EXHIBIT 10.34
ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of ___________,
2001, is made and entered into by and among PEMSTAR Inc., a Minnesota
corporation ("Buyer"), U.S. Assemblies New England, Inc., a Massachusetts
corporation ("Seller"), The MATCO Electronics Group, Inc. a Delaware corporation
("Parent") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual resident of the State of New
York ("▇▇▇▇▇▇▇▇").
WHEREAS, ▇▇▇▇▇▇▇▇ owns all or substantially all of the stock of Parent, and
Parent owns 100% of the stock of Seller, and Seller is engaged in the business
of electronic manufacturing services (the "Business"); and
WHEREAS, Seller desires to sell and assign to Buyer, and Buyer desires to
purchase and assume from Seller, on the terms and subject to the conditions set
forth in this Agreement, substantially all of the assets and certain liabilities
of Seller that are currently being used by Seller in the conduct of the
Business; and
WHEREAS, ▇▇▇▇▇▇▇▇ and Parent are willing to enter into this Agreement to
induce Buyer to purchase the assets of Seller.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements and the conditions set forth in this Agreement, Buyer,
Seller, Parent and ▇▇▇▇▇▇▇▇ hereby agree as follows:
ARTICLE I
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
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1.01 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, Seller shall, at the Closing (as defined in Section
3.01 hereof), sell, transfer and assign to Buyer, and Buyer shall purchase and
acquire from Seller, all of Seller's right, title and interest, as of the
Closing Date (as defined in Section 3.01 hereof), in and to the following assets
of Seller related to, or used in conjunction with, the Business (collectively,
the "Assets"):
(a) All of the equipment, machinery, vehicles, furniture, fixtures,
furnishings and leasehold improvements owned by Seller and used by Seller
in the operation of the Business, all of which are identified on Schedule
1.01(a) hereto, but excluding those assets which are identified as excluded
assets on Schedule 1.01(a);
(b) Seller's interest in all personal property leases to which Seller
is a party that are used in connection with the operation of the Business,
all of which leases are identified in Schedule 1.01(b) hereto;
(c) All of Seller's usable inventories of supplies, raw materials,
parts, finished goods, work-in-process, product labels and packaging
materials used in connection with the Business and Seller's interest in all
orders or contracts for the purchase of usable supplies, raw materials,
parts, product labels and packaging materials used in connection with the
Business,
but only to the extent that there are outstanding purchase orders (for
purchase within 90 days) from customers associated with such inventory and
the orders or contracts for such inventory, and which will be described on
Schedule 2.01 at the Closing;
(d) Seller's interest in all licenses, contracts or agreements with
respect to the Business to which Seller is a party and which are identified
on Schedule 1.01(d) hereto;
(e) All unfilled or uncompleted customer contracts, commitments or
purchase or sales orders received and accepted by Seller in connection with
the Business in the ordinary course of business and which are identified on
Schedule 1.01(e) hereto, including those mutually agreed to by Buyer and
Seller and added to Schedule 1.01(e) at the Closing;
(f) All documents or other tangible materials embodying technology or
intellectual property rights owned by, licensed to or otherwise controlled
by Seller and used in connection with the Business, whether such properties
are located on Seller's business premises or on the business premises of
Seller's suppliers or customers, including, without limitation all software
programs (including both source and object codes) and related documentation
for software used in or developed for support of the Business;
(g) All intellectual property rights, if any, owned by, licensed to
(but only to the extent assignable) or otherwise controlled by Seller or
used in, developed for use in or necessary to the conduct of the Business
as now conducted or planned to be conducted including, without limitation,
the rights to institute or maintain any action or investigation for and to
recover damages for any past infringement thereof or any actions of unfair
competition relating thereto, but excluding the Mapics software;
(h) All of Seller's customer, prospect, dealer and distributor lists,
sales literature, inventory records, purchase orders and invoices, sales
orders and sales order log books, customer information, commission records,
correspondence, employee payroll and personnel records, product data,
material safety data sheets, price lists, product demonstrations, quotes
and bids and all product catalogs and brochures;
(i) All permits, licenses and other governmental approvals held by
Seller with respect to the Business, to the extent they are assignable;
(j) All deposits made by Seller with respect to the Business, but
excluding Seller's deposit under the real estate lease for the property
described in Schedule 4.07(a); and
(k) Goodwill, all related tangibles and intangibles which Seller uses
in the conduct of the Business and all rights to continue to use the Assets
in the conduct of a going business.
The parties hereto expressly agree that Buyer is not assuming any of the
liabilities, obligations or undertakings relating to the foregoing Assets,
except for those liabilities and obligations specifically assumed by Buyer in
Section 1.02 hereof.
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1.02 Assumption of Liabilities. Buyer shall assume, pay, perform in
accordance with their terms or otherwise satisfy, as of the Closing Date:
(a) The liabilities of Seller set forth in Exhibit A hereto; and
(b) Seller's obligations under the leases, agreements, contracts,
arrangements and licenses described in Schedules 1.01(b), (d) and (e)
hereto.
1.03 Excluded Liabilities. Other than as set forth above in Section 1.02,
Seller shall retain, and Buyer shall not assume, and nothing contained in this
Agreement shall be construed as an assumption by Buyer of, any liabilities,
obligations or undertakings of Seller of any nature whatsoever, whether accrued,
absolute, fixed or contingent, known or unknown due or to become due,
unliquidated or otherwise. Seller shall be responsible for all of the
liabilities, obligations and undertakings of Seller not assumed by Buyer
pursuant to Section 1.02 hereof.
ARTICLE II
PURCHASE PRICE
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2.01 Amount. Subject to the purchase price adjustment provisions
immediately below, the total purchase price (the "Purchase Price") for the
Assets shall be Fifteen Million Two Hundred Forty Thousand Dollars
($15,240,000), which is composed of (subject to reallocation pursuant to Section
2.03 below) $3,200,000 for the inventory identified below, $5,000,000 for
equipment, fixed assets, etc., $4,250,000 for goodwill, and the assumption or
payoff at Closing of $2,790,000 of equipment-related long-term debt (which debt
is described in Exhibit A, and Exhibit A further identifies which debt will be
assumed and which will be paid off). If the principal balance of the
equipment-related long-term debt is less than $2,790,000 on the Closing Date,
then the $5,000,000 paid for the equipment will be increased by such difference.
The Purchase Price shall be adjusted, on a dollar-for-dollar basis, by an amount
equal to the difference (which may be a positive or negative number) between the
book value of the usable inventory purchased hereunder as of the Closing Date
and $3,200,000. The usable inventory to be purchased hereunder shall be
determined immediately prior to the Closing Date pursuant to the standards
described in Section 1.01(c), and shall be identified on Schedule 2.01 and
attached to this Agreement. The book value of such purchased inventory as of the
Closing Date shall be jointly determined by Buyer and Seller pursuant to a
physical inventory conducted immediately prior to the Closing Date and such
inventory shall be calculated in accordance with generally accepted accounting
principles applied on a consistent basis. Any disputes about the book value of
such purchased inventory shall be settled as soon as possible after the Closing
by an independent "big five" accounting firm chosen by Buyer and Seller. The
cost of such independent accounting firm shall be split between Buyer and
Seller. If there is a dispute regarding the book value of the purchased
inventory, Buyer shall pay on the Closing Date the purchase price for the
undisputed inventory and shall place in escrow with ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
on terms to be reasonably agreed the book value of the balance of the inventory
(as reflected on Seller's books). The escrow account shall be interest bearing
and invested in money market funds or government issues, whichever results in
the higher rate under the circumstances. Upon resolution of the disputed amount,
the escrowed funds and the pro rata share of earned interest, if any, shall be
paid to the parties in accordance with such resolution.
