EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
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Dated as of August 15, 2001
By and Among
COMPENSATED DEVICES, INC.,
a Massachusetts corporation
and
MICRO CDI ACQUISITION CORP.,
a Delaware corporation
and a wholly-owned subsidiary of
MICROSEMI CORPORATION,
a Delaware corporation
Table of Contents
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Page
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ARTICLE 1
PURCHASE AND SALE OF THE ASSETS; PURCHASE PRICE; POSSESSION
1.1 Assets and Liabilities......................................... 1
1.2 Purchase Price and Payment Terms............................... 6
1.3 Possession..................................................... 8
1.4 Sales, Use and Transfer Taxes.................................. 8
1.5 Allocation of Purchase Price and Adjustments................... 8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNERS
2.1 Organization................................................... 9
2.2 Authorization.................................................. 9
2.3 No Conflict.................................................... 9
2.4 Financial Statements........................................... 11
2.5 Absence of Certain Facts or Events............................. 11
2.6 Property, Leases and Encumbrances; Sufficiency of Assets....... 13
2.7 Contracts and Commitments...................................... 14
2.8 Permits and Authorizations..................................... 15
2.9 No Violations.................................................. 16
2.10 Claims, Investigations and Proceedings......................... 16
2.11 Insurance...................................................... 17
2.12 Proprietary Information and Rights............................. 17
2.13 Employee Benefits.............................................. 17
2.14 Employment Laws................................................ 18
2.15 Environmental Laws............................................. 19
2.16 Government Payments............................................ 20
2.17 No Unlawful Contributions...................................... 20
2.18 No Insider Transactions........................................ 21
2.19 Accounts Receivable............................................ 21
2.20 Inventories.................................................... 21
2.21 Customers and Suppliers; International Sales................... 22
2.22 Taxes.......................................................... 22
2.23 Warranties..................................................... 25
2.24 No Finders or Brokers.......................................... 25
2.25 Accuracy of Information Furnished by Seller.................... 26
2.26 Investment Representations..................................... 26
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Organization................................................... 27
3.2 Authorization.................................................. 27
3.3 No Conflict.................................................... 28
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Table of Contents
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(continued)
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3.4 Consents and Approvals......................................... 28
3.5 No Finders or Brokers.......................................... 29
3.6 Litigation..................................................... 29
3.7 SEC Filings.................................................... 29
3.8 Securities Law................................................. 30
3.9 Capitalization................................................. 30
3.10 Valid Issuance of Shares....................................... 30
ARTICLE 4
COVENANTS
4.1 Fulfillment of Conditions...................................... 30
4.2 Termination of Benefit Plans; Eligibility...................... 31
4.3 Use of Names................................................... 31
4.4 Covenant of Confidentiality.................................... 31
4.5 Bulk Sales Waiver of Delivery and Reservation of Rights to
Compliance Post Closing........................................ 32
4.6 Investigations................................................. 32
4.7 Access to Information and Records.............................. 33
ARTICLE 5
FURTHER COVENANTS OF THE SELLER
5.1 Access to Information and Records.............................. 33
5.2 Conduct of Business Pending the Closing........................ 33
5.3 Consents....................................................... 35
5.4 Other Action................................................... 35
5.5 Notification and Updates Regarding Disclosure.................. 35
5.6 Excess Warranty Work........................................... 35
ARTICLE 6
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
6.1 Obligation of Buyer............................................ 36
ARTICLE 7
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
7.1 Obligation of Seller........................................... 38
ARTICLE 8
CLOSING DELIVERIES
8.1 Deliveries of Owners and Seller................................ 39
8.2 Deliveries of Buyer............................................ 40
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(continued)
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ARTICLE 9
CLOSING OR TERMINATION
9.1 Closing Date.................................................. 40
9.2 Right of Termination Without Breach........................... 41
9.3 Termination for Breach........................................ 41
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification by Seller and Owners.......................... 42
10.2 Indemnification by Buyer...................................... 43
10.3 Third Party Claims............................................ 44
10.4 Survival Period............................................... 45
10.5 Limitations on Indemnification Obligations.................... 45
ARTICLE 11
COVENANTS NOT TO COMPETE
11.1 Covenant Not to Compete....................................... 46
11.2 No Solicitation............................................... 46
11.3 Severability.................................................. 46
11.4 Specific Performance.......................................... 47
ARTICLE 12
MISCELLANEOUS
12.1 Further Actions............................................... 47
12.2 Expenses...................................................... 48
12.3 Entire Agreement.............................................. 48
12.4 Descriptive Headings.......................................... 48
12.5 Notices....................................................... 48
12.6 Governing Law................................................. 49
12.7 Assignability................................................. 49
12.8 Waivers and Amendments........................................ 50
12.9 Third Party Rights............................................ 50
12.10 Public Announcements.......................................... 50
12.11 Confidential and Proprietary Information...................... 50
12.12 Severability.................................................. 51
12.13 Counterparts; Electronic Copies............................... 51
12.14 Dispute Resolution............................................ 52
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ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of August 15, 2001, by and among Compensated Devices, Inc., a Massachusetts
corporation ("Seller"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual ("▇▇▇"), ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇., an individual ("▇▇▇▇▇▇") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
("Don"), ("▇▇▇," "▇▇▇▇▇▇" and "Don" are the only record shareholders of Seller
and are each herein individually called the "Owner" and collectively called the
"Owners"), and Micro CDI Acquisition Corp., a Delaware corporation ("Buyer")
which is a wholly-owned subsidiary of Microsemi Corporation, a Delaware
corporation ("Microsemi").
RECITALS:
A. Seller is engaged in the business of semiconductor fabrication and
design (the "Business"). Buyer desires to purchase certain assets of Seller and
Seller desires to sell such assets to Buyer subject to the terms, covenants and
conditions set forth herein (the "Acquisition").
B. Following the Acquisition, Buyer intends to operate the assets
purchased from Seller initially as a separate division of Microsemi, located in
Melrose, Massachusetts (the "Division").
C. Seller and the Owners expect to benefit from the consummation of the
transactions contemplated hereby and, to induce Buyer to enter into this
Agreement, agree to be bound by the terms and provisions herein. Capitalized
terms not otherwise defined in this Agreement are defined in Appendix A hereto.
Accounting terms not otherwise defined herein are to be defined in accordance
with GAAP.
NOW, THEREFORE, in consideration of the mutual benefits to be derived and
the representations and warranties, conditions and promises contained herein,
and intending to be legally bound hereby, the parties hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE ASSETS; PURCHASE PRICE; POSSESSION
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1.1 Assets and Liabilities.
(a) Acquired Assets. Upon the terms and subject to the conditions of
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this Agreement, as of the Closing (as defined in Section 9.1), Buyer shall
purchase from Seller, and Seller
shall sell, assign, deliver, transfer and convey to Buyer, all right, title and
interest in and to all of the property, rights, contracts and claims related to
or used in the conduct of the business, or necessary to operate the business, of
Seller (collectively the "Purchased Assets"), excluding all real property and
other Excluded Assets on the terms and conditions described in Section 1.1(b)
herein. As contemplated hereby, Purchased Assets excludes any assets that Buyer
determines not to acquire from Seller, but specifically includes, without
limitation, all assets required in the operation of the Business as heretofore
conducted by Seller, all equipment located in the semiconductor production,
fabrication and design facilities, spare or replacement parts for, and product
warranties and prepaid service agreements on, such equipment (to the extent
assignable or transferable), all inventory, all customer and other contracts
that Buyer determines to acquire from Seller, all rights of Seller in designs or
mask works, know-how, discoveries, improvements, trade secrets, shop and royalty
rights, all intellectual property of Seller, including without limitation its
Products in design and development, engineering schematics, layouts, technology,
technical specifications, formulae, processes, sketches, drawings, data and any
studies thereof for Product development, testing or reworking, and Seller's
techniques, design and testing equipment, tools and software, accounts
receivable and cash and cash equivalents. The Purchased Assets include, but are
not limited to, the foregoing as well as those assets set out or described on
Schedules 1.1(a)(i) through 1.1(a)(xii) and the following:
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(i) Business Rights. All right, title and interest in and to any
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patents, patent applications, rights to ▇▇▇ for infringements of patents,
trademarks, service marks, trademark and service ▇▇▇▇ registrations and
applications, copyrights, copyright registrations and applications, trade names,
fictitious business names, logos, Product names, brand names, trade dress,
computer operating systems and application software in every media, together
with any rights at common law directly arising therefrom, licenses with respect
to any of the foregoing (to the extent such licenses are transferable) and other
intellectual property rights used in connection with the Business, and all
excerpts, reproductions, facsimiles, copies, compilations or analyses thereof in
any form or medium, including those which are listed on Schedule 1.1(a)(i)
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(which need not list common off-the-shelf software customarily sold by vendors)
(the "Business Rights").
(ii) Pre-Paid Expenses. Seller's leasehold or other interests in real
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property and buildings used in connection with the Business ("Leased Real
Property") are not to be transferred by Seller to Buyer; provided, however, that
all of Seller's right, title and interest in and to
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the security deposits, if any, paid by Owners or Seller (or their predecessors-
in-interest) and any personal property comprising prepaid expenses with respect
to any leasehold interests listed on Schedule 1.1(a)(ii) are to be transferred
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to Buyer.
(iii) Customer Lists. All customer or vendor lists or other lists or
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documents generated or used by Seller in the Business, including, but not
limited to, correspondence, credit information, manuals, and data, sales,
marketing and advertising materials.
(iv) Contracts. All rights and interests and general intangibles
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under the contracts, instruments, agreements, purchase orders and sales orders,
commitments or other understandings or arrangements of the Seller or the Owners
attributable or relating to the Business, the Purchased Assets or the Assumed
Liabilities (collectively "Contracts" and each a "Contract") that are either (A)
described and set forth on Schedule 1.1(a)(iv) hereto, or (B) that Buyer elects
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to accept and assume at any time on or after the Closing Date, by giving written
notice to the Seller as set forth in Section 12.5 hereof; provided that such
election by the Buyer shall not constitute a waiver of any rights of
indemnification or other rights under this Agreement which the Buyer may have by
virtue of the existence or breach of any such Contract, or any of its
provisions, or by virtue of any failure to disclose or to list in said Schedule
any such Contract or any amendment or modification to any term of any such
Contract known to Seller or Owners.
The Contracts described in clause (A) or (B) above are hereinafter
collectively described as the "Purchased Contracts." To the extent that any
Purchased Contract for which assignment to the Buyer is provided herein is not
assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof. The Seller and the
Buyer agree to use their reasonable best efforts (without any requirement on the
part of the Buyer or the Seller to pay any money or agree to any change in the
terms of any such Contract) to obtain the consent of such other party to the
assignment of any such Purchased Contract to the Buyer in all cases in which
such consent is or may be required for such assignment. If any such consent
shall not be obtained by the Closing Date, and the Seller agrees to cooperate
with the Buyer in any reasonable arrangement designed to provide for the Buyer
the benefits intended to be assigned to the Buyer under the relevant Purchased
Contract, including enforcement at the cost and for the account of the Buyer of
any and all rights of the Seller against the other party thereto arising out of
the breach or cancellation thereof, by such other party or otherwise. If and to
the extent that such arrangement
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cannot be made before Closing, the Buyer in the Buyer's sole and absolute
discretion, upon notice to the Seller, shall have no obligation with respect to
any such Contract and any such Contract shall not be deemed to be a Purchased
Contract hereunder and, if such Purchased Contract is a material Purchased
Asset, then the Buyer shall have the right to terminate his Agreement, unless
the parties agree to an adjustment to the purchase price or terms.
(v) Records and Documentation. Originals or, at Seller's
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option, copies of all business and financial records, tax information, files,
books and form contracts, specifically relating to the Purchased Assets
described in the other clauses of this Section 1.1(a) or to the Assumed
Liabilities, including, but not limited to, books and records, if any, which
reflect the principal terms of each Contract, Purchased Asset or Assumed
Liability, as the case may be .
(vi) Authorizations. All federal, foreign, state, local or
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other governmental consents, licenses, permits, grants or authorizations and the
like owned, held or utilized by Seller in the operation of the Business, which
Seller is not legally prohibited from assigning to Buyer, substantially all of
which are listed on Schedule 1.1(a)(vi) (the "Authorizations").
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(vii) Inchoate Rights. All rights, claims, credits, causes of
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action or rights of set-off with respect to or arising out of (A) the Purchased
Assets, (B) the Assumed Liabilities or (C) proceeds paid or payable under
insurance contracts relating to the Purchased Assets.
(viii) Cash. Cash, cash equivalents and investments, all deposit
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accounts, signature authority thereon, check registers and all printed or other
checks. The accounts are as set forth in Schedule 1.1(a)(viii).
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(ix) Accounts Receivable. The accounts receivable of Seller
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existing as of the Closing Date (the "Closing Date Receivables"). Substantially
all of the Closing Date Receivables are listed on Schedule 1.1(a)(ix) hereof.
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(x) Inventory. All items of inventory used in connection with
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the Business (the "Inventory"), substantially all of which are listed on
Schedule 1.1(a)(x).
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(xi) Furniture, Fixtures, Equipment, etc. All items of
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furniture, fixtures, leasehold improvements, equipment, all additions,
substitutions, modifications thereto, computers, computer hardware and software
(to the extent assignable or transferable with computers), photocopy
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machines, machines of any nature, and office supplies, whether owned or leased
by Seller and used in the Business (the "Furniture, Fixtures and Equipment"),
substantially all of which are listed on Schedule 1.1(a)(xi).
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(xii) Other Items of Property. All other items of property,
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supplies or other assets other than the Excluded Assets, which are used by
Seller in connection with the Business to the extent that Seller has any rights
or interests therein that are assignable including, but not limited to, those
listed on Schedule 1.1(a)(xii) ("Other Items of Property").
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(xiii) Goodwill. All goodwill associated with the Business and
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any of the assets, properties and rights set forth above.
(b) Excluded Assets and Certain Known Liabilities. Seller shall not
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sell, assign, transfer or convey to Buyer, and Buyer shall not purchase (i) the
corporate charter, qualifications to conduct business as foreign corporations,
arrangements with registered agents relating to foreign qualifications, taxpayer
and other identification numbers, seals, minute books, stock transfer books,
blank stock certificates, and any other documents relating to the organization,
maintenance, and existence of the Seller as a corporation, (ii) any of the
rights of Seller or Owners under this Agreement or any other agreement entered
into in connection with this Agreement, (iii) any of the past or present rights,
titles or interests of Seller in or to or connected with the Leased Real
Property or any other real property anywhere or (iv) any of the assets or
certain known liabilities used in the Business set forth on Schedule 1.1(b) (the
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"Excluded Assets and Certain Known Liabilities").
