Exhibit
10.2
Execution
Copy
SHARE AND ASSET PURCHASE AND SALE
AGREEMENT
BY AND AMONG
LITTON SYSTEMS,
INC.,
LITTON SYSTEMS INTERNATIONAL,
INC.,
and
LITTON U.K. LTD.,
as the Sellers
and
SIMCLAR GROUP LIMITED,
SIMCLAR, INC.,
SIMCLAR INTERCONNECT TECHNOLOGIES,
INC,
and
SIMCLAR INTERCONNECT TECHNOLOGIES
LIMITED
as the Buyers
Dated as of December 21,
2005
SHARE AND ASSET PURCHASE AND
SALE AGREEMENT
THIS SHARE AND ASSET PURCHASE AND SALE
AGREEMENT, dated as of December 21, 2005 (this “
Agreement ”), by and among LITTON SYSTEMS, INC.
(“ LSI ”), a Delaware corporation, LITTON
SYSTEMS INTERNATIONAL , INC. (“ LSII ”), a
Delaware corporation, and LITTON U.K. Limited (“ LUK
”), a U.K. Company (each a “ Seller ” and,
collectively, the “ Sellers ”) and Simclar Group
Limited, a U.K. company, its wholly-owned subsidiary Simclar
Interconnect Technologies Limited, a U.K. company, Simclar, Inc., a
Florida corporation, and its wholly-owned subsidiary Simclar
Interconnect Technologies, Inc., a Delaware corporation (each a
“ Buyer ” and collectively, the “
Buyers ”). Capitalized terms used herein have the
meanings provided in Article X, unless otherwise defined
herein.
WHEREAS, Sellers are in the business of
assembling and selling complex, high-performance electronic back
plane assemblies for electronic products, and providing related
research and development, design and engineering services (such
business, expressly excluding the printed circuit board
manufacturing operations of the Sellers located in Springfield,
Missouri and expressly excluding all discontinued operations,
including but not limited to the operations conducted in the
Fairfield, California facility, being hereinafter referred to as
the “ Business ”) in the U.S. and the U.K.
respectively, through LSI’s and LUK’s unincorporated
Interconnect Technology Division and in China through Litton
Electronics (Suzhou) Co. Ltd. (hereinafer referred to as “
LESC ” or the “ Company ”), an
indirect, wholly-owned subsidiary of LSI and a direct, wholly-owned
Subsidiary of LSII; and
WHEREAS, prior to the Closing, Northrop Grumman
Systems Corporation will execute and deliver a guarantee of the
Sellers’ obligations under this Agreement; and
WHEREAS, upon the terms and conditions set forth
herein and in the Equity Purchase Agreement attached hereto as
Exhibit A (the “ LESC Equity Purchase Agreement
”), the Buyers desire to purchase from the Sellers, and the
Sellers desire to sell to the Buyers, substantially all of the
assets and properties held by LSI and LUK and used primarily in
connection with or which are material to the Business, and all of
the right, title and interest of LSII in the Shares, and the Buyers
have agreed to assume the Assumed Liabilities.
NOW, THEREFORE, in consideration of the
foregoing and the respective representations, warranties, covenants
and agreements set forth herein, the Parties hereby agree as
follows.
ARTICLE
I
PURCHASE AND
SALE
SECTION 1.1.
Sale and Purchase of the Shares
and Assets .
Upon the terms and subject to the conditions
herein and in the LESC Equity Purchase Agreement, at the Closing,
the Sellers shall sell, transfer, assign and deliver (or cause to
be sold, transferred, assigned and delivered) to the Buyers, and
the Buyers shall purchase and acquire from the Sellers, all right,
title and interest of the Sellers in and to (i) the Shares, and
(ii) the properties, assets and rights of every nature, kind and
description, tangible and intangible, whether accrued, contingent
or otherwise, and whether now existing or hereinafter acquired
(other than the Excluded Assets) of every kind and description,
wherever located, used or held for use primarily in connection with
the Business (except for the assets or properties of the Company as
to which the Buyers will acquire control by virtue of the transfer
of the Shares), as the same may exist on the Closing Date
(collectively, the “ Assets ”), including
without limitation all those items in the following categories that
conform to the definition of the term
“Assets”:
(a) all personal property (whether as owner, lessor,
lessee or otherwise), including, without limitation, all machinery,
equipment, tooling, dies, molds, jigs, patterns, gauges, materials
handling equipment, furniture, office equipment, cars, trucks and
other vehicles (including, but not limited to, any of the foregoing
purchased subject to any conditional sales or title retention
agreement in favor of any other Person);
(b) all inventories in the U.S. and U.K. including,
without limitation, inventories of raw materials, components,
assemblies, subassemblies, work-in-progress, finished goods,
replacement parts, spare parts, operating and office supplies,
packaging (collectively, the “ Inventories ”),
including Inventories held at any location controlled by any
Seller, Inventories previously purchased and in transit to any
Seller at such locations, and returns of Inventories after the
Closing Date;
(c) all rights in and to products sold or leased
(including, but not limited to, products hereafter returned or
repossessed and unpaid Sellers’ rights of rescission,
replevin, reclamation and rights to stoppage in
transit);
(d) all rights (including but not limited to any and
all Intellectual Property rights) in and to the products sold or
leased and in and to any products or other Intellectual Property
rights under research or development prior to or on the Closing
Date;
(e) all of the rights of the Sellers under all
contracts, orders, commitments, arrangements, licenses, leases and
other agreements, including, without limitation, any right to
receive payment for products sold or services rendered, and to
receive goods and services, pursuant to such agreements and to
assert claims and take other rightful actions in respect of
breaches, defaults and other violations of such contracts,
arrangements, licenses, leases and other agreements and
otherwise;
(f) all sales agency agreements, subcontracts or
similar agreements regarding the sale or distribution of products
or services;
(g) all rights relating to credits, prepaid
expenses, deferred charges, advance payments, security deposits and
prepaid items;
(h) all accounts, notes and accounts receivable held
by the Sellers and all notes, bonds and other evidences of
indebtedness of and rights to receive payments from any Person held
by the Sellers;
(i) all Intellectual Property and all rights
thereunder or in respect thereof used or held for use primarily in
connection with the Business, including, but not limited to, rights
to Sellers’ “Databank” data transmission modeling
software and database, and rights to the mark “Interconnect
Technologies” (but only to the extent used in conjunction
with “Simclar” pursuant to the terms of the license
agreement attached hereto as Exhibit F) and other marks or domain
names used primarily in the Business, and rights to sue for and
remedies against past, present and future infringements thereof,
and rights of priority and protection of interests therein under
the laws of any jurisdiction worldwide and all tangible embodiments
thereof;
(j) all books, records, manuals and other materials
(in any form or medium), including, without limitation, all records
and materials maintained at the corporate offices of Sellers,
advertising matter, catalogues, price lists, correspondence,
mailing lists, customer lists, client lists, referral sources,
distribution lists, photographs, production data, sales and
promotional materials and records, purchasing materials and
records, personnel records relating to Business Employees (subject
to applicable Laws), financial and accounting records,
manufacturing and quality control records and procedures,
blueprints, research and development files, records, data and
laboratory books, Intellectual Property disclosures, media
materials and plates, accounting records, correspondence, service
and warranty records, equipment logs, operating guides and manuals,
sales order files and litigation files, provided that Sellers shall
retain a right of reasonable access to all such materials to the
extent such materials relate to any rights or liabilities retained
by Sellers after the Closing Date;
(k) solely with respect to the Assets used or held
exclusively in connection with the Business, all permits, licenses,
consents, rights, exemptions, concessions, authorizations,
certificates, orders, franchises, determinations, approvals,
qualifications and the like issued by any Governmental Entity, and
all pending applications therefor or renewals thereof;
(l) all rights to causes of action, lawsuits,
judgments, claims and demands of any nature whether choate or
inchoate, known or unknown, contingent or non-contingent, available
to or being pursued by the Sellers with respect to the Business or
the ownership, use, function or value of any Asset, whether arising
by way of counterclaim or otherwise; and
(m) all insurance benefits, including rights and
proceeds, arising from or relating to the Assets or Assumed
Liabilities with respect to claims arising prior to the Closing
Date but unresolved as of the Closing Date.
