EXECUTION VERSION

 

Asset Purchase Agreement by and between

ATC Holdings, LP and 

A.T. Cross Company 

__________________________________________________ 

Dated as of July 13, 2013

 

 

--------------------------------------------------------------------------------

 

 

 

 

 

 

 

 

 

 

 

 

 

ARTICLE I

DEFINITIONS

1 

1.1 

Certain Definitions

1 

1.2 

Terms Defined Elsewhere in this Agreement

18 

1.3 

Other Definitional and Interpretive Matters

21 

ARTICLE II

SALE AND PURCHASE OF PURCHASED ASSETS

22 

2.1 

Sale and Purchase of Purchased Assets

22 

2.2 

Excluded Assets

23 

2.3 

Assumption of Liabilities

25 

2.4 

Excluded Liabilities

26 

2.5 

Further Conveyances and Assumptions; Consent of Third Parties

27 

2.6 

Bulk Sales Laws

29 

2.7 

IP Payment

29 

ARTICLE III

PURCHASE PRICE

29 

3.1 

Initial Purchase Price

29 

3.2 

Determination and Payment of Initial Purchase Price

30 

3.3 

Final Purchase Price and Final Adjustment Amount

31 

3.4 

Allocation of Purchase Price

32 

ARTICLE IV

CLOSING AND TERMINATION

33 

4.1 

Closing Date

33 

4.2 

Closing Deliverables

34 

4.3 

Termination of Agreement

35 

4.4 

Procedure of Termination

36 

4.5 

Effect of Termination

36 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

39 

5.1 

Organization and Good Standing

39 

5.2 

Authorization of Agreement

39 

5.3 

Conflicts; Consents of Third Parties

39 

5.4 

Purchased Subsidiaries; Capitalization

40 

5.5 

Ownership and Transfer of Purchased Assets

41 

 

5.6 

Financial Statements

41 

5.7 

No Undisclosed Liabilities

42 

5.8 

Absence of Certain Developments

42 

5.9 

Taxes

42 

5.10 

Real Property

45 

5.11 

Tangible Personal Property

46 

5.12 

Intellectual Property

46 

5.13 

Material Contracts

48 

5.14 

Employee Benefits Plans

49 

5.15 

Labor

52 

5.16 

Litigation

53 

5.17 

Compliance with Laws; Permits

53 

5.18 

Environmental Matters

55 

5.19 

Financial Advisors

56 

5.20 

Products; Product and Service Warranties; Product Liability

56 

5.21 

Sufficiency of Assets

56 

5.22 

Affiliate Transactions; Shared Contracts

56 

5.23 

Inventory

57 

5.24 

Customers and Suppliers

57 

5.25 

Accounts Receivable

57 

5.26 

Accounting Controls

57 

5.27 

Insurance

57 

5.28 

Distribution Channel

58 

5.29 

No Other Representations or Warranties; Disclosure Letter

58 

5.30 

Further Acknowledgements

59 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PURCHASER

59 

6.1 

Organization and Good Standing

59 

6.2 

Authorization of Agreement

59 

6.3 

Conflicts; Consents of Third Parties

59 

 2 

 

--------------------------------------------------------------------------------

 

 

 

6.4 

Litigation

60 

6.5 

Investment Intention

60 

6.6 

Financial Advisors

60 

6.7 

Financial Capability

60 

6.8 

Limited Guaranty

61 

6.9 

Solvency

62 

6.10 

No Other Representations or Warranties

62 

6.11 

Further Acknowledgements

62 

ARTICLE VII

COVENANTS

63 

7.1 

Access to Information

63 

7.2 

Conduct of the Business Pending the Closing

64 

7.3 

Consents

67 

7.4 

Regulatory Approvals

67 

7.5 

Further Assurances

68 

7.6 

Confidentiality

68 

7.7 

Indemnification, Exculpation and Insurance

69 

7.8 

Preservation of Records

70 

7.9 

Publicity

70 

7.10 

Use of Brands

70 

7.11 

Employment and Employee Benefits

71 

7.12 

Notification

75 

7.13 

Exclusivity

75 

7.14 

Financing

76 

7.15 

Payments

78 

7.16 

Termination of Affiliate Transactions

78 

7.17 

Non-Competition / Non-Solicitation

78 

7.18 

Resignations

80 

7.19 

Release

80 

7.20 

Control of Business

80 

 

 

 

3

--------------------------------------------------------------------------------

 

 

 

7.21 

Release of Liens

80 

7.22 

Environmental Compliance Covenant

81 

7.23 

Intercompany Obligations Restructuring

81 

7.24 

Transition Services Agreement

81 

ARTICLE VIII

CONDITIONS TO CLOSING

81 

8.1 

Conditions Precedent to Obligations of Purchaser

81 

8.2 

Conditions Precedent to Obligations of Seller

83 

8.3 

Frustration of Closing Conditions

84 

ARTICLE IX

INDEMNIFICATION

84 

9.1 

Survival of Representations and Warranties and Covenants

84 

9.2 

Indemnification by Seller

85 

9.3 

Indemnification by Purchaser

86 

9.4 

Indemnification Procedures

86 

9.5 

Certain Limitations on Indemnification

88 

9.6 

Calculation of Losses

90 

9.7 

Tax Treatment of Indemnity Payments

91 

9.8 

Exclusive Remedy

92 

9.9 

Specific Performance

92 

ARTICLE X

TAX MATTERS

93 

10.1 

Tax Indemnification

93 

10.2 

Filing of Tax Returns; Payment of Taxes

94 

10.3 

Tax Refunds

95 

10.4 

Tax Contests

96 

10.5 

Termination of Tax Sharing Agreements

97 

10.6 

Cooperation

97 

10.7 

Elections

97 

10.8 

Tax Clearance Certificates

98 

10.9 

Conflicts

99 

10.10 

Other Tax Covenants

99 

 

 

 

 

 

 

4

--------------------------------------------------------------------------------

 

 

 

ARTICLE XI

MISCELLANEOUS

99 

11.1 

Payment of Sales, Use or Similar Taxes

99 

11.2 

Expenses

100 

11.3 

Submission to Jurisdiction; Consent to Service of Process

100 

11.4 

Entire Agreement; Amendments and Waivers

100 

11.5 

Governing Law

101 

11.6 

Notices

102 

11.7 

Severability

103 

11.8 

Binding Effect; No Third Party Beneficiaries; Assignment

103 

11.9 

Non-Recourse

104 

11.10 

Extension; Waiver

104 

11.11 

Counterparts

105 

 

 

5

--------------------------------------------------------------------------------

 

 

 

Exhibits 

Exhibit A

Limited Guaranty

Exhibit B

Form of Bill of Sale and Assignment and Assumption Agreement

Exhibit C

Transition Services Agreement Term Sheet

Exhibit D

Purchased Equity

Exhibit E

Form of Foreign Stock Transfer Agreements

Exhibit F

Debt Financing Commitments

Exhibit G

Equity Financing Commitment

Exhibit H

Form of Intellectual Property Assignment Agreement

Exhibit I

Intercompany Obligations Restructuring Steps

Exhibit J

Form of Intellectual Property License Agreement

 

6

--------------------------------------------------------------------------------

 

 

 

7

--------------------------------------------------------------------------------

 

 

ASSET PURCHASE AGREEMENT 

This ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of July 13, 2013, is
entered into by and between ATC Holdings, LP, a Delaware limited partnership
(“Purchaser”), and A.T. Cross Company, a Rhode Island corporation
(“Seller”).  Each of Purchaser and Seller are referred to herein as a “Party”
and collectively as the “Parties”.

W I T N E S S E T H:

WHEREAS, Seller and the Purchased Subsidiaries currently conduct the Business;

WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and Purchaser
desires to acquire and assume from Seller, all of the Purchased Assets and
Assumed Liabilities, all as more specifically provided herein;

WHEREAS, concurrently with the execution of this Agreement and as a condition to
the willingness of Seller to enter into this Agreement, Clarion Investors II, LP
(“Guarantor”) is entering into a limited guaranty in favor of Seller in form
attached hereto as Exhibit A (the “Guaranty”), pursuant to which, and subject to
the terms and conditions thereof, Guarantor is guaranteeing certain of the
obligations of Purchaser in connection with this Agreement; 

WHEREAS, concurrently with the execution of this Agreement, Purchaser is
entering into letter agreements with certain employees of Seller; and

WHEREAS, certain capitalized terms used in this Agreement are defined in Section
1.1.  

NOW, THEREFORE, in consideration of the above premises and the mutual
representations, warranties, covenants and other agreements contained herein,
the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Certain Definitions.  

(a) For purposes of this Agreement, the following terms shall have the meanings
specified in this Section 1.1:  

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person, and the term “control” (including
the terms “controlled by” and “under common control with”) means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.

1

 

--------------------------------------------------------------------------------

 

 

 “Ancillary Agreements” means the Transfer Documents, the Transition Services
Agreement, the IP License Agreement and each other agreement, document,
instrument or certificate explicitly contemplated by this Agreement or to be
executed by any Person in connection with the consummation of the transactions
contemplated by this Agreement.

“Anti-Corruption Laws” shall mean any Law or Order relating to anti-bribery or
anti-corruption (governmental or commercial), which applies to the business and
dealings of Seller or any of the Purchased Subsidiaries, including any Law or
Order that prohibits the payment, offer, promise, or authorization of the
payment or transfer of anything of value (including gifts or entertainment),
directly or indirectly, to any foreign government official, foreign government
employee or foreign commercial entity to obtain a business advantage, including
the U.S. Foreign Corrupt Practices Act of 1977, the UK Bribery of 2010 and any
Laws enacted to implement the OECD Convention on Combating Bribery of Foreign
Officials in International Business Transactions.

“Assumed Intercompany Obligation” means (i) any Intercompany Obligation in which
a payable is owed by Seller to any Purchased Subsidiary (or any Purchased
Subsidiaries) and (ii) any Intercompany Obligation in which a payable is owed by
any Purchased Subsidiary (or Purchased Subsidiaries) to another Purchased
Subsidiary (or Purchased Subsidiaries). 

“ATX” means A.T.X. International, Inc., a Rhode Island corporation.

“ATX Factoring Arrangements” means (i) the Receivables Purchase and Sale
Agreement, dated as of January 1, 1998, between Seller and ATX, (ii) the
Revolving Credit Agreement, dated as of January 1, 1998, between Seller and ATX
and (iii) the Promissory Note, dated as of January 1, 1998, between Seller and
ATX.

“ATX International Purchased Equity” means the Capital Stock of ATX set forth on
Exhibit D.  

“Benefit Plan” means any “employee benefit plan” (as defined in Section 3(3) of
ERISA) and any other material stock option, stock purchase, equity-based
compensation, bonus, incentive compensation, deferred compensation, pension,
retirement, welfare benefit, fringe benefit, severance, retention, vacation,
change-in-control, employment or consulting plan or agreement or any legally
binding arrangement in each case, other than a Governmental Plan and as to which
Seller or any of its ERISA Affiliates contributes, has an obligation to
contribute or otherwise has any Liability for the benefit of any current or
former Business Employee or Business Service Providers, but excluding any such
plan, agreement or arrangement as to which the Liability of Seller or any of its
Affiliates is indirect by reason of the payment of fees by Seller or any of its
Affiliates to a Business Service Provider for services rendered to the Seller or
any of its Affiliates.

“Bill of Sale and Assignment and Assumption Agreement” means the bill of sale
and assignment and assumption agreement in the form attached hereto as Exhibit
B.  

“Borrower” means ATC Acquisition, Inc., a Delaware corporation, and an indirect
wholly-owned Subsidiary of Purchaser.

2

--------------------------------------------------------------------------------

 

 

“Business” means the following businesses (and businesses ancillary thereto) as
conducted by Seller and the Purchased Subsidiaries immediately prior to the
Closing:  (i) the design, manufacture and marketing of writing instruments under
the Cross brand; (ii) the design, manufacture and marketing of writing
instruments under the FranklinCovey brand; (iii) the manufacture of writing
instruments as an original equipment manufacturer; (iv) the manufacture and
marketing of refills for writing instruments; and (v) the design and marketing
of a variety of personal and business accessories including leather goods,
reading glasses, watches, desk sets, cufflinks and stationery utilizing the
“Cross” brand.  For the avoidance of doubt, the “Business” does not include the
COG Business.

“Business Benefit Plan” means each Benefit Plan maintained, sponsored or
contributed to solely for the benefit of Business Employees, and their eligible
dependents, beneficiaries and current or former spouses.

“Business Day” means any day of the year on which national banking institutions
in New York,  New York are open to the public for conducting business and are
not required or authorized by Law to close.

“Business Intellectual Property” means the Purchased Intellectual Property and
all of the Intellectual Property owned by the Purchased Subsidiaries.

“Business Legacy Environmental Liabilities” means all Liabilities based upon,
resulting from or arising out of (i) the condition of the environment or the
presence of Hazardous Materials at any real property previously owned, leased or
occupied by Seller prior to (but not on) the Closing Date (which shall not
include the Seller’s facility located in Lincoln, Rhode Island) in connection
with the Business or otherwise (not including any real property previously
owned, leased or occupied by any of the Purchased Subsidiaries) and not included
in the Purchased Assets, (ii) any real property where wastes generated prior to
the Closing Date in connection with the Business or by Seller (not including any
wastes generated prior to the Closing Date by any of the Purchased Subsidiaries)
have come to be located or (iii) any Legal Proceedings against Seller alleging
exposure prior to the Closing Date to any Hazardous Materials.

“Business Service Provider” means any Person classified by Seller or its
Affiliates as an independent contractor, and (i) whose services are or were all
or substantially all devoted to the Business, (ii) whose services to Seller and
its Affiliates are or were sales of products or services of the Business, (iii)
who is or was a director of a Purchased Subsidiary, or (iv) who is or was a
former employee of Seller or any of its Affiliates, or other individual
performing services in respect of the Business of a type currently or formerly
performed by Business Employees.

“Capital Stock” means (i) any shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation; (ii) any
ownership interests in a Person other than a corporation, including membership
interests, equity interests, partnership interests, joint venture interests and
beneficial interests (whether equity or voting interests); and (iii) any profits
interests, warrants, options, convertible or exchangeable securities,
subscriptions, rights

3

--------------------------------------------------------------------------------

 

 

(including any preemptive or similar rights), calls or other rights to purchase
or acquire any of the foregoing.

“Cash and Cash Equivalents” means, as of any given time, all cash and cash
equivalents, including the amounts of any received but uncleared checks, drafts
and wires, less the amounts of any outstanding and unpaid checks, drafts and
wires. 

“Closing Adjustments” means any Liabilities to the extent (i) included as a
Current Liability or an adjustment to a Current Asset in the calculation of Net
Working Capital or (ii) constituting Transaction Expenses or Closing
Indebtedness, and, in each case, was taken into account in reducing the Initial
Purchase Price pursuant to Section 3.1 or the Final Purchase Price pursuant to
Section 3.3.  

“Closing Indebtedness” means the amount of consolidated Indebtedness of the
Purchased Subsidiaries outstanding immediately before the Closing, determined in
accordance with the Agreed Principles.

“Code” means the Internal Revenue Code of 1986, as amended.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

“COG” means Cross Optical Group, Inc., a Florida corporation.

“COG Business” means the design, manufacture and marketing of sunglasses and

other products under the Costa and Native brands, and businesses ancillary
thereto, as conducted by Seller and COG prior to the Closing.

“Competing Business” means any and all of the following businesses:  (i) the
design, manufacture and/or marketing of writing instruments, including the
manufacture of writing instruments as an original equipment manufacturer; (ii)
the manufacture and/or marketing of refills for writing instruments; and (iii)
the design and/or marketing of desk sets, stationary, writing journals and
writing pads for the personal and professional business accessories market.

“Consolidated Income Taxes” means all federal, state, provincial, local or
foreign Income Taxes that are paid on an affiliated, consolidated, combined,
unitary or similar basis with respect to Tax Returns that include one or more
Purchased Subsidiaries, on the one hand, and Seller or any of its Affiliates
(other than any of the Purchased Subsidiaries), on the other hand.

“Consolidated Tax Returns” means any Tax Returns with respect to Consolidated
Income Taxes.

“Contract” means any contract, agreement, indenture, note, bond, mortgage, loan,
instrument, lease, license, undertaking, commitment or other binding arrangement
(in each case, whether written or oral).

 

4

--------------------------------------------------------------------------------

 

 

“Cross France” means the French branch of Seller.

“Cross Germany” means A.T. Cross Deutschland GmbH (Germany), a company organized
under the laws of Germany.

“Cross Ireland” means A.T. Cross Limited (BDA/Ireland), a company organized
under the laws of Ireland.

“Cross Ireland Factoring Arrangements” means the Agreement to Purchase Accounts
Receivable, dated August 1, 1996, between Seller and Cross Ireland.

“Cross Ireland Liabilities” means any Liabilities of Cross Ireland based upon,
resulting from, or arising out of, the period prior to the Closing, including,
for the avoidance of doubt, those Liabilities set forth in Section 1.1(j) of the
Disclosure Letter, other than any Liabilities of any other Purchased Subsidiary.

“Cross UK” means A.T. Cross (Europe) Ltd., a company organized under the laws of
the United Kingdom.

“Current Assets” means the combined current assets of the Business or otherwise
included in the Purchased Assets, which current assets shall include only the
line items as set forth in Section 3.2(a)(I) of the Disclosure Letter under the
heading “Current Assets” and no other assets.  For the avoidance of doubt,
Current Assets shall not include any Excluded Assets.

“Current Liabilities” means the combined current liabilities of the Business or
otherwise included in the Assumed Liabilities, which current liabilities shall
include only the line items as set forth in Section 3.2(a)(I) of the Disclosure
Letter under the heading “Current Liabilities” and no other liabilities.  For
the avoidance of doubt, Current Liabilities shall not include any Excluded
Liabilities.

 “Debt Financing Sources” means entities that have committed to provide or
arrange or otherwise entered into agreements in connection with the Debt
Financing in connection with the transactions contemplated hereby, including the
parties named in the definition of the term “Term Loan Commitment Letter” and
“Revolving Loan Commitment Letter”, and the parties to any joinder agreements,
indentures or credit agreements entered pursuant thereto or relating thereto,
together with their respective Affiliates, and their respective Affiliates’
officers, directors, employees, agents and representatives acting on their
behalf with respect to the Debt Financing, and their respective successors and
assigns.

“Determination Time” means 11:59 p.m. local time (depending upon the
jurisdiction of determination) on the day prior to the Closing Date.

“Documents” means all files, documents, instruments, papers, books, reports,
records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers,
journals, title policies, customer and supplier lists, regulatory filings,
operating data and plans, technical documentation (design specifications,
functional requirements, operating instructions, logic manuals, flow charts,
etc.), user documentation (installation guides, user manuals, training
materials, release notes, working papers, etc.), marketing documentation (sales
brochures, flyers,

5

 

--------------------------------------------------------------------------------

 

 

pamphlets, web pages, etc.), and other similar materials or documents to the
extent related to the Business and the Purchased Assets in each case whether or
not in electronic form, including, personnel files of Business Employees;
provided that “Documents” shall not include duplicate copies of such Documents
retained by Seller pursuant to Section 2.2, which shall remain subject to the
obligations relating to the use and disclosure thereof set forth in this
Agreement.

“Dongguan Chrome Process Relocation” means any relocation of the process
generating chrome-contaminated waste water at the Dongguan Leased Real Property
undertaken in order to comply with Environmental Laws on or prior to the first
anniversary of the Closing Date.

“Environ Reports” means the Phase One Environmental Site Assessments and Limited
Environmental Compliance Reviews of the Leased Real Properties in Lincoln, Rhode
Island and Dongguan, China prepared for Purchaser and provided to Seller.

“Environmental Law” means any Law or Order relating to pollution, the protection
of the environment or natural resources, or exposure to or the presence in the
environment of Hazardous Materials.

“Environmental Corrective Actions” means any actions undertaken to correct the
instances of noncompliance with Environmental Laws identified in Section 7.22 of
the Disclosure Letter, except for the presence of chrome at the facility located
at the Leased Real Property in Dongguan, China; provided that in the good faith
judgment of Purchaser such actions shall be the most cost-effective actions to
correct such instances of noncompliance reasonably available in the
circumstances.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any Affiliate of Seller and any other entity, trade or
business that, together with Seller, would be treated as a single employer under
Section 4001 of ERISA or Section 414 of the Code.

“ERISA Affiliate Liability” means any Liability of Seller or the Purchased
Subsidiaries under or in respect of any employee benefit plan (other than any
Purchased Subsidiary Benefit Plan) pursuant to any statute or regulation that
imposes Liability on a “controlled group” or similar basis (as used in Section
4001 of ERISA or Section 414 of the Code), as a result of Seller or such
Purchased Subsidiary being an ERISA Affiliate prior to the Closing Date with
respect to any other Person other than (i) any Liability of any Purchased
Subsidiaries as a result of such Purchased Subsidiary being an ERISA Affiliate
of another Purchased Subsidiary or (ii) any Liability of a Purchased Subsidiary
without regard to being an ERISA Affiliate of any other Person.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and all rules and regulations promulgated thereunder.

6

 

--------------------------------------------------------------------------------

 

 

“Excluded Contracts” means the Contracts to which Seller is a party that
exclusively relate to the operation of the COG Business, the registration and
maintenance of Seller as a publicly listed company, or the issuance of Capital
Stock of Seller to any employee of Seller or its Subsidiaries (whether or not a
Business Employee), and those Contracts set forth in Section 1.1(a) of the
Disclosure Letter.

“Excluded Damages” means any special, indirect, punitive, exemplary damages or
damages that are remote, speculative, not reasonably foreseeable or do not flow
proximately from the underlying breach, in each case in respect of a given
breach of a representation, warranty or covenant or a Loss indemnifiable
hereunder, except to the extent such damages are awarded to a third party as
part of an Indemnification Claim.

“Excluded Employee Liabilities” means each of the following:

(i) (a) Seller’s or any of its Affiliates’ obligations to contribute to, make
payments with respect to, or provide benefits under any Retained Benefit Plan;
(b) any and all Liabilities  under the Transferred Benefit Plans arising on or
prior to the Closing, except to the extent covered by an insurance policy or by
assets of a related trust transferred to Purchaser or any of its Affiliates
(including assets transferred to Purchaser or any of its Affiliates in
accordance with Section 7.11(m) with respect to the Cafeteria Plan); (c) any and
all Liabilities arising out of, relating to, or resulting from the withdrawal
and/or cessation of Purchased Subsidiaries or Business Employees from
participation in any Benefit Plan at or prior to the Closing Date, including
pursuant to Section 4062(e) of ERISA; and (d) any ERISA Affiliate Liability; 

(ii) (a) any and all Liabilities arising out of, relating to, or resulting from
the Legal Proceedings set forth on Section 5.16 of the Disclosure Letter and any
other Legal Proceeding with respect to any current or former Business Employee
or Business Service Provider relating to his/her employment or services, or
termination of employment or services, with Seller or any of its Affiliates
(other than any Purchased Subsidiary), and (b) with respect to any Person
performing services for or on behalf of the Business prior to the Closing, any
misclassification prior to Closing of any such Person as an independent
contractor rather than as an employee;

(iii) any and all Liabilities arising out of, relating to, or resulting from the
services or termination of services with Seller or its Affiliates (other than
any Purchased Subsidiary) of any Business Service Provider whose agreement with
Seller or any of its Affiliates (other than a Purchased Subsidiary) is not a
Purchased Contract or of any current, former or prospective employee of Seller
and its Affiliates (other than any Purchased Subsidiary), but excluding any
Transferred Employee, including (a) payments or entitlements that Seller or any
of its Affiliates owe to any such current, former or prospective employee or
Business Service Provider, including wages, other remuneration, holiday, bonus,
severance pay (statutory or otherwise), commission, Taxes, or insurance
premiums, (b) any and all Liabilities under the WARN Act or any other Labor Laws
arising out of, relating to, or resulting from actions, inactions or practices
of Seller or any of its Affiliates (other than any Purchased Subsidiary), and
(c) any and all Liabilities to the extent arising out of, relating to, or
resulting from workers’ compensation claims and occupational health claims
against Seller or any of its Affiliates (other than any Purchased Subsidiary),
if any; and 

7

 

--------------------------------------------------------------------------------

 

 

(iv) any and all Liabilities arising out of, relating to, or resulting from (a)
any employment Contract with any Business Employee and Seller or any of its
Affiliates (other than any Purchased Subsidiary), other than the Employee
Agreements, including any obligation to provide any tax gross-up or other
payment as a result of the imposition of any excise Tax required by Section 4999
of the Code or any Taxes required by Section 409A of the Code; and (b) any
current, former or negotiated collective bargaining agreement, works council or
similar employee representative agreements (other than those maintained by any
Purchased Subsidiary and set forth in Section 5.15(a) of the Disclosure Letter).

For the avoidance of doubt, “Excluded Employee Liabilities” shall not include
Liabilities arising out of, relating to, or resulting from (A) a Transferred
Employee’s employment or termination of employment with Purchaser or any of its
Affiliates to the extent arising after the Closing, (B) any Legal Proceeding
relating to a Transferred Employee’s employment with Purchaser or any of its
Affiliates after Closing or (C) any Closing Adjustments.

“Excluded Equity” means all of the issued and outstanding equity interests of
COG.

“Excluded Furniture and Equipment” means the Furniture and Equipment set forth
in Section 1.1(b) of the Disclosure Letter.

“Final Determination” means (i) with respect to U.S. federal Income Taxes, a
“determination” as defined in Section 1313(a) of the Code or execution of an IRS
Form 870-AD, and (ii) with respect to Taxes other than U.S. federal Income
Taxes, any final determination of Liability in respect of a Tax that, under
applicable Law, is not subject to further appeal, review or modification through
proceedings or otherwise, including the expiration of a statute of limitations
or a period for the filing of claims for refunds, amended Tax Returns or appeals
from adverse determinations.

“Foreign Purchased Equity” means the Capital Stock set forth on Exhibit D other
than the ATX International Purchased Equity.

“Furniture and Equipment” means all furniture, fixtures, furnishings, equipment,
vehicles, leasehold improvements, tools, leasehold improvements, plant, spare
parts and other tangible personal property owned or used by Seller, including
all artwork, desks, chairs, tables, copiers, telephone lines and numbers,
telecopy machines and other telecommunication equipment, cubicles and
miscellaneous office furnishings and supplies.  For the avoidance of doubt,
“Furniture and Equipment” does not include Inventory.

“GAAP” means generally accepted accounting principles in the United States.

“German Pension Plan” means AT Cross Deutschland GmbH Unmittelbare
Versorgungszusagen (Unfunded Pension Plan).

8

 

--------------------------------------------------------------------------------

 

 

“Germany-UK Intercompany Obligations” means (i) any Intercompany Obligation in
which a payable is owed by Cross Germany to Cross UK and (ii) any Intercompany
Obligation in which a payable is owed by Cross UK to Cross Germany.

“Government Official” means (i) any official, officer, employee, or
representative of, or any Person acting in an official capacity for or on behalf
of, any Governmental Body, (ii) any political party or party official or
candidate for political office or (iii) any company, business, enterprise or
other entity owned, in whole or in part, or controlled by any Person described
in the foregoing clause (i) or (ii) of this definition.

“Governmental Body” means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal, state, provincial,
local or foreign, or any agency, governmental commission, department, board,
bureau, instrumentality or authority thereof, any court or arbitrator (public or
private) or any self-regulatory organization.

“Governmental Plan” means any governmental or statutory plan, program or
arrangement (including, without limitation, statutory severance, minimum wage
and workers’ compensation requirements), as to which Seller or any of its ERISA
Affiliates contributes, has an obligation to contribute, or otherwise has any
Liability for the benefit of any current or former Business Employee or Business
Service Providers.

“Hardware” means any and all computer and computer-related hardware, including,
but not limited to, computers, file servers, facsimile servers, scanners, color
printers, laser printers and networks.

“Hazardous Material” means any substance, material or waste that is defined or
regulated under applicable Environmental Law as “hazardous,” “toxic,” a
“pollutant,” a “contaminant,” or words of similar meaning and regulatory effect.

“Identified Environmental Issues” means (i) historic contamination at the Leased
Real Property located in Luton, United Kingdom, (ii) the presence or use of
chromium in violation of any applicable Environmental Laws at the Leased Real
Property located in Dongguan, China, and (iii) the matters listed on Section
7.22 of the Disclosure Letter hereto.

“Inactive Employees” means Business Employees who are on a Seller-approved leave
of absence on the Closing Date as a result of military service, pregnancy or
parental leave, disability leave, medical leave or any leave provided under
applicable Law.

“Income Taxes” mean all Taxes based upon, measured by, or calculated with
respect to (i) gross or net income or gross or net receipts or profits,
including any capital gains, minimum Taxes and any Taxes on items of Tax
preference, but not including Transfer Taxes or (ii) multiple bases, including
corporate franchise, doing business or occupation Taxes, if one or more of the
bases upon which such Tax may be based upon, measured by, or calculated with
respect to, is described in clause (i) above.

“Indebtedness” of any Person means, without duplication, (i) indebtedness or
other obligation of such Person for money borrowed, whether current, short-term
or long-term and whether secured or unsecured; (ii) indebtedness evidenced by
notes, debentures, bonds or

9

 

--------------------------------------------------------------------------------

 

 

other similar instruments for the payment of which such Person is responsible or
liable; (iii) all Liabilities of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current Liabilities); (iv)
any Liabilities of such Person in respect of any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which liabilities are required to be classified and accounted for under GAAP as
capital leases; (v) any Liabilities of such Person under any performance bond or
letter of credit or any bank overdrafts and similar charges; (vi) any accrued
interest, premiums, penalties and other obligations relating to the foregoing;
and (vii) all Liabilities of the type referred to in clauses (i) through (vi) of
any Persons the payment for which such Person is responsible or liable, directly
or indirectly, as obligor, guarantor, surety or otherwise (including under any
“keep well” or similar arrangement); and (xi) all obligations of the type
referred to in clauses (i) through (vi) of other Persons secured by any Lien on
any property or asset of such Person (whether or not such obligation is assumed
by such Person). Indebtedness shall also include (a) accrued interest and any
pre-payment penalties, “breakage costs,” redemption fees, costs and expenses or
premiums and other amounts owing pursuant to the instruments evidencing
Indebtedness, assuming that such Indebtedness is repaid on the Closing Date and
(b) with respect to Seller and its Subsidiaries, any Liabilities of any
Purchased Subsidiary based upon, resulting from or arising out of any unfunded
portion of the German Pension Plan or any other unfunded foreign statutory
benefit obligation that would be required to be included as a liability as of
the Closing on the consolidated financial statements of Seller and its
Subsidiaries prepared in accordance with GAAP.  Notwithstanding anything to the
contrary, with respect to Seller and its Subsidiaries, no amounts shall
constitute “Indebtedness” to the extent such amounts are (i) Excluded
Liabilities, (ii) Transaction Expenses or (ii) included as a Current Liability
or an adjustment to a Current Asset in the calculation of Net Working Capital.

“Intellectual Property” means all right, title and interest in or relating to
intellectual property, whether protected, created or arising under Law,
including:  (i) all patents and applications therefor, including all
continuations, divisionals, revisions, extensions, reexaminations, and
continuations-in-part thereof and patents issuing thereon, along with all
reissues, reexaminations and extensions thereof; (ii) all trademarks, service
marks, trade names, service names, brand names, trade dress rights, logos,
corporate names, trade styles, logos and other source or business identifiers
and general intangibles of a like nature, together with the goodwill associated
with any of the foregoing, along with all applications, registrations, renewals
and extensions thereof (“Trademarks”); (iii) all internet domain names; (iv) all
copyrights and all mask works, databases, original works of authorship and
design rights, whether or not registered or published, all registrations and
recordations thereof and all applications in connection therewith, along with
all reversions, extensions and renewals thereof and any moral rights, and rights
equivalent thereto, including the rights of attribution, assignation and
integrity; (iv) all trade secrets, know-how and confidential business
information (“Trade Secrets”); (v) intellectual property and similar intangible
proprietary rights in computer software, including programs applications, source
and object codes, data bases and documentation related to the foregoing; and
(vi) other similar intellectual property or intangible proprietary rights to the
foregoing (in whatever form or medium).

“Intellectual Property Licenses” means (i) any grant by Seller or a Purchased
Subsidiary to a third Person of any right relating to or under any Business
Intellectual Property

10

 

--------------------------------------------------------------------------------

 

 

used in, held for use in, or necessary to the operation of the Business and (ii)
any grant to Seller or any Purchased Subsidiary of any right relating to or
under any third Person’s Intellectual Property used in, held for use in or
necessary to the operation of the Business, other than commercial off-the-shelf
software available on reasonable terms for a license fee of less than $25,000 in
the aggregate or $500 per seat.

“Intercompany Obligation” means any payable, receivable, indebtedness, other
obligation, or Contract (whether evidenced by writing or documented only by book
entry) requiring or evidencing the right to receive a payment (or payments) or
the obligation to make a payment (or payments) (including any factoring
arrangements) between (i) Seller and any Purchased Subsidiary (or Purchased
Subsidiaries), (ii) any Subsidiary of Seller (other than a Purchased Subsidiary)
and any Purchased Subsidiary (or Purchased Subsidiaries), (iii) any other
Subsidiary of Seller (other than a Purchased Subsidiary) and Seller or (iv) any
Purchased Subsidiary and any other Purchased Subsidiary (or Purchased
Subsidiaries).

“Inventory” means all finished goods, work in process, raw materials,
manufactured and purchased parts and spares, in each case of any kind,
character, nature or description, whatever its description, in each case,
related to the Business.

“IP Assignment Agreements” means the forms of intellectual property assignment
agreements to be executed by Seller and ATX immediately prior to the Closing
Date in the form of Exhibit H.  

“IP License Agreement” means the form of intellectual property license agreement
to be executed by the parties thereto on the Closing Date, but immediately prior
to the conveyance of the Purchased Assets, in the form of Exhibit J.  

“IRS” means the United States Internal Revenue Service and, to the extent
relevant, the United States Department of Treasury.

“JM Mills Claim” means all Legal Proceedings arising out of, relating to or with
respect to the use by Seller or its Subsidiaries of the J.M. Mills Landfill
Site, which is part of the Peterson/Puritan Superfund Site in Cumberland, Rhode
Island.

“Knowledge of Seller” means the actual knowledge of the Seller Knowledge
Parties, in each case after reasonable inquiry.

“Labor Laws” means any Laws relating to employment, employment standards and
practices, employment of minors, employment discrimination, immigration,
workplace health and safety, labor relations, withholding, social security and
other Taxes, wages, hours, family and medical and other leave of absence,
workplace insurance or pay equity.

“Law” means any foreign, federal, state, provincial or local law, statute, code,
ordinance, rule, regulation or decree.

“Leased Real Property” means any real property subject to a Real Property Lease.

11

 

--------------------------------------------------------------------------------

 

 

“Legal Proceeding” means any action, claim, demand, hearing, charge, complaint,
investigation, examination, indictment, litigation, or other civil, criminal,
judicial, administrative or arbitral actions, suits or proceedings (public or
private) by or before a Governmental Body.

“Liability” means any debt, liability, obligation, loss, damage, claim, cost or
expense (including reasonable, out-of-pocket costs of investigation and defense
and reasonable attorney’s fees, costs and expenses), in each case whether direct
or indirect, absolute or contingent, known or unknown, asserted or unasserted,
accrued or unaccrued, liquidated or unliquidated, or due or to become due.

“Licensed ATX IP Amount” means the amount of the Initial Purchase Price to be
allocated to the Licensed ATX Intellectual Property as determined by Purchaser
in accordance with Section 3.4 of the Disclosure Letter and delivered to Seller
in writing no later than three (3) Business Days prior to the
Closing.  Notwithstanding Section 3.4 of the Disclosure Letter or anything else
to the contrary, in no event shall the Licensed ATX IP Amount exceed $6,000,000.

“Lien” means any lien, encumbrance, pledge, mortgage, deed of trust, deed to
secure debt, restriction, title default, security interest, claim, lease,
charge, option, right of first refusal, rights of first offer, restrictions on
transfer, encroachments or other survey defects, options, easement, servitude,
or other encumbrances.

