STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into as of
February 6, 1998, by and among XXXXXXXX INDUSTRIES, INC., a Delaware corporation
("Buyer"), and the undersigned persons identified on Schedule A hereto
("Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the issued
and outstanding common shares (the "Shares") of capital stock of Xxxx Motion
Controls, Inc., a North Carolina corporation (the "Company"), for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE"--as defined in SECTION 3.8.
"ADJUSTMENT CLAIMS" -- as defined in SECTION 2.2(B).
"ADJUSTMENT DATE"--as defined in SECTION 2.2(B).
"AFFILIATE"-- a Person which directly or indirectly controls, or is
controlled by, or is under common control with another Person, which owns five
percent (5%) or more of the voting equity of another Person, or five percent
(5%) or more of equity interest of which is owned by another Person.
"APPLICABLE CONTRACT"--any Contract (i) under which the Company has or may
acquire any rights, (ii) under which the Company has or may become subject to
any obligation or liability, or (iii) by which the Company or any of the assets
owned or used by it is or may become bound.
"BALANCE SHEET"--as defined in SECTION 3.4.
"BREACH"--a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (i) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (ii) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision; and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.3.
"CLOSING DATE"--the date and time as of which the Closing actually
takes place.
"CLOSING DATE A/R AND INVENTORY"--as defined in SECTION 2.2(B).
"COMPANY"--as defined in the Recitals of this Agreement.
"COMPANY OTHER BENEFIT OBLIGATION" means all obligations, arrangements, or
customary practices, owed, adopted or followed by the Company, whether or not
legally enforceable, to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees, or agents, other
than obligations, arrangements, and practices that are Plans, including
consulting agreements under which the compensation paid does not depend upon the
amount of service rendered, severance payment policies, and fringe benefits
within the meaning of IRC Section 132.
"COMPANY PLAN" means all Plans of which the Company is or was a Plan
Sponsor, or to which the Company otherwise contributes or has contributed, or in
which the Company otherwise participates or has participated. All references to
Plans are to Company Plans unless the context requires otherwise.
"COMPETING BUSINESS"--as defined in SECTION 3.24.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by this
Agreement, including (i) the sale of the Shares by Sellers to Buyer; (ii) the
execution, delivery, and performance of the Employment Agreements and the
Sellers' Releases; (iii) the performance by Buyer and Sellers of their
respective covenants and obligations under this Agreement; and (iv) Buyer's
acquisition and ownership of the Shares and exercise of control over the
Company.
"CONTRACT"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"COPYRIGHTS"--as defined in SECTION 3.22(a)(iii).
"DAMAGES"--as defined in SECTION 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENTS"--as defined in SECTION 2.4(a)(iii).
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"ENCUMBRANCE"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law.
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or relates to:
(i) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(ii) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(iii) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(iv) assuring that products are designed, formulated, packaged, and used
so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(v) protecting resources, species, or ecological amenities;
(vi) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(vii) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(viii) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
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"ERISA AFFILIATE" means, with respect to the Company, any other person
that, together with the Company, would be treated as a single employer under IRC
Section 414.
"FACILITIES"--any real property, leaseholds, or other interests currently
or formerly owned or operated by any the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Company.
"GAAP"--generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any federal, state, local, municipal, foreign, or
other government or governmental or quasi-governmental authority of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"INDEMNIFIED PERSONS"--as defined in SECTION 10.2.
"INTELLECTUAL PROPERTY ASSETS" --as defined in SECTION 3.22.
"INTERIM BALANCE SHEET"--as defined in SECTION 3.4.
"IRC"--the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
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"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MARKS"--as defined in SECTION 3.22(a)(i).
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA Section 3(37)(A).
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if: (i) such action
is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person; (ii) such
action is not required to be authorized by the board of directors of such Person
(or by any Person or group of Persons exercising similar authority); and (iii)
such action is similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (or by any Person or group
of Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.
"ORGANIZATIONAL DOCUMENTS"--the articles or certificate of
incorporation and the bylaws of a corporation and any amendment thereto.
"PATENTS"--as defined in SECTION 3.22(a)(ii).
"PENSION PLAN" has the meaning given in ERISA SECTION 3(2)(A).
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B).
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
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"PURCHASE PRICE"--as defined in SECTION 2.2(a).
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC SECTION 401(a).
"RELEASE"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SELLER'S CLOSING DOCUMENTS"--as defined in SECTION 3.2(a).
"SELLERS' RELEASES"--as defined in SECTION 2.4(a).
"SHARES"--as defined in the Recitals of this Agreement and Section 3.3.
"Threat of Release"--a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"TITLE IV PLANS" means all Pension Plans that are subject to Title IV of
ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer Plans.
"TRADE SECRETS"--as defined in SECTION 3.22(a).
"WT"-- Xxxxxxx X. Xxxx, a resident of Forsyth County, North Carolina.
2. SALE AND TRANSFER OF SHARES; CLOSING.
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2.1 SHARES. Subject to the terms and conditions of this Agreement, at the
Closing, Sellers will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Sellers.
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2.2 PURCHASE PRICE; ADJUSTMENT. (a) The purchase price (the "Purchase Price")
for the Shares payable by Buyer will be $1,841,304, payable to the Sellers in
immediately available funds (by bank cashier's checks, certified checks or wired
funds) on the Closing Date, in the amounts for each Seller set forth on Schedule
A.
(b) On or immediately following the Closing Date, Buyer shall
conduct a physical inventory and examination of all raw materials and purchased
parts inventory and Accounts Receivable held by the Company on the Closing Date
(the "Closing Date A/R and Inventory"). On the nine (9) month anniversary of the
Closing Date (the "Adjustment Date"), the Sellers shall jointly and severally
remit to Buyer an amount equal to (i) the book value of all Closing Date A/R and
Inventory (excluding hydraulic parts inventory and research and development
parts inventory (as physically designated by Buyer and WT prior to Closing)) (if
any) that are not sold or collected by the Company prior to the Adjustment Date,
and (ii) the aggregate amount of all claims and related costs associated with
the Company's default under that certain Incentive Contract as set forth in Part
3.17(d)(i) of the Disclosure Letter (such unsold or uncollected Closing Date A/R
and Inventory and such claims related to the Incentive Contract herein
collectively referred to as the "Adjustment Claims"), to the extent such
Adjustment Claims exceed $50,000.
