ASSET PURCHASE AGREEMENT
DATED AS OF
NOVEMBER 21, 2000
among
LSI INDUSTRIES INC.,
LIGHTRON OF CORNWALL, INC.,
EUGENE LITTMAN,
ELFRIEDE LITTMAN,
EUGENE LITTMAN 1994 IRREVOCABLE TRUST
FBO BONNIE GATOF,
EUGENE LITTMAN 1994 IRREVOCABLE TRUST
FBO DAVID LITTMAN
and
EUGENE LITTMAN 1994 IRREVOCABLE TRUST
FBO SANDRA FINKELSTEIN
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TABLE OF CONTENTS
Page
RECITALS.......................................................................1
1. DEFINITIONS.................................................................1
2. SALE OF ASSETS..............................................................1
2.1 ASSETS TO BE ACQUIRED..................................................1
2.2 EXCLUDED ASSETS........................................................3
2.3 ASSUMPTION OF LIABILITIES..............................................3
2.4 TRANSFER OF ASSETS; MULTIPLE CLOSINGS..................................5
3. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE; CLOSING.......................6
3.1 PURCHASE PRICE.........................................................6
3.2 ALLOCATION OF PURCHASE PRICE...........................................7
3.3 CLOSINGS...............................................................7
3.4 CLOSING OBLIGATIONS....................................................7
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS..............11
4.1 ORGANIZATION AND GOOD STANDING........................................11
4.2 AUTHORITY; NO CONFLICT................................................11
4.3 CAPITALIZATION........................................................13
4.4 FINANCIAL STATEMENTS..................................................13
4.5 BOOKS AND RECORDS.....................................................14
4.6 TITLE TO PROPERTIES; LIENS............................................14
4.7 REAL PROPERTY.........................................................14
4.8 ACCOUNTS RECEIVABLE...................................................14
4.9 INVENTORY.............................................................15
4.10 NO UNDISCLOSED LIABILITIES............................................15
4.11 TAXES.................................................................15
4.12 NO MATERIAL ADVERSE CHANGE............................................16
4.13 EMPLOYEE BENEFITS.....................................................16
4.14 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS......................17
4.15 LEGAL PROCEEDINGS; ORDERS.............................................18
4.16 ABSENCE OF CERTAIN CHANGES AND EVENTS.................................19
4.17 CONTRACTS; NO DEFAULTS................................................20
4.18 INSURANCE.............................................................22
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4.19 ENVIRONMENTAL MATTERS................................................22
4.20 EMPLOYEES............................................................23
4.21 LABOR RELATIONS; COMPLIANCE..........................................23
4.22 INTELLECTUAL PROPERTY................................................24
4.23 CUSTOMERS AND SUPPLIERS..............................................25
4.24 DISCLOSURE...........................................................26
4.25 BROKERS OR FINDERS...................................................26
5. REPRESENTATIONS AND WARRANTIES OF BUYER....................................26
5.1 ORGANIZATION AND GOOD STANDING.......................................26
5.2 AUTHORITY; NO CONFLICT...............................................26
5.3 BROKERS OR FINDERS...................................................27
6. COVENANTS..................................................................27
6.1 TAXES................................................................27
6.2 OPERATION OF BUSINESS AFTER THE FIRST CLOSING DATE
AND PRIOR TO THE FINAL CLOSING DATE..................................28
6.3 FULL ACCESS..........................................................30
6.4 CONSENTS.............................................................30
6.5 NOTICE OF DEVELOPMENTS...............................................30
6.6 EXCLUSIVITY..........................................................30
6.7 FURTHER ASSURANCES...................................................31
6.8 EMPLOYEES............................................................31
6.9 GOOD FAITH EFFORTS...................................................32
6.10 COOPERATION..........................................................33
6.11 DISCLOSURE SCHEDULES.................................................33
7. INDEMNIFICATION; REMEDIES..................................................33
7.1 INDEMNIFICATION BY THE STOCKHOLDERS..................................33
7.2 INDEMNIFICATION BY THE BUYER.........................................34
7.3 INDEMNIFICATION PROCEDURES...........................................34
7.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC......................35
7.5 LIMITATION ON INDEMNIFICATION........................................36
7.6 SOLE REMEDY..........................................................37
7.7 ESCROW/INDEMNIFICATION OFFSETS.......................................37
7.8 INSURANCE............................................................38
7.9 CLAIMS BASED UPON FRAUD - ORDER OF RECOURSE..........................38
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8. ADDITIONAL AGREEMENTS......................................................38
8.1 ENVIRONMENTAL INSURANCE POLICIES.....................................38
8.2 DISTRIBUTION FOR TAXES...............................................39
9. GENERAL PROVISIONS.........................................................40
9.1 EXPENSES.............................................................40
9.2 PUBLIC ANNOUNCEMENTS.................................................40
9.3 NOTICES..............................................................40
9.4 FURTHER ASSURANCES; RECORDS RETENTION................................41
9.5 WAIVER...............................................................42
9.6 ENTIRE AGREEMENT AND MODIFICATION....................................42
9.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS...................42
9.8 SEVERABILITY.........................................................43
9.9 BULK SALES WAIVER....................................................43
9.10 SECTION HEADINGS, CONSTRUCTION.......................................43
9.11 GOVERNING LAW........................................................43
9.12 COUNTERPARTS.........................................................43
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EXHIBITS
Exhibit 2.4(a) -- Manufacturing and Sales Agreement
Exhibit 3.2 -- Allocation of Purchase Price
Exhibit 3.4(a)(i) -- Bill of Sale
Exhibit 3.4(a)(ii) -- Assignment and Assumption Agreement
Exhibit 3.4(a)(iv) -- Escrow Agreement
Exhibit 3.4(a)(ix) -- White Employment Agreement
Exhibit 3.4(a)(x) -- Sublicense Agreement
Exhibit 3.4(a)(xii) -- Baer Marks & Upham, LLP Opinion
Exhibit 3.4(a)(xiii) -- Option Agreement
Exhibit 3.4(a)(xv) -- License Agreement
Exhibit 3.4(b)(v) -- Keating, Muething & Klekamp, LLP Opinion
Exhibit 3.4(e) -- Littman Employment Agreement
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SCHEDULES
Schedule 2.2(g) - Insurance Policies/Contracts
Schedule 2.3(a) - Assumption of Liabilities
Schedule 2.4(a) - Transfer of Assets
Schedule 4.1 - Organization and Good Standing
Schedule 4.2(b) - Authority; No Conflict/Seller
Schedule 4.4(a) - Financial Statements
Schedule 4.4(b) - Financial Statements
Schedule 4.6 - Title to Properties; Liens
Schedule 4.8 - Accounts Receivable
Schedule 4.10 - No Undisclosed Liabilities
Schedule 4.11 - Taxes
Schedule 4.13 - Employees
Schedule 4.13(a) - Employee Benefit Plans
Schedule 4.14(a) - Compliance with Law
Schedule 4.14(b) - Governmental Authorizations
Schedule 4.15 - Legal Proceedings; Orders
Schedule 4.16 - Absence of Certain Changes and Events
Schedule 4.17 - Material Contracts
Schedule 4.17(c) - Defaults
Schedule 4.18 - Insurance
Schedule 4.19(a) - Compliance with Environmental Laws
Schedule 4.19(b) - Violation of Environmental Laws
Schedule 4.19(c) - Hazardous Materials
Schedule 4.20(a) - Employees of Seller
Schedule 4.20(b) - Proprietary Rights Agreements
Schedule 4.21(a) - Collective Bargaining Agreements
Schedule 4.21(b) - Labor Relations; Compliance
Schedule 4.21(c) - Intellectual Property
Schedule 4.23 - Customers and Suppliers
Schedule 4.25 - Brokers or Finders
Schedule 5.2(b) - Authority; No Conflict/Buyer
Schedule 6.8 - Employees
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of November 21,
2000, by and among LSI INDUSTRIES INC., an Ohio corporation, or its permitted
assignee ("Buyer"), LIGHTRON OF CORNWALL, INC., a New York corporation
("Seller"), EUGENE LITTMAN ("Gene"), ELFRIEDE LITTMAN ("Elfriede"), EUGENE
LITTMAN 1994 IRREVOCABLE TRUST FBO BONNIE GATOF ("Gatof Trust"), EUGENE LITTMAN
1994 IRREVOCABLE TRUST FBO DAVID LITTMAN ("Littman Trust") and EUGENE LITTMAN
1994 IRREVOCABLE TRUST FBO SANDRA FINKELSTEIN ("Finkelstein Trust") (Gene,
Elfriede, Gatof Trust, Littman Trust and Finkelstein Trust are sometimes
individually referred to as a "Stockholder" and collectively as the
"Stockholders").
R E C I T A L S:
A. Seller desires to sell to Buyer, and Buyer desires to acquire from
Seller, substantially all the assets, real, personal or mixed, tangible or
intangible, used or useable in the conduct of Seller's business ("Seller's
Business") which purchase and sale shall occur in several stages pursuant to
separate closings.
B. As the transactions contemplated by this Agreement constitute the sale
of all or substantially all of the Seller's assets, Buyer desires that the
Stockholders also be liable to Buyer for any Breach by Seller of its warranties,
representations, agreements, covenants and indemnities hereunder, and the
Stockholders are willing to assume such liability, as and to the extent set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and undertakings hereinafter set forth, the parties hereto do hereby agree as
follows:
1. DEFINITIONS
Certain capitalized terms used in this Agreement have the meanings
specified in the Glossary attached hereto. Other capitalized terms are defined
in the body of this Agreement.
2. SALE OF ASSETS
2.1 ASSETS TO BE ACQUIRED
At the Closings, Seller shall sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase, acquire, accept and pay for,
all of Seller's right, title and interest in and to all of the properties,
assets and other rights (excluding the Excluded Assets (as defined
<PAGE>
hereinafter)), personal or mixed, tangible or intangible, owned or leased
by or licensed to Seller on the date of each Closing and used or useable in
the Seller's Business (collectively, the "Assets").
The Assets include, but shall not be limited to, the following:
(i) all cash and cash equivalents of Seller in existence as
of the First Closing Date;
(ii) all accounts receivable, prepaid accounts, notes
receivable and other receivables, including employee receivables,
arising out of the conduct of Seller's Business in existence as
of the First Closing Date;
(iii) all office, warehouse and other equipment, machinery,
vehicles, fixtures, office materials and supplies, spare parts
and other tangible personal property of every kind and
description owned as of the First Closing Date;
(iv) all inventories of raw materials, work in process,
finished goods, packaging materials and supplies, point of sale
supplies, brochures, printed materials, signs, and displays owned
as of the First Closing Date;
(v) all contracts, commitments or other arrangements,
including, without limitation, all non-competition,
non-solicitation and non-disclosure agreements for which Seller
receives any benefits, to which Seller is a party and related to
the Seller's Business as of the First Closing Date other than the
Excluded Contracts;
(vi) all Intellectual Property Assets owned or used by
Seller as of the First Closing Date and used or useable in
Seller's Business, including, without limitation, the rights to
the name "Lightron of Cornwall" or any derivation thereof;
(vii) all customer files and records of Seller relating to
the operation of the Seller's Business as of the First Closing
Date, including, without limitation, all written technical
information, employment records, data, specifications, research
and development information, engineering drawings, manuals,
computer programs, tapes and software relating to the Seller's
Business;
(viii) all of Seller's goodwill in and going concern value
of the Seller's Business;
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(ix) to the extent transferable under applicable law, all
franchises, approvals, permits, licenses, orders, registrations,
certificates and variances; and
(x) all other assets of the kind covered by subsections (i)
through (viii) above which are acquired by Seller after the First
Closing Date and on or before the Final Closing Date.
2.2 EXCLUDED ASSETS
Notwithstanding any other provision of this Agreement to the
contrary, all of Seller's right, title and interest in all of the
following properties, assets and other rights (collectively, the
"Excluded Assets") shall be excluded from the Assets and retained by
Seller:
(a) the building located on Seller's premises which is owned by
South Colden Realty Corp. and any related lease agreements;
(b) all assets of Littman Industries, Inc.;
(c) Libare Realty Corp.;
(d) the Excluded Contracts;
(e) minute books and tax and accounting records of Seller; and
(f) tax refund and recoveries and similar benefits of Seller
relating to any period prior to the Final Closing Date;
(g) Seller's rights under any insurance policies or other
contracts not included in the Assets which are set forth on Schedule
2.2(g); and
(h) all of Seller's right, title and interest in and to this
Agreement and all other agreements, documents and instruments
delivered in connection herewith.
