EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BY AND AMONG
GENERAL AUTOMATION, INC.,
XXX XXXXX
AND
PRECISION PARTNERS HOLDING COMPANY
----------------------------
DATED AS OF FEBRUARY 5, 1999
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TABLE OF CONTENTS
(Not a part of this Agreement)
PAGE
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RECITALS ........................................................................................1
I. DEFINITIONS..................................................................................1
1.1. Definitions....................................................................1
II. SALE AND PURCHASE OF ASSETS.................................................................8
2.1. Purchased Assets...............................................................8
2.2. Excluded Assets...............................................................10
2.3 Nonassignable Contracts, Leases and Permits...................................11
III. ASSUMPTION OF LIABILITIES.................................................................11
3.1. Liabilities Assumed by Buyer..................................................11
3.2. Liabilities Not Assumed by Buyer..............................................12
IV. CONSIDERATION FOR PURCHASED ASSETS; CLOSING................................................13
4.1. Purchase Price................................................................13
4.2. Estimated Adjustment..........................................................13
4.3. Post-Closing Adjustment.......................................................13
4.4. Adjustments to Closing Payments...............................................15
4.5. Allocation of Purchase Price..................................................15
V. CLOSING AND CLOSING DELIVERIES.............................................................16
5.1. The Closing...................................................................16
5.2. Deliveries of Seller..........................................................16
5.3. Deliveries by Buyer...........................................................17
5.4. Proceedings...................................................................18
VI. REPRESENTATIONS AND WARRANTIES OF SELLER...................................................18
6.1. ..............................................................................18
6.1.1. Corporate Existence and Power.........................................18
6.1.2. Enforceability........................................................18
6.1.3. Governmental Authorization............................................18
6.1.4. Non-Contravention; Consents...........................................18
6.1.5. Capitalization........................................................19
6.1.6. Financial Statements; Books and Records..............................19
6.1.7. No Undisclosed Liabilities...........................................20
6.1.8. Intercompany Accounts................................................20
6.1.9. Tax Matters..........................................................20
6.1.10. Absence of Certain Changes...........................................21
6.1.11. Contracts............................................................21
6.1.12. Insurance Coverage...................................................23
6.1.13. Litigation...........................................................24
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TABLE OF CONTENTS
(Not a part of this Agreement)
PAGE
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6.1.14. Compliance with Laws; Permits........................................24
6.1.15. Properties; Sufficiency of Assets....................................24
6.1.16. Intellectual Property................................................25
6.1.17. Environmental Matters................................................25
6.1.18. Plans and Material Documents.........................................27
6.1.19. Interests in Customers, Suppliers, Etc...............................28
6.1.20. Customer, Supplier and Employee Relations............................28
6.1.21. Other Employment Matters.............................................29
6.1.22. Accounts Receivable..................................................29
6.1.23. Inventory............................................................30
6.1.24. Millennium Compliance................................................30
6.1.25 Finders' Fees........................................................30
VII. REPRESENTATIONS AND WARRANTIES OF BUYER...................................................30
7.1. Corporate Existence and Power.................................................30
7.2. Authorization; Enforceability.................................................30
7.3. Governmental Authorization....................................................30
7.4. Non-Contravention.............................................................31
7.5. Litigation....................................................................31
7.6. Consents......................................................................31
7.7. Finders' Fees.................................................................31
7.8. Precision Structure...........................................................31
VIII. CERTAIN COVENANT.........................................................................31
8.1. Conduct of Business of the Company............................................31
8.2. Exclusive Dealing.............................................................33
8.3. Review of the Company; Confidentiality........................................33
8.4. Reasonable Efforts............................................................34
8.5. Transfer of Employees and Benefit Plans.......................................34
8.6 Books and Records.............................................................36
8.7 Bulk Transfer Laws............................................................36
8.8 Non-competition...............................................................36
8.9 Collection of Payments........................................................37
8.10 Accounts Receivable...........................................................37
8.11 Use of Names..................................................................37
8.12 Pre-Closing Audits............................................................37
8.13 Satisfaction and Termination of Equity Arrangements...........................38
8.14 Further Assurances. .........................................................38
IX. CONDITIONS TO CLOSING......................................................................38
9.1 Conditions to Obligations of Buyer............................................38
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TABLE OF CONTENTS
(Not a part of this Agreement)
PAGE
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9.1.1. Representations, Warranties and Covenants of Seller...................38
9.1.2. No Injunction, etc....................................................39
9.1.3. No Proceedings........................................................39
9.1.4. Required Filings......................................................39
9.1.5. Opinion of Counsel....................................................39
9.1.6. Due Diligence.........................................................39
9.1.7. Ancillary Agreements..................................................39
9.1.8. Third Party Consents; Governmental Approvals..........................39
9.1.9. FIRPTA................................................................39
9.1.10. No Material Adverse Change............................................39
9.1.11. Financing.............................................................39
9.1.12. HSR Act...............................................................39
9.1.13. Pre-Closing Audits...................................................40
9.2 Conditions to Obligations of Seller............................................40
9.2.1. Representations, Warranties and Covenants of Buyer....................40
9.2.2. Buyer's Certificate...................................................40
9.2.3. No Injunction, etc....................................................40
9.2.4. No Proceedings........................................................40
9.2.5. Required Filings......................................................40
9.2.6. Ancillary Agreements..................................................40
9.2.7. Opinion of Counsel....................................................40
9.2.8. HSR Act...............................................................40
X. SURVIVAL; INDEMNIFICATION....................................................................41
10.1 Survival.......................................................................41
10.2 Indemnification................................................................41
10.3 Tax Indemnification............................................................42
10.4 Procedures.....................................................................42
10.5 Payment and Treatment of Indemnification Payments..............................44
10.6 Indemnification Amounts Net of Benefits Received...............................44
10.7 Exclusive Remedy. .............................................................44
XI. MISCELLANEOUS...............................................................................44
11.1. Termination. .................................................................44
11.2. Notices. .....................................................................45
11.3. Amendments and Waivers.........................................................45
11.4. Expenses. ....................................................................45
11.5. Successors and Assigns. ......................................................46
11.6. No Third Party Beneficiaries. ................................................46
11.7. Governing Law. ...............................................................46
11.8. Jurisdiction. ................................................................46
iii
TABLE OF CONTENTS
(Not a part of this Agreement)
PAGE
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11.9. Waiver of Jury Trial...........................................................46
11.10. Counterparts. ................................................................46
11.11. Headings. ....................................................................47
11.12. Entire Agreement. ............................................................47
11.13. Severability. ................................................................47
11.14. No Waiver. ...................................................................47
11.15. Certain Interpretive Matters. ...............................................47
iv
(Not a part of this Agreement)
EXHIBIT AND SCHEDULE INDEX
EXHIBITS
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EXHIBIT A: Form of Employment Agreement
EXHIBIT B-1: Interim Financial Statements
EXHIBIT B-2: Monthly Financial Statements
EXHIBIT B-3: Compilation Statements
EXHIBIT C: Form of Non-competition Agreement
EXHIBIT D-1: Form of Xxxx of Sale
EXHIBIT D-2: Trademark Assignment
EXHIBIT D-3: Form of Copyright Assignment
EXHIBIT D-4: Form of Special Warranty Deed
EXHIBIT E: Balance Sheet Principles
EXHIBIT F: Form of Opinion of Xxxxxxxxx and Xxxxxxxxxx
EXHIBIT G: Form of Certificate of Amendment of Company's Charter
EXHIBIT H: Form of Opinion of Xxxxx, Day, Xxxxxx & Xxxxx
v
(Not a part of this Agreement)
SCHEDULES
---------
SCHEDULE 2.1(a)(xiv): Names
SCHEDULE 2.1(a)(xvii): Bank Accounts, etc.
SCHEDULE 2.2(c): Property
SCHEDULE 2.2(d): Xxxxxx X. Xxxxx Letter
SCHEDULE 3.1(a)(vi): Liability in Respect of Claims
SCHEDULE 6.1.4: Non-Contravention; Consents
SCHEDULE 6.1.5(a): Capitalization
SCHEDULE 6.1.5(b): Ownership of Shares of Capital Stock
SCHEDULE 6.1.6(c): Changes in the Company's Reserve or Accrual Policies
SCHEDULE 6.1.7: Undisclosed Liabilities
SCHEDULE 6.1.8: Intercompany Accounts
SCHEDULE 6.1.9(a): Tax Matters
SCHEDULE 6.1.9(b): Jurisdictions Which Impose Tax on Overall Net Income
SCHEDULE 6.1.10: Absence of Certain Changes
SCHEDULE 6.1.11(a): Contracts and Agreements
SCHEDULE 6.1.11(c): Grants of Severance or Termination Pay
SCHEDULE 6.1.12: Insurance Policies and Bonds
SCHEDULE 6.1.13: Litigation
SCHEDULE 6.1.14(a): Compliance with Laws; Permits
SCHEDULE 6.1.14(b)(i): Lists of Government or Regulatory Permits and Licenses
SCHEDULE 6.1.14(b)(ii): Invalid or Defective Permits and Licenses
SCHEDULE 6.1.15(a): Properties; Sufficiency of Assets
SCHEDULE 6.1.15(b): Real Property
SCHEDULE 6.1.16(a): Intellectual Property
SCHEDULE 6.1.16(b): Intellectual Property Disputes
SCHEDULE 6.1.17: Environmental Matters
SCHEDULE 6.1.17(b): Environmental Investigations
SCHEDULE 6.1.18(a): List of Benefit Plans
SCHEDULE 6.1.18(b): List of Certain Benefit Plans
SCHEDULE 6.1.18(c): Benefit Plans compliance
SCHEDULE 6.1.18(h): Employees Entitled to Bonuses and Benefits
SCHEDULE 6.1.18(i): Employees with Options to Purchase Shares
SCHEDULE 6.1.19: Interests in Customers, Suppliers, Etc.
SCHEDULE 6.1.20: Customer, Supplier and Employee Relations
SCHEDULE 6.1.21(a): Claims by Employees
SCHEDULE 6.1.21(b): Employees
SCHEDULE 6.1.21(d): Retired Employees Scheduled to Receive Benefits in the
Future
SCHEDULE 6.1.22: Accounts Receivable
SCHEDULE 6.1.23: Inventory
SCHEDULE 6.1.24: Millennium Compliance
SCHEDULE 7.5: Litigation
SCHEDULE 7.6: Consents
vi
(Not a part of this Agreement)
SCHEDULE 8.5(a): Transferred Employees
SCHEDULE 8.5(b): Benefits
SCHEDULE 8.8: Certain Employees of Seller
SCHEDULE 11.2: Notices
SCHEDULE 11.15(c)(i): Knowledge of Buyer
SCHEDULE 11.15(c)(ii): Knowledge of Buyer
vii
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February 5, 1999,
by and among GENERAL AUTOMATION, INC., an Illinois corporation (the "COMPANY" or
"SELLER"), XXX XXXXX ("STOCKHOLDER") and PRECISION PARTNERS HOLDING COMPANY, a
Delaware corporation ("BUYER").
RECITALS
A. The Company is a manufacturer of high precision screw machined parts
primarily for the automotive and medical industries.
B. Stockholder is the beneficial owner, through a living trust, of all of
the issued and outstanding capital stock of the Company.
C. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer all of the assets, properties and rights of Seller (other than the
Excluded Assets) subject to the Assumed Liabilities, all on the terms and
conditions set forth herein.
D. The parties desire to make certain representations, warranties and
covenants in connection with the transactions contemplated hereby and to
prescribe various conditions in connection therewith.
Accordingly, the parties hereto agree as follows:
I. DEFINITIONS
1.1. DEFINITIONS. In addition to the terms defined elsewhere herein and/or
in the Schedules attached hereto, the following terms, as used herein, have the
following meanings when used herein with initial capital letters:
"ACCOUNTANTS" has the meaning ascribed to such term in Section 4.3(b).
"ACCOUNTS RECEIVABLE" has the meaning ascribed to such term in Section
2.1(a)(vii).
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with the first
Person. For the purposes of this definition, "CONTROL," when used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"AGGREGATE CLOSING CONSIDERATION" has the meaning ascribed to such term in
Section 4.1.
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"AGREEMENT" has the meaning ascribed to such term in the introductory
paragraph of this Agreement as the same may be amended from time to time in
accordance with the terms hereof.
"ANCILLARY AGREEMENTS" means the Employment Agreement, the Non- competition
Agreement, the Xxxx of Sale, the Trademark Assignment, the Copyright Assignment
and the Deed.
"ASSUMED LIABILITIES" has the meaning ascribed to such term in Section
3.1(b).
"AUDITED FINANCIAL STATEMENTS" has the meaning ascribed to such term in
Section 8.12.
"BALANCE SHEET DATE" means June 30, 1998.
"BALANCE SHEET PRINCIPLES" has the meaning ascribed to such term in Section
4.3(a).
"BASE NET WORTH" means $8.0 million.
"BENEFIT PLANS" has the meaning ascribed to such term in Section 3.1(a)(iv)
"XXXX OF SALE" has the meaning ascribed to such term in Section 2.1(b)(i).
"BONUSES" have the meaning ascribed to such term in Section 6.1.21(b).
"BUSINESS" means the businesses of Seller as conducted as of the date
hereof and on the Closing, as described in Recital A.
"BULK TRANSFER LAWS" has the meaning ascribed to such term in Section 8.7.
"BUSINESS DAY" means a day other than a Saturday or Sunday or a day on
which banks located in New York City or Chicago, Illinois are authorized or
required to close.
"BUYER" has the meaning ascribed to such term in the introductory paragraph
of this Agreement.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, for any
applicable period, the obligations of such Person under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP, and the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Sections 9601, ET SEQ.
"CLOSING" has the meaning ascribed to such term in Section 5.1.
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"CLOSING DATE" has the meaning ascribed to such term in Section 5.1.
"CLOSING DATE BALANCE SHEET" has the meaning ascribed to such term in
Section 4.3(a).
"CLOSING NET WORTH" has the meaning ascribed to such term in Section
4.3(a).
"CLOSING NET WORTH STATEMENT" has the meaning ascribed to such term in
Section 4.3(a).
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"COMPANY" has the meaning ascribed to such term in the introductory
paragraph.
"COMPANY PROPERTY" means any real property and improvements at any time
owned, leased, used, operated or occupied (whether for storage, disposal or
otherwise) by the Company.
"COMPILATION STATEMENTS" means the compiled balance sheets of the Company
as of December 31, 1997, 1996 and 1995, together with the related statements of
income and retained earnings for the periods then ended and, for the period
ended December 31, 1997 only, cash flows, and the reports thereon. The
Compilation Statement for 1997 and 1996 were prepared by Xxxxxxx, Olefsky &
Company, certified public accountants, and the Compilation Statements for 1995
were prepared by Xxxx, Xxxxx & Xxxx, certified public accountants. All of the
Compilation Statements are attached hereto as EXHIBIT B-3.
"COMPUTER SYSTEMS" has the meaning ascribed to such term in Section 6.1.24.
"CONSTITUENT OF CONCERN" means any substance defined as a hazardous
substance, hazardous waste, hazardous material, pollutant, or contaminant by any
Environmental Law, any petroleum hydrocarbon and any degradation product of a
petroleum hydrocarbon, asbestos, PCB or similar substance, the handling,
storage, treatment or exposure of or to which is subject to regulation under any
Environmental Law.