(c) Liabilities Assumed by Buyer. Upon the terms and subject to the
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conditions of this Agreement, and in reliance on the representations,
warranties, covenants and agreements made by Seller herein, effective as of the
Closing Date, Buyer shall assume and be obligated pursuant to this Agreement to
pay when due, perform, or discharge only (i) the accounts payable, employee
accrued vacation obligations owed by Seller to present active-service employees
hired by Buyer on or about the Closing Date, debts, claims, liabilities,
obligations, open purchase orders and expenses in respective amounts not to
exceed the amounts (actual or estimated) as set forth on Schedule 1.1(c) for the
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period through the Closing Date, plus (ii) liabilities and obligations arising
pursuant to the Purchased Contracts, except to the extent that any such
liability arises out of a breach or default by Seller occurring on or prior to
the date hereof with respect to any such Purchased Contract, and plus (iii)
sales tax arising prior to the Closing which is not past due and employment
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taxes arising prior to the Closing which are not past due (collectively, the
items set forth in Section 1.1(c)(i), (ii) and (iii) shall be referred to as the
"Assumed Liabilities"). Seller and the Owners agree and acknowledge that Buyer
shall have the right, at its option and at any time following the Closing, to
negotiate with any creditor on any matters related to the Assumed Liabilities
Amount or otherwise; provided, however, that Buyer shall give prior notice to
and allow Seller and/or Owners to participate in negotiations relating to the
Assumed Liabilities.
(d) Excluded Liabilities. Except as set forth in Section 1.1(c) or
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any other express provision of this Agreement, Buyer shall not assume or
otherwise become obligated pursuant to this Agreement to pay when due, perform
or discharge any debts, claims, liabilities, obligations, damages or expenses of
Seller (whether known or unknown, contingent or absolute, or arising before, on
or after the Closing Date), including, without limitation, liability for (i)
Taxes (other than any specific Taxes which are included in the Assumed
Liabilities), (ii) defaults (or events which would constitute default upon
giving of notice, lapse of time or both) under contracts or any obligations of
Seller resulting from events or occurrences arising prior to the Closing Date,
(iii) obligations under contracts or agreements of Seller not listed on Schedule
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2.7 hereto (collectively, the "Excluded Liabilities"), (iv) all litigations,
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suits, claims, demands, disputes or investigations of or concerning Seller and
any present or former shareholders, employees, creditors, suppliers or customers
of Seller; (v) any claim arising from Leased or Owned Real Property or interest
in Leased or Owned Real Property prior to the Closing Date; (vi) the Seller's
Indebtedness as of the Closing Date aggregating not more than a maximum limit of
$1,379,411.98 to Eastern Bank in Lynn, Massachusetts owed by Seller (the sum as
described in this clause is hereinafter called the "Repayment Amount") (Buyer,
notwithstanding that the Buyer is not assuming this Indebtedness, is to pay the
Repayment Amount at the Closing as set forth below), or (vii) any obligation or
liability to any spouse or other Affiliate of any Owner or Seller other than as
set forth in the leases to Buyer of real property from Affiliates of the Owners
as contemplated by this Agreement.
1.2 Purchase Price and Payment Terms.
(a) Subject to the adjustment described below, the aggregate
Purchase Price for the Purchased Assets shall be comprised of (a) two payments
in cash (each a "Cash Payment" and collectively "Cash Payments"), one of which
shall be a payment of approximately $7,737,303.34 in cash to Seller and the
other of which shall be a payment to Eastern Bank of the Repayment Amount, (b)
assumption by Buyer as of the Closing of the Assumed Liabilities, (c) and a one-
year unsecured
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promissory note substantially in the form of Exhibit A ("Promissory Note") in an
original principal amount equal to $3,931,151.67 and bearing interest at the
rate of 6% per annum. The term "Purchase Price" includes (i) the respective Cash
Payments to be made to the Seller or other Persons; (ii) the Promissory Note;
and (iii) assumption of the Assumed Liabilities from the Seller.
(b) Such Purchased Assets will specifically exclude all real estate
owned by Seller.
(c) The Promissory Note shall be payable on or within 10 days
following the first anniversary of the Closing Date, at the sole and absolute
election of Microsemi, either in cash or shares of Common Stock (or in
combination) having a market value equal to the sum of the unpaid principal and
the accrued interest at the date of payment. Any shares of Common Stock issued
in payment of the Promissory Note shall be liquidated pursuant to an arrangement
with a custodian mutually acceptable to Microsemi and Seller within the 60 days
following the first anniversary of the Closing, at a rate of not more than
10,000 shares per trading day, except with Microsemi's prior written consent or
direction. Microsemi shall also pay Seller in cash any deficiency between (A)
the principal amount of the Promissory Note plus interest paid by delivery of
common stock and (B) the net proceeds to the Seller or its former shareholders
of the Shares, after sales commissions on dispositions of the Shares. To the
extent that their net proceeds exceed one hundred percent (100%) of the sum of
the unpaid principal plus accrued interest of the Promissory Note, the excess
shares shall not be sold and the excess shares shall be paid over to Microsemi
by the custodian and cancelled, or disposed of otherwise for Microsemi's sole
account. Microsemi shall not issue shares in payment of the Promissory Note
except to the extent that the sale thereof would be registered or could be sold
without registration under the Securities Act of 1933, as amended (the
"Securities Act"). The Promissory Note will provide for set-off as a source of
indemnification to Microsemi for and against any material breach or violation of
any of Seller's representations, warranties or agreements in the transaction.
(d) The shares of Microsemi Common Stock issuable, at Microsemi's
election, in payment of the Promissory Note issued in the transaction, shall be
validly issued, fully-paid and nonassessable, and subject to no restrictions
other than those arising under securities laws. Microsemi's right to issue
Common Stock will be subject to the ability of Seller and the shareholders of
Seller (provided that the Promissory Note is distributed pro rata to the
shareholders of Seller) to
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resell the shares received on payment of the promissory note under Rule 144 or
other registration or exemption from registration under the U.S. and state
securities laws.
(e) At Closing, Purchaser shall (i) pay to Seller the respective Cash
Payments to be made to the Seller or other Persons, (ii) deliver the Promissory
Note, and (iii) assume the Assumed Liabilities.
1.3 Possession. The assignment to Buyer of Seller's rights in the
Purchased Contracts, Business Rights, Authorizations, Leased or owned Real
Property, Furniture, Fixtures and Equipment and Inventory, and all other assets
of Seller that are included among the Purchased Assets, and the transfer of the
Assumed Liabilities to Buyer, will be effective as between Seller and Buyer as
of the beginning of business on the Closing Date.
1.4 Sales, Use and Transfer Taxes. Seller shall be responsible for any
documentary transfer taxes and any sales, use or other taxes, duties, fees and
governmental exactions imposed by reason of the transfer of the Purchased Assets
provided hereunder and any deficiency, interest or penalty asserted with respect
thereto.
1.5 Allocation of Purchase Price and Adjustments. The Final Purchase Price
shall be allocated in relation to the Purchased Assets as set forth on Schedule
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1.5 hereto or otherwise in a manner reasonably determined by the Buyer on or
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before Closing. Each party agrees that it will not, in its Tax returns or
elsewhere, take a position inconsistent with the allocations provided for in
this Section 1.5.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNERS
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As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, each of the Owners and Seller
(collectively, the "Indemnitors"), jointly and severally (except as otherwise
set forth in Section 2.2(b), Section 2.3(b) and Section 2.18 below) make the
following representations and warranties to Buyer as of the date of this
Agreement and as of the Closing Date, except as set forth in the Seller's
disclosure schedules attached hereto (which shall specifically reference the
Sections of this Agreement to which the specific items of disclosure therein
constitute an exception):
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2.1 Organization. Seller is a corporation, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the power
and authority to conduct the Business as it is presently being conducted and to
own and operate and lease its properties and assets. Seller is duly qualified
to do business as a foreign corporation, and is in good standing in every
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect.
2.2 Authorization.
(a) The execution and delivery of this Agreement by Seller and the
performance of all obligations hereunder have been duly authorized by each
Indemnitor and no other action or approval by any Indemnitor is necessary for
the execution, delivery or performance of this Agreement by Seller. Seller has
full right, power, authority and capacity to execute, deliver and perform this
Agreement and such other agreements and instruments as are contemplated hereby.
This Agreement has been duly executed and delivered by Seller and is a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect, relating to or limiting creditors' rights generally and (b) general
principles of equity (whether considered in an action in equity or at law).
(b) The Owners hereby represent severally as follows: Each Owner has
full right, power, authority and capacity to execute, deliver and perform this
Agreement and such other agreements and instruments as are contemplated hereby.
This Agreement has been duly executed and delivered by each Owner and is a valid
and binding obligation of each Owner, enforceable against each Owner in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, relating to or limiting creditors' rights generally and (b)
general principles of equity (whether considered in an action in equity or at
law).
2.3 No Conflict.
(a) Except as described on Schedule 2.3(a), neither the execution
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and delivery of this Agreement by Seller and the Owners, nor the consummation of
the transactions contemplated hereunder nor the fulfillment by Seller or the
Owners of any of the terms of this Agreement will:
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A except for such conflicts, breaches or defaults as would not
have a Material Adverse Effect on Buyer's ability to conduct the Business after
the Closing, conflict with or result in a breach by Seller, or constitute
default by it, him or her under, or create an event that, with the giving of
notice or the lapse of time, or both, would be a default under or breach of, any
of the terms, conditions or provisions of (i) any mortgage, lease, deed of
trust, pledge, loan or credit agreement, license agreement, or any other
material contract, arrangement or agreement to which Seller or an Owner is a
party or to which Seller or any material portion of the assets of Seller or any
Owner is subject, (ii) the Articles of Organization or Bylaws of Seller or (iii)
any judgment, order, writ, injunction, decree or demand of any Governmental
Entity, which would have a Material Adverse Effect upon Buyer's ability to
conduct the business substantially in the manner in which Seller conducted the
Business or the Buyer's ability to own or to convey the Purchased Assets free of
Encumbrances;
B result in the creation or imposition of any Encumbrance upon
the Purchased Assets; or
C cause a loss or adverse modification of any permit, license,
or other authorization granted by a Governmental Entity to or otherwise held by
Seller which would have a Material Adverse Effect upon Buyer's ability to
conduct business substantially in the same manner in which the Business was
conducted by Seller prior to the Closing.
Except for this Agreement, no Indemnitor has any obligation, absolute or
contingent, to any other person to sell the Business, or substantially all of
the assets of Seller or to effect any consolidation of Seller or to enter into
any Agreement with respect thereto.
(b) Except as described on Schedule 2.3(b), each Owner severally
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represents as to himself only, that neither the execution and delivery of this
Agreement by him, nor the consummation of the transactions contemplated
hereunder nor the fulfillment by him of any of the terms of this Agreement will,
except for such conflicts, breaches or defaults as would not have a Material
Adverse Effect on Buyer's ability to conduct the Business after the Closing,
conflict with or result in a breach by him of, or constitute default by, him
under, or create an event that, with the giving of notice or the lapse of time,
or both, would be a default under or breach of, any of the terms, conditions or
provisions of (i) any mortgage, lease, deed of trust, pledge, loan or credit
agreement, license agreement, or any other material contract, arrangement or
agreement to which such Owner is
10
a party or to which any material portion of the assets of Seller is
subject, (ii) the Articles of Organization or Bylaws of Seller or (iii) any
judgment, order, writ, injunction, decree or demand of any Governmental
Entity, which would have a Material Adverse Effect upon Buyer's ability to
conduct the business or own or convey the Purchased Assets.
2.4 Financial Statements.
(a) Seller has delivered to Buyer the unaudited balance sheets
and related statements of income and retained earnings of Seller for the 6
months ended June 30, 2001 (the "Interim Financials") and the balance
sheets and the related statements of income and retained earnings of Seller
for the fiscal years ended December 31, 1998, 1999 and 2000 (collectively,
with the Interim Financials, the "Financial Statements").
(b) Except as set forth in Schedule 2.4, Seller has no
------------
liabilities or obligations, either accrued, contingent or otherwise, which,
individually exceeds $5,000 or in the aggregate exceed $50,000, except to
the extent fully reserved in the Financial Statements, other than (i) those
liabilities arising in the ordinary course of business consistent with past
practice under any contract, commitment or agreement specifically disclosed
in this Agreement or any Schedule to this Agreement or not required to be
so disclosed because of the term or amount involved or otherwise and (ii)
those liabilities incurred since the date of the Interim Financials in the
ordinary course of business consistent with past practice, which
liabilities are not material individually or in the aggregate.
(c) Seller has, in accordance with good business practices,
maintained complete and accurate books and records, including financial
records which fairly present its results or operations and financial
condition, and corporate records of all of its material corporate
proceedings.
2.5 Absence of Certain Facts or Events. Except as listed on Schedule
--------
2.5, since March 31, 2001 (or such other date as specified in this Section 2.5),
---
there has not been to the Knowledge of Seller or any Owner:
(a) any Material Adverse Effect in the financial condition or
results of operations of Seller;
11
(b) any material damage, destruction or loss to any material
assets or business of Seller, whether covered by insurance or not, except
as fully reserved in the Interim Financials;
(c) any increase in the compensation payable or to become
payable by Seller to any employee or executive or in the coverage or
benefits under any bonus, insurance, pension or other Benefit Plan
(excluding annual length-of-service and similar adjustments to the benefits
of individual participants), other than relating to hourly or salary wages
of non-Owner employees of Seller increased in the ordinary course of
business and in amounts that are not material to the results of operations
of Seller;
(d) any obligations or expenditures of Seller that are in any
manner out of the ordinary course of business, except as adequately
reflected or reserved in the Interim Financials;
(e) any purchase or other acquisition by Seller of capital stock
or other interest in any other Person, any purchase or other acquisition by
Seller of all or substantially all of the business or assets of any other
Person, any transfer or sale of a substantial portion of the Business or
assets to any Person (other than sales of Inventory in the ordinary course
of business), any transaction between any Indemnitor and any of its
Affiliates (other than payments of employment compensation in the ordinary
course), or any agreement to take any such actions;
(f) any sale, assignment or transfer of any contractual rights,
claims or other assets of Seller valued at more than $10,000 individually,
or more than $100,000 in the aggregate, other than in the ordinary course
of business consistent with past practice;
(g) any Encumbrance placed on assets of Seller;
(h) any obligation or liability incurred by Seller as a result
of borrowed money or any capital expenditure, in either case in excess of
$50,000, or any commitment to borrow money entered into by Seller, or any
increase in any loans made or agreed to be made by Seller;
(i) any failure to pay or perform any obligation of Seller when
due involving more than $5,000 individually or more than $50,000 in the
aggregate;
(j) any intentional or, to the Knowledge of any Indemnitor,
other waiver of any rights of substantial value to Seller or any amendment
or termination of any agreement to which
12
Seller is a party or from which the Seller has suffered or is reasonably
likely to suffer a Material Adverse Effect;
(k) any material transaction, except for real estate leases,
entered into or consummated by Seller, except in the ordinary course of
business consistent with past practice or any transaction by Seller with
the Owners and their Affiliates regardless of past practice;
(l) any material addition to or modification of the Benefit
Plans of Seller or other arrangements or practices affecting personnel of
Seller not in the ordinary course of business consistent with past
practice;
(m) any oral or written notification to Seller or to any of the
Owners from any customer of Seller, or any distributor of Seller, that such
customer or distributor, as applicable, anticipates its purchases from
Seller will decrease in any material respect;
(n) any oral or written notification to Seller or to any of the
Owners from any supplier of Seller that such supplier anticipates its
accommodations, sales or services provided to Seller will decrease in any
material respect, or that its Product returns to Seller will increase;
(o) any oral or written notification to Seller or to any of the
Owners from any employee of Seller with annual compensation greater than
$35,000 that such employee intends to leave his or her position of
employment with Seller, other than to become an employee of the Buyer for
an indefinite period commencing on the Closing Date;
(p) any oral or written notification to Seller or to an of the
Owners from any sales representative or any manufacturer's representative
that such person anticipates that their sales for Seller will decrease, or
that its charges therefor will increase, in any material respect; or
(q) any oral or written notification to Seller or to either of
the ▇▇▇▇▇ from any independent contractor performing services for Seller
that such contractor anticipates its services provided to Seller will
decrease, or that its charges to Seller will increase, in any material
respect.
