ASSET PURCHASE AGREEMENT Between CHECKPOINT SYSTEMS, INC. and ALPHA SECURITY PRODUCTS, INC. Dated: November 1, 2007
Between
CHECKPOINT
SYSTEMS, INC.
and
ALPHA
SECURITY PRODUCTS, INC.
Dated:
November 1, 2007
THIS
ASSET PURCHASE AGREEMENT (together with all Schedules and Exhibits attached
hereto, the “Agreement”)
is
made this 1st day of November, 2007 by and between CHECKPOINT SYSTEMS, INC.,
a
Pennsylvania corporation (the “Buyer”),
and
ALPHA SECURITY PRODUCTS, INC., an Ohio corporation (the “Seller”).
BACKGROUND
This
Agreement describes a transaction in which Buyer is purchasing the assets of
Seller’s S3 Business (defined below) and assuming certain stated liabilities of
Seller. The S3 Business is the development, manufacture, distribution and sale
of retail store applied security products requiring removal by store personnel
at the cash register (the “Business”).
The
Business is principally located at ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇.▇., ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(“Facility”).
NOW,
THEREFORE, in consideration of the foregoing premises and of the mutual
covenants and agreements contained in this Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE
I
PURCHASE
AND SALE
1.1 Agreement
to Sell.
At the
closing of the transaction contemplated herein (the “Closing”),
which
is occurring on the date hereof (the “Closing
Date”),
and
in accordance with the terms and conditions of this Agreement, Seller shall
grant, sell, convey, assign and deliver to Buyer, all of the assets, properties
and rights of any kind, whether tangible or intangible, real or personal, of
Seller related to and/or constituting the Business, or used therein (except
for
Excluded Assets, as defined in Section 1.2 hereof) (collectively, the
“Acquired
Assets”)
including, without limitation, the following:
(a) the
Facility, which is the only real property owned by the Seller and used in the
Business (“Owned
Real Property”)
and
all fixtures, furniture, machinery, equipment, accessories, attachments,
ancillary devices, tooling, dies and other tangible personal property owned
by
Seller located at the Facility and used in connection with the operation of
the
Business and all fixtures, furniture, machinery, equipment, accessories,
attachments, ancillary devices, tooling, dies and other tangible personal
property owned by Seller located elsewhere and used in connection with the
operation of the Business (exclusive of employee owned tools) listed or
described on Schedule
1.1(a)
hereto
(collectively, the “Fixed
Assets”);
(b) All
supplies owned by Seller and used in connection with the operation of the
Business;
(c) All
inventories of the Business owned on the Closing Date or located at vendors
awaiting purchase (collectively, the “Inventory”);
(d) All
of
Seller’s rights in any written agreement, contract, lease, loan, evidence of
indebtedness, purchase order, letter of credit, indenture, security or pledge
agreement, franchise agreement, covenant not to compete, employment agreement,
license, instrument, obligation or commitment to which the Seller is a party,
all of which relate to the Business and (except for a listing of open purchase
orders which has separately been provided to Buyer or that do not involve an
amount greater than fifty thousand dollars ($50,000)) are listed on Schedule
1.1(d)
(“Contracts”);
(e) those
specific accounts and notes receivable (whether current or noncurrent), earned
but unbilled revenues, if any, refunds, deposits, prepayments and unbilled
costs
and fees of the Business and a statement of such other assets of the Business,
in each case that are listed on Schedule
1.1(e)
(“Accounts
Receivable”);
(f) all
prepaid items related to the Business listed on Schedule
1.1(f) hereto;
(g) All
rights, if any, in any intellectual property owned by Seller and used in the
Business, including any copyrights, trademarks, service marks, logos, trade
dress, trade names, and goodwill related thereto, technology rights, patents,
patent applications and licenses, computer software (including without
limitation any source or object codes therefor or documentation relating
thereto), trade secrets, franchises, know-how, inventions, designs,
specifications, plans, drawings, specifications, and intellectual property
rights, in addition to all registrations, applications and common-law rights
related thereto, all rights to obtain renewals, reissues and extensions of
registrations or other legal protections related thereto, and all rights to
▇▇▇
at law or in equity for any and all damages and relief from any infringement,
misappropriation or other impairment or violation thereof occurring prior to
the
Closing Date, including, without limitation, the intellectual property set
forth
on Schedule
2.19(a);
(h) The
unregistered name “ALPHA SECURITY PRODUCTS, INC.,” and the corresponding logos
and all names under which the Seller does business in connection with the
Business, and except as set forth on Schedule 1.1(h),
all
telephone, fax, data line numbers, any other such numbers, all internet related
assets, including all web sites, and all rights related thereto or in connection
therewith, together with the goodwill of the Business appertaining
thereto;
(i) All
licenses, franchises, consents, permits and other authorizations for the
operation of the Business (to the extent transferable and if not transferable,
are so marked) including all of the foregoing that are material and are listed
on Schedule
1.1(i)
hereto
(collectively, the “Licenses”);
(j) All
claims, causes of action, rights of recovery and rights of set-off of any kind,
against any person or entity, including, but not limited to, any encumbrances
or
other rights to payment or to enforce payment in connection with products
delivered or services provided by the Seller on or prior to the Closing
Date;
(k) All
operating data and records of Seller used in the Business, including
information, files, records, data, employee files, plans, Contracts and recorded
information, customer and supplier lists, bills of material, customer pricing
information, correspondence, office supplies, budgets and similar documents
and
records (collectively, the “Records”);
(l) Customer
and other deposits related to the Business, all of which that include an amount
greater than fifty thousand dollars ($50,000) are listed in Schedule
1.1(l)
hereto;
and
(m) All
manufacturer warranties or other warranty rights relating to the Acquired
Assets, if any and all rights under, or pursuant to, all warranties,
representations and guarantees made by third parties in connection with the
Assets or services furnished to the Seller pertaining to the Business or
affecting the Assets, to the extent such warranties, representations and
guarantees are assignable, and those which are not assignable are listed on
Schedule
1.1(m).
1.2 Excluded
Assets.
Notwithstanding the foregoing, the Acquired Assets shall not include any of
the
following assets that relate to the Business (collectively, the “Excluded
Assets”),
and
shall not be assigned or transferred to Buyer:
| (a) |
the
assets, properties or rights set forth or described on Schedule
1.2(a);
and
|
| (b) |
the
rights of Seller under this Agreement;
|
1.3 Agreement
to Purchase.
At the
Closing, in accordance with the terms and conditions of this Agreement and
in
reliance on the representations, warranties and covenants of Seller, Buyer
hereby purchases the Acquired Assets from Seller for the Purchase Price (as
defined in Section 1.4 hereof). In addition, Buyer hereby assumes at the Closing
and agrees to pay, discharge or perform, as appropriate, only those liabilities
and obligations of Seller described in Section 1.5 of this Agreement. Except
as
expressly provided in Section 1.5 hereof, Buyer does not hereby assume or be
responsible for any liabilities or obligations of the Business or
Seller.
1.4 Purchase
Price.
(a) The
purchase price for the Acquired Assets (the “Purchase Price”)
in the
aggregate consists of:
| (i) |
the
Initial Cash Purchase Price, as determined in Section 1.4(b),
|
| (ii) |
the
total Contingent Payments, described in Section 1.4(d),
and
|
| (iii) |
the
Final Net Working Capital Adjustment (as defined in Section
1.6(f)(vi)).
|
(b) The
“Initial
Cash Purchase Price”
equals
$122,000,000 minus
any
decrease resulting from the Initial Working Capital Adjustment (as defined
in
Section 1.6(f)(v) below) or plus
the
amount of any increase resulting from the Initial Net Working Capital
Adjustment. The balance of the Initial Cash Purchase Price, after giving effect
to the deposit of the Escrowed Amount described in Section 1.4(c) below, will
be
by paid by Buyer to Seller at Closing via wire transfer of immediately available
funds, pursuant to wiring instructions set forth on a closing statement executed
by both parties.
(c) Buyer
shall deposit Seven Million Five Hundred Thousand Dollars ($7,500,000) of the
Initial Cash Purchase Price (“the Escrowed
Amount”)
by
wire transfer at Closing into an escrow account of the escrow agent chosen
by
the parties prior to Closing (“Escrow
Agent”).
The
Escrowed Amount will be held and delivered by the Escrow Agent in accordance
with the terms and provisions of the “Escrow
Agreement,”
in
a
form satisfactory to each of the parties, which, in part, provides that the
Escrow Amount shall be used as security for Sellers’ indemnification obligations
set forth in Article V below; provided, however, that the Escrowed Funds shall
not be the limit of Seller’s obligations, if any. All interest accruing on the
Escrowed Amount shall inure to the account of the Seller.
(d) Contingent
Additional Purchase Price.
(i) Subsequent
to Closing and in accordance with this Section 1.4(d), Seller shall have the
right to receive, and Buyer shall pay as to the Seller, contingent additional
Purchase Price up to a maximum of Eight Million Dollars ($8,000,000) (the
“Contingent
Payment”)
together with interest thereon pursuant to Exhibit
1.4(d)(i)
attached
hereto. Buyer agrees that during the Contingent Payment Period (as defined
in
Exhibit 1.4(d)(i)) it will not take any action or refrain from taking any action
in the S3 Business, a purpose of which is to prevent or reduce any Contingent
Payments or Seller from earning the Maximum Contingent Payment Amount (as
defined in Exhibit 1.4(d)(i)).