2.3 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Buyer's counsel at Suite 3500, One
First Union Center, Charlotte, North Carolina, at 10:00 a.m. (local time) on
FEBRUARY 6, 1998 or at such other time and place as the parties may agree.
2.4 CLOSING OBLIGATIONS. At or before the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed by a
commercial bank, for transfer to Buyer;
(ii) releases in the form of EXHIBIT 2.4(a)(ii) executed by Sellers
(collectively, "Sellers' Releases");
(iii) employment agreements in the forms of EXHIBITS 2.4(a)(iii)(A),
(B), (C), (D) and (E), executed by WT, Xxxxxx Xxxxxxx, Xxxxxx Xxxx, Xxxxxxxx
Xxxxxxx, and Xxxxxx Xxxxxx, respectively (the "Employment Agreements");
(iv) an opinion of Nelson, Boyles, Xxxxxxx & Green, counsel to
Sellers, dated the Closing Date, in the form of EXHIBIT 2.4(a)(iv);
(v) resignation of all directors of the Company;
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(vi) such other certificates and
documents as Buyer shall reasonably request; and
(vii) all consents and approvals of governmental authorities,
lenders, lessors, and other third parties required in connection with the (x)
consummation of the Contemplated Transaction and (y) continued operation of the
business of the Company, including all consents required of First Citizens'
Bank.
(b) Buyer will deliver to Sellers:
(i) the amounts specified on SCHEDULE A by bank cashier's or
certified check payable to the order of the persons specified on SCHEDULE A; and
(ii) the Employment Agreements, executed by the Company.
2.5 CLOSING DATE FINANCIAL STATEMENTS.
---------------------------------
The Company's accountants, Xxxxx, Xxxxxxx & Company, will prepare a
balance sheet of the Company (the "Closing Date Balance Sheet") as of the
Closing Date and a statement of income of the Company (the "Closing Date Income
Statement") for the period from the date of the Balance Sheet through the
Closing Date (such Closing Date Balance Sheet and Closing Date Income Statement
being herein referred to as the "Closing Date Financial Statements"). Buyer's
accountants, BDO Xxxxxxx, LLP, will be given the opportunity to review the work
papers and to consult with the Company's accountants prior to the completion of
the Closing Date Financial Statements. The Closing Date Financial Statements
will be delivered to Buyer within thirty (30) days after the Closing Date. If
within thirty (30) days following such delivery of the Closing Date Financial
Statements, Buyer has not given notice of objection to the Closing Date
Financial Statements (which notice must contain a statement of reasonable basis
of objection), then the Closing Date Financial Statements will be deemed
acceptable. If Buyer gives notice of objection within such 30-day period, the
issues in dispute will be submitted to KPMG Peat Marwick LLP, certified public
accountants, for resolution. If the issues in dispute are submitted to such
third-party accountants for resolution, (i) each party will furnish to such
accountants such workpapers and other documents and information relating to the
disputed issues as such accountants may request and are available to that party
(or its independent public accountants), and will be afforded the opportunity to
present to such accountants any material relating to the determination and to
discuss the determination with such accountants; (ii) the determination by such
accountants, as set forth in a notice delivered to both parties by such
accountants, will be binding and conclusive on the parties; and (iii) Buyer and
Sellers will each bear 50% of the fees of such accountants for such
determination.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers represent and warrant to
Buyer as follows:
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3.1 ORGANIZATION AND GOOD STANDING.
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(a) The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of North Carolina, with full corporate
power and authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and to perform
all its obligations under Applicable Contracts. Except as set forth in Part 3.1
of the Disclosure Letter, the Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification. Part 3.1 of the Disclosure Letter contains a complete and
accurate list of each jurisdiction in which the Company is authorized to do
business.
(b) Sellers have delivered to Buyer copies of the Organizational Documents
of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT.
----------------------
(a) This Agreement constitutes the legal, valid, and binding obligation of
Sellers, enforceable against Sellers in accordance with its terms. Upon the
execution and delivery of the Employment Agreements (to which each Seller is a
party) and the Sellers' Releases (collectively, the "Sellers' Closing
Documents"), the Sellers' Closing Documents will constitute the legal, valid,
and binding obligations of Sellers, enforceable against Sellers in accordance
with their respective terms. Sellers have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and the
Sellers' Closing Documents and to perform their obligations under this Agreement
and the Sellers' Closing Documents.
(b) Except as set forth in Part 3.2(b) of the Disclosure Letter, neither
the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Company, or (B) any resolution
adopted by the board of directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company or any Seller, or any of
the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the business of, or any
of the assets owned or used by, the Company;
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(iv) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by the Company.
Except as set forth in Part 3.2(b) of the Disclosure Letter, no Seller or the
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION. The authorized equity securities of the Company consist
of 5,000 shares of common stock and 5,000 shares of preferred stock, each with a
par value of $10 per share, of which 185 shares of common stock are issued and
outstanding and constitute the Shares. No shares of preferred stock have been
issued or are outstanding. Sellers are and will be on the Closing Date the
record and beneficial owners and holders of the Shares, free and clear of all
Encumbrances. The Shares are owned by Sellers in the manner set forth on
Schedule A. No legend or other reference to any purported Encumbrance appears
upon any certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities, options,
warrants or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of the
Securities Act or any other Legal Requirement. The Company does not own, or have
any Contract to acquire, any equity securities or other securities of any Person
or any direct or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a) the compiled
balance sheets of the Company as at August 31 in each of the years 1996 and 1997
(such August 31, 1997 balance sheet being herein sometimes referred to as the
"Balance Sheet"), and the related statements of income for each of the fiscal
years then ended, and (b) an unaudited, management prepared balance sheet of the
Company as at December 31, 1997 (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income, changes in stockholders' equity,
and cash flow for the period then ended, including in each case the notes
thereto. Such financial statements and notes fairly present the financial
condition and the results of operations of the Company as at the respective
dates of and for the periods referred to in such financial statements, all in
accordance with GAAP, subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the absence of
notes (that, if presented, would not differ materially from those included in
the Balance Sheet); the financial statements referred to in this Section 3.4
reflect the consistent application of such accounting principles throughout the
periods involved, except as disclosed in the notes to such financial statements.