2.6 Property, Leases and Encumbrances; Sufficiency of Assets.
(a) Schedules 1.1(a)(ii) and 1.1(a)(xi) hereto accurately set
----------------------------------
forth all leased real property and all items of equipment and other
personal property of Seller which are used in the
13
Business (individually, a "Leased or Owned Property" and collectively, the
"Leased or Owned Properties") and contain with respect to each of the
Leased or Owned Properties a list of (i) all leases and other agreements
relating to such property, and (ii) all Indebtedness secured by any
Encumbrance on any such Leased or Owned Property, specifying the nature
thereof and the holder of such Indebtedness. The leases or other agreements
listed in Schedules 1.1(a)(ii) and 1.1(a)(xi) are in full force and effect
without any default or waiver by Seller or, to each Indemnitor's Knowledge,
by any other party thereto. Except as noted on Schedule 2.6, Seller has
good, valid and marketable title to all Leased or Owned Properties owned by
Seller free and clear of all Encumbrances other than (i) liens for taxes
not yet due and payable to any taxing authority or depository and
landlord's, ▇▇▇▇▇▇▇'▇, mechanics and similar statutory liens and
encumbrances for obligations not yet due and payable and (ii) other minor
liens or encumbrances which do not materially detract from the value, or
interfere with the use, thereof. None of the Leased or Owned Properties are
subject to any restrictions with respect to the transferability thereof.
The Seller has complete and unrestricted power and right to sell, assign,
convey and deliver the Leased or Owned Properties to the Buyer as
contemplated hereby. No other Person owns any personal property (other than
items of immaterial commercial value) at or situated in the real property
leased by Seller. At Closing, the Buyer will receive good and marketable
title to all of the Leased or Owned Properties, free and clear of all liens
other than the Encumbrances identified on Schedule 2.6.
(b) Except as noted on Schedule 2.6, all Leased or Owned
------------
Properties of Seller (i) are in good operating condition and repair
(subject to ordinary wear and tear), (ii) have been to Seller's Knowledge
properly operated, serviced, and maintained, and (iii) are suitable for the
uses for which they are presently being used in the Business.
(c) The Leased or Owned Property constitutes all of the real
property or tangible personal property necessary to permit Seller to
operate and conduct the Business as now conducted and to permit Buyer to
conduct its business as proposed business on and following the Closing
substantially in the same manner as the Business has been conducted by
Seller prior to Closing Date.
2.7 Contracts and Commitments.
(a) Except as set forth in Schedule 2.7, Seller has no (i)
------------
collective bargaining agreement, or any agreement that contains any
severance pay liabilities or obligations; (ii) employment, consulting or
similar agreement, contract or commitment which is not terminable
14
without penalty or cost by Seller on notice of thirty (30) days or less or which
contains an obligation of Seller to pay and/or accrue more than $20,000 per
year; (iii) note or other evidence of Indebtedness for borrowed money or the
deferred purchase price of property or services, which involves a liability of
more than $100,000; (iv) agreement of guaranty or indemnification; (v)
agreement, contract or commitment limiting the freedom of Seller, any Owner or,
to Seller's Knowledge, executive, officer or key employee of Seller to engage in
any line of business or compete with any Person; (vi) agreement, contract or
commitment relating to expenditures in excess of $100,000; (vii) agreement,
contract or commitment (written or oral) with a supplier of Seller that provided
more than $100,000 in goods or services to Seller in fiscal year 2000 or is
reasonably expected to provide such amount or more in fiscal year 2001; or
(viii) agreement, contract or commitment (written or oral) with customers or
other Persons which involves $100,000 or more and, by its terms, is not
cancelable without penalty or cost within sixty (60) days; (ix) agreement,
contract or commitment providing for the sharing, transfer, license, or other
disposition by the Seller of any Business Rights or Proprietary Information; or
(x) agreement, contract or commitment of the Seller with any of the Owners or
their respective Affiliates.
(b) Except as set forth in Schedule 2.7, (i) Seller is not to its
------------
knowledge in breach of, nor has Seller received in writing any claim or
assertion that it has breached, any of the terms or conditions of any agreement,
contract or commitment set forth or required to be set forth in any of the
Purchased Contracts; and (ii) each Purchased Contract is in full force and
effect in the form delivered to Buyer and, to Indemnitors' Knowledge, there is
no material breach or default by any party thereto, and Seller has not received
any notice (in writing or otherwise) that any party thereto wishes to cancel or
not renew such Purchased Contract.
(c) Except as set forth in Schedule 2.7, to the Seller's Knowledge
------------
there has not been any material adverse change since March 31, 2001 in the
business relationship of the Seller relating to any of the Purchased Assets with
any material customer of or material supplier to the Seller since March 31,
2001.
2.8 Permits and Authorizations.
(a) Schedule 1.1(a)(vi) lists each Authorization held or utilized by
-------------------
Seller in the operation of the Business. Except as set forth in Schedule 2.8,
------------
all Authorizations are in full force and effect and, to the Seller's Knowledge,
constitute all Authorizations that are required to permit Seller
15
to operate its assets and conduct the Business as historically conducted prior
to the Closing Date, except to the extent that a failure to hold such
Authorization would not have a Material Adverse Effect. Schedule 2.8 also
------------
discloses all proposed or pending applications for Authorizations, and all
applications for variances from compliance, or postponement of the dates for
compliance with any laws or regulations affecting Seller or the Business.
(b) Except as shown on Schedule 2.8, Seller has not received any
------------
written notification or, to the Knowledge of any Indemnitor has any reason to
believe, that any of the Authorizations will not be renewed upon their
expiration without new conditions, requirements or restrictions which would
materially restrict the Business or necessitate additional operating or capital
costs that would have a Material Adverse Effect.
(c) Except as shown on Schedule 2.8, Seller is not, to its knowledge,
------------
in breach of, nor has Seller received in writing or, to the Knowledge of any
Indemnitor, otherwise any claim or assertion that it has breached, any of the
terms or conditions of any Authorization.
2.9 No Violations.
(a) Seller is in compliance with each applicable law, statute, order,
rule or regulation promulgated or judgment entered by any Governmental Entity
applicable to the Business, except for such failures to comply as have not had a
Material Adverse Effect.
(b) Except for those filings listed on Schedule 2.9, to Seller's
------------
Knowledge, no consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Entity is required to be made or obtained by
any Indemnitor in connection with the execution, delivery and performance by
Seller or either Indemnitor of this Agreement and the consummation of the
transaction contemplated hereby, or the continued operation of the Business.
(c) No Indemnitor has been notified of any non-compliance by any of
Seller's subcontractors or other outsourcing relationships with laws applicable
to employment and work-place safety.
2.10 Claims, Investigations and Proceedings. Schedule 2.10 lists all
-------------
claims, investigations, suits, actions, arbitrations, mediations and legal or
administrative proceedings and governmental investigations, currently or at any
time within the past twelve (12) months pending or,
16
to Indemnitors' Knowledge, threatened against Seller or any of its properties or
the Business. Except as set forth on Schedule 2.10 hereto, to Indemnitors'
-------------
Knowledge, there is no outstanding judgment, order, decree, award, stipulation
or injunction of any Governmental Entity against or affecting Seller or its
properties, assets or business.
2.11 Insurance. Schedule 2.11 lists all insurance policies under which
-------------
Seller is an insured or a beneficiary or for which it is liable to pay premiums
and further sets forth the name of the insurer, type of coverage, policy limits
and deductibles, if any, and annual premium for each such policy. Seller has
furnished Buyer with copies of all such policies and a history of all claimed
losses in the past three (3) years, except that, with respect to workers'
compensation claims, Seller has furnished Buyer with a history of all claimed
losses in the past twelve (12) months. Except as noted on Schedule 2.11, the
-------------
policies listed thereon will be outstanding and in full force and effect on the
Closing Date and provide coverage against such risk of loss and in such amounts
as are historically maintained by Seller.
2.12 Proprietary Information and Rights. Schedule 1.1(a)(i) hereto
------------------
accurately lists all Business Rights necessary to conduct and operate the
Business. Schedule 1.1(a)(i) discloses the identity of each other Person which
------------------
owns any right, license, title or interest in and to the Business Rights.
Seller has not licensed or otherwise transferred to any other Person any right
to use the Business Rights owned by Seller. There has been no oral or written
claim that Seller has infringed upon any domestic or foreign patents,
trademarks, service marks, copyrights or other intellectual property rights of
any other Person. To any Indemnitor's Knowledge, Seller has the unrestricted
right to use every trade secret, know-how, process, discovery, development,
design, technique, customer and supplier list, marketing and purchasing
strategy, invention, confidential data and other proprietary information used in
connection with the design, development, manufacture, operation, sale and use of
all products and services sold by Seller (collectively, "Proprietary
Information"), free and clear of any right or claim of others. Seller has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all Proprietary Information, except to the extent that the absence of any
such measures has not had, and would not have a Material Adverse Effect.
2.13 Employee Benefits. Except as set forth in Schedule 2.13, Seller has
-------------
no "employee benefit plans" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA")), profit-sharing,
deferred compensation, bonus, stock option, stock purchase, vacation pay,
holiday pay, pension, retirement plans, medical and other compensation or
benefit
17
arrangements maintained or contributed to or required to be contributed to or
maintained by Seller for the benefit of the employees of the Business (or former
employees of the Business) and/or their beneficiaries (collectively, "Benefit
Plans"). Seller has delivered to Buyer true, complete, and correct copies and
descriptions of all Benefit Plans, all employees affected or covered such
Benefit Plans, and all liabilities and obligations thereunder.
2.14 Employment Laws. Except to the extent expressly provided in Schedule
--------
2.14 and, to Seller's Knowledge:
----
(a) Seller is in compliance with all federal, state or other
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours and occupational safety (except for
violations or failures to comply which are not reasonably likely to result in a
Material Adverse Effect), and has not received notice of, and, to the Knowledge
of any Indemnitor, is not engaged in, any unfair labor practice.
(b) There is no unfair labor practice complaint against Seller
pending before the National Labor Relations Board ("NLRB").
(c) There is no labor strike, dispute, slowdown or stoppage pending
or, to any Indemnitor's Knowledge, threatened against or affecting Seller.
(d) There are no claims, grievances or arbitration proceedings,
workers' compensation proceedings, labor disputes (including charges of
violations of any federal, state or local laws or regulations relating to
current or former employees (including retirees) or current or former applicants
for employment), governmental investigations or administrative proceedings of
any kind pending or, to the best Knowledge of any Indemnitor, threatened against
or relating to Seller, its employees or employment practices, or operations as
they pertain to conditions of employment; nor is any Indemnitor subject to any
order, judgment, decree, award or administrative ruling arising from any such
matter.
(e) No collective bargaining agreement is currently in existence or
being negotiated by Seller and, as of the date of this Agreement, no labor
organization has been certified or recognized as the representative of any
employees of Seller or, to the Knowledge of any Indemnitor, is seeking such
certification or recognition.
18
(f) Seller's contracts, if any, with temporary personnel agencies
or independent contractors represent bona-fide, arms-length agreements.
2.15 Environmental Laws.
(a) (i) The assets and the Business of Seller have, to Seller's
Knowledge, been operated in compliance in all respects with all applicable
Environmental Laws (except for such failures to comply as have not, and will not
have, had a Material Adverse Effect), (ii) other than in compliance with all
applicable Environmental Laws, there has been no generation, processing,
production, storage, treatment, transport, release, or disposal of any Hazardous
Materials at, in, on, under, about or from any of the Leased Real Property by or
on behalf of Seller or any of Seller's employees, agents, licensees,
contractors, invitees or guests, including any landlord of Seller or any other
tenant, (including facilities previously leased by Seller) or, to any
Indemnitor's Knowledge, by any previous owner or tenant of the Leased Real
Property, or any of their respective employees, agents, licensees, contractors,
invitees or guests, (iii) there are and have been no underground storage tanks
or any asbestos-containing materials on any of the Leased Real Property
(including facilities previously leased by Seller), and (iv) Seller has not
received from any Governmental Entity or any other Person nor has there been
threatened or commenced any notice of violation, notice to comply, compliance
schedule, administrative or judicial complaint, information request, order,
enforcement action or lien with respect to alleged or potential violations of or
liabilities under Environmental Laws by or on behalf of Seller and relating to
the Leased Real Property (including facilities previously leased by Seller and
including any release by any landlord or other tenant in buildings comprising
Leased Real Property, or facilities previously operated, occupied or leased by
or on behalf of the Seller), or any proceeding or inquiry with respect to any
actual or alleged violation of or liability under any Environmental Law or any
Release or alleged Release of a Hazardous Material by or on behalf of Seller or
relating to the Leased Real Property (including facilities previously leased by
Seller).
(b) "Environmental Law" shall mean all applicable laws, statutory
or otherwise, regulations, rules, plans, codes, standards, ordinances, decrees
and orders, as currently in effect, inquiries, demands of any Government Entity
purportedly to regulate the generation, processing, production, storage,
treatment, transport or Release of Hazardous Materials to the environment, or
impose requirements, conditions or restrictions relating to environmental
protection, management, planning, reporting or notice or public or employee
health and safety.
