EXHIBIT 10.18
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ASSET PURCHASE AGREEMENT
AMONG
BUYER
AND
KEPTEL, INC.,
AND
THE SOLE SHAREHOLDER OF KEPTEL, INC.
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CLOSING DATE: APRIL , 2002
EFFECTIVE TIME: CLOSE OF BUSINESS ON APRIL , 2002
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TABLE OF CONTENTS
PAGE
ARTICLE 1 PURCHASE AND SALE OF ASSETS ................................................ 1
Section 1.1 Transfer of Assets ..................................................... 1
Section 1.2 Consideration .......................................................... 3
Section 1.3 Assumption of Liabilities .............................................. 3
Section 1.4 Retained Liabilities ................................................... 4
Section 1.5 Adjustments to Purchase Price .......................................... 4
Section 1.6 Allocation of Purchase Price ........................................... 4
Section 1.7 Sales Taxes ............................................................ 5
Section 1.8 Adjustment for Solectron Manufactured Goods ............................ 5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER ................... 5
Section 2.1 Organization and Qualification ......................................... 5
Section 2.2 Corporate Power and Authority .......................................... 5
Section 2.3 Books and Records ...................................................... 6
Section 2.4 Validity, Etc .......................................................... 6
Section 2.5 Broker's or Finder's Fee ............................................... 6
Section 2.6 Capitalization, Shareholders, Subsidiaries and Investments ............. 6
Section 2.7 Financial Statements ................................................... 7
Section 2.8 Absence of Certain Changes and Events .................................. 7
Section 2.9 Absence of Undisclosed Liabilities ..................................... 7
Section 2.10 Employment and Labor Matters ........................................... 7
Section 2.11 Real Property .......................................................... 8
Section 2.12 Powers of Attorney; Absence of Limitations on Competition; Guarantees .. 8
Section 2.13 Governmental Approvals ................................................. 8
Section 2.14 Compliance with Law; Licenses and Permits .............................. 8
Section 2.15 Employee Benefits ...................................................... 9
Section 2.16 Assets ................................................................. 9
Section 2.17 Inventories ............................................................ 10
Section 2.18 Insurance .............................................................. 10
Section 2.19 Outstanding Contracts .................................................. 10
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TABLE OF CONTENTS
(CONTINUED)
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Section 2.20 Outstanding Leases ..................................................... 11
Section 2.21 Foreign Person ......................................................... 11
Section 2.22 Significant Customers .................................................. 11
Section 2.23 Taxes .................................................................. 11
Section 2.24 Litigation ............................................................. 12
Section 2.25 Environmental Matters .................................................. 12
Section 2.26 Intellectual Property .................................................. 13
Section 2.27 No Material Adverse Change ............................................. 14
Section 2.28 Product Warranty ....................................................... 14
Section 2.29 Product Liability ...................................................... 14
Section 2.30 Certain Practices ...................................................... 14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER .............................. 15
Section 3.1 Organization and Qualification ......................................... 15
Section 3.2 Corporate Power and Authority .......................................... 15
Section 3.3 Validity, Etc .......................................................... 15
Section 3.4 Relationships with Affiliates .......................................... 16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER .................................... 16
Section 4.1 Organization and Qualification ......................................... 16
Section 4.2 Corporate Power and Authority .......................................... 16
Section 4.3 Validity, Etc .......................................................... 16
Section 4.4 Broker's or Finder's Fee ............................................... 16
ARTICLE 5 COVENANTS AND AGREEMENTS ................................................... 17
Section 5.1 Required Approvals ..................................................... 17
Section 5.2 Employees And Employee Benefits ........................................ 17
Section 5.3 Customer and Other Business Relationships .............................. 20
Section 5.4 Tax Returns ............................................................ 20
Section 5.5 Employment Tax Reporting ............................................... 20
Section 5.6 Payment of Liabilities ................................................. 20
Section 5.7 Covenants of Seller and Shareholder .................................... 20
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TABLE OF CONTENTS
(CONTINUED)
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Section 5.8 Further Assurances ..................................................... 22
Section 5.9 Best Efforts ........................................................... 22
ARTICLE 6 CONDITIONS TO BUYER'S OBLIGATIONS .......................................... 22
Section 6.1 Consents ............................................................... 22
Section 6.2 Solectron Manufacturing Services Agreement ............................. 22
Section 6.3 Distribution Agreement ................................................. 22
Section 6.4 Transition Services Agreement .......................................... 23
Section 6.5 Opinion of Counsel to Seller and Shareholder ........................... 23
Section 6.6 Approval of Board of Directors of Buyer and Approval of ................ 24
Section 6.7 Amendment to Certificate of Incorporation .............................. 24
Section 6.8 Closing Documents ...................................................... 24
ARTICLE 7 CONDITIONS TO SELLER'S OBLIGATIONS ......................................... 24
Section 7.1 Solectron Manufacturing Services Agreement ............................. 24
Section 7.2 Distribution Agreement ................................................. 24
Section 7.3 Transition Services Agreement .......................................... 24
Section 7.4 Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ........................................... 24
Section 7.5 Closing Documents ...................................................... 25
ARTICLE 8 THE CLOSING AND CERTAIN CLOSING DELIVERIES ................................. 25
Section 8.1 Time and Place of Closing .............................................. 25
Section 8.2 Deliveries by Seller and the Shareholder ............................... 25
Section 8.3 Deliveries by Buyer .................................................... 26
ARTICLE 9 SURVIVAL AND INDEMNIFICATION ............................................... 26
Section 9.1 Survival ............................................................... 26
Section 9.2 Indemnification by Seller and the Shareholder .......................... 26
Section 9.3 Notice to Seller, Etc .................................................. 27
Section 9.4 Indemnification by Buyer ............................................... 27
Section 9.5 Notice to Buyer, Etc ................................................... 28
Section 9.6 Limitations on Indemnification ......................................... 28
Section 9.7 Offset ................................................................. 28
Section 9.8 Consequential Damages .................................................. 29
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TABLE OF CONTENTS
(CONTINUED)
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Section 9.9 Exclusive Remedy ....................................................... 29
ARTICLE 10 MISCELLANEOUS .............................................................. 29
Section 10.1 Knowledge of Seller or Shareholder ..................................... 29
Section 10.2 Knowledge of Buyer ..................................................... 29
Section 10.3 Best Efforts ........................................................... 29
Section 10.4 Schedules .............................................................. 29
Section 10.5 Publicity .............................................................. 29
Section 10.6 Notices ................................................................ 30
Section 10.7 Entire Agreement ....................................................... 31
Section 10.8 Modifications and Amendments ........................................... 31
Section 10.9 Assignment/Binding Effect .............................................. 31
Section 10.10 Parties in Interest .................................................... 31
Section 10.11 Governing Law .......................................................... 31
Section 10.12 Severability ........................................................... 31
Section 10.13 Interpretation ......................................................... 32
Section 10.14 Headings and Captions .................................................. 32
Section 10.15 Terms .................................................................. 32
Section 10.16 Reliance ............................................................... 32
Section 10.17 Expenses ............................................................... 32
Section 10.18 Counterparts ........................................................... 32
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LIST OF EXHIBITS
Exhibit A - ▇▇▇▇ of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - License Agreement
Exhibit D - Solectron Manufacturing Services Agreement
Exhibit E - Distribution Agreement
Exhibit F - Transition Services Agreement
LIST OF SCHEDULES
Schedule 1.3 - Assumed Liabilities
Schedule 2.1 - Organization and Qualification
Schedule 2.4 - Validity, Etc.
Schedule 2.5 - Broker's Fees
Schedule 2.7 - Financial Statements
Schedule 2.8 - Absence of Certain Changes and Events
Schedule 2.10 - Employment and Labor Matters
Schedule 2.12 - Powers of Attorney, Etc.
Schedule 2.15 - Employee Benefits
Schedule 2.16 - Assets
Schedule 2.17 - Inventories
Schedule 2.18 - Insurance
Schedule 2.19 - Contracts
Schedule 2.20 - Leases
Schedule 2.22 - Significant Customers
Schedule 2.23 - Taxes
Schedule 2.24 - Litigation
Schedule 2.25 - Environmental Matters
Schedule 2.26 - Intellectual Property
Schedule 2.27 - Accounts Receivable
Schedule 2.28 - Product Warranty
Schedule 3.4 - Relationships with Affiliates
Schedule 6.1 - Consents
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This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into this ____
day of April, 2002 by and among (i)__________., a Delaware corporation
("Buyer"); (ii) KEPTEL, INC., a Delaware corporation ("Seller"); and (iii) ARRIS
INTERNATIONAL, INC. a Delaware corporation and the sole shareholder of Seller
("Shareholder" and to the extent of its interest in any assets of the Business,
also "Seller").
RECITALS
A. Seller desires to sell or otherwise transfer to Buyer substantially all
of the assets relating to its business of design, manufacture, and/or sale of
the Product Lines set forth on the attached Schedule 2.17 (the "Business"); and
B. Buyer desires to purchase substantially all of Seller's assets related
to the Business on the terms and conditions set forth herein.
AGREEMENTS
In consideration of the foregoing preliminary statements and the mutual
covenants, representations, warranties and agreements hereinafter set forth, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Buyer, Seller and Shareholder hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
SECTION 1.1 Transfer of Assets.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, on the Closing Date, but effective as of the Effective Time (as
defined in Section 8.1), Seller shall transfer to Buyer, free and clear of all
claims, charges, liens, security interests, encumbrances and restrictions
whatsoever (collectively, "Claims"), all of the assets, properties and rights
owned by Seller and all rights or interests in assets or properties held by
Seller, of every type and description, real, personal and mixed, tangible and
intangible, confirmed or contingent, and exclusively used in connection with the
Business (other than the Excluded Assets as hereinafter defined), including,
without limitation, contracts, agreements, property, inventory, customer files
and lists, prospect lists, licenses and permits, service marks, trade secrets,
software (including, without limitation, documentation and related source and
object codes), computers and computer equipment, files and other records,
systems and processes, leasehold and other improvements, machines, machinery,
equipment, furniture, fixtures, fixed assets, proprietary molds (wherever
located), key tooling (wherever located), supplies, goodwill, all causes of
action, claims and demands of every nature relating to the Assumed Liabilities
and Contracts (as hereinafter defined) arising after the Closing, and Seller's
rights to the name "Keptel" (collectively, the "Transferred Assets"), all with
the intention that the Business shall be transferred to Buyer as a going
concern.
