STOCK PURCHASE AGREEMENT BY AND AMONG MCC, INC. a Pennsylvania corporation, dba Metallic CeramicCoatings, nCoat, Inc. a Delaware corporation, and The Stockholders of MCC, INC. June 19, 2007
EXHIBIT
2.1
BY
AND AMONG
MCC,
INC.
a
Pennsylvania corporation,
dba
Metallic
CeramicCoatings,
a
Delaware corporation,
and
The
Stockholders of
MCC,
INC.
June
19, 2007
Exhibits
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Exhibit
A
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Stockholders
and Holdings
|
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Exhibit
B
|
Form
of Escrow Agreement
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Exhibit
C
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Noncompetition
Agreement
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|
Exhibit
D
|
Consulting
Agreement
|
Schedules
Disclosure
Schedule
THIS
STOCK PURCHASE AGREEMENT (this "Agreement"), is made as of June 19, 2007,
by and among MCC, Inc., a Pennsylvania corporation (the "Company"),
nCoat, Inc., a Delaware OTCBB publicly traded corporation, its successors or
assigns ("Buyer"), and the Persons listed on the Exhibit A
hereto (collectively referred to herein as the "Stockholders" and
individually as a "Stockholder"). Except as otherwise
indicated herein, capitalized terms used herein are defined in Article
XI. The Company is a party to this Agreement solely for purposes of
Article III, Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.8, 5.10, 5.12, 5.13, 5.14,
Sections 6.1, 6.2, 6.5, 6.7, 6.8, 6.9, 6.10, Article XI and Article
XII.
Recitals
A. Each
of the Stockholders listed on Exhibit A owns the number of shares of the
Company's common stock, no par value per share ("Common Stock"), set
forth opposite his, her or its name on Exhibit A, with the shares of
Common Stock, set forth on Exhibit A being referred to herein as the
"Shares". The Shares constitute all of the issued and
outstanding capital stock of the Company.
C. Subject
to the terms and conditions of this Agreement, Buyer desires to purchase, and
each of the Stockholders desire to sell his, her or its Shares for a pro rata
share of the Purchase Price (as defined below), all as more particularly
set forth below.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby agree as
follows:
ARTICLE
I
SALE
OF STOCK; CLOSING
1.1 Stock
Purchase Transaction. On the basis of the representations,
warranties, covenants and agreements, and subject to the satisfaction or waiver
of the conditions set forth herein, each Stockholder shall sell to Buyer, and
Buyer shall purchase such Shares from each such Stockholder (the "Stock
Purchase Transaction"); provided, that as a result of the consummation of
the Stock Purchase Transaction, Buyer shall acquire all of the issued and
outstanding capital stock of the Company.
1.2 Purchase
Price. The purchase price ("Purchase Price") for the
Shares shall be $6.5965 per Share, not to exceed an aggregate Purchase Price
for
all Shares of Six Million Dollars ($6,000,000), of which, Five Million Dollars
($5,000,000) shall be paid in U.S. Currency (the “Cash Purchase Price”)
at Closing and One Million Dollars ($1,000,000) shall be paid in 1,333,333
shares of restricted common stock of Buyer (the “Purchase Shares”) at
Closing, but which Purchase Shares shall be subject to adjustments in the event
of any indemnification claim payment(s) or third party claim payment(s) pursuant
to Article IX. Subject to the foregoing, Buyer will pay to each
Stockholder a portion of the Cash Purchase Price equal to the number of Shares
owned by such Stockholder as set forth on Exhibit A, multiplied by
$5.4971 per share, as set forth in Section 1.5 of this Agreement.
3
1.3 Time
and Place of Closing. The Closing shall take place on the Closing
Date at 10:00 a.m., local time, at the offices of the Company at ▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1.4 The
Closing. At the Closing, Buyer shall consummate the Stock
Purchase Transaction by paying the amounts due to each Stockholder, less the
amount to be deposited into escrow pursuant to Section 1.5, by wire transfer
of
immediately available funds in accordance with wire transfer instructions
provided by each Stockholder prior to the Closing, or alternatively by delivery
at Closing of a cashier’s check, in either case upon delivery to Buyer of the
Shares to be sold in the Stock Purchase Transaction by such Stockholder pursuant
to Section 1.1 and 1.2.
1.5 Escrow. At
and as of the Closing, Stockholder shall deposit the Purchase Shares as a hold
back (the "Escrow Amount") with the Escrow Agent which shall be paid to
the Stockholders in one (1) or more installments, subject to the indemnification
obligations of the Stockholders as set forth in this Agreement. The
Escrow Amount shall be held by the Escrow Agent under the Escrow Agreement
pursuant to the terms thereof. The Escrow Amount shall be held as a
trust fund and shall not be subject to any Lien and Encumbrance, attachment,
trustee process or any other judicial process of any creditor of any party,
and
shall be held and disbursed, together with any interest accrued on Escrow
Amount, solely for the purposes and in accordance with the terms of the Escrow
Agreement.
ARTICLE
II
REPRESENTATIONS,
WARRANTIES AND RELEASES OF AND
REGARDING
THE STOCKHOLDERS
Each
of
the Stockholders, severally and jointly, represents and warrants to Buyer that
the statements contained in this Article II are true and correct as of the
date
of this Agreement and will be true and correct as of the Closing as though
made
as of the Closing, except to the extent such representations and warranties
are
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date). For
purposes of this Article II, the phrase "to the knowledge of each Stockholder",
“to the best knowledge of each Stockholder”, “has no knowledge”, “known to each
Stockholder” or any phrase of similar import shall be deemed to refer to the
actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on behalf of the Stockholders after a
commercially reasonable investigation of the factual basis or lack thereof
of
any representations and warranties of the Stockholders set forth in this Article
II:
2.1 Authorization;
Enforceability. Such Stockholder has the capacity to execute and
deliver this Agreement and to perform his, her or its obligations hereunder
and
to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by such Stockholder, and, assuming the
due
execution hereof by Buyer, this Agreement constitutes the legal, valid and
binding obligation of such Stockholder, enforceable against such Stockholder
in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, liquidation, dissolution, moratorium or other similar laws
relating to or affecting the rights of creditors generally and to the effect
of
the application of general principles of equity (regardless of whether
considered in proceedings at law or in equity). Such Stockholder is
the lawful owner, of record and beneficially, of the Shares being sold,
transferred, conveyed and assigned by him, her or it pursuant to this Agreement
and has good and marketable title to the Shares, free and clear of any Liens
and
Encumbrances whatsoever and with no restrictions on the voting rights and other
incidents of record and beneficial ownership pertaining
thereto. There are no agreements between such Stockholder and any
other person with respect to voting of, or any other matters pertaining to,
the
Stockholder’s Shares. Such Stockholder owns no capital stock of the
Company other than the Shares set forth by such Stockholder's name on Exhibit
A. Upon consummation of the transactions contemplated hereby,
such Stockholder will deliver to Buyer good title to the Shares owned by such
Stockholder free and clear of any Liens and Encumbrances. There are
no other Shares issued and outstanding other than Shares set forth and described
in Exhibit A hereto.
4
2.2 Conflicts. Neither
the execution, delivery and performance of this Agreement by such Stockholder
nor the consummation of the transactions contemplated hereby nor compliance
by
such Stockholder with any of the provisions hereof will (i) materially conflict
with, or result in any material violations of, or cause a material default
(with
or without notice or lapse of time, or both) under, or give rise to a right
of
termination, amendment, cancellation or acceleration or any obligations
contained in any contract material to the Stock Purchase Transaction to which
such Stockholder is a party, or by which such Stockholder or any of his, her
or
its properties may be bound or (ii), to the Knowledge of each Stockholder,
violate any law applicable to such Stockholder or any of his, her or its
properties which would, individually or in the aggregate, which would prevent
such Stockholder from consummating the transactions contemplated
hereby.
2.3 Permits;
Consents. No consent or approval of or by, or any notification of or filing
with, any Person with whom the Stockholder has an agreement is required in
connection with the execution, delivery and performance by such Stockholder
of
this Agreement or the consummation by such Stockholder of the transactions
contemplated hereby, the failure to obtain which would result in a Material
Adverse Effect upon the Company, Buyer or the Stock Purchase
Transaction.
2.4 Brokers;
Finders. No Stockholder has employed, and is not subject to any
valid claim of, any broker, finder, consultant or other intermediary in
connection with the Stock Purchase Transaction who might be entitled to a fee
or
commission in connection with such transaction. Unless agreed upon in
writing between Buyer and Stockholder, each Stockholder is solely responsible
for any payment, fee or commission that may be due to any broker, finder,
consultant or other intermediary employed by such Stockholder in connection
with
the Stock Purchase Transaction.
2.5 Investment
Representations.
(a)
Each
Stockholder understands that the Purchase Shares have not been registered under
the Securities Act, and that the certificates and instruments representing
the
Purchase Shares will bear restricted legends.
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(b)
Each
Stockholder has experience in evaluating and investing in securities of private
companies and is capable of evaluating the merits and risks of his, her or
its
investment in the Purchase Shares and has the capacity to protect his, her
or
its own interests.
(c)
Each
Stockholder is acquiring the Purchase Shares for his, her or its own account
for
investment only, and not with a view towards their distribution or
resale.
(d)
Each
Stockholder agrees that the Purchase Shares may not be sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act except pursuant to an exemption from
such
registration available thereunder, and without compliance with foreign
securities laws, in each case, to the extent applicable.
(e)
Each
Stockholder confirms that the Company has made available to the Stockholders
the
opportunity to perform due diligence with respect to Buyer and its business
and
its future prospects, including the opportunity to ask questions of the officers
and management employees of Buyer and to acquire information about the business
and financial condition of the business of Buyer prior to Closing.
(f)
Each
Stockholder has complied with all laws and regulations, including securities
laws, applicable to him, her or it in connection with the acquisition of the
Purchase Shares contemplated hereby, non-compliance with which would result
in a
Material Adverse Effect.
(g)
Each
Stockholder, individually or with the assistance of his, her or its investment
advisor, attorney or accountant, has the ability to evaluate the merits and
risks of acquiring the Shares. Each Stockholder has evaluated the
merits and risks of acquiring the Purchase Shares, has concluded that such
acquisition is in his, her or its best interests, and is not relying on the
advice or guidance of Buyer in respect of his, her or its decision to acquire
the Shares pursuant to the terms of this Agreement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANY
The
Company represents and warrants that, except as set forth in the separate
disclosure schedule (the "Disclosure Schedule"), the statements contained
in this Article III are true and correct as of the date of this Agreement and
will be true and correct as of the Closing as though made as of the Closing,
except to the extent such representations and warranties are specifically made
as of a particular date (in which case such representations and warranties
will
be true and correct as of such date). The Disclosure Schedule shall
be arranged in sections and subsections corresponding to the numbered and
lettered sections and subsections contained in this Article III. The
disclosures in any section or subsection of the Disclosure Schedule shall
qualify only the corresponding section or subsection in this Article
III. For purposes of this Article III, the phrase "to the knowledge
of the Company", “to the best knowledge of the Company”, “has no knowledge”,
“known to the Company” or any phrase of similar import shall be deemed to refer
to the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on behalf of the Company after
a
commercially reasonable investigation of the factual basis or lack thereof
of
any representations and warranties of the Company; provided that in respect
of
Sections 3.3(e) and 3.8(a) of this Article III, the representations and
warranties shall refer to the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ without
any
duty to investigate the factual basis or lack thereof.
6
3.1 Organization,
Qualification and Corporate Power. The Company is a corporation
or other entity duly organized, validly existing and in corporate and Tax good
standing under the laws of its jurisdiction of organization. Except
as set forth in Section 3.1 of the Disclosure Schedule, the Company is duly
qualified to conduct business and is in corporate and Tax good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except
for
those jurisdictions in which the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a material adverse effect on the business, operations or
financial condition of the Company, as the case may be. Except as set
forth in Section 3.1 of the Disclosure Schedule, to the knowledge of the
Company, the Company has all requisite corporate power and authority to carry
on
the businesses in which it is engaged and to own and use the properties owned
and used by it. The Company has all the requisite corporate power and
authority to enter into this Agreement, and this Agreement has been duly and
validly executed and delivered by the Company for the limited purpose set forth
on page 1 hereof, and, assuming the due execution hereof by Buyer and
Stockholders holding one hundred percent (100%) of the Shares, this Agreement
is
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, liquidation, dissolution, moratorium or other similar laws
relating to or affecting the rights of creditors generally and to the effect
of
the application of general principles of equity (regardless of whether
considered in proceedings at law or in equity).
