Exhibit 2.1
STOCK PURCHASE AND SALE AGREEMENT
by and among
ESCO TECHNOLOGIES HOLDING, INC.,
as Buyer,
and
ESCO TECHNOLOGIES INC.,
as Buyer Parent,
and
DOBLE ENGINEERING COMPANY,
as the Company
and
The Stockholders of the Company
November 6, 2007
TABLE OF CONTENTS
Page
Article I - PURCHASE AND SALE OF COMPANY SHARES; CLOSING. .................1
Section 1.1.Purchase and Sale of Company Shares.....................1
Section 1.2.Purchase Price and Payment..............................1
Section 1.3.Adjustment to Purchase Price............................3
Section 1.4.Time and Place of Closing...............................7
Section 1.5.Deliveries at Closing...................................7
Section 1.6.Stockholder Representative..............................8
Article II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................10
Section 2.1.Existence; Good Standing; Authority....................10
Section 2.2.Capitalization.........................................10
Section 2.3.Subsidiaries...........................................11
Section ▇.▇.▇▇ Conflict............................................11
Section ▇.▇.▇▇▇▇▇▇▇▇▇ Statements...................................12
Section 2.6.Absence of Certain Changes.............................13
Section 2.7.Necessary Property.....................................14
Section 2.8.Consents and Approvals.................................14
Section 2.9.Litigation.............................................14
Section 2.10. Taxes...............................................14
Section 2.11.Employee Benefit Plans................................17
Section 2.12.Real and Personal Property............................19
Section 2.13.Labor and Employment Matters..........................21
Section ▇.▇▇.▇▇▇▇ Privacy..........................................22
Section 2.15.Product & Service Warranties;
Product Safety Authorities............................22
Section 2.16.Contracts and Commitments.............................23
Section 2.17.Customers.............................................24
Section 2.18.Suppliers.............................................24
Section 2.19.Foreign Operations and Export Control.................24
Section 2.20.Intellectual Property.................................25
Section 2.21.Environmental Matters.................................26
Section 2.22.Inventory.............................................28
Section ▇.▇▇.▇▇▇▇▇▇▇▇▇.............................................28
Section 2.24.Accounts Receivable...................................28
Section 2.25.Transactions with Related Persons; Affiliates.........28
Section ▇.▇▇.▇▇ Guarantees.........................................28
Section 2.27. Brokers..............................................28
Section 2.28.Compliance with Laws..................................28
Section 2.29.Disclaimer of Other Representations and Warranties;
Knowledge; Disclosure............. .....29
Article III - SEVERAL REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.......30
Section ▇.▇.▇▇▇▇▇▇▇ Shares.........................................30
Section 3.2.Authority..............................................30
Section 3.3.Warranties Limited.....................................31
Article IV - REPRESENTATIONS AND WARRANTIES OF BUYER........................31
Section 4.1.Existence; Good Standing; Authority....................31
Section ▇.▇.▇▇ Conflict............................................32
Section 4.3.Consents and Approvals.................................32
Section 4.4.Litigation.............................................32
Section 4.5.Financing..............................................33
Section 4.6. Brokers..............................................33
Section 4.7.Investment Intent......................................33
Section 4.8.Inspection; No Other Representations...................33
Article V - CERTAIN COVENANTS OF BUYER, THE COMPANY AND THE STOCKHOLDERS...34
Section 5.1.Conduct of Business Prior to Closing...................34
Section 5.2.Access to Information..................................35
Section 5.3.Confidentiality........................................35
Section 5.4.Regulatory and Other Authorizations; Consents. ........36
Section 5.5.Further Action.........................................37
Section ▇.▇.▇▇▇▇▇ Releases.........................................37
Section ▇.▇.▇▇ Solicitation........................................37
Section 5.8.Conveyance Taxes; Costs................................37
Section 5.9.Books and Records; Insurance...........................38
Section 5.10.Officers' and Directors' Indemnification..............38
Section 5.11.Stockholder Release...................................38
Section ▇.▇▇.▇▇▇ Matters...........................................39
Section 5.13.Commitment Letter.....................................39
Section 5.14.Bonus Plans...........................................40
Section 5.15.Foreign Subsidiaries..................................40
Section 5.16.Rights to Software....................................40
Article VI - EMPLOYEE MATTERS...............................................40
Section 6.1.Employees; Benefits....................................40
Article VII - CONDITIONS TO CLOSING.........................................42
Section 7.1.Conditions to Obligations of the Stockholders..........42
Section 7.2.Conditions to Obligations of Buyer.....................43
Article VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.44
Section 8.1. Survival..............................................44
Section 8.2.Several Indemnification by the Stockholders............44
Section 8.3.Treatment of Indemnity Payments........................49
Section 8.4.Remedies Exclusive.....................................49
Article IX - TERMINATION....................................................50
Section 9.1.Termination............................................50
Section 9.2.Effect of Termination..................................51
Section 9.3. Waiver..............................................52
Article X - GENERAL PROVISIONS..............................................52
Section 10.1. Notices..............................................52
Section 10.2.Buyer Parent Guarantee................................53
Section 10.3.Fees and Expenses....... .............................53
Section 10.4.Certain Definitions...................................53
Section 10.5.Interpretation........................................55
Section 10.6.Counterparts..........................................56
Section 10.7.Amendments............................................56
Section 10.8.Entire Agreement; Severability........................56
Section 10.9.Third Party Beneficiaries.............................56
Section 10.10.Governing Law........................................56
Section 10.11.Assignment...........................................56
Section 10.12.Consent to Jurisdiction..............................56
Section 10.13.Dispute Resolution...................................57
Section ▇▇.▇▇.▇▇▇▇▇▇ Drafting......................................58
Section 10.15.Remedies.............................................58
Section ▇▇.▇▇.▇▇▇ Agreements.......................................58
EXHIBITS
Exhibit A Form of Indemnification Escrow Agreement
Exhibit B Form of Holdback Escrow Agreement
SCHEDULES
Schedule 1.1(b)-1 Stockholders and Company Shares;
Allocation of Purchase Price
Schedule 1.1(b)-2 Example of Purchase Price Calculation
Schedule 1.3 Working Capital
Schedule 1.5(a)(iii) Location of Corporate Records
Schedule 2.2 Capitalization
Schedule 2.3 Subsidiaries
Schedule 2.4 No Conflict
Schedule 2.5(a) Financial Statements
Schedule 2.5(b) Liabilities reflected on Financial Statements
Schedule 2.6 Absence of Certain Changes
Schedule 2.8 Consents and Approvals
Schedule 2.9 Litigation
Schedule 2.10 Taxes
Schedule 2.11(a) Employee Benefit Plans
Schedule 2.11(g) Severance Payments
Schedule 2.11(j) Terminated Employment
Schedule 2.12(a) Owned Real Property
Schedule 2.12(b) Leased Real Property
Schedule 2.12(c) Encumbrances
Schedule 2.12(d) Permitted Liens
Schedule 2.12(e) Leased Tangible Property
Schedule 2.12(j) Condition of Tangible and Real Property
Schedule 2.13(c) Employment Claims
Schedule 2.13(d) Employment Agreements Longer Than 3 Years
Schedule 2.13(e) Pending or threatened Claims related to Labor and
Employment
Schedule 2.15 Product and Service Warranties
Schedule 2.16 Contracts and Commitments
Schedule 2.17 Customers
Schedule 2.18 Suppliers
Schedule 2.19(c) Export Licenses
Schedule 2.19(d) Import Licenses
Schedule 2.20(a) Registered Intellectual Property
Schedule 2.20(b) Intellectual Property Disputes
Schedule 2.20(c) Infringement; Claims
Schedule 2.20(g) Intellectual Property Subject to Copyleft or
Other Obligations
Schedule 2.22 Inventory
Schedule 2.23 Insurance
Schedule 2.24 Accounts Receivable
Schedule 2.25 Related Persons Transactions
Schedule 2.26 Guarantees
Schedule 4.2 Conflicts of Buyer
Schedule 4.3(a) Buyer Government Consents
Schedule 4.3(b) Buyer Third-Party Consents
Schedule 4.5 Buyer's Financing Commitment
Schedule 5.1 Conduct of Business
Schedule 6.1(b) Change of Control Agreements
Schedule 7.2(f)(ii) Good Standing Certificates
Schedule 10.4 Change in Control Payments
STOCK PURCHASE AND SALE AGREEMENT
This STOCK PURCHASE AND SALE AGREEMENT (this "Agreement") is dated as of
November 6, 2007 by and among Doble Engineering Company, a Massachusetts
corporation (the "Company"), ESCO Technologies Holding, Inc., a Delaware
corporation ("Buyer"), ESCO Technologies Inc., a Missouri corporation and parent
of the Buyer ("Buyer Parent") solely for the purposes of Sections 4.1, 4.2 and
10.2 and the stockholders of the Company listed on the signature pages hereto
(each, a "Stockholder" and collectively, the "Stockholders").
WHEREAS, the Stockholders own beneficially and of record all the issued and
outstanding capital stock of the Company, as set forth on Schedule 1.1(b)-1
attached hereto (collectively, the "Company Shares"); and
WHEREAS, each Stockholder desires to sell to Buyer, and Buyer desires to
purchase from each Stockholder, all of the issued and outstanding Company Shares
owned by such Stockholder on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Article I - PURCHASE AND SALE OF COMPANY SHARES; CLOSING
Section 1.1. Purchase and Sale of Company Shares.
Subject to the terms and conditions set forth in this Agreement and in
reliance on the representations and warranties contained herein, at the
Closing (as defined in Section 1.4), each Stockholder severally agrees to
sell to Buyer, and Buyer agrees to purchase from each such Stockholder, all
of the Company Shares owned by such Stockholder as set forth opposite such
Stockholder's name on Schedule 1.1(b)-1 hereto for the purchase price set
forth in Section 1.2 below.
Section 1.2. Purchase Price and Payment.
(a) The aggregate purchase price for the Company Shares shall be an amount in
cash equal to (i) three hundred nineteen million dollars ($319,000,000)
(the "Cash Amount"), minus Indebtedness, minus Transaction Expenses, plus
the Initial Tax Benefit Amount (each as defined in Section 10.4) (the "Cash
Consideration"), plus or minus (ii) the Estimated Closing Adjustment (as
defined and determined in accordance with Section 1.3(a)), plus or minus
(iii) the Working Capital Adjustment Amount (as defined and determined in
accordance with Section 1.3(c)), plus (iv) the Deferred Tax Benefit Amount
(as defined and determined in accordance with Section 1.3(f)), if any, plus
(v) the Indemnification Tax Benefit Amount (as defined and determined in
accordance with Section 1.3(c)), if any, plus (vi) the Working Capital Tax
Benefit Amount (as defined and determined in accordance with Section
1.3(g)), if any (collectively, the "Purchase Price").
(b) At the Closing, Buyer shall pay the Cash Consideration by delivering to
each Stockholder (i) such Stockholder's pro rata share (as set forth
opposite such Stockholder's name on Schedule 1.1(b)-1) (the "Pro Rata
Share") of the Cash Consideration, (ii) plus or minus an amount equal to
such Stockholder's Pro Rata Share of the Estimated Closing Adjustment (as
defined in Section 1.3(a)), (iii) minus such Stockholder's Pro Rata Share
of the Escrow Amount and (iv) minus such Stockholder's Pro Rata Share of
the Stockholder Representative Payment (the "Closing Payments"). An example
of the calculation of the Closing Payments to be paid to each Stockholder
is attached hereto as Schedule 1.1(b)-2. At the Closing, the Stockholder
Representative (as defined below) shall revise Schedule 1.1(b)-1 to reflect
the Closing Payments to be paid to each Stockholder at the Closing, and
shall deliver such updated Schedule 1.1(b)-1 to Buyer with wire transfer
instructions for each Stockholder. Buyer is entitled to rely on the payment
instructions in Schedule 1.1(b)-1 and the Stockholders shall hold Buyer
harmless for the allocation among Stockholders with respect to any payments
made at Closing in accordance with such instructions.
(c) At the Closing, Buyer will deposit a portion of the Cash Consideration
otherwise payable to the Stockholders with Mellon Trust of New England,
N.A., a national banking association with its principal place of business
at Mellon Financial Center, Boston, MA 02108 (the "Escrow Agent"), in an
amount equal to $22,500,000 in cash (the "Escrow Amount"), such deposit to
constitute an escrow fund (the "Escrow Fund"). The Escrow Fund shall be
governed by the terms hereof and the terms of an escrow agreement to be
entered into by and among Buyer, the Stockholder Representative and the
Escrow Agent, in substantially the form attached hereto as Exhibit A (the
"Indemnification Escrow Agreement"). The Escrow Fund and the earnings
thereon shall be held in escrow and shall be available to settle certain
contingencies as provided in Section 1.3 and Article VIII of this Agreement
and such amounts will be distributed in accordance with the Indemnification
Escrow Agreement. Buyer, the Company, and the Stockholders agree that each
Stockholder shall (i) include in its gross income such Stockholder's Pro
Rata Share of the income earned on the Escrow Fund and (ii) receive from
the Escrow Fund, no later than thirty (30) days after the end of each
calendar year, a distribution in an amount equal to forty percent (40%) of
such Stockholder's Pro Rata Share of the income earned on the Escrow Fund
for such calendar year. Pursuant to the Indemnification Escrow Agreement,
the Company may receive payments from the Escrow Fund to which Mr. ▇▇▇▇▇▇
▇▇▇▇▇ ("▇▇. ▇▇▇▇▇") is entitled to receive a portion under the Transaction
Bonus Agreement (as defined below). Within five (5) business days following
the receipt of any such payment by the Company from the Escrow Fund, (A)
the Company will promptly pay such payment to ▇▇. ▇▇▇▇▇, subject to
withholding any Taxes imposed on or with respect to such payment, and the
Company shall pay the amounts withheld to the appropriate Governmental
Authorities and (B) the Buyer shall separately pay by wire transfer of
immediately available funds (1) to the Stockholders 96% of the product of
(a) 37%, multiplied by (b) the sum of the entire amount released to the
Company for payment to ▇▇. ▇▇▇▇▇ (including amount for Tax withholding)
(such product, the "Indemnification Tax Benefit Amount"), by payment to
each Stockholder of such Stockholders Pro Rata Share of the Indemnification
Tax Benefit Amount and (2) to ▇▇. ▇▇▇▇▇, 4% of the Indemnification Tax
Benefit Amount net of withholding Taxes. Notwithstanding the foregoing, the
payments to the Stockholders and the payments to ▇▇. ▇▇▇▇▇ shall be
proportionally reduced by Associated Payments made in connection with
payments to ▇▇. ▇▇▇▇▇ under this subsection (c).
(d) At the Closing, Buyer will deposit $500,000 of the Cash Consideration
otherwise payable to the Stockholders upon the Closing into an account
designated by the Stockholder Representative, as a fund for the fees and
expenses (including legal fees and expenses) of the Stockholder
Representative incurred in connection with this Agreement (the "Stockholder
Representative Payment").
(e) At the Closing, Buyer also will deposit an amount with the Escrow Agent,
such deposit to constitute an escrow amount equal to the twenty-five
percent (25%) deferred payment (the "Deferred Payment") which ▇▇. ▇▇▇▇▇ is
entitled to receive under the Transaction Bonus Agreement between the
Company and ▇▇. ▇▇▇▇▇ dated as of April 24, 2007, as amended to date (the
"Transaction Bonus Agreement") plus the maximum potential estimated
Associated Payments with respect to such Deferred Payment (the Deferred
Payment, together with such Associated Payments and interest and earnings
thereon, the "Deferred Escrow"). The Deferred Escrow will be deposited into
an account maintained by the Escrow Agent pursuant to an escrow agreement
to be entered into by and among ▇▇. ▇▇▇▇▇, the Stockholder Representative,
Company and the Escrow Agent, such escrow agreement to be in substantially
the form attached hereto as Exhibit B (the "Holdback Escrow Agreement").
(f) At the Closing, the Buyer will pay all (i) Transaction Expenses other than
the amount which is being paid into the Deferred Escrow pursuant to Section
1.2(e) and the amount that may become payable to ▇▇. ▇▇▇▇▇ pursuant to the
Transaction Bonus Agreement that is being paid into the Escrow Fund, and
(ii) the cost of the Title Policy (in an amount not to exceed $13,000) as
directed by the Company. To the extent such Transaction Expenses represent
compensatory payments, the Company shall withhold and pay Taxes imposed on
or with respect to such compensatory payments and pay such amounts over to
the appropriate Governmental Authorities.
(g) Each Stockholder acknowledges and agrees that the number of Company Shares
set forth opposite such Stockholder's name on Schedule 1.1(b)-1 is true and
correct. Each Stockholder further agrees to be bound by the Stockholder
Representative's calculation of the amount of the Purchase Price to be
received by such Stockholder hereunder (as determined in accordance with
this Section 1.2), and that such amount represents the full amount to which
such Stockholder is entitled under the Articles of Incorporation, as
amended, (the "Charter") in respect of such Stockholder's Company Shares.
Section 1.3. Adjustment to Purchase Price.
(a) Prior to the Closing Date, the Company shall prepare an estimate of the
Working Capital of the Company as of the time immediately prior to Closing
consistent with the methodology used to prepare the Working Capital of the
Company as of September 29, 2007 as set forth on Schedule 1.3 (the
"Estimated Working Capital"). Not later than two (2) business days prior to
the Closing Date, the Company shall deliver to Buyer the calculation of the
Estimated Working Capital, together with worksheets and data that support
the Estimated Working Capital. The Cash Consideration shall be adjusted
upward, dollar for dollar, to the extent that the Estimated Working Capital
exceeds $8,700,000 (which shall be treated as a positive number) (the
"Maximum Working Capital"). The Cash Consideration shall be adjusted
downward, dollar for dollar, to the extent that the Estimated Working
Capital is less than $6,700,000 (which shall be treated as a negative
number) (the "Minimum Working Capital"). The adjustment to the Cash
Consideration (whether an increase or decrease) pursuant to this Section
1.3(a) is the "Estimated Closing Adjustment."