“Material Adverse Effect” means any change, effect, circumstance, event,
occurrence, state of facts or development that has had, or would reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
or material adverse change in the business, assets, properties, results of
operations or financial condition of the Business (taken as a whole but
excluding any effect to the extent solely relating to the Excluded Assets and
the Excluded Liabilities) other than any effects resulting from an Excluded
Matter.  “Excluded Matter” means any one or more of the following:  (i) the
effect of any change in the United States or foreign economies or securities or
financial markets in general; (ii) the effect of any change that generally
affects the industry or industries in which the Business operates; (iii) the
effect of any change arising in connection with earthquakes, other extreme
weather, hostilities, acts of war, sabotage or terrorism or military actions or
any escalation or material worsening of any such hostilities, acts of war,
sabotage or terrorism or military actions existing or underway as of the date
hereof; (iv) the effect of any changes in applicable Laws or accounting rules;
or (v) the failure in and of itself of Seller or its Subsidiaries to meet any of
their respective internal projections, or to meet projections in the Regulatory
Filings (but not the underlying causes of any such failure); or (vi) any effect
resulting from the public announcement of this Agreement or any action taken at
the written request of Purchaser or its Affiliates (provided that this clause
(vi) shall not apply with respect to the matters described in Section 5.3 (and
the condition set forth in Section 8.1(a) as it relates to the representations
described in Section 5.3)); provided,  however, that in the case of clauses
(ii), (iii) and (iv), the effect of such matters shall be taken into account
when determining whether a Material Adverse Effect has occurred to the extent
that such matters have a disproportionate effect on the Business (taken as a
whole but excluding any effect to the extent solely relating to the Excluded
Assets and the Excluded Liabilities) as compared to other similarly situated
businesses engaged in the business of the design, manufacturing and marketing of
writing instruments, refills of writing instruments and personal and business
accessories.

12

 

--------------------------------------------------------------------------------

 

 

“Minimum Cash Cushion” means $300,000.

“Minimum Purchased Subsidiary Cash” means, for each Purchased Subsidiary (and/or
foreign branch thereof), the amount of Cash and Cash Equivalents set forth
opposite such Purchased Subsidiary (and/or foreign branch thereof) on Section
1.1(h) of the Disclosure Letter.

“Net Working Capital Target” means $38,750,000.

“Non-U.S. Business Employees” mean Business Employees located outside the United
States.

“Non-U.S. Purchased Subsidiary” means a Purchased Subsidiary other than ATX.

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment
or arbitration award of a Governmental Body.

“Ordinary Course” means the ordinary and usual course of the operations of the
Business consistent with past practice.

“Other Purchased Assets” means the Purchased Assets other than the Purchased
Equity.

“Permits” means any licenses, registrations, franchises, qualifications,
approvals, authorizations, consents, permits or certificates of a Governmental
Body and all pending applications therefor or renewals thereof.

“Permitted Exceptions” means (i) all defects, exceptions, restrictions,
easements, rights of way and encumbrances with respect to real property which do
not and would not reasonably be expected to, individually or in the aggregate,
materially impair the value, current use, occupancy or operation of such real
property; (ii) Liens for current Taxes, assessments or other governmental
charges not yet delinquent or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been established
on the Financial Statements in accordance with GAAP; (iii) mechanics’,
carriers’, workers’, repairers’ and similar Liens arising or incurred in the
Ordinary Course for amounts which are not delinquent or which are being
contested in good faith and for which appropriate reserves have been established
on the Financial Statements in accordance with GAAP; (iv) zoning, entitlement
and other land use Liens and environmental regulations by any Governmental Body
which do not prohibit or materially interfere with the current operation of any
real property by Seller or any Purchased Subsidiary; (v) requirements or
restrictions on the ownership or transfer of Capital Stock under applicable Law;
(vi) any non-exclusive Intellectual Property Licenses granted by Seller or a
Purchased Subsidiary; (vii) any Liens listed in Section 1.1(g) of the Disclosure
Letter; and (ix) such other Liens incurred in the Ordinary Course and not in
connection with borrowed money and which are not, individually or in the
aggregate, material to the Business taken as a whole.

13

 

--------------------------------------------------------------------------------

 

 

“Person” means any individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.

“Personal Data” means a natural person’s name, street address, telephone number,
e-mail address, photograph, social security number or tax identification number,
driver’s license number, passport number, credit card number, bank information,
or biometric identifiers or any other piece of information that, alone or in
combination with other information held by Seller or any of its Subsidiaries
(other than COG) allows the identification of or contact with a natural person
or can be used to identify a natural person.

“Post-Closing Tax Period” means any Tax period (or portion thereof) beginning
after the Closing Date.

“PRC Taxes” means any Taxes of Cross Dongguan for any taxable period (including,
for the avoidance of doubt, any Straddle Period, Pre-Closing Tax Period or
PostClosing Tax Period) arising out of or related to the difference between the
amounts reflected as payables and receivables on Chinese statutory books of
account of Cross Dongguan (the “Statutory Books”) and amounts reflected as
payables and receivables in the Chinese foreign exchange currency control system
(the “FX Control System”) with respect to Cross Dongguan, in each case on the
Closing Date (including, any Taxes as a result of a Chinese Taxing Authority
claiming that the account payable on the Statutory Books should be reduced to
match the account payable in the FX Control System).

“PRC Tax Filing” means, with respect to (i) the direct transfer of equity
interests in Cross Dongguan, all filings and registrations with the competent
local Taxing Authorities that may be required under the Interim Measures for the
Administration of Source-based Withholding of Enterprise Income Tax on
Nonresident Enterprises (Guoshuifa (2009) 3) issued by the State Administration
of Taxation of China on January 9, 2009, and (ii) the indirect transfer of
equity interests in A.T. Cross (Shanghai) Trading Company Ltd., all filings and
registrations with the competent local Taxing Authorities that may be required
under the Notice on Strengthening the Management of Enterprise Income Tax
Collection of Proceeds from Equity Transfers by Nonresident Enterprises
(Guoshuihan (2009) 698) issued by the State Administration of Taxation of China
on December 11, 2009 and any subsequent similar notices.

“Pre-Closing Tax Period” means any Tax period (or portion thereof) that ends on
or before the Closing Date.

“Products” means any and all products developed, manufactured, marketed or sold
by Seller and the Purchased Subsidiaries in the Business (and excluding, for the
avoidance of doubt, any and all products developed, manufactured, marketed or
sold by Seller and its Subsidiaries in the COG Business).

“Public Company Liabilities” means all Liabilities of Seller arising as a result
of Seller (i) being subject to Section 13 or 15(d) of the Exchange Act, and (ii)
issuing a class of securities listed on a national securities exchange.

14

 

--------------------------------------------------------------------------------

 

 

“Purchased Contracts” means all Contracts to which Seller is a party other than
the Excluded Contracts, including those Contracts set forth in Section 1.1(c) of
the Disclosure Letter.

“Purchased Equity” means the Capital Stock set forth on Exhibit D.  

“Purchased Furniture and Equipment” means all Furniture and Equipment owned or
used by Seller other than the Excluded Furniture and Equipment, including the
Furniture and Equipment set forth in Section 1.1(d) of the Disclosure Letter.

“Purchased Intellectual Property” means all Intellectual Property owned by
Seller, including the Intellectual Property set forth in Section 1.1(e) of the
Disclosure Letter.

“Purchased Intercompany Obligation” means (i) any Intercompany Obligation in
which a receivable is held by Seller from any Purchased Subsidiary (or any
Purchased Subsidiaries) and (ii) any Intercompany Obligation in which a
receivable is held by any Purchased Subsidiary (or any Purchased Subsidiaries)
from any another Purchased Subsidiary (or any Purchased Subsidiaries).

“Purchased IT Assets” shall mean Hardware, computer systems, servers, network
equipment, software, code, firmware, middleware, workstations, routers, hubs,
data communication lines, all other information technology equipment and all
associated documentation, in each case, owned or used by Seller in the operation
of the Business.

“Purchased Subsidiaries” means all of the Subsidiaries of Seller on the date
hereof other than COG.

“Purchased Subsidiary Benefit Plan” means a Benefit Plan maintained, sponsored
or contributed to by any Purchased Subsidiary.

“Purchased Subsidiary Cash” means, for each Purchased Subsidiary, the amount of
Cash and Cash Equivalents held by such Purchased Subsidiary.

“Purchased Subsidiary Legacy Environmental Liabilities” means all Liabilities
based upon, resulting from or arising out of (i) the condition of the
environment or the presence of Hazardous Materials at any real property
previously owned, leased or occupied prior to (but not on) the Closing Date
(which shall not include the Seller’s facility located in Lincoln, Rhode Island)
by any of the Purchased Subsidiaries, (ii) any real property where wastes
generated prior to the Closing Date by any Purchased subsidiary have come to be
located or (iii) any Legal Proceedings against any of the Purchased Subsidiaries
brought by unrelated nonemployee third parties alleging exposure prior to the
Closing Date to any Hazardous Materials.

“Purchaser Group” means Purchaser and its Subsidiaries.

“Regulatory Filings” means all forms, reports, schedules, statements, exhibits
and other documents filed by Seller with the SEC under the Securities Act or the
Exchange Act.

 

15

 

--------------------------------------------------------------------------------

 

 

“Retained Benefit Plans” means all Benefit Plans other than the Purchased
Subsidiary Benefit Plans and the Transferred Benefit Plans, including the
Retained Pension Plans, the A.T. Cross Company Employee Stock Purchase Plan and
the A.T. Cross Company Omnibus Incentive Plan (and all awards made thereunder),
the A.T. Cross Company Deferred Compensation Plan for Employee Officers and
Directors and the A.T. Cross Company Unfunded Excess Benefit Plan.

“Retained Pension Plans” means the A.T. Cross Company Pension Plan and the A.T.
Cross Company Limited (Irish Pension) Plan (a.k.a the A.T. Cross Senior
Executives Pension and Death Benefit Plan) to the extent of any remaining
Liabilities.

“Revolving Loan Commitment Letter” means the commitment letter dated as of the
date hereof, among Borrower, Clarion Investors II, LP and HSBC Bank US, National
Association, pursuant to which HSBC Bank US, National Association has committed,
on the terms set forth therein, to provide to Borrower up to $15,000,000 in
senior secured debt financing.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and all rules and regulations promulgated thereunder.

“Seller Benefit Plan” means a Benefit Plan maintained, sponsored or contributed
to for the benefit of Business Employees and other employees of Seller and its
Affiliates, other than the Business Benefit Plans.

“Seller Knowledge Parties” means those Persons identified in Section 1.1(f) of
the Disclosure Letter.

“Separate Tax Return” means any Tax Return that is not a Consolidated Tax
Return.

“Solvent” when used with respect to any Person, means that, as of any date of
determination, (i) the fair salable value (determined on a going concern basis)
of its assets and property will, as of such date, exceed the amounts required to
pay its debts as they become absolute and mature, as of such date, (ii) such
Person will have adequate capital to carry on its business and (iii) such Person
will be able to pay its debts as they become absolute and mature, in the
ordinary course of business, taking into account the timing of and amounts of
cash to be received by it and the timing of and amounts of cash to be payable on
or in respect of its indebtedness.

“Stock Power” means a stock power in a form reasonably satisfactory to Purchaser
to transfer the ATX International Purchased Equity.

“Subsidiary” means with respect to any Person, any other Person of which a
majority of the outstanding share capital, voting securities or other voting
equity interests are owned, directly or indirectly, by such first Person.

“Survival Date” means the eighteen (18) month anniversary of the Closing Date.

16

 

--------------------------------------------------------------------------------

 

 

“Tax” or “Taxes” means  (i) any and all federal, state, provincial, local,
foreign and other taxes, levies, fees, imposts, duties, and similar governmental
charges (including any interest, fines, assessments, penalties or additions to
tax imposed in connection therewith or with respect thereto) including (x) taxes
imposed on, or measured by, income, profits or gross receipts, and (y) ad
valorem, value added, capital gains, sales, goods and services, franchise, use,
real or personal property, capital stock, license, branch, payroll, estimated
withholding, employment, social security (or similar), unemployment,
compensation, utility, severance, production, excise, stamp, occupation,
premium, windfall profits, transfer and gains taxes, and customs duties, (ii)
any and all Liability for the payment of any items described in clause (i) above
as a result of being (or ceasing to be) a member of an affiliated, consolidated,
combined, unitary or aggregate group (or being included (or being required to be
included) in any Tax Return related to such group) and (iii) any and all
Liability for the payment of any amounts as a result of any successor or
transferee liability, in respect of any items described in clause (i) or (ii)
above.

“Taxing Authority” means the IRS and any other Governmental Body responsible for
the administration of any Tax.

“Tax Return” means any return, report, declaration, claim for refund, election,
disclosure, estimate, information report or return, or statement required to be
filed with any Taxing Authority with respect to any Tax (including any
attachments thereto, and any amendment thereof).

“Term Loan Commitment Letter” means the commitment letter dated as of the date
hereof, among Borrower and GSO Capital Partners LP, pursuant to which GSO
Capital Partners LP has committed, on the terms set forth therein, to provide to
Borrower up to $54,000,000 in senior secured debt financing.

“Transaction Expenses” means any fees, costs and expenses incurred or subject to
reimbursement by any Purchased Subsidiary, in each case in connection with the
transactions contemplated by this Agreement or the Ancillary Agreements (whether
incurred prior to or after the date hereof) and not paid prior to the Closing,
including:  (i) any brokerage, finders’ or other advisory fees, costs, expenses,
commissions or similar payments; (ii) any fees, costs and expenses of counsel,
accountants or other advisors or service providers; (iii) any fees, costs and
expenses or payments of Seller or any of its Affiliates related to any
transaction bonus, discretionary bonus, retention bonus, change-of-control
payment, phantom equity payout, severance, “stay-put” or other compensatory
payments made to any employee of Seller or any of its Affiliates as a result of
the execution of this Agreement or any Ancillary Agreement or in connection with
the transactions contemplated hereby or thereby, (iv) any other fees, costs,
expenses or payments resulting from the change of control of Seller or any
Purchased Subsidiary or otherwise payable in connection with receipt of any
consent or approval in connection with the transactions contemplated by this
Agreement or the Ancillary Agreements, (v) all fees, costs, expenses or payments
incurred in connection with seeking and obtaining consents and approvals
required pursuant to this Agreement in accordance with Section 7.3 not to exceed
$100,000 in the aggregate and (vi) any fees, costs, expenses or payments (other
than the Purchaser D&O Expenses) incurred with respect to obtaining the D&O
Insurance.  Notwithstanding anything to the contrary, no amounts shall
constitute “Transaction Expenses” to the extent such amounts are

17

 

--------------------------------------------------------------------------------

 

 

(i) Excluded Liabilities, (ii) Closing Indebtedness or (iii) included as a
Current Liability or an adjustment to a Current Asset in the calculation of Net
Working Capital.  

“Transfer Documents” means the Bill of Sale and Assignment and Assumption
Agreement, the Stock Power, the Foreign Stock Transfer Agreements and any
Foreign Asset Transfer Agreements.

“Treasury Regulations” means the regulations promulgated under the Code, as such
regulations may be amended from time to time.

“WARN Act” means the Worker Adjustment and Retraining Notification Act (29 USC
§2101 et seq.) and any similar state or local law within the United States of
America.

1.2 Terms Defined Elsewhere in this Agreement.  For purposes of this Agreement,
the following terms have meanings set forth in the sections indicated:

 

 

Term 

Section 

ADSP

10.7(a)(iii)

ADSP Allocation

10.7(a)(iii)

Agreed Principles

3.2(a)

Agreement

Preamble

Allocation

3.4(a)

Annual Financial Statements

5.6(a)

Antitrust Laws

7.4(b)

Assumed Liabilities

2.3

Assumed Taxes

2.3(h)

Balance Sheet

5.6(a)

Balance Sheet Date

5.6(a)

Basket

9.5(a)

Brands

7.10

Business Employee

7.11(a)

Cafeteria Plan

7.11(m)

Cap

9.5(a)

Clarion

7.6(a)

Closing

4.1

Closing Date

4.1

Closing Net Working Capital

3.3(a)

Closing Purchased Subsidiary Cash

3.3(a)

Closing Statement

3.3(a)

Confidentiality Agreement

7.6(a)

Contest

10.1(d)(i)

Cross Dongguan

5.3(b)

Currency Contracts

2.2(o)

D&O Insurance

7.7(b)

 

 

Debt Financing

6.7(a)

Debt Financing Commitments

6.7(a)

Destroyer

7.8

Disclosure Letter

Article V Preamble

Employee Agreements

7.11(d)

Enforcement Expenses

4.5(b)

Environmental Permits

5.18(a)

Equity Commitment Letter

6.7(a)

Equity Financing

6.7(a)

Equity Financing Commitment

6.7(a)

Estimated Closing Indebtedness

3.2(a)

Estimated Net Working Capital

3.2(a)

Estimated Purchased Subsidiary Cash

3.2(a)

Estimated Transaction Expenses

3.2(a)

Excluded Assets

2.2

Excluded Liabilities

2.4

Excluded Taxes

2.4(e)

Expense Invoices

4.2(b)(iv)

Fee Letter

6.7(b)

Final Adjustment Amount

3.3(a)

Financial Statements

5.6(a)

Financing

6.7(a)

Financing Commitments

6.7(a)

Financing Indemnified Party

7.14(c)

Foreign Asset Transfer Agreement

5.5(b)

Foreign Stock Transfer Agreements

5.5(a)

FX Payable

5.29

Guarantor

Recitals

Guaranty

Recitals

Hong Kong

5.15(g)

Indemnification Claim

9.4(b)

Indemnitees

7.7(a)

Independent Accountant

3.3(c)

Initial Purchase Price

3.1

Intercompany Obligations Restructuring

7.23

Interim Financial Statements

5.6(a)

IP Payment

2.7

Licensed ATX Intellectual Property

2.7

Licensed Intellectual Property

5.12(a)

Losses

9.2(a)

Material Contract

5.13(a)

Materials

2.5(a)

Net Working Capital

3.2(a)

Nonassignable Assets

2.5(b)

Non-Destroyer

7.8

Options

7.11(l)

Party

Preamble

Payment Date

4.5(a)

Personal Property Leases

5.11

Post-Closing Covenants

9.1(c)

Post-Closing Tax Claim

10.4(c)

Pre-Closing Covenants

9.1(c)

Pre-Closing Statement

3.2(a)

Pre-Closing Taxes

10.1(a)

Purchased Assets

2.1

Purchased Insurance Policies

2.1(o)

Purchaser

Preamble

Purchaser D&O Expenses

7.7(b)

Purchaser Documents

6.2

Purchaser Fundamental Representations

9.1(b)

Purchaser Indemnified Parties

9.2(a)

Purchaser Related Parties

4.5(b)

Purchaser Representations

9.1(b)

Purchaser Termination Fee

4.5(a)

Real Property Lease

5.10(a)

Required Remediation Activity

9.5(g)

Restricted Party

7.17(a)

Restricted Shares

7.11(l)

Restrictive Covenants

7.17(c)

RI Taxation Letter

10.8(c)

Section 388 Entity

10.7(b)

Section 338(g) Election

10.7(b)

Section 338(h)(10) Election

10.7(a)(i)

Seller

Preamble

Seller Common Stock

7.11(l)

Seller Documents

5.2

Seller Fundamental Representations

9.1(a)

Seller Indemnified Parties

9.3(a)

Seller Representations

9.1(a)

Straddle Period

10.2(d)

Straddle Tax Claim

10.4(b)

Sub-Basket

9.5(a)

Survival Period

9.1(c)

Tangible Property

5.11

Tax Benefit

9.6(a)

Tax Claim

10.4(a)

Tax Cost

9.6(a)

Tax Sharing Agreements

5.9(b)(vii)

Termination Date

4.3(b)(i)

Transferred Benefit Plans

7.11(m)

Transferred Employee

7.11(a)

Transfer Taxes

11.1

Transition Services Agreement

7.24(a)

TSA Date

7.24(b)

TSA Term Sheet

7.24(a)

18

 

--------------------------------------------------------------------------------

 

 

19

 

--------------------------------------------------------------------------------

 

 

20

 

--------------------------------------------------------------------------------

 

 

 

1.3 Other Definitional and Interpretive Matters.  

(a) Unless otherwise expressly provided, for purposes of this Agreement, the
following rules of interpretation shall apply:

Calculation of Time Period.  When calculating the period of time before which,
within which or following which any act is to be done or step taken pursuant to
this Agreement, the date that is the reference date in calculating such period
shall be excluded.  If the last day of such period is a non-Business Day, the
period in question shall end on the next succeeding Business Day.

Dollars.  Any reference in this Agreement to $ shall mean U.S. dollars.

Exhibits; Disclosure Letter.  All Exhibits annexed hereto are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein.  References to this Agreement shall include the Disclosure Letter.  No
disclosure in any Section of the Disclosure Letter relating to a possible breach
or violation of any Contract, Law or Order shall be construed as an admission or
indication that breach or violation exists or has actually occurred.  Any
capitalized terms used in any Exhibit or the Disclosure Letter but not otherwise
defined therein shall be defined as set forth in this Agreement.

Gender and Number.  Any reference in this Agreement to gender shall include all
genders, and words imparting the singular number only shall include the plural
and vice versa.

Headings.  The provision of a Table of Contents, the division of this Agreement
into Articles, Sections and other subdivisions and the insertion of headings are
for convenience of reference only and shall not affect or be utilized in
construing or interpreting this Agreement.  All references in this Agreement to
any “Section” are to the corresponding Section of this Agreement unless
otherwise specified.

21

 

--------------------------------------------------------------------------------

 

 

Herein.  The words such as “herein,” “hereinafter,” “hereof,” and “hereunder”
refer to this Agreement as a whole and not merely to a subdivision in which such
words appear unless the context otherwise requires.

Including.  The word “including” or any variation thereof means (unless the
context of its usage otherwise requires) “including, without limitation” and
shall not be construed to limit any general statement that it follows to the
specific or similar items or matters immediately following it.

 

22

 

--------------------------------------------------------------------------------

 

 

Reflected On or Set Forth In.  An item arising with respect to a specific
representation or warranty shall be deemed to be “reflected on” or “set forth
in” a balance sheet or financial statements, to the extent any such phrase
appears in such representation or warranty, if (a) there is a reserve, accrual
or other similar item underlying a number on such balance sheet or financial
statements that related to the subject matter of such representation, (b) such
item is otherwise specifically set forth on the balance sheet or financial
statements or (c) such item is reflected on the balance sheet or financial
statements (which shall include disclosure in the notes thereto).

(b) The Parties have participated jointly in the negotiation and drafting of
this Agreement and, in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as jointly drafted by
the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any provision of this
Agreement.

ARTICLE II

SALE AND PURCHASE OF PURCHASED ASSETS

2.1 Sale and Purchase of Purchased Assets.  On the terms and subject to the
conditions set forth in this Agreement, at the Closing Purchaser or a member of
the Purchaser Group (as designated by Purchaser) shall purchase, acquire and
accept from Seller, and Seller shall sell, transfer, assign, convey and deliver
to Purchaser or a member of the Purchaser Group (as designated by Purchaser)
free and clear of all Liens, other than Permitted Exceptions, all of Seller’s
right, title and interest in, to and under the Purchased Assets.  “Purchased
Assets” shall mean all of Seller’s assets and properties, whether real, personal
or mixed, tangible and intangible, of every kind and description, whether or not
reflected on the books and records of Seller and wherever located, other than
the Excluded Assets, including the following assets:

(a)

the Purchased Equity;

(b)

the Purchased Contracts;

(c)

all accounts or notes receivable (including any security or collateral for such
accounts receivable and including both billed and unbilled work and any payables
by any Purchased Subsidiary to Seller) relating to the Business or the Purchased
Assets;

(d)

all Inventory;

(e)

all deposits (including customer deposits and security deposits for rent,
electricity, telephone or otherwise) and prepaid charges and expenses, including
any prepaid rent;

(f)

all rights of Seller under each Real Property Lease, together with all
improvements, fixtures and other appurtenances thereto and rights in respect
thereof;

(g)

the Purchased Furniture and Equipment;

(h)

the Purchased Intellectual Property;

(i)

the Purchased IT Assets;

 23 

 

--------------------------------------------------------------------------------

 

 

(j)

all Documents;

(k)

all Permits related to or used in connection with the Business or the Purchased
Assets;

(l)

all rights of Seller under non-disclosure or confidentiality, non-compete, or
non-solicitation agreements with Business Employees or with third parties to the
extent  relating to the Business or the Purchased Assets;

(m)

all rights of Seller under or pursuant to all warranties, representations and
guarantees made by suppliers, manufacturers and contractors to the extent
relating to Purchased Furniture and Equipment and Products sold, or services
provided, to Seller affecting the Business or any Purchased Assets;

(n)

all business information relating to customers and suppliers of the Business and
the Purchased Subsidiaries, including customer and supplier lists, Personal Data
files and records relating to such customers and suppliers, and any other
information related to business relationships with such customers and suppliers;

(o)

all insurance policies held by Seller and its Subsidiaries for the exclusive
benefit of the Business or the Purchased Assets (including the Purchased
Subsidiaries), including the insurance policies listed in Section 2.1(o) of the
Disclosure Letter (the “Purchased Insurance Policies”);

(p)

all insurance benefits of Seller, including rights and proceeds, arising from or
relating to the Business, the Purchased Assets or the Assumed Liabilities prior
to the Closing;

(q)

any rights, causes of action, claims, credits, demands or rights of set-off of
Seller against any third party to the extent relating to the Business, the
Purchased Assets or the Assumed Liabilities, known or unknown, contingent or
noncontingent;

(r)

all goodwill and other intangible assets associated with the Business, including
the goodwill associated with the Purchased Intellectual Property; and

(s)

the Purchased Intercompany Obligations (it being understood that, for the
avoidance of doubt, any Purchased Intercompany Obligations set forth in clause
(ii) in the definition thereof shall be indirectly acquired by Purchaser or a
member of the Purchaser Group pursuant to the purchase of the Purchased Equity).

2.2 Excluded Assets.  Nothing contained herein shall be deemed to sell,
transfer, assign or convey the Excluded Assets to Purchaser or any member of the
Purchaser Group, and Seller shall retain all right, title and interest to, in
and under the Excluded Assets.  “Excluded Assets” shall mean only the following
assets of Seller: 

(a)

the Excluded Equity;

(b)

the Excluded Contracts;

24

 

--------------------------------------------------------------------------------

 

 

(c)

all cash, cash equivalents, bank deposits or similar cash items of Seller;

(d)

(i) all minute books, organizational documents, stock registers and such other
books and records of Seller or COG as pertain to ownership, organization or
existence of Seller and COG and (ii) duplicate copies of all minute books,
organizational documents, stock registers and duplicate copies of such other
books and records of the Purchased Subsidiaries to the extent necessary to
enable Seller and COG to file Tax returns and reports (all of which shall be
subject to Section 7.6);

(e)

the Excluded Furniture and Equipment;

(f)

any employee-related or employee benefit-related files or records (other than
personnel files of Transferred Employees), the Retained Benefit Plans and all
assets, trust agreements, administrative service agreements and other contracts,
files and records relating thereto;

(g)

any (i) other books and records that Seller is required by applicable Law to
retain; provided,  however, that Seller shall deliver to Purchaser copies of
and/or Seller shall provide Purchaser, upon reasonable advance notice, access to
any portions of such retained books and records that relate to the Business or
any of the Purchased Assets; (ii) any information management systems of Seller,
other than the Purchased IT Assets; and (iii) documents relating to proposals to
acquire the Business in connection with the sale process that resulted in the
execution of this Agreement (and not any prior sale processes) by Persons other
than Purchaser;

(h)

all insurance policies held by Seller and COG other than the Purchased Insurance
Policies;

(i)

all insurance benefits of Seller to the extent not related to the Business, the
Purchased Assets or the Assumed Liabilities;

(j)

any rights, claims or causes of action of Seller to the extent not related to
the Purchased Assets or the Assumed Liabilities;

(k)

all Tax Returns and financial statements of Seller and its Subsidiaries (other
than the Purchased Subsidiaries) and all records (including working papers)
related thereto;

(l)

any claim, right or interest of Seller in or to any refund, rebate, abatement or
other recovery for (x) Income Taxes and (y) Taxes (other than Income Taxes) for
any PreClosing Tax Period (or portion of a Straddle Period on or before the
Closing Date), together with any interest due thereon or penalty rebate arising
therefrom (in the case of a refund paid to Purchaser or an Affiliate of
Purchaser, net of Taxes on such refund and Taxes on any interest and net of
reasonable costs of obtaining such refund, as set forth in Section 10.3);

(m)

all of Seller’s or its Subsidiary’s rights, causes of action, claims, credits,
demands or rights of set-off against third parties, to the extent related to the
COG Business or any Excluded Asset;

25

 

--------------------------------------------------------------------------------

 

 

(n)

all rights that accrue to Seller under this Agreement; and

(o)

all receivables relating to the Seller’s foreign currency hedging contracts (the
“Currency Contracts”); 

(p)

any Intercompany Obligations, other than the Purchased Intercompany Obligations;
and

(q)

the assets set forth in Section 2.2(q) of the Disclosure Letter.

For the avoidance of doubt, no assets of any Purchased Subsidiary shall be
retained by Seller or COG, and all such assets shall be indirectly acquired by
Purchaser or a member of the Purchaser Group pursuant to the purchase of the
Purchased Equity.

2.3 Assumption of Liabilities.  On the terms and subject to the conditions set
forth in this Agreement, at the Closing Purchaser or a member of the Purchaser
Group (as designated by Purchaser) shall assume, effective as of the Closing,
and shall timely perform, pay and discharge in accordance with their respective
terms, all Liabilities of Seller to the extent relating to the Purchased Assets
other than the Excluded Liabilities (collectively, the “Assumed Liabilities”),
including the following Liabilities:

(a)

Liabilities of Seller under the Purchased Contracts;

(b)

Liabilities arising out of, relating to or with respect to (i) the employment or
performance of services of any Transferred Employee with Seller or any of its
Affiliates (including Liabilities for accrued and unpaid wages and accrued and
unpaid vacation or other paid time off as of the Closing Date, to the extent
included as a Current Liability or an adjustment to a Current Asset in the
calculation of Net Working Capital), except to the extent constituting Excluded
Employee Liabilities; (ii) all obligations to provide health care coverage
continuation in accordance with COBRA to all Transferred Employees located in
the United States and their qualified beneficiaries who incur or incurred a
qualifying event at any time; and (iii) workers’ compensation or occupational
health claims of any Transferred Employee;

(c)

Liabilities in respect of the sale of Products pursuant to product warranties,
product returns and rebates;

(d)

accounts payable of Seller relating to the Business or the Purchased Assets
(including, for the avoidance of doubt, (i) invoiced accounts payable and (ii)
accrued but uninvoiced accounts payable);

(e)

all Liabilities with respect to the Business or the Purchased Assets first
arising after the Closing;

(f)

sponsorship of the Purchased Subsidiary Benefit Plans and related trusts,
insurance policies and third-party administrator contracts; provided, that any
and all Liabilities under the Retained Pension Plans shall constitute Excluded
Employee Liabilities;

26

 

--------------------------------------------------------------------------------

 

 

(g)

sponsorship of the Transferred Benefit Plans and related trusts, insurance
policies and third-party administrator contracts, except to the extent
constituting Excluded Employee Liabilities or agreed in the Transition Services
Agreement; 

(h)

Liabilities for (i) Taxes to the extent included as a Current Liability or an
adjustment to a Current Asset in the calculation of Net Working Capital, (ii)
one-half of any Transfer Taxes, and (iii) all Taxes relating to the Purchased
Assets or the Business for a PostClosing Tax Period and the portion of any
Straddle Period beginning after the Closing Date (in the case of a Straddle
Period, determined in a manner consistent with Section 10.2(f)) (collectively
“Assumed Taxes”); and 

(i)

the Assumed Intercompany Obligations (it being understood that, for the
avoidance of doubt, any Assumed Intercompany Obligations set forth in clause
(ii) in the definition thereof shall be indirectly assumed by Purchaser or a
member of the Purchaser Group pursuant to the purchase of the Purchased
Equity). 

The Assumed Liabilities shall be assumed by the same member of the Purchaser
Group that acquired the Purchased Assets corresponding to such Assumed
Liabilities.

2.4 Excluded Liabilities.  Purchaser will not assume or be liable for any
Excluded Liabilities.  “Excluded Liabilities” shall mean only the following
Liabilities of Seller and COG:

(a)

all Liabilities arising out of or relating to (i) Excluded Assets, including
Excluded Contracts and Excluded Equity, (ii) the COG Business or (iii) the JM
Mills Claim;

(b)

all Liabilities arising out of or related to the ownership or operation of the
Business or the Purchased Assets prior to the Closing, except to the extent
arising in the ordinary course;

(c)

all Excluded Employee Liabilities;

(d)

all Public Company Liabilities;

(e)

except as otherwise provided in Section 2.3(h), (i) all Liabilities for Taxes
relating to the Purchased Assets or the Business, (ii) one-half of any Transfer
Taxes, and (iii) any Taxes, including Chinese capital gains Taxes, payable in
connection with the transactions contemplated by this Agreement (except related
to Transfer Taxes) (collectively, “Excluded Taxes”);

(f)

all Liabilities of Seller arising hereunder;

(g)

all Liabilities to the extent relating to (i) assets (other than Products)
and/or properties (including real property) formerly owned, leased or used by
Seller prior to (but not on) the Closing Date (which shall not include Seller’s
facility located in Lincoln, Rhode Island) or (ii) criminal or fraudulent
conduct of Seller, its Affiliates or any of their respective directors,
officers, employees, agents or representatives prior to the Closing Date;

(h)

all Liabilities arising out of any shareholder litigation brought by
shareholders of Seller against Seller, Purchaser or any of their respective
Affiliates or any

27

 

--------------------------------------------------------------------------------

 

 

director or officer of Seller, Purchaser or their respective Affiliates, in each
case arising out of or in connection with this Agreement or any Ancillary
Agreement or any of the transactions contemplated hereby or thereby;

(i)

all Business Legacy Environmental Liabilities;

(j)

all Liabilities arising out of or relating to the presence prior to the Closing
of chlorinated solvent contamination at the Leased Real Property in Lincoln,
Rhode Island (including any such presence commencing prior to the Closing and
continuing after the Closing), but not to the extent that such Liabilities arise
out of the exacerbation of the contamination by Purchaser after the Closing; 

(k)

all payables relating to the Currency Contracts; 

(l)

any Intercompany Obligations, other than the Assumed Intercompany

Obligations; and

(m)

the Liabilities set forth in Section 2.4(m) of the Disclosure Letter.

For the avoidance of doubt, subject to Article IX and X, no Liabilities of any
Purchased Subsidiary (other than any and all Liabilities under the Retained
Pension Plans) shall be retained by Seller, or COG, and all such Liabilities
shall be indirectly assumed by Purchaser pursuant to the purchase of the
Purchased Equity.  Notwithstanding anything to the contrary, no Liabilities
shall constitute “Excluded Liabilities” to the extent such Liabilities
constitute Current Liabilities or an adjustment to a Current Asset in the
calculation of Net Working Capital.

2.5 Further Conveyances and Assumptions; Consent of Third Parties.  

(a)

From time to time following the Closing, Seller and Purchaser shall (and
Purchaser shall cause the applicable member of the Purchaser Group (including
the Purchased Subsidiaries) to execute, acknowledge and deliver all such further
conveyances, notices, assumptions, releases and acquittances and such other
instruments, and shall take such further actions, as may be reasonably necessary
or appropriate to assure fully to Purchaser and the applicable member of the
Purchaser Group and their successors or assigns, all of the rights, titles and
interests in and to the Purchased Assets under this Agreement and the Transfer
Documents and to assure fully to Seller and its Affiliates and their successors
and assigns, the assumption of the Assumed Liabilities by Purchaser and the
applicable member of the Purchaser Group under this Agreement and the Transfer
Documents, and to otherwise make effective the transactions contemplated hereby
and thereby.  If either Party following the Closing (i) becomes aware that
Purchaser or the applicable member of the Purchaser Group does not have in its
possession certain technical schematics, designs, manuals, records and other
documentation owned by Seller or its Subsidiaries and used in the operation of
the Business as of the Closing Date and that constitute or should constitute
Purchased Assets (including with respect to products in development)
(“Materials”) and (ii) has a reasonable belief that Seller or its Subsidiaries
may have such Materials in its possession, then Seller shall use commercially
reasonable efforts to make copies of such Materials available to Purchaser or
the applicable member of the Purchaser Group.

28

 

--------------------------------------------------------------------------------

 

 

(b)

Nothing in this Agreement nor the consummation of the transactions contemplated
hereby shall be construed as an attempt or agreement to assign any Purchased
Asset, including any Contract, Permit, certificate, approval, authorization or
other right, which by its terms or by Law is nonassignable without the consent
of a third party or a Governmental Body or is cancelable by a third party in the
event of an assignment (“Nonassignable Assets”) unless and until such consent
shall have been obtained.  If any such consent is not obtained prior to the
Closing, (i) Seller, at its own expense, shall use its commercially reasonable
efforts to cooperate with Purchaser following the Closing Date to obtain, or
cause to be obtained, any such consent, substitution, approval or amendment
promptly; provided,  however, that Seller shall not take any material action
relating to any Nonassignable Assets without the prior written consent or
approval of Purchaser, and (ii) Purchaser shall use its commercially reasonable
efforts to cooperate with Seller following the Closing Date to obtain, or cause
to be obtained, any consent, substitution, approval or amendment required to (x)
novate all Liabilities under any and all Purchased Contracts or other
Liabilities that constitute Assumed Liabilities, or (y) obtain in writing the
unconditional release of Seller and its Affiliates so that, in any such case,
Purchaser (or the applicable member of the Purchaser Group) shall be solely
responsible for the Assumed Liabilities.  Notwithstanding anything to the
contrary, except as set forth in Section 2.5 of the Disclosure Letter, Seller
and its Affiliates shall not be required to take any action or incur any
expenses or Liabilities to obtain any such consent.

