2/25/99-2
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT made as of the 25th day of February, 1999
by and between AEROFLEX INCORPORATED, a Delaware corporation with its principal
place of business at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Purchaser"), and UNITED TECHNOLOGIES CORPORATION, a Delaware corporation,
acting through its ▇▇▇▇▇▇▇▇ STANDARD DIVISION, with its principal place of
business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Stockholder"), as the owner of all of the issued and outstanding capital stock
of UTMC MICROELECTRONIC SYSTEMS INC., a Delaware corporation with its principal
place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Company").
W I T N E S S E T H:
WHEREAS, the Purchaser and Stockholder have agreed to the sale by the
Stockholder to the Purchaser of all of the outstanding common stock of the
Company upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants, warranties and mutual
agreements herein set forth, and in reliance upon the representations and
warranties contained herein, the parties do hereby agree as follows:
1. Transfer of Stock.
In reliance on the representations and warranties contained herein and
subject to all of the terms and conditions hereof, the Stockholder hereby sells,
assigns, transfers and delivers to the Purchaser, and the Purchaser hereby
purchases from the Stockholder, all of the issued and outstanding Common Stock
of the Company (the "Stock").
2. Unadjusted Purchase Price.
2.1. Unadjusted Purchase Price. Subject to adjustment following the Closing
as provided in Section 2.2 hereof, the unadjusted purchase price for the Stock
(the "Unadjusted Purchase Price") shall be Forty-Two Million Five Hundred
Thousand Dollars ($42,500,000).
2.2 Post-Closing Purchase Price Adjustment.
(a) If the "Closing Net Book Value" (as defined in Section 2.2(c) below) of
the "I.C. Business" (as hereinafter defined) as finally determined under this
Section is less than Twenty-Seven Million Five Hundred Thousand Dollars
($27,500,000), the Unadjusted Purchase Price shall be reduced dollar for dollar
by the amount by which Twenty-Seven Million Five Hundred Thousand Dollars
($27,500,000) exceeds the Closing Net Book Value. Any payment to be made
pursuant to this Section 2.2(a) shall be made within three (3) business days of
final determination of the Closing Net Book Value by wire transfer to an account
in the United States designated by the person entitled to receive such payment.
Any such payment to be made which is not made when due shall bear interest at
the rate of twelve (12%) percent per annum from the due date thereof to the date
paid. The Unadjusted Purchase Price as adjusted is referred to herein as the
"Purchase Price".
(b) As soon as practicable after the Closing Date, but in no event
later than thirty (30) days after the Closing Date, the Stockholder will prepare
a balance sheet of the I.C. Business as of the close of business on the date
immediately preceding the Closing Date (the "Closing Balance Sheet"), and a
determination of the Closing Net Book Value as of such date in accordance
therewith and Section 2.2(c). Purchaser's representatives, including its
independent certified public accountants, shall have access to the Company's
accounting records, and work papers created in connection with preparing the
Closing Balance Sheet. The Stockholder will establish the Closing Net Book Value
in accordance with this Section 2.2 and deliver its Closing Balance Sheet within
such thirty (30) day period. If Purchaser objects to the determination of the
Closing Net Book Value, Purchaser shall give notice to Stockholder within ninety
(90) days after Purchaser's receipt thereof. If Purchaser fails to give notice
to Stockholder of an objection within such ninety (90) day period, the
determination by the Stockholder of the Closing Net Book Value shall be deemed
final, conclusive and binding on Stockholder and Purchaser as to the adjustment,
if any, of the Unadjusted Purchase Price and the Closing Net Book Value. If
Purchaser gives Stockholder notice of such an objection within such ninety (90)
day period, all disagreements with respect to the Closing Net Book Value shall
be resolved as soon as practicable by the Colorado Springs or Denver, Colorado,
office of a mutually acceptable "Big 5" accounting firm (other than KPMG Peat
Marwick LLP ("KPMG") and PricewaterhouseCoopers LLP ("Pricewaterhouse"), which
shall determine the Closing Net Book Value in accordance with Section 2.2(c).
The determination of the Closing Net Book Value by such mutually acceptable "Big
5" accounting firm shall be final, conclusive and binding, as to the adjustment
of the Unadjusted Purchase Price in accordance with this Section 2, upon
Stockholder and Purchaser. The fees and expenses of Pricewaterhouse shall be
borne solely by the Stockholder, the fees and expenses of KPMG shall be borne
solely by Purchaser, and the fees and expenses of the mutually acceptable "Big
5" accounting firm shall be shared equally by Purchaser and Stockholder.
Notwithstanding the preceding portions of this Section 2.2(b), the applicable
party or parties shall pay promptly to the other party or parties that portion
of any reduction in the Unadjusted Purchase Price which is not in dispute. Any
notice of objections shall specify in reasonable detail the nature of the
objections.
(c) The "Closing Net Book Value" shall be the difference between the
assets and liabilities of the I.C. Business as of the close of business on the
date immediately preceding the Closing Date based on the Closing Balance Sheet.
The Closing Balance Sheet shall present accurately (without regard to any
limitations as to materiality) the assets, liabilities and Closing Net Book
Value of the I.C. Business as of the close of business on the date immediately
preceding the Closing Date in accordance with GAAP consistently applied by the
Company. Notwithstanding the preceding provisions of this Section 2.2(c), for
purposes of preparing the Closing Balance Sheet and determining the Closing Net
Book Value:
(i) the same accounting principles that were used in
preparing the December 31, 1998 balance sheet and the December 31, 1997
balance sheet included in the "Financial Statements" (as hereinafter
defined) shall be used in preparing the Closing Balance Sheet and
determining the Closing Net Book Value;
(ii) the Closing Balance Sheet shall properly reflect a cash
balance at least equal to any accrued but unpaid bonus incentive
compensation to employees of the I.C. Business for the year ended December
31, 1998;
(iii) the Closing Balance Sheet shall not include any
"Excluded Assets" (as hereinafter defined) or "Excluded Liabilities" (as
hereinafter defined);
(iv) all accruals for current and deferred pension assets
and liabilities shall be excluded from the determination of Closing Net
Book Value; and
(v) any increase or decrease in the inventory reserve of
Seven Million Five Hundred Thousand Dollars ($7,500,000); deferred tax
assets of Four Million Four Hundred Nine Thousand U.S. Dollars
($4,409,000); deferred tax liabilities of Five Hundred Twelve Thousand U.S.
Dollars ($512,000); and a warranty reserve of One Hundred Thousand U.S.
Dollars ($100,000) will be excluded from the determination of the Closing
Net Book Value.
3. The Closing.
3.1. Place and Date.
The closing of the transactions provided for in Section 1 shall take
place at Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ (or at such other place as the parties may agree upon in writing)
contemporaneously with the execution of this Agreement. The closing is referred
to in this Agreement as the "Closing" and date of the closing is referred to
herein as the "Closing Date".
3.2. Unadjusted Purchase Price Paid at Closing.
At the Closing, the Purchaser shall pay the Unadjusted Purchase Price
to the Stockholder by wire transfer in immediately available funds to such bank
account as the Stockholder shall have specified in writing to the Purchaser
three (3) business days in advance of the Closing Date.
3.3. Documents to be Delivered by the Stockholder.
(a) the Stockholder shall, and in the case of the Facilities Lease
and Services Agreement shall cause ▇▇▇▇▇▇▇▇ Standard Electronics, Inc. to,
execute and deliver to the Purchaser the following:
(i) duly issued certificates representing all of the Stock
duly endorsed in blank, with blank stock powers attached and with all
required stock transfer stamps attached;
(ii) the "Facilities Lease and Services Agreement" executed
on the date hereof by the Company and the Stockholder;
(iii) the "Long Term Agreement" executed on the date hereof
by the Company and the Stockholder;
(iv) the "Assignment and License-Back Agreement" executed on
the date hereof by the Company and the Stockholder; and
(v) the certificate specified in Section 7.1 of this
Agreement.
(b) the Stockholder and the Company shall each execute such other
documents and instruments and take such action as may be necessary or reasonably
requested by the Purchaser to fully vest in Purchaser full title to the Stock
and place the Purchaser in possession and control of the Company and its assets.
3.4. Documents to be Delivered by the Purchaser.
At the Closing the Purchaser or the Company, as the case may be, shall
execute and/or deliver to the Stockholder the following:
(i) a copy of resolutions of the Board of Directors of the
Purchaser authorizing the execution, delivery and performance of this
Agreement by the Purchaser, and a certificate of its secretary or assistant
secretary, dated the Closing Date, to the effect that such resolutions were
duly adopted and are in full force and effect;
(ii) the Facilities Lease and Services Agreement;
(iii) the Long Term Agreement;
(iv) the Assignment and License-Back Agreement; and
(v) the certificate specified in Section 7.2 of this
Agreement.
3.5. Form of Documents.
Unless specifically otherwise provided herein, all documents to be
delivered pursuant to this Section 3 by one party to the other party to this
Agreement shall be in form and substance reasonably satisfactory to such other
party and its counsel.
4. Representations and Warranties of the Stockholder.
The Stockholder represents and warrants to the Purchaser as of the Closing
Date as follows:
4.1. Organization and Authority.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation as set
forth in Schedule 4.1, with all requisite power and authority (corporate and
governmental) to own, operate and lease its properties and to carry on its
business as now being conducted. The Company is duly licensed or qualified to do
business and is in good standing in each jurisdiction set forth on Schedule 4.1
hereto, which except as set forth in Schedule 4.1 are all the jurisdictions in
which the Company is required to be so qualified or licensed.
4.2. Subsidiaries.
The Company has no direct or indirect interest or interests by stock
ownership in any firm, association, corporation or business enterprise, except
as set forth on Schedule 4.2.
4.3. Authorization of Agreements.
The Stockholder has the corporate power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance by the Stockholder of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Stockholder. This Agreement
has been duly executed and delivered by the Stockholder and, assuming due
execution by the Purchaser, constitutes the legal, valid and binding obligation
of the Stockholder enforceable against the Stockholder in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general application relating to
or affecting the rights and remedies of creditors, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in an action at law or a suit in equity).