19
(c) "Hazardous Material(s)" shall mean any substance which is (i)
defined as a hazardous substance, hazardous material, hazardous waste,
pollutant, toxic substance, pesticide, contaminant or words of similar import
under any Environmental Law, (ii) a petroleum hydrocarbon, including crude oil
or any fraction thereof, (iii) hazardous, toxic, corrosive, flammable,
explosive, infectious, radioactive, carcinogenic or a reproductive toxicant, or
(iv) regulated pursuant to any Environmental Law.
(d) "Release" shall mean any spilling, leaking, pumping, pouring,
emitting, evaporating, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment (including the abandonment or
discarding of barrels, containers and other receptacles containing any Hazardous
Material).
(e) Seller has provided or made available to Buyer copies of all
documentation in its possession, custody or control relating to environmental
matters.
(f) Prior to the Closing Date, Seller and Microsemi have jointly
paid for and received a binder of insurance with an extended reporting period
for a period of fifteen (15) years. The insurance policy referenced above is
intended to be in addition to all rights of the Buyer and Microsemi arising in
any connection with this Agreement and enforceable separately and independently,
or in any combination, by Microsemi or Buyer or respective successors or
assigns.
2.16 Government Payments. All federal, state, foreign and local tax
returns and tax reports (including information returns) required to be filed by
Seller (collectively "Tax Returns") have been timely filed with the appropriate
Governmental Entities in all jurisdictions in which such returns and reports are
required to be filed, and all such returns and reports are, except as would not
have a Material Adverse Effect, complete, accurate and in accordance with all
legal requirements applicable thereto. All federal, state, foreign and local
income, profits, franchise, sales, use, occupation, property, excise,
withholding and other taxes, duties, charges and assessments (including interest
and penalties) due from Seller have been fully paid.
2.17 No Unlawful Contributions. Neither Seller nor any director, officer,
agent, employee or other Person associated with or acting on behalf of Seller
has made, attempted to make or used any corporate funds to make or attempt any
unlawful contributions, gifts or payments for entertainment or other unlawful
expenses relating to political activity or campaign for public office; made any
20
direct or indirect unlawful payments to officials or employees of any
Governmental Entity from corporate funds; failed to file any reports required
with respect to lawful contributions; established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; made any intentionally
false or fictitious entries on the books or records of Seller; or made or
received any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment, including but not limited to unlawful payments to officials or
employees of customers or suppliers.
2.18 No Insider Transactions. Except as disclosed in Schedule 2.18 (and
-------------
except for Seller), the Indemnitors hereby represent severally as follows: no
Indemnitor nor, to any Indemnitor's Knowledge, any of his relatives, nor any
entity in which he has a direct or indirect interest, has (a) any interest in
any Person that engages in the same or similar business in which Seller
currently engages, (b) any interest in any Person that purchases from or sells
or furnishes to Seller any goods or services, (c) a beneficial interest in any
contract, commitment, agreement or understanding to which Seller is a party or
by which it may be bound or affected with the exception of any such contracts
concerning post-closing leasing of real property from Affiliates of Owners as
contemplated in this Agreement; (d) any claim, whether or not valid, against
Seller or any assets of Seller or any of the Purchased Assets; or (e) made any
threat or demand indicating that his spouse would possibly make any claim
against or affecting adversely Microsemi, the Buyer, the Business or the
Purchased Assets. The ownership of publicly traded securities shall not be
deemed a violation of the preceding sentence. Except as disclosed on Schedule
--------
2.18, none of the assets of Seller include any receivables from any director,
----
executive or employee of Seller or any Owner or any Affiliate of any of them.
2.19 Accounts Receivable. The Closing Date Receivables are valid and
enforceable claims and were earned by performance in the ordinary course of
business (i.e., actual shipment of goods substantially conforming to the
customer's order).
2.20 Inventories. The inventories reflected on the Financial Statements
are in all material respects of a quality usable and saleable in the normal
course of the business of Seller, subject to the reserves reflected in the
Financial Statements in accordance with GAAP. Schedule 1.1(a)(x) lists
------------------
substantially all Inventory of Seller, including, but not limited to,
inventories of raw materials, finished goods and packaging supplies owned or in
the custody of Seller and, with respect to Inventory owned by or held for the
account of a customer, identifies such customer and Inventory in reasonable
detail, and specifies the location of such Inventory as of June 30, 2001. All
Inventory
21
purchased since March 31, 2001, consists of a quality and quantity usable and
saleable in the ordinary course of business. Except as set forth in Schedule
--------
2.20, all Inventory is located on premises owned or leased by the Seller as
----
reflected in this Agreement. All work-in-process contained in the Inventory
constitutes items in process of production pursuant to contracts or open orders
taken in the ordinary course of business, from regular customers of the Seller
with, to Seller's actual knowledge, no recent history of credit problems with
respect to the Seller; neither the Seller nor any such customer is in material
breach of the terms of any obligation to the other, and no valid grounds exist
for any counterclaim or set-off of amounts billable to such customers upon the
completion of orders to which work-in-process relates except for early payment
discounts extended in the ordinary course of business and reflected in the
applicable purchase orders. All work-in-process is of a quality ordinarily
produced in accordance with the requirements of the orders to which such
work-in-process is identified.
2.21 Customers and Suppliers; International Sales. Schedule 2.21
-------------
discloses the identity of Seller's ten (10) largest customers as of the fiscal
year ended December 31, 2000 (the "2000 Top Customers"). In addition, Schedule
--------
2.21 discloses the sales made by Seller to 2000 Top Customers during the six (6)
----
months ended June 30, 2001. Except as disclosed on Schedule 2.21, Seller has
-------------
not received any written or oral or other notice that any customer identified on
Schedule 2.21 expects or intends that its future purchases from Seller will
decrease by more than five percent (5%), as compared to the year ended December
31, 2000 or the six (6) months ended June 30, 2001. Schedule 2.21 discloses, as
-------------
of the fiscal year ended December 31, 2000 and as of the six (6) months ended
June 30, 2001, the identity of each of Seller's ten (10) largest suppliers and
the amounts payable to each such supplier as of the dates listed above. Except
as disclosed on Schedule 2.21, Seller has not received any written or oral
-------------
notice that any supplier identified on Schedule 2.21 expects or intends to
-------------
adversely curtail its accommodations, sales or services to Seller, in any
material respect, as compared to the year ended December 31, 2000 or the six (6)
months ended June 30, 2001.
2.22 Taxes. Except as set forth in the Tax Schedule:
(a) All Tax Returns required to be filed by Seller have been
duly filed on a timely basis and such Tax Returns are true, complete and correct
in all respects. All Taxes shown to be payable on the Tax Returns or on
subsequent assessments with respect thereto have been paid in full on a timely
basis, and no other Taxes are payable by Seller with respect to items or periods
covered
22
by such Tax Returns (whether or not shown on or reportable on such Tax
Returns) or with respect to any period prior to the date of this Agreement.
Seller has withheld and paid over all Taxes required to have been withheld
and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, stockholder or other third party. To
Seller's Knowledge, there are no liens on any of the assets of Seller with
respect to Taxes, other than liens for Taxes not yet due and payable for
which appropriate reserves have been established. As of the time of filing,
the foregoing Tax Returns correctly reflected the facts regarding the
income, business, assets, operations, activities, status or other matters
of Seller or any other information required to be shown thereon. In
particular, the foregoing Tax Returns are not subject to penalties under
Section 6662 of the Code, relating to accuracy-related penalties (or any
corresponding provision of the tax law). An extension of time within which
to file any Tax Return which has not been filed has not been requested or
granted.
(b) With respect to all amounts in respect of Taxes imposed upon
Seller, or for which Seller is or could be liable, whether to taxing
authorities (as, for example, under law) or to other persons with respect
to all taxable periods or portions of periods ending on or before the
Closing Date, to Seller's Knowledge, all applicable Tax laws and agreements
have been fully complied with, and the Seller has paid and withheld or
fully accrued on the Financial Statements all such amounts required to be
paid by Seller to taxing authorities or others on or before the date hereof
have been paid.
(c) Neither Seller nor any director or officer (or employee
responsible for Tax matters) of Seller knows of any reason or expects any
authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
liability of Seller either (A) claimed or raised by any authority in
writing or (B) as to which Seller or the directors or officers (and
employees responsible for Tax matters) of Seller has knowledge based upon
contact with any agent of such authority. Other than as noted in Schedule
--------
2.22, the Tax Returns of Seller have not at any time since December 31,
----
1997 been audited by a government or taxing authority, nor is any such
audit in process, pending or threatened (either in writing or verbally,
formally or informally). To Seller's Knowledge, no Tax deficiencies exist
or have been asserted (either in writing or verbally, formally or
informally) or are expected to be asserted with respect to Taxes of Seller,
and Seller has not received notice (either in writing or verbally, formally
or
23
informally) and does not expect to receive notice that it has not filed
a Tax Return or paid Taxes required to be filed or paid by it. Seller is
neither a party to any proceeding for assessment or collection of Taxes,
nor has such event been asserted or threatened (either in writing or
verbally, formally or informally) against Seller or any of its assets.
(d) The Seller has furnished Buyer true and complete copies of all
federal and state income tax or franchise Tax Returns for Seller for all
periods ending in 1997, 1998, 1999 and 2000. Seller has not, to its
knowledge, waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency,
nor has such waiver or extension been requested from Seller.
(e) Seller has not: (A) filed a consent under Code Section 341(f)
concerning collapsible corporations; (B) made any payments, is not
obligated to make any payments, and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that
will not be deductible under Code Section 280G; (C) been a United States
real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii); (D) been a member of an Affiliated Group filing a
consolidated federal income Tax Return, (E) executed, become subject to, or
entered into any closing agreement pursuant to Section 7121 of the Code or
any similar or predecessor provision thereof under the Code or other Tax
law, (F) received approval to make or agreed to a change in accounting
method, or (G) incurred or assumed any liability for the Taxes of any
person. Seller has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662, and is not a party to or bound by any Tax allocation or sharing
agreement.
(f) No Seller asset is property which Seller is required to treat as
being owned by any other person pursuant to the so-called "safe harbor
lease" provisions of former Section 168(f)(8) of the Code; none of the
Seller assets is "Tax-exempt use property" within the meaning of Section
168(h) of the Code; Seller has not agreed to make, nor is it required to
make, any adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise; Seller has not participated in (and will
not participate in) an international boycott within the meaning of Section
999 of the Code; neither Seller nor Seller is a person other than a United
States person within the meaning of the Code; the transaction contemplated
herein is not subject to the Tax withholding provisions of Code Section
3406, or of subchapter A of Chapter 3, of the Code or of any other
24
provision of law; Seller does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable Tax
treaty or convention between the United States of America and such foreign
country; and Seller is not a party to any joint venture, partnership, or
other arrangement or contract which could be treated as a partnership for
federal income Tax purposes.
(g) The unpaid Taxes of Seller (A) did not, as of the most recent
fiscal month end, exceed the reserve for Tax liability set forth on the
face of the most recent balance sheet (rather than in any notes thereto)
and (B) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Seller in filing its Tax Returns.
(h) Seller is not a party to any tax allocation or sharing agreement
with any Person, or a party to any agreement to indemnify any Person with
respect to Taxes.
(i) Seller will not be liable for any Taxes under Section 1374 of the
Code in connection with the purchase of the assets. Seller has not in the
past ten (10) years (A) acquired assets from another corporation in a
transaction in which Seller's Tax basis for the acquired assets was
determined, in whole or in part, by reference to the Tax basis of the
acquired assets (or any other property) in the hands of the transferor, or
(B) acquired the stock of any corporation which is a qualified subchapter S
subsidiary.
2.23 Warranties. Schedule 2.23 contains a copy of Seller's written
-------------
warranty terms to its distributors. Except as set forth on Schedule 2.23,
-------------
Seller has not given or made any other written or oral warranties to any
Person with respect to any products sold or services performed. No
Indemnitor has any written or oral notice of a claim against Seller,
whether or not covered by insurance, for products liability or liability on
account of any express or implied warranty, except for warranty obligations
and returns in the ordinary course of business consistent with past
practice for which appropriate reserves have been reflected in the
Financial Statements.
2.24 No Finders or Brokers. Except as disclosed on Schedule 2.24, no
-------------
Indemnitor, nor, to the Knowledge of any Indemnitor, any Affiliate of any
Indemnitor, has entered into any agreement, arrangement or understanding
with any Person which could result in the obligation to pay any finder's
fee, brokerage commission, advisory fee or similar payment in connection
with this Agreement or the transactions contemplated hereby. With respect
to any agreement, arrangement or
25
understanding identified on Schedule 2.24, and with respect to any
-------------
professional fees (including accounting and attorneys' fees) incurred by
Seller with respect to the transactions contemplated by this Agreement, all
such fees, commissions, professional fees or similar amounts payable shall
be paid by Indemnitors, and not by Buyer.
2.25 Accuracy of Information Furnished by Seller. No representation
or warranty set forth in this Article 2 or in any list or Schedule provided
to Buyer or its representatives by any Indemnitor contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained herein not misleading.
2.26 Investment Representations. The Seller and Owners understand
that the Shares have not been, and will not be, registered under the
Securities Act of 1933 (the "Securities Act"). With respect to the
Promissory Note and Shares issuable upon Microsemi's election to convert
pursuant to the Promissory Note (collectively hereafter called the
"Securities"), the Seller and Owners hereby represent and warrant as
follows ( provided nothing in Section 2.26 detracts from Buyer's
representations and warranties in Article 3 or covenants or other
obligations of the Buyer anywhere in this Agreement):
(a) The Seller and its Owners and management have had
substantial business experience so that the Seller is capable of evaluating
the merits and risks of its investment in the Buyer and has the capacity to
protect its own interests. The Seller acknowledges and each of the Owners
acknowledge that the Securities are subject to restrictions on transfer
pursuant to the Securities Act and any applicable state securities laws and
that the Seller may bear the economic risk of this investment indefinitely
unless the Shares are registered pursuant to the Securities Act or the
Securities are held by the Seller (or held by the Owners pursuant to
appropriate pro rata distribution by Seller) through the first anniversary
of the Closing Date and the Shares are thereafter sold in accordance with
Rule 144 (and applicable exemptions under state securities laws) or are
sold pursuant to other exemptions from registration if available.
(b) The Seller would be acquiring the Shares for its own
account for investment only and not with a view towards their resale or
distribution.
(c) The Seller has had an opportunity to discuss Microsemi's
business, management and financial affairs with officers and management of
Microsemi. The Seller has also
26
had the opportunity to ask questions of, and receive answers from,
Microsemi and its management regarding the terms and conditions of this
investment.
(d) The Seller and Owners are accredited investors within the
meaning of Regulation D under the Securities Act.