(c)

To the extent permitted by applicable Law and the terms of the Nonassignable
Assets, in the event consents to the assignment thereof cannot be obtained at or
prior to the Closing, such Nonassignable Assets shall be held, as of and from
the Closing Date, by Seller, consistent with any contractual obligation or any
applicable legal or fiduciary obligation under applicable Law, in trust for
Purchaser (or the applicable member of the Purchaser Group) and the covenants
and obligations thereunder shall be performed by Purchaser (or the applicable
member of the Purchaser Group) in Seller’s name and all benefits and obligations
existing thereunder shall be for Purchaser’s (or the applicable member of the
Purchaser Group’s) account.  Without limiting Seller’s obligations under Section
2.5(b), Seller shall take or cause to be taken, at Purchaser’s expense, such
actions in its name or otherwise as Purchaser may request so as to provide
Purchaser or the applicable member of the Purchaser Group with the benefits of
the Nonassignable Assets and to effect collection of money or other
consideration that becomes due and payable under the Nonassignable Assets, and
Seller shall promptly pay over to Purchaser (or the applicable member of the
Purchaser Group) all money or other consideration received by it in respect of
all Nonassignable Assets.  As of and from the Closing Date, Seller authorizes
Purchaser (or the applicable member of the Purchaser Group), to the extent
permitted by applicable Law and the terms of the Nonassignable Assets, at
Purchaser’s expense, to perform all the obligations and receive all the benefits
of Seller or its Affiliates under the Nonassignable Assets and appoints
Purchaser (or the applicable member of the Purchaser Group) its attorney-in-fact
to act in its name on its behalf or in the name of the applicable Affiliate of
Seller and on such Affiliate’s behalf with respect thereto, and Purchaser agrees
to indemnify and hold Seller and its Affiliates, agents, successors and assigns
harmless from and against any and all Liabilities and Losses based upon, arising
out of or relating to Purchaser’s or the applicable member of the Purchaser
Group’s performance of, or failure to perform, such obligations under the
Nonassignable Assets.

3.6

Bulk Sales Laws.  Except as set forth in the next sentence of this Section 2.6,
Purchaser hereby waives compliance by Seller with the requirements and
provisions of any

29

 

--------------------------------------------------------------------------------

 

 

“bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with
respect to the sale of any or all of the Purchased Assets to Purchaser.  No
later than five days before the Closing Date, Seller shall notify the Rhode
Island Tax Administrator of the transactions contemplated by this Agreement and
shall take all necessary steps to comply with bulk sale reporting requirements
in Rhode Island to the reasonable satisfaction of Purchaser.

3.7

IP Payment.  At the Closing but immediately prior to the conveyance of the
Purchased Assets, in accordance with the IP License Agreement, ATX shall grant
to Purchaser or a member of the Purchaser Group (as designated by Purchaser) the
exclusive right and license to use the Business Intellectual Property outside of
the United States and subject to the terms of the IP License Agreement (the
“Licensed ATX Intellectual Property”) in exchange for the Licensed ATX IP Amount
(the “IP Payment”).  Seller shall cause ATX to distribute the IP Payment to
Seller immediately prior to the conveyance of the Purchased Assets as a
distribution in respect of the common stock of ATX.

ARTICLE III

PURCHASE PRICE

3.1 Initial Purchase Price.  The aggregate consideration for the purchase and
sale of the Purchased Assets shall be (I) the assumption of the Assumed
Liabilities by Purchaser or a member of the Purchaser Group and (II) an amount
in cash (the “Initial Purchase Price”) equal to:

(a)

$60,000,000; plus 

(b)

the amount, if any, by which the Estimated Net Working Capital exceeds the Net
Working Capital Target; minus 

(c)

the amount, if any, by which the Net Working Capital Target exceeds the
Estimated Net Working Capital; minus 

(d)

the Estimated Closing Indebtedness; minus 

(e)

the Estimated Transaction Expenses; minus 

(f)

the amount, if any, by which the Minimum Purchased Subsidiary Cash for each
Purchased Subsidiary exceeds the Estimated Purchased Subsidiary Cash for such
Purchased Subsidiary (determined in each case on a Purchased Subsidiary (and/or
foreign branch thereof) by Purchased Subsidiary (and/or foreign branch thereof)
basis); plus 

(g)

the amount, if any, by which the Estimated Purchased Subsidiary Cash for each
Purchased Subsidiary exceeds the Minimum Purchased Subsidiary Cash for such
Purchased Subsidiary (determined in each case on a Purchased Subsidiary (and/or
foreign branch thereof) by Purchased Subsidiary (and/or foreign branch thereof)
basis); provided, that any such increase in the Initial Purchase Price shall not
exceed the Minimum Cash Cushion in the aggregate; provided,  further that to the
extent that the Estimated Purchased Subsidiary Cash for Cross Dongguan exceeds
the Minimum Purchased Subsidiary Cash for Cross Dongguan (after giving

30

 

--------------------------------------------------------------------------------

 

 

effect to any portion of the Minimum Cash Cushion used with respect to Cross
Dongguan), the Initial Purchase Price shall also be increased by fifty percent
(50%) of an amount equal to (x) such excess up to $3,000,000 minus (y) the
portion of the Minimum Cash Cushion used with respect to Cross Dongguan; minus 

(h)

the amount of the IP Payment.

3.2 Determination and Payment of Initial Purchase Price.  

(a)

At least three (3) Business Days prior to the Closing Date, Seller shall prepare
and deliver, or cause to be prepared and delivered, to Purchaser, a certificate
executed by an executive officer of Seller (the “Pre-Closing Statement”) that
contains Seller’s good faith estimates of (A) Closing Indebtedness (the
“Estimated Closing Indebtedness”), (B) Transaction Expenses (the “Estimated
Transaction Expenses”), (C) Net Working Capital as of the Determination Time
(the “Estimated Net Working Capital”) and (D) Purchased Subsidiary Cash for each
Purchased Subsidiary (and/or foreign branch thereof) as of the Determination
Time (the “Estimated Purchased Subsidiary Cash”), in each case determined in
accordance with the Agreed Principles, and the resulting calculation of the
Initial Purchase Price, together with supporting documentation for such
estimates and any additional information reasonably requested by Purchaser.  The
Pre-Closing Statement shall be prepared in consultation with Purchaser, and the
Company shall consider in good faith any comment to, or disagreement with, the
Pre-Closing Statement delivered by Purchaser to Seller prior to the Closing
Date.  “Net Working Capital” means Current Assets, minus Current Liabilities, in
each case, as determined in accordance with the accounting methods, policies,
principles, procedures, and consistent classifications and valuation and
estimation techniques used in preparing the Balance Sheet, applied on a
consistent basis and in accordance with GAAP and the adjustments set forth in
Section 3.2(a)(I) of the Disclosure Letter; provided that in the event of any
conflict between such accounting methods, policies, principles, procedures, and
consistent classifications and valuation and the estimation techniques and the
adjustments set forth in Section 3.2(a)(I) of the Disclosure Letter, the
adjustments set forth in Section 3.2(a)(I) of the Disclosure Letter shall govern
(collectively, the “Agreed Principles”), each calculated immediately before, and
without giving effect to, the Closing.  Section 3.2(a)(I) of the Disclosure
Letter sets forth, for illustrative purposes only, a schedule showing a sample
Net Working Capital calculation in accordance with the Agreed Principles.

(b)

On the Closing Date, Purchaser shall pay, or cause to be paid, (i) the IP
Payment to ATX and the Initial Purchase Price to Seller, in each case by wire
transfer of immediately available funds into one or more accounts as are
designated by Seller in writing no later than three (3) Business Days prior to
the Closing Date and (ii) to each payee of Transaction Expenses, their
respective portions of the Transaction Expenses by wire transfer of immediately
available funds to the accounts designated in the Expense Invoices.

(c)

With respect to the determination of Purchased Subsidiary Cash denominated in
currencies other than U.S. dollars, the foreign exchange rate for each such
currency as of the Determination Time as published by Reuters shall be used to
convert such amounts into U.S. dollars for purposes of determining the Purchased
Subsidiary Cash in connection with the adjustments pursuant to this Section 3.2
and Section 3.3.  

31

 

--------------------------------------------------------------------------------

 

 

3.3 Final Purchase Price and Final Adjustment Amount.  

(a)

As promptly as practicable, but no later than sixty (60) days after the Closing
Date, Purchaser shall cause to be prepared and delivered to Seller a closing
statement (the “Closing Statement”) setting forth and certifying Purchaser’s (A)
calculation of Closing Indebtedness, (B) calculation of Transaction Expenses,
(C) calculation of the Net Working Capital as of the Determination Time (clause
(C) being “Closing Net Working Capital”), (D) calculation of the Purchased
Subsidiary Cash for each Purchased Subsidiary as of the Determination Time
(clause (D) being “Closing Purchased Subsidiary Cash”), (E)  recalculation of
the Initial Purchase Price pursuant to Section 3.1 based on the amounts in
clauses (A) – (D) above in lieu of the amounts set forth on the Pre-Closing
Statement (the “Final Purchase Price”) and (F) calculation of the amount equal
to the Final Purchase Price minus the Initial Purchase Price set forth on the
Pre-Closing Statement (such positive or negative amount, the “Final Adjustment
Amount”), in each case as prepared in accordance with the Agreed Principles.  No
actions taken by Purchaser on its own behalf or on behalf of the Purchased
Subsidiaries or the Business, at or following the Closing, shall be given effect
for purposes of determining any matter contained in the Closing Statement.

(b)

If Seller disagrees with Purchaser’s calculation of any item of the Closing
Statement delivered pursuant to Section 3.3(a), Seller may, within thirty (30)
days after delivery of the Closing Statement, deliver a written notice to
Purchaser stating that Seller disagrees with such calculation and specifying in
reasonable detail those items or amounts as to which Seller disagrees and the
basis therefor.  To the extent not described by Seller in such written notice of
objection, Seller shall be deemed to have agreed with all other items and
amounts contained in the Closing Statement and the calculation of Closing Net
Working Capital, and/or Closing Purchased Subsidiary Cash, and the resulting
Final Purchase Price and Final Adjustment Amount delivered pursuant to Section
3.3(a).  

(c)

If a notice of disagreement shall be duly delivered pursuant to Section 3.3(b),
Seller and Purchaser shall, during the fifteen (15) days following such
delivery, use their commercially reasonable efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of Closing Indebtedness, Transaction Expenses, Closing Net Working Capital
and/or Closing Purchased Subsidiary Cash, as applicable.  If, during such
period, Seller and Purchaser are unable to reach such agreement, they shall
promptly thereafter cause KPMG LLP (the “Independent Accountant”) to review this
Agreement and the disputed items or amounts for the purpose of calculating
Closing Indebtedness, Transaction Expenses, Closing Net Working Capital and/or
Closing Purchased Subsidiary Cash, and the resulting Final Purchase Price and
Final Adjustment Amount, as applicable (it being understood that in making such
calculation, the Independent Accountant shall be functioning as an expert and
not as an arbitrator).  Each of Purchaser and Seller agree that it shall not
engage, or agree to engage, the Independent Accountant to perform any services
other than (i) as the Independent Accountant pursuant hereto until the Final
Purchase Price and Final Adjustment Amount have been finally determined pursuant
to Section 3.3(b) or Section 3.3(c) or (ii) those services for which it had
engaged the Independent Account prior to the time such notice of disagreement
was delivered pursuant to Section 3.3(b).  Each of Purchaser and Seller agrees
to execute, if requested by the Independent Accountant, a reasonable engagement
letter.  Purchaser and Seller shall cooperate with the Independent Accountant
and promptly provide all documents and information requested by the Independent
Accountant, other than those documents which Purchaser or Seller,

32

 

--------------------------------------------------------------------------------

 

 

as applicable, is prohibited by Law from disclosing or that are protected by
attorney-client privilege.  In making such calculation, the Independent
Accountant shall consider only those items or amounts in the Closing Statement
and Purchaser’s calculation of Closing Indebtedness, Transaction Expenses,
Closing Net Working Capital, and/or Closing Purchased Subsidiary Cash, and the
resulting Final Purchase Price and Final Adjustment Amount as to which Seller
has disagreed in its notice of disagreement duly delivered pursuant to Section
3.3(b) and shall be instructed that its calculation (i) must be made in
accordance with the standards and definitions in this Agreement (including the
Agreed Principles), and (ii) with respect to each item in dispute, such
determination shall not be in excess of the higher, nor less than the lower, of
the amounts advocated by Seller in the notice of disagreement or by Purchaser in
the Closing Statement with respect to such disputed line item.  The Independent
Accountant shall deliver to Seller and Purchaser, as promptly as practicable
(but in any case no later than thirty (30) days after the date of engagement of
the Independent Accountant), a written report setting forth such calculation and
the resulting Final Purchase Price and Final Adjustment Amount.  Such report
shall be final and binding upon the Parties, and no Party shall seek further
recourse to courts or other tribunals, other than to enforce such
report.  Judgment may be entered to enforce such report in any court of
competent jurisdiction.  The cost of the Independent Accountant’s review and
report shall be allocated between Purchaser and Seller based on the inverse of
the percentage its determination (before such allocation) bears to the total
amount of the total items in dispute as originally submitted to the Independent
Accountant.  For example, if the items in dispute equal $1,000 and the
Independent Accountant awards $600 in favor of Seller’s position, 60% of the
costs of the Independent Accountant’s review would be borne by Purchaser and 40%
of the costs would be borne by Seller.

(d)

Within five (5) Business Days after the final determination of the Final
Adjustment Amount in accordance with Section 3.3(b) or Section 3.3(c), as
applicable, the Final Adjustment Amount shall be paid as follows: (i) if the
Final Adjustment Amount is greater than zero, Purchaser shall pay, or cause to
be paid, to Seller the Final Adjustment Amount by wire transfer of immediately
available funds to the account designated by Seller, or (ii) if the Final
Adjustment Amount is less than zero, Seller shall pay, or cause to be paid, to
Purchaser the Final Adjustment Amount by wire transfer of immediately available
funds to the account designated by Purchaser.

3.4 Allocation of Purchase Price.  

(a)

Seller and Purchaser agree for Tax purposes only to allocate the Initial
Purchase Price (including any Assumed Liabilities or other amounts treated as
consideration for Tax purposes) among the Purchased Subsidiaries, on the one
hand, and the Other Purchased Assets (as a group), on the other hand as set
forth in Section 3.4(a) of the Disclosure Letter (the “Allocation”).  The
Parties shall allocate the portion of the Initial Purchase Price represented by
the IP Payment to the Licensed ATX Intellectual Property as set forth in Section
2.7.  

(b)

Except as set forth in item 6 of Section 3.4(a) of the Disclosure Letter, Seller
and Purchaser shall (i) be bound by the Allocation for purposes of determining
any Taxes; (ii) prepare and file, and cause its Affiliates to prepare and file,
all Tax Returns and any applicable forms required under applicable Tax Law in a
manner consistent with the Allocation; and (iii) take no position, and cause its
Affiliates to take no position, inconsistent with the

33

 

--------------------------------------------------------------------------------

 

 

Allocation on any applicable Tax Return or in any proceeding before any Taxing
Authority, except as otherwise required pursuant to a Final Determination.  In
the event that a Taxing Authority disputes the Allocation, the Party receiving
notice of such dispute shall promptly notify the other Party hereto, and Seller
and Purchaser shall use their commercially reasonable efforts to defend such
Allocation in any applicable proceeding, and the matter shall be handled as a
Tax Claim.

(c)

Purchaser shall allocate any post-Closing adjustment to the Initial Purchase
Price, including any modification necessary to reflect the determination of the
Final Purchase Price, to the Purchased Subsidiary or Other Purchased Assets (as
a group), to which such adjustment relates.  In the event of any adjustment to
the Allocation, the Parties shall timely file with the Taxing Authorities any
additional information required to be filed under applicable Law.

(d)

No Withholding.  Purchaser (and its Affiliates) shall not be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this
Agreement, except such amounts as Purchaser (or its Affiliates) is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign Tax Law as a result of a change in
Law after the date hereof or Seller’s or ATX’s failure to provide the
certificate in accordance with Section 8.1(i)(iii).  To the extent that such
amounts are so withheld as a result of a change in Law after the date hereof or
Seller’s or ATX’s failure to provide the certificate in accordance with Section
8.1(i)(iii) and paid over to the proper Taxing Authority by Purchaser (or its
Affiliates), such withheld and deducted amounts will be treated for all purposes
of this Agreement as having been paid to Seller or ATX, as applicable.

ARTICLE IV

CLOSING AND TERMINATION

4.1

Closing Date.  The closing of the sale and purchase of the Purchased Assets
provided for in Section 2.1 and the other transactions contemplated hereby (the
“Closing”) shall take place at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison LLP located at 1285 Avenue of the Americas, New York, NY 10019 (or at
such other place as the Parties may designate in writing) at 10:00 a.m. (New
York local time) on a date to be specified by the Parties (the “Closing Date”),
which date shall be no later than the third Business Day after the satisfaction
or waiver of the conditions set forth in Article VIII (other than conditions
that by their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions at such time), unless another time,
date or place is agreed to in writing by the Parties; provided that in no event
shall the Closing take place prior to August 13, 2013.

4.2

Closing Deliverables.  At the Closing:

(a)

Purchaser shall deliver to Seller:

(i)

a duly executed copy of each Ancillary Agreement to which it or any of its
Affiliates are a party;

(ii)

the certificate required to be delivered pursuant to Section 8.2(c);  

34

 

--------------------------------------------------------------------------------

 

 

(iii)

payment of the amounts set forth in Section 3.2(b);  

(b)

Seller shall deliver to Purchaser (or the applicable member of the Purchaser
Group):

(i)

a duly executed copy of each Ancillary Agreement to which it or any Purchased
Subsidiary is a party;

(ii)

the certificates required to be delivered pursuant to Section 8.1(d) and Section
8.1(i)(iii) and a copy of the new business license issued to Cross Dongguan
pursuant to Section 8.1(h)(iii);  

(iii)

in respect of each Purchased Subsidiary, certificates evidencing the Purchased
Equity to the extent that such Purchased Equity is in certificate form, duly
endorsed in blank or with stock powers duly executed in proper form for
transfer, and with any required stock transfer stamps affixed thereto;

(iv)

final invoices (the “Expense Invoices”) with respect to any Transaction Expenses
to be paid at the Closing;

(v)

evidence of the release of all Liens, other than Permitted Exceptions, on the
Purchased Assets in form and substance reasonably satisfactory to Purchaser;

(vi)

copies of the resignations of all members of the board of directors (or similar
body) and officers (other than Business Employees) of each Purchased Subsidiary
other than those identified by Purchaser to Seller by written notice at least
five (5) Business Days prior to the Closing Date, in form and substance
reasonably satisfactory to Purchaser;

(vii)

copies of the duly executed consents required to be obtained pursuant to Section
8.1(g), in form and substance reasonably satisfactory to Purchaser;

(viii)

evidence of the due completion of the PRC Tax Filing; and

(ix)

evidence of the mailing of the RI Taxation Letter.

4.3 Termination of Agreement.  This Agreement may be terminated prior to the
Closing as follows:

(a)

by mutual written consent of Seller and Purchaser;

(b)

at the election of Seller or Purchaser:

(i)

on or after November 13, 2013 (the “Termination Date”), if the Closing shall not
have occurred by 5:00 pm prevailing Eastern time on such date,

35

 

--------------------------------------------------------------------------------

 

 

provided, that the terminating Party’s willful breach or failure (or whose
Affiliates’ willful breach or failure) to perform any covenant or obligation
hereunder has not been the cause of, or resulted in the failure of, the
transactions contemplated by this Agreement to occur on or before such date;

(ii)

if there shall be in effect a final nonappealable Order of a Governmental Body
of competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby; or

(iii)

if any Law is enacted, entered or promulgated, by a Governmental Body of
competent jurisdiction that permanently restrains, enjoins or prohibits or makes
illegal the consummation of the transactions contemplated hereby;

(c)

by Purchaser if Seller shall have breached or failed to perform in any material
respect any of its respective representations, warranties, covenants or other
agreements contained in this Agreement, and such breach or failure to perform
(i) would give rise to the failure of a condition set forth in Section 8.1(a) or
Section 8.1(b) and (ii) (x) has not been or cannot be cured prior to the
Termination Date or (y) has not been cured prior to the date that is thirty (30)
days from the date that Seller is notified by Purchaser of such breach or
failure to perform; provided that Purchaser shall not have the right to
terminate this Agreement pursuant to this Section 4.3(c) if Purchaser is then in
material breach of any of its representations, warranties, covenants or other
agreement set forth herein in a manner that would cause any condition set forth
in Section 8.2(a) or Section 8.2(b) not to be satisfied;

(d)

by Seller if Purchaser shall have breached or failed to perform in any material
respect any of its respective representations, warranties, covenants or other
agreements contained in this Agreement, and such breach or failure to perform
(i) would give rise to the failure of a condition set forth in Section 8.2(a) or
Section 8.2(b) and (ii) (x) has not been or cannot be cured prior to the
Termination Date or (y) has not been cured prior to the date that is thirty (30)
days from the date that Purchaser is notified by Seller of such breach or
failure to perform; provided that Seller shall not have the right to terminate
this Agreement pursuant to this Section 4.3(d) if Seller is then in material
breach of any of its representations, warranties, covenants or other agreement
set forth herein in a manner that would cause any condition set forth in Section
8.1(a) or Section 8.1(b) not to be satisfied; or

(e)

by Seller if (i) the conditions set forth in Section 8.1 have been satisfied
(other than any condition the failure of which to be satisfied is attributable
to a breach by Purchaser of its representations, warranties, covenants or
agreements contained herein and other than those conditions that by their terms
are to be satisfied by actions taken at the Closing, each of which is capable of
being satisfied or waived by Seller at the Closing), (ii) Purchaser shall have
failed to consummate the Closing on the date the Closing should have occurred
pursuant to Section 4.1 and (iii) Seller has irrevocably confirmed by written
notice to Purchaser that all the conditions set forth in Section 8.2 have been
satisfied or that Seller is willing to waive any unsatisfied conditions set
forth in Section 8.2 (other than those conditions that by their terms are to be
satisfied by actions taken at the Closing, each of which is capable of being
satisfied or waived by Seller at the Closing) and that Seller is ready, willing
and able to consummate the Closing at such time.

36

 

--------------------------------------------------------------------------------

 

 

5.4

Procedure of Termination.  In the event of termination of this Agreement by
Purchaser or Seller, or both, pursuant to Section 4.3, written notice thereof
shall forthwith be given by the terminating Party to the other Party, and this
Agreement shall terminate, and the purchase of the Purchased Assets hereunder
shall be abandoned, without further action by Purchaser or Seller.

5.5

Effect of Termination.  

(a)

In the event that this Agreement is validly terminated (i) by Seller in
accordance with Section 4.3(d) or Section 4.3(e), in each case at a time when
Purchaser is not entitled to terminate this Agreement in accordance with Section
4.3(c) or (ii) by Seller or Purchaser in accordance with Section 4.3(b)(i), in
each case at a time when Seller is entitled to terminate this Agreement in
connection with Section 4.3(d) or Section 4.3(e), then, within five (5) Business
Days of such termination (the “Payment Date”), Purchaser shall deliver Two
Million Dollars ($2,000,000) (the “Purchaser Termination Fee”) by wire transfer
of immediately available funds to Seller into one or more accounts as are
designated by Seller in writing no later than three (3) Business Days prior to
the Payment Date (it being understood that in no event shall Purchaser be
required to pay the Purchaser Termination Fee on more than one occasion).

(b)

The Parties acknowledge that the agreements contained in this Section 4.5 are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the Parties would not enter into this Agreement;
accordingly, if Purchaser fails to pay the amount due pursuant to Section 4.5(a)
on or prior to the Payment Date, and, in order to obtain such payment, Seller
commences an action that results in a judgment against Purchaser for the amount
set forth in Section 4.5(a) or any portion thereof, Purchaser shall pay, or
cause to be paid, to Seller interest on such amount at the prime rate as
published in the Wall Street Journal in effect on the date such payment was
required to be made through the date such payment was actually received and its
costs and expenses (including attorneys’ fees) in connection with such action
(collectively, “Enforcement Expenses”).  If this Agreement is validly terminated
in accordance with Section 4.3 and 4.4, notwithstanding anything to the contrary
in this Agreement, Seller’s receipt of the Purchaser Termination Fee pursuant to
this Section 4.5 and the payment of the Enforcement Expenses, if any, shall be
the sole and exclusive remedy of Seller, any Subsidiary of Seller, and any of
their respective Affiliates and any representatives of any of the foregoing,
against Purchaser, its Affiliates and any of their respective former, current,
or future general or limited partners, stockholders, managers, members,
controlling persons, management companies, representatives or Debt Financing
Sources (the “Purchaser Related Parties”) for any loss suffered as a result of
any breach of any covenant or agreement in this Agreement or the Financing
Commitments or the failure of the transactions contemplated hereby or thereby to
be consummated whether at law or equity, in contract, in tort or otherwise,
other than pursuant to Section 4.5(f). Upon payment in full of Purchaser
Termination Fee and the Enforcement Expenses, if any, (i) no Purchaser Related
Party shall have any further liability or obligation relating to or arising out
of or in connection with this Agreement, other than pursuant to Section 4.5(f),
or the Financing Commitments, and (ii) none of Seller, any Subsidiary of Seller,
any of their respective Affiliates or any other Person shall be entitled to
bring or maintain any claim against any Purchaser Related Party relating to
arising out of or in connection with this Agreement or the Financing
Commitments, the transactions

37

 

--------------------------------------------------------------------------------

 

 

contemplated hereby or thereby, any representation made or alleged to have been
made in connection herewith or therewith or any matter forming the basis for any
termination hereof or thereof whether at law or equity, in contract, in tort or
otherwise, other than pursuant to Section 4.5(f).  

(c)

If this Agreement is terminated in accordance with Section 4.3 and 4.4,
notwithstanding anything to the contrary in this Agreement (including this
Section 4.5), under no circumstances will Seller, any Subsidiary of Seller, any
of their respective Affiliates or any other Person be entitled to aggregate
monetary damages or other monetary remedies for any Losses suffered as a result
of the failure of the transactions contemplated herein or in the Financing
Commitments to be consummated or for a breach or failure to perform hereunder or
thereunder or for any representation made or alleged to have been made in
connection herewith or therewith, in any case, except (i) to the extent payable,
the Purchaser Termination Fee and the Enforcement Expenses, if any, and (ii)
pursuant to Section 4.5(f).  For the avoidance of doubt, under no circumstances
shall Seller, any Subsidiary of Seller, any of their respective Affiliates or
any other Person be permitted or entitled to receive both a grant of specific
performance of Purchaser’s obligation to consummate the Closing and any portion
of the Purchaser Termination Fee, under this Agreement, the Financing
Commitments or otherwise.

(d)

If this Agreement is validly terminated in accordance with Section 4.3 and 4.4,
then each of the Parties shall be relieved of their duties and obligations
arising under this Agreement from and after the date of such termination and
such termination shall be without Liability to Purchaser or Seller; provided,
that all obligations of the Parties set forth in this Section 4.5,  Section 7.9
(Publicity), and Article XI shall survive any such termination and shall be
enforceable hereunder; provided,  further, that, subject to the limitations set
forth in this Section 4.5 (including Sections 4.5(b) and 4.5(c)), nothing in
this Section 4.5 shall relieve Seller or Purchaser of any Liability for (i)
fraud, (ii) willful and material breach of its representations and warranties or
(iii) willful and material breach of any of its other covenants or agreements
contained in this Agreement prior to the date of termination.

(e)

Notwithstanding the foregoing, the Confidentiality Agreement shall survive any
termination of this Agreement and nothing in this Section 4.5 is intended to,
nor shall it be construed as, a waiver or discharge of any of the rights and
obligations under the Confidentiality Agreement of the parties thereto.

(f)

Notwithstanding anything in this Agreement to the contrary, in the event that
this Agreement is terminated for any reason and either or both of the closing
conditions set forth in Section 8.1(h)(x) or Section 8.1(h)(y) have been
satisfied or any Foreign Stock Transfer Agreement with respect to Cross Dongguan
has been executed and/or filed with, or approved by, any Governmental Authority
or any Person has taken any actions in furtherance of the foregoing, then
Purchaser shall, shall cause its controlled Affiliates to, and shall use its
reasonable best efforts to cause its non-controlled Affiliates to, take all
actions legally required under Chinese Laws in connection with a transfer of
Capital Stock of Cross Dongguan to return to a state of affairs as if the
condition or conditions set forth in Section 8.1(h)(x) and Section 8.1(h)(y) had
not been satisfied and the Foreign Stock Transfer Agreements with respect to
Cross Dongguan had not been executed and/or filed and no person had taken any
actions in furtherance of the satisfaction of such conditions.  Without limiting
the foregoing, Purchaser shall, shall cause its controlled Affiliates to, and
shall use reasonable best efforts to cause its non-controlled Affiliates to, at
the request of Seller, effect (i) the approval of the local commerce bureau in
Dongguan, the

38

 

--------------------------------------------------------------------------------

 

 

approval of and registration with the local administration of industry and
commerce in Dongguan and any other PRC governmental authority with respect to
the transfer of Capital Stock of Cross Dongguan from Purchaser or any of its
Affiliates (as applicable) back to Seller or (or an Affiliate of Seller as
designated by Seller), (ii) the receipt of a business license of Cross Dongguan
evidencing Seller (or an Affiliate of Seller as designated by Seller) as the
equity owner of Cross Dongguan and (iii) the termination and/or withdrawal of
any filing, application, Contract, Permit, Order or other document or
certificate (including any Foreign Stock Transfer Agreement with respect to
Cross Dongguan) entered into, executed, filed or otherwise effected in
connection with the conditions set forth in Section 8.1(h)(x) and Section
8.1(h)(y), the Foreign Stock Transfer Agreements with respect to Cross Dongguan
or otherwise or any actions taken in furtherance thereof.  Purchaser hereby
covenants and agrees that, at any time and from time to time upon the reasonable
request of Seller in writing, Purchaser will do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be legally required under Chinese laws in connection with
equity transfer in Cross Dongguan in order to effect the transfers and other
actions contemplated by this Section 4.5(f).  Notwithstanding anything contained
in this Section 4.5(f), in the event of a termination of this Agreement pursuant
to Section 4.3(c), any actions taken by Purchaser or any of its Affiliates
pursuant to this Section 4.5(f) shall be at Seller’s sole cost and expense, and
Seller shall, upon request by Purchaser, promptly reimburse Purchaser or its
applicable Affiliate for such costs and expenses.  Purchaser acknowledges and
agrees that a breach of this Section 4.5(f) would cause irreparable damage to
the Seller and its Affiliates, and that the Seller and its Affiliates will not
have an adequate remedy at Law.  Therefore, the obligations of Purchaser and its
Affiliates under this Section 4.5(f) shall be enforceable to prevent or remedy
breaches or threatened breaches hereof by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith.  Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which Seller and its Affiliates may have under this Agreement or
otherwise.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the correspondingly numbered Section of the disclosure
letter, dated the date of this Agreement and delivered by Seller to Purchaser
prior to the execution of this Agreement (the “Disclosure Letter”), Seller
hereby represents and warrants to Purchaser that:

5.1 Organization and Good Standing.  Each of Seller and the Purchased
Subsidiaries is a legal Person, duly organized, validly existing and in good
standing under the Laws of its jurisdiction of formation and has all requisite
power and authority to own, lease and operate its properties and assets, and to
carry on its business as now conducted.  Each of Seller and the Purchased
Subsidiaries is duly qualified or authorized to do business and is in good
standing under the Laws of each jurisdiction in which it owns, operates or
leases real property and each other jurisdiction in which the conduct of its
business or the ownership, lease or operation of its properties requires such
qualification or authorization, except where the failure to be so qualified,
authorized or in good standing would not have a Material Adverse Effect.

39

 

--------------------------------------------------------------------------------

 

 

5.2 Authorization of Agreement.  Seller has all requisite power and authority to
execute, deliver and perform this Agreement and each Ancillary Agreement to
which Seller is or will be party (the “Seller Documents”), and to consummate the
transactions contemplated hereby and thereby.  The execution, delivery and
performance by each of Seller of this Agreement and each Seller Document, as
applicable, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite corporate action on the part
of Seller and no other proceeding, consent or authorization on the part of the
board of directors or the shareholders of Seller is necessary to authorize this
Agreement or any Seller Document or the transactions contemplated thereby.  This
Agreement has been, and each Seller Document will be at or prior to the Closing,
duly and validly executed and delivered by Seller and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each Seller Document when so executed and
delivered will constitute, the legal, valid and binding obligation of Seller
enforceable against Seller, in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
preferential transfers and similar Laws affecting creditors’ rights and remedies
generally, and subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity).

5.3 Conflicts; Consents of Third Parties.  

(a)

None of the execution, delivery or performance by Seller of this Agreement or
the Seller Documents, as applicable, the consummation of the transactions
contemplated hereby or thereby, or compliance by Seller with any of the
provisions hereof or thereof, as applicable, will conflict with, or result in
any violation of or infringement or default (with or without notice or lapse of
time, or both) under, or give rise to the creation of any Lien, except for
Permitted Exceptions, or a right of termination, amendment, acceleration or
cancellation under, any provision of (i) the articles of incorporation or
by-laws (or similar governing documents) of Seller or any Purchased Subsidiary;
(ii) any Contract or Permit to which Seller or any of the Purchased Subsidiaries
is a party or by which any of their respective properties or assets are bound;
(iii) any Order applicable to Seller or any of the Purchased Subsidiaries or by
which any of their respective properties or assets are bound; or (iv) any
applicable Law, other than, in the case of clauses (ii), (iii) and (iv), such
conflicts, violations, infringements, defaults, terminations, amendments,
accelerations or cancellations, that would not, individually or in the
aggregate, (x) prevent, materially delay or materially impair the consummation
of the transactions contemplated by this Agreement or (y) be material to the
Business, including the Purchased Subsidiaries, taken as a whole.

(b)

No consent, waiver, approval, Order, Permit, license, registration, approval or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of Seller or any Purchased
Subsidiary in connection with the execution, delivery and performance by Seller
or any Purchased Subsidiary of this Agreement or the Seller Documents or the
compliance by Seller or any Purchased Subsidiary with any of the provisions
hereof or thereof, or the consummation of the transactions contemplated hereby
or thereby, except for (i) the approval of the local commerce bureau in Dongguan
and the approval of and registration with the local administration of industry
and commerce in Dongguan, in each case with respect to the transfer of Capital
Stock of A.T. Cross

40

 

--------------------------------------------------------------------------------

 

 

Stationery (Dongguan) Co. Limited (“Cross Dongguan”) and (ii) such other
consents, waivers, approvals, Orders, Permits, licenses, registrations,
approvals or authorizations the failure of which to obtain would not (x)
prevent, materially delay or materially impair the consummation of the
transactions contemplated by this Agreement or (y) be material to the Business,
including the Purchased Subsidiaries, taken as a whole.