SECTION 1.2.
Excluded Assets
.
(a) For purposes of this Agreement, “
Excluded Assets ” shall mean the following:
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(i)
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all assets,
companies and properties of the Sellers or their Affiliates that
are not used or held for use primarily in connection with the
Business;
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(ii)
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the
Sellers’ “Litton” trade name, the
“Interconnect Technologies” trade name (use of which is
provided pursuant to the license agreement in Exhibit F )
name, and any other trade names and common law names of any of the
Sellers’ Affiliates, including the “Northrop
Grumman” name, and all related or associated trade names,
trade name rights, trademarks, trademark rights, service marks and
copyrights and all registrations and applications pending therefor
related to products or services other than the Business;
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(iv)
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all rights to
refunds and credits of Taxes paid by the Sellers;
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(v)
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all data and
records, in whatever media retained or stored, to the extent
relating to Tax liabilities, potential Tax liabilities, or refunds
of Taxes relating to the Business (other than any such data and
records of the Company relating to its liability for
Taxes);
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(vi)
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all
consideration received by, and all rights of, the Sellers pursuant
to this Agreement;
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(vii)
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all assets that
relate to any U.S. Benefit Plan or U.K. Benefit Plan;
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(viii)
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Seller’s
Springfield Facility and 2 Wheatstone Place, Glenrothes, United
Kingdom facility (and any Permits owned or used in connection
therewith);
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(ix)
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all assets that
relate to any discontinued operations, including, but not limited
to, the operations formerly conducted in Fairfield,
California;
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(x)
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any assets,
companies or properties set forth on Schedule 1.2(a)(x);
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(xi)
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bank accounts
of LSI or LUK; and
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(xii)
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any cash or
cash equivalents (except for cash which will be transferred to
Sellers after the Closing pursuant to Section 5.18 of this
Agreement.
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(b) The Sellers will retain, and will not sell,
transfer, assign, convey or deliver to the Buyers, and Buyers will
not purchase or acquire, any of their respective rights, titles to
or interests in or to any of the Excluded Assets. Excluded Assets
are not part of the transactions contemplated hereby and shall
remain the assets, companies and properties of the Sellers after
the Closing and the Sellers may take, or cause to be taken, any
action with respect to the Excluded Assets, notwithstanding any
provisions herein.
SECTION 1.3.
Assumption of
Liabilities .
Subject to the
terms and conditions set forth herein, at the Closing the Buyers
shall assume and agree to pay, honor and discharge when due all of
the following liabilities relating to the Assets and existing at or
arising on or after the Closing Date (collectively, the “
Assumed Liabilities ”):
(a) any and all liabilities, obligations and
commitments relating exclusively to the Business or the Assets that
are included in the calculation of Closing Date Net Working Capital
pursuant to Section 1.6(a);
(b) with respect to the Company and the Business any
and all liabilities, obligations and commitments arising out of any
agreements, contracts or commitments of the type described in
Section 2.13 (without regard to any dollar threshold or materiality
limitations set forth therein) (the “ Assumed
Contracts ”), but not including any obligation or
liability for any breach thereof occurring prior to the Closing
Date; and
(c) any and all liabilities set forth, described or
assumed in an assumption agreement in a form reasonably
satisfactory to Sellers and substantially in the form of Exhibit
G (the “ Assignment and Assumption Agreement
”) evidencing the assignment of the Assets and the assumption
by the Buyers of the Assumed Liabilities in accordance with the
terms herein.
SECTION 1.4.
Retained Liabilities
.
(a) Notwithstanding the provisions of Section 1.3 or
any other provision hereof or any schedule or exhibit hereto and
regardless of any disclosure to the Buyers, the Buyers shall not
assume any liabilities, obligations or commitments of any Seller
relating to or arising out of the operation of the Business or the
ownership of the Assets prior to the Closing other than the Assumed
Liabilities, and all of such non-assumed liabilities, obligations
or commitments of the Sellers shall be retained by the Sellers (the
“ Retained Liabilities ”).
(b) Without limiting the generality of the
definition of Retained Liabilities in Section 1.4(a), Retained
Liabilities shall include:
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(i)
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subject to
Section 1.9 hereof, liabilities of the Sellers for Taxes with
respect to the Business (but, for the avoidance of doubt, not
including any liability of the Company for Taxes) for taxable
periods, or portions thereof, ending on or before the Closing
Date;
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(ii)
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all
Environmental Losses to the extent arising from facts, events or
circumstances existing or occurring on or before the Closing
Date;
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(iii)
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all liabilities
to the extent relating to third party product liability claims for
goods or services sold or delivered by Sellers on or before the
Closing Date;
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(iv)
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all liabilities
expressly retained by the Sellers pursuant to Section 5.5(c) and
5.5(d) ; and
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(v)
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all liabilities
of the Sellers under any U.S. Benefit Plan to any U.S. Business
Employee, except for (x) current liabilities for wages, salaries or
other employee compensation included in the computation of Closing
Date Net Working Capital, and (y) current liabilities for accrued
vacation time and sick leave days credited to U.S. Transferred
Employees pursuant to Section 5.3(d).
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SECTION 1.5.
The Closing
.
(a) Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the “
Closing ”) shall take place as soon as practicable
(but, in any event, within five (5) Business Days) after the
satisfaction or waiver of the conditions set forth in Article VI
hereof (other than conditions which by their terms are to be
satisfied at the Closing) (the “ Closing Date ”)
at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP,
One New York Plaza, New York, NY 10004, commencing at 9:00 a.m.,
New York City time. On the terms and subject to the conditions set
forth in this Agreement and the LESC Equity Purchase Agreement, the
Buyers agree to pay or cause to be paid to Sellers an aggregate of
$28,000,000 as adjusted in Section 1.6 (the “ Purchase
Price ”) and to assume or cause one of the Buyers to
assume the Assumed Liabilities as provided in Section
1.3.
(b) Following the Closing:
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(i)
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Simclar
Interconnect Technologies, Inc. shall own all Assets (except for
any Excluded Assets) of the Business in the U.S. and shall have
assumed all Assumed Liabilities (except for any Retained
Liabilities) of the Business in the U.S. formerly owned by Litton
Systems, Inc.;
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(ii)
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Simclar
Interconnect Technologies Limited shall own all Assets (except for
any Excluded Assets) of the Business in the U.K. and shall have
assumed all Assumed Liabilities (except for any Retained
Liabilities) of the Business in the U.K. formerly owned by Litton
U.K. Limited; and
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(iii)
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Simclar
Interconnect Technologies Limited shall own the Shares formerly
owned by Litton Systems International, Inc.
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(i)
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Buyers shall
pay Sellers the sum of $28,000,000 by wire transfer of immediately
available funds to the accounts and in the amounts with respect to
each Buyer and Seller specified on Exhibit D ;
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(ii)
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the applicable
Seller shall deliver to the applicable Buyers the Approval
Certificate;
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(iii)
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the Sellers
shall deliver to the applicable Buyers (i) duly executed instrument
of assignment for the pending patent application substantially in
the form of Exhibit B (the “ Intellectual Property
Assignment ”), and (ii) any other agreements or documents
reasonably necessary to transfer or assign the Intellectual
Property that is contemplated to be transferred or assigned hereby
in accordance with the terms herein;
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(iv)
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the applicable
Seller and the applicable Buyer shall execute and deliver a
property license for the occupancy by such Buyer of the portion of
the applicable Seller’s Springfield Facility used by the
Sellers’ assembly operations substantially in the form of
Exhibit C (the “ LSI Property License
”);
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(v)
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the Sellers
shall deliver to the Buyers an officer’s certificate in
accordance with Section 6.2(c) hereof;
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(vi)
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the Buyers
shall deliver to the Sellers a duly executed Assignment and
Assumption Agreement;
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(vii)
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the Buyers
shall deliver to the Sellers an officer’s certificate in
accordance with Section 6.3(c) hereof; and
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(viii)
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the Sellers and
the Buyers shall execute and deliver any other agreements or
documents reasonably necessary to complete the transactions
contemplated hereby.
