AGREEMENT and Plan of Merger
by and among
H022 Corporation,
DT Industries, Inc.,
Xxxxxxxx Manufacturing Corporation
and
the Stockholder listed herein
September 23, 1996
Table of Contents
PAGE
RECITALS 1
ARTICLE I - DEFINITIONS 1
Section 1.1 Definitions 1
Section 1.2 Interpretive Rules 5
ARTICLE II - THE MERGER 5
Section 2.1 The Merger 5
Section 2.2 Effective Time of the Merger 5
Section 2.3 Certificate of Incorporation 5
Section 2.4 By-Laws 5
Section 2.5 Directors and Officers 5
Section 2.6 Conversion of Shares 6
Section 2.7 Closing of the Company Transfer Books 6
Section 2.8 Supplementary Action 6
ARTICLE III - MERGER CONSIDERATION; CLOSING 6
Section 3.1 Merger Consideration Determination 6
Section 3.2 Payment of Merger Consideration 7
Section 3.3 Payment for Stock 8
Section 3.4 Additional Merger Consideration 9
Section 3.5 Closing 9
ARTICLE IV - ADDITIONAL AGREEMENTS 9
Section 4.1 Indemnification and Escrow Agreement 9
Section 4.2 Stockholder Release 9
Section 4.3 Lease Agreement 10
Section 4.4 Employment and Noncompetition Agreement 10
Section 4.5 HSR Act 10
Section 4.6 Termination of Agreements 10
Section 4.7 Payment of Indebtedness 10
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE COMPANY 10
Section 5.1 Corporate Organization 10
Section 5.2 Valid and Binding Agreement 11
Section 5.3 No Violation 11
Section 5.4 Consents and Approvals 12
Section 5.5 Capitalization 12
Section 5.6 Subsidiaries and Affiliates 12
Section 5.7 Financial Statements 13
Section 5.8 Absence of Undisclosed Liabilities 13
Section 5.9 Interim Operations and Absence of Certain Changes 13
Section 5.10 Taxes 15
Section 5.11 Employee Benefit Plans 17
Section 5.12 Compliance with Law 19
Section 5.13 Litigation; Claims 19
Section 5.14 Contracts and Commitments 19
Section 5.15 Intellectual Property Rights 20
Section 5.16 Liens 20
Section 5.17 Insurance 21
Section 5.18 Accounts Receivable and Accounts Payable 21
Section 5.19 Inventories and Backlog 21
Section 5.20 Tangible Personal Property 22
Section 5.21 Real Property 22
Section 5.22 Environmental Matters 23
Section 5.23 Governmental Authorizations 24
Section 5.24 Employees 25
Section 5.25 Employee Relations 25
Section 5.26 Customers and Vendors 25
Section 5.27 Distributors and Representatives 26
Section 5.28 Broker's or Finder's Fees 26
Section 5.29 Disclosure 26
Section 5.30 Certain Transactions 26
Section 5.31 Absence of Questionable Payments 26
Section 5.32 Directors and Officers; Bank Accounts 27
-ii-
Section 5.33 Defects in Products or Designs; Product Safety 27
Section 5.34 Product Warranties 27
Section 5.35 Government Contracts 27
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER 27
Section 6.1 Ownership of Stock 27
Section 6.2 Valid and Binding Agreements 28
Section 6.3 No Violation 28
Section 6.4 Consents and Approvals 28
Section 6.5 Broker's or Finder's Fees 28
Section 6.6 Section 630 Liability 29
Section 6.7 Residency 29
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE GUARANTOR 29
Section 7.1 Corporate Organization 29
Section 7.2 Valid and Binding Agreements 29
Section 7.3 No Violation 29
Section 7.4 Consents and Approvals 30
Section 7.5 Broker's or Finder's Fees 30
ARTICLE VIII - COVENANTS 30
Section 8.1 Compliance with Law 30
Section 8.2 Operation of Business Prior to Closing 30
Section 8.3 Access 32
ARTICLE IX - CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE BUYER AND THE GUARANTOR 33
Section 9.1 Representations and Warranties 33
Section 9.2 Covenants, Agreements and Conditions 33
Section 9.3 Proceedings 33
Section 9.4 Corporate Proceedings 33
Section 9.5 Governmental Approvals 33
Section 9.6 No Material Adverse Effect 33
-iii-
Section 9.7 Insurance 34
Section 9.8 Deliveries 34
Section 9.9 HSR Act Requirements 34
Section 9.10 Opinion of Counsel 35
Section 9.11 Tax Status Certification 35
Section 9.12 Consents 35
Section 9.13 Evidence of Termination 35
Section 9.14 Releases of Liens 35
Section 9.15 Releases of Stock Pledges 35
Section 9.16 Payment of Indebtedness 35
Section 9.17 Repayment of Certain Debt 35
Section 9.18 Lease Extension 35
Section 9.19 Approval of Lenders 36
ARTICLE X - CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE COMPANY AND THE STOCKHOLDERS 36
Section 10.1 Representations and Warranties 36
Section 10.2 Covenants, Agreements and Conditions 36
Section 10.3 Proceedings 36
Section 10.4 Corporate Proceedings 36
Section 10.5 Governmental Approvals 37
Section 10.6 Deliveries 37
Section 10.7 HSR Act Requirements 37
Section 10.8 Opinion of Counsel 37
Section 10.9 Repayment of Certain Debt 37
Section 10.10 Letter of Credit 37
ARTICLE XI - TAX MATTERS 38
Section 11.1 Certain Tax Elections 38
Section 11.2 Change in Tax Status 38
Section 11.3 Certain Distributions 38
ARTICLE XII - OTHER MATTERS 39
Section 12.1 Confidentiality 39
Section 12.2 Further Assurances 39
-iv-
ARTICLE XIII - TERMINATION 39
Section 13.1 Methods of Termination 39
Section 13.2 Procedure Upon Termination 40
ARTICLE XIV - MISCELLANEOUS 40
Section 14.1 Survival of Representations, Warranties and
Agreements 40
Section 14.2 Service of Process 41
Section 14.3 Notices 41
Section 14.4 Governing Law 42
Section 14.5 Modification; Waiver 42
Section 14.6 Entire Agreement 42
Section 14.7 Assignment; Successors and Assigns 42
Section 14.8 Public Announcements 42
Section 14.9 Severability 43
Section 14.10 No Third Party Beneficiary 43
Section 14.11 Expenses 43
Section 14.12 Execution in Counterpart 43
EXHIBIT A Form of Closing Certificate
EXHIBIT B Form of Indemnificatino and Escrow Agreement
EXHIBIT C Principles and Procedures
EXHIBIT D Form of Certificate of Incorporation
EXHIBIT E Additional Merger Consideration
EXHIBIT F Form of Stockholder Releases
EXHIBIT G Form of Lease
EXHIBIT H Form of Employment and Noncompetitition Agreement
EXHIBIT I Form of Opinion of Xxxxxx, Xxxxxxx & Xxxxx
Schedule 2.5 Officers and Directors
Schedule 5.1 Foreign Qualifications
Schedule 5.4 Consents and Approvals
-v-
Schedule 5.5 Capitalization
Schedule 5.6 Subsidiaries and Affiliates
Schedule 5.7 Company Audited Financial Statements
Schedule 5.7A Company Unaudited Financial Statements
Schedule 5.8 Liabilities and Obligations
Schedule 5.9 Changes During Interim Operations
Schedule 5.10 Tax Matters
Schedule 5.11 Employee Benefit Plans
Schedule 5.13 Litigation; Claims
Schedule 5.14 Contracts and Commitments
Schedule 5.15 Intellectual Property Rights
Schedule 5.16 Liens
Schedule 5.17 Insurance
Schedule 5.18 Accounts Receivable and Accounts Payable
Schedule 5.19 Inventories and Backlog
Schedule 5.20 Tangible Personal Property Owned
Schedule 5.20A Tangible Personal Property Leased
Schedule 5.21 Real Property Leased
Schedule 5.22 Environmental Matters
Schedule 5.23 Governmental Authorizations
Schedule 5.24 Employees
Schedule 5.26 Customers and Vendors
Schedule 5.27 Distributors and Representatives
Schedule 5.30 Certain Transactions
Schedule 5.32 Directors and Officers; Bank Accounts
Schedule 5.33 Defects in Products or Designs
Schedule 6.1 Encumbrances on Stock
Schedule 7.5 Broker's or Finder's Fees
Schedule 9.14 Releases of Liens
-vi-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September
23, 1996, by and among H022 Corporation, a New York corporation (the "Buyer"),
DT Industries, Inc., a Delaware corporation (the "Guarantor"), Xxxxxxxx
Manufacturing Corporation, a New York corporation (the "Company"), and XxxXxxxx
X. Xxxxxxxx, Xx., the sole stockholder of the Company (the "Stockholder").
RECITALS
WHEREAS, the respective boards of directors of the Buyer and the Company
have approved the merger of the Buyer with and into the Company (the "Merger"),
pursuant to and subject to the conditions set forth herein;
WHEREAS, the Guarantor, as the owner of all of the issued and outstanding
capital stock of Advanced Assembly Automation, Inc., an Ohio corporation, which
owns all the issued and outstanding capital stock of the Buyer, has agreed to
guaranty the Buyer's obligations hereunder; and
WHEREAS, the Buyer, the Company and the Stockholder desire to make certain
representations, warranties and agreements in connection with the Merger and to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants which are to be made and performed by
the respective parties, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following terms when used in this Agreement have the meanings set forth
below:
(a) "Accountants" means Xxxxxxxx X. Xxxxxxx & Co., P.C., independent
certified public accountants of the Company.
(b) "Affiliate" means any Person now or hereinafter controlling, controlled
by or under common control with another Person.
(c) "Arbitrator" has the meaning set forth in Section 3.1(b)(iii).
(d) "BCL" means the New York Business Corporation Law.
(e) "CERCLA" has the meaning set forth in Section 5.22(a).
(f) "CERCLIS" has the meaning set forth in Section 5.22(f).
(g) "Certificate of Merger" has the meaning set forth in Section 2.2.
(h) "Claims Amount Escrow Fund" has the meaning set forth in Section
3.2(b).
(i) "Closing" has the meaning set forth in Section 3.5.
(j) "Closing Certificate" means the certificate of the Company
substantially in the form attached hereto as Exhibit A.
(k) "Closing Date" has the meaning set forth in Section 3.5.
(l) "Closing Report" has the meaning set forth in Section 3.1(b).
(m) "Closing Statements" has the meaning set forth in Section 3.1(b).
(n) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(o) "Company Financial Statements" has the meaning set forth in Section
5.7.
(p) "Company Interim Financial Statements" has the meaning set forth in
Section 5.7.
(q) "Constituent Corporations" means the Buyer and the Company.
(r) "Debt" means all long-term indebtedness, including the Revolving Credit
Line and the Term Loan, and current portions thereof, including outstanding
principal and interest and any success fees, prepayment premiums, make-whole
premiums or penalties, for borrowed money of the Company owed as of the Closing
Date, all indebtedness and distributions payable to the Stockholder and his
Affiliates, the Retiree Benefits Liabilities, the Deferred Compensation
Liability and the Working Capital Adjustment. It being understood that, to the
extent any current liability is included in the determination of Working
Capital, it should not again be included as a separate item of debt.
(s) "Debt Adjustment" is equal to the excess, if any, of the Debt (as
finally determined in accordance with Section 3.1(b)) over Fifteen Million
Dollars ($15,000,000), such that (i) if the Debt exceeds $15,000,000 then the
Debt Adjustment is equal to the amount of such excess; or (ii) if the Debt is
equal to or less than $15,000,000, then the Debt Adjustment is equal to zero
(0).
(t) "Deferred Compensation Liability" is equal to Five Hundred Thousand
Dollars ($500,000).
(u) "Deferred Merger Consideration Amount" means that portion of the Merger
Consideration which is not to be made available for payment at the Closing, but
which shall be paid in the manner set forth in Section 3.2(g).
(v) "Effective Time" has the meaning set forth in Section 2.2.
(w) "Environmental Laws" has the meaning set forth in Section 5.22(c).
(x) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
-2-
(y) "Escrow Agent" means the escrow agent selected by the parties to act
pursuant to the Indemnification and Escrow Agreement.
(z) "Escrow Amount" has the meaning set forth in Section 3.2(b).
(aa) "Estimated Debt Adjustment" means the estimated Debt Adjustment of the
Company determined as of the Closing Date and set forth on the Closing
Certificate.
(ab) "Estimated Merger Consideration" means the amount payable to the
Stockholder pursuant to Section 3.2(a).
(ac) "Estimated Working Capital Adjustment" means the estimated Working
Capital Adjustment of the Company determined as of the Closing Date and set
forth on the Closing Certificate.
(ad) "GAAP" means generally accepted accounting principles of the United
States applied in a manner consistent with past practice of the Company.
(ae) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
(af) "Hazardous Material" has the meaning set forth in Section 5.22(a).
(ag) "Indemnification and Escrow Agreement" means an indemnification and
escrow agreement substantially in the form attached hereto as Exhibit B.
