RECITALS
EX-2
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0002.htm
EXHIBIT 2.1 - ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of March 28,
2001, by and among Tempco Engineering, Inc., a California corporation ("Tempco")
and Hyco Precision, Inc., a California corporation ("Hyco") (together referred
to herein as "Sellers" and individually referred to as a Seller"); the
Shareholders of Tempco and the Shareholders of Hyco listed on Schedule A-1
attached hereto (collectively referred to herein as the "Shareholders" and
individually referred to as a "Shareholder"), and Metal Corporation, a Missouri
corporation doing business in the state of California as "Sun Valley Metal
Corporation" ("Purchaser").
RECITALS
A. The Shareholders own all of the issued and outstanding stock of
Tempco and Hyco.
B. Tempco's primary business is the manufacture and distribution of
machine parts, assemblies and related items; and Hyco's primary business is the
manufacture and distribution of machine parts, assemblies and related items
(each such business individually and together being referred to herein as the
"Business").
X. Xxxxxxx desire to sell and Purchaser desires to purchase the Assets
(as defined herein) and in connection therewith, Purchaser will assume certain
liabilities, all upon the terms and conditions hereinafter set forth.
D. The Shareholders are parties to this Agreement for the purpose of
making the representations and warranties, and for making certain covenants and
agreements contained herein.
E. LMI erospace, Inc., a Missouri corporation ("LMI") is the parent of
Purchaser and is willing to guarantee the obligations of Purchaser set forth in
this Agreement.
In consideration of the premises and of the agreements and provisions
set forth herein, and subject to the conditions herein contained, it is mutually
agreed as follows:
ARTICLE I - DEFINITIONS
Wherever used in this Agreement, the following terms shall have the
following meanings:
"Accounts Receivable" is defined in Section 4.08.(1)
"Accounts Receivable Schedule" is defined in Section 4.08.
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1 All references to "Sections" and "Articles" are to Sections and Articles in
this Agreement unless otherwise specified.
"Accountants' Resolution Period" is defined in Section 2.04(C).
"Adjustment Amount" is defined in Section 2.04(B).
"Affiliate" means a Person that directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first Person. "Control" (including the terms "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee or executor, or otherwise.
"Annual Statements" means the financial statements of Sellers for the
years ended December 31, 1998, December 31, 1999 and December 31, 2000, as
heretofore delivered to Purchaser.
"Assets" shall mean all assets, properties and rights of Sellers used
directly or indirectly in the conduct of, or generated by or constituting the
Business, except the Excluded Assets, and include, without limitation, the
following:
(a) all Equipment;
(b) all Inventory;
(c) all Closing Accounts Receivable;
(d) the Assigned Contracts;
(e) the Intellectual Property and the goodwill symbolized by all
trademarks and servicemarks included in the Intellectual Property;
(f) all operating information, files, books, records, data, plans,
contracts and recorded knowledge, including customer and supplier lists,
regardless of format or medium, relating to the Business, including those
relating to the Assets (including copies of financial, accounting and personnel
records for those employees who are being hired by Purchaser), that have been
used or are being used for the conduct of the Business prior to or as of the
Closing Date;
(g) the "Tempco" and "Hyco" names and all other trademarks,
servicemarks, company names, any trademark or servicemark rights therein and any
applications therefor, whether appearing alone or with any other name, xxxx,
design, or designation and any related name, xxxx, design or designation, and
the goodwill symbolized by such trademarks and servicemarks associated
therewith;
(h) the telephone, telecopy numbers used in the Business, together with
the telephone directory advertisements or listings in connection with the
Business and Email addresses all websites (and all assets related thereto)
related to the Business;
(i) to the extent not otherwise described above, and except for
Excluded Assets, all of Sellers' interest in all tangible or intangible assets,
including without limitations, all deposits and prepaid items, all governmental
permits and all contract rights owned or used by Sellers in connection with the
Business, including without limitation any of which have been fully depreciated
or written off.
"Assigned Contracts" shall mean all of Sellers' contracts, leases and
other agreements (i) directly relating to and necessary for the Business as
presently conducted by the Sellers and (ii) which are to be assigned and
transferred to Purchaser. A list of the Assigned Contracts is attached hereto as
Schedule A-2.
"Assumed Liabilities" shall mean the debts, liabilities and obligations
of Sellers incurred in the ordinary course of Sellers' Business prior to Closing
(except Excluded Liabilities), including without limitation, the liabilities of
Sellers set forth on Schedule A-5.
"Authorizations" shall mean all governmental and other franchises,
licenses, permits, easements, rights, applications, filings, registrations,
notices, certificates, bonds, consents, approvals, and other authorizations,
which are in any manner necessary or appropriate for the conduct of the
Business, as now or previously conducted, or for the ownership or use of the
Assets.
"Business" is defined in paragraph B of the Recitals to this Agreement.
"Claim" shall mean (i) any claim against a party hereto which, if paid
by such party, could constitute an Indemnifiable Loss or (ii) any action, suit
or proceeding against a party hereto which, if decided against such party, could
constitute an Indemnifiable Loss.
"Closing" shall have the meaning set forth in Section 3.01.
"Closing Consideration" is defined in Section 2.03(a)
"Closing Accounts Receivable" is defined in Section 4.08.
"Closing Accounts Receivable Schedule" is defined in Section 4.08.
"Closing Date" shall have the meaning set forth in Section 3.01.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"EBITDA" means net income before interest, taxes, depreciation and
amortization, as determined in accordance with the methodology employed in
making the estimated EBITDA calculation for the year 2000 attached hereto as
Schedule A-3, provided that: (a) neither amortization of the cost of Purchaser
acquiring the Assets or goodwill nor general corporate charges shall reduce
EBITDA; and (b) any specific costs related to use in the Business of Purchaser's
corporate resources will be priced and charged as a normal operating expense.
"EBITDA Earn-Out" is defined in Section 2.06.
"Employees" is defined in Section 6.02(A).
"Environmental Condition" shall mean the presence of any Hazardous
Materials on, in, under or emanating from, any property now or in the past
owned, leased or utilized by Sellers or the violation of any Environmental Laws
and Regulations.
"Environmental Laws and Regulations" shall mean all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any federal, state, foreign and local laws
or regulations relating to pollution, nuisance, or the environment including,
without limitation, (i) the Federal Clean Air Act, 42 U.S.C.ss.7401 et seq.;
(ii) the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C.ss.ss.9601 et seq.; (iii) the Federal Emergency Planning and Community
Right-to-Know Act, 42 U.S.C.ss.ss.1101 et seq.; (iv) the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C.ss.ss.136 et seq.; (v) the Federal Water
Pollution Control Act, 33 U.S.C.ss.ss.1251 et seq.; (vi) the Solid Waste
Disposal Act, 42 U.S.C.ss.ss.6901 et seq.; (vii) the Toxic Substances Control
Act, 15 U.S.C.ss.ss.2601 et seq.; (viii) laws relating in whole or in part to
emissions, discharges, releases, or threatened releases of any Hazardous
Material; and (ix) laws relating in whole or in part to the manufacture,
processing, distribution, use, coverage, disposal, transportation, storage or
handling of any Hazardous Material.
"Equipment" shall mean all machinery, equipment, motor vehicles, tools,
computer hardware and software, store fixtures, furniture, furnishings,
leasehold improvements, office supplies, packaging materials, incidentals and
like items owned or leased by Sellers and used or consumed in the Business and
any other tangible personal property.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow Agent" shall mean a financial institution unrelated to Sellers
or Purchaser selected by mutual agreement of Sellers and Purchaser.
"Escrow Agreement" is defined in Section 2.04(A)(ii).
"Escrow Amount" is defined in Section 2.04(A)(ii).
"Excluded Assets" shall mean those assets listed on Schedule A-6,
including without limitation, the Real Property.
"Excluded Liabilities" shall mean:
(a) any obligations for borrowed money or any promissory notes issued
by Sellers, including any notes to any lender, shareholder, director, officer or
affiliate of Sellers;
(b) any liability or obligation not arising out of the conduct of the
Business on or prior to the Closing Date, whether now known or hereafter
asserted including, without limitation, any Litigation;
(c) any liability or obligation relating to any Environmental Laws and
Regulations or any Environmental Condition arising or accruing on or prior to
the Closing Date;
(d) any liability or obligation to Employees other than as expressly
assumed in Section 6.02(A);
(e) any liability under any and all equipment leases between Sellers
and an Affiliate of Sellers, and any other obligation of Sellers to any
Affiliate of Sellers other than trade accounts payable for goods or services
actually delivered or rendered to Sellers at fair market price and used by
Sellers in the Business;
(f) any product liability or similar claim for injury to person or
property, regardless of when made or asserted, which arises out of or is based
upon any express or implied representation, warranty, agreement or guarantee, or
which is imposed or asserted to be imposed by operation of law, in connection
with any service performed or product sold or leased by or on behalf of Sellers
on or prior to the Closing Date, including without limitation any claim relating
to any product delivered in connection with the performance of such service and
any claim seeking recovery for consequential damage, lost revenue or income;
(g) any Taxes (a) payable or due with respect to the Business, the
Assets, the properties or the operations of Sellers for activities prior to or
on the Closing Date, or (b) incident to or arising as a consequence of the
negotiation or consummation, by Sellers of this Agreement and the transactions
contemplated hereby;
(h) any liability or obligation arising on or prior to the Closing Date
or relating to the Closing to any employees, agents or independent contractors
of Sellers, whether or not employed or retained by Purchaser after the Closing
Date, or under any benefit arrangement with respect thereto, including any
employee benefit plan or other such plan or arrangement referred to in Section
4.19; and
(i) any liability or obligation of Sellers arising or incurred in
connection with the negotiation, preparation and execution of this Agreement and
the transactions contemplated hereby, including the fees and expenses of
counsel, accountants and other experts.
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with the past practices of the Business.
"Hazardous Materials" shall mean any hazardous, infectious or toxic
substance, chemical, pollutant, contaminant, emission or waste which is or
becomes regulated by any local, state, federal or foreign authority. Hazardous
Materials include, without limitation, anything which is (i) defined as a
"pollutant" pursuant to 33 U.S.C. ss. 1362(6); (ii) defined as a "hazardous
waste" pursuant to 42 U.S.C. ss. 6921; (iii) defined as a "regulated substance"
pursuant to 42 U.S.C. ss.6991; (iv) defined as a "hazardous substance" pursuant
to 42 U.S.C. ss. 9601(14); (v) defined as a "pollutant or contaminant" pursuant
to 42 U.S.C. ss. 9601(33); (vi) petroleum; (vii) asbestos; or (viii)
polychlorinated biphenyl.
"Indemnifiable Loss" for Purchaser shall mean any loss, liability,
damage, cost or expense of any nature whatsoever as a result of a breach of a
representation, warranty, covenant or agreement referred to or included in
Section 8.01 or the waiver of compliance with the bulk transfers provisions of
the Uniform Commercial Code as enacted and in force in applicable jurisdictions
(collectively, the "Bulk Sales Law") referred to or included in Section 8.02 or
the failure to discharge liabilities referred to or included in Section 8.03.
"Indemnifiable Loss" for Sellers shall mean (i) any loss, liability, damage,
cost or expense of any nature whatsoever as a result of a breach of a
representation, warranty, covenant or agreement referred to or included in
Section 9.01 or the failure to discharge liabilities referred to or included in
Section 9.02.
"Indemnifying Shareholders" shall mean Xxxxxx X. Star, Xxxxx Xxxx and
Xxxxxx X. Star, jointly and severally.
"Intellectual Property" is defined in Section 4.20.
"Inventory" shall mean all items of inventory, goods held for sale,
merchandise, finished products, components and raw materials, garage and spare
parts and garage supplies.
"Knowledge" shall have the following meaning:
(a) an individual will be deemed to have "Knowledge" of a particular
fact or other matter if such individual is actually aware of such fact or other
matter or if such individual could be expected to discover or otherwise become
aware of such fact or other matter in the course of a reasonable investigation
consistent with the corporate duties of such individual as an officer and/or
director of a Seller; and
(b) a "Seller" will be deemed to have "Knowledge" of a particular fact
or other matter if an Indemnifying Shareholder has, or at any time, had
Knowledge (as defined above) of such fact or other matter.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
"Liens" shall mean restrictions on or conditions to transfer or
assignment, debts, claims, security interests, liens, encumbrances and other
title retention agreements, pledges, assessments, covenants, restrictions,
charges, mortgages, conditional sales agreements, options and other title
defects of every nature.
"Litigation" is defined in Section 4.15.
"Material Supplier and Vendor List" is defined in Section 4.32.
"Net Tangible Asset Value" means the value of the tangible Assets, less
Assumed Liabilities, as determined in accordance with GAAP by Purchaser's
Accountants, provided that the value of equipment shall be based on the
appraisal (a copy of which is attached hereto as Schedule A-4) heretofore
delivered to Purchaser and that all equipment acquired after such appraisal
shall be valued at acquisition cost.
"Neutral Auditors" is defined in Section 2.04(D).
"Person" shall mean an individual, firm, corporation, partnership,
limited liability company, trust, governmental authority or body, association,
unincorporated organization, or any other entity.
"Purchase Price" is defined in Section 2.03.
"Purchaser" shall mean LMI or a wholly owned subsidiary organized by
LMI for the purpose of acquiring the assets of the Sellers.
"Purchaser's Accountants" shall mean Ernst & Young, LLP.
"Purchaser's Documents" shall refer to all agreements, documents,
instruments and certificates required to be delivered by Purchaser in accordance
with the terms of this Agreement.
"Purchaser Group" is defined in Article VIII.
"Real Property" shall mean all real property (including, without
limitation, all interests in and any rights to real property) and improvements
located thereon which are owned, leased or used in the Business by Sellers.
"Sellers" when used herein to refer to a representation, warranty,
covenant, liability or obligation, shall mean each Seller as defined in the
introductory paragraph and shall also mean both Sellers combined.
"Sellers' Accountants" shall mean Xxxxxxx, Block + Company.
"Sellers' Documents" shall refer to all Schedules hereto and all
agreements, documents, instruments and certificates required to be delivered by
Sellers in accordance with the terms of this Agreement.
"Sellers Group" is defined in Article IX.
"Tax" or "Taxes" shall mean any and all federal, state, foreign or
local income, gross receipts, real and personal property, sales, use, ad
valorem, license, business, excise, franchise, employment, withholding, workers'
compensation, or similar taxes, fees, charges, assessments or premiums, together
with any interest, additions or penalties with respect thereto, and any interest
in respect of such additions or penalties.
"Tax Returns" shall mean all federal, state, foreign or local tax
returns and estimates, declarations of estimated tax and tax reports and forms.
