EXHIBIT 10.27
ASSET PURCHASE AGREEMENT
by and among
AFC CABLE SYSTEMS, INC.
AFC ACQUISITION, INC.
AREA LIGHTING RESEARCH, INC.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, AND
▇▇▇▇▇▇ ▇▇▇▇
Dated January 31, 1997
TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS ........................................ -1-
1.1 Description of Assets ......................................... -1-
1.2 Excluded Assets ............................................... -2-
1.3 Assumption of Certain Liabilities ............................. -3-
1.4 Liabilities Not Assumed ....................................... -3-
1.5 Purchase Price ................................................ -4-
1.6 Allocation of the Purchase Price .............................. -4-
1.7 Purchase Price Adjustment ..................................... -5-
2. CLOSING ............................................................ -6-
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
STOCKHOLDERS ....................................................... -6-
3.1 Due Organization .............................................. -6-
3.2 Authorization ................................................. -6-
3.3 No Conflicts; Approvals ....................................... -7-
3.4 Financial Statements .......................................... -7-
3.5 Undisclosed Liabilities and Obligations ....................... -8-
3.6 Accounts Receivable ........................................... -8-
3.7 Inventory ..................................................... -8-
3.8 Customers and Sales ........................................... -8-
3.9 Permits; Intellectual Property ................................ -9-
3.10 Real and Personal Property; Leases ............................ -9-
3.11 Title, Sufficiency of Assets .................................. -10-
3.12 Contracts ..................................................... -10-
3.13 Labor Matters ................................................. -11-
3.14 Insurance ..................................................... -11-
3.15 Employees ..................................................... -11-
3.16 Employee Benefit Plans ........................................ -11-
3.17 Qualified Plans ............................................... -12-
3.18 Litigation .................................................... -12-
3.19 Conformity with Law ........................................... -13-
3.20 Taxes ......................................................... -13-
3.21 Absence of Changes ............................................ -14-
3.22 Environmental Matters ......................................... -15-
3.23 Certain Transactions .......................................... -16-
3.24 Brokers and Finders ........................................... -16-
3.25 Completeness .................................................. -16-
3.26 Disclosure .................................................... -16-
4. REPRESENTATIONS OF AFC AND THE BUYER ............................... -16-
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4.1 Due Organization .............................................. -16-
4.2 Authorization ................................................ -17-
4.3 No Conflicts; Approvals ...................................... -17-
4.4 The Shares ................................................... -17-
4.5 Brokers and Finders .......................................... -17-
5. COVENANTS ......................................................... -18-
5.1 Access and Cooperation ....................................... -18-
5.2 Conduct of Business Pending Closing .......................... -18-
5.3 Prohibited Activities ........................................ -18-
5.4 No Shop ...................................................... -19-
5.5 Key Employees ................................................ -19-
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER ................. -19-
6.1 Representations and Warranties; Performance of Obligations ... -19-
6.2 Proceedings Satisfactory ..................................... -20-
6.3 No Litigation ................................................ -20-
6.4 Lease ........................................................ -20-
6.5 Escrow Agreement ............................................. -20-
6.6 Employment and Consulting Agreements ......................... -20-
6.7 Opinion of Counsel ........................................... -20-
6.8 Registration Rights Agreement ................................ -20-
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF AFC ........................ -20-
7.1 Representations and Warranties; Performance of Obligations ... -20-
7.2 Proceedings Satisfactory ..................................... -21-
7.3 No Litigation ................................................ -21-
7.4 No Material Adverse Change ................................... -21-
7.5 The Lease .................................................... -21-
7.6 Escrow Agreement ............................................. -21-
7.7 Employment Agreement ......................................... -21-
7.8 Release of Liens ............................................. -21-
7.9 Consents ..................................................... -21-
7.10 Key Employees ................................................ -21-
7.11 Purchase of Leased Equipment ................................. -21-
7.12 Opinion of Counsel ........................................... -22-
7.13 COMPLETE REMAINDER OF SECTION
8. COVENANTS AFTER THE CLOSING ....................................... -22-
8.1 Change of Name ............................................... -22-
8.2 Further Assurances ........................................... -22-
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8.3 Books and Records ............................................ -22-
9. INDEMNIFICATION ................................................... -22-
9.1 Survival of Representations and Warranties ................... -22-
9.2 General Indemnification by the Seller and the Stockholders ... -23-
9.3 Indemnification by AFC and the Buyer ......................... -24-
9.4 Limitation on Liability ...................................... -25-
9.5 Third Person Claims .......................................... -25-
9.6 Method of Payment ............................................ -25-
10. TERMINATION OF AGREEMENT .......................................... -25-
10.1 Termination .................................................. -25-
10.2 Liabilities in Event of Termination .......................... -26-
11. NONCOMPETITION .................................................... -26-
11.1 Prohibited Activities ........................................ -26-
11.2 Reasonable Restraint ......................................... -27-
11.3 Severability; Reformation .................................... -27-
11.4 Remedies ..................................................... -27-
11.5 Independent Covenant ......................................... -28-
12. FEDERAL SECURITIES ACT AND RESTRICTIONS ON THE SHARES ............. -28-
12.1 Shares Not Registered ........................................ -28-
12.2 Investment Representation, etc. .............................. -28-
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION ......................... -29-
13.1 The Seller and the Stockholders .............................. -29-
13.2 AFC and the Buyer ............................................ -29-
13.3 Remedies ..................................................... -29-
14. GENERAL ........................................................... -29-
14.1 Bulk Sales Laws .............................................. -29-
14.2 Effect of Investigation; Best Knowledge ...................... -30-
14.3 Successors and Assigns ....................................... -30-
14.4 Entire Agreement ............................................. -30-
14.5 Amendment .................................................... -30-
14.6 Counterparts ................................................. -30-
14.7 Expenses ..................................................... -30-
14.8 Notices ...................................................... -30-
14.9 Governing Law ................................................ -31-
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14.10 No Waiver .................................................. -31-
14.11 No Third-party Beneficiaries ............................... -32-
14.12 Severability ............................................... -32-
14.13 Attorneys' Fees and Costs .................................. -32-
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made effective as of
January 31, 1997 among AFC Cable Systems, Inc., a Delaware corporation
("AFC"), AFC Acquisition, Inc., a Delaware corporation and a wholly-owned
subsidiary of AFC (the "Buyer"), Area Lighting Research, Inc., a New Jersey
corporation (the "Seller"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇. (individually,
"▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (individually, "▇▇▇▇▇▇▇▇▇▇") and ▇▇▇▇▇▇ ▇▇▇▇
(individually, "▇▇▇▇"), the owners of all of the outstanding shares of
capital stock of the Seller (collectively, the "Stockholders" and
individually, a "Stockholder"). Unless the text clearly indicates to the
contrary, all capitalized terms used herein shall have the meanings assigned
such terms in this Agreement, as further described on Annex 1, or in Annex 1.
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires
to purchase from the Seller, upon the terms and conditions set forth herein,
substantially all of the assets of the Seller including, without limitation,
those assets that relate to the Seller's photocontrols business (the
"Business").
NOW, THEREFORE, in consideration of the respective covenants and
representations and warranties contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which re hereby
acknowledged, the parties hereto hereby agree, and, with respect to the
obligations of the Buyer, AFC and the Buyer hereby jointly and severally
agree, as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Description of Assets. The Seller agrees to sell and transfer to
the Buyer, and the Buyer agrees to purchase from the Seller, at the Closing,
subject to and upon the terms and conditions contained herein, free and clear
of any pledge, lien, option, security interest, mortgage, claim, charge or
other encumbrance of any kind whatsoever, all of its assets (other than the
Excluded Assets), including without limitation the following properties and
assets of the Seller (collectively, the "Assets"):
(a) all assets of the Seller reflected on the balance sheet of the
Seller (the "Balance Sheet") dated as of December 31, 1996 (the "Balance
Sheet Date") and all assets of the Seller of the same nature as those
reflected on the Balance Sheet that have been acquired in the ordinary
course of business since the Balance Sheet Date (other than the Excluded
Assets and other than assets reflected on the Balance Sheet that have been
disposed of in the ordinary course of business since the Balance Sheet
Date) (collectively, the "Balance Sheet Assets"), including without
limitation:
(i) all inventory and supplies of the Seller;
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(ii) all cash, cash equivalents, bank accounts, investments,
and other similar assets ("Cash") and all accounts receivable, notes
receivable, loans receivable, prepaid expenses, security and other deposits,
and other current assets of the Seller;
(iii) all furniture, fixtures and leasehold improvements of the
Seller; and
(iv) all equipment, machinery, tools, personal property and other
physical assets of the Seller of any nature or kind (including
without limitation all spare parts);
(b) all rights of the Seller with respect to leasehold interests
relating to the real and personal property used in the Business as listed
on Schedule 1.1(b) (the "Leases");
(c) all rights of the Seller under all licenses, approvals, consents
and franchises and, to the extent transferable, permits and authorizations,
used or useful in connection with the operation of the Business or any
pending applications relating to any of the foregoing;
(d) all patents, patent rights, inventions, processes, designs and
applications for patents used or useful in connection with the Business,
and all trademarks, trademark applications, service marks, service ▇▇▇▇
applications, copyrights, copyright applications, trade names, registered
designs and unregistered design rights used or useful in the operation of
the Business;
(e) all trade secrets, processes, know-how, procedures, formulae and
confidential information used or useful in the operation of the Business;
(f) all rights of the Seller under any licenses for Intellectual
Property used or useful in the operation of the Business;
(g) all customer, supplier and mailing lists relating to the
Business;
(h) all rights of the Seller under any contracts or agreements
relating to the Business as listed on Schedule 1.1(h), including without
limitation, to the extent transferable, all insurance policies carried by
the Seller with regard to the Business (the "Contracts");
(i) all equipment repair, maintenance or service records relating to
the Assets or necessary or material to the continued operation of the
Business (which does not include the corporate records of Seller such as
the corporate minute book, stock register, articles of incorporation,
bylaws and similar items); and
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(j) all other assets of the Seller of every kind and description,
tangible or intangible, pertaining to or used in the Business (other than
the Excluded Assets), including without limitation its good will.
1.2 Excluded Assets. The following assets of the Seller shall be excluded
from the assets to be sold to the Buyer hereunder (the "Excluded Assets"):
(a) any insurance claims pending or awarded relating to environmental
losses incurred by the Seller prior to the Closing Date;
(b) all business and financial books and records (provided that the
Seller complies with its obligations to provide access thereto to the Buyer in
accordance with the terms of Section 8.3 and further provided that the Seller
hereby agrees not to remove any of its business and financial books and records
(other than corporate records such as minute books and its share transfer books)
from the ▇▇▇▇▇▇ Road Facility for 3 years following the Closing Date without the
prior written consent of the Buyer);
(c) all tax refund claims with respect to any period prior to the
Closing Date, and any cause of action related thereto with respect to any period
prior to the Closing Date;
(d) all claims, rights, demands, and causes of action against NUJA
Realty Corp., Bolt Electric, WOJO and ▇▇▇▇▇▇ Leasing; and
(e) any medical insurance refund due under the Seller's group
self-insured medical program as referred to in a letter to the Seller from
Corporate Benefit Services, Inc. dated January 8, 1997, a copy of which has been
provided to the Buyer.
1.3 Assumption of Certain Liabilities.
(a) On the terms and subject to the conditions set forth herein, and
subject to Section 1.4 hereof, from and after the Closing, the Buyer will assume
and satisfy or perform when due only (i) those liabilities and obligations of
the Seller arising after the Closing Date under the Leases and the Contracts
(other than under those Contracts referred to in subsection (iii) below), (ii)
subject to Section 9.2(g) and 9.5, any obligations of the Seller under product
warranties for products sold prior to the Closing Date, (iii) those liabilities
and obligations of the Seller arising after the Closing Date under The Area
Lighting Research 401(k) Savings Plan, The Area Lighting Research Employee
Health and Prescription Drug Plan, Area Lighting Research, Inc. Dental Plan with
Allmerica Financial December 16, 1996, and the Area Lighting Research, Inc.
Christmas Club and The Area Lighting Research, Inc. Dependent Care and Flexible
Spending Account Plan (the "Assumed Plans"), subject to the terms and conditions
set forth in subparagraph (c) below, and (iv) any and all trade payable
liabilities and accrued expenses of the Seller incurred in the ordinary course
of the Seller's business and not in violation of any of the terms of this
Agreements and outstanding on the Closing Date (the "Assumed Payables")
(collectively, the "Assumed Obligations").
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(b) The Buyer shall deduct the amount the amount of the Assumed
Payables from the cash portion of the Purchase Price. The Seller shall
calculate the amount of the Assumed Payables between January 31, 1997 and
February 2, 1997 and shall certify to the Buyer as to the amount thereof on
February 3, 1997. Notwithstanding anything to the contrary set forth in this
Agreement, the Buyer shall not assume and shall not be liable for any Assumed
Payables in excess of the amount of Assumed Payables certified to by the Seller.
(c) Effective as of the Closing Date, the Buyer will assume
sponsorship of the Assumed Plans.
The Seller and Buyer agree to cooperate to transfer the sponsorship of
the Assumed Plans as soon as practical and effective as of the Closing. In
connection therewith, the Seller shall use its best efforts to cause to be
assigned to the Purchaser such policies of insurance or other contracts as
the Buyer designates in writing as pertained to the funding of benefits under
any of the Assumed Plans, or in case where such assignment is commercially
impractical, the Seller shall cooperate in arranging for the issuance of new
or modified policies or contracts.
The Seller and the Buyer agree to provide assistance and cooperation to
each other in the administration of the Assumed Plans and their respective
responsibilities with respect to obligations or liabilities under the Assumed
Plans before and after the Closing Date. Notwithstanding the assumption of
Assumed Plans by the Buyer, the Seller shall (i) prepare, file and/or
distribute to the appropriate government agencies and plan participants all
Annual Reports (Form 5500 series, including audited financial statements if
required), summary annual reports, summary of material modifications, benefit
statements and any other reports or disclosures required to made by
applicable law with respect to any plan year ending on or before the Closing
Date, and (ii) account for and remit to the Purchaser or the trustee in the
event any benefits under the Assumed Plans are held in trust all
contributions, including any employer contributions required to be
contributed under the Assumed Plan and any employee contributions (whether by
virtue of salary reduction agreements or otherwise) with respect to any
period ending on or prior to the Closing Date.
