Exhibit 2
EXECUTION COPY
CONFIDENTIAL
================================================================================
ASSET PURCHASE AGREEMENT
by and between
TII-DITEL, INC.
and
DITEL, INC.
February 26, 1999
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS........................................................1
1.1. Certain Definitions...................................................1
1.2. Other Defined Terms...................................................4
ARTICLE II THE TRANSACTION...................................................6
2.1. Sale and Purchase of Assets...........................................6
2.2. Excluded Assets.......................................................7
2.3. Assumed Liabilities...................................................8
2.4. Nonassignability of Assets............................................9
2.5. Retained Liabilities.................................................10
2.6. Purchase Price.......................................................10
2.7. Closing and Deliveries...............................................12
2.8. Allocation of Consideration..........................................12
2.9. Certain Expenses and Prepaid Items...................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER........................13
3.1. Organization and Good Standing.......................................13
3.2. Authorization and Enforceability.....................................13
3.3. No Violation of Laws or Agreements...................................14
3.4. Financial Statements.................................................14
3.5. Real Property Leases and Contracts...................................14
3.6. Inventory............................................................15
3.7. Title to and Adequacy of Assets......................................15
3.8. Litigation or Proceedings............................................15
3.9. Consents.............................................................15
3.10. Compliance With Laws................................................16
3.11. Benefit Plans.......................................................16
3.12. Intellectual Property...............................................16
3.13. Tax.................................................................17
3.14. Environmental Matters...............................................17
3.15. Brokerage...........................................................17
3.16. Accounts Receivable.................................................18
3.17. No Other Representations or Warranties..............................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER......................18
4.1. Organization and Good Standing.......................................18
4.2. Authorization and Enforceability.....................................18
4.3. Brokerage............................................................19
4.4. Sufficient Funds.....................................................19
4.5. No Violation of Laws or Agreements...................................19
4.6. Consents.............................................................19
4.7. Regulatory Matters...................................................20
4.8. Investment Intent....................................................20
ARTICLE V CERTAIN COVENANTS.................................................20
5.1. Conduct of Business..................................................20
5.2. Access, Information and Documents....................................20
5.3. Lockboxes............................................................21
5.4. Public Announcement..................................................21
5.5. Mutual Covenants.....................................................21
5.6. Employee Matters.....................................................22
5.7. Certain Taxes and Expenses...........................................23
5.8. Access to Information................................................23
5.9. Seller Intellectual Property.........................................24
5.10. Books and Records...................................................25
5.11. Transition Services.................................................25
5.12. Non-Compete.........................................................25
ARTICLE VI CONDITIONS PRECEDENT; TERMINATION................................26
6.1. Conditions Precedent to Obligations of Purchaser.....................26
6.2. Conditions Precedent to Obligations of Seller........................27
6.3. Termination..........................................................27
ARTICLE VII SURVIVAL AND INDEMNIFICATION....................................28
7.1. Survival of Representations and Warranties...........................28
7.2. Indemnification Obligations of Seller................................28
7.3. Indemnification Obligations of Purchaser.............................29
7.4. Limitations on Indemnification.......................................29
7.5. Indemnification Procedures...........................................30
7.6. Sole Remedy..........................................................32
7.7. Collateral Sources...................................................32
ARTICLE VIII MISCELLANEOUS..................................................32
8.1. Limitation on Seller's Representations...............................32
8.2. Schedules and Exhibits...............................................33
8.3. Supplements to Disclosure Schedules..................................33
8.4. Bulk Transfer Laws...................................................34
8.5. Notices..............................................................34
8.6. Successors and Assigns...............................................35
8.7. Governing Law........................................................35
8.8. Mediation............................................................36
8.9. Consent to Jurisdiction..............................................36
8.10. Entire Agreement....................................................36
8.11. Construction; Interpretation; Severability..........................36
8.12. Further Assurances..................................................37
8.13. No Third Party Beneficiaries........................................37
8.14. Amendment and Waiver................................................37
8.15. Counterparts and Headings...........................................37
8.16. Headings............................................................37
Schedules
2.1(a) Real Property Leases
2.1(b) Equipment and Machinery
2.1(c) Equipment Leases
2.1(i) Intellectual Property
2.2(f) Intercompany Accounts Receivable
2.2(h) Excluded Inventory
2.2(i) Computer Hardware and Software
2.2(j) Excluded Assets
2.3(e) Accrued Liabilities
2.6(b)(1) Definition of Net Assets
2.6(b)(2) Exceptions to GAAP
3.3 No Violation of Laws or Agreements
3.4 Exceptions to Financial Statements
3.5 Real Property Leases and Contracts
3.6 Inventory
3.7(a) Title - Personal Property
3.7(b) Title - Real Property Leases
3.8 Litigation
3.9 Seller's Consents
3.10 Compliance with Laws
3.11(a) Employee Benefit Plans
3.12 Intellectual Property
3.13 Tax
4.6 Purchaser's Consents
5.6(a) Non-Active Employees
6.1(d) Seller Required Consents
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), made this 26th day of February
1999, by and between TII-DITEL, INC., a North Carolina corporation ("Seller")
and DITEL, INC., a Utah corporation and a wholly-owned subsidiary of Critchley
Group, Inc. ("Purchaser").
Background
A. Seller owns and operates its fiber optic product business unit which is
engaged in the business of designing, manufacturing and marketing products used
to manage and protect sensitive fiber optic lines (the "Business").
B. Purchaser desires to purchase, and Seller desires to sell, substantially
all of the assets comprising the Business, all on the terms and subject to the
conditions set forth in this Agreement.
Terms
In consideration of the mutual agreements and covenants contained herein
and intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Certain Definitions.
As used in this Agreement, the following terms shall have the respective
meanings ascribed to them in this Section:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with, such other
Person at any time during the period for which the determination of affiliation
is being made. For purposes of this definition, the term "control" (including
the correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of management policies
of such Person, whether through the ownership of voting securities or by
contract or otherwise.
"Authority" means any United States federal, state or local governmental or
regulatory agency or authority.
"Books and Records" shall mean all books, ledgers, files, reports, plans
and operating records, whether in paper or electronic format, related
exclusively to, or maintained exclusively by, the Business.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in New York City are authorized or obligated by law
or executive order to close.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Closing Date Statement" means the statement prepared by Seller setting
forth Seller's calculation of Closing Date Net Assets.
"Code" means the Internal Revenue Code of 1986, as amended and the rules
and regulations promulgated thereunder from time to time.
"Employee" means any individual with whom Seller maintains at Closing, an
employer-employee relationship (including any such individual on short-term
disability or an approved leave of absence) whose primary responsibilities
relate to the Business and shall include, without limitation, Dare ▇. ▇▇▇▇▇▇▇▇.
"Environmental Law" means any federal, state, or local law, statute,
ordinance, rule, regulation, order, consent, decree, judgment or common-law
doctrine, and the provisions and conditions of permits, licenses and other
operating authorizations relating to pollution or protection of the environment,
including, without limitation, ambient air, surface water, ground water or land,
waste, hazardous or toxic substances, whether relating to manufacture, storage,
disposal, cleanup, release, threat of release, transport, monitoring, testing,
handling, reporting, personal injury or property damage, including all
requirements to install pollution control equipment and all requirements to
test, monitor or remove underground storage tanks, and shall include but not be
limited to any of the following: CERCLA, the Resource Conservation and Recovery
Act, the Superfund Amendments and Reauthorization Act of 1986, the Clean Air
Act, the Clean Water Act, and the Toxic Substance Control Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations issued thereunder.
"ERISA Affiliate" means any corporation or trade or business (whether or
not incorporated) which is treated with Seller as a single employer within the
meaning of Section 414 of the Code.
"Final Closing Date Statement" means the Closing Date Statement, as
modified by Purchaser and Seller or, in accordance with Section 2.6(b)(i), by
the Independent Accounting Firm, or if Purchaser fails to notify Seller of any
disputed items within the 30-day time period prescribed in Section 2.6(b)(i),
the Closing Date Statement as previously delivered to Purchaser pursuant to
Section 2.6(b)(i).
"Final Purchase Price" means the Purchase Price, as adjusted by the Net
Assets Adjustment.
"Fully Allocated Cost" means fully allocated cost, direct and indirect, in
accordance with Seller's customary accounting practices.
2
"GAAP" means generally accepted accounting principles in the United States.
"Hazardous Materials" means all materials defined as "hazardous
substances," "hazardous wastes," "toxic substances," or bearing similar or
analogous definitions in (i) CERCLA, (ii) the Resource Conservation and Recovery
Act, as amended, or (iii) any other Environmental Law.
"Intellectual Property" means all of the following irrespective of where
any of the same were issued, are pending or exist that are used exclusively in
the Business, except to the extent included in the Excluded Assets: patents,
patent applications, inventions, invention disclosures, trade secrets, formulas,
know-how, registered and unregistered trademarks, service marks, trade names,
trade dress, logos and any similar proprietary rights and any licenses or user
rights related to the foregoing.
"knowledge" means, with respect to Seller, the actual knowledge, without
special investigation, of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Dare ▇. ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Laws" means any statute, law, ordinance, regulation, rule, writ, order or
decree of any United States federal, state or local Authority.
"Lien" means any lien, charge, pledge, security interest or other monetary
encumbrance.
"Material Adverse Effect" means any material adverse change in the
financial condition or results of operations of the Business, taken as a whole,
other than with respect to any adverse changes which, directly or indirectly,
relate to or result from (i) public or industry knowledge relating to the
transactions contemplated by this Agreement (including but not limited to any
action or inaction by the Business' employees, customers and vendors) or (ii)
past, existing or prospective economic or regulatory conditions or other
conditions affecting at any time the Business or the industry in which the
Business competes. Notwithstanding the foregoing, Seller may, at its option,
include in the Schedules to this Agreement or elsewhere, items which would not
have a Material Adverse Effect within the meaning of the previous sentence in
order to avoid misunderstanding, and such inclusion shall not be deemed to be an
acknowledgment by Seller that such items would have a Material Adverse Effect.
"Net Assets Adjustment" means the difference between the Closing Date Net
Assets, as Closing Date Net Assets is calculated in the Final Closing Date
Statement, and the Net Assets Target.
"Net Assets Target" means US$1,778,759.
"North Carolina Facility" means the facility located at 857 and ▇▇▇-▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, an Authority, a trust, a joint stock company,
a joint venture, an unincorporated organization or other entity or organization.
