1
STOCK PURCHASE AGREEMENT
AMONG
ACME-CLEVELAND CORPORATION,
AC INTERMEDIATE COMPANY
AND
XXXXXXX-XXXXXXX, INC.
DATED SEPTEMBER 7, 1995
2
TABLE OF CONTENTS
ARTICLE I TERMS OF PURCHASE AND SALE 1
1.01. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Purchase and Sale of the Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03. Purchase Price Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04. Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.05. Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.06. Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II ADDITIONAL AGREEMENTS 6
2.01. Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.02. Release of Seller's Claims against the
Company and the Company Subsidiary . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 6
3.01. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.02. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.03. Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.04. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.05. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 8
3.06. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . 9
3.07. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.08. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.09. Patents, Trademarks, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.14. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.16. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.17. Corporate Power and Authority; Effect of
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.18. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.19. Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.21. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.23. Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.24. Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.25. Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.26. Absence of Questionable Payments . . . . . . . . . . . . . . . . . . . . . . . . 25
3.27. Product and Service Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.28. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 26
4.01. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(i)
3
4.02. Corporate Power and Authority; Effect of
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.03. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.04. Availability of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.06. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.07. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V COVENANTS OF SELLER 28
5.01. Cooperation by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.02. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.03. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.04. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.05. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI COVENANTS OF BUYER 30
6.01. Cooperation by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.02. Books and Records; Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.03. Buyer's Knowledge of Business; Seller's
Representations Modified by Buyer's
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.04. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.05. Performance Bonds, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.06. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII ADDITIONAL COVENANTS 34
7.01. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.02. Cash Management; Intercompany Accounts . . . . . . . . . . . . . . . . . . . . . 38
7.03. Sharing of Environmental Costs . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS 39
8.01. Representations, Warranties, and Covenants
of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.02. No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.03. Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.04. Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.05. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.06. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.07. Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS 40
9.01. Representations, Warranties, and Covenants
of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.02. No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.03. Performance Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.04. Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.05. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.06. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.07. Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(ii)
4
ARTICLE X EMPLOYMENT AND EMPLOYEE BENEFITS
ARRANGEMENTS 41
10.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.02. Pay Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.03. Pension and Other Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.04. Other Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.05. Long-Term Disability Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.06. Severance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XI TERMINATION PRIOR TO CLOSING 47
11.01. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.02. Effect on Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XII MISCELLANEOUS 48
12.01. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.02. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.03. Interpretive Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.04. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.05. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.06. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.07. Modification and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.08. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.09. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.10. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.11. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.12. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(iii)
5
DEFINED TERMS
Page
Account Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ACIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acme-Cleveland Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Advice Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Ancillary Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Benefit Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Buyer's Deductible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Buyer's Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Buyer's Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Closing Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Company Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Environmental Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Environmental Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Form 5500s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Indemnitor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Interim Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Liabilities Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Patent and Trademark Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Pension Plan Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Pension Plan Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Pension Transfer Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Plan Actuary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Price Waterhouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Salaried Pension Benefits Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(iv)
6
Salaried Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Savings Plan Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Seller's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Seller's Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Tax Matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(v)
7
STOCK PURCHASE AGREEMENT
This Agreement, made and entered into this 7th day of September,
1995, by and among ACME-CLEVELAND CORPORATION, an Ohio corporation ("Parent"),
AC INTERMEDIATE COMPANY, an Ohio corporation and a wholly-owned subsidiary of
Parent ("ACIC"; Parent and ACIC are hereinafter referred to, together, and, if
the context requires, individually, as "Seller"), and XXXXXXX-XXXXXXX, INC., a
Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, ACIC is the owner of all of the issued and outstanding
capital stock (the "Stock") of The National Acme Company, an Ohio corporation
(the "Company"); and
WHEREAS, ACIC desires to sell to Buyer, and Buyer desires to buy from
ACIC, all of the Stock;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements, and upon the terms and subject to the
conditions, hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
TERMS OF PURCHASE AND SALE
1.01. The Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the Cleveland offices of Xxxxxxxx,
Xxxx and Xxxxx, commencing at 9:00 a.m. no later than the fifth business day
after termination or expiration of the applicable waiting period (and any
extension thereof) under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act"), or
at such other time and/or place and/or on such other date as the parties may
mutually agree (the "Closing Date"). The parties agree to use reasonable
efforts to have the closing occur on or before September 29, 1995. The
effective time of the transactions contemplated hereby shall be deemed to be
the opening of business on the Closing Date.
1.02. Purchase and Sale of the Stock. (a) On the Closing Date,
Buyer shall purchase from ACIC, and ACIC shall sell to Buyer, the Stock.
(b) At the Closing, Seller shall deliver to Buyer certificates
representing the Stock, duly endorsed in blank for transfer or accompanied by
duly executed stock powers
8
assigning the Stock in blank. Buyer shall bear the cost of any documentary,
stamp, sales, excise, transfer, or other taxes payable (other than income taxes
payable by Seller) in respect of the sale of the Stock.
1.03. Purchase Price Determination.
(a) Definitions. The following terms when used in this Agreement
have the meanings set forth below:
(i) "GAAP" means generally accepted accounting
principles of the United States applied in a manner consistent with
those used in the preparation of the March 31, 1995 balance sheet of
the Company and the Financial Statements (as defined in Section 3.04).
(ii) "Net Worth," means the excess, as of the
Closing Date, of (A) the Company's assets determined in accordance
with the Principles and Procedures, over (B) the Company's liabilities
determined in accordance with the Principles and Procedures.
(iii) "Net Worth Adjustment" means the amount (which
may be positive or negative) equal to $6,394,000 as set forth in
Schedule 1.03(a)(iii), as "Shareholders Equity-Adj. w-S 3/31/95" minus
the Net Worth as determined in accordance with Section 1.03(c).
(iv) "Principles and Procedures" means the
principles and procedures set forth in Disclosure Schedule
1.03(a)(iv).
(b) Purchase Price. The consideration for the Stock shall be an
amount equal to $8,700,000 minus the Net Worth Adjustment and plus or minus any
other adjustment for which provision is specifically made herein (the "Purchase
Price"). Thus, a negative Net Worth Adjustment means an additional Purchase
Price payment by Buyer; and a positive Net Worth Adjustment means a refund by
Seller of a portion of the Purchase Price payment made at Closing.
(c) Determination of Net Worth Adjustment. The amount of the Net
Worth Adjustment shall be determined in the following manner:
(i) Closing Statements; Review. Promptly after the
Closing Date, Seller will prepare a balance sheet (the "Closing
Balance Sheet") of the Company as of the Closing Date in accordance
with this Agreement and the Principles and Procedures which shall set
forth the Net Worth and the Net Worth Adjustment. Ernst & Young, LLP
("Ernst & Young"), as independent
-2-
9
certified public accountants for Seller, at Seller's expense, will
examine and test the Closing Balance Sheet prepared by Seller in
accordance with GAAP and the Principles and Procedures and will issue
their report as to the results of such examination and testing (the
"Closing Report"). Within forty-five (45) days after the Closing Date
or as soon thereafter as reasonably practicable, Seller shall direct
Ernst & Young to deliver drafts of the Closing Balance Sheet and
Closing Report to Price Waterhouse, LLP ("Price Waterhouse"), as
independent certified public accountants for Buyer, for review and
analysis at least ten (10) business days prior to final issuance of
the Closing Balance Sheet and Closing Report. Buyer and/or Price
Waterhouse shall have the opportunity to be present at physical
inventories (if any), and to review and evaluate all working papers,
worksheets, and other documents utilized by Seller in the preparation
of the Closing Balance Sheet and by Ernst & Young in the examination
and testing of the Closing Balance Sheet.
(ii) Review by the Parties. Price Waterhouse and
Ernst & Young will attempt to resolve any disputed items prior to the
issuance of the Closing Balance Sheet and Closing Report. Failing
such resolution, Buyer and Seller will exchange within thirty (30)
days of issuance of the Closing Balance Sheet and Closing Report
detailed written explanations of those items in the Closing Balance
Sheet and Closing Report that remain in dispute. The amount of the
Net Worth Adjustment not affected by the disputed items will be deemed
to be as set forth in the Closing Balance Sheet and Closing Report.
Within a further period of thirty (30) days from the end of the
aforementioned review period, the parties will attempt to resolve in
good faith any disputed items.
(iii) Arbitration. Failing informal resolution
pursuant to subparagraph (ii) above, the unresolved disputed items
will be referred for final binding resolution to the Cleveland, Ohio
office of Deloitte & Touche LLP or to such other nationally-recognized
firm of certified public accountants as the parties may hereinafter
jointly select (the "Arbitrator"). If the Arbitrator determines that
the resolution of a given disputed item requires an interpretation of
law, then the Arbitrator may request a law firm of national standing
chosen by it to render a legal opinion as to such matter. The amount
of the Net Worth Adjustment affected by such unresolved disputed items
(if any) will be as determined by the Arbitrator. The fees, costs,
and expenses of the Arbitrator (A) shall be
-3-
10
borne by Buyer in the proportion that the aggregate dollar amount of
such disputed items so submitted that are unsuccessfully disputed by
Buyer (as finally determined by the Arbitrator) bears to the aggregate
dollar amount of such items so submitted and (B) shall be borne by
Seller in the proportion that the aggregate dollar amount of such
disputed items so submitted that are successfully disputed by Buyer
(as finally determined by the Arbitrator) bears to the aggregate
dollar amount of such items so submitted.
(d) Arbitrator. The Arbitrator shall be requested, with respect to
all matters referred to it, to render its decision within thirty (30) days of a
reference or as soon as practicable thereafter. The Arbitrator shall send
copies of its decision to each of Buyer and Seller.
(e) Access to Employees. Buyer hereby acknowledges and agrees that
access to employees of the Company and the Company Subsidiary (as defined in
Section 3.03) and to representatives of Buyer may be required in order that
Seller and its representatives may prepare the Closing Balance Sheet and
Closing Report. Buyer shall make these persons available to Seller and its
representatives and shall give Seller and its representatives all necessary
access to the Books and Records (as defined in Section 6.02), without charge to
Seller, as may reasonably be requested by Seller, in order to assist in the
preparation of the Closing Balance Sheet and Closing Report.
1.04. Payment of Purchase Price. Buyer will pay the Purchase Price
as follows:
(a) Closing Payment. At the Closing, Buyer shall
pay Seller an amount equal to $9,600,000 (as adjusted in accordance
with Section 6.05 hereof), of which $8,700,000 (subject to such
adjustment) represents the Purchase Price and $900,000 represents the
consideration for its Noncompetition Agreement to which reference is
made in Section 2.01 hereof.
(b) Net Worth Adjustment Payment. The amount of any
Net Worth Adjustment shall bear interest at an annual rate equal to
the six (6) month London Interbank Offered Rate (the "Interest Rate")
as in effect from and including the Closing Date to, but not
including, the date of payment. Any amount payable as a Net Worth
Adjustment (plus interest determined pursuant to the immediately
preceding sentence) shall be paid on the third business day following
(i) the final issuance of the Closing Balance Sheet and the Closing
Report in accordance with Section 1.03(c) hereof, if there shall have
been no dispute between
-4-
11
the parties with respect thereto, or such earlier date as Buyer shall
advise Seller of the absence of any dispute, (ii) the date mutual
agreement is reached as to the amount of the Net Worth Adjustment, if
any, in the event of a dispute that is settled by the parties without
resort to the Arbitrator, or (iii) the receipt of the report of the
Arbitrator in the event of a dispute which is settled by the
Arbitrator, as applicable.
(c) Form of Payments. All payments hereunder shall
be made by delivery to the recipient by depositing, by bank wire
transfer, the required amount (in immediately available funds) in an
account of the recipient, which account shall be designated by the
recipient at least three (3) business days prior to the date of the
required payment.
1.05. Deliveries by Seller. At the Closing, Seller shall deliver the
following items to Buyer:
(a) Certificates representing the Stock, duly
endorsed or accompanied by stock powers duly executed in blank and
otherwise in form acceptable for transfer on the books of the Company;
(b) The stock books, stock ledgers, minute books,
and corporate seal of the Company and the Company Subsidiary;
(c) Certificates from their respective states of
incorporation and qualification, dated not more than fifteen (15) days
in advance of the date of the Closing, as to the good standing and/or
qualification to do business of the Company Subsidiary in each
jurisdiction where they are so qualified;
(d) The opinion of counsel to Seller referred to in
Section 8.06;
(e) The certificates referred to in Sections 3.15(i)
and 8.01;
(f) The Noncompetition Agreement referred to in
Section 2.01;
(g) The release by Seller referred to in Section
2.02;
(h) The resignation of each director and officer of
the Company and the Company Subsidiary so designated by Buyer at least
ten (10) business days prior to the Closing Date; and
-5-
12
(i) All other previously undelivered items required
to be delivered by Seller to Buyer at or prior to the Closing pursuant
to this Agreement or otherwise required in connection herewith unless
waived in writing by Buyer.
1.06. Deliveries by Buyer. At the Closing, Buyer shall deliver the
following items to Seller:
(a) The payment as required in Section 1.04(a);
(b) The opinion of counsel to Buyer referred to in
Section 9.06;
(c) The certificate referred to in Section 9.01; and
(d) All other previously undelivered items required
to be delivered by Buyer at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith unless waived
in writing by Seller.
ARTICLE II
ADDITIONAL AGREEMENTS
2.01. Noncompetition Agreement. In order to protect Buyer's
investment in the Stock, Seller shall execute and deliver to Buyer at the
Closing a noncompetition agreement, dated as of the Closing Date, in
substantially the form of Exhibit 2.01 (the "Noncompetition Agreement").
2.02. Release of Seller's Claims against the Company and the Company
Subsidiary. At the Closing, Seller shall execute and deliver to Buyer a
release of the Company and the Company Subsidiary in substantially the form of
Exhibit 2.02.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.01. Capitalization. The authorized capital stock of the Company
consists solely of 750 common shares, par value $1.00 per share, 100 of which
are issued and outstanding; all of such 100 shares of the Company are owned of
record and beneficially by ACIC. All of the shares comprising the Stock are
validly issued, fully paid,
-6-
13
and non-assessable, and none of the shares comprising the Stock were issued in
violation of the preemptive rights of any present or former shareholder of the
Company. There are outstanding no securities convertible into, exchangeable
for, or carrying the right to acquire, equity securities of the Company, or
subscriptions, warrants, options, rights, or other arrangements or commitments
obligating the Company to issue or dispose of any of its equity securities or
any ownership interest therein. The sale and delivery of the Stock to Buyer
pursuant to Article I hereof will vest in Buyer legal and valid title to the
Stock, free and clear of all liens, security interests, pledges, equities,
proxies, claims, charges, rights of first refusal, restrictions, or other
encumbrances ("Encumbrances") (other than Encumbrances created or suffered by
Buyer).
3.02. Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Ohio and
has all requisite corporate power and authority to carry on its business as it
is now being conducted. The Company is duly qualified to do business and is in
good standing as a foreign corporation in all jurisdictions where the nature of
the property owned or leased by it, or the nature of the business conducted by
it, makes such qualification necessary and the absence of such qualification
would have a material adverse effect on the business, assets, financial
condition, or results of the Company and the Company Subsidiary, taken as a
whole (a "Material Adverse Effect"). Within the past three (3) years, no other
jurisdiction has made a written demand or request that the Company become so
qualified.
