Exhibit 2.2
Stock Purchase and Redemption Agreement among Owosso Corporation, MEPC, L.L.C.,
the Landover Company (d/b/a "Dura-Bond Bearing Company"), Engine Power
Components, Inc., and Melling Tool Co., effective as of October 29, 2000.
STOCK PURCHASE AND REDEMPTION AGREEMENT
among
Owosso Corporation, a Pennsylvania corporation, as Seller
and
MEPC, L.L.C., a Michigan limited liability company, as Purchaser
and
The Landover Company (d/b/a "Dura-Bond Bearing Company")
and
Engine Power Components, Inc., a Michigan corporation ("EPC")
and
Melling Tool Co., a Michigan corporation ("Melling Tool")
Effective as of
October 29, 2000
TABLE OF CONTENTS
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1. SALE OF SHARES..........................................................................................2
2. PURCHASE PRICE AND PAYMENT..............................................................................2
2.1 Purchase Price.................................................................................2
2.2 Payment........................................................................................4
3.
3.1 The Closing....................................................................................5
3.2 Closing Adjustments............................................................................5
3.3 Order of Transactions..........................................................................5
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................................6
4.1 Corporate Organization and Status..............................................................6
4.2 Qualification..................................................................................6
4.3 Authority to Execute and Perform Agreement; Authorization; Binding Effect; No Breach...........6
4.4 Authorized and Issues Capital; Options and Warrants............................................7
4.5 Title..........................................................................................7
4.6 Financial Statements...........................................................................7
4.7 No Material Adverse Effect.....................................................................8
4.8 Compliance with Laws...........................................................................8
4.9 Litigation.....................................................................................8
4.10 Real Property..................................................................................9
4.11 Inventory......................................................................................9
4.12 Accounts Receivable...........................................................................10
4.13 Contracts and Other Agreements................................................................10
4.14 Trade Secrets, Patents, Trademarks, Etc.......................................................11
4.15 Personal Property.............................................................................11
4.16 Liabilities...................................................................................11
4.17 Suppliers and Customers.......................................................................11
4.18 Employee Benefit Plans........................................................................11
4.19 Employee Relations............................................................................12
4.20 Products......................................................................................13
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TABLE OF CONTENTS
(continued)
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4.21 Absence of Changes............................................................................13
4.22 Absence of Certain Commercial Practices.......................................................14
4.23 Insurance.....................................................................................14
4.24 Taxes.........................................................................................14
4.25 Environmental Matters.........................................................................14
4.26 Operation in Ordinary Course..................................................................16
4.27 Transactions with Affiliates..................................................................16
4.28 Accounts; Funds...............................................................................16
4.29 Subsidiaries..................................................................................16
4.30 Books and Records.............................................................................16
4.31 Material Misstatements or Omissions...........................................................17
4.32 Representations and Warranties................................................................17
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................................................17
5.1 Due Incorporation.............................................................................17
5.2 Qualification of the Purchaser................................................................17
5.3 Corporate Power of the Purchaser; Authorization; Binding Effect; No Conflict..................17
5.4 Concerning the Shares.........................................................................18
5.5 Representations and Warranties................................................................18
5.6 Capital Structure.............................................................................18
6. COVENANTS OF THE SELLER................................................................................18
6.1 Continuance of Business.......................................................................18
6.2 Access to Information.........................................................................19
6.3 Confidentiality; Consultation Regarding Disclosure............................................19
6.4 Computer Support..............................................................................19
7. COVENANTS OF THE PURCHASER.............................................................................19
7.1 Confidentiality; Consultation Regarding Disclosure............................................19
7.2 Mexican Affiliate Receivable..................................................................20
7.3 Stay Bonuses..................................................................................20
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TABLE OF CONTENTS
(continued)
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8. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS....................................................20
8.1 Legal Proceedings.............................................................................20
8.2 Representations and Warranties on Closing Date................................................20
8.3 Terms, Covenants and Conditions...............................................................21
8.4 Consents, Approvals, Etc......................................................................21
8.5 No Material Adverse Change....................................................................21
8.6 Litigation....................................................................................21
8.7 Opinion of Counsel............................................................................21
8.8 Certain Financial Matters.....................................................................21
8.9 Environmental Audit...........................................................................22
8.10 Employment Contracts..........................................................................22
8.11 Opinion of Bond Counsel.......................................................................22
8.12 Due Diligence.................................................................................22
9. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS.......................................................22
9.1 Legal Proceedings.............................................................................22
9.2 Representations and Warranties on Closing Date................................................22
9.3 Terms, Covenants and Conditions...............................................................22
9.4 Litigation....................................................................................22
9.5 Opinion of Counsel............................................................................23
9.6 No Material Adverse Change....................................................................23
9.7 Certain Financial Matters.....................................................................23
10. ACTIONS TO BE TAKEN AT THE CLOSING.....................................................................23
10.1 Delivery of Shares............................................................................23
10.2 Payment for Shares............................................................................23
10.3 Opinions of Counsel...........................................................................23
10.4 Other Documents...............................................................................23
11. SURVIVAL...............................................................................................24
11.1 Survival of Representations and Warranties; Certain Other Matters.............................24
11.2 Non-Competition...............................................................................24
11.3 Confidential Information......................................................................24
11.4 Equitable Relief..............................................................................25
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TABLE OF CONTENTS
(continued)
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12. INDEMNIFICATION........................................................................................25
12.1 Obligation to Indemnify by the Seller.........................................................25
12.2 Limitations on Indemnification by the Seller..................................................25
12.3 Obligations to Indemnify by the Purchaser.....................................................25
12.4 Limitations on Indemnification by the Purchaser...............................................26
12.5 Procedure.....................................................................................26
13. TERMINATION OF AGREEMENT...............................................................................27
13.1 Termination...................................................................................27
13.2 Effect of Termination.........................................................................27
14. MISCELLANEOUS..........................................................................................27
14.1 Consent to Jurisdiction; Arbitration of Disputes..............................................27
14.2 Expenses......................................................................................28
14.3 Further Assurances............................................................................28
14.4 Indemnification of Brokerage..................................................................28
14.5 Certain Definitions...........................................................................29
14.6 Knowledge.....................................................................................29
14.7 Severability..................................................................................29
14.8 Notices.......................................................................................30
14.9 Entire Agreement..............................................................................31
14.10 Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies....................31
14.11 Governing Law.................................................................................31
14.12 Binding Effect; no Assignment.................................................................31
14.13 Counterparts..................................................................................31
14.14 Exhibits and Schedules........................................................................32
14.15 Headings......................................................................................32
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Schedules to Stock Purchase Agreement
Schedule 2.2 Escrow Agreement
Schedule 4.2 Qualifications
Schedule 4.3 Approvals and Consents
Schedule 4.4 Outstanding Securities
Schedule 4.6 Financial Statements
Schedule 4.8 Compliance
Schedule 4.9 Litigation
Schedule 4.10 Owned and Leased Real Property
Schedule 4.13 Contracts and Other Agreements
Schedule 4.14 Technology, Patents, Copyrights, Trademarks
Schedule 4.15 Personal Property
Schedule 4.18 Employee Benefit Plans
Schedule 4.19 Employee Relations Issues
Schedule 4.21 Material Changes
Schedule 4.23 Insurance
Schedule 4.24 Taxes
Schedule 4.25 Environmental Disclosures
Schedule 4.27 Transactions with Affiliates
Schedule 4.28 Accounts; Funds
Schedule 4.29 Subsidiaries
Schedule 8.7 Opinion of Counsel
Schedule 9.5 Opinion of Counsel
STOCK PURCHASE AND REDEMPTION AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated the 2nd day of
November, 2000 by and between Owosso Corporation, a Pennsylvania corporation
("Seller"), MEPC, L.L.C., a Michigan limited liability company ("Purchaser"),
The Landover Company (doing business as "Dura-Bond Bearing Company")
("Company"), Engine Power Components, Inc., a Michigan corporation ("EPC"), and
Melling Tool Co., a Michigan corporation ("Melling Tool").
BACKGROUND
----------
WHEREAS, there is 1 share of Class A Voting common stock of the Company
outstanding and 99 shares of Class B Non-voting common stock of the Company
outstanding (collectively "Common Stock"), and all of such Common Stock is owned
by Seller;
WHEREAS, the Seller has agreed to sell and the Purchaser has agreed to
purchase one share of the Class A Voting Common Stock of the Company ("Purchased
Share");
WHEREAS, the Purchaser shall cause the redemption of all of the
outstanding Class B Non-Voting Common Stock of the Company ("Redeemed Shares");
and
WHEREAS, on the Closing Date (as hereafter defined), the Purchased
Share and the Redeemed Shares shall constitute one hundred percent (100%) of the
presently issued and outstanding shares of Common Stock (such shares of Common
Stock are hereinafter collectively referred to as the "Shares").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Seller, the Company, the Purchaser, EPC, and
Melling Tool hereby agree as follows:
1. SALE OF SHARES.
Subject to the terms and conditions of this Agreement, at the Closing
(as hereafter defined): (i) the Seller hereby agrees to sell the Purchased Share
to the Purchaser, and the Purchaser hereby agrees to purchase the Purchased
Share from Seller, and (ii) Purchaser agrees to cause the redemption of all of
the Redeemed Shares.
2. PURCHASE PRICE AND PAYMENT.
2.1 Purchase Price.
(a) The purchase price for the Shares shall be the lesser of: (i)
$5,000,000.00, or (ii) a sum equal to four and three/quarters (4 3/4) times the
EBITDA (earnings before interest, state and federal income and similar taxes,
depreciation, and amortization) of the Company (exclusive of any EBITDA of
Panamericana de Acciones, S.A. de C.V. or Dura-Bond de Mexico S.A. de C.V.
included on the books of the Company) for the fiscal year to end on October 29,
2000 as such sum is determined hereunder, minus $5,000,000.00. Such purchase
price shall be referred to herein as the "Purchase Price".