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The costs of such escrow shall be paid by the party whose calculation of the
inventory book value in dispute is furthest from the resolved amount. The costs
of the escrow may be withheld from the distribution and paid to the escrow agent
or the party who paid such escrow fees.
2.02 Manner of Payment. Buyer shall pay the cash portion of the Purchase
Price for the Assets (which would be $12,450,000 before any adjustments pursuant
to Section 2.01) on the Closing Date by wire transfer to Seller, as directed by
Seller, except that $1,000,000 of the cash portion of the Purchase Price shall
be paid directly by Buyer on the account of Seller to those suppliers of Seller
listed on Exhibit B in the amounts listed on Exhibit B. Buyer shall have the
right to offset from such payment any amounts Seller or Parent owes Buyer.
2.03 Allocation of Purchase Price. The Buyer and Seller have allocated the
Purchase Price among the Assets as set forth on Exhibit C, which exhibit shall
be updated as of the Closing Date in such a manner as determined by Buyer
subject to Seller's consent (which shall not be unreasonably withheld), after
taking into account, the applicable Treasury Regulations and the fair market
value of such items. Buyer shall prepare for filing all Returns (as defined in
Section 4.09(a)) that may be required with respect to the transaction provided
for herein pursuant to Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), any Treasury Regulations promulgated thereunder, any other
similar provision of the Code and any other similar, applicable foreign, state
or local tax law or regulation. Seller shall provide information that may be
required by Buyer for the purpose of preparing such Returns, execute and file
such Returns as requested by Buyer and file all other returns and tax
information on a basis that is consistent with such Returns prepared by Buyer.
ARTICLE III
CLOSING
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3.01 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Seller at 9:00 a.m.
on April 30, 2001, which is referred to herein as the "Closing Date," and the
Closing shall be deemed effective as of the beginning of business on the Closing
Date.
3.02 General Procedure. At the Closing, each party shall deliver to the
party entitled to receipt thereof the documents required to be delivered
pursuant to Article VI hereof and such other documents, instruments and
materials (or complete and accurate copies thereof, where appropriate) as may be
reasonably required in order to effectuate the intent and provisions of this
Agreement, and all such documents, instruments and materials shall be
satisfactory in form and substance to counsel for the receiving party. The
conveyance, transfer, assignment and delivery of the Assets shall be effected by
Seller's execution and delivery to Buyer of a ▇▇▇▇ of sale substantially in the
form attached hereto as Exhibit D (the "▇▇▇▇ of Sale") and such other
instruments of conveyance, transfer, assignment and delivery as Buyer shall
reasonably request to cause Seller to transfer, convey, assign and deliver the
Assets to Buyer, and the assignment and assumption of Seller's Liabilities to
Buyer shall be effected by Seller's and Buyer's execution of an assignment and
assumption agreement substantially in the form attached hereto as Exhibit E (the
"Assignment and Assumption Agreement").
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
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Seller and Parent hereby jointly and severally represent and warrant to
Buyer that, except as set forth in the Disclosure Schedule delivered by Seller
to Buyer on the date hereof (the "Disclosure Schedule") (which Disclosure
Schedule sets forth the exceptions to the representations and warranties
contained in this Article IV under captions referencing the Sections to which
such exceptions apply):
4.01 Incorporation and Corporate Power. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Massachusetts and has all requisite corporate power and authority and all
authorizations, licenses, permits and certifications necessary to carry on the
Business as now being conducted and to own, lease and operate the Assets.
4.02 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors and Shareholders of Seller, and, no other proceedings on its
part are necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by Seller and,
assuming that this Agreement is the valid and binding agreement of Buyer,
constitutes the valid and binding obligation of Seller, enforceable in
accordance with its terms.
4.03 Authority; No Breach. Seller has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by Seller
and the consummation of the transactions contemplated hereby do not conflict
with or result in any breach of any of the provisions of, or constitute a
default under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Seller or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Seller or the Assets are
bound or affected, or any law, statute, rule or regulation or order, judgment or
decree to which Seller or the Assets are subject, except as set forth in the
Disclosure Schedule under the caption referencing this Section 4.03.
4.04 Governmental Authorities; Consents. Except as set forth in the
Disclosure Schedule under the caption referencing this Section 4.04, the Seller
is not required to submit any notice, report or other filing with any
governmental authority in connection with the execution or delivery by it of
this Agreement or the consummation of the transactions contemplated hereby.
Except as set forth in the Disclosure Schedule, no consent, approval or
authorization of any governmental or regulatory authority is required to be
obtained by Seller in connection with its execution, delivery and performance of
this Agreement.
4.05 Financial Information. Seller has delivered to Buyer copies of the
following financial information: the unaudited balance sheets of the Seller as
of December 31, 2000 (the
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"Latest Balance Sheet") and December 31, 1999 and the unaudited statements of
earnings, shareholders' equity and cash flows of the Seller for the year ended
December 31, 2000 and December 31, 1999 (collectively, the "Financial
Information"). This Financial Information is based upon the information
contained in the books and records of Seller, fairly present the financial
condition of the Business as of the dates thereof and results of operations for
the periods referred to therein and were prepared in accordance with generally
accepted accounting principles, consistently applied throughout the periods
indicated. Since the respective dates of this Financial Information there have
been no material changes in the Business or the Assets.
4.06 Absence of Undisclosed Liabilities. With respect to the Assets or the
operations of the Business, Seller has no liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) arising out of
transactions or events heretofore entered into, or any action or inaction, or
any state of facts existing, with respect to or based upon transactions or
events heretofore occurring, except (i) as reflected in the Financial
Statements, (ii) liabilities which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit), or (iii) as otherwise set forth in the
Disclosure Schedule under the caption referencing this Section 4.06.
4.07 Title to Properties.
(a) Seller does not own any real property relating to the Business.
The real property demised by the leases (the "Leases") described under the
caption referencing this Section 4.07(a) in the Disclosure Schedule
constitutes all of the real property used or occupied by Seller used in
connection with the Business (the "Real Property"). The Real Property has
access, sufficient for the conduct of the Business as now conducted or as
presently proposed to be conducted, to public roads and to all utilities,
including electricity, sanitary and storm sewer, potable water, natural gas
and other utilities, used in the operation of the Business at that
location.
