STOCK PURCHASE AGREEMENT
AMONG
X. X. XXXXXX AUTOMOTIVE CASTINGS, INC.
AND
THE STOCKHOLDERS OF
XXXXXX METAL PRODUCTS CORPORATION
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the
10th day of September, 1999, among X. X. Xxxxxx Automotive Castings, Inc., a
Delaware corporation ("Buyer"), and the stockholders and option holders of
Xxxxxx Metal Products Corporation who are identified on the signature pages
attached hereto (collectively "Sellers" and individually a "Seller"). Buyer and
each Seller are sometimes referred to collectively herein as the "Parties" and
each as a "Party."
PRELIMINARY STATEMENTS:
A. Sellers own beneficially and of record all issued and
outstanding shares of capital stock of Xxxxxx Metal Products Corporation, a
Delaware corporation (the "Company"), and all of the options exercisable into
shares of capital stock of the Company.
B. This Agreement contemplates a transaction in which Buyer will
purchase from Sellers, and Sellers will sell to Buyer, all of the shares of
capital stock of the Company, including shares issuable upon the exercise of
options (the "Shares"), in return for the cash consideration and other
obligations set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings indicated:
"AFFILIATE" means any Person that directly or indirectly controls,
is controlled by, or is in common control with, any other Person. For purposes
of the preceding sentence, "control" means possession, directly or indirectly,
of the power to direct or cause direction of management and policies through
ownership of voting securities, contract, voting trust or otherwise.
"AGGREGATE EXERCISE AMOUNT" means the aggregate amount payable upon
exercise of all of the Options in accordance with the Option Plan and the
applicable option agreement.
"AGGREGATE PURCHASE PRICE" means an aggregate purchase price in US
Dollars equal to the following: Enterprise Value minus Debt plus Cash plus the
Aggregate Exercise Amount plus Seller Debt, as adjusted pursuant to Section 2.3
below.
"AGREEMENT" is defined in the preamble hereto.
"APPLICABLE LAWS" is defined in Section 4.15.
"AUDITOR" is defined in Section 2.3(d).
"BUYER" is defined in the preamble hereto.
"BUYER DEBT FINANCING" is defined in Section 3.2(g).
"BUYER'S INDEMNIFIABLE CLAIMS" is defined in Section 8.2.
"CALLED OPTIONS" is defined in Section 5.10.
"CASH" means the aggregate amount of cash of the Company as of the
close of business on the Closing Date, as set forth on the Closing Balance
Sheet.
"CLOSING" is defined in Section 6.1.
"CLOSING BALANCE SHEET" is defined in Section 2.3(b).
"CLOSING CERTIFICATE" is defined in Section 6.2(e).
"CLOSING DATE" is defined in Section 6.1.
"COBRA" means Comprehensive Omnibus Budget Reconciliation Act of
1985, as amended.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" is defined in the preamble hereto.
"DAMAGES" is defined in Section 8.2.
"DEBT" means, without duplication, (i) all indebtedness or other
obligation of the Company for borrowed money, whether current, short-term, or
long-term, secured or unsecured, (ii) all indebtedness of the Company for the
deferred purchase price for purchases of property outside the ordinary course
which is not evidenced by trade payables, (iii) all lease obligations of the
Company under leases which are capital leases in accordance with GAAP, if any,
(iv) any off-balance sheet financing of the Company including, without
limitation, synthetic leases and project financing, (v) any payment of
obligations of the Company in respect of banker's acceptances or letters of
credit (other than stand-by letters of credit in support of ordinary course
trade payables), (vi) any liability of the Company with respect to interest rate
swaps, collars, caps and similar hedging obligations, (vii) any liability of the
Company under (x) the Phantom Stock Agreement, dated August 16, 1996, between
the Company and Xxxxxx X. Xxxxxx and (y) the Note Purchase Agreement, dated as
of August 4, 1999, between the Company and The Peninsula Fund L.P. (the "Note
Agreement"), and the Senior Subordinated Notes issued by the Company thereunder,
including without limitation, the Success Fee (as defined therein), (viii) any
indebtedness referred
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to in clauses (i) through (vii) above of any person or entity other than the
Company which is either guaranteed by, or secured by a Security Interest upon
any property owned by, the Company and (ix) accrued and unpaid interest of, and
prepayment premiums, penalties or similar contractual charges arising as a
result of the discharge at Closing of, any such foregoing obligation; provided,
however, that Debt pursuant to the Loan Agreement, dated July 19, 1996, between
the Company and Xxxxxx Financing shall be deemed to be zero if 100% of the
equity interests of Xxxxxx Financing is transferred to Buyer on or prior to
Closing pursuant to Section 5.15.
"DOJ" is defined in Section 5.4.
"ENTERPRISE VALUE" means $175,000,000.
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other statutes (including rules
and regulations thereunder) of federal, state and local governments (and all
agencies thereof) and common law concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, or chemical,
industrial, hazardous or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ESTIMATED CLOSING BALANCE SHEET" is defined in Section 2.3(a).
"ESTIMATED CLOSING WORKING CAPITAL" is defined in Section 2.3(a).
"FIXED ASSETS" is defined in Section 4.13.
"FTC" is defined in Section 5.4.
"GAAP" means generally accepted accounting principles, as in effect
in the United States from time to time and applied on a consistent basis.
"HAZARDOUS MATERIAL" means any substance defined as a "hazardous
material," "hazardous substance," "pollutant," "contaminant" or "toxic
substance" defined by another term of similar meaning and regulatory effect in
any of the Environmental, Health, and Safety Laws.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"INDEMNIFIABLE CLAIMS" is defined in Section 8.5(a).
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"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" are defined in Section
8.4(b).
"KNOWLEDGE" means (i) as it relates to each Seller, the actual
knowledge of that Seller and the officers and directors of the Company, and (ii)
as it relates to Buyer, the actual knowledge of the officers and directors of
Buyer.
"LEASED REAL PROPERTY" is defined in Section 4.12.
"MAJORITY SELLERS" is defined in Section 12.14.
"MATERIAL ADVERSE EFFECT" means (i) with respect to the Company, a
material adverse effect on the business, operations, assets or financial
condition or operating results of the Company and its subsidiaries, taken as a
whole; provided, however, that to the extent any effect arises from or is
attributable to the announcement of the transaction contemplated herein,
including, without limitation, adverse reactions from customers, such effect
shall not be deemed a "Material Adverse Effect," and provided further, that any
work stoppages or other labor disputes at one or more customer's facilities
shall not be deemed a "Material Adverse Effect" and (ii) with respect to the
Company, Seller or Buyer, a material adverse effect on the ability of the
Company, Seller or Buyer, respectively, to consummate the transactions
contemplated hereby or to perform its obligations set forth herein.
"MATERIAL CONTRACTS" and "MATERIAL CONTRACT" are defined in Section
4.18.
"MOST RECENT FINANCIAL STATEMENTS" is defined in Section 4.6.
"MOST RECENT FISCAL PERIOD END" is defined in Section 4.6.
"NEGOTIATORS" is defined in Section 10.2.
"NET PURCHASE PRICE" means the Aggregate Purchase Price minus the
Aggregate Exercise Amount minus Seller Debt.
"OPTION PLAN" is defined in Section 5.11.
"OPTION SHARES" means the Shares that are issuable upon exercise of
the Options, and "OPTION SHARE" means each such Share.
"OPTIONS" means all outstanding options, warrants or other
convertible securities granted under any employee stock option or compensation
plan or arrangement of the Company, other than Called Options to the extent such
Options have been canceled.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OWNED REAL PROPERTY" is defined in Section 4.11.
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"PERMITS" is defined in Section 4.14.
"PERMITTED EXCEPTIONS" is defined in Section 4.11.
"PERSON" means a natural person, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"PLAN" or "PLANS" is defined in Section 4.17(a).
"POLICY" is defined in Section 7.1(l)(i)(a).
"PROPRIETARY RIGHTS" is defined in Section 4.9(a)(ii).
"PURCHASE PRICE PER SHARE" means an amount determined by dividing
the Aggregate Purchase Price by the aggregate number of Shares outstanding as of
the Closing Date, assuming all Options have been exercised.
"REAL ESTATE LEASES" is defined in Section 4.12.
"SEC" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"SECTION 338(h)(10) ELECTION" is defined in Section 11.3.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge or other security interest, other than (i) mechanics' and similar liens
not yet due and payable, (ii) liens for any Tax not yet due and payable or for
any Tax that the taxpayer is contesting in good faith through appropriate
proceedings, (iii) purchase money liens and liens securing rental payments under
capital lease arrangements, and (iv) other immaterial liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"SELLER" and "SELLERS" is defined in the preamble hereto.
"SELLER AFFIDAVIT" is defined in Section 6.2(h).
"SELLER DEBT" means the aggregate amount of debt owed by Sellers to
the Company that has not been repaid prior to the Closing.
"SELLERS' EXPENSES" is defined in Section 12.6.
"SELLERS' INDEMNIFIABLE CLAIMS" is defined in Section 8.3(a).
"SHARES" is defined in the preamble hereto.
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"SUBSIDIARY" of any entity means a corporation of which that entity
owns directly or indirectly more than 50% of the outstanding securities entitled
generally to vote for the election of directors.
"TAX" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum or other tax (including the Michigan Single
Business Tax) of any kind whatsoever, including any interest, penalty or
addition thereto.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
"UPDATED DISCLOSURE SCHEDULE" is defined in Section 5.6.
ARTICLE II
SALE AND PURCHASE
2.1 TRANSFER OF SHARES. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, each Seller shall sell,
assign, transfer and deliver to Buyer free and clear of all liens, pledges,
encumbrances and similar security interests, and Buyer shall purchase from each
Seller, the number of Shares set forth opposite that Seller's name on Exhibit A
for the consideration specified in Section 2.2.
2.2 PURCHASE PRICE. In consideration of the delivery to Buyer in
accordance with this Agreement of certificates representing the Shares and of
the other obligations of Sellers set forth herein, at the Closing, Buyer shall
pay to Sellers an aggregate amount equal to the Net Purchase Price. Each Seller
shall receive (i) with respect to each Option Share, the Purchase Price Per
Share less the exercise price for such Option Share and (ii) with respect to all
other Shares, the Purchase Price Per Share less the portion of Seller Debt owing
by such Seller (which shall constitute payment in full of the Seller Debt).
Exhibit A sets forth the percentage of the Aggregate Purchase Price to be
received by each Seller at the Closing.
2.3 DETERMINATION OF CERTAIN PURCHASE PRICE ADJUSTMENTS.
(a) Within five business days prior to the Closing Date, Buyer and
the Company shall in good faith jointly prepare an estimate of the Closing
Balance Sheet (as defined in subsection (b) below) (the "ESTIMATED CLOSING
BALANCE SHEET") based on the Company's books and records and other information
then available, to determine Estimated Closing Working Capital. For purposes
hereof, "ESTIMATED CLOSING WORKING CAPITAL" means the book value of the
Company's total current assets (other than Cash and other than the current
portion of the Shore Line Industry promissory
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notes referred to in Section 5.13) LESS the Company's total current liabilities
(other than the current portion of Debt and other than accounts payable
attributable to capital expenditures) (which amount may be a negative number),
determined from the Estimated Closing Balance Sheet as of the Closing Date;
provided, however, that if Buyer and the Company are unable to agree on any item
of the Estimated Closing Working Capital, such disputed item shall be determined
based on the amount of such item set forth on the Company's balance sheet as of
the month-ending immediately prior to the Closing Date. At the Closing, the
Aggregate Purchase Price will be either (A) reduced by the amount by which
$17,000,000 exceeds the Estimated Closing Working Capital or (B) increased by
the amount by which Estimated Closing Working Capital exceeds $17,000,000.
(b) As promptly as practicable after the Closing Date, Buyer will
prepare a balance sheet of the Company as of the close of business on the
Closing Date (the "CLOSING BALANCE SHEET") for the purpose of establishing the
Actual Closing Working Capital. For purposes hereof, "ACTUAL CLOSING WORKING
CAPITAL" means the book value of the Company's total current assets (other than
Cash and other than the current portion of the Shore Line Industry promissory
notes referred to in Section 5.13) LESS the Company's total current liabilities
(other than the current portion of any Debt and other than accounts payable
attributable to capital expenditures) (which amount may be a negative number),
determined from the Closing Balance Sheet. The Closing Balance Sheet and the
Estimated Closing Balance Sheet shall (i) be prepared in accordance with GAAP
(regardless of whether GAAP was applied in prior periods), and (ii) reflect all
items and adjustments regardless of materiality. Within 60 days after the
Closing Date, Buyer shall deliver to Sellers the Closing Balance Sheet.
