STOCK PURCHASE AGREEMENT Dated as of April 13, 2007 By and Among EMCORE CORPORATION, OPTICOMM CORPORATION and
EXHIBIT
2.1
Dated
as
of April 13, 2007
By
and
Among
EMCORE
CORPORATION,
OPTICOMM
CORPORATION
and
THE
PERSONS NAMED ON EXHIBIT 1 HERETO
STOCK
PURCHASE AGREEMENT (this “Agreement”) dated as of April 13, 2007, by and among
EMCORE Corporation, a New Jersey corporation (the “Purchaser”), Opticomm
Corporation, a Delaware corporation (the “Company”), and
the
individuals named in Exhibit 1 attached hereto (the “Stockholders”), being all
of the shareholders of the Company.
W
I T
N E S S E T H:
WHEREAS,
the Stockholders own 30,000,000 shares of common shares, $.00033 par value
per
share (the “Stock”), being all of the outstanding shares of such common
stock;
WHEREAS,
the Stockholders desire to sell, and Purchaser desires to purchase, the Stock
pursuant to this Agreement; and
WHEREAS,
it is the intention of the parties hereto that, upon consummation of the
purchase and sale of the Stock pursuant to this Agreement, Purchaser shall
own
all of the outstanding shares of capital stock of the Company;
NOW,
THEREFORE, IT IS AGREED:
ARTICLE
I
DEFINITIONS
1.1 Definition
As
used
in this Agreement, the following defined terms shall have the respective
meanings specified therefor below:
“Actions
or Proceedings” means any action, suit, lawsuit, demand, inquiry, complaint,
petition, investigation, proceeding, arbitration, litigation or Governmental
or
Regulatory Authority investigation, audit or other proceeding, whether civil
or
criminal, administrative or otherwise in law or in equity, or before any
arbitrator or Governmental Regulatory Authority.
“Affiliate”
means, as applied to any Person, (a) any other Person directly or indirectly
controlling, controlled by or under common control with, that Person, (b) any
other Person that owns or controls ten percent (10%) or more of the total
aggregate voting power of all classes of equity securities (including any equity
securities issuable upon the exercise of any Option or convertible security)
of
that Person, (c) as to a corporation, each director thereof and corporation’s
chief executive officer, president, and chief financial officer, and as to
a
partnership, each general partner thereof, and as to a limited liability
company, each managing member or similarly authorized person thereof (including
officers comparable to a corporation’s chief executive officer, president, and
chief financial officer), and as to any other entity, each Person exercising
similar authority to those of a director, chief executive officer, president,
or
chief financial officer of a corporation or (d) as to any of the foregoing
Persons in (a) through (c), any Person related by blood, marriage or adoption
and any Person owned by such Persons, including without limitation, any spouse,
Purchaser, grand Purchaser, aunt, uncle, child, grandchild, sibling, cousin
or
in-law of such Person. For the purposes of this definition, “control” (including
with correlative meanings, the terms “controlling,” “controlled by,” and “under
common control with”) as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities
or
by contract or otherwise.
“Agreement”
means this Agreement including (unless the context otherwise requires) the
exhibits, the Company Disclosure Schedule, and the certificates and instruments
delivered in connection herewith, or incorporated by reference, as the same
may
be amended or supplemented from time to time in accordance with the terms
hereof.
“Ancillary
Agreements” has the meaning ascribed to it in Section 3.2.
“Approval”
means any approval, authorization, consent, permit, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from or made with, or any notice, statement or other communication required
to
be filed with or delivered to, any Governmental or Regulatory Authority or
any
other Person.
“Arbitration
Firm” shall mean CBIZ Accounting,
Tax & Advisory Services, LLC
“Assets
and Properties” of any Person means all assets and properties of every kind,
nature, character and description (whether real, personal or mixed, whether
tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned, licensed or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
“Associate”
means, with respect to any Person, any corporation or other business
organization of which such Person is an officer or partner or is the beneficial
owner, directly or indirectly, of ten percent (10%) or more of any class of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative
of
such spouse, who has the same home as such Person.
“Audited
Financial Statement Date” means December 31, 2006.
“Audited
Financial Statements” means the audited consolidated balance sheets of the
Company as of each of the fiscal years ended 2004, 2005 and 2006 through
the Audited Financial Statement Date, respectively, and the related audited
consolidated statements of operations, stockholders’
equity and cash flows for each of the fiscal years then ended, in each case,
together with the notes thereto and the unqualified report of the Company’s
Arbitration Firms with respect thereto.
“Books
and Records” means all files, documents, instruments, papers, books and records
relating to the business or condition (financial or otherwise), results of
operations, Assets and Properties of the Company, including financial
statements, internal reports, Tax Returns and related work papers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs (including
data
processing files and records), retrieval programs, operating data and plans
and
environmental studies and plans, excluding, however, in all cases any materials
that contain any confidential information of any third party (other than the
Company or Purchaser) that is restricted by Contract or applicable Law from
being disclosed to Purchaser and/or Persons.
“Business
Combination” means, with respect to any Person, (a) any merger, consolidation,
share exchange, reorganization or other business combination transaction to
which such Person is a party, (b) any sale, or other disposition of any capital
stock or other equity interests of such Person (except for issuances of common
stock upon conversion of preferred stock outstanding on the date hereof or
the
exercise of Options or warrants outstanding on the date hereof or issued in
accordance with this Agreement), (c) any tender offer (including a self tender),
exchange offer, recapitalization, restructuring, liquidation, dissolution or
similar or extraordinary transaction, (d) any sale, dividend or other
disposition of all or a substantial portion of the Assets and Properties of
such
Person (including by way of exclusive License or joint venture formation) other
than sales of inventory and license in the ordinary course of such Person’s
business and consistent with past practice, or (e) the entering into of any
Contract or understanding, the granting of any rights or Options, or the
acquiescence of such Person, to do any of the foregoing.
“Business
Day” means a day other than Saturday, Sunday or any day on which banks located
in the State of New York are authorized or obligated to close.
“Closing”
means the closing of the transactions contemplated by Section 2.2.
“Closing
Date” shall mean the date of execution hereof.
“Closing
Date Balance Sheet” has the meaning ascribed to it in Section
2.3(b).
“Closing
Date Working Capital” of the Company shall mean the following from the Closing
Date Balance Sheet: (a) the sum of (i) accounts receivable that are not older
than 90 days, (ii) inventory valued at the lower of cost or fair market value
as
of the Closing Date that is usable and saleable in the ordinary course, (iii)
cash and cash equivalents, (iv) prepaid expenses and (v) all other current
assts, less (b) the sum of the Company’s (i) accounts payable that are no older
than sixty days, (ii) a warranty reserve of $50,000, (iii) Company transaction
expenses not paid as of the Closing Date, and (v) all other Current Liabilities.
Working capital shall be calculated in accordance with GAAP and consistent
with
past practices of the Company; provided, however, that (a) working capital
may
not include cash (it being understood that the Company may dividend or otherwise
distribute available cash to the Stockholders prior to the closing of the
transaction), (b) any receivables included in working capital shall be not
older
than 90 days, (c) payables shall not be stretched out beyond forty-five (45)
days and (d) the Company must have sufficient inventory to support manufacturing
for sixty (60) days following the closing and any inventory and/or finished
goods included in working capital shall be useable and salable in the ordinary
course (finished goods used for demonstration/evaluation purposes
included).
“Company”
has the meaning ascribed to it in the forepart of this Agreement.
“Company
Capital Stock” shall mean any common or preferred stock of the
Company.
“Company
Common Stock” means shares of common stock of the Company, issued and
outstanding as of the Effective Time.
“Company
Convertible Securities” means the Company Options, the Company Warrants, and any
other Options, warrants, convertible notes, stock purchase rights or other
rights to acquire or receive shares of Company Capital Stock.
“Company
Disclosure Schedule” means the schedules delivered to Purchaser by or on behalf
of the Company, containing all lists, descriptions, exceptions and other
information and materials as are required to be included therein in connection
with the representations and warranties made by the Company in Article III
or
otherwise. The Company Disclosure Schedule is attached hereto as Schedule 3
and
forms an integral part of this Agreement.
“Company
Financials” means the Audited Financial Statements and the Interim Financial
Statements.
“Company
Intellectual Property” shall mean any Intellectual Property that (a) is owned
by; (b) is licensed to; (c) was developed or created by or for the Company
or
any of its Subsidiaries or (d) is used in the conduct of the business of the
Company as presently conducted, including (x) any Intellectual Property created
by any of the Company’s founders, employees, independent contractors or
consultants for or on behalf of the Company or any of its Subsidiaries and
(y)
currently used in the Company’s business (except to the extent owned by a third
party under “work for hire” or similar doctrines) created by any of the
Company’s founders prior to the creation of the Company or any of its
Subsidiaries.
“Company
Options” means all issued and outstanding Options to purchase or otherwise
acquire Company Capital Stock.
“Company
Registered Intellectual Property” means all Registered Intellectual Property
owned by, filed in the name of, assigned to or applied for by, the
Company.
“Company
Stockholders” means all Persons who are the record holders of shares of Company
Capital Stock immediately prior to the Effective Time.
“Company
Stock Purchase Right” means a right to purchase Company Restricted Stock granted
pursuant to a Company Stock Plan or otherwise.
“Company
Subsidiary” means a Subsidiary of the Company.
“Company
Warrants” means any and all warrants to purchase Company Capital
Stock.
“Contract”
means any contract, agreement, business arrangement, commitment, instrument,
document, certificate or other binding arrangement or understanding, whether
written or oral.
“Current
Liabilities” means outstanding payment obligations incurred for goods and/or
services actually received by the Company as of the Closing Date.
“Delaware
Law” or “DGCL” means the Delaware General Corporation Law and all amendments and
additions thereto.
“Earn-Out
Notice of Disagreement” has the meaning set forth in Section 2.3(c)(ii).
“Earn-Out
Payment” has the meaning set forth in Section 2.3(c)(iv)(i).
“Earn-Out
Payment Overage” has the meaning set forth in Section 2.3(c)(iv)(i).
“Earn-Out
Period” has the meaning set forth in Section 2.3(c)(i)(i).
“Earn-Out
Statements” has the meaning set forth in Section 2.3(c)(i)(i).
“Earn
Out
Stock Price” shall mean means the closing sales price of Purchaser Common Stock
as traded on the Nasdaq National Market and reported by Bloomberg L.P., on
the
date of this Agreement.
“Effective
Time” means the Closing Date.
“Employee
Benefit Plans” has the meaning ascribed to it in Section 3.15.
“Environment”
means air, surface water, ground water, or land, including land surface or
subsurface, and any receptors such as persons, wildlife, fish, biota or other
natural resources.
“Environmental
Clean-up Site” means any location which is listed or proposed for listing on the
National Priorities List, the Comprehensive Environmental Response, Compensation
and Liability Information System, or on any similar state list of sites relating
to investigation or cleanup, or which is the subject of any pending or
threatened action, suit, proceeding, or investigation related to or arising
from
any location at which there has been a Release or threatened or suspected
Release of a Hazardous Material.
“Environmental
Law” shall mean any Regulation, Order, settlement agreement or Authority
requirement, which relates to or otherwise imposes liability or standards of
conduct concerning the Environment, health, safety or Hazardous Materials,
including without limitation, discharges, emissions, releases or threatened
releases of noises, odors or any Hazardous Materials, whether as matter or
energy, into ambient air, water, or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of Hazardous Materials, including
but
not limited to CERCLA, the Superfund Amendments and Reauthorization Act of
1986,
the Hazardous Material Transportation Act, the Resource Conservation and
Recovery Act of 1976, the Toxic Substances Control Act, the Federal Water
Pollution Control Act, the Clean Water Act, the Clean Air Act, the Occupational
Safety and Health Act, any so-called “Superlien” Law, all as now or hereafter
amended or supplemented, and the Regulations promulgated thereunder, and any
other similar Federal, state or local Regulations.
“Environmental
Permit” shall mean Permits, certificates, Approvals, Licenses, decrees,
consents, Orders and other authorizations required by Environmental Law for
the
Company’s business.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and
the
rules and regulations promulgated thereunder.
“Escrow
Agent” means the First American Title Company.
“Escrow
Amount” has the meaning ascribed to it in Section 2.2(a).
“Escrow
Instructions” shall mean those instructions to the Escrow Agent attached hereto
as Exhibit 2.
“Expiration
Date” has the meaning ascribed to it in Section 8.1.
“GAAP”
means generally accepted accounting principles in the United States, as in
effect from time to time.
“Good
Faith Consultation” means consultation with a Person’s accounting firms
following disclosure in good faith to such accountants of all facts requested
by
such accountants or which the specified Person otherwise had reason to believe
would be relevant to such accountants’ assessment.
“Governmental
or Regulatory Authority” means any court, tribunal, arbitrator, authority,
agency, bureau, board, commission, department, official or other instrumentality
of the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision, and shall include any stock
exchange, quotation service and the National Association of Securities
Dealers.
“Gross
Margin” shall mean revenues less refunded returns and costs of revenue (which
shall include parts, materials, direct labor costs and outside services
associated with production).
“Hazardous
Material” shall be construed broadly to include any toxic or hazardous
substance, material, or waste, any petroleum or petroleum products, radioactive
materials, asbestos in any form that has become friable, ura formaldehyde foam
insulation, dielectric fluid containing levels of polychlorinated biphenyls,
and
radon gas, any chemicals, materials or substances defined or included in the
definition of “hazardous substances,” “restricted hazardous wastes,” “toxic
substances,” “toxic pollutants,” or words of similar import, under any
applicable Environmental Law, any other chemical, material or substance,
exposure to which is prohibited, limited, or regulated by any governmental
Authority and any other contaminant, pollutant or constituent thereof, whether
liquid, solid, semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing materials,
petroleum or petroleum products or by-products, and polychlorinated biphenyls,
the presence of which requires investigation or remediation under any
Environmental Law or which are or could reasonably be expected to become
regulated, listed or controlled by, under or pursuant to any Environmental
Law,
or which has been or shall be determined or interpreted at any time by any
Authority to be a hazardous or toxic substance regulated under any other Law
or
Order.
“Indebtedness”
with respect to any Person means (a) any obligation of such Person for borrowed
money, but in any event shall include: (i) any obligation or Liabilities
incurred for all or any part of the purchase price of property or other assets
or for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current Liabilities and
incurred in respect of property purchased in the ordinary course of business,
(whether or not such Person has assumed or become liable for the payment of
such
obligation) (whether accrued, absolute, contingent, unliquidated or otherwise,
known or unknown, whether due or to become due); (ii) the face amount of all
letters of credit issued for the account of such Person and all drafts drawn
thereunder; (iii) obligations incurred for all or any part of the purchase
price of property or other assets or for the cost of property or other assets
constructed or of improvements thereto, other than accounts payable included
in
current Liabilities and incurred in respect of property purchased in the
ordinary course of business (whether or not such Person has assumed or become
liable for the payment of such obligation) secured by Liens; (iv) capitalized
lease obligations; and (v) all Guarantees of such Person; (b) accounts payable
of such Person that have not been paid within sixty (60) days of their due
date
and are not being contested; (c) annual employee bonus obligations that are
not
accrued on the Financial Statements; and (d) retroactive insurance premium
obligations.
“Intellectual
Property” means all foreign and domestic, registered and unregistered trademarks
and trademark rights, trade names and trade name rights, service marks, service
names and service name rights, patents and patent rights, utility models and
utility model rights, registered and unregistered copyrights, mask works, brand
names, trade dress, product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions (whether
or not patentable or reduced to practice), invention disclosures, improvements,
processes, formulae, industrial models, designs, specifications, technology,
methodologies, computer software (including all source code and object code),
firmware, development tools, flow charts, annotations, all Web addresses, sites
and domain names, all data bases and data collections and all rights therein,
any other confidential and proprietary right or information, whether or not
subject to statutory registration, and all related technical information,
manufacturing, engineering and technical drawings, know-how, the goodwill
associated with any of the foregoing, and all pending applications for and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to ▇▇▇ for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, lab notebooks,
files and other media on which any of the foregoing is stored.
“Interim
Financial Statements” means the unaudited consolidated balance sheet of the
Company as of March
31,
2007, and the related unaudited consolidated statement of operations and
consolidated statement of cash flows for the three-month period ended on such
date.
“Internal
Revenue Code” means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
“Investment”
shall mean (a) any direct or indirect ownership, purchase or other acquisition
by a Person of any notes, obligations, instruments, capital stock, Options,
securities or ownership interests (including partnership interests and joint
venture interests) of any other Person; and (b) any capital contribution or
similar obligation by a Person to any other Person.
“Investment
Assets” means all debentures, notes and other evidences of Indebtedness, stocks,
securities (including rights to purchase and securities convertible into or
exchangeable for other securities), interests in joint ventures and general
and
limited partnerships, mortgage loans and other Investment or portfolio assets
owned of record or beneficially by the Company.
“IRS”
means the United States Internal Revenue Service or any successor
entity.
“Law”
or
“Laws” means any law, code, statute, Order, decree, consent decree, judgment,
rule, regulation, rule of common law, ordinance or other pronouncement having
the effect of law whether in the United States, any foreign country, or any
domestic or foreign state, county, city or other political subdivision or of
any
Governmental or Regulatory Authority.
“Lease
Documents” has the meaning ascribed to it in Section 3.16(c).
“Leased
Real Property(ies)” has the meaning ascribed to it in Section
3.16(a).
“Liabilities”
means all Indebtedness, obligations and other Liabilities of a Person, whether
absolute, accrued, contingent (or based upon any contingency), known or unknown,
fixed or otherwise, or whether due or to become due.
“License”
means any Contract that grants a Person the right to use or otherwise enjoy
the
benefits of any Intellectual Property (including any covenants not to ▇▇▇ with
respect to any Intellectual Property).
“Liens”
means any (a) mortgage, pledge, assessment, security interest, lease, lien,
easement, License, covenant, condition, restriction, adverse claim, levy,
charge, option, equity, adverse claim or restriction or other encumbrance of
any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities Law; (b)
filing or Contract to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute; and (c) subordination arrangement in
favor of another Person.
“Loss(es)”
means (i) any and all damages, fines, fees, Taxes, penalties, amounts paid
in
respect of indemnification obligations, deficiencies, Losses, (ii) special
damages, incidental damages, consequential damages or punitive damages, whether
or not foreseeable, (except special damages, incidental damages, consequential
damages or punitive damages of Purchaser, the Company or the Surviving
Corporation) and (iii) expenses, including interest, reasonable expenses of
investigation, court costs, reasonable fees and expenses of attorneys,
accountants and other experts or other reasonable expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and expenses
to include all reasonable fees and expenses, including reasonable fees and
expenses of attorneys, incurred in connection with (a) the investigation or
defense of any Third-Party Claims or (b) asserting or disputing any rights
under
this Agreement against any party hereto), net of any insurance proceeds actually
received (offset by the present value any adverse effect on the premiums paid
for such insurance) or proceeds received by virtue of third-party
indemnification.
“Material
Adverse Effect,” with respect to any Person, shall mean any event, change,
occurrence, effect, fact or circumstance having a material adverse effect on
(i)
the ability of such Person to perform its obligations under this Agreement,
or
to consummate the transactions contemplated hereby on a timely basis, or (ii)
the business, properties, assets, Liabilities, prospects, results of operations
or condition (financial or otherwise) of such Person and its Subsidiaries,
taken
as a whole.
“NASD”
means the National Association of Securities Dealers, Inc.
“Net
Sales” means any sales by the Company made at not less than a 55% Gross Margin.
Without derogating from the foregoing, in the event the aggregate average Gross
Margin for all sales for the Earn-Out Period is not less than 50%, then all
sales for the Earn-Out Period shall be considered “Net Sales” for purposes of
calculating any Earn-Out Payments owed pursuant to Article II
below.
“New
Jersey Law” means the New Jersey Business Corporation Act and all amendments and
additions thereto.