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(d) The Buyers shall bear the cost of any
documentary, stamp, sales, excise, transfer, gross receipts, value
added or other Taxes (other than Income Taxes) payable in respect
of the sale of the Shares and Assets, and the Sellers shall prepare
and file, subject to the Buyers’ review and consent, which
consent shall not be unreasonably withheld, all Tax Returns with
respect to such Taxes. The Buyer shall pay the amount of any such
Taxes to the Sellers at least two (2) days before the due date of
any such Taxes.
(e) Buyers shall bear the cost of preparing and
decontaminating for shipping, and shipping the Assets in
Seller’s Glenrothes, Scotland facility to Buyer’s
facility, and shall conduct such preparation, decontamination, and
shipping in compliance with all applicable Laws.
SECTION 1.6.
Purchase Price
Adjustment .
(a) For purposes of this Section 1.6 the
following definitions apply:
“ Purchase Price Adjustment ”
shall mean the adjustment to the Purchase Price made in accordance
with this Section 1.6.
“ Base Net Working Capital ”
shall mean $12,750,000.
“ Closing Date Net Working Capital
” shall mean Net Working Capital as of the Cut-Off Time
calculated consistent with the methodology used in Schedule
1.6.
“ Cut-Off Time ” shall mean
11:59 p.m., New York City time, on the day immediately prior to the
Closing Date.
“ Net Working Capital ” as of
any time shall mean (i) total current assets of the Business (other
than the Excluded Assets) as of any such time, minus (ii) total
current liabilities of the Business (other than the Retained
Liabilities) as of such time, each as calculated in accordance with
GAAP, except that (x) any current liability for Taxes shall be
computed in accordance with Section 1.9 hereof, (y) no intercompany
receivables or payables that are not trade accounts receivable or
payable of the Company shall be included in the calculation, and
(z) no liabilities for the payment of 2005 Annual Incentive Plan
bonuses shall be included in the calculation.
(b) Within sixty (60) days after the Closing Date,
Buyers shall prepare and deliver to the Sellers a statement
identifying the Closing Date Net Working Capital for purposes of
calculating the Purchase Price Adjustment (the “ Purchase
Price Adjustment Statement ”). In the event that the
Closing Date Net Working Capital is greater than the Base Net
Working Capital, the Buyers shall pay the Sellers an amount equal
to the difference between the Closing Date Net Working Capital and
the Base Net Working Capital in accordance with Section 1.6(f)
hereof. In the event that the Base Net Working Capital is greater
than the Closing Date Net Working Capital, the Sellers shall pay
the Buyers an amount equal to the difference between the Base Net
Working Capital and the Closing Date Net Working Capital in
accordance with Section 1.6(f) hereof.
(c) The Buyers and the Sellers agree that the sole
purpose of the Purchase Price Adjustment contemplated by this
Section 1.6 is to measure changes in working capital that have
occurred between the date as of which the Base Net Working Capital
was calculated and the Closing Date. The Purchase Price Adjustment
is not intended to permit the introduction of different judgments,
accounting methods, policies, practices, procedures,
classifications or estimation methodology for purposes of
determining the asset and liability balances from those used in the
preparation of the Financial Statements. Each Party shall provide
the other Party and its representatives with reasonable access to
Books and Records and relevant personnel during the preparation of
the Purchase Price Adjustment Statement and the resolution of any
disputes that may arise under this Section 1.6.
(d) If the Sellers disagree with the determination
of the Purchase Price Adjustment and the total amount of all such
disagreements exceed $50,000, the Sellers shall notify the Buyers
in writing of such disagreements within thirty (30) days after
delivery of the Purchase Price Adjustment Statement, which notice
shall describe the nature of any such disagreements in reasonable
detail. If the total amount of all disagreements with the
determination of the Purchase Price Adjustment is less than
$50,000, the Purchase Price Adjustment Statement delivered by the
Buyers shall be final for purposes of this Section 1.6. After
the end of such thirty (30) day period, the Sellers may not
introduce additional disagreements with respect to any item in the
Purchase Price Adjustment Statement or increase the amount of any
disagreement, and any item not so identified shall be deemed to be
agreed to by the Sellers and will be final and binding upon the
Parties. Similarly, a disagreement by the Sellers does not provide
any right to the Buyers to introduce any changes to the Purchase
Price Adjustment Statement not directly related to the disputed
item. In addition to the access rights described in Section 1.6(c),
during the thirty (30) day period of its review, the Sellers shall
have reasonable access to any documents, schedules or work papers
used in the preparation of the Purchase Price Adjustment
Statement.
(e) The Buyers and the Sellers agree to negotiate in
good faith to resolve any such disagreement and any resolution
agreed to in writing by the Buyers and the Sellers shall be final
and binding upon the Parties. If the Buyers and the Sellers are
unable to resolve all disagreements properly identified by the
Sellers pursuant to Section 1.6(d) hereof within
thirty (30) days after delivery to the Buyers of written
notice of such disagreement, then the disputed matters shall be
referred to the Chairman of Simclar Group Limited and the Assistant
Treasurer of the Northrop Grumman Corporation for resolution. If
such officers are unable to resolve all disagreements within
fifteen (15) days, then, within fifteen (15) days
thereafter, the matter shall be referred for final determination to
KPMG. If such firm is unable to serve, the Buyers and the Sellers
shall jointly select an arbiter from an accounting firm of national
standing that is not the independent auditor of either the Buyers
or the Sellers (or their respective Affiliates); if the Buyers and
the Sellers are unable to select such an arbiter within such time
period, the American Arbitration Association shall make such
selection. KPMG or any other Person so selected shall be referred
to herein as the “ Accounting Arbitrator ”. The
Accounting Arbitrator shall only consider those items and amounts
set forth on the Purchase Price Adjustment Statement as to which
the Buyers and the Sellers have disagreed within the time periods
and on the terms specified above and must resolve the matter in
accordance with the terms and provisions of this Agreement. The
Accounting Arbitrator shall deliver to the Buyers and the Sellers,
as promptly as practicable and in any event within sixty (60)
days after its appointment, a written report setting forth the
resolution of any such disagreement determined in accordance with
the terms herein. The Accounting Arbitrator shall select as a
resolution the position of either the Buyers or the Sellers for
each item of disagreement (based solely on presentations and
supporting material provided by the Parties and not pursuant to any
independent review) and may not impose an alternative resolution.
Such report shall be final and binding upon the Buyers and the
Sellers. The fees, expenses and costs of the Accounting Arbitrator
shall be divided equally between the Parties, so that the Buyers
will pay one-half of such fees, expenses and costs and the Sellers
shall collectively pay the remaining half.
(f) Any Purchase Price Adjustment shall be paid by
the Buyers or the Sellers, as applicable, in the same proportions
as are set forth on Exhibit D for payment of the Purchase
Price by wire transfer of immediately available funds to an account
designated by the Party receiving such payment within five (5)
Business Days after the final determination of the Purchase Price
Adjustment, plus interest on the amount of such reduction or
increase from the Closing Date to the date of such payment thereof
at the per annum rate equal to the London Interbank Offered Rate on
the Closing Date, as published in the Wall Street Journal (the
“ Interest Rate ”).
SECTION 1.7.
Allocation of the Purchase
Price .
The Purchase Price shall be allocated as set
forth on Exhibit D , and with respect to the Assets situated
in the U.S., such allocation shall conform with the requirements of
Section 1060 of the Code.
SECTION 1.8.
Non-Transferable
Assets.