3.2 Other
Ownership. The Company does not, directly or indirectly, have any
direct or indirect equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture, trust or other business
association or entity.
3.3 Conflicts;
Consents. Except as set forth in Section 3.3 of the Disclosure
Schedule, neither the execution and delivery by the Company of this Agreement,
nor the consummation by it of the transactions contemplated under this Agreement
on its part to be performed and/or observed, will (a) conflict with or violate
any provision of the charter or by-laws of the Company, (b) require any notice
to or filing with, or any permit, authorization, consent or approval of, any
governmental entity, (c) conflict with, result in a breach of, constitute (with
or without due notice or lapse of time or both) a default under, result in
the
acceleration of obligations under, create in any party the right to terminate,
modify or cancel, or require any notice, consent or waiver under, any contract
or instrument to which the Company is a party or by which it is bound or to
which any of its assets is subject, except for (i) any conflict, breach,
default, acceleration, termination, modification or cancellation which,
individually or in the aggregate, would not have a Material Adverse Effect
and
would not adversely affect the consummation of the transactions contemplated
hereby or (ii) any notice, consent or waiver the absence of which, individually
or in the aggregate, would not have a Material Adverse Effect and would not
adversely affect the consummation of the transactions contemplated hereby,
(d)
result in the imposition of any security interest upon any assets of the Company
or (e) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets, the violation
of
which would have a Material Adverse Effect in respect of the Business or the
Company.
7
3.4 Capitalization;
Structure. The authorized capital stock of the Company consists
of 2,000,000 shares of common stock, no par value per share, of which 909,565
shares are currently issued and outstanding. All of the issued and
outstanding shares of the Company's capital stock, including without limitation
the Shares, are validly issued, fully paid and nonassessable and to the
knowledge of the Company are held by the persons set forth on Exhibit
A. All of the outstanding shares of capital stock or other equity
interests of the Company has been validly issued and is fully paid and is free
and clear of any Liens and Encumbrances, and there are no outstanding options,
warrants or other rights of any kind to acquire, or obligations to issue, shares
of capital stock of any class of, or other equity interests in, the
Company. The Company has no obligation or liability to pay any
dividend as of the date hereof to any Stockholder.
3.5 Absence
of Certain Changes. Except as disclosed in Section 3.5 of the
Disclosure Schedule, since February 28, 2007:
(a)
the
Company has not had any physical damage, destruction or loss that would, after
taking into account any insurance recoveries payable in respect thereof, have
a
Material Adverse Effect;
(b)
the
Company has not declared, set aside or paid any dividends on or made any other
distribution in respect of any of its capital stock, or repurchased, redeemed
or
otherwise acquired any shares of its capital stock;
(c)
the
Company has not, except in the ordinary course of business, sold, transferred,
licensed, pledged, mortgaged or otherwise disposed of tangible or intangible
assets with an aggregate fair market value of greater than $10,000;
(d)
the
Company has not amended its charter or bylaws;
(e)
the
Company has not acquired or agreed to acquire by merging or consolidating with,
or by purchasing any material portion of the capital stock or assets of, or
by
any other manner, any business or any corporation, partnership, association
or
other business organization or division thereof;
(f)
the
Company has not suffered any change or changes, which, individually or in the
aggregate, have had or would have, a Material Adverse Effect;
(g)
the
Company has paid not, discharged, or satisfied any liabilities other than the
payment, discharge or satisfaction of liabilities in the ordinary and usual
course of business;
(h)
the
Company has not granted any increase in the compensation of officers, directors
or employees (other than documented, scheduled, normal increases to non-officer
employees in the ordinary and usual course of business);
(i)
the
Company has not made any change in any method of accounting or accounting
practice or any change in depreciation or amortization policies or rates
previously adopted;
8
(j)
the
Company has not paid, lent or advanced any amount to, or sold, transferred
or
leased any of the Company's assets to, or entered into any agreement or
arrangement with, any Affiliate, except for directors’ fees, and employment
compensation to officers in the ordinary and usual course of business;
and
(k)
the
Company has not made capital expenditures or commitments therefor exceeding,
in
the aggregate, $10,000.
3.6 Financial
Statements. The audited consolidated Balance Sheets and
statements of income, changes in stockholders’ equity and cash flows of the
Company for the past two (2) fiscal years ending August 31, 2005 and August
31,
2006 respectively and the unaudited consolidated statements of income, changes
in stockholders’ equity and cash flows of the Company for each full month from
the August 31,2006 audited statements until the Closing Date are attached as
Section 3.6 to the Disclosure Schedule (collectively the "Financial
Statements"). Except as set forth in Sections 3.6 of the
Disclosure Schedule, the Financial Statements present fairly in all material
respects the consolidated financial position, results of operations and cash
flows of the Company for the periods, or as of the dates, set forth therein
and
were prepared in conformity with GAAP, consistently applied. The
Company has in place adequate controls and procedures to allow management to
prepare the Financial Statements which accurately and to the best Knowledge
of
the Company reflect the financial condition of the Company.
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3.7
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Tax
Matters.
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(a)
Except as set forth in Sections 3.7 of the Disclosure Schedule, the Company
has
properly filed on a timely basis all Tax Returns that it was required to file,
and all such Tax Returns were true, correct and complete in all
respects. The Company has not been a member of a group of
corporations with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Company has paid on a timely
basis all Taxes that were due and payable. The unpaid Taxes of the
Company for tax periods through the Balance Sheet Date do not exceed the
accruals and reserves for Taxes (excluding accruals and reserves for deferred
Taxes established to reflect timing differences between book and Tax income)
set
forth on the Most Recent Balance Sheet. The Company (i) has not, to
the knowledge of the Company, any actual or potential liability under Treasury
Regulations Section 1.1502-6 (or any comparable or similar provision of federal,
state, local or foreign law), as a transferee or successor, pursuant to any
contractual obligation, or otherwise for any Taxes of any person other than
the
Stockholders, nor (ii) is a party to or bound by any Tax indemnity, Tax sharing,
Tax allocation or similar agreement. All Taxes that the Company is
required by law to withhold or collect have been duly withheld or collected
and,
to the extent required, have been properly paid to the appropriate governmental
entity.
9
(b)
The
Company has made available to Buyer for inspection (i) complete and, to the
Knowledge of Company, correct copies of all Tax Returns of the Company, as
identified in Section 3.7 (b)(i) of the Disclosure Schedule, relating to Taxes
for the Company’s fiscal years 2002 through 2006 and (ii) complete and correct
copies of all private letter rulings, revenue agent reports, information
document requests, notices of proposed deficiencies, deficiency notices,
protests, petitions, closing agreements, settlement agreements, pending ruling
requests and any similar documents submitted by, received by or agreed to by
or
on behalf of the Company, and relating to Taxes for all taxable periods for
which the statute of limitations has not yet expired. The federal
income Tax Returns of the Company have not been audited by the Internal Revenue
Service or any other relevant government entity. No examination or
audit of any Tax Return of the Company by any governmental entity is currently
in progress or, to the knowledge of the Company, threatened or
contemplated. The Company has not been informed by any jurisdiction
that the jurisdiction believes that the Company was required to file any Tax
Return that was not filed. The Company has not (i) knowingly waived
any statute of limitations with respect to Taxes or agreed to extend the period
for assessment or collection of any Taxes, (ii) requested any extension of
time
within which to file any Tax Return, which Tax Return has not yet been filed,
or
(iii) executed or filed any power of attorney with any Taxing
Authority.
(c)
There
are no adjustments under Section 481 of the Code (or any similar adjustments
under any provision of the Code or the corresponding foreign, state or local
Tax
laws) that are required to be taken into account by the Company in any period
ending after the Closing Date by reason of a change in method of accounting
in
any taxable period ending on or before the Closing Date.
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3.8
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Compliance
with Laws; Permits.
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(a)
Except as set forth in Section 3.8(a) of the Disclosure Schedule, the conduct
of
the business of the Company complies with all statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto, except
for
violations or failures so to comply, if any, that would not reasonably be
expected to have a Material Adverse Effect.
(b)
Except as set forth in Section 3.8(b) of the Disclosure Schedule, the Company
possess or has been granted all governmental licenses, permits, franchises
and
other authorizations of any federal, state, local or foreign national or local
governmental authority, except where the failure to so possess or have been
granted would not reasonably be expected to have a Material Adverse Effect
(the
"Licenses"). All Licenses are in full force and effect, except
for those whose failure to be in full force and effect would not reasonably
be
expected to have a Material Adverse Effect. To the knowledge of the
Company, as of the date hereof, no proceeding is pending or threatened seeking
the revocation or limitation of any License the revocation or limitation of
which would reasonably be expected to have a Material Adverse
Effect.
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3.9
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Intellectual
Property.
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(a)
Section 3.9(a) of the Disclosure Schedule lists (i) each patent, patent
application, trade secret, copyright registration or application therefor,
mask
work registration or application therefor, and trademark, service ▇▇▇▇ and
domain name registration or application therefor owned by, assigned to or
licensed by the Company and used in its business and operations.
10
(b)
The
Company, directly or indirectly, owns or has the right to use all Intellectual
Property necessary to operate its business. The Company has taken all
reasonable measures to protect the proprietary nature of each item of its
Intellectual Property, and to maintain in confidence all trade secrets and
confidential information, that it owns or uses. No other person or
entity has any rights to any of the Company's Intellectual Property (except
pursuant to agreements or licenses specified in Section 3.9(d) of the Disclosure
Schedule), and, to the knowledge of the Company, no other person or entity
is
infringing, violating or misappropriating any of the Company's Intellectual
Property.
(c)
To
the knowledge of the Company, none of the Company's products or services, or
the
marketing, distribution, provision or use thereof, infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity. Section 3.9(c) of the Disclosure Schedule lists any
complaint, claim or notice, or written threat thereof, received by the Company
alleging any such infringement, violation or misappropriation; and the Company
has provided to Buyer complete and accurate copies of all written documentation
in the possession of the Company relating to any such complaint, claim, notice
or threat. The Company has provided to Buyer complete and accurate
copies of all written documentation in the Company’s possession relating to
claims or disputes known to the Company or the Stockholders concerning any
of
the Company's Intellectual Property.
(d)
Section 3.9(d) of the Disclosure Schedule identifies each license or other
agreement pursuant to which the Company has licensed, distributed or otherwise
granted any rights to any third party with respect to, any of the Company's
Intellectual Property (numbers, letters or pseudonyms may be used when setting
forth the identities of licensees in Section 3.9(d) of the Disclosure Schedule,
which at Closing will be replaced by the Company with actual names of
licensees). Except as described in Section 3.9(d) of the Disclosure
Schedule, the Company has not agreed to indemnify any person or entity against
any infringement, violation or misappropriation of any Intellectual Property
rights with respect to any of the Company's products or services.
(e)
Section 3.9(e) of the Disclosure Schedule identifies each item of Intellectual
Property used by the Company in its business that is owned by a third party,
and
the license or agreement pursuant to which the Company uses it (excluding
off-the-shelf software programs licensed by the Company pursuant to "shrink
wrap" licenses).
(f)
Except as set forth in Section 3.9 (f) of the Disclosure Schedule, all of the
copyrightable materials (including software) incorporated in or bundled with
the
Company's products or services have been created by employees of the Company
within the scope of their employment by the Company or by independent
contractors of the Company who have executed agreements dated prior to the
Closing Date expressly assigning all right, title and interest in such
copyrightable materials to the Company. No portion of such
copyrightable materials was jointly developed with any third party.
3.10 Tangible
Properties and Necessary Assets. With the exception of tangible
properties disposed of in the ordinary course of operation of the Business
since
the latest date of the Balance Sheet, the Company has, and at the Closing will
directly or indirectly have, good title to all tangible properties necessary
for
the operation of the Business as presently conducted, or holds such tangible
properties by valid and existing lease or license. All tangible
property in active use by the Business is in good working order, ordinary wear
and tear excepted, except to the extent that any failure would not reasonably
be
expected to have a Material Adverse Effect.
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3.11 Title
to Assets. The Company, directly or indirectly, is the true and
lawful owner, and has good title to, all of the assets currently used in the
operation of the Business, free and clear of all Security Interests, except
as
set forth in Sections 3.11 of the Disclosure Schedule.
3.12 Litigation. Except
as set forth in Sections 3.12 of the Disclosure Schedule, there is no action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity or before any arbitrator which has been threatened in writing or to
the
knowledge of the Company is pending and which (a) seeks either damages in excess
of $10,000 or equitable relief or (b) in any manner challenges or seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement
or which could have a Material Adverse Effect. There are no
unsatisfied judgments, orders or decrees outstanding with respect to the
Business against the Company.