2.3 ASSUMPTION OF LIABILITIES
(a) The Assets shall be sold and conveyed to Buyer free and clear
of all Liens except Permitted Liens. On and after the First Closing
Date, Buyer will assume and discharge only those liabilities of Seller
relating to the First Closing Assets and which are (i) set forth in
the balance sheet included in the Most Recent Financial Statements,
(ii) those liabilities incurred in the Ordinary Course of Business
since the date of the balance sheet included in the Most Recent
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Financial Statements and on or prior to the First Closing Date and
(iii) those liabilities specified on Schedule (collectively, the
"First Closing Assumed Liabilities"). In addition, Buyer will assume
and discharge only those liabilities of Seller relating to the Assets
acquired at and as of each Subsequent Closing and which arise after
such Subsequent Closing (the "Subsequent Closing Assumed Liabilities"
and with the First Closing Assumed Liabilities, the "Assumed
Liabilities").
(b) Except as set forth in Section 2.3(a), Buyer hereby assumes
no other liabilities of Seller (including, without limitation,
liabilities, claims or actions alleging or relating to any tort,
product liability, environmental liability, taxes, or breach of
contract or otherwise seeking damages and relating to the operation of
the Seller's Business prior to the First Closing Date, liabilities
arising from or related to a violation or claimed violation by Seller
of any Environmental Laws between the First Closing Date and any
applicable Subsequent Closing Date and liabilities arising from or
relating to the Excluded Assets) (the liabilities of Seller which are
not assumed by Buyer pursuant to this Agreement are hereinafter
collectively referred to as the "Non-Assumed Liabilities").
Without limiting the generality of this Section 2.3(b) and
notwithstanding any other provision hereof, each of the following is a
Non-Assumed Liability of Seller which Buyer does not assume:
(i) any of Seller's obligations hereunder;
(ii) any liability of Seller arising from, or in connection
with, the conduct of the Seller's Business or the ownership of
the Seller's Business or the Assets by Seller prior to the
consummation of the transactions contemplated hereby which is not
an Assumed Liability, including, without limitation, any such
liabilities arising by reason of any violation or claimed
violation by Seller, of any federal, state or local law, rule,
regulation, ordinance or any requirement of any Governmental
Body, other than any such liability which Buyer has expressly
assumed as an Assumed Liability;
(iii) any liability of Seller arising from or related to any
violation or claimed violation of any Environmental Laws by
Seller relating to Seller's Business or the Assets;
<PAGE>
(iv) any liability of Seller relating to the Excluded
Contracts; provided, however, Buyer will assume the accrued but
unpaid incentive payments owed to Barry D. White pursuant to
Section 9 of the Independent Contractor Agreement between Seller
and Barry D. White Co., Inc. dated January 1, 1990 if, but only
if, such amounts are set forth on the balance sheet included in
the Most Recent Financial Statements;
(v) any liability of Seller for income or franchise taxes
not reflected on the balance sheet included in the Most Recent
Financial Statements other than as provided in Schedule 2.3(a);
(vi) any liabilities of Seller related to or arising from
the Excluded Assets;
(vii) any liability of Seller arising out of or related to
past, present or future litigation involving Seller or Seller as
the owner and operator of the Seller's Business, if the relevant
cause of action accrues before the First Closing Date;
(viii) except as otherwise provided in Section 6.8 hereof,
any liability arising out of the employment or termination of
employment prior to the First Closing Date of any person employed
by Seller in the Seller's Business;
(ix) any liability of Seller or any present or former
director or officer of Seller arising from any claim, action or
proceeding, including, without limitation, any derivative action,
brought by or on behalf of any present or former holder of any
debt or equity security of Seller or by any lender to Seller,
including, without limitation, any liability arising from any
indemnification, reimbursement or advance in connection therewith
accruing prior to the First Closing Date; and
(x) any other liability of Seller which is not an Assumed
Liability under Section 2.3(a).
(c) Notwithstanding any provision herein to the contrary, Buyer
shall be solely liable for the prompt and full discharge of the
Assumed Liabilities (the "Buyer's Post-Closing Liabilities").
2.4 TRANSFER OF ASSETS; MULTIPLE CLOSINGS
(a) The parties hereto have agreed that the Assets will be
transferred in several stages. At the First Closing those Assets
described on the attached Schedule 2.4(a) will be transferred to
Buyer. Such Assets shall be collectively described herein as the
"First Closing Assets." Seller shall retain title to and control of
the balance of the Assets subject to the terms of this Agreement and
<PAGE>
the Escrow Agreement. The balance of the Assets are to be transferred
to Buyer as soon as possible but in any event on or before February
21, 2001. The determination of when Buyer will receive title to and
control of the balance of the Assets shall be made by Buyer in its
sole discretion; provided, however, the parties have agreed that their
intention is that such transfer or transfers will be made to Buyer at
one of more Subsequent Closings and the balance of the Purchase Price
attributable to such Assets will be paid by the Escrow Agent to Seller
as soon as Buyer has acquired by purchase or lease a facility
satisfactory to accommodate such Assets and the business operations of
Seller conducted using such Assets and Buyer is able to successfully
transfer the balance of the Assets from Seller's facility to Buyer's
facility; provided, however, the balance of the purchase price (less
$1,344,435 which will be held in escrow) will be paid to Seller no
later than February 21, 2001.
(b) At the First Closing, Seller and Buyer shall enter into the
Manufacturing and Sales Agreement substantially in the form of the
attached Exhibit 2.4(a) (the "Manufacturing and Sales Agreement").
3. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE; CLOSING
3.1 PURCHASE PRICE
Subject to adjustment as set forth in Sections 8.1, 8.2, 8.3 and 8.4,
the purchase price (the "Purchase Price") for the Assets shall be Twenty
Six Million Eight Hundred Eighty Eight Thousand Seven Hundred Nine and
00/100 Dollars ($26,888,709), payable as follows:
(a) Twenty Million and 00/100 Dollars ($20,000,000) (the "First
Closing Cash Payment") shall be payable in immediately available funds
at the First Closing; and
(b) Six Million Eight Hundred Eighty-Eight Thousand Seven Hundred
Nine and 00/100 Dollars ($6,888,709) (the "Escrowed Cash") shall be
delivered to the Escrow Agent and held in escrow pursuant to the terms
of this Agreement and the Escrow Agreement and, in the interim: (i)
One Million Three Hundred Forty Four Thousand Four Hundred Thirty Five
and 00/100 Dollars ($1,344,435) of the Escrowed Cash shall serve as
security for breaches by Seller and/or the Stockholders of their
representations, warranties, covenants and agreements under this
Agreement; and (ii) Five Million Five Hundred Forty-Four Thousand Two
Hundred Seventy-Four and 00/100 Dollars ($5,544,274) of the Escrowed
Cash shall serve as (i) security for the payment by Buyer of the
Purchase Price for the Assets pursuant to the Subsequent Closings and
(ii) LSI's security for the Duke Purchase Price Adjustment.
<PAGE>
3.2 ALLOCATION OF PURCHASE PRICE
The Purchase Price shall be allocated among the First Closing Assets
as set forth on attached Exhibit 3.2, which Exhibit 3.2 shall be mutually
agreed upon within sixty (60) days after the First Closing Date. At each
Subsequent Closing, the Purchase Price attributable to the Assets so
transferred shall be allocated among such Assets in accordance with a
revised Exhibit 3.2. Within sixty (60) days after the First Closing (and
each Subsequent Closing) each party agrees to complete Internal Revenue
Form 8594, Asset Acquisition Statement under Section 1060 consistent with
the asset appraisal conducted by an independent third party appraiser
engaged by Buyer. Seller, Stockholders and Buyer hereby covenant and agree
that they will not take a position on any income tax return before any
Governmental Body charged with the collection of any income tax or in any
judicial proceeding that is in any way inconsistent with the terms of this
Section 3.2.
3.3 CLOSINGS
(a) The first closing of the transactions contemplated by this
Agreement (the "First Closing") shall take place at the offices of Baer
Marks & Upham LLP, 805 Third Avenue, New York, New York 10027, commencing
at 10:00 a.m. local time on November 21, 2000 (the "First Closing Date") or
such other date, time or place as the parties may mutually agree. The First
Closing shall be effective as of 12:00:02 a.m. on the day immediately
following the First Closing Date. The parties will in good faith use all
reasonable efforts to achieve the First Closing.
(b) Each subsequent transfer of Assets in accordance with the terms of
Section 2.4 shall take place at the offices of Baer Marks & Upham LLP, 805
Third Avenue, New York, New York 10027, commencing at 10:00 a.m. local time
at such date and time as the parties may mutually agree. Each Subsequent
Closing shall be effective as of 12:00:02 a.m. on the date immediately
following such Subsequent Closing Date. The parties will in good faith use
all reasonable efforts to achieve all Subsequent Closings as soon as
possible.
3.4 CLOSING OBLIGATIONS
(a) At the First Closing, Seller and/or the Stockholders will deliver
to Buyer:
(i) an executed bill of sale in the form of Exhibit 3.4(a)(i)
(the "Bill of Sale") and other instruments of transfer and conveyance
reasonably deemed necessary by Buyer to convey the First Closing
Assets to Buyer at the First Closing, in form and substance reasonably
satisfactory to Buyer (the "Transfer Documentation");
<PAGE>
(ii) an Assignment and Assumption Agreement in the form of
Exhibit 3.4(a)(ii)(the "Assignment and Assumption Agreement") executed
by Seller and the Stockholders regarding the assignment and assumption
of all contracts and agreements included in the First Closing Assets;
(iii) Copies certified by the Secretary of Seller of the
resolutions of Seller's Board of Directors and Stockholders approving
this Agreement and authorizing the transactions contemplated hereby;
(iv) The written Consents of each party whose Consent to the
transactions contemplated hereby is required;
(v) All of Seller's books, records, papers and other documents
relating to the First Closing Assets and/or Seller's Business, other
than the Excluded Assets.
(vi) An Escrow Agreement executed by the Seller and Stockholders
in the form of Exhibit 3.4(a)(vi)(the "Escrow Agreement");
(vii) Copies of the Articles of Incorporation of Seller as
certified by the Secretary of State of the State of New York and
copies of the By-Laws of Seller certified by Secretary of Seller;
(viii) Certificate of Existence issued by the Secretary of State
of the State of New York for Seller, dated within ten (10) days of the
First Closing Date.
(ix) an employment agreement with Barry White in the form of
Exhibit 3.4(a)(ix) (the "White Employment Agreement");
(x) a Sublicense Agreement in the form of Exhibit 3.4(a)(x) (the
"Sublicense Agreement") executed by Seller and the Stockholders;
(xi) Consents to Use Similar Name (New York Secretary of State
forms) executed by Seller;
(xii) Opinion of Baer Marks & Upham, LLP in the form of Exhibit
3.4(a)(xii);
(xiii) the Option Agreement executed by USA and the Stockholders
of USA; (xiv)ab the Manufacturing and Sales Agreement executed by
Seller;
<PAGE>
(xiv) the Manufacturing and Sales Agreement executed by Seller.
(xv) The License Agreement in the form of Exhibit 3.4(a)(xv) (the
"License Agreement") executed by Seller relating to Seller's right to
use the name "Lightron"; and
(xvi) a Certificate executed by the President and Secretary of
Seller confirming the truth and accuracy of the representations and
warranties made by Seller herein as of the date of such First Closing.
(b) At the First Closing, Buyer will deliver to the Stockholders
and/or Seller or (with respect to clause (ii) only) to the Escrow Agent:
(i) the First Closing Cash Payment in immediately available
funds;
(ii) the Escrowed Cash;
(iii) A certified copy of the resolutions of the Board of
Directors of Buyer approving this Agreement and authorizing the
transactions contemplated hereby;
(iv) The Escrow Agreement executed by Buyer;
(v) Opinion of Keating, Muething & Klekamp, P.L.L. in the form of
Exhibit 3.4(b)(v).
(vi) The White Employment Agreement executed by Buyer;
(vii) The Option Agreement executed by Buyer;
(viii) An Assignment and Assumption Agreement executed by Buyer;
(ix) The Manufacturing and Sales Agreement executed by Buyer;
(x) The License Agreement executed by Buyer; and
(xi) the Sublicense Agreement.
