STOCK PURCHASE AGREEMENT
BY AND BETWEEN
FLANDERS CORPORATION
a North Carolina corporation,
AND
THE SHAREHOLDERS OF
AIR SEAL FILTER HOUSINGS, INC.,
a Texas corporation
June 13, 1996
TABLE OF CONTENTS
SECTION PAGE
1. Purchase of Air Seal Shares........................................... 1
(a) Purchase....................................................... 1
(b) Cash Payment................................................... 1
(c) Issuance and Escrow of Xxxxx-Xxxxxxxx Shares................... 1
2. Delivery.............................................................. 2
(a) Delivery of the Air Seal Shares, the Xxxxx-Xxxxxxxx............
Shares, and the Cash Payment................................... 2
(b) Liabilities.................................................... 2
3. Representations and Warranties of the Seller.......................... 2
(a) Ownership of Air Seal Shares................................... 2
(b) Authority...................................................... 2
(c) Compliance with Law............................................ 3
(d) No Litigation.................................................. 3
(e) Solvency....................................................... 3
(f) Securities Laws Compliance..................................... 3
(g) Accuracy of Information Furnished.............................. 4
4. Representations and Warranties Concerning Air Seal.................... 4
(a) Organization, Standing and Qualification....................... 4
(b) Capitalization................................................. 5
(c) Subsidiaries................................................... 5
(d) Stock Transfer Books........................................... 5
(e) Corporate Records.............................................. 5
(f) No Defaults.................................................... 5
(g) No Conflict.................................................... 5
(h) Consents and Approvals......................................... 5
(i) Related-Party Transactions..................................... 6
(j) Safety Laws.................................................... 6
(k) Environmental Compliance....................................... 6
(l) Compliance With Law............................................ 8
(m) Financial Statements........................................... 8
(n) Properties and Assets.......................................... 8
(o) Equipment Leases............................................... 9
(p) Inventory...................................................... 9
(q) Intellectual Property.......................................... 9
(r) Material Contracts............................................. 9
(s) No Undisclosed Liabilities..................................... 10
(t) Litigation..................................................... 10
(u) Taxes.......................................................... 10
i
(v) Employment Contracts........................................... 10
(w) Air Seal Personnel Matters..................................... 10
(x) Employee Restrictions.......................................... 11
(y) Labor Matters.................................................. 11
(z) Employee Benefit Plans......................................... 11
(aa) No Adverse Change.............................................. 12
(ab) Discrimination................................................. 12
(ac) Disputes and Charges........................................... 13
5. Representations, Warranties and Agreements of Buyer................... 13
(a) Organization, Standing and Qualification....................... 13
(b) Authority...................................................... 13
(c) Compliance with Law............................................ 13
(d) Shares Purchased for Investment................................ 13
(e) Shares in Escrow............................................... 13
(f) Cash Payment................................................... 13
(g) Employment Contracts and Options............................... 14
(h) Consents and Approvals......................................... 14
6. The Closing........................................................... 14
7. Conditions of Buyer's and Seller's Performance........................ 14
(a) Buyer's Conditions............................................. 14
(b) Seller's Conditions............................................ 16
8. Indemnification 17
(a) General Indemnification Obligation of Xxxxxxx Xxxxx............ 17
(b) General Indemnification Obligation of Buyer.................... 18
(c) Limitation of Indemnity........................................ 18
(d) Method of Asserting Claims, Etc................................ 18
(e) Payment........................................................ 20
(f) Arbitration.................................................... 20
(g) Other Rights and Remedies Not Affected......................... 20
9. Non-Disclosure Covenants.............................................. 21
(a) Proprietary Information........................................ 21
(b) Publicity...................................................... 21
10. Other Matters......................................................... 21
(a) No Share Purchases............................................. 21
(b) Director Appointment........................................... 21
(c) Further Actions................................................ 21
(d) Separate Subsidiary............................................ 22
(e) Building Capacity and Equipment................................ 22
ii
11. Termination and Amendment............................................. 22
(a) Pre-Closing.................................................... 22
(b) Waiver......................................................... 23
12. Miscellaneous......................................................... 23
(a) Attorneys' Fees................................................ 23
(b) Brokers and Finders............................................ 23
(c) Expenses....................................................... 23
(d) Survival....................................................... 23
(e) Severability................................................... 23
(f) Notices........................................................ 23
(g) Entire Agreement............................................... 24
(h) Counterparts................................................... 25
(i) Binding Effect................................................. 25
(j) Governing Law.................................................. 25
Signatures............................................................ 25
iii
EXHIBITS
A. Shareholder Ownership
B. Description of Real Estate Conveyed by Seller to Air Seal
X. Xxxxx-Xxxxxxxx Shares Escrow Agreement
D. Registration Rights Agreement
SCHEDULES
4(i) Related-Party Transactions
4(m) Financial Statements - Air Seal
4(r) Contracts Matters
4(s) Job Completion
4(aa)(v) Distributions
4(w) Personnel at Closing - Air Seal
4(z) Employee Benefit Plans - Air Seal
5(g) Employment Contract With Xxx Xxxxx
7(a)(ix) Form of Seller's Closing Certificate
7(a)(x) Form of Legal Opinion - Seller
7(b)(iii) Buyer Closing Certificate
7(b)(ix) Form of Legal Opinion - Buyer
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is executed as of this 17th day
of June, 1996 by and between FLANDERS CORPORATION, a North Carolina corporation
("Buyer" or "Flanders"), and XXXXXXX XXXXX and XXX XXXXX (collectively,
"Seller"), who are all of the shareholders of Air Seal Filter Housings, Inc., a
Texas corporation ("Air Seal"), as described on Exhibit A.
R E C I T A L S
WHEREAS, Buyer is a publicly-held North Carolina corporation which is in
the business of, among other things, designing, manufacturing and selling high
performance filter systems; and
WHEREAS, Air Seal is a privately-held Texas corporation which is in the
business of designing, manufacturing and selling filter housings; and
WHEREAS, the parties intend by this Agreement to provide for the acquisition
by Buyer of all the issued and outstanding capital stock of Air Seal, as well as
the land and buildings where Air Seal is currently located, in exchange for:
Two million two hundred fifty-five thousand dollars ($2,255,000) to be received
by Xxxxxxx Xxxxx; and up to 150,000 shares of Flanders' common stock (the
"Xxxxx-Xxxxxxxx Shares") to be granted to Xxx Xxxxx pursuant to the terms
hereof.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth herein, it is agreed as follows:
1. Purchase of Air Seal Shares.
(a) Purchase. Subject to the terms and conditions contained herein,
Buyer agrees to purchase from Seller, and Seller agrees to sell to Buyer,
for the consideration set forth below, one hundred percent (100%) of Air
Seal's issued and outstanding shares of common stock (the "Air Seal
Shares"), as well as the land and buildings located at 0000 Xxxxxxxxxxxxx
Xxxx, Xxxxxxxx, Xxxxx 00000 (the "Real Property"), as more particularly
described on Exhibit B.
(b) Cash Payment. In consideration for the Air Seal Shares and the
Real Property, Buyer shall pay to Xxxxxxx Xxxxx at Closing the amount of
two million two hundred fifty-five thousand dollars ($2,255,000)
(hereinafter referred to as the "Cash Payment").
(c) Issuance and Escrow of Xxxxx-Xxxxxxxx Shares. In addition to
the Cash Payment, Buyer shall place the Xxxxx-Xxxxxxxx Shares into escrow at
Closing. The Xxxxx-Xxxxxxxx Shares shall be held in escrow and shall be
released to Xxx Xxxxx over a three year period (five, if necessary) if Air
Seal meets certain performance objectives
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as set forth in the escrow agreement attached as Exhibit C ("Xxxxx-Xxxxxxxx
Shares Escrow Agreement"). Xxx Xxxxx will be granted registration rights, per
the registration rights agreement attached as Exhibit D ("Registration Rights
Agreement"), with respect to the Xxxxx-Xxxxxxxx Shares. Xxxxxxx Xxxxx shall act
as Escrow Agent under such Agreement.
2. Delivery.
(a) Delivery of the Air Seal Shares, the Xxxxx-Xxxxxxxx Shares, and
the Cash Payment. At Closing (i) Seller shall deliver to Buyer
certificates evidencing the Air Seal Shares owned by Seller immediately
prior to Closing, endorsed in blank, together with duly executed and
medallion guaranteed stock powers and otherwise in proper form for
transfer, and (ii) Buyer shall deliver to the Escrow Agent certificates
representing the Xxxxx-Xxxxxxxx Shares, in the name of Xxx Xxxxx, and Xxx
Xxxxx shall concurrently deliver to the Escrow Agent the related duly
executed and medallion guaranteed stock powers. Buyer shall not be
obligated to purchase any of the Air Seal Shares unless ALL such shares are
delivered at Closing. Also at Closing, Buyer shall deliver to Seller both
the executed Xxxxx-Xxxxxxxx Share Escrow Agreement and the executed
Registration Rights Agreement. Finally, at Closing, Buyer shall deliver to
Seller the amount of two million two hundred fifty-five thousand dollars
($2,255,000) in the form of a cashiers check or by wire transfer to the
Seller's bank accounts as Seller shall direct.