3.13 Brokers
and Finders. Except as disclosed in Disclosure Schedule 3.13, the
Company has not employed, and is not subject to the valid claim of, any broker,
finder, consultant or other intermediary in connection with the transactions
contemplated by this Agreement. Other than those disclosed in
Disclosure Schedule 3.13, the Stockholders, and not the Company, shall be solely
responsible for any payment, fee or commission that may be due to any broker,
finder, consultant or other intermediary employed by the Company in connection
with the transactions contemplated hereby.
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3.14
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Employee
Benefit Plans.
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(a)
Section 3.14(a) of the Disclosure Schedule lists all material compensation
and
benefit plans, contracts and arrangements maintained by, sponsored or
participated in by the Company (other than routine administrative procedures
or
government-required programs) in effect as of the date hereof including, without
limitation, all pension, profit-sharing, savings and thrift, bonus, incentive
or
deferred compensation, severance pay and medial and life insurance plans in
which any current or former employees of the Company participate (collectively,
"Employee Benefit Plans"). Except as set forth in Section
3.14(a) of the Disclosure Schedule, each Employee Benefit Plan relating to
the
Business is solely sponsored or maintained by the Company.
(b)
Except as would not reasonably be expected to have a Material Adverse Effect,
all Employee Benefit Plans in which the employees of the Company and which
are
"employee benefit plans," as defined in Section 3(3) of ERISA, in all material
respects are in compliance with and have been administered in accordance with
their terms and in compliance with all applicable requirements of law,
including, but not limited to, the Code and ERISA, and all contributions
required to be made to each such plan by or on behalf of the Company under
the
terms of such plan, ERISA or the Code prior to the date hereof and the Closing
Date have been or will be, as the case may be, made or accrued.
(c)
Except as set forth in Section 3.14(c) of the Disclosure Schedule, the Company
is not required to contribute to, or during the five-year period ending on
the
Closing Date will have been required to contribute to, any "multiemployer plan,"
as such term is defined in Section 4001(a)(3) or ERISA.
12
(d)
Except as otherwise set forth in Section 3.14(d) of the Disclosure Schedule
or
as would not reasonably be expected to have a Material Adverse Effect, each
Employee Benefit Plan has been maintained in all material respects in accordance
with its terms and with all legal requirements applicable thereto and is funded
and/or book reserved for in accordance with applicable laws.
(e)
Except as set forth in Section 3.14(e) of the Disclosure Schedule:
(i) each
Employee Benefit Plan, if intended to be "qualified" within the meaning of
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and the related trusts have been determined to be exempt
from
tax under Section 501(a) of the Code and, to the Company's and the Stockholders'
Knowledge, nothing has occurred that has or could reasonably be expected to
affect adversely in a material manner such qualification or
exemption;
(ii) neither
the Company nor any of its ERISA Affiliates nor any other "disqualified Person"
or "party in interest" (as such terms are defined in Section 4975 of the Code
and Section 3(14) of ERISA, respectively) with respect to an Employee Benefit
Plan has breached the fiduciary rules of ERISA or engaged in a prohibited
transaction that could subject the Company or any of its ERISA Affiliates to
any
material Tax or penalty imposed under Section 4975 of the Code or Section
502(i), (j) or (l) of ERISA; and
(iii) except
as set forth on Section 3.14(e)(iii) of the Disclosure Schedule or as may be
required under laws of general application, none of the Employee Benefit Plans
obligates the Company to provide any employee or former employee, or their
spouses, family members or beneficiaries, any post-employment or post-retirement
health or life insurance, accident or other "welfare-type"
benefits.
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3.15
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Contracts.
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(a) The
books and records of the Company contain copies of all quotes to all potential
customers for all products and services offered by the Company during the last
three (3) fiscal years. Section 3.15(a) of the Disclosure Schedule
sets forth the aggregate revenue from each customer which is a Qualified Account
in any of the last three (3) fiscal years. Except as set
forth in Section 3.15(a) of the Disclosure Schedule, no current major customers
of the Company have canceled or terminated their contracts, or notified the
Company of their intent to cancel or terminate their contract or business
relationship (numbers, letters or pseudonyms may be used when setting forth
the
identities of customers in Section 3.15(a) of the Disclosure Schedule, which
at
Closing will be replaced by the Company with actual names of
customers).
(b)
Section 3.15(b) of the Disclosure Schedule contains a complete list of all
suppliers of the Company who within the past 12 months have invoiced the Company
for $20,000 or more, including the types of products and/or services provided
by
each such supplier (numbers, letters or pseudonyms may be used when setting
forth the identities of suppliers in Section 3.15(b) of the Disclosure Schedule,
which at Closing will be replaced by the Company with actual names of
suppliers).
13
(c)
Section 3.15(c) of the Disclosure Schedule sets forth a list of all of the
currently effective written contracts or material binding oral agreements known
to the Company, excluding customer contracts, (the "Contracts") to which
the Company is a party, of the following types (numbers, letters or pseudonyms
may be used when setting forth the identities of parties to Contracts in Section
3.15(c) of the Disclosure Schedule, which at Closing will be replaced by the
Company with actual names of the parties to the Contracts):
(i) Employment
agreements and any offers of employment outstanding;
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(ii)
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Royalty
agreements;
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(iii)
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Consulting
agreements;
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(iv) Agreements
or commitments for capital expenditures or the acquisition by purchase or lease
of fixed assets providing for payments in excess of $10,000 individually or
in
the aggregate;
(v) Agreements
for the purchase, lease or other transfer of any services, products, materials
or supplies in excess of $10,000 individually or in the aggregate;
(vi) Joint
venture or partnership agreements with any other entity;
(vii) Non-competition
or similar agreements which prevent the Company or any of its employees from
competing with any Person;
(viii) Confidentiality
or employee non-solicitation agreements with any other Person;
(ix) Agreements
relating to the research or development by the Company for others or by others
for the Company;
(x)
Agreements for the long-term borrowing or
long-term lending of money (including capitalized leases);
(xi) Agreements
for the short-term borrowing or short-term lending of money; and
(xii) Any
Contract, not listed in other Schedules to this Agreement, requiring the
performance by the Company of any obligation for a period of time extending
more
than one year from the date of this Agreement or calling for the Company to
pay
a consideration or incur costs of more than Ten Thousand Dollars
($10,000).
(d)
Except as set forth in Section 3.15 (d) of the Disclosure Schedule, the Company
has no knowledge of any Contract to which the Company is a party to or bound
by
which either separately or in the aggregate has resulted or is likely to result
in a loss to the Company which would reasonably be expected to have a Material
Adverse Effect.
14
(e)
Except as set forth in Section 3.15(e) of the Disclosure Schedule, the Company
is not, or to the Company's Knowledge, any other party to any Contract is not,
as of the date hereof, in material breach thereof or material default thereunder
and there does not exist under any provision thereof, to the Company's
Knowledge, any event that, with the giving of notice or the lapse of time or
both, would constitute such breach or default, except for such breaches,
defaults and events as to which requisite waivers or consents have been or
are
obtained or which would not reasonably be expected to have a Material Adverse
Effect.
(f)
True
and complete copies of all of the Contracts and instruments referred to above
have been delivered to Buyer (numbers, letters or pseudonyms may be used when
setting forth the identities of parties to Contracts in Section 3.15(f) of
the
Disclosure Schedule, which at Closing will be replaced by the Company with
actual names of the parties to the Contracts).
3.16 Accounts
Receivable. All accounts receivable of the Company reflected on the Most
Recent Balance Sheet (other than those paid since such date), are valid
receivables and are not, to the Knowledge of the Company, subject to setoffs
or
counterclaims, and are, to the Knowledge of the Company, collectible in the
ordinary course of business of the Company, net of the applicable reserve for
bad debts on the Most Recent Balance Sheet.
3.17 Labor
Matters. Except as set forth in Section 3.17 of the Disclosure
Schedule, the Company is not a party to any agreement with labor unions or
associations representing employees of the Company. As of the date
hereof, no work stoppage against the Company is pending or, to the Company's
Knowledge, threatened. As of the date hereof, the Company is not
involved in or, to the Company's Knowledge, threatened with any labor dispute,
arbitration, lawsuit or administrative proceeding relating to labor matters
involving the employees of the Company (excluding routine claims) that would
reasonably be expected to have a Material Adverse Effect.
3.18 Undisclosed
Liabilities. Except as disclosed in Sections 3.18 of the
Disclosure Schedule, and except to the extent reflected, reserved against or
otherwise disclosed in the Financial Statements, the Company has not, at the
Closing Date, any liabilities or obligations that would be required to be
reflected on a consolidated Balance Sheet prepared in conformity with GAAP,
consistently applied, except for liabilities or obligations of less than $10,000
in aggregate arising in the ordinary course of business and consistent with
past
practice.
3.19 Relationships
With Customers and Suppliers. Section 3.19 of the Disclosure
Schedule sets forth a list of (i) each customer that was a Qualified Account
during the last full fiscal year or the interim period through the Balance
Sheet
Date and the amount of revenues accounted for by such customer during each
such
period and (ii) each supplier that is the sole or major supplier of any
significant product or service to the Business. Except as disclosed
in Section 3.19 of the Disclosure Schedule, no such customer or supplier of
the
type identified in the previous sentence has expressly stated within the past
year that it will stop, or decrease the rate of, buying products or services
or
supplying products, as applicable, to the Business, the effect of which would
reasonably be expected to have a Material Adverse Effect, and to the Company’s
Knowledge, there is no reasonable basis to believe any such customer or supplier
will after the Closing stop, or decrease the rate of, buying products or
services or supplying products, as applicable to the Business, the effect of
which would reasonably be expected to have a Material Adverse
Effect. To the Company’s Knowledge, there is no unfilled customer
order, agreement or contract obligating the Company to process, manufacture
or
deliver products or perform services will result in a material loss to the
Company upon completion of performance. To the Company’s Knowledge,
no purchase order or commitment of the Company, with respect to the Business,
is
in excess of normal requirements, or are prices provided therein materially
in
excess of current market prices for the products or services to be provided
thereunder (factual numbers, but generic names may be used when setting forth
the Disclosures in this Section, which at Closing will be replaced with factual
names by the Company).
15
3.20 Insurance. The
Company is covered by valid and currently effective insurance policies issued
in
favor of the Company. Section 3.20 of the Disclosure Schedule sets
forth each insurance policy issued in favor of the Company and for each policy
identifies the type and amount of coverage.
3.21 Real
Property - Owned or Leased. Section 3.21 of the
Disclosure
Schedule
identifies all Real Property and, with respect to the Leased Property,
identifies for each such Leased Property the landlord, the monthly rent and
the
term of the lease applicable to such Leased Property. With respect to
the Real Property, except as set forth in Section 3.21 of the Disclosure
Schedule: (i) to the Knowledge of the Company, no portion thereof is
subject to any pending condemnation proceeding or action by any public or
quasi-public authority and, to the Company's and the Stockholders' knowledge,
there is no threatened condemnation or action with respect thereto, in each
case
which would affect the use of, or operation of the Business or the Real Property
in any material respect and (ii) with respect to the Leased Property, the
Company has not sub-leased or assigned its interests purported to be granted
by
any such lease and each lease is in full force and effect and constitutes a
valid and binding obligation of the Company, as applicable.
3.22 Books
and Records. Section 3.22 of the Disclosure Schedule sets forth
true and complete copies of all of the minute books of the Company containing
records of meetings and other corporate actions taken by the directors and
stockholders of the Company. To the Knowledge of Company, such
minute books of the Company do not omit any descriptions of corporate action
or
resolutions in respect of any material decision, event or
transaction. Section 3.22 of the Disclosure Schedule sets forth a
true and complete list, by name, address, employer, and length of service of
each of (a) the current executive officers and (b) the current directors of
the
Company.
3.23 Employees. Section
3.23 of the Disclosure Schedule contains a list of all employees and consultants
(collectively "Employees") of the Company, along with the position and
the annual rate of compensation of each such person. Section 3.23 of
the Disclosure Schedule contains a list of all Employees who are a party to
a
non-competition agreement with the Company, and copies of any such agreements
have previously been delivered to Buyer. Subject to applicable legal
and equitable principles limiting enforceability, each such agreement, if any,
will continue to be legal, valid, binding and enforceable and in full force
and
effect immediately following the Closing in accordance with the terms thereof
as
in effect immediately prior to the Closing. Except as set forth in
Sections 3.23 of the Disclosure Schedule, to the Knowledge of the Company,
no
key Employee or group of Employees has any plans to terminate employment, is
in
competition with the Company, or is using Company equipment, assets, customer
lists or other Company property for any purpose other than for the benefit
of
the Company (numbers, letters or pseudonyms may be used when setting forth
the
identities of employees in Section 3.23 of the Disclosure Schedule, which at
Closing will be replaced by the Company with actual names of
employees).