"CONTRACTS" has the meaning ascribed to such term in Section 2.1(a)(vi).
"COPYRIGHT ASSIGNMENT" has the meaning ascribed to such term in Section
2.1(b)(iii).
"COVENANT PERIOD" has the meaning ascribed to such term in the Non-
competition Agreement.
"DEED" has the meaning ascribed to such term in Section 2.1(b)(iv).
"DAMAGES" has the meaning ascribed to such term in Section 10.2(a).
"DIRECT CLAIM" has the meaning ascribed to such term in Section 10.4(c)
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"DROP DEAD DATE" has the meaning ascribed to such term in Section
11.1(a)(iv).
"EMPLOYMENT AGREEMENT" means the agreement between the entity designated by
Buyer pursuant to Section 11.5 and Stockholder, to be dated the Closing Date,
substantially in the form attached hereto as EXHIBIT A.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, citations, summonses,
notices of non-compliance or violation, requests for information under Section
104(e) of CERCLA or proceedings relating to any Environmental Law or any permit
issued under any such Law, including (a) Environmental Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b)
Environmental Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Constituents of Concern or arising from alleged injury or threat of injury to
human health and safety or the environment.
"ENVIRONMENTAL CONDITION" means a condition with respect to the environment
which has resulted or could result in a material loss, liability, cost or
expense to the Company.
"ENVIRONMENTAL LAW" means any Law in effect and amended as of the Closing
Date, together with any judicial interpretation thereof and applicable clean-up
standards, as of the Closing Date, including any judicial or administrative
order, consent decree or judgment, relating to the environment, human health and
safety, including CERCLA and any state and local counterparts or equivalents.
"ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities relating to or required
by Environmental Laws and necessary for the business of the Company as currently
conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any Person that, together with the Company, would
be considered a single employer within the meaning of Section 4001 of ERISA or
Section 414 of the Code.
"ESTIMATED ADJUSTMENT" has the meaning ascribed to such term in Section
4.2.
"ESTIMATED CLOSING NET WORTH" has the meaning ascribed to such term in
Section 4.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" has the meaning ascribed to such term in Section 2.2.
"FINAL ADJUSTMENT" has the meaning ascribed to such term in Section 4.4(a).
4
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign governmental or
regulatory authority.
"HSR ACT" has the meaning ascribed to such term in Section 6.1.3.
"INDEBTEDNESS" means with respect to any Person, at any date, without
duplication, (i) all obligations of such Person for borrowed money, including,
without limitation, all principal, interest, premiums, fees, expenses,
overdrafts and penalties with respect thereto, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of the
property or services, (iv) all obligations of such Person to reimburse any bank
or other Person in respect of amounts paid under a letter of credit or similar
instrument, (v) Capitalized Lease Obligations of such Person and (vi) all
Indebtedness of any other Person of the type referred to in clauses (i) to (v)
above directly or indirectly guaranteed by such Person or secured by any assets
of such Person. Notwithstanding anything to the contrary contained herein, the
term "Indebtedness" will not include trade payables or security deposits for
leases incurred in the Ordinary Course of Business.
"INDEMNIFIED PARTY" has the meaning ascribed to such term in Section
10.4(a).
"INDEMNIFYING PARTY" has the meaning ascribed to such term in Section
10.4(a).
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service xxxx, trade
name, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right, in each case
which is owned, used or held for use or otherwise necessary in connection with
the conduct of the Business.
"INTERIM FINANCIAL STATEMENTS" means the unaudited balance sheet of the
Company as of June 30, 1998 and September 30, 1998, together with the related
statements of income for the periods then ended, in each case, prepared
internally by the Company for management purposes only and which are attached
hereto as EXHIBIT B-1.
"IRS" means the Internal Revenue Service.
"JUNE 1998 BALANCE SHEET" means the unaudited balance sheet of the Company
as of June 30, 1998, prepared internally by the Company for management purposes
only and included in the Interim Financial Statements.
"LAW" means any federal, state or local statute, law, rule, regulation,
ordinance, code, permit, license, or rule of common law.
"LENDERS" has the meaning ascribed to such term in Section 5.2(viii).
5
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person will be deemed to own, subject to a Lien, any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
assets, liabilities, condition (financial and other), results of operations or
prospects of the Company.
"MAY 1985 REDEMPTION" has the meaning ascribed to such term in Section
3.2(a)(vi).
"MILLENNIUM COMPLIANCE" means that the Computer Systems are capable of the
following, during and/or after January 1, 2000: (a) handling date information
involving all and any dates, including accepting input, providing output and
performing date calculations in whole or in part; (b) operating accurately
without interruption on and in respect of any and all dates and without any
change in performance; (c) responding to and processing two digit year input
without creating any ambiguity as to the century; and (d) storing and providing
date input information without creating any ambiguity as to the century.
"MONTHLY FINANCIAL STATEMENTS" means the unaudited monthly balance sheets
of the Company from December 31, 1996 through the Closing Date and the related
monthly statements of income for the periods then ended, in each case, prepared
internally by the Company for management purposes only. The Monthly Financial
Statements through the month-ended immediately prior to the date hereof are
attached as EXHIBIT B-2.
"NON-COMPETITION AGREEMENT" means the Non-competition Agreement, dated as
of the Closing Date, between the entity designated by Buyer pursuant to Section
11.5, Buyer and Stockholder, substantially in the form attached hereto as
EXHIBIT C.
"NOVEMBER 1998 BALANCE SHEET" means the balance sheet of the Company as of
November 30, 1998, prepared internally by the Company for internal management
purposes only and contained in the Monthly Financial Statements.
"ORDER" means any judgment, injunction, judicial or administrative order or
decree.
"ORDINARY COURSE OF BUSINESS" means, with respect to any Person, the
ordinary course of business of such Person, consistent in all material respect
with such Person's past practice and custom, including with respect to any
category, quantity or dollar amount, term and frequency of payment, delivery,
accrual and expense or any other accounting entry.
"PERMITS" has the meaning ascribed to such term in Section 6.14(b).
"PERMITTED LIEN" means (a) mechanics', workmen's, repairmen's or other
Liens arising or incurred in the Ordinary Course of Business in respect of
obligations that are not
6
overdue or (b) other imperfections of title or encumbrances, in the case of
clause (a) and (b) which do not or could not reasonably be expected to,
individually or in the aggregate, materially affect the value or marketability
of the property subject thereto.
"PERSON" means an individual, corporation, partnership, limited liability
company or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PRE-CLOSING AUDITS" has the meaning ascribed to such term in Section 8.12.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof) that
actually ends on or before the Closing Date.
"PURCHASED ASSETS" has the meaning ascribed to such term in Section 2.1(a).
"REAL PROPERTY" has the meaning ascribed to such term in Section 6.1.15(b).
"RELIANCE LETTERS" has the meaning ascribed to such term in Section
5.2(viii).
"RETAINED LIABILITIES" has the meaning ascribed to such term in Section
3.2(b).
"RETURNS" has the meaning ascribed to such term in Section 6.1.9(a)(i).
"S CORPORATION" has the meaning ascribed to such term in Section
6.1.9(a)(ix).
"SELECTED BUYER REPRESENTATIONS AND WARRANTIES" means the representations
and warranties contained in Sections 7.1 (Corporate Existence and Power); 7.2
(Authorization; Enforceability), 7.3 (Governmental Authorization) and 7.4
(Non-Contravention).
"SELECTED SELLER REPRESENTATIONS AND WARRANTIES" means the representations
and warranties contained in Sections 6.1.1 (Corporate Existence and Power),
6.1.2 (Enforceability), 6.1.3 (Governmental Authorization) and 6.1.4
(Non-Contravention; Consents).
"SELLER" has the meaning ascribed to such term in the introductory
paragraph.
"SCHEDULE 8.8 INDIVIDUALS" has the meaning ascribed to such term in Section
3.1(a)(iv).
"SURVIVAL PERIOD" has the meaning ascribed to such term in Section 10.1.
"STOCKHOLDER" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"TAX" means (a) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any Taxing
Authority
7
(as hereinafter defined), (b) any liability of the Company for the payment
of any amounts of any of the foregoing types as a result of being a member of an
affiliated, consolidated, combined or unitary group, or being a party to any
agreement or arrangement whereby liability of the Company for payment of such
amounts was determined or taken into account with reference to the liability of
any other Person, and (c) liability of the Company for the payment of any
amounts as a result of being a party to any Tax Sharing Agreements or with
respect to the payment of any amounts of any of the foregoing types as a result
of any express or implied obligation to indemnify any other Person.
"TAX SHARING AGREEMENTS" means all existing Tax sharing agreements or
arrangements (whether or not written) binding the Company.
"TAXING AUTHORITY" means any Governmental Authority responsible for the
imposition of any Tax.
"THIRD PARTY CLAIM" means any claim, demand, action, suit or proceeding
made or brought by any Person who or which is not a party to this Agreement.
"TRADEMARK ASSIGNMENT" has the meaning ascribed to such term in Section
2.1(b)(ii).
"TRANSFER" has the meaning ascribed to such term in Section 2.1(a).
"TRANSFERRED EMPLOYEES" has the meaning ascribed to such term in Section
8.5(b)(i).
II. SALE AND PURCHASE OF ASSETS
2.1. PURCHASED ASSETS.
(a) At the Closing provided for in Article V, Seller will sell, assign,
transfer, convey and deliver ("TRANSFER"), free and clear of all Liens (except
Permitted Liens), whether legal or equitable, to Buyer and Buyer will purchase
and accept from Seller on the terms and subject to the conditions hereinafter
set forth, all of the assets, properties, rights and interests of Seller to the
extent existing as of the Closing Date, other than the Excluded Assets (all of
such assets, properties, rights and interests being hereinafter collectively
referred to as the "PURCHASED ASSETS"), including but not limited to:
(i) those assets, properties, rights and interests reflected on the
November 1998 Balance Sheet, other than such assets, properties and
interests sold in the Ordinary Course of Business or otherwise disposed of
as expressly authorized or permitted under this Agreement after such date;
(ii) Seller's title to, interest in, or rights under the leases of,
real property described in SCHEDULE 6.1.15(b), together with all right,
title and interest of Seller, if any, to all leasehold improvements thereon
and all easements, rights-of-way, transferable licenses and permits and
other appurtenances thereof;
8
(iii) all right, title and interest of Seller to all plant, machinery,
equipment, tools, spare parts, supplies, furniture, furnishings, vehicles
and other fixed assets owned or leased by Seller and used or held for use
in the conduct of the Business;
(iv) all raw materials and inventories wherever located, including
inventories of work-in-process, stores and supplies, owned by Seller and
used or held for use in connection with the conduct of the Business;
(v) any item that would constitute "cash" as shown on a balance sheet
of the Business as of the Closing Date determined in accordance with GAAP,
deposits, advance payments of any kind or prepayments by clients, letters
of credit naming Seller as account party, certificates of deposit, notes,
drafts, checks and similar instruments relating to or arising out of the
conduct of the Business;
(vi) all right, title and interest of Seller to all contracts (whether
written or oral) (other than to the extent that such contracts relate to
the Retained Liabilities or Excluded Assets), commitments, leases, purchase
orders, contracts to purchase raw materials, contracts for services and
supplies, contracts to supply or sell products and all of the other
agreements (whether written or oral) including those set forth or required
to be set forth in SCHEDULE 6.1.11(a) (collectively, the "CONTRACTS");
(vii) all accounts receivable (including billed and unbilled) of
Seller ("ACCOUNTS RECEIVABLE");
(viii) all Intellectual Property Rights of Seller;
(ix) all licenses, Permits, registrations, and authorizations held by
Seller;
(x) the books and records of Seller relating to the Purchased Assets
including, without limitation, all customer and supplier files, equipment
maintenance and warranty information, all correspondence with any
customers, suppliers, employees or governmental entities, all personnel
records related to the Transferred Employees, and any other reports,
marketing studies, plans and documents, including, without limitation, data
stored electronically;
(xi) all prepaid claims, prepaid Taxes (other than any prepaid Taxes
which can be utilized to offset or satisfy any liabilities described in
Section 3.2(a)(iii)), prepaid insurance premiums and other prepaid expense
items and deferred charges, credits, advance payments, security and other
deposits made by Seller to any other Person relating to the conduct of the
Business;
(xii) all policies of insurance, fidelity, surety or similar bonds and
third-party indemnities to the extent assignable where Seller is an
indemnified party and the coverages afforded thereby, in each case other
than to the extent relating to the Retained Liabilities or Excluded Assets;
(xiii) lists of customers and vendors of Seller, including, without
limitation, any data stored electronically;
9
(xiv) the right to use the names set forth on SCHEDULE 2.1(a)(xiv),
and all variants thereof;
(xv) the Business and goodwill of Seller;
(xvi) all securities or other ownership interests in any Person held
by Seller;
(xvii) all telephone and facsimile numbers (together with all other
similar numbers), electronic mail addresses and web sites, in each case
owned or used by Seller in the Business including such items as set forth
on SCHEDULE 2.1(a)(xvii);
(xviii) all rights of Seller pertaining to any counterclaims, set-offs
or defenses it may have with respect to the Assumed Liabilities; and
(xix) all other assets, properties and rights of every kind and nature
owned or held by Seller or in which Seller has an interest on the Closing
Date, known or unknown, fixed or unfixed, accrued, absolute, contingent or
otherwise, whether or not specifically referred to in this Agreement.
(b) In confirmation of the foregoing sale, assignment and transfer, Seller
will execute and deliver to Buyer at the Closing (i) a Xxxx of Sale and
Assignment and Assumption Agreement (the "XXXX OF SALE"), (ii) an Assignment of
Trademarks (the "TRADEMARK ASSIGNMENT"), (iii) an Assignment of Copyrights (the
"COPYRIGHT ASSIGNMENT"), (iv) the Special Warranty Deed (the "DEED"), each
substantially in the forms attached hereto as XXXXXXXX X-0, X-0, X-0 and D-4,
respectively, and (v) such other assignments and other instruments of transfer
as Buyer may reasonably deem necessary or desirable.
2.2. EXCLUDED ASSETS. Anything in this Agreement to the contrary
notwithstanding, the following assets of Seller (the "EXCLUDED ASSETS") are
being retained by Seller and will not be included in the Purchased Assets:
(a) Tax records reasonably necessary for the discharge by Seller of all
income and other Taxes payable in respect of the conduct of the Business of
Seller, prior to the Closing Date, provided that Buyer will have reasonable
access to such records prior to and after the Closing Date in accordance with
the provisions of Section 8.6(b) hereof to the extent Buyer will reasonably
require such access;
(b) the rights of Seller and Stockholder under this Agreement and under the
Ancillary Agreements and the proceeds payable to Seller pursuant to this
Agreement;
(c) all of the property listed on SCHEDULE 2.2(c);
(d) any recovery of funds, assets or any other item or items of value
obtained in connection with the matters described in the December 4, 1998 letter
from Xxxxxx X. Xxxxx and/or the documents related thereto and/or referred to
therein, which letter is attached hereto as SCHEDULE 2.2(d);
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(e) any Tax refund received to the extent attributable to any Pre-Closing
Tax Period (other than net operating loss carry-backs); and
(f) Indebtedness of employees of Seller to Seller set forth on the November
1998 Balance Sheet.
2.3 NONASSIGNABLE CONTRACTS, LEASES AND PERMITS. In the case of any
Purchased Assets constituting Contracts or Permits that are not by their terms
assignable or that require the consent of a third-party in connection with the
sale by Seller, Seller will use reasonable efforts (without being required to
expend money in connection therewith) to obtain, or cause to be obtained in
writing, prior to the Closing Date, any consents necessary to convey the
benefits thereof. Buyer will assist Seller in such manner as may be reasonably
requested in connection therewith; provided that such assistance will not be
deemed to require any expenditure of money on the part of Buyer. If the consent
of any third-party is not obtained prior to the Closing Date and the Closing
occurs notwithstanding the failure to obtain such consent, Seller will use
reasonable efforts (without being required to expend money in connection
therewith) to assist Buyer in obtaining such consent promptly. During such
period in which the applicable Contract or Permit is not capable of being
assigned to Buyer due to the failure to obtain any required consent, Seller will
use reasonable efforts (without being required to expend money in connection
therewith) to make such arrangements as may be necessary to enable Buyer to
receive all the economic rights and liabilities under such Contract accruing on
and after the Closing Date.
