SECURITIES PURCHASE AGREEMENT

Exhibit 10.15

E XECUTION V ERSION

 

SECURITIES PURCHASE AGREEMENT

by and among

FMC T ECHNOLOGIES , I NC .,

S CHILLING R OBOTICS , I NC .,

S CHILLING R OBOTICS , LLC,

and

for purposes of Articles II, III and IX only

T YLER S CHILLING

dated as of

December 24, 2008

 

TABLE OF CONTENTS

 

 

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SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of December 24, 2008, is made by and among FMC TECHNOLOGIES, INC., a Delaware corporation (“ Purchaser ”), SCHILLING ROBOTICS, INC., a Delaware corporation (“ Seller ”), SCHILLING ROBOTICS, LLC, a Delaware limited liability company (the “ Company ”) and, for purposes of Articles II, III and IX only, Tyler Schilling, an individual (“ Schilling ”). Purchaser, Seller, the Company and Schilling may be collectively referred to herein as the “ Parties ” and individually as a “ Party .” Certain capitalized terms used in this Agreement have the meanings ascribed to them in Section 10.1 hereof.

W I T N E S S E T H:

WHEREAS, Seller owns directly or indirectly one hundred (100) units of limited liability company membership interest (the “ Units ”) of the Company;

WHEREAS, prior to consummation of the transactions set forth in this Agreement, Seller and the Company shall engage in certain restructuring transactions to ensure that all of the employees, assets and agreements relating to the Business (other than certain equity and equity-like agreements) are assigned to or otherwise legally held by the Company;

WHEREAS, Seller is entering into a unitholders agreement with Purchaser pursuant to which, among other things, Purchaser will be granted the right to acquire the remaining Units of the Company, subject to certain terms and conditions, during the two-year period beginning January 1, 2012 (the “ Unitholders Agreement ”); and

WHEREAS, the Manager and Members of the Company and the respective Boards of Directors of each of Purchaser and Seller have approved, and each such Board of Directors deems it advisable and in the best interests of its respective stockholders to consummate, the transactions contemplated by this Agreement upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the Parties hereto agree as follows:

ARTICLE I

PURCHASE AND SALE OF UNITS

Section 1.1 Purchase and Sale . Subject to the terms and conditions of this Agreement, at the Closing: (a) the Company agrees to issue and transfer to Purchaser and Purchaser agrees to purchase from the Company 5.45 Class A-1 Units (the “ Class A-1 Units ”) for a purchase price equal to (i) $27,200,000 minus (ii) an amount equal to the product of 0.45 and the Schilling Transaction Expenses Estimate (the “ A-1 Unit Purchase Price ”) and (b) Seller agrees to sell and transfer to Purchaser, and Purchaser agrees to purchase from Seller, forty-two (42) of the Units held by Seller (the “ Purchased Units ”), for a purchase price equal to

$88,800,000 (the “ Purchased Unit Purchase Price ” and together with the A-1 Unit Purchase Price, the “ Total Purchase Price ”) (the “ Transaction ”). A portion of the Purchase Unit Purchase Price shall be placed into an escrow account pursuant and subject to Section 1.7 hereof and a portion of the A-1 Unit Purchase Price shall be retained by Purchaser pursuant and subject to Section 1.8 hereof.

Section 1.2 Closing . The Closing of the Transaction (the “ Closing ”) shall take place at the offices of DLA Piper LLP (US) (“ DLA Piper ”), counsel to Seller and the Company, at 400 Capitol Mall, Suite 2400, Sacramento, CA 95814, or at such other place as Purchaser, the Company and Seller may agree, on December 26, 2008, subject to the satisfaction or waiver of the conditions to Closing set forth in Article VII (the “ Closing Date ”).

Section 1.3 Deliveries . Subject to the terms and conditions of this Agreement, at the Closing, (a) Seller will deliver to Purchaser a certificate or certificates representing the Purchased Units, duly endorsed for transfer to Purchaser, against payment by Purchaser of the Purchased Unit Purchase Price (less the Escrow Amount) by wire transfer of immediately available funds to Seller’s account, (b) the Purchaser shall pay the Escrow Amount to the Escrow Agent by wire transfer of immediately available funds as provided in the Escrow Agreement, (c) the Company will deliver to Purchaser a certificate or certificates for the Class A-1 Units, registered in the name of Purchaser, against payment by Purchaser of the A-1 Unit Purchase Price (less the Holdback Amount) by wire transfer of immediately available funds to the Company’s account, and (d) the Parties shall deliver the other documents and agreements described in Article VII of this Agreement.

Section 1.4 Use of Proceeds . Seller shall apply the proceeds from the sale of Purchased Units solely to the repayment of principal and interest on certain installment notes issued by Seller under that certain Purchase Agreement, dated as of December 28, 2007, by and among Seller, Newco and the Company. The Company shall apply the proceeds from the sale of the Class A-1 Units to general working capital.

Section 1.5 Amendment of Operating Agreement and Admission of Purchaser as Member of the Company . At the Closing, (i) the Company’s current Limited Liability Company Operating Agreement (the “ Current Operating Agreement ”) shall be amended and restated in substantially the form attached hereto as Exhibit A (the “ New Operating Agreement ”) and (ii) Seller, the Company and Purchaser shall take all actions necessary and appropriate to cause Purchaser to be admitted as a “ Member ” of the Company under the New Operating Agreement.

Section 1.6 Board of Directors of the Company . As of the Closing, the Board of Directors of the Company shall be as set forth in the New Operating Agreement.

Section 1.7 Escrow . Concurrent with the Closing, Purchaser, Seller, Schilling and U.S. Bank National Association (the “ Escrow Agent ”) shall enter into an escrow agreement in substantially the form attached hereto as Exhibit B (the “ Escrow Agreement ”). At the Closing, Purchaser shall cause the amount of Ten Million Dollars ($10,000,000) from the Purchased Unit Purchase Price (the “ Escrow Amount ”) to be deposited with the Escrow Agent.

 

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Section 1.8 Purchase Price Adjustment .