(ii) The
Contingent Payment Statement (defined in Exhibit
1.4(d)(i))
shall
be subject to review and verification by the Seller. Buyer shall permit the
Seller and its representatives to have reasonable access (upon Seller’s
execution and delivery of Buyer’s accountant’s standard waiver/access letter, if
required) to the data and information on which such Contingent Payment Statement
was prepared and to Buyer’s employees and representatives who assisted in its
preparation to the extent necessary to verify such information. The Seller
shall
be deemed to have accepted as final the Contingent Payment Statement unless,
within thirty (30) days after the date of delivery of the Contingent Payment
Statement to Seller, the Seller gives written notice of objection to Buyer
to
any item thereon, which objection shall specify in reasonable detail the basis
for such objection, in which case Buyer and Seller shall attempt in good faith
to resolve such dispute as promptly as possible. If a final resolution thereof
is not obtained within thirty (30) days after the date of delivery of Seller’s
objection to Buyer the parties will engage ▇▇▇▇▇ & Company (the
“Independent Auditor”),
who
shall resolve any remaining differences concerning such calculations. The
Independent Auditor’s resolution shall be final and binding on the parties. The
fees and expenses of the Independent Auditor shall be borne by Buyer if its
calculation of the aggregate Contingent Payments was incorrect by more than
two
percent (2%) and otherwise such fees and expenses shall be borne by the
Seller.
(iii) Buyer
shall pay Seller any unpaid portion of the Contingent Payment determined to
be
due to Seller (and in the event that the determination is that Buyer has
overpaid Seller, Seller shall reimburse Buyer) not later than five (5) business
days after the determination thereof becomes final.
(iv) Seller's
right to receive the Contingent Payment, as outlined above, shall survive the
Closing and the Closing Date and shall be enforceable from and after the Closing
Date against Buyer.
The
right to receive the Contingent Payment may not be assigned or utilized as
collateral by the Seller without the prior written consent of the
Buyer.
1.5 Assumption
of Liabilities.
(a) At
the
Closing, Buyer shall assume and agree to pay, discharge or perform, as
appropriate, all liabilities and obligations of the Business accrued or arising
before or after the Closing, including, but not limited to, the following,
but
excluding all Retained Liabilities as hereinafter defined, (the “Assumed
Liabilities”):
(i) the
leases and Contracts described on Schedule
1.1(d);
(ii) all
accrued trade accounts payable, which shall be estimated on the Estimated
Statement of Net Working Capital and finalized with the Final Statement of
Net
Working Capital;
(iii) all
accrued expenses and operating liabilities (including sales, real and personal
property taxes, accrued bonus, and any vacation pay) incurred in the ordinary
course of operating the Business, which, except for vacation pay, shall be
estimated on the Estimated Statement of Net Working Capital and finalized with
the Final Statement of Net Working Capital; and
(iv) all
warranty claims in connection with products sold by the Seller in the Business;
provided, however, subject to the Seller’s reimbursement obligations set forth
in Section 5.1(f) and (g).
For
purposes of clarity, the parties acknowledge and agree that in the event that
Seller has overlooked the accrual of a trade accounts payable or the accrual
of
an expense or operating liability for the Business under Sections 1.5(a) (ii)
or
(iii) on the Estimated Statement of Net Working Capital, Seller shall be
entitled to submit to Buyer such accrual for inclusion on the Final Statement
of
Net Working Capital.
(b) Notwithstanding
the foregoing, Buyer shall not assume or agree to pay, discharge or perform
any
of the following liabilities or obligations (the “Retained
Liabilities”)
arising out of:
(i)
certain
trade accounts payable that are noted as retained by Seller on the Estimated
Statement of Net Working Capital and finalized with the Final Statement of
Net
Working Capital;
(ii) Any
claims made or threatened by, or on behalf of (e.g., a claim brought by the
EEOC) any employee or independent contractor (performing duties in the nature
of
an employee of the Business), including, without limitation, any claims relating
to or arising out of any tort (intentional or otherwise) or violation of law
relating to discrimination, harassment, wrongful termination or other similar
matters;
(iii) any
condition or liability arising on or before the Closing Date which violates
or
is alleged to violate any Environmental, Health and Safety Laws;
(iv) income,
franchise or other similar taxes;
(v) Retained
Employees (as hereinafter defined);
(vi) any
funded debt of Seller associated with the Business;
(vii) the
liabilities and obligations retained by Seller pursuant to Section 4.1(c);
and
(viii) the
complaint by Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇ as described on Schedule
2.15.
(c) Except
as
expressly provided in this Section 1.5, it is understood and agreed that Buyer
does not assume or agree hereunder or otherwise to pay, perform or discharge
any
debt, obligation, tax or liability, known or unknown, contingent or otherwise,
of Seller of any kind or nature whatsoever including, without limitation, any
income or franchise tax obligations of Seller.
1.6 Statements
of Net Working Capital and Determination of Net Working Capital
Adjustment.
(a) Seller’s
Preparation of Estimated Statement of Net Working Capital.
One (1)
business day prior to the Closing Date, the Seller shall have executed and
delivered to Buyer an estimated statement of Net Working Capital as of the
Closing Date (“Estimated
Statement of Net Working Capital”),
which
shall have been prepared in a manner consistent with the calculation of the
Net
Working Capital Threshold
Amount, as such calculation is further described on Schedule
1.6(a).
The
Estimated Statement of Net Working Capital shall include a calculation of the
Initial Net Working Capital Adjustment (as defined below in Section 1.6(f)(v))
and Accounts Receivable detail listing for the Accounts Receivable on the
Estimated Statement of Net Working Capital; provided, however, that Buyer shall
have the option at Closing to not accept the assignment of certain Accounts
Receivable set forth on the Estimated Statement of Net Working Capital, shall
identify those Accounts Receivable that shall remain with Seller and the Initial
Net Working Capital Adjustment shall be correspondingly reduced; provided,
however, that in no event shall Buyer have the option not to accept any Accounts
Receivable owed by it or its affiliates.
(b) Buyer’s
Preparation of Final Statement of Net Working Capital.
As
promptly as possible following the close of business on the Closing Date, but
in
no event later than ninety (90) days after the Closing Date, the Buyer shall
prepare a proposed Final Statement of Net Working Capital,
which
shall be consistent with the calculation of the Net Working Capital Threshold
Amount (including the stated amount of reserves). The parties agree that the
reserve in respect of
obsolescence shall be One Hundred Twenty-Five Thousand Dollars ($125,000) and
no
further adjustment to Inventory or such reserve shall be made in respect of
obsolete or unsaleable Inventory. For purposes of clarity, in no event shall
any
determination or calculation of Inventory and/or the reserves in respect thereof
made by Seller in the Estimated Statement of Net Working Capital be subject
to
modification by Buyer, except in the case of manifest error in determining
the
cost or quantity thereof. If,
based
on the Buyer’s calculations, the proposed Final Statement of Net Working Capital
contains a proposed Final Net Working Capital Adjustment that results in an
increase to the Purchase Price (as compared to the Estimated Statement of Net
Working Capital), the Buyer will pay in cash that increased amount to the Seller
at the time the proposed Final Statement of Net Working Capital is delivered
in
accordance with this Section 1.6(b).
(c) Seller’s
Review. Seller shall
have a period of thirty (30) days following delivery to it of the proposed
Final
Statement of Net Working Capital to review, at the expense of the Seller, the
proposed Final Statement of Net Working Capital and the computation of the
proposed Final Net Working Capital Adjustment. Buyer agrees to provide, or
cause
to be provided, to Seller or its designated representatives materials or
information in its possession in order for Seller to review the preparation
of
the proposed Final Statement of Net Working Capital and the computation of
the
proposed Final Net Working Capital Adjustment. In the event that Seller does
not
provide written notice to Buyer within such thirty (30) day period that Seller
disagrees with the proposed Final Statement of Net Working Capital and/or the
computation of the proposed Final Net Working Capital Adjustment (“Notice
of Disagreement”),
then
such Final Statement of Net Working Capital shall be deemed final.
(d) Independent
Review.
In the
event Seller provides Buyer with a Notice of Disagreement and the parties have
not resolved such disagreement within thirty (30) days after the date of
delivery of the Notice of Disagreement, the parties shall submit to an
Independent Auditor such Estimated Statement of Net Working Capital, the
proposed Final Statement of Net Working Capital and computation of the proposed
Final Net Working Capital Adjustment, Schedule
1.6(a),
the
Notice of Disagreement, and any other documents or information which the parties
deem, or the Independent Auditor deems, pertinent in order to make a final
and
binding determination of any issues as to which the parties are in disagreement.
The Independent Auditor shall advise the parties of its decision relative to
the
controversy within sixty (60) days (or as soon as practicable) after its receipt
of the applicable statements and other documents or information which it has
requested and at such time the Final Net Working Capital Adjustment as
determined by the Independent Accountant shall be deemed final. Such firm shall
be acting as an arbitrator and not as an auditor and shall decide only those
issues as to which the parties are not in agreement. The fees and expenses
of
the Independent Auditor shall be equally apportioned between the Buyer and
the
Seller.
(e) Payment
of Final Net Working Capital Adjustment.
Within
ten (10) days after the final determination of the Final Net Working Capital
Adjustment as provided in either Section 1.6(c) or Section 1.6(d):
(i)
if
the Final Net Working Capital Adjustment is an increase from the Initial Cash
Purchase Price as described in Section 1.6(f)(vi)(B), Buyer shall pay to Seller
such increase in cash, together with interest thereon from the Closing Date
to
the date of payment thereof, based on an annual compounded rate equal to the
“prime rate” as published in The
Wall Street Journal
on the
date of determination of the Final Net Working Capital Adjustment compounded
annually (the “Prime
Rate”),
and
(ii)
if
the Final Net Working Capital Adjustment is a decrease from the Initial Cash
Purchase Price as described in Section 1.6(f)(vi)(A), Buyer shall be entitled
to
recover such decrease in cash, together with interest thereon from the Closing
Date to the date of payment thereof at the Prime Rate, directly from Seller
for
any amount owing to Buyer.