ARTICLE II - PURCHASE AND SALE
2.01 Agreement to Sell. At the Closing, Sellers shall grant, sell,
convey, assign, transfer and deliver to Purchaser, upon and subject to the terms
and conditions of this Agreement, all right, title and interest of Sellers in
and to the Assets, free and clear of all Liens, except with respect to the
Assumed Liabilities which Purchaser shall assume and satisfy in accordance with
their terms.
2.02 Agreement to Purchase. At the Closing, in exchange for the
Purchase Price, Purchaser shall purchase the Assets from Sellers, upon and
subject to the terms and conditions of this Agreement and in reliance on the
representations, warranties, covenants, agreements and indemnifications of the
Sellers and Shareholders, respectively, contained herein. Each category of
Assets is a material part of this transaction, without which Purchaser would not
have agreed to purchase any of the Assets and pay the Purchase Price. In
addition, Purchaser shall assume at the Closing and agree to pay, discharge or
perform, as appropriate and in the ordinary course, the Assumed Liabilities.
Except as and to the extent specifically provided in this Section 2.02,
Purchaser shall not assume or otherwise be in any respect responsible for any
liabilities or obligations whatsoever of the Business of Sellers.
2.03 Purchase Price. Subject to adjustment pursuant to Section 2.05,
the Purchase Price for the Assets will be as follows:
(a) consideration to be paid at the Closing in the amount of Fourteen
Million Two Hundred Fifty Thousand Dollars ($14,250,000) (the "Closing
Consideration"), minus the Adjustment Amount, as defined in Section 2.04(B), if
applicable;
(b) assumption of the Assumed Liabilities; and
(c) the EBITDA Earn Out, as defined in Section 2.06.
2.04 Payment of Purchase Price.
(A) The Closing Consideration shall be paid as follows:
(i) Thirteen Million Dollars ($13,000,000) shall be paid to
the Sellers at Closing in cash (in U.S. dollars) by bank wire transfer
of immediately available funds to two (2) bank accounts, one for Tempco
and one for Hyco, as designated by the Sellers in accordance with
instructions given to Purchaser at least five (5) business days prior
to the Closing; and
(ii) One Million Two Hundred Fifty Thousand Dollars
($1,250,000) (the "Escrow Amount") shall be paid by delivery of such
amount to the Escrow Agent pursuant to the Escrow Agreement attached
hereto as Schedule 2.04 (the "Escrow Agreement").
(B) The "Adjustment Amount" means the amount, if any, by which the Net
Tangible Asset Value as of the Closing Date as determined by Purchaser's
Accountants, is less than, or greater than, as the case may be, Ten Million
Dollars ($10,000,000).
(C) Purchaser will cause Purchaser's Accountants to commence the
determination of the Adjustment Amount (which may include a physical inventory
count to be valued based upon the method set forth in Schedule 2.04(C)) promptly
after the Closing Date. Such computation will be conclusive and binding on
Sellers unless Sellers deliver a written objection thereto to Purchaser within
thirty (30) days of their receipt of such computation. Purchaser and Sellers
will use their best efforts in good faith to amicably reach an agreement on the
Adjustment Amount within ten (10) days of Purchaser's receipt of Sellers'
objection. The parties agree to supply each other with access to any applicable
information relating to a determination of the Adjustment Amount that is
reasonably requested by a requesting party, including, without limitation,
access to records and accountants' workpapers. If the parties cannot agree in
writing to the Adjustment Amount within such ten (10) day period, Purchaser's
Accountants and Sellers' Accountants, within thirty (30) days of the end of such
ten (10) day period (the "Accountants' Resolution Period"), will use their best
efforts in good faith to amicably resolve the disagreement regarding the
Adjustment Amount. The resolution by Purchaser's Accountants and Sellers'
Accountants as to the Adjustment Amount will be conclusive and binding on the
parties.
(D) If at the conclusion of the Accountants' Resolution Period there
remain items in dispute, then all disputed items will be submitted to a firm of
nationally recognized independent public accountants (the "Neutral Auditors")
selected by Purchaser and Sellers within ten (10) days after the expiration of
the Accountants Resolution Period. If Sellers and Purchaser are unable to agree
on the Neutral Auditors, a "big five" accounting firm will be selected by lot.
The Neutral Auditors shall not represent, nor have represented, Purchaser,
Sellers, or any of their respective Affiliates. All fees and expenses relating
to the work, if any, to be performed by the Neutral Auditors shall be borne
equally by Purchaser and Sellers. The Neutral Auditors shall act as an
arbitrator to determine, based solely on presentations by Purchaser and Sellers
and not by independent review, only those issues in dispute. The Neutral
Auditors' determination shall be made within thirty (30) days after their
selection; shall be set forth in a written statement delivered to Purchaser and
Sellers; and shall be final, binding and conclusive.
(E) Within fifteen (15) days of the final determination of the
Adjustment Amount computation:
(i) If the Adjustment Amount reflects an amount less than Ten
Millions Dollars ($10,000,000), Sellers jointly and severally shall pay
to Purchaser an amount equal to the Adjustment Amount; and
(ii) If the Adjustment Amount reflects a Net Tangible Asset
Value of more than Ten Million Dollars ($10,000,000), Purchaser shall
pay to Sellers an amount equal to such Adjustment Amount. The parties
agree that Sellers' obligation, if any, to pay the Adjustment Amount
under this Subsection (E) is independent of the Escrow Amount, i.e.,
Purchaser is not required to obtain reimbursement from the Escrow
Amount for such purpose.
2.05 Assumption of Liabilities. At the Closing, Purchaser shall assume
and agree to pay, discharge or perform, as appropriate, the Assumed Liabilities
in accordance with the terms of the Assumed Liabilities. EXCEPT FOR THE ASSUMED
LIABILITIES, PURCHASER IS NOT ASSUMING AND SHALL NOT BE OBLIGATED TO PAY ANY
OBLIGATIONS OR LIABILITIES OF SELLERS OR OF THE BUSINESS.
2.06 EBITDA Earn-Out. As additional consideration for the sale of
Assets hereunder, Purchaser will pay to Sellers an aggregate amount not to
exceed One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the "EBITDA
Earn-Out") as follows:
(a) If cumulative EBITDA of the Business for the period from April 1,
2001 through June 30, 2001 is equal to or greater than One Million One Hundred
Thousand Dollars ($1,100,000), Purchaser shall pay Sellers, not later than
August 31, 2001, an earn-out payment of Three Hundred Thousand Dollars
($300,000);
(b) If cumulative EBITDA of the Business for the period from April 1,
2001 through September 30, 2001 is equal to or greater than Two Million Two
Hundred Thousand Dollars ($2,200,000), Purchaser shall pay Sellers, not later
than November 30, 2001, an earn-out payment of Six Hundred Thousand Dollars
($600,000), less the amount of the prior earn-out payment, if any, paid pursuant
to Section 2.06(a);
(c) If cumulative EBITDA of the Business for the period from April 1,
2001 through December 31, 2001 is equal to or greater than Three Million Three
Hundred Thousand Dollars ($3,300,000), Purchaser shall pay Sellers, not later
than February 28, 2002, an earn-out payment of Nine Hundred Thousand Dollars
($900,000), less the aggregate amount of the prior earn-out payments, if any,
paid pursuant to Section 2.06(a) and (b);
(d) If cumulative EBITDA of the Business for the period from April 1,
2001 through March 31, 2002 is equal to or greater than Four Million Four
Hundred Thousand Dollars ($4,400,000), Purchaser shall pay Sellers, not later
than May 31, 2002, an earn-out payment of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000), less the aggregate amount of the prior earn-out payments,
if any, paid pursuant to Section 2.06(a) through (c); and
(e) If cumulative EBITDA of the Business for the period from April 1,
2001 through March 31, 2002 is less than Four Million Four Hundred Thousand
Dollars ($4,400,000), but for the period from April 1, 2001 through March 31,
2003, is equal to or greater than Eight Million Eight Hundred Thousand Dollars
($8,800,000), Purchaser shall pay Sellers, not later than May 31, 2003, an
earn-out payment of One Million Two Hundred Fifty Thousand Dollars ($1,250,000),
less the aggregate amount of the prior earn-out payments, if any, paid pursuant
to Section 2.06(a) through (d).
ARTICLE III - CLOSING, ITEMS TO BE DELIVERED,
AND FURTHER ASSURANCES
3.01 Closing. The closing (the "Closing") of the sale and purchase of
the Assets shall take place at 9:00 A.M., St. Louis, Missouri time on April 2,
2001, or on such other date as may be mutually agreed upon in writing by the
parties (the "Closing Date") at the offices of Gallop, Xxxxxxx & Xxxxxx, X.X.,
000 Xxxxx Xxxxxx Xxxx, Xxxxx 0000, Xx. Xxxxx, Xxxxxxxx 00000, or at such other
place as the parties may mutually agree upon in writing, but, to the extent
permitted by law, shall be deemed to be effective as of 12:01 a.m. (California
time) on April 1, 2001, provided all of the conditions precedent set forth in
Article VIII have been satisfied or waived in writing as of the Closing Date.
3.02 Conveyances at Closing. At the Closing Sellers will deliver to
Purchaser full possession of the Assets and such xxxx(s) of sale, endorsements,
assignments and other good and sufficient instruments of sale, conveyance,
transfer and assignment, all containing covenants of warranty, in form and
substance satisfactory to Sellers and Purchaser acting reasonably (including,
without limitation, a Xxxx of Sale and Assignment substantially in the form of
Schedule 3.02(a), an Assignment of Intellectual Property substantially in the
form of Schedule 3.02(b), and an Assignment of Contract Rights substantially in
the form of Schedule 3.02(c)), as will be required or as may be desirable in the
opinion of Purchaser's counsel in order to effectively vest in Purchaser full,
indefeasible, legal, equitable and beneficial title to the Assets with full
substitution and subrogation to all rights and actions of warranty, free and
clear of all Liens, except with respect to the Assumed Liabilities. On the
Closing Date, Purchaser shall assume and agree to discharge the Assumed
Liabilities by delivering to Sellers at the Closing an Agreement for Assignment
and Assumption of Assumed Liabilities substantially in the form of Schedule
3.02(d). In addition and on the Closing Date, Sellers shall assume and agree to
discharge in the ordinary course of business those Excluded Liabilities not paid
off and discharged prior to Closing by delivering to Purchaser at the Closing an
Agreement for Excluded Liabilities substantially in the form of Schedule
3.02(e). The parties have agreed to waive any compliance by the Sellers with
respect to the Bulk Sales Law, and the Sellers have agreed to indemnify
Purchaser in accordance with Section 8.02 for the failure to so comply.
3.03 Payment of Purchase Price. At the Closing, in consideration of the
sale, transfer, assignment and conveyance of the Assets by Sellers to Purchaser,
and also in consideration of the representations, warranties, covenants,
agreements and indemnities of Sellers contained in this Agreement and in the
other agreements and documents contemplated hereby, Purchaser will pay, and
Sellers will accept, the Purchase Price, subject to adjustment, as provided in
Sections 2.03, 2.04 and 2.06.
3.04 Further Assurances. From time to time after the Closing, at
Purchaser's request, Sellers will, without additional consideration, execute,
acknowledge and deliver to Purchaser such other instruments of conveyance and
transfer and will take such other actions and execute and deliver such other
documents, certifications and further assurances as Purchaser may reasonably
require in order to vest more effectively in Purchaser title to, or to put
Purchaser more fully in possession of, any of the Assets, or to better enable
Purchaser to complete, perform or discharge any of the Assumed Liabilities,
including, without limitation, using its best efforts to obtain any required
third party or governmental consents or releases not obtained at or prior to the
Closing. Each of the parties hereto will cooperate with the other and execute
and deliver to the other parties hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF
SELLERS AND SHAREHOLDERS
Sellers and the Indemnifying Shareholders jointly and severally
represent and warrant to, and covenant and agree with, Purchaser as follows:
4.01 Corporate Existence. Each Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has all necessary power and authority to own its own assets as now owned and
to carry on its business as now being conducted. Each Seller is duly qualified
to do business, and is in good standing as a foreign corporation, in those
jurisdictions listed on Schedule 4.01. Except as set forth in Schedule 4.01, the
aforementioned jurisdictions are the only jurisdictions in which the conduct of
the Business or the ownership of the Assets requires either Sellers to be so
qualified.
4.02 Power; Authorization; Enforceable Obligations. Each Seller has the
corporate power, authority and legal right to execute, deliver and perform this
Agreement and all covenants and agreements referred to in this Agreement. The
execution, delivery and performance of this Agreement and all agreements
referred to herein by Sellers have been duly authorized by all necessary
corporate and shareholder action. This Agreement has been, and the Sellers'
Documents will be, duly executed and delivered on behalf of Sellers by duly
authorized officers or agents of Sellers, and this Agreement constitutes, and
the Sellers' Documents when executed and delivered will constitute, the legal,
valid and binding obligations of Sellers and Shareholders, enforceable against
Sellers and Shareholders in accordance with their respective terms.
4.03 Title and Condition of Assets. Except as set forth in Schedule
4.03(a), each Seller has good and marketable title to and interest in their
respective Assets and such Assets are free and clear of all Liens, except with
respect to the Assumed Liabilities. All of the items of tangible
personal/movable property constituting a part of the Assets that are necessary
to produce inventory for current customers of Sellers are in reasonable
operating condition and repair except for ordinary, routine maintenance and
repairs. Schedule 4.03(b) is a true and complete list of all assets used by each
Seller in the Business but not owned by it, and a description of the terms of
and compensation for such use. Sellers will take all reasonable action necessary
to enable Purchaser to use such assets in the same manner and under the same
arrangements as Sellers.
4.04 No Interest in Other Entities. Except as otherwise set forth in
Schedule 4.04, Sellers do not own or hold, directly or indirectly, either of
record, beneficially or equitably, any shares of capital stock of any
corporation or any ownership or other investment interest, in any association,
partnership, limited liability company, joint venture or other legal entity.
4.05 No Conflicting Agreements or Orders; Required Consents or Filings.
Except as set forth on Schedule 4.05, the execution, delivery and performance of
this Agreement by Sellers does not and will not violate, conflict with or result
in the breach of any term, condition or provision of, or require the consent of
any other Person under: (i) any existing law, ordinance, or governmental rule or
regulation to which Sellers are subject; (ii) any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to Sellers; (iii) the
articles of incorporation or bylaws of Sellers, or any securities issued by
Sellers; or (iv) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization or other instrument, document or understanding, oral
or written, to which Sellers are parties, by which Sellers may have rights or by
which any of the Assets may be bound or affected, or which give any party with
rights thereunder the right to terminate, modify, accelerate or otherwise change
the existing rights or obligations of Sellers thereunder. Except as set forth on
Schedule 4.05, no Authorization, approval or consent of, and no registration or
filing with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery or performance of this
Agreement by Sellers, including, without limitation, the Worker Adjustment and
Retraining Notification Act.