1.4 Liabilities Not Assumed. Notwithstanding anything in this Agreement
to the contrary, the Buyer will not assume or perform any liabilities or
obligations not specifically contemplated by Section 1.3 hereof nor any of the
following obligations and liabilities (whether or not contemplated by
Section 1.3):
(a) any liability or obligation of the Seller for federal, state,
local or foreign Taxes, whether or not incurred prior to the Closing;
(b) any liability or obligation of the Seller for or in respect of
any loan, account payable or indebtedness (other than the Assumed Obligations);
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(c) any liability or obligation of the Seller arising as a result
of any legal or equitable action or judicial or administrative proceeding
initiated at any time in respect of anything done, suffered to be done or
omitted to be done by the Seller or any of its directors, officers, employees
or agents;
(d) any liability or obligation of the Seller incurred in connection
with the making or performance of this Agreement;
(e) any liability or obligation of the Seller for Taxes based on or
measured by any income or gain realized upon the transfer of the Assets
hereunder;
(f) any liability or obligation of the Seller accruing on or prior
to the Closing Date arising out of any "employee benefit plan" (as such term
is defined by the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), established or maintained by the Seller or to which the Seller
contributes or any liability with respect to any pension or benefit plan of
the Seller or the termination of any such plan;
(g) any liability or obligation of the Seller accruing on or prior
to the Closing Date for making payments of any kind (including without
limitation as a result of the sale of Assets or as a result of the
termination of employment by the Seller of employees, or other labor claims)
to employees of the Seller or in respect of payroll taxes for employees of
the Seller, including without limitation any liabilities or obligations of
the Seller arising under or with respect to the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA");
(h) any liability or obligation of the Seller with respect to any
claims or actions arising under or relating to any Environmental Laws, or
related common law theories, including without limitation third party claims
and any liability or obligation for any penalties, fines, expenses, costs,
losses, claims or damages arising out of or resulting from any generation,
storage, treatment, handling, disposal, discharge or release of Hazardous
Materials prior to the closing, including without limitation any liability or
obligation relating to the contamination of ground water beneath, or which
has migrated or may in the future migrate from, any facility owned, leased or
otherwise operated by the Seller, including without limitation that certain
facility located at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ (the
"Hackettstown Facility"; collectively, the "Facilities"), and including
without limitation any and all debts, liabilities and obligations of the
Seller or any of its Affiliates under the Environmental Settlement
Agreements;
(i) any liability or obligation of the Seller under any license or
any leases, contracts or agreements not listed on Schedules 1.1(b) or 1.1(h);
and
(j) any liability or obligation of the Seller with respect to any
of the Seller's subsidiaries or affiliates, including without limitation NUJA
Realty Corp. Bolt Electric, WOJO and ▇▇▇▇▇▇ Leasing.
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1.5 Purchase Price. The total purchase price (the "Purchase Price")
which the Buyer shall pay for the Assets and in consideration of the other
covenants and agreements of the Seller and the Stockholders contained herein
is a cash purchase price of (a) $8,200,000 less (plus) (b) the amount, if
any, by which the book value (calculated in accordance with GAAP in a manner
consistent with the manner used in preparing the Balance Sheet and without
giving effect to any write-up or write-down of assets or liabilities, or to
any reserve in any amount which is not reflected in such amount on the
Balance Sheet other than for transactions occurring in the ordinary course of
business since December 31, 1996 but including scheduled depreciation) of the
Closing Assets as of the Closing Date is less than (is greater than)
$4,860,000 (the "Assets Adjustment") plus (c) the amount of the Earnout
provided for under Section 1.8. For the purposes of this Agreement, the term
Closing Assets shall be deemed to mean the Seller's current assets (excluding
its insurance claim receivable), property, plant and equipment, net and other
assets (excluding its insurance claim receivable). The amount, if any, of
the Assets Adjustment shall be determined in the following manner: (i) within
30 days after the Closing Date, the independent public accountant of the
Seller shall prepare and deliver to the Buyer a calculation of the amount of
the Closing Assets as of the Closing Date and a calculation of the Assets
Adjustment, if any, (ii) if the Buyer has any objection to the determination
of the Seller's accountant, it shall notify the Seller thereof within 10 days
after its receipt of such calculations, and if the Buyer and Seller are
unable to resolve such dispute within 20 days thereafter, such dispute shall
be submitted to a nationally recognized firm of independent certified public
accountants not performing services for either party who shall determine the
amount of any Assets Adjustment within 30 days thereafter and whose
determination shall be conclusive and binding on the parties hereto. The
fees of such firm shall be borne equally by the Seller and the Buyer. The
Purchase Price (exclusive of the Earnout, without regard to the Assets
Adjustment and less the amount of the Assumed Payables) shall be paid by the
Buyer in cash at the Closing to the Seller, the Seller's lender in repayment
of outstanding secured indebtedness as specified in a payoff letter from
such lender dated January __, 1997, the New Jersey Economic Development
Authority in repayment of outstanding secured indebtedness as specified in a
payoff letter from such Authority dated January 30, 1997 and the Escrow Agent
as hereinafter provided.. An amount equal to $1,610,000 will be deposited by
the Buyer in cash (the "Escrow Deposit") with State Street Bank and Trust
Company, N.A., as agent (the "Escrow Agent") at the Closing to be held in
escrow pursuant to the Escrow Agreement substantially in the form of Exhibit
I (the "Escrow Agreement"). The Escrow Deposit shall be held for the
following purposes: (A) an amount equal to $310,000 shall be held in escrow
pending the purchase of uncollected accounts receivable and the Assets
Adjustment, (B) an amount equal to $1,200,000 shall be held in escrow to
secure the payment of the obligations of the Seller and its Affiliates under
the Environmental Settlement Agreements, and (C) an amount equal to
$100,000.00 shall be held in escrow to secure the Seller's obligations
pursuant to Section 9.2(g). The Purchase Price less the Escrow Deposit, less
the amounts paid to the Seller's secured creditors as set forth above and
less the amount, if any, of the Assumed Payables will be paid by the Buyer to
the Seller at the Closing in accordance with subsection 2(c). In addition to
the foregoing, it is anticipated that payment of the Purchase Price will
occur on February 3, 1997 and, accordingly, the Buyer agrees to pay interest
to the Seller at a rate
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per annum equal to 6% on the amount of cash payable
to or for the account of the Seller at the Closing for February 1, 1997 and
February 2, 1997. If, in connection with the determination of the Assets
Adjustment, it is determined that the amount of the Assumed Payables is
greater than (or less than) the amount of the Assumed Payables certified by
the Seller on February 3, 1997, the Buyer and the Seller will correct such
difference by a cash payment within 5 days after the determination of the
Assets Adjustment, without interest.
1.6 Allocation of the Purchase Price. The parties hereto agree that the
Purchase Price shall be allocated as set forth in Schedule 1.6 and agree that
such allocation is based upon the fair market value of the Assets and is an
appropriate allocation. Such allocation shall be binding upon the parties
hereto and the parties hereto shall file their respective tax returns in
accordance with such allocation and shall not take any position or action
inconsistent with such allocation in connection with their respective taxes.
1.7 Purchase Price Adjustment.
(a) The only adjustment to the Purchase Price following the Closing
shall be to reflect the Assets Adjustment determination. If the amount of
the Assets Adjustment increases the Purchase Price, the Buyer shall pay the
amount thereof to the Seller within 5 days after the final determination of
the amount thereof pursuant to Section 1.5 hereof. If the amount of the
Assets Adjustment decreases the Purchase Price, the Seller shall pay the
amount thereof to the Buyer within 2 days after the final determination of
the amount thereof pursuant to Section 1.5 hereof, provided that, to the
extent there are funds available under the Escrow Agreement to pay the same,
the amount thereof shall be payable from the Escrow Deposit in accordance
with the terms of the Escrow Agreement. If either Buyer or Seller fails to
pay the Assets Adjustment in full when due, the unpaid amount thereof shall
bear interest from its due date at a rate per annum equal to ten percent
(10%).
(b) The Buyer shall use its best efforts to collect all accounts
receivable included within the Assets. If, as of 120 days after the Closing
Date, the Buyer has collected less than the full amount of the accounts
receivable of the Seller as of the Closing Date, the Buyer shall sell to the
Seller, and the Seller shall purchase from the Buyer, without recourse,
warranty or representation of any kind, any and all such uncollected accounts
receivable and all documents, instruments and correspondence relating
thereto, and any collateral therefor, for an aggregate purchase price equal
to the uncollected amount of such accounts receivable of the Seller, less any
reserve for doubtful accounts recorded on the Balance Sheet. Such amount
shall be paid to the Buyer by the Escrow Agent from the amounts on deposit in
the Escrow Account for such purpose and any amount in excess thereof shall be
promptly paid by the Seller in cash to the Buyer. If the Seller makes a
payment to the Buyer due to an account receivable not being collected and the
Buyer subsequently receives payment on such account receivable, the Buyer
shall promptly remit such payment, without interest, to the Seller, whether
or not the Seller or any of the Stockholders are, or are claimed by Buyer to
be, in breach of any obligation hereunder.
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(c) If, any time during the period that is 18 months after the
Closing Date, the Buyer pays any amount to any Person in respect of a
warranty on a product sold prior to the Closing Date, the Buyer shall be
entitled to reimbursement for such amount from the amounts on deposit in
the Escrow Account for such purpose to the extent that the amount thereof
exceeds the indemnification limits provided for under Section 9.2(g)
hereof.
1.8 Earnout. As a part of the Purchase Price, the Buyer shall pay to
the Seller an amount equal to the excess of the EBIT of the Buyer for the
period from February 1, 1997 through December 31, 1997 over $1,100,000 (the
"Earnout"). The Buyer shall have the option to pay the Earnout in cash or 50%
in cash and to deliver to the Seller such number of shares of AFC Common
Stock as shall have a value equal to 50% of the amount of the Earnout, all as
hereinafter provided. In no event shall the amount of the Earnout exceed an
amount equal to $734,000. For purposes of the foregoing, EBIT shall be
defined as the earnings of the Buyer before taxes on income and interest
expense and interest income determined in accordance with GAAP (after
applying a corporate management charge of $75,000 payable to AFC), provided,
however, that in calculating EBIT no deduction shall be made to reflect any
amortization of goodwill in connection with the Purchase Price paid for the
Assets or depreciation of capital assets acquired during 1997, no deduction
shall be made to reflect the costs incurred by the Buyer in connection with
the negotiation or consummation of the transactions contemplated hereby, no
deduction shall be made to reflect any allocation of costs associated with
employees of AFC or any of its subsidiaries (other than employees of the
Buyer and except to the extent of the $75,000 corporate management fee),
intercompany transactions shall be reflected solely on an arm's length basis
and, if the Buyer purchases or succeeds to any business other than the
Business, no amounts shall be reflected with respect to the operations of
such business if such business on a stand-alone basis would incur a loss.
The $75,000 corporate management fee shall include the fees of the Buyer's
accountants, which shall be selected by the Buyer in its sole discretion.
The amount, if any, of the Earnout shall be determined in the following
manner: (i) on or before March 31, 1998, the Buyer shall prepare and deliver
to the Seller a calculation of the amount of the Earnout, (ii) if the Seller
has any objection to the determination of the Buyer, it shall notify the
Buyer thereof within 10 days after its receipt of such calculations, and if
the Buyer and Seller are unable to resolve such dispute within 20 days
thereafter, such dispute shall be submitted to a nationally recognized firm
of independent certified public accountants not performing services for
either party who shall determine the amount of any Earnout within 30 days
thereafter and whose determination shall be conclusive and binding on the
parties hereto. The fees of such firm shall be borne equally by the Seller
and the Buyer. Within 10 days following the determination of the amount of
the Earnout pursuant to the foregoing, the Buyer shall notify the Seller
whether it chooses to pay the Earnout in cash or in cash and AFC Common
Stock. If the Buyer chooses to make such payment solely in cash, such notice
shall be accompanied by payment thereof. If the Buyer chooses to make such
payment in cash and AFC Common Stock, the delivery of said shares shall occur
5 days following such notice from the Buyer. The number of shares of AFC
Common Stock to be delivered shall be determined by dividing 50% of the
Earnout amount by the arithmetic average of the mean of the closing bid and
asked prices for AFC Common Stock on the NASDAQ Market, or such other
nationally recognized market in which such Common Stock trades if such Common
Stock is no longer listed on the NASDAQ market, for the 20 trading days
immediately preceding the date of such notice from the Buyer.
Notwithstanding the foregoing, if the number of shares of AFC Common Stock
deliverable pursuant to the foregoing would exceed the aggregate trading
volume of AFC Common Stock for the month preceding the delivery thereof, the
Buyer shall only be able to pay for the Earnout in shares of AFC Common Stock
to the extent of such aggregate trading volume and shall pay cash for the
portion of the Earnout not paid in such shares.
8
1.9 Registration of Common Stock of AFC. AFC agrees that if the Buyer
delivers shares of AFC Common Stock to the Seller as set forth in Section
1.8, above, then the Buyer shall cause to be filed with the SEC a
registration statement on Form S-3 covering such shares in such a manner that
such shares shall be tradable without restriction under the Securities
Exchange Act of 1934 upon the issuance thereof. All fees and expenses
incident to the filing of such registration statement, including without
limitation, fees and expenses incurred in connection with the preparation,
filing, amending and supplementing of the registration statement (whether or
not the registration statement is filed or becomes effective), including the
fees and expenses of the AFC's legal counsel and accountants related thereto,
registration and filing fees and fees and expenses of compliance with state
securities or blue sky laws, will be borne by and paid by AFC.