Notwithstanding anything to the contrary in this Agreement, (i) no
investigation by Buyer shall affect the representations and warranties of
the Indemnitors under this Agreement or contained in any document,
certificate or other writing furnished or to be furnished to Buyer in
connection with the transactions contemplated hereby, (ii) such
representations and warranties shall remain true and correct and shall not
be affected or deemed waived by reason of the fact that Buyer knew or
should have known that any of the same is or might be inaccurate in any
respect, and (iii) such representations and warranties shall survive the
Closing Date (provided, however, such survival shall not expand or extend
any time limits for claiming indemnification provided in this Article 10).
Buyer acknowledges that only the Owners that are Indemnitors are making any
representations or warranties regarding the Purchased Assets of the
Business.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As an inducement to Seller and each of the Owners to enter into this
Agreement and to consummate the transactions contemplated hereby, Buyer
hereby makes the following representations and warranties to Seller and
each of the Owners as of the date of this Agreement and as of the Closing
Date:
3.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has the power and authority to perform its obligations under this
Agreement. Buyer is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction necessary to perform its
obligations under this Agreement.
3.2 Authorization. The execution and delivery of this Agreement by
Buyer and the performance of its obligations hereunder have been duly
authorized by Buyer and no other action or approval by Buyer or Microsemi
is necessary for the execution, delivery or performance of this Agreement
by Buyer. Buyer has full right, power, authority and capacity to execute,
deliver and perform this Agreement and such other agreements and
instruments as are contemplated hereby.
27
This Agreement has been duly executed and delivered by Buyer and is a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or limiting creditors' rights generally, and (b) general
principles of equity (whether considered in an action in equity or at law).
3.3 No Conflict. Neither the execution and delivery of this Agreement by
Buyer nor the consummation of the transactions contemplated hereunder nor the
fulfillment by Buyer of any of its terms will:
(a) conflict with or result in a breach by Buyer or Microsemi of, or
constitute a default by Buyer or Microsemi under, or create an event that, with
the giving of notice or the lapse of time, or both, would be a default under or
breach of, any of the terms, conditions or provisions of (i) any indenture,
mortgage, lease, deed of trust, pledge, loan or credit agreement, license
agreement or any other material contract, arrangement or agreement to which
Buyer or Microsemi is a party or to which a material portion of Buyer's assets
is subject, (ii) the Certificate of Incorporation or Bylaws of Buyer, or (iii)
any judgment, order, writ, injunction, decree or demand of any Governmental
Entity which materially affects Buyer or Microsemi or which materially affects
Buyer's or Microsemi's ability to conduct its business or perform its
obligations under this Agreement;
(b) result in the creation or imposition of any Encumbrance upon any
material portion of the assets of Buyer or Microsemi or which materially affects
Buyer's or Microsemi's ability to conduct its business as conducted prior to the
date of this Agreement or perform its obligations under this Agreement; or
(c) cause a loss or adverse modification of any permit, license, or
other authorization granted by any Governmental Entity to or otherwise held by
Buyer or Microsemi which is necessary or materially useful to Buyer's business
or otherwise necessary to allow Buyer to perform its obligations under this
Agreement.
3.4 Consents and Approvals. No consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Entity or other
person is required to be made or obtained by Buyer or Microsemi in connection
with the execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby.
28
3.5 No Finders or Brokers. Neither Buyer nor Microsemi has entered into
any agreement, arrangement or understanding with any Person which could result
in an obligation to pay any finder's fee, brokerage commission, advisory fee or
similar payment in connection with this Agreement or the transactions
contemplated hereby.
3.6 Litigation. There is neither (a) any action, suit, proceeding or
investigation, nor (b) any counter or cross-claim in an action brought by or on
behalf of the Buyer or Microsemi, whether at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind, that
is pending or, to the Knowledge of the Buyer, threatened, against the Buyer or
Microsemi, which could reasonably be expected to have a material adverse effect
on the Buyer's ability to perform its obligations under this Agreement or the
agreements referenced herein or complete any of the transactions contemplated
hereby or thereby. Neither Buyer nor Microsemi is subject to any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over the Buyer or Microsemi or any of their respective
assets which would adversely affect the ability of Buyer to close the
transactions contemplated hereby.
3.7 SEC Filings. Microsemi has timely filed all reports, registration
statements and other documents required to be filed by it (the "SEC Filings")
under the Securities Act, and the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "Exchange Act"). The
SEC Filings were prepared in accordance and complied in all material respects
with the applicable requirements of the Securities Act or the Exchange Act, as
the case may be. None of such forms, reports and statements, including, without
limitation, any financial statements, exhibits and schedules included therein
and documents incorporated therein by reference, at the time filed, declared
effective or mailed, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
information contained in any of the SEC Filings has been revised, corrected or
superseded by a later filing of any such form, report or document, none of the
SEC Filings currently contains an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
29
3.8 Securities Law. Neither this Agreement nor any of the transactions
contemplated hereby require qualification or filing with, notice to or any
authorization, consent or approval of the Securities Commissioner of the State
of California, the Securities Administrator of the Commonwealth of
Massachusetts, the federal Securities and Exchange Commission, or the comparable
regulatory body of any other state or jurisdiction, except that there may be
required (a) the filing of a Notice of Transaction Pursuant to Section 25102(f)
of the California Corporate Securities Law of 1968, (b) the filing of a Form D
pursuant to Securities and Exchange Commission Regulation D, (c) the filing of a
Form D notice in the Commonwealth of Massachusetts, and (d) the continued
compliance by Microsemi with the requirements imposed under Rule 144.
3.9 Capitalization. Microsemi's authorized stock, including issued and
outstanding shares, any and all outstanding options and all authorized and
unissued shares reserved under Microsemi's equity incentive plans, is as set
forth in the SEC Filings as of the date therein indicated.
3.10 Valid Issuance of Shares. The Shares, upon the delivery in payment of
the Promissory Note, upon the applicable date set forth in Section 1.2(c), when
issued, sold and delivered in accordance with the terms thereof for the
consideration set forth therein, will be duly authorized, validly issued, fully
paid and nonassessable and, based in part upon the representations of the Seller
and the Owners in this Agreement, will be issued in compliance with all
applicable federal and state securities laws.
ARTICLE 4
COVENANTS
---------
4.1 Fulfillment of Conditions.
(a) Each of the Seller and the Owners will use all reasonable efforts
to perform, comply with and fulfill all obligations, covenants and conditions
required by them or Seller under this Agreement. Buyer will use all reasonable
efforts to perform, comply with and fulfill all obligations, covenants and
conditions required by Buyer under this Agreement.
(b) Each of the Owners will use all reasonable efforts, and will
cause Seller to use all reasonable efforts, to secure all necessary consents,
waivers, permits, approvals, licenses and authorizations and will use all
reasonable efforts to make, and will cause Seller to use all reasonable efforts
to make, all necessary filings in order to enable Seller and Owner to consummate
the
30
transactions contemplated hereby. Buyer and Microsemi will use all reasonable
efforts to secure all necessary consents, waivers, permits, approvals, licenses
and authorizations and will make all necessary filings in order to enable Buyer
to consummate the transactions contemplated hereby.
4.2 Termination of Benefit Plans; Eligibility. Seller shall use its best
efforts to freeze its 401(k) plans prior to the Closing and to terminate such
plans as reasonably possible after the Closing, but in no event later than sixty
(60) days after the Closing. Seller shall use its best efforts to obtain a
favorable determination letter from the Internal Revenue Service regarding the
termination of such plan as soon as possible following the Closing. Employees
of the Buyer who were employees of the Seller shall be credited by the Buyer as
having eligibility under the Buyer's benefit plans to the same extent as if they
had served the Buyer since their hire dates with Seller.
4.3 Use of Names. As of the Closing Date, the Seller will cease, and each
Owner will cause the Seller to cease, using the corporate name and all other
trade names of Seller and consent and fully cooperate with their use and
ownership after the Closing Date by the Buyer. Promptly after the Closing, the
Seller will change its corporate name and will conduct no business operations
except that of managing and investing proceeds received from Buyer in this
Acquisition.
4.4 Covenant of Confidentiality.
(a) Seller and Owners. The Seller and the Owners shall not at any
time subsequent to the Closing, except as explicitly requested by the Buyer, (i)
ufor any purpose, (ii) disclose to any person, or (iii) keep or make copies of
documents, tapes, discs or programs containing, any Non-Public Information
concerning the Purchased Assets. For purposes hereof, "Non-Public Information"
shall mean and include, without limitation, all Trade Rights relating to the
Products in which the Seller has an interest or relate to the Products, all
customer lists and customer information relating to the Products, and all other
information relating to the Products and concerning the Seller's processes,
apparatus, formulae, engineering studies, packaging, Products, Seller's
financial condition or results of operations or Seller's marketing and
distribution methods, to the extent not previously disclosed to the public
directly by the Seller prior to the Closing Date. Non-Public Information shall
not include information in the public domain, information acquired from a third
party without the third party violating a confidentiality obligation to the
disclosing party, information known by the receiving party prior to the
disclosure or information that the receiving party can demonstrate that it
independently developed. The Seller agrees that the provisions and
31
restrictions contained in this Section 4.4(a) are necessary to protect the
legitimate continuing interests of the Buyer in acquiring the Purchased
Assets and the assumption of the Assumed Liabilities, and that any
violation or breach of these provisions will result in irreparable injury
to the Buyer for which a remedy at law would be inadequate and that, in
addition to any relief at law which may be available to the Buyer for such
violation or breach and regardless of any other provision contained in this
Agreement, the Buyer shall be entitled to injunctive and other equitable
relief as a court may grant after considering the intent of this Section
4.4(a).
(b) Buyer. Neither the Buyer nor Microsemi, nor its agents,
attorneys or other financial consultants that are provided with access to
the "Non-Public Information," as defined in Section 4.4(a) hereof, shall at
any time prior to the Closing, use such Non-Public Information for any
purpose other than evaluating the Purchased Assets, or disclose the Non-
Public Information to any person or keep or make copies of any Non-Public
Information. Each of the Buyer and Microsemi agrees that the provisions and
restrictions contained in this Section 4.4(b) are necessary to protect the
legitimate continuing interest of the Seller in the business and good will
of the Seller, and that any violation or breach of these provisions will
result in irreparable injury to the Seller for which a remedy at law would
be inadequate and that, in addition to any relief at law which may be
available to the Seller for such violation or breach and regardless of any
other provision contained in this Agreement, the Seller shall be entitled
to injunctive and other equitable relief as a court may grant after
considering the intent of this Section 4.4(b).
4.5 Bulk Sales Waiver of Delivery and Reservation of Rights to
Compliance Post Closing. Without limiting Seller's obligations or
liabilities to Buyer and Microsemi pursuant to this Agreement to deliver
title free and clear of all Encumbrances and to comply fully with all other
bulk sales and other laws to the extent they may apply, Buyer waives only
the condition of delivery at Closing and does not waive the Seller's
compliance prior to the Closing Date with all provisions of the tax laws
and requirements of Chapter 62C of the Massachusetts General Laws. Seller
covenants that the Seller will deliver to Buyer, and Buyer shall be
entitled to receive at the sole cost and expense of Seller, an official
waiver of the kind described in Section 51 promptly Post-Closing.
4.6 Investigations. The respective representations and warranties of
the Seller and the Buyer contained herein or in any certificates or other
documents delivered at or prior to the Closing, shall not be deemed waived
or otherwise affected by any investigation made by any party hereto.
32
4.7 Access to Information and Records. During the period after the
Closing, the Buyer shall give Seller and the Owners, their respective
counsel, accountants and other representatives (i) access during normal
business hours to such of the properties, books, records, contracts and
documents of the Buyer; and (ii) with the prior consent of the Buyer in
each instance, access to employees, agents and representatives of Buyer for
the purposes of such communications or meetings as the Seller reasonably
requests in writing, in each such case the access shall be limited to the
extent such request is for purposes of filing the Owners' personal tax
returns for periods before the Closing Date or any examination or audit
thereof by a Governmental Entity.
4.8 Retention of Seller's Employees and Continuity of Location of
Operations. Buyer agrees that there shall be no change in location nor any
termination by Buyer (other than for cause) of the employees hired by Buyer
at the Closing Date under this Agreement for a period of six months
following the Closing.
ARTICLE 5
FURTHER COVENANTS OF THE SELLER
-------------------------------
The Seller covenants and agrees as follows:
5.1 Access to Information and Records. During the period prior to the
Closing, the Seller shall give the Buyer, its counsel, accountants and
other representatives (i) access during normal business hours to all of the
properties, books, records, contracts and documents of the Seller for the
purpose of such inspection, investigation and testing as the Buyer deems
appropriate (and the Seller shall furnish or cause to be furnished to the
Buyer and its representatives all information with respect to the business
and affairs of the Seller as the Buyer may request); (ii) reasonable access
to employees, agents and representatives for the purposes of such meetings
and communications as the Buyer reasonably desires; and (iii) with the
prior consent of the Seller in each instance (which consent shall not be
unreasonably withheld), access to vendors, customers, manufacturers of its
machinery and equipment, and others having business dealings with the
Seller.
5.2 Conduct of Business Pending the Closing. From the date hereof
until the Closing, except as otherwise approved in writing by the Buyer:
(a) No Changes. The Seller will carry on its business relating
to the Products diligently and in the same manner as heretofore and will
not make or institute any changes in its
33
methods of purchase, sale, management, accounting or operation, other than
changes in the ordinary course of business. The Seller will remain on
favorable terms with and maintain and preserve its relationships with
creditors, customers, licensees, lessors, employees and other parties with
respect to the Products, the Purchased Assets and the Purchased Contracts.
(b) No Breach. The Seller will not knowingly do or negligently
omit any act, or permit any omission to act, which may cause a breach of
any Purchased Contract, commitment or obligation, or any breach of any
representation, warranty, covenant or agreement made by the Seller herein,
or which Seller knows or should know would have required disclosure on the
Disclosure Schedules had it occurred after March 31, 2001 and prior to the
date of this Agreement.
(c) No Material Contracts. No contract or commitment will be
entered into, and no purchase of raw materials or supplies and no sale of
assets (real, personal, or mixed, tangible or intangible) will be made, by
or on behalf of the Seller relating to the Purchased Assets, the Products,
the Purchased Contracts or the Assumed Liabilities, except contracts,
commitments, purchases or sales which (i) are (A) contracts or commitments
for the purchase of, and purchases of, raw materials and supplies made in
the ordinary course of business and consistent with past practice, (B)
contracts or commitments for the sale of, and sales of, product or
inventory in the ordinary course of business and consistent with past
practice, or (C) other contracts, commitments, purchases or sales in the
ordinary course of business and consistent with past practice, and (ii) are
not material to the Seller (individually or in the aggregate) and would not
have been required to be disclosed in the Disclosure Schedules had they
been in existence on the date of this Agreement.