4.06 No Third Party Options. There are no existing agreements, options,
commitments, or rights with, of or to any Person to acquire any of Sellers'
assets, properties or rights which are a part of the Assets or any interest
therein, except for those contracts entered into in the normal course of
business consistent with past practice for the sale of Inventory. There are no
existing options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any kind providing for the
purchase, issuance or sale of any shares of the capital stock of Sellers.
4.07 Financial Statements. The Annual Statements have been prepared and
adjusted on a basis consistent with prior accounting methods and practices used
in preparing the financial statements of the Sellers for years prior to 1997.
Except as expressly stated on Schedule 4.07, the Annual Statements fairly
represent the financial condition of the Sellers at the respective dates stated
therein and the income, expenses and results of operations of Sellers for the
time periods covered thereby and do not, and will not, omit to state or reflect
any fact concerning Sellers or the Business necessary to make the statements
therein not misleading. Sellers do not have any outstanding or potential
unasserted claims, contingent obligations (whether as a guarantor, indemnitor,
surety, accommodation party or otherwise), liability for taxes or forward or
long-term commitments or obligations relating to the Business or the Assets,
except as set forth in the Annual Statements or as set forth in the Schedules to
this Agreement. There are no additional, duplicate or other sets of books,
financial statements or other documents which more accurately reflect the
financial condition or results of operations of Sellers for the same periods of
time covered by the Annual Statements.
4.08 Accounts Receivable. Sellers have delivered to Purchaser a current
aged list of unpaid accounts and notes receivable (the "Accounts Receivable")
owing to Sellers (the "Accounts Receivable Schedule"), and will deliver to
Purchaser at Closing, an aged list of accounts receivable (the "Closing Accounts
Receivable") owing to Sellers as of the close of business on the preceding
business day (the "Closing Accounts Receivable Schedule"), and other information
pertaining to the Accounts Receivable as Purchaser shall reasonably request. The
Accounts Receivable Schedule, the Closing Accounts Receivable Schedule and any
such updates thereto or other related information provided to Purchaser set
forth or will set forth a true and correct list of all Accounts Receivable as of
the respective dates thereof. The Accounts Receivable are, and the Closing
Accounts Receivable will be legal, valid and binding claims and owing to Sellers
as of such date, do not and will not reflect any products placed on a
consignment or other basis whereby payment is conditional except for returns in
the normal course of business, and are not, and will not be, subject to any
defense, counterclaim or right of set-off arising prior to Closing.
4.09 Inventory. All Inventory used in the conduct of the Business: (i)
was acquired and has been maintained in the ordinary course of the Business;
(ii) is of good and merchantable quality; and (iii) consists substantially of a
quality, quantity and condition usable, leasable or saleable in the ordinary
course of the Business.
4.10 Absence of Undisclosed Liabilities. Except as specifically
disclosed in Schedule 4.10, Sellers have no liabilities or obligations with
respect to the Business or the Assets, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, which have resulted in or will
result in a Lien on any of the Assets or which will interfere with Purchaser's
use of the Assets following the Closing.
4.11 Employment Agreements; Compensation. Schedule 4.11(a) sets forth a
true and complete roster of all current employees of Sellers, including their
titles, dates of hire and current salary, wage or commission levels. Except as
disclosed on Schedule 4.11(b), Sellers have not entered into, nor has any
obligation or liability with respect to, any employment or consulting agreement,
employee leasing agreement, executive compensation plan, collective bargaining
agreement, deferred compensation agreement, supplemental retirement income
agreement, split dollar insurance plan, bonus plan, employee pension plan or
retirement plan, employee profit sharing plan, employee stock purchase or stock
option plan, severance agreement or any other agreement or arrangement providing
for remuneration or benefits to current or former employees of Sellers or their
dependents. Except as set forth on Schedule 4.11(c), Sellers do not have any
liability to any person presently or formerly employed by it in connection with
the operations of its business for any arrears in wages, salaries, deferred
compensation, supplemental retirement income, overtime pay, vacation, time off,
or pay in lieu of vacation or time off (other than for normal wage accruals with
respect to the Sellers' current pay period and vacation pay) or for any other
payments or penalties for failure to comply with any statute, law, rule,
regulation or agreement relating to or affecting the Business, nor is there any
basis known to Sellers for any such liability. It is understood and agreed that
the previous sentence does not apply to any Sellers' liability which has been
finally and fully resolved with no continuing or contingent obligation on the
part of the Sellers.
4.12 Leases. Schedule 4.12 attached hereto contains an accurate and
complete list and description of the terms of all leases or subleases of real
property and personal property to which Sellers are a party (as lessee,
sublessee, lessor, or sublessor). Each lease or sublease set forth in Schedule
4.12 (or required to be set forth in Schedule 4.12) is in full force and effect;
all rents due to date on each such lease or sublease have been paid; in each
case, the lessee or sublessee has been in peaceable possession since the
commencement of the original term of such lease or sublease and is not in
default thereunder and no waiver, indulgence or postponement of the lessee's or
sublessee's obligations thereunder has been granted by the lessor or sublessor;
and there exists no event of default or event, occurrence, condition or act
(including the purchase of the Assets hereunder) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a default under such lease or sublease. Sellers have not violated
any of the terms or conditions under any such lease or sublease, and all of the
terms, conditions and covenants to be performed by any other party under any
such lease or sublease have been fully performed. The property leased or
subleased by Sellers is in adequate operating condition and in a state of
maintenance and repair which is adequate and suitable for the purposes for which
it is presently being used.
4.13 Material Contracts. Except as set forth in Schedule 4.13 attached
hereto, Sellers have not entered into and are not bound by (i) any agreement,
contract or commitment relating to capital expenditures (not including inventory
or raw material) in an amount greater than $10,000.00 and not cancelable without
penalty within thirty (30) days, (ii) any loan or advance to, or investment in,
any Person or any agreement, contract or commitment relating to the making of
any such loan, advance or investment, (iii) any guarantee or other contingent
liability in respect of any indebtedness or obligation of any Person other than
Sellers (other than the endorsement of negotiable instruments for collection in
the ordinary course of business), (iv) any management service, consulting or any
other similar type contract, (v) any agreement, contract or commitment limiting
the freedom of the Sellers to engage in any line of business or to compete with
any Person, (vi) any agreement, contract or commitment which involves $10,000.00
or more and is not cancelable without penalty within thirty (30) days or (vii)
any agreement, contract or commitment which might reasonably be expected to have
an adverse impact on the business or operations of the Sellers. Except as set
forth in Schedule 4.13, each contract or agreement set forth in Schedule 4.13
(or required to be set forth in Schedule 4.13) and each Assigned Contract is in
full force and effect and there exists no default or event of default or event,
occurrence, condition or act (including the purchase of the Assets hereunder)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a default or event of default thereunder.
Sellers have not materially violated any of the terms or conditions of any
contract or agreement set forth in Schedule 4.13 (or required to be set forth in
Schedule 4.13) or of any Assigned Contract in any respect, and all of the terms,
conditions and covenants to be performed by any other party thereto have been
materially performed.
4.14 Restrictive Documents. Except as set forth in Schedule 4.14
attached hereto, Sellers are not subject to, or are a party to, any charter,
by-law, mortgage, Lien, lease, license, permit, agreement, contract, instrument,
law, rule, ordinance, regulation, order, judgment or decree, or any other
restriction of any kind or character, oral or written, which adversely affects
the business practices, operations or condition of Sellers or any of Sellers'
assets or property, or which would prevent consummation of the transactions
contemplated by this Agreement, compliance by Sellers with the terms, conditions
and provisions hereof or the continued operation of the Business or the Assets
after the Closing Date on substantially the same basis as heretofore operated or
which would restrict the ability of Sellers to acquire any property or conduct
business in any area.
4.15 Litigation. Except as set forth in Schedule 4.15, no civil,
criminal, administrative or other suit, action, decree, arbitration or legal,
administrative or other proceeding, controversy or investigation ("Litigation")
is pending or, to the best of Sellers' knowledge, threatened against Sellers or
any of their property, assets or rights which might adversely affect the
Business or the financial or other condition of Sellers or any of the Assets or
which would prevent the execution and delivery of this Agreement by Sellers or
prevent consummation of the transactions contemplated by this Agreement. Sellers
are not aware of any incident, occurrence or circumstance that Sellers believe
will result in any such Litigation. Except as set forth in Schedule 4.15,
Sellers are not subject to or in default with respect to any order, writ,
injunction, judgment or decree of any federal, state, local or foreign court,
department, agency or instrumentality, or any settlement of any Litigation, nor
has the time period of Sellers' compliance with respect to any of the same been
extended or stayed. Except as set forth in Schedule 4.15, Sellers are not
presently parties to any legal action to recover moneys due to, or damages
sustained by, Sellers in respect of the Business or the assets of Sellers.
4.16 Labor Relations. Except as set forth in Schedule 4.16(a), to the
Best Knowledge of Sellers or Indemnifying Shareholders: (i) the Sellers have
complied with all applicable laws, rules and regulations relating to the
employment of labor in connection with its business, including those relating to
wages (including overtime), benefits (including vacation), hours, employee
safety or other conditions of employment and the withholding and payment of
taxes; (ii) there are no labor disputes, controversies, grievances, strikes,
work slowdowns or stoppages, nor are there any proceedings before any court,
governmental agency or arbitrator relating to such matters, including unfair
labor practice claims, existing, pending or threatened against the Sellers or
between the Sellers and any employees or leased workers or any union
representing or claiming to represent any such employees or leased workers, nor
have any discharges occurred which form the basis for any claim of
discrimination against Sellers; (iii) Sellers are not a party to any collective
bargaining agreement nor have Sellers received any notice that any union claims
to represent any employees or leased workers of the Sellers; and (iv) Schedule
4.16(b) sets forth the name of each employee or leased worker of Sellers
terminated or laid off by the Sellers or Sellers' employee leasing provider
within sixty (60) days prior to the date of this Agreement and the circumstances
of such termination or lay off.
4.17 Taxes. Sellers have withheld all amounts required by law or
agreement to be withheld from the wages or salaries of its employees, and are
not liable for any arrears of wages or any Tax or penalties for failure to
comply with the foregoing. Sellers have paid over, and will pay over, to the
appropriate governmental agencies or depositories, at the time or times required
by law (without any extensions or stays), all "employment taxes" and
"withholding taxes" relating to Sellers' employees. Except as set forth in
Schedule 4.17(a), Sellers have filed all Tax Returns required to be filed by
Sellers within the times and in the manner prescribed by law and have paid in
full or made provision to pay within the period provided by law, all Taxes due
thereunder. All such Tax Returns were true, correct and complete in all material
respects when filed or made, are still true, correct and complete in all
material respects and, with respect to the Sellers' most recently completed tax
period(s), are listed, along with the appropriate federal taxing authority
(e.g., the Internal Revenue Service) and applicable state, local and foreign
taxing authorities, on Schedule 4.17(b) attached hereto. Sellers have delivered
to Purchaser and its advisors, for inspection, true, correct and complete copies
of all such Tax Returns for its last three (3) fiscal years. Except as provided
on Schedule 4.17(a), neither the Internal Revenue Service nor any other taxing
authority is now asserting or threatening to assert against Sellers any
deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. Sellers have not been granted or availed themselves of any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment or filing of, any federal, state or local tax,
assessment or premium. Except as set forth in Schedule 4.17(a), no waiver or
extension of any filing or payment date or of any statute of limitations with
respect to Taxes has been requested of or given to Sellers, and no claims have
been asserted or threatened for Taxes against Sellers. Sellers have accrued on
their books and records all Taxes accruing on its business or the operation
thereof which are presently payable. Except as set forth in Schedule 4.17(a),
all Taxes which are due and payable arising from the conduct of the Business or
ownership or operation of the Assets have been paid in full and all such Taxes
which will become due and payable on, prior to or after the Closing Date will be
paid in full on or prior to the Closing Date or in a timely manner, without
imposition of penalties or interest.
4.18 Compliance. Except as set forth in Schedule 4.18(a), to the Best
Knowledge of Sellers or the Indemnifying Shareholders have: (i) Sellers have
conducted the Business and maintained their properties, and the real and
personal property covered by present and past leases and subleases (until such
time as Sellers were divested of any interest in such property), in compliance
with, and are not in violation of, applicable laws, ordinances, rules,
regulations and orders of federal, state, local and foreign jurisdictions,
governments, regulatory bodies and courts (including, without limitation, any
and all applicable building, zoning and licensing laws, ordinances, regulations
or orders affecting the location, size and function of the Sellers' assets, all
Environmental Laws and Regulations and any and all applicable laws, regulations,
orders, decrees or requirements relating to securities, properties, business,
products, advertising, sales or employment practices, terms and conditions of
employment, occupational safety, health and welfare, conditions of occupied
premises, product safety, liability for civil rights and rights of disabled
persons); (ii) Sellers have not received any claim or notice that Sellers have
not complied in all respects in the operation of its business and related
properties with such laws, rules, regulations and orders; and (iii) except as
set forth on Schedule 4.18(a), Sellers have all Authorizations, licenses,
permits and consents required to be obtained from federal, state, local or
foreign authorities with respect to the ownership or use of its assets or the
operation of the Business, a complete list of which is set forth on Schedule
4.18(b).
4.19 Employee Benefits.
(a) Employee Benefit Plans and Similar Arrangements.
(i) Schedule 4.19 lists all employee benefit plans and other
similar arrangements to which Sellers are a party or by which they are
bound, legally or otherwise, including, without limitation, (a) any
profit-sharing, deferred compensation, bonus, stock option, stock
purchase, pension, retainer, consulting, retirement, severance, welfare
or incentive plan, agreement or arrangement, (b) any plan, agreement or
arrangement providing for "fringe benefits" or perquisites to
employees, officers, directors or agents, including but not limited to
benefits relating to any automobiles, clubs, vacation, child care,
parenting, sabbatical, sick leave, medical, dental, hospitalization,
life insurance and other types of insurance, and (c) any other
"employee benefit plan" (within the meaning of Section 3(3) of ERISA).
(ii) To the Best Knowledge of Sellers or the Indemnifying
Shareholders: (A) Sellers are in full compliance with the applicable
provisions of ERISA (as amended through the date of this Agreement),
the regulations and published authorities thereunder, and all other
Legal Requirements applicable with respect to all such employee benefit
plans, agreements and arrangements; (B) Sellers have performed all of
their obligations under all such plans, agreements and arrangements
including, but not limited to, the full payment when due of all amounts
required to be made as contributions thereto or otherwise; and (C)
there are no actions, suits or claims (other than routine claims for
benefits) pending or, to the knowledge of Sellers, threatened against
such plans or their assets, or arising out of such plans, agreements or
arrangements, and no facts exist which could give rise to any such
actions, suits or claims that might have a material adverse effect on
such plans, agreements or arrangements.