4.4. Capital Stock.
The authorized, issued and outstanding capital stock of all classes of
the Company are set forth on Schedule 4.4. All of the outstanding capital stock
of the Company has been duly authorized and is validly issued, fully paid and
nonassessable. All outstanding capital stock and any other outstanding
securities of the Company (including any employee stock options) were issued in
compliance with all applicable federal and state securities laws. The lawful,
registered and beneficial owners (and their addresses) of all issued and
outstanding shares of the capital stock of the Company and the number of shares
held by each is as indicated on Schedule 4.4 hereto. The Stockholder has and on
the Closing Date will convey to the Purchaser good title to the Stock, free and
clear of any security interest, claim, lien, pledge, option, warrant,
encumbrance or restriction whatsoever. Except as set forth on Schedule 4.4,
there are no rights, subscriptions, warrants, options, conversion rights,
commitments or agreements of any kind authorized or outstanding to purchase or
otherwise acquire from the Stockholder, the Company or any other person, any
shares of stock, or securities or obligations of any kind convertible into or
exchangeable for any shares of stock, of any class of the Company or any other
equity interest in the Company. There is no proxy, or any agreement, arrangement
or understanding of any kind authorized or outstanding which restricts, limits
or otherwise affects the right to vote any share of Stock or other securities of
the Company.
4.5. No Conflicts.
The execution, delivery and performance of this Agreement, any other
agreement or document contemplated herein and the consummation of all of the
transactions contemplated hereby and thereby: (i) do not and will not require
the consent, waiver, approval, license, designation or authorization of, or
declaration with, any Person or court to which the Company is subject or any
governmental authority or agency; and (ii) do not and will not, with or without
the giving of notice or the passage of time or both, violate or conflict with or
result in a breach or termination of any provision of, or constitute a default
under, or accelerate or permit the acceleration of the performance required by
the terms of, or result in the creation of any mortgage, security interest,
claim, lien, charge or other encumbrance upon any of the assets of the Company
pursuant to, or otherwise give rise to any liability or obligation under, the
certificate of incorporation or bylaws of the Company, any agreement, mortgage,
deed of trust, indenture, license, permit or any other agreement or instrument
or any order, judgment, decree, statute or regulation to which the Company is a
party or by which the Company or any of its assets may be bound; and (iii) will
not cause the termination of any such agreement or instrument, or in any way
affect or violate the terms and conditions of, or cause the cancellation,
modification, revocation or suspension of, any rights of the Company, except
with respect to clauses (i), (ii) and (iii) above, such breach or breaches of
the representations contained therein which individually or in the aggregate
would not have a material adverse effect upon the Company or the ▇.▇.▇▇▇▇▇▇▇▇.
4.6. Financial Statements.
Attached hereto as Schedule 4.6 are the Financial Statements of the
I.C. Business.
4.6.1 Except as set forth in Schedule 4.6.1, for the relevant periods,
the Financial Statements: (1) are complete and correct in all material respects;
(2) present fairly the financial position of the I.C. Business at such dates and
the results of operations and cash flows for the respective periods ended on
such dates; and (3) were prepared in accordance with generally accepted
accounting principles, consistently applied during the periods, and are in
accordance with the books and records maintained by the Company, with no
differences between such Financial Statements and the financial records
maintained and accounting methods applied by the Company for tax purposes,
except as disclosed in the notes to the Financial Statements.
4.6.2 As at December 31, 1998, the I.C. Business had no liabilities,
commitments or obligations of any nature, whether absolute, accrued, contingent
or otherwise, that are of a type required to be reflected on, or described in a
footnote to, an audited balance sheet prepared under generally accepted
accounting principles as consistently applied by the Company ("GAAP") that are
not adequately reflected or reserved against in the unaudited balance sheet of
the I.C. Business as at December 31, 1998 which is included in the Financial
Statements or disclosed in the footnotes thereto; provided, that the materiality
threshold for determining whether liabilities, commitments or obligations are
required to be reflected on, or described in a footnote to, an audited balance
sheet, shall be $300,000 in the aggregate, whether or not consistent with GAAP.
4.7. Taxes.
True and correct copies of the Company's state income tax returns for
the years ended December 31, 1997, 1996 and 1995 have been delivered to the
Purchaser. All tax returns (including information returns) required by any
jurisdiction to have been filed as of the date of this Agreement by or with
respect to the Company have been timely filed, except for returns with respect
to which extensions have been granted, and each such return is true, correct and
complete. Schedule 4.7 sets forth each jurisdiction in which the Company is
required to file all tax returns.
Except as set forth in Schedule 4.7, all liabilities of the Company to
any jurisdiction for taxes of every kind and nature, including interest thereon
and penalties with respect thereto, (collectively "Taxes") relating to any
period prior to December 31, 1998 have been timely paid by the Company or are
accrued and provided for in the Financial Statements as of December 31, 1998.
Any liability for Taxes incurred by the Company since December 31, 1998 was
incurred in the ordinary course of business.
The Company is not required to file any foreign income tax returns.
The state income tax returns of the Company have not been audited by the
appropriate taxing authorities within the past five (5) years. To the knowledge
of the Stockholder, neither the Internal Revenue Service nor any state, local or
other taxing authority has proposed any additional taxes, interest or penalties
with respect to the Company or any of its operations or business; there are no
pending or, to the knowledge of the Stockholder, threatened tax claims or
assessments; and there are no pending or, to the knowledge of the Stockholder,
threatened tax examinations by any taxing authorities.
The Company has not given any waivers of rights (which are currently
in effect) under applicable statutes of limitations with respect to the income
tax returns for any fiscal year.
4.8. No Adverse Changes.
Except as disclosed on Schedule 4.8 hereto, since December 31, 1998:
(i) the I.C. Business of the Company has been conducted only in the ordinary
course; (ii) there has been no change that individually or in the aggregate, has
had a material adverse effect on the condition (financial or otherwise), assets,
liabilities, business, operations, or affairs of the I.C. Business, taken as a
whole; and (iii) there has been no damage, destruction or loss or, to the
knowledge of the Stockholder, other occurrence or development, whether or not
insured against, which, either singly or in the aggregate, materially adversely
affects, and the Stockholder has no knowledge of any threatened occurrence or
development which would materially adversely affect, the condition (financial or
otherwise), assets, liabilities, business, operations, affairs or prospects of
the I.C. Business.
4.9. Conduct of Business.
Except as disclosed on Schedule 4.9 hereto, since December 31, 1998,
the Company with respect to the I.C. Business has not: (i) created or incurred
any liability (absolute, accrued, contingent or otherwise) except unsecured
current liabilities incurred in the ordinary course of business consistent with
past practice; (ii) mortgaged, pledged or subjected to any lien or otherwise
encumbered any of its assets, tangible or intangible; (iii) discharged or
satisfied any lien or encumbrance or paid any obligation or liability (absolute,
accrued, contingent or otherwise) other than current liabilities shown on the
Financial Statements as at December 31, 1998 and taxes and current liabilities
incurred since December 31, 1998 in the ordinary course of business or under
contracts or agreements entered into in the ordinary course of business (other
than as a result of any default or breach of, or penalty under, any such
contracts or agreements); (iv) waived, released or compromised any claims or
rights of substantial value, or experienced any actual or threatened strike or
lock-out or similar labor trouble, or lost, or been threatened with the loss of,
any key employees or any substantial number of employees; (v) entered into any
settlement, compromise or consent with respect to any claim, proceeding or
investigation; (vi) sold, assigned, transferred, leased or otherwise disposed of
any of any material asset, tangible or intangible, or canceled any debts or
claims except, in each case, for fair consideration in the ordinary course of
business (it being understood that the disposition of any asset, other than
inventory consisting of finished products, or cancellation of any debt or claim
carried on the books at more than $30,000 shall be deemed not to be a
disposition or cancellation in the ordinary course of business); (vii) declared
or paid any dividends, or made any other distribution on or in respect of, or
directly or indirectly purchased, retired, redeemed or otherwise acquired any
shares of its capital stock, paid any notes or accounts or paid any amount or
transferred any asset to the Stockholder (other than intercompany payables in
the ordinary course of business); (viii) made or become a party to, or become
bound by, any contract or commitment or renewed, extended, amended, modified or
terminated any contract or commitment which in any one case involved an amount
in excess of $50,000 (or in the aggregate an amount in excess of $100,000 but
excluding therefrom the amount of Material/Service Agreements entered into in
the ordinary course of business); (ix) issued or sold any shares of its capital
stock; (x) paid or agreed to pay, other than in the ordinary course of business,
conditionally or otherwise, any bonus, extra compensation, pension or severance
pay to any of its officers or employees, whether under any existing profit
sharing, pension or other plan or otherwise, or increased the rate or altered
the form of compensation, including without limitation salaries, fees,
commission rates, bonuses, profit sharing, incentive, pension, retirement or
other similar payments, from that being paid at December 31, 1998 to any of its
stockholders, directors, officers or employees; (xi) entered into any
transaction not in the ordinary course of business (except for transactions
contemplated by this Agreement); (xii) made or announced any change in the form
or manner of distribution of any of its products or services; (xiii) changed any
of its accounting methods or principles used in recording transactions on its
books or records or in preparing the Financial Statements; or (xiv) entered into
any contract or commitment to do any of the foregoing.
4.10. Title to and Condition of Assets.
With respect to the I.C. Business, the Company has valid title to all
of its personal property and valid leasehold interests in all real and personal
property leased by it, free and clear of all claims, liens, charges, mortgages,
pledges, security interests, restrictions and other encumbrances of any kind
whatsoever except as set forth in the terms of the related leases or as set
forth in Schedule 4.10. No instrument, easement, license or grant of record,
applicable zoning or building law, ordinance or administrative regulation or
other similar impediment of any kind prohibits or interferes with, limits or
impairs, or would, if not permitted by any prior nonconforming use, prohibit or
interfere with or limit or impair, the use, operation, maintenance of, or access
to, or the value of, the real or personal property owned or leased by the
Company in any material respect, except as set forth in such related leases. The
assets and properties owned or leased by the Company are (i) sufficient and
adequate to carry on its business as presently conducted; (ii) are in reasonably
good condition and repair, normal wear and tear excepted, and are in a state of
maintenance, repair and operating condition required for the proper operation
and use thereof in the ordinary course of business; (iii) comply in all material
respects with all applicable federal, state or local laws, ordinances, rules and
regulations and with the terms and conditions of all leases and other agreements
affecting or relating to any such property; and (iv) are adequate to provide the
products and services of the I.C. Business in accordance with the most current
standards established by I.C. Business customers, clients and governmental
bodies.
