STOCK PURCHASE AGREEMENT among MB AEROSPACE GROUP HOLDINGS LIMITED MB AEROSPACE HOLDINGS INC. and BARNES GROUP INC.

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Section 2.3          Closing Deliverables.

 

(a)          Purchaser Deliverables.  At the Closing, Purchaser shall take the following actions (or cause such actions to be taken):

 

(i)             make the payments contemplated by Section 3.1(b), Section 3.2 and Section 3.3;

 

(ii)           deliver to Seller a copy of the Escrow Agreement, duly executed by ▇▇▇▇▇▇▇▇▇; and

 

(iii)          deliver to Seller the closing certificate contemplated by Section 8.3(c).

 

(b)          Seller Deliverables.  At the Closing, Seller shall take the following actions (or cause such actions to be taken):

 

(i)            deliver to Purchaser a copy of the Escrow Agreement, duly executed by ▇▇▇▇▇▇;

 

(ii)        deliver to Purchaser a certification from the Company that complies with Section 1445 of the Code and Treasury Regulations Sections 1.1445-2(c)(3) and 1.897-2(h), dated as of the Closing Date and executed by a responsible corporate officer of the Company, certifying that the Company Shares are not “United States real property interests” (within the meaning of Section 897(c)(1) of the Code), which the Purchaser is hereby authorized to deliver to the Internal Revenue Service on behalf of the Company after the Closing; provided that, if no such certificate is delivered at the Closing, Purchaser’s sole remedy shall be to deduct and withhold pursuant to Section 3.6 of this Agreement;

 

(iii)          to the extent that the Company Shares are in certificate form, deliver to Purchaser stock certificates evidencing the Company Shares, free and clear of all Encumbrances, other than restrictions on transfer imposed by applicable securities laws, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank, with all required stock transfer Tax stamps affixed thereto, and to the extent that the Company Shares are not in certificate form, deliver to the Purchaser stock powers or other instruments of transfer duly executed in form for transfer, free and clear of Encumbrances, with respect to the Company Shares and such other documentation as is reasonably required to transfer the Company Shares in full to Purchaser;

 

(iv)         deliver to Purchaser (a) duly executed payoff letters (each, a “Payoff Letter”) in form and substance reasonably satisfactory to Purchaser from all financial institutions and other Persons to which any of the Indebtedness listed in Section 2.3 of the Company Disclosure Schedule is owed, or the applicable agent, trustee or other representative on behalf of such Persons, each of which Payoff Letters shall (x) indicate the total amount required to be paid to fully satisfy all principal, interest, prepayment premiums, penalties, breakage costs or other outstanding and unpaid obligations related to such Indebtedness as of the Closing Date (the “Payoff Amount”) and (y) state that all indebtedness, commitments, obligations (including guarantees) in respect thereof (subject to contingent indemnification obligations not yet accrued and payable and other obligations that expressly survive pursuant to the terms governing such indebtedness) and Encumbrances in connection therewith on the assets of the Company or any of its Subsidiaries shall be, substantially concurrently with the receipt of the Payoff Amount on the Closing Date by the Persons holding such Indebtedness, discharged and terminated in full and released or arrangements reasonably satisfactory to Purchaser for such release shall have been made by such time, subject, as applicable, to the replacement (or cash collateralization or backstopping) of any then-outstanding letters of credit or similar Indebtedness thereunder and (b) all documents, filings, and instruments necessary or customary to evidence the termination and release referred to in the preceding clause (a) (the “Release Documents”, together with each Payoff Letter, the “Payoff Documentation”);

 

(v)           deliver to Purchaser the resignations referred to in Section 7.16; and

 

(vi)          deliver to Purchaser the closing certificate contemplated by Section 8.2(c).

 

ARTICLE III

CONSIDERATION FOR SHARES

 

Section 3.1          Estimated Purchase Price; Certain Closing Date Payments.

 

(a)          Estimated Closing Statement.  At least five Business Days prior to the Closing Date, Seller shall prepare and deliver to Purchaser a written statement (the “Estimated Closing Statement”), duly certified by an officer of each of Seller and the Company, setting forth their good faith estimate of the Estimated Purchase Price and of each component thereof, including (i) the amount of Working Capital (the “Estimated Working Capital Amount”), (ii) the amount of Funded Indebtedness (the “Estimated Funded Indebtedness”), (iii) the amount of Cash (the “Estimated Cash”), (iv) the amount of the Company Transaction Expenses (the “Estimated Company Transaction Expenses”) and written invoices and wire instructions from each payee of such Estimated Company Transaction Expenses, and (v) the Aggregate Employee Note Payoff Amount (the “Estimated Employee Note Payoff Amount”), in each case, as of the Adjustment Time and in accordance with the terms of this Agreement and the Company Accounting Principles, together with reasonable written supporting detail with respect to each of the calculations and components contained therein. No amount included in any component of the Estimated Purchase Price shall be duplicated in any other component of the Estimated Purchase Price.  After the delivery of the Estimated Closing Statement, Seller shall, and shall cause the Company and its Subsidiaries to, provide the Purchaser and its Representatives with reasonable access to all books, workpapers and other records and supporting data of Seller and the Company and its Subsidiaries, in connection with Purchaser’s review of the Estimated Closing Statement and all calculations set forth therein, and reasonable access to the personnel and advisers of Seller and the Company and its Subsidiaries who were involved in the preparation of the Estimated Closing Statement in order to ask questions and receive answers; provided, however, that the independent accountants of the Company and its Subsidiaries shall not be obligated to make any working papers available to Purchaser unless and until Purchaser has signed a customary confidentiality and hold harmless agreement relating to such access to working papers in form and substance reasonably acceptable to such independent accountants. Prior to the Closing, Seller shall consider in good faith any revisions proposed by Purchaser to the Estimated Closing Statement, including the calculations set forth therein, and to the extent Seller, in its sole good faith discretion, agrees with any such revisions, the Estimated Closing Statement shall be modified to reflect such revisions; provided, that if the parties are unable to resolve such differences prior to the Closing Date, in no event shall such disagreement delay the Closing, the estimates and calculations of the Company set forth in the Estimated Closing Statement shall control for the purposes of calculating the Estimated Purchase Price and the parties shall make all payments required to be made on the Closing Date pursuant to Section 2.3(a). For the avoidance of doubt, any failure of Purchaser to dispute any item or aspect of the Estimated Closing Statement shall not preclude Purchaser from exercising any other rights under this Agreement (or failure of Purchaser and Seller to agree on any adjustment proposed by Purchaser to Seller prior to the Closing).

 

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Section 3.6            Withholding.  Purchaser shall be entitled to deduct and withhold from any payment made pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of any such payment under any applicable Tax Law; provided, that before making any deduction or withholding pursuant to this Section 3.6 (other than any withholding (x) arising from Seller’s failure to deliver the forms required to be delivered pursuant to Section 2.3(b)(ii) hereof or (y) required in respect of any compensatory payments), Purchaser shall (i) use commercially reasonable efforts to provide reasonable prior notice to the Person in respect of whom such deduction or withholding is to be made (together with the legal basis therefor), (ii) if practicable, afford such Person with a reasonable opportunity to provide any forms or other documentation or take such other steps in order to avoid such deduction or withholding, and (iii) reasonably cooperate with such Person in good faith to reduce or eliminate any amounts that would otherwise be deducted or withheld.  To the extent that amounts are withheld and paid to the proper Tax authority pursuant to any applicable Tax Law, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to such Person in respect of which such deduction and withholding was made.