(b) Notwithstanding any provision contained in this Agreement to the
contrary, there shall be excluded from the Transferred Assets and retained by
Seller the following assets (the "Excluded Assets"): (i) all cash on hand and in
banks (including all uncollected items); (ii) all billed and unbilled accounts
receivable; (iii) all assets employed in the Business which are located at
Seller's (or its subsidiary's) facilities in El Paso, Texas and Juarez, Mexico,
other than proprietary molds and key tooling; (iv) all employee benefit plans,
other than health insurance plans; (v) the minute books and stock transfer
records of Seller; (vi) all contracts, arrangements and understandings which are
not capable of being transferred or assigned without the approval or consent of
any party thereto other than Seller if such approval or consent has not been
obtained, subject, however, to Section 1.3 and Section 6.1 herein; (vii)
security deposits, prepaid insurance, and all causes of action, claims and
demands of every nature relating to the Assumed Liabilities and Contracts
arising prior to the Closing; (viii) the assets set forth on Schedule 1.1(b),
(ix) all Intellectual Property Assets (as defined in Section 2.26) which are not
used exclusively in the Business which will be the subject of a paid-up,
royalty-free, non-exclusive perpetual license from Seller and Shareholder to
Buyer (the "Licensed Assets"); (x) any Hazardous Materials, including waste
materials, other than unopened raw materials; and (xi) any underground storage
tanks or electrical transformers.
(c) Seller shall transfer the Transferred Assets to Buyer pursuant
to a ▇▇▇▇ of Sale in substantially the form of Exhibit A (the "▇▇▇▇ of Sale"),
an Assignment and Assumption Agreement in substantially the form of Exhibit B
(the "Assignment and Assumption Agreement"), and such other documents and
instruments as Buyer or its counsel may reasonably request. Seller shall
transfer the Licensed Assets to Buyer pursuant to a License Agreement in
substantially the form of Exhibit C (the "License Agreement").
(d) At any time and from time to time after the Closing Date, at the
request of Buyer and without further consideration, Seller shall execute and
deliver such other instruments of sale, transfer, conveyance, assignment and
confirmation as may be reasonably requested in order to more effectively
transfer, convey and assign to Buyer and to confirm Buyer's title to the
Transferred Assets.
(e) To the extent that Seller's rights under any Contract or Lease
to be assigned to Buyer hereunder may not be assigned without the consent of
another Person which has not been obtained, this Agreement shall not constitute
an agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful, and Seller shall use its Best Efforts (as defined
in Section 10.3) to secure any such required consent(s) as promptly as possible.
To the extent such consent is not obtained and the benefits of a Contract or
Lease can be made available to Buyer without breaching such Contract or Lease,
Seller will use its Best Efforts to obtain for Buyer the benefits of such
Contract or Lease and Buyer will bear the costs incurred for such benefits as if
such costs were Assumed Liabilities (as defined in Section 1.3).
(f) At the termination of the Transition Services Agreement as
described in Section 6.4, subject to the terms of this Agreement and related
Disclosure Schedules, Seller shall transfer the assets identified on Schedule
1.1(b) as the Rock Falls Equipment to Buyer for $1, pursuant to a ▇▇▇▇ of Sale.
SECTION 1.2 Consideration. In consideration for the transfer of the
Transferred Assets and the other covenants of Seller and Shareholder herein,
upon the terms and subject to the
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conditions set forth in this Agreement, Buyer shall assume the Assumed
Liabilities pursuant to Section 1.3 hereof and shall make payments
(collectively, the "Purchase Price") to Seller, which are subject to adjustment
as set forth in Section 1.5(c), as follows:
(a) an initial payment of Thirty Million Dollars ($30,000,000) shall
be delivered to Seller in cash on the Closing Date (defined in Section 8.1
below) by wire transfer or other means of immediately available funds (the
"Closing Payment");
(b) post-closing earn-out payments to Seller, if earned, as set
forth below based upon Revenues received during the 2002 Revenue Period and the
2003 Revenue Period (the "Revenue Period"):
EARN-OUT EARN-OUT
2002 REVENUE PAYMENT 2003 REVENUE PAYMENT
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$55,000,001 - $60,000,000 $ 0 - $1,500,000 $65,000,001 - $70,000,000 $ 0 - $1,500,000
$60,000,001 - $65,000,000 $1,500,001 - $2,750,000 $70,000,001 - $75,000,000 $1,500,001 - $2,750,000
$65,000,001 - $70,000,000 $2,750,001 - $4,000,000 $75,000,001 - $80,000,000 $2,750,001 - $4,000,000
$70,000,001 - $75,000,000 $4,000,001 - $5,000,000 $80,000,001 - $85,000,000 $4,000,001 - $5,000,000
$75,000,001 - $80,000,000 $5,000,001 - $6,000,000 $85,000,001 - $90,000,000 $5,000,001 - $6,000,000
$80,000,001 - $85,000,000 $6,000,001 - $7,000,000 $90,000,001 - $95,000,000 $6,000,001 - $7,000,000
Earn-out payments shall be calculated on a pro rata basis based on the
Revenue received for the applicable Revenue Period. For example, if Revenue for
the 2002 Revenue Period is equal to $57,500,000, Seller will be entitled to an
earn-out payment equal to $750,000. Any earn-out payments due Seller shall be
paid by Buyer within ninety (90) days following the end of the applicable
Revenue Period.
For purposes of this Section 1.2(b), "Revenue" shall be equal to all
revenues from the Business received by Buyer (which for purposes of clarity
shall include the Product Lines and any improvements or replacements therefor)
during the applicable Revenue Period that are attributable to sales generated
during such Revenue Period, together with all revenues of the Business
attributable to orders received prior to the last three (3) days of the
applicable Revenue Period for inventory in stock and to orders received prior to
the last thirty (30) days of the applicable Revenue Period for product not in
stock that is shipped within forty-five (45) days after the Revenue Period.
Buyer shall operate the Business during the 2002 and 2003 Revenue Periods
with the goal of maximizing revenue and profits of the Business during these
periods without regard to the incurrence of earn-out payments.
For purposes of this Section 1.2(b), the term "2002 Revenue Period" shall
mean the period commencing on July 1, 2002 and ending on June 30, 2003 and the
term "2003 Revenue Period" shall mean the period commencing on July 1, 2003 and
ending on June 30, 2004.
SECTION 1.3 Assumption of Liabilities. On the Closing Date, but effective
as of the Effective Time, Buyer shall assume and discharge only the liabilities
of Seller listed on Schedule 1.3 and any liability of Seller arising after the
Effective Time under any Contracts assumed by Buyer pursuant to the Assignment
and Assumption Agreement or the Lease Assignment and
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Assumption Agreement (other than any liability arising out of or relating to a
breach that occurred prior to the Effective Time) (collectively, the "Assumed
Liabilities").
SECTION 1.4 Retained Liabilities. The Retained Liabilities shall remain
the sole responsibility of and shall be retained, paid, performed and discharged
solely by Seller. "Retained Liabilities" shall mean every liability of Seller
(whether incurred prior to or following the Effective Time) other than the
Assumed Liabilities.
SECTION 1.5 Adjustments to Purchase Price. The Purchase Price shall be
subject to the following credits and adjustments:
(a) Prorations. Operating expenses, including without limitation
rent payable under real estate and equipment leases and utilities for which
bills are received or payment became due after the Effective Time with respect
to periods both prior to and after the Effective Time will be allocated to each
of Seller and Buyer on a pro-rata basis according to the ratio of pre-Effective
Time days to post-Effective Time days. Promptly upon receipt of notice from one
party of amounts so allocated to the other, the allocable amount shall be
remitted.
(b) Ad Valorem Taxes. Ad valorem real and tangible personal property
taxes with respect to the Transferred Assets for the calendar year in which the
Closing occurs shall be pro rated between Seller and Buyer as of the Effective
Time on the basis of no applicable discount. Promptly upon receipt of notice
from one party of amounts so allocated to the other, the allocable amount shall
be remitted.
(c) Inventory Audit. Prior to the Closing Date, Buyer shall be
permitted to conduct an independent audit of the Inventories (defined in Section
2.17 below). Representatives of Seller shall be available to answer questions
and assist (which shall include being available to move the Inventories from
place to place during the audit) the independent auditor retained by Buyer to
conduct such audit. Promptly following the audit, which shall be completed
within six (6) business days prior to the execution of this Agreement, Buyer's
independent auditor shall calculate the value of the Inventories based upon the
physical count of the audit and the Standard Costs (defined in Section 2.17)
(the "Inventory Value"). Promptly following the determination of the Inventory
Value, Buyer shall notify Seller of the Inventory Value. In the event the
Inventory Value is less than $10,000,000, Buyer shall deduct the amount of the
deficit from the Closing Payment. If Seller, prior to the Closing, shall notify
Buyer that Seller disputes the Inventory Value, the Closing shall take place on
the basis of the determination of the independent auditor retained by Buyer,
subject to further payment by Buyer after the Closing to the extent the
Inventory Value is subsequently determined by the parties, or in the absence of
agreement by the parties, by an independent auditor selected by the parties or
selected in accordance with the rules of the American Arbitration Association if
the parties cannot agree on an independent auditor, to be higher than the
Inventory Value on which the Closing was based.
SECTION 1.6 Allocation of Purchase Price. Within thirty (30) days after
the Closing Date, Buyer and Seller shall agree to an allocation of the Purchase
Price to the various classifications of Transferred Assets in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"). The
values to be reflected will be established as a result of good faith bargaining.
In reporting the transactions contemplated by this Agreement to
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the Internal Revenue Service, Buyer and Seller or Shareholder shall use such
values, and cooperate with each other in meeting the requirements of the Code
and the regulations promulgated thereunder. Each of Buyer and Seller or
Shareholder shall timely complete a Form 8594, Asset Acquisition Statement,
consistent with such allocation, shall provide a copy of such Form to the other
party, and shall file a copy of such Form with its Federal income tax return for
the period up to the Effective Time. The parties shall not take any position
with any tax or other governmental or regulatory authority which is inconsistent
with such allocation.
SECTION 1.7 Sales Taxes. Any sales, use or transfer taxes required to be
paid in connection with the transactions contemplated by this Agreement shall be
the responsibility of Seller.