16
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3.24
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Environmental
Matters.
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(a) To
the Company’s Knowledge, there are no underground storage tanks present on any
Company Facility.
(b) Schedule
3.24(b) accurately describes all of the Environmental Permits currently held
by
Company and the Environmental Permits listed on Schedule 3.24(b) are all of
the
Environmental Permits necessary for the continued conduct of any Hazardous
Material Activity of Company as such activities are currently being
conducted.
(c) Except
as set forth in Section 3.24(c) of the Disclosure Schedule, the Company has
not
transferred or released Hazardous Materials to any Disposal Sites and no action
or proceeding exists or, to the Company’s Knowledge, is threatened, against
Company with respect to any transfer or release of Hazardous Materials to a
Disposal Site.
(d) The
Company has delivered to Buyer or made available for inspection by Buyer any
records concerning the Hazardous Materials Activities of Company and all
environmental audits and environmental assessments of any Company Facility
conducted at the request of, or otherwise available to, Shareholders or
Company.
(e) To
the Company’s Knowledge, the Company has never conducted any Hazardous Material
Activity in violation of any applicable Environmental Law which could result
in
a Material Adverse Effect.
(f) No
action, proceeding, revocation proceeding, amendment procedure, writ, injunction
or claim is pending or, to the Company’s Knowledge, threatened concerning or
relating to any Environmental Permit or any Hazardous Materials Activity of
Company.
3.25 Warranties. Except
as set forth in Section 3.25 of the Disclosure Schedule, no product or service
manufactured, sold, leased, licensed or delivered by the Company is subject
to
any guaranty, warranty, right of return, right of credit or other indemnity
other than (a) applicable standard terms and conditions set forth in
Section 3.25 of the Disclosure Schedule, and (b) manufacturers’ warranties
for which the Company has any liability. Section 3.25 of the
Disclosure Schedule sets forth the aggregate expenses incurred by the Company
in
fulfilling its obligations under guaranty, warranty, right of return and
indemnity provisions during each of the fiscal years and the interim period
covered by the Financial Statements; and the Company does not know of any reason
why such expenses should significantly increase as a percentage of sales in
the
future, to the extent any such increase would reasonably be expected to result
in a Material Adverse Effect.
3.26 Product
Liability. Except as set forth in Section 3.26 of the Disclosure
Schedule, the Company has no knowledge of any defects in any of the Company's
products, including without limitation, software, hardware, equipment and/or
products heretofore or currently being distributed or sold by the Company,
which
would have a Material Adverse Effect.
17
3.27 Questionable
Payments; Affiliate Transactions. Except as set forth in Section
3.27 of the Disclosure Schedule, the Company is not a party to any contract
or
agreement with (a) any of its Affiliates, (b) any of its directors or officers
or (c) any Affiliate of its officers or directors, except in each case for
contracts or agreements entered into with terms no less favorable to the Company
than would be obtained from a Person not an Affiliate of such
Person.
3.28 Supplementation
of Disclosure Schedule. The Company may supplement the Disclosure
Schedule and deliver such Disclosure Schedule (as so supplemented, the
"Supplemental Schedule") to Buyer two (2) days prior to the Closing Date
solely for the purposes of updating disclosures made therein to reflect matters
or transactions permissible hereunder occurring after the date hereof and on
or
prior to the Closing Date; provided, however, that the Company shall not be
entitled to update the Disclosure Schedule to reflect any matter or transaction
that would violate any provision of this Agreement or any matter or transaction
that would have a Material Adverse Effect.
3.29 Disclosure. No
representation or warranty by the Company contained in this Agreement, and
no
statement contained in the Disclosure Schedule or any other document,
certificate or other instrument delivered or to be delivered by or on behalf
of
the Company pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made,
in
order to make the statements herein or therein not misleading. Within
two (2) days prior to the Closing Date, the Company shall have delivered to
Buyer true, complete and correct copies of all information relating to the
Company or the Business or the transactions contemplated by this Agreement
reasonably requested by Buyer and which is in possession of or under control
of
the Company.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to each Stockholder as follows:
4.1 Incorporation;
Authorization. Buyer is a corporation, duly organized validly
existing and in good standing under the laws of the State of
Delaware. Buyer has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of
this Agreement, the performance of Buyer's obligations hereunder and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and no other proceedings or actions on the part of Buyer are
necessary therefor. This Agreement has been duly executed and
delivered by Buyer, and, assuming the due execution hereof by the Company and
by
each of the Stockholders, this Agreement constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, subject to the effect of bankruptcy, insolvency, involuntary
reorganization, liquidation, dissolution, moratorium or other similar laws
relating to or affecting the rights of creditors generally and to the effect
of
the application of general principles of equity (regardless of whether
considered in proceedings at law or in equity).
18
4.2 Conflicts;
Consents. Neither the execution, delivery and performance of this
Agreement by Buyer nor the consummation by Buyer of the transactions
contemplated under this Agreement will (i) conflict with or violate any
provision of the charter or operating agreement of Buyer, (ii) require any
notice to or filing with, or any permit, authorization, consent or approval
of,
any governmental entity, (iii) violate any provision of, or be an event that
is
(or with the passage of time will result in) a violation of, or result in the
acceleration of or entitle any party to accelerate (whether after the giving
of
notice or lapse of time or both) any obligation under, or result in the
imposition of any Lien or Encumbrance upon any of Buyer's assets or properties
pursuant to, any Lien or Encumbrance, lease, agreement, instrument, order,
arbitration award, judgment or decree to which Buyer is a party or by which
Buyer is bound, or (iv) violate or conflict with any other material restriction
of any kind or character to which Buyer is subject, that, in the case of clauses
(iii) and (iv), would, individually or in the aggregate, have a Material Adverse
Effect on the ability of Buyer to consummate the transactions contemplated
hereby. Except as specified in Section 4.2 of the Disclosure
Schedule, no permit, order, authorization, consent or approval of or by, or
any
notification of or filing with, any Person (governmental or private) is required
in connection with the execution, delivery and performance by Buyer of this
Agreement or the consummation by Buyer of the transactions contemplated
hereby.
4.3 Brokers,
Finders, Etc. Buyer has not employed, and is not subject to the
valid claim of, any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this
Agreement. Buyer is solely responsible for any payment, fee or
commission that may be due to any broker, finder, consultant or other
intermediary employed by Buyer in connection with the transactions contemplated
hereby.
ARTICLE
V
COVENANTS
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5.1
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Communication
and Notification.
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(a)
Prior
to the Closing Date, neither Buyer nor its representatives shall contact any
of
the Employees (unless such is also a Stockholder), customers or suppliers of
the
Company, in connection with the transactions contemplated hereby, whether in
person or by telephone, mail or other means of communication, without the
specific prior written authorization of the Company (as authorized by the
Chairman of the Board of Directors or the President of the Company), which
authorization shall not be unreasonably withheld.
(b)
Any
information provided to Buyer or its representatives pursuant to this Agreement
shall be held by Buyer and its representatives in accordance with, and shall
be
subject to the terms of, the Mutual Nondisclosure Agreement, dated May 18,
2007,
by and between the Company and Buyer, which is hereby incorporated in this
Agreement as though fully set forth herein.
19
(c)
Buyer
agrees to (i) hold all of the books and records of the Company existing on
the
Closing Date and not to destroy or dispose of any thereof for a period of seven
(7) years from the Closing Date and thereafter, if it desires to destroy or
dispose of such books and records, to offer first in writing at least ten (10)
Business Days prior to such destruction or disposition to surrender them to
the
Stockholders and (ii) for one (1) year following the Closing Date to afford
the
Stockholders and their accountants and legal counsel, during normal business
hours, upon reasonable request, full access to such books, records and other
data and to the employees of the Company to the extent that such access may
be
requested for any purpose related to the enforcement of the Stockholders' rights
hereunder at no cost to the Stockholders (other than for reasonable
out-of-pocket expenses).
5.2 Reasonable
Efforts; Obtaining Consents. Subject to the terms and conditions
herein provided, the Stockholders, the Company and Buyer each agree to use
their
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective, as promptly as practicable, the transactions contemplated by
this Agreement and to cooperate with the other in connection with the foregoing,
including using their reasonable efforts (i) to obtain all necessary waivers,
consents and approvals from other parties to material loan agreements, leases
and other contracts, (ii) to obtain all consents, approvals and authorizations
that are required to be obtained under any federal, state, local or foreign
law
or regulation, (iii) to lift or rescind any injunction or restraining order
or
other order materially adversely affecting the ability of the parties hereto
to
consummate the transactions contemplated hereby, (iv) to effect all necessary
registrations and filings including, but not limited to, filings and submissions
of information requested or required by any domestic or foreign government
or
governmental or multinational authority, and (v) to fulfill all conditions
to
this Agreement. The Stockholders, the Company and Buyer further
covenant and agree, with respect to a threatened or pending preliminary or
permanent injunction or other order, decree or ruling or statute, rule,
regulation or executive order that would materially adversely affect the ability
of the parties hereto to consummate the transactions contemplated hereby, to
use
their respective reasonable efforts to prevent the entry, enactment or
promulgation thereof, as the case may be. In no event, however, shall
any Stockholder, the Company or Buyer be obligated to pay any money to any
Person or to offer or grant other financial or other accommodations to any
person in connection with its obligations under this Section
5.2. Notwithstanding anything contained in this Section 5.2 to the
contrary, the Company’s obligations hereunder are further limited by (i) the
provisions and disclaimers of the Disclosure Schedule, and (ii) the provisions
of this Agreement to which the Company is bound as provided in the first
paragraph of this Agreement.
5.3 Further
Assurances. Each Stockholder and Buyer agree that, from time to
time, whether before, at or after the Closing Date, each of them will execute
and deliver such further instruments of conveyance and transfer and each
Stockholder, the Company and Buyer shall take such other action as may be
reasonably necessary to carry out the purposes and intents of this Agreement
and
the transactions contemplated thereby.
5.4 Conduct
of Business. From the date hereof through the Closing, except as
disclosed on Section 5.4 of the Disclosure Schedule, or otherwise provided
for
in, or contemplated by, this Agreement, the Stockholders and the Company
covenant and agree that:
20
(a)
the
Company shall operate the Business in its ordinary and usual course in all
material respects in accordance with past practices;
(b)
the
Company shall not issue, sell or agree to issue or sell (i) any shares of its
capital stock, or (ii) any securities convertible into, or options with respect
to, or warrants to purchase or rights to subscribe for, any shares of its
capital stock;
(c)
except as contemplated by this Agreement, the Company shall not amend its
articles of incorporation or by-laws (or other charter documents) in any
material respect;
(d)
except in the ordinary course of business or as required by law or by
contractual obligations or other understandings or arrangements existing on
the
date hereof, the Company shall not (i) increase in any manner the base
compensation of, or enter into any new bonus or incentive agreement or
arrangement with, any of its directors, officers or other employees; (ii) pay
or
agree to pay any new pension, retirement allowance or other employee benefit
to
any such director, officer or employee, whether past or present; (iii) enter
into any new or amend in any way a previous or existing employment, severance,
consulting, or other compensation agreement with any director, officer or
employee; or (iv) commit itself to any new pension, profit-sharing, deferred
compensation, group insurance, severance pay, Employee Benefit Plan, retirement
or other employee benefit plan, fund or similar arrangement or amend or commit
itself to amend any of such plans, funds or similar arrangements in existence
on
the date hereof;
(e)
the
Company shall not:
(i)
except as set forth in Section 5.4(e)(i) of the Disclosure Schedule, sell,
transfer or otherwise dispose of any of its assets having a value in excess
of
$5,000, other than sales in the ordinary course of business consistent with
past
practice;
(ii) create
any new Lien or Encumbrance on its properties or assets (other than Permitted
Liens and Encumbrances);
(iii) enter
into any joint venture, partnership or other similar arrangement;
(iv) incur
any indebtedness for borrowed money of the Company that would be outstanding
immediately subsequent to the Closing;
(v) purchase
any assets or securities of any Person having a value in excess of $5,000,
except in the ordinary course of business consistent with past
practices;
(vi) enter
into any contract (or series of related contracts) other than in the ordinary
course of business and consistent with past practice;
(vii) delay
or postpone the payment of accounts payable and other obligations and
Liabilities or accelerate the collection of accounts receivable, other than
in
the ordinary course of business consistent with past custom and
practice;
21
(viii) enter
into any transaction with any of its officers, employees or Affiliates (or
any
directors, officers or employees of such Affiliate) with terms less favorable
to
the Company as would be obtained from a Person not an Affiliate of such Persons;
or
(ix) declare
or pay a distribution on any equity interests, or redeem or otherwise repurchase
any of its equity interests, or issue, deliver, pledge or encumber any
additional equity interests or other securities equivalent to, or exchangeable
for, equity interests or enter into any contract to do any of the
foregoing.
