EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
By and Among
XXXXX CO.
SELLER
XXXXXX X. XXXXXXX
STOCKHOLDER
and
NEW XXXXX CO., INC.
BUYER
Dated: September 9, 1997
-7-
ASSET PURCHASE AGREEMENT
CONTENTS
1. PURCHASE AND SALE OF ASSETS........................................-1-
1.1 Purchased Assets..........................................-1-
1.2 Retained Assets...........................................-3-
1.3 Transfer of Title to the Purchased Assets.................-4-
1.4 Liabilities...............................................-5-
1.5 Non-Assignable Contracts..................................-6-
2. PURCHASE PRICE.....................................................-6-
2.1 Purchase Price............................................-6-
2.2 Allocation of Purchase Price..............................-7-
2.3 Grant of Security Interest; Collection of
Receivables...............................................-7-
2.4 Final Adjustment to Purchase Price........................-8-
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND
STOCKHOLDER.......................................................-10-
3.1 Organization, Good Standing and Corporate Power..........-10-
3.2 Authorization for Agreement..............................-10-
3.3 Validity of Contemplated Transactions....................-10-
3.4 Authorization by Governmental Entities...................-11-
3.5 Financial Statements.....................................-11-
3.6 Title to the Purchased Assets............................-12-
3.7 Value, Condition of Assets and Properties................-12-
3.8 Inventory................................................-12-
3.9 Contracts................................................-12-
3.10 Taxes....................................................-13-
3.11 No Prior Sales...........................................-13-
3.12 Litigation...............................................-13-
3.13 Labor Matters............................................-14-
3.14 Employment Agreements and Employee Benefit Plans.........-14-
3.15 Insurance................................................-14-
3.16 Additional Material Liabilities..........................-14-
3.17 Compliance with Law......................................-15-
3.18 Patents, Trademarks, Licenses............................-15-
3.19 Change in Business.......................................-15-
3.20 Absence of Certain Changes or Events.....................-15-
3.21 Full Disclosure..........................................-16-
3.22 Licenses and Permits.....................................-16-
3.23 Related Party Transactions...............................-17-
3.24 Real Property Leases.....................................-17-
3.25 Improper Payments........................................-18-
3.26 Employee Benefits........................................-18-
3.27 Environmental Matters....................................-19-
3.28 Solvent Condition........................................-20-
3.29 Customer Orders..........................................-20-
3.30 Customers and Suppliers..................................-20-
-8-
4. REPRESENTATIONS AND WARRANTIES OF BUYER...........................-21-
4.1 Organization, Good Standing and Corporate Power..........-21-
4.2 Authorization for Agreement..............................-21-
4.3 Validity of Contemplated Transactions....................-21-
4.4 Authorization by Governmental Entities...................-21-
4.5 Litigation...............................................-22-
5. NO BROKERS........................................................-22-
6. COVENANTS OF THE PARTIES..........................................-22-
6.1 Buyer's Access to Information and Records................-22-
6.2 Parties' Access to Records After Closing.................-23-
6.3 Prorations...............................................-24-
6.4 Bulk Sales and Transfer Taxes............................-24-
6.5 Restrictive Covenant.....................................-25-
6.6 Competing Offers.........................................-25-
6.7 Employees................................................-25-
6.8 Collection, Allocation of Accounts Receivable
Relations with Customers.................................-26-
6.9 Further Assurances; Post Closing Assistance..............-26-
6.10 Financial Information for Form 8-K.......................-27-
7. SELLER'S AND STOCKHOLDER'S OBLIGATIONS UNTIL CLOSING..............-28-
7.1 Conduct of the Business; Negative Covenants..............-28-
7.2 Conduct of the Business: Affirmative Covenants...........-28-
8. CLOSING...........................................................-29-
9. CONDITIONS OF CLOSING.............................................-30-
9.1 Conditions to Buyer's Obligations........................-30-
9.2 Conditions to Seller's Obligations.......................-32-
10. CLOSING DOCUMENTS.................................................-32-
10.1 Seller's Obligations.....................................-32-
10.2 Buyer's Obligations......................................-33-
11. INDEMNIFICATION...................................................-34-
11.1 Seller's Indemnification.................................-34-
11.2 Buyer's Indemnification..................................-35-
11.3 Limitation on Indemnification............................-36-
11.4 Payment of Claims........................................-36-
11.5 Full Indemnification.....................................-36-
12. TERMINATION.......................................................-36-
13. RESCISSION........................................................-37-
14. OTHER PROVISIONS..................................................-38-
14.1 Public Announcements.....................................-38-
14.2 Costs and Expenses.......................................-38-
14.3 Passage of Title and Risk of Loss........................-38-
14.4 Notices..................................................-38-
-9-
14.5 Assignment...............................................-39-
14.6 Schedules and Exhibits...................................-40-
14.7 Integration, Amendment and Modification..................-40-
14.8 Waiver and Discharge.....................................-40-
14.9 Survival of Representations and Warranties...............-40-
14.10 Captions.................................................-40-
14.11 Law Governing............................................-40-
14.12 Benefit of Parties.......................................-41-
14.13 Counterparts.............................................-41-
-10-
SCHEDULES AND EXHIBITS
Schedule Description
-------- -----------
1.1.A. List of Tangible Assets, together with agreed
value, and together with monthly payments and
lease terms for leased assets
1.1.B. Inventory List
1.1.C. List of:
(i) Purchase Orders and Sales Orders, Open
Contracts, Contracts-in-Process, with
billing and percentage completion
information as of ____________, 1997;
(ii) Franchise and Distributorship
Agreements; and
(iii) Licenses and Permits
1.1.D. List of items of prepaid expenses selected by
Buyer
1.1.F. Trademarks, tradenames, patents, etc.
1.1.H. Copy of Lease
1.1.I. Employees covered by Employment Agreements
1.2.H. Artwork, Memorabilia, etc. Retained by Seller
1.4 Assumed Liabilities, selected by Buyer and Seller
2.2 Purchase Price Allocation
2.3 List of Accounts Receivable
3.1 Foreign qualification to do business
3.3 Necessary consents; Obligations Accelerated
3.5 Audited Balance sheet of Seller as of December 31,
1996 and unaudited balance sheet as of March 15,
1997
3.6 Certain agreements for which consent must be
obtained; Liens
3.9 Contracts
3.14 Description of Employee Benefit Plans
3.15 Policies of Insurance
3.18 Patents and Trademarks
3.20 Changes or events
3.22 Exceptions to:
(i) Licenses and Permits;
(ii) required consents; and
(iii) compliance with law
3.23 Related Party Transactions
3.26 Employee related expenses for "hired" employees
3.29 Customer orders, inventory purchases
3.30 Customers and Suppliers
-11-
6.1 Key customers, subcontractors, manufacturers and
lessors to be contacted prior to Closing
13 Material Contracts-in-Process
EXHIBITS
Exhibit Description
------- -----------
1 Xxxx of Sale
-12-
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made this 9th day of September, 1997, by and among XXXXX
CO., a Pennsylvania business corporation, with an office at 000 Xx. Xxxxx
Xxxxxxxxx, Xxxxxxxxxx, XX 00000 (the "Seller"), XXXXXX X. XXXXXXX, who owns
94.658% of the issued and outstanding capital stock of Seller (the
"Stockholder") and New Xxxxx Co., Inc., a Delaware business corporation, with an
office at 0000 Xxxxxxxxxxxx Xxxx, Xxxxxxxxxxxx, XX 00000 ("Buyer").
BACKGROUND
Seller is engaged in the business of marketing, selling, designing and
assembly of ventilation, environmental and process related products, together
with representing certain companies in support or related businesses (the
"Business"). Seller desires to sell and Buyer desires to purchase certain of the
assets of the Business, subject to the assumption of certain liabilities, as is
more specifically set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the parties hereto,
intending to be legally bound, agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. Subject to the terms and
conditions hereinafter set forth and in reliance on the representations and
warranties set forth herein, Seller shall sell, assign, transfer and deliver to
Buyer at the Closing (as hereinafter defined), and Buyer shall purchase, for the
purchase price set forth in paragraph 2.1 hereof, those certain assets described
below, and relating to the Business, but excluding the Retained Assets (as
defined in Section 1.2), as of the Effective Date (as hereinafter defined), all
of which are hereinafter called the "Purchased Assets":
A. All items of machinery, fixtures, leasehold
improvements, vehicles and equipment, and all documentation and manuals
concerning such items, and those additional items of furniture, tools and other
tangible property used in connection with the Business, except for those which
are consumed or disposed of in the normal and ordinary course of business, and
in a manner not inconsistent with the terms and conditions of this Agreement,
between the date hereof and the Closing Date. A substantial portion of such
assets (whether owned or leased), together with their agreed value, or, if
leased, the monthly payment and the remaining lease term, are listed in Schedule
1.1.A., attached hereto;
-13-
B. All inventories owned by Seller on the Closing
Date and located on the premises leased by Seller in Pittsburgh, together with
(i) those items of inventory in transit and (ii) all items of supplies and
packaging (collectively, the "Inventory") a substantial portion of which
Inventory, as of June 30, 1997, is set forth on Schedule 1.1.B;
C. All rights and interests of Seller in and to all
purchase orders, sales orders, open contracts, contracts-in-process, and
similar agreements pertaining to the Business in effect on the Effective Date
(including, but not limited to, Seller's right to be paid the amount of costs
and estimated earnings in excess of xxxxxxxx on uncompleted contracts), and all
licensing, franchise, manufacturer's representative, distributorship or similar
agreements (collectively, the "Assigned Contracts"), and Seller's rights under
governmental or quasi-governmental licenses and permits pertaining to the
Business. A list of all purchase orders, sales orders, open contracts,
contracts-in-process and similar agreements (showing, among other things,
percentage completed, costs and estimated earnings in excess of xxxxxxxx on
uncompleted contracts, xxxxxxxx in excess of costs and estimated earnings on
uncompleted contracts, all as of the Effective Date) is set forth on Schedule
1.1.C. A list of all licensing, franchise, distributorship or representative
agreements or arrangements relating to the Business (describing the territory
covered and the terms of such agreements or arrangements) currently in force is
set forth on Schedule 1.1.C. attached hereto. All governmental or
quasi-governmental licenses and permits are listed in Schedule 1.1.C. attached
hereto;
D. Those items of prepaid expense pertaining to the
Business or the Purchased Assets selected by Buyer, excluding, however, any of
such prepaid items included in the Retained Assets, as hereinafter defined. A
list of the items of prepaid expense so selected by Buyer is attached as
Schedule 1.1.D.;
E. All rights of Seller under or pursuant to all
warranties, representations and guaranties i) made by suppliers or vendors in
connection with products or services furnished to the Business, or ii) otherwise
pertaining to the Business or affecting the Purchased Assets;
F. All of Seller's right, title and interest in and
to the following items: (A) the common law state and federal trademarks, service
marks, trade names and trade styles listed on Schedule 1.1.F. attached hereto
and made a part hereof, (B) all rights in any pending applications for
registration or existing registrations on the Principal or Supplemental Register
of the United States Patent and Trademark Office of any marks or names listed on
Schedule 1.1.F. attached hereto and made a part hereof,
-14-
(C) all rights in any pending applications for registration of any marks or
names listed on Schedule 1.1.F. attached hereto and made a part hereof, in any
state or foreign country, (D) all rights in any pending applications for patent
and all issued patents in this or any foreign country including any
continuations or continuations-in-part of the applications for patent or
improvements thereto, (E) the common law and statutory copyrights and
registrations in this or any foreign country listed on Schedule 1.1.F. attached
hereto and made a part hereof, (F) all inventions, (G) all trade secrets, (H)
all technical and business confidential information including but not limited to
designs, plans, specifications, formulae, processes, process instructions,
procedures, methods, shop rights, discoveries, know-how and other business or
technical confidential information that are used in connection with or relate to
the Business or that provides Seller with a commercial advantage over any or all
of its competitors, (I) all promotional, sales and advertising material,
artwork, films, layouts, catalogues, brochures, descriptions of products and
package designs, (J) all customer lists and supplier lists, (K) the following
telephone and facsimile numbers: (000) 000-0000, (000) 000-0000, (000) 000-0000,
and (000) 000-0000 and (L) the right to the name Xxxxx Co. and any other
tradenames currently or previously used by Seller in connection with the
Business;
G. All records, correspondence and files (including
computer and microfiche files) relating to receivables, payables, customers and
suppliers and other matters, and all plans, systems, methods, designs,
procedures, books and records relating to the operations, vendors, suppliers and
customers of Seller;
H. All rights of Seller under the lease (the "Lease")
with Xxxxxxx X. Xxxx and JDA, Inc., (the "Landlord") for the premises at which
the Business is conducted at 000 Xx. Xxxxx Xxxxxxxxx, Xxxxxxxxxx, XX 00000 (the
"Premises"), including any security deposit with respect thereto, and all rights
of Seller, if any, in and to the leasehold improvements upon the Premises. A
true and correct copy of the Lease is attached hereto as Schedule 1.1.H;
I. All Seller's goodwill in connection with the
Business, including all rights of Seller under any covenants not-to-compete,
confidentiality or non-solicitation agreements running to Seller; and
J. All Seller's rights under employment agreements
(whether written or oral) with the employees set forth on Schedule 1.1.I.