(d) No Corporate Changes. The Seller shall not amend its
Articles of Organization or By-laws or other constituent documents, or take
or commence the taking of any action with respect to the dissolution,
liquidation or winding up of the Seller.
(e) No Negotiations. The Seller shall not enter into any
agreement, understanding or arrangement relating to any Acquisition
Proposal; consider, or engage in any discussions or negotiations relating
to, any Acquisition Proposal; solicit or encourage the submission of any
Acquisition Proposal; or permit any representative or Affiliate of the
Seller to do any of the foregoing. The term "Acquisition Proposal," as used
in this section, refers, to any proposal, plan, agreement, understanding or
arrangement with a Person other than Buyer or Microsemi contemplating (i)
the sale of the Seller, whether through an acquisition of assets, of or an
equity
34
interest in, or a merger, exchange offer, tender offer or other business
combination involving the Seller or (ii) the sale of the Purchased Assets.
5.3 Consents. The Seller will use its best efforts prior to the
Closing to obtain all consents necessary for the consummation of the
transactions contemplated hereby, including, without limitation, all
shareholder and third party consents and approvals necessary to effect the
sale, delivery, transfer and conveyance of the Purchased Contracts to the
Buyer. All such consents shall be in writing and executed counterparts
thereof shall, to the extent so obtained, be delivered to the Buyer
promptly after the Seller's receipt thereof but in no event later than two
business days prior to the Closing.
5.4 Other Action. The Seller shall use its best efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to
the parties' obligations to consummate the transactions contemplated in
this Agreement.
5.5 Notification and Updates Regarding Disclosure.
(a) During the period from the date hereof until the Closing,
the Seller shall promptly notify the Buyer in writing of:
(i) the discovery, known to Seller, of any event,
condition, fact or circumstance that occurred or existed on or prior to the
date of this Agreement and that caused or constitutes a material inaccuracy
in or a material breach of any representation or warranty made by the
Seller or an Owner in this Agreement;
(ii) any event, condition, fact or circumstance known to
the Seller that occurs, arises or exists after the date of this Agreement
and that would cause or constitute a material inaccuracy in or material
breach of any representation or warranty made by the Seller or an Owner in
this Agreement if such representation or warranty had been made as of the
time of the occurrence, existence or discovery of such event, condition,
fact or circumstance; and
(iii) any material breach known to Seller of any covenant or
obligation of the Seller or an Owner under this Agreement.
5.6 Excess Warranty Work. In the event that direct material and labor
costs and expenses incurred by the Buyer for repair and/or replacement
warranty work under the terms and conditions of
35
the Seller's warranties exceeds the sum of $50,000.00 with respect to products
manufactured and/or sold by the Seller prior to the Closing, the Seller shall
reimburse the Buyer for one hundred percent (100%) of the excess of such $50,000
of such costs and expenses incurred or accrued by Buyer prior to the first
anniversary of the Closing Date promptly within ten (10) business days of
receipt of invoices therefor. Normal distributor stock rotation shall be
excluded.
ARTICLE 6
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
-----------------------------------------------
6.1 Obligation of Buyer. Each and every obligation of the Buyer to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of each of the following conditions:
(a) Conveyance and Assignment. The Seller shall have duly executed and
delivered to the Buyer the ▇▇▇▇ of Sale and Assumption Agreement in the form
attached hereto as Exhibit B (the "▇▇▇▇ of Sale and Assumption Agreement"), and
any additional documents as the Buyer may reasonably request (collectively the
"Conveyance Documents"), to the reasonable satisfaction of the Buyer and its
counsel to sell, convey, assign, grant and otherwise transfer to the Buyer all
of the Seller's right, title and interest in and to the Purchased Assets.
(b) Non-Competition Agreement. The Buyer shall have received the Non-
Competition Agreement attached hereto as Exhibit C-1, duly executed by the
Seller and ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(c) Representations and Warranties True on the Closing Date. Each of
the representations and warranties made by the Seller or any Owner in this
Agreement, and the statements contained in the Disclosure Schedule or in any
instrument, list, certificate or writing delivered by the Seller or any Owner to
this Agreement, shall be true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the Closing Date
as though such representations and warranties were made or given on and as of
the Closing Date, except for any changes permitted by the terms of this
Agreement or consented to in writing by the Buyer; and the Seller shall have
delivered a certificate to the Buyer evidencing compliance with the conditions
set forth in this Section 8.2 as of the Closing Date.
36
(d) Compliance With Agreement. The Seller and each of the Owners have
in all material respects performed and complied with all of their respective
agreements and obligations under this Agreement which are to be performed or
complied with by any of them prior to or on the Closing Date.
(e) Absence of Suit. No action, suit or proceeding before any court or
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against the Buyer, the Seller, the Owners or any of the affiliates,
officers or directors of any of them, seeking to restrain or prevent the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
(f) Board and Shareholder Approval. The Seller's Board of Directors
and Shareholders shall have approved this Agreement, the sale of the Purchased
Assets and the other documents and instruments to be executed and delivered by
the Seller pursuant hereto.
(g) Consents and Approvals. All approvals, consents and waivers that
are required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to the
Buyer, unless the Seller shall have agreed to indemnify the Buyer against the
Seller's failure to obtain such consents. After the Closing, the Seller and each
of the Owners will continue to use their best effects to obtain any such
consents or approvals, and the Seller and the Owners shall not be relieved of
any liability hereunder for failure to perform its covenants or for the
inaccuracy of any representation or warranty.
(h) Opinion of Counsel. A written opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, counsel to the Seller and the Owners, dated as of the Closing Date,
addressed to the Buyer and Microsemi, substantially in the form of Exhibit D
hereto.
(i) Due Diligence. The Buyer shall have completed, to its sole
satisfaction, a due diligence review of the Business, the Purchased Assets and
the Assumed Liabilities and the Financial Statements and shall not have
discovered a material adverse condition in the Products, Purchased Assets or
Assumed Liabilities or in the prospects for the Business or relating to the
Products. The due diligence review of the Financial Statements shall have
confirmed that the Financial Statements
37
are auditable without undue cost or delay in accordance with accounting
requirements applicable to Microsemi as promulgated by the Securities and
Exchange Commission under Regulation S-X.
(j) Agreements with Key Employee. Seller shall deliver Buyer an
executed agreement or agreements with ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Key Employee") concerning
confidentiality, assignment of inventions and non-competition in substantially
the form of Exhibit C-2 hereto.
(k) Spouse of Owner. Each Owner shall deliver Buyer an executed
Consent and Joinder of Spouse, substantially in the form of Exhibit E hereto.
(l) Lease. The Seller shall cause the owners of the Leased Real
Property to execute and deliver a lease (each a "Lease") as to each Leased Real
Property substantially in the form of Exhibit F.
ARTICLE 7
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
------------------------------------------------
7.1 Obligation of Seller. Each and every obligation of the Seller to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of the following conditions:
(a) Payment. The Buyer shall have (i) made the Cash Payments
(including the Repayment Amount to the respective Persons as provided elsewhere
in this Agreement) and (ii) delivered to the Seller the Promissory Note.
(b) ▇▇▇▇ of Sale and Assumption Agreement. The Buyer shall have duly
executed and delivered to the Seller the ▇▇▇▇ of Sale and Assumption Agreement
and any other Conveyance Documents as to which the Buyer is a signatory.
(c) Representations and Warranties True on the Closing Date. Each of
the representations and warranties made by the Buyer in this Agreement shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date.
38
(d) Board Approval. The Buyer's Board of Directors shall have approved
this Agreement, the purchase of the Purchased Assets and the other documents and
instruments to be executed and delivered by the Buyer pursuant hereto.
(e) Compliance With Agreement. The Buyer shall have in all material
respects performed and complied with all of the Buyer's agreements and
obligations under this Agreement which are to be performed or complied with by
the Buyer or Microsemi prior to or on the Closing Date.
(f) Absence of Suit. No action, suit or proceeding before any court or
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against the Buyer, Microsemi, the Seller or the Owners, any of the
Affiliates, officers or directors of any of them, seeking to restrain or prevent
the transactions contemplated hereby, or questioning the validity or legality of
any such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
ARTICLE 8
CLOSING DELIVERIES
------------------
8.1 Deliveries of Owners and Seller. On the Closing Date, unless waived in
writing by Buyer, the Seller shall deliver, or cause to be delivered to Buyer,
the following documents and instruments, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) Executed Conveyance Documents, including the ▇▇▇▇ of Sale and
Assumption Agreement, substantially in the form of Exhibit B attached hereto;
(b) An executed Assignment and Assumption Agreement, substantially in
the form of Exhibit E attached hereto;
(c) Evidence of the receipt of all third party consents required to be
obtained in connection with the consummation of the transactions contemplated
hereunder, including, without limitation, all consents applicable to the Leased
Property, Authorizations and Furniture and Equipment;
39
(d) An opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to Seller
and the Owners, dated the Closing Date, substantially in the form attached as
Exhibit D attached hereto;
(e) A certificate dated the Closing Date, executed by Seller,
providing as attachments copies of resolutions approved by the shareholders and
the board of directors of Seller, certifying that the resolutions as attached to
such certificate were duly adopted by the shareholders and the board of
directors of Seller and that such resolutions remain in full force and effect,
authorizing and approving the execution by Seller of this Agreement and other
documents related to this transaction and approving the consummation by Seller
of the transactions contemplated by such agreements and documents; and
(f) A certificate dated the Closing Date, executed by Seller,
providing as attachments Certificates of Good Standing for Seller certified by
the appropriate state official in each state in which Seller is qualified, dated
no earlier than ten (10) days prior to the Closing Date.
8.2 Deliveries of Buyer. On the Closing Date, concurrently with the
execution of this Agreement, unless waived in writing by the Seller and Owners,
Buyer shall deliver, or cause to be delivered to the Seller, the following
documents and instruments, in form and substance reasonably satisfactory to the
Owners and their counsel:
(a) The Cash Payments by wire transfers to accounts designated by the
respective payee;
(b) The Promissory Note duly executed by Microsemi;
(c) The ▇▇▇▇ of Sale and Assumption Agreement, duly executed by
Buyer; and
(d) Evidence that Buyer and Microsemi received all consents and
approvals, if any, of third parties required to be obtained in connection with
the consummation by the Buyer and Microsemi of the transactions contemplated
hereunder
ARTICLE 9
CLOSING OR TERMINATION
----------------------
9.1 Closing Date. Subject to the satisfaction or waiver of each of the
conditions set forth in Articles 6 and 7, the closing for the consummation of
the purchase and sale contemplated by this
40
Agreement (the "Closing") shall, unless another date or place is agreed to in
writing by Buyer, each of the Indemnitors and Seller, take place at the offices
of Microsemi Microwave Products, Inc. in Lowell, Massachusetts on August 10,
2001 and shall be deemed effective as of 12:01 a.m. on August 10, 2001 (the
"Closing Date").
9.2 Right of Termination Without Breach. This Agreement may be terminated
without further liability of any party at any time prior to the Closing:
(a) by mutual written agreement of the Buyer and the Seller, or
(b) by either the Buyer or the Seller if the Closing shall not have
occurred on or before August 15, 2001, provided the terminating party has not,
through breach of a representation, warranty or covenant, prevented the Closing
from occurring on or before such date.
9.3 Termination for Breach.
(a) Termination by the Buyer. If (i) there has been a material
violation or breach by the Seller or an Owner of any of the agreements,
representations or warranties contained in this Agreement which has not been
waived in writing by the Buyer, or (ii) there has been a failure of satisfaction
of a condition to the obligations of the Buyer which has not been so waived, or
(iii) the Seller shall have attempted to terminate this Agreement under this
Article 9 or otherwise without grounds to do so, then the Buyer may, by written
notice to the Seller at any time prior to the Closing that such violation,
breach, failure or wrongful termination attempt is continuing, terminate this
Agreement with the effect set forth in Section 9.3(c) hereof.
(b) Termination by the Seller. If (i) there has been a material
violation or breach by the Buyer of any of the agreements, representations or
warranties contained in this Agreement which has not been waived in writing by
the Seller, or (ii) there has been a failure of satisfaction of a condition to
the obligations of the Seller which has not been so waived, or (iii) the Buyer
shall have attempted to terminate this Agreement under this Section 9 or
otherwise without grounds to do so, then the Seller may, by written notice to
the Buyer at any time prior to the Closing that such violation, breach, failure
or wrongful termination attempt is continuing, terminate this Agreement with the
effect set forth in Section 9.3(c) hereof.
41
(c) Effect of Termination. Termination of this Agreement pursuant to
this Section 9.3 shall not in any way terminate, limit or restrict the rights
and remedies of any party hereto against any other party which has violated,
breached or failed to satisfy any of the representations, warranties, covenants,
agreements, conditions or other provisions of this Agreement prior to
termination hereof. In addition to the right of any party under common law to
redress for any such breach or violation, each party whose breach or violation
has occurred prior to termination shall jointly and severally indemnify each
other party for whose benefit such representation, warranty, covenant, agreement
or other provision was made ("indemnified party") from and against all losses,
damages (including, without limitation, consequential damages), costs and
expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties, court costs, and attorneys' fees
and expenses) asserted against, resulting to, imposed upon, or incurred by the
indemnified party, directly or indirectly, by reason of, arising out of or
resulting from such breach or violation. Subject to the foregoing, the parties'
obligations under Section 4.4 of this Agreement regarding confidentiality shall
survive termination.
ARTICLE 10
INDEMNIFICATION
---------------
10.1 Indemnification by Seller and Owners.
Subject to the additional provisions set forth in this Article 10, each of
the Indemnitors shall, jointly and severally (other than as specifically set
forth in Article 2 herein), indemnify, defend and hold harmless Buyer and its
respective Affiliates including, without limitation, its shareholders, officers,
directors, employees and representatives (each a "Buyer Indemnitee") against,
and hold each Buyer Indemnitee harmless from, any and all claims, losses,
damages, liabilities, payments and obligations, and all expenses, including,
without limitation, reasonable legal fees, incurred, suffered, sustained or
required to be paid, directly or indirectly, by, or imposed upon, such Buyer
Indemnitee resulting from, related to or arising out of (i) any breach or
inaccuracy of any representation or warranty of any Indemnitor contained in this
Agreement or in any document delivered to Buyer pursuant to the provisions of
this agreement; (ii) any failure of the Seller or any Owner to perform any of
the covenants contained in this agreement or in any document delivered to Buyer
pursuant to the provisions of this Agreement; (iii) the Excluded Assets or
Excluded Liabilities; (iv) except to the extent specifically assumed by Buyer,
any claim by any third party brought against any Buyer Indemnitee in connection
with the Purchased Assets arising from the actions or inactions of the
42
Seller, any Owner or their Affiliates prior to the Closing Date in connection
with the operation of the Business; (v) any liability for Seller's Taxes (other
than Taxes to the extent expressly included in the Assumed Liabilities); (vi)
any liability or obligation of Seller arising under any Environmental Laws in
effect on the Closing Date based upon or arising out of acts, omissions, events
or conditions which occurred or existed prior to the Closing (even if
disclosed); and (vii) any liability or obligation that would not have existed if
it had been confirmed that no taxes are due on the Closing Date pursuant to
Sections 51 and 52 of Chapter 61C of the Massachusetts General Laws.