(b) The leases and licenses to be assumed by Buyer and listed in
Exhibit A or Schedules 1.01(b) or (d) are in full force and effect, and
Seller holds a valid and existing interest under each lease or license for
the term set forth under such caption in the Disclosure Schedule. Seller
has delivered to Buyer complete and accurate copies of each lease or
license, and none of such leases or licenses have been modified in any
respect, except to the extent that such modifications are disclosed by the
copies delivered to Buyer. Except as set forth in the Disclosure Schedule
referencing this Section 4.07(b), Seller is not in default, and no
circumstances exist which, if unremedied, would, either with or without
notice or the passage of time or both, result in such default under any of
such leases or licenses; nor, to the best knowledge of Seller, is any other
party to any of such leases or licenses in default.
(c) Except as set forth in the Disclosure Schedule referencing this
Section 4.07(c), Seller owns good and marketable title to the Assets,
including each of the tangible properties and tangible assets reflected on
the Latest Balance Sheet or acquired since the date thereof, free and clear
of all liens and encumbrances.
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(d) Schedule 1.01(a) sets forth a description of all the assets which
constitute equipment, machinery, motor vehicles, furniture, fixtures,
furnishings and leasehold improvements that are used in connection with the
operation of the Business. Except as otherwise described in the Disclosure
Schedule under the caption referencing this Section 4.07(d), all of the
buildings, machinery, equipment and other tangible assets necessary for the
conduct of the Business are in good condition and repair, ordinary wear and
tear excepted, and are usable in the ordinary course of business. There are
no defects in such assets or other conditions relating thereto which, in
the aggregate, materially adversely affect the operation or value of such
assets. Seller owns, or leases under valid leases, all buildings,
machinery, equipment and other tangible assets necessary for the conduct of
the Business.
(e) Except as set forth in the Disclosure Schedule referencing this
Section 407(e), Seller is not in violation of any applicable zoning
ordinance or other law, regulation or requirement relating to the operation
of any properties used in the operation of the Business, and Seller has not
received any notice of any such violation, or the existence of any
condemnation proceeding with respect to any of the Real Property, except,
in each case, with respect to violations the potential consequences of
which do not or will not have a material adverse effect on Seller.
(f) Seller has no knowledge of improvements made or contemplated to be
made by any public or private authority, the costs of which are to be
assessed as special taxes or charges against any of the Real Property, and
there are no present assessments.
4.08 Inventory. Seller's inventory of raw materials, work in process and
finished goods relating to the Business and purchased hereunder consists of
items of a quality and quantity usable and, with respect to finished goods only,
salable at the Seller's normal profit levels, in each case, in the ordinary
course of the business, and there are outstanding purchase orders (for purchase
within 90 days) from customers associated with such inventory. Seller's
inventory of finished goods generated by the Business is not obsolete, excess or
damaged and is merchantable and fit for its particular use. As of the date of
the Latest Balance Sheet, the values at which such inventory is carried on the
Latest Balance Sheet are in accordance with generally accepted accounting
principles. The Disclosure Schedule, under the caption referencing this Section
4.08, contains a materially complete and accurate summary of the Seller's
inventory of raw materials, work in progress and finished goods relating to the
Business as of the dates set forth on the Schedule.
4.09 Tax Matters.
(a) Each of Seller and any subsidiary, any affiliated, combined or
unitary group of which the Company or any subsidiary is or was a member,
any "Plans" (as defined in Section 4.15 hereof), as the case may be (each,
a "Tax Affiliate" and, collectively, the "Tax Affiliates"), has: (i) timely
filed (or has had timely filed on its behalf) all returns, declarations,
reports, estimates, information returns, and statements ("Returns")
required to be filed or sent by it in respect of any "Taxes" (as defined in
subsection (b) below) or required to be filed or sent by it by any taxing
authority having jurisdiction; (ii) timely and properly paid (or has had
paid on its
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behalf) all Taxes shown to be due and payable on such Returns; (iii)
established on its Latest Balance Sheet, in accordance with generally
accepted accounting principles, reserves that are adequate for the payment
of any Taxes not yet due and payable; (iv) complied with all applicable
laws, rules, and regulations relating to the withholding of Taxes and the
payment thereof (including, without limitation, withholding of Taxes under
Sections 1441 and 1442 of the Internal Revenue Code of 1986, as amended
(the "Code"), or similar provisions under any foreign laws), and timely and
properly withheld from individual employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and
paid over under all applicable laws. There are no liens for Taxes upon any
of the assets, except liens for Taxes not yet due.
(b) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies, or other assessments, including, without limitation,
all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment,
social security, unemployment, excise, estimated, severance, stamp,
occupation, property, or other taxes, customs duties, fees, assessments, or
charges of any kind whatsoever, including, without limitation, all interest
and penalties thereon, and additions to tax or additional amounts imposed
by any taxing authority, domestic or foreign, upon Seller or any Tax
Affiliate.
4.10 Contracts and Commitments.
(a) The Disclosure Schedule, under the caption referencing this
Section 4.10(a), lists the following agreements, whether oral or written,
to which Seller is a party, which are currently in effect, and which relate
to the operation of the Business or the Assets: (i) collective bargaining
agreement or contract with any labor union; (ii) bonus, pension, profit
sharing, retirement or other form of deferred compensation plan, other than
as described under the caption referencing Section 4.15 hereof (or excluded
by such Section from inclusion thereunder) in the Disclosure Schedule;
(iii) hospitalization insurance or other welfare benefit plan or practice,
whether formal or informal, other than as described under the caption
referencing Section 4.15 hereof in the Disclosure Schedule (or excluded by
such Section from inclusion thereunder); (iv) contract for the employment
of any officer, individual employee or other person on a full-time or
consulting basis or relating to severance pay for any such person; (v)
confidentiality agreement; (vi) agreement or indenture relating to the
borrowing of money or to mortgaging, pledging or otherwise placing a lien
on any of the Assets; (vii) guaranty of any obligation for borrowed money
or otherwise; (viii) lease or agreement under which it is lessee of, or
holds or operates any property, real or personal, owned by any other party,
for which the annual rental exceeds $5,000; (ix) lease or agreement under
which it is lessor of, or permits any third party to hold or operate, any
property, real or personal, for which the annual rental exceeds $5,000; (x)
contract or group of related contracts with the same party for the purchase
of products or services under which the undelivered balance of such
products or services is in excess of $25,000; (xi) contract or group of
related contracts with the same party for the sale of products or services
under which the undelivered balance of such products or services has a
sales price in excess of $25,000; (xii) contract or group of related
contracts with the same party (other than any contract or group of related
contracts for the purchase or sale of products or services) continuing over
a period of more than six months from the date or dates thereof, not
terminable
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by it on 30 days' or less notice without penalty and involving more than
$25,000; (xiii) contract which prohibits Seller from freely engaging in
business anywhere in the world; (xiv) contract for the distribution of any
of the products of the Business (including any distributor, sales and
original equipment manufacturer contract); (xv) franchise agreement; (xvi)
license agreement or agreement providing for the payment or receipt of
royalties or other compensation by Seller in connection with the
intellectual property rights listed under the caption referencing Section
4.11 hereof in the Disclosure Schedule; (xvii) contract or commitment for
capital expenditures in excess of $25,000; (xviii) agreement for the sale
of any capital asset; or (xix) other agreement which is either material to
the Business or was not entered into in the ordinary course of business.
