AGREEMENT FOR PURCHASE AND SALE OF STOCK
of
E. D. AND C. COMPANY, INC.
Among
XXXX XXXXXX, XXXX XXXXXX, XXXXX XXXXXX (as Beneficiary of the
Xxxxx Xxxxxx Voting Trust) and XXXXXXXXX X. XXXXX (as Trustee of
the Xxxxx Xxxxxx Voting Trust)
and
ELECTRICAL DESIGN AND CONTROL COMPANY
AGREEMENT FOR PURCHASE AND SALE OF STOCK
THIS AGREEMENT (this "Agreement"), dated as of the _______ day of
October, 1997, is made by and among XXXX XXXXXX, XXXX XXXXXX, XXXXX XXXXXX
(as Beneficiary of the Xxxxx Xxxxxx Voting Trust) and XXXXXXXXX X. XXXXX
(as Trustee of the Xxxxx Xxxxxx Voting Trust), being the holders of all of
the outstanding shares of stock of E. D. AND C. COMPANY, Inc., a Michigan
corporation (hereinafter "the Company"), all of said individuals being
hereinafter collectively referred to as the "Sellers," and ELECTRICAL
DESIGN AND CONTROL COMPANY, a Delaware corporation (hereinafter
"Holdings").
ARTICLE I
PURCHASE AND SALE; PRICE
1.1 Purchase and Sale of the Shares. At the Closing (hereinafter
defined) and in the manner herein provided, Sellers shall sell and deliver
all of the shares of capital stock of the Company (hereinafter collectively
called the "Shares") to Holdings, and Holdings shall purchase the Shares
from Sellers on the terms and conditions set forth herein.
1.2 Purchase Price. Subject to the terms and conditions of this
Agreement and in reliance on the representations and warranties of the
Sellers herein contained, and in consideration of the sale, conveyance,
transfer and delivery of the Shares provided for in this Agreement,
Holdings agrees to pay to the Sellers at the Closing an aggregate purchase
price (the "Purchase Price") of $18,500,000 plus the amounts payable to
Sellers described in Section 1.2(c) below to be paid as follows:
(a) $14, 500,000 by delivery to the Sellers by wire
transfer to an account designated by the Sellers in writing on the
Closing Date;
(b) $4,000,000 by delivery of a 9.0% subordinated note (in the form
designated as Exhibit 1.2 hereto) in the aggregate principal amount of
$4,000,000 to the Sellers (the "Subordinated Note"); and
(c) If and when required by Section 1.4(b) hereof, Holdings shall pay
the Sellers all or a portion of the Reserve Amount (hereinafter defined)
and the Additional Purchase Price Amount (hereinafter defined), together
with such other amounts as Holdings is required to pay to Sellers under
Section 1.4(b) hereof, by delivery to the Sellers of a certified or
cashier's check or by wire transfer or transfers to an account or accounts
designated by the Sellers.
1.3 Payment of Liabilities; Definitions.
(a) Liabilities.
(i) Payment of Liabilities Other Than Permitted Liabilities. The
Sellers acknowledge and agree that the Purchase Price has been calculated,
and is being paid, based on the agreement that the Company will have paid
or provided for payment in full immediately prior to the Closing all
liabilities and obligations of the Company other than the Permitted
Liabilities. "Permitted Liabilities" shall mean (A) the current portion of
trade accounts payable, accrued payroll, accrued payroll taxes, accrued
sales taxes and accrued operating expenses, the total of which at the
Closing shall not in the aggregate exceed $1,200,000 and (B) any payments
and obligations due after the Closing Date under the "Contracts" (defined
in Section 2.10 hereof) except any contract obligations assumed in
accordance with Part A.
(ii) Excluded Liabilities. "Excluded Liabilities" shall mean all
liabilities of the Company other than the Permitted Liabilities, including,
without limitation, all interest bearing debt, mortgages, shareholder
loans, dividends payable, other capital debt, income taxes payable, any
capital expenditure or other liability incurred outside the normal course
of business or any similar obligation (collectively, the "Excluded
Liabilities"). The Sellers shall give prior Notice (hereinafter defined) to
Holdings before permitting the Company to incur any Excluded Liabilities.
In the event any Excluded Liabilities which are determined to be valid
obligations of the Company exist at the Closing after giving Sellers a
reasonable opportunity to contest any such Excluded Liabilities which they
deem invalid, then the Purchase Price shall be reduced by the aggregate
amount of said Excluded Liabilities on a dollar for dollar basis and
Holdings shall then assume and pay said Excluded Liabilities. If the
Purchase Price has already been paid when such liabilities or obligations
are discovered by Holdings, then the Sellers will immediately pay such
liabilities or obligations or repay Holdings for any expenditure incurred
by Holdings in relation to such liabilities or obligations.
(b) Calculations; Definitions.
(i) Calculation of DFCE. "DFCE" shall mean debt free common equity and
shall equal (x) the aggregate dollar amount of the Company's Total Assets
(hereinafter defined) less (y) the aggregate dollar amount of the Permitted
Liabilities. For example purposes only, the Company's DFCE as of July 31,
1997 is set forth on Exhibit 1.3. In the calculation of DFCE, the Company
will use GAAP (hereinafter defined) and provide for all year-end expense
adjustments on a pro-rata basis. Notwithstanding anything herein to the
contrary, for purposes of the DFCE example and the calculation of DFCE at
the Closing, all bonus amounts for employees of the Company shall be fully
accrued and reflected through the date of calculation and Holdings agrees
to pay or cause the Company to pay in the ordinary course all accrued bonus
amounts reflected in the Closing Date DFCE.
(ii) Definition of Total Assets. "Total Assets" shall mean the amount
of all assets (net of reserves for bad debts, depreciation and similar
"contra-asset" items) of the Company other than the Excluded Assets
(defined below).
(iii) Definition of Laws. "Laws" shall mean, without limitation, all
foreign, federal, state and local laws, statutes, rules, regulations,
codes, ordinances, plans, orders, judicial decrees, writs, injunctions,
notices, decisions or demand letters issued, entered or promulgated
pursuant to any foreign, federal, state or local law.
(iv) Definition of GAAP or Generally Accepted Accounting Principles.
"GAAP" or "generally accepted accounting principles" shall mean such
principles, applied on a consistent basis, as set forth in Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards
Board which are applicable in the circumstances as of the date in question.