3
"Taxes" (or "Tax" where the context requires) means all federal, state,
county, provincial, local, foreign and other taxes (including, without
limitation, income, profits, premium, estimated, excise, sales, use, occupancy,
gross receipts, franchise, ad valorem, severance, capital levy, production,
transfer, withholding, employment and payroll related and property taxes, import
duties and other governmental charges and assessments), whether attributable to
statutory or nonstatutory rules and whether or not measured in whole or in part
by net income, and including without limitation interest, additions to tax or
interest, charges and penalties with respect thereto.
"Transaction Documents" means this Agreement, the Transition Services
Agreement, and the other documents contemplated hereby and thereby.
1.2. Other Defined Terms.
The following terms are defined elsewhere in this Agreement:
Term Section
---- -------
Assumed Liabilities...................................................2.3(b)
Basket Amount.........................................................7.4(a)
Benefit Plan..........................................................3.11(a)
Business..............................................................Preamble
Closing...............................................................2.7(a)
Closing Date..........................................................2.7(a)
Closing Date Net Assets...............................................2.6(b)(i)
Collateral Source.....................................................7.4
Confidentiality Agreement.............................................5.2
Continuation Coverage.................................................5.6
Contracts.............................................................2.1(d)
Equipment Leases......................................................2.1(c)
Excluded Assets.......................................................2.2(j)
Financial Statements..................................................3.4
Guarantees............................................................5.9
Indemnification Claim Notice..........................................7.5(a)
Indemnified Party.....................................................7.5(a)
Indemnifying Party....................................................7.5(a)
Independent Accounting Firm...........................................2.6(b)(i)
Internet Web Site.....................................................5.9(c)
Inventory.............................................................2.1(h)
IRS...................................................................3.11(b)
Linked Web Site.......................................................5.9(c)
Loss..................................................................7.2(a)
Net Assets............................................................2.6(b)
Non-Assignable Asset..................................................2.4
Notice................................................................8.5
Permits...............................................................2.1(e)
Prepaid Expenses......................................................2.1(g)
Purchase Price........................................................2.6(a)
4
Purchased Assets......................................................2.1
Purchaser Indemnitees.................................................7.2(a)
Real Property Leases..................................................2.1(a)
Retained Liabilities..................................................2.5
Seller's 401(k) Plan..................................................3.11(b)
Seller Intellectual Property..........................................2.2(e)
Seller Indemnitees....................................................7.3(a)
Termination Date......................................................6.3(a)(ii)
Third Party Claim.....................................................7.5(b)
TII Industries........................................................5.4
Transition Services Agreement.........................................5.11
Transferred Employees.................................................5.6
5
ARTICLE II
THE TRANSACTION
2.1. Sale and Purchase of Assets.
Upon the terms and subject to the conditions set forth in this Agreement,
at the Closing, Seller shall sell, convey, transfer, assign and deliver to
Purchaser, and Purchaser shall purchase and accept from Seller, all of Seller's
right, title and interest in and to the assets of Seller of every type and
description that are currently exclusively used in the operation of the
Business, whether tangible or intangible, real, personal or mixed, wherever
located, except for the Excluded Assets (the "Purchased Assets"), including,
without limitation, all of Seller's right, title and interest in the following:
(a) all of Seller's interest under the leases of real property set forth on
Schedule 2.1(a) (the "Real Property Leases");
(b) all equipment and machinery set forth on Schedule 2.1(b) and furniture
owned by Seller (except for the furniture owned by Dare ▇. ▇▇▇▇▇▇▇▇ and set
forth on Schedule 2.2(k)) at Closing, which are exclusively used by Seller in
the Business (the "Equipment");
(c) Seller's interest at Closing under the leases of equipment and
machinery set forth on Schedule 2.1(c), which are exclusively used by Seller in
the Business (the "Equipment Leases");
(d) all contracts, agreements and undertakings (whether oral or written) to
which Seller is a party relating exclusively to the Business, including without
limitation, the employment agreement between Seller and Dare ▇. ▇▇▇▇▇▇▇▇ dated
September 23, 1993 (as amended, supplemented or otherwise modified) (the
"Contracts");
(e) all licenses, permits and other like authorizations possessed by Seller
and necessary to the conduct of operations of the Business (the "Permits");
(f) all accounts receivable (other than receivables from Seller or any of
its Affiliates) in respect of the Business;
(g) all rights of Seller at Closing in and to prepaid taxes, rents, utility
charges and other obligations, and prepaid expenses and other prepaid benefits
exclusively relating to the Business (the "Prepaid Expenses");
(h) all raw materials, component parts, work-in-progress and finished goods
inventory owned by Seller at Closing which are exclusively used by Seller in the
Business to the extent that such items do not infringe Seller Intellectual
Property, but excluding all raw materials, component parts, work-in-progress and
finished goods inventory listed or described on Schedule 2.2(h) (the
"Inventory");
(i) all rights of Seller to the Intellectual Property listed on Schedule
2.1(i);
6
(j) the Books and Records;
(k) all computer hardware, stored data, computer software and computer
software documentation owned by Seller at Closing exclusively relating to the
Business (except for those set forth on Schedule 2.2(i));
(l) to the extent transferable, all rights of Seller to the telephone
numbers, including any toll-free numbers, and facsimile telephone numbers
assigned exclusively to Seller by Seller's telephone service providers; and
(m) all claims, choses in action and rights of action by Seller against
third parties, including but not limited to claims for refunds against
governmental agencies or other entities, rebates, refunds, prepaid discounts,
allowances or other monies or consideration received by Seller or any of its
Affiliates, which exclusively relate to the Purchased Assets or the Assumed
Liabilities.
Notwithstanding anything to the contrary contained in this Agreement,
Seller may retain copies of any Contract, Books and Records or any other
document or materials to the extent that Seller (i) is required to retain it by
Law, (ii) may need such copies for tax purposes, in connection with product
liability claims or claims related to Retained Liabilities or Excluded Assets,
in which case, Seller shall use such copies only in connection therewith or
(iii) may need such copies to carry out the terms or purposes of this Agreement.
2.2. Excluded Assets.
Notwithstanding anything herein to the contrary, from and after the
Closing, Seller shall retain all of its right, title and interest in and to, and
there shall be excluded from the sale, conveyance, assignment or transfer to
Purchaser hereunder, and the Purchased Assets shall not include, the following
assets and properties (such retained assets and properties herein collectively
referred to as the "Excluded Assets"):
(a) all real and personal property of Seller or any of its Affiliates not
included in the Purchased Assets;
(b) all books, minutes and general corporate records of Seller or any of
its Affiliates not solely relating to the Purchased Assets or the Business;
(c) all books and records that Seller or any of its Affiliates is required
to retain pursuant to any statute, rule, regulation or ordinance;
(d) all patents, patent applications, inventions, invention disclosures,
trade secrets, formulas, know-how, registered and unregistered trademarks,
service marks, trade names, trade dress, logos and any similar proprietary
rights and any licenses or user rights related to the foregoing in this clause
(d), irrespective of where any of the same were issued, are pending or exist,
that are owned or used by Seller or any of its Affiliates (other than the
Intellectual Property specifically described on Schedule 2.1(i)) (collectively,
the "Seller Intellectual Property");
(e) all claims, choses in action and rights of action by Seller or any of
its Affiliates against third parties, including but not limited to claims for
refunds against governmental
7
agencies or other entities, rebates, refunds, prepaid discounts, allowances or
other monies or consideration received by Seller or any of its Affiliates, other
than those exclusively relating to the Purchased Assets or the Assumed
Liabilities;
(f) all intercompany accounts receivable from Seller or any of its
Affiliates set forth on Schedule 2.2(f);
(g) all cash, cash equivalents, notes, loans receivable, securities,
investments and other receivables of every nature of Seller exclusively relating
to the Business, wherever located, including, without limitation, at the North
Carolina Facility, in accounts, lock boxes and other similar accounts, whether
maintained at a bank, savings and loan or other similar financial institution;
(h) all raw materials, component parts, work-in-progress and finished goods
inventory listed or described on Schedule 2.2(h);
(i) all licensed software and any computer hardware, stored data, computer
software and computer software documentation relating to the agreements listed
or described on Schedule 2.2(i) and all rights Seller may have with respect to
such agreements; and
(j) any other right or asset listed or described on Schedule 2.2(j).
2.3. Assumed Liabilities.
Subject to the terms and provisions of this Agreement, and except as
otherwise provided by this Section 2.3, Purchaser shall assume no debts,
liabilities or obligations of Seller except that Purchaser agrees at the Closing
to assume and discharge or perform when due the following (the "Assumed
Liabilities"):
(a) all debts, liabilities and obligations that Purchaser has expressly
assumed or agreed to assume pursuant to this Agreement;
(b) all debts, liabilities and obligations of Seller under the Real
Property Leases, the Equipment Leases, the Contracts and the Permits to the
extent such debt, liability or obligation relates to or arises on or following
the Closing;
(c) all accounts payable of Seller at Closing that are attributable to the
Business;
(d) all severance and other similar liabilities and obligations of Seller
with respect to the Employees arising in connection with or due to this
Agreement or the consummation of the transactions contemplated by this
Agreement;
(e) all accrued liabilities of the Business identified or provided for in
the Financial Statements relating to the items listed and identified on Schedule
2.3(e), including, without limitation, all accrued liabilities at Closing;
(f) all debts, liabilities and obligations that arise out of or relate to
the Purchased Assets or the Business to the extent attributable to occurrences
or circumstances
8
arising on or following the Closing, including any obligations to deliver goods
and products following the Closing under purchase orders or commitments entered
into by Seller prior to the Closing;
(g) all liabilities for state and local real and personal property taxes
which relate to the period on or subsequent to the Closing; and
(h) all liabilities with respect to all actions, suits, proceedings,
disputes, claims or investigations that relate to the Business or the ownership
or operation of the Purchased Assets, at law, in equity or otherwise, arising on
or following the Closing.
Pursuant to Section 7.3, Purchaser shall indemnify and hold harmless Seller
and its Affiliates from and against any and all losses, damages, liabilities,
costs and expenses (including, without limitation, attorneys' fees), judgments
and settlements arising from Purchaser's failure fully or timely to pay, perform
or satisfy the Assumed Liabilities. All persons or entities having any right
with respect to any of the Assumed Liabilities are intended third-party
beneficiaries of Purchaser's covenants in this Section 2.3. Purchaser's
obligations to third parties under this Section will not be subject to offset or
reduction by reason of any actual or alleged breach of any representation,
warranty or covenant contained in this Agreement or any closing or other
document contemplated by this Agreement, any right or alleged right of
indemnification hereunder or for any other reason.