(ah) "Intellectual Property" means any and all inventions, Marks (including
trademarks, service marks, certification marks, collective marks, and collective
membership marks whether word, logo, or other forms of Marks, all of the
foregoing collectively referred to as "Marks"), trade names, copyrights,
applications therefor, patents thereon, registrations thereof and licenses
thereof, royalty rights, any and all goodwill associated with the business or
represented by the assets of the Company, trade secrets, secret processes and
procedures, engineering, production, assembly, installation and design
encompassed in any and all embodiments including, but not limited to technical
drawings and specifications, working notes and memos, market studies,
consultants' reports, technical and laboratory data, competitive samples,
engineering prototypes, and confidential information, know-how, and all similar
property of any nature, tangible or intangible, including all property listed or
described on Schedule 5.15.
(ai) "IRS" means the United States Internal Revenue Service.
(aj) "Leased Improvements" has the meaning set forth in Section 5.21(b).
(ak) "Leased Property" has the meaning set forth in Section 5.21(b).
(al) "Material Adverse Effect" means, with respect to any Person, any
event, fact, condition, occurrence or effect which is materially adverse to the
business, properties, assets, liabilities, capitalization, stockholders equity,
financial condition, operations, licenses or other franchises, results of
operations or prospects of such Person.
(am) "Merger Consideration" has the meaning set forth in Section 3.1(a).
-3-
(an) "Merger Consideration Escrow Fund" has the meaning set forth in
Section 3.2(b).
(ao) "Pension Plans" has the meaning set forth in Section 5.11(c)(i).
(ap) "Permits" has the meaning set forth in Section 5.23.
(aq) "Permitted Encumbrances" has the meaning set forth in Section 9.14.
(ar) "Person" means and includes an individual, a partnership, a joint
venture, a corporation or trust, an unincorporated organization, a group or a
government or other department or agency thereof.
(as) "Plans" has the meaning set forth in Section 5.11(a).
(at) "Price Waterhouse" means Price Waterhouse LLP, certified public
accountants for the Buyer.
(au) "Principles and Procedures" means the accounting principles and
procedures set forth on Exhibit C.
(av) "Retiree Benefits Liabilities" is equal to Three Hundred Thousand
Dollars ($300,000).
(aw) "Revolving Credit Line" means that certain Line of Credit Agreement
between the Company and Manufacturers and Traders Trust Company, as more
particularly set forth in Schedule 5.14 hereof.
(ax) "Stock" means the common stock of the Company, par value $.01 per
share.
(ay) "Stockholder Release" has the meaning set forth in Section 4.2.
(az) "Surviving Corporation" has the meaning set forth in Section 2.1.
(ba) "Tax" has the meaning set forth in Section 5.10(c).
(bb) "Taxing Authority" has the meaning set forth in Section 5.10(a).
(bc) "Tax Return" has the meaning set forth in Section 5.10(d).
(bd) "Term Loan" means that certain Term Loan Agreement between the Company
and Manufacturers and Traders Trust Company, as more particularly set forth on
Schedule 5.14 hereof.
(be) "Working Capital" means the excess as of the Closing Date of (i) the
Company's current assets over (ii) the Company's non-interest bearing current
liabilities, each as determined in accordance with the Principles and
Procedures.
(bf) "Working Capital Adjustment" means the amount, if any, by which the
Working Capital (as finally determined in accordance with Section 3.1(b)) is
less than Twelve Million Five Hundred Forty Thousand Dollars ($12,540,000).
-4-
Section 1.2 Interpretive Rules.
For purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires: (a) defined terms include the
plural as well as the singular and the use of any gender shall be deemed to
include the other gender; (b) references to "Articles," "Sections" and other
subdivisions and to "Schedules" and "Exhibits" without reference to a document,
are to designated Articles, Sections and other subdivisions of, and to Schedules
and Exhibits to, this Agreement; (c) the use of the term "including" means
"including but not limited to"; and (d) the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular provision.
ARTICLE II
THE MERGER
Section 2.1 The Merger.
At the Effective Time, the Buyer shall be merged with and into the Company
in accordance with the applicable provisions of the BCL and the separate
existence of the Buyer shall thereupon cease, and the Company, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence in accordance with the BCL under the name Xxxxxxxx
Manufacturing Corporation.
Section 2.2 Effective Time of the Merger.
At the Closing, the Company shall cause the Merger to be consummated by
filing with the Secretary of State of New York an appropriate certificate of
merger (the "Certificate of Merger") duly executed in accordance with this
Agreement and the BCL. The date and time at which the Certificate of Merger is
filed is referred to herein as the "Effective Time."
Section 2.3 Certificate of Incorporation.
The Certificate of Incorporation of the Company as amended and restated in
the form set forth as Exhibit D shall be the Certificate of Incorporation of the
Surviving Corporation.
Section 2.4 By-Laws.
The By-Laws of the Buyer as in effect at the Effective Time shall be the
By-Laws of the Surviving Corporation.
Section 2.5 Directors and Officers.
The directors of the Surviving Corporation at the Effective Time shall be
the directors of the Buyer in office immediately prior to the Effective Time, as
set forth on Schedule 2.5, to serve in accordance with the By-Laws of the
Surviving Corporation. The officers of the Surviving Corporation at the
Effective Time shall be the officers of the Buyer immediately prior to the
Effective Time, as set forth on Schedule 2.5, to serve in accordance with the
By-Laws of the Surviving Corporation.
-5-
Section 2.6 Conversion of Shares.
At the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any securities of the Constituent Corporations:
(a) each share of Stock then outstanding, other than Stock to be canceled
pursuant to Section 2.6(b), and all rights with respect thereto, shall be
converted into and represent the right to receive the amounts of cash set forth
in Sections 3.1 and 3.4, payable as provided in Sections 3.2 and 3.4 and subject
to adjustment as provided in Sections 3.1 and 3.2;
(b) each share of Stock, if any, held in the Company's treasury or owned
beneficially by the Buyer shall be canceled and retired without payment of any
consideration therefor; and
(c) each issued and outstanding share of common stock of the Buyer, $0.01
par value per share, outstanding immediately prior to the Effective Time shall
remain outstanding and unchanged as a share of common stock of the Surviving
Corporation.
Section 2.7 Closing of the Company Transfer Books.
At the Effective Time, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers of Stock
thereafter. If, after the Effective Time, subject to the terms and conditions of
this Agreement, certificates representing any such shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for cash in
accordance with Section 2.6.
Section 2.8 Supplementary Action.
If at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either of the Constituent Corporations, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of the
respective Constituent Corporations, in the name of and on behalf of the
appropriate Constituent Corporation, to execute and deliver any and all things
necessary or proper to vest or to perfect or confirm title to such property or
rights in the Surviving Corporation, and otherwise carry out the purposes and
provisions of this Agreement.
ARTICLE III
MERGER CONSIDERATION; CLOSING
Section 3.1 Merger Consideration Determination.
(a) Merger Consideration. The aggregate merger consideration (the "Merger
Consideration") shall be (i) Ten Million Dollars ($10,000,000) minus (ii) the
sum of the Debt Adjustment and the amount distributed pursuant to Section
8.2(i)(ii).
-6-
(b) Determination of Debt Adjustment and Working Capital Adjustment. The
amount of the Debt Adjustment and Working Capital Adjustment shall be determined
in the following manner:
(i) Closing Statements; Review. Promptly after the Closing Date, the
Surviving Corporation will prepare statements in accordance with this Agreement
and the Principles and Procedures which shall set forth Debt, Debt Adjustment,
Working Capital and Working Capital Adjustment (the "Closing Statements"). Price
Waterhouse, at the Surviving Corporation's expense, will audit the Closing
Statements in accordance with U.S. generally accepted auditing standards and the
Principles and Procedures and issue their report as to the results of such audit
(the "Closing Report"). Within forty-five (45) days after the Closing Date, the
Surviving Corporation will deliver the Closing Statements and Closing Report to
the Stockholder. Upon request by the Stockholder, the Surviving Corporation
shall direct Price Waterhouse to deliver drafts of the Closing Statements and
Closing Report to the Accountants for review and analysis at least ten (10) days
prior to final issuance of the Closing Statements and Closing Report and
delivery to the Stockholder as noted above. The Accountants shall have the
opportunity to review and evaluate all working papers, worksheets and other
documents utilized by the Surviving Corporation in the preparation of the
Closing Statements and by Price Waterhouse in the audit of the Closing
Statements. Price Waterhouse and the Accountants will attempt to resolve any
disputed items prior to issuance of the Closing Statements and Closing Report.
(ii) Review by the Parties. Failing such resolution, the Stockholder
will provide the Surviving Corporation within fifteen (15) days of receipt of
the Closing Statements and Closing Report detailed written explanations of any
disputed items in the Closing Statements and the Closing Report. The amount of
the Debt Adjustment and Working Capital Adjustment not affected by the disputed
items will be deemed to be as set forth in the Closing Statements and Closing
Report. Within a further period of ten (10) days from the end of the
aforementioned review period, the parties will attempt to resolve in good faith
any disputed items.
(iii) Arbitration. Failing resolution pursuant to paragraph (ii)
above, the unresolved disputed items will be referred for final binding
resolution to such nationally-recognized firm of certified public accountants
as the parties may hereafter jointly select (the "Arbitrator"). Such referral
shall be in the form of written statements of position by the Stockholder, the
Surviving Corporation, Price Waterhouse and the Accountants, with each party
having an opportunity to respond to such written statements and any requests for
statements or information by the Arbitrator. If the Arbitrator determines that
the resolution of a given disputed item requires an interpretation of law, then,
with the permission of the parties, the Arbitrator may request a law firm of
national standing chosen by it to render a legal opinion as to such matter. The
amount of the Debt Adjustment and Working Capital Adjustment affected by such
unresolved disputed items (if any) will be as determined by the Arbitrator. The
cost of such Arbitrator's review (including reasonable attorneys' fees, if any)
shall be borne by the party or parties as determined by the Arbitrator.
Section 3.2 Payment of Merger Consideration.
(a) Estimated Merger Consideration. At the Closing, the Buyer shall pay the
Stockholder, as provided in Section 3.3, (i) Ten Million Dollars ($10,000,000)]
minus (ii) the sum of (A) the Estimated Debt Adjustment, (B) the Deferred Merger
-7-
Consideration Amount, (C) the Escrow Amount to be deposited with the Escrow
Agent pursuant to Section 3.2(b), and (D) the amount distributed pursuant to
Section 8.2(i)(ii).
(b) Escrow Amount. On June 30, 1997, the Buyer shall deposit Two Million
Dollars ($2,000,000) (the "Escrow Amount") with the Escrow Agent pursuant to the
terms of the Indemnification and Escrow Agreement. The Escrow Amount shall
constitute a Claims Amount Escrow Fund in the amount of Two Million Dollars
($2,000,000). To secure its obligation to make the deposit of the Escrow Amount
pursuant to this Section 3.2(b), the Buyer shall provide the Escrow Agent at the
Closing with an irrevocable standby letter of credit reasonably satisfactory to
the Stockholder.
(c) Closing Certificate. At the Closing, the chief financial officer of the
Company shall deliver to the Buyer, after prior consultation with Price
Waterhouse, the Closing Certificate, which shall set forth his or her best
estimate of the Estimated Debt Adjustment and the Estimated Working Capital
Adjustment.
(d) Closing Adjustment. The Debt Adjustment and Working Capital Adjustment
shall be computed based upon the Closing Report, by the agreement of the parties
or by the Arbitrator, as the case may be, and the Closing Adjustment shall be
paid within ten (10) business days thereafter. For the purposes of this
Agreement, the "Closing Adjustment" shall be equal to the Debt Adjustment minus
the Estimated Debt Adjustment. If the Closing Adjustment is a positive number,
that amount shall be paid by the Stockholder to the Surviving Corporation. If
the Closing Adjustment is a negative number, such amount shall be paid by the
Surviving Corporation to the Stockholder.
(e) Interest. All sums to be paid subsequent to the Closing Date pursuant
to this Section 3.2 shall bear interest from and after June 30, 1997, until so
paid, at the rate which is equal to the rate of interest actually earned on the
Escrow Amount during such period, computed on the basis of a 365-day year and
paid for the actual number of days elapsed. Interest calculated in accordance
with this Section 3.2(e) shall be due and payable on the date on which the
corresponding payment is due.
(f) Form of Payments. All payments hereunder, other than payments
originating from the Merger Consideration Escrow Fund or the Claims Amount
Escrow Fund, shall be made by delivery to the recipient by mailing checks to the
recipient or depositing, by bank wire transfer, the required amount (in
immediately available funds) in an account of the recipient, which account shall
be designated by the recipient at least three (3) business days prior to the
date of the required payment.
(g) Deferred Merger Consideration. The portion of the Estimated Merger
Consideration which exceeds One Million Dollars ($1,000,000) shall be paid by
the Surviving Corporation on June 30, 1997. The Surviving Corporation's
obligation to pay the portion of the Estimated Merger Consideration referred to
in this Section 3.2(g) shall be secured by an irrevocable standby letter of
credit reasonably satisfactory to the Stockholder, which shall be delivered at
the Closing.
Section 3.3 Payment for Stock.
(a) At the Effective Time, the Buyer shall make available for disbursement
in accordance with this Agreement, the aggregate Estimated Merger Consideration.