<PAGE>
(c) At each Subsequent Closing, Seller and/or the Stockholders will
deliver to Buyer:
(i) an executed bill of sale in the form of Exhibit 3.4(a)(i) and
such other instruments of transfer and conveyance reasonably deemed
necessary by Buyer to convey the Assets to be transferred to Buyer at
such Subsequent Closing, in form and substance reasonably satisfactory
to Buyer;
(ii) an Assignment and Assumption Agreement in the form of
Exhibit 3.4(a)(ii) executed by Seller and the Stockholders regarding
the assignment and assumption of all contracts and agreements included
in the Assets to be transferred to Buyer at such Subsequent Closing;
(iii) the written consent of each party whose consent is required
to the transfer of such Assets;
(iv) all of Seller's books, records, papers and other documents
relating to the Assets to be transferred to Buyer at such Subsequent
Closing;
(v) Certificate of Existence issued by the Secretary of State of
the State of New York for Seller, dated within ten (10) days of the
date of such Subsequent Closing; and
(vi) a Certificate executed by the President and Secretary of
Seller confirming the truth and accuracy of the representations and
warranties made by Seller in Sections 4.1, 4.2(a), 4.6 (solely as such
relates to title and free and clear of any Liens) and 4.25 herein
(limited, if appropriate, with reference to the Assets being
transferred to Buyer at such Subsequent Closing) as of the date of
such Subsequent Closing.
(d) At each Subsequent Closing, Buyer and/or the Escrow Agent (as
appropriate) will deliver to Seller and/or the Stockholders:
(i) that portion of the Escrowed Cash to be released to Seller as
a result of the transfer to Buyer of the Assets transferred at such
Subsequent Closing;
(ii) an Assignment and Assumption Agreement executed by Buyer
with respect to the Assets being transferred to Buyer at such
Subsequent Closing; and
<PAGE>
(iii) a Certificate executed by the President and Secretary of
Buyer confirming the truth and accuracy of the representations and
warranties made by Buyer in Section 5 hereof as of the date of such
Subsequent Closing.
(e) At the Final Closing, in addition to the other documents required
by Section 3.4(c) hereof, Eugene Littman will deliver to Buyer an
Employment Agreement substantially in the form of Exhibit 3.4(e) hereof
(the "Littman Employment Agreement") executed by Eugene Littman.
(f) At the Final Closing, in addition to the other documents required
by Section 3.4(d) hereof, Buyer will deliver to Eugene Littman the Littman
Employment Agreement executed by Buyer.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS
The Seller and the Stockholders, jointly and severally, represent and
warrant to Buyer as follows:
4.1 ORGANIZATION AND GOOD STANDING
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has all requisite
corporate power and authority to own and operate its properties and carry
on its business in the manner presently conducted. Seller is duly qualified
to do business, is in good standing and has all required and appropriate
licenses in each jurisdiction in which its ownership of property or the
nature of the business conducted by it requires such qualification or
licenses, except where the failure to be so qualified or licensed would not
reasonably be expected to have a Material Adverse Effect on Seller's
Business or the Assets. Schedule 4.1 contains a list of Seller's true and
complete copies of the currently effective Organizational Documents, true
and complete copies of which have been delivered to Buyer, and a list of
the current directors and officers of Seller. The minute books of Seller
made available to Buyer for review contain all records made of all meetings
actions by written consent held or taken by Seller's Board of Directors and
their stockholders since January 1, 1990.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller and the Stockholders, enforceable against Seller
and the Stockholders in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
<PAGE>
reorganization, moratorium or other similar laws affecting creditors'
rights and subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law) (the "Enforceability Exceptions"). Seller and the Stockholders
have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the other documents
contemplated to be executed and delivered at each Closing by Seller
and/or the Stockholders and to perform their respective obligations
under this Agreement and such other documents.
(b) Except as set forth in Schedule 4.2(b), neither the execution
and delivery of this Agreement nor the consummation or performance of
any of the transactions contemplated hereby will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of Seller, or
(B) any resolution adopted by the stockholders or Board of
Directors of Seller;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to
challenge any of the transactions contemplated hereby or to
exercise any remedy or obtain any relief under, any Law or any
Order to which Seller may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate,
or modify, any material Governmental Authorization that is held
by Seller or that otherwise relates to Seller's Business;
(iv) cause Buyer to become subject to, or to become liable
for the payment of, any state or local Tax (except as relates to
Buyer's ownership of the Assets from and after the applicable
Closing Date);
(v) cause any of the Assets to be reassessed or revalued by
any taxing authority or other Governmental Body (except as
relates to Buyer's ownership of the Assets after the applicable
Closing Date);
(vi) contravene, conflict with, or result in a violation or
breach of any material provision of, or give any Person the right
to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Material Contract; or
<PAGE>
(vii) result in the imposition or creation of any Lien upon
or with respect to any of the Assets.
Except as set forth in Schedule 4.2(b) and the Premerger
Notification required pursuant to the HSR Act, neither the Seller
nor the Stockholders are required to give any notice to or obtain
any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of
any of the transactions contemplated hereby.
4.3 CAPITALIZATION
The authorized equity securities of Seller consist of Two Thousand
(2,000) shares of common stock, no par value per share, of which Two
Thousand (2,000) shares are issued and outstanding. The Stockholders are,
and will be on the applicable Closing Date, the record and beneficial
owners and holders of all such outstanding shares. All such issued and
outstanding shares of Seller's common stock have been duly and validly
authorized and issued and are fully paid and non-assessable. There are not
outstanding: (a) any subscriptions, options, warrants or other rights to
purchase from Seller any capital stock of Seller; (b) any securities
convertible into or exchangeable for shares of Seller's capital stock; (c)
any other rights or commitments for the issuance of additional shares of
capital stock or options, warrants or other equity securities of Seller; or
(d) any commitments, plans or agreements (other than this Agreement) to
which Seller or any of the Stockholders is a party providing for the sale
or transfer of any shares of Seller's capital stock or giving any rights to
others with respect to shares of Seller's capital stock. Seller owns no
shares of capital stock in any other corporation, firm or other entity and
has no Subsidiaries.
4.4 FINANCIAL STATEMENTS
(a) Schedule 4.4(a) sets forth true and correct copies of the (i)
unaudited balance sheet of Seller as at September 30, 2000 and the related
statements of income and stockholder's equity for the period then ended
(the "Most Recent Financial Statements"); and (ii) the audited balance
sheet of Seller for the years ended December 31, 1997, 1998 and 1999 and
the related statements of income and stockholders' equity for the years
then ended (the "Year-End Financial Statements") (the Most Recent Financial
Statements and the Year-End Financial Statements are collectively referred
to as the "Financial Statements").
(b) Except as set forth in Schedule 4.4(b), the Financial Statements,
which are incorporated herein by reference, (i) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby; (ii) fully reflect all liabilities (including contingent
liabilities) of Seller required to be reflected therein on such basis as at
<PAGE>
the date thereof; and (iii) are true, accurate and complete and fairly
present in all material respects the financial position of Seller as of the
respective dates of the balance sheets included in the Financial Statements
and the results of Seller's operations for the respective periods
indicated.
4.5 BOOKS AND RECORDS
The books of account, stock record books and other records of Seller,
copies or the originals of all of which have been made available to Buyer,
are complete and correct in all material respects and have been maintained
in accordance with sound business practices.
4.6 TITLE TO PROPERTIES; LIENS
Seller owns, or otherwise has sufficient and legally enforceable
rights to use all of the properties and assets, personal or mixed, tangible
or intangible, used or held for use in connection with or necessary for the
conduct of the business and operations of Seller, including but not limited
to the Assets. Seller has good, valid and marketable title to, or in the
case of leased property, has good and valid leasehold interests in, all of
the Assets (except as may be disposed of in the Ordinary Course of Business
after the date hereof and in accordance with this Agreement), in each case
free and clear of any Lien other than Permitted Liens. Seller has
maintained all tangible Assets in good repair, working order, operating
condition and such are adequate and suitable for the purposes for which
they are presently being used subject only to ordinary wear and tear, and
all such tangible Assets are (i) in conformity in all respects with all
building, zoning, OSHA, safety or other applicable ordinances, regulations
and laws. Schedule 4.6 sets forth a list of all tangible Assets having a
book value in excess of Five Thousand Dollars ($5,000) held in connection
with the business and operations of Seller, including, but not limited to,
machinery, equipment and motor vehicles.
4.7 REAL PROPERTY
Seller does not own any real property.
4.8 ACCOUNTS RECEIVABLE
A complete list of all accounts, notes and other receivables of Seller
as of October 30, 2000 and the aging thereof has been separately delivered
to Buyer. All such accounts receivable and those arising from October 30,
2000 through the First Closing Date arose in the Ordinary Course of
Business and no entitlements to or claims of offset or reduction have been
made or exist and, subject to any allowance for doubtful accounts set forth
on the balance sheets of the Most Recent Financial Statements, all such
accounts are fully collectible in accordance with their terms without
<PAGE>
offset or compromise within ninety (90) days of the date of invoice or
note, except as otherwise disclosed in Schedule 4.8.
4.9 INVENTORY
All inventory of Seller owned by Seller as of the date of the Most
Recent Financial Statements is reflected in the balance sheet included in
the Most Recent Financial Statements. All inventory of Seller reflected on
its Most Recent Financial Statements consists of tangible property that is
of a quality and quantity usable in the Ordinary Course of Business, except
for obsolete items and items of below-standard quality which do not
constitute a material amount of such inventories.
4.10 NO UNDISCLOSED LIABILITIES
Seller has no liabilities or obligations of any nature, whether known
or unknown, absolute, accrued, contingent or otherwise and whether due or
to become due, except (i) as set forth in Schedule 4.10, (ii)as and to the
extent disclosed or reserved against in the Most Recent Financial
Statements and (iii) for liabilities and obligations that are incurred in
the Ordinary Course of Business after the date of the Most Recent Financial
Statements and which (x) are not prohibited by this Agreement and (y) would
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on Seller.
4.11 TAXES
Seller has properly and timely filed all Tax Returns and has paid all
Taxes due and payable, other than Taxes being disputed in good faith
through appropriate proceedings which are adequately reserved for in the
Financial Statements or disclosed in Schedule 4.11. All such Tax Returns
were correct in all material respects as filed, and no claims have been
assessed with respect to such Tax Returns. The liabilities recorded for
Taxes on the balance sheet included in the Most Recent Financial Statements
are sufficient in all respects for the payment of all Taxes, whether
disputed or not, that are due or are hereafter found to have been due with
respect to the conduct of Seller's Business up to and through the date of
the Most Recent Financial Statements. Except as disclosed in Schedule 4.11,
(i) there are no present disputes as to Taxes of any nature payable by
Seller, nor any Tax Liens, whether existing or inchoate, on any of the
assets of Seller except for current year Taxes not presently due and
payable; (ii) the federal income Tax Returns of Seller have never been
audited; (iii) no IRS or foreign, state, county or local Tax audit is
currently in progress with respect to Seller; and (iv) Seller has not
waived the expiration of the statute of limitations with respect to any
Taxes or Tax Returns, any of which would have a Material Adverse Effect on
Seller's Business or the Assets.
<PAGE>
4.12 NO MATERIAL ADVERSE CHANGE
Except as otherwise expressly permitted under this Agreement, since
December 31, 1999 there has not been any material adverse change in the
business, operations, properties, assets, or condition of Seller or
Seller's Business, and, to Seller's Knowledge, no event has occurred or
circumstance exists that would likely result in such a material adverse
change.
4.13 EMPLOYEE BENEFITS
(a) Schedule lists each Employee Benefit Plan (as defined in
Section 3(3) of ERISA) (x) that is (A) maintained by Seller or any
ERISA Affiliate and under which any current or former employee of
Seller may derive a benefit, or to which Seller or any ERISA Affiliate
contributes or is required to contribute and (B) under which any
current or former employee of Seller may derive a benefit or (y) that
Seller has adopted or maintains or to which Seller contributes or is
required to contribute:
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in
all material respects with the applicable requirements of ERISA,
the Code and all other applicable Laws, rules and regulations.
(ii) No Employee Benefit Plan is an Employee Pension Benefit
Plan. All material contributions, premiums and expenses relating
to any Employee Benefit Plan that have accrued but are not yet
due have been properly and adequately reflected on the balance
sheet included in the Most Recent Financial Statements to the
extent required under GAAP.
