STOCK PURCHASE AGREEMENT, dated as of December 19, 1997, among NTI,
INC., a California corporation ("NTI-CA"), THE XXXXXX MARITAL TRUST, UNDER TRUST
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DOCUMENT DATED MARCH 13, 1989, XXXXXXX X. XXXXX, AS TRUSTEE, a California
irrevocable trust (the "Xxxxxx Marital Trust"), THE XXXXXX SURVIVOR'S TRUST,
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UNDER TRUST DOCUMENT DATED MARCH 13, 1989, XXXXX XXXXXX, AS TRUSTEE, a
California revocable trust (the "Xxxxxx Survivor's Trust", and together with the
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Xxxxxx Marital Trust, collectively, the "Trusts"; NTI-CA and the Trusts are
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referred to herein, collectively, as the "Xxxxxx Group") and XXXXX X. XXXXXXXX,
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an individual ("Xxxxxxxx") (NTI-CA, the Trusts and Xxxxxxxx are referred to
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herein, collectively, as "Sellers"), and DETAILS, INC., a California corporation
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("Purchaser").
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W I T N E S S E T H :
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WHEREAS, Sellers own all the issued and outstanding shares of common
stock, no par value (the "Shares"), of Colorado Springs Circuits, Inc., a
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Colorado corporation (the "Company"); and
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WHEREAS, Sellers wish to sell to Purchaser, and Purchaser wishes to
purchase from Sellers, the Shares, upon the terms and subject to the conditions
set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, Purchaser and Sellers hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.01. Purchase and Sale. Upon the terms and subject to the
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conditions set forth in this Agreement, Sellers agree to sell to Purchaser, and
Purchaser agrees to purchase from Sellers, the Shares.
SECTION 1.02. Purchase Price. The aggregate purchase price (the
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"Purchase Price") for the Shares shall be $38,000,000 in cash, subject to
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adjustment, if any, in accordance with Section 1.04. The Purchase Price shall
be payable as provided in Section 1.03(c).
SECTION 1.03. Closing. (a) Subject to the terms and conditions of
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this Agreement, the sale and purchase of the Shares contemplated hereby shall
take place at a closing (the "Closing") to be held at 9:00 a.m., local time, on
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the later of (i) December 22, 1997 and (ii) the satisfaction or waiver of all
other conditions to the obligations of the parties set forth in Article VII, at
the offices of Shearman & Sterling, 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx, or at such other time or on such other date or at such other place
as Sellers and Purchaser may mutually agree upon in writing (the day on which
the Closing takes place being the "Closing Date").
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(b) At the Closing, Sellers shall deliver or cause to be delivered
to Purchaser (i) stock certificates evidencing the Shares duly endorsed in blank
or accompanied by stock powers duly executed in blank and (ii) the certificate
required to be delivered pursuant to Section 7.02(a).
(c) At the Closing, Purchaser shall deliver to Sellers (i) the
Purchase Price, as adjusted prior to the Closing pursuant to Section 1.04 by
wire transfer in immediately available funds, to an account or accounts
designated at least two Business Days prior to the Closing Date by Sellers in a
written notice to Purchaser and (ii) the certificate required to be delivered
pursuant to Section 7.01(a). The Purchase Price shall be distributed among
Sellers in accordance with the percentages (the "Sellers' Percentages") set
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forth on Exhibit 1.03(c).
(d) At Closing, Purchaser shall contribute to the Company and the
Company shall deliver to [Bank One] in escrow (the "Xxxxxx/St. Xxxxx Escrow"),
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the Estimated Xxxxxx/St. Andre Payments by wire transfer in immediately
available funds to an escrow account or accounts designated at least two
Business Days prior to the Closing Date by the Company in a written notice to
Purchaser.
(e) At Closing, Purchaser shall contribute $300,000 to the Company,
and the Company shall pay the Bonus Payments.
SECTION 1.04. Purchase Price Adjustment. (a) The Purchase Price
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shall be subject to adjustment, if any, as specified in this Section 1.04.
(b) Two days prior to the anticipated Closing Date, Sellers
delivered to Purchaser Sellers' written estimate of (i) the Net Debt Obligations
of the Company (the "Estimated Net Debt Obligations") as of the Closing Date,
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(ii) the Xxxxxx/St. Xxxxx Payments (the "Estimated Xxxxxx/St. Andre Payments"),
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which estimate will be based upon the Interim Net Worth and (iii) the amount
(the "Estimated Net Worth Differential") by which the Closing Net Worth will
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exceed or fall short of $5,065,000 (the "Net Worth Target"), a copy of which
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written estimate is attached hereto as Exhibit 1.04(b). The Purchase Price
payable by Purchaser at the Closing shall be (x) reduced by the aggregate amount
of the Estimated Debt Obligations, the Estimated Xxxxxx/St. Xxxxx Payments and
the Bonus Payments and (y) increased (if the Estimated Net Worth Differential is
a positive number) or reduced (if the Estimated Net Worth Differential is a
negative number) by the amount of the Estimated Net Worth Differential. Subject
to Section 1.04(e), within 35 Business Days after the date of receipt by Sellers
of the Closing Balance Sheet (as hereinafter defined):
(i) If the Net Debt Obligations of the Company disclosed on the
Closing Balance Sheet are less than the Estimated Net Debt Obligations,
Purchaser shall immediately pay to Sellers, as an adjustment to the
Purchase Price, in immediately available funds, an amount equal to the
amount by which the Estimated Net Debt Obligations exceed the Net Debt
Obligations;
(ii) If the Net Debt Obligations of the Company disclosed on the
Closing Balance Sheet are greater than the Estimated Net Debt Obligations,
Sellers shall immediately pay to Purchaser, as an adjustment to the
Purchase Price, in immediately available funds, an amount equal to the
amount by which the Net Debt Obligations exceed the Estimated Net Debt
Obligations;
(iii) If the Xxxxxx/St. Andre Payments calculated on the basis of the
final Purchase Price (without any reduction for the Xxxxxx/St. Xxxxx
Payments) determined pursuant to the Closing Balance Sheet are less than
the amounts delivered into the Xxxxxx/St. Andre Escrow in accordance with
Section 1.03(d), an amount equal to the difference between the Estimated
Xxxxxx/St. Xxxxx Payments and the Xxxxxx/St. Andre Payments shall be
distributed from the Xxxxxx/St. Xxxxx Escrow to Sellers; and
(iv) If the Xxxxxx/St. Andre Payments calculated on the basis of the
final Purchase Price (without any reduction for the Xxxxxx/St. Xxxxx
Payments) determined pursuant to the Closing Balance Sheet are greater than
the amounts delivered to the Xxxxxx/St. Andre Escrow in accordance with
Section 1.03(d), Sellers shall pay into the Xxxxxx/St. Xxxxx Escrow an
amount equal to the difference between the Estimated Xxxxxx/St. Andre
Payments and the Xxxxxx/St. Xxxxx Payments.
(c) As soon as practicable (but in no event later than 90 calendar
days following the Closing Date), Purchaser shall prepare and deliver to Sellers
an audited balance sheet for the Company (the "Closing Balance Sheet"), as of
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the Closing Date. The Closing Balance Sheet shall be accompanied by (i) the
report thereon of Price Waterhouse LLP, independent accountants of Purchaser
(the "Purchaser's Accountants"), stating that the Closing Balance Sheet fairly
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presents the financial position of the Company as of the date thereof in
accordance with GAAP applied on a basis consistent with the preparation of the
Financial Statements, (ii) a calculation of the Closing Net Worth and (iii) a
calculation of the Working Capital. Following the delivery of the Closing
Balance Sheet to Sellers and during the period of any dispute provided for in
Section 1.04(e), Purchaser shall provide Sellers and Sellers' Accountants
reasonable access to the books and records (including all supporting documents
and auditors work papers used in the preparation of the Closing Balance Sheet),
facilities and employees of the Company, and Purchaser shall cooperate fully
with Sellers' Accountants, in each case to the extent required by Sellers and
Sellers' Accountants in order to review the Closing Balance Sheet and to
investigate the basis for any such dispute.
(d) Subject to Section 1.04(e), within 35 Business Days after the
date of receipt by Sellers of the Closing Balance Sheet:
(i) If the Closing Net Worth is less than the sum of (A) the Net
Worth Target and (B) the Estimated Net Worth Differential (such sum being,
the "Interim Net Worth") Sellers shall immediately pay to Purchaser, as an
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adjustment to the Purchase Price, in immediately available funds, an amount
equal to such shortfall below the Interim Net Worth;
(ii) If the Closing Net Worth is greater than the Interim Net Worth,
Purchaser shall immediately pay, as an adjustment to the Purchase Price, in
immediately available funds, to Sellers an amount equal to such excess over
the Interim Net Worth; and
(iii) If the amount of Working Capital of the Company is less than
$4,200,000 (the "Working Capital Target"), Sellers shall immediately pay to
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Purchaser, as an adjustment to the Purchase Price, in immediately available
funds, an amount equal to the amount by which the Working Capital is less
than the Working Capital Target.
(e) If not disputed by Sellers in accordance with this Section
1.04(e), the Closing Balance Sheet and the calculation of Closing Net Worth and
Working Capital delivered by Purchaser to Sellers shall be final, binding and
conclusive on the parties hereto. Sellers may dispute any amounts reflected on
the Closing Balance Sheet or the calculation of Closing Net Worth and Working
Capital, provided, however, that Sellers shall notify Purchaser and Purchaser's
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Accountants in writing of each disputed item, specifying the amount thereof in
dispute and setting forth, in detail, the basis for such dispute, within 30
Business Days of Sellers' receipt of the Closing Balance Sheet. In the event of
such a dispute, each of Purchaser and Sellers shall negotiate in good faith to
reconcile their differences. If such dispute has not been resolved within 10
Business Days after the notice referred to in the preceding sentence has been
given, Xxxxx, Xxxxxxxxxx & Company (the "Sellers' Accountants") and Purchaser's
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Accountants shall attempt to reconcile their differences, and any resolution by
them as to any disputed amounts shall be final, binding and conclusive on the
parties hereto. If Purchaser's Accountants and Sellers' Accountants are unable
to reach a resolution with respect to all items, Purchaser's Accountants and
Sellers' Accountants shall submit the items remaining in dispute that Sellers
shall be entitled to dispute by the terms of this Section 1.04(e) for resolution
to Xxxxxx Xxxxxxxx LLP or such other independent accounting firm as may be
mutually acceptable to Sellers and Purchaser (the "Independent Accounting
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Firm"), which shall, within 30 Business Days of such submission, determine and
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report to Sellers and Purchaser upon such remaining disputed items, and such
report shall have the legal effect of an arbitral award and shall be final,
binding and conclusive on Sellers and Purchaser. The fees and disbursements of
the Independent Accounting Firm shall be allocated between Sellers and Purchaser
in the same proportion that the aggregate amount of such remaining disputed
items so submitted to the Independent Accounting Firm which is unsuccessfully
disputed by each such party (as finally determined by the Independent Accounting
Firm) bears to the total amount of such remaining disputed amounts so submitted.
Any amount that is subject to dispute under this Section 1.04(e) shall be paid
by Sellers or Purchaser, as the case may be, in immediately available funds,
within five Business Days following the resolution of such dispute and in an
amount in accordance with such resolution.
(f) In acting under this Agreement, Sellers' Accountants,
Purchaser's Accountants and the Independent Accounting Firm shall be entitled to
the privileges and immunities of arbitrators.
(g) Any payment required to be made by Sellers or Purchaser
pursuant to
Sections 1.04(b) or 1.04(d) shall bear interest from the Closing Date through
the date of payment on the basis of the average of the daily rate of interest
publicly announced by Citibank, N.A. in New York, New York from time to time as
its base rate from the Closing Date to the date of such payment. Any payment
required to be made by Sellers pursuant to Sections 1.04(b) or 1.04(d) shall be
a joint and several obligation of all Sellers.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of Sellers, jointly and severally among the members of the
Xxxxxx Group and severally (and not jointly) as between the Xxxxxx Group and
Xxxxxxxx, represents and warrants to Purchaser as follows:
SECTION 2.01. Incorporation and Authority of NTI-CA. NTI-CA is a
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corporation duly incorporated, validly existing and in good standing under the
laws of the State of California and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by NTI-CA, the performance by NTI-CA of its
obligations hereunder and the consummation by NTI-CA of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of NTI-CA. This Agreement has been duly executed and delivered by
NTI-CA, and (assuming due authorization, execution and delivery by Purchaser)
this Agreement constitutes a legal, valid and binding obligation of NTI-CA
enforceable against NTI-CA in accordance with its terms, subject to the effect
of any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 2.02. Formation and Authority of the Trusts. Each of the
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Trusts is a trust duly formed, validly existing and in good standing under the
laws of the State of California and has all necessary power and authority to
enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Trusts, the performance by the Trusts of their obligations
hereunder and the consummation by the Trusts of the transactions contemplated
hereby have been duly authorized by all requisite action on the part of the
Trusts. This Agreement has been duly executed and delivered by each of the
Trusts, and (assuming due authorization, execution and delivery by Purchaser)
this Agreement constitutes a legal, valid and binding obligation of each Trust
enforceable against each Trust in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 2.03. Incorporation and Qualification of the Company. The
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Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Colorado, and has the corporate power
and authority to own, operate or lease the properties and assets now owned,
operated or leased by the Company. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failures which,
would not have, individually or in the aggregate, a Material Adverse Effect.