2.4

Purchased Subsidiaries; Capitalization.  Section 5.4 of the Disclosure Letter
sets forth the name of each Purchased Subsidiary and, with respect to each such
Purchased Subsidiary, (i) the jurisdiction in which it is incorporated or
organized, (ii) the jurisdictions, if any, in which it is qualified to do
business, (iii) its authorized number of shares of Capital Stock, (iv) the par
value per such shares of Capital Stock, if applicable, (v) its number of issued
and outstanding shares of Capital Stock, and (vi) the record owner of its issued
and outstanding shares of Capital Stock.  All of the Capital Stock of the
Purchased Subsidiaries was duly authorized for issuance and are validly issued,
fully paid and non-assessable (to the extent such concepts are applicable), and
were not issued in violation of any preemptive rights.  Except for the shares of
Capital Stock set forth in Section 5.4 of the Disclosure Letter, there is no
outstanding Capital Stock of any Purchased Subsidiary.  There is no existing
option, warrant, call, right, or Contract to which any Purchased Subsidiary is a
party requiring, and there are no securities of any Purchased Subsidiary
outstanding that upon conversion or exchange would require, the issuance of any
shares of Capital Stock of any Purchased Subsidiary convertible into,
exchangeable for or evidencing the right to subscribe for or purchase shares of
Capital Stock of any Purchased Subsidiary.  No Purchased Subsidiary is party to
any voting trust or other Contract with respect to the voting, redemption, sale,
transfer or other disposition of the shares of such Purchased Subsidiary.  There
is no Capital Stock of any Purchased Subsidiary reserved, issued or outstanding,
and there are no preemptive or other outstanding rights, right of first offer,
right of first refusal, subscriptions, options, warrants, stock appreciation
rights, phantom stock, profit participation rights, redemption rights,
repurchase rights, convertible, exercisable, or exchangeable securities or other
agreements, arrangements or commitments of any character relating to the issued
or unissued share capital or other ownership interest in any Purchased
Subsidiary or any other securities or obligations convertible or exchangeable
into or exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of any Purchased Subsidiary, and no securities
evidencing such rights are authorized, issued or outstanding.  No Purchased
Subsidiary has any outstanding bonds, debentures, notes or other obligations
which provide the holders thereof the right to vote (or are convertible or
exchangeable into or exercisable for securities having the right to vote) with
the stockholders of such Purchased Subsidiary on any matter.

2.5

Ownership and Transfer of Purchased Assets.  

(a)

Seller is the record and beneficial owner of all of the Purchased Equity, free
and clear of any and all Liens, and has full power and authority to convey the
Purchased Equity free and clear of any and all Liens.  Upon execution and
delivery of the Stock Power and all documentation required for the valid
transfer of the Foreign Purchased Equity in each jurisdiction governing the
transfer of the Foreign Purchased Equity, including pursuant to the forms
attached as Exhibit E (collectively, the “Foreign Stock Transfer Agreements),
the delivery of the Purchased Equity and the delivery of a new business license
in respect of Cross Dongguan evidencing Purchaser or a member of the Purchaser
Group (as designated by

41

 

--------------------------------------------------------------------------------

 

 

Purchaser) as the new equity owner by Seller will convey to Purchaser or a
member of the Purchaser Group good and marketable title to such Purchased
Equity, free and clear of any and all Liens.

(b)

Seller owns and has good and marketable title to each of the Other Purchased
Assets, free and clear of all Liens other than Permitted Exceptions, and has
full power and authority to convey the Purchased Assets free and clear of any
and all Liens other than Permitted Exceptions.  Upon execution and delivery of
the Bill of Sale and Assignment and Assumption Agreement or such other agreement
as may be required by local Law in form and substance reasonably satisfactory to
Purchaser (each a “Foreign Asset Transfer Agreement”), Seller will convey to
Purchaser or a member of the Purchaser Group good and marketable title to the
Other Purchased Assets free and clear of any and all Liens other than Permitted
Exceptions.

5.6 Financial Statements.  

(a)

Section 5.6 of the Disclosure Letter sets forth true and complete copies of (i)
the unaudited consolidated and consolidating balance sheets of the Business and
the corporate functions of Seller relating to the Business, in each case as at
December 29, 2012, December 31, 2011, January 1, 2011 and January 2, 2010 and
the related unaudited consolidated and consolidating statements of income of the
Business and the corporate functions of Seller relating to the Business for the
fiscal years then ended (collectively, the “Annual Financial Statements”) and
(ii) the unaudited consolidated and consolidating balance sheet of the Business
and the corporate functions of Seller relating to the Business, in each case as
at March 31, 2013 and the related consolidated and consolidating statements of
income of the Business and the corporate functions of Seller relating to the
Business for the three (3) month period then ended (collectively, the “Interim
Financial Statements” and collectively with the Annual Financial Statements, the
“Financial Statements”).  The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved, subject to the absence of notes and normal and recurring year-end
adjustments that are not, in the aggregate, material to the Business, taken as a
whole.  The Financial Statements fairly present in all material respects the
financial condition of the Business and the corporate functions of Seller
relating to the Business as of the respective dates they were prepared and the
results of the operations of the Business and the corporate functions of Seller
relating to the Business for the periods indicated.  For the purposes hereof,
the consolidated balance sheet of the Business and the corporate functions of
Seller relating to the Business as at December 29, 2012 is referred to as the
“Balance Sheet” and December 29, 2012 is referred to as the “Balance Sheet
Date”.

(b)

Except as set forth in the Financial Statements, none of Seller, the Business or
any Purchased Subsidiary maintains any “off-balance-sheet arrangement” within
the meaning of Item 303 of Regulation S-K of the SEC. 

2.7

No Undisclosed Liabilities.  None of Seller or any of the Purchased Subsidiaries
has any Liabilities of any kind that would have been required to be reflected
in, reserved against or otherwise described on the Balance Sheet or in the notes
thereto in accordance with GAAP and were not so reflected, reserved against or
described, other than (i) Liabilities incurred in the Ordinary Course after the
Balance Sheet Date that would not be, individually or in the aggregate, material
to the Business, including the Purchased Subsidiaries, taken as a whole or (ii)
as described in Section 5.7 of the Disclosure Letter.

42

 

--------------------------------------------------------------------------------

 

 

2.8

Absence of Certain Developments.  Except as required by this Agreement, since
the Balance Sheet Date (i) Seller and each of the Purchased Subsidiaries has
conducted the Business only in the Ordinary Course, (ii) none of Seller or any
Purchased Subsidiary has taken any action that would, after the date hereof, be
prohibited or omitted to take any action that would, after the date hereof, be
required, as the case may be, by Section 7.2, (iii) there has been no material
damage, destruction, condemnation, seizure or loss (whether or not covered by
insurance) affecting any of the Purchased Assets or the Business in any material
respect which has not subsequently been repaired, replaced or restored in all
material respects, (iv) Seller has not received written notice and has no
Knowledge of any pending or threatened condemnation proceeding affecting any
material portion of the Purchased Assets (or portion thereof) or of any sale or
other disposition of any material portion of the Purchased Assets in lieu of
condemnation, and (v) there has not been any event, change, occurrence or
circumstance that has had or would reasonably be expected to have a Material
Adverse Effect.

2.9

Taxes.  

(a)

With respect to Seller and the Business (other than with respect to the
Purchased Subsidiaries which are governed by Section 5.9(b) below, except in the
case of Section 5.9(a)(vii) which shall apply to the Purchased Subsidiaries):

(i)

all material Tax Returns required to be filed with respect to the Business have
been properly prepared and timely filed, and all such Tax Returns (including
information provided therewith or with respect thereto) are true, complete and
correct in all material respects;

(ii)

all material Taxes owed with respect to the Business have been fully and timely
paid (whether or not shown on any Tax Return), and adequate provision has been
made for any material Taxes that are not yet due and payable, for all taxable
periods, or portions thereof, ending on or before the date hereof;

(iii)

no audit or other proceeding by any Taxing Authority is pending or threatened
with respect to any Taxes due with respect to the Business, no Taxing Authority
has given notice of any intention to assert any deficiency or claim for
additional Taxes against Seller with respect to the Business, and no claim has
been made by any Taxing Authority in a jurisdiction where Seller does not file
Tax Returns that Seller is or may be subject to taxation by that jurisdiction,
and all deficiencies for Taxes asserted or assessed in writing against Seller
with respect to the Business have been fully and timely paid, settled or
properly reflected in the Financial Statements;

(iv)

there are no Liens for Taxes upon the Purchased Assets, except for statutory
Liens for current Taxes not yet due;

(v)

none of the Purchased Assets constitutes “tax exempt use property” within the
meaning of Section 168(h)(1) of the Code;

(vi)

none of the Purchased Assets is subject to a lease made pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954; and

43

 

--------------------------------------------------------------------------------

 

 

(vii)

neither Seller nor any of its Subsidiaries has constituted a “distributing
corporation” or a “controlled corporation” (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of shares qualifying for taxfree
treatment under Section 355 of the Code (i) in the two years prior to the date
hereof or (ii) in a distribution that could otherwise constitute part of a
“plan” or “series of related transactions” (within the meaning of Section 355(e)
of the Code) in conjunction with this acquisition.

(b)

With respect to the Purchased Subsidiaries:

(i)

all material Tax Returns required to be filed by or with respect to the
Purchased Subsidiaries have been properly prepared and timely filed, and all
such Tax Returns (including information provided therewith or with respect to
thereto) are true, complete and correct in all material respects;

(ii)

the Purchased Subsidiaries have fully and timely paid all Taxes shown to be due
on the Tax Returns described in Section 5.9(b)(i) and all other material Taxes
owed by such companies (whether or not shown on any Tax Return), and have made
adequate provision for any material Taxes that are not yet due and payable, for
all taxable periods, or portions thereof, ending on or before the date hereof;

(iii)

there are no outstanding agreements extending or waiving the statutory period of
limitations applicable to any claim for, or the period for the collection or
assessment or reassessment of, material Taxes due from the Purchased
Subsidiaries for any taxable period and no request for any such waiver or
extension is currently pending;

(iv)

no audit or other proceeding by any Taxing Authority is pending or  threatened
in writing with respect to any material Taxes due from or with respect to the
Purchased Subsidiaries, no Taxing Authority has given written notice of any
intention to assert any deficiency or claim for additional Taxes against any
Purchased Subsidiary, and no claim in writing has been made by any Taxing
Authority in a jurisdiction where any Purchased Subsidiary does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction, and all
deficiencies for Taxes asserted or assessed in writing against the Purchased
Subsidiaries have been fully and timely paid or settled or properly reflected in
the Financial Statements;

(v)

there are no Liens for Taxes upon the assets or properties of the Purchased
Subsidiaries, except for statutory Liens for current Taxes not yet due;

(vi)

no Purchased Subsidiary has  participated in any “listed transaction” within the
meaning of Treasury Regulations Section 1.6011-4(b) (or any similar provision of
state or local Tax Law, or to the Knowledge of Seller, foreign Tax Law);

44

 

--------------------------------------------------------------------------------

 

 

(vii)

no Purchased Subsidiary is a party to any Contract (excluding, for the avoidance
of doubt, commercial Contracts the principal purpose of which is unrelated to
Taxes) relating to the sharing, allocation or indemnification of Taxes, or any
similar agreement, contract or arrangement, (collectively, “Tax
Sharing Agreements”) or has any liability for Taxes of any Person (other than
members of the affiliated group, within the meaning of Section 1504(a) of the
Code, filing consolidated federal income Tax returns of which Seller  is the
common parent) under Treasury Regulation § 1.1502-6, Treasury Regulation §
1.1502-78 or similar provision of state, local or foreign Tax Law, as a
transferee or successor;

(viii)

the Purchased  Subsidiaries have each withheld from their respective employees,
independent contractors, creditors, stockholders and third parties and timely
paid to the appropriate Taxing Authority all material amounts that were required
to be withheld for all periods ending on or before the Closing Date and have
each complied in all material respects with all Tax information reporting
provisions of all applicable Laws;

(ix)

none of the Purchased Subsidiaries will be required to include in a taxable
period ending after the Closing Date taxable income attributable to income that
accrued in a taxable period prior to the Closing Date but was not recognized for
Tax purposes in such prior taxable period as a result of the installment method
of accounting, the completed contract method of accounting, the long-term
contract method of accounting, the cash method of accounting, Section 481 of the
Code or Section 108(i) of the Code, or comparable provisions of state, local or
foreign Tax Law; 

(x)

none of the Purchased Subsidiaries has executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any similar provision of
state, local or foreign Tax Law, and none of the Purchased Subsidiaries is
subject to any private letter ruling of the IRS or comparable ruling of any
other Taxing Authority; and 

(xi)

each Purchased Subsidiary is treated as a corporation for U.S.federal income tax
purposes.  Notwithstanding the preceding sentence, Cross UK shall be permitted
to make a “check-the-box” election on IRS Form 8832 to be treated as a
disregarded entity before the Closing Date. 

(c) The representations and warranties in this Section 5.9 and Section 5.14
represent the sole and exclusive representations and warranties of Seller
regarding Tax matters.

5.10 Real Property.  

(a)

None of Seller or any of the Purchased Subsidiaries owns any real property or
fee interests in real property.  Section 5.10 of the Disclosure Letter sets
forth a complete list of all leases, licenses, or other occupancy agreements
granting an interest in real property to Seller or any Purchased Subsidiary,
including all amendments, supplements, and guarantees relating thereto (each a
“Real Property Lease” and, collectively, the “Real Property Leases”), which
schedule also includes (i) the address of the Real Property Lease parcel, and
(ii)

45

 

--------------------------------------------------------------------------------

 

 

the name of each party under such Real Property Lease.  Seller and each
Purchased Subsidiary, as applicable, has a good, valid and enforceable leasehold
interest in and to the real property granted to it pursuant to each applicable
Real Property Lease, free and clear of all Liens, except Permitted Exceptions.

(b)

Each Real Property Lease is in full force and effect, unimpaired by any acts or
omissions of Seller and any Purchased Subsidiary, and all rent and other sums
and charges payable by Seller and any Purchased Subsidiary, as applicable, as
tenant under any Lease are current, no notice or default or termination under
any Real Property Lease is outstanding, no termination event or condition or
uncured default on the part of Seller or any Purchased Subsidiary or, to the
Knowledge of Seller, the landlord, exists under any Lease, and, to the Knowledge
of Seller, no event has occurred and no condition exists which, with the giving
of notice, the lapse of time, or both, would constitute such a default or
termination event or condition.  Prior to the date hereof, Purchaser has been
supplied with, or has been given access to, true, correct and complete copies of
the Real Property Leases (including all modifications, amendments, supplements,
and guarantees).

(c)

Neither Seller nor any Purchased Subsidiary has entered into any contract,
sublease, license, sublicense, commitment or any other agreement to assign any
of its rights under any of the Real Property Leases.

(d)

Other than the Real Property Leases listed in Section 5.10 of the Disclosure
Letter, none of Seller or any Purchased Subsidiaries leases and/or uses any real
property or interest therein in the conduct of the Business.

11.11

Tangible Personal Property.  Section 5.11 of the Disclosure Letter sets forth
all leases of personal property by Seller related to the Business or the
Purchased Subsidiaries involving annual payments in excess of $50,000 as lessee
or lessor (the “Personal Property Leases”).  Neither Seller nor any Purchased
Subsidiary has received any written notice of any material default or any event
that with notice or lapse of time, or both, would constitute a material default
by Seller or any Purchased Subsidiary, as applicable, under any of the Personal
Property Leases.  The facilities, machinery, equipment, furniture, leasehold
improvements, fixtures, vehicles, structures, related capitalized items and
other tangible property that are, individually or in the aggregate, material to
the Business (including the Purchased Furniture and Equipment) (the “Tangible
Property”) are in good operating condition and repair, ordinary wear and tear
excepted, and subject to continued repair and replacement in accordance with
past practice, and are suitable for their intended use.  During the past two (2)
years there has not been any interruption of the operations of the Business or
any Purchased Subsidiary due to inadequate maintenance of the Tangible Property
that was material to the Business taken as a whole.

11.12

Intellectual Property.  

(a)

Subject to the exclusion in the second sentence of Section 5.12(e), all
Intellectual Property used, held for use or necessary for use in the Business in
the manner and to the extent currently conducted is either (i) Business
Intellectual Property, or (ii) is used by any of Seller or its Subsidiaries
(other than COG) pursuant to a valid, written license Contract (“Licensed
Intellectual Property”).

46

 

--------------------------------------------------------------------------------

 

 

(b)

Section 5.12(b) of the Disclosure Letter sets forth an accurate and complete
list of all registrations and applications for registration of Business
Intellectual Property, and all of the applicable owners thereof.  Seller and the
Purchased Subsidiaries have taken all necessary commercially reasonable actions
to maintain the Business Intellectual Property, including prosecuting the
registrations and applications for registration of the Business Intellectual
Property and marking products created, marketed, produced or sold by the
Business in accordance with relevant Laws related to such Intellectual Property,
and making filings and payments of maintenance, renewal or similar fees for
registered, issued or pending Business Intellectual Property.

(c)

Seller or a Purchased Subsidiary owns all of the Trademark registrations and
applications set forth in Section 5.12(b) of the Disclosure Letter.

(d)

Subject to the exclusion in the second sentence of Section 5.12(e), Seller or a
Purchased Subsidiary owns or has licenses to use all material Business
Intellectual Property and Licensed Intellectual Property. Such Business
Intellectual Property and Licensed Intellectual Property are free and clear of
any and all Liens, other than Permitted Exceptions.  To the Knowledge of Seller,
the material Business Intellectual Property used by Seller in the Business and
by the Purchased Subsidiaries is valid and enforceable.

(e)

The operation of the Business does not infringe, misappropriate or otherwise
violate the Intellectual Property of any Person (excluding any patents or patent
rights) and, to the Knowledge of Seller, the operation of the Business does not
infringe, misappropriate or otherwise violate any patents or patent rights of
any Person.  For the avoidance of doubt, this Section 5.12(e) contains Seller’s
sole representations with respect to actual or alleged infringement of patents
or patent rights of any Person. There are no claims pending or threatened, that
(i) allege the operation of the Business infringes, misappropriates or is
otherwise in violation of any Intellectual Property of any Person or (ii)
challenge the validity, enforceability or ownership of any Business Intellectual
Property. To the Knowledge of Seller, no rights in any Business Intellectual
Property are being infringed, misappropriated or otherwise violated by any
Person; and, to the Knowledge of Seller, there is no existing fact or
circumstance which would be reasonably expected to give rise to any such
claim.  Neither Seller nor any Purchased Subsidiary has received any written
notice of any default or any event that with notice or lapse of time, or both,
would constitute a default under any Intellectual Property License to which
Seller or any Purchased Subsidiary is a party or by which it is bound.

(f)

Seller and the Purchased Subsidiaries have taken all commercially reasonable
security measures to protect the confidentiality of the Trade Secrets included
in the Purchased Assets.

(g)

Each present or past employee, officer, consultant or any other Person who
developed any Business Intellectual Property (including any software) has
executed a valid and enforceable Contract with Seller or a Purchased Subsidiary
that conveys to Seller or the applicable Purchased Subsidiary any and all right,
title and interest in and to all Intellectual Property developed by such Person
in connection with such Person’s employment or engagement by Seller or the
applicable Purchased Subsidiary.

(h)

Seller and its Subsidiaries are in material compliance with all applicable Laws
regarding the collection, use, transmission, storage and protection of Personal
Data collected or used in connection with the Business, and, to the Knowledge of
Seller, no Person has gained unauthorized access to or made any unauthorized use
of any such Personal Data.  Each of

47

 

--------------------------------------------------------------------------------

 

 

Seller and its Subsidiaries has commercially adequate security measures in place
to protect Personal Data collected or used in connection with the
Business.  Upon the Closing, Purchaser or a member of the Purchaser Group will
own or have the right to use all such Personal Data transferred to Purchaser and
continue to have the right to use such Personal Data on substantially similar
terms and conditions as Seller and its Subsidiaries enjoyed immediately prior to
the Closing.  No Actions are pending or, to the Knowledge of Seller, threatened
against Seller or its Subsidiaries relating to the collection or use of Personal
Data.

(i)

No Intellectual Property owned by COG is used, held for use or necessary for use
in the Business.

(j)

To the Knowledge of Seller, the Purchased IT Assets (i) are adequate for the
operations of the Business, (ii) operate and run as currently necessary for the
conduct of the Business, (iii) conform in all material respects to the written
specifications thereof in possession of Seller or a Purchased Subsidiary, (iv)
operate in accordance with the Seller’s and the Purchased Subsidiaries’
documentation provided with such Purchased IT Assets, and (v) are free of
viruses or other disabling code or disabling faults.  No rights under the
Business Intellectual Property are obligated to be (x) waived or (y) licensed to
any Person as a result of Seller’s or any of the Purchased Subsidiaries’ use of
“open source” code in any software.

5.13 Material Contracts.  

(a) Section 5.13(a) of the Disclosure Letter sets forth a true and complete list
of all Material Contracts.  For purposes of this Agreement, a “Material
Contract” means the following Contracts (x) relating to the Business to which
Seller or any of its assets or properties are bound or (y) to which any
Purchased Subsidiary is a party or by which it or any of its assets or
properties are bound, in each case including all amendments, modifications or
supplements thereto as of the date hereof (it being understood that any Contract
described in the categories set forth below, whether or not listed in Section
5.13(a) of the Disclosure Letter, shall be a Material Contract):

(i)

Contracts with Seller or any of its Affiliates, or any current stockholder
holding in excess of 5% of the Capital Stock of Seller as of the date hereof,
officer or director of Seller or any of its Affiliates (or any family member of
the foregoing);

(ii)

Contracts with any labor union or association representing any employee of
Seller that works in the Business or any employee of any Purchased Subsidiary;

(iii)

Contracts for the sale of any of the assets (including Inventory) of Seller
related to the Business or any of the assets (including Inventory) of any
Purchased Subsidiary for consideration in excess of $200,000 received in
calendar year 2011 or 2012, other than Contracts with distributors or sales
agents that are the subject of Section 5.13(a)(vii);  

(iv)

Intellectual Property Licenses;

(v)

Contracts for goods and services furnished to the Business or any Purchased
Subsidiary that involved individual or aggregate payments or consideration of
more than $500,000 in calendar year 2011 or 2012;

48

 

--------------------------------------------------------------------------------

 

 

(vi)

Contracts relating to the incurrence of Indebtedness, or the making of any
loans;

(vii)

any distribution Contract or agency Contract with a distributor or agent
relating to the distribution of either the Business’ Products either within the
United States or internationally under which Seller or any Purchased Subsidiary
received at least $500,000 in calendar year 2011 or 2012;

(viii)

any material Contract containing a “most favored nation” provision or which
contains any non-competition provision that currently limits in any material
respect the ability of the Business or the Purchased Subsidiaries to engage in
any business or compete with any Person;

(ix)

any noncompetition or nonsolicitation Contract with any current or former
Business Employee, Business Service Provider, or third party relating to the
Business or the Purchased Assets other than any such Contracts entered into in
connection with a potential sale of the Business in connection with the process
leading to this Agreement;

(x)

any Contract that involves non-cancelable commitments to make capital
expenditures or which provide for future payments for goods or services by the
Business or any Purchased Subsidiary to any Person and include an expenditure or
purchase commitment reasonably expected to exceed $100,000 in the next 12
months;

(xi)

any joint venture, limited liability company, partnership or similar agreements
with any third party;

(xii)

any Contracts pursuant to which the Business or any Purchased Subsidiary is a
lessee of any personal property, for which the aggregate annual base rent or
lease payments exceed $100,000;

(xiii)

any Contract entered into in the past three (3) years involving any resolution
or settlement of any actual or threatened Legal Proceeding providing for
payments by Seller or any Purchased Subsidiary in excess of  $25,000 or which
imposes material continuing obligations;

(xiv)

any Contract providing for any change-in-control payment or similar compensation
obligations to Business Employees by reason of the transactions contemplated by
this Agreement; and

(xv)

any Contract under which the Business or any of the Purchased Subsidiaries has
continuing material indemnification obligations to any Person, other than those
entered into in the Ordinary Course.

(b) Each Material Contract is and will be as of the Closing Date a legal, valid
and binding obligation of Seller and each Purchased Subsidiary, as applicable,
and, to the Knowledge of Seller, of each counterparty thereto, and is in full
force and effect, and none of Seller, such Purchased Subsidiary, or to the
Knowledge of Seller, any other party thereto, is in breach of, or in default
under, any such Material Contract in any material respect, and no event has
occurred that with notice or lapse of

49

 

--------------------------------------------------------------------------------

 

 

time or both would constitute such a breach or default thereunder by Seller or
any Purchased Subsidiary, or, to the knowledge of Purchaser, any other party
thereto.  Prior to the date hereof, Purchaser either has been supplied with, or
has been given access to, a true and complete (i) copy of each written Material
Contract and (ii) summary of all of the material terms and conditions of each
oral Material Contract.

5.14 Employee Benefits Plans.  

(a)

Section 5.14(a) of the Disclosure Letter sets forth a true, correct and complete
list of each material Business Benefit Plan and Seller Benefit Plan (other than
any individual grant agreement or employment agreement with any Non-U.S.
Business Employee which is terminable on less than 90 days’ notice and without
severance pay exceeding the amount required under applicable Law and the amount
under the severance plan applicable generally to similarly situated employees at
such work location), and specifies the sponsor of each such plan.  All Purchased
Subsidiary Benefit Plans are Business Benefit Plans.

(b)

Seller has provided Purchaser with true and complete copies of each Business
Benefit Plan and Seller Benefit Plan (or, in the case of any such Benefit Plan
that is unwritten, descriptions thereof), and with respect thereto, if
applicable: (i) the most recent annual reports on Form 5500 required to be filed
with the IRS, any attached financial statement and any related actuarial reports
(if applicable), (ii) the most recent summary plan description, (iii) the
currently applicable trust agreement, insurance contract, or other funding
vehicle and (iv) all material correspondence to or from any Governmental Body in
the last three years.

(c)

Each Business Benefit Plan and Seller Benefit Plan has been administered in all
material respects in accordance with its terms and is in compliance with the
applicable provisions of ERISA, the Code and all other applicable Laws, except
for any noncompliance that would not be material to the Business taken as a
whole.  With respect to each Governmental Plan, (i) Seller and its Affiliates
have complied in all material respects with the requirements thereof, and (ii)
no Liability has been incurred by Seller or any of its Affiliates that has not
been satisfied in full (other than with respect to amounts for which the due
date without penalty has not yet occurred).  Each Business Benefit Plan and
Seller Benefit Plan intended to be “qualified” within the meaning of Section
401(a) of the Code has received a favorable determination letter from the IRS or
is entitled to rely upon a favorable opinion issued by the IRS, and, to the
Knowledge of Seller, there are no existing circumstances or any events that have
occurred that could reasonably be expected to adversely affect the qualified
status of any such plan.  No current or former Business Employee or Business
Service Provider has been improperly excluded from participation in any Benefit
Plan.

(d)

Except as specifically contemplated by this Agreement, neither the execution and
delivery of this Agreement nor the transactions contemplated by this Agreement
(either alone or in combination with another event) shall result in (i) any
increase or payment in the compensation or benefits (including severance pay,
retention bonus or change-in-control payment) of any Business Employee or
Business Service Provider, (ii) the acceleration of payment, funding, or vesting
of any rights of any Business Employee or Business Service Provider under any
Benefit Plan (including under any employment agreement with Seller or any of the
Purchased Subsidiaries), (iii) forgiveness of indebtedness, trigger of any
funding

50

 

--------------------------------------------------------------------------------

 

 

obligation under any Benefit Plan or (iv) impose any restrictions or limitations
on the right of any of Seller, Purchaser or their respective Affiliates to amend
or terminate any Benefit Plan.

(e)

Neither the execution and delivery of this Agreement nor the transactions
contemplated by this Agreement (either alone or in combination with another
event) shall (i) result in any payment or deemed payment (whether in cash,
property, the vesting of property or otherwise) to any “disqualified individual”
(as such term is defined in Treasury Regulation Section 1.280G-1) that could
reasonably be construed, individually or in combination with any other such
payment, to constitute a “excess parachute payment” (as defined in Section
280G(b)(1) of the Code) or (ii) constitute a change in ownership or control
within the meaning of Section 280G of the Code.  No Person is entitled to
receive any additional payment (including any tax gross-up or other payment)
from Seller or its Affiliates as a result of the imposition of the excise Taxes
required by Section 4999 of the Code or any Taxes required by Section 409A of
the Code.

(f)

None of Seller or any ERISA Affiliates (i) has, or within the last six (6) years
has had, any Liability with respect to any multiemployer plan (as defined in
Section 4001(a)(3) of ERISA), any plan subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Code, or any “multiple
employer plan” within the meaning of Section 4063 or 4064 of ERISA, or (ii)
has  been involved in any transaction that could cause the Purchased
Subsidiaries or the Business, or following the Closing, Purchaser or its
Affiliates to  be subject to liability under Section 4069 of ERISA.  No
Liability under Title IV of ERISA has been incurred by Seller or any of its
ERISA Affiliates that has not been satisfied in full (other than with respect to
amounts not yet due).

(g)

No Business Benefit Plan or Seller Benefit Plan provides for medical,
disability, life insurance or other welfare benefits (other than severance
benefits) coverage with respect to any of the Business Employees or Business
Service Providers for claims incurred after their retirement, other than (i)
coverage mandated by COBRA or other applicable Law and at the expense of the
employee or former employee, (ii) benefits under any “employee pension benefit
plan” (as such term is defined in Section 3(2) of ERISA), (iii) coverage through
the last day of the calendar month in which a termination of employment occurs
or (iv) conversion rights under any insurance policy.  No condition or
circumstance exists which would prevent or restrict the amendment or termination
of any post-retirement medical or welfare benefit coverage made available to any
U.S. Business Employee under any Transferred Benefit Plan.

(h)

As of the date hereof, there is no pending or, to the Knowledge of Seller,
threatened material Legal Proceedings relating to any Business Benefit Plan or
Seller Benefit Plan.  As of the date hereof, there is no pending or, to the
Knowledge of Seller, threatened material Legal Proceedings against the Seller or
any of its Affiliates relating to the Business and any Government Plan.  There
are no pending, threatened or, to the Knowledge of Seller, anticipated claims
(other than claims for benefits in accordance with the terms of the Benefit
Plans) by, on behalf of or against any of the Benefit Plans or any trusts
related thereto that could reasonably be expected to be material to the
Business, including the Purchased Assets, taken as a whole.  None of Seller,
Seller’s Affiliates, any Benefit Plan, or, to the Knowledge of Seller, any
trustee, administrator, other third-party fiduciary and/or party-in-interest
thereto, has engaged in any breach of fiduciary responsibility or any
“prohibited transaction” (as such term is defined in

51

 

--------------------------------------------------------------------------------

 

 

Section 406 of ERISA or Section 4975 of the Code), which could reasonably be
expected to be material to the Business taken as a whole.

(i)

Except for those matters that, individually or in the aggregate, have not been
and would not reasonably be expected to be material to the Business taken as a
whole, each Business Benefit Plan and Seller Benefit Plan that is maintained
outside the jurisdiction of the United States and/or primarily for the benefit
of employees outside of the United States, including any such plan required to
be maintained or contributed to by applicable Law, custom or rule of the
relevant jurisdiction (i) complies with applicable local Law, (ii) if and to the
extent required by applicable Law or Contract to be funded prior to the year in
which benefit payments are made, is fully funded and/or book reserved, as
appropriate, based upon reasonable actuarial assumptions, (iii) has been
registered to the extent required, and has been maintained in good standing with
applicable regulatory authorities and, (iv) if intended to qualify for special
Tax treatment, meets all requirements for such treatment.

(j)

All contributions (including all employer contributions and employee salary
reduction contributions), premium payments and other payments required to be
made in respect of any Benefit Plan and any Governmental Plan, under the terms
of any such Benefit Plan or Government Plan, related funding arrangement or in
accordance with applicable Law, have, in all material respects, been paid within
the time so prescribed or have been properly accrued in accordance with GAAP.

(k)

Each Business Benefit Plan and Seller Benefit Plan that is a “nonqualified
deferred compensation plan” (as such term is defined in Section 409A(d)(1) of
the Code) is in material compliance with Section 409A of the Code and the
regulations thereunder, and none of such Benefit Plans or the completion of the
transactions contemplated hereunder will cause a Business Employee or Business
Service Provider to be subject to the Tax imposed by Section 409A(a)(1)(B) of
the Code.

5.15 Labor.  

(a)

None of Seller or any Purchased Subsidiary is a party to any labor, collective
bargaining or works council agreement, and no such agreement is currently being
negotiated with respect to any Business Employee.  There are no labor or
contractual claims that may be asserted by any union, works council or employee
group that could reasonably be expected to be material to the Business,
including the Purchased Assets, taken as a whole, or that could prevent,
materially delay or materially impair the consummation of the transactions
contemplated by this Agreement.  There is not pending or, to the Knowledge of
Seller, threatened, and there has not been in the past three (3) years, any
organized effort or demand for recognition or certification or attempt to
organize the Business Employees by any labor organization.

(b)

There are no, and in the past three (3) years there have not been, any (i)
strikes, work stoppages, work slowdowns or lockouts pending or, to the Knowledge
of Seller, threatened against or involving Seller or any Purchased Subsidiary,
or (ii) unfair labor practice charges, grievances or material complaints pending
or, to the Knowledge of Seller, threatened by or on behalf of any employee or
group of employees of Seller or any Purchased Subsidiary, except in each case as
would not be material to the Business taken as a whole.  With respect to any
Person performing services on behalf of the Business on or prior to the Closing,
neither Seller nor any Purchased Subsidiary has any Liability with respect to
any misclassification of

52

 

--------------------------------------------------------------------------------

 

 

such Person as an independent contractor rather than as an employee, or as an
“exempt” employee rather than a “non-exempt” employee (within the meaning of the
Fair Labor Standards Act of 1938, as amended), or with respect to such Person’s
status as a leased employee.

(c)

To the extent permitted by local Laws, Section 5.15(c)(i) of the Disclosure
Letter sets forth a true, correct and complete list as of the date hereof of all
Business Employees, including each Business Employee’s (i) name, (ii) job title
or function (and indicating whether the Business Employee is fully or primarily
employed by the Business), (iii) job location, (iv) salary or wage rate, (v)
bonus opportunity, commission status or other incentive compensation paid or
payable for 2013, (vi) bonus, commission or incentive compensation paid in 2012,
(vii) the amount of accrued but unused vacation time, (viii) date of hire, and
(ix) leave of absence status.  Section 5.15(c)(ii) of the Disclosure Letter sets
forth a true, correct and complete list of all Business Service Providers,
including each such Person’s (A) name, (B) function or services provided, (C)
job location, and (D) current compensation structure.

(d)

There has been no “mass layoff” or “plant closing” (as defined by the WARN Act)
with respect to Seller or the Business within the past six months.  Neither
Seller nor any Affiliate of Seller has incurred any Liability under the WARN Act
that remains unpaid or unsatisfied. To the extent that, after the Closing,
Purchaser operates the Business in the same manner operated by Seller and its
Affiliates during the six-month period prior to the Closing, Purchaser will not
incur any Liability under the WARN Act as a result of any layoffs or other
employment terminations made by Seller or any of its Affiliates during such
six-month period prior to the Closing.

(e)

As of the date of this Agreement, no current Business Employee who has an annual
salary in excess of $200,000 has given written notice of resignation to Seller
or any of its Affiliates.  Seller has not made any statement to any Business
Employee providing that such Business Employee would continue employment with
Purchaser after the Closing or that an offer of employment would be made with
terms inconsistent with Section 7.11.  To the Knowledge of Seller, no Business
Employee is in any material respect in violation of any term of any employment
contract, non-disclosure agreement or noncompetition agreement.

(f)

The Purchased Subsidiaries which are incorporated in the People’s Republic of
China have timely paid the full amount of the social security fees that were
required to be paid no later than the date of this Agreement for each of their
employees in accordance with Chinese Law as of the date hereof.

(g)

The Purchased Subsidiaries which are incorporated or registered in the Hong Kong
Special Administrative Region of People’s Republic of China (“Hong Kong”) have
enrolled all of its eligible employees under the Mandatory Provident Fund Scheme
in Hong Kong to the extent required in accordance with applicable Law and have
duly made all relevant mandatory contributions that were required to be paid no
later than the date of this Agreement.

11.16

Litigation.  There are no Legal Proceedings pending or, to the Knowledge of
Seller, threatened against Seller relating to the Business or any Purchased
Subsidiary before any Governmental Body, which, if adversely determined, would
be material to the Business taken as a whole.  None of Seller or any Purchased
Subsidiary is subject to any material Order that prohibits or otherwise
restricts the ability of Seller or any Purchased Subsidiary to enter into this

53

 

--------------------------------------------------------------------------------

 

 

Agreement or the Seller Documents or to consummate fully the transactions
contemplated hereby or thereby.

11.17

Compliance with Laws; Permits.  

(a)

Seller and each Purchased Subsidiary is operating the Business in compliance
with all Laws and Orders applicable to the Business, except where the failure to
be in compliance would not be material to the Business, including the Purchased
Subsidiaries, taken as a whole.  None of Seller or any Purchased Subsidiary has
received any written notice of or been charged with the violation of any Laws,
except where such violation would not be material to the Business, including the
Purchased Subsidiaries, taken as a whole.

(b)

Seller and each Purchased Subsidiary, and, to the Knowledge of Seller, their
respective employees, agents and consultants, and each other Person acting for,
or on behalf of, Seller or a Purchased Subsidiary, have complied and are in
currently compliance with all Anti-Corruption Laws and other U.S. and foreign
anti-bribery Laws.  Notwithstanding the provisions of the immediately preceding
sentence, the representations set forth in such sentence shall be applicable to
Seller’s and the Purchased Subsidiary’s employees, agents and consultants, and
other Persons acting for, or on behalf of, Seller or any Purchased Subsidiary
solely to the extent that the actions of such Persons could result in the
imposition of Liability on Purchaser or a Purchased Subsidiary under
Anti-Corruption Laws and other U.S. and foreign anti-bribery Laws.