(a) The parties hereto acknowledge that the purchase price has been based in part on the Company having an equity value (after giving effect to the transactions contemplated hereby, including the application of proceeds therefrom) as of the Closing Date of at least $257,777,777. The A-1 Unit Purchase Price delivered by Purchaser pursuant to Section 1.1 shall be adjusted in accordance with the following procedures. Seller and the Company agree to cause the Company’s independent auditors to complete and deliver to the Company and Purchaser, as soon as practicable after the Closing Date, a consolidated audited balance sheet of Seller, the Company and the Subsidiaries as of December 26, 2008, and the related statements of operations and cash flows for the fiscal year then ended, including the notes thereto (together the “ 2008 Financial Statements ”). Within 30 days after delivery of the 2008 Financial Statements, the Company shall deliver to Purchaser a statement setting forth the proposed calculations (the “ Proposed Calculations ”) of Actual 2008 EBITDA, Net Debt, Actual Net Equity Value and the Actual Purchased Interest Value, accompanied by materials showing in reasonable detail Seller’s support for the Proposed Calculations. For purposes of calculating “Actual Net Equity Value,” the Parties agree to use the following formula:

 

(b) Purchaser shall have the right for 30 days following its receipt of the Proposed Calculations to object to the Proposed Calculations. Any objection made by Purchaser shall be accompanied by materials showing in reasonable detail Purchaser’s support for its position. Purchaser shall be deemed to have waived any rights to object under this Agreement unless Purchaser furnishes its written objections, together with supporting materials, to the Company within such 30-day period. Purchaser and the Company shall meet to resolve any differences in their respective positions with respect to the Proposed Calculations. If the Company and Purchaser are unable to agree upon the Proposed Calculations within 30 days of the Company’s receipt of Purchaser’s objections, Purchaser or the Company may submit the matter to be resolved through an arbitration procedure conducted in accordance with Section 9.3.

(c) Following the final determination of the Actual Purchased Interest Value as set forth in Section 1.7(b) above, if the Actual Purchased Interest Value is less than $116,000,000 (the amount of such shortfall, the “ Company Adjustment Payment ”), Purchaser shall offset the Company Adjustment Payment against the Holdback Amount. Following such offset, (i) to the extent the Company Adjustment Payment exceeds the Holdback Amount, the Company shall promptly (but in any event within five Business Days) wire transfer in immediately available funds to Purchaser, to an account designated by Purchaser, an amount equal to such excess, or (ii) to the extent the Holdback Amount exceeds the Company Adjustment Payment, Purchaser shall promptly (but in any event within five Business Days) wire transfer in immediately available funds to the Company, to an account designated by the Company, an amount equal to such excess. Notwithstanding the foregoing, in the event that the Company Adjustment Payment exceeds $20,000,000, the Company shall promptly (but in any

 

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event within five Business Days) deliver to Purchaser in the manner described above, $10,000,000 in immediately available funds and the Parties shall consult with each other as to the treatment of the amount in excess of $20,000,000.

(d) Following the final determination of the Actual Purchased Interest Value as set forth in Section 1.7(b) above, if the Actual Purchased Interest Value equals or exceeds $116,000,000, no payment shall be made by the Company in respect of this Section 1.7. In such event, Purchaser shall promptly (but in any event within five Business Days) wire transfer in immediately available funds to the Company, to an account designated by the Company, an amount equal to the Holdback Amount.

(e) All amounts to be paid under this Section 1.7 shall be deemed to be adjustments to the Total Purchase Price.

(f) For illustration purposes only, Exhibit C attached hereto sets forth three sample calculations of Actual Net Equity Value and the resulting amounts payable by Seller or Buyer pursuant to this Section 1.7.

(g) The Parties agree that the determination of Actual 2008 EBITDA shall, to the extent applicable, take into account the adjustments described on Exhibit D hereto. The Company shall manage its working capital, including the payment of accounts payable, in a manner consistent with past practice until the end of the Company’s fiscal year ending December 26, 2008.

ARTICLE II

REPRESENTATIONS AND WARRANTIES REGARDING SELLER

Except as set forth in the schedule prepared and signed by an appropriate officer of Seller and an appropriate officer of the Company delivered to Purchaser prior to the execution of this Agreement setting forth specific exceptions to Seller’s, the Company’s and Schilling’s representations and warranties set forth in this Agreement (each section of which qualifies the correspondingly numbered representation and warranty by the Company, Seller and Schilling) (the “ Disclosure Schedule ”), Seller and Schilling, jointly and severally, represent and warrant to Purchaser as of the date hereof and the Closing Date as follows:

Section 2.1 Title . Seller is the record owner of 55 Units, its wholly owned subsidiary, Newco, is the record owner of 45 Units, and Seller is the beneficial owner of all 100 Units. Immediately after the Closing Purchaser will be the record and beneficial owner of all such Purchased Units, in each case free and clear of all Liens, other than Liens created or imposed by Purchaser and restrictions on transfers under applicable securities laws. Seller has not granted any option or right, and is not a party to or bound by any agreement that requires or, upon the passage of time, the payment of money or occurrence of any other event, would require Seller to transfer any of the Units to anyone (other than to Purchaser under this Agreement).

Section 2.2 Organization and Authority . Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all

 

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requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and currently contemplated to be conducted. Seller is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such other jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Company Material Adverse Effect. Seller has the requisite corporate power and authority to execute and deliver this Agreement and the other agreements, documents and instruments of Seller contemplated hereby and to perform its obligations hereunder and thereunder. Execution, delivery and performance of such obligations by Seller have been duly and validly authorized by all requisite action on the part of Seller.

Section 2.3 Capitalization .

(a) As of the date hereof, the authorized equity interests of Seller consist of 30,000,000 shares of common stock, $0.0001 par value per share (the “ Seller’s Common Stock ”), 15,660,901 of which are issued and outstanding. As of the date hereof, (i) no shares of Seller’s Common Stock are issued and held in the treasury of Seller and (ii) no shares of Seller’s Common Stock are reserved for issuance pursuant to any outstanding options, warrants or other securities convertible into shares of Seller’s Common Stock. Of the issued and outstanding shares of Seller’s Common Stock set forth above, none are subject to repurchase rights in connection with the Transaction. All of the outstanding shares of Seller’s Common Stock are duly authorized, validly issued, fully paid and non-assessable and were issued in compliance with all applicable laws, including federal and state securities laws, and Seller’s certificate of incorporation and bylaws, and are held free and clear of all Liens. The rights, preferences and privileges of the shares of Seller’s Common Stock are as set forth in the Seller’s certificate of incorporation. Schedule 2.3(a) of the Disclosure Schedule sets forth a true and complete list of all record holders of the shares of Seller’s Common Stock as of the date of this Agreement with the name of each holder and number of shares of Seller’s Common Stock held. Seller is the record and beneficial owner of all outstanding Securities of Newco.

(b) Except as set forth in Schedule 2.3(a) of the Disclosure Schedule, (i) there are no equity interests of Seller or Newco issued or outstanding; (ii) there are no existing options, warrants, calls, preemptive rights, rights of first refusal, equity appreciation, phantom stock or similar rights, indebtedness having general voting rights or debt convertible into securities having such rights (“ Voting Debt ”) or subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued equity interests of Seller or Newco obligating Seller or Newco to issue, transfer or sell or cause to be issued, transferred or sold any equity interests or Voting Debt of, or other equity interest in, Seller or Newco or securities convertible into or exchangeable for such equity interests, or obligating Seller or Newco to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment and (iii) there are no outstanding contractual obligations of Seller or Newco to repurchase, redeem or otherwise acquire any shares of Seller’s Common Stock or other Securities of Newco or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any other entity.

 

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(c) There are no voting trusts or other agreements or understandings to which Seller or Newco is a party with respect to the voting of the equity interests of Seller or Newco.