1.2 Retained Assets. Notwithstanding the provisions
of paragraph 1.1, the following assets pertaining to the
-15-
Business (hereinafter the "Retained Assets") shall be retained by Seller and
shall not be sold and transferred to Buyer as of the Effective Date:
A. All right, title and interest of Seller in and to
all cash on hand and in banks and all cash equivalents (as such amounts existed
as of the Effective Date, it being understood that all cash, cash equivalents or
proceeds of accounts receivable received by Seller after the Effective Date
shall be applied as set forth in Sections 2.1, 2.3, 2.4 and 6.3 hereof),
accounts receivable existing on the Effective Date (except to the extent set
forth in Section 2.3 hereof and except that all accounts receivable and proceeds
thereof arising after the Effective Date shall be the property of Buyer, if
Closing shall occur), certificates of deposit, commercial paper, life insurance
policies (including the cash surrender value thereof) and similar assets
(including xxxxx cash) of the Business;
B. Prepaid insurance, including all related rights to
the refund of unearned premiums as of the Effective Date;
C. Prepaid federal, state and local income and other
taxes;
D. All corporate minutes, by-laws, and similar items
of Seller;
E. All insurance rebates, including but not limited
to worker's compensation, to which Seller may be entitled;
F. Unbilled out-of-pocket costs on progress billing
matters, the aggregate amount of which unbilled costs will not exceed $11,000;
G. The bond maintained by Seller at The Rivers Club;
H. Various pieces of artwork and memorabilia, more
fully described on Schedule 1.2.H. attached hereto;
I. Seller's right to receive payment hereunder; and
J. Those items of prepaid expense owned by Seller and
not selected by Buyer in accordance with the provisions of Section 1.1.D.
hereof.
1.3 Transfer of Title to the Purchased Assets. The
sale, assignment, conveyance, transfer, and delivery by
-16-
Seller of the Purchased Assets shall be made at the Closing by appropriate bills
of sale, assignments, endorsements, and such other appropriate instruments of
transfer as shall be reasonably requested by Buyer or otherwise sufficient to
vest in Buyer as of the Effective Date good and marketable title to the
Purchased Assets which are owned, and a valid and assignable leasehold interest
in the Purchased Assets which are leased by Seller (to the extent such leases
are assigned to Buyer hereunder), in each case free and clear of any security
interests, liens, charges and encumbrances. Such instruments of assignment,
conveyance, and transfer shall include without limitation a xxxx of sale
substantially in the form of Exhibit 1 hereto (the "Xxxx of Sale"). Seller
covenants and agrees to execute and deliver such other and further instruments
of assignment, transfer or conveyance of any of the Purchased Assets as Buyer
may reasonably require, whether on or after the Closing Date, to evidence or
perfect its right, title and interest in and to the Purchased Assets.
1.4 Liabilities. Buyer shall not assume, nor be
obligated to perform, fulfill or pay, any obligations or indebtedness of Seller
whatsoever, except for (a) the operating expenses of the Business for the period
from and after the Effective Date and (b) those liabilities of the specific kind
and character, or in the amount, set forth on Schedule 1.4 attached hereto,
which liabilities include the amount of xxxxxxxx in excess of costs and
estimated earnings on uncompleted contracts (the "Liabilities") which
Liabilities Buyer shall assume as of the Effective Date, and contingent upon the
Closing. The parties specifically agree that Buyer shall not assume any
liability or obligation for any litigation, claims or other liability of Seller
for damages asserted by any third party arising, directly or indirectly, as a
result of the conduct of the Business or any other operations of Seller on or
prior to the Effective Date, including, without limitation, product liability
and warranty claims with respect to products manufactured, sold or delivered by
Seller prior to the Effective Date; provided, however, that with respect to any
product liability or warranty claim that may arise after Closing in connection
with progress billing contracts, work-in-process contracts, or contracts-in-
process, as set forth on Schedule 3.9-A, the costs incurred in adequately
responding to any such claims shall be allocated between, and paid by, Buyer and
Seller in accordance with the "percentage completed" set forth on Schedule
3.9-A, subject to the adjustment, if any, determined pursuant to the procedures
set forth in Section 2.4 (i.e., if a contract is 30% completed, based on such
Schedule, Seller will pay 30% of all costs incurred in connection with such
warranty claim). Seller shall pay and discharge all liabilities not specifically
assumed by Buyer, and shall maintain insurance in force to cover all insurable
liabilities.
-17-
1.5 Non-Assignable Contracts. To the extent that any
of the contracts, rights or commitments for which assignment to Buyer is
provided herein are not assignable without the consent of another party, this
Agreement shall not constitute an assignment or an attempted assignment if such
assignment or attempted assignment would constitute a breach thereof. Seller
agrees to use its best efforts to obtain the consent of each other party to any
such contract, right or commitment to the assignment thereof to Buyer in all
cases in which such consent is required for assignment or transfer. If such
consent is not obtained at or prior to the Closing, and if Buyer does not
terminate this Agreement in accordance with the provisions of Section 12.B
hereof, Seller and Stockholder agree to cooperate with Buyer in subsequently
seeking such consent and in any reasonable arrangements (including billing
arrangements) designed to provide for Buyer the benefits under any such
contract, right, or commitment, including enforcement at the cost and for the
account of Buyer of any and all rights of Seller against each other party
thereto arising out of the cancellation by such other party or otherwise. If and
to the extent that such arrangements cannot be made, Buyer shall have no
obligation with respect to any such contract, right or commitment.
2. PURCHASE PRICE.
2.1 Purchase Price. The purchase price (the "Purchase
Price") for the Purchased Assets shall be Two Million One Hundred Thousand
Dollars ($2,100,000). At Closing, Buyer shall pay to Seller the sum of
$2,100,000, less the credit described in Section 3.26 below, by cashiers or
certified check or by wire transfer of immediately available funds on the
Closing Date. As a result of the Buyer's payment of such amount at Closing, and
as a result of Buyer's assumption of certain of Seller's liabilities on
contracts-in-process, Seller shall be obligated to pay to Buyer, on or before
the 180th day after Closing, an amount equal to the difference, if any, between
(x) the amount by which the xxxxxxxx in excess of costs and estimated earnings
on uncompleted contracts as of the Effective Date exceeds the amounts then
received by Buyer and resulting from costs and estimated earnings in excess of
xxxxxxxx on uncompleted contracts as of the Effective Date, and (y) the net
amount then collected by Buyer from Seller's accounts receivable, in accordance
with Section 2.3 below, and all as determined in accordance with Section 2.4
below. Stockholder hereby guaranties, and becomes surety for, the full, complete
and timely payment of such amount by Seller. Within 10 days after the end of
each calendar month, Buyer shall deliver a report to Seller setting forth the
amount of Seller's accounts receivable
-18-
collected by Buyer through the end of such calendar month, along with a payment
of any amount collected by Buyer in excess of Seller's obligation to Buyer
pursuant to this Section 2.1.
2.2 Allocation of Purchase Price. The allocation of
the Purchase Price for the Purchased Assets shall be as determined by mutual
agreement of Buyer and Seller and as set forth on Schedule 2.2. attached hereto,
and such allocation shall govern any reporting by Seller and Buyer. Seller
agrees to execute at Buyer's request any information filing relating to such
allocations with any federal, state or local regulatory body, including, without
limitation, Internal Revenue Service Form 8594, which shall be completed in a
manner consistent with the Purchase Price allocation set forth herein.
2.3 Grant of Security Interest; Collection of
Receivables. In order to secure the obligation of Seller to pay to Buyer the
obligation described in Section 2.1 hereof, the Seller hereby grants to the
Buyer, its successors and assigns, a security interest in all the Seller's
accounts receivable, including, but not limited to, all of Seller's present and
future accounts, general intangibles, chattel paper and instruments, as such
terms are defined in the Uniform Commercial Code as in effect in the
Commonwealth of Pennsylvania (the "Collateral"). In order to perfect the
security interest granted herein, the Seller will execute and deliver to the
Buyer, at Closing, Uniform Commercial Code financing statements containing a
description of the Collateral, which statements shall be filed in every
governmental, municipal or other office in every jurisdiction necessary to
publish notice of and protect the validity of and to establish a valid, legal
and perfected security interest in favor of the Buyer and respect of the
Collateral. A true and complete list of all Seller's accounts receivable, as of
the Effective Date, containing the name and the address of the account debtor,
the amount owing, the invoice number and the invoice date is attached hereto as
Schedule 2.3. As of Closing, the Collateral will be owned by the Seller free and
clear of any lien of any nature whatsoever, except as granted pursuant to this
Agreement. From and after the Closing, the Seller shall assist the Buyer in the
collection of its accounts receivables and, to the extent the Seller receives
any check or other payment on account of any accounts receivable, such item
shall be delivered to the Buyer in precisely the form received, with any
necessary endorsements. The Buyer shall have the right, as the true and lawful
agent of the Seller, with power of substitution for the Seller (i) to receive,
endorse, assign and/or deliver any checks, drafts, money orders or other
evidences of payment relating to the Collateral or any part thereof, and (ii) to
demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral and to sign the name of the Seller in
any invoice or xxxx of lading relating to the Collateral. All
-19-
amounts received by the Buyer in connection with the collection of the Seller's
accounts receivable shall be applied to the obligation owing to the Buyer by the
Seller in accordance with the provisions of Section 2.1 hereof and, upon payment
in full of such amount (whether as a result of the collection of accounts
receivable, or the payment by the Seller 180 days after Closing, as described in
Section 2.1 above), the security interest granted to the Buyer in the accounts
receivable shall terminate and, thereafter, all accounts receivable, and the
proceeds thereof, shall be the sole property of the Seller.