(iii) Seller has delivered or made available to the Buyer
correct and complete copies of the plan documents and summary
plan descriptions, the most recent Form 5500 Annual Report, and
all related trust agreements, insurance contracts, and other
funding agreements which relate to each such Employee Benefit
Plan and all material communications involving or relating to any
such plan with any Governmental Body.
(iv) The requirements of Part 6 of Subtitle B of Title I of
ERISA and of Code Section 4980B have been met with respect to
each Employee Benefit Plan which is subject to such requirements.
<PAGE>
(v) Seller has not contributed to or has not been required
to contribute to any Multi-Employer Plan or has any liability
(including withdrawal liability), contingent or otherwise under
any Multi-Employer Plan.
(b) With respect to each Employee Benefit Plan that Seller
maintains or to which it contributes:
(i) No action, suit, proceeding, hearing, or investigation
with respect to any such Employee Benefit Plan (other than
routine claims for benefits) is pending, or, to the Knowledge of
Seller, has been Threatened, except to the extent that any such
actions, suits, proceedings, hearings or investigations,
individually or in the aggregate, would not have a Material
Adverse Effect on the Assets of Seller's Business.
(c) Except for changes required by the provisions of the Taxpayer
Relief Act of 1997, the Small Business Job Protection Act of 1996 and
the Health Insurance Portability and Accountability Act of 1996,
neither the Stockholders nor Seller has made any commitment to modify
any Employee Benefit Plan or to establish or implement any other
employee or retiree benefit or compensation arrangement or employment,
retention or change in control agreement.
(d) The consummation of the transactions contemplated by this
Agreement will not, either alone or in conjunction with any other
event, result in an increase in the amount of compensation or benefits
or the acceleration of the vesting, funding or timing of payment of
any compensation or benefits paid, payable or to become payable to or
in respect of any current or former employee of Seller or give rise to
the right of any current employee of Seller to terminate his
employment.
(e) Except as required by applicable Law or by a collective
bargaining agreement, each of the Employee Benefit Plans that are
maintained or sponsored by Seller on a stand alone basis, if any, may
be amended and/or terminated at any time following the Closing.
(f) Except as set forth in Schedule 4.13, no employees of Seller
are parties to any change of control, retention, termination or
severance agreements or arrangements which entitle them to any stay
bonuses, severance payments or similar compensation.
4.14 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth on Schedule 4.14(a):
<PAGE>
(i) Seller is in compliance in all material respects with
each Law that is or was applicable to it or to the conduct or
operation of Seller's Business or the ownership or use of any of
the Assets;
(ii) No event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result
in a violation by Seller of, or a failure on the part of Seller
to comply with, any Law, or (B) may give rise to any obligation
on the part of Seller to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature; and
(iii) Seller has not received, at any time since January 1,
1997, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential material violation of, or
material failure to comply with, any Law, or (B) any actual,
alleged, possible, or potential obligation on the part of Seller
to undertake, or to bear all or any portion of the cost of, any
material remedial action of any nature.
(b) Except as set forth on Schedule 4.14(b) , there is no
material Governmental Authorization that is held by Seller or that
otherwise relates to the Assets or the Seller's Business.
4.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth on Schedule 4.15, there is no pending
Proceeding:
(i) that has been commenced by or against Seller or that
otherwise relates to or may affect the Assets or Seller's
Business; or
(ii) against Seller or the Stockholders that challenges, or
that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the transactions
contemplated hereby.
To Seller's Knowledge, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists
that would likely give rise to or serve as a basis for the
commencement of any such Proceeding other than as set forth in
Schedule 4.15. Seller has delivered or will deliver to Buyer
copies of all pleadings, correspondence, and other documents
relating to any Proceeding listed on Schedule 4.15. Any
Proceedings listed on Schedule 4.15 will not have a Material
Adverse Effect on the Assets or Seller's Business.
<PAGE>
(b) Except as set forth on Schedule 4.15:
(i) Seller is not subject to any Order that relates to
Seller's Business, or any of the Assets; and,
(ii) No officer or director or, to Seller's Knowledge, agent
or employee of Seller is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to
Seller's Business.
4.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth on Schedule 4.16 or as otherwise expressly
permitted in this Agreement, since December 31, 1999, Seller has conducted
Seller's Business only in the Ordinary Course of Business and there has not
been any:
(a) change in Seller's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of
Seller; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or
other acquisition by Seller of any shares of any such capital stock;
or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to any of the Organizational Documents of Seller;
(c) except in the Ordinary Course of Business, payment or
increase by Seller of any bonuses, salaries, or other compensation to
any stockholder, director, officer, or employee or entry into any
employment, severance, or similar contract with any director, officer,
or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of Seller except in the ordinary course of business
consistent with past practices;
(e) damage to or destruction or loss of any asset or property of
Seller, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business or financial condition of
Seller (including the loss of any material business relationships);
<PAGE>
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, exclusive contract or arrangement,
joint venture, credit, or similar agreement material to Seller's
Business, or (ii) any contract or transaction involving a total
remaining commitment by or to Seller (determined on an individual
basis) of at least $25,000;
(g) other than in the Ordinary Course of Business, sale, lease,
or other disposition of any asset or property of Seller or mortgage,
pledge, or imposition of any lien or other encumbrance on any material
asset or property of Seller, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value
(determined individually) to Seller in excess of $25,000;
(i) change in the accounting methods used by Seller; or
(j) agreement, whether oral or written, by Seller to do any of
the foregoing.
4.17CONTRACTS; NO DEFAULTS
(a) Schedule 4.17 lists all of the following types of contracts in
existence on the date of this Agreement to which Seller is a party or by
which any of its Assets are bound or pursuant to which Seller receives a
benefit or owes an obligation (such contracts collectively referred to as
the "Material Contracts"):
(i) all contracts or agreements having a value to or imposing an
obligation upon Seller in excess of Twenty Thousand and 00/100 Dollars
($20,000.00) annually and all contracts or agreements having a value
to or imposing an obligation on Seller that have remaining obligations
of Ten Thousand and 00/100 Dollars ($10,000) or more, regardless of
the annual payment;
(ii) all broker, agency and sales promotion contracts and
agreements to which Seller is a party;
(iii) all employment, retention, change in control, severance or
other management contracts and contracts with employees, independent
contractors or consultants (or similar arrangements) to which Seller
or any employee thereof is a party and all collective bargaining
agreements applicable to employees of Seller;
<PAGE>
(iv) all contracts and agreements with any Governmental Body to
which Seller is a party;
(v) all contracts and agreements that limit the ability of Seller
to compete in any line of business or with any Person or in any
geographic area or during any period of time;
(vi) loan agreements, indentures, letters of credit (including
related letter of credit applications and reimbursement obligations),
mortgages, security agreements, pledge agreements, deeds of trust,
bonds, note, guarantees, instruments and other contracts or
obligations, contingent or otherwise, relating to the borrowing of
money or obtaining of or extension of credit;
(vii) all agreements (whether written or oral) between Seller and
any current or former officer, director, consultant, employee or
shareholder of Seller;
(viii) joint venture, partnership and similar contracts involving
a sharing of profits or expenses;
(ix) stock purchase agreements, asset purchase agreements and
other acquisition or divestiture agreements, including but not limited
to any agreements relating to the acquisition, lease or disposition of
any material assets or properties of Seller, any business, or any
capital stock of or other interest in any Person by Seller; and
(x) contracts that are otherwise material to the Business,
operations, results of operations and Assets of Seller.
(b) The contracts identified in items (i) - (x) above are all of the
contracts that are material to the Business, operations, results of
operations, and Assets of Seller.
(c) At or prior to the delivery of the Disclosure Schedule, Seller
shall have provided or made available to the Buyer true and correct copies
of all Material Contracts. All Material Contracts are legal, valid,
binding, in full force and effect and enforceable against Seller, if a
party thereto, and to the Knowledge of Seller, against each other party
thereto, except for the Enforceability Exceptions. Except as set forth in
Schedule 4.17(c), there does not exist under any Material Contract any
violation, breach or event of default, or event or condition that, after
notice or lapse of time or both, would constitute a violation, breach or
event of default thereunder, on the part of Seller or, to the Knowledge of
Seller, any other Person.
<PAGE>
4.18 INSURANCE
(a) Seller has delivered or made available to Buyer:
(i) true and complete copies of all policies of insurance to
which Seller is a party or under which Seller is or has been covered
at any time within the three (3) years preceding the date of this
Agreement; and
(ii) true and complete copies of all pending applications for
policies of insurance.
(b) Schedule 4.18 describes:
(i) any self-insurance arrangement by or affecting Seller or
Seller's Business, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by Seller's
Business; and
(iii) all obligations of Seller to third parties with respect to
insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is
provided.
4.19 ENVIRONMENTAL MATTERS
(a) Except as set forth in Schedule 4.19(a), Seller has complied and
is in compliance in all material respects with all applicable Environmental
Laws pertaining to the operations of Seller and the properties (now or
previously owned or operated) of Seller, and the use, ownership and
operation thereof.
(b) Except as set forth in Schedule 4.19(b), Seller has not received
any notice or report regarding any actual or alleged violation of
Environmental Laws, or any liabilities (whether accrued, absolute,
contingent or unliquidated), including any investigatory, remedial or
corrective obligations, relating to Seller or its Facilities arising under
applicable Environmental Laws.
(c) Except as set forth in Schedule 4.19(c), neither Seller nor, to
the Knowledge of Seller, any other Person (including any tenant or
subtenant) has caused or taken any action that is likely to result in, and
Seller is not subject to, any liability or obligation on the part of
<PAGE>
Seller, relating to (x) the environmental conditions on, under, or about
the properties or assets owned, leased, operated or used by Seller at the
present time or in the past, including without limitation, the air, soil
and groundwater conditions at such properties or (y) the past or present
use, management, handling, transport, treatment, generation, storage,
disposal or Release of any Hazardous Materials by Seller.
(d) Seller has disclosed and made available to Buyer all material
information, including, without limitation, all studies, analyses and test
results, in the possession, custody or control of Seller and the
Stockholders which, to the Knowledge of Seller, relates to (x) the
environmental conditions on, under or about the properties or assets owned,
leased, operated or used by Seller or any predecessor in title thereto at
the present time or in the past, and (y) any Hazardous Materials used,
managed, handled, transported, treated, generated, stored or Released by
Seller or any other Person on, under, about or from any of the real
property of Seller, or otherwise in connection with the use or operation of
any of the other properties and Assets of Seller.
4.20 EMPLOYEES
(a) Schedule 4.20(a) contains a complete and accurate list of the
following information for each employee of Seller, including each employee
on leave of absence or layoff status: employee name; job title; current
base salary paid or payable, bonuses and any change in compensation since
January 1, 2000; vacation accrued; date of hire; and whether such employee
has executed a non-competition covenant or non-disclosure agreement with
Seller.
(b) Except as set forth on Schedule 4.20(b), to Seller's Knowledge, no
employee of Seller is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee and any other Person
("Proprietary Rights Agreement") that in any way materially adversely
affects (i) the performance of his or her duties as an employee in Seller's
Business, or (ii) the ability of Seller to conduct Seller's Business. To
Seller's Knowledge, no officer or other key employee of Seller intends to
terminate his employment with Seller as a result of the transactions
contemplated hereby.
4.21 LABOR RELATIONS; COMPLIANCE
(a) Seller has not experienced any strike or other concerted activity
by employees resulting in a material interruption of work or received any
notice of any union organizational effort relating to any of its employees.
Except as set forth in Schedule 4.21(a), Seller is not a party to any
collective bargaining agreement with any labor organization.
<PAGE>
(b) Except as set forth in Schedule 4.21(b), no party (including, but
not limited to, Seller's employees or Governmental Bodies) has made any
claim, and, to Seller's Knowledge, there is no reasonable basis for any
such claim, against Seller under or arising out of any employment agreement
or arrangement, or arising out of any federal, state or local statute,
ordinance or regulation relating to discrimination with respect to
employees or any other employment practices, including, without limitation,
retirement, labor relations, equal employment opportunity and occupational,
safety and health standards, any of which would have a Material Adverse
Effect on Seller.
