts in respect of claims for
indemnification pursuant to Section 10.3(i) hereof, unless and until the total
amount of all claims for indemnification by the Buyer Indemnified Parties
pursuant to Section 10.2(i) or by the Seller Indemnified Parties pursuant to
Section 10.3(i) hereof, as the case may be, shall exceed Four Hundred Thousand
Dollars ($400,000) in the aggregate (the "INDEMNIFICATION THRESHOLD AMOUNT"),
whereupon the Buyer Indemnified Parties or the Seller Indemnified Parties, as
the case may be, shall only be entitled to recover the amount of any Damages in
excess of the Indemnification Threshold Amount suffered or incurred in respect
of such claims for indemnification; provided, however, that the Buyer
Indemnified Parties shall be entitled to recover for, and the Indemnification
Threshold Amount shall not apply as a threshold to, any and all claims or
payments made with respect to (i) fraud or fraudulent misrepresentation with
respect to representations and warranties made by the Seller, (ii) knowing,
intentional or willful breaches of or inaccuracies in any representations and
warranties made by the Seller, (iii) any breach of representations and
warranties set froth in Section 3.2 (Authority) hereof, and (iv) any of the
matters referenced in Sections 10.2(ii)-(iv) hereof, inclusive; and; and,
provided further, that the Seller Indemnified Parties shall be entitled to
recover for, and the Indemnification Threshold Amount shall not apply as a
threshold to, any and all claims or payments made with respect to (i) fraud or
fraudulent misrepresentation with respect to representations and warranties made
by the Buyer, (ii) knowing, intentional or willful breaches of or inaccuracies
in the representations and warranties made by the Buyer, (iii) any breach of
representation and warranty set forth in Section 4.2 (Authority) hereof, and
(iv) any of the matters referenced in Sections 10.3(ii)-(iv) hereof, inclusive.
-45-
EXECUTION COPY
(b) Indemnification Claim Limit. The Buyer Indemnified Parties
shall not be entitled to recover any amounts in respect of claims for
indemnification pursuant to Section 10.2(i) hereof, and the Seller Indemnified
Parties shall not be entitled to recover any amounts in respect of claims for
indemnification pursuant to Section 10.3(i) hereof, in excess of Eight Million,
Two Hundred and Fifty Thousand Dollars ($8,250,000) in the aggregate (the
"INDEMNIFICATION CAP"); provided, however, that the Buyer Indemnified Parties
shall be entitled to recover the full amount of, and the Indemnification Cap
shall not apply as a limitation on, any and all claims or payments made with
respect to (i) fraud or fraudulent misrepresentation with respect to
representations and warranties made by the Seller, (ii) knowing, intentional or
willful breaches of or inaccuracies in any representations and warranties made
by the Seller, (iii) any breach of representation and warranty set forth in
Section 3.2 (Authority) or Section 3.12 (Taxes) hereof, and (iv) any of the
matters referenced in Sections 10.2(ii)-(iv) hereof, inclusive; and, provided
further, that the Seller Indemnified Parties shall be entitled to recover the
full amount of, and the Indemnification Cap shall not apply as a limitation on,
any and all claims or payments made with respect to (i) fraud or fraudulent
misrepresentation with respect to representations and warranties made by the
Buyer, (ii) knowing, intentional or willful breaches of or inaccuracies in the
representations and warranties made by the Buyer and (iii) any breach of
representation and warranty contained in Section 4.2 (Authority), and (iv) any
of the matters referenced in Sections 10.3(ii)-(iv) hereof, inclusive.