2.4. Nonassignability of Assets.
Nothing in this Agreement shall be construed as an attempt by Seller or any
of its Affiliates to assign to Purchaser pursuant to this Agreement any
contract, agreement, lease, permit, franchise, claim or asset included in the
Purchased Assets (i) which is by its terms or by law nonassignable without the
consent of any other party or parties or any governmental authority, unless such
consent or approval shall have been given, or (ii) as to which all the remedies
for the enforcement thereof available to Seller or such Affiliate would not by
law pass to Purchaser as an incident of the assignments provided for by this
Agreement (a "Non-Assignable Asset"). To the extent that any such consent or
approval in respect of, or a novation of, a Non-Assignable Asset shall not have
been obtained on or before the Closing, the parties hereto shall use reasonable
efforts and shall cooperate in any reasonable arrangement to assure Purchaser
the benefits of such Non-Assignable Asset to the extent permitted by law. To the
extent lawful, practicable and reasonable in the circumstances, including the
obtaining of any such necessary consent or approval after the Closing (provided
that Seller and its Affiliates shall not be required to pay any money or other
consideration or grant forbearances to any third party to effect such consent or
approval), Seller, on its own or at the request and under the direction of
Purchaser and, in each case, at Purchaser's expense, shall take all reasonable
actions to assure that the rights and obligations of Seller and its Affiliates
under the Non-Assignable Assets shall be preserved for the account of Purchaser
to the extent not involving any undue hardships upon Seller or its Affiliates or
unreasonable time constraints in the request or compliance with any such
Purchaser instructions. Purchaser shall indemnify and hold harmless Seller and
its Affiliates for taking any such actions and reimburse Seller and its
Affiliates for their expenses related thereto. The parties hereto agree that
Seller shall not be deemed to be in breach of this Agreement as a result of its
failure to transfer to Purchaser any Non-Assignable Asset at Closing; provided,
however, if such failure causes a failure of any of the conditions to
Purchaser's obligations as set forth in Article
9
VI, the Closing shall proceed only if Purchaser elects, in its sole discretion,
to waive such conditions. Purchaser shall be responsible for obtaining any
necessary governmental consent or approval for the transfer or re-issuance of
any Permit included in the Purchased Assets.
2.5. Retained Liabilities.
Notwithstanding anything to the contrary contained in this Agreement,
Seller shall retain and be responsible for all debts, liabilities and
obligations of Seller other than the Assumed Liabilities ("Retained
Liabilities").
2.6. Purchase Price.
(a) Purchase Price. Subject to the terms and conditions of this Agreement,
in addition to assuming the Assumed Liabilities, the aggregate price to be paid
by Purchaser for the purchase of the Purchased Assets (the "Purchase Price")
shall be US$5,300,000 in cash, subject to adjustment as set forth in Section
2.6(b). The Purchase Price shall be paid by Purchaser on the Closing Date, in
immediately available funds, by wire transfer to an account designated by Seller
in writing to Purchaser prior to the Closing Date.
(b) Post-Closing Adjustment to Purchase Price.
(i) As soon as practicable, but in any event within twenty-one (21) days
after the Closing Date, Seller shall prepare and deliver the Closing Date
Statement to Purchaser. The Closing Date Statement shall include a calculation
of the Net Assets (as hereafter defined) of the Business as of the Closing Date
(the "Closing Date Net Assets") and the amount of any Net Assets Adjustment.
Purchaser and Seller agree that (x) the term "Net Assets" shall have the meaning
set forth on Schedule 2.6(b)(1), and (y) the Closing Date Net Assets shall be
derived from a balance sheet of the Business as of the Closing Date, which
balance sheet, except as set forth on Schedule 2.6(b)(2), shall be prepared in
accordance with GAAP applied in a manner consistent with the Financial
Statements. Purchaser shall give Seller and its independent auditors access at
all reasonable times to the properties, books and records pertaining to the
Purchased Assets for such purpose. Purchaser may not dispute any amounts
reflected on the Closing Date Statement unless Purchaser can demonstrate that
the Closing Date Statement was not prepared in accordance with GAAP applied in a
manner consistent with the Financial Statements. Purchaser shall notify Seller
in writing of each disputed item, and specify the amount thereof in dispute,
within twenty-one (21) days of Purchaser's receipt of the Closing Date
Statement. If Purchaser timely notifies Seller of any such dispute, and Seller
and Purchaser cannot resolve any such dispute within seven (7) days of
Purchaser's delivery of such notice, such dispute shall be resolved by
PriceWaterhouseCoopers LLP, or if such firm is unable to so act or is not at
such time independent of both Seller and Purchaser, by an independent
internationally recognized accounting firm selected by Seller which accounting
firm is reasonably acceptable to Purchaser (the accounting firm so engaged shall
hereinafter be referred to as the "Independent Accounting Firm"). The written
determination of the Independent Accounting Firm shall be made as promptly as
practicable (and in any event within thirty (30) days of notice of receipt of
such dispute by Purchaser and Seller, which shall be promptly given by the
parties) and shall be final. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated between Purchaser and Seller so
that Purchaser's share of such costs shall be in the same proportion that the
aggregate amount of the disputed amounts submitted to the Independent
10
Accounting Firm that are unsuccessfully disputed by Purchaser (as finally
determined by the Independent Accounting Firm) bears to the total amount of such
disputed amounts so submitted to the Independent Accounting Firm.
(ii) If the Net Assets Adjustment is a positive number, the Purchase Price
shall be increased by the amount of the Net Assets Adjustment subject to a
maximum adjustment of $100,000, and within five (5) Business Days after
establishment of the Final Closing Date Statement, or within five (5) Business
Days after the agreement of Seller and Purchaser in respect of any portion
thereof, Purchaser shall pay Seller by wire transfer in immediately available
funds the amount of the Net Assets Adjustment. If the Net Assets Adjustment is a
negative number, the Purchase Price shall be decreased by the amount of the Net
Assets Adjustment, and within five (5) Business Days after the establishment of
the Final Closing Date Statement, or within five (5) Business Days after the
agreement of Seller and Purchaser in respect of any portion thereof, Seller
shall pay Purchaser by wire transfer in immediately available funds the amount
of the Net Assets Adjustment.
(iii) The procedures for resolution of disputes concerning the Closing Date
Net Assets and the Closing Date Statement set forth in this Section are intended
to be final and exclusive of any other contest or appeal in relation thereto, so
that if (x) Purchaser shall have failed to give notice of any disputed item, or
(y) having given notice of a disputed item, Purchaser subsequently reaches
agreement with Seller on the disputed item, or (z) no such agreement is reached
and the matter is submitted to the Independent Accounting Firm and they make
their determination, then in all such cases neither party shall be entitled to
subject such agreement or determination to appeal to any court or tribunal. Any
adjustment or non-adjustment to the Purchase Price or Closing Date Net Assets,
whether pursuant to this Section 2.6 or otherwise, shall not form the basis for
any claim for damages pursuant to this Agreement.
2.7. Closing and Deliveries.
(a) Closing. Subject to the terms and conditions of this Agreement, the
closing of the sale and purchase of the Purchased Assets shall take place at
10:00 a.m., New York City time, on February 26, 1999 or on such other date or at
such other time as may be mutually agreed upon in writing by Purchaser and
Seller (the "Closing Date") and the effective time of such closing shall be
11:59 p.m., New York City time, on February 28, 1999 or on such other date or at
such other time as may be mutually agreed upon in writing by Purchaser and
Seller (the "Closing").
(b) Delivery and Payment. Subject to the terms and conditions of this
Agreement, on the Closing Date:
(i) Purchaser shall pay the Purchase Price to Seller in immediately
available funds by wire transfer to an account which shall be designated by
Seller prior to the Closing Date;
(ii) Seller shall deliver to Purchaser such instruments of transfer,
assignment, conveyance and other instruments sufficient to convey, transfer and
assign to Purchaser all right, title and interest in and to the Purchased Assets
together with possession, with respect to personal property, and the right to
possession, with respect to the real property, of such
11
Purchased Assets, all in form and substance reasonably satisfactory to
Purchaser;
(iii) Purchaser shall deliver to Seller such instruments of assumption
sufficient to assume, discharge or perform when due, all of the Assumed
Liabilities, all in form and substance reasonably satisfactory to Seller; and
(iv) Seller and Purchaser shall deliver, each to the other, such documents
as are required pursuant to Article VI hereof.
2.8. Allocation of Consideration.
Seller and Purchaser agree that the Purchase Price shall be reasonably
allocated among the Purchased Assets, tangible and intangible, on the basis of
an allocation (the "Allocation") to be prepared by Seller for the review and
approval of Purchaser. A final version of such Allocation must be agreed by
Seller and Purchaser on or before the Closing Date. Such final version of the
Allocation shall, upon agreement by Seller and Purchaser, become part of this
Agreement for all purposes. Seller and Purchaser agree to report, pursuant to
Section 1060 of the Code and the regulations promulgated thereunder, if and when
required, the Allocation of the Purchase Price, as adjusted, among the Purchased
Assets in a manner entirely consistent with such Allocation in the preparation
and filing of all Tax returns (including IRS form 8594). Neither Seller nor
Purchaser will take any action that would call into question the bona fides of
such Allocation.
2.9. Certain Expenses and Prepaid Items.
With respect to state and local real and personal property taxes imposed or
to be imposed on the Purchased Assets for the period commencing before and
ending after the Closing, Seller and Purchaser shall make such arrangements as
may be necessary to prorate such expenses so that Seller will bear such expenses
to the extent they relate to the period prior to the Closing and Purchaser will
bear such expenses to the extent they relate to the period on or after the
Closing. Such arrangements will include a net payment from Seller to Purchaser
or vice versa, as the case may be, on, or as soon as practicable following, the
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1. Organization and Good Standing.
Seller is a corporation validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and corporate authority to own, lease and operate its properties and
assets as now owned, leased and operated.
3.2. Authorization and Enforceability.
Seller has full corporate power and corporate authority to make, execute,
deliver and perform this Agreement and the other Transaction Documents to which
it is a party, and the
12
execution, delivery and performance by Seller of this Agreement and the other
Transaction Documents to which it is a party, have been duly authorized by all
necessary corporate and stockholder actions on the part of Seller. This
Agreement has been duly executed and delivered by Seller and constitutes, and
the other Transaction Documents to which it is a party will constitute when
executed and delivered, the legal, valid and binding obligation of Seller
enforceable against Seller in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to or affecting the rights of creditors generally
and to general principals of equity, whether considered in a suit at law or in
equity.