(d) No Indebtedness of Seller contains any restriction upon (i) the prepayment of any of such Indebtedness, (ii) the incurrence of Indebtedness by Seller, or (iii) the ability of Seller to grant any Lien on its properties or assets. Newco has not incurred and is not liable for any Indebtedness. For purposes of this Agreement, “ Indebtedness ” shall mean (A) all indebtedness, whether or not contingent, for borrowed money or for the deferred purchase price of property or services, (including but not limited to amounts referred to by Seller, the Company or any Subsidiary as equipment debt, AR debt, and “ growth capital ” debt), (B) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (C) all obligations under financing or capital leases or letters of credit, (D) all obligations in respect of acceptances issued or created, (E) all liabilities secured by any lien on any property, (F) all non-compete payments due to owners of businesses acquired by Seller, the Company or any Subsidiary and (G) all guarantee obligations, in each case including the principal amount thereof, any accrued interest thereon and any prepayment premiums or fees or termination fees with respect thereto, provided, however , that trade payables and accruals incurred in the ordinary course of business shall not be considered Indebtedness hereunder.

Section 2.4 No Conflict; Consents .

(a) No notice to or filing with, and no permit, authorization, waiver, consent or approval of, any arbitrator, court, nation, government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial regulatory or administrative functions of, or pertaining to, government (in each case, whether foreign or domestic) (a “ Governmental Entity ”), or any other Person is necessary for the execution, delivery or performance of this Agreement and the other agreements contemplated hereby by Seller or the consummation by Seller of the transactions contemplated by this Agreement, except for (i) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities laws and the securities laws of any foreign country; (ii) such antitrust filings as may be required in any jurisdiction; and (iii) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, could not be reasonably expected to have a Company Material Adverse Effect.

(b) No consent, order, authorization, approval, declaration or filing is required on the part of Seller for or in connection with the execution, delivery or performance of this Agreement and the other agreements, documents and instruments of Seller contemplated hereby. Neither the execution and delivery of this Agreement by Seller, the consummation by Seller of the transactions contemplated hereby nor compliance by Seller with any of the provisions hereof will (i) conflict with or result in any breach of any provision of Seller’s certificate of incorporation or bylaws, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or result in the creation of any mortgage, pledge, charge, security interest, claim or encumbrance of any kind (collectively, a “ Lien ”)) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, permit, authorization, franchise, contract, agreement or other instrument or obligation to which Seller is a party or by which it or any of its properties or assets may be bound or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Seller, or its properties or assets.

 

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Section 2.5 Validity and Enforceability . This Agreement, and the Transaction Documents to which Seller is a party, shall be, when executed and delivered by Seller, the valid and binding obligations of the Seller enforceable in accordance with their respective terms, subject to (i) laws of general application relating to specific performance, injunctive relief or other equitable remedies, (ii) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (iii) federal or state laws limiting enforceability of the indemnification provisions in Article IX of this Agreement.

Section 2.6 No Other Activities . Except as disclosed on Schedule 2.6 of the Disclosure Schedule, Seller has not engaged in any business activities, held any assets or incurred any liabilities since its formation, other than holding Units solely as a unitholder of the Company.

Section 2.7 Taxes .

(a) The Seller’s wholly owned subsidiary, Newco, through which the Seller indirectly owns 45 Units, is properly classified as an entity disregarded as separate from the Seller for U.S. federal income Tax purposes in accordance with Treas. Reg. § 301.7701-3;

(b) For federal income Tax purposes, the Seller is, and has been at all times since its inception, properly classified as an “S corporation” under Section 1361 of the Code and the Treasury Regulations thereunder, and is and has been so classified for state income Tax purposes pursuant to analogous state provisions. Each of the subsidiaries of the Seller is either (i) properly classified as an entity disregarded as separate from the Seller for U.S. federal income Tax purposes in accordance with Treas. Reg. § 301.7701-3 or (ii) properly classified as a “qualified subchapter S subsidiary” within the meaning of Section 1361 of the Code; provided , however , that the foregoing will not apply to the Company or the Subsidiaries after the completion of the Seller’s obligations in Section 6.7. The Seller will not be liable for any Tax under Section 1374 of the Code or any other applicable state or local law as a result of the transactions contemplated by this Agreement, including the making of a Section 338(h)(10) Election. The Seller has not, since its inception, acquired assets from another corporation in a transaction in which the Seller’s Tax basis for the acquired assets was determined, in whole or in part, by reference to the Tax basis of the acquired assets (or any other property) in the hands of the transferor or acquired the stock of any corporation which is or became a “qualified subchapter S subsidiary” within the meaning of Section 1361(b)(3)(B) of the Code;

(c) The Seller is not required to make payments, dividend distributions or loans to any shareholder in regard to taxes owed by that shareholder with respect to its share of taxable income earned by the Seller;

(d) The Seller has timely filed with the appropriate Tax Authorities all Tax Returns required to be filed, and such Tax Returns are true, correct and complete;

 

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(e) The Seller has paid in full all Taxes which are or have become due (whether or not shown on any Tax Return). There are no liens for Taxes upon any property or assets of the Seller except for liens for personal property Taxes not yet due and payable. No Audits are presently pending with regard to any Taxes or Tax Returns of the Seller, and no such Audit is threatened, and no deficiency or adjustment for any Taxes has been proposed, asserted, or assessed against the Seller. No material adjustments have been asserted as a result of any Audit which have not been resolved and fully paid, and no issue has been raised by any Tax Authority in any Audit of the Seller that, if raised with respect to any other period not so audited, could be expected to result in a proposed deficiency for any period not so audited. The Seller has never received any notice of any claim made by a Tax Authority in a jurisdiction where the Seller does not file a Tax Return, that the Seller is or may be subject to taxation by that jurisdiction. There are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against the Seller, and no power of attorney granted by the Seller with respect to any Taxes or Tax Returns is currently in force. The Seller does not have any liability for or in respect of the Taxes of, or determined by reference to the Tax liability of, another Person. The Seller is not a party to, bound by, obligated under, any Tax sharing agreement, Tax allocation agreement, Tax indemnification agreement, agreement where liability is determined by reference to the Tax liability of a third party, or any similar agreement, contract, or arrangement;

(f) The Seller has never had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country; and

(g) The Seller has never engaged in any transaction that gives rise to: (x) a registration obligation under Section 6111 of the Code or the Treasury Regulations promulgated thereunder; (y) a list maintenance obligation under Section 6112 of the Code or the Treasury Regulations promulgated thereunder; or (z) a disclosure obligation as a “reportable transaction” under Section 6011 of the Code or the Treasury Regulations promulgated thereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

Except as set forth in the Disclosure Schedule, the Company, Seller and Schilling, jointly and severally, represent and warrant to Purchaser as of the date hereof and the Closing Date as follows:

Section 3.1 Organization .

