Exhibit 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
STONERIDGE, INC.
AND
THE SHAREHOLDERS
OF
HI-STAT MANUFACTURING CO., INC.
Dated: As of December 7, 1998
TABLE OF CONTENTS
Page No.
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 PURCHASE AND SALE OF SHARES 1
2.1 Basic Transaction.......................................... 1
2.2 Purchase Price............................................. 2
2.3 The Closing................................................ 2
2.4 Deliveries at the Closing.................................. 3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION 3
3.1 Representations and Warranties of Sellers.................. 3
3.2 Representations and Warranties of Buyer.................... 4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY 5
4.1 Organization, Qualification, and Corporate Power........... 5
4.2 Capitalization; Subsidiaries............................... 5
4.3 Noncontravention........................................... 6
4.4 Brokers' Fees.............................................. 6
4.5 Financial Statements; Liabilities.......................... 6
4.6 Events Subsequent to Most Recent Fiscal Period End......... 7
4.7 Legal Compliance........................................... 8
4.8 Tax Matters................................................ 9
4.9 Real Property.............................................. 9
4.10 Title to Assets............................................ 10
4.11 Intellectual Property...................................... 11
4.12 Inventory.................................................. 11
4.13 Contracts.................................................. 11
4.14 Accounts and Notes Receivable.............................. 13
4.15 Powers of Attorney......................................... 13
4.16 Insurance.................................................. 13
4.17 Material Litigation........................................ 13
4.18 Employees.................................................. 14
4.19 Employee Benefits.......................................... 14
4.20 Guaranties................................................. 16
4.21 Environmental, Health and Safety........................... 16
4.22 Certain Business Relationships with Company................ 17
4.23 Stock Records.............................................. 17
4.24 Labor Relations............................................ 17
4.25 Product Liability and Recalls; Product Warranty............ 17
4.26 Customers.................................................. 17
4.27 Seller and Seller Affiliated Party Claims.................. 17
ARTICLE 5 PRE-CLOSING COVENANTS 18
5.1 General; Timing of Closing................................. 18
5.2 Notices and Consents....................................... 18
5.3 Operation of Business...................................... 18
i
5.4 Preservation of Business................................... 19
5.5 Full Access................................................ 19
5.6 Notice of Developments..................................... 19
5.7 Exclusivity................................................ 19
5.8 Excluded Assets............................................ 20
5.9 Updated Disclosure Schedule................................ 20
5.10 Employee Benefit Plans..................................... 21
5.11 Compensation Arrangements; Extraordinary Payments.......... 22
5.12 Debt....................................................... 22
5.13 Audit Matters.............................................. 22
5.14 Accounts Payable and Inventory............................. 22
ARTICLE 6 POST-CLOSING COVENANTS 23
6.1 General.................................................... 23
6.2 Litigation Support......................................... 23
6.3 Transition................................................. 23
6.4 Indemnification............................................ 24
ARTICLE 7 CONDITIONS TO OBLIGATION TO CLOSE 24
7.1 Conditions to Obligation of Buyer.......................... 24
7.2 Conditions to Obligation of Sellers........................ 25
ARTICLE 8 INDEMNIFICATION 26
8.1 Survival of Representations and Warranties................. 26
8.2 Indemnification Provisions for Benefit of Buyer............ 26
8.3 Indemnification Provisions for Benefit of Sellers.......... 27
8.4 Exclusive Remedy........................................... 27
ARTICLE 9 LIMITATIONS ON INDEMNIFICATION 28
9.1 Term....................................................... 28
9.2 Indemnification Baskets.................................... 28
9.3 Limited Recourse........................................... 29
ARTICLE 10 COOPERATION 29
10.1 Notice of Claims........................................... 29
10.2 Right to Defense........................................... 30
10.3 Determination of Adverse Consequences...................... 30
ARTICLE 11 DISPUTE RESOLUTION 31
11.1 Exclusive Procedure for Dispute Resolution................. 31
11.2 Negotiation Between Executives............................. 31
11.3 Mediation.................................................. 31
11.4 Litigation................................................. 32
11.5 Provisional Remedies....................................... 32
11.6 Tolling Statutes of Limitation............................. 32
11.7 Performance to Continue.................................... 32
ARTICLE 12 TERMINATION 32
12.1 Termination of Agreement................................... 32
12.2 Effect of Termination...................................... 33
ARTICLE 13 AGREEMENTS CONCERNING CERTAIN TAX MATTERS 34
13.1 Mutual Cooperation......................................... 34
13.2 Section 338 Election....................................... 34
ii
13.3 Federal Income Tax Allocation of Purchase Price............ 34
13.4 Certain Tax Matters........................................ 34
ARTICLE 14 MISCELLANEOUS 35
14.1 Nature of Certain Obligations.............................. 35
14.2 Press Releases and Public Announcements.................... 35
14.3 No Third-Party Beneficiaries............................... 35
14.4 Entire Agreement........................................... 36
14.5 Succession and Assignment.................................. 36
14.6 Counterparts............................................... 36
14.7 Headings................................................... 36
14.8 Notices.................................................... 36
14.9 Governing Law; Consent to Jurisdiction..................... 37
14.10 Amendments and Waivers..................................... 38
14.11 Severability............................................... 38
14.12 Expenses................................................... 38
14.13 Construction............................................... 38
14.14 Incorporation of Exhibits and Schedules.................... 38
EXHIBITS
--------
Exhibit A Defined Terms
Exhibit 7.1(f) Closing Opinions of Sellers' Counsel
Exhibit 7.1(k) Noncompetition Agreement
Exhibit 7.2(e) Closing Opinion of Buyer's Counsel
iii
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
December 7, 1998, by and among Stoneridge, Inc., an Ohio corporation ("Buyer"),
and the shareholders of Hi-Stat Manufacturing Co., Inc. who are identified on
the signature page attached hereto (collectively "Sellers" and individually a
"Seller"). Buyer and Sellers are sometimes referred to collectively herein as
the "Parties."
RECITALS
A. Sellers own beneficially and of record all issued and outstanding
shares of capital stock of Hi-Stat Manufacturing Co., Inc., a Florida
corporation (the "Company").
B. This Agreement contemplates a transaction in which Buyer will purchase
from Sellers, and Sellers will sell to Buyer, all of the issued and outstanding
shares of capital stock of the Company (the "Shares") in return for the cash
consideration and other obligations set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings ascribed
thereto in Exhibit A attached hereto or as otherwise defined elsewhere in this
Agreement. Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. As used in this Agreement,
the word "including" shall mean including without limitation.
ARTICLE 2
PURCHASE AND SALE OF SHARES
Basic Transaction. On and subject to the terms and conditions of this
-----------------
Agreement, at the Closing Buyer agrees to purchase from each Seller, and each
Seller agrees to sell, assign, transfer and deliver to Buyer, all of such
Seller's shares of capital stock of the Company for the consideration specified
in this Article 2.
Purchase Price.
--------------
In consideration of the transfer of Shares and the other obligations set forth
in this Agreement, Buyer shall deliver at the Closing the sum of Three Hundred
Sixty Two Million Dollars ($362,000,000.00) less the amount of Net Company Debt
as of the Closing Date and less the amount of the Update Adjustment (if any)
determined pursuant to Section 5.9 (the "Purchase Price"), payable in cash by
wire transfer of immediately available funds, which shall be disbursed to
Sellers to such bank accounts as Sellers shall designate in writing to Buyer
prior to the Closing, to be allocated among Sellers in proportion to their
respective holdings of the Shares as set forth in Section 4.2 of the Disclosure
Schedule.
For purposes of Section 2.2, the term "Net Company Debt" shall mean the amount
of outstanding principal of, accrued and unpaid interest on, and any prepayment
or similar fees that would be incurred by the immediate payment of, all
indebtedness of the Company under the credit facilities listed on Schedule
2.2(b) of the Disclosure Schedule as existing as of the Closing Date (which
amounts shall be set forth in a certificate of Sellers delivered to Buyer one
business day prior to Closing), decreased by the amount of the Company's cash
balances in all bank accounts and similar accounts as of the Closing Date. Such
certificate of Sellers shall also confirm to Buyer that the Company has
maintained its accounts payable and inventory through the Closing Date in the
Ordinary Course of Business. At Buyer's request, at or prior to Closing Sellers
shall cause the Company to provide Buyer with such information and documentation
related thereto as Buyer shall reasonably request.
The Parties acknowledge that the Company may increase the Net Company Debt prior
to Closing to pay certain transaction expenses related to this Agreement, and
Sellers acknowledge that they shall be obligated to cause the Company to
maintain its accounts payable and inventory in the Ordinary Course of Business
through the Closing. Buyer acknowledges that it shall cause the Company to
repay the credit facilities of the Company listed on Schedule 2.2(b) promptly
following the Closing.
The Closing. The closing of the transactions contemplated by this Agreement
-----------
(the "Closing") shall take place at the offices of Xxxxxxx & Xxxxxx LLP, 000
Xxxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxx, commencing at 10:00 a.m. local time on the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as Buyer and Sellers may
mutually determine (the "Closing Date"); provided, the Closing Date shall be no
later than March 31, 1999, subject to the obligation of the Parties set forth in
Section 5.1 to use reasonable best efforts to cause the Closing to occur on or
before December 31, 1998.
2
Deliveries at the Closing. At the Closing, (a) Sellers will deliver to Buyer
-------------------------
the various certificates, instruments, and documents referred to in Section 7.1,
(b) Buyer will deliver to Sellers the various certificates, instruments, and
documents referred to in Section 72, (c) each Seller will deliver to Buyer stock
certificates representing all of such Seller's Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (d) Buyer will deliver to
each Seller the consideration specified in Section 22.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
Representations and Warranties of Sellers. Each Seller represents and warrants
-----------------------------------------
to Buyer that the statements contained in this Section 31 with respect to such
Seller are true and correct as of the date of this Agreement and will be true
and correct with respect to such Seller as of the Closing Date as though made
again as of such date:
Capacity and Authorization of Sellers. Seller is either (i) a natural person
--------------------------------------
with the legal capacity to execute and deliver this Agreement and to perform his
or her obligations hereunder, or (ii) a valid trust with the power and authority
(trust and otherwise) to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of Seller, enforceable in accordance with its terms and conditions.
Noncontravention. Neither the execution and the delivery of this Agreement, nor
----------------
the consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental agency or
court to which Seller is subject, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license or instrument to which Seller is a
party or by which Seller is bound or to which any of Seller's assets is subject.
Except for the filings required by the HSR Act, to the Knowledge of Sellers,
Seller is not required to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement.
Brokers' Fees. Except for the fees payable to Xxxxxx X. Xxxxx & Co.
-------------
Incorporated ("Baird") listed on Schedule 3.1(c), which Sellers will cause the
Company to pay on or before the Closing Date, neither Sellers nor the Company
shall have any Liability or obligation to pay any finder's fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated by
this Agreement for which Buyer could become liable or obligated.
Shares. Seller holds of record and owns beneficially the number of Shares set
------
forth next to his, her or its name in Section 4.2 of the Disclosure Schedule,
free and clear of any restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims and demands,
and has full and unrestricted
3
power to sell, assign, transfer and deliver such Shares. Seller is not a party
to any option, warrant, purchase right or other contract or commitment that
could require Seller to sell, transfer or otherwise dispose of any capital stock
of the Company (other than this Agreement). Seller is not a party to any voting
trust, proxy or other agreement or understanding with respect to the capital
stock of the Company.
