EXHIBIT 2.5
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STOCK PURCHASE AGREEMENT
BY AND AMONG
WEC COMPANY
("BUYER"),
C. XXXXXXXXXXX XXXXXXX,
XXX X. XXXXXXX,
XXXX X. XXXXXX,
XXXX X. XXXXXX,
XXXXXXX X. XXXXXXXX, AND
XXXXXX X. XXXXXXXX
(COLLECTIVELY, "SHAREHOLDERS")
AND
ZANETIS ENTERPRISES, LLC
(THE "LLC")
DATED AS OF JULY 30, 1999
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ARTICLE I PURCHASE AND SALE 1
1.01 Purchase and Sale of Shares...................................................... 1
ARTICLE II PURCHASE PRICE - PAYMENT 2
2.01 Purchase Price................................................................... 2
2.02 Payment of Purchase Price........................................................ 2
2.03 Determination of Working Capital Value and Indebtedness Amount................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS 5
3.01 Corporate........................................................................ 6
3.02 No Violation..................................................................... 6
3.03 Financial Statements............................................................. 6
3.04 Shareholders..................................................................... 7
3.05 Capitalization................................................................... 7
3.06 Tax Matters...................................................................... 7
3.07 Accounts Receivable.............................................................. 9
3.08 Inventory........................................................................ 9
3.09 Absence of Certain Changes....................................................... 9
3.10 Absence of Undisclosed Liabilities............................................... 11
3.11 No Litigation.................................................................... 11
3.12 Compliance With Laws and Orders.................................................. 11
3.13 Title to and Condition of Properties............................................. 13
3.14 Title Insurance.................................................................. 14
3.15 Surveys.......................................................................... 14
3.16 Bank Accounts.................................................................... 14
3.17 Insurance........................................................................ 14
3.18 Contracts and Commitments........................................................ 15
3.19 Labor Matters.................................................................... 16
3.20 Employee Benefits Plans.......................................................... 17
3.21 Employment Compensation.......................................................... 21
3.22 Proprietary Rights............................................................... 21
3.23 Major Customers and Suppliers.................................................... 22
3.24 Product Warranty and Product Liability........................................... 22
3.25 Affiliates' Relationships to Company............................................. 23
3.26 Spinoff of Xxxxxx Division; Transfer of Xxxxxx Employees and Employee Benefits... 23
3.27 Production Transition............................................................ 24
3.28 Assets Necessary to PA Business.................................................. 24
3.29 Copies of Certain Documents...................................................... 24
3.30 Underlying Documents............................................................. 24
3.31 PA Business of Company........................................................... 24
3.32 Disclosure of Material Facts..................................................... 24
3.33 No Payment of Transaction Expenses............................................... 24
3.34 No Brokers or Finders............................................................ 24
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 25
4.01 Corporate........................................................................ 25
4.02 Authority........................................................................ 25
4.03 No Brokers or Finders............................................................ 25
ARTICLE V POST-CLOSING COVENANTS 25
5.01 Noncompetition; Confidentiality.................................................. 25
5.02 Preparation of Company's Tax Return.............................................. 27
5.03 Underground Storage Tank......................................................... 27
5.04 Year 2000 Compliance............................................................. 27
5.05 Further Assurance................................................................ 28
5.06 Payment of Line of Credit........................................................ 28
ARTICLE VI [Intentionally Omitted] 28
ARTICLE VII RELEASE 28
7.01 By the LLC and Members........................................................... 28
ARTICLE VIII INDEMNIFICATION 28
8.01 By Shareholder................................................................... 28
8.02 By Buyer......................................................................... 29
8.03 Indemnification of Third-Party Claims............................................ 29
8.04 Payment.......................................................................... 30
8.05 Limitations on Indemnification................................................... 31
8.06 Exclusive Remedy................................................................. 32
ARTICLE IX CLOSING 32
9.01 Shareholders' Closing Deliveries................................................. 33
9.02 LLC and Members' Closing Deliveries.............................................. 34
9.03 Buyer's Closing Deliveries....................................................... 34
ARTICLE X MISCELLANEOUS 35
10.01 Schedules........................................................................ 35
10.02 Disclosures and Announcements.................................................... 35
10.03 Assignment; Parties in Interest.................................................. 35
10.04 Law Governing Agreement.......................................................... 35
10.05 Amendment and Modification....................................................... 35
10.06 Notice........................................................................... 35
10.07 Expenses......................................................................... 37
10.08 Entire Agreement................................................................. 37
10.09 Counterparts..................................................................... 37
10.10 Headings......................................................................... 38
10.11 Index of Terms................................................................... 38
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Exhibits
Exhibit A - Form of Legal Opinion of Xxxxx & Xxxxxxx
Exhibit B - Form of Lease Agreement
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Employment Agreement
Exhibit E - Form of Consulting Agreement
Exhibit F - Form of Non-Competition Agreement
Exhibit G - Form of Legal Opinion of Xxxxx & Lardner
Schedules
Schedule 2.03(d) Estimated Closing Balance Sheet
Schedule 3.01 Qualifications
Schedule 3.02 No Violation
Schedule 3.03 Financial Statements
Schedule 3.05 Capitalization
Schedule 3.06 Tax Matters
Schedule 3.07 Accounts Receivable
Schedule 3.08 Inventory
Schedule 3.09 Absence of Certain Changes
Schedule 3.10 Absence of Undisclosed Liabilities
Schedule 3.11 Litigation
Schedule 3.12 Compliance with Laws and Orders
Schedule 3.13 Title to and Condition of Personal and Real Properties
Schedule 3.16 Bank Accounts
Schedule 3.17 Insurance
Schedule 3.18 Contracts and Commitments
Schedule 3.19 Labor Matters
Schedule 3.20 Employee Benefit Plans
Schedule 3.21 Employment Compensation
Schedule 3.22 Proprietary Rights
Schedule 3.23 Major Customers and Suppliers
Schedule 3.24 Product Warranty and Product Liability
Schedule 3.25 Affiliates' Relationships to Company
Schedule 3.26 Xxxxxx Spinoff
Schedule 5.04 Year 2000 Compliance
Schedule 5.06 Payment of Line of Credit
Schedule 8.06 Certain Tax Matters
Schedule 9.01(j) Assets to be Transferred from Zanetis Enterprises
Schedule 9.01(k) Third Party Obligations To Be Released at Closing
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated July 30, 1999, by and
among WEC COMPANY d/b/a Xxxxx Equipment Company, a Delaware corporation
("Buyer"), C. Xxxxxxxxxxx Xxxxxxx, Xxx X. Xxxxxxx, Xxxx X. Xxxxxxx, Xxxx X.
Xxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx (each individually, a
"Shareholder," and, together, "Shareholders"), and Zanetis Enterprises, LLC, an
Illinois limited liability corporation (the "LLC").
RECITALS
A. Alitec Corporation, an Indiana corporation ("Company"), is engaged in
the manufacture and sale of power attachment tools (the "PA Business") and heavy
equipment (together with the PA Business, the "Business"). Shareholders own all
of the issued and outstanding shares (the "Shares") of capital stock of Company.
B. Company's facilities formerly consisted of manufacturing facilities
located in Brownsburg, Indiana and Danville, Indiana (collectively, the
"Facilities"). Company's divisions formerly consisted of a power attachment
division (the "PA Division") and a heavy equipment division (the "Xxxxxx
Division"). As of the date of this Agreement, the PA Division is the sole
division of Company and the PA Business is the only business in which the
Company is engaged.
C. Buyer desires to purchase the outstanding stock of Company which at
the time of such acquisition shall consist solely of the PA Division of Company.
D. Buyer desires to purchase the Shares from Shareholders and
Shareholders desire to sell to Buyer the Shares, upon the terms and conditions
set forth herein.
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows. Capitalized terms are defined herein. An index of defined terms is set
forth in Section 10.11 hereof.
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, on the Closing Date Buyer agrees to purchase from Shareholders,
and Shareholders agree to sell to Buyer, all of the Shares.
ARTICLE II
PURCHASE PRICE - PAYMENT
2.01 Purchase Price.
(a) The purchase price (the "Purchase Price") for the Shares shall
be equal to:
(i) Seven Million Dollars ($7,000,000); plus
(ii) the amount, if any, by which the Working Capital Value as
of the Closing Date exceeds the April 1999 Value; minus
(iii) the amount, if any, by which the April 1999 Value exceeds
the Working Capital Value as of the Closing Date; minus
(iv) the amount, if any, by which the Indebtedness Amount
exceeds Four Million Dollars ($4,000,000) as of the Closing Date.
2.02 Payment of Purchase Price. The Purchase Price shall be paid by Buyer
as follows:
(a) Cash to Escrow Agent. At the Closing, Buyer shall deliver to
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the Escrow Agent, under the Escrow Agreement, the sum of Seven Hundred
Thousand Dollars ($700,000) (the "Escrow Amount").
(b) Cash to Shareholders. At the Closing, Buyer shall deliver to
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Shareholders or their designee the Purchase Price, calculated pursuant to
the Estimated Closing Balance Sheet, less the Escrow Amount.
(c) Post-Closing Adjustment. On or before the fifth business day
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following the final determination of the Final Closing Balance Sheet
("Settlement Date"), the parties shall make the following adjustments:
(i) Shareholders shall pay to Buyer the amount, if any, by
which the Working Capital Value as reflected on the Estimated Closing
Balance Sheet exceeds the Working Capital Value as reflected on the
Final Closing Balance Sheet, or Buyer shall pay to Shareholders the
amount, if any by which the Working Capital Value as reflected on the
Estimated Closing Balance Sheet is less than the Working Capital
Value as reflected on the Final Closing Balance Sheet; and
(ii) Shareholders shall pay to Buyer the amount, if any, by
which the Excess Indebtedness Amount as reflected on the Estimated
Closing Balance Sheet is less than the Excess Indebtedness Amount on
the Final Closing Balance Sheet, or Buyer shall pay to Shareholders
the amount, if any, by which the Excess Indebtedness Amount as
reflected on the Final Closing
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Balance Sheet is less than the Excess Indebtedness Amount as
reflected on the Estimated Closing Balance Sheet.
Any Settlement Date payments shall be made together with interest on the
amount being paid from the Closing Date to the date of payment at a rate of
eight percent (8%) per annum.
(d) Source and Method of Payment. All payments under this Section
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2.02 shallfollowing the be made by wire transfer of immediately available
funds to an account designated by the recipient not less than forty-eight
(48) hours prior to the time for payment specified herein. With respect to
any payments required to be made by Shareholders pursuant to Section
2.02(c), the parties agree that Buyer's initial source of payment will be
C. Xxxxxxxxxxx Xxxxxxx, on behalf of Shareholders, and that Shareholders
(other than C. Xxxxxxxxxxx Xxxxxxx) will have direct payment obligations
only if C. Xxxxxxxxxxx Xxxxxxx fails to cover Shareholders payment
obligations under this Section 2.02.
2.03 Determination of Working Capital Value and Indebtedness Amount.
(a) Definition of April 1999 Value. The term "April 1999 Value"
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shall mean Two Million Four Hundred Fifty-Seven Thousand Dollars
($2,457,000), which sum represents the Working Capital Value of the Company
as of April 30, 1999.