SECTION 2.04. Capital Stock of the Company. Except as set forth in
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Section 2.04 of the Disclosure Schedule, the Shares constitute all the
authorized, issued and outstanding shares of capital stock of the Company. The
Shares have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any pre-emptive rights. There
are no options, warrants or rights of conversion or other rights, agreements,
arrangements or commitments relating to the capital stock of the Company
obligating the Company to issue or sell any of its shares of capital stock.
Each Seller has good and valid title to, and is the record beneficial owner of
the Shares set forth opposite such Seller's name in Section 2.04 of the
Disclosure Schedule, free and clear of all pledges, security interests and all
other material liens, encumbrances and adverse claims, except for any liens,
encumbrances or adverse claims arising out of, under or in connection with this
Agreement. There are no voting trusts, stockholder agreements, proxies or other
agreements in effect with respect to the voting or transfer of the Shares.
SECTION 2.05. Subsidiaries. The Company has no Subsidiaries.
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SECTION 2.06. No Conflict. Assuming all consents, approvals,
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authorizations and other actions described in Section 2.07 have been obtained
and all filings and notifications listed in Section 2.07 of the Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating particularly to Purchaser or as described in Section 2.06
of the Disclosure Schedule, the execution, delivery and performance of this
Agreement by Sellers do not and will not (a) violate or conflict with (i) the
Certificate of Incorporation or By-laws of NTI-CA or the Company or (ii) the
organizational documents of the Trusts, (b) conflict with or violate any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to Sellers, the Company or the Business or (c) result in any
breach of, or constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require consent under or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien or other encumbrance on
the Shares or on any of the assets or properties of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which any
of Sellers or the Company is a party or by which any of such assets or
properties is bound or affected, except in the case of clause (c) as would not
have, individually or in the aggregate, a Material Adverse Effect or have a
material adverse effect on the ability of Sellers to consummate the transactions
contemplated by this Agreement.
SECTION 2.07. Consents and Approvals. The execution and delivery
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of this Agreement by Sellers does not, and the consummation by Sellers of the
transactions contemplated hereby and by the other agreements delivered at
Closing will not, require any consent, approval, authorization or other action
by, or filing with or notification to, any Governmental Authority, except (a) as
described in Section 2.07 of the Disclosure Schedule, (b) where failure to
obtain such consent, approval, authorization or action, or to make such filing
or notification, would not prevent Sellers from performing any of their material
obligations under this Agreement and (c) as may be necessary as a result of any
facts or circumstances relating particularly to Purchaser. Sellers make no
representations or warranties regarding the necessity of complying with the pre-
merger notification requirements of the HSR Act.
SECTION 2.08. Financial Information. Sellers have caused to be
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delivered to Purchaser the Financial Statements (a copy of which is included in
Section 2.08 of the Disclosure Schedule). The Financial Statements fairly
present in all material respects the financial position, results of operations
and cash flows of the Business as of the date thereof and for the period covered
thereby in conformity with GAAP, with respect to the Audited Financial
Statements, with only such deviations from GAAP as are referred to in the notes
thereto and, with respect to the Interim Financial Statements, taking into
account the absence of footnotes and such other exceptions or deviations as are
set forth therein.
SECTION 2.09. Absence of Undisclosed Liabilities. As of the
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Closing, there shall be, to Sellers' knowledge, no liability of the Company
except liabilities (i) disclosed in the Disclosure Schedule or otherwise
addressed by any of the representations, warranties, covenants or agreements
made by Sellers in this Agreement, (ii) as, and to the extent, reflected or
reserved against in the Financial Statements, (iii) to the extent covered by
insurance, indemnification, contribution or comparable arrangements, with
respect to which liabilities, payments related thereto have actually been
recovered or are reasonably expected to be recovered under such arrangements,
(iv) with respect to the matters addressed in Section 2.16 and Article VI (which
shall be governed solely by the terms of such Section 2.16 and Article VI), and
(v) liabilities which would not have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 2.10. Absence of Certain Changes or Events. (a) Since the
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date of the balance sheet contained in the Audited Financial Statements (the
"Balance Sheet Date"), except as disclosed in Section 2.10 of the Disclosure
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Schedule, the business of the Company has been conducted in the ordinary course
and consistent with past practice.
(b) Since the Balance Sheet Date and except as set forth in Section
2.10 of the Disclosure Schedule or as contemplated by this Agreement, there has
not been:
(i) any damage, destruction or loss to any of the assets or
properties of the Company in the aggregate in excess of $100,000;
(ii) any capital expenditures by the Company, which exceed in the
aggregate
$30,000.
(iii) any establishment or increase in any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing,
stock option (including, without limitation, any grant of any stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plans, or other increase
in, or promise to increase, the compensation payable or to become payable
to (A) any officer or key employee of the Company or (B) to all or
substantially all of the employees of the Company (including, without
limitation, any such payments to be made or promised to such employees of
the Company in connection with and/or from the proceeds of the transactions
contemplated hereby), except, in any case described above, in accordance
with an existing employee benefit plan or other agreement or as may be
required by law;
(iv) any employment or severance agreement entered into with any of
the employees of the Company;
(v) except for sales of inventory in the ordinary course of
business, any sale, assignment, transfer, lease or other disposition or
agreement to sell, assign, transfer, lease or otherwise dispose of any of
the fixed assets of the Company having an aggregate value exceeding
$100,000;
(vi) (A) any acquisition by the Company (by merger, consolidation,
or acquisition of stock or assets) of any corporation, partnership or other
business organization or division thereof or (B) any incurrence of any
indebtedness for borrowed money or issuance of any debt securities or
assumption, grant, guarantee or endorsement, or other accommodation or
arrangement making the Company responsible for, the obligations of any
person, or any loans or advances, the aggregate value of any matter set
forth in this clause (vi) which exceeds $100,000;
(vii) any change in any method of accounting, accounting practice,
pricing policies or payment, collection, credit or inventory maintenance
practices used by the Company, other than such changes required by GAAP;
(viii) any issuance or sale of additional shares of the capital stock
of, or other equity interests in, the Company, or securities convertible
into or exchangeable for such shares or equity interests in the Company, or
issuance or granting of any options, warrants, calls, subscription rights
or other rights of any kind to acquire additional shares of such capital
stock, such other equity interests, or such securities;
(ix) any amendment to the Company's Certificate of Incorporation or
By-laws;
(x) any declaration or payment of dividends by the Company;
(xi) any entering into or performance of transactions by the
Company with Affiliates;
(xii) any agreement by the Company to take any of the actions
specified in this Section 2.10, except for this Agreement; and
(xiii) any labor union organizing activities, or any actual or
threatened employee strikes, work stoppages, slow-downs or lock-outs at the
Company.
SECTION 2.11. Absence of Litigation. Except as set forth in
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Section 2.11 of the Disclosure Schedule, there are no claims, actions,
proceedings or investigations ("Actions") pending or, to the knowledge of
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Sellers, threatened against any of Sellers, the Company or any of the assets or
properties of the Company, before any court, arbitrator or administrative,
governmental or regulatory authority or body which, if adversely determined
against the Company, would (a) result in damages against the Company in excess
of $50,000 or (b) have, individually or in the aggregate, a Material Adverse
Effect. There is no Action pending or, to the knowledge of Sellers, threatened
which seeks rescission of, seeks to enjoin the consummation of or otherwise
relates to, this Agreement or any of the transactions contemplated hereby.
Except as set forth in Section 2.11 of the Disclosure Schedule, the Company and
its assets and properties are not subject to any order, writ, judgment,
injunction, decree, determination or award which would have, individually or in
the aggregate, a Material Adverse Effect.
SECTION 2.12. Compliance with Laws. The Company has not been and
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is not currently, and its employees have not been and are not currently, in
violation of any law, rule, regulation, order, judgment or decree applicable to
the Company or its operations or by which any of the properties of the Company
is bound or affected, except (i) as set forth in Section 2.12 of the Disclosure
Schedule and (ii) for violations the existence of which would not have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 2.13. Licenses and Permits. Except as set forth in Section
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2.13 of the Disclosure Schedule, the Company has all governmental licenses,
permits and authorizations necessary to conduct the Business (the "Permits"),
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except for such governmental licenses, permits and authorizations the absence of
which would not have, individually or in the aggregate, a Material Adverse
Effect. All of the Permits are in full force and effect, except where failure to
be in full force and effect does not have and would not have, individually or in
the aggregate, a Material Adverse Effect. The operations of the Company as
currently conducted are not in violation of any Permits, except as would not
have, individually or in the aggregate, a Material Adverse Effect. The Company
has not received any written notice that any governmental or licensing authority
or association currently plans to revoke, cancel, rescind, materially modify or
refuse to renew in the ordinary course any of the Permits.
SECTION 2.14. Real Property. (a) The Company does not own any real
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property.
(b) Section 2.14 of the Disclosure Schedule lists the real property
leased by the Company (the "Leases"). True and correct copies of the Leases
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have been delivered to Purchaser. Each of the Leases is a legal, valid and
binding obligation of the Company. Neither the Company, nor to the knowledge of
Sellers any other party thereto, is in default of any material provision under
any Lease. Each parcel of real property leased by the Company is leased, free
and clear of all liens, security interests, claims and other charges and
encumbrances, except: (i) as disclosed in Section 2.14 of the Disclosure
Schedule; (ii) liens for Taxes and assessments not yet payable; (iii) liens for
Taxes, assessments and charges and other claims, the validity of which are being
contested in good faith; (iv) imperfections of title, liens, security interests,
claims and other charges and encumbrances the existence of which would not have,
individually or in the aggregate, a Material Adverse Effect; (v) inchoate
mechanics' and materialmen's liens for construction in progress; and (vi)
workmen's, repairmen's, warehousemen's and carriers' liens arising in the
ordinary course of the Business.
SECTION 2.15. Employee Benefit Matters. (a) Section 2.15 of the
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Disclosure Schedule contains a true and complete list of all employee benefit
plans (within the meaning of Section 3(3) of ERISA) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements with respect to which the Company has any
obligation, liability for premiums or benefits or which are maintained,
contributed to or sponsored by the Company for the benefit of any employee,
former employee, beneficiaries of such employee or former employee, or officer
or director of the Company, other than plans, programs, arrangements, contracts
or agreements for which no benefits, liabilities, or penalties are payable or
due as of or after the Closing (the "Plans"). Except as disclosed in Section
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2.15 of the Disclosure Schedule, each Plan is in writing and a true and complete
copy of each Plan has been furnished to Purchaser and each of the following
documents, to the extent applicable, prepared in connection with each such Plan:
(i) a copy of each trust or other funding arrangement, (ii) the most recently
filed Internal Revenue Service ("IRS") Form 5500, (iii) the most recently
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received IRS determination letter and related correspondence subsequent to such
determination letter and (iv) the most recently prepared actuarial report and
financial statement. Except as otherwise disclosed in Section 2.15 of the
Disclosure Schedule, Sellers and the Company have no express or implied
commitment to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by any applicable law, including
ERISA and the Code.
(b) Except as otherwise disclosed in Section 2.15 of the Disclosure
Schedule, none of the Plans (i) is a multiemployer plan, within the meaning of
Section 3(37) or 4001(a)(3) of ERISA (a "Multiemployer Plan"), or a single
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employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which the Company could incur liability under Section 4063 or 4064 of ERISA (a
"Multiple Employer Plan"), or (ii) provides or promises to provide retiree
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medical or life insurance benefits.
(c) Each Plan is now and has been operated in all material respects
in
accordance with the requirements of the Plan and all applicable laws, including,
without limitation, ERISA and the Code. Nothing has occurred with respect to any
Plan that has subjected or could subject the Company to a penalty under Section
502 of ERISA or to a tax under Sections 4972, 4973, 4975 or 4979 of the Code, or
that has subjected or could subject any participant in or beneficiary of any
Plan to a tax under Section 4974 of the Code, except, in each case, as would not
have, individually or in the aggregate, a Material Adverse Effect. All prior
contributions, premiums or payments made with respect to any Plan have been
deducted for income tax purposes and no such deduction previously claimed has
been challenged by any government entity. The Financial Statements reflect
accruals of all amounts of employer contributions and premiums accrued but
unpaid with respect to the Plans as of the date of the Financial Statement.
(d) The Company 401(k) Plan (the "401(k) Plan"), which is intended
-----------
to be qualified under Section 401(a) of the Code, has received a favorable
determination letter from the IRS that it is so qualified, and the related
trust, which is intended to be exempt from federal income tax pursuant to
Section 501(a) of the Code, has received a determination letter from the IRS
that such trust is so exempt.
(e) Except as described in Section 2.15 of the Disclosure Schedule
and other than as required under Section 601 et seq. of ERISA, no Plan that is a
welfare benefit plan within the meaning of Section 3(1) of ERISA (a "Welfare
-------
Benefit Plan") provides benefits or coverage following retirement or other
------------
termination of employment. Nothing has occurred with respect to any Plan that
could subject the Company to a tax under Section 4980B of the Code. Any welfare
benefit trust or fund constitutes or is associated with a Plan and that is
intended to be exempt from Federal income tax under Section 501(c)(9) is so
exempt.