(a) It is understood that the Sellers may determine,
in their reasonable discretion, that certain Assets (including, but
not limited to, any manufacturers’, contractors’ and
other warranties and guaranties, and one or more contracts) may not
be immediately transferable or assignable to the Buyers because any
such attempted assignment thereof, without the consent of a third
party thereto, would constitute a breach or default thereof, cause
or permit the acceleration or termination thereof or in any way
materially and adversely affect the rights of the Sellers or the
Buyers thereunder or the rights of the Buyers to conduct all or any
part of the Business in the manner currently conducted by the
Sellers (the “ Non-Transferable Assets ”), and
this Agreement will not constitute an assignment of any such
Non-Transferable Assets. In such event, (i) the Sellers will grant
to the Buyers full use and benefit of Sellers’ interest in
the Non-Transferable Assets to the extent permitted by the terms of
or applicable to such Non-Transferable Assets, it being the intent
of the Parties that the Buyers will have the benefit of the
Non-Transferable Assets as though they were the sole owners
thereof, (ii) the Sellers will use commercially reasonable efforts
to preserve the value of the Non-Transferable Assets, (iii) the
Sellers will not transfer or assign the Non-Transferable Assets to
any Person other than the Buyers or the Buyers’ assigns, (iv)
the Sellers will transfer or assign the Non-Transferable Assets to
the Buyers at the earliest date, if any, on which such transfer or
assignment can be effected and (v) the Buyers will be responsible
for obligations and liabilities relating to such Non-Transferable
Assets as if they had been transferred or assigned to the Buyers in
accordance with the terms of this Agreement. All costs and expenses
of carrying out Sellers’ obligations the foregoing clauses
(i), (ii), (iii) and (iv) will be paid by the Sellers, and Sellers
shall indemnify and hold Buyers harmless from and against, any
costs incurred by Buyers as a result of Sellers’ failure to
do so. Nothing in this Section 1.8(a) shall be deemed a waiver by
the Buyers of their right to have received on or before the Closing
an effective assignment of all of the Assets nor shall this Section
1.8(a) be deemed to constitute an agreement to exclude from the
Assets any assets described under Section 1.1.
(b) The Buyers shall (i) perform and fully pay
and discharge all debts, obligations and liabilities in a timely
manner with respect to any rights provided to the Buyers pursuant
to Section 1.8(a) hereof and (ii) in accordance with
Section 8.2 hereof, indemnify the Seller Indemnified Parties
for any and all liabilities, costs or expenses arising from or in
connection with the Buyers’ failure to perform or discharge
all debts, obligations and liabilities, as applicable, under any
rights so transferred to the Buyers pursuant to Section 1.8(a)
hereof.
SECTION 1.9.
Certain Apportionments
.
For purposes of determining the liability of the
Sellers for Taxes with respect to the Business under Section
1.4(b)(i) hereof, the following rules of apportionment shall apply:
(i) real and personal property Taxes with respect to the
Assets for the taxable period which includes the Closing Date shall
be prorated between the Sellers and the Buyers, with such Taxes
being borne by the Sellers based on the ratio of the number of days
in the relevant period prior to the Closing Date to the total
number of days in the actual taxable period with respect to which
such Taxes are assessed, irrespective of when such Taxes are due,
become a lien or are assessed, and such Taxes being borne by the
Buyers based on the ratio of the number of days in the relevant
period from and after the Closing Date to the total number of days
in the actual taxable period with respect to which such Taxes are
assessed, irrespective of when such Taxes are due, become a lien or
are assessed; (ii) sales and use Taxes shall be deemed to
accrue as property is purchased, sold, used, or transferred; and
(iii) all other Taxes shall accrue in accordance with GAAP,
except for Income Taxes, which shall accrue by way of a closing of
Books and Records, as though the relevant taxable period ended on
the Closing Date in accordance with Income Tax
principles.
ARTICLE
II
REPRESENTATIONS AND
WARRANTIES OF THE SELLERS
Except as specifically set forth in the
disclosure schedules which have been delivered by the Sellers to
the Buyers prior to the execution of this Agreement (the “
Seller Disclosure Schedules ”), the Sellers hereby
jointly and severally represent and warrant to the Buyers as of the
date hereof and as of the Closing Date as follows:
SECTION 2.1.
Corporate Existence, Power and
Qualification .
Each of the Sellers is a corporation duly
organized, validly existing and, where applicable, in good standing
under the laws of their respective jurisdictions of organization
and have all corporate power and authority necessary to carry on
its business (including its portion of the Business), to own or
lease and operate the properties included in the Assets as and in
the places where such business is conducted and such properties are
owned, leased or operated, and to consummate the transactions
contemplated hereby. Each Seller is duly qualified or licensed to
do business and is in good standing in each of the jurisdictions in
which the operation of its portion of the Business or the character
of the properties owned, leased or operated by it in connection
with the Business makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed to do
business would not, individually or in the aggregate, have a
Business Material Adverse Effect.
SECTION 2.2.
Authorization
.
The execution, delivery and performance by the
Sellers of this Agreement and the consummation by the Sellers of
the transactions contemplated hereby are within each Seller’s
corporate powers and have been duly authorized by all necessary
corporate action on the part of each Seller. This Agreement
constitutes, and each other agreement executed and delivered or to
be executed and delivered by any of the Sellers pursuant to this
Agreement will, upon such execution and delivery, constitute, a
legal, valid and binding obligation of such Seller enforceable
against such Seller in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance,
liquidation, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, and
general equitable principles (whether considered in a proceeding in
equity or at law).
Except as set forth on Schedule 2.3 and except
as required under the competition or investment, foreign exchange
control or other applicable laws of any non-U.S. jurisdiction, no
material consent, approval, license, permit, order or authorization
(each, a “ Consent ”) of, or registration,
declaration or filing (each, a “ Filing ”) with,
any Governmental Entity which has not been obtained or made by the
Sellers is required for or in connection with the execution and
delivery of this Agreement by the Sellers or the consummation by
the Sellers of the transactions contemplated hereby.
SECTION 2.4.
Noncontravention
.
The execution, delivery and performance of this
Agreement by the Sellers do not, and the consummation by the
Sellers of the transactions contemplated hereby will not, (i)
violate any provision of the organizational documents of the
Sellers or the Company, (ii) subject to obtaining or making the
Consents and/or Filings referred to in Section 2.3 hereof, conflict
with or violate in any material respect any applicable Law or order
of any Governmental Entity currently in effect with respect to the
Business, (iii) violate in any material respect any provision of,
require any third party consents under, or give rise to a right or
claim of termination, amendment, modification, vesting acceleration
or cancellation or any right or obligation or loss of any material
benefit under, any Material Contract of the Company or the Sellers
with respect to the Business, or (iv) result in the imposition of
any lien upon, or the creation of a security interest in, the
Shares or the Assets pursuant to, any mortgage, lease, franchise,
license, permit, agreement, instrument, Law, order, arbitration
award, judgment or decree to which the Sellers or the Company are a
party or by which the Sellers or the Company are bound.
SECTION 2.5.
Organization and Standing of the
Company .
The Company (a) is a corporation validly
existing and, where applicable, in good standing under the laws of
its jurisdiction of organization, has the corporate power and
authority, and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to
own, lease or otherwise hold its properties and assets and to carry
on its business as presently conducted, except such power,
authority, franchises, licenses, permits, authorizations and
approvals the absence of which would not, individually or in the
aggregate, have a Business Material Adverse Effect, and (b) where
applicable, is duly qualified and in good standing to do business
as a foreign corporation in each jurisdiction in which the conduct
or nature of its business or the ownership, leasing or holding of
its properties makes such qualification or good standing necessary,
except where the failure to be so qualified or in good standing
would not, individually or in the aggregate, have a Business
Material Adverse Effect.
SECTION 2.6.
Capitalization of the
Company .
The registered capital of the Company has been
fully paid in and capital verification reports have been issued by
a qualified PRC accounting firm that certifies that the capital
contributions have been made.
SECTION 2.7.
Brokers and
Intermediaries .
The Sellers have not employed any broker,
finder, advisor or intermediary in connection with the transactions
contemplated hereby who would be entitled to a broker’s,
finder’s, adviser’s, intermediary’s or similar
fee or commission in connection therewith or upon the consummation
thereof from the Company.
SECTION 2.8.
Financial Statements
.