Upon surrender to the Buyer of an outstanding certificate or certificates,
together with an endorsement or stock power in blank, duly executed, the Buyer
shall disburse to the Stockholder in accordance with this Agreement the pro rata
share of the Estimated Merger Consideration attributable to each such
certificate. Until so
-8-
surrendered, each certificate which immediately prior to the Effective Time
represented outstanding Stock shall be deemed for all corporate purposes to
evidence only the right to receive upon such surrender the pro rata share of the
Estimated Merger Consideration. No interest shall accrue or be paid on any cash
payable upon the surrender of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Stock. If outstanding
certificates for shares of the Company are not surrendered, or the cash payment
therefor not claimed prior to six years after the Effective Time (or, in any
particular case, prior to such earlier date on which such cash payment would
otherwise escheat to or become the property of any governmental unit or agency),
the unclaimed amounts shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(b) If the Merger Consideration (or any portion thereof) is to be delivered
to a person other than the person in whose name the certificates surrendered in
exchange therefor are registered, it shall be a condition to the payment of such
Merger Consideration that the certificates so surrendered shall be properly
endorsed or accompanied by appropriate stock powers and otherwise in proper form
for transfer, that such transfer otherwise be proper and that the person
requesting such transfer pay to the Buyer any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Buyer that such
taxes have been paid or are not required to be paid. Appropriate procedures
shall be implemented to deal with lost stock certificates.
Section 3.4 Additional Merger Consideration.
Notwithstanding Sections 3.1 and 3.3 of this Article, the Buyer agrees to
make certain additional payments to the Stockholder in the form, amounts and at
the time determined in accordance with Exhibit E.
Section 3.5 Closing.
The closing of the transactions contemplated hereby (the "Closing") shall
take place at the offices of Xxxxxx, Xxxxxxx & Xxxxx, 000 Xxxxxxx Xxxxx,
Xxxxxxxxx, Xxx Xxxx on September 30, 1996, or at such other place, time or date
as may be agreed upon by the parties hereto (the "Closing Date").
ARTICLE IV
ADDITIONAL AGREEMENTS
Section 4.1 Indemnification and Escrow Agreement.
At the Closing, the Surviving Corporation, the Guarantor, the Stockholder
and the Escrow Agent will enter into the Indemnification and Escrow Agreement,
pursuant to which the Buyer shall deliver the Escrow Amount to be held in escrow
by the Escrow Agent.
Section 4.2 Stockholder Release.
At the Closing, the Stockholder shall deliver to the Surviving Corporation
a release substantially in the form attached hereto as Exhibit F (the
"Stockholder Release").
-9-
Section 4.3 Lease Agreement.
At the Closing, the Surviving Corporation shall enter into an agreement
with XxxXxxxx X. Xxxxxxxx, Xx. for the lease of the premises known as 0000
Xxxxxx Xxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx, such agreement to be substantially in
the form attached hereto as Exhibit G.
Section 4.4 Employment and Noncompetition Agreement.
In order to protect the Buyer's investment in the Business of the Company,
at the Closing, XxxXxxxx X. Xxxxxxxx, Xx. shall enter into an employment and
noncompetition agreement with the Surviving Corporation or an Affiliate, such
agreement to be substantially in the form attached hereto as Exhibit H.
Section 4.5 HSR Act.
The Buyer, the Company and the Stockholder agree to furnish to each other
such necessary information and reasonable assistance as may be requested in
connection with any necessary filings or submissions required pursuant to the
HSR Act.
Section 4.6 Termination of Agreements.
All agreements, whether written or oral, direct or indirect, between the
Company and the Stockholder or his Affiliates, including any guaranties of any
obligations of the Stockholder or such Affiliates to third parties, shall be
terminated at or prior to the Closing. At or prior to the Closing, the
Stockholder shall have purchased the Company's interest in the whole life and
split dollar life insurance arrangements insuring the life of the Stockholder in
exchange for the value of such interests as reflected in the accounts of the
Company. At or prior to the Closing, the Company shall have assigned, and the
Stockholder shall have assumed, those certain motor vehicle leases between the
Company and American Credit Services, Inc. and General Motors Acceptance
Corporation, respectively, and the Company shall have no further obligation with
respect to such motor vehicle leases.
Section 4.7 Payment of Indebtedness.
At or prior to Closing, the Stockholder and/or his Affiliates shall repay
all indebtedness to the Company, including any outstanding principal and
interest, for borrowed money, advances or other amounts paid to or on behalf of
the Stockholder, his family or Affiliates, other than advances permitted by
Section 5.9(m).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Buyer as follows, and the
Buyer in agreeing to consummate the transactions contemplated by this Agreement
has relied upon such representations and warranties, that:
Section 5.1 Corporate Organization.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite
-10-
power and authority (corporate and other) to own, lease and operate its
properties and to carry on its business as now being conducted.
(b) The Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each of the jurisdictions listed on
Schedule 5.1. The Company is not qualified or licensed to do business as a
foreign corporation in any other jurisdiction and there are no other
jurisdictions in which the failure to be qualified or licensed as a foreign
corporation would have a Material Adverse Effect on the Company.
(c) The copies of the certificate of incorporation and all amendments
thereto of the Company, as certified by the secretary of state of its
jurisdiction of incorporation, and the by-laws, as amended to date, of the
Company, as certified by its secretary, which have heretofore been delivered to
the Buyer, are true, complete and correct copies of the certificate of
incorporation and by-laws of the Company, as amended and in effect on the date
hereof, and will be true, complete and correct as of the Closing Date.
(d) The minute books and records of the Company, copies of which have been
delivered to the Buyer prior to the date hereof, are the original minute books
and records of the Company, contain all proceedings of the stockholders, the
Board of Directors and any committees thereof with respect to the Company, and
are true, correct and complete in all material respects. There have been no
changes, alterations or additions to the minute books and records which have not
been furnished to counsel for the Buyer prior to the date hereof.
Section 5.2 Valid and Binding Agreement.
The Company has all requisite corporate power and authority to enter into
this Agreement and the Indemnification and Escrow Agreement. All necessary
action on the part of the Company and its stockholders has been taken to
authorize the execution and delivery of this Agreement and the Indemnification
and Escrow Agreement, the performance of its obligations hereunder and
thereunder and the consummation of the transaction contemplated hereby and
thereby. This Agreement has been, and as of the Closing Date, the
Indemnification and Escrow Agreement will be, duly and validly executed and
delivered by the Company, and will constitute valid and binding agreements of
the Company, enforceable in accordance with their respective terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights generally and to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 5.3 No Violation.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby, including obtaining the consent of
Manufacturers and Traders Trust Company referenced on Schedule 5.4 hereof, nor
compliance by the Company with any of the provisions hereof will (i) violate or
conflict with any provision of the certificate of incorporation or by-laws of
the Company, (ii) materially violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Company, or (iii) materially violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or any event
-11-
which, with or without due notice or lapse of time, or both, would constitute a
default) under, or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
other encumbrance upon the Stock or any of the properties or assets of the
Company under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation of which the Company is a party or by which the Company
or any of its assets are bound.
Section 5.4 Consents and Approvals.
Except for any filings required by the HSR Act, the filing of the
Certificate of Merger or except as set forth on Schedule 5.4 hereof, no permit,
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or third party is required to be
made or obtained by the Company in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
Section 5.5 Capitalization.
(a) The authorized capital stock of the Company consists solely of Sixty
Thousand (60,000) shares of Stock, of which Forty Thousand (40,000) shares are
issued and outstanding. The issued and outstanding common stock is duly
authorized, validly issued, fully paid and nonassessable (except insofar as
liability may be imposed by Section 630 of the New York Business Corporation
Law), and none of the issued and outstanding shares of common stock were issued
in violation of the preemptive rights of any present or former stockholder of
the Company.
(b) Except as set forth in Section 5.5(a) or Schedule 5.5, (i) there are no
shares of capital stock or other equity securities (as the term "equity
security" is defined in the Securities Exchange Act of 1934, as amended) of the
Company outstanding, (ii) there are no outstanding subscriptions, options,
warrants or rights to purchase or acquire any equity securities of the Company,
(iii) no equity securities of the Company are reserved for issuance for any
purpose, and (iv) there are no contracts, commitments, agreements,
understandings, arrangements or restrictions to which the Company is a party or
by which the Company is bound relating to any shares of the capital stock or
other equity securities of the Company (including the Stock), whether or not
outstanding.
(c) The Stockholder is the owner, beneficially and of record, of the shares
of Stock and, except as set forth on Schedule 5.5, there is no lien, encumbrance
or other interest relating to the Stock or any other equity securities held of
record by any other Person.
Section 5.6 Subsidiaries and Affiliates.
(a) The Company does not own any capital stock or other equity securities
of any other corporation and has no other type of interest (whether ownership or
other) in any other corporation, partnership, joint venture or other business
organization or entity. The Company is not subject to any obligation or
requirement to provide funds for, or to make any investment (in the form of a
loan, capital contribution or otherwise) to or in, any Person.
(b) Except as set forth on Schedule 5.6, neither the Stockholder nor, to
the knowledge of the Company, any of his Affiliates or members of his immediate
family
-12-
have any direct or indirect interest in any Person that competes with, conducts
any business similar to, has any agreement or arrangement with or is involved in
any way with, the business conducted by the Company. Except as set forth on
Schedule 5.6, the Stockholder, his Affiliates and members of his immediate
family have no direct or indirect interest in any property used by, or relating
to, the business of the Company, except by virtue of ownership of the Stock,
which interest will be transferred upon consummation of the Merger.
Section 5.7 Financial Statements.
The audited financial statements of the Company for each of the three (3)
years ended December 31, 1993, December 31, 1994 and December 31, 1995, attached
as Schedule 5.7 hereto (the "Company Audited Financial Statements") present
fairly the financial position, results of operations, stockholders' equity and
cash flows of the Company in accordance with GAAP, as of the statement dates and
for the periods indicated. The unaudited internal financial statements of the
Company for the period ended August 31, 1996, attached as Schedule 5.7A hereto
(the "Company Unaudited Financial Statements") (i) present fairly the financial
position, results of operations, stockholder's equity and cash flows of the
Company, as of the statement date and for the period indicated, and (ii) have
been prepared in accordance with the Company's customary procedures for the
preparation of interim financial statements consistently applied throughout and
among the periods indicated and are consistent with the Company Audited
Financial Statements subject to year-end audit and other normal or recurring
year-end adjustments (made in accordance with GAAP, in the ordinary course of
business and consistent with prior year-end accounting principles and
adjustments).
Section 5.8 Absence of Undisclosed Liabilities.
Except as set forth on Schedule 5.8, the Company has no liability or
obligation (absolute, accrued, contingent or otherwise), including any guaranty
with respect to any obligation, except (a) such liabilities or obligations as
are fully reflected, reserved against or disclosed in the Company Audited
Financial Statements (or the footnotes thereto) or the Company Unaudited
Financial Statements and (b) such liabilities or obligations as have been
incurred in the ordinary course of business, consistent with past practice,
since July 31, 1996.
Section 5.9 Interim Operations and Absence of Certain Changes.
Since December 31, 1995, except as set forth on Schedule 5.9, the Company
has conducted its business in the ordinary course and consistent with past
practice, and the Company did not:
(a) incur any indebtedness or other liabilities (whether absolute, accrued,
contingent or otherwise) or guarantee any such indebtedness, except in the usual
and ordinary course of its business, consistent with past practice;
(b) suffer any damage, destruction or loss of tangible assets, whether or
not covered by insurance, in excess of $10,000;
(c) suffer any change in its financial condition, assets, liabilities or
business or suffer any other event or condition of any character which
individually or in the aggregate had or has a Material Adverse Effect on the
Company or materially diminishes the value of the assets of the Company;
-13-
(d) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) or fail to pay any accounts payable
or other liabilities when due, except in each case in the ordinary course of
business;
(e) cancel any debts or waive any claims or rights of substantial value,
except in each case in the ordinary course of business;
(f) permit any material insurance policy to be cancelled or terminated;
(g) pledge or permit the imposition of any lien on or sell, assign,
transfer or otherwise dispose of any of its tangible assets, except the sale of
inventory in the ordinary course of business;
(h) factor, discount or otherwise accept less than full payment with regard
to its accounts receivable and other amounts due or sell any inventory at less
than fair market value or make any bulk sale of such inventory;
(i) solicit customer advances or payment of accounts receivable or other
sums due in advance of their respective due dates except in each case in the
usual and ordinary course of business, consistent with past practice;
(j) sell, assign, encumber, license, pledge, abandon or otherwise transfer
any patents, applications for patents, Marks, trade names, copyrights, licenses
or other intangible assets;
(k) make any change in any method of accounting or accounting principle or
practice;
(l) write up or down the value of the inventory or determine as collectible
any notes or accounts receivable that were previously considered to be
uncollectible, except for write-ups or write-downs and other determinations in
accordance with GAAP and in the ordinary course of business and consistent with
past practice;
(m) except for payments to the Stockholder sufficient to pay his income
taxes attributable to the earnings of the Company for the fiscal year ended
December 31, 1995 and for the period from January 1, 1996 through the Closing
Date, to the extent the Stockholder is taxed on such earnings as a result of the
Company's status as an S Corporation, make any payment of cash or transfer of
any assets to the Stockholder or any Affiliate of the Stockholder;
(n) grant any general increase in the compensation payable or to become
payable to its officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment) or any special
increase in the compensation payable or to become payable to any officer or
employee, except for normal merit and cost of living increases in the ordinary
course of business and in accordance with past practice;
(o) declare, pay or set aside for payment any dividend or other
distribution (other than as permitted by Section 5.9(m)) on any shares of its
capital stock; split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock; or repurchase or
otherwise acquire any shares of its capital stock;
-14-
(p) make any loans which in the aggregate exceed $5,000 to any employee or
make any loans to any stockholder, officer, director or Affiliate;
(q) make capital expenditures or commitments for same in excess of $25,000
in the aggregate;
(r) lose or learn of the prospective loss of any customer or vendor listed
on Schedule 5.26 or any representative or agent listed on Schedule 5.27;
(s) agree or propose, whether in writing or otherwise, to take any action
described in this Section 5.9; or
(t) make or change any Tax election.