3.3. No Violation of Laws or Agreements.
Except as set forth on Schedule 3.3 hereof, the execution, delivery and
performance by Seller of this Agreement and the other Transaction Documents to
which it is a party does not, assuming the receipt of all consents, approvals,
waivers and authorizations required to be obtained by Seller (as set forth on
Schedule 3.9) or Purchaser, and the giving or making of notices and filings
required to be given or made by Seller (as set forth on Schedule 3.9) or
Purchaser, (a) to the knowledge of Seller, violate any provision of applicable
Law, (b) to the knowledge of Seller, violate any judgment, order, writ or decree
of any court or other tribunal applicable to Seller, (c) violate any of the
provisions of the Articles of Incorporation or the By-Laws (or similar
organizational documents) of Seller, or (d) to the knowledge of Seller, conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any Real Property Leases, Equipment
Leases, Contracts or Permits, except to the extent any such violation, conflict,
breach, default, acceleration, termination, modification, cancellation or
failure to give notice under clauses (a) through (d) of this Section would not
reasonably be expected to have a Material Adverse Effect or a material adverse
effect upon Seller's ability to consummate the transactions contemplated by this
Agreement in accordance with the terms hereof.
3.4. Financial Statements.
Seller has previously delivered to Purchaser (i) a balance sheet for the
Business as of June 30, 1998 and (ii) a statement of operations for the Business
for the fiscal years ended June 28, 1996, June 27, 1997, and June 26, 1998
(collectively, the "Financial Statements"). The Financial Statements, except as
set forth on Schedule 3.4, (a) have been derived from the internal books and
records of Seller, (b) taken as a whole, are correct and complete in all
material respects and present fairly the financial information purported to be
reflected thereby and (c) have been prepared in accordance with GAAP. Seller
makes no other representation or warranty with respect to the Financial
Statements.
3.5. Real Property Leases and Contracts.
To the knowledge of Seller, except as set forth on Schedule 3.5, each of
the Real Property Leases and Contracts is in full force and effect in all
material respects, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles, and Seller is
not in breach or default thereunder and no other party, to the knowledge of
Seller, to any
13
such Real Property Lease or Contract is in breach or default thereunder, except
for such breaches or defaults which would not result in a Material Adverse
Effect.
3.6. Inventory.
The Inventory is of a quality which is substantially usable or saleable in
the ordinary course of business, except for the Inventory set forth on Schedule
3.6 and such other Inventory, the existence of which would not reasonably be
expected to have a Material Adverse Effect.
3.7. Title to and Adequacy of Assets.
(a) Assets other than Real Property. Seller owns all the Purchased Assets
comprising personal property free and clear of all Liens except (i)
imperfections of title and encumbrances that will not result in a Material
Adverse Effect and (ii) Liens disclosed on Schedule 3.7(a) hereto.
(b) Leased Real Property. Seller has valid leasehold interests in the Real
Property Leases subject, in all cases, to the following: (i) exceptions,
objections, agreements, claims, defects, easements, rights of way,
encroachments, encumbrances, covenants, reservations, restrictions, conditions,
leases, tenancies and the like of record or otherwise known by, made known to or
available to Purchaser, (ii) zoning, building, subdivision and other statutory
or regulatory conditions and restrictions, (iii) liens for Taxes and assessments
not yet due and payable, (iv) all matters, states of fact and defects that are
or should be apparent from a physical inspection of leased real property or that
would be disclosed by and on the ground survey, (iv) Liens which would not have
a Material Adverse Effect, (v) Liens disclosed on Schedule 3.7(b) and (vi) Liens
upon the underlying fee estate.
(c) The Purchased Assets constitute all of the material assets necessary
for the operation of the Business as currently operated by Seller except for the
Excluded Assets and those assets, rights, or agreements which are the subject of
Section 5.11(a).
3.8. Litigation or Proceedings.
Except as disclosed in Schedule 3.8 hereto, to Seller's knowledge, as of
the date hereof, there are no actions, suits, investigations or proceedings
pending or threatened in writing before any court or arbitrator or Authority in
respect of the Purchased Assets which would have a Material Adverse Effect.
Except as disclosed in Schedule 3.8 hereto, as of the date hereof, there are no
outstanding judgments, decrees or orders of any court or Authority against
Seller in respect of the Purchased Assets which would have a Material Adverse
Effect.
3.9. Consents.
Except as set forth in Schedule 3.9, to Seller's knowledge, no consent,
approval or authorization of, or registration or filing by Seller with, any
Person is required in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby by Seller,
which the failure to obtain or make would have a Material Adverse Effect or
prohibit Seller from consummating the transactions contemplated hereby.
14
3.10. Compliance With Laws.
To Seller's knowledge, except as set forth in Schedule 3.10, as of the date
hereof no notice, citation, summons or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending or threatened in writing by any Authority in connection with or relating
to (a) the Purchased Assets or (b) the failure by Seller to have any Permit
required in connection with the Purchased Assets (in each case, other than with
respect to any violations or failures which would not have a Material Adverse
Effect).
3.11. Benefit Plans.
(a) Set forth on Schedule 3.11(a) is a true and complete list of each
"employee benefit plan," as defined in Section 3(3) of ERISA and all other
retirement, deferred compensation, incentive, severance and other material
fringe benefit plans, programs or arrangements maintained or contributed to by
Seller or any ERISA Affiliate for the benefit of any Employee (the "Benefit
Plans").
(b) As applicable with respect to each Benefit Plan, Seller has made
available to Purchaser, true and complete copies of (i) each Benefit Plan,
including all amendments thereto, (ii) the current summary plan description for
the TII Industries, Inc. 401(k) Plan (the "Sellers 401(k) Plan") and each
summary of material modifications thereto and (iii) the most recent Internal
Revenue Service ("IRS") determination letter. In addition, with respect to each
Benefit Plan that is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) (a "Pension Plan"), Seller has made available to
Purchaser true and complete copies of the most recent annual report (Form 5500
and all schedules thereto) filed with the IRS.
(c) Each Benefit Plan has been maintained, operated and administered in
substantial compliance in all material respects with its terms and the
applicable provisions of ERISA and the Code except where such noncompliance
would not have a Material Adverse Effect. Each Pension Plan meets the
qualification requirements of Section 401(a) of the Code.
3.12.....Intellectual Property.
Schedule 2.1(i) sets forth a list as of the date hereof of all material
Intellectual Property owned by or licensed to Seller which, to Seller's
knowledge, are material to the Purchased Assets. Except as set forth in Schedule
3.12, Seller has no knowledge of any objections or claim being asserted by any
Person against Seller with respect to the ownership, validity, enforceability or
use of any such Intellectual Property or challenging or questioning the validity
or effectiveness of any such license which, if resolved adversely to Seller,
would have a Material Adverse Effect.
3.13. Tax.
(a) Seller has timely filed (within any applicable extension periods) with
the appropriate authorities all Tax returns and reports required to be filed
with respect to the Purchased Assets and has paid, or will pay, all Taxes which
are required to be paid on or prior to the Closing Date, the non-payment of
which would result in a Lien or encumbrance on any Purchased Asset or would
result in Purchaser becoming liable or responsible therefore.
15
(b) Except as set forth on Schedule 3.13, Seller has not received from any
taxing authority any notice in writing of proposed adjustment, deficiency, or
underpayment of any Taxes related to the Purchased Assets. Seller has not agreed
to the extension of time for the assessment of Taxes related to the Purchased
Assets.
3.14. Environmental Matters.
(a) To the knowledge of Seller, Seller, with respect to the Purchased
Assets, is in substantial compliance with all applicable Environmental Laws,
except for such noncompliance which would not have a Material Adverse Effect.
(b) During the past three (3) years, Seller has not received written notice
of any citation, summons, order, complaint, penalty, investigation, or review by
any governmental or other entity with respect to any violation by Seller of any
Environmental Law with respect to the Purchased Assets, except with respect to
such violations that would not have a Material Adverse Effect.
(c) Seller has not received any written requests for information, notices
of claim, demands, or notifications that Seller is, or may be, potentially
responsible with respect to any investigation or cleanup of any threatened or
actual release of any Hazardous Materials generated in connection with the
Purchased Assets, except for such requests, notices, demands or notifications,
which would not have a Material Adverse Effect.
3.15. Brokerage.
Except for the retention of CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp. ("CIBC ▇▇▇▇▇▇▇▇▇▇▇"),
Seller has not made any agreement or taken any other action with any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement that would cause Purchaser or its Affiliates to
become liable for a broker's fee, finder's fee or other similar fee or
commission as a result of the transactions contemplated hereunder. Seller agrees
to bear all costs it incurs in connection with the transactions contemplated by
the Agreement unless otherwise expressly provided herein.
3.16. Accounts Receivable.
The accounts receivable of Seller (other than intercompany accounts
receivable) with respect to the Business are bona fide receivables, arose out of
arms-length transactions and are recorded correctly on the applicable books and
records of Seller.
3.17. No Other Representations or Warranties.
Except for the representations and warranties contained in this Article
III, and any amendment, supplementation or modification made pursuant to the
express provisions of this Agreement with respect to such representations and
warranties, neither Seller nor any other Person makes any express or implied
representation or warranty on behalf of Seller, and Seller hereby disclaims any
such representation or warranty whether by Seller or any of its officers,
directors, employees, agents or representatives or any other Person, with
respect to the execution and delivery of this Agreement or the transactions
contemplated hereby, notwithstanding the
16
delivery or disclosure to Purchaser or any of its officers, directors,
employees, agents or representatives or any other Person of any documentation or
other information by Seller or any of its officers, directors, employees, agents
or representatives or any other Person with respect to any one or more of the
foregoing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1. Organization and Good Standing.
Purchaser is a corporation validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and corporate authority to own, lease, and operate its properties and
assets as now owned, leased and operated.
4.2. Authorization and Enforceability.
Purchaser has full corporate power and corporate authority to make,
execute, deliver and perform this Agreement and the other Transaction Documents
to which it is a party, and the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party, have been
duly authorized by all necessary corporate and stockholder actions on the part
of Purchaser. This Agreement has been duly executed and delivered by Purchaser
and constitutes, and the other Transaction Documents to which it is a party will
constitute when executed and delivered, the legal, valid and binding obligation
of Purchaser enforceable against Purchaser in accordance with their terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or other similar laws relating to or affecting the
rights of creditors generally and to general principals of equity, whether
considered in a suit at law or in equity.