(a) Schedule 2.8(a) contains are the following
financial statements: (i) the unaudited combined balance sheet of
the Business as at December 31, 2004, (ii) the unaudited combined
statement of operations of the Business for the period December 31,
2004 (the financial statements referenced in clauses (i) and (ii)
collectively, the “ Annual Financial Statements
”), and the unaudited combined balance sheet and statement of
operations of the Business as at September 30, 2005 and for the
nine months then ended (the “ Interim Financial
Statements ”). The Annual Financial Statements and
Interim Financial Statements are collectively referred to herein as
the “ Financial Statements .”
(b) The Financial Statements are complete and
correct in all material respects and have been prepared in
accordance with GAAP consistently applied throughout the periods
presented, with the material exceptions thereto identified in
Schedule 2.8(b), throughout the periods covered thereby, and fairly
present, in all material respects, the financial condition and
results of operations of the Business, as of and for the periods to
which they relate.
(c) Other than the Excluded Assets and Retained
Liabilities, the balance sheets included in the Financial
Statements do not include any material assets or liabilities not
intended to constitute a part of the Business or the Assets after
giving effect to the transactions contemplated hereby. The
statements of operations included in the Financial Statements do
not reflect the operations of any entity or business not intended
to constitute a part of the Business after giving effect to all
such transactions, and reflect all costs that historically have
been incurred by the Business including costs related to the
Excluded Assets and Retained Liabilities.
SECTION 2.9.
[Reserved]
.
SECTION 2.10.
Title to and Sufficiency of
Assets.
Except as disclosed in Schedule 2.10, the
Sellers have good title to all the Assets and the Shares free and
clear of any and all Encumbrance other than Permitted Encumbrances.
The Assets, together with the services and arrangements described
in Section 5.14 and the assets of the Company, comprise all
material assets and services required for the continued conduct of
the Business by the Buyer as now being conducted by the Sellers.
The Assets and the assets of the Company, taken as a whole,
constitute all the properties and assets relating to or used or
held for use primarily in connection with the Business during the
past twelve months (except Inventory sold, cash disposed of,
accounts receivable collected, prepaid expenses realized, contracts
fully performed, properties or assets replaced by equivalent or
superior properties or assets, in each case in the ordinary course
of business, and the Excluded Assets). Except for Excluded Assets,
there are no assets or properties used primarily in the operation
of the Business and owned by any Person other than the Sellers or
the Company, except for assets or properties that will be leased or
licensed to the Buyers under valid, current leases or license
arrangements, or assets or properties of customers or suppliers of
the Business held temporarily by the Sellers in the course of
performance of agreements with such customers or suppliers. The
Assets, and the assets of the Company, are in all material respects
adequate for the purposes for which such assets are currently used
or are held for use, and are in reasonably good repair and
operating condition (subject to normal wear and tear) and, to the
Knowledge of the Sellers, there are no facts or conditions
affecting the Assets, or the assets of the Company, which could,
individually or in the aggregate, interfere in any material respect
with the use, occupancy or operation thereof as currently used,
occupied or operated, or their adequacy for such use.
SECTION 2.11.
Litigation
.
Except as set forth on Schedule 2.11, there is
no action, claim, demand, suit, proceeding, arbitration, grievance,
citation, summons, subpoena, inquiry or investigation of any
nature, civil, criminal, regulatory or otherwise, in law or in
equity, pending, or to the Knowledge of Sellers threatened, against
or relating to any Seller or the Company in connection with the
Assets or the Business or against or relating to the transactions
contemplated by this Agreement.
SECTION 2.12.
Compliance with Applicable
Laws .
(a) The Business is, to the Knowledge of the
Sellers, being conducted in compliance in all material respects
with all applicable Laws of all Governmental Entities having
jurisdiction over the Company or the Sellers with respect to the
Business, except as would not have a Business Material Adverse
Effect.
(b) The Sellers or the Company, as the case may be,
have duly obtained all material permits, concessions, grants,
franchises, licenses and other governmental authorizations and
approvals (collectively, “ Permits ”) necessary
for the conduct of the Business, except for such Permits which, if
not obtained, would not have a Business Material Adverse Effect.
Each Permit is in full force and effect, and there are no
proceedings pending or, to the Knowledge of the Sellers, threatened
which would result in the revocation, cancellation, suspension or
modification of any Permit.
(c) Notwithstanding the foregoing, all
representations with respect to (i) Laws applicable to Business
Employees are made solely and exclusively in Sections 2.21 and 2.22
hereof, (ii) Taxes are made solely and exclusively in Section 2.26
hereof and (iii) Environmental Laws are made solely and exclusively
in Section 2.28 hereof.
SECTION 2.13.
Material Contracts
.
(a) Sellers have delivered or made available to
Buyers for their inspection and copying complete and correct copies
of all material written agreements, contracts, commitments and
other instruments and arrangements (or written descriptions of any
oral agreements, contracts, and commitments of the types described
below (x) by which the Company or any of the Assets are bound or to
which the Company or any of the Assets are subject, or (y) to which
any Seller is a party or by which it is bound and relating
primarily to the Business or the Assets (the “ Material
Contracts ”);
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(i)
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leases,
licenses, permits, insurance policies exclusively relating to the
Business or the Assets;
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(ii)
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licenses,
licensing arrangements and other contracts providing in whole or in
part for the use of, or limiting the use of, any Intellectual
Property, other than licenses for mass market software with a
suggested retail per copy license fee of $500 or less;
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(iii)
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joint venture,
partnership and similar contracts involving a sharing of profits,
losses, costs or liabilities (including but not limited to joint
research and development and joint marketing contracts);
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(iv)
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as of the date
specified on Schedule 2.13(a)(iv), orders and other contracts for
the purchase or sale of materials, supplies, products or services,
each of which involves aggregate payments in excess of
$150,000;
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(v)
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other contracts
with respect to which the aggregate amount that could reasonably be
expected to be paid or received by the Business in the future
exceeds $150,000;
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(vi)
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sales agency,
manufacturer’s representative, marketing or distributorship
agreements;
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(vii)
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contracts or
agreements affecting the ownership of, leasing of, title to, use of
or any leasehold or other interest in personal property, except
personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less
than $50,000 and with a term of less than one year;
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(viii)
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contracts or
agreements containing covenants that in any way purport to restrict
the Company’s business activity or limit the freedom of the
Company to engage in any line of business or to compete with any
Person; or
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(ix)
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any other
contracts, agreements or commitments that are material to the
Business.
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(b) All Material Contracts are in full force and
effect and enforceable against each party thereto. There does not
exist under any Material Contract any 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 any Seller or, to the Knowledge of any Seller, any
other party thereto except as set forth in Schedule 2.13(b) and
except for such events or conditions that, individually and in the
aggregate, (i) have not had or resulted in, and will not have or
result in, a Business Material Adverse Effect and (ii) have not and
will not materially impair the ability of any Seller to perform
their respective obligations under this Agreement, the LESC Equity
Purchase Agreement and under the other Ancillary Agreements. Except
as set forth in Schedule 2.13(b) and except as would not have a
Business Material Adverse Effect, to the Knowledge of Sellers, (i)
no consent of any third party is required under any Material
Contract as a result of or in connection with, and (ii) the
enforceability of any Material Contract will not be affected in any
manner by, the execution, delivery and performance of this
Agreement or any other Ancillary Agreements or the consummation of
the transactions contemplated thereby.
SECTION 2.14.
Absence of Certain Changes and
Events .