(b) Definition of Working Capital Value. The term "Working Capital
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Value" shall mean the dollar amount by which the sum of current assets of
the PA Division exceeds the sum of current liabilities of the PA Division,
each as reflected in the Estimated Closing Balance Sheet or Final Closing
Balance Sheet, as applicable.
(c) Definition of Indebtedness Amount, Excess Indebtedness Amount
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and Affiliate.
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(i) The term "Indebtedness Amount" shall mean all indebtedness
other than accounts payable and accrued expenses, including both
amounts owed to unaffiliated third parties (including any bank
overdrafts) and indebtedness to any Affiliate outstanding as of the
Closing Date, as reflected in the Estimated Closing Balance Sheet or
Final Closing Balance Sheet, as applicable.
(ii) The term "Excess Indebtedness Amount" shall mean the
amount, if any, by which the Indebtedness Amount exceeds the sum of
$4,000,000.
(iii) As used in this Agreement, the term "Affiliate" shall mean
and include all Shareholders, directors and officers of Company, the
spouse of any such person, any person who would be the heir or
descendant of any such person if such person were not living and any
entity in which any of the foregoing has a direct or indirect
interest, except through ownership of less
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than five percent (5%) of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in
the national over-the-counter market.
(d) Estimated Closing Balance Sheet. For purposes of determining
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the amount to be paid by Buyer at the Closing, the parties have agreed as
follows:
(i) They will use the balance sheet of the PA Division
attached hereto as Schedule 2.03(d), which balance sheet (the
"Estimated Closing Balance Sheet") is stated as of the close of
business on the business day immediately prior to the Closing Date
(hereinafter the "Effective Time"), and
(ii) The Working Capital Value adjustment required by the
Estimated Closing Balance Sheet is a subtraction from the Purchase
Price otherwise payable at Closing in the amount of One Hundred
Twenty Thousand and Eighty-Eight Dollars ($120,088).
(e) Final Closing Balance Sheet. The Final Closing Balance Sheet of
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Company shall be prepared as follows:
(i) Within forty-five (45) days after the Closing Date, Buyer
shall deliver to Shareholders a pro forma balance sheet of the PA
Division as of the Effective Time, prepared in accordance with
generally accepted accounting principles from the books and records
of Company, on a basis consistent with the generally accepted
accounting principles theretofore followed by Company in the
preparation of the Recent Balance Sheet and in accordance with this
Section 2.03, and fairly presenting the financial position of the PA
Division as of the Effective Time. The balance sheet shall be
accompanied by detailed schedules and by a report of Buyer's
independent accounts ("Buyer's Accountants") setting forth (1) the
Working Capital Value and Indebtedness Amount reflected in the
balance sheet, and (2) the amount of any adjustment to the Purchase
Price to be paid and by whom pursuant to Section 2.02(c) hereof,
which adjustment shall be calculated in a manner consistent with the
calculations used to arrive at the number set forth in Section
2.03(d)(ii).
(ii) Within thirty (30) days following the delivery of the
balance sheet referred to in (i) above, Shareholders or their
independent accountants ("Shareholders' Accountants") may object to
any of the information contained in said balance sheet or
accompanying schedules which could affect the necessity or amount of
any adjustment to Purchase Price pursuant to Section 2.02(c) hereof.
Any such objection shall be made in writing and shall state
Shareholders' calculation of Working Capital Value and Indebtedness
Amount.
(iii) In the event of a dispute or disagreement relating to such
balance sheet or accompanying schedules which Buyer and Shareholders
are unable to
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resolve, either party may elect to have such dispute or disagreement
resolved by an accounting firm of nationally recognized standing (the
"Third Accounting Firm") to be mutually selected by Shareholders and
Buyer or, if no agreement is reached, by Shareholders' Accountants
and Buyer's Accountants. The Third Accounting Firm shall make a
resolution of the balance sheet of Company as of the Effective Time
and the calculations of Working Capital Value and Indebtedness
Amount, which shall be final and binding for purposes of this Article
II. The Third Accounting Firm shall be instructed to use every
reasonable effort to perform its services within fifteen (15) days of
submission of the balance sheet to it and, in any case, as soon as
practicable after such submission. The fees and expenses for the
services of the Third Accounting Firm shall be shared by Buyer and
Shareholders as follows:
Shareholders shall pay a percentage of such fees and expenses equal
to A/(A+B) and Buyer shall pay a percentage of such fees and expenses
equal to B/(A+B), where A is equal to the absolute value of the
difference (in dollars) between Working Capital Value and
Indebtedness Amount as finally determined by the Third Accounting
Firm and Working Capital Value and Indebtedness Amount as reflected
in the objection prepared and delivered by Shareholders in accordance
with Section 2.03(d)(ii), and B is equal to the absolute value of the
difference (in dollars) between Working Capital Value and
Indebtedness Amount as finally determined by the Third Accounting
Firm and Working Capital Value and Indebtedness Amount as reflected
in the report prepared and delivered by Buyer and Buyer's Accountants
in accordance with Section 2.03(d)(i). As used in this Agreement, the
term "Final Closing Balance Sheet" shall mean the balance sheet of
Company as of the Effective Time as finally determined for purposes
of this Article II, whether by acquiescence of Shareholders to the
figures supplied by Buyer in accordance with Section 2.03(d)(i), by
negotiation and agreement of the parties, or prepared by the Third
Accounting Firm in accordance with Section 2.03(d)(iii).
(iv) After the Closing Date, Buyer agrees to permit
Shareholders, Shareholders' Accountants, and their respective
representatives, during normal business hours, to have reasonable
access to, and to examine any books and records of Company, which
documents and access are necessary to review the balance sheet
delivered by Buyer in accordance with this Section.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders, jointly and severally, make the following representations and
warranties to Buyer, each of which is true and correct on the date hereof, shall
be unaffected by any investigation heretofore or hereafter made by Buyer, or any
knowledge of Buyer other than as
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specifically disclosed in the Disclosure Schedules (the "Schedules") delivered
to Buyer, and shall survive the Closing of the transactions provided for herein.
3.01 Corporate.
(a) Organization. Company is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Indiana.
(b) Corporate Power. Company has all requisite corporate power and
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authority to own, operate and lease its properties and to carry on the PA
Business as and where such is now being conducted.
(c) Qualification. Company is duly licensed or qualified to do
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business as a foreign corporation, and is in good standing, in each
jurisdiction where the character of the properties owned or leased by it,
or the nature of the Business, makes such licensing or qualification
necessary. The states in which Company is licensed or qualified to do
business are listed in Schedule 3.01.
(d) No Subsidiaries. Company does not own any interest in any
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corporation, partnership or other entity.
3.02 No Violation. Except as set forth on Schedule 3.02, neither the
execution and delivery of this Agreement or the other documents and instruments
to be executed and delivered by Shareholders pursuant hereto, nor the
consummation by Shareholders of the transactions contemplated hereby and thereby
(a) will violate any applicable statute, law, ordinance, rule or regulation
(collectively, "Laws"), or any order, writ, injunction, judgment, plan or decree
(collectively, "Orders"), (b) will require any authorization, consent, approval,
exemption or other action by or notice to any government entity (including,
without limitation, under any "plant closing" or similar law), or (c) will
violate or conflict with, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the assets of Company or the
Shares under any term or provision of the Articles of Incorporation or By-laws
of Company or of any contract, commitment, understanding, arrangement, agreement
or restriction of any kind or character to which Company is a party, or by which
Company, any of its assets or properties, any Shareholder, or any of their
respective assets or properties, may be bound or affected.
3.03 Financial Statements. Included as Schedule 3.03 are true and complete
copies of the financial statements of the PA Division consisting of (i) balance
sheets of the PA Division as of December 31, 1998, December 31, 1997 and
December 31, 1996, and the related statements of income and cash flows for the
years then ended (including the notes contained therein or annexed thereto),
which financial statements have been reported on, and are accompanied by, the
signed, unqualified opinions of Xxxxxxxxx Xxxxxxx & Co., Inc., independent
auditors for Company for such years, and (ii) an unaudited balance sheet of the
PA Division as of June 30, 1999 (the "Recent Balance Sheet"), and the related
unaudited statements of income and cash flows for the six (6) months then ended
and for the
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corresponding period of the prior year (including the notes and schedules
contained therein or annexed thereto). All of such financial statements
(including all notes and schedules contained therein or annexed thereto) have
been prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, for the absence of footnote
disclosure) applied on a consistent basis, have been prepared in accordance with
the books and records of Company, and fairly present, in accordance with
generally accepted accounting principles, the assets, liabilities and financial
position, the results of operations and cash flows of the PA Division as of the
dates and for the years and periods indicated.
3.04 Shareholders.
(a) Power. Each Shareholder has full power, legal right and
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authority to enter into, execute and deliver this Agreement and the other
documents and instruments to be executed and delivered by the parties
pursuant hereto (such other documents sometimes referred to herein as
"Ancillary Documents") and to carry out the transactions contemplated
hereby and thereby.
(b) Validity. This Agreement and each Ancillary Document has been
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duly and validly executed and delivered by each Shareholder, and is the
legal, valid and binding obligation of each such Shareholder, enforceable
in accordance with its terms, except as such may be limited by bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights
generally, and by general equitable principles.
(b) Title. Each Shareholder has, and at Closing, Buyer will
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receive, good and marketable title to the Shares, free and clear of all
Liens including, without limitation, voting trusts or agreements, proxies,
marital or community property interests.
(c) Obligations with Respect to Shares. Company and Shareholders
----------------------------------
have no commitment or obligation to issue, deliver or sell, under any
offer, subscription, stock option agreement, stock bonus agreement, stock
purchase plan, incentive compensation plan, warrant, call, conversion right
or otherwise, any shares of its capital stock or securities, except as
contemplated under this Agreement. There are no shareholder agreements,
voting agreements, voting trusts or other agreements or arrangements which
may have the effect of restricting or limiting the transfer, voting or
other rights associated with the Shares, except as contemplated by this
Agreement.
3.05 Capitalization. Schedule 3.05 sets forth a complete list of all the
authorized capital stock of Company. No shares of such capital stock are issued
or outstanding except for the Shares, which are owned of record and beneficially
by Shareholders in the respective numbers set forth in Schedule 3.05.
3.06 Tax Matters.
(a) Provision For Taxes. The provision made for taxes on the Recent
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Balance Sheet is sufficient for the payment of all federal, state, foreign,
county, local and other income, ad valorem, excise, profits, franchise,
occupation, property,
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payroll, sales, use, gross receipts and other taxes (and any interest and
penalties) and assessments, whether or not disputed at the date of the
Recent Balance Sheet, and for all years and periods prior thereto. Since
the date of the Recent Balance Sheet, Company has not incurred any taxes
other than taxes incurred in the ordinary course of the PA Business
consistent in type and amount with past practices of Company.
(b) Tax Returns Filed. Except as set forth on Schedule 3.06, all
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federal, state, foreign, county, local and other tax returns required to be
filed by or on behalf of Company (including, without limitation, the
Company's 1998 federal tax return) have been timely filed and when filed
were true and correct in all material respects, and the taxes shown as due
thereon were paid or adequately accrued. Company has duly withheld and paid
all taxes which it is required to withhold and pay relating to salaries and
other compensation heretofore paid to the employees of Company.