For purposes of this definition, the requirement that such principles be
applied on a "consistent basis" shall mean that accounting principles
observed in the current period are comparable in all material respects to
those applied in the preceding periods, except as change is permitted or
required under or pursuant to such accounting principles.
1.4 Financial Requirements Regarding Purchased DFCE; Post Closing
Adjustments.
(a) Financial Requirements. Notwithstanding anything in this Agreement
to the contrary, the DFCE at the Closing shall not be less than $4,000,000,
plus all earnings and profits of the Company from July 31, 1997 to the
Closing Date (hereinafter defined) less $600,000 (which is the amount
described in Exhibit 2.9 distributed to Sellers in October, 1997).
(b) Post-Closing Adjustments. Immediately after the Closing, at no
cost to the Sellers, Holdings will have prepared by Ernst & Young LLP a
balance sheet of the Company as of the Closing Date, together with a
calculation of DFCE at the Closing Date (the "Closing Financials and
Computations"). The Closing Financials and Computations will include a
calculation of the Additional Purchase Price Amount described in Exhibit
1.4 hereto ("Additional Purchase Price Amount"). The Closing Financials and
Computations will be completed within 120 business days after the Closing
Date and delivered to the Sellers for review. If the Sellers have any
objections to or otherwise dispute the Closing Financials and Computations,
the parties agree that the provisions of Section 12.7 hereof will apply in
resolving said dispute. Immediately after the completion of the Closing
Financials and Computations, and the review and acceptance of the same by
the Sellers, or, if applicable the resolution in accordance herewith of any
dispute between the parties with respect to the Closing Financials and
Computations, the parties agree that the Reserve Amount, or portions
thereof, shall be retained by Holdings to satisfy any deficiency in the
DFCE requirement described in Section 1.4(a) above (the "Deficiency").
Immediately thereafter, Holdings shall pay to the Sellers the remaining
Reserve Amount, if any, or all of the Reserve Amount, if appropriate and
the Additional Purchase Price Amount, together with interest on said
refunded Reserve Amount, if any, and the Additional Purchase Price Amount
calculated from the Closing Date at a rate of interest equal to the rate of
interest in effect at Closing for 90-day United States Treasury
obligations. To the extent that the Deficiency at Closing exceeds the
Reserve Amount, such Deficiency shall not constitute Damages (hereinafter
defined in Article XI), but shall be immediately due and payable to
Holdings in cash by the Sellers. The term "Reserve Amount" shall mean
$500,000, which amount shall be retained by Holdings and disbursed pursuant
to this Agreement.
(c) Pro-Rata Adjustments. The Sellers and Holdings will provide for
all year-end expense adjustments on a pro-rata basis in the preparation of
the Closing Financials and Computations and disbursement of the Reserve
Amount and the Additional Purchase Price Amount in accordance with Section
1.4(b) above.
1.5 Allocations of the Purchase Price Among Sellers.
The Purchase Price shall be paid and allocated among the Sellers as
provided in the allocation set forth on Exhibit 1.5 hereto.
1.6 Accounts and Notes Receivable. Sellers will deliver to Holdings a
schedule of all accounts and notes receivable (and the face amounts
thereof) which are outstanding on the Closing Date. Except for the items
described in Exhibit 1.6 ("Excluded Assets"), all accounts and notes
receivable listed on the schedule delivered at the Closing will constitute
valid claims against third parties not affiliated with the Company arising
in the ordinary course of business of the Company. The parties hereto agree
that the Company shall distribute the Excluded Assets to Sellers prior to
the Closing Date. The parties further agree that any accounts and notes
receivable which are outstanding on the Closing Date and which are
uncollected as of the date nine months after the Closing Date shall
constitute Damages under Article XI hereof, to the extent the same exceed
the reserve for doubtful accounts on the Closing Financials and
Computations. Holdings shall assign to Sellers any unpaid accounts and
notes receivable of the Company which are paid by Sellers in accordance
herewith. All amounts which are collected from an account or note debtor
after the Closing Date shall be first applied to reduce the oldest
outstanding balance on such account or with such note debtor.
1.7 Product Claims and Returns. Sellers shall be responsible for
customer claims relating to services rendered by the Company prior to the
Closing Date, and customer claims relating to, or returns of, products of
the Company sold and shipped by the Company prior to the Closing Date or in
the finished goods inventory of the Company as of the Closing Date. If a
customer makes a claim or seeks a return and, in the judgment of the then
management of the Company the claim or return is proper, the Company shall
replace or repair, as the case may be, the services rendered or product
purchased at the Company's then generally prevailing prices and labor
rates. Such repairs or returns shall be for the account of Sellers who
shall promptly reimburse Holdings for the amounts thereof in excess of
reserves for such items included in the Balance Sheet.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers and Xxxxxxx Xxxxxx, spouse of Xxxx Xxxxxx ("Warrantor"),
hereby jointly and severally represent and warrant to Holdings, as follows:
2.1. Corporate Organization, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Michigan with all requisite corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease
its properties and assets. Exhibit 2.1.1 lists each of the states where the
Company is qualified as a foreign corporation. The conduct of its business
and its ownership or use of property do not require the Company to be
qualified or licensed to do business as a foreign corporation in any state
except those listed in Exhibit 2.1.1. Exhibit 2.1.2 contains complete and
correct copies of the Company's (i) articles or certificate of
incorporation; (ii) bylaws; (iii) good standing certificates from the
secretary of state of (A) the state of Michigan and (B) each of the states
listed on Exhibit 2.1.1; and (iv) certificates of authority for the states
listed in Exhibit 2.1.1, each as amended to date. The Company has all
federal, state, local and foreign licenses, permits or other approvals
required for the operation of its business as now being conducted.
2.2. Capital Stock; Options. The authorized capital stock of the
Company and the shares of capital stock of the Company issued and
outstanding, of all classes, and the respective holdings of each of
Sellers, are as set forth in Exhibit 2.2. The Shares represent all of the
issued and outstanding capital stock of the Company, the Shares are all
listed on Exhibit 2.2, and the Company has no treasury stock. All of the
Shares are validly issued, fully paid and nonassessable and are owned by
Sellers, free and clear of all encumbrances or claims. There are no issued
and outstanding options, warrants, rights, securities, contracts,
commitments, understandings or arrangements by which the Company is bound
to issue any additional shares of its capital stock or options to purchase
shares of its capital stock.