(a) The Company is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and currently contemplated to be conducted. The Company is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or

 

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licensing necessary, except in such other jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Company Material Adverse Effect. For purposes of this Agreement, “ Company Material Adverse Effect ” means any event or occurrence that has had or could reasonably be expected to have, individually or in the aggregate, a material adverse effect (i) on the business, assets, liabilities, properties, results of operations or condition (financial or otherwise) of Seller, the Company and the Subsidiaries, taken as a whole, or (ii) that would prevent or materially alter or delay the Transaction or any of the other transactions contemplated hereby, in each case other than as a result of changes or effects resulting, directly or indirectly, from (A) the public announcement of or performance of the Transaction (including any action or inaction by the Company’s or any Subsidiary’s customers, suppliers, employees or competitors as a result of the public announcement or consummation of the Transaction), (B) changes in GAAP or any applicable law, (C) changes in the Business, (D) any attack on, or by, outbreak or escalation of hostilities or acts of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity, (E) changes in general economic conditions or the financial securities markets or credit markets generally, but only to the extent any such change described in clauses (B), (C), (D) and (E) is not specifically related to Seller, the Company and the Subsidiaries taken as a whole or disproportionately affects the Seller, Company and the Subsidiaries taken as a whole relative to other businesses that derive substantially all of their revenue from the same type of business as the Business. The Company has heretofore delivered to Purchaser accurate and complete copies of the Company’s Current Operating Agreement.

(b) Each subsidiary of the Company (each a “ Subsidiary ”) is an organization duly formed, validly existing and in good standing (with respect to jurisdictions that recognize such concept with respect to such entity) under the laws of the jurisdiction of its formation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and currently contemplated to be conducted. Each Subsidiary is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such other jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Company Material Adverse Effect.

(c) Schedule 3.1(c) of the Disclosure Schedule lists each Subsidiary and its jurisdiction of organization. Each Subsidiary is 100% owned by the Company. The Company does not own or have the right to acquire, directly or indirectly, any capital stock or other equity securities of any corporation or have any direct or indirect equity or ownership investment or interest in any Person other than the Subsidiaries.

(d) Schedule 3.1(d) of the Disclosure Schedule sets forth the name and title of each officer and director of the Company and each Subsidiary. Schilling is the sole manager of the Company (the “ Manager ”).

Section 3.2 Capitalization .

(a) As of the date hereof, the authorized equity interests of the Company consist of 100 Units, all of which are issued and outstanding. As of the date hereof,

 

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(i) no Units are issued and held in the treasury of the Company and (ii) no Units are reserved for issuance pursuant to any outstanding options, warrants or other securities convertible into Units. Of the issued and outstanding Units set forth above, none are subject to repurchase rights in connection with the Transaction. All of the outstanding Units are duly authorized, validly issued, fully paid and non-assessable and were issued in compliance with all applicable laws, including federal and state securities laws, and the Current Operating Agreement, and are held free and clear of all Liens. The rights, preferences and privileges of the Units are as set forth in the Current Operating Agreement. Schedule 3.2(a) of the Disclosure Schedule sets forth a true and complete list of all record and beneficial holders of Units as of the date of this Agreement with the name of each holder and number and type of Units held.

(b) At the Closing, the Units of the Company shall be recapitalized into Class A Units and the authorized equity interests of the Company shall consist of the following: (i) a total of 100 authorized Class A Units, all of which shall be issued and outstanding, and (ii) a total of 5.45 authorized Class A-1 Units, all of which shall be issued and outstanding, pursuant to the transactions contemplated by this Agreement.

(c) Except as set forth in Schedule 3.2(a) of the Disclosure Schedule, (i) there are no equity interests of the Company issued or outstanding; (ii) there are no existing options, warrants, calls, preemptive rights, rights of first refusal, equity appreciation, phantom stock or similar rights, indebtedness having general voting rights or Voting Debt or subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued equity interests of the Company or any Subsidiary obligating the Company or any Subsidiary to issue, transfer or sell or cause to be issued, transferred or sold any equity interests or Voting Debt of, or other equity interest in, the Company or any Subsidiary or securities convertible into or exchangeable for such equity interests, or obligating the Company or any Subsidiary to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment and (iii) there are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Units or other equity interests of any Subsidiary or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any other entity.

(d) There are no voting trusts or other agreements or understandings to which the Company is a party with respect to the voting of the equity interests of the Company.

(e) No Indebtedness of the Company or any Subsidiary contains any restriction upon (i) the prepayment of any of such Indebtedness, (ii) the incurrence of Indebtedness by the Company, or (iii) the ability of the Company to grant any Lien on its properties or assets.

Section 3.3 Authorization . The Company has the requisite limited liability company power and authority to execute and deliver this Agreement and the other agreements, documents and instruments of the Company contemplated hereby and to perform its obligations hereunder and thereunder. All action on the part of the Company and its Manager and Members necessary for the authorization, execution, delivery and performance of this Agreement and the authorization, sale, issuance and delivery of the Class A-1 Units and the performance of the Company’s obligations hereunder has been taken or will be taken prior to the Closing.

 

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(a) This Agreement, and the Transaction Documents to which the Company is a party, shall be, when executed and delivered by the Company, the valid and binding obligations, of the Company enforceable in accordance with their respective terms, subject to (i) laws of general application relating to specific performance, injunctive relief or other equitable remedies, (ii) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (iii) federal or state laws limiting enforceability of the indemnification provisions in Article IX of this Agreement.

(b) When issued, sold and delivered in accordance with the terms of this Agreement for the consideration provided for herein, the Class A-1 Units shall be duly authorized, validly issued, fully paid and non-assessable and shall be free of any Liens, other than restrictions on transfer under the New Operating Agreement, the Unitholders Agreement and applicable state and federal securities laws.

(c) No Member of the Company has any right of first refusal or any preemptive rights or similar rights in connection with the issuance and sale of the Class A-1 Units.

Section 3.4 No Conflict; Consent .

(a) No notice to or filing with, and no permit, authorization, waiver, consent or approval of, any Governmental Entity, or any other Person is necessary for the execution, delivery or performance of this Agreement and the other agreements contemplated hereby by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except for (i) filings required under Regulation D of the Securities Act; (ii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities laws and the securities laws of any foreign country; (iii) such antitrust filings as may be required in any jurisdiction; and (iv) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, could not be reasonably expected to have a Company Material Adverse Effect.

(b) No consent, order, authorization, approval, declaration or filing is required on the part of the Company for or in connection with the execution, delivery or performance of this Agreement and the other agreements, documents and instruments of the Company contemplated hereby. Neither the execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions contemplated hereby nor compliance by the Company with any of the provisions hereof will (i) conflict with or result in any breach of any provision of the Current Operating Agreement, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or result in the creation of any Lien) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, permit, authorization, franchise, contract, agreement or other instrument or obligation to which the Company is a party or by which it or any of its properties or assets may be bound or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any Subsidiary, or their respective properties or assets.