(b) Owosso shall cause the certified public accounting firm of
Deloitte & Touche ("Deloitte Firm") to perform an audit of the Company's
financial statements (without a scope qualification) for the fiscal year end
dated October 29, 2000 and to determine the Company's EBITDA for the fiscal year
end dated October 29, 2000 and Working Capital (defined below in Section 4.6(b))
as of the fiscal year end dated October 29, 2000. Owosso and the Deloitte Firm
shall permit the certified public accounting firm of Xxxxxx, Xxxxxxxx & Heimark,
CPAs ("Xxxxxx Firm") to review such audit as deemed necessary and appropriate by
the Xxxxxx Firm. Owosso shall further cause such audited financial statements
and the Deloitte Firm's EBIDTA and Working Capital determinations, together with
all applicable work papers, to be delivered to the Xxxxxx Firm on or before
December 31, 2000. The Xxxxxx Firm shall, on or before December 31, 2000 or the
date 30 days after the Company's year end financial statements have been
delivered to them, whichever is later, review the Company's audited year end
financial statements and the Deloitte Firm's EBITDA and Working Capital
determinations and shall either agree with such EBITDA and Working Capital
determinations or disagree with such EBITDA and Working Capital determinations.
Such review and certification shall include the following: (i) verifying that
the income and expenses of the Company for the fiscal year end dated October 29,
2000 have been calculated in a manner consistent with prior years (years ending
October, 1998 and October, 1999), (ii) verifying that the Company's expenses and
payments to the Seller or to any other affiliates are consistent with prior
years (years ending October, 1998 and October, 1999), and (iii) verifying that
accruals, deferrals, inventory procedures, and other accounting methods and
practices are consistent with prior years (years ending October, 1998 and
October, 1999). In the course of its review and certification, the Xxxxxx Firm
shall be entitled to rely upon such ratios and comparability analyses relating
to the Company as it deems appropriate.
(c) If the Xxxxxx Firm agrees with the Deloitte Firm's
determinations of both EBITDA and Working Capital, then the Xxxxxx Firm shall so
notify the parties, the sums thus determined shall be EBITDA and Working Capital
for purposes of this Paragraph 2.1, and the Purchase Price shall be deemed to
have been finally determined (for purposes of the Agreement and the Escrow
Agreement) as of the date of such notice. If the Xxxxxx Firm does not agree with
the Deloitte Firm's calculation of EBITDA or Working Capital applying the tests
as set forth above in Subparagraph (b), the Xxxxxx Firm shall: (i) determine the
EBITDA and Working Capital of the Company for the fiscal year to end on October
29, 2000 as if all of the tests described above have been satisfied, (ii) notify
the parties of such determination, and (iii) provide the parties with the work
papers and information as necessary to verify and support the Xxxxxx Firm's
determinations. If the Seller or the Purchaser disagree with the Xxxxxx Firm's
determination of the Company's EBITDA or Working Capital, such party shall be
entitled to resolve the dispute under the terms of Section 14.1 (Arbitration)
and such party shall give notice of such election to arbitrate within 14
(fourteen) days following the receipt of the Xxxxxx Firm's notice. If no such
notice is given within fourteen (14) days following the receipt of Xxxxxx Firm's
notice, the Purchase Price shall be deemed to have been finally determined (for
purposes of this Agreement and the Escrow Agreement) as of the date 15 days
following the receipt of the Xxxxxx Firm's notice by Seller. In resolving any
dispute between the parties under this Section 2.1, the arbitrators shall use
and apply the consistency tests set forth above in Subparagraph (b) in addition
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to any other information or data available to the arbitrators. If an arbitration
proceeding is conducted to resolve any dispute between the parties under this
Section 2.1, the date of the arbitrator's written decision shall be the date
that the Purchase Price shall be deemed to have been finally determined (for
purposes of this Agreement and the Escrow Agreement). The parties agree to
provide to the Xxxxxx Firm and to any arbitrators all data information and
documents as may be reasonably required for them to perform their work
hereunder.
(d) The following items shall be adjustments to the Purchase
Price:
(1) If the Working Capital of the Company as of the Closing
is greater than the Working Capital of the Company as of September 24, 2000,
then such difference shall be added to the sums comprising the Purchase Price
pursuant to Section 2.1(a). If the Working Capital of the Company as of the
Closing is less than the Working Capital of the Company as of September 24,
2000, then such difference shall be subtracted from the sums comprising the
Purchase Price pursuant to Section 2.1(a). The Working Capital as of the Closing
shall be determined under the terms of Sections 2.1(b) and (c).
(2) The Purchase Price shall be reduced by the amount of
interest paid by the Company for the October, 2000 interest for the draw
reimbursement under that Letter of Credit in favor of Sun Bank as Trustee dated
August 1991.
(3) The Purchase Price shall be reduced by the amount by
which the total liabilities of the Company as of the Closing (after giving
effect to the Closing and except for the liabilities associated with the IRB (as
defined in paragraph 4.6 (b) and except for indebtedness to EPC, Melling Tool,
and to Bank One created or incurred in connection with the transactions
contemplated hereby) exceed $500,000.00.
The Purchase Price adjustments described in this Paragraph
2.1(d) shall be determined by the Deloitte Firm and the Xxxxxx Firm under the
terms and procedures described above in Paragraphs 2.1(b) and (c), with any
disputes between the parties to be resolved under Section 14.1 (b) hereof. Any
adjustments shall be paid to the appropriate party under Sections 3 and 4 of the
Escrow Agreement.
2.2 Payment. The Purchaser shall pay or cause to be paid the sum of
$5,000,000.00 at the Closing as follows:
(a) The Purchaser shall pay Fifty Thousand Dollars ($50,000.00)
(subject to adjustment under Section 3.2, but without double counting) shall be
paid by Purchaser to Seller in immediately available funds for the Purchased
Share.
(b) Purchaser shall pay or cause the Company to pay Three Million
Nine Hundred Fifty Thousand Dollars ($3,950,000.00) (subject to adjustment under
Section 3.2, but without double counting) to the Seller in immediately available
funds at Closing for the Redeemed Shares.
(c) Purchaser shall pay or cause the Company to pay One Million
Dollars ($1,000,000.00) for the Redeemed Shares in immediately available funds
to Bank One Trust Company, N.A., as the Escrow Agent pursuant to the terms of
that Escrow Agreement attached hereto as Schedule 2.2 ("Escrow Agreement") .
Such sum shall be held and disbursed pursuant to the terms of the Escrow
Agreement by the Escrow Agent.
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(d) If the Purchase Price (as determined and adjusted under
Section 2.1) exceeds Five Million Dollars ($5,000,000.00) then within five (5)
days after the final determination of the Purchase Price hereunder, the Company
shall pay to the Seller, in immediately available funds, an amount equal to the
difference between the Purchase Price (as determined and adjusted under Section
2.1) and Five Million Dollars ($5,000,000.00).
3.
3.1 The Closing.
The closing of the transactions contemplated hereby (the "Closing")
shall take place on November 2, 2000 (the "Closing Date") and shall be effective
as of the close of business on October 29, 2000. (At the Closing, (a) the Seller
shall deliver to the Purchaser the certificate evidencing the Purchased Share,
together with duly executed stock powers, (b) the Seller shall deliver to the
Company certificates) evidencing the Redeemed Shares, together with duly
executed stock powers, and (c) the Purchaser and the Company will pay to the
Seller and the Escrow Agent the Purchase Price on the terms set forth in Section
2.2.
3.2 Closing Adjustments. The following adjustments shall be made at
Closing:
(a) The sum paid to the Seller under Sections 2.2 (a) and (b)
shall be reduced by one-half (1/2) of any sums required to be paid to the Escrow
Agent at Closing pursuant to the Escrow Agreement, and by one-half (1/2) of the
Xxxxxx Firm's retainer, and such sums shall be paid to such recipients by the
Purchaser on behalf of the Seller.
(b) Purchaser shall pay one-half (1/2) of the Xxxxxx Firm's
retainer at Closing and one-half (1/2) of any sums required to be paid to the
Escrow Agent at Closing.
3.3 Order of Transactions. Notwithstanding anything to the contrary
herein, the transactions described herein shall occur in the following sequence:
(a) Owosso shall sell the Purchased Share to the Purchaser
hereunder.
(b) All directors and officers of the Company shall resign and
such resignations shall be accepted by the Company.
(c) The Purchaser shall elect Xxxx X. Xxxxx ("Xxxxx") and Xxxx
Xxxxxxx ("Xxxxxxx") as members of the Company's Board of Directors.
(d) The Company's Board of Directors (Xxxxx and Melling) shall
cause the Company to approve of this Agreement and the transactions contemplated
hereby on behalf of the Company.
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(e) The Company's Board of Directors (Xxxxx and Xxxxxxx shall
elect the following persons as officers of the Company:
Chairman Xxxx X. Xxxxx
President Xxxxxxx X. Xxxxxxx
Secretary Xxxx Xxxxxxx
(f) The Company's Board of Directors (Xxxxx and Xxxxxxx) shall
cause the Company to execute such loan documents and agreements with Bank One
Trust Company, N.A. ("Bank One Trust") as the directors, in their sole
discretion, deem appropriate.
(g) The Company's Board of Directors (Xxxxx and Xxxxxxx) shall
cause and effect the redemption of the Redeemed Shares hereunder.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller hereby represents and warrants to the Purchaser as follows:
4.1 Corporate Organization and Status. The Company is a corporation,
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has all requisite corporate power and
authority to own, lease and operate its assets and properties and to conduct and
operate its business as heretofore and now being conducted.
4.2 Qualification. Schedule 4.2 sets forth a list of jurisdictions in
which the Company is qualified or licensed to do business as a foreign
corporation. The Company is duly qualified or licensed as a foreign corporation
to do business and is in good standing in all states or jurisdictions in which
the nature of its business as presently operated by it or the character of the
property owned or leased by it makes such qualification or authorization
necessary, except in such jurisdictions where the failure to be so qualified or
licensed and in good standing would not have an effect which is materially
adverse to the business, assets or financial condition of the Company taken as a
whole. For purposes of this Agreement, the term "Material Adverse Effect" shall
mean an effect which is materially adverse to the business, assets, or financial
condition of the Company taken as a whole.
4.3 Authority to Execute and Perform Agreement; Authorization; Binding
Effect; No Breach. The Seller has the corporate power and all authority and
approvals required to execute and deliver this Agreement and to perform their
obligations hereunder. The execution and delivery of this Agreement by the
Seller and the performance of its obligations hereunder has been duly authorized
by all necessary corporate action of the Seller. This Agreement has been duly
executed and delivered by the Seller and constitutes, and each of the other
agreements to be executed and delivered hereunder by the Seller, when executed
and delivered by the Seller will constitute, the legal, valid and binding
obligation of the Seller, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, arrangement, fraudulent transfer or
conveyance, moratorium, reorganization, insolvency and other similar laws and to
equitable principles affecting enforcement of the rights of creditors generally.