SECTION 1.8 Adjustment for Solectron and UPG Manufactured Goods. For
purposes of this section "Gross Margin" shall be the aggregate customer revenues
from Solectron and UPG manufactured products ("Customer Revenues") less the
aggregate Solectron or UPG invoices with respect to such products for the period
beginning at Closing and ending December 31, 2002. In the event Gross Margin is
less than 35.8%, Shareholder shall pay Buyer an amount equal to Customer
Revenues times the difference between 35.8% and the actual Gross Margin up to a
maximum of Eight Hundred Thousand Dollars ($800,000). From and after December
31, 2002, Shareholder shall pay said sum to Buyer within thirty (30) days of
receipt of an invoice from Buyer. Buyer may, at its option, exercise a right of
offset against any payments due Shareholder or Seller from Buyer pursuant to
Section 1.2(b) of this Agreement or under the Transition Services Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller and Shareholder, jointly and
severally, represent and warrant to Buyer as follows:
SECTION 2.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction, with full corporate power and authority to conduct its business as
it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all of its obligations under the
Contracts (as defined in Section 2.19 below). Seller is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where failure to obtain such qualification
would not have a material adverse effect on the Business or its financial
condition. Schedule 2.1 contains a complete and accurate list of Seller's
jurisdiction of incorporation and any other jurisdiction in which it is
qualified to do business as a foreign corporation.
SECTION 2.2 Corporate Power and Authority. Seller (a) has the power and
authority to execute, deliver and perform this Agreement and the other
agreements, schedules, documents and instruments contemplated hereby to be
executed and delivered by it (collectively, the
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agreements, schedules, documents and instruments contemplated by this Agreement
shall constitute the "Documents") and to consummate the transactions
contemplated hereby and thereby, and (b) has taken all necessary corporate and
shareholder action to authorize and approve the execution, delivery and
performance of this Agreement and the Documents and the consummation of the
transactions contemplated hereby and thereby. This Agreement and the Documents
have been duly and validly executed and delivered by Seller and, subject to due
execution and delivery by Buyer, constitute valid and binding obligations of
Seller, enforceable against Seller in accordance with their terms.
SECTION 2.3 Books and Records. The books of account and other financial
records of Seller relating to the Business, all of which have been made
available to Buyer, are complete and represent actual, bona fide transactions
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls. The minute books of
Seller, which have been and will be made available to Buyer and its
representatives, contain accurate records of all meetings held of, and corporate
action taken by, the shareholders, the board of directors and committees of the
board of directors of Seller.
SECTION 2.4 Validity, Etc. Except as set forth on Schedule 2.4, neither
the execution and delivery of this Agreement or the other Documents to which
Seller is a party, the consummation of the transactions contemplated hereby or
thereby, nor the performance of this Agreement or the Documents in compliance
with the terms and conditions hereof and thereof by Seller will, directly or
indirectly (with or without notice or lapse of time) (i) violate, conflict with
or result in any breach of the Certificate of Incorporation, bylaws or any
resolutions adopted by the board of directors or shareholders of Seller, (ii)
violate, conflict with or result in a breach, default or termination under any
contract or agreement to which Seller is party or give rise to any right of
termination, cancellation or acceleration of the maturity of any payment date of
any of the indebtedness or other obligation of Seller, except for such defaults
(or rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained in writing and provided to Buyer, (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller, (iv) result in the creation of any Claim upon the
Transferred Assets, or (v) result in any shareholder of Seller having the right
to exercise dissenter's appraisal rights. Except as set forth on Schedule 2.4,
Seller is not and will not be required to obtain any consent or approval from or
to provide any notice to any Person (as defined in Section 3.4) in connection
with the execution and delivery of this Agreement or the consummation or
performance of the transactions contemplated by this Agreement and the other
Documents.
SECTION 2.5 Broker's or Finder's Fee. Except as set forth on Schedule 2.5,
no agent, broker, Person or firm acting on behalf of Seller is, or will be,
entitled to any commission or broker's or finder's fees from Seller, or from any
Person controlling, controlled by or under common control with Seller, in
connection with any of the transactions contemplated by this Agreement and the
other Documents.
SECTION 2.6 Capitalization, Shareholders, Subsidiaries and Investments.
The authorized equity securities of Seller consist of one thousand (1000) shares
of common stock, $1.00 par value per share, of which 1 share is issued and
outstanding. Shareholder is the sole shareholder of Seller and owns one hundred
percent (100%) of the issued and outstanding capital stock of Seller free and
clear of all Claims. There are no contracts or agreements, whether written or
oral, relating to the issuance, sale or transfer of any equity securities or
other securities
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of Seller. Seller has no subsidiaries and does not own, directly or indirectly,
any capital stock or other equity or ownership or proprietary interest in any
other corporation, partnership, association, trust, joint venture or other
entity.
SECTION 2.7 Financial Statements. Seller has previously furnished to
Buyer, and attached hereto as Schedule 2.7 are, the unaudited balance sheet of
the Business (the "Balance Sheet") as at December 31, 2001 (the "Balance Sheet
Date"), the related unaudited income statement for the fiscal year then ended,
and the unaudited balance sheet of the Business as at February 28, 2002 and the
related unaudited income statement for the two (2) months then ended. Except as
set forth on Schedule 2.7, all such financial statements (the "Financial
Statements") were prepared from the books and records of Seller in accordance
with Seller's historical policies and procedures consistently applied and fairly
present the financial position and results of operations, changes in
shareholders' equity and cash flows of Seller as of the respective dates of and
for the periods referred to in such Financial Statements.
SECTION 2.8 Absence of Certain Changes and Events. Since the Balance Sheet
Date, except as set forth on Schedule 2.8, Seller has not (i) incurred any
material liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise) outside of the ordinary course of business consistent
with past practices, (ii) canceled any indebtedness owing to it or any claims
that it might have possessed or waived any material rights of substantial value,
(iii) sold, leased, encumbered, transferred or otherwise disposed of, or agreed
to sell, lease, encumber, or otherwise dispose of its assets outside the
ordinary course of business consistent with past practice, (iv) permitted any of
its assets to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, (v) made any material capital
expenditure or commitment therefor, (vi) paid any bonuses, salaries or other
compensation to any shareholder, director, officer or employee, other than in
the ordinary course of business consistent with past practices, (vii) entered
into any employment, severance or similar contract with any director, officer,
shareholder or employee; (viii) declared or paid any dividend or made any
distribution on any shares of its capital stock, or redeemed, purchased or
otherwise acquired any shares of its capital stock or any option, warrant or
other right to purchase or acquire any such shares, (ix) borrowed or agreed to
borrow any funds, made any loan to any Person or guaranteed or agreed to
guarantee any obligations of others, (x) written off as uncollectible any notes
or accounts receivable, except write-offs in the ordinary course of business
charged to applicable reserves, (xi) made any material change in any method of
accounting or auditing practice, (xii) otherwise conducted the Business or
entered into any transaction, except in the ordinary course consistent with past
practices, or (xii) agreed, whether or not in writing, to do any of the
foregoing.
SECTION 2.9 Absence of Undisclosed Liabilities. Except (i) as and to the
extent of the amounts specifically reflected or reserved against in the Balance
Sheet, and (ii) liabilities and obligations incurred in the ordinary course of
business and consistent with past practice, Seller has no material liabilities
or obligations of any nature whether absolute, accrued, contingent or otherwise.
SECTION 2.10 Employment and Labor Matters.
(a) Schedule 2.10 lists each officer and employee of Seller
(including any retired employee or any employee on leave of absence or layoff
status but excluding employees
7
at the Rock Falls plant) exclusively involved in the Business on the date
hereof, along with the amount of the current annual salaries and total
compensation paid or due for services to each officer, or employee for the most
recent fiscal year end.
(b) Except as set forth on Schedule 2.10, Seller is not a party to
or bound by any collective bargaining agreement with any labor organization,
group or association covering any of its employees, and to the Knowledge (as
defined in Section 10.1) of Seller there is no current attempt to organize
Seller's employees by any Person, unit or group seeking to act as their
bargaining agent. There are no pending or, to the Knowledge of Seller,
threatened charges (by employees, their representatives or governmental
authorities) of unfair labor practices or of employment discrimination or of any
other wrongful action with respect to any aspect of employment of any person
employed or formerly employed by Seller. Within the last two years, Seller has
received no written notice of the scheduling by any governmental agency or
authority, of any union representation election relating to the employees of
Seller or any organizational effort with respect to any of such employees, or
any investigation of Seller's employment policies or practices by any
governmental agency or authority. Seller is not currently involved in labor
negotiations with any unit or group seeking to become the bargaining unit for
any employees of Seller. Within the last two years, Seller has not experienced
any material work stoppages.
(c) Seller has complied in all material respects with all laws and
regulations relating to the employment of labor, including, without limitation,
any provisions thereof relating to wages, hours, benefits, worker's
compensation, employment practices, terms and conditions of employment,
immigration, collective bargaining, equal opportunity or similar laws and the
payment of social security and similar taxes, and is not liable for any material
arrears of wages or any material taxes or penalties for failure to comply with
any of the foregoing.
SECTION 2.11 Real Property. Seller owns no real property used in the
Business.
SECTION 2.12 Powers of Attorney; Absence of Limitations on Competition;
Guarantees. Except as set forth in Schedule 2.12, (i) no power of attorney or
similar authorization given by Seller presently is in effect or outstanding;
(ii) no contract or agreement to which Seller is a party or is bound or to which
Seller's properties or assets are subject limits the freedom of Seller to
compete in any line of business or with any Person; and (iii) Seller is not a
party to or bound by any guarantee of any debt or obligation of any other
Person.
SECTION 2.13 Governmental Approvals. No registration or filing with, or
consent or approval of or other action by any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by Seller of this Agreement.
SECTION 2.14 Compliance with Law; Licenses and Permits. Except as set
forth on Schedule 2.25 regarding environmental matters, Seller is substantially
in compliance with all laws, ordinances, legal requirements, rules, regulations
and orders (collectively, "Legal Requirements") applicable to it, its
operations, properties, assets, products and services, including, but not
limited to, all Legal Requirements related to import, export and other customs
Legal Requirements related to the Business. Seller has not received any notice
or other communication (whether oral or written) from any governmental body or
any other Person
8
regarding (i) any actual, alleged, possible or potential violation of, or
failure to comply with any Legal Requirement, or (ii) any actual, alleged,
possible or potential obligation on the part of Seller to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature. Seller
possesses all franchises, permits, licenses, certificates and consents required
from any governmental or regulatory authority in order for Seller to carry on
the Business as currently conducted and to own and operate its properties and
assets as now owned and operated except for those franchises, permits, licenses,
certificates or consents which Seller's failure to so possess would not have a
material adverse effect on the Business or its financial condition.
SECTION 2.15 Employee Benefits.