2. CLOSING.
The closing of the purchase and sale of the Assets and the other
transactions contemplated hereby (the "Closing") shall take place at the
offices of ▇▇▇▇▇▇▇▇ & English, Newark, New Jersey, or at such other place as
may be agreed to by the Buyer and the Seller, at 10:00 a.m. on January 31,
1997 or on such date, not later than January 31, 1997 except as otherwise
agreed to in accordance with subsection 10.1(b)(i), as may be agreed to by
the Buyer and the Seller (the "Closing Date"). At the Closing:
(a) the Seller shall execute and deliver to the Buyer a ▇▇▇▇ of
Sale substantially in the form of Exhibit II and shall execute and deliver to
the Buyer all such other instruments and documents of conveyance and
assignment (including without limitation assignments of patents, trademarks
and other intellectual property) as are reasonably requested by the Buyer to
vest in the Buyer title to the Assets;
(b) AFC and the Buyer shall execute and deliver to the Seller an
Assumption Agreement substantially in the form of Exhibit III; and
(c) the Buyer shall pay to the Seller the portion of the Purchase
Price payable to the Seller at the Closing by wire transfer in accordance
with the following wire instructions: First Union National Bank, Newark, NJ
Routing No. ▇▇▇▇▇▇▇▇▇, CAP Account "Area Lighting Research, Inc.
#8880609649"; shall make the Escrow Deposit with the Escrow Agent by wire
transfer in accordance with the following wire instructions: ABA #▇▇▇▇▇▇▇▇▇,
DBA #99039430, Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇, for account of Area Lighting Research,
9
and shall pay the amounts payable to the Seller's secured lender and the New
Jersey Economic Development Authority as provided above.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS.
The Seller and each of the Stockholders jointly and severally make the
following representations and warranties to the Buyer:
3.1 Due Organization. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
Jersey, and is duly authorized, qualified and licensed under all applicable
laws, regulations, ordinances and orders of public authorities to carry on
its business in the places and in the manner as now conducted, except where
the failure to be so authorized, qualified or licensed would not have a
material adverse effect on the business, operations, assets, properties or
condition, financial or otherwise, of the Seller. The Seller has delivered
to AFC and the Buyer complete and correct copies of the Articles of
Incorporation and By-laws of the Seller. Schedule 3.1 sets forth each name,
including without limitation any trade name, under which the Seller conducts
its business and identifies each jurisdiction in which the Seller is
qualified to do business as a foreign corporation. Schedule 3.1 also lists
each Subsidiary and Affiliate of the Seller and its relationship to the
Seller.
3.2 Authorization. The Seller has all corporate power and authority,
and each of the Stockholders has all power and authority, to enter into and
perform this Agreement and the other documents and instruments to be
delivered pursuant to this Agreement and to consummate the transactions
contemplated hereby or thereby. The execution and delivery by the Seller of
this Agreement and the consummation by the Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Seller. This Agreement has been duly executed and
delivered by the Seller and each of the Stockholders and constitutes the
legal, valid and binding obligation of the Seller and each of the
Stockholders and is enforceable against each of them in accordance with its
terms.
3.3 No Conflicts; Approvals.
(a) Neither the execution, delivery and performance of this
Agreement by the Seller nor the consummation of the transactions contemplated
hereby will (i) conflict with or result in a breach of any provision of the
Articles of Incorporation or By-laws of the Seller, (ii) result in any
conflict with, breach of, or default (or give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit)
under or require any consent or approval which has not been, or prior to
Closing will not be, obtained with respect to any of the terms, conditions or
provisions of any indenture, lease, agreement, permit, license, judgment or
other instrument to which the Seller or any of the Stockholders is or are a
party or by which the Seller or any of the Stockholders or any of their
properties or assets may be bound except for agreements to which the Seller
is a party with sales representatives and other agreements which are not,
individually or in the aggregate, material to the Assets or
10
the conduct of the Business, (iii) violate any order, law, rule or regulation
applicable to the Seller or any of the Stockholders or by which the Seller or
any of the Stockholders or any of their respective properties or assets may
be bound, or (iv) result in the creation of any pledge, lien, security
interest, mortgage, charge or other encumbrance of any kind upon any of the
assets or properties of the Seller.
(b) No action, consent or approval by, or filing by the Seller or
any of the Stockholders with, any federal, state, municipal, foreign or other
court or governmental body or agency, or any other regulatory body, or any
other person is required in connection with the execution, delivery or
performance by the Seller and any of the Stockholders of this Agreement or
the consummation of the transactions contemplated hereby, except any filing,
consent or approval that has been made or obtained prior to the Closing.
3.4 Financial Statements. The Seller has previously furnished AFC and
the Buyer with copies of the following financial statements of the Seller
(the "Financial Statements"):
(a) the audited balance sheets of the Seller as at December 31,
1994 and as at December 31, 1995 and the audited statements of income and
retained earnings and of cash flows of the Seller for the fiscal years of the
Seller then ended.
(b) The unaudited balance sheets and statements of income, retained
earnings and cash flows of the Seller for the 12-month period ending December
31, 1996, including, without limitation, the Balance Sheet.
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except for inventory adjustments to reflect obsolescence,
a write-down of work in process inventory and a write-down of the overhead
burden from the prior year booked in the preparation of the Balance Sheet)
and present fairly the financial condition of the Seller at the respective
dates thereof and the results of its operations for the periods covered
thereby, subject in the case of the Balance Sheet and other unaudited
Financial Statements to normal year-end audit adjustments and to the addition
of footnotes.
3.5 Undisclosed Liabilities and Obligations. The Seller has no
liabilities or obligations of any kind, whether accrued, absolute, secured or
unsecured, contingent or otherwise which under generally accepted accounting
principles would be required to be shown on the financial statements of the
Seller, except for those liabilities and obligations shown on the Balance
Sheet and except for liabilities and obligations incurred in the ordinary
course of the Seller's business between the date of the Balance Sheet and the
Closing Date.
3.6 Accounts Receivable. Schedule 3.6 sets forth a complete and
accurate list of all accounts receivable of the Business as of December 31,
1996 and contains a complete and accurate aging schedule of such accounts
receivable on a 30-, 60-, 90-, and more than
11
90-day basis. These accounts receivable, and all accounts receivable of the
Business arising after such date, arose from valid sales in the ordinary
course of business and have been collected in full since such date or are
collectible in full within 120 days of their respective due dates.
3.7 Inventory. Schedule 3.7 sets forth a complete and accurate list of
all inventories, including finished goods, work-in-process and raw materials
of the Business as of December 31, 1996. Since December 31, 1996, there has
been no change in such inventories except changes resulting from purchases
and sales in the ordinary course of business. In valuing its inventory for
the purposes of preparing its Financial Statements as of December 31, 1996,
the Seller employed the following methodology which is consistent with
generally accepted accounting principles and its past practice: (i) Seller
only included inventories which it reasonably deemed to be of a quality and
quantity usable or salable in the ordinary course of business and Seller
excluded all inventories which it reasonably deemed to be slow-moving,
discontinued or damaged except to the extent the same have been fully
reserved for on such Financial Statements, and (ii) Seller only included
items of inventory which it owned and now owns except for subsequent valid
sales made in the ordinary course of business, for which sales either (i) the
purchaser thereof has made full payment, or (ii) the purchaser's liability to
make payment is reflected as an account receivable on the Seller's books.
Except as disclosed on Schedule 3.7, no items included in the inventories
have been pledged as collateral or are held by the Seller on consignment from
another. All inventories are valued at the lower of cost or market, and cost
is determined using the first in, first out ("FIFO") method, applied on a
basis consistent with that of prior years and in accordance with generally
accepted accounting principles. The foregoing provisions of this Section 3.7
shall not be deemed to be a guarantee, and the Seller does not guarantee,
that any inventory will be sold.
3.8 Customers and Sales. Schedule 3.8 is a complete and correct list of
the top ten customers (by purchases from the Seller) of the Business for
1994, 1995 and 1996. The Seller has provided the Buyer with a complete and
correct list of all customers of the Business that have made purchases from
the Seller aggregating more than $5,000 in any year since December 31, 1994,
together with summaries of the sales made to each customer for the year
ending December 31, 1995 and 1996. To the best knowledge of the Seller and
each of the Stockholders, no such customer of the Seller intends to cease
doing business with the Seller, or materially decrease the amount of the
business that it is presently doing with the Seller, where the effect of such
customer's ceasing to do business with the Seller or materially decreasing
the amount of its business with the Seller could have a material adverse
effect on the Business.
3.9 Permits; Intellectual Property. Schedule 3.9 sets forth an accurate
list of all permits, licenses, franchises and certificates owned, held,
licensed or otherwise used by the Seller in the Business (collectively, the
"Permits") and all trademarks, trade names, service marks, patents, patent
applications and copyrights owned, held or used by the Seller (collectively,
the "Intellectual Property").
12
Such Permits and Intellectual Property are valid and in full force and
effect. The Seller owns or possesses adequate rights to use (without making
any payment or granting any right to any person in exchange) all Intellectual
Property. There are no claims or proceedings pending or, to the best
knowledge of the Seller and each of the Stockholders, threatened against the
Seller asserting the infringement by the Seller of, and, to the best
knowledge of the Seller and each of the Stockholders, the Seller has not
infringed on, any trademark, service ▇▇▇▇, copyright, patent, patent right or
other proprietary right of any other person. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will cause a default under or alter or impair any rights
under, or with respect to, any Permit or Intellectual Property.
3.10 Real and Personal Property; Lease.
(a) Schedule 1.1(b) sets forth:
(i) a complete and correct list and a substantially complete
description of all the real property owned or leased by the Seller; and
(ii) a complete and correct list of all tangible personal property
leased by the Seller.
(b) All tangible personal property used in the Business, whether
owned or leased, is in good working order and condition, subject to ordinary
wear and tear.
(c) The Leases constitute all leases for real or personal property
used in the Business. The Seller is not in default under any Lease and has
not received or given any notice of default thereunder, and, to the best
knowledge of the Seller and each of the Stockholders, no other party to any
Lease is in default thereunder. The Seller has delivered to the Buyer
complete and correct copies of all Leases. Each of the Leases is the legal,
valid and binding obligation of the Seller and, to the best knowledge of the
Seller and each of the Stockholders, the other parties thereto.
3.11 Title, Sufficiency of Assets.
(a) The Seller has good and marketable title to, or in the case of
leased property, has valid leases under which it enjoys peaceful and
undisturbed possession of, all of its properties and assets, including
without limitation all those reflected in the Balance Sheet (except for
properties or assets sold or otherwise disposed of in the ordinary course of
business since the Balance Sheet Date), free and clear of all mortgages,
liens, pledges, charges or other encumbrances, except for mortgages, liens,
pledges, charges or other encumbrances disclosed on Schedule 3.11.
(b) The Assets, together with the property covered by the ▇▇▇▇▇▇
Road Lease and personal property leased by the Seller and listed on Schedule
1.1(b), are sufficient to enable the Buyer to operate and conduct the
Business immediately after the Closing in substantially the same manner as
the Business has heretofore been conducted by the Seller.
13
3.12 Contracts.
(a) The Contracts constitute all material contracts, commitments
and similar agreements or arrangements, whether written or oral, relating to
the Business to which the Seller is a party or by which it or its properties
is bound (including without limitation employment agreements, joint venture
or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, noncompetition agreements,
bonds, mortgages, options to purchase land, liens, pledges or other security
agreements).
(b) The Seller has delivered to AFC and the Buyer complete and
correct copies (including all amendments and other supplements thereto) of
all written Contracts and an accurate and complete description of all oral
Contracts.
(c) The Seller has complied with all material commitments and
obligations pertaining to the Contracts, the Seller is in not in material
default under any Contract and has not received or given any notice of
default thereunder, and, to the best knowledge of the Seller and each of the
Stockholders, no other party to any Contract is in default thereunder.
(d) Each of the Contracts is the legal, valid and binding
obligation of the Seller and, to the best knowledge of the Seller and each of
the Stockholders, the other parties thereto.
(e) No Contract, singly or in the aggregate with one or more other
Contracts, materially and adversely affects the business, operations,
properties, assets or condition, financial or otherwise, of the Business.
3.13 Labor Matters. The Seller is not bound by or subject to any
agreement or arrangement with any labor union. None of the Seller's
employees are represented by any labor union or covered by any collective
bargaining agreement nor, to the best knowledge of the Seller and each of the
Stockholders, is any organization campaign to establish such representation
contemplated. Except as set forth on Schedule 3.13, there is no pending or,
to the best knowledge of the Seller and each of the Stockholders, threatened,
labor dispute involving the Business and the Business has not experienced any
labor interruptions over the past three years. There are no unfair labor
practice or other administrative or court proceedings pending or, to the best
knowledge of the Seller and each of the Stockholders, threatened between the
Seller, on the one hand, and the employees of the Business, on the other
hand, nor, to the best knowledge of the Seller and each of the Stockholders,
is there any basis for any such proceeding.
3.14 Insurance. Schedule 3.14 sets forth an accurate description of all
insurance policies carried by the Seller with respect to the Business. Such
insurance is in full force and effect and shall remain in full force and
effect through the Closing.
14
3.15 Employees. Schedule 3.15.1 sets forth an accurate list of all
employees of the Business, the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation) of each such person as of
the date hereof and any increase therein since the Balance Sheet Date. The
employees listed in Schedule 3.15.2 constitute, in the Seller's opinion, all of
the individuals that have significant management or supervisory responsibilities
with respect to the Business and its affairs and operations.