(c) If Actual Closing Working Capital exceeds Estimated Closing
Working Capital, Buyer shall within three business days pay to Sellers the
amount of such excess. If Actual Closing Working Capital is less than Estimated
Closing Working Capital, Sellers shall within three business days pay to Buyer
in immediately available funds the amount of such shortfall. All amounts owed
pursuant to this subsection (c) shall include interest, from the Closing Date to
the date of payment, at 8.5% annual interest, calculated on the basis of a
365-day year.
(d) If Sellers disagree with any item on the Closing Balance
Sheet, Sellers shall notify Buyer in writing of such disagreement within 30
business days after Sellers' receipt thereof (such notice setting forth in
reasonable detail the basis for such disagreement). Buyer shall permit Sellers
access to such work papers relating to the preparation of the Closing Balance
Sheet as may be reasonably necessary to permit Sellers to review in detail the
manner in which the Closing Balance Sheet was prepared. Buyer and Sellers shall
thereafter negotiate in good faith to resolve any such disagreements; PROVIDED,
HOWEVER, that Sellers or Buyer, as the case may be, shall within three business
days pay to Buyer or Sellers, as the case may be, the amount determined pursuant
to subsection (c) above which is not subject to dispute, if any. If Buyer and
Sellers are unable to resolve any such disagreements within 30 days, Buyer and
Sellers shall jointly retain Deloitte & Touche (the "AUDITOR") to resolve any
remaining disagreements in accordance with subsection (e) below.
(e) Buyer and Sellers shall direct the Auditor to render a
determination within 25
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days of its retention and Buyer and Sellers shall use their best efforts to
cause the Auditor to resolve all disagreements over individual line items as
soon as possible. The Auditor shall consider only those items and amounts in
the Closing Balance Sheet that Buyer and Sellers are unable to resolve. The
determination of the Auditor shall be conclusive and binding upon Buyer and
Sellers. The fees and expenses of the Auditor shall be borne one-half by Buyer
and one-half by Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
3.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. Each Seller
represents and warrants to Buyer that the statements contained in this Section
3.1 with respect to that Seller are true and correct as of the date of this
Agreement and will be true and correct with respect to that Seller as of the
Closing Date as though made again as of the Closing Date, except as set forth in
the disclosure schedule delivered by Sellers to Buyer on the date hereof, a copy
of which is attached hereto and acknowledged by the Parties (the "Disclosure
Schedule").
(a) CAPACITY AND AUTHORIZATION OF SELLERS. Seller is a natural
person with the legal capacity to enter into this Agreement, to perform his
obligations hereunder and to consummate the transactions contemplated hereby.
Assuming the due execution and delivery of this Agreement by the other Sellers
and Buyer, this Agreement is a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject to general
principles of equity and applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting the enforcement
of creditors' rights generally.
(b) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement by Seller nor the consummation by Seller of the transactions
contemplated hereby will (i) conflict with or result in a breach of any
provision of the articles or certificate of incorporation or bylaws of the
Company; (ii) violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate or cause a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Seller under any agreement, indenture, instrument, order, judgment or
decree binding on Seller or on his properties or assets, except for such
violations, conflicts, breaches, defaults, terminations, accelerations, liens,
security interests, charges or encumbrances that would not separately or in the
aggregate have a Material Adverse Effect on Seller; (iii) violate any statute,
rule, regulation, ordinance or other law or any judgment, order, decree,
stipulation, injunction or charge of any court, administrative agency or
commission or other governmental authority or instrumentality by which Seller is
bound, except for such violations that would not separately or in the aggregate
have a Material Adverse Effect on Seller; or (iv) require any consent, approval,
declaration, order or authorization of, or registration or filing with, any
third party, court or governmental body or other agency, instrumentality or
authority by or with respect to Seller in connection with the execution and
delivery of this Agreement or the consummation of
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the transactions contemplated hereby, other than the filing of a premerger
notification report by Seller under the HSR Act, except if the failure to obtain
any such consent, approval, declaration, order or authorization or to make any
such registration or filing would not have a Material Adverse Effect on Seller.
(c) BROKERS' FEES. Except for the fees payable to Ernst & Young
LLP listed in Section 3.1(c) of the Disclosure Schedule, which Sellers will
cause the Company to pay on or before the Closing Date, neither Seller nor the
Company shall have any liability or obligation to pay any finder's fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Buyer could become liable or obligated.
(d) SHARES. Seller holds of record and owns beneficially the
number of Shares and Options exercisable for the number of Option Shares set
forth opposite his name on Exhibit A, free and clear of any liens, security
interests, encumbrances, pledges, charges, claims, voting trusts and
restrictions on transfer of any nature whatsoever, except as set forth in
Section 3.1(d) of the Disclosure Schedule and except for restrictions on
transfer imposed by or pursuant to the securities laws of the United States and
of any state that has jurisdiction over such transfer. Seller is not a party to
any option, warrant, purchase right or other contract or commitment that could
require Seller to sell, transfer or otherwise dispose of any capital stock or
any options, warrants of other convertible securities of the Company (other than
this Agreement).
(e) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
described in Section 3.1(e) of the Disclosure Schedule, neither Seller nor its
Affiliates is or has been involved in any material business arrangement or
relationship with the Company within the past 12 months and neither Seller nor
their Affiliates (other than the Company) owns any material asset, tangible or
intangible, that is used in the business of the Company.
(f) CONSENTS AND APPROVALS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with Seller's execution and delivery of this
Agreement or his performance of the terms hereof, other than the filing of a
pre-merger notification report by Seller under the HSR Act.
(g) LITIGATION. There is no claim, litigation, action, suit,
proceeding, investigation or inquiry, administrative or judicial, pending or, to
the Knowledge of Seller, threatened against Seller, at law or in equity, before
any federal, state or local court or regulatory agency, or other governmental
authority, that, separately or in the aggregate, is reasonably likely to have a
Material Adverse Effect on Seller.
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Sellers that the statements contained in this Section 3.2 are true
and correct as of the date of this Agreement and will be true and correct as of
the Closing Date as though made again as of the Closing Date.
(a) CORPORATE ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate
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power and authority to own, lease and operate its property and conduct its
business as presently conducted. Buyer is duly qualified to do business and is
in good standing in each jurisdiction in which Buyer owns or leases real
property, maintains an office or has employees residing. Neither the nature of
the business conducted by Buyer nor the property Buyer owns, leases or operates
requires it to qualify to do business as a foreign corporation in any other
jurisdiction except where the failure to be so qualified would not have a
Material Adverse Effect on Buyer. Buyer has delivered to Sellers true, correct
and complete copies of the articles or certificate of incorporation and bylaws
of Buyer.
(b) AUTHORIZATION. Buyer has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. All necessary corporate
action has been taken by Buyer with respect to the execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby. Assuming the due execution and delivery of this Agreement
by Sellers, this Agreement is a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to general
principles of equity and applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting the enforcement
of creditors' rights generally.
(c) CONSENTS AND APPROVALS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with Buyer's execution and delivery of this
Agreement or its performance of the terms hereof, other than the filing of a
pre-merger notification report by Buyer under the HSR Act.
(d) INVESTMENT INTENT. Buyer is acquiring the Shares for the
purpose of investment only and not with a view to, or for sale in connection
with, any distribution thereof within the meaning of the Securities Act.
(e) LITIGATION. There is no claim, litigation, action, suit,
proceeding, investigation or inquiry, administrative or judicial, pending or, to
the Knowledge of Buyer, threatened against Buyer, at law or in equity, before
any federal, state or local court or regulatory agency, or other governmental
authority, that, separately or in the aggregate, is reasonably likely to have a
Material Adverse Effect on Buyer.
(f) NO CONFLICTS. Neither the execution and delivery of this
Agreement by Buyer nor the consummation by Buyer of the transactions
contemplated hereby will (i) conflict with or result in a breach of any
provision of the articles or certificate of incorporation or bylaws of Buyer;
(ii) violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with the giving of notice, the passage
of time or otherwise, would constitute a default) under, or entitle any party
(with the giving of notice, the passage of time or otherwise) to terminate,
accelerate or cause a default under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Buyer under any agreement, indenture, instrument, order, judgment or decree
binding on Buyer or on its properties or assets, except for such violations,
conflicts, breaches, defaults, terminations, accelerations, liens, security
interests, charges
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or encumbrances that would not separately or in the aggregate have a Material
Adverse Effect on Buyer; (iii) violate any statute, rule, regulation, ordinance
or other law or any judgment, order, decree, stipulation, injunction or charge
of any court, administrative agency or commission or other governmental
authority or instrumentality by which Buyer is bound, except for such violations
that would not separately or in the aggregate have a Material Adverse Effect on
Buyer; or (iv) require any consent, approval, declaration, order or
authorization of, or registration or filing with, any third party, court or
governmental body or other agency, instrumentality or authority by or with
respect to Buyer in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, other than the
filing of a premerger notification report by Buyer under the HSR Act, except if
the failure to obtain any such consent, approval, declaration, order or
authorization or to make any such registration or filing would not have a
Material Adverse Effect on Buyer.
(g) TRANSACTION FINANCING. Buyer has delivered to the Company a
financing commitment letter that represents commitments of Chase Securities,
Inc., the Chase Manhattan Bank, Banc of America Securities LLC, and Bank of
America NT & SA to provide Buyer with cash and cash equivalents (the "Buyer Debt
Financing") in an amount, taken together with the equity proceeds referred to in
such commitment letter, sufficient to enable it to purchase the Shares as
provided in Section 2.2 without violating any solvency requirements currently
applicable to Buyer.
(h) BROKERS' FEES. Buyer has no liability or obligation to pay
any finder's fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
Each Seller, jointly and severally, represents and warrants to Buyer
that the statements in this Article IV are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date as though
made again as of the Closing Date, except as set forth in the Disclosure
Schedule.
4.1 CORPORATE ORGANIZATION; AUTHORITY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite power and authority (corporate
and other) to own, lease and operate its property and conduct its business as
presently conducted. The Company is duly qualified to do business and is in
good standing in each jurisdiction in which the Company owns or leases real
property, maintains an office or has employees residing. Neither the nature of
the business conducted by the Company nor the property the Company owns, leases
or operates requires it to qualify to do business as a foreign corporation in
any other jurisdiction except where the failure to be so qualified would not
have a Material Adverse Effect on the Company. The Company has all requisite
power and authority (corporate and other) to enter into this Agreement, to
perform its obligations hereunder and
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to consummate the transactions contemplated hereby. Sellers have delivered to
Buyer true, correct and complete copies of the Certificate of Incorporation and
the Bylaws of the Company.
4.2 SUBSIDIARIES, ETC. Except as set forth in Section 4.2 of the
Disclosure Schedule, the Company has no Subsidiary and the Company holds no
direct or indirect beneficial interest in any other corporation, partnership,
joint venture, limited liability company, or other entity or enterprise.
4.3 CAPITALIZATION AND SECURITY HOLDERS. The authorized capital
shares of the Company consist solely of 1,200,000 common shares, $.01 par value,
of which 856,200 are issued and outstanding as set forth in Exhibit A hereof and
500,000 preferred shares, without par value, of which none are issued and
outstanding. All outstanding common shares of the Company have been validly
issued and are fully paid and nonassessable and are not subject to, nor were
they issued in violation of, any preemptive rights. Except as set forth in
Section 4.3 of the Disclosure Schedule, (i) there are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings, or
other commitments or rights of any type relating to the issuance, sale or
transfer by the Company of any securities of the Company, (ii) there are no
outstanding securities that are convertible into or exchangeable for any capital
shares of the Company, (iii) the Company has no obligation of any kind to issue
any additional securities, and (iv) there are no voting trusts, proxies or any
other agreements or understandings with respect to voting of the capital stock
of the Company. The Company has not, within the last six months, redeemed or
otherwise purchased any of its capital stock.
4.4 LITIGATION. Except as set forth in Section 4.4 of the
Disclosure Schedule, there is no claim, litigation, action, suit, proceeding,
grievance, charge, investigation or inquiry, administrative or judicial, pending
or, to the Knowledge of each Seller, threatened against the Company, at law or
in equity, before any foreign, federal, state or local court or regulatory
agency, or other governmental authority or any arbitrator, that is reasonably
likely to have a Material Adverse Effect on the Company.