Representations and Warranties of Buyer. Buyer represents and warrants to
---------------------------------------
Sellers that the statements contained in this Section 32 are true and correct as
of the date of this Agreement and will be true and correct as of the Closing
Date as though made again as of such date.
Organization of Buyer. Buyer is a corporation duly incorporated, validly
---------------------
existing and in good standing under the laws of the State of Ohio, and is duly
qualified to do business in each jurisdiction in which Buyer owns or leases real
property, maintains an office or has employees residing, except where the
failure to be so qualified, separately or in the aggregate, would not have a
material adverse effect on the business or financial condition of Buyer.
Authorization of Transaction. Buyer has full corporate power and authority to
----------------------------
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement has been duly authorized by all necessary corporate action of
Buyer and constitutes the valid and legally binding obligation of Buyer,
enforceable in accordance with its terms and conditions.
Noncontravention. Neither the execution and delivery of this Agreement, nor the
----------------
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental agency or
court to which Buyer is subject or any provision of its Governing Documents, or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any agreement, contract, lease,
license or instrument to which Buyer is a party or by which it is bound or to
which any of its assets is subject, except where such violations, conflicts or
defaults would not separately or in the aggregate have a material adverse effect
on the business or financial condition of Buyer, provided, however that no such
violations, conflicts or defaults by Buyer will impose any Liability on Sellers.
Except for the filings required by the HSR Act, to the knowledge of Buyer, Buyer
is not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement, except to the extent that the failure to obtain any such consent,
approval or authorization, or to make any such filing, separately or in the
aggregate, would not have a material adverse effect on the business or financial
condition of Buyer, provided, however, that no such failure by Buyer will impose
any Liability upon Sellers.
Brokers' Fees. Buyer shall be obligated for all fees payable to its investment
-------------
adviser, Xxxxxxxxx, Lufkin & Xxxxxxxx, in connection with the transactions
contemplated by this Agreement. Buyer has no Liability or obligation to pay any
finder's fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which any Seller could become
liable or obligated.
4
Investment. Buyer is acquiring the Shares solely for its own account and not
----------
with a view to, or for sale in connection with, any distribution thereof within
the meaning of the Securities Act.
Financing. Buyer has sufficient funds available, through firm financing
---------
commitments or otherwise, to purchase the Shares pursuant to this Agreement
without violating any solvency requirements currently applicable to Buyer.
Buyer has previously supplied to Sellers its unaudited financial statements
dated as of a date not later than September 30, 1998.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
Each Seller represents and warrants to Buyer that the statements in this
Article 4 are true and correct as of the date of this Agreement and will be true
and correct as of the Closing Date as though made again as of such date.
Organization, Qualification, and Corporate Power. The Company is a corporation
------------------------------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Florida. The Company is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction in which the Company owns or
leases real property, maintains an office or has employees residing. The
Company has full corporate power and authority to carry on the businesses in
which it is engaged and to own and use its properties owned and used. Section
4.1 of the disclosure schedule delivered by Sellers to Buyer on the date hereof,
a copy of which is attached hereto and acknowledged by the Parties (the
"Disclosure Schedule"), lists the directors and officers of the Company.
Capitalization; Subsidiaries. The authorized capital stock of the Company
----------------------------
consists of 7,500 common shares, par value $1.00 per share, of which 300 common
shares are issued and outstanding. All Shares are duly authorized, validly
issued, fully paid and nonassessable, and are held of record and owned
beneficially by Sellers as set forth in Section 4.2 of the Disclosure Schedule.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments that require the Company to issue, sell or otherwise cause to become
outstanding any of its capital stock. There are no outstanding stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Company. The Company has no obligation of any kind to issue any
additional equity securities to any Person. The Company does not have any
Subsidiary (defined as a corporation of which the Company owns directly or
indirectly more than 50% of the outstanding securities entitled generally to
vote for the election of directors) and does not hold any material direct or
indirect beneficial interest in any other corporation, partnership, joint
venture or other entity or enterprise.
5
Noncontravention. To the Knowledge of Sellers, neither the execution and
----------------
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (a) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge or other restriction
of any government, governmental agency or court to which the Company is subject
or any provision of the Governing Documents of the Company, or (b) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any agreement, contract, lease, license
or instrument to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Except for filings required by the HSR Act,
to the Knowledge of Sellers, the Company is not required to give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
Brokers' Fees. Except for the fees payable to Baird which Sellers will cause
-------------
the Company to pay on or before the Closing Date, the Company has no Liability
or obligation to pay any finder's fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
Financial Statements; Liabilities. Attached hereto as Schedule 4.5 of the
---------------------------------
Disclosure Schedule are the following financial statements of the Company
(collectively the "Financial Statements"): (a) audited balance sheets and
statements of income, statements of shareholders' interest and cash flow as of
and for the fiscal years ended December 31, 1997, 1996, and 1995, and (b)
unaudited balance sheets and related statements of income (the "Most Recent
Financial Statements") as of and for each of the months through October 31, 1998
(the "Most Recent Fiscal Period End"). The Financial Statements (other than the
Most Recent Financial Statements), including the notes thereto, have been
prepared from and are in accordance with the Company's books and records and are
in accordance with GAAP, and fairly present the financial condition of the
Company as of the dates stated and the results of operations of the Company for
such periods. The Most Recent Financial Statements have been prepared from and
are in accordance with the Company's books and records in accordance with the
Company's accounting policies and procedures consistently applied, which, except
as set forth in Section 4.5 of the Disclosure Schedule, generally are in
accordance with GAAP, and fairly present the financial condition of the Company
as of the date stated and the results of operations of the Company for such
period, except that the Most Recent Financial Statements contain estimates of
certain accruals, lack footnotes and other presentation items, and are subject
to normal year-end adjustments. All accounts payable of the Company have been
incurred in the Ordinary Course of Business, except for accounts payable not
incurred in the Ordinary Course of Business in an aggregate amount not to exceed
$100,000. Except as set forth on Section 4.5 of the Disclosure Schedule, to the
Knowledge of Sellers, the Company does not have any material liability or
obligation of any nature except:
6
those set forth or reflected in the Most Recent Financial Statements that have
not been paid or discharged since the date hereof;
those arising under agreements or other commitments described or identified on
the Disclosure Schedule or in the Ordinary Course of Business;
those incurred since the dates of the Most Recent Financial Statements in the
Ordinary Course of Business; and
those not required to be reflected on the financial statements of the Company
under GAAP.
Events Subsequent to Most Recent Fiscal Period End. Since the Most Recent
--------------------------------------------------
Fiscal Period End, except (i) as set forth on Section 4.6 of the Disclosure
Schedule, (ii) as permitted or contemplated by this Agreement, or (iii) as
consented by Buyer in writing, there has not been:
any material adverse change in the business or financial condition of the
Company taken as a whole;
any transaction entered into or carried out by the Company other than in the
Ordinary Course of Business;
any material borrowing or agreement to borrow funds by the Company, other than
in the Ordinary Course of Business; any incurring by the Company of any other
material obligation or liability (contingent or otherwise), except liabilities
incurred in the Ordinary Course of Business; or any endorsement, assumption or
guarantee of payment or performance of any material loan or obligation of any
other Person by the Company;
any material change in the Company's method of doing business or any material
change in its accounting principles or practices or its method of application of
such principles or practices;
any material mortgage, pledge, lien, security interest, hypothecation, charge or
other encumbrance imposed or agreed to be imposed on or with respect to the
properties or assets of the Company, other than in the Ordinary Course of
Business;
any material lien, mortgage, security interest, pledge, hypothecation, charge or
other encumbrance of the Company discharged or satisfied, or any obligation or
liability (absolute or contingent) paid, other than in the Ordinary Course of
Business and liabilities incurred and obligations under contracts entered into
after the Most Recent Financial Statement, in the Ordinary Course of Business;
7
any sale, lease or other disposition of, or any agreement to sell, lease or
otherwise dispose of, any of the material properties or assets of the Company,
other than sales of inventory in the Ordinary Course of Business;
any material loan or advance made by the Company to any Person;
any elimination of any material reserve established on the Company's books or
any changing of the method of accrual unless there is any change of significant
facts or circumstances pertaining to such reserve which would justify its
elimination or change in method of accrual;
any increase in the base compensation or other payment to any director, officer
or employee, whether now or hereafter payable or granted (other than payment of
bonuses or increases in base compensation in the Ordinary Course of Business),
or entry into or amendments of the terms of any employment or incentive
agreement with any such person;
any issuance or sale of any equity securities of the Company, or any alteration
of any terms of any outstanding equity securities of the Company; or
any declaration of, or any payment of, any dividend or distribution (whether in
cash, stock or property or otherwise) in respect of any Shares, including,
without limitation, any Subchapter S distribution or any similar distribution.
Legal Compliance.
----------------
Set forth in Section 4.7(a) of the Disclosure Schedule is a list of all material
governmental permits, variances, licenses, registrations, certificates and other
governmental authorizations (the "Permits") held by the Company and used in the
conduct of the Company's business. The Permits constitute all governmental
permits, variances, licenses, registrations certificates and other governmental
authorizations necessary for the Company to conduct its business as presently
conducted, except where the failure to possess any such governmental permit,
variance, license, registration, certificate or other governmental authorization
would not have a material adverse effect on the business or financial condition
of the Company.
To the Knowledge of Sellers, the Company is in compliance in all material
respects with all applicable laws, statutes, rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder of
federal, state, local and foreign courts or governmental authorities (and all
agencies thereof) (collectively, the "Applicable Laws"), and the Company is not
under investigation with respect thereto, nor has it been charged with or given
notice of any material violation of, any of the Applicable Laws.
8
Tax Matters. Except as set forth on Section 4.8 of the Disclosure Schedule:
-----------
The Company has filed or caused to be filed all significant Tax Returns required
to be filed with respect to the Company. All such Tax Returns at the time of
filing complied with all applicable Tax laws in all material respects. All
Taxes owed by the Company shown on any Tax Return have been paid. The Company
is not currently the beneficiary of any extension of time within which to file
any Tax Return. No claim has been made by an authority in a jurisdiction where
the Company does not file Tax Returns that it is subject to taxation by that
jurisdiction. There are no Security Interests on the assets of the Company that
arose in connection with any failure or alleged failure to pay any Tax.
There is no dispute or claim concerning any Tax Liability of the Company (i)
claimed or raised by any Taxing authority in writing, or (ii) as to which
Sellers have Knowledge based upon personal contact with any agent of such
authority. Section 4.8 of the Disclosure Schedule lists all federal, state,
local and foreign Tax Returns filed with respect to the Company for taxable
periods ended on or after December 31, 1995 and, with respect to Tax Returns for
the fiscal period ended December 31, 1997, the amount of Taxes paid by the
Company with respect thereto. Sellers have delivered to Buyer true and correct
copies of all federal income Tax Returns filed with respect to the Company since
December 31, 1995.
The Company has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
The Company is not a party to any Tax allocation or sharing agreement.
All federal income Tax Returns of the Company have been examined by the Internal
Revenue Service or closed by applicable statute and satisfied for all periods to
and including the fiscal year 1993, and any deficiencies asserted as a result of
such examinations have been paid or finally settled. Except as set forth on
Schedule 4.8, no audit of the Company's federal income Tax Return is currently
pending.
Effective January 1, 1986, the Company made a valid election to be taxed as an S
Corporation under Section 1362(a) of the Code, and such election has not been
terminated under Section 1362(d) of the Code or otherwise. Since January 1,
1986, the Company has met all applicable requirements of the Code to maintain
the Company's election to be taxed as an S Corporation thereunder.