4.11. Real Property.
4.11.1. Schedule 4.11.1 contains, among other things: (i) a
description of each parcel of real property owned or leased by the Company or in
which it has any interest, and (ii) a true and complete copy of the certificate
of occupancy (or local equivalent, if any) covering each of the parcels owned by
the Company.
4.11.2 The only real property owned by the Company is the premises,
including an unimproved contiguous parcel of real property, known as ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (collectively, the "Real
Property"). The Real Property is all of the real property owned by the Company.
The Company is in actual possession of the Real Property and has good and
indefeasible title in fee simple to, and owns the Real Property, free and clear
of any encroachment, mortgage, deed of trust (other than those listed on
Schedule 4.11.2(i) hereto), or other lien, security interest, or encumbrance,
lease, sublease, or right of occupancy, except for: (i) minor matters (other
than liens) which are not substantial in character and which, individually, and
in the aggregate, do not materially interfere with the existing use or operation
of the Real Property, or any material part thereof, and do not materially
adversely affect the value of the Real Property, or any part thereof; (ii) real
property taxes, if any, affecting the Real Property only, not yet due and
payable; (iii) the exceptions set forth in Schedule 4.11.2(i) hereto; and (iv)
the state of facts shown on the survey listed in Schedule 4.11.2(ii) hereto, as
of the date of such survey so listed. None of the improvements erected on the
Real Property encroach on adjoining property or public street except as shown on
the aforesaid survey.
4.11.3 The only leasehold estates under which the Company is a lessee
(or sublessee) of any real property or interest therein are as set forth in
Schedule 4.11.1 (the "Leases"). True, correct and complete copies of the Leases
as in effect on the date hereof have been delivered to Purchaser. The Company is
in actual possession of the properties demised under the Leases and has good and
indefeasible title to the leasehold estates conveyed under the Leases, free and
clear of any mortgage, deed of trust, pledge, vendors' or other lien, security
interest, sublease or right of occupancy.
4.11.4 All easements, rights of way or licenses material to the use or
the operations of the Real Property or the quiet enjoyment of the leasehold
estates and possession of the properties demised under the Leases are set forth
on Schedule 4.11.4 and are in full force and effect, and each such easement,
right of way and license is not affected by the transaction provided for in this
Agreement (without the requirement for any consent or other action by or payment
to any third party). The Company has the right of ingress and egress through a
public road or street, to and from each parcel of Real Property and to and from
the properties demised under the Leases.
4.11.5 The Real Property, the properties demised under the Leases and
any other properties and assets owned, leased or used by the Company in
connection with the operation of the Real Property or the properties demised
under the Leases (including, without limitation, the walls, ceilings and other
structural elements of any improvements erected on any part of the Real Property
and the building systems such as heating, plumbing, ventilation, air
conditioning and electrical) are, to the knowledge of the Stockholder, adequate
and sufficient for the current operations of the Company and such properties now
being used by the Company in its businesses and operations, whether leased or
owned, are in reasonably good working order, repair and operating condition
(ordinary wear and tear excepted), are without any material structural defects,
and have been maintained in accordance with generally accepted industry
practices.
4.11.6 To the knowledge of Stockholder, there is no pending or
threatened proceeding for the taking or condemnation of all or any portion of
the Real Property or the properties demised under the Leases or pending or
threatened taking or condemnation proceeding which would result in a termination
of any Lease.
4.12. Personal Property.
Schedule 4.12 hereto sets forth an accurate summary of all material
items of personal property (exclusive of inventory) owned or leased by the I.C.
Business. Except as described in Schedule 4.12, no material shortage or damage
exists for which the Company is liable to another in (i) any raw materials,
supplies, work in process or finished goods owned by customers or suppliers of
the Company and stored upon its premises or (ii) any other items of personal
property owned by another.
4.13. Inventory.
Schedule 4.13 hereto sets forth an accurate summary of all of the
inventory of the I.C. Business as of December 31, 1998. The items described in
Schedule 4.13 together with the assets listed in Schedules 4.11.1 and 4.12
constitute substantially all of the tangible assets used in the I.C. Business.
The inventory summarized in Schedule 4.13 and all additions thereto acquired
since December 31, 1998 and now on hand are in reasonably good condition, of a
quantity and quality usable and saleable in the ordinary course of business and
are adequate and appropriate for the I.C. Business as now conducted. Obsolete,
discontinued, returned, damaged, overage or off-quality items do not constitute
a material part of such inventory and are carried on the Financial Statements
for the period ending December 31, 1998 at realizable market value. Finished
goods in inventory conform to specifications, including without limitation all
applicable governmental regulations, are free from defects and are marketable in
their current condition.
4.14. Accounts Receivable.
All accounts receivable shown on the Financial Statements as of
December 31, 1998, or thereafter acquired by the I.C. Business have been
collected or are current and payable within 90 days of issuance and are subject
to no known counterclaims or setoffs. All such accounts receivable have been
generated in the ordinary course of business and reflect a bona fide obligation
for the payment of goods or services provided by the Company and have been or
will be collected within 180 days of date of invoice therefor.
4.15. Material/Service Agreements; Other Contracts.
(a) Schedule 4.15(a) sets forth as of February 8, 1999, a complete
list with regard to the I.C. Business of (i) all bids, applications or proposals
submitted by it to provide materials or services with a valuation of $25,000 or
more per annum to any Person and for which the award, approval or selection is
pending ("Material/Service Bids"), and (ii) all contracts or agreements for the
provision of materials or services with a valuation of $25,000 or more per annum
to which the Company is a party and which have not yet been performed in full
("Material/Service Agreements"). To the Stockholder's knowledge, all of such
Material/Service Bids and Material/Service Agreements are fully performable by
the Company in compliance with their terms. No grounds exist for the termination
or cancellation for cause of any Material/Service Agreement by the other party
thereto. Schedule 4.15(a) sets forth for each Material/Service Agreement: (i)
the customer, (ii) the remaining revenue to be earned, and (iii) delivery dates.
(b) Except as disclosed in Schedule 4.15(b) hereto other than as
disclosed on Schedule 4.15(a), the Company, with respect to the I.C. Business,
is not a party to or bound by any oral or written contracts, obligations or
commitments with respect to any of the following:
(i) contract, commitment or arrangement involving, in any one
case, $20,000 or more;
(ii) contract with a term of, or requiring performance, more than
six months from its date;
(iii) lease or lease purchase agreement, mortgage, conditional
sale or title retention agreement, indenture, security agreement, credit
agreement, pledge or option with respect to any property, real or personal
(tangible or intangible), in any capacity;
(iv) employment contracts, undertakings, understandings or
arrangements;
(v) contract or agreement with any labor union or other
collective bargaining group;
(vi) bonus, pension, savings, welfare, profit sharing, stock
option, phantom stock, stock appreciation rights, retirement, commission,
executive compensation, hospitalization, insurance or similar plan providing for
employee benefits or any other arrangement providing for benefits for any former
or current employees or for the remuneration, direct or indirect, of the
directors, officers or employees of the Company ;
(vii) note, loan, credit or financing agreement or other contract
for money borrowed, and all related security agreements and collateral
documents, including any agreement for any commitment for future loans, credit
or financing;
(viii) guarantees;
(ix) contract or understanding regarding any capital expenditures
in excess of $25,000;
(x) agency (sales or otherwise), distribution, brokerage
(including, without limitation, any brokerage or finder's agreement or
arrangement with respect to any of the transactions contemplated by this
Agreement) or advertising agreement;
(xi) contract with investment bankers, accountants, attorneys,
consultants or other independent contractors, including those relating to this
Agreement;
(xii) shareholder agreement or contract with the Stockholder (or
family member thereof), director or officer of the Company or any Affiliate of
such persons;
(xiii) contract, commitment or arrangement which would restrain
the Company from engaging or competing in any business;
(xiv) contract, commitment or arrangement not made in the
ordinary course of business involving an amount payable per annum of $25,000 or
more or, in the aggregate, $200,000; and
(xv) license (other than shrink wrap licenses relating to
generally available software), franchise or royalty agreement.
(c) The Stockholder has delivered or made available to the Purchaser
correct and complete copies of all of the contracts, agreements and other
documents listed in Schedules 4.15(a) and 4.15(b) hereto and all amendments
thereto and any waivers currently in effect granted thereunder (the "Scheduled
Contracts"). Except as specifically set forth on Schedules 4.15(a) and 4.15(b),
the sale of the Stock to the Purchaser and the consummation of the other
transactions contemplated by this Agreement are not a violation of or grounds
for the modification or cancellation of any of the Scheduled Contracts or for
the imposition of any penalty or security interests thereunder. To the
Stockholder's knowledge, the Company enjoys good working relationships under all
Scheduled Contracts, and no unresolved disputes are pending or, to the
Stockholder's knowledge, threatened under or in respect of any such Scheduled
Contracts. The consideration to be received or paid by the Company under all
Scheduled Contracts have been determined in accordance with its established
policies. The Company has no outstanding power of attorney other than routine
power of attorney relating to representation before governmental agencies or
given in connection with qualification to do business in another jurisdiction.
Except as described in Schedules 4.15(a) and (b) hereto, all Scheduled
Contracts described in such Schedules 4.15(a) and (b) are valid and enforceable
against the Company, and to the Stockholder's knowledge against the other party
or parties thereto, as the case may be, in accordance with their respective
terms, except as the enforcement thereof may be subject to or limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies; and there is not, under any of such Scheduled Contracts, any
existing default by the Company, to the Stockholder's knowledge, by any other
party, or, to the Stockholder's knowledge, any event which with notice, lapse of
time, or both, would constitute a default and which would have a material
adverse effect on the continued operation of the I.C.
Business.