(c)

None of Seller any Purchased Subsidiary or, to the Knowledge of Seller, any of
their respective employees, agents or other Persons acting on behalf of Seller
or any Purchased Subsidiary has, directly or indirectly, offered, paid, promised
to pay, or authorized the payment of any money, or offered, given, promised to
give, or authorized the giving of anything of value, including but not limited
to cash, checks, wire transfers, tangible and intangible gifts, favors,
services, and those entertainment and travel expenses that go beyond what is
reasonable and customary and of modest value, to any Governmental Body or
Government Official or to any person under circumstances where Seller any
Purchased Subsidiary or any of their respective employees knew or ought
reasonably to have known (after due and proper inquiry) that all or a portion of
such money or thing of value would be offered, given, or promised, directly or
indirectly, to a Person:

(i)

for the purpose of: (i) influencing any act or decision of a Governmental Body
in their official capacity; (ii) inducing a Governmental Body to do or omit to
do any act in violation of their lawful duties; (iii) securing any improper
advantage; (iv) inducing a Government Official to influence or affect any act or
decision of any Governmental Body; or (v) assisting Seller or any Purchased
Subsidiary or any of their employees or any other Person acting on behalf of
Seller or any Purchased Subsidiary in obtaining or retaining business for or
with, or directing business to, Seller or any Purchased Subsidiary; or

(ii)

in a manner which would constitute or have the purpose or effect of public or
commercial bribery, acceptance of, or acquiescence in extortion, kickbacks, or
other unlawful or improper means of obtaining business or any improper
advantage.

(d) None of Seller or any Purchased Subsidiary has conducted or initiated any

54

 

--------------------------------------------------------------------------------

 

 

internal investigation or made a voluntary, directed, or involuntary disclosure
to any Government Body or similar agency with respect to any alleged act or
omission arising under or relating to any noncompliance with any Anti-Corruption
Law and none of Seller or any Purchased Subsidiary has received any notice,
request, or citation for any actual or potential noncompliance with any of the
foregoing.

(e)

No officer, director, or employee of Seller or any Purchased Subsidiary is a
Governmental Official. To the Knowledge of Seller, no Governmental Official or
Government Body presently owns an interest, whether direct or indirect, in
Seller or any Purchased Subsidiaries or has any legal or beneficial interest in
Seller or any Purchased Subsidiaries or to payments made to Seller by Purchaser
hereunder.

(f)

Seller and its Affiliates have complied in all material respects with all
applicable Labor Laws for all Business Employees and Business Service
Providers.  None of Seller or any of its Affiliates is the subject of, nor, to
the Knowledge of Seller, is there threatened, any Legal Proceeding reasonably
likely to give rise to a material Liability asserting that Seller or any of its
Affiliates has committed an unfair labor practice, act of discrimination, or
other similar complaints with respect to any Business Employee or Business
Service Provider.

(g)

Section 5.17(g) of the Disclosure Letter sets forth a complete and correct list,
as of the date of this Agreement, of all material Permits issued in connection
with the Business to Seller or any Purchased Subsidiary, each of which are
validly held by Seller or such Purchased Subsidiary.  The Permits set forth in
Section 5.17(g) of the Disclosure Letter are all of the Permits that are
required for the operation of the Business as presently conducted, other than
those the failure of which to possess would not (i) be material to the Business,
including the Purchased Subsidiaries, taken as a whole or (ii) prevent,
materially delay or materially impair the consummation of the transactions
contemplated by this Agreement.  None of Seller or any Purchased Subsidiary is
in default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any term,
condition or provision of any Permit related to the Business to which it is a
party, except where such default or violation would not be material to the
Business, including the Purchased Subsidiaries, taken as a whole or that would
prevent, materially delay or materially impair the consummation of the
transactions contemplated by this Agreement.

5.18 Environmental Matters.  The representations and warranties contained in
this Section 5.18 are the sole and exclusive representations and warranties of
Seller pertaining to any matters arising under any Environmental Laws.  Except
as would not, individually or in the aggregate, be material to the Business
taken as a whole:

(a)

Except for any noncompliances specifically identified in the Environ Reports,
the operations of Seller with respect to the Business and the operations of each
of the Purchased Subsidiaries are and have been, for the past three years, in
compliance with all applicable Environmental Laws, which compliance includes
obtaining, maintaining and complying with any Permits required under all
applicable Environmental Laws necessary to operate its business (“Environmental
Permits”); all such Environmental Permits are in full force and effect;

(b)

none of Seller (with respect to the Purchased Assets or any Purchased Subsidiary
is subject to any pending or, to the Knowledge of Seller, threatened Legal
Proceeding

55

 

--------------------------------------------------------------------------------

 

 

or Order alleging that such Person may be in violation of any Environmental Law
or any Environmental Permit or may have any Liability under any Environmental
Law or related to Hazardous Materials;

(c)

to the Knowledge of Seller, there are no currently known conditions that would
reasonably be expected to result in Purchaser or any Purchased Subsidiary
incurring any Liability pursuant to any Environmental Law; and

(d)

Seller has made available all material environmental investigations, studies,
reviews and other environmental analyses conducted in relation to the current or
prior business or property of the Purchased Subsidiaries or any property owned,
leased or operated by the Business, and that are not Excluded Liabilities or
Purchased Subsidiary Legacy Environmental Liabilities, that are in the
possession or control of Seller or any of the Purchased Subsidiaries.

5.19 Financial Advisors.  Except for C.W. Downer & Co., no Person has acted,
directly or indirectly, as a broker, finder or financial advisor for Seller or
any Purchased Subsidiary in connection with the transactions contemplated by
this Agreement and no such Person is entitled to any fee or commission or like
payment from Purchaser in respect thereof.

5.20 Products; Product and Service Warranties; Product Liability.  Section 5.20
of the Disclosure Letter sets forth a list of all express written warranties by
Seller or any of the Purchased Subsidiaries in connection with Product
sales.  Since January 1, 2011, (a) to the Knowledge of Seller, except for
customer returns and allowances in the Ordinary Course, the products
manufactured and sold by the Business and the services provided by the Business
conform with all applicable contractual commitments and warranties in all
material respects and (b) there have been no material product liability Legal
Proceedings against Seller or any Purchased Subsidiary that involves any
Products arising out of any injury to any individual or property as a result of
the use of any such Product.  Section 5.20 of the Disclosure Letter sets forth
all material product liability claims settled by Seller or any Purchased
Subsidiary relating to the Business since January 1, 2011.

5.21 Sufficiency of Assets.  The Purchased Assets and the assets of the
Purchased Subsidiaries (a) together with the assets, properties and services to
be utilized by or provided to Purchaser under the Transition Services Agreement,
constitute all the assets and properties used or held for use by Seller and the
Purchased Subsidiaries in connection with or otherwise related to the Business
and includes all of the assets and properties as are necessary for the conduct
of the Business by Seller and its Subsidiaries as of immediately prior to the
Closing and (b) are in good and working order (subject to normal wear and
tear).  No assets owned or used by COG are used, held for use or necessary for
use in the Business.

5.22 Affiliate Transactions; Shared Contracts.  None of Seller, any Affiliate of
Seller (other than any of the Purchased Subsidiaries), any current or former
officer, director, stockholder or Affiliate of any of the Purchased Subsidiaries
and any immediate family member of any of the foregoing Persons is a party to or
the beneficiary any Contract with any of the Purchased Subsidiaries or has any
interest in any property used by any of the Purchased Subsidiaries, other than
for Purchased Assets.  Section 5.22 of the Disclosure Letter sets forth a true
and complete list of each Contract (in each case that are not Purchased Assets)
between

56

 

--------------------------------------------------------------------------------

 

 

Seller or any of its Affiliates (other than a Purchased Subsidiary), on the one
hand, and any third party, on the other hand, pursuant to which the Business
receives the benefit or use of any assets or services.

5.23 Inventory.  None of the Inventory reflected on the Balance Sheet is not
useable or, with respect to finished goods, saleable in the Ordinary Course,
subject to such reserves and write-downs as are reflected on the Balance Sheet
(or in any notes thereto), as adjusted for operations and transactions through
the Closing Date in accordance with the past custom and practice of the
Business.

5.24 Customers and Suppliers.  Section 5.24 of the Disclosure Letter sets forth
a true and complete list, for the 12 months ended in calendar year 2012, of the
20 largest customers of goods and services of the Business and the 20 largest
suppliers of goods and services to the Business.  No Person set forth in Section
5.24 of the Disclosure Letter (i) has threatened in writing to cancel or
otherwise terminate or, to the Knowledge of Seller, intends to cancel or
otherwise terminate, the relationship of such Person with Seller or any
Purchased Subsidiary or (b) has materially modified or decreased materially or
threatened in writing to materially modify or decrease materially or limit
materially or, to the Knowledge of Seller, intends to materially modify its
relationship with Seller or any Purchased Subsidiary or intends to decrease
materially its purchases from, or services or supplies to, Seller or any
Purchased Subsidiary.

5.25 Accounts Receivable.  All of the outstanding accounts receivable shown on
the Balance Sheet have been valued in accordance with GAAP and represent, as of
the respective dates thereof, valid Liabilities arising from sales actually made
or services actually performed, in each case, in the Ordinary Course.  All of
the outstanding accounts receivable deemed uncollectible have been reserved
against on the Financial Statements in accordance with GAAP.  The accounts
receivable created since the Balance Sheet Date have been created in the
ordinary course of business consistent with past practice.  Since the Balance
Sheet Date, neither Seller nor any Purchased Subsidiary has canceled, or agreed
to cancel, in whole or in part, any accounts receivable of the Business except
in the Ordinary Course.

5.26 Accounting Controls.  The accounting controls of Seller and the Purchased
Subsidiaries, taken as a whole, has been since the Balance Sheet Date and are
sufficient to provide reasonable assurances that (i)  transactions are executed
in accordance with management’s general or specific authorization, and
(ii)  transactions are recorded as necessary to permit the accurate preparation
of financial statements in accordance with GAAP in all material respects.

5.27 Insurance.  Section 5.27 of the Disclosure Letter sets forth a true and
complete summary of all insurance policies maintained by Seller relating to the
Business and each Purchased Subsidiary.  All such insurance policies and binders
are valid, binding and in full force and effect.  Neither Seller nor any
Purchased Subsidiary has received any notice of cancellation or non-renewal of
any such policies or binders nor, to the Knowledge of Seller, is the termination
of any such policies or binders threatened.  There is no material Legal
Proceeding pending under any of such policies or binders as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
binders.  Seller has provided Purchaser with loss-runs for the last three (3)
years in respect of Seller relating to the Business and each of the Purchased

57

 

--------------------------------------------------------------------------------

 

 

Subsidiaries for the insurance policies listed as items 1, 2, 3, 6, 7, 8, 9, 10,
11, 13, 14, 15, 16, 17, 18, 19, 26, 34, 41, 43 and 46 on Section 5.27 of the
Disclosure Letter.

5.28 Distribution Channel.  Neither Seller nor any Purchased Subsidiary, has,
since the Balance Sheet Date, effected any sales of its Products to any customer
of the Business (i) with payment terms longer than terms customarily offered by
Seller or any Purchased Subsidiary for such Products, (ii) at a greater discount
from listed prices than customarily offered for such Products, (iii) at a price
that does not give effect to any previously announced general increase in the
list price for such Products, (iv) with shipment terms more favorable to any
customer than the shipment terms customarily offered by Seller or any Purchased
Subsidiary for such Products, (v) to the Knowledge of Seller, in a quantity
greater than the reasonable retail or wholesale (as the case may be) resale
requirements of the particular customer or (vi) in conjunction with other
material benefits not generally offered to customers, in each case outside the
Ordinary Course and in a manner that, to the Knowledge of Seller, would
reasonably be expected to result in a material reduction, temporary or
otherwise, in the demand for any Products by such customer after the
Closing.    

5.29 Cross Dongguan FX Payable.  The account payable from Cross Dongguan to
Seller in an amount equal to RMB 23,431,320 (as of May 31, 2013 and subject to
adjustment in the Ordinary Course since that date) reflected in the FX Control
System (the “FX Payable”) represents a valid Liability to Seller, and Seller
possesses sufficient documentation that, together with any additional
documentation that is reasonably capable of being completed by Seller (or
Purchaser following the Closing), would permit Cross Dongguan to distribute cash
in the amount of the FX Payable to Seller (or to Purchaser following the
Closing) in compliance with all applicable Law (including the requirements of
the FX Control System).

5.30 No Other Representations or Warranties; Disclosure Letter.  Except for the
representations and warranties expressly contained in this Article V, neither
Seller nor any other Person is making or has made any other representation or
warranty, express or implied, in law or in equity, in respect of Seller, its
Subsidiaries, the Business, the Purchased Assets, the Assumed Liabilities or the
transactions contemplated by this Agreement, and Seller disclaims any other
representations or warranties, whether made by Seller, any Affiliate of Seller
or any of their respective officers, directors, employees, agents or
representatives.  Except for the representations and warranties expressly
contained in Article V, Seller (i) expressly disclaims any representation or
warranty, expressed or implied, at law or in equity, relating to the condition
of the Purchased Assets (including any implied or expressed warranty of
merchantability or fitness for a particular purpose, or of conformity to models
or samples of materials) and (ii) hereby disclaims all Liability and
responsibility for any representation, warranty, projection, forecast,
statement, or information made, communicated, or furnished (orally or in
writing) to Purchaser or its Affiliates or representatives (including any
opinion, information, projection, or advice that may have been or may be
provided to Purchaser by any director, officer, employee, agent, consultant, or
representative of Seller or any of its Affiliates).  Seller makes no
representations or warranties to Purchaser regarding the probable success or
profitability of the Business.  The disclosure of any matter or item in any
Section of the Disclosure Letter hereto shall not be deemed to constitute an
acknowledgment that any such matter is required to be disclosed.

58

 

--------------------------------------------------------------------------------

 

 

5.31 Further Acknowledgements.  Except for the representations and warranties
expressly set forth in Article VI, Seller acknowledges and agrees that (i)
neither Purchaser nor any other Person is making or has made, and Seller is not
relying on, any representation or warranty, expressed or implied, in law or in
equity, in respect of Purchaser, its Subsidiaries or the transactions
contemplated by this Agreement, and (ii) Seller is not relying on any other
representations or warranties, whether made by Purchaser, any Affiliate of
Purchaser or any of their respective officers, directors, employees, agents or
representatives.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Seller that:

6.1 Organization and Good Standing.  Purchaser is a limited partnership duly
organized, validly existing and in good standing under the Laws of the State of
Delaware and has all requisite limited partnership power and authority to own,
lease and operate its properties and assets and carry on its business as now
being conducted.

6.2 Authorization of Agreement.  Purchaser has full corporate, partnership or
other company power and authority to execute, deliver and perform this Agreement
and each Ancillary Agreement to which Purchaser is or will be party (the
“Purchaser Documents”), and to consummate the transactions contemplated hereby
and thereby.  The execution, delivery and performance by Purchaser of this
Agreement and each Purchaser Document have been duly authorized by all necessary
corporate, partnership or other company action on behalf of Purchaser and no
other proceeding, consent or authorization on the part of the general partner or
any equity holders of Purchaser is necessary to authorize this Agreement, the
Ancillary Agreements or the transactions contemplated hereby.  This Agreement
has been, and each Purchaser Document will be at or prior to the Closing, duly
executed and delivered by Purchaser and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement
constitutes, and each Purchaser Document when so executed and delivered will
constitute, the legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
preferential transfers, and similar Laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).

6.3 Conflicts; Consents of Third Parties.  

(a)

None of the execution, delivery or performance by Purchaser of this Agreement or
the Purchaser Documents, the consummation of the transactions contemplated
hereby or thereby, or the compliance by Purchaser with any of the provisions
hereof or thereof will conflict with, or result in any violation of or
infringement or default (with or without notice or lapse of time, or both)
under, or give rise to the creation of any Lien, except for Permitted
Exceptions, or a right of termination, amendment, acceleration or cancellation
under, any provision of (i) the certificate of incorporation and by-laws (or
other organizational and governing documents) of Purchaser; (ii) any material
Contract or material Permit to which

59

 

--------------------------------------------------------------------------------

 

 

Purchaser is a party or by which Purchaser or its properties or assets are
bound; (iii) any Order applicable to Purchaser or by which any of the properties
or assets of Purchaser are bound; or (iv) any applicable Law.

(b)

No consent, waiver, approval, Order, Permit license, registration, approval, or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of Purchaser in connection with the
execution, delivery and performance of this Agreement or the Purchaser
Documents, the compliance by Purchaser with any of the provisions hereof or
thereof, the consummation of the transactions contemplated hereby or the taking
by Purchaser of any other action contemplated hereby.

6.4 Litigation.  There are no Legal Proceedings pending or, to the knowledge of
Purchaser, threatened against Purchaser that would reasonably be expected to
prohibit or restrain the ability of Purchaser to enter into this Agreement or
consummate the transactions contemplated hereby.

6.5 Investment Intention.  Purchaser is acquiring the Purchased Equity for its
own account, for investment purposes only and not with a view to the
distribution (as such term is used in Section 2(11) of the Securities
Act).  Purchaser understands that the sale of the Purchased Equity to Purchaser
has not been registered under the Securities Act and the Purchased Equity cannot
be sold by Purchaser unless subsequently registered under the Securities Act or
an exemption from such registration is available.

6.6 Financial Advisors.  Except for Lincoln International, no Person has acted,
directly or indirectly, as a broker, finder or financial advisor for Purchaser
in connection with the transactions contemplated by this Agreement and no Person
is entitled to any advisor’s fees, cost, expenses or commission or like payment
in respect thereof.

6.7 Financial Capability.  

(a)

Attached as Exhibit F are true, correct and complete copies of the Term Loan
Commitment Letter and the Revolving Loan Commitment Letter (collectively, the
“Debt Financing Commitments”), pursuant to which lenders party thereto have
agreed, subject to the terms and conditions set forth therein, to lend the
amounts set forth therein for, among other things, the purposes of financing the
transactions contemplated by this Agreement to the extent set forth therein (the
“Debt Financing”).  Attached as Exhibit G is a true, correct and complete copy
of the equity commitment letter, dated as of the date hereof, by and between
Clarion Investors II, LP and Purchaser (the “Equity Commitment Letter” and, the
equity commitments reflected therein, the “Equity Financing Commitment” and,
together with the Debt Financing Commitments, the “Financing Commitments”),
pursuant to which the investors party thereto have committed, subject to the
terms and conditions set forth therein, to invest the amount set forth therein
to purchase equity interests of Purchaser (the “Equity Financing” and together
with the Debt Financing, the “Financing”).

(b)

None of the Financing Commitments have been amended or modified in any manner
prior to the date of this Agreement.  As of the date hereof, except as
contemplated by the Financing Commitments, no such amendment or modification is
contemplated and the

60

 

--------------------------------------------------------------------------------

 

 

respective commitments contained in the Financing Commitments have not been
withdrawn or rescinded in any respect.  Except for a fee letter relating to the
Debt Financing contemplated by the Debt Financing Commitments (the “Fee
Letter”), as of the date hereof, neither Purchaser nor any of its Affiliates has
entered into any agreement, side letter or other arrangement relating to the
financing of the transactions contemplated by this Agreement, other than as set
forth in the Financing Commitments and the fee letters related
thereto.  Purchaser has fully paid or caused to be fully paid any and all
commitment fees or other fees in connection with the Financing Commitments that
are payable by it on or prior to the date hereof and has otherwise satisfied all
other terms and conditions under the Financing Commitments required to be
satisfied by it prior to the date hereof, and will pay or cause to be paid when
due any and all remaining commitment fees and other fees required to be paid by
it under the Financing Commitments as and when they become payable.  As of the
date hereof, the Financing Commitments are in full force and effect and are the
valid, binding and enforceable obligations of Purchaser and, to the knowledge of
Purchaser, each other party thereto, to provide the Financing subject only to
the satisfaction or waiver of the conditions specified in the Debt Financing
Commitments.  The Equity Commitment Letter provides, and will continue to
provide, that Seller is, for the limited purposes provided for therein, a
third-party beneficiary thereof and is entitled to enforce the Equity Commitment
Letter subject to the terms and conditions herein and therein.

(c)

As of the date hereof, assuming the accuracy of the representations and
warranties of Seller set forth in Article V, Purchaser does not have any reason
to believe that it will be unable to satisfy on a timely basis any term or
condition to the initial funding of the Financing within its control at Closing
(which initial funding, when taken together with other funds available to
Purchaser, shall be sufficient to consummate the transactions contemplated by
this Agreement) contained in the Financing Commitments required to be satisfied
by it.  Other than the Fee Letter, there are no conditions precedent or other
contingencies, side agreements or other arrangements or understandings, in each
case, to which Purchaser is a party related to the initial funding of the
Financing at Closing, other than as expressly set forth in the Financing
Commitments.  As of the date hereof, assuming the accuracy of the
representations and warranties of Seller set forth in Article V, no event has
occurred which, with or without due notice, lapse of time or both, would
constitute a breach or default on the part of Purchaser or, to the knowledge of
Purchaser any other party under any of the Financing Commitments, and Purchaser
has no reason to believe that any of the conditions to the Financing
contemplated by the Financing Commitments will not be satisfied or that the
Financing will not be made available to Purchaser at the times contemplated by
the Financing Commitments.  The aggregate proceeds from the Financing
Commitments constitute all of the financing required for Purchaser to pay the
aggregate Initial Purchase Price and any other amounts required to be paid by
Purchaser in connection with the consummation of the transactions contemplated
by this Agreement, and to pay all related fees and expenses of Purchaser.

(d)

In no event shall the receipt or availability of the Financing by Purchaser or
any Affiliate of Purchaser or any other financing or other transactions be a
condition to any of Purchaser’s obligations hereunder.

6.8 Limited Guaranty.  The Guaranty is in full force and effect and is a valid
and binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and preferential transfers, and similar Laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability to general principles of equity, including principles of
commercial

61

 

--------------------------------------------------------------------------------

 

 

reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity)) and no event has occurred which,
with or without notice, lapse of time or both, could constitute a default on the
part of the Guarantor under the Guaranty.

6.9 Solvency.  Purchaser is not entering into this Agreement or the Financing
Commitments with the intent to hinder, delay or defraud either present or future
creditors.  Immediately after giving effect to all of the transactions
contemplated by this Agreement and the Financing Commitments, including the
Financing and the making of the payments contemplated by Sections 3.2 and 3.3
(if any), and, assuming satisfaction of the conditions to Purchaser’s obligation
to consummate the transactions contemplated by this Agreement, the accuracy of
the representations and warranties of Seller set forth herein and the
performance by Seller of its obligations hereunder, Purchaser and the Purchased
Subsidiaries will be Solvent.

6.10 No Other Representations or Warranties.  Except for the representations and
warranties expressly contained in this Article VI, neither Purchaser nor any
other Person is making or has made any other representation or warranty, express
or implied, in law or in equity, in respect of Purchaser, its Affiliates or the
transactions contemplated by this Agreement, and Purchaser disclaims any other
representations or warranties, whether made by Purchaser, any Affiliate of
Purchaser or any of their respective officers, directors, employees, agents or
representatives.  Except for the representations and warranties expressly
contained in Article VI, Purchaser hereby disclaims all Liability and
responsibility for any representation, warranty, projection, forecast,
statement, or information made, communicated, or furnished (orally or in
writing) to Seller or its Affiliates or representatives (including any opinion,
information, projection, or advice that may have been or may be provided to
Seller by any director, officer, employee, agent, consultant, or representative
of Purchaser or any of its Affiliates).

6.11 Further Acknowledgements.  

(a)

Sole Representations and Warranties.  Except for the representations and
warranties expressly set forth in Article V (as modified by the Disclosure
Letter), Purchaser acknowledges and agrees that (i) neither Seller nor any other
Person is making or has made, and Purchaser is not relying on, any
representation or warranty, expressed or implied, in Law or in equity, in
respect of Seller, its Subsidiaries, the Business, the Purchased Assets, the
Assumed Liabilities or the transactions contemplated by this Agreement, (ii)
Purchaser is not relying on any other representations or warranties, whether
made by Seller, any Affiliate of Seller or any of their respective officers,
directors, employees, agents or representatives and (iii) neither Seller or any
other Person has made any representation or warranty, express or implied, in Law
or in equity, as to the accuracy or completeness of any confidential information
memorandum, documents, projections, materials or other information (financial or
otherwise) regarding the Business, the Purchased Assets, the Assumed Liabilities
or the transactions contemplated by this Agreement, furnished to Purchaser or
its representatives or made available to Purchaser or its representatives in any
“data rooms”, “virtual data rooms”, management presentations or in any other
form in expectation of or in connection with, the transactions contemplated by
this Agreement, or in respect of any other matter or thing whatsoever.

(b)

Independent Investigation.  Purchaser acknowledges and agrees that it has
conducted to its satisfaction, its own independent investigation of the
condition, operations and business of the Business, the Purchased Assets and the
Assumed Liabilities, and, in making its

62

 

--------------------------------------------------------------------------------

 

 

determination to proceed with the transactions contemplated by this Agreement,
Purchaser has relied on the results of its own independent investigation.

ARTICLE VII

COVENANTS

7.1 Access to Information.  

(a)

Prior to the Closing, Seller shall, and shall cause each of the Purchased
Subsidiaries to, afford to Purchaser, through its officers, employees and
representatives (including its legal advisors, financial advisors, auditors and
accountants), to make such investigation of the Business, Purchased Assets,
Assumed Liabilities and each Purchased Subsidiary and such examination of the
employees, properties, assets, books and records of Seller and each Purchased
Subsidiary relating to the Business, the Purchased Assets and the Assumed
Liabilities as it reasonably requests.  Any such investigation and examination
shall be conducted during regular business hours upon reasonable advance notice
and under reasonable circumstances and shall be subject to restrictions under
applicable Law.  Seller shall cause the officers, employees, consultants,
agents, accountants, attorneys and other representatives of Seller and each
Purchased Subsidiary to furnish promptly to Purchaser all such information as
may be reasonably requested and to cooperate with Purchaser and Purchaser’s
representatives in connection with such investigation and examination, and
Purchaser and its representatives shall cooperate with Seller, the Purchased
Subsidiaries and their respective representatives and shall use its reasonable
efforts to minimize any disruption to the Business.  Notwithstanding anything
herein to the contrary, no such investigation or examination shall be permitted
to the extent that it would require Seller or any Purchased Subsidiary to
disclose information, where upon the advice of legal counsel, such disclosure
would (i) reasonably be expected to result in the inability to successfully
assert a claim of attorney-client privilege of Seller or any Purchased
Subsidiary, as applicable; provided, that the Parties hereto shall reasonably
cooperate in seeking to allow disclosure of such information without
jeopardizing the attorney-client privilege, (ii) conflict with any
confidentiality obligations to which Seller or any Purchased Subsidiary is bound
or (iii) constitute a violation of the Antitrust Laws.  Notwithstanding anything
to the contrary contained herein, prior to the Closing, without the prior
written consent of Seller, which consent shall not be unreasonably withheld,
conditioned or delayed, (i) Purchaser shall not, outside of its ordinary course
of business consistent with conduct prior to the date hereof and in no way
involving matters contemplated by this Agreement, contact any suppliers to, or
customers of, Seller or its Subsidiaries, and (ii) Purchaser shall have no right
to perform invasive or subsurface investigations of the properties or facilities
of Seller or any of its Subsidiaries.

(b)

For a period of three (3) years after the Closing, Purchaser will give Seller
reasonable access during Purchaser’s regular business hours upon reasonable
advance written notice and under reasonable circumstances to books and records
transferred to Purchaser to the extent necessary for the preparation of
financial statements, Regulatory Filings or Tax Returns of Seller or any of its
Affiliates in respect of periods ending on or prior to Closing.  Seller shall be
entitled, at its sole cost and expense, to make copies of the books and records
to which it is entitled to access pursuant to this Section 7.1(b).  Any
information Seller obtains pursuant to this Section 7.1(b) shall be subject to
Section 7.6.  

63

 

--------------------------------------------------------------------------------

 

 

7.2 Conduct of the Business Pending the Closing.  

(a) Prior to the Closing, except (I) as set forth in Section 7.2 of the
Disclosure Letter, (II) as required by applicable Law, (III) as otherwise
contemplated by the express terms of this Agreement or (IV) with the prior
written consent of Purchaser (which consent shall not be unreasonably withheld,
conditioned or delayed), Seller shall, and shall cause each Purchased Subsidiary
to:

(i)

conduct the Business only in the Ordinary Course;

(ii)

(A) use their commercially reasonable efforts to preserve and maintain intact
the business operations, organization and goodwill of each Purchased Subsidiary
and the Business, and (B) preserve and maintain good relationships with
customers, suppliers, lenders, Governmental Bodies, creditors, business
associates and others having material relationships with, each Purchased
Subsidiary and the Business;

(iii)

manage the working capital of the Business and each Purchased Subsidiary
(including the timing of collection of accounts receivable and of the payment of
accounts payable and the management of Inventory) in the Ordinary Course;

(iv)

make capital expenditures of the Business and each Purchased Subsidiary
consistent with those contemplated by the capital expenditure budget set forth
in Section 7.2(b)(ix) of the Disclosure Letter; and

(v)

use commercially reasonable efforts to keep available the services of the
directors, officers, agents and key employees of the Business and of each
Purchased Subsidiary.

(b) Except (I) as set forth in Section 7.2 of the Disclosure Letter, (II) as
required by applicable Law, (III) as otherwise contemplated by express terms of
this Agreement or (IV) with the prior written consent of Purchaser (which
consent shall not be unreasonably withheld, conditioned or delayed), Seller
shall not, and Seller shall cause each Purchased Subsidiary to not:

(i)

with respect to the shares of Capital Stock of any Purchased Subsidiary: (A)
transfer, issue, sell, pledge or dispose of such shares or other securities, (B)
grant options, warrants, calls or other rights to purchase such shares or other
securities; (C) split, combine or effect any recapitalization, reclassification
or like change in such shares or other securities (whether by merger,
consolidation or otherwise); or (D) redeem, repurchase or otherwise acquire any
such shares or other securities (whether by merger, consolidation or otherwise);

(ii)

subject to Section 7.25, permit any Purchased Subsidiary to declare, set aside
or pay any dividend or distribution (whether in cash, stock or property, or any
combination thereof) to any Person other than a Purchased

64

 

--------------------------------------------------------------------------------

 

 

Subsidiary except (A) dividends or other distributions consisting solely of Cash
and Cash Equivalents (but only to the extent such dividends or distributions
would not reasonably be expected to cause the Cash and Cash Equivalents held by
any Purchased Subsidiary at the Closing to be less than the Minimum Purchased
Subsidiary Cash for such Purchased Subsidiary) or (B) as may facilitate the
termination of certain Contracts, arrangements or Liabilities contemplated by
Section 7.23 (Intercompany Accounts Restructuring);

(iii)

amend the certificate of incorporation or by-laws or comparable organizational
and governing documents of any Purchased Subsidiary;

(iv)

other than in the Ordinary Course or as required by any Benefit Plan disclosed
in Section 5.14(a) of the Disclosure Letter, (A) increase the annual level of
compensation of any Business Employee or Business Service Provider, (B) grant
any unusual or extraordinary bonus or employee benefit to any Business Employee
or Business Service Provider, (C) materially increase the coverage or benefits
available under any (or create any new) Business Benefit Plan or Seller Benefit
Plan or (D) enter into any employment, deferred compensation, severance,
consulting, non-competition, change-in-control, retention or similar agreement
(or amend any such agreement) to which any Purchased Subsidiary is a party or
involving a Business Employee or Business Service Provider, except, in each
case, (x) as required by applicable Law from time to time in effect or by the
terms of any Benefit Plans in effect as of the date hereof and heretofore
provided to Purchaser, (y) increases in benefits under a Benefit Plan covering
any group of employees of Seller and its Affiliates generally which would not
result in a material increase in cost to Purchaser or its Affiliates or (z) with
respect to any Business Employee or Business Service Provider that Purchaser has
indicated a desire not to employ or engage following the Closing;

(v)

create, assume or permit to exist, any Lien upon any of the properties or assets
(whether tangible or intangible) of any Purchased Subsidiary or any Purchased
Assets, except for Permitted Exceptions;

(vi)

other than with respect to the Excluded Assets, acquire any material properties
or assets or sell, assign, license, pledge, encumber, grant, transfer, convey,
lease or otherwise dispose of any of the properties or assets (including any
Business Intellectual Property) of any Purchased Subsidiary or Seller (to the
extent related to the Business) (except (A) for Inventory pursuant to an
existing Contract for fair consideration in the Ordinary Course, (B) for the
purpose of disposing of obsolete or worthless assets in the Ordinary Course, (C)
pursuant to a non-exclusive license or other grant of rights in Business
Intellectual Property in the Ordinary Course, or (D) the abandonment,
forfeiture, dedication to the public, non-maintenance of, or other
discontinuance of the exercise of, ownership and control of any non-material
Business Intellectual Property in the Ordinary Course);

(vii)

do any act or knowingly omit to do any act whereby any material Business
Intellectual Property may become invalidated, abandoned,

65

 

--------------------------------------------------------------------------------

 

 

unmaintained, unenforceable or dedicated to the public domain, in each case,
other than in the Ordinary Course;

(viii)

subject to clauses (xi) and (xii) below, other than in the Ordinary Course, (A)
cancel or compromise any material Indebtedness or claim or (B) waive or release
any material right of any Purchased Subsidiary or Seller, in each case, to the
extent relating to the Business or the Purchased Assets;

(ix)

enter into any commitment for capital expenditures of any Purchased Subsidiary
or Seller (to the extent it would be an Assumed Liability) that is not
contemplated by the capital expenditure budget set forth in Section 7.2(b)(ix)
of the Disclosure Letter in excess of $100,000 for any individual commitment and
$250,000 for all commitments in the aggregate;

(x)

enter into, modify or terminate any labor, collective bargaining or works
council agreement of any Purchased Subsidiary or Seller (to the extent related
to Business Employees);

(xi)

except with respect to Consolidated Income Taxes or any Consolidated Tax Return,
in each case with respect to the Business or any of the Purchased Subsidiaries,
(A) make, change or revoke any material Tax election, (B) settle or compromise
any material Tax claim or Liability, (C) waive or extend, in respect of Taxes or
any Tax Return, any statute of limitations or period within which a Tax Return
may be filed or an assessment or reassessment of Taxes may be issued (other than
pursuant to extensions of time to file Tax Returns obtained in the ordinary
course of business), (D) file any amended Separate Tax Return or (E) surrender
any claim for a refund of Taxes.  For the avoidance of doubt, Seller shall not
make or cause to be made any “check-the-box” election on IRS Form 8832 with
respect to any Purchased Subsidiary other than in respect of Cross UK, which,
for the avoidance of doubt, Seller shall be permitted to file a “check-thebox”
election to treat it as a disregarded entity effective prior to the Closing
Date;

(xii)

enter into, amend or modify in any material respect or terminate any Material
Contract, or otherwise waive, release or assign any material rights, claims or
benefits thereto of Seller or any Purchased Subsidiary with respect to the
Business;

(xiii)

settle any material Legal Proceeding involving or against Seller relating to the
Business or the Purchased Assets or any of the Purchased Subsidiaries;

(xiv)

permit any Purchased Subsidiary to make any loans, advances or capital
contributions to, or investments in, any other Person;

(xv)

permit any Purchased Subsidiary to create, incur, assume, suffer to exist or
otherwise be liable with respect to any Indebtedness, other than the incurrence
of trade indebtedness in the Ordinary Course;

66

 

--------------------------------------------------------------------------------

 

 

(xvi)

permit any Purchased Subsidiary to extend credit or renew or forgive a
previously existing extension of credit (either directly or indirectly) other
than in the Ordinary Course;

(xvii)

change any methods of accounting, except as required by GAAP as agreed to by its
independent public accountants; 

(xviii)

permit any Purchased Subsidiary to enter into or agree to enter into any merger
or consolidation with any Person; or

(xix)

agree to take any of the actions prohibited by this Section 7.2.  

7.3 Consents.  Seller shall use (and Seller shall cause each Purchased
Subsidiary to use) their commercially reasonable efforts, and Purchaser shall
cooperate with Seller and each Purchased Subsidiary, to obtain at the earliest
practicable date all consents and approvals required to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements,
including the consents and approvals referred to in Section 5.3(b);  provided,
that,

Seller shall bear 100% of the out-of-pocket costs and expenses of the Business
not to exceed $100,000 in the aggregate in connection with seeking consents and
approvals required pursuant to this Agreement and such costs shall be treated as
a Transaction Expense.