(c) Tax Audits. The federal and state income tax returns of Company
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have been audited by the Internal Revenue Service (the "IRS") and
appropriate state taxing authorities for the periods and to the extent set
forth in Schedule 3.06, and Company has not received from the IRS or from
the tax authorities of any state, county, local or other jurisdiction any
notice of underpayment of taxes or other deficiency which has not been
paid, nor has the IRS or any of such tax authorities made any objection to
any return or report filed by Company. There are outstanding no agreements
or waivers extending the statutory period of limitations applicable to any
tax return or report of Company.
(d) Consolidated Group. Schedule 3.06 lists every year in which
------------------
Company was a member of an affiliated group of corporations that filed a
consolidated tax return on which the statute of limitations does not bar a
federal tax assessment, and each corporation that has been part of such
group.
(e) Other. Except as set forth in Schedule 3.06, since January 1,
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1990, Company has not (i) filed any consent or agreement under Section
341(f) of the Code, (ii) applied for any tax ruling, (iii) entered into a
closing agreement with any taxing authority, (iv) filed an election under
Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed election
under Section 338(e) of the Code occurred), (v) made any payments, or been
a party to an agreement (including this Agreement) that under any
circumstances could obligate it to make payments that will not be
deductible because of Section 280G of the Code, or (vi) been a party to any
tax allocation or tax sharing agreement.
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3.07 Accounts Receivable. All accounts receivable reflected on the Recent
Balance Sheet, and incurred since the date thereof, represent arm's length sales
actually made in the ordinary course of the PA Business, are subject to no
counterclaim or setoff, and are not in dispute. Schedule 3.07 contains an aged
schedule of accounts receivable included in the Recent Balance Sheet. All
accounts receivable reflected on the Final Closing Balance Sheet will represent
arm's length sales actually made in the ordinary course of the PA Business.
3.08 Inventory. All inventory reflected on the Recent Balance Sheet
consists of a quality and quantity usable and saleable in the ordinary course of
the PA Business, had a commercial value at least equal to the value shown on
such balance sheet and is valued in accordance with generally accepted
accounting principles at the lower of cost (on a FIFO basis) or market. All
inventory purchased since the date of such balance sheet consists of a quality
and quantity usable and saleable in the ordinary course of the PA Business.
Except as set forth in Schedule 3.08, all inventory of the PA Division is
located on premises owned or leased by Company as reflected in this Agreement.
All work-in-process contained in inventory constitutes items in process of
production pursuant to contracts or open orders taken in the ordinary course of
the PA Business, from regular customers of Company with no recent history of
credit problems with respect to Company; neither Company nor any such customer
is in material breach of the terms of any obligation to the other, and no valid
grounds exist for any set-off of amounts billable to such customers on the
completion of orders to which work-in-process relates. All work-in-process is of
a quality ordinarily produced in accordance with the requirements of the orders
to which such work-in-process is identified, and will require no rework with
respect to services performed prior to Closing.
3.09 Absence of Certain Changes. Since April 30, 1999, unless otherwise
described in Schedule 3.09 or consented to in writing by Buyer, Company has
conducted the PA Business only in the ordinary and usual course consistent with
past practice and, without limiting the generality of the foregoing, there has
not been:
(a) Adverse Change. Any adverse change in the financial condition,
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assets, the PA Business, prospects or operations of the PA Division, or the
liabilities of Company;
(b) Damage. Any loss, damage or destruction in excess of $10,000,
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whether covered by insurance or not, affecting the PA Business, Facilities
or properties;
(c) Increase in Compensation. Any increase in excess of $5,000 per
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individual per year or $50,000 for all employees in the aggregate in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company (including, without limitation, any increase
or change pursuant to any bonus, pension, profit sharing, retirement or
other plan or commitment), or any bonus or other employee benefit granted,
made or accrued;
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(d) Labor Disputes. Any labor dispute or disturbance, other than
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individual routine grievances which are not material to the PA Business,
financial condition or results of operations of the PA Division;
(e) Commitments. Any commitment or transaction by Company
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(including, without limitation, any borrowing or capital expenditure) other
than in the ordinary course of the PA Business consistent with past
practice or other than such commitments as will be transferred in
connection with the Xxxxxx Spinoff;
(f) Dividends. Any declaration, setting aside, or payment of any
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dividend or any other distribution in respect of Company's capital stock;
any redemption, purchase or other acquisition by Company of any capital
stock of Company, or any security relating thereto; or any other payment to
any Shareholder in such person's capacity as a shareholder;
(g) Disposition of Property. Any sale, lease or other transfer or
-----------------------
disposition of any properties or assets of Company, except for (i) the
disposition of all the Xxxxxx Assets and (ii) the sale of inventory items
in the ordinary course of the PA Business;
(h) Indebtedness. Any indebtedness for borrowed money incurred,
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assumed or guaranteed by Company;
(i) Liens. Any liens (statutory or otherwise), security interests,
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claims, pledges, licenses, equities, options, conditional sales contracts,
assessments, levies, easements, covenants, reservations, restrictions,
rights-of-way, exceptions, limitations, charges or encumbrances of any
nature whatsoever (collectively, "Liens") made on any of the properties or
assets of Company other than the Xxxxxx Assets;
(j) Amendment of Contracts. Any entering into, amendment or
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termination by Company of any contract, or any waiver of material rights
thereunder, other than (i) in the ordinary course of the PA Business or
(ii) such contracts as will be transferred in connection with the Xxxxxx
Spinoff;
(k) Loans and Advances. Any loan or advance (other than advances
------------------
to employees in the ordinary course of the PA Business for travel and
entertainment in accordance with past practice) to any person including,
but not limited to, any officer, director or employee of Company, or any
Shareholder or Affiliate;
(l) Credit. Any grant of credit to any customer or distributor on
------
terms or into employees amounts more favorable than those which have been
extended to such customer or distributor in the past, any other change in
the terms of any credit heretofore extended, or any other change of
Company's policies or practices with respect to the granting of credit; or
(m) Unusual Events. Any other event or condition not in the
--------------
ordinary course of the PA Business.
-10-
3.10 Absence of Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Recent Balance Sheet or in Schedule 3.10, Company
does not have any liabilities other than commercial liabilities and obligations
incurred since the date of the Recent Balance Sheet in the ordinary course of
the PA Business and consistent with past practice and none of which has or will
have a material adverse effect on the PA Business, financial condition or
operations of Company. Except as and to the extent described in the Recent
Balance Sheet or in Schedule 3.10, no Shareholder has knowledge of any basis for
the assertion against Company of any liability and there are no circumstances,
conditions, happenings, events or arrangements, contractual or otherwise, which
may give rise to Liabilities, except commercial liabilities and obligations
incurred in the ordinary course of the PA Business and consistent with past
practice.
3.11 No Litigation. Except as set forth in Schedule 3.11, there is no
action, suit, arbitration, proceeding, investigation or inquiry, whether civil,
criminal or administrative (collectively, "Litigation") pending or threatened
against Company, its directors (in their capacity as directors of Company), the
PA Business or any of its assets, nor does any Shareholder know, or have grounds
to know, of any basis for any Litigation. Schedule 3.11 also identifies all
Litigation to which Company or any of its directors have been parties since
January 1, 1994. Except as set forth in Schedule 3.11, none of Company, the PA
Business or Company's assets is subject to any Order of any government entity.
3.12 Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 3.12, Company
----------
(including each and all of its operations, practices, properties and
assets) is in compliance with all applicable Laws and Orders, including,
without limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, competition and pricing,
product warranties, zoning, building and sanitation, employment, retirement
and labor relations, product advertising and the Environmental Laws (as
hereinafter defined). Except as set forth in Schedule 3.12, Company has not
received notice of any violation or alleged violation of, and is subject to
no liability for past or continuing violation of, any Laws or Orders. All
reports and returns required to be filed by Company with any government
entity have been filed, and were accurate and complete when filed. Without
limiting the generality of the foregoing:
(i) The operation of the Business as it is now conducted does
not, nor does any condition existing at any of the Facilities, in any
manner constitute a nuisance or other tortious interference with the
rights of any person or persons in such a manner as to give rise to
or constitute the grounds for a suit, action, claim or demand by any
such person or persons seeking compensation or damages or seeking to
restrain, enjoin or otherwise prohibit any aspect of the conduct of
the Business or the manner in which it is now conducted.
-11-
(ii) Company has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such
accounts, and each of such accounts has a positive balance.
(iii) Company has delivered to Buyer copies of all reports of
Company for the past five (5) years required under the federal
Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety laws and regulations. The
deficiencies, if any, noted on such reports have been corrected.
(b) Permits and Licenses. Company has all permits, licenses,
--------------------
approvals, authorizations and consents of all government entities and all
certification organizations required for the conduct of the Business (as
presently conducted) and operation of the Facilities. All such licenses,
permits, approvals, authorizations and consents are described in Schedule
3.12, are in full force and effect and, except as to those permits and
licenses unique to the Xxxxxx Division or otherwise noted on Schedule 3.12,
are assignable to Buyer in accordance with the terms hereof. Except as set
forth in Schedule 3.12, Company (including its operations, properties and
assets) is and has been in compliance with all such permits and licenses,
approvals, authorizations and consents.
(c) Environmental Matters. The applicable Laws relating to
---------------------
pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, releases or threatened releases
of pollutants, contaminants, chemicals or industrial, toxic, hazardous or
petroleum or petroleum-based substances or wastes (collectively, "Waste")
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Waste including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"),
each as amended (collectively, all such laws, together with their state and
local counterparts, "Environmental Laws." Without limiting the generality
of the foregoing provisions of this Section 3.12, Company is in full
compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in the Environmental Laws or contained in any regulations, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder. Except as set forth in
Schedule 3.12, there is no Litigation nor any demand, claim, hearing or
notice of violation pending or threatened against Company relating in any
way to the Environmental Laws or any Order issued, entered, promulgated or
approved thereunder. Except as set forth in Schedule 3.12, there are no
past or present (or, to the best of Shareholders' knowledge, future)
events, conditions, circumstances, activities, practices, incidents,
actions, omissions
-12-
or plans with respect to the operations of the Business, the activities of
Company or the condition of any Real Property currently or previously
leased or owned by Company which may interfere with or prevent compliance
or continued compliance with the Environmental Laws or with any Order
issued, entered, promulgated or approved thereunder, or which may give rise
to any liability, including, without limitation, liability under CERCLA or
similar state or local Laws, or otherwise form the basis of any Litigation,
hearing, notice of violation, study, investigation or remediation based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any Waste.
3.13 Title to and Condition of Properties.
(a) Marketable Title. Company has good and marketable title to all
----------------
of Company's personal property and other assets (other than the Leased Real
Property) used by Company to conduct the PA Business, free and clear of all
mortgages and Liens except those described in Schedule 3.13. None of such
personal property or assets is subject to any restrictions with respect to
the transferability thereof.
(b) No Owned Real Property. Company does not own or have an option
----------------------
to purchase any real property.
(c) Condition. All tangible assets owned by Company and used in
---------
the operation of the PA Division are in good operating condition and
repair, free from any defects (except such minor defects as do not
interfere with the use thereof in the conduct of the normal operations of
the PA Division), have been maintained consistent with the standards
generally followed in the industry and are sufficient to carry on the PA
Business as conducted during the twelve (12) months preceding the date
hereof.