In
the
event that a party (other than the Escrow Agent) does not make its total payment
as required by this Section 1.6, then the unpaid amount shall accrue interest
at
a rate equal to the Prime Rate plus five percent (5%) until fully
paid.
(f) Definitions.
For
purposes of this Section 1.6, the foregoing capitalized terms shall have the
meanings ascribed below:
(i) “Net
Working Capital Threshold Amount”
shall
mean $10,700,000.
(ii) “Final
Statement of Net Working Capital”
shall
mean a Schedule of the Business’ Net Working Capital as of the Closing Date
prepared in a manner consistent with the calculation of the Net Working Capital
Threshold Amount.
(iii) “GAAP”
means
United States generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
professionals of the United States of America, which are applicable on any
particular date and are consistently applied.
(iv) “Net
Working Capital”
shall
mean, with respect to the Seller, the Accounts Receivable less
a
reserve (the “Accounts
Receivable Reserve”)
plus
net
Inventory plus
prepaid
expenses less
the
trade accounts payables assumed pursuant to Section 1.5(a)(ii) less
the
accrued operating expenses assumed pursuant to Section 1.5(a)(iii) directly
related to the Acquired Assets less
an
accrued warranty reserve (the “Warranty
Reserve”),
all
as determined in a manner consistent with the calculation of the Net Working
Capital Threshold Amount.
(v) “Initial
Net Working Capital Adjustment”
shall
mean (A) the amount, if any, by which the Net Working Capital Threshold Amount
exceeds the Estimated Net Working Capital or (B) the amount, if any, by which
the Estimated Net Working Capital exceeds the Net Working Capital Threshold
Amount.
(vi) “Final
Net Working Capital Adjustment”
shall
mean either (A) the amount, if any, by which the Estimated Net Working Capital
exceeds the Final
Statement of Net Working Capital
or (B)
by the amount, if any, by which the Final
Statement of Net Working Capital exceeds the Estimated Net Working
Capital.
1.7 Allocation
of Purchase Price.
The
Purchase Price shall be allocated among the Acquired Assets and Assumed
Liabilities as jointly determined by the Buyer and Seller and in accordance
with
GAAP and the fair market value of such Acquired Assets and Assumed Liabilities.
Buyer shall deliver a statement
of such allocation (“Statement
of Allocation”)
to
Seller within ten (10) days from the date the Final Statement of Net Working
Capital is finalized. Seller and Buyer each hereby covenant and agree that
they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the Statement of Allocation
and
this Section 1.7.
1.8 Title
to Acquired Assets; Risk of Loss.
Title
to
and risk of loss for all Acquired Assets shall pass from Seller to Buyer at
midnight on the Closing Date.
1.9 Local
Entity Transfers of Acquired Assets.
Seller
shall cause each applicable local subsidiary of Seller (a “Seller
Local Entity”)
in
each of the jurisdictions where the Acquired Assets are being transferred to
transfer those Acquired Assets owned by such Seller Local Entity to Buyer or
Buyer’s nominee. Seller shall cause each Seller Local Entity to enter into a
separate written agreement (each a “Local
Agreement”)
for
the sale and transfer of the portion of the Acquired Assets which are being
transferred from the respective Seller Local Entity to Buyer or a local entity
of Buyer in the jurisdiction in which the assets are being transferred (a
“Buyer
Local Entity”).
The
parties agree that each Buyer Local Entity shall be a third party beneficiary
under this Agreement and shall have standing to enforce any rights and remedies
that Buyer may have under this Agreement. To the extent this Agreement provides
for remedies of either party, the parties acknowledge that either party can
seek
remedies not only for their own damages but also for damages of the Seller
Local
Entity (with respect to the Seller) or the Buyer Local Entity (with respect
to
the Buyer).
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF SELLER
Seller
represents, warrants and covenants to Buyer as of the date hereof and the
Closing Date, as follows:
2.1 Corporate
Existence.
Seller
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Ohio and has all requisite corporate power and authority
to
carry on its business as now conducted. Seller is not required to be qualified
to do business as a foreign corporation in any other jurisdictions in which
the
failure to so qualify would have a material adverse effect on the properties,
operation or condition (financial or otherwise) of the Business.
2.2 Authorization
of Transaction.
Seller
has full corporate power and authority and legal right to enter into this
Agreement and to consummate the transactions provided for herein. All corporate
actions on the part of Seller necessary to approve the transactions contemplated
by this Agreement have been duly taken as required by applicable law and any
applicable agreements. This Agreement has been, and the other agreements,
documents and instruments required to be delivered by Seller in accordance
with
the provisions hereof will be, duly executed and delivered by Seller and
constitute, or will constitute when delivered, the valid and binding agreement
and obligations of Seller enforceable against Seller in accordance with their
respective terms.
2.3 Absence
of Violation or Conflicts/Consents.
The
execution and delivery of this Agreement, and the consummation of the
transactions contemplated by this Agreement, by Seller do not and will not
violate, conflict with or result in the breach of any material (applicable
only
to sections (a), (b) and (d)) term, condition or provision of, or require the
consent of any other person under (a) any material existing law, ordinance,
or
governmental rule or regulation to which Seller is subject, (b) any material
judgment, order, writ, injunction, decree or award of any court, arbitrator
or
governmental or regulatory official, body or authority which is applicable
to
Seller, (c) the charter, bylaws or any other organizational documents of Seller
or any securities issued by Seller, or (d) except as set forth on Schedule
2.3(d),
any
material instrument, document or agreement, oral or written, to which Seller
is
a party, by which Seller may have rights or by which any of the Acquired Assets
or the Business may be bound or affected, or which would create a lien, claim
or
encumbrance on the Acquired Assets as a result thereof. Except for
authorizations, approvals, consents, registrations and filings that have either
been obtained, registered or filed or will be filed or applied for prior to
Closing and are disclosed in Schedule
2.3(e),
no
material authorization, approval or consent of, and no registration or filing
with, any governmental or regulatory official, body or authority is required
in
connection with the execution, delivery or performance of this Agreement by
Seller.
2.4 Financial
Statements and Backlog.
(a) Attached
as Schedule
2.4(a) are
copies of the un-audited balance sheet and statements of income for the Business
as at and for the fiscal ended December 31, 2006 (the "Annual
Financial Statement").
(b) Attached
as Schedule
2.4(b) are
copies of internal, unaudited balance sheets and statements of income for the
Business as at and for the periods ending March 31, 2007, June 30, 2007 and
September 30, 2007 (the "Interim
Financial Statements"
and,
together with the Annual Financial Statement, the "Financial
Statements").
(c) Except
for the absence of footnotes and as otherwise described on Schedule
2.4(c),
or as
disclosed in the Financial Statements, as of their respective dates, the
Financial Statements: (i) were prepared in accordance with the Accounting
Principles and Procedures attached as Schedule
2.4(c)
(the
“Accounting
Principles and Procedures”)
and
otherwise in accordance with GAAP, consistently applied from period to period
(except for changes, if any, and disclosed therein), and (ii) fairly present
in
all material respects the financial position and results of operations of the
Business, as applicable, as of the dates and for the periods covered thereby,
subject, in the case of the Interim Financial Statements, to normal year end
adjustments, none of which are expected to be material.
(d) Attached
as Schedule
2.4(d)
are true
and correct copies of the backlog report containing actual orders by customers
or releases against long-term agreements and represents contractual obligations
(subject to confirming customer purchase orders or rights to cancel or postpone)
of the listed customers of the Business (the “Backlog
Report”)
as of
a date not more than three (3) weeks prior to the date hereof. The Backlog
Report shall be presented by customer name, sales dollar value and due date
of
shipment.
2.5 Title
to Acquired Assets.
Seller
has good, valid and marketable title to all of its properties and assets,
personal and mixed, which are included in the Acquired Assets, free and clear
of
all mortgages, liens, pledges, security interests, charges, claims, restrictions
and other encumbrances and defects of title of any nature whatsoever, except
for
(i) liens for current real or personal property taxes not yet delinquent, (ii)
mechanic’s or materialman’s liens, to the extent such liens arise from the
Assumed Liabilities, (iii) existing lease of a portion of the Facility, liens
and encumbrances disclosed in Schedule
2.5-1
attached
hereto (“Permitted
Liens”),
or
(iv) existing liens and encumbrances disclosed in Schedule
2.5-2
attached
hereto, which will be satisfied at or prior to Closing. Except as set forth
on
Schedule
2.5-3
attached
hereto and the Excluded Assets, the Acquired Assets constitute all of the assets
necessary to operate the Business as it is currently being conducted.
2.6 Condition
of Fixed Assets.
Except
for the Excluded Assets, the Fixed Assets and the operating condition thereof
are sufficient for the operation of the Business as it has been historically
operated.
THE
FIXED
ASSETS ARE BEING SOLD “AS IS, WHERE IS.” EXCEPT FOR THE SPECIFIC REPRESENTATIONS
STATED IN SECTIONS 2.5 AND 2.6, THERE ARE NO OTHER WARRANTIES EXPRESS OR
IMPLIED. ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE FOR THE FIXED
ASSETS ARE EXCLUDED.
2.7 Compliance
with Law.
With
respect to the Business, Seller has materially complied with, and is not in
violation of, any material law, ordinance or governmental rule or regulation,
whether federal, state, or local to which the Seller’s Business, operations,
assets or properties is subject, excluding matters referred to in Sections
2.10,
2.11, 2.12 and 2.16 (“Regulations”),
and
has not failed to obtain or adhere to the requirements of any material Licenses
which are necessary for the conduct of the Business as now conducted or for
the
ownership and use of the assets owned or used by Seller in the conduct of the
Business. Seller is not in default, nor has it received any notice of any claim
of default, with respect to any such License. Except as set forth in
Schedule
2.3(e)
hereto,
all such Licenses are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures
or
to pay any amounts other than routine filing fees. No shareholder, director,
officer, employee or former employee of Seller or any affiliates of Seller,
or
any other person, firm or corporation owns or has any proprietary, financial
or
other interest (direct or indirect) in any License which Seller owns, possess
or
uses in the operation of the Business as now conducted.