(b) Except as disclosed in the Disclosure Schedule under the caption
referencing this Section 4.10(b), Seller has performed all obligations
required to be performed by it in connection with the contracts or
commitments required to be disclosed in the Disclosure Schedule under the
caption referencing Section 4.10(a) and is not in receipt of any claim of
default under any contract or commitment required to be disclosed under
such caption; Seller has no present expectation or intention of not fully
performing any material obligation pursuant to any contract or commitment
required to be disclosed under such caption; and Seller has no knowledge of
any breach or anticipated breach by any other party to any contract or
commitment required to be disclosed under such caption.
(c) Prior to the date of this Agreement, Buyer has been supplied with
a true and correct copy of each written contract or commitment, and a
written description of each oral contract or commitment, referred to under
the caption referencing Section 4.10(a) in the Disclosure Schedule,
together with all amendments, waivers or other changes thereto.
4.11 Intellectual Property Rights. The Disclosure Schedule describes under
the caption referencing this Section 4.11 all intellectual property rights which
have been licensed to third parties and those intellectual property rights which
are licensed from third parties. Seller has taken all necessary action to
protect the intellectual property rights set forth under such caption. Seller
has not received any notice of, nor are there any facts known to Seller which
indicate a likelihood of, any infringement or misappropriation by, or conflict
from, any third party with respect to the intellectual property rights listed in
the Disclosure Schedule; no claim by any third party contesting the validity of
any intellectual property rights listed under such caption has been made, is
currently outstanding or, to the best knowledge of the Company, is threatened;
Seller has not received any notice of any infringement, misappropriation or
violation by Seller of any intellectual property rights of any third parties and
Seller has not infringed, misappropriated or otherwise violated any such
intellectual property rights; and no infringement, illicit copying,
misappropriation or violation has occurred or will occur with respect to
products currently being sold by Seller or with respect to the products
currently under development (in their present state of development) or with
respect to the conduct of the Business as now conducted.
4.12 Litigation. Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.12, there are no actions, suits, proceedings,
orders or investigations pending or, to the best knowledge of Seller, threatened
against Seller, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board,
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bureau, agency or instrumentality, domestic or foreign, relating to the Business
and there is no reasonable basis known to Seller for any of the foregoing.
4.13 Warranties. The Disclosure Schedule summarizes under the caption
referencing this Section 4.13 all claims outstanding, pending or, to the best
knowledge of Seller, threatened for breach of any warranty relating to any
products of the Business sold by Seller prior to the date hereof. The
description of Seller's product warranties set forth under the caption
referencing this Section 4.13 is correct and complete. The reserves for warranty
claims on the Latest Balance Sheet are consistent with Seller's prior practices
and are fully adequate to cover all warranty claims made or to be made against
any products of the Business sold prior to the date thereof.
4.14 Employees. Except as set forth in the Disclosure Schedule under the
caption referencing this Section 4.14, and only with respect to employees of
Seller who perform functions in connection with the Business: (a) to the best
knowledge of Seller, no employee of Seller and no group of the Seller's
employees has any plans to terminate his or its employment; (b) Seller has
complied with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes; (c) Seller has no material labor
relations problem pending and its labor relations are satisfactory; (d) there
are no workers' compensation claims pending against Seller nor is Seller aware
of any facts that would give rise to such a claim; (e) to the best knowledge of
Seller, no employee of Seller is subject to any secrecy or noncompetition
agreement or any other agreement or restriction of any kind that would impede in
any way the ability of such employee to carry out fully all activities of such
employee in furtherance of the Business; and (f) no employee or former employee
of Seller has any claim with respect to any intellectual property rights of
Seller set forth under the caption referencing Section 4.14 hereof in the
Disclosure Schedule. The Disclosure Schedule, under the caption referencing this
Section 4.14, lists, as of the date set forth in the Disclosure Schedule, each
employee of Seller who performs functions in connection with the Business and
the position, title, remuneration (including any scheduled salary or
remuneration increases), date of employment and accrued vacation pay of each
such employee.
4.15 Employee Benefit Plans.
(a) Except as set forth under the caption referencing Section 4.15
hereof in the Disclosure Schedule, with respect to all employees and former
employees of Seller who perform or performed functions in connection with
the Business and all dependents and beneficiaries of such employees and
former employees: (i) Seller does not maintain or contribute to any
nonqualified deferred compensation or retirement plans, contracts or
arrangements; (ii) Seller does not maintain or contribute to any qualified
defined contribution plans (as defined in Section 3(34) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section
414(i) of the Code; (iii) Seller does not maintain or contribute to any
qualified defined benefit plans (as defined in Section 3(35) of ERISA or
Section 414(j) of the Code); and (iv) Seller does not maintain or
contribute to any employee welfare benefit plans (as defined in Section
3(1) of ERISA).
10
(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits), all employee benefit plans (as
defined in Section 3(3) of ERISA) which Seller does maintain or to which it
does contribute (collectively, the "Plans") comply in all material respects
with the requirements of ERISA and the Code. With respect to the Plans, (i)
all required contributions which are due have been made and a proper
accrual has been made for all contributions due in the current fiscal year;
(ii) there are no actions, suits or claims pending, other than routine
uncontested claims for benefits; and (iii) there have been no prohibited
transactions (as defined in Section 406 of ERISA or Section 4975 of the
Code).
(c) Buyer has received true and complete copies of the most recent
determination letter, if any, received by Seller from the Internal Revenue
Service regarding the Plans which Seller maintains or to which it
contributes and any amendment to any Plan made subsequent to any Plan
amendments covered by any such determination letter.
(d) Seller does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. Seller has no
actual or potential liabilities under Section 4201 of ERISA for any
complete or partial withdrawal from a multi-employer plan. Seller has no
actual or potential liability for death or medical benefits after
separation from employment, other than (i) death benefits under the
employee benefit plans or programs (whether or not subject to ERISA) set
forth under the caption referencing this Section 4.15 in the Disclosure
Schedule and (ii) health care continuation benefits described in Section
4980B of the Code.
(e) Neither Seller nor any of its directors, officers, employees or
other "fiduciaries", as such term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any
other applicable law with respect to the Plans which would subject Seller,
Buyer, Buyer's subsidiaries or any of their respective directors, officers
or employees to any liability under ERISA or any applicable law.
(f) Seller has not incurred any liability for any tax or civil penalty
or any disqualification of any employee benefit plan (as defined in Section
3(3) of ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6 of
Title I and Section 502(i) of ERISA.
4.16 Suppliers. The Disclosure Schedule, under the caption referencing this
Section 4.16, lists the 10 largest suppliers of Seller relating to the Business
for the fiscal year ended December 31, 2000 and for the two-month period ended
February 28, 2001 and sets forth opposite the name of each such supplier the
approximate percentage of net sales or purchases by Seller attributable to such
supplier for each such period.