 

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except as set forth in the Company Disclosure Schedule, Seller hereby represents and warrants to Purchaser:

 

 

Section 4.2           Organization and Good Standing.  Seller is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation.  Seller (a) has all requisite power and authority to own and lease its assets and to operate its business as the same are now being owned, leased and operated and (b) is duly qualified or licensed to do business as a foreign entity in, and is in good standing in, each jurisdiction in which the nature of its business or its ownership of its properties requires it to be so qualified or licensed, except in each case where the failure to have such power or authority or be so qualified or licensed would not reasonably be expected to materially impair or delay Seller’s ability to perform its respective obligations under this Agreement and the other Transaction Agreements or consummate the transactions contemplated hereby or thereby.

 

 

Section 4.4            No Conflicts; Consents.

 

(a)          Except as set forth in Section 4.4 of the Company Disclosure Schedule and assuming all Governmental Filings and waiting periods described in or contemplated by Section 5.4(b), Section 4.4(b) and Section 6.3(b) have been obtained or made, or have expired, the execution, delivery and performance of this Agreement and the other Transaction Agreements by Seller and the consummation by Seller of the transactions contemplated hereby and thereby will not (i) violate any applicable Law or Governmental Order to which Seller is subject, (ii) with or without notice, lapse of time or both, conflict with, result in a violation or breach of, or constitute a default under, result in the acceleration, termination or cancellation of or create in any party the right to accelerate, terminate or cancel any Contract to which Seller or any member of the Seller Group is a party or by which any of its material properties, rights or assets is bound, (iii) result in the creation of any Encumbrance (other than any Permitted Encumbrance) on any properties, rights or assets of Seller or (iv) violate the certificate of incorporation or bylaws or comparable governing documents, each as amended to the date of this Agreement, of Seller, other than, in the case of clauses (i), (ii) and (iii) above, where any such violations, conflicts, breaches, defaults, accelerations, terminations, cancellations, rights or Encumbrances would not reasonably be expected to materially impair or delay Seller’s ability to perform its obligations under this Agreement and the other Transaction Agreements or consummate the transactions contemplated hereby or thereby.

 

(b)          No filings or registrations with, notifications to, or authorizations, consents or approvals of, a Governmental Entity (collectively, “Governmental Filings”) are required to be obtained or made by Seller in connection with the execution, delivery and performance of this Agreement by Seller or the consummation by Seller of the transactions contemplated hereby, except (i) compliance with and filings under the HSR Act, (ii) Governmental Filings set forth on Section 4.4(b) of the Company Disclosure Schedule and (iii) such other Governmental Filings, the failure of which to be obtained or made would not materially impair or delay the ability of Seller to consummate the transactions contemplated by this Agreement.

 

 

Section 4.6           Proceedings.  There is no Action of any kind whatsoever, at Law or in equity, pending, or threatened in writing against Seller or any member of the Seller Group or any of their respective properties or assets, except in each case where any such Action would not reasonably be expected to materially impair or delay Seller’s ability to perform its obligations under this Agreement and the other Transaction Agreements or consummate the transactions contemplated hereby or thereby.  None of  Seller nor any other member of the Seller Group or any of their respective properties or assets is subject to any Governmental Order, except in each case where any such Governmental Order would not reasonably be expected to materially impair or delay Seller’s ability to perform its obligations under this Agreement and the other Transaction Agreements or consummate the transactions contemplated hereby or thereby.

 

 

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the Company Disclosure Schedule, the Company hereby represents and warrants to Purchaser:

 

 

Section 5.2          Capitalization and Title to Shares.

 

(a)          The authorized capital stock of the Company consists of 1,500 shares of common stock, par value $0.01 per share.  The Company Shares are the only shares of common stock of the Company outstanding.  Except as set forth above, there are no shares of capital stock or other equity securities or interests of the Company issued, reserved for issuance or outstanding.  All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued, and are fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right.  There are not any bonds, debentures, notes or other Indebtedness of the Company or any of its Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which any holder of any share of capital stock or other equity interests of the Company or any of its Subsidiaries may vote (“Voting Company Debt”).  Except as set forth in Section 5.2(a) or Section 5.2(b) of the Company Disclosure Schedule, as of the date of this Agreement, (A) there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, profit participation rights, preemptive rights, puts, calls, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound (i) obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible into or exercisable for or exchangeable into, or giving any Person a right to subscribe for or acquire, any shares of capital stock of or other securities or equity interest in, the Company or any Subsidiary of the Company or any Voting Company Debt, (ii) obligating the Company or any of its Subsidiaries to issue, grant or enter into any such option, warrant, right, security, commitment, Contract, arrangement or undertaking or (iii) pay an amount in cash or in kind with respect to, or based on the value of, any shares of capital stock of or other equity interest in the Company or any of its Subsidiaries or any Voting Company Debt and (B) there are no voting trusts, proxies or other similar agreements or understandings to which Seller, the Company or any of their respective Subsidiaries is a party or by which Seller, the Company or any of their respective Subsidiaries is bound with respect to the voting of voting or equity interests in the Company or any of its Subsidiaries.

 

(b)          Except as set forth on Section 5.2(b) of the Company Disclosure Schedule, there are not any outstanding contractual obligations of the Company or any of its Subsidiaries (i) to repurchase, redeem or otherwise acquire any shares of capital stock of or other equity interest in the Company or any of its Subsidiaries or (ii) relating to the voting or registration for sale of any equity securities of the Company or any of its Subsidiaries.

 

(c)          Section 5.2(c) of the Company Disclosure Schedule sets forth a true and complete list of all Subsidiaries of the Company, including the name and jurisdiction of organization of each such Subsidiary, the issued and outstanding capital stock of each such Subsidiary and the record owner of such capital stock.  All the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and not subject to or issued in violation of applicable securities Law, any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right, and, except as set forth on Section 5.2(c) of the Company Disclosure Schedule, are held, directly or indirectly, by the Company or another wholly-owned Subsidiary of the Company, free and clear of all Encumbrances (other than Permitted Encumbrances).

 

(d)          Except for interests in the Company’s Subsidiaries, and except as set forth in Section 5.2(d) of the Company Disclosure Schedule, the Company and its Subsidiaries do not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other voting or equity interest in any Person (including any securities exercisable or exchangeable for or convertible into capital stock, membership interest, partnership interest, joint venture interest or other voting or equity interests in).  There are no outstanding commitments or agreements obligating the Company or one of its Subsidiaries to make any investment (in the form of a loan, capital contribution or any other form of investment) in any Person, other than any such commitments or agreements between or among the Company and any of its wholly-owned Subsidiaries. The Company beneficially owns 100% of the equity and/or voting interests in the Company’s Subsidiaries.

 

(e)          Upon the transfer and delivery of the Company Shares being sold hereunder by Seller to Purchaser at the Closing, Purchaser will receive good and valid title to such Company Shares, free and clear of all Encumbrances, except for any Encumbrances created, directly or indirectly, by or on behalf of Purchaser and such Company Shares shall not be subject to any voting or transfer restrictions (other than restrictions generally imposed on securities under U.S. federal, state or foreign securities Laws and restrictions created, directly or indirectly, by or on behalf of Purchaser).

 

 

Section 5.4            No Conflicts; Consents.