Real Property.
-------------
Owned Real Property. Section 4.9(a) of the Disclosure Schedule lists all real
-------------------
property owned by the Company as of the date of this Agreement, and all real
property that will be owned by the Company as of the Closing Date. With respect
to each such parcel of owned real property, except as described in the
Disclosure Schedule:
9
(1) the Company has good, valid and marketable title in fee
simple absolute to the parcel of real property, free and clear of any
Security Interest, easement, covenant or other restriction, except for
installments of special assessments not yet delinquent, recorded
easements, covenants, and other restrictions which do not materially
and adversely impair the current use or occupancy of the subject
property, and zoning and building restrictions;
(2) there are no pending or, to the Knowledge of Sellers,
threatened condemnation proceedings, lawsuits or administrative
actions relating to the property or similar matters materially and
adversely affecting the current use or occupancy thereof;
(3) there are no leases, subleases, licenses, concessions or
other agreements granting to any party or parties the right of use or
occupancy of any portion of the subject property; and
(4) there are no outstanding options or rights of first refusal
to purchase the subject property, or any portion thereof or interest
therein.
Leased Real Property. Section 4.9 (b) of the Disclosure Schedule lists all real
--------------------
property leased or subleased to or by the Company and the leases or subleases in
respect thereof. Sellers have delivered to Buyer true and correct copies of the
leases and subleases listed in Section 4.9(b) of the Disclosure Schedule. To
the Knowledge of Sellers, each lease and sublease listed in Section 4.9(b) of
the Disclosure Schedule is legal, valid, binding, enforceable and in full force
and effect. With respect to each lease and sublease listed in Section 4.9(b) of
the Disclosure Schedule, except as described in the Disclosure Schedule:
(5) to the Knowledge of Sellers, no party to the lease or
sublease is in material breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a material
breach or default or permit termination, material modification or
acceleration thereunder;
(6) no party to the lease or sublease has repudiated any material
provision thereof, and there are no material disputes, oral agreements
or forbearance programs in effect as to the lease or sublease; and
(7) the Company has not assigned, transferred, conveyed,
mortgaged or encumbered its interest in the leasehold or subleasehold.
Title to Assets. Except as described in Section 4.10 of the Disclosure
---------------
Schedule, the Company has good title to, or a valid leasehold interest in, all
material, tangible, personal property assets used regularly in the conduct of
its business, including all fixtures, furniture, equipment, machinery and
leasehold improvements (the "Fixed Assets"), subject to no material liens,
mortgages, pledges, encumbrances or charges, except for such exceptions which
are not material in character, amount or extent and do not materially detract
from the value of or interfere with
10
the use of the tangible assets subject thereto or affected thereby. Except as
set forth in Section 4.10 of the Disclosure Schedule, no financing statement
under the Uniform Commercial Code or similar law naming any Seller or the
Company as debtor has been filed in any jurisdiction in respect of the Fixed
Assets. Neither any Seller nor (to the Knowledge of Sellers) the Company is a
party to or bound by any agreement or legal obligation authorizing any Person to
file any such financing statements in respect of the Fixed Assets (other than
agreements or obligations authorizing the filing of a financing statement by
lessors as a precautionary matter with respect to true leases). All Fixed Assets
are in good condition and repair, ordinary wear and tear excepted, except where
the failure to be maintained in such good condition and repair would not have a
material adverse effect on the business or financial condition of the Company.
Intellectual Property. Section 4.11 of the Disclosure Schedule identifies each
---------------------
patent, trademark, trade name, copyright and application therefor owned or
licensed by or to Company, and identifies each license, agreement or other
permission which the Company has granted to any third party with respect to any
of the foregoing. The Company owns (or possesses enforceable licenses or other
rights to use) all material patents, trademarks, trade names, copyrights,
inventions, formulas and processes necessary to the operation of its business as
presently conducted and, to the Knowledge of Sellers, such present use does not
conflict with the lawful rights of others in any material respect. No
proceedings are pending or, to the Knowledge of Sellers, threatened which
challenge the validity or the ownership by the Company to the patents,
trademarks, trade names, copyrights and applications set forth in Section 4.11
of the Disclosure Schedule. To the Knowledge of Sellers, the manufacture and
sale of Company's products does not result in a material infringement of any
U.S. patent owned by a third party, and Sellers have no Knowledge of facts which
would invalidate the patents disclosed in Section 4.11 of the Disclosure
Schedule.
Inventory. The inventory of supplies, raw materials, work-in-progress and
---------
finished goods as reflected in the balance sheet included in the Most Recent
Financial Statements is valued at the lower of cost or market value on a basis
consistent with past practices. Except as disclosed in Section 4.12 of the
Disclosure Schedule, all such inventories are good and merchantable in the
Ordinary Course of Business and of a quality and quantity generally presently
usable (net of reserves established on the Company's books and records). To the
Knowledge of Sellers, adequate reserves have been established on the Company's
books of account with respect to obsolescent and slow moving inventory, and the
Company's management also believes this to be the case.
Contracts. Section 4.13 of the Disclosure Schedule lists the following
---------
contracts and other agreements (other than those of a type disclosed in another
Section to the Disclosure Schedule) to which the Company is a party:
each sales agency, dealer, representative, distributorship or brokerage
agreement or franchise;
11
each contract, agreement or commitment in respect of the sale of products or the
performance of services, or for the purchase of inventories, equipment, raw
materials, supplies, services or utilities which (i) involves payments or
receipts by the Company of $250,000 or more and is not terminable by the Company
at any time upon notice of 90 days or less, or (ii) is not to be fully performed
within one year from the date of this Agreement;
any material agreement for the lease of personal property to or from any Person
providing for lease payments in excess of $100,000 per annum;
each partnership, joint venture, joint operating or similar agreement;
indebtedness for borrowed money, or any capitalized lease obligation, in excess
of $500,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
any agreement concerning confidentiality or noncompetition;
any material agreement with any Seller or an Affiliate of any Seller;
any deferred compensation, severance or other plan or arrangement for the
benefit of its current or former directors, officers and employees;
any collective bargaining agreement,
any agreement under which the Company has advanced or loaned money to directors,
officers or employees outside the Ordinary Course of Business; and
any agreement restricting the right of the Company to do business anywhere in
the world.
Sellers have delivered to Buyer a true and correct copy of each written
agreement listed in Section 4.13 of the Disclosure Schedule and a written
summary setting forth the terms and conditions of each oral agreement referred
to therein. With respect to each such agreement: (i) to the Knowledge of
Sellers, no party thereto is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material breach
or default, or permit termination, material modification or acceleration, under
the agreement; (ii) no party has repudiated any material provision of the
agreement; and (iii) to the Knowledge of Sellers, the agreement is legally valid
and binding against the parties thereto, except no representation or warranty is
made as to the validity or binding effect of that certain understanding
described on Section 4.13 of the Disclosure Schedule relating to the Patent
Application Understanding.
12
Accounts and Notes Receivable. All notes and accounts receivable of the Company
-----------------------------
at the Most Recent Fiscal Period End represent sales actually made in the
Ordinary Course of Business and are properly reflected in the Most Recent
Financial Statements. To the Knowledge of Sellers, adequate reserves have been
established on the Company's books of account with respect to uncollectible
notes and accounts receivable.
Powers of Attorney. Except as set forth on Schedule 4.15, there are no
------------------
outstanding powers of attorney executed on behalf of Company.
Insurance. To the Knowledge of Sellers, the Company is insured by financially
---------
sound and reputable insurers, unaffiliated with the Company, with respect to its
properties and the conduct of its business in such amounts and against such
risks as are sufficient for compliance with law and as are adequate to protect
the properties and business of the Company in accordance with normal industry
standards. Section 4.16 of the Disclosure Schedule sets forth the following
information with respect to each insurance policy to which the Company is a
party, a named insured, or otherwise the beneficiary of coverage:
the name, address, and telephone number of the agent;
the name of the insurer, the name of the policyholder and the name (or group
designation) of each covered insured; and
the policy number and the period of coverage.
With respect to each such insurance policy: (i) to the Knowledge of
Sellers, neither the Company nor any other party thereto is in material breach
or default (including with respect to the payment of premiums), and no event has
occurred which, with notice or the lapse of time, would constitute such a
material breach or default, or permit termination, material modification or
acceleration, under the policy; and (ii) no party to the policy has repudiated
any material provision thereof.
Material Litigation. Section 4.17 of the Disclosure Schedule sets forth each
-------------------
instance in which the Company (a) is subject to any outstanding injunction,
judgment, order, decree, ruling or charge of any court of competent jurisdiction
(of other than general application), or (b) is a party or, to the Knowledge of
Sellers, is threatened to be made a party, to any action, suit, proceeding,
hearing or investigation of, in or before any court or administrative agency of
any federal, state, local or foreign jurisdiction or before any arbitrator,
seeking either (i) injunctive or similar relief, or (ii) damages in excess of
$50,000. There is no claim, litigation, action, arbitration, suit, or judicial
proceeding pending or, to the Knowledge of Sellers, threatened, nor any
governmental investigation pending or to the Knowledge of Sellers threatened,
against the Company, at law or equity, before any federal, state or local court
or regulatory agency, or other governmental
13
authority, which is reasonably likely to have a material adverse effect on the
business or financial condition of the Company taken as a whole.
Employees. Except as set forth in Section 4.18 of the Disclosure Schedule, to
---------
the Knowledge of Sellers, no executive, key employee or group of employees has
any plans to terminate employment with the Company as a result of the Closing.
Employee Benefits. Section 4.19 of the Disclosure Schedule lists each Employee
-----------------
Benefit Plan that is or was at any time during the last five years maintained,
administered or contributed to by the Company or any Affiliate. Solely for
purposes of this Section 4.19, an "Affiliate" of any Person means any other
Person which, together with such Person, would be treated as a single employer
under Section 414 of the Code. With respect to each such Employee Benefit Plan:
Each such Employee Benefit Plan (and each related trust, insurance contract, or
fund) substantially complies in form and in operation with all applicable legal
requirements, including ERISA and the Code and the terms of the plan documents;
All required reports and descriptions (including Form 5500 Annual Reports,
summary annual reports, and summary plan descriptions) have been filed or
distributed appropriately with respect to each Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Section
4980B have been met with respect to each Employee Benefit Plan which is an
Employee Welfare Benefit Plan;
All contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan and which is a "qualified
plan" under Code Section 401(a), and all such contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
each such Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of the Company. All premiums or other payments for all
periods ending on or before the Closing Date have been paid with respect to each
Employee Benefit Plan which is an Employee Welfare Benefit Plan;
The market value of assets under each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and which is a "qualified plan" under Code Section
401(a) equals or exceeds the present value of all vested and nonvested
Liabilities thereunder;
No such Employee Benefit Plan which is an Employee Pension Benefit Plan has been
completely or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC;
To the Knowledge of Sellers, there have been no Prohibited Transactions with
respect to any such Employee Benefit Plan, and no Fiduciary has any Liability
for breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such
14
Employee Benefit Plan. No action, suit, proceeding, hearing or governmental
investigation of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of Sellers, threatened;
Neither the Company nor any Affiliate has incurred any Liability to the PBGC or
otherwise under Title IV of ERISA (including any withdrawal Liability) with
respect to any such Employee Benefit Plan which is an Employee Pension Benefit
Plan;
Sellers have delivered to Buyer true and correct copies of the plan documents
and summary plan descriptions, the most recent determination letter received
from the Internal Revenue Service, the three most recent Form 5500 Annual
Reports, and all related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit Plan;
Full payment has been made of all amounts which the Company is required to have
paid as benefits under any Employee Benefit Plan;
There is no liability in respect of post-retirement health and medical benefits
for current or retired employees of the Company or any of its Affiliates and the
Company has reserved its right to amend or terminate any Employee Benefit Plan
providing health or medical benefits in respect of any employee or former
employee of the Company under the terms of any such plan and descriptions
thereof given to employees or former employees;
There has been no amendment to, written interpretation or announcement (whether
or not written) by the Company or any of its Affiliates relating to any Employee
Benefit Plan which would materially increase the expense of maintaining such
Employee Benefit Plan above the level of the expense incurred in respect thereof
for the fiscal year ended immediately prior to the Closing Date;
Except as set forth in Section 4.19 of the Disclosure Schedule, the execution,
delivery and consummation of the transactions contemplated by this Agreement do
not constitute a triggering event under any Employee Benefit Plan, whether or
not legally enforceable, which (either alone or upon the occurrence of any
additional or subsequent event) will or may result in any payment (of severance
pay or otherwise), acceleration, increase in vesting, or increase in benefits to
any current or former participant, employee or director of the Company;
Neither the Company nor any of its Affiliates has any plan or commitment to
create any additional Employee Benefit Plan or benefit arrangement that would
affect any employee or former employee of the Company or any of its Affiliates;
and
All Employee Benefit Plans are and remain fully terminable by the Company or its
Affiliates at any time (subject only to the payment of benefits accrued to date
of such plan termination).