 

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Section 3.5 Financial Statements .

(a) The Company has previously provided Purchaser with the Seller’s consolidated audited balance sheet as of December 28, 2007 (the “ December Balance Sheet ”) and its unaudited consolidated balance sheet as of October 24, 2008 (the “ Latest Balance Sheet ”), and the related statements of operations and, with respect to the audited financial statements, statements of cash flows for the preceding two (2) fiscal years (which do not include Seller) including the notes thereto, and the consolidated statement of income of Seller for the 10-month period ended October 24, 2008 (which does not contain footnotes) (together the “ Financial Statements ”). The Financial Statements for the years ended December 29, 2006, and December 28, 2007, have been audited by Mann, Urrutia, Nelson CPAs & Associates, LLP, the Company’s and the Seller’s independent accountants. The Financial Statements have been prepared in accordance with GAAP consistently applied, are true and correct in all material respects and fairly present the financial position of Seller, the Company, and the Subsidiaries on a consolidated basis as of such dates and their results of operations and cash flows for such fiscal periods except, in the case of such unaudited statements, for normal recurring year end adjustments which adjustments will not be material, either individually or in the aggregate, and the absence of footnotes.

(b) Seller, the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general and specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since January 1, 2007, none of Seller, the Company or any of the Subsidiaries and, to the Company’s Knowledge, no manager, officer, employee, auditor, accountant or representative of Seller, the Company or any Subsidiary has received or otherwise become aware of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Seller, the Company or any Subsidiary or of their respective internal controls over financial reporting, including any complaint, allegation, assertion or claim that Seller, the Company or any Subsidiary has engaged in questionable accounting or auditing practices. There have been no instances of fraud, whether or not material, that occurred during any period covered by the Financial Statements involving the management of Seller, the Company or the Subsidiaries or other employees or consultants of Seller, the Company or the Subsidiaries who have a role in preparation of the Financial Statements.

Section 3.6 Absence of Certain Changes . Since the date of the December Balance Sheet, Seller, the Company and each Subsidiary has operated only in the usual and ordinary course of business, and none of Seller, the Company or any Subsidiary has:

(a) suffered any Company Material Adverse Effect;

 

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(b) incurred any liabilities or obligations (whether asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due or otherwise) except items incurred in the ordinary course of business and consistent with past practice, none of which exceeds $250,000 in the aggregate or $25,000 individually (counting obligations or liabilities arising from one transaction or a series of similar transactions, and all periodic installments or payments under any lease or other agreement providing for periodic installments or payments, as a single obligation or liability), or increased, or experienced any change in any assumptions underlying or methods of calculating, any bad debt, contingency or other reserves, other than trade payables incurred in the ordinary course of business and consistent with past practice;

(c) paid, discharged or satisfied any claim, liabilities or obligations (whether asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due or otherwise) other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities and obligations reflected or reserved against in the Latest Balance Sheet or incurred since the date of the Latest Balance Sheet in the ordinary course of business, consistent with past practice and not material in the aggregate;

(d) permitted or allowed any of its property or assets (real, personal or mixed, tangible or intangible) to be subjected to any Liens except for liens for real and personal property Taxes not yet due and payable;

(e) written down the value of any of its inventory (including write-downs by reason of shrinkage or mark-down) or written off as uncollectible any notes or accounts receivable, except for immaterial write-downs and write-offs in the ordinary course of business and consistent with past practice;

(f) cancelled any debts or waived any claims or rights of material value;

(g) sold, transferred, or otherwise disposed of any of its properties or assets (real, personal or mixed, tangible or intangible) except for sales of product in the ordinary course of business and consistent with past practice;

(h) granted or committed to any increase in the compensation or benefits of the Manager or any member of senior management, officer or director of Seller, the Company or any Subsidiary (including any such increase pursuant to any Benefit Plan) or any increase in the compensation or benefits payable or to become payable to the Manager or any member of senior management, officer or director of the Company or any Subsidiary, except in the ordinary course of business and consistent with past practice;

(i) disposed of, granted, obtained, or permitted to lapse any rights to, any Intellectual Property except for non-material Intellectual Property as necessary in the ordinary conduct of business and consistent with past practice;

(j) disposed of or disclosed to any Person, other than representatives of Purchaser and other than pursuant to any Material Contract, any Trade Secret;

 

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(k) made any change in severance policy or practices or established, amended or agreed to establish or amend any Benefit Plan, except as required by applicable law;

(l) made any capital expenditure or acquired any property, plant and equipment for a cost in excess of $100,000 per fiscal quarter in the aggregate;

(m) declared, paid or set aside for payment any dividend or other distribution in respect of its equity interests or redeemed, purchased or otherwise acquired, directly or indirectly, any equity interests or other securities of Seller, the Company or any Subsidiary;

(n) filed any amendment to any Tax Return, made any election relating to Taxes, change any election relating to Taxes already made, adopted or changed any accounting method relating to Taxes, entered into any closing agreement relating to Taxes, settled any claim or assessment relating to Taxes, consented to any claim or assessment relating to Taxes or any waiver of the statute of limitation for any such claim or assessment or surrendered any right to claim a refund of Taxes;

(o) paid, loaned or advanced any amount to, or sold, transferred or leased any properties or assets (real, personal or mixed, tangible or intangible) to, or entered into any agreement or arrangement with, any of its officers, managers or unitholders or any affiliate or associate of any of its officers, managers or unitholders except for (i) managers’ fees, and (ii) compensation to officers at rates not inconsistent with the Company’s past practice;

(p) agreed to be bound by any exclusivity provisions or similar such provisions under which the Company is restricted (either directly or through a third party appointed to do the same) from selling, licensing or otherwise distributing any of its products to any class of customers, in any geographic area;

(q) agreed to be bound by any “most favored nations” pricing or commercial terms in any contract, agreement or other commitment; or

(r) agreed, whether in writing or otherwise, to take any action described in this Section 3.6.

Since the Latest Balance Sheet date, none of the Persons with which the Company or any Subsidiary has a material business relationship has given notice in writing or other indication of any intention to cancel or otherwise terminate a business relationship with the Company or any Subsidiary and, to the Company’s Knowledge, no event has occurred or failed to occur which (i) would reasonably be expected to result in the cancellation or termination of such a business relationship or (ii) would entitle any such entity or customer to terminate such business relationship.

Section 3.7 No Undisclosed Liabilities . Except as specifically provided in the Latest Balance Sheet or the Material Contracts, each of the Company and the Subsidiaries has no liabilities or obligations (whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due or otherwise) that were not fully reflected or fully reserved against in the Latest Balance Sheet other than liabilities or obligations incurred in the ordinary course of business, consistent with past practice and that are not material in the aggregate.