(a) Set forth on Schedule 2.15 is a list of all pension, profit
sharing, retirement, deferred compensation, stock purchase, stock option, stock
appreciation right, employee stock ownership, incentive, bonus, vacation,
severance, change-in-control, disability, hospitalization, medical insurance,
life insurance, fringe benefit, welfare and other employee benefit plans,
programs, policies or arrangements pursuant to which Seller or its ERISA
Affiliates provide (directly or indirectly, individually or jointly through
others) benefits or compensation to or on behalf of employees, directors or
independent contractors or former employees or former directors or former
independent contractors of Seller (or its ERISA Affiliates) exclusively involved
in the Business, whether formal or informal, whether or not written ("Employee
Plan"). Seller shall furnish to Buyer true, complete and accurate copies of each
written Employee Plan and related trust agreement, a complete and accurate
description of each unwritten Employee Plan, a current copy of each summary plan
description, all insurance contracts relating to Employee Plans, and all annual
reports filed with respect to each Employee Plan for the last four years. Seller
shall maintain the Employee Plans listed on Schedule 2.15 in full force and
effect until the Effective Time. Except as set forth on Schedule 2.15, Buyer
shall not have any obligation or liability of any kind or nature for any
compensation or benefits of any kind or nature to the employees or consultants
of Seller for services rendered prior to the Effective Time.
(b) For purposes of this Section 2.15, the term "ERISA" shall mean
the Employee Retirement Income Security Act of 1974, as amended, and the term
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with Seller is treated as a single employer under
section 414(b), (c), (m), (o), or (t) of the Internal Revenue Code.
SECTION 2.16 Assets.
(a) The Transferred Assets constitute all of the assets, tangible
and intangible, of any nature whatsoever, necessary to operate the Business in
the manner presently operated by Seller and include all of the operating assets
of Seller, except in each case, the Excluded Assets and the Contracts and Leases
which are being dealt with pursuant to Section 1.1(c) and 1.1(e).
(b) Seller has good and marketable title to or a valid leasehold
interest in all of the Transferred Assets, free and clear of all Claims.
(c) Schedule 2.16 contains a true and complete list of all of the
Transferred Assets which are proprietary molds, key tooling or fixed assets with
an individual net book value
9
of greater than $25,000.00, whether owned or leased. All of Seller's fixed
assets, whether owned or leased, are adequate and usable for the purposes for
which they are currently used.
SECTION 2.17 Inventories.
(a) All inventory of Seller used in connection with the Business,
including all finished goods, work-in-process, raw materials, spare parts and
other materials and supplies to be used or consumed by Seller in the production
of finished goods (collectively, the "Inventories") (a) consist of items which
are good and merchantable within normal trade practice, and (b) are of a quality
presently usable or salable in the ordinary course of business consistent with
past practice.
(b) No previously sold Inventories are subject to returns in excess
of those historically experienced by Seller. Inventories now on hand that were
purchased subsequent to the Balance Sheet Date were purchased in the ordinary
course of business at a cost not exceeding market prices prevailing at the time
of purchase. All Inventories have been valued at Seller's standard cost which
standard costs have been approved by Buyer (the "Standard Costs").
(c) A listing of the Inventories of Seller and their respective
Standard Costs, as of the Closing Date, is attached to Schedule 2.17. All
Inventories are located in California, Florida, Illinois, North Carolina, Texas
or Mexico.
SECTION 2.18 Insurance. Seller is, and will be through the Closing,
insured with insurers in respect of its properties, assets and businesses as set
forth on the attached Schedule 2.18. The insurance policies listed on Schedule
2.18 are (i) valid, outstanding and enforceable, (ii) are issued by an insurer
that is financial sound and reputable; and (iii) taken together, provide
adequate insurance coverage of the assets and operations of Seller for all risks
normally insured against by a Person carrying on the same business or businesses
as Seller in the same location. Such insurance shall remain in full force and
effect with respect to all events occurring prior to the Effective Time. Except
as set forth on Schedule 2.18, Seller (i) has not failed to give any notice or
present any claim under any such policy or binder in due and timely fashion,
(ii) has not received notice of cancellation or non-renewal of any such policy
or binder, (iii) is not aware of any threatened or proposed cancellation or
non-renewal of any such policy or binder, and (iv) has not received notice of
any insurance premium which will be materially increased in the future. There
are no outstanding claims under any such policy which have gone unpaid for more
than 45 days as to which the insurer has disclaimed liability.
SECTION 2.19 Outstanding Contracts. Schedule 2.19 sets forth a list of all
existing contracts, agreements, leases (other than real property leases),
commitments, licenses and franchises related to the Business, which involve
obligations or commitments by Seller of $50,000 or more and are not cancelable
by Seller without penalty within thirty (30) days, along with a list or copy of
all of purchase orders being transferred by Seller to Buyer hereunder (together
with those not required to be listed because of the amount involved,
collectively, the "Contracts"), whether written or oral. Seller has delivered or
made available to Buyer true, correct and complete copies of all of the
Contracts specified on Schedule 2.19 which are in writing, and such schedule
sets forth a complete description of all Contracts which are not in writing. All
of the Contracts on Schedule 2.19 are in full force and effect and enforceable
in accordance with their terms. Seller and, to the Knowledge of Seller, each
other party thereto has
10
materially performed all the obligations required to be performed by it, has
received no notice of default and is not in default (with due notice or lapse of
time or both) under any of these Contracts. Seller has no Knowledge of any
significant breach by the other party to any of the Contracts to which Seller is
a party. No written notice of termination of, or any threat to terminate, any of
the Contracts has been given or received by Seller.
SECTION 2.20 Outstanding Leases. Schedule 2.20 sets forth a list of each
agreement by which Seller leases each parcel of real property (the "Real
Property") used in connection with the Business (collectively, the "Leases").
Seller has delivered or made available to Buyer true, correct and complete
copies of all of the Leases specified on Schedule 2.20. All rents due under the
Leases have been paid. All of the Leases are in full force and effect and
enforceable in accordance with their terms. Except as set forth on Schedule
2.20, Seller, and to the Knowledge of Seller, each other party thereto has
performed all the obligations required to be performed by it, has received no
notice of default and is not in default (with due notice or lapse of time or
both) under any of the Leases. Seller has no Knowledge of any breach or
anticipated breach by the other party to any of the Leases. No written notice of
termination of, or any threat to terminate, any of the Leases has been given or
received by Seller.
SECTION 2.21 Foreign Person. Seller is not a foreign person as that term
is defined in Section 1445(f)(3) of the Code and applicable regulations.
SECTION 2.22 Significant Customers. Set forth on Schedule 2.22 is a true
and correct list of Business' twenty (20) largest customers, based upon the
amount of revenues attributable to such customers for the most recent twelve
(12) month period ending December 31, 2001, together with the amount of services
attributable to such customers expressed in dollars and as a percentage of total
sales and services.
SECTION 2.23 Taxes.
(a) All federal, state, local and foreign tax returns and tax
reports and customs reports or filings (collectively "Tax Returns") required to
be filed by Seller on or before the date hereof have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such returns and
reports are required to be filed and all amounts shown as owing thereon or
actually owed have been paid. All taxes, including, without limitation, income,
accumulated earnings, property, sales, use, franchise, capital stock, excise,
license, value added, fuel, customs, employees' income withholding and social
security taxes (collectively, "Taxes"), which have become due or payable or are
required to be collected by Seller or are otherwise attributable to any periods
ending on or before the Closing Date and all interest and penalties thereon,
whether disputed or not, have been paid. Seller currently is not the beneficiary
of any extension of time within which to file any Tax Return. There are no
Claims on any of the Transferred Assets that arose in connection with any
failure (or alleged failure) to pay any Tax, and Seller has no Knowledge of any
basis for assertion of any claims attributable to such Taxes, which, if
adversely determined, would result in any such Claim.
(b) Seller has delivered or made available to Buyer copies of, and
Schedule 2.23 contains a complete and accurate list of, all Tax Returns filed
since January 1, 1999. Schedule 2.23 contains a complete and accurate list of
all Tax Returns of Seller that have been audited or are currently under audit
and accurately describes any deficiencies or other amounts
11
that were paid or are currently being contested. To the Knowledge of Seller, no
undisclosed deficiencies are reasonably expected to be asserted with respect to
any such audit. Seller has no Knowledge that any governmental body or authority
is likely to assess any additional Taxes for any period for which Tax Returns
have been filed. Seller has not given or been requested to give waivers or
extensions of any statute of limitations relating to the payment of Taxes of
Seller for which Seller may be liable.
(c) The charges, accruals and reserves with respect to Taxes on the
books and records of Seller are adequate (determined in accordance with GAAP)
and are at least equal to Seller's liability for Taxes.
(d) All Taxes that Seller is or was required by law to withhold,
deduct or collect have been duly withheld, deducted and collected and, to the
extent required, have been paid to the proper governmental body or authority.
(e) There is no tax sharing arrangement, tax allocation agreement,
tax indemnity obligation or similar written or unwritten agreement, arrangement,
understanding or practice with respect to Taxes that will require any payment by
Seller.
(f) Seller has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662.
SECTION 2.24 Litigation. Except as set forth on Schedule 2.24, there is no
(i) action, suit, claim, proceeding or investigation pending or, to the
Knowledge of Seller, threatened against the Business at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceeding pending against the Business, or (iii) governmental
inquiry pending or, to the Knowledge of Seller, threatened against or involving
the Business. There are no outstanding material orders, writs, judgments,
injunctions or decrees served upon Seller by any court, governmental agency or
arbitration tribunal against Seller. Seller is not in default with respect to
any material order, writ, injunction or decree served upon it from any court or
of any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign. There is no
material action or suit by Seller pending or threatened against any third party.
SECTION 2.25 Environmental Matters. Except as disclosed in Schedule 2.25:
(a) The Seller has at all times conducted its operations in
substantial compliance with, and all equipment is in substantial compliance
with, all applicable Environmental Laws. There is no pending or, to the
knowledge of Seller, threatened claim, lawsuit, agency proceeding, or other
action or proceeding arising under Environmental Laws concerning the Transferred
Assets or operation of the Transferred Assets. Except as set forth on Schedule
2.25, none of the equipment contains any Hazardous Material.
(b) As used in this Section 2.25, the term "Environmental Law" shall
mean any federal, state, local, or other law, ordinance, code, regulation, order
or decree issued, promulgated or entered into by any governmental entity,
relating to the environment, preservation or reclamation of natural resources,
or to Hazardous Materials.