(d) Leased Real Property. Schedule 3.13 sets forth a description of
--------------------
all real property used or occupied by Company (the "Leased Real Property").
Schedule 3.13 also includes copies of each such lease. There are now in
full force and effect duly issued certificates of occupancy permitting the
Leased Real Property and improvements located thereon to be legally used
and occupied as the same are now constituted. Neither the Leased Real
Property nor its use is in violation of any local governmental ordinance,
regulation or building code, nor is there a pending or threatened
investigation regarding a possible violation of any of the foregoing. There
are no claims of adverse possession or prescriptive rights involving any
parcel of the Leased Real Property, and no basis exists for any such claim.
No public improvements have been commenced, and, to Shareholders'
knowledge, no public improvements are planned, which may result in special
assessments against, or which may otherwise materially adversely affect,
any Leased Real Property. No portion of any parcel of the Leased Real
Property has been used as a landfill or for storage or landfill of
hazardous or toxic materials. No Shareholder has notice or knowledge of any
(i) Order requiring repair, alteration, or correction of any existing
condition
-13-
affecting any Leased Real Property or the systems or improvements thereat,
(ii) condition or defect which could give rise to an Order of the sort
referred to in "(i)" above, or (iii) underground storage tanks (except as
referenced in Section 5.03), or any structural, mechanical, or other
defects of material significance affecting any Leased Real Property or the
systems or improvements thereat (including, but not limited to, inadequacy
for normal use of mechanical systems or disposal or water systems at or
serving the Leased Real Property).
(e) No Condemnation or Expropriation. Neither the whole nor any
--------------------------------
portion of the property or any other assets of Company is subject to any
Order to be sold or is being condemned, expropriated or otherwise taken by
any government entity with or without payment of compensation therefor,
nor, to the best of Shareholders' knowledge, has any such condemnation,
expropriation or taking been proposed, nor has Company agreed or committed
to dedicate any part of the Leased Real Property.
(f) No Omission of Material Fact regarding the Leased Real Property.
---------------------------------------------------------------
Company and Shareholders represent that Company or Shareholders have
delivered or disclosed to Buyer all information known to Company or
Shareholders regarding the Leased Real Property, and that Company and
Shareholders have not failed to deliver any material fact of which either
of such parties has knowledge regarding the condition of the Leased Real
Property.
3.14 Title Insurance. Shareholders have provided to Buyer correct and
complete copies of Company's leasehold title insurance policies.
3.15 Surveys. Shareholders have provided to Buyer correct and complete
copies of the most recent surveys of all Leased Real Property.
3.16 Bank Accounts. Set forth in Schedule 3.16 is a list of each bank in
which Company has an account or safe deposit box, the name and number of each
such account or box and the names of all persons authorized to draw thereon or
who have access thereto, with the amounts they are authorized to draw.
3.17 Insurance. Set forth in Schedule 3.17 is a complete and accurate list
and description of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the Business and properties of Company, true and correct copies of
which have heretofore been delivered to Buyer. Schedule 3.17 includes, without
limitation, the carrier, the description of coverage, the limits of coverage,
retention or deductible amounts, amount of annual premiums, date of expiration
and the date through which premiums have been paid with respect to each such
policy, and any pending claims in excess of $10,000. All such policies are
valid, outstanding and enforceable policies and provide insurance coverage for
the properties, assets and operations of Company, of the kinds, in the amounts
and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the
-14-
date hereof. Schedule 3.17 indicates each policy as to which (a) the coverage
limit has been reached or (b) the total incurred losses to date equal 75% or
more of the coverage limit. No notice of cancellation or termination has been
received with respect to any such policy. Company has not been refused any
insurance with respect to any aspect of the operations of the Business nor has
its coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last three years.
Company has duly and timely made all claims it has been entitled to make under
each policy of insurance. All products liability and general liability policies
maintained by or for the benefit of Company have been "occurrence" policies and
not "claims made" policies. There is no claim by Company pending under any such
policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies, and no Shareholder knows of any basis for denial
of any claim under any such policy.
3.18 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in Schedule 3.13,
--------------------
Company has no leases of real property.
(b) Personal Property Leases. Except as set forth in Schedule 3.18,
------------------------
Company has no leases of personal property involving consideration or other
expenditure in excess of $10,000 or involving performance over a period of
more than six (6) months.
(c) Purchase Commitments. Company has no purchase commitments for
--------------------
inventory items or supplies that, together with amounts on hand, constitute
in excess of six (6) months normal usage, or which are at an excessive
price.
(d) Sales Commitments. Company has no sales contracts or
-----------------
commitments to customers or distributors (collectively, "Sales
Commitments") except those made in the ordinary course of the Business, at
arm's length and none of such Sales Commitments is for a sales price which
would result in a loss, in the aggregate for any one customer, to Company.
(e) Contracts With Affiliates and Certain Others. Except as
--------------------------------------------
disclosed in Schedule 3.18, Company has no agreement, understanding,
contract or commitment (written or oral) with any Affiliate or any other
officer, employee, agent, consultant, distributor, dealer or franchisee
that is not cancelable by Company on notice of not longer than thirty (30)
days without liability, penalty or premium of any nature or kind
whatsoever.
(f) Powers of Attorney. Company has not given a power of attorney,
------------------
which is currently in effect, to any person, firm or corporation for any
purpose whatsoever.
(g) Collective Bargaining Agreements. Company is not a party to
--------------------------------
any collective bargaining agreements with any unions, guilds, shop
committees or other collective bargaining groups.
-15-
(h) Loan Agreements. Except as set forth in Schedule 3.18, Company
---------------
is not obligated under any loan agreement, promissory note, letter of
credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise.
(i) Guarantees. Except as disclosed on Schedule 3.18, Company has
----------
not guaranteed the payment or performance of any person, firm or
corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the
obligations of any person.
(j) Contracts Subject to Renegotiation. Company is not a party to
----------------------------------
any contract with any government entity body which is subject to
renegotiation.
(k) Burdensome or Restrictive Agreements. Company is not a party to
------------------------------------
nor is it bound by any agreement, deed, lease or other instrument which is
so burdensome as to materially affect or impair the PA Business or
operation of the PA Division. Without limiting the generality of the
foregoing, Company is not a party to nor is it bound by any agreement
requiring Company to assign any interest in any trade secret or proprietary
information, or prohibiting or restricting Company from competing in any
business or geographical area or soliciting customers or otherwise
restricting it from carrying on the PA Business anywhere in the world.
(l) Other Material Contracts. Company has no lease, license,
------------------------
contract or commitment of any nature involving consideration or other
expenditure in excess of $50,000 or involving performance over a period of
more than six (6) months, or which is otherwise individually material to
the operations of Company, except as explicitly described in Schedule 3.18
or in any other Schedule.
(m) No Default. Company is not in default under any lease, contract
----------
or commitment, nor has any event or omission occurred which through the
passage of time or the giving of notice, or both, would constitute a
default thereunder or cause the acceleration of any of Company's
obligations or result in the creation of any Lien on the Facilities or any
of the assets owned, used or occupied by Company. No third party is in
default under any lease, contract or commitment to which Company is a
party, nor has any event or omission occurred which, through the passage of
time or the giving of notice, or both, would constitute a default
thereunder or give rise to an automatic termination, or the right of
discretionary termination, thereof.
3.19 Labor Matters. Except as set forth in Schedule 3.19, within the last
five (5) years Company has not experienced any labor disputes, union
organization attempts or any work stoppage due to labor disagreements in
connection with the Business. Except to the extent set forth in Schedule 3.19,
(a) Company is in compliance with all applicable Laws regarding employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (b) there is no unfair labor
practice charge or complaint against Company pending or threatened; (c) there is
no labor strike, dispute, request for representation, slowdown or stoppage
actually pending or threatened against or affecting Company nor any secondary
boycott with respect to products of
-16-
Company; (d) no question concerning representation has been raised or is
threatened respecting the employees of Company; (e) no grievance which might
have a material adverse effect on the Business or operation of Company, nor any
arbitration proceeding arising out of or under collective bargaining agreements,
is pending and no such claim therefor exists; (f) there are no administrative
charges or court complaints against Company concerning alleged employment
discrimination or other employment related matters pending or threatened before
the U.S. Equal Employment Opportunity Commission or any government entity or
before any federal or state court; and (g) there are no investigations,
complaints, citations or other proceedings threatened or pending against Company
by the U.S. Occupational, Safety and Health Administration or any state agency
concerning any health or safety matters.
3.20 Employee Benefits Plans.
(a) Disclosure. Schedule 3.20 sets forth all pension, thrift,
----------
savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, cafeteria plan (as defined in Section 125 of
the Code), reimbursement plans for medical expenses or dependent care,
qualified transportation or parking benefit program, adoption or education
assistance program, stock purchase, stock option, stock appreciation, stock
bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and
any employment or consulting contracts, "golden parachutes," collective
bargaining agreements, severance agreements or plans, vacation and sick
leave plans, programs, arrangements and policies, including, without
limitation, all "employee benefit plans" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (such act,
"ERISA")), all employee manuals, and all written or binding oral statements
of policies, practices or understandings relating to employment, which are
provided to, for the benefit of, or relate to, any persons employed by
Company. The items described in the foregoing sentence are hereinafter
sometimes referred to collectively as "Employee Plans/Agreements." True and
correct copies of all the Employee Plans/Agreements, including all
amendments thereto, have heretofore been provided to Buyer. Each of the
Employee Plans/Agreements is identified on Schedule 3.20, to the extent
applicable, as one or more of the following: an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), a "defined benefit plan" (as
defined in Section 414 of the Code), an "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and/or as a plan intended to be
qualified under Section 401 of the Code. No Employee Plan/Agreement is a
"multi-employer plan" (as defined in Section 4001 of ERISA), and Company
has never contributed to, or been obligated to contribute to, any such
multi-employer plan.
(b) Terminations, Proceedings, Penalties, etc. With respect to each
-----------------------------------------
employee benefit plan (including, without limitation, the Employee
Plans/Agreements) that is subject to the provisions of Title IV of ERISA
and with respect to which Company or any of its assets may, directly or
indirectly, be subject to any liability, contingent or otherwise, or the
imposition of any Lien (whether by reason of the
-17-
complete or partial termination of any such plan, the funded status of any
such plan, any "complete withdrawal" (as defined in Section 4203 of ERISA)
or "partial withdrawal" (as defined in Section 4205 of ERISA) by any person
from any such plan, or otherwise):
(i) no such plan has been terminated so as to subject,
directly or indirectly, any assets of Company to any liability,
contingent or otherwise, or the imposition of any lien under Title IV
of ERISA;
(ii) no proceeding has been initiated or threatened by any
person (including the Pension Benefit Guaranty Corporation ("PBGC"))
to terminate any such plan;
(iii) no condition or event currently exists or currently is
expected to occur that could subject, directly or indirectly, any
assets of Company to any liability, contingent or otherwise, or the
imposition of any lien under Title IV of ERISA, whether to the PBGC
or to any other person or otherwise on account of the termination of
any such plan;
(iv) if any such plan were to be terminated as of the Closing
Date, no assets of Company would be subject, directly or indirectly,
to any liability, contingent or otherwise, or the imposition of any
lien under Title IV of ERISA;
(v) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred with respect to any such plan;
(vi) no such plan which is subject to Section 302 of ERISA or
Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code, respectively), whether or not waived; and
(vii) no such plan is a multi-employer plan or a plan described
in Section 4064 of ERISA.