3.16 Employee Benefit Plans. Schedule 3.16 sets forth an accurate schedule
listing all employee benefit plans of the Seller, including without limitation
any employment agreement and any pension, retirement, profit-sharing, bonus,
stock option, incentive, deferred compensation, or welfare plan, contract,
arrangement or practice, whether or not reduced to writing, in which one or more
of the employees (including without limitation former employees and
beneficiaries of employees or former employees) participates or is eligible to
participate, together with a description of such plans, contracts, arrangements
or practices, the classification of employees covered thereby and copies of such
plans, arrangements and contracts and any trusts related thereto. Such plans
include without limitation any employee benefit plan (as such term is described
in Section 3(3) of ERISA) or any plan, practice or arrangement (whether or not
reduced to writing) that constitutes a "fringe benefit" plan, vacation plan or
policy, sick leave program, medical, disability or life insurance plan,
agreement to pay severance or comparable benefits to any employee whose
employment with the Seller is terminated (including without limitation those
employment or other agreements that contain "golden parachute" provisions). The
Seller has not established nor does it maintain any plan, program or arrangement
to provide post-retirement medical benefits to any employee, former employee or
beneficiary of an employee or former employee. All employee benefit plans
listed on Schedule 3.16 which are subject to ERISA are in substantial compliance
with ERISA and the regulations promulgated thereunder, as well as with, to the
best of the knowledge of the Seller or each of the Stockholders, all other
applicable federal, state and local statutes, ordinances and regulations.
3.17 Qualified Plans. All plans listed on Schedule 3.16 that are intended
to qualify (the "Qualified Plans") under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
included as part of Schedule 3.16. Except as disclosed on Schedule 3.16, all
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including without limitation
actuarial reports, audits and tax returns) have been timely filed or
distributed, and copies thereof are included as part of Schedule 3.16. Neither
the Seller nor any of the Stockholders nor such plan listed in Schedule 3.16 has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such plan listed in Schedule 3.16 has
incurred an "accumulated funding deficiency" (as such term is defined in
Section 412(a) of the Code and Section 302(1) of ERISA); and the Seller has not
incurred any liability for excise tax or penalty due to the Internal Revenue
Service and has not incurred any liability to the Pension Benefit Guaranty
Corporation. The Seller and each of the Stockholders further represents that:
15
(a) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and
approval by the Internal Revenue Service;
(b) no plan listed in Schedule 3.16 subject to the
provisions of Title IV of ERISA has been terminated;
(c) there have been no "reportable events" (as such term is defined
in Section 4043 of ERISA) with respect to any plan listed in Schedule 3.16; and
(d) the Seller has incurred no liability under Section 4062 of ERISA
or with respect to any "multi-employer plan" (as such term is defined in
Section 4001(a)(3) of ERISA).
3.18 Litigation. Other than as set forth in Schedule 3.18, there are no
claims, actions, suits, proceedings or investigations pending or, to the best
knowledge of the Seller and each of the Stockholders, threatened against or
affecting the Seller. Except as disclosed on Schedule 3.22, there have been no
citations, fines or penalties assessed against the Seller relating to or
affecting the Business under any Environmental Law that remain unpaid, and no
such citations, fines or penalties have been assessed or threatened within the
five-year period prior to the date hereof, or, to the best knowledge of the
Seller and each of the Stockholders, are now being threatened, nor are there any
administrative actions, suits, proceedings or investigations with respect to
such matters pending or, to the best knowledge of the Seller and each of the
Stockholders, threatened, nor, to the best knowledge of the Seller and each of
the Stockholders, is there any basis therefor. The Seller is and has not been
subject to any ruling, order, decree, judgment or writ entered into by any
court, agency or other authority relating to or affecting the Business.
3.19 Conformity with Law. The Seller has conducted and is conducting the
Business in substantial compliance with all applicable federal, state and local
statutes, ordinances, permits, licenses, orders, approvals, rules and
regulations, and is not in violation of any of the foregoing, which violation
could reasonably be expected to materially and adversely affect the Business.
3.20 Taxes. [Intentionally omitted]
3.21 Absence of Changes. Since the Balance Sheet Date, the Seller has
carried on the Business in the ordinary course, and, without limiting the
generality of the foregoing, there has not been:
(a) any material adverse change in the financial condition or
results of operations of the Business or any dividend, distribution or other
payment or transfer of assets to or for the benefit of, directly or
indirectly, any of the shareholders of the Seller (other than distributions
in the ordinary course of business to enable the shareholders to pay income
taxes attributable to them for the 1996 fiscal year of the Seller as a result
of the Seller's S-corporation status and other than salary and
16
employee benefits paid to or for the benefit of the Stockholders in the
ordinary course of the Seller's business and consistent with Seller's past
practices);
(b) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the Assets or the Business;
(c) any increase in compensation in any form (including without
limitation any increase in value of any benefits) payable or to become
payable to any officer, director, employee, consultant or agent of the
Seller, other than regularly scheduled pay increases in the ordinary course
of business;
(d) any work interruptions, labor grievances or claims filed,
proposed law or regulation or any event or condition of any character
materially adversely affecting the Business;
(e) except in the ordinary course of business, either (i) any
acquisition or disposition by the Seller of any assets or properties in a
transaction with any officer, director or stockholder or any affiliate of
any such person, or (ii) any acquisition or disposition by the Seller of
any assets or properties in any other transaction with any other person;
(f) any waiver by the Seller of any material rights or claims under
any Contract;
(g) any pledge, mortgage or other encumbrance with respect to any of
the Assets, except for liens disclosed on Schedule 3.11 and other
encumbrances which are discharged at or before Closing;
(h) any amendment or termination of any Contract or Permit, or any
breach by Seller of any Contract or Permit, in each case which amendment,
termination or breach has or could reasonably be expected to have a
material adverse effect of the Business;
(i) any agreement or commitment by the Seller to do any of the
foregoing; or.
(j) a material change in the overall relationship or course of
dealing between the Seller or any of its subsidiaries and their suppliers
or customers, or action taken by the Seller or the Shareholders (including
without limitation announcement, notice or otherwise) with respect to the
Seller's or any of its subsidiaries' suppliers and customers, or action
taken by suppliers and customers, which has had, or will likely have, a
result which will render improbable or generally defeat the Buyer's ability
to transact business with such customer or supplier in a manner which
could, in the aggregate, have a material adverse effect on the Business.
17
3.22 Environmental Matters.
(a) Except as disclosed in Schedule 3.22, to the knowledge of the
Seller or any of the Stockholders:
(i) The Seller does not generate, manufacture, use, store,
transport or have transported or dispose of, and has not in the past
generated, manufactured, used, stored, transported or had transported or
disposed of, Hazardous Materials, except in compliance with Environmental
Laws.
(ii) there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance with Environmental Laws, or
which may give rise to any common or legal liability or penalty, or otherwise
form the basis of any claim, action, event, proceeding, hearing or
investigation under or pursuant to Environmental Laws, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, handling, release or threatened release of any Hazardous Materials;
(iii) no underground storage tank (as such term is defined in
Subchapter Nine of the Solid Waste Disposal Act) exists or has
existed on or about the Facilities or the Assets; and
(iv) the Seller is in material compliance with all
Environmental Laws and no notice, request, investigation, administrative
order, consent order, agreement, litigation or settlement is proposed,
threatened, anticipated or in existence with respect to the violation of any
federal, state, or local environmental law or regulation, the presence,
suspected presence or potential presence of any Hazardous Material on or
about the Facilities or the Assets from any source.
(b) Notwithstanding any provision in this Agreement to the contrary,
the representations and warranties set forth in this Paragraph 3.22 shall be
the sole and exclusive representations given by the Seller and the
Stockholders with respect to environmental matters, compliance with
Environmental Laws, and environmental conditions on, at, under, emanating
from or affecting the Facilities, the Assets or the Business.
(c) For the purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 USC Section 9601, et
seq., the Solid Waste Disposal Act as amended by the Resource Conversation
and Recovery Act ("RCRA"), 42 USC Section 6901, et seq., the Federal Water
Pollution Control Act
18
("FWPCA"), 33 USC Section 1251 et seq.,
the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq., the Toxic
Substances Control Act (TSCA"), 15 USC Section 2601, et seq., the
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA"), the Spill
Compensation Control Act, N.J.S.A. 58:10-23.11a et seq., the Solid Waste
Management Act 13:1E-1 et seq., the New Jersey Underground Storage of
Hazardous Substances Act, as amended, N.J.S.A. 58:10A-21 et seq., the New
Jersey Water Pollution Control Act, as amended, N.J.S.A. 58:10A-1 et seq.,
the Air Pollution Control Act, as amended, N.J.S.A. 26:2C-1 et seq., the
Hazardous Discharge Site Remediation Act, N.J.S.A. 58:10B-1 et seq., as the
same are in effect at the time of the Closing. Solely for the purposes of
Sections 8.4, 8.5 and 9.3(c) of this Agreement, Environmental Laws pursuant
to the preceding sentence shall mean such laws defined as Environmental
Laws pursuant to the preceding sentence, together with any amendments to
the same adopted, enacted or promulgated after the Closing.
"Hazardous Materials" shall mean asbestos, asbestos-containing
materials, polychlorinated biphenyls, oil and other petroleum hydrocarbons or
other substances which, as of the Closing, shall be listed or defined as
hazardous substances or hazardous wastes pursuant to Environmental Laws.
"to the knowledge of the Seller or any of the Stockholders" (or
terms or similar import) shall mean the actual personal knowledge of ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇.
3.23 Certain Transactions. Except for that certain lease for the use of
the Seller's facility located at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
(the "▇▇▇▇▇▇ Road Facility") between NUJA Realty Corp. and the Seller, none
of the directors, officers or salaried employees of the Seller, or any
relative by blood or marriage or affiliate of any of the foregoing, is
currently a party to any material transaction with the Seller (other than for
services as employees, officers and directors), including without limitation
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from, any such person, or any
corporation, partnership, trust or other entity in which such personal has a
substantial interest or is an officer, director, trustee or partner, or any
officer, director or employee of such an entity.
3.24 Brokers and Finders. Neither the Seller nor any of the Stockholders
nor any officer, director or employee of the Seller has incurred any liability
for any brokerage fees, commissions or finders' fees in connection with this
Agreement or the transactions contemplated hereby.
3.25 Completeness. The copies of all leases, instruments, agreements,
licenses, permits, certificates or other documents which are included on
schedules attached hereto or have been delivered to AFC or the Buyer in
connection with the transactions contemplated hereby are complete and correct.
19
3.26 Disclosure. This Agreement and the schedules hereto and all other
documents and information furnished to AFC and the Buyer and their
representatives pursuant hereto do not and will not include any untrue
statement of material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
3.27 Flood Hazards. Except as described on Schedule 3.27, no portion of
any of the Facilities is located within a flood plain, flood prone area,
special or moderate flood or mudslide hazard area or the like, as so
designated by any applicable flood hazard boundary map, flood insurance rate
map, or any similar map or plat issued or controlled by the U.S. Department
of Housing & Urban Development under the Federal Flood Disaster Protection
Act of 1973, as amended, National Flood Insurance Act of 1968, as amended, or
pursuant to any other national, state or local flood insurance program.
3.28 Warranty Claims. The schedule of warranty expenses as described in
Schedule 3.28 is true and correct.
3.29 Products Liability. Except as disclosed on Schedule 3.29, neither the
Seller nor any subsidiary thereof nor anyone acting for or on their behalf
has, in the preceding five years, paid any amount or damages to any third
party for deaths of or injuries to persons or damage to property, or for
breach of warranty in excess of $25,000.00 arising out of any alleged defect
in quality, materials, workmanship or design of any of their products sold or
services performed.
3.30 UL Listed. The Seller has currently effective Underwriters
Laboratories Listings and CSA Listings for certain of its inventory and has
supplied the Buyer with copies of all certificates related thereto.
3.31 Minimum Value of Assets. [Intentionally omitted.]
3.32 Schedules. Any information set forth in any Schedule and attached to
this Agreement or incorporated in any Section of this Article 3 or any other
Article shall be considered to have been set forth in each other Schedule to
this Agreement.
3.33 Limitation of Warranties. OTHER THAN THOSE REPRESENTATIONS AND
WARRANTIES EXPRESSLY MADE BY THE SELLER IN THIS ARTICLE 3 OR IN ANY
COLLATERAL AGREEMENT, THE SELLER MAKES NO REPRESENTATIONS AND WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, REPRESENTATIONS OR
WARRANTIES OF MERCHANTABILITY OR FITNESS.
4. REPRESENTATIONS OF AFC AND THE BUYER.
AFC and the Buyer jointly and severally make the following representations
and warranties.
20
4.1 Due Organization. Each of AFC and the Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and is duly authorized, qualified and
licensed under all applicable laws, regulations and ordinances of public
authorities to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized, qualified or
licensed would not have a material adverse effect on the business,
operations, assets, properties or condition, financial or otherwise, of AFC
on a consolidated basis. AFC has delivered to the Seller complete and
correct copies of the Certificates of Incorporation and By-laws of AFC and
the Buyer.
4.2 Authorization. Each of AFC and the Buyer has all corporate power and
authority to execute and deliver this Agreement and the other documents and
instruments to be delivered pursuant to this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by AFC and the
Buyer of this Agreement and the consummation of the transactions contemplated
hereby by AFC and the Buyer have been duly and validly authorized by all
necessary corporate action on the part of AFC and the Buyer. This Agreement
has been duly executed and delivered by each of AFC and the Buyer and
constitutes the valid and binding obligation of each of them, enforceable in
accordance with its terms.
4.3 No Conflicts; Approvals.
(a) Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby by AFC
and the Buyer will (i) conflict with or result in a breach of any provision
of the certificate of incorporation or by-laws of AFC or the Buyer, (ii)
result in any conflict with, breach of, or default (or give rise to any right
to termination, cancellation or acceleration or loss of any right or benefit)
under or require any consent or approval which has not been waived or
obtained prior to the Closing with respect to any of the terms, conditions or
provisions of any indenture, lease, agreement, permit, license, judgment or
other instrument to which AFC or the Buyer is a party or by which AFC or the
Buyer or any of their respective properties may be bound, or (iii) violate
any order, law, rule or regulation applicable to AFC or the Buyer or by which
AFC or the Buyer or any of their respective properties is bound.