SECTION 2.16. Taxes. (a) Except as set forth in Section 2.16 of
-----
the Disclosure Schedule, (i) all returns declarations, reports, claims for
refund or information returns or statements with respect to Taxes, including any
schedule or attachment hereto, and including any amendment thereof ("Tax
---
Returns") required to be filed with respect to the Company (including any
-------
consolidated federal income tax return of NTI-CA or any state or local income
tax return that includes the Company on a combined, consolidated or unitary
basis) have been timely filed (taking into account any available extensions),
(ii) such Tax Returns are true, correct and complete (it being understood,
however, that the Company makes no representation or warranty as to its net
operating losses or other tax attributes other than the representation contained
in section 2.16(f)), (iii) the Company has paid all Taxes owed by the Company
(whether or not shown on any Tax Returns), (iv) the Company has withheld and
paid all Taxes required to have been withheld and paid in connection with the
amounts paid to any employee, independent contractor, creditor, stockholder, or
other third party, (v) no deficiency for any amount of Tax has been asserted or
assessed by a taxing authority against the Company and (vi) the Company is
currently not and will not be on the Closing Date the beneficiary of any
extension of time within which to file any Tax Return.
(b) Except as set forth in Section 2.16 of the Disclosure Schedule, there
is no dispute or claim concerning any Tax liability of the Company either (i)
claimed or raised by
any authority in writing or (ii) to Sellers' knowledge, based upon personal
contact by employees of the Company with any agent of such authority. Section
2.16 of the Disclosure Schedule (i) lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Company for taxable periods ended
on or after Xxxxx 00, 0000, (xx) indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. Sellers have delivered to Purchaser correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by or on behalf of the Company since March 31,
1990.
(c) Except as set forth in Section 2.16 of the Disclosure Schedule, 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.
(d) The Company has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. At the Closing Date, the Company will not
have made any payments, will not be obligated to make any payments, nor will it
be a party to any agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under Section 280G of the Code
or subject to the excise tax of Section 4999 of the Code. The Company has not
been a United States real property holding corporation within the meaning of the
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(e) The Company currently is not a party to any inter-company tax sharing
agreement.
(f) Section 2.16(f) of the Disclosure Schedule sets forth the basis of
the Company in its assets (set forth by category of asset) as of most recent
practicable date.
SECTION 2.17. Brokers. Except for BancAmerica Xxxxxxxxx Xxxxxxxx
-------
("BARS"), no broker, finder or investment banker is entitled to any brokerage,
-----
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Sellers. Sellers are solely responsible for the fees and expenses of BARS.
SECTION 2.18. Material Contracts. (a) Section 2.18(a) of the
------------------
Disclosure Schedule lists the following contracts (collectively, with the Leases
listed on Section 2.14 of the Disclosure Schedule, the "Material Contracts") in
------------------
effect as of the date of this Agreement to which the Company is a party, true
and correct copies of which have been delivered to Purchaser:
(i) any commitment, contract, agreement, note, loan, evidence
of indebtedness, purchase order or letter of credit (other than the Leases
listed on Section 2.14 of the Disclosure Schedule) that Sellers reasonably
anticipate will, in accordance with its terms, involve aggregate payments
by the Company of more than $100,000 or under which the Company has
guaranteed the obligations of another Person which may give rise to an
obligation of the Company of more than $100,000, in
each case within the 12 month period following the date of this Agreement
and that is not cancelable without liability upon no more than 60 days'
notice;
(ii) any lease of personal property involving any annual
expense in excess of $50,000 and not cancelable by the Company without
liability upon no more than 60 days' notice;
(iii) any contracts or agreements containing covenants
limiting the freedom of the Company to engage in any line of business or
compete with any Person;
(iv) any employment agreements involving annual payments by
the Company in excess of $50,000 that are not terminable without liability
upon no more than 60 days' notice;
(v) All contractual obligations under which the Company is
or may become obligated to pay any legal, accounting, brokerage, finder's
or similar fees or expenses in excess of $10,000 in connection with, or has
incurred any severance pay or special compensation obligations in excess of
$10,000 which would become payable by reason of, this Agreement or
consummation of the transactions contemplated hereby;
(vi) All contractual obligations (including, without
limitation, options) to sell or otherwise dispose of any Assets except for
sales of inventory in the ordinary course of business;
(vii) All agreements pursuant to which the Company leases
material personal property as lessor or licenses any personal property as
licensor or licensee in any case, aggregating more than $25,000;
(viii) All contractual obligations under which the Company has
or will after the Closing have any liability or obligation to or for the
benefit of the Sellers or any Affiliates of the Sellers; and
(ix) All contractual obligations under which the Company is
or may become obligated to pay any amount in respect of indemnification
obligations, purchase price adjustment or otherwise in connection with any
(A) acquisition or disposition of assets or securities, (B) merger,
consolidation or other business combination, or (C) series or group of
related transactions or events of a type specified in subclauses (A) and
(B);
(x) All agreements with sales representatives and
distributors.
(b) The Company is not (and, to the knowledge of Sellers, no other
party is), as of the date of this Agreement, in breach or violation of, or
default under, any of the Material Contracts, where such breaches or violations
or default would have, individually or in the aggregate, a Material Adverse
Effect. Each Material Contract is, as of the date of this
Agreement, a valid agreement, arrangement or commitment of the Company,
enforceable against the Company in accordance with its terms (except as would
not have, individually or in the aggregate, a Material Adverse Effect) and, to
the knowledge of Sellers, is a valid agreement, arrangement or commitment of
each other party thereto, enforceable against such party in accordance with its
terms, except in each case where enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally and
except where enforceability is subject to the application of equitable
principles or remedies.
SECTION 2.19. Customers and Suppliers. Section 2.19 of the
-----------------------
Disclosure Schedule contains a complete and accurate list, as of the date of
this Agreement, of the ten largest customers of the Company taken as a whole in
terms of revenues during the Company's 1997 fiscal year and during the 6 months
ended on September 30, 1997, showing the approximate total sales by the Company
to each such customer during such period. Except as set forth in Section 2.19 of
the Disclosure Schedule, from September 30, 1997, through the date of this
Agreement, (i) there has not, to the knowledge of Sellers, been any change in
the business relationships of the Company with any customers named in Section
2.19 of the Disclosure Schedule, (ii) no customer (or group of customers which
in the aggregate is significant) of the Company has either given the Company
written notice or, to the knowledge of the Company, has taken any other action
which has given the Company any reason to believe that such customer (or group
of customers) will cease to purchase products or services or reduce
significantly the amount of products and services purchased from the Company;
and (iii) no significant supplier or vendor (or group of suppliers or vendors
which in the aggregate is significant) of the Company has either given the
Company written notice or, to the knowledge of the Company, has taken any other
action which has given the Company any reason to believe that such supplier or
vendor (or group of suppliers or vendors) will cease to supply or restrict the
amount supplied or adversely change its price or terms to the Company of any
products or services.
SECTION 2.20. Environmental and Safety Matters. The Company is in
--------------------------------
all material respects in compliance with the provisions of all federal, state
and local laws relating to pollution, protection of the environment or
occupational safety and health applicable to it or to real property leased by it
or to the use, operation or occupancy thereof. The Company has not engaged in
any activity in material violation of any provision of any federal, state or
local law, or otherwise, relating to pollution, protection of the environment or
occupational safety and health. Except as disclosed in Section 2.20 of the
Disclosure Schedule, the Company does not have any liability, absolute or
contingent, under any federal, state or local law relating to pollution,
protection of the environment or occupational safety and health which would
have, individually or in the aggregate, a Material Adverse Effect.
SECTION 2.21. Trademarks, Patents and Copyrights. Except as set
----------------------------------
forth in Section 2.21 of the Disclosure Schedule, or to the extent the
inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy), would not have, individually or in the aggregate, a Material
Adverse Effect, the Company owns or possesses adequate licenses or other legal
rights to use all patents, patent rights, trademarks, trademark rights, trade
names, trade dress, trade name rights, copyrights, servicemarks, trade secrets,
applications for
trademarks and for servicemarks, know-how and other proprietary rights and
information used in connection with the business of the Company as currently
conducted, and Sellers are unaware of any assertion or claim challenging the
validity of any of the foregoing. The conduct of the business of the Company as
currently conducted does not infringe upon any patent, patent right, license,
trademark, trademark right, trade dress, trade name, trade name right, service
xxxx, or copyright of any third party that would have, individually or in the
aggregate, a Material Adverse Effect. To Sellers' knowledge, there are no
infringements of any material proprietary rights owned by or licensed by or to
the Company.
SECTION 2.22. Title to Assets. The Company has good and marketable
---------------
title to, or, in the case of property held under lease or other contractual
obligation, a valid and enforceable right to use under an enforceable lease or
license, all of its properties, rights and assets, whether real, personal or
intellectual and whether tangible or intangible (collectively, the "Assets"),
------
including without limitation all properties, rights and assets reflected in the
respective balance sheets included in the Financial Statements (except as sold
or otherwise disposed of since the date thereof in the ordinary course of
business or otherwise in accordance with this Agreement). The Assets are not
subject to any Encumbrance, except for Permitted Encumbrances and except as
described in Section 2.22 of the Disclosure Schedule. The Assets constitute all
properties, rights and Assets held for or used in or necessary for the conduct
of the Business as currently conducted and proposed by the Company to be
conducted. All personal property included in the Assets, other than personal
property having an aggregate book value of less than $25,000, is in good working
order, operating condition and state of repair, ordinary wear and tear excepted.
To the Company's knowledge, all leased real property of the Company is in
reasonably good physical condition commensurate with its current use.
SECTION 2.23. Transactions with Affiliates. Except for the matters
----------------------------
set forth in Section 2.23 of the Disclosure Schedule, (i) no Affiliate of the
Company is an employee, consultant, competitor, customer, distributor, supplier
or vendor of, or is party to any contractual obligation with, the Company and
(ii) to Sellers' knowledge, no officer or director of the Company is an
Affiliate of any competitor, customer, distributor, supplier or vendor of the
Company. There is no intellectual property, franchisee, know-how, or proprietary
or confidential knowledge that any such Affiliate (other than the Company) owns
or is licensed or otherwise has the right to use which are used or necessary to
the conduct of the Business.
SECTION 2.24 Ultimate Parent Entities. As calculated in accordance
------------------------
with Section 801.11 of the Premerger Notification Rules, the annual net sales
and total assets of each Person within which the Company is included (as defined
in accordance with Section 801.1(a)(1) of the Premerger Notification Rules) is
less than $100,000,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
SECTION 3.01. Incorporation and Authority of Purchaser. Purchaser
----------------------------------------
is a corporation duly incorporated, validly existing and in good standing under
the laws of California and has all necessary corporate power and authority to
enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Purchaser, the performance by Purchaser of its obligations
hereunder and the consummation by Purchaser of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of Purchaser. This Agreement has been duly executed and delivered by Purchaser,
and (assuming due authorization, execution and delivery by each of Sellers)
constitutes a legal, valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 3.02. No Conflict. Except as may result from any facts or
-----------
circumstances relating solely to Sellers, the execution, delivery and
performance of this Agreement by Purchaser do not and will not (a) violate or
conflict with the Certificate of Incorporation or By-laws of Purchaser, (b)
conflict with or violate any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award applicable to Purchaser, or (c)
result in any breach of, or constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of any lien or other encumbrance on any of the assets or
properties of Purchaser pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument relating to such assets or properties to which Purchaser or any of
its subsidiaries is a party or by which any of such assets or properties is
bound or affected, except as would not, individually or in the aggregate, have a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement.
SECTION 3.03. Consents and Approvals. The execution and delivery of
----------------------
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser will not, require any consent, approval, authorization or other action
by, or filing with or notification to, any Governmental Authority, except (a) as
described in a writing delivered to Sellers by Purchaser on the date hereof, (b)
where failure to obtain such consent, approval, authorization or action, or to
make such filing or notification, would not prevent Purchaser from performing
any of its material obligations under this Agreement and (c) as may be necessary
as a result of any facts or circumstances relating solely to Sellers.
SECTION 3.04. Absence of Litigation. No claim, action, proceeding
---------------------
or investigation is pending before any court, arbitrator or administrative,
governmental or regulatory authority or body which seeks to delay or prevent the
consummation of the transactions contemplated hereby or which would be
reasonably likely to materially and adversely affect or restrict Purchaser's
ability to consummate the transactions contemplated
hereby.
SECTION 3.05. HSR Act. Based upon the Seller's representation and
-------
warranty in Section 2.24, the requirements of the HSR Act are not applicable to
the transactions contemplated by the Agreements, and accordingly, such
transactions do not obligate the parties to this Agreement to file a
Notification and Report Form pursuant to the HSR Act.
SECTION 3.06. Financing. Purchaser has received and delivered to
---------
Sellers the Xxxx Funds Commitment Letter. In addition, Purchaser has delivered
to Sellers a copy of the Chase Credit Agreement. Subject to Purchaser's
satisfaction of the funding conditions set forth in the Xxxx Funds Commitment
Letter and of the conditions set forth in Section 5.2 of the Chase Credit
Agreement, Purchaser will have available at the Closing sufficient funds to pay
the Purchase Price (as the same may be adjusted pursuant to Section 1.04).
SECTION 3.07. Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01. Conduct of Business Prior to the Closing. (a) Unless
----------------------------------------
Purchaser otherwise agrees in writing and except as otherwise set forth herein
or in the Disclosure Schedule (including Section 4.01 thereof), between the date
of this Agreement and the Closing Date, Sellers shall cause the Company to (i)
conduct the Business only in the ordinary course, (ii) use reasonable efforts to
preserve substantially intact the business organization of the Business and
(iii) use reasonable efforts to preserve the current relationships of the
Company with their respective customers, suppliers, distributors and other
persons with which the Company has significant business relationships.