7.4 Regulatory Approvals.  

(a)

Each Party shall use its commercially reasonable efforts to file as soon as
practicable following the date hereof, with the local commerce bureau in
Dongguan in respect of the transfer of the Capital Stock of Cross Dongguan,
which filing shall occur no later than ten (10) Business Days following the date
hereof, and shall file with and register the transfer of the Capital Stock of
Cross Dongguan for purposes of obtaining a new business license with the local
administration of industry and commerce in Dongguan within three (3) Business
Days following receipt of the approval of the local commerce bureau, and furnish
to each other all information required for any application or other filing to be
made pursuant to any applicable Law in connection with the transactions
contemplated by this Agreement.  Each Party shall promptly inform the other
Parties of any substantive oral communication with, and provide copies of
substantive written communications with, any Governmental Body regarding any
such filings or notifications.  No Party may independently participate in any
formal meeting with any Governmental Body in respect of any such filings,
investigation, or other inquiry without giving the other Parties prior notice of
the meeting and, to the extent permitted by such Governmental Body, the
opportunity to attend and/or participate.  

(b)

Each Party shall use its commercially reasonable efforts to resolve any
objections as may be asserted by any Governmental Body with respect to the
transactions contemplated by this Agreement under the Sherman Antitrust Act, as
amended, the Clayton Antitrust Act, as amended, the Federal Trade Commission
Act, as amended, and any other United States federal or state or foreign
statutes, rules, regulations, orders, decrees, administrative or judicial
doctrines or other Laws that are designed to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade
(collectively, the “Antitrust Laws”).  In connection with and without limiting
the foregoing, each of Purchaser and Seller agrees to use its reasonable best
efforts to take promptly any and all steps

67

 

--------------------------------------------------------------------------------

 

 

necessary or appropriate to avoid or eliminate each and every impediment under
any Antitrust Laws that may be asserted by any Federal, state or foreign
Governmental Body, so as to enable the Parties to close the transactions
contemplated by this Agreement as expeditiously as possible.

(c)

In the event of any inconsistency between the terms of any Foreign Stock
Transfer Agreement and the terms of this Agreement, the terms of this Agreement
shall control. 

7.5 Further Assurances.  Subject to, and not in limitation of, Section 7.4, each
of Purchaser and Seller shall use (and Seller shall cause each Purchased
Subsidiary to use) its commercially reasonable efforts to (a) take all actions
necessary or appropriate to consummate the transactions contemplated by this
Agreement and (b) cause the fulfillment at the earliest practicable date of all
of the conditions to their respective obligations to consummate the transactions
contemplated by this Agreement, in each case until the earlier of (x) the
Closing and (b) the date this Agreements is terminated in accordance with
Article IV.  

7.6 Confidentiality.  

(a)

Purchaser acknowledges that the information provided to it in connection with
this Agreement and the transactions contemplated hereby is subject to the terms
of that certain Confidentiality Agreement between Clarion Capital Partners, LLC
(“Clarion”) and C.W. Downer & Co. acting on behalf of Seller dated February 4,
2013 (the “Confidentiality Agreement”).  Purchaser hereby agrees to be bound by
all terms of the Confidentiality Agreement applicable to Clarion, all of which
terms are hereby incorporated by reference.  Effective upon, and only upon, the
Closing Date, the Confidentiality Agreement (other than the second sentence of
paragraph 7 thereof as it applies to Seller and COG only) and corresponding
obligations of Purchaser pursuant to this Section 7.6 shall terminate.

(b)

Effective upon, and only upon, the Closing Date, (i) Seller shall not, and
Seller shall use its reasonable efforts to cause its Affiliates and its
Affiliates’ respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents not to, directly or indirectly, disclose,
reveal, divulge or communicate to any Person or use or otherwise exploit for
their own benefit or for the benefit of anyone other than Purchaser or any
Purchased Subsidiary any confidential documents or information concerning the
Business and (ii) Purchaser shall not, shall cause the members of the Purchased
Group not to, and Purchaser shall use its reasonable efforts to cause its
Affiliates and its Affiliates’ respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents not to, directly or
indirectly, disclose, reveal, divulge or communicate to any Person or use or
otherwise exploit for their own benefit or for the benefit of anyone other than
Seller or its Affiliates any confidential documents or information concerning
Seller unrelated to the Business, the Purchased Assets or the Assumed
Liabilities, in each case except (A) to the extent that such information can be
shown by such party to have been (i) in the public domain through no fault of
such party, or (ii) later lawfully acquired by such party without an obligation
of confidentiality owing to the other party or (B) that a Party may disclose, or
may permit disclosure of, such information as requested or required to be
disclosed by applicable Law or by the applicable rules of any stock exchange on
which Seller lists securities (provided that prior to any such disclosure such
Party, to the extent practicable, shall notify the other Party of such request
or requirement).

68

 

--------------------------------------------------------------------------------

 

 

7.7 Indemnification, Exculpation and Insurance.  

(a)

For a period of six (6) years from and after the Closing Date, Purchaser shall
and shall cause each Purchased Subsidiary to take any necessary actions, except
as otherwise required by Law, to provided, on terms that are no less favorable,
all rights to indemnification and all limitations on liability currently
existing in favor of  the individuals who on or prior to the Closing Date were
directors, officers or employees of any Purchased Subsidiary (collectively, the
“Indemnitees”) with respect to all acts or omissions by them in their capacities
as such or taken at the request of Seller or any other Purchased Subsidiary at
any time prior to the Closing Date, as provided in (i) the organizational and
governing documents of such Purchased Subsidiary in effect on the date of this
Agreement or (ii) any agreement providing for indemnification by a Purchased
Subsidiary of any Indemnitees in effect on the date of this Agreement to which
Seller or a Purchased Subsidiary is a Party.

(b)

Notwithstanding anything to the contrary in this Agreement, prior to the Closing
Date, Seller shall obtain a “tail” insurance policy from a reputable insurance
carrier with respect to directors’ and officers’ liability insurance (the “D&O
Insurance”) covering acts or omissions occurring prior to the Closing Date with
respect to those Persons at the Purchased Subsidiaries who are currently covered
by a directors’ and officers’ liability insurance policy, with a claims period
of at least six (6) years from and after the Closing Date, the terms of which,
including coverage and amount, shall be no less favorable to the current and
former directors and officers of the Purchased Subsidiaries than the current
directors’ and officers’ liability insurance under which such Persons are
covered as of the date hereof.  Purchaser shall pay fifty percent (50%) of any
fees, costs, expenses or payments incurred by Seller in obtaining the D&O
Insurance up to $50,000 (the “Purchaser D&O Expenses”).

(c)

The provisions of this Section 7.7:  (i) are intended to be for the benefit
of,and shall be enforceable by, each Indemnitee, his or her heirs and his or her
representatives; and (ii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such person may have by
Contract or otherwise.

(d)

In the event that Purchaser or any of its successors or assigns (i) consolidates
with or merges into any other Person and is not the continuing or surviving
corporation or entity of such consolidation or merger; or (ii) transfers or
conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of Purchaser shall assume all of the obligations thereof
set forth in this Section 7.7.  

(e)

The obligations of Purchaser under this Section 7.7 shall not be terminated or
modified in such a manner as to materially and adversely affect any Indemnitee
to whom this Section 7.7 applies without the consent of the affected Indemnitee
(it being expressly agreed that the Indemnitees to whom this Section 7.7 applies
shall be third party beneficiaries of this Section 7.7).

7.8 Preservation of Records.  Seller and Purchaser agree that each of them shall
preserve and keep the records held by them or their Affiliates relating to the
Business (including all books and records with respect to Taxes pertaining to
the Purchased Assets or any Purchased Subsidiary) for a period of seven (7)
years after the Closing Date and shall make such records and personnel available
to the other as may be reasonably required by such Party in connection with,
among other things, any insurance claims by or Legal Proceedings against such
Party (other

69

 

--------------------------------------------------------------------------------

 

 

than any Legal Proceeding instituted by the other Party hereto or its respective
Affiliates) or any of their Affiliates or in order to enable such Party to
comply with its obligations under applicable Law, this Agreement and each other
agreement, document or instrument contemplated hereby.  In the event Seller or
Purchaser wishes to destroy such records after the seventh anniversary of the
Closing Date (the “Destroyer”), the Destroyer shall first give 90 days prior
written notice to Seller (if Purchaser is the Destroyer) or Purchaser (if Seller
is the Destroyer) notifying the other Party (the “Non-Destroyer”) of Destroyer’s
intent to destroy such records and the date of such planned destruction.  After
any such notice of destruction, the NonDestroyer shall have the right, at its
option and expense and upon prior written notice given to the Destroyer prior to
the date on which the Destroyer intends to destroy such records, to take
possession of the records within 180 days after the date of such notice by the
Non-Destroyer.

7.9 Publicity.  No Party nor any Affiliate or representative of such Party may
issue or cause the publication of any press release or public announcement
concerning this Agreement or the transactions contemplated hereby without
obtaining the prior written approval of the other Party hereto, which approval
will not be unreasonably withheld, conditioned or delayed, unless disclosure is
otherwise required by applicable Law or by the applicable rules of any stock
exchange on which Seller lists securities; provided, that any public
announcement or statement or press release shall, to the extent practicable, be
subject to the prior review and opportunity to comment by each of Seller and
Purchaser.  The foregoing shall not restrict communications between Purchaser
and/or its Affiliates and the investors or potential investors of Purchaser or
its Affiliates in the ordinary course of business consistent with past
practice.  Purchaser understands and agrees that Seller plans to and may file a
Current Report on Form 8-K, to disclose this Agreement and the transactions
contemplated hereby and to file a copy of this Agreement with the SEC.

7.10 Use of Brands.  Other than as expressly provided in this Agreement and the
Ancillary Agreements, Seller will have no right, title, interest, license or any
other right whatsoever in or to, and shall not use or permit any of its
Affiliates to use, any of the Trademarks included in the Business Intellectual
Property or any names, words, Trademarks, identifying symbols, logos, emblems,
signs, insignia or other business identifiers containing or comprising the
foregoing, including any derivations, translations, modifications or alterations
thereof, or any word, name or mark confusingly similar thereto (the “Brands”)
and, following the Closing, Seller shall, and shall cause its Affiliates to,
promptly cease the use or deployment of the Brands; provided that Purchaser
hereby grants to Seller and COG a non-exclusive, non-transferable,
nonsublicensable limited right and license to use the name “A.T. Cross Company”,
“ATX” and “Cross Optical Group, Inc.” solely (a) as the legal name of Seller and
COG, respectively, (b) as the ticker symbol for Seller’s publicly listed
securities, (c) in connection with the Retained Pension Plans, and (d) in all
ways customarily incidental to each of the foregoing, and in the case of clause
(a) (along with clause (d) to the extent related to clause (a)) until such time
as Seller is able to obtain the necessary shareholder approval to amend its
articles of incorporation to change its legal name and take such other actions
as are necessary to change Seller’s and COG’s legal name (including pursuant to
the applicable rules of any stock exchange on which Seller lists
securities).  Seller shall use, and shall cause COG to use, reasonable best
efforts to effect such changes to clause (a) of the foregoing sentence (and
clause (d) of the foregoing sentence to the extent related to clause (a) of the
foregoing sentence) as promptly as practicable after the Closing (and shall
continue to do so until such change is effected).

70

 

--------------------------------------------------------------------------------

 

 

7.11 Employment and Employee Benefits.  

(a)

Offers of Employment.  Each employee of Seller and the Purchased Subsidiaries
who is primarily employed with respect to the Business, including those set
forth in Section 7.11(a)(i) of the Disclosure Letter (but not including those
set forth in Section 7.11(a)(ii) of the Disclosure Letter), is herein referred
to as a “Business Employee” and collectively as the “Business
Employees.”  Seller shall promptly update the information required to be
provided under Section 5.15 of the Disclosure Letter to reflect any and all
employment or service hirings or terminations occurring prior to the Closing
Date, with the final such update to occur no later than five (5) Business Days
prior to the Closing Date (it being understood that Seller will inform Purchaser
in writing of the termination of employment or services of a Business Employee
following the date hereof). As of the Closing Date, Purchaser or a member of the
Purchaser Group shall cause each of the Purchased Subsidiaries to continue to
employ all of its Business Employees.  At least five (5) days prior to the
Closing Date, Purchaser or a member of the Purchaser Group shall offer
employment as of the Closing Date to each Business Employee who is not employed
by a Purchased Subsidiary in accordance with the terms of this Agreement and as
may be required to comply with applicable Law.  Each Business Employee employed
by the Purchased Subsidiaries and each Business Employee who accepts the offer
of employment from Purchaser or a member of the Purchaser Group shall be
referred to herein as a “Transferred Employee.”  Unless a written acceptance of
an offer of employment is required by applicable Law, a Business Employee who
received an offer of employment from Purchaser or its Affiliate, is actively at
work with Purchaser or a member of the Purchaser Group as of the Closing Date
and continues employment shall be deemed to have accepted the offer of
employment from Purchaser or one of its Affiliates, unless such employee
specifically declines such offer of employment.  Each Transferred Employee shall
be hired on an “at will” basis unless otherwise agreed by Purchaser. Purchaser
shall, at its sole expense, use its commercially reasonable efforts to secure
the prompt transfer of employment of Business Employees in compliance with all
applicable immigration Laws (including transfer of any H1-B visas or similar
employer sponsored work permits), and Seller shall reasonably cooperate with
Purchaser in such efforts.  Neither Purchaser nor any of its Affiliates shall be
obligated, however, to continue to employ any Business Employee for any specific
period of time following the Closing Date, subject to applicable Law.

(b)

Transfers of Employment.  The employment of each Transferred Employee with
Purchaser or a member of the Purchaser Group shall commence immediately upon the
Closing and shall be deemed, for all purposes, consistent with applicable Law
and except as otherwise expressly provided herein, to have occurred with no
interruption or break in service and no termination of employment; provided,
 however, that any Inactive Employee who is employed in the United States shall
not be considered a Transferred Employee unless and until such Inactive Employee
returns to active status pursuant to the following sentence, and notwithstanding
anything herein to the contrary, Purchaser and its Affiliates shall only be
responsible for Liabilities relating to any Inactive Employee who is employed
within the United States from and after the date such Inactive Employee becomes
a Transferred Employee.  The employment with the Purchaser Group of any Inactive
Employee who is employed outside of the United States shall be effective as of
the Closing and of any Inactive Employee who is employed within the United
States shall be effective upon his or her return to active work, provided that
the Inactive Employee reports to work with Purchaser or another member of the
Purchaser Group, as applicable, within fifteen (15) days after the end of any
such approved leave and, to the extent

71

 

--------------------------------------------------------------------------------

 

 

permitted by applicable Law, in no event later than one hundred twenty (120)
days following the Closing Date, and, as of such date, such Inactive Employee
shall be a Transferred Employee.  Subject to, and effective as of, the Closing,
Seller hereby waives and releases each of the Transferred Employees from any and
all contractual, common law or other restrictions enforceable by Seller and its
Affiliates on the employment, activities or other conduct of such individuals
with the Business after their employment with Purchaser or a member of Purchaser
Group except with respect to obligations related to confidentiality and trade
secrets.  Prior to the Closing Date, and to the extent necessary to implement
this sentence, Seller shall cause to be taken all actions as may be reasonably
required to amend any Benefit Plan and take or cause to be taken all other
action as may be reasonably required to provide that severance or separation
payments shall not be payable to any Transferred Employee on account of such
Transferred Employee’s termination of employment with Seller and its Affiliates,
and for the avoidance of doubt, Excluded Employee Liabilities include all
Liabilities with respect to any such severance or separation payments that may
become payable.

(c)

Terms and Conditions of Employment.  Purchaser shall offer each Business
Employee who is not employed at a Purchased Subsidiary employment with a member
of the Purchaser Group in substantially the same position and work
location.  For a period of at least six months after the Closing Date, Purchaser
or its Affiliates shall provide each Transferred Employee, while in the employ
of Purchaser, any Purchased Subsidiary or any of their Affiliates, at least the
same salary, wages and target annual cash incentive opportunity as were provided
to such employee immediately prior to the Closing Date (excluding
change-in-control or retention cash bonuses, if any).  In addition, until
December 31, 2013, Purchaser shall, or shall cause its Affiliates to, provide
each Transferred Employee with employee benefits that provide substantially
comparable aggregate value to those benefits provided to such employee under the
applicable Benefit Plans in effect immediately prior to the Closing Date,
provided that for purposes of this covenant, stock options, other equity-based
awards, profit sharing, retiree medical and defined benefit pension plans shall
be disregarded. 

(d)

Individual Employee Agreements.  Each Purchased Subsidiary shall retain
exclusive responsibility for all individual employment, retention, termination,
severance and other similar Contracts with any Transferred Employee to which
such Purchased Subsidiary is a party (collectively, “Employee Agreements”).  As
of the Closing Date, Purchaser shall, or shall cause its Affiliates to, assume
all obligations of Seller under all Employee Agreements pursuant to which Seller
has any obligation, contingent or otherwise.

(e)

Layoff Benefits.  Without limiting Section 7.11(d), except as Purchaser or its
Affiliates may otherwise agree with any Transferred Employee, Purchaser shall,
or shall cause its Affiliates to, provide severance benefits to any Transferred
Employee whose employment is terminated by Purchaser or its Affiliates during
the six-month period following the Closing Date in an amount that is at least
equal to the layoff or severance benefits that would have been paid to such
employee pursuant to the terms of the applicable severance plan as in effect on
the date hereof and described on Section 5.14(a) of the Disclosure Letter, to be
calculated, however, on the basis of the employee’s compensation and service at
the time of the layoff or other termination.

(f)

Credit for Service.  Purchaser shall, or shall cause its Affiliates to, credit
Transferred Employees for service earned on and prior to the Closing Date with
Seller and their Affiliates, or any of their respective predecessors, in
addition to service earned with Purchaser and its Affiliates on or after the
Closing Date, to the extent that service is relevant for purposes of

72

 

--------------------------------------------------------------------------------

 

 

eligibility, vesting or the calculation of vacation, sick days, severance,
layoff and similar benefits (but not for purposes of equity compensation,
nonqualified defined contribution plans, retiree medical, or pension benefit
accruals) under any retirement or other employee benefit plan, program or
arrangement of Purchaser or any of its Affiliates for the benefit of the
Transferred Employees on or after the Closing Date; provided,  however, that
such service shall not be recognized to the extent that (x) such recognition
would result in a duplication of benefits or (y) such service was not recognized
under the corresponding Benefit Plan.

(g)

Pre-existing Conditions; Coordination.  Purchaser shall, and shall cause its
Affiliates to, waive limitations on benefits relating to any pre-existing
conditions of the Business Employees and their eligible spouses, domestic
partners and dependents.  Purchaser shall, and shall cause its Affiliates to,
recognize for purposes of annual deductible and out-of-pocket limits under their
health plans applicable to Transferred Employees, deductible and out-of-pocket
expenses paid by Transferred Employees and their respective spouses, domestic
partners and dependents under Seller’s or any of its Affiliates’ health plans in
the calendar year in which the Closing Date occurs.

(h)

Non-U.S. Business Employees.  In the case of Non-U.S. Business Employees,
Seller, Purchaser and their respective Affiliates (including each Purchased
Subsidiary) shall, in addition to meeting the requirements of the other
provisions of Section 7.11, cooperate in complying with any additional
obligations or standards arising under applicable Law governing the terms and
conditions of their employment or termination of employment in connection with
the transfer of the Business or otherwise.

(i)

Form W-2 Reporting.  Pursuant to the “Standard Procedure” provided in section 4
of Revenue Procedure 2004-53, 2004-2 C.B. 320, (i) Purchaser and Seller shall
report on a predecessor/successor basis as set forth therein, (ii) Seller will
not be relieved from filing a Form W-2 with respect to any Transferred
Employees, and (iii) Purchaser will undertake to file (or cause to be filed) a
Form W-2 for each such Transferred Employee with respect to the portion of the
year during which such Transferred Employees are employed by Purchaser that
includes the Closing Date, excluding the portion of such year that such
Transferred Employee was employed by Seller and its Affiliates.

(j)

Withdrawal from Benefit Plans.  Effective immediately prior to the Closing,
Seller shall cause the Purchased Subsidiaries’ withdrawal from participation in
all Benefit Plans other than the Purchased Subsidiary Benefit Plans, in each
case, without resulting in any actual or contingent liability to the Purchased
Subsidiaries, Purchaser or their respective Affiliates.

(k)

Vesting.  Effective as of the Closing Date, Seller shall, or shall cause, each
Transferred Employee who was participating in any qualified or nonqualified
defined contribution plan and/or defined benefit plan maintained by Seller or
any of their Affiliates immediately prior to the Closing Date (other than any
Purchased Subsidiary Benefit Plan or Transferred Benefit Plan) to be fully
vested in his or her account and benefit, as applicable, as of the Closing Date,
if and to the extent not yet fully vested.

(l)

Treatment of Equity.  Effective upon the Closing, Seller shall cause (a) any
unvested restricted shares (“Restricted Shares”) of Class A common stock, par
value $1.00

73

 

--------------------------------------------------------------------------------

 

 

per share, of Seller (“Seller Common Stock”) and any unvested options
(“Options”) to purchase shares of Seller Common Stock held by any Transferred
Employee immediately prior to Closing to become fully vested, (b) all Options
held by Transferred Employees immediately prior to Closing to remain exercisable
until the earlier of (i) six months following the Closing (or such longer period
approved by Seller), and (ii) the expiration of the original term of such
option.  For the avoidance of doubt, Excluded Employee Liabilities include all
Liabilities with respect to Restricted Shares and Options.

(m)

Transferred Benefit Plans.  Effective as of the Closing, Purchaser or one of its
Affiliates shall assume sponsorship of each of the Benefit Plans listed on
Section 7.11(m) of the Disclosure Letter (the “Transferred Benefit Plans”), and
any trusts, insurance policies or third-party administrator Contracts related to
the Transferred Benefit Plans shall be assigned to Purchaser or its Affiliates
effective as of the Closing; provided, that, except as agreed in the Transition
Services Agreement, effective prior to the Closing, Seller shall, or shall
cause, all participants of the Transferred Benefit Plans who are not Transferred
Employees or former employees of Seller and its Affiliates to withdraw from
participation from such Transferred Benefit Plans, without resulting in any
Liability to Purchaser, the Purchased Subsidiaries or their respective
Affiliates.  With respect to the Transferred Benefit Plan which is a flexible
spending account plan (the “Cafeteria Plan”), Purchaser shall, through December
31, 2013, administer the flexible spending accounts for health and dependent
care expenses of participants who are not Transferred Employees, and as soon as
practicable after the Closing Date, (i) Seller shall pay to Purchaser in cash
the amount, if any, by which aggregate contributions made to accounts under the
Cafeteria Plan since the first day of the current plan year exceeded the
aggregate benefits provided as of the Closing Date, or (ii) Purchaser shall pay
to Seller in cash the amount, if any, by which aggregate benefits provided from
accounts under the Cafeteria Plan for the current plan year exceeded the
aggregate contributions made from the first day of the current plan year through
the Closing Date.  

(n)

No Third-Party Beneficiaries.  Nothing herein, express or implied, shall confer
upon any confer upon any other Persons (including any current or former employee
of Seller, Purchaser or any of their respective Affiliates) any rights or
remedies hereunder, including any right to employment or continued employment
for any specified period or continued participation in any Benefit Plan or other
benefit plan, or any nature or kind whatsoever under or by reason of this
Agreement.  Nothing herein restricts or precludes the right of Purchaser to
terminate the employment of any Transferred Employee.  Purchaser and Seller
agree that the provisions contained herein are not intended to be for the
benefit of or otherwise be enforceable by, any third party, including any
current or former Business Employee or Business Service Provider.

7.12 Notification.  

(a)

The Parties acknowledge that the inclusion of any item in the Disclosure Letter
shall not be deemed to be an acknowledgement or representation that such item is
material or establish any standard of materiality or to define further the
meaning of such terms for purposes of this Agreement.  The disclosure of any
matter in one Section of the Disclosure Letter shall be deemed disclosed with
respect to any other Section of the Disclosure Letter, notwithstanding the
omission of a cross reference thereto, to the extent the relevance of such
matter to such Section is reasonably apparent on its face.

74

 

--------------------------------------------------------------------------------

 

 

(b)

Prior to the Closing, each Party shall promptly notify the other Party in
writing upon acquiring knowledge of any event, circumstance, occurrence or fact
that would cause any of the closing conditions set forth in Section 8.1 or 8.2
to not to be satisfied on or prior to the Termination Date.  No such advice
shall be deemed to amend or modify any representation or warranty of the Party
disclosing such information or affect any rights or remedies available to the
Party receiving such information in connection with any breach of any
representation or warranty; provided,  however, that, a breach of this Section
7.12 shall not be considered for purposes of determining the satisfaction of the
closing conditions set forth in Section 8.1 and 8.2 or give rise to a right of
termination under Section 4.3 if the underlying breach or breaches with respect
to which the other Party failed to give notice would not result in the failure
of the closing conditions set forth in Section 8.1 and 8.2  nor result in the
right of such non breaching Party to terminate this Agreement under Section 4.3,
as the case may be.

7.13 Exclusivity.  Until the earlier of the Closing and such time as this
Agreement is terminated in accordance with Article IV, except for the
transactions contemplated by this Agreement and the Ancillary Agreements, Seller
and each of the Purchased Subsidiaries shall not, and each shall cause its and
its controlled Affiliates’ respective directors, officers and other
representatives not to, directly or indirectly, solicit, encourage or enter into
any negotiation, discussion or Contract, with any party, with respect to the
sale of the Business, the Purchased Assets or all or any material portion of the
assets of Seller used in the Business or any Purchased Subsidiary or any merger,
recapitalization or similar transaction with respect to Seller, any Purchased
Subsidiary or the Business that is intended to or would reasonably be expected
to interfere in any material respect with the transactions contemplated hereby
between Seller and Purchaser relating to the Business.

7.14 Financing.  

(a)

Purchaser shall use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to (i) maintain in effect the Debt Financing and the Debt Financing
Commitments, (ii) subject to Seller’s compliance with Section 7.14(c), enter
into definitive financing agreements with respect to the Debt Financing, so that
such agreements are in effect as promptly as practicable but in any event no
later than the Closing Date, (iii) satisfy on a timely basis all conditions
applicable to, and within the control of, Purchaser or its Affiliates in such
definitive financing agreements and (subject to the satisfaction of the
conditions contained in Section 8.1 and the conditions to closing set forth in
the Debt Commitments Letters) consummate the Debt Financing at or prior to the
Closing, and (iv) subject to the last sentence of Section 7.14(b), enforce its
rights under the Debt Financing Commitments.  Purchaser shall keep Seller
informed on a reasonably current basis of any material developments in respect
of the Financing Commitments.  Prior to the Closing, Purchaser shall not
terminate the Debt Financing Commitments or agree to, or permit, any amendment
or modification of, or waiver under, the Financing Commitments or other
documentation relating to the Financing that (i) would reduce the aggregate
amount of the Debt Financing, including by changing the amount of fees to be
paid or original issue discount (other than any market flex provisions) from
that contemplated in the Debt Financing Commitments (except to the extent that
the amount of the Equity Financing is correspondingly increased or as would not
otherwise reasonably be expected to adversely affect Purchaser’s ability to
consummate the transactions contemplated by this Agreement), (ii) would impose
new or

75

 

--------------------------------------------------------------------------------

 

 

additional conditions, or otherwise expand, amend or modify any of the
conditions to the receipt of the Debt Financing to fund the transactions
contemplated by this Agreement in a manner adverse to Purchaser or (iii) could
reasonably be expected to adversely affect Purchaser’s ability to consummate the
transactions contemplated in this Agreement, in each case without the prior
written consent of Seller (which consent shall not be unreasonably withheld,
conditioned or delayed).  In addition, Purchaser shall use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to obtain the Equity Financing,
including using reasonable best efforts to (i) maintain in effect the Equity
Financing Commitment, (ii) satisfy on a timely basis all conditions applicable
to Purchaser in such Equity Financing Commitment that are within its control,
(iii) consummate the Equity Financing at or prior to the Closing, and (iv)
enforce its rights under the Equity Financing Commitment.

(b)

If at any time prior to Closing, notwithstanding the use of reasonable best
efforts by Purchaser to satisfy its obligations under Section 7.14(a), any other
party to the Debt Financing or the Debt Financing Commitments (or any definitive
financing agreement relating thereto) refuses to fund or is unable to fund the
Debt Financing, in whole or in part, for any reason, Purchaser shall (i)
immediately notify Seller of such refusal or inability and the reasons therefor
and (ii) use its reasonable best efforts promptly to arrange for alternative
financing to replace the Debt Financing to the extent available in amounts and
otherwise on the terms and conditions no less favorable to Purchaser,
individually as to economic terms and in the aggregate as to all other terms,
than is set forth in the Debt Financing Commitments.  The alternative financing
(a) shall be sufficient to pay, when added with the Equity Financing, all
amounts required to be paid by Purchaser pursuant to Articles II and III and (b)
shall not include any more (or more onerous) terms and conditions than those set
forth in the Debt Financing Commitments, unless approved by Seller.  For the
avoidance of doubt, and notwithstanding anything in this Agreement to the
contrary, (i) in order to comply with the standard of reasonable best efforts
set forth in this Section 7.14, Purchaser and its Affiliates shall not be
required to threaten, commence or prosecute any legal proceeding against any
lender or other party to any financing contemplated by the Debt Financing
Commitments and (ii) in the case of any breach of the obligations of Purchaser
set forth in this Section 7.14, Seller’s and its Affiliates’ sole and exclusive
rights and remedies shall be Seller’s rights and remedies set forth in Section
9.9.  

(c)

Seller shall, and shall cause each Purchased Subsidiary and its and their
respective representatives to, provide such cooperation (including with respect
to timeliness) in connection with the arrangement of the Debt Financing as may
be reasonably requested by Purchaser, including (i) providing to Purchaser from
time to time information regarding the Business and each Purchased Subsidiary
and their industry reasonably requested by the lenders providing the Debt
Financing and assisting with identification of any portion of such information
that constitutes material non-public information and using commercially
reasonable efforts to update any such information to the extent contained in an
offering document if Seller becomes aware of any new material information, (ii)
facilitating and promoting negotiations between Purchaser with the existing
senior lenders to Seller, participating in meetings, presentations, road shows,
due diligence sessions with prospective lenders and sessions with rating
agencies, (iii) assisting with the preparation of materials for rating agency
presentations, offering documents, business projections and similar marketing
documents required in connection with the Debt Financing, (iv) as promptly as
practicable, furnishing Purchaser and its Debt Financing Sources information
reasonably requested by any of them in connection with the Debt Financing,

76

 

--------------------------------------------------------------------------------

 

 

including permitting the prospective lenders and Purchaser and any of their
agents and representatives to perform field examinations and inventory
appraisals required in connection with the Debt Financing, (v) permitting the
prospective lenders to evaluate the Business’ and each Purchased Subsidiary’s
current assets, cash management and accounting systems, policies and procedures
relating thereto for the purposes of establishing collateral arrangements and
establishing bank and other accounts in connection with the foregoing, (vi)
promptly providing quarterly and monthly financial statements (excluding
footnotes) to the extent available and prepared by Seller and each Purchased
Subsidiary in the ordinary course of business and (vii) as of the Closing Date,
taking all corporate actions necessary to authorize the consummation of the Debt
Financing; provided that, notwithstanding anything to the contrary contained in
this Section 7.14(c), nothing in this Section 7.14(c) shall require any
cooperation to the extent that it would (A) require Seller or any Purchased
Subsidiary, as applicable, to waive or amend any terms of this Agreement, agree
to pay any commitment, financing or other fees or reimburse any expenses with
respect to the Debt Financing prior to the Closing Date or (B) require any
Purchased Subsidiary or any officer of any Purchased Subsidiary to take any
action with respect to the Debt Financing that is not contingent upon the
Closing (including the entry into any agreement) or would require the disclosure
of information which would reasonably be expected to jeopardize the
attorney-client or similar privilege of such Purchased Subsidiary.  In
connection with the offering materials related to the syndication of the Debt
Financing, Seller hereby consents to the use of its and each Purchased
Subsidiary’s logos, trademarks and service marks.  Purchaser shall, upon request
by Seller, promptly reimburse Seller for all reasonable and documented
out-ofpocket costs and expenses (including reasonable and documented attorney’s
fees) incurred by Seller in connection with the cooperation of Seller
contemplated by this Section 7.14(c) and shall indemnify and hold harmless
Seller, each Purchased Subsidiary and each of their respective officers,
directors, employees, agents, Affiliates and representatives (any such Person, a
“Financing Indemnified Party”) from and against any and all Losses suffered or
incurred by any of them of any type in connection with the arrangement or
consummation of any Debt Financing except with respect to any written
information prepared or provided by Seller or any other Financing Indemnified
Party or to the extent such Losses result from the gross negligence or willful
misconduct of Seller or any other Financing Indemnified Party.

7.15 Payments.  

(a)

Seller shall promptly pay or deliver to Purchaser any monies or checks which
have been sent to Seller or any of its Affiliates after the Closing Date by
customers, suppliers or other contracting parties of any Purchased Subsidiary
and the Business and which should have been sent to Purchaser (including
promptly forwarding invoices or similar documentation to Purchaser).

(b)

Seller agrees that Purchaser has the right and authority to endorse, without
recourse, any check or other evidence of Indebtedness received by Purchaser in
respect of any note or receivable transferred to Purchaser pursuant to this
Agreement and Seller shall furnish Purchaser such evidence of this authority as
Purchaser may request.

(c)

Purchaser shall promptly pay or deliver to Seller any monies or checks which
have been sent after the Closing Date to Purchaser to the extent they are not
due to the Business or any Purchased Subsidiary or should have otherwise been
sent to Seller or any of its Affiliates (including promptly forwarding invoices
or similar documentation to Seller).

77

 

--------------------------------------------------------------------------------

 

 

7.16Termination of Affiliate Transactions.  On or before the Closing Date,
except for arrangements relating to employment relationships, the payment of
compensation and benefits in the Ordinary Course and the treatment of the
Intercompany Obligations (pursuant to the Intercompany Obligations Restructuring
or otherwise), all Contracts, arrangements or Liabilities (other than the
Purchased Contracts) between any Purchased Subsidiary, on the one hand, and one
or more of their respective Affiliates (including Seller and COG, but excluding
any other Purchased Subsidiary), on the other hand, shall be terminated in full,
without any Liability to Purchaser, each Purchased Subsidiary or any of their
respective Affiliates following the Closing.

7.17 Non-Competition / Non-Solicitation.  

(a) In order for Purchaser to have and enjoy the full benefit of the Business,
and as a material inducement to Purchaser to enter into this Agreement (without
such inducement Purchaser would not have entered into this Agreement), for a
period of five (5) years commencing on the Closing Date, neither Seller, COG nor
any of their controlled Affiliates (each a “Restricted Party”) shall, directly
or indirectly (whether by itself, through an Affiliate, in partnership or
conjunction with, or as an employee, officer, director, manager, member, owner,
consultant or agent of, any other Person):

(i)

undertake, participate or carry on or be engaged or have any financial or other
interest in, or in any other manner advise or assist any other Person in
connection with the operation of a Competing Business anywhere in the world;

(ii)

solicit, entice, encourage or intentionally influence, or attempt to solicit,
entice, encourage or influence, any employee of Purchaser, any Purchased
Subsidiary or any of their respective controlled Affiliates as of immediately
following the Closing or any Business Employee who did not accept employment
with Purchaser at the Closing, to resign or leave the employ of Purchaser, any
Purchased Subsidiary or any of their respective Subsidiaries or otherwise hire,
employ, engage or contract any such employee to perform services other than for
the benefit of Purchaser, any Purchased Subsidiary or any of their respective
Subsidiaries; or

(iii)

solicit, entice, encourage or influence, or attempt to solicit, entice,
encourage or influence, any customer of the Business (including any Person who
has been a customer of the Business or any Purchased Subsidiary at any time
during the period of 12 months before the Closing) to alter, reduce or terminate
its business relationship with the Business, Purchaser, any Purchased Subsidiary
or any of their respective Subsidiaries for the direct or indirect benefit of
any Competing Business.

(b)

Notwithstanding Section 7.17(a), none of the following activities shall
constitute a violation of Section 7.17(a): (i) the advertisement of job openings
by use of newspapers, magazines, the internet and other media not directed at
individual prospective employees, consultants or independent contractors; or
(ii) a Restricted Party holding not more than 5% of the outstanding securities
of any class of any publicly-traded securities of a company that is engaged in a
Competing Business.