(b) Within thirty (30) days after the Closing Date, Buyer shall (i) prepare a
calculation of the Working Capital of the Company as of the time
immediately prior to Closing in accordance with GAAP and consistent with
the Company's past practices and procedures and the methodology used to
prepare the Working Capital of the Company as of September 29, 2007,
subject to ordinary year-end adjustments consistently applied, all as set
forth as Schedule 1.3 attached hereto, (the "Closing Working Capital") and
deliver to the Stockholder Representative the calculation of the Closing
Working Capital, together with worksheets and data that support the Closing
Working Capital. Following the Closing, the Company shall give the
Stockholder Representative and his advisors access (including the right to
make copies) to the books and records of the Company in order to resolve
any disputes regarding the calculation of Closing Working Capital. Unless
the Stockholder Representative delivers the Dispute Notice (as defined
below) within fifteen (15) days after receipt of the calculation of Closing
Working Capital, the Closing Working Capital shall be deemed the "Final
Working Capital," shall be binding upon all parties and shall not be
subject to dispute or review. If the Stockholder Representative disagrees
with calculation of Closing Working Capital, the Stockholder Representative
may, within fifteen (15) days after receipt thereof, notify the Buyer in
writing (the "Dispute Notice"), which Dispute Notice shall provide
reasonable detail of the nature of each disputed item in the calculation of
Closing Working Capital. The Stockholder Representative and the Buyer shall
first use commercially reasonable efforts to resolve such dispute between
themselves and, if the parties are able to resolve such dispute, the
Closing Working Capital shall be revised to the extent necessary to reflect
such resolution, shall be deemed the "Final Working Capital" and shall be
conclusive and binding upon all parties and shall not be subject to dispute
or review. If the Buyer and the Stockholder Representative cannot mutually
agree on the same, then within the later of (i) sixty (60) days after the
Closing Date and (ii) fifteen (15) days following delivery by the
Stockholder Representative of the Dispute Notice, Buyer and the Stockholder
Representative shall select a nationally recognized independent accounting
firm mutually satisfactory to Buyer and the Stockholder Representative to
resolve such dispute (the "Neutral Auditor"). The Neutral Auditor shall
review the Closing Working Capital, and, within ten (10) days of its
appointment, shall make any adjustments necessary thereto, and, upon
completion of such review, such Closing Working Capital as determined by
the Neutral Auditor shall be deemed the "Final Working Capital" and shall
be conclusive and binding upon all parties and shall not be subject to
dispute or review. If such a review is conducted, then the party (i.e.,
Buyer, on the one hand, or the Stockholders, on the other hand) whose last
proposed offer for the settlement of the items in dispute, taken as a
whole, was farther away from the final determination by the Neutral Auditor
pursuant to the preceding sentence, shall pay all fees and expenses
associated with such review.
(c) Within three (3) business days following the determination of the Final
Working Capital, either the Buyer or the Stockholders, as applicable, shall
effect the payment in accordance with the provisions below, if any (the
"Working Capital Adjustment Amount"):
(i) if the Estimated Closing Adjustment is greater than the Final Closing
Adjustment, then the Stockholders shall pay to Buyer the amount of such
difference by the Buyer and the Stockholder Representative providing joint
written instructions to the Escrow Agent to pay the appropriate amount to
Buyer out of the Escrow Fund; and
(ii) if the Estimated Closing Adjustment is less than the Final Closing
Adjustment, then the Buyer shall pay by wire transfer of immediately
available funds (A) to the Stockholders an amount equal to 96% of such
difference, by payment to each Stockholder of such Stockholder's Pro Rata
Share of the amount so owed, (B) to ▇▇. ▇▇▇▇▇ an amount equal to 3% of such
difference, subject to withholding any Taxes imposed on or with respect to
such amount and pay the amounts withheld to the Company to be paid to the
appropriate Governmental Authorities and (C) to the Escrow Agent to be held
under the Holdback Escrow Agreement as part of the Deferred Escrow an
amount equal to 1% of such difference; provided that if the Deferred
Payment has already been paid to ▇▇. ▇▇▇▇▇, such amount shall be paid to
▇▇. ▇▇▇▇▇, subject to withholding any Taxes imposed on or with respect to
such amount and the amounts withheld shall be paid to the Company to be
paid to the appropriate Governmental Authorities. Notwithstanding the
foregoing, the payments to the Stockholders and the payments to ▇▇. ▇▇▇▇▇
shall be proportionally reduced by Associated Payments made in connection
with payments to ▇▇. ▇▇▇▇▇ under this subsection (c)(ii).
(d) For purposes of this Section 1.3, the "Final Closing Adjustment" shall be
either (i) the amount by which the Closing Working Capital exceeds the
Maximum Working Capital (which shall be treated as a positive number), (ii)
the amount by which the Closing Working Capital is less than the Minimum
Working Capital (which shall be treated as a negative number) or (iii) an
amount equal to zero if the Closing Working Capital is both equal to or
more than the Minimum Working Capital and equal to or less than the Maximum
Working Capital.
(e) As used in this Section 1.3 "Working Capital" means Current Assets minus
Current Liabilities of the Company on a consolidated basis, without
duplication; "Current Assets" means and includes all cash, cash
equivalents, short-term investments, Accounts Receivable, inventory,
prepaid expenses and other current assets of the Company (other than
deferred tax assets that solely reflect timing differences between book
income and taxable income), and, whether or not current assets, all
marketable securities (including municipal bonds that have maturities
greater than one year at the value as of the Closing Date), in each case
determined in accordance with GAAP and the Company's past practices and
procedures and the methodology used to prepare the Working Capital of the
Company as of September 29, 2007, subject to ordinary year-end adjustments
consistently applied, all as set forth as Schedule 1.3 attached hereto; and
"Current Liabilities" means and includes all accounts payable, accrued
expenses, deferred revenue, Transaction Expenses to the extent not deducted
from the Cash Amount pursuant to Section 1.2(a)(i), the aggregate premiums
to be paid for the extended reporting period endorsement purchased pursuant
to Section 5.10 and other current liabilities of the Company (other than
deferred tax liabilities that solely reflect timing differences between
book income and taxable income), in each case determined in accordance with
GAAP and the Company's past practices and procedures and the methodology
used to prepare the working capital statement of the Company as of
September 29, 2007, subject to ordinary year-end adjustments consistently
applied, all as set forth as Schedule 1.3 attached hereto. Notwithstanding
the foregoing, (i) Working Capital shall exclude all amounts included in
the Company's Indebtedness, Transaction Expenses and the Tax Benefit
Amount, to the extent reflected in the adjustments described in Section
1.2(a)(i) and (ii) Current Assets and Current Liabilities will not include
any assets or liabilities relating to the Company's Supplemental Executive
Retirement Plan for Elected Officers and the Company's Retirement Income
Plan, including but not limited to any prepaid asset or accrued pension
liability.
(f) At such time as the Deferred Payment is determined to be payable to ▇▇.
▇▇▇▇▇ in accordance with the Transaction Bonus Agreement, the Stockholder
Representative and Buyer shall deliver joint written instructions to the
Escrow Agent to pay (i) on behalf of the Company to ▇▇. ▇▇▇▇▇ the entire
amount of the Deferred Escrow net of withholding Taxes and Associated
Payments imposed on or with respect to such amounts and (ii) to the Company
the balance of the Deferred Escrow following the payment to ▇▇. ▇▇▇▇▇
pursuant to clause (i), and the Company shall timely pay such Taxes and
Associated Payments to the appropriate Governmental Authorities. Upon
delivery of such joint written instructions to the Escrow Agent, Buyer
shall separately pay by wire transfer of immediately available funds (x) to
the Stockholders 96% of the product of (A) 37%, multiplied by (B) the sum
of the entire amount of the Deferred Escrow (immediately prior to the
payments made under clauses (i) and (ii)) (such product, the "Deferred Tax
Benefit Amount"), by payment to each Stockholder of such Stockholders Pro
Rata Share of the Deferred Tax Benefit Amount and (y) to ▇▇. ▇▇▇▇▇ 4% of
the Deferred Tax Benefit Amount net of withholding Taxes. At such time as
the Deferred Payment is determined not to be payable to ▇▇. ▇▇▇▇▇ in
accordance with the terms of the Transaction Bonus Agreement, the
Stockholder Representative and Buyer shall deliver joint written
instructions to the Escrow Agent to pay all amounts held in the Deferred
Escrow to the Stockholders in accordance with each Stockholder's Pro Rata
Share. Notwithstanding the foregoing, the payments to the Stockholders and
the payments to ▇▇. ▇▇▇▇▇ shall be proportionally reduced by Associated
Payments made in connection with payments to ▇▇. ▇▇▇▇▇ under subsection (y)
of this section.
(g) Upon any payments to ▇▇. ▇▇▇▇▇ pursuant to Section 1.3(c)(ii)(B), Buyer
shall concurrently pay by wire transfer of immediately available funds (x)
to the Stockholders 96% of the product of (A) 37%, multiplied by (B) the
sum of the entire amount paid pursuant to Section 1.3(c)(ii)(B) (such
product, the "Working Capital Tax Benefit Amount"), by payment to each
Stockholder of such Stockholders Pro Rata Share of the Working Capital Tax
Benefit Amount and (y) to ▇▇. ▇▇▇▇▇ an amount equal to 3% of the Working
Capital Tax Benefit Amount, subject to withholding any Taxes imposed on or
with respect to such amount and pay the amounts withheld to the Company to
be paid to the appropriate Governmental Authorities and (z) to the Escrow
Agent to be held under the Holdback Escrow Agreement an amount equal to 1%
of Working Capital Tax Benefit Amount; provided that if the Deferred
Payment has already been paid to ▇▇. ▇▇▇▇▇, such amount shall be paid to
▇▇. ▇▇▇▇▇, subject to withholding any Taxes imposed on or with respect to
such amount and the amounts withheld shall be paid to the Company to be
paid to the appropriate Governmental Authorities. Notwithstanding the
foregoing, the payments to the Stockholders and the payments to ▇▇. ▇▇▇▇▇
shall be proportionally reduced by Associated Payments made in connection
with payments to ▇▇. ▇▇▇▇▇ under this subsection (g).
Section 1.4. Time and Place of Closing.
The closing (the "Closing") of the purchase and sale of the Company Shares
and the other transactions contemplated by this Agreement shall be held at
the offices of ▇▇▇▇▇▇▇ Procter LLP, Exchange Place, Boston, Massachusetts,
on the date that is three (3) business days following the date on which the
conditions to Closing set forth in Sections 7.1 and 7.2 of this Agreement
have been satisfied or waived in writing, or at such other time or such
other place as Buyer and the Stockholder Representative may mutually
determine; however, in no event shall the Closing to occur earlier than
November 30, 2007. The date on which the Closing actually occurs is
referred to herein as the "Closing Date."
Section 1.5. Deliveries at Closing.
(a) At the Closing, the Stockholders or the Company, as applicable, will
deliver or cause to be delivered to Buyer the following:
(i) stock certificates evidencing all of the Company Shares, in each case duly
endorsed in blank or accompanied by stock powers duly executed in blank, or
if such stock certificates are not then available, affidavits of loss in
lieu thereof;
(ii) stock certificates evidencing all of the shares of each Subsidiary to the
extent certificated or if such stock certificates are not then available,
affidavits of loss in lieu thereof;
(iii) such minute books and stock transfer books of the Company and its
Subsidiaries (as defined below), except where such books are not customary
or required by Law; provided that such minute books and stock record books
shall be deemed to be delivered to Buyer if the books are in the possession
of the responsible officer of the Company or Subsidiary identified on
Schedule 1.5(a)(iii);
(iv) each of the certificates, instruments and other documents required to be
delivered at the Closing pursuant to Section 7.2 hereof; and
(v) non-foreign affidavits (for each Stockholder) dated as of the Closing Date,
sworn under penalty of perjury and in form and substance required under
Treasury Regulations issued pursuant to Section 1445 of the Code stating
that each Stockholder is not a "Foreign Person" as defined in Section 1445
of the Code.
(b) At the Closing, Buyer will deliver or cause to be delivered the following:
(i) the Closing Payments to the Stockholders by wire transfer of immediately
available funds to an account specified in writing by the Stockholder
Representative;
(ii) the Escrow Amount and the Deferred Payment to the Escrow Agent by wire
transfer of immediately available funds;
(iii) the payments pursuant to Section 1.2(e); and
(iv) each of the certificates and other documents required to be delivered at
the Closing pursuant to Section 7.1 hereof.
Section 1.6. Stockholder Representative.
(a) By the execution and delivery of this Agreement, each Stockholder hereby
irrevocably constitutes and appoints ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as his, her or its
true and lawful agent and attorney-in-fact (the "Stockholder
Representative"), with full power of substitution to act in such
Stockholder's name, place and stead with respect to all transactions
contemplated by and all terms and provisions of this Agreement, and to act
on such Stockholder's behalf in any dispute, litigation or arbitration
involving this Agreement, and to do or refrain from doing all such further
acts and things, and execute all such documents as the Stockholder
Representative shall deem necessary or appropriate in connection with the
transactions contemplated by this Agreement, including, without limitation,
the power:
(i) to waive any condition to the obligations of such Stockholder to consummate
the transactions contemplated by this Agreement;
(ii) to execute and deliver all ancillary agreements, certificates and
documents, and to make representations and warranties therein, on behalf of
such Stockholder which the Stockholder Representative deems necessary or
appropriate in connection with the consummation of the transactions
contemplated by this Agreement;
(iii) to receive on behalf of, and to distribute (after payment of any unpaid
expenses chargeable to the Stockholders or the Company prior to the Closing
in connection with the transactions contemplated by this Agreement), all
amounts payable to such Stockholder under the terms of this Agreement;
(iv) to execute any amendment or modification to this Agreement on behalf of the
Stockholders;
(v) to pay fees and expenses in connection with the Stockholder
Representative's duties and responsibilities hereunder out of the
Stockholder Representative Payment; and
(vi) to do or refrain from doing any further act or deed on behalf of such
Stockholder which the Stockholder Representative deems necessary or
appropriate in its sole discretion relating to the subject matter of this
Agreement, as fully and completely as such Stockholder could do if
personally present.
(b) The appointment of the Stockholder Representative shall be deemed coupled
with an interest and shall be irrevocable, and Buyer and the Company, each
of their Affiliates and any other Person may conclusively and absolutely
rely, without inquiry, upon any action of the Stockholder Representative on
behalf of the Stockholders in all matters referred to herein. All notices
delivered by Buyer or the Company (following the Closing) to the
Stockholder Representative (whether pursuant hereto or otherwise) for the
benefit of the Stockholders shall constitute notice to the Stockholders.
The Stockholder Representative shall act for the Stockholders on all of the
matters set forth in this Agreement in the manner the Stockholder
Representative believes to be in the best interest of the Stockholders and
consistent with its obligations under this Agreement, but the Stockholder
Representative shall not be responsible to the Stockholders for any loss or
damages it or they may suffer by reason of the performance by the
Stockholder Representative of its duties under this Agreement, other than
loss or damage arising from willful violation of the law.
(c) Each Stockholder agrees to indemnify and hold harmless the Stockholder
Representative from any loss, damage or expense arising from the
performance of its duties as the Stockholder Representative hereunder,
including, without limitation, the cost of legal counsel retained by the
Stockholder Representative on behalf of the Stockholders, but excluding any
loss or damage arising from willful violation of the law.
(d) All actions, decisions and instructions of the Stockholder Representative
taken, made or given pursuant to the authority granted to the Stockholder
Representative pursuant to this Section 1.6 shall be conclusive and binding
upon each Stockholder, and no Stockholder shall have the right to object,
dissent, protest or otherwise contest the same.
(e) The provisions of this Section 1.6 are independent and severable, shall
constitute an irrevocable power of attorney, coupled with an interest and
surviving death or dissolutions, granted by the Stockholders to the
Stockholder Representative and shall be binding upon the executors, heirs,
legal representatives, successors and assigns of each such Stockholder.
Article II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes to Buyer the representations and warranties
contained in this Article II on the date hereof and as of the Closing.
Section 2.1. Existence; Good Standing; Authority.
(a) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts. The
Company has all requisite corporate power and authority to own, operate,
lease and encumber its properties and carry on its business as currently
conducted. The Company is duly licensed or qualified to do business as a
foreign corporation under the laws of each other jurisdiction in which the
character of its properties or in which the transaction of its business
makes such qualification necessary, except where the failure to be so
licensed or qualified would not, individually or in the aggregate, result
in material liability to the Company. The copies of the Charter and the
Company's by-laws, each as amended to date and made available to Buyer's
counsel, are complete and correct, and no amendments thereto are pending.
(b) The Company has the corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement, the performance by the Company of its
obligations hereunder and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the
part of the Company. This Agreement has been duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery of
this Agreement by Buyer, this Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general equitable principles.
Section 2.2. Capitalization.
As of the date of this Agreement, the authorized, issued and outstanding
capital stock of the Company is set forth on Schedule 2.2. All of the
issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable. As of the date of
this Agreement, there are no outstanding options, warrants or other rights
of any kind to acquire any additional shares of capital stock of the
Company or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any such
additional shares, nor is the Company committed to issue any such option,
warrant, right or security. Except as set forth on Schedule 2.2, there are
no agreements or understandings to which the Company is a party with
respect to the voting of any shares of capital stock of the Company or
which restrict the transfer of any such shares. Except as set forth on
Schedule 2.2, there are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of capital
stock, other equity interests or any other securities of the Company. The
Company is not under any obligation by reason of any agreement to register
the offer and sale or resale of any of its securities under the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act").
Section 2.3. Subsidiaries.
(a) The Company's subsidiaries are listed on Schedule 2.3 (collectively, the
"Subsidiaries" and each a "Subsidiary"). The Company owns directly each of
the outstanding shares of capital stock or other equity interest of each of
the Subsidiaries free and clear of any and all Encumbrances. There are no
outstanding options, warrants or other rights of any kind to acquire any
additional shares of capital stock of any Subsidiary or securities
convertible into or exchangeable for, or which otherwise confer on the
holder thereof any right to acquire, any such additional shares, nor is any
Subsidiary committed to issue any such option, warrant, right or security.
Except as set forth on Schedule 2.3, there are no agreements or
understandings to which the Company or any Subsidiary is a party with
respect to the voting of any shares of capital stock of any Subsidiary or
which restrict the transfer of any such shares. Except as set forth on
Schedule 2.3, there are no outstanding contractual obligations of any
Subsidiary to repurchase, redeem or otherwise acquire any shares of capital
stock, other equity interests or any other securities of any Subsidiary.
Except as set forth on Schedule 2.3, neither the Company nor any Subsidiary
owns directly or indirectly any interest or investment (whether equity or
debt) in any Person.
(b) Each of the Subsidiaries is a corporation or limited company duly
incorporated or organized and validly existing under the laws of its
jurisdiction of incorporation or organization and has all requisite
corporate or proprietary limited, as applicable, power and authority to
own, operate, lease and encumber its properties and carry on its business
as currently conducted, except as would not, individually or in the
aggregate, be material to such Subsidiary. Each such Subsidiary is duly
licensed or qualified to do business as a foreign corporation or limited
company, as applicable, in each other jurisdiction in which the character
of its properties or in which the transaction of its business makes such
qualification necessary, except where the failure to be so licensed or
qualified would not, individually or in the aggregate, result in material
liability to such Subsidiary.
Section 2.4. No Conflict.
Neither the execution and delivery by the Company of this Agreement and the
other agreements, documents and instruments contemplated hereby, nor the
consummation by the Company of the transactions in accordance with the
terms hereof and thereof, conflicts with or results in a breach of any
provisions of the Charter or by-laws of the Company or the organizational
documents of any Subsidiary. Except as set forth on Schedule 2.4, and
assuming the consents, approvals and authorizations contemplated by Section
2.8. are obtained, the execution and delivery by the Company of this
Agreement and the other agreements, documents and instruments contemplated
hereby and the consummation by the Company and the Stockholders of the
transactions in accordance with the terms hereof and thereof will not
(i) violate any laws applicable to the Company or to any of its
Subsidiaries; (ii) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) or require any
third-party consents, approvals, authorizations or actions under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, lease, contract or other agreement to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties is bound, except, in
each case (A) as would not result in material liability to the Company or
any Subsidiary, individually or in the aggregate, (B) as would become
applicable as a result of the business or activities in which Buyer
proposes to engage in that differ from the activities previously or
currently conducted or proposed to be conducted by the Company or (C) as a
result of any acts or omissions by, or the status of any facts pertaining
to, Buyer that differ from the acts or omissions previously or currently
undertaken or proposed to be undertaken by, or status of any facts
pertaining to, the Company; or (iii) result in the creation of any
mortgage, pledge, lien, conditional sale agreement, security title,
encumbrance or other charge (collectively, "Encumbrances") against any of
the properties or assets of the Company or any of its Subsidiaries.