(c) Prohibited Transactions, etc. There have been no "prohibited
----------------------------
transactions" within the meaning of Section 406 or 407 of ERISA or Section
4975 of the Code for which a statutory or administrative exemption does not
exist with respect to any Employee Plan/Agreement, and no event or omission
has occurred in connection with which Company or any of its assets or any
Employee Plan/Agreement, directly or indirectly, could be subject to any
liability under ERISA, the Code or any other Law or Order applicable to any
Employee Plan/Agreement, or under any agreement, instrument, Law or Order
pursuant to or under which Company has agreed to indemnify or is required
to indemnify any person against liability incurred under any such Law or
Order.
-18-
(d) Full Funding. The funds available under each Employee
------------
Plan/Agreement which is intended to be a funded plan exceed the amounts
required to be paid, or which would be required to be paid if such Employee
Plan/Agreement were terminated, on account of rights vested or accrued as
of the Closing Date (using the actuarial methods and assumptions then used
by Company's actuaries in connection with the funding of such Employee
Plan/Agreement).
(e) Controlled Group; Affiliated Service Group; Leased Employees.
------------------------------------------------------------
Company has never been a member of a controlled group of corporations as
defined in Section 414(b) of the Code or in common control with any
unincorporated trade or business as determined under Section 414(c) of the
Code. Company has never been a member of an "affiliated service group"
within the meaning of Section 414(m) of the Code. There are not and never
have been any leased employees within the meaning of Section 414(n) of the
Code who perform services for Company, and no individuals are expected to
become leased employees with the passage of time.
(f) Payments and Compliance. With respect to each Employee
-----------------------
Plan/Agreement, (i) all payments due from Company to date have been made
and all amounts properly accrued to date as liabilities of Company which
have not been paid have been properly recorded on the books of Company and
are reflected in Company's balance sheets; (ii) Company has complied with,
and each such Employee Plan/Agreement conforms in form and operation to,
all applicable laws and regulations, including but not limited to ERISA and
the Code, in all respects and all reports and information relating to such
Employee Plan/Agreement required to be filed with any governmental entity
have been timely filed; (iii) each Employee Plan/Agreement which is a
"group health plan" (as defined in Section 5000(b) of the Code) has been
operated in accordance with the group health plan continuation coverage
requirements and portability requirements of the Code and ERISA; (iv) all
reports and information relating to each such Employee Plan/Agreement
required to be disclosed or provided to participants or their beneficiaries
have been timely disclosed or provided; (v) each such Employee
Plan/Agreement which is intended to qualify under Section 401 of the Code
has received a favorable determination letter from the Internal Revenue
Service with respect to such qualification, its related trust has been
determined to be exempt from taxation under Section 501(a) of the Code, and
nothing has occurred since the date of such letter that has or is likely to
adversely affect such qualification or exemption; (vi) there are no
actions, suits or claims pending (other than routine claims for benefits)
or, to the best of Shareholders' knowledge, threatened with respect to such
Employee Plan/Agreement or against the assets of such Employee
Plan/Agreement; (vii) no investigation, review or audit of any Employee
Plan/Agreement by the IRS, United States Department of Labor or other
government entity is in progress, pending, scheduled or noticed; and (viii)
no Employee Plan/Agreement is a plan which is established and maintained
outside the United States primarily for the benefit of individuals
substantially all of whom are nonresident aliens.
-19-
(g) Post-Retirement Benefits. No Employee Plan/Agreement provides
------------------------
benefits, including, without limitation, death or medical benefits (whether
or not insured) with respect to current or former Company's employees
beyond their retirement or other termination of service other than (i)
coverage mandated by applicable law, (ii) death or retirement benefits
under any Employee Plan/Agreement that is an employee pension benefit plan,
(iii) deferred compensation benefits accrued as liabilities on the books of
Company (including the Recent Balance Sheet), (iv) disability benefits
under any Employee Plan/Agreement that is an employee welfare benefit plan
and which have been fully provided for by insurance or otherwise or (v)
benefits in the nature of severance pay.
(h) No Triggering of Obligations. The consummation of the
----------------------------
transactions contemplated by this Agreement will not (i) entitle any
current or former employee of Company to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee or (iii)
result in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available.
(i) Delivery of Documents. There has been delivered to Buyer, with
---------------------
respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required under ERISA, with
respect to each such Employee Plan/Agreement for the last two (2)
years;
(ii) a copy of the summary plan description, together with each
summary of material modifications, required under ERISA with respect
to such Employee Plan/Agreement, all material employee communications
relating to such Employee Plan/Agreement, and, unless the Employee
Plan/Agreement is embodied entirely in an insurance policy to which
Company is a party, a true and complete copy of such Employee
Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded through a trust
or any third party funding vehicle (other than an insurance policy),
a copy of the trust or other funding agreement and the latest
financial statements thereof;
(iv) the most rece nt determination letter received from the
IRS with respect to each Employee Plan/Agreement that is intended to
be a "qualified plan" under Section 401 of the Code; and
(v) a copy of any investment management agreement which
delegates authority for investment of the assets of any Employee
Plan/Agreement.
(vi) With respect to each Employee Plan/Agreement for which an
annual report has been filed and delivered to Buyer pursuant to
Section
-20-
3.17(i)(i) hereof, no material adverse change has occurred with
respect to the matters covered by the latest such annual report since
the date thereof.
(j) Future Commitments. Company has not announced any plan or
------------------
legally binding commitment to create any additional Employee
Plans/Agreements or to amend or modify any existing Employee
Plan/Agreement.
3.21 Employment Compensation. Schedule 3.21 contains a true and correct
list of all employees to whom Company is paying compensation, including bonuses
and incentives, at an annual rate in excess of $50,000 for services rendered or
otherwise; and in the case of salaried employees such list identifies the
current annual rate of compensation for each employee and in the case of hourly
or commission employees identifies certain reasonable ranges of rates and the
number of employees falling within each such range.
3.22 Proprietary Rights.
(d) Schedule 3.22 constitutes a full and complete list of all
trademarks, trade names, service marks, copyrights and patents, or
applications therefor, owned or used by Company in the PA Business. Company
owns or possesses adequate licenses or other rights to use all patents,
patent applications, trademarks, trademark registrations, applications for
trademark registrations, trade secrets, service marks, service xxxx
registrations, applications for service xxxx registrations, trade names,
labels, slogans, claims of copyright, copyright registrations, applications
for copyright registrations, copyrights, drawings, designs, proprietary
know-how or information, or other rights with respect thereto (collectively
referred to as "Proprietary Rights"), used in the PA Business or operation
of the PA Division (as so used, the "PA Proprietary Rights"), and the same
are sufficient to conduct the PA Business as it has been and is now being
conducted.
(e) Company warrants that all maintenance and renewal fees have been
paid in full and according to schedule.
(f) The operations of Company do not conflict with or infringe, and
no one has asserted to Company or any Shareholder that such operations
conflict with or infringe, any Proprietary Rights owned, possessed or used
by any third party. To the knowledge of each Shareholder, there are no
third parties whose operations conflict with or infringe, nor has anyone
asserted that such operations conflict with or infringe, any Proprietary
Rights owned, possessed or used by Company.
(a) There are no pending claims, and no Shareholder has any
knowledge of any threatened claims, against Company relating to whether the
Products and services of Company are Year 2000 Compliant.
-21-
3.23 Major Customers and Suppliers.
(a) Major Customers. Schedule 3.23 contains a list of the ten (10)
---------------
largest customers, including distributors, of the PA Division for each of
the two (2) most recent fiscal years (determined on the basis of the total
dollar amount of net sales) showing the total dollar amount of net sales to
each such customer during each such year. No Shareholder has any knowledge
or information of any facts indicating, nor any other reason to believe,
that any of the customers listed on Schedule 3.23 will not continue to be
customers of Company after the Closing at substantially the same level of
purchases as heretofore.
(b) Major Suppliers. Schedule 3.23 contains a list of the ten (10)
---------------
largest suppliers to the PA Division for each of the two (2) most recent
fiscal years (determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from each such
supplier during each such year. No Shareholder has any knowledge or
information of any facts indicating, nor any other reason to believe, that
any of the suppliers listed on Schedule 3.23 will not continue to be
suppliers to Company after the Closing and will not continue to supply
Company with substantially the same quantity and quality of goods at
competitive prices.
(c) Dealers and Distributors. Schedule 3.23 contains a list of all
------------------------
sales representatives, dealers, distributors and franchisees of the PA
Division, together with representative copies of all sales representative,
dealer, distributor and franchise contracts and policy statements, and a
description of all substantial modifications or exceptions.
3.24 Product Warranty and Product Liability. Schedule 3.24 contains a
true, correct and complete copy of Company's standard warranty or warranties for
sales of Products, and, except as stated therein, there are no warranties,
commitments or obligations with respect to the return, repair or replacement of
Products. Schedule 3.24 sets forth the estimated aggregate annual cost to
Company of performing warranty obligations for customers of the PA Division for
each of the five (5) preceding fiscal years and the current fiscal year to the
date of the Recent Balance Sheet. Schedule 3.24 contains a description of all
product liability claims and similar Litigation relating to Products
manufactured or sold, or services rendered, which are presently pending or which
to any Shareholder's knowledge are threatened, or which have been asserted or
commenced against Company within the last five (5) years, in which a party
thereto either requests injunctive relief or alleges damages in excess of
$50,000 (whether or not covered by insurance). There are no defects in design,
construction or manufacture of Products which would adversely affect performance
or create an unusual risk of injury to persons or property. None of the Products
has been the subject of any replacement, field fix, retrofit, modification or
recall campaign and, to any Shareholder's knowledge, no facts or conditions
exist which could reasonably be expected to result in such a recall campaign.
The Products have been designed, manufactured and labeled so as to meet and
comply with all governmental standards and specifications currently in effect,
and have received all governmental approvals necessary to allow their sale and
use. The term
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"Products" means any and all products currently or at any time previously
manufactured, distributed or sold by Company, or by any predecessor of Company
under any brand name or xxxx under which products are or have been manufactured,
distributed or sold by Company.
3.25 Affiliates' Relationships to Company.
(a) Contracts With Affiliates. All leases, contracts, agreements or
-------------------------
other arrangements between Company and any Affiliate are described on
Schedule 3.25.
(b) No Adverse Interests. None of the Affiliates have any direct or
--------------------
indirect interest in (i) any entity which does business with Company or is
competitive with the PA Business, or (ii) any property, asset or right
which is used by Company in the conduct of the PA Business.
(c) Obligations. All obligations of any Affiliate to Company, and
-----------
all obligations of Company to any Affiliate, are listed on Schedule 3.25.
3.26 Spinoff of Xxxxxx Division; Transfer of Xxxxxx Employees and Employee
Benefits.
(a) All of the Xxxxxx Assets and Xxxxxx Liabilities, and the
business of the Xxxxxx Division, have been transferred by Company ("New
Xxxxxx"). "Xxxxxx Assets" shall mean all assets of Company relating
exclusively to the Xxxxxx Division. "Xxxxxx Liabilities" shall mean all
payment obligations, contingent liabilities and other liabilities of
Company, however and whenever incurred, and whenever due and payable,
arising out of, as a result of, or related to the operations of the Xxxxxx
Division. The foregoing transfer of Xxxxxx Assets and the Xxxxxx
Liabilities is referred to in this Agreement as the "Xxxxxx Spinoff."