 

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Section 3.8 No Default . None of the Company, the Seller or any Subsidiary is in default or violation of (and no event has occurred which with notice or the lapse of time or both would constitute a default or violation of or could cause acceleration of obligations or loss of rights under) any term, condition or provision of (i) the Current Operating Agreement or any organizational document of Seller or any Subsidiary, (ii) any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation to which the Company, Seller or any Subsidiary is a party or by which it or any of its properties or assets may be bound, (iii) any order, writ, injunction, decree, or (iv) any statute, rule or regulation applicable to the Company, Seller or any Subsidiary, except with respect to clause (ii), for such defaults or violations that, individually or in the aggregate, would not result in a Company Material Adverse Effect. To the Company’s Knowledge, none of the Company, Seller or any Subsidiary may be liable for liquidated damages under any contract, agreement or other instrument or obligation to which the Company, Seller or any Subsidiary is a party or by which it or any of its properties or assets may be bound.

Section 3.9 Litigation . There is no action, suit, proceeding, arbitration or investigation pending before any Government Entity or arbitration or mediation panel or, to the Company’s Knowledge, threatened (a) in which Seller, the Company or any Subsidiary is a party, or, (b) to the Company’s Knowledge, in relation to the affairs of Seller, the Company or any Subsidiary, in which any member, officer, director, manager or employee of Seller, the Company or any Subsidiary is a party. None of Seller, the Company or any Subsidiary is a party or subject to the provisions of any order or decree of any Governmental Entity. There is no action, suit, proceeding, arbitration or investigation which Seller, the Company or any Subsidiary presently intends to initiate. To the Company’s Knowledge, there are no occurrences, facts, or circumstances which would give rise to a claim or potential claim against Seller, the Company or any Subsidiary or those to which Seller, the Company or any Subsidiary owes any obligation of indemnification or defense, for the violation of the rights of any third party or the violation of any law, order, or regulation. There are no actions, suits, proceedings or orders pending or, to the Company’s Knowledge, threatened against or affecting the Company or any Subsidiary at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would adversely affect the consummation of the transactions contemplated hereby.

Section 3.10 Compliance with Laws . Each of Seller, the Company and each Subsidiary is in compliance with, and have not violated any applicable law, rule or regulation of any United States federal, state, local, or foreign government or agency thereof which materially affects the business, properties or assets of Seller, the Company and the Subsidiaries, taken as a whole, and no notice, charge, claim or action has been received by Seller, the Company or any Subsidiary or has been filed, commenced or, to the Company’s Knowledge, threatened against Seller, the Company or any Subsidiary alleging any such violation. All material franchises, licenses, permits, authorizations and approvals required under such laws, rules and regulations, and all material franchises, licenses, permits, authorizations and approvals of non-governmental authorities which are required by Seller, the Company and its Subsidiaries are set forth on Schedule 3.10 of the Disclosure Schedule and are in full force and effect. The Company and

 

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each Subsidiary are in compliance with, and have not violated any such franchises, licenses, permits, authorizations and approvals. To the Company’s Knowledge, there is no threatened suspension, revocation or invalidation of any such franchises, licenses, permits, authorizations and approvals.

Section 3.11 Taxes .

(a) The Company and the Subsidiaries have timely filed with the appropriate Tax Authorities all Tax Returns required to be filed, and such Tax Returns are true, correct and complete;

(b) The Company and the Subsidiaries have paid in full all Taxes which are or have become due and payable (whether or not shown on any Tax Return) other than those (i) currently payable without penalty or interest, or (ii) being contested in good faith by appropriate proceedings properly instituted and diligently pursued, and in the case of both clauses (i) and (ii) are fully reserved for on the Latest Balance Sheet. All liabilities for Taxes attributable to the period commencing on the date following the date of the December Balance Sheet have been incurred in the ordinary course of business and are consistent in type and amount with Taxes attributable to similar business activity conducted in prior periods;

(c) There are no liens for Taxes upon any property or assets of the Company or any Subsidiary except for liens for real and personal property Taxes not yet due and payable and for which adequate reserves have been taken;

(d) No Audits are presently pending with regard to any Taxes or Tax Returns of the Company or any Subsidiary, and no such Audit is threatened, and no deficiency or adjustment for any Taxes has been proposed, asserted, or assessed against the Company or any Subsidiary. No material adjustments have been asserted as a result of any Audit which have not been resolved and fully paid, and no issue has been raised by any Tax Authority in any Audit of the Company or any Subsidiary that, if raised with respect to any other period not so audited, could be expected to result in a proposed deficiency for any period not so audited. Neither the Company nor any Subsidiary has ever received any notice of any claim made by a Tax Authority in a jurisdiction where the Company or any Subsidiary does not file a Tax Return, that the Company or any Subsidiary is or may be subject to taxation by that jurisdiction;

(e) There are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against the Company or any Subsidiary, and no power of attorney granted by the Company with respect to any Taxes or Tax Returns is currently in force;

(f) Neither the Company nor any Subsidiary has any liability for or in respect of the Taxes of, or determined by reference to the Tax liability of, another Person, except to the extent the Company and Subsidiaries Tax liability is consolidated with Seller;

(g) Neither the Company nor any Subsidiary is a party to, is bound by, or has any obligation under, any Tax sharing agreement, Tax allocation agreement, Tax indemnification agreement, agreement where liability is determined by reference to the Tax liability of a third party, or any similar agreement, contract, or arrangement;

 

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(h) The Company has not made a “check-the-box” election to be taxed as a corporation pursuant to Treas. Reg. § 301.7701-3. At all times prior to the completion of the Seller’s obligations in Section 6.7, the Company is and was properly classified as an entity disregarded as separate from Seller for U.S. federal income Tax purposes in accordance with Treas. Reg. § 301.7701-3. At all times after the completion of the Seller’s obligations in Section 6.7, the Company is properly classified as a partnership for U.S. federal income Tax purposes;

(i) At all times after the completion of the Seller’s obligations in Section 6.7, each Subsidiary is properly classified as an entity disregarded as separate from the Company for U.S. federal income Tax purposes in accordance with Treas. Reg. § 301.7701-3;

(j) The Company has not agreed nor is it required to include in income any adjustment under either Section 481(a) or 263A of the Code (or an analogous provision of state, local, or foreign law) by reason of a change in accounting method or otherwise which would have an effect on any taxable period following the Closing;

(k) Neither the Company nor any Subsidiary has entered into any closing agreements with any Tax Authorities and has no pending requests for letter rulings or similar administrative determinations with any Tax Authority;

(l) The Company has never had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country;

(m) The Company has never engaged in any transaction that gives rise to: (x) a registration obligation under Section 6111 of the Code or the Treasury Regulations promulgated thereunder; (y) a list maintenance obligation under Section 6112 of the Code or the Treasury Regulations promulgated thereunder; or (z) a disclosure obligation as a “reportable transaction” under Section 6011 of the Code or the Treasury Regulations promulgated thereunder;

(n) All amounts required to be collected or withheld by the Company or any Subsidiary with respect to Taxes have been duly collected or withheld and any such amounts that were or are required to be remitted to any Tax Authority have been duly and timely remitted. All agreements between the Company or any Subsidiary with their customers require the customer to pay all applicable sales tax and such sales tax is collectible in full by the Company or the Subsidiary in the ordinary course of business; and

(o) All of the property of the Company and the Subsidiaries that is subject to property Tax has been properly listed and described on the property tax rolls of the appropriate taxing jurisdiction for all periods prior to Closing and no portion of such property constitutes omitted property for property tax purposes.