4.5 NO CONFLICTS. Except as set forth in Section 4.5 of the
Disclosure Schedule, to the Knowledge of each Seller, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) conflict with or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of the Company; (ii) violate, conflict
with or result in a breach of any provision of, or constitute a default (or an
event that, with the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any party (with the giving of notice,
the passage of time or otherwise) to terminate, accelerate or cause a default
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any
agreement, indenture, instrument, order, judgment or decree binding on the
Company or Sellers or on their respective properties or assets, except for such
violations, conflicts, breaches, defaults, terminations, accelerations, liens,
security interests, charges or encumbrances that would not separately or in the
aggregate have a Material Adverse Effect on the Company; (iii) violate any
statute, rule, regulation, ordinance or other law or any judgment, order,
decree, stipulation, injunction or charge of any court, administrative agency or
commission or other governmental authority or instrumentality by the Company or
assets of the
12
Company are bound, except for such violations that would not separately or in
the aggregate have a Material Adverse Effect on the Company; or (iv) require any
consent, approval, declaration, order or authorization of, or registration or
filing with, any third party, court or governmental body or other agency,
instrumentality or authority by or with respect to the Company in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, other than the filing of a premerger
notification report by Sellers under the HSR Act, except if the failure to
obtain any such consent, approval, declaration, order or authorization or to
make any such registration or filing would not have a Material Adverse Effect on
the Company.
4.6 FINANCIAL STATEMENTS. Attached hereto as Section 4.6 of the
Disclosure Schedule are the following financial statements of the Company
(collectively, the "Financial Statements"): (i) audited balance sheets and
statements of operations, statements of stockholders' equity and statements of
cash flows as of and for the fiscal years ended December 31, 1998, 1997, and
1996, and (ii) an unaudited balance sheet, income statement, statement of
shareholders' equity and cash flow statement (the "Most Recent Financial
Statements") as of and for the fiscal period ended May 31, 1999 (the "Most
Recent Fiscal Period End"). Except as set forth in Section 4.6 of the
Disclosure Schedule, the Financial Statements have been prepared from the books
and records of the Company and are in accordance with GAAP, and fairly present
in all material respects the financial condition of the Company as of the dates
stated and the results of operations of the Company for the periods then ended,
except that normal recurring year-end adjustments have not been made with
respect to interim financial statements.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 4.7 of the Disclosure Schedule and except for such changes and events
that would not have a Material Adverse Effect on the Company, since the Most
Recent Fiscal Period End, there has not been:
(a) Any material adverse change in business, operations, assets,
financial conditions or operating results of the Company or any occurrence,
circumstance, or combination thereof that reasonably could be expected to result
in any such material adverse change;
(b) Any transaction entered into or carried out by the Company
other than in the Ordinary Course of Business;
(c) Any material borrowing or agreement to borrow funds by the
Company, other than pursuant to the Company's existing revolver facility in the
Ordinary Course of Business; any incurring by the Company of any other material
obligation or liability (contingent or otherwise), except liabilities incurred
in the Ordinary Course of Business; or any endorsement, assumption or guarantee
of payment or performance of any material loan or obligation of any other
individual, firm, corporation or other entity by the Company;
(d) Any material change in the Company's method of doing business
or any change in its accounting principles or practices or its method of
application of such principles or practices;
(e) Any material mortgage, pledge, lien, security interest,
hypothecation, charge
13
or other encumbrance imposed or agreed to be imposed on or with respect to the
property or assets of the Company, other than in the Ordinary Course of
Business;
(f) Any material lien, mortgage, security interest, pledge,
hypothecation, charge or other encumbrance of the Company discharged or
satisfied, or any obligation or liability (absolute or contingent) paid, other
than in the Ordinary Course of Business;
(g) Any sale, lease or other disposition of, or any agreement to
sell, lease or otherwise dispose of, any of the properties or assets of the
Company in excess, individually or in the aggregate, of $250,000, other than
sales in the Ordinary Course of Business;
(h) Any loan or advance made by the Company to any individual,
firm, corporation or other entity;
(i) Any direct or indirect redemption or repurchase of any shares
of its capital stock or any payment or declaration of a dividend or other
distribution in respect of any shares of its capital stock;
(j) Any issuance, sale or transfer of any notes, bonds or other
debt securities or any equity securities, securities convertible, exchangeable
or exercisable into equity securities, or warrants, options or other rights to
acquire equity securities, of the Company;
(k) Any theft, damage, destruction or loss in excess of $250,000,
to its tangible assets, whether or not covered by insurance or suffered any
substantial destruction of the Company's books and records;
(l) Any acquisition or any arrangement to make an acquisition
(whether by merger, acquisition of stock or assets, or otherwise) of any
business or product line;
(m) Any lease, contract, agreement, commitment, or any other
transaction in excess of $50,000 entered into, amended or terminated other than
in the Ordinary Course of Business, or any transaction with any Affiliate
entered into;
(n) Any bonus or any wage, salary or compensation increase in
excess of $25,000 per year made or granted to any employee or sales
representative, group of employees or consultants or made or granted any
increase in any employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement; or
(o) Any labor strikes or other material labor disputes with the
employees of the Company.
4.8 TAXES. Except as set forth on Section 4.8 of the Disclosure
Schedule, (i) the Company has duly filed all federal, state, local and foreign
Tax Returns required to be filed by it and each such Tax Return has been
prepared in compliance with all applicable laws and regulations and
14
is true and correct except to the extent that any failure to so file or failure
to comply or be true and correct would not have a Material Adverse Effect on the
Company; (ii) all Taxes that have become due and payable by the Company have
been paid; (iii) there are no tax liens (other than for Taxes not yet due and
payable) on the assets of the Company and the Company has received no notice
that any deficiency or proposed adjustment that has not been settled or
otherwise resolved has been or is being proposed, asserted or assessed against
the Company with respect to any Taxes; (iv) there are no outstanding agreements
or waivers extending the statutory period of limitation to any Tax Returns
required to be filed by or on behalf of the Company; (v) there is no action,
suit, taxing authority proceeding or audit with respect to Taxes now in
progress, pending or, to the Knowledge of each Seller, threatened against or
with respect to the Company; (vi) no written claim has ever been received by the
Company from a taxing authority in a jurisdiction where the Company does not
file Tax Returns that the Company is or may be subject to Taxes assessed by such
jurisdiction; (vii) the Company has not been a member of any affiliated,
consolidated, combined, unitary or aggregate group for purposes of filing Tax
Returns or paying Taxes and has no liability under Treasury Regulation 1.1502-6
or any comparable provision of state or local law for the Taxes of another
member of such a group, (viii) the Company has been a validly electing S
corporation within the meaning of Sections 1361 and 1362 of the Code at all
times since August 1, 1996; and (ix) at all times since August 1, 1996, the
Company has held no equity interest in any corporation other than stock of a
corporation that was a "qualified subchapter S subsidiary" within the meaning of
Section 1361(b)(3)(B) of the Code.
4.9 PROPRIETARY RIGHTS.
(a) Section 4.9 of the Disclosure Schedule sets forth:
(i) All patents, trade names, trademarks, service marks, Internet
domain names, copyrights, logos, inventions, designs, trade secrets,
confidential information, computer software and franchises and all
licenses, sublicenses or agreements in respect thereof or applications
therefor, that the Company owns or has the right to use or to which the
Company is a party; and
(ii) All filings, registrations or issuances of any of the
foregoing with or by any federal, state, local or foreign regulatory,
administrative or governmental office or offices ((i) and (ii)
collectively, the "Proprietary Rights").
(b) Except as set forth in Section 4.9 of the Disclosure Schedule,
the Proprietary Rights comprise all intellectual property owned or necessary for
the operation of the Company's business and the Company is the sole and
exclusive owner of all right, title and interest in and to all Proprietary
Rights, free and clear of all liens, claims, charges, equities, rights of use,
encumbrances and restrictions whatsoever, except where the failure to own such
right, title and interest would not have a Material Adverse Effect on the
Company.
(c) To the Knowledge of each Seller, the business of the Company
is not conducted in contravention of any patent, trademark, copyright or other
intellectual property of any
15
third party.
(d) To the Knowledge of each Seller, none of the computer
software, computer firmware, computer hardware (whether general or special
purpose) or other similar or related items of automated, computerized or
software systems that are used or relied on by the Company in the conduct of its
business will malfunction, will cease to function, will generate incorrect data
or will produce incorrect results when processing, providing or receiving (i)
data from, into and between the twentieth and twenty-first centuries or (ii)
data in connection with any valid date in the twentieth and twenty-first
centuries.
4.10 INSURANCE. The Company is insured by financially sound and
reputable insurers, unaffiliated with the Company, with respect to its
properties and the conduct of its business in such amounts and against such
risks as are sufficient for compliance with law and as are adequate to protect
the properties and business of the Company in accordance with normal industry
practice.
4.11 REAL PROPERTIES. Section 4.11 of the Disclosure Schedule sets
forth the address and a true, correct and complete legal description of all of
the real property owned by the Company (the "Owned Real Property"). Except as
set forth in Section 4.11 of the Disclosure Schedule (such exceptions, the
"Permitted Exceptions"), the Company has good, valid and marketable title, in
fee simple absolute, to all of the Owned Real Property. Except as set forth in
Section 4.11 of the Disclosure Schedule, the Owned Real Property is held by the
Company free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions of any nature whatsoever, except mortgages and
liens securing debt that is reflected in the Financial Statements or the
Disclosure Schedule which mortgages and liens shall be released at or prior to
the Closing. Section 4.11 of the Disclosure Schedule contains a true and
complete description of each parcel of Owned Real Property.
4.12 REAL ESTATE LEASES. Set forth in Section 4.12 of the
Disclosure Schedule is a list of all leases and subleases of real property,
including all amendments, modifications and supplements thereto (the "Real
Estate Leases"), to which the Company is a party. With respect to each Real
Estate Lease, (i) such Real Estate Lease is in full force and effect and the
Company holds a valid and existing leasehold or subleasehold interest and (ii)
the Real Estate Lease is fully assignable to Buyer. Set forth in Section 4.12
of the Disclosure Schedule is a list of all other material agreements between
the Company and any lessor or sublessor under any of the Real Estate Leases, any
mortgagee of any of the premises covered by the Real Estate Leases (the "Leased
Real Property") or any assignor of any of the Real Estate Leases.
4.13 FIXED ASSETS. Except as set forth in Section 4.13 of the
Disclosure Schedule, the Company has marketable title to all furniture,
fixtures, equipment, machinery and leasehold improvements (the "Fixed Assets")
owned or used by the Company in the conduct of its business or located at the
Owned Real Property or the Leased Real Property as of the date hereof. Except
as set forth in Section 4.13 of the Disclosure Schedule and except for defects
that do not materially detract from the value thereof or adversely affect the
use thereof, the Company has good and
16
sufficient title to all Fixed Assets (other than those Fixed Assets that in the
aggregate are not material to the business of the Company) reflected in the
Financial Statements (other than property that has been disposed of in the
Ordinary Course of Business). Except as set forth in Section 4.13 of the
Disclosure Schedule, all the Fixed Assets are in good operating condition,
normal wear and tear excepted, and held free and clear of all Security
Interests. With respect to all buildings (and all components thereof) located
on the Owned Real Property and Leased Real Property, such buildings are in good
condition and repair in light of their age and adequate to operate such
facilities in the manner in which they are being operated.
4.14 PERMITS. Set forth in Section 4.14 of the Disclosure Schedule
is a list of all material permits, variances, licenses, registrations,
certificates and other governmental authorizations ("Permits") held by the
Company and used in the conduct of the Company's business. The Permits
constitute all permits, variances, licenses, registrations, certificates and
other governmental authorizations necessary for the Company to conduct its
business as presently conducted, except when the failure to possess any such
permit, variance, license, registration, certificate or other governmental
authorization would not have a Material Adverse Effect on the Company.
4.15 COMPLIANCE WITH LAWS. Except as set forth in Section 4.15 of
the Disclosure Schedule, the Company has complied, and is in compliance, with
all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered, by any
foreign, federal, state or local court or governmental authority applicable to
the Company, its business or its properties (collectively, the "Applicable
Laws"), except for any such noncompliance that would not have a Material Adverse
Effect on the Company.
4.16 ENVIRONMENT, HEALTH AND SAFETY. Except as set forth in
Section 4.16 of the Disclosure Schedule:
(a) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against the
Company alleging (i) a failure to comply with or liability arising under
Environmental, Health and Safety Laws, (ii) a requirement to clean up, remove or
take remedial or other response action due to the disposal, depositing,
discharge, leaking or other release of any Hazardous Materials with respect to
the Owned Real Property or the Leased Real Property, or (iii) a requirement to
pay all or a portion of the cost of any past, present or future clean up,
removal or remedial or other response action that arises out of or is related to
the disposal, depositing, discharge, leaking or other release of any Hazardous
Materials by the Company; and
(b) The Company has no liability or obligation (i) for damage to
or contamination of any site, property, location or body of water (surface or
subsurface or groundwater), (ii) for any illness of or personal injury to any
employee or other Person under any of the Environmental, Health and Safety Laws,
or (iii) otherwise relating to or arising under Environmental, Health and Safety
Laws.