(c) Indemnification Claim Expiration. The Buyer Indemnified
Parties shall not be entitled to indemnification for Damages in respect of
claims for indemnification pursuant to Section 10.2(i) hereof asserted by the
Buyer Indemnified Parties after the expiration of the applicable Survival
Period, and the Seller Indemnified Parties shall not be entitled to
indemnification for Damages in respect of claims for indemnification pursuant to
Section 10.3(i) hereof asserted by the Seller Indemnified Parties after the
expiration of the applicable Survival Period; provided, however, that if a Buyer
Indemnified Party or a Seller Indemnified Party, as the case may be, delivers an
Indemnification Claim Certificate, in good faith, to the other party or parties
hereto pursuant to this Agreement prior to the expiration of the applicable
Survival Period, any claims set forth in such Indemnification Claim Certificate
shall survive until such time as such claims are fully and finally resolved
notwithstanding the expiration of the applicable Survival Period; and, provided
further, that the applicable Survival Period shall not apply as a limitation on,
and the Buyer Indemnified Parties shall be entitled to recover the full amount
of, any and all claims or payments made with respect to any of the following
notwithstanding the expiration of the applicable Survival Period (i) fraud or
fraudulent misrepresentation with respect to representations and warranties made
by the Seller, (ii) knowing, intentional or willful breaches of or inaccuracies
in any representations and warranties made by the Seller, and (iii) any of the
matters referenced in Sections 10.2(ii)-(iv) hereof, inclusive; and, provided
further, that the applicable Survival Period shall not apply as a limitation on,
and the Seller Indemnified Parties shall be entitled to recover the full amount
of, any and all claims or payments made with respect to any of the following
notwithstanding the expiration of the applicable Survival Period (i) fraud or
fraudulent misrepresentation with respect to representations and warranties made
by the Buyer and (ii) knowing, intentional or willful breaches of or
inaccuracies in the representations and
-46-
EXECUTION COPY
warranties made by the Buyer, and (iii) any of the matters referenced in
Sections 10.3(ii)-(iv) hereof, inclusive.
(d) Special, Consequential, Incidental, Punitive and Exemplary
Damages. Notwithstanding anything to the contrary set forth herein, neither the
Buyer Indemnified Parties, on the one hand, nor the Seller Indemnified Parties,
on the other hand, shall be entitled to indemnification from the Seller or the
Buyer, respectively, pursuant to the indemnification provisions of this Article
10 or otherwise, for any special, consequential, incidental, punitive or
exemplary damages that may be imposed upon, suffered or incurred by the Buyer
Indemnified Parties or the Seller Indemnified Parties, as the case may be,
except as such damages may be required to be paid to a Government Authority or
to a third party which is not affiliated with a party to this Agreement.
(e) Third Party Recoveries. Notwithstanding anything to the
contrary set forth herein, the amount of any Damages for which the Buyer
Indemnified Parties and the Seller Indemnified Parties shall be entitled to
indemnification pursuant to this Article 10 shall be reduced, on a dollar for
dollar basis, by the amount of any insurance proceeds recovered in respect
thereof or any other amount recovered (whether by payment or setoff) under any
indemnity, contribution or other similar arrangement with a third Person in
respect thereof. Prior to recovering any indemnification pursuant to this
Article 10, the Seller Indemnified Party or Buyer Indemnified Party, as the case
may be, shall use commercially reasonable efforts to collect any and all
available amounts under any available insurance policies or agreements of
indemnity, contribution or other similar arrangements with third Persons;
provided, however, that this provision shall not apply to Buyer Indemnified
Parties with respect to Excluded Liabilities.
(f) Tax Benefits. Notwithstanding anything to the contrary set
forth herein, the amount of any Damages for which the Buyer Indemnified Parties
and the Seller Indemnified Parties shall be entitled to indemnification pursuant
to this Article 10 shall be reduced, on a dollar for dollar basis, by the amount
of any Tax benefits received by the Seller Indemnified Party or the Buyer
Indemnified Party, as the case may be. For purposes of this provision, the
amount of any Tax benefits shall be calculated using an effective tax rate equal
to the sum of (i) the highest marginal income tax rate applicable to
corporations under the Code, plus four percent (4%) (the "EFFECTIVE TAX RATE").
If any Tax benefit in respect of any Damages is allowable in future taxable
periods (e.g., a capitalized tax benefit), rather than the period in which the
Damages occurs, such Tax benefit shall be calculated using the Effective Tax
Rate and discounting the Tax benefit to the date of the indemnity payment at the
Federal midterm rate, as that term is defined in Section 1274(d)(1) of the Code,
using annual compounding.