“Option”
with respect to any Person means any security, right, subscription, warrant,
Option, “phantom” stock right, stock appreciation right, profit participation or
arrangement or other Contract that gives the right to (a) purchase or otherwise
receive or be issued any shares of capital stock or other equity interests
of
such Person or any security of any kind convertible into or exchangeable or
exercisable for any shares of capital stock or other equity interests of such
Person or (b) receive any benefits or rights similar to any rights enjoyed
by or
accruing to the holder of shares of capital stock or other equity interests
of
such Person, including any rights to participate in the equity, income or
election of directors or officers of such Person.
“Order”
means any writ, judgment, decree, injunction, rule, ruling, consent or similar
Order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
“Purchaser”
has the meaning ascribed to in the forepart of this Agreement.
“Purchaser
Common Stock” has the meaning ascribed to it in Section 2.2(c)(iv) of this
Agreement.
“Purchaser
Disclosure Schedule” has the meaning ascribed to it in Section 5.
“Purchaser
Indemnitees” has the meaning ascribed to it in Section 8.2.
“PBGC”
means the Pension Benefit Guaranty Corporation established under
ERISA.
“Permit”
means any License, permit, franchise, authorization, registrations,
certificates, Orders, qualifications or Approvals required by any Authority
or
other Person.
“Person”
means any natural person, corporation, general partnership, limited partnership,
limited liability company or partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
“Pre-Closing
Period” has the meaning ascribed to it in Section 3.13(b).
“PTO”
means the United States Patent and Trademark Office.
“Registered
Intellectual Property” shall mean all United States, international and foreign:
(a) patents and patent applications (including provisional applications); (b)
registered trademarks and servicemarks, applications to register trademarks
and
servicemarks, intent-to-use applications, other registrations or applications
to
trademarks or servicemarks, or trademarks or servicemarks in which common law
rights are owned or otherwise controlled; (c) registered copyrights and
applications for copyright registration; (d) any mask work registrations and
applications to register mask works; and (e) any other Intellectual Property
that is the subject of an application, certificate, filing, registration or
other document issued by, filed with, or recorded by, any state, government
or
other public legal authority.
“Release”
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of a Hazardous Material
into
the Environment.
“Securities
Act” means the Securities Act of 1933, as amended.
“Stockholders”
has the meaning ascribed to in the forepart of this Agreement.
“Site”
means any of the real properties currently or previously owned, leased,
occupied, used or operated by the Company or Subsidiary of the Company, any
predecessors of the Company or Subsidiary of the Company, or any entities
previously owned by the Company or Subsidiary of the Company, including all
soil, subsoil, surface waters and groundwater.
“Subsidiary”
means any Person in which the Company or Purchaser, as the context requires,
directly or indirectly through Subsidiaries or otherwise, beneficially owns
at
least fifty percent (50%) of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date
hereof.
“Takeover
Statute” means a “fair price,” “moratorium,” “control share acquisition” or
other similar antitakeover statute or regulation enacted under state or federal
laws in the United States.
“Tax”
or
“Taxes” means all taxes, assessments, charges, duties, fees, levies or other
governmental charges, including, without limitation, all federal, state, local,
foreign and other income, franchise, profits, gross receipts, capital gains,
capital stock, transfer, property, sales, use, value-added, occupation,
property, excise, severance, windfall profits, stamp, License, payroll, social
security, withholding and other taxes, assessments, charges, duties, fees,
levies or other governmental charges of any kind whatsoever (whether payable
directly or by withholding and whether or not requiring the filing of a Tax
Return), all estimated taxes, deficiency assessments, additions to tax,
penalties and interest and shall include any liability for such amounts as
a
result either of being a member of a combined, consolidated, unitary or
affiliated group or of a contractual obligation to indemnify any person or
other
entity.
“Tax
Returns” means any tax return, report, form, information return, election,
schedule, certificate, statement or other document (including elections,
declarations, disclosures and estimates) and any amendments thereto, for Taxes
or filed or required to be filed with a Taxing Authority.
“Taxing
Authority” means any governmental agency, board, bureau, body, department or
authority of any United States federal, state or local jurisdiction or any
foreign jurisdiction, having or purporting to exercise jurisdiction with respect
to any Tax.
“Third-Party
Claim” has the meaning ascribed to it in Section 8.2.
“Third-Party
Expenses” the fees and expenses of third parties including all legal, accounting
and financial advisory fees and expenses.
“VEBAs”
has the meaning ascribed to it in Section 3.15(a).
“Warranty
Obligations” has the meaning ascribed to it in Section 3.29.
“WARN
Act” has the meaning ascribed to it in Section 3.22(f).
“Working
Capital Shortfall” means that the Company’s Closing Date Working Capital is less
than $1,000,000
“Working
Capital Surplus” means that the Company’s Closing Date Working Capital is
greater than $1,000,000.
ARTICLE
II
SALE
OF STOCK
2.1 Sale
of Stock
Subject
to the terms and conditions set forth in this Agreement, each Stockholder agrees
to sell, assign, transfer and deliver to the Purchaser on the Closing Date,
and
Purchaser agrees to purchase from each Stockholder on the Closing Date, the
number of shares of Stock set forth opposite the name of such Stockholder on
Exhibit 1 attached hereto.
2.2 Closing
The
sale
referred to in Section 2.1 (the "Closing") shall take place simultaneously
with
the execution hereof by the parties at the offices of EMCORE Corporation, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The date of execution hereof is herein
referred to as the "Closing Date".
2.3 Consideration
The
consideration to be paid in connection with this sale shall consist of cash
in
the amount of four million United States dollars ($4,000,000) (the “Initial
Consideration”) and, at Purchaser’s option, either additional cash or shares of
Purchaser’s common stock (the “Earn Out Consideration”), all payable in
accordance with the terms of this Section 2.3.
(a) Initial
Consideration
Purchaser
shall pay the Initial Consideration to the Stockholders on the Closing Date
as
follows:
(i) An
amount
equal to $1,265,000 (the “Escrow Amount”), shall be paid into the Escrow Account
and disbursed by the Escrow Agent in Accordance with the Escrow
Instructions
(ii) Each
Stockholder shall receive that portion of the remainder of the Initial
Consideration as is set forth opposite such Stockholder’s name on Exhibit 1
under the heading “Initial Consideration Payment”.
(iii) Should
any portion of the Escrow Amount remain following the Escrow Agent’s other
payments in accordance with the Escrow Instructions, the Escrow Instructions
shall provide that this amount shall be disbursed to ▇▇▇▇▇ ▇▇▇▇▇▇.
(b) Adjustments
to Initial Consideration
As
soon
as practicable after the Closing Date but in any event within thirty days,
Purchaser’s Chief Financial Officer shall prepare and deliver to the
Stockholders a balance sheet for the Company (the “Closing
Date Balance Sheet”)
and a
calculation of the Closing Date Working Capital as of the close of business
on
the Closing Date, which shall be prepared by Purchaser’s Chief Financial Officer
in accordance with GAAP and this Agreement. In the event of any conflict between
the provisions of GAAP and this Agreement, the provisions of this Agreement
shall prevail. Purchaser’s Chief Financial Officer shall also make available to
the Stockholders copies of all work papers and other documents and data as
was
used to prepare the Closing Date Balance Sheet. The Stockholders and Purchaser
shall have the right to dispute the Closing Date Balance Sheet (and any items
therein) and the Closing Date Working Capital calculation and make any proposed
adjustments thereto as provided in Section 2.3(b)(ii) hereto.
(i) If
it is
determined there is a Working Capital Shortfall, the Working Capital Shortfall
shall be paid by
the
Stockholders to the Purchaser on the Settlement Date, and if it is determined
that there is a Working Capital Surplus, the Working Capital Surplus shall
be
paid by the Purchaser to Stockholders on the Settlement Date.
(ii) Dispute
Resolution Procedures. The Stockholders shall have until thirty (30) days after
the delivery of the Closing Date Working Capital calculation, to review such
calculation and propose any adjustments thereto. All adjustments proposed by
the
Stockholders shall be set out in detail in a written statement delivered to
Purchaser (the “Adjustment
Statement”)
and
shall be incorporated into the Closing Date Balance Sheet, unless Purchaser
shall object in writing to such proposed adjustments (the proposed adjustment
or
adjustments to which Purchaser objects are referred to herein as the
“Contested
Adjustments”
and
Purchaser’s objection notice is referred to herein as the “Contested
Adjustment Notice”)
within
thirty (30) days of delivery by the Stockholders to Purchaser of the Adjustment
Statement. If Purchaser delivers a Contested Adjustment Notice to the
Stockholders, Purchaser and the Stockholders shall attempt in good faith to
resolve their dispute regarding the Contested Adjustments, but if a final
resolution thereof is not obtained within ten (10) days after Purchaser delivers
to the Stockholders said Contested Adjustment Notice, either Purchaser or the
Stockholders may retain for the benefit of all the parties hereto the
Arbitration Firm to resolve any remaining disputes concerning the Contested
Adjustments. If the Arbitration Firm is retained, then (A) the Stockholders
and
Purchaser shall each submit to the Arbitration Firm in writing not later than
fifteen (15) days after the Arbitration Firm is retained their respective
positions with respect to the Contested Adjustments, together with such
supporting documentation as they deem necessary or as the Arbitration Firm
requests, and (B) the Arbitration Firm shall, within thirty (30) days after
receiving the positions of both the Stockholders and Purchaser and all
supplementary supporting documentation requested by the Arbitration Firm, render
its decision as to the Contested Adjustments by accepting the position of either
the Stockholders or Purchaser, which decision shall be final and binding on,
and
nonappealable by, the Stockholders and Purchaser. The fees and expenses of
the
Arbitration Firm shall be paid by the party whose position is not accepted
by
the Arbitration Firm’s calculation of the Closing Date Working Capital. The
decision of the Arbitration Firm shall also include a certificate of the
Arbitration Firm setting forth the final Closing Date Working Capital
calculation (the “Settlement
Amount Certificate”).
The
Closing Date Balance Sheet shall be deemed to include all proposed adjustments
not disputed by Purchaser and those adjustments accepted by the decision of
the
Arbitration Firm in resolving the Contested Adjustments.
(iii) There
shall be a “Settlement
Date”
after
the calculation of the Closing Date Working Capital which shall mean the
following, as applicable:
(A) If
the
Stockholders have not timely delivered an Adjustment Statement to Purchaser,
thirty-five (35) days after the date the Stockholders receive the Closing Date
Working Capital calculation;
(B) If
the
Stockholders have timely delivered an Adjustment Statement and Purchaser has
not
timely delivered a Contested Adjustment Notice, thirty-five (35) days after
the
date Purchaser receives the Adjustment Statement;
(C) If
the
Stockholders and Purchaser have any disputes regarding Contested Adjustments
and
they resolve those disputes, five (5) Business Days after such
resolution;
(D) Five
(5)
Business Days after the Arbitration Firm delivers the Settlement Amount
Certificate, if applicable; or
(E) Such
other date as shall be agreed between the Stockholders and Purchaser in
writing.
(iv) The
determination of Closing Date Working Capital, in accordance with the provisions
of this Article II, shall be conclusive, final and binding upon the parties
hereto.
(c) Earn-Out
Payments.
(i) Not
later
than
March 1,
2008, Purchaser shall provide Stockholders a statement (the “Earn-Out
Statement”) of the Net Sales for the Company during calendar 2007 (the “Earn-Out
Period”), together with appropriate supporting documentation.
(ii) Within
30
days following receipt by the Stockholders of the Earn-Out Statement the
Stockholders shall deliver written notice (an “Earn-Out Notice of Disagreement”)
to Purchaser of any dispute Stockholders have with respect to the preparation
or
content of such Earn-Out Statement. The Earn-Out Notice of Disagreement must
describe in reasonable detail the items contained in the Earn-Out Statement
that
the Stockholders dispute and the basis for any such dispute. If the Stockholders
do not notify Purchaser of a dispute with respect to such Earn-Out Statement
within such 30-day period, Net Sales reflected in such Earn-Out Statement will
be final, conclusive and binding on the parties. If an Earn-Out Notice of
Disagreement is delivered to Purchaser, Purchaser and the Stockholders shall
negotiate in good faith to resolve such dispute. If Purchaser and the
Stockholders, notwithstanding such good faith effort, fail to resolve such
dispute within 14 days after the Stockholders advises Purchaser of its
objections, then Purchaser and the Stockholders jointly shall engage the
Arbitration Firm to resolve such dispute in accordance with the standards set
forth in this Section 2.3(c)(i)
and in
accordance with the definition of Net Sales. The scope of the disputes to be
resolved by the Arbitration Firm will be limited to the items in dispute that
were included in the Earn-Out Notice of Disagreement and the Arbitration Firm
shall determine Net Sales for the applicable Earn-Out Period based solely on
one
written submission by the Stockholders and their representatives and one written
submission by Purchaser and its representatives and not by independent review.
The Arbitration Firm shall, within thirty (30) days after receiving the
positions of both the Stockholders and Purchaser and all supplementary
supporting documentation requested by the Arbitration Firm, render its decision
by accepting the position of either the Stockholders or Purchaser, which
decision shall be final and binding on, and nonappealable by, the Stockholders
and Purchaser, and judgment may be entered upon the determination of the
Arbitration Firm in any court having jurisdiction over the party against which
such determination is to be enforced. The fees and expenses of the Arbitration
Firm shall be paid by the party whose position is not accepted by the
Arbitration Firm’s calculation of Net Sales for the applicable Earn-Out
Period.
(iii) For
purposes of complying with the terms set forth in this Section 2.3(c), each
party shall cooperate with and make available to the other parties and their
respective representatives all information, records, data and working papers,
and shall permit reasonable access to its facilities and personnel, as may
be
reasonably required in connection with the preparation and analysis of the
Earn-Out Statements and the resolution of any disputes thereunder. Until
the
expiration of the Earn-Out Period, Purchaser shall operate the Company’s
business in the ordinary course and not with the purpose of reducing the amount
of the Earn-Out Payment.
(iv) If
the
Earn-Out Statement (as finally determined pursuant to Section 2.3(c)(ii)
reflects Net Sales for the Earn-Out Period in excess of $5,000,000 (the
“Earn-Out Period Overage”), Purchaser shall pay to the Stockholders within ten
(10) Business Days following the date on which the Earn-Out Statement is finally
determined pursuant to Section 2.3(c)(ii) an amount (the “Earn-Out Payment”) in
accordance with the following provisions:
(A) The
Earn-Out Payment shall be made, at the option of the Purchaser, either in the
form of cash or of unregistered shares of Purchaser Common Stock; provided,
however, that if at the time of issuance the Purchaser Common Stock is not
publicly traded on either the NASDAQ, OTCBB or the “pink sheets” published by
the National Quotation Bureau, the Earn-Out Payment shall be made in the form
of
cash. .
The
value of each share of Purchaser Common Stock for purposes of payment of the
Earn Out Consideration shall be the Earn Out Stock Price.
(B) The
Stockholders shall be entitled to payment of the Earn Out Payment by receiving
either cash or shares of Purchaser Common Stock equal in value to fifty percent
(50%) of the Earn-Out Period Overage in excess of $5,000,000. They shall each
receive a percentage of the Earn-Out Payment equal to the percentage set forth
opposite such Stockholder’s name on Exhibit 1 under the heading “Ownership
Percentage”.
(C) Cash
or
shares totaling 85% of the Earn Out Payment shall be transferred to the
Stockholders within fifteen (15) days following the final determination of
the
Earn-Out Payment pursuant to Section 2.3(c)(ii).
(D) The
remainder of the Earn-Out Payment (the “Earn-Out Reserve”) shall be transferred
15 months after the Closing Date, and shall be subject to offset for (x) any
amounts of the Working Capital Shortfall owed under Section 2.3(b) but unpaid
by
the Stockholders on that date; and (y) any amounts owed by the Stockholders
pursuant to the indemnity provisions of Article VIII below.
(v) Fractional
Shares. No fraction of a share of Purchaser Common Stock shall be issued, but
in
lieu thereof, each Stockholder who would otherwise be entitled to a fraction
of
a share of Purchaser Common Stock (after aggregating all fractional shares
of
Purchaser Common Stock to be received by such holder) shall be entitled to
receive from Purchaser an amount of cash (rounded to the nearest whole cent)
equal to the product of (a) such fraction, multiplied by (b) the Earn Out Stock
Price.
(vi) The
rights of the Stockholders to receive, at any time, Purchaser Common Stock
and
other relevant amounts hereunder shall be equitably adjusted to reflect fully
the effect of any stock split, reverse split, stock combination, stock dividend
(including any dividend or distribution of securities convertible into Purchaser
Common Stock), reorganization, reclassification, recapitalization, combination,
exchange of shares or other like change with respect to Purchaser Common Stock
the effective date of which occurs after the date hereof.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE STOCKHOLDERS AND THE COMPANY
The
Stockholders and the Company (collectively, the “Selling Parties”) represent,
warrant and agree, jointly and severally as follows to Purchaser, subject to
such exceptions as are clearly disclosed (referencing the specific numbered
and
lettered sections and subsections of this Article III) in the Company Disclosure
Schedule delivered herewith and dated as of the date hereof, and numbered with
corresponding numbered and lettered sections and subsections, that the following
are true and correct as of the date hereof, and shall be true and correct as
at
the Closing, except where the following is expressly stated to be true as of
a
specified date prior to the Closing, in which case it shall, as of the Closing,
continue to be true as of such specified date hereof:
3.1 Organization
and Qualification
The
Company is a corporation or partnership duly organized, validly existing and
in
good standing under the Laws of the state of its incorporation or formation,
as
the case may be, and has full corporate or partnership power and authority,
as
the case may be, to conduct its business as now conducted and as currently
proposed to be conducted and to own, use, License and lease its Assets and
Properties. The Company is duly qualified, licensed or admitted to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the ownership, use, licensing or leasing of its Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so duly qualified, licensed
or admitted and in good standing that do not and could not reasonably be
expected to have a Material Adverse Effect on the Company. Section 3.1(a) of
the
Company Disclosure Schedule sets forth each jurisdiction where the Company
or
any of its Subsidiaries (as applicable) is so qualified, licensed or admitted
to
do business and separately lists each other jurisdiction in which the Company
and each of its Subsidiaries (as applicable) owns, uses or leases from third
parties substantial tangible Assets and Properties, or has employees. Section
3.1(b) of the Company Disclosure Schedule contains complete and accurate copies
of the Company’s Amended and Restated Certificate of Incorporation and Bylaws,
in each case as amended and in full force and effect as of the date of this
Agreement.
3.2 Authorization
and Validity of this Agreement
The
Selling Parties have full corporate power and authority to execute and deliver
this Agreement and the other agreements which are attached (or forms of which
are attached) as exhibits hereto (the “Ancillary
Agreements”)
to
which they are a party, to perform their obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. This
Agreement was duly approved by the Stockholders in accordance with Delaware
Law
and the Company’s certificate of incorporation on April 13, 2007. The Company’s
board of directors approved this Agreement on April 13, 2007, and declared
its
advisability. The execution and delivery by the Selling Parties of this
Agreement and the Ancillary Agreements to which the any of the Selling Parties
are or will become a party, the consummation by the Selling Parties of the
transactions contemplated hereby and thereby, and the performance by the Selling
Parties of their obligations hereunder and thereunder, have been duly and
validly authorized by all necessary action by the board of directors of the
Company. No other action on the part of the board of directors of the Company,
or any corporate action on the part of the Company, is required to authorize
the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which any of the Selling Parties are or will become a party and
the consummation by the Selling Parties of the transactions contemplated hereby
and thereby. This Agreement and the Ancillary Agreements to which any of the
Selling Parties are or will become a party have been or will be, in the case
of
the Ancillary Documents, as applicable, duly and validly executed and delivered
by the Selling Parties and, assuming the due authorization, execution and
delivery hereof by, and enforceability against, the other signing party, each
constitutes or will constitute, as applicable, a legal, valid and binding
obligation of the Selling Parties enforceable against them.