2.3. Subsidiaries and Affiliates. Except as set forth in Exhibit 2.3,
the Company has no subsidiaries, Affiliates or investments in any other
entity or business operation. The term "Affiliates" includes each
shareholder, director, officer and employee of the Company, the family
members of each Seller, and any director, officer or employee of the
Company, and any corporation, partnership or other entity in which the
Company, any Seller, any family member of a Seller or director or officer
of the Company has any financial interest or is a controlling person, as
that term is used in connection with the federal securities laws, if such
person or entity has, or in the past had, a contractual relationship with
or is transacting, or has in the past transacted, business with the
Company. All of the outstanding shares of all classes of capital stock of
each subsidiary of the Company are owned by the Company free of any liens,
security interests, claims or encumbrances. The Company has no Affiliate
whose liabilities or obligations will be assumed by Holdings.
2.4. Authorization, etc. The Sellers have full power and authority to
enter into this Agreement and to carry out the transactions contemplated
hereby. Except as set forth in Exhibit 2.4, none of the Sellers are
residents of any state that has enacted community property statutes nor are
any of the Sellers subject to any community property statutes. At the
Closing, Warrantor agrees to enter into a Spousal Consent in the form set
forth in Exhibit 2.4.
2.5. No Violation. Except as set forth in Exhibit 2.5, the Company is
not subject to or obligated under any article or certificate of
incorporation, bylaw, Law (as defined in Section 12.6), or any agreement or
instrument, or any license, franchise or permit, which would be breached or
violated by Sellers' execution, delivery and performance of this Agreement.
Sellers will comply with all applicable Laws in connection with their
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby.
2.6. Governmental Authorities. Neither the Sellers nor the Company are
required to submit any notice, report or other filing with, and no consent,
approval or authorization is required, by any governmental or regulatory
authority in connection with their execution, delivery, consummation or
performance of this Agreement or the transactions contemplated hereby.
Neither the Company or any "Ultimate Parent Entity" (as defined in 16
C.F.R. ' 801.1(a) (1988)) of the Company immediately prior to the
transactions contemplated hereunder is a person that has total assets or
annual net sales of $100,000,000 or more within the meaning of 15 U.S.C.
Section 18a.
2.7. Financial Statements. Exhibit 2.7 contains the Company's audited
statement of financial position as of December 31, 1996 and audited
statement of income and retained earnings for the fiscal year then ended.
Exhibit 2.7 also contains the Company's compiled statements of financial
position as of December 31 for each of the years 1994 and 1995 and compiled
statements of income and retained earnings for the fiscal years then ended.
Each of the statements set forth in Exhibit 2.7 were prepared by Xxxx &
Xxxxxx, PLC. All such statements of financial position and the notes
thereto are complete and accurate and fairly present the financial position
of the Company as of the respective dates thereof, and such statements of
income and retained earnings and the notes thereto fairly present the
results of operations for the periods therein referred to, all in
accordance with generally accepted accounting principles consistently
applied throughout the periods indicated (except as stated therein or in
the notes thereto). The statement of financial position as of December 31,
1996 and the notes thereto are referred to as the "Balance Sheet". December
31, 1996 is referred to as the "Financial Statement Date."
2.8. No Undisclosed Liabilities, Claims, etc. Except for (a)
liabilities fully reflected or reserved against in the Balance Sheet; and
(b) regular and usual liabilities and obligations incurred in the ordinary
course of business consistent with past practices after the Financial
Statement Date, the Company has no liabilities, obligations or claims
(absolute, accrued, fixed or contingent, matured or unmatured, or
otherwise), including liabilities, obligations or claims which may become
known or which arise only after the Closing and which result from actions,
omissions or occurrences of the Company prior to the Closing.
2.9. Absence of Certain Changes. Since the Financial Statement Date,
there has not been (a) any adverse change in the business, prospects,
financial condition, earnings or operations of the Company's business; (b)
any damage, destruction or loss, whether covered by insurance or not,
adversely affecting the Company's properties and business; (c) except for
distributions described in Exhibit 2.9, any declaration, setting aside or
payment of any dividend whether in cash, stock or property with respect to
the Company's capital stock, or any redemption or other acquisition of such
stock by the Company; (d) except as disclosed in Exhibit 2.21 any increase
in the compensation payable or to become payable by the Company to its
directors, officers, key employees, Affiliates or any of the Sellers or any
adoption of or increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such party;
(e) any entry by the Company into any commitment or transaction, including,
without limitation, any borrowing or capital expenditure other than in
accordance with the schedule of capital expenditures (Exhibit 2.25); (f)
any change by the Company in accounting methods, practices or principles;
(g) any adoption of any statute, rule, regulation or order which adversely
affects the Company; (h) any termination or waiver of any rights of value
to the business of the Company; (i) any other transaction or event other
than in the ordinary course of the Company's business; (j) any transaction
or conduct inconsistent with the Company's past business practices; (k) any
adoption or amendment of any collective bargaining, bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, or
other plan, agreement, trust, fund or arrangement for the benefit of
employees; or (l) any agreement or understanding made or entered into to do
any of the foregoing.
2.10. Contracts. Exhibit 2.10 contains a schedule of, and copies of,
all Contracts to which the Company is a party. The term "Contracts" shall
include, but shall not be limited to, all oral (which shall be summarized
in Exhibit 2.10) and written contracts, agreements, agency agreements, loan
agreements, mortgages, indentures, deeds of trust, guarantees, commitments,
joint venture agreements, purchase and/or sale agreements, collective
bargaining, union, consulting and/or employment contracts, leases of real
or personal property, easements, distribution or dealer agreements, service
agreements, license agreements and advertising agreements (except there
shall not be included agreements which do not exceed, in the case of any
one agreement, an obligation of $10,000, and in the case of all agreements,
an aggregate obligation of $20,000). The Company is not in default or
alleged to be in default under any Contract nor are Sellers aware of any
default by any other party to any Contract, and there exists no event,
condition or occurrence which, after notice or lapse of time, or both,
would constitute a default under any Contract. All of the Contracts are in
full force and effect and constitute legal, valid and binding obligations
of the parties thereto in accordance with their terms, and will remain in
full force and effect after the Closing without any notice to or consent by
any other party.
2.11. True and Complete Copies. Copies of all agreements, contracts
and documents delivered and to be delivered hereunder by Sellers or the
Company are and will be true and complete copies of such agreements,
contracts and documents. All written summaries of oral agreements will be
true and complete.