Except as set forth in Schedule 2.14, since the
date of the Interim Financial Statements, the Sellers have
conducted the Business only in the ordinary course consistent with
prior practice and have not on behalf of, in connection with, or
relating to the Business or the Assets:
(a) suffered any Business Material Adverse
Effect;
(b) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due,
except current liabilities for trade or business obligations
incurred in connection with the purchase of goods or services in
the ordinary course of business consistent with prior practice,
none of which liabilities, in any case or in the aggregate, could
have a Business Material Adverse Effect;
(c) discharged or satisfied any Encumbrance other
than those then required to be discharged or satisfied, or paid any
obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current
liabilities shown on the Interim Financial Statements and current
liabilities incurred since the date thereof in the ordinary course
of business consistent with prior practice;
(d) assigned, mortgaged, pledged or otherwise
subjected to Encumbrance, any property, business or assets,
tangible or intangible, held in connection with the Business or the
Assets;
(e) sold, transferred, leased to others or otherwise
disposed of any of the Assets, except for inventory sold in the
ordinary course of business, or forgiven, canceled or compromised
any debt or claim, or waived or released any right of substantial
value;
(f) suffered any damage, destruction or loss
(whether or not covered by insurance) which, in any case or in the
aggregate, has had a Business Material Adverse Effect;
(g) transferred or granted any rights or licenses
under, or entered into any settlement regarding the breach or
infringement of, any Intellectual Property, or modified any
existing rights with respect thereto;
(h) made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable,
or paid or agreed or orally promised to pay, conditionally or
otherwise, any bonus, incentive, retention or other compensation,
retirement, welfare, fringe or severance benefit or vacation pay,
to or in respect of any officer, employee, salesman, distributor or
agent of the Company, or of any officer, employee, salesman,
distributor or agent of the Sellers whose activities relate
primarily to the Business, except for increases in the ordinary
course of business consistent with prior practice;
(i) encountered any labor union organizing activity,
had any actual or threatened employee strikes, work stoppages,
slowdowns or lockouts, or had any material change in its relations
with its employees, agents, customers or suppliers;
(j) failed to replenish the inventories and supplies
of the Business in a normal and customary manner consistent with
prior practice, or made any purchase commitment in excess of the
normal, ordinary and usual requirements of the Business or at any
price in excess of the then current market price or upon terms and
conditions inconsistent with prior practice, or made any change in
selling, pricing, advertising or personnel practices inconsistent
with prior practice;
(k) made any capital expenditures or capital
additions or improvements in that would cause total capital
expenditures of the Business to exceed amounts budgeted for in the
2005 Budget attached hereto as Exhibit H by more than
120%;
(l) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or governmental
body relating to the Business or the Assets other than in the
ordinary course of business consistent with past practices, but not
in any case involving amounts in excess of $25,000;
(m) (i) entered into, terminated, or received notice
of termination of any contract or commitment, including without
limitation, any license, distributorship, dealer, sales
representative, joint venture or similar arrangement, other than in
the ordinary course of business, (ii) breached any contract or
commitment or (iii) paid or agreed to pay any legal, accounting,
brokerage, finder’s fee, Taxes or other expenses in
connection with, or incurred any severance pay obligations by
reason of, this Agreement or the transactions contemplated
hereby;
(n) made any material changes in policies or
practices relating to selling practices, returns, discounts or
other terms of sale or accounting therefor or in policies of
employment;
(o) made any prepayment of any accounts payable,
delayed payment of any trade payables or other obligations other
than in the ordinary course of business consistent with past
practice, or made any other cash payments other than in the
ordinary course of business;
(p) failed to maintain all of the tangible Assets
and all other tangible properties and assets owned, leased,
occupied, operated or used in connection with the Business in good
repair, working order and operating condition subject only to
ordinary wear and tear;
(q) modified any existing Material Contract or
entered into (i) any agreement, commitment or other transaction,
other than agreements entered into in the ordinary course of
business consistent with prior practice and involving an
expenditure of less than $150,000 in the aggregate, or (ii) any
agreement or commitment that, pursuant to its terms, is cancelable
without penalty on less than 30 days’ notice; and
(r) made any material change in any respect in its
accounting methods or practices, policies or principles.
SECTION 2.15.
Inventories.
As of the date specified on Schedule 2.15, all
Inventories are of good, usable and merchantable quality in all
material respects and, except as set forth on Schedule 2.15, do not
include obsolete or discontinued items. Except as set forth on
Schedule 2.15, (a) all Inventories are of such quality as to meet
the quality control standards of Sellers and any applicable
governmental quality control standards, (b) all Inventories that
are finished goods are saleable as current inventories at the
current prices thereof in the ordinary course of business, and (c)
all Inventories are recorded on the books of the Business at the
lower of cost or market value determined in accordance with
GAAP.
SECTION 2.16.
Customers and
Suppliers .
(a) Except as disclosed on Schedule 2.16, no Seller
has Knowledge that any of the customers of the Business identified
on the Estimated 2006 Sales Forecast by Customers attached hereto
as Exhibit I has ceased, or will cease (during 2006) to
purchase the products, goods or services of the
Business.
(b) Except as disclosed on Schedule 2.16, no Seller
has Knowledge that there has been or will be (during 2006) a
reduction by greater than 10% of the aggregate “Total ITD-AO
Customers 2006 Sales Forecast” figures shown in Exhibit
I.
(c) To the Knowledge of Sellers, there has not been
any material adverse change in the price of the raw materials,
supplies, merchandise or other goods or services purchased by the
Business from its principal suppliers, or that any such supplier
will not sell raw materials, supplies, merchandise and other goods
to the Buyers at any time after the Closing Date on terms and
conditions similar to those used in its current sales to the
Business, subject to general and customary price
increases.
(a) Buyers have been furnished with complete and
correct copies of the standard terms and conditions of sale for
each of the products or services of the Business (including if
applicable guaranty, warranty and indemnity provisions). Except as
required by Law, as contained in a Material Contract, or as set
forth on Schedule 2.17(a), no product manufactured, sold, or
delivered by, or service rendered by or on behalf of, the Business
is subject to any guaranty, warranty or other indemnity, express or
implied, beyond such standard terms and conditions.
(b) Except as set forth on Schedule 2.17(b), no
Seller nor the Company has entered into, or offered to enter into,
any material agreement, contract commitment or other arrangement
(whether written or oral) pursuant to which any of them is or will
be obligated to make any rebates, discounts, promotional allowances
or similar payments or arrangements to any customer of the
Business. All such obligations are reflected in the Financial
Statements or have been incurred after the date thereof in the
ordinary course of business.
SECTION 2.18.
Receivables.
All of the Sellers’ and Company’s
receivables (including accounts receivable, loans receivable and
advances) which have arisen in connection with the Business and
which are reflected in the Financial Statements, and all such
receivables which will have arisen since the Interim Financial
Statement date, represent valid obligations arising from sales
actually made or services actually performed in the ordinary course
of business. Sellers have no Knowledge of any facts or
circumstances generally (other than general economic conditions)
which would result in any material increase in the uncollectability
of such receivables as a class in excess of the reserves therefor
set forth on the Interim Financial Statements. Sellers have
delivered to or made available for inspection by Buyers an aged
listing of receivables, which will be updated on the Closing Date
as of a date within five (5) Business Days preceding the Closing
Date.
SECTION 2.19.
Books and Records.
The books of account and other financial records
of the Company, and of Sellers (insofar as they relate to or affect
the Business and the Assets), are complete and correct and
represent actual, bona fide transactions and have been maintained
in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. The minute
books of the Company have been made available to Buyers for
inspection and copying and are substantially complete and correct
in all material respects.
SECTION 2.20.
[Reserved.]
SECTION 2.21.
U.S. Benefit Plans
.
Subject to
applicable Laws (including, without limitation, all applicable data
protection Laws), Schedule 2.21 lists each “U.S. employee
benefit plan” (within the meaning of ERISA section 3(3),
including, without limitation, multiemployer plans within the
meaning of ERISA section 3(37)) and all material severance,
employment, change-in-control, fringe benefit, bonus, incentive,
deferred compensation and all other material employee benefit
plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA, whether oral or written under
which any U.S. Business Employee or former U.S. Business Employee
has any present or future right to compensation or employee
benefits and pursuant to which the Business could have any material
liability (“ U.S. Benefit Plans ”). Sellers
acknowledge that the scope of the representations and warranties
contained in this Section 2.21 have been limited as a result of the
inclusion of liabilities under any U.S. Benefit Plan as Retained
Liabilities, and Sellers’ indemnification of the Buyer
Indemnified Parties from and against any Losses resulting therefrom
pursuant to Section 8.2 (it being acknowledged and agreed by the
Parties that the foregoing in no way increases any remedies of
Buyers or any liabilities Sellers (including without limitation any
closing conditions or indemnification) with respect to the
transactions contemplated hereby).