 

(a)        Except as set forth in Section 5.4(a) of the Company Disclosure Schedule and assuming all Governmental Filings and waiting periods described in or contemplated by Section 5.4(b), Section 4.4(b) and Section 6.3(b) have been obtained or made, or have expired, the execution, delivery and performance of this Agreement and the other Transaction Agreements by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) violate any applicable Law or Governmental Order to which the Company or its Subsidiaries are subject, (ii) with or without notice, lapse of time or both, conflict with, result in a violation or breach of, or constitute a default under, result in the acceleration, termination or cancellation of or create in any party the right to accelerate, terminate or cancel any Company Material Contract or result in the loss of any material benefit under any Company Material Contract, (iii) result in the creation of any Encumbrance (other than any Permitted Encumbrance) on any properties, rights or assets of the Company or any of the Company’s Subsidiaries or (iv) violate the certificate of incorporation or bylaws or comparable governing documents, each as amended to the date of this Agreement, of the Company or any of its Subsidiaries, other than, in the case of clauses (i), (ii) and (iii) above, any such violations, conflicts, breaches, defaults, accelerations, terminations, cancellations, rights or Encumbrances that would not reasonably be expected, individually or in the aggregate, to (A) be material to the Company and its Subsidiaries, taken as a whole and (B) materially impair or delay the Company’s ability to perform its obligations under this Agreement and the other Transaction Agreements or consummate the transactions contemplated hereby or thereby.

 

(b)        No Governmental Filings are required to be obtained or made by the Company or its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except (i) compliance with and filings under the HSR Act, (ii) Governmental Filings set forth on Section 5.4(b) of the Company Disclosure Schedule and (iii) such other Governmental Filings, the failure of which to be obtained or made would not, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole, and would not be expected to materially impair or delay the Company’s ability to perform its obligations under this Agreement and the other Transaction Agreements or consummate the transactions contemplated hereby or thereby.

 

Section 5.5            Financial Statements.

 

(a)          Section 5.5 of the Company Disclosure Schedule sets forth true and complete copies of (i) the audited combined consolidated financial statements of the MB Aerospace Group as of and for the fiscal years ended January 2, 2022 and January 2, 2023, including balance sheets as of January 2, 2022 and January 2, 2023, and the related statements of operations, cash flows and changes in members’ equity for each fiscal year then ended (the “Audited Financial Statements”), and (ii) the unaudited combined consolidated financial statements of the MB Aerospace Group as of and for the fiscal quarter ended April 2, 2023, including a balance sheet as of April 2, 2023 and the related statements of operations and cash flows for the three (3)-month period then ended (the “Interim Financial Statements,” and together with the Audited Financial Statements, the “Financial Statements”), each of which have been delivered by the Company to Purchaser.  The Financial Statements have been prepared in accordance with GAAP, consistently applied, and present fairly, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of the date indicated and the results of operations for the period then ended, except with respect to the Interim Financial Statements, which are subject to (x) normal year-end adjustments, which are not, individually or in the aggregate, material and (y) the absence of disclosures normally made in footnotes.  The balance sheet as of April 2, 2023, which is included in the Financial Statements, is referred to herein as the “Latest Company Balance Sheet” and April 2, 2023 is referred to as the “Latest Company Balance Sheet Date.”

 

(b)         The Company and its Subsidiaries maintain books and records reflecting their assets and liabilities that are accurate in all material respects and are maintained in all material respects in good faith and in accordance with GAAP and any other applicable accounting requirements.  The Company and its Subsidiaries maintain systems of internal accounting controls that are designed to provide reasonable assurance in all material respects that:  (i) transactions are executed only with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of their financial statements and (iii) access to their assets is permitted only in accordance with management’s general or specific authorization.  To the Knowledge of the Company, there are no deficiencies in the design or operation of the Company or its Subsidiaries’ controls that, individually or in the aggregate, would reasonably be expected to materially impair the Company or its Subsidiaries’ ability to record, process, summarize and report financial data with respect to the business operated by the Company and its Subsidiaries.  There is no fraud with respect to the internal controls of the Company or its Subsidiaries, whether or not material, that involves management or other employees of the Seller or its Affiliates who have a significant role in the internal controls of the Company and its Subsidiaries.

 

(c)          None of the Company nor any of its Subsidiaries is a party to, nor do the Company or any its Subsidiaries have any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or any off-balance sheet arrangements where the purpose or intended effect of such Contract is to avoid disclosure of any transaction involving, or liabilities of, the Company or any of its Subsidiaries.

 

Section 5.6          No Undisclosed Liabilities.  Neither the Company nor any of its Subsidiaries has any liabilities of any kind other than (i) those to the extent specifically disclosed, reflected and adequately reserved for on the Latest Company Balance Sheet, (ii) liabilities incurred in the ordinary course of business after the Latest Company Balance Sheet Date (none of which is a liability from breach of contract, breach of warranty, tort, infringement or misappropriation), (iii) liabilities incurred in connection with the transactions contemplated by this Agreement or (iv) liabilities that, individually or in the aggregate, are not otherwise material in amount or nature.

 

 

Section 5.8            Real Property; Title to Assets.

 

(a)          Section 5.8(a) of the Company Disclosure Schedule sets forth a true and complete list of all of the real property (by street address) owned or held in perpetual usufruct by the Company or any of its Subsidiaries (such properties, collectively, the “Owned Real Property”).  The Company or one of its Subsidiaries has good and marketable title to the Owned Real Property, subject to Permitted Encumbrances.

 

(b)          Section 5.8(b) of the Company Disclosure Schedule sets forth a true and complete list of all of the real property leases, subleases or other occupancies (collectively, the “Leases”) to which the Company or any of its Subsidiaries is a party as tenant for real property (collectively, the “Leased Real Property”).  The Company and its Subsidiaries, as applicable, hold a valid and existing leasehold interest under each of the Leases to which it is a party for the terms set forth therein, free and clear of all Encumbrances (other than any Permitted Encumbrances).  Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, all of the Leases are in full force and effect and enforceable by the Company or such Subsidiaries which is a party thereto in accordance with their terms, subject to the Enforceability Exceptions.  Neither the Company or any of its Subsidiaries nor, to the Knowledge of the Company, any other party to the Lease, is in material breach of or taken or failed to take any act which, with or without notice, lapse of time, or both, would constitute a material default under any Lease that would, individually or in the aggregate, reasonably be expected to materially impair the continued use and operations of the Leased Real Property to which they relate in the conduct of the business of the Company and its Subsidiaries as presently conducted or be material to the Company and its Subsidiaries, taken as a whole.

 

(c)          Other than any exception which would not, individually or in the aggregate, reasonably be expected to be, individually or in the aggregate, material to the Company and its Subsidiaries, the Company and its Subsidiaries own each of the items of material tangible personal property reflected on the Latest Company Balance Sheet or acquired thereafter (except for assets reflected thereon or acquired thereafter that have been disposed of since the Latest Company Balance Sheet Date), free and clear of all Encumbrances, except for (i) Encumbrances identified or described in Section 5.8(c) of the Company Disclosure Schedule and (ii) Permitted Encumbrances. Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, the Company and its Subsidiaries maintain reasonable policies, practices and procedures with respect to the security and safeguard of inventories and other tangible assets (including with respect to employee and third-party theft and other loss).

 

(d)          Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, (i) the use and operation of the Owned Real Property and the Leased Real Property by the Company and its Subsidiaries do not violate in any material respect any material Law, covenant, condition, restriction, easement, license, Permit or agreement and (ii) there are no Actions pending nor, to the Knowledge of the Company, threatened against or affecting the Owned Real Property, the Leased Real Property or any portion thereof or interest therein in the nature or in lieu of condemnation or eminent domain proceedings.

 

(e)          To the Knowledge of the Company, all buildings, structures, improvements, fixtures, building systems and equipment, and all components thereof, included in the Owned Real Property and the Leased Real Property (the “Improvements”) are, in all material respects, in serviceable operating condition and repair (giving due account to the age and length of use of the same, ordinary wear and tear excepted). To the Knowledge of the Company, there are no structural deficiencies or latent defects affecting any of the Improvements and there are no facts or conditions affecting any of the Improvements which would, individually or in the aggregate, be material to the Company and its Subsidiaries.

 

Section 5.9             Intellectual Property.