2.12. Title and Related Matters. Except as set forth in Exhibit 2.12,
the Company has good and marketable title to all of the properties and
assets reflected in the Balance Sheet or acquired after the date thereof
(except properties sold or otherwise disposed of since the date thereof in
the ordinary course of business and consistent with past practices),
including, without limitation, the specific assets referred to in
paragraphs (a), (b) and (c) below, free and clear of all mortgages,
security interests, liens, pledges, claims, escrows, options, rights of
first refusal, indentures, easements, licenses, security agreements or
other agreements, arrangements, contracts, commitments, understandings,
obligations, charges or encumbrances of any kind or character, except as
reflected on the Balance Sheet. The Company owns or leases, directly or
indirectly, all of the assets and properties, and is a party to all
licenses and other agreements, presently used or necessary to carry on the
business or operations of the Company as presently conducted.
(a) Real Property.
(i) The Company has good and marketable title in fee simple to the
land, including buildings and improvements thereon, shown on the Balance
Sheet. All such land, buildings and improvements of the Company are owned
free and clear of all encumbrances, restrictions and charges of every kind
and character including, without limitation, any of the various types
listed above, except as set forth on Exhibit 2.12.
(ii) The Company is not a tenant under any lease(s) of real property
used by the Company except as described on Exhibit 2.10. With respect to
the leased real property described on Exhibit 2.10 and except as set forth
on Exhibit 2.12: (A) all such leases are in full force and effect and
constitute valid and binding obligations of the respective parties thereto;
(B) there have not been and there currently are not any defaults thereunder
by any party thereto; (C) no event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other
event) would constitute a default thereunder entitling the lessor to
terminate the lease; and (D) the continuation, validity and effectiveness
of all such leases under the current rentals and other current terms
thereof will in no way be affected by the transactions contemplated by this
Agreement or, if any would be affected, Sellers shall use all necessary
means at their disposal to cause an appropriate consent to such
transactions to be delivered to Holdings prior to the Closing Date at no
cost or other adverse consequences to the Company ((A) through (D) are
hereinafter collectively referred to as "Lease Restrictions").
(iii) Except as shown on Exhibit 2.12, each parcel of real property,
building, structure and improvement owned, leased or otherwise utilized by
the Company (collectively the "Premises") conforms to all applicable Laws,
including zoning regulations, none of which will, upon the sale of the
Shares to Holdings, prohibit the use of such properties, buildings,
structures or improvements, for the purposes for which they are now
utilized. The Premises are of good quality construction throughout, are in
good condition and working order, are adequate for their intended purposes,
have no structural or other substantial deficiencies, and are free from
deferred maintenance.
(iv) The Company does not currently have, and in the past has not had,
any interest (as owner, tenant or otherwise) in any real property except as
disclosed on Exhibit 2.12.
(b) Personal Property. The Company has good and marketable title to
all the personal property and assets, tangible or intangible, shown on the
Balance Sheet, except to the extent sold or disposed of in transactions
entered into in the ordinary course of business consistent with past
practices since the Financial Statement Date. The personal property in the
aggregate is in good condition and working order, and each individual item
of personal property which would cost in excess of $10,000 to replace is in
good condition and working order. None of such assets are subject to any
(i) contracts of sale or lease, except contracts for the sale of inventory
in the ordinary and regular course of business; or (ii) security interests,
encumbrances, liens or charges of any kind or character, except as set
forth in Exhibit 2.12. Except as set forth in Exhibit 2.12, there are no
Lease Restrictions with respect to the personal property leased by the
Company.
(c) Inventories. In addition to subsection (b) of this Section, the
inventories of the Company included on the Balance Sheet, to be included on
interim balance sheets provided pursuant to Section 4.8 and owned by the
Company on the Closing Date: (i) are valued with respect to each category
of inventory at the lower of cost (on a FIFO basis) or market; and (ii) do
not include any items which are below standard quality, damaged or spoiled,
obsolete or of a quality or quantity not usable or salable in the normal
course of the business of the Company as currently conducted within normal
inventory "turn" experience, the value of which has not been fully written
down, or with respect to which adequate reserves have not been provided.
The Company has the proper amount of inventories to conduct its business
consistent with past practices. There has not been since the Financial
Statement Date any provision for markdowns or shrinkage with respect to
inventories other than in the ordinary and regular course of business
consistent with past practices or as otherwise consented to by Holdings.
(d) No Disposition of Assets. There has not been since the Financial
Statement Date any sale, lease or any other disposition or distribution by
the Company of any of its assets or properties and any other assets now or
hereafter owned by it, except transactions in the ordinary and regular
course of business consistent with past practices or as otherwise consented
to by Holdings.
2.13. Litigation. Except as set forth in Exhibit 2.13, there is no
suit, action, investigation or proceeding pending or, to the knowledge of
the Sellers, threatened against the Company or any of Sellers which, if
adversely determined, would adversely affect the business, prospects,
operations, earnings, properties or the condition, financial or otherwise,
of the Company, nor is there any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against the Company having, or
which, insofar as can be reasonably foreseen, in the future may have, any
such effect.
2.14. Tax Matters. The term "Taxes" means all net income, capital
gains, gross income, gross receipts, sales, use, transfer, ad valorem,
franchise, profits, license, capital, withholding, payroll, employment,
excise, goods and services, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees or
assessments, or other governmental charges of any kind whatsoever, together
with any interest, fines and any penalties, additions to tax or additional
amounts incurred or accrued under applicable Law or assessed, charged or
imposed by any governmental authority, domestic or foreign, provided that
any interest, penalties, additions to tax or additional amounts that relate
to Taxes for any taxable period (including any portion of any taxable
period ending on or before the Closing Date) shall be deemed to be Taxes
for such period, regardless of when such items are incurred, accrued,
assessed or imposed. For the purposes of this Section 2.14 and Section 6.4,
the Company shall be deemed to include any predecessor of the Company or
any person or entity from which the Company incurs a liability for Taxes as
a result of any transferee liability.