Except as otherwise set forth in this Agreement or any schedule hereto, no
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approval or consent of any other person is required in connection with the
execution and delivery by the Seller of this Agreement and the consummation and
performance by the Seller of the transactions contemplated hereby, except for
such consents and approvals which will have to be obtained prior to the Closing,
a list of which is set forth on Schedule 4.3 hereto. Except as specifically set
forth on Schedule 4.3 hereto, the execution, delivery and performance of this
Agreement by the Seller and the consummation of the transactions contemplated
hereby by the Seller will not W violate any provision of the Articles of
Incorporation or By-laws of the Seller or the Company, (ii) violate, conflict
with or result in the breach of any of the terms of, result in a material
modification of the effect of, otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any material contract or agreement to which the
Seller or the Company is a party or by or to which the Seller or the Company or
their respective assets or properties may be bound or subject, (iii) violate any
material order, judgment, injunction, award or decree of any court, arbitrator
or governmental or regulatory body by which the Seller or the Company, or the
assets or properties of the Seller or the Company are bound, (iv) violate any
statute, law or regulation, or (v) violate or cause any revocation of or
limitation on any Permit (as hereinafter defined) (x) which is necessary and
material to the lawful conduct of the Company's business or (y) the violation,
revocation or limitation of which would have a Material Adverse Effect.
4.4 Authorized and Issues Capital; Options and Warrants.
(a) The Company's authorized capital consists of 10,000 shares of
Class A Voting Common Stock, par value $1.00 per share, of which one (1) is
issued and outstanding on the date hereof, and 10,000 shares of Class B
Non-voting Common Stock, par value $1.00 per share, of which ninety-nine (99)
shares are issued and outstanding on the date hereof.
(b) All of the Shares have been duly authorized and validly
issued, are fully paid and nonassessable, and have been issued in conformity
with all laws. There are no preemptive rights with respect to the Shares.
(c) Except as set forth on Schedule 4.4, the Company has not
issued any securities, including but not limited to warrants or options,
exercisable for or convertible into equity securities of the Company, nor is it
bound by contract to issue any equity securities.
4.5 Title. The execution by Seller in accordance with the provisions of
this Agreement of the certificates evidencing the Shares or stock powers in
respect thereof and the delivery of such certificates and stock powers to
Purchaser and the Company will vest in the Purchaser and the Company good title
to the Shares, free and clear of all liens and encumbrances.
4.6 Financial Statements.
(a) The Seller has heretofore delivered to Purchaser copies of the
Company's unaudited financial statements at October 31, 1999, October 25, 1998
and October 26, 1997, which were prepared for and included in the Seller's
audited financial statements and the Company's unaudited financial statements at
September 24, 2000 (collectively, the "Company's Financial Statements"), copies
of which are attached hereto as Schedule 4.6. The Company's Financial Statements
(a) have been prepared and presented in accordance with generally accepted
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accounting principles ("GAAP") applied on a basis consistent throughout the
periods indicated and with prior periods (except as otherwise noted therein),
except that the Financial Statements do not contain footnote disclosures which
would be required by GAAP (provided, however, that such footnote disclosures
would not, if given, have a Material Adverse Effect on the Financial Statements)
, (b) were prepared from the books and records of the Company, which books and
records are complete and correct in all material respects and fairly reflect all
material transactions of the Company's business, and (c) present fairly the
financial condition and the results of operations of the Company as of the dates
thereof and for the periods indicated. Since October 26, 1997, there have been
no changes in the accounting methods of the Company other than changes in the
ordinary course of business.
(b) As of the date of Closing, the accounts receivable plus cash
plus inventory less accounts payable ("Working Capital") of the Company shall
not be less than $3,000,000.00 or the Working Capital of the Company as of
September 24, 2000, whichever is greater. As of the date of Closing, the total
liabilities of the Company (after giving effect to the Closing and except for
the liabilities associated with that Department of Commerce Industrial Revenue
Bond dated August 1, 1998 in the original amount of $5,000,000.00 ("IRB") and
except for indebtedness to EPC, Melling Tool, and to Bank One created or
incurred in connection with the transactions contemplated hereby) shall not be
more than $500,000.00. Notwithstanding anything to the contrary herein, the
exclusive remedy for a breach of this representation shall be an adjustment of
the Purchase Price under Paragraph 2.1(d).
4.7 No Material Adverse Effect. Since October 31, 1999, there has been
no Material Adverse Effect.
4.8 Compliance with Laws. The Company has complied in all material
respects with all applicable federal, state and local laws, regulations and
ordinances or all mandatory requirements of any governmental body, court or
arbitrator applicable to it or its assets or properties, except where a failure
so to comply would not have a Material Adverse Effect. Schedule 4.8 sets forth a
list of all permits, certificates of occupancy, licenses and other
authorizations and approvals of any federal, state or local governmental or
regulatory bodies necessary for and material to the conduct of the Company's
business or for the use and occupancy of the assets and properties of the
Company as heretofore conducted in the ordinary course (collectively,
"Permits"). All such Permits are in full force and effect and there are no
proceedings pending or threatened, to the knowledge of Seller, which would
result in the revocation or cancellation of any thereof. The consummation of the
transactions contemplated hereby will not result in any such revocation or
cancellation. The Company is in compliance with all Permits except where the
failure so to be in compliance would not have a Material Adverse Effect.
4.9 Litigation. Except as set forth on Schedule 4.9 hereto, there is no
material action, suit, claim, arbitration or other legal or administrative
proceeding (whether or not the defense thereof or liabilities in respect thereof
are covered by insurance) pending or, to the knowledge of the Seller threatened,
against the Company or with respect to the Company's business. Except as
described on Schedule 4.9, there is not outstanding any order, writ, injunction,
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decree or judgment of any court, governmental or regulatory body or arbitration
tribunal to which the Company is party which would have a Material Adverse
Effect.
4.10 Real Property.
(a) Schedule 4.10 hereto sets forth a complete listing and
description of all real property owned by the Company (the "Real Property"). The
Company does not lease (as lessor or lessee) any real property.
(b) Except as set forth on Schedule 4.10 or the Company's
Financial Statements, the Company holds title to all Real Property, subject to
no liens or other encumbrances.
(c) There are no actions, suits or proceedings pending or, to the
knowledge of the Seller threatened, to condemn all or any material portion of
any of the Real Property pursuant to a power of eminent domain or similar
governmental authority. There are no laws, statutes or ordinances or building or
use restrictions or zoning laws applicable to any Real Property which prohibit
or impair, in any material respect, the uses presently being made thereof by the
Company. Schedule 4.8 sets forth all of the Permits required for the use and
occupancy of each item of Real Property. The Company is not a party to any
contract or agreement with any governmental or regulatory body or taxing
authority the subject matter of which concerns the abatement of any taxes or
assessments on any Real Property or any amounts due in lieu of any taxes or
assessments on any Real Property. No assessment for public improvements, such as
sewer and water lines and mains, streets, sidewalks and curbs, has been made
against any of the Real Property which remains unpaid. No public improvement
with respect to any Real Property has been ordered to be made which has not been
heretofore completed, and the costs therefore assessed and paid. The assessed
valuation and real estate taxes in respect of the Real Property are as set forth
on Schedule 4.10 hereto. There are no tax abatements or exemptions affecting the
Real Property.
(d) The Real Property is supplied with utilities (including water,
sewage disposal, electricity, gas and telephone) and other services reasonably
necessary for the operations presently conducted at such Real Property (as
currently being operated) and there is no existing condition which, to the
knowledge of the Seller, would result in the termination of the present access
by the Real Property to such utility services.
(e) The improvements constructed on the Real Property are
presently in operating condition (on an overall basis) subject to ordinary wear
and tear and are reasonably sufficient for the operation of the business as
presently being conducted.
4.11 Inventory. The inventory shown on the Company's Financial
Statements consists of items of a quantity, quality, condition and kind saleable
in the ordinary course of the Company's business at the full value thereof
reflected in the Company's Financial Statements. The value of all obsolete
materials and finished goods in the inventory shown on the Company's Financial
Statements has been written down to net realizable value or adequate reserves
have been provided therefor, and the values at which inventories are carried on
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the Company's Financial Statements, unless otherwise indicated, reflect the
normal inventory valuation procedures of the Company of stating inventories at
the lower of cost or market.
4.12 Accounts Receivable. The accounts receivable (other than Mexican
Affiliate receivables referred to in Section 7.2) reflected in the Company's
Financial Statements arose from arms, length transactions in the ordinary course
of the Company's business. The accounts receivable are subject to no defenses,
counterclaims, or rights of set off and, provided that the Company uses the same
collections methods and procedures as it has used during the 12 month period
prior to the Closing, the accounts receivable are fully collectible in the
ordinary course of business within 120 days after the invoice date, except to
the extent of the reserve for uncollectible accounts as set forth in the
Financial Statements.
4.13 Contracts and Other Agreements. Schedule 4.13 sets forth all of
the following contracts and other agreements (other than the Leases) to which
the Company is a party or by which the Company or its assets are bound or
subject and which involve more than $10,000.00: (i) contracts and other
agreements with any labor union or association representing employees; (ii)
contracts not entered into in the ordinary course of business; (iii) contracts
and other agreements for the sale of any of assets or the Company's properties
(other than contracts and other agreements for the sale of inventory in the
ordinary course of business) or for the grant to any person of any preferential
rights to purchase any assets or properties; (iv) joint venture and partnership
agreements; (v) contracts or other agreements under which the Company has agreed
to indemnify any party or to share any liability of any party including, without
limitation, liability with respect to taxes, other than contracts and other
agreements regarding the sale of goods in the ordinary course of business; (vi)
contracts and other agreements with customers or suppliers for the sharing of
fees, the rebating of charges or other similar arrangements; (vii) contracts and
other agreements containing covenants of the Company not to compete in any line
of business or with any person in any geographical area; (viii) contracts and
other agreements relating to the acquisition by the Company of any operating
business or the capital stock of any other person; (ix) options for the sale or
purchase of any stock, note or other security; (x) contracts and other
agreements requiring the payment to any person of a royalty, override or similar
commission; (xi) contracts and other agreements relating to the borrowing of
money or the incurrence of indebtedness; (xii) guarantees, performance or
completion bonds and surety agreements; (xiii) contracts of agency,
representation, distribution or franchise; (xiv) contracts for the employment
for any period of time whatsoever, or restricting the employment, of any
salaried employee; and (xv) contracts and other agreements with a term longer
than one (1) year. There have been delivered to the Purchaser copies of all of
the contracts and other agreements set forth on Schedule 4.13 or, if unwritten,
accurate summaries of all of the material terms thereof, and there are no other
material terms of such contracts or other agreements except as set forth on such
copies and/or summaries. Except as disclosed on Schedule 4.13 all of such
contracts and other agreements are valid, in full force and effect and binding
upon the Company in accordance with their terms; and the Company is not in
material default under any of them. Except as separately identified on Schedule
4.13, no approval or consent of any person is needed in order that the contracts
and other agreements set forth on Schedule 4.13 continue in full force and
effect following the consummation of the transactions contemplated by this
Agreement.