III. ASSUMPTION OF LIABILITIES
3.1. LIABILITIES ASSUMED BY BUYER.
(a) Subject to Section 3.2, at the Closing, Buyer will assume, as of the
Closing Date, and will subsequently pay, honor and discharge when due and
payable and otherwise in accordance with their terms, the following liabilities
and obligations of Seller to the extent existing on the Closing Date:
(i) (x) all liabilities reflected on the November 1998 Balance Sheet
and (y) all such liabilities of the same categories as those reflected on
the November 1998 Balance sheet arising thereafter and to the extent
reflected on the Closing Date Balance Sheet as finally determined in
accordance with this Agreement, in the case of liabilities described in
clauses (x) and (y) of this clause 3.1(a)(i), to the extent that such
liabilities were not incurred in breach of this Agreement, and in each
case, other than Indebtedness described in Section 3.2(a)(vi);
(ii) all liabilities and obligations under Contracts to which Seller
is a party, including those that (A) are disclosed in SCHEDULE 6.1.11(a)
and SCHEDULE 6.1.15(b) and (B) have been entered into by Seller in the
Ordinary Course of Business prior to the Closing Date, in each case, other
than contracts to which Seller is a party that are entered into by Seller
in breach of this Agreement and liabilities and obligations under Contracts
to which Seller is a party that relate to a breach by Seller of any of the
terms and conditions of any such Contracts on, or prior to the Closing
Date; PROVIDED that the
11
existence of any such Contract does not constitute the breach of any
representation, warranty or covenant of Seller hereunder;
(iii) all liabilities or obligations to Transferred Employees in
accordance with, and subject to the limitations set forth in, Section 8.5
with respect to wages, salaries, bonus, vacation, severance or other
compensation reflected on the Closing Date Balance Sheet (to the extent not
discharged prior to the Closing Date) or otherwise accruing on and after
the Closing, provided that the existence thereof does not constitute a
breach of any representation, warranty or covenant of Seller hereunder;
(iv) except as provided in Section 3.2(a)(iii) and other than to the
extent applicable to the individuals listed on SCHEDULE 8.8 (the "SCHEDULE
8.8 INDIVIDUALS") (but without limiting the obligations of Buyer and GA
Acquisition Delaware, Inc. under: (x) the Employment Agreement, or (y)
COBRA for such SCHEDULE 8.8 Individuals), liabilities or obligations
relating or pertaining to any employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and any other plan, program, agreement, arrangement,
policy, contract, commitment, or scheme, written or oral, statutory or
contractual of Seller, including, but not limited to, any deferred
compensation agreement, executive compensation, bonus, incentive or
severance pay plan, any life, health, disability or accident insurance plan
or any cafeteria plan or any holiday or vacation practice under which
employees or former employees of Seller are eligible to participate or
derive a benefit and as to which such Seller has or in the future could
reasonably be expected to have any direct or indirect actual or contingent
liability (hereinafter the "BENEFIT PLANS"), provided that the existence of
such Benefit Plans does not constitute a breach of any representation,
warranty or covenant of Seller hereunder;
(v) the obligation to issue credit as appropriate in the Ordinary
Course of Business of Seller; and
(vi) liability (for the defense of, and liability (if any) in respect
of, claims in suits and other proceedings specifically described in
SCHEDULE 3.1(a)(vi).
(b) The liabilities to be assumed by Buyer pursuant to Section 3.1(a) are
hereinafter sometimes collectively referred to as "ASSUMED LIABILITIES."
3.2. LIABILITIES NOT ASSUMED BY BUYER.
(a) Anything in this Agreement to the contrary notwithstanding, Buyer will
not assume or be liable or responsible for, from and after the date hereof or
after the Closing, any liabilities or obligations of Seller, except as listed in
Section 3.1(a). Without limiting the generality or effect of the foregoing,
Buyer will not assume the following:
(i) any liability or obligation of Seller (including the liability
referred to in Section 6.1.25) arising out of or in connection with the
negotiation and preparation of the Agreement (including the Ancillary
Agreements) and the consummation and performance of the transactions
contemplated hereby;
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(ii) liability for the defense of, and liability (if any) in respect
of, all claims (other than claims which constitute Assumed Liabilities), to
the extent arising out of or relating to facts or circumstances existing on
or prior to the Closing Date;
(iii) any liability or obligation of Seller with respect to federal,
state or local Taxes;
(iv) any liability or obligation of Seller incurred in breach of this
Agreement or any of the Ancillary Agreements;
(v) all claims, liabilities and obligations with respect to the
Excluded Assets;
(vi) (x) Indebtedness in connection with the 1985 redemption by the
Seller of 565 shares of its capital stock from Xxxxx Xxxxx Xxxxxxxxxx (the
"MAY 1985 REDEMPTION")) and (y) Indebtedness constituting the guaranty
referred to in SCHEDULE 6.1.11(a)(vi); and
(vii) items listed in any of the Schedules which are expressly
identified in any such Schedule as constituting a "Retained Liability."
(b) All liabilities or obligations of Seller other than Assumed Liabilities
are hereinafter sometimes collectively referred to as the "RETAINED
LIABILITIES."
IV. CONSIDERATION FOR PURCHASED ASSETS; CLOSING
4.1. PURCHASE PRICE. In consideration for the Transfer by Seller to Buyer
of the Purchased Assets pursuant to this Agreement, Buyer will deliver at the
Closing to Seller an aggregate amount equal to $45.0 million (the "AGGREGATE
CLOSING CONSIDERATION"). The Aggregate Closing Consideration will be subject to
adjustment at the Closing as provided in Section 4.2 and will be payable in cash
by wire transfer in immediately available funds to one account designated in
writing by Seller. The Aggregate Closing Consideration will be subject to
adjustment after the Closing as provided in Sections 4.3 and 4.4.
4.2. ESTIMATED ADJUSTMENT. Not less than two Business Days prior to the
Closing Date, Seller will cause Xxxxxxx, Olefsky & Company, certified public
accountants, to prepare a good faith estimate of the Closing Net Worth (the
"ESTIMATED CLOSING NET WORTH") determined in accordance with Section 4.3, as if
it were the actual Closing Net Worth, but based upon Xxxxxxx, Olefsky &
Company's review of the monthly financial information then available and
inquiries of personnel responsible for the preparation of the financial
information relating to the Company in the Ordinary Course of Business. The
Aggregate Closing Consideration will be adjusted by the amount equal to the
difference, if any, between the Estimated Closing Net Worth and the Base Net
Worth and as otherwise adjusted in accordance with the methodology set forth in
EXHIBIT E (as so adjusted, the "ESTIMATED ADJUSTMENT").
4.3. POST-CLOSING ADJUSTMENT. (a) As soon as practicable (and in no event
later than 90 days after the Closing), Buyer will prepare and deliver or cause
to be prepared and delivered to Seller a balance sheet of the Company as of the
opening of business on the Closing Date (the "CLOSING DATE BALANCE SHEET") and a
proposed statement of the net worth of the
13
Company as of the opening of business on the Closing Date (the "CLOSING NET
WORTH STATEMENT"). The Closing Date Balance Sheet and the Closing Net Worth
Statement (i) will reflect, respectively, the financial position of the Company
and the components and calculation of the net worth of the Company in each case
as of the opening of business on the Closing Date, (ii) will be prepared and
determined as of the opening of business on the Closing Date using the same
policies, principles and methodology used in connection with the preparation of
the June 1998 Balance Sheet, and (iii) will be subject to adjustment in
accordance with the principles and methodology set forth in EXHIBIT E attached
hereto (the policies, principles and methodology in clauses (ii) and (iii) of
this Section 4.3(a) being referred to herein as the "BALANCE SHEET PRINCIPLES").
Notwithstanding anything contained herein to the contrary, there will be no
changes in reserve or accrual policies or amounts (with respect to accrual and
reserve amounts, without the prior written consent of Buyer which will not be
unreasonably withheld or delayed) between June 30, 1998 and the Closing Date
without the prior written consent of Buyer. The net worth of the Company as of
the Closing Date determined in accordance with this Section 4.3 is referred to
herein as the "CLOSING NET WORTH." In the event of any conflict or inconsistency
between the policies, principles and methodology described in the foregoing
clauses (ii) and (iii), the policies, principles and methodology set forth in
EXHIBIT E shall govern.
(b) If, within 45 days after the date of Buyer's delivery of the Closing
Date Balance Sheet and the Closing Net Worth Statement, Seller disagrees with
the Closing Date Balance Sheet and/or the Closing Net Worth Statement as
prepared and determined by Buyer, Seller will give written notice to Buyer
within such 45-day period (i) setting forth Seller's proposed changes to the
Closing Date Balance Sheet as prepared by Buyer and the determination by Buyer
of the Closing Net Worth and (ii) specifying in reasonable detail Seller's basis
for disagreement. The failure by Seller to so express disagreement and provide
such specification within such 45-day period will constitute the acceptance of
Buyer's preparation of the Closing Date Balance Sheet and the computation of the
Closing Net Worth. If Buyer and Seller are unable to resolve any disagreement
between them with respect to the Closing Date Balance Sheet and the Closing Net
Worth within 30 days after the giving of notice by Seller to Buyer of such
disagreement, the items in dispute will be referred for determination to
Pricewaterhouse Coopers LLP (the "ACCOUNTANTS") as promptly as practicable, but
not later than five days after the expiration of such 30 day period. Buyer and
Seller will use reasonable efforts to cause the Accountants to render their
decision as soon as practicable thereafter (but in no event later than 30 days
after the submission to the Accountants of the notice of disagreement referred
to in the immediately preceding sentence), including without limitation by
promptly complying with all reasonable requests by the Accountants for
information, books, records and similar items. The Accountants will make a
determination as to each of the items in dispute (but only those items in
dispute), which determination will be in writing, furnished to each of the
parties hereto as promptly as practicable after the items in dispute have been
referred to the Accountants (but in no event later than 30 days thereafter),
made in accordance with this Agreement (including EXHIBIT E), and conclusive and
binding upon each of the parties hereto. Nothing herein will be construed to
authorize or permit the Accountants to determine (i) any question or matter
whatsoever under or in connection with this Agreement, except the determination
of what adjustments, if any, must be made in one or more disputed items
reflected in the Closing Date Balance Sheet and the Closing Net Worth Statement
delivered by Buyer in order for the Closing Net Worth to be determined in
accordance with the provisions of this Agreement (including EXHIBIT E), or a
Closing Net Worth that is not equal to one of, or between, the Closing Net Worth
14
as determined by Seller and as determined by Buyer. The fees and expenses of the
Accountants will be paid one-half by Buyer and one-half by Seller.
(c) During the period that Seller's advisors are conducting their review of
Buyer's preparation of the Closing Date Balance Sheet and determination of the
Closing Net Worth, Seller and its representatives will have reasonable access
during normal business hours to the work papers prepared by or on behalf of
Buyer and its representatives and any and all other things reasonably requested
by Seller's advisors, in each case, in connection with Buyer's preparation of
the Closing Net Worth Statement and determination of the Closing Net Worth;
PROVIDED, HOWEVER, that Seller will conduct such review in a manner that does
not unreasonably interfere with the conduct of the business of the Company. To
the extent any such work papers are in the control of Seller after the Closing,
Seller will grant Buyer and its representatives reciprocal access rights for the
purpose of finalizing the preparation of the Closing Date Balance Sheet and the
determination of the Closing Net Worth. Seller and Buyer agree in good faith to
use all reasonable efforts to provide such information and access described in
this Section 4.3(c).
4.4. ADJUSTMENTS TO CLOSING PAYMENTS.
(a) Upon the final determination of the Closing Net Worth, the parties will
recalculate the Estimated Adjustment in accordance with the methodology set
forth in EXHIBIT E (the "FINAL ADJUSTMENT") and will make the following
adjustments:
(i) If the Final Adjustment exceeds the Estimated Adjustment, then the
Aggregate Closing Consideration will be increased by, and Buyer will pay to
Seller the amount of such difference; and
(ii) If the Final Adjustment is less than the Estimated Adjustment,
then the Aggregate Closing Consideration will be decreased by, and Seller
will pay to Buyer the amount of such difference.
(b) Any payment in respect of an adjustment required to be made under
Section 4.4(a) will be made by Buyer or Seller, as applicable, in cash by wire
transfer of immediately available funds to one account of the payee specified
prior to the date such payment is required to be made hereunder in writing by
Buyer or Seller, as applicable. Such payment will be made on such of the
following dates as may be applicable: (i) if Seller shall not have disagreed
with the Closing Date Balance Sheet and/or the Closing Net Worth as prepared and
determined by Buyer, the earlier of (A) 45 days after delivery to Seller of the
Closing Date Balance Sheet and the Closing Net Worth Statement or (B) seven days
after Seller has indicated in writing that it has no objections to the Closing
Date Balance Sheet and the Closing Net Worth, or (ii) if Seller shall have
objected to the Closing Date Balance Sheet and the Closing Net Worth as prepared
and determined by Buyer, within seven days following final agreement or decision
with respect to the Closing Date Balance Sheet and the Closing Net Worth, as
provided in Section 4.3 and this Section 4.4.
4.5. ALLOCATION OF PURCHASE PRICE. The Aggregate Closing Consideration will
be allocated among the Purchased Assets as determined by Seller in the manner
required by Section 1060 of the Code and otherwise in its sole discretion
(exercised reasonably and in good faith). For purposes of determining the
Buyer's basis in the Purchased Assets and gain or loss
15
recognized by Seller with respect to the sale of the Purchased Assets to Buyer,
Buyer and Seller covenant and agree that the aggregate Purchase Price will be
allocated among the Purchased Assets consistent with this Section 4.5 and the
parties further agree that they shall file all Tax returns and related forms
(including, without limitation, Form 8594) in accordance with the allocation
determined in accordance with this Section 4.5 and will not make any
inconsistent statement or take any inconsistent position on any Tax returns, in
any refund claim, or during the course of any IRS or other tax audit. Each party
will notify the other party if it receives notice that the IRS proposes any
allocation that is different from the allocation agreed upon under this Section
4.5.