Section 3.12 Employee Benefits .

(a) Schedule 3.12 of the Disclosure Schedule contains a true, complete and correct list of each employee benefit plan (including, without limitation, any “employee benefit plan,” as defined in Section 3(3) of ERISA and employee benefit plans such as foreign

 

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plans, that are not subject to the provisions of ERISA) and any employment, change of control, bonus, pension, profit sharing, retirement, deferred compensation, incentive compensation, unit option or purchase, equity-based compensation, consulting, vacation, severance, disability, death benefit, hospitalization, life or other benefits-related insurance, supplemental unemployment benefits or other plan, program, policy, agreement, arrangement or material understanding (whether formal or informal or whether or not legally binding), (i) sponsored, maintained or contributed to or required to be contributed to by the Company and its Subsidiaries or by any trade or business, whether or not incorporated (an “ ERISA Affiliate ”), that together with the Company would be deemed a “single employer” within the meaning of Section 4001(b)(1) ERISA, for the benefit of any current or former employee, manager or consultant of the Company, or (ii) with respect to which the Company or any Subsidiary could have any liability (all the foregoing being herein referred to as “ Benefit Plans ”). The Company has made available to Purchaser a true and correct copy of all documents related to the Benefit Plans, including but not limited to, (u) as they exist, the three most recent annual reports or Form 5500 Series filings if required under ERISA, filed with the Internal Revenue Service (the “ IRS ”) with respect each Benefit Plan, (v) a copy of each written Benefit Plan (including all amendments thereto) or a written description of any Benefit Plan that is not otherwise in writing and the most recent Summary Plan Description, any Summary of Material Modifications or Form 5500 Series if required under ERISA, (w) each trust agreement and group annuity contract, if any, relating to such Benefit Plan, (x) the most recent actuarial report or valuation relating to each Benefit Plan subject to Title IV of ERISA or providing post-retirement health and/or life insurance benefits, (y) a current determination letter received from the Internal Revenue Service with respect to each Benefit Plan intended to qualify under Section 401(a) of the Code and (z) all contracts relating to the Benefit Plans with respect to which the Company or any ERISA Affiliate may have any liability, including, but not limited to, insurance contracts, investment management agreements, subscription and participants agreements and record keeping agreements.

(b) No Benefit Plans are subject to Title IV of ERISA. No event has occurred and to the Company’s Knowledge, there exists no condition or set of circumstances which are reasonably likely to occur in connection with which the Company or any Subsidiary would be subject to any liability (except liability for benefits claims and funding obligations payable in the ordinary course), under ERISA, the Code or any other applicable law.

(c) With respect to Benefit Plans, in the aggregate, there are no funded benefit obligations for which contributions have not been timely made or properly accrued and there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in the Financial Statements. There are no outstanding unfunded U.K. pension plan liabilities.

(d) Each of the Benefit Plans is and has been administered in compliance with its terms and with applicable laws and regulations, including, but not limited to, ERISA, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Health Insurance Portability and Accountability Act of 1996, the Code and federal and state securities laws.

(e) Each of the Benefit Plans that is intended to be a qualified plan within the meaning of Section 401(a) of the Code has been determined by the IRS to be so qualified and nothing has occurred to cause the loss of such qualified or tax-exempt status, or the

 

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Company has applied to the IRS for such a determination prior to the expiration of the requisite period under applicable Treasury Regulations or IRS pronouncements in which to apply for such a determination and to make any amendments necessary to obtain a favorable determination, or has been established under a standardized prototype plan for which an IRS opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer. Each fund established under a Benefit Plan that is intended to satisfy the requirements of Section 501(c)(9) of the Code has so satisfied such requirements.

(f) Neither the Company nor any Subsidiary has any obligations for retiree health, medical or life insurance benefits under any Benefit Plan other than (i) coverage mandated by applicable laws, (ii) death or retirement benefits under any “employee pension plan” as defined in Section 3(2) of ERISA, or (iii) benefits the full cost of which is borne by the current or former employee (or beneficiary thereof). Each Benefit Plan that is a “nonqualified deferred compensation plan” subject to Section 409A of the Code is in material compliance with such section.

(g) No Benefit Plan is a “multiemployer pension plan,” as such term is defined in Section 3(37) of ERISA or a “multiple employer plan” as such term is defined in Section 413(c) of the Code.

(h) Each Benefit Plan can be terminated within a period of thirty (30) days, without payment of any additional compensation or amount or the additional vesting or acceleration of any benefits.

(i) No Benefit Plan is under actual or, to the Company’s Knowledge, threatened investigation, audit or review by any governmental agency, or the subject of any pending, or to the Company’s Knowledge, threatened claim, lawsuit, arbitration or other proceeding.

Section 3.13 Change in Control . Except as set forth in Schedule 3.13 of the Disclosure Schedule, the Company is not a party to any contract, agreement or understanding which contains a “change in control,” “potential change in control” or similar provision. The consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional acts or events) (i) result in any payment (whether of severance pay or otherwise) becoming due from the Company to any Person, or accelerate the time of payment or vesting, or increase the amount of or otherwise enhance any benefit due from the Company to any Person, (ii) result in the termination, modification or cancellation of or default under any contract, franchise, license, permit, authorization or approval or (iii) result in the payment of any amounts that would be reasonably likely to be nondeductible under Section 280G of the Code.

Section 3.14 Intellectual Property .

(a) The Company and its Subsidiaries own or have a valid right to use all trademarks, service marks, trade names, Internet domain names, designs, logos, slogans, and general intangibles of like nature, together with all goodwill, registrations and applications related to the foregoing (collectively, “ Trademarks ”); patents and industrial design registrations or applications (including any continuations, divisional, continuations-in-part, renewals, reissues,

 

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and applications for any of the foregoing) (collectively, “ Patents ”); copyrights (including any registrations and applications therefor); “maskworks” (as defined under 17 U.S.C. § 901) and any applications and registrations therefor; Software; technology; inventions, whether or not patented, patentable, tested or reduced to practice; trade secrets and other confidential information, know-how, proprietary processes, formulae, algorithms, models, and methodologies (collectively, “ Trade Secrets ,” and together with the foregoing, the “ Intellectual Property ”) used or held for use in or necessary for the conduct of the Business.