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4.14 Trade Secrets, Patents, Trademarks, Etc. Except as set forth on
Schedule 4.14, all trade secrets, computer software, patents, patent
applications, registered copyrights, trade names, trademarks, trademark
applications, service marks, distributorships and franchises (collectively, the
"Rights,,) owned or licensed by or to Company necessary and material to the
Company's business in the ordinary course as heretofore conducted are listed and
described on Schedule 4.14. Except as set forth on Schedule 4.14, the Company.
owns or possesses adequate rights to use the foregoing. The Company has taken
all necessary action to maintain the continued validity of the Rights set forth
on Schedule 4.14. Except as set forth in Schedule 4.14, the Company has not
granted any outstanding licenses or other rights to any patent, registered
copyright, trademark, service xxxx or trade name listed on Schedule 4.14 hereto,
nor is Company under any binding obligation to grant the same. To the knowledge
of the Seller, the Company has not infringed and is not infringing upon the
intellectual property rights of any other person, and neither the Seller nor the
Company has received any claim alleging any infringement upon the intellectual
property rights of any other person which claim has not heretofore been
resolved. To the knowledge of the Seller, no third party has infringed upon or
violated any intellectual property rights of the Company.
4.15 Personal Property. Except as set forth on Schedule 4.15, the
Company has good title to all personal property owned by it, including but not
limited to the personal property reflected in the Company's Financial Statements
and on Schedule 4.15, free and clear of all liens and encumbrances. Except as
set forth on Schedule 4.15, the Company's personal property, on an overall
basis, is in reasonably satisfactory condition and is reasonably sufficient for
the operations of the Company as heretofore conducted in the ordinary course.
4.16 Liabilities. As of the date hereof and the date of the Closing,
the Company has no outstanding indebtedness or liabilities (whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and whether due or to become due), except for: (i)
liabilities set forth on the Company's Financial Statements, and (ii)
liabilities which have arisen after the dates of the Company's Financial
Statements in the ordinary course of business.
4.17 Suppliers and Customers. The Seller has no knowledge that any
supplier or customer of the Company currently intends, or intends if the
transactions hereby contemplated are consummated, to cancel or otherwise modify
its relationship with the Company or to decrease materially its services,
supplies or materials provided to the Company or its usage or purchase of the
services or products of the Company's business, such that, as a result thereof,
there would be a Material Adverse Effect.
4.18 Employee Benefit Plans. Schedule 4.18 contains a list of any of
the following which relate to or cover any employees of the Company or their
beneficiaries: (i) "employee pension benefit plans", "employment benefit plans"
and "employee welfare benefit plans", as defined, respectively, in Section 3(2),
3(3) and 3(l) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including "multiemployer plans" as defined in Section 3(37) of ERISA,
and (ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance or other employee benefit plan, policy or
program which the Company or any subsidiary, affiliate or any other entity which
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is a member of a controlled group (within the meaning of Section 4001(b) of
ERISA and/or Sections 414(b)-(n) of the Internal Revenue Code of 1986, as
amended (the "Code")) including the Company operates or maintains or to which
the Company has any obligation to contribute (the "Plans"). The Seller has
delivered or made available to the Purchaser copies of all documents embodying
or relating to any Plan.
(a) The Company maintains no other employee pension benefit plan
as defined in ERISA Section 3(2) for the benefit of employees of the Company's
business. The Company maintains no other welfare benefit plan for former
employees.
(b) With respect to each Plan, such Plan is in substantial
compliance with all applicable provisions of ERISA, the Code and any other
applicable law; no termination, partial termination or reportable event has
occurred and no liability to the Pension Benefit Guaranty Corporation ("PBGC")
has been incurred (other than normal premiums and fees due the PBGC); no
accumulated funding deficiency within the meaning of ERISA Section 302 and
Section 412 of the Code has been incurred, and no such accumulated funding
deficiency has been waived by the PBGC; and all contributions or premiums
required to be made to such Plan or the PBGC have been made.
(c) The Company is not obligated to contribute to any
multiemployer plan as defined in ERISA Section 3(37) in which any employee of
the Company's business is a participant. The Company has not ever completely or
partially withdrawn (within the meaning of the Multiemployer Pension Plan
Amendments Act of 1980 ("MPPAA")) from any multiemployer plan.
(d) Neither the Company nor any other "disqualified person" or
"party in interest" (as defined in Section 4975 of the Code and ERISA Section 3,
respectively) has engaged in any "prohibited transaction" as such term is
defined in Section 4975 of the Code or ERISA Section 406, which would subject
any of the Plans (or their related trusts) , the Company or any officer,
director, employee or shareholder of the Company or any trustee, administrator
or any other fiduciary of any of the Plans to any material tax or penalty,
including those imposed under Section 4975 of the Code or ERISA Section 502(e),
with respect to the employees of the Company.
(e) There are no material actions, audits, suits or claims pending
or, to the knowledge of the Seller threatened, against the Company with respect
to any Plan or any of the Plans.
(f) The parties acknowledge and agree that all of the Plans shall
be terminated as of the Closing, including medical and dental plans, 401(k)
plan, Short Term Disability, Long Term Disability, Group Life Insurance and
Accidental Death and Disability, Flexible Spending Accounts, and Voluntary
Supplemental Life Insurance.
4.19 Employee Relations. Except as set forth on Schedule 4.19, the
Company is not a party to any union, collective bargaining or similar agreement
with respect to employees of the Company's business, nor to the knowledge of the
Seller is there currently any organizing drive or campaign on behalf of any
union or other employees, association. The Company's business has not at any
time during the last three years had a strike, work stoppage or work slowdown
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relating to the Company's business. Schedule 4.19 sets forth the names and
current annual salary rates or current hourly wage rates for all present
employees of the Company whose annualized cash compensation for the current
fiscal year exceeds $40,000 or who have a contract of employment not terminable
"at will." Schedule 4.19 also contains copies of the employment contracts of
those employees of the Company who are not terminable "at will". To the
knowledge of the Company, no executive or key employee or significant group of
employees plan to terminate employment with the Company as a consequence of the
transaction contemplates by this Agreement.
4.20 Products. There are no orders or decrees of any court or
governmental or regulatory body by which the Company is bound and, to the
knowledge of the Seller, no citations or decisions against the Company by any
governmental or regulatory body that any product manufactured, marketed or
distributed by the Company ("Product") is defective or fails to meet any safety
standards promulgated by any such governmental or regulatory body. There have
been no recalls ordered by any such governmental or regulatory body with respect
to any Product within the last three (3) years.
4.21 Absence of Changes. Since September 24, 2000, except as set forth
on Schedule 4.21 hereto, the Company has not:
(a) mortgaged, pledged or subjected to any lien or other
encumbrance any of its assets;
(b) acquired or disposed of any material assets or properties
except in the ordinary course of business;
(c) except in the ordinary course of business, forgiven or
canceled without consideration any material debts;
(d) canceled, terminated or amended any material agreement
relating to the conduct of the Company's business, except in the ordinary
course;
(e) incurred or assumed any material debt or material liability,
except in the ordinary course of business;
(f) except in the ordinary course of business, made or given any
wage or salary increase or bonus, or increase in any other direct or any
indirect compensation or any severance or termination pay, for or to any of the
directors, officers or employees of the Company;
(g) entered into, amended or terminated any employment agreement
except in the ordinary course of business, or any agreement with any labor union
or association representing any employee or adopted or entered into any Plan;
(h) entered into any lease (as lessor or lessee);
(i) except in the ordinary course of business, sold, abandoned or
made any disposition of any of its material assets or properties;
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(j) except in accordance with their terms or in the ordinary
course of business, terminated any contract or other agreement set forth on
Schedule 4.13.
4.22 Absence of Certain Commercial Practices. The Company has not,
directly or indirectly, given or agreed to give any unlawful gift or similar
benefit to any customer, supplier, governmental employee, employee or official
of a domestic or foreign government or political party or any other person who
is or may be in a position to help or hinder or assist the Company in connection
with any actual or proposed transaction, nor does it maintain any unaccounted
fund for such purpose.
4.23 Insurance. Schedule 4.23 sets forth a list and description of all
insurance policies or binders of insurance or programs of self-insurance which
insure the Company and relate to the Company's business. No notice of
cancellation or nonrenewal with respect to, or disallowance of any material
pending claim under, any such policy or binder has been received by Company. The
parties acknowledge and agree that all such coverages shall terminate at
Closing.
4.24 Taxes. Except as set forth on Schedule 4.24, the Company has filed
or caused to be filed all federal, state, municipal and other tax returns
required to be filed by it and all such tax returns are true, correct and
complete in all material respects, and the Company has paid all taxes which have
become due and payable by it (whether reflected on said tax returns or
otherwise). The Company has delivered to the Purchaser complete and accurate
copies of the Company's federal and state tax returns for the fiscal years 1997,
1998, and 1999. Except as set forth on Schedule 4.24, the Company does not have
any liability for taxes in excess of the amounts paid or reserves established,
and no deficiencies for taxes have been claimed, proposed, or assessed by any
taxing authority against the Company or any affiliated group of which the
Company is now or has been a member. There are no pending, or to the knowledge
of the Company, threatened audits, investigations, or claims for or relating to
additional liability in respect of taxes, and there are no matters under
discussion with any governmental authorities with respect to taxes that may
result in a material additional liability for taxes. There have been no audits
of federal, state, or local returns for taxes by the relevant tax authorities
for any period, and neither the Company nor any affiliated group of which the
Company is now or has been a member has been notified that any taxing authority
intends to audit a return for any period. There are no liens for taxes on any
assets or property of the Company. Except as set forth on Schedule 4.24, the
Company has never been a member of an affiliated group of corporations within
the meaning of Section 1504 of the Internal Revenue Code. The Company has
complied with all applicable laws, rules, and regulations relating to the
withholding and payment of taxes and has timely withheld and paid to the proper
governmental authorities all amounts required to have been withheld and paid in
connection with the amounts paid and owing to any employee, independent
contractor, creditor, or shareholder. Except as set forth on Schedule 4.24,
since January 1, 1994, the Company has paid on a timely basis, without penalty,
all quarterly estimated state and federal tax payments through the date of
Closing and has provided copies of such payments to Purchaser.