2.4 Final Adjustment to Purchase Price.
(a) At least five days prior to the Closing
Date, Seller shall deliver to Buyer a schedule listing all open contracts or
contracts-in-process, and setting forth, with respect to each of such contracts,
Seller's best estimate of the percentage completed, estimated cost, estimated
profits, costs and profits anticipated to be collected after Closing, costs and
estimated earnings in excess of xxxxxxxx, and xxxxxxxx in excess of costs and
estimated earnings, all as of the Effective Date and all of which shall have
been reviewed by Xxxxxxxxx Downs, Seller's accountant (the "Estimated Contract
Liability Schedule"), which statement shall also set forth the calculation of
the estimated amount by which the accounts receivables of Seller (valued and
determined consistently with Seller's past practices) plus the costs and
estimated earnings in excess of xxxxxxxx on uncompleted contracts, as of the
Effective Date, exceeds the estimated xxxxxxxx in excess of costs and estimated
earnings on uncompleted contracts. If within such five (5) day period the Buyer
objects to the Estimated Contract Liability Schedule, the parties shall make a
good faith effort to resolve their differences and modify the Estimated Contract
Liability Schedule accordingly. The failure of the parties to resolve their
differences shall constitute a failure of a condition described in Section 9.1
hereof.
(b) Thereafter, Buyer shall prepare and
deliver to Seller, within 60 days after the Closing, a contract liability
schedule of Seller as of the Effective Date which shall have been reviewed by
Xxxxxxxx & Company, P.C., Buyer's auditors (hereinafter referred to as the
"Contract Liability Schedule"). The Contract Liability Schedule shall specify
(i) with respect to each open contract or contract-in-process (A) Buyer's best
estimate of the actual percentage completed as of the Effective Date, (B) the
cost and estimated earnings in excess of xxxxxxxx, if any, as of the Effective
Date, (C) the xxxxxxxx in excess of cost and estimated earnings, if any, as of
the Effective Date, (ii) the amount of Seller's accounts receivable collected by
Buyer through the date of the report, and (D) the costs and profits collected by
Buyer after Closing, and a comparison of such amounts to the estimated amounts
provided by Seller in the
-20-
Estimated Contract Liability Schedule, and (iii) the amount owing by Seller to
Buyer in connection with xxxxxxxx in excess of costs and estimated earnings on
uncompleted contracts, or in connection with anticipated costs and profits not
realized (or, if the amount of the Seller's receivable collected by Buyer
exceeds Seller's obligation to Buyer under Section 2.1 hereof, the amount owing
by Buyer to Seller), together with a summary of the relevant calculations
employed in their determination.
(c) After delivery of the Contract Liability
Schedule, Seller and its accountants shall have access to Buyer, its
accountants, its books and records and all aspects of the preparation of the
Contract Liability Schedule, including any work papers, schedules and other
documents with respect thereto. If Seller disagrees with or disputes the
Contract Liability Schedule or any aspect thereof in any respect, Seller shall
send Buyer notice of such disagreement within fifteen (15) days after receipt of
the Contract Liability Schedule, which notice shall state the nature of such
disagreement. If Seller does not send such written notice to Buyer within such
fifteen (15) day period, Seller shall be deemed to have agreed with the Contract
Liability Schedule. If Seller timely provides such written notice of
disagreement to Buyer and if Buyer and Seller cannot mutually resolve such
disagreement within fifteen (15) days after Seller's delivery of such notice of
disagreement, such dispute shall promptly be submitted to a mutually acceptable,
nationally recognized independent certified public accounting firm (the
"Independent Firm"). Each of Buyer and Seller shall submit in writing to the
Independent Firm on the date the dispute is submitted their respective final
calculation (after the above-described negotiations) of the disputed amount
owing or the disputed portion of the Contract Liability Schedule. The parties
shall each make available to the Independent Firm all books and records, work
papers and personnel reasonably requested by such firm. The Independent Firm
shall resolve such dispute and shall deliver its written decision, including its
determination with respect to the disputed portion of the Contract Liability
Schedule. The Independent Firm shall resolve such disagreement in accordance
with the terms of this Agreement. The Independent Firm shall only consider and
resolve the matters stated in Seller's notice of disagreement. The decision of
the Independent Firm shall be final and binding upon the parties. A portion of
the fees and expenses of such Firm shall be borne by Seller on the one hand, and
by Buyer on the other, wherein each such party will pay a fraction thereof for
which the numerator is the difference between such party's proposed calculation
of the disputed portion of the amount owing or the Contract Liability Schedule,
as applicable, as submitted to the Independent Firm and the final determination
of such disputed amount, as determined by the Independent Firm, and the
denominator is the difference between such party's proposed calculation of the
amount owing or the Contract Liability Schedule, as applicable, and the proposed
-21-
calculation of the amount owing or the Contract Liability Schedule, as
applicable, as submitted to the Independent Firm by the other party. Such fees
and expenses shall be paid within five (5) days after the determination of the
Independent Firm. The fees and expenses of the Buyer's auditors' preparation of
the Contract Liability Schedule and the calculations with respect to the amount
owing shall be paid by Buyer. The fees and expenses of Seller's auditors and
accountants in reviewing such Schedule shall be paid by Seller.
(d) At such time as the Contract Liability
Schedule, or the calculations with respect to amount owing have been finally
agreed to or determined as set forth above, then the amount owing, as finally
determined, shall be paid by Buyer or Seller, as appropriate, in immediately
available U.S. funds, or by wire-transfer per the instructions of the receiving
party.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER.
Seller and the Stockholder jointly and severally represent to Buyer, on which
representations and warranties Seller and the Stockholder acknowledge Buyer will
rely, and which representations and warranties shall survive Closing for the
period set forth in Section 14.9 hereof, as follows:
3.1 Organization, Good Standing and Corporate Power.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and is duly qualified and in
good standing to do business as a foreign corporation in each jurisdiction in
which, by the nature of its activities, it is required to be so qualified, each
of which is listed on Schedule 3.1 attached hereto. Seller has the corporate
power to own the Purchased Assets and to carry on the Business as it is now
being conducted. Seller has full corporate power to sell, assign, convey,
transfer and deliver the Purchased Assets to Buyer and to perform the other
covenants of Seller under this Agreement. Seller has no subsidiaries, and does
not own or hold securities of any other corporation, limited liability company
or partnership.
3.2 Authorization for Agreement. All corporate
approvals necessary to the execution, delivery and performance of this agreement
by Seller have been obtained, there are no certificates of incorporation, by-law
or other corporate restrictions which prevent Seller from performing fully its
obligations under this Agreement and this Agreement constitutes the valid and
binding obligation of Seller.
3.3 Validity of Contemplated Transactions. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement will not (i) violate or conflict
with the provisions of the
-22-
certificate of incorporation or by-laws of Seller or, assuming the obtaining of
necessary consents, as set forth on Schedule 3.3 attached hereto, to the
assignment of the Assigned Contracts (as hereinafter defined), or the provisions
of any note, indenture, security agreement, lease, guaranty or other contract,
agreement or instrument to which Seller is a party or by which it is bound, (ii)
result in a breach or violation by Seller of the provisions of any law or
regulation or any order, injunction, judgment or decree of any court,
governmental authority or regulatory agency which is applicable to Seller, (iii)
except as set forth on Schedule 3.3, cause the acceleration of maturity of any
loan or material obligation to which Seller is a party or by which it is bound
or with respect to which it is an obligor or guarantor, or (iv) result in the
creation or imposition of any lien, claim, charge, restriction, equity or
encumbrance of any kind whatsoever upon, or give to any person other than Buyer
any interest or right (including any right of termination or cancellation) in,
or with respect to, any of the Purchased Assets.
3.4 Authorization by Governmental Entities. No
governmental license, permit, authorization or approval, and no registration,
declaration or filing with any court, governmental authority or regulatory
agency, is required as a condition to the valid and binding execution, delivery
or performance of this Agreement by Seller or Stockholder.
3.5 Financial Statements. Attached hereto as Schedule
3.5 is the audited balance sheet of the Seller as at December 31, 1996 (the
"Balance Sheet Date"), and the related statements of income and cash flows for
the twelve month period then ended, and an unaudited balance sheet of the Seller
as of March 31, 1997 and the related statements of income and cash flows for the
three (3) months then ended. Such financial statements: (i) are in accordance
with the books and records of the Business and Seller for the items reflected
therein and accurately account for the financial transactions of the Seller;
(ii) have been prepared by Seller in accordance with accounting principles
consistently applied by Seller (as set forth in this subparagraph 3.5); and
(iii) present fairly and in accordance with generally accepted accounting
principles the assets, liabilities and the results of operations of the Business
as of the dates and for the periods indicated. Since the Balance Sheet Date,
there has been no material adverse change in the condition (financial or
otherwise), properties or the Business and the Business has been conducted in
the ordinary course. The audited balance sheet of the Business as at the Balance
Sheet Date is referred to herein as the "Balance Sheet." The Balance Sheet
reflects all liabilities, contingent or otherwise, of the Business as at the
Balance Sheet Date, except performance obligations under executory contracts and
other liabilities which are not required to be so reflected in accordance with
generally accepted accounting principles. Such liabilities not so
-23-
reflected were incurred in the ordinary course of business and do not in the
aggregate have any material adverse effect upon the condition, financial or
otherwise, of the Business.
3.6 Title to the Purchased Assets. Seller has good
and marketable title to the Purchased Assets which are owned and a valid and
assignable leasehold interest in the Purchased Assets which are leased as
reflected in the Balance Sheet and to those purchased or leased since the
Balance Sheet Date, except (i) in each case for properties or assets since sold
or otherwise disposed of in the ordinary course of business and (ii) as
indicated for certain agreements set forth in Schedule 3.6 attached hereto for
which consent to assignment must be obtained. The Purchased Assets are free and
clear of all mortgages, liens, security interests, pledges, charges and other
encumbrances of every nature whatsoever, except for (i) those referred to in
Schedule 3.6, which shall be discharged at or prior to Closing, (ii) liens for
current taxes not yet due and payable or being contested in good faith by
appropriate proceedings and (iii) such imperfections of title, easements and
encumbrances as do not detract from the value of the properties subject thereto
or affected thereby or otherwise do not interfere with their present or future
use in a manner consistent with present practices or impair the operation of the
Business. At Closing, upon the execution and delivery by Seller of a xxxx of
sale or other instruments of assignment, good title to the Purchased Assets
shall pass to Buyer, free and clear of all mortgages, liens, security interests,
charges, pledges, restrictions on transfer or assignment, and other
encumbrances, except for the liens or security interests granted hereunder.
3.7 Value, Condition of Assets and Properties. All of
the machinery, equipment and fixtures being conveyed hereunder are in good
order, condition and repair, except for ordinary wear and tear which does not
affect the use or operation thereof, are fit for their particular purpose, and
all are owned, maintained and used in conformity with all applicable federal,
state and local laws, regulations and ordinances (including but not limited to
zoning, environmental, occupational safety and health laws and regulations). All
non-cash assets constituting, used principally in connection with, and necessary
to the conduct of, the Business are included in the Purchased Assets.
3.8 Inventory. The values at which the Inventory is
shown on Seller's records are at the lower of actual purchase cost or the market
value thereof, as determined in accordance with generally accepted accounting
principles. Each element of the Inventory is without defect.
3.9 Contracts. Except as set forth on Schedule 3.9,
Seller is not a party to any presently existing leases, purchase orders, sales
orders, contracts, agreements, franchises,
-24-
joint venture agreements, or commitments, or agreements to enter into any of the
same, written or oral (collectively the "Contracts") which (i) extend beyond the
Closing Date or (ii) which are not cancelable, without liability, at will.