4.22 INTELLECTUAL PROPERTY
(a) The term "Intellectual Property Assets" means:
(i) the name "Lightron of Cornwall," all fictional business
names, trading names, registered and unregistered trademarks, service
marks, and applications used by Seller (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable owned by Seller (collectively,
"Patents");
(iii) all copyrights in both published works and unpublished
works of Seller (collectively, "Copyrights"); and,
(iv) all know-how, trade secrets, confidential information,
customer lists, internally derived or custom software, technical
information, data, process technology, plans, drawings, and blue
prints (collectively, "Trade Secrets") owned, used, or licensed by
Seller as licensee or licensor.
(b) Seller has no contracts or agreements relating to the Intellectual
Property Assets, including any royalties paid or received by Seller, to
which Seller is a party or by which Seller is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $10,000
under which Seller is the licensee. There are no outstanding and, to
Seller's Knowledge, no Threatened disputes or disagreements with respect to
any such agreement.
(c) (i) Schedule 4.22(c) sets forth a complete and accurate list of
all Marks.
<PAGE>
(ii) Except as set forth on Schedule 4.22(c), no Mark has been or
is now involved in any opposition, invalidation, or cancellation and,
to Seller's Knowledge, no such action is Threatened with respect to
any of the Marks.
(iii) Except as set forth on Schedule 4.22(c), to Seller's
Knowledge, there is no trademark or trademark application of any third
party potentially interfering with any Mark.
(d) (i) With respect to the Trade Secrets, taken as a whole, the
documentation relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it and to
allow its full and proper use without reliance on the knowledge or
memory of any individual.
(ii) To the best of its knowledge, Seller has taken all
reasonable and customary precautions to protect the secrecy,
confidentiality and value of its Trade Secrets.
4.23 CUSTOMERS AND SUPPLIERS
Schedule 4.23 sets forth all customers, licensees and other Persons
that accounted for five percent (5%) or more of Seller's revenues for the
twelve (12) month period ended December 31, 1999 and the twelve (12) month
period ended December 31, 1998 ("Material Customers") and the top ten (10)
suppliers by dollar value of Seller for the twelve (12) month period ended
December 31, 1999 and December 31, 1998 (the "Material Suppliers"). Except
as set forth in Schedule 4.23: (a) all Material Customers and Material
Suppliers continue to be customers or suppliers, as the case may be, of
Seller, and none of such Material Customers or Material Suppliers has
reduced materially its business with Seller from the levels achieved during
the twelve (12) month period ended December 31, 1999 and the twelve (12)
month period ended December 31, 1998 and Seller has not received notice
that such a reduction will occur; (b) Seller is not involved in any claim,
dispute or controversy with any of its Material Customers or Material
Suppliers other than claims, disputes or controversies arising in the
Ordinary Course of Business which do not involve more than $5,000 in the
aggregate with respect to any one Material Customer or Material Supplier;
and (c) Seller is not involved in any claim, dispute or controversy with
any of its customers or suppliers which, to the Knowledge of Seller,
individually or in the aggregate, would have a Material Adverse Effect on
Seller's Business or the Assets.
<PAGE>
4.24 DISCLOSURE
No representation or warranty by Seller or the Stockholders contained
in this Agreement or in any agreement or certification furnished or to be
furnished to Buyer pursuant hereto contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements (taken as a whole) contained herein or therein, in light of the
circumstances in which they were made, not false or misleading.
4.25 BROKERS OR FINDERS
Except as set forth on Schedule 4.25 and except for the fee owed by
the Stockholders to BNY Capital Markets, Inc. (which is solely the
obligation and liability of the Stockholders), neither Seller nor the
Stockholders and their agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation organized, validly existing, and in good
standing under the laws of the State of Ohio, with full corporate power and
authority to conduct its business as it is now being conducted and to own
or use the properties and assets that it purports to own or use. Buyer is
duly qualified to do business as foreign corporation and is in good
standing (or the local law equivalent) under the laws of each state or
other jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to be so qualified
would not have a Material Adverse Effect on Buyer.
5.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms, subject to the Enforceability Exceptions. Buyer has the
absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and the other documents contemplated to be
executed and delivered at each Closing by Buyer and to perform its
obligations under this Agreement and such other documents.
<PAGE>
(b) Except as set forth on Schedule 5.2(b), neither the execution
and delivery of this Agreement nor the consummation or performance of
any of the transactions contemplated hereby will give any Governmental
Body or other Person the right to challenge, prevent, delay, or
otherwise interfere with any of the transactions contemplated hereby,
or will, directly or indirectly, with or without notice or lapse of
time, contravene, conflict with or result in a violation of:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the Board of Directors of
Buyer; or
(iii) any Law or Order to which Buyer may be subject.
Except as set forth on Schedule 5.2(b) and except for the Premerger
Notification required under the HSR Act, Buyer is not and will not be
required to give notice to or to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the transactions contemplated
hereby.
5.3 BROKERS OR FINDERS
Except for the fee to J. Jeffrey Brausch & Company, which is solely
the obligation and liability of Buyer, Buyer and its agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commission or other similar payment in connection
with this Agreement.
6. COVENANTS
6.1 TAXES
Seller shall: (a) timely file, on or before each Closing Date, all Tax
Returns required to be filed on or before such Closing Date for periods
prior to such Closing Date; (b) timely pay all Taxes due and all Taxes
claimed to be due; and (c) make timely withholdings and payments of the
Taxes required to be deducted and withheld from the wages or other
remuneration paid to employees of Seller for periods prior to such Closing
Date.
<PAGE>
6.2 OPERATION OF BUSINESS AFTER THE FIRST CLOSING DATE AND PRIOR TO
THE FINAL CLOSING DATE
After the First Closing Date and until the Final Closing Date, Seller
shall continue to operate its business in accordance with the terms of the
Manufacturing and Supply Agreement. Seller shall use its reasonable best
efforts to maintain the ordinary and customary relationships with suppliers
and others having business relationships with Seller with a view toward
preserving for Buyer, to and after the Final Closing Date, the Assets, and
the operations of Seller's Business. Seller shall not take any action
without Buyer's prior written consent, with respect to the operations of
Seller's Business that is inconsistent with the terms of the Manufacturing
and Supply Agreement or this Agreement. Without limiting the generality of
any of the preceding two sentences, until the Final Closing Date, Seller
shall:
(a) use its reasonable best efforts to maintain the Assets of
Seller in their present state, reasonable wear and tear excepted, and
preserve Seller's relationships with its customers, suppliers,
vendors, employees, salespeople and any other persons or entities;
(b) not sell, lease or otherwise transfer, or contract to sell,
lease or otherwise transfer, any Assets of Seller, except pursuant to
the Manufacturing and Supply Agreement, this Agreement, or mortgage,
pledge or subject any Assets to any Lien;
(c) not make any commitments or incur any liabilities or
obligations for capital expenditures in excess of $10,000 other than
in the Ordinary Course of Business;
(d) not make any loan or advance to any person, corporation, firm
or other entity or borrow any money;
(e) not terminate, transfer or grant any right under any
contract, lease, license, agreement, document, franchise, including
payment to or by Seller exceeding $10,000, except in the Ordinary
Course of Business;
(f) not make any change in, take any steps to implement any
change in or make any arrangement for the payment of any additional or
increased wages, salaries, compensation, pension or other benefits
payable to any officer, employee or salesperson or pay any severance
or termination pay to or become obligated to pay any severance or
termination pay to any officer, employee or salesperson except in the
Ordinary Course of Business or negotiated as part of a collective
bargaining agreement;
<PAGE>
(g) not incur, become a party to or become subject to, any
agreement, obligation or commitment having a term of one (1) year or
more;
(h) not incur, become a party to or become subject to, any
agreement, obligation or commitment in excess of Ten Thousand and
00/100 Dollars ($10,000.00) except in the Ordinary Course of Business;
(i) not introduce any new method of management or operation;
(j) not take any other action with respect to the Assets other
than in the Ordinary Course of Business;
(k) not take any other action or make any other commitment which
has or may reasonably be expected to have a Material Adverse Effect on
the Assets;
(l) timely pay and discharge, or cause to be timely paid and
discharged, all Taxes, assessments, and other governmental charges
imposed upon it or any of their properties or in respect of their
franchises or income; provided, however, that no such Tax or charge
need be paid if being contested in good faith by proceedings
diligently conducted and if such reservation or other appropriate
provisions, if any, as shall be required by GAAP shall have been made
therefor;
(m) (i) maintain or cause to be maintained insurance with respect
to its properties and business against such casualties and
contingencies and in such types and amounts as is customary or as may
be required by law in the case of corporations of similar size engaged
in the same or similar business of Seller, (ii) name LSI as an
additional insured on all such policies and (iii) deliver to LSI
certificates evidencing all such insurance policies;
(n) comply with all applicable Laws and with every applicable
lawful Order, in each case in all material respects;
(o) comply in all material respects with all agreements,
contracts, leases, licenses, and documents;
(p) not create, incur, assume, or permit to exist, any Lien on
any of the Assets whether now owned or hereafter acquired, other than
Permitted Liens; and
(q) not (i) declare or pay dividends or make other distributions
(whether by reduction of capital or otherwise) with respect to the
capital stock of Seller; (ii) purchase, redeem, retire or otherwise
acquire any of its capital stock now or hereafter outstanding or (iii)
make any payments for executive compensation for tax payments on S
<PAGE>
corporation earnings except to the extent necessary to cover income
taxes payable by the Stockholders relating to the net income of the
operations of Seller after the First Closing Date and prior to the
Final Closing Date.
6.3 FULL ACCESS
Until the Final Closing Date, Seller will permit representatives of
the Buyer to have full access at all reasonable times during normal
business hours upon reasonable notice to Seller, and in a manner so as not
to interfere with the normal operations of Seller's Businesses, to all
premises, properties, personnel, books, records (including tax records),
contracts and documents of or pertaining to Seller.
6.4 CONSENTS
Seller shall use its reasonable best efforts to obtain Consents from
all appropriate third parties to the assignment to Buyer of the Assets,
including all Material Contracts, if such Consent is required thereby on
terms and conditions reasonably satisfactory to Buyer, which Consents shall
waive any right of third parties to the Assets, including the right to
terminate such Material Contracts, upon the assignment of any such to
Buyer. In addition, Seller and Buyer shall use their respective reasonable
best efforts to obtain all approvals and Consents of all persons, firms,
entities and any Governmental Body, which are necessary to consummate the
transactions contemplated by this Agreement.
6.5 NOTICE OF DEVELOPMENTS
Until the Final Closing Date, each party will give prompt written
notice to the other party of any material adverse development causing a
Breach of any of its own representations and warranties in this Agreement.
No disclosure by any party pursuant to this Section 6.5, however, shall be
deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, or Breach of any representation, warranty or
covenant nor will a breach of any representation, warranty or covenant
relieve Buyer of any of its obligations under this Agreement.
6.6 EXCLUSIVITY
Until the Final Closing Date, neither Seller nor the Stockholders will
(i) solicit, initiate or encourage the submission of any proposal or offer
from any person relating to the acquisition of any capital stock or other
voting securities, or any substantial portion of the Assets of Seller
(including any acquisition structured as a merger, consolidation or share
exchange); or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate
<PAGE>
in, or facilitate in any other manner any effort or attempt by any person
to do or seek any of the foregoing. Seller will notify the Buyer
immediately if any person makes any proposal, offer, inquiry or contact
with respect to any of the foregoing.
6.7 FURTHER ASSURANCES
After each Closing, if Buyer reasonably considers or is advised that
any further assignment, conveyance or other documents are reasonably
necessary to vest, perfect, confirm or record in Buyer title to any of the
Assets or to aid in the prosecution, defense or enforcement of any rights
arising from the transfer of the Assets to Buyer, Seller and the
Stockholders shall execute and deliver promptly to Buyer any and all deeds,
assignments, or other reasonably requested documents relating to the Assets
and do all things reasonably requested by Buyer to vest, perfect or confirm
title to the Assets in Buyer or to convey such other rights as provided
herein or to otherwise carry out the intent of this Agreement and Buyer
shall promptly reimburse Seller for any costs reasonably incurred by Seller
relating thereto.
6.8 EMPLOYEES
(a) After the execution of this Agreement and until the Final
Closing, neither Seller nor the Stockholders shall (i) make any
commitments to any of the employees of Seller with respect to the
continued employment of such employees by Buyer after the Final
Closing Date; provided, however, Seller and the Stockholders shall, on
request from Buyer, make reasonable efforts to assist Buyer, as Buyer
deems appropriate, in facilitating Buyer's hire of any of such
Seller's employees; or (ii) induce any person who is an employee or
agent of Seller to terminate such relationship.