2.8 Inventory.
All
Inventory of Seller used in the conduct of the Business (including without
limitation, raw materials, packing materials, work-in process and finished
goods), was acquired or manufactured and has been maintained in the ordinary
course of the Business. No representation is being made with respect to the
obsolescence or unsaleability of Inventory.
2.9 Assumed
Liabilities.
Except
for third-party consents referred to in Section 4.5 hereof, the execution of
this Agreement and the consummation of the transaction provided for herein
will
not result in a breach of or default under any of the Assumed Liabilities or
give rise to a right of termination by any party thereto.
2.10 Employees.
Seller
has not received written notice of and to Seller’s knowledge (as defined in
Section 7.4 below) there exists no basis for any grievances or claims of unfair
labor practices relating to the employees of the Business. For purposes of
this
Agreement, the phrase “employees of the Business” or other words to that effect
shall mean employees of Seller predominantly utilized in the furtherance of
the
Business. With respect to the employees of the Business, Seller has not engaged
in any patterns or practices that have resulted in employment-related claims
being filed against Seller with the Equal Employment Opportunity Commission
or
any similar federal or state agency or court. Except as shown on Schedule
2.10,
or
otherwise not paid or payable in the ordinary course of business, Seller has
paid or accrued all wages, bonuses, vacation pay, sick pay and other
compensation to all employees of the Business for all periods prior to the
Closing Date. Except as shown on Schedule
2.10,
there
are no verbal or written agreements with employees of the Business regarding
compensation or other aspects of employment, and all employees have been
employed by Seller at will, except in those jurisdictions in which at will
employment is not recognized. To Seller’s knowledge and except as set forth on
Schedule
2.10,
no
executive, key employee, or group of employees of the Business has any plans
to
terminate employment with Seller prior to Closing or not accept employment
with
Buyer in the Business subsequent to Closing due to, or in connection with,
the
consummation of the transactions contemplated by this Agreement. With respect
to
the employees of the Business in the last two (2) years prior to the Closing
Date, except as set forth on Schedule
2.10,
Seller
has not transferred, hired, given pay increases or decreases to such employees
except in the ordinary course of the Business and has not terminated the
employment of such employees except in the ordinary course of the Business.
Seller is not a party to or bound by any collective bargaining or other labor
agreement with respect the employees of the Business, and there are no labor
unions or other organizations representing or, to the knowledge of the Seller
purporting to represent or attempting to represent, any employees of the
Business. To Seller’s knowledge, no organizational effort is presently being
made or threatened by or on behalf of any labor union with respect to employees
of the Business.
2.11 Employee
Plans.
(a) Seller
has made available to Buyer each material employment, bonus, profit sharing,
compensation, severance, stock option, stock appreciation right, restricted
stock, phantom stock, performance unit, pension, retirement, deferred
compensation, welfare or other employee benefit agreement, policy or arrangement
maintained or contributed to, or required to be contributed to, by the Seller
for the benefit of any director, officer, employee or former employee of the
Business (collectively referred to herein as the “Employee
Plans.”)
Schedule
2.11(a)
sets
forth a correct and complete list of all Employee Plans. True, correct and
complete copies of all Employee Plans, including amendments thereto, trust
agreements and any insurance contracts under which benefits are provided under
such Plans, and a description of any such Plan that is not written, have been
supplied to Buyer with respect to all Plans included in Assumed Liabilities.
Buyer has been provided with a copy of the summary plan description, if any,
for
each Employee Plan that is an employee benefit plan, as defined in Section
3(3)
of Employee Income Security Act of 1974, as amended (“ERISA”).
(b) Full
payment has been made of all amounts that are required under the terms of the
Employee Plans to be paid as contributions with respect to all periods prior
to
and including the last day of the most recent fiscal year such Employee Plan
ended on or before the date of this Agreement and all periods prior to the
Closing Date and no accumulated funding deficiency or liquidity shortfall (as
defined in Section 302 of ERISA) has been incurred with respect to any such
Employee Plan. The funded status of each Employee Plan maintained by Seller
is
set forth on Schedule
2.11(b).
Seller
has paid or will pay all applicable premiums for any insurance contract which
funds an Employee Plan for coverage provided through Closing. Seller has
remitted all participant contributions on a timely basis to the Employee Plans
in accordance with applicable law and regulation.
(c) Seller
has maintained all of its Employee Plans in material compliance with their
terms
and with all applicable provisions of ERISA, the Code and state laws. Seller
has
filed or caused to be filed with the Internal Revenue Service annual reports
on
Form 5500 for each Employee Plan for all years and periods for which such
reports were required and within the time period required by ERISA and the
Code.
Copies of all such Form 5500 reports required to be filed by Seller for the
past
three years have been provided to Buyer for any Employee Plans to be assumed
by
Buyer hereunder.
(d) All
Employee Plans currently maintained or contributed to by Seller that are
intended to be qualified under Section 401(a) of the Code are currently subject
to favorable determination letters issued by the Internal Revenue Service with
respect to the qualified status of such Employee Plans. There has been no
occurrence since the date of any such determination letter that has adversely
affected the qualified status of any such Employee Plan.
(e) No
“prohibited transaction,” as defined in Section 406 of ERISA and Section 4975 of
the Code, has occurred with respect to any Employee Plan, and, to the knowledge
of Seller, no civil or criminal action brought pursuant to Part V, Title I
of
ERISA is pending or is threatened in writing or orally against any fiduciary
of
any such Employee Plan. Neither the Internal Revenue Service nor the Department
of Labor is currently auditing or reviewing any Employee Plan and the Seller
has
not received written notice of any impending audit or review of any such
Employee Plan from the Internal Revenue Service or the Department of
Labor.
(f) Neither
the Seller nor any affiliated entity (hereafter referred to as “ERISA
Affiliate”) that together with the Seller are deemed a “single employer” within
the meaning of Section 4001(a)(14) of ERISA, currently maintain any Employee
Plan that is subject to Title IV of ERISA, nor have previously maintained any
such Employee Plan within the past five years that has resulted in any liability
or potential liability to the Seller or its ERISA Affiliates under said Title
IV.
(g) Neither
the Seller nor its ERISA Affiliates maintain, or has contributed to within
the
past five years, any multi-employer plan, within the meaning of Section 3(37)
or
4001(a)(3) of ERISA. Neither the Seller nor any of its ERISA Affiliates
currently has any liability to make withdrawal liability payments to any
multi-employer plan.
(h) Except
as
set forth on Schedule
2.11(h),
Seller
does not maintain any plans or programs providing post-retirement medical,
death
or other welfare benefits (other than benefits required by law).
(i) Each
Employee Plan that is a group health plan has been operated in material
compliance with the applicable requirements of Parts 6 and 7 of Subtitle B
of
Title I of ERISA, and Sections 9801 and 9802 of the Code and the regulations
thereunder. Seller has not contributed to a non-conforming group health plan,
as
that term is defined in Section 5000(c) of the Code, or incurred any tax
liability under Section 5000(a) of the Code. Each Employee Plan that is a group
health plan has been operated in material compliance with the applicable
requirements of Section 4980B(f) of the Code and Sections 601 through 608 of
ERISA.
(j) Seller
has not incurred any excise tax liability that has not been satisfied as of
the
Closing Date with respect to any Employee Plan.
(k) The
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee of Seller to severance pay, unemployment
compensation, accrued vacation pay, or any similar payment for which Buyer
could
be liable except as otherwise expressly provided herein, (ii) accelerate the
time of payment or vesting or increase the amount of any compensation to or
in
respect of any current or former employee of Sellers for which Buyer could
be
liable, or (iii) result in or satisfy any condition to the payment of
compensation to any current or former employee of Seller for which Buyer could
be liable that would, in combination with any other payment, result in an
“excess parachute payment” within the meaning of Section 280G of the
Code.
The
foregoing representations and warranties are limited to and are given and
effective only to the extent related to the Business, the Acquired Assets,
and
the Assumed Liabilities and are null and void otherwise.
2.12 Environment,
Health and Safety.
Except
as set forth on Schedule
2.12:
(a) Seller
has materially complied in the operation of the Business in all respects with
all Environmental and Health and Safety Laws (as defined in Section 2.12(d)
below). No action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or written notice has been held or commenced against it alleging
any failure so to comply (without regard to materiality). Without limiting
the
generality of the preceding sentence, Seller has obtained and been in compliance
with all of the terms and conditions of all material permits, licenses and
other
authorizations which are required under, and has complied with all material
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables which are contained in, all Environmental,
Health and Safety Laws.
(b) Seller
does not have any current liability for and Seller has not received notice
in
any form from any governmental authority or any third party that it: handled
or
disposed of any substance, arranged for the disposal of any substance in
violation of or subject to strict liability pursuant to any Environmental,
Health and Safety Law, to Seller’s knowledge exposed any employee or other
individual to any substance or condition, or owned or operated any property
or
facility in any manner that could reasonably be expected to form the basis
for,
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against Seller giving rise to any liability for
damage to any site, location or body of water (surface or subsurface), for
any
illness of or personal injury to any employee or other individual or for any
reason under any Environmental, Health and Safety Law.
(c) All
owned, occupied and/or leased properties and equipment used in the Business,
or
in connection with the Business, are and have been free of both regulated and
unregulated underground storage tanks; any
flammable substances or explosives; any radioactive and/or extremely hazardous
wastes, chemicals or materials; asbestos in any form which is or could become
friable; urea formaldehyde foam insulation; electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls
in
excess of fifty parts per million; pesticides; and any other chemical, material
or substance, exposure to, and/or use or disposal of which is prohibited,
limited or regulated by any governmental authority or pursuant to any
environmental Health and Safety Laws as a hazardous, dangerous, polluting and/or
toxic substance, waste chemical or material, and/or one that may or could pose
a
hazard to the environment or to the health and safety of the owners, occupants
or any persons in the vicinity of or otherwise in connection with the Seller’s
business, except as in material compliance with Environmental, Health and Safety
Laws.
