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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
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BY AND AMONG
CPI AEROSTRUCTURES, INC.,
XXXXX, INC.,
a wholly-owned Delaware subsidiary of CPI AEROSTRUCTURES, INC.,
as Buyer,
and
XXXXX MACHINE, INC.,
as Seller,
and Xxxxxx Xxxxxxx
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September 9, 1997
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") dated September 9, 1997 by
and among Xxxxx Machine, Inc., a New York corporation (the "Seller"), Xxxxxx
Xxxxxxx ("Xxxxxxx"), CPI Aerostructures, Inc., a New York corporation ("CPI")
and Xxxxx, Inc.(the "Buyer"), a Delaware corporation. Seller, Xxxxxxx, CPI,
and Buyer may be referred to herein as "party" or collectively as the
"parties".
W I T N E S S E T H:
WHEREAS, the Buyer is a wholly-owned subsidiary of CPI;
WHEREAS, the Seller has been engaged in New York, in the business of
precision machining and assembly servicing the electronics industry, including
computer and microwave device manufacturers, as well as the materials
handling, aerospace and banking industries (the "Business"), which Business
the Seller shall cease to operate and shall be reconstituted as a new business
of the Buyer;
WHEREAS, the Seller wishes to sell and the Buyer wishes to purchase
certain tangible and intangible assets associated with the Business (the
"Assets").
NOW, THEREFORE, in consideration of the foregoing and the terms,
conditions, representations, warranties and mutual covenants appearing in this
Agreement, the parties hereto hereby agree as follows:
Section 1. Sale and Purchase of Assets. Upon the terms and subject to
the conditions set forth in this Agreement, at the Closing (as hereinafter
defined), the Seller shall sell, assign, transfer and deliver to the Buyer,
and the Buyer shall purchase, acquire, accept and take possession of all of
the Seller's right, title and interest in and to the following assets of the
Seller (all of which are hereinafter sometimes referred to as the "Assets,"
which shall be defined as those assets set forth in Sections 1(a) through 1(o)
as of the date of this Agreement) adjusted for the deletions and additions
thereto in the ordinary course of business for the period after the date of
this Agreement through the Closing Date (as hereinafter defined)):
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(a) Seller's inventory, which relates to the Business (the
"Inventory"), as set forth on Schedule 1(a) attached hereto.
(b) The land as owned by Xxxxxxx which relates to the Business (the
"Owned Real Property"), and all right, title and interest in the leased real
property (the "Leased Real Property"), as set forth on Schedule 1(b) attached
hereto, and collectively referred to as the "Real Property."
(c) The buildings and improvements, located on the Real Property,
including storage, which relate to the Business, as set forth on Schedule 1(c)
attached hereto.
(d) Seller's equipment and machinery, which relate to the Business,
as set forth on Schedule 1(d) attached hereto.
(e) All of Seller's office furniture, fixtures, facilities and
supplies which relate to the Business, as set forth on Schedule 1(e) attached
hereto.
(f) Seller's automobiles, trucks, all other vehicles and forklifts
which relate to the Business, as set forth on Schedule 1(f) attached hereto.
(g) All of Seller's miscellaneous equipment and hand tools which
relate to the Business.
(h) Seller's accounts receivable which relate to the Business, as set
forth on Schedule 1(h) attached hereto (the "Accounts Receivable").
(i) All of Seller's right, title and interest in and to each lease,
license, contract, warranty, agreement, purchase or sales order (including
releases of quantities pursuant thereto), indenture or commitment, written or
oral, to which Seller is a party on the Closing Date or by which any of the
Assets are then bound (the "Assumed Agreements"), including, without
limitation, the agreements described in Schedule 1(i) attached hereto; and
(j) The Assets set forth in subsections (b) through (g) above are
sometimes referred to herein as the "Fixed Assets."
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(k) Seller's pre-paid and other assets which relate to the Business,
as set forth on Schedule 1(k) attached hereto (the "Pre-Paid Assets").
(l) Seller's trade names which relate to the Business, as set forth
on Schedule 1(l) attached hereto.
(m) Seller's trademarks which relate to the Business, as set forth on
Schedule 1(m) attached hereto.
(n) The customer list of Seller which relates to the Business, as set
forth on Schedule 1(n) attached hereto.
(o) Seller's goodwill.
(p) The Assets shall be conveyed free and clear of all liabilities,
obligations, liens, security interests and encumbrances of any character
whatsoever, excepting only those liabilities and obligations which are
expressly to be assumed by the Buyer hereunder and described below in Section
4(a) as the Assumed Liabilities.
Section 2. Purchase Price.
(a) Payment of the Purchase Price. In full consideration for the
sale, transfer, conveyance, assignment and delivery of the Assets (exclusive
of the Real Property) by the Seller to the Buyer and in reliance upon the
representations and warranties made herein by the Seller and for other
consideration set forth herein, the Buyer hereby agrees to pay to the Seller
(except as described in Section 2(c) below) at the Closing (as hereinafter
defined) a purchase price (the "Purchase Price") of Thirteen Million and
00/100 ($13,000,000), Dollars plus the Buyer's assumption of the Seller's
liabilities pursuant to Section 4 of this Agreement. The $13,000,000 shall be
payable at the Closing as follows:
(i) The Buyer shall pay to the Seller at the Closing a
payment by wire transfer of immediately available funds equal to Nine Million
and 00/100 ($9,000,000) Dollars. There shall be a post-Closing adjustment as
provided in subsection (c) below; and
(ii) In addition, the Buyer shall pay to the Seller, Four
Million and 00/100 ($4,000,000) Dollars payable by the issuance, to
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the Seller at the Closing, of a $4,000,000 promissory note (the "Note") (equal
to the term of the loan to the Buyer agented by The Chase Manhattan Bank
("Chase") maturing on December 31, 2001 ("the Chase Loan"), plus an additional
91 days) bearing interest at 8% per annum with interest only payable monthly
by wire transfer with the entire principal due at the maturity date of the
Note. The Note, the form of which is attached hereto as Exhibit 2(a)(ii),
shall be convertible by the Seller, in whole or in part, at any time during
the term of the Note in no less than 100,000 share increments into 1,000,000
shares of CPI's common stock, $.001 par value (the "Common Stock"), subject to
adjustment as described below.
(iii) Payment of the purchase price for the Common Stock
issued upon conversion of the Note shall be exclusively by a corresponding
discharge of Buyer's obligation to pay to the Seller an equivalent amount of
principal under the Note. In the event that the Seller converts the Note in
part, such partial conversion shall be indicated on the Note, however, a new
note will not be issued to the Seller. Accrued, but unpaid interest due under
the Note shall not be so discharged upon any conversion. The Note shall have a
default interest rate on default payments equal to the greater of 12% per
annum or 2 percentage points above the prime rate of Chase, but not to exceed
18% per annum. The incremental interest above 8% per annum shall commence upon
the due date of each such defaulted payment and continue until the default is
cured. Solely with respect to the portion of the principal balance of the Note
converted by Seller to CPI Stock, no interest shall accrue under the Note
after the date the CPI Stock is issued to Seller or its designee upon exercise
of the conversion rights. No exercise by Seller of its conversion rights shall
impair in any way Seller's rights against Buyer under the Note with respect to
any remaining principal (if the exercise is partial) or any accrued but unpaid
interest under the Note. However, the Company's obligation to pay interest on
the portion of the Note converted shall cease upon conversion. The conversion
feature of the Note shall contain anti-dilution provisions in the event that
following the Closing, CPI's Common Stock is subdivided or combined or a stock
dividend is declared, or in the event of a merger, capital reorganization or
reclassification of CPI or its stock that entitles the shareholders of CPI's
stock to receive stock, securities or assets in exchange for their stock. All
of the foregoing dilutive transactions are exclusive of any shares, options or
other derivative securities issued by CPI to any of its employees, consultants
or directors.
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CPI shall execute a registration rights agreement (the "Registration Rights
Agreement"), the form of which is attached hereto as Exhibit 2(a)(iii),
granting to the Seller certain demand and "piggyback" registration rights with
respect to the Common Stock issuable upon conversion of the Note (the "Note
Shares"). The Registration Rights Agreement will provide that the Company
shall register the Note Shares within eighteen (18) months from the Closing
subject to any lock-up agreement reasonably required by CPI's investment
bankers for a period not to exceed the end of the 18 month period nor to be
more restrictive than any such agreement imposed on the officers, directors or
principal shareholders of CPI. During such 18 month period, in the event that
the Note Shares have not been registered, the Seller shall have "piggyback"
registration rights, and the Note Shares shall be eligible for sale under the
Securities Act of 1933 as amended (the "Securities Act") commencing twelve
(12) months from the Closing, subject, in each case to a six-month lock-up
agreement, but in any event not to exceed the end of the 18 month period. The
Registration Rights Agreement shall obligate Buyer and CPI to cooperate fully
with Seller or its designee and take all reasonable actions necessary such
that at any time after the date which is eighteen (18) months from the
Closing, if Seller or its designee elects to exercise its conversion rights in
whole or in part, the recipient may sell, transfer, assign, devise, or
otherwise dispose of such CPI Stock without any restriction, constraint, or
limitation (a "Transfer Constraint"). The Registration Rights Agreement shall
be in satisfactory form to Seller in its sole discretion.
(iv) In order to secure payment of the Note, the Buyer shall
execute a security agreement (the "Security Agreement") with the Seller, the
form of which is attached hereto as Exhibit 2(a)(iv), covering all of the
Assets of Buyer and the filing of UCC-1 financing statements (both subordinate
only to the security interest of Chase, as agent, or any successor or assign
as agent.) The cost of recording such financing statements shall be borne by
Buyer.
(v) In order to secure payment of the Note, the Buyer shall
execute a mortgage (the "Mortgage"), naming the Seller as mortgagee, the form
of which is attached hereto as Exhibit 2(a)(v), covering the Real Property
purchased by Buyer from Xxxxxxx, such Mortgage to be subordinate only to the
mortgage interest of Chase, as agent, or any successor or assign as agent. The
cost of
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recording the Mortgage and the mortgage tax thereon shall be borne
by Buyer.
(vi) CPI shall execute a subordinated guaranty (the
"Guaranty"), the form of which is attached hereto as Exhibit 2(a)(vi)(A), in
which CPI guarantees to the Seller payment in full of the Note, and in which
CPI guarantees to the Seller and Xxxxxxx satisfaction by Buyer of all
obligations of Buyer to the Seller and to Xxxxxxx under this Agreement. In
order to secure payments under the Guaranty, CPI shall execute a stock pledge
agreement (the "Stock Pledge Agreement"), the form of which is attached hereto
as Exhibit 2(a)(vi)(B), in which CPI pledges to the Seller all of its stock in
Buyer, such Stock Pledge Agreement to be subordinate only to the security
interest of Chase, as agent, or any successor or assign as agent.
(b) Real Property Purchase Price. In full consideration for the sale,
transfer, conveyance, assignment and delivery of the Real Property owned by
Xxxxxxx to the Buyer and in reliance upon the representations and warranties
made herein by Xxxxxxx and for other consideration set forth herein, the Buyer
agrees to pay to Xxxxxxx at the Closing, by wire transfer of immediately
available funds the sum of One Million Five Hundred Thousand and no/100
($1,500,000) Dollars.
(c) Adjusted Purchase Price. The parties hereto agree that the
purchase and sale of the Assets and the assumption of the Assumed Liabilities
shall be accounted for on the close of business on the Closing date (the
"Closing Date"). The Seller agrees to consult CPI on any material issues,
events, conditions or contracts prior to the Closing. Furthermore, the Seller
agrees not to enter into any new capital obligations or capital expenditures
which relate to the Business from the date of the Agreement and prior to the
Closing, except with the Buyer's consent. Buyer shall be deemed to have
granted its consent to any purchases described in the last sentence of Section
9(d)(1.) of this Agreement.