Section 2.5. Financial Statements.
(a) The Company has delivered to Buyer the following financial statements,
copies of which are attached hereto as Schedule 2.5(a) (collectively, the
"Financial Statements"):
(i) Audited consolidated balance sheet of the Company and its Subsidiaries as
of December 31, 2006 and December 31, 2005, and statements of income and
retained earnings and statements of cash flows for each of the years then
ended;
(ii) Unaudited adjusted consolidated balance sheet of the Company and its
Subsidiaries as of September 29, 2007 (the "Base Balance Sheet"); and
(iii) Unaudited adjusted consolidated statements of income of the Company and
its Subsidiaries for 39 week period ending September 29, 2007.
Except as expressly set forth on Schedule 2.5(a), and subject to the
absence of footnotes and year-end audit adjustments with respect to any
unaudited Financial Statements, the Financial Statements have been prepared
using the Company's past practices and procedures in accordance with GAAP
consistently applied, and (i) were derived from the books and records of the
Company and (ii) present fairly in all material respects the consolidated
financial condition of the Company.
(b) As of the date hereof, all liabilities of the Company and its Subsidiaries
of a type that would be required to be shown on the Financial Statements in
accordance with GAAP have been (i) stated or adequately reserved against on
the Base Balance Sheet or the notes thereto, (ii) reflected on Schedule
2.5(b) or the other Schedules furnished to Buyer hereunder, (iii) reflected
in the calculation of Final Working Capital or (iv) incurred after the date
of the Base Balance Sheet in the ordinary course of business consistent
with past practices.
Section 2.6. Absence of Certain Changes.
Except as set forth on Schedule 2.6, from the date of the Base Balance
Sheet to the date of this Agreement, the Company and its Subsidiaries have
operated only in the ordinary course of business consistent with past
practices and there has not been any:
(a) change in the business or condition (financial or otherwise), operations,
results of operations or, to the extent relating to the Company's current
plans to outsource production and relocate its principal office, prospects,
of the Company or any Subsidiary other than changes in the ordinary course
of business (which changes have not, individually or in the aggregate, had
a Material Adverse Effect);
(b) change in the authorized or issued capital stock of the Company or any of
its Subsidiaries; grant of any option, right to purchase or similar right
regarding the capital stock of the Company or any of its Subsidiaries;
purchase, redemption, retirement, or other acquisition by the Company or
any of its Subsidiaries of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of the
capital stock of the Company or any of its Subsidiaries;
(c) amendment to the Charter or by-laws of the Company, or amendment to the
organizational documents of any Subsidiary;
(d) increase, or to the Company's knowledge, offer to increase, whether in
writing or orally, the rate or terms of compensation or benefits payable to
or to become payable by the Company or any Subsidiary, to any of their
respective directors, officers, employees, salesmen, distributors, or
agents or increased rate or terms of any bonus, pension or other employee
benefit plan covering any of its directors, officers or employees except in
each case increases occurring in the ordinary course of business consistent
with past practices (including normal periodic performance reviews and
related compensation and benefits increases);
(e) damage to or destruction or loss of any asset or property of the Company or
any of its Subsidiaries, whether or not covered by insurance, in an amount
in excess of $250,000;
(f) loan or advance by the Company or any Subsidiary to any third party;
(g) incurrence of Indebtedness or guarantee of debt or other liability of any
third party by the Company or any Subsidiary other than in the ordinary
course of business;
(h) undertaking to make, or commitment to undertake, by the Company or any
Subsidiary any capital expenditure in an amount that exceeds $1,000,000 in
the aggregate other than in the ordinary course of business; or
(i) entering into any written agreement to do any of the actions described in
clauses (a) through (h).
Section 2.7. Necessary Property.
The Company and the Subsidiaries own good title to, valid leasehold
interests in or hold a valid license to use all the assets used in or
necessary for the conduct of its business in the manner and to the extent
presently conducted by the Company and the Subsidiaries.
Section 2.8. Consents and Approvals.
Except as set forth on Schedule 2.8, the execution, delivery and
performance of this Agreement by the Company and the Stockholders will not,
as of the Closing Date, (i) require any material consent, approval,
authorization or other action by, or filing with or notification to, any
federal, state, local, whether U.S. or non-U.S. government, governmental,
regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body (a "Governmental Authority") or (ii)
any consent, approval, authorization or other action by, or filing with or
notification to any United States federal or Massachusetts Governmental
Authority, except (A) the notification requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if applicable, and (B) as may be necessary as a result of any facts
or circumstances relating solely to Buyer (including, without limitation,
its sources of financing).
Section 2.9. Litigation.
Schedule 2.9 lists each litigation, action, suit, proceeding, claim,
arbitration or investigation (each a "Legal Proceeding") involving a claim
for more than $250,000 pending at any time during the past five years and
each Legal Proceeding, to the knowledge of the Company, threatened during
the past three years. Except as set forth on Schedule 2.9, there is no
Legal Proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, as to which there is a
reasonable likelihood of an adverse determination and which, if adversely
determined, individually or in the aggregate, with all such other
litigation, actions, suits, proceedings, claims, arbitrations or
investigations, would have a Material Adverse Effect.
Section 2.10. Taxes.
(a) Except as set forth on Schedule 2.10 or as would not, individually or in
the aggregate, result in a material liability to the Company or any
Subsidiary:
(i) The Company and each of its Subsidiaries have timely filed all Tax Returns
required by Law to be filed by them, taking into account any extension of
time to file granted to or obtained on behalf of the Company or any of its
Subsidiaries. All such Tax Returns filed by or with respect to the Company
and each of its Subsidiaries are true, correct and complete and were
prepared in compliance with all applicable laws and regulations. All Taxes
have been correctly accounted for by the Company and its Subsidiaries. The
Company and each of its Subsidiaries have paid (or caused to be paid on
their behalf) all Taxes due and owing, whether or not shown on their Tax
Returns. Neither the Company nor any of its Subsidiaries have filed any Tax
Return that is, or would be, subject to penalties under Section 6662 of the
Code (or any corresponding provisions of foreign, state, and local tax
law). Neither the Company nor any of its Subsidiaries has participated in
any listed transaction as defined under Section 6011 of the Code.
(ii) Neither the Company nor any of its Subsidiaries currently are the
beneficiaries of any extension of time within which to file any Tax Return.
Neither the Company nor any of its Subsidiaries has waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency, nor is any such waiver or
extension pending.
(iii) Neither the Internal Revenue Service (the "IRS") nor any other
Governmental Authority is asserting, or has asserted in the last six (6)
years, as of the date of this Agreement, any deficiency or claim for any
amount of additional Taxes against the Company or any of its Subsidiaries.
The IRS audit of the Company and its Subsidiaries for the taxable year
ended December 31, 2004 resulted in cumulative adjustments of less than
$150,000 and all matters in connection therewith have been resolved.
(iv) Within the last six (6) years, no claim has ever been made by any
Governmental Authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that the Company or any of its
Subsidiaries is or may be subject to taxation in that jurisdiction.
(v) Each of the Company and its Subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid
or owing to any employee, independent contractor, creditor, stockholder, or
other third party.
(vi) No federal, state, local or foreign audits, administrative, court or other
proceedings are pending as of the date of this Agreement with regard to any
Taxes or Tax Returns of the Company or any of its Subsidiaries.
(vii) Neither the Company nor any of its Subsidiaries has received from any
federal, state, local, or foreign Taxing authority (including jurisdictions
where the Company or its Subsidiaries have not filed Tax Returns) any (A)
notice indicating an intent to open an audit or other review, (B) request
for information related to Tax matters, or (C) notice of deficiency or
proposed adjustment for any amount of Tax proposed, asserted, or assessed
by any taxing authority against the Company or any of its Subsidiaries.
(viii) True, correct and complete copies of federal and state Income Tax Returns
with respect to the Company for tax years ending 2004, 2005 and 2006 were
delivered to Buyer.
(ix) Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract, arrangement, or plan that has resulted or will result,
separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Code 280G (or any corresponding provision
of state, local, or foreign Tax law).
(x) Neither the Company nor any of its Subsidiaries have been part of a
consolidated group for Tax purposes with any Person. Neither the Company
nor any of its Subsidiaries is a party to or bound by any Tax allocation or
sharing agreement. Neither the Company nor any of its Subsidiaries has any
liability for the Taxes of any Person as a transferee or successor, by
contract, or otherwise (other than the Company or any such Subsidiary).
(xi) Neither the Company nor any of its Subsidiaries will be required to
included any item of income in, or exclude any item of deduction from,
taxable income for any taxable period (or portion thereof) ending after the
Closing as a result of any: (A) change in method of accounting for a
taxable period ending on or prior to the Closing Date (or any corresponding
or similar provision of state, local, or foreign law); (B) agreement with
any Governmental Authority with regard to the Tax liability of the Company
or any of its Subsidiaries , executed on or prior to the Closing Date; (C)
installment sale or open transaction disposition made on or prior to the
Closing Date; or (D) prepaid amount received on or prior to the Closing
Date. Neither the Company nor any of its Subsidiaries has knowledge that
the IRS has proposed any such adjustment or change in accounting method.
(xii) Neither the Company nor any of its Subsidiaries is a party to any joint
venture, partnership, or other arrangement or contract that could be
treated as a partnership for federal income tax purposes.
(xiii) Neither the Company nor any of the Subsidiaries have constituted a
"distributing corporation" or a "controlled corporation" within the meaning
of Section 355(a)(1)(A) of the Code in a distribution of stock intended to
qualify for tax-free treatment under Section 355 of the Code.
(xiv) The Company has not taken into account any Tax benefit related to the
Transaction Expenses in conjunction with the filing of any Tax Return,
payment of any Taxes, or the preparation of the Base Balance Sheet (except
for an accrual for legal fees for the period through September 30, 2007).
(b) For the purposes of this Agreement:
(i) "Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, or impositions of any kind payable to the IRS or any taxing
authority, including all interest and penalties thereon, and additions to
tax or additional amounts attributable to, imposed upon, or with respect to
such tax, charges, fees, levies, assessments or impositions, and including
an liability for the Taxes of any Person under Treasury Regulation
1.1502-6 (or any similar provision of U.S. or non-U.S. law), as transferee
or successor, by contract or otherwise. The term "Income Tax" means any tax
measured by net income or gross income.
(ii) "Tax Returns" shall mean any report, return, document, declaration, report,
claim for refund, information return or statement, or other filing relating
to Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
Section 2.11. Employee Benefit Plans.
(a) All benefit and compensation plans, employment agreements, contracts,
policies or arrangements covering current or former employees of the
Company and its Subsidiaries (the "Employees") and current or former
directors of the Company, including, but not limited to, "employee benefit
plans" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), deferred compensation,
severance, stock option, stock-based, change in control, incentive and
bonus plans, health care reimbursement, dependent care assistance and
cafeteria plans and other fringe benefit plans (the "Benefit Plans"),
including Benefit Plans maintained outside of the United States primarily
for the benefit of Employees working outside of the United States (such
plans hereinafter being referred to as "Non-U.S. Benefit Plans"), are
listed on Schedule 2.11(a) and complete copies of all Benefit Plans listed
on Schedule 2.11(a), including, but not limited to, any trust instruments,
insurance contracts, and all amendments thereto have been provided, or made
available in the electronic data room, to Buyer.
(b) All Benefit Plans, other than Non-U.S. Benefit Plans, (collectively, "U.S.
Benefit Plans") have been administered, operated and maintained in
compliance in all material respects (provided that any failure to comply
would not result in material liability to the Company or any Subsidiary)
with ERISA, the Internal Revenue Code of 1986, as amended (the "Code")
including without limitation, the in-service distribution rules and
nondiscrimination rules of ERISA and the Code, with and other applicable
Laws and with the terms and provisions thereof. Each U.S. Benefit Plan
which is subject to ERISA that is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA (a "Pension Plan") intended to be
qualified under Section 401(a) of the Code, has received a favorable
determination or opinion letter from the Internal Revenue Service (the
"IRS"), and the Company is not aware of any circumstances that would
reasonably be expected to result in the loss of the qualification of such
Benefit Plan under Section 401(a) of the Code or the imposition of any
sanctions against the Company due to the failure of such Plan to satisfy
any requirements thereunder.
(c) No material liability under Subtitle C or D of Title IV of ERISA has been
incurred by the Company or any of its Subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the
Code (an "ERISA Affiliate") other than payment of premiums in the ordinary
course. No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the reporting requirement has not been waived or
extended, has been required to be filed for any Pension Plan or by any
ERISA Affiliate within the 36-month period ending on the date hereof. No
notices have been required to be sent to participants and beneficiaries or
the Pension Benefit Guaranty Corporation under Section 302 or 4011 of ERISA
or Section 412 of the Code (including Section 412(m)).
(d) Neither the Company nor any ERISA Affiliate contributes to, or in the six
years prior to the date hereof has contributed to, any multiemployer plan,
as defined in Section 3(37) of ERISA.
(e) All contributions required to be made under each Benefit Plan, as of the
date hereof, have been timely made and all obligations in respect of each
Benefit Plan have been properly accrued and reflected in the most recent
balance sheet of the Company to the extent required by GAAP. No Pension
Plan has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA. The Company
has not provided, and is not required to provide, security to any Pension
Plan pursuant to Section 401(a)(29) of the Code.
(f) As of the date hereof, there is no pending or, to the knowledge of the
Company, threatened litigation or administrative action or liability other
than for routine plan sponsorship and administration relating to the
Benefit Plans, nor, to the knowledge of the Company, are there any
circumstances providing a basis for any such litigation or administrative
action. Neither the Company nor any of its Subsidiaries has any obligations
for retiree health or life benefits under any Benefit Plan.
(g) Except as set forth in Schedule 2.11(g), neither the execution of this
Agreement nor the consummation of the transactions contemplated herein will
(i) entitle any Employees to severance pay or any increase in severance pay
upon any termination of employment after the date hereof or (ii) accelerate
the time of payment or vesting or result in any payment or funding (through
a grantor trust or otherwise) of compensation or benefits under, increase
the amount payable or result in any other material obligation pursuant to,
any of the Benefit Plans or (iii) result in aggregate payments to any
Employee under the Benefit Plans (as in effect on the date hereof and as of
the Closing) in excess of $1,000,000 in any calendar year ending after the
Closing.
(h) All Non-U.S. Benefit Plans comply in all material respects (provided that
any failure to comply would not result in material liability to the Company
or any Subsidiary) with applicable local Law. As of the date hereof, there
is no pending or, to the knowledge of the Company, threatened litigation or
liability other than for routine plan sponsorship and administration
relating to Non-U.S. Benefit Plans.
(i) All Benefit Plans that are "nonqualified deferred compensation plans"
(within the meaning of Section 409A of the Code) have been maintained and
administered in good faith compliance with the requirements of Section 409A
of the Code and any regulations or other guidance issued thereunder.
(j) Schedule 2.11(j) identifies all individuals whose employment with the
Company and its Subsidiaries was terminated during 2006 or 2007 and that
participated in a Pension Plan and identifies the Pension Plan in which
such individuals participated.
Section 2.12. Real and Personal Property.
(a) Schedule 2.12(a) sets forth a general description and the property address
of all real property owned by the Company or any of its Subsidiaries (the
"Owned Real Property").
(b) Schedule 2.12(b) sets forth a list of all the real property that is leased
by the Company or any of its Subsidiaries (collectively, the "Leased Real
Property," and collectively with the Owned Real Property, the "Real
Property"). The Company has made available to the Buyer true and correct
copies of all of the leases listed on Schedule 2.12(b), including all
material amendments to such leases, under which the Company or any
Subsidiary has possession of the Leased Real Property (the "Leases"). With
respect to each Lease, except as would not, individually or in the
aggregate, have a Material Adverse Effect:
(i) the Company or a Subsidiary, as applicable, have good, valid and
enforceable leasehold interests to the leasehold estate in the Leased Real
Property granted to the Company or such Subsidiary, as applicable, pursuant
to each pertinent Lease, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity;
(ii) each of said Leases has been duly authorized and executed by the Company or
such Subsidiary, as applicable, and is in full force and effect; and
(iii) to the knowledge of the Company, neither the Company nor such Subsidiary,
nor any landlord or other party to any of said Leases, is in default under
any of said Leases, nor, to the knowledge of the Company, has any event
occurred which, with notice or the passage of time, or both, would give
rise to such a default by the Company or such Subsidiary, as applicable, or
any landlord or other party to any of said Leases, as applicable, except as
would not, individually or in the aggregate, be material to the Company or
a Subsidiary.
(c) To the knowledge of the Company, except as set forth on Schedule 2.12(c) or
as specifically disclosed in the Base Balance Sheet, and except with
respect to leased personal property, the Company and each of its
Subsidiaries has good title to all of their respective tangible personal
property and assets shown on the Base Balance Sheet or acquired after the
date of the Base Balance Sheet, free and clear of any Encumbrances, except
for (i) assets which have been disposed of to nonaffiliated third parties
since the date of the Base Balance Sheet in the ordinary course of
business, (ii) Encumbrances reflected in the Base Balance Sheet,
(iii) Encumbrances of record or imperfections of title which are not,
individually or in the aggregate, material in character, amount or extent
and which do not materially detract from the value or materially interfere
with the present use of the assets subject thereto or affected thereby or
which would not otherwise, individually or in the aggregate, have a
Material Adverse Effect and (iv) Encumbrances for current Taxes not yet due
and payable, but only to the extent such Taxes are reflected as a Current
Liability in the computation of the Final Working Capital.
(d) Except as set forth in Schedule 2.12(d), the Company and its Subsidiaries
have good title to the Owned Real Property and to all of their non-leased
fixtures, machinery, equipment, furniture and other tangible assets located
on the Real Property ("Tangible Property") free and clear of any
Encumbrances other than Permitted Liens. "Permitted Liens" means (i) any
matters which an accurate survey of the Owned Real Property may show which
would not, individually or in the aggregate, have a Material Adverse
Effect; (ii) any landlord lien on the Tangible Property to the extent
applicable; (iii) property taxes and assessments not yet due and payable,
but only to the extent such Taxes are reflected as a Current Liability in
the computation of the Final Working Capital; (iv) any matters set forth in
any instrument recorded or filed in the "Registry of Deeds" (or in respect
of a foreign subsidiary the nearest equivalent Governmental Authority) for
the county in which the applicable Real Property is located which would
not, individually or in the aggregate, have a Material Adverse Effect; and
(v) such other encumbrances which were created, incurred or arise in the
ordinary course of business.