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3.5 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Buyer, are complete and correct and have been maintained in accordance with
sound business practices. At the Closing, all of those books and records will be
in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.6 of the Disclosure Letter
contains a complete and accurate list of all real property, leaseholds, or other
interests therein owned by or in which the Company has an interest. The Company
owns all the properties and assets (whether real, personal, or mixed and whether
tangible or intangible) that it purports to own located in the facilities owned
or operated by the Company or reflected as owned in the books and records of the
Company, including all of the properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet (except for assets held under capitalized
leases and personal property sold since the date of the Balance Sheet and the
Interim Balance Sheet, as the case may be, in the Ordinary Course of Business).
All material properties and assets reflected in the Balance Sheet and the
Interim Balance Sheet are free and clear of all Encumbrances except (i) security
interests shown on the Balance Sheet or the Interim Balance Sheet as securing
specified liabilities or obligations, with respect to which no default exists
and (ii) liens for current taxes not yet due.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants, structures,
and equipment owned and leased by the Company are structurally sound, in good
operating condition and repair, are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs, except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The building, plants,
structures, and equipment, owned and leased by the Company are sufficient for
the continued conduct of the Company's businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current. There is no contest, claim, or right of set-off,
other than returns in the Ordinary Course of Business, under any Contract with
any obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Part 3.8 of the Disclosure Letter contains a complete and
accurate list of all Accounts Receivable as of January 30, 1998, which list sets
forth the aging of such Accounts Receivable.
3.9 INVENTORY. Except with regard to Closing Date A/R and Inventory, all
inventory of the Company, whether or not reflected in the Balance Sheet or the
Interim Balance Sheet, consists of a quality and quantity usable and salable in
the Ordinary Course of Business, except for obsolete items and items of
below-standard quality which have been written off or written down to net
realizable value.
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3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of the
Disclosure Letter, the Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective dates thereof.
3.11 TAXES.
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(a) The Company has filed or caused to be filed, within the times and
within the manner prescribed by law, all federal, state, local, and foreign tax
returns and tax reports that are required to be filed by, or with respect to,
the Company, and Sellers have delivered, or made available, to Buyer copies of,
and Part 3.11 of the Disclosure Letter contains a complete and accurate list of,
all such returns and reports filed within the past five (5) years. Such returns
and reports reflect accurately all liability for taxes of each the Company for
the periods covered thereby. All federal, state, local and foreign income,
profits, franchise, sales, use, occupancy, excise, customs, withholding and
other taxes and assessments (including interest and penalties) payable by, or
due from, the Company have been fully paid or adequately disclosed and fully
provided for (in accordance with GAAP) on the Balance Sheet and the Interim
Balance Sheet.
(b) No examination of any tax return of the Company or other tax audit is
currently in progress or is planned, and (i) there are no outstanding agreements
or waivers extending the statutory period of limitation applicable to any tax
return of the Company, (ii) none of Sellers or the Company has any tax liability
that could result in any lien being imposed on the capital stock or the assets
of the Company, (iii) the Company is, and has been, an accrual method taxpayer,
and (iv) the Company has not elected to be treated as a small business
corporation under Subchapter S of the IRC.
3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet, there
has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
3.13 EMPLOYEE BENEFITS.
(a) (i) Part 3.13(a)(i) of the Disclosure Letter contains a complete
and accurate list of all Company Plans and Company Other Benefit Obligations and
identifies as such all Company Plans that are Qualified Plans.
(ii) Part 3.13(a)(v) of the Disclosure Letter sets forth the
financial cost of all obligations owed under any Company Plan or Company Other
Benefit Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
(b) Sellers have delivered to Buyer:
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(i) all documents that set forth the terms of each Company Plan and
Company Other Benefit Obligation and of any related trust, including (A) all
plan descriptions and summary plan descriptions of Company Plans for which the
Company is required to prepare, file, and distribute plan descriptions and
summary plan descriptions, and (B) all summaries and descriptions furnished to
participants and beneficiaries regarding Company Plans and Company Other Benefit
Obligations for which a plan description or summary plan description is not
required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both pension and
welfare benefits) by the Company, and all collective bargaining agreements
pursuant to which contributions are being made or obligations are owed by such
entities;
(iv) a written description of any Company Plan or Company Other
Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any Company
Plan;
(vi) all insurance policies purchased by or to provide benefits
under any Company Plan;
(vii) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that relate
to any Company Plan and Company Other Benefit Obligation;
(viii) all reports submitted within the four (4) years preceding the
date of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to any
Company Plan or Company Other Benefit Obligation;
(ix) all notifications to employees of their rights under ERISA
Section 601 et seq. and IRC Section 4980B;
(x) the Form 5500 filed in each of the most recent three plan years
with respect to each Company Plan, including all schedules thereto and the
opinions of independent accountants;
(xi) all notices that were given by the IRS or the Department of
Labor to the Company or any Company Plan within the four (4) years preceding the
date of this Agreement; and
(xii) the most recent determination letter for each Company Plan
that is a Qualified Plan.
13
(c) Except as set forth in Part 3.13(c)(vi) of the Disclosure Letter:
(i) No Company Plan is a Title IV Plan.
(ii) The Company has never established, maintained, or contributed
to or otherwise participated in, or had an obligation to maintain, contribute
to, or otherwise participate in, any Multi-Employer Plan.
(iii) There are no voluntary employees' beneficiary associations
under IRC Section 501(c)(9) whose members include employees of the Company.