 

(a)          Section 5.9(a) of the Company Disclosure Schedule sets forth a listing of all Intellectual Property registrations and applications included in the Company IP (collectively, the “Company Registered IP”).

 

(b)        Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (i) the Company and its Subsidiaries own all right, title and interest in and to the Company IP, (ii) all Company Registered IP is subsisting and unexpired, and not invalid or unenforceable, (iii) the Company is current in the payment of all registration, maintenance and renewal fees with respect to Company Registered IP and (iv) the Company exclusively owns, free and clear of all Encumbrances (other than Permitted Encumbrances) the Company IP.

 

(c)         Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, the Company owns or has sufficient and valid rights to use all Intellectual Property used in, held for use in or necessary for the conduct of the business of the Company and its Subsidiaries as currently conducted, including the development, manufacture, use, sale, commercialization or other exploitation of any product, service or other offering provided by the Company or its Subsidiaries, all of which rights shall survive the consummation of the transactions contemplated by this Agreement without being terminated or materially changed.  Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, neither the execution and delivery of nor performance under this Agreement by the Company, or the consummation of the transaction contemplated by this Agreement will, under any Contract to which the Company is bound, result in the Company or Purchaser and any of their respective Affiliates being (i) bound by or subject to any obligation to grant licenses, covenants not to assert, or other rights with respect to Company IP, which such party was not bound by or subject to prior to the Closing, or (ii) obligated to pay any material royalties, fees or other payments to any Person, with respect to Intellectual Property, in excess of those obligations by such party prior to the Closing.

 

(d)          Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, (i) there are no claims pending against the Company or its Subsidiaries before any Governmental Entity (A) contesting or challenging the use, validity, enforceability or ownership of any Company IP or (B) alleging that the conduct of the Company’s and its Subsidiaries’ businesses, including the development, manufacture, use, sale, commercialization or other exploitation of any product, service or other offering provided by the Company or its Subsidiaries, is infringing, misappropriating or otherwise violating any Intellectual Property of a third party, (ii) the conduct of the Company’s and its Subsidiaries’ businesses, including the development, manufacture, use, sale, commercialization or other exploitation of any product, service or other offering provided by the Company or its Subsidiaries, does not infringe upon or misappropriate any Intellectual Property of any third party and (iii) to the Knowledge of the Company, no third party is infringing or misappropriating any Intellectual Property owned by the Company or any of its Subsidiaries;

 

(e)          Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, the Company and its Subsidiaries take commercially reasonable measures to maintain and protect (i) their material trade secrets and material confidential information and no such material trade secrets or material confidential information have been used, disclosed to or otherwise discovered by any Person except pursuant to non-disclosure obligations that have not been breached by such Person, and (ii) the integrity, continuous operation and security of their material software and systems, and there have been no violations, outages or breaches of same, other than those that were resolved without material cost or liability.

 

(f)          Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (i) each Person (including any employees, officers, contractors or service providers) who has, on behalf of the Company or its Subsidiaries, developed, invented, conceived or reduced to practice any material Intellectual Property has assigned to the Company or its Subsidiaries all of such Person’s rights therein that do not vest in the Company or its Subsidiaries by operation of Law and (ii) no such Person retains any right, title or interest in or to any such Intellectual Property.

 

(g)         Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, the Company or its Subsidiaries owns the Intellectual Property in all material proprietary Software owned (or purported to be owned) or that was authored or developed by or on behalf of the Company, including NX and Teamcenter software (collectively, “Company Software”).  Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, neither the Company nor its Subsidiaries has delivered, licensed or made available, nor is under a duty or obligation (whether present, contingent, or otherwise) to deliver, license or make available, the source code for any Company Software to any escrow agent or other Person who is not an employee or consultant who are subject to valid and binding confidentiality obligations and acting on behalf of the Company or its Subsidiaries.

 

(h)        Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, neither the Company nor its Subsidiaries has distributed, made available for remote interaction, or incorporated or linked any Open Source Software in conjunction with or into any Company Software in a manner that requires the Company to (i) disclose or distribute to any Person or the public of any portion of the source code for such Company Software, (ii) imposes any restriction on the consideration to be charged for the distribution of such Company Software, or (iii) grants, or purports to grant, to any third party, any rights or immunities under any Company IP.  Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, the Company and its Subsidiaries is in material compliance with the terms and conditions of all relevant licenses for Open Source Software, including notice and attribution obligations.

 

Section 5.10          Information Technology; Data Protection.

 

(a)        Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, all Company IT Assets (i) are free from any material defect, to the extent applicable, and (ii) do not contain any virus, software, routine or hardware component, in each case, designed to permit unauthorized access or control, or to disable or otherwise harm any Company IT. Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, the Company complies with, and is not in breach or default of, its obligations and use restrictions with respect with to third-party software (including with respect to Open Source Software licenses).

 

(b)         Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (i) the Company IT Assets (A) operate and perform in all material respects in accordance with their documentation and functional specifications, (B) are sufficient for the current needs of the business of the Company and (C) have not malfunctioned or failed during the prior three (3)-year period in a manner that has caused material disruption to the business operations of the Company and (ii) since January 1, 2020, there has been no unauthorized access to or unauthorized use of the Company IT Assets, or the Personal Data stored or contained therein or transmitted thereby. The Company has taken commercially reasonable steps to provide for archival, back-up, recovery and restoration of its material business data.

 

(c)        Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, since January 1, 2020, the Company has established and implemented written policies and organizational, physical, administrative and technical measures regarding privacy, cyber security, data protection and the collection, retention, protection, transfer, use and processing of Personal Data, in each case, that are commercially reasonable and consistent in all material respects with requirements of (i) all applicable Data Protection Laws, (ii) any contractual commitments of the Company and (iii) any publicly facing statements or policies adopted by the Company relating to its collection or processing of Personal Data (clauses (i) and (ii), collectively, the “Privacy and Security Requirements”).

 

(d)         Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, neither the Company nor any of its Subsidiaries has received any written notice (including any enforcement notice), letter, or complaint alleging, or providing notice of any investigation concerning, any material noncompliance with any applicable Laws or any obligations concerning such Personal Data and no Person has gained unauthorized access to or misused any Personal Data in a manner that, individually or in the aggregate, has resulted in or is reasonably expected to result in material liability to the Company or any of its Subsidiaries or an obligation for the Company or any of its Subsidiaries to notify any Governmental Entity, including a requirement to make a filing with the SEC.

 

(e)         Except as would not have a Company Material Adverse Effect, (A) (i) the Company is in compliance, and since January 1, 2020, has been in compliance, with all applicable Data Protection Laws and the Company’s own Privacy and Security Requirements with respect to privacy, data protection and the collection, retention, protection, transfer, use and processing of Personal Data, (ii) none of the Company or any of its Subsidiaries has received any written notice from any Governmental Entity regarding any actual, alleged, possible or potential violation of, or failure to comply with, any applicable Data Protection Laws or the Company’s own Privacy and Security Requirements and (iii) the Company has since January 1, 2020 taken commercially reasonable steps designed to ensure the confidentiality, privacy and security of all Personal Data that is collected, used, stored, transferred or otherwise processed by or on behalf of the Company, or is otherwise in its possession or control and (B) to the extent required by applicable Data Protection Laws, the Company has entered into written agreements with all third parties who process or store Personal Data for or on behalf of the Company that obligate such persons to comply with all applicable Data Protection Laws and to take steps to protect and secure Personal Data from loss, theft, misuse or unauthorized use, access, modification or disclosure.