3.03. Subsidiary. Schedule 3.03 sets forth the name and jurisdiction
of incorporation or organization of the sole subsidiary of the Company
(collectively, the "Company Subsidiary"). The Company Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of its respective jurisdiction of incorporation or organization and has
all requisite corporate power and authority to carry on its business as it is
now being conducted. The Company Subsidiary is duly qualified to do business
and is in good standing as a foreign corporation in all jurisdictions where the
nature of the property owned or leased by it, or the nature of the business
conducted by it, makes such qualification necessary and the absence of such
qualification would have a Material Adverse Effect. Within the past three (3)
years, no other jurisdiction has made a written demand or request that the
Company Subsidiary become so qualified. All outstanding shares of capital
stock of the Company Subsidiary are owned by the Company and are validly
issued, fully paid, and non-assessable, are not subject to preemptive rights,
and
-7-
14
are owned free and clear of all Encumbrances. There are outstanding no
securities convertible into, exchangeable for, or carrying the right to
acquire, equity securities of any Company Subsidiary, or subscriptions,
warrants, options, rights, or other arrangements or commitments obligating any
Company Subsidiary to issue or dispose of any of its equity securities or any
ownership interest therein.
3.04. Financial Statements. The audited balance sheet of the
Company as of July 31, 1995 and the related audited statements of consolidated
operations, consolidated shareholders' equity, and consolidated cash flows for
the period ended July 31, 1995 (the "Interim Financial Statements") present
fairly, in all material respects, the Company's financial position, results of
operations, and cash flows as of such date and for such period ended July 31,
1995 in conformity with GAAP. The unaudited balance sheet of the Company as of
March 31, 1995 and the related statements of consolidated operations,
consolidated shareholders' equity, and consolidated cash flows for the period
ended March 31, 1995 present fairly, in all material respects, the Company's
financial position, results of operations, and cash flows as of such date and
for such period ended March 31, 1995 in conformity with GAAP (except for the
exclusion of footnotes). The audited balance sheets of the Company as of
September 30, 1993 and September 30, 1994 and the audited related statements of
consolidated operations, consolidated shareholders' equity, and consolidated
cash flows for the fiscal years ended September 30, 1993 and September 30, 1994
(the "1993 and 1994 Financial Statements") present fairly, in all material
respects, the Company's financial position, results of operations, and cash
flows as of such dates and for such fiscal years in conformity with GAAP (the
Interim Financial Statements and the 1993 and 1994 Financial Statements are
sometimes hereinafter collectively referred to as the "Financial Statements").
3.05. Absence of Undisclosed Liabilities. Seller knows of no
liability or obligation (absolute, accrued, contingent, or otherwise) of either
the Company or the Company Subsidiary, including any guaranty with respect to
any obligation, except with respect to (a) such liabilities or obligations as
are required by GAAP to be reflected or reserved against and are fully
reflected or reserved against in the Interim Financial Statements; (b) such
liabilities or obligations which have been incurred in the ordinary course of
business since July 31, 1995; and (c) liabilities or obligations incurred in
the ordinary course of business that are not required by GAAP to be reflected
or reserved against in the Interim Financial Statements and which will not have
Material Adverse Effect either individually or in the aggregate.
-8-
15
3.06. Absence of Certain Changes or Events. Except as set forth in
Schedule 3.06 or permitted or contemplated by this Agreement, since July 31,
1995, neither the Company nor the Company Subsidiary has (a) suffered any
damage, destruction, or casualty loss to its physical properties in excess of
$50,000; (b) incurred any obligation or liability or entered into any other
transaction not in the ordinary course of business or which individually or in
the aggregate exceeds $100,000; (c) suffered any Material Adverse Effect; (d)
increased the rate or terms of compensation payable or to become payable by the
Company or any Company Subsidiary to their respective directors, officers, or
key employees or increased the rate or terms of any bonus, pension, or other
employee benefit plan covering any of their respective directors, officers, or
key employees, except in each case increases occurring in the ordinary course
of business in accordance with its customary practices (including normal
periodic performance reviews and related compensation and benefit increases) or
as required by any pre-existing Commitment (as defined in Section 3.10); (e)
made any capital expenditures or commitments for capital expenditures not in
the ordinary course of business or in excess of $100,000 in the aggregate; (f)
paid, discharged, or satisfied any claims, liabilities, or obligations
(absolute, accrued, contingent, or otherwise) which exceed $100,000 in the
aggregate; (g) made any change in any method of accounting or accounting
principle or practice (other than as set forth in Disclosure Schedule
1.03(a)(iv)); or (h) written up the value of any inventory other than normal
adjustments in reserves in accordance with GAAP or determined as collectible
any notes or accounts receivable that were previously considered to be
uncollectible.
3.07. Assets. The Company and the Company Subsidiary have good and
indefeasible (and, in the case of Real Property, fee simple) title to all of
their respective assets and properties which they purport to own (including
those reflected on the balance sheet of the Interim Financial Statements,
except for assets and properties sold, consumed, or otherwise disposed of in
the ordinary course of business since July 31, 1995), free and clear of all
Encumbrances, except (a) as set forth in Schedule 3.07, and (b) liens for taxes
not yet due and payable or due but not delinquent or being contested in good
faith by appropriate proceedings. The assets and properties of the Company and
the Company Subsidiary comprise all the properties and assets which are
necessary for the conduct of the Company's and the Company Subsidiary's
business as presently conducted and are in good operating condition (subject to
ordinary wear and tear). Schedule 3.07 sets forth a list of all owned and
leased equipment, machinery, installations, and other personal property of the
Company and each Company Subsidiary which is material to the
-9-
16
business of the Company or the Company Subsidiary (if any of the foregoing
property is leased, Schedule 3.07 shall indicate the lessor of such property).
3.08. Real Property.
(a) Schedule 3.08 contains a correct and complete list of all the
real property (including a general description of the improvements thereon)
owned by the Company or the Company Subsidiary or that the Company or the
Company Subsidiary has agreed (or has an option) to purchase, sell, or lease,
or may be obligated to purchase, sell, or lease to a third party in connection
with its business and any title insurance or guarantee policies with respect
thereto. Such real property is hereinafter referred to as the "Real Property,"
and the improvements and fixtures thereon are hereinafter referred to as the
"Improvements."
(b) Schedule 3.08 identifies all of the real property that the
Company or the Company Subsidiary leases, has agreed to lease from a third
party, or has an obligation to lease from a third party in connection with its
business (including a general description of the improvements thereon). Such
leased real property is hereinafter referred to as the "Leased Property," and
the improvements and fixtures thereon are hereinafter referred to as the
"Leased Improvements."
(c) Except as set forth on Schedule 3.08, the Company or the Company
Subsidiary is the sole legal and equitable owner of the Real Property, the
Improvements, and all interests therein and possesses good and marketable,
indefeasible fee simple title to the Real Property and the Improvements, good
of record and in fact, free and clear of all conditions, exceptions,
reservations, liens, restrictions, rights-of-way, easements, encumbrances, and
other matters affecting title.
(d) There are no adverse or other parties in possession of the Real
Property, the Improvements, the Leased Property, the Leased Improvements, or
any portion or portions thereof, and as of the Closing Date the Real Property,
the Improvements, and the leasehold interests in the Leased Property and the
Leased Improvements will be free and clear of any and all leases, licenses,
occupants, or tenants except as set forth on Schedule 3.08. There are no
pending or, to the knowledge of Seller, threatened condemnation, eminent
domain, or similar proceedings, or litigation or other proceedings affecting
the Real Property, the Improvements, the Leased Property, the Leased
Improvements, or any portion or portions thereof which would have a Material
Adverse Effect. There are no pending or, to the knowledge of Seller,
threatened requests,
-10-
17
applications, or proceedings to alter or restrict any zoning or other use
restrictions applicable to the Real Property, the Improvements, the Leased
Property, or the Leased Improvements that would interfere with the conduct of
the business of the Company or the Company Subsidiary or the use of the assets
consistent with past practice, which interference would have a Material Adverse
Effect. Except as set forth on Schedule 3.08, to the knowledge of Seller, all
water, sewer, gas, electric, telephone, drainage, and other utility equipment,
facilities, and services required by law or necessary for the operation of the
Improvements and the Leased Improvements as presently operated or contemplated
to be operated by Seller are installed and connected pursuant to valid permits,
and no notice has been received by Seller regarding the termination or material
impairment of any such service. All easements necessary for normal operations
on the Real Property and the Leased Property exist and are in full force and
effect. The Real Property and the Leased Property have access, in accordance
with past practice, to and from a public right of way or road dedicated for
public use, and no notice has been received by Seller relating to the
termination or impairment of such access (including applicable parking
requirements).
(e) Schedule 3.08 identifies all real property of the Company or the
Company Subsidiary sold or otherwise disposed of since October 1, 1991.
3.09. Patents, Trademarks, Etc. Schedule 3.09 sets forth a correct
and complete list, as of the date hereof, of all United States and/or foreign
patents, trademarks, service marks, royalty rights, trade secrets, confidential
information, logos, trade names, copyrights and applications therefor, and
regulations or licenses therein owned or used by the Company and the Company
Subsidiary in, or relating to, the conduct of their respective businesses (the
"Patent and Trademark Rights"); provided that all trade secrets, confidential
information, and unregistered copyrights may be too numerous to list thereon
and immaterial items may be deleted therefrom. Except as set forth in Schedule
3.09, (a) the Company or the Company Subsidiary owns or possesses adequate
licenses or other valid rights to use all Patent and Trademark Rights; and (b)
the conduct of the respective businesses of the Company and the Company
Subsidiary as now being conducted, including the use of the Patent and
Trademark Rights, does not conflict with any valid patents, trademarks, trade
names, or copyrights of others in any way which has a Material Adverse Effect.
Except as set forth in Schedule 3.09, the Patent and Trademark Rights are
assignable to the Buyer and the consummation of the transactions contemplated
hereby will not alter or impair any such rights. Except as set forth in
Schedule 3.09, no claims have been asserted by
-11-
18
any person to the use of any of the Patent and Trademark Rights, or challenging
or questioning the rights of the Company and the Company Subsidiary to such
use, and, to the knowledge of Seller, there is no basis for any such claim.
3.10. Commitments. Schedule 3.10 contains a complete list, as of the
date hereof, of each contract or agreement, whether written or oral (including
any and all amendments thereto), to which the Company or the Company Subsidiary
is a party or by which the Company or the Company Subsidiary is bound
(collectively, the "Commitments") and which either involve commitments in
excess of $100,000, have a term of one year or more, or that are not in the
ordinary course of business and are material. Schedule 3.10 also contains a
complete list of all individual employment, consulting, and severance
agreements to which either the Company or the Company Subsidiary is a party or
by which either of them is bound. Except as set forth on Schedule 3.10, (i) to
the knowledge of Seller, each of the Commitments is a valid and binding
obligation of the Company or the Company Subsidiary, and, to the knowledge of
Seller, each of the Commitments is enforceable in accordance with its terms
with respect to the other party or parties thereto, except in each case as
enforcement may be limited by bankruptcy, insolvency, reorganization, or
similar laws or equitable principles relating to creditors' rights generally,
and (ii) neither the Seller nor (to the knowledge of Seller) any other party
thereto has terminated, canceled, modified, or waived any material term or
condition of any Commitment. None of the Commitments contains any covenant or
other restriction preventing or limiting the consummation of the transactions
contemplated hereby. Neither the Company nor the Company Subsidiary has
outstanding powers of attorney except routine powers of attorney relating to
the representation of the Company or the Company Subsidiary before governmental
agencies or given in connection with qualification to conduct business or
customs matters. Except as set forth in either Schedule 3.09 or Schedule 3.10,
neither the Company nor the Company Subsidiary is a party to any written or
oral licensing agreement, either as a licensor or a licensee.
3.11. Litigation. Except as set forth in Schedule 3.11, there is no
action, suit, proceeding, or investigation in any court or before any
governmental authority ("Litigation") pending or, to the knowledge of Seller,
threatened against the Company or the Company Subsidiary. Also, there is no
Litigation pending or, to the knowledge of Seller, threatened against the
Company, the Company Subsidiary, or Seller that seeks to enjoin or obtain
damages in respect of the consummation of the transactions contemplated by this
Agreement. Except as set forth in Schedule 3.11, neither the Company nor the
Company
-12-
19
Subsidiary is subject to any outstanding orders, rulings, judgments,
arbitration awards, or decrees.
3.12. Compliance with Laws. Except as set forth in Schedule 3.12
and except for any and all Environmental Matters (as hereinafter defined), the
Company and the Company Subsidiary are currently and have been in compliance
with all applicable laws, rules, and regulations currently in effect, except
where the failure to comply therewith does not have a Material Adverse Effect.
The Company and the Company Subsidiary have all governmental permits, licenses,
and authorizations necessary for the conduct of their respective businesses as
presently conducted, except where the absence thereof does not have a Material
Adverse Effect. All material governmental permits, licenses, and
authorizations of the Company and the Company Subsidiary are listed in Schedule
3.12.
3.13. Environmental Matters.
(a) Defined Terms. In addition to terms elsewhere defined in this
Agreement, the following terms shall have the indicated meanings:
(i) "Business Facility" is the real property
including the land, the improvements thereon, and the ground water
and surface water thereof, that the Company or any Company
Subsidiary has at any time owned, operated, occupied, controlled or
leased.
(ii) "Disposal Site" is any facility or property
that receives or received solid or hazardous waste or Hazard
Materials for treatment, storage and/or disposal or the location or
former location of a disposal agent, waste hauler or recycler of
Hazardous Materials.
(iii) "Environmental Laws" are all laws, rules,
regulations, orders, treaties, statutes, and codes promulgated by
any Governmental Authority which prohibit, regulate, or control any
Hazardous Material or any Hazardous Material Activity, including,
without limitation the following: the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980; the Resource
Recovery and Conservation Act of 1976; the Federal Water Pollution
Control Act; the Clean Air Act; the Hazardous Materials
Transportation Act; the Clean Water Act; all comparable laws,
rules, regulations, orders, treaties, statutes, and codes of other
Governmental Authorities; all regulations promulgated pursuant to
any of the foregoing; and
-13-
20
all amendments and modifications of any of the foregoing now in
effect.
(iv) "Environmental Permit" is any approval, permit,
license, clearance, or consent required to be obtained from any
private person or any Governmental Authority with respect to a
Hazardous Material Activity which is or was conducted by the
Company or any Company Subsidiary.
(v) "Governmental Authority" is any local, state,
provincial, federal, or international governmental authority
(including, without limitation, courts) or agency which has had or
now has jurisdiction over any portion of the subject of this
Agreement or any Business Facility of the Company or the Company
Subsidiary.
(vi) "Hazardous Material" is any material or
substance that is prohibited or regulated by any Environmental Law
or that has been designated by any Governmental Authority to be
radioactive, toxic, hazardous, or otherwise a danger to health,
reproduction, or the environment.
(vii) "Hazardous Material Activity" is the
transportation, transfer, recycling, storage, use, disposal,
arrangement for disposal, treatment, manufacture, investigation,
removal, remediation, release, exposure of others to, sale, or
distribution of any Hazardous Material or any product containing a
Hazardous Material.
(b) Environmental Representations. Seller represents, warrants,
and agrees as follows:
(i) To the knowledge of Seller, except as set forth
on Schedule 3.13, there is no ambient air, surface water,
groundwater, or land contamination from Hazardous Materials within,
under, originating from, or relating to any Business Facility and
none of such properties has been used for Hazardous Material
Activity in violation of applicable Environmental Laws where such
activity could have a Material Adverse Effect.
(ii) To the knowledge of Seller, except as set forth
on Schedule 3.13, each of the Company and the Company Subsidiary
possesses and is in compliance in all material respects with all
Environmental Permits relating to the Environmental Laws necessary
to conduct its business or required by Environmental Laws.