(iv) There are, and have been, no ERISA Affiliates.
(v) The Company has performed all of its respective obligations
under all Company Plans and Company Other Benefit Obligations. The Company has
made appropriate entries in its financial records and statements for all
obligations and liabilities under such Plans and Obligations that have accrued
but are not due.
(vi) No statement, either written or oral, has been made by the
Company to any Person with regard to any Plan or Other Benefit Obligation that
was not in accordance with the Plan or Other Benefit Obligation and that could
have an adverse economic consequence to the Company or to Buyer.
(vii) The Company, with respect to all Company Plans and Company
Other Benefits Obligations is, and each Company Plan and Company Other Benefit
Obligation is, in full compliance with ERISA, the IRC, and other applicable Laws
including the provisions of such Laws expressly mentioned in this Section 3.13,
and with any applicable collective bargaining agreement.
(A) No transaction prohibited by ERISA Section 406 and no
"prohibited transaction" under IRC Section 4975(c) has occurred with respect to
any Company Plan.
(B) All filings required by ERISA and the IRC as to each Plan have
been timely filed, and all notices and disclosures to participants required by
either ERISA or the IRC have been timely provided.
(C) All contributions and payments made or accrued with respect to
all Company Plans and Company Other Benefit Obligations are deductible under IRC
Section 162 or Section 404. No amount, or any asset of any Company Plan is
subject to tax as unrelated business taxable income.
(viii) Each Company Plan can be terminated within thirty (30) days,
without payment of any additional contribution or amount and without the vesting
or acceleration of any benefits promised by such Plan.
14
(ix) No event has occurred or circumstance exists that could result
in a material increase in premium costs of Company Plans and Company Other
Benefit Obligations that are insured, or a material increase in benefit costs of
such Plans and Obligations that are self-insured.
(x) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Company Plan
or Company Other Benefit Obligation is pending or, is Threatened.
(xi) Each Qualified Plan of the Company is qualified in form and
operation under IRC Section 401(a); each trust for each such Plan is exempt from
federal income tax under IRC Section 501(a). No event has occurred or
circumstance exists that will or could give rise to disqualification or loss of
tax-exempt status of any such Plan or trust.
(xii) Except to the extent required under ERISA Section 601 et seq.
and IRC Section 4980B, the Company does not provide health or welfare benefits
for any retired or former employee or is obligated to provide health or welfare
benefits to any active employee following such employee's retirement or other
termination of service.
(xiii) Sellers and the Company have complied with the provisions of
ERISA Section 601 et seq. and IRC Section 4980B.
(xiv) No payment that is owed or may become due to any director,
officer, employee, or agent of the Company will be non-deductible to the Company
or subject to tax under IRC Section 280G or Section 4999; nor will the Company
be required to "gross up" or otherwise compensate any such person because of the
imposition of any excise tax on a payment to such person.
(xv) The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
---------------------------------------------------------------
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times since January 1, 1995 has been,
in full compliance with each Legal Requirement that is or was applicable to it
or to the conduct or operation of its business or the ownership or use of any of
its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
the Company of, or a failure on the part of the Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
15
(iii) the Company has not received, at any time since January 1,
1995, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or to any of the assets owned or used by,
the Company. Each Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter is valid and in full force and effect. Except
as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times since January 1, 1995 has been,
in full compliance with all of the terms and requirements of each Governmental
Authorization identified in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or indirectly
in a violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed in Part 3.14 of the Disclosure Letter, or (B)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any Governmental
Authorization listed in Part 3.14 of the Disclosure Letter;
(iii) the Company has not received, at any time since January 1,
1995, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations listed in Part 3.14 of the Disclosure Letter
have been duly filed on a timely basis with the appropriate Governmental Bodies,
and all other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
(v) the Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate its business in
the manner it currently conducts and operates such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
16
3.15 LEGAL PROCEEDINGS; ORDERS.
-------------------------
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding (i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, any the Company; or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions. No such Proceeding has been Threatened,
and no event has occurred or circumstance exists that may give rise to or serve
as a basis for the commencement of any such Proceeding. Sellers have delivered
to Buyer copies of all pleadings, correspondence, and other documents relating
to each Proceeding listed in Part 3.15 of the Disclosure Letter. The Proceedings
listed in Part 3.15 of the Disclosure Letter will not have a material adverse
effect on the business, operations, assets, condition, or prospects of the
Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter (i) there is
no Order to which any of the Company, or any of the assets owned or used by the
Company, is subject; and (ii) Seller is not subject to any Order that relates to
the business of, or any of the assets owned or used by, the Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter (i) the
Company is, in full compliance with all of the terms and requirements of each
Order to which it, is subject; (ii) no event has occurred or circumstance exists
that may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order to
which the Company, is subject; and (iii) the Company has not received, any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which the Company, is subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in Part
3.16 of the Disclosure Letter, since the date of the Balance Sheet, the Company
has conducted its businesses only in the Ordinary Course of Business and there
has not been any:
(a) change in the Company's authorized or issued capital stock; issuance,
redemption, or transfer of any shares of capital stock; grant of any stock
option, warrant or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
any the Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of shares of
capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except in the Ordinary
Course of Business) employee, entry into any employment, severance, or similar
Contract with any director, officer, or employee, or extending any loan or
advance to any officer, director, or employee of the Company
17
or the Sellers; provided, however, Buyer acknowledges that the Company may repay
an existing loan to WT and his spouse in an amount not to exceed $8,500 in the
aggregate.
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of the
Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to any the Company of at least $10,000;
(g) termination of or receipt of notice of terminations of any existing
relationship with employees or customers;
(h) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any asset
or property of the Company, including the sale, lease, or other disposition of
any of the Intellectual Property Assets;
(i) cancellation or waiver of any claims or rights with a value to the
Company in excess of $5,000;
(j) material change in the accounting methods used by the Company; or
(k) incurring of any material indebtedness (other than trade payables), or
making of any significant capital expenditures; or
(l) agreement, whether oral or written, by the Company to do any of the
foregoing.