3.3 Capital
Stock
(a) The
authorized capital stock of the Company consists of (i) 66,000,000 shares of
authorized Company Common Stock, $.00033 par value per share, of which
30,000,000 shares are issued and outstanding, and (ii) 6,000,000 shares of
authorized Company Preferred Stock, $.00033 par value per share (the
“Company
Preferred Stock”),
of
which none are issued and outstanding. Such outstanding Company Capital Stock
is
held of record by the persons, and in the amounts set forth in Section 3.3(a)
of
the Company Disclosure Schedule, and is subject only to those restrictions,
repurchase rights, limitations, and preferences on distributions, mergers,
acquisitions, liquidations and other similar corporate events described in
the
Company’s Amended and Restated Certificate of Incorporation. Section 3.3(a) of
the Company Disclosure Schedule sets forth the name and address for each holder
of Company Capital Stock as contained in the Company’s stock records on the date
hereof. All of the issued and outstanding shares of Company Capital Stock are
duly authorized, validly issued, fully paid and non-assessable, have been issued
in compliance with all applicable Laws, and are not subject to preemptive rights
created by statute, the Amended and Restated Certificate of Incorporation or
Bylaws of the Company or any Contract to which the Company is a party or by
which it is bound.
(b) No
Company Capital Stock is subject to a repurchase option or buy-back Contract
on
the part of the Company. There are no outstanding Restricted Stock Purchase
Agreements or shares of Company Restricted Stock or Contracts obligating the
Company to issue any Company Restricted Stock.
(c) There
are
no outstanding Company Convertible Securities, Company Options, Company
Warrants, Company Stock Purchase Rights, Restricted Stock Purchase Agreements
or
shares of Company Restricted Stock or Contracts, or arrangements or
understandings to which the Company is a party (written or oral) or by which
it
is bound obligating the Company to issue any Company Options or Company
Restricted Stock.
(d) There
are
no preemptive rights or Contracts, arrangements or understandings to issue
preemptive rights with respect to the issuance or sale of Company Capital Stock
created by statute, the Amended and Restated Certificate of Incorporation or
bylaws of the Company, or any Contract or other arrangement to which the Company
is a party (written or oral) or to which it is bound and there are no Contracts,
arrangements or understandings to which the Company is a party (written or
oral)
pursuant to which the Company has the right to elect to satisfy any Liability
by
issuing Company Capital Stock or Company Options.
(e) There
are
no Company Stock Plans or stock option agreements pertaining to the Company.
Except as set forth in Section 3.3(e) of the Company Disclosure Schedule, the
Company is not a party or subject to any Contract or understanding, and, to
the
Company’s knowledge, there is no Contract, arrangement or understanding between
or among any Persons which affects, restricts or relates to voting, giving
of
written consents, dividend rights or transferability of shares with respect
to
the Company Capital Stock, including any voting trust agreement or proxy. No
debt securities of the Company are issued and outstanding.
(f) Each
Stockholder is the lawful owner of the number of shares of Stock listed opposite
the name of such Stockholder in Section 3.3 of the Company Disclosure Schedule,
free and clear of all liens, encumbrances, restrictions and claims of every
kind, except as set forth in that Section. Each Stockholder has full legal
right, power and authority to enter into this Agreement and to sell, assign,
transfer and convey the shares of Stock so owned by such Stockholder pursuant
to
this Agreement and the delivery to Purchaser of the Stock pursuant to the
provisions of this Agreement will transfer to Purchaser good and marketable
title thereto, free and clear of all liens, encumbrances, restrictions and
claims of every kind. Each Stockholder is a resident of the State of California.
3.4 No
Subsidiaries
The
Company has no (and prior to the Closing will have no) Subsidiaries and does
not
(and prior to the Closing will not) otherwise own or hold, directly or
indirectly, any equity, membership, partnership, joint venture or other
ownership interest or Investment in, or control directly or indirectly, any
Person.
3.5 Directors
and Officers
The
names
of each director and officer of the Company and its Subsidiaries (as applicable)
on the date hereof, and his or her position with the Company or any Subsidiary
are listed in Section 3.5 of the Company Disclosure Schedule.
3.6 No
Conflicts
The
execution and delivery by the Selling Parties of this Agreement and the
Ancillary Agreements to which the Selling Parties are a party does not, the
performance by the Selling Parties of their obligations under this Agreement
and
the Ancillary Agreements to which they are a party and the consummation of
the
transactions contemplated hereby and thereby do not, and will not:
(a) conflict
with or result in a violation or breach of, or default under (with or without
notice or lapse of time or both), any of the terms, conditions or provisions
of
the Amended and Restated Certificate of Incorporation or Bylaws of the Company
or the organizational documents of any of its Subsidiaries;
(b) subject
to obtaining the consents, Approvals and actions, making the filings and giving
the notices disclosed in Section 3.6(b) of the Company Disclosure Schedule,
if
any, conflict with or result in a violation or breach of any Law or Order
applicable to the Selling Parties, the Company’s Subsidiaries or any of their
respective Assets and Properties; or
(c) except
as
disclosed in Section 3.6(c) of the Company Disclosure Schedule, (i) conflict
with or result in a violation or breach of, (ii) constitute a default (or an
event that, with or without notice or lapse of time or both, would constitute
a
default) under, (iii) require the Selling Parties or any of the Company’s
Subsidiaries to obtain any consent, Approval or action of, make any filing
with
or give any notice to, any Person; and (B) such consents Approvals, Orders,
authorizations, registrations, declarations and filings as may be required
under
applicable state or federal securities Laws), (iv) result in or give to any
Person any right of termination, cancellation, acceleration or modification
in
or with respect to, (v) result in or give to any Person any additional rights
or
entitlement to increased, additional, accelerated or guaranteed payments or
performance under, (vi) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon the Company or any of its Assets
and Properties under, or (vii) result in the loss of any material benefit under,
any of the terms, conditions or provisions of any Contract or License to which
the Company or any of its Subsidiaries is a party or by which any of the Assets
and Properties of the Company or its Subsidiaries are bound.
3.7 Approvals
(a) Section
3.7(a) of the Company Disclosure Schedule sets forth a list of all Approvals
of
Governmental or Regulatory Authorities relating to the business conducted by
the
Company and its Subsidiaries that are required to be given to or obtained by
the
Company or any of its Subsidiaries from any and all Governmental or Regulatory
Authorities in connection with the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements.
(b) Section
3.7(b) of the Company Disclosure Schedule sets forth a list of all material
Approvals that are required to be given to or obtained by the Company or any
of
its Subsidiaries from any and all third parties other than Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements.
(c) Except
as
set forth in Section 3.7(c)(i) of the Company Disclosure Schedule, the Company
and each of its Subsidiaries has obtained all material Approvals from
Governmental or Regulatory Authorities necessary to conduct the business
conducted by the Company or any of its Subsidiaries and there has been no
written notice received by the Company or any of its Subsidiaries of any
material violation or material non-compliance with any such Approvals. All
material Approvals from Governmental or Regulatory Authorities necessary to
conduct the business conducted by the Company or any of its Subsidiaries as
it
is currently being conducted are set forth in Section 3.7(c)(ii) of the Company
Disclosure Schedule.
3.8 Compliance
Except
as
set forth in Section 3.8 of the Company Disclosure Schedule, the Company, its
Affiliates, and, to the knowledge of the Selling Parties, their officers,
directors, agents and employees have been and are in compliance with all
applicable Laws and Orders of any Governmental or Regulatory Authorities
applicable to the business conducted by the Company or any of its Subsidiaries,
and neither the Company, its Subsidiaries nor any of its Affiliates is aware
of
any claim of violation, or of any actual violation, of any such Laws and Orders
by the Company or its Subsidiaries.
3.9 Takeover
Statutes
No
Takeover Statute applicable to the Company or its Subsidiaries is applicable
to
the transactions contemplated hereby.
3.10 Company
Financial Statements
(a) Section
3.10(a)(1) of the
Company Disclosure Schedule sets forth a complete and accurate copy of the
Company Financials. The Company Financials have been prepared in accordance
with
GAAP applied on a basis consistent throughout the periods indicated and
consistent with each other except (i) as may be indicated in the notes thereto,
and (ii) in the case of the Interim Financial Statements, for the absence of
required footnotes and subject to normal year-end adjustments, which adjustments
will not be material in amount or significance. The Company Financials present
fairly the financial condition and operating results of the Company as of the
dates and during the periods indicated therein, except, in the case of the
Interim Financial Statements, for the absence of required footnotes and subject
to normal year-end adjustments, which adjustments will not be material in amount
or significance. Since December 31, 2006, there has been no change in any
accounting policies, principles, methods or practices, including any change,
except as disclosed in the Company Financials, with respect to reserves (whether
for bad debts, contingent Liabilities or otherwise) of the Company. The Company
does not utilize any percentage of completion or similar method of accounting
for revenue, income or cost recognition purposes. The Company has not since
its
inception written off any research and development costs, incurred any
reorganization, restructuring or similar costs or changed the book value of
any
assets, Liabilities or goodwill of any Subsidiary or business acquired by the
Company. Except as set forth in Schedule 3.10(a)(3) of the Company Disclosure
Schedule hereto, the Company does not have any obligation to make any additional
Investments in any Person. All properties used in the Company’s business
operations during the period covered by the foregoing financial statements
are
reflected in the Company Financials in accordance with and to the extent
required by GAAP.
(b) Except
as
reflected or reserved against in the Company Financials or as disclosed in
Section 3.10(b) of the Company Disclosure Schedule, the Company does not have
any Indebtedness or Liabilities of, relating to or affecting the Company, any
of
its Subsidiaries, or any of their respective Assets and Properties, other than
Liabilities incurred in the ordinary course of business consistent with past
practice since the Audited Financial Statement Date and in accordance with
the
provisions of this Agreement which do not, and could not reasonably be expected
to, exceed $25,000, and are not for tort or for breach of Contract, Law or
Order.
(c) There
is
no Person that has guaranteed, or provided any financial accommodation of,
any
Indebtedness, obligation or liability of the Company or for the benefit of
the
Company for the periods covered by the Company Financials other than as set
forth in the Company Financials. The management of the Company has disclosed
to
the Company’s independent auditors all facts and circumstances known to them
that are material and bear upon the accuracy of the audited financial
statements. The Company’s accounting systems and controls are sufficient to
detect material fraud and inaccuracies in the financial reporting processes
and
reports.
3.11 Books
and Records; Organizational Documents
The
minute books and stock record books and other similar records of the Company
and
each of its Subsidiaries (a) have been provided or made available to Purchaser
or its counsel prior to the execution of this Agreement, (b) are complete and
correct in all respects and (c) have been maintained in accordance with sound
business practices. Such minute books contain a true and complete record of
all
actions taken at all meetings and by all written consents in lieu of meetings
of
the directors, stockholders and committees of the board of directors of the
Company and its Subsidiaries from the applicable date of incorporation through
the date hereof. Neither the Company nor any Subsidiary has any of its records,
systems, controls, data or information recorded, stored, maintained, operated
or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company or a wholly-owned
Subsidiary.
3.12 Absence
of Changes
Since
the
Audited Financial Statement Date, except as set forth in Section 3.12 of the
Company Disclosure Schedule, there has not been any Material Adverse Effect
upon
the Company or any occurrence or event which, individually or in the aggregate,
could be reasonably expected to have any Material Adverse Effect upon the
Company. In addition, without limiting the generality of the foregoing, except
as expressly contemplated by this Agreement and except as disclosed in Section
3.12 of the Company Disclosure Schedule, since the Audited Financial Statement
Date:
(a) neither
the Company nor any of its Subsidiaries has, other than with Purchaser or its
Affiliates, entered into any Contract, commitment or transaction or incurred
any
Liabilities outside of the ordinary course of business consistent with past
practice;
(b) neither
the Company nor any of its Subsidiaries has entered into any Contract, other
than with Purchaser or its Affiliates, in connection with any transaction
involving a Business Combination;
(c) neither
the Company nor any of its Subsidiaries has altered or entered into any Contract
or other commitment to alter, its interest in any corporation, association,
joint venture, partnership or business entity in which the Company or its
Subsidiaries directly or indirectly holds any interest on the date
hereof;
(d) neither
the Company nor any of its Subsidiaries has entered into any strategic alliance,
joint development or joint marketing Contract;
(e) there
has
not been any material amendment or other material modification (or Contract
to
do so) or violation of the terms of, any of the Contracts set forth or described
in Sections 3.19(a)(1), 3.19(a)(2) or 3.19(a)(3) of the Company Disclosure
Schedule;
(f) neither
the Company nor any of its Subsidiaries has entered into any material
transaction with any officer, director, stockholder, Affiliate or Associate
of
the Company or, as applicable, its Subsidiaries, other than pursuant to any
Contract in effect on the Audited Financial Statement Date and disclosed to
Purchaser pursuant to (and so identified in) Section 3.12(f) or Section 3.21(a)
of the Company Disclosure Schedule or other than pursuant to any contract of
employment listed pursuant to Section 3.19(a)(1) of the Company Disclosure
Schedule;
(g) neither
the Company nor any of its Subsidiaries has entered into or amended any Contract
pursuant to which any other Person is granted manufacturing, marketing,
distribution, licensing or similar rights of any type or scope with respect
to
any products of the Company or its Subsidiaries or Company Intellectual
Property, other than as contemplated by the Contracts and Licenses disclosed
in
Section 3.18(e) of the Company Disclosure Schedule;
(h) no
Action
or Proceeding has been commenced or, to the knowledge of the Company, threatened
by or against the Company or any of its Subsidiaries;
(i) neither
the Company nor any of its Subsidiaries has (i) declared or set aside or paid
any dividends on or made any other distributions (whether in cash, stock or
property) in respect of any Company Capital Stock, capital stock (however
denominated) of any Company Subsidiary or Options, (ii) effected or approved
any
split, combination or reclassification of any Company Capital Stock, capital
stock (however denominated) of any Company Subsidiary or Options, (iii) issued
or authorized the issuance of any other securities in respect of, in lieu of
or
in substitution for shares of Company Capital Stock, capital stock (however
denominated) of any Company Subsidiary or Options, or (iv) repurchased, redeemed
or otherwise acquired, directly or indirectly, any shares of Company Capital
Stock, capital stock (however denominated) of any Company Subsidiary or Options,
except repurchases of Company Capital Stock pursuant to Contracts of the Company
or any Company Subsidiary with employees, officers, directors and consultants
relating to repurchases at cost upon termination of service with the Company
or
the applicable Company Subsidiary;
(j) (i)
neither the Company nor any of its Subsidiaries has issued, granted, delivered
or sold, or authorized or proposed to issue, grant, deliver or sell, or
purchased or proposed to purchase, any shares of Company Capital Stock, capital
stock (however denominated) of any Company Subsidiaries or Options, (ii) neither
the Company nor any of its Subsidiaries has modified or amended the rights
of
any holder of any outstanding shares of Company Capital Stock, capital stock
(however denominated) of any Company Subsidiaries or Options (including to
reduce or alter the consideration to be paid to the Company upon the exercise
of
any outstanding Company Options, Company Warrants, Company Stock Purchase Rights
or other Options), (iii) there have not been any Contracts, arrangements, plans
or understandings with respect to any such modification or amendment; and (iv)
the Company has not granted any Company Options with an exercise price of less
than the fair market value of the Company Capital Stock for which such Company
Option was exercisable on the date the Company Option was granted (as determined
in good faith by the board of directors of the Company, following Good Faith
Consultation with, and consistent with the advice provided by, the Company’s
accounting firms);
(k) there
has
not been any amendment to the Company’s Amended and Restated Certificate of
Incorporation or Bylaws or the organizational documents of any of the Company’s
Subsidiaries;
(l) there
has
not been any transfer (by way of a License or otherwise) to any Person of rights
to any Company Intellectual Property;
(m) neither
the Company nor any of its Subsidiaries has made or agreed to make any
disposition or sale of, waiver of rights to, License or lease of, or incurrence
of any Lien on, any Assets and Properties of the Company or any Company
Subsidiary, other than dispositions of inventory, or nonexclusive licenses
of
products to Persons to whom the Company or, as applicable, a Subsidiary of
the
Company had granted licenses of its products as of the Audited Financial
Statement Date, in the ordinary course of business of the Company and its
Subsidiaries consistent with past practice;
(n) neither
the Company nor any of its Subsidiaries has made or agreed to make any purchase
of any Assets and Properties of any Person other than (i) acquisitions of
inventory, or Licenses of products, in the ordinary course of business of the
Company and its Subsidiaries consistent with past practice and (ii) other
acquisitions in an amount not exceeding twenty-five thousand dollars ($25,000)
in the case of any individual item or fifty thousand dollars ($50,000) in the
aggregate;
(o) neither
the Company nor any of its Subsidiaries has made or agreed to make any capital
expenditures or commitments for additions to property, plant or equipment of
the
Company or, as applicable, its Subsidiaries, constituting capital assets
individually or in the aggregate in an amount exceeding twenty-five thousand
dollars ($25,000);
(p) neither
the Company nor any of its Subsidiaries has made or agreed to make any write-off
or write-down, any determination to write off or write-down, or revalue, any
of
the Assets and Properties of the Company or, as applicable, its Subsidiaries,
or
change any reserves or Liabilities associated therewith, individually or in
the
aggregate in an amount exceeding twenty-five thousand dollars
($25,000);
(q) neither
the Company nor any of its Subsidiaries has made or agreed to make payment,
discharge or satisfaction, in an amount in excess of twenty-five thousand
dollars ($25,000), in any one case, or fifty thousand dollars ($50,000) in
the
aggregate, of any claim, Liability or obligation (whether absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of Liabilities
reflected or reserved against in the Company Financials and other than
Liabilities incurred in the ordinary course of business since the Audited
Financial Statement Date;
(r) neither
the Company nor any of its Subsidiaries has failed to pay or otherwise satisfy
any Liabilities presently due and payable of the Company or any Subsidiary
of
the Company (other than immaterial delays in the ordinary course of the
Company’s business consistent with past practices), except such Liabilities
which are being contested in good faith by appropriate means or procedures
and
which, individually or in the aggregate, are immaterial in amount;
(s) neither
the Company nor any of its Subsidiaries has incurred any Indebtedness or
guaranteed any Indebtedness in an aggregate amount exceeding twenty-five
thousand dollars ($25,000) or issued or sold any debt securities of the Company
or its Subsidiaries or guaranteed any debt securities of others;
(t) neither
the Company nor any of its Subsidiaries has granted any severance or termination
pay to any director, officer employee or consultant, except payments made
pursuant to written Contracts outstanding on the date hereof, copies of which
have been delivered to Purchaser and the terms of which are disclosed in Section
3.12(t) of the Company Disclosure Schedule;
(u) neither
the Company nor any of its Subsidiaries has granted or approved any increase
of
greater than five percent (5%) in salary, rate of commissions, rate of
consulting fees or any other compensation of any current or former officer,
director, stockholder, employee, independent contractor or consultant of the
Company or, as applicable, its Subsidiaries;
(v) neither
the Company nor any of its Subsidiaries has paid or approved the payment of
any
consideration of any nature whatsoever (other than salary, commissions or
consulting fees and customary benefits paid to any current or former officer,
director, stockholder, employee or consultant of the Company or, as applicable,
its Subsidiaries) to any current or former officer, director, stockholder,
employee, independent contractor or consultant of the Company or, as applicable,
its Subsidiaries;
(w) neither
the Company nor any of its Subsidiaries has established or modified any (i)
targets, goals, pools or similar provisions under any Employee Benefit Plan,
employment Contract or other employee compensation arrangement or independent
contractor Contract or other compensation arrangement or (ii) salary ranges,
increased guidelines or similar provisions in respect of any Employee Benefit
Plan, employment Contract or other employee compensation arrangement or
independent contractor Contract or other compensation arrangement;
(x) neither
the Company nor any of its Subsidiaries has adopted, entered into, amended,
modified or terminated (partially or completely) any Employee Benefit
Plan;
(y) neither
the Company nor any of its Subsidiaries has paid or agreed or made any
commitment to pay any discretionary or stay bonus other than fiscal year end
bonuses approved by Purchaser;
(z) neither
the Company nor any of its Subsidiaries has made or changed any material
election in respect of Taxes, adopted or changed any accounting method in
respect of Taxes, entered into any tax allocation agreement, tax sharing
agreement, tax indemnity agreement or closing agreement, settlement or
compromise of any claim or assessment in respect of Taxes, or consented to
any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes with any Taxing Authority or otherwise;
(aa) neither
the Company nor any of its Subsidiaries has made any change in accounting
policies, principles, methods, practices or procedures (including for bad debts,
contingent Liabilities or otherwise, respecting capitalization or expense of
research and development expenditures, depreciation or amortization rates or
timing of recognition of income and expense);
(bb) other
than in the ordinary course of business, neither the Company nor any of its
Subsidiaries has made any representation or proposal to, or engaged in
substantive discussions with, any of the holders (or their representatives)
of
any Indebtedness, or to or with any party which has issued a letter of credit
which benefits the Company or, as applicable, any of its
Subsidiaries;
(cc) neither
the Company nor any of its Subsidiaries has commenced or terminated, or made
any
change in, any line of business;
(dd) neither
the Company nor any of its Subsidiaries has failed to renew any insurance
policy; no insurance policy of the Company or any of its Subsidiaries has been
canceled or materially amended; and the Company and each of its Subsidiaries
has
given all notices and presented all claims (if any) under all such policies
in a
timely fashion;
(ee) there
has
been no material amendment or non-renewal of any of the Company’s Approvals, and
the Company and its Subsidiaries have used commercially reasonable efforts
to
maintain such Approvals and have observed in all material respects all Laws
and
Orders applicable to the conduct of the Company’s or any of its Subsidiaries’
business or the Company’s or its Subsidiaries’ Assets and
Properties;
(ff) the
Company and its Subsidiaries have taken all action required to procure,
maintain, renew, extend or enforce any Company or Subsidiary Intellectual
Property, including, without limitation, submission of required documents or
fees during the prosecution of patent, trademark or other applications for
Registered Intellectual Property rights;
(gg) there
has
been no physical damage, destruction or other casualty Loss (whether or not
covered by insurance) affecting any of the real or personal property or
equipment of the Company or any of its Subsidiaries individually or in the
aggregate in an amount exceeding twenty-five thousand dollars
($25,000);
(hh) neither
the Company nor any of its Subsidiaries has entered into or approved any
Contract, arrangement or understanding or acquiesced in respect of any
arrangement or understanding, to do, engage in or cause or having the effect
of
any of the foregoing, including with respect to any Business Combination not
otherwise restricted by the foregoing paragraphs;
(ii) neither
the Company nor its Subsidiaries has cancelled any debts or waived any claims
or
rights of substantial value;
(jj) neither
the Company nor its Subsidiaries sold, transferred, or otherwise disposed of
any
of its Assets and Properties (real, personal or mixed, tangible or intangible),
except in the ordinary course of business consistent with past
practice.