Schedule 3.12 accurately describes all of the Environmental Permits
currently
-14-
21
held by the Company or any Company Subsidiary and relating to the
Business.
(iii) Except as disclosed in Schedule 3.13, no
claims have been made against the Company, the Company Subsidiary,
or, to the knowledge of Seller, their predecessors in interest
during the past five (5) years (except claims which have been
resolved without material fines or penalties) and no presently
outstanding citations or notices have been issued against the
Company or the Company Subsidiary under the Environmental Laws,
where such could have a Material Adverse Effect. Neither the
Company nor the Company Subsidiary has been or is currently subject
to any civil, criminal, or administrative action, suit, claim,
hearing, notice of violation, investigation, inquiry, or proceeding
for failure to comply with, or received notice of any violation or
potential liability under the Environmental Laws with respect to
any Business Facility, Disposal Site, or otherwise, where such
could have a Material Adverse Effect, nor, to the knowledge of
Seller, are there any facts, whether or not confirmed or reported,
which would give rise to any such potential liability.
(iv) To the knowledge of Seller, except as set forth
on Schedule 3.13, there are no underground storage tanks at any
real property, site, or facility (as defined in CERCLA) of the
Company or the Company Subsidiary which contains or did contain
Hazardous Materials. The Company further warrants and represents
that any prior use and operation of underground storage tanks has
been in compliance with all Environmental Laws, except where such
could not have a Material Adverse Effect.
(v) The Company has delivered to Buyer true,
complete, and correct copies of results of any non-privileged
reports, studies, audits, assessments, analyses, tests, or
monitoring in the possession of or initiated by Seller, the Company
or the Company Subsidiary within the past five (5) years pertaining
to the existence of Hazardous Materials and any other environmental
concerns relating to any Business Facility, or concerning
compliance with or liability under the Environmental Laws. In
addition, Seller knows of no facts in any privileged reports,
studies, audits, assessments, analyses, tests, or monitoring
relating to the Company or the Company Subsidiary that is
inconsistent, in any material respect, with the facts described in
the materials to which reference is made in the preceding sentence.
-15-
22
(vi) Neither the Company nor the Company Subsidiary
has expressly assumed the liability of any other person or entity
pursuant to any of the Environmental Laws.
(vii) Buyer and Seller agree that the only
representations and warranties of Seller in this Agreement as to
any Environmental Matters are those contained in this Section 3.13.
As used herein, the term "Environmental Matters" means any matter
arising out of or relating to Hazardous Material Activity.
3.14. Employee Benefit Plans. (a) Schedule 3.14 lists all
Company Benefit Plans and Benefit Arrangements (as defined in Sections 10.01(c)
and (d), respectively). True and complete copies thereof, where in writing,
have previously been delivered or made available to Buyer.
(b) With respect to each of the Company Benefit Plans intended to
qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), except as set forth on Schedule 3.14, (i) a favorable
determination letter has been issued by the Internal Revenue Service (the
"IRS") and (ii) nothing has occurred to cause the IRS to revoke such
determination and the IRS has not indicated its intention to revoke such
determination.
(c) With respect to each of the Company Benefit Plans and Benefit
Arrangements, true and complete copies of (i) all plan documents (including all
amendments and modifications thereof), and related agreements including,
without limitation, the trust agreement and amendments thereto, insurance
contracts, and investment management agreements; (ii) the most recent annual
actuarial valuation reports; (iii) the last three filed Form 5500 series and
Schedules A, B, P, and/or SSA, as applicable, and Forms PBGC-1, if any
(collectively, the "Form 5500s"); (iv) summary plan descriptions; (v) summary
of material modifications, if any; (vi) the most recent auditor's report; (vii)
copies of any private letter rulings, requests and applications for
determination and determination letters issued with respect to the Company
Benefit Plans within the past five years; and (viii) the most recent annual and
periodic accounting of related Plan assets have been delivered to Buyer.
(d) Except as set forth in Schedule 3.14, the Company Benefit
Plans and the Benefit Arrangements have been maintained in accordance with
their terms and the provisions of applicable law, including, without
limitation, COBRA (defined herein to mean the requirements of Code Section
4980B, Proposed Treasury Regulation
-16-
23
Section 1.162-26 and Part 6 of Subtitle B of Title I of ERISA), except where
the failure to do so does not have a Material Adverse Effect, and all required
filings that are due prior to the date hereof including, without limitation,
the applicable Form 5500s, for all Company Benefit Plans and Benefit
Arrangements have been timely filed.
(e) Except as set forth in Schedule 3.14, neither the Company nor
the Company Subsidiary has ever participated in or withdrawn from a
multiemployer plan as defined in Section 4001(a)(3) of Title IV of ERISA, and
neither the Company nor the Company Subsidiary has incurred or owes any
liability as a result of any partial or complete withdrawal by any employer
from such a multiemployer plan as described under Sections 4201, 4203, or 4205
of ERISA;
(f) No accumulated funding deficiency, as defined by Section
301(a)(2) of ERISA, exists (whether or not waived) with respect to any of the
Company Benefit Plans and Benefit Arrangements, and neither the Company nor the
Company Subsidiary is delinquent with respect to any contribution which is
required to be made to any of the Company Benefit Plans and Benefit
Arrangements;
(g) No prohibited transactions (within the meaning of Section 406
of ERISA or Section 4975 of the Code) for which no exemption exists under
Section 408 of ERISA or Section 4975 of the Code have occurred with respect to
any of the Company Benefit Plans and Benefit Arrangements;
(h) Neither the Company nor the Company Subsidiary has engaged in
any transaction in connection with which the Company or the Company Subsidiary
could be subject to a criminal or civil penalty under ERISA which could have a
Material Adverse Effect;
(i) No condition exists which would constitute grounds of
involuntary termination for any of the Company Benefit Plans and Benefit
Arrangements maintained by the Company or the Company Subsidiary under Section
4042 of ERISA, and there have been no reportable events as defined in Section
4043(b) of ERISA (other than events for which the thirty-day notice period has
been waived by the Pension Benefit Guaranty Corporation (the "PBGC")) with
respect to any of the Company Benefit Plans and Benefit Arrangements;
(j) No proceeding or other action has been initiated by the PBGC
to terminate any of the Company Benefit Plans and Benefit Arrangements, and no
notice has been received of any intention to commence or seek commencement of
any such proceeding or action;
-17-
24
(k) None of the Company Benefit Plans and Benefit Arrangements,
nor any trust which serves as a funding medium for any of such Company Benefit
Plans and Benefit Arrangements, nor any issue relating thereto, is currently
under examination by or pending before the IRS, the Department of Labor, the
PBGC, or any court, other than any applications for determinations pending
before the IRS;
(l) No claims are currently pending against any of the Company
Benefit Plans and Benefit Arrangements (except those submitted in the ordinary
course of administration of such Plan);
(m) At March 31, 1995, the present value (based on the actuarial
assumptions and methods set forth in Schedule 3.14) of the liability for post
employment obligations (other than pensions) for active eligible employees or
current retirees of the Company or the Company Subsidiary did not exceed
$19,316,000.
(n) With respect to each Company Benefit Plan which is intended to
satisfy the requirements of Section 401(k) of the Code, all excess
contributions, if any (together with any income allocable thereto), have been
distributed (or, if forfeitable, forfeited) before the close of the first two
and one half (2-1/2) months of the following plan year; and there is no
liability for excise tax under Section 4979 of the Code with respect to such
excess contributions, if any, for any such plan; and
(o) the unfunded liability of all Company Benefit Plans which are
"employee pension benefit plans" as defined in Section 3(2) of ERISA (other
than the Salaried Pension Plan, as defined in Section 10.03(b)(1) hereof) on an
ongoing basis, based on reasonable actuarial assumptions and methods, is as
listed below:
(i) Pension Plan for Hourly-Rated Employees of The
National Acme Company: $4,867,200 as of January 1, 1995 actuarial
valuation;
(ii) Pension Plan for Hourly-Rated Employees of The
National Acme Company, Plant Security and Certain Other Employees:
$126,000 as of January 1, 1995 actuarial valuation; and
(iii) Retirement Plan for Hourly Employees of The
National Acme Company, Distribution Center, Fremont, Ohio: $1,000
as of October 1, 1994 actuarial valuation.
(p) Except as set forth in Schedule 3.14, the consummation of the
transactions contemplated by this Agreement will not (i) result in the payment
or series of
-18-
25
payments by the Company or the Company Subsidiary to any Employee (as defined
in Section 10.01(b)) or other person of an "excess parachute payment" within
the meaning of Section 280G of the Code, (ii) entitle any Employee to severance
pay or other compensation or benefit entitlements by reason of any Employee's
deemed termination of employment as a result of the transaction contemplated
hereby, or (iii) accelerate the time of payment for vesting of any stock
option, stock appreciation right, deferred compensation, or other employee
benefits under any of the Company Benefit Plans or Benefit Arrangements
(including vacation and sick pay) that would constitute an obligation of the
Company or the Company Subsidiary.
(q) Except as set forth in Schedule 3.10, Schedule 3.14, or
Schedule 3.21, to the knowledge of Seller, there are no obligations of the
Company, the Company Subsidiary, Seller, or its affiliates under any agreement
with any Employee that relates to employment or compensation or benefits that
will be binding on the Company or the Company Subsidiary after the Closing
Date.
(r) Except for the obligations set forth in Schedule 3.10,
Schedule 3.14, or Schedule 3.21, to the knowledge of Seller, neither the
Company nor the Company Subsidiary has any obligation to continue to employ any
Employee on or after the Closing Date at substantially the same salary or wages
(including bonus, commission, and sales incentive programs) and/or on
substantially the same terms and conditions as in effect immediately prior to
the Closing Date, nor is the Company or the Company Subsidiary obligated to
continue any Company Benefit Plan or Benefit Arrangement under substantially
the same terms and conditions in effect immediately prior to the Closing Date.
3.15. Taxes. (a) Except as set forth in Schedule 3.15, the
Company, the Company Subsidiary, and Seller with respect to the Tax Returns (as
defined in Section 3.15(c)) in which the Company and the Company Subsidiary are
included, have timely filed with the appropriate federal, state, local, and
foreign governmental entity or other authority (individually or collectively,
"Taxing Authority") all Tax Returns required to be filed and have timely paid
in full all Taxes (as defined in Section 3.15(b)), if any, shown to be due on
such Tax Returns, and such Tax Returns are correct and complete in all material
respects. No other Taxes for the periods (or portions thereof) ending prior to
or on July 31, 1995 are required to be paid that have not been accrued on the
Interim Financial Statements. There are no liens for Taxes upon the Company,
the Company Subsidiary, or their assets, except liens for current Taxes not yet
due. Except as set forth on Schedule 3.15, Seller, the Company, and the
Company Subsidiary have not granted any waiver of any
-19-
26
statute of limitations with respect to, or any extension of a period for the
assessment of, any Taxes.
(b) As used in this Agreement, "Tax" means any of the Taxes and
"Taxes" means, with respect to Seller, the Company, and the Company Subsidiary,
(i) all income taxes (including any tax on or based upon net income, or gross
income, or income as specially defined, or earnings, or profits, or selected
items of income, earnings, or profits) and all gross receipts, estimated,
sales, use, ad valorem, transfer, franchise, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, or
windfall profit taxes, environment, alternative, or add-on minimum taxes,
custom duties or other taxes, fees, assessments, or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any Taxing Authority on Seller, the Company, or
the Company Subsidiary and (ii) any liability for the payment of any amount of
the Tax described in the immediately preceding clause (i) as a result of being
a "transferee" (within the meaning of Section 6901 of the Internal Revenue Code
of 1986 (as amended) ("Code") or any other applicable law) of another person or
successor, by contract, or otherwise, or a member of an affiliated,
consolidated, or combined group.
(c) As used in this Agreement, "Tax Return" is defined as any
return, report, information return, or other document (including any related or
supporting information) filed or required to be filed with any Taxing Authority
or other authority in connection with the determination, assessment, or
collection of any Tax paid or payable by Seller, the Company, or the Company
Subsidiary or the administration of any laws, regulations, or administrative
requirements relating to any such Tax.
(d) Schedule 3.15 lists each jurisdiction in which the Company and
the Company Subsidiary file Tax Returns for each period or portion thereof
ending on or before the Closing Date, and any action, suit, proceeding,
investigation, audit or claim now pending against the Company and the Company
Subsidiary in respect of any Tax, and any matter under discussion with any
Taxing Authority relating to any Tax, or any claim for additional Tax asserted
by any such authority against the Company and the Company Subsidiary. Except
as provided on Schedule 3.15, no claim is outstanding against the Company or
the Company Subsidiary by any Taxing Authority in a jurisdiction where the
Company or the Company Subsidiary do not file Tax Returns that they are or may
be subject to taxation by that jurisdiction.
(e) The Company and the Company Subsidiary have not now and have
never been a party to any agreement, contract,
-20-
27
arrangement, or plan that would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G
of the Code.
(f) Except as set forth in Schedule 3.15, neither Seller, the
Company, the Company Subsidiary, nor any member of the affiliated group that
includes Seller (1) has filed a consent pursuant to Section 341(f) of the Code
nor agreed to have Section 341(f)(2) apply to any disposition of a subsection
(f) asset (as such term is defined in Section 34(f) of the Code) owned by the
Company or the Company Subsidiary, (2) has agreed, or is required, to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise that will affect the liability of the Company or the
Company Subsidiary for Taxes, (3) has made an election, or is required, to
treat any asset of the Company or the Company Subsidiary as owned by another
person pursuant to the provisions of former Section 168(f)(8) of the Code, or
(4) has made any of the foregoing elections or is required to apply any of the
foregoing rules under any comparable state or local tax provision.
(g) Any and all consolidated federal income tax (or similar)
agreements executed between the Company and the Company Subsidiary on the one
hand, and Seller or any other member of Seller's consolidated group on the
other hand, that relate to any payments or liability therefor by or to the
Company or the Company Subsidiary with respect to their federal income and
other Taxes and that are continuing in effect will terminate as of the Closing
Date, and the Company and the Company Subsidiary shall have no liability to, or
make any payments to Seller or any member of the consolidated group that
includes the Company and the Company Subsidiary with respect to such agreements
for any tax period.
(h) Except as set forth on Schedule 3.15, neither the Company nor
the Company Subsidiary nor any corporation to which the Company or the Company
Subsidiary is a successor, directly or indirectly, by merger or otherwise (i)
has been a member of an affiliated group of corporations (as defined in Section
1504(a) of the Code) other than the group in which Seller is the common parent
or (ii) has filed or been included in a combined, consolidated, or unitary
income tax return other than with Seller or a member of Seller's affiliated
group.
(i) Seller is not a "foreign person" within the meaning of Section
1445(b)(2) of the Code, and Seller will furnish Buyer at the Closing with a
certificate to that effect in form reasonably satisfactory to Buyer.
-21-
28
(j) There are no material outstanding balances of deferred gain or
loss accounts (as such term is defined in Treas. Reg. Section 1.1502-13 as in
effect before July 12, 1995) or of intercompany items (as such term is defined
in Treas. Reg. Section 1.1502-13 as in effect after July 11, 1995) between any
member of Seller's affiliated group and the Company or the Company Subsidiary.
(k) There exists no excess loss account (as such term is defined
in Treas. Reg. Section 1.1502-19) with respect to the stock of the Company or
the Company Subsidiary.
3.16. Consents. Except as set forth in Schedule 3.16 and the
expiration of the required waiting period under the HSR Act, no consent,
approval, or authorization of, or exemption by, or filing with, any
governmental authority is required to be obtained or made by Seller in
connection with the execution, delivery, and performance by Seller of this
Agreement or the taking by Seller of any other action contemplated hereby.