Schedule 3.9-A, which constitutes a part of Schedule 3.9, sets forth all
contracts-in-process, open contracts, or progress billing contracts, of Seller,
and lists for each contract, among other things, the total contract amount, the
percentage completed, xxxxxxxx and accounts receivable, xxxxxxxx in excess of
costs and estimated earnings, costs and estimated earnings in excess of
xxxxxxxx, estimated costs and estimated profits, which Schedule 3.9-A is true,
correct and complete. Copies of all written Contracts, and a memorandum
describing in full each oral Contract listed on Schedule 3.9, together with each
Contract which requires the payment by the Seller of a sum in excess of $1,000
in the aggregate, have been delivered to Buyer, and are true and complete in all
respects. No Contract is presently expected to result in a loss to the Seller
upon completion or performance thereof. No Contract contains any covenant
limiting or restricting the freedom of Seller to engage in any business or
compete with any person. Seller has complied in all material respects with all
other provisions of all such Contracts and of all other contracts to which it is
a party, and is not in material breach, violation or default under any of them,
and no event has occurred, which constitutes, or with a lapse of time or the
giving of notice, or both, would constitute such a breach, violation or default
thereunder, except as described on Schedule 3.9 attached hereto.
3.10 Taxes. Seller has paid any and all taxes
(including, but not limited to, income taxes, sales taxes, withholding taxes,
and federal, state or local taxes, levies and imposts), license fees, or other
charges levied, assessed or imposed upon the Seller, or upon any of the
Purchased Assets or the Business in connection with Seller's acquisition or
operation thereof.
3.11 No Prior Sales. Seller has not entered into any
other contract or option to sell, mortgage or encumber the Purchased Assets,
except for the sale of inventory in the ordinary course of business.
3.12 Litigation. There are no lawsuits or
governmental proceedings pending, or to the knowledge of Seller or the
Stockholder, threatened against Seller which have or might reasonably be
expected to have an adverse effect on the financial condition, business or
properties of the Business. Seller is not subject to any judgment which has or
might reasonably be expected to have an adverse impact on the financial
condition, business or properties of the Business.
-25-
3.13 Labor Matters. No labor union represents
Seller's employees or, to the knowledge of Seller, claims to represent such
employees. No strike or union organizational effort is pending, or to the
knowledge of Seller, threatened against Seller by its employees or any labor
union claiming to represent such employees.
3.14 Employment Agreements and Employee Benefit
Plans. Except as set forth on Schedule 3.14 attached hereto, there are no
written contracts of employment between Seller and any of the employees of the
Seller or which govern any such employee's employment with Seller. All oral
contracts of employment are terminable at will by Seller. Except as provided in
Schedule 3.14, Seller does not maintain any employee benefit plans, as that term
is defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, for the benefit of the employees of the Seller (the "Benefit
Plans"). The written terms of the Benefit Plans are and have been administered
in compliance with the requirements of ERISA and, where applicable, Paragraph
401 of the Internal Revenue Code of 1986, as amended (the "Code"). There are no
accumulated funding deficiencies as defined in Paragraph 302 of ERISA or
Paragraph 412 of the Code, whether or not waived, with respect to the Benefit
Plans. There is not now, nor has there been any prohibited transaction (as
defined in Paragraph 406 of ERISA or Paragraphs 503 or 4975 of the Code)
involving the Benefit Plans. There are no pending or, to the knowledge of
Seller, threatened claims by or on behalf of the Benefit Plans or by any
employee of the Business alleging a breach or breaches of such plans, or
fiduciary duties thereunder, violations of other applicable federal or state law
with respect to the Benefit Plans or arising out of events relating to the
employment of the employees of the Seller, which could result in a monetary
liability, or any material non-monetary liability, on the part of Seller under
ERISA or any other law, nor, to the knowledge of Seller, is there any basis for
such a claim. Seller has no liability, withdrawal or otherwise, actual or
contingent, to any Multi-Employer Pension Plan.
3.15 Insurance. All policies of insurance carried by
Seller in respect of the Purchased Assets and the Business are listed in
Schedule 3.15 and are in full force and effect. Such policies adequately insure
Seller against liability (including products liability and breach of warranty
claims) risks and against the risks of fire, theft, casualty and vandalism.
3.16 Additional Material Liabilities. Except as
otherwise set forth herein, since the Balance Sheet Date Seller has not entered
into any agreements with customers, clients, suppliers, unions, employees or
others, nor has it committed any acts or knowingly suffered any act to be
committed, as a
-26-
consequence of any of which its liabilities have been or may be materially
increased over those shown on the Balance Sheet.
3.17 Compliance with Law. Seller has not failed to
file any report or return required by any government or governmental agency
which failure would materially and adversely affect the Seller, the Purchased
Assets or the financial condition or results of operations of the Business,
taken as a whole. Seller is in compliance with all rules, regulations, statutes
and ordinances of the Federal, State, county and city governments, and all
subdivisions, bureaus and agencies thereof, applicable to Seller or to the
conduct of the Business and where the failure to comply would have a material
adverse affect on the financial condition of the Company or the operation of the
Business. Seller has not received any written notice from any person in an
official capacity as a representative of any such government or subdivision,
bureau or agency thereof asserting a currently unremedied violation of any
applicable law, regulation or rule. Seller is in compliance with all applicable
zoning laws and rules with respect to the Business.
3.18 Patents, Trademarks, Licenses. Except as set
forth on Schedule 3.18, there are no trademarks, copyrights or patents owned by
or licensed to Seller and presently used in the operation of the Business or
necessary for its continued operation. The operations of the Business as
currently conducted do not infringe any trademark, trade name, copyright or
patent of any third party. Seller has not received any claim of infringement of
any trademark, trade name, copyright, patent application or patent of any third
party with respect to operation of the Business.
3.19 Change in Business. Seller has not been informed
of any facts which give it reason to believe that the services of personnel
currently operating or employed in the Business will not be available to Buyer
for a reasonable period of time after the Closing for the continued conduct of
the Business on substantially the same terms as at present (other than as
requested by Buyer) or that business relations currently maintained by the
Seller with customers, suppliers and others will not similarly be maintained.
3.20 Absence of Certain Changes or Events. Since the
Balance Sheet Date, except as described in Schedule 3.20, there has not been
(and as of Closing, there will not have been):
A. any change, or any development, or the
incurring of any liabilities, which has materially affected or might be likely
to materially affect adversely the Business, or its properties, prospects,
operations, earnings, assets, liabilities or financial or other condition, other
than changes in the ordinary course of business;
-27-
B. any material damage, destruction, or
loss, whether or not covered by insurance, adversely affecting the Business, or
its properties, business, assets or financial position;
C. any waiver of any material rights of
value to Seller relating to the Business, except in the ordinary course of
business;
D. any transfer or grant of any material
rights in Seller's patents, trademarks, trade names or copyrights relating to
the Business;
E. any disposition or lapsing of any
patents, trademarks, or trade names held by Seller relating to the Business or
any disposition or disclosure to any person of any trade secrets relating to the
Business; or
F. any modification, change or termination
of any existing license, lease, contract, franchise or distributorship agreement
or other document referred to in this Agreement or any of the Schedules hereto,
or relating to the Business, or the failure to renew or extend any material
contract relating to the Business, except in the ordinary course of business.
3.21 Full Disclosure. None of the representations and
warranties made by Seller contained in this Agreement, including all Schedules,
nor in any statement, document, certificate, schedule, list, memorandum or other
writing (collectively, "Statements") furnished or to be furnished by Seller
pursuant hereto, is or will be materially incorrect or incomplete, or contains
or will contain any material untrue statement of fact, and none of such
representations, warranties and Statements omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not materially misleading. There is no material fact known to Seller
which Seller has not disclosed in this Agreement, or in a Schedule hereto, or in
a Statement, which materially and adversely affects or may reasonably be
expected to affect materially and adversely, the Seller, the Business, or its
business, properties, prospects, operations, earnings, assets, liabilities or
condition (financial or otherwise).
3.22 Licenses and Permits.
A. Except as set forth on Schedule 3.22, (i)
the permits, licenses, and governmental authorizations described in Schedule
1.1.C. (collectively, "Licenses") constitute all of the Licenses required for
and utilized in the ownership and operation of Seller's Business as it is
currently being conducted; (ii) no consent, waiver, approval, license or
-28-
authorization of or designation, declaration or filing with any governmental
agency authority, or any third party is required in connection with the
execution and delivery of this Agreement or any instrument contemplated hereby
or the consummation of the transactions contemplated hereby; and (iii) Seller
has complied with, and is currently in compliance with all statutes, laws,
ordinances, rules, regulations, judgments, decrees and orders, of any court or
governmental or quasi-governmental authority, involving the Business to which it
is subject or by which it is bound.
B. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby will not
result in a revocation or suspension of, or require the amendment of any
License.
3.23 Related Party Transactions. Except as set
forth on Schedule 3.23, no officer, director, or employee of Seller or
Stockholder nor any member of any such person's immediate family is presently a
party to any transaction with Seller relating to Seller's Business, including
without limitation, any contract, agreement or other arrangement (i) providing
for the furnishing of services by, (ii) providing for the rental of real or
personal property from, or (iii) otherwise requiring payments (other than for
services as officers, directors or employees of the Seller) to any such person,
or to any corporation, partnership, trust or other entity in which any such
person has a substantial interest as a shareholder, officer, director, trustee
or partner.
3.24 Real Property Leases. With respect to the
Lease,
A. Seller is the owner and holder of all the
leasehold estates purported to be granted to Seller by the Lease, and the
Premises described are presently occupied and exclusively used by Seller;
B. Seller has not received notice from the
Landlord, or from any party claiming an interest in the Premises through the
Landlord, requiring Seller to repair, or to pay for the repair, of any portion
of the Premises, which repair remains unremedied, and if the Premises were to be
surrendered by Seller to the Landlord in its present condition, the Premises
would be required to be accepted by the Landlord in such condition under the
terms of the applicable Lease without payment of any sum;
C. All rentals due under the Lease are
current and have been paid through the current date, no notices of default under
the Lease have been given by the Landlord, there exists no default of Seller
under the Lease, or, to Seller's knowledge, of Landlord under the terms of such
Lease, and no
-29-
event has occurred which, with the passage of time or the giving of notice, or
both, would result in any event of default of Seller or, to Seller's knowledge,
of Landlord, or prevent Seller from exercising or obtaining the benefits of its
rights under the Lease; and
D. The Lease is in full force and effect and
constitutes a legal, valid and binding obligation of Seller and Landlord
enforceable in accordance with its terms.
3.25 Improper Payments. Except for non-cash gifts
or transfers made in the ordinary course of business and not involving goods,
services or items with a value of more than $250, neither Seller, nor any
officer, director, employee or agent of Seller in connection with the activities
of Seller related to its Business, has at any time made gifts, gratuities, or
payments in any other form, whether in cash, goods or services, to any persons
or entities whatsoever, in payment for, or intended to encourage, or which
resulted in or may have resulted in or had the effect of obtaining, encouraging
or continuing the referral of persons or entities as customers of Seller's
Business, or obtaining, encouraging or extending any contractual relationship,
written or oral, for any of the same; nor, with respect to the Business has
Seller or any officer, director, employee or agent of Seller (i) entered into
any arrangement, written or oral, under or pursuant to which bribes, kickbacks,
rebates, payoffs or other forms of illegal or improper payments or remuneration
have been or will be made, provided for or suffered, either directly, or
indirectly through agents, brokers, distributors, dealers or other
intermediaries, to any person or entity or (ii) made any illegal or improper
contribution of monies, services or property to any political party, candidate
or elected official for any purpose.