(d) No
hazardous substance has been disposed of, spilled or otherwise released by
Seller in connection with the operation of the Business at the Facility in
such
a way as to create any material and/or unresolved liability to Seller under
any
applicable Environmental, Health and Safety Laws. For purposes of this
Agreement, the definition of the term “hazardous substance” shall be that set
out in Section 101(14) of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. § 9601(14), as in effect on
the date hereof, except that the term also shall include petroleum or any
fraction and natural gas (whether existing as a gas or a liquid).
(e) “Environmental,
Health and Safety Laws”
means
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. 9601, et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
6901, et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251, et
seq.), the Clean Air Act (42 U.S.C. 7401, et seq.), the Toxic Substance Control
Act (15 U.S.C. 2601, et seq.), the Emergency Planning Community Right To Know
Act (42 U.S.C. 11001, et seq.), and
the
Occupational Safety and Health Act of 1970 (“OSHA”),
each
as amended, together with all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings and charges thereunder)
of federal, state, and local governments (and all agencies thereof) concerning
pollution or protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants or chemical,
industrial, hazardous or toxic materials or wastes into air, surface water,
ground water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes, all of which are related and material to the Business or the Facility
only and not the Seller generally.
2.13 Real
Property.
(a) Title
to and Condition of Real Property.
Schedule
2.13(a)
sets
forth:
(i) the
street location for all Owned Real Property;
(ii) the
complete legal description of each parcel of Owned Real Property;
(iii)
a copy
of all deeds,
surveys, documents to title, policies of title insurance, title opinions and
appraisals in the Seller’s possession or control that relate to the Real
Property;
and
(iv) a
copy of
each written contract and a written description of each oral contract relating
to the Owned Real Property (other than Permitted Liens and Contracts required
to
be disclosed on Schedule
1.1(d))
which
either:
(A) requires
expected expenditures in the aggregate of more than One Hundred Fifty Thousand
Dollars ($150,000) annually;
(B) cannot
be
canceled without penalty on not less than ninety (90) days prior notice;
or
(C) requires
payment of any commissions or brokerage fees to any third party.
The
Seller as indicated on Schedule
2.13(a)
owns
title to the Owned Real Property, in fee simple, which title shall be, on the
Closing Date, recorded, marketable and free and clear of any and all Liens,
claims, demands or rights of any third party whatsoever, and any and all
easements under which such real property may be a subservient estate as well
as
all rights of way, encroachments, restrictions, covenants, recorded or
unrecorded, except for Permitted Liens.
(b) Except
as
disclosed on Schedule
2.13(b),
no
portion of the Owned Real Property is subject to any pending condemnation
proceeding by any public or quasi-public authority and, to the knowledge of
Seller, there is no threatened condemnation proceeding with respect thereto.
Schedule
2.13(b)
lists
any notice of an increase in the assessed (or equalized) valuation of the Owned
Real Property and, except for such notice (or as disclosed on Schedule
2.13(b)),
no
notice of any contemplated special assessment has been given and there is,
to
the knowledge of Seller, no other threatened special assessment pertaining
to
any portion of the Owned Real Property. Except as disclosed on Schedule
2.13(b),
the
Seller has not received written notice of any outstanding violation of any
Regulation respecting any portion of the Owned Real Property and no written
notice of any such violation has been issued to the Seller by any Governmental
Entity requiring construction, alterations or installation in connection with
any portion of the Owned Real Property that has not been complied with. Except
as disclosed in Schedules
2.13(b) or 2.5-1,
the
Owned Real Property is supplied with utilities and other services necessary
for
the operation of the facilities located thereon as presently conducted, and
all
of such services are adequate to conduct that portion of the Business as is
presently conducted at such Owned Real Property; the Seller has not sublet,
underlet or assigned any portion of the Owned Real Property and no third party
is in possession of any portion of the Owned Real Property other than the
Seller; and the zoning of each portion of the Owned Real Property permits the
presently existing improvements and the continuation of the Business presently
being conducted thereon as a conforming use.
2.14 Books
of Accounts.
The
books, records and accounts of Seller maintained with respect to the Business
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of the Business. Seller has not engaged in any
transaction with respect to the Business, maintained any bank account or used
any of its funds in the conduct of the Business except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of Seller for the Business.
2.15 Litigation.
Except
as shown on Schedule
2.15,
no
litigation, including any arbitration, investigation or other proceeding of
or
before any court, arbitrator or governmental or regulatory official, body or
authority, is pending or, to the knowledge of Seller, threatened against Seller
which relates to the Acquired Assets or the Business or the transactions
contemplated by this Agreement, nor does Seller, to its knowledge, know of
any
reasonably likely basis for any such litigation, arbitration, investigation
or
proceeding, the result of which could materially and adversely affect the
Acquired Assets or the Business or the transactions contemplated hereby. Seller
is not a party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority.
2.16 Tax
and Other Returns and Reports.
All
federal, state and local tax returns, reports, statements and other similar
filings required to be filed by Seller (the “Tax
Returns”)
with
respect to any federal, state or local taxes, assessments, interest, penalties,
deficiencies, fees and other governmental charges or impositions (including
without limitation all income tax, unemployment compensation, social security,
payroll, sales and use, excise, privilege, property, ad valorem, franchise,
license, and any other tax or similar governmental charge) (“Taxes”)
have
been filed with the appropriate governmental agencies in all jurisdictions
in
which such Tax Returns are required to be filed and all such Tax Returns
properly reflect the tax liabilities of Seller for the periods, property or
events covered thereby. Seller has not received any notice of assessment or
proposed assessment in connection with any Tax Returns and there are no pending
or, to Seller’s knowledge, threatened, tax examinations or tax claims asserted
against Seller or any of the Acquired Assets or the Business. There are no
tax
liens (other than any lien for current taxes not yet due and payable) on any
of
the Acquired Assets or the Business. Seller has made all deposits required
by
law to be made with respect to employees’ withholding and other employment taxes
for all periods prior to the date of this Agreement and shall have paid all
of
the foregoing through the date of Closing.
The
foregoing representation and warranty is limited to and is given and effective
only to the extent related to the Business, the Acquired Assets, and the Assumed
Liabilities and is null and void otherwise.
2.17 Accounts
Receivable.
The
Accounts Receivable reflected on the Estimated Statement of Net Working Capital
will be: (i) valid receivables, (ii) not subject to any existing valid
counterclaims or setoffs, and (iii) collectible within ninety (90) days
following Closing, except to the extent of any bad debt reserve reflected on
the
Final Statement of Net Working Capital. Schedule
1.1(e)
provides
an accurate and complete breakdown and aging of all Accounts Receivable as
a
date within the last three (3) days of the date hereof. No representation or
writing is made as to any Accounts Receivable owed by Buyer or its affiliates.
All existing Accounts Receivable represent valid obligations of customers of
the
Seller arising from bona fide transactions entered into in the ordinary course
of business.
2.18 Contracts.
(a) Seller
has made available to Buyer for its review accurate and complete copies of
all
Contracts listed on Schedule
1.1(d),
including all amendments thereto (the “Listed
Contracts”).
Except as set forth on Schedule
2.18(a),
each
Contract is valid and in full force and effect, and is enforceable by the Seller
in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules
of
law governing specific performance, injunctive relief and other equitable
remedies.
(b) Except
as
set forth in Schedule
2.18:
(i) the
Seller has not violated or breached, or committed any default under, any
Contract in any material way, and, to the knowledge of the Seller, no other
person has violated or breached, or committed any default under, any Contract
in
any material way; (ii) to the knowledge of the Seller, no event has occurred,
and no circumstance or condition exists, that (with or without notice or lapse
of time) will, or could reasonably be expected to, (A) result in a violation
or
breach of any of the provisions of any Contract, (B) give any person the right
to declare a default or exercise any remedy under any Contract, (C) give any
person the right to accelerate the maturity or performance of any Contract,
or
(D) give any person the right to cancel, terminate or modify any Contract;
(c) The
Seller has not received any notice or other communication regarding (i) any
actual or possible violation or breach of, or default under, any Contract,
or
(ii) any actual or possible termination of any Contract; and (iii) to its
knowledge the Seller has not waived any of its material rights under any
Contract.
(d) Except
as
set forth in Section
2.18(d),
no
person is renegotiating, or has been authorized by the Seller to renegotiate,
any amount paid or payable to the Seller under any Contract or any other term
or
provision of any Contract.
(e) Except
as
set forth on Schedule
1.1(d)
or in
the Mutual Non-Competition Agreement, Seller has not entered into any contract
or agreement that contains one or more covenants that, upon assignment to Buyer
at Closing, would in the operation of the Business limit or restrict Buyer’s
freedom to operate the Business, engage in any line of business or compete
with
any person or entity.
2.19 Intellectual
Property Rights.
(a) Schedule
2.19(a)
sets
forth all patents, pending applications for patents, trademarks, service marks,
and trade names relating to the Business (“Intellectual
Property”)
owned,
used or licensed to the Seller.
(b) Except
as
set forth on Schedule
2.19(b),
the
Seller owns or possesses the right to use all Intellectual Property and any
material trade secrets, know-how or inventions it currently uses, without any
conflict with the rights of others. The Seller has taken such actions as are
reasonable to ensure full protection of the Intellectual Property under any
applicable laws.
(c) The
Seller owns or has a valid and enforceable right to use all material computer
software used by the Seller in the operation of the Business, without any
conflict with the rights of others.