(g) Characterization of Indemnity Payments. Any
indemnification payment shall be considered, to the extent permissible under
Law, as adjustments to the Purchase Price for Tax purposes.
(h) Mitigation. While each party agrees that it shall, and it
shall cause its Affiliates to, use its or their commercially reasonable efforts
to mitigate any Damages to be indemnified.
-47-
EXECUTION COPY
(i) No Limitation on Right to Contest. Nothing in this Section
10.4 shall be construed as a limitation on the indemnifying party's right to
contest in good faith whether the indemnified party is entitled to
indemnification pursuant to this Article 10 with respect to a particular claim.
10.5 Exclusive Remedy. Whether or not the Transactions shall be
consummated pursuant to the terms and conditions of this Agreement, except in
the event of fraud or the willful or intentional breach of the provisions of
this Agreement, the sole and exclusive remedy of the Buyer Indemnified Parties,
on the one hand, and the Seller Indemnified Parties, on the other hand, with
respect to any and all claims arising out of or relating to this Agreement,
whether arising in contract, tort or otherwise, shall be the right of the Buyer
Indemnified Parties and the Seller Indemnified Parties, as the case may be, to
make claims of indemnification for Damages pursuant to the provisions of this
Article 10. In furtherance of the foregoing, each party hereby waives, to the
fullest extent permitted under applicable Law, any and all other rights, claims
and causes of action it or any of its affiliates may have (excluding rights,
claims or causes of action of any party under this Article 10 for fraud or
fraudulent misrepresentation with respect to representations and warranties made
by the Seller or knowing, intentional or willful breaches of or inaccuracies in
any representations and warranties), from and after the Closing, against the
Seller Indemnified Parties or the Buyer Indemnified Parties, as the case may be.
The provisions of this Section 10.5 shall not restrict the right of any party to
seek specific performance or other equitable remedies in connection with any
breach of any of the covenants contained in this Agreement or any of the
Transaction Agreements.
10.6 Indemnification Procedures.
(a) Any party seeking indemnification for Damages pursuant to
this Article 10 (the "INDEMNIFIED PARTY") shall deliver a certificate (an
"INDEMNIFICATION CLAIM CERTIFICATE"), signed by any duly authorized officer
thereof (i) stating that such Indemnified Party has actually sustained,
incurred, properly accrued or paid, or reasonably anticipates in good faith that
it will have to actually sustain, incur, properly accrue or pay, Damages and
(ii) specifying in reasonable detail the individual items of Damages included in
the amount so stated, the date each such item was actually sustained, incurred,
properly accrued or paid, or the basis for such anticipated liability, and the
nature of the misrepresentation, breach of warranty or covenant, Excluded
Liability, Assumed Liability or Transfer Tax to which such item is related. The
party receiving an Indemnification Claim Certificate (the "INDEMNIFYING PARTY")
may object to such claim by written notice to the Indemnified Party specifying
the basis for the Indemnifying Party's objection, within thirty (30) calendar
days following receipt by the Indemnifying Party of notice from such Indemnified
Party regarding such claim for indemnification.
(b) In the event that the Indemnifying Party shall fail to
object to a claim for indemnification set forth in an Indemnification Claim
Certificate pursuant to Section 10.6(a) hereof, the Indemnifying Party hereby
agrees to, and shall, promptly pay
-48-
EXECUTION COPY
to the applicable Indemnified Party the amount set forth in such Indemnification
Claim Certificate.
(c) In the event that the Indemnifying Party shall object to a
claim for indemnification set forth in an Indemnification Claim Certificate
pursuant to Section 10.6(a) hereof, prior to filing any claims in a court of law
or prior to seeking non-binding mediation pursuant to this Section 10.6(c), the
Indemnifying Party and the Indemnified Party shall in good faith first negotiate
a written resolution of such dispute or claim within a period not to exceed
fifteen (15) calendar days from the date of receipt of a request for such
negotiation. Such negotiations shall be conducted by managers of each of the
Indemnifying Party and the Indemnified Party who have authorization to resolve
any such dispute or claim. In the event the Indemnifying Party and the
Indemnified Party cannot negotiate a written resolution to such dispute or claim
during such fifteen (15) calendar-day negotiation period, either the
Indemnifying Party or the Indemnified Party may seek to resolve such dispute or
claim in a court of competent jurisdiction or seek other legal or equitable
resolution. Notwithstanding the foregoing, either the Indemnifying Party or the
Indemnified Party may at any time apply to any court of competent jurisdiction
for injunctive relief in connection with a claim for indemnification or
otherwise to prevent irreparable harm.