3.17 CONTRACTS; NO DEFAULTS.
----------------------
(a) Part 3.17(a) of the Disclosure Letter contains a complete and accurate
list, and Sellers have delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by the Company of an amount or value in excess
of $5,000;
(ii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of the
Company in excess of $5,000;
18
(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate annual payments of less than $5,000 and with terms of less than one
year);
(iv) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(v) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(vi) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
the Company with any other Person;
(vii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of the Company or limit the freedom of
the Company to engage in any line of business or to compete with any Person;
(viii) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods;
(ix) each power of attorney that is currently effective and
outstanding;
(x) each Applicable Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking by the
Company to be responsible for consequential damages;
(xi) each Applicable Contract for capital expenditures in excess of
$5,000; and
(xii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company
other than in the Ordinary Course of Business.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) No Seller (and no related person of a Seller) has or may acquire
any rights under, and no Seller has or may become subject to any obligation or
liability under, any Contract that relates to the business of, or any of the
assets owned or used by, the Company; and
19
(ii) No officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter, each
Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) The Company is in full compliance with all applicable terms and
requirements of each Contract under which it has any obligation or by which the
Company or any of the assets owned or used by the Company is bound;
(ii) each other Person that has any obligation under any Contract
under which the Company has any rights is in full compliance with all applicable
terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, or result in a violation or
breach of, or give the Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Contract; and
(iv) The Company has not given to or received from any other Person,
any notice or other communication (whether oral or written) regarding any
actual, alleged, or potential violation or breach of, or default under, any
Contract.
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to the Company under
current or completed Contracts with any Person, and no such Person has made
written demand for such renegotiation.
(f) The Contracts relating to the sale or provision of products or services
by the Company have been entered into in the Ordinary Course of Business and
have been entered into without the commission of any act alone or in concert
with any other Person, or any consideration having been paid or promised, that
is or would be in violation of any Legal Requirement.
(g) The Company is not restricted by any Contract from marketing any
product of the Company in any geographical territory in the world.
(h) Except as disclosed in Part 3.17(h) of the Disclosure Letter, neither
the Company nor any Seller is party to any distributor agreement or any
marketing arrangement with Dematex, Inc., IMTEX, Inc., Xxxxxxx Xxxxxx or any of
their Affiliates; PROVIDED, HOWEVER, the Sellers shall provide full indemnity to
the Buyer for any claim and related costs of defense related
20
to any relationship or purported relationship between the Company or any Seller
and Dematex, Inc., IMTEX, Inc., Xxxxxxx Xxxxxx or any of their Affiliates.
3.18 INSURANCE.
---------
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance to which
the Company is a party or under which the Company, or any director of the
Company, is or has been covered at any time within the five (5) years preceding
the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of the Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with respect
to insurance (including such obligations under leases and service agreements)
and identifies the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, a statement
describing each claim under an insurance policy for an amount in excess of
$10,000, and
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) All policies to which the Company is a party or that provide
coverage to either Seller, the Company, or any director or officer of the
Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for the
assets and the operations of the Company for all risks normally insured against
by a Person carrying on the same business or businesses as the Company;
21
(D) are sufficient for compliance with all Legal Requirements and
Contracts to which the Company is a party or by which it is bound;
(E) will continue in full force and effect following the Closing
Date; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the Company.
(ii) The Company has not received (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights, or (B) any
notice of cancellation or any other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and have otherwise
performed all of its respective obligations, under each policy to which the
Company is a party or that provides coverage to the Company or a director
thereof.
(iv) The Company has given timely notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in Part 3.19 of the
Disclosure Letter:
(a) The Company is, and at all times has been, in full compliance with, and
has not been and is not in violation of or liable under, any Environmental Law.
No Seller or the Company has any basis to expect, nor has any of them or any
other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company, or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which Sellers or the Company has or had an
interest.
22
(c) No Seller or the Company has any basis to expect, nor has any of them
or any other Person for whose conduct they are or may be held responsible,
received, any citation, directive, inquiry, notice, Order, summons, warning, or
other communication that relates to Hazardous Activity, Hazardous Materials, or
any alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Sellers or the Company had an interest, or
with respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company, or any other Person for whose conduct they are or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(d) No Seller or the Company, or any other Person for whose conduct they
are or may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which Sellers or the
Company (or any predecessor), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such other
property or assets.
(e) There are no Hazardous Materials present on or in the Environment at
the Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or thereon. Each
of the Sellers, the Company, any other Person for whose conduct the Sellers or
the Company are or may be held responsible, or any other Person, has not
permitted, conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
(f) There has been no Release or Threat of Release of any Hazardous
Materials at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which
Sellers or the Company has or had an interest, or any geologically or
hydrologically adjoining property, whether by Sellers, the Company, or any other
Person.
(g) Sellers have delivered to Buyer true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or initiated by
Sellers or the Company pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the Facilities, or concerning compliance by Sellers, the
Company, or any other Person for whose conduct they are or may be held
responsible, with Environmental Laws.
-23-
3.20 EMPLOYEES.
---------
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the Company,
name; job title; current compensation paid or payable and any change in
compensation since January 1, 1996; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan.
(b) No employee or director of the Company is a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers or
the Company by any such employee or director. No director, officer, or other key
employee of the Company intends to terminate his employment with the Company
except as disclosed in Part 3.20 of the Disclosure Letter.
(c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of the Company, or their dependents, receiving benefits or scheduled to receive
benefits in the future: name, pension benefit, pension option election, retiree
medical insurance coverage, retiree life insurance coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE. The Company has not been and is not a
party to any collective bargaining or other labor Contract. There has not been,
there is not presently pending or existing, and there is not Threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any Proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Company or its premises, or
(c) any application for certification of a collective bargaining agent. No event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. The Company has complied in all respects with
all Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
24
3.22 INTELLECTUAL PROPERTY.
---------------------
(a) Intellectual Property Assets. The term "Intellectual Property Assets"
--------------------------------------------------------------------
includes:
--------
(i) the Company's name, all fictional business names, trading names,
registered and unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets") owned, used, or
licensed by the Company as licensee or licensor.