An adjusted Purchase Price (the "Adjusted Purchase Price") shall be
calculated and agreed to by both the Seller and the Buyer which shall adjust
the Purchase Price as follows. The $13 million portion of the Purchase Price
(exclusive of the Real Property) is based upon the Audited Financial
Statements reflecting shareholders' equity of $3,540,000, as of December 31,
1996, as adjusted below. The $3,540,000 amount is subject to adjustment
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(hereinafter referred to as the "Actual Shareholders' Equity") based on
inventory and other adjustments determined in the Audited Financial
Statements, but such adjustment shall not affect the Purchase Price. Seller
shall prepare, within fifteen (15) days after the Closing Date, and submit for
CPI's review, an unaudited balance sheet effective as of the Closing Date
("Closing Balance Sheet") prepared in accordance with generally accepted
accounting principles, as historically and consistently applied to the Seller
and as used in preparation of the Audited Financial Statements. If the Closing
Balance Sheet reflects shareholders' equity of either more than or less than
the Actual Shareholders' Equity as of the Closing Date, then the Purchase
Price shall be increased or decreased by one dollar for each dollar of
shareholders' equity in excess of or less than, respectively, Actual
Shareholders' Equity. In addition, if the Closing Balance Sheet reflects cash
of less than $250,000 as of the Closing Date, then the Purchase Price shall be
decreased by one dollar for each dollar of cash less than $250,000.
Notwithstanding the foregoing, no increase or decrease in the Purchase Price
shall occur unless the final adjustment is at least $10,000. In such event,
the adjustment shall include the first $10,000, as well as all amounts in
excess of $10,000.
Buyer shall have the right, for a period of up to fifteen (15) days
from receipt of the Closing Balance Sheet to review same. If the Buyer wishes
to dispute the Closing Balance Sheet, then the Buyer shall, within such 15 day
period, deliver notice of such dispute to the Seller, which notice shall
contain an explanation of the Buyer's problems with the proposed Closing
Balance Sheet. If no such notice is received by Seller, a post closing
adjustment shall be made to the Purchase Price to account for any differences
between the Actual Shareholder's Equity and the Closing Balance Sheet and the
post-closing adjustment shall be paid in either case within 45 days from the
Closing Date. If such a notice is received by Seller, Buyer and Seller shall
attempt, for a period of fifteen (15) days after delivery of any such notice,
to reach an agreement with respect to the Closing Balance Sheet at which time
the post-closing adjustment shall be paid within 45 days from the Closing. If
the Seller and the Buyer and their respective accountants are unable to
determine the matter by mutual agreement within such fifteen (15) day period,
then both parties shall cause the disagreement to be submitted to a third
accounting firm in Syracuse, New York, that has not represented either Seller
or Buyer, for a determination that shall be final, binding and
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conclusive upon the parties hereto and their successors in interest. The
Seller and the Buyer shall be deemed to have agreed to the result of such
determination as of the date of its issuance. The cost of such determination
shall be divided equally between the Seller and the Buyer. If any post closing
adjustment results in an increase in the Purchase Price, Buyer shall pay to
the Seller by wire transfer a dollar amount equal to such increase, or if it
results in a decrease in the Purchase Price, Seller shall pay to Buyer by wire
transfer a dollar amount equal to such decrease. Such payments shall be made
immediately upon final determination of any post closing adjustment.
(d) Payment of Sales, Transfer and Use Taxes. Buyer shall pay any and
all state and/or county sales, transfer and/or use taxes resulting from the
sale of the Assets to Buyer pursuant to the terms of this Agreement. At or
prior to Closing, Buyer shall provide to Seller Exempt Use and/or Resale
Certificates, in form satisfactory to Seller's counsel, with respect to any
Assets for which Buyer claims exemption from sales and use taxes. Calculation
and payment of sales and use taxes shall be based on the purchase price
allocation described in subsection (e) of this Section 2. In any event,
however, Seller and Xxxxxxx shall be responsible, respectively, for any of
Seller's and Xxxxxxx'x personal income taxes resulting from the sale of the
Business.
(e) Allocation of Purchase Price. The Seller, Xxxxxxx, Buyer and CPI
agree that the Purchase Price shall be allocated as set forth in Exhibit 2(e),
which shall be agreed to by the parties at least two (2) weeks prior to
Closing and which shall be amended to reflect any post-Closing adjustments
contemplated by this Agreement.
(f) Real Property Adjustments. The following adjustments with respect
to the Real Property shall be made between the parties at the Closing as of
the close of business on the day prior to the Closing, but only to the extent
not reflected as a pre-paid asset on the Closing Balance Sheet or the
Schedules attached hereto, and only to the extent not treated as an Assumed
Liability hereunder:
(i) real estate taxes, water charges, sewer rents and vault
charges, if any, except that if there is a water meter on the Real Property,
adjustments shall be based on the last available
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reading, subject to adjustment after the Closing when the next
meter reading is available;
(ii) charges under assignable service contracts listed on
Schedule 6(B)(l); and
(iii)charges under assignable insurance policies listed
on Schedule 6(B)(k) hereto.
Section 3. Excluded Assets. Notwithstanding anything to the contrary
contained in Section 1 hereof, Seller is not selling and Buyer is not
purchasing any of the assets listed on Schedule 3(a) attached hereto, all of
which shall be retained by Seller (collectively, the "Excluded Assets").
Section 4. Assumption of Executory and Other Liabilities.
(a) At the Closing, Buyer and CPI jointly and severally shall assume
and thereafter pay when due, and shall discharge, defend, indemnify and hold
Seller harmless (solely in accordance with Section 8 of this Agreement) with
respect to all obligations, commitments, duties, debts, claims or liabilities
of any kind or nature whatsoever, relating to the Business, whether known or
unknown, absolute, accrued, contingent or otherwise, or whether due or to
become due, arising out of events or transactions occurring on or prior to the
Closing Date (collectively, "the Assumed Liabilities"), except (i) all
existing tax liabilities and contingencies and all tax liabilities arising out
of this transaction of both Seller and Xxxxxxx and (ii) all environmental
claims and liabilities relating to the Seller and Xxxxxxx. Such Assumed
Liabilities shall include, without limitation, (i) the liabilities and
obligations of Seller under each Assumed Agreement assigned to Buyer pursuant
to Section 1(i); and (ii) Seller's liabilities and obligations reflected in
the Closing Balance Sheet.
(b) The Assets shall be conveyed to Buyer at the Closing free and
clear of all liabilities, obligations, liens, security interests and
encumbrances of any character whatsoever, excepting only the Assumed
Liabilities, statutory liens, liabilities created by Buyer and Seller's
mortgage and security interest pursuant to the Note and Security Agreement
provided for herein.
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Section 5. Closing. The closing of the sale and purchase of the
Assets and Real Property provided for in Sections 1 and 2 of this Agreement
(the "Closing") shall take place at the offices of counsel to the Seller,
Green & Seifter Attorneys, P.C. on the 18th day of September 1997, or such
other time and place as the parties may agree, subject to Section 15 hereof.
The day on which the Closing occurs is sometimes hereinafter referred to as
the "Closing Date."
Section 6. Representations and Warranties of the Seller and Xxxxxxx.
(A) Representations and Warranties of the Seller. The Seller warrants
and represents to the Buyer and CPI as follows:
(a) Title. Except as set forth in Schedule 6A(a)(i) of this
Agreement, the Seller owns, and at the Closing shall have, good, valid and
marketable title to the Assets (other than the Real Property) and full right
to transfer title to the Assets (other than the Real Property) and at the
Closing Seller shall convey to Buyer full legal and equitable right, title and
interest to the Assets (other than the Real Property), free and clear of all
liens, mortgages, charges, claims liabilities, security interests and
encumbrances of any nature whatsoever, except the Assumed Liabilities,
statutory liens, liabilities created by Buyer, and Seller's mortgage and
security interest pursuant to the Note and the Security Agreement provided for
herein.
Except as set forth in Schedule 6A(a) of this Agreement, the
sale, conveyance, transfer and delivery of the Assets by the Seller and of the
Real Property by Xxxxxxx, to the Buyer pursuant to this Agreement will
transfer full legal and equitable right, title and interest in the Assets to
the Buyer, free and clear of all liens, mortgages, charges, claims,
liabilities, security interests and encumbrances of any nature whatsoever,
except the Assumed Liabilities, statutory liens, liabilities created by Buyer,
and Seller's mortgage and security interest pursuant to the Note and the
Security Agreement provided for herein.
(b) Capacity; Organization; Standing. The Seller has full capacity to
enter into and perform under this Agreement, and all other agreements to be
entered into in connection with the transactions contemplated hereby (the
"Other Agreements") and to
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consummate such transactions; and no other consent or joinder of any other
persons or corporations is required. This Agreement has been, and each of the
Other Agreements executed by the Seller hereunder will at the Closing, be duly
authorized, executed and delivered by the Seller. This Agreement constitutes,
and each of the Other Agreements executed by the Seller will constitute, the
legal, valid and binding obligations of the Seller enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally or by general equitable principles. The Seller is
duly organized, validly existing and in good standing under the laws of the
State of New York. The Seller has no subsidiaries. The Seller has full
corporate power and authority to conduct the Business as it is now being
conducted and is duly qualified to do business in the State of New York, and
in each jurisdiction where the nature of the property owned or leased, or the
nature of the business conducted by the Seller with respect to the Business
requires such qualification, where failure to be so qualified would have a
material adverse effect on the Business. Except, where failure to be so
licensed would not have a material adverse effect on the Business, the Seller
has all necessary licenses and authority to operate its business as now being
conducted.
(c) Legal Proceedings. Except as set forth in Schedule 6(A)(c) of
this Agreement, the Seller is not a party to any pending litigation,
arbitration or administrative proceeding or investigation, with respect to or
relating to the Assets or the Business and, to the Seller's best knowledge and
belief, no litigation, arbitration or administrative proceeding or
investigation that would have a material adverse effect on the Assets or the
Business is threatened.
(d) Trade Names and Trademarks, etc. With respect to the Business,
the Seller owns or has the right to use the trade names and trademarks as set
forth on Schedules 1(l) and 1(m), respectively. Except as disclosed in
Schedules 1(l) and 1(m), to the best knowledge of the Seller, no other trade
names or trademarks are owned or used by the Seller in relation to the
Business. To the Seller's knowledge and belief, the operation of the Business
does not infringe on the trade names, trademarks or any other intellectual
property rights of any third party. No claim has been made that there is any
such infringement. To the
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Seller's knowledge and belief, no trade name or trademarks of any person
infringes the trade names or trademarks which relate to the Business. Except
as disclosed in Schedules 1(1) and 1(m), the Seller has not granted, and will
not grant prior to the Closing, licenses or other rights to use such trade
names and trademarks.
(e) Description of Material Contracts. Except for this Agreement and
the Other Agreements, Schedule 6A(e) contains a complete and correct list as
of the date hereof of all material agreements, contracts and commitments,
obligations and understandings, written or oral (the "Material Agreements")
which are not set forth in any other Schedule delivered hereunder, which
relate to the Business and to which the Seller is a party or by which it or
any of the Assets are bound. The Material Agreements, together with this
Agreement and the Other Agreements, constitute all of the material contracts,
leases and other agreements related to the operation or sale of the Business.
All of the Material Agreements shall be assigned to and assumed by the Buyer
(the "Assigned Agreements") unless designated in Schedule 6A(e). All of the
Material Agreements to which the Seller is a party constitute valid and
legally binding obligations of the Seller. The Seller has no knowledge that
the Material Agreements are not valid and legally binding obligations of the
other parties thereto. The Material Agreements are enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally or by general equitable principles, are in full
force and effect. Except as otherwise specified in Schedule 6A(e), the
Assigned Agreements are validly assignable to the Buyer without the consent of
any party. After the assignment of the Assigned Agreements to the Buyer
pursuant hereto, the Buyer will be entitled to the full benefits thereof.