15
Guaranties. Except as set forth in Section 4.20 of the Disclosure Schedule, the
----------
Company is not a guarantor for any Liability or obligation (including
indebtedness) of any other Person.
Environment, Health and Safety. Except as set forth in Section 4.21 of the
------------------------------
Disclosure Schedule, to the Knowledge of Sellers and after Appropriate Inquiry
(as defined below):
The Company has been, and currently is, in compliance in all material respects
with all Environmental, Health and Safety Laws, and there is no contingent
liability relating to any Environmental, Health and Safety Laws, except for any
such noncompliance or liability that would not have a material adverse effect on
the business or financial condition of the Company.
No action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or commenced or threatened against the Company
alleging a failure to comply with Environmental, Health, and Safety Laws.
The Company has no liability (i) for damage to any site, location or body of
water (surface or subsurface), or (ii) for any illness of or personal injury to
any employee or other Person under any Environmental, Health and Safety Laws.
The Company has not performed, arranged for or allowed, by any method or
procedure, the generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, pouring, emitting, discharging, releasing
or disposing of Hazardous Substances or other waste in contravention of any
Environmental, Health and Safety Laws or in a manner that would subject the
Company or the Buyer to liability.
The Company has not received notice that it is a potentially responsible party
for a federal or state environmental cleanup site or for corrective action under
the Comprehensive Environmental Response and Liability Act of 1980 ("CERCLA"),
42 U.S.C. (S) 9601 et seq., as amended, the Resource Conservation and Recovery
-------
Act ("RCRA"), 42 U.S.C. (S) 6901 et seq., as amended, or any other applicable
-------
Environmental, Health and Safety Laws.
All properties, machinery, equipment and product used or produced in Company's
business are free of asbestos, PCB's, dioxins, dibenzofurans and Hazardous
Substances, except to the extent their presence is in substantial compliance
with the Environmental, Health and Safety Laws.
Sellers have delivered to Buyer "phase I" reports prepared by McLaren/Xxxx, Inc.
with respect to all material parcels of real property owned by the Company ("xxx
Xxxxx I Reports"). As used in this Section 4.21, the term "Appropriate Inquiry"
means the request of Sellers to McLaren/Xxxx, Inc. to prepare the Phase I
Reports, and the review thereof by Sellers.
16
Certain Business Relationships with Company. Except as described in Section
-------------------------------------------
4.22 of the Disclosure Schedule, no Seller or its Affiliates has been involved
in any material business arrangement or relationship with the Company within the
past 12 months and no Seller or its Affiliates (other than the Company) owns any
material asset, tangible or intangible, which is used in the business of
Company.
Stock Records. The stock certificate books and records of the Company
-------------
accurately reflect all transactions in the capital stock of Company since its
date of incorporation.
Labor Relations. To the Knowledge of Sellers, (i) there is no unfair labor
---------------
practice complaint against the Company pending before any governmental
authority, and (ii) there is no labor strike, dispute, slowdown or stoppage, or
any union-organizing effort or campaign, pending against or involving the
Company. The Company is not a party to a collective bargaining agreement and no
union or collective bargaining unit represents any employees of the Company.
Product Liability and Recalls; Product Warranty.
-----------------------------------------------
Except as set forth on Section 4.25 of the Disclosure Schedule, there is no (i)
claim, action, suit, inquiry or proceeding by or before any court or other
governmental authority pending, or (ii) to the Knowledge of the Sellers, any
such claim, action, suit, inquiry or proceeding or governmental investigation
threatened, against the Company, relating to any product alleged to have been
designed, manufactured or sold by the Company and alleged to have been defective
or improperly designed or manufactured.
Except as set forth on Section 4.25 of the Disclosure Schedule, to the Knowledge
of Sellers there is no pending or threatened government-mandated recall of any
product sold by the Company.
To the Knowledge of Sellers, each product manufactured, sold, leased or
delivered by the Company has been in material conformity with all contractual
commitments and all express and implied warranties.
Customers. Except as set forth in Section 4.26 of the Disclosure Schedule, to
---------
the Knowledge of Sellers none of General Motors, Ford or Chrysler has given
notice to the Company that any material contracts or orders will be terminated
or canceled prior to their expiration date.
Seller and Seller Affiliated Party Claims. As of the Closing Date, no Seller
-----------------------------------------
will have and, to the Knowledge of Sellers, no Seller Affiliated Party will
have, any claim, demand, cause of action or right, contractual or otherwise,
known or unknown, at law or in equity, against the Company that arose prior to
the Closing Date or on account of or arising out of any matter, cause or event
occurring prior to the Closing Date, including rights to S Corporation
distributions or rights to indemnification or reimbursement, whether pursuant to
the Company's Governing
17
Documents or otherwise, and whether or not relating to third party claims to the
Knowledge of Sellers pending on, or asserted after, the Closing Date, other than
(i) claims arising under, out of, or resulting from a Seller Affiliated Party's
participation in an Employee Benefit Plan described in the Section 4.19 of the
Disclosure Schedule, or (ii) payment of current salary and commissions and
reimbursement of reasonable business expenses incurred through the Closing Date,
to the extent incurred in the Ordinary Course of Business.
ARTICLE 5
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
General; Timing of Closing. Each of the Parties will use reasonable best
--------------------------
efforts to take all action and to do all things necessary to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Article 7).
Each of the Parties will use reasonable best efforts to cause the satisfaction
of all closing conditions set forth in Article 7 on or before December 31, 1998.
Notices and Consents. Sellers will cause the Company to give any notices to
--------------------
third parties and to use its reasonable best efforts to obtain any third party
consents that Buyer reasonably may request or that are required pursuant to the
terms of any material agreement or contract listed on the Disclosure Schedule.
Each of the Parties will (and Sellers will cause the Company to) give any
notices, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents and approvals of, governments and governmental
agencies in connection with the matters referred to in Section 31(), Section
3.2(c) and Section 4.3. Without limiting the generality of the foregoing, each
of the Parties will promptly make (and Sellers will cause the Company to
promptly make) all required filings under the HSR Act, including a Notification
and Report Form for Certain Mergers and Acquisitions (or any successor form) and
any amendments thereto with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice in connection with the
transactions contemplated by this Agreement as required by the anti-trust laws
of the United States. In the event that a request for additional information is
made of Buyer, Sellers or the Company pursuant to the HSR Act, Buyer or Sellers,
as the case may be, shall use reasonable best efforts (and Sellers will cause
the Company to use reasonable best efforts) to comply with such request as soon
as practicable after receipt of such request.
Operation of Business. Sellers will not cause or permit the Company to (i)
---------------------
change or amend the Company's articles of incorporation or bylaws, (ii) merge or
consolidate with any other Person or
18
acquire a material amount of assets of any other Person, or (iii) to engage in
any practice, take any action or enter into any transaction outside the Ordinary
Course of Business.
Preservation of Business. Sellers will cause the Company to use reasonable best
------------------------
efforts to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions and relationships
with lessors, licensors, suppliers, customers and employees, and to conduct the
business, operations, activities and practices only in the Ordinary Course of
Business (except to the extent otherwise contemplated or permitted by this
Agreement).
Full Access. Upon not less than one business day's written notice received by
-----------
Sellers, Sellers will cause the Company to permit representatives of Buyer to
have reasonable access during normal business hours, but only in a manner so as
not to interfere with the normal business operations of Company, to the
premises, properties, personnel, books, records, contracts and documents of or
pertaining to the Company, including those relating to the Company's S
Corporation status, provided, however, that Buyer shall be required to be
accompanied by Sellers or a representative of Sellers or the Company at all
times upon the Company's premises. Buyer will comply with the terms and
conditions of the confidentiality letter agreement between Buyer and the Company
dated September 15, 1998 with respect to any Confidential Information (as
defined therein) received from Sellers or the Company in the course of the
reviews contemplated by this Section 5.5 and will not use any such Confidential
Information except in connection with this Agreement or as permitted by such
confidentiality letter agreement, and, if this Agreement is terminated for any
reason whatsoever, Buyer will return to Sellers and the Company or destroy (and
upon request certify such destruction in writing to Sellers and the Company) all
tangible embodiments (and all copies) of the Confidential Information which are
in its possession. In the event of any conflict between the terms of this
Section 5.5 and such confidentiality letter agreement, the terms of such
confidentiality letter agreement will be controlling.
Notice of Developments. Sellers will give prompt written notice to Buyer of any
----------------------
development causing a material breach of any representations and warranties in
Article 4. Each Party will give prompt written notice to the other of any
development causing a breach of any of his, her or its representations and
warranties in Article 3. No disclosure by a Party pursuant to this Section 5.6,
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty or breach of covenant,
except to the extent included in the Updated Disclosure Schedule contemplated by
Section 5.9 and accepted or deemed accepted by Buyer pursuant thereto.
Exclusivity. None of Sellers will (and Sellers will not cause or permit the
-----------
Company to) (a) solicit, initiate or encourage the submission of any proposal or
offer from any Person relating to the acquisition of all or substantially all of
the capital stock or assets of the Company (including any acquisition structured
as a merger, consolidation or share exchange), or (b) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or
19
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Sellers will not vote the Shares in
favor of any such acquisition structured as a merger, consolidation or share
exchange.
Excluded Assets. Prior to the Closing, the Company shall sell to one or more
---------------
Sellers (or one or more newly organized business entities beneficially owned by
one or more Sellers) for reasonable value the assets of the Company identified
on Schedule 5.8 attached hereto (the "Excluded Assets"). As of the Closing,
Sellers shall cause the appropriate transferee(s) of the Excluded Assets to
assume all Liabilities related to the Excluded Assets other than those solely
relating to use thereof by the Company (the "Assumed Liabilities").
Updated Disclosure Schedule.