(b) Except as expressly provided in this Agreement or the Disclosure
Schedule (including Section 4.01 thereof), between the date of this Agreement
and the Closing Date, Sellers shall cause the Company to refrain from taking any
of the actions set forth in Section 2.10(b) of the Agreement any of the
following without the prior written consent of Purchaser.
SECTION 4.02. Access to Information. (a) From the date hereof until
---------------------
the Closing, upon reasonable notice, Sellers shall, and shall cause the
officers, directors, employees, auditors and agents of the Company to, (i)
afford the officers, employees and authorized agents and representatives of
Purchaser and the Financing Parties reasonable access, during normal business
hours, to the offices, properties, books and records of the Company, and (ii)
furnish to the officers, employees and authorized agents and representatives of
Purchaser such additional financial and operating data and other information
regarding the
assets, properties, goodwill and business of the Company as Purchaser may from
time to time reasonably request; provided, however, that such investigation
-------- -------
shall not unreasonably interfere with any of the businesses or operations of
Sellers or the Company or any of their respective affiliates.
(b) Purchaser agrees that it shall use commercially reasonable efforts
to preserve and keep all Books and Records in Purchaser's possession for a
period of at least eight years from the Closing Date, except for Books and
Records destroyed in the ordinary course. After such eight-year period, before
Purchaser shall dispose of any of such Books and Records, at least 90 calendar
days' prior written notice to such effect shall be given by Purchaser to
Sellers, and Sellers shall be given an opportunity, at their cost and expense,
to remove and retain all or any part of such Books and Records as Sellers may
select.
(c) Each party agrees that it will cooperate with and make available
to the other party, during normal business hours, all Books and Records,
information and employees (without substantial disruption of employment)
retained and remaining in existence after the Closing Date which are necessary
or useful in connection with any Tax inquiry, audit, investigation or dispute,
any litigation or investigation or any other matter requiring any such Books and
Records, information or employees for any reasonable business purpose. The
party requesting any such Books and Records, information or employees shall bear
all of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee benefits)
reasonably incurred in connection with providing such Books and Records,
information or employees. Sellers may require certain financial information
relating to the Business for periods prior to the Closing Date for the purpose
of filing federal, state, local and foreign Tax Returns and other governmental
reports, and Purchaser agrees to furnish such information to Sellers at Sellers'
request and expense.
SECTION 4.03. Confidentiality. Except as required by law,
---------------
contemplated by this Agreement or necessary to carry out the transactions
contemplated hereby in accordance with the terms hereof, at all times prior to
Closing, Purchaser shall comply with, and shall cause its representatives and
the Financing Parties to comply with, all of its obligations under the
Confidentiality Agreement dated October 8, 1997 (the "Confidentiality
---------------
Agreement").
---------
SECTION 4.04. Regulatory and Other Authorizations; Consents. (a)
---------------------------------------------
Each party hereto shall use its best efforts to obtain all authorizations,
consents, orders and approvals of all federal, state and local regulatory bodies
and officials that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to, this Agreement and will
cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. The parties hereto will not
take any action that will have the effect of delaying, impairing or impeding the
receipt of any required approvals.
(b) Each party hereto agrees to cooperate in obtaining any other
consents and approvals which may be required in connection with the transactions
contemplated by this Agreement.
SECTION 4.05. Investigation. Purchaser acknowledges and agrees that
-------------
it (i) has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning, the Company and the Business and (ii)
has been furnished with or given adequate access to such information about the
Company and the Business as it has requested.
SECTION 4.06. Financing. Purchaser shall use commercially
---------
reasonable efforts to satisfy the funding conditions set forth in the Xxxx Funds
Commitment Letter and Section 5.2 of the Chase Credit Agreement so as to have
available to it at Closing all funds necessary to consummate the transactions
contemplated by this Agreement.
SECTION 4.07. Further Action. Each of the parties hereto shall
--------------
execute and deliver such documents and other papers and use commercially
reasonable efforts to take such further actions as may be reasonably required to
carry out the provisions hereof and give effect to the transactions contemplated
hereby.
SECTION 4.08. Sellers' Confidentiality; Non-Competition. Each
-----------------------------------------
Seller acknowledges that the success of the Company after the Closing depends
upon the continued preservation of the confidentiality of certain information
possessed by Sellers, that the preservation of the confidentiality of such
information by Sellers is an essential premise of the bargain between the
parties, and that Purchaser would be unwilling to enter into this Agreement in
the absence of this Section 4.08.
(a) Sellers' Confidentiality Covenant. Each Seller hereby agrees with
---------------------------------
Purchaser that such Seller will not, and will cause its Affiliates (other
than the Company) not to, at any time during the period commencing on the
date hereof and ending on the fourth anniversary of the Closing Date,
directly or indirectly, without the prior written consent of Purchaser,
disclose or intentionally use, in any way harmful to the Company, any
confidential or proprietary information involving or relating to the
Company; provided, however, that the information subject to the foregoing
provisions of this sentence shall be deemed not to include any information
known generally in the industry or is otherwise publicly available (other
than as a result of disclosure in violation hereof by such Seller or any
such Affiliate thereof). In addition, the provisions of this Section
4.08(a) shall not prohibit any disclosure required in connection with the
enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby or required by legal process or by
operation of applicable law; provided, however, that (i) the disclosing
Person shall first promptly (and, if practicable under the circumstances,
prior to disclosure) advise and consult with the Company and its counsel
concerning the information proposed to be disclosed, (ii) the Company shall
have the right to seek an appropriate protective order or other remedy
concerning the confidential information proposed to be disclosed and the
disclosing Person will cooperate with the Company to obtain such protective
order, and (iii) in the event that such protective order or other remedy is
not obtained by the Company, the disclosing Person will disclose only that
portion of the confidential
information which the disclosing Person is legally required to disclose,
and the disclosing Person will use its reasonable best efforts to obtain
assurances that confidential treatment will be accorded to such
information. The foregoing provisions of this Section 4.08(a) shall not
prohibit any confidential retention of records in connection with the
enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby or as required by law.
(b) Non-competition Covenant. By their execution and delivery of this
------------------------
Agreement, each of Sellers hereby confirms and agrees that, during the
period beginning on the Closing Date and ending on the third anniversary
thereof, such Seller will not, and will use his, or her, or its reasonable
best efforts to cause such Seller's Affiliates (other than the Company) not
to, directly or indirectly, or by or through any other Person, whether as a
shareholder, guarantor, employee, agent, partner, joint venturer,
consultant or otherwise, (i) engage or invest in, or consult with or to,
any business (other than the Company) which is the same as or substantially
similar to and which competes, directly or indirectly, with the Business in
the United States or in any other geographic area in which the Company
conducts business as of the date hereof or as of the Closing Date or (ii)
solicit or hire any employee, buying or selling representative or other
agent of the Company, assist in the solicitation or hiring of such Persons
by any other Person, or knowingly encourage any such employee,
representative or agent to terminate his or her relationship with the
Company, or (iii) solicit or encourage any customer, supplier, vendor or
distributor of the Company to terminate its relationship with them;
provided, however, that ownership or acquisition by any Seller and his, her
or its Affiliates of an aggregate of (calculated for such Seller and his or
her Affiliates, collectively) less than five percent (5%) of the
outstanding stock of any publicly traded company shall not in itself
constitute a violation of this Section 4.08(b).
(c) Enforcement. Each Seller acknowledges and agrees that, (i) it regards
-----------
the restrictions applicable to such Seller contained in this Section 4.08
as reasonable and designed to provide Purchaser with limited, legitimate
and reasonable protection against subsequent diminution of the value of the
Company attributable to any actions of any such Seller or any of its
Affiliates contrary to such covenants and (ii) because the legal remedies
of Purchaser may be inadequate in the event of a breach of, or other
failure to perform, any of the covenants and obligations set forth in this
Section 4.08, Purchaser may, in addition to obtaining any other remedy or
relief available to them (including, without limitation, consequential and
other damages at law), obtain specific enforcement of this Section 4.08 and
other equitable remedies. Each Seller also acknowledges and agrees that no
breach by Purchaser of, or other failure by Purchaser to perform, any of
the material covenants or obligations of Purchaser under this Agreement
required to be performed following the Closing or otherwise shall relieve
such Seller of any of its obligations under this Section 4.08.
SECTION 4.09. Preparation of Financial Statements; Consents.
---------------------------------------------
Sellers shall cause the Company to promptly cause its accountants, Stockman,
Kast, Xxxx & Xxxxxxx (the "Company Accountants") to (a) undertake preparation of
-------------------
financial statements for the Company
which meet the requirements of Regulation S-X under the Securities Act
applicable in respect of Purchaser's registration statement on form S-4 filed
with the Securities and Exchange Commission under the Securities Act on November
26, 1997 (File No. 333-41211)(the "Registration Statement")and (b) complete the
----------------------
work necessary for an interim period review under Statement of Accounting
Standards No. 71 in respect of the interim periods included in the financial
statements described in clause (a) above. In addition, Sellers shall cause the
Company to request (x) the Company Accountants, subject to appropriate
conditions, to deliver to Purchaser in connection with the Registration
Statement a "comfort letter" in accordance with Statement of Accounting
Standards No. 72 in respect of the financial statements of the Company included
in the Registration Statement and to consent to the inclusion in the
Registration Statement of those reports of the Company Accountants on such
financial statements as have been reported on by the Company Accountants and (y)
Deloitte & Touche LLC, subject to appropriate conditions, to consent to the
inclusion in the Registration Statement of those reports of the Company
Accountants on such financial statements as have been reported on by Deloitte &
Touche LLC. Purchaser shall reimburse Sellers for all out-of-pocket costs and
expenses incurred by the Company or Sellers in connection with the preparation
of such financial statements or the procurement of such consents
(collectively, the "Financial Statements Expenses"); provided, however, in the
----------------------------- -------- -------
event this Agreement is terminated in accordance with Section 9.01, the
Financial Statements Expenses shall be borne equally by Sellers and Purchaser.
SECTION 4.10. NTI Name. At Closing, the Sellers shall assign the
--------
trademark "NTI" to the Company and, within three days following the Closing,
NTI-CA shall change its name such that it does not involve "NTI" or any variant
thereof.
SECTION 4.11. Xxxxxx Group Assets. NTI-CA covenants and agrees that
-------------------
for the period commencing on the Closing Date and ending on March 31, 1999, it
will not distribute its assets, except to the Trusts. Each of the Trusts
covenants and agrees that for the period commencing on the Closing Date and
ending on March 31, 1999, it shall not liquidate or otherwise distribute assets
of such Trust, except to other members of the Xxxxxx Group; provided, however,
-------- -------
that nothing contained in this Section 4.11 shall prohibit the Xxxxxx Group from
paying expenses, or shall prohibit the Trusts from making such payments as are
required by the Code for purposes of retaining their status as Qualified
Terminable Interest Property Trusts or Qualified Subchapter S Trusts.
SECTION 4.12. Real Estate Leases. As soon as reasonably practicable
------------------
after the Closing, Sellers and Purchaser shall cause the Trusts and the Company,
respectively, to enter into amendments and restatements of the Leases, which
amendments and restatements shall be in substantially the form attached as
Exhibit 4.12, except that (i) the Leases with respect to the premises at 980
------------
Technology Court and 0000 Xxxxxx Xxxxx shall not contain the right of first
offer and purchase option provision set forth in Sections 54, 55 and 56 of
Exhibit 4.12, (ii) Section 8 of the Leases shall be modified as appropriate to
reflect the reasonable requests of the Lessor's (as defined in the Leases)
lender, (iii) Sellers shall use commercially reasonable efforts to obtain the
Lessor's lender's consent to providing subordination and non-disturbance
agreements from such lender, (iv) the Leases shall be modified, as
appropriate, to reflect the legal comments of local (Colorado) counsel with
respect to conveyancing procedures and other issues that are generally local in
nature and (v) the effectiveness of the amendments and restatements of the
Leases shall be subject to the consent (if required) of the Lessor's lender.
Sellers shall use commercially reasonable efforts to obtain any required consent
of the Lessor's lenders to such amendment and restatements.
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
TAX MATTERS
SECTION 6.01. Tax Indemnities. (a) From and after the Closing
---------------
Date, each Seller, jointly and severally among the members of the Xxxxxx Group,
and severally (and not jointly) as between the Xxxxxx Group and Xxxxxxxx, agrees
to indemnify and hold harmless Purchaser and the Company and their Affiliates
against all Taxes (including but not limited to, any obligation to contribute to
the payment of Tax determined on a consolidated, combined or unitary basis with
respect to a group of corporations that include or included the Company),
imposed on, and against any costs or expenses (including, without limitation,
reasonable attorney's fees) incurred by the Company with respect to (i) a breach
of the representations and warranties made in Section 2.16 and (ii) any taxable
period or portion thereof that ends on or before the Closing Date, except to the
extent that the amount of such Taxes (together with all Taxes as of the Closing
Date) does not exceed the amount reserved for as a current liability for Taxes
(and not including deferred Taxes reflecting timing differences between book and
Tax income liabilities in the Closing Balance Sheet (but taking into account
previous payments made after the Closing Date of Taxes included in the Closing
Balance Sheet) and taken into account in the Closing Net Worth ("Reserved
--------
Taxes"), except that, in the case of a breach of the representation contained in
-----
Section 2.16(f), Taxes reflecting timing differences between book and Tax income
liabilities shall be included); provided, however, that no indemnity shall be
-------- -------
provided under this Agreement for any Tax resulting from (x) an actual or deemed
election under Section 338 of the Code with respect to the transactions
contemplated by this Agreement; or (y) any transaction of the Company, occurring
on the Closing Date but after the Closing that is not in the ordinary course of
business. Sellers also shall indemnify Purchaser, the Company, and their
affiliates against any Taxes imposed on the receipt or accrual of any indemnity
payment and its Tax effects so that on an after-Tax basis, Purchaser receives an
indemnity for Taxes described in the preceding sentence. If the income Tax
deduction for the Xxxxxx/St. Xxxxx Payments and the Bonus Payments to be claimed
by the Company under Section 6.02 of this Agreement is disallowed in whole or in
part, Sellers shall promptly pay to Purchaser or the Company any Tax which is
payable by Purchasers or the Company due to the disallowance of these
deductions, to the extent that such deductions have been taken into account in
adjusting the Purchase Price or otherwise have been paid to the Sellers.