(b) Buyer shall be solely responsible for all compensation
accruing for service on and after the Final Closing Date with respect
to Final Closing Employees, and for all contributions to, and benefits
payable under, all employee benefit plans, employee benefit
arrangements and employee compensation policies and practices
established by Buyer with respect to Final Closing Employees.
(c) With respect to any collective bargaining agreement that
relates to Final Closing Employees, Buyer shall (i) recognize each
union which represents any group of Final Closing Employees as the
collective bargaining representative of such group of Final Closing
Employees as of the Final Closing Date and (ii) assume the obligations
for Final Closing Employees under any such collective bargaining
agreement or enter into its own collective bargaining agreement with
the Final Closing Employees. Effective as of the Final Closing Date,
Buyer shall establish such employee benefit plans which are required
<PAGE>
for Final Closing Employees under the terms of any collective
bargaining agreement.
(d) For purposes of computing deductible amounts (or like
adjustments or limitations on coverage) under any Employee Welfare
Plan, expenses and claims previously recognized for similar purposes
under the applicable welfare plan of Seller shall be credited or
recognized under the welfare plan of Buyer and its Affiliates. Buyer
shall make available to all Final Closing Employees who are
participating in the group health plan of Seller immediately prior to
the Final Closing Date a group health plan which has no waiting period
for such Final Closing Employees with respect to eligibility to enroll
and participate and no exclusions or limitations based on pre-existing
conditions for such Final Closing Employees.
(e) At the Final Closing Date, Buyer shall offer employment to
all Final Closing Employees so that such Final Closing Employees shall
be afforded the opportunity for uninterrupted employment before and
immediately after the Final Closing Date. Seller and Buyer agree that
the transactions contemplated by this Agreement shall not constitute a
severance of employment of any Final Closing Employees, and that such
Final Closing Employees will be deemed for all purposes to have
continuous and uninterrupted employment before and immediately after
the Final Closing Date. Buyer shall indemnify and hold Seller harmless
from and be responsible for any claims made by any Final Closing
Employee for severance or other benefits based on separation from, or
termination or constructive termination of, employment, including, but
not limited to changing the position or terms and conditions of
employment of, a Final Closing Employee, based on the actions of Buyer
on or after the Final Closing Date.
(f) Effective as of the Final Closing Date, Buyer shall be
responsible for all obligations under Section 4980B of the Code and
Part 6 of Subtitle B of Title I of ERISA ("COBRA") with respect to all
Final Closing Employees and qualified beneficiaries (within the
meaning of COBRA) of such Final Closing Employees. Seller shall be
responsible for COBRA for all employees who are not Final Closing
Employees and with respect to the "qualified beneficiaries" (within
the meaning of COBRA) of such employees until Seller terminates its
group health plan. Upon the termination of the Seller's group health
plan in connection with the sale, Buyer shall be responsible for
COBRA.
6.9 GOOD FAITH EFFORTS
Each of the parties hereto agrees to use its diligent good faith
efforts to take, or cause to be taken, all appropriate and reasonable
action, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under applicable laws and regulations and in accordance
with the terms hereof to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation satisfaction,
<PAGE>
but not waiver, of the Closing obligations set forth in Section 3.4 above
and filing a Premerger Notification under the HSR Act.
6.10 COOPERATION
Prior to the Final Closing (and after the Final Closing Date, if
necessary), Buyer, Seller and the Stockholders will fully cooperate with
each other and their respective counsel and accountants in connection with
all steps reasonably necessary to be taken as part of their obligations
under this Agreement.
6.11 DISCLOSURE SCHEDULES
(a) Seller has delivered to Buyer the Disclosure Schedules
(together with copies of the documents referred to therein) prior to
the execution of this Agreement.
(b) Seller shall give reasonably detailed written notice to Buyer
promptly upon the occurrence of any event that would cause or
constitute a Breach of any representations or warranties of Seller or
the Stockholders contained in this Agreement or in the Disclosure
Schedule.
7. INDEMNIFICATION; REMEDIES
7.1 INDEMNIFICATION BY THE STOCKHOLDERS
Seller and the Stockholders, jointly and severally, covenant and agree
to defend, indemnify and hold harmless the Buyer and its Affiliates and
their respective officers, directors and employees (collectively, the
"Buyer Indemnitees") from and against, and pay or reimburse the Buyer
Indemnitees for, any and all claims, demands, liabilities, strict
liabilities, obligations, losses, fines, costs, expenses, royalties,
litigation, deficiencies or damages (whether absolute, accrued, conditional
or otherwise and whether or not resulting from third party claims),
including interest and penalties with respect thereto and out-of-pocket
expenses and reasonable attorneys' and accountants' fees and expenses
incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights hereunder
(collectively, "Losses"), resulting from or arising out of:
(a) any misrepresentation or Breach of any representation,
warranty, covenant, obligation or agreement of Seller and/or the
Stockholders in this Agreement or in any schedule, document or
agreement furnished or to be furnished by Seller or the Stockholders
under this Agreement;
<PAGE>
(b) any claims, demands, suits, investigations, proceedings or
actions by any third party containing or relating to allegations that,
if true, would constitute a Breach of, or misstatement in, any one of
the representations and warranties contained in Article 4;
(c) any Non-Assumed Liabilities;
(d) any and all liabilities for Taxes of Seller arising prior to
the First Closing; and
(e) any claim, action, suit, investigation or proceeding against
Buyer's Indemnities or to which any of them are named a party by any
creditor of any Seller relating to or alleging any violation of
applicable bulk transfer laws in connection with the transactions
contemplated by this Agreement.
7.2 INDEMNIFICATION BY THE BUYER
The Buyer covenants and agrees to defend, indemnify and hold harmless
Seller and the Stockholders and their respective Affiliates and their
respective officers, directors and employees (collectively the "Seller
Indemnitees") from and against, and pay or reimburse the Seller Indemnitees
for, any and all Losses (as defined in Section 7.1) resulting from or
arising out of:
(a) any misrepresentations or Breach of any representation,
warranty, covenant, obligation or agreement of Buyer in this Agreement
or in any document or agreement furnished or to be furnished by Buyer
under this Agreement;
(b) any Assumed Liabilities; and
(c) the conduct of Seller's Business after the First Closing and
any Subsequent Closings.
7.3 INDEMNIFICATION PROCEDURES
In the case of any claim asserted by a third party against a party
entitled to indemnification under this Agreement (the "Indemnified Party"),
written notice shall be given by the Indemnified Party to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume
the defense of any claim or any litigation resulting therefrom, provided,
that (i) counsel for the Indemnifying Party who shall conduct the defense
of such claim or litigation shall be reasonably satisfactory to the
<PAGE>
Indemnified Party, and the Indemnified Party may participate in such
defense at such Indemnified Party's expense, and (ii) the failure of any
Indemnified Party to give written notice as provided herein shall not
relieve the Indemnifying Party of its indemnification obligation under this
Agreement except to the extent that such failure results in a lack of
actual notice to the Indemnifying Party and such Indemnifying Party is
materially prejudiced as a result of such failure to give notice. Except
with the prior written consent of the Indemnified Party, no Indemnifying
Party, in the defense of any such claim or litigation, shall consent to
entry of any judgment or enter into any settlement that provides for
injunctive or other nonmonetary relief affecting the Indemnified Party or
that does not include as an unconditional term thereof the giving by each
claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation. In the event that the
Indemnified Party shall in good faith determine, after consultation with
the Seller, that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by
the Indemnifying Party would adversely affect in a material manner the
Indemnified Party's Tax liability or (in the case of an Indemnified Party
that is a Buyer Indemnitee) the ability of Buyer to conduct its business,
or that the Indemnified Party may have available to it one or more defenses
or counterclaims that are inconsistent with one or more of those that may
be available to the Indemnifying Party in respect of such claim or any
litigation relating thereto, the Indemnified Party shall have the right at
all times to take over and assume control over the defense, settlement,
negotiations or litigation relating to any such claim at the sole cost
(provided such costs are reasonable) of the Indemnifying Party, such costs
to be paid by the Indemnifying Party to the Indemnified Party during the
conduct of such defense, settlement, negotiations or litigation, no later
than twenty (20) Business Days after its receipt of notice thereof, in form
and substance satisfactory to the Indemnifying Party, provided, that if the
Indemnified Party does so take over and assume control, the Indemnified
Party shall not settle such claim or litigation without the written consent
of the Indemnifying Party, such consent not to be unreasonably withheld. In
the event that the Indemnifying Party does not accept the defense of any
matter as above provided within ten (10) Business Days of its receipt of
written notice of such claim by an Indemnified Party, the Indemnified Party
shall have the full right to defend against any such claim or demand, to
settle or agree to pay in full such claim or demand, and the Indemnifying
Party shall remain responsible for any Losses the Indemnified Party may
suffer resulting from, arising out of or caused by such third party claims
to the extent provided in this Article 7. In any event, Seller and the
Stockholders and the Buyer shall cooperate in the defense of any claim or
litigation subject to this Article 7 and the records of Seller and Buyer
shall be reasonably available to the other with respect to such defense.
7.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
The representations and warranties contained in this Agreement shall
survive the execution and delivery of this Agreement, but only to the
extent specified below:
<PAGE>
(a) except as set forth in clauses (b), (c) and (d) below, the
representations and warranties contained in Articles 4 and 5 and shall
survive until October 1, 2002 except as to those matters with respect
to which a party shall have given written notice of any claim within
such period; and
(b) the representations and warranties of the Stockholders
contained in Sections 4.1, 4.2(a), 4.3 and 4.6 (solely as it relates
to title to the Assets) and of Buyer contained in Sections 5.1 and
5.2(a) shall survive without limitation and the representations and
warranties of the Seller and the Stockholders contained in Sections
4.11, 4.13 and 4.19 shall survive for the applicable statute of
limitations.
(c) Notwithstanding the above limitations, indemnification for
claims resulting from a fraudulent or intentional breach of any
representation, warranty, covenant or agreement under this Agreement
shall extend indefinitely.
(d) If a party shall have given written notice of any claim
within the applicable survival period, the representations and
warranties as they relate solely to such claim shall survive until
such time as the claim is resolved.
7.5 LIMITATION ON INDEMNIFICATION
(a) Except as set forth in Section 7.5(b) below, neither Buyer,
on the one hand, nor Seller and the Stockholders, on the other hand,
shall be entitled to indemnification under this Agreement unless and
until the aggregate amount of any Losses exceeds One Hundred Fifty
Thousand Dollars ($150,000) (the "Basket Amount") after which Buyer,
on the one hand, or Seller and the Stockholders, on the other hand,
shall be liable for the entire amount of such Losses, including the
Basket Amount. Unless specifically stated elsewhere in this Agreement,
the maximum aggregate obligation of Buyer with respect to all matters
for which Seller and the Stockholders may seek indemnification under
this Agreement with respect to any claim, loss, liability or damages
of any kind whatsoever arising out of or relating or incident to this
Agreement or any agreement or document delivered in connection
herewith or the transactions contemplated hereby (the "Buyer Cap")
shall not exceed Two Million Six Hundred Eighty Eight Thousand Eight
Hundred Seventy Dollars ($2,688,870). The maximum aggregate obligation
of Seller and the Stockholders with respect to all matters for which
Buyer may seek indemnification from them under this Agreement and with
respect to any claim, loss, liability or damages of any kind
whatsoever arising out of or relating or incident to this Agreement or
any agreement or document delivered in connection herewith or the
transactions contemplated hereby (the "Seller Cap") shall not exceed
Two Million Six Hundred Eighty Eight Thousand Eight Hundred Seventy
Dollars ($2,688,870); provided, however, the Seller Cap shall be Four
Million Thirty Three
<PAGE>
Thousand Three Hundred Six Dollars ($4,033,306) for any
indemnification claims resulting from a fraudulent breach by Seller
and the Stockholders of any of their representations, warranties or
covenants under this Agreement. The Buyer Cap and the Seller Cap are
collectively referred to as the "Cap".