4.16. Intellectual Property.
Schedule 4.16 hereto sets forth a true and complete list of all (i)
trademarks, service marks and tradenames, and the federal, state and foreign
registrations and applications thereof, (ii) patents and patent applications and
extensions and renewals thereof, (iii) copyrights and copyright applications and
renewals thereof, (iv) licenses held with respect to any trademark, service
▇▇▇▇, trade name, patent or copyright (other than shrink-wrap licenses relating
to generally available software), and (v) Trade Secrets of the I.C. Business
(the "Intellectual Property"). All the Intellectual Property that is owned by
the Company is owned free and clear of any and all licenses, liens, claims,
security interests, charges or other encumbrances or restrictions of any kind,
except as reflected on Schedule 4.16, and no licenses for the use of any of such
rights have been granted by the Company to any third parties, except as
reflected in Schedule 4.16 attached hereto. All of such rights are valid,
enforceable and in good standing, and are sufficient and appropriate for the
conduct of the I.C. Business as currently conducted or, to the Stockholder's
knowledge, as contemplated in its plans for future activities. The sale of the
Stock to the Purchaser and the consummation of the other transactions
contemplated hereby will not adversely affect any rights in the Intellectual
Property of the Company. To the Stockholder's knowledge, the operation of the
I.C. Business does not infringe in any way on or conflict with any registered or
unregistered patent, trademark, trade name, copyright, trade secret, contract,
license or other right, of any person, and the Company does not license any such
right from others except as set forth on Schedule 4.16. No claim is pending or,
to the Stockholder's knowledge, threatened or has been made within the past five
years, to the effect that any such infringement or conflict has occurred. No
other Intellectual Property other than those owned or licensed by the Company
are required by it for its I.C. Business as conducted prior to the date hereof.
The Stockholder has no knowledge of any infringement by any third parties upon
any of the Intellectual Property. True, correct and complete copies of all
documentation describing or relating to the Intellectual Property other than
Trade Secrets have been made available or delivered by the Stockholder to the
Purchaser.
4.17. Insurance.
Schedule 4.17 hereto contains a complete and correct list of all
insurance policies maintained by the Company together with a schedule of
required premiums under each such policy. The Stockholder has made available to
the Purchaser complete and correct copies of all such policies together with all
riders and amendments thereto. Such policies are in full force and effect, and
all premiums due thereon have been paid. The Company has complied in all
material respects with the provisions of such policies. No notice has been
received canceling or threatening to cancel or refusing to renew any of such
insurance. Except as set forth in Schedule 4.17, the rights of the insured under
such policies will not be terminated or adversely affected by the Closing or the
consummation of the other transactions contemplated hereby. To the Stockholder's
knowledge, there is currently no basis for any insurance claim by the Company.
The Company has not created any letters of credit or other funding obligation
with respect to such policies.
4.18. Customer and Supplier Relationships.
Attached as Schedule 4.18 is a complete and correct list of all
current customers of the I.C. Business showing the sales to each for the year
ended December 31, 1998 and of all suppliers whose sales to the Company amounted
to more than $200,000 during such period showing the sales of each such
supplier. With respect to any such customer or supplier or group of related
customers or suppliers listed on Schedule 4.18, the Stockholder has no knowledge
that any such customer, supplier or group of related customers or suppliers has
terminated or expects to terminate a material portion of its normal business
with the Company, other than as a result of general economic or industry
conditions.
4.19. Employees.
The Stockholder has furnished to Purchaser a true and complete list
setting forth all of the employees and officers of the I.C. Business whose
annual salary and bonus is in the aggregate $50,000 or more (listing each such
person individually by name) with a description of their job designations,
compensation, benefits (including severance pay and bonuses), outstanding loans
to officers or employees and all understandings not in the ordinary course of
business relating to terms and conditions of employment. Proper and accurate
amounts have been withheld by the Company from its employees' compensation for
all periods in full compliance with tax withholding provisions of applicable
federal, state, local or foreign law. Proper and accurate federal, state, local
and foreign returns have been filed by the Company for all periods for which
returns were due with respect to employee income tax withholding, social
security and unemployment taxes, and the amounts shown thereon to be due and
payable have been timely paid.
4.20. Labor Relations.
There has been no violation of any federal, state or local statutes,
laws, ordinances, rules, regulations, orders or directives with respect to the
employment of individuals by, or the employment practices or work conditions of
the Company or their respective terms and conditions of employment, wages and
hours that could have a material adverse effect on the Company or the I.C.
Business. The Company is not engaged in any unfair labor practice or other
unlawful employment practice and there are no unfair labor practice charges or
other employee related complaints against the Company pending or, to the
Stockholder's knowledge, threatened before the National Labor Relations Board,
the Equal Employment Opportunity Commission, the Occupational Safety and Health
Review Commission, the Department of Labor, or any other federal, state, or
local, or other governmental authority by or concerning the employees of the
Company that could have a material adverse effect on the Company or the I.C.
Business. No representation question, grievance or arbitration proceedings
arising out of collective bargaining agreements covering employees of the
Company exists or is pending or, to the Stockholder's knowledge, threatened
respecting the employees of the Company. There is no work stoppage, strike,
slowdown, lockout, picketing or other similar labor problem involving persons
employed by the Company pending or, to the Stockholder's knowledge, threatened.
There are no labor union contracts or collective bargaining agreements to which
the Company is a party relating to any employee of the Company.
4.21. Benefit Plans.
(a) Schedule 4.21(a) hereto sets forth a true and complete list of
each "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
maintained by the Company or to which the Company contributes or is required to
contribute, including any multiemployer employee welfare benefit plan, on behalf
of officers and employees of the Company (such multiemployer and other employee
welfare benefit plans being hereinafter collectively referred to as the "Welfare
Benefit Plans"). With respect to each Welfare Benefit Plan, all contributions or
premiums due by, or attributable to the period ending on, the Closing Date have
been paid.
(b) Schedule 4.21(b) hereto sets forth a true and complete list of
each "employee pension benefit plan" (as defined in Section 3(2) of ERISA)
maintained by the Company or to which the Company contributes or is required to
contribute, including any multiemployer employee pension benefit plan, on behalf
of officers and employees of the Company (such multiemployer and other employee
pension benefit plans being hereinafter collectively referred to as the "Pension
Benefit Plans"). Except as set forth in Schedule 4.21(b). no Pension Benefit
Plan is a "defined benefit plan" (as defined in Section 3(35) of ERISA). With
respect to each Pension Benefit Plan, all contributions due by or attributable
to the period ending on the Closing Date have been made or accrued on the
Financial Statements and each Pension Benefit Plan has been fully funded without
further liability to the Company in respect thereof.
(c) Each Pension Benefit Plan, each Welfare Benefit Plan and each
related trust agreement and annuity contract and insurance policy complies
currently and has complied in the past, both as to form and operation, in all
material respects with the provisions of (A) the Code in order to be tax
qualified under the Code; (B) ERISA; and (C) all other applicable laws, rules
and regulations; all necessary government approvals for the Pension Benefit
Plans have been obtained; and favorable determination letters, copies of which
have been made available to the Purchaser, as to the qualification under the
Code of each of the Pension Benefit Plans, as amended, have been received from
the Internal Revenue Service and no event has occurred or condition exists which
would materially adversely affect such determination.
(d) Each Welfare Benefit Plan and each Pension Benefit Plan has been
administered to date in compliance with the requirements of the Code, ERISA and
all other applicable laws and all reports required by any government agency with
respect to each Welfare Benefit Plan and each Pension Benefit Plan have been
timely filed.
(e) Neither the Company nor any plan fiduciary of any Welfare Benefit
Plan or Pension Benefit Plan has engaged in any transaction in violation of
Section 406 of ERISA or any "prohibited transaction" (as described in Section
4975(c) of the Code).
(f) Schedule 4.21(f) lists each deferred compensation plan, bonus
plan, employee stock purchase plan and any other employee benefit plan,
agreement, arrangement or commitment not required under a previous subsection to
be listed on Schedule 4.21(a) or 4.21(b) maintained by the Company or an
Affiliate with respect to the compensation of any of the Company's employees.
(g) There are no actions, suits or claims (other than routine claims
for benefits) pending or which could reasonably be expected to be asserted
against the Company in connection with, or against, any Pension Benefit Plan or
Welfare Benefit Plan, and there are no civil or criminal actions pending or, to
the Stockholder's knowledge, threatened against any fiduciary, Pension Benefit
Plan or Welfare Benefit Plan with respect to such Plans.
(h) All Welfare Benefit Plans, Pension Benefit Plans, related trust
agreements or annuity contracts (or any other funding instruments), and all
plans, agreements, arrangements and commitments referred to in subsection (f) of
this Section are legally valid and binding and in full force and effect.
4.22. Litigation; Compliance; Permits.
Except as disclosed in Schedule 4.22 hereto, there are no actions,
suits, proceedings, arbitrations or governmental investigations pending, or, to
the Stockholder's or Company's knowledge, threatened against, by or affecting
the Company in which, individually or in the aggregate, an unfavorable
determination could materially affect the business of the Company or its
prospects, earnings or condition (financial or otherwise) or any of its assets
or result in any material liability on the part of the Company or prevent,
hinder or delay the execution and performance of this Agreement or any of the
transactions contemplated hereby, or could declare this Agreement unlawful or
cause the rescission of any of the transactions hereunder, or require the
Purchaser to divest itself of the Stock; nor has any such suit been pending
within the two years prior to the date hereof. The Company has not been charged
with or received notice of any violation of any applicable federal, state, local
or foreign law, rule, regulation, ordinance, order or decree relating to it, or
the operation of its business, and the Stockholder and the Company are not aware
of any threatened claim of such violation (including any investigation) or any
basis therefor. Schedule 4.22 sets forth a list of all actions, suits,
proceedings, arbitrations or governmental investigations pending, or, to the
best of Stockholder's knowledge, threatened against, by or affecting the
Company.
The Company has complied in all material respects with all laws,
rules, regulations, ordinances, orders, judgments, decrees, writs, injunctions,
building codes, safety, fire and health approvals, certificates of occupancy or
other governmental restrictions applicable to them, their assets, employees and
employment practices.
The Company has all material governmental licenses, permits,
approvals or other authorizations required for the conduct of its business as
now conducted, all of which are in full force and effect and all of which are
listed on Schedule 4.22 hereto; there is no action pending or, to the knowledge
of the Stockholder, threatened, to terminate any rights under any such
governmental licenses, permits or authorizations; and except as disclosed on
Schedule 4.22 at the Closing, none of such licenses, permits, approvals and
authorizations will be adversely affected by the sale of the Stock to the
Purchaser or the consummation of the other transactions contemplated by this
Agreement.