(f)
the
Company shall not settle any material Tax Audit, make or change any material
Tax
election or file any amended Tax Return amending a Tax Return in any material
respect; and
(g)
the
Company shall agree to take any action prohibited by this Section
5.4.
Notwithstanding
the provisions of this Section 5.4, nothing in this Agreement shall be construed
or interpreted to prevent the Company from engaging in any transaction incident
to the normal cash management procedures of the Company including, without
limitation, the prepayment of any outstanding indebtedness as reflected upon
the
Most Current Balance Sheet of the Company.
5.5 Preservation
of Business. Subject to the terms and conditions of this
Agreement and subject to the provisions and disclaimers of the Disclosure
Schedule, prior to Closing, the Company shall use commercially reasonable
efforts to preserve the Business intact, to keep available to the Company and
Buyer, the services of the employees of the Business, and to preserve its
relationship with customers and others having business relations with the
Business, in each case in all material respects.
5.6 Public
Announcements. Except as may otherwise be required by applicable
law, prior to the Closing, neither the Company, any Stockholder nor Buyer will
issue or permit to be issued, any press releases or otherwise make, or permit
any agent or Affiliate to make, any public statements with respect to this
Agreement and the transactions contemplated hereby. Following the Closing,
no
public statements shall be made by any Stockholder or any agent or Affiliate
of
a Stockholder without the prior written consent of the Buyer.
5.7 Non-Solicitation. If
this Agreement is terminated, Buyer will not, for a period of two (2) years
thereafter, without the prior written approval of the Company, directly or
indirectly, solicit, encourage, entice or induce any person who is an employee
of the Company at the date hereof or at any time hereafter that precedes such
termination, to terminate his or her employment with the Company;
provided, however, that the foregoing restriction shall not apply
to any solicitation made by Buyer to the public generally. Buyer
agrees that any remedy at law for any breach by it of this Section 5.7 would
be
inadequate, and Stockholders, the Company would be entitled to injunctive or
other equitable relief in such a case. If it is ever held that the
restriction placed on Buyer by this Section 5.7 is too onerous and is not
necessary for the protection of Stockholders, the Company, Buyer agrees that
any
court of competent jurisdiction may impose lesser restrictions which such court
may consider to be necessary or appropriate to properly protect Stockholders,
the Company.
22
5.8 No
Shop. During the period commencing the date hereof to the earlier
of the termination of this Agreement or the Closing Date, the Company and the
Stockholders shall deal exclusively with Buyer regarding the acquisition of
or
investment in the Company, whether by way of merger, purchase of capital stock,
purchase of assets or otherwise (a "Potential Transaction") and, without
the prior written consent of Buyer, the Company and the Stockholders shall
not
directly or indirectly, (a) solicit, initiate discussions with or engage in
negotiations with any Person (whether such negotiations are initiated by the
Company, the Stockholders, or otherwise), other than Buyer relating to a
Potential Transaction, (b) provide information or documentation with respect
to
the Company or the Business relating to a Potential Transaction to any Person,
other than Buyer or (c) enter into an agreement with any Person, other than
Buyer, providing for any Potential Transaction. If the Company or the
Stockholders receive an unsolicited inquiry, offer or proposal relating to
any
of the above, the Company shall immediately notify Buyer thereof, but shall
not
entertain the solicitation until the termination of this Agreement.
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5.9
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Buyer's
Obligations for Employee
Benefits.
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(a)
After
the Closing Date, subject to the other provisions of this Section 5.9, Buyer
agrees that, for a period of two (2) years after the Closing Date, it will
use
reasonable care to (i) continue in full force and effect all Employee Benefit
Plans in accordance with their terms without any reduction of material benefits
or other amendment or modification which would be materially adverse to the
employees covered thereby, taken as a whole (except to the extent necessary
to
comply with applicable law); (ii) provide all Employees with severance benefits
at least as favorable in the aggregate as those provided to Employees
immediately prior to the Closing Date; (iii) provide all Employees with medical
and other welfare benefits no less favorable in the aggregate than those
provided to Employees immediately prior to the Closing Date; (iv) provide all
Employees with a wage and salary program no less favorable in the aggregate
than
that in place at the Company, as applicable immediately prior to the Closing
Date; and (v) provide all Employees with other compensation and benefits no
less
favorable in the aggregate than the corresponding compensation and benefits
provided to Employees immediately prior to the Closing Date; provided that
the
costs of maintaining the benefits in items (i) and (ii) above will not
materially exceed the Company's average annual cost of providing such benefits
during the prior two-year period. In addition, the Company agrees to
give Employees service credit for all periods of employment with the Company
prior to the Closing Date for purposes of vesting and eligibility (not for
pension benefit accruals) under any plan adopted or maintained by the Company
in
which such employees participate. The Company agrees to waive any
limitations regarding preexisting conditions, and to give full credit for any
copayments made and deductibles fully or partially satisfied prior to the
Closing Date with respect to Employee Benefit Plans, under any welfare or other
employee benefit plans maintained, by the Company in which Employees participate
after the Closing. From and after the Closing Date, the Company shall
be solely responsible for all termination and severance benefits, costs, charges
and liabilities of any nature incurred with respect to the termination of a
Employee on or after the Closing Date, including, without limitation, any claims
arising out of or relating to any plant closing, mass layoff or similar event
under applicable law occurring on or after the Closing Date provided the
termination was not cause by any actions of Stockholders and/or employees prior
to the Closing.
23
(b)
The
Company shall be responsible for the administration of and shall assume any
and
all obligations arising under the continuation coverage requirements of Section
4980B of the Code and Part 6 of Title I of ERISA for those plan participants
in,
and beneficiaries under, the Employee Benefit Plans who are eligible to exercise
their rights to such coverage as of or following the Closing Date.
(c)
At or
promptly after the Closing and subject to applicable securities laws and vesting
limitations, Buyer will issue to up to fifteen (15) employees of the Company
designated by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ options to purchase or other rights in respect
of an aggregate of up to 500,000 shares of Common Stock of Buyer, in such
amounts as are reasonable satisfactory to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
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5.10
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Employees.
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(a)
The
Company shall be responsible for providing any notice required, pursuant to
the
United Sates Federal Worker Adjustment and Retraining Act of 1988, any successor
United States federal law, and any applicable plant closing notification law
with respect to a layoff or plant closing relating to the Business that occurs
as a result of or after the Closing. The Company shall be responsible
for providing any such notice with respect to a layoff or plant closing
occurring prior to the Closing.
(b)
The
Company will permit Employees to carry over and take accrued, but unused,
vacation days with pay as set forth in Disclosure Schedule 5.10(b) in accordance
with the applicable policies or collective bargaining agreements of the Company
as in effect as of the Closing Date.
(c)
To
the extent necessary to comply with any applicable laws in foreign jurisdictions
which safeguard the rights of employees in transfers of undertakings, businesses
or parts of businesses (collectively, the "Transfer Laws"), the Company
shall comply with its obligations under the Transfer Laws, including any
obligations to maintain certain terms and conditions of employment of the
Employees to the extent the failure to comply would result in a material
obligation being imposed on the Stockholders.
5.11 Transfer
Taxes. All federal, state, local, foreign, and other transfer,
sales, use, or similar Taxes applicable to or imposed upon or arising out of
the
transfer of the Shares or other transactions contemplated by this Agreement
shall be paid by the party incurring such Tax.
5.12 Covenant
to Supply Information. From and after the date of this Agreement
until the Diligence Termination Date or the earlier termination of this
Agreement, except as otherwise consented to in writing by Buyer, the Company
shall afford Buyer, its financing sources and their respective advisors,
representatives and agents (a) reasonable and customary access to the
properties, books, records and executive personnel of the Company, (b) access
to
the customers of the Company under mutually agreeable circumstances, (c) upon
reasonable notice by Buyer and at times and in accordance with procedures to
be
mutually agreed by the Company and Buyer, the opportunity to make such
reasonable inspections of the Company operations and (d) the opportunity to
review financial and operating data and other information with respect to the
Business. The Company shall promptly respond to each due diligence
request from Buyer and in all events shall deliver due diligence responses
which
are complete in all material respects to Buyer no later than the Diligence
Termination Date.
24
5.13 Delivery
of Subsequent Financial Information. For each calendar month
during 2007 ending prior to the earlier of (a) the Closing Date and (b) the
termination of this Agreement, the Company shall prepare and deliver to Buyer,
as soon as reasonably practicable consistent with past practices, the unaudited
consolidated calendar monthly Balance Sheet of the Company, the unaudited
consolidated statement of cash flows of the Company and the unaudited
consolidated statement of income of the Company for the fiscal year-to-date
period then ended, including any and all footnotes thereto.
5.14 Additional
Agreements. At the Closing, the parties hereto shall execute and
deliver any instruments of transfer, assignment or conveyance necessary to
consummate the transactions contemplated by this Agreement, including a
Consulting Agreement between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in form and
substance substantially similar to the Consulting Agreement attached hereto
as
Exhibit D.
5.15 Deposit
of Certificates. Concurrent with the execution of this Agreement,
the Stockholders each shall deposit the certificates representing their Shares
in escrow with an escrow company in the Philadelphia, PA area, acceptable to
both Stockholders and Buyer, pursuant to the terms of an Escrow Agreement,
the
form of which is attached hereto as Exhibit B. In the event
the Closing does not occur or this Agreement is terminated, such certificates
shall be promptly returned to the Stockholders. Otherwise, Escrow
Agent shall deliver such certificates to the Closing for an on behalf of the
Stockholders.
ARTICLE
VI
CONDITIONS
TO BUYER'S OBLIGATION TO CLOSE
Buyer's
obligation to consummate the Stock Purchase Transaction shall be subject to
the
satisfaction on or prior to the Closing Date of all of the following conditions,
unless otherwise waived by Buyer:
6.1 Representations,
Warranties and Covenants of Stockholders and the Company. The
representations and warranties of the Stockholders and the Company contained
in
this Agreement shall be true and correct in all material respects to the best
knowledge of the Company and the Stockholders on and as of the Closing Date
with
the same effect as though such representations and warranties had been made
on
and as of such date except for representations and warranties that speak as
of a
specific date or time prior to the date hereof (which need only be true and
correct in all material respects as of such date or time); the covenants and
agreements of each Stockholder and the Company to be performed on or before
the
Closing Date in accordance with this Agreement shall have been duly performed
in
all material respects; and Buyer shall have received at the Closing a
certificate to that effect (the Company’s certificate shall be subject to the
limitations set forth in sub-clause (ii) of the first unnumbered paragraph
of
Article III) dated the Closing Date and validly executed by each Stockholder
and
the Company a certificate certifying the organizational documents of the Company
and the Board resolutions of the Company approving this Agreement and the
transactions contemplated hereby on the Company’s part to be performed and/or
observed.
25
6.2 Filings;
Consents; Waiting Periods. All registrations, filings,
applications, notices, consents, approvals, orders, qualifications and waivers
necessary to consummate the transactions contemplated hereby shall have been
filed, made or obtained.
6.3 No
Injunction. At the Closing Date, there shall be no injunction,
restraining order or decree of any nature or any proceeding of any court or
governmental agency or body of competent jurisdiction that is in effect that
restrains or prohibits or could be reasonably expected to restrain or prohibit
the consummation of the transactions contemplated hereby.
6.4 Transaction
Documents. Buyer shall have obtained duly executed counterparts
of this Agreement and all other documents and agreements to be executed and
delivered in connection therewith, each duly executed by the parties thereto
other than Buyer.
6.5 Resignation
of Directors. The Board of Directors of the Company shall be
reconstituted simultaneously with the Closing.
6.6 Selling
Stockholders. Counterpart signature pages to this Agreement shall
have been delivered in a manner or structure that delivers one hundred percent
(100%) of the issued and outstanding Shares to Buyer.
6.7 Employee
Non-disclosure Agreements. The Company shall have obtained from
each of its Employees listed on Schedule 6.7 hereof, a non-disclosure,
non-competition, invention assignment and non-solicitation agreement in a form
reasonably acceptable to Buyer.