4.3. Brokerage.
Purchaser has not made any agreement or taken any other action with any
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would cause Seller or its Affiliates to
become liable for a broker's fee, finder's fee or other similar fee or
commission as a result of the transactions contemplated hereunder. Purchaser
agrees to bear all costs it incurs in connection with the transactions
contemplated by this Agreement unless otherwise expressly provided herein.
4.4. Sufficient Funds.
Purchaser has sufficient immediately available funds to pay in full the
Purchase Price and any adjustments pursuant to Section 2.6 hereof and will have
such immediately available funds on the Closing Date.
17
4.5. No Violation of Laws or Agreements.
The execution, delivery and performance by Purchaser of this Agreement and
the other Transaction Documents to which it is a party, does not (a) violate any
provision of applicable Law, (b) violate any judgment, order, writ or decree of
any court or other tribunal applicable to Purchaser, (c) violate any of the
provisions of the Articles of Incorporation or the By-Laws (or similar
organizational documents) of Purchaser, or (d) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
part the right to accelerate, terminate, modify, or cancel, or require any
notice under any material agreement, contract, lease, license, instrument, or
other arrangement to which Purchaser is a party or by which any of its
properties or assets are bound, except to the extent any such violation,
conflict, breach, default, acceleration, termination, modification, cancellation
or failure to give notice under clauses (a) through (d) of this Section would
not reasonably be expected to have a material adverse effect on Purchaser or a
material adverse effect upon Purchaser's ability to consummate the transactions
contemplated by this Agreement in accordance with the terms hereof.
4.6. Consents.
Except as set forth on Schedule 4.6 hereto, no consent, approval or
authorization of, or registration or filing by Purchaser with, any Person is
required in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby by Purchaser, which the
failure to obtain or make would have a material adverse effect on Purchaser or
prohibit Purchaser from consummating the transactions contemplated hereby.
4.7. Regulatory Matters.
Purchaser is not subject to any enforcement action, citation, consent
decree or other similar action by any Authority which might materially affect
its ability to (a) obtain any of the consents listed on Schedule 4.6, (b) have
any Permit transferred or reissued to it, or (c) consummate the transactions
contemplated hereby.
4.8. Investment Intent.
Purchaser confirms that (i) it is familiar with the Purchased Assets, (ii)
it has had the opportunity to ask questions of the officers of Seller and to
obtain (and that it has received to its satisfaction) such information about the
Purchased Assets as it has reasonably requested and (iii) it has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of its purchase of the Purchased Assets.
ARTICLE V
CERTAIN COVENANTS
5.1. Conduct of Business.
Nothing in this Agreement shall diminish Seller's sole title to the
Purchased Assets or shall be construed to limit Seller's discretion to operate
the Business in the ordinary course, or shall give Purchaser any ownership
rights to the Purchased Assets before the Closing. Purchaser
18
acknowledges and agrees that Seller shall be entitled to assign and convey
assets (other than the Purchased Assets) prior to the Closing and that Seller
shall have absolute and complete discretion over the terms of such assignments
and conveyances.
5.2. Access, Information and Documents.
(a) Upon reasonable notice and during normal business hours, Seller shall
give Purchaser and its representatives (including Purchaser's accountants,
counsel and employees), reasonable access to the properties, contracts, books,
records and affairs of Seller relating to the Purchased Assets and cause its
officers and employees to furnish to Purchaser all documents, records and
information (or copies thereof) relating to the Purchased Assets as Purchaser
may reasonably request; it being understood that (a) Seller, in its sole
discretion, may deny or restrict any access (i) involving possible breaches of
applicable confidentiality agreements or possible waivers of any applicable
attorney-client privileges or (ii) in the event Purchaser is in breach of this
Agreement, (b) such investigations shall not under any circumstances interfere
with Seller's operations, activities or employees, and (c) such investigations
shall not be of a nature which in the opinion of Seller may violate applicable
antitrust or similar laws. Purchaser shall at all times prior to the Closing,
and in the event of termination of this Agreement, cause any information so
obtained to be kept confidential and will not use, or permit the use of, such
documents, work papers and other materials in its business or in any other
manner or for any other purpose except as contemplated hereby. In the event this
Agreement is terminated pursuant to Section 6.3, Purchaser shall return to
Seller (without retaining any copies thereof), or certify to Seller that it has
destroyed, all documents, work papers and other material supplied by Seller (or
any of its respective agents, employees or representatives) as a result hereof
or in connection herewith, whether so obtained before or after the execution
hereof.
(b) All information provided or obtained pursuant to clause (a) above shall
be held by Purchaser in accordance with and subject to the terms of the
Confidentiality Agreement, dated October 22, 1998, between Critchley Group, Inc.
and CIBC ▇▇▇▇▇▇▇▇▇▇▇, on behalf of TII Industries (the "Confidentiality
Agreement").
5.3. Lockboxes.
Subject to Section 2.2(g) hereof, Seller and Purchaser shall reasonably
cooperate with each other after the Closing to effect the transfer and
assignment by Seller to Purchaser of any rights Seller may have with respect to
lockboxes exclusively used by Seller in the Business.
5.4. Public Announcement.
No party hereto shall make or issue, or cause to be made or issued, any
announcement or written statement concerning this Agreement or the transactions
contemplated hereby for dissemination to the general public without the prior
written consent of the other party (except to the respective directors, officers
and creditors of Purchaser and Seller or, after consultation with the other
party regarding the form and content of such disclosure, as may be required by
applicable law or administrative or legal process); provided that each of TII
Industries, Inc. ("TII Industries") and Critchley Group plc may make such
announcements, statements or other disclosure it believes in good faith to be
appropriate in light of its respective status as a publicly traded company.
19
5.5. Mutual Covenants.
The parties mutually covenant and agree, as applicable, to use best efforts
to obtain promptly the satisfaction of the conditions to the Closing of the
transactions contemplated herein. In furtherance of the foregoing, Purchaser
agrees to use its best efforts to (a) file all necessary documentation with the
appropriate Authorities as soon as practicable to obtain as soon as possible all
consents, approvals or authorizations required by any Authority in order to
consummate the transactions contemplated by this Agreement, (b) take any action
reasonably requested or accept any condition reasonably imposed by any Authority
in connection with any such consent, approval or authorization, and (c) resolve
any objection asserted with respect to the transactions contemplated hereby
under any federal or state statute, rule or regulation designed or intended to
prohibit or regulate actions in restraint of trade, including, if required by
any applicable Authority, agreeing to divest or hold separate pending required
divestitures, businesses owned by Purchaser and entering into such other
agreements, orders or decrees with such Authority as may be required by such
Authority. Each party hereto shall furnish to the other and to the other's
counsel all such information as may be reasonably required in order to
effectuate the foregoing action. 5.6......Employee Matters.
(a) Effective as of the Closing, Purchaser shall offer employment to all
Employees on terms and conditions (including terms and conditions relating to
employee compensation and the Benefit Plans) that are substantially similar to
those provided by Seller immediately prior to the Closing. Purchaser shall
maintain such terms and conditions at such substantially similar level (or an
improved level) for a period of one (1) year following the Closing. For a period
of one (1) year after the Closing, Purchaser shall honor in accordance with
their terms all severance plans and programs of Seller as in effect immediately
prior to the Closing. With respect to any Employee who is not actively employed
at Closing due to short-term disability or an approved leave of absence as set
forth on Schedule 5.6(a) and who accepts Purchaser's offer of employment,
Purchaser shall provide such individual with a similar employment status. All
Employees who accept Purchaser's offer of employment are herein referred to as
the "Transferred Employees." All Transferred Employees shall be given credit for
all service with Seller (or such greater service credited by Seller under the
Benefit Plans) under all employee benefit plans, programs and policies and
fringe benefits of Purchaser for purposes of eligibility, participation, vesting
and benefit accrual.
(b) Effective as of the Closing, active participation of Employees in
Seller's 401(k) Plan shall cease. The benefits of such Employees under Seller's
401(k) Plan shall be paid to the Employees in accordance with the terms of such
plan.
(c) Effective as of the Closing, active participation of Employees in
Seller's "employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
(the "Seller's Welfare Plans") shall cease. Notwithstanding the preceding
sentence, Seller shall retain liability for all claims incurred by the Employees
and their dependents under Seller's Welfare Plans prior to the Closing.
Purchaser shall be responsible for all claims incurred by the Employees and
their dependents under the employee welfare benefit plans of Purchaser on or
after the Closing. A claim shall be deemed incurred (i) on the date of the
occurrence of death or dismemberment in the case of claims under life insurance
and accidental death and dismemberment plans and (ii) on the
20
date on which the service or treatment is provided in the case of claims under
medical, hospital, dental and similar plans and not the date of the inception of
the related illness or injury or the date of submission of a claim related
thereto. Seller shall retain responsibility for providing employees of Seller
who were employed in connection with the Business, who terminated employment
prior to the Closing, and who elected group health coverage required by Section
4980B of the Code ("Continuation Coverage") under the terms of the health plan
maintained by Seller, with such Continuation Coverage. Effective as of the
Closing, Purchaser shall perform the duties required of a successor employer
with respect to Continuation Coverage, including, but not limited to, making
such coverage available to the Transferred Employees on and after the Closing
upon their termination of employment with the Business or Purchaser to the
extent required by law.
(d) Effective as of the Closing, Purchaser shall assume and be responsible
for all accrued but untaken vacation, personal and sick time owed by Seller to
any Transferred Employee.
(e) Purchaser shall cause its employee welfare benefit plans (including
without limitation, its medical and dental plans) to waive any preexisting
condition limitations for Transferred Employees who were covered under the
applicable medical, dental or health plans of Seller. Purchaser shall also use
its best efforts to cause its employee welfare benefit plans (including without
limitation its life and long-term disability insurance plans) to waive any
medical certifications for Transferred Employees.
5.7. Certain Taxes and Expenses.
Purchaser shall pay all sales, use, transfer, real property transfer,
documentary stamp and other similar taxes and all recording, filing and other
fees and costs with respect to the sale and purchase of the Purchased Assets
(other than any federal, state or foreign income tax on any gain recognized by
Seller on the sale of the Purchased Assets). Whether or not the transactions
contemplated by this Agreement are consummated, Seller and Purchaser shall each
bear its respective accounting, legal, financial advisory and other expenses
incurred in connection with the transactions contemplated by this Agreement,
except as specifically otherwise provided herein.