3.26 Employee Benefits. With the exception of the
credit to be granted by Seller to Buyer for vacation pay, sick pay and
"personal" days pay with respect to those employees of Seller which Buyer will
hire, the amount of which credit is set forth on Schedule 3.26, and which amount
will be deducted from the Purchase Price set forth in Section 2.1, Seller has
accrued and reserved, with respect to the Business, and has included in the
financial statements, sufficient sums to satisfy, and will pay and will
indemnify and hold Buyer harmless from and against, all unpaid obligations of
Seller which have accrued or will accrue for periods through the Closing,
including but not limited to:
A. Taxes;
B. Premiums for medical, life, accidental
death and dismemberment and long term disability benefit insurance;
-30-
C. Holiday pay relating to holidays which
occurred prior to the Closing Date;
D. Taxes, premiums or contributions for
unemployment compensation;
E. Unpaid vacation pay;
F. Unpaid sick leave;
G. Unpaid "personal" days, severance pay or
similar employee-related expenses; and
H. Bonus, salary, commissions, car
allowances and travel and entertainment expenses relating to Business employees;
and
I. Authorized payroll deductions (including,
but not limited to, 401(K) deductions).
Schedule 3.26 lists the amount of all accrued vacation pay, sick pay, personal
days, severance pay, bonus, salary, commissions, car allowances, travel and
entertainment and similar employee-related expenses relating to those employees
listed on such Schedule, which list includes all employees Buyer has informed
Seller it intends to hire.
3.27 Environmental Matters.
A. To the knowledge of Seller and
Stockholder, there are no toxic wastes or other toxic or hazardous substances or
materials being stored or otherwise held on, under or about the Premises. To the
knowledge of Seller and Stockholder, the Premises have been maintained, and the
Business has always been conducted, in compliance with all federal, state and
local environmental protection, occupational health and safety, and similar
laws, ordinances, restrictions, licenses and regulations, including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. Sect. 1251 et
seq.), Resource Conservation & Recover Act (42 U.S.C. Sect. 6901 et seq.), Safe
Drinking Water Act (15 U.S.C. Sect. 3000(f) et seq.), Toxic Substance Control
Act (15 U.S.C. Sect. 261 et seq.), Clean Air Act (42 U.S.C. Sect. 7401 et seq.),
Comprehensive Environmental Response of Compensation and Liability Act (42
U.S.C. Sect. 6901 et seq.), and all similar State and Local laws, rules,
regulations and ordinances (collectively, the "Environmental Laws").
B. Neither Seller nor the Stockholder has
any notice of any pending or threatened action, claim or proceeding under
Environmental Laws arising out of the condition of the Premises. With respect to
the Business, and the Premises,
-31-
Seller has not been served with any citation or received any notice or other
communication of noncompliance by Seller with any Environmental Laws. With
respect to the Business, and the Premises, Seller has no notice of any formal or
informal assertion by any governmental agency or other person that Seller or a
predecessor business or landowner may be a potentially responsible party in
connection with any waste disposal site or facility.
3.28 Solvent Condition. As of the date hereof, and as
of the Closing Date, the amount of the "present fair salable value" of the
assets of the Seller exceeds or will exceed the amount of all "liabilities of
the Seller, contingent or otherwise", as such quoted terms are determined in
accordance with applicable federal and state laws governing determinations of
the insolvency of debtors.
3.29 Customer Orders. At June 30, 1997, the aggregate
amount of all accepted and unfilled orders placed by customers for the resale of
inventory entered into by Seller with respect to the Business is not less than
$________, the aggregate amounts to be received under all open purchase order or
contracts with customers relating to work-in-process is $__________ (exclusive
of accounts receivable) and the aggregate of all contracts for the purchase of
inventory by Seller with respect to the Business does not exceed $________. All
such contracts are set forth on Schedule 3.29.
3.30 Customers and Suppliers. Schedule 3.30 attached
hereto contains a complete and accurate list of the names and addresses and
nature of the relationship with (i) the twenty (20) largest customers of the
Business (in terms of sales dollars) during the most recent twelve (12) month
period, showing the approximate total sales in dollars by Seller to each of
these customers during such year; and (ii) the ten (10) largest suppliers of the
Business in terms of sales by Seller of products supplied by such supplier
during the most recent twelve (12) month period, showing approximate totals of
such sales in dollars by Seller for products supplied by each of these suppliers
during such year. Since the Balance Sheet Date, there has been no adverse change
in the business relationship of the Seller with any customer or supplier named
in Schedule 3.30 which would have a material adverse affect individually or in
the aggregate on the Business, the properties, prospects or condition (financial
or otherwise) of the Seller or the Business. Except as set forth on Schedule
3.30, Seller has not received communication from any customer or supplier named
in Schedule 3.30 of any intention to terminate or materially reduce purchases
from or supplies to Seller. Except as set forth on Schedule 3.30 attached
hereto, the relationships between Seller and the suppliers and customers listed
on such schedule are on a sound, commercial basis and Seller has no reason to
believe that the relationships with such
-32-
customers and suppliers will not continue without material change following the
Closing. Except as set forth on Schedule 3.30, there are no commitments, special
arrangements, promotional agreements, advertising programs or similar
arrangements with any customers of Seller.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
to Seller, on which representations and warranties Buyer acknowledges Seller and
Stockholder will rely, and which representations and warranties shall survive
Closing for the period set forth in Section 14.9 hereof, as follows:
4.1 Organization, Good Standing and Corporate Power.
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware. Buyer has the corporate power to carry
on its business as it is now being conducted and to own, lease and operate the
properties and assets used in connection therewith. Buyer has full corporate
power to purchase and take title to the Purchased Assets from Seller and to
perform the other covenants of Buyer under this Agreement.
4.2 Authorization for Agreement. All corporate
approvals necessary to the execution, delivery and performance of this Agreement
by Buyer have been obtained, there are no certificate of incorporation, by-law
or other corporate restrictions which would prevent Buyer from performing fully
its obligations under this Agreement and this Agreement constitutes the valid
and binding obligation of Buyer.
4.3 Validity of Contemplated Transactions. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement will not (i) violate or conflict
with the provisions of the certificate of incorporation or by-laws of Buyer or
the provisions of any note, indenture, security agreement, lease, guaranty or
other agreement or instrument to which the Buyer is a party or by which it is
bound, or (ii) result in a breach or violation by Buyer of the provisions of any
law or regulation or any order, injunction, judgment or decree of any court,
governmental authority or regulatory agency which is applicable to Buyer.
4.4 Authorization by Governmental Entities. No
governmental license, permit or authorization, and no registration, declaration
or filing with any court, governmental authority or regulatory agency, is
required as a condition to the valid and binding execution, delivery and
performance of this Agreement by Buyer.
-33-
4.5 Litigation. There is no suit, action, dispute,
claim, arbitration or legal, administrative or other proceeding or governmental
investigation pending or, to the knowledge of Buyer, threatened against Buyer,
its properties or business which might reasonably be expected to affect
adversely or restrict the ability of Buyer to consummate the transactions
contemplated hereby, and, to the knowledge of Buyer, no basis for any such suit,
action, dispute, claim or proceeding exists.
5. NO BROKERS. Except for an investment banking or advisory
fee to be paid to Xxxxx Xxxxxxx, or a firm with which he is affiliated, by
Seller or Stockholder, and for which Buyer has no liability or responsibility,
Buyer and Seller each represent and warrant to the other that all negotiations
relative to this proposed transaction have been carried on by it directly
without the intervention of any person, firm, corporation or entity who or which
may be entitled to any brokerage fee or other commission in respect of the
consummation of the transactions contemplated hereby; and Seller and the
Stockholder, on the one hand, and Buyer on the other, each agree to indemnify
and hold the other harmless against any and all claims, losses, liabilities or
expenses which may be asserted against the other as a result of either of their
dealings, arrangements or agreements with any such person, firm, corporation or
entity in contravention of the foregoing representation and warranty.
6. COVENANTS OF THE PARTIES.
6.1 Buyer's Access to Information and Records. Buyer
shall have the right to make or cause to be made prior to the Closing Date such
investigation of the business and properties of Seller and of its financial
condition as Buyer deems necessary or advisable to familiarize itself with such
matters. Such investigation shall include telephone calls and/or meetings (to be
established by Seller) with Seller's customers, subcontractors, entities for
which Seller provides manufacturer's representative services, lessors and
suppliers identified in Schedule 6.1 hereof for the purpose of verifying that
the business relationship currently maintained by Seller with such entities are
on a sound commercial basis and will continue without change following the
Closing and that such entities will consent, in writing, to the assignment of
their contract with Seller to Buyer contemporaneously with the Closing. The
written consent to assignment shall be in a form, and contain terms, reasonably
acceptable to Buyer. Seller and Stockholder shall assist Buyer in speaking with
or meeting with Seller's customers and suppliers, and will participate in such
meetings or calls. Such investigation shall be conducted by Buyer so as not to
interfere with Seller's normal operation of the Business and shall be so
undertaken in accordance with such other procedures
-34-
as may be established by agreement among the designated representatives of
Seller and Buyer. Subject to the foregoing, Seller agrees to permit Buyer and
its authorized representatives, including legal counsel and independent
accountants, upon reasonable notice, to have full access during normal business
hours to the properties, inventories, facilities, records, contracts and
documents of the Seller. Seller and its officers will furnish to Buyer such
financial and operating data and other information on the properties of the
Seller as Buyer shall from time to time reasonably request. In connection with
Buyer's investigation, Seller shall furnish Buyer complete and current copies of
such of the documents and records referred to herein as Buyer may from time to
time request. In the event of the termination of this Agreement, Buyer will
deliver to Seller all documents, work papers and other materials obtained from
Seller which remain in Buyer's possession or the possession of third parties to
whom they were delivered by Buyer relating to Seller or the transactions
contemplated hereby, whether so obtained before or after the execution hereof.
Buyer will not use any information so obtained from Seller and will not disclose
any such information to any third party, except that such restrictions shall not
apply to any information (i) which is in or comes into the public domain other
than by the act or omission of Buyer, its agents, employees, or representatives,
(ii) which was in the possession of Buyer before the commencement of
negotiations with Seller relating to this Agreement, (iii) which pertains to the
Business if the transactions contemplated hereby shall have been consummated,
(iv) which at any time lawfully comes into the possession of Buyer from third
parties who have a right to disclose such information otherwise than in
connection with this Agreement, or (v) which is required to be disclosed by
court order, subpoena or other similar judicial or administrative process.
6.2 Parties' Access to Records After Closing. Seller
and the Stockholder acknowledge that all customer lists, records and other
information pertaining to the Business and its customers which is included in
the Purchased Assets is proprietary, confidential information and that on and
after the Closing Date, all such lists, records and information shall be the
property of Buyer. Buyer and Seller each agree to preserve until December 31,
2001, all records in its possession relating to any of the assets, liabilities
or business of the Business for all time periods hereof ended on or prior to the
Closing Date, or to the transactions contemplated herein. In the event that
either party needs access to such records in the possession of the other party
relating to any of the assets, liabilities or business of the Seller or to the
transactions contemplated herein for the purpose of preparing income tax returns
or for complying with any audit request, subpoena or other investigative demand
by any governmental authority or for any civil litigation or any other
legitimate purpose not injurious to the other party, each
-35-
party will allow representatives of the other party reasonable access to such
records during normal business hours at such party's place of business for the
sole purpose of obtaining information for use as aforesaid and will permit such
other party to make extracts and copies thereof as may be necessary or
convenient and, if required for such purpose, to have access to and copies of
original documents (at the requesting party's expense).
6.3 Prorations.
A. With respect to those charges (including,
without limitation, lease payments, real estate taxes, water and sewer rents, if
any, utility charges, telephone bills, and similar items) which relate to a
period both prior to and subsequent to the Effective Date, other than any such
items included within the Liabilities, any invoices or statements received by
either party which cover such period shall be prorated by Buyer in good faith
between Buyer and Seller according to the number of working or calendar days, as
applicable, in the period covered by such invoice or statement during which
Buyer and Seller, respectively, operated the Business and each shall pay its
allocable share thereof, either directly or by way of reimbursement if the other
party shall have paid the same, upon receipt of an invoice therefor or evidence
of such payments, as applicable.