10.7 Third-Party Claims.
(a) Promptly after receipt by the Indemnified Party of notice
of any third-party claim, liability or expense in respect of which the
Indemnified Party is reasonably likely to be entitled to receive indemnification
from the Indemnifying Party pursuant hereto, the Indemnified Party shall
promptly give notice thereof in writing to the Indemnifying Party, stating the
information then available regarding the amount and nature of such claim,
liability or expense; provided, however, that the failure to give such prompt
notice shall not affect the rights of the Indemnified Party to receive
indemnification for Damages pursuant to this Agreement unless and only to the
extent that the Indemnifying Party shall have been materially prejudiced by the
Indemnified Party's failure to deliver such prompt notice.
(b) Upon receipt of notice from the Indemnified Party
delivered pursuant to Section 10.7(a) hereof, the Indemnifying Party shall have
the right, exercisable upon written notice to the Indemnified Party within
thirty (30) calendar days after receiving the notice from the Indemnified Party
referred to in Section 10.7(a) hereof, at the Indemnifying Party's own cost and
expense and with counsel of such party's own choice, to defend, contest,
protest, settle, compromise and otherwise control the resolution of any such
claim, action or proceeding; provided, however, that (i) if there is a
reasonable probability that a third party claim of Damages for which the
Indemnified Party may be entitled to indemnification pursuant hereto may (A)
materially and adversely affect the Indemnified Party other than as a result of
money damages or other money payments or (B) result in money damages or payments
in excess of the amount for which the Indemnifying Party is obligated to
indemnify the Indemnified Party pursuant to this Article 10, then the
Indemnified Party shall have the right, at the Indemnified Party's own cost and
expense and with counsel of its own choice, to participate in the defense,
-49-
EXECUTION COPY
settlement or compromise of such third party claim, (ii) the Indemnifying Party
shall not, without the Indemnified Party's written consent, settle or compromise
any third party claim of Damages for which the Indemnified Party may be entitled
to indemnification pursuant hereto if (A) the settlement or compromise includes
terms that may materially and adversely affect the Indemnified Party other than
as a result of money damages or other money payments or (B) the settlement or
compromise amount exceeds the amount for which the Indemnifying Party is ready,
willing and able to indemnify the Indemnified Party pursuant to this Article 10,
(iii) the Indemnifying Party shall not, without the Indemnified Party's written
consent, consent to entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such Damages,
(iv) in the event that the Indemnifying Party undertakes the defense of any
third party claims for Damages pursuant hereto, the Indemnified Party, at the
Indemnified Party's own cost and expense and with counsel of its own choice,
shall have the right to consult with the Indemnifying Party and such party's
counsel or other representatives concerning such third party claims and the
Indemnified Party and the Indemnifying Party and their respective counsel or
other representatives shall cooperate with respect to such third party claims
and (vi) in the event that the Indemnifying Party shall undertake the defense of
any such third party claims, the Indemnifying Party shall keep the Indemnified
Party informed of the status of the defense of such third party claims and
furnish the Indemnified Party with all documents, instruments and information
that the Indemnified Party shall reasonably request in connection therewith. If
the Indemnifying Party shall notify the Indemnified Party that the Indemnifying
Party has elected to assume any such defense of any such third party claims,
then the Indemnifying Party shall not be liable to the Indemnified Party
pursuant hereto for any legal or other expense subsequently incurred by the
Indemnified Party in connection therewith.