2.20 Warranties.
(a) Schedule
2.20(a)-1
summarizes all claims outstanding, pending or, to the knowledge of the Seller,
threatened for breach of any warranty relating to any products sold by the
Seller in the Business prior to the date hereof. The description of the Seller’s
product warranties for the Business set forth on Schedule
2.20(a)-2
is
correct and complete.
(b) Except
as
set forth on Schedule
2.20(b),
the
goods and services sold by the Seller in the Business conform in all material
respects with the specification, documentation, performance standard, made
or
provided with respect thereto by the Seller. Except as set forth on Schedule
2.20(b),
there
is not currently pending any written claim by any customer or other person
alleging that any such goods and services of the Business do not conform in
any
material respect with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of the Seller.
2.21 Changes
or Events.
Except
as set forth on Schedule
2.21,
during
the period extending from June 30, 2007 to the date of this Agreement, none
of
the following has occurred:
(a) Any
change in the financial condition, assets, liabilities, business or operations,
which alone or in the aggregate would have a material adverse effect on the
Business;
(b)
Any
damage, destruction or loss of Fixed Assets, whether or not covered by
insurance, which alone or in the aggregate exceeds $150,000.
(c)
Any
sale,
assignment, transfer, lease or other disposition of, or agreement to sell,
assign, transfer, lease or dispose of or place an encumbrance upon, any of
the
Acquired Assets, other than dispositions in the regular, normal and ordinary
course of business;
(d)
Any
transaction relating to the Business entered into by the Seller other than
in
the regular, normal and ordinary course of the Business;
(e)
Any
event
of default, cancellation or termination of any material Contract between the
Seller and any party thereto, other than, with respect to the cancellation
or
termination of any Contract, in the ordinary course of the
Business;
(f)
Any
capital expenditure or commitment for addition to property, plant or equipment
of the Business that exceeds $150,000 or capital expenditures in the aggregate
in excess of $1,000,000;
(g)
Any
cancellation or waiver of any claims or rights of value, or any sale, lease,
transfer, assignment, distribution or other disposition of any of the Business’
material assets, except for sales of finished goods inventory in the ordinary
course of Business, or any disposal of any material assets for any amount to
any
affiliate of the Seller;
(h)
Any
disposal or lapse of any rights in, to or for the use of any of the Business’
patent, trademark, trade name or copyright rights, or, except in the ordinary
course of business, any disclosure to any person not an employee, or other
disposition of, any customer lists pertaining to the Business;
(i)
Any
increase in the base compensation or other payment to any employee of the
Business, whether now or hereafter payable or granted, or entry into or
variation of the terms of any employment or incentive agreement with any such
person (other than changes in compensation or terms in the ordinary course
of
the Business consistent in timing and amount with past practices);
(j)
Any
change in any method of accounting or keeping its books of account or accounting
practices relating to the Acquired Assets or the Business;
(k)
Except
liabilities incurred in the ordinary course of the Business, any material
obligation or liability occurring in the Business, including, without
limitation, any liability for non-performance or termination of any
Contract;
(l)
Any
elimination of any reserves established on the Seller's books or any changing
of
the method of accrual pertaining to any reserves which would justify their
elimination;
(m)
Authorized
for issuance, issued, delivered or sold any equity securities of the Seller,
or
altered the terms of any outstanding securities issued by it subsequent to
the
approval of the equity holders of the Seller regarding the transaction
contemplated by this Agreement; and
(n)
Any
agreement or commitment by the Seller to do or take any of the actions referred
to in subsections (a) through (m) of this Section 2.21.
2.22 Representations
to be Read Conjunctively.
The
foregoing representations and warranties, and all Schedules referred to therein,
are to be read in conjunction with each other. A
disclosure made in any of the Schedules referenced herein that is reasonably
sufficient to inform Buyer of information required to be disclosed in another
Schedule to avoid a misrepresentation under a section of the Agreement shall be
deemed, for all purposes of the Agreement, to have been made under such other
Schedule.
2.23 Brokers.
Seller
has not dealt with any broker or finder in connection with any of the
transactions contemplated by this Agreement, and insofar as it knows, no broker
or other person is entitled to any commission or finder’s fee in connection with
any of these transactions.
2.24 Applicable
Time Period.
To the
extent that any of the foregoing representations or warranties refers to
activity or conduct by the Seller or the occurrence of prior events, such
representation shall be deemed to refer only to the five (5) year period
immediately preceding the Closing Date and not any prior time period.
2.25 No
Undisclosed Liabilities. Except
as
set forth in Schedule
2.25
or in
the Financial Statements and except for a liability or obligation of the type
or
nature that is specifically addressed in this Agreement, including, but not
limited to, in this ARTICLE II (e.g. a warranty claim), there are no liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) of the Business arising from of an action, inaction or event
occurring prior to Closing.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to Seller as of the date hereof, as
follows:
3.1 Organization.
Buyer
is a corporation duly organized, validly existing and in good standing under
the
laws of the Commonwealth of Pennsylvania and has all requisite corporate power
and authority to own its properties and carry on its business as now conducted
and as contemplated by this Agreement.
3.2 Authority.
Buyer
has full corporate power and authority and legal right to enter into this
Agreement and to consummate the transactions provided for herein. All corporate
actions on the part of Buyer necessary to approve the transactions contemplated
by this Agreement have been duly taken as required by applicable law and any
applicable agreements. This Agreement and the other agreements, documents and
instruments required to be delivered by Buyer in accordance with the provisions
hereof have been duly executed by Buyer and constitute the valid and binding
agreement of Buyer, enforceable against it in accordance with their respective
terms.
3.3 Absence
of Violations or Conflicts.
The
execution and delivery of this Agreement and the consummation and performance
by
Buyer of the transactions contemplated herein and therein (a) will not violate,
conflict with or result in the breach of any term, condition or provision of,
or
require the consent of any other period under (a) to Buyer’s knowledge, any
existing law, ordinance, or governmental rule or regulation to which Buyer
is
subject, (b) any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority
which is applicable to Buyer, (c) the charter, bylaws or any other
organizational documents of Buyer or any securities issued by Buyer, or (d)
any
mortgage, indenture, or other material instrument, document or agreement, oral
or written, to which Buyer is a party, by which Buyer may have rights or by
which any of their properties or assets may be bound or affected. Except for
authorizations, approvals, consents, registrations and filing that have either
been obtained, registered or filed, no authorization, approval or consent of,
and no registration or filing with, any governmental or regulatory official,
body or authority is required in connection with the execution, delivery or
performance of this Agreement by Buyer.
3.4 Litigation.
No
litigation, including any arbitration, investigation or other proceeding of
or
before any court, arbitrator or governmental or regulatory official, body or
authority, is pending or, to the knowledge of Buyer, threatened against Buyer
which would be likely to have a material adverse effect on Buyer, nor does
Buyer, to its knowledge, know of any reasonably likely basis for any such
litigation, arbitration, investigation or proceeding, the result of which could
materially and adversely affect Buyer. Buyer is not a party to or subject to
the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or
authority.
3.5
No Actual Knowledge of Incorrect Representation. To the actual knowledge
of the following employees of Buyer: ▇▇▇▇▇▇ Off, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇
and
Per ▇▇▇▇▇, Buyer is not aware of any fact or circumstance that would make
any
representation or warranty of Seller set forth in Article II above materially
incorrect or untrue.
3.6 Brokers.
Buyer
has not dealt with any broker or finder in connection with any of the
transactions contemplated by this Agreement, and insofar as it knows, no broker
or other person is entitled to any commission or finder’s fee in connection with
any of these transactions.
ARTICLE
IV
OTHER
AGREEMENTS
4.1 Employees.
(a) Except
for the employees of Seller (the “Retained
Employees”)
as set
forth on Schedule
4.1(a),
as of
Closing, Buyer shall offer at-will employment to all persons who are employees
of the Business at such time (the “Continuing
Employees”).
Seller shall attach a list of all Continuing Employees, their rate of
compensation, job title and exempt/non-exempt status. It is Seller’s present
intention to retain the employment of those individuals listed on Schedule
4.1(a).
Based
on the foregoing covenant of Buyer, Seller has made no filings, given no notices
or otherwise complied with the WARN Act (29 U.S.C. 2101 et seq.) and similar
state laws (“WARN
Laws”).
(b) From
and
after the Closing Date, Buyer will evaluate each of Seller’s bonus and other
compensation plans generally applicable to the Continuing Employees as of the
date of this Agreement, consult with the executive officers listed on
Schedule
4.1(a)
and
provide bonus and/or other compensation plans substantially similar to other
similarly situated employees employed by Buyer. Buyer agrees to pay all bonus
amounts accrued as part of the Net Working Capital of the Business to the
applicable employees at the end of the applicable bonus period in accordance
with historical practices of the Business.
(c) Except
for wages, bonus, vacation pay and sick pay assumed pursuant to this Agreement,
or as expressly contemplated by this Agreement, Buyer shall assume no liability
for any agreements, arrangements, Employee Plans, commitments, policies or
understandings of any kind relating to employment, compensation or benefits
for
the present or former employees of the Business for all employment prior to
the
Closing Date. The parties agree that no employee shall be entitled to any third
party beneficiary status by virtue of this Section 4.1. Nothing in this
Agreement or in Section 4.1 obligates Buyer to employ a Continuing Employee
for
any specified of minimum period of time, and nothing therein or in this
Agreement shall constitute a limitation on the right of Buyer to terminate
any
Continuing Employee at will. All Continuing Employees shall be employees at
will
and may be terminated at any time, with or without notice, and with or without
cause.
4.2 Expenses.
Except
as otherwise provided herein, each party hereto shall pay its own expenses
and
costs incurred in connection with the negotiation and consummation of this
Agreement and the transactions contemplated hereby. Buyer shall pay all federal,
state and local sales, documentary and transfer taxes, if any, due as a result
of the purchase, sale or transfer of the Acquired Assets.