 

 

 

(a)         All material Tax Returns required to be filed by the Company or any of its Subsidiaries with any Governmental Entity have been timely filed (taking into account applicable extensions of time to file), and all such Tax Returns are true, correct and complete in all material respects.  All material Taxes required to be paid by the Company or any of its Subsidiaries have been paid in full, other than Taxes which are not yet due and payable or are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.  The Company and its Subsidiaries have withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid by the Company or any Subsidiary to any employee, independent contractor, creditor or stockholder.

 

(b)        There is no audit, examination or other administrative or court proceeding involving any material Tax of the Company or any of its Subsidiaries that is currently in progress or threatened in writing by a Governmental Entity.  No deficiency or proposed adjustment that has not been fully paid or finally resolved for any material amount of Tax has been asserted, assessed or proposed by any Governmental Entity against the Company or any of its Subsidiaries.

 

(c)         Neither the Company nor any of its Subsidiaries has received from any Governmental Entity in a jurisdiction where the Company or its Subsidiary has not filed any Tax Returns any written claim that the Company or such Subsidiary is or may be subject to taxation by, or required to file Tax Returns in, that jurisdiction, which claim has not been fully resolved.

 

(d)         There are no Encumbrances for Taxes upon any of the assets of the Company or any of its Subsidiaries, other than Permitted Encumbrances.

 

(e)          Neither the Company nor any of its Subsidiaries is a party to, is bound by or has any obligation under any Tax allocation or Tax sharing agreement, other than (i) any such agreement solely among the Company and its Subsidiaries or (ii) any commercial agreement entered into in the ordinary course of business, the primary subject matter of which is not Taxes (a “Commercial Tax Agreement”).

 

(f)         No extension or waiver of any statute of limitations with respect to the assessment or determination of any of the Company’s or its Subsidiaries’ material Taxes is in effect (except for automatic extensions of time to file income Tax Returns obtained in the ordinary course of business).

 

(g)         Neither the Company nor any of its Subsidiaries (i) is resident for Tax purposes in a jurisdiction outside of its jurisdiction of organization or incorporation or (ii) has, or has ever had, a permanent establishment or other taxable presence in any country other than its country of organization or incorporation.

 

(h)         Neither the Company nor any of its Subsidiaries (i) has been a member of an affiliated, consolidated, combined, unitary or similar Tax group for purposes of filing any income Tax Return, other than a group of which the Company or one of its Subsidiaries is the common parent, or (ii) has any liability for a material amount of Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise by operation of Law.

 

(i)         Neither the Company nor any of its Subsidiaries will be required to (i) include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) beginning after the Closing Date, as a result of (A) any change in or improper method of accounting for a Pre-Closing Tax Period, (B) “closing agreement” described in Section 7121 of the Code (or any similar provision of state, local or foreign Law) entered into prior to Closing, (C) installment sale or open transaction disposition made on or prior to the Closing, (D) prepaid amount or deferred revenue received on or prior to the Closing, (E) any intercompany transaction or excess loss amount account described in Treasury Regulations under Section 1502 of the Code (or any similar provision of state, local of foreign law), or (F) a gain recognition agreement under Section 367 of the Code (or any corresponding or similar provision of applicable Tax Law), or (ii) pay any amount of Tax in respect of an election pursuant to Section 965(h) of the Code.

 

(j)          None of the Company or any of its Subsidiaries has been either a “distributing corporation” or a “controlled corporation” in a distribution occurring during the two-year period ending on the date hereof in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable.

 

(k)          None of the Company or any of its Subsidiaries has participated in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).

 

(l)          There are no issued, requested or pending private letter rulings, advance pricing agreements or similar agreements with any Governmental Entity with respect to Taxes that would bind the Company or any of its Subsidiaries following the Closing.

 

(m)         The Company and its Subsidiaries have not deferred the payment of any Tax pursuant to the CARES Act that remains unpaid.

 

(n)        The Company and its Subsidiaries have made available all documentation relating to any material Tax holidays, deferrals or incentives granted by any Governmental Authority to any of them and are in compliance in all material respects with the requirements for any such Tax holidays, deferrals or incentives.

 

(o)          The entity classification for U.S. federal income tax purposes of each of the Company and its Subsidiaries as of the date hereof is set forth in Section 5.12(o) of the Company Disclosure Schedule, together with the effective date of any entity classification election for U.S. federal income tax purposes.

 

(p)       The Company and its Subsidiaries have complied in all material respects with all applicable Laws regarding the preparation and maintenance of all documentation required to substantiate the transfer pricing practices and methodologies of the Company and its Subsidiaries.

 

(q)          The Company and its Subsidiaries have complied in all material respects with all applicable rules regarding the registration for, and collection and remittance of, goods and services, value-added, or similar Taxes.

 

(r)          Neither the Company nor any of its Subsidiaries has any material liability in respect of escheat or unclaimed property.

 

Notwithstanding anything to the contrary in this Agreement, other than the representations and warranties set forth in Section 5.5, Section 5.7, and Section 5.14 (in each case, to the extent relating to Tax matters), this Section 5.12 contains the exclusive representations and warranties of the Company with respect to Tax matters.

 

 

Section 5.14          Benefit Plans.

 

(a)          Section 5.14(a) of the Company Disclosure Schedule sets forth a true and complete list of each material Company Benefit Plan as of the date of this Agreement.  With respect to each material Company Benefit Plan, the Company has made available to Purchaser a current, complete and accurate copy (or to the extent no copy exists, an accurate summary) of (i) each such Company Benefit Plan, including any material amendments thereto, (ii) any trust, insurance, annuity or other funding instrument related thereto, (iii) any summary plan description of a Company Benefit Plan, (iv) for the most recent year and to the extent applicable, (A) audited financial statements, (B) actuarial or other valuation reports prepared with respect thereto (where such statements or reports are required to be prepared under applicable Law or otherwise reasonably available) and (C) Form 5500 and attached schedules, (v) all determination letters issued by the IRS or the United States Department of Labor and (vi) all still open material correspondence with a Governmental Entity since January 1, 2020.  The Company has made available to Purchaser true, correct and complete copies of all form restrictive covenants currently applicable to any current or former employee of the Company or any of its Subsidiaries and a list of employees that have executed such forms.

 

(b)          Except as set forth on Section 5.14(b) of the Company Disclosure Schedule:

 

(i)          Neither the Company nor any of its Subsidiaries has (A) during the six-year period immediately preceding the date hereof, been the sponsor of, contributed to or been obligated to make contributions to, or otherwise incurred any liability with respect to, a “multiemployer plan” (as defined in Title I or Title IV of ERISA), a plan subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA, (B) incurred or would be reasonably expected to incur any material liability or obligation with respect to a defined benefit plan (including any amount that is or could become due by virtue of Section 75 or Section 75A of the Pensions Act 1995 as amended by subsequent regulations), (C) engaged in any prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any Company Benefit Plan that would be reasonably likely to subject the Company to any material Tax or penalty (civil or otherwise) imposed by ERISA or the Code or (D) or would reasonably be expected to have, following the Closing, any liability (contingent or otherwise) with respect to clauses (A) through (C) above as a result of their affiliation with any Person that would be or, at any relevant time, would have been considered a single employer with the Company or any of its Subsidiaries under the Code or ERISA (or any similar state, local or foreign law);

 

(ii)          each Company Benefit Plan that is intended to be Tax-qualified under Section 401(a) of the Code has received a favorable determination letter or opinion letter from the Internal Revenue Service as to its qualification and is so qualified, and no circumstances exist that would reasonably be expected to affect the qualified status of any such Company Benefit Plan;

 

(iii)         each Company Benefit Plan has been maintained and operated in compliance in all material respects with its respective terms and all applicable Laws, and all contributions required under the terms of each Company Benefit Plan or applicable Laws or otherwise, and all premiums due or payable with respect to insurance policies funding any Company Benefit Plan, have been timely made or paid in all material respects, or to the extent a contribution is premium is not required to be made or paid on or before the date hereof, have been fully reflected on the reflected on the Financial Statements in accordance with GAAP;