5.8. Access to Information.
Seller and Purchaser shall reasonably cooperate with each other after the
Closing so that (subject to any limitations that are reasonably required to
preserve any applicable attorney-client privilege) each party has access to the
business records, contracts and other information existing at the Closing and
relating to the Purchased Assets and the Assumed Liabilities or the conduct of
the Business (whether in the possession of Seller or Purchaser) as is reasonably
necessary for (a) the preparation of the Closing Date Statement and the
determination of the Net Assets Adjustment pursuant to Section 2.6(b), (b) the
preparation for or the prosecution or defense of any suit, action, litigation or
administrative, arbitration or other proceeding or investigation (other than one
by or on behalf of a party to this Agreement) by or against Seller or Purchaser,
(c) the preparation and filing of any tax return or election relating to the
Purchased Assets or the Assumed Liabilities and any audit by any taxing
authority of any returns of Purchaser or Seller relating thereto, and (d) the
preparation and filing of any other documents required by any Authority. The
party requesting such information and assistance shall reimburse
21
the other party for all out-of-pocket costs and expenses incurred by such party
in providing such information and in rendering such assistance. The access to
files, books and records contemplated by this Section 5.8 shall be during normal
business hours and upon not less than two Business Days' prior written request,
shall be subject to such reasonable limitations as the party having custody or
control thereof may impose to preserve the confidentiality of information
contained therein, and shall not extend to material subject to a claim of
privilege unless expressly waived by the party entitled to claim the same.
5.9. Seller Intellectual Property.
(a) Purchaser hereby acknowledges and agrees that nothing in this Agreement
grants or shall be deemed to grant to Purchaser the right to use or any interest
in any Seller Intellectual Property, including, without limitation, the
tradename "TII Industries", "TII" or "TII-Ditel" or any trademark, tradename,
service ▇▇▇▇ or other similar ▇▇▇▇ or similar right which is a derivative of the
tradename "TII Industries", "TII" or "TII-Ditel". The prohibitions in this
Section 5.9 shall apply to any and all uses whatsoever of the Seller
Intellectual Property.
(b) Purchaser shall, at Purchaser's expense, remove, destroy and dispose of
all signs, labels, and other materials featuring, containing or comprising names
or logos of Seller or its Affiliates appearing anywhere in, on or about any of
the real property subject to the Real Property Leases as soon as possible, but
in no event later than sixty (60) days after the Closing. Purchaser shall be
permitted to use printed materials, including stationary, printed product
brochures or other printed marketing materials, that have been printed
exclusively for Seller prior to the Closing, all of which are included in the
Purchased Assets pursuant to Section 2.1 hereof, so long as Purchaser deletes
all names or logos of, or other references to, Seller, its Affiliates or the
Excluded Assets from such printed materials.
(c) Seller shall grant to Purchaser for a period commencing at Closing and
continuing for three (3) months thereafter a nontransferable license to use
Seller's internet address and web site, "▇▇▇▇://▇▇▇.▇▇▇-▇▇▇▇▇.▇▇▇/" (the
"Internet Web Site"), solely for purposes of Purchaser establishing a link to a
new internet address and web site, and informing internet users of such new
internet address and web site, Purchaser plans to establish with respect to the
Business (the "Linked Web Site"). Not later than five (5) Business Days after
the Closing, Purchaser shall delete all contents of the Internet Web Site and
may replace such contents only with a message, which message shall be
pre-approved in writing by Seller (the "Replaced Message"), informing internet
users (i) that Purchaser has purchased the Business from Seller, (ii) that
Seller, TII Industries and their Affiliates are no longer affiliated with the
Business and are not responsible for the contents of the Linked Web Site and
(iii) the location of the Linked Web Site. Seller agrees to cooperate with
Purchaser in connection with the foregoing, it being understood that Purchaser
shall be responsible for, and shall promptly reimburse Seller for, all costs
incurred by Seller in connection with the foregoing or otherwise incurred by
Seller or Purchaser in connection with the Internet Web Site and the Linked Web
Site on or subsequent to the Closing. On or prior to the date that is three (3)
months after the Closing, Purchaser shall delete the Replaced Contents of the
Internet Web Site and take all steps necessary to remove the Internet Web Site
from the internet and the world wide web. Following such removal, neither
Purchaser nor Seller shall re-establish or otherwise use the Internet Web Site.
Purchaser shall indemnify, defend and hold harmless the Seller Indemnitees (as
defined in Section 7.3(a)) from and after the Closing, in respect of any Loss
(as defined in Section 7.2(a)) which any Seller Indemnitee suffers,
23
sustains or becomes subject to as a result of, arising out of or in connection
with the use, ownership, possession, operation or content of the Internet Web
Site or the Linked Web Site.
5.10. Books and Records.
For a period of six (6) years after the Closing, (a) Purchaser agrees to
retain all Books and Records relating to the period as of and prior to the
Closing and to make the same available after the Closing for inspection and
copying by Seller or its agents at Seller's expense, upon reasonable request and
upon reasonable notice and (b) no such Books and Records shall be destroyed by
Purchaser without first advising Seller in writing and giving Seller a
reasonable opportunity to obtain possession thereof.
5.11. Transition Services.
(a) On the Closing Date, if Purchaser determines that it would like Seller
to provide transition services that are necessary for the operation of the
Business, Purchaser and Seller shall execute and deliver a transition services
agreement (the "Transition Services Agreement") pursuant to which for a period
not to exceed thirty (30) days following the Closing Date, Seller shall make
available to Purchaser at Fully Allocated Cost such services reasonably
requested by Purchaser and agreed to by Seller.
(b) For a period of thirty (30) days after the Closing Date or such shorter
period as Seller may determine, Purchaser agrees to provide to TII Industries
assembly services with respect to TII Industries' network interface devices in
substantially the same manner and at the same cost at which Seller is providing
such services to TII Industries at the date of this Agreement. Purchaser agrees
that TII Industries is an intended third-party beneficiary of Purchaser's
covenant in this Section 5.11.
5.12. Non-Compete.
(a) For a period of three (3) years after the Closing, or such lesser
period allowed by applicable law, neither Seller nor any Affiliate of Seller
shall (i) directly or indirectly engage in or have any ownership interest in any
Person that engages in the fiber optics channeling systems business within any
geographical area worldwide; provided, however, that nothing herein shall
prohibit Seller or its Affiliates from owning less than 5% of the equity
securities or other interest in any Person; (ii) initiate contact with any
Employee for purposes of attempting to hire such person for employment; or (iii)
disclose to any Person engaged in the fiber optics channeling business customer
lists relating exclusively to the Business.
(b) Seller acknowledges that money damages would not be an adequate remedy
for any breach of this Section 5.12. Therefore, in the event of a breach or
threatened breach of this Section, Purchaser may, in addition to other rights
and remedies existing in its favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violation of, the provisions hereof. Seller agrees that the
restrictions contained in this Section are reasonable.
23
ARTICLE VI
CONDITIONS PRECEDENT; TERMINATION
6.1. Conditions Precedent to Obligations of Purchaser.
The obligations of Purchaser to purchase the Purchased Assets, assume the
Assumed Liabilities and consummate the other transactions contemplated hereunder
are subject to the satisfaction, as of the Closing Date, of each of the
following conditions (any one or more of which may be waived in whole or in part
by Purchaser in its sole discretion to the extent permitted by law):
(a) Performance of Agreements. Seller shall have performed or complied in
all material respects with all agreements, covenants and conditions required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date.
(b) Representations and Warranties. The representations and warranties made
by Seller in this Agreement shall be true and correct in all material respects
on the date hereof and on and as the Closing Date, except for (i) changes
contemplated by this Agreement or attributable to matters disclosed by Seller in
the Schedules hereto, (ii) those representations and warranties that address
matters only as of a particular date, (iii) such inaccuracies or breaches of
warranty as to which Purchaser had knowledge on or prior to the Closing Date or
which were the subject of Purchaser's investigations prior to the Closing Date
and (iv) such inaccuracies or breaches of warranty as would not have a Material
Adverse Effect.
(c) Officer's Certificate. Purchaser shall have been furnished with a
certificate of an authorized officer of Seller, dated as of the Closing Date,
certifying to the effect that the conditions contained in Sections 6.1(a) and
6.1(b) have been fulfilled.
(d) Required Consents. All material consents, approvals, authorizations,
registrations or filings by Seller as set forth on Schedule 6.1(d), which are
required to be received by Seller under the laws or regulations of the United
States and any other Authority in order to consummate the transactions
contemplated by this Agreement shall have been obtained.
(e) Injunction; Litigation. No statute, rule or regulation or order, decree
or judgment of any court or Authority shall be in effect which prohibits the
transactions contemplated by this Agreement.
(f) Deliveries. Seller shall have delivered to Purchaser all of the
deliveries referenced in Section 2.7(b).
6.2. Conditions Precedent to Obligations of Seller.
The obligations of Seller to sell the Purchased Assets and consummate the
other transactions contemplated hereunder are subject to the satisfaction, as of
the Closing Date, of each of the following conditions (any one or more of which
may be waived in whole or in part by Seller in its sole discretion to the extent
permitted by law):
(a) Performance of Agreements. Purchaser shall have performed or complied
in all material respects with all agreements, covenants and conditions required
by this Agreement to be performed or complied with by it at or prior to the
Closing Date.
24
(b) Representations and Warranties. The representations and warranties made
by Purchaser in this Agreement shall be true and correct in all material
respects on the date hereof and on and as the Closing Date, except for (i)
changes contemplated by this Agreement, (ii) those representations and
warranties that address matters only as of a particular date and (iii) such
inaccuracies or breaches of warranty as would not have a material adverse effect
on Purchaser.
(c) Officer's Certificate. Seller shall have been furnished with a
certificate of an authorized officer of Purchaser, dated as of the Closing Date,
certifying to the effect that the conditions contained in Sections 6.2(a) and
6.2(b) have been fulfilled.
(d) Required Consents. All material consents, approvals, authorizations,
registrations or filings by Purchaser which are required to be received by
Purchaser under the laws or regulations of the United States and any other
Authority in order to consummate the transactions contemplated by this Agreement
shall have been obtained.
(e) Injunction; Litigation. No statute, rule or regulation or order, decree
or judgment of any court or Authority shall be in effect which prohibits the
transactions contemplated by this Agreement.
(f) Deliveries. Purchaser shall have delivered to Seller all of the
deliveries referenced in Section 2.7(b).
6.3. Termination.
(a) When Agreement May be Terminated. This Agreement may be terminated by
either party if the Closing Date shall not have occurred by March 1, 1999 (the
"Termination Date"); provided, however, that no party then in breach of any
obligations hereunder shall have the right to terminate this Agreement.