Section 5.10 Taxes.
(a) The Company has duly and timely filed with each appropriate federal,
state, local and foreign governmental entity or other authority (individually or
collectively, "Taxing Authority") all Tax Returns required to be filed. All such
Tax Returns were true, correct and complete in all material respects. The
Company has paid all Taxes which have become due and payable (whether or not
shown on any Tax Return). Adequate reserves and accruals have been established
to provide for the payment of all Taxes which are not yet due and payable with
respect to the Company for taxable periods or portions thereof ending on or
before the Closing Date. There are no liens for Taxes upon the Company or its
assets except liens for current Taxes not yet due. The Company has delivered to
the Buyer correct and complete copies of all federal, state, local and foreign
income Tax Returns for the five (5) most recently completed years, all
examination reports by any Taxing Authority, and any statements of deficiencies
proposed or assessed against or agreed to by the Company. No audit, examination,
investigation, proceeding, action or claim with respect to the Company's Taxes
is pending, proposed or threatened, and there is no basis for the assessment or
collection of additional Taxes against the Company. Except as set forth on
Schedule 5.10, there has never been an examination or notice of potential
examination of the Tax Returns of the Company by any Taxing Authority. No
extension is in effect with respect to the filing of any Tax Return, the payment
of any Taxes, or any limitation period regarding the assessment or collection of
any Taxes.
(b) All Taxes that are required to have been withheld or collected by the
Company have been duly withheld or collected and, to the extent required, have
been paid to the proper governmental authorities or properly deposited as
required by applicable laws.
(c) As used in this Agreement, "Tax" means any of the Taxes and "Taxes"
means, with respect to the Company, (i) all income taxes (including any tax on
or based upon net income, or gross income, or income as specially defined, or
earnings, or profits, or selected items of income, earnings or profits) and all
gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profit taxes, alternative or add-on minimum taxes, custom
duties or other taxes, fees, assessments or charges of any kind whatsoever,
together with any interest, penalties, additions to tax or additional amounts
imposed by any Taxing Authority whether disputed or not and (ii) any liability
for the payment of any amount of Tax described in the immediately preceding
clause (a) as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another person or successor, by
contract, or otherwise.
-15-
(d) As used in this Agreement, "Tax Return" is defined as any return,
report, information return or other document (including any related or
supporting information) filed or required to be filed with any Taxing Authority
or other authority in connection with the determination, assessment or
collection of any Tax paid or payable by the Company or the administration of
any laws, regulations or administrative requirements relating to any such Tax.
(e) Schedule 5.10 lists the jurisdictions in which the Company either files
Tax Returns or pays Taxes with respect to which no returns are required to be
filed. No claim has ever been made by any Taxing Authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(f) The Stockholder is not a foreign person within the meaning of Section
1445(b)(2) of the Code.
(g) No property of the Company is property that the Company is or will be
required to treat as owned for tax purposes by another person, or is "tax-exempt
use property" as defined in Section 168(h) of the Code.
(h) The Company has never agreed to or been required to make any adjustment
pursuant to Section 481(a) of the Code by reason of any change in accounting
method initiated by it; the IRS has not proposed any such adjustment or change
in accounting method; and the Company has no application pending with any Taxing
Authority requesting permission for any change in accounting method.
(i) The Company is not now nor during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code has ever been a United States real property
holding corporation as defined in Section 897(c)(2) of the Code.
(j) The Company is not now nor has ever been a party to any agreement,
contract, arrangement or plan that would result, separately or in the aggregate,
in the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(k) The Company has not filed a consent pursuant to Section 341(f) of the
Code nor has the Company agreed to have Section 341(f)(2) of the Code apply to
any disposition of a section (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company.
(l) The Company has never been (i) a member of an affiliated group of
corporations (as defined in Section 1504(a) of the Code), or filed or been
included in a combined, consolidated, or unitary Tax Return, or (ii) a party to
any tax allocation, sharing or reimbursement agreement or arrangement.
(m) Except as set forth on Schedule 5.10, the Company is not an obligor on
and none of its assets has been financed directly or indirectly by any
tax-exempt bonds.
(n) The Company has not executed or entered into a closing agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state, local or foreign law.
-16-
(o) The Company does not have any liability for the Taxes of any other
person under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(p) The Company does not have pending any request for a private letter
ruling.
(q) The Company has not been a personal holding company within the meaning
of Section 542 of the Code during the five-year period preceding the date
hereof.
(r) The Company has disclosed on its federal income tax Returns all
positions therein that, to the knowledge of the Company, could give rise to a
substantial understatement of federal income tax within the meaning of Code
Section 6662.
(s) At all times since its incorporation, the Company has had in effect a
valid election under Code Section 1362 to be an S Corporation.
Section 5.11 Employee Benefit Plans.
(a) Schedule 5.11 is a true and complete list of all annuity, bonus,
cafeteria, stock option, stock purchase, profit sharing, savings, pension,
retirement, incentive, group insurance, disability, employee welfare, prepaid
legal, nonqualified deferred compensation including without limitation, excess
benefit plans, top-hat plans, deferred bonuses, rabbi trusts, secular trusts,
nonqualified annuity contracts, insurance arrangements, nonqualified stock
options, phantom stock plans, or golden parachute payments, or other similar
fringe benefit plans, and all other employee benefit funds or programs (within
the meaning of Section 3(3) of ERISA), covering employees, former employees or
directors of the Company (the "Plans"). Except as set forth on Schedule 5.11,
the Company is not a party to any employee agreement, understanding, plan,
policy, procedure, pattern or practice, or other arrangement, whether written or
oral, which provides compensation or fringe benefits to its employees, and the
Company is in substantial compliance with all its obligations under all such
Plans. Except for changes required by applicable law, there are no negotiations,
demands, commitments or proposals that are pending or that have been made that
concern matters now covered, or that would be covered by the type of agreements
described on Schedule 5.11 or in this Section 5.11(a).
(b) With respect to each employee benefit plan listed on Schedule 5.11,
true and complete copies of (i) all Plan documents (including all amendments and
modifications thereof), and related agreements including without limitation, the
trust agreement and amendments thereto, insurance contracts and investment
management agreements; (ii) the last three filed Form 5500 series and Schedules
A, B, C, P and/or SSA, as applicable, and Forms PBGC-1, if any; (iii) summary
plan descriptions; (iv) summary of material modifications, if any; (v) the most
recent auditor's report, and copies of any and all tax qualification
correspondence including without limitation, private letter rulings,
applications for determination and determination letters issued with respect to
the Plans; and (vi) the most recent annual and periodic accounting of related
Plan assets, have also been delivered to the Buyer.
(c) With respect to the Plans listed on Schedule 5.11 which are subject to
ERISA, to the Company's knowledge:
-17-
(i) The Plans are in material compliance with the applicable
provisions of ERISA and each of the employee pension benefit plans, within the
meaning of Section 3(2) of ERISA (the "Pension Plans"), which are intended to be
qualified under Section 401(a) of the Code have received a favorable
determination letter from the IRS or a request for such determination has been
timely filed with the IRS (and to the knowledge of the Company, nothing has
occurred to cause the IRS to revoke such determination and the IRS has not
indicated any disapproval of any request for such a determination);
(ii) Each Plan has been operated substantially in accordance with
its terms and all required filings that are due prior to the date hereof,
including without limitation, the Forms 5500, for all Plans have been timely
made;
(iii) No prohibited transactions, as defined by Section 406 of ERISA
or Section 4975 of the Code, have occurred with respect to any of the Plans;
(iv) The Company has not engaged in any transaction in connection
with which the Company could be subjected to a criminal or civil penalty under
ERISA;
(v) None of the Plans, nor any trust which serves as a funding
medium for any of such Plans, nor any issue relating thereto is currently under
examination by or pending before the IRS, the Department of Labor, the PBGC or
any court, other than applications for determinations pending before the IRS;
(vi) None of the Pension Plans is a defined benefit plan within the
meaning of Section 414(j) of the Code;
(vii) None of the Plans is a "multiemployer plan" as that term is
defined in Section 3(37) of ERISA and Section 411(f) of the Code, nor a plan
maintained by more than one employer (hereinafter referred to as a "multiple
employer plan"), nor a single employer plan under a multiple controlled group
within the meaning of Section 4063 of ERISA, and neither the Company nor any
entity required to be aggregated with the Company under Section 414(b), (c),
(m), or (o) of the Code has incurred any withdrawal liability with respect to
any single plan, multiemployer or multiple employer plan, which liability could
constitute a liability of the Surviving Corporation;
(viii) No written benefit claims (except those submitted in the
ordinary course of administration of such Plan) are currently pending against
any Plan;
(ix) Except as set forth on Schedule 5.11, no Plan provides for
retiree medical or retiree life insurance benefits for current or former
employees of the Company, and there is no liability for taxes with respect to
disqualified benefits under Section 4976 of the Code; and
(x) Except as set forth on Schedule 5.11, no Pension Plan has been
terminated by the Company, and there is no liability for taxes with respect to a
reversion of qualified plan assets under Section 4980 of the Code.
(d) There have been no material failures to comply with the continuation
coverage provisions required by Sections 601-608 of ERISA and Section 4980B of
the Code under any Plan.
(e) There are no employee benefit plans which cover employees of the
Company which are required to comply with the provisions of any foreign law.
-18-
(f) All excess contributions, if any (together with any income allocable
thereto), have been distributed (or, if forfeitable, forfeited) before the close
of the first two and one half (2 1/2) months of the following plan year; and
there is no liability for excise tax under Section 4979 of the Code with respect
to such excess contributions, if any, for any Plan.
(g) There is no liability for Taxes with respect to: (i) an accumulated
funding deficiency under Section 4971 of the Code and/or (ii) a nondeductible
contribution under Section 4792 of the Code.
Section 5.12 Compliance with Law.
The Company has been, is and on the Closing Date will continue to be in
compliance with all applicable laws (including duties imposed by common law),
rules, regulations, orders, ordinances, judgments and decrees of all
governmental authorities (federal, state, local and foreign) and all
requirements imposed under building, zoning, occupational safety and health,
pension, environmental control, toxic waste, fair employment, equal opportunity
or similar laws, rules, regulations and ordinances, in each case the
noncompliance with which would be likely to have a Material Adverse Effect on
the Company.
Section 5.13 Litigation; Claims.
Schedule 5.13 hereto contains a complete and accurate list of (a) all
claims, actions, suits, proceedings or investigations pending or (to the
knowledge of the Company) threatened by or against the Company, and (b) all
judgments, decrees, arbitration awards, agreements or orders binding upon the
Company. Except as set forth on Schedule 5.13, no material claims, including
without limitation, product liability claims, have been asserted against the
Company during the past ten (10) years, and, to the knowledge of the Company,
there is no basis for any material action, proceeding or investigation involving
the Company, other than as set forth on Schedule 5.13.
Section 5.14 Contracts and Commitments.
(a) Schedule 5.14 contains a complete and accurate list of all contracts,
agreements and commitments (other than the agreements or arrangements set forth
in Schedules 5.11, 5.15, 5.17, 5.20A, 5.21, 5.24, 5.26 and 5.27), whether
written or oral, of the Company that involve commitments in excess of $10,000,
have a term of six (6) months or more or that are not in the ordinary course of
business.
(b) The agreements set forth in Schedules 5.11, 5.14, 5.15, 5.17, 5.20A,
5.21, 5.24, 5.26 and 5.27 are hereinafter referred to collectively as the
"Operating Agreements." None of the Operating Agreements has been assigned or is
the subject of any security agreement, except as set forth on Schedule 5.14.
Except as otherwise set forth on Schedule 5.14, (i) each of the Operating
Agreements is a valid and binding obligation of the Company and (to the
knowledge of the Company) the other party or parties thereto, enforceable in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws or equitable principles relating to
creditors' rights generally; (ii) neither the Company nor (to the knowledge of
the Company) any other party thereto, has terminated, canceled, modified or
waived any term or condition of any Operating Agreement; and (iii) except where
such default could not have a Material Adverse Effect on the Company, neither
the Company nor (to the knowledge of the Company) any other party to any
Operating Agreement is in default or alleged to be in default under any
Operating Agreement and there exists no event,
-19-
condition or occurrence that, after notice or lapse of time, or both, would
constitute such a default by the Company or (to the knowledge of the Company)
any other party to any such Operating Agreement. Except as described on Schedule
5.14, none of such Operating Agreements contains any covenant or other
restriction preventing or limiting the consummation of the transactions
contemplated hereby, including any provision prohibiting the assignment of the
Company's rights thereunder or granting any party a right of termination or
modification of any provision as a result thereof. The Company has no
outstanding powers of attorney. The Company delivered to the Buyer a copy of
each of the written Operating Agreements and a description of the terms and
conditions of any oral Operating Agreements.
Section 5.15 Intellectual Property Rights.