(b) No action, consent or approval by, or filing by AFC or the Buyer
with, any federal, state, municipal, foreign or other court or governmental
body or agency, or any other regulatory body or any other person, is required
in connection with the execution and delivery by AFC or the Buyer of this
Agreement or the consummation by AFC and the Buyer of the transactions
contemplated hereby, except any filing, consent or approval that has been
made or obtained prior to the Closing.
4.4 Brokers and Finders. Neither AFC nor the Buyer nor any of their
respective officers, directors or employees has employed any broker, agent or
finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with this Agreement or the transactions
contemplated hereby.
21
5. COVENANTS.
The Seller and each of the Stockholders make the following covenants.
5.1 Access and Cooperation. During the period from the date hereof
through the Closing, the Seller will afford to AFC and the Buyer and their
authorized representatives reasonable access to all of the Seller's sites,
properties, books and records, will furnish AFC and the Buyer with such
additional financial and operating data and other information as to the
Business as AFC and the Buyer may from time to time reasonably request and
will make available, upon the reasonable request of AFC and the Buyer, the
officers and employees of the Seller to confer with AFC and the Buyer about
the Business.
5.2 Conduct of Business Pending Closing. During the period from the date
hereof through to Closing, the Seller will, and each of the Stockholders will
cause the Seller to:
(a) carry on the Business in substantially the same manner as it has
heretofore been carried on and, without limiting the generality of the
foregoing, not introduce any material new method of management, operation or
accounting;
(b) maintain its properties, facilities and equipment, including
without limitation those held under leases, in good working order and
condition, ordinary wear and tear excepted;
(c) perform all of its material obligations under leases and
greements relating to or affecting the Business;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage with comparable insurers;
(e) use its reasonable efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships with suppliers, customers and others with whom it has
business relationships;
(f) use its reasonable efforts to maintain compliance with all
permits, laws, rules and regulations, consent orders, and similar
requirements; and
(g) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments and not make any payments of
principal, interest, fees or other charges in respect of its indebtedness
for borrowed money or with respect to any environmental liabilities after
December 31, 1996.
5.3 Prohibited Activities. During the period from the date hereof to the
Closing, the Seller will not, and each of the Stockholders will cause the
Seller not to:
22
(a) except as provided in Section 5.8 below, take, or permit or
suffer to be taken, any action which is represented and warranted in Section
3.21 (c), (e), (f), (g), (h) (I) or (j) not to have occurred since the
Balance Sheet Date; or
(b) enter into any contract or commitment or incur or agree to incur
any liability except in the normal course of business or make capital
xpenditures in excess of $10,000 in the aggregate (other than its ommitment
to purchase a 16-cavity mold as to which the Seller has reviously provided
the Buyer with a description of the nature of its ommitment).
5.4 No Shop. Neither the Seller nor any of the Stockholders will, and
neither will they permit, any agent, officer, director or any representative
of any of the foregoing to, during the period commencing on the date of this
Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement in accordance with the terms hereof, directly
or indirectly, (i) solicit or initiate the submission of proposals or offers
from any person for, (ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AFC or the Buyer
relating to, any acquisition or purchase of all or a material amount of the
assets of, or any equity interest in, the Seller or a merger, consolidation
or business combination of the Seller.
5.5 Key Employees. The Seller shall cooperate with the Buyer in, and will
not interfere with the Buyer's efforts to employ those employees of the
Business listed on Schedule 3.15.2 following the Closing.
5.6 Schedules. The Seller may revise or supplement any one or more
Schedules to this Agreement (any such revision or supplement being herein
called a "New Schedule") at any time at or prior to the Closing Date to
reflect information that either (i) existed on the date hereof and should
have been included on one or more Schedules but was not, or (ii) came into
existence after the date hereof and would have been required to be disclosed
on one or more Schedules if such information was in existence on the date
hereof.
5.7 Public Announcements. Except as required by applicable law, neither
the Seller, AFC nor the Buyer shall make any disclosure or public
announcement in respect of this Agreement or the transactions contemplated
hereby until after the Closing Date, except for announcements by the Seller
to its employees. If AFC is required by applicable law to make a public
announcement in respect of this Agreement or the transactions contemplated
hereby, it will consult with the Seller concerning the content of the
announcement and will give the Seller at least one (1) day prior notice of
such announcement.
5.8 Tax Dividends. Anything in this Agreement to the contrary
notwithstanding, prior to the Closing the Seller shall have the right to
declare and pay cash dividends on its common stock in an aggregate amount
which does not exceed the product of the Company's net income for 1996 and
the period between January 1, 1997 and the Closing Date multiplied by the
combined highest federal and state marginal tax rate applicable to any
Stockholder (less the aggregate amount of any distributions previously made
to the Stockholders with respect thereto).
23
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER.
The obligation of the Seller to consummate the transactions
contemplated hereby is subject to the satisfaction, prior to or at the
Closing, of each of the following conditions, any of which may be waived by
the Seller.
6.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of AFC and the Buyer contained in this
Agreement shall be true and correct at and as of the Closing with the same
force and effect as though made at and as of the Closing; all of the terms,
covenants and conditions of this Agreement to be complied with, performed and
satisfied by AFC and the Buyer at or before the Closing shall have been
complied with, performed and satisfied; and a certificate to the foregoing
effect dated the Closing Date and signed by a duly authorized officer of AFC
shall have been delivered to the Seller.
6.2 Proceedings Satisfactory. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto shall be
reasonably satisfactory to the Seller, the Stockholders and their counsel.
6.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the consummation of the transactions contemplated hereby
or to impose any remedy, condition or restriction unacceptable to the Seller
and the Stockholders in their reasonable judgment.
6.4 ▇▇▇▇▇▇ Road Lease. The Buyer and AFC shall have executed and
delivered to NUJA Realty Corp. a lease with respect to the property located
at the ▇▇▇▇▇▇ Road Facility substantially in the form of Exhibit IV, which
lease is for a period of 2 years following the Closing Date with two
subsequent options of two years each (triple net) and an annual lease amount
of $120,000.00, and which lease or a summary thereof shall be recorded within
10 days after the Closing (the "▇▇▇▇▇▇ Road Lease").
6.5 Escrow Agreement. AFC, the Buyer and the Escrow Agent shall have
executed and delivered to the Seller the Escrow Agreement.
6.6 Employment Agreement. The Buyer shall have executed and delivered to
each of ▇▇▇▇▇▇▇ and ▇▇▇▇ an employment agreement on terms and conditions
reasonably satisfactory to the parties thereto.
6.7 Assumption Agreement. AFC and the Buyer shall have executed and
delivered to the Seller the Assumption Agreement.
6.8 Opinion of Counsel. The Seller shall have received a favorable
opinion from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to AFC and the Buyer, dated the
Closing Date, substantially in the form of Exhibit V.
24
6.9 Incumbency Certificate. The Buyer shall deliver to the Seller
Certificates of Incumbency for the officers of the Buyer.
6.10 Good Standing. AFC and the Buyer shall deliver to the Seller a
Certificate of Existence and Good Standing of AFC and the Buyer from the
Secretary of State of the State of their organization, dated the most recent
practical date prior to Closing Date but in any event at most 30 days prior to
the Closing Date.
6.11 Compliance with ISRA
The Seller shall have received from the NJDEP pursuant to ISRA any of the
following: (i) written approval of Seller's Remedial Action Workplan for the
Hackettstown Facility (ii) a no further action letter as such term is defined
under ISRA, advising that the Seller has satisfied the requirements of ISRA
with respect to the Hackettstown Facility and the transaction contemplated by
this Agreement; or (iii) a Remediation Agreement, as such term is defined
under ISRA, authorizing the completion of the transaction contemplated by
this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF AFC AND THE BUYER.
The obligation of AFC and the Buyer to consummate the transactions
contemplated hereby is subject to the satisfaction, prior to or at the
Closing, of each of the following conditions, any of which may be waived by
AFC and the Buyer.
7.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Seller and each of the Stockholders
contained in this Agreement shall be true and correct at and as of the Closing
with the same force and effect as though made at and as of the Closing; all of
the terms, covenants and conditions of this Agreement to be complied with,
performed and satisfied by the Seller or the Stockholders at or before the
Closing shall have been complied with, performed and satisfied; and a
certificate to the foregoing effect dated the Closing Date and signed by the
Seller and each of the Stockholders shall have been delivered to AFC and the
Buyer.
7.2 Proceedings Satisfactory. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto shall be
reasonably satisfactory to AFC, the Buyer and their counsel.
7.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the consummation of the transactions contemplated hereby
or to impose any remedy, condition or restriction unacceptable to AFC and the
Buyer in their reasonable judgment.
7.4 No Material Adverse Change. Since the Balance Sheet Date, no
material adverse change in the results of operations or the financial
condition of the Business shall have occurred, and there shall not have been
any material loss or damage to any property
25
or assets of the Business, whether or not covered by insurance; and a
certificate to the foregoing effect dated the Closing Date and executed by
the Seller and each of the Stockholders shall have been delivered to AFC and
the Buyer.
7.5 The ▇▇▇▇ of Sale. The Seller shall have executed and delivered to
the Buyer the ▇▇▇▇ of Sale.
7.6 Assumption Agreement. [Intentionally omitted.]
7.7 The ▇▇▇▇▇▇ Road Lease. NUJA Realty Corp. shall have executed and
delivered to the Buyer the ▇▇▇▇▇▇ Road Lease.
7.8 Escrow Agreement. The Seller and the Escrow Agent shall have
executed and delivered to AFC and the Buyer the Escrow Agreement.
7.9 Employment Agreement. ▇▇▇▇▇▇▇ and ▇▇▇▇ shall have executed and
delivered to the Buyer their respective employment agreements.
7.10 Lien Search. The Seller shall have delivered to the Buyer a lien
search of all Assets of the Seller and each of its subsidiaries showing the
names and addresses of all persons holding liens, mortgages or other
encumbrances against the Assets and describing such interests, to be delivered
not later than 20 days prior to the Closing Date.
7.11 Release of Liens. All liens encumbering the Assets shall have been
released and discharged and financing statement terminations, or other
appropriate instruments evidencing such release and discharge, shall have been
provided to Buyer in form suitable for filing.
7.12 Consents. The Seller shall have obtained all required consents of,
and made all required filings with, any governmental authority or agency and
any other person or entity relating to sale of the Assets to the Buyer and
the consummation of the transactions contemplated hereby.
7.13 Key Employees. [Intentionally omitted.]
7.14 Purchase of Leased Equipment. The Seller shall have purchased or
shall have a commitment from the lessor thereof to transfer to the Buyer as
part of the Assets, free and clear of any liens, pledges, security interests
or other encumbrances, the equipment referenced in Schedule 1.1(b), currently
leased and capitalized by the Seller, at no cost or expense to the Buyer.
With respect to leased equipment not capitalized by the Seller, the Seller
shall have obtained the consent of the lessor thereof to the transfer of the
rights of the Seller to the Buyer under any such leases, together with an
estoppel certificate satisfactory in form and substance to the Buyer with
respect to the validity of each such lease and the non-existence of any
defaults thereunder.
26
7.15 Opinion of Counsel, AFC and the Buyer shall have received a
favorable opinion of ▇▇▇▇▇▇▇▇ & English, counsel to the Seller and the
Stockholders, substantially in the form of Exhibit V.
7.16 Resolutions. The Seller shall deliver to the Buyer a copy of
resolutions duly adopted by the Seller's stockholders and directors
authorizing and approving the performance of the transactions contemplated
herein and the execution and delivery of the documents described herein, and
appointing a representative of the Seller to act on the Seller's behalf,
certified as true and of full force as of the Closing Date by an officer of
the Seller.
7.17 Certificate as to Representations and Warranties. [Intentionally
omitted.]
7.18 Incumbency Certificate. The Seller shall deliver to the Buyer
Certificates of Incumbency for the officers of the Seller and for the
Stockholders making certifications as of the Closing Date.
7.19 Good Standing. The Seller shall deliver to the Buyer a Certificate
of Existence and Good Standing of the Seller and any subsidiaries from the
Secretary of State of the State of their organization, dated the most recent
practical date prior to Closing Date but in any event at most 30 days prior
to the Closing Date.
7.20 Use of Name and Marks. The Seller shall execute and deliver to the
Buyer an appropriate instrument granting to the Buyer all of the Seller's and
its subsidiaries' right to use those names and marks as described in
subsections 1.1(d) and Section 8.1.
7.21 Required Consents. The Seller shall deliver to the Buyer any
consents required by any third parties which are material to the transactions
contemplated herein.
7.22 Environmental Audits. [Intentionally omitted]
7.23 Insurance Certificates. The Seller shall deliver to the Buyer a
certificate of insurance evidencing the existence and continuing existence of
products liability insurance covering claims for products sold by the Seller
and its subsidiaries prior to the Closing Date.
7.24 Insurance Endorsements. [Intentionally omitted.]
7.25 Benefit Plans. The Seller shall deliver to the Buyer appropriate
adoption, transfer and policy documents with respect to any plan, trust, or
policy related to any employee 401(k) or health and welfare plan which the
Buyer assumes, adopts or continues.
7.26 Other Documents. The Seller shall deliver to the Buyer such other
instruments and documents as are reasonably necessary or reasonably requested
by the Buyer to transfer the Assets and to effect the transactions
contemplated herein.
27
7.27 New Schedules. No New Schedule shall have been provided by Seller
containing information which the Buyer, in its sole discretion, deems
material to its decision as to whether the consummate the transactions
contemplated hereby.
7.28 Compliance with ISRA.
The Seller shall have received from the NJDEP pursuant to ISRA any of the
following: (i) written approval of Seller's Remedial Action Workplan for the
Hackettstown Facility (ii) a no further action letter as such term is defined
under ISRA, advising that the Seller has satisfied the requirements of ISRA with
respect to the Hackettstown Facility and the transaction contemplated by this
Agreement; or (iii) a Remediation Agreement, as such term is defined under ISRA,
authorizing the completion of the transaction contemplated by this Agreement,
and Buyer shall be satisfied, in its sole discretion, with the terms and
conditions thereof.