78

 

--------------------------------------------------------------------------------

 

 

(c)

Notwithstanding anything to the contrary set forth herein (including Section
11.3 in the event of a breach of any of the provisions of Section 7.17(a) (the
“Restrictive Covenants”):

(i)

Purchaser and its Subsidiaries (including the Purchased Subsidiaries) shall have
the right and remedy, without regard to any other available remedy, to (A) have
the Restrictive Covenants specifically enforced by any court of competent
jurisdiction and (B) have issued an injunction restraining any such breach
without posting of a bond; it being understood that any breach of any of the
Restrictive Covenants would cause irreparable and material Loss to Purchaser and
its Subsidiaries (including the Purchased Subsidiaries), the amount of which
cannot be readily determined and as to which neither Purchaser nor any of its
Subsidiaries (including the Purchased Subsidiaries) will have any adequate
remedy at law or in damages;

(ii)

it is the desire and intent of the Parties that the Restrictive Covenants be
enforced to the fullest extent permissible under the Laws, Orders and public
policies applied in each jurisdiction in which enforcement is sought and if any
Restrictive Covenant shall be adjudicated finally to be invalid or
unenforceable, such Restrictive Covenant shall be deemed amended to the extent
necessary in order that such provision be valid and enforceable, the remainder
of such Restrictive Covenant shall not thereby be affected and shall be given
full effect without regard to invalid portions and such amendment shall apply
only with respect to the operation of the Restrictive Covenant in the particular
jurisdiction in which such adjudication is made; and

(iii)

the Parties acknowledge and agree that the Restrictive Covenants are necessary
for the protection and preservation of the value and the goodwill of Purchaser’s
and each of Purchased Subsidiary’s businesses and are reasonable and valid in
geographical and temporal scope and in all other respects.

7.18Resignations.  Seller shall cause to be delivered to Purchaser on the
Closing Date the resignations of all members of the board of directors (or
similar body) and officers (other than Business Employees) of each Purchased
Subsidiary other than those identified by Purchaser to Seller by written notice
at least three (3) Business Days prior to the Closing Date.

7.19 Release.  

(a)

Other than with respect to this Agreement or the Ancillary Agreements, effective
as of the Closing, Seller hereby unconditionally and irrevocably waives any
claims that Seller has or may have in the future with respect to matters arising
on or prior to the Closing against each Purchased Subsidiary and releases, on
its own behalf and on behalf of its successors and assigns, Purchaser, each
Purchased Subsidiary and their respective Affiliates, directors and officers,
from any and all Legal Proceedings with respect thereto.

(b)

Other than with respect to this Agreement or the Ancillary Agreements or in the
case of fraud or criminal activity, effective as of the Closing, Purchaser
hereby unconditionally releases, on its own behalf and on behalf of its
Affiliates and its and their

79

 

--------------------------------------------------------------------------------

 

 

successors and assigns, Seller and its Affiliates, directors and officers, from
any and all Legal Proceedings to the extent directly arising out of Purchaser’s
ownership or operation of the Business (including the Purchased Assets and the
Assumed Liabilities).

7.20Control of Business.  Notwithstanding anything in this Agreement to the
contrary, Purchaser acknowledges on behalf of itself and its Affiliates and its
and their directors, officers, employees, Affiliates, agents, representatives,
successors and assigns that the operation of the Business by Seller and each
Purchased Subsidiary remains in the dominion and control of Seller and each
Purchased Subsidiary until the Closing, except as specifically contemplated or
permitted by Article VII.  

7.21Release of Liens.  Seller shall take any and all actions necessary to
remove, or cause to be removed, all Liens, other than Permitted Exceptions, on
the Purchased Assets (including the Purchased Subsidiaries) at or prior to the
Closing, including the repayment of Indebtedness of Seller or any of its
Subsidiaries.

7.22Environmental Compliance Covenant.  Prior to the Closing, Seller shall use
commercially reasonable efforts to cause the correction of the instances of
noncompliance with Environmental Law identified on Section 7.22 of the
Disclosure Letter hereto.

7.23Intercompany Obligations Restructuring.  Prior to the Closing, Seller shall,
and Seller shall cause its Subsidiaries to, effect the transactions set forth on
Exhibit I to be consummated in accordance with the terms and conditions set
forth therein (the “Intercompany Obligations Restructuring”).  All documentation
effecting the Intercompany Obligations Restructuring shall be in form and
substance reasonably acceptable to Seller and Purchaser.

7.24 Transition Services Agreement.  

(a)

At or immediately prior to the Closing, Seller and Purchaser shall enter into a
transition services agreement (the “Transition Services Agreement”) upon the
terms set forth on Exhibit C (the “TSA Term Sheet”), which shall set forth the
provision of transition support and other transition services after the Closing
between Seller and Purchaser .

(b)

As soon as practicable following the date of this Agreement, Seller and
Purchaser shall work together in good faith (i) to identity any additional
services to be included in the Transition Services Agreement and (ii) to
complete the Transition Services Agreement upon the terms contemplated by the
TSA Term Sheet.  In furtherance and not in limitation of the foregoing, each of
Seller and Purchaser shall use reasonable best efforts to make available and
cause the necessary personnel to work together in good faith to finalize the
terms of the Transition Services Agreement no later than July 31, 2013 (the “TSA
Date”).

7.25Cross Dongguan Dividends.  Seller shall cause any dividends or distributions
made by Cross Dongguan (whether in cash, stock or property, or any combination
thereof) to any Person to be treated for accounting purposes on a consistent
basis as between Cross Dongguan's Statutory Books and US GAAP books.

ARTICLE VIII

CONDITIONS TO CLOSING

80

 

--------------------------------------------------------------------------------

 

 

8.1 Conditions Precedent to Obligations of Purchaser.  The obligations of
Purchaser to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions (any or all of which may be waived by Purchaser in whole or
in part to the extent permitted by applicable Law):

(a)

Each of the Seller Fundamental Representations shall be true and correct at and
as of the Closing Date, except for de minimis inaccuracies in the case of
Section 5.4.  Each of the other representations and warranties of Seller set
forth in this Agreement shall be true and correct at and as of the Closing,
except to the extent such representations and warranties relate to an earlier
date (in which case such representations and warranties shall be true and
correct on and as of such earlier date); provided,  however, that in the event
of a breach of any such other representation or warranty, the condition set
forth in this Section 8.1(a) shall be deemed satisfied unless the effect of all
such breaches of representations and warranties taken together (without giving
effect to any “material”, or “Material Adverse Effect or any other materiality
qualifications set forth therein) results in a Material Adverse Effect;

(b)

Seller shall have performed and complied with in all material respects all
covenants, obligations and agreements required by this Agreement to be performed
or complied with by it on or prior to the Closing Date;

(c)

since the date of this Agreement, there shall not have occurred any Material
Adverse Effect;

(d)

Purchaser shall have received a certificate signed by an executive officer of
Seller, dated the Closing Date, stating that the conditions specified in Section
8.1(a),  Section 8.1(b) and Section 8.1(c) have been satisfied;

(e)

there shall not be in effect any Order by a Governmental Body of competent
jurisdiction restraining, enjoining, having the effect of making the
transactions contemplated by this Agreement illegal or otherwise prohibiting the
consummation of the transactions contemplated hereby;

(f)

no Law shall have been enacted, entered, promulgated and remain in effect that
prohibits or makes illegal the consummation of the transactions contemplated
hereby;

(g)

Seller shall have obtained the third party consents set forth in Section 8.1(g)
of the Disclosure Letter, in form and substance reasonably satisfactory to
Purchaser;

(h)

Seller shall have obtained (x) the approval of the local commerce bureau in
Dongguan, and the approval of and registration with the local administration of
industry and commerce in Dongguan with respect to the transfer of Capital Stock
of Cross Dongguan and (y) the receipt of a new business license of Cross
Dongguan evidencing Purchaser as the new equity owner, with each approval and
license in form and substance satisfactory to Purchaser,

(i)

Seller shall have delivered, or caused to be delivered, to Purchaser (i) duly
executed copies of the Transfer Documents, (ii) the Transition Services
Agreement in form and substance reasonably acceptable to Purchaser

81

 

--------------------------------------------------------------------------------

 

 

and (iii) a certificate from each of Seller and ATX to the effect that it is not
a “foreign person” within the meaning of Section 1445 of the Code;

(j)

Seller shall have delivered evidence reasonably satisfactory to Purchaser of the
resignation of all members of the board of directors (or similar body) and
officers (other than Business Employees) of each Purchased Subsidiary other than
those identified by Purchaser to Seller by written notice at least five (5)
Business Days prior to the Closing Date;

(k)

Seller shall have delivered to Purchaser duly executed copies of the IP
Assignment Agreements;

(l)

Seller shall have removed, or caused to be removed, all Liens against the
Purchased Assets other than Permitted Exceptions;

(m)

Purchaser shall have received the deliverables required to be delivered pursuant
to Section 4.2(b); and

(n)

the China Intercompany Restructuring, the Factoring Arrangement Restructuring
and the Intercompany Obligation Netting Steps (in each case as such terms are
defined in Exhibit I) shall have been completed in accordance with Exhibit I and
Seller shall have delivered evidence reasonably satisfactory to Purchaser of
such fact.

8.2 Conditions Precedent to Obligations of Seller.  The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions (any or all of which may be waived by Seller in whole or in part to
the extent permitted by applicable Law):

(a)

Each of the Purchaser Fundamental Representations shall be true at and as of the
Closing Date.  Each of the other representations and warranties of Purchaser set
forth in this Agreement qualified as to materiality or “material adverse effect”
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, at and as of the Closing Date as though made on the
Closing Date, except to the extent such representations and warranties relate to
an earlier date (in which case such representations and warranties qualified as
to materiality or “material adverse effect” shall be true and correct, and those
not so qualified shall be true and correct in all material respects, on and as
of such earlier date);

(b)

Purchaser shall have performed and complied with in all material respects all
covenants, obligations and agreements required by this Agreement to be performed
or complied with by Purchaser on or prior to the Closing Date;

(c)

Seller shall have received a certificate signed by an executive officer of
Purchaser, dated the Closing Date, stating that the conditions specified in
Section 8.2(a) and Section 8.2(b) have been satisfied;

(d)

there shall not be in effect any Order by a Governmental Body of competent
jurisdiction restraining, enjoining, having the effect of making the
transactions contemplated by this Agreement illegal or otherwise prohibiting the
consummation of the transactions contemplated hereby;

82

 

--------------------------------------------------------------------------------

 

 

(e)

no Law shall have been enacted, entered, promulgated and remain in effect that
prohibits or makes illegal the consummation of the transactions contemplated
hereby; 

(f)

Purchaser shall have delivered to Seller duly executed copies of the IP
Assignment Agreements;

(g)

Purchaser shall have delivered, or caused to be delivered, to Seller the
Transition Services Agreement in form and substance reasonably acceptable to
Seller; and

(h)

Seller shall have received the deliverables required to be delivered pursuant to
Section 4.2(a).  

8.3 Frustration of Closing Conditions.  No Party may rely on the failure of any
condition set forth in Sections 8.1 or 8.2, as the case may be, if such failure
was caused by such Party’s failure to comply with any provision of this
Agreement.

ARTICLE IX

INDEMNIFICATION

9.1 Survival of Representations and Warranties and Covenants.  

(a)

The representations and warranties of Seller contained in this Agreement or in
the certificate delivered pursuant to Section 8.1(d) (the “Seller
Representations”) shall survive the Closing and continue in full force and
effect until the Survival Date; provided,  however, that (i) the representations
and warranties made pursuant to Section 5.1 (Organization and Good Standing),
Section 5.2 (Authorization of Agreement), Section 5.4 (Purchased Subsidiaries;
Capitalization), Section 5.5 (Ownership and Transfer of Purchased Assets),
Section 5.19 (Financial Advisors) (collectively, the “Seller Fundamental
Representations”) and the representations and warranties made pursuant to
Section 5.9 (Taxes) and Section 5.14 (Employee Benefits Plans) shall in each
case survive until sixty (60) days following the expiration of the applicable
statutory period of limitation (including all periods of extension, whether
automatic or permissive), (ii) the representations and warranties made pursuant
to Section 5.12(c) (Intellectual Property) and Section 5.18 (Environmental
Matters) shall survive until the third (3rd) anniversary of the Closing Date and
(iii) the representations and warranties made pursuant to Section 5.12
(Intellectual Property) other than Section 5.12(c) shall survive until the
second (2nd) anniversary of the Closing Date.  Written notice of a claim for
indemnification must be given by Purchaser to Seller in accordance with the
provisions hereof prior to the expiration of the applicable representations and
warranties, in which case such claim shall survive until finally resolved or
judicially determined.  Any claim for indemnification as a result of a breach of
a representation and warranty by Seller for which notice is not delivered to
Seller on or prior to the expiration of the applicable representation and
warranty will be irrevocably and unconditionally released and waived.

(b)

The representations and warranties of Purchaser contained in this Agreement or
in the certificate delivered pursuant to Section 8.2(c) (the
“Purchaser Representations”) shall survive the Closing and continue in full
force and effect until the Survival Date; provided,  however, that the
representations and warranties of Purchaser set forth

83

 

--------------------------------------------------------------------------------

 

 

in Section 6.1 (Organization and Good Standing), Section 6.2 (Authorization of
Agreement) and Section 6.6 (Financial Advisors) shall survive indefinitely (all
of such representations and warranties, the “Purchaser Fundamental
Representations”).  Indemnification claims may be asserted with respect thereto
to the extent permitted by this Article IX.  Written notice of a claim for
indemnification must be given by Seller to Purchaser in accordance with the
provisions hereof prior to the expiration of the applicable representations and
warranties, in which case such claim shall survive until finally resolved or
judicially determined.  Any claim for indemnification as a result of a breach of
a representation and warranty by Purchaser for which notice is not delivered to
Purchaser on or prior to the expiration of the applicable representation and
warranty will be irrevocably and unconditionally released and waived.

(c)

All of the covenants or other agreements of the Parties contained in this
Agreement shall survive until fully performed or fulfilled, unless and to the
extent only that noncompliance with such covenants or agreements is waived in
writing by the Party entitled to such performance.  Except as may governed by
Article X, no claim for a breach of a covenant or other agreement set forth in
this Agreement that (i) by its nature is required to be performed by or prior to
Closing (the “Pre-Closing Covenants”) may be made or brought by any Party after
the eighteen (18) month anniversary of the Closing Date and (ii) by its nature
is required to be performed after Closing (the “Post-Closing Covenants”) may be
made or brought by any Party after the eighteen (18) month anniversary of the
last date on which each such Post-Closing Covenant was required to be performed
in accordance with its terms (in each case, a “Survival Period”); provided,
 however, that any obligation to indemnify and hold harmless shall not terminate
with respect to any Losses to which the Person to be indemnified shall have
given notice in writing setting forth the specific claim and the basis therefor
to the indemnifying party in accordance with Section 9.4 before the termination
of the applicable Survival Period.  Any claim for indemnification as a result of
a breach of a covenant not made by a Party on or prior to the termination of the
applicable Survival Period will be irrevocably and unconditionally released and
waived.

9.2 Indemnification by Seller.  

(a) Subject to Sections 9.1 and 9.5, Seller hereby agrees, from and after the
Closing Date, to indemnify and hold harmless, to the fullest extent permitted by
law, Purchaser and its Affiliates (including the Purchased Subsidiaries) and
their respective directors, officers, employees, managers, advisors (including
financial and accounting advisors), stockholders, agents, attorneys and
representatives in their respective capacities as such and their respective
successors and permitted assigns (collectively, the “Purchaser Indemnified
Parties”) from and against and in respect of any and all losses, Liabilities,
claims, demands, judgments (other than Excluded Damages), fines, suits, actions,
costs, fees and expenses (each a “Loss” and, collectively, “Losses”) incurred or
suffered by any of the Purchaser Indemnified Parties based upon, resulting from
or arising out of:

(i)

any failure of the Seller Representations made by Seller to be true and correct
as of the date hereof and as of the Closing Date (except with respect to
representations and warranties which speak to an earlier date, in which case, as
of such earlier date);

84

 

--------------------------------------------------------------------------------

 

 

(ii)

the breach of any Pre-Closing Covenant on the part of Seller or any Purchased
Subsidiary;

(iii)

the breach of any Post-Closing Covenant on the part of Seller;

(iv)

the Excluded Liabilities or Excluded Assets;

(v)

any Purchased Subsidiary Legacy Environmental Liabilities;

(vi)

the Identified Environmental Issues;

(vii)

the Environmental Corrective Actions and the Dongguan Chrome Process
Relocation; 

(viii)

Seller’s breach of Section 2.6 (Bulk Sales Laws); and 

(ix)

any Cross Ireland Liabilities.

This Section 9.2 shall not apply to Taxes, which are specifically governed by
Article X.  

9.3 Indemnification by Purchaser.  

(a) Subject to Section 9.1 and 9.5, Purchaser hereby agrees, from and after the
Closing Date, to indemnify and hold harmless, to the fullest extent permitted by
law, Seller and its Affiliates, and their respective directors, officers,
employees, managers, advisors (including financial and accounting advisors),
stockholders, agents, attorneys and representatives in their respective
capacities as such, and their respective successors and permitted assigns
(collectively, the “Seller Indemnified Parties”) from and against, and pay to
the applicable Seller Indemnified Parties the amount of, any and all Losses
incurred or suffered by any of the Seller Indemnified Parties based upon,
resulting from or arising out of:

(i)

any failure of the Purchaser Representations made by Purchaser to be true and
correct as of the date hereof and as of the Closing Date (except with respect to
representations and warranties which speak to an earlier date, in which case, as
of such earlier date);

(ii)

the breach of any Pre-Closing Covenant on the part of Purchaser;

(iii)

the breach of any Post-Closing Covenant on the part of Purchaser; and

(iv)

the Assumed Liabilities or the Purchased Assets.

This Section 9.3 shall not apply to Taxes, which are specifically governed by

85

 

--------------------------------------------------------------------------------

 

 

 

 

Article X.  

 

9.4 

Indemnification Procedures.  

 

(a)

A claim for indemnification for any matter not involving a third-Person claim
may be asserted by notice to the Party from whom indemnification is sought.

(b)

Other than with respect to any Tax matter (which shall be governed exclusively
by Section 10.4), in the event that any Legal Proceedings shall be instituted,
or that any claim shall be asserted, by any third party in respect of which
payment may be sought under Section 9.2 or 9.3 (regardless of the limitations
set forth in Section 9.5) (an “Indemnification Claim”), the indemnified party
shall promptly cause written notice of the assertion of any Indemnification
Claim of which it has knowledge which is covered by this indemnity to be
forwarded to the indemnifying party.  The failure of the indemnified party to
give reasonably prompt notice of any Indemnification Claim shall not release,
waive or otherwise affect the indemnifying party’s obligations with respect
thereto except to the extent that the indemnifying party is prejudiced as a
result of such failure.  The indemnifying party shall have the right, at its
sole option and expense, to be represented by counsel of its choice, which must
be reasonably satisfactory to the indemnified party, and to defend against,
negotiate, settle or otherwise deal with any Indemnification Claim which relates
to any Losses indemnified against by it hereunder.  If the indemnifying party
elects to defend against, negotiate, settle or otherwise deal with any
Indemnification Claim which relates to any Losses indemnified against by it
hereunder, it shall within 30 days of receipt of written notice of such
Indemnification Claim (or sooner, if the nature of the Indemnification Claim so
requires) notify the indemnified party of its intent to do so; provided, that
the indemnifying party shall not be entitled to assume or control the defense of
any Indemnification Claim if (i) the Indemnification Claim relates to or arises
in connection with any criminal Legal Proceeding, (ii) the Indemnification Claim
seeks an injunction or equitable relief against any indemnified party, (iii) the
Indemnification Claim has or would reasonably be expected to result in Losses in
excess of the amounts available for indemnification pursuant to this Article IX,
(iv) the indemnifying party has failed or is failing to defend in good faith the
Indemnification Claim, (v) the indemnifying party has not acknowledged that such
Indemnification Claim is subject to indemnification pursuant to this Article IX;
 provided,  further, that if Seller is the indemnifying party that defends
against, negotiates, settles or otherwise deals with such Indemnification Claim,
the attorneys’ fees and other Losses incurred by Seller in connection with such
defense, negotiation, settlement or other dealings shall reduce (by the amount
thereof) the amount recoverable under the Cap by Purchaser Indemnified Parties
or (vi) the Indemnification Claim concerns compliance with Environmental Laws at
one of the properties that are the subject of the Real Property Leases, in which
case the indemnifying party shall be provided with the opportunity to attend,
but not participate in, any telephonic or inperson discussions or negotiations
with the relevant Governmental Authority and to comment on any proposed
settlement, which comments shall be given reasonable considerations.  If the
indemnifying party elects not to defend

86

 

--------------------------------------------------------------------------------

 

 

against, negotiate, settle or otherwise deal with any Indemnification Claim
which relates to any Losses indemnified against hereunder, the indemnified party
may defend against, negotiate, settle or otherwise deal with such
Indemnification Claim.  If the indemnifying party shall assume the defense of
any Indemnification Claim, the indemnified party may participate, at his or its
own expense, in the defense of such Indemnification Claim; provided,  however,
that such indemnified party shall be entitled to participate in any such defense
with separate counsel at the expense of the indemnifying party if, (i) so
requested by the indemnifying party to participate or (ii) in the reasonable
opinion of counsel to the indemnified party, a conflict or potential conflict
exists between the indemnified party and the indemnifying party that would make
such separate representation advisable; provided,  further, that the
indemnifying party shall not be required to pay for more than one such counsel
(plus any appropriate local counsel) for all indemnified parties in connection
with any Indemnification Claim.  The Parties agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
Indemnification Claim.  Notwithstanding the foregoing, if a settlement offer
solely for money damages is made by the applicable third party claimant, and the
indemnifying party notifies the indemnified party in writing of the indemnifying
party’s willingness to accept the settlement offer and, subject to the
applicable limitations of Sections 9.5 and 9.6, pay the amount called for by
such offer, and the indemnified party declines to accept such offer, the
indemnified party may continue to contest such Indemnification Claim, free of
any participation by the indemnifying party, and the amount of any ultimate
Liability with respect to such Indemnification Claim that the indemnifying party
has an obligation to pay hereunder shall be limited to the lesser of (A) the
amount of the settlement offer that the indemnified party declined to accept or
(B) the aggregate Losses of the indemnified party with respect to such
Indemnification Claim.  If the indemnifying party makes any payment on any
Indemnification Claim, the indemnifying party shall be subrogated, to the extent
of such payment, to all rights and remedies of the indemnified party to any
insurance benefits or other claims of the indemnified party with respect to such
Indemnification Claim.

(c)

After any final decision, judgment or award shall have been rendered by a
Governmental Body of competent jurisdiction and the expiration of the time in
which to appeal therefrom, or a settlement shall have been consummated, or the
indemnified party and the indemnifying party shall have arrived at a mutually
binding agreement with respect to an Indemnification Claim hereunder, the
indemnified party shall forward to the indemnifying party notice of any sums due
and owing by the indemnifying party pursuant to this Agreement with respect to
such matter.

9.5 Certain Limitations on Indemnification.  

(a)

Notwithstanding the provisions of this Article IX, neither Seller nor Purchaser
shall have any indemnification obligations for Losses under Section 9.2(a) or
Section 9.3(a), respectively, (i) for any individual item, or group of items
arising out of the same or related events, where the Loss relating thereto

87

 

--------------------------------------------------------------------------------

 

 

is less than $25,000 (the “Sub-Basket”) and (ii) unless the aggregate amount of
all such Losses (excluding any Losses within the Sub-Basket) in the aggregate
exceeds $600,000 (the “Basket”), and then only to the extent of such excess,
(iii) for any Losses to the extent the aggregate amount of such Losses exceed
$6,000,000 (the “Cap”); provided,  however, that (A) in respect of any claim
involving Losses resulting from or arising out of a breach of the
representations and warranties made pursuant to Section 5.12(c) (Intellectual
Property), the Cap shall apply provided that the Cap shall be equal to
$12,000,000, (B) in respect of any indemnity claim made pursuant to Section
9.2(a)(v) or Section 9.2(a)(vi) or any Losses resulting from or arising out of a
breach of the representations and warranties made pursuant to Section 5.18
(Environmental Matters), the Cap shall not apply and the maximum aggregate
Losses for which Seller shall have indemnification obligations for all such
matters in this clause (B) shall instead be equal to $6,000,000, (C) in respect
of any indemnity claim made pursuant to Section 9.2(a)(vii), the Cap shall not
apply and the maximum aggregate Losses for which Seller shall have
indemnification obligations for all such matters in this clause (C) shall
instead be equal to $250,000, (D) in respect of any claim involving Losses
resulting from or arising out of (1) fraud or willful misconduct, (2) a breach
of the Seller Fundamental Representations or the Purchaser Fundamental
Representations, (3) Taxes or other amounts payable pursuant to Section 10.1 or
(4) a breach of the representations and warranties made in clause (a) of Section
5.21 (Sufficiency of Assets), the Sub-Basket, Basket and Cap shall not apply and
the maximum aggregate Losses for which Seller shall have indemnification
obligations for all such matters in this clause (D) shall instead be equal to
the Final Purchase Price, (E) in respect of any indemnity claim made pursuant to
Section 9.2(a)(ii) or 9.2(a)(viii), the Sub-Basket, Basket and Cap shall not
apply and the maximum Losses for which Seller shall have indemnification
obligations for all such matters in this clause (E) shall instead be equal to
the Final Purchase Price, (F) in respect of any indemnity claim made pursuant to
Section 9.3(a)(ii), the Sub-Basket, Basket and Cap shall not apply and the
maximum Losses for which Purchaser shall have indemnification obligations for
all such matters in this clause (F) shall instead be equal to the Final Purchase
Price, (G) in respect of any indemnity claim made pursuant to Section
9.2(a)(iii) or 9.2(a)(iv), the Sub-Basket, Basket and Cap shall not apply, (H)
in respect of any indemnity claim made pursuant to Section 9.2(a)(ix), the
Sub-Basket and Basket shall not apply and (I) in respect of any indemnity claim
made pursuant to Section 9.3(a)(iii) or 9.3(a)(iv), the Sub-Basket, Basket and
Cap shall not apply.  Notwithstanding anything to the contrary contained herein,
in no event shall the aggregate indemnification amounts payable to the Seller
Indemnified Parties, on the one hand, or the Purchaser Indemnified Parties, on
the other hand, pursuant to this Agreement, including pursuant to Article IX and
Article X hereof, exceed the Final Purchase Price, other than in respect of
indemnity claims made pursuant to Section 9.2(a)(iii),  9.2(a)(iv),  9.3(a)(iii)
or 9.3(a)(iv).  

(b)

The right to indemnification, payment of Losses or other remedies based on any
representations, warranties, covenants or agreements set forth in this Agreement
will not be affected by any investigation conducted with respect to or any
knowledge or information acquired at any time, whether before

88

 

--------------------------------------------------------------------------------

 

 

or after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or agreement (other than disclosures made in
the Disclosure Letter hereto).  The waiver of any condition based on the
accuracy of any representation or warranty or on the performance of or
compliance with any covenant or agreement, will not affect the right to
indemnification, payment of Losses or other remedy based on such
representations, warranties, covenants or agreements.

(c)

Indemnification shall only be available pursuant to Section 9.2(a)(vi) with
respect to (1) the Identified Environmental Issues listed on Section 7.22 of the
Disclosure Letter and (2) the presence or use of chromium in violation of any
applicable Environmental Laws at the Leased Real Property located in Dongguan,
China, for Losses arising out of fines and penalties associated with such
matters; provided that this limitation shall in no way limit the indemnification
in Section 9.2(a)(vii).  

(d)

Notwithstanding anything to the contrary, no Purchaser Indemnified Party shall
be entitled to any indemnification for any amounts pursuant to this Agreement,
including pursuant to Article IX and Article X, in respect of any matter to the
extent such matter constitutes a Closing Adjustment.

(e)

Any party seeking indemnification shall take all commercially reasonable steps
to mitigate any Loss as may be required by Law.  

(f)

Sellers’ obligation to indemnify the Purchaser Indemnified Parties pursuant to
Section 9.2(a)(v) and Section 9.2(a)(vi) shall survive until the third (3rd)
anniversary of the Closing Date.  Seller’s obligation to indemnify the Purchaser
Indemnified Parties pursuant to Section 9.2(a)(vii) shall survive, with respect
to the Environmental Corrective Actions, until 120 days following the Closing
Date, and with respect to the Dongguan Chrome Relocation Process, until the
first (1st) anniversary of the Closing Date.

(g)

The Purchaser Indemnified Parties shall not be entitled to indemnification
pursuant to Section 9.2(a)(iv) with respect to environmental contamination by
Hazardous Materials at the Lincoln, Rhode Island Leased Real Property or
indemnification pursuant to Section 9.2(a)(v) with respect to environmental
contamination by Hazardous Materials at the Luton, United Kingdom Leased Real
Property where, in either case, the Losses for which any of the Purchaser
Indemnified Parties seeks indemnification; (A) arise out of invasive
environmental sampling by or on behalf of Purchaser at the relevant Leased Real
Property, unless such sampling is required of Purchaser (i) by Environmental
Laws or the written, unsolicited direction of a Governmental Body or (ii) in
response to an imminent and substantial threat to human health or the
environment ; or (B) arise out of any investigation, remediation or other action
taken by or on behalf of a Purchaser Indemnified Party to address such
contamination to the extent that such activity is not reasonably appropriate to
comply with the minimum standards required under Environmental Law or by a
Governmental Authority with jurisdiction applicable to the use of such property
as of the Closing Date, taking into account the availability of any engineering
controls and deed restrictions and without materially interfering with the
operations of Purchaser.  In the event that a Purchaser Indemnified Parties

89

 

--------------------------------------------------------------------------------

 

 

believes that it is required to conduct any investigation, remediation or other
action that would give rise to a claim for indemnification pursuant to Section
9.2(a)(iv) with respect to environmental contamination by Hazardous Materials at
the Lincoln, Rhode Island Leased Real Property or for indemnification pursuant
to Section 9.2(a)(v) with respect to environmental contamination by Hazardous
Materials at the Luton, United Kingdom Leased Real Property (“Required
Remediation Activity”), the Purchaser Indemnified Parties shall first provide
the Seller with reasonable notice and the opportunity to conduct such Required
Remediation Activity at Seller’s sole cost and expense.  Seller shall notify
Purchaser in writing within ten (10) Business Days of receipt of such notice
whether it shall conduct such Required Remediation Activity at Seller’s sole
cost.  In the event that Seller declines to undertake such Required Remediation
Activity, then the Purchaser Indemnified Parties shall be entitled to conduct
such Required Remediation Activity and entitled to such indemnification as
otherwise provided herein.  The Purchaser Indemnified Parties shall not be
entitled to indemnification for any Required Remediation Activity to the extent
that Seller is not first provided with the opportunity to conduct such Required
Remediation Activity, except to the extent such Required Remediation Activity is
necessary to comply with Environmental Law or address an imminent and
substantial threat to human health or safety and notice to Seller is
impractical.

(h)

Sellers’ obligation to indemnify the Purchaser Indemnified Parties pursuant to
Section 9.2(a)(ix) shall survive until the Survival Date; provided,  however,
that (i) any claims made pursuant to Section 9.2(a)(ix) relating to Taxes or
employee matters shall in each case survive until sixty (60) days following the
expiration of the applicable statutory period of limitation (including all
periods of extension, whether automatic or permissive) and (ii) any claims made
pursuant to Section 9.2(a)(ix) relating to environmental matters shall survive
until the third (3rd) anniversary of the Closing Date.

9.6 Calculation of Losses.  

(a)

The amount of any Losses for which indemnification is provided under

this Article IX or Article X shall be net of any (i) Tax benefits actually
realized by the indemnified party as a result of the incurrence or payment of
any such Losses in the year of the Loss or the following three (3) taxable years
(“Tax Benefit”), and (ii) amounts actually recovered by the indemnified party
under insurance policies or otherwise with respect to such Losses (in each case
net of any reasonable and documented deductible or copayment, the costs of
filing a claim, arbitration costs, and all other documented out-of-pocket
expenses and Taxes incurred in connection with such recovery).  If such Tax
Benefit for the year of the Loss or the following three (3) taxable years is
determined after the applicable indemnity payment is made pursuant to this
Section 9.6, the indemnified party shall repay to the indemnifying party,
promptly after such determination, any amount that the indemnifying party would
not have had to pay pursuant to this Section 9.6 had such determination been
made at the time of such payment (provided that in no event shall the
indemnifying party receive any payment in excess of the amount actually paid to
the indemnified party in respect of such Loss).  In the event that an insurance
recovery is received by any indemnified party with respect to any Losses for
which any such Person has been indemnified hereunder, then a refund shall be
made promptly to the

90

 

--------------------------------------------------------------------------------

 

 

indemnifying party that made or provided such indemnification payment to such
indemnified party equal to the excess of (I) the amount previously received by
such indemnified party hereunder, plus the amount of the insurance payments or
other recoveries from such insurance recovery actually received by such
indemnified party (net of any expenses reasonably incurred by the indemnified
party in collecting such amounts, including any deductible or copayment amounts,
reasonable and documented attorney’s fees and increase in insurance premiums),
over (B) the amount of Losses with respect to such claim which such indemnified
party incurred, regardless of whether such indemnified party has become entitled
to receive an indemnity payment under this Section 9 (provided that in no event
shall the indemnifying party receive a refund in excess of the amount actually
paid to the indemnified party in respect of such Loss). The amount of any Losses
for which indemnification is provided under this Article IX or Article X shall
be increased to take into account any additional Tax cost incurred by the
indemnitee in the year of the Loss or the following three (3) taxable years
arising from the receipt of indemnification payments hereunder (“Tax Cost”).  In
computing the amount of any Tax Cost or Tax Benefit, the indemnitee shall be
deemed to recognize all other items of income, gain, loss, deduction or credit
before recognizing any item arising from the receipt of any indemnification
payment hereunder or the incurrence or payment of any indemnified Loss.  For the
avoidance of doubt, nothing in the foregoing shall provide Seller with any
access or right to review Purchaser’s or its Subsidiaries Tax Returns.  

(b)

Notwithstanding anything to the contrary elsewhere in this Agreement, no Party
shall, in any event, be liable to any other Person for any Excluded Damages
hereunder.

(c)

Notwithstanding anything to the contrary elsewhere in this Agreement, with
respect to determining whether (i) a breach of any of the Seller Representations
has occurred for purposes of this Article IX or Article X, or (ii) the amount of
Losses incurred or suffered, for such purposes, as a result of any such breach,
any Material Adverse Effect or materiality qualification limiting the scope of
such representations or warranties shall be disregarded.

9.7 Tax Treatment of Indemnity Payments.  Any indemnity payment made pursuant to
this Agreement shall be treated for all Tax purposes as an adjustment to the
Final Purchase Price paid by Purchaser unless a Final Determination with respect
to the indemnified party or its Affiliate causes such payment to be treated
other than as an adjustment to the Final Purchase Price for any Tax purposes.

9.8 Exclusive Remedy.  From and after the Closing, except with respect claims
for fraud, willful misconduct or in connection with a dispute under Section 3.4
(which shall be governed by Section 3.4) or in accordance with Section 4.5, the
sole and exclusive remedy for any and all claims for monetary damages arising
under, out of, or related to this Agreement, shall be the rights of
indemnification set forth in this Article IX and Article X only, and no Person
will have any other entitlement, remedy or recourse, whether in contract, tort
or otherwise.  The provisions of this Section 9.8, together with the provisions
of Sections 5.20 and 6.9, and the remedies provided in this Article IX and
Article X, were specifically bargained-for between Purchaser and Seller and were
expressly taken into account by Purchaser and Seller in arriving at the Final
Purchase Price.  Purchaser and Seller have specifically relied upon the
provisions of this Section 9.8, together with the provisions of Sections 5.20
and 6.9, and the remedies provided in this

91

 

--------------------------------------------------------------------------------

 

 

Article IX and Article X, in agreeing to the Final Purchase Price and in
agreeing to provide the specific representations and warranties set forth
herein.

9.9 Specific Performance.  

(a)

Notwithstanding Section 9.8, the Parties acknowledge and agree that a breach of
this Agreement would cause irreparable damage to the non-breaching Party, and
that the non-breaching Party will not have an adequate remedy at
Law.  Therefore, prior to the termination of this Agreement pursuant to Section
4.3, the obligations of Purchaser and Seller pursuant to this Agreement,
including Purchaser’s obligation to acquire the Purchased Assets and pay the
Initial Purchase Price and the Final Purchase Price, shall be enforceable to
prevent breaches of this Agreement by a decree of specific performance issued by
any court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith.  Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which Seller or Purchaser may have under this Agreement or otherwise; provided,
 however, that the right of Seller to obtain specific performance to cause
Purchaser to cause the Equity Financing to be funded and to consummate the
transactions contemplated by this Agreement shall be subject to the provisions
of Section 9.9(b).  In no event shall Purchaser be obligated to litigate against
its Debt Financing Sources.  The provisions of this Section 9.9(a) are intended
to be for the benefit of, and enforceable by, the Debt Financing Sources of
Purchaser and each such Person shall be a third party beneficiary of this
Section 9.9(a).  