4.17 Compliance with Laws; Permits.
(a) Seller and its officers, directors, agents and employees have
complied in all material respects with all applicable laws, regulations and
other requirements, including, but not limited to, federal, state, local
and foreign laws, ordinances, rules, regulations and other requirements
pertaining to product labeling, consumer products safety, equal employment
opportunity, employee retirement, affirmative action and other hiring
practices, occupational
11
safety and health, workers' compensation, unemployment and building and
zoning codes, which materially affect the Business, the Assets or the Real
Property and to which Seller may be subject, and no claims have been filed
against Seller alleging a violation of any such laws, regulations or other
requirements. Seller has no knowledge of any action, pending or threatened,
to change the zoning or building ordinances or any other laws, rules,
regulations or ordinances affecting the Assets or the Real Property. Seller
is not relying on any exemption from or deferral of any such applicable
law, regulation or other requirement that would not be available to Buyer
after it acquires the Assets.
(b) Seller has, in full force and effect, all licenses, permits and
certificates, from federal, state, local and foreign authorities
(including, without limitation, federal and state agencies regulating
occupational health and safety) necessary to conduct its Business and own
and operate Assets (other than Environmental Permits, as such term is
defined in Section 4.18(c) hereof) (collectively, the "Permits"). A true,
correct and complete list of all the Permits is set forth under the caption
referencing this Section 4.17 in the Disclosure Schedule, with an
indication as to whether the Permit is assignable to Buyer. Seller has
conducted its business in compliance with all material terms and conditions
of the Permits.
(c) In particular, but without limiting the generality of the
foregoing, Seller has not violated and has no liability, and has not
received a notice or charge asserting any violation of or liability under,
the federal Occupational Safety and Health Act of 1970 or any other federal
or state acts (including rules and regulations thereunder) regulating or
otherwise affecting employee health and safety in connection with the
Business.
4.18 Environmental Matters.
(a) As used in this Section 4.18, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as
defined in or governed by any federal, state or local law, statute,
code, ordinance, regulation, rule or other requirement relating to
such substance or otherwise relating to the environment or human
health or safety, including without limitation any waste, material,
substance, pollutant or contaminant that might cause any injury to
human health or safety or to the environment or might subject Seller
to any imposition of costs or liability under any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules, regulations, codes, ordinances, orders,
decrees, directives, permits, licenses and judgments relating to
pollution, contamination or protection of the environment (including,
without limitation, all applicable federal, state, local and foreign
laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to Hazardous
Materials in effect as of the date of this Agreement).
12
(iii)"Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether
intentional or unintentional, of any Hazardous Material.
(b) Seller, with respect to the Business and the Real Property, is in
material compliance with all applicable Environmental Laws.
(c) Seller has obtained, and maintained in full force and effect, all
environmental permits, licenses, certificates of compliance, approvals and
other authorizations necessary to conduct the Business and own or operate
the Assets, including the Real Property (collectively, the "Environmental
Permits"). A copy of each such Environmental Permit has been provided by
Seller to Buyer. Seller has conducted the Business in compliance with all
terms and conditions of the Environmental Permits. Seller has filed all
reports and notifications required to be filed under and pursuant to all
applicable Environmental Laws with respect to the Business and the Assets.
(d) Except as set forth in the Disclosure Schedule under the caption
referencing this Section 4.18: (i) no Hazardous Materials have been
generated, treated, contained, handled, located, used, manufactured,
processed, buried, incinerated, deposited, stored, or released on, under or
about any part of the Real Property, (ii) the Real Property and any
improvements thereon, contain no asbestos, urea, formaldehyde, radon at
levels above natural background, polychlorinated biphenyls (PCBs) or
pesticides, and (iii) no aboveground or underground storage tanks are
located on, under or about the Real Property, or have been located on,
under or about the Real Property and then subsequently been removed or
filled. If any such storage tanks exist on, under or about the Real
Property, such storage tanks have been duly registered with all appropriate
governmental entities and are otherwise in compliance with all applicable
Environmental Laws.
(e) Except as set forth in the Disclosure Schedule under the caption
referencing this Section 4.18, Seller has not received notice alleging in
any manner that Seller is, or might be potentially responsible for, any
Release of Hazardous Materials, or any costs arising under or violation of
Environmental Laws with respect to the Business or the Assets.
(f) No expenditure will be required in order for Buyer to comply with
any Environmental Laws in effect at the time of the Closing in connection
with the operation or continued operation of the Business or the Real
Property in a manner consistent with the current operation thereof by
Seller.
(g) Seller and the Real Property are not and have not been listed on
the United States Environmental Protection Agency National Priorities List
of Hazardous Waste Sites, or any other list, schedule, law, inventory or
record of hazardous or solid waste sites maintained by any federal, state
or local agency.
(h) Seller has disclosed and delivered to Buyer all environmental
reports and investigations which Seller has obtained or ordered with
respect to the Business and the Assets, including the Real Property.
13
(i) No part of the Business or the Assets (including the Real
Property) have been used as a landfill, dump or other disposal, storage,
transfer, handling or treatment area for Hazardous Materials, or as a
gasoline service station or a facility for selling, dispensing, storing,
transferring, disposing or handling petroleum and/or petroleum products.
(j) No lien has been attached or filed against Seller (with respect to
the Business or the Assets) or the Assets or the Real Property in favor of
any governmental or private entity for (i) any liability or imposition of
costs under or violation of any applicable Environmental Law; or (ii) any
Release of Hazardous Materials.
(k) Seller, on behalf of itself and its successors and assigns, hereby
waives, releases and agrees not to bring any claim, demand, cause of action
or proceeding, including without limitation any cost recovery action,
against Buyer under any Environmental Law in connection with the Buyer's
purchase, ownership or operation of the Business and the Assets. Except as
provided above, Buyer, on behalf of itself and its successors and assigns,
hereby waives, releases and agrees not to bring any claim, demand, cause of
action or proceeding, including without limitation any cost recovery
action, against Seller under any Environmental Law arising from Buyer's
operation of the Business and the Assets.
4.19 Brokerage. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller that:
5.01 Incorporation and Corporate Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Minnesota, with the requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
5.02 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Buyer and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement.
This Agreement has been duly executed and delivered by Buyer and constitutes the
valid and binding obligation of Buyer, enforceable in accordance with its terms.
5.03 No Breach. The execution, delivery and performance of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
do not conflict with or result in any breach of any of the provisions of,
constitute a default under, result in a violation of,
14
result in the creation of a right of termination or acceleration or any lien,
security interest, charge or encumbrance upon any assets of Buyer, or require
any authorization, consent, approval, exemption or other action by or notice to
any court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Buyer or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Buyer is bound or affected,
or any law, statute, rule or regulation or order, judgment or decree to which
Buyer is subject.
5.04 Governmental Authorities; Consents. Buyer is not required to submit
any notice, report or other filing with any governmental authority in connection
with the execution or delivery by it of this Agreement or the consummation of
the transactions contemplated hereby. No consent, approval or authorization of
any governmental or regulatory authority or any other party or person is
required to be obtained by Buyer in connection with its execution, delivery and
performance of this Agreement or the transactions contemplated hereby.