4.3 Disclosure
to Employees.
Seller
and Buyer shall mutually agree on the timing and content of any notification
or
discussions with Seller’s employees or any other parties and/or representatives
of the employees with respect to the transactions contemplated by this
Agreement.
4.4 Public
Disclosure.
Seller
and Buyer shall not make any public statement or release concerning this
Agreement or the transactions contemplated hereby except for such information
as
shall have been approved in writing as to form and content by the other party
hereto or as may be required under applicable law.
4.5 Third
Party Consents.
To the
extent that Seller’s rights under any agreement, contract, commitment, lease,
license, permit, authorization or other Acquired Asset 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 each of Seller and Buyer shall use their best efforts (with each
of Seller or Buyer’s, as the case may be, cooperation) to obtain any such
required consent as promptly as possible after the Closing. If any such consent
shall not be obtained or if any attempted assignment would be ineffective or
would impair Buyer’s rights under the instrument or document in question so that
Buyer would not in effect acquire the benefit of all such rights, Seller, to
the
maximum extent permitted by law and the instrument or document, shall act as
Buyer’s agent in order to obtain for it the benefits thereunder and shall
cooperate, to the maximum extent permitted by law and the instrument or
document, with Buyer in any other reasonable arrangement designed to provide
such benefits exclusively to Buyer.
4.6 Post-Closing
Financial Statement Deliveries by Seller.
Within
thirty (30) days following the Closing Date, Seller, at Buyer’s sole expense,
will cause the delivery to Buyer of the following:
(a) audited
financial statements for the Business as at and for the fiscal ended December
31, 2006;
(b) un-audited
statements of income and statements of cash flows for the Business for the
quarterly periods ending March 31, 2007, June 30, 2007 and September 30, 2007;
and
(c) an
un-audited balance sheet for the Business as at September 30, 2007.
ARTICLE
V
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
5.1 Indemnification
by Seller.
Seller
shall indemnify, hold harmless and defend Buyer, its directors, officers,
employees, subsidiaries, affiliates and their respective successors, permitted
assigns and heirs, as applicable (“Buyer
Indemnitees”)
after
the Closing Date from and against all Damages (as defined below in Section
5.4)
incurred or suffered by Buyer that result from, relate to or arise out
of:
(a) any
misrepresentation or breach of warranty on the part of Seller under this
Agreement;
(b) non-fulfillment
of any agreement or covenant on the part of Seller as required under this
Agreement, the Escrow Agreement, the Transition Agreement, the License Agreement
and the Mutual Non-Competition Agreement;
(c) all
Retained Liabilities of Seller;
(d) all
liabilities for the conduct of Seller’s business not purchased hereunder or
other actions of Seller occurring after the Closing Date; and
(e) all
product liability claims (excluding Warranty Claims which are subject to the
terms of sub-paragraphs (f) and (g) below) arising from or in connection with
any products manufactured or sold by Seller prior to Closing.
(f) fifty
percent (50%) of all Warranty Claims over and above Two Hundred Thousand Dollars
($200,000) of Warranty Claims (the “First
Warranty Claim Threshold”).
For
purposes of clarity, Buyer shall be responsible for all Warranty Claims up
to
and including the First Warranty Claim Threshold and, thereafter subject to
Section 5.1(g), Buyer and Seller shall each be responsible for fifty (50%)
of
the aggregate amount of all Warranty Claims that exceed the First Warranty
Claim
Threshold. As used herein, “Warranty
Claim”
means
a
claim made against Buyer by a purchaser of any product sold and delivered by
Seller prior to the Closing Date for a breach of the warranty offered by Seller
for such product and such claim fully complies with the terms of such warranty.
(g) all
Warranty Claims in excess of the sum of the First Warranty Claim Threshold
plus
One Million Eight Hundred Thousand Dollars ($1,800,000) (the “Second
Warranty Claim Threshold”),
for
purposes of clarity, the parties understand that after the equal sharing of
Warranty Claim liability described in Section 5.1(f), Seller shall be solely
responsible for all Warranty Claim liability exceeding the Second Warranty
Claim
Threshold.
Buyer
shall advise Seller of any individual Warranty Claim in excess of Fifty Thousand
Dollars ($50,000). Buyer shall report to Seller on a quarterly basis details
as
to all outstanding Warranty Claims, including any resolution of a Warranty
Claim
during each such quarter.
5.2 Limits
on Seller’s Indemnification.
(a) Time
Limitation.
Except
as otherwise provided in Section 5.2(f), the indemnification obligations of
Seller provided for in Sections 5.1(a), (f) and (g) shall expire eighteen (18)
months after the Closing Date;
(b) Basket.
Except
as otherwise provided in Section 5.2(d), the indemnification obligations of
Seller provided for in Section 5.1(a) shall not require Seller to indemnify
Buyer Indemnitees for Losses incurred by Buyer Indemnitees under Section 5.1(a)
until the aggregate amount of such Losses exceeds Two Million Five Hundred
Thousand Dollars ($2,500,000) (“Basket”),
in
which event Buyer Indemnitees may claim indemnification to the extent that
such
Losses exceed One Million Dollars ($1,000,000);
(c) Cap.
Except
as otherwise provided in Section 5.2(e), the indemnification obligations of
Seller provided for in Section 5.1(a) shall not exceed in the aggregate Twenty
Million Dollars ($20,000,000) (“Cap”).
(d) Exceptions
to Basket.
The
Basket shall not apply to Sections 2.2 (Authority), 2.5 (Title), first sentence
only, 2.11 (Benefit Plans), 2.12 (Environmental), 2.16 (Taxes) and 2.17
(Accounts Receivable) (collectively, the “Primary
Representations and Warranties”).
(e) Exceptions
to Cap.
The Cap
shall not apply to a breach of the Primary Representations and
Warranties.
Notwithstanding
anything to the contrary, the Basket and Cap shall not apply to Seller’s
non-performance or non-payment of: (a) any covenant of a party hereto to make
a
payment as required hereunder, (b) any covenant in which Seller willfully does
not perform and (c) any brokerage fees owed by Seller hereunder.
(f) Exception
to Time Limitation.
Anything to the contrary contained in Section 5.2(a) notwithstanding, Sellers’
indemnification obligations provided for in Section 5.1(a) with respect to
a
breach of any of the representations and warranties in Section 2.2 (Authority),
2.5 (Title), first sentence only, 2.12 (Environmental), and 2.16 (Taxes), which
shall not expire due to the passage of time and shall survive for the applicable
statutes of limitation.
Except
where limited by a specific restriction on duration set forth herein, Seller’s
obligation to perform its covenants hereunder shall expire when each such
covenant is performed. Any such obligations under this Section 5.2 for which
Buyer gives Sellers timely notice as provided in Section 5.5 within such
eighteen (18) month period shall survive until the claim is finally resolved.
5.3 Indemnification
by Buyer.
Buyer
shall indemnify, hold harmless and defend Seller, its directors, officers,
employees, subsidiaries, affiliates and their respective successors, assigns
and
heirs, as applicable (“Seller
Indemnitees”)
after
the Closing Date from and against all Damages incurred or suffered by Seller
that result from, relate to or arise out of:
(a) any
misrepresentation or breach of warranty on the part of Buyer under this
Agreement;
(b) non-fulfillment
of any agreement or covenant on the part of Buyer as required under this
Agreement, the Escrow Agreement, the Transition Agreement and the License
Agreement and the Mutual Non-Competition Agreement;
(c) the
Assumed Liabilities;
(d) all
liabilities for the conduct of Buyer’s business or other actions of Buyer
occurring after the Closing Date, including, but not limited to, all liabilities
to Continuing Employees;
(e) any
failure of Seller to comply with any WARN Laws; and
(f) the
ownership and use of the Acquired Assets and the Business for events occurring
after the Closing Date.
Except
where limited by a specific restriction on duration set forth herein, Buyer’s
obligation to perform its covenants hereunder shall expire when each such
covenant is performed.
5.4 Damages.
For the
purposes of this Article V, the term “Damages”
shall
(a) include any and all losses (including any claims, judgments, damages, fines,
penalties, liabilities, costs or expenses, including reasonable attorneys’ fees
(collectively, the “Damages”))
actually paid or incurred by the Indemnified Party (as defined herein), (b)
be
reduced by any amounts recovered from any surety, insurance carrier or third
party obligor and no right of subrogation against any Indemnifying Party shall
accrue hereunder to or for the benefit of any surety, insurance company or
any
third party, and (c) be computed on an after-tax basis. Each party agrees to
submit in a timely manner to any applicable surety, insurance carrier or third
party obligor, all claims for Damages for which such entity may have a liability
to the party claiming the right to indemnification. The amount of the actual
loss and the amount of the indemnity payment shall be computed by taking into
account the timing of the loss or payment, as applicable, using the Prime Rate
as an interest rate or discount rate, as appropriate. A party claiming indemnity
shall take all reasonable steps to mitigate damages in respect of any claim
for
which it is seeking indemnification and shall use reasonable efforts to avoid
any costs or expenses associated with such claim and, if such costs and expenses
cannot be avoided, to minimize the amount thereof.
5.5 Claims
for Indemnification.
Whenever any claim shall arise for indemnification under this Article V, Seller
or Buyer, as the case may be, seeking indemnification (the “Indemnified
Party”),
shall
notify the party from whom indemnification is sought in writing (the
“Indemnifying
Party”)
of the
claim within fourteen (14) days of the receipt of written notice of any such
claim and, when known, the facts constituting the basis for such claim (an
“Indemnification
Claim Notice”).