B. At the Closing, Seller and Buyer shall
adjust as necessary for any and all wages and payroll taxes (i) either paid by
Seller for periods subsequent to the Effective Date for the benefit of Buyer
and/or those employees of Seller who are employed by Buyer subsequent to the
Effective Date or (ii) incurred by Seller and paid by Buyer and relating to
periods prior to the Effective Date, and shall adjust for other
employment-related expenses with respect to such employees, other than any such
items included within the Assumed Liabilities.
6.4 Bulk Sales and Transfer Taxes.
A. Buyer hereby waives compliance by Seller
or Stockholder with the requirements of any and all laws relating to bulk sales
and transfers; and as consideration for such waiver, Seller and the Stockholder,
jointly and severally, agree to indemnify Buyer for any loss resulting from any
claim by any creditor of Seller under any such law, except to the extent such
claim is in respect of a Liability assumed by Buyer hereunder. Seller further
agrees to timely pay its account creditors with respect to liabilities not being
assumed by Buyer hereunder.
B. All transfer taxes of any kind, including
state and local sales taxes, if any, and any and all
-36-
recording and/or filing fees arising from or in connection with the transactions
contemplated hereunder, shall be paid by Seller.
6.5 Restrictive Covenant; Injunctive Relief. The
parties understand and agree that it is the intention of Buyer to pursue and
expand the Business, and to expand markets and marketing activities utilizing
the Purchased Assets beyond those engaged in by Seller. Therefore, Seller and
the Stockholder expressly agree that for a period of four (4) years from and
after the Closing Date, neither Seller nor the Stockholder will, within the
United States, (i) directly or indirectly, engage in, be employed by, be a
consultant to, invest in, acquire, or itself commence, any business which shall
compete with the Business as it is currently conducted, or (ii) solicit or hire
any employees of Seller hired by Buyer in accordance with the provisions of
Section 6.7 hereof. Seller and the Stockholder acknowledge that the restrictions
contained in this covenant, in view of the nature of the business activities in
which Buyer intends to utilize the Purchased Assets, are reasonable and
necessary in order to protect the legitimate interests of Buyer, and that any
violation thereof would result in irreparable injuries to Buyer. Seller and the
Stockholder therefore acknowledge that, in the event of a breach or threatened
breach by it of the provisions of this paragraph, Buyer shall be entitled to
obtain from any court of competent jurisdiction, appropriate injunctive relief
restraining Seller or the Stockholder from any violation of the restrictive
covenant contained in this paragraph. Nothing herein contained shall be
construed as prohibiting Buyer from pursuing any other remedies available to it
for such breach or threatened breach, including recovery of damages and an
equitable accounting of all earnings, profits and other benefits arising from
such violation, from Seller or the Stockholder.
6.6 Competing Offers. From the date of this Agreement
until the Closing or termination hereof, neither Seller nor the Stockholder
shall solicit or encourage inquiries or proposals with respect to, or furnish
any information relating to or participate in any negotiations or discussions
concerning, any acquisition or purchase of any portion of the Purchased Assets,
other than as contemplated by this Agreement, except those which are consented
to in writing by Buyer in its sole discretion; and to notify Buyer immediately
if any such inquiries or proposals are received by, or such information is
requested from, or any such negotiations or discussions are sought to be
initiated with Seller or the Stockholder.
6.7 Employees. On the Closing Date, Buyer shall hire
all the employees of the Business then employed and not on leave. With respect
to the employees of Seller which Buyer hires, Seller shall pay all salary,
benefits or similar items owing to such employees and accruing through the
Closing Date, and Buyer shall receive a credit, at Closing, for all accrued
-37-
vacation and other benefits owing to such employees which benefits have not
theretofore been discharged by Seller, in connection with the consummation of
the transaction contemplated herein. In addition, at the time of Closing, all
pension, bonus, salary, commission, car allowance, and travel and entertainment
expenses or other benefits owing to Seller's employees and not credited to Buyer
as aforesaid shall be discharged by Seller in accordance with the terms of the
agreements under which any such amounts are due. Buyer shall give Seller's
employees who are hired by Buyer in accordance with the terms of this Section
credit for such employees years of service with Seller in determining such
employees' entitlement to vacation and other similar employee items (excluding
pensions) provided by Buyer. Buyer shall assume all obligations accruing after
the Closing Date with respect to Seller's employee benefit plans and shall
become the sponsor of Seller's 401(k) plan.
6.8 Collection, Allocation of Accounts Receivable
Relations with Customers. After Buyer has been paid all amounts owing to it
under Section 2.1 hereof, and if requested by Seller, Buyer shall, for a period
of six (6) months after Closing, assist Seller in collecting Seller's accounts
receivable relating to the Business which arose prior to Closing. Any account
receivable of Seller which is collected by Buyer after Buyer has been paid all
amounts owing to it under Section 2.1 hereof shall be paid to Seller weekly for
all checks which cleared the previous week. Assistance by Buyer shall consist of
making telephone calls and writing letters, from time to time, as requested by
Seller; provided, however, that Buyer shall not be required to institute
litigation, or to undertake any other action on Seller's behalf if Buyer deems
such other action not to be in its best interest. With respect to amounts
received from customers which have receivables owing to both Seller and Buyer,
such amounts shall be applied to the oldest receivable, unless (i) the
remittance indicates the invoice to which it is to be applied, in which case it
will be applied to that invoice, or (ii) either Buyer or Seller is aware of a
dispute with respect to any specific receivable, in which case it will be
applied to the next oldest receivable. At the termination of the collection
period set forth herein, all uncollected accounts will be turned over by Buyer
to Seller, together with copies of Buyer's records, if any, relating to
collection.
6.9 Further Assurances; Post Closing Assistance. At
the Closing, and from time to time thereafter, Seller and Stockholder shall, at
the request of Buyer, take all action necessary to put Buyer in actual
possession and operating control of the Purchased Assets, and shall execute and
deliver to Buyer such further instruments of assignment, consent, transfer and
conveyance, and take such other actions, as Buyer or counsel for Buyer may
reasonably request, in order more effectively to transfer and convey the
Purchased Assets and the Business to
-38-
Buyer. Seller shall, at the request of Buyer, cooperate with Buyer in sending a
notice to Seller's customers and suppliers to assist Buyer in continuing to
enjoy good relationships with such customers and suppliers.
6.10 Financial Information for Form 8-K. On or before
September 12, 1997, Seller shall cause to be prepared and delivered to Buyer
financial statements for the Seller and related documents meeting the
requirements of Item 7(a) of Securities and Exchange Commission (the "SEC") Form
8-K (the "Item 7(a) Requirements"), including without limitation the following
documents (in each case including such number of signed original copies as Buyer
may reasonably request):
(i) balance sheets for the Seller at
December 31, 1996 and statements of operations, cash flows and changes in equity
for the Seller for the year ended December 31, 1996, in each case audited by
Xxxxxxxxx Downs & Co., Inc. and including notes thereto (the "Annual Financial
Statements"); provided however that the Annual Financial Statements may consist
of statements of assets and liabilities and statements of income and expense for
the Seller at the relevant dates and for the relevant periods, in each case
audited by Xxxxxxxxx Xxxxx & Co., Inc. and including notes thereto, if the SEC
agrees in advance that such statements will satisfy the Item 7(a) Requirements
for Buyer's Form 8-K for this transaction;
(ii) a manually signed accountants' report
from Xxxxxxxxx Downs & Co., Inc. with respect to the Annual Financial
Statements;
(iii) a manually signed consent of Xxxxxxxxx
Xxxxx & Co., Inc. to the inclusion of the Annual Financial Statements and
Xxxxxxxxx Downs & Co., Inc.'s report thereon in the Form 8-K to be filed by
Buyer with respect to its acquisition of the Assets;
(iv) unaudited balance sheets for the Seller
at March 31, 1997 and unaudited statements of operations, cash flows and changes
in equity for the six-month periods ended March 31, 1997 for Seller, in each
case including notes thereto (the "Interim Financial Statements"); provided
however that the Interim Financial Statements may consist of statements of
assets and liabilities and statements of income and expense at the relevant
dates and for the relevant periods, in each case including notes thereto, if the
SEC agrees in advance that such statements will satisfy the Item 7(a)
Requirements for Buyer's Form 8-K for this transaction; and
(v) a certificate of Seller, executed by the
Chief Financial Officer of Seller and a Director of Seller, dated the date the
Annual Financial Statements and Interim Financial
-39-
Statements are delivered to Buyer, certifying that such financial statements (A)
are true, complete and correct; (B) are in accordance with the books and records
of Seller; and (C) fairly present the financial position and results of
operation of the Seller as of the dates and for the periods indicated (and in
accordance with generally accepted accounting principles consistently applied to
the extent applicable).
7. SELLER'S AND STOCKHOLDER'S OBLIGATIONS UNTIL CLOSING.
7.1 Conduct of the Business; Negative Covenants.
Between the date of execution of this Agreement and the Closing Date (the
"Interim Period"), neither Seller nor the Stockholder will, except as otherwise
provided herein, do any of the following with regard to the Business, without
the prior written consent of Buyer:
A. Conduct the Business otherwise than in
the regular and ordinary course in accordance with the same business practices
previously followed by it;
B. Increase the amount of compensation
currently being paid to any employee or agent, or enter into or provide for any
new bonus arrangements with any employee or agent;
C. Make or commit to make any expenditure
for fixed assets exceeding $1,000 without first obtaining the written consent of
Buyer;
D. Make any contract, commitment, or
liability extending beyond thirty (30) days or enter into any other transaction,
in either case other than in the ordinary course of business;
E. Transfer any of the assets which are
included in the Purchased Assets except in the ordinary course of business; or
F. Violate the terms of any lease or
contract connected with the Business.
7.2 Conduct of the Business: Affirmative Covenants.
During the Interim Period, Seller and Stockholder will:
A. Without making any commitment on behalf
of Buyer, except as provided for herein, use its best efforts to preserve
Seller's business organization intact, and except as may otherwise be requested
by Buyer, keep available to Buyer the services of Seller's present employees,
and preserve for Buyer
-40-
the goodwill of Seller's customers and others having business relations with
Seller;
B. Conduct the Business in all material
respects in accordance with the laws, rules and regulations of all applicable
local, State and Federal governments and consistent with present practice;
C. Pay or provide for all social security,
withholding, sales and unemployment insurance taxes owed by Seller to all
applicable local, State and Federal governments;
D. Pay wages and all other amounts, if any,
to become due during the Interim Period on account of health and welfare
insurance, accrued vacation and holiday pay and other fringe benefits;
E. Maintain the present insurance coverage
of the Business in effect;
F. Duly withhold and collect all taxes and
other assessments and liens which Seller is required by law to withhold or to
collect for periods ending prior to the Closing Date and either pay over such
amounts to the proper governmental authorities or hold such amounts in
segregated accounts pending payment, as Buyer shall determine; and
G. In cooperation with Buyer as required,
commence all reasonable action required hereunder (i) to obtain all applicable
permits, licenses, certificates and other governmental authorizations or
approvals necessary for Buyer to carry on the operations as presently conducted,
and (ii) to obtain all applicable consents, approvals and agreements of, and to
give all notices and make all filing with, any third parties (including, but not
limited to, Seller's vendors and suppliers) as may be necessary to consummate
the transactions contemplated hereby, by a date early enough to allow the
transactions to be consummated by the Closing Date; provided, however, that
Buyer shall not be required to agree to any unfavorable modification of any
existing contract or agreement in order to obtain such consent.