3.17. Corporate Power and Authority; Effect of Agreement. Seller
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Ohio and has all requisite corporate power and
authority to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Seller. This Agreement has been duly and validly executed and
delivered by Seller and constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except to the extent
that such enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws relating to creditors' rights
generally, and (ii) is subject to general principles of equity. The execution,
delivery, and performance by Seller of this Agreement and the consummation by
Seller of the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, (x) violate any provision of
law, rule, or regulation to which Seller, the Company, or the Company
Subsidiary is subject (other than the HSR Act), (y) violate any order,
judgment, or decree applicable to Seller, the Company, or the Company
Subsidiary, or (z) violate any provision of the Charter or the By-Laws or
Regulations of Seller, the Company, or the Company Subsidiary; except, in each
case, for violations that in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby. To the
knowledge of Seller, the execution, delivery, and performance by Seller of this
Agreement and the
-22-
29
consummation by Seller of the transactions contemplated hereby will not, with
or without the giving of notice or the lapse of time, or both, result in a
breach of, or constitute a default under (or with notice or lapse of time,
result in a breach of or constitute a default under) or otherwise give any
person the right to terminate any contract to which the Company or the Company
Subsidiary is a party.
3.18. Brokers. Other than Xxxxxxxx Xxxxxxxx & Co. Incorporated,
whose fee will be paid by Seller, Seller does not know of any broker, finder,
or investment banking firm that is acting or has acted in connection with the
transactions contemplated by this Agreement, and it knows of no other
corporation, firm, or person entitled to receive any brokerage commission,
finder's fee, or other similar compensation in connection with these
transactions.
3.19. Disclaimer. EXCEPT AS SET FORTH IN THIS ARTICLE III, SELLER
MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED (INCLUDING THOSE
REFERRED TO IN SECTION 1302.25 OF THE OHIO UNIFORM COMMERCIAL CODE OR IN ANY
STATUTE APPLICABLE TO REAL PROPERTY), AND THE ASSETS AND BUSINESS OF THE
COMPANY AND THE COMPANY SUBSIDIARY BEING TRANSFERRED TO BUYER UPON THE
ACQUISITION BY BUYER OF THE STOCK AT THE CLOSING ARE TO BE CONVEYED HEREUNDER
"AS IS WHERE IS" ON THE CLOSING DATE, AND IN THEIR THEN PRESENT CONDITION, AND
BUYER SHALL RELY UPON ITS OWN EXAMINATION THEREOF. IN ANY EVENT, SELLER MAKES
NO WARRANTY OF MERCHANTABILITY, SUITABILITY, OR FITNESS FOR A PARTICULAR
PURPOSE, OR QUALITY, WITH RESPECT TO ANY OF THE TANGIBLE ASSETS BEING SO
TRANSFERRED, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT.
3.20. Insurance. All insurance policies and fidelity bonds
currently in effect relating to the assets of the Company and the Company
Subsidiary, including summary descriptions and the termination dates thereof,
are set forth in Schedule 3.20. Of the policies set forth on Schedule 3.20,
only the two workers' compensation policies covering the two years from October
1, 1993 to September 30, 1995 for states other than California and Ohio provide
for retrospective premiums. The textual portion of Schedule 3.20 indicates the
estimated magnitude of the Company's exposure for such retrospective premiums.
Neither Company nor the Company Subsidiary has been refused any insurance with
respect to its business or any of its assets, nor has coverage been limited or
quoted at other than standard rates by any insurance carrier to which it has
applied for insurance or with which it has carried insurance, during the last
two (2) years. Seller has not identified any specific risks other than Ohio
Workers' Compensation which the Company or the Company Subsidiary
-23-
30
designates as being self-insured, and neither the Company nor the Company
Subsidiary has set aside any reserves to cover specific risks, except as set
forth in the Financial Statements.
3.21. Labor Matters. Schedule 3.21 sets forth all current
collective bargaining agreements having provisions in effect between the
Company or the Company Subsidiary and any labor unions or organizations
representing any of their respective employees. Except as set forth in
Schedule 3.21, within the last five (5) years neither the Company nor the
Company Subsidiary has experienced any labor disputes or any work stoppage or
slowdowns due to labor disagreements. Except as set forth in Schedule 3.21,
(i) there is no unfair labor practice charge or complaint against the Company
or the Company Subsidiary, and, to the knowledge of Seller, none are threatened
before the National Labor Relations Board or any foreign authority; (ii) there
is no labor strike, dispute, request for representation, slowdown, or stoppage
actually pending or affecting or, to the knowledge of Seller, threatened
against the Company or the Company Subsidiary; (iii) to the knowledge of
Seller, no question concerning representation has been raised or threatened
respecting the employees of the Company or the Company Subsidiary; and (iv) no
grievance that might have a Material Adverse Effect, nor any arbitration
proceeding arising out of or under any collective bargaining agreement, is
pending and, to the knowledge of Seller, no claims therefor exist.
3.22. Employees. Schedule 3.22 sets forth a complete and accurate
list of all sales persons of the Company and the Company Subsidiary and all
other employees of the Company and the Company Subsidiary whose annual cash
compensation exceeds $50,000 showing for each: name, current job title or
description, 1994 W-2 wages paid, current salary level (including any bonus or
deferred compensation arrangements), and any bonus, commission, or other
remuneration paid during fiscal year 1994.
3.23. Suppliers. Schedule 3.23 sets forth a complete and accurate
list of (i) the twenty (20) largest suppliers (by dollar volume) of products
and services to the Company and the Company Subsidiary during the fiscal year
ended September 30, 1994 and the ten (10) month period ended July 31, 1995,
indicating the existing contractual arrangements with each such firm (a "Major
Supplier"), and (ii) the names of any sole-source suppliers (a "Sole-Source
Supplier") of significant materials or services to the Company and the Company
Subsidiary with respect to which practical alternative sources of supply are
not available on comparable terms and conditions, indicating the contractual
arrangements for continued supply from each such firm. Since September 30,
1994, no Major Supplier or
-24-
31
Sole-Source Supplier has declined to continue to act as such, and no present
Major Supplier or Sole-Source Supplier has indicated any present or future
intention to cease to do so or to materially change the terms of such
arrangements.
3.24. Customers. Schedule 3.24 sets forth a complete list of the
twenty (20) largest customers (by dollar volume) of the Company and the Company
Subsidiary during the fiscal year ended September 30, 1994 and the ten (10)
month period ended July 31, 1995, indicating the existing contractual
arrangements, if any, with each such customer. Except as set forth in Schedule
3.24, there are no material outstanding disputes with any customer listed
thereon, and, since September 30, 1994, no customer listed thereon has refused
to continue to do business with the Company or the Company Subsidiary or has
stated its intention not to continue to do business with the Company or the
Company Subsidiary.
3.25. Certain Transactions. Except as set forth in Schedule 3.25,
none of the directors or officers of the Company or the Company Subsidiary is
currently a party to any transaction with the Company or the Company Subsidiary
(other than for services as employees, officers, and directors), including
without limitation any contact, agreement, or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from, any such
person, or to or from any corporation, partnership, trust, or other entity in
which such person owns in excess of five percent (5%) of the outstanding equity
interest. As of the Closing Date, neither the Company nor the Company
Subsidiary will be a party to any contract, agreement, or other arrangement
with Seller or any affiliate of Seller concerning management or consulting
services.
3.26. Absence of Questionable Payments. To the knowledge of
Seller, neither the Company, nor the Company Subsidiary, nor any director,
officer, agent, employee, or other person acting on behalf of the Company or
the Company Subsidiary has (i) used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others
or established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Securities Exchange Act of 1934, as amended, or any other
applicable foreign, federal, or state law, or (ii) accepted or received any
unlawful contributions, payments, expenditures, or gifts.
3.27. Product and Service Warranties. Schedule 3.27 contains
copies of the standard product and
-25-
32
service warranties currently used by the Company and the Company Subsidiary.
The Company's and the Company Subsidiary's practices and policies with respect
to the provision of warranties and the handling of warranty claims has remained
unchanged for at least three (3) years, and Seller believes that the future
warranty claims experience of the Company and the Company Subsidiary with
respect to products sold and services provided by them prior to the Closing
Date should be substantially similar to the claims experience during the past
three (3) years.
3.28. Disclosure. No representation or warranty by Seller to
Buyer contained in this Agreement, and no statement contained in any schedule
or certificate furnished to Buyer pursuant to the provisions hereof, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make such statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.01. Organization. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of
its incorporation, and has all requisite corporate power and authority to carry
on its business as it is now being conducted, and to execute, deliver, and
perform this Agreement and to consummate the transactions contemplated hereby.
4.02. Corporate Power and Authority; Effect of Agreement. The
execution, delivery, and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly and validly executed and delivered by Buyer and
constitutes the valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditors' rights generally, and
(ii) is subject to general principles of equity. The execution, delivery, and
performance by Buyer of this Agreement and the consummation by Buyer of the
transactions contemplated hereby will not, with or without the giving of notice
or the lapse of time, or both, (i) violate any provision of law, rule, or
regulation to which Buyer is subject, (ii) violate any order, judgment, or
decree applicable to Buyer or (iii) violate any provision of the Certificate of
-26-
33
Incorporation or the By-laws of Buyer; except, in each case, for violations
which in the aggregate would not materially hinder or impair the consummation
of the transactions contemplated hereby.
4.03. Consents. Except for the expiration of the waiting period
under the HSR Act, no consent, approval, or authorization of, or exemption by,
or filing with, any governmental authority is required to be obtained or made
by Buyer in connection with the execution, delivery, and performance by Buyer
of this Agreement, or the taking by Buyer of any other action contemplated
hereby.
4.04. Availability of Funds. Buyer will have available on the
Closing Date sufficient funds to enable it to consummate the transactions
contemplated by this Agreement.
4.05. Litigation. There is no Litigation pending or, to the
knowledge of Buyer, threatened (i) against Buyer or any of its affiliates with
respect to which there is a reasonable likelihood of a determination that would
have a material adverse effect on the ability of Buyer to perform its
obligations under this Agreement, or (ii) that seeks to enjoin or obtain
damages in respect of the consummation of the transactions contemplated hereby.
Neither Buyer nor any of its affiliates is subject to any outstanding orders,
rulings, judgments, or decrees that would have a material adverse effect on the
ability of Buyer to perform its obligations under this Agreement.
4.06. Brokers. Other than Stanwich Partners, Inc., whose fee will
be paid by Buyer, Buyer does not know of any broker, finder, or investment
banking firm that is acting or has acted in connection with the transactions
contemplated by this Agreement, and it knows of no other corporation, firm, or
person entitled to receive any brokerage commission, finder's fee, or other
similar compensation in connection with these transactions.
4.07. Purchase for Investment. Buyer is purchasing the Stock for
investment and not with a view to any public resale or other distribution
thereof, except in compliance with applicable securities laws. Buyer
acknowledges that it has received, or has had access to, all information that
it considers necessary or advisable to enable it to make a decision concerning
its purchase of the Stock.
-27-
34
ARTICLE V
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
5.01. Cooperation by Seller. From the date hereof and prior to
the Closing, Seller will use its reasonable efforts, and will cooperate with
Buyer, to secure all necessary consents, approvals, authorizations, exemptions,
and waivers from third parties (including pursuant to the HSR Act) as shall be
required in order to enable Seller to effect the transactions contemplated
hereby, and will otherwise use its reasonable efforts to cause the consummation
of such transactions in accordance with the terms and conditions hereof.
5.02. Conduct of Business. (a) Except as may be otherwise
contemplated by this Agreement or required by any of the documents listed in a
Schedule hereto or except as Buyer may otherwise consent to in writing (which
consent shall not be unreasonably withheld), from the date hereof and prior to
the Closing, Seller will cause the Company and the Company Subsidiary to (i) in
all material respects, operate their respective businesses only in the ordinary
course; (ii) use their reasonable efforts to preserve intact their respective
business organizations; (iii) maintain their respective properties, machinery,
and equipment in sufficient operating condition and repair to enable them to
operate their respective businesses in all material respects in the manner in
which the businesses are currently operated, except for maintenance required by
reason of fire, flood, earthquake, or other acts of God; (iv) use their
reasonable efforts to continue all existing insurance policies (or comparable
insurance) of or relating to the Company and the Company Subsidiary in full
force and effect; (v) use their reasonable efforts to keep available until the
Closing the services of their respective present officers, employees, and
agents (as a group); (vi) use their reasonable efforts to preserve their
relationship with their respective material lenders, suppliers, customers,
licensors, and licensees and others having material business dealings with the
Company or any Company Subsidiary such that their respective businesses will
not be materially impaired; (vii) not make any new commitments, whether written
or oral, for capital expenditures in excess of $100,000 in the aggregate;
(viii) not grant any increase in the wages or salary of any officer, employee,
or agent of the Company or the Company Subsidiary; (ix) not enter into any
employment agreement, sales agency or other contract or arrangement with
respect to the performance of personal services, which is not terminable by it
without liability on not more than thirty (30) days notice; (x) not
-28-
35
enter into or extend any labor contract with any hourly-paid employees or any
union or agree to take any such action; and (xi) not terminate or materially
modify any lease, license, permit, contract or, other agreement.
(b) Notwithstanding the provisions of Section 5.02(a), Seller
shall not be responsible for any breach or violation of Section 5.02(a) by
reason of any action taken or omitted to be taken by Seller, the Company, or
the Company Subsidiary after the date hereof unless the same was at the
direction or written concurrence of management of Seller located at Cleveland,
Ohio.
5.03. Access. From the date hereof and prior to the Closing,
Seller shall provide Buyer with such information as Buyer may from time to time
reasonably request with respect to the Company and the Company Subsidiary and
the transactions contemplated by this Agreement, and shall provide Buyer and
its representatives reasonable access during regular business hours and upon
reasonable notice to the properties, books, and records of the Company and the
Company Subsidiary as Buyer may from time to time reasonably request; provided,
however, that Seller shall not be obligated to provide Buyer or its
representatives with (i) any information relating to trade secrets or that
would violate any law, rule, or regulation or term of any Commitment, or if the
provision thereof would adversely affect the ability of Seller or any of its
affiliates (including the Company and each Company Subsidiary) to assert
attorney-client, attorney work product, or other similar privilege or (ii)
access to the properties of the Company or the Company Subsidiary for the
purpose of conducting any on-site environmental review, including, without
limitation, on-site environmental testing of such properties, which is beyond
the scope of Phase I assessment. Any disclosure whatsoever during such
investigation by Buyer shall not constitute an enlargement of or additional
representations or warranties of Seller beyond those specifically set forth in
this Agreement. All such information and access shall be subject to the terms
and conditions of the letter agreement dated April 24, 1995, and signed by
Stanwich Partners, Inc. on April 26, 1995 (the "Confidentiality Agreement").
5.04. No Solicitation. From the date hereof and prior to the
Closing, Seller shall not, and shall not permit any of its affiliates to,
solicit or encourage any inquiries or proposals for, or enter into any
discussions with respect to, the acquisition of any of the Stock or all, or any
material part, of the respective assets or the businesses of the Company or the
Company Subsidiary or the merger, consolidation, or other business combination
of the Company or the Company Subsidiary and any other person, or furnish or
cause to be furnished any non-public information
-29-
36
concerning the Company or the Company Subsidiary to any person (other than
Buyer and its agents) in connection therewith.