---------------------------
Immediately prior to the Closing, Sellers shall prepare and deliver to Buyer an
updated Disclosure Schedule (the "Updated Disclosure Schedule") that updates the
information contained in the Disclosure Schedule as of the Closing Date. Buyer
shall accept and acknowledge the Updated Disclosure Schedule as of the Closing,
except as otherwise permitted by subsections (b) and (c) below. Upon such
acceptance and acknowledgment by Buyer, for all purposes under this Agreement
such Updated Disclosure Schedule shall be deemed to supersede and amend the
original Disclosure Schedule dated as of the date of this Agreement.
If Buyer reasonably believes the Updated Disclosure Schedule reflects new or
changed information which indicates a material adverse change in the business or
financial condition of the Company taken as a whole, Buyer may elect to
terminate this Agreement pursuant to Section 12.1(b).
If Buyer reasonably believes the Updated Disclosure Schedule does not reflect
new or changed information which indicates a material adverse change in the
business or financial condition of the Company taken as a whole, but does
reasonably believe it contains new or changed information which significantly
affects the appropriateness of the Purchase Price for the Shares, Buyer may
object in writing to the new or changed information contained in the Updated
Disclosure Schedule and request an adjustment to the Purchase Price based
thereon. If Buyer so objects, the Closing shall be delayed and Buyer and
Sellers in good faith immediately shall attempt to agree upon the amount, if
any, by which the Purchase Price should be adjusted as a result of the new or
changed information contained in the Updated Disclosure Schedule (the "Update
Adjustment"). If Buyer and Sellers fail to reach agreement within ten (10)
business days after Buyer's objection, then Buyer (on the one hand) and Sellers
(on the other hand) shall each place in a separate sealed envelope a final
proposal as to appropriate amount of the Update Adjustment, and the final
determination thereof shall be submitted to arbitration in accordance with
subsections (d) through (f).
Within five (5) business days after the period described in subsection (c),
Buyer and Sellers shall agree upon and jointly appoint a single arbitrator who
shall be by profession an independent certified public accountant familiar with
manufacturing businesses in the State of Ohio (the "Arbitrator"). Neither Buyer
nor Sellers shall consult with the Arbitrator as to their opinions of the
appropriate amount of the Update
20
Adjustment prior to such appointment, but as soon as practicable following the
Arbitrator's appointment each of Buyer and Sellers shall submit to the
Arbitrator a written position statement explaining their respective positions
regarding the appropriate amount of an Update Adjustment. The determination of
the Arbitrator shall be limited solely to whether Buyer's or Sellers' submitted
determination of the Update Adjustment is closer to the appropriate amount of
the Update Adjustment, as determined by the Arbitrator. The Arbitrator shall
review the Company's books and records and other information, interview Company
employees, and hold such hearings as the Arbitrator, in his or her sole
discretion, determines to be necessary or appropriate in reaching such
determination.
As promptly as reasonably possible, but in no event later than thirty (30) days
following appointment, the Arbitrator shall reach a determination as to whether
the Parties shall use Buyer's or Sellers' proposed Update Adjustment, and shall
notify Buyer and Sellers of such determination in writing, it being understood
and agreed that the Arbitrator must select either Buyer's or Sellers' proposed
Update Adjustment as being the closer of the two to the Update Arbitrator's
determination of the appropriate amount of the Update Adjustment. Within three
(3) business days after notification of the Arbitrator's determination, assuming
that each other condition to Closing has been satisfied, the Parties shall
proceed to the Closing, the Updated Disclosure Schedule shall be deemed accepted
by Buyer, and the Purchase Price shall be adjusted as determined by the
Arbitrator.
The Arbitrator's decision with respect to the appropriate Update Adjustment
shall be final, shall be binding upon Buyer and Sellers, and may be enforced by
any Party by the filing of an action in any court of competent jurisdiction in
the State of Ohio. If Buyer and Sellers fail to agree upon and appoint an
Arbitrator, the appointment of the Arbitrator shall be made by the Presiding
Judge of the Richland Common Pleas Court, or if he or she refuses to act, by any
judge having jurisdiction over the Parties. The costs of arbitration shall be
paid by the Party or Parties whose proposed Update Adjustment amount is not
selected by the Arbitrator.
Employee Benefit Plans. Except (i) to the extent required by applicable law, or
----------------------
(ii) as contemplated or permitted by this Agreement, Sellers will cause the
Company not to do or agree to do any of the following without the prior written
consent of Buyer:
grant any material increase in compensation or benefits to any of employee,
except in accordance with the provisions of any applicable program or plan
adopted by the Company and set forth on the Disclosure Schedule; adopt or
materially amend the terms of any severance or termination agreements, plans,
programs, policies or procedures, with or for its employees; or materially
effect any change in retirement or any other benefit plans, programs, policies,
or procedures for any of its employees (unless such change is required by
applicable law or as a condition to obtaining a favorable determination letter
from the Internal Revenue Service with respect to an Employee Benefit Plan) that
would increase the liabilities of Buyer hereunder, provided that Sellers shall
consult with Buyer regarding matters relating to such changes in applicable law
or maintaining the tax qualified status of such Employee Benefit Plans; and
21
except with respect to temporary employees in the ordinary course and automatic
changes in wages and terms of employment consistent with any current contracts,
enter into or materially modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to any of the Company's employees.
Compensation Arrangements; Extraordinary Payments. Except as otherwise
-------------------------------------------------
contemplated or permitted by this Agreement or as set forth in Schedule 5.11 of
the Disclosure Schedule, (i) Sellers shall not cause the Company to enter into
or materially modify any employee arrangements, grant bonuses, increase salaries
or improve severance or termination pay, except in the Ordinary Course of
Business, and (ii) Sellers shall not cause the Company to declare or pay any
dividend or other similar distribution of any kind (whether in cash, shares,
property or a combination thereof).
Debt. Sellers will not cause the Company (i) to incur any indebtedness for
----
borrowed money in addition to indebtedness outstanding on the date of this
Agreement, except in the Ordinary Course of Business or as otherwise
contemplated or permitted by this Agreement, (ii) assume, guarantee, endorse, or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person; or (iii) make any loans,
advances or capital contributions to, or investments in, any other Person,
except in the Ordinary Course of Business.
Audit Matters. In the event the Closing does not occur prior to December 31,
-------------
1998, Sellers will cause the Company to reasonably cooperate with Buyer in the
conduct of the audit of the Company's financial statements for the fiscal year
ended December 31, 1998, and will permit Buyer's representatives to participate
in such audit and in the material decisions related thereto. Without
limitation, upon written request Sellers will cause the Company to engage the
independent accountants requested by Buyer to conduct such audit of the
Company's financial statements on behalf of the Company. If for any reason the
Closing does not occur and this Agreement is terminated, upon written request
and provision of reasonable documentation relating thereto Buyer will promptly
reimburse the Company for the excess costs incurred by the Company in engaging
independent accountants selected by Buyer instead of the independent accountants
the Company otherwise would have engaged to conduct the audit in the Ordinary
Course of Business.
Accounts Payable and Inventory. Prior to the Closing, Sellers shall cause the
------------------------------
Company to maintain its accounts payable and inventory in the Ordinary Course of
Business such that, as of the Closing, the accounts payable and inventory of the
Company shall have been maintained at levels in the Ordinary Course of Business.
22
ARTICLE 6
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing.
General. If at any time after the Closing any further action is necessary to
-------
carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Article 8). Sellers acknowledge and agree that
from and after the Closing, Buyer will be entitled to possession of all
documents, books, records, agreements and financial data relating to the
Company, provided, however, that after Closing upon request Buyer shall cause
the Company to provide Sellers with true, complete and correct copies of any of
the foregoing at Company's sole expense for any proper purpose (including
preparation of Tax Returns and responding to any audits by Taxing authorities).
Litigation Support. If and for so long as any Party is actively contesting or
------------------
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand in connection with (a) any transaction contemplated
under this Agreement, or (b) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction on or prior to the Closing Date involving the
Company, each of the other Parties shall cooperate with such Party and such
Party's counsel in the defense or contest, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the defense or contest, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Article 8).
Transition. No Seller will take any action designed or intended to have the
----------
effect of discouraging any material customer, supplier or other business
associate of the Company from maintaining substantially the same business
relationship with the Company after the Closing as it maintained prior to the
Closing.
23
Indemnification. Buyer shall cause the Company to keep in effect provisions in
---------------
its articles of incorporation and bylaws with respect to indemnification no less
favorable to directors and officers than those contained therein on the date
hereof, which provisions shall not be amended, repealed or otherwise modified
for a period of at least six years from the Closing in any manner that would
adversely affect the rights thereunder of individuals who at any time prior to
the Closing were directors or officers of the Company in respect of actions or
omissions at or prior to the Closing (including the transactions contemplated by
this Agreement), except as required by applicable law or except to make changes
permitted by law that would not materially diminish such rights of
indemnification.
ARTICLE 7
CONDITIONS TO OBLIGATION TO CLOSE
Conditions to Obligation of Buyer. The obligation of Buyer to consummate the
---------------------------------
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
the representations and warranties set forth in Section 31 and Article 4 shall
be true and correct in all material respects at and as of the Closing Date;
Sellers shall have performed and complied with all of their covenants hereunder
in all material respects through the Closing;
no action, suit, or proceeding shall be pending or, to the Knowledge of Sellers,
threatened in writing within six months prior to the Closing, before any federal
or state court wherein an unfavorable injunction, judgment, order, decree,
ruling or charge has been or is about to be issued (i) preventing consummation
of the transactions contemplated by this Agreement, or (ii) causing the
transactions contemplated by this Agreement to be rescinded following
consummation;
there shall not have been any material adverse change in the business,
operations, assets or financial position of the Company since the date of this
Agreement;
Sellers shall have delivered to Buyer a certificate to the effect that each of
the conditions specified in Section 71()-(d) is satisfied in all material
respects;
24
Buyer shall have received from counsel to Sellers and the Company closing legal
opinions in substantially the form of Exhibits 7.1(f)(1), 7.1(f)(2) and
7.1(f)(3), addressed to Buyer and dated as of the Closing Date;
all appropriate HSR Act filings shall have been made and any applicable waiting
period (and extensions thereof) under the HSR Act shall have expired or
terminated;
each of the directors, and each of the officers (specified by Buyer) of the
Company shall have tendered their resignations effective as of the Closing Date;
Sellers shall have delivered to Buyer the Updated Disclosure Schedule, which
Updated Disclosure Schedule shall have been accepted or deemed accepted by Buyer
pursuant to Section 5.9;
Sellers shall have delivered to Buyer good standing certificates issued by the
Secretary of State of each jurisdiction in which the Company owns or leases real
property or maintains an office, and the corporate minute books and stock
transfer records of the Company;
each of Xxxxxxx X. Hire, Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxx shall have
executed and delivered to Buyer the Non-Competition Agreement in substantially
the form attached hereto as Exhibit 7.1(k); and
all other material governmental approvals or consents, if any, required by
Applicable Law, and all applicable third party consents, if any, required under
any material contract to which the Company is a party identified on the
Disclosure Schedule, for the consummation of the transactions contemplated by
this Agreement, shall have been received, satisfied or waived.
Buyer may waive any condition specified in this Section 71 if it executes a
writing so stating at or prior to the Closing.