8. COVENANTS AFTER THE CLOSING.
8.1 Change of Name. The Seller shall, effective immediately following the
Closing, change its name to a name not using "Area Lighting Research" and
otherwise reasonably satisfactory to AFC and the Buyer. The Seller shall
cooperate with the Buyer to allow the Buyer to change its name to "Area Lighting
Research, Inc." immediately following the Closing. The Seller and each of the
Stockholders acknowledge and agree that the Buyer will acquire as part of the
Assets the exclusive use of the name "Area Lighting Research, Inc." and that
neither the Seller nor any of the Stockholders will use that name or any similar
name subsequent to the Closing.
8.2 Further Assurances. From time to time after the Closing, at the
request of the Buyer or the Seller and without further consideration, the
Seller, each of the Stockholders and the Buyer shall execute and deliver any
further instruments and take such other action as may be reasonably requested to
vest or confirm in the Buyer title to the Assets or otherwise carry out the
transact ions contemplated hereby.
8.3 Books and Records.
(a) Access by Buyer. The Seller shall maintain all of its books and
records not transferred to the Buyer as part of the Assets for the period of
time required by law and shall provide the Buyer with access to, or copies of,
such books and records as the Buyer may from time to time reasonably request and
shall further comply with its obligations with respect thereto set forth in
Section 1.2(b) hereof.
(b) Access by Seller. The Buyer shall maintain all books and records
transferred to the Buyer as part of the Assets for the period time required by
law and shall provide the Seller with access to, or copies of, such books and
records as the Seller may from time to time reasonably request. Reasonable
access during normal business hours to books and records relating to the Assets
that are transferred by the Seller to the Buyer shall be given to the Seller as
may be reasonably necessary for financial reporting and
28
accounting purposes, the
preparation and filing of tax returns or the defense of any tax claim or
assessment by the Seller.
8.4 Environmental Matters
(a) Subject to Section 9.3 of this Agreement, the Seller shall take
all actions at its sole and cost and expense that are required by the NJDEP to
satisfy the Seller's obligations pursuant to the Environmental Settlement
Agreements and to achieve full Compliance with ISRA, including, without
limitation, the maintenance of any Institutional Controls and/or Engineering
Controls required or approved by the NJDEP pursuant to the Environmental
Settlement Agreements or ISRA.
(b) The Seller shall have the sole and exclusive right to prepare,
submit to the NJDEP or other Governmental Authority, and negotiate any
investigative or remedial activities proposed to be undertaken by the Seller
pursuant to this Section 8.4, the Environmental Settlement Agreements or ISRA,
it being agreed that the scope, extent and method of any such activities are
matters to be agreed upon by and between the Seller and the NJDEP or other
Governmental Authority exercising jurisdiction over the matter. AFC and the
Buyer hereby authorize the Seller at Seller's sole cost and expense (and its
employees, representatives, contractors or consultants) to take any and all
actions at, on or under the Hackettstown Facility that, in the Seller's
judgment, are necessary or advisable to comply with the requirements of the
NJDEP pursuant to the Environmental Settlement Agreements or ISRA at the lowest
cost to the Seller, provided that such actions are approved by the NJDEP and
such actions do not unreasonably interfere with the Buyer's day-to-day operation
of the Business. Without in any way limiting the scope or generality of the
foregoing, AFC and the Buyer hereby specifically authorize the Seller at
Seller's sole cost and expense (and its employees, representatives, contractors
or consultants) to (i) install ▇▇▇▇▇ or systems for monitoring or remediation of
soil or groundwater at the Hackettstown Facility, including, without limitation,
above-ground or underground wells, pipes, hoses or other equipment for the
transfer or treatment of groundwater at or emanating from such facility; (ii)
employ in-situ chemical oxidation technology to remediate groundwater at or
emanating from such facility; (iii) use any alternative soil or groundwater
cleanup standard or criteria (including non-residential cleanup criteria,
natural remediation criteria or Classification Exception Areas) in determining
the extent of the remediation of soil or goundwater at or emanating from such
facility; and (iv) use engineering or institutional controls (as such terms are
defined under ISRA) to address any environmental conditions on, at, under,
emanating from or effecting such facility. Neither AFC nor the Buyer shall
propose, recommend or otherwise seek to secure the agreement of the NJDEP or any
other Governmental authority to any investigative or remedial activities other
than measures approved in writing by the Seller unless AFC and the Buyer shall
have agreed in a writing satisfactory in form and substance to the Seller or the
Stockholders that the Buyer shall be responsible for all material incremental
costs (including, without limitation, capital, operation and maintenance,
design, engineering, consulting or treatment, storage or disposal fees or costs)
associated with such measure.
29
(c) Following the Closing, AFC and the Buyer shall provide the
Seller (and its employees, representatives, contractors and consultants) with
access to the Hackettstown Facility as reasonably necessary to enable the
Seller to conduct any action undertaken by the Seller or required by the
NJDEP under this Section 8.4, the Environmental Settlement Agreements or
ISRA. To the extent consistent with the requirements of the NJDEP, the
Seller shall schedule the performance of investigative or remedial activities
at the Hackettstown Facility so as not to unreasonably interfere with the
Buyer's day-to-day operations at such facility. The Seller shall give the
Buyer at least five (5) days' prior notice (or such shorter notice as shall
be necessary for the Seller to comply with any order or directive of the
NJDEP or any other applicable Governmental authority) of the Seller's
initiation of any investigative or remedial activities at the facility. AFC
or the Buyer (or their employees, representatives, contractors or
consultants) may, at their expense, observe all environmental tests, studies,
and remedial work performed at the Hackettstown Facility by the Seller and
take split samples of the Seller's soil and groundwater sampling.
(d) Neither AFC nor the Buyer shall unreasonably interfere with any
investigative or remedial activities undertaken by the Seller in accordance with
this Section 8.4, the Environmental Settlement Agreements or ISRA. Without
limiting in any way the generality of the foregoing, neither AFC nor the Buyer
shall remove or disturb any structure or equipment required as part of any
remedial action employed or installed by the Seller at the Hackettstown Facility
in accordance with this Section 8.4, the Environmental Settlement Agreements or
ISRA, including, without limitation, the existing monitoring ▇▇▇▇▇ at such
facility. AFC and the Buyer shall permit the storage at the Hackettstown
Facility of equipment and materials necessary to perform such investigative or
remedial activities or of excavated soils and groundwater extracted in the
course of sampling, monitoring, well development, hydraulic testing or
remediation activities until the proper and lawful disposal of such material or
until such soil is re-used at the Hackettstown Facility, provided that such
storage or reuse is in accordance with applicable Environmental Laws and that
such material shall be located as reasonably directed by the Buyer so as not to
unreasonably interfere with the Buyer's use of such facility.
(e) During the period in which the Buyer occupies the Hackettstown
Facility, the Seller shall deliver to the Buyer copies of any analytical data,
environmental reports, correspondence, directives, orders, and other documents
submitted by the Seller to or received by the Seller from the NJDEP or other
applicable Governmental Authority in connection with any action undertaken by
the Seller pursuant to this Section 8.4, the Environmental Settlement Agreements
or ISRA within ten (10) days after the receipt or submission of the same by the
Seller. If the Buyer at any time prior to Seller's satisfaction of its
obligations under Section 8.4(a) hereof with respect to the Environmental
Settlement Agreements or ISRA reasonably believes on the basis of such documents
that the Seller is failing or unreasonably refusing to perform a material
obligation required by the NJDEP under the Environmental Settlement Agreement or
ISRA, the Buyer may notify the Seller thereof in writing, which notice shall
identify with specificity such obligation and the basis for the Buyer's belief
that the Seller is failing or unreasonably refusing to satisfy the same. The
Seller shall respond to the Buyer's notice in writing within ten (10) days of
Seller's receipt of the same. If the Buyer is not satisfied with Seller's
response, the Buyer shall so notify the
30
Seller in writing within ten (10) days of Buyer's receipt of such response
and the parties shall negotiate in good faith for a period of ten days
following Seller's receipt of Buyer's written notice (or for such longer
period as the parties may mutually agree upon in writing) to attempt to
resolve such dispute. If the parties are unable to resolve such dispute, or
the Seller is unable to secure a written statement from the NJDEP that the
Seller is in compliance with the obligation identified by the Buyer or that
the NJDEP has waived the requirement for the Seller to comply with such
obligation, the Buyer shall have the right, within ten (10) days of the
termination of the negotiation period, to notify the NJDEP in writing (with
a copy to the Seller) of such dispute. In the event the NJDEP in response to
such notice issues a written determination that Seller has not complied with
such obligation, the Buyer shall have the right to perform the actions
required by the NJDEP to satisfy such obligation unless the Seller (i)
performs such actions within the time period specified by the NJDEP, or (ii)
successfully contests such NJDEP determination. If the Buyer performs any
such actions required by the NJDEP pursuant to the preceding sentence, the
Seller shall promptly reimburse the Buyer for the reasonable costs incurred
by the Buyer to perform such actions upon the Seller's receipt of a written
statement from the Buyer specifying in reasonable detail the actions
performed by the Buyer and itemizing the costs incurred by the Buyer to
perform the same.
(f) Unless otherwise disclosed on Schedule 3.22, the Seller and
each of the Stockholders shall: (i) provide immediate written notice to the
Buyer if any Hazardous Material is, to their knowledge, incident on or about
the Facilities or the Assets; (ii) provide immediate written notice to the
Buyer along with a photocopy thereof of any action, orders, requests,
notifications or other written or verbal communication from any agency
relating to the presence, suspected presence or potential presence or the
discharge, release or threatened release of any Hazardous Material on or
about the Facilities or the Assets from any source of which they have
knowledge; and (iii) provide immediate written notice to the Buyer in the
event that, to the knowledge of the Seller or any of the Stockholders, the
Facilities or Assets (A) are not in full compliance with the requirements of
any of the Environmental Laws, (B) are subject to a federal or state
investigation evaluating whether any remedial action is needed to respond to
the discharge, release or threatened release of any Hazardous Material on or
about the Facilities or the Assets, (C) are subject to a federal, state or
local lien in connection with remedial action needed or taken to respond to
any Hazardous Material, or (D) are subject of claims made or threatened by
any third party pursuant to Environmental Laws against the Seller, any
subsidiary thereof, any of the Stockholders, the Facilities or the Assets
relating to damage, contribution, cost recovery compensation, loss or injury
resulting from any Hazardous Material on or about the Facilities or Assets.
8.5 Compliance with Environmental Laws
AFC and the Buyer shall take all actions at their sole cost and
expense required to comply with all Environmental Laws applicable to the use
by the Buyer of the Hackettstown Facility or the Buyer's operations at such
facility. Without limiting in any way the generality of the foregoing, in the
event of (i) the termination of the ▇▇▇▇▇▇ Road Lease or other cessation of
operations by the Buyer at the Hackettstown Facility; or (ii) any transfer
31
of ownership or operations (as such term is defined under ISRA) effected by AFC
or the Buyer prior to the termination of the ▇▇▇▇▇▇ Road Lease, AFC and the
Buyer shall take all actions that are required to achieve Compliance with
ISRA.
8.6 Employees of Seller.
Immediately following the Closing, the Buyer shall offer at will
employment to all of the employees of Seller on substantially the same terms
and conditions as those provided by Seller prior to the Closing except to the
extent that any term or condition has not been disclosed to Buyer pursuant to
the terms hereof. The foregoing commitment is provided to Seller solely for
its benefit and shall not be deemed to create a third party beneficiary
relationship with any such employee.
9. INDEMNIFICATION.
9.1 Survival of Covenants, Representations and Warranties.
(a) The covenants, representations and warranties of the Seller
and each of the Stockholders contained herein (including this Section 9) and
in the certificates and other documents delivered in connection herewith,
including, without limitation, any information provided in any New Schedule
provided pursuant to Section 5.5, shall survive the Closing for a period of
18 months from the Closing Date, provided that the indemnity relating to
Taxes set forth in Section 9.2 (d) shall survive until the expiration of the
applicable statutes of limitations for such Taxes (including any extensions
thereof), provided further that the covenants of the Seller set forth in
Section 8.4 (a), (b), (c) and (d) of this Agreement, shall survive forever,
and the covenants of the Seller set forth in Section 8.4 (e) and (f) of this
Agreement shall survive until the expiration or termination of the ▇▇▇▇▇▇
Road Lease, and provided further that the representations and warranties of
the Seller and the Stockholders set forth in Section 3.22 of this Agreement
shall survive the Closing for a period of 36 months from the Closing Date and
provided further that covenants, representations and warranties with respect
to which a claim is made within the applicable survival period shall survive
until such claim is finally determined and paid.
(b) The covenants of AFC and the Buyer set forth in Section 8.4
(b), (c) and (d) of this Agreement shall survive until Seller has satisfied
its obligations under Section 8.4 (a) hereof. The covenants of AFC and the
Buyer set forth in Section 8.5 of this Agreement shall survive for a period
of 36 months following the expiration or termination of the ▇▇▇▇▇▇ Road
Lease, provided, however, that the covenant of AFC and the Buyer to comply
with ISRA pursuant to Section 8.5 shall survive for a period of 36 months
following the expiration or termination of the ▇▇▇▇▇▇ Road Lease or until AFC
and the Buyer achieve Compliance with ISRA (to the extent such compliance is
required under Section 8.5), whichever is later. The representations,
warranties and all other covenants of AFC and the Buyer made in this
Agreement and in the documents and certificates delivered in connection
herewith shall survive the Closing for a period of 18 months following the
Closing Date; provided however,
32
that claims for indemnification under Section 9.3(c) with respect to such
covenants, representations and warranties may be brought for a period of 36
months following the expiration of the ▇▇▇▇▇▇ Road Lease and provided,
however, that such covenants, representations and warranties with respect to
which a claim is made within such period shall survive until such claim is
finally determined and paid.
(c) No claim for indemnification may be made with respect to a
covenant, representation or warranty after the expiration of the applicable
survival period, other than claims based on intentional fraud.