4.23. Environmental Compliance.
Except as set forth in Schedule 4.23, (i) all of the assets and
properties owned, leased or operated by the Company are in material compliance
with all Environmental Laws and are not subject to any pending or, to the
knowledge of the Stockholder or the Company, threatened Environmental Actions;
(ii) none of the assets and properties which have been or are currently owned,
leased or operated by the Company have been used while owned, leased or operated
by the Company for the generation, storage, manufacture, use, transportation,
disposal or treatment of Hazardous Substances in violation of Environmental
Laws; (iii) there has been no Hazardous Discharge on or from any of the assets
and properties currently or formerly owned, leased or operated by the Company
prior to or during such ownership, leasing or operation; (iv) there are no
outstanding or, to the Stockholder's knowledge, threatened Environmental Actions
against the Company or, to the Stockholder's knowledge, any of the owners or
operators of any facilities that may have received solid waste or Hazardous
Substances from any of the assets, former assets and properties currently or
formerly owned, leased or operated by the Company; and (v) the Company has not
owned, possessed or arranged for the transportation of Hazardous Substances at
any site where it has performed remediation services. No employee or other
person has ever made a claim or demand against the Company based on alleged
damage to health caused by any Hazardous Substance. All services performed by
the Company, including, without limitation, remediation activities, were and are
in full compliance with all Environmental Laws and provide no basis for an
Environmental Action against the Company or any other Person or any other claim
that such services were not properly performed.
4.24. Corporate Records.
The copy of the certificate of incorporation of the Company, and all
amendments thereof to date, certified by the Secretary of State of their
respective jurisdictions of incorporation and of the by-laws of the Company, as
amended to date, certified by the Secretary or an Assistant Secretary of the
Company, as applicable, all under a date not more than five (5) days prior to
the Closing Date which have been or will be delivered to the Purchaser are
complete and correct, and the minute books of the Company correctly reflect all
material corporate actions taken at all meetings of directors (including
committees thereof) and the stockholders. The stock transfer books and stock
ledgers are complete and correct and correctly reflect all issuances and
transfers of the capital stock of the Company.
4.25. Bank Accounts; Power of Attorney.
Schedule 4.25 hereto correctly sets forth: (i) a list of all banks in
which the Company has an account or safety deposit box, account number, purpose
of such account or safety deposit box and the names of all persons authorized to
draw thereon or have access thereto; and (ii) the names of all persons holding
powers of attorney from the Company and a description of the power of attorney.
4.26. Warranties.
Except as described in Schedule 4.26 annexed hereto, during the past
three years the Company has not given any written warranties with respect to any
of its I.C. Business products or services, and except as set forth in such
Schedule 4.26, in the last three years no claim for breach of any such written
warranty or any implied warranty with respect to such I.C. products or services
has been made, or to the knowledge of the Stockholder or the Company, is
threatened. Returns and repairs in respect of the Company's products for each of
the three (3) calendar years preceding the date of this Agreement are listed in
Schedule 4.26, and Schedule 4.26 sets forth all such separate returns and
repairs in excess of $25,000 during such three (3) year period. Schedule 4.26
also sets forth a description of all claims for personal injury or property
damage or similar claims for I.C. Business product liability or arising from
services provided by the I.C. Business which have been made against the Company
during the past three years.
4.27. Disclosure.
As used in this Agreement the term "to the Stockholder's knowledge" or
"to the best of the Stockholder's knowledge" means the actual knowledge of the
Stockholder or any executive officer or director of the Company .
4.28. Y2K Representation.
(a) For purposes of this Agreement, "Year 2000 Compliant" shall mean
that: (i) the occurrence in or use by computer programs of dates before, on or
after January 1, 2000 will not adversely affect the performance of such programs
with respect to date-dependent data, computations, output, or other functions
(including, without limitation, calculating, comparing and sequencing); (ii)
such programs will not abnormally end or provide invalid or incorrect results as
a result of datedependent data; and (iii) such programs can accurately
recognize, manage, accommodate and manipulate date-dependent data, including,
without limitation, single and multi-century formulas and leap years.
(b) The Company's products do not contain any computer programs. The
Company's key financial and operational computer programs have been reviewed
and, where required, detailed plans have been developed and have been and are
being implemented on a schedule intended to permit the Company's computer
programs to be Year 2000 Compliant. Set forth on Schedule 4.28 is a summary of
such plans and schedule.
(c) Except as disclosed on Schedule 4.28, the Company has not received
any communications from any of its suppliers or customers relating to the
possibility that any of their computer programs (including those contained in
any of their products) are not or will not be Year 2000 Compliant.
(d) Except as disclosed on Schedule 4.28, the Company has not given
any warranties or undertakings to any of its customers to the effect that the
Company or any of its computer programs (including those contained in any of is
products) are Year 2000 Compliant.
(e) Notwithstanding the foregoing or any other provision of this
Agreement, Stockholder makes no representation or warranty about whether any of
the Company's computer programs are Year 2000 Compliant and Stockholder shall
have no liability or obligation to Purchaser or any other person in the event
any such programs are determined not to be Year 2000 Compliant.
4.29 Foreign Corrupt Practices Act.
The Company has not made, offered or agreed to offer anything of value
to any government official, political party or candidate for government office
nor has it taken any action which would cause the Company to be in violation of
the Foreign Corrupt Practices Act of 1977 or any similar law of any foreign
jurisdiction or the United States.
5. Representations and Warranties of Purchaser.
The Purchaser represents and warrants to the Stockholder and the Company on
the date hereof and on the Closing Date as follows:
5.1. Corporate Status.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to carry on its business as now conducted.
5.2. Authorization of Agreements.
The Purchaser has the power and authority to execute and deliver this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance by the Purchaser of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser and constitutes the legal, valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors.
5.3 Purchase of Stock for Investment.
Purchaser represents that it is acquiring the Stock for its own
account for investment and not with a view to or for sale in connection
therewith, any distribution thereof, nor with any present intention of
distributing or selling the same.
5.4 No Conflicts.
The execution, delivery and performance of this Agreement, any other
agreement or document contemplated herein and the consummation of all of the
transactions contemplated hereby and thereby: (i) do not and will not require
the consent, waiver, approval, license, designation or authorization of, or
declaration with, any Person or court to which the Purchaser is subject or any
governmental authority or agency; and (ii) do not and will not, with or without
the giving of notice or the passage of time or both, violate or conflict with or
result in a material breach or termination of any provision of, or constitute a
material default under, or accelerate or permit the acceleration of the
performance required by the terms of, or result in the creation of any mortgage,
security interest, claim, lien, charge or other material encumbrance upon any of
the material assets of the Purchaser pursuant to, or otherwise give rise to any
liability or obligation under, the certificate of incorporation or By-laws of
the Purchaser, any material agreement, mortgage, deed of trust, indenture,
license, permit or any other material agreement or instrument or any order,
judgment, decree, statute or regulation to which the Purchaser is a party or by
which the Purchaser or any of its assets may be bound, which individually or in
the aggregate could have a material adverse effect upon the Purchaser; and (iii)
will not cause the termination of any such agreement or instrument, or in any
way affect or violate the terms and conditions of, cause the cancellation,
modification, revocation or suspension of, any rights of the Purchaser, except
with respect to clauses (i), (ii) and (iii) above, such breach or breaches of
the representations contained therein which individually or in the aggregate
would not have a material adverse effect upon the Purchaser.
5.5 Litigation.
Except as disclosed in Schedule 5.5 hereto, there are no actions,
suits, proceedings, arbitrations or governmental investigations pending, or, to
the Purchaser's knowledge, threatened against, by or affecting the Purchaser in
which, individually or in the aggregate, an unfavorable determination could
prevent, hinder or delay the execution and performance of this Agreement or any
of the transactions contemplated hereby, or could declare this Agreement
unlawful or cause the rescission of any of the transactions hereunder, or
require the Purchaser to divest itself of the Stock; nor has any such suit been
pending within the two years prior to the date hereof.
6. Covenants.
6.1. Consents.
The Stockholder and the Company shall use their best efforts to obtain
at the earliest practicable date, by instruments in form and substance
reasonably satisfactory to the Purchaser, all consents and approvals to the sale
of the Stock to the Purchaser, if any, required by any governmental entity or
under any of the Scheduled Contracts.
6.2. Expenses.
The Purchaser and the Stockholder shall bear their own respective
expenses incurred in connection with this Agreement and the transaction
contemplated hereby and in connection with all obligations required to be
performed by each of them under this Agreement. The Company shall not pay any
such expenses of the Stockholder or the Company in connection herewith.
6.3. Resignations of Directors and Officers.
The Stockholder shall provide to the Purchaser written resignations
effective as of the Closing Date of such directors, officers, trustees and bank
signatories of the Company as the Purchaser may request prior to the Closing
Date. In the event that the Purchaser requests any bank signatory or trustee
resignations, the Stockholder shall cause to be delivered to Purchaser written
instructions to each bank at which the Company has an account or credit facility
or at which the Company rents a safe deposit box informing such bank of the said
resignations and revoking the authority of said persons to act with respect to
said account, credit facility or trust and to have access to said safe deposit
box. The Stockholder and the Company shall also cause to be delivered to
Purchaser effective the Closing Date the written surrender by all persons
holding powers of attorney from the Company of their authority and power to act
under such powers of attorney.
6.4. Minute Books, Stock Books and Corporate Records.
The complete and correct minute books, certificate of incorporation,
by-laws, stock certificate and transfer books, stock ledgers, financial and
other corporate records and the corporate seal of the Company shall be delivered
to the Purchaser by the Stockholder on or before the Closing Date.
6.5. Taxes.
The Stockholder shall pay any federal, state or local sales, transfer
or stamp taxes payable in connection with the sale and transfer of the Stock
pursuant to this Agreement, including any sales or transfer taxed applicable to
the Real Property.
6.6. No Section 338(h)(10) Election.
Neither the Seller nor Purchaser shall make an election pursuant to
Section 338(h) (10) of the Internal Revenue Code with respect to the Company.
6.7. Access to Books and Records of the Company.
After the Closing Date, the Purchaser shall permit the Stockholder
and the representatives of the Stockholder reasonable access, at reasonable
intervals, during normal business hours and in a manner so as not to interfere
with the normal business operations of the Company, to relevant books, records
(including tax records), contracts and documents of or pertaining to the Company
in connection with the preparation of the Closing Balance Sheet as well as tax
audits and investigations of Stockholder conducted by a governmental authority
relating to periods of time prior to the Closing Date. The Stockholder will keep
strictly confidential all such information which it receives from the Company in
the course of the tax reviews contemplated by this Section and will not use any
such information except in connection with tax audits and investigations of
Stockholder conducted by a governmental authority relating to periods of time
prior to the Closing Date.