4.25 Environmental Matters. "Environmental Law" means any federal,
state or local statute, act, law, rule, regulation, ordinance or other legal
requirement relating to pollution, protection of public health, safety, welfare
or the environment including those relating to emissions, discharges, releases
or threatened releases of Hazardous Substances into the environment (including
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ambient air, surface water, ground water, soil or land) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"Hazardous Substance" means any pollutant, contaminant, industrial,
toxic, hazardous or noxious substance, waste material or byproduct the emission,
discharge, release, use, storage, disposal, transport or handling of which is
regulated by any federal, state or local law or governmental authority
including, without limitation, (a) any petroleum, petroleum byproduct, petroleum
compound (refined or crude), flammable substance, explosive, radioactive
material, and any other material, pollutant or contaminant which poses or may
pose a hazard to any real or personal property or to any person or protected
animal or cause any real property to be in violation of any Environmental Law,
(b) asbestos or any asbestos containing material of any kind or character, (c)
polychlorinated biphenyls regulated by the Toxic Substances Control Act, 15
U.S.C. Section 2601 et sea., (d) any materials or substances designated as
"hazardous substances" pursuant to the Clean Water Act, 33 U.S.C. Section 1251
et sec., (e) any "pesticide" as defined in the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. Section 135 et sea., (f) any "chemical substance,"
"new chemical substance" or "hazardous chemical substance or mixture" pursuant
to the Toxic Substances Control Act, 15 U.S.C. Section 2601 et sea., (g) any
"hazardous substance" within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et sec., (h)
any "hazardous waste" within the meaning of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., and W any "extremely hazardous
substances" within the meaning of the Emergency Planning and Community Right to
Know Act of 1986, 42 U.S.C. Section 11001 et sea.
Except as set forth on Schedule 4.25:
(a) The Company has conducted its business at all times since
October 31, 1994 in compliance in all respects with all Environmental Laws and
is in compliance in all material respects with all Permits required under the
Environmental Laws for the conduct of the Company's business or the occupancy of
the Real Property. Except as set forth on Schedule 4.25, no condition exists at
any of the Real Property which constitutes a material violation of any
Environmental Law (each such matter being referred to as an "Environmental
Deficiency");
(b) There is not presently pending or, to the knowledge of the
Seller threatened, any civil or governmental suit, action, proceeding, claim or
investigation against the Company relating to (i) any violation by the Company
of any Environmental Law, or (ii) any release, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposal of a Hazardous Substance into the environment, or the
abandonment or discarding of barrels, containers, or other closed receptacles
containing a Hazardous Substance by the Company;
(c) Except as disclosed on Schedule 4.25, there are no underground
storage tanks located on any of the Real Property, and all underground storage
tanks located on any of the Real Property (whether or not identified on Schedule
4.25) comply in all respects with all Environmental Laws relating to the use and
condition thereof; and
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(d) The Seller has provided to the Purchaser copies of all
studies, reports, assessments, investigations, surveys and other materials in
the Company's possession or control relating to (i) the occurrence of any
discharge, release or presence of any Hazardous Substance on or affecting any of
the Real Property, (ii) the existence of any circumstance or condition at any of
the Real Property which would result in the violation of any Environmental Law,
and (iii) any other physical condition of any of the Real Property giving rise
to any claim under any Environmental Law. Schedule 4.25 identifies all such
studies, reports, assessments, investigations, surveys and other materials which
the Company has provided to Purchaser.
4.26 Operation in Ordinary Course. Since January 1, 1998, the business
of the Company has been operated only in the ordinary course of business, and
will continue to be operated in such matter until the Closing.
4.27 Transactions with Affiliates. Except as set forth in Schedule
4.27, no individuals who are affiliates of the Company (or any family member
thereof) is an officer, director, employee, consultant, competitor, customer,
distributor, supplier, or vendor of, or is a party to any contractual obligation
with, the Company other than employment contracts and employee benefit plans.
Except as set forth in Schedule 4.27, there are no intellectual property rights
or proprietary or confidential information that any such affiliate (other than
the Company and/or the Seller) owns or otherwise has the right to use which are
necessary to the conduct of the business of the Company.
4.28 Accounts; Funds. Schedule 4.28 identifies all bank accounts of the
Company as well as the names of those persons authorized to sign checks and
perform other functions relating to such accounts.
4.29 Subsidiaries. Except as set forth on Schedule 4.29, the Company
has no subsidiaries or any direct or indirect stock or equity or ownership
interests (whether controlling or not) in any corporation, limited liability
company, association, partnership, limited partnership, joint venture, or other
entity. The Company has beneficial ownership of 164,000 shares of the capital
stock of Panamericana de Acciones, S.A. de C.V. ("Panamericana") free and clear
of any encumbrances. Panamericana has beneficial ownership of 99.9% of the
capital stock of Dura-Bond de Mexico, S.A. de C.V. ("Dura-Bond de Mexico")
Schedule 4.29 identifies the number of outstanding shares of capital stock of
Panamericana and Dura-Bond de Mexico and the owners of all such shares, as well
as any agreement between the shareholders with respect to the stock of
Panamericana and Dura-Bond de Mexico and any other agreements, options, or
warrants with respect to the capital stock of such subsidiary. Schedule 4.29
also sets forth a list of any contracts, agreement, or loans between
Panamericana and DuraBond de Mexico and the Company, or summaries thereof if
such agreements are not in writing. No party is in breach or default of any such
contracts or agreements.
4.30 Books and Records. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The copies of the stock book records of the Company
heretofore delivered to Purchaser are true, correct and complete, and accurately
reflect all transactions effected in the stock of the Company through and
including the date hereof. The Company has not engaged in any material
-15-
transaction or maintained any bank account except for transactions and bank
accounts which have been and are reflected in the normally maintained books and
records of the Company.
4.31 Material Misstatements or Omissions. No representation or warranty
in this Section 4 (including any disclosure schedule or exhibit hereto) or in
any other transaction document, certificate, or other document delivered to the
Purchaser pursuant to this Agreement contains any untrue statement of a material
fact.
4.32 Representations and Warranties. The representations and warranties
of the Seller contained in this Section 4 are and shall be on the Closing Date,
true and correct in all material respects with the same force and effect as
though such representations and warranties were made on the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser, EPC,
and Melling Tool, jointly and severally, represent and warrant to the Seller as
follows:
5.1 Due Incorporation. The Purchaser is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Michigan, and has all requisite corporate power and authority to own,
lease and operate its assets and properties, and to conduct and operate its
business as heretofore and now being conducted.
5.2 Qualification of the Purchaser. The Purchaser is duly qualified or
licensed to do business and is in good standing in all states or jurisdictions
in which the nature of its business as presently operated by it or the character
of the property owned or leased by it makes such qualification or authorization
necessary, except in such jurisdiction where the failure to be so qualified or
licensed and in good standing would not have an effect which is materially
averse to the business, assets or financial condition of the Purchaser.
5.3 Corporate Power of the Purchaser; Authorization; Binding Effect; No
Conflict. The Purchaser has the corporate power and all authority and approvals
required to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Purchaser and the
performance of its obligations hereunder has been duly authorized by all
necessary corporate action of the Purchaser. This Agreement has been duly
executed and delivered and constitutes, and each of the other agreements to be
executed and delivered hereunder by the Purchaser, when executed and delivered
by the Purchaser will constitute, the legal, valid and binding obligation of the
Purchaser enforceable in accordance with their respective terms, subject to
applicable bankruptcy, arrangement, moratorium, reorganization, insolvency and
other similar laws and to equitable principles affecting enforcement of the
rights of creditors generally. No approval or consent of any other person is
required in connection with the execution and delivery by the Purchaser of this
Agreement and the consummation and performance by the Purchaser of the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby by the Purchaser will not (i) violate any provision of the
Articles of Organization of the Purchaser; (ii) violate, conflict with or result
in the breach of any of the terms of, result in a material modification of the
effect of, otherwise give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a default under,
any material contract or agreement to which the Purchaser is a party or by or to
-16-
which the Purchaser or any of its assets or properties may be bound or subject;
(iii) violate any material order, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body by which the Purchaser or
its properties or business is bound; or (iv) violate any statute, law or
regulation which is material to the Purchaser or to its properties or business.
5.4 Concerning the Shares. The Purchaser is acquiring the Purchased
Share for its own account for investment and not with any view to the resale or
public distribution thereof. The Purchaser understands that the Shares have not
been registered under the Securities Act or any applicable state securities or
blue sky law and may not be resold or otherwise transferred without registration
thereunder, unless an exemption from the registration requirements of the
Securities Act and such state laws is available.
5.5 Representations and Warranties. The representations and warranties
of the Purchaser contained in this Section 5 are and shall be on the Closing
Date, true and correct in all material respects with the same force and effect
as though such representations and warranties were made on the Closing Date.
5.6 Capital Structure. As of the Closing, the Company has been
capitalized with a term loan from Bank One in the amount of $3,420,000. The
difference between: (i) the amounts paid at Closing by the Company and the
Purchaser under Section 2.2, and (ii) $3,420,000, is comprised of a combination
of subordinated debt and equity capital. After giving effect to the transactions
contemplated hereby, the Company will be solvent as of the Closing (meaning
that: (i) the Company's assets (at an appraised fair valuation) will exceed its
liabilities, and (ii) the Company will be able to pay its debts as they come
due).