Except as stated in Exhibit 2.14.1:
(a) The Company has duly and timely filed (and prior to the Closing
Date will duly and timely file) true, correct and complete tax returns,
reports or estimates, all prepared in accordance with applicable Laws, for
all years and periods (and portions thereof) and for all applicable
jurisdictions (whether federal, state, local or foreign) in which any such
returns, reports or estimates were due. All Taxes shown as due and payable
on such returns, reports and estimates have been paid, and there is no
current liability for any Taxes due and payable in connection with any such
returns. All Taxes which have accrued but are not yet due and payable have
been fully accrued on the books of the Company and adequate reserves have
been established therefor; the charges, accruals and reserves for Taxes
provided for on the financial statements delivered or to be delivered
pursuant to Section 2.7 and Section 4.8 are adequate; and there are no
unpaid assessments for additional Taxes for any period nor is there any
basis therefor. Attached hereto as Exhibit 2.14.2 are copies of all
federal, state and foreign tax returns filed by the Company for the past
five (5) years.
(b) The Company is not, and never has been, a member of any
consolidated, combined or unitary group for federal, state, local or
foreign tax purposes. The Company is not a party to any joint venture,
partnership or other arrangement that could be treated as a partnership for
federal income tax purposes.
(c) The Company has (i) withheld all required amounts from its
employees, agents, contractors and nonresidents and remitted such amounts
to the proper agencies; (ii) paid all employer contributions and premiums
and (iii) filed all applicable federal, state, local and foreign returns
and reports with respect to employee income tax withholding, and social
security and unemployment taxes and premiums, all in compliance with the
withholding tax provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), as in effect for the applicable year or any prior provision
thereof and other applicable Laws.
(d) The federal income tax returns of the Company have been examined
by the Internal Revenue Service (the "IRS"), or have been closed by the
applicable statute of limitations, for all periods through December 31,
1996; the applicable state tax returns of the Company have been examined by
the relevant state agencies or such returns have been closed by the
applicable statute of limitations for all periods through December 31,
1996; no deficiencies or reassessments for any Taxes have been proposed,
asserted or assessed in writing against the Company by any federal, state,
local or foreign taxing authority. Exhibit 2.14.1 describes the status of
any federal, state, local or foreign tax audits or other administrative
proceedings, or court proceedings that are presently pending with regard to
any Taxes or tax returns of the Company (including a description of all
issues raised by the taxing authorities in connection with any such audits
or proceedings), and no additional issues are being asserted against the
Company in connection with any existing audits or proceedings.
(e) The Company has not executed or filed any agreement or other
document extending the period for assessment, reassessment or collection of
any Taxes, and no power of attorney granted by the Company with respect to
any Taxes is currently in force.
(f) The Company has not entered into any closing or other agreement
with any taxing authority which affects any taxable year of the Company
ending after the Closing Date. The Company is not a party to any tax
sharing agreement or similar arrangement for the sharing of tax liabilities
or benefits.
(g) The Company has not agreed to and is not required to make any
adjustment by reason of a change in accounting methods that affects any
taxable year ending after the Closing Date. The IRS has not proposed to the
Company in writing any such adjustment or change in accounting methods that
affects any taxable year ending after the Closing Date. The Company has no
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to its business or operations and
that affects any taxable year ending after the Closing Date.
(h) The Company has not consented to the application of
Code Section 341(f).
(i) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company that, individually or
collectively, would give rise to the payment by the Company of any amount
that would not be deductible by reason of Code Section 280G.
(j) No asset of the Company is tax exempt use property under Code
Section 168(h). No portion of the cost of any asset of the Company has been
financed directly or indirectly from the proceeds of any tax exempt state
or local government obligation described in Code Section 103(a).
(k) None of the assets of the Company is property that the Company is
required to treat as being owned by any other person pursuant to the safe
harbor lease provision of former Code Section 168(f)(8).
(l) The Company does not have and has not had a permanent
establishment in any foreign country and does not and has not engaged in a
trade or business in any foreign country. Neither the Sellers nor the
Company is a foreign person within the meaning of Code Section 1445.
(m) Neither Holdings nor the Company will be liable for any applicable
federal, state, local, foreign and other sales, use, documentary,
recording, stamp, transfer or similar Taxes applicable to, imposed upon or
arising out of the transfer of the Shares to Holdings and the transactions
contemplated by this Agreement.
2.15. Government Contracts. No Contract or other aspect of the
business of the Company is subject to the Armed Services Procurement
Regulations or other regulations of any governmental agency. The Company
has not bid on or been awarded any "small business set aside contract", any
other "set aside contract" or other order or contract requiring small
business or other special status at any time during the last three years.
None of the Company's expected sales or orders will be lost, and the
Company's customer relations will not be damaged, as a result of the
Company's continuing the operations of an entity that does not qualify as a
small business.
2.16. Compliance with Law.
(a) The Company has not previously failed and is not currently failing
to comply with any applicable Laws relating to the business of the Company
or the operation of its assets where such failure or failures would
individually or in the aggregate have an adverse effect on the financial
condition, business, operations or prospects of the Company. In particular,
but without limiting the generality of the foregoing, the Company is in
compliance with all applicable Laws relating to anti-competitive practices,
price fixing, health and safety, environmental, employment and
discrimination matters. There are no proceedings of record and no
proceedings are pending or threatened, nor has the Company or any of the
Sellers received any written notice regarding any violation of any Law,
including, without limitation, any requirement of OSHA or any pollution or
environmental control agency (including air and water).
(b) Exhibit 2.16 contains copies of all reports of inspections by
representatives of any federal, state or local governmental entity or
agency of the business and properties of the Company from January 1, 1994
through the date hereof under OSHA and under all other applicable health
and safety Laws. The deficiencies, if any, noted on such reports or any
deficiencies noted by such inspections through the Closing Date shall be
corrected by the Closing Date. Neither the Company or any of the Sellers
know or have reason to know of any other safety, health, environmental,
anti-competitive or discrimination problems relating to the financial
condition, business, assets, operations, prospects, earnings or employment
practices of the Company.
2.17. Absence of Certain Business Practices. None of the Sellers, any
person or entity related to or affiliated with any of the Sellers, any
officer, employee or agent of the Company or any of the Sellers, any other
person or entity acting on behalf of or associated with the Company or any
of the Sellers, nor any other entity directly or indirectly owned or
controlled by any of the Sellers or the Company, acting alone or together,
has (a) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic benefit,
regardless of its nature or type, from any customer, supplier, trading
company, shipping company, governmental employee or other entity or
individual with whom the Company has done business directly or indirectly;
or (b) directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, supplier, trading company, shipping company,
governmental employee or other person or entity who is or may be in a
position to help or hinder the business of the Company (or assist the
Company in connection with any actual or proposed transaction) which (i)
might subject the Company to any damage or penalty in any civil, criminal
or governmental litigation or proceeding, (ii) if not given in the past,
might have had an adverse effect on the assets, business or operations of
the Company as reflected in the financial statements set forth as Exhibit
2.7 or (iii), if not continued in the future, might adversely affect the
assets, business, operations or prospects of the Company or which might
subject the Company to suit or penalty in any private or governmental
litigation or proceeding.