6.8 December 31, 1998 Financials.
The Stockholder will furnish Purchaser with the December 31, 1998
financial statements of the I.C. Business as audited by Pricewaterhouse promptly
after Stockholder's receipt thereof but no later than February 15, 1999.
6.9 Right of First Refusal.
The Stockholder will not, at any time prior to the date sixty (60)
days following the expiration of the Facilities Lease and Services Agreement and
Transitional Service Agreement (and any extensions thereof), sell any material
asset used in connection with the operation of the Circuit Card Assembly
Business without first giving written notice to the Purchaser (the "Notice of
Sale"). The Notice of Sale shall include the substantially complete terms of the
proposed sale. For a period of thirty (30) days after receipt by Purchaser of
the Notice of Sale, Purchaser will have the right to give written notice to
Stockholder of Purchaser's exercise of Purchaser's right to purchase such asset
used in connection with the operation of the Circuit Card Assembly Business on
the same terms, price and conditions as set forth in the Notice of Sale. If
Purchaser exercises such right in the manner and within the time period set
forth above, then Purchaser shall purchase such asset within fifteen (15) days
of the date on which the Purchaser delivers its notice of exercise to
Stockholder. If the Stockholder does not receive written notice of Purchaser's
exercise of such right to purchase within such thirty (30) day period, there
shall be a conclusive presumption that Purchaser has elected not to exercise
such rights and Stockholder may sell such asset used in connection with the
operation of the Circuit Card Assembly Business on the same terms as set forth
in the Notice of Sale. If the sale is not consummated within 120 days of the
date of the Notice of Sale, then Purchaser's right of first refusal shall
reapply to such transaction.
6.10 Scholar Award Plan.
Stockholder will reimburse Company for all awards made by the Company to
those employees who complete the requirements of its scholar award plan within
six (6) months after Closing.
6.11 COBRA.
(a) For a period of eighteen (18) months after Closing, the Stockholder,
upon the request of the Company, will furnish COBRA benefits to those employees
of the I.C. Business who as of the Closing are, or during the three (3) month
period after the Closing become, entitled to such benefits, and the Company
shall reimburse Stockholder for its full costs therefor plus an amount equal to
permitted statutory fees to the extent not collected by the Stockholder from
such employees.
(b) For a period of up to three (3) months after Closing, the Stockholder,
upon the request of the Company, will provide to employees of the I.C. Business
"UTC Choice" benefits (including medical, dental, life, long- and short-term
disability, medical and dependent reimbursement). The Purchaser will cause the
Company to reimburse Stockholder for the cost to Stockholder of providing such
benefits during such period, including, without limitation, the actual cost of
claims incurred during the period of coverage, plus applicable third party
administrators' fees to the extent the Stockholder is self-insured.
6.12 Accounts Receivable.
(a) From and after the date hereof, Stockholder will pay to the Company all
proceeds of accounts receivable and other collections of the I.C. Business which
are deposited in Stockholder's or its Affiliates' lockbox within five (5)
business days after deposit thereof.
(b) All accounts receivable of the Company which constitute payables
by Stockholder or its Affiliates will be paid or caused to be paid to the
Company by Stockholder within thirty (30) days after invoice therefor.
(c) Payments not made pursuant to (a) and (b) above shall bear
interest at the rate of twelve (12%) percent per annum.
(d) The Purchaser will cause the Company to assign to Stockholder
those uncollected accounts receivable referred to in Section 4.14 hereof which
have been paid by Stockholder (instead of such account debtor) to the Company.
6.13 Employee Benefit Plans.
For a period of one (1) year following the Closing, Purchaser agrees
to establish, maintain and provide retirement and welfare benefit arrangements
for the benefit of the employees of the I.C. Business, including, without
limitation, a 401(k) defined contribution plan, medical and dental plans, life
insurance and disability benefits. Purchaser will cause service rendered by such
employees prior to the Closing Date to be taken into account for vesting,
accrual and eligibility purposes under employee benefit plans of Purchaser as to
which such employees may benefit, to the same extent as such service was taken
into account under the corresponding plans of the Company, or its Affiliates, as
the case may be, for those purposes.
7. Closing Certificates.
7.1 The Stockholder shall deliver to the Purchaser at Closing a certificate
dated the Closing Date to the effect that (i) the representations and warranties
contained in Section 4 hereof are true at and as of the date hereof, except as
affected by the transactions contemplated hereby, and (ii) the Stockholder has
duly performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by him on the
Closing Date.
7.2 The Purchaser shall deliver to the Stockholder at Closing a certificate
dated the Closing Date to the effect that (i) the representations and warranties
contained in Section 5 hereof are true at and as of the date hereof and shall be
repeated and shall be true at and as of the date hereof, except as affected by
the transactions contemplated hereby, and (ii) the Purchaser has duly performed
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it on the Closing Date.
8. Competition.
8.1 Covenant Not to Compete.
(a) In furtherance of the sale of the Stock and the business of the
Company, for a period commencing on the Closing Date and ending five (5) years
thereafter, the Stockholder shall not, directly or indirectly (a) manufacture or
sell any Products, or participate in any business which offers or sells any
Products, which compete in any geographic area of the Territory (as defined in
Section 8.1(d) and (e) below) with the Products offered or sold by the Company,
or (b) induce or attempt to induce directly or indirectly any customer of the
Company to cease doing business in whole or in part with the Company or solicit
the business of any such customer for any products which compete with any of the
Products offered or sold by the Company. Participation in a business shall
include, but not be limited to, serving as a director, officer, employee, agent
or representative or having a direct and indirect interest in the business as a
stockholder, partner, joint venturer or any other financial interest; provided,
however, that the following shall not be a violation of the foregoing covenant:
(i) the ownership by the Stockholder of not more than two (2%) percent of the
outstanding shares of stock of any such business listed on any national stock
exchange or listed and actively traded on NASDAQ; nor (ii) the design,
development, or manufacture of integrated circuits or circuit card assemblies
for the Stockholder's internal manufacturing or assembly requirements for
products that do not directly or indirectly compete with the Products sold or
offered for sale by the Company.
(b) For a period commencing on the Closing Date and ending at the
earlier of (i), as to all employees, three (3) years thereafter or (ii), as to
any particular employee, three (3) months after termination of employment of
such employee by the Company, the Stockholder shall not, either on its own
account or for any person, firm or company, hire, solicit, interfere with, or
endeavor to cause any employee of the Company to leave his employment or induce
or attempt to induce any such employee to breach his employment agreement with
the Company without the written consent of the Company. Such consent will not be
unreasonably withheld provided that such consent may be conditioned upon
repayment to the Purchaser or the Company of any severance benefits paid by
either of them to such employee after the Closing.
(c) For a period commencing on the Closing Date and ending at the
earlier of (i), as to all employees, the expiration of the Facilities Lease and
Services Agreement and the Transitional Service Agreement (including any
extensions or renewal option periods exercised thereunder), or (ii) as to any
particular employee, three (3) months after termination of employment of such an
employee by the Stockholder's Circuit Card Assembly Business conducted at the
Company's facility, Purchaser shall not, and shall cause the Company not to,
hire, solicit, interfere with, or endeavor to cause any such employee to leave
his employment or induce or attempt to induce any such employee to breach his
employment with the Stockholder without the written consent of the Stockholder.
Such consent will not be unreasonably withheld provided that such consent may be
conditioned upon repayment to the Stockholder of any severance benefits paid to
such employee after the Closing.
(d) For purposes of Section 8.1(a), "Territory" shall mean the United
States and Canada and any other state, province or place where the Company has
engaged in business in any material respect during the three (3) years preceding
the date hereof, and all references to the Stockholder shall be deemed to
include all subsidiaries and Affiliates of the Stockholder.
(e) The Stockholder acknowledges that the geographic scope of the
restrictions imposed on the Stockholder hereunder are fair and reasonable in the
circumstances and are necessary and fundamental to the protection of the
business of the Company.
8.2. Equitable Relief.
The Stockholder acknowledges that the covenants contained in this
Section 8 were a material and necessary inducement for the Purchaser to agree to
the transactions contemplated hereby, that the Stockholder realized significant
monetary benefit from these transactions, that violation of any of the covenants
contained in this Section 8 will cause irreparable and continuing damage to the
Purchaser, that without the necessity of posting a bond, the Purchaser shall be
entitled to injunctive or other equitable relief from any court of competent
jurisdiction restraining any further violation of such covenants and that such
injunctive relief shall be cumulative and in addition to any other rights or
remedies to which the Purchaser may be entitled. The covenants in this Section 8
shall run in favor of the Company and its successors and assigns.
8.3. Severability.
In case any one or more of the terms or provisions contained in this
Section 8 shall for any reason be held invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any other terms or
provisions hereof, but such term or provision shall be deemed modified or
deleted as or to the extent required by applicable law, and such modification or
deletion shall not affect the validity of the other terms or provisions of this
Section 8. In addition, if any one or more of the restrictions contained in this
Section 8 shall for any reason be held to be unreasonable with regard to time,
duration, geographic scope or activity, the parties contemplate and hereby agree
that such restrictions shall be modified and shall be enforced to the full
extent compatible with applicable law.
9. Definitions; Miscellaneous.
9.1. Definition of Certain Terms.
As used herein, the following terms shall have the following
meanings:
Affiliate: with respect to any Person, any Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
Agreement: this Stock Purchase Agreement.
Assignment and Assumption Agreement: the Agreement dated as of
February 25, 1999 between the Company and ▇▇▇▇▇▇▇▇ Standard Electronics, Inc.,
executed immediately prior to the Closing.
Assignment and License-Back Agreement: as defined in Section
3.3(a)(iv).
Circuit Card Assembly Business: the assembly and testing of
electronic circuit cards for the benefit of ▇▇▇▇▇▇▇▇ Standard, to be used in
▇▇▇▇▇▇▇▇ Standard products.
Closing: as defined in Section 3.1.
Closing Balance Sheet: as defined in Section 2.2(b).