6. COVENANTS OF THE SELLER.
6.1 Continuance of Business. From the date hereof through the Closing
Date, the Seller agrees that it will cause the Company, unless otherwise
consented to in writing by the Purchaser to:
(a) carry on the Company's business in, and only in, the regular
and ordinary course in substantially the same manner as heretofore carried on;
and exercise its reasonable efforts to preserve intact its present business
organization, to keep available the services of its present employees, to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that the Seller's business shall be conducted on
substantially the same basis at the Closing Date as at the date hereof;
(b) maintain the Real Property and the tangible Personal Property
of the Company's business in the same condition as exists on the date hereof,
except for depreciation, obsolescence and ordinary wear and tear;
(c) keep in full force and effect insurance at least equal to that
carried by the Company or with respect to the Company's business on the date
hereof;
(d) perform in all material respects all of its obligations under
all understandings, agreements, contracts and instruments relating to the
Company's business;
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(e) maintain books of account and business records of the Company
in the usual, regular and ordinary manner;
(f) comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to it or to the conduct of the
Company's business;
(g) do or cause to be done all things reasonably necessary to
ensure that the Seller's representations and warranties will be true and correct
in all material respects at the Closing Date as though made on the Closing Date;
and
(h) promptly advise the Purchaser in writing of (i) any material
adverse change in the Company's financial condition, assets, operations or
business; (ii) any event, condition or circumstance occurring from the date
hereof through the Closing Date that would constitute a violation or breach of
this Agreement, or constitute the failure of any condition to the obligations of
the Seller, (iii) any event, occurrence, transaction or other item which would
have been required to have been disclosed on any Schedule or statement delivered
hereunder, had such event, occurrence, transaction or item existed on the date
hereof.
6.2 Access to Information. Prior to the Closing Date, the Purchaser
shall be entitled, through its employees and representatives, to make such
investigation of the assets, properties, business and operations of the Company
and such examination of the books, records and financial condition of the
Company's business as the Purchaser deems desirable. Any such investigation and
examination shall be conducted at reasonable times and under reasonable
circumstances and the Seller and the officers and employees of the Company shall
cooperate fully therein. In order that the Purchaser may have full opportunity
to make such business, accounting and legal review, examination or investigation
as it may wish of the business and affairs of the Company's business, the Seller
shall furnish the Purchaser and its representative with all such information and
copies of such documents concerning the Company's affairs as the Purchaser or
its representatives may reasonably request, and cause the Company's officers,
employees, consultants, agents, accountants and attorneys to cooperate fully
with the Purchaser and its representatives in connection with such review and
examination.
6.3 Confidentiality; Consultation Regarding Disclosure. The Seller
shall not issue, disclose or make any statement, public report or press release
regarding the existence or content of this Agreement or the transactions
contemplated hereby, except as may be required under the federal securities laws
or the rules and regulations thereunder. In preparing any public announcement
pursuant to the foregoing, the Seller shall notify and consult with the
Purchaser.
6.4 Computer Support. The Seller agrees to provide computer services
and support to the Company through April 30, 2001 without any charge to the
Company except the cost of the direct phone line between the Company and the
Seller. Such computer service and support shall consist of the same level of
service and support provided to the Company prior to the Closing.
7. COVENANTS OF THE PURCHASER.
7.1 Confidentiality; Consultation Regarding Disclosure. The Purchaser
shall not issue, disclose or make any statement, public report or press release
regarding the existence or content of this or the transactions contemplated
hereby, except: (i) to its professional advisors who have a need to know such
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information, (ii) with the consent of the Seller, or (iii) as required by
applicable laws or regulations. Notwithstanding the foregoing, after the
Closing, the Purchaser may publicly disclose or announce the fact that the
Purchaser has acquired the Company, without disclosing or announcing the terms
of this Agreement.
7.2 Mexican Affiliate Receivable. Purchaser understands and
acknowledges that the Company was owed approximately $300,000 as of September
24, 2000 from Panamericana/Dura-Bond de Mexico. Purchaser covenants and agrees
that it shall pay to Seller fifty percent (50%) of any sums collected within the
thirty-six (36) month period following the Closing Date from
Panamericana/Dura-Bond de Mexico on account of obligations outstanding on or
prior to the Closing Date, any such payment to be made within five (5) business
days following receipt of any such payment by the Company or Purchaser.
7.3 Stay Bonuses. The Purchaser acknowledges that certain employees of
the Company are entitled to receive "stay bonuses" to be paid within thirty (30)
days after the Closing. Such payments shall not be deducted in computing EBITDA
under Section 2.1 above. The Purchaser agrees, therefore, to cause the Company
to pay the following sums to the following persons on or before the date thirty
(30) days following the Closing:
Xxxxx Xxxxxxx $69,142
Xxxx Xxxxxxxx $25,337
Xxx Xxxxxx $16,496
Xxx XxXxxxx $18,253
Provided that the Purchaser complies with its obligations under this
Section 7.3, the Seller agrees to indemnify the Purchaser for any claims arising
out of any "stay" payments or "stay" bonuses which the Company owes to any
employee (over and above the employee's normal compensation) as a result of such
employee having continued his employment with the Company through the Closing
Date.
8. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS. The obligations
of the Purchaser hereunder are, at the option of the Purchaser, subject to the
satisfaction on or prior to the Closing Date of the following conditions:
8.1 Legal Proceedings. All actions and legal proceedings in connection
with the transactions contemplated hereby and all documents and other papers
required to be delivered by the Seller to the Purchaser hereunder and all other
related matters shall have been approved by the Purchaser and its counsel in
their sole discretion and the Seller shall have delivered to the Purchaser
certificates of its appropriate officers, dated as of the Closing Date, as to
the resolutions adopted by the board of directors of the Seller duly authorizing
the execution, delivery and performance of this Agreement and the execution and
delivery of all instruments and documents contemplated hereby.
8.2 Representations and Warranties on Closing Date. Except as set forth
in the Schedules hereto and except for changes between the date of this
Agreement and the Closing Date set forth on updated Schedules from time to time
delivered by Seller to the Purchaser prior to the Closing, all representations
and warranties of the Seller made in this Agreement or in any document or
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certificate delivered by the Seller to the Purchaser pursuant hereto shall be
true and correct in all material respects on the Closing Date with the same
force and effect as though such representations and warranties were made on the
Closing Date.
8.3 Terms, Covenants and Conditions. All the terms, covenants and
conditions of this Agreement to be complied with and performed by the Seller on
or prior to the Closing Date shall have been complied with and performed in all
material respects.
8.4 Consents, Approvals, Etc. All consents, Permits, approvals,
authorizations or orders of any court or governmental authority or regulatory
body necessary for the lawful consummation of the transactions contemplated
hereby shall have been obtained; all consents, Permits and approvals from
parties to contracts and other agreements with respect to the Company's
business, and any other material consent, Permit or approval that may be
required in connection with the performance by the Seller of its obligations
under this Agreement or the consummation of the transactions contemplated
hereby, or the continuance of such contracts, Permits or other agreements after
the Closing shall have been obtained.
8.5 No Material Adverse Change. Between the date hereof and the Closing
Date, there shall have been no Material Adverse Effect.
8.6 Litigation. No action, suit or proceeding shall have been
instituted, by or before any court or governmental or regulatory body, or
instituted or threatened by any governmental or regulatory body, to restrain the
consummation of the transactions contemplated hereby, or to modify in any
material respect the terms hereof or the manner in which the Company conducts
its businesses, or to seek damages or a discovery order in connection with such
transactions.
8.7 Opinion of Counsel. The Purchaser shall have received an opinion of
Montgomery, McCraken, Xxxxxx & Xxxxxx, LLP, the Seller's counsel, in the form of
Schedule 8.7 hereto.
8.8 Certain Financial Matters. As of the Closing Date:
(a) the inter-company debt owned by the Company to Seller shall
have been eliminated in a manner that does not generate taxable income to the
Company;
(b) Working Capital will be not less than the greater of
$3,000,000 or the Working Capital of the Company as of September 24, 2000;
(c) the total liabilities of the Company (after giving effect to
the Closing and except for liabilities associated with industrial revenue bond
financing, the Stay Bonuses and except for indebtedness to EPC, Melling Tool,
and to Bank One created or incurred in connection with the transactions
contemplated hereby) will be not more than $500,000; and
(d) the only liabilities of the Company as would be required to be
reflected in its financial statements as at the Closing Date will be current
liabilities and accruals arising in the ordinary course of business and
indebtedness and liabilities associated with industrial revenue bond financing.
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8.9 Environmental Audit. Purchaser shall have received a satisfactory
environmental audit (including a baseline environmental assessment if deemed
necessary) of the real estate owned by the Company.
8.10 Employment Contracts. Purchaser shall have negotiated employment
contracts with Xxxxx Xxxxxxx, Xxxx Xxxxxxxx, Xxx XxXxxxx, and Xxx Xxxxxx in form
and substance satisfactory to Purchaser.
8.11 Opinion of Bond Counsel. Purchaser shall have received an opinion
of counsel from attorneys of its choice that the rights and obligations of the
Company in respect of the industrial revenue bond financing dated August 1, 1988
relating to its Carson City, Nevada facility shall not be adversely affected by
the transaction contemplated by this Agreement.
8.12 Due Diligence. The Purchaser shall be satisfied, in its sole
discretion, with all of the Purchaser's due diligence.
9. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS. The obligations of
the Seller hereunder are, at the option of the Seller, subject to the
satisfaction on or prior to the Closing Date of the following conditions:
9.1 Legal Proceedings. All actions and legal proceedings in connection
with the transactions contemplated hereby and all documents and other papers
required to be delivered by the Purchaser to the Seller hereunder and all other
related matters shall have been approved by the Seller and its counsel in their
sole discretion and the Purchaser shall have delivered to the Seller
certificates of its appropriate officers, dated as of the Closing Date, as to
the resolutions adopted by the board of directors or members, as appropriate, of
the Purchaser duly authorizing the execution, delivery and performance of this
Agreement and the execution and delivery of all instruments and documents
contemplated hereby.
9.2 Representations and Warranties on Closing Date. Except as set forth
in the Schedules hereto and except for changes between the date of this
Agreement and the Closing Date, all representations and warranties of the
Purchaser contained in this Agreement or in any document or certificate
delivered by the Purchaser to the Seller pursuant hereto shall be true and
correct in all material respects on the Closing Date with the same force and
effect as though such representations and warranties were made on the Closing
Date.
9.3 Terms, Covenants and Conditions. All the terms, covenants and
conditions of this Agreement to be complied with and performed by the Purchaser
on or prior to the Closing Date shall have been complied with and performed in
all material respects.