(b) Liabilities. All shareholder notes payable or other amounts
owed by Air Seal to Seller shall be canceled prior to or at Closing.
3. Representations and Warranties of the Seller. Seller represents and
warrants to Buyer that the following statements are true, correct and complete
as of the date hereof:
(a) Ownership of Air Seal Shares. Seller owns, beneficially and of
record, one hundred percent (100%) of the issued and outstanding Air Seal
Shares, free and clear of any lien, security interest, pledge, claim,
demand, encumbrance or restriction of any kind or character whatsoever, and
the Air Seal Shares represent all of the issued and outstanding shares of
capital stock and equity securities of Air Seal. All such Air Seal Shares
are duly authorized, validly issued, fully paid and nonassessable and have,
in the hands of the Seller, and will have in the hands of Buyer, all the
rights, privileges and preferences ordinarily accorded to owners of Air
Seal's common stock.
(b) Authority. Seller now has and will have, at the Closing, full
power, authority and legal right to sell the Air Seal Shares to Buyer
pursuant to this Agreement. This Agreement has been duly and validly
authorized, executed and delivered by, and is the valid and binding
obligation of, Seller, subject to (i) the effect of applicable bankruptcy,
insolvency, reorganization, moratorium, arrangement, preference, fraudulent
conveyance or other similar laws and regulations now or hereafter in effect
relating to or limiting creditors' rights generally or the enforcement of
specific rights provided for in agreements, (ii) general principles of
equity and/or the discretion of the court governing or limiting the
availability of specific performance, injunctive relief and other
2
equitable remedies (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and (iii) the application of principles of
public policy underlying any such laws and regulations.
(c) Compliance with Law. The consummation of the transactions
contemplated hereby will be in compliance with all applicable laws, rules,
regulations and requirements of all Federal, state and local governmental
authorities without the necessity for any license or permit or other action
or permission in the nature thereof, or any registration with, or consent
of, any such governmental authority.
(d) No Litigation. There are no suits or proceedings at law or in
equity, or before or by any governmental agency or arbitrator, pending, or
to Seller's knowledge, threatened, anticipated or contemplated, which in
any way affect the consummation of the transactions contemplated hereby or,
if valid, would constitute or result in a breach of any representation,
warranty or agreement of the Seller set forth herein.
(e) Solvency. Seller is not bankrupt or insolvent. Additionally,
Seller has not assigned Seller's estate for the benefit of creditors or
entered into any arrangements with creditors. Furthermore, Seller does not
have any present intention to file a petition in bankruptcy, to assign
Seller's estate for the benefit of creditors, or to enter into any
arrangements with creditors. Seller has no knowledge of any basis for the
filing by any other person of an involuntary petition in bankruptcy with
respect to Seller or Air Seal.
(f) Securities Laws Compliance.
(i) Seller has been represented by such legal and tax counsel
and others, each of whom has been personally selected by Seller, as Seller
has found necessary to consult concerning this transaction, and such
representation has included an examination of applicable documents,
and an analysis of all tax, financial, and securities law aspects.
Seller, his counsel and advisors, and such other persons with whom
Seller has found it necessary to consult, have sufficient knowledge
and experience in business and financial matters to evaluate the above
information, and the merits and risks of the transactions contemplated
by this Agreement, and to make an informed investment decision with
respect thereto;
(ii) Seller has had, prior to the date hereof, the opportunity
to ask questions of, and to receive answers from, Buyer and its
representatives, concerning the terms and conditions of the
acquisition of the Xxxxx-Xxxxxxxx Shares and access to obtain any
information, documents, financial statements, records and books (A)
relative to Buyer, Buyer's business and an investment in Buyer, and
(B) necessary to verify the accuracy of any information furnished to
Seller. All materials and information requested by Seller, his
counsel and advisors, or others representing Seller, including any
information requested to verify any information furnished to Seller,
have been made available and examined.
3
(iii) Seller has had, prior to the date hereof, the opportunity
to review all of Buyer's reports filed with the Securities and
Exchange Commission, including, but not limited to, Buyer's Form 10-K
for December 31, 1995, and Form 10-Q for March 31, 1996.
(iv) Seller is acquiring the shares for Seller's own account and
not as a fiduciary for any other person and for investment purposes
only and not with a view to or for the transfer, assignment, resale,
or distribution thereof, in whole or in part. Seller understands the
meaning and legal consequences of the representations and warranties
contained in this paragraph. Seller is not an "underwriter" of the
securities, as that term is defined in Section 2(11) of the Securities
Act of 1933 ("Securities Act"), and Seller will not take or cause to
be taken any action that would cause Seller or Buyer to be deemed an
"underwriter" of the securities.
(v) Seller understands that the Xxxxx-Xxxxxxxx Shares have not
been registered under the Securities Act nor pursuant to the
provisions of the securities or other laws of any applicable
jurisdictions. Seller further understands that the Xxxxx-Xxxxxxxx
Shares cannot be sold, assigned, pledged, transformed or otherwise
disposed of unless such shares are registered or an exemption from
registration is available, and that the Xxxxx-Xxxxxxxx Shares will
bear a restrictive legend to that effect.
(g) Accuracy of Information Furnished. Seller has not made any
material misstatement of fact or omitted to state any material fact
necessary or desirable to make complete, accurate and not misleading the
representations, warranties and agreements set forth herein, or in any
Exhibit hereto or certificate or other document furnished in connection
herewith.
4. Representations and Warranties Concerning Air Seal. Seller
represents and warrants to Buyer that the following statements concerning the
affairs of Air Seal are true, correct and complete as of the date hereof:
(a) Organization, Standing and Qualification. Air Seal is duly
organized, validly existing and in good standing under the laws of the
State of Texas and is authorized and qualified to own and operate its
properties and assets and conduct its business in all jurisdictions where
such properties and assets are owned and operated and such business
conducted. Air Seal has duly filed any and all certificates and reports
required to be filed to date by the laws of Texas and any other applicable
law. Air Seal has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted
by it, the lack of which could materially adversely affect the business,
properties, prospects, or its financial condition. Air Seal is not in
default in any material respect under any of such franchises, permits,
licenses or other similar authority.
4
(b) Capitalization. As of the date of Closing, the authorized
capital stock of Air Seal consists of 1,000,000 shares of common stock, par
value $1.00 per share, of which 10,000 shares are issued and outstanding.
All of the outstanding shares of common stock of Air Seal were issued to
Seller, and when issued, were duly authorized and validly issued and are
fully paid and nonassessable. Air Seal has no treasury shares, outstanding
subscriptions, options, warrants, calls, contracts, demands, commitments,
convertible securities or other rights, agreements or arrangements of any
character or nature whatsoever relating to the issuance of common stock or
other securities of Air Seal. No holder of any security of Air Seal is
entitled to any preemptive or similar rights to purchase any securities of
Air Seal.
(c) Subsidiaries. Air Seal has no subsidiaries and no other
investment in any entity. Air Seal is not a participant in any joint
venture, partnership or other similar arrangement.
(d) Stock Transfer Books. Air Seal's stock transfer books and stock
ledgers are in good order, complete, accurate and up to date, and they
include all necessary signatures, and set forth all stock and securities
issued, transferred and surrendered. No duplicate certificate has been
issued at any time heretofore. No transfer has been made without surrender
of the proper certificate duly endorsed. All certificates so surrendered
have been duly canceled and are attached to the proper stubs with all
necessary stock powers attached thereto.
(e) Corporate Records. Air Seal's minute books and other corporate
record books are in good order, complete, accurate, up to date, and they
include all necessary signatures and set forth all meetings and actions
taken by the stockholders and directors, including all actions set forth in
all certificates of votes of stockholders or directors furnished to anyone
at any time. The copies of Air Seal's Articles of Incorporation and Bylaws
which have been delivered to Buyer are complete and correct, as amended, to
the date of execution of this Agreement.
(f) No Defaults. Air Seal is not in default under or in violation
of any provisions of its Articles of Incorporation or Bylaws or any
restriction, lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability relating to Air Seal's
business.