5.05. Further Assurances. At any time or from time to time after
the Closing, Seller shall, at the request of Buyer and at Buyer's expense,
execute and deliver any further instruments or documents and take all such
further action as Buyer may reasonably request in order to evidence the
consummation of the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
6.01. Cooperation by Buyer. From the date hereof and prior to the
Closing, Buyer will use its reasonable efforts, and will cooperate with Seller,
to secure all necessary consents, approvals, authorizations, exemptions, and
waivers from third parties (including pursuant to the HSR Act) as shall be
required in order to enable Buyer to effect the transactions contemplated
hereby, and will otherwise use its reasonable efforts to cause the consummation
of such transactions in accordance with the terms and conditions hereof.
6.02. Books and Records; Personnel. For a period of five (5)
years with respect to tax related books and records, and three (3) years with
respect to all other books and records, from and after the Closing Date:
(a) Buyer shall not, and shall cause the Company and
the Company Subsidiary not to, dispose of or destroy any of the
books and records of the Company or the Company Subsidiary relating
to periods prior to the Closing ("Books and Records") without first
offering to turn over possession thereof to Seller by written
notice to Seller at least thirty (30) days prior to the proposed
date of such disposition or destruction.
(b) Buyer shall, and shall cause the Company and the
Company Subsidiary to, upon reasonable notice and at reasonable
times allow Seller and its agents access to all Books and Records
during normal working hours at Buyer's principal place of business
or at any location where any Books and Records are stored, and
Seller shall have the right, at its own expense, to make copies of
any Books and Records; provided, however, that
-30-
37
any such access or copying shall be had or done in such a manner so
as not to interfere with the normal conduct of Buyer's, the
Company's, or the Company Subsidiary's businesses.
(c) Buyer shall, and shall cause the Company and the
Company Subsidiary to, make available to Seller upon written
request (i) copies of any Books and Records, (ii) Buyer's, the
Company's, and the Company Subsidiary's personnel to assist Seller
in locating and obtaining any Books and Records, and (iii) any of
Buyer's, the Company's, and the Company Subsidiary's personnel
whose assistance or participation is reasonably required by Seller
or any of its affiliates in anticipation of, or preparation for,
existing or future Litigation, tax returns, or other matters in
which Seller or any of its affiliates is involved. Seller shall
reimburse Buyer, the Company, or the Company Subsidiary for the
reasonable out-of-pocket expenses incurred by any of them in
performing the covenants contained in this Section 6.02(c) .
(d) The foregoing provisions of this Section 6.02
shall be in addition to the obligations of Buyer under Sections
7.01(d) and 12.02(d)(ii).
6.03. Buyer's Knowledge of Business; Seller's Representations
Modified by Buyer's Knowledge. Buyer hereby agrees that to the extent any
representation or warranty of Seller made herein or in any such Ancillary
Document (as defined in Section 12.01) is, to the knowledge of any executive
officer or Director of Buyer acquired prior to the date hereof, untrue or
incorrect, (i) Buyer shall have no rights thereunder by reason of such untruth
or inaccuracy, and (ii) any such representation or warranty by Seller shall be
deemed to be amended to the extent necessary to render it consistent with such
knowledge of Buyer. In addition, between the date hereof and the Closing,
Buyer may acquire additional knowledge concerning the matters covered by
Seller's representations and warranties. Accordingly, Buyer agrees (without
prejudice to any rights that Buyer may have under Sections 8.01, 11.01, and
11.02) that, if the Closing occurs, then to the extent any representation or
warranty of Seller made herein or in any Ancillary Document entered into at or
prior to the Closing, to the knowledge of Buyer acquired from and after the
date hereof and prior to the Closing, is untrue or incorrect, (x) Buyer shall
have no rights thereunder by reason of such untruth or inaccuracy, and (y) any
such representation or warranty by Seller shall be deemed to be amended to the
extent necessary to render it consistent with such knowledge of Buyer.
-31-
38
6.04. Liabilities. (a) Buyer understands and agrees that, from
and after the Closing, except as specifically provided in Section 7.01 and the
last sentence of Section 10.02 to the contrary, and except for (a) any
obligations expressly incurred by Seller in its capacity as seller of the Stock
hereunder (including without limitation, under Sections 12.02 and 12.08) and
(b) any liabilities or obligations to persons not party to this Agreement that
(i) arise out of acts or failures to act prior to the Closing Date by Seller,
the Company, or the Company Subsidiary that are criminal, grossly negligent,
reckless, and/or constitute willful misconduct, or (ii) are subject to coverage
under insurance policies in effect prior to the Closing, neither Seller nor any
of its affiliates shall have any liability or responsibility for any liability
or obligation (including those relating to Environmental Matters) of or arising
out of or relating to the Company or the Company Subsidiary or the operation or
ownership by Seller, the Company, or the Company Subsidiary (or any of their
predecessors) of the Company or the Company Subsidiary, of whatever kind or
nature, whether contingent or absolute, whether arising prior to, on, or after,
and whether determined or indeterminable on, the Closing Date, and whether or
not specifically referred to in this Agreement (the foregoing being
collectively referred to hereinafter as the "Liabilities"). Accordingly, Buyer
agrees that, effective upon the Closing, Buyer, the Company and the Company
Subsidiary shall jointly and severally be responsible for and indemnify Seller
and its affiliates and hold each of them harmless against any liability, loss,
damage, claim (including third party claims, whether or not meritorious), cost
or expense (including, without limitation, reasonable attorneys' fees and
disbursements) (collectively, "Losses") incurred or suffered by any of them
arising out of any of the Liabilities.
(b) Buyer acknowledges that Seller or an affiliate thereof may be
making payments after the Closing to Seller's insurers in respect of medical
and other claims and related administrative costs, including associated claims
handling charges, for which Seller or any of its affiliates is responsible vis
a vis Seller's Insurers and for which Buyer has assumed and the Company or any
Company Subsidiary has retained responsibility pursuant to paragraph (a) of
this Section 6.04 and Section 10.04 ("Claims"). Without in any way limiting
the generality of this Section 6.04 and Section 10.04, Buyer agrees to pay, or
cause the Company or a Company Subsidiary to pay, each Claim or reimburse
Seller therefor within five (5) days after Seller advises Buyer of the amount
thereof and provides Buyer with an invoice from Seller's insurers or other
documentation reasonably satisfactory to Buyer as to the Claim (the "Advice
Date"). If the Buyer fails to pay
-32-
39
any Claim or reimburse Seller therefor within five (5) days of the Advice Date,
Buyer shall pay to Seller interest on the amount thereof at an annual rate
equal to the Interest Rate from and including the Advice Date to, but not
including, the date of payment.
6.05. Performance Bonds, etc. Schedule 6.05 sets forth a
description of each performance bond, payment bond, bid bond, letter of credit,
guarantee, and similar instrument of the Company and the Company Subsidiary.
At the Closing, Buyer, in its sole discretion, shall, or shall cause the
Company or the Company Subsidiary to, either assume or deliver to Seller
replacement performance bonds, payment bonds, bid bonds, letters of credit,
guaranties, and similar instruments, in an aggregate principal amount and with
terms and from banks or other financial institutions or surety companies in
each case satisfactory to Seller, to replace (or, to the extent required as
described above, to collateralize) any performance bonds, payment bonds, bid
bonds, letters of credit, guaranties, and similar instruments of the Company,
the Company Subsidiary, or of any affiliate thereof with respect to the Company
and the Company Subsidiary (in each case, or portions thereof) remaining
outstanding on the Closing Date with respect to which Seller or any affiliate
of Seller (other than the Company and the Company Subsidiary) will have any
liability after the Closing. In the event that, prior to the Closing Date,
Seller does not change the bonds currently deposited with the State of Ohio
relating to the Company's and the Company Subsidiary's self-insurance program
with the Ohio Bureau of Worker's Compensation, Buyer shall, or shall cause the
Company Subsidiary to, assign to Seller these bonds, and, to the extent that
these bonds are reflected on the Interim Financial Statements, there shall be a
deduction to the Purchase Price paid on the Closing Date. Seller shall
cooperate with, and provide reasonable assistance to, Buyer in its efforts to
establish a similar self-insurance program for the Company and the Company
Subsidiary following the Closing Date.
6.06. Further Assurances. At any time or from time to time after
the Closing, (a) Buyer shall, at the request of Seller and at Seller's expense,
execute and deliver any further instruments or documents and take all such
further action as Seller may reasonably request in order to (i) evidence the
consummation of the transactions contemplated hereby and (ii) evidence the
consummation of the transactions contemplated by the restructuring of Seller
and its affiliates in October, 1991; and (b) Seller shall, at the request of
Buyer, cooperate to the extent reasonably necessary for the presentation and
prosecution by Buyer of any claims against insurance policies in effect prior
to the Closing.
-33-
40
ARTICLE VII
ADDITIONAL COVENANTS
7.01. Taxes.
(a) Returns and Payments. (i) Buyer shall cause the Company and
the Company Subsidiary to consent to join, for all taxable periods of the
Company and the Company Subsidiary ending on or before the Closing Date for
which the Company and the Company Subsidiary are eligible to do so, in any
consolidated, combined, or unitary federal, state, local, or foreign income and
franchise tax returns that Seller shall request it to join. Seller shall cause
to be prepared and filed all such consolidated, combined, or unitary returns
and pay the tax shown to be due thereon. Buyer agrees to cooperate with Seller
and its affiliates in the preparation of the portions of such returns
pertaining to the Company and the Company Subsidiary, and hereby agrees to take
no position inconsistent with the Company's and the Company Subsidiary's being
a member of the consolidated, combined, or unitary group of which Seller is a
member for such periods. For purposes of the federal consolidated income tax
return for the short period ending on the Closing Date, the Company and the
Company Subsidiary shall close their books and records (including work papers)
as of the opening of business on the Closing Date in accordance with Treasury
Regulations Section 1.1502-76(b)(1)(ii) and (2)(i) in order to report their
annual income as determined on the basis of income shown on their permanent
books and records including work papers. Seller shall cause to be prepared and
Buyer shall cause to be timely filed, or, at Seller's option, Buyer shall
timely cause the Company or the Company Subsidiary, as the case may be, to sign
and return to Seller such documents as are necessary to permit Seller to timely
file, all separate (unconsolidated) state and local income and franchise tax
returns with respect to the Company and the Company Subsidiary required to be
filed for any period ending on or before the Closing Date for which returns
have not been filed as of such date. Seller shall cause to be timely paid all
taxes to which such separate returns relate for all periods covered by such
returns, unless, for any period ending on the Closing Date, Seller has accrued
for such taxes on the Closing Balance Sheet in which case Buyer shall pay such
taxes.
(ii) Seller shall cause to be prepared, and Buyer shall cause to
be timely filed, all monthly or quarterly sales/use tax returns for the period
ending with the month of the Closing.
(iii) Buyer shall cause to be prepared and timely filed the 1996
Ohio Inter-County Personal Property Tax
-34-
41
Return. Seller shall be afforded an opportunity to review such return prior to
its filing. Seller will have accrued on the Closing Balance Sheet an amount
for 1996 Ohio personal property taxes. To the extent such accrual is greater
than a pro rata amount of the 1996 personal property taxes based on the return
as filed, Buyer shall pay the excess to Seller, and if the accrual is less than
such pro rata amount, Seller shall pay the shortfall to Buyer. Payment is to
be made within five (5) days after the filing of the return. The pro rata
amount of 1996 Ohio personal property taxes shall be determined by multiplying
the amount of tax based on the return by a fraction, the numerator of which is
the number of days from January 1, 1995 up to the Closing Date, and the
denominator of which is 365.
(iv) Seller currently files income or franchise tax returns in the
states of Ohio, Michigan and Pennsylvania, and local income tax returns in
Cleveland and Fremont, Ohio. Seller shall cause to be timely prepared and
Buyer shall timely file all such state and local returns which are based upon
the year-end caused by the Closing. Seller will have made estimated payments
for, or accrued an amount on the Closing Balance Sheet for such state and local
taxes. To the extent the estimated payments and accrual are greater than the
amount of state and local tax shown on the return, the Buyer will pay such
excess to Seller, and if the estimated payments and accrual are less than the
amount of state or local tax shown on the return, Seller will pay the shortfall
to Buyer. Payment in each case is to be made within five (5) days of the time
the return is filed.
(v) Seller will have accrued an amount on the Closing Balance
Sheet for 1995 real estate taxes with respect to real property located in
Cleveland and Fremont, Ohio. To the extent such accrued amount is greater than
a pro rata amount of the real estate tax due for 1995, Buyer shall pay the
excess to Seller, and if such accrued amount is less than the pro rata amount
of the real estate tax due for 1995, Seller shall pay the shortfall to Buyer.
Payment is to be made on January 15, 1996. The amount of real estate tax due
for 1995 shall be based upon the tax xxxx rendered by the County Auditor for
the first half of 1995. The pro rata amount of real estate taxes shall be
determined in the same manner as the pro rata amount of the personal property
taxes in Section 7.01(a)(iii).
(vi) All payments made pursuant to Sections 7.01(a)(iii) through
(v) shall be treated as adjustments to the purchase price.
(vii) Buyer agrees that it and its affiliates shall make no
election under Section 338 of the Internal Revenue
-35-
42
Code with respect to the purchase of stock contemplated by the Agreement, and
Buyer further agrees that it and its affiliates shall make such elections under
the Internal Revenue Code as are necessary to prevent the carryback of any net
operating loss to any year of the Company or the Company Subsidiary during
which either of them were members of Parent's consolidated group.
(b) Indemnification; Audits. (i) Seller shall indemnify and hold
harmless Buyer, the Company, and the Company Subsidiary against any and all
liability, (A) for all claims asserted for any Taxes of the Company and the
Company Subsidiary with respect and attributable to all taxable periods or
portions thereof ending on or prior to the Closing Date, except for 1996 Ohio
franchise and personal property taxes (other than the adjustments provided in
Sections 7.01(a)(iii) and (iv)), (B) for all claims incurred or suffered by
reason of the breach of any representation or warranty made by the Seller in
Section 3.15; and (C) any Taxes of any member of any affiliated group of which
Seller is a member assessed or otherwise asserted against the Company or the
Company Subsidiary for any taxable period ending prior to or including the
Closing Date, as well as any Taxes of any member of any affiliated group that
at any time included as a member any corporation as to which the Company or the
Company Subsidiary is a successor, directly or indirectly, by merger or
otherwise, by reason of the Company and the Company Subsidiary being severally
liable for the entire tax of such affiliated group pursuant to Treasury
Regulations Section 1.1502-6 or any analogous state or local tax provision.
(ii) Buyer shall promptly notify Seller in writing upon receipt by
Buyer or any affiliate of Buyer (including the Company and the Company
Subsidiary) of notice of any pending or threatened federal, state, local, or
foreign income or franchise tax audits or assessments that may affect the tax
liabilities of the Company or the Company Subsidiary and for which Seller would
be liable under Section 7.01(b)(i). Seller shall also promptly notify Buyer in
writing of notice of any pending or threatened federal, state, local, or
foreign income or franchise tax audits of or assessments for taxable periods
ended before or including the Closing Date with respect to the Company or the
Company Subsidiary. Seller shall have the sole right to represent the
Company's or the Company Subsidiary's interests in any federal, state, local,
or foreign income or franchise tax matter, including any audit or
administrative or judicial proceeding or the filing of any amended return, that
involves a tax liability or potential tax liability for which Seller would be
liable under Section 7.01(a)(i) (a "Tax Matter"), and to employ counsel of its
choice at its expense. Buyer and Seller
-36-
43
agree that they will cooperate fully with each other and their counsel in the
defense or compromise of any claim in any said proceeding.