(iii) Except as specified in Schedule 4.19, each of the plans,
agreements or arrangements can be terminated by Sellers within a period
of 30 days, without payment of any additional compensation or amount or
the additional vesting or acceleration of any such benefits.
(b) Qualified Plans.
(i) Schedule 4.19 lists all "employee pension benefit plans"
(within the meaning of Section 3(2) of ERISA) which are also stock
bonus, pension or profit-sharing plans within the meaning of Section
401(a) of the Code.
(ii) Each such plan has been duly authorized by the applicable
board of directors of Sellers. Each such plan is qualified in form and
operation under Section 401(a) of the Code and each trust under each
such plan is exempt from tax under Section 501(a) of the Code. No event
has occurred that will or could give rise to disqualification or loss
of tax-exempt status of any such plan or trust under such Sections.
(c) Title IV Plans.
No plan listed on Schedule 4.19 is a plan subject to Title IV of ERISA.
(d) Welfare Benefit Plans.
All group health plans of Sellers and any Affiliate (as that term is
defined in ERISA) have been operated in compliance with the group health plan
continuation coverage requirements of Part 6 Subtitle B of Title I of ERISA and
4980B of the Code to the extent such requirements are applicable. Except to the
extent required under Section 4980B of the Code, Sellers do not provide health
or welfare benefits (through the purchase of insurance or otherwise) for any
retired or former employees.
4.20 Intellectual Property. "Intellectual Property" shall mean all
patents, patent applications, trademarks, registered trademarks, trademark
applications, service marks, registered service marks, service xxxx
applications, trade names, copyrights, registered copyrights, copyright
applications, computer software including the source code, object code and
executable code relating thereto (other than miscellaneous off-the-shelf
software, such as, by way of example, word processing, network and spread sheet
programs), trade secrets, confidential information and proprietary know-how
owned and/or used by Sellers. Intellectual Property specifically includes such
items set forth in Schedule 4.20(a). All of the Intellectual Property on the
Closing Date is owned and/or used by Sellers free and clear of any licenses or
Liens, except as set forth in Schedule 4.20(b) attached hereto. Purchaser's
ownership and use of the Intellectual Property will not infringe upon any other
Person's rights or create any Lien on the Intellectual Property. Sellers do not
knowingly infringe upon or unlawfully or wrongfully use any intellectual
property owned or claimed by another. Sellers are not in default under any
obligation relating to, nor have Sellers received any notice of any claim of
infringement or any other claim or proceeding relating to, any intellectual
property, including the Intellectual Property, except as set forth in Schedule
4.20(b). Except as set forth in Schedule 4.20(b), no present or former employee
of Sellers and no other Person owns or has any proprietary, financial or other
interest, direct or indirect, in whole or in part, in any Intellectual Property.
There are no confidentiality or non-disclosure agreements to which Sellers or
any of Sellers' employees or leased workers is a party which relate to the
Business or the Assets, except that signed in conjunction with this transaction.
4.21 Environmental.
(A) To the Best Knowledge of Sellers or the Indemnifying Shareholders,
Sellers are complying and have complied with all Environmental Laws and
Regulations, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced or threatened
against Sellers alleging any failure so to comply.
(B) To the Best Knowledge of Sellers or the Indemnifying Shareholders:
(i) except as set forth in Schedule 4.21(b), Sellers have obtained all permits,
licenses and other Authorizations which are required with respect to the
Sellers' operations, as well as the transactions contemplated hereby, under all
Environmental Laws and Regulations and is in full compliance therewith; and (ii)
all such permits, licenses and Authorizations are listed in Schedule 4.21(b).
(C) To the Best Knowledge of Sellers or the Indemnifying Shareholders,
Sellers have not used, stored, or manufactured any Hazardous Materials, except
those necessary in the ordinary course of business and listed in Schedule
4.21(c) and, as to such Hazardous Materials, has been in compliance with all
laws, ordinances and regulations applicable to the use and storage thereof.
(D) To the Best Knowledge of Sellers or the Indemnifying Shareholders:
(i) except as shown in Schedule 4.21(d), Sellers have not caused or experienced
any past or present events, conditions, circumstances, plans or other matters
which may give rise to any statutory, common law, or other legal liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation or investigation based on or relating to Hazardous
Materials including, without limitation, such matters relating to any property
now or previously owned, leased or utilized by Sellers; (ii) arise from
inventory of or waste from Hazardous Materials; or (iii) arise from any off-site
disposal, release or threatened release of Hazardous Materials.
(E) To the Best Knowledge of Sellers or the Indemnifying Shareholders,
except as shown in Schedule 4.21(e), Sellers have not installed, used or stored
any asbestos, polychlorinated biphenyls, carbon tetrachloride or lead-based
paints on any real property or in any building now or previously owned,
operated, leased or used by Sellers. Additionally, Sellers have not installed,
owned, removed, leased or used any underground storage tanks on any real
property or in any building now or previously owned, operated, leased or used by
Sellers.
(F) To the Best Knowledge of Sellers or the Indemnifying Shareholders,
except as shown in Schedule 4.21(f), no past or present employee or leased
worker of Sellers has been exposed to any Hazardous Material owned, produced or
utilized by the Sellers.
(G) To the Best Knowledge of Sellers or the Indemnifying Shareholders,
except as shown in Schedule 4.21(g), and subject to the disclosure on such
Schedule: (i) no underground tanks, including but not limited to underground
storage tanks, piping or subsurface structures of any type exist or have existed
on any real property now or previously owned, operated, leased or utilized by
Sellers; and (ii) with respect to those tanks disclosed on Schedule 4.21(g), the
tanks still in operation are in compliance with all Environmental Laws and
Regulations, and the tanks which are not in operation have been closed or
removed in compliance with all Environmental Laws and Regulations.
(H) Except as shown in Schedule 4.21(h), with respect to the Real
Property, Sellers have not received any notice, and are not aware of any facts
which might give rise to such notice, from any government agency or private or
public entity advising it that it is or may be responsible for any investigation
or response costs with respect to a release, threatened release or clean-up of
chemicals or materials, currently or in the past, produced, used, stored,
treated, disposed of or resulted from any business, commercial or industrial
activities, operations or processes, including without limitation any Hazardous
Materials.
(I) Schedule 4.21(i) contains a complete list of all environmental
investigations, assessments, audits, studies, tests and related materials in
possession of Sellers, or known to Sellers, which relate to the current or prior
operations of the Sellers or any real property now or previously owned,
operated, leased or utilized by Sellers.
4.22 No Changes Since December 31, 2000. Since December 31, 2000,
except as set forth on Schedule 4.22, Sellers have not (i) incurred any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), except in the ordinary course of business, (ii) permitted any of
their assets to be subjected to any Lien, (iii) sold, transferred or otherwise
disposed of any assets except in the ordinary course of business, (iv) made any
capital expenditure or commitment therefor, except in the ordinary course of
business, (v) made any bonus or profit sharing distribution or payment of any
kind, except in the ordinary course of business, (vi) increased their
indebtedness for borrowed money, except current borrowings from banks in the
ordinary course of business, or made any loan to any Person, (vii) written off
as uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business, none of which individually or in the aggregate are
material to Sellers, (viii) granted any increase in the rate of wages, salaries,
bonuses or other remuneration of any executive employee or other employees,
except in the ordinary course of business, (ix) canceled or waived any claims or
rights of substantial value, (x) made any change in any method of accounting or
auditing practice, (xi) engaged in any material transaction except in the
ordinary course of business as theretofore conducted, (xii) suffered any
material adverse change in their financial or other condition or prospects,
(xiii) had any customer which generated revenues of over $100,000 per year for
either of Sellers' last two fiscal years cease doing business with or advise
Sellers that it intended to cease doing business with Sellers or substantially
reduce the amount of business it does or proposes to do with Sellers, (xiv)
otherwise conducted the Business or entered into any material transaction,
except in the usual and ordinary manner and in the ordinary course of business,
or (xv) agreed, whether or not in writing, to do any of the foregoing.
4.23 Absence of Certain Business Practices. Except as set forth in
Schedule 4.23, neither the Sellers nor any officer, employee or agent of the
Sellers have: (i) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic benefit (excluding
frequent flyer miles or similar programs), regardless of its nature or type,
from any customer, supplier, trading company, shipping company, governmental
employee or other entity or individual with whom the Sellers have done business
directly or indirectly; or (ii) directly or indirectly, given or agreed to give
any gift or similar benefit, other than of nominal value, to any customer,
supplier, trading company, shipping company, governmental employee or other
person or entity who is or may be in a position to help or hinder the business
of Sellers (or assist Sellers in connection with any actual or proposed
transaction), which: (a) would subject Sellers to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (b) if not given in
the past would have had an adverse effect on the assets, business or operations
of Sellers, as reflected in the Annual Statements, or (c) if not continued in
the future, would adversely affect the assets, business, operations or prospects
of Sellers or which would subject Sellers to suit or penalty in any private or
governmental litigation or proceeding.
4.24 Receipt of Notices. Neither the Sellers nor the officers,
directors and Shareholders of the Sellers, have received any notice, oral or
written, which indicates or suggests that any of the representations and
warranties contained in this Article IV are not true and complete in all
respects.
4.25 Assets. Except as set forth in Schedule 4.25, the Assets include
all rights and property necessary to the conduct of the Business by Purchaser in
the manner it is presently conducted by Sellers.
4.26 Conditions Affecting Sellers. Except as set forth in Schedule
4.26, there is no fact, development or threatened development with respect to
the markets, products, services, clients, customers, facilities, computer
software, data bases, personnel, vendors, suppliers, operations, assets or
prospects of the Business which are known to Sellers which would materially
adversely affect the Business, operations or prospects of Sellers considered as
a whole, other than such conditions as may affect as a whole the economy
generally or that is public information. Sellers have used and will use their
best efforts to keep available for Purchaser the services of the employees,
leased workers, agents, customers and suppliers of Sellers active in the conduct
of the Business. Sellers do not have any knowledge that any loss of any
employee, leased worker, agent, customer or supplier or other advantageous
arrangement will result because of the consummation of the transactions
contemplated hereby.
4.27 Real Property. The following representations and warranties apply
to the Real Property used by the Sellers in the Business:
(a) Schedule 4.27 correctly sets forth a list of the Real Property
which is owned, leased or used by Sellers in the operation of the Business. The
Real Property is the only real property owned, leased or used by Sellers.
(b) To the Best Knowledge of Sellers or the Indemnifying Shareholders:
(i) the use and operation of all Real Property does not violate any instrument
of record or agreement relating to the Real Property, or any building, zoning,
subdivision or other land use or similar law, regulation or ordinance affecting
the Real Property; and (ii) there is no violation of any covenant, condition,
restriction, easement or order of any governmental body or any other Person
affecting the Real Property, or the use or occupancy thereof.
(c) To the Best Knowledge of Sellers or the Indemnifying Shareholders:
(i) except as set forth in Schedule 4.27, the Real Property is currently zoned
in the zoning categories which permit operation of the Real Property in the
manner now and historically used, operated or maintained. Sellers have not
requested, applied for, or given consent to, and there are no pending zoning
variances or changes with respect, to the Real Property; and (ii) except as set
forth in Schedule 4.27, the consummation of the transactions contemplated hereby
will not result in a violation of any applicable zoning ordinance or the
termination of any applicable variance now existing, and if the improvements on
the Real Property are damaged or destroyed prior to or after the Closing, the
repair or replacement of same by Purchaser will not violate any applicable
zoning ordinance.
(d) Sellers do not know of any pending, proposed or threatened action
to condemn or take by way of eminent domain, or to impose any special
assessments on, or otherwise to take or restrict in any way the right to use,
alter or occupy any part of the Real Property. All streets providing ingress and
egress to the Real Property are public streets.
(e) To the Best Knowledge of Sellers or the Indemnifying Shareholders,
the activities carried on in all buildings, structures and improvements included
as part of, or located on the Real Property, and the buildings, structures and
improvements themselves, comply in all material respects with applicable law,
including any health, safety or sanitation regulation. All buildings, structures
and improvements located on the Real Property are in good operating condition
and repair and are usable in the ordinary course of business.
(f) Sellers have not received notice of any disputes with contiguous
property owners as to the boundary lines of the Real Property or as to any
improvements, structures or buildings thereon.
(g) Sellers have not received notice of any claims or rights of other
Persons as to any rights over, across, under or through any of the Real
Property, other than those which are a matter of public record.
(h) To the Best Knowledge of Sellers or the Indemnifying Shareholders,
all material permits, licenses and approvals necessary for the use of the Real
Property in the manner in which same is now being used have been obtained and
are in full force and effect.
(i) Except as set forth in Schedule 4.27, the Real Property is not
subject to any lease, assignment, easement, option, right of way or license.
(j) Schedule 4.27 sets forth a complete description of all service,
maintenance, utility and management contracts affecting the Real Property. All
such contracts are currently in full force and effect and there is no default or
action or omission of any third party or of Sellers which with the giving of
notice or passage of time would constitute a default thereunder.
(k) Sellers have delivered to Purchaser copies of the three (3) most
recent real estate tax assessments for the Real Property.
(l) The Real Property has such access to all gas, water, electricity,
storm and sanitary sewer, telephone and other utility services necessary or
beneficial to the operation of the Business, at its current level of operations.
(m) Except as set forth on Schedule 4.27, there are no construction,
improvement or expansion programs currently on-going or contracted for with
respect to any of the Real Property.
4.28 Insurance. All of the properties and Assets and Business and
operations of Sellers are insured, in amounts set forth on Schedule 4.28,
against all risks usually insured against by persons operating similar
properties or conducting similar operations, under valid and enforceable
policies issued by insurers of recognized responsibility. Schedule 4.28 lists
all such policies.
4.29 Interests in Clients, Suppliers, etc. Except as set forth in
Schedule 4.29, neither Sellers, nor any officer, director or Shareholder
possess, directly or indirectly, any material financial interest in, or is a
director, officer or employee of, any corporation, firm, association,
partnership, limited liability company, or other legal entity which is a client,
supplier, customer, lessor, lessee, or competitor or potential competitor of
Sellers. Ownership of securities of a company whose securities are registered
under the Securities Exchange Act of 1934 not in excess of 1% of any class of
such securities shall not be deemed to be a financial interest for purposes of
this Section 4.29.
4.30 Warranties. All products manufactured or sold by Sellers have been
in substantial conformity with applicable contractual commitments and all
express or implied warranties made in connection therewith.
4.31 Prepaid Expenses and Deposits. Schedule 4.31 sets forth a
description of all liabilities, obligations, accounts and expenses which have
been prepaid by Sellers and all deposits which have been made by Sellers, which
are individually in excess of $1,000.00. All such amounts arose in the ordinary
course of business.