There is not thereunder any existing default, or event which, after notice or
lapse of time, or both, would constitute a default or result in a right to
accelerate or loss of rights. Except for the lease agreements with Xxxxxxx,
the Seller has not received any notice of termination of any Material
Agreement. True and complete copies of all of the written Material Agreements
have been delivered to the Buyer. Notwithstanding anything to the contrary
above, Buyer and Seller acknowledge and agree that Schedule 6(A)(e) shall be
deemed complete if all the customers who have open purchase orders with Seller
are listed. The individual purchase orders with customers are not required to
be listed on Schedule
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6(A)(e) nor are they required to be delivered to Buyer except as may be
reasonably requested by Buyer.
(f) Default; Violations or Restrictions. The Seller is not in
material default under, nor to the Seller's best knowledge, has any event
occurred which, with the lapse of time or action by a third party, could
result in a material default under any outstanding note, indenture, mortgage,
contract or agreement to which it is bound, relating to the Assets. Except as
declared in Schedule 6(A)(f), the execution, delivery and performance of this
Agreement and of any agreement to be executed and delivered by the Seller
pursuant hereto, and the consummation of any of the transactions contemplated
hereby or thereby will not (or with the giving of notice or the lapse of time
or both would not), to the Seller's best knowledge, result in any material
violation of any provision of or result in the material breach of,
modification of, acceleration of the maturity of obligations, or constitute a
default, or give rise to any right of termination, cancellation or
acceleration or otherwise be in material conflict with or result in a loss of
material contractual benefits to the Seller, as such relates to the Assets,
under any law, order, writ, injunction, decree, statute, rule or regulation of
any court, governmental agency or arbitration tribunal or any of the terms,
conditions or provisions of any contract, lease, note, bond, mortgage, deed of
trust, indenture, license, security agreement, agreement or other instrument
or obligation by which the Seller is a party or by which it may be bound, or
require any consent, approval or notice under any such document or instrument;
or result in the creation or imposition of any lien, claim, restriction,
charge or encumbrance upon the Assets.
(g) Court Orders and Decrees. Except as set forth on Schedule
6(A)(g), the officers of the Seller have not received written or oral notice
that there is outstanding, pending, or threatened any order, writ, injunction
or decree of any court, governmental agency or arbitration tribunal against or
affecting the Assets.
(h) Approvals and Authorizations. The Seller has obtained all
necessary consents, approvals or authorizations in connection with the
transactions contemplated hereby, which are required by law or otherwise in
order to make this Agreement binding upon the Seller.
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(i) Governmental Licenses. Schedule 6(A)(i) attached hereto contains
a list of all material governmental and administrative consents, permits,
appointments, approvals, licenses, certificates and franchises which are
required in connection with the Seller's execution, delivery or performance of
this Agreement, all of which have been obtained and are in full force and
effect. The Seller has not received any notice of any material violation with
respect to any such consents, permits, licenses or other regulatory orders and
which remain unabated.
(j) Hazardous Material and Nuisance. Except as disclosed on Schedule
6(A)(j) attached hereto and in the Phase I reports on the Real Property
obtained by Buyer and delivered to Seller, Seller has received no notice of
and, to the best knowledge of the Seller, there are no known or potential
claims which may exist against the Seller relating to the Business and/or the
Assets, for, with respect to, or as direct or indirect result of, the presence
on or under, or the escape, seepage, leakage, spillage, discharge, or emission
discharging, from the real property of the Seller of any "Hazardous Material,"
including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses, reasonable fees of counsel or claims asserted or arising
under the Comprehensive Environmental Response, Compensation and Liabilities
Act ("CERCLA"), any so-called "Super Fund" or "Super Lien" law or any other
applicable federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree now or at any time hereafter in effect,
regulating, relating to or imposing liability or standards of conduct
concerning any Hazardous Material.
(k) Employee Benefit Plans. No funding deficiency exists or has
existed with respect to any "Employee Benefit Plans" (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any other profit sharing, deferred compensation, bonus, stock
option, stock purchase, pension or other compensation plan (excluding
salaries, wages and other customary employee benefits such as vacation and
sick leave), or any other plan or arrangement to benefit employees maintained
or contributed to by the Seller or any person, firm or corporation (an
"Affiliate") under "common control" (within the meaning of Section 401(b) of
ERISA) with the Seller and in which any of the employees of the Seller or any
Affiliate participates or is eligible to participate covering any present or
former employee of the Seller or any Affiliate which may cause or result in a
lien upon any of
-14-
the Assets. Unless the Buyer chooses to adopt or otherwise assume or take over
any of the Seller's Employee Benefit Plans (in which case there shall be no
Seller indemnification), the Seller shall indemnify and hold harmless the
Buyer and CPI for any losses or expenses incurred by the Buyer and/or CPI as a
result of any Employee Benefit Plan, as set forth in Section 8(b) hereof.
Schedule 6(A)(k) attached hereto discloses, as of now and since January 1,
1985, all Employee Benefit Plans concerning the Business.
(l) Absence of Certain Business Practices. Neither the Seller, nor
any officer nor to the best knowledge and belief of the Seller, any employee
or agent of the Seller acting on the Seller's behalf, nor any other person
acting on Seller's behalf, has, directly or indirectly, within the past three
(3) years given or agreed to give any material gift or similar benefit
inconsistent with the Seller's past practices and policies to any customer,
supplier, governmental employee or other person who is or may be in a position
to help or hinder the Business (or assist the Seller in connection with any
actual or proposed transaction) which (i) would subject the Seller to any
material damage or penalty in any civil, criminal or governmental litigation
or proceeding, (ii) if not given in the past would have had a material adverse
effect on the assets, business or operation of the Business, or (iii) if not
continued in the future, would materially adversely affect the Assets, the
Business or its operations or prospects, or which would subject the Seller to
suit or penalty in any private or governmental litigation or proceeding.
(m) Brokers. The Seller has not entered into and will not enter into
any agreement, arrangement or understanding with any person or firm which will
result in an obligation of the Buyer or CPI to pay any finder's fee, brokerage
commission, or similar payment in connection with the transactions
contemplated by this Agreement. Any brokerage commission owing to Telling
Group Ltd. and The Geneva Companies in connection with the transactions
contemplated by this Agreement, if any, shall be paid by the Seller in
accordance with the Seller's agreement with Telling Group Ltd.
and The Geneva Companies.
(n) Financial Statements.
-15-
(i) The Seller has delivered to the Buyer during the process of the
Buyer's due diligence investigation copies of all the financial statements
requested by the Buyer (hereinafter collectively called the "Unaudited
Financial Statements") and which are attached hereto as Exhibit 6(A)(n). The
Unaudited Financial Statements were prepared by Management of the Seller in
the ordinary course of business for periods through and including the month
ending December 31, 1996 (the "Balance Sheet Date"), were prepared from the
books and records of the Seller, and, except as disclosed on Schedule 6(A)(n),
are complete and accurate in all material respects, present fairly the
financial condition of the Business as at the Balance Sheet Date and the
results of the Business' operations for the periods covered thereby and are
true and correct statements of the financial condition of the Business at such
date.
(ii) Buyer's independent accountants, Xxxxxxxxx Xxxxx Xxxxxxx &
Company, P.C., shall audit the Financial Statements of Seller as at and for
the two-year period ended December 31 1996 (the "Audited Financial
Statements"), at Buyer's expense. The Audited Financial Statements shall
include the balance sheet of Seller as at December 31, 1996 and the statements
of income, statements of cash flow and statements of shareholders' equity for
the two-year period ended December 31, 1996, together with the related notes
and schedules attached thereto. The Seller shall sign and deliver to Buyer's
accountants a management representation letter in the ordinary course of
business. The Audited Financial Statements shall be delivered to the Seller no
later than two (2) weeks prior to Closing. At such time, Seller shall be
permitted to review any applicable work papers relating to the Seller's
Audited Financial Statements.
The Audited Financial Statements shall (i) be in accordance with the
books of account and records of Seller; and (ii) present fairly, in all
material respects, Seller's financial condition and the results of its
operations as at and for the periods therein specified. Except as and to the
extent shown or provided for in the balance sheet included in the Audited
Financial Statements or the notes and schedules thereto or as disclosed in any
of the Schedules to this Agreement, as of the Balance Sheet Date, Seller has
no other liabilities or obligations (whether accrued, absolute, contingent or
otherwise) which are material to the financial condition of Seller.
-16-
(iii) Seller shall prepare for CPI's review the unaudited Closing
Balance Sheet as described in Section 2(c) above. The Closing Balance Sheet
shall be prepared from the books and records of the Seller in accordance with
generally accepted accounting principles, on the same basis as the Audited
Financial Statements described in Subsection (ii) above, shall be complete and
accurate in all material respects and, to the extent reflected on such Closing
Balance Sheet, shall present fairly the financial condition of the Business at
the Closing Date and the results of the Business' operations for the period
covered thereby.
(o) Absence of Undisclosed Liabilities and Conditions. Except as and
to the extent reflected or reserved against in the Audited Financial
Statements, the Closing Balance Sheet, or as set forth on Schedule 6(A)(o)
attached hereto, as of the Closing Date, the Seller had no material debts,
liabilities or obligations (whether due or to become due, absolute, accrued,
contingent or otherwise) of any nature whatsoever, including, without
limitation, any foreign or domestic tax liabilities or deferred tax
liabilities incurred in respect of or measured by the Sellers' income, for the
period after the Balance Sheet Date and prior to the Closing or any other
material debts, liabilities or obligations relating to or arising out of any
act, transaction, circumstance or state of facts which occurred or existed on
or before the Closing Date, whether or not then known, due or payable, other
than liabilities of the same nature as those set forth in the Audited
Financial Statements and the Closing Balance Sheet and reasonably incurred in
the ordinary course of business after the Balance Sheet Date. The Audited
Financial Statements do not include any assets or liabilities of any entity
other than the Seller nor any expense of any entity other than the Seller. The
Seller does not know of any currently existing facts, other than those of the
same nature as those set forth in the Audited Financial Statements, that
materially adversely affect the Assets.
(p) Compliance With Laws. Except as disclosed on Schedule 6(A)(p),
the operations and activities of the Business concerning the Assets comply in
all material respects with all applicable federal, state and local laws,
statutes, codes, ordinances, rules, regulations, permits, judgments, orders,
writs, awards, decrees or injunctions (collectively, the "Laws"), as in effect
on or before the date of this Agreement, including, without limitation, all
rules and regulations of the Occupational Safety and Health
-17-
Administration. Neither the ownership nor use of the Assets nor the conduct of
the Business as presently conducted materially conflicts with the rights of
any other person, firm or corporation or violates, or with or without the
giving of notice or the passage of time, or both, will materially violate,
conflict with or result in a material default, right to accelerate or loss of
rights under, any terms or provisions of the Seller's Certificate of
Incorporation or Bylaws as presently in effect, or any lien, encumbrance,
mortgage, deed of trust, lease, license, agreement, understanding (hereinafter
collectively referred to as "Liens"), or Laws to which the Seller is a party
or by which it or the Assets may be bound or affected. The Seller has received
no notice or communication from any third party asserting a failure to comply
with any Laws, nor has the Seller received any notice that any authority or
third party intends to seek enforcement against the Seller to compel
compliance with any such Laws.