(g) No Conflict. Neither the execution and delivery of this
Agreement nor consummation of the transactions contemplated hereby will
conflict with or result in a breach of or constitute a default under (1)
any provision of Air Seal's Articles of Incorporation or Bylaws, (2) any
law, rule, regulation, judgment, decree, order or other such requirement,
or (3) any material restriction, lien, encumbrance, indenture, contract,
lease, sublease, loan agreement, note or other material obligation or
liability to which Air Seal is a party or by which it is bound, or to which
any of its assets are subject.
(h) Consents and Approvals. The execution, delivery and performance
of this Agreement by Seller and the consummation of the transactions
contemplated hereby do
5
not require Air Seal or Seller to obtain any consent, approval or action of, or
make any filing with or give notice to any corporation, person or firm or any
public, governmental or judicial authority except: (i) such as have been duly
obtained or made, as the case may be, and are in full force and effect on the
date hereof, (ii) those which the failure to obtain or make would have no
material adverse effect on the transactions contemplated hereby or on Air Seal's
business or financial condition, and (iii) any filings required under the
Securities Act, or any applicable state securities laws.
(i) Related-Party Transactions. Except as set forth in Schedule
4(i), no employee, officer, or director of Air Seal or member of his or her
immediate family is indebted to Air Seal, nor is Air Seal indebted (or
committed to make loans or extend or guarantee credit) to any such
individuals. To the best of Seller's knowledge, and except as set forth on
Schedule 4(i), none of such individuals has any direct or indirect
ownership interest in any firm or corporation with which Air Seal is
affiliated or with which Air Seal has a business relationship, or any firm
or corporation that competes with Air Seal, except that employees,
officers, or directors of Air Seal and members of their immediate families
may own stock in publicly traded companies that may compete with Air Seal.
No member of the immediate family of any officer or director of Air Seal
is directly or indirectly interested in any material contract with Air
Seal.
(j) Safety Laws. Air Seal is not in violation of any applicable
statute, law or regulation relating to occupational health and safety
(including, but not limited to OSHA and any similar state laws), and to the
best of Seller's knowledge, no material expenditures are or will be
required to comply with any such existing statute, law or regulation.
(k) Environmental Compliance.
(i) Definitions. As used in this Agreement:
(A) "Environmental Law" means any federal, state or local
law, statute, ordinance, or regulation pertaining to health,
industrial hygiene, or environmental conditions, including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. '' 9601, et
seq.; the Resource Conservation and Recovery Act of 1976, 42
U.S.C. '' 6901, et seq.; the Toxic Substances Control Act of
1976, 15 U.S.C. '' 2601, et seq.; the Superfund Amendments and
Reauthorization Act of 1986, Title III, 42 U.S.C. '' 11001, et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
'' 1801, et seq.; the Clean Air Act, 42 U.S.C. '' 7401, et seq.;
the Federal Water Pollution Control Act, 33 U.S.C. '' 1251, et
seq.; the Safe Drinking Water Act, 42 U.S.C. '' 300f, et seq.;
the Solid Waste Disposal Act, 42 U.S.C. '' 3251, et seq.; and any
other federal, state or local law, statute, ordinance, or
regulation now in effect or hereafter enacted which pertains to
health, industrial hygiene, or the regulation or
6
protection of the environment, including, without limitation, ambient air, soil,
groundwater, surface water, and/or land use.
(B) "Hazardous Substance" means any material, waste,
substance, pollutant, or contaminant which may or could pose a
risk of injury or threat to health of the environment, including,
without limitation:
(1) Those substances included within the definitions of
"hazardous substance," "hazardous waste," "hazardous
material," "toxic substance," "solid waste," or "pollutant
or contaminant" in, or otherwise regulated by any
Environmental Law;
(2) Those substances listed in the United States
Department of Transportation Hazardous Materials Table (49
CFR 172.101, including appendices and amendments thereto),
or by the Environmental Protection Agency (or any successor
agency) as hazardous substances (40 CFR Part 302 and
amendments thereto);
(3) Such other substances, materials, or wastes which
are or become regulated or classified as hazardous or toxic
under federal, state, or local laws or regulations; and
(4) Any material, waste, or substance which is I)
petroleum or refined petroleum products; ii) asbestos in any
form; iii) polychlorinated biphenyls; iv) flammable
explosives; v) radioactive materials; or vi) radon.
Any reference in this paragraph to statutory or regulatory sections
shall be deemed to include any amendments thereto and any
successor sections.
(ii) Environmental Representations.
(A) All property owned, leased or occupied by Air Seal (the
"Property") is free from, and to Seller's knowledge, has always
been free from, Hazardous Substances, and is not now, and to
Seller's knowledge, has never been in violation of any
Environmental Law. Air Seal has not caused or allowed the use,
generation, manufacture, production, treatment, storage, release,
discharge, or disposal of any Hazardous Substances on, under, or
about the Property, and has not caused or allowed the
transportation to or from the Property of any Hazardous
Substance.
(B) There are not now, and to Seller's knowledge, have never
been, any buried or partially buried storage tanks located on the
Property.
7
(C) Air Seal has received no warning, notice of violation,
administrative complaint, judicial complaint, or other formal or
informal notice alleging that conditions on the Property or
adjacent property are or have been in violation of any
Environmental Law, or informing Seller that the Property is
subject to investigation or inquiry regarding the presence of
Hazardous Substances on or about the Property, or informing
Seller of a potential violation of any Environmental Law.
(D) Air Seal is not aware of any facts or circumstances
which could give rise to a violation of any Environmental Law.
(E) No environmental lien in favor of any governmental
entity has attached to any of the Property.
(iii) Archeological Matters. There are no historical or
archeological materials or artifacts of any kind or any Indian ruins
of any kind located on the Property.
(iv) Endangered Species Act. No part of the Property is
"critical habitat" as defined in the Federal Endangered Species Act,
16 U.S.C. ''1531 et seq., as amended, or in regulations promulgated
thereunder, nor are any "endangered species" or "threatened species"
located on the Property, as defined therein.
(l) Compliance With Law. To the best of Seller's knowledge, neither
Air Seal nor any of its directors, officers, fiduciaries, agents or
employees, is in violation of any applicable law, rule, regulation or
requirement of any governmental authority in any way relating to Air Seal's
business.
(m) Financial Statements. The Financial Statements of Air Seal for
the periods ending December 31, 1991 through December 31, 1995, attached
hereto as Schedule 4(m), are correct and complete and present fairly in all
material respects the financial condition of Air Seal as of the dates
described therein, and have been prepared in accordance with Generally
Accepted Accounting Principles consistently applied. The books and records
of the Company are complete in all material respects and are in an
auditable condition such that a complete audit of Air Seal can be performed
as of the Closing without unreasonable cost or expense.
(n) Properties and Assets. The properties and assets presently
owned by Air Seal and shown on its books, include all properties and assets of
every kind, class and description, real and personal, tangible and
intangible, used in Air Seal's business and necessary to the conduct of its
business as presently conducted. Air Seal has, or will have at Closing
after transfer of the Real Property, good and indefeasible title to and
possession of all such known properties and assets, free and clear of all
liens, claims, security interests, encumbrances, restrictions and rights,
title and interests in others, and there are no existing agreements,
options or commitments or rights with, to or in any
8
third party to acquire any of Air Seal's properties or assets or any interest
therein, except for those entered into in the ordinary course of business and
not materially adversely affecting Air Seal's properties, assets or rights. Air
Seal's assets on the Closing shall include all of the assets described
hereinabove or otherwise reflected on the Financial Statements, adjusted only
for inventory and other assets acquired or disposed of in the ordinary course of
business after December 31, 1995, and before the Closing Date.
(o) Equipment Leases. Air Seal does not have any equipment leases.
(p) Inventory. The inventory, as reflected on the latest Financial
Statements and as in existence at the Closing, was acquired and has been
maintained in the ordinary course of Air Seal's business practices, and is
valued at reasonable amounts based on the ordinary course of business.
None of such inventory is obsolete, unusable, damaged, or unsalable in the
ordinary course of business, except to the extent reflected on said
Financial Statements.