4.32 Suppliers. Schedule 4.32 sets forth a list of the suppliers and
vendors to Sellers who, during the year ended December 31, 2000, each sold at
least $50,000 of products or services to Sellers ("Material Supplier and Vendor
List"). Sellers will provide to Purchaser, no later than five (5) business days
prior to the Closing, a supplemental Material Supplier and Vendor List, which
will disclose any Person which became a supplier or vendor of Sellers after
December 31, 2000 and any Person which ceased to be a supplier or vendor of
Sellers after the date hereof, where in either case Sellers reasonably expected
that the volume of products or services to be obtained therefrom during the
twelve (12) month period ended December 31, 2001 would exceed $50,000. If
requested by Purchaser, Sellers will send estoppel letters to all or a portion
of Sellers' suppliers and vendors set forth on the Material Supplier and Vendor
List in a form acceptable to Purchaser.
4.33 Customers. Schedule 4.33 sets forth a list of Sellers' customers
who, during the fiscal year ended December 31, 2000, purchased at least $100,000
of Inventory ("Material Customer List"). Schedule 4.33 also lists any of
Sellers' former customers who ceased to be a customer of Sellers during the
three (3) year period ending December 31, 2000 and during the interim period
ending on the date of this Agreement and had previously purchased from Sellers
at least $100,000 of Inventory in a twelve (12) month period. Sellers will
provide to Buyer, no later than five (5) business days prior to the Closing, a
supplemental Material Customer List, which will disclose any Person which became
a customer of Sellers after December 31, 2000 and any Person which ceased to be
a customer of Sellers after the date of this Agreement, where in either case
Sellers reasonably expected that the customer would purchase at least $100,000
of Inventory from Sellers during the twelve (12) month period ended December 31,
2001. If requested by Purchaser, Sellers will send estoppel letters in a form
acceptable to Purchaser to all or a portion of Sellers' customers on the
Material Customer Lists.
4.34 Ownership of Stock. The Shareholders collectively own all of the
issued and outstanding stock of the Sellers.
4.35 Documents. Sellers have furnished or made available to Purchaser
and its advisors for their examination copies of all agreements, policies,
leases, and other instruments and documents listed on the Schedules attached
hereto. Such copies are true and complete and include all amendments,
supplements, and modifications thereto or waivers currently in effect
thereunder.
4.36 No Misrepresentation. No representation or warranty made by
Sellers or Shareholders in this Agreement or any Schedule hereto contains or
will contain any untrue statement of any fact or omits or will omit to state or
reflect any fact required to be stated or reflected therein or necessary to make
the statements contained herein and therein not misleading.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers and Shareholders as
follows:
5.01 Existence. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Missouri.
5.02 Corporate Power and Authorization. Purchaser has the corporate
power, authority and legal right to execute, deliver and perform this Agreement
and all covenants and agreements referred to in this Agreement. The execution,
delivery and performance of this Agreement and all agreements referred to herein
by Purchaser have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered on behalf of Purchaser by duly
authorized officers or agents of Purchaser and this Agreement constitutes the
legal, valid and binding obligation of Purchaser enforceable against Purchaser
in accordance with its terms.
5.03 Validity of Contemplated Transactions. The execution, delivery and
performance of this Agreement by Purchaser does not and will not violate,
conflict with or result in the breach of any term, condition or provision of, or
require the consent of any other party to:
(a) any existing law, ordinance, or governmental rule or regulation to
which Purchaser is subject;
(b) any action, claim, suit, proceeding, investigation or any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
Purchaser;
(c) the Certificate of Incorporation or Bylaws of, or any securities
issued by, Purchaser; or
(d) any mortgage, indenture, agreement, contract, commitment, lease,
plan or other instrument, document or understanding, oral or written, to which
Purchaser is a party or by which Purchaser is otherwise bound.
No Authorization, approval or consent of, and no registration or filing with,
any governmental or regulatory official, body or authority is required in
connection with the execution, delivery and performance of this Agreement by
Purchaser.
ARTICLE VI - COVENANTS OF THE PARTIES
6.01 Conduct of Business. Subject to the provisions of this Section
6.01, until the Closing Sellers shall conduct, and Shareholders shall cause
Sellers to conduct, the Business in the ordinary and usual course and, without
limiting the generality of the foregoing, without the prior approval of the
Purchaser, Sellers covenant and agree as follows:
(a) Sellers will maintain Inventories at levels adequate, but not
excessive, in relation to the circumstances of the Business and in accordance
with past inventory practices, and not dispose of or waive any property, right
or other assets employed in the Business, except in the ordinary course;
(b) Sellers will maintain their assets in good repair, order and
condition, reasonable wear and tear excepted, and not acquire or dispose of any
material fixed assets;
(c) Sellers will maintain and keep in full force and effect all
insurance on its assets and property and all insurance provided for their
employees under welfare benefit plans, all liability and other casualty
insurance, and all presently carried bonds and other surety arrangements in
connection with the Business, the Assets, the liabilities and the employees of
Sellers;
(d) Sellers will not enter into or amend any employment, bonus,
severance, retirement contract or arrangement nor any Employee Benefit Plan,
except as set forth in Schedule 6.01;
(e) Sellers will not increase any salary or other form of compensation
payable or to become payable to any of the Employees, alter any fringe benefit
to which any Employee is entitled, nor pay any bonuses to any Employees, except
as may be required by law or for payments to be made pursuant to the bonus or
profit sharing provisions of the employment agreements listed on Schedule
4.11(b) and other wage increases in the normal course of business.
(f) Sellers will not enter into or agree to enter into any lease or
supply, purchase, distribution or other contract, nor make or agree upon any
lease, contract, purchase or sale order, or other commitment requiring an
expenditure in excess of $10,000 with a term expiring more than three (3) months
beyond the Closing Date, nor will Sellers make or permit to be made any material
amendment or termination of any contract or agreement to which a Sellers is a
party, or surrender or forfeit any Authorization;
(g) Sellers will continue to deal with their present executives,
employees, agents, suppliers, customers, and others having business relations
with it consistent with Sellers' current practices;
(h) Sellers will maintain their books, accounts and records in the
usual and ordinary manner on a basis consistent with the Annual Statements and
prior years;
(i) Sellers will not allow a Lien to be created or imposed on any of
their assets;
(j) Sellers will not incur any debt or obligation for borrowed funds;
(k) Sellers will not extend credit in the sale of products, collection
of receivables or otherwise, except in the ordinary course of business and
consistent with past practices;
(l) Sellers will not sell, option, mortgage, lease, buy or otherwise
acquire or dispose of any Real Property or any interest therein nor modify,
cancel or amend any leases with respect to the Real Property nor buy or
otherwise acquire or lease any other real property;
(m) Sellers will maintain, preserve and protect the Intellectual
Property, cause to be made all needed and proper renewals thereto so that the
Business may be properly conducted at all times, and maintain, keep in full
force and effect and make all necessary payments on all contracts, licenses,
patents and agreements related to the Intellectual Property;
(n) Sellers will pay and discharge all indebtedness and obligations
promptly in accordance with Sellers' normal terms and practices before the same
shall become in default, as well as all lawful claims for labor, materials and
supplies;
(o) Sellers will pay when due all Taxes, assessments and other
governmental charges or levies which become due and payable to any political
entity, subdivision or department thereof under any law now or hereafter in
force and effect, unless such Taxes, assessments, charges or levies are
contested in good faith in appropriate proceedings;
(p) Sellers will not (i) wind up, liquidate or dissolve or enter into
any transaction of merger or consolidation, or (ii) convey, sell, lease or
otherwise dispose of any properties, other than Inventory sold in the ordinary
course of business; and
(q) Sellers will keep confidential all of its trade secrets,
proprietary information and know-how.
(r) Following the Closing Date, Sellers will not use any name, xxxx,
commercial symbol or logo that is the same as or confusingly similar to any of
the Intellectual Property.
6.02 Employees.
(A) As of the Closing Date, Purchaser shall offer employment, on an
at-will basis (except as noted in this Agreement), to such of those persons then
employed by Sellers in the Business as Purchaser may determine in its sole
discretion, at such compensation rates, benefit levels and with duties
determined by Purchaser in its sole discretion (the "Employees"). Each such
Employee, whether represented by a labor union or not, who becomes an employee
of Purchaser shall receive full credit for his or her past service to Sellers
for the following purposes only: (i) vacation benefits; (ii) union seniority, if
applicable; (iii) vesting under any defined benefit plan created, sponsored or
assumed by Purchaser; and (iv) as required by any union contract or union
pension plan which is being assumed by Purchaser. Past service credit will not
be received for any other purposes, including but not limited to, determining
benefits under any such defined benefit plan (except for the union pension plan)
or severance pay.
(B) Except with respect to the Assumed Liabilities, Sellers shall pay
in full to and/or settle with, on or before the Closing Date, each of the
Employees who accepts an offer of employment by Purchaser in accordance with
Section 6.02(A), all salaries, bonuses and other amounts payable to or
receivable by the Employees or payable to or receivable by any government agency
with respect to workers' compensation or any other similar taxes or benefits, up
to and including the Closing Date.
(C) Until the third anniversary of the Closing Date, Sellers will not
directly or indirectly solicit or offer employment to any Employee (i) who is an
employee of Purchaser at the time of such solicitation or offer, or (ii) who
became an employee of Purchaser but terminated such employment without the
consent of Purchaser within 180 days of such solicitation or offer.
(D) Sellers and Shareholders shall use their respective best efforts to
persuade those employees of Sellers, designated by Purchaser, to become
employees of Purchaser following the Closing on terms, and pursuant to written
employment agreements, acceptable to Purchaser.
6.03 Employee Benefits. Except for Assumed Liabilities, no portion of
the assets of any plan, fund, program or arrangement, written or unwritten,
heretofore sponsored or maintained by Sellers (and no amount attributable to any
such plan, fund, program or arrangement) shall be required hereunder or
otherwise to be transferred to Purchaser, and Purchaser shall not be required to
continue any such plan, fund, program or arrangement after the Closing Date.
Purchaser shall not be liable for any claim for insurance, reimbursement,
unfunded profit sharing payment, accrued but unpaid bonuses, any self-insured
benefits or other benefits payable by reason of any event which occurs prior to
the Closing Date.
6.04 Litigation. Until the Closing, Sellers shall promptly notify the
Purchaser of any Litigation or claims that are commenced or made or, to the
knowledge of the Sellers, threatened against Sellers. 6.05 Publicity. Neither
Sellers, Shareholders nor Purchaser shall issue any publicity release or
announcement concerning the transactions contemplated hereby without the advance
consent of Sellers (in the event of a proposed Purchaser disclosure) or
Purchaser (in the event of a proposed disclosure by Sellers or Shareholders),
except as such release or announcement may be required by applicable law,
including without limitation, applicable federal securities laws.
6.06 Access to Records After Closing. For a period of three (3) years
after the Closing, with respect to materials related to or required with respect
to Tax Returns or tax audits, or for any other materials, the Purchaser shall
retain and make available to Sellers any of the books and records of Sellers (or
copies thereof, at the expense of the Sellers) delivered to the Purchaser at the
Closing, at any reasonable time during normal business hours for any reasonable
purpose (including, without limitation, settling or defending any claim or
responding to any tax audit). The Purchaser shall have the right after the
applicable periods to dispose of any such books or records that are not material
in nature; provided, however, not less than thirty days prior to destruction of
any such materials, Purchaser will give Sellers written notice of intent to
destroy such materials, on a date stated in the notice, reasonably identifying
such materials, and if Sellers do not give written notice to Purchaser prior to
such date stated in the notice, of Sellers' wish to obtain such records,
Purchaser may destroy such records in accordance with its normal record
destruction policy. Purchaser will provide Sellers with suitable office
facilities at the principal location of the Business for the purpose of such
access.
6.07 Litigation Cooperation. If Sellers or Purchaser shall become
engaged or participate in any Litigation or claim with any third party in
respect of the Business as conducted on, prior to, or following the Closing
Date, the Purchaser or Sellers, as the case may be, shall cooperate with one
another in all reasonable respects, in connection therewith, including without
limitation, making available, relevant records and employees who may be helpful
with respect to such Litigation or claim.
6.08 California State Sales and Transfer Taxes. Purchaser will pay to
Sellers not later than ten (10) days prior to the due date, and Seller will pay
to California State Board of Equalization the California state sales and
transfer taxes related to the transfer to Purchaser of the Assets.
6.09 Expenses of Sale. Sellers, on the one hand, and the Purchaser, on
the other hand, shall bear their own direct and indirect expenses incurred in
connection with the negotiation and preparation of this Agreement and the
consummation and performance of the transactions contemplated hereby, including,
without limitation, all legal fees, accounting fees and financial advisory fees.
6.10 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 13.01, neither Sellers nor Shareholders will, and
each will cause each of their representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Purchaser)
relating to any transaction involving the sale of the Business or Assets (other
than in the ordinary course of the Business) of Sellers, or any of the capital
stock of Sellers, or any merger, consolidation, business combination, or similar
transaction involving Sellers, or enter into any agreement to do any of the
foregoing.
6.11 Insurance Claims. Following the Closing and with respect to
occurrences prior to Closing, Sellers shall provide the Purchaser with the
benefit of such existing workers compensation or general liability (excluding
director and officer liability), automobile liability or other insurance
policies as currently cover the operations of Sellers, but only to the extent
the Sellers are able, using its reasonable efforts to obtain such benefits.
6.12 Insurance.
(A) Sellers will maintain all direct damage, legal liability (including
products liability), workers' compensation and other pertinent policies of
insurance until the Closing Date. Sellers represent, warrant and covenant that
Sellers' policy or policies of products liability insurance apply to all
occurrences in the Business through the Closing Date, regardless of the date a
claim is made arising out of any occurrence.
(B) In the event that, on or prior to the Closing Date, any property
owned, leased or used by Sellers suffers any material damage, destruction or
loss, Sellers do not repair or replace said property prior to the Closing Date
and the Purchaser determines that it will proceed with the consummation of the
transactions contemplated by this Agreement, Sellers shall surrender to the
Purchaser (i) insurance proceeds received by it with respect to such damage or
loss equal to the cost of the repair or replacement of such property, and (ii)
all rights of Sellers with respect to any causes of action, whether or not
litigation has commenced on the Closing Date, in connection with such damage or
loss, up to the cost of the repair or replacement of such property. In the event
Sellers repair or replace said property prior to the Closing Date, Sellers shall
retain all insurance proceeds and all rights with respect to any causes of
action in connection with such damage or loss.
6.13 Consents and Conditions Precedent. As soon as reasonably
practicable after the execution and delivery of this Agreement, and in any event
on or before the Closing Date, each party will use its best efforts to obtain
the written consent of all Persons whose consent to such party's execution of,
and consummation of the transactions contemplated by, this Agreement is
required, in form and substance acceptable to the other parties acting
reasonably, including the written consent of any Person whose consent to the
transfer of any Asset, including the Assigned Contracts, is required. Each party
will furnish the other parties with original executed copies of such consents as
they are obtained. Sellers and the Shareholders will use their best efforts to
satisfy those conditions precedent set forth in Section 7.01 which are within
the control of Sellers and the Shareholders, respectively. Purchaser will use
its best efforts to satisfy those conditions precedent set forth in Section 7.02
which are within Purchaser's control.