2.18. ERISA and Related Employee Benefit Matters.
(a) Welfare Benefit Plans. Exhibit 2.18.1 lists each "employee welfare
benefit plan" (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA")) maintained by the Company
or to which the Company contributes or is required to contribute, including
any multiemployer plan ("Welfare Benefit Plan") and sets forth as of the
most recent valuation date (i) the amount of any liability of the Company
for payments due with respect to any Welfare Benefit Plan, (ii) the amount
of any payment made and to be made, stated separately, by the Company with
respect to any Welfare Benefit Plan for the plan year during which the
Closing is to occur, and (iii) with respect to any Welfare Benefit Plan to
which Section 505 of the Code applies, a statement of assets and
liabilities for such Welfare Benefit Plan as of the most recent valuation
date. Without limiting the foregoing, Exhibit 2.18.1 discloses any
obligations of the Company to provide retiree health benefits to current or
former employees of the Company.
(b) Pension Benefit Plans. Exhibit 2.18.2 lists each "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) maintained by
the Company or to which the Company contributes or is required to
contribute, including any multiemployer plan ("Pension Benefit Plan"). All
costs of the Pension Benefit Plans have been provided for on the basis of
consistent methods and, if applicable, in accordance with sound actuarial
assumptions and practices that are acceptable under ERISA. With respect to
each Pension Benefit Plan that is subject to Title I, Part 3 of ERISA
(concerning "funding"), Exhibit 2.18.2 sets forth as of the valuation date
(i) the unfunded liability for all accrued benefits, (ii) the funding
method, (iii) the actuarially computed value of vested benefits, (iv) the
fair market value of the assets held for funding purposes, (v) the amount
and plan year of any "accumulated funding deficiency," as defined in
Section 302(a)(2) of ERISA (arising for any reason whatever) that exists
with respect to any plan year, and (vi) the amount of any contribution by
the Company paid and to be paid, stated separately, for the plan year
during which the Closing is to occur. With respect to each Pension Benefit
Plan that is not subject to Title I, Part 3 of ERISA, Exhibit 2.18.2 sets
forth as of the valuation date (i) the amount of any liability of the
Company for any contributions due with respect to such Pension Benefit Plan
and (ii) the amount of any contribution paid and to be paid, stated
separately, by the Company with respect to such Pension Benefit Plan for
the plan year during which the Closing is to occur.
(c) Compliance with Applicable Law. Each of the Pension Benefit Plans,
Welfare Benefit Plans, any related trust agreements, annuity contracts, and
other funding instruments, comply with the provisions of ERISA and the Code
and all other statutes, orders, governmental rules and regulations
applicable to such Welfare Benefit Plans and Pension Benefit Plans. The
Company has performed all of its obligations currently required to have
been performed under all Welfare Benefit Plans and Pension Benefit Plans.
There are no actions, suits or claims (other than routine claims for
benefits) pending or threatened against or with respect to any Welfare
Benefit Plans, Pension Benefit Plans or the assets of such plans, and no
facts exist that could give rise to any actions, suits or claims (other
than routine claims for benefits) against such plans or the assets of such
plans. Each Pension Benefit Plan is qualified in form and operation under
Section 401(a) of the Code, the Internal Revenue Service has issued a
favorable determination letter with respect to each Pension Benefit Plan,
and no event has occurred that will or could give rise to a
disqualification of any Pension Benefit Plan under Code section 401(a). No
event has occurred that will or could subject any Welfare Benefit Plan or
Pension Benefit Plan to tax under Section 511 of the Code.
(d) Administration of Plans. Each Welfare Benefit Plan and each
Pension Benefit Plan has been administered to date in compliance with the
requirements of ERISA and the Code. No plan fiduciary of any Welfare
Benefit Plan or Pension Benefit Plan has engaged in (i) any transaction in
violation of Section 406(a) or (b) of ERISA, or (ii) any "prohibited
transaction" (within the meaning of Section 4975(c)(1) of the Code) for
which no exemption exists under Section 408 of ERISA or Section 4975(d) of
the Code.
(e) Title IV Plans. With respect to each Pension Benefit Plan which is
subject to the provisions of Title IV of ERISA in which the Company (for
purposes of this subsection the Company shall include each trade or
business, whether or not incorporated, which is a member of a group of
which the Company is a member and which is under common control within the
meaning of Section 414 of the Code and the regulations thereunder)
participates or has participated, (i) the Company has not withdrawn from
such Pension Benefit Plan during a plan year in which it was a "substantial
employer" (as defined in Section 4001(a) (2) of ERISA), (ii) the Company
has not completely or partially withdrawn from a Pension Benefit Plan that
is a multiemployer plan, and the liability to which the Company would
become subject under ERISA if the Company were to withdraw completely from
all multiemployer plans in which it currently participates is not in excess
of $5,000 as of the most recent valuation date applicable thereto, (iii)
the Company has not filed a notice of intent to terminate any such Pension
Benefit Plan or adopted any amendment to treat such Pension Benefit Plan as
terminated, (iv) the Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any such Pension Benefit Plan, (v) no
other event or condition has occurred that might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
Trustee to administer, any such Pension Benefit Plan, (vi) all required
premium payments to the Pension Benefit Guaranty Corporation have been paid
when due, and (vii) no "reportable event" (as described in Section 4043 of
ERISA and the regulations thereunder) has occurred with respect to said
Pension Benefit Plan.
(f) Other Employee Benefit Plans and Agreements. Exhibit 2.18.3 lists
each fringe benefit, profit sharing, deferred compensation, bonus, stock
option, stock purchase, pension, retainer, consulting, retirement, welfare,
or other incentive plan or agreement, employment agreement not terminable
on 30 days or less written notice, and any other employee benefit plan,
agreement, arrangement, or commitment not previously listed on the Exhibits
to this Section that is maintained by the Company or to which the Company
contributes or is required to contribute. Exhibit 2.18.3 also contains a
complete list of all employees of the Company and the amount of vacation
pay currently accrued to each such employee.