(q) Intellectual Property. To Seller's best knowledge, Air Seal has
full rights of use for all unregistered trademarks and service marks and
does not infringe on any third party rights, and Air Seal owns all U.S. or
foreign, inventions, franchises, discoveries, ideas, research, engineering,
methods, practices, processes, systems, formulae, designs, drawings,
products, projects, improvements, developments, know-how, and trade secrets
which are used in or necessary for the conduct of its business
(collectively the "Proprietary Rights"). All of the foregoing Proprietary
Rights that are not in the public domain stand solely in the name of Air
Seal and not in the name of any stockholder, director, officer, agent,
partner or employee or anyone else known to Seller, and none of the same
have any right, title, interest, restriction, lien or encumbrance therein,
thereon or thereto. To the best of Seller's knowledge, Air Seal's
ownership and use of the Proprietary Rights do not and will not infringe
upon, conflict with or violate in any material respect any patent,
copyright, trade secret or other lawful proprietary right of any other
party, and no claim is pending or, to the best of Seller's and Air Seal's
knowledge, threatened to the effect that the operations of Air Seal
infringe upon or conflict with the asserted rights of any other person
under any proprietary right, and there is no reasonable basis for any such
claim (whether or not pending or threatened). No claim is pending or, to
the best of Seller's knowledge, threatened to the effect that any
Proprietary Rights owned or licensed by Air Seal, or which Air Seal
otherwise has the right to use, is invalid or unenforceable by Air Seal,
and, to the best of Seller's knowledge, there is no reasonable basis for
any such claim (whether or not pending or threatened). Air Seal has not
granted or assigned to any other person or entity any right to manufacture,
have manufactured, assemble or sell the products or proposed products or to
provide the services or proposed services of Air Seal. To the best of
Seller's knowledge, all patents, copyrights, trademarks, service marks and
federal, state and foreign registrations thereof, are valid and in full
force and effect and are not subject to any taxes, maintenance fees, or
actions falling due within ninety (90) days of Closing.
(r) Material Contracts. Except as set forth in Schedule 4(r), Air
Seal does not have any material obligations, contracts, agreements, leases,
subleases, commitments
9
or understandings of any kind, nature or description, oral or written, fixed or
contingent, due or to become due, existing or inchoate, other than customer
purchase orders or service contracts, all of which are either reflected in the
Financial Statements for the periods such were in effect, or which impose upon
Air Seal a liability of less than $5,000 individually or $25,000 in the
aggregate.
(s) No Undisclosed Liabilities. Except as set forth on Schedule
4(s), Air Seal does not have any material liabilities or obligations,
including, without limitation, contingent liabilities for the performance
of any obligation, except for (i) liabilities or obligations which are
disclosed or fully provided for in Air Seal's Financial Statements, (ii)
liabilities or obligations disclosed in this Agreement or in any exhibit or
schedule to this Agreement, and (iii) liabilities not in excess of $5,000
individually or $25,000 in the aggregate.
(t) Litigation. There are no suits or proceedings at law or in
equity, or before or by any governmental agency or arbitrator, pending, or
to Seller's knowledge, threatened, anticipated or contemplated, which, if
decided against Air Seal, would have a material adverse effect on its
business or financial condition, and there are no unsatisfied or
outstanding judgments, orders, decrees or stipulations which in any way
affect Air Seal or its properties or assets or to which it is or may become
a party. There are no claims against Air Seal pending, or to Seller's
knowledge threatened, anticipated, or contemplated which, if valid, would
constitute or result in a breach of any representation, warranty or
agreement set forth herein.
(u) Taxes. Air Seal is an "S Corporation" and as such Air Seal has
duly filed all federal, state, local and other tax returns and reports
required to be filed by Air Seal on or prior to the date hereof with
respect to all taxes withheld by or imposed upon Air Seal. All such
returns or reports reflect in all material respects the liability for such
taxes of Air Seal as computed therein for the periods indicated, and all
taxes shown on such returns or reports and all assessments received by Air
Seal have been paid, or fully reserved for, to the extent that such taxes
have become due. There are no waivers or agreements by Air Seal for the
extension of time for the assessment of such taxes. There are no material
questions of taxation which are, as at the date hereof, the subject of
dispute with any taxing authority. With respect to any period through the
date hereof for which tax returns have not yet been filed, or for which
taxes are not yet due or owing, Air Seal has made adequate reserves,
determined in accordance with Generally Accepted Accounting Principles, for
all liabilities for taxes as set forth in its financial statements. Air
Seal is not presently the subject of any tax audit by any taxing authority.
(v) Employment Contracts. Air Seal has no written or oral contracts
of employment with any of its shareholders, employees or sales
representatives.
(w) Air Seal Personnel Matters. As of the date of Closing, the Air
Seal employees shall only include the individuals as set forth on Schedule
4(w). All such employees are either United States citizens or have
obtained permission to reside and work within the United States, and Air
Seal's employee files have copies of all legally
10
required documentation evidencing the same. With the exception of vacation
accrued since the end of the 1995 calendar year, all accrued vacation of such
employees has been taken or payment made with respect thereto prior to Closing.
Any and all severance benefits owed to terminated employees has been paid in
full by Air Seal prior to Closing.
(x) Employee Restrictions. To Seller's knowledge, no Air Seal
employee is subject to any secrecy or non-competition agreement or any
other agreement or restriction of any kind that would impede in any way the
ability of such employee to carry out fully all activities of such employee
in furtherance of Air Seal's business.
(y) Labor Matters. Air Seal is not party to nor subject to any
collective bargaining agreement, nor is any union organizing action or
certification vote pending or threatened.
(z) Employee Benefit Plans.
(i) Identification. Schedule 4(z) contains a complete and
accurate list of all employee benefit plans (the "Employee Benefit
Plans") (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (A) sponsored by
Air Seal, (B) to which Air Seal contributes on behalf of its
employees, (C) with respect to which Air Seal participates on behalf
of its employees, or (D) previously sponsored or contributed to by Air
Seal on behalf of its employees within the three years preceding the
date hereof. Each of the Employee Benefit Plans can be terminated or
amended at will by Air Seal, with no unfunded liability to Air Seal.
No unwritten amendment exists with respect to any Employee Benefit
Plan.
(ii) Compliance. Each Employee Benefit Plan has been
administered and maintained in compliance with all Laws. No Employee
Benefit Plan is currently the subject of an audit, investigation,
enforcement action or other similar proceeding conducted by any
governmental authority. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any
Employee Benefit Plan. No pending or, to the knowledge of Seller,
threatened claims, suits or other proceedings exist with respect to
any Employee Benefit Plan other than normal benefit claims filed by
participants or beneficiaries.
(iii) Funding Status. No accumulated funding deficiency (within
the meaning of Section 412 of the Internal Revenue Code), whether
waived or unwaived, exists with respect to any Employee Benefit Plan.
(iv) Multi-employer Plans. Air Seal has never been obligated to
contribute to a Multi-employer plan within the meaning of Section
3(37) of ERISA.
11
(v) PBGC. No facts or circumstances exist that would result in
the imposition of liability against Buyer by the Pension Benefit
Guaranty Corporation as a result of any act or omission by Air Seal.
No reportable event (within the meaning of Section 4043 of ERISA) for
which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of
Title IV of ERISA.
(vi) Retirees. Air Seal does not have, except as may be
required by law, any obligation or commitment to provide medical, dental or
life insurance benefits to or on behalf of any of its employees who
may retire or any of its former employees who have retired from
employment with Air Seal, including those receiving disability
benefits.
(aa) No Adverse Change. Since December 31, 1995, there has not
been:
(i) any material adverse change in the properties, assets,
business, affairs, material contracts or prospects of Air Seal and, to
Seller's knowledge, no such changes currently are threatened,
anticipated or contemplated;
(ii) any actual or, to Seller's knowledge, threatened,
anticipated or contemplated damage, destruction, loss, conversion,
termination, cancellation, default or taking by eminent domain or
other action by governmental authority, which has affected or may
hereafter affect the properties, assets, business, affairs, contracts
or prospects of Air Seal;
(iii) any material and adverse dispute pending or, to Seller's
knowledge, threatened, anticipated or contemplated, of any kind with
any customer, supplier, source of financing, employee, landlord,
subtenant or licensee of Air Seal, or any pending or, to Seller's
knowledge, threatened, anticipated or contemplated occurrence or
situation of any kind, nature or description which is reasonably
likely to result in any material reduction in the amount, or any
change in the terms or conditions, of business with any substantial
customer, supplier or source of financing;
(iv) any pending or, to Seller's knowledge, threatened,
anticipated or contemplated occurrence or situation of any kind,
nature or description peculiar to Air Seal's business and materially
and adversely affecting its properties, assets, business, affairs or
prospects; or
(v) except as set forth in Schedule 4(aa)(v), any material
reduction of capital, or any redemption of stock or dividend or
distribution by Air Seal.
(bb) Discrimination. Air Seal has not received any written claim of
any unfair labor practice or illegal discrimination on the basis of race,
color, religion, gender, national origin, age or handicap in its employment
conditions or practices. To the best of Seller's knowledge, Air Seal has
not engaged in any unfair labor practice or illegal
12
discrimination on the basis of race, color, religion, gender, national origin,
age or handicap in its employment conditions or practices.