(b) The Basket Amount shall not apply to any claim made by Buyer
based upon (i) the representations and warranties of Seller and the
Stockholders contained in any of Sections 4.1, 4.2(a), 4.6 (solely as
it relates to title to the Assets) 4.8, 4.11, 4.13, and 4.19; or (ii)
any Non-Assumed Liabilities. The Basket Amount shall not apply to any
indemnification claims resulting from a fraudulent or intentional
breach by the Seller and Stockholders, on the one hand, or Buyer, on
the other hand, of any of their respective representations, warranties
or covenants under this Agreement. The Basket Amount shall not apply
to any claim made by Seller or any Stockholder based upon the
representations and warranties of Buyer contained in any of Sections
5.1 and 5.2(a).
(c) If Buyer's indemnification claims are based upon Seller's
and/or the Stockholders' fraudulent breach of any representations,
warranties or covenants under this Agreement and such claims are
deemed not to amount to fraud (notwithstanding whether they constitute
a breach), Buyer agrees to pay Seller's reasonable attorney's fees
related to defending the fraud claim by Buyer.
(d) Buyer's remedies with respect to Losses shall be satisfied
first by the assertion of its rights under the Escrow Agreement.
7.6 SOLE REMEDY
The parties acknowledge and agree that the indemnification provisions
set forth in this Article 7 shall be their sole and exclusive remedy and
recourse for the recovery of money damages with respect to any and all
claims relating to or arising out of this Article 7; provided, however, the
parties may seek any remedy available to them, in equity or law except
recission, for any other cause of action including, but not limited to, any
cause of action based on fraud, subject to the limitations set forth in
Section 7.5.
7.7 ESCROW/INDEMNIFICATION OFFSETS
Upon written notice to Seller and the Stockholders specifying in
reasonable detail the basis for a claim for indemnification hereunder,
Buyer may give written notice of a claim in such amount under the Escrow
Agreement, in accordance therewith. The exercise of such right to make a
claim by Buyer in good faith, whether or not ultimately determined to be
justified, will not constitute an election of remedies or limit Buyer in
any manner in the enforcement of any other remedies that may be available
to it, subject to the limitations set forth herein. Notwithstanding
<PAGE>
anything herein to the contrary, Seller and the Stockholders shall
indemnify Buyer, its successors and assigns, to the extent provided in this
Article 7 and such indemnification, to the extent provided, shall not be
limited to the amount of the Indemnification Escrow but shall be limited by
the Seller Cap.
7.8 INSURANCE
In calculating the amount of any Losses for which an Indemnified Party
is entitled to indemnification under this Section 7, the amount of any
insurance proceeds received by the Indemnified Party relating to or in
connection with such Loss shall reduce the amount of any claim for
indemnification.
7.9 CLAIMS BASED UPON FRAUD - ORDER OF RECOURSE
If Buyer's indemnification claims are based upon the fraud of Seller
and/or the Stockholders, Buyer agrees to seek indemnification from its
Losses first from Eugene Littman and Elfriede Littman and then from the
remaining Stockholders. Notwithstanding the foregoing or anything to the
contrary contained herein, Seller's and the Stockholders' indemnification
obligations to Buyer and its Affiliates are joint and several. The
provisions of this Section 7.9 are for the Stockholders' convenience only,
and only with respect to claims of fraud by Buyer, and in no way limit or
restrict Buyer's indemnification rights under this Agreement or limit or
restrict the Stockholders' obligations under this Agreement.
8. ADDITIONAL AGREEMENTS
8.1 ENVIRONMENTAL INSURANCE POLICIES
The parties acknowledge and agree that Seller purchased a Pollution
Legal Liability Select Policy, Policy No. PLS 8087010 dated July 18, 2000
from Commerce and Industry Insurance Company. Seller and the Stockholders
acknowledge and agree that any costs and/or expenses related to Seller's
purchase and maintenance of such insurance policy, including, without
limitation, the payment of premiums related thereto (whether paid prior to
the First Closing Date or payable after the First Closing Date), shall be
the sole obligation and liability of the Stockholders. The Stockholders
agree to indemnify and hold harmless Buyer and its Affiliates from and
against any and all Losses, including, without limitation, the premiums
paid prior to the First Closing Date and payable after the First Closing
Date, related to or arising from such insurance policy. Buyer shall have
the right to offset amounts owing by Buyer to Seller and/or the
Stockholders, or any of them, against amounts owing to Buyer under this
Section 8.1.
<PAGE>
8.2 DISTRIBUTION FOR TAXES
The parties acknowledge and agree that no dividends or distributions
were permitted by Seller through the Final Closing Date other than
distributions to cover the Stockholders' estimated tax liability solely
related to the earnings of Seller through the First Closing Date (the
"Estimated Tax Liability"). Buyer agrees that if the Stockholders' actual
tax liability solely related to the earnings of Seller through the First
Closing Date (the "Actual Tax Liability") is greater than the Estimated Tax
Liability, Buyer shall pay the Stockholders the difference between the
Actual Tax Liability and the Estimated Tax Liability, which amount shall be
payable within thirty (30) days after such determination. If the
Stockholders' Actual Tax Liability is less than the Estimated Tax
Liability, the Stockholders shall pay Buyer the difference between the
Estimated Tax Liability and the Actual Tax Liability, which amount shall be
payable within thirty (30) days after such determination. Seller, the
Stockholders and Buyer shall use their best efforts to determine the Actual
Tax Liability as soon as practicable after the First Closing Date, but in
any event on or before January 15, 2001.
8.3 GROSS-UP
The parties acknowledge that the Purchase Price was calculated based
upon a proposed purchase price of $26,500,000 (the "Proposed Purchase
Price") if the transaction was structured as a purchase and sale of stock.
The parties agreed that the Proposed Purchase Price would be adjusted
upwards (the "Gross-Up Amount") to account for the different tax treatment
received by the Stockholders as a result of structuring this transaction as
a purchase and sale of assets rather than a purchase and sale of stock. As
of the First Closing Date, the parties have estimated that the Gross-Up
Amount is $388,709 (the "Estimated Gross-Up Amount"), as reflected in the
Purchase Price set forth in Section 3.1.
On the Final Closing Date, the parties shall determine the actual
Gross-Up Amount (the "Actual Gross-Up Amount") based upon the final
allocation of the Purchase Price at the Final Closing pursuant to Section
3.2. If the Actual Gross-Up Amount is more than the Estimated Gross-Up
Amount (the "Upward Adjustment Amount"), the Purchase Price shall be
adjusted upwards, dollar for dollar, by the Upward Adjustment Amount, and
the Upward Adjustment Amount shall be added to the Purchase Price payable
to Seller for the Final Closing Assets. If the Actual Gross-Up Amount is
less than the Estimated Gross-Up Amount (the "Downward Adjustment Amount"),
the Purchase Price shall be adjusted downwards, dollar for dollar, by the
Downward Adjustment Amount, and the Buyer shall, at its election, (a)
reduce the Purchase Price payable for the Final Closing Asset by the
Downward Adjustment Amount, (b) make a claim against the Escrowed Cash
under the Escrow Agreement equal to the Downward Adjustment Amount, or (c)
elect a combination of (a) and (b) above.
<PAGE>
8.4 DUKE PURCHASE PRICE ADJUSTMENT
The parties acknowledge and agree that the Purchase Price was
calculated based upon represented revenues of Seller resulting from Duke
Solutions' (or its successor) specifications or purchases during the fiscal
year ending December 31, 2000 equal to Three Million Dollars ($3,000,000)
(the "Represented Duke Revenues"). If the actual revenues (the "Actual Duke
Revenues") of Seller resulting from Duke Solutions' (or its successor)
specifications or purchases for the period beginning November 21, 2000
through and including September 30, 2001 (the "Duke Period") is less than
the Represented Duke Revenues, the Purchase Price shall be adjusted
downwards, dollar for dollar, by the difference between the Represented
Duke Revenues and the Actual Duke Revenues (the "Duke Purchase Price
Adjustment"). The Actual Duke Revenues shall be determined in accordance
with GAAP based upon actual shipments made by Buyer during the Duke Period,
less any credits related thereto. Buyer shall have the right to make a
claim under the Escrow Agreement for the Duke Purchase Price Adjustment, in
accordance with the Escrow Agreement.
9. GENERAL PROVISIONS
9.1 EXPENSES
Except as otherwise provided in this Agreement, Buyer, on the one
hand, and Seller and the Stockholders, on the other hand, will bear their
respective expenses incurred in connection with the preparation, execution,
and performance of this Agreement and the transactions contemplated hereby,
including all fees and expenses of agents, representatives, counsel and
accountants; provided, however, that (i) Buyer shall pay all filing fees
required under the HSR Act; and (ii) if the transactions contemplated by
this Agreement are consummated, Buyer shall reimburse the Seller at the
First Closing and at the Subsequent Closings for up to $100,000, in the
aggregate, for actual out-of-pocket expenses incurred in connection with
this Agreement and the Option Agreement, excluding fees due to BNY Capital
Markets, Inc.
9.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the transactions contemplated hereby will be issued, if at
all, at such time and in such manner as Buyer and Seller mutually
determine. Seller and Buyer will consult with each other in good faith
concerning the means by which Seller's employees, customers, and suppliers
and others having dealings with the Seller's Business will be informed of
the transactions contemplated hereby, and Buyer and Seller will have the
right to be present for any such communication. Without prior notice to
Seller, Buyer shall not communicate with Seller's employees, customers and
suppliers.
<PAGE>
9.3 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent
by telecopier (with written confirmation of receipt), or (c) when received
by the addressee, if sent by a nationally recognized overnight delivery
service, in each case to the appropriate addresses and telecopier numbers
set forth below (or to such other addresses and telecopier numbers as a
party may designate by written notice to the other parties):
Seller: Lightron of Cornwall, Inc.
1126 River Road
P.O. Box 4270
New Windsor, New York 12553
Attention: Eugene Littman
Facsimile No.: (914) 562-2181
The Stockholders: Eugene Littman
67 Susan Drive
Newburgh, New York 12550
with a required copy to: Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10027
Attention: Joel Handel
Facsimile No.: (212) 702-5797
Buyer: LSI Industries Inc.
10000 Alliance Road
Cincinnati, Ohio 45241
Attention: Robert J. Ready
Facsimile No.: (513) 791-0813
<PAGE>
with a required copy to: Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Paul V. Muething
Facsimile No.: (513) 579-6956
9.4 FURTHER ASSURANCES; RECORDS RETENTION
The parties agree: (a) to furnish upon reasonable request to each
other such further information; (b) to execute and deliver to each other
such other documents; and (c) to do such other acts and things, all as the
other party or parties may reasonably request for the purpose of carrying
out the intent of this Agreement and the documents referred to in this
Agreement. For a period of six (6) years after the Final Closing, Buyer
shall retain all files, books and other records of Seller relating to the
operation of Seller's Business and shall, after the Final Closing, give
Seller and its respective representative(s) access thereto during regular
business hours on reasonable prior notice.
9.5 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of
such right, power or privilege, and no single or partial exercise of any
such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law, (a)
no claim or right arising out of this Agreement or the documents referred
to in this Agreement can be discharged by one party, in whole or in part,
by a waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c)
no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
9.6 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements, arrangements or
understandings between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be
amended except by a written agreement executed by all the parties hereto.
<PAGE>
9.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Except as otherwise provided herein, neither Buyer, on the one hand,
nor Seller and the Stockholders, on the other hand, may assign any of its
rights under this Agreement without the prior consent of the other parties,
which will not be unreasonably withheld. Notwithstanding anything to
contrary contained herein, Buyer may assign any of its rights under this
Agreement to any Subsidiary of Buyer; provided, however, no such assignment
shall release Buyer from any of its liabilities or obligations under this
Agreement. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors
and permitted assigns of the parties. Nothing expressed or referred to in
this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy or claim under or
with respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns.
9.8 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
9.9 BULK SALES WAIVER
Subject to the indemnification provisions of Section 7.1(e), Buyer
hereby waives compliance by Seller and the Stockholders with the provisions
of the bulk sales law of any state which may be applicable to the
transactions contemplated hereby.
9.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
All references to "Section" or "Sections" refer to the corresponding
Section or Sections of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
<PAGE>
9.11 GOVERNING LAW
This Agreement will be governed by and construed under the laws of the
State of Ohio without regard to conflicts of laws principles. The parties
hereto further agree that any suit, action or proceeding brought by Buyer
alleging the fraud of Seller or the Stockholders shall be instituted in the
federal and state courts having a situs in the State of New York.