(q) Taxes. As of the Closing Date all taxes, including, without
limitation, income, property, sales, use, franchise, added value, employees'
income withholding and social security taxes, imposed by any governmental
entity whatsoever, which are due or payable by the Seller in connection with
the Business, and all interest and penalties thereon, have been paid in full,
all tax returns required to be filed in connection therewith have been timely
filed and all deposits required by law to be made by the Seller with respect
to withholding taxes for employees engaged in the Business have been duly
made. The Seller is not delinquent in the payment of any tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it which would result in a tax lien on the
Assets. Except for amounts accrued, but not payable as of the Closing Date,
and except for taxes arising from the transactions contemplated by this
Agreement, (i) the Seller is not liable for the payment of any taxes relating
to the Assets or the operation of the Business, and (ii) the Buyer shall have
no liability for any taxes related to the ownership or operation of the Assets
or the Business prior to the Closing Date. The Seller's determination of what
equipment and tangible personal property is used in manufacturing of Seller is
necessary. The Seller does not know of any tax deficiency or claim
outstanding, proposed, or assessed against it with respect to any taxes,
including, without limitation, income, property, sales, use, franchise,
valued-added, employees' income withholding, and social security taxes imposed
by the United States or by any foreign
-18-
country or by any state, municipality, subdivision, or instrumentality of the
United States or of any foreign country, or by any other taxing authority that
could have a material adverse effect on the Assets or the Business, or result
in the imposition of a tax lien upon any of the Assets.
(r) Absence of Changes or Events. Without limiting the foregoing,
since the Balance Sheet Date and through the date of this Agreement there has
been no material adverse change in the Business. Except as set forth in
Schedule 6(A)(r) attached hereto, since the Balance Sheet Date, the Seller has
conducted the Business in the ordinary course as historically conducted and
has not:
[i] Incurred any obligation or liability, except
current liabilities for trade or business obligations
incurred in the ordinary course of business and consistent
with its prior practice, or as requested by the Buyer, none
of which liabilities materially and adversely affects the
Assets, or the Business;
[ii] Mortgaged, pledged or subjected to lien,
charge, security interest or any other encumbrance or
restriction on any of the Assets other than as set forth on
Schedule 6(A)(r);
[iii] Except for the sale of Inventory, in the
ordinary course of business, sold, transferred, leased to
others or otherwise disposed of any of the Assets;
[iv] Received any notice of termination of any
agreement or suffered any damage, destruction or loss which
has had or, with the passage of time, could have a
materially adverse effect on the Assets, or the Business;
[v] Made any change in its pricing, advertising or
personnel practices inconsistent with its prior practice;
[vi] Suffered any change, event or condition which,
has had or may have a materially adverse effect on the
Assets, the Business, its operations, or which might
reasonably be expected to materially adversely affect the
prospects thereof;
-19-
[vii] Entered into any transaction, contract or
commitment other than in the ordinary course of business
which had a material adverse effect on the Assets or the
Business other than as set forth on Schedule 6(A)(r); or
[viii] Instituted, settled or agreed to settle any
litigation, action or proceeding before any court or
governmental body relating to the Seller, the Assets, or the
Business.
(s) Inventories. All Inventory consists of items purchased or
manufactured in the ordinary course of the Business. All Inventory has been
fully paid for or accrued by the Seller.
(t) Labor Relations. The Seller in connection with the Business is
not (i) a party to any collective bargaining agreement relating to any of the
employees of the Business and has not recognized and is not required to
recognize and has not received a demand for recognition by any collective
bargaining representative, (ii) a party to any contract with any of its
employees, agents, consultants, officers, sales representatives, distributors
or dealers that is not cancelable by the Seller without penalty on not more
than thirty (30) days' notice, except as set forth on Schedule 6(A)(t)
attached hereto, (iii) subject to any strike or work stoppage in effect or to
the Seller's best knowledge threatened against the Business nor has any strike
or work stoppage been enjoined by any order, writ, injunction or decree of any
court or federal, state, municipal or other governmental agency or
instrumentality.
(u) Customer Lists. All written agreements, and except as may occur
in the ordinary course of business all arrangements or commitments, with or
respecting any customer of the Seller to which the Seller is a party or is
bound have been described in Schedule 1(n) attached hereto except for those
not involving a consideration of at least $1,000 per annum.
(v) Investment. Subject to the provisions of Section 2(a), the Seller
(or its designees) is acquiring the Note which is convertible into CPI shares
of Common Stock ("CPI Shares"). In the event Seller converts the Note it will
acquire the CPI Shares for investment for its own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
-20-
distribution thereof. The Seller understands that the CPI Shares will not have
been registered under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the representations of the Seller as expressed
herein. Notwithstanding the foregoing, the representations and warranties
contained in this subsection 6(A)(v) shall terminate upon the effective date
of the registration statement for the Note Shares.
(w) Schedules. The Seller will deliver to the Buyer complete and
correct schedules, in form and substance reasonably acceptable to the Buyer,
prior to the Closing. The Seller will deliver updated schedules, supplemented
as necessary, to the Buyer as of the Closing, or thereafter as provided in
Section 2(c).
(x) Accuracy. No representation, warranty, covenant or statement by
the Seller in this Agreement, the Schedules attached hereto and the
certificates or other documents furnished or to be furnished to the Buyer
pursuant hereto, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact required to be stated
herein or therein or necessary to make the statements contained herein or
therein in light of the circumstances under which they were made, not false or
misleading.
(y) CONDITION. ALL FIXED ASSETS USED BY SELLER IN THE BUSINESS ARE
BEING SOLD IN "AS IS CONDITION" AS OF THE CLOSING DATE. NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY AS
TO FITNESS FOR A PARTICULAR PURPOSE OR AS TO MERCHANTABILITY IS BEING MADE
WITH RESPECT TO ANY OF THE ASSETS, EXCLUSIVE OF ANY MANUFACTURER'S OR OTHER
PARTY'S WARRANTIES HELD BY SELLER.
(B) Representations and Warranties of Xxxxxxx. Xxxxxxx warrants and
represents to the Buyer and CPI concerning the Real Property, as follows:
(a) Title. Except as set forth in Schedule 6(A)(a)(ii) of this
Agreement, Xxxxxxx owns, and at the Closing shall have, good, valid,
marketable and fee simple title to the Real Property and full right to
transfer title to the Real Property and at the
-21-
Closing, Xxxxxxx shall convey to Buyer full legal and equitable right, fee
simple title and interest to the Real Property.
The sale, conveyance, transfer and delivery of the Real
Property by Xxxxxxx to the Buyer pursuant to this Agreement will transfer fee
simple title and full legal and equitable right and interest in the Real
Property to the Buyer, free and clear of all liens, mortgages, charges,
claims, liabilities, security interests, tenancies, occupancy rights (except
those of the Seller, which shall be terminated at the Closing) and
encumbrances of any nature whatsoever, except for zoning, prohibitions and
other requirements imposed by governmental authorities, public utility
easements, real estate taxes for the current tax year that are not then due
and payable, the Assumed Liabilities, statutory liens, liabilities created by
Buyer, Seller's mortgage and security interests provided for herein and such
other matters as Chicago Title Insurance Company shall be willing without
special premium to omit as exceptions to coverage and as shall be accepted by
any banking organization as defined in Section 274-a of the Real Property Law
("Institutional Lender") which has committed in writing to provide mortgage
financing to Buyer for the purchase of the Real Property.
(b) Capacity; Organization; Standing. Xxxxxxx has full capacity to
enter into and perform under this Agreement, and all other agreements to be
entered into in connection with the transactions contemplated hereby and to
consummate such transactions; and no other consent or joinder of any other
persons or corporations is required. This Agreement has been, and each of the
other agreements executed by Xxxxxxx hereunder will at the Closing, be duly
authorized, executed and delivered by Xxxxxxx. This Agreement constitutes, and
each of the other agreements executed by Xxxxxxx will constitute, the legal,
valid and binding obligations of Xxxxxxx enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights generally or by general equitable principles.
(c) Legal Proceedings. Xxxxxxx is not a party to any pending
litigation, arbitration or administrative proceeding or investigation, with
respect to or relating to the Real Property or the Business and, to Xxxxxxx'x
best knowledge and belief, no litigation, arbitration or administrative
proceeding or
-22-
investigation that would have a material adverse effect on the Real Property
or the Business is threatened.
(d) Hazardous Material and Nuisance. Except as disclosed on Schedule
6(A)(j)(ii) attached hereto and in the Phase I reports on the Real Property
obtained by Buyer, Seller has received no notice of, and, to the best
knowledge of Xxxxxxx, there are no known or potential claims which may exist
against Xxxxxxx relating to the Real Property, for, with respect to, or as
direct or indirect result of, the presence on or under, or the escape,
seepage, leakage, spillage, discharge, or emission discharging, from the Real
Property of any "Hazardous Material," including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses, reasonable fees of
counsel or claims asserted or arising under the Comprehensive Environmental
Response, Compensation and Liabilities Act ("CERCLA"), any so-called "Super
Fund" or "Super Lien" law or any other applicable federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree now or at any
time hereafter in effect, regulating, relating to or imposing liability or
standards of conduct concerning any Hazardous Material.
(e) Taxes. As of the Closing Date all taxes, including, without
limitation, real property, taxes, imposed by any governmental entity
whatsoever, which are due or payable by Xxxxxxx in connection with the Real
Property, and all interest and penalties thereon, have been paid in full.
Xxxxxxx is not delinquent in the payment of any tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against him which would result in a tax lien on the Real
Property. Xxxxxxx does not know of any tax deficiency or claim outstanding,
proposed, or assessed against him with respect to any taxes, imposed by the
United States or by any foreign country or by any state, municipality,
subdivision, or instrumentality of the United States or of any foreign
country, or by any other taxing authority that could have a material adverse
effect on the Real Property, or result in the imposition of a tax lien upon
any of the Real Property. Xxxxxxx represents that he will take all reasonable
action upon Buyer's request and cost, and to the extent permitted by
applicable law, to have the benefits of all tax abatements or exemptions
affecting the Real Property, if any, passed on to the Buyer. Xxxxxxx shall not
withdraw, settle or otherwise compromise any protest or reduction proceeding
affecting
-23-
real estate taxes assessed against the Real Property without the consent of
Buyer, which consent shall not be unreasonably withheld. Real estate tax
refunds and credits received after the Closing, which are attributable to the
Real Property tax years during which the Closing occurs, shall be apportioned
between Xxxxxxx and Buyer pursuant to Section 2(f) of this Agreement. This
obligation shall survive Closing.
(f) FIRPTA. With respect to the parcels of Real Property set forth on
Schedule 1(b) that are to be conveyed to Buyer, the seller of each parcel of
real estate is not a "foreign person", as that term is defined for purposes of
the Foreign Investment in Real Property Tax Act, Internal Revenue Code Section
1445, as amended, and the regulations promulgated thereunder (collectively
"FIRPTA").
(g) Brokers. Xxxxxxx has not entered into and will not enter into any
agreement, arrangement or understanding with any person or firm which will
result in an obligation of the Buyer or CPI to pay any finder's fee, brokerage
commission, or similar payment in connection with the transactions
contemplated by this Agreement. Any brokerage commission owing to Telling
Group Ltd. and The Geneva Companies in connection with the transactions
contemplated by this Agreement, if any, shall be paid by the Seller in
accordance with the Seller's agreement with Telling Group Ltd. and The Geneva
Companies.
(h) Real Property; Miscellaneous.
(i) No tenant is a party to any lease or other agreement
which grants to any person any rights or estate in the
Real Property. The Real Property will be delivered at
Closing free of leases, tenancies and occupancy
rights. All leases relating to the Real Property will
be terminated on the Closing Date. Xxxxxxx shall not
enter into, amend, renew or extend any lease, in any
respect, prior to Closing.
(ii) Xxxxxxx has no knowledge of pending or contemplated
condemnation proceedings affecting the Real Property or
any part thereof.
(iii) Xxxxxxx does not owe any leasing commission in
connection with any leases, or on account of any
-24-
tenancy or occupancy in effect on the delivery of the
deed for the Real Property, or if there is, Xxxxxxx
shall be responsible for same. This obligation shall
survive the Closing.