(cc) Disputes and Charges. There are no existing or, to the best of
Seller's knowledge, threatened disputes, grievances, harassment charges,
controversies or other employment or labor troubles affecting Air Seal.
Air Seal's employees are not represented by a labor union, and no
organizing effort is currently in process or threatened.
5. Representations, Warranties and Agreements of Buyer. Buyer
represents and warrants to and agrees with the Seller that:
(a) Organization, Standing and Qualification. Buyer is duly
organized and validly existing and in good standing under the laws of the
State of North Carolina, and is authorized and qualified to own and operate
its properties and assets and conduct its business in all jurisdictions
where such properties and assets are owned and operated and such business
is conducted.
(b) Authority. Buyer has full right, power and authority to
execute, deliver and perform the terms of this Agreement. This Agreement has
been duly authorized by Buyer and constitutes a binding obligation of Buyer,
enforceable in accordance with its terms.
(c) Compliance with Law. Neither the execution and delivery of this
Agreement nor consummation of the transactions contemplated hereby will
conflict with or result in a breach of or constitute a default under any
provision of Buyer's Articles of Incorporation or Bylaws, any law, rule,
regulation, judgment, decree, order or other such requirement, or any
material restriction, lien, encumbrance, indenture, contract, lease,
sublease, loan agreement, note or other material obligation or liability to
which it is a party or by which it is bound, or to which its assets are
subject.
(d) Shares Purchased for Investment. Buyer is acquiring the Air
Seal Shares for its own account for investment purposes and not with a view to
or in connection with, any distribution thereof within the meaning of the
Securities Act.
(e) Shares in Escrow. The Xxxxx-Xxxxxxxx Shares held in escrow for
Xxx Xxxxx are duly authorized, validly issued, fully paid, non-assessable,
not issued in violation of the preemptive rights of any Flanders'
shareholder, identical to all other shares of Flanders' common stock, and,
in Seller's hands will have all the rights, privileges and preferences
accorded to all other holders of shares of Flanders common stock.
(f) Cash Payment. Buyer currently has or has immediate access to
sufficient funds with which to pay the Cash Payment.
13
(g) Employment Contracts and Options. Buyer has full right, power
and authority to execute and deliver, and to perform its obligations under,
the employment contract attached as Schedule 5(g) hereto (the "Employment
Contract"). The Employment Contract has been duly authorized by Buyer and,
upon its execution thereof, will constitute a valid and binding obligation
of Buyer, enforceable against it in accordance with its terms, subject to
(i) the effect of applicable bankruptcy, insolvency, reorganization,
moratorium, arrangement, preference, fraudulent conveyance or other similar
laws and regulations now or hereafter in effect relating to or limiting
creditors' rights generally or the enforcement of specific rights provided
for in agreements, (ii) general principles of equity and/or the discretion
of the court governing or limiting the availability of specific
performance, injunctive relief and other equitable remedies (regardless of
whether such enforceability is considered in a proceeding in equity or at
law), and (iii) the application of principles of public policy underlying
any such laws and regulations.
(h) Consents and Approvals. The execution, delivery and performance
of this Agreement by Buyer and the consummation of the transactions
contemplated hereby do not require Buyer to obtain any consent, approval or
action of, or make any filing with or give notice to any corporation,
person or firm or any public, governmental or judicial authority except:
(i) such as have been duly obtained or made, as the case may be, and are in
full force and effect on the date hereof, or (ii) those which the failure
to obtain or make would not have a material adverse effect on the
transactions contemplated hereby or on Buyer's business.
6. The Closing. The closing of the purchase and sale of the Air Seal
Shares shall take place at Seller's offices on or before June 21, 1996, or at
such other time or place as shall be fixed by the mutual consent of the
parties. Said date of conveyance is herein called the "Closing."
7. Conditions of Buyer's and Seller's Performance.
(a) Buyer's Conditions. The obligation of Buyer to consummate this
Agreement is subject to the satisfaction at the Closing, or waiver by Buyer
in writing, of each of the following conditions:
(i) Seller shall have executed this Agreement;
(ii) Seller shall have canceled any notes payable from Air Seal
to the Seller or any other employee of Air Seal, and Buyer shall be
furnished with written evidence thereof;
(iii) Seller shall have canceled any notes payable from Seller
to Air Seal, and Buyer shall be furnished with written evidence thereof;
(iv) Seller shall have conveyed to Air Seal the Real Property;
14
(v) A Phase I Environmental Survey shall have been completed on
the Real Property, at Buyer's direction and expense, showing no
liabilities for Remedial Work (or otherwise);
(vi) Buyer shall have received an executed Employment Contract
in substantially the form set forth in Schedule 5(g) from Xxx Xxxxx;
(vii) Buyer shall have received an executed Registration Rights
Agreement in substantially the form set forth in Exhibit D from Xxx
Xxxxx;
(viii) At the Closing, no governmental agency or body, or other
person or entity, shall have instituted or threatened any action to
restrain or prohibit any of the transactions contemplated by this
Agreement;
(ix) The representations and warranties of the Seller contained
in this Agreement or in any certificate or document delivered to Buyer
pursuant hereto shall be deemed to have been made again at the Closing
and shall then be true in all material respects; Seller shall have
performed and complied in all material respects with all agreements
and conditions required by this Agreement to be performed or complied
with by Seller prior to or at the Closing; Seller shall not be in
default under any of the provisions of this Agreement; and Buyer shall
have been furnished with one or more closing certificates of Seller
dated as of the Closing, in substantially the form of Schedule
7(a)(ix) certifying (A) to the fulfillment of the foregoing conditions
and the due performance of such covenants and agreements, (B) except
as set forth in Schedule 4(aa)(v), that no material change has
occurred in Air Seal's Financial Statements since December 31, 1995,
(C) that the representations and warranties set forth in this
Agreement are true and correct as of Closing, and (D) that neither Air
Seal nor Seller is a party to any litigation or has knowledge of any
claim, brought or threatened, seeking to recover damages from Air Seal
or to prevent Air Seal or Seller from continuing to use Air Seal
assets or to conduct business in the manner as the same were used or
conducted prior thereto, and which litigation or claim is likely to
result in any judgment, order, decree or settlement which will
materially and adversely affect the financial condition or business of
Air Seal;
(x) Buyer shall have received a legal opinion of Seller's
counsel in the form set forth in Schedule 7(a)(x), dated as of the Closing
date;
(xi) Buyer shall have received summaries of the accounts payable
and accounts receivable of Air Seal, dated not later than five (5)
days prior to Closing and not materially different from those dated
May 9, 1996, except for changes occurring in the ordinary course of
Air Seal's business;
(xii) Seller shall deliver to Buyer at Closing certificates of
search of the Uniform Commercial Code for filings against Air Seal in
form and substance
15
satisfactory to Buyer. Such certificates shall show searches of filings with
respect to Air Seal and all names under which Air Seal has conducted its
business;
(xiii) Seller shall deliver to Buyer at Closing evidence of
title in the form of Title Insurance, at Buyer=s expense, insuring Air
Seal's interest in the Real Property under this Agreement for the
amount of the property value, subject only to this Agreement and
standard exceptions;
(xiv) All proceedings taken in connection with the transactions
contemplated herein and all instruments and documents required in
connection therewith or incident thereto shall be satisfactory in form
to Xxxxx & Xxxxxx, legal counsel for Buyer.
(b) Seller's Conditions. The obligation of Seller to consummate
this Agreement is subject to the satisfaction at the Closing, or waiver by
Seller in writing, of each of the following conditions:
(i) Buyer shall have executed and delivered the Employment
Contract with Xxx Xxxxx in substantially the form set forth in
Schedule 5(g);
(ii) At the Closing date, no governmental agency or body, or other
person or entity, shall have instituted or threatened any action to
restrain or prohibit any of the transactions contemplated by this
Agreement.