(b) Effect of Termination. In the event of termination of this Agreement as
provided in Section 6.3(a), this Agreement shall immediately terminate and be of
no further force and effect, and there shall be no liability on the part of
either Purchaser or Seller (except for liabilities arising from a willful breach
of this Agreement prior to such termination); provided that the last two
sentences of Section 5.2(a), Sections 5.2(b), 5.4, and 5.7 and this Article VI
shall survive the termination hereof.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1. Survival of Representations and Warranties.
(a) The representations and warranties contained in this Agreement shall
survive the Closing until eighteen (18) months after the Closing.
(b) No party hereto shall be deemed to have breached any representation,
warranty or covenant if (i) such party shall have notified the other party
hereto in writing, on or prior to the Closing Date, of the breach of, or
inaccuracy in, or of any facts or circumstances constituting or resulting in the
breach of or inaccuracy in, such representation, warranty or
25
covenant, and (ii) such other party has permitted the Closing to occur and, for
purposes of this Agreement, is thereby deemed to have waived such breach or
inaccuracy; provided, however, that a disclosure pursuant to this Section 7.1(b)
shall not prejudice the rights of the parties pursuant to Article VI hereof not
to consummate the transactions contemplated by this Agreement
7.2. Indemnification Obligations of Seller.
(a) Subject to the provisions of Section 7.4, Seller shall indemnify,
defend and hold harmless Purchaser and its Affiliates and their respective
stockholders, officers, directors and employees (collectively, the "Purchaser
Indemnitees") from and after the Closing, in respect of any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses) (a
"Loss"), but excluding punitive damages and unforeseen or other consequential
damages, which any Purchaser Indemnitee suffers, sustains or becomes subject to
as a direct result of:
(i) the breach by Seller of any of the covenants made by it in this
Agreement;
(ii) the breach of any of the representations and warranties made by Seller
contained in Article III (provided, that Seller is given an Indemnification
Claim Notice during the applicable survival period specified in Section 7.1); or
(iii) any Retained Liability.
(b) Purchaser acknowledges and agrees that Seller shall not have any
liability under any provision of this Agreement for any Loss to the extent that
it relates to actions taken by or omitted to be taken by Purchaser or Seller
after the Closing. Purchaser shall take and cause its Affiliates to take all
reasonable steps to mitigate any Loss upon becoming aware of any event which
would reasonably be expected to, or does, give rise thereto, including incurring
costs only to the minimum extent necessary to remedy the breach which gives rise
to the Loss.
7.3. Indemnification Obligations of Purchaser.
(a) Subject to the provisions of Section 7.4, Purchaser shall indemnify,
defend and hold harmless Seller and its Affiliates and their respective
stockholders, officers, directors and employees (collectively, the "Seller
Indemnitees") from and after the Closing, in respect of any Loss, but excluding
punitive damages and unforeseen or other consequential damages, which any Seller
Indemnitee suffers, sustains or becomes subject to as a direct result of:
(i) the breach by Purchaser of any of the covenants made by it in this
Agreement;
(ii) the breach of any of the representations and warranties made by
Purchaser contained in Article IV (provided, that Purchaser is given an
Indemnification Claim Notice during the applicable survival period specified in
Section 7.1);
(iii) any Assumed Liability; or
(iv) the use, ownership, possession or operation of any Purchased Assets,
or actions taken by, or omitted to be taken by, Purchaser or its Affiliates from
and after
26
the Closing.
(b) Seller shall take and cause its Affiliates to take all reasonable steps
to mitigate any Loss upon becoming aware of any event which would reasonably be
expected to, or does, give rise thereto, including incurring costs only to the
minimum extent necessary to remedy the breach which gives rise to the Loss.
7.4. Limitations on Indemnification.
(a) Dollar Limitations. No Indemnifying Party shall have liability under
Section 7.2 or 7.3, as the case may be, until the aggregate amount of Losses to
the Indemnified Party, as the case may be, exceed $50,000 (the "Basket Amount"),
in which case the Indemnified Party, as the case may be, shall be entitled to
Losses in an amount up to $1,000,000 in the aggregate; provided, however, that
the Indemnifying Party, as the case may be, shall be liable only for the amount
by which all Losses exceed the Basket Amount; provided, further, that no
individual claim for payment of a Loss may be made under Section 7.2(a)(ii) or
Section 7.3(a)(ii) unless such claim is an amount of $25,000 or greater.
(b) Losses Net of Insurance and Other Items. The amount of any Loss for
which indemnification is provided under this Article VII shall be net of (i) any
amounts recovered or recoverable by the Indemnified Party pursuant to any
indemnification by or indemnification agreement with any third party, (ii) any
insurance proceeds or other cash receipts or sources of reimbursement available
as an offset against such Loss (and no right of subrogation shall accrue to any
third party indemnitor, insurer or reimburser hereunder) (each such person named
in clauses (i) and (ii), a "Collateral Source") and (iii) an amount equal to the
present value of the Tax benefit attributable to such Loss. If the amount to be
netted hereunder from any payment required under Section 7.2 or 7.3 is
determined after payment by the Indemnifying Party of any amount required to be
paid to an Indemnified Party pursuant to this Article VII, the Indemnified Party
shall repay to the Indemnifying Party, within five (5) days, any amount that the
Indemnifying Party would not have had to pay pursuant to this Article VII had
such determination been made at the time of such payment. If such amount has not
been paid to the Indemnifying Party within five (5) days of the Indemnified
Party's receipt of such recovery, such amount will accrue interest from the date
of payment thereof to the date of repayment at a rate of interest equal to the
Prime Rate, as publicly announced in the Wall Street Journal and in effect from
time to time during such period, plus 1 1/2% , calculated on the basis of the
actual number of days elapsed over 365.
(c) Notwithstanding anything to the contrary set forth herein, no
limitation on the indemnification obligations set forth in Section 7.4(a) shall
apply in the case of fraud or intentional misconduct.
7.5. Indemnification Procedures.
(a) Notice of Claim. Any Person making a claim for indemnification pursuant
to Section 7.2 or 7.3 (an "Indemnified Party") must give the party from whom
indemnification is sought (an "Indemnifying Party") written notice of such claim
(an "Indemnification Claim Notice") within fifteen (15) Business Days after the
Indemnified Party receives any written notice of any action, lawsuit,
proceeding, investigation or other claim against or involving the Indemnified
Party by an Authority or other third Person or otherwise discovers the
liability,
27
obligation or facts giving rise to such claim for indemnification; provided that
the failure to notify or delay in notifying an Indemnifying Party will not
relieve the Indemnifying Party of its obligations pursuant to Section 7.2 or
7.3, as applicable, except to the extent that such failure actually ▇▇▇▇▇ the
Indemnifying Party, but in no event shall the Indemnifying Party be liable for
expenses incurred prior to its receipt of notice. Each Indemnification Claim
Notice must contain a description of the claim and the nature and amount of such
Loss (to the extent that the nature and amount of such Loss is known at such
time). All indemnification claims in respect of the Purchaser Indemnitees under
this Section 7.5 shall be made by Purchaser, and all indemnification claims in
respect of the Seller Indemnitees under this Section 7.5 shall be made by
Seller.
(b) Control of Defense: Conditions. The obligations of an Indemnifying
Party under this Article VII with respect to Losses arising from claims of any
third Person that are subject to indemnification as provided for in Section 7.2
or 7.3 (a "Third Party Claim") shall be governed by and be contingent upon the
following additional terms and conditions:
(i) At its option, an Indemnifying Party may assume the defense of any
Third Party Claim by giving written notice to the Indemnified Party within
thirty (30) days after its receipt of an Indemnification Claim Notice. The
assumption of the defense of a Third Party Claim by the Indemnifying Party shall
not be construed as an acknowledgment that the Indemnifying Party is liable to
indemnify the Indemnified Party in respect of the Third Party Claim, nor shall
it constitute a waiver by the Indemnifying Party of any defenses it may assert
against the Indemnified Party's claim for indemnification. Upon assuming the
defense of a Third Party Claim, the Indemnifying Party may appoint as lead
counsel in the defense of the Third Party Claim any legal counsel selected by
the Indemnifying Party (even if the provisions of Section 7.4 would or could
limit such Indemnifying Party's obligation). In the event the Indemnifying Party
assumes the defense of a Third Party Claim, the Indemnified Party shall
immediately deliver to the Indemnifying Party all original notices and documents
(including, without limitation, court papers) received by the Indemnified Party
in connection with the Third Party Claim. Should the Indemnifying Party assume
the defense of a Third Party Claim, it will not be liable to the Indemnified
Party for any legal expenses subsequently incurred by the Indemnified Party in
connection with the analysis, defense or settlement of the Third Party Claim. In
the event that it is ultimately determined that the Indemnifying Party is not
obligated to indemnify, defend or hold the Indemnified Party harmless from and
against the Third Party Claim, the Indemnified Party shall reimburse the
Indemnifying Party for any and all costs and expenses (including, without
limitation, attorneys' fees and costs of suit) incurred by the Indemnifying
Party in its defense of the Third Party Claim.
(ii) Without limiting Section 7.5(b)(i), the Indemnified Party will be
entitled to participate in, but not control, the defense of such Third Party
Claim and to employ counsel of its choice for such purpose; provided, that such
employment shall be at the Indemnified Party's own expense unless (A) the
employment thereof has been specifically authorized by the Indemnifying Party in
writing or (B) the Indemnifying Party has failed to assume the defense and
employ counsel in accordance with Section 7.5(b)(i) (in which case the
Indemnified Party shall control the defense).
(c) Settlement. The Indemnifying Party shall have authority to consent to
the entry of any judgment or enter into any settlement with respect to any Third
Party Claim provided it obtains the prior written consent of the Indemnified
Party (which consent shall not be
28
unreasonably withheld), where the Indemnifying Party has assumed the defense of
the Third Party Claim in accordance with Section 7.5(b)(i). Whether or not the
Indemnifying Party chooses to defend or prosecute any Third Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge any Third Party Claim without the prior written consent
of the Indemnifying Party (which consent shall not be unreasonably withheld).
(d) Cooperation. Whether or not the Indemnifying Party chooses to defend or
prosecute any Third Party Claim, the parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested in connection therewith. Such
cooperation shall include access during normal business hours afforded to the
Indemnifying Party to, and reasonable retention by the Indemnified Party of,
records and information which are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder, and
the Indemnifying Party shall reimburse the Indemnified Party for all its
reasonable out-of-pocket expenses in connection therewith.