Schedule 5.15 contains a correct and complete list of the following assets
and related matters: (a) all patents and applications for patents, all Marks and
registration of Marks and applications for registration of Marks, all copyright
registrations and applications for copyright registration, and all trade names,
owned or used (pursuant to license agreements or otherwise) by the Company, and
in the case of any such Intellectual Property that is so owned, the
jurisdictions in or by which such assets or any of them have been registered,
filed or issued and (b) to the extent not listed on Schedule 5.14, all
contracts, agreements or understandings pursuant to which the Company has
authorized any Person to use any of the Intellectual Property which is so owned.
The Company owns, possesses or licenses and as of the Closing Date will own,
possess or license, all right, title and interest in and to the items of
Intellectual Property that are material to the conduct of its business as now
conducted without conflict with the rights of others. Except as set forth on
Schedule 5.15: (a) the Company has the right to use and, to the knowledge of the
Company, the sole and exclusive rights to use, the Intellectual Property
(including applications for any of the foregoing) used in connection with the
business of the Company, and none of the past or present employees, officers,
directors or stockholders of the Company, or, to the knowledge of the Company,
anyone else, has any rights with respect thereto; (b) the consummation of the
transactions contemplated hereby will not alter or impair any such rights; (c)
the Company has not received any notice or claim of infringement or any claim
challenging or questioning the validity or effectiveness of any of the items of
Intellectual Property, and to the knowledge of the Company, there is no valid
basis for any such claim; and (d) the Company is not liable, nor has it made any
contract or arrangement whereby it may become liable, to any Person for any
royalty or other compensation for use of any of the items of Intellectual
Property.
Section 5.16 Liens.
Except as set forth on Schedule 5.16, none of the properties or assets,
whether real, personal or mixed, or tangible or intangible, owned or leased by
the Company is subject to any mortgage, lien, encumbrance or other security
interest, except for (a) liens for taxes and assessments or governmental charges
or levies not at the time due or being contested in good faith and for which
adequate reserves have been established; (b) liens in respect of pledges or
deposits under workmen's compensation laws or similar legislation, carriers',
warehousemen's, mechanics', laborers' and materialmen's and similar liens, if
the obligations secured by such liens are not then delinquent or are being
contested in good faith by appropriate proceedings disclosed on Schedule 5.13
and (c) liens incidental to the conduct of the business.
-20-
Section 5.17 Insurance.
Except as set forth on Schedule 5.11, all insurance policies and fidelity
bonds relating to the business, assets and personnel of the Company, including
summary descriptions and the termination dates thereof, are set forth on
Schedule 5.17. Except as set forth on Schedule 5.17, the Company has not had
coverage denied or limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance, during the last two (2) years.
Section 5.18 Accounts Receivable and Accounts Payable.
Except as set forth on Schedule 5.18, all accounts receivable of the
Company, whether reflected on the Company Audited Financial Statements and/or
the Company Unaudited Financial Statements, or otherwise, represent sales
actually made in the ordinary course of business or valid claims as to which
full performance has been rendered, and the reserves against the accounts
receivable for returns and bad debts are commercially reasonable and have been
determined in accordance with GAAP, consistently applied. Except to the extent
reserved against the accounts receivable, no counterclaims or offsetting claims
with respect to the accounts receivable are pending or, to the knowledge of the
Company, threatened. Except as set forth on Schedule 5.18, the accounts payable
of the Company reflected on the Company Audited Financial Statements and the
Company Unaudited Financial Statements arose from bona fide transactions in the
ordinary course of business, and all such accounts payable have been paid, are
not yet due and payable under the Company's payment policies and procedures
(copies of which have been previously provided to the Buyer), or are being
contested by the Company in good faith.
Section 5.19 Inventories and Backlog.
The inventories of the Company as of the date hereof consist of raw
materials, goods in process and finished goods salable or usable in the normal
course of the business of the Company, and such inventories are, and shall be on
the Closing Date, at levels consistent with past practices of the business. All
such inventories are carried on the books of the Company pursuant to the normal
inventory valuation policies of the Company, which are in accordance with GAAP,
as reflected in the Company Audited Financial Statements. Any expected losses on
customer contracts in progress are recognized and recorded in the period in
which such losses are determined. Schedule 5.19 sets forth the locations of all
inventories of the Company and the amount of inventory at each location as of
July 31, 1996. Except as set forth on Schedule 5.19, no items included in
inventories of the Company is or will be pledged as collateral or held by the
Company on consignment from others. The Company is not committed to purchase
inventories in amounts greater than are reasonably expected to be usable in the
ordinary course of business as presently conducted. With respect to inventories
in the hands of suppliers for which the Company will be committed on the Closing
Date, such inventories on the Closing Date will be reasonably expected to be
usable in the ordinary course of business as presently being conducted. At July
26, 1996, the backlog of firm orders for the Company was $22,951,000. Schedule
5.19 sets forth each order of such backlog in excess of $500,000 and the
scheduled or committed delivery date thereof.
-21-
Section 5.20 Tangible Personal Property.
Schedule 5.20 includes all of the fixed assets of the Company and each item
of tangible personal property, other than inventory (whether finished goods or
raw materials) or supplies, with an original purchase price of at least $500,
owned by the Company and the location thereof including all such furniture,
furnishings, office equipment, machinery, tools and other equipment. The Company
has, and on the Closing Date will have, good and legal title to all of the items
listed on Schedule 5.20, free and clear of all liens, claims and encumbrances
except as set forth thereon or on Schedule 5.16. Schedule 5.20A lists all leases
of tangible personal property leased by the Company and the location thereof.
Except as set forth on Schedule 5.20A, none of such leases contains any covenant
or restriction preventing or limiting the consummation of the transactions
contemplated hereunder. All of the personal property listed on Schedule 5.20 and
the assets leased pursuant to the leases listed on Schedule 5.20A are suitable
for the uses for which they are employed, are in good operating condition and
repair (ordinary wear and tear excepted) and have been maintained in accordance
with manufacturers' recommendations.
Section 5.21 Real Property.
(a) The Company does not own any real property and has not agreed (and has
no option) to purchase, sell or lease to a third party, and is not obligated to
purchase, sell or lease to a third party in connection with its business, any
real property.
(b) Schedule 5.21 contains a correct and complete list of all the real
property that is leased by the Company or that the Company has agreed (or has an
option) to lease, or may be obligated to lease and a correct and complete
description of each lease pursuant to which such real property is leased. Such
real property is hereinafter referred to as the "Leased Property," and the
improvements and fixtures thereon are hereinafter referred to as the "Leased
Improvements."
(c) Except as set forth on Schedule 5.21, the Company is the sole legal and
equitable owner of the leasehold interest in the Leased Property and the Leased
Improvements and possesses good and indefeasible title thereto, free and clear
of all conditions, exceptions, reservations, liens, restrictions, rights-of-way,
easements, encumbrances and other matters affecting title to such leasehold that
could impair the ability of the Company to realize the benefits of the rights
provided to it under its lease as such rights are currently utilized in the
conduct of the business of the Company consistent with past practice.
(d) There are no adverse or other parties in possession of the Leased
Property, the Leased Improvements, or any portion or portions thereof, and on
the Closing Date the leasehold interests in the Leased Property and the Leased
Improvements will be free and clear of any and all leases, licensees, occupants
or tenants except as set forth on Schedule 5.21. There are no pending or to the
knowledge of the Company, threatened condemnation, eminent domain or similar
proceedings, or litigation or other proceedings affecting the Leased Property,
the Leased Improvements or any portion or portions thereof. To the knowledge of
the Company, there are no pending or threatened requests, applications or
proceedings to alter or restrict any zoning or other use restrictions applicable
to the Leased Property or the Leased Improvements that would interfere with the
conduct of the business of the Company or the use of its assets, which
interference would have a Material Adverse Effect on the business of the
Company. Except as set forth on Schedule 5.21, to the knowledge of the
-22-
Company, all water, sewer, gas, electric, telephone, drainage and other utility
equipment, facilities and services required by law or necessary for the
operation of the Leased Improvements are installed and connected pursuant to
valid permits and no notice has been received by the Company regarding the
termination or material impairment of any such service. All equipment and
fixtures associated with the Leased Improvements are in good operating condition
and repair (ordinary wear and tear excepted). The roof, foundation and
structural elements of the Leased Improvements are in good condition and repair
(ordinary wear and tear excepted). All necessary easements exist and are in full
force and effect, except where the nonexistence or nonenforceability of such
easements would not have a Material Adverse Effect on the Company. The Leased
Property has access, in accordance with past practice, to and from a public
right of way or road dedicated for public use and no notice has been received by
the Company relating to the termination or impairment of such access (including
applicable parking requirements).
Section 5.22 Environmental Matters.
(a) As used in this Agreement "Hazardous Material" shall mean: (i) any
"hazardous substance" as now defined pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Section
9601(14), or any substance listed or identified by any characteristic in any
regulation adopted pursuant to any statute referred to or incorporated into such
definition, all as in effect on the date hereof; (ii) any petroleum, including
crude oil and any fraction thereof; (iii) natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel; (iv) any "hazardous
chemical" as defined pursuant to 29 C.F.R. Part 1910; and (v) any friable
asbestos, polychlorinated biphenyl ("PCB"), or isomer of dioxin.
(b) Except as set forth on Schedule 5.22, there is no Hazardous Material
within, under, originating from or relating to any real property interest or, to
the Company's knowledge, other location geologically or hydrologically connected
to such properties owned, operated or controlled by the Company or its
predecessors in interest.
(c) Neither the Company nor any of its predecessors in interest has any
liability, matured or not matured, absolute or contingent, assessed or
unassessed, imposed or based upon any provision under any foreign, federal,
state or local law, rule, or regulation or common law, or under any code, order,
decree, judgment or injunction applicable to the Company or its predecessors in
interest, nor, except as set forth on Schedule 5.22 hereof, has the Company
received any notice, or request for information issued, promulgated, approved or
entered thereunder, or under the common law, or any tort, nuisance or absolute
liability theory, relating to public health or safety, worker health or safety,
or pollution, damage to or protection of the environment including without
limitation, laws relating to emissions, discharges, releases or threatened
releases of Hazardous Material into the environment (including without
limitation, ambient air, surface water, groundwater, land surface or
subsurface), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, generation, disposal, transport or handling of any
Hazardous Material (hereinafter collectively referred to as "Environmental
Laws").
(d) The Company possesses and is in compliance in all material respects
with all permits, licenses, certificates, franchises and other authorizations
relating to the Environmental Laws necessary to conduct its business or required
by environmental regulations.
-23-
(e) The Company has not, during the past five (5) years, been subject to
any civil, criminal or administrative action, suit, claim, hearing, notice of
violation, investigation, inquiry or proceeding for failure to comply with, or
received notice of any violation or potential liability under the Environmental
Laws, nor is the Company aware of any information, whether or not confirmed or
reported, which could give rise to any such potential liability.
(f) No real property, site or facility (as defined in CERCLA, 42 U.S.C.
Section 9601(9)) owned or operated by the Company is (i) listed or proposed for
listing on the National Priority List or (ii) listed on the Comprehensive
Environmental Response, Compensation, Liability Information System List
("CERCLIS") promulgated pursuant to CERCLA, or any comparable list maintained by
any foreign, state or local government authority.
(g) There are no underground storage tanks owned or operated by the
Company, and any prior use and operation of underground storage tanks owned or
operated by the Company has been in compliance with all Environmental Laws.
(h) The Company has provided to the Buyer an opportunity to inspect its
facilities, and to review and copy documents, and the Company has delivered to
the Buyer true, complete and correct copies of results of any reports, together
with supporting studies, analyses and tests in the possession of or initiated by
the Company pertaining to the existence of Hazardous Material and any other
environmental concerns relating to any of its facilities, or sites or real
property owned, leased, operated, used or controlled by the Company or any of
its predecessors in interest, or concerning compliance with or liability under
the Environmental Laws.
(i) There are no PCBs in or at any premises owned, leased, operated or
controlled by the Company and its prior use, handling, storage, transport or
disposal of PCBs has been in material compliance with all Environmental Laws.
(j) There is no friable asbestos or asbestos containing materials on or in
the properties and assets owned, leased, operated or controlled by the Company
and the facilities on such properties comply in all material respects with the
Environmental Laws including but not limited to, Occupational Safety and Health
Act regulations with respect to ambient air exposure to asbestos.
(k) The Company has not, by contract, agreed to assume the liability of any
other person or entity pursuant to any of the Environmental Laws.
Section 5.23 Governmental Authorizations.
The Company possesses all licenses, franchises, permits, certificates,
orders, approvals, exemptions, registrations or other authorizations
(collectively, the "Permits") from governmental, regulatory or administrative
agencies or authorities required for the ownership of its properties and assets
and operation of its business in the manner presently conducted, except where
the failure to possess such permit would not have a Material Adverse Effect on
the Company, (including those required pursuant to laws or regulations relating
to the protection of the environment), each of which will be in full force and
effect on the Closing Date. A list of all material Permits is set forth on
Schedule 5.23. Except as specified on Schedule 5.23, no registrations, filings,
applications, notices, transfers, consents, approvals, orders, qualifications,
waivers or other actions of any kind are required by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to enable the
-24-
Company to continue the possession and operation of its properties and assets
and the business of the Company as presently conducted in all material respects.
Section 5.24 Employees.