Closing Date: as defined in Section 3.1.
Closing Net Book Value: as defined in Section 2.2(c).
Company: as defined in the Preamble to this Agreement.
Code: the Internal Revenue Code of 1986, as amended, together with
the U.S. Treasury rulings and regulations promulgated thereunder.
Employee Benefit Plan: any pension, retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, or other employee benefit program,
arrangement, agreement or understanding, or medical, vision, dental or other
health plan, or life insurance or disability plan, or any other employee benefit
plan, including, without limitation, any Employee benefit plan" as defined in
Section 3(3) of ERISA to which the Company contributes or is a party or is bound
or under which it may have liability and which employees or former employees of
the Company (or their beneficiaries) are eligible to participate or derive a
benefit.
Environmental Actions: refers to any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, proceeding, judgment, letter
or other communication from any federal, state, local or municipal agency,
department, bureau, office or other authority or any third party involving a
Hazardous Discharge or any violation of any order, permit or Environmental laws.
Environmental Laws: as defined in the definition of Hazardous Substances.
ERISA: the Employee Retirement Income Security Act of 1974, as amended.
Excluded Assets: all fixtures, equipment, materials, inventory, personal
property, intellectual property, interests, rights, contracts, records, reports,
permits and other tangible and intangible assets of every kind and description,
including, without limitation, all rights with respect to the rights and
services of employees of the Company, that relate solely to the conduct by the
Company of the Circuit Card Assembly Business, including without limitation, the
assets listed on Schedule 9.1, the inventory of silicon wafers which are
identified for and uniquely suitable for the design and manufacture of products
to be incorporated into ▇▇▇▇▇▇▇▇ Standard products and all intellectual property
and other data necessary therefor.
Excluded Liabilities: means (i) all liabilities or obligations of every
kind and description of the Company to the extent that they relate to or are
associated with the Excluded Assets or the Circuit Card Assembly Business; (ii)
all liabilities in respect of Employee Benefit Plans for retirees and long- and
short-term disability income benefits for employees sustaining such disabilities
prior to the Closing Date; (iii) all liabilities in respect of defined benefit
plans, the UTC Employees Savings Plan, the UTC Voluntary Early Retirement Plan,
and the UTC Medical and Life Insurance Benefit Plan; (iv) all liabilities
for federal, state, local, income and other taxes arising from the assignment
and transfer by the Company to ▇▇▇▇▇▇▇▇ Standard Electronics, Inc. ("HSE") of
the Excluded Assets and HSE's assumption of certain liabilities, more
particularly described in the Assignment and Assumption Agreement; (v) all
liabilities arising from the distribution of the shares of capital stock of HSE
to the Stockholder; (vi) all liabilities arising from claims made by employees
of the Circuit Card Assembly Business for termination, severance and similar
payments or compensation and for other employee benefits and compensation; (vii)
Workmens' Compensation claims arising from events occurring prior to the Closing
Date; (viii) employee and covered dependents medical, dental and hospitalization
claims based upon illness or other event giving rise to such claims which
occurred prior to the Closing Date; (ix) claims for extended medical benefits
for existing early retirees; and (x) all liability for claims of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ for wrongful termination of employment.
Facilities Lease and Services Agreement: as defined in Section
3.3(a)(ii).
Financial Statements: the financial statements of the I.C. Business
as at, and for the year ended December 31, 1997, audited by Pricewaterhouse,
certified public accountants for the Company, and the year ended December 31,
1998, unaudited, which financial statements include, in each case, a balance
sheet, a statement of earnings and accumulated earnings, and a statement of cash
flows.
Hazardous Discharge: means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of Hazardous Substances.
Hazardous Substance: means any substance, compound, chemical or
element which is (i) defined as a hazardous substance, hazardous material, toxic
substance, hazardous waste, pollutant or contaminant under any Environmental
law, or (ii) a petroleum hydrocarbon, including crude oil or any fraction
thereof, (iii) hazardous, toxic, corrosive, flammable, explosive, infectious,
radioactive, carcinogenic or a reproductive toxicant, or (iv) regulated pursuant
to any Environmental Laws. The term "Environmental Law" means each and every
applicable federal, state, local and foreign law, statute, ordinance,
regulation, rule, judicial or administrative order or decree, permit license,
approval, authorization or similar requirement of each and every federal, and
pertinent state, local and foreign governmental agency or other governmental
authority, pertaining to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9601 et set, the
Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et seq., the Toxic
Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., the Water Pollution
Control Act (FWPCA), 33 U.S.C. 1251 et seq., and the Occupational Safety and
Health Act (OSHA), 42 U.S.C. 655. The term "Hazardous Substance" shall also
include asbestos-containing materials and manufactured products containing
Hazardous Substances.
Hewlett-Packard Indemnification Agreement: means the
Indemnification Agreement effective August 11, 1995 among Hewlett-Packard
Company and United Technologies Corporation, acting through its ▇▇▇▇▇▇▇▇
Standard division, and its affiliates, United Technologies Microelectronics
Center, Inc., ▇▇▇▇▇▇▇▇ Standard Commercial Aircraft Electronics, Inc. and CTU of
Delaware, formerly known as ▇▇▇▇▇▇ Corporation.
I.C. Business: means all of the properties, assets, rights and
interests of the Company of every kind and description, tangible and intangible,
real, personal and mixed, including the Real Property, and wherever located,
less the Excluded Assets; and all liabilities of every kind and description of
the Company other than the Excluded Liabilities.
Indemnified Party: a party hereto or other Person designated herein
entitled to indemnification under this Agreement.
Indemnifying Party: a party hereto required to provide
indemnification under this Agreement.
Intellectual Property: as defined in Section 4.16.
Leases: as defined in Section 4.11.3.
Long Term Agreement: as defined in Section3.3(a)(iii).
Material/Service Agreements: as defined in Section 4.15(a).
Material/Service Bids: as defined in Section 4.15(a).
NBV Loss: as defined in Section 10.5(a).
Non-NBV Loss: as defined in Section 10.5(b).
Notice of Sale: as defined in Section 6.9.
Pension Benefit Plans: as defined in Section 4.21(b).
Person: any natural person, firm, partnership, association,
corporation, trust, public body or government.
Plan: each Pension Benefit Plan and each Welfare Benefit Plan.
Products: application specific integrated circuits and communication
data bus integrated circuits; standard integrated circuit products; and circuit
card products designed by the Company for applications other than ▇▇▇▇▇▇▇▇
Standard products; in each case manufactured by the Company during the three (3)
year period preceding the Closing Date.
Purchaser: as defined in the Preamble to this Agreement.
Purchase Price: as defined in Section 2.2(a).
Real Property: as defined in Section 4.11.2.
Rockwell Agreement: The Asset Purchase Agreement dated July 14, 1995
between United Technology Corporation, for its wholly-owned subsidiary United
Technology Microelectronics Center, Inc., and Rockwell International
Corporation, Telecommunications Business, for its wholly-owned subsidiary
Rockwell Telecommunications Colorado Springs, Inc.
Scheduled Contracts: as defined in Section 4.15(c).
Stock: as defined in Section 1.
Stockholder: as defined in the Preamble to this Agreement.
Taxes: as defined in Section 4.7.
Territory: as defined in Section 8.1(d).
Trade Secret: any information used by the Company in its business,
including a formula, pattern, compilation, program, device, method, technique,
or process, that has a material independent economic value, actual or potential,
not being generally known to, and not being readily ascertainable by proper
means by other Persons who can obtain economic value by its` disclosure or use.
Unadjusted Purchase Price: as defined in Section 2.1.
Welfare Benefit Plans: as defined in Section 4.21(a).
Year 2000 Compliant: as defined in Section 4.28.
10. Survival of Representations & Warranties; Indemnification.
10.1 Survival of Representations and Warranties.
Except as expressly provided in this Agreement, all representations
and warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall not terminate, but shall survive the
Closing and continue in effect until the expiration of three (3) years following
the Closing Date, at which time they shall expire; provided, however, that
representations and warranties under Sections 4.4 and 4.7, and the first
sentence of 4.10 shall remain in effect until the expiration of the applicable
statute of limitations, if any, and the representations and warranties under
Section 4.23 shall continue in effect until the expiration of five (5) years
following the Closing Date, at which time they shall expire; and further
provided, that any such representation or warranty as to which a claim shall
have been asserted during such survival period shall continue in effect until
such time as such claim shall have been resolved or settled. Notice of such
claim shall specify the nature thereof in reasonable detail and the Indemnified
Party shall give reasonable access to any documents or properties within the
control of the Indemnified Party as may be useful in the investigation of the
basis of such claim.
10.2 Survival of Covenants and Agreements.
Except as expressly provided in this Agreement, all covenants and
agreements made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall not terminate but shall survive the
Closing without limitation, except as provided by law.
10.3 Indemnification by Stockholder.
Stockholder agrees to indemnify and hold harmless Purchaser, its
affiliates, their respective officers, directors and principal stockholders and
their respective successors and assigns on an after-tax benefit basis, from and
against any claims, liabilities, losses, damages or expenses (any one such item
being herein called a "Loss" and all such items being herein collectively called
"Losses") which are caused by or arise out of: (i) any breach or default in the
performance by Stockholder of any covenant or agreement of the Stockholder
contained herein or in any certificate delivered pursuant hereto; (ii) any
breach of warranty or representation made by Stockholder contained herein or in
any certificate delivered pursuant hereto; (iii) the Excluded Liabilities; (iv)
the Company's indemnification obligations set forth in Section 15(B)(1) of the
Rockwell Agreement; (v) the occurrence, release or threat of release of
"Contamination" or "Contaminants", at, on, under or from the "Property" as a
result of Hewlett-Packard's activities or operations at the "HP Facility", as
such terms are defined in the "Hewlett Packard Indemnification Agreement"; and
(vi) any and all actions, suits, proceedings, claims, demands, judgments, costs
and expenses (including reasonable legal fees) incident to any of the foregoing;
provided that the Stockholder receives written notice of the Purchaser's claim
in respect of such Losses, specifying in reasonable detail the basis therefor,
on or before the last day of the applicable survival period specified in Section
10.1, or, in the case of the indemnities set forth in romanettes (iv) and (v)
above, on or before the fifth anniversary of the Closing Date; and provided
further, that no item shall be a Loss to the extent that (i) such item was
reserved on the Closing Balance Sheet, or (ii) such item is taken into
consideration in the calculation of Closing Net Book Value.