9.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Asset
Purchase Agreement as of the date and year first written above.
LSI INDUSTRIES INC.
By:
-----------------------------------------
Robert J. Ready,
Chairman of the Board,
Chief Executive Officer and
President
LIGHTRON OF CORNWALL, INC.
By:
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Its:
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Eugene Littman
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Elfriede Littman
EUGENE LITTMAN 1994 IRREVOCABLE TRUST
FBO BONNIE GATOF
By:
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Its:
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By:
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Its:
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By:
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Its:
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<PAGE>
EUGENE LITTMAN 1994 IRREVOCABLE TRUST
FBO DAVID LITTMAN
By:
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Its:
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By:
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Its:
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By:
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Its:
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EUGENE LITTMAN 1994 IRREVOCABLE TRUST
FBO SANDRA FINKELSTEIN
By:
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Its:
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By:
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Its:
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By:
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Its:
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<PAGE>
GLOSSARY
"Affiliate" -- has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Assets" -- as defined in Section 2.1.
"Assumed Liabilities" -- as defined in Section 2.3(a)
"Bill of Sale" -- as defined in Section 3.4(a)(i)
"Breach" -- a "Breach" of a representation, warranty, covenant, obligation
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation or other provision and the term
"Breach" means any such inaccuracy, breach, failure, claim, occurrence, or
circumstance.
"Business Day" - any day other than Saturday, Sunday or any other day in
which commercial banks in Cincinnati, Ohio are required or permitted to be
closed.
"Buyer" -- as defined in the first paragraph of this Agreement.
"Buyer's Post-Closing Liabilities" -- as defined in Section 2.3(c).
"Closing" -- shall mean each of the First Closing and each Subsequent
Closing and Closings shall mean all of such closings as defined in Section 3.3.
"Closing Cash Payment -- as defined in Section 3.1(a).
"Closing Date" -- the date of each Closing.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Consent" -- any approval, consent, ratification, waiver or other
authorization (including any Governmental Authorization).
"Copyrights" -- as defined in Section 4.22(a).
<PAGE>
"Disclosure Schedule" -- the disclosure letter delivered by Seller to Buyer
concurrently with the execution and delivery of this Agreement.
"Employee Benefit Plan" -- means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), (d) Employee Welfare Benefit Plan or (e) bonus, incentive
compensation, severance, termination, retention, change of control, stock option
or other equity-based, performance or other employee or retiree benefit or
compensation plan, program, agreement or policy, whether written or unwritten.
"Employee Pension Benefit Plan" -- has the meaning set forth in ERISA ss.
3(2).
"Employee Welfare Benefit Plan" -- has the meaning set forth in ERISA ss.
3(1).
"Enforceability Exceptions" -- as defined in Section 4.2(a).
"Environment" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental Law" -- all applicable federal, state and local laws,
statutes, codes, ordinances, regulations, rules, policies, consent decrees,
judicial or administrative orders, permits, approvals, or other requirements
relating to the protection of human health or the Environment, all as amended or
modified from time to time, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section 9601, et seq.), the Solid Waste Disposal Act, as amended (42
U.S.C. Section 6901 et seq.), the Hazardous Waste Materials Transportation Act,
as amended (49 U.S.C. Section 1801 et seq.), the Clean Air Act, as amended (42
U.S.C. Section 7401 et seq.), the Federal Water Pollution Control Act, as
amended 33 U.S.C. Section 1251, et seq.), the Toxic Substances Control Act, as
amended (15 U.S.C. Section 2601 et seq.), the Safe Drinking Water Act, as
amended (42 U.S.C. Section 300f et seq.), the Atomic Energy Act, as amended (42
U.S.C. Section 2014 et seq.), the Federal Insecticide Fungicide and Rodenticide
Act, as amended (7 U.S.C. Section 136, et seq.), the Oil Pollution Act of 1990,
as amended (33 U.S.C. Section 2701, etseq.), the Emergency Planning and
Community Right-to-Know Act of 1986, as amended (42 U.S.C. Section 11001, et
seq.), the Occupational Safety and Health Act, as amended (29 U.S.C. Section 651
et seq.), and the regulations adopted and publications promulgated pursuant
thereto, and shall also include any common law theory based on nuisance,
trespass, negligence or other tortious conduct.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA Affiliate"-- means, with respect to Seller, any other person that,
together with Seller, would be treated as a single employer under IRC ss. 414.
"Escrow Agent" -- means the escrow agent defined in the Escrow Agreement.
"Escrow Agreement" -- as defined in Section 3.4(a)(vi).
"Escrowed Cash" -- as defined in Section 3.1(b).
"Exchange Act" -- The Securities and Exchange Act of 1934, as amended.
"Excluded Assets" -- as defined in Section 2.2.
"Excluded Contracts" -- (a) the Independent Contractor Agreement dated
January 1, 1990 between Seller and Barry D. White Co., Inc., (b) the Labor Union
Contract with Local Union No. 363 of the International Brotherhood of Electrical
Workers, (c) the Agreement dated June 5, 1996 between Seller and Architectural
Art and Technology, Inc., (d) the Independent Contractor Agreement dated June
15, 2000 between Seller and Angel Rivera, and (e) the lease of the real property
located at 1126 River Road, New Windsor, New York between Seller and Littman
Industries, Inc.
"Facilities" -- any real property, leaseholds, or other interests currently
or formerly owned or operated by Seller in the conduct of Seller's Business and
any buildings, plants, structures, or equipment (including motor vehicles)
currently or formerly owned or operated by Seller in the conduct of Seller's
Business.
"Final Closing" - The date on which the Final Closing occurs.
"Final Closing Date" - The Subsequent Closing at which the last of the
Assets is transferred to Buyer.
"Final Closing Employee" - means, except as set forth on Schedule 6.8, each
employee of Seller on the Final Closing Date.
<PAGE>
"Financial Statements" -- as defined in Section 4.4(a).
"First Closing" -- as defined in Section 3.3.
"First Closing Assets" - those Assets to be transferred to Buyer at the
First Closing.
"First Closing Date" - as defined in Section 3.3.
"GAAP" - generally accepted United States accounting principles, applied on
a consistent basis.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Law.
"Governmental Body" -- any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
"Hazardous Materials" --any substance, material or waste (a) the presence
of which requires investigation or remediation under any Environmental Law; or
(b) which is defined, characterized, identified, or listed as a hazardous waste,
hazardous substance, toxic substance, infectious waste, solid waste, industrial
waste, mixed (hazardous and radioactive) waste, pollutant, contaminant or
similar term under any Environmental Law; or (c) which is toxic, explosive,
corrosive, reactive, ignitable, flammable, infectious, radioactive, toxic,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
<PAGE>
any Governmental Body as a threat to human health or safety or the environment;
or (d) the presence of which on the property causes or threatens to cause a
nuisance upon the property or to adjacent property or poses or threatens to pose
a hazard to the health or safety of persons on or about the property; or (e) the
Release of which on adjacent properties could constitute a trespass; or (f)
which is asbestos or asbestos containing materials; or (g) which is
polychlorinated biphenyls; or (h) which contains petroleum or any
petroleum-derived product or fraction thereof; or (i) which is dioxin; or (j)
which may give rise to liability or are otherwise regulated under any
Environmental Law.
"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Indemnification Escrow" -- has the meaning set forth in the Escrow
Agreement.
"Intellectual Property Assets" -- as defined in Section 4.22.
"IRC" -- the Internal Revenue Code of 1986 or any successor law and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter or had reason to know (consistent with his position and
duties with Seller) of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
For purposes hereof, Knowledge by Eugene Littman, Barry White and Jim
Spannagel shall be deemed Knowledge by Seller, and Seller's Knowledge shall mean
Knowledge of Eugene Littman, Barry White or Jim Spannagel.
"Laws" -- all laws, statutes, ordinances, regulations, and other
pronouncements having the effect of law in the United States of America, or any
domestic foreign state, province, commonwealth, city, country, municipality,
territory, protectorate, possession, court, tribunal, agency, government,
department, commission, arbitrator, board, bureau, or instrumentality thereof.
<PAGE>
"Liens" -- any mortgage, pledge, deed of trust, hypothecation, right of
others, claim, security interest, encumbrance, burden, title defect, title
retention agreement, lease, sublease, license, occupancy agreement, easement,
covenant, condition, encroachment, voting or voting trust agreement, interest,
option, right of first offer, negotiation or refusal, preemptive right, proxy,
lien, charge or other restrictions or limitations of any nature whatsoever,
including but not limited to such Liens as may arise under any Material
Contract.
"Littman Employment Agreement" -- as defined in Section 3.4(e).
"Manufacturing and Sales Agreement" -- as defined in Section 2.4.
"Marks" -- as defined in Section 4.22(a).
"Material Adverse Effect" -- any condition, change or effect (or series of
related conditions, changes or effects) that individually or in the aggregate is
substantially or significantly different from the usual and customary norms of
the condition specified, or which is substantially or significantly adverse to
(i) the business, operations, condition (financial or otherwise) or results of
operations of Seller, taken as a whole; (ii) the validity or enforceability of
this Agreement; or (iii) the ability of Seller and the Stockholders to perform
their obligations under this Agreement.
"Material Contracts" -- as defined in Section 4.17(a).
"Material Customers" -- as defined in Section 4.23.
"Material Suppliers" -- as defined in Section 4.23.
"Most Recent Financial Statements" -- as defined in Section 4.4(a).
"Multi-Employer Plan" has the meaning given in ERISA ss. 3(37)(A).
"Non-Assumed Liabilities" -- as defined in Section 2.3(b).
"Occupational Safety and Health Law" -- any applicable Law designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
<PAGE>
"Option Agreement" - means that certain Option Agreement in the form of
Exhibit 3.4(a)(xiii) relating to USA.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be specifically authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to actions customarily
taken, without any specific authorization by the board of directors
(or by any Person or group of Persons exercising similar authority),
in the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business and that are of a
similar size as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"Other Benefit Obligations" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, or agents, other than obligations, arrangements, and
practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered, sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC ss. 132.
<PAGE>
"Patents" -- as defined in Section 4.22(a).
"PBGC" -- means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Liens" -- (a) mechanic's, materialmen's, and similar liens
arising in the Ordinary Course of Business, (b) liens for taxes not yet due and
payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, (d) liens incurred, or pledges or
deposits required in connection with workmen's compensation, unemployment
insurance and other social security legislation.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan" has the meaning given in ERISA ss. 3(3).
"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Purchase Price" -- as defined in Section 3.
"Related Person" -- With respect to a specified Person other than an
individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a material interest in such specified Person;
<PAGE>
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a material interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the first
degree, and (iv) any other natural person who resides with such individual, and
(b) "material interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Release" -- any exposure to or past or current spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, disposing, abandonment, or any other release, however defined, whether
intentional or unintentional, of any Hazardous Materials into the environment in
violation of applicable Environmental laws, or which otherwise gives rise to any
liability under any Environmental Laws, and includes any suspected or threatened
Release.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Seller" -- as defined in the first paragraph of this Agreement.
"Seller's Business" -- as defined in the preamble of this Agreement.
"Stockholders" -- as defined in the first paragraph of this Agreement.
"Subsequent Closing" - any closing after the First Closing at which any of
the Assets are transferred to Buyer.
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"Subsequent Closing Date" - the date on which a Subsequent Closing occurs.
"Subsidiary" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of Seller.
"Taxes" -- all federal, state, local, foreign and other taxes, levies,
fees, imports, duties and similar governmental charges (including any interest,
penalties or additions to tax imposed in connection therewith or with respect
thereto), including, without limitation, taxes imposed on or with respect to, or
measured by, income, franchise, profits or gross receipts, ad valorem, value
added, sales, use, service, real or personal property, capital stock, license,
payroll, withholding, employment, social security, unemployment, compensation,
utility, severance, production, excise, stamp, occupation, premium, windfall
profits, transfer and gains taxes, and custom duties.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Law relating to any Tax.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing) that
would lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken or otherwise
pursued in the future.
"Trade Secrets" -- as defined in Section 4.22(a).
"Transfer Documentation" -- as defined in Section 3.4(a).
"USA" -- USA Illumination, Inc., a New York corporation.
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"White Employment Agreement" -- as defined in Section 3.4(a)(ix).
"Year-End Financial Statements" -- as defined in Section 4.4(a).