9.2 General Indemnification by the Seller and the Stockholders.
The Seller and each of the Stockholders (each in the capacity as an
indemnifying party pursuant to this Section 9.2 and Sections 9.4 and 9.5, a
"Seller Indemnifying Party") covenant and agree that they will jointly and
severally indemnify, defend, protect and hold harmless each of AFC and the
Buyer (each in the capacity as an indemnified party pursuant to this Section
9.2 and Sections 9.4 and 9.5, a "Buyer Indemnitee" from and against all
losses, claims, damages, actions, suits proceedings, demands, assessments,
adjustments, costs and expenses (including without limitation reasonable
attorneys' fees and expenses of litigation and investigation) (collectively
"Damages"), from and after the date of this Agreement until the expiration of
the period of limitations applicable thereto and provided for herein as a
result of or incident to:
(a) any breach of any representation or warranty of the Seller or any
of the Stockholders set forth herein or in any certificate or other
document delivered in connection herewith (except for any breach of the
representations made in Section 3.6, for which a remedy is provided in
Section 1.7(b)), after giving effect to any information provided in any New
Schedule provided pursuant to Section 5.5;
(b) any breach or nonfulfillment of, or noncompliance by the Seller
or any of the Stockholders with, any covenant, agreement or obligation
contained herein or in any certificate or other document delivered in
connection herewith;
(c) the ownership of the Assets and the operation of the Business
prior to the Closing;
(d) any Taxes of any kind to which the Seller has been, is or may be
subject, including, without limitation, those Taxes relating to or arising
in connection with the transfer of the Assets to the Buyer;
(e) any liability or obligation of, or any claim against, the Seller
not expressly assumed by the Buyer pursuant to the terms hereof, including
without limitation the liabilities and obligations described in
Section 1.4;
(f) any failure to comply with any so-called "bulk sales law" or
other similar law in any jurisdiction in respect of the transactions
contemplated hereby;
33
(g) any (i) product liability claim with respect to any products sold
or manufactured in connection with the operation of the Business by the
Seller on or before the Closing Date, and (ii) any product warranty claim
with respect to products sold by the Seller prior to the Closing Date if,
after giving effect thereto, the aggregate of all such product warranty
claims paid by Buyer would exceed $20,000 per calendar year; and
(h) without limiting the foregoing provisions, any failure by the
Seller, the Stockholders or any predecessor of the Seller to comply with
the provisions of Section 8.4 or any breach by the Seller or the
Stockholders of the representations and warranties set forth in Section
3.22 of this Agreement.
9.3 Indemnification by AFC and the Buyer. AFC and the Buyer (each in the
capacity as an indemnifying party pursuant to this Section 9.3 and Sections 9.4
and 9.5, a "Buyer Indemnifying Party"; each Buyer Indemnify Party and each
Seller Indemnifying Party being sometimes herein collectively referred to as an
"Indemnifying Party") covenant and agree that they will jointly and severally
indemnify, defend, protect and hold harmless the Seller and each of the
Stockholders (each in the capacity as an indemnified party pursuant to this
Section 9.3 and Sections 9.4 and 9.5, a "Seller Indemnitee; each Seller
Indemnitee and each Buyer Indemnitee being sometimes herein collectively
referred to as an "Indemnitee") at all times from and after the date of this
Agreement from and against all Damages as a result of or incident to:
(a) any breach of any representation or warranty of AFC or the Buyer
set forth herein or in any certificate or other document delivered in
connection herewith (as if such representation or warranty would read if
all qualifications as to materiality and knowledge were deleted from it);
(b) any breach or nonfulfillment by Buyer or AFC of, or noncompliance
by Buyer or AFC with, any covenant, agreement or obligation contained
herein or in any certificate or other document delivered in connection
herewith;
(c) any failure by the Buyer or AFC to comply with all Environmental
Laws with respect to the operation of the Business at the Hackettstown
Facility during the period in which it occupies the Hackettstown Facility
under the ▇▇▇▇▇▇ Road Lease or any failure by the Buyer or AFC to comply
with their obligations pursuant to Sections 8.4 and 8.5 of this Agreement;
(d) any product liability claim or product warranty claim made with
respect to any products sold by the Buyer after the Closing Date;
(e) any product warranty claim made after the Closing Date with
respect to any products sold or manufactured by the Buyer or the Seller
before, on or after the Closing Date;
34
(f) any liability to which the Seller becomes subject for
severance claims of former employees of the Seller whose employment with the
Buyer is terminated; and
(g) the ownership of the Assets and the operation of the Business
after the Closing; and
(h) any Assumed Obligations.
9.4 Adjustment to Indemnification Payments. Any payment made by a Seller
Indemnifying Party to the buyer Indemnitees, on the one hand, or by a Buyer
Indemnifying Party to the Seller Indemnitees, on the other hand, pursuant to
this Article 9 or in respect of any claim (i) shall be net of any insurance
proceeds realized by and paid to the Buyer Indemnitees or the Seller
Indemnitees, as the case may be, in respect of such claim and (ii) shall be
reduced by an amount equal to any Tax benefits attributable to such claim. The
Buyer Indemnitees or the Seller Indemnitees, as the case may be, shall use their
respective reasonable efforts to make insurance claims relating to any claim for
which either is seeking indemnification pursuant to Section 9.
9.5 Limitation on Liability. Neither any Seller Indemnifying Party nor any
Buyer Indemnifying Party shall have any obligation under this Section 9 to
indemnify the Buyer Indemnitees or the Seller Indemnitees, as the case may be,
with respect to any item of Damage (a) unless the aggregate combined total of
all such Damages incurred by the Buyer Indemnitees or the Seller Indemnitees,
respectively, exceeds, in the case of product warranty claims, $20,000 per
calendar year, and, in the case of all other claims, $80,000, and then only for
the amount of such excess, and (b) in excess of the Purchase Price.
9.6 Third Person Claims. (a) Promptly after an Indemnitee has received
notice of or has knowledge of any claim by a person not a party to this
Agreement (a "Third Person") or the commencement of any action or proceeding by
a Third Person, the Indemnitee shall give the Seller Indemnifying Party or the
Buyer Indemnifying Party, as the case may be, written notice of such claim or
the commencement of such action or proceeding. The failure to so notify the
Indemnifying Party will relieve the Indemnifying Party from liability under this
Section 9 with respect to such claim, suit or proceeding, but only if and to the
extent that such failure adversely affects the ability of the Indemnifying Party
to defend its interest in such claim, action or proceedings.
(b) The Indemnitee shall permit the Indemnifying Party (at the
expense of such Indemnifying Party) to assume control of the investigation
and defense of any claim by a Third Person or any litigation resulting
therefrom, provided that (i) the counsel for the Indemnifying Party who shall
conduct the defense of such claim or litigation shall be reasonably
satisfactory to the Indemnitee and (ii) the Indemnitee may participate in
such defense at such Indemnitee's expense.
(c) The Indemnifying Party may make any settlement with respect to
any such claim by a Third Person or any litigation resulting therefrom,
without the prior consent of the
35
Indemnitee, provided that without the prior written consent
of the Indemnitee, which consent shall not be unreasonably withheld, no
Indemnifying Party, in the defense of any such claim or litigation, shall
consent to entry of any judgment or enter into any settlement that provides for
injunctive or other nonmonetary relief affecting the Indemnitee or that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to the Indemnitee release of all liability in respect such claim or litigation.
9.7 Method of Payment. All claims for indemnification shall be paid in
cash without interest.
9.8 Exclusive Remedy. The indemnifications under this Article IX shall be
the Buyer's and the Seller's sole and exclusive remedies with respect to money
damages, each against the other, with respect to matters arising under this
Agreement, of any kind or nature including, without limitation, matters arising
under Environmental Laws or relating to the Business, the Assets, the Assumed
Liabilities or the Excluded Assets.
10. TERMINATION OF AGREEMENT.
10.1 Termination. This Agreement may be terminated at any time
prior to Closing:
(a) by mutual written consent of AFC and the Seller;
(b) by either AFC or the Seller upon written notice to the other if:
(i) the Closing shall not have occurred on or before January
31, 1997 or such later date, if any, as AFC and the Seller may agree upon
writing; provided, however, that the right to terminate this Agreement
pursuant to this subsection 10.1(b)(i) shall not be available to any party
whose breach of any representation or warranty or failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or before such date;
(ii) any court or governmental or regulatory agency, authority
or body shall have enacted, promulgated or issued any statute, rule,
regulation, ruling, writ or injunction, or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and all appeals and means of appeal there from have been exhausted;
(c) by AFC if (i) there shall have been a breach of any of the
covenants or agreements of the Seller or any of the Stockholders hereunder
which cannot be or has not been cured within 10 days (but not later than
one business day before closing) after written notice to the breaching
party, or (ii) there shall have been any breach of any representation or
warranty of the Seller or any of the Stockholders contained herein or in
any instrument or other document delivered by or on behalf of the Seller or
any of the Stockholders in connection herewith, which cannot be or has
36
not been cured within 10 days (but not later than one business day before
closing) after written notice to the breaching party; or
(d) by the Seller if (i) there shall have been a breach
of any of the covenants or agreements of AFC or the Buyer hereunder which
cannot be or has not been cured within 10 days (but not later than one
business day before closing) after written notice to the breaching party, or
(ii) there shall have been any breach of any representation or warranty of
AFC or the Buyer contained herein or in any instrument or other document
delivered by or on behalf of AFC or the Buyer in connection herewith.
10.2 Liabilities in Event of Termination. The termination of this
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach by such party with respect to any of its
representations, warranties or agreements contained in this Agreement. The
provisions of this Section 10.2 shall survive the termination of this Agreement.
11. NONCOMPETITION.
11.1 Prohibited Activities. The Seller and each of the Stockholders agree
that for a period of (i) in the case of the Seller, ▇▇▇▇▇▇▇ and ▇▇▇▇, five years
following the Closing Date, and (ii) in the case of ▇▇▇▇▇▇▇▇▇▇, three years
following the Closing Date (and, with respect to each of ▇▇▇▇▇▇▇ and ▇▇▇▇
specifically, five years following his employment termination with the Buyer or
its successor or assign) (the "Noncompete Period"), neither the Seller nor any
of the Stockholders will:
(a) establish, enter into, be employed by, advise,
consult with, become an owner in or a part of or in any way participate in,
any company, partnership, corporation or other entity or venture (other than
AFC, the Buyer or its subsidiaries) that competes with, or in any way engages
in any business or venture (for itself or himself or others and whether as an
officer, director, stockholder, owner, partner, joint venturer, employee,
independent contractor, consultant, advisor or representative) that competes
with, the Business as it may exist from time to time, or with respect to
▇▇▇▇▇▇▇▇▇▇ only, as it exists on the Closing Date;
(b) directly or indirectly hire, or solicit for hire, any present or
future employee of AFC or the Buyer, including without limitation any
employee of the Seller who becomes an employee of the Buyer (provided that
the Seller may continue to employ the Stockholders for the sole purpose of
assisting in the winding up of the affairs of the Seller following the
Closing); or
(c) directly or indirectly solicit any present, potential or past
customer of the Business or of the Buyer.
Ownership of not more than one percent of the voting stock of a corporation
whose stock is traded on a national securities exchange or over-the-counter
shall not of itself
37
constitute a violation of this Section 11.1 nor shall it be
a violation of this Section 11.1 for ▇▇▇▇▇▇▇▇▇▇ to own or operate a business
which incorporates photocontrol products purchased from companies other than the
Buyer into other products provided that such photocontrol products do not
constitute a majority of the value of the product into which they are
incorporated.
11.2 Reasonable Restraint. The parties agree that the covenants contained
in this Section 11 impose a reasonable restraint on the Seller and each of the
Stockholders in light of the activities and business of the Business and the
future plans of the Buyer.
11.3 Severability; Reformation. The covenants in this Section 11 are
severable, and in the event that any one or more of such covenants are deemed
illegal or unenforceable, the remaining covenants shall remain in full force and
effect, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. In the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth in this Section 11 are unreasonable, then it is the intention of the
parties that such restrictions be enforced to the fullest extent which the court
deems reasonable, and the provision of this Section 11 shall thereby be
reformed.
11.4 Remedies. The Seller and each of the Stockholders acknowledge and
agree that, because the legal remedies of AFC and the Buyer may be inadequate in
the event of a breach of any of the covenants set forth in Section 11, AFC and
the Buyer may, at their option, in addition to obtaining any other remedy or
relief available to it (including without limitation damages at law), enforce
the provisions of this Section 11 by injunction and other equitable relief.
11.5 Independent Covenant.
(a) Each of the covenants contained in this Section 11 shall be
construed as a covenant independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Seller
or any of the Stockholders against AFC, the Buyer or any of their
respective subsidiaries, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by AFC or the Buyer of
any such covenant.
(b) The Noncompete Period shall be computed by excluding from such
computation any time during which the Seller or any of the Stockholders is
in violation of any provision of this Section 11 and any time during which
there is pending in any court of competent jurisdiction any action
(including any appeal from any judgment) brought by any person, whether or
not a party to this Agreement, in which AFC or the Buyer seeks to enforce
the covenants of contained in Section 11 or in which any person contests
the validity or enforceability of any such covenant or seeks to avoid the
performance or enforcement of any such covenant.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
38
12.1 The Seller and the Stockholders. The Seller and each of the
Stockholders recognize and acknowledge that they have in the past, currently
have, and in the future may possibly have, access to certain confidential
information about the Business, such as lists of customers, operational
policies, and pricing and cost policies. The Seller agrees that it will not,
and each of the Stockholders agrees that he will not, use any such
confidential information for its own benefit or disclose such confidential
information to any person or entity for any purpose whatsoever, except to AFC
and the Buyer, unless such information becomes known to the public generally
through no fault of the Seller or any of the Stockholders or unless the
Seller or any of the Stockholders is required by law or subpoena to disclose
such information. If the Seller or any of the Stockholders is requested to
provide such information pursuant to requirements of applicable law or by
subpoena, it shall notify AFC as promptly as possible and shall allow AFC the
opportunity to oppose such request or to seek an appropriate protective order.