(e) Schedule 2.12(e) sets forth a list of all leases with a value in excess of
$100,000 with respect to Tangible Property ("Tangible Property Leases")
pursuant to which the Company or any Subsidiary is a lessee as of the date
of this Agreement ("Leased Tangible Property"). The Company or any
Subsidiary, as applicable, has a valid leasehold interest in the Leased
Tangible Property free and clear of any liens other than the rights of the
owners thereof and Permitted Liens, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
and general principles of equity. All Tangible Property Leases have been
duly authorized and executed by the Company or any such Subsidiary, as
applicable, and is in full force and effect. To the knowledge of the
Company, neither the Company nor any Subsidiary, nor any other party to any
of said Tangible Property Leases, is in default under any of said Tangible
Property Leases, nor, to the knowledge of the Company, has any event
occurred which, with notice or the passage of time, or both, would give
rise to such a default by the Company or such Subsidiary, as applicable, or
any other party to any of said Tangible Property Leases, as applicable,
except as would not, individually or in the aggregate, have a Material
Adverse Effect.
(f) There is no action or proceeding instituted or pending, or to the knowledge
of the Company, threatened or contemplated for eminent domain or for
condemnation of any of the Real Property, for which the Company or any of
its Subsidiaries has received written notice.
(g) Neither the Company nor any Subsidiary has leased, subleased, licensed or
granted occupancy rights in any parcel or any portion of any parcel of Real
Property to any other Person and no other Person has any rights to the use,
occupancy or enjoyment thereof pursuant to any lease, sublease, license,
occupancy or other agreement, nor has the Company or any Subsidiary
assigned its interest under any Lease.
(h) The Owned Real Property is free and clear of any purchase options, rights
of first refusal, letters of intent, purchase agreements or other rights to
acquire which are not recorded in the applicable registry of deeds or which
arise by statute. Neither the Company nor any Subsidiary has incurred or
become liable for any broker's commission or finder's fee relating to or in
connection with any potential sale or lease of the Owned Real Property.
(i) To the knowledge of the Company, the Title Commitment dated June 5, 2007,
(the "Title Commitment") issued by Lawyers Title Insurance Corporation with
regard to the Owned Real Property omits no instrument, restriction,
covenant, easement or other agreement of record or fact which affects the
Owned Real Property and would be binding upon the owner thereof, other than
any applicable Material Contracts (collectively, "Title Exceptions"). To
the knowledge of the Company, neither the Company nor such Subsidiary, nor
any other party to any Title Exception, is in default under any of said
Title Exceptions, nor, to the knowledge of the Company, has any event
occurred which, with notice or the passage of time, or both, would give
rise to such a default by the Company or such Subsidiary, as applicable, or
any other party to any Title Exception, as applicable, except as would not,
individually or in the aggregate, have a Material Adverse Effect.
(j) To the knowledge of the Company, the Tangible Property and the
improvements, building systems and fixtures comprising the Real Property
are in good operating condition, subject to normal wear and tear, as
reasonably required for their continued use in connection with the ordinary
course of business as presently conducted, except as would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 2.13. Labor and Employment Matters.
(a) The Company and each of its Subsidiaries are, as of the date hereof, in
compliance in all material respects (provided that any failure to comply
would not result in material liability to the Company or any Subsidiary)
with all foreign, federal, state and local laws of any Governmental
Authority respecting employment, immigration temporary workers, employment
practices, terms and conditions of employment, and wages and hours,
including any notice, training and filing requirements thereunder, and
there are no pending or, to the knowledge of the Company threatened
investigations or claims by any branch or department of any Governmental
Authority regarding their compliance with these Laws.
(b) Neither the Company nor any Subsidiary is a party to or otherwise bound by
any collective bargaining agreement, project labor agreement, memorandum of
understanding, letter agreement, side agreement, contract or any other
agreement or understanding with a labor union, labor organization or group
of employees acting in concert. As of the date of this Agreement, neither
the Company nor any Subsidiary is subject to any charge, demand, request
for recognition, petition or representation proceeding seeking to compel,
require or demand it to recognize and/or bargain with any labor union,
labor organization or group of employees acting in concert nor, as of the
date of this Agreement, is there pending or, to the knowledge of the
Company, threatened, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company or any Subsidiary.
(c) Except as set forth in Schedule 2.13(c), there is no basis for any action
or proceeding, no action or proceeding pending, or to the knowledge of the
Company, threatened against the Company or its Subsidiaries for: (i) breach
of an actual or implied contract of employment (including, but not limited
to, any claim of fraud, promissory fraud, promissory estoppel, fraudulent
misrepresentation in the making of any actual or implied contract of
employment), (ii) unjust, wrongful, discriminatory, retaliatory or tortious
discharge (including any claim of whistleblowing), (iii) slander, libel or
other action claiming defamation, (iv) intentional tort (including assault,
battery, conversion and/or intentional infliction of emotional distress) or
(v) negligent infliction of emotional distress, negligent hiring, negligent
supervision or negligent retention.
(d) Except as set forth in Schedule 2.13(d), neither the Company nor any of its
Subsidiaries are party to (i) any U.S. employment agreement or employment
contract or (ii) any non-U.S. employment agreement or employment contract,
of a duration of longer than 3 years.
(e) Except as set forth in Schedule 2.13(c), to the knowledge of the Company,
there is no basis for any claim against. and no claim is pending or, to the
knowledge of the Company, threatened against the Company arising out of
any law relating to discrimination in employment or employment practices or
occupational safety and health standards.
Section 2.14. Data Privacy.
The Company and each Subsidiary is in compliance in all material respects
(provided that any failure to comply would not result in material liability
to the Company or any Subsidiary) with all applicable data protection and
privacy laws or regulations. The Company nor any Subsidiary has received
any written notice from any Governmental Authority regarding any actual or
possible violation of, or failure to comply with, any requirement set forth
by any applicable data protection and privacy law or regulation.
Section 2.15. Product and Service Warranties; Product Safety Authorities.
(a) Schedule 2.15 contains the standard forms of product and service warranties
and guarantees currently used by the Company and all of its Subsidiaries.
Other than such standard forms and except as set forth on Schedule 2.15,
the Company and its Subsidiaries have no other currently outstanding
written product and service warranties and guarantees. The Company and its
Subsidiaries have not made any oral product or service warranties or
guaranties containing terms less favorable to the Company or any Subsidiary
than the terms of the standard forms of product and service warranties and
guarantees set forth in Schedule 2.15. The aggregate warranty expense
incurred by the Company for the 5-year period ended December 31, 2006 did
not exceed $1,100,000. The warranty reserve of $185,565.50 on the Base
Balance Sheet takes into account adequate reserves for product warranty
claims pending as of the date of the Base Balance Sheet. The
representations and warranties contained in this Section 2.15(a) exclude
any and all warranty, service and repair obligations of the Company and its
Subsidiaries pursuant to contracts under which the Company and its
Subsidiaries lease equipment.
(b) Neither the Company nor any Subsidiary has been required in the past five
years to file any notification or other report with or provide information
to any Governmental Authority or product safety standards group concerning
actual or potential defects or hazards with respect to any services
performed or products manufactured, sold, distributed or put in commerce by
the Company or any Subsidiary, and to the knowledge of the Company, there
exist no grounds for the recall of any such products.
Section 2.16. Contracts and Commitments.
Schedule 2.16 sets forth a list of each "Material Contract" to which the
Company or any Subsidiary is a party. A "Material Contract" means:
(a) any partnership agreements or joint venture agreements;
(b) other than oral at will employment arrangements, any employment, severance
or consulting agreements with any director, officer or employee requiring
an annual payment of cash compensation in excess of $100,000;
(c) any agreements with another Person materially limiting or restricting the
ability of the Company or any Subsidiary to enter into or engage in any
market or line of business;
(d) any agreements with another Person, of an executory nature, for the
purchase of materials, supplies, goods or services that provide for annual
payments by the Company or any Subsidiary in excess of $100,000 that cannot
be cancelled by the Company or such Subsidiary without penalty upon notice
of 90 days or less;
(e) any agreements with another Person, of an executory nature, for the sale or
distribution by the Company or any Subsidiary of materials, supplies, goods
or services that provide for annual payments to the Company or such
Subsidiary in excess of $200,000;
(f) any agreement for the sale of any assets of the Company or any Subsidiary
other than the sale of inventory in the ordinary course of business;
(g) any agreement under which the Company or any Subsidiary has made advances
or loans to any other Person (which shall not include advances made to any
employees of the Company or any Subsidiary in the ordinary course of
business);
(h) any agreement relating to Indebtedness or the deferred purchase price of
real property (whether incurred, assumed, guaranteed or secured by any
asset) or letters of credit involving future payments by the Company or any
Subsidiary in excess of $100,000;
(i) other than employment agreements, any agreement between the Company or any
Subsidiary on the on the one hand, and any stockholder, director, officer
or Affiliate of the Company or any Subsidiary on the other hand;
(j) any agreement which grants a license or sublicense to Intellectual Property
owned or used by the Company or any Subsidiary other than licenses for
software entered into in the ordinary course of business and licenses for
commercially available third-party software; or
(k) any other material agreement (or group of related agreements) the
performance of which involves consideration in excess of $100,000 other
than agreements entered into in the ordinary course of business.
Section 2.17. Customers.
Schedule 2.17 is a true, complete and correct list of the 10 largest
customers of the Company and all of its Subsidiaries, taken as a whole, by
dollar amount of sales for the 39 week period ended September 29, 2007 (the
"Material Customers"). Except as set forth on Schedule 2.17, neither the
Company nor any Subsidiary has received any written notice from any
Material Customer to the effect that any such customer will stop, or
materially decrease the rate of, buying materials, products or services
from the Company or any Subsidiary.
Section 2.18. Suppliers.
Schedule 2.18 is a true, complete and correct list of the 10 largest
suppliers of the Company and all of its Subsidiaries, taken as a whole, by
dollar amount for the 39 week period ended September 29, 2007 ("Material
Suppliers"). Except as set forth on Schedule 2.18, neither the Company nor
any Subsidiary has received any written notice from any Material Supplier
to the effect that any such supplier will stop, or materially decrease the
rate of, supplying materials, products or services to the Company or any
Subsidiary.
Section 2.19. Foreign Operations and Export Control.
The Company and all of its Subsidiaries, and to Company's knowledge, each
officer, director, employee, agent or other Person acting on behalf of the
Company or any Subsidiary, is, and for the past five years has been,
acting:
(a) in compliance in all material respects (provided that any failure to comply
would not result in material liability to the Company or any Subsidiary)
with all applicable foreign laws, including without limitation laws
relating to foreign investment, foreign exchange control, immigration,
employment and taxation;
(b) in compliance in all material respects (provided that any failure to comply
would not result in material liability to the Company or any Subsidiary)
with all relevant anti boycott laws, regulations and guidelines, including
without limitation Section 999 of the Code and the regulations and
guidelines issued pursuant thereto and the Export Administration
Regulations administered by the U.S. Department of Commerce, as amended
from time to time, including all reporting requirements;
(c) in compliance in all material respects (provided that any failure to comply
would not result in material liability to the Company or any Subsidiary)
with any and all applicable export or reexport control or sanction laws,
orders or regulations of any applicable jurisdictions, including without
limitation the U.K., Norway and the European Union, and including without
limitation the Export Administration Regulations administered by the U.S.
Department of Commerce and sanctions and embargo executive orders and
regulations administered by the Office of Foreign Assets Control of the
U.S. Treasury Department, all as amended from time to time, and without
written notice of violation of and in compliance with any required export
or reexport licenses or authorizations, general licenses or license
exceptions granted under such laws, regulations or orders, which licenses
and authorizations are described on Schedule 2.19(c);
(d) in compliance in all material respects (provided that any failure to comply
would not result in material liability to the Company or any Subsidiary)
with any and all applicable import laws, orders or regulations of any
applicable jurisdiction, as amended from time to time, and without written
notice of violation of and in compliance with any required import permits,
licenses, authorizations and general licenses granted under such laws,
regulations or orders, which permits, licenses and authorizations are
described on Schedule 2.19(d); and
(e) without material violation (provided that any violation would not result in
material liability to the Company or any Subsidiary) of the Foreign Corrupt
Practices Act of 1977.
Section 2.20. Intellectual Property.
(a) Schedule 2.20(a) sets forth all registered Intellectual Property which has
been issued to the Company and any Subsidiary that is not expired or lapsed
and each pending application for registration the Company has made
(together, the "Company Intellectual Property"). All Company Intellectual
Property is currently in compliance with formal legal requirements
(including payment of filing, examination and maintenance fees and proofs
of use) and no Company Intellectual Property is subject to any unpaid
maintenance fees or taxes or actions due within 90 days after the Closing
Date.
(b) There are no proceedings or actions known to the Company before any court
or tribunal (including the United States Patent and Trademark Office or
equivalent authority anywhere in the world) related to any Intellectual
Property owned by or licensed to the Company other than those set forth in
Schedule 2.20(b). No third party has challenged the validity or
enforceability of any registered Intellectual Property owned by or to the
knowledge of the Company licensed to the Company and, to the knowledge of
the Company, no third party has infringed or misappropriated any such
registered Intellectual Property.
(c) To the knowledge of the Company, neither the Company nor any Subsidiary
has, in the conduct of the business, infringed or misappropriated any
Intellectual Property of a third party. To the knowledge of the Company,
there are no claims (pending or threatened in writing) to the effect that
the business or the use, reproduction, modification, manufacture,
distribution, licensing, sublicensing, or sale of the products by the
Company or any Subsidiary infringes on any Intellectual Property of a third
party.
(d) Except as set forth in Schedule 2.20(d), the Intellectual Property used by
the Company and its Subsidiaries in the business is either: (i) owned
solely by Company or a Subsidiary free and clear of any Liens; or (ii) to
the knowledge of the Company, rightfully used and authorized for use by the
Company and its Subsidiaries in the business pursuant to a valid and
enforceable license. No entity other than the Company and its Subsidiaries
and their respective customers possesses any current or contingent rights
to any of the Intellectual Property owned by the Company and its
Subsidiaries.
(e) There is no violation of any material license, sublicense or other
agreement to which the Company or a Subsidiary is a party or is otherwise
bound, relating to any of the Intellectual Property used by the Company and
its Subsidiaries in the business.
(f) The Company has taken commercially reasonable measures consistent with
industry practice to protect the proprietary nature of the Intellectual
Property owned or used by the Company and its Subsidiaries in the business
and to maintain in confidence all trade secrets and confidential
information owned or used by the Company and its Subsidiaries in the
business.
(g) Except as set forth on Schedule 2.20(g), none of the material software
developed for, or used in, the business is subject to any "copyleft" or
other obligation or condition (contractual or otherwise, including any
obligation or condition under any "open source" license) that would: (i)
require the Company or any Subsidiary to release any of the source code of
such material software to the public; or (ii) otherwise impose any material
limitation, restriction or condition on the use, licensing or distribution
of such software by the Company and its Subsidiaries.
Section 2.21. Environmental Matters.
(a) The Company and each of its Subsidiaries is, and for the three year period
prior to Closing has been, in compliance in all material respects with all
Environmental Laws, including requirements under such Environmental Laws to
hold and comply with any applicable and material permits, certificates,
licenses, approvals, registrations and authorizations.
(b) No written notice or other written communication has been issued to or
received by the Company or its Subsidiaries from any third party,
including, but not limited to, a Governmental Authority having jurisdiction
over the Company's or any Subsidiary's assets, alleging that the Company or
any Subsidiary is in violation of, or has liability under, any applicable
Environmental Laws, and there is no civil, administrative, or criminal
proceeding pending or, to the knowledge of the Company, threatened against
the Company or any Subsidiary under any Environmental Laws.
(c) None of the Owned Real Property or Leased Real Property contains any
Hazardous Materials, nor has there been a spill, leak discharge, disposal
or release of Hazardous Materials on, under or from such properties, in a
condition, amount or concentration that may impose a material liability
under, or present an obligation on the part of the Company or its
Subsidiaries to undertake any notification, investigation, remediation,
removal, or other response action under, any Environmental Laws.
(d) No facts, circumstances or conditions exist with respect to the operations
of the Company or its Subsidiaries or with respect to any property formerly
owned, leased or operated by Company or its Subsidiaries or any property at
which the Company or its Subsidiaries arranged for the disposal or
treatment of Hazardous Materials that may impose a material liability
under, or present an obligation on the part of the Company or its
Subsidiaries to undertake any notification, investigation, remediation,
removal, or other response action under, any Environmental Laws.
(e) There are no asbestos fibers or materials, polychlorinated biphenyls, or
underground storage tanks on or beneath the Owned Real Property or Leased
Real Property that may impose a material liability under, or present an
obligation on the part of the Company or its Subsidiaries to undertake any
abatement, closure, notification, investigation, remediation, removal, or
other response action under, any Environmental Laws.
(f) The Company has provided to Buyer true, accurate and complete information
pertaining to all of the matters set forth in paragraphs (a) through (e)
hereof, including all environmental audits or assessments.
(g) "Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq., as amended; the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., as amended;
the Clean Air Act, 42 U.S.C. 7401 et seq., as amended; the Clean Water Act,
33 U.S.C. 1251 et seq., as amended; the Occupational Safety and Health Act
of 1970, 29 U.S.C. 651 et seq, as amended, and any other applicable
foreign, federal, state, and local statute, law, regulation, rule, and
ordinance and the common law relating to pollution, contamination,
remediation, or the protection of health, safety or the environment
(including without limitation ambient air, soil, sediment, surface water
and groundwater), in effect as of the date of this Agreement.
(h) "Hazardous Materials" means any substance that is toxic, ignitable,
reactive, corrosive, radioactive, caustic, hazardous, or is a contaminant,
hazardous waste, special waste, or pollutant, including without limitation
petroleum, its derivatives, by-products and other hydrocarbons,
polychlorinated bi-phenyls and friable asbestos.
(i) The representations and warranties set forth in this Section 2.21 shall
constitute the only representations and warranties by the Company with
respect to environmental matters.
Section 2.22. Inventory.
Except as set forth on Schedule 2.22, the valuation of the Company's
inventory reflected on the Base Balance Sheet takes into account adequate
reserves for excess and obsolete inventory as of the date of the Base
Balance Sheet.
Section 2.23. Insurance.
Schedule 2.23 lists all the insurance policies held by, or for the benefit
of, the Company and its Subsidiaries. None of the Company or any of its
Subsidiaries is in material default under any such policy or has received
written notice of cancellation or any such policy. All premiums under such
policies have been timely paid. The Company and all Subsidiaries have at
all times during the past three years maintained insurance as required by
applicable law or under any contract to which the Company or any Subsidiary
is or has been a party, including without limitation general comprehensive
liability, unemployment and workers' compensation coverage.
Section 2.24. Accounts Receivable.
Except as set forth on Schedule 2.24, all Accounts Receivable of the
Company and any Subsidiary arose out of the bona fide transactions. To the
knowledge of the Company, the aggregate Accounts Receivable of the Company
and all of its Subsidiaries reflected on the Base Balance Sheet are not
subject to any counterclaims, setoffs, credits or allowances in excess of
the amount of the existing reserves and allowances provided for in the Base
Balance Sheet. "Accounts Receivable" means accounts, notes and other
receivables of the Company and any of its Subsidiaries, respectively.