(iii) Buyer shall not be in default under any of the provisions
of this Agreement; and Seller shall have been furnished with one or
more closing certificates of Buyer dated as of the Closing date, in
substantially the form of Schedule 7(b)(iii) certifying (A) to the
fulfillment of the foregoing conditions and the due performance of
such covenants and agreements, (B) that the representations and
warranties set forth in this Agreement are true and correct as of
Closing, and (C) that Buyer is not a party to any litigation and has
no knowledge of any claim, brought or threatened, seeking to prevent
Buyer from entering into this Agreement or consummating the
transactions contemplated hereby;
(iv) Buyer shall have delivered to Escrow Agent the Xxxxx-
Xxxxxxxx Shares;
(v) All proceedings taken in connection with the transactions
contemplated herein and all instruments and documents required in
connection therewith or incident thereto shall be satisfactory in form
to Seller's legal counsel;
(vi) The representations and warranties of Buyer contained in
this Agreement or in any closing certificate or document delivered to
Seller pursuant hereto shall be deemed to have been made again at the
Closing and shall then be true in all material respects; Buyer shall
have performed and complied with all
16
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing;
(vii) Buyer shall have executed the Registration Rights
Agreement with Xxx Xxxxx in substantially the form set forth in Exhibit D;
(viii) Buyer shall have executed and delivered such other
documents, instruments, certificates or agreements and shall have
taken such other actions as, in the opinion of Seller's legal counsel,
shall be reasonably necessary to consummate this transaction;
(ix) Seller shall have received a legal opinion of Buyer's
counsel in the form set forth in Schedule 7(b)(ix), dated as of the
Closing;
(x) Buyer shall have executed this Agreement; and
(xi) Air Seal shall have canceled any notes or other obligations
of Seller to Air Seal.
8. Indemnification.
(a) General Indemnification Obligation of Xxxxxxx Xxxxx. From and
after the Closing, Xxxxxxx Xxxxx will indemnify and hold harmless Buyer and
its successors and assigns (an "Indemnified Buyer Party") against and in
respect of:
(i) Damages. Any and all damages, losses, deficiencies,
liabilities, costs and expenses (collectively "Damages") incurred or
suffered by the Indemnified Party that result from, relate to or arise
out of:
(A) Any and all liabilities and obligations of Air Seal of
any nature whatsoever, in existence as of the Closing, except for
those liabilities and obligations of Air Seal set forth in the
Financial Statements or schedules to this Agreement;
(B) Any and all actions, suits, claims or legal,
administrative, arbitration, governmental or other proceedings or
investigations against an Indemnified Buyer Party or Air Seal
that relate to Seller or Air Seal to the extent that the event
giving rise thereto occurred prior to the Closing or which result
from or arise out of any action or inaction prior to the Closing
of Seller, Air Seal, or any director, officer, employee, agent,
representative or subcontractor of Air Seal, except for those set
forth in the Financial Statements or schedules to this Agreement;
or
(C) Any material misrepresentation, breach of warranty or
nonfulfillment of any agreement or covenant on Seller's part
under this Agreement, or from any material misrepresentation in
or omission from
17
any certificate, schedule, statement, document or instrument furnished to Buyer
pursuant hereto; and
(ii) Actions. Any and all actions, suits, claims, proceedings,
investigations, demands, assessments, fines, judgments, costs and
other expenses (including, without limitation, reasonable legal fees
and expenses) (collectively "Actions") incident to any of the
foregoing.
(b) General Indemnification Obligation of Buyer. From and after the
Closing, Buyer will reimburse, indemnify and hold harmless Xxxxxxx Xxxxx
and Xxxxxxx Xxxxx'x successors and assigns (an "Indemnified Seller Party")
against and in respect of:
(i) Damages. Any and all Damages incurred or suffered by any
Indemnified Seller Party that result from, relate to or arise out of
(A) any misrepresentation, breach of warranty or non-fulfillment of
any agreement or covenant on the part of Buyer under this Agreement or
any other document delivered by Buyer pursuant to this Agreement, or
from any misrepresentation in or omission from any certificate,
schedule, statement, document or instrument furnished to Seller
pursuant hereto or thereto; and
(ii) Actions. Any and all Actions incident to any of the
foregoing or to the enforcement of this paragraph 8(b).
(c) Limitation of Indemnity. Notwithstanding any provision in this
Agreement to the contrary, neither Buyer nor Xxxxxxx Xxxxx shall be liable
to the other under this paragraph 8 for:
(i) Dollar Amounts. Damages or actions in an amount less than
$5,000 in connection with any claim hereunder relating to a single
occurrence or event, or for Damages or Actions in an aggregate amount
less than $25,000 in connection with all claims hereunder;
(ii) Failure of Notice. Any claim for which either party has
not received a Claim Notice (as defined below) from the other on or before
a date two (2) years following the Closing;
(iii) Aggregate Liability. Damages or actions in an amount in
excess of $200,000.
(iv) Insurance. Any claim hereunder to the extent such claim is
paid by any insurer.
(d) Method of Asserting Claims, Etc. In the event that any claim or
demand is asserted against or sought to be collected from an Indemnified
Purchaser Party or Indemnified Seller Party (an "Indemnified Party") by a
third party, the Indemnified Party shall promptly notify the party from
which indemnification is sought pursuant to paragraphs 8(a) or 8(b) above
(the "Indemnifying Party") of such claim or demand,
18
specifying the nature of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim and demand) (the "Claim Notice").
The Indemnifying Party shall have twenty (20) days from the Indemnifying Party's
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not the Indemnifying Party disputes its liability to the
Indemnified Party hereunder with respect to such claim or demand, and (ii)
notwithstanding any such dispute, whether or not the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such claim
or demand.
(i) Dispute of Liability. If the Indemnifying Party disputes
its liability with respect to such claim or demand or the amount thereof
(whether or not the Indemnifying Party desires to defend the
Indemnified Party against such claim or demand as provided herein),
such dispute shall be resolved in accordance with paragraph 8(f)
hereof. Pending the resolution of any dispute by the Indemnifying
Party of its liability with respect to any claim or demand, such claim
or demand shall not be settled without the prior written consent of
the Indemnified Party.
(ii) Defense. In the event that the Indemnifying Party notifies
the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such claims or demand, then,
provided: (i) that the Indemnifying Party acknowledges that it is
liable to indemnify the Indemnified Party with respect to a particular
claim; and (ii) the Indemnifying Party has financial resources which
are reasonably adequate to pay the amount of the claim, except as
hereinafter provided, the Indemnifying Party shall have the right to
defend the Indemnified Party by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by the
Indemnifying Party to a final conclusion in such a manner as to avoid
any risk of the Indemnified Party becoming subject to liability for
any other matter. If any Indemnified Party desires to participate in,
but not control, any such defense or settlement, it may do so at its
sole cost and expense.
(iii) Defense Unsuccessful. (1) If the Indemnifying Party
elects not to defend the Indemnified Party against such claim or
demand, whether by not giving the Indemnified Party timely notice as
provided above or otherwise, then the amount of any such claim or
demand, or if the same be defended by the Indemnifying Party or by the
Indemnified Party (but no Indemnified Party shall have any obligation
to defend any such claim or demand), then that portion thereof as to
which such defense is unsuccessful, in each case shall be conclusively
deemed to be a liability of the Indemnifying Party hereunder, unless
the Indemnifying Party shall have disputed its liability to the
Indemnified Party hereunder, as provided herein, in which event such
dispute shall be resolved as provided in paragraph 8(f) hereof; (2)
In the event an Indemnified Party should have a claim against the
Indemnifying Party hereunder that does not involve a claim or demand
being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall promptly send a Claim Notice with
19
respect to such claim to the Indemnifying Party. If the Indemnifying Party
disputes its liability with respect to such claim or demand, such dispute shall
be resolved in accordance with paragraph 8(f) hereof; if the Indemnifying Party
does not notify the Indemnified Party within the Notice Period that it disputes
such claim, the amount of such claim shall be conclusively deemed a liability of
the Indemnifying Party hereunder.
(e) Payment. Upon determination of liability hereunder, the
appropriate party shall pay to the other, as the case may be, within twenty
(20) days after such determination, the amount of any claim for
indemnification made hereunder. Upon the payment in full of any claim
hereunder, the entity making payment shall be subrogated to the right of
the Indemnified Party against any person, firm or corporation with respect
to the subject matter of such claim.
(f) Arbitration. All disputes under this Section 8 shall be settled
by arbitration in North Carolina before a single arbitrator pursuant to the
rules of the American Arbitration Association. Arbitration may be
commenced at any time by any party hereto giving written notice to each
other party to a dispute that such dispute has been referred to arbitration
under this paragraph 8(f). The arbitrator shall be selected by the joint
agreement of Xxxxxxx Xxxxx and Buyer, but if they do not so agree within 20
days after the date of the notice referred to above, the selection shall be
made pursuant to the rules from the panels of arbitrators maintained by
such Association. Any award rendered by the arbitrator shall be conclusive
and binding upon the parties hereto; provided, however, that any such award
shall be accompanied by a written opinion of the arbitrator giving the
reasons for the award. This provision for arbitration shall be
specifically enforceable by the parties and the decision of the arbitrator
in accordance herewith shall be final and binding and there shall be no
right of appeal therefrom. Each party shall pay its own expenses of
arbitration and the expenses of the arbitrator shall be equally shared;
provided, however, that if in the opinion of the arbitrator any claim for
indemnification or any defense or objection thereto was unreasonable, the
arbitrator may assess, as part of his award, all or any part of the
arbitration expenses of the other party (including reasonable attorneys'
fees) and of the arbitrator against the party raising such unreasonable
claim, defense or objection. Nothing contained in this paragraph 8(f)
shall prevent the parties from settling any dispute by mutual agreement at
any time.