 

(iv)         neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby (whether alone or in connection with any other event), will directly or indirectly (w) result in any payment or benefit (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director, officer, employee or other service provider of the Company or its Subsidiaries, (x) increase any compensation or benefits otherwise payable to any director, officer, employee or other service provider of the Company or its Subsidiaries, (y) result in any acceleration of the timing of payment, vesting, exercisability, funding or delivery of any compensation or benefits, or (z) result in any limitation on the right of the Company or its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Company Benefit Plan or related trust;

 

(v)          none of the Company Benefit Plans provides medical or other welfare benefits to any retired Person, or any current or former employee or other service provider of the Company or its Subsidiaries following such individual’s retirement or other termination of employment or service, except as required by applicable Law (including Section 4980B of the Code);

 

(vi)        no amount paid or payable (whether in cash, in property or in the form of benefits) by the Company or its Subsidiaries in connection with the transactions contemplated hereby (whether alone or in combination with other events) will be an “excess parachute payment” within the meaning of Section 280G of the Code.  No Company Benefit Plan provides for the gross-up or reimbursement of Taxes under Section 4999 or 409A of the Code or otherwise;

 

(vii)         there are no material claims pending or, to the knowledge of the Company, threatened (other than routine claims for benefits in the ordinary course of business) or other proceedings, and, to the knowledge of the Company, no set of circumstances exists that may reasonably give rise to a claim or other proceeding, against the Company Benefit Plans, any fiduciaries thereof or the assets of any trusts related thereto that would reasonably be expected to result in any material liability of the Company or its Subsidiaries, and no Company Benefit Plan is under audit or the subject of an investigation by any Governmental Entity, nor, to the knowledge of the Company, is any such audit or investigation pending or threatened; and

 

(viii)       each Company Benefit Plan that is in any part a “nonqualified deferred compensation plan” subject to Section 409A of the Code complies and has complied, both in form and operation, with the requirements of Section 409A of the Code and the final regulations and other applicable guidance thereunder.

 

Section 5.15          Compliance with Applicable Law; Permits.

 

(a)         Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, since January 1, 2019, (i) the Company and each of its Subsidiaries has been and is in compliance with all applicable Laws, (ii) the Company and each of its Subsidiaries has possessed all licenses, permits, registrations, permanent certificates of occupancy, authorizations, and certificates issued by the applicable Governmental Entity necessary to operate its business as currently conducted (collectively, “Permits”), (iii) all Permits have been and are valid and in good standing (to the extent such concept is applicable) and have been and are in full force and effect, (iv) the Company and the Company’s Subsidiaries are in compliance with the terms of such Permits, and (v) all material fees and charges with respect to such Permits as of the date of this Agreement have been paid in full.

 

(b)         Except as set forth in Section 5.15(b) of the Company Disclosure Schedule or as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, since January 1, 2019, none of the Company or any of its Subsidiaries has received any written notice from any Governmental Entity regarding any actual, alleged, possible or potential violation of, or failure to comply with, any Law or Governmental Order applicable to the Company or any of its Subsidiaries or by which any properties or assets owned or used by the Company or any of its Subsidiaries are bound or affected.

 

Section 5.16          Environmental Matters.

 

(a)          Except as set forth in Section 5.16(a) of the Company Disclosure Schedule or as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole:

 

(i)           the Company and each of its Subsidiaries (including with respect to their respective facilities and operations on the Owned Real Property and the Leased Real Property) are, and since January 1, 2019 have been, in compliance with all Environmental Laws in all material respects;

 

(ii)          the Company and each of its Subsidiaries possesses all Permits required under Environmental Law with respect to the operation of its business as currently conducted (collectively, “Environmental Permits”), all Environmental Permits are valid and in good standing (to the extent such concept is applicable) and are in full force and effect, and the Company and the Company’s Subsidiaries are in compliance with the terms of such Environmental Permits;

 

(iii)         there are no Actions of any kind pursuant to Environmental Laws that are pending, or to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective properties or assets, and none of the Company or any of its Subsidiaries or any of their respective properties or assets is subject to any Governmental Order relating to Environmental Laws;

 

(iv)         there has been no Release of any Hazardous Material in violation of any Environmental Laws with respect to the business or assets of the Company or any of its Subsidiaries (or any predecessor thereof) or any Owned Real Property or Leased Real Property, and the Company and its Subsidiaries have not, since January 1, 2019, received any written notice that any Owned Real Property or Leased Real Property (including soils, groundwater, surface water, buildings, and other structure located on any such Owned Real Property or Leased Real Property) has been contaminated with any Hazardous Material, in each case which Release or contamination would reasonably be expected to result in a claim pursuant to any Environmental Law against, or a material violation of Environmental Laws or term of any Environmental Permit by, the Company or its Subsidiaries;

 

(v)          to the Knowledge of the Company, (1) no current conditions exist with respect to any of the Owned Real Property or Leased Real Property that would reasonably be expected to result in an obligation of the Company or any of its Subsidiaries to investigate or remediate such conditions under Environmental Law and (2) neither the Company nor any of its Subsidiaries has assumed, undertaken, or otherwise become subject to, any liability of any other Person relating to Environmental Laws or Hazardous Material;

 

(vi)        neither the Company nor any of its Subsidiaries is subject to any outstanding Governmental Order related to any Environmental Laws, Environmental Permits or Hazardous Material with respect to which any such Person has any future obligations related to any Environmental Laws, Environmental Permits or Hazardous Material; and

 

(vii)         since January 1, 2019, neither the Company nor any of its Subsidiaries nor any member of the Seller Group have received from any Governmental Entity any written notice of violation of any Environmental Law with respect to the Owned Real Property or the Leased Real Property, other than any such violation that has been resolved.

 

 

Section 5.18          Labor and Employment Matters.

 

(a)         Except as set forth in Section 5.18(a) of the Company Disclosure Schedule, (a) there are no and since January 1, 2020 has not been any pending, or to the Knowledge of the Company, threatened in writing, Actions by or on behalf of any current, prospective or former employee or other non-employee individual service provider which would reasonably be expected to result in any material liability of the Company or its Subsidiaries, (b) none of the Company or any of its Subsidiaries is or since January 1, 2020 has been a party to, bound by or in the process of negotiating any collective bargaining or other labor agreement with respect to any employees of the Company or any of its Subsidiaries, and (c) to the Knowledge of the Company, there are no and since January 1, 2020 have not been pending union organizational activities or proceedings with respect to employees of the Company or any of its Subsidiaries.  Since January 1, 2020, except as would not be material, there has not been any labor strikes, slowdowns, stoppages, arbitrations, grievances or other labor disputes pending or, to the Knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries.  There is no unfair labor practice charge or complaint against the Company or its Subsidiaries pending or, to the Knowledge of the Company, threatened before the National Labor Relations Board.  Since January 1, 2020, the Company has been in compliance in all material respects with all applicable Laws relating to employment and employment practices, including terms and conditions of employment, wages and hours, employment discrimination, employee classification, workers’ compensation, family and medical leave, immigration and occupational safety and health requirements, and no claims or legal proceedings are pending or, to the Knowledge of the Company, threatened with respect to the foregoing.  Except as would not be material, each individual who renders services to the Company or its Subsidiaries who is classified as an independent contractor, consultant or other non-employee status for any purpose (including for purposes of taxation and Tax reporting and under the Company Benefit Plans) is properly so characterized.  To the Knowledge of the Company, no material allegations of sexual harassment or other sexual misconduct have been made against any current or former employee or other non-employee individual service provider of the Company or its Subsidiaries, in their capacity as such.  Neither the Company nor any of its Subsidiaries have been a party to or involved in any material proceedings, or entered into any material settlement agreements, related to allegations of sexual harassment or misconduct by any current or former employee or other service provider of the Company or its Subsidiaries.