10.2 Indemnification by Buyer.
Subject to the additional provisions set forth in this Article 10, Buyer
shall indemnify each Indemnitor and its respective Affiliates including, without
limitation, its shareholders, officers, directors, employees and representatives
(each a "Seller Indemnitee") against, and hold each Seller Indemnitee harmless
from, any and all losses, incurred, suffered, sustained or required to be paid,
directly or indirectly, by, or imposed upon, such Seller Indemnitee resulting
from, related to or arising out of (i) any breach or inaccuracy of any
representation or warranty of Buyer contained in this Agreement or in any
document delivered to Seller pursuant to the provisions of this Agreement; (ii)
any failure of any Buyer or Microsemi to perform any of the covenants contained
in this Agreement or in any document delivered to Seller pursuant to the
provisions of this Agreement; (iii) the Assumed Liabilities; (iv) any claim by
any third party brought against any Seller Indemnitee in connection with the
Purchased Assets arising from the actions or inactions of Buyer or Microsemi or
its Affiliates following the Closing Date in connection with the operation of
the Business (unless such claim arises from a breach of a representation or
warranty by the Seller or the Owners); (v) any liability for Buyer's or
Microsemi's taxes unless such claim arises from a breach of a representation or
warranty by the Seller or the Owners; (vi) any liability or obligation of Buyer
arising under any Environmental Laws in effect on the Closing Date based upon or
arising out of events or conditions which first occurred or first existed
following the Closing, and which were created through the acts or omissions of
Buyer or Microsemi following the Closing; and (vii) any liability related to
benefit plans, for former Seller employees of Buyer or Microsemi first existing
after the Closing Date (other than any Assumed Liabilities).
43
10.3 Third Party Claims.
(a) If any Buyer Indemnitee or Seller Indemnitee (each referred to as
an "Indemnitee") receives notice of the assertion by any third party of any
claim or of the commencement by any such third party of any action (any such
claim or action being referred to herein as an "Indemnifiable Claim") with
respect to which Indemnitors or Buyer are or may be obligated to provide
indemnification, the Indemnitee shall promptly notify the Indemnitor or Buyer in
writing (the "Claim Notice") of the Indemnifiable Claim; provided, that the
delay or failure to provide such notice shall not relieve or otherwise affect
the obligation of the Indemnitor to provide indemnification hereunder, except to
the extent that the Indemnitor or Buyer, as the case may be, is materially
adversely affected by such delay or failure .
(b) The Indemnitor or Buyer shall have thirty days after receipt of
the Claim Notice (unless the claim or action requires a response before the
expiration of such thirty (30) day period, in which case the Indemnitor or
Buyer, as the case may be, shall have until the date that is ten days before the
required response date) to acknowledge responsibility and undertake, conduct and
control, through counsel of its own choosing, and at its expense, the settlement
or defense thereof, and the Indemnitee shall cooperate with the Indemnitor or
Buyer in connection therewith; provided, that (i) the Indemnitor or Buyer, as
the case may be, shall permit the Indemnitee to participate in such settlement
or defense through counsel chosen by the Indemnitee, provided that the fees and
expenses of such counsel shall not be borne by the Indemnitor except as
otherwise expressly provided, (ii) the Indemnitor or Buyer shall not settle any
Indemnifiable Claim without the Indemnitee's consent if the settlement requires
the Indemnitee to admit wrongdoing, pay any fines or refrain from any action and
(iii) if, in the opinion of counsel to the Indemnitor or Buyer, the Indemnitee
has separate defenses from the Indemnitor or Buyer or there is a conflict of
interest between the Indemnitor or Buyer and Indemnitee or if there is any
danger of criminal liability of the Indemnitee, then the Indemnitee shall be
permitted to retain special counsel of its own choosing at the expense of the
Indemnitor or Buyer, as the case may be. So long as the Indemnitor or Buyer, as
the case may be, is vigorously contesting any such Indemnifiable Claim in good
faith, the Indemnitee shall not pay or settle such claim without the
Indemnitor's consent, which consent shall not be unreasonably withheld.
(c) If the Indemnitor or Buyer, as the case may be, does not notify
the Indemnitee within thirty (30) days after receipt of the Claim Notice (or
before the date that is ten (10) days before the required response date, if the
claim or action requires a response before the expiration of
44
such thirty (30) day period), that it acknowledges responsibility and elects
to undertake the defense of the Indemnifiable Claim described therein, the
Indemnitee shall have the right to contest, settle or compromise the
Indemnifiable Claim in the exercise of its reasonable discretion at the expense
of the Indemnitee, including but not limited to attorneys' fees and costs;
provided, that the Indemnitee shall notify the Indemnitor of any compromise or
settlement of any such Indemnifiable Claim.
10.4 Survival Period. Each Indemnitor's and Buyer's obligation to
indemnify and hold harmless Indemnitees with respect to the breach of any
representations or warranties contained herein shall expire thirty-six (36)
months from the date hereof, except that (i) the obligation to indemnify and
hold harmless Indemnitees with respect to the representations and warranties
made in Sections 2.2 and 3.2 (Authorization), 2.16 (Government Payments) and
2.22 (Taxes) shall survive the Closing until the expiration of the applicable
statute of limitations, and (ii) the obligation to indemnify and hold harmless
Indemnitees with respect to the representations and warranties made in Section
2.15 (Environmental Laws) shall survive the Closing until the earlier of the
expiration of the applicable statutes of limitations or the termination of the
15 year insurance policy referred to in Section 2.15(f) above. The expiration
of any Indemnitor's or Buyer's obligation to indemnify and hold harmless the
Indemnitees hereunder shall not affect any claim for indemnification made prior
to the date of such expiration.
10.5 Limitations on Indemnification Obligations. Except in the case of
fraud, the liability of the Indemnitors or Buyer, as the case may be, to the
Indemnitees pursuant to Section 10.1(i) or Section 10.2(i), as applicable, shall
be subject to the following limitations:
(a) The Seller's and each of the Owners respective obligations to
indemnify Buyer Indemnitees for breaches of representations and warranties of
Seller or the Owners in this Agreement shall arise only after, and only to the
extent that, the aggregate amount of claims thereunder exceeds $10,000 (the
"Indemnity Basket"), and in any event shall not exceed the aggregate amount of
the Purchase Price (the "Seller's Cap").
(b) The obligation, if any, of each Owner to indemnify Buyer
Indemnitees for breaches of representations and warranties shall not exceed a
pro rated portion of the aggregate amount of the Purchase Price that has been
received by the Seller based on a fraction, the numerator of which is the number
of shares of Seller that Owner holds of record on the Closing Date and the
45
denominator of which is the number of shares of Seller outstanding on the
Closing Date (the "Owner's Cap").
ARTICLE 11
COVENANTS NOT TO COMPETE
------------------------
11.1 Covenant Not to Compete. The Seller and each Owner hereby covenants
that for a period of three (3) years following the Closing Date, the Seller and
each such Owner will not, directly or indirectly through one or more Affiliates,
own, manage, operate, join, control or participate in the ownership, management,
operation or control of, or be connected as a shareholder, member, manager,
director, officer, employee, partner, consultant or otherwise with, any profit
or non-profit business, firm, entity or organization, which competes with the
Business as existing or in development on the Closing Date, in any county or
city in the United States (whether by selling such product to customers located
in the United States or by manufacturing such product in the United States);
provided, however, that this Section 11.1 shall not prohibit the ownership of up
to 5% in voting stock of any publicly traded company that competes with the
Business.
11.2 No Solicitation. The Seller and each Owner covenants that for a
period of two (2) years commencing on the Closing Date, the Seller and such
Owner (each Owner's covenant referring only to future activities of the Seller
or of such Owner himself) shall neither (i) solicit or attempt to influence any
of Buyer's then current employees to become employees or render services to any
business or employer other than Buyer or to terminate their employment with
Buyer (provided, however, that the Seller and an Owner shall not be prohibited
from employing an employee of Buyer if such employee (a) independently seeks
employment with the Seller or (b) has been terminated or otherwise released from
employment with Buyer) or not (ii) solicit or attempt to influence any of
Buyer's then current customers or clients to purchase goods or services from a
competitor of Buyer if such purchase could cause a diminution of Buyer's sales
to such customer or client.
11.3 Severability. In the event any of the covenants in this Article 11
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time, or over too great a
geographical area, or by reason of its being too extensive in any other respect,
it shall be interpreted to extend only over the maximum period of time for which
it may be enforceable, and/or
46
to the maximum extent in all other respects as to which it may be enforceable,
all as determined by such court in such action.
11.4 Specific Performance. The Seller and each Owner acknowledges that a
breach of the covenants contained in Article 11 will cause irreparable damage to
Buyer, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, the Seller
and each Owner agrees that if the Seller or any Owner breaches the covenants
contained in Article 11 in addition to any other remedy which may be available
at law or in equity, Buyer and Microsemi shall be entitled to specific
performance and injunctive relief, without, in the event of a final judgment,
posting a bond or other security.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Further Actions. From time to time, as and when requested by any
party hereto, each other party shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as the requesting party may
reasonably deem necessary or desirable to carry out the intent and purposes of
this Agreement, to transfer, assign and deliver the Purchased Assets to Buyer
and its successors and assigns effective as of the Closing (or to evidence the
foregoing) and to consummate and give effect to the other transactions,
covenants and agreements contemplated hereby. To the extent that the rights of
Seller under any contract may not be assigned without the consent of another
person which has not been obtained by Seller prior to the Closing, neither this
Agreement nor the Assignment and Assumption Agreement shall constitute an
agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful. If any such consent has not been obtained or if
any attempted assignment would be ineffective or would impair Buyer's rights
under the instrument in question so that Buyer would not effectively acquire the
benefit of all such rights, then Seller, to the maximum extent permitted by law
and the instrument, shall, at Buyer's request, act as Buyer's agent in order to
obtain for Buyer the benefits thereunder and cooperate, to the maximum extent
permitted by law and the instrument, with Buyer in any other reasonable
arrangement designed to provide such benefits to Buyer (including, without
limitation, by entering into an equivalent arrangement). Notwithstanding
Buyer's decision to consummate the Closing in the absence of any such consent,
after the Closing Seller shall use its best efforts to obtain all such consents
and, if and when any is obtained, Seller shall promptly assign the instrument in
question to Buyer.
47
12.2 Expenses. Except as otherwise specifically provided herein, Seller,
the Owners, Microsemi and Buyer shall each bear their own respective legal fees
and other costs and expenses with respect to the negotiation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereunder.
12.3 Entire Agreement. This Agreement, which includes the Appendix, the
Schedules and the Exhibits hereto and the other documents, agreements and
instruments executed and delivered pursuant to this Agreement, contains and
compromises the entire agreement between the parties hereto with respect to the
transactions contemplated by this Agreement and supersedes all prior statements,
representations, arrangements, understandings, proposals, prospectuses,
projections and related materials with respect thereto, including without
limitation, the letter of intent among the parties hereto dated June 11, 2001.
12.4 Descriptive Headings. The descriptive headings of this Agreement are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.
12.5 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be sufficiently given if (a)
delivered personally or (b) sent by registered or certified mail, postage
prepaid, or (c) sent by overnight courier with a nationally recognized courier,
or (d) sent via facsimile confirmed in writing in any of the foregoing manners,
as follows:
If to Seller or any Owner: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇. ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇.▇. ▇/▇▇/ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Northwoods Business Park
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
48
If to Buyer: Microsemi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
WITH A COPY TO: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Yocca Patch & Yocca, LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If sent by mail, notice shall be considered delivered five (5) business
days after the date of mailing, and if sent by any other means set forth above,
notice shall be considered delivered upon receipt thereof. Any party may by
notice to the other parties change the address to which notice or other
communications to it are to be delivered or mailed.
12.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts (other than the
choice of law principles thereof). Subject to Section 12.15, any action, suit
or other proceeding initiated in connection with this Agreement may be brought
in any Federal or state court in Orange County, California or Middlesex County,
Massachusetts, having jurisdiction over the subject matter thereof as the party
bringing such action, suit or proceeding shall elect. The Seller, each Owner,
the Buyer, and Microsemi hereby submit themselves to the jurisdiction of any
such court and agree that service of process on them in any such action, suit or
proceeding may be effected by the means by which notices are to be given to it
under this Agreement.
12.7 Assignability. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. This Agreement shall not be assignable by any party without the written
consent of the other parties and any such purported assignment by any party
without such consent shall be void, except that:
(a) Any or all rights of Buyer to receive the performance of the
obligations of any Indemnitor hereunder and rights to assert claims against any
Indemnitor in respect of any inaccuracy in or breach of any representations,
warranties or covenants of any Indemnitor hereunder, may be assigned by Buyer to
a direct or indirect subsidiary of Microsemi or to a purchaser of the Business;
provided, however, that such assignment by Buyer shall not relieve it of any of
its obligations hereunder; and
49
(b) Buyer may assign to any bank, insurance or other financial
institution providing financing or extending credit to Buyer any or all of its
rights to assert claims against any Indemnitor in respect of any inaccuracy in
or breach of representations, warranties or covenants under this Agreement;
provided, however, that such assignment by Buyer shall not relieve it of any of
its obligations hereunder.
12.8 Waivers and Amendments. Any amendment or supplementation of this
Agreement shall be effective only if in writing signed by each of the parties
hereto. Any waiver of any term or condition of this Agreement shall be
effective only if in writing signed by the party giving the waiver. A waiver of
any breach or failure to enforce any of the terms or conditions of this
Agreement shall not in any way affect, limit or waive a party's rights hereunder
at any time to enforce strict compliance thereafter with every term or condition
of this Agreement, except to the extent such future rights are specifically
included within the scope of such written waiver.
12.9 Third Party Rights. Notwithstanding any other provision of this
Agreement, and except as expressly provided in Sections 9.1 and 9.2 hereof or as
permitted pursuant to Section 12.7 hereof, this Agreement shall not create
benefits on behalf of any shareholder or employee of Buyer, or any other Person
(including without limitation any broker or finder), and this Agreement shall be
effective only as between the parties hereto, their successors and permitted
assigns.