6.8 2005-2006
Audit. The Buyer shall have received the Company’s audited
financials statements as of August 31, 2006, and August 31, 2005, together
with
the unqualified audit report thereon, all correspondence between the Company
and
its independent accountants pertaining to such audit and year to date (through
April 30, 2007) compiled financial statements, including the Most Recent Balance
Sheet.
6.9 Diligence;
Delivery of Documents. Buyer shall have completed its due
diligence investigation of the Company and the Stockholders to its sole
satisfaction.
6.10 Deliveries. At
Closing, the Company shall execute and/or deliver to Buyer (except in the case
of Section 6.10(c), where the Company shall have an obligation to use its best
efforts to deliver to Buyer):
(a) The
minutes and stock transfer books of the Company;
(b) Resignations
from each of the Company’s directors and officers, as may be designated by
Buyer;
26
(c)
A
waiver of First Horizon Bank of any right to accelerate or declare a default
under the terms of the loan documents dated February 15, 2007 between the
Company and First Horizon Bank in the original principal amount of
$320,000;
(d)
Noncompetition Agreement in the form attached hereto as Exhibit C,
executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇;
(e)
Consulting Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the form attached hereto as
Exhibit D;
(f)
All
other certificates, Schedules, Exhibits, and attachments, in completed form,
which are required by the provisions of this Agreement on the Company’s part to
be performed or observed;
(g)
The
actual names and/or identities of the customers and other parties previously
disclosed by numbers, letters or pseudonyms to Buyer pursuant to Sections 3.15,
3.19, and 3.23;
(h)
A
true and correct copy of the Company's articles of incorporation and bylaws,
all
as amended through the Closing Date; and
(i) Resolutions
of the Company's Board of Directors (i) authorizing the Company to make such
deliveries and take such actions as are necessary to close the Stock Purchase
Transaction, and (ii) certifying the accuracy in all material respects and
subject to the provisions and disclaimers set forth in the Disclosure Schedule,
of the representations and warranties set forth in Article III above, which
resolutions are dated as of the Closing Date.
ARTICLE
VII
CONDITIONS
TO STOCKHOLDERS' OBLIGATIONS TO CLOSE
Each
Stockholder's obligation to
consummate the Stock Purchase Transaction shall be subject to the satisfaction
on or prior to the Closing Date of all of the following conditions:
7.1 Representations,
Warranties and Covenants of Buyer. The representations and
warranties of Buyer in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date except
for
representations and warranties that speak as of a specific date or time prior
to
the date hereof (which need only be true and correct in all material respects
as
of such date or time); the covenants and agreements of Buyer to be performed
on
or before the Closing Date in accordance with this Agreement shall have been
duly performed in all material respects; and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, on behalf of
each Stockholder, shall have received at the Closing a certificate to that
effect dated the Closing Date and validly executed on behalf of Buyer and a
certificate certifying the charter documents of Buyer and resolutions approving
this Agreement and the transactions contemplated thereby.
27
7.2 Filings;
Consents; Waiting Periods. All registrations, filings,
applications, notices, consents, approvals, orders, qualifications and waivers
necessary to consummate the transactions contemplated hereby shall have been
filed, made or obtained.
7.3 No
Injunction. At the Closing Date, there shall be no injunction,
restraining order or decree of any nature or any proceeding of any court or
governmental agency or body of competent jurisdiction that is in effect or
is
pending or threatened that restrains or prohibits or could be reasonably
expected to prohibit the consummation of the transactions contemplated
hereby.
7.4 Transaction
Documents. The Stockholders shall have received duly executed
counterparts of this Agreement and all other documents and agreements to be
executed and delivered in connection therewith, each duly executed by the
parties thereto other than the Company and the Stockholders, including the
Consulting Agreement.
ARTICLE
VIII
INDEMNIFICATION
8.1 Survival. All
representations, warranties and (except as provided in the following sentence)
covenants of the parties contained in this Agreement or in any Disclosure
Schedule hereto, or in any certificate, document or other instrument delivered
in connection herewith shall terminate and cease to be of further force and
effect as of the Closing; provided, however, that the
representations and warranties of the Stockholders and the Company contained
in
Articles II and III (subject to the provisions and disclosures of the Disclosure
Schedule) and in Sections 5.4 and 5.5 (collectively, the "Fundamental
Representations and Warranties") survive the Closing Date until the
Termination Date. Further, those obligations and covenants that
contemplate or may involve actions to be taken or obligations in effect after
the Closing shall survive in accordance with their terms.
8.2 Indemnification
Generally; Etc. From and after the Closing Date and prior to the
Termination Date each Stockholder, severally and jointly, agrees to indemnify
and hold harmless Buyer for his, her or its pro-rata portion of any and all
Losses actually suffered, sustained or incurred as a result of:
(a)
the
inaccuracy or breach of any representation or warranty of such Stockholder
contained in Article II of this Agreement; or
(b)
the
breach of any agreement or covenant of such Stockholder contained in this
Agreement or the breach of any agreement or covenant of the Company contained
in
Sections 5.4 or 5.5 of this Agreement; or
(c)
the
inaccuracy or breach of any representation or warranty of or by the Company
contained in Article III of this Agreement; but only to the extent the losses
were not caused by Buyer.
8.3 Limitation
on Indemnification. Anything contained herein to the contrary
notwithstanding:
28
(a)
Claims Notice Date. Buyer shall be indemnified only with
respect to claims as to which Buyer has given the Stockholders written notice
on
or before the Termination Date.
(b)
Indemnity Baskets for the Stockholders. Buyer shall not have
the right to be indemnified pursuant to Section 8.2(c) for breaches of
representations and warranties unless and until Buyer shall have incurred on
a
cumulative basis since the Closing Date aggregate Losses from such breaches
in
an amount exceeding $100,000 (the "Indemnity Threshold"), after which the
right to be indemnified shall apply to all of Buyer's Losses.
(c)
Indemnity Limitations for the Stockholders. The pro-rata sum
of all Losses pursuant to which indemnification is payable by any Stockholder
pursuant to Section 8.2 shall not exceed, for any Stockholder, the fair market
value of the Purchase Shares issued to such Stockholder as of the date the
Losses are finally determined; provided, however, that there shall be no
limitation on the amount of the indemnity obligation of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in
respect of the representations and warranties set forth in the third through
seventh sentences of Section 2.1 above.
8.4 Notice
and Defense of Third-Party Claims. The obligations and
Liabilities of the Indemnifying Person with respect to Losses resulting from
the
assertion of any Liability by third parties (each a "Third-Party Claim")
shall be subject to the terms and conditions set forth below.
(a)
The
Indemnified Persons shall promptly give written notice to the Indemnifying
Persons of any Third-Party Claim which might give rise to any Loss by the
Indemnified Persons, stating the nature and basis of such Third-Party Claim
and
the amount thereof to the extent known; provided, however, that no
delay on the part of the Indemnified Person in notifying any Indemnifying Person
shall relieve the Indemnifying Person from any Liability or obligations
hereunder unless (and then solely to the extent) the Indemnifying Person thereby
is prejudiced by the delay. Such notice shall be accompanied by
copies of all relevant documentation with respect to such Third-Party Claim,
including, but not limited to, any summons, complaint or other pleading which
may have been served, any written demand or any other document or
instrument.
(b)
If
the Indemnifying Persons acknowledge in a writing delivered to the Indemnified
Person that the Indemnifying Persons shall be obligated under the terms of
their
indemnification obligations hereunder in connection with such Third-Party Claim,
then the Indemnifying Persons shall have the right to assume the defense of
any
Third-Party Claim at their own expense and by their own counsel, which counsel
shall be reasonably satisfactory to the Indemnified Persons; provided,
however, that the Indemnifying Persons shall not have the right to
assume
the defense of any Third-Party Claim, notwithstanding the giving of such written
acknowledgement, if (i) the Indemnified Persons shall have one or more legal
or
equitable defenses available to them which are different from or in addition
to
those available to the Indemnifying Persons, and, in the opinion of the
Indemnified Persons, counsel for the Indemnifying Persons could not adequately
represent the interests of the Indemnified Persons because such interests could
be in conflict with those of the Indemnifying Persons, (ii) such Action is
reasonably likely to have an effect on any other matter beyond the scope of
the
indemnification obligation of the Indemnifying Persons or (iii) the Indemnifying
Persons shall not have assumed the defense of the Third-Party Claim in a timely
fashion.
29
(c)
If
the Indemnifying Persons assume the defense of a Third-Party Claim (under
circumstances in which the proviso to Section 8.4(b) is not applicable), the
Indemnifying Persons shall be responsible for any legal or other defense costs
subsequently incurred by the Indemnified Persons in connection with the defense
thereof. If the Indemnifying Persons do not exercise their right to
assume the defense of a Third-Party Claim by giving the written acknowledgement
referred to in Section 8.4(b), or are otherwise restricted from so assuming
by
the proviso to Section 8.4(b), the Indemnifying Persons shall nevertheless
be
entitled to participate in such defense with their own counsel and at their
own
expense; and in any such case, the Indemnified Persons may assume the defense
of
the Third-Party Claim, with counsel which shall be reasonably satisfactory
to
the Indemnifying Persons, and shall act reasonably and in accordance with their
good faith business judgment and shall not effect any settlement without the
consent of the Indemnifying Persons, which consent shall not unreasonably be
withheld or delayed.
(d)
If
the Indemnifying Persons exercise their right to assume the defense of a
Third-Party Claim, they shall not make any settlement of any claims without
obtaining in connection therewith a full release of the Indemnified Persons,
in
form and substance reasonably satisfactory to the Indemnified
Persons.
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8.5
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Escrow.
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(a)
At
the Closing, the Escrow Amount shall be deposited with a person or an
institution selected by Buyer with the reasonable consent of the Stockholders,
as escrow agent (the "Escrow Agent"), such deposit to constitute the
escrow fund (the "Escrow Fund") and to be governed by the terms set forth
herein and in the Escrow Agreement. The Escrow Fund shall be
available to compensate Buyer pursuant to the indemnification obligations of
the
Stockholders as set forth in Section 8.2; provided, however, that Buyer may
recover Losses in excess of the Escrow Amount directly from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
in
respect of breaches of any of the representations and warranties set forth
in
the third through seventh sentences of Section 2.1 above. The
Escrow Fund shall be the initial but not the exclusive recourse of the Buyer
in
the event the indemnification obligations of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in respect of
breaches of any of the representations and warranties set forth in the third
through seventh sentences of Section 2.1 above exceed the amount of the Escrow
Fund.
(b)
The
Escrow Agent shall hold the Escrow Fund (or any then remaining portion thereof),
subject to any earlier releases of any portion of the Escrow Fund pursuant
to
Section 8.5(e) below, in escrow until that date which shall be the earlier
of
(i) the date on which the Escrow Agent receives instructions to terminate the
escrow and distribute the Escrow Fund signed by each of Buyer and the
Stockholders, and (ii) the eighteenth (18th) month
anniversary
of the date of the Closing Date (the "Termination Date"),
provided, however, that if such termination is pursuant to clause (ii)
above, the Escrow Agent shall continue to hold and not release after the
Termination Date all or a portion of the Escrow Fund equal in stated value
to
the dollar amount of any claim or claims described in any Indemnification Claim
Notice that is submitted but not resolved before the Termination Date (such
amount being referred to as the "Disputed Claim Amount").
30
(c)
Within three (3) Business Days after the Termination Date (the "Release
Date"), the Escrow Agent shall release from escrow to the Stockholders, pro
rata, all or any then remaining portion of the Escrow Fund, less the Disputed
Claim Amount, if applicable. The Escrow Agent shall in all events
release all of the remaining Escrow Fund (including the Disputed Claim Amount)
on or before that date that shall be three (3) months after the Release Date
(the "Disputed Claim Release Date") unless on or prior to the Disputed
Claim Release Date, the parties to this Agreement (other than the Escrow Agent)
shall have (i) resolved any dispute by settlement and provided the Escrow Agent
with mutually executed delivery instructions with respect to the portion of
the
Escrow Fund then held by the Escrow Agent, of (ii) any party shall have
commenced a legal action or arbitration to resolve such dispute, in which case
the Escrow Agent shall continue to hold any then remaining portion of the Escrow
Fund (including the Disputed Claim Amount) until such action or arbitration
is
concluded.
(d)
The
Escrow Fund, or any beneficial interest therein, may not be pledged, sold,
assigned or transferred, including by operation of law, by any Stockholder
or be
taken or reached by any legal or equitable process in satisfaction of debt
or
other liability of any Stockholder, prior to the delivery to the Stockholders
of
the Escrow Fund by the Escrow Agent as provided herein.