(iv) No rents or leases will, on the delivery of the deed for
the Real Property be assigned or pledged except in
connection with any mortgage which shall be satisfied
upon Closing.
(v) No person, firm or entity has any rights in or rights to
acquire, including any option to purchase, the Real
Property or any part thereof.
(i) To the best of Xxxxxxx'x knowledge, the Real Property, the
improvements thereon and the Seller's and Xxxxxxx'x use and operation thereof
prior to Closing comply with all laws or municipal ordinances, orders or
requirements of any state, municipal or other governmental department or
agency having jurisdiction against or affecting the Real Property including,
but not limited to, building and zoning code requirements.
(j) As of the Closing, gas, electric power, sanitary and storm sewer
and water facilities and all other utilities necessary for the Seller's and
Xxxxxxx'x use and operation of the Real Property are available to and will
service the Real Property for the Seller's use of the Real Property prior to
the Closing.
(k) The insurance policies set forth on Schedule 6(B)(k) are true and
complete copies of all insurance policies affecting the Real Property, and the
information contained therein is accurate as of the date set forth therein.
Xxxxxxx shall maintain in full force and effect until the Closing the
insurance policies described in such Exhibit.
(l) The service contracts set forth on Schedule 6(B)(l) are true and
complete copies of all service contracts affecting the Real Property. Xxxxxxx
shall not modify or amend any service contract or enter into any new service
contract without the consent of Buyer.
(m) The certificates of occupancy set forth on Schedule 6(B)(m) are
true and complete copies of all such certificates
-25-
affecting the Real Property. Seller represents that use of the
Real Property conforms with the certificates of occupancy.
(n) No fixtures, equipment or personal property included in the sale
of the Real Property shall be removed from the Real Property unless the same
are replaced with similar items of at least equal quality prior to the
Closing.
Section 7. Representations and Warranties of the Buyer and CPI. The
Buyer and CPI, jointly and severally, warrant and represent to the Seller as
follows:
(a) Capacity. The Buyer and CPI have full capacity to enter into and
perform their respective obligations under this Agreement, and the Other
Agreements, and to consummate such transactions; and no other consent or
joinder of any other persons or corporations is required. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement will not, constitute a material breach of any
term or provision of the certificate of incorporation or by-laws of the Buyer
or CPI or constitute a material default under any material law, rule,
regulation, indenture, instrument, mortgage, deed of trust, or other agreement
or instrument to which the Buyer or CPI is a party or by which they are bound.
(b) Organization.
(i) The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and the
Buyer has corporate power and authority to carry on its business as now
conducted and to own, lease or operate the properties and assets now used by
it in connection therewith. The Buyer is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties make such qualification necessary.
(ii) CPI is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York, and CPI has
corporate power and authority to carry on its business as now conducted and to
own, lease or operate the properties and assets now used by it in connection
therewith. CPI is duly qualified and in good standing to do business in each
-26-
jurisdiction in which the nature of its business or the ownership or leasing
of its properties make such qualification necessary.
(c) Consents and Approvals. No governmental license, permit or
authorization, and no registration or filing with any court, governmental
authority or regulatory agency, is required in connection with the Buyer's and
CPI's execution, delivery or performance of this Agreement. The Buyer and CPI
shall execute, deliver and perform their obligations under this Agreement and
no consent or other approval or any other party is required to be obtained by
the Buyer or CPI in connection with the transactions contemplated hereby.
(d) Legal Proceedings. Neither CPI nor the Buyer is a party to or
affected by any pending litigation, arbitration or any governmental proceeding
or investigation that would in any manner affect its entering into this
Agreement or performing the transactions contemplated hereby or that might
result in any material adverse change in the financial condition, business or
properties of the Buyer or CPI and to the best of their respective knowledge
no such litigation, arbitration, proceeding or investigation is threatened.
(e) Misrepresentations and Omissions. No representation, warranty,
covenant or statement by the Buyer or CPI in this Agreement, any Exhibit
attached hereto, the Schedules attached hereto and the certificates or other
documents furnished or to be furnished to the Seller pursuant hereto
(including the Schedules, if any, provided for in this Section 7 and Exhibits
thereto), contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make the statements contained herein or therein in
light of the circumstances under which they were made, not false or materially
misleading.
(f) Binding Obligation. This Agreement has been, and each of the
Other Agreements executed by the Buyer and/or CPI hereunder will at the
Closing, be duly authorized, executed and delivered by the Buyer and/or CPI,
respectively. The execution, delivery, and performance by CPI and Buyer of
this Agreement and the Other Agreements and any other instruments to be
executed and performed by CPI or Buyer pursuant thereto have been duly and
effectively authorized by all corporate action required by law for such
-27-
transactions, and no other proceedings on the part of CPI or Buyer are
necessary. This Agreement constitutes, and each of the Other Agreements
executed by the Buyer and/or CPI, respectively, will constitute, the legal,
valid and binding obligations of the Buyer and/or CPI, respectively,
enforceable in accordance with their respective terms, except as such
enforcability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally or by
general equitable principles. All action of the Boards of Directors of the
Buyer and CPI and all other corporate action necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby has been duly and validly taken.
(g) Financial Statements. CPI has delivered to the Seller a copy of
its Annual Report on Form 10-KSB for December 31, 1996 and its Quarterly
Report on Form 10-QSB for March 31, 1997, as filed by CPI with the Securities
and Exchange Commission (the "CPI Financial Statements"), which fairly present
the consolidated financial condition of CPI as of the respective dates. Except
as disclosed in the CPI Financial Statements, CPI has no material debts,
liabilities or obligations (whether due or to become due, absolute, accrued,
contingent or otherwise) of any nature whatsoever relating to or arising out
of any act, transaction, circumstance or state of facts which occurred or
existed on or before the date of the CPI Financial Statements, whether or not
then known, due or payable. To the best knowledge and belief of the Buyer and
CPI, there has been no material adverse change in the financial condition of
CPI since the date of the CPI Financial Statements and through the date of
this Agreement. There shall be no material adverse change in the financial
condition of CPI since the date of the CPI Financial Statements and through
the date of Closing.
(h) Brokers, Finders. No agent, broker, investment banker, person or
firm acting on behalf of the Buyer or CPI or any firm or corporation
affiliated with the Buyer or CPI or under their authority is or will be
entitled to any brokers' or finders' fee or any other commission or similar
fee directly or indirectly from the Seller or any entity affiliated with the
Seller in connection with any of the transactions contemplated hereby.
-28-
(i) Capitalization. At the Closing, the authorized capital stock of
CPI will consist of fifteen million (15,000,000) shares of voting Common
Stock, $.001 par value. As of the date of this Agreement, there are options
and warrants outstanding to purchase 1,669,000 shares of CPI Common Stock. At
the Closing, all of the issued and outstanding shares of CPI Common Stock will
have been duly authorized, validly issued, fully paid and be non-assessable,
and will have been offered and sold by CPI in compliance with all applicable
federal and state securities laws. There shall always be the required number
of shares of CPI Common Stock authorized and unissued or in treasury, for
issuance to the Seller upon conversion of the Note. Upon any conversion of the
Note, all CPI Common Stock issued and delivered to the Seller pursuant thereto
shall be duly authorized, validly issued, fully paid and non-assessable. These
representations shall survive the Closing and shall continue indefinitely
until the earlier to occur of payment in full under the Note or issuance to
the Seller of all CPI Common Stock under the Note.
(j) Registration. On and after the Closing Date, CPI shall effect
registration of the shares subject to issuance under the Note in accordance
with the registration rights of Seller set forth in the Registration Rights
Agreement, a form of which is attached hereto as Exhibit 2(a)(iii). This
representation shall survive the Closing and shall continue indefinitely until
the earlier to occur of payment in full under the Note or registration of all
CPI Common Stock issued to the Seller or its designees under the Note.
Section 8. Survival of Representations and Warranties:
Indemnification.
(a) Survival of Representations and Warranties. All representations
and warranties made by the Seller or Xxxxxxx or the Buyer and CPI in this
Agreement, including without limitation all representations and warranties
made in any Exhibit or Schedule hereto or certificate delivered hereunder,
shall survive the Closing until and through the later of the third anniversary
of the Closing Date or the date set forth in this Agreement (the "Survival
Date"); provided, however, that all representations and warranties made by the
Seller in Sections 6(A)(j), 6(A)(k), 6(A)(p) and 6(A)(q) hereof shall survive
the Closing until and through the expiration of the applicable statute of
limitations (the "Extended Survival Date"). Notwithstanding the foregoing,
Seller's
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representations and warranties are for the exclusive benefit of Buyer and CPI,
their successors and assigns, and shall not be for the benefit of any other
person or entity.
(b) Indemnity on Outstanding Obligations. The Seller hereby agrees to
indemnify, defend and hold harmless the Buyer and CPI from and against all
liabilities, losses, costs or damages whatsoever (including expenses and
reasonable fees of legal counsel) (collectively, "Damages"), arising on or
before the Survival Date and out of or from or are based upon (i) the
inaccuracy in any material respect of any representation or warranty contained
in Section 6 made by the Seller; (ii) the non-performance by the Seller in any
material respect of any covenant, agreement or obligation to be performed by
the Seller under this Agreement;(iii) any liability relating to the Business
other than the Assumed Liabilities; (iv) the legal proceedings set forth on
Schedule 6(A)(c); (v) any potential environmental claims set forth on Schedule
6(A)(j); and (vi) any liability, other than for unemployment claims or for
post-closing unemployment insurance contributions, relating to the Seller's
termination of the employees of the Business other than the termination of
employees that occurs on the Closing Date or is otherwise contemplated by this
Agreement.
The Buyer and CPI, jointly and severally, hereby agree to indemnify,
defend and hold harmless the Seller from and against all Damages arising on or
before the Survival Date and out of or from or are based upon (i) the
inaccuracy in any material respect of any representation or warranty contained
in Section 7 made by the Buyer or CPI; (ii) the non-performance by the Buyer
or CPI in any material respect of any covenant, agreement or obligation to be
performed by the Buyer or CPI under this Agreement; (iii) any liability
relating to assumption of the Assumed Liabilities and (iv) any liability
relating to the operation of the Business that accrues, arises or is based
upon events occurring after the Closing Date.
Xxxxxxx hereby agrees to indemnify, defend and hold harmless the
Buyer and CPI from and against all Damages arising on or before the Survival
Date and out of or from or based upon (i) the inaccuracy in any material
respect of any representation or warranty contained in Section 6(B) made by
Xxxxxxx; (ii) the non-performance by Xxxxxxx in any material respect of any
covenant,
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agreement or obligation to be performed by Xxxxxxx under this Agreement;
and(iii) any potential environmental claims set forth on Schedule 6(A)(j)ii.
Whenever any claim shall arise for indemnification hereunder, the
party seeking indemnification (the "Indemnitee") shall notify the indemnifying
party (the "Indemnitor") in writing within 30 days after the Indemnitee has
actual knowledge of the facts constituting such claim (the "Notice of Claim").
The Notice of Claim shall specify all facts known to the Indemnitee giving
rise to such indemnification claim and the amount or an estimate of the amount
of the liability arising therefrom.
If the facts giving rise to any such indemnification shall involve
any actual, threatened or possible claim or demand by any person against the
Indemnitee, the Indemnitor shall be entitled (without prejudice to the right
of the Indemnitee to participate at its expense through co-counsel of its own
choosing) to contest or defend such claim at its expense and through counsel
of its own choosing if the Indemnitor gives written notice of its intention to
do so to the Indemnitee within 30 days after receipt of the Notice of Claim.