12
(c) As used in this Section 2.25, the term "Hazardous Materials"
shall mean any flammables, explosives, radioactive materials, asbestos, presumed
asbestos-containing material, polychlorinated biphenyls ("PCBs"), pollutants,
contaminants, hazardous wastes, toxic substances or related materials, urea
formaldehyde, petroleum and petroleum products.
SECTION 2.26 Intellectual Property.
(a) The term "Intellectual Property Assets" means all intellectual
property that is owned, licensed (as licensor or licensee) or utilized by Seller
or in which Seller has a proprietary interest and which is used in the Business
(other than licenses for commonly available software programs under which Seller
is a licensee), including, without limitation:
(i) all assumed fictional business names, trade names,
registered and unregistered trademarks, service marks and
applications (collectively, "Marks");
(ii) all patents, patent applications and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all registered and unregistered copyrights in both
published works and unpublished works (collectively, "Copyrights");
(iv) all rights in mask works;
(v) all know-how, trade secrets, confidential or proprietary
information, customer lists, software, technical information, data,
process technology, plans, drawings and blue prints (collectively,
"Trade Secrets").
(b) Schedule 2.26 contains a complete and accurate list and summary
description, including royalties paid or received by Seller with respect to the
Business for the last two years, and Seller has delivered to Buyer accurate and
complete copies, of all Seller contracts relating to the Intellectual Property
Assets. Except as set forth on Schedule 2.26, there are no outstanding and, to
Seller's Knowledge, no threatened disputes or disagreements with respect to any
such contract.
(c) Except as set forth on Schedule 2.26, the Intellectual Property
Assets are all those necessary for the operation of the Business as it is
currently conducted. Except as otherwise provided in Schedule 2.26, Seller is
the owner or licensee of all right, title and interest in and to each of the
Intellectual Property Assets, free and clear of all Claims, and has the right to
use without payment to another Person, all of the Intellectual Property Assets.
(d) Schedule 2.26 contains a complete and accurate list and summary
description of all Patents used exclusively in the Business. All of the issued
Patents used in the Business are currently in compliance with formal Legal
Requirements (including payment of filing, examination and maintenance fees and
proofs of working or use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days after
the Closing Date.
(e) Schedule 2.26 contains a complete and accurate list and summary
description of all Marks used exclusively in the Business. Except as otherwise
provided on
13
Schedule 2.26, all Marks used in the Business have been registered with the
United States Patent and Trademark Office, are currently in compliance with all
formal Legal Requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications) are valid and
enforceable and are not subject to any maintenance fees or taxes or actions
falling due within ninety (90) days after the Closing Date.
(f) Schedule 2.26 contains a complete and accurate list and summary
description of all Copyrights used exclusively in the Business. All registered
Copyrights used in the Business are currently in compliance with all formal
Legal Requirements.
(g) Schedule 2.26 contains a complete and accurate list and summary
description of all Licensed Assets being transferred to Buyer pursuant to the
License Agreement. Seller has the right to enter into the License Agreement and
license the Licensed Assets to Buyer free and clear of all claims and without
payment of any license fee.
(h) There are no pending or, to the Knowledge of Seller, threatened
proceedings or litigation or other adverse claims affecting or with respect to
any of the Intellectual Property Assets. There is, to the Knowledge of Seller,
no reasonable basis upon which a claim may be asserted against Seller for
infringement of any Intellectual Property Assets of any other Person. To the
Knowledge of Seller, no Person is infringing the Intellectual Property Assets.
SECTION 2.27 No Material Adverse Change. Since the Balance Sheet Date,
there has not been any material adverse change in the Business, operations,
assets, results of operations or condition (financial or otherwise) of Seller,
and no event has occurred that is reasonably likely to result in such a material
adverse change.
SECTION 2.28 Product Warranty. To the Knowledge of Seller, Seller does not
have any liabilities for product warranties other than those set forth in the
terms and conditions of sale furnished to Buyer.
SECTION 2.29 Product Liability. To the Knowledge of Seller, Seller does
not have any liability arising out of any injury to individuals or property as a
result of the ownership, possession or use of any product manufactured, sold,
leased or delivered by Seller in connection with the Business.
SECTION 2.30 Certain Practices. To the Knowledge of Seller, none of
Seller's directors, officers or employees have, 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; established or maintained
any unlawful or unrecorded fund of corporate monies or other assets; made any
false or fictitious entry on the books or records of Seller or any subsidiary;
given any favor or gift which is not deductible for federal income tax purposes;
or made any bribe, kickback, or other payment of a similar or comparable nature,
whether lawful or not, to any person or entity, private or public, regardless of
form, whether in money, business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained.
14
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Shareholder represents and warrants to
Buyer as follows:
SECTION 3.1 Organization and Qualification. Shareholder is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to conduct its
business as it is now being conducted.
SECTION 3.2 Corporate Power and Authority. Shareholder (a) has the power
and authority to execute, deliver and perform this Agreement and the Documents
contemplated hereby to be executed and delivered by it and to consummate the
transactions contemplated hereby and thereby, and (b) has taken all necessary
corporate and shareholder action to authorize and approve the execution,
delivery and performance of this Agreement and the Documents and the
consummation of the transactions contemplated hereby and thereby. This Agreement
and the Documents have been duly and validly executed and delivered by
Shareholder and, subject to due execution and delivery by Buyer, constitute
valid and binding obligations of Shareholder, enforceable against Shareholder in
accordance with their terms.
SECTION 3.3 Validity, Etc. Except as set forth on Schedule 2.4, neither
the execution and delivery of this Agreement or the other Documents to which
Shareholder is a party, the consummation of the transactions contemplated hereby
or thereby, nor the performance of this Agreement or the Documents in compliance
with the terms and conditions hereof and thereof by Seller will, directly or
indirectly (with or without notice or lapse of time) (i) violate, conflict with
or result in any breach of the Certificate of Incorporation, bylaws or any
resolutions adopted by the board of directors or shareholders of Seller, (ii)
violate, conflict with or result in a breach, default or termination under any
contract or agreement to which Seller is party or give rise to any right of
termination, cancellation or acceleration of the maturity of any payment date of
any of the indebtedness or other obligation of Seller, except for such defaults
(or rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained in writing and provided to Buyer, (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller, or (iv) result in the creation of any Claim upon the
Transferred Assets. Shareholder is not and will not be required to obtain any
consent or approval from or to provide any notice to any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of the transactions contemplated by this Agreement and the other
Documents.
SECTION 3.4 Relationships with Affiliates. Except as disclosed in Schedule
3.4, Shareholder has no interest in any property (whether real, personal or
mixed and whether tangible or intangible) used in or pertaining to the Business.
Neither Shareholder nor any Affiliate (defined below) of Shareholder during 2001
engaged in any transaction or series of related transactions with the Business
involving more than $60,000 other than business dealings or transactions
disclosed in Schedule 3.4, each of which has been conducted in the ordinary
course of business with Seller at substantially prevailing market prices and on
substantially prevailing market terms. An "Affiliate" is as defined by the
Securities and Exchange Commission.
15
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller and Shareholder to enter into this Agreement
and to consummate the transactions contemplated hereby, Buyer represents and
warrants to Seller and Shareholder as follows:
SECTION 4.1 Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
SECTION 4.2 Corporate Power and Authority. Buyer (a) has the corporate
power and authority to execute, deliver and perform this Agreement and the
Documents to be executed by it and to consummate the transactions contemplated
hereby and thereby, and (b) has taken all necessary corporate and shareholder
action to authorize and approve the execution, delivery and performance of this
Agreement and the other Documents and the consummation of the transactions
contemplated hereby and thereby. This Agreement and the other Documents to which
Buyer is a party have been duly and validly executed and delivered by Buyer and,
subject to due execution and delivery by Seller and Shareholder, constitute
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with their terms.
SECTION 4.3 Validity, Etc. Neither the execution and delivery of this
Agreement or the other Documents to which Buyer is a party, the consummation of
the transactions contemplated hereby or thereby, nor the performance of this
Agreement or the other Documents to which Buyer is a party in compliance with
the terms and conditions hereof and thereof by Buyer will violate, conflict with
or result in any breach of the Certificate of Incorporation or bylaws of Buyer
or any writ, injunction, judgment, decree, order, statute, rule or regulation
applicable to Buyer. SECTION 4.4 Broker's or Finder's Fee. No agent, broker,
Person or firm acting on behalf of Buyer is, or will be, entitled to any
commission or broker's or finder's fees from Buyer, or from any Person
controlling, controlled by or under common control with Buyer, in connection
with any of the transactions contemplated herein.
ARTICLE 5
COVENANTS AND AGREEMENTS
SECTION 5.1 Required Approvals. As promptly as practicable after the date
of this Agreement, Seller shall make all filings and give all notices that are
required by law to be made in order to consummate the transactions contemplated
by this Agreement and the other Documents (including all filings under the ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ Act). Seller and Shareholder shall also cooperate with Buyer and
its representatives with respect to all filings that Buyer elects to make or,
pursuant to applicable law, shall be required to make in order to consummate the
transactions contemplated by this Agreement and the other Documents. Seller and
Shareholder shall use their Best Efforts to obtain all consents of third parties
that are required in connection with this transaction, unless otherwise waived
by Buyer.
16
SECTION 5.2 Employees And Employee Benefits.
(a) Information on Active Employees. For purposes of this Agreement,
the term "Active Employees" shall mean all employees employed by Seller or an
Affiliate in connection with the Business immediately prior to the Effective
Time who are:
(i) bargaining unit employees currently covered by a
collective bargaining agreement, or
(ii) employed exclusively in the Business as currently
conducted, including employees on temporary leave of absence,
including family medical leave, military leave, temporary disability
or sick leave, but excluding employees on long-term disability
leave.
(b) Employment of Active Employees by Buyer.
(i) Buyer will have reasonable access to the facilities and
personnel records (including performance appraisals, disciplinary
actions, grievances and medical Records) of Seller or an Affiliate
for the purpose of preparing for and conducting employment
interviews with any Active Employees it chooses to interview. Buyer
shall offer employment to the Active Employees listed on Schedule
5.2, but is not otherwise obligated to hire any Active Employee. Any
Active Employees to whom Buyer has made an offer of employment that
has been accepted to be effective as of the Effective Time shall be
referred to as the "Hired Active Employees". Buyer shall give
service credit for service with Seller for purposes of Buyer's
benefit plans, arrangements, policies and procedures, including, but
not limited to (i) eligibility to participate and qualify for
benefits under all of Buyer's "employee welfare benefit plans", and
(ii) eligibility to participate and vesting under Buyer's "employee
pension benefit plans" as defined under ERISA. Provided, however,
that Buyer shall not give service credit for service with Seller for
purposes of any of Buyer's severance plans, arrangements, policies
and procedures and benefit accrual or calculation purposes unless
the employment of a Hired Active Employee is terminated within the
first twelve (12) months of employment with Buyer, in which case
Buyer shall give two (2) weeks service credit for each year of
service with Seller. Effective immediately before the Effective
Time, Seller will terminate the employment of all of its Hired
Active Employees. Buyer shall be given a reasonable opportunity to
hire any Active Employees being retained by Seller for purposes of
the Transition Services Agreement upon the completion of that
agreement and any such employees hired by Buyer shall be considered
Hired Active Employees.