8. CLOSING. The closing of the purchase and sale contemplated
by this Agreement (hereinafter the "Closing") shall take place either at the
offices of White and Xxxxxxxx, 0000 Xxx Xxxxxxx Xxxxx, Xxxxxxxxxxxx, XX, or at
Buyer's office in Conshohocken, Pennsylvania, as the parties shall agree, in
either event at 10:00 a.m. on September 23, 1997, or at such other place, time,
and date no later than September 30, 1997, as shall be fixed by mutual agreement
between the parties, time being of the essence. The date of Closing is
hereinafter referred to as
-41-
the "Closing Date." The Closing shall be deemed to be effective as of 11:59 p.m.
on the Closing Date; provided, however, that for accounting and related purposes
the Closing will be deemed to have occurred at 11:59 p.m. on June 30, 1997 (the
"Effective Date"). All proceedings to be taken and all documents to be executed
and delivered by all parties at the Closing shall be deemed to have been taken
and executed simultaneously, and no proceedings shall be deemed taken, nor any
documents executed or delivered until all have been taken, executed, and
delivered.
9. CONDITIONS OF CLOSING.
9.1 Conditions to Buyer's Obligations. The
obligations of Buyer under this Agreement are subject to the satisfaction of all
of the following conditions as of the Closing Date (any of which may be waived
in writing in whole or in part by Buyer):
A. all representations and warranties of
Seller and the Stockholder contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date with the same effect as
though given on and as of the Closing Date;
B. Seller and the Stockholder shall have
fully performed and observed, in all material respects, its obligations and
covenants set forth in this Agreement which are to be performed or observed by
it on or prior to the Closing Date and shall tender the required documents,
instruments and certificates at the Closing as set forth in subparagraph 10.1 or
otherwise required hereby;
C. the consummation of the transactions
contemplated by this Agreement shall not then be subject to an injunction or
temporary restraining order;
D. Buyer, Seller and the Landlord of the
Premises shall have entered into an Extension, Assignment and Assumption
Agreement, in form and substance satisfactory to Buyer, in which, inter alia,
Buyer shall have obtained the written consent of the Landlord to the assignment
of the Lease to Buyer, Landlord shall have extended the term of the Lease
through July 31, 2002, with the rental rate for such renewal term to be at the
lower of (x) the then existing market rate or (y) $11,109 per month, adjusted,
annually, to reflect any increase in the consumer price index between July, 2001
and July of each year of the renewal term, and the Landlord shall have
represented to Buyer that (i) no default exists under the Lease, (ii) all
amounts owing under the Lease have been fully and timely paid, and (iii) if the
Lease were terminated at Closing, the Landlord would accept the Premises in
their present condition without
-42-
assessment of any charges for damage to, or failure to repair, the Premises;
E. there shall not be any material adverse
change in the Purchased Assets or the Business from the Effective Date to the
Closing Date and, during that period, there shall not be any material loss by
fire or casualty, whether or not covered by insurance;
F. all consents, approvals and waivers from
governmental authorities, vendors, suppliers, parties to Assigned Contracts, and
other parties necessary to permit Seller to transfer the Purchased Assets and
the Business to Buyer as contemplated hereby, and to permit Buyer to acquire
such Purchased Assets and the Business shall have been obtained;
G. Buyer shall have completed the "due
diligence" review described in Section 6.1 hereof, with the results thereof
being satisfactory to Buyer in its absolute discretion;
H. Buyer shall have entered into a
Employment, Non-Compete and Confidentiality Agreement with Stockholder, the
terms and conditions of which shall be acceptable to Buyer;
I. Buyer shall have determined that the
customers of Seller to which Seller has made sales in any of the last two (2)
fiscal years aggregating more than five percent (5%) of its total sales in such
year will continue to do business with Buyer, after Closing;
J. The customers, subcontractors, entities
for which Seller provides manufacturer's representative services and suppliers
listed on Schedule 6.1 shall have consented to the assignment of their
contractual relationship with Seller to Buyer.
K. The employees listed on Schedule 3.14
shall have (i) consented to the assignment to Buyer of their employment
agreement with Seller, and (ii) executed and delivered to the Buyer a
Non-Compete and Confidentiality Agreement, all on terms satisfactory to Buyer.
L. Seller shall have delivered to Buyer
evidence that the security interests described in Schedule 3.6 hereof shall have
been terminated; and
M. Seller shall have delivered to Buyer the
opinion of its counsel, which counsel shall be reasonably acceptable to Buyer,
to the effect set forth in Sections 3.1 and 3.2 hereof, and, to the knowledge of
such counsel, to the effect
-43-
set forth in Sections 3.3, 3.4, 3.12 and 3.14 (excluding the first two sentences
thereof) hereof.
9.2 Conditions to Seller's Obligations. The
obligations of Seller under this Agreement are subject to the satisfaction of
the following conditions as of the Closing Date (any of which may be waived in
writing in whole or in part by Seller):
A. All representations and warranties of
Buyer contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though given on
and as of the Closing Date;
B. Buyer shall have fully performed and
observed, in all material respects, its obligations and covenants set forth in
this Agreement which are to be performed or observed by it on or prior to the
Closing Date and shall tender the required payments, documents, instruments and
certificates at the Closing as set forth in subparagraph 10.2 or otherwise
required hereby;
C. The consummation of the transactions
contemplated by this Agreement shall not then be subject to an injunction or
temporary restraining order;
D. Buyer, Seller and the Landlord of the
Premises shall have entered into an Extension, Assignment and Assumption
Agreement, in form and substance satisfactory to Buyer, in which, inter alia,
Buyer shall have obtained the written consent of the Landlord to the assignment
of the Lease to Buyer, Landlord shall have extended the time of the Lease
through July 31, 2002, with the rental rate for such renewal term to be at the
lower of (x) the then existing market rate or (y) $11,109 per month, adjusted,
annually, to reflect any increase in the consumer price index between July, 2001
and July of each year of the renewal term, and the Landlord shall have
represented to Buyer that (i) no default exists under the Lease, (ii) all
amounts owing under the Lease have been fully and timely paid, and (iii) if the
Lease were terminated at Closing, the Landlord would accept the Premises in
their present condition without assessment of any charges for damage to, or
failure to repair, the Premises; and
E. Stockholder shall have entered into an
Employment, Non-Compete and Confidentiality Agreement with Buyer.
10. CLOSING DOCUMENTS.
10.1 Seller's Obligations. It shall be a condition of
Buyer's requirement to close that at the Closing,
-44-
Seller shall deliver to Buyer the following, in such form as counsel for Buyer
may reasonably request:
A. A certificate of the President of Seller
and of the Stockholder that (a) the representations and warranties of Seller set
forth in this Agreement are true and correct in all material respects as of the
Closing Date with the same effect as though given on and as of the Closing Date,
and (b) Seller shall have fully performed and observed, in all material
respects, its obligations and covenants set forth in this Agreement which are to
be performed or observed by it on or prior to the Closing Date;
B. A certified copy of the resolutions of
the Board of Directors and the Shareholders of Seller approving this Agreement
and the transactions contemplated hereunder;
C. An executed copy of the Xxxx of Sale, and
such other documents as are, in the reasonable opinion of counsel for Buyer,
necessary or desirable to vest title to the Purchased Assets in Buyer;
D. Original copies of all consents to the
assignment of the written Assigned Contracts;
E. All closing adjustment payments, if any,
due from Seller hereunder;
F. A certificate of insurance evidencing
Seller's obtaining the insurance required by Section 1.4 hereof; and
G. Such other documents relating to the
transactions contemplated hereby as Buyer or its counsel may reasonably request.
10.2 Buyer's Obligations. It shall be a condition
of Seller's requirement to close that at the Closing, Buyer shall deliver to
Seller the following, in such form as counsel for Seller may reasonably request:
A. A certificate of the President or a Vice
President of Buyer that (i) the representations and warranties of Buyer set
forth in this Agreement are true and correct in all material respects as of the
Closing Date with the same effect as though given on and as of the Closing Date,
and (ii) Buyer shall have fully performed and observed, in all material
respects, its obligations and covenants set forth in this Agreement which are to
be performed or observed by it on or prior to the Closing Date;
-45-
B. A certified copy of the resolutions of
the Board of Directors of Buyer approving this Agreement and the transactions
contemplated hereunder;
C. An unendorsed certified or official bank
check payable to Seller in the amount described in Section 2.1 hereof (or wire
transferred immediately available U.S. funds in such amount);
D. All closing adjustment payments, if any,
due from Buyer hereunder; and
E. Such other documents relating to the
transactions contemplated hereby as Seller or its counsel may reasonably
request.
11. INDEMNIFICATION.
11.1 Seller's Indemnification.
A. Seller and the Stockholder, jointly and
severally, agree to indemnify and hold harmless Buyer from and after the Closing
Date against and in respect of the entire amount of all losses, liabilities,
claims, damages, costs and expenses of any kind, including reasonable attorneys'
fees, which Buyer may sustain by virtue of (i) any misrepresentation, breach of
warranty or nonfulfillment of any covenant on the part of Seller or the
Stockholder under this Agreement, or under any agreement executed in connection
with this Agreement, whether asserted by Buyer in its own right or asserted
against Buyer by a third party, or any allegation which, if true, would
constitute a misrepresentation, breach of warranty or non-fulfillment of any
such covenant on the part of Seller or the Stockholder, (ii) any claims of third
parties arising out of or relating to the ownership or operation of the
Purchased Assets or the Business by Seller prior to the Closing Date, or (iii)
any liabilities of Seller which are not assumed by Buyer pursuant to Section 1.4
hereof, whether accrued, absolute, contingent or otherwise, including but not
limited to any litigation, whether identified in any schedule attached to this
Agreement or otherwise.
B. Buyer shall promptly notify Seller and
Stockholder of the existence of any claim, demand, or other matter to which
Seller's or Stockholder's indemnification obligation hereunder would apply.
Seller and the Stockholder shall be permitted to defend the same at its own
expense and with reputable counsel of its own selection; provided, however, that
notice of the intention of Seller or Stockholder so to contest any claim shall
be delivered to Buyer within five (5) days from the date of notice thereof by
Buyer to Seller, and Seller or the Stockholder shall provide to Buyer security,
deemed adequate by
-46-
Buyer in its reasonable discretion, relating to Seller's or Stockholder's
ability to pay any amount found to be owing in connection with such claim.
Notwithstanding the assumption of the defense of any such claim by Seller or
Stockholder, Buyer shall have the right to fully participate in the defense
thereof at its own expense, with counsel of its choosing. If requested by Seller
or Stockholder, Buyer shall reasonably cooperate in contesting any such third
party claim which Seller or Stockholder elects to contest.
C. The rights of Buyer hereunder are
independent of and in addition to such rights and remedies of an equitable
nature as it may have (other than actions or proceedings seeking monetary
damages) for any misrepresentation, breach of warranty or failure to fulfill any
agreement or covenant hereunder on the part of Seller, including, without
limitation, the right to seek either specific performance or rescission and
restitution, none of which rights shall be affected or diminished hereby.
11.2 Buyer's Indemnification.
A. Buyer agrees to indemnify and hold
harmless Seller from and after the Closing Date against and in respect of the
entire amount of all losses, liabilities, claims, damages, costs and expenses of
any kind, including reasonable attorneys' fees, which Seller may sustain by
virtue of (i) any misrepresentation, breach of warranty or nonfulfillment of any
covenant on the part of Buyer under this Agreement, whether asserted by Seller
in its own right or asserted against Seller by a third party, or any allegation
which, if true, would constitute a misrepresentation, breach of warranty or
non-fulfillment of any such covenant on the part of Buyer, or (ii) any claims of
third parties arising out of or relating to the ownership or operation of the
Purchased Assets or the Business by Buyer on or subsequent to the Closing Date.