9.4 Litigation. No action, suit or proceeding shall have been
instituted by or before any court or governmental or regulatory body, or
instituted or threatened by any governmental or regulatory body, to restrain the
consummation of the transaction contemplated hereby, or modify in any material
respect the terms hereof or prevent the carrying out of the transactions
contemplated hereby, or to seek damages or a discovery order in connection with
such transactions.
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9.5 Opinion of Counsel. The Seller shall have received an opinion of
Varnum, Riddering, Xxxxxxx & Xxxxxxx LLP, the Purchaser's counsel, in the form
of Schedule 9.5 hereto.
9.6 No Material Adverse Change. Between the date hereof and the Closing
Date, there shall have been no Material Adverse Effect.
9.7 Certain Financial Matters. As of the Closing Date:
(a) the inter-company debt owned by the Company to Seller shall
have been eliminated in a manner that does not generate taxable income to the
Company;
(b) the Working Capital of the Company will be not less than the
greater of $3,000,000 or the Working Capital of the Company as of September
24,2000 interim financial statements adjusted for changes in the ordinary course
of business through the Company's fiscal year end;
(c) the total liabilities of the Company (exclusive of liabilities
associated with the IRB financing) will be not more than the lesser of $500,000
or the liabilities (exclusive of liabilities associated with the IRB financing)
of the Company as of September 24, 2000 and
(d) the only liabilities of the Company as would be required to be
reflected in its financial statements as at the Closing Date will be current
liabilities and accruals arising in the ordinary course of business and
indebtedness and liabilities associated with industrial revenue bond financing.
10. ACTIONS TO BE TAKEN AT THE CLOSING. The following actions shall be
taken at the Closing, each of which shall be conditional on completion of all
the others and all of which shall be deemed to have taken place simultaneously:
10.1 Delivery of Shares. The Seller shall deliver to the Purchaser and
the Company certificates, duly executed by its president and attested by its
secretary or accompanied by stock powers so executed, for the Shares, sufficient
to vest in Purchaser and the Company good title to the Shares as required by
this Agreement, and any approvals and consents required to be delivered pursuant
to the terms of this Agreement.
10.2 Payment for Shares. The Purchaser and the Company shall deliver to
the Seller and the Escrow Agent the Purchase Price on the terms set forth in
Section 2.2.
10.3 Opinions of Counsel. Each of the Seller and Purchaser shall
deliver to the other the opinions contemplated by Sections 8.7 and 9.5.
10.4 Other Documents.
(a) The parties shall have executed and delivered an escrow
agreement in the form attached hereto as Exhibit 10.4(a) and the Escrow Funds
(as therein defined) required to be deposited at Closing shall have been so
deposited.
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(b) The Company and Xxxxxxx X. Xxxxxxx, Xxxx Xxxxxxxx, Xxx
XxXxxxx, and Xxx Xxxxxx shall have entered into employment contracts as
contemplated by Section 8.10.
11. SURVIVAL.
11.1 Survival of Representations and Warranties; Certain Other Matters.
The representation and warranty of the Seller under Section 4.16 and of the
Purchaser under Section 5.6 shall survive the execution and delivery hereof and
the Closing for 36 months following the Closing, subject to the limitations set
forth in Section 12 hereof. All of the other representations and warranties of
the Seller and Purchaser contained in this Agreement (as supplemented pursuant
to the terms hereof) shall survive the execution and delivery hereof and the
Closing for 18 months following the Closing, subject to the limitations set
forth in Section 12.2 and Section 12.4 hereof.
11.2 Non-Competition. For a period of three (3) years from and after
the date of this Agreement, the Seller agrees (for itself and for and on behalf
of its subsidiaries and controlled affiliates) that it will not directly or
indirectly: (i) engage in any activity or business which competes with the
business of the Company determined as of the Closing Date within the following
geographic territory: North America; (ii) obtain or acquire a direct or indirect
financial interest in any business or enterprise that engages in any activity or
business which competes with the business of the Company determined as of the
Closing Date within the following geographic territory: North America (provided,
however, that investments not exceeding a five percent (5%) interest in such an
entity shall not be deemed to violate the foregoing restrictions); (iii)
knowingly hire or engage or attempt to hire or engage any employee of the
Company or encourage any such employee to terminate his or her employment with
the Company; or (iv) knowingly solicit or encourage any customer or vendor of
the Company to terminate or reduce its commercial relationship with the Company.
Additionally, Seller agrees, following the Closing Date, that it shall not use,
for commercial purposes, the names "The Landover Company" or "Dura-Bond" or
"Dura-Bond Bearing Company" or any confusingly similar name in connection with
any venture or commercial activity that would cause confusion among the
customers, vendors and suppliers to the Company. If a final judgment of a court
of competent jurisdiction determines that any provision of this Section 11.2 is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration or area of the term or provision, to delete specific words
or phrase, or to replace any invalid or unenforceable term or provision of this
Section 11.2 with a narrower term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified. The
restrictions on Seller contained in this Section 11.2 shall automatically
terminate if the Purchaser materially breaches this Agreement, but shall be
automatically reinstated if the Purchaser cures such breach.
11.3 Confidential Information. For a period of five (5) years from and
after the date of this Agreement, Seller agrees not to disclose and to hold as
confidential, all of the confidential and proprietary information of the Company
except for disclosures to the Purchaser, to Seller's professional advisers or as
may be required by law, provided, however, that Seller shall not be restricted
or limited in respect of any information which is or becomes public through no
breach hereof on the part of the Seller or which Seller receives from any third
party after the date hereof or which Seller is required by law or legal process
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to disclosure. In the event that Seller is required in any legal proceeding to
disclose any such confidential and proprietary information, Seller shall
endeavor to promptly notify the Purchaser so that Purchaser may seek an
appropriate protective order.
11.4 Equitable Relief. The parties acknowledge that damages for
breaches of the obligations set forth in Sections 11.2 and 11.3 may be difficult
or impossible to calculate. Therefore, the parties agree that the Purchaser
shall be entitled to injunctive relief on account of any breach thereof by
Seller.
12. INDEMNIFICATION.
12.1 Obligation to Indemnify by the Seller. The Seller agrees to
indemnify, defend and hold harmless the Purchaser (and its affiliates and their
respective shareholders, directors, officers and employees) from and against all
claims, suits, actions, causes of action, losses, liabilities, damages,
deficiencies, out-of-pocket costs or expenses, including interest, penalties and
reasonable attorneys' fees and disbursements and other out-of-pocket costs
incurred in investigating, settling or defending any of the foregoing or in
prosecuting a claim for indemnification hereunder ("Losses"), based upon,
arising out of or otherwise in respect of (i) any inaccuracy in or any breach of
any representation or warranty of the Seller contained in this Agreement or in
any schedule or agreement delivered or entered into pursuant hereto (without
regard to any modifier qualifying a representation or warranty based on
materiality or a "Material Adverse Effect"), (ii) any breach of any covenant or
agreement of the Seller contained in this Agreement or in any schedule or
agreement delivered or entered into pursuant hereto, (iii) any product liability
claim in respect of any product sold by the Company prior to the Closing Date,
and (iv) any unaccrued Losses arising after the Closing out of those matters
disclosed on Schedule 4.9.
12.2 Limitations on Indemnification by the Seller. The Seller's
obligation to indemnify the Purchaser hereunder shall expire and terminate as to
claims for which written notice has not been provided to the Seller on or before
the date which is eighteen (18) months after the Closing Date; provided,
however, that with respect to any claims made for any breach of a representation
or warranty contained in paragraph 4.16, the Seller's obligation to indemnify
the Purchaser hereunder shall expire and terminate as to claims for which
written notice has not been given to the Seller on or before the date which is
thirty-six (36) months after the Closing Date. The Seller shall be obligated to
indemnify Purchaser only if Purchaser's Losses (as considered without regard to
any modifier qualifying a representation based on materiality or on a "Material
Adverse Effect") exceed $50,000 in the aggregate, in which event the Purchaser
shall be entitled to indemnification in the amount of all such Losses (back to
the first dollar of Loss). Notwithstanding the foregoing, in no event shall
Seller be liable to the Purchaser under or in respect of this Agreement,
including but not limited to Section 12.1 hereof, in an amount or amounts in the
aggregate in excess of the cash consideration paid to Seller for the Shares
under Section 2.
12.3 Obligations to Indemnify by the Purchaser. The Purchaser, EPC, and
Melling Tool agree, jointly and severally, to indemnify, defend and hold
harmless the Seller (and its affiliates and their respective shareholders,
directors, officers and employees) from and against all Losses based upon,
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arising out of or otherwise in respect of (i) any inaccuracy in or any breach of
any representation or warranty of the Purchaser contained in this Agreement or
in any schedule or agreement delivered or entered into pursuant hereto (without
regard to any modifier qualifying a representation or warranty based on
materiality or a "Material Adverse Effect"), (ii) any breach of any covenant or
agreement of the Purchaser contained in this Agreement or in any schedule or
agreement delivered or entered into pursuant hereto, (iii) any product liability
claims in respect of any product sold by the Company on or after the Closing
Date, and (iv) any claims of any present or future creditors of the Company
whether or not presently existing as of the Closing Date (including but not
limited to claims arising out of or in respect of the capitalization of the
Purchaser or the Company as of the Closing).
12.4 Limitations on Indemnification by the Purchaser. The Purchaser's,
EPCIs and Melling Tool's obligation to indemnify the Seller hereunder shall
expire and terminate as to claims for which written notice has not been provided
to the Seller on or before the date which is eighteen (18) months after the
Closing Date; provided, however, that with respect to claims contemplated by
Section 12.3(iv) or f or a breach of a representation or warranty contained in
paragraph 5.6, the Purchaser's, EPCIs and Melling Tool's obligation to indemnify
hereunder shall expire and terminate as to claims for which written notice has
not been given to the Purchaser on or before the date which is thirty-six (36)
months after the Closing Date. The Purchaser shall be obligated to indemnify
Seller only if Seller's Losses (as considered without regard to any modifier
qualifying a representation based on materiality or on a "Material Adverse
Effect") exceed $50,000 in the aggregate, in which event the Purchaser shall be
entitled to indemnification in the amount of all such Losses (back to the first
dollar of Loss). Notwithstanding the foregoing, in no event shall Purchaser be
liable to the Seller under or in respect of this Agreement, including but not
limited to Section 12.3 hereof, in an amount or amounts in the aggregate in
excess of the cash consideration paid to Purchaser for the Shares under Section
2.