6.14 Tax Returns and Audits.
(A) Filing of Tax Returns and Payment of Taxes. Sellers shall file or
cause to be filed when due all Tax Returns in respect of Taxes for taxable years
or periods ending on or prior to the Closing Date and shall pay or cause to be
paid the Taxes shown to be due on any such Return. Purchaser shall file or cause
to be filed when due all Tax Returns for Taxes in respect of the Assets for all
periods beginning after the Closing Date and for all periods that include the
Closing Date and shall pay or cause to be paid the Taxes shown to be due on any
such returns. Sellers, upon notification and receipt of satisfactory
documentation from Purchaser, at least fifteen (15) days prior to the due date
for payment, shall pay Purchaser, prior to the due date for payment, the Taxes
to be paid with any such Tax Returns with respect to all taxable periods or
portions of periods ending on or before the Closing Date (to the extent not
previously paid by Sellers). Purchaser shall be responsible for any audits of
such Tax Returns; provided, however, that Sellers shall be given notice of the
commencement of any audit within ten (10) days thereafter and Sellers, at their
own expense, may participate in such audit. If there is an audit in which there
is a possibility Sellers may become liable under this Section 6.14(A) or
otherwise, Purchaser shall not settle or compromise the Tax claim without the
prior written consent of Sellers, which consent shall not be unreasonably
withheld. If there is a settlement or other disposition of the audit, Purchaser
shall be entitled to receive, at least ten (10) days in advance of any payment
that it makes in connection with the settlement or other disposition of such
proceedings, the part of any such payment for which Sellers are liable under
this Section 6.14(A).
(B) Cooperation and Assistance. Purchaser and Sellers and the
Shareholders agree to furnish or cause to be furnished to each other, upon
written request and as promptly as practicable, such information (including
without limitation, access to books and records) and reasonable assistance
relating to the Business or the Assets as is necessary for the filing of a
return, preparation for any audit, and prosecution or defense of any claim, suit
or proceeding relating to any proposed adjustment. Purchaser and Sellers and the
Shareholders shall cooperate with each other in the conduct of any audit or
other proceeding involving the Business or the Assets and each shall execute and
deliver such documents as are necessary to carry out the intent of this Section
6.14(B). Except as provided in Section 6.14(A) above, Purchaser shall have the
right to control the resolution of the audit or settlement proceedings for which
Purchaser is to bear the cost of any resulting Tax.
(C) Nonforeign Affidavit. Sellers shall furnish Purchaser affidavits,
stating, under penalties of perjury, the transferors' United States taxpayer
identification numbers and that the transferors are not foreign persons,
pursuant to Section 1445(b)(2) of the Code.
6.15 Reasonable Access. Prior to the Closing, and after the execution
of this Agreement by the parties hereto, Sellers will give Purchaser and its
representatives (including its attorneys and independent accountants) reasonable
access, during normal business hours and upon reasonable prior notice to
Sellers, to the assets, personnel, properties, books, records, agreements and
commitments of Sellers and the work papers of Sellers' Accountants and shall
furnish Purchaser during such period with all such information relating to
Sellers as Purchaser may reasonably request.
6.16 Maintenance of Assets. At all times prior to and following the
Closing, Sellers will maintain assets sufficient to satisfy their obligations
under this Agreement. 6.17 Reasonable Efforts to Obtain Employment Agreement.
Sellers and Indemnifying Shareholders agree to use reasonable efforts to cause
Xxxxx X. Xxxxxx to enter into an employment agreement with Purchaser on terms
acceptable to Xxxxx X. Xxxxxx and the Company promptly after Closing.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.01 Conditions Precedent to Purchaser's Obligations. All obligations
of Purchaser under this Agreement are subject to the fulfillment or satisfaction
(or waiver in writing by Purchaser in its sole discretion), prior to or at the
Closing, of each of the following conditions precedent:
(a) Representations, Warranties, Covenants and Agreements of Sellers
and Shareholders. The representations, warranties, covenants and agreements of
Sellers and Shareholders contained in this Agreement or in any of Sellers'
Documents shall have been true and correct on the date hereof, without regard to
any Schedule amendments or updates furnished by Sellers after the date hereof,
and shall be true and correct at the Closing with the same effect as though such
representations, warranties, covenants and agreements were made as of the
Closing.
(b) Compliance with this Agreement. Sellers shall have performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing.
(c) Closing Certificate. Purchaser shall have received certificates
from Sellers, dated as of the Closing, certifying in such detail as Purchaser
may reasonably request that the conditions specified in Section 7.01 hereof have
been fulfilled and certifying that Sellers have obtained all consents and
approvals required and not waived under this Agreement.
(d) No Threatened or Pending Litigation. As of the Closing no suit,
action or other proceeding or injunction or final judgment relating thereto
shall be threatened or be pending before any court or governmental or regulatory
official, body or authority in which it is sought to restrain or prohibit or to
obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby, and no investigation that
might result in any such suit, action, proceeding, injunction or judgment shall
be pending or threatened.
(e) Third Party Consents and Releases. All consents and waivers by
third parties that are required for the transfer of the Assets to the Purchaser
or that are required for the consummation of the transactions contemplated
hereby, or that are required in order to prevent a breach of or a default under
or a termination or modification of any lease, license or other agreement
relating to the Business or the Assets to which the Sellers are a party or to
which any portion of the property of Sellers relating to the Business is subject
will have been obtained, and, releases of any and all security interests held by
third parties on the Assets required by Purchaser will have been obtained, all
on terms reasonably satisfactory to the Purchaser.
(f) Other Authorizations. All Authorizations that are required for the
consummation of the transactions contemplated hereby and all Authorizations that
are required for the conduct of the Business will have been duly made and
obtained on terms satisfactory to the Purchaser.
(g) Leases. Purchaser shall have entered into leases, on terms
acceptable to Purchaser, of the Real Property currently used by Sellers in
connection with the Business.
(h) Payment of Excluded Liabilities. All known Excluded Liabilities,
including those referred to in the non-exclusive list in the definition of
"Excluded Liabilities," which have accrued as of the Closing Date and which, if
not paid, would create a Lien against any of the Assets or interfere with
Purchaser's use of the Assets following the Closing shall have been paid in full
by Sellers and Sellers shall have delivered satisfactory evidence thereof to
Purchaser.
(i) Opinion of Counsel for Sellers and Shareholders. Xxxxx Xxxxxxx
XxXxxxxx & Xxxxxxx shall have delivered to Purchaser a written opinion, dated as
of the Closing, in the form of Schedule 7.01(i) with only such changes as shall
be in form and substance reasonably satisfactory to the Purchaser and its legal
counsel.
(j) Material Adverse Changes. The Business, the Assets or the
operations or prospects of the Business shall not have been, and shall not be
threatened to be, materially adversely affected in any way as a result of any
event or occurrence.
(k) Good Standing and Other Certificates. Sellers shall have delivered
to the Purchaser:
(i) copies of the Sellers' articles of incorporation,
including all amendments thereto, in each case certified by the
Secretary of State of the State of Sellers' organization;
(ii) certificates from the Secretary of State of the state of
Sellers' organization, to the effect that the Sellers are in good
standing;
(iii) a certificate from the Secretary of State or other
appropriate official in each State in which Sellers are qualified to do
business to the effect that Sellers are in good standing in such State;
(iv) a copy of the bylaws of Sellers, certified by the
Secretary of the Sellers as being true and correct and in effect at the
Closing; and
(v) evidence satisfactory to Purchaser that Sellers have taken
all actions necessary by Sellers to enable Purchaser to use the names
"Tempco Engineering" and "Hyco Precision" and all names similar
thereto, including providing to Purchaser fully executed articles of
amendment of their respective articles of incorporation or other papers
necessary to change their corporate names, in form satisfactory for
filing with the Secretary of State of the state of Sellers'
organization and each state in which Sellers are qualified to do
business.
(l) Approval of Documents; Corporate Matters.
(i) All actions, proceedings, resolutions, instruments and
documents reasonably required by Purchaser to carry out this Agreement
or incidental hereto and all other related legal matters shall be
legally sufficient and reasonably satisfactory to Purchaser and its
counsel.
(ii) The execution and delivery of this Agreement by Sellers
and the performance of Sellers' covenants and obligations hereunder,
shall have been duly authorized by all necessary corporate and other
actions of Sellers, including, without limitation, the approval of
Sellers' board of directors and the shareholders, and Purchaser shall
have received copies of all resolutions pertaining to such
authorization, certified by the corporate secretary of Sellers.
(m) Casualty Loss. The Business shall not have been curtailed or
interrupted by, and the Assets shall not have been affected by, any material
loss, destruction or damage due to fire or other casualty or, if any such loss,
destruction or damage shall have occurred, Purchaser shall have determined that
such loss, destruction or damage is not of such nature as to curtail or
interrupt the Business or determined that available insurance proceeds are
sufficient to repair or replace any damaged or lost Assets and Sellers shall
have assigned the proceeds of any such insurance to Purchaser or repaired or
replaced any lost or damaged Asset.
(n) Key Customers. Purchaser shall have received reasonable oral
assurance from Sellers' customers listed on Schedule 7.01(n) ("Key Customers")
that the Key Customers continue to have an obligation to do business with Buyer
after the Closing and that order backlog with Sellers will remain in place with
Purchaser, subject to Purchaser's continuation of Sellers' customary level of
quality and service.
(o) Environmental Assessment. Purchaser shall have received and
approved an environmental assessment, performed by a company acceptable to
Purchaser, and confirming compliance with Environmental Laws and Regulations
with respect to the Business and the Real Property used in connection with the
Business, and Seller will pay the expense of such assessment up to $3,500, with
all expense for such assessment in excess of $3,500 being split equally between
Purchaser and Sellers.
(p) Employment Agreements. Purchaser shall have entered into employment
agreements with Sellers' employees listed on Schedule 7.01(p).
(q) Consulting Agreements. Purchaser shall have entered into Consulting
Agreements with Xxxxxx X. Star and Xxxxx Xxxx for a term of one year and for an
annual fee of $1.00 each and otherwise on terms acceptable to Purchaser.
(r) Noncompetition Agreements. Sellers and the Shareholders listed on
Schedule 7.01(r) shall each have executed noncompetition agreements for five (5)
years after the Closing Date and otherwise on terms acceptable to Purchaser.
(s) Satisfactory Review of the Business, Assets and Inspections, Etc.
Purchaser shall have been given access to and been permitted to review the
Assets, the Business and such other information as shall have been requested by
Purchaser and to visit with or otherwise contact customers, suppliers and
vendors of Sellers (provided any such visit or contact shall be conducted in a
manner reasonably agreeable to Sellers and approved in advance by Sellers), and
Purchaser shall be satisfied, in its sole discretion, with the physical,
environmental and operating condition of the Assets, the financial condition of
the Business, the future of relationships with Sellers' customers, suppliers and
all findings related to Environmental Laws and Regulations.
(t) Name Change. Sellers will provide Purchaser at Closing with fully
executed Articles of Amendment changing their respective corporate names.
(u) Agreement to Allocation of Purchase Price. Sellers and Purchaser
shall have allocated the Purchase Price in conformity with Purchaser's opening
balance sheet intending to reflect the Business immediately after the Closing,
as more specifically set forth in Schedule 7.01(u) attached hereto.
(v) Transactional Closing Documents. Seller and Purchaser shall have
reasonably agreed on the terms of Schedules 2.04, 3.02(a), 3.02(b), 3.02(c),
3.02(d), 3.02(e), 7.01(i), 7.01(r) and 7.02(f), which, upon agreement thereon,
will be attached to this Agreement prior to Closing.
7.02 Conditions Precedent to Sellers' Obligations. All obligations of
Sellers under this Agreement are subject to the fulfillment or satisfaction (or
waiver by Sellers in its sole discretion), prior to or at the Closing, of each
of the following conditions precedent:
(a) Representations and Warranties of Purchaser. The representations
and warranties of Purchaser contained in this Agreement or in any of Purchaser's
Documents shall have been true and correct on the date hereof and shall be true
and correct at the Closing with the same effect as though such representations
and warranties were made as of such date.
(b) Compliance with this Agreement. Purchaser shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
(c) Closing Certificate. Sellers shall have received a certificate from
Purchaser dated as of the Closing certifying in such detail as Sellers may
reasonably request that the conditions specified in this Section 7.02 hereof
have been fulfilled.
(d) No Threatened or Pending Litigation. As of the Closing, no suit,
action or other proceeding or injunction or final judgment relating thereto
shall be threatened or be pending before any court or governmental or regulatory
official, body or authority in which it is sought to restrain or prohibit or to
obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby, and no investigation that
might result in any such suit, action, proceeding, injunction or judgment shall
be pending or threatened.
(e) Approval of Documents. The execution and delivery of this Agreement
by Purchaser and the performance of Purchaser's covenants and obligations
hereunder, shall have been duly authorized by all necessary corporate and other
actions of Purchaser, including, without limitation, the approval of Purchaser's
board of directors, and Sellers shall have received copies of all resolutions
pertaining to such authorization, certified by the corporate secretary of
Purchaser.
(f) Opinion of Counsel for Purchaser. Gallop, Xxxxxxx & Xxxxxx, X.X.,
counsel to Purchaser, shall have delivered to Sellers a written opinion, dated
as of the Closing, in the form of Schedule 7.02(f) with only such changes as
shall be in form and substance reasonably satisfactory to Sellers and Sellers'
counsel.
(g) Employment Agreements. The key employees listed on Schedule 7.01(p)
will each have entered into an employment agreement with Purchaser in form and
substance satisfactory to the employee.
(h) Consulting Agreements. Sellers shall have entered into Consulting
Agreements with Xxxxxx X. Star and Xxxxx Xxxx on terms acceptable to the
Shareholders.
(i) Leases. Purchaser shall have entered into leases, on terms
acceptable to Sellers, of the Real Property currently used by Sellers in
connection with the Business.
(j) Receipt of Closing Consideration. Sellers shall have received the
Closing Consideration in accordance with Section 2.04(A).
(k) Agreement on Allocation of Purchase Price. Sellers and Purchaser
shall have allocated the Purchase Price in conformity with Purchaser's opening
balance sheet intending to reflect the Business immediately after the Closing,
as more specifically set forth in Schedule 7.01(u) attached hereto.
(l) LMI Guaranty. LMI shall execute a guaranty acceptable to Sellers,
of the obligations of Purchaser under this Agreement and all other agreements
executed and delivered by Purchaser pursuant to the terms of this Agreement.