Section 2.25. Transactions with Related Persons; Affiliates.
Except as otherwise disclosed on Schedule 2.25, no spouse or immediate
family member of a stockholder, director, officer or employee of the
Company or any Subsidiary is employed by the Company or any Subsidiary.
Except as otherwise disclosed on Schedule 2.25, no stockholder, director,
officer or employee of the Company or any Subsidiary, or to the knowledge
of the Company any of their respective spouses or immediate family members,
(i) owns directly or indirectly, on an individual or joint basis, any
interest in, or serves as an officer or director or in another similar
capacity of, any competitor, customer or supplier of the Company or any
Subsidiary, or any organization which has a material contract or
arrangement with the Company or any Subsidiary, (ii) is party to any loan,
lease or other agreement or transaction with the Company or any Subsidiary
(other than related to employment with the Company or a Subsidiary in the
ordinary course of business).
Section 2.26. No Guarantees.
Except as set forth in Schedule 2.26, neither the Company nor any
Subsidiary has guaranteed, or otherwise become contingently liable for, the
financial obligations or liabilities of any other Person.
Section 2.27. Brokers.
Except for the fees payable to The ▇▇▇▇▇▇▇ Company, LLC, which fees shall
be paid by the Company, neither the Company nor any Subsidiary has incurred
or become liable for any broker's commission or finder's fee relating to or
in connection with the transactions contemplated by this Agreement.
Section 2.28. Compliance with Laws.
Neither the Company nor any Subsidiary is in material default or violation
of any law, statute, ordinance, regulation, rule, order, judgment or decree
applicable to the Company or such Subsidiary or by which any property or
asset of the Company or its Subsidiaries is bound. The Company and all of
its Subsidiaries have obtained all material governmental permits, licenses
and authorizations necessary for the conduct of their respective businesses
as presently conducted in the ordinary course and all such permits,
licenses and authorizations are in full force and effect. Notwithstanding
the foregoing sentences, the representations and warranties in this Section
2.28 do not apply to matters covered by Sections 2.10 (Taxes), 2.11
(Employee Benefit Plans), 2.13 (Labor and Employment Matters), 2.19
(Foreign Operations and Export Control), 2.20 (Intellectual Property), and
2.21 (Environmental Matters), which matters are covered exclusively in such
Sections.
Section 2.29. Disclaimer of Other Representations and Warranties;
Knowledge; Disclosure.
(a) NONE OF THE COMPANY, ITS REPRESENTATIVES OR THE STOCKHOLDERS HAVE MADE ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER
RELATING TO THE COMPANY OR THE BUSINESS OF THE COMPANY OR OTHERWISE IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, OTHER THAN THOSE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE II AND
ARTICLE III HEREOF.
(b) Without limiting the generality of the foregoing, none of the Company, such
representatives of the Company or the Stockholders has made, and shall not
be deemed to have made, any representations or warranties in the materials
relating to the business of the Company and its Subsidiaries made available
to Buyer or in any presentation of the business of the Company and its
Subsidiaries in connection with the transactions contemplated hereby, and
no statement contained in any of such materials or made in any such
presentation shall be deemed a representation or warranty hereunder or
otherwise. It is understood that any cost estimates, projections or other
predictions, any data, any financial information or any memoranda or
offering materials or presentations, including but not limited to, the
Confidential Offering Memorandum made available by the Company and its
representatives are not and shall not be deemed to be or to include
representations or warranties of the Company.
(c) Whenever a representation or warranty made by the Company herein refers to
the knowledge of the Company, such knowledge shall be deemed to consist
only of the actual knowledge, after reasonable inquiry, on the date hereof
and on the Closing Date, as applicable, of ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Vegard ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, and
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
(d) Each party shall use its reasonable best efforts to specifically identify
and list on each Schedule information which is relevant to such Schedule.
Notwithstanding anything to the contrary contained in this Agreement or in
any of the Schedules, any information disclosed in one Schedule shall be
deemed to be disclosed in all Schedules to the extent that such disclosure
sets forth facts in sufficient detail so that the relevance of such
disclosure to other Schedules would be apparent to a reasonable reader of
such disclosure. Certain information set forth in the Schedules is included
solely for informational purposes and may not be required to be disclosed
pursuant to this Agreement. The disclosure of any information shall not be
deemed to constitute an acknowledgment that such information is required to
be disclosed in connection with the representations and warranties made by
the Company in this Agreement or that such information is material, nor
shall such information be deemed to establish a standard of materiality,
nor shall it be deemed an admission of any liability of, or concession as
to any defense available to, the Company.
(e) No less than three business days prior to the Closing Date, the Company
will supplement or amend the Schedules with respect to (i) any matter first
existing or occurring after the date hereof that, if existing or occurring
at or prior to the date hereof, would have been required to be set forth or
described in such Schedule or (ii) any matter that is necessary to correct
any information in such Schedule that has been rendered inaccurate thereby;
provided, that, if the Closing shall not have occurred by December 1, 2007
then as soon as practicable after December 1, 2007 and from time to time
thereafter up to the Closing Date, the Company will supplement or amend the
Schedule as described above. No supplement or amendment to any Schedule
will have any effect (i) for the purpose of determining satisfaction of the
conditions set forth in Sections 7.2 or 9.1, or, (ii) on rights to
indemnification under Article VIII.
Article III - SEVERAL REPRESENTATIONS AND
WARRANTIES OF STOCKHOLDERS
Each Stockholder hereby severally, and not jointly, makes to Buyer each of
the representations and warranties set forth in this Article III with
respect to such Stockholder on the date hereof and as of the Closing.
Section 3.1. Company Shares.
Such Stockholder owns of record and beneficially the number and class or
series of the Company Shares set forth opposite such Stockholder's name in
Schedule 1.1(b)-1 attached hereto. Such Company Shares are, and when
delivered by such Stockholder to Buyer pursuant to this Agreement will be,
free and clear of any and all Encumbrances, other than Encumbrances
resulting from this Agreement.
Section 3.2. Authority.
(a) Each Stockholder has full right, power and authority, individually or under
its governing documents, to execute and deliver this Agreement and each
agreement, document and instrument to be executed and delivered by or on
behalf of such Stockholder pursuant to this Agreement and to carry out the
transactions contemplated hereby and thereby. This Agreement and each
agreement, document and instrument executed and delivered by such
Stockholder pursuant to this Agreement constitutes a valid and binding
obligation of such Stockholder, enforceable in accordance with their
respective terms (except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general equitable principles),
and has been duly authorized by all necessary action of each Stockholder,
and such Stockholder has full power and authority to transfer, sell and
deliver the Company Shares to Buyer pursuant to this Agreement.
(b) The execution and delivery by each Stockholder of this Agreement and the
other agreements, documents and instruments contemplated hereby, and the
consummation by such Stockholder of the transactions in accordance with the
terms hereof and thereof, will not violate, or conflict with, or result in
a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, lease, contract or other agreement to which such
Stockholder is a party, or by which such Stockholder or any of its
properties is bound, except, in each case, as would not have an adverse
effect on the ability of such Stockholder to perform its obligations under
this Agreement.
(c) If such Stockholder is not an individual, neither the execution and
delivery by such Stockholder of this Agreement and the other agreements,
documents and instruments contemplated hereby, nor the consummation by such
Stockholder of the transactions in accordance with the terms hereof and
thereof, conflicts with or results in a breach of any provisions of such
Stockholder's organizational or governing documents.
Section 3.3. Warranties Limited.
SUCH STOCKHOLDER HAS NOT MADE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, OF ANY NATURE WHATSOEVER RELATING TO THE COMPANY, THE BUSINESS OF
THE COMPANY, THE COMPANY SHARES OR OTHERWISE IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY, OTHER THAN THOSE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE III.
Article IV - REPRESENTATIONS AND WARRANTIES OF BUYER
Each of Buyer and Buyer Parent with respect to Sections 4.1 and 4.2 hereby
makes to the Company and the Stockholders the representations and
warranties in this Article IV, each of which is true and correct on the
date hereof and shall be true and correct as of the Closing.
Section 4.1. Existence; Good Standing; Authority.
(a) The Buyer is a corporation, validly existing and in good standing under the
laws of the State of Delaware. The Buyer Parent is a corporation, validly
existing and in good standing under the laws of the State of Missouri. Each
of Buyer and Buyer Parent is duly licensed or qualified to do business as a
foreign corporation under the laws of any other jurisdiction in which the
character of its properties or in which the transaction of its business
makes such qualification necessary, except where the failure to be so
licensed or qualified would not, individually or in the aggregate, have a
material adverse effect on the ability of Buyer and Buyer Parent to perform
their obligations under this Agreement. Each of Buyer and Buyer Parent has
all requisite corporate power and authority to own, operate, lease and
encumber its properties and carry on its business as currently conducted.
(b) Each of Buyer and Buyer Parent has the corporate power and authority to
execute and deliver this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant to
this Agreement and to carry out the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the performance by
each of Buyer and Buyer Parent of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Buyer and Buyer
Parent. This Agreement has been duly executed and delivered by Buyer and
Buyer Parent and, assuming the due authorization, execution and delivery of
this Agreement by the Stockholders and the Company, this Agreement
constitutes a legal, valid and binding obligation of Buyer and Buyer
Parent, enforceable against Buyer and Buyer Parent in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and by general equitable principles.
Section 4.2. No Conflict.
Neither the execution and delivery by Buyer of this Agreement and the other
agreements, documents and instruments contemplated hereby, nor the
consummation by Buyer of the transactions in accordance with the terms
hereof and thereof, conflicts with or results in a breach of any provisions
of Buyer's certificate of incorporation or by-laws or other organizational
documents. Except as set forth on Schedule 4.2, the execution and delivery
by Buyer of this Agreement and the other agreements, documents and
instruments contemplated hereby, and the consummation by Buyer of the
transactions in accordance with the terms hereof and thereof, will not
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, lease,
contract or other agreement to which Buyer is a party, or by which Buyer or
any of its properties is bound, except, in each case, as would not have a
material adverse effect on the ability of Buyer to perform its obligations
under this Agreement.
Section 4.3. Consents and Approvals.
(a) Except as set forth on Schedule 4.3(a), the execution, delivery and
performance of this Agreement by Buyer will not, as of the Closing Date,
require any consent, approval, authorization or other action by, or filing
with or notification to, any Governmental Authority, except (i) the
notification requirements of the HSR Act, if applicable, and (ii) as may be
necessary as a result of any facts or circumstances relating solely to the
Company or the Stockholders.
(b) Except as set forth on Schedule 4.3(b), the execution, delivery and
performance of this Agreement by Buyer will not, as of the Closing Date,
require any third-party consents, approvals, authorizations or actions.
Section 4.4. Litigation.
As of the date of this Agreement, there is no litigation, action, suit,
proceeding, claim, arbitration or investigation pending or, to Buyer's
knowledge, threatened, against Buyer, as to which there is a reasonable
likelihood of an adverse determination and which, if adversely determined
(a) would delay, hinder or prevent the consummation of the transactions
contemplated by this Agreement by Buyer, or (b) would not have in the
aggregate a material adverse effect on the ability of Buyer to perform its
obligations under this Agreement.
Section 4.5. Financing.
Buyer has access to sufficient funds to purchase the Company Shares and to
pay the Cash Consideration and the other amounts contemplated by Section
1.2 and Section 1.3 of this Agreement. Buyer has heretofore furnished the
Company and the Stockholder Representative with sufficient evidence,
including the Commitment Letter dated October 17, 2007 from National City
Bank to Buyer (together with the Term Sheet referred to therein and
attached thereto, the "Commitment Letter"), a true and complete copy of
which is attached hereto as Schedule 4.5, of its ability to purchase the
Company Shares and to pay the Cash Consideration and the other amounts
contemplated by Section 1.2 and Section 1.3 of this Agreement. Buyer
acknowledges and agrees that Buyer's performance of its obligations under
this Agreement is not in any way contingent upon the availability of
financing to Buyer. Buyer represents that (i) the Commitment Letter is in
full force and effect and no party has terminated or given any notice of
any proposed termination of the Commitment Letter, and (ii) no facts or
circumstances exist that would reasonably be expected to cause the failure
of any condition to, or otherwise prevent, the consummation of the
financing contemplated in the Commitment Letter.
Section 4.6. Brokers.
Except for the fees payable to ▇▇▇▇▇▇▇▇, Inc., which fees are payable by
Buyer, Buyer has not incurred or become liable for any broker's commission
or finder's fee relating to or in connection with this Agreement or the
transactions contemplated hereby.
Section 4.7. Investment Intent.
Buyer is acquiring the Company Shares solely for the purpose of investment
and not with a view to, or for offer or sale in connection with, any
distribution thereof. Buyer is an "accredited investor" as such term is
defined in Rule 501 under the Securities Act. Buyer acknowledges that the
Company Shares to be acquired by Buyer pursuant to the transactions
contemplated hereby have not been registered under the Securities Act or
the securities laws of any state or other jurisdiction and cannot be
disposed of unless they are subsequently registered under the Securities
Act and the securities laws of any applicable state or other jurisdiction
or an exemption from such registration is available.
Section 4.8. Inspection; No Other Representations.
Buyer is an informed and sophisticated purchaser, and has engaged expert
advisors, experienced in the evaluation and purchase of companies such as
the Company and its Subsidiaries as contemplated hereunder. Buyer has
undertaken such investigation and has been provided with and has evaluated
such documents and information as it has deemed necessary to enable it to
make an informed and intelligent decision with respect to the execution,
delivery and performance of this Agreement and the transactions
contemplated hereby. Buyer agrees to accept the Company Shares and the
Company and its Subsidiaries in the condition they are in at the Closing
based upon its own inspection, examination and determination with respect
thereto as to all matters, and without reliance upon any express or implied
representations or warranties of any nature, whether in writing, orally or
otherwise, made by or on behalf of or imputed to the Company or its
Stockholders, except as expressly set forth in this Agreement. Without
limiting the generality of the foregoing, Buyer acknowledges that neither
the Company nor the Stockholders makes any representation or warranty with
respect to (a) any projections, estimates or budgets delivered to or made
available to Buyer of future revenues, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Company and its Subsidiaries or the future
business and operations of the Company and its Subsidiaries or (b) any
other information or documents made available to Buyer or its counsel,
accountants or advisors with respect to the Company its Subsidiaries or any
of their respective businesses, assets, liabilities or operations, except
as expressly set forth in this Agreement.
Article V - CERTAIN COVENANTS OF BUYER, THE COMPANY
AND THE STOCKHOLDERS
Section 5.1. Conduct of Business Prior to Closing.
The Company agrees that, between the date hereof and the Closing Date, it
shall operate in the ordinary course of business, consistent with past
practices, except as described in Schedule 5.1 or as otherwise contemplated
by this Agreement. In furtherance of the foregoing, except as described in
Schedule 5.1, without the consent of the Buyer, the Company shall refrain
from (and shall cause its Subsidiaries to refrain from):
(a) changing or introducing any method of management or operations except in
the ordinary course of business and consistent with prior practices;
(b) making any change to the Company's Charter or by-laws or the organizational
documents of its Subsidiaries, or changing the authorized or issued capital
stock or equity interests of the Company or any Subsidiary;
(c) (i) declaring, setting aside or paying any dividend, making any other
distribution in respect of its capital stock, shares or ownership
interests, (ii) making any direct or indirect redemption, purchase or other
acquisition of its stock or ownership interests or (iii) issuing, granting,
awarding, selling, pledging, disposing of or encumbering or authorizing the
issuance, grant, award, sale, pledge, disposition or encumbrance of any
shares of, or securities convertible or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of its capital stock of any class thereof;
(d) (i) prepaying any loans (if any) from its Stockholders, officers or
directors or any Person affiliated with any of the foregoing, (ii) making
any change in its borrowing arrangements, (iii) modifying, amending or
terminating any of its Material Contracts except in as specifically
provided in this Agreement or in the ordinary course of business, or (iv)
waiving, releasing or assigning any material rights or claims, other than
in the ordinary course of business;
(e) materially changing Tax or accounting policies, methods, elections, or
procedures;
(f) settle or compromise of any Tax claim, audit, assessment or liability;
surrender any right to claim a Tax refund, offset or other reduction in Tax
liability; agree to a waiver or extension of the statute of limitations
with respect to the assessment or determination of Taxes; filing of any
amended Tax Return, enter into any closing agreement with respect to Tax;
or take or omit to take any other action, if, in the case of any of the
foregoing, any such action or omission would have the effect of materially
increasing the Tax liability or materially reducing any Tax asset of the
Company or any of its Subsidiaries;
(g) increasing the rates of direct compensation or bonus compensation payable
or to become payable to any officer, employee, director, shareholder, agent
or consultant of the Company or any Subsidiary, except in the ordinary
course of business;
(h) making any acquisition or capital expenditure other than in the ordinary
course of business;
(i) transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any material property or assets, including, without limitation,
any shares of capital stock of any Subsidiary and Company Intellectual
Property (other than in the ordinary course of business; provided, however,
that in no event shall any arrangement to transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber the "Doble"
trademark be deemed to be in the ordinary course of business);
(j) settle or compromise any material claims or litigation or waive, release or
assign any material rights other than in connection with amending, renewing
or terminating contracts in the ordinary course of business;
(k) amend or terminate any Material Contract or enter into any contract that
would be a Material Contract, in each case, other than in the ordinary
course of business;
(l) effect any payment of Transaction Expenses;
(m) abandon or allow to lapse any Company Intellectual Property, or not seek to
enforce against any infringing party of which the Company has knowledge is
infringing upon Company Intellectual Property.
Section 5.2. Access to Information.
Without undue disruption of its business, between the date of this
Agreement and the Closing Date, the Company shall give Buyer and its
representatives reasonable access upon reasonable notice and during times
mutually convenient to Buyer and senior management of the Company to the
facilities, properties, employees, books, and records of the Company and
its Subsidiaries as from time to time may be reasonably requested. Any such
investigation by Buyer shall not unreasonably interfere with any of the
businesses or operations of the Company and its Subsidiaries.
Section 5.3. Confidentiality.
(a) The parties shall adhere to the terms and conditions of that certain
Confidentiality Agreement dated July 20, 2007 by and between the Company
and Buyer (the "Confidentiality Agreement").
(b) Following the Closing, each Stockholder shall maintain, and shall cause its
Affiliates, trustees, beneficiaries, advisors, agents and representatives
to maintain, in confidence any non-public, proprietary, confidential
information, including any non-public, proprietary, confidential
information included in any Intellectual Property of the Company ("Doble
Confidential Information") that each may have and such information shall
not be disclosed by a Stockholder, its Affiliates, trustees, beneficiaries,
advisors, agents or representatives to any third party without the Buyer's
prior written consent, unless such information is: (i) otherwise publicly
available through no fault of such Stockholder or its Affiliates, trustees,
agents or representatives; (ii) required to be disclosed pursuant to
judicial order, regulation or law; or (iii) required to be disclosed by the
rules of the New York Stock Exchange or any other applicable exchange (it
being understood that any information described in (i), (ii) or (iii) above
shall not be considered Doble Confidential Information). If a Stockholder
becomes legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoena, civil or criminal investigative
demands, or similar process) or is required by a regulatory body to make
any disclosure with respect to the Company's business that is prohibited by
this Section 5.3, such Stockholder will provide Buyer with prompt notice
(to the extent such notice is not prohibited by law) of such requirement so
that Buyer may seek an appropriate protective order or other appropriate
remedy. Subject to the foregoing, a Stockholder may furnish that portion
(and only that portion) of such information that such Stockholder is
legally compelled or are otherwise required to disclose. Each Stockholder
shall be responsible and liable for any breach of this Section 5.3 by any
of its Affiliates, trustees, beneficiaries, advisors, agents or
representatives.