3.13 Taxes
(a) Tax
Returns.
The
Company and its Subsidiaries have timely filed or caused to be timely filed
with
the appropriate taxing authorities all Tax Returns that are required to be
filed
by, or with respect to, the Company and its Subsidiaries on or prior to the
Closing Date. The Tax Returns have accurately reflected and will accurately
reflect all liability for Taxes of the Company and its Subsidiaries for the
periods covered thereby.
(b) Payment
of Taxes.
All
Taxes
and Tax Liabilities due by or with respect to the income, assets or operations
of the Company and its Subsidiaries for all taxable years or other taxable
periods that end on or before the Closing Date and, with respect to any taxable
year or other taxable period beginning on or before and ending after the Closing
Date, for the portion of such taxable year or period ending on and including
the
Closing Date and any transactions contemplated by this Agreement in connection
with the Closing (“Pre-Closing
Period”)
have
been timely paid on or prior to the Closing Date or accrued and adequately
disclosed and fully provided for on the Books and Records of the Company and
its
Subsidiaries as of the Closing Date in accordance with GAAP.
(c) Other
Tax Matters.
(i) (A)
Neither the Company nor any of its Subsidiaries has been the subject of an
audit
or other examination of Taxes by any Taxing Authority; (B) no such audit is
contemplated or pending; and (C) neither the Company nor any of its Subsidiaries
has received any notices, orally or in writing, from any Taxing Authority
relating to any issue which could affect the Tax liability of the Company or
any
of its Subsidiaries.
(ii) Neither
the Company nor any of its Subsidiaries, as of the Closing Date, (A) has entered
into a Contract or waiver or been requested to enter into a Contract or waiver
extending any statute of limitations relating to the payment or collection
of
Taxes of the Company or any of its Subsidiaries, (B) is the beneficiary of
any
extension of time to file any Tax Return or pay any Tax, (C) is presently
contesting the Tax liability of the Company or any of its Subsidiaries before
any court, tribunal or agency, (D) has granted a power-of-attorney relating
to
Tax matters to any person or (E) has applied for and/or received a ruling or
determination from a Taxing Authority regarding a past or prospective
transaction of the Company or any of its Subsidiaries.
(iii) Neither
the Company nor any of its Subsidiaries has been included in any “consolidated,”
“unitary” or “combined” Tax Return provided for under the Law of the United
States, any foreign jurisdiction or any state or locality other than such Tax
Returns that include only the Company and any of its Subsidiaries and no other
entities.
(iv) All
Taxes
which the Company and each of its Subsidiaries is (or was) required by Law
to
withhold or collect in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party have been
duly withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable and have been correctly and timely
included in the appropriate Tax Return.
(v) No
claim
has ever been made, orally or in writing, by any Taxing Authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that the Company or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction.
(vi) There
are
no tax sharing, allocation, indemnification or similar Contracts in effect
as
between the Company or any of its Subsidiaries or any predecessor or affiliate
thereof and any other party (including the Stockholders and any predecessors
or
affiliates thereof) under which the Company or any of its Subsidiaries could
be
liable for any Taxes or other claims of any party after the Closing
Date.
(vii) Neither
the Company nor any of its Subsidiaries has applied for, been granted, or agreed
to any accounting method change for which it will be required to take into
account any adjustment under Section 481 of the Internal Revenue Code or any
similar provision of the Internal Revenue Code or the corresponding tax Laws
of
any nation, state or locality.
(viii) No
election under Section 341(f) of the Internal Revenue Code has been made or
shall be made prior to the Closing Date to treat the Company or any of its
Subsidiaries as a consenting corporation, as defined in Section 341 of the
Internal Revenue Code.
(ix) Neither
the Company nor any of its Subsidiaries is a party to any Contract that would
require the Company or any of its Subsidiaries or any affiliate thereof to
make
any payment that would constitute an “excess parachute payment” for purposes of
Sections 280G and 4999 of the Internal Revenue Code.
(x) There
are
no security interests on any of the assets of the Company or any Subsidiary
that
arose, or as a result of the transactions contemplated by this Agreement could
arise, in connection with any failure (or alleged failure) to pay any
Taxes.
(xi) (A)
There
are no deferred intercompany transactions between the Company and any of its
Subsidiaries or between its Subsidiaries and there is no excess loss account
(within the meaning of Treasury Regulations Section 1.1502-19 with respect to
the stock of the Company or any of its Subsidiaries) which will or may result
in
the recognition of income upon the consummation of the transaction contemplated
by this Agreement, and (B) there are no other transactions or facts existing
with respect to the Company and/or its Subsidiaries which by reason of the
consummation of the transaction contemplated by this Agreement or otherwise
will
result in the Company and/or its Subsidiaries recognizing income or reducing
any
deduction in periods following the Closing Date.
(xii) No
Indebtedness of the Company or any of its Subsidiaries consists of “corporate
acquisition indebtedness” within the meaning of Section 279 of the Internal
Revenue Code. The transactions contemplated in connection with this Agreement
will not result in any cancellation of indebtedness realized by the Company,
any
of its Subsidiaries, or Purchaser.
(xiii) Neither
the Company nor any of its Subsidiaries has been a “United States real property
holding corporation” within the meaning of Section 897(c)(2) of the Internal
Revenue Code at any time during the five-year period ending on the date
hereof.
(xiv) There
is
currently no limitation on the utilization of the net operating losses, built-in
losses, capital losses, Tax credits or other tax attributes of the Company
or
its Subsidiaries under Sections 382, 383 or 384 of the Internal Revenue
Code.
3.14 Legal
Proceedings
Except
as
set forth in Section 3.14 of the Company Disclosure Schedule:
(a) there
have not been and there are no Actions or Proceedings pending or, to the
knowledge of the Company or its Subsidiaries, threatened against, relating
to or
affecting the Company or its Subsidiaries or any of their respective Assets
and
Properties;
(b) there
are
no facts or circumstances known to the Company or its Subsidiaries that could
reasonably be expected to give rise to any Action or Proceeding against,
relating to or affecting the Company or its Subsidiaries or any of their
respective Assets and Properties;
(c) neither
the Company nor any of its Subsidiaries has received notice, and do not
otherwise have knowledge of any Orders outstanding against the Company or,
as
applicable, its Subsidiaries; and
(d) neither
the Company nor any of its Subsidiaries has received notice of, and neither
the
Company nor any of its Subsidiaries have knowledge of, any defects, or dangerous
or substandard conditions in the products or materials sold, distributed, or
currently proposed to be sold or distributed by the Company or its Subsidiaries
that could cause bodily injury, sickness, disease, death or damage to property,
or result in loss of use of property, or any claim, suit, demand for arbitration
or notice seeking damages for bodily injury, sickness, disease, death, or damage
to property, or loss of use of property. Prior to the execution of this
Agreement, the Company has delivered to Purchaser all responses of counsel
for
the Company and its Subsidiaries to auditor’s requests for information for the
preceding three years (together with any updates provided by such counsel)
regarding Actions or Proceedings pending or threatened against, relating to
or
affecting the Company or any of its Subsidiaries. Section 3.14 of the Company
Disclosure Schedule sets forth all Actions or Proceedings relating to or
affecting, or, to the knowledge of the Company and its Subsidiaries, threatened
against, the Company, any Company Subsidiaries or any of their respective Assets
and Properties during the three-year period prior to the date
hereof.
3.15 Employee
Benefit Plans.
(a) List
of Plans.
Set
forth in Section 3.15(a) of the Company Disclosure Schedule is an accurate
and
complete list of all domestic and foreign (i) “employee benefit plans,” within
the meaning of Section 3(3) of ERISA; (ii) bonus, stock option, stock purchase,
restricted stock, incentive, fringe benefit, “voluntary employees’ beneficiary
associations” (“VEBAs”)
under
Section 501(c)(9) of the Internal Revenue Code, profit-sharing, pension or
retirement, deferred compensation, medical, life insurance, disability,
accident, salary continuation, severance, accrued leave, vacation, sick pay,
sick leave, supplemental retirement and unemployment benefit plans, programs,
arrangements, commitments and/or practices (whether or not insured); and (iii)
employment, consulting, termination, and severance Contracts; in each case
for
active, retired or former employees or directors, whether or not any such plans,
programs, arrangements, commitments, Contracts and/or practices (referred to
in
(i), (ii) or (iii) above) are in writing or are otherwise exempt from the
provisions of ERISA; that have been established, maintained or contributed
to
(or with respect to which an obligation to contribute has been undertaken)
or
with respect to which any potential liability is borne by the Company or any
of
its Subsidiaries (including, for this purpose and for the purpose of all of
the
representations in this Section 3.15, any predecessors to the Company or to
any
of its Subsidiaries and all employers (whether or not incorporated) that would
be treated together with the Company or any of its Subsidiaries as a single
employer (1) within the meaning of Section 414 of the Internal Revenue Code,
or
(2) as a result of the Company or any Subsidiary having been a general partner
of any such employer), since September 2, 1974 (“Employee
Benefit Plans”).
(b) Status
of Plans.
Each
Employee Benefit Plan (including any related trust) complies in form with the
requirements of all applicable Laws, including, without limitation, ERISA and
the Internal Revenue Code, and has at all times been maintained and operated
in
substantial compliance with its terms and the requirements of all applicable
Laws, including, without limitation, ERISA and the Internal Revenue Code. No
complete or partial termination of any Employee Benefit Plan has occurred or
is
expected to occur. Neither the Company nor any of its Subsidiaries has any
commitment, intention or understanding to create, modify or terminate any
Employee Benefit Plan. Except as required to maintain the tax-qualified status
of any Employee Benefit Plan intended to qualify under Section 401(a) of the
Internal Revenue Code, no condition or circumstance exists that would prevent
the amendment or termination of any Employee Benefit Plan. No event has occurred
and no condition or circumstance has existed that could result in a material
increase in the benefits under or the expense of maintaining any Employee
Benefit Plan from the level of benefits or expense incurred for the most recent
fiscal year.
(c) No
Pension Plans.
No
Employee Benefit Plan is an “employee pension benefit plan” (within the meaning
of Section 3(2) of ERISA) subject to Section 412 of the Internal Revenue Code
or
Section 302 or Title IV of ERISA. Neither the Company nor any of its
Subsidiaries has ever maintained or contributed to, or had any obligation to
contribute to (or borne any liability with respect to) any “multiple employer
plan” (within the meaning of the Internal Revenue Code or ERISA) or any
“multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).
(d) Liabilities.
(i) Neither
the Company nor any of its Subsidiaries maintains any Employee Benefit Plan
which is a “group health plan” (as such term is defined in Section 607(1) of
ERISA or Section 5000(b)(1) of the Internal Revenue Code) that has not been
administered and operated in all respects in compliance with the applicable
requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B
of
the Internal Revenue Code and neither the Company nor any of its Subsidiaries
is
subject to any material liability, including, without limitation, additional
contributions, fines, taxes, penalties or loss of tax deductions as a result
of
such administration and operation. No Employee Benefit Plan which is such a
group health plan is a “multiple employer welfare arrangement,” within the
meaning of Section 3(40) of ERISA. Each Employee Benefit Plan that is intended
to meet the requirements of Section 125 of the Internal Revenue Code meets
such
requirements, and each program of benefits for which employee contributions
are
provided pursuant to elections under any Employee Benefit Plan meets the
requirements of the Internal Revenue Code applicable thereto. Neither the
Company nor any of its Subsidiaries maintains any Employee Benefit Plan which
is
an “employee welfare benefit plan” (as such term is defined in Section 3(1) of
ERISA) that has provided any “disqualified benefit” (as such term is defined in
Section 4976(b) of the Internal Revenue Code) with respect to which an excise
tax could be imposed.
(ii) Neither
the Company nor any of its Subsidiaries maintains any Employee Benefit Plan
(whether qualified or non-qualified under Section 401(a) of the Internal Revenue
Code) providing for post-employment or retiree health, life insurance and/or
other welfare benefits and having unfunded Liabilities, and neither the Company
nor any of its Subsidiaries have any obligation to provide any such benefits
to
any retired or former employees or active employees following such employees'
retirement or termination of service. Neither the Company nor any of its
Subsidiaries has any unfunded Liabilities pursuant to any Employee Benefit
Plan
that is not intended to be qualified under Section 401(a) of the Internal
Revenue Code. No Employee Benefit Plan holds as an asset any interest in any
annuity contract, guaranteed investment contract or any other investment or
insurance contract, policy or instrument issued by an insurance company that,
to
the knowledge of the Company, is or may be the subject of bankruptcy,
conservatorship, insolvency, liquidation, rehabilitation or similar
proceedings.
(iii) Neither
the Company nor any of its Subsidiaries has incurred any liability for any
tax
or excise tax arising under Chapter 43 of the Internal Revenue Code, and no
event has occurred and no condition or circumstance has existed that could
give
rise to any such liability.
(iv) There
are
no actions, suits, claims or disputes pending, or, to the best knowledge and
belief of the Company, threatened, anticipated or expected to be asserted
against or with respect to any Employee Benefit Plan or the assets of any such
plan (other than routine claims for benefits and appeals of denied routine
claims). No civil or criminal action brought pursuant to the provisions of
Title
I, Subtitle B, Part 5 of ERISA is pending, threatened, anticipated, or expected
to be asserted against the Company or any of its Subsidiaries or any fiduciary
of any Employee Benefit Plan, in any case with respect to any Employee Benefit
Plan. No Employee Benefit Plan or any fiduciary thereof has been the direct
or
indirect subject of an audit, investigation or examination by any governmental
or quasi-governmental agency.
(e) Contributions.
Full
payment has been timely made of all amounts which the Company or any of its
Subsidiaries is required, under applicable Law or under any Employee Benefit
Plan or any Contract relating to any Employee Benefit Plan to which the Company
or any of its Subsidiaries is a party, to have paid as contributions or premiums
thereto as of the last day of the most recent fiscal year of such Employee
Benefit Plan ended prior to the date hereof. All such contributions and/or
premiums have been fully deducted for income tax purposes and no such deduction
has been challenged or disallowed by any governmental entity, and to the best
knowledge and belief of the Company and its Subsidiaries no event has occurred
and no condition or circumstance exists or has existed that could give rise
to
any such challenge or disallowance. The Company has made adequate provision
for
reserves to meet contributions and premiums and any other Liabilities that
have
not been paid or satisfied because they are not yet due under the terms of
any
Employee Benefit Plan, applicable Law or related Contracts. Benefits under
all
Employee Benefit Plans are as represented and have not been increased subsequent
to the date as of which documents have been provided.
(f) Tax
Qualification.
Each
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code has, as currently in effect, been determined to be so
qualified by the Internal Revenue Service. Each trust established in connection
with any Employee Benefit Plan which is intended to be exempt from federal
income taxation under Section 501(a) of the Internal Revenue Code has, as
currently in effect, been determined to be so exempt by the Internal Revenue
Service. Each VEBA has been determined by the Internal Revenue Service to be
exempt from federal income tax under Section 501(c)(9) of the Internal Revenue
Code. Since the date of each most recent determination referred to in this
paragraph 3.15(f), no event has occurred and no condition or circumstance has
existed that resulted or is likely to result in the revocation of any such
determination or that could adversely affect the qualified status of any such
Employee Benefit Plan or the exempt status of any such trust or
VEBA.
(g) Transactions.
Neither
the Company nor any of its Subsidiaries nor any of their respective directors,
officers, employees or, to the best knowledge and belief of the Company, other
persons who participate in the operation of any Employee Benefit Plan or related
trust or funding vehicle, has engaged in any transaction with respect to any
Employee Benefit Plan or breached any applicable fiduciary responsibilities
or
obligations under Title I of ERISA that would subject any of them to a tax,
penalty or liability for prohibited transactions or breach of any obligations
under ERISA or the Internal Revenue Code or would result in any claim being
made
under, by or on behalf of any such Employee Benefit Plan by any party with
standing to make such claim.
(h) Triggering
Events.
The
execution of this Agreement and the consummation of the transactions
contemplated hereby, do not constitute a triggering event under any Employee
Benefit Plan, policy, arrangement, statement, commitment or Contract, whether
or
not legally enforceable, which (either alone or upon the occurrence of any
additional or subsequent event) will or may result in any payment (whether
of
severance pay or otherwise), “parachute payment” (as such term is defined in
Section 280G of the Internal Revenue Code), acceleration, vesting or increase
in
benefits to any employee, former employee or director of the Company or any
of
its Subsidiaries. No Employee Benefit Plan provides for the payment of
severance, termination, change in control or similar-type payments or
benefits.
(i) Documents.