B. Seller shall promptly notify Buyer of the
existence of any claim, demand, or other matter to which Buyer's indemnification
obligation hereunder would apply. Buyer shall be permitted to defend the same at
its own expense and with reputable counsel of its own selection; provided,
however, that notice of the intention of Buyer so as to contest any claim shall
be delivered to Seller within five (5) days from the date of notice thereof by
Seller to Buyer. Notwithstanding the assumption of the defense of any such claim
by Buyer, Seller shall have the right to fully participate in the defense
thereof at its own expense, with counsel of its choosing. If requested by Buyer,
Seller shall reasonably cooperate in contesting any such third party claim which
Buyer elects to contest.
-47-
C. The rights of Seller hereunder are
independent of and in addition to such rights and remedies of an equitable
nature as it may have (other than actions or proceedings seeking monetary
damages) for any misrepresentation, breach of warranty or failure to fulfill any
agreement or covenant hereunder on the part of Buyer, including, without
limitation, the right to seek either specific performance or rescission and
restitution, none of which rights shall be affected or diminished hereby.
11.3 Limitation on Indemnification. Seller's,
Stockholder's and Buyer's indemnification liability under subparagraphs 11.1 and
11.2, respectively, relating to misrepresentations and breaches of warranties
made by Seller and Buyer hereunder shall be limited to claims asserted within
two years after the Closing Date except for claims involving actions,
liabilities, claims or demand asserted against Buyer, Seller or Stockholder by
third parties which claims are covered by the indemnification provisions hereof,
in which case the indemnification liability hereunder shall extend to claims
asserted not more than sixty (60) days after the expiration of the applicable
statute of limitations, if any, governing such claims.
11.4 Payment of Claims. Seller and the
Stockholder, on the one hand, and Buyer, on the other, shall pay to the other
the amount of established claims for indemnification within five (5) days after
the establishment thereof in cash, by certified check or other immediately
available funds. Any amounts not paid when due under this Section shall bear
interest from the due date thereof until the date paid at a rate equal to the
greater of (i) twelve percent (12%) per annum or (ii) three percent (3%) per
annum in excess of the "prime rate" of interest (as published in the Wall Street
Journal) as in effect from time to time.
11.5 Full Indemnification. The parties hereto
intend for the indemnification provisions of this Section to be construed as a
full indemnification in accordance with its terms, notwithstanding the use of
any "substantial" or "material" standard contained elsewhere in this Agreement.
12. TERMINATION. The obligation of the parties hereto
to consummate the purchase and sale contemplated hereby may be
terminated:
A. At any time by the mutual consent of
Buyer and Seller;
B. By Buyer, if the conditions set forth in
subparagraph 9.1 of this Agreement shall not have been satisfied
-48-
on or before September 30, 1997, and by Seller, if the conditions set forth in
subparagraph 9.2 of this Agreement shall not have been satisfied on or before
the Closing Date; or
C. By either Buyer or Seller, if on or
before September 30, 1997, the transactions contemplated by this Agreement are
enjoined by a court of competent jurisdiction and such injunction is final,
permanent and nonappealable.
In the event of the termination of this Agreement pursuant to this Section 12,
this Agreement shall become void and have no effect, without any liability on
the part of any party or its directors, officers of stockholders to any other
party (with respect to the payment of its expenses or otherwise), except as
provided in Section 5 or Section 6.1 hereof, which provisions shall survive the
termination of this Agreement. Notwithstanding the foregoing, a termination
pursuant to this Section 12 shall not relieve a party who deliberately and
willfully failed to comply with any agreement or covenant in this Agreement
prior to the date of termination, or who knowingly misrepresented or breached a
warranty, of liability for any such deliberate and willful failure to comply
with any agreement or covenant in this Agreement prior to the date of
termination or any knowing misrepresentation or breach of warranty, or
constitute a waiver of any claim with respect thereto.
13. RESCISSION. Seller and Stockholder have represented to
Buyer that the open contracts, or contracts-in-process, listed on Schedule 13
will all continue in full force and effect after Closing, with all benefits
thereunder to be realized by Buyer. In the event that any of the contracting
parties described on Schedule 13 notifies Seller, Buyer or Stockholder, within
ninety (90) days after Closing, that it desires to terminate its contract with
Seller as a result of the transaction described herein, or otherwise, Buyer may,
by delivering written notice to Seller within ten (10) days after it has been
notified of such event, elect to rescind this transaction. In the event Buyer
elects so to rescind the transaction, all amounts paid by Buyer to Seller or
Stockholder will immediately be repaid by Seller or Stockholder, as appropriate,
and Buyer will reconvey to Seller all assets conveyed to Buyer hereunder, and
each of Buyer and Seller shall take all such additional steps as shall be
necessary in order to put the parties back into the position that they were
prior to the Closing Date, and, after such actions have been taken and amounts
paid, neither Seller nor Buyer shall have any further obligations hereunder,
except as provided in Section 5 and Section 6.1 hereof.
-49-
14. OTHER PROVISIONS.
14.1 Public Announcements. Any announcements or
similar publicity with respect to this Agreement or the transactions
contemplated herein shall be at such time and in such manner as Seller and Buyer
shall agree, provided that nothing herein shall prevent either party upon notice
to the other (and the granting to the other of an opportunity to review and
comment on such announcement or release in advance) from making such public
announcements as such party's counsel may consider necessary or advisable in
order to satisfy that party's legal or contractual obligations in such regard.
14.2 Costs and Expenses. Each party hereto shall bear
its own costs and expenses in connection with this Agreement and the
transactions contemplated hereby, except that the cost incurred to Xxxxxxxxx
Downs, Seller's accountant, in preparing audited statements for Seller for 1996
shall be divided 50/50 between the Buyer and Seller, subject to the execution of
an engagement letter with Xxxxxxxxx Xxxxx which is acceptable to Buyer and
Seller.
14.3 Passage of Title and Risk of Loss. Legal title,
equitable title and risk of loss with respect to the property and rights to be
transferred hereunder shall not pass to Buyer until the property or right is
transferred at the Closing hereunder; provided, however, that if any loss of any
of the Purchased Assets occurs between the date hereof and the Closing, and if
Buyer proceeds with the Closing without reduction of the Purchase Price on
account of such loss, Buyer shall be entitled to the proceeds of any insurance
payable with respect to the loss of such Purchased Assets.
14.4 Notices. All notices, requests, demand and other
communications required or permitted hereunder shall be in writing, or if
transmitted by facsimile, confirmed in writing within twenty-four hours of such
facsimile transmission, and shall be deemed to be duly given (i) when delivered,
if delivered by hand, (ii) when transmitted, if delivered by facsimile, or (iii)
three days after mailing, if mailed certified or registered first class mail,
postage prepaid, properly addressed to the party entitled to receive such notice
at the address stated below:
If to Buyer: New Xxxxx Co., Inc.
0000 Xxxxxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
Chairman
Telecopier No.: (000) 000-0000
-50-
With a copy to: White & Xxxxxxxx
One Liberty Place, Suite 1800
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
If to Seller: Xxxxx Co.
000 Xx. Xxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
If to Stockholder: Xx. Xxxxxx X. Xxxxxxx
000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000-0000
Telecopier No.: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxxx &
Xxxxxxx, LLC
00xx Xxxxx, 000 Xxxxx Xxxxxx
USX Tower
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Esquire
Telecopier No.: (000) 000-0000
And to: Xx. Xxxx X. Xxxxxx
Xxxxxxxxx Xxxxx & Co., Inc.
0000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Each party may designate by Notice to the other in the manner set forth herein,
a new address to which any notice may thereafter be so given, served, or sent.
14.5 Assignment. This Agreement or any right
hereunder shall not be assigned by Buyer, Seller or Stockholder without the
prior written consent of the other party hereto, and if either party shall
attempt to assign this Agreement or any right hereunder without the prior
written consent of the other party hereto, then this Agreement shall, at the
option of the party whose consent was not obtained, immediately become null and
void and without legal effect and all rights and obligations hereunder shall
cease and terminate; provided, however, that Buyer may assign its rights
hereunder to any affiliate of CECO Filters, Inc., and provided further that
Buyer may grant a collateral assignment of its rights hereunder to CoreStates
Bank, to which collateral assignment Seller and the Stockholder shall, if
requested, consent. No assignment by Buyer, Seller or Stockholder of this
Agreement or any of its rights hereunder,
-51-
whether or not consented to by the other party hereto, shall relieve the
assigning party of any of its obligations hereunder, nor, if assigned by Buyer,
shall such assignment violate the terms of the Lease. Subject to the foregoing
provisions of this Section 13.5, this Agreement shall be binding upon and enure
to the benefit of the parties hereto and their respective successors and
assigns.
14.6 Schedules and Exhibits. The Schedules and
Exhibits attached to this Agreement are made a part of this Agreement.
14.7 Integration, Amendment and Modification. This
Agreement, including the Schedules and Exhibits attached hereto, represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter. Except as specifically set forth in this
Agreement, neither party makes to the other any representation or warranty,
whether express or implied, of any kind whatsoever. This Agreement may not be
amended, modified, supplemented or changed in any respect except by a writing
duly executed by Seller, Buyer and Stockholder.
14.8 Waiver and Discharge. The failure of any party
hereto to enforce at any time any of the provisions of this Agreement shall in
no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part thereof or the right of any
party thereafter to enforce each and every provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
14.9 Survival of Representations and Warranties. All
representations and warranties of either party contained herein shall survive
the Closing Date for the period or periods set forth in Section 11.3 hereof,
regardless of any investigation made by the other party or on its behalf.
14.10 Captions. The captions appearing in this
Agreement are inserted only as a matter of convenience and as a reference and in
no way define, limit or describe the scope or intent of this Agreement or any of
the provisions hereof.
14.11 Law Governing. This Agreement shall be governed
in all respects, whether as to validity, construction, interpretation, capacity,
performance or otherwise, by the internal laws of the Commonwealth of
Pennsylvania in which it has been executed and in which it has a situs, without
regard to any "conflict of law" rules; provided, however, that with respect to
matters of law concerning the internal corporate affairs of any corporate entity
which is a party to or the subject of this
-52-
Agreement, the law of the jurisdiction under which the respective entity derives
its powers shall govern. If any provision of this Agreement other than those
contained in Section 6.5 shall be held invalid by a court with jurisdiction over
the parties to this Agreement, then and in that event, such provision shall be
deleted from the Agreement, which shall then be construed to give effect to the
remaining provisions thereof. If a court of competent jurisdiction shall find
Section 6.5 or any provision thereof unenforceable said court may modify the
same as more specifically described therein. Except as aforesaid, if any one or
more of the provisions contained in this Agreement or in any other instrument
referred to herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then and in that event, to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement or any other such instrument.
14.12 Benefit of Parties. Except as specifically
provided herein, nothing in this Agreement shall be construed to give any person
or entity other than Seller, Stockholder and Buyer any legal or equitable right,
remedy or claim under this Agreement, and this Agreement shall be for the sole
and exclusive benefit of Seller, Stockholder and Buyer.
14.13 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement as of the day and year first above written.
NEW XXXXX CO., INC.
By:/s/ Xxxxxx X. Xxxx
--------------------------------
Xxxxxx X. Xxxx, Chairman
XXXXX CO.
By:/s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx, President
/s/ Xxxxxx X. Xxxxxxx
--------------------------------
XXXXXX X. XXXXXXX
-53-