V. CLOSING AND CLOSING DELIVERIES
5.1. THE CLOSING. The closing of the sale and purchase of the Purchased
Assets (the "CLOSING") will take place at the offices of Xxxxx, Day, Xxxxxx &
Xxxxx located at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m., New
York time, as soon as possible after the date hereof but in no event later than
the first to occur of (a) ten Business Days after satisfaction or waiver of the
conditions to Closing and (b) March 31, 1999. The date upon which the Closing
occurs is herein called the "CLOSING DATE."
5.2. DELIVERIES OF SELLER. At the Closing, Seller will deliver to
Purchaser:
(i) Xxxx of Sale duly executed by Seller;
(ii) Trademark Assignment duly executed by Seller;
(iii) Copyright Assignment duly executed by Seller;
(iv) Deed duly executed by Seller;
(v) instruments of assignment and assumption and other instruments, as
Buyer may reasonably deem necessary or desirable to transfer any of the
Purchased Assets duly executed by Seller;
(vi) certificates of the Chief Executive Officer of Seller to evidence
compliance with the conditions set forth in Section 9.1.1(c);
(vii) certificates of Seller's Secretary or Assistant Secretary as
provided in Section 9.1.1(d);
(viii) the opinion of Xxxxxxxxx and Xxxxxxxxxx counsel to Seller and
Stockholder, dated the Closing Date substantially in the form attached
hereto as EXHIBIT F, together with letters (the "RELIANCE LETTERS")
entitling the bank lenders and underwriters engaged by or on behalf of
Buyer to provide financing as contemplated by Section 9.1.11 (the
"LENDERS") to rely on such opinion;
16
(ix) evidence or copies of any consents, approvals, orders,
qualifications or waivers required by any third-party or governmental
entity pursuant to Section 9.1.8;
(x) Certificate of Amendment of Seller's Certificate of Incorporation,
dated the Closing Date and in proper form for filing substantially in the
form attached hereto as EXHIBIT G, which Seller will, on the Closing Date,
file with the Secretary of State of the State of Illinois, changing
Seller's corporate name to "GAI, Inc.," together with all other
documentation required to be filed in other jurisdictions where Seller is
qualified or licensed to do business to reflect such name change;
(xi) other Ancillary Agreements required to be duly executed and
delivered by Seller or Stockholder;
(xii) a non-foreign person affidavit of Seller required by Section
1445 of the Code; and
(xiii) such other documents and instruments as may be reasonably
required in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements and to comply
with the terms hereof and thereof (including state environmental disclosure
statements, good standing certificates and resale exemption certificates).
5.3. DELIVERIES BY BUYER. At the Closing, Buyer will deliver or cause to be
delivered to Seller:
(i) the Aggregate Closing Consideration by wire transfer of
immediately available funds to the one account specified pursuant to
Section 4.1;
(ii) certificate of the Chief Executive Officer of Buyer to evidence
compliance with the conditions set forth in Section 9.2.1;
(iii) certificate of Buyer's Secretary or Assistant Secretary as
provided in Section 9.2.2;
(iv) Xxxx of Sale duly executed by Buyer;
(v) the opinion of Xxxxx, Day, Xxxxxx & Xxxxx, counsel to Buyer, dated
the Closing Date substantially in the form attached hereto as EXHIBIT H;
(vi) other Ancillary Agreements required to be duly executed and
delivered by Buyer; and
(vii) such other documents and instruments as may be reasonably
required in connection with the consummation the transactions contemplated
by this Agreement and the Ancillary Agreements and to comply with the terms
hereof and thereof (including state environmental disclosure statements,
good standing certificates and resale exemption certificates).
17
5.4. PROCEEDINGS. Except as otherwise specifically provided for herein, all
proceedings that will be taken and all documents that will be executed and
delivered by the parties hereto on the Closing Date will be deemed to have been
taken and executed simultaneously, and no proceeding will be deemed taken nor
any document executed and delivered until all have been taken, executed and
delivered.
VI. REPRESENTATIONS AND WARRANTIES OF SELLER
6.1. Seller represents and warrants to Buyer as of the date hereof and the
Closing as follows:
6.1.1. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company has all corporate power required to
carry out its business as now conducted and, to Seller's knowledge, all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. The Company is duly qualified to
conduct business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary except for those
jurisdictions where the failure to be so qualified or in good standing could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has heretofore delivered to Buyer a true and
complete copy of its articles of incorporation and bylaws, the receipt of which
by Buyer is hereby acknowledged.
6.1.2. ENFORCEABILITY. The execution, delivery and performance by the
Company of this Agreement are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. This Agreement and
each Ancillary Agreement to which Stockholder and/or the Company will be a party
at the Closing have been and will be at the Closing duly executed and delivered
by Stockholder and/or the Company, as applicable and constitute and will
constitute the valid and binding agreements of Stockholder and the Company,
enforceable against them in accordance with their terms, except to the extent
that their enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
6.1.3. GOVERNMENTAL AUTHORIZATION. Except as may be required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), to Seller's knowledge, the execution, delivery and performance by
Stockholder and the Company of this Agreement and each Ancillary Agreement to
which Stockholder and the Company will be a party at the Closing require no
action by or in respect of, or filing with, any Governmental Authorities.
6.1.4. NON-CONTRAVENTION; CONSENTS. Except as disclosed on SCHEDULE 6.1.4,
the execution, delivery and performance by the Company and the Stockholder of
this Agreement and each Ancillary Agreement to which the Company or the
Stockholder will be a party at the Closing will not
(a) violate the articles of incorporation or bylaws or comparable
organizational documents of the Company,
18
(b) violate any applicable Law or Order,
(c) require any filing with or permit, consent or approval of, or the
giving of any notice to, any Person (including filings, consents or approvals
required under any permits of the Company or any licenses to which the Company
is a party),
(d) result in a violation or breach of, conflict with, constitute (with or
without due notice or lapse of time or both) a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company under or result in a loss of any benefit to which the
Company is entitled under any agreement or other instrument binding upon, the
Company or any license, franchise, permit or other similar authorization held by
the Company, or
(e) result in the creation or imposition of any Lien on any asset of the
Company;
(f) except in the case of clauses (c), (d) and (e) for such filings,
permits, consents, approvals or notices and violations, breaches, conflicts and
Liens which, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
6.1.5. CAPITALIZATION. (a) Immediately prior to the Closing, the
authorized, issued and outstanding capital of the Company will be as set forth
on SCHEDULE 6.1.5(a).
(b) Except as disclosed in SCHEDULE 6.1.5(b), Seller does not own any
capital stock or other equity or ownership or proprietary interest in any
corporation, partnership, association, trust, joint venture or other entity.
6.1.6. FINANCIAL STATEMENTS; BOOKS AND RECORDS. (a) Seller has heretofore
furnished Buyer with a true and complete copy of the Compilation Statements, the
receipt of which by Buyer is hereby acknowledged. The Compilation Statements
have been derived from the books and records of the Company and constitute a
fair and accurate presentation in all material respects of the financial
position of the Company at the respective dates thereof and the results of the
operations of the Company for the periods indicated and, in the case of the
Compilation Statements, dated as of and for the period ended December 31, 1997
only, cash flows of the Company.
(b) Seller has also heretofore furnished Buyer with a true and complete
copy of the Interim Financial Statements and, through the month ended December
31, 1998, the Monthly Financial Statements, the receipt of which by Buyer is
hereby acknowledged. The Interim Financial Statements and such Monthly Financial
Statements have been, and Monthly Financial Statements required to be delivered
pursuant to Section 8.1 when delivered shall have been, derived from the books
and records of the Company, and have been, and shall have been, as applicable,
prepared on a basis consistent otherwise with the Compilation Statements dated
as of and for the periods ended December 31, 1996 and December 31, 1997. The
Interim Financial Statements and, through the month ended December 31, 1998, the
Monthly Financial Statements constitute, and the Monthly Financial Statements
required to be delivered pursuant to Section 8.1, when delivered will
constitute, a fair and accurate presentation in all material respects of the
19
financial position of the Company at the respective dates thereof and the
results of operations of the Company for the respective periods indicated.
(c) Except as disclosed on SCHEDULE 6.1.6.(c), there have been no changes
in the Company's reserve policies since November 30, 1998.
(d) The books of account, minute books, stock record books, and other
records of the Company, all of which have been made available to Buyer, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices. The minute books of the Company
contain materially accurate and complete records of all meetings held of, and
corporate action taken by, Stockholder, the Board of Directors, and committees
of the Boards of Directors of the Company, and no meeting of stockholders, Board
of Directors or committee thereof has been held for which minutes have not been
prepared and are not contained in such minute books.
6.1.7. NO UNDISCLOSED LIABILITIES. There are no liabilities of the Company
or any facts or circumstances which could reasonably be expected to give rise to
liabilities of the Company, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than (a) liabilities fully provided for in the
most recent Interim Financial Statements; (b) liabilities specifically disclosed
on SCHEDULE 6.1.7; (c) and other undisclosed liabilities incurred since the date
of the most recent Interim Financial Statements in the Ordinary Course of
Business which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
6.1.8. INTERCOMPANY ACCOUNTS. SCHEDULE 6.1.8 contains a complete list of
all intercompany balances, as of the date immediately preceding the date hereof,
between the Company's Affiliates, on the one hand, and of the Company, on the
other hand. Other than as disclosed on SCHEDULE 6.1.8 and compensation paid in
the Ordinary Course of Business, since such date, there has not been any accrual
of liability of the Company to Stockholder or any of Company's Affiliates or
other transaction between the Company, on the one hand, and the Company's
Affiliates, on the other hand, or any action taken (other than this Agreement)
which could reasonably be expected to result in any such accrual, or the
incurrence of any legal or financial obligation to any such Person, after such
date.
6.1.9. TAX MATTERS. (a) Except as disclosed in SCHEDULE 6.1.9(a):
(i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with
any Taxing Authority with respect to any Pre-Closing Tax Period by or on
behalf of the Company (collectively, the "RETURNS") have, to the extent
required to be filed on or before the date hereof, been filed when due in
accordance with all applicable laws;
(ii) All Taxes owed by the Company (shown as due and payable on the
Returns that have been filed) have been timely paid, or withheld and
remitted to the appropriate Taxing Authority;
20
(iii) The Company is not delinquent in the payment of any Tax and the
Company has not requested any extension of time within which to file any
Return except for extensions granted as a matter of right;
(iv) The Company (or any member of any affiliated, consolidated,
combined or unitary group of which the Company is or has been a member) has
not granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired;
(v) There is no action, suit or proceeding of which Seller has been
served with process or has otherwise received written notice now pending
and no claim, audit or investigation now pending of which Seller is aware
or, to the knowledge of Seller, any action, suit, claim, audit or
investigation threatened, against or with respect to the Company in respect
of any Tax;
(vi) There are no Liens for Taxes upon the assets of the Company,
except Liens for current Taxes not yet due;
(vii) The Company has not been a member of an affiliated,
consolidated, combined or unitary group or participated in any other
arrangement whereby any income, revenues, receipts, gain or loss of the
Company was determined or taken into account for Tax purposes with
reference to or in conjunction with any income, revenues, receipts, gain,
loss, asset or liability of any other Person; and
(viii) The Company made a timely and valid election to be treated as
an "S corporation" for federal income tax purposes pursuant to Section 1362
of the Code within the meaning of Section 1361(a) of the Code (an "S
CORPORATION"). Such election was effective for the year commencing January
1, 1991. The Company has also made all such elections permitted or required
under analogous provisions of state and local Law; and the Company will
continue to be a valid S Corporation through the Closing.
(b) To Seller's knowledge, SCHEDULE 6.1.9(b) contains a list of all
jurisdictions (whether foreign or domestic) to which any Tax imposed on overall
net income is properly payable by the Company.
6.1.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed on SCHEDULE 6.1.10,
since June 30, 1998, there has not been any event, occurrence, development,
circumstances or state of facts which (a) has had or which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
(b) could reasonably be expected to have constituted a violation of any covenant
of Stockholder or the Company hereunder (including Section 8.1) had such
covenant applied to either of them since June 30, 1998.
6.1.11. CONTRACTS. (a) Except as specifically disclosed in SCHEDULE
6.1.11(a), the Company is not a party to or bound by any of the following
(whether written or oral):
(i) any lease (whether of real or personal property) providing for
annual rentals of $50,000 or more;
21
(ii) other than purchase orders entered into in the Ordinary Course of
Business, any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets (including in terms of quantity and
dollar amount) that provides for either (A) annual payments by the Company
of $25,000 or more or (B) aggregate payments by the Company of $50,000 or
more;
(iii) other than purchase orders entered into in the Ordinary Course
of Business, any sales, distribution or other similar agreement providing
for the sale by the Company or any subsidiary of materials, supplies,
goods, services, equipment or other assets that provides for either (A)
annual payments to the Company of $25,000 or more or (B) aggregate payments
to the Company of $50,000 or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to Indebtedness (in any case, whether
incurred, assumed, guaranteed or secured by any asset);
(vii) any license, franchise or similar agreement;
(viii) any agency, dealer, sales representative, marketing or other
similar agreement;
(ix) any noncompetition agreement limiting the freedom of the Company
to compete in any line of business or geographic area or with any Person;
(x) any agreement with (A) Stockholder or any of Stockholder's
Affiliates, (B) any Person directly or indirectly owning, controlling or
holding with power to vote, 5% or more of the outstanding voting securities
of any of Stockholder's Affiliates, (C) any Person 5% or more of whose
outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote by Stockholder or any of Stockholder's
Affiliates, (D) any director or officer of any of Stockholder's Affiliates
or any "associates" or members of the "immediate family" (as such terms are
respectively defined in Rule 12b-2 and Rule 16a-1 of the Exchange Act) of
any such director or officer, or (E) any director or officer of the Company
or with any "associate" or any member of the "immediate family" (as such
terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange
Act) of any such director or officer;
(xi) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution
in respect of capital stock of the Company;
22
(xii) any management service, consulting or any other similar type of
contract;
(xiii) any warranty, guaranty or other similar undertaking with
respect to contractual performance extended by the Company other than in
the Ordinary Course of Business;
(xiv) any employment, deferred compensation, severance, bonus,
retirement or other similar agreement or plan in effect as of the date
hereof and entered into or adopted by the Company, on the one hand, and to
which any director or officer of the Company or any other employee of the
Company receiving annual compensation of $75,000 or more is a party or who
is otherwise a beneficiary thereof, on the other hand; or
(xv) any other agreement, commitment, arrangement or plan not made in
the Ordinary Course of Business that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in SCHEDULE 6.1.11(a) or any other Schedule to this Agreement or
required to be disclosed pursuant to this Section is, to Seller's knowledge, a
valid and binding agreement of the Company, and is in full force and effect,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles, and neither the Company, nor, to the knowledge of Seller, any other
party thereto is in default or breach in any material respect under the terms of
any such agreement, contract, plan, lease, arrangement or commitment. To the
knowledge of Seller, there is no event, occurrence, condition or act (including
the consummation of the transactions contemplated hereby) which, with the giving
of notice or the passage of time, or the happening of any other event or
condition, could reasonably be expected to become a material default or event of
default thereunder.
(c) SCHEDULE 6.1.11(c) sets forth every grant by the Company in the past
three years of any severance or termination pay in excess of $5,000 to any
employee of the Company receiving annual compensation of $75,000 or more, or any
director or officer of the Company.