The
Company has delivered or caused to be delivered to Purchaser and its counsel
true and complete copies of all material documents in connection with each
Employee Benefit Plan, including, without limitation (where applicable): (i)
all
Employee Benefit Plans as in effect on the date hereof, together with all
amendments thereto, including, in the case of any Employee Benefit Plan not
set
forth in writing, a written description thereof; (ii) all current summary plan
descriptions, summaries of material modifications, and material communications;
(iii) all current trust agreements, declarations of trust and other documents
establishing other funding arrangements (and all amendments thereto and the
latest financial statements thereof); (iv) the most recent Internal Revenue
Service determination letter obtained with respect to each Employee Benefit
Plan
intended to be qualified under Section 401(a) of the Internal Revenue Code
or
exempt under Section 501(a) or 501(c)(9) of the Internal Revenue Code; (v)
the
annual report on Internal Revenue Service Form 5500-series or 990 for each
of
the last three years for each Employee Benefit Plan required to file such form;
(vi) the most recently prepared financial statements for each Employee Benefit
Plan for which such statements are required; and (vii) all Contracts relating
to
each Employee Benefit Plan, including, without limitation, service provider
agreements, insurance contracts, annuity contracts, investment management
agreements, subscription agreements, participation agreements, and recordkeeping
agreements and collective bargaining agreements.
(j) Litigation.
Other
than routine claims for benefits under the Plans, there are no pending, or,
to
the best knowledge of the Company or its Subsidiaries, threatened, Actions
or
Proceedings involving the Plans, or the fiduciaries, administrators, or trustees
of any of the Plans or the Company, any Subsidiary or any of their respective
ERISA Affiliates as the employer or sponsor under any Plan, with any of the
IRS,
the Department of Labor, the PBGC, any participant in or beneficiary of any Plan
or any other person. Neither the Company nor any of its Subsidiaries know of
any
reasonable basis for any such Action or Proceeding.
3.16 Real
Property.
(a) Section
3.16(a) of the Company Disclosure Schedule contains a true and correct list
of
(i) each parcel of real property leased, utilized and/or operated by the Company
or any of its Subsidiaries (as lessor or lessee or otherwise) (the “Leased
Real Property”)
and
(ii) all Liens relating to or affecting any parcel of real property referred
to
in clause (i) to which the Company or any of its Subsidiaries is a party.
Neither the Company nor any of its Subsidiaries owns any real property other
than Company or Subsidiary owned leasehold improvements, if any, on Leased
Real
Property.
(b) Subject
to the terms of its respective leases, the Company or any of its Subsidiaries,
as applicable, has a valid and subsisting leasehold estate in and the right
to
enjoyment of each of the Leased Real Properties for the full term of the leases
(including renewal periods) relating thereto. Each lease referred to in Section
3.16(a) is a legal, valid and binding Contract, enforceable in accordance with
its terms, of the Company or its Subsidiary, as applicable, and of each other
Person that is a party thereto, and except as set forth in Section 3.16(b)
of
the Company Disclosure Schedule, there is no, and neither the Company nor any
of
its Subsidiaries has received notice of any, default (or any condition or event
which, after notice or lapse of time or both, would constitute a default)
thereunder. Neither the Company nor any of its Subsidiaries owes brokerage
commissions or finder's fees with respect to any such Leased Real Property,
except to the extent that the Company or its Subsidiary, as applicable, may
renew the term of any such lease, in which case, any such commissions and fees
would be in amounts that are reasonable and customary for the spaces so leased,
given their intended use and terms.
(c) Except
as
disclosed in Section 3.16(c) of the Company Disclosure Schedule, all
improvements on the Leased Real Property (A) comply with and are operated in
accordance with applicable Laws (including Environmental Laws) and all
applicable Liens, Approvals, Contracts, covenants and restrictions and (B)
are
in all material respects in good operating condition and in a state of good
maintenance and repair, ordinary wear and tear excepted, and such improvements
are in all material respects adequate and suitable for the purposes for which
they are presently being used and there are no condemnation or appropriation
proceedings pending or, to the knowledge of the Company or its Subsidiaries,
threatened against any of such real property or the improvements
thereon.
(d) True
and
correct copies of the documents under which the Leased Real Property is leased,
subleased (to or by the Company, any of its Subsidiaries, or otherwise),
utilized, and/or operated (the “Lease
Documents”)
have
been delivered to Purchaser. The Lease Documents are unmodified and in full
force and effect, and there are no other Contracts between the Company, any
of
its Subsidiaries, and any third party(ies), or by and among any third
party(ies), claiming an interest in the interest of the Company or any of its
Subsidiaries in the Leased Real Property or otherwise relating to the use and
occupancy of the Leased Real Property.
3.17 Tangible
Personal Property
.
The
Company and each of its Subsidiaries is in possession of and has good and
marketable title to, or has valid leasehold interests in or valid rights under
Contract to use, all tangible personal property used in the conduct of its
business, including all tangible personal property reflected on the Company
Financials and tangible personal property acquired since the Audited Financial
Statement Date, other than property disposed of since such date in the ordinary
course of business consistent with past practice. Section 3.17(a)(1) of the
Company Disclosure Schedule lists all tangible personal property used by the
Company, which the Company has valid leasehold interests in or valid rights
under Contract to use. Except (i) for purchase money liens on equipment
purchases or product purchases in the ordinary course of the Company’s or any of
its Subsidiaries’ business for which the purchase price is not yet due and
payable, or (ii) as disclosed in Section 3.17(a)(2) of the Company Disclosure
Schedule, all such tangible personal property (including plant, property and
equipment) is free and clear of all Liens. The Selling Parties make no
representation or warranty regarding the condition of any such tangible personal
property. All tangible personal property is assumed in its “as is” and “where
is” condition.
3.18 Intellectual
Property.
(a) Section
3.18 of the Company Disclosure Schedule sets forth a complete and accurate
list
(i) in subsection 1, of all letters patent owned by the Company and each of
its
Subsidiaries; (ii) in subsection 2, of all U.S. federal copyright, trademark,
and service ▇▇▇▇ registrations owned by the Company and each of its
Subsidiaries; (iii) in subsection 3, of all U.S. common law copyrights,
trademarks, and service marks owned by the Company and each of its Subsidiaries;
(iv) in subsection 4, of all U.S. letters patent owned by the Company and each
of its Subsidiaries which are, as of the date hereof, subject to a reissue
or
reexamination proceeding in the U.S. Patent and Trademark Office (the
“PTO”);
(v)
in subsection 5, of all applications for U.S. letters patent filed by and
subject to ongoing prosecution by the Company and each of its Subsidiaries;
(vi)
in subsection 6, of all applications for letters patent in jurisdictions other
than the United States filed by and subject to ongoing prosecution by the
Company and each of its Subsidiaries, including PCT applications; (vii) in
subsection 7, of all applications for U.S. federal copyright, trademark, or
service ▇▇▇▇ registrations filed by and subject to ongoing prosecution by the
Company and each of its Subsidiaries; (viii) in subsection 8, of all
applications for copyright, trademark, or service ▇▇▇▇ registrations in
jurisdictions other than the United States filed by and subject to ongoing
prosecution by the Company and each of its Subsidiaries; and (ix) in subsection
9, of all patent interference and similar proceedings in which the Company
and
each of its Subsidiaries are involved, including, but not limited to,
interferences and the like asserted against the Company and each of its
Subsidiaries and interferences and the like which the Company and each of its
Subsidiaries have provoked.
(b)
(i)
The
Company represents and warrants that it has received no claims that the Company
is infringing the intellectual property rights of a third party or offers to
license from a third party, and that it has no knowledge that the Company’s
products and technologies sold or used infringe the intellectual property rights
of any third party;
(ii) The
Company has the right to use, sell and license all registered trademarks and
service marks set forth on Section 3.18 of the Company Disclosure Schedule,
and
all registrations and applications for registrations thereof, both foreign
and
domestic; to the knowledge of the Company, all such marks are owned by the
Company and no party has rights in such marks superior to the Company’s, and the
Company’s use of such marks as source identifiers has been
continuous;
(iii) The
Company has the right to reproduce, prepare derivative works of, distribute
copies of, perform, display, transfer and license works in which the Company
has
registered a copyright in the United States Copyright Office or in the copyright
office of foreign countries; the Company represents all such works that it
has
created, its employees created, or which were created by another as a work
for
hire to be original works of authorship to which it has the entire right, title
and interest; The Company has obtained all necessary assignments or promises
to
make such assignments from all authors of all works of authorship to be
transferred under this Agreement; and
(iv) The
Company has the right to use, sell and license its trade secrets, including
know-how, methods, processes, protocols, methodologies, designs, computer
software (including, but not limited to, source code and object code),
specifications (including design, functional, operational, quality assurance,
technical and other specifications of the Company).
(c) The
Company represents that all software and related documentation purchased from
any third party are owned by and/or licensed to the Company, and such ownership
and any applicable license provides the Company the right to transfer the
ownership of such purchased software, including any applicable license, to
the
Purchaser. The Company either owns or has sufficient license rights to all
software to be transferred hereunder and is able to transfer ownership of such
software or said license rights.
(d) Section
3.18(d) of the Company Disclosure Schedule sets forth a complete and accurate
list of (i) the Contracts, including, but not limited to, license agreements,
and of all parties thereto, under which the Company obtains or is the
beneficiary of any license or right to use any Intellectual Property right
of
any third party (the “Licensed-In
Agreements”)
and
(ii) the Contracts, including, but not limited to, license agreements, to which
the Company is a party and pursuant to which a third party is authorized to
use
or is granted a license (including have made rights and reserve manufacturing
rights) to any of the Intellectual Property of the Company.
(e) The
Company has the right to sell, license, assign, or otherwise transfer the
registered patents, patent applications, registered trademarks, trademark
applications, copyrights, and other Intellectual Property listed in Section
3.18
of the Company Disclosure Schedule.
(f) The
Company represents that each item of Intellectual Property listed in Section
3.18 of the Company Disclosure Schedule (i) is free and clear of any
encumbrances; (ii) is not subject to any outstanding judicial order, decree,
judgment, stipulation, agreement, including any agreement restricting the scope
of the Company’s use thereof or rights therein; and (iii) the Company has no
knowledge of any of the aforementioned affecting the use of or rights in any
Intellectual Property listed in Section 3.18 of the Company Disclosure Schedule
that the Company has purchased, licensed or otherwise obtained from any third
party except as set forth in the agreements relating to such purchase or
license.
(g)
(i) The
Company has not received any written notice, demand, correspondence, cease
and
desist request, or any other communication in writing from any third party
indicating that any product, software, service, or apparatus, made, used,
offered for sale, sold, imported or distributed by or on behalf of the Company
infringes upon, misappropriates or otherwise violates the intellectual property
rights of any third party; (ii) The Company has no knowledge of any unauthorized
use, unauthorized disclosure to or by, or infringement, misappropriation or
any
other violation of any of its Intellectual Property by, any third party or
any
current or former officer, employee, independent contractor, consultant or
any
other agent of the Company (each, a “Seller
Agent”);
(iii)
The Company has not entered into any agreement to indemnify any third party
against any claim of infringement, misappropriation or other violation of
Intellectual Property rights other than indemnification provisions contained
in
purchase orders, customer agreements, Licensed-In Agreements, or software
licenses listed in Section 3.18 of the Company Disclosure Schedule; and (iv)
in
the last two years, the Company has not been charged in any suit, action or
proceeding with, and the Company has not charged others with, unfair
competition, infringement, misappropriation, wrongful use of or any other
violation or improper or illegal activity with respect to or affecting
Intellectual Property or with claims contesting the validity, ownership or
right
to make, use, offer to sell, sell, import, license or otherwise dispose of
its
Intellectual Property.
(ii) Subject
to applicable Laws, all rights in all inventions and discoveries made, developed
or conceived by Seller Agents during the course of their employment (or other
retention) by the Company or made, written, developed or conceived with the
use
or assistance of the Company’s facilities or resources which are the subject of
one or more issued letters patent or applications for letters patent have been
assigned in writing to the Company; (ii) to the extent permitted by applicable
Law, the policy of the Company requires, and since the Company’s formation has
required, each Seller Agent to sign documents confirming that he or she assigns
to the Company all Intellectual Property rights made, written, developed or
conceived by him or her during the course of his or her employment (or other
retention) by the Company or made, written, developed or conceived with the
use
or assistance of the Company’s facilities or resources; (iii) to the extent that
ownership of any such Intellectual Property rights does not vest in the
Purchaser by operation of law, and to the extent that any employee of Seller
Agent has not executed such documents, the Company will require Seller Agent
to
execute such documents at or before the Closing; and (iv) all Intellectual
Property made, written, developed or conceived by any Seller Agent during the
course of his or her employment (or retention) by the Company has been assigned
to the Company.
(h) To
the
knowledge of the Selling Parties, the Intellectual Property owned by or licensed
to the Company prior to the execution of this Agreement constitutes all of
the
Intellectual Property necessary to conduct the business as conducted by the
Company prior to the Closing. The Company has not sold or licensed outward
any
Intellectual Property. Furthermore, the Company has not received any
infringement claim or notice, or offer to license, from a third party that
would
give the Company reason to believe that additional inward licenses would be
necessary for the lawful conduct of its business as conducted prior to the
Closing.
(i) The
Company has taken reasonable and practicable steps to protect and preserve
the
confidentiality of its valuable Intellectual Property (including, without
limitation, trade secrets, but excluding letters patent, source code, inventory,
copyrights, trademarks and service marks and registrations and applications
for
registration thereof) (“Confidential
IP Information”).
The
Company believes that all use by the Company of Confidential IP Information
not
owned by the Company has been and is pursuant to, and in compliance with, the
terms of a written agreement between the Company and the owner of such
Confidential IP Information, or is otherwise lawful.
(j) To
the
knowledge of the Selling Parties, all Intellectual Property, licenses and other
rights necessary to conduct the business as currently conducted will be
transferred to the Purchaser at Closing. In the event that there is Intellectual
Property which has been omitted from Section 3.18 of the Company Disclosure
Schedule, the Company hereby transfers and assigns such Intellectual
Property.
3.19 Contracts.
(a) Section
3.19(a)(1) of the Company Disclosure Schedule contains a true and complete
list
of each material Contract (including, without limitation, all joint development
agreements) or other arrangement (true and complete copies or, if none,
reasonably complete and accurate written descriptions of which, together with
all amendments and supplements thereto and all waivers of any terms thereof,
have been made available to Purchaser prior to the execution of this Agreement),
to which the Company or any of its Subsidiaries is a party or by which any
of
their respective Assets and Properties are bound. Section 3.19(a)(2) of the
Company Disclosure Schedule contains a true and complete list of each Contract
of the Company or any of its Subsidiaries (i) not terminable by the Company
or,
as applicable, any of its Subsidiaries upon thirty (30) days (or less) notice,
without penalty or obligation to make payments based on such termination or
(ii)
which provides for continuing design, Intellectual Property Licenses or other
services (including engineering and research and development services) by the
Company after the Closing Date. Section 3.19(a)(3) of the Company Disclosure
Schedule contains a true and complete list and description of all contract
manufacturing arrangements of the Company or its Subsidiaries.
(b) Each
Contract required to be disclosed in Section 3.19(a)(1), 3.19(a)(2) or
3.19(a)(3) of the Company Disclosure Schedule is in full force and effect and
constitutes a legal, valid and binding Contract, enforceable in accordance
with
its terms, and, to the knowledge of the Selling Parties, no other party to
such
Contract is, nor has received notice that it is, in violation or breach of
or
default under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Contract).
(c) Neither
the Company nor any of its Subsidiaries is a party to or bound by any Contract
that has or could reasonably be expected to have, individually or in the
aggregate with any other similar Contracts, a Material Adverse Effect on the
Company or, as applicable, its Subsidiaries, or that has resulted or could
reasonably be expected to result, individually or in the aggregate with any
such
other Contracts, in Losses to the Company or, as applicable, its Subsidiaries,
which have a Material Adverse Effect on the Company.
(d) Except
as
disclosed in Sections 3.19(a)(1) or 3.19(a)(2) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to or
bound
by
(i) any
collective bargaining agreements;
(ii) any
Contract that contains any severance pay or post-employment Liabilities or
obligations;
(iii) any
bonus, deferred compensation, pension, profit sharing or retirement plans,
or
any other employee benefit plans or arrangements;
(iv) any
employment or consulting Contract or commitment with an employee, director
or
officer of the Company or any of its Subsidiaries or individual consultant
or
salesperson or any consulting or sales Contract or commitment under which any
firm or other organization provides services to the Company or any of its
Subsidiaries;
(v) any
Contract or plan, including, without limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated,
by
the occurrence of any of the transactions contemplated by this Agreement or
the
value of any of the benefits of which will be calculated on the basis of any
of
the transactions contemplated by this Agreement;
(vi) any
fidelity or surety bond or completion bond;
(vii) any
lease
of personal property having a value in excess of $12,500 individually or $25,000
in the aggregate;
(viii) any
Contract of indemnification or guaranty;
(ix) any
Contract or commitment containing any covenant limiting the freedom of the
Company or any of its Subsidiaries from engaging in any line of business or
competing with any Person in any geographical area, or which materially
restricts any other Person from competing with the Company or any of its
Subsidiaries in any line of business or geographical area;
(x) Contracts
which restrict the Company or any of its Subsidiaries from disclosing any
information concerning or obtained from any other Person, or which restrict
any
other Person from disclosing any information concerning or obtained from the
Company or any of its Subsidiaries (other than Contracts entered into in the
ordinary course of business consistent with past practice);
(xi) any
confidentiality, nondisclosure or similar Contract which contains any
“standstill” provisions or similar restrictions on acquisitions or acquisition
proposals by any third party (other than Purchaser or its Affiliates);
(xii) Contracts
involving (i) the acquisition, merger or purchase of all or substantially all
of
the assets or business of a third party, involving aggregate consideration
of
$25,000 or more, or (ii) the purchase or sale of assets, or a series of
purchases and sales of assets, involving aggregate consideration of $25,000
or
more;
(xiii) Contracts
with any Affiliate that would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act;
(xiv) Contracts
which are material to the Company and contain a “change in control” or similar
provision;
(xv) any
Contract or commitment relating to capital expenditures and involving future
payments in excess of $12,500 individually or $25,000 in the
aggregate;
(xvi) any
Contract or commitment relating to the disposition or sale of any material
amount of assets (other than in the ordinary course of business consistent
with
past practices) or any interest in any business enterprise or for the grant
to
any Person of any preferential rights to purchase of any material amount of
assets;
(xvii) any
mortgages, indentures, loans or credit agreements, security agreements or other
Contracts or instruments relating to the borrowing of money or extension of
credit, including guaranties referred to in clause (viii) hereof and notes
or
the granting of any security interests;
(xviii) any
purchase order or Contract for the purchase of raw materials and/or supplies
involving $25,000 or more;
(xix) any
dealer, distribution, joint marketing or development Contract;
(xx) any
sales
representative, original equipment manufacturer, value added, remarketer,
reseller or independent software vendor or other Contract for use or
distribution of the Company’s products, technology or services;
(xxi) Contracts
relating to any joint venture, partnership, strategic alliance or similar
arrangement;
(xxii) any
Contract pursuant to which the Company has granted or may grant in the future,
to any party, a source-code License or option or other right to use or acquire
source-code;
(xxiii) any
Contract that automatically terminates or allows termination by the other party
thereto upon consummation of the transactions contemplated by this
Agreement.
3.20 Insurance.
(a) Section
3.20(a) of the Company Disclosure Schedule contains a true and complete list
(including the names and addresses of the insurers, the expiration dates
thereof, the annual premiums and payment terms thereof, the period of time
covered thereby and a brief description of the interests insured thereby) of
all
liability, property, workers’ compensation, directors’ and officers’ liability
and other insurance policies currently in effect that insure any of the
business, operations or employees of the Company and its Subsidiaries or affect
or relate to the ownership, use or operation of any of the Assets and Properties
of the Company and that (a) have been issued to the Company or its Subsidiaries
or (b) to the knowledge of the Company or its Subsidiaries, have been issued
to
any Person (other than the Company) for the benefit of the Company or any of
its
Subsidiaries. The insurance coverage provided by the policies set forth in
Section 3.20(a) of the Company Disclosure Schedule will not terminate or lapse
by reason of any of the transactions contemplated by this Agreement or any
of
the Ancillary Agreements and are fully assignable to Purchaser. Each policy
listed in Section 3.20(a) of the Company Disclosure Schedule is valid and
binding and in full force and effect, all premiums due thereunder have been
paid
when due and neither the Company, the applicable Subsidiary of the Company
or
the Person to whom such policy has been issued has received any notice of
cancellation or termination in respect of any such policy or is in default
thereunder, and the Company has no knowledge of any reason or state of facts
that could reasonably be expected to lead to the cancellation of such policies
or of any threatened termination of, or material premium increase with respect
to, any of such policies. The insurance policies listed in Section 3.20(a)
of
the Company Disclosure Schedule are in amounts and have coverages as required
by
any Contract to which the Company or any of its Subsidiaries is a party or
by
which any of their respective Assets and Properties is bound.