Schedule 5.24 sets forth a complete and accurate list of all employees of
the Company having total annual compensation in excess of $25,000, showing for
each: name, hire date, current job title or description, current salary level
(including any bonus or deferred compensation arrangements) and any bonus,
commission or other remuneration paid during fiscal 1995 and fiscal 1996, and
describing any existing contractual arrangement with such employee. None of the
employees of the Company is currently on short-term or long-term disability.
Except as set forth on Schedule 5.24, since December 31, 1995 no salaried
employee of the Company who has been compensated at an annual rate in excess of
$40,000 has terminated his or her employment or had such employment terminated
for any reason or for no reason; no such employee has given notice of his or her
intent to terminate such employment; and no notice of termination has been given
to any such employee by the Company. Except as set forth on Schedule 5.24, no
employees of the Company shall receive any compensation as a result of the
consummation of the transaction contemplated by this Agreement.
Section 5.25 Employee Relations.
The Company has not at any time during the past five years had, nor is
there now threatened, any labor disputes or any strike, picket, work stoppage,
work slowdowns or other job action due to labor disagreements. The Company is in
material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including the terms and provisions of any collective bargaining agreement or
other contract with a labor union representing any employees of the Company and
is not engaged in any unfair labor practice; there is no unfair labor practice
charge or complaint against the Company, or (to the knowledge of the Company)
threatened before the National Labor Relations Board or any foreign authority;
no question concerning representation has been raised or is (to the knowledge of
the Company) threatened respecting the employees of the Company; no grievance
that might have a Material Adverse Effect on the Company, nor any arbitration
proceeding arising out of or under any collective bargaining agreement, is
pending and no claims therefor exist; and no collective bargaining agreement
that is binding on the Company restricts it from relocating, closing or
contracting any of its operations.
Section 5.26 Customers and Vendors.
Schedule 5.26 sets forth a correct and complete list of the ten (10)
largest (by dollar volume) customers and vendors of the Company during the most
recently completed fiscal year, indicating the existing contractual
arrangements, if any, with each such customer or vendor. Except as set forth on
Schedule 5.26, there are no outstanding disputes with any customer or vendor
listed thereon and no customer or vendor listed thereon has refused to continue
to do business with the Company or has stated to the Company its intention not
to continue to do business with the Company or to materially change the amount
or terms of the business done with the Company. Since December 31, 1995, there
has not been any material shortage or unavailability of the raw materials
necessary to manufacture the products sold by the Company and the Company
-25-
has no knowledge of any current shortage or unavailability which leads it to
believe that any such shortages will occur.
Section 5.27 Distributors and Representatives.
Schedule 5.27 sets forth a correct and complete list of the twenty (20)
largest (by dollar volume) distributors, representatives and agents for the sale
of the products of the Company during the two (2) most recently completed fiscal
years and all distributors, representatives and agents to whom the Company has
given any exclusive rights with respect to territories or products. Since
December 31, 1995, there has been no termination of any independent distributor,
wholesaler, sales representative or agent relationship, nor, to the knowledge of
the Company, has any present independent distributor, wholesaler, sales
representative or agent indicated any intention to terminate or materially
change the terms of its relationship with the Company.
Section 5.28 Broker's or Finder's Fees.
No agent, broker, investment banker, Person or firm acting on behalf of the
Company or under the authority of the Company is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any of the
transactions contemplated hereby.
Section 5.29 Disclosure.
No representation or warranty by the Company to the Buyer contained in this
Agreement, and no statement contained in the Schedules hereto or any certificate
furnished to the Buyer pursuant to the provisions hereof, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein not
misleading.
Section 5.30 Certain Transactions.
Except as set forth on Schedule 5.30, neither the Stockholder nor the
directors or officers of the Company is currently a party to any transaction
with the Company (other than for services as employees, officers and directors),
including without limitation any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from, any
such Person, or to or from any corporation, partnership, trust or other entity
in which any such Person, owns in excess of five percent (5%) of the outstanding
equity interest. All transactions described on Schedule 5.30, or required to be
described thereon, were entered into at arms-length upon terms no less favorable
to the Company than those generally available from unrelated third parties.
Section 5.31 Absence of Questionable Payments.
Neither the Company nor any director, officer, agent, employee or other
Person acting on their behalf has (i) used any corporate or other funds for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Securities Exchange Act of 1934, as amended, or any other
applicable foreign, federal or state law; or (ii) accepted or received any
unlawful contributions, payments, expenditures or gifts.
-26-
Section 5.32 Directors and Officers; Bank Accounts.
Schedule 5.32 lists each of the directors and officers and all of the
accounts (and signatories thereto) of the Company with any bank, brokerage firm
or other financial institution or depository.
Section 5.33 Defects in Products or Designs; Product Safety.
(a) Except as set forth on Schedule 5.33, there have been no claims of any
Person alleging any defects in the design, construction, manufacturing or
installation of any material product ("Product") made, manufactured,
constructed, distributed, sold, leased or installed by the Company or its
employees, or agents, that would adversely affect the performance or quality of
such Product. Each Product has been designed, manufactured, packaged and
labelled in compliance with all regulatory, engineering, industrial and other
codes applicable thereto and the Company has not received notice of any alleged
noncompliance with any such code. Each Product advertised or represented as
being rated or approved by a rating organization, such as Underwriters'
Laboratories, the National Sanitation Foundation or the Society of Automotive
Engineers or other similar organizations, complies with all conditions of such
rating or approval.
(b) The Company has not been required to file, and has not filed, a
notification or other report with the United States Consumer Product Safety
Commission concerning actual or potential hazards with respect to any Product
manufactured or sold by the Company.
Section 5.34 Product Warranties.
True and correct copies of all written warranties and guaranties applicable
to the Company and its products and services have been provided to the Buyer.
The amounts reflected as warranty reserves in the Company Audited Financial
Statements and/or Company Unaudited Financial Statements are commercially
reasonable and have been determined in accordance with GAAP, consistently
applied.
Section 5.35 Government Contracts.
The Company is not a party to, or bound by the provisions of, any contract
(including purchase orders, blanket purchase orders and agreements and delivery
orders) with the United States Government or any department, agency, or
instrumentality thereof or any state or local governmental agency or authority.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to the Buyer, and the Buyer in
agreeing to consummate the transactions contemplated by this Agreement has
relied upon such representations and warranties, that:
Section 6.1 Ownership of Stock.
Except as set forth on Schedule 6.1, the Stockholder is the owner,
beneficially and of record, of Forty Thousand (40,000) shares of Stock, which
constitutes all of the shares of Stock which are issued and outstanding, free
and clear of any pledge,
-27-
lien, security interest, option, charge, right of first refusal, encumbrance,
claim or equity of any kind. On the Closing Date the Stockholder will have
complete and unrestricted power and the unqualified right to sell, assign,
transfer and deliver to the Buyer on the Closing Date, good and valid title to
all of the shares of Stock which are issued and outstanding free and clear of
any such pledge, lien, security interest, option, charge, right of first
refusal, encumbrance, claim or equity of any kind.
Section 6.2 Valid and Binding Agreements.
The Stockholder has the full right, capacity and power to enter into this
Agreement. All necessary action on the part of the Stockholder has been taken to
authorize the execution and delivery of this Agreement and the Indemnification
and Escrow Agreement by the Company, the performance of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby. This Agreement has been, and on the Closing Date the
Indemnification and Escrow Agreement will be, duly and validly executed and
delivered by the Stockholder, and constitutes and will constitute valid and
binding obligations, enforceable against the Stockholder, in accordance with
their respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
generally and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 6.3 No Violation
Neither the execution and delivery of this Agreement or the Indemnification
and Escrow Agreement by the Stockholder nor the consummation of the transactions
contemplated hereby or thereby nor compliance by the Stockholder with any of the
provisions hereof or thereof will (i) violate or conflict with any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Stockholder or the Company, or (ii) violate or conflict with,
or result in a breach of any provision of, or constitute a default (or any event
which, with or without due notice or lapse of time, or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument of the Stockholder or by which he, or any of his assets, is bound.
Section 6.4 Consents and Approvals.
Except for any filings under the HSR Act or for the filing of the
Certificate of Merger, no permit, consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or third party is required to be made or obtained by the Stockholder
in connection with the execution, delivery and performance of this Agreement or
the Indemnification and Escrow Agreement or the consummation of the transactions
contemplated hereby or thereby.
Section 6.5 Broker's or Finder's Fees.
No agent, broker, investment banker, Person or firm acting on behalf of the
Stockholder or under the authority of the Stockholder is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any of the
transactions contemplated hereby.
-28-
Section 6.6 Section 630 Liability.
The Stockholder has no liability pursuant to Section 630 of the New York
Business Corporation Law.
Section 6.7 Residency.
The Stockholder is not a resident of the State of New York for the purposes
of determining the tax treatment of the transactions contemplated by this
Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE GUARANTOR
The Buyer and the Guarantor represent and warrant to the Company and the
Stockholder, and the Company and the Stockholder in agreeing to consummate the
transactions contemplated by this Agreement have relied upon such
representations and warranties, that:
Section 7.1 Corporate Organization.
The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has the requisite power and
authority (corporate and other) to own, lease and operate its properties and to
carry on its business as now being conducted. The Guarantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority (corporate and
other) to enter into this Agreement and to perform its obligations hereunder.
Section 7.2 Valid and Binding Agreements.
The Buyer has all requisite corporate power and authority to enter into
this Agreement and the Indemnification and Escrow Agreement. All necessary
corporate action on the part of the Buyer and the Guarantor has been taken to
authorize the execution and delivery of this Agreement and the Indemnification
and Escrow Agreement, the performance of their respective obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby. This Agreement has been, and as of the Closing Date, the
Indemnification and Escrow Agreement will be, duly and validly executed and
delivered by the Buyer and the Guarantor, and will constitute valid and binding
agreements of the Buyer and the Guarantor, enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
generally and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 7.3 No Violation.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby or thereby (including obtaining the
consent referred to in Section 9.19) nor compliance by the Buyer and the
Guarantor
-29-
with any of the provisions hereof or thereof will (i) violate or conflict with
any provision of the certificate of incorporation or by-laws of the Buyer or the
Guarantor or any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Buyer or the Guarantor, or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or any event which, with or without due notice or lapse of
time, or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument of the Buyer or the Guarantor.
Section 7.4 Consents and Approvals.
Except for the consent referred to in Section 9.19, any filings required
under the HSR Act or the filing of the Certificate of Merger, no permit,
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or third party is required to be
made or obtained by the Buyer or the Guarantor in connection with the execution,
delivery and performance of this Agreement or the Indemnification and Escrow
Agreement or the consummation of the transactions contemplated hereby or
thereby.
Section 7.5 Broker's or Finder's Fees.
Except as disclosed on Schedule 7.5, no agent, broker, investment banker,
Person or firm acting on behalf of the Buyer or the Guarantor, or under the
authority of the Buyer or the Guarantor, is or will be entitled to any broker's
or finder's fee or any other commission or similar fee directly or indirectly
from the Buyer or the Guarantor in connection with any of the transactions
contemplated hereby.
ARTICLE VIII
COVENANTS
Section 8.1 Compliance with Law.
From the date hereof through the Closing Date, the Company will promptly
comply in all material respects with all laws and regulations (including without
limitation, those relating to the protection of the environment and employee
benefits) applicable to the Company's business and all laws and regulations with
which compliance is required for the valid consummation of the transactions
contemplated hereby and will promptly notify the Buyer of any legal,
administrative or other proceedings, investigations, inquiries, complaints,
notices of violation or other asserted claims, judgments, injunctions or
restrictions, pending, outstanding or, to the knowledge of the Company,
threatened or contemplated, which could have a Material Adverse Effect on the
Company.
Section 8.2 Operation of Business Prior to Closing.
During the period from the date hereof through the Closing Date, the
Company agrees that (except as expressly contemplated or permitted by this
Agreement or to the extent that the Buyer shall otherwise consent in writing):
-30-
(a) The Company shall carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and
shall use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be impaired in any material respect at the Closing Date.
(b) The Company shall not grant any general increase in the compensation
payable or to become payable to its officers or employees (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or any special increase in the compensation payable or to become
payable to any officer or employee, except for normal merit and cost of living
increases in the ordinary course of business and in accordance with past
practice.
(c) The Company shall not settle or compromise any material claims or
litigation or, except in the ordinary and usual course of business, modify,
amend or terminate any of its material contracts or cancel any debts or waive
any claims or rights of substantial value.
(d) The Company shall not permit any material insurance policy to be
canceled or terminated without notice to the Buyer.
(e) The Company shall not fail to confer on a regular and frequent basis
with one or more representatives of the Buyer to report material operational
matters and the general status of ongoing operations.
(f) The Company shall not, except in the ordinary course of business, (i)
factor, discount or otherwise accept less than full payment with regard to its
accounts receivable or other amounts due, (ii) delay payment on, or otherwise
alter the payment terms of, its accounts payable or pay the amounts due
thereunder later than the stated date for payment thereof or (iii) sell any
inventory at less than fair market value or make any bulk sale of such
inventory, or fail to maintain its inventory at ordinary, customary levels,
consistent with the Company Audited Financial Statements, the Company Unaudited
Financial Statements and past practice.
(g) The Company shall not, except as expressly permitted by this Agreement,
take any action that would or is reasonably likely to result in any of its
representations and warranties set forth in this Agreement being untrue in any
material respect, or in any of the conditions in this Agreement set forth in
Article IX not being satisfied.