SECTION 2.22.
Non U.S. Benefit
Plans
Subject to
applicable Laws (including, without limitation, all applicable data
protection Laws), Schedule 2.22 lists each material non-U. S.
employee benefit plan and all material severance, employment,
change-in-control, fringe benefit, bonus, incentive, deferred
compensation and all other material employee benefit plans,
agreements, programs, policies or other arrangements, whether oral
or written under which any U.K. Business Employee, China Business
Employee or former U.K. Business Employee or China Business
Employee has any present or future right to compensation or
employee benefits or pursuant to which the Business could have any
material liability (“ Non U.S. Benefit Plans ”).
Copies of any summary plan description concerning the extent of the
benefits provided under any Non U.S. Benefit Plan have been
furnished or made available to the Buyers.
SECTION 2.23.
Labor and Employment
Matters .
With respect to the Business Employees, no
Seller nor the Company is a party to, or bound by, any collective
bargaining agreement, shop floor agreement contract or other
agreement or understanding with a labor union or labor
organization. Except as would not have a Business Material Adverse
Effect, (i) no proceeding regarding a unfair labor practice or
requiring the Company or the Sellers with respect to the Business
to bargain with any labor organization as to wages or conditions of
employment involving the Business has been commenced nor is any
such proceeding, to the Knowledge of the Sellers, threatened;
(ii) there is no strike, work stoppage, or lockout involving
the Business pending or, to the Knowledge of the Sellers,
threatened (other than broad actions that are not targeted solely
at any company); and (iii) no representation question exists
or has been raised respecting any of the Business Employees within
the past eighteen months nor, to the Knowledge of the Sellers, are
there any campaigns being conducted to solicit cards from Business
Employees to authorize representation by any labor organization.
The Company and the Sellers with respect to the Business are in
compliance, in all material respects, with their obligations
pursuant to all material notification and bargaining obligations
arising under any collective bargaining agreement, or statute or
otherwise. Except as would not, individually or in the aggregate,
have a Business Material Adverse Effect, the Company and the
Sellers with respect to the Business are (i) in compliance with all
applicable federal, state and local Laws (domestic and foreign)
respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, in each case, with
respect to the Business Employees; (ii) have withheld all amounts
required by Law or by agreement to be withheld from wages, salaries
and other payments to the Business Employees; and (iii) are not
liable for any arrears of wages or any Taxes or any penalty for
failure to comply with any of the foregoing.
SECTION 2.24.
Insurance .
The Sellers or the Company maintain Insurance
Policies and bonds in such amounts and against such liabilities and
hazards with respect to the Business as are consistent with
industry practice. All such Insurance Policies and bonds are, to
the Knowledge of the Sellers, valid and enforceable and in full
force and effect (except as the enforceability of any such
Insurance Policy may be limited by the insurer’s bankruptcy,
insolvency, liquidation, moratorium and other similar Laws relating
to or affecting creditors’ rights generally or by general
equitable principles), all premiums owing in respect thereof have
been timely paid, and, as of the date hereof, neither the Sellers
nor the Company have received any written notice of any material
premium increase or cancellation with respect to any such Insurance
Policies or bonds. Except for any matters which would not,
individually or in the aggregate, have a Business Material Adverse
Effect, there are no claims pending as to which the insurer has
denied liability or is reserving its rights, and all claims have
been timely and properly filed.
SECTION 2.25.
Intellectual Property
.
(a) To the Knowledge of the Sellers, the Sellers or
the Company collectively have right, title and interest in, or a
license or similar right or authorization to use, all Intellectual
Property primarily used in connection with the Business or
necessary for the operation of the Business as of the date hereof
(“ Business Intellectual Property ”), except
where the absence of such rights, title and interest would not,
individually or in the aggregate, have a Business Material Adverse
Effect.
(b) No default has occurred under any license or
other agreement with a third party providing the Company or the
Sellers permission to use Business Intellectual Property, nor does
any such license or agreement contain any change in control or
other terms or conditions that will become applicable or
inapplicable as a result of the consummation of the transactions
contemplated by this Agreement. Immediately after the Closing,
Buyers will own or will have a right to use all Business
Intellectual Property, free from any Encumbrances (other than
Permitted Encumbrances) and on the same terms and conditions as in
effect prior to the Closing.
(c) No written claim or demand of any Person has
been made nor is there any proceeding that is pending, or to the
Knowledge of the Sellers or the Company, threatened, which (i)
challenges the rights of the Company or the Sellers in respect of
any Business Intellectual Property, or (ii) asserts that the
Company or any Seller is infringing or otherwise in conflict with,
or is required to pay any royalty, license fee, charge or other
amount with regard to, any third party Intellectual
Property.
SECTION 2.26.
Taxes and Tax Matters
.
(a) All Business Tax Returns required to be filed by
the Sellers or the Company have been duly and timely filed (taking
into account applicable extensions) and all such Business Tax
Returns are true, correct and complete. All Taxes with respect to
the Business which are due or claimed to be due by any Taxing
authority (without regard to whether or not such Taxes are shown as
due on any Business Tax Returns) have been paid or adequate
reserves (in conformity with GAAP consistently applied) have been
established in the Financial Statements for the payment of such
Taxes.
(b) There is no action, suit, proceeding, audit,
investigation or claim pending or, to the Knowledge of the Sellers,
threatened in respect of any Taxes relating to the Business for
which a Seller or a Company is or may become liable, nor has any
deficiency or claim for any such Taxes been proposed, asserted or,
to the Knowledge of the Sellers, threatened.
(c) None of the Sellers nor the Company are subject
to a contract or agreement relating to the sharing, allocation or
payment of, or indemnity for, Taxes relating to the Business (other
than a contract the only parties to which are the
Sellers).
(d) The Sellers have complied in all material
respects with all rules and regulations relating to the withholding
of Taxes relating to the Business.
SECTION 2.28.
Environmental Matters
.
(a) All Permits required by applicable Environmental
Laws have been obtained with respect to the operation of the
Business at Sellers’ Springfield, Missouri facility (the
“Springfield Facility”), except for such Permits, which
if not obtained, would not have a Business Material Adverse Effect.
All such Permits with respect to the operation of the Business at
the Springfield Facility are listed on Schedule 2.28(a).
(b) The Company currently holds all Permits required
by applicable Environmental Laws, except for such Permits which, if
not obtained, would not have a Business Material Adverse Effect.
All such Permits with respect to the operation of the Company are
listed on Schedule 2.28(b). To the knowledge of the Sellers, the
Company is in compliance in all material respects with (i) all such
Permits, and (ii) all applicable Environmental Laws pertaining to
its operations or any real property that is the subject of any
Lease, except as would not have a Business Material Adverse
Effect.
(c) The Sellers have disclosed or made available to
the Buyers all material information, as is set forth on Schedule
2.28(a), related to violations of the Permits referenced in Section
2.28(a) above, the type and quantity of hazardous waste generated,
and site remedial investigation activities conducted by the Sellers
in connection with the operation of the Business at the Springfield
Facility, except as would not have a Business Material Adverse
Effect.
(d) Except as provided for in Schedule 2.28(a) or
except as would not have a Material Business Material Adverse
Effect, with respect to the operations of the Company there are no
pending or, to the Knowledge of the Sellers, threatened claims,
notices (including, without limitation, notices that the Company or
the Sellers are or may be a potentially responsible person or
otherwise liable in connection with any waste disposal site
containing Hazardous Materials or other location allegedly used for
the disposal of Hazardous Materials), suits, hearings, proceedings
or liens with respect to Environmental Laws or Hazardous
Materials.
(e) Sellers acknowledge that the scope of the
representations and warranties contained in this Section 2.28 have
been limited as a result of the inclusion of Environmental Losses
as Retained Liabilities, and Sellers’ indemnification of the
Buyer Indemnified Parties from and against such Environmental
Losses pursuant to Section 8.2 (it being acknowledged and agreed by
the Parties that the foregoing in no way increases any remedies of
Buyers or any liabilities of Sellers (including without limitation
any closing conditions or indemnification) with respect to the
transactions contemplated hereby).