 

(b)         Section 5.18(b) of the Company Disclosure Schedule sets forth an anonymized list of each employee of the Company and its Subsidiaries, including with respect to each such employee, to the extent permitted by applicable Law, the job position or title, status (active or on approved leave), status as full-time, part-time or temporary employee, annual base salary rate or hourly base pay rate, cash and equity incentive opportunities (if applicable), exempt/non-exempt status, primary work location, hire date (or, if different, service commencement date) and whether subject to a collective bargaining agreement or similar labor agreement.

 

Section 5.19          Company Material Contracts.

 

(a)          Section 5.19(a) of the Company Disclosure Schedule sets forth a listing of the following Contracts of the following types to which the Company or any of its Subsidiaries is a party or by which any assets of the Company or any of its Subsidiaries are bound or are subject as of the date hereof (other than the Company Benefit Plans); provided, that the Company shall not be required to list or provide copies of any purchase orders, statements of work or similar Contracts on Section 5.19(a) of the Company Disclosure Schedule to the extent such purchase orders, statements of work and similar Contracts (A) have been made available to Purchaser or (B) are on terms which do not differ from those that have been made available to Purchaser in a manner that is materially detrimental to the Company or its Subsidiaries, but such purchase orders, statements of work and similar Contracts (solely to the extent meeting the criteria of any of the following types of Contracts set forth in this Section 5.19(a)) shall still be considered Company Material Contracts:

 

(i)            each Contract with (A) any of the top fifteen (15) customers (including distributors and resellers but excluding members of the Seller Group) (each such customer, a “Material Customer”) of the Company and its Subsidiaries, (B) any of the top fifteen (15) suppliers (each such supplier, a “Material Supplier”) of the Company and its Subsidiaries and (C) except as otherwise provided in the foregoing clauses (A) or (B), any other Persons that provide for payment or receipt by the Company or any of its Subsidiaries of more than $750,000 per year, including any such Contracts with customers or clients (in each case of clauses (A) through (C), determined on a consolidated basis based on amounts received or paid during the twelve (12)-month period ending on January 2, 2023);

 

(ii)          each joint venture agreement, partnership or limited liability company agreement (excluding any organizational documents of the Company or its Subsidiaries), collaboration, profit-sharing (or loss-sharing), strategic alliance, co-promotion, commercialization, research, development or other similar agreement;

 

(iii)         Contracts for the sale, assignment, transfer or other disposition of assets of the Company or any of its Subsidiaries (A) since January 1, 2020, for aggregate consideration under such Contract of $1,000,000 or more other than in the ordinary course of business consistent with past practice or (B) under which the Company or any of its Subsidiaries has any material continuing liability or obligation;

 

(iv)         Contracts providing for the acquisition or disposition by the Company or any of its Subsidiaries of any business, division or product line (whether by merger, sale of stock, sale of assets or otherwise), or capital stock of any other Person, in each case, (A) since January 1, 2016, with a purchase price in excess of $1,000,000 or (B) pursuant to which any “earn-out,” contingent purchase price, deferred purchase price, notes payable, royalty payment, indemnity or other similar obligations of the Company or its Subsidiaries remain outstanding;

 

(v)           any Contract evidencing or guaranteeing or providing for the incurrence of Indebtedness in excess of $4,000,000;

 

(vi)        any Contract under which an Encumbrance (other than a Permitted Encumbrance) has been imposed on any of the assets or properties of the Company and its Subsidiaries, excluding any such Contract that also evidences or guarantees indebtedness for borrowed money in an amount less than $1,000,000 and other than purchase money security interests in connection with the acquisition of equipment in the ordinary course of business;

 

(vii)        any Contract under which the Company or any of its Subsidiaries grants to, or receives from, a third party any material licenses or other material rights to use any Intellectual Property, other than non-exclusive licenses (A) granted to customers, distributors, resellers and business partners in the ordinary course of business or (B) for commercially available software, technology or data;

 

(viii)        any Contract that limits or purports to limit the ability of the Company or any of its Subsidiaries to compete or engage in any material respect in any line of business or with any Person or in any geographic area or during any period of time or that would so limit the freedom of Purchaser or its Affiliates or the Company and its Subsidiaries after the Closing;

 

(ix)        any Contract that obligates the Company or any of its Subsidiaries to conduct business on a “most favored nation” basis with any third party, including with respect to pricing or terms of delivery or service level credits, or that contains exclusivity, right of first refusal or right of first offer obligations or restrictions;

 

(x)           each material Lease;

 

(xi)          any interest rate, currency or other hedging Contracts;

 

(xii)       any non-competition or non-solicitation Contract with any current or former officer, employee or independent contractor of the Company or its Subsidiaries who provides or has provided services wholly or primarily to or on behalf of the Company or its Subsidiaries and whose total annual cash compensation from the Company and its Subsidiaries for the last completed fiscal year is at least $250,000;

 

(xiii)       any (A) Affiliate Arrangement or (B) Contract (or group of related Contracts) under which the Company or any of its Subsidiaries has advanced or loaned any amount to any of the Seller Group’s directors, officers, employees or contractors;

 

(xiv)        any Contract that (A) involves the resolution or settlement of any Action in an amount greater than $250,000 that has not been fully performed by the Company and its Subsidiaries or (B) imposes any continuing material obligations on the Company or any of its Subsidiaries;

 

(xv)         any Contract or group of Contracts (A) involving any individual capital expenditure in excess of $750,000 in the fiscal year ended January 2, 2023, or (B) involving a remaining commitment by the Company or its Subsidiaries to pay any individual capital expenditure or series of related capital expenditures in excess of $750,000; and

 

(xvi)        any Contracts with any Governmental Entity (other than Permits and Contracts pursuant to which any Governmental Entity is a customer or client of the Company or any of its Subsidiaries).

 

(b)          The Company has made available true, correct and complete copies of each Contract required to be identified in Section 5.19(a) of the Company Disclosure Schedule (collectively, the “Company Material Contracts”) to Purchaser, together with any and all amendments and supplements thereto and material statements of work, “side letters” and waivers that affect and provide for rights and/or obligations of the Company and its Subsidiaries following the Closing and similar documentation relating thereto (other than any such documents, which shall not be required to be made available, that are on terms which do not differ from those that have been made available to Purchaser in a manner that is materially detrimental to the Company or its Subsidiaries).  Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, (i) each of the Company Material Contracts (other than Contracts no longer in effect after the date of this Agreement that have expired in accordance with their terms or have been terminated in accordance with this Agreement) are in full force and effect, are valid and binding on the Company and any of its Subsidiaries to the extent that the Company or such Subsidiary is a party thereto, and to the Knowledge of the Company, the other parties thereto, and are enforceable in accordance with their respective terms, subject in each case to the Enforceability Exceptions, (ii) the Company and each of its Subsidiaries (as the case may be) has performed all obligations required to be performed by it pursuant to such Company Material Contracts, and (iii) none of the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto, is in default or breach or violation in any material respect under the terms of, or has provided or received any notice of any intention to modify, terminate, or fail to renew any such Company Material Contract, and, to the Knowledge of the Company, no event or circumstance has occurred that with notice or lapse of time would constitute an event of default thereunder.