(b)

Notwithstanding anything to the contrary set forth in this Agreement, the right
of Seller to seek specific performance to cause Purchaser to cause the Equity
Financing to be funded and to consummate the transactions contemplated by this
Agreement shall be subject to the requirements that:  (i) all of the conditions
set forth in Section 8.1 and 8.2 (other than any condition the failure of which
to be satisfied is attributable to a breach by Purchaser of its representations,
warranties, covenants or agreements contained herein and other than those
conditions that by their terms are to be satisfied by actions taken at the
Closing, each of which is capable of being satisfied or waived by Seller at the
Closing) have been satisfied, (ii) the Debt Financing has been funded or will be
funded in accordance with the terms thereof at the Closing, if the Equity
Financing is funded at the Closing, (iii) Purchaser is obligated to consummate
the Closing in accordance with Section 4.1 and Seller has confirmed to Purchaser
in writing that (A) all conditions in Section 8.1 and 8.2 have been satisfied or
that such Person is willing to waive such open conditions and (B) if specific
performance is granted and the Equity Financing and Debt Financing were funded,
the Closing would occur.

ARTICLE X

TAX MATTERS

10.1 Tax Indemnification.  

(a)

Indemnification by Seller.  Seller shall indemnify and hold harmless, to the
fullest extent permitted by Law, the Purchaser Indemnified Parties from and
against any and

92

 

--------------------------------------------------------------------------------

 

 

all Losses (in excess of Taxes constituting Closing Adjustments) arising out of,
without duplication, (i) Taxes of Seller and the Purchased Subsidiaries for
periods or portions thereof (including the portion of a Straddle Period ending
on the Closing Date) ending on or before the Closing Date (“Pre-Closing Taxes”);
(ii) Taxes of any member of an affiliated, consolidated, combined or unitary
group of which Seller or any of its Subsidiaries is or was a member on or prior
to the Closing Date by reason of liability under Treasury Regulation §1.1502-6,
Treasury Regulation §1.1502-78 or comparable provision of foreign, state or
local Tax Law; (iii) Taxes imposed on a Purchaser Indemnified Party as a result
of (x) a breach of a representation or warranty set forth in Section 5.9 or (y)
a breach of a covenant or agreement set forth in Section 7.2(b)(xi) or (z) Tax
Sharing Agreement not terminated in accordance with Section 10.5; (iv) Excluded
Taxes;  (v) Taxes arising out of the Section 338(h)(10) Election and the Section
338(g) Elections (as provided in Section 10.7 below); (vi) Taxes arising out of
the failure to make any filings described in Section 10.8 below (including any
filings not made pursuant to Section 10.8(a), but which should have been made);
and (vii) fifty percent (50%) of PRC Taxes up to $2,000,000 (it being understood
that, for the avoidance of doubt, nothing in this Section 10.1(a)(vii) shall
require Seller to pay to the Purchaser Indemnified Parties any amount in excess
of $1,000,000 in the aggregate (i.e., 50% of $2,000,000)).

(b)

Indemnification by Purchaser. Purchaser and its Affiliates (including the
Purchased Subsidiaries) shall indemnify, defend and hold Seller and its
Affiliates harmless from and against Losses arising out of Assumed Taxes (other
than any such Tax Liabilities that Seller must indemnify Purchaser and its
Affiliates for under Section 10.1(a).  

(c)

(i) After the Closing, each Party (whether Purchaser or Seller, as the case may
be) shall promptly notify the other Party in writing of any demand, claim or
notice of the commencement of any audit or administrative or judicial proceeding
(any such audit or administrative or judicial proceeding, a “Contest”) received
by such party from any Taxing Authority or any other Person with respect to
Taxes for which such other Party is liable pursuant to Section 10.1 of this
Agreement; provided,  however, that a failure to give such notice will not
affect such other party’s rights to indemnification under this Article X, except
to the extent that such party is actually prejudiced thereby.

(ii)

Any indemnity payment required to be made pursuant to this Section 10.1 shall be
made within thirty (30) days after the indemnified party makes written demand
upon the indemnifying party, but in no case earlier than five (5) Business Days
prior to the date on which the relevant Taxes are required to be paid to the
applicable Taxing Authority or applicable third party.

(iii)

All amounts required to be paid pursuant to this Article X shall be paid
promptly in immediately available funds by wire transfer to a bank account
designated by the indemnified Party.

(iv)

The indemnification obligations under Sections 10.1(a)(i)10.1(a)(vi) shall
survive until 60 (sixty) days after the expiration of the relevant statute of
limitations (including all periods of extension, whether automatic or
permissive).  The indemnification obligations under Section 10.1(a)(vii) shall
survive until the fifth (5th) anniversary of the Closing. 

10.2 Filing of Tax Returns; Payment of Taxes.  

93

 

--------------------------------------------------------------------------------

 

 

(a)

Seller shall prepare and timely file, or cause to be prepared and timely filed,
all federal, state, local and foreign Tax Returns in respect of the Purchased
Assets (including the Purchased Subsidiaries) and the Business (i) that are
required to be filed (taking into account any applicable extensions) on or
before the Closing Date or (ii) that are required to be filed (taking into
account any applicable extensions) after the Closing Date and are Consolidated
Income Tax Returns. Such Consolidated Income Tax Returns shall be prepared in a
manner consistent with the allocations set forth in Section 3.4.  

(b)

Purchaser shall prepare and timely file, or cause to be prepared and timely
filed, all Tax Returns (other than those Seller is entitled to prepare pursuant
to Section 10.2(a)), including those relating to Transfer Taxes (unless Seller
is required to file such Tax Returns related to Transfer Taxes), required to be
filed in respect of the Purchased Assets (including the Purchased Subsidiaries)
or the Business.  Seller shall cooperate with Purchaser in respect of preparing
any Tax Returns with respect to Transfer Taxes. With respect to Tax Returns that
are required to be filed by or with respect to Seller or any of its Purchased
Subsidiaries for PreClosing Tax Periods or Straddle Periods, such Tax Returns
shall be prepared in a manner consistent with past practice (unless otherwise
required by applicable Law) and Seller shall be responsible for the Pre-Closing
Taxes for which Seller would be liable pursuant to Section 10.1(a) due in
respect of such Tax Returns. Purchaser shall provide a draft of any such Tax
Return for a Pre-Closing Tax Period or Straddle Period (including supporting
workpapers) prepared pursuant to this Section 10.2 for which Seller may have an
indemnification obligation pursuant to Section 10.1(a) to Seller on or prior to
the date that is ten (10) Business Days prior to the due date (including
extensions), along with a supporting schedule that shows the allocation of
portion of the Taxes shown as due on such Tax Return to the Pre-Closing Tax
Period, for Seller’s review and approval, such approval not to be unreasonably
withheld, conditioned or delayed.  If Seller disputes any item on such Tax
Return it is entitled to review hereunder, it shall notify Purchaser of such
disputed item (or items) and the basis for its objection.  Purchaser and Seller
shall cooperate in good faith to resolve any dispute as to any matter in such
Tax Returns. If the Parties cannot resolve any disputed item, the item in
question shall be resolved by an Independent Accounting firm in a manner
consistent with Section 3.3(c) prior to the due date (with extensions) for such
Tax Return.

(c)

Neither Purchaser nor any of its Affiliates (including any Purchased Subsidiary)
shall file an amended Tax Return, or agree to any waiver or extension of the
statute of limitations relating to Taxes with respect to any Purchased Asset or
the Business for a PreClosing Tax Period, (unless, in each case, otherwise
required by a Final Determination), without the prior written consent of Seller,
which consent may be withheld in Seller’s sole and absolute discretion.

(d)

Straddle Periods.  For purposes of this Agreement, in the case of any Taxes of
Seller or any of its Purchased Subsidiaries that are payable with respect to any
Tax period that begins before and ends after the Closing Date (a “Straddle
Period”), the portion of any such Taxes that constitutes Pre-Closing

94

 

--------------------------------------------------------------------------------

 

 

Taxes shall: (i) in the case of Taxes that are either (x) based upon or related
to income or receipts, or (y) imposed in connection with any sale, transfer or
assignment or any deemed sale, transfer or assignment of property (real or
personal, tangible or intangible), be deemed equal to the amount that would be
payable if the Tax year or period ended on the Closing Date; and (ii) in the
case of Taxes (other than those described in clause (i) above) that are imposed
on a periodic basis with respect to the business or assets of Seller or its
Purchased Subsidiaries or otherwise measured by the level of any item, be deemed
to be the amount of such Taxes for the entire Straddle Period (or, in the case
of such Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding Tax period) multiplied by a fraction the numerator of
which is the number of calendar days in the portion of the Straddle Period
ending on the Closing Date and the denominator of which is the number of
calendar days in the entire Straddle Period.  For purposes of clause (i) of the
preceding sentence, any exemption, deduction, credit or other item (including,
without limitation, the effect of any graduated rates of Tax) that is calculated
on an annual basis shall be allocated to the portion of the Straddle Period
ending on the Closing Date on a pro rata basis determined by multiplying the
total amount of such item allocated to the Straddle Period times a fraction, the
numerator of which is the number of calendar days in the portion of the Straddle
Period ending on the Closing Date and the denominator of which is the number of
calendar days in the entire Straddle Period.  In the case of any Tax based upon
or measured by capital (including net worth or long-term debt) or intangibles,
any amount thereof required to be allocated under this Section 10.2 shall be
computed by reference to the level of such items on the Closing Date.

10.3 Tax Refunds.  Other than with respect to Assumed Taxes and excluding any
refund that was included as a Current Asset or an adjustment to a Current
Liability in determining the Final Purchase Price, Seller shall be entitled to
retain, or receive prompt payment from Purchaser or any of its Subsidiaries or
Affiliates (including the Purchased Subsidiaries) with respect to, any refund
actually received or realized with respect to Income Taxes of Seller or the
Purchased Subsidiaries with respect to a Pre-Closing Tax Period, including any
such amounts arising by reason of amended Tax Returns filed after the Closing
Date (if any).  Purchaser will reasonably cooperate, and cause the Purchased
Subsidiaries reasonably to cooperate, with respect to such claim for refund, and
will pay, or cause the relevant Purchased Subsidiary to pay, to Seller the
amount (including interest) of any related refund actually received or realized
by Purchaser or any Affiliate thereof (including any Purchased Subsidiary), net
of Taxes on such refund and Taxes on interest and net of reasonable costs in
obtaining such refund, within fifteen (15) days after receipt (or realization)
thereof.  To implement the foregoing, the Purchased Subsidiaries shall be
required to file any amended Tax Returns related to Pre-Closing Tax Periods or
Straddle Periods only upon Seller’s written request made no later than two (2)
years following the Closing Date.  

10.4 Tax Contests.  

(a)

If a claim related to a Pre-Closing Taxable Period shall be made by any Taxing
Authority which, if successful, might result in an indemnity payment to
Purchaser or any

95

 

--------------------------------------------------------------------------------

 

 

of its Affiliates pursuant to Section 9.2 (to the extent related to any Tax
matter) or Section 10.1 (a “Tax Claim”), Purchaser shall promptly notify Seller
in writing of such claim (and provide copies of any documents received from the
Taxing Authority in respect of such claim) no later than five (5) Business Days
after such Tax Claim is made. Seller shall control all proceedings and may make
all decisions taken in connection with such Tax Claim (including selection of
counsel), but Purchaser shall have the right to participate in such proceeding
(except in the case of a Tax Claim that relates in any way to a Consolidated Tax
Return), at its own expense, and Seller shall not settle, compromise and/or
concede any portion of such proceeding that is reasonably likely to affect the
Tax liability of the Purchased Subsidiaries or with respect to the Business for
any taxable year (or portion thereof) beginning after the Closing Date without
the consent of Purchaser, which consent shall not be unreasonably withheld,
conditioned or delayed.  If Seller fails to assume control of the conduct of any
such proceeding within a reasonable period following the receipt by Seller of
notice of such proceeding (except with respect to a Tax Claim that relates in
any way to a Consolidated Tax Return), Purchaser shall have the right to assume
control of such Tax Claim but shall not settle, compromise or concede such
proceeding without Seller’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.  Seller may, subject to the
foregoing consent rights, with Purchaser’s participation, pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with any
Taxing Authority with respect thereto, and may either pay the applicable Tax
Liability and sue for a refund (and be entitled to such refund if received) or
contest the Tax Claim.  Seller shall notify Purchaser of any material
development with respect to a proceeding to the extent that Purchaser does not
elect to participate in any such proceeding hereunder.

(b)

If a claim related to a Straddle Period or PRC Taxes shall be made by any Taxing
Authority which, if successful, might result in an indemnity payment to
Purchaser or any of its Affiliates pursuant to Section 9.2 (to the extent
related to any Tax matter) or Section 10.1 (a “Straddle Tax Claim”), the Parties
shall jointly control the conduct of any such proceeding arising out of the
Straddle Tax Claim, and the Parties shall not settle, compromise and/or concede
such proceeding (or portion thereof the resolution of which would result in an
indemnity payment to Purchaser) without the consent of the other Party, such
consent, in each case, not to be unreasonably withheld, conditioned or delayed.

(c)

If a claim related to a Post-Closing Taxable Period (other than in respect of
PRC Taxes, which shall be governed by Section 10.4(b)) shall be made by any
Taxing Authority which, if successful, might result in an indemnity payment to
Purchaser or any of its Affiliates pursuant to Section 9.2 (to the extent
related to any Tax matter) or Section 10.1 (a “Post-Closing Tax Claim”),
Purchaser shall control all proceedings and may make all decisions taken in
connection with such Post-Closing Tax Claim (including selection of counsel);
provided, that (i) Purchaser shall provide Seller with a timely and reasonably
detailed account of each phase of any portion of such proceeding the resolution
of which would result in an indemnity payment to Purchaser, (ii) Purchaser shall
consult with Seller before taking any significant action in connection with any
portion of such proceeding the resolution of which would result in an indemnity
payment to Purchaser, (iii) Purchaser shall consult with Seller and offer Seller
a reasonable opportunity to comment before submitting any written materials
prepared or furnished in connection with any portion of such proceeding the
resolution of which would result in an indemnity payment to Purchaser, (iv)
Purchaser shall defend such proceeding diligently and in good faith as if it
were the only party in interest in connection with such

96

 

--------------------------------------------------------------------------------

 

 

proceeding, (v) Seller shall be entitled to participate, at its own expense, in
any portion of such proceeding the resolution of which would result in an
indemnity payment to Purchaser and (vi) Purchaser shall not settle, compromise
or abandon any portion of such proceeding the resolution of which would result
in an indemnity payment to Purchaser without obtaining the prior written consent
of Seller, which consent shall not be unreasonably withheld, conditioned or
delayed.

(d)

For the avoidance of doubt, Purchaser shall have no rights to control or to
participate in respect of any Tax Claim, Straddle Tax Claim or Post-Closing Tax
Claim that relates, in any way, to a Consolidated Tax Return.

(e)

Except as otherwise provided herein, Purchaser shall control all Contests with
respect to Taxes of the Purchased Subsidiaries or Taxes otherwise relating to
the Purchased Assets or the Business.

10.5 Termination of Tax Sharing Agreements.  On the Closing Date, all Tax
sharing Agreements between (i) any Purchased Subsidiary, on the one hand; and
(ii) Seller or any of its Affiliates (other than any Purchased Subsidiary), on
the other hand, shall be terminated effective as of the close of business on the
Closing Date and shall have no further effect for any Tax period (whether past,
present or future), and, after the Closing Date, no additional payments shall be
made thereunder with respect to any Tax period, whether in respect of a
redetermination of Liabilities for Taxes or otherwise.  Seller and Purchaser
shall take all steps necessary to ensure that each such termination is effective
in the manner described above.

10.6 Cooperation.  Each of Purchaser and Seller shall provide the other with
such information and records, and make such of its officers, directors,
employees and agents available, as may reasonably be requested by such other
Party in connection with the preparation of any Tax Return or the conduct of any
audit or other proceeding.  Any information provided to Seller pursuant to this
Section 10.6 shall be subject to the provisions of Section 7.6.  

10.7 Elections.  

(a) Section 338(h)(10) Elections.

(i)

Upon the request of Purchaser, Seller shall, or shall cause its relevant
Affiliates to, join with Purchaser in making an election under Section
338(h)(10) of the Code and any corresponding or similar elections under state or
local Tax Law (collectively the “Section 338(h)(10) Election”) with respect to
the purchase and sale of the Capital Stock of ATX. Any such request shall be
made by Purchaser in writing no later than one hundred and twenty (120) days
after the Closing Date.  In the event Purchaser does not request that Seller
join in making the Section 338(h)(10) Election, the remainder of the provisions
of this Section 10.7(a) shall not apply.

(ii)

Purchaser shall prepare and file all forms and documents required in connection
with the Section 338(h)(10) Election.  For the purpose of making the Section
338(h)(10) Election, on or prior to the Closing Date, Purchaser and Seller each
shall execute two copies of IRS Form 8023 (or successor form).  Seller shall
execute (or cause to be executed) and deliver to Purchaser such additional
documents or forms as are reasonably requested to complete the

97

 

--------------------------------------------------------------------------------

 

 

Section 338(h)(10) Election at least 10 days prior to the date such documents or
forms are required to be filed.

(iii)

Purchaser shall determine and allocate the “aggregate deemed sales price”
(“ADSP”) with respect to the assets of ATX in accordance with Section 3.4
hereof, Section 338 of the Code and the applicable Treasury Regulations
promulgated thereunder or comparable provisions for state, local and foreign Tax
Law (the “ADSP Allocation”), after taking into account the Licensed ATX
Intellectual Property pursuant to the IP License Agreement and ATX’s receipt of
the IP Payment and distribution of the IP Payment to Seller pursuant to
Section 2.7.  Purchaser shall deliver a draft of the ADSP Allocation to Seller
120 days following the Closing. If Seller believes any item on such draft ADSP
Allocation, was not allocated in accordance with Section 3.4 hereof, it shall
notify Purchaser of such disputed item (or items) and the basis for its
objection.  Purchaser and Seller shall cooperate in good faith to resolve any
dispute as to any matter in such draft ADSP Allocation.  If the Parties cannot
resolve any disputed item, the item in question shall be resolved by an
Independent Accounting firm in a manner consistent with Section
3.3(c).  Purchaser and Seller and their respective Affiliates shall be bound by
the Section 338(h)(10) Election and the ADSP Allocation, as finally determined,
for all Tax purposes.  Purchaser and Seller shall file, and shall cause their
respective Affiliates to file, all Tax Returns in a manner consistent with the
Section 338(h)(10) Election and the ADSP Allocation and shall take no position
contrary thereto unless required to do so by applicable Law or a Final
Determination.

(b) Section 338(g) Elections. At its discretion, so long as Purchaser complies
with Section 3.4(a), Purchaser may make, and may cause its relevant Affiliates
to make an election under Section 338(g) of the Code (the “Section 338(g)
Election”) and any corresponding or similar elections under state or local Tax
law with respect to the acquisition of any Purchased Subsidiaries other than ATX
(a “Section 338 Entity”). Seller shall not object to any such election, and
shall reasonably cooperate with Purchaser with respect to the making of such
election.

10.8 Tax Clearance Certificates.  

(a)

Except as set forth in Section 10.8(b) and 10.8(c), Purchaser (i) acknowledges
that neither Seller nor any of its Subsidiaries has received or applied for a
Tax clearance certificate or other similar document from Taxing Authorities in
any jurisdiction where Seller is doing business or has assets and (ii) agrees
that the Parties shall not seek (or be expected to obtain) prior to Closing any
such Tax clearance certificates or other similar document.

(b)

Prior to the Closing Date, Seller shall duly complete and deliver to Purchaser,
to the reasonable satisfaction of Purchaser, necessary documents evidencing the
due completion of the PRC Tax Filing.

(c)

On or prior to the Closing Date, Seller shall duly complete and deliver to
Purchaser, to the reasonable satisfaction of Purchaser, necessary documents
evidencing the mailing of a letter to the Rhode Island Department of Taxation
(the “RI

98

 

--------------------------------------------------------------------------------

 

 

Taxation Letter”) requesting that Seller’s permit to make sales at retail in the
State of Rhode Island with respect to the Business be cancelled effective prior
to the Closing Date and take any other actions necessary so that the transfer of
Purchased Assets pursuant to this Agreement qualify for the sales and use Tax
exception for the occasional sale of business assets.

10.9 Conflicts.  To the extent there is a conflict between the provisions of
this Article X and the provisions of Article IX, the provisions of this Article
X shall govern with respect to Tax matters.

10.10 Other Tax Covenants.  

(a)

Purchaser shall not cause or permit any Purchased Subsidiary to take any action
on the Closing Date other than in the Ordinary Course; provided, that,
notwithstanding the foregoing, the Purchased Subsidiaries shall be permitted to
(i) make any check the box elections as Purchaser deems advisable, (ii) make the
Section 338(g) Elections and Section 338(h)(10) Election and (iii) engage in
restructuring of their operations (including intercompany sale of goods and
transfer pricing) after the Closing Date.

(b)

After the Closing Date and prior to the end of the taxable year of any NonU.S.
Purchased Subsidiary that includes the Closing Date (other than a Non-U.S.
Purchased Subsidiary in respect of which (i) an election is made pursuant to
Section 338(g) of the Code or (ii) a “check-the-box” election is made to treat
such Non-U.S. Purchased Subsidiary as a disregarded entity for federal income
tax purposes, in which case the following restrictions shall not apply),
Purchaser shall, and shall cause each such Non-U.S. Purchased Subsidiary, not to
take any actions outside the Ordinary Course (other than, for the avoidance of
doubt, those described in Section 10.10(a)) which would substantially diminish
the earnings and profits of such Purchased Subsidiary for such taxable year
without the prior consent of Seller, such consent not to be unreasonably
withheld, conditioned or delayed.

ARTICLE XI

MISCELLANEOUS

11.1 Payment of Sales, Use or Similar Taxes.  All sales, use, goods and
services, harmonized sales, value added, transfer, intangible, recordation,
documentary, stamp or similar Taxes or charges (other than pursuant to any
applicable bulk sales Laws or any local notary fees), of any nature whatsoever,
applicable to, or resulting from, the transactions contemplated by this
Agreement (“Transfer Taxes”) shall be borne 50% by Purchaser and 50% by Seller.

11.2 Expenses.  Except as otherwise provided in this Agreement, each of the
Parties shall bear its own expenses incurred in connection with the negotiation
and execution of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby.

11.3 Submission to Jurisdiction; Consent to Service of Process.  

(a)

Other than a claim for equitable relief as set forth in Section 11.3(b) and not
involving the Debt Financing Sources, the Parties hereby irrevocably submit to
the exclusive

99

 

--------------------------------------------------------------------------------

 

 

jurisdiction of any federal or state court located within the Borough of
Manhattan, City of New York, State of New York, and any appellate court thereof,
over any dispute arising out of or relating to this Agreement, the Ancillary
Agreements, the Debt Financing Commitments or any of the transactions
contemplated hereby or thereby, including, for the avoidance of doubt, any
dispute involving any Debt Financing Source, and each Party hereby irrevocably
agrees that all claims in respect of any such dispute or any suit, action
proceeding related thereto may be heard and determined in such courts.  The
Parties hereby irrevocably waive, to the fullest extent permitted by applicable
Law, any objection which they may now or hereafter have to the laying of venue
of any such dispute brought in such court or any defense of inconvenient forum
for the maintenance of such dispute.  Each of the Parties agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law.

(b)

Nothing contained in Section 11.3(a) shall limit the rights of either Party to
take any legal action against the other Party in any court of competent
jurisdiction for the purposes of seeking any equitable remedy or relief to the
extent a judgment in such jurisdiction is necessary to enforce the terms of this
Agreement in such jurisdiction, including injunctions, rescission or specific
performance, nor shall the taking of any such legal action in one or more
jurisdictions preclude the taking of any such legal action in any other
jurisdiction (whether concurrently or not) if and to the extent permitted by
Law.

(c)

Each of the Parties hereby consents to process being served by any Party in any
suit, action or proceeding by the delivery of a copy thereof in accordance with
the provisions of Section 11.6.  

(d)

The provisions of this Section 11.3 are intended to be for the benefit of, and
enforceable by, the Debt Financing Sources of Purchaser and each such Person
shall be a third party beneficiary of this Section 11.3.  

11.4 Entire Agreement; Amendments and Waivers.  

(a)

This Agreement (including the Exhibits hereto), the Disclosure Letter and the
Ancillary Agreements contain the entire agreement and understanding between the
Parties with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings (including any offer letters or term
sheets), whether written or oral, relating to such subject matter.  The Parties
have voluntarily agreed to define their rights, Liabilities and obligations
respecting the transactions contemplated by this Agreement exclusively in
contract pursuant to the express terms and conditions of this
Agreement.  Furthermore, the Parties each hereby acknowledge that this Agreement
embodies the justifiable expectations of sophisticated parties derived from
arm’s-length negotiations, and all Parties specifically acknowledge that no
Party has any special relationship with another Party that would justify any
expectation beyond that of an ordinary purchaser and ordinary seller in an
arm’s-length transaction.  

(b)

This Agreement can be amended, supplemented or changed, and any provision hereof
can be waived, only by written instrument making specific reference to this
Agreement signed by the Party against whom enforcement of any such amendment,
supplement, modification or waiver is sought.  No action taken pursuant to this
Agreement, including any investigation by or on behalf of any Party, shall be
deemed to constitute a waiver by the Party taking such action of compliance with
any representation, warranty, covenant or agreement contained herein.  The
waiver by any Party of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any

100

 

--------------------------------------------------------------------------------

 

 

other or subsequent breach.  No failure on the part of any Party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of such right,
power or remedy by such Party preclude any other or further exercise thereof or
the exercise of any other right, power or remedy.

11.5 Governing Law.  

(a)

This Agreement, and all claims or causes of action (whether in law or in equity,
whether in contract or tort or otherwise) that may be based upon, arise out of
or relate to this Agreement, the Ancillary Agreements or the negotiation,
execution or performance of this Agreement or the Ancillary Agreements
(including any claim or cause of action based upon, arising out of or related to
any representation or warranty made in or in connection with this Agreement, the
Ancillary Agreements or as an inducement to enter this Agreement or the
Ancillary Agreements), including in each case with respect to the Debt Financing
Commitments or any Debt Financing Source, shall be governed by and construed in
accordance with the internal Laws of the State of New York without giving effect
to the choice of Law principles or rules of conflict of laws that would result
in, require or permit the application of the Laws of a different jurisdiction or
direct a matter to another jurisdiction; provided, that the transfer of any
Purchased Equity issued by a foreign Purchased Subsidiary shall take place
pursuant to the applicable Law of the jurisdiction of such Purchased
Subsidiaries incorporation or formation in accordance with international
corporate principles.

(b)

EACH PARTY TO THIS AGREEMENT WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST THE OTHER ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED
IN CONNECTION HEREWITH OR THE ADMINISTRATION THEREOF OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THEREIN, INCLUDING ANY ACTION RELATING TO THE DEBT
FINANCING OR THE PERFORMANCE THEREOF (INCLUDING WITH RESPECT TO THE DEBT
FINANCING COMMITMENTS OR ANY DEBT FINANCING SOURCE).  NO PARTY TO THIS AGREEMENT
SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER
LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY
RELATED INSTRUMENTS (INCLUDING THE DEBT FINANCING COMMITMENTS) OR THE
RELATIONSHIP BETWEEN THE PARTIES.  NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  EACH PARTY TO THIS AGREEMENT
CERTIFIES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT OR INSTRUMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS SET FORTH ABOVE IN
THIS SECTION 11.5.  NO PARTY (OR ITS REPRESENTATIVE, AGENT OR ATTORNEY) HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS SECTION 11.5 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

(c) The provisions of this Section 11.5 are intended to be for the benefit of,
and enforceable by, the Debt Financing Sources and each such Person shall be a
third party beneficiary of this Section 11.5.  

101

 

--------------------------------------------------------------------------------

 

 

11.6 Notices.  All notices and other communications under this Agreement shall
be in writing and shall be deemed given (i) when delivered personally by hand
(with written confirmation of receipt), (ii) when sent by facsimile (with
written confirmation of transmission), (iii) when sent by electronic mail (with
electronic confirmation of receipt), or (iv) one Business Day following the day
sent by overnight courier (with written confirmation of receipt), in each case
at the following addresses and facsimile numbers (or to such other address or
facsimile number as a Party may have specified by notice given to the other
Parties pursuant to this provision):

If to Seller:

A.T. Cross Company

One Albion Road

Lincoln, Rhode Island 02865

Facsimile: (401) 333-9759

Email: dwhalen@cross.com

Attention: David G. Whalen

With a copy (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

100 Federal Street, 34th Floor

Boston, Massachusetts 02110

Facsimile: (617) 772-8333

Email: steven.peck@weil.com 

Attention: Steven Peck

If to Purchaser:

ATC Holdings, LP

c/o Clarion Capital Partners, LLC 110 East 59th Street, Suite 2400

New York, New York  10022

Facsimile: (212) 371-7597

Email:ekogan@clarion-capital.com

Attention: Eric Kogan

With a copy (which shall not constitute notice) to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019

Facsimile: (212) 492-0131

Email: pginsberg@paulweiss.com

Attention: Paul D. Ginsberg

11.7 Severability.  If any term or other provision of this Agreement is invalid,
illegal, or incapable of being enforced by any Law or public policy, all other
terms or provisions of this

102

 

--------------------------------------------------------------------------------

 

 

Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any Party.  Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.

11.8 Binding Effect; No Third Party Beneficiaries; Assignment.  This Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns.  Except as set forth in Sections
7.7,  7.12,  9.2,  9.3,  9.9,  11.3,  11.5, and 11.9 nothing in this Agreement
or the Ancillary Agreements is intended to create or shall create or be deemed
to create any legal or equitable rights, benefits, claims, causes of action or
remedies with respect to the subject matter or any provisions hereof or thereof
in or on behalf of any Person or entity not a party to this Agreement.  No
assignment of this Agreement or of any rights or obligations hereunder may be
made by any Party, directly or indirectly (by operation of Law or otherwise),
without the prior written consent of Purchaser (in the case of Seller) or Seller
(in the case of Purchaser) and any attempted assignment without the required
consents shall be void; provided,  however, that without written consent of any
party hereto, (i) Purchaser may assign its rights and obligations hereunder to
any of its controlled Affiliates and (ii) Purchaser may assign its rights
hereunder as collateral security to any senior secured lender to
Purchaser.  Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Parties and their
respective successors and permitted assigns.  No assignment of any obligations
hereunder shall relieve the Parties of any such obligations.  Upon any such
permitted assignment, the references in this Agreement to Purchaser shall also
apply to any such assignee unless the context otherwise requires.

11.9 Non-Recourse.  

(a)

Except for the enforcement of the Equity Financing Commitment, the Guaranty and
the Confidentiality Agreement, in each case, to the extent set forth therein, or
as a consequence of receiving specific performance as set forth in Section 9.9,
Seller and its Affiliates, and their respective directors, officers, employees,
managers, advisors (including financial and accounting advisors), stockholders,
agents, attorneys, representatives, and their respective successors and
permitted assigns may only enforce this Agreement against, and any claim or
cause of action based upon, arising out of, or related to this Agreement may
only be brought against, Purchaser and then only with respect to the specific
obligations set forth herein with respect to Purchaser.  Other than Purchaser,
with respect to this Agreement, and the Parties expressly named in the Equity
Financing Commitment, the Guaranty and the Confidentiality Agreement with
respect to the Equity Financing Commitment, the Guaranty and the Confidentiality
Agreement (and then only to the extent of the specific obligations undertaken by
Purchaser in this Agreement, or the named parties under the Equity Financing
Commitment, the Guaranty and the Confidentiality Agreement and not otherwise),
no Purchaser Related Party shall have any liability (whether in law or in
equity, whether in contract or tort or otherwise) for any obligations or
liabilities of Purchaser under this Agreement or for any claim based on, in
respect of, or by reason of, the transactions contemplated hereby and thereby or
in respect of any oral representations made or alleged to have been made in
connection herewith or therewith.  For the avoidance of doubt, Seller may not
bring any claim or cause of action based upon, arising out

103

 

--------------------------------------------------------------------------------

 

 

of, or related to this Agreement or the Debt Financing Commitments against any
Debt Financing Source.

(b)

Purchaser and its Affiliates, and their respective directors, officers,
employees, managers, advisors (including financial and accounting advisors),
stockholders, agents, attorneys, representatives, and their respective
successors and permitted assigns may only enforce this Agreement against, and
any claim or cause of action based upon, arising out of, or related to this
Agreement may only be brought against, Seller and then only with respect to the
specific obligations set forth herein with respect to Seller.  Other than
Seller, with respect to this Agreement, no Affiliate of Seller or any other
Person shall have any liability (whether in law or in equity, whether in
contract or tort or otherwise) for any obligations or liabilities of Seller
under this Agreement or for any claim based on, in respect of, or by reason of,
the transactions contemplated hereby and thereby or in respect of any oral
representations made or alleged to have been made in connection herewith or
therewith.

(c)

The provisions of this Section 11.9 are intended to be for the benefit of, and
enforceable by, the directors, officers, employees, incorporators, members,
partners, stockholders, Affiliates, agents, attorneys, representatives and the
Debt Financing Sources of Purchaser and each such Person shall be a third party
beneficiary of this Section 11.9.  

3.10

Extension; Waiver.  At any time prior to the Closing, either Seller or Purchaser
may (a) extend the time for performance of any of the obligations or other acts
of the other Party, (b) waive any inaccuracies in the representations and
warranties of the other Party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) waive compliance with any of the
agreements or conditions of the other Party contained in this Agreement.  Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the Party granting such extension or waiver.

3.11

Counterparts.  This Agreement may be signed by the Parties in one or more
counterparts, each of which when delivered to the other Parties (including via
facsimile or e-mail portable document format (*.pdf)) will be deemed to be an
original copy of this Agreement and all of which, when taken together, will be
deemed to constitute one and the same Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK – SIGNATURE PAGES FOLLOW]  

104

 

--------------------------------------------------------------------------------

 

 

 

105

 

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed and
delivered by their respective authorized officers, effective as of the date
first above written.

 

 

 

A.T. CROSS COMPANY

By:

DAVID G. WHALEN

Name:

David G. Whalen

Title:

Chief Executive Officer and President

 

[Signatures Continue]

 

 

 

--------------------------------------------------------------------------------

 

 

C HOLDING GP, LLC

 

 

ATC HOLDINGS, LP

By:

ATC HOLDINGS GP, LLC,

 

Its General Partner

 

 

By:

ERIC KOGAN

Name:

Eric Kogan

Title:

President

 

 

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT A 

See attached. 

 

Limited Guaranty Form of Bill of Sale and Assignment and Assumption Agreement
Transition Services Agreement Term Sheet

 

 1-1 

--------------------------------------------------------------------------------

 

 

 

 2-1 

--------------------------------------------------------------------------------

 

 

 

EXHIBIT B

Purchased Equity

 

 

Issuer

Purchased Equity

A.T. Cross Stationery (Dongguan) Co. Limited

Registered capital of US$1,929,400

A.T. Cross Limited (BDA / Ireland)

335,000 shares of Ordinary Shares

A.T.X. International, Inc.

8,000 shares of common stock

Comercializadora AT-Cross, S. de R.L. de C.V.

1 Series B partnership interest

AT-Cross Services Mexico S. de R.L. de C.V.

1 Series B partnership interest

 

 

 3-1 

--------------------------------------------------------------------------------

 

 

 

EXHIBIT C

 

Form of Foreign Stock Transfer Agreements

See attached. 

 

 4-1 

--------------------------------------------------------------------------------

 

 

 

EXHIBIT D

Debt Financing Commitments

See attached. 

 

 5-1 

--------------------------------------------------------------------------------

 

 

 

EXHIBIT E

Equity Financing Commitment

See attached.

 

 

 6-1 

--------------------------------------------------------------------------------

 

 

 

EXHIBIT F

Form of Intellectual Property Assignment Agreement

See attached. 

 

 7-1 

--------------------------------------------------------------------------------

 

 

 

EXHIBIT G

Intercompany Obligations Restructuring Steps

See attached. 

 

 

 8-1 

--------------------------------------------------------------------------------

 

 

 

EXHIBIT H

Form of Intellectual Property License Agreement

See attached.  

 9-1 

--------------------------------------------------------------------------------