(m) Transactional Closing Documents. Seller and Purchaser shall have
reasonably agreed on the terms of Schedules 2.04, 3.02(a), 3.02(b), 3.02(c),
3.02(d), 3.02(e), 7.01(i), 7.01(r), and 7.02(f), which, upon agreement thereon,
will be attached to this Agreement prior to Closing.
ARTICLE VIII - INDEMNIFICATION OF PURCHASER GROUP
This Article sets forth the respects in which Purchaser, its officers,
directors and shareholders (collectively, the "Purchaser Group") shall be
indemnified by Sellers and the Shareholders in the event the Purchaser Group
shall become obligated or liable for, or shall discharge, obligations or
liabilities of Sellers, other than the Assumed Liabilities, and/or in the event
of any breach of a representation, warranty, covenant or agreement on the part
of Sellers or as a result of the waiver of compliance with the Bulk Sales Law.
8.01 Breach of Representation, Warranty, Covenant or Agreement. Sellers
and the Shareholders agree, jointly and severally, to indemnify the Purchaser
Group and hold the Purchaser Group harmless against any and all loss, liability,
damage, claim, cost and expense of any nature whatsoever, including, without
limitation, costs of cleanup, containment or other remediation and reasonable
attorneys', consultants' and contractors' fees and costs, arising from or in
connection with any breach of a representation, warranty, covenant or agreement
on the part of Sellers or Shareholders under this Agreement or under any other
instrument or document executed and delivered by Sellers or Shareholders in
connection with the transactions contemplated hereby, as any of the same may be
amended from time to time.
8.02 Failure to Comply with Bulk Sales Law. Sellers and the
Shareholders agree, jointly and severally, to indemnify the Purchaser Group and
hold the Purchaser Group harmless against any and all loss, liability, damage,
claim, cost and expense of any nature whatsoever, including, without limitation,
reasonable attorneys' fees, arising out of the parties' agreement to waive
compliance with the Bulk Sales Law or any other law in respect of the bulk sale
and transfer contemplated by this Agreement.
8.03 Failure to Discharge Liabilities. Except with respect to the
Assumed Liabilities, Sellers and the Shareholders agree, jointly and severally,
to indemnify the Purchaser Group and hold the Purchaser Group harmless against
any and all loss, liability, damage, claim, cost and expense of any nature
whatsoever, including, without limitation, costs of cleanup, containment or
other remediation and reasonable attorneys', consultants' and contractors' fees
and costs, arising from or in connection with any liability of Sellers arising
or accruing prior to, at or following the Closing Date (regardless of any
disclosures made in any schedule to this Agreement or any matter described in
the environmental assessment referred to in Section 7.01(o) hereof), including,
without limitation: (i) Excluded Liabilities; (ii) any payment or performance
made by Purchaser to any third party in order to perform or discharge fully or
partially any liability or obligation of Sellers (other than the Assumed
Liabilities), including any Excluded Liability, which Purchaser shall have the
option, but shall not be required, to do; (iii) any judgment or other
circumstances pursuant to which Purchaser may be held liable or accountable for,
or the Assets may be charged in respect of, any liability or obligation of
Sellers; (iv) the presence of contaminants, pollutants and other harmful
substances in or on the Real Property; (v) the noncompliance by Sellers with any
applicable laws, rules, regulations and orders of federal, state, local and
foreign governments and regulatory bodies (including, without limitation, all
Environmental Laws and Regulations); (vi) all Taxes attributable to operations
of Sellers for any taxable year, period or portion thereof, ending on or before
the Closing Date, whether such liabilities relate to the Business or the Assets
or otherwise, Sellers being entitled to any and all refunds of such Taxes; and
(vii) all claims, disputes or demands of Sellers' Employees that relate to any
employee benefit plan (as that term is defined in Section 3(3) of ERISA) or any
other fringe benefit maintained or offered by Sellers.
8.04 Indemnification Escrow. The Escrow Amount shall be held in escrow
by the Escrow Agent for a period of 12 months after the Closing Date. Any claim
of the Purchaser Group to be indemnified hereunder shall first be made against
the Escrow Amount during such period in accordance with the terms of the Escrow
Agreement. Any of the Escrow Amount not subject to an indemnification claim at
the end of such period will be paid to Sellers in accordance with the Escrow
Agreement. Sellers and the Shareholders shall be jointly and severally liable
for any claim of the Purchaser Group against the Sellers and the Shareholders to
the extent such claims cannot be satisfied out of the Escrow Amount. Sellers
acknowledge that, although Purchaser has no obligation to make a claim against
the Escrow Amount for unpaid Adjustment Amount and may make such claim directly
against Sellers, Purchaser reserves the right to make such claim against the
Escrow Amount at any time.
8.05 Remedies Not Exclusive. The rights and remedies of the Purchaser
Group provided for in this Article or otherwise in this Agreement shall be
deemed to be cumulative and in addition to and not in limitation or exclusion of
all other rights and remedies, whether by terms of other provisions of this
Agreement or at law or in equity or otherwise, which may exist on the part of
the Purchaser Group by reason of any breach of a representation, warranty,
covenant or agreement on the part of Sellers hereunder. Such rights and remedies
shall be cumulative and may be exercised at any time or from time to time, and
any failure or delay by a member of the Purchaser Group in exercising any right
or remedy at any time shall not constitute a waiver thereof or restrict its
subsequent enforcement or the enforcement of any other right or remedy by such
member of the Purchaser Group. Without limiting the foregoing, remedies of the
Purchaser Group are not limited to recourse to the Escrow Amount.
ARTICLE IX - INDEMNIFICATION OF SELLERS GROUP
This Article sets forth the respects in which Sellers, their respective
officers, directors and the Shareholders (collectively, the "Sellers Group")
shall be indemnified by Purchaser in the event the Sellers Group shall become
obligated for, or shall discharge, any liabilities of Purchaser or in the event
of any breach of a representation, warranty, covenant or agreement on the part
of Purchaser hereunder.
9.01 Breach of Representation, Warranty, Covenant or Agreement.
Purchaser agrees to indemnify the Sellers Group and hold the Sellers Group
harmless against any and all loss, liability, damage, claim, cost and expense of
any nature whatsoever, including, without limitation, costs of cleanup,
containment or other remediation and reasonable attorneys' and consultants' fees
and costs, arising from or in connection with any breach of a representation,
warranty, covenant or agreement on the part of Purchaser under this Agreement or
under any other instrument or document executed and delivered by Purchaser in
connection with the transactions contemplated hereby, as any of the same may be
amended from time to time.
9.02 Failure to Discharge Liabilities. Purchaser agrees to indemnify
the Sellers Group and hold the Sellers Group harmless against any and all loss,
liability, damage, claim, cost and expense of any nature whatsoever, including,
without limitation, reasonable attorneys fees arising from or in connection with
any liability incurred on account of the Assumed Liabilities.
9.03 Remedies Not Exclusive. The rights and remedies of the Sellers
Group provided for in this Article or otherwise in this Agreement shall be
deemed to be cumulative and in addition to and not in limitation or exclusion of
all other rights and remedies, whether by the terms of other provisions of this
Agreement or at law or in equity or otherwise, which may exist on the part of
the Sellers Group by reason of any breach of a representation, warranty,
covenant or agreement on the part of Purchaser hereunder. Such rights or
remedies shall be cumulative and may be exercised at any time or from time to
time, and any failure or delay by a member of the Sellers Group in exercising
any right or remedy at any time shall not constitute a waiver thereof or
restrict its subsequent enforcement or the enforcement of any other right or
remedy by such member of the Sellers Group. Sellers will notify Purchaser of any
Indemnifiable Loss to be claimed as soon as Sellers determines that it will
claim an Indemnifiable Loss and the basis therefor.
ARTICLE X - INDEMNIFICATION RIGHTS AND LIMITATIONS
10.01 Indemnification Rights. In the event a party incurs an
Indemnifiable Loss, such party may seek indemnification under this Agreement.
The indemnified party may avail itself of any and all rights and remedies
provided for in this Agreement or at law or in equity or otherwise. In the event
of a Claim against a party which intends to seek indemnification under this
Agreement, the indemnified party shall notify the indemnifying party within
thirty (30) days after the receipt of notice of such Claim; provided, however,
that the omission by any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its indemnification obligation under
this Agreement except to the extent that such omission results in a failure of
actual notice to the indemnifying party and such indemnifying party is
materially damaged as a result of such failure to give notice. If the Claim
relates to an action threatened or brought against the indemnified party, the
indemnifying party will be entitled to participate in or assume the defense
thereof with counsel reasonably satisfactory to such indemnified party and,
after notice of its election to assume the defense thereof, the indemnifying
party will no longer be liable for any legal or other expense subsequently
incurred by the indemnified party in connection with the defense thereof;
provided, however, that the indemnified party shall be entitled at all times to
participate in the defense of any such action at its own cost. Except with the
prior written consent of the indemnified party, no indemnifying party, in the
defense of any such Claim, shall consent to the entry of any judgment or enter
into any settlement that provides for any relief, including injunctive or other
nonmonetary relief, affecting the indemnified party or that does not include as
an unconditional term thereof the giving by each claimant or plaintiff to such
indemnified party of a release from all liability with respect to such Claim.
ARTICLE XI - SURVIVAL OF REPRESENTATIONS,
WARRANTIES, AND COVENANTS; LIMITATIONS ON AMOUNT OF INDEMNIFICATION OBLIGATION
11.01 Survival of Representations and Warranties. Except as otherwise
expressly provided in this Agreement, all representations, warranties, and
covenants made by the parties in this Agreement or in any certificate, schedule,
statement, document or instrument furnished hereunder or in connection with the
negotiation, execution and performance of this Agreement shall survive the
Closing for two (2) years following the Closing Date, except for matters
relating to Sections 4.17 (regarding Taxes), 4.20 (regarding employee benefit
plans and similar arrangements), and 4.22 (regarding Environmental Laws and
Regulations and products liability Claims), which shall survive the Closing for
the periods of the respective statutes of limitations applicable thereto,
including the period of any waiver or extension thereof. Notwithstanding any
investigation or audit conducted before or after the Closing Date or the
decision of any party to complete the Closing, each party shall be entitled to
rely upon the representations, warranties, and covenants set forth herein and
therein.
11.02 Limitations on Amount of Indemnification. The joint and several
liability of Sellers and the Indemnifying Shareholders under Article VIII shall
in no case exceed $3,250,000 in the aggregate (including the Escrow Amount) with
respect to Claims; provided, however: (a) such limitation shall not apply to
Claims relating to Sections 4.17 (regarding Taxes), 4.20 (regarding employee
benefit plans and similar arrangements), or 4.22 (regarding Environmental Laws
and Regulations), or product liability Claims, which Claims shall not be taken
into account when determining the maximum aggregate indemnification obligation
of Sellers and the Indemnifying Shareholders hereunder; and (b) beginning on the
first anniversary date of the Closing and expiring two (2) years following the
Closing Date, the aggregate maximum amount of all Indemnification Claims that
may be made against Sellers and the Indemnifying Shareholders (excluding all
Claims made prior to the first anniversary date of the Closing Date) shall not
exceed $1,500,000, subject to the exceptions set forth in subsection (a) hereof.
ARTICLE XII - POST CLOSING MATTERS
12.01 Reporting of Allocation of Purchase Price. Sellers and Purchaser
covenant and agree with the other that, for purpose of all federal, state and
other income tax returns filed by Sellers or Purchaser, each will adopt the
allocations of the Purchase Price among the Assets in accordance with the
methodology set forth in Schedule 7.01(u) attached hereto. Upon examination of
any such tax return that would affect the allocations set forth herein, Sellers
and Purchaser each agree to notify the other of such examination and to use good
faith efforts to maintain such allocations. Sellers and Purchaser further agree
to file such forms and reports as may be required by Section 1060 of the Code in
a manner which will be consistent with such allocations.
12.02 Discharge of Business Obligations. From and after the Closing
Date, Sellers shall pay, discharge and perform, in accordance with past practice
but not less than on a timely basis, all obligations and liabilities incurred or
arising prior to the Closing Date in respect of the Business, its operations or
the assets and properties used therein, including without limitation any
liabilities or obligations to employees, trade creditors and clients of the
Business, the filing of all applicable tax returns, estimates, forms and reports
and the payment of all applicable taxes, but excluding all Assumed Liabilities.
12.03 Discharge of Assumed Liabilities. From and after the Closing
Date, Purchaser shall pay, discharge and perform all Assumed Liabilities, in
accordance with its past practice but not less than on a timely basis.
ARTICLE XIII - MISCELLANEOUS
13.01 Termination.
(A) Anything herein or elsewhere to the contrary notwithstanding, this
Agreement may be terminated by written notice of termination at any time on or
before the Closing only as follows:
(i) by mutual consent of Sellers and Purchaser;
(ii) by Purchaser, (a) at any time if any of the
representations, warranties, covenants and agreements of Sellers
contained in Article IV hereof were incorrect in any material respect
when made or at any time thereafter; (b) at any time if any of the
covenants of Sellers and Shareholders pending the Closing have not been
satisfied; or (c) if any of the conditions precedent to the obligations
of Purchaser contained in Section 7.01 hereof have not been fulfilled
or satisfied, or waived by Purchaser, by the Closing.
(iii) by Sellers, (a) at any time if any of the
representations and warranties of Purchaser contained in Article V
hereof were incorrect in any material respect when made or at any time
thereafter; or (b) if any of the conditions precedent to the
obligations of Sellers contained in Section 7.02 hereof have not been
fulfilled or satisfied, or waived by Sellers, by the Closing.
(B) In the event of the termination hereof pursuant to the provisions
of this Section 13.01, this Agreement (except for Sections 6.05 (regarding
publicity) and 13.03 (regarding expenses)) become void and have no effect,
without any liability on the part of any of the parties or their directors,
officers or shareholders in respect of this Agreement. Such right of termination
is in addition to any other rights the parties hereto may have in the event any
party hereto breaches any covenant or agreement herein, and in such case the
exercise of the right of termination pursuant to this Section 13.01 will not be
an election of remedies.
(C) In the event of the termination hereof pursuant to the provisions
of this Section 13.01, each party hereto shall return to the other parties all
documents provided by such other parties and shall continue to be bound by any
and all confidentiality agreements previously executed by the applicable
parties.
13.02 Brokers' and Finders' Fees.
(A) Sellers agree to pay the commissions and fees due to the X. X.
Xxxxxx Company in connection with the transactions contemplated by this
Agreement. Sellers represent and warrant to Purchaser that all negotiations
relative to this Agreement have been carried on by it directly without the
intervention of any Person, other than referred to above, who may be entitled to
any brokerage or finder's fee or other commission in respect of this Agreement
or the consummation of the transactions contemplated hereby, and Sellers agree
to indemnify and hold harmless Purchaser against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by Purchaser
as a result of Sellers' dealings, arrangements or agreements with any Person.