Section 5.4. Regulatory and Other Authorizations; Consents.
(a) The Company and Buyer shall use their good faith commercially reasonable
efforts to obtain the authorizations, consents, orders and approvals
necessary for their execution and delivery of, and the performance of their
obligations pursuant to, this Agreement. If required by the HSR Act, each
party hereto agrees to make an appropriate filing of a Pre-Merger
Notification and Report Form with respect to the transactions contemplated
by this Agreement within two (2) business days after the date hereof and to
supply promptly any additional information and documentary material that
may be requested pursuant to the HSR Act. The parties hereto shall at the
time of filing request early termination of the 30-day premerger waiting
period pursuant to the HSR Act, and further will not take any action that
will have the effect of delaying, impairing or impeding the receipt of any
required approvals and shall promptly respond to any requests for
additional information from any Governmental Authority or filings in
respect thereof. Buyer shall pay all filing and related fees in connection
with any such filings which must be made by any of the parties under the
HSR Act. Buyer hereby covenants and agrees to use its best efforts to
secure termination of any waiting periods under the HSR Act, including
without limitation, if necessary, promptly offering to sell any of its
assets or business as may be necessary to secure such termination.
(b) Buyer shall use its good faith commercially reasonable efforts to assist
the Company in obtaining the consents of third parties listed in Schedule
2.8, including (i) providing to such third parties such financial
statements and other financial information as such third parties may
reasonably request, (ii) agreeing to commercially reasonable adjustments to
the terms of the agreements with such third parties (provided that neither
party hereto shall be required to agree to any increase in the amount
payable with respect thereto) and (iii) executing agreements to effect the
assumption of such agreements on or before the Closing Date.
Section 5.5. Further Action.
Each of the parties hereto shall use its respective commercially reasonable
efforts to take or cause to be taken all appropriate action, do or cause to
be done all things necessary, proper or advisable, and execute and deliver
such documents and other papers, as may be required to carry out the
provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
Section 5.6. Press Releases.
The parties hereto will, and will cause each of their Affiliates and
representatives to, maintain the confidentiality of this Agreement and will
not, and will cause each of their Affiliates not to, issue or cause the
publication of any press release or other public announcement with respect
to this Agreement or the transactions contemplated hereby without the prior
written consent of the other parties hereto which consent shall not be
unreasonably withheld; provided, however, that a party may, without the
prior consent of the other parties hereto, issue or cause publication of
any such press release, public announcement or regulatory filing to the
extent that such party reasonably determines, after consultation with
outside legal counsel, such action to be required by law or by the rules of
any applicable self-regulatory organization, in which event such party will
use its commercially reasonable efforts to allow the other parties hereto
reasonable time to comment on such press release, public announcement or
regulatory filing in advance of its issuance.
Section 5.7. No Solicitation.
(a) Except as otherwise provided herein, unless and until this Agreement shall
have been terminated in accordance with its terms, the Company and the
Stockholders agree and covenant that neither the Company nor the
Stockholders shall, directly or indirectly, initiate, solicit or encourage
any inquiries or the making or implementation of any proposal or offer with
respect to a merger, acquisition, or similar transaction involving the
purchase of the Company, any Subsidiary, all or a material portion of the
Company's assets, or the Company Shares.
(b) From the date of this Agreement until the earlier of the Closing or one
year from the date of this Agreement, Buyer on the one hand and the Company
on the other hand shall not, and shall ensure that its directors, officers,
employees, partners, agents, Affiliates, advisors or representatives shall
not, directly or indirectly, (i) solicit for employment or employ any
officer, employee or consultant of the other party, (ii) encourage, induce
or attempt to induce any officer, employee or consultant of the other party
to terminate his or her employment or consulting relationship with the
other party, (iii) interfere with the business or operations of the other
party, or (iv) take or fail to take any actions which could reasonably be
expected to adversely affect the other party's business relationships with
its customers and suppliers or goodwill.
Section 5.8. Conveyance Taxes; Costs.
All transfer, value added, excise, stock transfer, stamp, recording,
registration and any similar duties or Taxes that become payable in
connection with the acquisition by Buyer of the Company Shares and other
transactions contemplated hereby shall be borne 50% by Buyer and 50% by the
Stockholders, and the Stockholder Representative shall, file all necessary
Tax Returns and other documentation with respect to all such Taxes
described in this Section 5.8.
Section 5.9. Books and Records; Insurance.
Buyer shall, and shall cause the Company and each Subsidiary to, until the
seventh anniversary of the Closing Date, retain all Tax Returns and
material financial information pertaining to the business of the Company
and its Subsidiaries in existence on the Closing Date and to make the same
available for inspection and copying by the Stockholders or any
representative of the Stockholders at the expense of the Stockholders
during the normal business hours of Buyer, the Company or such Subsidiary,
as applicable, upon reasonable request and upon reasonable notice.
Section 5.10. Officers' and Directors' Indemnification.
The Company, the Stockholders and Buyer agree that all rights to
exculpation and indemnification existing in favor of, and all limitations
on the personal liability of, the directors, officers, employees of the
Company and its Subsidiaries ("Indemnified Persons") provided for in its
Charter and by-laws and the organizational documents of its Subsidiaries,
as applicable, as in effect as of the date hereof with respect to matters
occurring prior to and through the Closing, and specifically including the
transactions contemplated hereby, shall continue in full force and effect
for a period of six (6) years from the Closing; provided, however, that all
rights to indemnification in respect of any claims asserted or made within
such period shall continue until the disposition of such claim. Following
the Closing, Buyer shall not, and shall not permit the Company or any
Subsidiary to, amend or modify its Charter or by-laws or other
organizational documents, as applicable, except as required by applicable
law, if the effect of such amendment or modification would be to lessen or
otherwise adversely affect the indemnification rights of such Indemnified
Persons as provided therein, and Buyer shall cause the Company or any
Subsidiary to advance expenses to each such Indemnified Person in
connection with any proceeding involving such Indemnified Person to the
fullest extent so permitted upon receipt of any undertaking required by law
or in the Charter or by-laws of the Company or the organizational documents
of such Subsidiary, as applicable. In the event that the Company or any
Subsidiary transfers all or substantially all of its properties and assets
to any Person, then and in each such case, proper provision shall be made
so that the transferee of such properties or assets shall assume the
obligations of the Company or such Subsidiary, as applicable, under this
Section 5.10. Prior to the Closing, the Company shall purchase an extended
reporting period endorsement under the Company's existing directors' and
officers' liability insurance coverage for the Company's and its
Subsidiaries' directors and officers in a form acceptable to the Company
which shall provide such directors and officers with coverage for six (6)
years following the Closing of not less than the existing coverage under,
and have other terms not materially less favorable to, the insured Persons
than the directors' and officers' liability insurance coverage presently
maintained by the Company. This Section 5.10 is intended to benefit each of
the Indemnified Persons and their respective heirs and personal
representatives, each whom shall be entitled to enforce the provisions
hereof. Nothing in this Section 5.10 shall be deemed to extend to
Stockholders (other than trustees, officers or directors of Stockholders
that are officers or directors of the Company) any rights of directors,
officers or employees provided for herein.
Section 5.11. Stockholder Release.
For and in consideration of the covenants and promises set forth in this
Agreement each Stockholder, on behalf of himself and his assigns, heirs,
beneficiaries, creditors, representatives, agents and affiliates (the
"Releasing Parties"), hereby fully and finally releases, acquits and
forever discharges the Company, each other Stockholder and each of the
Company's and other Stockholder's present and former direct or indirect
partners, members and stockholders and the officers, directors, partners,
members, stockholders, trustees, shareholders, representatives, employees,
agents, affiliates, subsidiaries, predecessors, successors, assigns,
beneficiaries, heirs, executors, insurers and attorneys of any of them
(collectively, the "Released Parties") from any and all actions, debts,
claims, counterclaims, demands, liabilities, damages, causes of action,
costs, expenses, and compensation of every kind and nature whatsoever,
past, present, or future, at law or in equity, whether known or unknown,
which such Releasing Parties, or any of them, had, has, or may have had at
any time in the past until and including the date of this Agreement against
the Released Parties, or any of them, including but not limited to any
claims which relate to or arise out of such Releasing Party's prior
relationship with the Company or his , her or its rights or status as a
stockholder, officer or director of the Company, except for claims arising
under or pursuant to this Agreement, the Indemnification Escrow Agreement,
the Holdback Escrow Agreement and rights to indemnification and insurance
for directors and officers as provided in Section 5.10. Each Stockholder
further agrees to execute a release substantially similar to the release
contained in this Section 5.11 upon the Closing. Each Stockholder hereby
represents and warrants that he, she or it has adequate information
regarding the terms of this Agreement, the scope and effect of the releases
set forth in this Section 5.11, and all other matters encompassed by this
Section 5.11 to make an informed and knowledgeable decision with regard to
this Section 5.11, and that he has independently and without reliance upon
the Released Parties made his, her or its own analysis and decision to
enter into this Agreement. Each Stockholder further agrees not to institute
any litigation, lawsuit, claim or action against any Released Party with
respect to any and all claims released in this Section 5.11. Each
Stockholder acknowledges that he has had the benefit of advice of competent
legal counsel with respect to his decision to enter into the release
provided for in this Section 5.11. Each Stockholder further acknowledges
that the consideration payable to him pursuant to this Agreement provides
good and sufficient consideration for the releases set forth in this
Section 5.11. This Section 5.11 is intended to benefit each of the Released
Parties and their respective heirs and personal representatives, each whom
shall be entitled to enforce the provisions hereof.
Section 5.12. Tax Matters.
(a) Buyer shall not amend any Tax Return of the Company filed on or prior to
the Closing Date if it would give rise to an indemnity obligation under
Section 8.2 without the prior written consent of the Stockholder
Representative which consent shall not be unreasonably withheld, except
that in no case may such consent be withheld with respect to amendments
that are necessary in order to ensure that "substantial authority," as
defined in Code 6662 and corresponding Treasury Regulations, exists for
any non-disclosed tax position taken on a Tax Return.
(b) The Stockholder Representative and Buyer shall cooperate with each other to
the extent reasonably requested, in connection with the preparation and
filing of Tax Returns and any audit, litigation or other proceeding with
respect to Taxes.
Section 5.13. Commitment Letter.
Buyer shall promptly (and in any event within two (2) business days after
the occurrence thereof) notify the Company and the Stockholder
Representative of any of the following events: (i) any termination of the
Commitment Letter or (ii) the failure of any condition to the consummation
of the financing contemplated in the Commitment Letter. None of the events
described in this Section 5.13 shall give rise to a right of the Company or
the Stockholders to declare an anticipatory repudiation by Buyer or
otherwise to effect termination of this Agreement prior to Closing;
provided that nothing contained in this Section 5.13 shall modify the
Company's right to terminate this Agreement pursuant to Section 9.1(g).
Section 5.14. Bonus Plans.
Prior to the Closing, the Company will amend each of the Company's Profit
Sharing Plan and Officer Annual Incentive Plan (the "Bonus Plans") to (i)
permit accelerated payment of benefits pursuant to the terms of such plan
upon the Closing, and (ii) ensure that all benefit obligations thereunder
prior to and with respect to the 2007 plan year are fully satisfied so that
as of Closing no participant or beneficiary shall have a claim for benefits
thereunder and (iii) terminate such plan on or prior to Closing so that no
further benefit entitlements may accrue thereunder.
Section 5.15. Foreign Subsidiaries.
The Company and each Subsidiary, as the case may be, shall have used their
respective commercially reasonable efforts to deliver to Buyer the
following documents:
(a) Articles of Incorporation or equivalent document of such Subsidiary
certified by a Government Authority in the Subsidiary's jurisdiction of
organization (other than with respect to Doble PowerTest Limited, Doble
Transinor, AS, and Doble Engineering Private Limited);
(b) a certificate by the Secretary or any Assistant Secretary of each
Subsidiary, dated as of the Closing Date, as to a copy of the by-laws of
such Subsidiary (as applicable); and
(c) certificates of good standing for each Subsidiary (if available in the
Subsidiary's jurisdiction of organization).
Section 5.16. Rights to Software.
The Company shall use its commercially reasonable efforts to obtain and
deliver to the Buyer prior to the Closing the written assignment of all
rights to the software developed by Software Products Group and CompuPage
and used in, or intended to be used in, the business of the Company and its
Subsidiaries.
Article VI - EMPLOYEE MATTERS
Section 6.1. Employees; Benefits.
(a) Buyer shall ensure that all Persons who were employed by the Company and
its Subsidiaries immediately preceding the Closing Date, including those on
vacation, leave of absence or disability (the "Company Employees"), will
remain employed in a comparable position on and immediately after the
Closing Date, at not less than the same base rate of pay. Buyer shall not,
at any time prior to ninety (90) days after the Closing Date, effectuate a
"mass layoff" as that term is defined in the Worker Adjustment and
Retraining Notification Act of 1988, as amended ("WARN"), or comparable
conduct under any applicable foreign or state law, affecting in whole or in
part any facility, site of employment, operating unit or employee of the
Company or its Subsidiaries without complying fully with the requirements
of WARN or such applicable foreign or state law.
(b) Buyer acknowledges that consummation of the transactions contemplated by
this Agreement will constitute a change in control of the Company (to the
extent such concept is applicable) for purposes of the Benefit Plans. From
and after the Closing, Buyer and the Company will make any payments at the
time and in the amount provided under the terms of all transaction bonus
and change-of-control agreements and retirement benefits listed on Schedule
6.1(b) and in effect prior to the Closing Date.
(c) To the extent that service is relevant for purposes of eligibility,
vesting, calculation of any benefit, or benefit accrual under any employee
benefit plan, program or arrangement established or maintained by Buyer
(other than any defined benefit pension plan) following the Closing Date
for the benefit of Company Employees, such plan, program or arrangement
shall credit such Company Employees for service on or prior to the Closing
Date that was recognized by the Company or its Subsidiaries, as the case
may be, for purposes of employee benefit plans, programs or arrangements
maintained by the Company, except to the extent it would result in a
duplication of benefits. In addition, with respect to any welfare benefit
plan (as defined in Section 3(1) of ERISA) established or maintained by
Buyer following the Closing Date for the benefit of Company Employees, such
plan shall waive any pre-existing condition exclusions to the extent such
condition was covered under a Benefit Plan immediately preceding the
Closing Date and provide that any covered expenses incurred on or before
the Closing Date by any Company Employee or by a covered dependent shall be
taken into account for purposes of satisfying applicable deductible
coinsurance and maximum out-of-pocket provisions after the Closing Date.
(d) With respect to any Pension Plan listed on Schedule 2.11(a) that is
qualified under Section 401(a) of the Code, Buyer shall, or shall cause the
Company to, maintain such Pension Plan for the benefit of the Company
Employees for the period provided under Section 410(b)(6)(C) of the Code.
With respect to any medical or dental welfare benefit plan (as defined in
Section 3(1) of ERISA maintained pursuant to any insurance or other
contract, prior to the renewal date for such contract Buyer shall evaluate
such welfare benefit plan and determine whether to renew such contract or
to provide the Company Employees with coverage under welfare benefit plans
otherwise maintained by Buyer. Buyer shall evaluate any other welfare plan
benefit plan and determine in its discretion whether to renew such plan or
to provide the Company Employees with coverage under welfare benefit plans
otherwise maintained by Buyer.
(e) Nothing in this Agreement shall be interpreted or construed to confer any
third party rights upon the Employees or any other Person who is not a
party to this Agreement. This Section 6.1 shall be binding on all
successors and assigns of Buyer and the Company. Notwithstanding the
foregoing, (i) nothing in this Agreement shall be interpreted or construed
to confer upon the Company Employees any right with respect to continuance
of employment by the Company, such Subsidiaries or Buyer, nor shall this
Agreement interfere in any way with the right of the Company, such
Subsidiaries or Buyer to terminate any employee's employment at any time
and (ii) nothing in this Agreement shall interfere in any way with the
right of Buyer to amend, terminate or otherwise discontinue any or all
plans, practices or policies of Buyer in effect from time to time.
Article VII - CONDITIONS TO CLOSING
Section 7.1. Conditions to Obligations of the Stockholders.
The obligations of the Stockholders to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or
waiver, at or prior to the Closing, of each of the following conditions:
(a) All covenants contained in this Agreement to be complied with by Buyer on
or before the Closing shall have been complied with in all material
respects and the Company shall have received a certificate of Buyer to such
effect signed by a duly authorized officer of Buyer.
(b) Each of the representations and warranties of Buyer contained in Article IV
shall be true and correct as of the Closing Date as though made on and as
of the Closing Date except for such inaccuracies as (i) would not delay,
hinder or prevent the consummation of the transactions contemplated by this
Agreement by Buyer, or (ii) would not have in the aggregate a material
adverse effect on Buyer's ability to perform its obligations under this
Agreement; and Buyer shall have delivered to the Company and the
Stockholder Representative a certificate of the President and Chief
Financial Officer of Buyer dated as of the Closing Date to the effect that
the statements set forth in this Section 7.1(b) above are true and correct.
(c) Any waiting period (and any extension thereof) under the HSR Act applicable
to the transactions to be consummated at the Closing shall have expired or
been terminated.
(d) No Governmental Authority or court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and has the effect of making the transactions
contemplated by this Agreement for the Closing illegal or otherwise
restraining or prohibiting consummation of such transactions.
(e) The Buyer shall have delivered to Stockholders the following documents and
payments:
(i) a certificate by the Secretary or any Assistant Secretary of the Buyer,
dated as of the Closing Date, as to (A) the good standing of the Buyer, in
its jurisdiction of incorporation, (B) the content of the Charter of the
Buyer, as then in effect, and (C) the effectiveness of any board or
shareholder resolutions of the Buyer passed in connection with this
Agreement and transactions contemplated hereby; and
(ii) certificates, documents, other materials and payments required to be
delivered pursuant to Section 1.5(b).
Section 7.2. Conditions to Obligations of Buyer.
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction or waiver, at or prior
to the Closing, of each of the following conditions:
(a) All covenants contained in this Agreement to be complied with by the
Company and the Stockholders on or before the Closing shall have been
complied with in all material respects and Buyer shall have received a
certificate of the Company to such effect signed by a duly authorized
officer of the Company.
(b) Each of the representations and warranties of the Company and the
Stockholders contained in Article II and Article III shall be true and
correct as of the Closing Date as though made on and as of the Closing Date
(other than any representations and warranties made of a specific date
which shall be true and correct as of such date) except for such
inaccuracies as would not have in the aggregate a Material Adverse Effect;
and the Company shall have delivered to Buyer a certificate of the
Company's President and Chief Financial Officer dated as of the Closing
Date to the effect that the statements set forth in this Section 7.2(b)
above are true and correct.