5.05 Brokerage. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Buyer.
ARTICLE VI
COVENANTS OF SELLER AND CONDITIONS TO CLOSING
---------------------------------------------
6.01 Conduct of the Business. In connection with the Assets or the
Business, Seller agrees to observe each term set forth in this Section 6.01 and
agrees that, from the date hereof until the Closing Date, unless otherwise
consented to by Buyer in writing:
(a) The Business shall be conducted only in, and Seller shall not take
any action except in, the ordinary course of Seller's business, on an
arm's-length basis and in accordance in all material respects with all
applicable laws, rules and regulations and Seller's past custom and
practice;
(b) Seller shall not, directly or indirectly, do or permit to occur
any of the following insofar as they relate to Business or the Assets: (i)
sell, pledge, dispose of or encumber any of the Assets, except in the
ordinary course of business; (ii) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership, joint venture or other business organization or
division or material assets thereof; (iii) incur any indebtedness for
borrowed money or issue any debt securities except the borrowing of working
capital in the ordinary course of business and consistent with past
practice; (iv) accelerate, beyond the normal collection cycle, collection
of accounts receivable; or (v) enter into or propose to enter into, or
modify or propose to modify, any agreement, arrangement or understanding
with respect to any of the matters set forth in this Section 6.01(b);
(c) Seller shall not, directly or indirectly, (i) enter into or modify
any employment, severance or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termination pay to, any
officers or directors or consultants; or (ii) in the case of employees,
officers or consultants, take any action with respect to the grant of any
15
bonuses, salary increases, severance or termination pay or with respect to
any increase of benefits payable in effect on the date hereof;
(d) Seller shall not adopt or amend any bonus, profit sharing,
compensation, pension, retirement, deferred compensation, employment or
other employee benefit plan, trust, fund or group arrangement for the
benefit or welfare of any employees or affiliates;
(e) Seller shall not cancel or terminate its current insurance
policies covering the Assets and the Business, or cause any of the coverage
thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to or
greater than the coverage under the canceled, terminated or lapsed policies
for substantially similar premiums are in full force and effect;
(f) Seller shall (i) use its best efforts to preserve intact the
organization and goodwill of the Business, keep available the services of
Seller's officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having
business relationships with Seller in connection with the Business; (ii)
confer on a regular and frequent basis with representatives of Buyer to
report operational matters and the general status of ongoing operations
with respect to the Business; (iii) not intentionally take any action which
would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at the
Closing; (iv) notify Buyer of any emergency or other change in the normal
course of the Business or in the operation of the properties of the
Business and of any governmental or third party complaints, investigations
or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or
hearing would be material, individually or in the aggregate, to the
business, operations or financial condition of Seller or to Seller's or
Buyer's ability to consummate the transactions contemplated by this
Agreement; and (v) promptly notify Buyer in writing if Seller shall
discover that any representation or warranty made by it in this Agreement
was when made, or has subsequently become, untrue in any respect;
(g) Seller shall file any Tax returns, elections or information
statements with respect to any liabilities for Taxes of Seller or other
matters relating to Taxes of Seller which affect the Assets and pursuant to
applicable law must be filed prior to the Closing Date;
6.02 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article IV hereof
shall be true and correct in all material respects at and as of the Closing
Date as though then made and as though the Closing Date had been
substituted for the date of this Agreement throughout such representations
and warranties (without taking into account any disclosures by Seller of
discoveries, events or occurrences arising on or after the date hereof),
except that any such representation or warranty made as of a specified date
(other than the date hereof) shall only need to have been true on and as of
such date;
16
(b) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic
or foreign, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of
the transactions contemplated hereby or seeking to obtain material damages
in connection with such transactions, (ii) seeking to prohibit direct or
indirect ownership or operation by Buyer of all or a material portion of
the Assets, or to compel Buyer or any of its subsidiaries to dispose of or
to hold separately all or a material portion of the business or assets of
Buyer and its subsidiaries, as a result of the transactions contemplated
hereby, (iii) seeking to invalidate or render unenforceable any material
provision of this Agreement, or (iv) otherwise relating to and materially
adversely affecting the transactions contemplated hereby;
(c) Buyer shall not have discovered any fact or circumstance existing
as of the date of this Agreement which has not been disclosed to Buyer as
of the date of this Agreement regarding the Business or Assets, which is,
individually or in the aggregate with other such facts and circumstances,
materially adverse to the value of the Assets or the Business, as
determined by the Buyer in its reasonable discretion;
(d) There shall have been no damage, destruction or loss of or to any
of the Assets, whether or not covered by insurance, which, in the
aggregate, has, or would be reasonably likely to have, a material adverse
effect on the Assets or the Business;
(e) Buyer shall have negotiated to its satisfaction the terms of a
Lease Agreement for the facility currently leased by Seller (which Lease
Agreement is referenced in subsection (g) (iii) below and shall include the
consent of the Massachusetts Industrial Finance Agency and an Attornment
Agreement acceptable to Buyer);
(f) Buyer shall have received evidence of the appropriate consents as
are necessary, in Buyer's judgment, for Buyer to assume the leases or debt
to be assumed by Buyer under this Agreement on terms satisfactory to Buyer;
(g) On the Closing Date, Seller shall have delivered to Buyer all of
the following:
(i) an executed copy of the ▇▇▇▇ of Sale and such other
instruments of conveyance, transfer, assignment and delivery as Buyer
shall have reasonably requested pursuant to Section 3.02 hereof;
(ii) an executed copy of the Assignment and Assumption Agreement;
(iii)a Lease Agreement executed by the owner of the Real Property
in the form attached hereto as Exhibit F (the "Lease Agreement") (if
the Lease Agreement is not attached at the time of the execution of
this Agreement, then it will be attached if and when Buyer
successfully negotiates the terms as described in subsection (e)
above);
(iv) such representations, warranties and covenants, which shall
be incorporated into this Agreement and subject to Article VIII,
regarding the assumption of the
17
debt under the Industrial Development Revenue Bonds as Buyer deems
necessary and reasonable under the circumstances;
(v) certificate of the President of Seller dated as of the
Closing Date stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied;
(vi) an opinion letter from legal counsel to Seller addressed to
Buyer opining as to the enforceability of this Agreement, the ▇▇▇▇ of
Sale and the Assignment and Assumption Agreement under Massachusetts
law in such form as is reasonably satisfactory to Buyer; and
(vii) such other certificates, documents and instruments as Buyer
reasonably requests related to the transactions contemplated hereby
(including UCC releases or termination statements from the creditors
of Seller and Parent with liens on any of the Assets and the
Attornment Agreement referred to in subsection (e) above).
(h) Seller shall have made an arrangement with Microsoft Corporation
on terms satisfactory to Buyer so that Buyer will have appropriate paid-up
licenses to all the Microsoft software currently being used by Seller in
the Business.
(i) Buyer shall have received and shall be satisfied with the results
of an environmental audit of the operations of and the real property used
by the Business.
6.03 Conditions to Seller's Obligations. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) On the Closing Date, Buyer will have delivered to Seller
(i) an executed copy of the Assignment and Assumption Agreement;
and
(ii) an executed copy of the Lease Agreement.
(b) On the Closing Date, Buyer shall have delivered to Escrow Agent
the purchase price as determined pursuant to section 2.01 above.