(b) Company has terminated the employment of certain employees set
forth on Schedule 3.26 hereto, and such employees have been transferred to
New Xxxxxx. Company has transferred the employment of certain employees set
forth on Schedule 3.26 from the Xxxxxx Division to the PA Division. Company
represents and warrants that those employees transferred from the Xxxxxx
Division to the PA Division are necessary to the operation of the PA
Business.
(c) The Employee Benefit Plans of Company shall be transferred to
New Xxxxxx or retained by Company, as described on Schedule 3.26.
(d) The Xxxxxx Division shall be released from any and all
obligations relating to an intra-company loan from the PA Division, in an
amount, as of June 30, 1999, equal to Three Million Five Hundred Three
Thousand Dollars.
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3.27 Production Transition. Company has transferred the vibratory roller
operations and related PA Division Products from Company's Danville, Indiana
Facility to Company's Brownsburg, Indiana Facility.
3.28 Assets Necessary to PA Business. Upon the Xxxxxx Spinoff and the
transfer of the assets referenced in Section 9.01(j), the Company will own all
property and assets, tangible and intangible, and all leases, licenses and other
agreements, which are necessary to permit Buyer to carry on the PA Business as
presently conducted.
3.29 Copies of Certain Documents. Shareholders have heretofore delivered
to Buyer true and complete copies of: (a) all agreements entered into by
Company, if any, providing for the acquisition or disposition of businesses or
product lines; (b) all federal and other tax returns filed by Company and, to
the extent such returns relate to the properties, assets or operations of
Company, by any Shareholder, for the years ended on December 31, 1998, December
31, 1997, and December 31, 1996; and (c) a complete list of all investments of
Company, if any, in marketable or other securities (whether debt or equity).
3.30 Underlying Documents. Any underlying documents listed or described in
this Agreement or in the attached Schedules have heretofore been furnished to
Buyer or its representatives. All such documents furnished to Buyer or its
representatives are true and complete copies, and there are no amendments or
modifications thereto, except as expressly noted in the Schedules in which such
documents are listed, described and/or incorporated. The minute books of Company
contain full, complete and accurate records of all meetings and other corporate
actions taken by the directors and Shareholders of Company.
3.31 PA Business of Company. To the knowledge of Shareholders, there are
no conditions existing with respect to the markets, products, Facilities or
personnel of Company which would reasonably be expected to materially and
adversely affect the PA Business or prospects of the PA Division, other than
such conditions as may affect the industry in general in which Company
participates.
3.32 Disclosure of Material Facts. Shareholders have disclosed to Buyer
all material facts relating to the condition (financial or otherwise), of the
Business, net worth, assets, properties, liabilities, operations or future
prospects of Company. The representations and warranties contained in Article
III of this Agreement and in the Schedules hereto, and any other documents or
information furnished to Buyer by any Shareholder do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained herein or therein not misleading.
3.33 No Payment of Transaction Expenses. Shareholders have not caused nor
have taken any action which will cause Company to pay, or reimburse
Shareholders, for any expenses incurred by Company or Shareholders pursuant to
or otherwise in connection with the transactions contemplated by this Agreement.
3.34 No Brokers or Finders. Neither Company nor any of its directors,
officers, employees, Shareholders or agents have retained, employed or used any
broker or finder in
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connection with the transaction provided for herein or in connection with the
negotiation thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Shareholders,
each of which is true and correct on the date hereof, shall be unaffected by any
investigation heretofore or hereafter made by Shareholders or any notice to
Shareholders, and shall survive the Closing of the transactions provided for
herein.
4.01 Corporate.
(a) Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware.
(b) Corporate Power. Buyer has all requisite corporate power to
---------------
enter into this Agreement and the other documents and instruments to be
executed and delivered by Buyer and to carry out the transactions
contemplated hereby and thereby.
4.02 Authority. The execution and delivery of this Agreement and the
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by the board of directors of Buyer. No
other corporate act or proceeding on the part of Buyer is necessary to authorize
this Agreement, any of the Ancillary Documents, or the consummation of the
transactions contemplated hereby and thereby. When executed and delivered, each
of this Agreement and each Ancillary Document constitutes a valid and binding
agreement of Buyer, enforceable in accordance with its terms, except as such may
be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
4.03 No Brokers or Finders. Neither Buyer nor any of its directors,
officers, employees or agents have retained, employed or used any other broker
or finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
ARTICLE V
POST-CLOSING COVENANTS
5.01 Noncompetition; Confidentiality. Subject to the Closing, and as an
inducement to Buyer to execute this Agreement and complete the transactions
contemplated hereby, and in order to preserve the goodwill associated with the
PA Business being acquired pursuant to this Agreement, each Shareholder hereby
covenants and agrees as follows:
(a) Covenant Not to Compete. For a period of five (5) years from the
-----------------------
Closing Date, no Shareholder will, directly or indirectly:
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(i) engage in, continue in or carry on any business which
competes with the PA Business or is substantially similar thereto,
including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business organization
which is so engaged;
(ii) consult with, advise or assist in any way, whether or not
for consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of Buyer
in any aspect with respect to the PA Business including, but not
limited to, advertising or otherwise endorsing the products of any
such competitor; soliciting customers or otherwise serving as an
intermediary for any such competitor; loaning money or rendering any
other form of financial assistance to or engaging in any form of
business transaction on other than an arm's length basis with any
such competitor;
(iii) offer employment to any employee of Buyer without the
prior written consent of Buyer; or
(iv) engage in any practice the purpose of which is to evade
the provisions of this covenant not to compete or to commit any act
which adversely affects the PA Business; provided, however, that the
foregoing shall not prohibit the ownership of securities of
corporations which are listed on a national securities exchange or
traded in the national over-the-counter market in an amount which
shall not exceed five percent (5%) of the outstanding shares of any
such corporation. The parties agree that the geographic scope of this
covenant not to compete shall extend throughout North and South
America and Europe, and Shareholders acknowledge that such territory
is reasonable in light of the PA Business. The parties agree that
Buyer may sell, assign or otherwise transfer this covenant not to
compete, in whole or in part, to any person, corporation, firm or
entity that purchases all or part of the PA Business or the Shares.
In the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as
to duration, geographic scope or activity, it is expressly agreed
that this covenant not to compete shall be construed so that the
remaining provisions shall not be affected, but shall remain in full
force and effect, and any such over broad provisions shall be deemed,
without further action on the part of any person, to be modified,
amended and/or limited, but only to the extent necessary to render
the same valid and enforceable in such jurisdiction.
(b) Covenant of Confidentiality. No Shareholder shall at any time
---------------------------
subsequent to the Closing, except as explicitly requested by Buyer, (i) use
for any purpose, (ii) disclose to any person, or (iii) keep or make copies
of documents, tapes, discs or programs containing, any confidential
information concerning the PA Division. For purposes hereof, "confidential
information" shall mean and include, without limitation, all PA Proprietary
Rights in which has an interest, all customer
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lists and customer information, and all other information concerning the PA
Division's processes, apparatus, equipment, packaging, products, marketing
and distribution methods, not already in the public domain.
(c) Equitable Relief for Violations. Each Shareholder agrees that
-------------------------------
the provisions and restrictions contained in this Section 5.01 are
necessary to protect the legitimate continuing interests of Buyer in
acquiring the PA Division, and that any violation or breach of these
provisions will result in irreparable injury to Buyer for which a remedy at
law would be inadequate and that, in addition to any relief at law which
may be available to Buyer for such violation or breach and regardless of
any other provision contained in this Agreement, Buyer shall be entitled to
injunctive and other equitable relief as a court may grant after
considering the intent of this Section 5.01.
5.02 Preparation of Company's Tax Return. Buyer shall prepare Company's
federal and state income tax return for the period beginning January 1, 1999 and
ending on the Closing Date.
5.03 Underground Storage Tank. Following the Closing, the Shareholders and
the LLC will comply fully with applicable Indiana Environmental Laws with
respect to the closure or removal of any underground storage tank located on the
premises of the Brownsburg Facility.
5.04 Year 2000 Compliance.
(a) Current Status of Year 2000 Compliance. The parties acknowledge
--------------------------------------
that Company's internal systems are not, as of the Closing, fully Year 2000
Compliant, and that the Shareholders have not conducted inquiries to
determine whether Company's major suppliers and vendors and all Products
and services marketed by Company are fully Year 2000 Compliant. To be "Year
2000 Compliant" (i) an internal system or a product or service must at all
times before, during and after January 1, 2000, accurately process and
handle date and time data (including, but not limited to calculating,
comparing and sequencing) from, into and between the twentieth and twenty-
first centuries, and the years 1999 and 2000, including leap year
calculations, to the extent that other information technology used in
combination with such internal systems and such products and services
properly exchange date/time data with it, and (ii) to the extent any such
internal systems and such products and services must perform as a system,
such internal systems and such products and services used in combination
with other such internal systems and such products and services,
respectively, must properly exchange date/time data with them in accordance
with clause (i).
(b) Post-Closing Costs of Year 2000 Compliance. Shareholders will
------------------------------------------
reimburse Buyer for all reasonable costs incurred in good faith as a result
of (i) the installation and start-up of the software described in Schedule
5.04; and (ii) the application of Buyer's Y2K readiness campaign to the
Company. To the extent not
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reimbursed by Shareholders, such costs shall be subject to offset against
any special bonus amounts which may hereafter become due and owing under
the Employment Agreement.
5.05 Further Assurance. From time to time, at Buyer's request and without
further consideration, Shareholders will execute and deliver to Buyer such
documents and take such other action as Buyer may reasonably request in order to
consummate more effectively the transactions contemplated hereby and to vest in
Buyer good, valid and marketable title to the Shares.
5.06 Payment of Line of Credit. Contemporaneously with the Closing, Buyer
shall cause the payment obligations associated with Company's obligations to
Peoples Bank, set forth on Schedule 3.18, to be satisfied.
ARTICLE VI
[Intentionally Omitted]
ARTICLE VII
RELEASE
7.01 By the LLC and Members. The LLC, C. Xxxxxxxxxxx Xxxxxxx and Xxx X.
Xxxxxxx (the "Members") each, personally and on behalf of such person's heirs,
successors and assigns, hereby releases, remises, forever discharges and
covenants not to xxx Buyer or any of Buyer's Affiliates, of and from all manner
of Claims arising from or based upon any obligations and liabilities relating to
the Town of Brownsburg, Indiana Variable Rate Demand Economic Development
Revenue Bonds, Series 1998 (Zanetis Enterprises, L.L.C. Project) (the "Bonds")
including loss of tax exemption.