6.1.12. INSURANCE COVERAGE. The Company has furnished or otherwise made
available to Buyer a list of, and a true and complete copy of, all insurance
policies and fidelity bonds covering the assets, business, operations,
employees, officers and directors of the Company. To Seller's knowledge, there
is no material claim by the Company pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and the Company has complied in all material respects
with the terms and conditions of all such policies and bonds. Such policies of
insurance and bonds (or other policies and bonds providing substantially similar
insurance coverage) are in full force and effect and are disclosed in SCHEDULE
6.1.12. The Company does not know of any threatened termination of, or premium
increase with respect to, any of such policies or bonds. To Seller's knowledge,
since the last renewal date of any insurance policy, there has not been any
material adverse change in the relationship of the Company with its insurers or
the premiums payable pursuant to such policies.
23
6.1.13. LITIGATION. Except as disclosed in SCHEDULE 6.1.13, there is no
action, suit, investigation, arbitration or administrative or other proceeding
pending in respect of which the Company or Stockholder has been served with
process or has otherwise received written notice or, to the knowledge of the
Company, threatened against or affecting the Company or Stockholder or any of
their respective properties before any court or arbitrator or any Governmental
Authorities which, if determined or resolved adversely to the Company or the
Stockholder, (a) could reasonably be expected to, individually or in the
aggregate, materially and adversely affect the right or ability of the Company
to carry on its business as now conducted or have a Material Adverse Effect, or
(b) which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement and the
Ancillary Agreements to which it will be party at Closing; and Seller does not
know of any valid basis for any such action, proceeding or investigation.
6.1.14. COMPLIANCE WITH LAWS; PERMITS. (a) Except as disclosed in SCHEDULE
6.1.14(a), the Company is not and the Company has not been since the Balance
Sheet Date in violation of any applicable Law or Order, except for such
violations that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) To Seller's knowledge, SCHEDULE 6.1.14(b)(i) sets forth a list of each
government or regulatory license, authorization, permit, consent and approval
held by the Company, issued and held in respect of the Company or required to be
so issued and held to carry on the businesses of the Company as currently
conducted (collectively "PERMITS"). Except as disclosed in SCHEDULE
6.1.14(b)(ii), each such license, authorization, permit, consent and approval is
valid and in full force and effect and will not be terminated or impaired (or
become terminated or impaired) as a result of the transactions contemplated
hereby. The Company is not in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under, any material
license, franchise, permit, consent or approval or similar authorization held by
the Company.
6.1.15. PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except as disclosed in
SCHEDULE 6.1.15(a) and except for inventory disposed of in the Ordinary Course
of Business, the Company has good title to, or in the case of leased property
has valid leasehold interests in, all property and assets (whether real or
personal, tangible or intangible) reflected in the June 1998 Balance Sheet or
acquired after the Balance Sheet Date. None of such property or assets is
subject to any Liens, except for (i) Liens disclosed in the June 1998 Balance
Sheet; (ii) Liens for Taxes not yet due or being contested in good faith (and
for which adequate accruals or reserves have been established on the June 1998
Balance Sheet); (iii) Permitted Liens and (iv) regarding the Premises (as
defined in SCHEDULE 6.1.15(b)), the Permitted Exceptions (as defined in EXHIBIT
D-4 attached hereto)
(b) SCHEDULE 6.1.15(b) sets forth a list of all real property assets owned
or leased by the Company ("REAL PROPERTY"). All such leases of real property are
valid and binding agreements of the Company, have been duly executed and
delivered by the parties thereto and, to Seller's knowledge, are in full force
and effect, except to the extent that their enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally or by general equitable
principles. The Company is a tenant or possessor in good standing under all such
leases of real property and all rents due under such leases have been paid.
There does not exist under any such lease any default or any event which with
notice or lapse of time or both would constitute a default, except for such
defaults that have not and could not reasonably be expected to have,
24
individually or in the aggregate, a Material Adverse Effect. The Company has not
received any written notice of any appropriation, condemnation or like
proceeding, or of any violation of any applicable zoning Law or Order relating
to or affecting the Real Property, and to the Company's knowledge, no such
proceeding has been threatened or commenced.
(c) The assets owned or leased by the Company (including, real, personal,
tangible and intangible property), or which it otherwise has the right to use
(including, real, personal, tangible and intangible property), constitute all of
the assets held for use or used in connection with the business of the Company
and are generally in good operating condition and repair (normal wear and tear
excepted) and are adequate to conduct such businesses as currently conducted.
6.1.16. INTELLECTUAL PROPERTY. (a) SCHEDULE 6.1.16(a) sets forth a list of
all Intellectual Property Rights and all material licenses, sublicenses and
other written agreements as to which the Company or any of its Affiliates is a
party and pursuant to which any Person is authorized to use such Intellectual
Property Right, including the identity of all parties thereto.
(b) Except as disclosed in SCHEDULE 6.1.16(b):
(i) The Company has not since January 1, 1996, been sued or charged in
writing with or been a defendant in any claim, suit, action or proceeding
relating to its business that is either pending or, to the knowledge of the
Company, threatened that, in either case, has not been finally terminated
prior to the date hereof and that involves a claim of infringement by the
Company of any trademark, service xxxx, trade name, invention, patent,
trade secret, copyright, know-how or any other similar type of proprietary
intellectual property right of any other Person or continuing infringement
by any other Person of any Intellectual Property Rights, and Seller does
not have any knowledge of any basis for such claim of infringement or of
any continuing infringement by any other Person of any Intellectual
Property Rights;
(ii) No Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use
thereof by the Company or restricting the licensing thereof by the Company
to any Person; and
(iii) The Company has not entered into any agreement to indemnify any
other Person against any charge of infringement of any trademark, service
xxxx, trade name, invention, patent, trade secret, copyright, know-how or
any other similar type of proprietary intellectual property right.
6.1.17. ENVIRONMENTAL MATTERS. (a) Except as disclosed in SCHEDULE 6.1.17
and except for any matters which otherwise could not reasonably be expected ,
individually or in the aggregate, to have a Material Adverse Effect:
(i) Constituents of Concern have not been generated, recycled, used,
treated or stored on, transported to or from, or released or disposed on,
the Company Property or, to the knowledge of Seller, any property adjoining
or adjacent, except in compliance with Environmental Laws;
25
(ii) the Company is in compliance with Environmental Laws and the
requirements of permits issued under such Environmental Laws with respect
to the Company Property;
(iii) There are no Environmental Claims (a) which are pending against
the Company or any Company Property and in respect of which the Company has
been served with process or has otherwise received written notice, or, (b)
to Seller's knowledge, which are threatened against the Company or any
Company Property;
(iv) There are no facts, circumstances, conditions or occurrences
regarding the Company' past or present business or operations or any
Company Property, or to the knowledge of Seller, any property adjoining any
Company Property, that could reasonably be expected to form the basis of an
Environmental Claim against the Company, or any of the Company Property or
assets, or to cause any currently owned, leased, used, operated or occupied
Company Property or assets to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law;
(v) There are not now and, to the knowledge of the Company, there have
never been any underground storage tanks or sumps located on any Company
Property or, to the knowledge of Seller, located on any property that
adjoins or is adjacent to any Company Property;
(vi) Neither the Company nor any Company Property is listed or
proposed for listing on the National Priorities List under CERCLA, or
CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign
list of sites requiring investigation or clean-up;
(vii) There are no Environmental Permits that are nontransferable or
require consent, notification or other action to remain in full force and
effect following the consummation of the transactions contemplated hereby;
and
(viii) The Company does not have any liability under any Environmental
Law (including an obligation to remediate any Environmental Condition
whether caused by the Company or any other Person) which could reasonably
be expected to have a Material Adverse Effect.
(b) Except as disclosed on SCHEDULE 6.1.17(b) there has been no
environmental investigation, study, audit, test, review or other analysis
commenced or conducted by or on behalf of the Company (or by a third party of
which the Company has knowledge) in relation to the current or prior business of
the Company, or any property or facility currently or, to the knowledge of the
Company, previously owned or leased by the Company, which has not been disclosed
or delivered to Buyer prior to the date hereof.
(c) The Company does not own or lease or has not owned or leased any
property, and does not conduct and has not conducted any operations, in New
Jersey or Connecticut.
26
(d) For purposes of this Section, the terms "COMPANY" (including the use of
such terms in the term "COMPANY PROPERTY") will include any entity which is, in
whole or in part, a predecessor of the Company.
6.1.18. PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 6.1.18(a) sets forth a
list of all Benefit Plans with respect to which the Company or any ERISA
Affiliate has or has had in the six years preceding the date hereof any
obligation or liability or which are or were in the six years preceding the date
hereof maintained, contributed to or sponsored by the Company or any ERISA
Affiliate for the benefit of any current or former employee, officer or director
of the Company or any ERISA Affiliate. With respect to each Benefit Plan subject
to ERISA, the Company has delivered to Buyer a true and complete copy of each
such Benefit Plan (including all amendments thereto) and a true and complete
copy of each material document (including all amendments thereto) prepared in
connection with each such Benefit Plan including, without limitation, (i) a copy
of each trust or other funding arrangement, (ii) each summary plan description
and summary of material modifications, and (iii) the most recently filed IRS
Form 5500 for each such Benefit Plan, if any. The Company does not have any
express or implied commitment to create, incur liability with respect to or
cause to exist any employee benefit plan or to modify any Benefit Plan, other
than as required by Law.
(b) Except as disclosed in SCHEDULE 6.1.18(b), none of the Plans is a plan
that is or has ever been subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code. None of the Benefit Plans is (i) a "multiemployer plan"
as defined in Section 3(37) of ERISA, (ii) a plan or arrangement described under
Section 4(b)(5) or 401(a)(1) of ERISA, or (iii) a plan maintained in connection
with a trust described in Section 501(c)(9) of the Code. Except as disclosed in
SCHEDULE 6.1.18(b), and except for benefits provided in the Company's 401(k)
Plan, none of the Benefit Plans provides for the payment of separation,
severance, termination or similar-type benefits to any person or provides for
or, except to the extent required by Law, promises retiree medical or life
insurance benefits to any current or former employee, officer or director of the
Company.
(c) Except as disclosed in SCHEDULE 6.1.18(c), each Benefit Plan is in
compliance in all material respects with, and has always been operated in all
material respects in accordance with, its terms and the requirements of all
applicable Law and the Company and the ERISA Affiliates have satisfied in all
material respects all of their statutory, regulatory and contractual obligations
with respect to each such Benefit Plan. No legal action, suit or claim is
pending or, to the knowledge of the Company, threatened with respect to any
Benefit Plan (other than claims for benefits in the ordinary course) and no fact
or event exists that could reasonably be expected to give rise to any such
action, suit or claim.
(d) The Company's 401(k) Plan has been established by the Company pursuant
to its adoption of a prototype plan and adoption agreement sponsored and
prepared by Great-West Life & Annuity Insurance Company. The Company has not
applied for a determination letter from the Internal Revenue Service that this
Plan is qualified and exempt from taxation under Sections 401(a) and 501(a) of
the Code. The form of the prototype plan has been determined by the Internal
Revenue Service to be in compliance with the applicable provisions of the Code
and a copy of that opinion has been delivered to Buyer. To Seller's knowledge,
no fact or occurrence has occurred since the date of the above-referenced
opinion to
27
adversely affect the qualified or exempt status of any Benefit Plan or related
trust, including the Company's 401(K) plan.
(e) There has been no non-exempt prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any Benefit
Plan. Neither the Company nor any ERISA Affiliate has incurred any material
liability for any excise tax arising under the Code with respect to a Benefit
Plan and no fact or event exists which could reasonably be expected to give rise
to such liability.
(f) All material contributions, premiums or payments required to be made
with respect to any Benefit Plan have been made on or before their due dates.
For completed plan years of the Benefit Plans, all such contributions have been
fully deducted for income tax purposes and no such deduction has been challenged
or disallowed by any Government Authorities, and no fact or event exists which
could give rise to any such challenge or disallowance.
(g) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any ERISA Affiliate
thereof relating to, or change in employee participation or coverage under, any
Benefit Plan that would increase materially the expense of maintaining such
Benefit Plan above the level of the expense incurred in respect thereto for the
most recent fiscal year ended prior to the date hereof.
(h) Except as disclosed in SCHEDULE 6.1.18(h) or in this Agreement or the
Ancillary Agreements, no employee or former employee of the Company or any ERISA
Affiliate thereof will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced such benefit (including acceleration of
vesting or exercise of an incentive award) as a result of the transactions
contemplated hereby.
(i) Except as disclosed in SCHEDULE 6.1.18(i), no current or former
employee of the Company or any ERISA Affiliate thereof holds any option to
purchase shares of the Company.
6.1.19. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as disclosed in
SCHEDULE 6.1.19, neither Stockholder, nor, to Seller's knowledge, any other
officer or director of the Company possesses, directly or indirectly, any
ownership interest in, or is a director, officer or employee of, any Person
which is a supplier, customer, lessor, lessee, licensor, developer, competitor
or potential competitor of the Company. Ownership of securities of a company
whose securities are registered under the Exchange Act of 2% or less of any
class of such securities will not be deemed to be an ownership interest for
purposes of this Section 6.1.19.
6.1.20. CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS. To Seller's knowledge,
the relationships of the Company with its customers, suppliers and employees are
good commercial working relationships. Except as disclosed in SCHEDULE 6.1.20,
none of the Company's material customers or material suppliers or employees
receiving annual compensation in excess of $75,000 has canceled, terminated or
otherwise materially altered or notified the Company in writing of any intention
or otherwise threatened to cancel, terminate or materially alter its
relationship with the Company effective prior to, as of, or within one year
after, the Closing. As of the date hereof, there has not been, and Seller has no
reason to believe that there will be, any
28
change in relations with material customers, suppliers or employees of the
Company as a result of the transactions contemplated by this Agreement.
6.1.21. OTHER EMPLOYMENT MATTERS. (a) The Company is in compliance with all
Laws and Orders respecting employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be so
in compliance could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and has not, and is not, engaged in any
unfair labor practice; no unfair labor practice complaint against the Company is
pending of which the Company has been served with process or has otherwise
received written notice before the National Labor Relations Board; there is no
labor strike, dispute, slowdown or stoppage actually pending or to Seller's
knowledge threatened against or involving the Company; the Company is not party
to any collective bargaining agreement and no collective bargaining agreement is
currently being negotiated by the Company; to the knowledge of Seller, no
representation question exists respecting employees of the Company; and, except
as specifically set forth on SCHEDULE 6.1.21(a), no claim in respect of the
employment of any employee has been asserted and is currently pending of which
the Company has been served with process or has otherwise received written
notice or, to the knowledge of Seller threatened, against the Company.
(b) Seller has delivered to Buyer a complete and accurate list, attached
hereto as SCHEDULE 6.1.21(b), of each employee and director of the Company,
together with each such employee's and director's job description, salary or
hourly rate of compensation, date of hire, and all bonuses and any other amounts
to be paid by the Company to employees of the Company at or in connection with
the Closing ("BONUSES").
(c) No current employee or current director of the Company or, to Seller's
knowledge, any former employee or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee or
director and any other Person that in any way adversely affected, affects, or
could reasonably be expected to affect the performance of his duties as an
employee or director of the Company, or the ability of the Company to conduct
its business.