(c) Any waiting period (and any extension thereof) under the HSR Act applicable
to the transactions to be consummated at the Closing shall have expired or
been terminated.
(d) No Governmental Authority or court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and has the effect of making the transactions
contemplated by this Agreement for the Closing illegal or otherwise
restraining or prohibiting consummation of such transactions.
(e) No facts or circumstances shall exist that have had or would reasonably be
expected to have a Material Adverse Effect and the Buyer shall have
received a certificate of the Company to such effect signed by a duly
authorized officer of the Company.
(f) The Stockholders, Company and each Subsidiary, as the case may be, shall
have delivered to Buyer the following documents:
(i) a certificate by the Secretary or any Assistant Secretary of the Company,
dated as of the Closing Date, as to (a) Articles of Incorporation of the
Company certified by the Secretary of State of the Massachusetts; (b) copy
of the Company's by-laws, (c) copy of the resolutions approving this
Agreement and the transactions contemplated hereby; and (d) a certificate
of incumbency of the officers of the Company executing this Agreement and
any other documents or instruments contemplated hereby;
(ii) certificates of good standing for the Company for each jurisdiction as set
forth on Schedule 7.2(f)(ii);
(iii) an ALTA form 10-17-92 owner's policy of title insurance issued by Lawyers
Title Insurance Company to the Company, as the insured, insuring the
Company's title to the Owned Real Property, which policy shall be in the
form of the Title Commitment, except that (A) the effective date of the
policy shall be the Closing Date, (B) the amount of the policy shall be
$12,100,000, (C) Schedule B-Section 1 shall be deleted as satisfied, (D)
Exception Nos. 1, 2, 3 and 4 of Schedule B-Section 2 shall be deleted, (E)
the policy shall include an ALTA form 15-06 non-imputation endorsement
which identifies all officers and directors of the Company, and (F) the
policy shall include a contiguity endorsement, access and entry endorsement
(Walnut Street), tax parcel endorsement, same-as-survey endorsement,
subdivision endorsement, waiver of arbitration endorsement, utility
facility endorsement, Address/Location endorsement and Alta 3.1 Zoning
endorsement, in customary forms; and
(iv) certificates, documents and other materials required to be delivered
pursuant to Section 1.5(a).
Article VIII - SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
Section 8.1. Survival.
Subject to the limitations and other provisions of this Agreement, the
representations and warranties of the parties hereto contained herein, as
the case may be, shall survive the Closing.
Section 8.2. Several Indemnification by the Stockholders
(a) The Stockholders agree, subject to the other terms and conditions of this
Agreement, to severally, in accordance with their Pro Rata Share, indemnify
Buyer, the Company and their respective officers and directors (each a
"Buyer Indemnified Party") against and hold them harmless to the extent of
any Losses resulting from:
(i) fraud by the Company or any Stockholders with respect to any of the
representations and warranties contained in Article II and Article III
hereof;
(ii) except as provided for in clause (iii) below, the breach of any
representation or warranty contained in Article II and Article III hereof;
(iii) the breach of any representation or warranty contained in Section 2.10
(Taxes), Section 2.11 (Employee Benefit Plans), Section 2.19 (Foreign
Operations and Export Control), Section 2.20 (Intellectual Property) and
Section 2.21 (Environmental Matters) hereof;
(iv) the breach of any covenant or agreement of the Company or the Stockholders
contained herein;
(v) any Legal Proceeding arising out of or relating to the matter disclosed on
Schedules 2.13(c) and 2.13(e) and noted with an asterisk; and
(vi) subject to Section 8.2(m), the inability of the Buyer and/or the Company to
recognize a deduction under Section 162(a)(1) of the Code (and any
comparable provisions of state Law) (A) in an amount at least equal to
$6,140,000 related to Change in Control Payments made at Closing, (B) if
the Deferred Payment is made to ▇▇. ▇▇▇▇▇, the amount of the Deferred
Escrow, (C) any amount paid pursuant to the third to last sentence of
Section 1.2(c) and (D) any amount paid pursuant to Section 1.3(c)(ii)(B)
((A) through (D) together, the "Indemnified Deductions"). The amount of any
Loss for which any indemnity claim be a Buyer Indemnified Party may be
brought pursuant to this Section 8.2(a)(vi) shall be determined by applying
an income tax rate of 37% (rather than the actual income tax rate), and
applying the actual amount of any interests, penalties, or additions to tax
with respect to such Loss.
(b) The indemnification obligations of the Stockholders pursuant to Section
8.2(a)(ii), Section 8.2(a)(iii) (other than with respect to Excluded Claims
which shall be subject to the limitations set forth in Section 8.2(c)),
Section 8.2(a)(v) and Section 8.2(a)(vi) shall be limited as follows:
(i) the Stockholders shall have no obligation to provide any indemnification
unless and until the aggregate dollar amount of all Losses that would
otherwise be indemnifiable pursuant to Section 8.2(a)(ii) and Section
8.2(a)(iii) exceeds $1,500,000 (the "Deductible Amount"), and then only to
the extent such aggregate amount exceeds such Deductible Amount; provided
that the Deductible Amount shall not apply to Losses arsing under Section
8.2(a)(v) or Section 8.2(a)(vi);
(ii) the Stockholders shall not be obligated to indemnify any Buyer Indemnified
Party pursuant to Section 8.2(a)(ii), Section 8.2(a)(iii), Section
8.2(a)(v) and Section 8.2(a)(vi) for any amount of Losses in excess of the
Escrow Fund and the Escrow Fund shall be the sole and exclusive recourse
for satisfying indemnification obligations under Section 8.2(a)(ii),
Section 8.2(a)(iii), Section 8.2(a)(v) and Section 8.2(a)(vi); and
(iii) no indemnification shall be payable to a Buyer Indemnified Party (A) with
respect to claims asserted by such Buyer Indemnified Party pursuant to
Section 8.2(a)(ii) after the 14 month anniversary of the Closing Date and
(B) with respect to claims asserted by such Buyer Indemnified Party
pursuant to Section 8.2(a)(iii), Section 8.2(v) and Section 8.2(a)(vi)
after the 24 month anniversary of the Closing Date.
(c) The indemnification obligations of the Stockholders pursuant to Section
8.2(a)(i), Section 8.2(a)(ii) (solely with respect to Excluded Claims) and
Section 8.2(a)(iv) shall be limited as set forth in this Section 8.2(c). In
no event shall any Stockholder be obligated to indemnify a Buyer
Indemnified Party for any Losses based upon or resulting from claims
brought pursuant to Section 8.2(a)(i), Section 8.2(a)(ii) (solely with
respect to Excluded Claims) and Section 8.2(a)(iv):
(i) in excess of such Stockholder's Pro Rata Share of such Loss (which
limitation shall not apply to breaches of representations and warranties by
such Stockholder of any representations and warranties made by such
Stockholder);
(ii) attributable to a breach of this Agreement by any other Stockholder;
(iii) in excess of such Stockholder's Pro Rata Share of the Purchase Price
received by such Stockholder; and/or
(iv) asserted after the expiration of the statute of limitations applicable to
such claim.
(d) A Buyer Indemnified Party must proceed first against and exhaust the Escrow
Fund in respect of all indemnification claims under this Section 8.2 before
proceeding against any Stockholder; provided that a Buyer Indemnified Party
may proceed directly against the Stockholders in respect of any Excluded
Claim once the aggregate of all Excluded Claims exceeds $1,000,000.
(e) The amount of Losses otherwise recoverable under this Section 8.2 shall be
reduced to the extent of any insurance proceeds and any indemnity,
contribution or other similar payment actually received by Buyer
Indemnified Parties from any third party with respect thereto and of any
Federal, state, local or foreign tax benefits when and as realized (net of
any Tax cost) by the Buyer Indemnified Parties by reason of any Loss or
indemnity payment hereunder.
(f) No Buyer Indemnified Party shall be entitled to indemnification hereunder
for any Loss (including, but not limited to, a breach of any representation
contained in Sections 2.5, 2.15(a), 2.22 and 2.24) and the amount of any
Loss shall not be included in the calculation of the Deductible Amount or
any other limitations on indemnification set forth herein, to the extent
that such Loss is included in a Current Liability included in the
calculation of Final Working Capital up to the amount so included.
(g) Anything herein to the contrary notwithstanding, no breach of any
representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of a Buyer Indemnified Party, after the
consummation of the transactions contemplated hereby, to rescind this
Agreement or any of the transactions contemplated hereby.
(h) Neither the Company nor the Stockholders shall have any liability under any
provision of this Agreement or otherwise for any exemplary or punitive
damages or any multiple of damages.
(i) Any liability for indemnification under this Section 8.2 shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.
(j) Any liability for indemnification under this Section 8.2 which is based on
a breach of any representation or warranty contained in Sections 2.10,
2.11(b) or (h), 2.13(a) or 2.19 shall be determined without regard to any
qualification of materiality contained in such Sections.
(k) A Buyer Indemnified Party shall give the Stockholder Representative written
notice of any claim, assertion, event or proceeding by or in respect of a
third party as to which such Buyer Indemnified Party may request
indemnification hereunder or as to which the Deductible Amount may be
applied as soon as is practicable and in any event within thirty (30) days
of the time that such Buyer Indemnified Party learns of such claim,
assertion, event or proceeding; provided, however, that the failure to so
notify the Stockholder Representative shall not affect rights to
indemnification hereunder except to the extent that the Stockholders' are
prejudiced by such failure. Except as set forth in Section 8.2(l), the
Stockholder Representative shall have the right to direct, through counsel
of its own choosing, the defense or settlement of any such claim or
proceeding at its own expense. If the Stockholder Representative elects to
assume the defense of any such claim or proceeding, the Stockholder
Representative shall consult with the Buyer Indemnified Party for the
purpose of allowing the Buyer Indemnified Party to participate in such
defense, but in such case the expenses of the Buyer Indemnified Party shall
be paid by the Buyer Indemnified Party. A Buyer Indemnified Party shall
provide and shall cause the Company to provide, as applicable, the
Stockholder Representative and counsel with access to its records and
personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with the Stockholder
Representative in the defense or settlement thereof, and the Stockholders
shall reimburse Buyer Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith. If the Stockholder
Representative elects to direct the defense of any such claim or
proceeding, Buyer Indemnified Party shall not pay, or permit to be paid,
any part of any claim or demand arising from such asserted liability unless
the Stockholder Representative consents in writing to such payment or
unless the Stockholder Representative, subject to the last sentence of this
Section 8.2(k), withdraws from the defense of such asserted liability or
unless a final judgment from which no appeal may be taken by or on behalf
of the Stockholders is entered against Buyer Indemnified Party for such
liability. If the Stockholder Representative fails to defend or if, after
commencing or undertaking any such defense, the Stockholder Representative
fails to prosecute or withdraws from such defense, Buyer Indemnified Party
shall have the right to undertake the defense or settlement thereof, at the
Stockholders' expense. If the Buyer Indemnified Party assumes the defense
of any such claim or proceeding pursuant to this Section 8.2(k) and
proposes to settle such claim or proceeding prior to a final judgment
thereon or to forego any appeal with respect thereto, then the Buyer
Indemnified Party shall give the Stockholder Representative prompt written
notice thereof, and the Stockholder Representative shall have the right to
participate in the settlement or assume or reassume the defense of such
claim or proceeding.
(l) Notwithstanding Section 8.2(k), if (i) at the time a claim is made the
aggregate amount payable with respect to all pending claims is reasonably
expected to exceed the remaining amount in the Escrow Fund by more than the
amount remaining in the Escrow Fund, (ii) at the time a claim is made the
aggregate amount payable with respect to all pending claims is reasonably
expected to be less than the Deductible Amount or to exceed the Deductible
Amount by less than $1,500,000 or (iii) the outcome of a claim would
reasonably be expected to have a material impact on the Company's business,
operations, reputation or prospects, then, in each such case, the Buyer
Indemnified Party shall have the right to direct, through counsel of its
own choosing, the defense or settlement of any such claim or proceeding and
shall consult with the Stockholder Representative for the purpose of
allowing the Stockholder Representative to participate in such defense, but
in such case the expenses of the Stockholder Representative shall be paid
by the Stockholder Representative; provided, however, that any claim,
assertion, event or proceeding by or in respect of a third party as to
which a Buyer Indemnified Party may request indemnification under Section
8.2(a)(v) or Section 8.2(a)(vi) shall be governed by Section 8.2(k) above.
A Buyer Indemnified Party shall provide and shall cause the Company to
provide, as applicable, the Stockholder Representative and counsel with
access to its records and personnel relating to any such claim, assertion,
event or proceeding during normal business hours and shall otherwise
cooperate with the Stockholder Representative in the defense or settlement
thereof, and the Stockholders shall reimburse Buyer Indemnified Party for
all its reasonable out-of-pocket expenses in connection therewith. Buyer
Indemnified Party shall not consent to the entry of judgment with respect
to the matter or enter into any settlement with respect to the matter
without consulting with the Stockholder Representative in advance. If the
Buyer Indemnified Party fails to defend or if, after commencing or
undertaking any such defense, the Buyer Indemnified Party fails to
prosecute or withdraws from such defense, Stockholder Representative shall
have the right to undertake the defense or settlement thereof, at the
Stockholders' expense provided that the Stockholder Representative notified
the Buyer Indemnified Party in writing of its election to indemnify the
Buyer Indemnified Party with respect to such claim or proceeding by or in
respect of a third party. If the Stockholder Representative assumes the
defense of any such claim or proceeding pursuant to this Section 8.2(l) and
proposes to settle such claim or proceeding prior to a final judgment
thereon or to forego any appeal with respect thereto, then the Stockholder
Representative shall give the Buyer Indemnified Party prompt written notice
thereof, and the Buyer Indemnified Party shall have the right to
participate in the settlement.
(m) The Stockholders shall not be obligated to indemnify any Buyer Indemnified
Party pursuant to Section 8.2(a)(vi) for the amount of the respective
Losses unless (A) the Company deducts on its federal, and state income tax
returns for the period ending on the Closing Date $6,140,000 related to
Change in Control Payment made at Closing, (B) the Company deducts on its
federal, and state income tax returns the full amount of the Deferred
Escrow (other than amounts paid to Stockholders), (C) the Company deducts
on its federal, and state income tax return any amount paid pursuant to the
third to last sentence of Section 1.2(c), (D) the Company deducts on its
federal, and state income tax return any amount paid pursuant to Section
1.3(c)(ii)(B) and (E) the Buyer, the Company, and its Subsidiaries refrain
from (x) disclosing on any Tax Return if it is not more likely than not
that such deduction is allowable, or otherwise providing notice to the IRS
or any other Governmental Authority, any information with respect to such
deductions, except to the extent such disclosure is otherwise required to
avoid the imposition of penalties on the Company or the income tax return
preparer or is otherwise required by law and (y) seeking a private letter
ruling or a pre-filing agreement (or the equivalent thereof) from the IRS
or any other Governmental Authority with respect to such deductions, except
to the extent otherwise required by law. Notwithstanding the foregoing, the
Company shall not be required to claim a deduction under (A) through (D) of
the preceding sentence to the extent an income tax return preparer is not
permitted to claim such a deduction under Section 10.34 of Circular 230.
Because any claim or claims under Section 8.2(a)(vi) are not subject to the
Deductible Amount, the Stockholder Representative shall have the right to
control any contest (including any administrative appeals or audits) which
could result in an indemnification obligation pursuant to Section
8.2(a)(vi), subject, however, to the remaining provisions of Section 8.2(k)
and Section 8.2(l) other than with respect to the Deductible Amount.
Subject to compliance with this Section 8.2(m), after the 23-month
anniversary of the Closing Date and prior to the 24-month anniversary of
the Closing Date, a Buyer Indemnified Party will have the right to make a
claim for indemnification under Section 8.2(a)(vi) with respect to any
Indemnified Deductions for which an indemnity claim has not previously been
made, whether or not any claim by the IRS or any other Governmental
Authority has been made with respect to such Indemnified Deductions and
whether or not such Buyer Indemnified Party has incurred any Loss with
respect thereto. Such claim (1) shall be made against the Escrow Fund by
delivering a Claim Notice as provided in Section 5(f) of the
Indemnification Escrow Agreement, and (2) shall constitute an Open Claim
(as defined in the Indemnification Escrow Agreement) under the
Indemnification Escrow Agreement. If no claim is made by the IRS or any
other Governmental Authority with respect to an Indemnified Deduction
included in such Open Claim prior to the expiration of the statute of
limitations applicable to such Indemnified Deduction, then, no later than
five (5) days following the expiration of such statute of limitations, the
Buyer and the Stockholder Representative shall provide joint written
instructions to the Escrow Agent to distribute the amount of such
Indemnified Deduction to the Stockholders.
Section 8.3. Treatment of Indemnity Payments.
All payments made by the Stockholders or Buyer, as the case may be, to or
for the benefit of the other parties pursuant to this Article VIII shall be
treated as adjustments to the Purchase Price for tax purposes, and such
agreed treatment shall govern for purposes of this Agreement.
Section 8.4. Remedies Exclusive
(a) Buyer hereby acknowledges and agrees that prior to the Closing, Buyer shall
have no right or remedy to take any action in respect of, and the Company
and the Stockholders shall have no liability to Buyer in respect of, any
breach by the Company or the Stockholders of any of their respective
representations or warranties contained herein or a material failure to
comply with any of their covenants, conditions or agreements contained
herein, except (i) to terminate this Agreement pursuant to Section 9.1
hereof, in which event, the Company and the Stockholders shall thereupon
have no obligation or liability to Buyer other than as provided in Section
9.2 or (ii) seek specific performance or injunctive relief.
(b) From and after the Closing, the rights of the Buyer and Buyer Indemnified
Parties to indemnification relating to this Agreement or the transactions
contemplated hereby shall be strictly limited to those contained in this
Article VIII, and such indemnification rights shall be the sole and
exclusive remedies of the Buyer and Buyer Indemnified Parties subsequent to
the Closing Date with respect to any matter in any way relating to this
Agreement or the transactions contemplated hereby. To the maximum extent
permitted by law, the parties hereby waive all other rights and remedies
with respect to any matter in any way relating to this Agreement or arising
in connection herewith, whether under any laws (including any right or
remedy under the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. Section 9602 et seq., or any other Environmental
Law), at common law or otherwise. From and after the Closing, except as
provided in this Article VIII, no claim, action or remedy shall be brought
or maintained by the Buyer or Buyer Indemnified Parties against the
Company, the Stockholders or the Stockholder Representative, and no
recourse shall be brought or granted against any of them, by virtue of or
based upon any alleged misstatement or omission respecting any inaccuracy
in, or any breach of, any of the representations, warranties or covenants
of the Company, the Stockholders or the Stockholder Representative set
forth or contained in this Agreement.