(b) From and after the Closing Date, Purchaser and the Company shall
indemnify each of Sellers and their affiliates against all Taxes imposed on or
with respect to the Company that are not subject to indemnification pursuant to
paragraph (a) of this Section 6.01, including, but not limited to, Taxes (i)
resulting from an actual or deemed election under Section 338 of the Code with
respect to the transactions contemplated by this Agreement or (ii) resulting
from any transaction of the Company occurring on the Closing Date but after the
Closing that is not in the ordinary course of business.
(c) Payment by the indemnitor of any amount due under this Section
6.01 shall be made within ten days following written notice by the indemnitee
that payment of such amounts to the appropriate tax authority is due it being
understood that in the case of a Tax that is contested in accordance with the
provisions of Section 6.04, payment of the Tax to the appropriate tax authority
will not be considered to be due (unless the applicable taxing authority
requires payment prior to a final determination or in order to contest the Tax)
earlier than the date a final determination to such effect is made by the
appropriate taxing authority or a court, provided that the indemnitor shall not
--------
be required to make any payment earlier than ten business days before it is due
to the appropriate tax authority. If any Seller receives an assessment or other
notice of Tax due with respect to the Company for any period ending on or before
the Closing Date for which Sellers are not responsible, in whole or in part,
pursuant to paragraph (a) of this Section 6.01 because all or a part of such Tax
does not exceed the amount of Reserved Taxes, and such Seller pays such Tax,
then Purchaser or the Company shall refund to such Seller, in accordance with
the first sentence of this Section 6.01(c), the amount of such Tax for which
such Seller is not responsible.
(d) For purposes of this Agreement, in the case of any Tax that is
imposed on a periodic basis and is payable for a period that begins before the
Closing Date and ends after the Closing Date, the portion of such Taxes payable
for the period ending on the Closing Date shall be (i) in the case of any Tax
based upon or measured by income or receipts, the amount which would be payable
if the taxable year ended on the Closing Date, except that exemptions,
allowances or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis, (ii) ad
--
valorem Taxes (including, without limitation, real and personal property Taxes)
-------
shall be accrued on a daily basis over the period for which the Taxes are
levied, or if it cannot be determined over what period the Taxes are being
levied, over the fiscal period of the relevant taxing authority, in each case
irrespective of the lien or assessment date of such Taxes, and (iii) franchise
and other privilege Taxes not measured by income shall be accrued on a daily
basis over the period to which the privilege relates.
SECTION 6.02. Preparation of Tax Returns. For the taxable year
--------------------------
ending on the Closing Date (or, with respect to any state or local Tax for which
the taxable year of the Company does not end on the Closing Date, the taxable
year that includes the Closing Date), the Company shall claim compensation
deductions that include the Xxxxxx/St. Andre Payments and the Bonus Payments,
except to the extent expressly not allowed by applicable law. To the extent
that such deductions result in a net operating loss for such taxable year, such
net operating loss shall be carried back to prior taxable years of the Company
to the extent
allowable under applicable law. Such Tax Returns shall be prepared on a basis
consistent with prior tax years unless a different treatment is required by an
intervening change in law, or in facts. The parties agree that if the Company is
permitted, but not required, under applicable state or local income or franchise
tax laws to treat the Closing Date as the last day of a Tax period, they will
treat the Tax period as ending on the Closing Date. NTI-CA shall prepare all
such Tax Returns to be filed on a combined, consolidated or unitary basis with
NTI-CA with respect to the Company for periods ending on or before the Closing
Date only. Sellers shall prepare all other Tax Returns of the Company relating
to any taxable years ending on or prior to the Closing Date. Such Tax Returns
prepared by Sellers shall be subject to the reasonable review of Purchaser, and
after such Tax Returns have been finalized shall be filed by the Company.
Purchaser and the Company shall reasonably cooperate with the Sellers, and at
Sellers' expense, in pursuing any claims for refund. Sellers shall pay or cause
to be paid when due and payable all Taxes with respect to the Company for any
taxable period ending on or before the Closing Date to the extent such Taxes
exceed the amount of Reserved Taxes. Purchaser shall prepare and timely file or
cause the Company to prepare and timely file all Tax Returns for which Sellers
are not responsible. Purchaser and the Company agree to notify Sellers in
writing prior to filing any return that reports any material item in a manner
that is materially inconsistent with prior years and to consider all comments
made by Sellers with respect thereto in good faith.
SECTION 6.03. Refunds and Tax Benefits. (a) Purchaser shall
------------------------
promptly pay to Sellers any refund of Taxes net of additional Tax and other
reasonable costs (including any interest paid or credited with respect thereto)
actually received by Purchaser or the Company (i) relating to taxable periods or
portions thereof ending on or before the Closing Date but not after the Closing
(other than carry-backs from periods after the Closing Date that result in a
refund for periods ending before the Closing Date), and (ii) were paid by
Sellers or the Company, except for any refund included in the Closing Date
Balance Sheet. Notwithstanding the foregoing, with respect to the net income
tax benefit from the payment of the Xxxxxx/St. Xxxxx Payments on the Closing
Date, the Purchaser shall pay to Sellers 75% of the entire amount of such net
income tax benefit (and shall retain 25% of the entire amount of such net income
tax benefit) when a refund claim is actually received in respect of carrying
back into a prior tax year the tax loss in the tax year ending on the Closing
Date attributable to the Xxxxxx/St. Andre Payments. The net income tax benefit
in respect of the Xxxxxx/St. Xxxxx Payments shall be deemed to be the excess of
(i) the income tax paid or payable in respect of periods through and including
the Closing Date assuming the Xxxxxx/St. Andre Payments were made, over (ii) the
income taxes paid or payable (after taking into account refunds received or to
be received) in respect of periods through and including the Closing Date after
taking into account the Xxxxxx/St. Xxxxx Payments. In the event that any refund
of Taxes for which a payment has been made pursuant to this Section 6.03(a) is
subsequently reduced or disallowed, Sellers shall indemnify and hold harmless
the payor or the Company for any additional Taxes or costs.
(b) Purchaser and the Company shall, upon actual realization, refund
to Sellers, any Tax benefit which they realize for a period or portion thereof
beginning after the Closing Date (a "Post-Closing Date Tax Benefit") that arose
-----------------------------
in connection with any underlying
adjustment that resulted in a payment by Sellers to Purchaser or the Company
under Section 6.01 (such as a timing adjustment resulting in a Tax deduction for
the Company for a period after the Closing Date), provided that such payment
shall not exceed the related payment actually made by Sellers under Section
6.01. A Post-Closing Date Tax Benefit will be considered to be actually realized
for purposes of this Section 6.03 at the time that it is reflected on a Tax
Return of Purchaser or the Company, provided, however, that if Purchaser and the
Company make a payment to Sellers for such a Post-Closing Date Tax Benefit that
is disallowed or reduced (or Purchaser or the Company do not actually realize
such Post-Closing Date Tax Benefit), then Sellers shall refund such payment to
Purchaser and the Company plus interest at the rate for Tax underpayments
prescribed in Section 6621(a)(2) of the Code and similar provision under state
or local law.
SECTION 6.04. Contests. (a) After the Closing, Purchaser shall
--------
promptly notify Sellers in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on Purchaser or
the Company which, if determined adversely to the taxpayer or after the lapse of
time would be grounds for indemnification under Section 6.01 hereof. Such
notice shall contain factual information (to the extent known to Purchaser or
the Company) describing the asserted Tax liability in reasonable detail and
shall include copies of any notice or other document received from any taxing
authority in respect of any such asserted Tax liability. The failure to give
any notice required by this Section 6.04(a) shall not relieve Sellers of any
obligations contained in this Article VI, except to the extent that the failure
to give such notice actually prejudices the rights of the Sellers.
(b) Purchaser and the Company shall reasonably cooperate with the
Sellers, at Sellers' expense, in causing the Company to contest any audit, claim
for refund and administrative or judicial proceeding involving any asserted
liability with respect to which indemnity may be sought under Section 6.01 (any
such audit, claim for refund or proceeding relating to an asserted Tax liability
is referred to herein as a "Contest"). However, neither Purchaser nor the
-------
Company may settle or compromise any asserted liability for which the Sellers
are liable under Section 6.01 over the objection of Sellers.
SECTION 6.05. Cooperation and Exchange of Information. Sellers and
---------------------------------------
Purchaser will provide each other with such cooperation and information as any
of them reasonably may request of another in filing any Tax Return, amended
return or claim for refund, determining a liability for Taxes or a right to a
refund of Taxes or participating in or conducting any audit or other proceeding
in respect of Taxes, consistent with this Agreement. Such cooperation and
information shall include providing copies of relevant Tax returns or portions
thereof, together with accompanying schedules, books and related work papers and
documents relating to rulings or other determinations by taxing authorities.
Each party shall make its employees available on a mutually convenient basis to
provide explanations of any documents or information provided hereunder. Each
party will retain all returns, schedules and work papers and all material
records or other documents relating to Tax matters of the Company for its
taxable period first ending after the Closing Date and for all prior taxable
periods until the later of (i) the expiration of the statute of limitations of
the taxable periods to which such returns and other documents relate, without
regard to extensions except to the extent notified by another party in writing
of such extensions for the respective Tax periods, or
(ii) eight years following the due date (without extension) for such returns.
Any information obtained under this Section 6.05 shall be kept confidential,
except as may be otherwise necessary in connection with the filing of returns or
claims for refund or in conducting an audit or other proceeding.
SECTION 6.06. Conveyance Taxes. Purchaser and Sellers shall equally
----------------
share liability for and to pay all sales, transfer, stamp, real property
transfer or gains and similar Taxes incurred as a result of the sale of the
Shares contemplated hereby.
SECTION 6.07. Miscellaneous. (a) The parties agree to treat all
-------------
payments made under this Article VI or under Article VIII as adjustments to the
purchase price for Tax purposes, unless provided for otherwise by applicable
law.
(b) Except as expressly provided otherwise and except for the
representations contained in Section 2.16 of this Agreement, this Article VI
shall be the sole provision governing Tax matters and indemnities therefor under
this Agreement.
(c) For purposes of this Article VI, all references to Purchaser,
Sellers, and the Company include successors thereto.
(d) All indemnification obligations of Sellers under this Article VI
shall be joint and several obligations among the members of the Xxxxxx Group,
and several (and not joint) as between the Xxxxxx Group and Xxxxxxxx and shall
be pro-rata based on each party's Seller's Percentage.
SECTION 6.08. Survival of Obligations. The obligations of the
-----------------------
parties set forth in this Agreement relating to Taxes (including, without
limitation, the representations and warranties contained in Section 2.16) shall,
except as otherwise agreed to in writing by the parties, be unconditional and
absolute and shall remain in effect without limitation as to time or amount of
recovery by any party hereto until the date 60 days after the expiration of the
applicable statute of limitations governing the Tax to which such obligations
relate (after giving effect to any agreement extending or tolling such statute
of limitations).
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of Sellers. The obligations
------------------------------------
of Sellers to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment or waiver, at or prior to the Closing, of each of
the following conditions:
(a) Representations and Warranties; Covenants. (i) The
-----------------------------------------
representations and warranties of Purchaser contained in this Agreement
shall be true and correct as of the Closing, with the same force and effect
as if made as of the Closing (or, in the case of
representations and warranties of Purchaser which address matters only as
of a particular date, as of such date), except where the failure to be so
true and correct would not have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated by this Agreement;
(ii) the covenants and agreements contained in this Agreement to be
complied with by Purchaser at or prior to the Closing shall have been
complied with in all material respects and (iii) Sellers shall have
received a certificate of Purchaser as to the matters set forth in clauses
(i) and (ii) above signed by a duly authorized officer of Purchaser; and
(b) No Order. No United States or state governmental authority or
--------
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order which is in effect
and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of
such transactions; provided, however, that the parties hereto shall use
-------- -------
their best efforts to have any such order or injunction vacated.
(c) Opinion of Counsel. Purchaser shall have furnished Sellers with a
------------------
favorable opinion of Ropes & Xxxx, addressing the matters set forth in
Section 7.01(c).
SECTION 7.02. Conditions to Obligations of Purchaser. The
--------------------------------------
obligations of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
-----------------------------------------
representations and warranties of Sellers contained in this Agreement shall
be true and correct as of the Closing, with the same force and effect as if
made as of the Closing (or, in the case of representations and warranties
of Sellers which address matters only as of a particular date, as of such
date), except where the failure to be so true and correct would not have a
Material Adverse Effect or have a material adverse effect on the ability of
Sellers to consummate the transactions contemplated by this Agreement; (ii)
the covenants and agreements contained in this Agreement to be complied
with by Sellers at or prior to the Closing shall have been complied with in
all material respects, except where the failure to so comply would not have
a Material Adverse Effect or have a material adverse effect on the ability
of Sellers to consummate the transactions contemplated by this Agreement;
and (iii) Purchaser shall have received a certificate from each of Sellers
as to the matters set forth in clauses (i) and (ii) above signed by a duly
authorized officer or trustee of each such Seller or from such Seller, if a
natural person;
(b) No Order. No United States or state governmental authority or
--------
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order which is in effect
and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of
such transactions; provided, however, that the parties hereto shall use
-------- -------
their best efforts to have any such order or injunction vacated.