(d) SCHEDULE 6.1.21(d) contains a complete and accurate list of the
following information for each retired employee or director of the Company, or
their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefits, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
6.1.22. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 6.1.22, all of
the accounts receivable reflected on the June 1998 Balance Sheet (net of the
applicable reserves set forth on the June 1998 Balance Sheet) and all accounts
receivable which have arisen since the Balance Sheet Date (net of any immaterial
additional applicable reserves established since the Balance Sheet Date in the
Ordinary Course of Business) are valid and enforceable claims, and the goods and
services sold and delivered which gave rise to such accounts receivable were
sold and delivered in conformity with the applicable purchase orders, agreements
and specifications. To Seller's knowledge, such accounts receivable are subject
to no defenses, offsets or recovery in whole or in part by the Persons whose
purchase gave rise to such accounts receivable or by third parties and are fully
collectible in the Ordinary Course of Business without resort to legal
29
proceedings, except to the extent of the amount of the applicable reserve for
doubtful accounts reflected in the June 1998 Balance Sheet and reasonable
additional applicable reserves for doubtful accounts established since the
Balance Sheet Date in the Ordinary Course of Business.
6.1.23. INVENTORY. Except as set forth in SCHEDULE 6.1.23, all inventories
reflected on the June 1998 Balance Sheet (net of the applicable reserves set
forth on the June 1998 Balance Sheet) and all inventories which have been
acquired or produced since the Balance Sheet Date (net of any reasonable
additional applicable reserves established since the Balance Sheet Date in the
Ordinary Course of Business) are in good condition, conform in all material
respects with the applicable specifications and warranties of the Company, are
not obsolete, and are useable or saleable in the Ordinary Course of Business.
The amount and mix of items in the inventories of supplies, in-process and
finished products are, and will be at the Closing Date, consistent with the past
business practices of the Company.
6.1.24. MILLENNIUM COMPLIANCE. To the knowledge of Seller, SCHEDULE 6.1.24
describes the measures that have been implemented to determine the extent to
which the computer systems used by the Company in its business (the "COMPUTER
SYSTEMS") are not in Millennium Compliance, and the material details of any
program undertaken with a view towards causing the Computer Systems to achieve
Millennium Compliance.
6.1.25 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Stockholder or the Company who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement or any of the
Ancillary Agreements.
VII. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and Stockholder as of the date
hereof and the Closing as follows:
7.1. CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Buyer has all corporate power required to carry
on its business as now conducted. To Buyer's knowledge, Buyer has all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted.
7.2. AUTHORIZATION; ENFORCEABILITY. The execution, delivery and performance
by Buyer of this Agreement are within, Buyer's powers and have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes a valid
and binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except to the extent that their enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
7.3. GOVERNMENTAL AUTHORIZATION. To the Buyer's knowledge, except as may be
required under the HSR Act, the execution, delivery and performance by Buyer of
this Agreement require no action by or in respect of, or filing with, any
Governmental Authorities.
30
7.4. NON-CONTRAVENTION. The execution, delivery and performance by Buyer of
this Agreement will not violate the certificate of incorporation or bylaws of
Buyer, or any applicable Law or Order.
7.5. LITIGATION. Except as disclosed in SCHEDULE 7.5, there is no action,
suit, investigation, arbitration or administrative or other proceeding pending
in respect of which Buyer has been served with process or has otherwise received
written notice or, to the knowledge of Buyer, threatened against or affecting
Buyer, or any of Buyer's properties before any court or arbitrator or any
Governmental Authorities which, if determined or resolved adversely to Buyer,
could, individually or in the aggregate, reasonably be expected to materially
and adversely affect the right or ability of Buyer to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements to
which the Company will be a party after the Closing; and Buyer knows of no valid
basis for any such action, suit, investigation or proceeding.
7.6. CONSENTS. Except as disclosed on SCHEDULE 7.6, the execution, delivery
and performances by Buyer of this Agreement will not require the consent of or
notice to any Person.
7.7. FINDERS' FEES. Except for Xxxxxxxx Xxxx & Xxxxxx, X.X., Xxxxxxxx
Group, L.P. and Xxxxxx & Company, LLC, whose fees and expenses (including
transaction fees) will be paid by Buyer, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Buyer who might be entitled to any fee or commission from
Stockholder, the Company, Buyer or any of Buyer's Affiliates upon consummation
of the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
7.8. PRECISION STRUCTURE. Effective as of the Closing, Buyer (a) will own
of record, directly or indirectly, all of the issued and outstanding capital
stock of Mid State Machine Products and Galaxy Industries Corporation and (b)
will own, indirectly the Purchased Assets and the other businesses acquired with
the financing contemplated by Section 9.1.11.
VIII. CERTAIN COVENANTS
8.1. CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
this Agreement to the Closing Date, the Company will conduct its operations in
the Ordinary Course of Business (including managing its working capital in
accordance with its past practice and custom), except as expressly permitted
under this Agreement, and will use reasonable efforts to: preserve intact its
business organizations, keep available the services of its officers and
employees and maintain its relationships and goodwill with licensors, suppliers,
distributors, customers, landlords, employees, agents and others having business
relationships with it. During the period from the date of this Agreement to the
Closing, the Company will confer with Buyer concerning operational matters of a
material nature and report periodically to Buyer concerning their respective
businesses, operations and finances and will deliver all Monthly Financial
Statements to Buyer not previously delivered to Buyer on or prior to the date
hereof. Without limiting the generality or effect of the foregoing, prior to the
Closing Date, except with the prior written consent of Buyer, the Company will
not (except to the extent otherwise expressly permitted under this Agreement):
31
(a) Amend or modify its articles of incorporation, bylaws or any other
organizational document from its form on the date of this Agreement;
(b) Change any salaries or other compensation of, or pay any bonuses to any
director, officer, employee or stockholder of the Company, or enter into any
employment, severance, or similar agreement with any director, officer,
stockholder or employee of the Company, provided, however, that the compensation
of employees of the Company receiving annual compensation of less than $75,000
may be changed in the Ordinary Course of Business;
(c) Adopt or increase any benefits under any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any of its employees, other than matching
contributions by the Company under the Company's 401(k) plan in an amount not to
exceed 100% of each employee's contribution not in excess of $80,000 in the
aggregate;
(d) Enter into any contract or commitment except contracts and commitments
(for capital expenditures or otherwise) in the Ordinary Course of Business;
(e) Incur, assume or guaranty (i) Indebtedness to employees of Seller or
any of its Affiliates or (ii) other Indebtedness, except, in the case of clause
(ii), incurred in the Ordinary Course of Business;
(f) Enter into any transaction or commitment relating to the assets or the
business of the Company (other than purchase orders entered into in the Ordinary
Course of Business) which, individually or in the aggregate, could reasonably be
expected to be material to the Company, or cancel or waive any claim or right of
substantial value which, individually or in the aggregate, could reasonably be
expected to be material to the Company, or amend any term of any Company
Securities;
(g) Other than to the extent necessary to pay the unpaid and/or estimated
Taxes of Stockholder imposed in connection with the income or operations of
Seller between January 1, 1998 and the Closing Date (other than Taxes which
constitute a breach of any representation or warranty contained in this
Agreement), set aside or pay any dividend or make any other distribution with
respect to any shares of capital stock of the Company or repurchase, redeem or
otherwise acquire directly or indirectly, any outstanding shares of capital
stock or other securities of, or other ownership interests in as of the Closing
Date, the Company, which Seller believes, in its reasonable good faith judgment,
would, in the aggregate, result in a reduction in the Company's net worth to
below the Base Net Worth;
(h) Make any change in accounting methods or practices (including changes
in accruals or reserve amounts (with respect to amounts, such prior written
consent of Buyer not to be unreasonably withheld or delayed) or policies),
except as otherwise expressly set forth in this Agreement and except for changes
in accounting methods instituted, prescribed, utilized, and/or adopted by Ernst
& Young, LLP in conducting the Pre-Closing Audits;
(i) Issue or sell any Company Securities or make any other changes in its
capital structure, including the grant of any stock option or other right to
purchase shares of capital stock of the Company;
32
(j) Sell, lease or otherwise dispose of any material asset or property
(such prior written consent of Buyer not to be unreasonably withheld or
delayed);
(k) Write-off as uncollectible any notes or accounts receivable or any
other asset, except write-offs in the Ordinary Course of Business charged to
applicable reserves; write-off, write-up or write-down any other asset of the
Company, except write-ups and write-downs in the Ordinary Course of Business and
except for employee compensation or bonus paid by canceling Indebtedness listed
under item no. 6 on SCHEDULE 2.2(c); or alter its customary time periods for
collection of accounts receivable or payments of accounts payable;
(l) Create or assume any Lien other than a Permitted Lien;
(m) Make any loan, advance or capital contributions to or investment in any
Person;
(n) Terminate or close any material facility, business or operation of the
Company;
(o) Intentionally cause or suffer any damage, destruction or other casualty
loss (whether or not covered by insurance) affecting the business or assets of
the Company which, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect;
(p) Intentionally cause any other event, occurrence, development or state
of circumstances or facts which, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect; or
(q) Agree to do any of the foregoing.
Nothing in this Section 8.1 will be construed to prohibit the Stockholder from
purchasing at the book value thereof between the date hereof and the Closing
Date the property listed on SCHEDULE 2.2(c).
8.2. EXCLUSIVE DEALING. During the period from the date of this Agreement
to the earlier of the Closing Date and the termination of this Agreement in
accordance with its terms, Stockholder will not and will cause his Affiliates
(including the Company) and their respective representatives (including
advisors, agents, attorneys, directors, employees and consultants) not to, take
any action to, directly or indirectly, encourage, initiate, solicit or engage in
discussions or negotiations with, or provide any information to any Person,
other than Buyer (and its affiliates and representatives), concerning any
purchase of any capital stock of the Company or any asset purchase, merger or
similar transaction involving the Company. Stockholder will disclose to Buyer
the existence or occurrence of any proposal or contract which he or any of his
Affiliates (including the Company) or any of their respective representatives
described above may receive in respect of any such transaction as well as the
identity of the Person from whom such a proposal or contract is received.
8.3. REVIEW OF THE COMPANY; CONFIDENTIALITY. (a) Buyer may, prior to the
Closing Date, through one or more representatives of the Company designated by
the Company
33
in writing, review the properties, books and records of the Company and their
financial and legal condition to the extent it in good xxxxx xxxxx necessary or
advisable to familiarize itself with such properties and other matters. The
Company will permit Buyer and its representatives to have, after the date of
execution of this Agreement through the representative or representatives
designated pursuant to the immediately preceding sentence, full access (at
mutually convenient times agreed upon in advance) to the premises and to all the
respective books and records of the Company and to cause the officers of the
Company to furnish Buyer through such representative with such financial and
operating data and other information with respect to the business and properties
of the Company as Buyer may from time to time reasonably request. The Company
will deliver or cause to be delivered to Buyer such additional instruments,
documents, certificates and opinions as Buyer may reasonably request for the
purpose of verifying the information set forth in this Agreement or on any
Schedule attached hereto and consummating or evidencing the transactions
contemplated by this Agreement. Any review or access by or of Buyer described in
this Section 8.3(a) will be subject to the condition that such review and access
not unreasonably interfere with the conduct of the business of Seller.
(b) Prior to the Closing, the parties will be bound by the provisions of
the section entitled "Confidentiality" of the letter of intent between Seller
and Buyer dated November 4, 1998.
8.4. REASONABLE EFFORTS. Seller and Buyer will cooperate and use their
respective reasonable efforts to take, or cause to be taken, all appropriate
actions, and to make, or cause to be made, all filings necessary, proper or
advisable under applicable laws and regulations (including, without limitation,
the filing of Notification and Report Forms under the HSR Act with the Federal
Trade Commission and the Antitrust Division of the Department of Justice) to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable efforts to obtain,
prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company as are necessary for consummation of the
transactions contemplated by the Agreement and to fulfill the conditions to the
sale contemplated hereby. Notwithstanding any other provision hereof, (i) in no
event will Buyer or any of its Affiliates (including the Company after the
Closing) be required to enter into or offer to enter into any divestiture,
hold-separate, business limitation or similar agreement or undertaking in
connection with this Agreement or the transactions contemplated hereby and (ii)
in no event will Buyer, Stockholder or any of their respective Affiliates
(including the Company after the Closing) be required to make any payment in
connection with any consent or approval or condition to Closing set forth in any
subsection of Sections 9.1 or 9.2 which it is necessary or advisable for
Stockholder, the Company or Buyer to obtain or satisfy in order to consummate
the transactions contemplated by this Agreement.
8.5. TRANSFER OF EMPLOYEES AND BENEFIT PLANS. As of the Closing Date:
(a) Employees of Seller with respect to the Business immediately prior to
the Closing Date whose names are listed on SCHEDULE 8.5(a) will be offered
employment with Buyer or an Affiliate of Buyer with each such offer to include
(i) a substantially equivalent title, level of responsibility and compensation
as each such employee had as an employee of Seller on the date hereof and (ii)
the benefits listed on SCHEDULE 8.5(b), provided that this Section 8.5 will not
be
34
construed to prohibit Buyer from modifying or eliminating any such benefits
after the Closing Date other than benefits provided to Executive under the
Employment Agreement;
(b) Other than with respect to the SCHEDULE 8.8 Individuals, Buyer will
assume all obligations relating to the payment of (i) salary, wages and benefits
reflected on the Closing Date Balance Sheet as finally determined in accordance
with this Agreement (to the extent not discharged prior to the Closing Date) or
otherwise arising or accruing after the Closing Date, provided that the
existence thereof does not constitute a breach of any representation, warranty
or covenant of Seller hereunder, in each case with respect to any employee of
Seller who accepts employment with Buyer (the "TRANSFERRED EMPLOYEES"), and (ii)
severance payments and other severance benefits to which the Transferred
Employees become entitled because of actual termination of their employment with
and by Buyer or an Affiliate of Buyer after they become employees of Buyer,
PROVIDED, HOWEVER, that Buyer will provide all COBRA benefits under applicable
Law for all of the SCHEDULE 8.8 Individuals.
(c) Buyer will assume and discharge the obligations of Seller under each of
the agreements listed on SCHEDULE 6.1.11(a)(xiv) to which Seller is party;
(d) Buyer will assume sponsorship of all Benefit Plans and Seller will take
all action necessary to transfer sponsorship of all Benefit Plans to Buyer as of
the Closing; and
(e) Buyer will cause the Company's health plan, or any health plan it
adopts to replace the Company's health plan, to provide COBRA benefits or
similar benefits required by applicable Law for any former employee of the
Company (and such former employee's eligible beneficiaries) who, on the Closing
Date, is receiving or is eligible to elect COBRA or such similar benefits and
will be responsible for providing COBRA notices or similar notices required by
applicable Law to any employee of the Company who terminates employment on or
after the Closing Date and to such employee's eligible beneficiaries.
Nothing contained in this Agreement will confer upon any Transferred Employee,
or any legal representative thereof, any rights or remedies, including, without
limitation, any right to employment for any specified period, of any nature or
kind whatsoever, under or by reason of this Agreement (other than as provided in
the Employment Agreement). Notwithstanding anything to the contrary contained in
this Agreement, neither Buyer nor any Affiliate of Buyer will be required to
continue any particular Benefit Plan after the Closing Date for the Transferred
Employees, and any such Benefit Plan may be amended or terminated in accordance
with its terms and any applicable Law. In the event the Benefit Plans are
terminated by Buyer, Buyer will replace such Benefit Plans with a benefit
program for Transferred Employees, and such Transferred Employees will be
eligible to participate in such benefit program and will receive full credit for
their service with Seller and Buyer for eligibility and vesting purposes with
respect to such benefit program. In addition, at any time prior to the Closing
Date, Seller may, with the prior written consent of Buyer, which will not be
unreasonably withheld or delayed, distribute to its employees a written notice
announcing the existence of this Agreement and the transactions contemplated
hereby, the Closing Date, and the identity of the Buyer.