(ii) Neither Seller nor Shareholder nor their Affiliates shall
solicit the continued employment of any Active Employee (unless and
until Buyer has informed Seller in writing that the particular
Active Employee will not receive any employment offer from Buyer in
accordance with the above provisions). For a period of two (2) years
after the Closing, neither Arris Group, Inc., the parent of the
Shareholder (the "Shareholder Parent"), nor any of its subsidiaries
will knowingly hire any other Hired Active Employee (unless and
until that Employee
17
has been terminated by Buyer) or in any manner induce or attempt to
induce any employee of Seller to terminate his or her employment
with Buyer.
(iii) It is understood and agreed that (A) Buyer's obligation
to extend offers of employment as set forth in this section shall
not constitute any commitment, contract or understanding (expressed
or implied) of any obligation on the part of Buyer to a post-Closing
employment relationship of any fixed term or duration or upon any
terms or conditions other than those that Buyer may establish
pursuant to individual offers of employment, except as otherwise
provided herein, and (B) employment offered by Buyer is "at will"
and may be terminated by Buyer or by an employee at any time for any
reason (subject to any written commitments to the contrary made by
Buyer or an employee and applicable law, to the provision of
severance benefits in accordance with Buyer's plans and practices,
and the collective bargaining agreement, if applicable). Nothing in
this Agreement shall be deemed to prevent or restrict in any way the
right of Buyer to terminate, reassign, promote or demote any of the
Hired Active Employees after the Closing or to change adversely or
favorably the title, powers, duties, responsibilities, functions,
locations, salaries, other compensation or terms or conditions of
employment of such employees.
(c) Salaries and Benefits.
(i) Seller shall be responsible for (A) the payment of all
wages and other remuneration due to Active Employees with respect to
their services as employees of Seller through the Effective Time,
including pro rata bonus payments and all vacation pay earned prior
to the Effective Time; (B) the payment of any termination or
severance payments and the provision of health plan continuation
coverage in accordance with the requirements of COBRA and Sections
601 through 608 of ERISA; and (C) any and all payments to employees
required under the Worker Adjustment and Retraining Notification Act
(the "WARN Act.").
(ii) Seller shall be liable for any claims made or incurred by
Active Employees and their beneficiaries through the Closing Date
under the Employee Plans. For purposes of the immediately preceding
sentence, a charge will be deemed incurred, in the case of hospital,
medical or dental benefits, when the services that are the subject
of the charge are performed and, in the case of other benefits (such
as disability or life insurance), when an event has occurred or when
a condition has been diagnosed that entitles the employee to the
benefit.
(d) Seller's Retirement and Savings Plans. All Hired Active
Employees who are participants in Seller's retirement plans shall retain their
accrued benefits under Seller's retirement plans as of the Closing Date, and
Seller (or Seller's retirement plans) shall retain sole liability for the
payment of such benefits as and when such Hired Active Employees become eligible
therefor under such plans. All Hired Active Employees shall become fully vested
in their accrued benefits under Seller's retirement plans as of the Closing
Date, and Seller will so amend such plans if necessary to achieve this result.
18
(e) No Transfer of Assets. Neither Seller nor Shareholder nor their
respective Affiliates will make any transfer of pension or other employee
benefit plan assets to Buyer, until such time as approved by Buyer.
(f) General Employee Provisions.
(i) Seller and Buyer shall give any notices required by law
and take whatever other actions with respect to the plans, programs
and policies described in this Section 5.2 as may be necessary to
carry out the arrangements described in this Section 5.2.
(ii) Seller and Buyer shall provide each other with such plan
documents and summary plan descriptions, employee data or other
information as may be reasonably required to carry out the
arrangements described in this Section 5.2.
(iii) If any of the arrangements described in this Section 5.2
are determined by the Internal Revenue Service or other governmental
body to be prohibited by law, Seller and Buyer shall modify such
arrangements to as closely as possible reflect their expressed
intent and retain the allocation of economic benefits and burdens to
the parties contemplated herein in a manner that is not prohibited
by law.
(iv) Except as disclosed in Schedule 5.2(b)(iv), Seller has no
foreign born Hired Active Employees who are employed in the United
States pursuant to a work visa.
(v) Buyer shall not have any responsibility, liability or
obligation, whether to Active Employees, former employees, their
beneficiaries or to any other Person, with respect to any employee
benefit plans, practices, programs or arrangements (including the
establishment, operation or termination thereof and the notification
and provision of COBRA coverage extension) maintained by Seller.
(g) Incentive Arrangements. For the 2002 and 2003 Revenue Periods,
Buyer will establish incentive arrangements for the achievement of revenues and
gross profits on an aggregate basis during the Revenue Period for the Hired
Active Employees who had incentive plans for the year prior to the Closing
consistent with Buyer's current incentive plans for employees in similar
positions.
SECTION 5.3 Customer and Other Business Relationships After the Closing,
Seller and Shareholder shall cooperate with Buyer in its efforts to continue and
maintain for the benefit of Buyer those business relationships of Seller
existing prior to the Closing and relating to the business to be operated by
Buyer after the Closing, including relationships with lessors, employees,
regulatory authorities, licensors, customers, suppliers and others. Seller will
refer to Buyer all inquiries relating to the Business, other than Retained
Liabilities. Neither Seller nor any of its officers, employees, agents or
shareholders shall take any action that would tend to diminish the value of the
Transferred Assets after the Closing or that would interfere with the
19
business of Buyer to be engaged in after the Closing, including disparaging the
name or business of Buyer.
SECTION 5.4 Tax Returns. After the Closing, Seller shall prepare, at its
sole expense, and timely file all of Seller's required Tax Returns, including,
but not limited to, any short period returns and returns in the normal course.
Seller and/or Shareholder, as applicable, shall be responsible for the payment
of all amounts due or actually owed under such Tax Returns, and shall indemnify,
defend and hold Buyer harmless against all Taxes due from or assessed against
Seller.
SECTION 5.5 Employment Tax Reporting.. Following the Closing Date, Buyer
and Seller shall abide by the alternate procedure for employment tax reporting
set forth in Section 5 of IRS Revenue Procedure 96-60 with respect to the filing
of all applicable Form W-2s, 941s or other related employment tax filings for
2002.
SECTION 5.6 Payment of Liabilities. Seller shall pay and satisfy in full
all the Retained Liabilities.
SECTION 5.7 Covenants of Seller and Shareholder.
(a) Confidential Information and Trade Secrets. Seller and
Shareholder hereby agree that they and each of their respective directors,
officers, shareholders and employees shall not disclose to any Person any
confidential and trade secret information, including, but not limited to,
matters of a technical nature, such as formulae, "know how," computer programs,
systems and software (including, without limitation, documentation and related
source and object codes), product sources, product research and designs, and
matters of a business nature, such as its customer lists, customer contact
information, on-site program and support materials, training programs and
associated materials, pricing lists, contracts, sales reports, sales, financial
and marketing data, systems, forms, methods, procedures, and analyses, and any
other proprietary information, whether communicated orally or in documentary or
other tangible form, primarily concerning the Business (hereinafter,
collectively referred to as "Confidential Information"). Seller and Shareholder
recognize that Seller has invested considerable amounts of time and money in
attaining and developing the Confidential Information, and any unauthorized
disclosure or release of such Confidential Information in any form would
irreparably harm Buyer. Notwithstanding the foregoing, the obligations imposed
by this Section shall not apply, or shall cease to apply, to any Confidential
Information if and when, but only to the extent that, such Confidential
Information: (i) was, or becomes through no breach of Seller or Shareholder
hereunder, known to the public; or (ii) becomes known to Seller or Shareholder
from a source other than Buyer under circumstances which, to the Knowledge of
Seller and Shareholder, do not involve any breach of any confidentiality
obligations between such source and Buyer. In addition, it shall not be a breach
of Seller's and Shareholder's obligations hereunder for Seller or Shareholder to
disclose Confidential Information where, but only to the extent that, such
disclosure is required by law or applicable legal process.
(b) Non-Competition Covenants. Seller and Shareholder operate the
Business throughout the United States of America, India and Mexico (the
"Territory"). In consideration of the rights granted hereunder, Seller and
Shareholder agree that during the Non-Compete Period (as defined below) neither
they, Shareholder Parent nor any other subsidiary of Shareholder
20
Parent shall (without the prior written consent of Buyer), in any manner,
directly or indirectly, engage in, have any equity or profit interest in, make
any loan to or for the benefit of, guaranty the repayment of funds by, or render
any services of any executive, marketing, sales, administrative, supervisory or
consulting nature to any business conducting operations in the Territory which
are competitive with the Business, except as set forth on Schedule 5.7, except
as contemplated by the Distribution Agreement (defined in Section 6.3 below) or
except for an interest that is acquired as part of an acquisition or merger and
divested within six (6) months of acquisition.
(c) Non-Solicitation and Other Covenants. Seller and Shareholder
further agree that during the Non-Compete Period, neither they, Shareholder
Parent nor any other subsidiary of Shareholder Parent shall, without the prior
written approval of Buyer, directly or indirectly, acting either alone or in
concert with others: (i) solicit, divert or appropriate or attempt to solicit,
divert or appropriate any customers, clients, or suppliers of Seller for the
purpose of providing services competitive, with the Business, except as set
forth in Schedule 5.7, except as contemplated by the Distribution Agreement or
except in the case of an acquisition which is being divested as provided above;
or (ii) at any time publicly disparage Buyer or any of its shareholders,
directors, officers, employees or agents.
(d) Non-Compete Period. As used herein, "Non-Compete Period" shall
mean the period beginning on the Closing Date and ending on the third (3rd)
anniversary of the Closing Date.