(e)
At
any time after the Closing, Buyer may give written notice to the Stockholders
and Escrow Agent that Buyer claims all or any part of the Escrow Fund in
satisfaction of any damages for which Buyer is entitled to be indemnified
pursuant to this Agreement (such claim is herein referred to as an
"Indemnification Claim" and any such written notice of a claim is
hereinafter referred to as an "Indemnification Claim Notice"). The
Indemnification Claim Notice shall set forth in reasonable detail: (i) the
nature of the Indemnification Claim; and (ii) the amount of the Indemnification
Claim (hereinafter referred to as the "Indemnification Claim Amount"). In
the event Buyer gives any Indemnification Claim Notice to Escrow Agent, Buyer
shall also give such Notice to the Stockholders at the same time such Notice
is
given to the Escrow Agent.
Within
fifteen (15) calendar days following receipt of an Indemnification Claim Notice
which specifies the amount of the Indemnification Claim, Escrow Agent shall
charge the Escrow Fund for the Indemnification Claim Amount and pay to Buyer
the
Indemnification Claim Amount unless Escrow Agent receives a written notice
from
any Stockholder (the “Representative's Notice") objecting to
such charge and payment and disputing the Indemnification Claim. The
Representative's Notice shall be given to Buyer and Buyer's counsel at the
same
time the Representative's Notice is given to the Escrow Agent, and shall set
forth (i) the amount of the Indemnification Claim Amount in dispute, (ii) the
amount of the Indemnification Claim not in dispute, and (iii) in reasonable
detail the basis for the dispute.
In
the
event of such a dispute, the Escrow Agent shall pay to Buyer that portion of
the
Indemnification Claim Amount which is not in dispute, if any, and Buyer and
the
Stockholder giving the Representative Notice shall use commercially reasonable
efforts to mutually resolve the dispute within ten (10) days of Buyer's receipt
of the Representative's Notice. In the event such resolution does not occur
within said ten-day time period, the dispute shall be promptly submitted to
binding arbitration, conducted in accordance with the Commercial Rules of the
American Arbitration Association, to determine which Party is entitled to the
disputed portion of the Indemnification Claim Amount; provided,
however, that if the disputed amount is greater than $500,000, either
Party shall have the option, prior to the commencement of arbitration
proceedings, to pursue and obtain resolution of such dispute and determination
through litigation. The disputed portion of the Indemnification Claim Amount
shall then be paid by the Escrow Agent pursuant to the arbitrators' award or
judgment of the court, as the case may be. In resolving such dispute, the
arbitrator or the court, as the case may be, shall determine the "prevailing
party" for purposes of Section 11.5 below.
31
Any
amount paid to Buyer from the Escrow Fund pursuant to the foregoing provisions
of this Agreement shall be deemed a reduction in the Purchase
Price.
8.6 Indemnification
of Stockholders. After the
Closing and prior to the Termination Date, Buyer hereby agrees to indemnify
and
hold harmless the Stockholders in respect of any Losses actually suffered,
sustained or incurred by any resulting from: (a) the inaccuracy or
breach of any representation or warranty of Buyer contained in Article IV of
this Agreement; (b) the breach of any covenant or agreement on the part of
Buyer
under this Agreement; or (c) any claims against the Stockholders arising from
the conduct of the business of the Company after the Closing Date (but only
to
the extent that such claim or the basis therefore, including the facts giving
rise thereto, (i) did not exist prior to the Closing Date and (ii) was not
caused by any Stockholder or any of their respective Affiliates); provided,
however, that the Stockholders shall not have the right to be indemnified under
Section 8.6(a) and (b) until Losses since the Closing Date exceed the Indemnity
Threshold, after which the right to be indemnified shall apply to all losses
of
the Stockholders.
ARTICLE
IX
TERMINATION
9.1 Termination. This
Agreement may be terminated at any time prior to the Closing by:
(a)
the
mutual consent of the Stockholders and Buyer;
(b)
Buyer, if (i) less than one hundred percent (100%) of the Stockholders have
not
signed and delivered this Agreement to Buyer before June 19, 2007, or (ii)
the
Company and/or the Stockholders have not delivered complete Disclosure
Schedules, due diligence responses, information or materials pursuant to the
provisions hereof, on or before the Diligence Termination Date;
(c)
either the Stockholders or Buyer, if the Closing has not occurred by the close
of business on that date which is fifteen (15) days after the Closing Date,
and
if the failure to consummate the transactions on or before such date did not
result from the failure by the party seeking termination of this Agreement
to
fulfill any undertaking or commitment provided for herein that is required
to be
fulfilled by such party prior to the Closing;
(d)
Buyer, if any Stockholder or the Company shall have materially breached any
representations, warranty or covenant which is not cured within fifteen (15)
days after notice from Buyer of such breach (provided that such is capable
of
being cured);
32
(e)
the
Company or any Stockholder, if Buyer shall have materially breached any
representation, warranty or covenant which is not cured within fifteen (15)
days
after notice from the Company or any Stockholder of such breach (provided that
(i) such is capable of being cured and (ii) is not the obligation to pay the
Purchase Price);
(f)
the
Stockholders, if Buyer proposes to reduce the consideration to be received
by
any Stockholder hereunder as a result of any failure of a condition to Buyer's
obligations hereunder resulting from any change in the business, results of
operations or condition of the Company and within fourteen (14) days after
making such proposal Buyer and the Stockholder have failed to reach a mutually
agreeable settlement as a result of Buyer's proposal;
(g)
either the Stockholders or Buyer, if a United States federal or state court
of
competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining
or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and non-appealable;
provided, however, that the party seeking to terminate this
Agreement pursuant to this Section 9.1(g) shall have complied with
Section 5.2 hereof, and with respect to other matters not covered by Section
5.2
hereof, shall have used all reasonable efforts to remove such injunction, order
or decree; or
(h)
the
Company, if the Closing has not occurred by the close of business on that date
which is fifteen (15) days after the Closing Date and in no event later than
30
days from the complete execution date of this Agreement.
9.2 Procedure
and Effect of Termination. In the event of termination of this
Agreement by any of the Company, the Stockholders and/or Buyer pursuant to
Section 9.1 hereof, written notice thereof shall forthwith be given by the
terminating party to the other parties hereto, and this Agreement shall
thereupon terminate and become void and have no effect, and the transactions
contemplated hereby shall be abandoned without further action by the parties
hereto, except that the provisions of Sections 5.1(b) (regarding confidentiality
and nondisclosure), 5.6 (Public Announcements), 5.7 (Non-Solicitation) and
11.5
(Expenses; Termination Fee, Liquidated Damages) hereof shall survive the
termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any breach
of this Agreement. If this Agreement is terminated as provided herein
all (i) filings, applications and other submissions made pursuant to this
Agreement shall, to the extent practicable, be withdrawn from the agency or
other persons to which they were made, and (ii) all information, including,
without limitation, documents, papers, books, records, financial statements
in
any form or medium, provided to Buyer by the Company shall be immediately
delivered by Buyer to the Company, together with a certificate executed by
a
principal of Buyer that it has delivered all such information to the
Company..
9.3 Effect
of Closing Over Known Unsatisfied Conditions. No party hereto
shall be deemed to have breached any agreement, representation, warranty or
covenant if (a) such party shall have notified the other parties hereto in
writing, on or prior to the Closing Date, of the breach of, or inaccuracy in,
or
of any facts or circumstances constituting or resulting in the breach of or
inaccuracy in, or modification to, such agreement, representation, warranty
or
covenant, and (b) such other parties have permitted the Closing to occur; and,
for purposes of this Agreement, such other parties are thereby deemed to have
waived such breach or inaccuracy; provided, however, that
disclosure in and of itself pursuant to this Section 9.3 shall not prejudice
the
rights of the parties pursuant to Articles VI or VII hereof not to consummate
the transactions contemplated by this Agreement.
33
ARTICLE
X
CERTAIN
DEFINITIONS
As
used in this Agreement the following
terms shall have the following respective meanings:
"Action"
shall mean any actual
action, suit, arbitration, inquiry, proceeding or investigation by or before
any
court, governmental or other regulatory or administrative agency or commission
or arbitral panel.
"Affiliate"
or
"Affiliates" (and, with a correlative meaning, "Affiliated") shall
mean, with respect to any Person, any other Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such first Person. As used in this definition,
"control" (including, with correlative meanings, "controlled by"
and "under common control with") shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise).
"Agreement"
shall have the
meaning set forth in the preamble hereto.
"Balance
Sheet" or "Balance
Sheets" shall mean the audited consolidated balance sheet of the Company as
of August 31, 2005 and August 31, 2006 included in the Financial
Statements.
"Balance
Sheet Date" shall mean
the date representing the last calendar full month prior to the Closing
Date.
"Business"
shall mean the
world-wide integrated ceramic metallic coatings applications entities, products
and services currently provided by the Company, together with its Intellectual
Property.
"Business
Day" or "Business
Days" means (i) any day that is not a Saturday, Sunday, or legal holiday or
(ii) a day on which banks located in Philadelphia, Pennsylvania are obligated
to
remain open.
“Cash
Purchase Price” shall have
the meaning set forth in Section 1.2 hereof.
"Buyer"
shall have the meaning set forth in the preamble hereto.
"Closing"
shall mean the
consummation of the transactions contemplated by Sections 1.1 through 1.5
hereof.
34
"Closing
Date" shall mean (i)
the date on which (a) the conditions set forth in Articles VI and VII hereof
shall be satisfied or duly waived and (b) which is on or before July 2, 2007,
or
(ii), if the Stockholders and Buyer mutually agree on a different date, the
date
upon which they have mutually agreed.
"Code"
shall mean the Internal
Revenue Code of 1986, as amended, and any successor thereof.
"Common
Stock" shall have the
meaning set forth in the Recital A hereto.
"Company"
shall have the meaning
set forth in the preamble hereto.
“Company’s
Knowledge” means to
the knowledge of any of the Stockholders, owners, officers, employees,
consultants or advisors of the Company.
"Contract"
or "Contracts"
shall have the meaning set forth in Section 3.15(c) hereof.
“Diligence
Termination Date”
means that date on which Buyer has completed its due diligence investigation
of
the Company and the Stockholders which shall be that date which is the first
to
occur of (i) the date Buyer provides notice to the Company that it has completed
its due diligence investigation or (ii) one (1) Business Days prior to the
Closing Date; provided that the Diligence Termination Date shall be
extended, but not beyond July 31, 2007, for each day that the Company or any
Stockholder fails to deliver to Buyer complete due diligence responses,
information or materials pursuant to Section 5.12 hereof.
"Disclosure
Schedule" shall have
the meaning set forth in Article II hereof.
"Disputed
Claim Amount" shall
have the meaning set forth in Section 8.5(b) hereof.
"Disputed
Claim Release Date"
shall have the meaning set forth in Section 8.5(c) hereof.
"Dividend"
shall have the
meaning set forth in Section 2.5 hereof.
"Employee"
or "Employees"
shall have the meaning set forth in Section 3.23 hereof.
"Employee
Benefit Plan" or
"Employee Benefit Plans" shall have the meaning set forth in Section 3.14
hereof.
“Environmental
Law” shall mean
all applicable local, state and federal laws, other legal requirements and
all
common law regulating or relating to the protection of the environment and/or
human health and safety from environmental effects or to the generation,
management, removal, remediation, emission, discharge, control, processing,
use,
treatment, storage, disposal, transport, release, recycling, or handling of
Hazardous Materials, including, without limitation, the Resource Conservation
and Recovery Act, the Comprehensive Environmental Response, Compensation, and
Liability Act, the Clean Water Act and the Federal Clean Air Act, each as
amended, and the regulations promulgated thereunder.
35
"ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA
Affiliate" or "ERISA
Affiliates" means, with respect to any Person, any entity that is a member
of a "controlled group of corporations" with, or is under "common control"
with,
or is a member of the same "affiliated service group" with such Person as
defined in Section 414(b), 414(c) or 414(m) of the Code.
"Escrow
Agent" shall have the
meaning set forth in Section 8.5(a) hereof.
"Escrow
Agreement" shall mean
the form of Escrow Agreement attached hereto as Exhibit B.
"Escrow
Amount" shall have the
meaning set forth in Section 1.5 hereof.
"Escrow
Fund" shall have the
meaning set forth in Section 8.5(a) hereof.
"Financial
Statements" shall
have the meaning set forth in Section 3.6 hereof.
"Fundamental
Representations and
Warranties" shall have the meaning set forth in Section 8.1
hereof.