Conditions to Obligation of Sellers. The obligation of Sellers to consummate
-----------------------------------
the transactions to be performed by them in connection with the Closing is
subject to satisfaction of the following conditions:
the representations and warranties set forth in Section 3.2 shall be true and
correct in all material respects at and as of the Closing Date;
Buyer shall have performed and complied with all of its covenants hereunder in
all material respects through the Closing;
25
no action, suit, or proceeding shall be pending before any federal or state
court wherein an unfavorable injunction, judgment, order, decree, ruling or
charge has been or is likely to be issued (i) preventing consummation of the
transactions contemplated by this Agreement, or (ii) causing any of the
transactions contemplated by this Agreement to be rescinded following
consummation;
Buyer shall have delivered to Sellers a certificate executed by a senior
executive officer of Buyer to the effect that each of the conditions specified
in Section 72()-() is satisfied in all material respects;
Sellers shall have received from counsel to Buyer a closing legal opinion in
substantially the form of Exhibit 7.2(e), addressed to Sellers and dated as of
the Closing Date; and
all appropriate HSR Act filings shall have been made and any applicable waiting
period (and extensions thereof) under the HSR Act shall have expired or
terminated.
Sellers may waive any condition specified in this Section 72 if they execute a
writing so stating at or prior to the Closing.
ARTICLE 8
INDEMNIFICATION
Survival of Representations and Warranties. Subject to Article 9 of this
------------------------------------------
Agreement, all covenants, agreements, representations and warranties made by
Sellers and Buyer pursuant to this Agreement shall be deemed to have survived
the Closing and shall remain effective, subject to the provisions of Section
9.1.
Indemnification Provisions for Benefit of Buyer. Subject to Article 9,
-----------------------------------------------
following the Closing Sellers shall indemnify and save and hold Buyer harmless
from and against any Adverse Consequences suffered or incurred by Buyer arising
out of or resulting from:
the inaccuracy or alleged inaccuracy in any representation or the breach or
alleged inaccuracy of any warranty made by Sellers in this Agreement;
the failure of any Seller duly to perform or observe any covenant or agreement
in this Agreement required on the part of such Seller to be performed or
observed prior to, at or after the Closing Date;
the failure of the Company to timely pay any federal, state or local income
taxes related to or arising out of the period from January 1, 1986 through the
Closing Date;
26
any claim asserted or made by any Person against the Company or Buyer in respect
of the Assumed Liabilities; and
any claim made by any Seller or any Seller Affiliated Party against the Company
described in Section 4.27, other than those items excepted therefrom,
provided that Buyer shall not be entitled to be indemnified or held harmless
under this Section 8.2 on account of any Tax liability resulting from adjustment
of the income or deductions of the Company to the extent that such adjustments
merely postpone to a later period the Tax benefit of such adjusted items.
Indemnification Provisions for Benefit of Sellers. Following the Closing, Buyer
-------------------------------------------------
shall indemnify and save and hold harmless each of Sellers from and against any
Adverse Consequences suffered or incurred by any one or more of them arising out
of or resulting from:
the inaccuracy or alleged inaccuracy in any representation or the breach or
alleged breach of any warranty made by Buyer in this Agreement;
the failure of Buyer duly to perform or observe any covenant or agreement in
this Agreement required on the part of Buyer to be performed or observed prior
to, at or after the Closing Date; and
the failure of the Company to timely pay any federal, state or local income
taxes after the Closing Date;
provided that Sellers shall not be entitled to be indemnified or held harmless
under this Section 8.3 on account of any Tax liability resulting from adjustment
of the income or deductions of the Company to the extent that such adjustments
merely postpone to a later period the Tax benefit of such adjusted items.
Exclusive Remedy. After the Closing occurs, Article 8, as limited by the
----------------
provisions of Article 9, shall provide the sole and exclusive remedy for any and
all Adverse Consequences sustained or incurred by a Party in connection with the
transactions contemplated by this Agreement, except that the Parties shall
continue to have rights and/or remedies which may arise as a result of failure
to perform or observe the covenants contained in Article 6, and absent fraud or
willful misconduct on the part of the Party or Parties against whom damages are
sought.
27
ARTICLE 9
LIMITATIONS ON INDEMNIFICATION
Term.
----
Any rights of Buyer to indemnification under this Agreement (including under
Section 8.2) shall apply only to those claims written notice of which shall have
been delivered by Buyer to Sellers on or before March 31, 2000.
Any rights of any Seller to indemnification under this Agreement (including
under Section 8.3) shall apply only to those claims written notice of which
shall have been delivered by Sellers to Buyer on or before March 31, 2000.
Notwithstanding anything in this Article 9 to the contrary, (ii) the
representations and warranties of Sellers contained in Section 4.8 shall survive
until the date which is 36 months following the Closing Date, (ii) the
representations and warranties of Sellers contained in Section 3.1(d) shall
survive indefinitely, and (iii) the covenants of the Parties shall survive
according to their respective terms. As set forth in Section 9.2(e), the rights
of Buyer to be indemnified in respect of Assumed Liabilities shall survive
indefinitely.
Indemnification Baskets.
-----------------------
Other than those rights of Buyer to indemnification under this Agreement
relating to (i) claims relating to or arising out of inaccuracies or alleged
inaccuracies, or breaches or alleged breaches, of Sellers' representations and
warranties in Section 4.27 and made pursuant to Section 8.2(e), which shall be
subject to application of the Seller Claims Basket in Section 9.2(c), (ii)
claims relating to or arising out of inaccuracies or alleged inaccuracies, or
breaches or alleged breaches, of Sellers' representations, warranties and
covenants relating to Taxes in this Agreement, including Buyer's rights to
indemnification pursuant to Section 8.2(c), all of which shall be subject to
application of the Tax Basket in Section 9.2(b), or (iii) claims asserted or
made by any Person against the Company or Buyer in respect of the Assumed
Liabilities, all of which shall be subject to the provisions of this Section
9.2, any right of Buyer to indemnification under this Agreement shall not apply
to any claim until the aggregate of all such claims which have become final
totals $3,000,000 (the "General Basket"), in which event such indemnity shall
apply to all such claims which become final, but only to the extent of the
amount in excess of the General Basket.
Any right of Buyer to indemnification under this Agreement (including Section
8.2) relating to or arising out of inaccuracies or alleged inaccuracies, or
breaches or alleged breaches, of Sellers' representations, warranties and
covenants relating to Taxes, including Buyer's rights to indemnification
pursuant to Section 8.2(c), shall not apply to any claim until the aggregate of
all such claims which have become final
28
totals $1,000,000 (the "Tax Basket"), in which event such indemnity shall apply
to all such claims which become final, but only to the extent of the amount in
excess of the Tax Basket.
Any right of Buyer to indemnification under Section 8.2(e) or relating to or
arising out of inaccuracies or alleged inaccuracies, or breaches or alleged
breaches, of Seller's representations and warranties in Section 4.27 shall not
apply to any claims made thereunder until the aggregate of all such claims which
have become final totals $50,000 (the "Seller Claims Basket"), in which event
such indemnity shall apply to all such claims which become final, but only to
the extent of the amount in excess of the Seller Claims Basket.
In the event claims for indemnification are made by Buyer under this Agreement
that are subject to the Tax Basket in Section 9.2(b), that portion of the Tax
Basket actually used to limit Sellers' payment obligations under this Agreement
shall reduce the amount of the General Basket on a dollar for dollar basis. In
the event claims for indemnification are made by Buyer under this Agreement
which are subject to the Seller Claims Basket under Section 9.2(c), that portion
of the Seller Claims Basket actually used to limit Sellers' payment obligations
under this Agreement shall reduce the amount of the General Basket on a dollar
for dollar basis. By way of example, and solely for the purposes of
illustration, in the event Buyer presents a timely claim for indemnification
under this Agreement in the amount of $1,500,000 based upon an inaccuracy of
Sellers' representations and warranties relating to Taxes under Section 4.8 and
such claim becomes final hereunder, Sellers shall be obligated to indemnify
Buyer in the amount of $500,000, and the amount of the General Basket available
for application against other claims of Buyer for indemnification pursuant to
Section 9.2(a) shall be reduced from $3,000,000 to $2,000,000. If aggregate
claims against Sellers subject to Section 9.1(a) which become final exceed the
amount of the General Basket, the Tax Basket and the Seller Claims Basket shall
be eliminated, it being understood that the collective value of the General
Basket, the Tax Basket and the Seller Claims Basket shall not exceed $3,000,000.
Notwithstanding anything to the contrary contained in this Agreement, no claim
asserted or made by any Person in respect of the Assumed Liabilities shall be
subject to the General Basket, the Tax Basket or the Seller Claims Basket, and
the limitations set forth in Section 9.1(a) and Section 9.3 shall not apply to
any such claim.
Limited Recourse. Notwithstanding anything to the contrary in this Agreement,
----------------
all rights of Buyer to indemnification by Sellers under this Agreement
(including under Section 8.2) shall be limited to ten percent (10%) of the
Purchase Price.
ARTICLE 10
COOPERATION
Notice of Claims. Each Party will give prompt written notice to the other
----------------
Parties of any claim by a third party or by any governmental body, or any legal,
administrative or arbitration proceeding ("Third Party Claim") which such Party
("Indemnified Party") discovers or of which it receives
29
notice after the Closing and which might give rise to a claim against any other
Party or Parties ("Indemnifying Party") under Sections 8.2 or 8.3, as the case
may be. All notices shall state in reasonable detail the nature, basis and
amount of such Third Party Claim. No delay on the part of the Indemnified Party
in notifying the Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then, subject to Article 9, solely to the
extent) the Indemnifying Party thereby is prejudiced.
Right to Defense.
----------------
The Indemnifying Party shall have the right to defend the Indemnified Party
against the Third Party Claim with counsel of its choice reasonably satisfactory
to the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within fifteen (15) days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party
will, subject to the limitations set forth in Article 9, indemnify the
Indemnified Party from and against any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, and (ii) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations hereunder.
The Indemnified Party shall make available to the Indemnifying Party, their
attorneys and accountants, at all reasonable times, all books and records of the
Indemnified Party or the Company, as the case may be, relating to any Third
Party Claim and the Parties will render to each other such assistance as may
reasonably be required in order to insure proper and adequate defense of any
Third Party Claim.
So long as the Indemnifying Party is conducting the defense of the Third Party
Claim, the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim. Neither the
Indemnified Party nor the Indemnifying Party will consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the other Party; provided, however, that
where the Indemnified Party is Buyer: (i) if Buyer shall desire to effect a
compromise or settlement of any Third Party Claim and Sellers shall refuse to
consent to such compromise or settlement, then Buyer shall be excused from the
defense and Sellers shall bear all further responsibility for the defense of the
Third Party Claim; (ii) if Sellers shall desire to effect a compromise or
settlement of any Third Party Claim pursuant to an offer or compromise or
settlement by the claimant or plaintiff and Buyer shall refuse to consent to
such compromise or settlement, then the Sellers' Liability with respect to such
Third Party Claim shall be limited to the amount so offered in compromise or
settlement; and (iii) if Sellers desire to effect a compromise or settlement
where no offer has been made by the claimant or plaintiff the Sellers' Liability
shall be limited to an amount determined by agreement between Sellers and Buyer.
Determination of Adverse Consequences. The Parties shall make appropriate
-------------------------------------
adjustments for Tax benefits and insurance coverage in determining Adverse
Consequences for purposes of this Agreement.
30
ARTICLE 11
DISPUTE RESOLUTION
Exclusive Procedure for Dispute Resolution. Any dispute arising out of or
------------------------------------------
relating to this Agreement, other than pursuant to Section 5.9, including claims
for indemnification pursuant to Article 8, shall be resolved in accordance with
the procedures specified in this Article 11, which shall be sole and exclusive
procedures for the resolution of any such disputes.