(c) The Company has provided to Buyer true and correct copies of
all material
17
environmental assessments, reports, and audits, relating to and in the
possession or control of the Company, including, without limitation, those
relating to its current or former properties, operations or facilities.
4.17 EMPLOYEE BENEFIT PLANS.
(a) Section 4.17 of the Disclosure Schedule lists each employee
benefit plan, fund or program that, as of the date of this Agreement, is being
directly or indirectly maintained or contributed to by the Company or any Seller
for the benefit of the current or former employees of the Company, including,
without limitation, any and all "employee benefit plans" (as defined in Section
3(3) of ERISA) (individually, a "Plan" and collectively the "Plans").
(b) Other than the Plans, no Seller nor the Company directly or
indirectly maintains or contributes to (or has any obligation or liability with
respect to) any plan, fund or program (whether domestic or foreign) that
provides medical, health, hospitalization, life, disability or other insurance,
vacation, deferred compensation, pension, bonus, stock options, stock purchase
rights, or other employee benefits with respect to present or former employees
of the Company.
(c) Except as set forth in Section 4.17 of the Disclosure
Schedule, each Plan (and each related trust or insurance contract) complies in
form and in operation in all material respects with all Applicable Laws,
including ERISA, the Code and COBRA, and the Company has made all contributions
and premium payments due thereunder on or before the date of this Agreement.
(d) Except as set forth in Section 4.17 of the Disclosure
Schedule, no material charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand with respect to any Plan (other than routine
claims for benefits) is pending or, to the Knowledge of each Seller and the
Company, has been threatened.
(e) Except as set forth in Section 4.17 of the Disclosure
Schedule, Sellers have made available to Buyer correct and complete copies of
(i) the plan documents and summary plan description, (ii) the most recent Form
5500 Annual Report, and (iii) all trust agreements, insurance contracts and
other funding agreements with respect to each Plan.
(f) Except as set forth in Section 4.17 of the Disclosure
Schedule, the Company has never contributed to, or been under any obligation to
contribute to, any multiemployer plan (as defined in Section 3(37) of ERISA).
(g) Except as set forth in Section 4.17 of the Disclosure
Schedule, no Plan provides for medical or life insurance benefits to retired or
former employees of the Company or any Subsidiary (other than as required under
Code Section 4980B, or similar state law).
(h) The Company has not incurred and has no reason to expect any
liability to the Pension Benefit Guaranty Corporation (other than premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability) or under the Code with respect to any employee pension benefit plan
that the Company or any other entity, that together with the Company is treated
18
as a single employer under Code Section 414, maintains or ever has maintained or
to which any of them contributes, ever has contributed, or ever has been
required to contribute.
4.18 CONTRACTS. Section 4.18 of the Disclosure Schedule lists the
following contracts and other agreements (other than those of a type disclosed
in another Section to the Disclosure Schedule) to which the Company is a party
(collectively, the "Material Contracts" and each a "Material Contract"):
(a) each sales agency, dealer, representative, distributorship or
brokerage agreement or franchise;
(b) each contract or group of related contracts with the same
party providing for the purchase of goods or services by the Company and under
which the undelivered balance of such goods or services has a purchase price in
excess of $500,000;
(c) each contract or group of related contracts with the same
party providing for the sale of goods or services by the Company and under which
the undelivered balance of such goods or services has a purchase price in excess
of $500,000;
(d) any material agreement for the lease of personal property to
or from any Person providing for lease payments in excess of $100,000 per annum;
(e) each partnership, joint venture, joint operating or similar
agreement;
(f) indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $500,000 or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(g) any agreement involving consideration in excess or $100,000 or
any other material agreement with any Seller or an Affiliate of any Seller;
(h) any deferred compensation, severance or other plan or
arrangement for the benefit of its current or former directors, officers and
employees;
(i) any collective bargaining agreement or employment or
consulting agreement;
(j) any agreement under which the Company has advanced or loaned
money to directors, officers or employees outside the Ordinary Course of
Business.
(k) any agreement that prohibits it from freely engaging in
business anywhere in the world; or
(l) any agreement pursuant to which the Company subcontracts work
to third parties.
Sellers have previously delivered to Buyer true, correct and
complete copies of all
19
written Material Contracts. Each Material Contract is legally valid and binding
against the Company, in full force and effect and enforceable against the
Company in accordance with its terms, except as disclosed in Section 4.18 of the
Disclosure Schedule and except when the invalidity or nonbinding nature of that
Material Contract would not have a Material Adverse Effect on the Company. The
Company is not in breach or default of any Material Contract and has no
Knowledge of any cancellation, breach or anticipated breach by any other party
to a Material Contract in any material respect.
4.19 INVENTORY. The inventory reflected in the Financial
Statements as of the Most Recent Fiscal Period End is valued on a basis
consistent with past practices. Except as disclosed in Section 4.19 of the
Disclosure Schedule or as reserved in such Financial Statements, substantially
all such inventories are good and merchantable in the Ordinary Course of
Business and of a quality and quantity presently usable. In the aggregate,
management believes adequate reserves have been established on the Company's
books of account with respect to obsolescent and slow moving inventory.
4.20 DIRECTORS, OFFICERS, EMPLOYEES AND COMPENSATION. The Company
has previously provided to Buyer a true and correct list of the officers and
directors of the Company and all employees whose total current salary and bonus
exceeds $75,000 per annum and the total salary, fee and bonus payments received
in the calendar year ended December 31, 1998, by each such officer, director and
employee. The provisions for wages, salaries and bonuses accrued on the
Financial Statements as of the Most Recent Fiscal Period End are adequate for
salaries and wages, including accrued vacation pay, for the period through the
date thereof, and the Company has accrued on its books and records all
obligations for wages and salaries and other compensation to its employees,
including, without limitation, vacation pay and sick pay, and all commissions
and other fees payable to agents, salesmen and representatives.
4.21 LABOR RELATIONS. Except as set forth in Section 4.21 of the
Disclosure Schedule, there is no unfair labor practice, charge or complaint
against the Company pending before any governmental authority. Except as set
forth in Section 4.21 of the Disclosure Schedule, there is no labor strike, or
any material dispute, slowdown, grievance, or stoppage, or any union-organizing
or decertification effort or campaign, actively pending against or involving the
Company or its employees. Except as set forth in Section 4.21 of the Disclosure
Schedule, the Company is not a party to a collective bargaining agreement, and
no collective bargaining agreement is currently being negotiated by the Company
and no union or collective bargaining unit represents any of the employees of
the Company. No layoff of employees has been implemented that could implicate
the Worker Adjustment and Retraining Notification (WARN) Act of 1988.
4.22 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. Except as set forth
in Section 4.22 of the Disclosure Schedule, all accounts receivable of the
Company represent sales actually made in the Ordinary Course of Business and all
accounts payable have been incurred in the Ordinary Course of Business.
4.23 DEBT. The amount of Debt that is included in the determination of
the Xxxxxxxxx
00
Xxxxxxxx Price represents all the Debt obligations of the Company.
4.24 PRODUCT WARRANTY AND LIABILITY. All products designed,
manufactured, merchandised, serviced, distributed, sold or delivered by the
Company at any time prior to the Closing Date have been in conformity with all
applicable contractual commitments and all express or implied warranties other
than the routine satisfaction of warranty claims consistent with past practice.
No liability exists for recall or replacement thereof or other damages in
connection with such sales or deliveries at any time prior to the Closing Date.
No products heretofore sold by the Company are now subject to any guarantee or
warranty other than the Company's standard terms and conditions of sale other
than in the Ordinary Course of Business or in accordance with industry practice.
The Company has no liabilities (and, to the Knowledge of each Seller, there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company giving
rise to any liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by the Company.
ARTICLE V
COVENANTS
5.1 GENERAL. Each of the Parties will use reasonable best efforts
to take all action and to do all things necessary to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Article
VII).
5.2 CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO THE CLOSING.
(a) Sellers will not cause or permit the Company to engage in any
practice, take any action of enter into any transaction (i) outside the Ordinary
Course of Business or (ii) that would have required disclosure (if such
practice, action or transaction had occurred prior to the date hereof) under
Section 4.7 of this Agreement.
(b) Prior to the Closing, unless Buyer agrees otherwise in
writing, Sellers will cause the Company to, and Sellers will:
(i) conduct the Company's business and operations only in the
usual and Ordinary Course of Business, including, without limitation, with
respect to maintenance of working capital balances, collection of accounts
receivable, payment of accounts payable, repairs and maintenance, capital
expenditures and cash management practices generally;
(ii) use their reasonable best efforts to cause the Company's
current insurance (or reinsurance) policies not to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under
the canceled,
21
terminated or lapsed policies for substantially similar premiums are in
full force and effect;
(iii) keep in full force and effect their respective corporate
existence and all rights, franchises and intellectual property relating or
pertaining to their businesses;
(iv) use their reasonable best efforts to carry on the business of
the Company in the same manner as presently conducted and to keep the
Company's business organizations and properties intact, including their
present business operations, physical facilities, working conditions and
employees and their present relationships with lessors, licensors,
suppliers and customers and others having business relations with them;
(v) maintain the assets of the Company in normal repair, order and
condition consistent with current needs, replace inoperable, worn out or
obsolete assets with assets of good quality consistent with prudent
practices and current needs;
(vi) promptly (once the Company or Sellers have Knowledge thereof)
inform Buyer in writing of any variances from the representations and
warranties contained in Article 3.1 or Article IV hereof or any breach of
any covenant hereunder by Sellers or the Company.
5.3 ACCESS TO RECORDS. Upon not less than three days' written
notice received by Sellers, Sellers will cause the Company to permit
representatives of Buyer to have reasonable access during normal business hours,
but only in a manner so as not to interfere with the normal business operations
of the Company, to the premises, properties, personnel, books, records,
contracts and documents of or pertaining to the Company; provided, however, that
such access to the premises shall not be provided unless reasonably necessary to
accomplish a legitimate business purpose of Buyer, and provided further, that
Buyer shall be required to be accompanied by Sellers or a representative of
Sellers or the Company at all times upon the Company's premises. Buyer shall
hold in confidence all information so obtained and shall use such information
only for the purpose of implementing the transactions contemplated hereby.
Buyer further covenants and agrees that, prior to the consummation of the
transactions contemplated herein, it shall not at any time, and shall cause its
agents, affiliates, employees and representatives not to at any time, without
the prior written consent of each Seller, disclose any confidential information
regarding the operations of the Company or any Seller to any third party. If
the transactions contemplated hereby are not consummated, Buyer shall return all
data and other information to Sellers and continue to honor the foregoing
confidentiality and nondisclosure covenants. Buyer's obligations under this
Section 5.3 do not extend to any (i) information that is shown to be or to have
been generally known to others engaged in the same trade or business as the
Company; (ii) information that is or becomes public knowledge through no act or
omission by Buyer or any of its directors, officers, employees, professional
advisors, or other representatives; (iii) information that is rightfully
obtained by Buyer from a third party that is under no contractual or other
obligation of confidentiality with respect to such information; or (iv)
information that is required to be disclosed pursuant to judicial or
governmental requirements.
22
5.4 HSR ACT FILINGS. Buyer and Sellers shall, as promptly as
practicable but in no event later than five business days following the
execution and delivery of this Agreement, file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "DOJ") the notification and report form, if any,
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act. Any such
notification and report form and supplemental information shall be in
substantial compliance with the requirements of the HSR Act. Each Party shall
furnish to the other such necessary information and reasonable assistance as the
other may request in connection with its preparation of any filing or submission
that is necessary under the HSR Act. The Parties shall keep each other apprised
of the status of any communications with, and inquiries or requests for
additional information from, the FTC and the DOJ and shall comply promptly with
any such inquiry or request. Buyer shall pay all fees and expenses incurred by
any Party in connection with that preparation and filing.
5.5 LITIGATION SUPPORT. If and for so long as any Party is
actively contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (i) any
transaction contemplated by this Agreement, or (ii) any fact, situation,
circumstance, status, condition, activity, practice plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving the Company, each of the other Parties shall cooperate with such Party
and such Party's counsel in the defense or contest, make available its
personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the defense or contest, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Article VIII).