12.10 Public Announcements. Prior to the Closing, Buyer and Indemnitors
will consult with each other before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement, and the Buyer, the Seller and any Owner shall not issue any such
press release or make any such public statement without the prior approval of
the other parties both as to the making of such release or statement and as to
the form and content thereof, except to the extent that such party is advised by
counsel, in good faith, that such release or statement is required as a matter
of law. After the Closing, Buyer shall be permitted to issue any press release
or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without consulting with the Seller, except to the
extent required by applicable law.
12.11 Confidential and Proprietary Information. Each of the Owners have
in the past had access, and shall continue to have access, to certain
Confidential and Proprietary Information concerning Seller and its Affiliates.
Each of the Owners agrees that he will not, either directly or indirectly,
disclose to any person or use any of the Confidential and Proprietary
Information in any
50
way during (except as required in the course of the performance of his duties to
the Buyer) or after the expiration of such Owner's relationship with Buyer.
12.12 For purposes of this Agreement, "Confidential and Proprietary
Information" means any of the following information relating to the business of
Seller that is not generally known to competitors, suppliers and customers of
Seller: (i) any business or technical information, design, process, procedure,
formula, improvement, or any portion or phase thereof, that is owned by or has,
at the time of determination, been used by Seller; (ii) any information related
to the development of products and production processes; (iii) any information
concerning proposed new products and production processes; (iv) any information
concerning marketing processes, market feasibility studies, customer lists and
other customer information, vendor lists and information, price data, cost data,
profit plans, capital plans and proposed or existing marketing techniques or
plans; and (v) any other information which would constitute a "Trade Secret"
under the Uniform Trade Secrets Act as in force and effect in the Commonwealth
of Massachusetts; provided, however, the terms "Confidential and Proprietary
Information" shall not include information which (a) is hereinafter disclosed or
made available to the Owner by a third party not in violation of its obligations
to anyone to maintain the confidentiality of such information, (b) is required
to be disclosed by court order or otherwise as a matter of law, or (c) at the
time of disclosure is reasonably available to the public through no fault of the
Owner.
12.12 Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction, be invalid
or unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable such term or provision in any other
jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or enforceable.
12.13 Counterparts; Electronic Copies. This Agreement and each agreement
to be executed at the Closing as contemplated by this Agreement may be
sufficiently executed in any number of counterparts or electronic copies, and
each such counterpart or electronic copy hereof shall be deemed to be an
original instrument, but all such counterparts and copies together shall
constitute but one agreement. Electronic copies shall be considered as if they
were originals.
51
12.14 Dispute Resolution. The parties hereto agree to the following as
their sole means of resolving any disputes arising from or in any way relating
to this Agreement, provided that the parties hereto shall have the right to seek
an injunction or other equitable remedy in the event of a breach of Article 11
of this Agreement. In the event of a dispute, the parties shall first attempt to
negotiate in good faith to resolve such dispute among themselves for a period
not to exceed sixty (60) days. If after sixty (60) days, the dispute remains
unresolved, the parties agree to in good faith select a neutral third party to
mediate their dispute. If the parties are unable to agree upon a mediator, any
party to this Agreement may submit a request to the American Arbitration
Association (the "AAA") to appoint a mediator. If the AAA refuses to appoint a
mediator, or if either party fails to pay the fees requested by the AAA for the
appointment of a mediator, then the party seeking mediation may file a petition
with the Superior Court of the County of Middlesex, Massachusetts, for the
appointment of a mediator, as if arbitration were being compelled and an
arbitrator appointed. Any fees and costs of mediation shall be shared one-half
by Buyer and one-half by Indemnitors. Although the parties have agreed to
participate in good faith in efforts to mediate any disputes, the results of any
mediator's recommendations shall not be binding upon any party and mediation
shall produce a binding agreement only if all parties agree to be bound by the
results thereof. If after ninety (90) days from the day it was submitted to
mediation, the dispute remains unresolved, any party may submit the dispute to
binding arbitration through the AAA, pursuant to the AAA Rules of Commercial
Arbitration or any successor rules thereto, at the office of the AAA located in
Middlesex County, Massachusetts, or such other location as is mutually agreed to
by the parties. The arbitrator shall apply the laws of the Commonwealth of
Massachusetts in the resolution of all disputes, controversies or claims and
shall have the right and authority to determine how his or her decision or
determination as to each issue or matter in dispute may be implemented or
enforced. Any decision or award of the arbitrator shall be final and conclusive
on the parties to this Agreement and their respective Affiliates, and there
shall be no appeal therefrom other than from gross negligence or willful
misconduct. The costs of arbitration, including the fees and expenses of the
arbitrator, shall be paid one-half equally by Buyer on the one hand, and one-
half by the Seller and the Owners on the other hand, unless the arbitration
award provides otherwise. Each party shall bear the cost of preparing and
presenting its case unless the arbitration award provides otherwise. The parties
agree that the arbitrator shall have no power or authority to make any award
that provides for punitive or exemplary damages. The arbitrator's decision shall
be final and binding. The award may be confirmed and enforced in any court of
competent jurisdiction. The parties hereto agree that any action to compel
arbitration pursuant to this Agreement may be brought in the appropriate federal
or
▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, and in connection with
such action to compel the laws of the Commonwealth of Massachusetts to control.
The parties hereto hereby consent to the jurisdiction of the arbitrator and of
such court and waive any objection to the jurisdiction of such arbitrator and
court.
[SIGNATURE PAGE FOLLOWS]
53
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
"SELLER" COMPENSATED DEVICES, INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Treasurer and Clerk
"OWNER" /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual
"OWNER" /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇.
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., an individual
"OWNER" /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
"BUYER" MICRO CDI ACQUISITION CORP.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President, East Coast
Operations
MICROSEMI CORPORATION
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President, East Coast
Operations
54
APPENDIX A
DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings, if any,
ascribed to them in this Appendix A. Meanings of other capitalized terms have
----------
been defined elsewhere in this Agreement.
AAA shall have the meaning ascribed to it in Section 12.15.
Agreement shall have the meaning ascribed to it in the Preamble.
Affiliate: With respect to any specified Person, any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" means the power to direct the management and policies of another
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Assumed Liabilities shall have the meaning ascribed to it in Section
1.1(c).
Authorizations shall have the meaning ascribed to it in Section 1.1(a)(vi).
Benefit Plans shall have the meaning ascribed to it in Section 2.13.
Business shall have the meaning ascribed to it in Recital A.
Business Rights shall have the meaning ascribed to it in Section 1.1(a)(i).
Bulk Sales Laws shall mean any and all laws pertaining to the bulk sale or
bulk transfer of assets in connection with a transaction of the same kind as the
Acquisition.
Buyer shall have the meaning ascribed to it in the Preamble.
Buyer Indemnitee shall have the meaning ascribed to it in Section 10.1.
Cash Payments shall have the meaning ascribed to it in Section 1.2(a).
Cause shall mean, with respect to an employee, (i) the commission of any
willful breach of duty of loyalty to the employer, or the habitual refusal to
perform, or neglect of, any material duties, which the person has been employed
to perform, (ii) the commission of a material violation of a company policy of
the employer that the employee was aware of before such violation (and such
violation cannot be reasonably cured), any act of material dishonesty, or any
illegal act, (iii) he commission of any felony, or misdemeanor involving a moral
turpitude, or (iv) the material breach of any covenant of confidentiality by
which such employee is bound.
Closing shall have the meaning ascribed to it in Section 9.1.
Closing Date shall have the meaning ascribed to it in Section 9.1.
A-1
Closing Date Receivables has the meaning ascribed to it in Section
1.1(a)(ix).
Code shall mean the U.S. Internal Revenue Code of 1986, as amended.
Confidential and Proprietary Information shall have the meaning ascribed to
it in Section 12.12.
Disability shall mean, with respect to any individual, the inability to
perform one's material duties of employment due to illness or injury for a
period in excess of one hundred and twenty (120) days during any twelve (12)
month period.
Encumbrance: Any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
Environmental Laws shall have the meaning ascribed to it in Section
2.15(b).
ERISA shall have the meaning ascribed to it in Section 2.13.
Excluded Assets and Certain Known Liabilities shall have the meaning
ascribed to it in Section 1.1(b).
Excluded Liabilities shall have the meaning ascribed to it in Section
1.1(d).
Financial Statements shall have the meaning ascribed to it in Section
2.4(a).
Furniture, Fixtures and Equipment shall have the meaning ascribed to it in
Section 1.1(a)(xi).
GAAP: Generally accepted accounting principles as set forth in statements
from Auditing Standards No. 69 entitled "The Meaning of `Present Fairly in
Conformance with Generally Accepted Accounting Principles in the Independent
Auditors Reports'" issued by the Auditing Standards Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
Governmental Entity: Any nation or any state, commonwealth, territory,
possession or tribe and any political subdivision, courts, departments,
commissions, boards, bureaus, agencies or other instrumentalities of any of the
foregoing.
Hazardous Material(s) shall have the meaning ascribed to it in Section
2.15(c).
Indebtedness: With respect to any Person (a) all indebtedness for borrowed
money; (b) that portion of obligations with respect to capital leases that is
properly classified as a liability on a balance sheet in conformity with GAAP;
(c) notes payable and drafts accepted representing extensions of credit whether
or not representing obligations for borrowed money; (d) any obligation owed for
all or any part of the deferred purchase price of property or services if the
purchase price is due more than six (6) months from the date the obligation is
incurred or is evidenced by a note or similar written instrument; and (e) all
indebtedness secured by any Encumbrance on any property or
A-2
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person.
Indemnifiable Claim shall have the meaning ascribed to it in Section
10.3(a).
Indemnitee shall have the meaning ascribed to it in Section 10.3(a).
Indemnitor shall have the meaning ascribed to it in Article 2.
Indemnity Basket shall have the meaning ascribed to it in Section 10.5(a).
Interim Financials shall have the meaning ascribed to it in Section 2.4(a).
Inventory shall have the meaning ascribed to it in Section 1.1(a)(x).
Knowledge of Seller or Seller's Knowledge or similar statements about facts
or circumstances recognized by Seller shall refer to the actual knowledge of any
of the Owners and the knowledge, after all due inquiry, of any of the officers,
directors or key management employees of Seller.
Leased or Owned Property shall have the meaning ascribed to it in Section
2.6(a).
Leased Real Property shall have the meaning ascribed to it in Section
1.1(a)(ii).
Material Adverse Effect: A material adverse effect on the business,
operations, condition (financial or otherwise) or prospects of Seller, which are
greater than $100,000 when aggregated with all other breaches, defaults or non-
performances of Seller (determined as if there were no Material Adverse Effect
qualifier).
Non-Public Information shall have the meaning ascribed to it in Section
4.4(a).
NLRB shall have the meaning ascribed to it in Section 2.14(b).
Owner shall have the meaning ascribed to it in the Preamble.
Owner's Cap shall have the meaning ascribed to it in Section 10.5(b).
Other Items of Property shall have the meaning ascribed to it in Section
1.1(a)(xii).
Person shall mean an individual, corporation, limited liability company,
partnership, joint venture, trust or unincorporated organization or association
or other form of business enterprise or a Governmental Entity.
Products shall mean all of the products of the Business.
Proprietary Information shall have the meaning ascribed to it in Section
2.12.
Purchase Price shall have the meaning ascribed to it in Section 1.2(a).
Purchased Assets shall have the meaning ascribed to it in Section 1.1(a).
A-3
Purchased Contracts shall have the meaning ascribed to it in Section
1.1(a)(iv).
Release shall have the meaning ascribed to it in Section 2.15(d).
Repayment Amount shall have the meaning ascribed to it in Section 1.1(d).
SEC Filings shall have the meaning ascribed to it in Section 3.7.
Seller shall have the meaning ascribed to it in the Preamble.
Seller Indemnitee shall have the meaning ascribed to it in Section 10.2.
Seller Cap shall have the meaning ascribed to it in Section 10.5(a).
Seller's Taxes shall mean any Tax attributable to or arising from the
operation of the Business prior to the Closing.
Tax shall mean any and all license and registration fees, taxes (including,
without limitation, income, minimum or alternative minimum tax, gross receipts,
ad valorem, value added, environmental tax, turnover, sales, use, personal
property (tangible and intangible), stamp, leasing, lease, user, leasing use,
excise, payroll, franchise, transfer, fuel, excess profits, occupational,
interest equalization and other taxes), levies, imposts, duties, charges or
withholdings of any nature whatsoever, imposed by any Governmental Entity,
together with any and all penalties, fines, additions to tax and interest
thereon.
Tax Returns shall have the meaning ascribed to it in Section 2.16.
2000 Top Customers shall have the meaning ascribed to it in Section 2.21.
A-4
LIST OF EXHIBITS
Exhibit A Promissory Note
Exhibit B ▇▇▇▇ of Sale and Assumption Agreement
Exhibit C-1 Non-Competition Agreement -- Owners
Exhibit C-2 Non-Competition Agreement -- Key Employee
Exhibit D Opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ -- Counsel to
Seller and the Owners
Exhibit E Consent and Joinder of Spouse
Exhibit F Form of Lease
LIST OF SCHEDULES
Schedule 1.1(a)(i) Business Rights.
Schedule 1.1(a)(ii) Pre-Paid Expenses.
Schedule 1.1(a)(iv) Contracts.
Schedule 1.1(a)(vi) Authorizations.
Schedule 1.1(a)(viii) Cash.
Schedule 1.1(a)(ix) Accounts Receivable.
Schedule 1.1(a)(x) Inventory.
Schedule 1.1(a)(xi) Furniture, Fixtures, Equipment, etc.
Schedule 1.1(a)(xii) Other Items of Property.
Schedule 1.1(b) Excluded Assets and Certain Known Liabilities.
Schedule 1.1(c) Liabilities Assumed by Buyer.
Schedule 1.4 Sales, Use and Transfer Taxes
Schedule 1.5 Allocation of Purchase Price and Adjustments.
Schedule 2.3(a) No Conflict (Seller).
Schedule 2.3(b) No Conflict (Owner).
Schedule 2.4 Financial Statements.
Schedule 2.5 Absence of Certain Facts or Events.
Schedule 2.6 Property, Leases and Encumbrances; Sufficiency of
Assets.
Schedule 2.7 Contracts and Commitments.
Schedule 2.8 Permits and Authorizations.
Schedule 2.9 No Violations.
Schedule 2.10 Claims, Investigations and Proceedings.
Schedule 2.11 Insurance.
Schedule 2.13 Employee Benefits.
Schedule 2.14 Employment Laws.
Schedule 2.18 No Insider Transactions.
Schedule 2.20 Inventories.
Schedule 2.21 Customers and Suppliers; International Sales.
Schedule 2.22 Taxes.
Schedule 2.23 Warranties.
Schedule 2.24 No Finders or Brokers.