Negotiation Between Executives.
------------------------------
The Parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation between Sellers or their
appointed representatives and executives of Buyer who, if possible, shall be at
a higher management level than the individuals with direct responsibility for
administration of this Agreement (the "Negotiators"). Any Party may give the
other Parties written notice of any dispute not resolved in the normal course of
business. Within 15 days after delivery of the notice, the receiving Party
shall submit to the others a written response. The notice and response shall
include (i) a statement of each Party's position and a summary of arguments
supporting that position, and (ii) the name and title of the Negotiators and of
any other Person who will accompany them. Within 30 days after delivery of the
disputing Party's notice, the Negotiators shall meet at a mutually acceptable
time and place, and thereafter as often as they reasonably deem necessary, to
attempt to resolve the dispute. All reasonable requests for information made by
one Party to the others will be honored.
If the matter has not been resolved by these Persons within 60 days of the
disputing Party's notice, or if the Parties fail to meet within 30 days, any
Party may initiate mediation as provided below.
All negotiations pursuant to this clause are confidential and shall be treated
as compromise and settlement negotiations for purposes of the Federal Rules of
Evidence and State rules of evidence.
Mediation. If the dispute has not been resolved by negotiation as provided
---------
above, the Parties shall endeavor to settle the dispute by mediation under the
then current Center for Public Resources (CPR) Model Procedure for Mediation of
Business Disputes. The neutral third party will be selected from the CPR Panels
of Neutrals, with the assistance of CPR, unless the Parties agree otherwise.
31
Litigation. If the dispute has not been resolved by non-binding means as
----------
provided herein within 90 days of the initiation of such procedure, any Party
may initiate litigation (upon 30 days written notice to the other Party);
provided, however, that if one Party has requested the others to participate in
a non-binding procedure and the others have failed to participate, the
requesting Party may initiate litigation before expiration of such period.
Provisional Remedies. The procedures specified in this Article 11 shall be the
--------------------
sole and exclusive procedures for the resolution of disputes between the Parties
arising out of or relating to this Agreement; provided, however, that a Party,
without prejudice to the above procedures, may file a complaint (for statute of
limitations or venue reasons or to seek preliminary injunction or other
provisional judicial relief), if in its reasonable judgment such action is
necessary to avoid irreparable damage or to preserve the status quo. Despite
such action the Parties will continue to participate in good faith in following
the dispute resolution procedures specified in this Article 11.
Tolling Statutes of Limitation. All applicable statues of limitation and
------------------------------
defenses based upon the passage of time shall be tolled while the procedures
specified in this Article 11 are pending. The Parties will take such action, if
any, reasonably required to effectuate such tolling.
Performance to Continue. Each Party shall continue to perform his or its
-----------------------
obligations under this Agreement pending final resolution of any dispute arising
out of or relating thereto.
ARTICLE 12
TERMINATION
Termination of Agreement. The Parties may terminate this Agreement at any time
------------------------
prior to Closing as provided below:
Buyer and Sellers may terminate this Agreement by mutual written consent;
Buyer may terminate this Agreement by giving written notice to Sellers in the
event that (i) any Seller has breached any representation, warranty or covenant
contained in this Agreement in any material respect, Buyer has notified Sellers
of the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach, (ii) Buyer reasonably determines that new or changed
information contained in the Update Disclosure Schedule reflects a material
adverse change in the business or financial condition of the Company taken as a
whole, Buyer gives written notice to Sellers thereof within two business days
after receipt of the Updated Disclosure Schedule, and such new or changed
information contained therein is not removed from the Updated Disclosure
Schedule within 10 days thereafter, or (iii) the Closing shall not have occurred
on or before March 31, 1999 by reason of the failure of any condition precedent
under
32
Section 71 (unless the failure results primarily from Buyer breaching any
representation, warranty or covenant contained in this Agreement); and
Sellers may terminate this Agreement by giving written notice to Buyer in the
event that (i) Buyer has breached any representation, warranty or covenant
contained in this Agreement in any material respect, Sellers have notified Buyer
of the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach, or (ii) the Closing shall not have occurred on or
before March 31, 1999 by reason of the failure of any condition precedent under
Section 72 (unless the failure results primarily from any Seller breaching any
representation, warranty or covenant contained in this Agreement).
Effect of Termination.
---------------------
If Buyer or Sellers terminate this Agreement pursuant to Section 121, all
rights and obligations of the Parties hereunder shall terminate without any
Liability of any Party to any other Party; provided, however, that the
confidentiality provisions contained in the confidentiality letter agreement
between the Company and Buyer shall survive termination, and provided further
that Buyer and Sellers shall have Liability to the extent set forth in Section
12.2(b) and Section 12.2(c).
If Buyer terminates this Agreement pursuant to Section 12.1(b)(iii) because of
the failure of the Closing to occur and such failure results primarily from
Sellers breaching any material representation, warranty or covenant contained in
this Agreement, Sellers shall have Liability for all direct out-of-pocket
expenses incurred by Buyer in connection with the transactions contemplated by
this Agreement (including reasonable attorneys' and accountants' fees and
expenses) through the date of such termination plus an amount equal to
$7,500,000, and Sellers shall deliver such amount to Buyer by wire transfer of
immediately available funds as liquidated damages (and not as a penalty) within
two (2) business days after receipt of a written request therefor received from
Buyer (which shall include a reasonably detailed itemized statement of such
direct out-of-pocket expenses incurred by Buyer in connection with the
transactions contemplated by this Agreement).
If Sellers terminate this Agreement pursuant to Section 12.1(c)(ii) because of
the failure of the Closing to occur and such failure results primarily from
Buyer breaching any material representation, warranty or covenant contained in
this Agreement, Buyer shall have Liability for all direct out-of-pocket expenses
incurred by Sellers and the Company in connection with the transactions
contemplated by this Agreement (including reasonable attorneys' and accountants'
fees and expenses) through the date of such termination plus an amount equal to
$7,500,000, and Buyer shall deliver such amount to the Company by wire transfer
of immediately available funds as liquidated damages (and not as a penalty)
within two (2) business days after receipt of a written request therefor
received from Sellers or the Company (which shall include a reasonably detailed
itemized statement of such direct out-of-pocket expenses incurred by Sellers and
the Company in connection with the transactions contemplated by this
Agreement)..
33
ARTICLE 13
AGREEMENTS CONCERNING CERTAIN TAX MATTERS
Mutual Cooperation. Sellers and Buyer shall provide each other with such
------------------
assistance as may reasonably be requested by any of them in connection with the
preparation and execution of any Tax Return, any audit or other examination by
any Taxing authority, or any judicial or administrative proceedings relating to
Liability for Taxes, and each will retain and, not later than thirty (30) days
from the written request of any other Party, provide such other Party with any
records or information which may be relevant to such return, audit, examination
or proceedings. Such assistance shall include making employees or other
representatives available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder and shall include
providing copies of any relevant Tax Returns (or portions thereof) and
supporting work schedules. The Party requesting such assistance hereunder shall
reimburse the others for reasonable out-of-pocket expenses incurred by the
others in providing such assistance.
Section 338 Election. With respect to the acquisition of the Shares, the
--------------------
Parties shall together make a timely election under Section 338(h)(10) of the
Code. The Parties agree to jointly prepare and timely file Form 8023 and shall
allocate the Purchase Price of the Shares in the manner provided in Section 13.3
as soon as practicable after the election is made. Sellers shall execute the
Form 8023 at or prior to the Closing.
Federal Income Tax Allocation of Purchase Price. At or prior to the Closing,
-----------------------------------------------
the Parties shall make a good faith allocation of the Purchase Price among the
assets of the Company (the "Section 338 Allocation") within the requirements of
Treasury Regulation Section 1.338(b)-2T with the knowledge and understanding
that the Section 338 Allocation will be used by the Parties for federal income
tax reporting purposes, including using the Section 338 Allocation in making any
election pursuant to Section 338(h)(10) of the Code as set forth in Section
13.2. The Parties shall report the transactions contemplated by this Agreement
for federal income tax purposes in accordance with the Section 338 Allocation.
The Parties will not, nor will any consolidated or unitary tax reporting group
of which any Party is a part, take a position inconsistent with the Section 338
Allocation except with the written consent of the other Parties. However, if
the Internal Revenue Service takes a position with respect to one Party to this
Agreement that is inconsistent with the Section 338 Allocation, the other
Parties may take a protective position adopting the Internal Revenue Service's
contention until the controversy is finally resolved.
Certain Tax Matters.
-------------------
Sellers shall prepare on behalf of the Company all income, franchise and single
business Tax Returns for the periods ending on or before the Closing Date, and
shall pay all income taxes with respect to the
34
Company for all periods through the Closing Date (reduced by the amount of
estimated income taxes, if any, paid to such taxing authority with respect to
the Company prior to the Closing Date). Buyer shall be responsible for filing
any Tax Returns which include periods commencing on or prior to the Closing Date
and ending subsequent to the Closing Date, and payment of all Taxes imposed upon
the Company with respect thereto. Buyer shall also be responsible for filing all
Tax Returns relating to the Company, and the payment of all Taxes with respect
thereto, for all periods beginning after the Closing Date.
If the Internal Revenue Service or any other federal, state, local or foreign
taxing authority notifies the Company of its intention to conduct an audit of
the Company with respect to any Tax Return filed by the Company or allegedly
required to be filed by the Company that relates or could reasonably be expected
to relate to obligations of the Company or Sellers to pay Taxes associated with
any period prior to the Closing Date, such event shall be considered a Third
Party Claim within the meaning of Section 10.2. Sellers shall have the rights
and obligations of an Indemnifying Party and Buyer shall have the rights and
obligations of an Indemnified Party with respect thereto.
ARTICLE 14
MISCELLANEOUS
Nature of Certain Obligations. The covenants, representations and warranties of
-----------------------------
Sellers in this Agreement are several obligations, and not joint and several
obligations. This means that the recourse of Buyer against any Seller shall be
limited to such Seller's pro-rata portion of any Adverse Consequences which
Buyer may suffer as a result of any breach thereof, to the extent provided in
Article 8 and subject to the limitations set forth in Article 9.
Press Releases and Public Announcements. Neither Buyer nor Sellers shall issue
---------------------------------------
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
Buyer, Sellers and Xxxxx; provided, however, Sellers acknowledge that Buyer
shall be obligated to make certain public disclosures with respect to the
transactions contemplated by this Agreement pursuant to federal and state
securities laws and applicable listing or trading agreements concerning its
publicly traded securities, and Buyer may make any such public disclosure
required by applicable federal or state securities laws or such listing or
trading agreement and disclosures to and discussions with securities analysts
and financial institutions (and Buyer shall use reasonable best efforts to
advise Sellers and Xxxxx prior to making any such disclosure and to consult with
Sellers and Xxxxx regarding the form and content thereof), and verbal replies in
response thereto by representatives of Buyer in the Ordinary Course of Business.
No Third-Party Beneficiaries. This Agreement and the other agreements,
----------------------------
certificates and instruments contemplated hereby shall not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns.
35
Entire Agreement. This Agreement, including the documents referred to herein,
----------------
constitutes the entire agreement among the Parties and supersedes all prior
understandings, agreements and representations by or among the Parties, written
or oral, to the extent relating in any way to the subject matter hereof,
provided, however, that the confidentiality letter agreement dated September 15,
1998 between Buyer and the Company shall not be deemed superseded hereby.
Succession and Assignment. This Agreement shall be binding upon and inure to
-------------------------
the benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Agreement or any rights,
interests or obligations hereunder without the prior written approval of the
other Parties.