(c) If the Indemnifying Party shall fail to notify the
Indemnified Party of such party's election to defend any third party claim
pursuant to Section 10.7(b) hereof, then the Indemnified Party may defend,
contest, protest, settle and otherwise control the resolution of such third
party claims. The Indemnifying Party shall have the right to participate in the
defense of any such third party claims, subject to the Indemnified Party's right
of control thereof, at the Indemnifying Party's own cost and expense and with
counsel of its own choice. In the event the Indemnified Party shall undertake
the defense of any such third party claim, the Indemnified Party shall keep the
Indemnifying Party informed of the status of the defense of such third party
claims and furnish the Indemnifying Party with all documents, instruments and
information that the Indemnifying Party shall reasonably request in connection
therewith, and the Indemnifying Party, at the Indemnifying Party's own cost and
expense and with counsel of their own choice, shall have the right to consult
with the Indemnified Party and such party's counsel or other representatives
concerning such third party claims and the Indemnifying Party and their
respective counsel or other representatives shall cooperate with respect to such
third party claims, and the Indemnified Party shall not settle, adjust or
compromise any such third party claims without prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
-50-
EXECUTION COPY
ARTICLE 11
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. Except as set forth in Section 11.2 hereof, this
Agreement may be terminated and the Transactions abandoned at any time prior to
the Closing:
(a) by mutual written consent of the Buyer and the Seller;
(b) by the Buyer or the Seller by written notice if the
Transactions have not been consummated and the Closing shall not have occurred
by December 31, 2004 (the "TERMINATION DATE"); provided, however, that the right
to terminate this Agreement pursuant to this Section 11.1(b) shall not be
available to any party hereto whose action or failure to act has been a
principal cause of or resulted in the failure of the Closing to occur on or
before the Termination Date and such action or failure to act constitutes a
material breach of this Agreement;
(c) by the Buyer or the Seller if this Agreement and the
Transactions shall not have been approved and adopted by the requisite vote of
the Seller's shareholders under California Law at a meeting of the Seller's
shareholders duly convened therefor or at any adjournment or postponement
thereof; provided, however, that the right to terminate this Agreement pursuant
to this Section 11.1(c) shall not be available to any party hereto whose action
or failure to act has been a principal cause of or resulted in the failure of
the Seller to obtain the requisite shareholder approval of this Agreement and
the Transactions and such action or failure to act constitutes a material breach
of this Agreement;
(d) by the Buyer or the Seller if: (i) there shall be in
effect a final non-appealable order, judgment, injunction or decree of a court
of competent jurisdiction in effect preventing the consummation of the
Transactions and, prior to such termination, the parties shall have used their
respective commercially reasonable efforts to resist, resolve or lift, as
applicable, such order, judgment, injunction or decree or (ii) there shall be
any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Transactions by any Governmental Authority that would make
consummation of the Transactions illegal;
(e) by the Buyer if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement of the Seller set forth in this
Agreement such that the conditions set forth in Section 9.2 hereof would not be
satisfied and such breach has not been cured within thirty (30) calendar days
after written notice thereof to the Seller; provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured;
(f) by the Seller if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement of the Buyer set forth in this
Agreement such that the conditions set forth in
-51-
EXECUTION COPY
Section 9.3 hereof would not be satisfied and such breach has not been cured
within thirty (30) calendar days after written notice thereof to the Buyer;
provided, however, that no cure period shall be required for a breach which by
its nature cannot be cured;
(g) by the Seller, at any time prior to the six-month
anniversary of the execution of this Agreement, if (i) it is not in material
breach of the terms of Section 5.8(a) hereof, (ii) the board of directors of the
Seller has authorized the Seller to enter into a definitive agreement for a
transaction that constitutes a Superior Proposal, (iii) the Seller has notified
the Buyer in writing that the Seller has received a Superior Proposal and
intends to enter into a definitive agreement with respect to such Superior
Proposal pursuant to Section 5.8(b) hereof, and (iv) Buyer does not make, within
five (5) business days after receipt of the Seller's written notice of its
intention to enter into a definitive agreement with respect to such Superior
Proposal, an offer that the board of directors of the Seller determines in good
faith (after consultation with its financial advisor) to be more favorable to
the Seller's shareholders from a financial point of view than the terms of the
Superior Proposal; or
(h) by the Buyer if the board of directors of the Seller,
shall have, in a manner adverse to the Buyer, publicly (i) withdrawn its
recommendation of this Agreement and the Transactions or (ii) approved or
recommended any Proposal or proposed publicly to approve or recommend, or
publicly taken a neutral position with respect to, any Proposal.