ARTICLE
III
REPRESENTATIONS AND
WARRANTIES
OF THE
BUYERS
The Buyers hereby represent and warrant to the
Sellers as follows:
SECTION 3.1.
Corporate Existence and
Power .
Each of the Buyers is a corporation duly
organized, validly existing and in good standing under the law of
the jurisdiction of its organization and has all corporate power
necessary to consummate the transactions contemplated
hereby.
SECTION 3.2.
Authorization
.
The execution, delivery and performance by the
Buyers of this Agreement and consummation by the Buyers of the
transactions contemplated hereby are within the Buyers’
corporate powers and have been duly authorized by all necessary
corporate action on the part of the Buyers. This Agreement
constitutes, and each other agreement executed and delivered or to
be executed and delivered by the Buyers pursuant to this Agreement
will, upon such execution and delivery, constitute, a legal, valid
and binding obligation of the Buyers enforceable against the Buyers
in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, liquidation, reorganization,
moratorium and other similar laws relating to or affecting
creditors’ rights generally and general equitable principles
(whether considered in a proceeding in equity or at
law).
Except as may be required under the
International Trade in Arms Regulations, 22 CFR §122.1, no
material Consent or Filing with any Governmental Entity which has
not been obtained or made by the Buyers is required for or in
connection with the execution and delivery of this Agreement by the
Buyers or the consummation by the Buyers of the transactions
contemplated hereby.
SECTION 3.4.
Noncontravention
.
The execution, delivery and performance of this
Agreement by the Buyers do not, and the consummation by the Buyers
of the transactions contemplated hereby will not, (i) violate any
provision of the organizational documents of the Buyers, (ii)
conflict with or violate any applicable Law or order of any
Governmental Entity currently in effect with respect to the Buyers,
or (iii) to the Knowledge of the Buyers, violate in any material
respect any provision of, require any third party consents under or
result in the termination of any material obligation of the Buyers,
except in the case of clauses (ii) and (iii) above, for any
deviations which would not reasonably be expected to prevent or
delay the consummation of the transactions contemplated
hereby.
SECTION 3.5.
Litigation
.
There are no actions, suits, claims,
arbitrations, proceedings or investigations pending or, to the
Knowledge of the Buyers, threatened against the Buyers or the
transactions contemplated hereby, at law or in equity, or before or
by any court, arbitrator or Governmental Entity, domestic or
foreign, except for actions, claims, arbitrations, proceedings or
investigations that would not reasonably be expected to prevent or
delay the consummation of the transactions contemplated hereby. The
Buyers are not (i) operating under or subject to any order, award,
writ, injunction, decree or judgment of any court, arbitrator or
Governmental Entity or (ii) in default with respect to any order,
award, writ, injunction, decree or judgment of any court,
arbitrator or Governmental Entity, except for orders, awards,
writs, injunctions, decrees, judgments or defaults that would not
reasonably be expected to prevent or delay the consummation of the
transactions contemplated hereby.
(a) The Buyers have available, and will have
available on the Closing Date, funds sufficient to pay the Purchase
Price and to pay or otherwise discharge the Assumed
Liabilities.
(b) The Buyers shall not finance their acquisition
of the Shares through the use of any financing mechanism which
would give rise to any “financial assistance”
prohibitions in the jurisdictions in which the Company is
organized.
SECTION 3.7.
Brokers and
Intermediaries .
The Buyers have not employed any broker, finder,
advisor or intermediary in connection with the transactions
contemplated hereby who would be entitled to a broker’s,
finder’s, adviser’s, intermediary’s or similar
fee or commission in the connection therewith or upon consummation
thereof.
SECTION 3.8.
Investment Intent
.
Simclar Interconnect Technologies Limited is
acquiring the Shares for its own account for investment, without a
view to resale or distribution thereof in violation of U.S. federal
or state or non-U.S. securities laws and with no present intention
of distributing or reselling any part thereof. The Buyers will not
so distribute or resell any of the Shares in violation of any such
law.
SECTION 3.9.
Investigation
.
The Buyers are knowledgeable about the industry
in which the Business operates and is experienced in the
acquisition and management of businesses. The Buyers have been
afforded reasonable access to the Books and Records, facilities and
personnel of the Business for purposes of conducting a due
diligence investigation of the Business. The Buyers have conducted
a reasonable due diligence investigation of the Business and has
received answers to all inquiries it has made with respect to the
Business.
SECTION 3.10.
No Inducement or Reliance;
Independent Assessment .
(a) The Buyers have not been induced by and has not
relied upon any representations, warranties or statements, whether
express or implied, made by the Sellers (or their Affiliates,
officers, directors, employees, agents or representatives) that are
not expressly set forth herein (including the Seller Disclosure
Schedules), whether or not any such representations, warranties or
statements were made in writing or orally.
(b) The Buyers acknowledge that none of the Sellers
(or their Affiliates, officers, directors, employees, agents or
representatives) makes, will make or has made any representation or
warranty, express or implied, as to the prospects of the Business
or its profitability for the Buyers, or with respect to any
forecasts, projections or business plans made available to the
Buyers in connection with the Buyers’ review of the
Business.
ARTICLE
IV
COVENANTS RELATING TO
CONDUCT OF BUSINESS
SECTION 4.1.
Conduct of the
Business .
(a) The Sellers hereby covenant and agree that, from
the date hereof until the Closing Date, unless contemplated hereby
or consented to in writing by the Buyers (which consent will not be
unreasonably withheld or delayed), and subject to actions that
Sellers may take related to the employees of the Business who
Buyers are not offering to employ and therefore are not listed on
Schedules 5.3 and 5.5, they will conduct the Business in the
ordinary course of business in all material respects. Without
limiting the generality of the foregoing, except as otherwise
contemplated hereby, as set forth on Schedule 4.1, or as consented
to in writing by the Buyers (which consent will not be unreasonably
withheld or delayed), from the date hereof until the Closing Date,
the Sellers shall not, except to the extent compelled by applicable
Law:
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(i)
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amend the
business license, articles of association or the organizational
documents (or equivalent) of the Company ( provided , that
the Sellers shall be permitted to amend such documents for the
purpose of removing the “Litton” name from the name of
the Company or for the purpose of effecting the transactions
contemplated by this Agreement);
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(ii)
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encumber,
transfer or sell any equity interest of the Company to a third
party;
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(iii)
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permit the
Company to (a) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, indirectly, contingently
or otherwise) for the material obligations of any Person other than
in the ordinary course of business; (b) make any capital
expenditures or make any loans, advances or capital contributions
to, or investments in, any other Person (other than for customary
travel, relocation or business advances or loans to employees in
each case in the ordinary course of business) in the aggregate, in
excess of $100,000 other than in the ordinary course of business;
(c) acquire or agree to acquire by merging or consolidating with,
or by purchasing outside of the ordinary course of business the
assets of, or by any other manner, (A) any business or any
corporation, limited liability company, partnership, joint venture,
association or other business organization or division thereof, or
(B) any assets that would be, individually or in the aggregate,
material to the Business; or (d) divest, sell, transfer, mortgage,
pledge or otherwise dispose of, or encumber, or agree to divest,
sell, transfer, mortgage, pledge or otherwise dispose of or
encumber, any assets.
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(iv)
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divest, sell,
transfer, mortgage, pledge or otherwise dispose of, or encumber, or
agree to divest, sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any assets used in the Business other than
(A) transfers of assets from one entity to any other entity that
will be transferred to the Buyers at the Closing, (C) transfers of
Excluded Assets to the Sellers or their Affiliates, without any
consideration paid or payable, (D) in the ordinary course of
business and (E) Permitted Encumbrances.
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(v)
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increase in any
material respect the compensation or employee benefits of any
officers of the Company or of the Sellers who will become
Transferred Employees, other than routine increases made in the
ordinary course of business;
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(vi)
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make or rescind
any express or deemed election relating to Taxes of the
Business;
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(vii)
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settle or
compromise any material Tax liability of the Business or agree to
an extension of a statute of limita
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