(b) Agreements. Part 3.22(b) of the Disclosure Letter contains a complete
and accurate list and summary description, including any royalties paid or
received by the Company, of all Contracts relating to the Intellectual Property
Assets to which the Company is a party or by which the Company is bound, except
for any license implied by the sale of a product and perpetual, paid-up licenses
for commonly available software programs with a value of less than $10,000 under
which the Company is the licensee. There are no outstanding and no Threatened
disputes or disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business.
-----------------------------------
(i) The Intellectual Property Assets are all those necessary for the
operation of the Company's businesses as they are currently conducted. Except as
set forth in Part 3.22(c) of the Disclosure Letter, the Company is the owner of
all right, title, and interest in and to each of the Intellectual Property
Assets, free and clear of all Encumbrances, and has the right to use without
payment to a third party all of the Intellectual Property Assets.
(ii) No employee of the Company has entered into any Contract that
restricts or limits in any way the scope or type of work in which the employee
may be engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than the Company.
(d) Patents
-------
(i) Part 3.22(d) of the Disclosure Letter contains a complete and
accurate list and summary description of all Patents. Except as set forth in
Part 3.22(d) of the Disclosure Letter, the Company is the owner of all right,
title, and interest in and to each of the Patents, free and clear of all
Encumbrances.
25
(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.
(iii) Except as set forth in Part 3.22(d) of the Disclosure Letter,
no Patent has been or is now involved in any interference, reissue,
reexamination, or opposition proceeding and there is no potentially interfering
patent or patent application of any third party.
(iv) Except as set forth in Part 3.22(d) of the Disclosure Letter,
no Patent is infringed or has been challenged or threatened in any way. Except
as set forth in Part 3.22(d) of the Disclosure Letter, none of the products
manufactured and sold, nor any process or know-how used, by the Company
infringes or is alleged to infringe any patent or other proprietary right of any
other Person.
(e) Trademarks
----------
(i) Part 3.22(e) of Disclosure Letter contains a complete and
accurate list and summary description of all Marks. The Company is the owner of
all right, title, and interest in and to each of the Marks, free and clear of
all Encumbrances.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.
(iii) No Xxxx has been or is now involved in any opposition,
invalidation, or cancellation and no such action is Threatened with the respect
to any of the Marks.
(iv) There is no potentially interfering trademark or trademark
application of any third party.
(v) No Xxxx is infringed or has been challenged or threatened in any
way and none of the Marks used by the Company infringes or is alleged to
infringe any trade name, trademark, or service xxxx of any third party.
(vi) All products and materials containing a Xxxx xxxx the proper
federal registration notice where permitted by law.
26
(f) Copyrights
----------
(i) Part 3.22(f) of the Disclosure Letter contains a complete and
accurate list and summary description of all Copyrights. The Company is the
owner of all right, title, and interest in and to each of the Copyrights, free
and clear of all Encumbrances.
(ii) All Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the date of Closing.
(iii) No Copyright is infringed has been challenged or threatened in
any way and none of the subject matter of any of the Copyrights infringes or is
alleged to infringe any copyright of any third party or is a derivative work
based on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked with
the proper copyright notice.
(g) Trade Secrets
-------------
(i) With respect to each Trade Secret, the documentation relating to
such Trade Secret is current, accurate, and sufficient in detail and content to
identify and explain it and to allow its full and proper use without reliance on
the knowledge or memory of any individual.
(ii) Sellers and the Company have taken all reasonable precautions
to protect the secrecy, confidentiality, and value of their Trade Secrets.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets and the Trade Secrets are
not part of the public knowledge or literature, and have not been used,
divulged, or appropriated either for the benefit of any Person or to the
detriment of the Company and no Trade Secret is subject to any adverse claim or
has been challenged or Threatened in any way.
3.23 CERTAIN PAYMENTS. Neither the Company nor any director, officer,
agent, employee of the Company, or any other Person associated with or acting
for or on behalf of the Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company, or (iv) in violation of any Legal Requirement, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.24 RELATIONSHIPS WITH RELATED PERSONS. Except as disclosed in Part 3.24
of the Disclosure Letter, no Seller or any related person of Sellers or of the
Company has any interest in any property (whether real, personal, or mixed and
whether tangible or intangible),
27
used in or pertaining to the Company businesses. Except as disclosed in Part
3.24 of the Disclosure Letter, no Seller or any related person of Sellers or of
the Company is a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company other than business
dealings or transactions conducted in the Ordinary Course of Business with the
Company at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with the Company with
respect to any line of the products or services of the Company (a "Competing
Business") in any market presently served by the Company. Except as set forth in
Part 3.24 of the Disclosure Letter, no Seller or any related person of Sellers
or of the Company is a party to any Contract with, or has any claim or right
against, the Company.
3.25 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.26 DISCLOSURE. No representation or warranty of Sellers in this Agreement
and no statement in the Disclosure Letter fails to state a material fact or
contains an untrue statement, necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Buyer has the
absolute and unrestricted right, power, and authority to execute and deliver
this Agreement and to perform its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement by Buyer, nor the
consummation or performance of any of the Contemplated Transactions by Buyer,
will give any Person the right to prevent, delay, or otherwise interfere with
any of the Contemplated Transactions pursuant to (i) any provision of Buyer's
Organizational Documents; (ii) any resolution adopted by the board of directors
of Buyer; (iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be bound.
(c) Except as provided in Schedule 4.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced or Threatened against Buyer and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions.
28
4.4 BROKERS OR FINDERS. Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Sellers harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE.