10.4 Indemnification by Purchaser.
Purchaser agrees to indemnify and hold harmless Stockholder and the
Company, its affiliates, its respective officers, directors and principal
stockholders and its respective successors and assigns on an after-tax benefit
basis, from and against any claims, liabilities, losses, damages or expenses
(any one such item being herein called a "Loss" and all such items being herein
collectively called "Losses") which are caused by or arise out of: (i) any
breach or default in the performance by Purchaser of any covenant or agreement
of the Purchaser contained herein or in any certificate delivered pursuant
hereto; (ii) any breach of warranty or representation made by Purchaser
contained herein or in any certificate delivered pursuant hereto; and (iii) any
and all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees) incident to any of the foregoing;
provided that the Purchaser receives written notice of the Stockholder's claim
in respect of such Losses, specifying in reasonable detail the basis therefor,
on or before the last day of the applicable survival period specified in Section
10.1.
10.5 Indemnification Thresholds and Cap.
(a) Notwithstanding anything contained in this Agreement to the
contrary, no Indemnified Party shall be entitled to seek indemnification under
this Section 10 in respect of any Loss arising out of the breach of any
representation or warranty set forth in Section 4 hereof to the extent that, if
it had been known and taken into consideration at the time of the preparation of
the Closing Balance Sheet, the Loss would have been reflected in the calculation
of the Closing Net Book Value (a "NBV Loss"), until such time as the aggregate
amount of its present claim in respect to such NBV Loss against the Indemnifying
Party plus all prior claims for NBV Losses exceeds the Deductible Amount (as
defined below), at which time the Indemnified Party shall be entitled to receive
the amount by which the amount of indemnification to which it is entitled in
respect of all such present and prior claims for NBV Losses exceeds the
Deductible Amount and shall be entitled to indemnification for the full amount
of its damages for NBV Losses arising thereafter. The "Deductible Amount" shall
mean the amount (if any) by which the Closing Net Book Value exceeds
$27,200,000.
(b) Notwithstanding anything contained in this Agreement to the
contrary, no Indemnified Party shall be entitled to seek indemnification under
this Section 10 in respect of any Loss arising out of the breach of any
representation or warranty set forth in Section 4 hereof to the extent that such
Loss is not a NBV Loss (a "Non-NBV Loss") until such time as the aggregate
amount of its present claim in respect of such Non-NBV Loss against the
Indemnifying Party plus all prior claims for Non-NBV Losses exceeds $200,000, at
which time the Indemnified Party shall be entitled to receive the amount by
which the amount of indemnification to which it is entitled in respect of all
such present and prior claims for Non-NBV Losses exceeds $200,000 and shall be
entitled to indemnification for the full amount of its damages for Non-NBV
Losses thereafter.
(c) Notwithstanding anything contained in this Agreement to the
contrary, (i) the Stockholder shall not be required to indemnify the Purchaser
from and after such time that the aggregate amount of the Purchaser's Losses for
which the Stockholder has indemnified Purchaser exceeds Fifteen Million Dollars
($15,000,000), and (ii) the Purchaser shall not be required to indemnify the
Stockholder from and after such time that the aggregate amount of the
Stockholder's Losses for which the Purchaser has indemnified Stockholder exceeds
Fifteen Million Dollars ($15,000,000).
10.6 Defense by Indemnifying Parties.
(a) In the event any Indemnified Party is entitled to indemnification
hereunder based upon a claim asserted by a third party, the Indemnifying Party
shall be given prompt notice thereof, in reasonable detail. Subject to the
proviso of Sections 10.3 and 10.4, the failure to so notify the Indemnifying
Party shall not constitute a waiver of such claim but an Indemnified Party shall
not be entitled to receive any indemnification with respect to any Loss that
occurred as a result of the failure of such person to give such notice. The
Indemnifying Party shall have the right (without prejudice to the right of any
Indemnified Party to participate at its expense through counsel of its own
choosing) to defend or prosecute such claim at its expense and through counsel
of its own choosing if it gives written notice of its intention to do so not
later than thirty (30) days following notice thereof by the Indemnified Party or
such shorter time period as required so that the interests of the Indemnified
Party would not be materially prejudiced as a result of its failure to have
received such notice; provided, however, that if the defendants in any action
shall include both an Indemnifying Party and an Indemnified Party and the
Indemnified Party shall have reasonably concluded that counsel selected by the
Indemnifying Party has a conflict of interest because of the availability of
different or additional defenses to the Indemnified Party, the Indemnified Party
shall have the right to select separate counsel to participate in the defense of
such action on its behalf, at the expense of the Indemnifying Party. If the
Indemnifying Party does not so choose to defend or prosecute any such claim
asserted by a third party for which any Indemnified Party would be entitled to
indemnification hereunder, then the Indemnified Party shall be entitled to
recover from the Indemnifying Party, on a monthly basis, all of its attorneys'
reasonable fees and other reasonable costs and expenses of litigation of any
nature whatsoever incurred in the defense of such claim. If the Indemnifying
Party assumes the defense of any such claim, the Indemnifying Party will hold
the Indemnified Party harmless from and against any and all damages arising out
of any settlement approved by such Indemnifying Party or any judgment in
connection with such claim or litigation. Notwithstanding the assumption of the
defense of any claim by the Indemnified Party pursuant to this Section 10.6(a),
the Indemnifying Party shall have the right to approve the terms of any
settlement of a claim (which approval shall not be unreasonably withheld).
(b) The Indemnifying Party and the Indemnified Party shall cooperate
in furnishing evidence and testimony and in any other manner which the other may
reasonably request, and shall in all other respects have any obligation of good
faith dealing, one to the other, so as not to unreasonably expose the other to
an undue risk of loss. The Indemnified Party shall be entitled to reimbursement
for out-of-pocket expenses reasonably incurred by it in connection with such
cooperation. Except for fees and expenses for which indemnification is provided
pursuant to Section 10.3 or 10.4 hereof, as the case may be, and as provided in
the preceding sentence, each party shall bear its own fees and expenses incurred
pursuant to this Section 10.6(b).
10.7 Remedies Exclusive.
Subject to the last sentence of this Section 10.7, from and after the
Closing Date, the rights and remedies under Sections 10.3 and 10.4 hereof shall
be deemed to be exclusive of all other rights and remedies that would otherwise
be available to the parties hereto. No course of dealing by either party shall
operate as a waiver of such right or remedy. Notwithstanding the foregoing, each
of the parties hereto shall have the right to enforce their respective rights
hereunder by an action or actions for specific performance, injunction or other
appropriate equitable remedies.
11. Miscellaneous.
11.1. Consent to Jurisdiction and Waivers.
The Purchaser and the Stockholder each irrevocably consent that any
legal action or proceeding against any of them under, arising out of or in any
manner relating to, this Agreement or any other document delivered in connection
herewith, may be brought in any court of the State of New York located within
Nassau County or New York County or in the United States District Court for the
Eastern or Southern District of New York. The Purchaser and the Stockholder by
the execution and delivery of this Agreement, expressly and irrevocably consent
and submit to the personal jurisdiction of any of such courts in any such action
or proceeding. The Purchaser and the Stockholder further irrevocably consent to
the service of any complaint, summons, notice or other process relating to any
such action or proceeding by delivery thereof to it by hand or by any other
manner provided for in Section 11.3. The Purchaser and the Stockholder hereby
expressly and irrevocably waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis. Nothing in this Section shall affect
or impair in any manner or to any extent the right of the Purchaser to commence
legal proceedings or otherwise proceed against the Stockholder in any
jurisdiction or to serve process in any manner permitted by law.
11.2. Severability.
If any provision of this Agreement, and, in particular, if any
provision of the covenant not to compete, shall be held or deemed to be or
shall, in fact, be inoperative or unenforceable as applied in any particular
case because it conflicts with any other provision or provisions hereof or any
constitution or statute or rule of public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering
any other provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatever. The invalidity of any one or more phrases,
sentences, clauses, sections, or subsections of this Agreement shall not affect
the remaining portions of this Agreement.
11.3. Notices.
All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto shall
be validly given, made or served, if in writing and delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid,
recognized national or international air courier or by facsimile transmission
electronically confirmed:
if to Purchaser:
Aeroflex Incorporated
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Blau, Kramer, Wactlar & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ll753
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Stockholder:
United Technologies Corporation
(▇▇▇▇▇▇▇▇ Standard Division)
One ▇▇▇▇▇▇▇▇ Road, M/S 1-3-BC27
Windsor Locks, Connecticut 06096-1010
Attn.: Vice President, Contracts and Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
or, in each case, at such other address as may be specified in writing to the
other parties in accordance herewith.
11.4. Consequential Damages. Neither party shall have any liability to the
other under this Agreement for consequential, exemplary, special, incidental or
punitive damages.
11.5. Waiver.
Either party may waive compliance by the other with any of the
provisions of this agreement. No waiver of any provisions shall be construed as
a waiver of any other provision or a future waiver of any other provision
hereof. Any waiver must be in writing.
11.6. Brokers, Finders, etc.
The Company, Stockholder and Purchaser represent and warrant to each
other that they have not dealt with or employed any broker, finder, investment
banker or financial advisor in connection with the negotiation, execution or
performance of this Agreement.
11.7. Miscellaneous.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. This Agreement, including the Schedules hereto which are made a part
hereof, constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement may not be amended except by an instrument
in writing duly executed and delivered on behalf of each of the parties hereto.
This Agreement may be executed in several counterparts, each of which shall be
deemed an original, and all of which shall constitute one and the same
instrument. This Agreement shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of New York,
applicable to contracts made and to be performed in New York. This Agreement
shall be binding upon and inure to the benefit of the successors and permitted
assigns of the parties hereto. This Agreement is not assignable by a party
without the prior written consent of the other party. The rights and obligations
contained in this Agreement are solely for the benefit of the parties hereto and
are not intended to benefit or be enforceable by any other party, under the
third party beneficiary doctrine or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
AEROFLEX INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
UNITED TECHNOLOGIES CORPORATION
(▇▇▇▇▇▇▇▇ STANDARD DIVISION)
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Jr.
Title:Vice President, ▇▇▇▇▇▇▇▇ Standard
Division and Assistant Secretary