(g) Copies of Plans. Exhibit 2.18.4 includes true and complete copies
of: each Welfare Benefit Plan; each Pension Benefit Plan; related trust
agreements, annuity contracts and other funding instruments; each plan,
agreement, arrangement, and commitment referred to in subsection (f) of
this Section; favorable determination letters; annual reports (Form 5500
series) required to be filed with any governmental agency for each Welfare
Benefit Plan, Pension Benefit Plan, and fringe benefit plan for the three
most recent plan years, including, without limitation, all schedules
thereto and all financial statements with attached opinions of independent
accountants; current summary plan descriptions; and actuarial reports as of
the last valuation date for each Pension Benefit Plan that is subject to
Title IV of ERISA.
(h) Continuation Coverage Requirements for Health Plans. All group
health plans of the Company (including any plans of affiliates of the
Company that must be taken into account under Section 4980B of the Code)
have been operated in compliance with the group health plan continuation
coverage requirements of Section 4980B of the Code and Title I, Part 6 of
ERISA.
(i) Valid Obligations. All Welfare Benefit Plans, Pension Benefit
Plans, related trust agreements, annuity contracts or other funding
instruments, and all plans, agreements, arrangements and commitments
referred to in subsection (f) of this Section are legal, valid and binding
and in full force and effect, and there are no defaults thereunder. Except
as specified in Exhibit 2.18.5, none of the rights of the Company
thereunder will be impaired by the consummation of the transactions
contemplated by this Agreement, and all of the rights of the Company
thereunder will be enforceable by Holdings at and after the Closing without
the consent or agreement of any other party other than consents and
agreements specifically listed in Exhibit 2.18.5.
2.19. Intellectual Property. The Company has good and marketable title
to, and Exhibit 2.19 contains a detailed listing of, each copyright,
trademark, trade name, service xxxx, trade dress, patent, franchise, trade
secret, product designation, formula, process, know-how, right of
publicity, design and other similar rights (collectively "Intellectual
Property Rights") used in, or necessary for, the operation of its business
as currently conducted. Except as otherwise set forth on Exhibit 2.19, all
of said Intellectual Property Rights are free and clear of all royalty
obligations, security interests, liens and encumbrances. The Company has
the exclusive right to use all Intellectual Property Rights used in, or
necessary for, the operation of its business as currently conducted. The
Sellers have taken all action necessary to protect against and defend
against, and have no knowledge of, any conflicting use of any such
Intellectual Property Rights. The Company does not have nor does the
Company utilize any Intellectual Property Rights except those which are set
forth in Exhibit 2.19. Except as set forth in Exhibit 2.19, the Company is
not a party in any capacity to any franchise, license, royalty or other
agreement respecting or restricting any Intellectual Property Rights, and
the Intellectual Property Rights used by the Company in the conduct of its
business do not conflict with the Intellectual Property Rights of any third
party. No product made, sold or distributed by the Company, or service
provided by the Company, violates any license or infringes any Intellectual
Property Rights of any third party, and there are no pending claims or
demands by any third party to the contrary.
2.20. Warranties. Except as set forth in Exhibit 2.20, there are no
claims existing or threatened under or pursuant to any warranty, whether
expressed or implied, on products or services sold by the Company and the
Balance Sheet reserves, if any, for anticipated claims are adequate to
cover any such claims. Exhibit 2.20 includes a copy of the form of all
written warranties furnished by the Company to purchasers of any product
since January 1, 1994.
2.21. Labor Relations. Except as set forth in Exhibit 2.21, there have
been no strikes, work stoppages or any demands for collective bargaining by
any union or labor organization since January 1, 1994; there is no
collective bargaining relationship between the Company and any union; there
is no dispute or controversy with any union or other organization of the
Company's employees and there are no arbitration proceedings pending or
threatened involving a dispute or controversy. The Company is in full
compliance with all Laws respecting employment and employment practices,
terms and conditions of employment and wages and hours including, without
limitation, the Fair Labor Standards Act, the Family and Medical Leave Act
of 1993, the Americans with Disabilities Act of 1990, the Veterans
Reemployment Rights Act, the Equal Employment Opportunities Act, as amended
by the Civil Rights Act of 1991, the Occupational Safety and Health Act,
the Employee Retirement Income Security Act of 1974, the Immigration Reform
and Control Act of 1986, the Age Discrimination in Employment Act, Title
VII of the Civil Rights Act of 1964, the Older Workers Benefit Protection
Act, and all other Laws, each as amended to date, relating to
employer/employee rights and obligations. The Company currently has
satisfactory relationships with its employees. Except as disclosed in
Exhibit 2.21 and since January 1, 1994, no non-officer employees of the
Company and no officers of Seller have resigned, advised the Company of an
intention to resign from such employment or refused to continue employment
with the Company. Exhibit 2.21 lists each former employee and/or officer of
the Company whose aggregate annualized compensation exceeded $50,000 and
whose employment by the Company has ceased for any reasons since January 1,
1994. Set forth opposite the name of each such employee and/or officer are:
the positions held; the beginning and ending employment dates; and the
reason for the cessation of employment.
2.22. Insurance. Exhibit 2.22 lists and includes copies of all
certificates of coverage regarding all of the Company's existing insurance
policies, the premiums therefor and the coverage of each policy. Such
policies and the amount of coverage and the risks insured are, in the
aggregate, sufficient to protect and insure the Company against perils
which good business practice demands be insured against or which are
normally insured against by other industry members similarly situated, and
will remain in full force and effect after the Closing.
2.23. Products Liability. Except as described in Exhibit 2.13, there
exist no claims, whether known or unknown, against the Company for injury
to person or property of its employees or any third parties suffered as a
result of the sale of any product or performance of any service by the
Company, including, but not limited to, claims arising out of the defective
or unsafe nature of its products or services. The Company has full and
adequate insurance coverage for potential products liability claims against
it. The products liability and personal injury insurance maintained by the
Company has been on an "occurrence" basis during the six (6) year period
prior to the Closing Date.
2.24. Environmental.
(a) For purposes of this Section:
(1) "Hazardous Materials" means any hazardous, infectious or toxic
substance, chemical, pollutant, contaminant, emission or waste which is or
becomes regulated by any local, state, federal or foreign authority.