5.6 UPDATED DISCLOSURE SCHEDULE. Immediately prior to the
Closing, Sellers shall prepare and deliver to Buyer an updated Disclosure
Schedule (the "Updated Disclosure Schedule") that updates the information
contained in the Disclosure Schedule as of the Closing Date. Buyer shall accept
and acknowledge the Updated Disclosure Schedule if the Closing occurs, provided
it meets the standard set forth in Section 7.1(i) or Section 5.16, as
applicable. Upon such acceptance and acknowledgment by Buyer, for all purposes
under this Agreement such Updated Disclosure Schedule shall be deemed to
supersede and amend the original Disclosure Schedule dated as of the date of
this Agreement.
5.7 INDEMNIFICATION. Buyer shall cause the Company to keep in
effect provisions in its certificate of incorporation and bylaws with respect to
indemnification no less favorable to directors and officers than those contained
therein on the date hereof, which provisions shall not be amended, repealed or
otherwise modified for a period of at least six years from the Closing in any
manner that would adversely affect the rights thereunder of individuals who at
any time prior to the Closing were directors or officers of the Company in
respect of actions or omissions at or prior to the Closing (including the
transactions contemplated by this Agreement), except as required by applicable
law or except to make changes permitted by law that would not materially
diminish such rights of indemnification.
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5.8 EXCLUSIVITY. None of Sellers will (and Sellers will not cause
or permit the Company to) (a) solicit, initiate or encourage the submission of
any proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of the Company (including any
acquisition structured as a merger, consolidation or share exchange), or (b)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. Sellers will not vote the Shares in favor of any such acquisition
structured as a merger, consolidation or share exchange. Sellers shall notify
Buyer immediately if any Person makes any proposal, offer or inquiry with
respect to the foregoing.
5.9 S CORPORATION DISTRIBUTION. Prior to the Closing, Sellers
shall cause the Company to make certain payments to such Persons, and in such
amounts, as set forth on Section 5.9 of the Disclosure Schedule. The making of
such payments by the Company shall not be deemed a breach of any representation,
warranty or covenant of Sellers otherwise contained in this Agreement.
5.10 CALL OF OPTIONS. Prior to the Closing, Sellers shall cause
the Company to cancel the options identified on Section 5.10 of the Disclosure
Schedule (the "Called Options") by paying to the holder of each such option
$10.00 per share for each share subject to purchase pursuant to such option.
5.11 EXERCISE OF OPTIONS. Prior to the Closing, the Sellers shall
cause the Company to take such actions as are necessary, including, if
necessary, amending the Company's Non-Qualified Stock Option Plan (the "Option
Plan"), so that (a) all outstanding Options granted under the Plan automatically
will vest immediately prior to the Closing and (b) such Options automatically
will be canceled upon payment by Buyer to each holder thereof of an amount in
cash equal to the difference between the Purchase Price Per Share and the
exercise price per share for that holder's respective Options for each share
subject to that holder's respective Options. The amendment of the Option Plan
provided for in this Section 5.11 shall be conditioned upon the consummation of
the transactions contemplated by this Agreement so that, in the event the
transactions are not consummated and this Agreement is terminated, the Options
shall in all respects revert to the terms in effect prior to the amendment.
5.12 PERFORMANCE BONUS AMENDMENT. Prior to the Closing, the
Sellers shall use all reasonable efforts to cause the Company to enter into an
amendment to the Performance Bonus and Noncompete Agreement with each of Messrs.
Myers, Fischer, Xxxxxxx and Xxxxx that clarifies that the change in control
payments to be made to such individuals as a result of the transactions
contemplated by this Agreement represent satisfaction in full of all obligations
arising under such agreements.
5.13 PROMISSORY NOTES FROM SHORE LINE INDUSTRIES, INC. If and when
Buyer receives principal and interest payments under the two promissory notes
dated July 1, 1998, issued by Shore Line Industries, Inc. in favor of the
Company, Buyer shall, within five days after such receipt, pay to Xxxxx X.
Xxxxxxxx for distribution to Sellers the amount of such payments in
24
immediately available funds.
5.14 RELEASE OF GUARANTY. If and when the Company is released
from its obligations to guaranty indebtedness of Shore Line Industries, Inc.,
Buyer shall, within five days after such release, pay to Xxxxx X. Xxxxxxxx for
distribution to Sellers, in immediately available funds, an amount equal to the
principal amount of the indebtedness guaranteed, but only to the extent such
principal amount was included in Debt for purposes of determining the Aggregate
Purchase Price.
5.15 XXXXXX FINANCING. At the Closing, Xxxxx Xxxxxxxx, the sole
stockholder of Xxxxxx Metal Financing Corporation ("Xxxxxx Financing"), will
transfer to Buyer all of the equity interests of Xxxxxx Financing for no
additional consideration, free and clear of all liens and encumbrances. Sellers
represent and warrant that Xxxxx X. Xxxxxxxx is the sole stockholder of Xxxxxx
Financing, and Xxxxxx Financing has no liabilities or obligations other than
those related to the financing arrangement reflected in the Loan Agreement dated
July 31, 1996 between Xxxxxx Financing and the Company.
5.16 COMPLIANCE AUDIT. The Company has retained an environmental
consultant to perform a so-called "compliance audit" of the Company's facilities
and operations. If such audit identifies liabilities or potential liabilities
that could reasonably be expected to exceed $1 million, Buyer shall have the
right, for a period of 7 business days after receipt of the compliance audit, to
terminate this Agreement. Nothing in this Section shall limit the ability of
Sellers to amend the Disclosure Schedule pursuant to Section 5.6 (with the same
level of specificity as the current Disclosure Schedule).
ARTICLE VI
CLOSING
6.1 THE CLOSING. The transactions contemplated by this Agreement
shall be closed (the "Closing"), and all deliveries to be made at such time in
connection therewith shall take place, at the offices of Xxxxx & Xxxxxxxxx LLP,
0000 Xxxxxxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxxx, commencing at 10:00 a.m., Cleveland
time, on October 15, 1999 (the "Closing Date"), or such other date mutually
satisfactory to the Parties after the satisfaction or waiver of all of the
conditions set forth in Article VII.
6.2 DELIVERIES OF SELLERS AT CLOSING. At the Closing, Sellers
will deliver or cause to be delivered to Buyer the following:
(a) Certificates representing the Shares, which shall be
registered in the name of Buyer, or duly endorsed for transfer to Buyer or
accompanied by duly executed stock powers as set forth in Section 7.1(g);
(b) The certificate referred to in Section 7.1(f) of this
Agreement;
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(c) A Certificate of the Secretary of State of Delaware as to the
legal existence and good standing of the Company, together with the Company's
Certificate of Incorporation, certified by the Secretary of State of Delaware;
(d) All minute books, stock transfer books, stock certificate
books and all corporate seals and financial and accounting books and records of
the Company;
(e) A certificate setting forth the amount of Debt and Cash (the
"Closing Certificate");
(f) Copies of third party and governmental consents, if any,
listed on Schedule 6.2;
(g) A duly executed Section 338(h)(10) Election; and
(h) An affidavit dated as of the Closing Date and sworn under
penalty of perjury setting forth the names, addresses and federal tax
identification numbers of each Seller stating that such Seller is not a "foreign
person" within the meaning of Section 1445 of the Code (the "Seller Affidavit").
6.3 DELIVERIES OF BUYER AT CLOSING. At the Closing, Buyer will
deliver or cause to be delivered to Sellers the following:
(a) The Net Purchase Price in the form specified in Section 2.2 of
this Agreement payable pursuant to the directions of Sellers delivered at least
three business days before the Closing;
(b) The certificate referred to in Section 7.2(e) of this
Agreement; and
(c) A Certificate of the Secretary of State of Delaware as to the
legal existence and good standing of Buyer, together with a copy of Buyer's
articles or certificate of incorporation, certified by the Secretary of State of
Delaware.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS
7.1 CONDITIONS TO OBLIGATIONS OF BUYER. Each and every obligation
of Buyer to be performed under this Agreement is subject to the satisfaction at
or prior to the Closing of each of the following conditions (unless waived in
writing by Buyer):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Section 3.1 and Article IV of this Agreement
(disregarding for purposes hereof any materiality or Material Adverse Effect
qualifications set forth therein) shall have been true and correct when made and
shall be true and correct at and as of the Closing as though such
representations and
26
warranties were made as of the Closing (without taking into account any
disclosures made by Sellers to Buyer pursuant to Section 5.6 or 5.2(b)(vi)),
except for such inaccuracies that in the aggregate have not had and would not
reasonably be expected to have, in the reasonably foreseeable future, a Material
Adverse Effect on the Company.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions and other
obligations under this Agreement that are to be performed or complied with by
each Seller shall have been performed and complied with in all material respects
on or prior to the Closing, including, without limitation, all deliveries to be
made pursuant to Section 6.2 of this Agreement and all covenants to be performed
prior to the Closing pursuant to Article V of this Agreement.
(c) CONSENTS. All applicable governmental approvals, premerger
filing requirements and waiting periods, including, without limitation, those
under the HSR Act, shall have been received or satisfied.
(d) NO ADVERSE CHANGE. There shall not have been any change since
the date of this Agreement that has had, or would reasonably be expected to
have, a Material Adverse Effect on the Company.
(e) NO ADVERSE PROCEEDING. There shall not be pending or
threatened any claim, action, litigation or proceeding (judicial or
administrative) or governmental investigation against Buyer, any Seller or the
Company for the purpose of enjoining or preventing the consummation of this
Agreement, or otherwise claiming that this Agreement or the consummation of the
transactions contemplated hereby is illegal.
(f) CERTIFICATE. Sellers shall have delivered to Buyer at the
Closing a certificate, dated the date of Closing, to the effect that the
conditions set forth in subsections (a) through (d) and, to the Knowledge of
each Seller, (e), of this Section 7.1 have been satisfied.
(g) SHARES. There shall have been delivered to Buyer certificates
representing the Shares, which shall be registered in the name of Buyer, or duly
endorsed for transfer to Buyer or accompanied by duly executed stock powers.
(h) RESIGNATION OF DIRECTORS AND OFFICERS. Each of the directors
and each of the officers (specified by Buyer) of the Company shall have tendered
their resignations effective as of the Closing Date.
(i) UPDATED DISCLOSURE SCHEDULE. Sellers shall have delivered to
Buyer the Updated Disclosure Schedule, which Updated Disclosure Schedule shall
not contain, in the reasonable opinion of Buyer, any new or updated items of
information that reflect, individually or in the aggregate, a change that has
had a Material Adverse Effect on the Company.
(j) LEGAL OPINION. Buyer shall have received from counsel to
Sellers and the Company a closing legal opinion in substantially the form of
Exhibit B, addressed to Buyer and dated as of the Closing Date.
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(k) RECEIPT OF FINANCING PROCEEDS. Buyer shall have obtained the
proceeds of the Buyer Debt Financing.
(l) TITLE COMMITMENT; SURVEY. (i) With respect to each parcel of
Owned Real Property, Buyer shall receive:
(a) upon Buyer's payment of the applicable premium
therefor, a title insurance policy or an irrevocable and
unconditional commitment to issue a title insurance policy (the
"Policy"), based on a title commitment for an ALTA Owners Policy of
Title Insurance issued by Buyer's title insurer, insuring Buyer's
interest in the Owned Real Property subject only to the Permitted
Exceptions and matters corrected by Sellers pursuant to subsection
(iii). The Policy shall contain such endorsements as reasonably
requested by Buyer or Buyer's lender; and
(b) current surveys prepared by Buyer's surveyor, which
surveys (1) shall conform to 1997 ALTA/ACSM Minimum Detail
Requirements for Urban Title Surveys and (2) shall not disclose any
survey defect or encroachment or a violation of a covenant,
condition or restriction that affects the Owned Real Property,
including, without limitation, the Permitted Exceptions, from or
onto any of the Owned Real Property that materially adversely
effects the conduct of the business of the Company on that
respective parcel of Owned Real Property or the value of such
parcel.
(ii) With respect to Leased Real Property, Buyer shall
receive an estoppel letter from the Landlords, lessors and sublessors for
such property (which shall contain, if required by the applicable lease or
sublease, the consent of the respective Landlord, lessor or sublessor to
the transactions contemplated herein) in form and substance reasonably
satisfactory to Buyer.
(iii) No liens or encumbrances affecting the Owned Real
Property that are not Permitted Exceptions shall be grounds for rejecting
title, provided Sellers cause Buyer's title insurer without cost to
Buyer, to insure over such lien or encumbrance.
(m) SELLER AFFIDAVIT. Buyer shall have received from each Seller
the Seller Affidavit.