(c) Financing. Purchaser shall have obtained an incremental
---------
$25,000,000 in Borrowings pursuant to Section 5.2 of the Chase Credit
Agreement in order to fund a portion of the Purchase Price.
(d) Xxxxxxxx Employment Agreement. Xxxxxxxx shall have entered into
-----------------------------
the Xxxxxxxx Employment Agreement.
(e) Material Adverse Effect. There shall have been no Material
-----------------------
Adverse Effect from the date hereof until the Closing Date.
(f) Resignation of Directors. Purchaser shall have received the
------------------------
resignations, effective as of the Closing, of all the directors of the
Company.
(g) Consents, etc. Sellers shall have secured written consents or
-------------
waivers for all agreements identified in Section 2.06 of the Disclosure Schedule
and all consents, approvals, authorizations and other actions identified in
Section 2.07 of the Disclosure Schedule, in each case reasonably satisfactory in
form and substance to Purchaser, necessary to permit the consummation of the
transactions contemplated hereby.
(h) Releases. The Company shall have received releases executed by
--------
each of Xxxx Xxxxxx and Xxxxx St. Xxxxx regarding the obligations of the Company
under the letter agreements between each of Xxxx Xxxxxx and Xxxxx St. Xxxxx and
the Company, dated as of May 12, 1992, as amended by agreements, dated as of
December 19, 1997.
(i) Opinions of Counsel. Sellers shall have furnished Purchaser with
-------------------
favorable opinions of Shearman & Sterling and such other counsel as shall be
reasonably satisfactory to Purchaser, addressing the matters set forth in
Exhibit 7.02(i).
(j) Change of Name. NTI-CA shall have executed an agreement assigning
--------------
the trademark "NTI" to Purchaser and shall have taken all corporate action
necessary other than the filing of the amendment to its articles of
incorporation, to change its name as of, upon the filing of the amendment to its
articles of incorporation, as of December 22, 1997.
(k) Stock Pledge. Xxxxxxxx shall have entered into the Stock Pledge.
------------
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival. Subject to the limitations and other
--------
provisions of this Agreement, the representations and warranties, of the parties
hereto contained herein shall survive the Closing and shall remain in full force
and effect until March 31, 1999; provided that (i) the representations and
warranties in Sections 2.12 (provided that Sellers' liability for a
breach of the representations and warranties contained in Section 2.12 shall
only remain in full force and effect with respect to willful or reckless
violations of applicable law, rule, regulation, order, judgment or decree) and
2.15, and claims based on representations set forth in Article II which were
fraudulently made by Sellers, shall remain in full force and effect until the
expiration of the respective statute of limitations, (ii) the representations
and warranties in Sections 2.03 and the fourth sentence of Section 2.04 shall
survive indefinitely and (iii) the survival of the representations and
warranties in Section 2.16 shall be governed exclusively by Section 6.09.
SECTION 8.02. Indemnification by Purchaser. (a) Purchaser agrees,
----------------------------
subject to the other terms and conditions of this Agreement, to indemnify
Sellers against and hold Sellers harmless from all Losses to Sellers arising out
of (i) the breach of any representation, warranty, covenant or agreement of
Purchaser herein (other than Article VI, it being understood that the sole
remedy for breach thereof shall be pursuant to Article VI) and (ii) the conduct
of the Business by Purchaser following the Closing. Anything in Section 8.01
to the contrary notwithstanding, no claim may be asserted nor any action
commenced against Purchaser (x) for breach of any representation or warranty
contained herein, unless written notice of such claim or action is received by
Purchaser describing in detail the facts and circumstances with respect to the
subject matter of such claim or action on or prior to the date on which the
representation or warranty on which such claim or action is based ceases to
survive as set forth in Section 8.01, irrespective of whether the subject matter
of such claim or action shall have occurred before or after such date or
(y) for breach of any covenant or agreement contained herein to be performed
prior to the Closing, unless written notice of such claim or action is received
by Purchaser describing in detail the facts and circumstances with respect to
the subject matter of such claim or action on or prior to March 31, 1999 and (z)
for breach of any covenant contained in Section 4.02(b), 4.02(c) or 4.07 unless
written notice of such claim or action is received by Purchaser describing in
detail the facts and circumstances with respect to the subject matter of such
claim or action on or prior to the 90th day after any Seller becomes aware of
the facts or circumstances constituting such breach.
(b) The indemnification obligations of Purchaser pursuant to Section
8.02(a)(i) (other than in respect of a Seller Special Claim) shall not be
effective until the aggregate dollar amount of all Losses which would otherwise
be indemnifiable pursuant to Section 8.02(a)(i) exceeds $450,000 ("Purchaser's
-----------
Threshold Amount"), and then only to the extent such aggregate amount exceeds
----------------
Purchaser's Threshold Amount; provided, however, that the indemnification
-------- -------
obligations of Purchaser pursuant to Section 8.02(a)(i) shall be effective from
the first dollar with respect any Losses arising out of a breach of the
representations and warranties set forth in Section 3.05. In addition, no claim
may be made against Purchaser for indemnification pursuant to Section 8.02(a)(i)
with respect to any individual item of Loss (other than Losses arising from a
breach of the representations and warranties set forth in Section 3.05), unless
such item exceeds $10,000, nor shall any such item be applied to or considered
part of Purchaser's Threshold Amount (it being understood that substantially
similar Losses arising out of or resulting from a breach of the same
representation or warranty based on a substantially similar set of facts and
circumstances shall be considered a single item of Loss). The indemnification
obligations of Purchaser pursuant to Section 8.02(a)(i) shall be
effective only until the dollar amount paid in respect of the Losses indemnified
against under Section 8.02(a)(i) (other than in respect of a Seller Special
Claim) aggregates to an amount equal to $6,000,000. A "Seller Special Claim"
--------------------
shall mean a claim based on representations set forth in Article III which were
fraudulently made by Purchaser or for a breach of any covenant or agreement.
(c) Payments by Purchaser pursuant to Section 8.02(a) shall be limited
to the amount of any Losses that remains after deducting therefrom (i) any Tax
benefit to Sellers or any affiliate thereof net of any additional Tax costs,
(ii) any insurance proceeds and any indemnity, contribution or other similar
payment if and when actually received by Sellers or any affiliate thereof from
any third party with respect thereto and (iii) any adjustments to the Purchase
Price pursuant to Section 1.04 with respect to the subject matter in dispute
(the limitations set forth in clauses (i), (ii) and (iii) in the preceding
sentence shall also apply to the determination of the amount of any Loss for
purposes of Section 8.02(b)). If a payment is made by Purchaser in accordance
with this Section 8.02, and (A) if in a subsequent taxable year a Tax benefit is
realized by Sellers (that was not previously taken into account to reduce an
amount otherwise payable by Purchaser under Section 8.02), Sellers shall pay to
Purchaser at the time of such realization the amount of such Tax benefit to the
extent that the Tax benefit would have resulted in a reduction in the amount
paid by Purchaser under Section 8.02 if the Tax benefit had been obtained in the
year of such payment and (B) if subsequently any Seller or any affiliate of
Seller receives insurance proceeds or indemnity, contribution or other similar
payments from any third party (that was not previously taken into account to
reduce the amount otherwise payable by Purchaser under Section 8.02), in respect
of the Loss for which such payment was made, Sellers shall pay to Purchaser at
the time that such proceeds or payments are received by Sellers or any affiliate
thereof the amount of such proceeds or payments to the extent that such proceeds
or payments would have resulted in a reduction in the amount paid by Purchaser
under this Section 8.02 if the proceeds or payments had been received by Sellers
or any affiliate thereof at the time the amount of Purchaser's obligations with
respect thereto under Section 8.02 were initially determined. A Tax benefit
will be considered to be realized for purposes of this Section 8.02 at the time
and to the extent that it is reflected on a Tax Return of any Seller and it
actually results in a reduction of Taxes otherwise then payable. Purchaser
shall indemnify Sellers if any such Tax benefit is disallowed or subsequently
reduced.
(d) Sellers hereby acknowledge and agree that, from and after the
Closing, their sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article VIII and in Article VI. In
furtherance of the foregoing, Sellers hereby waive, to the fullest extent
permitted under applicable law, any and all other rights, claims and causes of
action they may have, from and after the Closing, against Purchaser or its
officers, directors, employees, agents, representatives and affiliates relating
to the subject matter of this Agreement.
(e) Except as set forth in this Agreement, Purchaser is not making any
representation, warranty, covenant or agreement with respect to the matters
contained herein. Notwithstanding anything to the contrary contained in this
Agreement, no breach of any
representation, warranty, covenant or agreement contained herein shall give rise
to any right on the part of Sellers, after the consummation of the purchase and
sale of the Shares contemplated by this Agreement, to rescind this Agreement or
any of the transactions contemplated hereby.
(f) Sellers shall take all reasonable steps to mitigate their
Losses upon and after becoming aware of any event which could reasonably be
expected to give rise to any Losses.
SECTION 8.03. Indemnification by Sellers. (a) Each Seller, as a
--------------------------
joint and several obligation among the members of the Xxxxxx Group, and as a
several (and not joint) obligation as between the Xxxxxx Group and Xxxxxxxx,
agrees, subject to the other terms and conditions of this Agreement, to
indemnify the Company and Purchaser against and hold them harmless from all
Losses to the Company and Purchaser to the extent arising out of (i) the breach
of any representation or warranty (as each such representation or warranty would
read if all qualifications as to materiality (including, without limitation, as
to Material Adverse Effect) were deleted therefrom), or covenant or agreement of
Sellers herein (other than Section 2.16 and Article VI, it being understood that
the sole remedy for breach of such provisions shall be pursuant to Article VI),
(ii) any liability of NTI-CA existing (whether or not contingent) at the time of
the Section 351 transfer dated April 1, 1991 from NTI-CA to the Company,
including without limitation liability related to the matters disclosed under
the caption "Charleston Road California Site" in Section 2.20 of the Disclosure
Schedule, (iii) any obligation owing to Xxxx Xxxxxx or Xxxxx St. Xxxxx under the
respective letters dated May 12, 1992 between the Company and each of them or
any successor agreement or (iv) liabilities related to the matters disclosed
under the caption "Galley Road Dump Site" on Section 2.20 of the Disclosure
Schedule. Anything in Section 8.01 to the contrary notwithstanding, no claim
may be asserted nor any action commenced against Sellers (x) for breach of any
representation or warranty contained herein, unless written notice of such claim
or action is received by Sellers describing in detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation or warranty on which such claim or
action is based ceases to survive as set forth in Section 8.01, irrespective of
whether the subject matter of such claim or action shall have occurred before or
after such date or (y) for breach of any covenant or agreement contained herein
to be performed prior to the Closing, unless written notice of such claim or
action is received by Sellers describing in detail the facts and circumstances
with respect to the subject matter of such claim or action on or prior to March
31, 1999 and (z) for breach of any covenant contained in Section 4.02(c), 4.07
or 4.08 unless written notice of such claim or action is received by Sellers
describing in detail the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the 90th day after Purchaser
becomes aware of the facts or circumstances constituting such breach.
(b) The indemnification obligations of Sellers pursuant to clauses
(i) and (iv) of Section 8.03(a) (other than in respect of a Special Claim) shall
not be effective until the aggregate dollar amount of all Losses which would
otherwise be indemnifiable pursuant thereto exceeds $450,000 ("Sellers'
--------
Threshold Amount"), and then only to the extent such aggregate
----------------
amount exceeds Sellers' Threshold Amount. In addition, no claim may be made
against Sellers for indemnification pursuant to clauses (i) and (iv) of Section
8.03(a) (other than in respect of a Special Claim) with respect to any
individual item of Loss, unless such item exceeds $10,000, nor shall any such
item be applied to or considered part of Sellers' Threshold Amount (it being
understood that substantially similar Losses arising out of or resulting from a
breach of the same representation or warranty based on a substantially similar
set of facts and circumstances shall be considered a single item of Loss). The
indemnification obligations of Sellers pursuant to clauses (i) and (iv) of
Section 8.03(a) (other than in respect of a Special Claim) shall be effective
only until the aggregate dollar amount paid in respect of the Losses indemnified
against under this Section 8.03 aggregates to an amount equal to $6,000,000. In
no event shall the Xxxxxx Group, on the one hand, and Xxxxxxxx, on the other
hand, be obligated to make indemnification payments to Purchaser pursuant to
clauses (i) and (iv) of Section 8.03(a) (other than in respect of a Special
Claim) once the aggregate of all such payments made by the Xxxxxx Group or
Xxxxxxxx, as the case may be, equals such party's or group's pro-rata share
(based on the Sellers' Percentages) of $6,000,000. To the extent that Purchaser
seeks indemnification from Sellers under the provisions of this Article VIII,
Purchaser shall use commercially reasonable efforts to pursue such claim for
indemnification against each of the Xxxxxx Group and Xxxxxxxx on the same basis
and any settlement entered into by Purchaser with the Xxxxxx Group or Xxxxxxxx,
as the case may be, shall be offered to the other party on the same basis. For
purposes of this Section 8.03, a "Special Claim" shall mean a claim based on
-------------
representations set forth in Article II which were fraudulently made by Sellers
or for a breach of any covenant or agreement or a representation or warranty
contained in Section 2.03, the fourth sentence of Section 2.04, Section 2.12 or
Section 2.15; provided, however, that a claim for a breach of a representation
or warranty contained in Section 2.12 shall only be a Special Claim to the
extent that it related to a reckless or willful violation by the Company or any
employee of applicable law, rule, regulation, order, judgment or decree.