7.6. Sole Remedy.
Each of the parties acknowledges and agrees that its sole and exclusive
remedy with respect to any and all claims relating to the subject matter of this
Agreement (other than the Confidentiality Agreement) shall be pursuant to the
indemnification provisions set forth in this Article VII, Section 2.4 and
Section 5.9(c). In furtherance of the foregoing, after the Closing, Purchaser
hereby waives, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of action (including rights of contribution and rights
of rescission or rescissory damages, if any) it may have against Seller or any
of its Affiliates arising under or based upon any Laws (including, without
limitation, any such rights, claims or causes of action relating to, or arising
under or based upon any securities law, Environmental Law, common law or
otherwise).
7.7. Collateral Sources.
Indemnification under this Article VII shall not be available to any
Indemnified Party unless such Indemnified Party first seeks recovery from any
Collateral Source for such claim before making any claim for indemnification by
the Indemnifying Party. Any Indemnifying Party may, in its sole discretion,
require any Indemnified Party to grant an assignment of the right of such
Indemnified Party to assert a claim against any Collateral Source. In the event
of such assignment, the Indemnifying Party will pursue such claim at its own
expense.
ARTICLE VIII
MISCELLANEOUS
8.1. Limitation on Seller's Representations.
Purchaser acknowledges and agrees that it has had or will have prior to the
Closing, adequate opportunity to investigate and inspect the condition of the
Purchased Assets and Purchaser is purchasing the Purchased Assets in their "AS
IS, WHERE IS CONDITION WITH ALL FAULTS, INCLUDING BUT NOT LIMITED TO BOTH LATENT
AND PATENT
29
DEFECTS." EXCEPT AS EXPRESSLY SET FORTH TO THE CONTRARY IN THIS AGREEMENT, NO
WARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY SELLER OR ANY OF ITS AFFILIATES
CONCERNING SUCH ITEMS, INCLUDING BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Purchaser further
acknowledges and agrees that it has had an opportunity to review and to discuss
with various agents and/or representatives of Seller the environmental condition
of the Purchased Assets. Purchaser has investigated and has knowledge of
operative or proposed governmental Laws and regulations including, without
limitation, Environmental Laws and regulations to which the Purchased Assets are
or may be subject and Purchaser is purchasing the Purchased Assets upon the
basis of its review and determination of the applicability and effect of such
laws and regulations. Except as otherwise expressly set forth in Article III of
this Agreement (including the disclosure schedules with respect thereto),
Purchaser acknowledges that Seller expressly disclaims any representations or
warranties of any kind or nature, express or implied, as to the condition
(financial or otherwise), value or quality of the products, assets or properties
of the Business. Purchaser further acknowledges that neither Seller nor any
other Person has made any representation or warranty, expressed or implied, as
to the accuracy or completeness of any information regarding Seller, the
Business, the Purchased Assets or the Assumed Liabilities not included in this
Agreement, and neither Seller nor any other Person will have or be subject to
any liability to Purchaser or any other Person resulting from the distribution
to Purchaser or its representatives (including, without limitation, its counsel,
accountants, or advisors), or Purchaser's use of, any information not included
in Article III including, without limitation, the confidential information
memorandum prepared by CIBC ▇▇▇▇▇▇▇▇▇▇▇ relating to Seller, the Business, the
Purchased Assets or the Assumed Liabilities, any other offering memorandum,
brochure or other publication or any business plan, projections, estimates, or
budgets heretofore delivered to or made available to Purchaser or its
representatives (including, without limitation, its counsel, accountants, or
advisors) of future revenues, expenses or expenditures, or future results of
operations of the Business, or any other document or information provided to
Purchaser or its representatives (including, without limitation, its counsel,
accountants, or advisors) in connection with the sale of the Business, the
Purchased Assets or the Assumed Liabilities.
8.2. Schedules and Exhibits.
Disclosure of any fact or item in any Schedule or Exhibit hereto shall be
deemed to have been disclosed in any other Schedule or Exhibit or representation
or warranty made by Seller herein. Matters reflected in the Schedules and
Exhibits hereto are not necessarily limited to matters required by this
Agreement to be disclosed herein or therein. Such additional matters are
provided for informational purposes only.
8.3. Supplements to Disclosure Schedules.
Seller shall disclose to Purchaser information that arises from an event
that occurs on or after the date hereof, or from an event that occurred prior to
the date hereof, but which was not and could not have been a matter of Seller's
knowledge, supplementing or amending the representations, warranties and
disclosures (including the Schedules hereto) in order to make such information
therein timely, complete and accurate. Unless as a result of any such
supplemental information, Purchaser sends a termination notice under Section
6.3(a)(iii) hereof, any covenant, representation or warranty of Seller affected
by such supplemental information shall be deemed to
30
have been amended accordingly on the third (3rd) day following Purchaser's
receipt of such supplemental information.
8.4. Bulk Transfer Laws.
Purchaser and its Affiliates waive compliance by Seller and its Affiliates
with the provisions of any bulk sales or similar law, if and to the extent
applicable to the transactions contemplated hereby.
8.5. Notices.
Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted to be given to any party hereunder
(each, a "Notice") shall be in writing and shall be deemed given only if
delivered to the party personally or sent to the party by overnight courier,
telecopy, telegram (followed by hard copy sent by registered or certified mail)
or by registered or certified mail (return receipt requested) with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below. Such Notices shall be deemed delivered (i) when
delivered, if delivered personally or sent by telegram, (ii) when receipt is
acknowledged, if sent by telecopy, (iii) after five (5) Business Days, if sent
by U.S. mail, or (iv) after one (1) Business Day if sent by overnight courier.
If to Seller:
TII-Ditel, Inc.
c/o TII Industries, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
31
with a copy to:
Dechert Price & ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
If to Purchaser:
DiTel, Inc.
c/o Critchley Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇ Sessions & ▇▇▇▇▇▇▇
One Utah Center, 13th Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
8.6. Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that no party may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the consent of the
other party hereto.
8.7. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina, without giving effect to the conflict of
laws provisions thereof.
8.8. Mediation.
In the event that a dispute arises out of or relates to this Agreement, or
the breach thereof, and the dispute cannot be settled through negotiations, the
parties agree first to try in good faith to resolve the dispute by mediation
administered by the American Arbitration Association under its Commercial
Financial Disputes Mediation Rules, before resorting to litigation or some other
dispute resolution procedure.
32
8.9. Consent to Jurisdiction.
Purchaser and Seller each irrevocably and unconditionally submits and
consents to the exclusive jurisdiction of the courts of the State of North
Carolina and of the United States of America located in the State of North
Carolina, for the purposes of any suit, action or other proceeding arising out
of this Agreement or any transactions contemplated hereby, and hereby waives the
right to assert the lack of personal or subject matter jurisdiction or improper
venue in connection with any such suit, action or other proceeding. In
furtherance of the foregoing, each of the parties (i) waives the defense of
inconvenient forum, (ii) agrees not to commence any suit, action or other
proceeding arising out of this Agreement or any transactions contemplated hereby
other than in courts of the State of North Carolina and of the United States of
America located in the State of North Carolina, (iii) agrees that a final
judgment in any such suit, action or other proceeding shall be conclusive and
may be enforced in other jurisdictions by suit or judgment or in any other
manner provided by law and (iv) agrees that service of any process, summons,
notice or document by U.S. registered or certified mail to Seller or Purchaser,
as the case may be, at the addresses set forth in Section 8.5 hereof, shall be
effective service of process for any such suit, action or other proceeding.
8.10. Entire Agreement.
This Agreement constitutes the entire understanding of the parties and
supersedes any prior agreements, understandings, representations, written or
oral, by or between the parties with respect to the subject matter hereof other
than the Confidentiality Agreement.
8.11. Construction; Interpretation; Severability.
The parties hereby agree that any rule of law or any legal decision that
would require interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is expressly waived.
References in this Agreement to dollar amount thresholds shall not, for purposes
of this Agreement, be deemed to be evidence of materiality or a Material Adverse
Effect. If any provision, clause or part of this Agreement, or the application
thereof under certain circumstances, is held invalid, the remainder of this
Agreement, or the application of such provision, clause or part under other
circumstances, shall not be affected thereby.
8.12. Further Assurances.
Each party shall cooperate and take such action as may be reasonably
requested by the other party in order to carry out the provisions and purposes
of this Agreement and the transactions contemplated hereby.
8.13. No Third Party Beneficiaries.
Except as provided in Section 2.3 and Article VII of this Agreement, this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give or be construed to
give to any person or entity, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
33
8.14. Amendment and Waiver.
The parties may, by mutual agreement, amend this Agreement in any respect,
and any party, as to such party, may (a) extend the time for the performance of
any of the obligations of the other party; (b) waive any inaccuracies in
representations and warranties by the other party; (c) waive compliance by the
other party with any of the agreements contained herein and performance of any
obligations by the other party; and (d) waive the fulfillment of any condition
that is precedent to the performance by such party of any of its obligations
under this Agreement. To be effective, any such amendment or waiver must be in
writing and be signed by the party against whom enforcement of the same is
sought.
8.15. Counterparts and Headings.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but which together shall constitute one and the
same instrument.
8.16. Headings.
The headings preceding the text of the sections and subsections hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement nor shall they affect its meaning, construction or effect.
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
TII-DITEL, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: VP - Finance
DITEL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Secretary
Critchley Group, Inc. hereby guarantees the
performance of all of DiTel, Inc.'s debts,
liabilities, covenants and obligations under this
Agreement and confirms the truth and accuracy of the
representation and warranty set forth in Section 4.4.
CRITCHLEY GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Secretary
Schedules
The following schedules have been omitted from this filing of the Asset
Purchase Agreement:
2.1(a) Real Property Leases
2.1(b) Equipment and Machinery
2.1(c) Equipment Leases
2.1(i) Intellectual Property
2.2(f) Intercompany Accounts Receivable
2.2(h) Excluded Inventory
2.2(i) Computer Hardware and Software
2.2(j) Excluded Assets
2.3(e) Accrued Liabilities
2.6(b)(1) Definition of Net Assets
2.6(b)(2) Exceptions to GAAP
3.3 No Violation of Laws or Agreements
3.4 Exceptions to Financial Statements
3.5 Real Property Leases and Contracts
3.6 Inventory
3.7(a) Title - Personal Property
3.7(b) Title - Real Property Leases
3.8 Litigation
3.9 Seller's Consents
3.10 Compliance with Laws
3.11(a) Employee Benefit Plans
3.12 Intellectual Property
3.13 Tax
4.6 Purchaser's Consents
5.6(a) Non-Active Employees
6.1(d) Seller Required Consents
TII Industries will provide the schedules to the Securities and Exchange
Commission upon request.