7.2 CONDITIONS TO OBLIGATIONS OF SELLERS. Each and every
obligation of Sellers to be performed under this Agreement shall be subject to
the satisfaction at or prior to the Closing of the following conditions (unless
waived in writing by each Seller):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth in Section 3.2 of this Agreement shall have been
true and correct when made, and shall be true and correct at and as of the
Closing as though such representations and warranties were made as of the
Closing, except for such inaccuracies that have not had and would not reasonably
be
28
expected to have, in the reasonably foreseeable future, a Material Adverse
Effect on Buyer.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions and other
obligations under this Agreement that are to be performed or complied with by
Buyer shall have been performed and complied with in all material respects on or
prior to the Closing, including, without limitation, all deliveries to be made
pursuant to Section 6.3 of this Agreement.
(c) CONSENTS. All applicable governmental approvals, premerger
filing requirements and waiting periods, including, without limitation, those
under the HSR Act, shall have been received or satisfied.
(d) NO ADVERSE PROCEEDING. There shall not be pending or
threatened any claim, action, litigation or proceeding (judicial or
administrative) or governmental investigation against Buyer, any Seller or the
Company for the purpose of enjoining or preventing the consummation of this
Agreement, or otherwise claiming that this Agreement or the consummation of the
transactions contemplated hereby is illegal.
(e) CERTIFICATE. Buyer shall have delivered to Sellers at the
Closing a certificate signed on its behalf by its President or Vice President
and Secretary or Assistant Secretary, dated the date of Closing, to the effect
that the conditions set forth in subsections (a) through (c) and, to the
Knowledge of such officers, (d), of this Section 7.2 have been satisfied.
(f) PURCHASE PRICE. Buyer shall have paid the Net Purchase Price
at the Closing in accordance with Section 2.2 hereof.
(g) LEGAL OPINION. Sellers shall have received from counsel to
Buyer a closing legal opinion in substantially the form of Exhibit C, addressed
to Buyer and dated as of the Closing Date.
ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Subject to the limitations set forth in Sections 8.4 and 8.7 of this Agreement
and notwithstanding any investigation conducted at any time with regard thereto
by or on behalf of the Parties, all representations and warranties in this
Agreement of Sellers and Buyer shall survive execution and delivery of this
Agreement for a period of 15 months from the Closing Date, except for the
representations and warranties contained in Sections 3.1(a), 3.1(c), 3.1(d),
3.2(a), 3.2(b), 4.1 and 4.3 which shall survive execution and delivery of this
Agreement indefinitely, and Section 4.8, which shall survive execution and
delivery of this Agreement until 60 days after the expiration of the applicable
statute of limitations.
8.2 INDEMNIFICATION BY SELLERS.
29
(a) Subject to the limitations set forth in Sections 8.4 and 8.7
of this Agreement, Sellers, jointly and severally, hereby covenant and agree to
indemnify and hold harmless Buyer from and against any and all losses,
liabilities, damages, demands, claims, suits, actions, judgments or causes of
action, assessments, costs and expenses, including, without limitation,
interest, penalties, attorneys' fees, any and all expenses incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Damages"), asserted against,
resulting to, imposed on or incurred or suffered by Buyer, directly or
indirectly, as a result of or arising from the following (collectively, "Buyer's
Indemnifiable Claims"):
(i) Any inaccuracy in or breach of any of the representations or
warranties (disregarding for purposes hereof, any materiality and Material
Adverse Effect qualifications set forth in such representations and
warranties) made by Sellers in this Agreement; or
(ii) Any breach or nonperformance of any covenant, certificate or
obligation to be performed or delivered by Sellers pursuant to this
Agreement.
(iii) Any liability arising under Environmental Health and Safety
Laws relating to or arising from the Brite Metals facility located at 0000
Xxxxxxx Xxxxxx X.X., Xxxxx Xxxxxx, Xxxxxxxx.
(iv) All Taxes that are not accrued or reserved for in the Closing
Balance Sheet (A) of the Company with respect to taxable periods (or
portions thereof) ending on or before the Closing Date (other than the
Section 338(h)(10) Taxes) and (B) of any other person for which the
Company is liable (I) as a result of such person being a member of a
consolidated, combined or unitary group that included the Company for any
taxable period (or portion thereof) ending on or before the Closing Date,
(II) as a successor, or (III) by contract entered into on or before the
Closing Date.
(b) For purposes of this Article, all Damages shall be computed
net of any insurance coverage proceeds received by the Company with respect
thereto, or any corresponding tax benefit when and as received by or realized by
such Party, that reduces the Damages that would otherwise be sustained.
(c) Buyer shall be considered to have suffered Damages arising out
of or resulting from the matters referred to in subsection (a) above if the same
shall be suffered by any parent, subsidiary or Affiliate of Buyer, including,
without limitation, the Company.
8.3 INDEMNIFICATION BY BUYER.
(a) Subject to the limitations set forth in Sections 8.4 and 8.7
of this Agreement, Buyer hereby covenants and agrees to indemnify and hold
harmless each Seller from and against any and all Damages asserted against,
resulting to, imposed on or incurred or suffered by that Seller, directly or
indirectly, as a result of or arising from the following (collectively,
"Sellers' Indemnifiable Claims"):
30
(i) Any inaccuracy in or breach of any of the representations or
warranties made by Buyer in this Agreement (disregarding for purposes
hereof, any materiality and Material Adverse Effect qualifiers set forth
in such representations and warranties);
(ii) Any breach or nonperformance of any covenant or obligation to
be performed by Buyer pursuant to this Agreement; or
(iii) All (A) Taxes of the Company that are accrued or reserved for
in the Closing Balance Sheet or with respect to taxable periods (or
portions thereof) beginning after the Closing Date, (B) the Section
338(h)(10) Taxes and (C) Taxes of any other person for which the Company
is liable (I) as a result of such person being a member of a consolidated,
combined or unitary group that is created after the Closing Date and that
includes the Company with respect to any taxable period (or portion
thereof) beginning after the Closing Date or (II) by contract entered into
after the Closing Date.
(b) For purposes of this Article, all Damages shall be computed
net of any insurance coverage proceeds received by the Sellers with respect
thereto, or any corresponding tax benefit when and as received by or realized by
such Party, that reduces the Damages that would otherwise be sustained.
8.4 LIMITATIONS ON RECOVERY. Rights to indemnification hereunder
are subject to the following limitations:
(a) Subject to Section 12.13 below, the obligation of indemnity
provided herein constitutes the sole remedy of each Party with respect to any
claim arising under this Agreement, other than a claim arising under Section 9.2
or a claim based on intentional misrepresentation or willful misconduct, and
terminates after the fifteenth month after the Closing Date, other than in
connection with a claim arising as a result of a breach of the representations
and warranties contained in Section 3.1(a), 3.1(c), 3.1(d), 3.2(a), 3.2(b), 4.1,
4.3 or 4.8.
(b) The foregoing provisions of this Section notwithstanding, if,
prior to the termination of any obligation to indemnify as provided for herein,
written notice of a claimed breach specifying the Section of this Agreement with
respect to which the claimed breach arose and setting forth in reasonable detail
the facts constituting the claimed breach is given by a Party seeking
indemnification (the "Indemnified Party") to the Party from whom indemnification
is sought (the "Indemnifying Party"), or a suit or action based upon a claimed
breach is commenced against the Indemnifying Party, the Indemnified Party shall
not be precluded from pursuing such claimed breach or suit or action, or from
recovering from the Indemnifying Party (whether through the courts or otherwise)
on the claim, suit or action, by reason of the termination otherwise provided
for above.
(c) Sellers' obligation to indemnify Buyer under this Article VIII
shall be joint and several. Except with respect to any breach of the
representations and warranties contained in Section 3.1(a), 3.1(c), 3.1(d),
3.2(a), 3.2(b), 4.1, 4.3, 4.8, 4.23 or 5.15, Sellers' and Buyer's obligation to
indemnify the other Party under Section 8.2(a)(i) and 8.3(a)(i), respectively,
shall be applicable only after and to the extent that the aggregate amount of
all Damages asserted under
31
Buyer's Indemnifiable Claims or Sellers' Indemnifiable Claims relating to such
Sections 8.2(a)(i) or 8.3(a)(i), as applicable, exceeds an amount equal to .75%
of the Enterprise Value (the "Basket"); provided, however, that (1) neither
Buyer nor Sellers shall have any obligation to indemnify the other party for any
single course of conduct, related set of circumstances, occurrence or event,
unless the Damages arising therefrom exceed $50,000; and (2) no Damages arising
from any single course of conduct, related set of circumstances, occurrence or
event shall be included in calculating whether the Basket has been exceeded
unless the Damages arising therefrom exceed $50,000.
(d) Except with respect to any breach of the representations and
warranties contained in Section 3.1(a), 3.1(c), 3.1(d), 3.2(a), 3.2(b), 4.1,
4.3, 4.8 or 4.23, the maximum aggregate liability of Sellers to Buyer under
Section 8.2(a)(i) for Damages under Buyer's Indemnifiable Claims and of Buyer to
Sellers under Section 8.3(a)(i) for Damages under Sellers' Indemnifiable Claims
shall be an amount equal to 10% of the Enterprise Value.
(e) Notwithstanding anything to the contrary contained herein,
Sellers' obligation to indemnify Buyer under Section 8.2(a)(iii) shall be
applicable only after and to the extent that the aggregate amount of all Damages
asserted under such Section exceeds the amount of $400,000. To the extent that
the amount of Damages for all Buyers' Indemnifiable Claims under Section
8.2(a)(iii) exceeds $400,000, the next $3,000,000 of Damages for Buyers'
Indemnifiable Claims under Section 8.2(a)(iii) shall be shared 15% by Buyer and
85% by Sellers. The maximum aggregate liability of Sellers to Buyer under
Section 8.2(a)(iii) shall be $2,550,000. Sellers' obligation to indemnify Buyer
under Section 8.2(a)(iii) shall expire on the fourth anniversary of the date
hereof; provided, however, that Sellers' obligation to indemnify Buyer under
Section 8.2(a)(iii) shall include Damages which have been committed to be paid
by Buyer on or before the fourth anniversary of the date hereof. Buyer shall
have the right to control the actions for which indemnification may be sought
under Section 8.2(a)(iii). Sellers shall have the right, at their sole cost and
expense and through a designated representative, to reasonably participate in
the management of any action for which Buyer seeks indemnification under Section
8.2(a)(iii). Such right of participation shall include the right to: (i)
receive copies of documents Buyer receives from or submits to governmental
authorities; (ii) receive advance notices of material meetings between Buyer and
third parties or governmental authorities and attend and participate in such
meetings; and (iii) reasonably confer with Buyer with respect to the management
of such action. No Damages incurred by Buyer in connection with the Brite
Metals facility, including in connection with the remediation thereof, shall be
indemnifiable by Sellers hereunder, unless such Damages relate to or arise from
payments, actions or obligations that are reasonably necessary to comply with
Environmental Health and Safety Laws; comply with or respond to a judgment,
order, claim or request of a governmental authority; respond to a third-party
claim; address conditions that would reasonably be expected to present a risk to
human health or the environment; or limit the liability of the Company to third
parties or the Michigan Department of Environmental Quality.
(f) Notwithstanding anything to the contrary contained herein, (i)
no Party shall be liable to or otherwise responsible to any other Party or any
of its successors and assigns for consequential or punitive damages (other than
punitive damages, awarded to third parties) or for lost profits with respect to
Indemnifiable Claims, and (ii) with respect to any breach of the
32
representations and warranties contained in Section 3.1(a), 3.1(c) or 3.1(d),
each Seller's obligation to indemnify Buyer shall be several and not joint, and
each Seller shall be obligated to indemnify Buyer only with respect to breaches
of the representations and warranties made by that Seller.
8.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY
CLAIMS.
(a) If the Indemnified Party determines to seek indemnification
under this Article with respect to any Sellers' Indemnifiable Claims or Buyer's
Indemnifiable Claims, as applicable ("Indemnifiable Claims"), resulting from the
assertion of liability by third parties, it shall give notice to the
Indemnifying Party within 60 days of the Indemnified Party's becoming aware of
such Indemnifiable Claim; provided, however, that the failure to give timely
notice hereunder shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent such party is materially prejudiced thereby.
The notice shall identify the Section of this Agreement with respect to which
the claimed breach arose and shall set forth such information with respect
thereto as is then reasonably available to the Indemnified Party, including the
facts constituting the claimed breach. If any such liability is asserted
against the Indemnified Party, and the Indemnified Party notifies the
Indemnifying Party thereof, the Indemnifying Party will be entitled, if it so
elects by written notice delivered to the Indemnified Party within 20 days after
receiving the Indemnified Party's notice, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. Notwithstanding the
foregoing, (i) the Indemnified Party shall also have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Party (as long as the Indemnifying Party
continues to defend such matter); and (ii) the rights of the Indemnified Party
to be indemnified hereunder in respect of Indemnifiable Claims shall be
considered forfeited by its failure to give notice pursuant to the foregoing
only to the extent that the Indemnifying Party is materially prejudiced by such
failure to give notice. With respect to any assertion of liability by a third
party that results in an Indemnifiable Claim, the Parties shall make reasonably
available to each other all relevant information in their possession material to
any such assertion.