(e) Severability. If any court shall in any proceeding refuse to
enforce Section 5.7(b) in whole or in part because the time limit, geographical
scope or any other element thereof is deemed unreasonable in the jurisdiction of
that court, it is expressly understood and agreed that Section 5.7(b) shall not
be void but, for the purpose of such proceeding, such time limit, geographical
scope or other element shall be deemed to be reduced to the extent necessary to
permit the enforcement of Section 5.7(b) to the maximum extent allowable in that
particular jurisdiction. The foregoing, however, is not intended to and shall
not in any way affect, invalidate or limit the remaining provisions of Section
5.7(b) or affect, invalidate or limit the validity or enforceability of Section
5.7(b) as written in any other jurisdiction at any time.
(f) Injunctive Relief. Seller and Shareholder hereby agree that any
breach or threatened breach by Seller or Shareholder of Section 5.7(a), Section
5.7(b) or Section 5.7(c) of this Agreement will irreparably injure Buyer and
that any remedy at law for any breach or threatened breach by Seller or
Shareholder of the provisions contained in Section 5.7(a), Section 5.7(b) or
Section 5.7(c) hereof shall be inadequate, and that Buyer shall be entitled to
injunctive relief in addition to any other remedy they might have under this
Agreement or at law or in equity without the necessity of (i) proving monetary
damages or the insufficiency thereof.
SECTION 5.8 Further Assurances. Buyer, Seller and Shareholder shall
cooperate reasonably with each other and with their respective representatives
in connection with any steps required to be taken as part of their respective
obligations under this Agreement, and shall (a) furnish upon request to each
other such further information; (b) execute and deliver to each other such other
documents; and (c) do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement,
the other Documents and the transactions contemplated hereby and thereby.
21
SECTION 5.9 Best Efforts. Seller and Shareholder shall use their Best
Efforts to cause the conditions in Article 6 to be satisfied.
ARTICLE 6
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to make deliveries to Seller pursuant to Section
1.2 hereof and to consummate the other transactions contemplated hereby is
subject to the satisfaction, on or before the Closing Date, of the following
conditions each of which may be waived by Buyer in its sole discretion:
SECTION 6.1 Consents. Except as set forth on Schedule 2.4 hereof, ,
Schedule 6.1 contains a complete list of all consents or approvals required in
connection with the consummation of the transactions contemplated by this
Agreement or the other Documents. All consents and approvals set forth on
Schedule 6.1 shall have been obtained and shall be in full force and effect.
SECTION 6.2 Solectron Manufacturing Services Agreement. Buyer and
Solectron shall have executed and delivered a Manufacturing Services Agreement,
in substantially the form attached hereto as Exhibit D (the "Solectron
Manufacturing Services Agreement").
SECTION 6.3 Distribution Agreement. Telewire Supply, a division of
Telewire International, Inc., a subsidiary of Shareholder, shall have executed
and delivered to Buyer a Distribution Agreement in substantially the form
attached hereto as Exhibit E (the "Distribution Agreement").
SECTION 6.4 Transition Services Agreement. Buyer and Shareholder shall
have executed and delivered a Transition Services Agreement in substantially the
form attached hereto as Exhibit F (the "Transition Services Agreement").
SECTION 6.5 Opinion of Counsel to Seller and Shareholder. Buyer shall have
received from ▇▇▇▇▇ ▇. ▇▇▇▇, counsel to Seller and Shareholder, an opinion,
dated as of the Closing Date, in form and substance reasonably satisfactory to
Buyer and in substantially the form of Exhibit G.
SECTION 6.6 Approval of Board of Directors of Buyer and Approval of . The
Board of Directors of Buyer and the Chief Executive Officer of shall have
approved this Agreement and the transactions contemplated hereby.
SECTION 6.7 Amendment to Certificate of Incorporation. Seller shall have
prepared for filing Certificate of Amendment to its Certificate of Incorporation
changing its name to a name other than "Keptel, Inc."
SECTION 6.8 Closing Documents. Seller shall have delivered all of the
resolutions, certificates, documents and instruments required by this Agreement.
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ARTICLE 7
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of Seller to transfer the Transferred Assets to Buyer and
the obligations of Seller and the Shareholder to consummate the other
transactions contemplated hereby is subject to the satisfaction, on or before
the Closing Date, of the following conditions, each of which may be waived by
Seller or Shareholder in their sole discretion:
SECTION 7.1 Solectron Manufacturing Services Agreement. Buyer and
Solectron Corporation shall have executed and delivered the Manufacturing
Services Agreement.
SECTION 7.2 Distribution Agreement. Buyer shall have executed and
delivered the Distribution Agreement.
SECTION 7.3 Transition Services Agreement. Buyer shall have entered into
the Transition Services Agreement.
SECTION 7.4 Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇. Seller and the Shareholder shall
have received from ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, PLLC, counsel to Buyer, an opinion dated
as of the Closing Date, in form and substance reasonably satisfactory to Seller
and the Shareholder, and to the following effect:
(a) Buyer is a corporation validly existing and in good standing
under the laws of the State of Delaware;
(b) Buyer has the corporate power and authority to execute, deliver
and perform the Agreement and the other Documents to which it is a party. The
Agreement and the other Documents to which it is a party have been duly and
validly executed and delivered by Buyer and constitute the legal, valid and
binding obligations of Buyer, enforceable against Buyer in accordance with their
terms; and
(c) The execution, delivery and performance of the Agreement and the
other Documents to which Buyer is a party, and the consummation of the
transactions contemplated hereby and thereby in compliance with the terms and
conditions hereof and thereof by Buyer will not (i) violate, conflict with or
result in any breach of the Certificate of Incorporation or bylaws of Buyer,
(ii) to the knowledge of counsel, violate, conflict with or result in a breach,
default or termination under any contract or agreement to which Buyer is a party
or give rise to any right of termination, cancellation or acceleration of the
maturity of any payment date of any indebtedness or other obligations of Buyer,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained in
writing and provided to Seller, or (iii) to the knowledge of counsel, violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Buyer.
SECTION 7.5 Closing Documents. Buyer shall have delivered all of the
resolutions, certificates, documents and instruments required by this Agreement.
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ARTICLE 8
THE CLOSING AND CERTAIN CLOSING DELIVERIES
SECTION 8.1 Time and Place of Closing. Upon the terms and subject to the
satisfaction of waiver of the conditions contained in this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of the Seller at ___.m. on the date hereof (the
"Closing Date"). The transactions contemplated in this Agreement shall be
effective as of 12:01 A.M. on the Closing Date (the "Effective Time").
SECTION 8.2 Deliveries by Seller and the Shareholder. At the Closing,
Seller and/or Shareholder, as appropriate, will deliver or cause to be delivered
to Buyer the following:
(a) the ▇▇▇▇ of Sale required by Section 1.1(c);
(b) the Assignment and Assumption Agreement required by Section
1.1(c);
(c) the Distribution Agreement required by Section 6.3;
(d) the Transition Services Agreement required by Section 6.5;
(e) Articles of Amendment to Seller's Certificate of Incorporation;
(f) a copy of the resolutions of the Board of Directors and
shareholder of Seller adopting and approving this Agreement and the transactions
contemplated hereby; and
(g) all other documents, instruments and writings required to be
delivered by Seller at or prior to the Closing Date pursuant to this Agreement
or otherwise required in connection herewith.
SECTION 8.3 Deliveries by Buyer. At the Closing, Buyer will deliver the
following to Seller:
(a) the payment required by Section 1.2(a) above;
(b) the Assignment and Assumption Agreement required by Section
1.1(c) above;
(c) a certificate from an authorized representative of Buyer
certifying satisfaction of the conditions precedent in Sections 6.2 and 6.6;
(d) the Distribution Agreement required by Section 7.2 above;
(e) the Transition Services Agreement required by Section 7.4;
(f) a copy of the resolutions of the Board of Directors of Buyer
adopting the Agreement and authorizing the transactions contemplated hereby; and
24
(g) all other documents, instruments and writings required to be
delivered by Buyer at or prior to the Closing Date pursuant to this Agreement or
otherwise required in connection herewith.
ARTICLE 9
SURVIVAL AND INDEMNIFICATION
SECTION 9.1 Survival. All representations, warranties and indemnification
obligations contained in this Agreement and the other Documents shall survive
the Closing of the purchase of the Transferred Assets contemplated by this
Agreement for a period of three (3) years, except that (a) claims, if any,
asserted in writing prior to such third anniversary identified as a claim for
indemnification pursuant to this Article 9 shall survive until finally resolved
and satisfied in full; and (b) customs, tax, or environmental representations
and warranties contained in Section 2.14, Section 2.23 or Section 2.25,
respectively, and any claims resulting from a breach thereof shall survive for
the full period of the applicable statute of limitations, and until finally
resolved and satisfied in full if asserted in writing on or prior to the
expiration of any such period. The representations and warranties shall not be
affected or otherwise diminished by any investigation at any time by or on
behalf of the party for whose benefit such representations and warranties were
made.
SECTION 9.2 Indemnification by Seller and the Shareholder. Subject to the
terms and limitations in this Article 9, Seller and Shareholder, jointly and
severally, shall indemnify, defend, and hold Buyer, its directors, officers,
shareholders and successors and assigns (the "Buyer's Indemnitees") harmless
from, against and with respect to any claim, liability, obligation, loss,
damage, assessment, judgment, cost and expense of any kind or character,
including reasonable attorneys' fees and expenses (the "Buyer Damages"), arising
out of or in any manner incident, relating or attributable to:
(a) any inaccuracy in any representation or breach of any warranty
of Seller or the Shareholder contained in this Agreement;
(b) any failure by Seller or Shareholder to perform or observe, or
to have performed or observed, in full, any covenant, agreement or condition to
be performed or observed by it under this Agreement;
(c) liabilities or obligations relating to, or arising out of, the
operation of the Business prior to the Effective Time, whether or not such
liabilities, obligations or claims were known on such date, but excluding the
Assumed Liabilities and matters for which Seller and Shareholder are to be
indemnified pursuant to Section 9.4;
(d) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been
made, by any Person with Seller or Shareholder (or any Person acting on their
behalf) in connection with any of the transactions contemplated by this
Agreement;
(e) any liability under the WARN Act or any similar state or local
Legal Requirement that may result from an "Employment Loss," as defined by 29
U.S.C. Section 2101 (a)
25
(6), caused by any action of Seller prior to the Closing or by Buyer's decision
not to hire previous employees of Seller to whom Buyer has not agreed to offer
employment; or
(f) any current or former Employee Plan established or maintained by
Seller or an Affiliate.