12.2 AFC and the Buyer. AFC and the Buyer recognize and acknowledge that
prior to the Closing they will have access to certain confidential
information about the Business, such as lists of customers, operational
policies, pricing and cost policies, which has been provided to AFC and the
Buyer for the purpose of evaluating the transactions contemplated by this
Agreement. AFC and the Buyer agree, that, without the prior written consent
of the Seller, prior to the Closing and following any termination of this
Agreement if the Closing should not occur, it will not use such confidential
information other than for the purposes for which it has been provided and
will not disclose such confidential information to any person or entity for
any purpose whatsoever, unless such information becomes known to the public
generally through no fault of AFC or the Buyer or unless AFC is required by
law or subpoena to disclose such information. If the Buyer or AFC is
requested to provide such information pursuant to requirements of applicable
law or by subpoena, it shall notify the Seller and each of the Stockholders
as promptly as possible and shall allow the Seller and/or each of the
Stockholders the opportunity to oppose such request or to seek an appropriate
protective order.
12.3 Remedies. The parties acknowledge and agree that, because legal
remedies may be inadequate in the event of a breach of any of the covenants
set forth in this Section 12, in addition to any other remedy or relief
available (including without limitation damages at law), the provisions of
this Section 12 may be enforced by injunction and other equitable relief.
12.4 Survival of Termination. The provisions of this Section 12 shall
survive the termination of this Agreement.
13. GENERAL.
13.1 Bulk Sales Laws. Each of the Seller and the Buyer hereby waives
compliance by each other with the so-called "bulk sales law" and other
similar law in any jurisdiction in respect of the transactions contemplated
by this Agreement.
13.2 Effect of Investigation; Best Knowledge.
39
(a) No investigation by the parties hereto shall affect the
representations and warranties of the parties contained herein or in any
certificate or other document delivered in connection herewith and each such
representation and warranty shall survive such investigation.
(b) When a representation or warranty contained herein or in any
certificate or other document delivered in connection herewith is made to the
"best knowledge" of a party, unless otherwise indicated herein or therein,
such party shall be deemed to know all facts and circumstances that a
reasonable investigation of the subject matter of such representation or
warranty would have revealed.
13.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor
the rights or the obligations of any party hereto may be assigned without the
prior written consent of the other parties hereto.
13.4 Entire Agreement. This Agreement (including the schedules and
exhibits hereto) constitute the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings, whether written or
oral, with respect to the subject matter hereof.
13.5 Amendment. This Agreement may be modified or amended only by a
written instrument executed by each of AFC, the Buyer, the Seller and the
Stockholders.
13.6 Counterparts; Facsimilies. This Agreement may be executed in any
number of counterparts which together shall constitute one instrument. This
Agreement and any other Agreement delivered hereunder may be executed and
delivered by facsimile transmission, and any such transmission may be
considered an original by its recipient party unless otherwise specified by
the delivering party at the time of the transmission.
13.7 Costs and Expenses. Whether or not the transactions contemplated
hereby are consummated, each of the parties hereto shall bear all expenses,
costs and fees incurred by it in connection with the preparation of this
Agreement, the consummation of the Closing and compliance by it with the
terms and provisions hereof, including without limitation the fees and
expenses of any attorneys, accountants, brokers or other persons engaged by
it, except as may be permitted by Sections 9 or 13.13.
13.8 Notices. All notices or communications required or permitted
hereunder shall be in writing. Any notice, demand or other communication
given under this Agreement shall be deemed to be given if given in writing
(including facsimile, telex, telecopy or similar transmission) addressed as
provided below (or at such other address as the addressee shall have
specified by notice actually received by the addressor) and if either (a)
actually delivered in fully legible form, to such address (evidenced in the
case of a telex by receipt of the correct answer back) or (b) in the case of
a letter, five days shall have elapsed after the
40
same shall have been deposited in the United States mail, with first-class
postage prepaid and registered or certified.
If to AFC or the Buyer, addressed to them as follows:
AFC Cable Systems, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller or the Stockholders, addressed to it as
follows:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & English
Four Gateway Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fascimile: ▇▇▇-▇▇▇-▇▇▇▇
13.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts
without regard to principles of conflict of laws. Each of the parties hereto
irrevocably submits to the nonexclusive jurisdiction of the courts of the
Commonwealth of Massachusetts for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement or the subject matter
hereof and agrees that process may be served upon it if it cannot otherwise
be served in such state by registered or certified mail addressed as provided
in Section 13.8.
41
13.10 No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a
waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
13.11 No Third-party Beneficiaries. This Agreement is not intended
to be for the benefit of and shall not be enforceable by any person or entity
who or which is not a party hereto (or a permitted assign or successor to
such party).
13.12 Severability. The provisions of this Agreement, are severable,
and in the event that any one or more provisions are deemed illegal or
unenforceable, the remaining provisions shall remain in full force and
effect, and the unenforceability of any specific provision shall not affect
any other provision. In the event any court of competent jurisdiction shall
determine that any provision of this Agreement is unreasonable, then it is
the intention of the parties that such provision be enforced to the fullest
extent that the court deems reasonable, and the relevant provision shall
thereby be reformed..
13.13 Attorneys' Fees and Costs. If litigation is brought to enforce
provisions of this Agreement, the reasonable attorneys' fees and costs
incurred by the prevailing party shall be paid by the non-prevailing party.
14. Guaranty by AFC.
14.1 Guaranty. For valuable consideration, the receipt of which is
hereby acknowledged, AFC unconditionally guarantees to Seller and each of the
Stockholders (collectively, the "Beneficiaries") full and prompt performance
by Buyer of all of its obligations arising out of or related to the foregoing
Asset Purchase Agreement (collectively, the "Obligations").
14.2 Certain Waivers. Notice of acceptance of this Guaranty and of any
action to be taken by the Beneficiaries from time to time under this Guaranty
or the Obligations is hereby waived, and this Guaranty shall operate as a
continuing and absolute Guaranty covering all obligations of Buyer to the
Beneficiaries arising under the Obligations. Failure of the Beneficiaries to
make any demand or otherwise to proceed against AFC in respect to any default
by the Buyer shall not constitute a waiver of the Beneficiaries' right to
proceed in respect to any or all other defaults by the Buyer.
14.3 Liability Not Affected; Successors. The liability of AFC shall not
be terminated or otherwise affected or impaired by the Beneficiaries from
time to time granting one or more extensions of time, renewals or other
indulgence(s) to the Buyer, or by the Beneficiaries heretofore, now, or
hereafter acquiring, releasing or agreeing to amend or modify the
Obligations, whether or not notice thereof shall have been or be given to
AFC. This Guaranty shall be binding upon the successors and assigns of AFC.
42
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
AFC CABLE SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Title: VP & CFO
----------------------------
AFC ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: Vice President
------------------------------
AREA LIGHTING RESEARCH, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
------------------------------
Name: ▇▇▇▇▇▇ M. D. ▇▇▇▇▇ ▇▇.
------------------------------
Title: President
------------------------------
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
43
LIST OF EXHIBITS AND SCHEDULES
Exhibit No. Description
---------- -----------
Exhibit I Form of Escrow Agreement
Exhibit II Form of ▇▇▇▇ of Sale
Exhibit III Form of Assumption Agreement
Exhibit IV Form of ▇▇▇▇▇▇ Road Lease
Exhibit V Form of Opinion of Counsel to AFC and the Buyer
Exhibit VI Form of Opinion of Counsel to the Seller and the Stockholders
Schedule No. Description
Schedule 1.1(b) Leases
Schedule 1.1(h) Contracts
Schedule 1.3 Assumed Obligations
Schedule 1.6 Purchase Price Allocation
Schedule 3.1 Names and Trade Names; Foreign Qualification
Schedule 3.6 Accounts Receivable
Schedule 3.7 Inventory
Schedule 3.8 Customers
Schedule 3.9 Permits and Intellectual Property
Schedule 3.10 Real and Personal Property
Schedule 3.11 Permitted Liens
Schedule 3.14 Insurance
Schedule 3.15.1 Employees
Schedule 3.15.2 Key Employees
Schedule 3.16 Employee Benefit Plans
Schedule 3.18 Litigation
Schedule 3.22 Environmental Matters
Schedule 3.27 Flood Hazards
Schedule 3.28 Warranty Claims
Schedule 3.29 Products Liability
44
ANNEX 1
Asset Purchase Agreement
As used in the Agreement, the following capitalized terms have
the following meanings or are as defined in the following Sections of the
Agreement:
"AFC" is defined in the Preamble.
"Affiliate" means, singly and collectively, with respect to
any Person, any other entity or Person (including without limitation any
subsidiary of such Person) which, directly or indirectly, is in control of,
is controlled by or is under common control with such Person. For purposes
of this definition, an entity or other Person shall be deemed to be
"controlled by" the such Person if such Person possesses, directly or
indirectly, power either to (i) vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person, or (ii)
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise, and the legal representative, successor or
assign of any such Person.
"Agreement" is defined in the Preamble.
"▇▇▇▇▇▇ Road Lease" is defined in Section 6.4.
"Assets" is defined in Section 1.1.
"Assumed Obligations" is defined in Section 1.3.
"Balance Sheet Assets" is defined in subsection 1.1(a).
"Balance Sheet" is defined in subsection 1.1(a).
"Balance Sheet Date" is defined in subsection 1.1(a).
"Business" is defined in the Preamble.
"Buyer" is defined in the Preamble.
"CAA" is defined in subsection 3.22(c).
"CERCLA" is defined in subsection 3.22)c).
"Closing" is defined in Section 2.
"Closing Date" is defined in Section 2.
45
"COBRA" is defined in subsection 1.4(g).
"Code" is defined in Section 3.17.
"Contracts" is defined in subsection 1.1(h).
"Compliance with ISRA" shall mean, in relation to the
Hackettstown Facility and the transaction contemplated by this Agreement, the
receipt by the Seller from the NJDEP of a no further action letter, or
approval of a Negative Declaration, as such terms are defined in ISRA, or
other comparable written determination by the NJDEP that the Seller has
satisfied the requirements of ISRA. In relation to (i) the termination of
the ▇▇▇▇▇▇ Road Lease or other cessation of operations by the Buyer at the
Hackettstown Facility, or (ii) any transfer of ownership or operations (as
such term is defined in ISRA) effected by AFC or the Buyer prior to the
termination of the ▇▇▇▇▇▇ Road Lease, the receipt by AFC or the Buyer from
the NJDEP and the delivery to the Seller of a no further action letter, or
approval of a Negative Declaration, as such terms are defined in ISRA, or
other comparable written determination by the NJDEP that AFC or the Buyer
have satisfied the requirements of ISRA.
"Damages" is defined in Section 9.2.
"▇▇▇▇▇▇▇" is defined in the Preamble.
"▇▇▇▇" is defined in the Preamble.
"Environmental Laws" is defined in subsection 3.22(c).
"Environmental Settlement Agreements" means the Settlement
Agreement by and among the State of New Jersey, the New Jersey Department of
Environmental Protection and the Seller and NUJA Realty Corporation, executed
by the parties in January, 1995 and the Stipulation of Settlement Between
Plaintiffs and Area Lighting Research, Inc. nd NUJA Realty Corporation,
Superior Court of New Jersey, Docket No. WRN-L-000708-92, each as it may be
amended, supplemented or otherwise modified and in effect from time to time.
"ERISA" is defined in subsection 1.4(f).
"Escrow Agent" is defined in Section 1.5.
"Escrow Agreement" is defined in Section 1.5.
"Escrow Deposit" is defined in Section 1.5.
"Excluded Assets" is defined in Section 1.2.
"Facilities" is defined in subsection 1.4(h).
46
"FIFO" is defined in Section 3.7.
"Final Balance Sheet" is defined in Section 1.5.
"Financial Statements" is defined in Section 3.4.
"FWPCA" is defined in subsection 3.22(a)(i).
"Governmental Authorities" shall mean all agencies, bureaus,
departments and officials of federal, state, county, municipal and local
governments and public authorities having or claiming jurisdiction over the
Facilities or any part thereof, or over the Seller or the Buyer.
"Hackettstown Facility" if defined in subsection 1.4(h).
"▇▇▇▇▇▇▇▇▇▇" is defined in the Preamble.
"Hazardous Materials" is defined in subsection 3.22(c).
"Indemnifying Party" is defined in Sections 9.2 and 9.3.
"Indemnitee" is defined in Sections 9.2 and 9.3.
ISRA" shall mean the New Jersey Industrial Site Recovery Act,
P.L. 1993, c.139, c.139, N.J.S.A. 13:1K-6, et seq.
"Intellectual Property" is defined in Section 3.9.
"Leases" is defined in subsection 1.1(b).
"Liabilities Adjustment" is defined in Section 1.5.
"NJDEP" shall mean the New Jersey Department of Environmental
Protection or any successor thereof.
"Noncompete Period" is defined in Section 11.1.
"Proceeding" is defined in subsection 3.20(b).
"Permits" is defined in Section 3.9.
"Person" means an individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency
or political subdivision thereof.
"Purchase Price" is defined in Section 1.5.
47
"Qualified Persons" is defined in Section 3.17.
"RCRA" is defined in subsection 3.22(c).
"Seller" is defined in the Preamble.
"Stockholder" is defined in the Preamble.
"Tax" and "Taxes" shall mean any federal, state, local,
foreign, or other tax, fee, levy, assessment or other governmental charge,
including without limitation any income, franchise, gross receipts, property,
sales, use, services, value added, withholding, social security, estimated,
accumulated earnings, alternative or add-on minimum, transfer, license,
privilege, payroll, profits, capital stock, employment, unemployment, excise,
severance, stamp, occupancy, customs or occupation tax and any interest,
additions to tax and penalties in connection therewith.
"Third Person" is defined in Section 9.5.
"to the knowledge of the Seller or any of the Stockholders" is
defined in subsection 3.22(c)
"TSCA" is defined in subsection 3.22(c).
48