(b) Schedule 3.14(b)(1) of the Disclosure Schedule sets forth, a complete and accurate list of all U.S. and foreign (i) Patents, (ii) Trademark registrations (including Internet domain registrations) and applications and material unregistered Trademarks and (iii) copyright and maskwork registrations and applications, and material unregistered copyrights, including those in Software, indicating for each, the applicable jurisdiction, registration number (or application number), record owner and date issued (or date filed), for the Intellectual Property owned by the Company and the Subsidiaries. Schedule 3.14(b)(2) of the Disclosure Schedule sets forth a complete and accurate list of all license agreements, assignment agreements, covenants not to sue, and development agreements (other than commercially available “shrink-wrap” or “click-through” licenses acquired in the ordinary course of business having an acquisition price of less than $10,000 for all such related licenses) granting or restricting any right to use or practice any rights under any Intellectual Property, whether the Company or a Subsidiary is the licensee or licensor thereunder, and any settlement agreements or royalty agreements relating to any Intellectual Property to which the Company or any Subsidiary is a party or otherwise bound (collectively, the “ License Agreements ”), indicating for each the title, the parties, date executed or entered into, and the Intellectual Property covered thereby. The Company has furnished to Purchaser true and correct copies of all License Agreements (or descriptions thereof, in the case of oral contracts).

(c) The Intellectual Property owned by the Company and the Subsidiaries is free and clear of all Liens, and the Company or a Subsidiary is listed in the records of the appropriate United States, state, or foreign agency as the sole and exclusive owner of record and beneficial owner for each application and registration listed in Schedule 3.14(b)(1) of the Disclosure Schedule. With respect to any Patents in which the Company or a Subsidiary has an ownership interest: (i) each has been prosecuted in compliance with all applicable rules, policies and procedures of the U.S. Patent and Trademark Office or applicable foreign agency; and (ii) to the Company’s and the Subsidiaries’ Knowledge there is no prior art or other facts that could render any of the claims in the patents invalid or unenforceable.

(d) The Intellectual Property owned by the Company and the Subsidiaries and, to the Company’s Knowledge, any Intellectual Property used by or held for use by the Company or any Subsidiary, is valid and subsisting, in full force and effect, and has not been canceled, expired or been abandoned. There is no pending or threatened opposition, interference or cancellation proceeding before any court or registration authority in any jurisdiction against the registrations listed in Schedule 3.14(b)(1) of the Disclosure Schedule, or, to the Company’s Knowledge, against any material Intellectual Property licensed to the Company or any Subsidiary.

 

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(e) The products, technology and business of the Company and the Subsidiaries as currently conducted, and the products, technology and business that the Company or any Subsidiary currently expects to commercially develop or conduct as set forth in Schedule 3.14(e)(l) of the Disclosure Schedule do not, to the Company’s Knowledge, infringe upon, misappropriate, dilute or violate any Intellectual Property owned or controlled by any third party (either directly or indirectly such as through contributory infringement or inducement to infringe). There are no claims or suits pending or, to the Company’s Knowledge, threatened, and neither the Company nor a Subsidiary has received any written notice (or to the Company’s Knowledge, any oral notice) of a third party claim or suit (1) alleging that its activities or the conduct of its businesses infringes upon, misappropriates, dilutes, violates, or constitutes the unauthorized use of the Intellectual Property rights of any third party other than as set forth in Schedule 3.14(e)(2) or (2) challenging the ownership, use, validity or enforceability of any Intellectual Property owned, used or held for use by the Company or any Subsidiary in the Business, and there has been no such written claim (or, to the Company’s Knowledge, any oral claim) asserted or, to the Company’s Knowledge, threatened in the past six (6) years against the Company or any Subsidiary or, to the Company’s Knowledge, any other Person.

(f) There are no settlements, forbearances to sue (other than licenses granted in the ordinary course), consents, judgments, or orders or similar obligations which (i) restrict the Company’s or any Subsidiary’s rights to use any Intellectual Property, (ii) restrict the Company’s or any Subsidiary’s business in order to accommodate a third party’s Intellectual Property or (iii) permit third parties to use any Intellectual Property owned or controlled by the Company or any Subsidiary. Neither the Company nor any Subsidiary has licensed or sublicensed its rights in any material Intellectual Property other than pursuant to the License Agreements, and no royalties, honoraria or other fees are payable by the Company or any Subsidiary for the use of or right to use any Intellectual Property, except pursuant to the License Agreements. The License Agreements are valid and binding obligations of all parties thereto, enforceable in accordance with their terms, and there exists no event or condition which has occurred or exists which constitutes or which, with or without notice, the happening of any event and/or the passage of time, will result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default by the Company or any Subsidiary or, to the Company’s Knowledge, any other party under any such License Agreement, or could cause the acceleration of any obligation or loss of any rights of any party thereto or give rise to any right of termination or cancellation thereof. Each License Agreement (or description) sets forth the entire agreement and understanding between the Company or the Subsidiary and the other parties thereto.

(g) The Company and the Subsidiaries use commercially reasonable efforts to protect the confidentiality of their Trade Secrets. To the Company’s Knowledge, no Trade Secret owned or used by the Company or any Subsidiary has been disclosed or authorized to be disclosed to any third party other than pursuant to a non-disclosure agreement that protects the Company’s and the Subsidiaries’ proprietary interests in and to such Trade Secrets in a commercially reasonable fashion. Neither the Company nor any Subsidiary nor, to the Company’s Knowledge, any other party to any non-disclosure agreement relating to the Trade Secrets of the Company or any Subsidiary is in breach or default thereof.

 

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(h) No current or former partner, manager, officer or employee of the Company or any Subsidiary (or any of their respective predecessors in interest) will, after giving effect to each of the transactions contemplated herein, own or retain any rights in or to, or have the right to receive any royalties as payment based on the assignment, transfer or license of, any of the Intellectual Property owned or used by the Company or any Subsidiary. Each such current or former partner, manager, officer or employee of the Company or any Subsidiary who has, in each case, been involved in the development or modification of any technology or Intellectual Property owned or purported to be owned by the Company or any its Subsidiaries, has executed a written agreement expressly assigning to the Company or a Subsidiary all right, title and interest in any inventions and works of authorship and all Intellectual Property rights therein and expressly obligating such Person to maintain the confidentiality of the Trade Secrets owned by or licensed to the Company or any Subsidiary and not to use such Trade Secrets for the benefit of any Person other than the Company or a Subsidiary.

(i) To the Company’s Knowledge, no third party is misappropriating, infringing, diluting, or violating any Intellectual Property owned by the Company and its Subsidiaries and no such claims have been brought or threatened against any third party by the Company or any Subsidiary in the past six (6) years.

(j) The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, the Company’s or any Subsidiary’s right to own, use, or hold for use any of the Intellectual Property as owned, used, or held for use in the conduct of the business as currently conducted and currently contemplated to be conducted. Neither this Agreement nor the transactions contemplated by this Agreement, will result in the Company, any Subsidiary or any of their Affiliates: (i) granting to any third party any incremental right to or with respect