(b) Section
3.20(b) of the Company Disclosure Schedule contains a list of all claims made
under any insurance policies covering the Company or any of its Subsidiaries
in
the last two years. Neither the Company nor any of its Subsidiaries has received
notice that any insurer under any policy listed (or required to be listed)
in
Section 3.20(a) of the Company Disclosure Schedule is denying, disputing or
questioning liability with respect to a claim thereunder or defending under
a
reservation of rights clause.
3.21 Affiliate
Transactions.
(a) Except
as
disclosed in Section 3.21(a) of the Company Disclosure Schedule, (i) there
are
no Contracts or Liabilities between the Company or its Subsidiaries, on the
one
hand, and (A) any current or former officer, director, stockholder, or to the
Company’s knowledge, any past or current Affiliate or Associate of the Company
or its Subsidiaries or (B) any Person who, to the Company’s knowledge, is an
Associate of any such officer, director, stockholder or Affiliate, on the other
hand, (ii) neither the Company nor any of its Subsidiaries provides or causes
to
be provided any assets, services or facilities to any such current or former
officer, director, stockholder, Affiliate or Associate, (iii) neither the
Company, its Subsidiaries nor any such current or former officer, director,
stockholder, Affiliate or Associate provides or causes to be provided any
assets, services or facilities to the Company and (iv) neither the Company
nor
any of its Subsidiaries beneficially owns, directly or indirectly, any
Investment Assets of any such current or former officer, director, stockholder,
Affiliate or Associate.
(b) Except
as
disclosed in Section 3.21(b) of the Company Disclosure Schedule, each of the
Contracts and Liabilities listed in Section 3.21(a) of the Company Disclosure
Schedule were entered into or incurred, as the case may be, on terms no less
favorable to the Company or its Subsidiaries (in the reasonable judgment of
the
Company) than if such Contract or Liability was entered into or incurred on
an
arm’s-length basis on competitive terms.
3.22 Employees;
Labor Relations.
(a) Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement and there are no unfair labor practice or labor arbitration
proceedings pending with respect to the Company or any of its Subsidiaries,
or,
to the knowledge of the Company, threatened, and there are no facts or
circumstances known to the Company or any of its Subsidiaries that could
reasonably be expected to give rise to such complaint or claim. To the knowledge
of the Company or any of its Subsidiaries, there are no organizational efforts
presently underway or threatened involving any employees of the Company or
any
of its Subsidiaries or any of the employees performing work for the Company
or
any of its Subsidiaries but provided by an outside employment agency, if any.
There has been no work stoppage, strike or other concerted action by employees
of the Company or any of its Subsidiaries.
(b) Each
Person who is an employee of the Company or any of its Subsidiaries is employed
at will, and no employee of the Company or any of its Subsidiaries is
represented by a union. Each Person who is an independent contractor of the
Company or any of its Subsidiaries is properly classified as an independent
contractor for purposes of all employment related Laws and all Laws concerning
the status of independent contractors. Section 3.22(b)(1) of the Company
Disclosure Schedule sets forth, individually and by category, the name of each
officer, employee, independent contractor and consultant, together with such
person’s position or function, annual base salary or wage and any incentive,
severance or bonus arrangements with respect to such person. Except as described
in Section 3.22(b)(2) of the Company Disclosure Schedule, the completion of
the
transactions contemplated by this Agreement will not result in any payment
or
increased payment becoming due from the Company or any of its Subsidiaries
to
any current or former officer, director, or employee of, or consultant to,
the
Company, and to the knowledge of the Company no employee of the Company or
any
of its Subsidiaries has made any threat, or otherwise revealed an intent, to
terminate such employee’s relationship with the Company or, as applicable, any
of its Subsidiaries, for any reason, including because of the consummation
of
the transactions contemplated by this Agreement. Neither the Company nor any
of
its Subsidiaries is a party to any Contract for the provision of labor from
any
outside agency. To the knowledge of the Company, since December 31, 2003 there
have been no claims by employees of such outside agencies, if any, with regard
to employees assigned to work for the Company and its Subsidiaries, and no
claims by any governmental agency with regard to such employees.
(c) Except
as
described in Section 3.22(c) of the Company Disclosure Schedule, since December
31, 2003, there have been no federal or state claims, Actions or Proceedings
based on sex, sexual or other harassment, age, disability, race or other
discrimination or common law claims, including claims of wrongful termination,
by any employees of the Company or any of its Subsidiaries or by any of the
employees performing work for the Company or any of its Subsidiaries but
provided by an outside employment agency, and there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to any such complaint, claim, Action or Proceeding. The Company and each
of
its Subsidiaries has complied with all Laws related to the employment of
employees and, except as set forth in Section 3.22(c) of the Company Disclosure
Schedule, since December 31, 2003 neither the Company nor any of its
Subsidiaries has received notice of any claim that it has not complied in any
material respect with any Laws relating to the employment of employees,
including any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination, employee safety, or that it is liable
for any arrearages of wages or any taxes or penalties for failure to comply
with
any of the foregoing.
(d) Neither
the Company nor any of its Subsidiaries has any written policies and/or employee
handbooks or manuals except as described in Section 3.22(d) of the Company
Disclosure Schedule.
(e) To
the
knowledge of the Company, no officer, employee or consultant of the Company
or
any its Subsidiaries is obligated under any Contract or subject to any Order
or
Law that would interfere with the Company’s, or as applicable, any of its
Subsidiaries’ business as currently conducted. None of the execution nor
delivery of this Agreement, the carrying on of the Company’s or any of its
Subsidiaries’ business as presently conducted or any activity of such officers,
employees or consultants in connection with the carrying on of the Company’s, or
as applicable, any of its Subsidiaries’, business as presently conducted, will
conflict with or result in a breach of the terms, conditions or provisions
of,
constitute a default under, or trigger a condition precedent to any rights
under
any Contract under which any such officers, employees or consultants are now
bound.
(f) Since
the
enactment of the Workers Adjustment Retraining and Notification Act (the
“WARN
Act”),
neither the Company nor any of its Subsidiaries has effectuated a (i) “plant
closing” (as defined in the WARN Act) affecting any site of employment or
facility of the Company or any of its Subsidiaries; or (ii) a “mass layoff” (as
defined in the WARN Act) affecting any site of employment or facility of the
Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law; and (iii) none of the employees of the Company
or
any of its Subsidiaries has suffered an “employment loss” (as defined in the
WARN Act) since six (6) months prior to the date hereof.
3.23 Environmental
Matters.
(a) The
Company and each of its Subsidiaries possess any and all Environmental Permits
necessary to or required for the operation of their respective businesses.
The
Company and its Subsidiaries will obtain, prior to the Closing, any
Environmental Permits that must be obtained as of or immediately after the
Closing in order for the Surviving Corporation, and its Subsidiaries to conduct
their respective businesses as was conducted prior to the Closing.
(b) The
Company and each of its Subsidiaries is in compliance with (i) all terms,
conditions and provisions of its Environmental Permits; and (ii) all
Environmental Laws.
(c) None
of
the Company, any Subsidiary of the Company, or any predecessor thereof or any
entity previously owned thereby has received any notice of alleged, actual
or
potential responsibility for, or any inquiry regarding, (i) any Release or
threatened or suspected Release of any Hazardous Material, or (ii) any violation
of Environmental Law.
(d) None
of
the Company, any Subsidiary of the Company, or any predecessor thereof or any
entity previously owned thereby has any obligation or liability with respect
to
any Hazardous Material, including any Release or threatened or suspected Release
of any Hazardous Material, and there have been no events, facts or circumstances
which could form the basis of any such obligation or liability.
(e) No
Releases of Hazardous Material(s) have occurred at, from, in, to, on, or under
any Site and no Hazardous Material is present in, on, about or migrating to
or
from any Site.
(f) None
of
the Company, any Subsidiary of the Company, or any predecessor thereof or any
entity previously owned thereby has transported or arranged for the treatment,
storage, handling, disposal or transportation of any Hazardous Material at
or to
any location.
(g) No
Site
is a current or proposed Environmental Clean-up Site.
(h) There
are
no Liens under or pursuant to any Environmental Law on any Site.
(i) There
is
no (i) underground storage tank, active or abandoned, (ii) polychlorinated
biphenyl containing equipment, (iii) asbestos-containing material, (iv) radon,
(v) lead-based paint or (vi) urea formaldehyde at any Site. Any underground
storage tank meets all upgrade requirements.
(j) There
have been no environmental investigations, studies, audits, tests, reviews
or
other analyses conducted with respect to any Site which have not been delivered
to Purchaser prior to execution of this Agreement.
(k) Neither
the Company nor any of its Subsidiaries is a party, whether as a direct
signatory or as successor, assign, third-party beneficiary, guarantor or
otherwise, to, and is not otherwise bound by, any lease or other Contract under
which the Company or any of its Subsidiaries is obligated or may be obligated
by
any representation, warranty, covenant, restriction, indemnification or other
undertaking respecting Hazardous Materials or under which any other person
is or
has been released respecting Hazardous Materials.
(l) The
Company, any Subsidiary of the Company, and any predecessor thereof or any
entity previously owned thereby have provided all notifications and warnings,
made all reports, and kept and maintained all records required pursuant to
Environmental Laws.
3.24 Substantial
Customers and Suppliers
Section
3.24(a) of the Company Disclosure Schedule lists the ten (10) largest customers
of the Company and its Subsidiaries, collectively, on the basis of revenues
accrued for the most recent complete fiscal year. Section 3.24(b) of the Company
Disclosure Schedule lists the ten (10) largest suppliers of the Company and
its
Subsidiaries on the basis of cost of goods or services purchased for the most
recent fiscal year. Except as disclosed in Section 3.24(c) of the Company
Disclosure Schedule, no such customer has threatened to cease to purchase the
Company’s products and no such supplier has ceased or materially reduced its
sales or provision of services to the Company (or threatened to do so) since
December 31, 2006. The foregoing notwithstanding, it is clarified that the
Selling Parties make no representation or warranty that the Company will receive
any future order from any customer. It is further clarified that previous
ordering volumes hold no basis for future ordering volumes as such are dependent
upon matters outside the Selling Parties’ control. Except as disclosed in
Section 3.24(d) of the Company Disclosure Schedule, to the knowledge of the
Company or its Subsidiaries, no such customer or supplier is threatened with
bankruptcy or insolvency or has indicated to the Company that it is unable
to
pay its Indebtedness when due.
3.25 Accounts
Receivable
All
of
the Company’s accounts and notes receivable have arisen from bona fide sales
transactions in the ordinary course of business, are carried at values
determined in accordance with GAAP consistently applied, are legal, valid and
binding obligations of the respective debtors, and are collectible except to
the
extent of the reasonable reserves therefor set forth in the Company Financials
or, for receivables arising subsequent to the Audited Financial Statement Date
which are accounted for in accordance with GAAP, consistently applied, including
without limitation the taking of a reasonable reserve for uncollectable
receivables. No person has any Lien on, valid set-off or counterclaim against
any of the Company’s accounts or notes receivable and no request or Contract for
deductions or discount has been made or is contemplated with respect to any
of
the Company’s accounts or notes receivable. No account or note receivable has
been collected prior to the due date thereof except in a manner consistent
with
past practices in the ordinary course of business.
3.26 Inventory
All
inventory of the Company and its Subsidiaries reflected on the balance sheet
included in the Company Financials consisted, and all such inventory acquired
since the Audited Financial Statement Date consists, of a quality and quantity
usable and salable in the ordinary course of business. All inventory of the
Company and its Subsidiaries reflected on the balance sheet included in the
Company Financials is carried at the lower of cost or market. Except as
disclosed in the notes to the Financial Statements or in Section 3.26 of the
Company Disclosure Schedule, all items included in the inventory of the Company
and its Subsidiaries are the property of the Company or its Subsidiaries free
and clear of any Lien, have not been pledged as collateral, are not held by
the
Company or its Subsidiaries on consignment from others and conform in all
material respects to all standards and specifications applicable to such
inventory or its use or sale imposed by Governmental or Regulatory Authorities.
There are no goods held by the Company on consignment or other goods in the
possession of the Company which goods are not owned by the Company. The Company
is not under any Liability with respect to the return of inventory or
merchandise in the possession of wholesalers, distributors, retailers or other
customers of the Company.
3.27 Other
Negotiations; Brokers; Third-Party Expenses
Neither
the Company’s nor any of its Subsidiaries’ officers, directors, employees,
agents, or, to the knowledge of the Company, any of its or its Subsidiaries'
stockholders or Affiliates (nor any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf
of
the Company, any of its Subsidiaries or any such Affiliate) (a) has entered
into
any Contract that conflicts with any of the transactions contemplated by this
Agreement or (b) has entered into any Contract or had any discussions with
any
Person regarding any transaction involving the Company or its Subsidiaries
which
could result in Purchaser, the Company, any of its Subsidiaries or any general
partner, limited partner, manager, officer, director, employee, agent or
Affiliate of any of them being subject to any claim for liability to said Person
as a result of entering into this Agreement or consummating the transactions
contemplated hereby. No broker, investment banker, financial advisor or other
Person, other than The Delphos Group, is entitled to any broker’s, finder’s,
financial advisor’s or similar fee or commission in connection with this
Agreement and the transactions contemplated hereby based on arrangements made
by
or on behalf of the Company or its Subsidiaries.
3.28 Banks
and Brokerage Accounts
Section
3.28 of the Company Disclosure Schedule sets forth (a) a true and complete
list
of the names and locations of all banks, trust companies, securities brokers
and
other financial institutions at which the Company or any of its Subsidiaries
has
an account or safe deposit box or maintains a banking, custodial, trading or
other similar relationship, (b) a true and complete list and description of
each
such account, box and relationship, indicating in each case the account number
and the names of the respective officers, employees, agents or other similar
representatives of the Company or any Subsidiary having signatory power with
respect thereto and (c) a list of each Investment Asset, the name of the record
and beneficial owner thereof, the location of the certificates, if any,
therefor, the maturity date, if any, and any stock or bond powers or other
authority for transfer granted with respect thereto.
3.29 Warranty
Obligations
(a) Section
3.29(a) of the Company Disclosure Schedule sets forth (i) a list of all forms
of
written warranties, guarantees and written warranty policies of the Company
and
its Subsidiaries in respect of any of the Company’s and, as applicable, its
Subsidiaries’ products and services, which are currently in effect (the
“Warranty
Obligations”),
and
the duration of each such Warranty Obligation, (ii) each of the Warranty
Obligations which is subject to any dispute or, to the knowledge of the Company,
threatened dispute and (iii) each claim exceeding $10,000 made or, to the
Company’s knowledge, threatened against Company during the two years immediately
preceding the date of this Agreement by a customer or other user of products
of
the Business manufactured by Company alleging that such product did not comply
with any express or implied warranty regarding such product or was otherwise
defective or off-specification. True and correct copies of the Warranty
Obligations have been delivered to Purchaser prior to the execution of this
Agreement.
(b) Except
as
disclosed in Section 3.29(b) of the Company Disclosure Schedule, (i) there
have
not been any material deviations from the Warranty Obligations, and no
salesperson, employee or agent of the Company or any of its Subsidiaries are
authorized to undertake obligations to any customer or other Person in excess
of
such Warranty Obligations and (ii) the balance sheet included in the Interim
Financial Statements reflects adequate reserves for Warranty Obligations. All
products manufactured, designed, licensed, leased, rented or sold by the Company
or any of its Subsidiaries satisfy any and all Contract or other specifications
related thereto to the extent stated in writing in such Contracts or
specifications, in each case, in all material respects. The foregoing
notwithstanding, the Selling Parties make no representation or warranty that
any
of the products manufactured, designed, licensed, leased, rented or sold by
the
Company do not or will not contain any defects or bugs.
3.30 Foreign
Corrupt Practices Act
Neither
the Company, nor to the knowledge of the Company or its Subsidiaries, any agent,
employee or other Person associated with or acting on behalf of the Company
or
any of its Subsidiaries has, directly or indirectly, used any corporate funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence
payment, kickback or other similar unlawful payment.
3.31 Prepayment
of Company Debt
No
Indebtedness of the Company contains any restriction upon (i) the prepayment
of
any Indebtedness of the Company, (ii) the incurrence of Indebtedness by the
Company or (iii) the ability of the Company to grant any Lien on the Assets
of
Properties of the Company. Section 3.32 of the Company Disclosure Schedule
sets
forth the amount of principal and unpaid interest outstanding under each
instrument evidencing Indebtedness of the Company, if any, that will accelerate
or become due or result in a right on the part of the holder of such
Indebtedness (with or without due notice or lapse of time) to require
prepayment, redemption or repurchase as a result of the execution of this
Agreement or the consummation of any of the transactions contemplated
hereby.
3.32 Potential
Conflict of Interest
No
officer or director of the Company owns or holds, directly or indirectly, any
interest in (excepting holdings solely for passive investment purposes of
securities of publicly held and traded entities constituting less than five
percent (5%) of the equity of any such entity), or is an officer, director,
employee or consultant of any Person that is, a competitor, lessor, lessee,
customer or supplier of the Company or which conducts a business similar to
any
business conducted by the Company. No officer or director of the Company (a)
owns or holds, directly or indirectly, in whole or in part, any Company
Intellectual Property, (b) has any claim, charge, action or cause of action
against the Company, except for claims for reasonable unreimbursed travel or
entertainment expenses, accrued vacation pay or accrued benefits under any
employee benefit plan existing on the date hereof, (c) has made, on behalf
of
the Company, any payment or commitment to pay any commission, fee or other
amount to, or to purchase or obtain or otherwise contract to purchase or obtain
any goods or services from, any other Person of which an officer or director
of
the Company (or, to the knowledge of the Company, a relative of any of the
foregoing) is a partner or shareholder (except holdings solely for passive
investment purposes of securities of publicly held and traded entities
constituting less than five percent (5%) of the equity of any such entity)
or
(d) owes any money to the Company or (e) has any material interest in any
property, real or personal, tangible or intangible, used in or pertaining to
the
business of the Company.
3.33 Propriety
of Payments
(a)
No
unrecorded fund or asset of the Company has been established for any purpose,
(b) no accumulation or use of corporate funds of the Company has been made
without being properly accounted for in the books and records of the Company,
(c) to the knowledge of the Company, no payment has been made by or on behalf
of
the Company with the understanding that any part of such payment is to be used
for any purpose other than that described in the documents supporting such
payment and (d) to the knowledge of the Company, neither the Company nor any
director, officer, employee or agent of the Company or any other Person
associated with or acting for or on behalf of the Company has, directly or
indirectly, made an, illegal contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, private or public,
regardless of form, whether in money, property or services, (i) to obtain
favorable treatment for the Company or any Affiliate of the Company in securing
business, (ii) to pay for favorable treatment for business secured for the
Company or any Affiliate of the Company, (iii) to obtain special concessions,
or
for special concessions already obtained, for or in respect of the Company
or
any Affiliate of the Company or (iv) otherwise for the benefit of the Company
or
any Affiliate of the Company in violation of any federal, state, local,
municipal, foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute,
or
treaty (including existing site plan approvals, zoning or subdivision
regulations or urban redevelopment plans relating to Real Property). Neither
the
Company nor, to the knowledge of the Company, any current director, officer,
agent, employee or other Person acting on behalf of any the Company has accepted
or received any unlawful contribution, payment, gift, kickback, expenditure
or
other item of value.