 

Section 5.20          Customers and Suppliers.  Section 5.20 of the Company Disclosure Schedule sets forth a true and complete list of the Material Customers and the Material Suppliers.  Neither Seller nor the Company nor any of its Subsidiaries or Representatives has received any written notice from any Material Supplier that such supplier will terminate or cancel any Company Material Contract to which it is a party or stop, decrease the rate of, or change the material terms (whether related to payment, price or otherwise) with respect to supplying materials, products or services to the Company and its Subsidiaries.  Neither the Company nor any of its Subsidiaries has received any written notice from any Material Customer that such customer will terminate or cancel any Company Material Contract to which it is a party or stop, or materially decrease the rate of, purchasing services and/or products of the Company and its Subsidiaries (whether as a result of the consummation of the transactions contemplated by this Agreement or otherwise).

 

Section 5.21          Foreign Corrupt Practices Act; Export Control and Sanctions; Anticorruption.

 

(a)          (i) None of the Company nor any of its Subsidiaries, their directors, officers or employees or, to the Knowledge of the Company, any agent or other Person acting on their behalf has violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, and any rules or regulations promulgated thereunder (the “FCPA”), (ii) the Company and its Subsidiaries make and keep books, records, and accounts that accurately and fairly reflect transactions and the distribution of the assets of the Company and its Subsidiaries, and maintain a system of internal accounting controls sufficient to provide reasonable assurances that actions are taken in accordance with management’s directives and are properly recorded, in each case in accordance with the FCPA, and (iii) the Company and its Subsidiaries have effective disclosure controls and procedures and an internal accounting controls system that is sufficient to provide reasonable assurances that violations of the FCPA will be prevented, detected and deterred.

 

(b)          Since January 1, 2018, (i) neither the Company nor any of its Subsidiaries has violated, in connection with the business of the Company and its Subsidiaries, any Law relating to anti-bribery or anticorruption, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the U.K. Bribery Act 2010, in each case, as in effect at the time of such action (all such Laws, “Anticorruption Laws”), (ii) no director, officer, or employee, or, to the Knowledge of the Company, agent, representative, consultant or other Person acting for or on behalf of the Company has, with respect to the business of the Company and its Subsidiaries, violated any Anticorruption Law, and (iii) none of the Seller, the Company or any of their respective Subsidiaries has received any notice alleging any such violation of any Anticorruption Law.

 

(c)         Since January 1, 2018, the Company and each of its Subsidiaries has been in compliance with the trade control aspects of the U.S. Export Administration Regulations, the International Traffic in Arms Regulations (“ITAR”), Section 999 of the Code, the U.S. customs regulations, the Foreign Trade Regulations, regulations administered by the Bureau of Alcohol, Tobacco, Firearms and Explosives and any other U.S. or non-U.S. applicable Laws pertaining to export and import controls, tariffs, safeguards, antidumping and countervailing duties, quotas, antiboycott, and foreign trade zones (collectively, “Trade Control Laws”).

 

(d)         Since January 1, 2018, (i) the Company and each of its Subsidiaries, and their directors, officers, employees, and to the Knowledge of the Company, other Representatives acting on their behalf have been in compliance with Sanctions, and (ii) none of the Company, any of its Subsidiaries, or any of their respective directors, officers, employees and to the Knowledge of the Company, other Representatives acting on their behalf has engaged in, nor is now engaging in, directly, or, to the Knowledge of the Company, indirectly, any dealings or transactions in a Sanctioned Country or with a Sanctioned Person. None the Company, any of its Subsidiaries, or any of their respective directors, officers, or employees, nor, to the Knowledge of the Company, any other Representative or customer thereof or any other Person authorized to act for or on behalf of the Company or any of its Subsidiaries is a Sanctioned Person or a target of Sanctions or other restrictions under Trade Control Laws.

 

(e)         Since January 1, 2018, there have been no claims, complaints, charges, investigations, voluntary or directed disclosures, administrative subpoenas inquiries, audits, enforcement actions or other Actions involving the Company or any of its Subsidiaries pertaining to any Sanctions or Trade Control Laws, and there are no pending or, to the Knowledge of the Company, threatened claims or investigations involving suspected or confirmed violations thereof.

 

(f)          The Company and its Subsidiaries have instituted and maintain policies and procedures designed to ensure continued compliance with Anticorruption Laws, Trade Control Laws and Sanctions.

 

Section 5.22          Related Party Transactions.  Except as set forth in Section 5.22 of the Company Disclosure Schedule, no member of the Seller Group, equityholder, director or officer or employee  of any of the foregoing) has any interest, directly or indirectly, in any Affiliate Arrangements, or property (real, personal or mixed, tangible or intangible) or asset used in, pertaining to or owned by, or any interest in any supplier of, the Company or any of its Subsidiaries, except solely in such Person’s capacity as an equityholder, director, officer, or employee, as applicable, of the Company or any of its Subsidiaries (other than, in the case of any employee, officer or director, any employment Contract or Contract with respect to the issuance of equity in the Seller or any other Company Benefit Plan). Except as expressly set forth therein or Section 7.9, as of the Closing, all items set forth on Section 5.22 of the Company Disclosure Schedule shall have been terminated, with no fees or amounts due thereunder.

 

Section 5.23          Inventory.  Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, all Inventory (including finished goods) (i) has been valued and specifically and adequately reserved for in accordance with GAAP, (ii) has been manufactured, assembled, tested and stored in compliance in all material respects with applicable Law, (iii) is free of material defects in materials, fabrication and workmanship, and (iv) is suitable for use or sale in the ordinary course of business in all material respects and in compliance in all material respects with applicable Law.

 

Section 5.24         Sufficiency of Assets.  At the Closing, the Company will own or have the right to use (including by means of ownership of rights pursuant to licenses or other Contracts, in each case, that have been provided to Purchaser) all of the material assets, properties and rights necessary to conduct the business of the Company and its Subsidiaries immediately following the Closing in substantially the same manner as conducted as of the date of this Agreement and as of the Closing, and constitute all the material rights, property and assets currently used in the operation of such business as currently conducted.  All activities and operations of the business of the Company and its Subsidiaries are conducted solely by the Company and its Subsidiaries.

 

Section 5.25        Accounts Receivable.  All accounts receivable reflected on the Latest Company Balance Sheet and all accounts receivable arising after the date thereof (i) have arisen from bona-fide transactions entered into by the Company and its Subsidiaries involving the sale of goods or the rendering of services (or, in the case of non-trade accounts or notes, represent amounts receivable in respect of other bona-fide business transactions) in the ordinary course of business and (ii) constitute only valid, undisputed claims of the Company and its Subsidiaries, not subject to claims of set-off or other defenses, other than counterclaims, normal discounts and returns in the ordinary course of business.

 

Section 5.26          Products Liability.

 

(a)         Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, each product designed, formulated, manufactured or sold by the Company and its Subsidiaries since January 1, 2020 is in conformity in all material respects with all applicable product specifications, applicable express and implied warranties and applicable Law.

 

(b)         Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, since January 1, 2020, there has been no notice, demand, claim, action, suit inquiry, hearing proceeding, notice of violation or investigation from, by or before any Governmental Entity relating to any product, including the packaging and advertising related thereto, designed, formulated, manufactured, processed or sold by the Company or any of its Subsidiaries or any service provided by the Company or any of its Subsidiaries or any claim or lawsuit or Action involving such products or services which is pending or, to the Knowledge of the Company, threatened by any Person, alleging that any such product is materially defective or not in conformity in all material respects with the applicable product specification, applicable express or implied warranties or applicable Law.

 

(c)         Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, since January 1, 2020, there has not been, nor is there under consideration by the Company or any of its Subsidiaries, any product recall or post-sale warning of a material nature conducted by or on behalf of the Company or any of its Subsidiaries concerning any products of or sold by the Company or any of its Subsidiaries.