(c) Payments by Sellers pursuant to Section 8.03(a) shall be
limited to the amount of any Losses that remains after deducting therefrom (i)
any Tax benefit to Purchaser (including the Company) net of any additional tax
costs, (ii) any insurance proceeds and any indemnity, contribution or other
similar payment if and when actually received by Purchaser or any affiliate from
any third party with respect thereto and (iii) any adjustments to the Purchase
Price pursuant to Section 1.04 with respect to the subject matter in dispute. If
a payment is made by any Seller in accordance with this Section 8.03, and (A) if
in a subsequent taxable year a Tax benefit is realized by Purchaser, the Company
or any affiliate of Purchaser, the Company or any Person with which the Company
files a consolidated, combined or unitary Tax return (that was not previously
taken into account to reduce an amount otherwise payable by Sellers under
Section 8.03), Purchaser, the Company or any affiliate of Purchaser in respect
of the Loss for which such payment was made, the Company or any Person with
which the Company files a consolidated, combined or unitary Tax Return shall pay
to such Seller at the time of such realization the amount of such Tax benefit to
the extent that the Tax benefit would have resulted in a reduction in the amount
paid by Sellers under this Section 8.03 if the Tax benefit had been obtained in
the year of such payment or (B) if subsequently Purchaser or the Company or any
affiliate of Purchaser or the Company receives insurance proceeds or indemnity,
contribution or other similar payments from any third party (that was not
previously taken into account to reduce the amount otherwise payable by Sellers
under Section 8.03) in respect of the Loss for which such payment was made, the
Company shall pay to Sellers at the time that such proceeds or payments are
received by Purchaser, the Company or any affiliate of Purchaser the amount of
such proceeds or payments to the extent that such proceeds or payments would
have resulted in a reduction in the amount paid by Sellers under this Section
8.03 if the such proceeds or payments had been received by Purchaser, the
Company or any affiliate of Purchaser at the time the amount of Sellers
obligations with respect thereto under Section 8.03 were initially determined.
A Tax benefit will be considered to be realized for purposes of this Section
8.03 at the time and to the extent that it is reflected on a Tax Return of
Purchaser, the Company or any affiliate of Purchaser, the Company or any Person
with which Purchaser or the Company files a consolidated, combined or unitary
Tax Return and actually results in a reduction in Tax otherwise then payable.
Sellers shall indemnify Purchaser and the Company if any such Tax benefit is
disallowed or subsequently reduced.
(d) Purchaser hereby acknowledges and agrees that, from and after
the Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article VIII and in Article VI. In
furtherance of the foregoing, Purchaser hereby waives, from and after the
Closing, to the fullest extent permitted under applicable law, any and all other
rights, claims and causes of action it (or, after the Closing, the Company) may
have against Sellers or their officers, directors, employees, agents,
representatives and affiliates relating to the subject matter of this Agreement.
(e) Except as set forth in this Agreement, Sellers are not making
any representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of Purchaser, after the consummation of the
purchase and sale of the Shares contemplated hereby, to rescind this Agreement
or any of the transactions contemplated hereby.
(f) Purchaser shall take and shall cause the Company to take all
reasonable steps to mitigate their Losses upon and after becoming aware of any
event which could reasonably be expected to give rise to any Losses.
SECTION 8.04. Indemnification Procedures. (a) For purposes of this
--------------------------
Section 8.04, a party against which indemnification may be sought is referred to
as the "Indemnifying Party" and the party which may be entitled to
------------------
indemnification is referred to as the "Indemnified Party".
-----------------
(b) The Indemnified Party agrees to give the Indemnifying Party
written notice of any claim, assertion, event or proceeding made against it by a
third party as to which it may request indemnification hereunder or as to which
Purchaser's Threshold Amount or Sellers' Threshold Amount, as the case may be,
may be applied within 30 days after the receipt by the Indemnified Party of
notice of any claim against such Indemnified Party or the commencement of any
action or proceeding against such Indemnified Party. The failure to
give any notice required by this Section 8.04(b) shall not relieve any
Indemnifying Party of any obligations contained in this Article VIII, except to
the extent that the failure to give such notice actually prejudices the rights
of such Indemnifying Party. [With respect to a claim by or in respect of a
person not party to this Agreement, the Indemnifying Party shall, after giving
prompt notice to the Indemnified Party acknowledging the Indemnifying Party's
obligation under this Article VIII to indemnify the Indemnified Party in respect
of such claim have the right to direct, through counsel of its own choosing, the
defense or settlement of any such claim or proceeding at its own expense;
provided, however, in the event that, subsequent to the Indemnifying Party's
-------- -------
acknowledgment of its indemnification obligation under this Article VIII, the
Indemnifying Party discovers additional or different facts which cause the
Indemnifying Party to determine that it is not obligated under this Article VIII
to indemnify the Indemnified Party therefore, the Indemnifying Party shall give
the Indemnified Party prompt written notice of such determination and shall
relinquish the defense or settlement of such claim to the Indemnified Party; and
provided, further, that except for the settlement of a claim that involves no
--------
obligation of the Indemnified Party other than the payment of money for which
indemnification is provided hereunder (in which case the Indemnifying Party may
effect such settlement in its discretion), the Indemnifying Party shall not
settle or compromise any claim without the prior written consent of the
Indemnified Party, which consent will not be unreasonably withheld; and
provided, further, that the Indemnifying Party may not consent to entry of any
--------
judgment or enter into any settlement in respect of a claim which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to the Indemnified Party of a release from all liability in respect of such
claim. If the Indemnifying Party elects to assume the defense of any such claim
or proceeding, the Indemnified Party may participate in such defense, but in
such case the expenses of the Indemnified Party shall be paid by the Indemnified
Party. The Indemnified Party shall provide the Indemnifying Party with access
to its records and personnel relating to any such claim, assertion, event or
proceeding during normal business hours and shall otherwise cooperate with the
Indemnifying Party in the defense or settlement thereof, and the Indemnifying
Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket
expenses in connection therewith. Notwithstanding the foregoing, if the
Indemnifying Party shall fail to defend, or if, after commencing or undertaking
any such defense, the Indemnifying Party fails to prosecute or withdraws from
such defense, or, if in the reasonable judgment of the Indemnified Party (i)
there is a conflict between the positions of the Indemnifying Party and the
Indemnified Party in conducting the defense of such claim or (ii) in the case
where Purchaser or the Company is the Indemnified Party, considerations relating
to the operation of the Company that, in the reasonable judgment of Purchaser,
would materially adversely affect the business, operations or profitability of
the Company would require the Indemnified Party to defend or respond in a manner
different from that recommended by the Indemnifying Party, the Indemnified Party
shall have the right to undertake the defense or settlement thereof, at the
Indemnifying Party's expense, and the Indemnifying Party shall be entitled to
participate in the defense of such claim, the cost of such participation to be
at its own expense. The Indemnified Party may compromise or settle any claim
against it at any time; provided, however, that the Indemnified Party shall not
-------- -------
settle or compromise any claim without the prior written consent of the
Indemnifying Party; provided, further, that if in
-------- -------
the reasonable judgment of the Indemnified Party it would be materially harmed
or otherwise materially prejudiced by not entering into a proposed settlement or
compromise and the Indemnifying Party withholds consent to such settlement or
compromise, the Indemnified Party may enter into such settlement or compromise
and such settlement or compromise shall not be conclusive as to, or otherwise be
used to establish, the liability of the Indemnifying Party to the Indemnified
Party or any third party.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at any
-----------
time prior to the Closing:
(a) by the mutual written consent of Sellers and Purchaser;
(b) either by Sellers, acting collectively, or Purchaser, if any
Governmental Authority with jurisdiction over such matters shall have
issued a Governmental Order restraining, enjoining or otherwise prohibiting
the sale of the Shares hereunder and such order, decree, ruling or other
action shall have become final and unappealable; provided, however, that
-------- -------
the provisions of this Section 9.01(b) shall not be available to any party
unless such party shall have used its best efforts to oppose any such
order, judgment, injunction, decree, stipulation, determination or award or
to have such order, judgment, injunction, decree, stipulation,
determination or award vacated or made inapplicable to the transactions
contemplated by this Agreement; or
(c) either by Sellers, acting collectively, or Purchaser, if the
Closing shall not have occurred prior to January 31, 1998; provided,
--------
however, that the right to terminate this Agreement under this Section
-------
9.01(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur prior to such date.
Time shall be of the essence in this Agreement.
SECTION 9.02. Effect of Termination. In the event of termination of
---------------------
this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except (a) as set forth in Section 4.03, Section 11.01 and 11.03 and (b) that
nothing herein shall relieve either party from liability for any willful breach
hereof.
SECTION 9.03. Waiver. At any time prior to the Closing, any party
------
may (a) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby.
ARTICLE X
DEFINITIONS
SECTION 10.01. Certain Defined Terms. As used in this Agreement,
---------------------
the following terms shall have the following meanings:
"Adjacent Property" The term "Adjacent Property" shall mean the land
-----------------
owned by the Trusts and known as Xxx 0, XxxXxxx Xxx. Xx. 0, a replat of Xxx 0,
G&H Sub. in El Paso County, in the State of Colorado, consisting of
approximately 5.54 acres of land.
"Affiliate" The term "Affiliate" shall mean, as to the Company (or, if
---------
another Person is specified, as to such other specified Person), (i) each Person
directly or indirectly controlling, controlled by or under the direct or
indirect common control with the Company (or such specified Person), including
without limitation, in the case of the Company, each Seller, (ii) any Person who
is or has been within two years of the time in question a director or direct or
indirect beneficial holder of at least 5% of any class of the outstanding
capital stock of any Person referred to in clause (i) above and the members of
the immediate family of each such director or holder (and, if such specified
Person is a natural person, of such specified Person), and (iii) each Person of
which the Company (or such specified Person) or an Affiliate (as defined in
clauses (i) or (ii) above) thereof shall, directly or indirectly, beneficiary
own at least 5% of any class of outstanding capital stock or other evidence of
beneficial interest.
"Agreement" means this Stock Purchase Agreement, dated as of December
---------
19, 1997, among Sellers and Purchaser (including the Disclosure Schedule) and
all amendments hereto made in accordance with Section 10.10.
"Audited Financial Statements" means the audited balance sheet, income
----------------------------
statement and statement of cash flows of the Company as of and for the 12 month
period ended March 31, 1997.
"Bain Funds Commitment Letter" means the financing commitment letter,
----------------------------
dated November 19, 1997, pursuant to which Xxxx Capital Fund V, L.P. and Xxxx
Capital Fund V-B, L.P. have committed to purchase an aggregate of $15,000,000 of
equity in Purchaser to fund a portion of the Purchase Price.
"Bonus Payments" means the "successful transaction" bonus payments in
--------------
the aggregate amount of $300,000 to be paid by the Company to the employees of
the Company specified on Schedule 10.01 in connection with the closing of the
transactions contemplated by this Agreement.
"Books and Records" means all books of account and other financial
-----------------
records pertaining to the Company.
"Business" means the business of the Company as conducted as of the
--------
date hereof.
"Business Day" means any day that is not a Saturday, a Sunday or other
------------
day on which banks are required or authorized by law to be closed in the City of
New York.
"Chase Credit Agreement" means the Credit Agreement, dated as of
----------------------
October 28, 1997, by and among Purchaser, The Chase Manhattan Bank and the banks
and other financial institutions or entities from time to time party thereto,
pursuant to which Purchaser is entitled to borrow up to $25,000,000 in order to
fund a portion of the Purchase Price, subject to the conditions set forth in
Section 5.2 of the Chase Credit Agreement.
"Closing Net Worth" means total assets minus total liabilities of the
-----------------
Company as shown on the Closing Balance Sheet; provided, however, regardless of
-------- -------
whether such items are reflected on the Closing Balance Sheet, for purposes of
the Closing Net Worth calculation, the Closing Net Worth shall be calculated
without regard to (i) any liability in respect of the Xxxxxx/St. Xxxxx Payments
or the Bonus Payments, and (ii) any asset or reduction in liability in respect
of any income tax deduction or other Tax benefit relating to the Xxxxxx/St.
Andre Payments (it being understood that the calculation of Closing Net Worth
shall include an asset or reduction in liability in respect of an income tax
deduction for the Bonus Payments).
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Disclosure Schedule" means the Disclosure Schedule dated as of the
-------------------
date hereof delivered to Purchaser by Sellers.
"Encumbrance" means any security interest, pledge, mortgage, lien,
-----------
charge, adverse claim of ownership or use, or other encumbrance of any kind.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Financial Statements" means, collectively, the Audited Financial
--------------------
Statements and the Interim Financial Statements.
"GAAP" means United States generally accepted accounting principles in
----
effect from time to time applied consistently throughout the time period
involved.
"Governmental Authority" means any government, any governmental
----------------------
entity, department, commission, board, agency or instrumentality, and any court,
tribunal, or judicial or arbitral, body, whether federal, state or local.