Notwithstanding anything to the contrary contained herein, (i) if
there is a reasonable probability that the Damages may materially and
adversely affect the Indemnitee other than as a result of money damages or
other money payments, the Indemnitee shall have the right to defend,
compromise or settle the claim; provided, however, in such event, if the
Indemnitee shall compromise or settle such claim without the approval of the
Indemnitor, the Indemnitor shall not be bound by such compromise or
settlement, and (ii) the Indemnitor shall not, without the Indemnitee's
written consent, settle or compromise the claim or consent to entry of any
judgment that does not include as an unconditional term thereof the release by
the claimant or the plaintiff of the Indemnitee from all liability in respect
of the claim.
Notwithstanding any provision of this Agreement to the contrary, no
claim for indemnification, pursuant to this Section 8, by any of the parties
hereto shall be asserted or claimed except to the extent of damages exceeding,
in the aggregate, the sum of $25,000.
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Section 9. Covenants of the Seller. The Seller hereby covenants and
agrees:
(a) Further Assurances. The Seller hereby agrees that from time to
time at the reasonable request of the Buyer or CPI, and without further
consideration, to execute and deliver such additional instruments and to take
such other action as the Buyer or CPI may reasonably require to convey,
assign, transfer and deliver the Assets and otherwise to carry out the terms
of this Agreement.
(b) Access to Information. Subsequent to the date hereof and prior to
the Closing Date, and with respect to the Closing Balance Sheet and its
review, for up to ninety (90) days after the Closing, the Seller will continue
to give to the Buyer, CPI, their counsel, accountants, and other
representatives, full and free access to all properties, books, contracts,
commitments and records of the Seller relating to the Assets so that the Buyer
and CPI may have full opportunity to make such investigation as they shall
desire. Unless the Buyer has actual knowledge, no information or knowledge
obtained either independently or as a result of investigation of the Seller
shall diminish or otherwise affect the representations and warranties of the
Seller. In the event that this transaction is not completed for any reason,
the Buyer, CPI and their representatives agree to keep confidential and not
disclose any matters relating to the Business.
(c) Closing Documents. The Seller shall execute and deliver all
instruments and documents required under Section 11 as a condition precedent
to the Closing under Section 11 hereof and take all action required to carry
out the terms of this Agreement and to consummate the transactions
contemplated hereby.
(d) Conduct of Business. From the date of this Agreement to the
Closing Date, except as expressly disclosed in the Schedules to this Agreement
or as consented to in writing by the Buyer:
1. Ordinary Course. The Business of the Seller will be conducted in
the ordinary and historical course which, without limitation, shall include:
(i) compliance with all applicable laws, regulations and administrative orders
of any state or municipality, which if not complied with would have a material
adverse effect on the financial condition of the Seller; (ii)
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continuing operations as currently conducted; (iii) not acquiring or disposing
of any assets other than in the ordinary course of business as currently
conducted (except as set forth below); (iv) making no change in compensation
policies (except as set forth below); (v) making all payments of principal and
interest due in connection with outstanding indebtedness prior to the Closing
Date and not incurring any additional material indebtedness (except as set
forth below), and (vi) not engaging in any other transactions not in the
ordinary course of business. Seller and Buyer understand and agree that Seller
granted compensation increases to its employees in the normal course of the
Business, effective July 1, 1997; and that Seller did and may before Closing,
purchase and finance equipment and inventory purchases in the normal course,
and that Seller may distribute prior to the Closing Date to its sole
shareholder outstanding cash balances in excess of approximately $250,000
cash.
2. Preservation of Goodwill. Consistent with conducting its Business
in accordance with good business judgment, the Seller will use reasonable
efforts to preserve its business organization intact and the goodwill of
suppliers, customers and others having business relations with the Seller.
(e) Employment. The Seller shall pay all of its employees, on or
before five (5) business days after the Closing Date, all compensation earned
by them through the Closing Date. The Buyer shall not be liable for any
severance pay due or owing to any employee of the Seller who leaves the employ
of Seller prior to the Closing Date (other than for unused and accrued
vacation, sick and personal days and accrued compensation related thereto).
Section 10. Covenants of the Buyer and CPI. The Buyer and CPI hereby
covenant and warrant as follows:
(a) Noninterference. The Buyer and CPI shall not take or omit to take
any action that (i) if taken or omitted on or before the date of this
Agreement, would make untrue any of the representations and warranties
contained in Section 7 of this Agreement, or (ii) would interfere with the
Buyer's or CPI's ability to perform or would prevent performance of any of its
obligations under this Agreement or any of the other agreements or instruments
provided for herein.
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(b) Closing Documents. The Buyer and CPI shall execute and deliver
all instruments and documents required under Section 12 as a condition
precedent to the Closing hereof and take all action required to carry out the
terms of this Agreement and to consummate the transactions contemplated
hereby.
(c) Payment of Sales and Personal Property Taxes; Other Amounts. The
Buyer will pay at Closing any and all state and/or county sales, transfer
and/or use taxes relating to equipment and tangible property not used in
manufacturing of Seller, resulting from the sale of the Assets to the Buyer
pursuant to the terms of this Agreement, exclusive of income taxes of the
Seller and of Seller's shareholder. Buyer will also pay all other amounts
required to be paid by Buyer pursuant to the terms of this Agreement.
(d) Access. The Buyer agrees to preserve and provide the Seller and
its representatives with access to all such business records that are provided
by the Seller to the Buyer in connection with this transaction at all times
for all reasonable purposes for a period of six (6) years following the
Closing.
(e) Transfer of CPI Stock. Buyer and CPI shall, at CPI's sole cost
and expense, take all reasonable actions necessary such that at any time after
the date which is eighteen (18) months from the Closing Date, if Seller or its
designee elects to exercise its conversion rights in whole or in part, the
recipient may sell, transfer, assign, devise, or otherwise dispose of such CPI
Stock without any Transfer Constraint (as defined in Section 2 of this
Agreement).
(f) Plant Closing; Layoffs. The Buyer shall notify Seller of any plan
on the part of Buyer to carry out a plant closing or significant layoff in
contravention of The Work Adjustment and Retaining Notification Act (29 USC
2101 et seq)which would take place within 60 days after Closing.
Section 11. Conditions Precedent to the Buyer's and CPI's
Obligations. The obligations of the Buyer and CPI under this Agreement are
subject to the following conditions (any of which may be waived in writing in
whole or in part by the Buyer or CPI, as applicable):
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(a) There shall not have been any material breach of the
representations, warranties, covenants and agreements of the Seller or Xxxxxxx
contained in this Agreement or the Schedules hereto and all such
representations and warranties shall be true in all material respects at all
times on or before the Closing as if given at such time, except to the extent
that any such representation or warranty is expressly stated to be true as of
some other time.
(b) The Seller and Xxxxxxx shall have performed and complied in all
material respects with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by them prior to or at the
Closing Date. All documents and instruments required in connection with this
Agreement shall be reasonably satisfactory in form and substance to Snow
Xxxxxx Xxxxxx P.C., counsel for the Buyer.
(c) The Buyer shall have received a certificate dated the date of the
Closing and signed by the Seller and Xxxxxxx, certifying that the conditions
specified in subsections (a) and (b) above have been fulfilled.
(d) The Buyer shall have received a certificate dated the date of the
Closing and signed by the Seller, certifying that there has been no material
adverse change in the Assets since the date of this Agreement that has not
been disclosed to Buyer.
(e) The Seller shall have obtained and delivered to the Buyer any
required consents or approvals of any other third parties whose consent is
required to the transactions contemplated hereunder.
(f) The Buyer shall have received a written opinion of counsel for
the Seller dated as of the Closing Date, in the form of Exhibit 11(f) hereto.
(g) The Buyer shall have received a deed or deeds with covenants
against Grantors Act, a xxxx of sale or bills of sale and documentation and
such other good and sufficient instruments of transfer and conveyance as, in
the reasonable opinion of counsel to the Buyer, shall be effective to transfer
to the Buyer good and valid title to the Assets, as herein provided.
(h) The Seller shall have delivered or otherwise surrendered
possession to the Buyer of the Assets sold to the Buyer hereunder as described
in Section 1 hereof.
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(i) The Buyer shall have received copies of the minutes and
resolutions of the Board of Directors of the Seller showing the authorization
and approval by such Board of the execution and delivery by the Seller of this
Agreement, the Other Agreements and such other agreements and instruments
provided for herein, certified as of a recent date, by the Secretary or
another officer of the Seller.
(j) The Buyer shall have received at the Closing a satisfactory title
opinion, or title insurance (at Buyer's cost) with regard to the Real Property
interests transferred to the Buyer.
(k) The Buyer shall have received from the Seller, an agreement in
the form of Exhibit 11(k) attached hereto, whereby the Seller agrees for a
period of three years from the Closing Date, not to compete with the Buyer or
CPI in selling any products to current customers of the Business as existing
on the Closing Date. Such agreement shall be reasonably satisfactory in form
and substance to counsel for the Buyer.
(l) The Buyer shall have completed its due diligence review to its
satisfaction and, among other things, determined that Universal and Hi-Speed,
the principal customers of the Seller (the "Principal Customers"), will
continue to do business with the Buyer following the Closing and do not
anticipate a material adverse change in anticipated business for its Business
following the Closing.
(m) The Buyer shall have received assumption and assignment
agreements, in the form of Exhibit 11(m) attached hereto, for each agreement
as set forth on Schedule 6(A)(e) requiring such agreement to be executed in
order to be assigned, and such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance reasonably
satisfactory to the Buyer, as shall be effective to transfer to the Buyer good
and marketable title to the Assets and put the Buyer in actual possession and
operating control thereof and to assist the Buyer in exercising all rights
with respect thereto.
(n) Since the Balance Sheet Date and through the Closing Date, there
shall not have occurred any material adverse change in the Assets or the
condition (financial or otherwise) of the Business, its properties or
prospects.
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(o) The Buyer shall have received all contracts, customer files and
business records relating to the Assets in the possession of the Seller and
Xxxxxxx, but excluding corporate records and any other Excluded Assets.
(p) The Buyer shall have received all documents required to be
delivered to the Buyer under any other provision of this Agreement.
(q) The Buyer shall have received a Certificate of Incumbency
identifying the officers and directors of the Seller executing this Agreement
and the Other Agreements immediately before Closing.
(r) The Buyer shall have received, at its cost, with copies to the
Seller, no later than two (2) weeks prior to Closing, the Phase I (and Phase
II if necessary) environmental study and report (the "Environmental Report")
applicable to the Real Property transferred to the Buyer pursuant to this
Agreement. Any costs of remediation shall be paid for by the Seller.
(s) The Buyer shall have received the Audited Financial Statements of
the Seller with respect to the Business described in Section 6(A)(n)(ii)for
the last two fiscal years attached hereto as Exhibit 11(s) and the unaudited
Closing Balance Sheet described in Section 6(A)(n)(iii).
(t) The Buyer shall have entered into a three-year employment
contract with Xxxxxx Xxxxxxx in the form of Exhibit 11(t) to employ Xx.
Xxxxxxx as President of Seller's Business. The agreement shall have a renewal
option exercisable by Xx. Xxxxxxx. The employment contract shall contain
non-competition provisions which run for a period of three years from the
expiration of such agreement, including any renewals or extensions. The
non-competition provision shall preclude Xx. Xxxxxxx from being employed by a
competitor of the Seller located within a 500 mile radius of Ithaca, New York;
and/or with doing business with any potential customers of the Seller located
within a 500 mile radius of Ithaca, New York, and from soliciting any existing
customers of the Seller at the termination of his employment with Buyer. The
employment agreement shall be entered into with Xx. Xxxxxxx. The employment
agreement shall provide that upon the earlier of (a) payment of the Note to
Chase evidencing the Chase Loan, or (b) termination of the employment
agreement at the end of or within the 3-year term, all insurance on Xxxxxxx'x
life owned by the Buyer, CPI or Chase shall
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be cancelled, and notice of such cancellation shall be delivered by Buyer,
CPI, Chase and the insurance company to Xxxxxxx or, at Xxxxxxx'x option and
expense, such insurance shall be assigned to Xxxxxxx.