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
7.01 Employment Matters. Effective as of the Closing Date, Buyer shall
offer to hire all qualified employees of Seller who Buyer reasonably believes
are necessary and qualified to operate its business. All terms, including
benefits, of each offer to such person shall be determined by Buyer in its sole
discretion and nothing herein shall constitute an agreement to assume or be
bound by any previous or existing agreement between Seller and any of Seller's
employees or a guaranty that any employee of Seller, to whom an offer of
employment may be
18
made, shall be entitled to remain in the employment of Buyer for a specified
period of time. An employee of the Business to whom an offer of employment is
made by Buyer and who accepts such offer shall become an employee of Buyer on
the day such person reports to work for the Buyer. Such person who is unable to
report to work for Buyer on the Closing Date due to illness, injury or other
reason shall remain an employee of Seller until such person reports to work for
Buyer. Seller shall remain solely responsible for all salaries, wages, benefits,
severance arrangements and all other terms of employment for (a) each person who
may become an employee of Buyer accruing prior to the date such person becomes
an employee of Buyer and (b) each employee of the Business who does not become
an employee of Buyer accruing at any time.
7.02 Payment of Seller Liabilities. Seller agrees that, after the Closing,
it shall pay in the ordinary course of business all liabilities of Seller
related to the Business and not provided for in the Escrow Agreement.
7.03 Non-Competition.
(a) For a period of two (2) years from and after the Closing Date
("Non-Competition Period"), Seller, Parent, or any corporation or other
entity or business with which Seller or Parent is in any way affiliated
shall not directly or indirectly, without the prior written consent of
Buyer, (i) engage anywhere in the Restricted Territory, or have any
ownership interest in (except for ownership of one percent (1%) or less of
any entity whose securities have been registered under the Securities Act
or the Exchange Act), or participate in the financing, operation,
management or control of, any firm, partnership, corporation, entity or
business that engages or participates in a "Seller Competing Business
Purpose," (ii) solicit any business from or perform any business for any
customer of Seller existing on the Closing Date and identified on Schedule
7.03(a), (iii) induce or attempt to induce any customer, supplier,
distributor, licensee or other business relation of the Seller to cease
doing business with the Buyer or any affiliate of Buyer, or in any way
interfere with the relationship between any such customer, supplier,
distributor, licensee or business relation, (iv) request, induce or attempt
to influence, directly or indirectly, any employee of Buyer to leave the
employ of Buyer, or in any way interfere with the relationship between
Buyer and any employee thereof, or (v) employ any person who as of the date
of this Agreement is, or after such date is, an employee of Buyer or any
affiliate of Buyer, or was within the preceding one-year period an employee
of Seller or any affiliate of Seller. The term "Restricted Territory" shall
mean Massachusetts, New Hampshire and Rhode Island. The term "Seller
Competing Business Purpose" means the Business as conducted at the Closing
Date.
(b) Seller and Parent acknowledge and agree that their covenants and
obligations with respect to non-competition relate to special, unique and
extraordinary matters and that a violation of any of the terms of such
covenants and obligations will cause irreparable injury for which adequate
remedies are not available at law. Therefore, Seller and Parent agree that
Buyer will be entitled to an injunction, restraining order or such other
equitable relief as a court of competent jurisdiction may deem necessary or
appropriate to restrain Seller and/or Parent or its affiliates from
committing any violation of the covenants set forth in this Section
7.03(b).
19
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
-------------------------
8.01 Survival of Representations and Warranties. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article IV and
Article V hereof shall survive the Closing.
8.02 (a) Indemnification by Seller. Seller and Parent jointly and severally
agree to indemnify in full Buyer and its officers, directors, employees, agents
and stockholders (collectively, the "Buyer Indemnified Parties") and hold them
harmless against any loss, liability, deficiency, damage, expense or cost
(including reasonable legal expenses) (collectively, "Losses"), which Buyer
Indemnified Parties may suffer, sustain or become subject to, as a result of (i)
any misrepresentation in any of the representations and warranties of Seller
contained in this Agreement or in any exhibits, schedules, certificates or other
documents delivered or to be delivered by or on behalf of Seller pursuant to the
terms of this Agreement or otherwise referenced or incorporated in this
Agreement (collectively, the "Related Documents"), (ii) any breach of, or
failure to perform, any agreement of Seller contained in this Agreement or any
of the Related Documents, (iii) any "Claims" (as defined in Section 8.04(a)
hereof) or threatened Claims against Buyer arising out of the actions or
inactions of Seller with respect to the Assets or the Business prior to the
Closing, or (iv) any liabilities of the Seller or the Business not specifically
assumed in this Agreement (collectively, "Buyer Losses").
(b) Indemnification by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇ agrees to indemnify
in full the Buyer Indemnified Parties and hold them harmless against any
Loss which Buyer Indemnified Parties may suffer, sustain or become subject
to, as a result of Buyer Losses, but only after and to the extent that
Buyer has fully and completely exhausted its rights and remedies against
Seller and Parent pursuant to Section 8.02(a) of this Agreement and is
unable to collect some or all of the obligation owed to Buyer pursuant to
Section 8.02(a) from Parent and/or Seller. Buyer expressly agrees that it
may not seek indemnification from ▇▇▇▇▇▇▇▇ unless and until it has first
exhausted its remedies against Seller and Parent. Buyer further agrees that
it will notify ▇▇▇▇▇▇▇▇ of any claims to indemnification it may have
against Parent or Seller simultaneously with notifying Parent or Seller of
the same.
8.03 Indemnification by Buyer. Buyer agrees to indemnify in full the
Seller, and its officers, directors, employees, agents and stockholders
(collectively, the "Seller Indemnified Parties") and hold them harmless against
any Losses which any of the Seller Indemnified Parties may suffer, sustain or
become subject to as a result of (i) any misrepresentation in any of the
representations and warranties of Buyer contained in this Agreement or in any of
the Related Documents, (ii) any breach of, or failure to perform, any agreement
of Buyer contained in this Agreement or any of the Related Documents, or (iii)
any "Claims" (as defined in Section 8.04(a) hereof) or threatened Claims against
Seller arising out of the actions or inactions of Buyer with respect to the
Assets or the Business after the Closing (collectively, "Seller Losses").
8.04 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Buyer Indemnified Party" or "Seller Indemnified Party," as
applicable, the "Notifying
20
Party" shall refer to the party hereto whose Indemnified Parties are entitled to
indemnification hereunder, and the "Indemnifying Party" shall refer to the party
hereto obligated to indemnify such Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability or the
costs or expenses of which are Losses (any such third party action or
proceeding being referred to as a "Claim"), the Notifying Party shall give
the Indemnifying Party prompt notice thereof. The failure to give such
notice shall not affect any Indemnified Party's ability to seek
reimbursement unless such failure has materially and adversely affected the
Indemnifying Party's ability to defend successfully a Claim. The
Indemnifying Party shall be entitled to contest and defend such Claim;
provided, that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently contests
and defends such Claim. Notice of the intention so to contest and defend
shall be given by the Indemnifying Party to the Notifying Party within 20
business days after the Notifying Party's notice of such Claim (but, in all
events, at least five business days prior to the date that an answer to
such Claim is due to be filed). Such contest and defense shall be conducted
by reputable attorneys employed by the Indemnifying Party. The Notifying
Party shall be entitled at any time, at its own cost and expense (which
expense shall not constitute a Loss unless the Notifying Party reasonably
determines that the Indemnifying Party is not adequately representing or,
because of a conflict of interest, may not adequately represent, any
interests of the Indemnified Parties, and only to the extent that such
expenses are reasonable), to participate in such contest and defense and to
be represented by attorneys of its or their own choosing. If the Notifying
Party elects to participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the conduct of such defense.