(b) If the Indemnifying Party, within 20 days after receipt of the
aforesaid notice of an Indemnifiable Claim, fails to assume the defense of the
Indemnified Party against such Indemnifiable Claim, the Indemnified Party shall
have the right to undertake the defense and to compromise or settle such action
on behalf of and for the account and risk of the Indemnifying Party.
(c) Notwithstanding anything in this Section to the contrary, the
Indemnifying Party shall not, without the Indemnified Party's written consent,
settle or compromise any Indemnifiable Claim or consent to entry of any judgment
in respect thereof. If the Indemnifying Party can settle such Indemnifiable
Claim with a complete release of the Indemnified Party and all Affiliates of the
Indemnified Party for monetary damages only, but the Indemnified Party refuses
such settlement, the Indemnifying Party shall not be liable for Damages in
excess of the monetary damages of such proposed settlement.
8.6 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD-PARTY
CLAIMS. If the Indemnified Party asserts the existence of an Indemnifiable
Claim giving rise to Damages (other
33
than claims resulting from the assertion of liability by third parties), it
shall give written notice to the Indemnifying Party identifying the Section of
this Agreement with respect to which the claim arose, setting forth, in
reasonable detail, the facts constituting the claim and specifying the nature
and amount of the claim. If the Indemnifying Party, within 20 days after the
mailing of notice by the Indemnified Party, shall not give written notice to the
Indemnified Party announcing its intent to contest the assertion of the
Indemnified Party, the assertion by the Indemnified Party shall be considered
accepted and agreed to by the Indemnifying Party. If, however, the Indemnifying
Party contests the assertion of a claim by giving that written notice to the
Indemnified Party within that period, then the Parties shall resolve such claim
in accordance with the procedures set forth in Article X. Each Party shall pay
its own legal, auditing and other fees in connection with such a contest;
provided, however, that the fees of any mediator and expenses incurred by the
mediator shall be borne one-half by Buyer and one-half by Sellers.
8.7 EXCEPTIONS. Notwithstanding anything to the contrary
contained in this Agreement, if a Party receives written notice from the other
Party that, at the time of Closing, there exists (A) a default in any covenant,
agreement or obligation to be performed by such other Party under this Agreement
or (B) any breach of or inaccuracy of any representation or warranty of such
Party made in this Agreement, and the Party receiving such notice nonetheless
elects to proceed to the Closing, then, upon the consummation of the Closing,
the Party receiving such notice shall be considered to have waived any such
default and breach and shall have no claim against such other Party with respect
thereto.
ARTICLE IX
TERMINATION
9.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual written consent of Buyer and each Seller;
(b) by Buyer if any Seller remains in breach of any representation
or warranty contained herein for 15 days after the date on which Buyer has
notified each Seller in writing of that breach;
(c) by any Seller if Buyer remains in breach of any representation
or warranty contained herein for 15 days after the date on which a Seller has
notified Buyer in writing of that breach;
(d) by Buyer if any obligation, term or condition to be performed,
kept or observed by any Seller has not been performed, kept or observed in any
material respect at or prior to the time specified in this Agreement and such
failure continues for 15 days after the date on which Buyer has notified each
Seller in writing of such failure;
34
(e) by any Seller if any obligation, term or condition to be
performed, kept or observed by Buyer has not been performed, kept or observed in
any material respect at or prior to the time specified in this Agreement and
such failure continues for 15 days after the date on which a Seller has notified
Buyer in writing of such failure;
(f) by Buyer or any Seller if any permanent injunction or other
order of a court or other competent authority preventing the consummation of the
transactions contemplated by this Agreement shall have become final and
nonappealable; or
(g) by Buyer or any Seller, if not then in material breach of any
of its obligations hereunder, if the Closing has not occurred by November 15,
1999; or
(h) by Buyer under the circumstances described in Section 5.16.
9.2 EFFECT OF TERMINATION. A termination under this Article IX
does not prejudice any claims which any Party may have under this Agreement, in
law or in equity, as a consequence of any failure or default under this
Agreement by another Party hereto. If Buyer or Sellers terminate this Agreement
because the condition in Section 7.1(k) is not satisfied, Buyer shall pay to the
Company the amount of $5,000,000, by wire transfer of immediately available
funds, within two business days of such termination, such amount to serve as
liquidated damages (and not as a penalty); provided that any termination
resulting from the failure of any other condition set forth in Section 7.1
(which may also have resulted in a failure of Section 7.1(k)) shall not result
in any obligation to make such liquidated damage payment.
ARTICLE X
DISPUTE RESOLUTION
10.1 EXCLUSIVE PROCEDURE FOR DISPUTE RESOLUTION. Any dispute
arising out of or relating to this Agreement, other than pursuant to Section
9.2, including claims for indemnification pursuant to Article VIII, shall be
resolved in accordance with the procedures specified in this Article X, which
shall be sole and exclusive procedures for the resolution of any such disputes.
35
10.2 NEGOTIATION BETWEEN EXECUTIVES.
(a) The Parties shall attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by negotiation between
Sellers or their appointed representatives and executives of Buyer who, if
possible, shall be at a higher management level than the individuals with direct
responsibility for administration of this Agreement (the "Negotiators"). Any
Party may give the other Parties written notice of any dispute not resolved in
the normal course of business. Within 15 days after delivery of the notice
(five days if the notice is delivered prior to a Closing hereunder), the
receiving Party shall submit to the other Parties a written response. The
notice and response shall include (i) a statement of each Party's position and a
summary of arguments supporting that position, and (ii) the name and title of
the Negotiators and of any other Person who will accompany them. Within 30 days
after delivery of the disputing Party's notice (five days if the disputing
Party's notice is delivered prior to a Closing hereunder), the Negotiators shall
meet at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute. All reasonable
requests for information made by one Party to the other Parties will be honored.
(b) If the matter has not been resolved by these Persons within 60
days of the disputing Party's notice (10 days if the disputing Party's notice is
delivered prior to a Closing hereunder), or if the Parties fail to meet within
30 days (five days if the disputing Party's notice is delivered prior to a
Closing hereunder), any Party may initiate mediation as provided below.
(c) All negotiations pursuant to this clause are confidential and
shall be treated as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and state rules of evidence.
10.3 MEDIATION. If the dispute has not been resolved by
negotiation as provided above, the Parties shall endeavor to settle the dispute
by mediation under the then current Center for Public Resources (CPR) Model
Procedure for Mediation of Business Disputes. The neutral third party will be
selected from the CPR Panels of Neutrals, with the assistance of CPR, unless the
Parties agree otherwise.
10.4 LITIGATION. If the dispute has not been resolved by
non-binding means as provided herein within 90 days of the initiation of such
procedure, any Party may initiate litigation (upon 30 days' written notice to
the other Party); provided, however, that if one Party has requested the others
to participate in a non-binding procedure and the others have failed to
participate, the requesting Party may initiate litigation before expiration of
such period.
10.5 PROVISIONAL REMEDIES. The procedures specified in this
Article X shall be the sole and exclusive procedures for the resolution of
disputes between the Parties arising out of or relating to this Agreement;
provided, however, that a Party, without prejudice to the above procedures, may
file a complaint (for statute of limitations or venue reasons) or to seek
preliminary injunction or other provisional judicial relief, if in its
reasonable judgment such action is necessary to avoid irreparable damage or to
preserve the status quo. Despite such action the Parties will
36
continue to participate in good faith in following the dispute resolution
procedures specified in this Article X.
10.6 TOLLING, STATUTES OF LIMITATION. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled while the
procedures specified in this Article X are pending. The Parties will take such
action, if any, reasonably required to effectuate such tolling.
10.7 PERFORMANCE TO CONTINUE. Each Party shall continue to perform
his or its obligations under this Agreement pending final resolution of any
dispute arising out of or relating thereto.
ARTICLE XI
AGREEMENTS CONCERNING CERTAIN TAX MATTERS
11.1 MUTUAL COOPERATION. Sellers and Buyer shall provide each
other with such assistance as may reasonably be requested by any of them in
connection with the preparation and execution of any Tax Return, any audit or
other examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each will retain and, not later
than 30 days from the written request of any other Party, provide such other
Party with any records or information that may be relevant to such return,
audit, examination or proceedings. Such assistance shall include making
employees or other representatives available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder and shall include providing copies of any relevant Tax Returns (or
portions thereof) and supporting work schedules. The Party requesting such
assistance hereunder shall reimburse the others for reasonable out-of-pocket
expenses incurred by the others in providing such assistance.
11.2 CERTAIN TAX MATTERS. Sellers, with reasonable assistance of
the Company (which reasonable assistance will be at no cost to Sellers), shall
prepare and file on behalf of the Company in a manner consistent with past
practices all income, franchise and single business Tax Returns for the periods
ending on or before the Closing Date and shall pay all Taxes due with respect to
such periods that are not accrued or reserved for in the Closing Balance Sheet
(other than the Section 338(h)(10) Taxes). Sellers shall provide a copy of each
such Tax Return to Buyer for Buyer's review and approval (which approval shall
only be required with respect to items that impact the amount of any Section
338(h)(10) Taxes or reflect the allocation referred to in Section 11.4 hereof)
at least 15 days prior to the date such Tax Return is filed. Buyer shall be
responsible for filing any Tax Returns that include periods commencing on or
prior to the Closing Date and ending subsequent to the Closing Date and the
payment of all Taxes imposed upon the Company with respect thereto; provided
that Sellers shall promptly reimburse Buyer for the amount of such Taxes that is
attributable to the portion of any such period that ended on the Closing Date
and that is not accrued or reserved for in the Closing Balance Sheet (other than
the Section 338(h)(10) Taxes). Buyer shall also be responsible for filing all
Tax Returns relating to the Company, and the payment
37
of all Taxes with respect thereto, for all periods beginning after the Closing
Date.
11.3 SECTION 338(h)(10) ELECTION. At Buyer's option, Buyer and
each of the Sellers will join with Buyer in making an election under Section
338(h)(10) of the Code (and any election corresponding to Section 338(h)(10) or
Section 338(g) of the Code under state, local, and foreign tax law to the extent
necessary to achieve Tax basis step-up in the Company's assets) with respect to
the purchase and sale of the stock of the Company hereunder (a "Section
338(h)(10) Election"). Buyer will be responsible for (i) any Tax imposed under
Section 1374 of the Code as a result of the Section 338(h)(10) Election and (ii)
any state, local or foreign Tax imposed on the Company as a result of the
Section 338(h)(10) Election (together, the Taxes described in clauses (i) and
(ii) constitute the "Section 338(h)(10) Taxes" for purposes of this Agreement),
and Buyer shall indemnify Sellers against any adverse consequences arising out
of any failure to pay any such Taxes. In addition, Buyer shall reimburse Sellers
for (i) the additional amount of income Taxes, if any, required to be paid by
Sellers solely as a result of the Section 338(h)(10) Election and (ii) the
additional amount of income Taxes required to be paid by Sellers as a result of
the amount paid to Sellers pursuant to this sentence. For avoidance of doubt,
the purpose of the reimbursement described in the preceding sentence is to cause
Sellers to realize, from the transactions contemplated by this Agreement, the
same amount after payment of all required income Taxes, that Sellers would have
realized if the Section 338(h)(10) Election were not made with respect to the
sale of the Shares.
11.4 ALLOCATION OF PURCHASE PRICE. Buyer and Sellers agree that
the Purchase Price and the liabilities of the Company (plus other relevant
items) will be allocated in a manner consistent with the fair market values of
the assets of the Company as reasonably determined by Buyer. Within 180 days
after the Closing Date, Buyer shall prepare, or cause to be prepared, a schedule
setting forth such allocation and shall deliver a copy of such schedule to
Sellers. Buyer, the Company and Sellers will file all Tax Returns (including,
without limitation, supporting schedules, amended returns, claims for refunds
and information returns) in a manner consistent with the values set forth on
such schedule.