11.2 Effect of Termination; Fee.
(a) In the event of termination of this Agreement pursuant to
Section 11.1 hereof, this Agreement shall forthwith become void and there shall
be no Liability on the part of any party hereto, or its affiliates, officers,
directors or stockholders; provided, however, notwithstanding the foregoing,
nothing set forth in this Section 11.2 shall relieve any party hereto from
liability for any breach of any of the covenants or agreements in this Agreement
including Section 11.2(b) hereof; and, provided further, that the provisions of
Section 5.4 and Section 5.5 hereof, this Section 11.2 and Article 12 hereof
shall remain in full force and effect and survive any termination of this
Agreement.
(b) In the event that (i) this Agreement and the Transactions
contemplated hereby shall be terminated prior to the Closing pursuant to Section
11.1(g) or Section 11.1(h) hereof, (ii) the Buyer shall have satisfied in all
material respects all conditions to Closing that are or were at the time within
the reasonable control of the Buyer and shall not have taken action reasonably
calculated to prevent the Closing, then the Seller shall pay to the Buyer within
two (2) business days of such termination by wire transfer of same day funds, a
termination fee equal to One Million, Six Hundred and Fifty Thousand Dollars
($1,650,000) (the "TERMINATION FEE AMOUNT"). In the event that (i) this
Agreement and the Transactions contemplated hereby shall be terminated prior to
the Closing pursuant to Section 11.1(c) hereof, (ii) the Buyer shall have
satisfied in all material respects all conditions to Closing that are or were at
the time within the reasonable control of the Buyer and shall not have taken
action reasonably calculated to
-52-
EXECUTION COPY
prevent the Closing, (iii) following the execution of this Agreement and the
public announcement of the Transactions and prior to such termination, a
Proposal shall have been publicly announced and not withdrawn, and (iv) within
twelve (12) months following such termination, the Seller shall have either (A)
consummated the transactions contemplated by such Proposal or (B) entered into a
letter of intent or Contract in respect of the transactions contemplated by such
Proposal and later consummates such Proposal, then the Seller shall pay to the
Buyer within two (2) business days of consummating such transaction by wire
transfer of same day funds, a termination fee equal to the Termination Fee
Amount. The Seller acknowledges that the agreements contained in this Section
11.2(b) are an integral part of the Transactions and that, without these
agreements, the Buyer would not enter into this Agreement. Any payment made by
the Seller pursuant to this Section 11.2(b) shall constitute liquidated damages
with respect to any claim for damages or any other claim that the Buyer would
otherwise be entitled to assert against the Seller or its assets, or against any
of the Seller's directors, officers, employees, shareholders or Affiliates, with
respect to any such termination of this Agreement pursuant to Section 11.1(c),
Section 11.1(g) or Section 11.1(h) hereof, and shall constitute the sole and
exclusive remedy of the Buyer with respect to any such termination of this
Agreement.
11.3 Amendment. This Agreement may be amended or supplemented by the
parties hereto at any time and from time to time in the sole discretion of each
of the parties hereto by the execution and delivery of an instrument in writing
signed for and on behalf of each of the parties hereto and in their respective
names by duly authorized officers of each of the parties hereto. No purported
amendment or supplement shall be binding or effective for any purpose unless
made in accordance with this Section 11.3.