(u) At Closing, Seller shall pay any and all finders or
brokers fees in full, including any and all fees to Telling Group
Ltd. and The Geneva Companies.
(v) Seller, by no later than April 15, 1998, shall have changed its
name from Xxxxx Machine, Inc. to any other name without "Xxxxx" in the name.
(w) The Buyer shall have received from Xxxxxxx:
(i) All service contracts in Xxxxxxx'x possession
relating to the Real Property which are in effect
at Closing and which are assignable to Buyer.
(ii) All original insurance policies relating to the
Real Property with respect to which premiums are
to be apportioned, or, true copies or
certificates thereof.
(iii) To the extent they are in Xxxxxxx'x possession,
all certificates, licenses, permits,
authorizations and approvals issued for or with
respect to the Real Property by all governmental
authorities having jurisdiction.
Section 12. Conditions Precedent to the Seller's Obligations. The
obligations of the Seller under this Agreement are subject to the following
conditions (any of which may be waived in writing in whole or in part by the
Seller):
(a) There shall not have been any material breach of the
representations, warranties, covenants and agreements of the Buyer or CPI
contained in this Agreement, and all such representations and warranties shall
be true at all times at and before the Closing, except to the extent that any
such representation or warranty is expressly stated to be true as of some
other time.
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(b) The Buyer and CPI shall have performed and complied in all
material respects with all agreements and conditions required by this
Agreement to be performed or complied with by it. All documents and
instruments required in connection with this Agreement shall be reasonably
satisfactory in form and substance to Green & Seifter Attorneys, P.C., counsel
for the Seller.
(c) All operating personnel of Seller shall be offered employment by
Buyer at or prior to the Closing, and shall be employed by Buyer on the same
terms and conditions of their employment with Seller; Buyer shall assume all
Assigned Agreements; Buyer shall assume all accrued and unpaid vacation and
sick/personal pay of employees of Seller who become employed by Buyer; Buyer
shall provide Seller's Business with supporting financial and/or other support
personnel as may be required following the Closing and otherwise allow Liguori
the discretion to make operating decisions normally made by a President,
subject to the Board of Directors' approval when required.
(d) The Seller shall have received copies of and shall be satisfied
with Buyer's employee benefit programs and policies and plans and Buyer's
employment procedures, including without limitation, the plans described in
Exhibit 12(d), and the immediate implementation of such programs, policies,
plans and procedures effective at Closing. Buyer shall not materially reduce
employee benefits or materially adversely change employment procedures of
Seller, it being the intent of the parties that benefits, compensation, terms
and conditions of employment and career paths for the employees retained by
Buyer be comparable to or better than those currently provided by Seller. The
employees of Seller who are hired by Buyer shall be given service credit in
and to any such employee benefits for the time they were employed by Seller.
Exhibit 12(d) sets forth the terms of the medical insurance program, the
pre-tax flexible benefit plan for medical insurance premiums, the 401(k) plan,
the profit sharing plan, and the vacation, sick pay and personal day policies
of Buyer.
(e) Upon full disclosure to Buyer or CPI of the existence of any
existing personal guaranty of obligations of Seller by Xxxxxx Xxxxxxx and
Xxxxxxxx Xxxxxxx, Buyer shall obtain the release of Mr. and Xxx. Xxxxxxx of
any such guarantees of obligations assumed by Buyer or CPI.
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(f) The Seller shall have received a certificate dated the date of
the Closing and signed by the Buyer and CPI, certifying that the conditions
specified in subsections (a) and (b) above have been fulfilled.
(g) The Seller shall have received a written opinion of counsel for
the Buyer and CPI, dated as of the Closing Date, in the form of Exhibit 12(g)
attached hereto.
(h) At the Closing, the Seller and Xxxxxxx shall have received
payment in the amount of the Purchase Price as set forth in Section 2(a) and
2(b) above, and as adjusted pursuant to Section 2(c).
(i) The Seller shall have received copies of the minutes and
resolutions of the Board of Directors of the Buyer and CPI showing the
authorization and approval by such Boards of the execution and delivery by the
Buyer and CPI to the Seller of this Agreement, the Other Agreements and the
agreements and instruments provided for herein and of the performance of the
obligations of the Buyer and CPI under this Agreement and the Other Agreements
and such other instruments and agreements, certified as of a recent date by
each Secretary or another officer of the Buyer and CPI.
(j) The Seller shall have received a certificate of incumbency
identifying the officers and directors of the Buyer and CPI immediately before
Closing.
(k) The Seller shall have received an officer's certificate of the
Buyer and CPI evidencing its authority to execute this Agreement and to
consummate the transactions contemplated hereby.
(l) The Seller shall have received all documents required to be
delivered to the Seller under any other provision of this Agreement.
(m) The Buyer shall have obtained and delivered to the Seller any
required consents or approvals of any other third parties whose consent is
required to the transactions contemplated hereunder.
(n) The Seller shall have received the Audited Financial Statements
of the Seller at least two (2) weeks prior to Closing.
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(o) There shall not have occurred any material change in the
condition (financial or otherwise) of CPI since the date of the CPI Financial
Statements.
(p) The Buyer shall have duly executed and delivered to the Seller
its Note in the form of Exhibit 2(a)(ii), the Registration Rights Agreement in
the form of Exhibit 2(a)(iii) the Security Agreement in the form of Exhibit
2(a)(iv), together with UCC-1 forms for the filing in the appropriate state
and county officers, the Mortgage in the form of Exhibit 2(a)(v), and the
Guaranty of CPI in the form of Exhibit 2(a)(vi), executed by each of the
respective parties thereto.
(q) The Seller shall have given its consent to and signed the
Non-Competition Agreement, in the form of Exhibit 11(k).
(r) Xxxxxxx shall have given his consent to and signed the Employment
Agreement, as described in Section 11(t).
(s) The Buyer and CPI shall have provided to the Seller assurances
from Chase, satisfactory to the Seller, no later than one (1) week prior to
Closing, that there are no known impediments to providing the financing
required to consummate this transaction, and that the cash portion of the
Purchase Price for the Assets and the Real Property Purchase Price will be
available for wiring to the Seller at Closing.
(t) The Seller shall have received no later than two(2)weeks prior to
closing and shall be satisfied with the terms of any subordination agreement
("Subordination Agreement") required by Chase or other creditor, which
Subordination Agreement shall be attached hereto as Exhibit 12(t).
(u) The Seller shall have received no later than two(2) weeks prior
to Closing and shall be satisfied with the terms of any lockup agreement
("Lock-Up Agreement") required by CPI's underwriter in connection with CPI
Common Stock issuable under the Note, which Lock-Up Agreement shall be
attached hereto as Exhibit 12(u).
(v) The Buyer and CPI shall have provided notice to Seller of any
significant plant closing subject to the Worker Adjustment and Retaining
Notification Act (WARN) within 60 days after and Closing, or shall have
provided to Seller at Closing a certificate
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covenanting and representing that no layoff or plant closing subject to WARN
shall occur within 60 days after Closing.
(w) The Buyer shall have provided Seller at Closing with a resale or
exemption certificate for any of the Assets for which it claims exemption from
sales tax.
Section 13. Conditions Precedent to Obligations of Both the Seller
and the Buyer. The obligations of both the Seller and the Buyer to complete
this transaction shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) No Injunctions. No action or proceeding shall have been
instituted or threatened by any public authority or private person prior to
the Closing before any court or administrative body to restrain, enjoin or
otherwise prevent the consummation of this transaction or to recover any
damages or obtain other relief as a result of this transaction.
(b) Due Diligence. The Seller and the Buyer shall each have been
afforded the opportunity to complete their due diligence and conduct a review
of the business and prospects of the other and CPI, and shall be reasonably
satisfied as to such business and prospects.
(c) Consents. Any consent to the transaction considered by the Seller
or the Buyer to be necessary or advisable under any agreement or contract, the
withholding of which might have, in the judgment of the Seller or the Buyer, a
material adverse effect on the financial condition of the other party or CPI,
shall have been obtained.
(d) Corporate Proceedings. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement, and all
documents and instruments incident thereto, shall be reasonably satisfactory
in substance and form to the Seller and the Buyer and their counsel, and the
Seller and the Buyer and their counsel shall have received all certified
resolutions of the Boards of Directors of the Seller and the Buyer authorizing
the transactions contemplated by this Agreement, and such other certificates,
documents and instruments, or copies thereof, certified if requested, as may
be reasonably requested.
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(e) Pre-Merger Notification. If applicable, promptly after execution
of this Agreement the parties shall each file with the Federal Trade
Commission and Antitrust Division of the Department of Justice all necessary
notification and report forms prescribed by the "pre-merger notification"
regulations promulgated under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, together with all such additional reports, documents, materials and
data as may be requested by such agencies in connection with such pre-merger
notification.
Section 13A Status of Schedules and Exhibits as of Signature Date.
(a) The parties each acknowledge and agree that as of the
date this Agreement is executed and delivered, none of the Schedules or
Exhibits to this Agreement have been prepared, delivered, reviewed, or
approved by the parties or their respective counsel. In addition to and
without in any way limiting, any other express and implied condition precedent
to the obligations of any of the parties under this Agreement, the obligations
of each of the parties under this Agreement are hereby made subject to and
contingent upon the following:
(i) The preparation, delivery, and approval by the
parties of all of the Schedules described in this Agreement;
(ii) The preparation, delivery, and approval by the
parties of all of the Exhibits to this Agreement; and
(iii) All other express and implied conditions
precedent to the obligations of the parties under this
Agreement shall have been satisfied or waived at or prior to
the Closing.
(b) In addition, notwithstanding any other term, condition, covenant,
or provision of this Agreement or of any Other Agreement, the parties have not
made, and shall not be deemed to have made by their execution and delivery of
this Agreement, any representation or warranty with respect to any:
(i) Schedule described in this Agreement;
(ii) Exhibit to this Agreement;
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(iii) Document or state of facts pertaining to any
Schedule or Exhibit to this Agreement; or
(iv) The intended contents to any document or state
of facts pertaining to any Schedule or Exhibit to this
Agreement.
Any representations or warranties with respect to those matters or
items shall be made (unless waived or amended) only as of the Closing Date,
and only with respect to the Schedules and Exhibits attached to this Agreement
as of the Closing Date.
Section 14. Subsequent Events.
[INTENTIONALLY LEFT BLANK]
Section 15. Termination. (a) This Agreement may be terminated at any
time prior to the Closing Date:
(i) By mutual written consent of the Seller, Xxxxxxx and the
Buyer; or
(ii) By the Buyer or the Seller or Xxxxxxx if this
transaction is not completed by October 15, 1997 by written notice to the
other party; or
(iii) By the Buyer or the Seller or Xxxxxxx, if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the other party
from undertaking the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall not have been withdrawn by 30 days
after the date on which such order, decree, ruling or other action was first
issued or taken; or
(iv) By the Seller or the Buyer or Xxxxxxx if a proceeding
in bankruptcy or reorganization of the Buyer, CPI, or the Seller or the
readjustment or any of its debts under the Bankruptcy Act, as amended, or any
part thereof, or under any other laws, whether state or federal, for the
relief of debtors now or
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hereafter existing, shall be commenced by or against the Buyer, CPI
or the Seller; or
(v) By the Buyer if the Seller or Xxxxxxx has materially
breached any of its representations, warranties or covenants under this
Agreement; or
(vi) By the Seller or Xxxxxxx if the Buyer or CPI have
materially breached any of their representations, warranties or covenants
under this Agreement.
(vii) By Buyer, if any of the conditions precedent to
Closing provided for in Sections 11, 13 or 13A of this Agreement have not been
met and have not been waived in writing by Buyer;
(viii) By Seller or Xxxxxxx, if any of the conditions
precedent to Closing provided for in Sections 12, 13 or 13A of this Agreement
have not been met and have not been waived in writing by Seller or Xxxxxxx.