Counterparts. This Agreement may be executed in one or more counterparts, each
------------
of which shall be deemed an original but all of which together will constitute
one and the same instrument.
Headings. The section headings contained in this Agreement are inserted for
--------
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
Notices. All notices, requests, demands, claims, and other communications
-------
hereunder shall be in writing. Any notice, request, demand, claim or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Sellers:
Xxxxxxx X. Hire
Boca Grande Club GM 303
Xxxx Xxxxxx, XX 00000
Hanford X. Xxxxxxxx
0000 Xxxxxxxxx Xxxxx Xxxx.
Xxxxxxxx, XX 00000
Xxxxxxx X. Xxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
36
Copy to: Xxxx X. Xxxx, III, Esq.
Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
And to: Xxxx X. Hire, Esq.
Xxxxxx, Xxxxxx & Xxxxxx
Bank One Building, 8th and 9th Floors
00 Xxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxx 00000-0000
And to: Xxxxxxx X. Xxxxxxx, Esq.
Shapack, XxXxxxxxxx & Xxxxxx P.C.
0000 Xxxxxxxxx Xx.
Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000-0000
If to Buyer:
Stoneridge, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
Copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxx & Xxxxxxxxx LLP
3200 National City Center
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and
--------------------------------------
construed in accordance with the domestic laws of the State of Ohio without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Ohio or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Ohio. THE PARTIES HEREBY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF OHIO AND
THE UNITED STATES DISTRICT COURT LOCATED IN THE NORTHERN DISTRICT OF OHIO SOLELY
WITH RESPECT TO
37
ACTIONS RELATED TO THIS AGREEMENT. EACH PARTY HEREBY WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF ANY PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST
ANY OTHER PARTY IN THE COURTS OF ANY OTHER JURISDICTION.
Amendments and Waivers. No amendment of any provision of this Agreement shall
----------------------
be valid unless the same shall be in writing and signed by Buyer and Sellers.
No waiver by any Party of any default, misrepresentation or breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
Severability. Any term or provision of this Agreement that is invalid or
------------
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
Expenses. Buyer shall bear its own costs and expenses (including legal fees and
--------
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. The Company shall bear all of Sellers' costs and expenses
(including all legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby (other than any income Tax on
any gain resulting from the sale of Shares hereunder).
Construction. The Parties have participated jointly in the negotiation and
------------
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement.
Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified
---------------------------------------
in this Agreement (including the Disclosure Schedule) are incorporated herein by
reference and made a part hereof. Any disclosure by Sellers in any Schedule
attached hereto shall constitute a disclosure under each other Schedule referred
to herein, whether or not such disclosure is specifically referenced within such
other Schedule.
38
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date
first above written.
BUYER:
STONERIDGE, INC.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Its: President and CEO
----------------------------------
SELLERS:
XXXXXXX X. HIRE, TRUSTEE U/A DATED 4/24/98
/s/ Xxxxxxx X. Hire, Trustee
--------------------------------------
Xxxxxxx X. Hire, Trustee
XXXXXXX X. HIRE, TRUSTEE U/A DATED 4/24/98
/s/ Xxxxxxx X. Hire, Trustee
--------------------------------------
Xxxxxxx X. Hire, Trustee
XXXXXXX X. XXXXX, TRUSTEE U/A DATED 11/7/84
/s/ Xxxxxxx X. Xxxxx, Trustee
--------------------------------------
Xxxxxxx X. Xxxxx, Trustee
HANFORD X. XXXXXXXX, TRUSTEE U/A DATED 4/14/94
/s/ Hanford X. Xxxxxxxx, Trustee
--------------------------------------
Hanford X. Xxxxxxxx, Trustee
39
XXXX X. HIRE, TRUSTEE U/A DATED 12/23/94
/s/ Xxxx X. Hire, Trustee
--------------------------------------
Xxxx X. Hire, Trustee
XXXX X. HIRE, TRUSTEE U/A DATED 12/23/94
/s/ Xxxx X. Hire, Trustee
--------------------------------------
Xxxx X. Hire, Trustee
XXXX X. HIRE, TRUSTEE U/A DATED 12/23/94
/s/ Xxxx X. Hire, Trustee
--------------------------------------
Xxxx X. Hire, Trustee
XXXX X. HIRE, TRUSTEE U/A DATED 12/23/94
/s/ Xxxx X. Hire, Trustee
--------------------------------------
Xxxx X. Hire, Trustee
XXXX X. HIRE, TRUSTEE U/A DATED 12/23/94
/s/ Xxxx X. Hire, Trustee
--------------------------------------
Xxxx X. Hire, Trustee
XXXX X. HIRE, TRUSTEE U/A DATED 12/23/94
/s/ Xxxx X. Hire, Trustee
--------------------------------------
Xxxx X. Hire, Trustee
40
EXHIBIT A
---------
DEFINITIONS
-----------
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is in common control with, any other Person. For purposes of
the preceding sentence, "control' means possession, directly or indirectly, of
the power to direct or cause direction of management and policies through
ownership of voting securities, contract, voting trust or otherwise.
Notwithstanding the foregoing, solely for purposes of Section 4.19, the term
"Affiliate" has the meaning set forth in Section 4.19.
"Applicable Laws" has the meaning set forth in Section 4.7(b).
"Appropriate Inquiry" has the meaning set forth in Section 4.19.
"Arbitrator" has the meaning set forth in Section 5.9.
"Assumed Liabilities" has the meaning set forth in Section 5.8.
"Xxxxx" has the meaning set forth in Section 3.1(c).
"Buyer" has the meaning set forth in the preface.
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the recitals.
"Confidential Information" means any oral or written information (including
documents, statistical and financial information, and internal policies and
procedures) relating to the businesses and affairs of the Company not already
generally available to the public.
"Disclosure Schedule" has the meaning set forth in Section 4.1.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c)
qualified defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan or material fringe benefit plan or program, including any
employment agreement or severance policy.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Employment Agreements" has the meaning set forth in Section 5.10.
"Environmental, Health, and Safety Laws" means any federal, state, or local
statute, law, ordinance, code, order, injunction, decree, ruling; any
regulations promulgated thereunder, or any nuisance, trespass, strict liability
or negligence theory of liability which regulates or controls pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened release of pollutants, contaminants, or chemical, industrial, toxic
or Hazardous Substances or waste into ambient air, surface water, ground water
or lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, or chemical, industrial, toxic or Hazardous Substances or waste.
The term specifically includes, without limitation: CERCLA; RCRA; the Hazardous
Materials Transportation Act ("HMTA"), 49 U.S.C. (S)5101 et seq., as amended;
-------
the Toxic Substances Control Act ("TSCA"), 15 U.S.C. (S)2601 et seq., as
-------
amended; the Clean Air Act ("CAA"), 42 U.S.C. (S)7401 et seq., as amended; the
-------
Clean Water Act ("CWA"), 33 U.S.C. (S)1251 et seq., as amended; the Safe Water
-------
Drinking Act, 42 U.S.C. (S)300f et seq., as amended; the Emergency Planning and
-------
Community Right to Know Act ("EPCRA"), 42 U.S.C. (S)11001 et seq., as amended;
-------
the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C.
(S)136 et seq., as amended; the Occupational Safety and Health Act ("OSHA"), 29
-------
U.S.C. (S)651 et seq., as amended; the National Environmental Policy Act
-------
("NEPA"), 42 U.S.C. (S)4321 et seq., as amended; any similar state or local
-------
statutes or ordinances and the regulations promulgated thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 4.5.
"Fixed Assets" has the meaning set forth in Section 4.10.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"General Basket" has the meaning set forth in Section 9.2.
"Governing Documents" means, as to any Person, the articles of
incorporation or certificate of incorporation and code of regulations and/or
bylaws (if such Person is a
corporation); the partnership agreement and partnership certificate (if such
Person is a partnership); or the articles of organization and operating
agreement (if such Person is a limited liability company); and other documents
relating to and establishing or governing the existence and legal operation of
such Person, of any type or nature, each as amended to date.
"Hazardous Substances" means any toxic substance, hazardous substance,
hazardous waste, hazardous material, solid waste, residual waste, infectious
waste, contaminant, pollutant, or constituent thereof, whether solid, semi-
solid, liquid or gaseous, which are regulated, listed or controlled by
Environmental, Health and Safety Laws.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Anti-trust Improvements Act of 1976,
as amended.
"Indemnified Party" has the meaning set forth in Section 10.1.
"Indemnifying Party" has the meaning set forth in Section 10.1.
"Knowledge of Sellers" and all similar phrases relating to facts designated
herein as known to Sellers means the actual knowledge of any one or more of
Sellers without any obligation to make inquiry or investigation.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Most Recent Fiscal Period End" shall mean September 30, 1998.
"Most Recent Financial Statements" has the meaning set forth in Section
4.5.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Negotiators" has the meaning set forth in Section 11.2(a).
"Net Company Debt" has the meaning set forth in Section 2.2(b).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parties" and "Party" have the meaning set forth in the preface.
"Patent Application Understanding" has the meaning set forth in Section
4.11 of the Disclosure Schedule.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" has the meaning set forth in Section 4.7.
"Person" means a natural person, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Phase I Reports" has the meaning set forth in Section 4.22.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2.2.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Section 338 Allocation" has the meaning set forth in Section 13.3.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, other than (a) mechanic's and similar liens, (b)
liens for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" has the meaning set forth in the preface.
"Seller Affiliated Party" shall mean, in addition to each Seller, each
grantor of each Seller which is a trust, each named beneficiary of each Seller
which is a trust, each Person controlled by, in control of, or under common
control with, any of the foregoing Persons.
"Seller Claims Basket" has the meaning set forth in Section 9.2.
"Shares" means all issued and outstanding shares of capital stock of the
Company.
"Treasury Regulation" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such may be amended from time to
time (including corresponding provisions of succeeding regulations).
"Tax" means any federal, state, local or foreign income, gross receipts,
gross income, capital gains, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum or other tax of any
kind whatsoever, including any interest, penalty or addition thereto.
"Tax Basket" has the meaning set forth in Section 9.2.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 10.1.
"Updated Disclosure Schedule" has the meaning set forth in Section 5.9.
"Update Adjustment" has the meaning set forth in Section 5.9.
Pursuant to Item 601(b) of Regulation S-K, the Registrant is not filing the
Schedules to the Stock Purchase Agreement. The omitted schedules are:
Schedule No.
------------
2.2(b) Credit Facilities
3.1(c) Brokers' Fees
4.1 Hi-Stat Officers and Directors
4.2 Hi-Stat Shareholders
4.5 Hi-Stat Financial Statements
4.6 Event Subsequent to the Most Recent Fiscal Period
4.7(a) Permits
4.8 Tax Matters
4.9(a) Real Property Owned by Hi-Stat
4.9(b) Real Property Leased to or by Hi-Stat
4.10 Encumbered Assets
4.11 Intellectual Property
4.12 Inventory
4.13 Contracts
4.15 Powers of Attorney
4.16 Insurance
4.17 Material Litigation
4.18 Key Employee Terminations
4.19 Employee Benefits
4.20 Guaranties
4.21 Environmental, Health and Safety
4.22 Certain Business Relationships
4.25 Product Liability Claims and Recalls
4.26 "Big Three" Customer Cancellations
5.8 Excluded Assets
5.10 Material Changes to Employee Benefit Plans
5.11 Compensation Arrangements
The Registrant hereby agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request.