(c) Refunds. Any refunds or credits of federal, state, local, or
foreign income and franchise taxes (including any interest thereon) received by
or credited to the Company or the Company Subsidiary attributable to periods
ending on or prior to the Closing Date ("Seller's Refunds"), shall be for the
benefit of Seller, and Buyer shall use reasonable efforts to obtain any
Seller's Refunds and shall cause the Company and the Company Subsidiary to pay
over to Seller any Seller's Refunds within five (5) days after the receipt
thereof.
(d) Cooperation. After the Closing Date, Buyer and Seller shall
make available to the other, as reasonably requested, and to any Taxing
Authority all information, records or documents relating to Tax liabilities or
potential Tax liabilities of the Company and the Company Subsidiary for all
periods prior to or including the Closing Date and shall preserve all such
information, records, and documents for five years from the Closing Date unless
Seller reasonably requests in writing that Buyer preserve such records for a
longer period. Buyer shall prepare and provide to Seller such federal, state,
local, and foreign tax information packages as Seller shall reasonably request
for Seller's use in preparing any tax return that relates to the Company or the
Company Subsidiary. Such tax information packages shall be completed by Buyer
and provided to Seller within ninety (90) days after the close of the tax
period to which the information relates. Notwithstanding any other provisions
hereof, each party shall bear its own expenses in complying with the foregoing
provisions.
(e) Buyer's Taxes. Buyer shall pay, or cause to be paid, and
Buyer, the Company, and the Company Subsidiary shall jointly and severally
indemnify Seller and its affiliates against and hold them harmless from any
liability for Taxes payable by the Company or the Company Subsidiary
attributable to any period or portion thereof beginning after the Closing Date,
except for the adjustments provided in Sections 7.01(a)(iii) and (iv).
(f) Tax Sharing. As of the Closing Date, neither the Company nor
the Company Subsidiary shall have further rights or obligations under any
tax-sharing agreement among it and Seller and/or any of Seller's affiliates.
(g) No New Tax Elections. No new elections with respect to Taxes,
or any changes in current elections with respect to Taxes, affecting the
Company or the Company
-37-
44
Subsidiary shall be made after the date hereof without the prior written
consent of Buyer.
7.02. Cash Management; Intercompany Accounts. (a) As part of the
cash management program of Seller, the Company maintains a separate
zero-balance account at Huntington National Bank for the collection of lockbox
receipts, electronic customer payments, and controlled disbursement check
disbursements (the "ZBA"). The daily zero ledger balance in the account is
maintained by either the transfer of positive balances to, or the covering of
negative balances from, a central concentration account maintained by Seller.
Effective on the Closing Date, Seller will relinquish all control (signature
and otherwise) over the ZBA, including its linkage with Seller's concentration
account. Buyer shall be responsible to fund the ZBA in amounts sufficient to
pay all checks and drafts that are written but not presented for payment prior
to the close of business on the day immediately preceding the Closing Date; the
total of these outstanding checks and drafts will be designated by the caption
"Payable to Banks" on the Company's financial statements. Seller shall be
entitled, prior to the Closing Date, to collect, concentrate, and retain the
proceeds of all items received in its lockbox collection account or otherwise
in respect of the Company; on and after the Closing Date, Buyer shall be
entitled to collect, concentrate, and retain these proceeds.
(b) Outside of Seller's cash management concentration system, the
Company Subsidiary maintains a demand deposit account at Huntington National
Bank into which lockbox receipts are deposited and on which checks are drawn.
Balances in this account sufficient to cover outstanding checks are maintained.
Effective at the opening of business on the Closing Date, Seller will
relinquish all control (signature and otherwise) over this account. Seller
shall cause the Company Subsidiary to remit to Seller on the day prior to the
Closing Date the book balance of this account, thereby retaining in the account
a sufficient balance to cover only those outstanding checks which will not be
included in the "Payables to Banks" caption on the Company's financial
statements as of the Closing Date.
(c) The intercompany account reflecting the collection of the
Company's cash receipts or funding of the ZBA shall be canceled as of the
opening of business on the Closing Date.
7.03. Sharing of Environmental Costs. In the event that the
Company or the Company Subsidiary should incur any loss, cost, or expense
("Environmental Cost") within the period of five (5) years from the Closing
Date due to any
-38-
45
claim asserted by a Governmental Authority or a damage claim asserted by a
third party not related to Buyer, Seller, the Company, the Company Subsidiary,
or any affiliate thereof arising out of any condition or circumstance which
violates or is not in compliance with any Environmental Law, and the amount
thereof is not subject to the limitations on Buyer's right to indemnification
set forth in the second sentence of Section 12.02(a), Seller and Buyer (or the
Company or the Company Subsidiary in lieu of Buyer) shall each pay one-half of
such Environmental Costs, so long as (i) such Environmental Costs relate to
circumstances or conditions in existence on the Closing Date or relating to any
property owned or operated by the Company or the Company Subsidiary and (ii)
such claims are presented to Seller within two (2) years after the Closing
Date. Seller's liability hereunder shall be combined with any liability under
Section 12.02(a) and be subject to the $3,000,000 maximum cost to Seller
therein provided. In connection with the sharing of Environmental Costs
hereunder, Seller and Buyer shall cooperate with each other in a timely and
reasonable manner and shall endeavor to reach decisions that are fair to one
another, having due regard to Buyer's intentions to continue the operations of
the Company and the Company Subsidiary in an uninterrupted and profitable
manner and Seller's desire to avoid unreasonable costs and expenses. If Seller
and Buyer are unable to reach agreement or are in dispute as to a specific
matter or matters, their disagreement shall be submitted to a mutually
acceptable arbitrator, which arbitrator shall be instructed to act promptly and
to make a final and binding determination as to the matters in disagreement,
having due regard to the above-mentioned factors. The fees and expenses of the
arbitrator shall be shared equally by Seller and Buyer.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligation of Buyer to purchase the Stock shall be subject to
the satisfaction (or waiver) on or prior to the Closing Date of all of the
following conditions:
8.01. Representations, Warranties, and Covenants of Seller.
Seller shall have complied in all material respects with its agreements and
covenants contained herein to be performed on or prior to the Closing Date, and
the representations and warranties of Seller contained herein shall be true in
all material respects on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except (a) as otherwise contemplated
hereby, and (b) to the extent that any such representations and warranties were
made as of a specified date and as to
-39-
46
such representations and warranties the same shall continue on the Closing Date
to have been true in all material respects as of the specified date. Buyer
shall have received a certificate of Seller, dated as of the Closing Date and
signed by an officer of Seller, certifying as to the fulfillment of the
condition set forth in this Section 8.01 (the "Seller's Certificate").
8.02. No Prohibition. No statute, rule or regulation, or order of
any court or administrative agency shall be in effect that prohibits Buyer from
consummating the transactions contemplated hereby.
8.03. Third Party Consents. Buyer shall have received the
consents from third parties, in form reasonably acceptable to Buyer, set forth
on Exhibit 8.03.
8.04. Governmental Consents. The applicable waiting period under
the HSR Act shall have expired or been terminated and all other consents,
approvals, authorizations, exemptions, and waivers from governmental agencies
that shall be required in order to enable Buyer to purchase the Stock shall
have been obtained (except for such consents, approvals, authorizations,
exemptions, and waivers, the absence of which would not prohibit the purchase
or render the purchase illegal).
8.05. Proceedings. No action or proceeding shall be pending or
threatened to restrain or prevent the consummation of the transactions
contemplated hereby.
8.06. Opinion of Counsel. Buyer shall have received a written
opinion dated the Closing Date from Xxxxxxxx, Xxxx and Xxxxx, counsel to
Seller, substantially in the form attached as Exhibit 8.06.
8.07. Deliveries. Seller shall have delivered to Buyer the items
referred to in Section 1.05.
ARTICLE IX
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of Seller to sell the Stock shall be subject to the
satisfaction (or waiver) on or prior to the Closing Date of all of the
following conditions:
9.01. Representations, Warranties, and Covenants of Buyer. Buyer
shall have complied in all material respects with its agreements and covenants
contained herein to be performed on or prior to the Closing Date, and the
representations and warranties of Buyer contained herein shall be true in all
material respects on and as of the
-40-
47
Closing Date with the same effect as though made on and as of the Closing Date,
except (a) as otherwise contemplated hereby, and (b) to the extent that any
such representations and warranties were made as of a specified date and as to
such representations and warranties the same shall continue on the Closing Date
to have been true in all material respects as of the specified date. Seller
shall have received a certificate of Buyer, dated as of the Closing Date and
signed by an officer of Buyer, certifying as to the fulfillment of the
condition set forth in this Section 9.01 (the "Buyer's Certificate").
9.02. No Prohibition. No statute, rule or regulation, or order of
any court or administrative agency shall be in effect that prohibits Seller
from consummating the transactions contemplated hereby.
9.03. Performance Bonds. Buyer shall have either assumed the
performance bonds, letters of credit, and/or other instruments referred to in
Section 6.05 or delivered to Seller replacements thereof.
9.04. Governmental Consents. The applicable waiting period under
the HSR Act shall have expired or been terminated and all other consents,
approvals, authorizations, exemptions, and waivers from governmental agencies
that shall be required in order to enable Seller to sell the Stock to Buyer
shall have been obtained (except for such consents, approvals, authorizations,
exemptions, and waivers, the absence of which would not prohibit the sale or
render the sale illegal).
9.05. Proceedings. No action or proceeding shall be pending or
threatened to restrain or prevent the consummation of the transactions
contemplated hereby.
9.06. Opinion of Counsel. Seller shall have received a written
opinion dated the Closing Date from Bass, Xxxxx & Xxxx, counsel to Buyer,
substantially in the form attached as Exhibit 9.06.
9.07. Deliveries. Buyer shall have delivered to Seller the items
referred to in Section 1.06.
ARTICLE X
EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS
10.01. Definitions. (a) The term "Business" shall mean
individually and collectively (i) the Company and the Company Subsidiary and
(ii) Seller and its affiliates and any predecessor to any of the foregoing, but
only with respect to the Company and the Company Subsidiary.
-41-
48
(b) The term "Employees" shall mean all current employees
(including those on layoff, disability, or leave of absence, whether paid or
unpaid), former employees, and retired employees of the Business, and the term
"Employee" shall mean any of the Employees.
(c) The term "Company Benefit Plans" shall mean each and all
"employee benefit plans," as defined in Section 3(3) of ERISA, maintained or
contributed to by the Business or in which the Business participates or
participated and which provides benefits to Employees or their spouses or
covered dependents, including (i) any such plans that are "employee welfare
benefit plans" as defined in Section 3(1) of ERISA and (ii) any such plans that
are "employee pension benefit plans" as defined in Section 3(2) of ERISA.
(d) The term "Benefit Arrangements" shall mean each and all
pension, supplemental pension, basic and supplemental accidental death and
dismemberment, basic and supplemental life and health insurance and benefits
(including medical, dental, and hospitalization), savings, bonus, deferred
compensation, incentive compensation, business travel and accident, holiday,
vacation, severance pay, salary continuation, sick pay, sick leave, short and
long term disability, tuition refund, service award, company car, scholarship,
relocation, patent award, fringe benefit, and other employee benefit
arrangements, plans, contracts (other than individual employment, consulting,
or severance contracts), policies, or practices of the Business providing
employee or executive compensation or benefits to Employees, other than the
Company Benefit Plans.
10.02. Pay Obligations. Buyer shall assume, and shall cause the
Company and the Company Subsidiary to honor and continue to perform, all
obligations of Seller and its affiliates (including the Company and the Company
Subsidiary) under all agreements with any Employee that relate to employment or
compensation or benefits.
10.03. Pension and Other Plans. (a)(1) As of the Closing Date,
the Company and the Company Subsidiary shall cease to be a participating
employer under the Acme-Cleveland Corporation and Subsidiaries Retirement
Savings Plan (the "Acme-Cleveland Savings Plan"), and Seller shall take, or
cause to be taken, all such action as may be necessary to effect such cessation
of participation. As soon as practicable after the Closing Date, Buyer shall,
or shall cause the Company and the Company Subsidiary to, establish or
designate, and maintain, a defined contribution plan (the "Buyer's Savings
Plan") to provide benefits to the Employees who, on the Closing Date, are
participants in the Acme-Cleveland Savings Plan ("Savings
-42-
49
Plan Participants"). The Buyer's Savings Plan shall be qualified under
Sections 401(a) and 401(k) of the Code and shall provide the Savings Plan
Participants credit for service with Seller and its affiliates (including the
Company and the Company Subsidiary) and their respective predecessors prior to
the Closing Date for all purposes for which service was recognized under the
Acme-Cleveland Savings Plan.
(2)(i) As soon as practicable after the receipt by Seller of the
opinion or determination letter described in subparagraph (ii) below, Seller
shall cause the trustee of the Acme-Cleveland Savings Plan to transfer to the
trust forming a part of the Buyer's Savings Plan cash in an amount equal to the
account balances of Savings Plan Participants as of the date of transfer, which
shall be a valuation date (the "Account Balances"), provided, however, that the
investment known as the "Executive Life Contract," and any attendant rights to
which the Buyer's Savings Plan is entitled in connection therewith, may be
transferred in lieu of cash (on a proportionate basis), so long as said
Contract provides for the payment of interest and, in the event of a
distribution upon termination of employment, principal.
(ii) Within 60 days after the Closing Date, Buyer shall either (A)
provide Seller with an opinion letter of counsel acceptable to Seller that the
Buyer's Savings Plan and related trust satisfy the requirements for
qualification under Section 401(a) and 401(k) of the Code as of the later of
its effective date or the Closing Date or (B) deliver to Seller a favorable
determination letter issued by the IRS that the Buyer's Savings Plan and
related trust satisfy the requirements for qualification under Section 401(a)
and 401(k) of the Code as of the later of its effective date or the Closing
Date. No transfer shall be made until Buyer provides Seller with the opinion
letter or determination letter referred to in this subparagraph (ii).
(3) In consideration for the provisions contained in this Section
10.03(a) for the transfer by the Acme-Cleveland Savings Plan of the Account
Balances to the trust forming a part of the Buyer's Savings Plan, Buyer shall,
effective as of the Closing Date, assume all of the liabilities and obligations
of Seller and its affiliates in respect of the Savings Plan Participants and
their beneficiaries under the Acme-Cleveland Savings Plan, and Seller and its
affiliates and the Acme-Cleveland Savings Plan shall be relieved of all
liabilities and obligations to the Savings Plan Participants and their
beneficiaries arising out of the Acme-Cleveland Savings Plan; provided,
however, that Buyer shall not assume, and Seller and its affiliates shall not
be relieved of, any liability
-43-
50
resulting from a prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code), a breach of fiduciary duty or any other
violation of ERISA or the Code occurring prior to the Closing Date.
(b)(1) As of the Closing Date, the Company and the Company
Subsidiary shall cease to be a participating employer under the Salaried
Employees Pension Plan of Acme-Cleveland Corporation and Subsidiaries (the
"Salaried Pension Plan"), and Seller shall take, or cause to be taken, all such
action as may be necessary to effect such cessation of participation. As soon
as practicable after the Closing Date, Buyer shall, or shall cause the Company
and the Company Subsidiary to, establish or designate, and maintain, a defined
benefit pension plan (" Buyer's Pension Plan") to provide benefits to Employees
who, on the Closing Date, are participants in the Salaried Pension Plan
("Pension Plan Participants"). Buyer's Pension Plan shall be qualified under
Section 401(a) of the Code and shall provide the Pension Plan Participants with
credit for service with Seller and its affiliates (including the Company and
the Company Subsidiary) and their respective predecessors prior to the Closing
Date for all purposes for which such service was recognized under the Salaried
Pension Plan (other than benefit accrual), including, without limitation,
vesting, eligibility to participate, and eligibility for disability and early
retirement benefits (including subsidies relating to such benefits), and the
accrued benefit of each Employee under the Salaried Pension Plan as of the
Closing Date shall be provided by Buyer's Pension Plan as a result of the
transfer of assets described in Section 10.03(b)(3)(i).