"GAAP"
shall mean generally
accepted accounting principles as used in the United States applied on a basis
consistent with the historical policies and practices used by the
Company.
“Hazardous
Materials” shall mean
any flammable material, explosives, radioactive materials, gasoline, petroleum
products, asbestos, urea formaldehyde, polychlorinated biphenyls and other
hazardous materials, hazardous wastes, hazardous or other toxic substances,
or
materials as to which Liabilities or standards of conduct may be imposed under
the Environmental Laws.
“Indemnification
Claim” shall
have the meaning set forth in Section 8.5(e) hereof.
“Indemnification
Claim Amount”
shall have the meaning set forth in Section 8.5(e) hereof.
“Indemnification
Claim Notice”
shall have the meaning set forth in Section 8.5(e) hereof.
"Indemnified
Person" or
"Indemnified Persons" means the Persons entitled to indemnification under
Article VIII.
"Indemnifying
Person" or
"Indemnifying Persons" means the Persons obligated to indemnify an
Indemnified Person.
36
"Indemnity
Threshold" shall have
the meaning set forth in Section 8.3(b) hereof.
"Intellectual
Property" shall
mean (a) all patents, patent rights, trademarks, trademark registrations, trade
names, service marks, service ▇▇▇▇ registrations, copyrights, inventions,
formulas, trade secrets, patent pendings, patents and other similar rights,
applications for any of the foregoing, and licenses therefore, in each case
used
in the Business and (b) all such items that are acquired or developed for use
in
the Business between the date of this Agreement and the Closing Date, excluding,
with respect to clauses (a) and (b), all such items which expire or are
withdrawn, abandoned, canceled, transferred or licensed in the ordinary course
of business on or prior to the Closing Date in accordance with the terms of
this
Agreement.
"Leased
Property" shall mean any and all real property leased by the Company and
used in the Business.
"Liability"
or
"Liabilities" shall mean any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of
when
asserted.
"Licenses"
shall have the
meaning set forth in Section 3.8(b) hereof.
"Lien
and Encumbrance" or
"Liens and Encumbrances" shall mean any security interest, pledge,
mortgage, lien, charge, encumbrance, proxy, voting trust or voting
agreement.
"Loss"
or "Losses" shall
mean any and all losses, claims, shortages, damages, liabilities, expenses
(including reasonable attorneys' and accountants' and other professionals'
fees), assessments, Tax deficiencies and Taxes incurred in connection with
the
receipt of indemnification payments (including interest or penalties thereon)
arising from and actually incurred in connection with any such matter that
is
the subject of indemnification under Section 8.2. or 8.6, but without regard
for
any Material Adverse Effect condition or limitation, offset by any Tax benefits
actually realized and any insurance or other recoveries obtained against such
Losses.
"Material
Adverse Effect" shall
mean any undisclosed (not disclosed in the Disclosure Schedules) action or
condition by a Shareholder, the Company or anyone associated therewith which
would cause adverse business, operations or financial conditions of more than
$100,000 in expenditures to Buyer after Closing.
"Most
Recent Balance Sheet"
shall mean the balance sheet of the Company as of April 30, 2007.
"Permitted
Liens and
Encumbrances" shall mean all Liens and Encumbrances (a) that are set forth
on Disclosure Schedule 1 hereto, (b) that are reflected or reserved
against in the Balance Sheet, (c) that arise out of Taxes or general or special
assessments not in default and payable without penalty or interest or the
validity of which is being contested in good faith by appropriate proceedings,
(d) of carriers, warehousemen, mechanics, materialmen and other similar persons
or otherwise imposed by law incurred in the ordinary course of business for
sums
not yet delinquent or being contested in good faith, (e) that relate to deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or
(f)
Liens and Encumbrances securing indebtedness or other obligations not to exceed
$5,000.
37
"Person"
shall mean any
individual, firm, corporation, partnership or other entity, and shall include
any successor (by merger or otherwise) of such entity.
"Potential
Transaction" shall
have the meaning set forth in Section 5.8 hereof.
"Purchase
Price" shall have the
meaning set forth in Schedule 1.2 hereof.
“Purchase
Shares” shall have the
meaning set forth in Section 1.2 hereof.
“Qualified
Account” shall have
the meaning given that term in the Consulting Agreement.
"Real
Property" shall mean any and all real property owned by the Company and used
in the Business.
"Release
Date" shall have the
meaning set forth in Section 8.5(c) hereof.
“Representative
Notice” shall
have the meaning set forth in Section 8.5(e) hereof.
“Securities
Act” shall mean the
Securities Act of 1933, as amended.
"Stockholder"
or
"Stockholders" shall have the meaning set forth in the preamble
hereto.
"Share"
or "Shares" shall
mean the shares of Common Stock of the Company sold hereunder.
"Stock
Purchase Transaction"
shall have the meaning set forth in Section 1.1 hereof.
"Subsidiary"
or
"Subsidiaries" based upon representations from the Stockholders, there
are not Subsidiaries of the Company, therefore all such words or phrases have
been removed from this Agreement.
"Supplemental
Schedule" or
"Supplemental Schedules" shall have the meaning set forth in Section 3.28
hereof.
"Tax"
or "Taxes" shall mean any and all taxes, charges, fees, levies or other
similar assessments or liabilities in the nature of a tax, including, without
limitation, income, gross receipts, ad valorem, premium, value-added, net worth,
capital stock, capital gains, documentary, recapture, alternative or add-on
minimum, disability, estimated, registration, recording, excise, real property,
personal property, sales, use, license, lease, service, service use, transfer,
withholding, employment, unemployment, insurance, social security, business
license, business organization, environmental, workers compensation, payroll,
profits, severance, stamp, occupation, windfall profits, customs, duties,
franchise and other taxes of any kind whatsoever imposed by the United States
of
America or any state, local or foreign government, or any agency or political
subdivision thereof, and any interest, fines, penalties, assessments or
additions to tax imposed with respect to such items or any contest or dispute
thereof.
38
"Tax
Audit" shall mean any audit or examination by any Taxing
Authority.
"Tax
Return" or "Tax Returns" shall mean any and all reports, returns,
declarations, or statements relating to Taxes, including any schedule or
attachment thereto and any related or supporting workpapers or information
with
respect to any of the foregoing, including any amendment thereof.
"Taxing
Authority" shall mean a Governmental Entity responsible for the imposition
or collection of Taxes.
"Termination
Date" shall have the meaning set forth in Section 8.5(b)
hereof.
"Third-Party
Claim" shall have
the meaning set forth in Section 8.4 hereof.
"Transfer
Laws" shall have the
meaning set forth in Section 5.11 hereof.
Any
other
term specifically defined herein shall have the meaning set forth.
ARTICLE
XI
MISCELLANEOUS
11.1 Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one
or
more counterparts have been signed by each of the parties and delivered to
the
other party in person, via facsimile, U.S. Mail or by courier.
|
|
11.2
|
Governing
Law.
|
(a)
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware without reference to the choice of law principles
thereof.
(b)
The
parties hereto irrevocably submit to the jurisdiction of the state or federal
courts of the States of Pennsylvania in any Action arising out of or relating to
this Agreement, and hereby irrevocably agree that all claims in respect of
such
Action may be heard and determined in such state or federal
court. The parties hereto irrevocably waive, to the fullest extent
they may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The parties further agree,
to the extent permitted by law, that final and unappealable judgment against
any
of them in any action or proceeding contemplated above shall be conclusive
and
may be enforced in any other jurisdiction within or outside the United States
by
suit on the judgment, a certified copy of which shall be conclusive evidence
of
the fact and amount of such judgment.
39
(c)
To
the extent any party hereto has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service
or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, each of the parties hereto
hereby irrevocably waives such immunity in respect of its obligations under
this
Agreement.
11.3 MUTUAL
WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
11.4 Entire
Agreement; Third-Party Beneficiaries. This Agreement (including
agreements incorporated herein) and the Schedules hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. This
Agreement is not intended to confer upon any Person not a party hereto (and
their successors and assigns permitted by Section 11.7 hereof) any rights or
remedies hereunder.
11.5 Expenses;
Termination Fee, Liquidated Damages. Except as set forth in this
Agreement, whether the Stock Purchase Transaction and the transactions
contemplated in connection therewith are or are not consummated, all legal
and
other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs
and expenses; except that the Company shall pay the fees of ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP which has acted as counsel to the Company and
the Stockholders in an amount not to exceed $35,000. In the event of
any action to enforce the terms of this Agreement, the Confidentiality Agreement
described in Section 5.1(b) and all other documents executed and delivered
in
connection with this Agreement, the prevailing party shall be entitled to all
reasonable costs and legal fees incurred, whether prior to or after judgment
including on appeal or after remand, provided that no party shall be deemed
to
be a “prevailing party” for purposes of this Section 11.5 unless, viewed in the
entirety of the circumstances, such party has substantially prevailed in the
matter, and no party obtaining only de minimis benefits shall be a “prevailing
party.”
11.6 Notices. All
notices hereunder shall be sufficiently given for all purposes hereunder if
in
writing and delivered personally, sent by documented overnight delivery service
or, to the extent receipt is confirmed, telecopy, facsimile or other electronic
transmission service to the appropriate address or number as set forth
below. Notices to the Company shall be addressed to:
MCC,
Inc.
▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
40
with
a
copy to (▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇’▇ Attorney):
▇▇▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
or
at such other address and to the
attention of such other person as Stockholder may designate by written notice
to
Buyer. Notices to the Stockholders shall be sent to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
at the following address:
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with
a
copy to (▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇’▇ Attorney):
▇▇▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Notices
to Buyer shall be addressed to:
▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇.▇.
▇▇▇
▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile
No.: ▇▇▇-▇▇▇-▇▇▇▇
with
a
copy to:
Durham
▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇, Esq.
Facsimile
No.: 801-415-3500
or
at
such other address and to the attention of such other person as Buyer may
designate by written notice to the Stockholders. Such notice shall be
deemed to be given when received if delivered personally, or two (2) business
days after the date mailed if sent certified or registered mail, return receipt
requested, or one (1) day after deposited with a nationally recognized overnight
courier service in time for next day delivery, provided such next day is not
a
Saturday, Sunday or holiday. Any notice of any change of address
shall be given in the manner set forth above. Whenever the giving of
notice is required, the giving of such notice may be waived in writing by the
party entitled to receive such notice.
41
11.7 Successors
and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that no party hereto shall assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of each other party hereto except that each Stockholder may transfer
or
assign any or all of its rights hereunder to any Affiliate of such Stockholder
or any charitable trust, organization group or other entity without the consent
of any other party hereto; and provided, further, that Buyer, so
long as Buyer remains liable for its obligations hereunder, may transfer any
of
its rights or obligations hereunder to any of its Affiliates. In the
case of such a transfer or assignment to an Affiliate of any Stockholder, such
Affiliate shall be the "Stockholder" for all purposes hereunder.
11.8 Headings;
Definitions. The Section and Article headings contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated. All defined terms and phrases
herein are equally applicable to both the singular and plural forms of such
terms.
11.9 Amendments
and Waivers. This Agreement may not be modified or amended except
by an instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, on behalf of the Stockholders, may waive compliance by Buyer or
Buyer
may waive compliance by the Stockholders with any term or provision of this
Agreement on the part of such party to be performed or complied with, but only
by an instrument in writing. The waiver by any party hereto of a
breach of any term or provision of this Agreement shall not be construed as
a
waiver of any subsequent breach.
11.10 Interpretation. It
is understood and agreed that the specification of any dollar amount in the
representations and warranties contained in this Agreement or the inclusion
of
any specific item in the Schedules is not intended to imply that such amounts
or
higher or lower amounts, or the items so included or other items, are or are
not
material, and neither party shall use the fact of the setting of such amounts
or
the fact of the inclusion of any such item in the Disclosure Schedule in any
dispute or controversy between the parties as to whether any obligation, item
or
matter not described herein or included in a Disclosure Schedule is or is not
material for purposes of this Agreement.
[signature
pages follow]
42
IN
WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf
of each of the parties as of the day first above written.
|
COMPANY:
MCC,
INC.
By:
_________________________________
Name:
______________________________
Title:
________________________________
|
BUYER:
By:
_________________________________
Name:
______________________________
Title:
________________________________
|
|
|
|
|
STOCKHOLDER:
____________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|
|
STOCKHOLDER:
____________________________________
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|
43
Exhibit
A
Stockholders
and Holdings
Exhibit
B
ESCROW
AGREEMENT
Exhibit
C
NONCOMPETITION
AND NONDISCLOSURE AGREEMENT
Exhibit
D
CONSULTING
AGREEMENT