11.4 Extension; Waiver. At any time prior to the Closing, the Buyer, on
the one hand, and the Seller, on the other hand, may, in the sole discretion of
each of the parties hereto, to the extent permissible under applicable Law (i)
extend the time for the performance of any of the obligations of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties made
by such other party in this Agreement, any Ancillary Agreement or in any
certificate, instrument or other document delivered in connection with the
Transactions and (iii) waive compliance with any of the agreements or conditions
for the benefit of such other party set forth in this Agreement, any Ancillary
Agreement or in any certificate, instrument or other document delivered in
connection with the Transactions. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE 12
GENERAL
12.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or three business days after being mailed by
registered or certified mail
-53-
EXECUTION COPY
(return receipt requested) or sent via facsimile (with acknowledgement of
complete transmission) with a copy mailed by U. S. Postal Service to the
respective parties hereto at the following respective addresses (or at such
other address for a party hereto as shall be specified by like notice):
(a) if to the Buyer, to:
Teledyne Wireless, Inc.
c/o Teledyne Technologies Incorporated
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
McGuireWoods LLP
Dominion Tower
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Seller, to:
Celeritek, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.2 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Seller Disclosure Schedule, the Confidentiality Agreement, the
Ancillary Agreements
-54-
EXECUTION COPY
and the certificates, instruments and other documents among the parties hereto
referenced herein constitute the entire agreement among the parties with respect
to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof and thereof.
12.3 Assignment. This Agreement shall not be assigned, by operation of
Law or otherwise, by a party hereto without the prior written consent of the
other party hereto, provided, however, that Buyer may assign this Agreement to
an Affiliate of the Buyer, provided that any such assignment by the Buyer shall
not relieve the Buyer of its obligations hereunder.
12.4 Bulk Transfer Laws. The Buyer hereby waives compliance by the
Seller and its Affiliates with the provisions of any so called "Bulk Transfer
Law" of any jurisdiction in connection with the sale of the Transferred Assets
and the Seller shall indemnify the Buyer Indemnified Parties with respect
thereto.
12.5 Severability. In the event that any provision of this Agreement or
the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable (i) the remainder of this
Agreement shall continue in full force and effect and the application of such
provision to other persons or circumstances shall be interpreted so as
reasonably to effect the intent of the parties hereto and (ii) the Seller and
the Buyer shall replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
commercially practicable, the economic, business and other purposes of such void
or unenforceable provision.
12.6 Other Remedies. Any and all remedies herein expressly conferred
upon a party hereto shall be deemed cumulative with, and not exclusive of, any
other remedy conferred hereby, or by law or equity upon such party or parties,
and the exercise by a party hereto of any one remedy will not preclude the
exercise of any other remedy.
12.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
12.8 Jurisdiction and Venue. Except as set forth in Section 10.6(c)
hereof, each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within Santa ▇▇▇▇▇ County, California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process.
12.9 Rules of Construction. Each of the Seller and the Buyer hereby
acknowledge and agree that they have been represented by counsel during the
negotiation
-55-
EXECUTION COPY
and execution of this Agreement and, therefore, waive the application of any
Law, holding or rule of construction providing that ambiguities in an agreement
or other document will be construed against the party drafting such agreement or
document.
12.10 WAIVER OF JURY TRIAL. EACH OF THE SELLER AND THE BUYER HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
12.11 Fees and Expenses. Whether or not the Transactions are
consummated, all costs and expenses (including all legal, accounting, financial
advisory, consulting and other fees) incurred in connection with the negotiation
or effectuation of this Agreement or consummation of such Transactions shall be
the obligation of the respective party hereto incurring such costs and expenses.
12.12 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 hereto and delivered to the other party hereto, it being understood
and agreed that each of the parties hereto need not sign the same counterpart.
12.13 Parties in Interest. This Agreement shall be binding upon, inure
solely to the benefit of and be enforceable by each party and their respective
successors and assigns hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person other than the
parties any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
[Remainder of Page Intentionally Left Blank]
-56-
EXECUTION COPY
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the date first above written.
THE BUYER:
TELEDYNE WIRELESS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
THE SELLER:
CELERITEK, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman
Subject in all respects to the Buyer's obligation to consummate the
Transactions pursuant to the terms and conditions set forth in this Agreement,
the undersigned hereby agrees to deliver (or cause to be delivered) to the Buyer
sufficient funds to enable the Buyer to pay the Purchase Price pursuant to
Section 2.3 hereof.
TELEDYNE TECHNOLOGIES INCORPORATED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President and Chief Financial Officer
ASSET PURCHASE AGREEMENT