11.5 S CORPORATION STATUS. Sellers will not, and Sellers will not
permit the Company to, revoke the Company's election to be taxed as an S
corporation within the meaning of Section 1361 and 1362 of the Code. Sellers
will not, and Sellers will not permit the Company to, take or allow any action
other than the sale of the Company's stock pursuant to this Agreement that would
result in the termination of the Company's status as a validly electing S
corporation within the meaning of Section 1361 and 1362 of the Code.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 NOTICE. All notices, requests, demands and other
communications required or permitted under this Agreement, including, without
limitation, all notices required pursuant to Article VIII of this Agreement,
shall be considered to have been duly given and made if in writing
38
and served either by personal delivery (which shall include delivery by Federal
Express or similar services) to the Party for whom it is intended or by being
deposited postage prepaid, certified or registered mail, return receipt
requested (or such form of mail as may be substituted therefor by postal
authorities), in the United States mail, bearing the address shown in this
Agreement for, or such other address as may be designated in writing hereafter
by, such Party:
If to Sellers: To the address set forth under
each Seller's name on Exhibit A
With a copy to: Xxxxx & Xxxxxxxxx LLP
3200 National City Center
0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
If to Buyer: X. X. Xxxxxx Automotive Castings, Inc.
0000 X. Xxxxxx Xx.
X.X. Xxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: President
With a copy to: Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx
12.2 ENTIRE AGREEMENT. This Agreement, the Disclosure Schedule and
the Exhibit hereto and the Additional Documents embody the entire agreement and
understanding of the Parties with respect to the subject matter hereof, and
supersede all prior and contemporaneous agreements and understanding relative to
that subject matter.
12.3 BINDING EFFECT; ASSIGNMENT. This Agreement and the various
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon Buyer, its representatives, successors and assigns, and Sellers,
their respective representatives, successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
transferred or assigned (by operation of law or otherwise) by any Party without
the prior written consent of the other Parties (which consent shall not be
unreasonably withheld), except that Buyer shall have the right to assign its
rights hereunder to its lender for collateral security purposes or to a wholly
owned subsidiary of Buyer and to transfer and assign ownership of the Company or
its assets and properties to a subsidiary or Affiliate of Buyer. No such
transfer by Buyer shall operate in any way to modify or discharge any of the
obligations of Buyer contemplated by this Agreement.
12.4 NO THIRD-PARTY BENEFICIARIES. Subject to Section 12.3 hereof,
nothing herein,
39
express or implied, is intended or shall be construed to confer upon or give to
any person, firm, corporation or legal entity, other than the Parties, any
rights, remedies or other benefits under or by reason of this Agreement.
12.5 COUNTERPARTS. This Agreement may be executed simultaneously
in multiple counterparts, each of which shall be considered an original, but all
of which taken together shall constitute one and the same instrument.
12.6 EXPENSES AND TRANSACTIONS. Buyer shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. Except as otherwise
specifically set forth in this Agreement, the Sellers shall bear all of Sellers'
and the Company's costs and expenses (including all legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, any income Tax on any gain resulting from
the deemed liquidation of the Company pursuant to the Section 338(h)(10)
Election) (the "Sellers' Expenses"). Sellers shall pay such Sellers' Expenses
prior to the Closing Date or accrue such Sellers' Expenses on the Closing
Balance Sheet. To the extent such Sellers' Expenses are not paid or accrued on
the Closing Balance Sheet, Sellers shall indemnify Buyer for such Sellers'
Expenses.
12.7 WAIVER; CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than in accordance with
its terms), in whole or in part, except by a writing executed by the Parties,
and no waiver of any of the provisions or conditions of this Agreement or any of
the rights of a Party shall be effective or binding unless such waiver shall be
in writing and signed by the Party claimed to have given or consented thereto.
12.8 OTHER AND FURTHER COVENANTS. The Parties shall, in good
faith, execute such other and further instruments, assignments or documents as
may be necessary for the consummation of the transactions contemplated by this
Agreement, and shall assist and cooperate with each other in connection with
these activities.
12.9 GENDER. Whenever the context requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be considered to include and designate the
masculine, feminine or neuter gender.
12.10 GOVERNING LAW. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of Delaware,
without regard to any such laws relating to choice or conflict of laws.
12.11 PUBLIC ANNOUNCEMENTS. Neither Buyer nor any Seller shall,
without the prior written consent of the other, make any public announcement or
any release to trade publications or to the press or make any statement to any
competitor, customer or any other third party with respect to the transactions
contemplated herein, except such announcement, release or statement necessary in
the opinion of its counsel to comply with applicable requirements of federal or
state law, the content of which is mutually agreed to by the Parties.
40
12.12 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
12.13 SPECIFIC PERFORMANCE. Sellers acknowledge that the Company's
business is unique and recognize and affirm that in the event of a breach of
this Agreement by Sellers, money damages may be inadequate and Buyer may have no
adequate remedy at law. Accordingly, Sellers agree that Buyer shall have the
right, in addition to any other rights and remedies existing in its favor, to
enforce its rights and Sellers' obligations hereunder not only by an action or
actions for damages but also by an action or actions for specific performance,
injunctive and/or other equitable relief.
12.14 NON-COMPETITION; NON-SOLICITATION. In consideration of
Buyer's agreement to enter into this Agreement, and as a condition thereto, Xxxx
X. Xxxxxxxx and Xxxxx X. Xxxxxxxx (the "Majority Sellers") covenant and agree as
follows:
(a) For a period of five years from and after the Closing Date,
the Majority Sellers will not engage directly or indirectly in the design,
manufacture or sale of any products which the Company designs, manufacturers or
sells as of the Closing Date anywhere in North America; PROVIDED, HOWEVER, that
ownership of less than 5% of the outstanding stock of any publicly traded
corporation shall not be deemed to be engaging solely by reason thereof in any
of its businesses.
(b) Each Majority Seller agrees that, for a period of five years
from the Closing Date, such Majority Seller (i) will not directly or indirectly
contact or solicit for the purpose of offering employment to or hiring (whether
as an employee, consultant, agent, independent contractor or otherwise) or
actually hire any person employed by the Company at any time during the one-year
periods preceding and following the Closing Date, without the prior written
consent of the Company and (ii) will not induce or attempt to induce any
customer or other business relation of the Company into any business
relationship with might materially harm the Company.
(c) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this subsection is invalid or
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(d) The Majority Sellers acknowledge and agree that in the event
of a breach by the Majority Sellers of any of the provisions of this Section
12.14, monetary damages will not constitute a sufficient remedy. Consequently,
in the event of any such breach, the Company, Buyer
41
and/or their respective successors or assigns may, in addition to other rights
and remedies existing in their favor, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof,
in each case without the requirement of posting a bond or proving actual
damages.
[Signature pages follow.]
42
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first set forth above.
BUYER:
X. X. XXXXXX AUTOMOTIVE CASTINGS, INC.
By: /s/ Xxxx X.Xxxxxx
----------------------------------------
Title: Vice President
-------------------------------------
SELLERS:
------------------------------- -------------------------------
/s/ Xxxxx X. Xxxxxxxx /s/ Xxxxxx Xxxxxx
------------------------------- -------------------------------
/s/ Xxxx X. Xxxxxxxx /s/ Xxxxx Xxxxx
------------------------------- -------------------------------
/s/ Xxxx X. Xxxxxxxx, Trustee of the Xxxxx /s/ Xxxxx Xxxx
X. Xxxxxxxx Children's Trust dated
May 7, 1999
------------------------------- -------------------------------
/s/ Xxxxx X. Xxxxxxxx, Co-Trustee of the /s/ Xxxxx Xxxxxxx
Trust F/B/O Xxxxxxxx X. Xxxxxxxx
Xxxxxxxx Trust dated May 17, 1999
------------------------------- -------------------------------
/s/ Xxxxxx X. Xxxxxxxx, Co-Trustee of the /s/ Xxxxxx Xxxxxxxx
Trust F/B/O Xxxxxxxx X. Xxxxxxxx Xxxxxxxx
Trust dated May 17, 1999
43
------------------------------- -------------------------------
/s/ Xxxxx Xxxxxx, Co-Trustee of the Trust /s/ Xxxxx Xxxxx
F/B/O Xxxxxxxx X. Xxxxxxxx Xxxxxxxx
Trust dated May 17, 1999
------------------------------- -------------------------------
/s/ Xxxxx X. Xxxxxxxx, Co-Trustee of the /s/ Xxxxxxx Xxxx
Trust F/B/O Xxxxxx X. Xxxxx
Xxxxxxxx Trust dated May 17, 1999
------------------------------- -------------------------------
/s/ Xxxxxx X. Xxxxxxxx, Co-Trustee of the /s/ Xxx Xxxxxxxxx
Trust F/B/O Xxxxxx X. Xxxxx Xxxxxxxx
Trust dated May 17, 1999
------------------------------- -------------------------------
/s/ Xxxxx Xxxxxx, Co-Trustee of the /s/ Xxxx Xxxxx
Trust F/B/O Xxxxxx X. Xxxxx Xxxxxxxx
Trust dated May 17, 1999
------------------------------- -------------------------------
/s/ Xxxxx X. Xxxxxxxx, Co-Trustee of the /s/ Xxxx Xxxxxxxxxx
Trust F/B/O Xxxxxxxx X. Xxxxxx
Xxxxxxxx Trust dated May 17, 1999
------------------------------- -------------------------------
/s/ Xxxxxx X. Xxxxxxxx, Co-Trustee of the /s/ Xxxxx Xxxxxx, Co-Trustee of
Trust F/B/O Xxxxxxxx X. Xxxxxx Xxxxxxxx the Trust F/B/O Xxxxxx Xxxxxxxx
Trust dated May 17, 1999 Trust dated May 17, 1999
------------------------------- -------------------------------
/s/ Xxxxx Xxxxxx, Co-Trustee of the /s/ Xxxxxx X. Xxxxxxxx, Co-
Trust F/B/O Xxxxxxxx X. Xxxxxx Xxxxxxxx Trustee of the Trust F/B/O
Trust dated May 17, 1999 Xxxxxx Xxxxxxxx Trust dated
May 17, 1999
44
-------------------------------
/s/ Xxxxx X. Xxxxxxxx, Co-Trustee of the
Trust F/B/O Xxxxxx Xxxxxxxx Trust
dated May 17, 1999
45
DISCLOSURE SCHEDULE
Reference is made to the Stock Purchase Agreement (the "Agreement"),
dated as of September 9, 1999, by and among X. X. Xxxxxx Automotive Castings,
Inc. and the stockholders of Xxxxxx Metal Products Corporation, a Delaware
corporation (the "Company"). Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
This Disclosure Schedule is qualified in its entirety by reference
to specific provisions of the Agreement, and is not intended to constitute, and
shall not be construed as constituting, any representations or warranties of
Sellers except as and to the extent provided in the Agreement, subject to the
limitations therein. Certain of the information contained in this Disclosure
Schedule may not be required to be disclosed pursuant to the Agreement. Such
information is included solely for informational purposes, and disclosure of
such information shall not be deemed to enlarge or enhance any of the
representations or warranties in the Agreement or otherwise alter in any way the
terms of the Agreement. Inclusion of information herein shall not be construed
as an admission that such information is material to the business, assets,
liabilities, financial position, operations or results of operations of the
Company.
Facts disclosed in one part or section of the Disclosure Schedule
shall be deemed to be disclosed on each other part or section of the Disclosure
Schedule where the facts disclosed would put a reasonable person on notice of
their applicability to such other parts or sections of the Disclosure Schedule.
Headings have been inserted on the sections of the Disclosure Schedule for
convenience of reference only and shall not have the effect of amending or
changing the express description of any sections set forth in the Agreement.
LIST OF SECTIONS REFERRED TO IN DISCLOSURE SCHEDULE
Section 3.1(c) Brokers' Fees
Section 3.1(d) Share Ownership and Authority
Section 3.1(e) Certain Business Relationships
Section 4.2 Subsidiaries
Section 4.3 Capitalization and Security Holders
Section 4.4 Litigation
Section 4.5 Conflicts
Section 4.6 Financial Statements
Section 4.7 Absence of Certain Changes or Events
Section 4.8 Taxes
Section 4.9 Proprietary Rights
Section 4.11 Real Properties
Section 4.12 Real Estate Leases
Section 4.13 Fixed Assets
Section 4.14 Permits
Section 4.15 Compliance with Laws
Section 4.16 Environment, Health & Safety
Section 4.17 Employee Benefit Plans
Section 4.18 Contracts
Section 4.19 Inventory
Section 4.20 Directors, Officers, Employees and Compensation
Section 4.21 Labor Relations
Section 4.22 Accounts and Notes Receivable
Section 5.9 S Corporation Distribution
Section 5.10 Called Options
Section 6.2 Third Party and Governmental Consents
LIST OF EXHIBITS
Exhibit A List of Sellers
Exhibit B Legal Opinion of Sellers' Counsel
Exhibit C Legal Opinion of Buyer's Counsel