12.5 Procedure. The provisions of this Section 12.5 shall apply in any
case where a party suffers or may suffer a Loss based on a claim made or an
action commenced by a third party.
(a) Promptly after receipt by any party hereto (the "Indemnitee")
of any written claim, demand for payment or legal process made or served by, for
or on behalf of any third party that asserts a liability of the Indemnitee that
may result in a Loss (an "Asserted Liability"), and promptly after acquiring
actual knowledge of circumstances which, with the lapse of time or the giving of
notice or both, are reasonably likely to result in the assertion of an Asserted
Liability, the Indemnitee shall give notice thereof (a "Claims Notice") to the
escrow agent under the Escrow Agreement and to the party obligated or arguably
obligated to provide indemnification pursuant to Sections 12.1 or 12.3 (the
"Indemnifying Party") . The Claims Notice shall describe the Asserted Liability
in reasonable detail, and shall indicate the amount (estimated, if necessary) of
the Loss that has been or may be suffered by the Indemnitee. Notwithstanding the
foregoing, an Indemnitee's failure to give, or delay in giving, a Claims Notice
pursuant to this subsection 12.5(a) with respect to an Asserted Liability shall
discharge the obligation of an Indemnifying Party hereunder only to the extent
that such failure increases the Indemnifying Party's obligation or liability
hereunder or otherwise is detrimental to the Indemnifying Party.
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(b) Upon receipt of any Claims Notice, the Indemnifying Party may
elect to compromise or defend, at its own expense and by its own counsel (which
shall be reasonably acceptable to the Indemnitee), any Asserted Liability. If
the Indemnifying Party elects to compromise or defend such Asserted Liability,
it shall within 30 days (or sooner, if the nature of the Asserted Liability so
requires) notify the Indemnitee of its intent to do so, and the Indemnitee shall
cooperate, at the expense of the Indemnifying Party, in the compromise of, or
defense against, such Asserted Liability. If the Indemnifying Party elects not
to compromise or defend the Asserted Liability, fails to notify the Indemnitee
of its election as herein provided or contests its obligation to indemnify under
this Agreement, the Indemnitee may pay, compromise or defend such Asserted
Liability for the account of the Indemnifying Party, subject to a determination
that the Indemnifying Party is liable hereunder for such Loss. Notwithstanding
the foregoing, neither the Indemnifying Party nor the Indemnitee may settle or
compromise any claim over the reasonable objection of the other; provided,
however, that consent to settlement or compromise shall not be unreasonably
withheld or delayed. In any event, the Indemnitee and the Indemnifying Party may
participate, at their respective own expense, in the defense of such Asserted
Liability. If the Indemnifying Party chooses to defend any claim, the Indemnitee
shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense
and otherwise shall cooperate in good faith in the defense of such claim.
13. TERMINATION OF AGREEMENT.
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing as follows:
(a) at the election of the Purchaser, (a) if any one or more of
the conditions to its obligations to close has not been fulfilled as of the
Closing Date in all material respects, or (b) if the Seller has breached any
representation, warranty, covenant or agreement contained in this Agreement or
in any document delivered pursuant to this Agreement in any material respect;
and
(b) at the election of the Seller, (a) if any one or more of the
conditions to its respective obligations to close has not been fulfilled as of
the Closing Date in all material respects, or (b) if the Purchaser has breached
any representation, warranty, covenant or agreement contained in this Agreement
or in any document delivered pursuant to this Agreement in any material respect.
13.2 Effect of Termination. The termination of this Agreement in
accordance with Section 13.1 shall not affect the rights or remedies of any
party hereto against any other party hereto based on any breach of this
Agreement existing prior to such termination.
14. MISCELLANEOUS.
14.1 Consent to Jurisdiction; Arbitration of Disputes.
(a) Any legal action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
instituted exclusively in federal or state court located in Nevada and each
party agrees not to assert, by way of motion, as a defense, or otherwise, in any
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such action, suit or proceeding, any claim that it is not subject personally to
the jurisdiction of such court, that its property is exempt or immune from
attachment or execution, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is improper
or inconvenient or that this Agreement or the subject matter hereof may not be
enforced in or by such court. Each party further irrevocably submits to the
personal jurisdiction of any such court in any such action, suit or proceeding.
Nothing contained herein shall be deemed to affect the right of any party to
serve process in any manner permitted by law in any jurisdiction.
(b) Notwithstanding anything herein to the contrary, in the event
that there shall be a dispute among the parties after the Closing arising out of
or relating to this Agreement, including without limitation the indemnities
provided in Section 12 or the breach thereof, or of any of the representations
and warranties in this Agreement, or arising out of or relating to any agreement
delivered in connection herewith, the parties agree that such dispute shall be
resolved by final binding arbitration in Carson city, Nevada, administered by
the American Arbitration Association ("AAA") in accordance with AAA's commercial
arbitration rules then in effect or such other procedures as the parties to such
dispute may unanimously agree upon. Any award issued as a result of such
arbitration shall be final, unappealable, and binding between the parties
thereto, and shall be enforceable by any court having jurisdiction over the
party against whom enforcement is sought. The arbitration award may also award
to the successful party the costs, fees, and expenses of the arbitration
(including attorneys fees) if such an award is warranted and appropriate in the
arbitrator's discretion. If no such award is made, the parties shall each bear
their own arbitration expenses and shall share equally the fees and costs of the
arbitrators.
14.2 Expenses. The parties to this Agreement shall, except as otherwise
specifically provided herein, bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including, without limitation, all fees
and expenses of agents, representatives, employee benefit consultants, counsel
and accountants. Purchaser and the Seller shall share equally the fees and
expenses of the Xxxxxx Firm for work performed under Section 2.1 and escrow
expense. Seller shall pay all fees and expenses of the Deloitte Firm for work
performed under Section 2.1.
14.3 Further Assurances. Each of the parties shall execute such
documents and other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall use its reasonable efforts to fulfill
or obtain the fulfillment of the conditions to the Closing, including, without
limitation, the execution and delivery of any document or other papers, the
execution and delivery of which are conditions precedent to the Closing.
14.4 Indemnification of Brokerage. The Purchaser represents and
warrants to the Seller that no broker, finder, agent or similar intermediary has
acted on its behalf in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finders, fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with the Purchaser or any action taken
by the Purchaser. The Seller represents and warrants to the Purchaser that no
broker, finder, agent or similar intermediary has acted on behalf of the Seller
in connection with this Agreement or the transactions contemplated hereby, and
that there are no brokerage commissions, finders, fees or similar fees or
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commissions payable in connection therewith based on any agreement, arrangement
or understanding with the Seller, or any action taken by the Seller. Each of the
Purchaser, on the one hand, and the Seller on the other, agrees to indemnify and
save the other harmless from any claim or demand for commissions or other
compensation by any broker, finder, agent or similar intermediary claiming to
have been employed by or on behalf of the Purchaser, on the one hand, or the
Seller, on the other, and to bear the cost of legal expenses incurred in
defending against any such claim.
14.5 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
(a) "affiliate" with respect to any person, means any other person
controlling, controlled by or under common control with such person.
(b) "contracts and other agreements" means all contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, franchises, licenses, commitments or other binding
arrangements, written or oral.
(c) "document" means any document, agreement, instrument,
certificate, notice, consent, affidavit, letter, telegram, telex, statement,
schedule (including any Schedule to this Agreement), exhibit (including any
Exhibit to this Agreement) or any other paper whatsoever.
(d) "governmental or regulatory body" means any government or
political subdivision thereof, whether federal, state, local or foreign, or any
agency or instrumentality of any such government or political subdivision.
(e) "lien or other encumbrance" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
(f) "person" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, limited liability
company, unincorporated organization, governmental or regulatory body or other
entity of any kind whatsoever.
(g) "property" means real, personal or mixed property, tangible or
intangible.
14.6 Knowledge. As used in this Agreement, the term "knowledge" means
that which is actually known and that which reasonably should have been known by
(i) Xxxxxx X. Xxxxxx, Xx., President and Chief Executive Officer, Xxxx X.
Xxxxxxx, Executive Vice President of Finance and Chief Financial Officer, and
Xxxxx X. Holiday, Chief Operating officer, and (ii) Xxxxx Xxxxxxx and Xxxx
Xxxxxxxx.
14.7 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
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unenforceable such provision in any other jurisdiction. If any court determines
that any covenant, or any part of any covenant is invalid or unenforceable, all
other covenants shall not thereby be affected and shall be given full effect,
without regard to the invalid portions.
14.8 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by confirmed facsimile
transmission or, if mailed, upon receipt by the addressee, as follows:
(i) If to the Purchaser, to:
(a) Xxxx X. Xxxxx
0000 Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxx Xxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
(b) Xxxx Xxxxxxx
Melling Tool Co.
0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to:
Xxxx X. Xxxxxxx, Esquire
Varnum, Riddering, Xxxxxxx & Xxxxxxx, LLP
0000 X. Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxx Xxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
(ii) if to the Seller, to:
Xxxxxx X. Xxxxxx Owosso Corporation
The Triad Building
0000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000
Phone: 000-000-0000 Fax:
Fax: 000-000-0000
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with a copy to:
Xxxxx X. Xxxxxxxxxx, Xx., Esquire
Montgomery, McCracken, Xxxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
14.9 Entire Agreement. This Agreement (including the Schedules and
Exhibits) and the agreements, certificates and other documents delivered
pursuant hereto or in connection with the transactions contemplated hereby
contain the entire agreement among the parties with respect to the transactions
described herein, and supersede all prior agreements, written or oral, with
respect thereto.
14.10 Waivers and Amendments; Non-Contractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity,
except that Section 12 shall constitute the parties' sole remedy for breach of
representation, warranty, agreement or covenant hereunder.
14.11 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Nevada applicable to agreements made
and to be performed entirely within such State, without regard to Nevada
conflicts of laws principles.
14.12 Binding Effect; no Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
legal representatives. Except by operation of law, this Agreement is not
assignable without the consent of the parties and any purported assignment
without such consent shall be null and void.
14.13 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
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14.14 Exhibits and Schedules. The Schedules are a part of this
Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses or Schedules shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require.
14.15 Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
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