3.34 Disclosure
No
representation or warranty made by the Company contained in this Agreement,
and
no statement contained in the Company Disclosure Schedule or in any certificate,
list or other writing furnished to Purchaser pursuant to any provision of this
Agreement (including the Company Financials and the notes thereto) contains
any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading. The Company has
provided Purchaser with all of the Contracts and Licenses heretofore requested
on behalf of Purchaser in writing, and all other material information concerning
the Company or its Subsidiaries in the possession, custody or control of the
Company or its Subsidiaries.
3.35 Internal
Controls
The
Company maintains a system of internal accounting controls that management
reasonably believes is sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorizations; (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain asset
accountability; and (c) access to assets is permitted only in accordance with
management's general and specific authorization. Except as disclosed on Section
3.36 of the Company Disclosure Schedule, since January 1, 2002, neither the
Company nor, to the knowledge of the Company, any director, officer, employee,
auditor, accountant or representative of the Company has received or has
otherwise become aware of any complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies, or methods of the Company or of its internal controls over
financial reporting, including any complaint, allegation, assertion or claim
that the Company has engaged in questionable accounting or auditing practices.
There have been no instances of fraud, whether or not material, that occurred
during any period covered by the Company Financials involving the management
of
the Company or other employees of the Company who have a role in preparation
of
the Company's financial statements.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE
STOCKHOLDERS
Each
of
the Stockholders hereby, severally and not jointly, represents and warrants
to
Purchaser as follows:
4.1 Authority
(a) Such
Principal Company Stockholder has all requisite power and authority to execute
and deliver this Agreement and the Ancillary Agreements and to perform his,
her
or its obligations under this Agreement and the Ancillary Agreements. This
Agreement and the Ancillary Agreements have each been duly and validly executed
and delivered by such stockholder, and each constitutes a valid and binding
obligation of such stockholder, enforceable against such stockholder in
accordance with its terms.
(b) Subject
to compliance with (a) the applicable requirements of the Securities Act, (b)
any applicable state securities laws, and (c) Delaware Law, and except as set
forth on Section 4.1 of the Disclosure Schedule, the execution and delivery
of
this Agreement and the Ancillary Agreements by such stockholder and the
consummation by such stockholder of the transactions contemplated thereby will
not (i) require on the part of such stockholder any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (ii) conflict
with, result in breach of, constitute (with or without due notice or lapse
of
time or both) a default under, result in the acceleration of, create in any
party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, security interest or other arrangement to
which such stockholder is a party or by which such stockholder is bound or
to
which any of its assets are subject, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to such stockholder
or any of its properties or assets.
4.2 Investment
Representations
(a) Such
Principal Company Stockholder is acquiring the Purchaser Common Stock issued
in
connection with the transactions contemplated by this Agreement for his, her
or
its own account for investment only, and not with a view to, or for sale in
connection with, any distribution of such Purchaser Common Stock in violation
of
the Securities Act or any rule or regulation under the Securities
Act.
(b) Such
Principal Company Stockholder has had adequate opportunity to obtain from
representatives of Purchaser such information, in addition to the
representations set forth in the Agreement, as is necessary to evaluate the
merits and risks of his, her or its investment in Purchaser.
(c) Such
Principal Company Stockholder has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the
acquisition of Purchaser Common Stock to be issued to him, her or it and to
make
an informed investment decision with respect to such investment. Such Principal
Stockholder is an “accredited investor” within the meaning of Rule 501(a) under
the Securities Act.
(d) Such
Principal Company Stockholder understands that the Purchaser Common Stock issued
in connection with the transactions contemplated by this Agreement has not
been
registered under the Securities Act and are “restricted securities” within the
meaning of Rule 144 under the Securities Act; and Purchaser Common Stock cannot
be sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available.
(e) Such
Principal Company Stockholder understands that a legend substantially in the
following form will be placed on the certificate representing Purchaser Common
Stock to be issued to such stockholder: “The shares represented by this
certificate have not been registered under the Securities Act of 1933, as
amended, and may not be sold, transferred or otherwise disposed of in the
absence of an effective registration statement or exemption from registration
under such Act.”
(f) The
above
sections of this Article IV shall not have the effect of limiting the
obligations of Purchaser under Article II of this Agreement.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Purchaser
each hereby represents and warrants to the Company, subject to such exceptions
as are clearly disclosed (referencing the specific numbered and lettered
sections and subsections of this Article V) in the disclosure schedule and
schedule of exceptions (the “Purchaser
Disclosure Schedule”)
delivered herewith and dated as of the date hereof, and numbered with
corresponding numbered and lettered sections and subsections, that the following
are true and correct as of the date hereof and shall be true and correct as
at
the Closing:
5.1 Organization
and Qualification
Purchaser
is a corporation duly organized, validly existing and in good standing under
the
Laws of the State of New Jersey. Purchaser has full corporate power and
authority to conduct its business as now conducted and as currently proposed
to
be conducted and to own, use and lease its Assets and Properties. Purchaser
is
duly qualified, licensed or admitted to do business and is in good standing
in
each jurisdiction in which the ownership, use, licensing or leasing of its
Assets and Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for such failures to
be
so duly qualified, licensed or admitted and in good standing that do not and
could not reasonably be expected to have a Material Adverse Effect on
Purchaser.
5.2 Authorization
and Validity of this Agreement
Purchaser
has full corporate power and authority to execute and deliver this Agreement
and
the Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by Purchaser of this Agreement and
the
Ancillary Agreements to which it is a party and the consummation by Purchaser
of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action by the board of directors of Purchaser,
and
no other action on the part of the board of directors of Purchaser, or any
corporate action on the part of Purchaser is required to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by Purchaser of the
transactions contemplated hereby and thereby. This Agreement and the Ancillary
Agreements to which Purchaser is a party have been or will be, as applicable,
duly and validly executed and delivered by Purchaser, as applicable, and,
assuming the due authorization, execution and delivery hereof by the Company
and/or the other parties thereto, constitutes or will constitute, as applicable,
a legal, valid and binding obligation of Purchaser, as applicable, enforceable
against Purchaser in accordance with its respective terms.
5.3 Issuance
of Purchaser Common Stock
The
shares of Purchaser Common Stock to be issued pursuant hereto, when issued,
will
be duly authorized, validly issued, fully paid, non-assessable and issued in
compliance with applicable federal and state securities Laws subject to the
truth and accuracy of the representations made by the Company in Section
3.3.
5.4 No
Conflicts
The
execution and delivery by Purchaser of this Agreement and the Ancillary
Agreements to which it is a party does not, and the performance by Purchaser
of
its obligations under this Agreement and the Ancillary Agreements to which
it is
a party and the consummation of the transactions contemplated hereby and thereby
do not, and will not:
(a) conflict
with or result in a violation or breach of, or default under (with or without
notice or lapse of time or both), any of the terms, conditions or provisions
of
the articles of incorporation or bylaws of Purchaser
(b) subject
to obtaining the consents, Approvals and actions, making the filings and giving
the notices disclosed in Section 5.4(b) of Purchaser Disclosure Schedule,
conflict with or result in a violation or breach of any Law or Order applicable
to Purchaser or its Assets or Properties; or
(c) except
as
would not have a Material Adverse Effect on the parties hereto, (i) conflict
with or result in a violation or breach of, (ii) constitute a default (or an
event that, with or without notice or lapse of time or both, would constitute
a
default) under, (iii) require Purchaser to obtain any consent, Approval or
action of, make any filing with or give any notice to any Person as a result
of
the terms of (except for such consents, Approvals, Orders, authorizations,
registrations, declarations and filings as may be required under applicable
state or federal securities Laws), (iv) result in or give to any Person any
right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments or
performance under, (vi) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon Purchaser or any of their
respective Assets or Properties, or (vii) result in the loss of a material
benefit under, any of the terms, conditions or provisions of any Contract or
License to which Purchaser is a party or by which any of its Assets and
Properties are bound.
5.5 Approvals
(a) No
Approvals of Governmental or Regulatory Authorities relating to the business
conducted by Purchaser are required to be given to or obtained by Purchaser
from
any and all Governmental or Regulatory Authorities in connection with the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements (other than (i) such consents, Approvals, Orders,
authorizations, registrations, declarations and filings as may be required
under
state or federal securities Laws, (iii) filing with the NASD of a listing of
additional shares with respect to the shares of Purchaser Common Stock issuable
under this Agreement and (iii) Approvals of Governmental or Regulatory
Authorities which could not reasonably be expected to have a Material Adverse
Effect on the parties hereto).
(b) No
Approvals are required to be given to or obtained by Purchaser from any and
all
third parties (other than Governmental or Regulatory Authorities) in connection
with the consummation of the transactions contemplated by this Agreement and
the
Ancillary Agreements, other than such Approvals the failure of which to make
or
obtain as could not reasonably be expected to have a Material Adverse Effect
on
the
parties hereto.
(c) Takeover
Statutes.
No
Takeover Statute applicable to Purchaser or its Subsidiaries is applicable
to
the transactions contemplated hereby.
5.6 Investment
Representations
(a) The
Purchaser is acquiring the Company Common Stock in connection with the
transactions contemplated by this Agreement for its own account for investment
only, and not with a view to, or for sale in connection with, any distribution
of such Company Common Stock in violation of the Securities Act or any rule
or
regulation under the Securities Act.
(b) The
Purchaser has had adequate opportunity to obtain from the Stockholders such
information, in addition to the representations set forth in the Agreement,
as
is necessary to evaluate the merits and risks of its purchase of the Company
Common Stock.
(c) The
Purchaser has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the acquisition of Company
Common Stock and to make an informed investment decision with respect to such
investment. The Purchaser is an “accredited investor” within the meaning of Rule
501(a) under the Securities Act.
ARTICLE
VI
CLOSING
6.1 Selling
Parties’ Deliveries at the Closing
.
The
Selling Parties will deliver the following to Purchaser at the
Closing:
(a) Counsel
Opinion.
An
opinion, dated the Closing Date, of The Law Offices of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, in
substantially the form attached hereto as Exhibit 6.1(a).
(b) Good
Standing and Other Certificates.
(a) a
“long-form certificate of Good Standing”, as provided by the Secretary of State
of Delaware, (b) a certificate from the Secretary of State of California to
the
effect that the Company is qualified to do business in California, (c) a copy
of
the By-Laws of the Company, certified by the Secretary of the Company as being
true and correct and in effect on the Closing Date, and (d) a copy of the
resolutions of the Company’s Board of Directors authorizing the transaction
contemplated hereby, certified by the Secretary of the Company as being true
and
correct and in effect and unmodified on the Closing Date.
(c) Employment
Agreements.
Executed employment agreements between (i) the Company and ▇▇▇▇▇ ▇▇▇▇▇▇, and
(ii) the Company and ▇▇▇▇▇ ▇▇▇▇▇▇, substantially in the form of Exhibit 6.1(c)
attached hereto.
(d) Share
Certificates.
The
certificates representing the Stock, duly endorsed, in the name of the
Purchaser.
(e) Shareholder
Approval.
This
Agreement and the transactions consummated hereby shall have been approved
and
adopted by the requisite vote of the shareholders of the Company under
applicable law and the Company's certificate of incorporation and
bylaws.
(f) Officers’
Certificates.
A
certificate, dated the Closing Date and executed by the Company’s President and
Chief Executive Officer, substantially in the form of Exhibit 6.1(f) attached
hereto.
(g) Interim
Financial Statements:
The
Company’s Interim Financial Statements.
(h) Resignation
of Directors.
The
resignations of all officers and directors of the Company.
(i) Submission
of Expenses.
A
statement of fees, costs and expenses (including, without limitation, fees
and
expenses of legal counsel and financial advisors and accountants, if any)
incurred by the Company in connection with the transactions contemplated
hereby.
(j) Lease
Agreement.
An
executed amendment to lease agreement between (i) the Company; and (ii) the
▇▇▇▇▇ ▇▇▇▇▇▇ Separate Property Trust to replace a certain lease agreement
between said parties dated November
19, 2002 (and related amendment dated February 9, 2006), substantially in the
form of Exhibit 6.1(j) attached hereto.
(k) Subtenant
Estoppel.
An
estoppel certificate from Orbigen, Inc., substantially in the form attached
hereto as Exhbiit 6.1(k).
(l) Escrow
Instructions.
Executed copies of the Escrow Instructions signed by the Selling Parties and
the
Escrow Agent.
6.2 Purchaser’s
Deliveries at the Closing
The
Purchaser will deliver the following to the Selling Parties at the
Closing:
(a) Wire
transfer numbers reflecting payments in the amount of the Initial Consideration
Payment, payable in accordance with the provisions of Section 2.3(a)
above.
(b) An
executed copy of the Escrow Instructions signed by the Purchase.
(c)
Evidence that the Escrow Amount has been deposited with the Escrow Agent in
accordance with the Escrow Instructions.
(d)
Assumption of Trustee status for the Company’s 401K Pension Plan by ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ to replace ▇▇▇▇▇ ▇▇▇▇▇▇ as Trustee under said plan, substantially in
the
form of Exhibit 6.2(b) attached hereto.
(e)
a
copy of
the resolutions of the Purchaser’s Board of Directors authorizing the
transaction contemplated hereby, certified by the Secretary of the Company
as
being true and correct and in effect and unmodified on the Closing
Date.
6.3 Post-Closing
Arrangements and Deliveries
.
The
following actions shall be taken immediately after the Closing Date, as
follows:
(a) Company
Bank Accounts.
The
parties shall cooperate to ensure the transfer of all monies in the Company
Bank
Accounts to one or more accounts designated by Purchaser, and to close the
Company Bank Accounts, within fifteen (15) days following the Closing
Date.
(b) Company
Credit Cards.
All
company credit cards existing prior to the Closing Date shall be cancelled
within fifteen (15) days following the Closing Date.
ARTICLE
VII
COVENANTS
OF THE STOCKHOLDERS
7.1 Non-Competition;
Non-Interference
In
consideration of the purchase of the Stock by the Purchaser, each Stockholder
agrees that from the date of this Agreement until March 31, 2010, such
Stockholder will not:
(a) directly
or indirectly own, manage, operate, control, be employed by or participate
in
the ownership, management, operation or control of, or be connected in any
manner with, any business of the type and character engaged in and competitive
with that conducted by the Company. For these purposes, ownership of securities
of 1% or less of any class of securities of a public company shall not be
considered to be competition with the Company or the Purchaser or any of its
subsidiaries or affiliates; or
(b) persuade
or attempt to persuade any potential customer or client to which the Company
or
the Purchaser or any of its subsidiaries has made a presentation, or with which
the Company or the Purchaser or any of its subsidiaries has been having
discussions, not to hire the Company or the Purchaser or such subsidiary, or
to
hire another company; or
(c) solicit
for himself or herself or any Person other than the Company or the Purchaser
or
any of its subsidiaries the business of any Person which is a customer or client
of the Company or the Purchaser or any of its subsidiaries, or was its customer
or client within two years prior to the date of this Agreement; or
(d) persuade
or attempt to persuade any employee of the Company or the Purchaser or any
of
its subsidiaries, or any individual who was its employee during the two years
prior to the date of this Agreement, to leave the Company's or the Purchaser’s
or such subsidiary's employ, or to become employed by any Person other than
the
Company or the Purchaser or such subsidiary; or
(e) disclose
or use any confidential or secret information relating to the Company the
Purchaser, any of its subsidiaries or any of their clients and
customers.
It
is the
desire and intent of the parties to this Agreement that the provisions of this
Section 7.1 shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
If any particular provisions or portion of this Section 7.1 shall be adjudicated
to be invalid or unenforceable, this Section shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
such amendment to apply only with respect to the operation of such Section
in
the particular jurisdiction in which such adjudication is made.
The
parties recognize that the performance of the obligations under this Section
7.1
by each of the Stockholders is special, unique and extraordinary in character,
and that in the event of the breach by any Stockholder of the terms and
conditions of this Section 7.1 to be performed by such Stockholder, the Company
shall be entitled, if it so elects, to institute and prosecute proceedings
in
any court of competent jurisdiction, either in law or in equity, to obtain
damages for any breach of this Section 7.1, or to enforce the specific
performance thereof by such Stockholder or to enjoin such Stockholder from
performing services for any Person.
ARTICLE
VIII
SURVIVAL
OF REPRESENTATIONS, WARRANTIES,
COVENANTS
AND AGREEMENTS; INDEMNITY
8.1 Survival
of Representations, Warranties, Covenants and Agreements
Notwithstanding
any right of Purchaser or the Company (whether or not exercised) to investigate
the affairs of Purchaser or the Company (whether pursuant to Section 6.3 or
otherwise) or a waiver by Purchaser or the Company of any condition to Closing
set forth in Article VI, each party shall have the right to rely fully upon
the
representations, warranties, covenants and agreements of the other party
contained in this Agreement or in any instrument delivered pursuant to this
Agreement. All of the representations and warranties contained in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Closing Date until fifteen (15) months following the Closing Date (the
“Expiration
Date”).
8.2 Indemnity
Provisions
.
(a) The
Stockholders will indemnify, defend and hold harmless Purchaser and its
subsidiaries, Affiliates and agents, including without limitation their
respective officers, directors, employees, members, managers, shareholders,
successors and assigns and each person, if any, who controls or may control
Purchaser within the meaning of the Securities Act (collectively, the
“Purchaser
Indemnitees”)
from
and against any and all Losses (whether or not involving a Third-Party Claim),
incurred or sustained by Purchaser or any other Purchaser Indemnitee arising
out
of, directly or indirectly, (i) any inaccuracy in or breach (or any claim by
any
third party alleging or constituting an inaccuracy or breach) of any
representation or warranty of the Company or a Stockholder, as of the date
of
this Agreement, contained in this Agreement or in the Ancillary Agreements
or
any other instrument delivered pursuant to this Agreement; or (ii) any breach
of
any covenant or agreement of a Stockholder contained in this Agreement or the
Ancillary Agreements or in any instrument delivered pursuant to this Agreement;
provided,
however,
that
(i) Purchaser Indemnitees may not make any claims against the Stockholders
unless the aggregate Losses incurred or sustained exceed $50,000 (the “Basket”);
and (ii) that in no event shall the Stockholders be liable to the Purchaser
Indemnitees for any such Losses incurred or sustained exceeding, in the
aggregate, an amount equal to fifteen percent (15%) of the Initial
Consideration; and (iii) that the Stockholders shall only be liable to the
Purchaser Indemnitees for such Losses incurred or sustained and claimed by
the
Expiration Date. For purposes of determining whether the Basket has been
satisfied with respect to any breach by the Company or any Principal Company
Stockholder of any of its respective representations and warranties contained
in
or made by or pursuant to this Agreement that are qualified by materiality
or
Material Adverse Effect, any such representation and warranty so qualified
shall
be deemed breached if it is untrue or incorrect, regardless of whether such
breach would or could have a Material Adverse Effect or otherwise be material.
Each Stockholder shall be responsible for acts of fraud only if it either
participated in such fraud or had actual knowledge of such fraud on or before
the Closing Date.