ARTICLE VIII
INDEMNIFICATION
8.01 By Shareholder. Subject to the terms and conditions of this Article
VIII, each Shareholder, jointly and severally, hereby agrees to indemnify,
defend and hold harmless Buyer, and its directors, officers, employees and
controlled and controlling persons (hereinafter "Buyer's Affiliates"), from and
against all Claims asserted against, resulting to, imposed upon, or incurred by
Buyer, Buyer's Affiliates, Company or the Business, directly or indirectly, by
reason of, arising out of or resulting from (a) the inaccuracy or breach of any
representation or warranty of any Shareholder contained in or made pursuant to
this Agreement (regardless of whether such breach is deemed "material"); (b) the
breach of any covenant of any Shareholder contained in this Agreement
(regardless of whether such breach is deemed "material"); (c) any environmental
matters identified on Schedule 3.12; (d) PA Division obligations and liabilities
existing or arising from events occurring prior to the Closing Date which are
not reflected on the Recent Balance Sheet (or which exceed the amounts on the
Recent Balance Sheet reserved therefor), including, without limitation,
contingent or
-28-
undisclosed liabilities, Litigation or claims of any kind, whether or not
pending or threatened, relating to any claim, event or occurrence prior to the
Closing Date, taxes (including penalties and interest thereon) owed for any
period prior to the Closing Date, environmental and employee benefit plan
liabilities and claims or liabilities (including warranty obligations in excess
of that reflected on the Recent Balance Sheet) for any PA Division Product
manufactured or sold by Company prior to the Closing Date; or (e) any Xxxxxx
Liabilities and New Xxxxxx liabilities, including, without limitation,
contingent or undisclosed Xxxxxx Liabilities and New Xxxxxx liabilities,
Litigation or claims of any kind, whether or not pending or threatened, relating
to any claim, event or occurrence occurring prior to or at any time after the
Closing Date, taxes (including penalties and interest thereon), owed for any
period prior to or after the Closing Date on the operations of the Xxxxxx
Division or New Xxxxxx, as the case may be, including, without limitation, taxes
(including penalties and interest thereon) incurred as a result of the Xxxxxx
Spinoff, environmental and employee benefit plan liabilities and claims or
liabilities for any Product of the Xxxxxx Division manufactured or sold by
Company or New Xxxxxx (or any successor thereto), as the case may be, prior to
or at any time after the Closing Date (including without limitation any warranty
obligations with respect to Products of the Xxxxxx Division).
As used in this Article VIII, the term "Claim" shall include (i) all
liabilities; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, settlements, costs and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and reasonable attorneys' fees and
expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings and assessments, whether or not
ultimately determined to be valid.
8.02 By Buyer. Subject to the terms and conditions of this Article VIII,
Buyer hereby agrees to indemnify, defend and hold harmless each Shareholder from
and against all Claims asserted against, resulting to, imposed upon or incurred
by any such person, directly or indirectly, by reason of or resulting from (a)
the inaccuracy or breach of any representation or warranty of Buyer contained in
or made pursuant to this Agreement (regardless of whether such breach is deemed
"material"); (b) the breach of any covenant of Buyer contained in this Agreement
(regardless of whether such breach is deemed "material"); or (c) obligations and
liabilities relating to the PA Division existing or arising from events
occurring after the Closing Date.
8.03 Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other party under this Article VIII
with respect to Claims relating to third parties shall be subject to the
following terms and conditions:
(a) Notice and Defense. The party or parties to be indemnified
------------------
(whether one or more, the "Indemnified Party") will give the party from
whom indemnification is sought (the "Indemnifying Party") prompt written
notice of any such Claim, and the Indemnifying Party and/or its chosen
representatives will undertake the defense thereof. Failure by the
Indemnified Party to give such notice shall not affect the Indemnifying
Party's duties or obligations under this Article VIII,
-29-
except to the extent the Indemnifying Party is prejudiced thereby. So long
as the Indemnifying Party is defending any such Claim actively and in good
faith, the Indemnified Party shall not settle such Claim. The Indemnified
Party shall make available to the Indemnifying Party and/or its
representatives all records and other materials reasonably required by them
and in the possession or under the control of the Indemnified Party, for
the use of the Indemnifying Party and/or its representatives in defending
any such Claim, and shall in all other respects give reasonable cooperation
in such defense.
(b) Failure to Defend. If the Indemnifying Party, within a
-----------------
reasonable time period after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon further
notice from the Indemnifying Party) have the right to undertake the
defense, compromise or settlement of such Claim or to consent to the entry
of a judgment with respect to such Claim, on behalf of and for the account
and risk of the Indemnifying Party, and the Indemnifying Party shall
thereafter have no right to challenge the Indemnified Party's defense,
compromise, settlement or consent to judgment.
(c) Indemnified Party's Rights. Anything in this Article VIII to the
--------------------------
contrary notwithstanding, (i) if there is a reasonable probability that a
Claim may materially and adversely affect the Indemnified Party other than
as a result of money damages or other money payments, the Indemnified Party
shall have the right to defend, compromise or settle such Claim, and (ii)
the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry
of any judgment which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Claim.
8.04 Payment.
(a) Time for Payment. Upon judgment, determination, settlement or
----------------
compromise of any third-party Claim, the Indemnifying Party shall pay
promptly on behalf of the Indemnified Party, and/or to the Indemnified
Party in reimbursement of any amount theretofore required to be paid by it,
the amount so determined by judgment, determination, settlement or
compromise and all other Claims of the Indemnified Party with respect
thereto, unless in the case of a judgment an appeal is made from the
judgment. If the Indemnifying Party desires to appeal from an adverse
judgment, then the Indemnifying Party shall post and pay the cost of the
security or bond to stay execution of the judgment pending appeal.
(b) Effect of Payment. Upon the payment in full by the Indemnifying
-----------------
Party of such amounts, the Indemnifying Party shall succeed to the rights
of such Indemnified Party, to the extent not waived in settlement, against
the third party who made such third-party Claim.
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(c) Source and Procedure for Payment of Certain Buyer Claims. With
--------------------------------------------------------
respect to any claims for indemnification by Buyer that are subject to the
limitations of Section 8.06(b)(i), the parties agree that that Buyer's sole
source of payment will be disbursements from the escrow account established
pursuant to the terms of the Escrow Agreement, such disbursements to be
effected in accordance with the procedures set forth in the Escrow
Agreement.
8.05 Limitations on Indemnification.
(a) Time Limitation. No Claim shall be brought under this Article
---------------
VIII after the lapse of two (2) years following the Closing. Regardless of
the foregoing, however, or any other provision of this Agreement:
(i) There shall be no time limitation on Claims brought for
breach of any representation or warranty made by Shareholders in
Sections 3.04 and 3.05, or for claims or actions brought for fraud in
connection with the sale of the Shares to Buyer by Shareholders and
(all such Claims, collectively, "Fraud and Title Claims") and
Shareholders hereby waive all applicable statutory limitation periods
with respect thereto.
(ii) The time limitation on Claims brought for breach of any
representation or warranty made by Shareholders in Section 3.06 or
for those items identified on Schedule 8.06 ("Tax Claims") shall be
twelve (12) months following the end of any applicable taxing
authority's statute of limitations period.
(iii) There shall be no time limitation on Claims for breach of
any representation or warranty made by Shareholders in Section
3.12(c) or Claims brought with respect to Shareholders'
indemnification obligations under clause (d) of Section 8.01
("Environmental Claims"), and Shareholders hereby waive all
applicable statutory limitation periods with respect thereto.
(iv) There shall be no time limitation on Claims with respect
to Shareholders' indemnification obligations under clause (e) of
Section 8.01 to the extent arising from Company's litigation with
Attec International, as described in Schedule 3.11 ("Attec Claims").
(v) There shall be no time limitation on Claims for breach of
any representation or warranty made by Shareholders to the extent
that such representation or warranty is made with respect to the
Xxxxxx Division, the Xxxxxx Assets or the Xxxxxx Liabilities, or
Claims with respect to Shareholders' indemnification obligations
under clause (f) of Section 8.01 (all such Claims, the "Xxxxxx
Claims").
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(vi) There shall be no time limitation on Claims brought for
breach of any representation or warranty made by the LLC, or for
claims or actions brought in connection with the Bonds.
(vii) If any act, omission, disclosure or failure to disclosure
shall form the basis for a claim for breach of more than one
representation or warranty, and such claims have different periods of
survival hereunder, the termination of the survival period of one
claim shall not affect a party's right to make a claim based on the
breach of representation or warranty still surviving.
(b) Amount Limitation.
-----------------
(i) Except as provided for in Subsections 8.06(b)(ii) and
(iii), Shareholders shall have liability to Buyer and Buyer's
Affiliates only to the extent of the Escrow Amount.
(ii) Shareholders shall have liability to Buyer and Buyer's
Affiliates, to the extent such liability does not exceed the Purchase
Price, for Fraud and Title Claims, Tax Claims, Environmental Claims,
Attec Claims or Xxxxxx Claims.
(iii) Claims by Buyer pursuant Section 5.04(b) are subject to
offset as provided in that Section.
(c) No Waiver. The closing of the transactions contemplated by this
---------
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of
condition constituting the basis of the Claim at or before the Closing, and
regardless of whether such breach, violation or failure is deemed to be
"material."
8.06 Exclusive Remedy. The indemnification provisions in this Article VIII
shall be the sole remedy, exclusive of all other remedies, causes of actions or
claims (whether common law or statutory) of the Indemnified Party for any
monetary relief or recovery against the Indemnifying Party in connection with
any claim arising out of a matter subject to indemnification under this Article
VIII or any breach of the representations and warranties set forth in Articles 3
and 4. All indemnification payments under this Article VIII shall be deemed
adjustments to the Purchase Price.
ARTICLE IX
CLOSING
The closing of this transaction (the "Closing") shall take place at the
offices of Xxxxx & Lardner at 000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx at 10:00 A.M. on July 30, 1999, or at such other time and place as the
parties hereto shall agree upon. Such date is referred to in this Agreement as
the "Closing Date."
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9.01 Shareholders' Closing Deliveries. At the Closing, Shareholders shall
deliver to Buyer the following documents, in each case duly executed or
otherwise in proper form:
(a) Stock Certificates. Stock certificates representing the Shares,
------------------
duly endorsed for transfer or with duly executed stock powers attached.
(b) Opinion of Counsel. A written opinion of Xxxxx & Xxxxxxx,
------------------
counsel to Shareholders, dated as of the Closing Date, addressed to Buyer,
substantially in the form of Exhibit A hereto.
(c) Resignations. The resignations of all of the officers and
------------
directors of Company, effective as of the Closing Date and in form and
substance satisfactory to Buyer.
(d) Termination of Lease Agreements. The termination of the lease
-------------------------------
agreements existing prior to the Closing Date for the Leased Real Property.
(e) Lease Agreements. The lease agreement in the form of Exhibit B
----------------
(the "Lease Agreement"), each duly executed by the owner of the related
parcel of Leased Real Property.
(f) Escrow Agreement. The Escrow Agreement duly executed by
----------------
Shareholders in the form of Exhibit C hereto (the "Escrow Agreement").
(g) Articles; By-laws. A current copy of the By-laws of Company
-----------------
certified by the secretary of Company, and a current copy of the Articles
of Incorporation of Company certified by the Secretary of State of the
state of incorporation of Company.
(h) General Releases. Each Shareholder shall deliver duly executed
----------------
general releases, in form and substance satisfactory to Buyer, releasing
Company from all liabilities to the Closing Date.
(i) Employment Agreement; Consulting Agreement; Non-Competition
-----------------------------------------------------------
Agreement. An employment agreement, consulting agreement and non-
---------
competition agreement in the forms of Exhibit D, Exhibit E and Exhibit F,
respectively, duly executed by C. Xxxxxxxxxxx Xxxxxxx.