Article IX - TERMINATION
Section 9.1. Termination. This Agreement may be terminated:
(a) at any time, by the mutual written consent of the Stockholder
Representative, the Company and Buyer;
(b) by the Company or the Stockholder Representative, if the Company and the
Stockholders are not then in material breach of any term of this Agreement,
upon written notice to Buyer, upon a material breach of any representation,
warranty or covenant of Buyer contained in this Agreement, provided that
such breach is not capable of being cured or has not been cured within
thirty (30) days after the giving of notice thereof by the Company or the
Stockholder Representative to Buyer;
(c) by Buyer, if Buyer is not then in material breach of any term of this
Agreement, upon written notice to Company and the Stockholder
Representative, upon a material breach of any representation, warranty or
covenant of the Company or the Stockholders contained in this Agreement,
provided that such breach is not capable of being cured or has not been
cured within thirty (30) days after the giving of notice thereof by Buyer
to the Company and the Stockholder Representative;
(d) by Buyer, the Company or the Stockholder Representative at any time after
January7, 2008, if the Closing has not occurred as of such date and the
party seeking termination is not then in material breach of any of the
terms of this Agreement; provided, however, that notwithstanding anything
to the contrary in this Agreement, if January 7, 2008 the conditions to
Closing set forth in Section 7.1(c) and Section 7.2(c) with respect to the
receipt of regulatory approvals or consents from Governmental Authorities
have not been satisfied, then each of Buyer and the Stockholder
Representative shall have the right to extend to a specified date that is
within five (5) business days following the expected receipt of such
approvals or consents by providing written notice of such election to the
other party; provided, further, that, it is reasonably likely at such time
that the Company or Buyer, as applicable, will receive such approvals or
consents by such expected date;
(e) by Buyer, the Company or the Stockholder Representative at any time more
than thirty (30) days after the latest date set forth in Section 9.1(d),
including any extensions thereof;
(f) by Buyer, the Company or the Stockholder Representative if a Governmental
Authority or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction
or other order (whether temporary, preliminary or permanent) that is in
effect and has the effect of making the transactions contemplated by this
Agreement for the Closing illegal or otherwise restraining or prohibiting
consummation of such transactions; and
(g) by the Company or the Stockholder Representative, if, at the time of the
Closing, Buyer has not completed the financing contemplated in the
Commitment Letter or otherwise have sufficient funds for Buyer to
consummate the transactions contemplated by this Agreement, including the
payments required pursuant to Section 1.2 and Section 1.3, it being
understood that this Section 9.1(g) shall not give rise to a right of the
Company or the Stockholders to declare an anticipatory repudiation by Buyer
or otherwise to effect termination of this Agreement prior to such time as
all other conditions to Closing described in Section 7.2 have been
satisfied or waived.
Section 9.2. Effect of Termination.
In the event of termination of this Agreement as provided in Section 9.1,
this Agreement shall forthwith become void and there shall be no further
liability or obligations hereunder on the part of any party hereto or their
respective Affiliates except for the obligations of the parties pursuant to
this Section 9.2 and Sections 5.3, 5.7(b) and 10.2; provided, however, that
nothing herein shall relieve either party from liability for any willful
breach of this Agreement existing at the time of such termination. If this
Agreement is terminated by the Company or the Stockholder Representative
pursuant to Section 9.1(b) or 9.1(g), then the Buyer shall pay to the
Company an amount in cash equal to $10,000,000 as promptly as possible (but
in any event within five (5) business days) following such termination. If
this Agreement is terminated by the Buyer pursuant to Section 9.1(c), then
the Company shall pay to the Buyer an amount in cash equal to $10,000,000
as promptly as possible (but in any event within five (5) business days)
following such termination. Section 9.3. Waiver. At any time prior to the
Closing, Buyer, the Company and the Stockholder Representative hereto may
(a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in
any document delivered by the other party pursuant hereto or (c) waive
compliance with any of the agreements of the other party or conditions to
its own obligations contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party to
be bound thereby. Waiver of any term or condition of this Agreement by a
party shall not be construed as a waiver of any subsequent breach or waiver
of the same term or condition by such party, or a waiver of any other term
or condition of this Agreement by such party.
Article X - GENERAL PROVISIONS
Section 10.1. Notices.
All notices, requests, claims, demands and other communications under this
Agreement will be in writing and will be deemed given if delivered
personally, sent by overnight courier (providing proof of delivery), or via
facsimile to the parties at the following addresses (or at such other
address for a party as specified by like notice):
(a) if to the Company, to:
Doble Engineering Company
▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ Procter LLP
Exchange Place
Boston, Massachusetts 02109
Attn: ▇▇▇▇▇▇ ▇. Cable
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Stockholder Representative, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President, Finance and Administration
Tufts University Administration Building
160 Holland Street
(c) ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇ to Buyer, to:
ESCO Technologies Holding, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇ LLP
One Metropolitan Square
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Section 10.2. Buyer Parent Guarantee.
Buyer Parent hereby guarantees the prompt and full payment and performance
of all payment and other obligations of Buyer and its successors under this
Agreement.
Section 10.3. Fees and Expenses.
Except as provided otherwise herein, each of Buyer, on the one hand, and
the Company (on behalf of the Company and the Stockholders) on the other
hand, shall bear its own expenses in connection with the negotiation and
the consummation of the transactions contemplated by this Agreement.
Section 10.4. Certain Definitions. For purposes of this Agreement:
(a) An "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person;
(b) "Associated Payment" means (i) the employer portion of any payroll Taxes
imposed on or required to be paid by the Company, any Subsidiary or the
Buyer, or any Affiliate of any of them, with respect to any compensatory
payments which are Transaction Expenses, including, without limitation, the
employer's portion of social security, Medicare and other similar Taxes,
and (ii) any other payments incurred by any of the Company, any Subsidiary
or the Buyer, or any Affiliate of any of them, with respect to such
Transaction Expenses in either (i) or (ii) in excess of the amount such
entity would have incurred during the year had the respective Transaction
Expense not been incurred.
(c) "Change in Control Payments" means the aggregate amount payable by the
Company to certain Employees and directors, as a result of the change in
control of the Company that will occur as a result of the transactions
contemplated by this Agreement (other than amounts payable (i) under the
Bonus Plans, (ii) for accrued and unpaid vacation time or (iii) as a result
of actions taken by Buyer or the Company after the Closing including the
termination of employment of any Employee) including, but not limited to,
those set forth on Schedule 10.4;
(d) "Excluded Claims" means claims made pursuant to Section 8.2(a)(ii) and
relating solely to breaches of the representations and warranties of the
Company and the Stockholders contained in Section 2.1(b) (Authorization),
Section 2.2 (Capitalization), Section 2.27 (Brokers), Section 3.1 (Company
Shares) and Section 3.2 (Authority);
(e) "GAAP" means U.S. generally accepted accounting principles, consistently
applied;
(f) "Indebtedness" means the amount of the Company's indebtedness for borrowed
money (excluding capital leases, accounts payable and outstanding undrawn
letters of credit);
(g) "Initial Tax Benefit Amount" means an amount equal to the sum of (i) two
million two hundred seventy-one thousand eight hundred dollars ($2,271,800)
plus (ii) 1.48% of the Estimated Closing Adjustment;
(h) "Intellectual Property" means all intellectual property and other similar
proprietary rights in any jurisdiction, whether owned or held for use under
license, whether registered or unregistered, including such rights in and
to (a) inventions, invention disclosures, discoveries and improvements
(whether patentable or unpatentable and whether or not reduced to
practice), improvements thereto, and patents, patent applications, and
patent disclosures, together with all divisions, reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) writings, works, copyrightable works, all copyrights, and
all applications, registrations, and renewals in connection therewith, (d)
trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings
and specifications), (e) computer software (including related
documentation), (f) copies and embodiments of any of the foregoing (in
whatever form or medium), (g) registered domain names and uniform resource
locators, (h) moral rights; and (i) claims, causes of action and defenses
relating to the enforcement of any of the foregoing; in each case,
including any registrations of, applications to register, and renewals and
extensions of, any of the foregoing clauses (a) through (h) with or by any
governmental authority in any jurisdiction;
(i) "Law" means any federal, state or local, U.S./domestic or non-U.S./foreign,
statute, law, ordinance, decree, order, injunction, rule, directive, or
regulation of any government or quasi-governmental authority, and includes
rules and regulations of any regulatory or self-regulatory authority
compliance with which is required by Law, in effect on the date hereof, or,
with respect to prior time periods, as in effect during the applicable
prior period.
(j) "Losses" of a Person means any and all losses, liabilities, damages,
claims, awards, judgments, costs and expenses (including, without
limitation, reasonable attorneys' fees) actually suffered or incurred by
such Person;
(k) "Material Adverse Effect" means a material adverse effect on the financial
condition, business of the Company and its Subsidiaries, taken as a whole,
except for any such effects resulting from (i) this Agreement, the
transactions contemplated hereby or the announcement thereof, (ii) changes
in general economic or political conditions or the securities markets in
general that do not have a disproportionate adverse effect on the Company,
or (iii) changes, after the date of this Agreement, in conditions generally
applicable to businesses in the same industries of the Company and its
Subsidiaries that do not have a disproportionate adverse effect on the
Company including (A) changes in laws generally applicable to such
businesses or industry and (B) changes in GAAP or its application;
(l) "Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or
other entity;
(m) "Tax Benefit Amount" means an amount equal to the sum of (i) the Initial
Tax Benefit Amount, plus (ii) the Deferred Tax Benefit Amount, plus (iii)
the Indemnification Tax Benefit Amount, plus (iv) the Working Capital Tax
Benefit Amount; and
(n) "Transaction Expenses" means any unpaid legal fees, including legal fees of
▇▇. ▇▇▇▇▇, accounting fees, investment banking fees, Change in Control
Payments, any Associated Payments and all other miscellaneous expenses or
costs of the Company and the Sellers incurred in connection with the
transactions contemplated by this Agreement (other than the cost of the
Title Policy).
Section 10.5. Interpretation.
When a reference is made in this Agreement to an Article, Section, Schedule
or Exhibit, such reference will be to an Article or Section of, or a
Schedule or Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes"
or "including" are used in this Agreement, they will be deemed to be
followed by the words "without limitation." The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement
will refer to this Agreement as a whole and not to any particular provision
of this Agreement. All terms used herein with initial capital letters have
the meanings ascribed to them herein and all terms defined in this
Agreement will have such defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
References to "$" and dollars shall be deemed to refer to the United States
currency.
Section 10.6. Counterparts.
This Agreement may be executed in one or more counterparts, all of which
will be considered one and the same agreement and will become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties.
Section 10.7. Amendments.
This Agreement may not be amended or modified, nor may compliance with any
condition or covenant set forth herein be waived, except by a writing duly
and validly executed by Buyer, the Company and the Stockholder
Representative, or in the case of a waiver, the party waiving compliance.
Section 10.8. Entire Agreement; Severability.
This Agreement (including the exhibits, schedules, documents and
instruments referred to herein) and the Confidentiality Agreement
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter of this Agreement. If any term, condition or other
provision of this Agreement is found to be invalid, illegal or incapable of
being enforced by virtue of any rule of law, public policy or court
determination, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect.
Section 10.9. Third Party Beneficiaries.
Except as expressly provided in this Agreement, each party hereto intends
that this Agreement shall not benefit or create any right or cause of
action in or on behalf of any Person other than the parties hereto.
Section 10.10. Governing Law.
This Agreement will be governed by, and construed in accordance with, the
internal laws of the Commonwealth of Massachusetts regardless of the laws
that might otherwise govern under applicable principles of conflict of
laws.
Section 10.11. Assignment.
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement may be assigned, in whole or in part, by operation of
law or otherwise by the parties hereto without the prior written consent of
the Company, the Stockholder Representative and the Buyer. Any assignment
in violation of the preceding sentence will be void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective
successors and assigns.
Section 10.12. Consent to Jurisdiction.
Each of the parties hereby consents to exclusive jurisdiction, service of
process and venue in the federal or state courts of the Commonwealth of
Massachusetts for any claim, suit or proceeding arising under this
Agreement, or the transactions contemplated hereby or in the case of a
third party claim subject to indemnification hereunder, in the court where
such claim is brought.
Section 10.13. Dispute Resolution.
(a) Any dispute arising out of or relating to this Agreement, including, but
not limited to, claims for indemnification pursuant to Article VIII other
than under Section 1.3 hereof shall be resolved in accordance with the
procedures specified in this Section 10.13 which shall be the sole and
exclusive procedures for the resolution of any such disputes.
Notwithstanding the foregoing, any dispute regarding the Closing Working
Capital shall be resolved in accordance with Section 1.3.
(b) The parties shall attempt in good faith to resolve any dispute arising out
of or relating to this Agreement promptly by negotiation between the
Stockholder Representative and executives of Buyer who, if possible, are at
a higher level of management than the persons with direct responsibility
for administration of this Agreement. Any party may give the other party
written notice of any dispute not resolved in the normal course of
business. Within 15 days after delivery of the notice, the receiving party
shall submit to the other a written response. The notice and response shall
include (i) a statement of each party's position, and (ii) the name and
title of the executive who will act as such party's representative. Within
30 days after delivery of the disputing party's notice, the Stockholder
Representative and the Buyer shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary to attempt
to resolve the dispute. All reasonable requests for information made by one
party to the other will be honored. All negotiations pursuant to this
clause are confidential and shall be treated as compromise and settlement
negotiations for purposes of the Federal Rules of Evidence and State Rules
of Evidence.
(c) If the matter has not been resolved by these persons within 60 days of the
disputing party's notice, or if the parties fail to meet within 30 days,
either party may initiate litigation as provided hereinafter.
(d) All negotiations pursuant to this clause are confidential and shall be
treated as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and State Rules of Evidence.
(e) If the dispute has not been resolved by the procedures provided for in this
Section 10.13 within 60 days of the initiation of such procedures, either
party may initiate litigation upon 30 days written notice to the other
party; provided, however, that if one party has requested the other to
participate in such procedures and the other party has failed to
participate, the requesting party may provide written notice of its intent
to initiate litigation prior to the expiration of such 60-day period.
(f) The procedures specified in this Section 10.13 shall be the sole and
exclusive procedures for the resolution of disputes between the parties
arising out of or relating to this Agreement; provided, however, that any
party may, without prejudice to the above procedures, seek preliminary
injunction if in its sole judgment such action is necessary to avoid
irreparable damage or to preserve the status quo. Despite such action the
parties will continue to participate in good faith in the procedures
specified in this Section 10.13.
(g) All applicable statutes of limitation and defenses based upon the passage
of time shall be tolled while the procedures specified in Section 10.13 are
pending. The parties will take such action, if any, required to effectuate
such tolling.
(h) Each party is required to continue to perform its obligations under this
Agreement pending final resolution of any dispute arising out of or
relating to this Agreement.
Section 10.14. Mutual Drafting.
The parties hereto are sophisticated and have been represented by attorneys
throughout the transactions contemplated hereby who have carefully
negotiated the provisions hereof. As a consequence, the parties do not
intend that the presumptions of laws or rules relating to the
interpretation of contracts against the drafter of any particular clause
should be applied to this Agreement or any agreement or instrument executed
in connection herewith, and therefore waive their effects.
Section 10.15. Remedies.
Other than any breach of a provision of this Agreement for which a payment
is provided for under Section 9.2, it is specifically understood and agreed
that any breach of the provisions of this Agreement or any other agreement
executed and delivered pursuant to this Agreement by any party hereto could
result in irreparable injury to the other parties hereto, that the remedy
at law alone could be an inadequate remedy for such breach, and that, in
addition to any other remedies which they may have, such other parties may
seek to enforce their respective rights by actions for specific performance
(to the extent permitted by law).
Section 10.16. New Agreements.
In connection with the transactions contemplated by this Agreement, the
Buyer has specifically authorized and directed the Company to enter into
with ▇▇. ▇▇▇▇▇ the (a) Executive Employment Agreement and (b) Separate
Agreement and General Release (together, the "▇▇▇▇▇ Employment Agreement")
and, prior to the Closing, the Buyer may direct the Company to enter into
employment agreements with other executives of the Company (all of such
agreements, including the ▇▇▇▇▇ Employment Agreement, the "New
Agreements"). Notwithstanding anything in this Agreement to the contrary,
and except to the extent the New Agreements preserve or restate the same
terms previously existing with respect to ▇▇. ▇▇▇▇▇ or such other
executives, the Buyer acknowledges and agrees that (i) the Company and the
Stockholders are not responsible for the terms or content of any New
Agreement or the impact or effect of any New Agreement on any existing
agreement or Benefit Plan of the Company, (ii) the New Agreements shall not
be deemed to exist for purposes of the Company's and the Stockholders
representations, warranties, covenants, obligations and conditions under
this Agreement, (iii) in no event shall the existence of the New Agreements
be permitted to have an adverse effect on any of the rights and obligations
of the Company and the Stockholders under this Agreement, and (iv) neither
the existence or terms of the New Agreements nor the effect of the New
Agreements on any existing contract or Benefit Plan of the Company shall
form the basis of any indemnification claim under Article VIII or any other
claim against the Company or the Stockholders.
SECTION 1.3(B) OF THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION
WHICH MAY BE ENFORCED BY THE PARTIES.
[Remainder of page intentionally left blank]
[Signature Page to Stock Purchase and Sale Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
and Sale Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
DOBLE ENGINEERING COMPANY:
By: ______/s/ ▇▇▇▇▇▇ ▇. Nichols________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
BUYER:
ESCO TECHNOLOGIES HOLDING, INC.
By: ______/s/ Alyson Barclay__________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
BUYER PARENT:
By: ______/s/ Alyson Barclay___________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President & General
Counsel, Secretary
▇▇▇▇▇ ▇. ▇▇▇▇▇ GROUP TRUST
By:______/s/_Eleanor M. Eddy__________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Trustee
By:______/s/_Edward M. Condit________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
By:______/s/_Thomas S. McGurty_______
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
By:_____/s/_Margaret A. McKenna______
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
By: Bank of America, N.A. as trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇ Group Trust
By:_____/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ____
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Senior Vice President
▇▇▇▇▇ ▇. ▇▇▇▇▇ WIFE'S TRUST
By: ______/s/_Eleanor M. Eddy__________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Trustee
By: ______/s/_Edward M. Condit________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
By:______/s/_Thomas S. McGurty_______
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
By:_____/s/_Margaret A. McKenna______
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
By: Bank of America, N.A. as trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇ Wife's Trust
By:_____/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ____
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Senior Vice President
▇▇▇ ▇. ▇▇▇▇▇▇ TRUST
By: Bank of America, N.A. as trustee of the ▇▇▇ ▇. ▇▇▇▇▇▇ Trust
By:_____/s/ ▇▇▇▇ Wahnow_________
Name: ▇▇▇▇ Wahnow
Title: Vice President
▇▇▇▇▇▇▇ FAMILY DOBLE REVOCABLE TRUST
By: ____/s/ ▇▇. ▇▇▇▇▇▇▇▇▇ ▇. Gleason_____
Name: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
By: ____/s/ ▇▇. ▇▇▇▇▇▇▇ ▇. Gleason_______
Name: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
▇▇▇▇▇▇ ▇▇▇▇▇▇
_____/s/ ▇▇▇▇▇▇ Hooper____________
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TRUST UNDER ARTICLE EIGHTH OF THE WILL OF ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ DATED JULY 2, 1970
By: Cambridge Trust Company, Trustee
By:______/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ _______
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President