In
the event of any such claim for indemnification hereunder resulting from or
in
connection with any claim or legal proceedings by a third party, the
Indemnification Claim Notice shall specify, if known, the amount or an estimate
of the amount of the liability arising therefrom and shall append all legal
papers, notices and other documents received in connection therewith. The
delivery of the Indemnification Claim Notice by the Indemnified Party to the
Indemnifying Party within such fourteen (14) day period shall not be a condition
precedent to any liability of the Indemnifying Party under this Agreement,
unless such Indemnifying Party has otherwise been prejudiced by the lack of
or
delay in delivering such Indemnification Claim Notice. The Indemnified Party
shall not settle or compromise any claim by a third party for which it is
entitled to indemnification hereunder without the prior written consent of
the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed
if the settlement or judgment includes an unconditional release to the
Indemnified Party from all liability with respect to such claim, provided,
however,
that if
suit shall have been instituted against the Indemnified Party and the
Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Section 5.6 hereof, the Indemnified Party shall have
the
right to settle or compromise such claim upon giving reasonable and timely
notice to the Indemnifying Party, as provided in Section 5.6.
5.6 Defense
by the Indemnifying Party.
In
connection with any claim which may give rise to indemnity hereunder resulting
from or arising out of any claim or legal proceeding, the Indemnifying Party,
at
its sole cost and expense may, upon written notice to the Indemnified Party,
assume the defense of any such claim or legal proceeding, whether or not under
a
reservation of rights with respect to ultimate liability under this Article
V.
If the Indemnifying Party assumes the defense of any such claim or legal
proceeding, the Indemnifying Party shall select counsel reasonably acceptable
to
the Indemnified Party to conduct the defense of such claims or legal proceedings
and at the sole cost and expense of the Indemnifying Party shall take all steps
necessary in the defense or settlement thereof. The Indemnifying Party shall
not
consent to a settlement of, or the entry of any judgment arising from, any
such
claim or legal proceeding, without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed if the
settlement or judgment includes an unconditional release to the Indemnified
Party from all liability with respect to such claim). If the Indemnified Party
shall withhold its consent to an economic settlement tendered to it by the
Indemnifying Party (the expense of which would be borne solely by the
Indemnifying Party), then the amount of any indemnification liability of the
Indemnifying Party specific to the claim which was the subject of the proffered
and rejected settlement shall not exceed the amount of such proffered and
rejected settlement, plus costs and expenses applicable to consummating such
settlement. The Indemnified Party shall be entitled to participate in (but
not
control) the defense of any such action, with its own counsel and at its own
expense. If the Indemnifying Party does not assume the defense of any such
claim
or litigation resulting therefrom within twenty one (21) days after the date
of
the Indemnification Claim Notice, (a) the Indemnified Party may defend against
such claim or litigation in such manner as it may deem appropriate, including,
but not limited to, settling such claim or litigation, after giving notice
of
the same to the Indemnifying Party, on such terms as the Indemnified Party
may
reasonably deem appropriate, and (b) the Indemnifying Party shall be entitled
to
participate in (but not control) the defense of such action, with its counsel
and at its own expense.
5.7 Payment.
Upon
the determination of liability under Sections 5.1 or 5.3 hereof, the appropriate
party shall pay to the other, within ten (10) days after such determination,
the
amount of any claim for indemnification made hereunder and, if such payment
is
not made thereunder, the Indemnified Party shall have set-off rights against
any
amounts owed to the Indemnifying Party, and/or its affiliates. Upon the payment
in full of any claim, by setoff or otherwise, the Indemnifying Party, except
as
set forth in Section 5.5, shall be subrogated to the rights of the Indemnified
Party against any person, firm or corporation with respect to the subject matter
of such claim. Except for any payment due in respect of the Final Net Working
Capital Adjustment, or for breaches of the Escrow Agreement, Transition
Agreement or the License Agreement or the Mutual Non-Competition Agreement,
the
indemnification provisions of this Article V shall be the exclusive remedies
of
the parties in connection with the purchase and sale of any Acquired Assets.
In
the event that Buyer receives payment from Seller for Buyer’s inability to
collect the Accounts Receivable, such uncollected Accounts Receivable shall,
without further action on the part of Buyer be assigned to Seller and in the
event that Buyer receives any payment thereon, Buyer will immediately remit
such
payment to Seller.
5.8 Bulk
Sales Law.
The
parties hereto waive compliance, if applicable, with the provisions of any
bulk
sales law including, without limitation, the bulk transfer provisions of the
Uniform Commercial Code of any state or any similar statute, if and to the
extent applicable to the transactions contemplated by this Agreement. Seller
agrees to indemnify, defend and hold harmless Buyer and its officers, agents
and
employees from any loss, cost, expenses (including related counsel fees),
liability or damage which Buyer or its officers, agents or employees may suffer
or incur by virtue of the noncompliance by Seller with any such bulk sales
law,
except with respect to the Assumed Liabilities. This obligation of Seller is
not
subject to the limitations contained in Section 5.2.
ARTICLE
VI
DISPUTE
RESOLUTION
6.1 Dispute
Resolution.
In the
event any dispute arises in connection with this Agreement, the parties agree
to
use all commercially reasonable efforts to settle such dispute by consulting
and
negotiating with each other, in good faith and understanding of their mutual
interests, to reach a just and equitable solution satisfactory to both
parties.
ARTICLE
VII
MISCELLANEOUS
PROVISIONS
(a) Upon
the
execution of this Agreement and thereafter, each party shall do such things
as
may be reasonably requested by another party hereto, at the expense of such
requesting party, in order more effectively to consummate or document the
transaction contemplated by this Agreement.
(b) Each
party hereto acknowledges that subsequent to Closing, the other party may need
access to Records, information or documents in the control or possession of
such
party for the purposes of concluding the transactions contemplated hereby,
preparation of tax returns, audits, compliance with governmental requirements,
and the prosecution or defense of third party claims. Accordingly, Seller and
Buyer agree that after Closing, for a period not in excess of six (6) years
subsequent to Closing, each shall make reasonably available to the other’s
representatives or agents, independent auditors, and/or governmental agencies
or
authorities, upon written request and at the expense of the requesting party,
such documents and information as may be available relating to the Business
for
periods prior and subsequent to Closing to the extent necessary to facilitate
concluding the transaction herein contemplated, tax filings, audits, compliance
with governmental requirements and regulations, and the prosecution or defense
of claims.
7.2 Notices.
All
notices, communications and deliveries under this Agreement shall be made in
writing, signed by the party making the same, shall specify the Section of
this
Agreement pursuant to which it is given, and shall be deemed given on the date
delivered if delivered in person or on the next day after delivered by Federal
Express or other nationally recognized overnight courier service, as follows:
Buyer: Checkpoint
Systems, Inc.
▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇.▇.
▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇▇▇ ▇▇▇▇, General Counsel
with
a
copy to:
▇▇▇▇▇▇▇▇ Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esquire
Seller:
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
With
a
copy to: ▇▇▇▇
▇▇▇▇▇▇▇▇, LPA
▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or
to
such other representative or to such other address as the parties hereto may
furnish to the other parties in writing. If notice is given pursuant to this
section of a permitted successor or assign of a party of this Agreement, then
notice shall be given as set forth above to such successor or assign of such
party.
7.3 Assignment.
This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, and their respective successors and permitted assigns. Neither party
may
assign this Agreement or any rights hereunder, by operation of law or otherwise,
without the prior written consent of the other party.
7.4 Definition
of Knowledge.
For
purposes of this Agreement, the phrases “to
the knowledge of Seller”
or
“Seller’s
knowledge”
or
similar phrases shall mean the actual knowledge of Seller after due inquiry
of
the following employees of Seller: ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇.
7.5 Controlling
Law; Amendment; Waiver.
(a) This
Agreement shall be construed and enforced in accordance with the laws of the
State of Delaware.
(b) This
Agreement may not be altered or amended except in a writing signed by Buyer
and
Seller.
(c) The
failure of any party hereto at any time to require performance of any provisions
hereof shall in no manner affect the right to enforce the same. No waiver by
any
party hereto of any condition, or of the breach of any term, provision,
warranty, representation, agreement or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed
or
construed as a further or continuing waiver of any such condition or breach
or a
waiver of any other condition or of the breach of any other terms, provision,
warranty, representation, agreement or covenant herein contained.
7.6 Representations
and Warranties.
The
respective representations and warranties of each party hereto shall not be
deemed to be waived or otherwise affected by any investigation made by any
other
parties hereto unless
otherwise specifically provided herein, including, but not limited to Section
3.5.
7.7 Entire
Agreement.
This
Agreement , including the Schedules attached hereto, constitutes the entire
agreement among the parties hereto with respect to the transactions contemplated
and supersedes all prior agreements, understandings, the letter of intent,
and
negotiations, both written and oral, among the parties with respect thereto.
7.8
No
Presumption; Interpretation.
Neither
this Agreement nor any other agreement between the parties nor any uncertainty
or ambiguity herein or therein shall be construed or resolved using any
presumption against any party hereto or thereto, whether under any rule of
construction or otherwise. On the contrary, this Agreement and the other
agreements between the parties have been reviewed by the parties and their
counsel and, in the case of any ambiguity or uncertainty, shall be construed
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of all parties hereto. The titles or captions of
articles, sections and subsections contained in this Agreement are inserted
only
as a matter of convenience and for reference and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision hereof.
For purposes of interpretation of this Agreement, there shall be no duplication
of materiality when a provision containing materiality references another
provision containing materiality.
7.9Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
document.
[INTENTIONALLY
LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement
to
be duly executed and delivered on the date first above written.
SELLER:
ALPHA
SECURITY PRODUCTS, INC.
By:
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ________________
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
Executive Vice President
BUYER:
CHECKPOINT
SYSTEMS, INC.
By:
/s/
▇▇▇▇▇▇ ▇. Off
Name:
▇▇▇▇▇▇ ▇. Off
Title:
President and Chief Executive Officer