(j) Transfer of Assets. Transfer documentation in form and substance
------------------
satisfactory to Buyer effecting the transfer of those assets listed on
Schedule 9.01(j) from the LLC to Company.
(k) Release of Liens and Other Third Party Obligations. Payoff
--------------------------------------------------
letters or similar documentation in form and substance reasonably
satisfactory to Buyer enabling Buyer to ascertain that the third parties
listed on Schedule 9.01(k) will, upon payment of the amounts set forth in
such payoff letters: (i) release any and all Liens on the Company's assets
(including assets transferred to the Company pursuant to the
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transaction required by Section 9.01(j); and (ii) release any and all
guaranties or other contingent obligations of Company delivered in favor of
such persons.
(l) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to Buyer at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
9.02 LLC and Members' Closing Deliveries. At the Closing, LLC and Members,
as applicable, shall deliver to Buyer releases or similar documentation in form
and substance reasonably satisfactory to Buyer evidencing Company's
unconditional release from (i) the Unlimited Continuing Guaranty, dated June 3,
1998, by and between Company and Firstar; (ii) the General Security Agreement,
dated June 3, 1998, by and between Company and Firstar; (iii) any and all
indemnifications owed to Firstar by Company; and (iii) Environmental Indemnity
Agreement, dated June 3, 1998, by and between Company and the LLC.
9.03 Buyer's Closing Deliveries. At the Closing, Buyer shall deliver to
Shareholders the following documents, in each case duly executed or otherwise in
proper form:
(a) Estimated Purchase Price. To Shareholders the estimated Purchase
------------------------
Price as required by Section 2.02(b), and to the Escrow Agent the Escrow
Amount as required by Section 2.02(a).
(b) Opinion of Counsel. A written opinion of Xxxxx & Xxxxxxx,
------------------
counsel to Buyer, dated as of the Closing Date, addressed to Shareholders,
in substantially the form of Exhibit G hereto.
(c) Certified Resolutions. A certified copy of the resolutions of
---------------------
the Board of Directors of Buyer authorizing and approving this Agreement
and the consummation of the transactions contemplated by this Agreement.
(d) Escrow Agreement. The Escrow Agreement duly executed by Buyer.
----------------
(e) Lease Agreement. The Lease Agreement, duly executed by Buyer.
---------------
(f) Incumbency Certificate. Incumbency certificates relating to each
----------------------
person executing any document executed and delivered to Shareholders by
Buyer pursuant to the terms hereof.
(g) Employment Agreement. The Employment Agreement duly executed by
--------------------
Buyer.
(h) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to Shareholders at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Shareholders may reasonably request.
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ARTICLE X
MISCELLANEOUS
10.01 Schedules. Information set forth in the Schedules specifically refers
to the article and section of this Agreement to which such information is
responsive and such information shall not be deemed to have been disclosed with
respect to any other article or section of this Agreement or for any other
purpose. Except as specifically provided for herein, the Schedules shall not
vary, change or alter the language of the representations and warranties
contained in this Agreement and, to the extent the language in the Schedules
does not conform in every respect to the language of such representations and
warranties, such language shall be disregarded and be of no force or effect.
10.02 Disclosures and Announcements. Both the timing and the content of all
disclosure to third parties and public announcements concerning the transactions
provided for in this Agreement by either Shareholders or Buyer shall be subject
to the approval of the other in all essential respects.
10.03 Assignment; Parties in Interest.
(a) Assignment. Except as expressly provided herein, the rights and
----------
obligations of a party hereunder may not be assigned, transferred or
encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, (i) Buyer may, without consent of any other
party, cause one or more subsidiaries of Buyer to carry out all or part of
the transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any
such subsidiary, to Shareholders hereunder; and (ii) Buyer may assign its
interest in this Agreement to CSFB, as agent, as additional security for
Buyer's obligations to such lender and Shareholders agree to execute
acknowledgements of such assignments as reasonably may be required by such
lender.
(b) Parties in Interest. This Agreement shall be binding upon,
-------------------
inure to the benefit of, and be enforceable by the respective successors
and permitted assigns of the parties hereto. Nothing contained herein shall
be deemed to confer upon any other person any right or remedy under or by
reason of this Agreement.
10.04 Law Governing Agreement. This Agreement may not be modified or
terminated orally, and shall be construed and interpreted according to the
internal laws of the State of Illinois, excluding any choice of law rules that
may direct the application of the laws of another jurisdiction.
10.05 Amendment and Modification. Buyer and Shareholders may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
10.06 Notice. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by facsimile transmission or other electronic means of transmitting written
documents; or (c) sent to the
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parties at their respective addresses indicated herein by registered or
certified U.S. mail, return receipt requested and postage prepaid, or by private
overnight mail courier service. The respective addresses to be used for all such
notices, demands or requests are as follows:
(a) If to Buyer, to:
Xxxxx Equipment Company
0000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
(with a copy, which copy shall not constitute notice, to)
Madison Dearborn Partners, Inc.
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxx
Facsimile: (000) 000-0000
(and to)
Xxxxx & Xxxxxxx
Xxx XXX Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
or to such other person or address as Buyer shall furnish to Shareholders in
writing.
(b) If to Shareholders, to:
C. Xxxxxxxxxxx Xxxxxxx
0000 Xxxxxxxxx Xxx
Xxxxxxxxxx, Xxxxxxx 00000
(with a copy, which copy shall not constitute notice, to)
Xxxxx & Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Given
Facsimile: (000) 000-0000
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or to such other person or address as Shareholders shall furnish to Buyer in
writing.
If personally delivered or sent by overnight courier, such communication
shall be deemed delivered upon actual receipt; if electronically transmitted
pursuant to this paragraph, such communication shall be deemed delivered the
next business day after transmission (and sender shall bear the burden of proof
of delivery); and if sent by U.S. mail pursuant to this paragraph, such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Any party
to this Agreement may change its address for the purposes of this Agreement by
giving notice thereof in accordance with this Section.
10.07 Expenses. Regardless of whether or not the transactions contemplated
hereby are consummated:
(a) Brokerage. Shareholders and Buyer each represent and warrant to
---------
each other that there is no broker involved or in any way connected with
the transfer provided for herein. Buyer agrees to hold Shareholders
harmless from and against all claims for brokerage commissions or finder's
fees incurred through any act of Buyer in connection with the execution of
this Agreement or the transactions provided for herein. Shareholders,
jointly and severally, agree to hold Buyer harmless from and against all
claims for brokerage commissions or finder's fees incurred through any act
of any Shareholder in connection with the execution of this Agreement or
the transactions provided for herein.
(b) Expenses to be Paid by Shareholders. Shareholders shall pay, and
-----------------------------------
shall indemnify, defend and hold Buyer harmless from and against, any
sales, use, excise, transfer or other similar tax imposed with respect to
the transactions provided for in this Agreement, and any interest and
survey costs or penalties related thereto.
(c) Expenses to be Paid by Buyer. Buyer shall pay, and shall
----------------------------
indemnify, defend and hold Shareholders harmless from and against the fees
and other expenses relating to the environmental and health and safety
audit performed by Buyer.
(d) Other. Except as otherwise provided herein, each of the parties
-----
shall bear its own expenses and the expenses of its counsel and other
agents in connection with the transactions contemplated hereby.
10.08 Entire Agreement. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
10.09 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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10.10 Headings. The headings in this Agreement are inserted for convenience
only and shall not constitute a part hereof.
10.11 Index of Terms. The following sets forth the location of definitions
of capitalized terms defined in the body of this Agreement:
"Affiliate" - Section 2.03(c)(iii)
"Attec Claims" - Section 8.06(a)(v)
"Ancillary Documents" - Section 3.04(a)
"April 1999 Value" - Section 2.03(a)
"Bonds" - Section 8.03
"Business" - Recitals
"Buyer's Accountants" - Section 2.03(e)(i)
"Buyer's Affiliates" - Section 8.01
"Brownsburg Facility" - Section 6.02
"CERCLA" - Section 3.12(c)
"Claim" - Section 8.01
"Closing" - Preamble to Article IX
"Closing Date" - Preamble to Article IX
"Code" - Section 3.06(e)
"Company" - Recitals
"CSFB" - Section 9.01(b)
"Effective Time" - Section 2.03(d)
"Employee Plans/Agreements" - Section 3.20(a)
"Environmental Claims" - Section 8.06(a)(ii)
"Environmental Laws" - Section 3.12(c)
"ERISA" - Section 3.20(a)
"Escrow Agreement" - Section 9.01(f)
"Escrow Amount" - Section 2.02(a)
"Estimated Closing Balance Sheet" - Section 2.03(d)
"Excess Indebtedness Amount" - Section 2.03(c)(ii)
"Excluded Assets" - Section 1.02
"Excluded Liabilities" - Section 1.03
"Facilities" - Recitals
"Final Closing Balance Sheet" - Section 2.03(e)(iii)
"Firstar" - Section 9.02(a)
"Fraud and Title Claims" - Section 8.06(a)(i)
"IRS" - Section 3.06(c)
"Indebtedness Amount" - Section 2.03(c)(i)
"Indemnified Party" - Section 8.04(a)
"Indemnifying Party" - Section 8.04(a)
"Xxxxxx Division" - Recitals
"Xxxxxx Assets" - Section 3.26(a)
"Xxxxxx Claims" - Section 8.06(a)(iv)
"Xxxxxx Liabilities" - Section 3.26(a)
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"Xxxxxx Spinoff" - Section 3.26(a)
"LLC" - Recitals
"Laws" - Section 3.02
"Lease Agreement" - Section 9.01(e)
"Leased Real Property" - Section 3.13(d)
"Liens" - Section 3.09(i)
"Litigation" - Section 3.11
"Members" - Section 7.01
"New Xxxxxx" - Section 3.26(a)
"Operation Agreement" - Section 6.08
"Orders" - Section 3.02
"PA Business" - Recitals
"PA Division" - Recitals
"PA Proprietary Rights" - Section 3.22(a)
"PBGC" - Section 3.20(b)(ii)
"Products" - Section 3.24
"Proprietary Rights" - Section 3.22(a)
"Purchase Price" - Section 2.01(a)
"Recent Balance Sheet" - Section 3.03
"Sales Commitments" - Section 3.18(d)
"Schedules" - Preamble to Article III
"Settlement Date" - Section 2.02(c)
"Shareholders' Accountants" - Section 2.03(e)(ii)
"Shares" - Recitals
"Third Accounting Firm" - Section 2.03(e)(iii)
"Waste" - Section 3.12(c)
"Working Capital Value" - Section 2.03(b)
"Year 2000 Compliant" - Section 3.22(b)
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
***************
(The next page is the signature page)
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
WEC COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Its: Vice President
SHAREHOLDERS:
/s/ C. Xxxxxxxxxxx Xxxxxxx
--------------------------------
C. Xxxxxxxxxxx Xxxxxxx
/s/ Xxx Xxxxxxx
--------------------------------
Xxx Xxxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxx
ZANETIS ENTERPRISES, LLC
/s/ C. Xxxxxxxxxxx Xxxxxxx
--------------------------------
By: C. Xxxxxxxxxxx Xxxxxxx
Its: Member
-2-