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
Closing Date, Sellers will, and will cause the Company and its Representatives
to, (a) afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full and free access to the
Company's personnel, properties, contracts, books and records, and other
documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating and other data and information as Buyer may
reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY. Between the date of this
Agreement and the Closing Date, Sellers will, and will cause the Company to:
(a) Conduct the business of the Company only in the Ordinary Course of
Business;
(b) Use their best efforts to preserve intact the current business
organization of the Company, keep available the services of current officers,
employees and agents of the Company, and maintain the relations and good will
with suppliers, customers, landlords, creditors, employees, agents and others
having business relationship with the Company;
(c) Confer with Buyer concerning operational matters of a material nature;
and
(d) Otherwise report periodically to Buyer concerning the status of the
business, operations and finances of the Company.
5.3 NEGATIVE COVENANT. Except otherwise permitted by this Agreement,
between the date of this Agreement and the Closing Date, Sellers will not, and
will cause the Company not to, without the prior written consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of the occurrence or likelihood of occurrence of any of
the changes or events listed in Section 3.16.
5.4 REQUIRED APPROVALS. As promptly as practicable after the date of this
Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to commensurate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company
29
to, cooperate with Buyer with respect to all filings that Buyer elects to make
or is required by Legal Requirements to make in connection with the Contemplated
Transactions.
5.5 NOTIFICATION. Between the date of this Agreement and the Closing Date,
each Seller will promptly notify Buyer in writing if such Seller or the Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Sellers' representations and warranties as of the date of this Agreement,
or if such Seller or the Company becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Letter if the Disclosure
Letter were dated as of the date of occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each Seller will promptly
notify Buyer of the occurrence of any Breach of any covenant of Sellers in this
Section 5 or of the occurrence of any event that may make satisfaction of the
conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY AFFILIATES. Except as expressly provided in
this Agreement, Sellers will cause all indebtedness owing to the Company by
either Sellers or any Affiliate of Sellers to be paid in full prior to the
Closing.
5.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause the Company
and each of their representatives not to, directly or indirectly, solicit,
initiate or encourage any inquiries or proposals from, discussions or
negotiations with, provide a non-public information to, or consider the merits
of any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets (other
than in the Ordinary Course of Business) of the Company, or any of the capital
stock of the Company, or any merger, consolidation, business combination, or
similar transaction involving the Company.
5.8 BEST EFFORTS. Between the date of this Agreement and the Closing Date,
Sellers will use their best efforts to cause the conditions in Sections 7 and 8
to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicably after the
date of this Agreement, Buyer will make all filings required by Legal
Requirements to be made to consummate the Contemplate Transactions. Between the
date of this Agreement and the Closing Date, Buyer will cooperate with Sellers
with respect to all filings that Sellers are required to by Legal Requirements
to make in connection with Contemplated Transactions, provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
30
6.2 BEST EFFORTS. Except as is set forth in the provisos to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its best
efforts to cause the conditions in Section 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
purchase the Shares and to take the other actions required to be taken by Buyer
at the Closing is subject to the satisfaction, at or prior to the Closing of
each of the following conditions (any of which may be waived by Buyer, in whole
or in part);
7.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE.
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of the covenants and obligations (considered
individually), must have been fully performed and complied with in all material
respects.
(b) Each document required to be delivered pursuant to Section 2.4 must
have been delivered, and each of the other covenants and obligations in Section
5 must have been performed and complied with in all respects.
7.3 CONSENTS. Each of the consents identified in Part 3.2 of the Disclosure
Letter must have been obtained and must be in full force and effect.
7.4 ADDITIONAL CONDITIONS. Each of the following conditions must have been
satisfied to the satisfaction of Buyer:
(a) Buyer will have completed all of its legal and financial due diligence
of the Company, the results of which will have been satisfactory to Buyer.
(b) WT will have negotiated and entered into, on behalf of the Company,
lease agreements for the following locations of the Company on terms
satisfactory to Buyer:
(i) With respect to the Company's assembly facility (Xxxxxxxxx
Road), a renewal of the existing lease through at least August 31, 1998 at the
same rental rate and on the same terms as currently in effect; and
(ii) With respect to the Company's research and development facility
and general offices facility (Reynolda Road), a lease for a term of two (2)
years from the Closing Date. The rental rate shall be the average of the two (2)
MAI appraisals (or such other appraisal
31
standard as agreed upon by Buyer and WT) (one commissioned by each of Buyer and
WT) prepared on a "gross" lease basis.
(c) Buyer shall have secured financing on terms satisfactory to Buyer for
the consummation of the Contemplated Transactions.
(d) Buyer shall have received such other documents as Buyer may reasonably
request for the purpose of evidencing the accuracy of Sellers' representations
and warranties and performance of covenants to be complied with pursuant to the
terms of this Agreement.
7.5 NO PROCEEDINGS. Since the day of this Agreement there must not have
been any commenced or Threatened against Buyer or any Person affiliated with
Buyer, any Proceeding (i) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (ii)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must have
not been made or Threatened by any Person any claim asserting that such Person
(i) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity or
ownership interest in, the Company or (ii) is entitled to all or any portion of
the Purchase Price payable for the Shares.
7.7 NO PROHIBITION. Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, any applicable Legal Requirement
or Order.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE. Sellers' obligation
to sell the Shares and to take the actions required to be taken by Sellers at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Sellers, in whole or
in part):
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 BUYER'S PERFORMANCE. All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
32
8.3 CONSENTS. Each of the consents identified in Part 3.2 of the Disclosure
Letter must have been obtained and must be in full force and effect.
8.4 RELEASE OF GUARANTY. WT and his spouse shall have been released from
their personal guaranty of all obligations of the Company owing to First
Citizens' Bank.
8.5 NO INJUNCTION. There must not be any Legal Requirement or any
injunction or other Order that (i) prohibits the sale of the Shares by Sellers
to Buyer and (ii) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
9. TERMINATION.
-----------
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or at
the Closing, be terminated (a) by either Buyer or Sellers if a material Breach
of any provision of this Agreement has been committed by the other party and
such Breach has not been waived; (b)(i) by Buyer if any of the conditions set
forth in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date; or (ii) by
Sellers, if any of the conditions in Section 8 has not been satisfied as of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Sellers to comply with their obligations
under this Agreement) and Sellers have not waived such condition on or before
the Closing Date; (c) by mutual consent of Buyer and Sellers; or (d) by either
Buyer or Sellers if the Closing has not occurred (other than through the failure
of any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before February 6, 1998, or such later
date as the parties may agree upon.