35
8.6 BOOKS AND RECORDS.
(a) From and after the Closing Date, Buyer will give Seller's
representatives reasonable access to such documentation and information and
reasonable access to and cooperation of employees which Seller may reasonably
require (i) to prepare and file Tax returns and to respond to any issues which
may arise with respect to Taxes for which Sellers or the Stockholder are
responsible to the extent relating to the Purchased Assets or Assumed
Liabilities, (ii) with respect to any Retained Liabilities; and (iii) to defend
any claim which Seller is required to defend pursuant to this Agreement or in
connection with the operation of the Business prior to the Closing Date. Subject
to the other provisions of this Section 8.6(a), Buyer will retain and maintain
at the principal place of business of the Company a copy of all of the books,
records, and other documentation which are delivered or transferred to Buyer
under the terms of this Agreement, including without limitation all of all of
the same described in Section 2.1(a)(x). Prior to the fourth anniversary of the
Closing Date, Buyer will give Seller at least ten days prior written notice of
Buyer's intention to dispose of any books, records or other documentation which
are delivered to Buyer under the terms of this Agreement, and Seller will have
the opportunity to obtain possession, at its own expense, of any such books,
records or documentation prior to Buyer's disposition thereof. In the absence of
bad faith or willful misconduct, Buyer will have no liability arising out of or
in connection with its retention and handling of such records.
(b) From and after the Closing Date, Seller will give Buyer's
representatives reasonable access to such documentation, information and
reasonable access to and cooperation of the Stockholder and other employees of
Seller which Buyer may reasonably require (i) to prepare and file tax returns
and respond to any issues which may arise with respect to Taxes for which Buyer
is responsible to the extent relating to the Purchased Assets or Assumed
Liabilities or (ii) to defend any claim which Buyer is required to defend
pursuant to this Agreement or in connection with the operation of the Business
after the Closing Date. Prior to the fourth anniversary of the Closing Date,
Seller will give Buyer at least ten days prior written notice of Seller's
intention to dispose of any books, records or other documentation contemplated
by this Section 8.6(b), and Buyer will have the opportunity to obtain
possession, at its own expense, of any such books, records or documentation
prior to Seller's disposition thereof. In the absence of bad faith or willful
misconduct, Seller will have no liability arising out of or in connection with
its retention and handling of such records.
8.7 BULK TRANSFER LAWS. Buyer hereby waives compliance by Seller with the
provisions of any Laws of any jurisdiction relating to bulk transfers which may
be applicable in connection with the transfer of the Purchased Assets to Buyer
("BULK TRANSFER LAWS"), and no representation, warranty or covenant of
Stockholder contained in this Agreement will be deemed to have been breached as
a result of such noncompliance.
8.8 NON-COMPETITION.
(a) During the Covenant Period, Seller will not promote, participate or
engage in any business which is competitive with the Business of Buyer or any
Affiliate of Buyer;
(b) During the Covenant Period, Seller will not directly or indirectly
solicit, canvass or approach any Person who, to the knowledge of Seller, was
provided with products or
36
services by Seller at any time prior to the Closing Date, to offer that Person
products or services similar to or derivative of products or services currently
provided or previously provided at any time within the two year period preceding
the Closing Date or prior to the expiration of the Covenant Period, in each
case, by Buyer or any Affiliate of Buyer or at any time prior to the Closing
Date, by Seller.
(c) During the Covenant Period, Seller will not directly or indirectly
solicit, canvass or approach any Person who, to the knowledge of Seller,
provided products or services to Buyer or any Affiliate of Buyer at any time
during the two years before the Closing Date or prior to the expiration of the
Covenant Period to endeavor to cause such Person to cease providing products or
services to Buyer or any Affiliate of Buyer.
(d) During the Covenant Period, Seller will not directly or indirectly
employ, solicit or entice away any Board of Directors member, management
committee member, director, officer or employee of Buyer or any other Person
directly or indirectly controlled by Buyer, other than the current employees of
Seller identified on SCHEDULE 8.8.
8.9 COLLECTION OF PAYMENTS. Following the Closing: (a) Seller will
promptly, and in any event, not later than seven days following receipt, forward
to Buyer any payments received by Seller with respect to any of the Purchased
Assets, and any checks, drafts or other instruments payable to Seller will, when
so delivered, bear all endorsements required to effectuate the transfer of the
same to Buyer, (b) Seller will promptly forward to Buyer any mail or other
communications received by Seller relating to the Purchased Assets or the
Assumed Liabilities, (c) Buyer will promptly, and in any event, not later than
seven days following receipt, forward to Seller any payments received by Buyer
with respect to any of the Excluded Assets, and any checks, drafts or other
instruments payable to Buyer shall, when so delivered, bear all endorsements
required to effect the transfer of the same to Seller and (d) Buyer will
promptly forward to Seller any mail or other communications received by Buyer
relating to the Excluded Assets or the Retained Liabilities.
8.10 ACCOUNTS RECEIVABLE. From and after the Closing Date, Seller will use
reasonable efforts to assist Buyer in the collection of Accounts Receivable,
and, promptly after receipt of payment by Seller in respect of any Accounts
Receivable, Seller will pay to Buyer or its designee the full amount of such
payment.
8.11 USE OF NAMES. On and after the Closing Date, Seller will discontinue
all use of the name "General Automation, Inc." alone or in any combination of
words for any product or service and will as promptly as possible, but in no
event later than 30 days after the Closing Date, eliminate such names from all
signs, purchase orders, invoices, sales orders, packaging stock, labels,
letterheads, shipping documents and other materials used by Seller.
8.12 PRE-CLOSING AUDITS. Seller will permit Ernst & Young LLP to conduct
and complete prior to Closing an audit of the Company's financial statements
(including balance sheet and statements of income, retained earnings and cash
flows) at the expense of Buyer, for the fiscal years ended December 31, 1996,
1997 and 1998 (the "AUDITED FINANCIAL STATEMENTS") in accordance with GAAP
(including the issuance of reports thereon by such certified public accountants)
(collectively, the "PRE-CLOSING AUDITS") and to deliver the Audited Financial
Statements (together with the reports thereon by such certified public
accountants) with
37
copies thereof to Seller and Buyer upon completion thereof. Seller will,
directly or through its representatives, provide such access to the books and
records of the Company (including accountants' work papers) and to employees and
other representatives of the Company as is necessary or advisable in the good
faith judgment of Buyer and as requested by Buyer in good faith to complete the
Pre-Closing Audits; provided that such activities will not unreasonably
interfere with the operations of the Company in the Ordinary Course of Business.
Prior to the Closing, Seller will keep the Audited Financial Statements
confidential in accordance with Section 8.3(b) and will not copy or otherwise
use the Audited Financial Statements other than as expressly permitted by this
Agreement. Notwithstanding anything to the contrary contained in the immediately
preceding sentence, Seller may retain possession of the Audited Financial
Statements without restriction on the use thereof (a) if the Closing fails to
occur because of any of the conditions to Closing set forth in Section 9.1.6,
Section 9.1.11 or in any subsection of Section 9.2 (other than Sections 9.2.3 ,
9.2.4 and 9.2.8) has not been satisfied prior to the Drop Dead Date; or (b) if
the Closing fails to occur because any of the conditions to Closing set forth in
Sections 9.1.2, 9.1.3, 9.1.8, 9.1.10, 9.1.12, 9.1.13, 9.2.3, 9.2.4 or 9.2.8 has
not been satisfied prior to the Drop Dead Date, PROVIDED, HOWEVER, that in the
case of this clause (b), Seller shall have paid Buyer or its designee an
aggregate of $25,000.
8.13 SATISFACTION AND TERMINATION OF EQUITY ARRANGEMENTS. On or prior to
the Closing Date, Seller will terminate all equity-based plans or agreements
listed in any of the Schedules attached hereto.
8.14 FURTHER ASSURANCES. From time to time, as and when requested by any
party hereto and subject to Section 8.4, the other parties will execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and will take, or cause to be taken, all such further or other
actions, as the requesting party may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement.
IX. CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the Closing are subject to the satisfaction of the following
conditions:
9.1.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. (a) The
representations and warranties of Seller made in this Agreement will be true and
correct in all respects (or, if any such representation is not expressly
qualified by "materiality," "Material Adverse Effect" or words of similar
import, then in all material respects) as of the date hereof and as of the
Closing, as though made as of the Closing; (b) Seller shall have performed and
complied with all terms, agreements and covenants contained in this Agreement
required to be performed or complied with by Seller on or before the Closing
Date; (c) Seller shall have delivered to Buyer a certificate of Seller's Chief
Executive Officer, dated the Closing Date, confirming the foregoing and such
other evidence of compliance with Seller's obligations as Buyer may reasonably
request; and (d) Seller shall have delivered to Buyer a certificate from its
Secretary or Assistant Secretary certifying as to the due adoption of
resolutions of the Board of Directors of Seller authorizing the execution of
this Agreement and the taking of any and all actions deemed necessary or
advisable to consummate the transactions contemplated herein.
38
9.1.2. NO INJUNCTION, ETC. No provision of any applicable law or regulation
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
9.1.3. NO PROCEEDINGS. No proceeding challenging this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby or
seeking to prohibit, alter, prevent or materially delay the Closing or seeking
damages will have been instituted by any Person (other than Buyer or the
Company) before any court, arbitrator or Governmental Authorities and be
pending.
9.1.4. REQUIRED FILINGS. All actions by or in respect of or filings by the
Company or Stockholder with any Person required to permit the consummation of
the Closing shall have been taken, made or obtained.
9.1.5. OPINION OF COUNSEL. Buyer shall have received the opinion of
Xxxxxxxxx & Xxxxxxxxxx, counsel to the Company and Stockholder, dated the
Closing Date, substantially in the form attached hereto as EXHIBIT F, together
with the Reliance Letters to the Lenders.
9.1.6. DUE DILIGENCE. Buyer shall have completed, or caused to be completed
by its attorneys, accountants and other representatives, to its reasonable and
good faith satisfaction, business, legal, environmental and accounting due
diligence investigations and reviews of each of the Company.
9.1.7. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall have
been executed and delivered by the parties thereto other than Buyer.
9.1.8. THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All consents,
approvals or waivers, if any, disclosed on any Schedule attached hereto or
otherwise required in connection with the consummation of the transactions
contemplated by this Agreement shall have been received. All of the consents,
approvals, authorizations, exemptions and waivers from Governmental Authorities
that will be required in order to enable Buyer to consummate the transactions
contemplated hereby shall have been obtained.
9.1.9. FIRPTA. Seller shall have furnished to Buyer, on or prior to the
Closing Date, a non-foreign person affidavit required by Section 1445 of the
Code.
9.1.10. NO MATERIAL ADVERSE CHANGE. Prior to the Closing, no event shall
have occurred which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.
9.1.11. FINANCING. Buyer shall have obtained financing for the payment of
the Aggregate Closing Consideration on terms satisfactory to it in its sole
discretion.
9.1.12. HSR ACT. Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby will have expired or been terminated.
39
9.1.13. PRE-CLOSING AUDITS. The Pre-Closing Audits shall have been
completed and the Audited Financial Statements shall have been delivered to
Buyer and will not in the aggregate reflect any materially adverse difference
from the applicable Compiled Statements.
9.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
consummate the Closing are subject to the satisfaction of the following
conditions:
9.2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. (a) The
representations and warranties of Buyer made in this Agreement will be true and
correct in all respects (or, if any such representation is not expressly
qualified by "materiality," "Material Adverse Effect" or words of similar
import, then in all material respects) as of the date hereof and as of the
Closing, as though made as of the Closing; (b) Buyer shall have performed and
complied with all terms, agreements and covenants contained in this Agreement
required to be performed or complied with by Buyer on or before the Closing
Date; and (c) Buyer shall have delivered to Seller a certificate of Buyer's
Chief Executive Officer, dated the Closing Date, confirming the foregoing and
such other evidence of compliance with its obligations as Seller may reasonably
request.
9.2.2. BUYER'S CERTIFICATE. Buyer shall have delivered to Seller a
certificate from its Secretary or Assistant Secretary certifying as to the due
adoption of resolutions adopted by the Board of Directors (or equivalent body)
of Buyer authorizing the execution of this Agreement and the taking of any and
all actions deemed necessary or advisable to consummate the transactions
contemplated herein.
9.2.3. NO INJUNCTION, ETC. No provision of any applicable law or regulation
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
9.2.4. NO PROCEEDINGS. No proceeding challenging this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby or
seeking to prohibit, alter, prevent or materially delay the Closing or seeking
damages will have been instituted by any Person (other than Stockholder) before
any court, arbitrator or Governmental Authorities and be pending.
9.2.5. REQUIRED FILINGS. All actions by or in respect of or filings by
Buyer with any Person required to permit the consummation of the Closing shall
have been taken, made or obtained.
9.2.6. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall have
been executed and delivered by the Company.
9.2.7. OPINION OF COUNSEL. The Company and Stockholder shall have received
an opinion of Xxxxx, Day, Xxxxxx & Xxxxx, counsel to Buyer, dated the Closing
Date, substantially in the form attached hereto as EXHIBIT H.
9.2.8. HSR ACT. Any applicable waiting period under the HSR Act relating to
the transactions contemplated hereby will have expired or been terminated.
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X. SURVIVAL; INDEMNIFICATION
10.1 SURVIVAL. The representations and warranties, and the covenants and
agreements, of the parties contained in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith will survive
the Closing for 15 months thereafter; PROVIDED, HOWEVER, that the
representations and warranties contained in Sections 6.1.9 and 6.1.17 will
survive the Closing until the expiration of the statute of limitations
applicable to the matters covered thereby (after giving effect to any waiver,
mitigation or extension thereof granted by the Company after the Closing) and
the Selected Seller Representations and Warranties and the Selected Purchaser
Representations and Warranties will survive the Closing indefinitely; provided,
however, that for any matter covered by Section 6.1.17 for which there is no
applicable statute of limitations, the representations and warranties under
Section 6.1.17 relating to such matter will survive the Closing for five years
thereafter. Notwithstanding the immediately preceding sentence, any
representation and warranty, or covenant and agreement, in respect of which
indemnity may be sought under this Agreement will survive the time at which it
would otherwise terminate pursuant to the preceding sentence if written notice
of the inaccuracy or breach thereof giving rise to such right of indemnity shall
have been in good faith given to the party against whom such indemnity may be
sought prior to such time; PROVIDED, HOWEVER, that the applicable covenant,
agreement, representation or warranty will survive only with respect to the
particular inaccuracy or breach specified in such written notice.
Notwithstanding the first sentence of this Section 10.1, all covenants and
agreements of the parties contained in this Agreement, to the extent required by
their terms to be performed after the Closing, will survive the Closing until
each such covenant shall have been performed in accordance with its respective
terms. The period of time for which a representation and warranty, or covenant
and agreement, survives as provided for in this Section 10.1 is hereinafter
referred to as the "SURVIVAL PERIOD."