(g) Other Rights and Remedies Not Affected. The indemnification
rights of the parties under this Section 8 are independent of and in
addition to such rights and remedies as the parties may have at law or in
equity or otherwise for any misrepresentation, breach of warranty or
failure to fulfill any agreement or covenant hereunder on the part of any
party hereto, including without limitation the right to seek specific
performance, rescission or restitution, none of which rights or remedies
shall be affected or diminished hereby; provided that any recovery for a
claim for monetary damages for any breach of a representation or warranty
hereunder shall be limited to the amount of $200,000 as provided in Section
8(e)(iii) above.
(h) No Indemnification by Xxx Xxxxx. Xxx Xxxxx is providing no
indemnification under this Stock Purchase Agreement, it being understood that
this Section 8 describes the only indemnification being provided by any of the
parties hereto.
20
9. Non-Disclosure Covenants.
(a) Proprietary Information. Seller acknowledges that Seller's
relationship with Air Seal may have created or may hereafter create a
relationship of confidence and trust with respect to information of a
confidential or secret nature that may be disclosed to Seller by Air Seal
that relates to the business of Air Seal or to the business of any
affiliate, customer, or supplier of Air Seal ("Proprietary Information").
Such Proprietary Information includes, but is not limited to, any
information regarding inventions, marketing plans, product plans, business
strategies, financial information, forecasts, personnel information,
customer lists, software, hardware, processes, formulas, development or
experimental work, work in process, business, trade secrets, or any other
secret or confidential matter relating to the products, projects, programs,
sales, customer lists, price lists, or data, or business of Air Seal which
is not generally known to the public. Seller agrees to keep all such
Proprietary Information in confidence and trust, and will not use or
disclose any of such Proprietary Information without the prior written
consent of Air Seal, except as may be necessary to perform any duties
Seller may now or hereafter have as an employee of Air Seal. Seller
further agrees that at the Closing hereunder, and subsequently upon request
of Air Seal or at the time of the termination of the Seller's employment
(if any) with Air Seal, Seller will deliver to Air Seal only, and shall not
retain for Seller's own or others' use, any and all software programs,
documents, and any other material and all copies thereof relating to
Seller's work or Air Seal's products, projects, programs, or business of
which the Seller had knowledge, or which contain any Proprietary
Information.
(b) Publicity. Seller agrees not to disclose to any person or
entity, without the prior written consent of Buyer, any of the terms of
this Agreement at any time prior to Closing and for a period of ninety (90)
days thereafter, except as may be necessary for the performance of their
obligations hereunder or the operation of Air Seal in the ordinary course
of business. Air Seal and Buyer shall jointly disclose and publicize this
transaction in a press release as and when agreed upon between them or as
required by law.
10. Other Matters.
(a) No Share Purchases. Seller agrees to not purchase any of the
shares of the Buyer from any source whatsoever at any time after the date
hereof and prior to Closing.
(b) Director Appointment. At Closing, Seller and Buyer agree to
appoint to the Board of Directors Buyer's selected Directors, including but
not limited to Xxxxxx Xxxxx, Xxxxxx Xxxxxxx and Xxx Xxxxx.
(c) Further Actions. Seller warrants and agrees that, from time to
time, Seller will use Seller's best efforts to cause any present or
previous shareholder, director or officer of Air Seal to execute such
minutes of meetings or other instruments and take
21
whatever actions as shall be reasonably necessary or desirable to effect, or to
carry out the intent and purposes of, the transactions contemplated hereby.
(d) Separate Subsidiary. From the time of Closing until the
Xxxxx-Xxxxxxxx Shares either vest or fail to vest, Buyer agrees to operate
Air Seal as a separate subsidiary in a manner similar to the current
operation with its Financial Statements prepared in compliance with
Generally Accepted Accounting Principles and other relevant rules and
regulations.
(e) Building Capacity and Equipment. Buyer agrees to finance the
purchase of the building which is across the street to the Real Property to
provide Air Seal an additional 15,000 square feet of light industrial or
warehouse building capacity on commercially reasonable terms. If Air Seal
is unable to acquire the adjacent building on commercially reasonable
terms, Air Seal will use its best efforts to acquire similar facilities
which will be financed by Buyer. In addition, Buyer agrees to finance the
purchase of two (2) press breaks and one (1) shear of twelve (12) foot
length and twelve (12) gauge capacity and any necessary related equipment.
The full purchase price of any such building and equipment purchase will
be treated as a loan from Buyer to Air Seal, and such loan will accrue
interest at the lowest borrowing rate currently available to Buyer.
11. Termination and Amendment.
(a) Pre-Closing. This Agreement may be terminated by Buyer or
Seller at any time prior to the Closing upon written notice to the other party:
(i) If the representations, warranties and agreements or
conditions of this Agreement to be complied with or performed by Air
Seal or the Seller (in the case of Buyer) or Buyer (in the case of
Seller) on or before the Closing shall not have then been complied
with or performed in some material respect and such material
noncompliance or nonperformance shall not have been waived by the
party giving notice of termination or shall not have been cured by the
defaulting party, or cure thereof commenced and diligently prosecuted
thereafter by such party within three (3) business days after written
notice of such material noncompliance or nonperformance is given by
the non-defaulting party;
(ii) If any governmental action is commenced to prevent the
consummation of the transactions contemplated hereby; or
(iii) By mutual written agreement of the parties;
(iv) By either party upon written notice to the other if a Phase
I Environmental Survey of the Real Property reveals any environmental
liabilities for Remedial Work (or otherwise) in excess of $5,000;
(v) If the Closing has not occurred by July 31, 1996.
22
(b) Waiver. Any representations, warranties, agreements or
conditions of this Agreement may be waived at any time by the party
entitled to the benefit thereof by action taken and evidenced by a written
waiver executed by any such party.
12. Miscellaneous.
(a) Attorneys' Fees. In any action or proceeding arising out of or
related to this Agreement, the prevailing party shall be entitled to its
reasonable attorney fees and related costs, including fees and costs
incurred prior to formal initiation of an action or proceeding, and
including fees and costs incurred for collecting or attempting to collect
any judgment or award.
(b) Brokers and Finders. Except as otherwise provided herein, each
of the parties hereto represents and warrants that it has dealt with no
broker or finder in connection with any of the transactions contemplated by
this Agreement. In the event that any finder's fee or broker's commission
shall become payable by any party hereto as a result of another party's
actions which constitute a misrepresentation or breach of warranty under
this Section 12(b), such fee and commission shall be the sole and exclusive
responsibility and liability of such breaching party with no right of
contribution and the breaching party shall indemnify, defend and hold all
other parties harmless in respect of all claims, losses, expenses and
obligations (including reasonable attorneys' fees) to the extent that the
same arise or result from such finder's fee or broker's commission.
(c) Expenses. Buyer will bear both its own legal fees and other
expenses and Seller's legal fees and other expense in connection with the
transactions contemplated by this Agreement, up to $10,000, to be paid at
Closing.
(d) Survival. Except as specified below, all parties agree that the
representations, warranties and agreements contained in this Agreement
shall survive and remain in full force and effect following the Closing,
for a period of eighteen (18) months. This Section 12(d) shall have no
effect on Buyer's obligations under the Employment Contract, the Stock
Option Agreement, the Xxxxx-Xxxxxxxx Share Escrow Agreement, and the
Registration Rights Agreement.
(e) Severability. If any term or provision of this Agreement,
including the exhibits hereto, or the application thereof to any person,
property or circumstances, shall to any extent be invalid or unenforceable,
the remainder of this Agreement, including the exhibits or the application
of such term or provision to persons, property or circumstances other than
those as to which it is invalid and unenforceable, shall not be affected
thereby, and each term and provision of this Agreement and the exhibits
shall be valid and enforced to the fullest extent permitted by law.
(f) Notices. Any notices, requests or consents hereunder shall be
deemed given, and any instrument delivered, two days after they have been
mailed by first class mail, postage prepaid, or twelve hours after such
notice has been sent by telecopier or
23
straight telegram, telegraphic charges prepaid, or upon receipt if delivered
personally, as follows:
To Seller: Xxxxxxx X. Xxxxx
Air Seal Filter Housings, Inc.