(2) As soon as practicable after the Closing Date, Seller shall
cause the actuary for the Salaried Pension Plan (the "Plan Actuary") to
determine the aggregate present value as of the Closing Date of the accrued
benefits of the Pension Plan Participants under the Salaried Pension Plan on a
plan termination basis in accordance with Section 414(l) of the Code and the
regulations thereunder, using an interest rate of 7 3/4% and the other
actuarial assumptions used by the Plan Actuary in preparing the Salaried
Pension Plan's most recent actuarial report, disregarding those assumptions not
relevant to a termination basis calculation, such as projected salary
increases, and assuming no turnover (the "Salaried Pension Benefits Value").
Seller shall provide Buyer with the information for the determination of the
Salaried Pension Benefits Value.
(3)(i) As soon as practicable after the latest of (A) the date on
which the Salaried Pension Benefits Value is determined, (B) the expiration of
30 days following the filing of any required Form 5310 with the IRS in respect
of
-44-
51
the Buyer's Pension Plan and the Salaried Pension Plan, and (C) the receipt by
Seller of the opinion or determination letter described in subparagraph (ii)
below, Seller shall cause the trustee of the Salaried Pension Plan to transfer
to the trust forming a part of the Buyer's Pension Plan an amount (the "Pension
Transfer Amount ") in cash having an aggregate value equal to the portion (not
to exceed 100 percent) of the Salaried Pension Benefits Value covered by
Salaried Pension Plan assets as of the Closing Date in accordance with the
rules of Section 4044 of ERISA (I) increased by interest during the period from
the Closing Date to the date of transfer (the "Interim Period") at an interest
rate equal to the interest rate credited from time to time during the Interim
Period on assets held in the Salaried Pension Plan trustee's short-term
investment fund (the "Pension Plan Interest Rate") and (II) reduced by (x) an
amount equal to the benefit payments made to the Pension Plan Participants or
their beneficiaries under the Salaried Pension Plan during the Interim Period
plus interest at the Pension Plan Interest Rate on such benefit payments for
the Interim Period and (y) an amount equal to the allocable share of fees and
expenses arising during the Interim Period plus interest at the Pension Plan
Interest Rate on such allocable share of fees and expenses for the Interim
Period.
(ii) As soon as reasonably practicable after the Closing Date,
Buyer shall either (A) provide Seller with an opinion letter of counsel
acceptable to Seller that the Buyer's Pension Plan and related trust satisfy
the requirements for qualification under Section 401(a) of the Code as of the
later of its effective date or the Closing Date or (B) deliver to Seller a
favorable determination letter issued by the IRS that the Buyer's Pension Plan
and related trust satisfy the requirements for qualification under Section
401(a) of the Code as of the later of its effective date or the Closing Date.
No transfer shall be made until Buyer provides Seller with the opinion letter
or determination letter referred to in this subparagraph (ii).
(4) In consideration for the provisions contained in this Section
10.03(b) for the transfer of the Pension Transfer Amount to the trust forming a
part of the Buyer's Pension Plan, including the agreement specified in Section
10.03(b)(5) hereof, Buyer shall, effective as of the Closing Date, assume all
of the liabilities and obligations of Seller and its affiliates in respect of
the Pension Plan Participants and their beneficiaries under the Salaried
Pension Plan, and Seller and its affiliates and the Salaried Pension Plan shall
be relieved of all liabilities and obligations arising out of or relating to
the Pension Plan Participants and their beneficiaries arising out of the
Salaried Pension Plan; provided, however, that Buyer shall not assume, and
Seller and its
-45-
52
affiliates shall not be relieved of, any liability resulting from a prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code), a breach of fiduciary duty or any other violation of ERISA or the Code
occurring prior to the Closing Date.
(5) Within five (5) days after the date of the transfer by the
trustee from the Salaried Pension Plan of the Pension Transfer Amount, Seller
shall pay to Buyer in cash or cash equivalent funds an amount equal to the
excess of the Salaried Pension Benefits Value over the Pension Transfer Amount,
to the extent that such excess exceeds $150,000 as of the Closing Date, plus
interest during the period from the Closing Date to the date of payment at an
interest rate equal to the Pension Plan Interest Rate, as defined in Section
10.03(b)(3)(i).
10.04. Other Benefit Plans. For a period of two (2) years
following the Closing Date, Buyer agrees to provide Seller with prior written
notice in the event Buyer, the Company, or the Company Subsidiary ceases to
provide benefits that are substantially the same as the benefits provided to
Employees under the Company Benefit Plans and Benefit Arrangements. To the
extent any employee benefit plans provide medical or dental welfare benefits to
Employees after the Closing Date, the plans shall waive any pre-existing
conditions and actively-at-work exclusions and shall provide that any expenses
incurred on or before the Closing Date shall be taken into account under the
plans for purposes of satisfying applicable deductible, coinsurance, and
maximum out-of-pocket provisions. Without limiting the generality of Section
6.04, Buyer shall or shall cause the Company and the Company Subsidiary to,
assume all Employee-related liabilities and obligations of Seller and its
affiliates (including the Company and the Company Subsidiary) that have been
accrued on the Closing Balance Sheet, including all liabilities and obligations
under the Company Benefit Plans and Benefit Arrangements (other than those
Company Benefit Plans that are covered by Section 10.03, which shall be
governed by that Section) and workers' compensation arrangements with respect
to the Employees and their dependents and beneficiaries, including, but not
limited to, (i) liabilities and obligations for wages, benefits, compensation,
contributions, insurance, and health maintenance organization premiums,
reserves, and administrative expenses, to the extent that such liabilities and
obligations have been accrued in full on the Closing Balance Sheet, and whether
or not reported as of the Closing Date, (ii) liabilities and obligations
arising under COBRA (as defined in Section 3.14(d)) with respect to all
Employees (or any beneficiary or dependent of any Employee) who, as of the
Closing Date, have exercised or are eligible to exercise their right to such
continuation
-46-
53
coverage (except for liability arising out of any violation of the COBRA notice
provisions by Seller, the Company, or the Company Subsidiary prior to the
Closing Date), and (iii) liabilities and obligations to provide post-retirement
health and life insurance benefits to Employees (whether or not currently
retired).
10.05. Long-Term Disability Plan. Notwithstanding anything to the
contrary contained in this Agreement, Seller shall retain liability to provide
long-term disability benefits after the Closing Date to the one salaried
Employee of the Company who is receiving benefits as of the Closing Date under
the Company's long-term disability plan. The parties agree that the provisions
of this Section 10.05 do not extend to any other liabilities or any other
employees of the Company.
10.06. Severance. Buyer agrees to provide, or cause the Company
and the Company Subsidiary to provide, severance pay and other benefit
entitlements that may be owing to any Employee whose employment is terminated
by Buyer, the Company or the Company Subsidiary on or after the Closing Date or
by reason of the transactions contemplated hereby in accordance with the normal
severance policies afforded to employees of the Buyer and its affiliates,
provided that, in the application of these policies to the Employees,
employment with Seller, the Company, and the Company Subsidiary prior to the
Closing Date shall be treated as employment with Buyer.
ARTICLE XI
TERMINATION PRIOR TO CLOSING
11.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) By the mutual written consent of Buyer and
Seller; or
(b) By either Seller or Buyer in writing, if the
Closing shall not have occurred on or before September 30, 1995; or
(c) By either Seller or Buyer in writing, if there
shall have been a material breach by the other party of any of its
representations, warranties, covenants, or agreements contained
herein and such breach results in a failure to satisfy a condition
to the terminating party's obligation to consummate the
transactions provided herein; or
-47-
54
(d) By Seller if any of the conditions specified in
Article IX have not met or waived by Seller at such time as such
condition can no longer be satisfied; or
(e) By Buyer if any of the conditions specified in
Article VIII have not been met or waived by Buyer at such time as
such condition can no longer be satisfied.
11.02. Effect on Obligations. Termination of this Agreement
pursuant to this Article XI shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 12.08, 12.11, and 12.12
and the last sentence of Section 5.03; provided, however, that termination
pursuant to clause (b) or (c) of Section 11.01 by reason of breaches of
covenants or agreements or by reason of a breach by Buyer of its
representations and warranties contained in Section 4.04 shall not relieve the
defaulting or breaching party (whether or not it is the terminating party) from
any liability to the other party hereto.
ARTICLE XII
MISCELLANEOUS
12.01. Survival. Except as otherwise set forth in this Section
12.01, the representations and warranties made in this Agreement or in any
agreement, certificate (including the Seller's Certificate and the Buyer's
Certificate), or other document executed at or prior to the Closing in
connection herewith (an "Ancillary Document") shall survive the Closing until
the eighteen (18) month anniversary thereof; provided, however, that (a) the
representations and warranties set forth in Section 3.01, the fourth sentence
of Section 3.03, the first sentence of Section 3.07, and Section 3.08(c) shall
survive the Closing and expire at the end of the relevant statute of
limitations, (b) the representations and warranties set forth in Section 3.15
shall survive the Closing and expire at the end of the relevant statute of
limitations and the expiration of all applicable periods of appeal, (c) the
representations and warranties set forth in Section 3.13 shall survive the
Closing until the second anniversary thereof, and (d) the representations and
warranties set forth in the Noncompetition Agreement shall survive the Closing
and expire in accordance with the terms set forth therein and shall thereupon
expire together with any right to indemnification for breach thereof (except to
the extent a written notice asserting a claim for breach of any of the
foregoing representations or warranties, describing the nature of the breach in
reasonable detail, shall have been
-48-
55
given prior to such date to the party that made such representation or
warranty, in which case the representation and warranty shall survive, to the
extent of the alleged claim only, until the claim is resolved, whether or not
the amount of the damages or expenses resulting from the alleged breach has
been finally determined at the time the notice is given, if, but only if, (i)
in the case of a claim made by Buyer by reason of a third party claim, the
written notice is accompanied by a copy of the written notice of the third
party claimant or an affidavit by an officer of Buyer, the Company, or the
Company Subsidiary that a third party has made an assertion of fact and/or law
that, if true, would constitute a breach of a representation, warranty, or
covenant of Seller set forth in this Agreement or any Ancillary Document and
(ii) in the case of any claim made by Buyer other than by reason of a third
party claim, some damages or expense shall have been incurred in good faith at
or prior to the date of such notice; and provided that any notice asserting a
claim for breach of any of the representations and warranties contained in
Section 3.13 (or in the Seller's Certificate insofar as it pertains to Section
3.13) as to Environmental Matters (an "Environmental Breach") shall not be
effective notice unless accompanied by (x) written notice from the applicable
regulatory authority, or, if there has been a claim made against Buyer by a
third party, the written notice of the third party claimant, alleging the
existence of the conditions as to which an Environmental Breach is claimed or
(y) a written report from a environmental consulting firm reasonably acceptable
to Buyer and Seller, the fees and expenses of which firm shall be borne solely
by Buyer, confirming, in reasonable detail, the existence of the conditions as
to which an Environmental Breach is claimed). If Buyer, the Company, or the
Company Subsidiary has obtained title insurance with respect to any real
property owned by the Company or the Company Subsidiary, Buyer shall make no
claim for breach of representations or warranties contained in Sections 3.07
and 3.08(c) (and in Seller's Certificate insofar as it pertains to these
sections) to the extent that any damage or expense is covered by such title
insurance. The covenants and agreements contained herein to be performed or
complied with prior to the Closing (and the provisions of the Seller's
Certificate and the Buyer's Certificate pertaining thereto) shall expire at the
Closing. The covenants and agreements contained herein to be performed or
complied with at or after the Closing (other than the covenant and agreement to
indemnify against breaches of representations and warranties, which shall
expire as set forth in the first sentence of this Section 12.01, but including
the indemnification obligations contained in Section 6.04(a) and 7.01(b)) shall
survive the Closing until the expiration of the applicable statute of
limitations. Notwithstanding anything in this
-49-
56
Section 12.01 to the contrary, in the event that any notice is given within the
time period of survival set forth in this Section 12.01 asserting a claim for
breach of any of Seller's representations or warranties in this Agreement or in
any Ancillary Document, the representations and warranties contained in the
first sentence of Section 6.03 shall survive until such claim is resolved.
12.02. Indemnification. (a) If the Closing shall occur, Seller
shall indemnify Buyer and its affiliates (including the Company and the Company
Subsidiary) and hold each of them harmless from and against all Losses that are
incurred or suffered by any of them (i) by reason of the breach of any of the
representations or warranties made by Seller herein or in any Ancillary
Document (other than any that do not survive the Closing), (ii) by reason of
the failure by Seller to perform or comply with any of the covenants or
agreements contained herein or in any Ancillary Document to be performed or
complied with by Seller at or after the Closing, or (iii) that are attributable
to any business formerly owned or operated by the Company, or the Company
Subsidiary that is not functionally related to the manufacture, design, sale,
or servicing of turning lathe machine tools or parts therefor. Any recovery by
Buyer and its affiliates for indemnification under this Section 12.02(a) and
for claims under Section 7.03 shall be limited as follows: (1) Buyer and its
affiliates shall not be entitled to any recovery unless a claim for
indemnification is made in accordance with Sections 12.01 and paragraph (d)(i)
of this Section 12.02 and within the time period of survival set forth in
Section 12.01; (2) Buyer and its affiliates shall not be entitled to any
recovery whatsoever with respect to individual indemnification claims that are
less than $10,000; (3) Buyer and its affiliates shall not be entitled to
recover any amount for indemnification claims unless and until the amount that
Buyer and its affiliates are entitled to recover in respect of such claims
exceeds, in the aggregate, $300,000 (the "Buyer's Deductible"), in which event
(subject to clause (4) below) the entire amount that Buyer and its affiliates
are entitled to recover in respect of such claims less the Buyer's Deductible
shall be payable; and (4) the maximum amount recoverable by Buyer and its
affiliates for indemnification claims shall in the aggregate be equal to
$3,000,000. Notwithstanding the immediately preceding sentence, any recovery
by Buyer and its affiliates for indemnification under (i) Section 3.15 claims
or Section 7.01(b) or (ii) the covenant contained in Section 10.03(b)(5),
respectively, shall not be limited by Section 12.02(a).
(b) If the Closing shall occur, Buyer, the Company, and the
Company Subsidiary shall jointly and severally indemnify Seller and its
affiliates and hold each of them
-50-
57
harmless from and against all Losses that are incurred or suffered by any of
them (i) by reason of the breach by Buyer of any of the representations or
warranties made by Buyer herein or in any Ancillary Document or (ii) by reason
of the failure by Buyer (or, from and after the Closing, the Company or the
Company Subsidiary) to perform or comply with any of the covenants or
agreements contained herein or in any Ancillary Document to be performed or
complied with by any of them at or after the Closing. Any recovery by Seller
and its affiliates for indemnification under this Section 12.02(b) shall be
limited as follows: (1) Seller and its affiliates shall not be entitled to any
recovery unless a claim for indemnification is made in accordance with Section
12.01 and paragraph (d)(i) of this Section 12.02 and within the time period of
survival set forth in Section 12.01; (2) Seller and its affiliates shall not be
entitled to any recovery whatsoever with respect to individual indemnification
claims that are less than $10,000; (3) Seller and its affiliates shall not be
entitled to recover any amount for indemnification unless and until the amount
that Seller and its affiliates are entitled to recover in respect of such
claims exceeds, in the aggregate, $300,000 (the "Seller's Deductible"), in
which event (subject to clause (4) below) the entire amount that Seller and its
affiliates are entitled to recover in respect of such claims less the Seller's
Deductible shall be payable; and (4) the maximum amount recoverable by Seller
and its affiliates for indemnification claims under this Section 12.02(b) shall
in the aggregate be equal to $3,000,000.