(h) The Company shall not (i) make any new or change any current tax
election or (ii) settle or compromise any material federal, state, local or
foreign income tax liability.
(i) The Company shall not (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except for a distribution
to the Stockholder in the amount not to exceed $490,000 immediately prior to the
effectiveness of the revocations referred to in Section 11.2, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (iii) repurchase or otherwise
acquire any shares of its capital stock.
-31-
(j) No liens, encumbrances, obligations or liabilities relating to the
Company, whether absolute or contingent (including litigation claims), shall be
discharged, satisfied or paid, other than liabilities shown on the Company
Audited Financial Statements or the Company Unaudited Financial Statements and
liabilities incurred after the date thereof in the ordinary course of business
and in normal amounts, and no such discharge, satisfaction or payment shall be
effected other than in accordance with the ordinary payment terms relating to
the liability discharged, satisfied or paid.
(k) The Company shall not amend its certificate of incorporation or
by-laws.
(l) The Company shall not (i) authorize capital expenditures in excess of
$25,000 or make any acquisition of, or investment in, assets or equity
securities of any other Person; (ii) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof; (iii) assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of any
Person, or make any loans or advances to any Person; (iv) enter into any
material contract or agreement other than in the ordinary course of business; or
(v) enter into or amend in any respect any material contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
Section 8.2(l).
(m) The Company shall not exceed its current borrowing availability under
the Revolving Credit Line or enter into or amend in any respect the Revolving
Credit Line or Term Loan.
(n) The Company shall not make any change in any method of accounting or
accounting principle or practice.
(o) The Company shall not enter into any agreement or understanding to do
any of the foregoing.
Section 8.3 Access.
At all times prior to the Closing Date, the Company shall provide the Buyer
and its representatives with full access to, and will make available for
inspection and review, all properties, personnel, books, records and accounts of
the Company in order that the Buyer may have full opportunity to make such
investigation as each shall desire to make of the affairs of the Company. It is
understood that the Buyer shall be permitted to maintain personnel on the
premises of the Company during customary business hours to observe all aspects
of the operations of the Company and to confer with its management, attorneys
and other third parties reasonably requested for verification of any information
obtained pursuant to such observations. The Company also consents to the
examination of workpapers and other records of its accountants pertaining to the
Company and will cooperate with the Buyer to obtain such access and related
information from its accountants.
-32-
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER AND THE GUARANTOR
All obligations of the Buyer that are to be discharged under this Agreement
at the Closing are subject to the Company's and the Stockholder's fulfillment,
at the Closing or effective as of the Closing Date, of each of the following
conditions (unless expressly waived in writing by the Buyer at any time at or
prior to the Closing) and the Company and the Stockholder shall use their
reasonable efforts to cause each of such conditions to be satisfied:
Section 9.1 Representations and Warranties.
On the Closing Date, the representations and warranties of the Company and
the Stockholder set forth in Articles V and VI of this Agreement shall be true
and correct in all material respects as though such representations and
warranties had been made by the Company and the Stockholder on and as of the
Closing Date and the Buyer shall have received at the Closing a certificate,
dated the Closing Date, signed by the President or a Vice President of the
Company and the Stockholder to such effect.
Section 9.2 Covenants, Agreements and Conditions.
The Company and the Stockholder shall have performed and complied in all
material respects with all covenants, agreements and conditions contained in
this Agreement required to be performed by the Company and the Stockholder on or
prior to the Closing Date, and the Buyer shall have received at the Closing a
certificate, dated the Closing Date, signed by the President or a Vice President
of the Company and the Stockholder to such effect.
Section 9.3 Proceedings.
No action or proceeding shall be pending or threatened to restrain or
prevent the consummation of the transactions contemplated hereby.
Section 9.4 Corporate Proceedings.
All corporate and other proceedings to be taken and all consents to be
obtained by the Company and the Stockholder in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Buyer and its counsel,
Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx LLP, both of whom shall have received all
such originals or certified or other copies of such documents as either may
reasonably request.
Section 9.5 Governmental Approvals.
There shall have been received all necessary governmental consents or
authorizations required in connection with the transactions contemplated hereby.
Section 9.6 No Material Adverse Effect.
During the period from July 31, 1996 through the Closing Date, there shall
not have occurred any Material Adverse Effect on the Company.
-33-
Section 9.7 Insurance.
The Company shall have maintained in full force and effect the insurance
coverage described on Schedule 5.17 hereto or policies providing substantially
equivalent coverage.
Section 9.8 Deliveries.
The Company and the Stockholder shall have delivered to the Buyer the
following items:
(a) certificates representing the shares of Stock, duly endorsed or
accompanied by stock powers duly executed in blank (with signatures guaranteed
by any national bank or trust company) and otherwise in form acceptable for
transfer on the books of the Company;
(b) the stock books, stock ledgers, minute books and corporate seal of the
Company;
(c) certificates from appropriate authorities, dated as of or about the
Closing Date, as to the good standing, qualification to do business, and payment
of taxes by the Company in each jurisdiction where it is so qualified;
(d) the resignation of each director and officer of the Company, as
requested by the Buyer;
(e) a certificate of the Secretary or Assistant Secretary of the Company,
certifying as to the Certificate of Incorporation, By-laws, resolutions of the
Board of Directors, and incumbency and signatures of officers of the Company;
(f) a legally binding estoppel certificate from each lessor of real
property or material personal property to the Company, which certificate shall
be in form and substance reasonably satisfactory to the Buyer and its counsel;
(g) An appropriate form, executed by the Stockholder, making the election
referred to in Section 11.1;
(h) satisfactory evidence of the revocations referred to in Section 11.2;
and
(i) all other previously undelivered items required to be delivered by the
Company or the Stockholder to the Buyer at or prior to the Closing pursuant to
this Agreement (including all items referred to in Article IV) or otherwise
required in connection herewith unless waived in writing by the Buyer.
Section 9.9 HSR Act Requirements.
Any "waiting period" under the HSR Act applicable to the transactions
contemplated hereby shall have expired by the Closing Date or shall have been
terminated by the appropriate agency.
-34-
Section 9.10 Opinion of Counsel.
The Buyer shall have received a written opinion dated as of the Closing
Date from Xxxxxx, Xxxxxxx & Xxxxx, counsel to the Company and the Stockholder,
in form and substance reasonably satisfactory to the Buyer and its counsel.
Section 9.11 Tax Status Certification.
The Buyer shall receive an affidavit, reasonably satisfactory to Buyer,
from the Stockholder that the Stockholder is not a foreign person within the
meaning of Section 1445 of the Code. If, on or before the Closing Date, Buyer
shall not have received such affidavit, Buyer may withhold from the Estimated
Merger Consideration payable at the Closing to the Stockholder such sums as are
required to be withheld therefrom under Section 1445 of the Code.
Section 9.12 Consents.
All consents, approvals and waivers from third parties required in
connection with the transactions contemplated hereby shall have been obtained.
Section 9.13 Evidence of Termination.
The Buyer shall have received satisfactory evidence of the termination of
the agreements and other transactions referred to in Section 4.6.
Section 9.14 Releases of Liens
The Company shall have delivered to the Buyer releases of all liens and
encumbrances on the Company's assets of record other than the liens and
encumbrances set forth on Schedule 9.14 (the "Permitted Encumbrances").
Section 9.15 Releases of Stock Pledges.
The Stockholder shall have delivered to the Buyer releases of all pledges
of the Stock.
Section 9.16 Payment of Indebtedness.
The Buyer shall have received evidence of the repayment of all
indebtedness, including any outstanding principal and interest, for borrowed
money, advances or other amounts paid to or on behalf of the Stockholder, his
family or his Affiliates by the Company as of the Closing Date.
Section 9.17 Repayment of Certain Debt.
At the Closing, the Surviving Corporation shall pay all amounts owed as of
the Closing Date under the Revolving Credit Line and the Term Loan, including
outstanding principal and interest and any success fees, prepayment premiums,
make-whole premiums or penalties.
Section 9.18 Lease Extension.
The Company shall have extended the Lease Agreement by and between the
Company and Wilray of Rochester Inc., dated May 1993, as amended (the "Lease"),
-35-
for a period of one (1) year upon substantially the same economic terms and
conditions as the Lease.
Section 9.19 Approval of Lenders.
At or prior to Closing, the Buyer and the Guarantor shall have received the
consent of the senior secured lender of the Guarantor to the consummation of the
transactions contemplated by this Agreement.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
COMPANY AND THE STOCKHOLDER
All obligations of the Company and the Stockholder that are to be
discharged under this Agreement at the Closing are subject to the Buyer's
fulfillment at the Closing or effective as of the Closing Date of each of the
following conditions (unless expressly waived in writing by the Company at any
time at or prior to the Closing) and the Buyer shall use its reasonable efforts
to cause each of such conditions to be satisfied:
Section 10.1 Representations and Warranties.
On the Closing Date, the representations and warranties of the Buyer and
the Guarantor set forth in Article VII of this Agreement shall be true and
correct in all material respects as though such representations and warranties
had been made on and as of the Closing Date, and the Company and the Stockholder
shall have received at the Closing a certificate, dated the Closing Date, signed
by the President or a Vice President of the Buyer and the Guarantor to such
effect.
Section 10.2 Covenants, Agreements and Conditions.
The Buyer shall have performed and complied in all material respects with
all covenants, agreements and conditions contained in this Agreement required to
be performed by it on or prior to the Closing Date, and the Company and the
Stockholder shall have received at the Closing a certificate, dated the Closing
Date, signed by the President or a Vice President of the Buyer to such effect.
Section 10.3 Proceedings.
No action or proceeding shall be pending or threatened to restrain or
prevent the consummation of the transactions contemplated hereby.
Section 10.4 Corporate Proceedings.
All corporate and other proceedings to be taken and all consents to be
obtained by the Buyer and the Guarantor in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company and the Stockholder
and their counsel, Xxxxxx, Xxxxxxx & Xxxxx, each of whom shall have received all
such originals or certified or other copies of such documents as either may
reasonably request.
-36-
Section 10.5 Governmental Approvals.
There shall have been received all necessary governmental consents or
authorizations required in connection with the transactions contemplated hereby.
Section 10.6 Deliveries.
The Buyer shall have delivered to the Company and the Stockholder the
following items:
(a) the payments as required by Section 3.2;
(b) a certificate of the Secretary or Assistant Secretary of the Buyer,
certifying as to the Certificate of Incorporation, By-laws, resolutions of the
Board of Directors, and incumbency and signatures of officers of the Buyer;
(c) a certificate of the Secretary or Assistant Secretary of the Guarantor,
certifying as to the Certificate of Incorporation, By-laws, resolutions of the
Board of Directors, and incumbency and signatures of officers of the Guarantor;
(d) a legally binding release from each creditor of the Company to whom the
Stockholder has guaranteed the obligations of the Company, which release shall
be in form and substance reasonably satisfactory to the Stockholder and his
counsel; and
(e) all other previously undelivered items required to be delivered by the
Buyer and the Guarantor at or prior to the Closing pursuant to this Agreement
(including the items listed in Article IV) or otherwise required in connection
herewith unless waived in writing by the Company and the Stockholder.
Section 10.7 HSR Act Requirements.
Any "waiting period" under the HSR Act applicable to the transactions
contemplated hereby shall have expired by the Closing Date or shall have been
terminated by the appropriate agency.
Section 10.8 Opinion of Counsel.
The Company and the Stockholders shall have received a written opinion
dated as of the Closing Date from Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx LLP,
counsel to the Buyer and the Guarantor, in form and substance reasonably
satisfactory to the Company, the Stockholder and their counsel.
Section 10.9 Repayment of Certain Debt.
At the Closing, the Surviving Corporation shall pay all amounts owed as of
the Closing Date under the Revolving Credit Line and the Term Loan, including
outstanding principal and interest and any success fees, prepayment premiums,
make-whole premiums or penalties.
Section 10.10 Letter of Credit.
The Buyer shall have provided to the Stockholder and Escrow Agent,
respectively, the irrevocable standby letters of credit described in Sections
3.2(b) and 3.2(g).
-37-
ARTICLE XI
TAX MATTERS
Section 11.1 Certain Tax Elections.
The Stockholder agrees to join with the corporate parent of Buyer in making
a timely election under Section 338(h)(10) of the Code with respect to the
acquisition of the Stock by operation of the Merger hereunder solely for U.S.
federal income tax purposes. The Stockholder further agrees to take all actions,
including the timely execution and filing of forms, necessary to effectuate such
election.
Section 11.2 Change in Tax Status.
The Company's election to be treated as an S Corporation for New York
income tax purposes shall be revoked, effective as of the day prior to the
Closing Date. The Company and the Stockholder shall take all actions, including
the timely execution and filing of forms, necessary to effectuate such
revocation; provided, however, that no action shall be taken to revoke the
Company's election to be treated as an S Corporation for federal income tax
purposes. If so directed by the Buyer prior to the Closing Date, the Company's
election to be treated as an S Corporation shall be similarly revoked for
Michigan income tax purposes. If the S Period Tax Return is not filed by January
1, 1997, then this Section 11.3 shall be initially applied as if the S Period
Tax Return had been filed on January 1, 1997 based upon reasonable estimates
made by the Surviving Corporation. This Section 11.3 shall again be applied,
with appropriate adjustments, upon the actual filing of the S Period Tax Return.