10.2 INDEMNIFICATION. (a) Subject to compliance with Section 10.4(d),
Stockholder, will indemnify, defend and hold harmless Buyer and its officers,
directors, employees, members, managing directors, Affiliates and agents, and
the successors to the foregoing (and their respective officers, directors,
employees, members, managing directors, Affiliates and agents), against any and
all liabilities, damages and losses, including, without limitation, diminution
in value of the Business and other consequential damages and, if and only to the
extent asserted in a Third Party Claim, punitive damages, and all costs or
expenses, including, without limitation, reasonable attorneys' and consultants'
fees and expenses ("DAMAGES"), incurred or suffered as a result of or arising
out of (i) the failure of any representation and warranty made by the Company in
any subsection of Section 6.1 to be true and correct as of the Closing Date
(other than a breach of Section 6.1.9 with respect to Taxes, which will be
governed by Section 10.3), (ii) the breach of any covenant or agreement made or
to be performed by the Company pursuant to this Agreement or (iii) claims under
the Bulk Transfer Laws; PROVIDED, HOWEVER, that notwithstanding anything to the
contrary contained in this Agreement, Stockholder will not be liable under this
Section 10.2(a) unless the aggregate amount of Damages exceeds $500,000 and then
from the first dollar above $250,000 of such Damages to the full extent of such
Damages; PROVIDED, FURTHER, HOWEVER, that notwithstanding anything to the
contrary contained in this Agreement, Stockholder's liability under this Section
10.2(a) will not exceed, in the aggregate, $7.5 million.
(b) Subject to compliance with Section 10.4(d), Buyer will indemnify,
defend and hold harmless Stockholder and Seller and its shareholders, officers,
directors, employees,
41
members, managing directors, Affiliates and agents and the successors to the
foregoing (and their respective officers, directors, employees, members,
managing directors, Affiliates and agents), against Damages incurred or suffered
as a result of or arising out of (i) the failure of any representation or
warranty made by Buyer in this Agreement to be true and correct as of the
Closing Date or (ii) the breach of any covenant or agreement made or to be
performed by Buyer pursuant to this Agreement; PROVIDED, HOWEVER, that,
notwithstanding anything to the contrary contained in this Agreement, Buyer will
not be liable under this Section 10.2(b) unless the aggregate amount of Damages
exceeds $500,000 and then from the first dollar above $250,000 of such Damages
to the full extent of such Damages; PROVIDED, FURTHER, HOWEVER, that Buyer's
liability under this Section 10.2(b) will not exceed, in the aggregate, $7.5
million.
10.3 TAX INDEMNIFICATION. Subject to compliance with Section 10.4(d), the
Stockholder will indemnify, defend and hold harmless Buyer, and its officers,
directors, employees, members, managing directors, Affiliates (including, after
the Closing Date, the Company) and agents and the successors to the foregoing
(and their respective officers, directors, employees, members, managing
directors, Affiliates and agents) against (i) all Taxes (and losses, claims and
expenses related thereto) resulting from, arising out of, or incurred with
respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the failure of any representation or warranty
made pursuant to Section 6.1.9 to be true and correct as of the Closing Date;
(ii), until the expiration of the statute of limitations applicable to the
matters covered by this clause (ii) (after giving effect to any waiver,
mitigation or extension thereof granted by the Company after the Closing), all
Taxes imposed on or asserted against the Company or Buyer or for which the
Company or Buyer may be liable in respect of the properties, income or
operations of the Company for all Pre-Closing Tax Periods (net of applicable
reserves for Taxes to the extent accurately reflected in the computation of the
Closing Net Worth) and (iii), until the expiration of the statute of limitations
applicable to the matters covered by this clause (iii) (after giving effect to
any waiver, mitigation or extension thereof granted by the Company after the
Closing) and subject to the last sentence of this Section 10.3, all Taxes
imposed or asserted against the Company or Buyer, or for which the Company or
Buyer may be liable, as a result of any transaction contemplated by this
Agreement (net of applicable reserves to the extent accurately reflected in the
computation of Closing Net Worth. All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest), imposed on the Buyer or the Company which are incurred in
connection with this Agreement will be borne by Buyer when due.
10.4 PROCEDURES. (a) If any Person who or which is entitled to seek
indemnification under Section 10.2 or Section 10.3 (an "INDEMNIFIED PARTY")
receives notice of the assertion or commencement of any Third Party Claim
against such Indemnified Party with respect to which the Person against whom or
which such indemnification is being sought (an "INDEMNIFYING PARTY") is
obligated to provide indemnification under this Agreement, the Indemnified Party
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than 20 days after receipt of such written notice of such
Third Party Claim. Such notice by the Indemnified Party will describe the Third
Party Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have the right to participate in, or, by
giving written notice to the Indemnified Party, to assume, the defense of any
Third Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel
42
(reasonably satisfactory to the Indemnified Party), and the Indemnified Party
will cooperate in good faith in such defense.
(b) If, within ten days after giving notice of a Third Party Claim to an
Indemnifying Party pursuant to Section 10.4(a), an Indemnified Party receives
written notice from the Indemnifying Party that the Indemnifying Party has
elected to assume the defense of such Third Party Claim as provided in the last
sentence of Section 10.4(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within ten days after receiving written notice from the Indemnified Party that
the Indemnified Party reasonably believes the Indemnifying Party has failed to
take such steps or if the Indemnifying Party has not undertaken fully to
indemnify the Indemnified Party in respect of all damages relating to the
matter, the Indemnified Party may assume its own defense, and, subject to
Sections 10.2(a) and (b), the Indemnifying Party will be liable for all
reasonable costs and expenses paid or incurred in connection therewith. Without
the prior written consent of the Indemnified Party, except to the extent
expressly set forth in this Agreement, the Indemnifying Party will not enter
into any settlement of any Third Party Claim which would lead to liability or
create any financial or other obligation on the part of the Indemnified Party
for which the Indemnified Party is not entitled to indemnification hereunder, or
which provides for injunctive or other non-monetary relief applicable to the
Indemnified Party, or does not include an unconditional release of all
Indemnified Parties. If a firm offer is made to settle a Third Party Claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give written notice
to the Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within ten days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim and,
in such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer. The Indemnified
Party will provide the Indemnifying Party with reasonable access during normal
business hours to books, records, and employees of the Indemnified Party
necessary in connection with the Indemnifying Party's defense of any Third Party
Claim which is the subject of a claim for indemnification by an Indemnified
Party hereunder.
(c) Any claim by an Indemnified Party on account of Damages which does not
result from a Third Party Claim (a "DIRECT CLAIM") will be asserted by giving
the Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than 20 days after the Indemnified Party becomes aware of such
Direct Claim. Such notice by the Indemnified Party will describe the Direct
Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have a period of ten days within which to
respond in writing to such Direct Claim. If the Indemnifying Party does not so
respond within such ten day period, the Indemnifying Party will be deemed to
have rejected such claim, in which event the Indemnified Party will be free to
pursue such remedies as may be available to the Indemnified Party on the terms
and subject to the provisions of this Agreement.
43
(d) A failure to give timely notice or to include any specified information
in any notice as provided in Section 10.4(a), 10.4(b) or 10.4(c) will not affect
the rights or obligations of any party hereunder, except and only to the extent
that, as a result of such failure, any party which was entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise materially prejudiced as a result of such
failure, unless such notice is received by the Indemnifying Party after the
expiration of the Survival Period applicable to the representation, warranty,
covenant or agreement the breach of which gives rise to the indemnity obligation
asserted in such notice, in which case the Indemnifying Party will have no
indemnification obligation under this Agreement with respect to the breach of
such representation, warranty, covenant or agreement described in such notice.
10.5 PAYMENT AND TREATMENT OF INDEMNIFICATION PAYMENTS. All indemnifiable
Damages under this Agreement will be paid in cash in immediately available
funds. Any amount paid by Stockholder or Buyer under Section 10.2 or 10.3 will
be treated as a capital contribution, on the one hand, and/or an adjustment to
the Aggregate Closing Consideration on the other hand.
10.6 INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED. The amount of
Damages for which indemnification is provided under Sections 10.2 and 10.3 will
be computed net of any insurance proceeds actually received by or paid for the
benefit of the Indemnified Party in connection with such Damages, reduced by all
direct costs and expenses related thereto. If the amount with respect to which
any claim is made under this Section 10.6 gives rise to a realizable Tax
benefit, the indemnity payment will be reduced by the amount of such realizable
benefit then available to the party making the claim if and to the extent
actually realized by such party.
10.7 EXCLUSIVE REMEDY. Absent fraud, Article X constitutes the exclusive
remedy for the breach of covenants, agreements, representations or warranties
set forth in this Agreement; PROVIDED, HOWEVER, that the provisions of this
Section 10.7 will not prevent the Stockholder, the Company or Buyer from seeking
the remedies of specific performance or injunctive relief in connection with the
breach of a covenant or agreement of any party hereto.
XI. MISCELLANEOUS
11.1. TERMINATION. (a) This Agreement may be terminated at any time prior
to the Closing:
(i) by the mutual written consent of Buyer and Seller;
(ii) by Buyer, if there has been a material and intentional violation
or breach by Seller of any covenant, representation or warranty contained
in this Agreement which prevents the satisfaction of any condition to the
obligations of Buyer at the Closing, and such material and intentional
violation or breach has not been waived by Buyer or, in the case of a
covenant breach, cured by Seller within the earlier of (x) ten days after
written notice thereof from Buyer or (y) the Closing Date;
(iii) by Seller, if there has been a material and intentional
violation or breach by Buyer of any covenant, representation or warranty
contained in this Agreement which
44
prevents the satisfaction of any condition to the obligations of Seller at
the Closing, and such material and intentional violation or breach has not
been waived by Seller or, in the case of a covenant breach, cured by Buyer
within the earlier of (x) ten days after written notice thereof from Seller
or (y) the Closing Date; or
(iv) by Buyer or Seller for any reason or cause or for no reason or
cause without any liability whatsoever to Buyer or Seller or Stockholder or
to any other Person if the transactions contemplated hereby have not been
fully consummated by March 31, 1999 (the "DROP DEAD DATE"), other than by
reason of the intentional acts of Stockholder or Seller or Buyer, as
applicable, calculated to prevent the Closing; and
(v) by Buyer, if the conditions to Closing set forth in Sections 9.1.6
or 9.1.11 have not been satisfied.
(b) In the event that this Agreement is terminated pursuant to Section
11.1(a), all further obligations of the parties hereto under this Agreement
(other than pursuant to Section 11.4, which will continue in full force and
effect) will terminate without further liability or obligation of any party to
any other party hereunder; PROVIDED, HOWEVER, that Buyer will not be released
from liability hereunder if this Agreement is terminated pursuant to Section
11.1(a)(iii) and Seller will not be released from liability hereunder if this
Agreement is terminated pursuant to Section 11.1(a)(ii).
11.2. NOTICES. All notices, requests and other communications to any party
hereunder will be in writing (including facsimile transmission) and will be
given to such party at its address set forth in SCHEDULE 11.2. All such notices,
requests and other communications will be deemed received on the date of receipt
by the recipient thereof if received prior to 5:00 p.m. in the place of receipt
and such day is a Business Day in the place of receipt. Otherwise, any such
notice, request or communication will be deemed not to have been received until
the next succeeding business day in the place of receipt.
11.3. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) Except as otherwise expressly provided in this Agreement, no failure or
delay by any party in exercising any right, power or privilege hereunder will
operate as a waiver thereof nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided will be
cumulative and not exclusive of any rights or remedies provided by Law.
11.4. EXPENSES. Except as otherwise expressly provided for herein, the
parties will pay or cause to be paid all of their own fees and expenses incident
to this Agreement and in preparing to consummate and consummating the
transactions contemplated hereby, including the fees and expenses of any broker,
finder, financial advisor, legal advisor or similar person engaged by such
party; PROVIDED that if the Closing does not occur on or before March 31, 1999,
because of the failure of the condition set forth in Section 9.1.11 to be
satisfied, Buyer will pay
45
the reasonable fees and expenses of Seller up to, but not exceeding $100,000
promptly after presentation of reasonably detailed invoices in respect thereof.
11.5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto. Notwithstanding the foregoing (a) Buyer may,
on or prior to the Closing designate a wholly-owned subsidiary of Buyer to
acquire all of the Purchased Assets and to assume all of the Assumed Liabilities
under this Agreement, without the consent of Seller or Stockholder provided that
such designation will not relieve Buyer of any of its obligations hereunder and
(b) Buyer may assign its rights (but not its obligations) under this Agreement
in connection with obtaining bank financing as contemplated by Section 9.1.11.
11.6. NO THIRD PARTY BENEFICIARIES. Except as provided in Article X, this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied will give or be construed to
give to any Person, other than the parties hereto and such permitted assigns any
legal or equitable rights hereunder.
11.7. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal substantive law of the State of Illinois, without
regard to any conflict of laws rules, principles or provisions of such state or
of any other state.
11.8. JURISDICTION. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby shall be brought in any court of competent
jurisdiction in the courts of the State of Illinois and/or the United States
District Court for the Northern District of Illinois, Eastern Division (assuming
that such court otherwise has or can obtain or accept jurisdiction) and each of
the parties hereby consents to the exclusive jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.2 will be deemed
effective service of process on such party.
11.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.10. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
46
11.11. HEADINGS. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
11.12. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement among the parties with respect
to the subject matter of this Agreement. This Agreement (including the Schedules
and Exhibits hereto) supersedes all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
of this Agreement.
11.13. SEVERABILITY. If any provision of this Agreement or the application
of any such provision to any person or circumstance is held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
hereof.
11.14. NO WAIVER. No action or inaction taken or omitted pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
11.15. CERTAIN INTERPRETIVE MATTERS. (a) Unless the context otherwise
requires, (i) all references to Sections, Articles, Exhibits or Schedules are to
Sections, Articles, Exhibits, or Schedules of or to this Agreement, (ii) each of
the Schedules will apply only to the corresponding Section or subsection of this
Agreement, (iii) each term defined in this Agreement has the meaning assigned to
it, (iv) words in the singular include the plural and VICE VERSA, and (v) the
term "INCLUDING" means "including without limitation." All references to $ or
dollar amounts will be to lawful currency of the United States. To the extent
the term "day" or "days" is used, it shall mean calendar days.
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) All references to the "KNOWLEDGE OF BUYER" or to words of similar
import will be deemed to be references to the actual knowledge of one or more of
the executive officers, directors or members of the management committee of
Buyer whose names are listed on SCHEDULE 11.15(c)(i) and, will include such
knowledge as such executive officers, directors or management committee members
would have had after due inquiry of the responsible individuals of Buyer whose
names are listed separately on SCHEDULE 11.15(c)(ii).
(ii) All references to the "KNOWLEDGE OF SELLER" or to words of
similar import will be deemed to be references to the actual knowledge of
Stockholder after due inquiry.
47
The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers or in their individual capacity, if applicable,
as of the day and year first above written.
GENERAL AUTOMATION, INC.
By: /s/ Xxx X. Xxxxx
-------------------------------
Name: Xxx X. Xxxxx
Title: President
PRECISION PARTNERS HOLDING COMPANY
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
STOCKHOLDER
/s/ Xxx Xxxxx
------------------------------------
Xxx Xxxxx
48