Neither the Notifying Party nor the Indemnifying Party may concede, settle
or compromise any Claim without the consent of the other party, which
consents will not be unreasonably withheld. Notwithstanding the foregoing,
(i) if a Claim seeks equitable relief or (ii) if the subject matter of a
Claim relates to the ongoing business of any of the Indemnified Parties,
which Claim, if decided against any of the Indemnified Parties, would
materially adversely affect the ongoing business or reputation of any of
the Indemnified Parties, then, in each such case, the Indemnified Parties
alone shall be entitled to contest, defend and settle such Claim in the
first instance and, if the Indemnified Parties do not contest, defend or
settle such Claim, the Indemnifying Party shall then have the right to
contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party
that it does not dispute the claim described in such notice or fails to
notify the Notifying Party within 30 days after delivery of such notice by
the Notifying Party whether the Indemnifying Party disputes the claim
described in such notice, the Loss in the amount specified in the Notifying
Party's notice will be conclusively deemed a liability of the Indemnifying
Party and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has timely disputed
its Liability with respect to such claim, the Chief Executive Officers of
each of the Indemnifying Party and the Notifying Party will proceed in good
faith to negotiate a resolution of such dispute, and if not
21
resolved through the negotiations of such Chief Executive Officers within
60 days after the delivery of the Notifying Party's notice of such claim,
such dispute shall be resolved fully and finally in Boston, Massachusetts
by an arbitrator selected pursuant to, and an arbitration governed by, the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator shall resolve the dispute within 90 days after selection and
judgment upon the award rendered by such arbitrator may be entered in any
court of competent jurisdiction.
(c) After the Closing, the rights set forth in this Article VIII shall
be each party's sole and exclusive remedies against the other party hereto
for misrepresentations or breaches of covenants contained in this Agreement
and the Related Documents. Notwithstanding the foregoing, nothing herein
shall prevent any of the Indemnified Parties from bringing an action based
upon allegations of fraud or other intentional breach of an obligation of
or with respect to either party in connection with this Agreement and the
Related Documents. In the event any action is brought under this Article
VIII, the prevailing party's attorneys' fees and costs shall be paid by the
nonprevailing party.
(d) Any indemnification payable under this Article VIII shall be, to
the extent permitted by law, an adjustment to purchase price.
ARTICLE IX
MISCELLANEOUS
-------------
9.01 Expenses. Except as otherwise expressly provided for herein, Seller
and Buyer will pay all of their own expenses (including attorneys' and
accountants' fees), in connection with the negotiation of this Agreement, the
performance of their respective obligations hereunder and the consummation of
the transactions contemplated by this Agreement (whether consummated or not). In
the event that the transactions contemplated hereby have not been consummated by
April 30, 2001, and if the conditions of each party's obligation to consummate
the transactions have been satisfied as set forth in Section 6.02 and 6.03, as
the case may be, then the party not willing or able to consummate the
transactions shall pay the "transaction expenses" of the other. For purposes of
this Section, the "transaction expenses" shall mean the out-of-pocket expenses,
including the expenses of outside legal counsel, incurred in the pursuit of this
transaction and the negotiation of this Agreement for the 60 days preceding the
expected Closing Date. The payment of these expenses shall be the sole remedy of
either party for any claim relating to the failure to consummate the
transactions contemplated hereunder. If the conditions to close as set forth in
Section 6.02 or 6.03 have not been met by April 30, 2001, then the party for
whom such conditions are identified shall have the right to terminate this
Agreement without any further obligation or liability.
9.02 Further Assurances. Seller agrees that, on and after the Closing Date,
it shall take all appropriate action and execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the provisions hereof, including, without limitation, putting Buyer
in possession and operating control of the Assets and transferring all Permits
and Environmental Permits to Buyer that are transferable.
22
9.03 Cooperation and Exchange of Information. Buyer and Seller shall provide
each other with such cooperation and information as either of them reasonably
may request of the other in filing any Tax return, amended return or claim for
refund, determining a liability for Taxes or a right to a refund of Taxes or in
conducting any audit or proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of relevant Tax returns or portions
thereof, together with accompanying schedules and related work papers and
documents relating to rulings or other determinations by Taxing authorities.
Each party shall make its employees available on a mutually convenient basis to
provide explanation of any documents or information provided hereunder. The
Seller upon written request by the Buyer, will provide to the Buyer such factual
information reasonably necessary for filing Tax returns, Tax planning and
contesting any Tax audit that the Seller possesses as the Buyer may reasonably
request with respect to the Assets (which information the Seller agrees to
maintain and preserve for so long as it may be needed by the Buyer).
9.04 Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify or
amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
9.05 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or three
business days after being mailed by first class U.S. mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Buyer and Seller will, unless another address is specified in writing, be sent
to the address indicated below:
Notices to Buyer: with a copy to:
---------------- --------------
PEMSTAR Inc. ▇▇▇▇▇▇ & Whitney
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇. ▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇. ▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to Seller, Parent and ▇▇▇▇▇▇▇▇: with a copy to:
-------------------------------------- --------------
MATCO Electronics Group, Inc. ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.06 Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted
23
assigns, except that neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by either party hereto without the prior
written consent of the other party hereto.
9.07 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
9.08 Complete Agreement. This Agreement and the Exhibits hereto, the
Disclosure Schedule and the other documents referred to herein contain the
complete agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
9.09 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
9.10 Governing Law. The internal law, without regard to conflicts of laws
principles, of the State of Massachusetts will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PEMSTAR INC.
By
-------------------------------------
Its
------------------------------------
THE MATCO ELECTRONICS GROUP, INC.
By
-------------------------------------
Its
------------------------------------
U.S. ASSEMBLIES NEW ENGLAND, INC.
By
-------------------------------------
Its
------------------------------------
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
24
LIST OF EXHIBITS
----------------
Exhibit A Liabilities of Seller
Exhibit B List of Seller Suppliers to be Paid at Closing
Exhibit C Allocation of Purchase Price
Exhibit D ▇▇▇▇ of Sale
Exhibit E Assignment & Assumption Agreement
Exhibit F Lease Agreement
LIST OF SCHEDULES
-----------------
Schedule 1.01(a) List of Equipment
Schedule 1.01(b) Personal Property Leases
Schedule 1.01(d) Seller's Interest in all Licenses
Schedule 1.01(e) Customer Contracts
Schedule 2.01 List of Usable Inventory to be Purchased
Schedule 7.03(a) Closing Date Customer List
Disclosure Schedule
25