Section 11.3 Certain Distributions.
Within ten (10) days after the filing of the federal income Tax Return (the
"S Period Tax Return") of the Company for the period beginning on January 1,
1996 and ending on the Closing Date, either (i) the Surviving Corporation shall
pay to the Stockholder the amount by which the Stockholder S Period Tax (as
defined herein) exceeds the amount of cash distributions made by the Company to
the Stockholder since January 1, 1996 (excluding the distribution permitted by
Section 8.2(i)), or (ii) the Stockholder shall pay to the Surviving Corporation
the amount by which the amount of cash distributions made by the Company to the
Stockholder since January 1, 1996 (excluding the distribution permitted by
Section 8.2(i)) exceeds the Stockholder S Period Tax. Notwithstanding the
provisions of clause (i) above, any amount payable to the Stockholder by the
Surviving Corporation shall not exceed the amount, if any, by which Debt is less
than $15,000,000. For purposes of this Section 11.3, the "Stockholder S Period
Tax" shall be equal to the sum of (A) the taxable income (excluding capital
gains and losses) of the Company as shown on the S Period Tax Return multiplied
by 43.9% plus (B) the net capital gains of the Company as shown on the S Period
Tax Return multiplied by 32.3%; provided, however, that for purposes of
computing the Stockholder S Period Tax, taxable income of the Company shall
exclude all additional income arising solely by reason of the election made
pursuant to Section 11.1. Any sums payable by either party pursuant to this
Section 11.3 shall bear interest from the Closing Date through the date of
payment at the rate which is equal to the rate of interest actually earned on
the Escrow Amount while the Escrow Amount was held in escrow prior to the
payment to be made hereunder, if any, and the rate earned on the Vision U.S.
Treasury Money Market Fund (or, if such fund is not in continuous existence
during the relevant
-38-
period, such similar money market mutual fund selected by the parties) for any
period during which the Escrow Amount was not held in escrow, computed on the
basis of a 365-day year and paid for the actual number of days elapsed from the
Closing Date to the date of payment. If the S Period Tax Return is not filed by
January 1, 1997, then this Section 11.3 shall be initially applied as if the S
Period Tax Return had been filed on January 1, 1997 based upon reasonable
estimates made by the Surviving Corporation. This Section 11.3 shall again be
applied, with appropriate adjustments, upon the actual filing of the S Period
Tax Return.
ARTICLE XII
OTHER MATTERS
Section 12.1 Confidentiality.
(a) Notwithstanding the termination of this Agreement, each party hereto
and his, her or its respective accountants, attorneys, employees and other
agents, will keep confidential all information, oral and written, obtained from
any other party hereto or its Affiliates and refrain from using in any manner
all information set forth above not otherwise publicly available.
(b) The Stockholder agrees that, except in the ordinary course of business
of the Company, at all times from and after the Closing Date, he shall keep
secret and retain in strictest confidence, and shall not use for his benefit or
for the benefit of others, confidential information with respect to the Company,
including but not limited to, "know-how," trade secrets, customer lists, details
of client or consultant contracts, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans other
than any of the foregoing which are in the public domain (except through conduct
of the Stockholder which violates this Section 12.1 or the Employment and
Noncompetition Agreement) prior to any disclosure by the Stockholder.
Section 12.2 Further Assurances.
Each party hereto shall cooperate with the others, and execute and deliver,
or cause to be executed and delivered, all such other instruments, including
instruments of conveyance, assignment and transfer, and take all such other
actions as may be reasonably requested by the other parties hereto from time to
time, consistent with the terms of this Agreement, to effectuate the purposes
and provisions of this Agreement.
ARTICLE XIII
TERMINATION
Section 13.1 Methods of Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual consent of the Buyer and the Company;
-39-
(b) by the Buyer at any time after the date which is thirty (30) days from
the date of this Agreement if any of the conditions provided for in Article IX
of this Agreement shall not have been met prior to such date;
(c) by the Company at any time after the date which is thirty (30) days
from the date of this Agreement if any of the conditions provided for in Article
X of this Agreement shall not have been met prior to such date; or
(d) at any time prior to the Effective Time by either the Buyer or the
Company if the Merger shall not have been consummated by November 30, 1996.
Section 13.2 Procedure Upon Termination.
In the event of termination by the Buyer, the Company, or both, pursuant to
this Article XIII, written notice thereof shall promptly be given to the other
party or parties and the obligations of the Buyer, the Company and the
Stockholder under this Agreement shall, except as set forth below, terminate
without further action. Upon any such termination:
(a) each party will redeliver all documents, workpapers and other materials
of the other party or parties relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the party or parties
furnishing the same; and
(b) no party shall have any liability or further obligation to any other
party, except for such legal and equitable rights and remedies as any party may
have under this Agreement or otherwise, by reason of any breach or violation of
this Agreement by the other party.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by or on behalf of any of the
parties hereto or the results of any such investigation and notwithstanding the
participation of such party in the Closing, all representations and warranties
of the Buyer and the Company and the Stockholder contained in Articles V, VI and
VII herein and in any certificate executed and delivered by either the Buyer or
the Company or the Stockholder in connection with this Agreement shall survive
the Closing Date and shall terminate and expire twenty-four (24) months
thereafter; provided, however, that the representations and warranties contained
in Sections 5.5(c), 5.10, 5.11, 5.22, 5.28, 6.1, 6.5, 6.6, 6.7 and 7.5 shall
survive the Closing Date and terminate and expire at the end of the relevant
statute of limitations. All agreements of the parties contemplating performance
after the Closing Date shall survive the Closing Date for a period equal to
ninety (90) days after the expiration of the applicable statute of limitations
for any claim relating thereto.
-40-
Section 14.2 Service of Process.
Service of process on any of the Buyer, the Company or the Stockholder for
any claim, legal action or proceeding under this Agreement may be made in the
manner set forth in Section 14.3.
Section 14.3 Notices.
All notices, requests, consents and other communications hereunder shall be
deemed given when delivered if delivered personally (including by courier) or
telecopied (which is confirmed) and three (3) days after mailing, if mailed,
postage prepaid, by registered or certified mail (return receipt requested) to
the parties at the following addresses or to other such addresses as may be
furnished in writing by one party to the others:
(a) if to the Company (prior to Closing):
Xxxxxxxx Manufacturing Corporation
0000 Xxxxxx Xxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopier: 000-000-0000
Attention: XxxXxxxx X. Xxxxxxxx, Xx.
with a copy to:
Xxxxxx, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000-0000
Telecopier: 000-000-0000
Attention: Xxxxxxx X. Xxxxx, Esquire
(b) if to the Stockholder (after the Closing):
0000 Xxxxx Xxxxx Xxxxxxxxx
Xxxx Xxxxxx, Xxxxxxx 00000-0000
Telecopier: 000-000-0000
with a copy to:
Xxxxxx, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000-0000
Telecopier: 000-000-0000
Attention: Xxxxxxx X. Xxxxx, Esquire
(c) if to the Buyer or to the Surviving Corporation:
c/o DT Industries, Inc.
Corporate Center, Suite 2-300
0000 Xxxx Xxxxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Chief Executive Officer
-41-
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx LLP
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Telecopier: 000-000-0000
Attention: Xxx X. Xxxxx, Esquire
Section 14.4 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, without regard to such jurisdiction's conflicts
of law principles. The parties agree that venue or any suit, action, proceeding
or litigation arising out of or in relation to this Agreement shall be in any
federal or state court in the State of New York having subject matter
jurisdiction.
Section 14.5 Modification; Waiver.
This Agreement shall not be altered or otherwise amended except pursuant to
an instrument in writing signed by the Buyer, the Company and the Stockholder.
Any party may waive any misrepresentation by any other party, or any breach of
warranty by, or failure to perform any covenant, obligation or agreement of, any
other party, provided that mere inaction or failure to exercise any right,
remedy or option under this Agreement, or delaying in exercising the same, will
not operate as nor shall be construed as a waiver, and no waiver will be
effective unless set forth in writing and only to the extent specifically stated
therein.
Section 14.6 Entire Agreement.
This Agreement, the schedules and exhibits hereto, and any other agreements
or certificates delivered pursuant hereto constitute the entire agreement of the
parties hereto with respect to the matters contemplated hereby and supersede all
previous written or oral negotiations, commitments, representations and
agreements.
Section 14.7 Assignment; Successors and Assigns.
This Agreement may not be assigned by the Company or the
Stockholder without the prior written consent of the Buyer. Prior to the Closing
Date, this Agreement may not be assigned by the Buyer without the prior written
consent of the Company. After the Closing, the Surviving Corporation may assign
this Agreement. Notwithstanding the foregoing, the Buyer and the Guarantor shall
be entitled to assign their respective rights under this Agreement, before and
after the Closing, to its senior lenders, including The Boatmen's National Bank,
N.A., as Agent, and their respective successors and assigns. All covenants,
representations, warranties and agreements of the parties contained herein shall
be binding upon, inure to the benefit of and be enforceable by their respective
successors and permitted assigns.
Section 14.8 Public Announcements.
Prior to the Closing, no public announcement of the transactions
contemplated hereby or of the terms hereof shall be made by the parties to this
Agreement without the written consent, such consent not to be unreasonably
withheld or delayed, of the Buyer and the Company, except to the extent required
by law.
-42-
Section 14.9 Severability.
The provisions of this Agreement are severable, and in the event that any
one or more provisions are deemed illegal or unenforceable, the remaining
provisions shall remain in full force and effect.
Section 14.10 No Third Party Beneficiary.
This Agreement is intended and agreed to be solely for the benefit of the
parties hereto and their stockholders, and no other party shall accrue any
benefit, claim or right of any kind whatsoever pursuant to, under, by or through
this Agreement.
Section 14.11 Expenses.
Except as otherwise expressly provided herein, each party to this Agreement
will pay his, her or its own expenses in connection with the negotiation of this
Agreement, the performance of its obligations hereunder, and the consummation of
the transactions contemplated herein. Any such expenses incurred by the Company,
including any expenses of the Stockholder billed to the Company, shall be paid
by the Stockholder prior to or at the Closing.
Section 14.12 Execution in Counterpart.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
[The balance of this page has been intentionally left blank.]
-43-
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of
Merger as of the date first written above.
H022 CORPORATION
By: /s/ Xxxxx X. Xxxxx
--------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
XXXXXXXX MANUFACTURING CORPORATION
By: /s/ XxxXxxxx X. Xxxxxxxx, Xx.
--------------------------------------
XxxXxxxx X. Xxxxxxxx, Xx.
President
STOCKHOLDER:
/s/ XxxXxxxx X. Xxxxxxxx, Xx.
------------------------------------------
XxxXxxxx X. Xxxxxxxx, Xx.
The undersigned hereby unconditionally guarantees the full and punctual payment
and performance of all of the obligations of the Buyer to the Stockholder
arising under this Agreement. The liability of the undersigned hereunder shall
be primary, and in any right of action which shall accrue to the Stockholder
under this Agreement, the Stockholder may at his option, proceed against the
undersigned without having commenced any action, or having obtained any
judgment, against the Buyer.
DT INDUSTRIES, INC., as Guarantor
By: /s/ Xxxxxxx X. Xxxx
--------------------------------------
Xxxxxxx X. Xxxx
President and Chief Executive Officer
NOTE
The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrant pursuant to Item 601(b)(2) of
Regulation S-K.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
EXHIBIT A Form of Closing Certificate
EXHIBIT B Form of Indemnificatino and Escrow Agreement
EXHIBIT C Principles and Procedures
EXHIBIT D Form of Certificate of Incorporation
EXHIBIT E Additional Merger Consideration
EXHIBIT F Form of Stockholder Releases
EXHIBIT G Form of Lease
EXHIBIT H Form of Employment and Noncompetitition Agreement
EXHIBIT I Form of Opinion of Xxxxxx, Xxxxxxx & Xxxxx
Schedule 2.5 Officers and Directors
Schedule 5.1 Foreign Qualifications
Schedule 5.4 Consents and Approvals
Schedule 5.5 Capitalization
Schedule 5.6 Subsidiaries and Affiliates
Schedule 5.7 Company Audited Financial Statements
Schedule 5.7A Company Unaudited Financial Statements
Schedule 5.8 Liabilities and Obligations
Schedule 5.9 Changes During Interim Operations
Schedule 5.10 Tax Matters
Schedule 5.11 Employee Benefit Plans
Schedule 5.13 Litigation; Claims
Schedule 5.14 Contracts and Commitments
Schedule 5.15 Intellectual Property Rights
Schedule 5.16 Liens
Schedule 5.17 Insurance
Schedule 5.18 Accounts Receivable and Accounts Payable
Schedule 5.19 Inventories and Backlog
Schedule 5.20 Tangible Personal Property Owned
Schedule 5.20A Tangible Personal Property Leased
Schedule 5.21 Real Property Leased
Schedule 5.22 Environmental Matters
Schedule 5.23 Governmental Authorizations
Schedule 5.24 Employees
Schedule 5.26 Customers and Vendors
Schedule 5.27 Distributors and Representatives
Schedule 5.30 Certain Transactions
Schedule 5.32 Directors and Officers; Bank Accounts
Schedule 5.33 Defects in Products or Designs
Schedule 6.1 Encumbrances on Stock
Schedule 7.5 Broker's or Finder's Fees
Schedule 9.14 Releases of Liens