"Governmental Order" means any order, judgment, injunction, decree,
------------------
stipulation, determination or award entered by or with any Governmental
Authority.
"Xxxxxx/St. Xxxxx Payments" means the payments to be made by the
-------------------------
Company to Xxxx Xxxxxx and Xxxxx St. Xxxxx, pursuant to letters between the
Company and each of them, dated as of December 19, 1997, which letters amend and
restate the letters between the Company and each of Xxxx Xxxxxx and Xxxxx St.
Xxxxx, each dated May 12, 1992.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
-------
1976, as amended, and the rules and regulations thereunder.
"Interim Financial Statements" means the unaudited balance sheet,
----------------------------
income statements and statement of cash flows of the Company as of and for the
six month period ended September 29, 1997.
"knowledge of Sellers" or "Sellers' knowledge" means the actual
-------------------- ------------------
knowledge after reasonable inquiry of each Seller, each of the directors of the
Company or NTI-CA, and each of the following employees of the Company: Xxxxx
Xxxxxxxx, Xxxxx St. Xxxxx and Xxxxx Xxxxxx.
"Losses" of a Person means any and all losses, liabilities, damages,
------
claims, awards, judgments, costs and expenses (including, without limitation,
reasonable attorney's fees) actually suffered or incurred by such Person.
"Xxxxxxxx Employment Agreement" means the Employment Agreement, dated
-----------------------------
as of December 19, 1997, between Purchaser and Xxxxxxxx.
"Material Adverse Effect" means any effect or change that does have,
-----------------------
or would reasonably be expected to have, a material adverse affect on the
business, financial condition, operating results or assets of the Company or the
Business.
"Net Debt Obligations" means (A) all obligations of the Company in
--------------------
respect of long-term debt obligations (including the current portion thereof),
indebtedness for borrowed money, lines of credit, notes payable and capital
leases (but excluding therefrom any operating leases of the Company), together
with all accrued and unpaid interest thereon through the Closing Date and all
prepayment penalties and other obligations due in respect thereof upon repayment
and termination at the Closing and the Transaction Costs of the Company less (B)
all cash and cash equivalents held by the Company.
"Person" means any individual, partnership, firm, corporation,
------
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Exchange Act.
"Permitted Encumbrances" means (i) Encumbrances for inchoate
----------------------
mechanics' and materialmen's liens for construction in progress and workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of the Business which in the
aggregate have a value of less than $25,000, (ii) Encumbrances for Taxes not yet
payable and for Taxes being contested in good faith, (iii) Encumbrances arising
out of, under or in connection with this Agreement, (iv) Encumbrances in
connection with debt obligations of the Company as described in clause (A) of
the definition of Net Debt Obligations and (v) Encumbrances and imperfections of
title the existence of which would not materially affect the use of the property
subject thereto, consistent with past practice.
"Premerger Notification Rules" means the rules promulgated pursuant to
----------------------------
the HSR Act.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Stock Pledge" means the Stock Pledge Agreement, dated as of December
------------
19, 1997, between Xxxxxxxx and Purchaser.
"Tax" or "Taxes" means all income, gross receipts, sales, use,
--- -----
employment, franchise, profits, property, transfer or other taxes, fees, stamp
taxes and duties, assessments or charges of any kind whatsoever (whether payable
directly or by withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto.
"Working Capital" means current assets of the Company minus current
---------------
liabilities of the Company, as reflected on the Closing Balance Sheet; provided,
however, that regardless of whether such items are reflected on the Closing
Balance Sheet, the Working Capital shall be calculated without regard to (i) any
liability in respect to the Xxxxxx/St. Xxxxx Payments or the Bonus Payments, and
(ii) any asset or reduction in liability in respect of any income tax deduction
or other Tax Benefit relating to the Xxxxxx/St. Andre Payment or the Bonus
Payments.
SECTION 10.02. Other Defined Terms. Each of the following terms has
-------------------
the meaning specified in the Section set forth opposite such term:
TERM SECTION
---- -----------
Actions 2.11
Assets 2.22
BARS 2.17
Balance Sheet Date 2.10(a)
Closing 1.03(a)
Closing Balance Sheet 1.04(c)
Closing Date 1.03(a)
Company recitals
Company Accountants 4.09
Confidentiality Agreement 4.03
Contest 6.04(b)
Xxxxxx Group preamble
Xxxxxx Marital Trust preamble
Xxxxxx Survivor's Trust preamble
Estimated Net Debt Obligations 1.04(b)
Estimated Xxxxxx/
St. Andre Payments 1.04(b)
Estimated Net Worth Differential 1.04(b)
Financial Statement Expenses 4.09
401(k) Plan 2.15(d)
Xxxxxx/St. Xxxxx Escrow 1.03(d)
Independent Accounting Firm 1.04(e)
IRS 2.15(a)
Indemnified Party 8.04(a)
Indemnifying Party 8.04(a)
Interim Net Worth 1.04(d)(i)
Leases 2.14(b)
Xxxxxxxx preamble
Xxxxxxxx Employment Agreements 7.02(d)
Material Contracts 2.18
Multiemployer Plan 2.15(b)
Multiple Employer Plan 2.15(b)
Net Worth Target 1.04(b)
NTI-CA preamble
Permits 2.13
Plans 2.15(a)
Post-Closing Date Tax Benefit 6.03(b)
Purchase Price 1.02
Purchaser preamble
Purchaser's Accountants 1.04(c)
Purchaser's Threshold Amount 8.02(b)
Registration Statement 4.09
Reserved Taxes 6.01(a)
Sellers preamble
Sellers' Accountants 1.04(e)
Sellers' Percentages 1.03(c)
Seller Special Claim 8.02(b)
Sellers' Threshold Amount 8.03(b)
Shares Recitals
Special Claim 8.03(b)
Tax Returns 2.16(a)
Trusts preamble
Welfare Benefit Plan 2.15(e)
Working Capital Target 1.04(d)(iii)
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. All costs and expenses, including, without
--------
limitation, fees and disbursements of counsel, financial advisors, financing
sources, equity investors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby (the "Transaction Costs")
-----------------
shall be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred, subject, in the case of Transaction Costs of the
Company (including any bonus payments made in connection with the Closing of the
transactions contemplated hereby), to the definition of Long-term Debt
Obligations in Section 10.1.
SECTION 11.02. Notices. All notices, request, claims, demands and
-------
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by facsimile, by telegram,
by telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 11.02):
(a) if to any Seller:
Shareholders of Colorado Springs Circuits, Inc.
c/o NTI
000 Xxxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to Purchaser:
Details, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx XxXxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxx Capital, Inc.
Xxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 11.03. Public Announcements. No party to this Agreement
--------------------
shall make any public announcements in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without the prior written consent of the parties hereto, and the parties shall
cooperate as to the timing and contents of any such announcement.
SECTION 11.04. Headings. The headings contained in this Agreement
--------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
SECTION 11.06. Entire Agreement. This Agreement and the
----------------
Confidentiality Agreement constitute the entire agreement of the parties hereto
with respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, other than the Confidentiality Agreement,
among Sellers and Purchaser with respect to the subject matter hereof and except
as otherwise expressly provided herein.
SECTION 11.07. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise; provided, however, that after the Closing,
Purchaser may (a)
make a collateral assignment of this Agreement to any lender to the Company and
(b) assign this Agreement to any entity which acquires all or substantially all
of the Business.
SECTION 11.08. No Third-Party Beneficiaries. Except as provided in
----------------------------
Article V, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 11.09. Amendment. This Agreement may not be amended or
---------
modified except by an instrument in writing signed by Sellers and Purchaser.
SECTION 11.10. Governing Law. This Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed in that State.
SECTION 11.11. Counterparts. This Agreement may be executed in one
------------
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each Seller and Purchaser has executed this
Agreement as of the date first written above or has caused this Agreement to be
executed as of the date first written above by its respective officers or
trustee thereunto duly authorized.
NTI, INC., a California corporation
By /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name:
Title:
----------------------------
XXXXX X. XXXXXXXX
THE XXXXXX MARITAL TRUST DATED
MARCH 13, 1989, a California irrevocable trust
By /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxx X. Xxxxx
Trustee
THE XXXXXX SURVIVOR'S TRUST DATED
MARCH 13, 1989, a California revocable trust
By /s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx
Trustee
DETAILS, INC.
By /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Financial Officer
EXHIBIT 1.03(c)
---------------
SELLERS' PERCENTAGES
--------------------
Xxxxxxxx 24.62%
NTI-CA 75.18%
The Xxxxxx Marital Trust 00.10%
The Xxxxxx Survivor's Trust 00.10%
The calculation of Sellers' percentages are based upon Sellers' respective
percentage ownership interests in the shares, adjusted to reflect the
understanding of the parties that Xxxxxxxx'x proceeds are not reduced by
obligations relating to the Xxxxxx/St. Xxxxx payments or any intercompany debt.
Sellers' percentages will be adjusted to reflect final purchase price
adjustments under the terms of the Stock Purchase Agreement relating to the
differences between Sellers' estimates of such amounts and the final
calculations thereof.
Exhibit 7.01(c)
[Form of Purchaser's Counsel Opinion]
Exhibit 7.02(d)
[Forms of Employment and Non-Compete Agreements]
Exhibit 7.02(i)
[Forms of Legal Opinions]
Exhibit 7.02(i)
[Forms of Real Property Documents]
Disclosure Schedule
--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
--------------------------------------------------------------------------------
dated as of December 19, 1997
among
NTI, INC.,
XXXXX X. XXXXXXXX,
THE
XXXXXX MARITAL TRUST,
UNDER TRUST DOCUMENT DATED MARCH 13, 1989,
XXXXXXX X. XXXXX, AS TRUSTEE ,
THE XXXXXX SURVIVOR'S TRUST,
UNDER TRUST DOCUMENT DATED MARCH 13, 1989,
XXXXX XXXXXX, AS TRUSTEE
and
DETAILS, INC.
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE
1.01. Purchase and Sale. 1
1.02. Purchase Price 1
1.03. Closing 1
1.04. Purchase Price Adjustment 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
2.01. Incorporation and Authority of NTI-CA 5
2.02. Formation and Authority of the Trusts 5
2.03. Incorporation and Qualification of the Company 6
2.04. Capital Stock of the Company 6
2.05. Subsidiaries 6
2.06. No Conflict 6
2.07. Consents and Approvals 7
2.08. Financial Information 7
2.09. Absence of Undisclosed Liabilities 7
2.10. Absence of Certain Changes or Events 8
2.11. Absence of Litigation 9
2.12. Compliance with Laws 9
2.13. Licenses and Permits 10
2.14. Real Property 10
2.15. Employee Benefit Matters 10
2.16. Taxes 12
2.17. Brokers 13
2.18. Material Contracts 13
2.19. Customers and Suppliers 14
2.20. Environmental and Safety Matters 15
2.21. Trademarks, Patents and Copyrights 15
2.22. Title to Assets 15
2.23. Transactions with Affiliates 16
2.24. Ultimate Parent Entities 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01. Incorporation and Authority of Purchaser 16
3.02. No Conflict 17
3.03. Consents and Approvals 17
3.04. Absence of Litigation 17
3.05. HSR Act 17
3.06. Financing 17
3.07. Brokers 18
4.01. Conduct of Business Prior to the Closing 18
4.02. Access to Information 18
4.03. Confidentiality 19
4.04. Regulatory and Other Authorizations; Consents. 19
4.05. Investigation 19
4.06. Financing 20
4.07. Further Action 20
4.08. Sellers' Confidentiality; Non-Competition 20
4.09. Preparation of Financial Statements; Consents 21
4.10. NTI Name 22
4.11. Xxxxxx Group Assets 22
4.12. Real Estate Leases 22
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
TAX MATTERS
6.01. Tax Indemnities 23
6.02. Preparation of Tax Returns 24
6.03. Refunds and Tax Benefits 25
6.04. Contests 26
6.05. Cooperation and Exchange of Information 26
6.06. Conveyance Taxes 27
6.07. Miscellaneous 27
6.08. Survival of Obligations 27
ARTICLE VII
CONDITIONS TO CLOSING
7.01. Conditions to Obligations of Sellers 28
7.02. Conditions to Obligations of Purchaser 28
ARTICLE VIII
INDEMNIFICATION
8.01. Survival 30
8.02. Indemnification by Purchaser 30
8.03. Indemnification by Sellers 32
8.04. Indemnification Procedures 35
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01. Termination 36
9.02. Effect of Termination 37
9.03. Waiver 37
ARTICLE X
DEFINITIONS
10.01. Certain Defined Terms 37
10.02. Other Defined Terms 41
ARTICLE XI
GENERAL PROVISIONS
11.01. Expenses 42
11.02. Notices 43
11.03. Public Announcements 44
11.04. Headings 44
11.05. Severability 44
11.06. Entire Agreement 44
11.07. Assignment 44
11.08. No Third-Party Beneficiaries 44
11.09. Amendment 45
11.10. Governing Law 45
11.11. Counterparts 45
EXHIBITS AND SCHEDULES
Exhibit 1.03(c) - Sellers' Percentages
Exhibit 1.04(b) - Sellers' Written Estimates
Exhibit 4.12 - Form of Amendment and Restatement of Lease
Exhibit 7.01(c) - Form of Purchaser's Counsel Opinion
Exhibit 7.02(d) - Xxxxxxxx Employment Agreement
Exhibit 7.02(i) - Forms of Legal Opinions
Schedule 10.01 - Bonus Payments
Disclosure Schedule