SECTION 9.3 Notice to Seller, Etc. If any of the matters as to which
Buyer's Indemnitees are entitled to receive indemnification under Section 9.2
should entail litigation with or claims asserted by parties other than Seller,
Buyer shall give Seller prompt notice thereof and Seller shall have the right,
at its expense, to control such claim or litigation upon prompt notice to Buyer
of its election to do so. To the extent requested by Seller, Buyer, at its
expense, shall cooperate with and assist Seller, in connection with such claim
or litigation. Buyer shall have the right to appoint, at its expense, legal
counsel to consult with and remain advised by Seller in connection with such
claim or litigation. Seller shall have final authority to determine all matters
in connection with such claim or litigation; provided, however, that Seller
shall not settle any third party claim without the consent of Buyer, which shall
not be unreasonably denied or delayed.
SECTION 9.4 Indemnification by Buyer. Buyer shall indemnify, defend, and
hold Seller, Seller's directors and officers, Shareholder and their respective
successors and assigns (the "Seller's Indemnitees") harmless from, against and
with respect to any claim, liability, obligation, loss, damage, assessment,
judgment, cost and expense of any kind or character, including reasonable
attorneys' fees and expenses (the "Seller Damages"), arising out of or in any
manner incident, relating or attributable to:
(a) any inaccuracy in any representation or breach of warranty of
Buyer contained in this Agreement;
(b) any failure by Buyer to perform or observe, or to have performed
or observed, in full, any covenant, agreement or condition to be performed or
observed by it under this Agreement;
(c) the failure of Buyer to pay or perform the Assumed Liabilities
subsequent to the Closing Date;
(d) liabilities or obligations relating to or arising out of the
operation of the Business after the Effective time including, without
limitation, those arising from the sale of products or use of materials included
in the Inventory; or
(e) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been
made, by any Person with Buyer (or any Person acting on its behalf) in
connection with any of the transactions contemplated by this Agreement.
SECTION 9.5 Notice to Buyer, Etc. If any of the matters as to which
Seller's Indemnitees are entitled to receive indemnification under Section 9.4
should entail litigation with or claims asserted by parties other than Buyer,
Seller shall give Buyer prompt notice thereof and Buyer shall have the right, at
its expense, to control such claim or litigation upon prompt notice to Seller of
its election to do so. To the extent requested by Buyer, Seller and Shareholder,
at
26
their expense, shall cooperate with and assist Buyer, in connection with such
claim or litigation. Seller and Shareholder shall have the right to appoint, at
its expense, legal counsel to consult with and remain advised by Buyer in
connection with such claim or litigation. Buyer shall have final authority to
determine all matters in connection with such claim or litigation; provided,
however, that Buyer shall not settle any third party claim without the consent
of Seller, which shall not be unreasonably denied or delayed.
SECTION 9.6 Limitations on Indemnification. Notwithstanding anything in
this Agreement to the contrary, the aggregate liability of Seller and
Shareholder under Section 9.2(a) shall be limited to thirty percent (30%) of the
amount of the Purchase Price (the "Cap") and in no event shall Seller or the
Shareholder be required to make to any Buyer's Indemnitee any payments to
satisfy its obligations under Section 9.2(a) in excess of such amount; provided,
however, that this Cap shall not apply to a breach of the representations or
warranties relating to Assets contained in Section 2.16. In no event shall
Buyer's Indemnitees be entitled to seek any relief or exercise any rights
against either Seller or the Shareholder pursuant to the terms of Section 9.2(a)
until and solely to the extent Buyer Damages hereunder exceed an aggregate
amount of $300,000; provided, however that Seller and Shareholder shall
indemnify Buyer's Indemnitees from any claims resulting from a breach of the
customs, tax environmental or product warranty representations and warranties
contained in Section 2.14, Section 2.23, Section 2.25 and Section 2.28,
respectively, from the first dollar for claims or liabilities of Seller for
which Buyer is to be held harmless pursuant to this Agreement. Notwithstanding
anything in this Agreement to the contrary, the aggregate liability of Buyer
under Section 9.4(a) shall be limited to thirty percent (30%) of the amount of
the Purchase Price and in no event shall Buyer be required to make to any
Seller's Indemnitee any payments to satisfy its obligations under Section 9.4(a)
in excess of such amount. In no event shall Seller's Indemnitees be entitled to
seek any relief or exercise any rights against either Buyer pursuant to the
terms of Section 9.4(a) until and solely to the extent Seller Damages hereunder
exceed an aggregate amount of $300,000.
SECTION 9.7 Offset. The parties agree that each party shall be entitled to
offset any indemnity claim under Section 9.2 against any payment due to that
party under the Agreement.
SECTION 9.8 Consequential Damages. Anything to the contrary contained
herein notwithstanding, in no event shall any party hereto be liable for
indirect, special, consequential or punitive damages arising out of a breach of
this Agreement or a representation or warranty thereof, even if advised of the
possibility of such damages; provided, however, that a party shall be entitled
to seek consequential damages relating to or arising out of such a breach if
such breach constituted fraud or bad faith.
SECTION 9.9 Exclusive Remedy. The indemnification provisions of this
Article 9 shall be the exclusive remedy for any breach of any representation,
warranty or obligation of this Agreement, absent fraud or bad faith.
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ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Knowledge of Seller or Shareholder. For purposes of this
Agreement, the term "Knowledge" when applied to Seller or Shareholder, shall
mean the current, actual knowledge of the President of Seller and the President
and Chief Financial Officer of Shareholder after conducting a reasonably
comprehensive investigation regarding such fact or matter.
SECTION 10.2 Knowledge of Buyer. For purposes of this Agreement, the term
"Knowledge" when applied to Buyer, shall mean the current, actual knowledge of
the President of Buyer after conducting a reasonably comprehensive investigation
regarding such fact or matter.
SECTION 10.3 Best Efforts. For purposes of this Agreement, the term "Best
Efforts" shall mean the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to achieve that result as
expeditiously as possible; provided, however, that a Person required to use Best
Efforts under this Agreement will not be required to take actions that would
result in a material adverse change in the benefits to such Person of this
Agreement and the transactions contemplated hereby or to dispose of or make any
change to its business, expend any funds or incur any other burden, except for
nominal funds or burdens.
SECTION 10.4 Schedules. The disclosures in the Schedules must relate only
to the representations and warranties in the section of the Agreement to which
they expressly relate and not to any other representation or warranty in this
Agreement. In the event of any inconsistency between the statements in the body
of this Agreement and those in the Schedules (other than an exception clearly
and expressly set forth in such in the Schedules with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement shall control.
SECTION 10.5 Publicity. Any public announcement or similar publicity with
respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as the parties mutually
determine, subject to the obligation of each party to disclose material matters
under the securities laws and the rules of the relevant exchanges. Seller and
Buyer shall consult with each other concerning the means by which Seller's
employees, customers, suppliers and others having dealings with Seller will be
informed of this Agreement and the transactions contemplated hereby, and Buyer
shall have the right to be present for any such communication.
SECTION 10.6 Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) sent by recognized overnight courier, (iii) made by facsimile transmission,
or (iv) sent by registered or certified mail, return receipt requested, postage
prepaid.
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If to Buyer:
With a copy, which shall not constitute notice, to each of:
If to Seller or the Shareholder:
Arris International, Inc.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: __________________
Facsimile __________________
with a copy, which shall not constitute notice, to:
Arris International, Inc.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if sent
by overnight courier, on the next business day following the day such notice is
delivered to the courier service, (iii) if made by telecopy or facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, or (iv) if sent by registered or certified
mail, on the fifth business day following the day such mailing is sent. The
address of any party herein may be changed at any time by written notice to the
parties.
SECTION 10.7 Entire Agreement. This Agreement and the other Documents
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statements, representation, warranty, covenant or agreement of any kind not
expressly set forth in the other Documents shall affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
SECTION 10.8 Modifications and Amendments. The terms and provisions of
this Agreement may be modified or amended only by written agreement executed by
all parties hereto.
SECTION 10.9 Assignment/Binding Effect. Neither this Agreement, nor any
right hereunder, may be assigned by any of the parties hereto without the prior
written consent of the
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other parties. This Agreement shall be binding upon, and inure to the benefit
of, the parties hereto and their respective heirs, personal representatives,
successors and permitted assigns.
SECTION 10.10 Parties in Interest. Nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement shall be construed to create any rights or obligations except among
the parties hereto, and no Person shall be regarded as a third-party beneficiary
of this Agreement.
SECTION 10.11 Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be construed in accordance with and governed by
the internal laws of the State of Delaware without giving effect to the conflict
of law principles thereof.
SECTION 10.12 Severability. In the event that any tribunal of competent
jurisdiction shall finally determine that any provision, or any portion thereof,
contained in this Agreement shall be void or unenforceable in any respect, then
such provision shall be deemed limited to the extent that such tribunal
determines it enforceable, and as so limited shall remain in full force and
effect. In the event that such tribunal shall determine any such provision, or
portion thereof, wholly unenforceable, the remaining provisions of this
Agreement shall nevertheless remain in full force and effect.
SECTION 10.13 Interpretation. The parties hereto acknowledge and agree
that: (i) the rule of construction to the effect that ambiguities are resolved
against the drafting party shall not be employed in the interpretation of this
Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party, regardless of which party was generally responsible for the preparation
of this Agreement.
SECTION 10.14 Headings and Captions. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
SECTION 10.15 Terms. Common nouns and pronouns refer to the masculine,
feminine, neuter, singular and plural, as the identity of the Person may in the
context require. Any reference to the Code or other statutes or laws include all
amendments, modifications, or replacements of the specific sections and
provisions concerned.
SECTION 10.16 Reliance. The parties hereto agree that, notwithstanding any
right of any party to this Agreement to investigate the affairs of any other
party to this Agreement, the party having such right to investigate shall have
the right to rely fully upon the representations and warranties of the other
party expressly contained herein.
SECTION 10.17 Expenses. Except as otherwise provided herein, each party
shall pay its own fees and expenses (including the fees of any attorneys,
accountants, appraisers or others engaged by such party) incurred in connection
with this Agreement and the transactions contemplated hereby whether or not the
transactions contemplated hereby are consummated.
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SECTION 10.18 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same Agreement.
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SIGNATURES
Buyer, Seller and Shareholder have caused this Agreement to be executed by
the duly authorized officer of Buyer, Seller and Shareholder, as applicable, as
of the day and year first above written.
Buyer:
By: ____________________________________
Its:____________________________________
Seller: KEPTEL, INC.
By: ____________________________________
Its:____________________________________
Shareholder: ARRIS INTERNATIONAL, INC.
By: ____________________________________
Its:____________________________________
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