(c) Notwithstanding anything herein to the contrary, Buyer, the
Company, and the Company Subsidiary shall have no right to any indemnification
under this Section 12.02 for any matter if (i) the Closing Balance Sheet was
reduced for such matter and either Buyer did not dispute the amount of the
reduction in the Closing Balance Sheet or the dispute as to the amount of such
reduction was resolved pursuant to Section 1.03(c) or (ii) the Closing Balance
Sheet was not reduced for such matter, Buyer disputed such nonreduction, and
the dispute was resolved pursuant to Section 1.03(c).
(d)(i) In the event that any party shall incur or suffer any
Losses in respect of which indemnification may be sought by such party pursuant
to the provisions of this Section 12.02, the party seeking to be indemnified
hereunder (the "Indemnitee") shall assert a claim for indemnification by
written notice (a "Notice") to the party from whom indemnification is sought
(the "Indemnitor") stating the nature and basis of the claim, and, if the claim
is with respect to a third party claim or an Environmental Breach, accompanied
by the documentation set forth in Section 12.01. In the case of Losses arising
by
-51-
58
reason of any third party claim, the Notice shall be given within 30 days of
the filing or other written assertion of any such claim against the Indemnitee,
but the failure of the Indemnitee to give the Notice within such time period
shall not relieve the Indemnitor of any liability that the Indemnitor may have
to the Indemnitee except to the extent that the Indemnitor is prejudiced
thereby.
(ii) The Indemnitee shall provide to the Indemnitor on request all
information and documentation reasonably necessary to support and verify any
Losses that the Indemnitee believes give rise to a claim for indemnification
hereunder and shall give the Indemnitor reasonable access to all books,
records, and personnel in the possession or under the control of the Indemnitee
that would have bearing on such claim.
(iii) In the case of third party claims for which indemnification
is sought, the Indemnitor shall have the option, and with respect to such
claims that represent or are in respect of any of the Liabilities ("Liabilities
Claims") shall have the obligation, (x) to conduct any proceedings or
negotiations in connection therewith, (y) to take all other steps to settle or
defend any such claim (provided that the Indemnitor shall not settle any such
claim without the consent of the Indemnitee (which consent shall not be
reasonably withheld)), and (z) to employ counsel to contest any such claim or
liability in the name of the Indemnitee or otherwise. In any event, the
Indemnitee shall be entitled to participate at its own expense and by its own
counsel in any proceedings relating to any third party claim. The Indemnitor
shall, within 45 days of receipt of the Notice, notify the Indemnitee of (or,
in the case of a Liabilities Claim, confirm to the Indemnitee) its intention to
assume the defense of the claim. Until the Indemnitee has received notice of
the Indemnitor's election whether to (or, in the case of a Liabilities Claim,
the Indemnitor's confirmation of its intention to) defend any claim, the
Indemnitee shall take reasonable steps to defend (but may not settle) the
claim. Except for Liabilities Claims, as to which this sentence shall not be
applicable, if the Indemnitor shall decline to assume the defense of any such
claim, or shall fail to notify the Indemnitee within 45 days after receipt of
the Notice of the Indemnitor's election to defend the claim, the Indemnitee
shall defend against the claim (provided that the Indemnitee shall not settle
such claim without the consent of the Indemnitor, which consent shall not be
unreasonably withheld). The expenses of all proceedings, contests, or lawsuits
in respect of such claims (other than those incurred by the Indemnitee which
are referred to in the second sentence of this subparagraph (iii)) shall be
borne by the Indemnitor but only if the Indemnitor is responsible pursuant
hereto to indemnify the Indemnitee in
-52-
59
respect of the third party claim and, if applicable, only to the extent
required by the second sentence of Section 12.02(a). Regardless of which party
shall assume the defense of the claim, the parties agree to cooperate fully
with one another in connection therewith. In the case of a claim for
indemnification made under Section 12.02(a)(i) or 12.02(b)(i), (a) if (and to
the extent) the Indemnitor is responsible pursuant hereto to indemnify the
Indemnitee in respect of the third party claim, then within ten days after the
occurrence of a final non-appealable determination with respect to such third
party claim, the Indemnitor shall pay the Indemnitee, in immediately available
funds, the amount of any Losses (or such portion thereof as the Indemnitor
shall be responsible pursuant to the provisions hereof, including, without
limitation, the second sentence of Section 12.02(a)), and (b) in the event that
any Losses incurred by the Indemnitee do not involve payment by the Indemnitee
of a third party claim, then, if (and to the extent) the Indemnitor is
responsible pursuant hereto to indemnify the Indemnitee against such Losses,
the Indemnitor shall within ten days after agreement on the amount of Losses or
the occurrence of a final non-appealable determination of such amount pay to
the Indemnitee, in immediately available funds, the amount of such Losses (or
such portion thereof as the Indemnitor shall be responsible pursuant to the
provisions hereof, including, without limitation, the second sentence of
Section 12.02(a)).
(e) The provisions of paragraph (d) of this Section 12.02 shall
apply to all claims for indemnification hereunder except indemnification claims
that involve Tax Matters, which claims shall be governed by Section 7.01(b) .
(f) The indemnification provided in this Section 12.02 shall be
the sole and exclusive remedy for any inaccuracy or breach of any
representation or warranty made by Seller in this Agreement or in any Ancillary
Document except as provided under Sections 7.01(b) and 7.03. All amounts
payable by one party in indemnification of the other shall be considered an
adjustment to the Purchase Price.
(g) In no event shall Seller be liable for loss of profits or
consequential damages by reason of a breach of any representation or warranty
made by Seller or any of its affiliates in this Agreement or any Ancillary
Document.
(h) Notwithstanding anything in this Agreement to the contrary,
Seller shall not be responsible for any liability or obligation as a result of
Buyer's, the Company's, or the Company Subsidiary's failure to comply with
applicable law after the Closing even if the Company
-53-
60
and the Company Subsidiary are owned or operated after the Closing in the
manner owned or operated prior to Closing except to the extent that such
failure to comply with applicable law constitutes a breach of the
representations set forth in Section 3.12.
(i) Buyer understands and agrees that the rights accorded it by
Section 7.03 and Section 12.02(a) are its, the Company's, and the Company
Subsidiary's sole and exclusive remedy against Seller or any of its affiliates
with respect to any Environmental Matters whatsoever. Buyer, on its own behalf
and on behalf of its affiliates (including (effective upon the Closing),
without limitation, the Company and the Company Subsidiary) and the successors
and assigns of any of the foregoing, hereby waives any right (other than as
contemplated by Section 7.03 and Section 12.02(a)) to seek contribution or
other recovery from Seller or any of its affiliates that any of them may now or
in the future ever have under 42 U.S.C. Section Section 9607 and 9613(f) of
the Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Section 9601 et seq.), as amended ("CERCLA"), the Hazardous Material
Transportation Act (49 U.S.C. Section 801 et seq.), the Clean Water Act (33
U.S.C. Section 1251 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42
U.S.C. Section Section 11001 et seq.), the Safe Drinking Water Act (42 U.S.C.
Section Section 300f et. seq.), the Toxic Substances Control Act, as amended
(15 U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seq.), the Occupational Safety and
Health Act (29 U.S.C. Section 651 et seq.), or any other federal, state,
local, or foreign law relating to Environmental Matters, the rules and
regulations promulgated under any thereof, and any provisions of common law
providing for any remedy or right of recovery with respect to Environmental
Matters, as these laws, rules, regulations, and provisions were in the past or
are currently in effect, or may in the future be enacted or be in effect
(collectively, "Environmental Laws"), with respect to the Liabilities. In
consideration of the foregoing indemnification, Buyer, on its own behalf and on
behalf of its affiliates (including (effective upon the Closing), without
limitation, the Company and the Company Subsidiary) and the successors and
assigns of any of the foregoing, hereby further unconditionally releases Seller
and its affiliates from any and all claims, demands, and causes of action that
any of them may now or in the future ever have against Seller or any of its
affiliates for recovery under CERCLA or under any other Environmental Laws with
respect to the Liabilities.
(j) Upon making any payment to an Indemnitee for any
indemnification claim pursuant to this Section 12.02,
-54-
61
the Indemnitor shall be subrogated, to the extent of such payment, to any
rights that the Indemnitee may have against any other parties with respect to
the subject matter underlying such indemnification claim.
(k) Notwithstanding any other provision hereof, Buyer, the
Company, and the Company Subsidiary shall jointly and severally indemnify
Seller and its affiliates and hold each of them harmless from and against any
Losses that may be incurred or suffered by any of them (i) under the Worker
Adjustment and Retraining Notification Act arising out of, or relating to, any
actions taken by Buyer, the Company, or the Company Subsidiary on or after the
Closing Date; (ii) in connection with any claim made by any current Employee by
reason of the Company's or the Company Subsidiary's failure to continue to
employ such Employee on or after the Closing Date at substantially the same
salary or wages (including bonus, commission, and sales incentive programs)
and/or on substantially the same terms and conditions as in effect immediately
prior to the Closing Date (including any claim made by reason of the Employee's
not receiving benefits under any Company Benefit Plan or Benefit Arrangement or
receiving any particular benefit or level of benefit); (iii) in connection with
any claim made by any Employee for any severance pay or other compensation or
benefit entitlements by reason of any Employee's termination or deemed
termination of employment as a result of the transactions contemplated hereby;
or (iv) by reason of Buyer's, the Company's, or the Company Subsidiary's
failure to comply with any of the provisions of this Article XII.
12.03. Interpretive Provisions.
(a) Whenever used in this Agreement, "to Seller's knowledge" or
"to the knowledge of Seller" shall mean the actual knowledge of the corporate
officers of Seller and matters disclosed to Seller prior to the Closing, after
due inquiry by Seller by Xxxxxx X. Xxxxxx, President of the Company, and, in
the case of matters referred to in Section 3.13, additionally by Xxxxxxx
Xxxxxxx, Director of Manufacturing of the Company, and Xxxxxx Xxxx, Plant
Engineer for the Company; and "to Buyer's knowledge" or "to the knowledge of
Buyer" shall mean the actual knowledge of the executive officers and Directors
of Buyer.
(b) The words "hereof," "herein," "hereby," and "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section, or other subdivision thereof.
(c) For purposes of this Agreement, the Company and the Company
Subsidiary shall be deemed to be an affiliate
-55-
62
of Seller prior to the Closing and an affiliate of Buyer after the Closing.
12.04. Entire Agreement. This Agreement (including the Schedule
and Exhibits hereto) and the Confidentiality Agreement constitute the sole
understanding of the parties with respect to the subject matter hereof.
Matters disclosed by Seller to Buyer pursuant to any Section of this Agreement
shall be deemed to be disclosed with respect to all Sections of this Agreement.
12.05. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto; provided however, that this
Agreement may not be assigned by Buyer without the prior written consent of
Seller, except that Buyer may, at its election, assign this Agreement to any
direct or indirect wholly owned subsidiary so long as (a) the representations
and warranties of Buyer made herein are equally true of such assignee and (b)
such assignment does not have any adverse consequences to Seller or any of its
affiliates (including, without limitation, any adverse tax consequences or any
adverse effect on the ability of Buyer to consummate (or timely consummate) the
transactions contemplated hereby), and (c) such assignee shall execute a
counterpart of this Agreement agreeing to be bound by the provisions hereof as
"Buyer," and agreeing to be jointly and severally liable with the assignor and
any other assignee for all of the obligations of the assignor hereunder, but no
such assignment of this Agreement or any of the rights or obligations hereunder
shall relieve Buyer of its obligations under this Agreement.
12.06. Headings. The headings of the Articles, Sections, and
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
hereof.
12.07. Modification and Waiver. No amendment, modification, or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by the parties hereto, except
that any of the terms or provisions of this Agreement may be waived in writing
at any time by the party which is entitled to the benefits of such waived terms
or provisions. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar). No delay on the part of any party in exercising any right,
power, or privilege hereunder shall operate as a waiver thereof.
-56-
63
12.08. Expenses. Except as otherwise provided herein, Seller and
Buyer shall each pay all costs and expenses incurred by it or on its behalf in
connection with this Agreement and the transactions contemplated hereby,
including, without limiting the generality of the foregoing, fees and expenses
of its own financial consultants, accountants, and counsel.
12.09. Notices. Any notice, request, instruction, or other
document to be given hereunder by any party hereto to any other party shall be
in writing and shall be given (and will be deemed to have been duly given upon
receipt) by delivery in person, by electronic facsimile transmission, cable,
telegram, telex, or other standard forms of written telecommunications, by
overnight courier or by registered or certified mail, postage prepaid,
if to Seller to:
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx Xxxx, Xxxx 00000
Attention: President
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx, Xxxx and Xxxxx
1100 National City Bank Building
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
(or if after October 6, 1995,
3900 Society Center
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000)
Attention: Xxxxxx X. Xxxxxxxxx
Telecopy: (000)000-0000
if to Buyer to:
XxXxxxx-Xxxxxxx, Inc.
One Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: President Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Bass, Xxxxx & Xxxx
First American Center
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: J. Page Davidson
Telecopy: (000) 000-0000
-57-
64
or at such other address for a party as shall be specified by like notice.
12.10. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Ohio applicable to
agreements made and to be performed wholly within that jurisdiction. Each of
the parties hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Ohio and of the United
States of America, in each case located in County of Cuyahoga, for any
Litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process,
summons, notice, or document by U.S. registered mail to its respective address
set forth in Section 12.09 shall be effective service of process for any
Litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any Litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of Ohio or the United States of
America, in each case located in Cuyahoga County, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such Litigation brought in any such court has been brought
in an inconvenient forum.
12.11. Public Announcements. Neither Seller nor Buyer shall
make any public statements, including, without limitation, any press releases,
with respect to this Agreement and the transactions contemplated hereby without
the prior written consent of the other party (which consent shall not be
unreasonably withheld) except as may be required by law. If a public statement
is required to be made by law, the parties shall consult with each other in
advance as to the contents and timing thereof.
12.12. No Third Party Beneficiaries. This Agreement is
intended and agreed to be solely for the benefit of the parties hereto and no
other party shall accrue any benefit,claim or right of any kind whatsoever
pursuant to, under, by or through this Agreement.
12.13. Counterparts. This Agreement may be executed in one
of more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.
-58-
65
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
ACME-CLEVELAND CORPORATION
By: /s/ X. X. Xxxxx
----------------------------
Name: X. X. Xxxxx
Title: Chairman
AC INTERMEDIATE COMPANY
By: /s/ X. X. Xxxxx
----------------------------
Name: X. X. Xxxxx
Title: Chairman
XXXXXXX-XXXXXXX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
66
The undersigned hereby agrees, effective upon the Closing, to be bound by the
provisions of the foregoing Agreement applicable to it, including, without
limitation, Section 12.02(i).
THE NATIONAL ACME COMPANY
By: /s/ X. X. Xxxxx
----------------------------
Name: X. X. Xxxxx
Title: Chairman