9.2 Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
11.1 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
-------------------------
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letter, and any other certificate or document delivered pursuant to
this Agreement will survive the Closing. The right to indemnification, payment
of Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any knowledge acquired (or capable of being acquired)
33
at any time, whether before or after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of Damages, or other remedy based
on such representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers will
jointly and severally indemnify and hold harmless Buyer, the Company, and their
respective Representatives, stockholders, controlling persons, and Affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage expense (including
costs of investigation and defense and reasonable attorneys' fees) or diminution
of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with (i) any
Breach of any representation or warranty made by Sellers in this Agreement, the
Disclosure Letter, or any other certificate or document delivered by Sellers
pursuant to this Agreement; (ii) any Breach by any Seller of any covenant or
obligation of such Seller in this Agreement; or (iii) the claim of any third
party for liabilities or obligations of the Company based on or arising out of
the conduct of the Company's business prior to the Closing. The remedies
provided in this Section 10.2 will not be exclusive of or limit any other
remedies that may be available to Buyer or the other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will indemnify
and hold harmless Sellers, their respective heirs, executors and personal
representatives, and will pay to Sellers, their respective heirs, executors and
personal representatives the amount of any Damages arising, directly or
indirectly, from or in connection with (i) any Breach of any representation or
warranty made by Buyer in this Agreement; or (ii) any Breach by Buyer of any
covenant or obligation of Buyer in this Agreement which is to be performed by
Buyer after the Closing.
10.4 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section 10.2 or
10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in SECTION 10.4(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation
34
would be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding) to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
(10) days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound in accordance with the terms of SECTION 10 by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its Affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any court
in which a Proceeding is brought against any Indemnified Person for purposes of
any claim that an Indemnified Person may have under this Agreement with respect
to such Proceeding or the matters alleged therein, and agree that process may be
served on Sellers with respect to such a claim anywhere in the world.
10.5 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
35
11. GENERAL PROVISIONS.
11.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants; provided, however, upon the Closing
of the Contemplated Transactions, attorneys' and accountants' fees incurred by
Sellers in connection with the Contemplated Transactions will be paid by the
Company at or before the Closing to the extent such costs are determined to be
reasonable by Sellers and Buyer.
11.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing,
Sellers shall, and shall cause the Company to, keep the terms of this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Sellers and Buyer will consult with each other concerning the means by
which the Company employees, customers, and suppliers and others having dealings
with the Company will be informed of the Contemplated Transactions, and Buyer
will have the right to be present for any such communication.
11.3 CONFIDENTIALITY. Except as otherwise provided herein, the terms of the
Confidentiality Agreement between Buyer, WT and the Company dated October 10,
1997, shall remain in full force and effect until the Closing Date.
11.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to Sellers: Xxxxxxx X. Xxxx
c/o Todd Motion Controls, Inc.
Xxxx Xxxxxx Xxx 00000
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: 000-000-0000
with a copy to: H. Xxxxx Xxxxxxx, Esq.
Nelson, Boyles, Xxxxxxx & Green
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
36
If to Buyer: Xxxxxx X. Xxxxxxxx, President
Xxxxxxxx Industries, Inc.
P. O. Xxx 00000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to: Xxxxxxxxxx Xxxxxxxx LLP
3500 One First Union Center
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Xx., Esq.
Facsimile No.: (000) 000-0000
11.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of North
Carolina, County of Mecklenburg, or, if it has or can acquire jurisdiction, in
the United States District Court for the Western District of North Carolina and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world.
11.6 FURTHER ASSURANCES. The parties agree (i) to furnish upon request to
each other such further information, (ii) to execute and deliver to each other
such other documents, and (iii) to do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
11.7 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (ii) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (iii) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter (including the
37
Letter of Intent between Buyer and Sellers dated November 25, 1997, as amended)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended,
except by a written agreement executed by the party to be charged with the
amendment.
11.9 DISCLOSURE LETTER.
(a) Any disclosure or exception by the Company or any Seller in this
Agreement, in any exhibit or schedule hereto, or in the Disclosure Letter shall
be deemed to be a disclosure and exception with respect to same and any
applicable representation or warranty set forth in Section 3 hereinabove.
(b) In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Letter (other than an exception
expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other parties, except that Buyer may assign any of its rights under this
Agreement to any subsidiary of Buyer without the consent of the Sellers. Subject
to the preceding sentence, this Agreement will apply to, be binding in all
respects upon, and inure to the benefit of the successors and permitted assigns
of the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. Except as otherwise provided herein all references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
38
11.14 GOVERNING LAW. This Agreement will be governed by the laws of the
State of North Carolina without regard to conflicts of laws principles.
11.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
39
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
-----
XXXXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------
Its: President
---------
SELLERS:
-------
/s/ Xxxxxxx X. Xxxx
---------------
Xxxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxx
---------------
Xxxxxx X. Xxxx
/s/ Xxxxxx Xxxxxxx
---------------
Xxxxxx Xxxxxxx
/s/ Xxxx Xxxxxxxx
-------------
Xxxx Xxxxxxxx
CLTLIB01:343594.02\VER. 5
40
Exhibits and Schedules
Exhibits
2.4(a)(ii) Seller's Release
2.4(a)(iii)(A) Employment Agreement of Xxxxxxx Xxxx
2.4(a)(iii)(B) Employment Agreement of Xxxxxx Xxxxxxx
2.4(a)(iii)(C) Employment Agreement of Xxxxxx Xxxx
2.4(a)(iii)(D) Employment Agreement of Xxxxxxxx Xxxxxxx
2.4(a)(iii)(E) Employment Agreement of Xxxxxx Xxxxxx
2.4(a)(iv) Opinion of Nelson, Boyles, Xxxxxxx & Green
Schedules
A List of Sellers and Ownership Percentages
4.2 Required Buyer Consents