0000 Xxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
with simultaneous copy to:
Xxxxx & Xxxxxxxxx L.L.P.
0000 Xxxxxxxxx #000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxx
Telecopier: (000) 000-0000
To Buyer: Flanders Corporation
000 Xxxxxxxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Chief Financial Officer
Telecopier: (000) 000-0000
with simultaneous copy to:
Xxxxx & Xxxxxx
000 X. Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
except that any of the foregoing may from time to time by written notice to the
others designate another address which shall thereupon become its effective
address for the purposes of this Section.
(g) Entire Agreement. This Agreement, including the exhibits,
schedules and documents referred to herein which are a part hereof,
contains the entire understanding of the parties hereto with respect to the
subject matter contained herein and may be amended only by a written
instrument executed by the Buyer and the Seller or their respective
successors or assigns. There are no restrictions, promises, warranties,
covenants, or undertakings other than those expressly set forth or referred
to herein. Any Section headings or table of contents contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
24
(h) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
(i) Binding Effect. This Agreement shall inure to the benefit of
and be binding upon Seller and Buyer and their respective heirs and successors,
but shall not inure to the benefit of anyone other than the parties signing
this Agreement and their respective heirs and successors.
(j) Governing Law. This Agreement shall be governed by the laws of
the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
BUYER:
FLANDERS CORPORATION, a North Carolina
Corporation
By: /s/ Xxxxxx X. Xxxxx
__________________________
/s/ CFO
Its: __________________________
SELLER:
/s/ Xxxxxxx Xxxxx
___________________________________
Xxxxxxx Xxxxx
/s/ Xxx Xxxxx
___________________________________
Xxx Xxxxx
25
EXHIBIT C
XXXXX-XXXXXXXX SHARES ESCROW AGREEMENT
XXXXX-XXXXXXXX SHARES ESCROW AGREEMENT
DATED: June 17, 1996
PARTIES: Flanders Corporation ("Buyer"), Xxxxxxx X. Xxxxx and Xxx Xxxxx
(collectively, "Seller") and Xxxxxxx Xxxxx ("Escrow Agent")
RECITALS
WHEREAS, Buyer and Seller have entered into a Stock Purchase Agreement
dated June 17, 1996 (the "Stock Purchase Agreement"). All capitalized terms
used herein shall have the meaning assigned to them in the Stock Purchase
Agreement.
WHEREAS, to facilitate the performance of the Stock Purchase Agreement,
Buyer shall deliver the Xxxxx-Xxxxxxxx Shares into escrow to be held by the
Escrow Agent. The Escrow Agent has agreed to hold and distribute the Xxxxx-
Xxxxxxxx Shares pursuant to the terms and conditions set forth in this
Agreement. Any term used herein not otherwise defined shall have the meaning
set forth in the Stock Purchase Agreement.
Accordingly, in consideration of the covenants and agreements contained in
this Agreement and in the Stock Purchase Agreement, the parties agree as
follows:
1. ESCROW AGENT. Buyer and Seller hereby appoint and designate Xxxxxxx
Xxxxx as Escrow Agent for the purposes set forth herein and the Escrow Agent
accepts such appointment and designation.
2. DELIVERY OF FLANDERS SHARES. Prior to or simultaneously with the
execution of this Agreement by all parties, Buyer shall deliver to the Escrow
Agent the Xxxxx-Xxxxxxxx Shares, consisting of 150,000 shares of Flanders
Corporation common stock. During the term of this Agreement, the Escrow Agent
shall take no action with respect to the Xxxxx-Xxxxxxxx Shares inconsistent
with the terms of this Agreement, and shall deliver the Xxxxx-Xxxxxxxx Shares
only as permitted by the provisions hereof.
(a) INSTRUCTIONS TO ESCROW AGENT REGARDING RELEASE OF ESCROWED
SHARES. Escrow Agent shall release the Xxxxx-Xxxxxxxx Shares to Xxx Xxxxx (or
his surviving spouse, or to his estate if there is no surviving spouse) upon
written notice signed by both Buyer and Seller (or his surviving spouse, or his
estate if there is no surviving spouse), based on the achievement of certain
performance criteria of Air Seal Filter Housings, Inc. ("Air Seal") as set
forth on the attached Exhibit A, incorporated herein by this reference. If
such criteria are not reached by Air Seal by June 13, 2001, the remaining
Xxxxx-Xxxxxxxx Shares shall be forfeited by Seller, and returned to the Buyer
for cancellation.
(b) IN THE EVENT OF TERMINATION OTHER THAN DEATH OR DISABILITY.
Buyer agrees to execute on the Termination Date a written notice to Escrow
Agent to release all remaining Xxxxx-Xxxxxxxx Shares to Xxx Xxxxx or his
surviving spouse, or to his estate if there is no surviving spouse, if Xxx
Xxxxx'x employment is terminated by Buyer under the Employment Agreement
between Buyer and Xxx Xxxxx, for any reason other than Cause. Xxx Xxxxx agrees
to execute a written notice to Escrow Agent to return all remaining Xxxxx-
Xxxxxxxx Shares to Flanders Corporation for cancellation if his employment is
terminated by Xxx Xxxxx for any reason other than Good Reason, as defined in
the Employment Agreement.
3. NO VOTING OF SHARES. So long as the Xxxxx-Xxxxxxxx Shares are held
in Escrow, the Seller shall not be entitled to exercise any rights of ownership
with respect thereto, including, but not limited to, voting rights or rights to
receive dividends. While the Xxxxx-Xxxxxxxx Shares are held in Escrow, Seller
appoints Xxxxxx Xxxxxxx or his assignee with full power of subscriber to vote
such shares.
4. ESCROW AGENT'S COMPENSATION AND EXPENSES. For its services
hereunder, the Escrow Agent shall be entitled to be reimbursed for all out of
pocket expenses incurred by it in connection with the performance of its duties
under this Agreement. The expenses of the Escrow Agent shall be paid by the
Buyer.
5. ESCROW AGENT'S LIABILITY. The Escrow Agent shall not be liable for
any error of judgment or for any act done or omitted by it in good faith, or
for anything which the Escrow Agent may in good faith do or refrain from doing
in connection herewith, or for any negligence other than its gross negligence;
no liability shall be incurred by the Escrow Agent, if, in the event of any
dispute or question as to its duties or obligations hereunder, it acts in
accordance with Paragraph 6. The Escrow Agent is authorized to act upon any
document believed by it to be genuine and to be signed by the proper parties
and shall incur no liability in so acting. Buyer and the Seller shall jointly
and severally indemnify, defend and hold the Escrow Agent harmless from any and
all loss, damage, or liability, and all expenses (including without limitation,
reasonable legal costs and fees) except to the extent arising out of the gross
negligence or bad faith of the Escrow Agent, incurred, arising out of, or in
connection with, its entering into or performing its duties pursuant to this
Agreement.
6. DISPUTES. In the event of a dispute concerning the subject matter of
this Agreement such that the Escrow Agent deems it necessary for its
protection, the Escrow Agent may (i) deposit the Xxxxx-Xxxxxxxx Shares,
together with any notices received by it, into a court of competent
jurisdiction until such time as a civil action shall have been finally
concluded determining any rights hereunder, (ii) may appoint a new escrow
agent, provided such new agent agrees to be bound by the terms hereof, or (iii)
at its discretion at any time, commence a civil action to interplead any
conflicting demands to a court of competent
2
jurisdiction to determine its rights and the rights of Buyer and Seller.
7. NOTICES. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be given to the Escrow
Agent at Xxxxx & Gallaspia, L.L.P., 0000 Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx
00000, Attention: Xxxxxxx Xxxxx. All notices, requests, demands, other
communications and deliveries pursuant to this Agreement shall be made as
follows:
If to Buyer: Flanders Corporation
000 Xxxxxxxx Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Fax No. (000) 000-0000
If to the Seller:
Xxx Xxxxx
Air Seal Filter Housings, Inc.
0000 Xxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Fax No. (000) 000-0000
or to such other address as a party may have furnished to the others in
writing. Communications shall be effective only when received.
8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, which together shall constitute one instrument.
9. BINDING EFFECT; GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of North Carolina, and
shall be binding upon and inure to the benefit of the parties and their heirs,
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
hereof.
FLANDERS CORPORATION
/s/ Xxxxxx X. Xxxxx
By: ___________________________________
/s/ CFO
Its:___________________________________
3
Seller
/s/ Xxxxxxx X. Xxxxx
___________________________________
Xxxxxxx X. Xxxxx
/s/ Xxx Xxxxx
___________________________________
Xxx Xxxxx
ESCROW AGENT
By: /s/ Xxxxxxx Xxxxx
4