(B) Purchaser agrees to pay the commissions and fees due to Xxxxxxx &
Associates, Inc. in connection with the transactions contemplated by this
Agreement. Purchaser represents and warrants to Sellers that all negotiations
relative to this Agreement have been carried on by it directly without the
intervention of any Person, other than referred to above, who may be entitled to
any brokerage or finder's fee or other commission in respect of this Agreement
or the consummation of the transactions contemplated hereby, and Purchaser
agrees to indemnify and hold harmless Sellers against any and all claims,
losses, liabilities and expenses which may be asserted against or incurred by
Sellers as a result of Purchaser's dealings, arrangements or agreements with any
such Person.
13.03 Expenses. Except as otherwise provided in this Agreement, each
party hereto shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
13.04 Entire Agreement; Amendment. This Agreement and the agreements
attached hereto or expressly referred to herein, set forth the entire agreement
and understanding of the parties hereto with respect to the transactions
contemplated hereby. Any and all previous agreements and understandings between
or among the parties regarding the subject matter hereof, whether written or
oral, are superseded by this Agreement with the exception of the binding
provisions of the Letter of Intent dated November 21, 2000. This Agreement shall
not be amended or modified except by written instrument duly executed by each of
the parties hereto.
13.05 Assignment and Binding Effect. No party hereto may assign its
interest in this Agreement without the prior written consent of the other
parties, except that Purchaser may assign this Agreement to a newly organized
subsidiary or Affiliate of Purchaser, provided that Purchaser guarantees the
performance of obligations of such entity under this Agreement. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of the Sellers, the Shareholders and Purchaser.
13.06 Waiver. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
13.07 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given:
If to Purchaser, to:
Metal Corporation
0000 Xxxxxxx Xxxx
Xx. Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Fax: (000) 000-0000
With a copy to:
Gallop, Xxxxxxx & Xxxxxx, X.X.
000 X. Xxxxxx Xxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
If to Sellers, to:
Xxxxxx X. Star
00000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
With a copy to:
Xxxxx Xxxxxxx XxXxxxxx & Xxxxxxx
00000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
or such other address or telecopy number as such parties may hereafter specify
by notice to the other party. Each such notice, request or other communication
shall be effective: (i) if given by telecopy and the appropriate acknowledgment
of receipt of such telecopy is received; or (ii) if given by any other means,
when delivered at the address specified in this Section 13.07.
13.08 Governing Law. This Agreement shall be governed by and
interpreted and enforced in accordance with the internal substantive laws of the
State of Missouri, without regard to its conflicts of law provisions or
interpretations.
13.09 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their heirs, executors, administrators, legal
representatives, successors and assigns, and they shall not be construed as
conferring any rights on any other Persons.
13.10 Incorporation of Schedules. The Schedules attached hereto shall
be deemed to be incorporated in and form a part of this Agreement.
13.11 Headings and Gender. All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires.
13.12 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
13.13 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. The signature of any party which is delivered by telefax or
photocopy shall be deemed to be an original signature and shall be effective
upon receipt thereof. This Agreement shall become binding when one or more
counterparts taken together shall have been executed and delivered by the
parties.
[Remainder of this page is intentionally blank.]
The parties hereto have duly executed this Agreement as of the date
first written above.
"PURCHASER":
METAL CORPORATION
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxx X. Xxxx
Title: President
"SELLERS":
TEMPCO ENGINEERING, INC.
By: /s/ Xxxxxx X. Star
-------------------------------------
Name: Xxxxxx X. Star
Title: President
and
By: /s/ Xxxxx Xxxx
-------------------------------------
Name: Xxxxx Xxxx
Title: Chairman of the Board
HYCO PRECISION, INC.
By: /s/ Xxxxxx X. Star
-------------------------------------
Name: Xxxxxx X. Star
Title: President
and
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Secretary
"SHAREHOLDERS":
Tempco Shareholders:
XXXXX AND XXXX X. XXXX TRUST dated
February 8, 1989
By: /s/ Xxxxx Xxxx
-----------------------------------------
Xxxxx Xxxx, Trustee
By: /s/ Xxxx X. Xxxx
-----------------------------------------
Xxxx X. Xxxx, Trustee
THE XXXXXX X. STAR and XXXXXXXXX X. STAR 1978
TRUST dated August 25, 1978
By: /s/ Xxxxxx X. Star
-----------------------------------------
Xxxxxx X. Star, Trustee
By: /s/Xxxxxx X. Star, Attorney in Fact
-----------------------------------------
Xxxxx X. Xxxxxx, Trustee
Hyco Shareholders:
By: /s/ Xxxxxx X. Star
-----------------------------------------
Xxxxxx X. Star
/s/ Xxxxxx X. Star, Attorney in Fact
-----------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxx
-----------------------------------------
Xxxxxx X. Xxxx
/s/ Xxxxxxx X. Xxxx
-----------------------------------------
Xxxxxxx X. Xxxx
[The following to be signed by the two shareholders of Tempco and one
shareholder of Hyco for who will sign consulting agreements]
The undersigned execute this Agreement for the additional purpose of
agreeing to enter into a consulting agreement with Purchaser on mutually
agreeable terms, and for the purpose of agreeing to enter into the
noncompetition agreements referred to in the Agreement for five year periods and
otherwise on terms acceptable to Purchaser and such Shareholders.
Tempco Shareholders:
/s/ Xxxxx Xxxx
-----------------------------------------
Xxxxx Xxxx
/s/ Xxxxxx X. Star
-----------------------------------------
Xxxxxx X. Star
Hyco Shareholder:
/s/ Xxxxxx X. Star
----------------------------------------
Xxxxxx X. Star
[The following to be signed by "key" persons who will sign employment
agreements with Purchaser]
The undersigned execute this Agreement solely for the purpose of
agreeing to enter into the employment agreements referred to in the Agreement
and also, to the extent requested by Purchaser, noncompetition and/or
nondisclosure agreements referred to in the Agreement for periods and otherwise
on terms acceptable to Purchaser and such employees.
/s/ Xxxxxx X. Star
----------------------------------------
Xxxxxx X. Star
[The following to be signed by the spouses of the Shareholders]
By executing this Agreement, the undersigned join in making the
representations and warranties and indemnities of their respective spouses as
Shareholders for the purpose of confirming that any funds received by their
respective spouses from the sale of Assets by Sellers to Purchaser will be
subject to all indemnification claims of Purchaser arising out of the foregoing
Agreement.
/s/Xxxxxxxxx Xxxx
----------------------------------------
/s/ Eva Star
----------------------------------------
/s/ Xxxx X. Xxxx
----------------------------------------
-----------------------------------------------------
ASSET PURCHASE AGREEMENT
-----------------------------------------------------
TEMPCO ENGINEERING, INC.
and
HYCO PRECISION, INC.,
as Sellers,
and
the Shareholders of Tempco Engineering, Inc.
and
the Shareholders of Hyco Precision, Inc.,
as Shareholders,
and
METAL CORPORATION,
as Purchaser
DATED AS OF MARCH 28, 2001
------------------------------
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS........................................................1
ARTICLE II - PURCHASE AND SALE.................................................8
2.01 Agreement to Sell.............................................8
2.02 Agreement to Purchase.........................................8
2.03 Purchase Price................................................8
2.04 Payment of Purchase Price.....................................8
2.05 Assumption of Liabilities....................................10
2.06 EBITDA Earn-Out..............................................10
ARTICLE III - CLOSING, ITEMS TO BE DELIVERED,
AND FURTHER ASSURANCES..........................................10
3.01 Closing......................................................10
3.02 Conveyances at Closing.......................................11
3.03 Payment of Purchase Price....................................11
3.04 Further Assurances...........................................11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF
SELLERS AND SHAREHOLDERS.........................................12
4.01 Corporate Existence..........................................12
4.02 Power; Authorization; Enforceable Obligations................12
4.03 Title and Condition of Assets................................12
4.04 No Interest in Other Entities................................12
4.05 No Conflicting Agreements or Orders; Required
Consents or Filings..........................................12
4.06 No Third Party Options.......................................13
4.07 Financial Statements.........................................13
4.08 Accounts Receivable..........................................13
4.09 Inventory....................................................14
4.10 Absence of Undisclosed Liabilities...........................14
4.11 Employment Agreements; Compensation..........................14
4.12 Leases.......................................................14
4.13 Material Contracts...........................................15
4.14 Restrictive Documents........................................15
4.15 Litigation...................................................15
4.16 Labor Relations..............................................16
4.17 Taxes........................................................16
4.18 Compliance...................................................17
4.19 Employee Benefits............................................17
4.20 Intellectual Property........................................18
4.21 Environmental................................................19
4.22 No Changes Since December 31, 2000...........................20
4.23 Absence of Certain Business Practices........................20
4.24 Receipt of Notices...........................................21
4.25 Assets.......................................................21
4.26 Conditions Affecting Sellers.................................21
4.27 Real Property................................................21
4.28 Insurance....................................................23
4.29 Interests in Clients, Suppliers, etc.........................23
4.30 Warranties...................................................23
4.31 Prepaid Expenses and Deposits................................23
4.32 Suppliers....................................................23
4.33 Customers....................................................24
4.34 Ownership of Stock...........................................24
4.35 Documents....................................................24
4.36 No Misrepresentation.........................................24
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................24
5.01 Existence....................................................24
5.02 Corporate Power and Authorization............................24
5.03 Validity of Contemplated Transactions........................25
ARTICLE VI - COVENANTS OF THE PARTIES.........................................25
6.01 Conduct of Business..........................................25
6.02 Employees....................................................27
6.03 Employee Benefits............................................28
6.04 Litigation...................................................28
6.05 Publicity....................................................28
6.06 Access to Records After Closing..............................28
6.07 Litigation Cooperation.......................................28
6.08 California State Sales and Transfer Taxes....................28
6.09 Expenses of Sale.............................................29
6.10 No Negotiation...............................................29
6.11 Insurance Claims.............................................29
6.12 Insurance....................................................29
6.13 Consents and Conditions Precedent............................29
6.14 Tax Returns and Audits.......................................30
6.15 Reasonable Access............................................31
6.16 Maintenance of Assets........................................31
6.17 Reasonable Efforts to Obtain Employment Agreement............31
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING.............................31
.01 Conditions Precedent to Purchaser's Obligations..............31
7.02 Conditions Precedent to Sellers' Obligations.................34
ARTICLE VIII - INDEMNIFICATION OF PURCHASER GROUP.............................36
8.01 Breach of Representation, Warranty, Covenant or Agreement....36
8.02 Failure to Comply with Bulk Sales Law........................36
8.03 Failure to Discharge Liabilities.............................36
8.04 Indemnification Escrow.......................................37
8.05 Remedies Not Exclusive.......................................37
ARTICLE IX - INDEMNIFICATION OF SELLERS GROUP.................................37
9.01 Breach of Representation, Warranty, Covenant or Agreement....37
9.02 Failure to Discharge Liabilities.............................38
9.03 Remedies Not Exclusive.......................................38
ARTICLE X - INDEMNIFICATION RIGHTS AND LIMITATIONS............................38
10.01 Indemnification Rights.......................................38
ARTICLE XI - SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS;
LIMITATIONS ON AMOUNT OF
INDEMNIFICATION OBLIGATION.......................................39
11.01 Survival of Representations and Warranties...................39
11.02 Limitations on Amount of Indemnification.....................39
ARTICLE XII - POST CLOSING MATTERS............................................39
12.01 Reporting of Allocation of Purchase Price....................39
12.02 Discharge of Business Obligations............................39
12.03 Discharge of Assumed Liabilities.............................40
ARTICLE XIII - MISCELLANEOUS..................................................40
13.01 Termination..................................................40
13.02 Brokers' and Finders' Fees...................................41
13.03 Expenses.....................................................41
13.04 Entire Agreement; Amendment..................................41
13.05 Assignment and Binding Effect................................41
13.06 Waiver.......................................................41
13.07 Notices......................................................42
13.08 Governing Law................................................42
13.09 No Benefit to Others.........................................42
13.10 Incorporation of Schedules...................................43
13.11 Headings and Gender..........................................43
13.12 Severability.................................................43
13.13 Counterparts.................................................43
SCHEDULES
Schedule Title
-------- -----
A-1 List of Shareholders
A-2 Assigned Contracts
A-3 Estimated Year 2000 EBITDA
A-4 Equipment Appraisal
A-5 Non-exclusive List of Assumed Liabilities
A-6 Excluded Assets
2.04 Escrow Agreement
2.04(C) Inventory Valuation Methodology
3.02(a) Xxxx of Sale and Assignment
3.02(b) Assignment of Intellectual Property
3.02(c) Assignment of Contract Rights
3.02(d) Agreement for Assignment and Assumption of Assumed Liabilities
3.02(e) Agreement for Excluded Liabilities
4.01 Foreign Qualifications
4.03(a) Exceptions to Sellers' Good Title to Assets
4.03(b) Assets not owned by Seller
4.04 Interests in other Entities
4.05 Conflicting Agreement or Orders; Required Consents or Filings
4.07 Financial Statements
4.10 Undisclosed Liabilities
4.11(a) Employees
4.11(b) Employment Agreements
4.11(c) Employment Liabilities
4.12 Leases
4.13 Material Contracts
4.14 Restrictive Documents
4.15 Litigation
4.16(a) Noncompliance with Employment Laws
4.16(b) Terminated Employees
4.17(a) Exceptions to Tax Compliance
4.17(b) Recent Tax Returns
4.18(a) Compliance with Applicable Law
4.18(b) Governmental Authorizations
4.19 Employee Benefits
4.20(a) Intellectual Property
4.20(b) Exceptions to Good Title to Intellectual Property
4.21(b) Environmental Permits and Authorizations
4.21(c) Hazardous Materials
4.21(d) Use and Storage of Hazardous Conditions
4.21(e) Storage of Certain Materials
4.21(f) Exposure to Hazardous Materials
4.21(g) Underground Storage Tanks
4.21(h) Notice of Environmental Contamination
4.21(i) Environmental Investigations
4.22 Changes since December 31, 2000
4.23 Certain Business Practices
4.25 Exceptions to Sellers' Ownership of Assets
Required to do Business
4.26 Certain Conditions Affecting Sellers
4.27 Real Property
4.28 Insurance
4.29 Interests in Clients and Suppliers
4.31 Prepaid Expenses and Deposits
4.32 Suppliers and Vendors
4.33 Customers
6.01 Modifications to Employee Benefit Plans
7.01(i) Opinion of Counsel for Sellers and Shareholders
7.01(n) Key Customers
7.01(p) Retained Employees
7.01(r) Shareholder Noncompetition Agreements
7.01(u) Allocation of Purchase Price
7.02(f) Opinion of Counsel for Purchaser