(b) In the event of termination of this Agreement, Sections 20, 21,
22 and 27 of this Agreement shall survive any such termination.
Section 16. Bulk Sales Act. Unless waived by the Buyer, the Seller
agrees to comply with all applicable State Bulk Sales Acts and the rules and
regulations promulgated thereunder. The Seller shall indemnify and hold
harmless the Buyer and CPI for any losses or expenses incurred by the Buyer
and/or CPI as a result of non-compliance with such Bulk Sales Acts, as set
forth in Section 8(b) hereof.
Section 17. Orderly Transfer. The Seller shall, and hereby agrees to,
cooperate with the Buyer in all reasonable ways, at no direct or indirect cost
to the Seller, in effecting any orderly transfer to the Buyer of the Assets to
be acquired by the Buyer hereunder.
Section 18. Parties in Interest. Subject to the limitations on
assignment herein, this Agreement shall be binding upon and shall inure to the
benefit of the parties and their successors and assigns. Nothing herein
expressed or implied is intended or shall be construed to confer upon or to
give any person, firm, or
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corporation other than the parties hereto any rights or remedies under or by
reason hereof.
Section 19. Entire Agreement. This instrument, including the
Schedules and Exhibits hereto, contains the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof and shall
not be modified or affected by any offer, proposal, statement or
representation, oral or written, made by or for any party in connection with
the negotiation of the terms hereof. All references herein to this Agreement
shall specifically include, incorporate and refer to the Schedules and
Exhibits attached hereto which are hereby made a part hereof. There are no
representations, promises, warranties, covenants, undertakings or assurances
(express or implied) other than those expressly set forth or provided for
herein and in the other documents referred to herein. This Agreement may not
be modified or amended orally, but only by a writing signed by all the parties
hereto. The provisions of this Agreement shall survive the execution and
delivery of this Agreement, the Closing, and the delivery of all documents and
the performance of all transactions contemplated by this Agreement.
Section 20. Governing Law; Consent to Jurisdiction. This Agreement
and all rights and obligations hereunder shall be governed by, and construed
in accordance with, the laws of the State of New York, applicable to
agreements made and to be performed wholly within said State, without regard
to the conflicts of laws principles of such State. The parties hereto consent
to the jurisdiction of the courts of the Supreme Court of the State of New
York, Xxxxxxxx County, and the United States District Court for the Northern
District of New York, as well as the jurisdiction of all courts to which an
appeal may be taken from such courts, for the purposes of any suit, action or
other proceeding relating to this Agreement or with respect to any transaction
contemplated hereby, and expressly waive any and all objections the parties
hereto may have as to the venue of such courts to settle or adjudicate any
claim or controversy arising hereunder.
Section 21. Expenses. Each party hereto shall pay its own expenses
and fees incidental to the preparation of this Agreement, the carrying out of
the provisions of this Agreement and the consummation of the transactions
contemplated hereby, unless otherwise agreed to herein. With respect to the
purchase of the Real Property, Buyer shall pay all abstract costs, title
insurance premiums (including the costs of endorsements), survey costs,
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escrow and recording fees, deed stamps and mortgage tax. Real estate taxes
will be prorated as of Closing. Buyer shall also pay for all costs incurred by
Buyer or Seller in paying off or modifying existing Business financing, if
requested to be so paid off or modified by Buyer, including all prepayment
penalties and premiums. Buyer shall pay for the costs incurred and fees
charged by Xxxxx & Xxxxxxx LLP in connection with preparation of the Audited
Financial Statements.
Section 22. Severability. If any part of this Agreement is held to be
unenforceable or invalid under, or in conflict with, the applicable law of any
jurisdiction, the unenforceable, invalid or conflicting part shall, to the
extent permitted by applicable law, be narrowed or replaced, to the extent
possible, with a judicial construction in such jurisdiction that effectuates
the intent of the parties regarding this Agreement and such unenforceable,
invalid or conflicting part. To the extent permitted by applicable law,
notwithstanding the unenforceability, invalidity or conflict with applicable
law of any part of this Agreement, the remaining parts shall be valid,
enforceable and binding on the parties.
Section 23. Notices.
(a) All notices, requests, consents and demands by the parties
hereunder shall be delivered by hand, or telecopier at the applicable
telecopier numbers designated below (with written confirmation from the
noticed party of receipt) by recognized national overnight courier or by
registered or certified mail, return receipt requested, addressed to the party
to be notified at the addresses set forth below:
(i) if to the Seller to:
Xxxxx Machine, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx, President
Telecopier No. (000) 000-0000
(ii) if to Xxxxxx Xxxxxxx:
000 Xxxxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
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Telecopier No. (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxx, Esq.
Green & Seifter Attorneys, P.C.
Xxx Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Telecopier No.: (000) 000-0000
(iii)if to the Buyer or CPI to:
CPI Aerostructures, Inc.
000X Xxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx August, President
Telecopier No.: (000) 000-0000
with a copy to:
Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
(b) Notices given by mail shall be deemed effective on the date shown
on the proof of receipt of such mail. Other notices shall be deemed given on
the date of receipt or in the case of telecopier notice, written confirmation
of receipt. Any party hereto may change the address specified in Section 23(a)
by written notice to the other parties hereto.
Section 24. Amendment; Non-Waivers. Any provisions of this Agreement
may be amended, if and only if, such amendment is written and signed by each
party to this Agreement. Neither any failure nor any delay on the part of any
party to this Agreement in exercising any right, power or privilege hereunder
shall operate as a waiver of any rights of such party, unless such waiver is
made by a writing executed by the party and delivered to the other parties
hereto, nor shall a single or partial exercise of any right preclude any other
or further exercise of any other right, power or privilege accorded to any
party hereto.
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Section 25. Assignment. This Agreement may not be assigned by
any party without the prior written consent of the other parties.
Section 26. Disclosure. From and after the Date of this Agreement
until the Closing or the termination of this Agreement, the Seller will not
(i) solicit or encourage inquiries or proposals with respect to, or furnish
any information relating to, or participate in, any negotiations or
discussions concerning the sale of the Assets with anyone other than the
Buyer; or (ii) unless otherwise required by law, neither party shall make any
public announcement without prior approval of the language of such
announcement by the other, except in compliance with Article 6 ("Bulk Sales")
of the New York Uniform Commercial Code.
Section 27. Confidentiality. From and after the date of this
Agreement until the Closing of this Agreement and for a period of five (5)
years after the Closing or the termination of this Agreement, if this
Agreement does not close, the Buyer and CPI and their respective employees and
representatives and the Seller and its representatives will maintain the
confidentiality of all documents and information of a confidential nature
disclosed to the other party in the course of their negotiations as set forth
in and shall abide in all respects by the terms of the Confidentiality
Agreement dated May 30, 1997 attached as Exhibit 27 and incorporated herein by
reference. The Confidentiality Agreement shall survive the Closing or
termination of this transaction.
Section 28. Tax Reporting.
(a) The parties agree and acknowledge that the determination of the
Purchase Price for the Assets and for the Real Property being sold hereunder
and as set forth in this Agreement is the result of arms-length negotiations
between them, and the parties agree and warrant and represent to each other
that their respective tax returns shall report the transactions contemplated
by this Agreement in accordance with the characterization and allocations set
forth herein.
(b) Each party will timely file IRS Form 8594 with the Internal
Revenue Service ("IRS"), or otherwise comply with the interim procedures set
forth in Treasury Regulation Section 1.1060-1T(h)(3). The form and all
information provided to the IRS shall be completed in conformity with the
information set forth in this Agreement.
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Section 29. Miscellaneous. Each of the parties hereto shall use its
best efforts to take or cause to be taken, and to cooperate with the other
parties hereto to the extent necessary with respect to, all action, and to do,
or cause to be done, consistent with applicable law, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
Section 30. Headings. The headings contained herein are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
Section 31. Counterparts. This Agreement may be executed and
delivered in multiple counterpart copies, each of which shall be an
original and all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the date first above written.
XXXXX MACHINE, INC. (SELLER)
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx, President
XXXXX, INC. (BUYER)
By: /s/ Xxxxxx August
------------------------------------
Xxxxxx August, Chairman of the Board
CPI AEROSTRUCTURES, INC.
By: /s/ Xxxxxx August
------------------------------------
Xxxxxx August, President
Xxxxxx Xxxxxxx is executing this Agreement in an individual capacity
only with respect to his personal rights and obligations set forth in Sections
1(b), 2(b), 6(B), 8(a), 8(b), and 15.
/s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx, Individually
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SCHEDULES TO THE ASSET PURCHASE AGREEMENT
AMONG XXXXX MACHINE, INC., CPI AEROSTRUCTURES INC.,
XXXXX, INC. AND XXXXXX XXXXXXX
Schedule No. Description
------------ -----------
1(a) The Inventory
1(b) The Real Property
1(c) The Buildings and Improvements
1(d) The Equipment and Machinery
1(e) The Office Furniture and Fixtures
1(f) The Automobiles, Trucks, Vehicles and Forklifts
1(h) The Accounts Receivable
1(i) The Assumed Agreements
1(k) The Pre Paid Assets
1(l) The Trade Names
1(m) The Trademarks
1(n) The Customer List
3(a) The Excluded Assets
6(A)(a)(i) and (ii) Exceptions to Title 6(A)(c)Legal Proceedings
6(A)(e)Material Agreements Including Assigned Agreements
6(A)(f)Violations or Restrictions
6(A)(g)Court Orders and Decrees
6(A)(i)Governmental Licenses
6(A)(j)(i) and (ii) Environmental Claims
6(A)(k)Employee Benefit Plans
6(A)(n)The Seller's Financial Statements
6(A)(o)Undisclosed Liabilities and Conditions
6(A)(p)Compliance with Laws
6(A)(r)Changes Outside of Ordinary Course
6(A)(t)Non-Cancelable Labor Contracts
6(B)(k)Insurance Policies
6(B)(l)Service Contracts
6(B)(m)Certificates of Occupancy
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EXHIBITS TO THE ASSET PURCHASE AGREEMENT
AMONG XXXXX MACHINE, INC., CPI AEROSTRUCTURES, INC.,
XXXXX, INC. AND XXXXXX XXXXXXX
Exhibit No. Description
----------- -----------
2(a)(ii) Form of 8% Promissory Note
2(a)(iii) Form of Registration Rights Agreement
2(a)(iv) Form of Security Agreement
2(a)(v) Form of Mortgage
2(a)(vi)(A) Form of Guaranty
2(a)(vi)(B) Form of Stock Pledge Agreement
2(e) Allocation of Purchase Price
6(A)(n) The Seller's Unaudited Financial
Statements
11(f) Form of the Seller's Legal Opinion
11(k) Form of Non-Competition Agreement
11(m) Form of Assumption and Assignment
Agreements
11(s) The Seller's Audited Financial
Statements
11(t) Form of Xxxxxxx Employment Contract
12(d) The Buyer's Employee Benefit Plans
and Policies
12(g) Form of the Buyer's Legal Opinion
12(t) Form of Subordination Agreement
12(u) Form of Lock-Up Agreement
27 Confidentiality Agreement dated May
30, 1997
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SCHEDULE 3(a)
Excluded Assets
(a) 1993 Honda Accord automobile, VIN number 0XXXX0000XX000000,
and any encumbrances thereon.
(b) Seller's minute books, tax returns and other corporate
documents and employment records; provided, however, that
the Seller's employment records shall be delivered to buyer
with respect to individual employees upon the delivery of
executed consents of the affected employees.
(c) All books, records, correspondence and other information
which relate to the assets of Seller to be retained by the
Seller pursuant to the terms of this agreement.
(d) All tax refunds and claims therefor.
(e) All memorabilia.
(f) All insurance policies not specifically assigned to Buyer,
and all claims thereunder.
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