(b) The
Purchaser will indemnify, defend and hold harmless each of the Stockholders
and
their Affiliates, agents, successors and assigns (collectively, the
“Stockholder
Indemnitees”)
from
and against any and all Losses (whether or not involving a Third-Party Claim),
incurred or sustained by the Stockholders or any Stockholder Indemnitee arising
out of, directly or indirectly, (i) any inaccuracy in or breach (or any claim
by
any third party alleging or constituting an inaccuracy or breach) of any
representation or warranty of the Purchaser, as of the date of this Agreement,
contained in this Agreement or in the Ancillary Agreements or any other
instrument delivered pursuant to this Agreement; or (ii) any breach of any
covenant or agreement of a Purchaser contained in this Agreement or the
Ancillary Agreements or in any instrument delivered pursuant to this Agreement;
provided,
however,
that
(i) Stockholder Indemnitees may not make any claims against the Purchaser unless
the aggregate Losses incurred or sustained exceed $50,000 (the “Basket”); and
(ii) that in no event shall the Purchaser be liable to the Purchaser Indemnitees
for any such Losses incurred or sustained exceeding, in the aggregate, an amount
equal to fifteen percent (15%) of the total consideration received for the
sale
of Stock pursuant to Article II of this Agreement; and (iii) that the Purchaser
shall only be liable to the Stockholder Indemnitees for such Losses incurred
or
sustained and claimed by the Expiration Date. For purposes of determining
whether the Basket has been satisfied with respect to any breach by the
Purchaser of any of its respective representations and warranties contained
in
or made by or pursuant to this Agreement that are qualified by materiality
or
Material Adverse Effect, any such representation and warranty so qualified
shall
be deemed breached if it is untrue or incorrect, regardless of whether such
breach would or could have a Material Adverse Effect or otherwise be material.
Purchaser shall be responsible for acts of fraud only if it either participated
in such fraud or had actual knowledge of such fraud on or before the Closing
Date. This Section shall not be construed to prohibit an action for
consideration which is unpaid at a time when Purchaser is then obligated to
pay
such amounts pursuant to Article II.
(c) Stockholders;
Power of Attorney.
(i) ▇▇▇▇
▇▇▇▇▇▇▇▇▇, Esq. shall, to the fullest extent permitted by law, be appointed
as
agent and attorney-in-fact for the Stockholders, for and on behalf of the
Stockholders, to give and receive notices and communications, to object to
such
deliveries, to agree to, negotiate, enter into settlements and compromises
of,
and demand and comply with Orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in
the
judgment of the Stockholders for the accomplishment of the foregoing. Such
agency may be changed by the Stockholders from time to time upon not less than
thirty (30) days prior written notice to Purchaser signed by each Stockholder.
Any vacancy in the position of Stockholders may be filled by the remaining
Stockholder. No bond shall be required of this agent, and he shall not receive
any compensation for his services from either Purchaser or the Company. Notices
or communications to or from this agent shall constitute, to the fullest extent
permitted by law, notice to or from each of the Stockholders.
(ii) The
agent
shall not incur any liability with respect to any action taken or suffered
by
him or omitted hereunder as agent while acting in good faith and in the exercise
of reasonable judgment.
(d) The
agent
shall treat confidentially and not disclose any nonpublic information from
or
about the Company or Purchaser to anyone (except on a need to know basis to
individuals who agree in writing to treat such information confidentially)
without prior consent of Company or Purchaser, as the case may be.
(e) Third-Party
Claims.
(i) The
procedure for seeking indemnification by a party claiming a right of
indemnification hereunder (each an “Indemnitee”)
from
an indemnifying person (each an “Indemnitor”)
in any
way relating to a third party claim against such Indemnitee (a “Third-Party
Claim”)
shall
be governed by the provisions of this Section 8.2(e).
(ii) The
Indemnitee shall give prompt written notice to the Indemnitor of the
commencement of any Third Party Claim, or any threat thereof, or any state
of
facts which Indemnitee determines will give rise to a Third Party Claim, setting
forth, in reasonable detail, the nature and basis of the Third Party Claim
and
the amount thereof, to the extent known, and any other relevant information
in
the possession of the Indemnitee (a “Notice
of Claim”).
The
Notice of Claim shall be accompanied by any relevant documents in the possession
of the Indemnitee relating to the claim (such as copies of any summons,
complaint or pleading which may have been served and, or any written demand
or
document evidencing the same). No failure to give a Notice of Claim shall
affect, limit or reduce the indemnification obligations of an Indemnitor
hereunder, except to the extent such failure materially prejudices such
Indemnitor’s ability successfully to defend the Third Party Claim giving rise to
the indemnification claim.
(iii) In
the
event that an Indemnitee furnishes an Indemnitor with a Notice of Claim, then
upon the written acknowledgment by the Indemnitor given to the Indemnitee within
30 days of receipt of the Notice of Claim, stating that the Indemnitor is
undertaking and will assume the defense of the Third Party Claim (with counsel
reasonably satisfactory to the Indemnitee), and confirming that as between
the
Indemnitor and the Indemnitee, the Third Party Claim covered by the Notice
of
Claim is subject to this Section 8.2(e) (an “Indemnification
Acknowledgment”),
then
the Third Party Claim covered by the Notice of Claim may be defended by the
Indemnitor, at the sole cost and expense of the Indemnitor; provided,
however,
that
the Indemnitee is authorized to file any motion, answer or other pleading that
may be reasonably necessary or appropriate to protect its interests during
such
30-day period upon at least two days’ prior notice to Indemnitor. However, in
the event the Indemnitor does not furnish an Indemnification Acknowledgment
to
the Indemnitee within such 30-day period, the Indemnitee may, upon written
notice to the Indemnitor, assume the defense (with legal counsel chosen by
the
Indemnitee) without prejudice to its right of indemnification hereunder and
dispose of the Third Party Claim, at the sole cost and expense of the Indemnitor
(subject to the limitations on the form and amount of recovery hereunder).
Notwithstanding receipt of an Indemnification Acknowledgment, the Indemnitee
shall have the right to employ its own counsel in respect of any such Third
Party Claim, but the fees and expenses of such counsel shall be at the
Indemnitee’s own cost and expense, unless (A) the employment of such counsel and
the payment of such fees and expenses shall have been specifically authorized
by
the Indemnitor in connection with the defense of such Third Party Claim or
(B)
there are specific defenses available to the Indemnitee which are materially
in
conflict with those available to the Indemnitor in which case the costs and
expenses incurred by the Indemnitee shall be borne by the
Indemnitor.
(iv) The
Indemnitee or the Indemnitor, as the case may be, who is controlling the defense
of the Third Party Claim shall keep the other fully informed of such Third
Party
Claim at all stages thereof, whether or not such party is represented by
counsel. The parties hereto agree to render to each other such assistance as
they may reasonably require of each other in order to ensure the proper and
adequate defense of any such Third Party Claim. Subject to the Indemnitor
furnishing the Indemnitee with an Indemnification Acknowledgment in accordance
with Section 8.2(e), the Indemnitee shall cooperate with the Indemnitor and
provide such assistance, at the sole cost and expense of the Indemnitor, as
the
Indemnitor may reasonably request in connection with the defense of any such
Third Party Claim including, but not limited to, providing the Indemnitor with
reasonable access to and use of all relevant corporate records and making
reasonably available its officers and employees for depositions, pre-trial
discovery and as witnesses at trial, if required. In requesting any such
cooperation, the Indemnitor shall have due regard for, and attempt to not be
disruptive of, the business and day-to-day operations of the Indemnitee and
shall follow the requests of the Indemnitee regarding any documents or
instruments which the Indemnitee believes should be given confidential
treatment.
(v) The
Indemnitor shall not make or enter into any compromise or settlement of any
Third Party Claim which the Indemnitor has undertaken to defend, without the
Indemnitee’s prior written consent (which consent shall not be unreasonably
withheld or delayed), unless the sole relief provided is monetary damages that
are paid in full by the Indemnitor, there is no obligation, directly or
indirectly, on the part of the Indemnitee to contribute to any portion of the
payment for any of the Losses, the Indemnitee receives a general and
unconditional release with respect to the Third Party Claim (in form, substance
and scope reasonably acceptable to the Indemnitee), there is no finding or
admission of any violation of Law or the rights of any person, or fault or
wrongdoing by, or effect on any other claim that may be made against, the
Indemnitee and, in the reasonable judgment of the Indemnitee, the relief granted
in connection therewith is not likely to have a material adverse effect on
the
Indemnitee. The Indemnitee shall not make or enter into any settlement of any
Third Party Claim for which Indemnitee will seek indemnification from Indemnitor
under this Article VIII without the Indemnitor’s prior written consent (which
consent shall not be unreasonably withheld or delayed).
8.3 Stockholder
Indemnity
By
their
approval of this Agreement, each Stockholder agrees to indemnify, defend,
protect, and hold harmless each Purchaser Indemnitee at all times from and
after
the date of this Agreement from and against all Losses incurred by such
Purchaser Indemnitee as a result of or incident to any Claim by a holder or
former holder of the Company’s capital stock or options, warrants or other
securities convertible into or exercisable for shares of the Company’s capital
stock or any other person or entity, seeking to assert, or based upon: (a)
ownership or rights of ownership to any shares of capital stock of the Company;
(b) any rights of a stockholder of the Company including any option, preemptive
rights, or rights to notice or to vote; (c) any rights under the charter or
bylaws of the Company or pursuant to Delaware Law, including with respect to
appraisal or dissenting shareholder rights, or (d) any other rights relating
to
the transactions contemplated by this Agreement. All amounts payable by the
Stockholders pursuant to this Section 8.3 shall be paid jointly and severally
by
the Stockholders.
8.4 Effect
of Investigation, Reliance
The
right
to indemnification, payment of Losses or for other remedies based on any
representation, warranty, covenant or obligation of the Company or any
Stockholder contained in or made pursuant to this Agreement or any Ancillary
Agreements shall not be affected by any investigation conducted with respect
to,
or any knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement, with respect
to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. No Indemnified Person shall be required to
show reliance on any representation, warranty, certificate or other agreement
in
order for such Indemnified Person to be entitled to indemnification hereunder.
Purchaser’s sole and exclusive remedy against any of the Selling Parties in
connection with any matter pertaining to this Agreement, the Company and/or
any
of the transactions carried out or contemplated by this Agreement shall be
indemnification pursuant to, and limited by, the provisions of this Article
VIII.
8.5 Inspection
of Documents.
All
documents and information provided to Purchaser (as stated in this Agreement)
or
as referenced in any and all Schedules, Exhibits and attachments hereto, have
been received, reviewed, and inspected by Purchaser. Purchaser agrees that
all
such documentation and information has been taken into consideration and
understood prior to execution of this Agreement and that any questions,
ambiguities, or discrepancies have been inquired on and resolved. Purchaser
has
had every opportunity to ask questions and has received answers to its full
satisfaction.
ARTICLE
IX
MISCELLANEOUS
PROVISIONS
9.1 Notices
.
Any and
all notices or other communications or deliveries required or permitted to
be
given or made pursuant to any of the provisions of this Agreement shall be
deemed to have been duly given or made for all purposes if (i) hand delivered,
(ii) sent by a nationally recognized overnight courier for next Business Day
delivery, or (iii) sent by confirmed facsimile transmission or email
transmission of a scanned PDF file (provided that the original is sent by
overnight courier for next Business Day delivery) as follows:
|
If
to Purchaser:
|
If
to Seller:
|
|
EMCORE
Corporation
Attn:
Legal Department
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
|
▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇. ▇▇▇▇▇
|
|
with
a copy to:
|
|
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, Esq.
|
|
|
Law
Offices of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
2448
Historic ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
|
|
or
at
such other address as any party may specify by notice given to the other party
in accordance with this Section 9.1. The date of giving of any such notice
shall
be the date of hand delivery, the next Business Day after delivery to the
overnight courier service, the date sent by confirmed facsimile transmission,
or
the date sent by email transmission of a scanned PDF file.
9.2 Entire
Agreement
This
Agreement and the Exhibits and Schedules hereto, including the Company
Disclosure Schedule (a) constitute the entire Agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except for the Confidentiality Agreement (which shall
continue in full force and effect and shall survive any termination of this
Agreement or the Closing in accordance with its terms), and (b) shall be deemed
to have the same effect on construction or interpretation of this Agreement
as
if set forth herein.
9.3 Further
Assurances; Post-Closing Cooperation
.
(a)
At
any time or from time to time after the Closing, the parties shall execute
and
deliver to the other parties such other documents and instruments, provide
such
materials and information and take such other actions as the other parties
may
reasonably request to consummate the transactions contemplated by this Agreement
and otherwise to cause the other parties to fulfill their obligations under
this
Agreement and the transactions contemplated hereby. Each party
agrees
to
use commercially reasonable efforts to cause the conditions to its obligations
to consummate the transactions hereunder to be satisfied.
(b)
Without limiting the generality of the foregoing, the Stockholders agree to
use
their best efforts to promptly obtain all documents relating to the repayment
of
the loans which are the subject of the Escrow Instructions (including without
limitation reconveyances of all deeds of trust and releases of all guarantees
securing such loans), to promptly record all such documents as are subject
to
recording in the real estate records of San Diego County, California, and to
provide to Purchaser copies of all such executed and recorded
documents.
9.4 Waiver
Any
term
or condition of this Agreement may be waived at any time by the party that
is
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement
or
by Law or otherwise afforded, will be cumulative and not
alternative.
9.5 Third-Party
Beneficiaries
The
terms
and provisions of this Agreement are intended solely for the benefit of each
party hereto and their respective successors or permitted assigns, and it is
not
the intention of the parties to confer third-party beneficiary rights, and
this
Agreement does not confer any such rights, upon any other Person other than
any
Person entitled to indemnity under Article VIII; provided, that this Section
9.5
shall
not be construed to prohibit an action for consideration which is unpaid at
a
time when Purchaser is then obligated to pay such amounts pursuant to Article
II.
9.6 No
Assignment; Binding Effect
Neither
this Agreement nor any right, interest or obligation hereunder may be assigned
(by operation of law or otherwise) by any party without the prior written
consent of the other parties and any attempt to do so will be void. Subject
to
the preceding sentence, this Agreement is binding upon, inures to the benefit
of
and is enforceable by the parties hereto and their respective successors and
assigns.
9.7 Headings
The
headings and table of contents used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions
hereof.
9.8 Invalid
Provisions
If
any
provision of this Agreement is held to be illegal, invalid or unenforceable
under any present or future Law, and if the rights or obligations of any party
hereto under this Agreement will not be materially and adversely affected
thereby, (a) such provision will be fully severable, (b) this Agreement will
be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by
the
illegal, invalid or unenforceable provision or by its severance herefrom and
(d)
in lieu of such illegal, invalid or unenforceable provision, there will be
added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
9.9 Governing
Law, Submission to Jurisdiction
Except
as
and to the extent required to consummate the transactions hereunder under
Delaware Law, this Agreement, any Ancillary Agreements and any other closing
documents shall be governed by and construed in accordance with the Laws of
the
State of California as applied to Contracts entered into by California residents
and performed entirely in California. Each party hereto irrevocably agrees
that
any legal action or proceeding with respect to this Agreement or for recognition
and enforcement of any judgment in respect hereof brought by another party
hereto or its successors or assigns may be brought and determined by either
a
state court or federal court sitting in City of San Diego and each party hereto
hereby irrevocably submits with regard to any such action or proceeding for
itself and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each party hereto hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) any claim that it is not personally subject to the jurisdiction
of the above-named courts for any reason other than the failure to serve process
in accordance with this Section 9.9, (b) that it or its property is exempt
or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable Law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum,
(ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
9.10 WAIVER
OF TRIAL BY JURY
IN
ANY
ACTION OR PROCEEDING ARISING HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL
WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY
HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION
OR
PROCEEDING.
9.11 Negotiation
The
parties hereto agree that this Agreement is the product of negotiation between
sophisticated parties and individuals, all of whom were represented by counsel,
and each of whom had an opportunity to participate in and did participate in,
the drafting of each provision hereof. Accordingly, ambiguities in this
Agreement, if any, shall not be construed strictly or in favor of or against
any
party hereto but rather shall be given a fair and reasonable construction
without regard to the rule of contra proferentem.
9.12 Counterparts
This
Agreement may be executed in any number of counterparts, each of which will
be
deemed an original, but all of which together will constitute one and the same
instrument. The facsimile transmission (or email transmission of a scanned
PDF
file) of any original signed counterpart of this Agreement (or any amendment
hereto or any other document delivered pursuant hereto) shall be treated for
all
purposes as the delivery of an original signed counterpart; provided that the
original signed counterpart is sent by overnight courier for next Business
Day
delivery.
9.13 Specific
Performance
The
parties hereto agree that irreparable damage would occur in the event that
any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Notwithstanding any other provision
to the contrary herein, it is agreed that the parties shall be entitled to
an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof without the requirement of a
posting of a bond or other indemnity in any court of the United States or any
state having jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity. Nothing in Article VIII shall be
construed or interpreted to limit the availability of injuction relief as a
remedy pursuant to this Section 9.13.
9.14 Limitation
on Damages and Recovery
Neither
the Company nor any Company Stockholder may make any claims against Purchaser
unless the aggregate Losses incurred or sustained exceed $10,000 (other than
Claims relating to Sections 5.2 and 5.3; which shall be immediately payable,
shall not be subject to any minimum dollar threshold and does not apply towards
the minimum threshold).
9.15 Construction
(a) Unless
the context of this Agreement otherwise requires, (i) words of any gender
include each other gender and the neuter, (ii) words using the singular or
plural number also include the plural or singular number, respectively, (iii)
the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to
this entire Agreement as a whole and not to any particular Article, Section
or
other subdivision, (iv) the terms “Article” or “Section” or other subdivision
refer to the specified Article, Section or other subdivision of the body of
this
Agreement, (v) the phrases “ordinary course of business” and “ordinary course of
business consistent with past practice” refer to the business and practice of
the Company, (vi) the words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without limitation,” and (vii) when a
reference is made in this Agreement to Exhibits, such reference shall be to
an
Exhibit to this Agreement unless otherwise indicated. All accounting terms
used
herein and not expressly defined herein shall have the meanings given to them
under GAAP. When used herein, the terms “party” or “parties” refer to Purchaser
and Merger Sub, on the one hand, and the Company and Principal Company
Stockholders, on the other, and the terms “third party” or “third parties”
refers to Persons other than Purchaser, Merger Sub, the Company or the Principal
Company Stockholders.
(b) When
used
herein, the phrase “to the knowledge of” any Person, “to the best knowledge of”
any Person, “known to” any Person or any similar phrase, means (i) with respect
to any Person who is an individual, the actual knowledge of such Person, (ii)
with respect to any other Person, the actual knowledge of the directors and
officers of such Person and other individuals that have a similar position
or
have similar powers and duties as the officers and senior management of such
Person, and (iii) in the case of each of (i) and (ii), the knowledge of facts
that such individuals should have after due inquiry. For this purpose, “due
inquiry” with respect to any matter means inquiry of and consultations with (A)
the directors and officers of such Person and other individuals that have a
similar position or have similar powers and duties as such officers and
directors, (B) other employees of and the advisors to such Person, including
legal counsel and outside auditors, who have principal responsibility for the
matter in question or are otherwise likely to have information relevant to
the
matter, and (C) the stockholders owning more than ten percent (10%) of the
equity interests, by vote or value, of such Person.
(c) When
a
reference is made to “material” or any derivative or similar words in connection
with the Company and such reference is not defined, material shall mean an
amount equal to individually or in the aggregate twenty-five thousand dollars
($25,000).
9.16 Announcements.
In
addition to any disclosure restrictions contained in the Confidentiality
Agreement, neither party shall make any public announcements or disclosures
of
any of the terms of this Agreement and/or any of the transactions contemplated
hereby without the prior written consent of all parties here
(a) to,
except to the extent that the Purchase is obligated to make disclosures in
accordance with federal or state securities laws.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, Purchaser, the Stockholders and the Company have caused this
Agreement to be signed by their duly authorized representatives, all as of
the
date first written above.
|
OPTICOMM
CORPORATION
|
EMCORE
CORPORATION
|
|
By:
/s/
▇▇▇▇▇ ▇▇▇▇▇▇
|
By:
/s/
Hong Hou
|
|
Name:
▇▇▇▇▇ ▇▇▇▇▇▇
Title:
President
|
Name:
Hong Hou
Title:
President and Chief Operating Officer
|
|
/s/
▇▇▇▇▇ ▇▇▇▇▇▇
|
/s/
▇▇▇▇▇ ▇▇▇▇▇▇
|
|
▇▇▇▇▇
▇▇▇▇▇▇
|
▇▇▇▇▇
▇▇▇▇▇▇
|