Hazardous Materials include, without limitation, anything which is: (i)
defined as a "pollutant" pursuant to 33 U.S.C. Section 1362(6); (ii)
defined as a "hazardous waste" pursuant to 42 U.S.C. Section 6921; (iii)
defined as a "regulated substance" pursuant to 42 U.S.C. Section 6991; (iv)
defined as a "hazardous substance" pursuant to 42 U.S.C. Section 9601(14);
(v) defined as a "pollutant or contaminant" pursuant to 42 U.S.C. Section
9601(33); (vi) petroleum; (vii) asbestos; and (viii) polychlorinated
biphenyl.
(2) "Environmental Laws and Regulations" means all limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any Laws relating to
pollution, nuisance, or the environment including, without limitation, (i)
the Federal Clean Air Act, 42 U.S.C. Sections 7401 et seq.; (ii) the
Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. Sections 9601 et seq.; (iii) the Federal Emergency Planning and
Community Right-to- Know Act, 42 U.S.C. Sections 1101 et seq.; (iv) the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136
et seq.; (v) the Federal Water Pollution Control Act, 33 U.S.C. Sections
1251 et seq.; (vi) the Solid Waste Disposal Act, 42 U.S.C. Sections 6901 et
seq.; (vii) the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et
seq.; (viii) Laws relating in whole or part to emissions, discharges,
releases, or threatened releases of any Hazardous Material; and (ix) Laws
relating in whole or part to the manufacture, processing, distribution,
use, coverage, disposal, transportation, storage or handling of any
Hazardous Material.
(b) The operations and activities of the Company comply, and have in
the past complied, in all respects, with all Environmental Laws and
Regulations. There are no pending or currently proposed changes to any
Environmental Laws and Regulations which, when implemented or effective,
may affect the operations of the Company.
(c) The Company has obtained and is and has been in full compliance
with all requirements, permits, licenses and other authorizations which are
required with respect to the Company's operations, as well as the
transactions contemplated hereby under all Environmental Laws and
Regulations. Exhibit 2.24 lists each such permit, license or other
authorization. There are no other such permits, licenses or other
authorizations which are required by any Environmental Laws and Regulations
to be obtained after the Closing.
(d) There is no civil, criminal, administrative or other action, suit,
demand, claim, hearing, notice of violation, proceeding, investigation,
notice or demand pending, received, or, to the best knowledge of the
Company, threatened against the Company relating in any way to any
Environmental Laws and Regulations.
(e) The Company has not caused or experienced any past or present
events, conditions, circumstances, plans or other matters which: (i) are
not in compliance with all Environmental Laws and Regulations; (ii) may
give rise to any statutory, common law, or other legal liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation or investigation based on or relating to
Hazardous Materials including, without limitation, such matters relating to
any property owned, leased or utilized by the Company at any time; (iii)
arise from inventory of or waste from Hazardous Materials; or (iv) arise
from any off-site or on-site disposal, release or threatened release of
Hazardous Materials.
(f) No asbestos, polychlorinated biphenyls, lead-based paints, or
radon are on any real property or in any building now or previously owned,
operated, leased or utilized by the Company.
(g)No employee or former employee of the Company has been exposed to
any Hazardous Material owned, produced or utilized by the Company or any
former subsidiary.
(h) The Company has not received any notice or indication from any
governmental agency or private or public entity advising it that it is or
may be responsible for any investigation or response costs with respect to
a release, threatened release or cleanup of chemicals or materials produced
by or resulting from any business, commercial or industrial activities,
operations or processes, including, without limitation, any Hazardous
Materials. The Company is not aware of any facts which might give rise to
such notices.
(i) No underground tanks, piping or subsurface structures of any type
exist or have existed on any real property now or previously owned,
operated, leased or utilized by the Company.
(j) Exhibit 2.24 contains complete copies of all environmental
investigations, assessments, audits, studies, tests and related materials
in possession of the Company, or known to the Company to exist, which
relate to the current or prior operations of the Company or any real
property now or previously owned, operated, leased or utilized by the
Company.
2.25. Capital Expenditures. The Company has outstanding commitments
for capital expenditures as set forth in Exhibit 2.25, which includes a
schedule of substantially all monies disbursed on account of capital
expenditures made by the Company between the Financial Statement Date and
the date hereof. After the date hereof, no capital expenditures or
commitments in excess of [$10,000] in the aggregate will be made by the
Company, except as set forth in Exhibit 2.25 or with Holdings' prior
written consent.
2.26. Suppliers. No suppliers of goods or services to the Company that
has made sales or provided services representing, individually or in the
aggregate, more than [$10,000] in payments or commitments by the Company
within the last 12 months has (i) ceased, or indicated any intention to
cease, doing business with the Company, or (ii) changed or indicated any
intention to change any terms or conditions for future supply or sale of
products or services from the terms or conditions that existed with respect
to the supply or sale of such products or services during the 12 month
period ending on the date hereof.
2.27. Dealings with Affiliates. Exhibit 2.27 sets forth a complete
list (including the parties) and copies (or a detailed summary in the case
of an oral agreement) of all oral or written contracts, arrangements or
other agreements to which the Company or any Affiliate is, will be or has
been a party at any time from January 1, 1994, to the Closing Date, and to
which any other Affiliate or the Company was or is also a party.
2.28. Business Generally. Since January 1, 1994, there have been no
events, transactions or information which have come to the attention of
Sellers (other than matters in the public domain) which could be expected
to have an adverse effect on the business and operations of the Company,
and the Company is not a party to any agreement, contract or covenant
limiting the Company from competing in any line of business or with any
person or other entity in any geographic area.
2.29. Bank Accounts. Exhibit 2.29 is a list of all bank accounts, lock
boxes, post office boxes and safe deposit boxes maintained in the name of
or controlled by the Company and the names of the persons having access
thereto.
2.30. Compensation. Exhibit 2.30 lists the current job title and total
remuneration (including, without limitation, salary, commissions and
bonuses) for each of Sellers and for each officer, director, employee or
consultant of the Company who received total remuneration in excess of
[$50,000] from the Company during any of the past three fiscal years or who
is expected to receive total remuneration in excess of such amount during
the current fiscal year. Except as disclosed on Exhibit 2.30, the Company
has not since the Financial Statement Date and will not prior to the
Closing Date increase or commit to increase the base compensation,
commission, bonus or the rate (or any other component) of total
compensation payable or to become payable by the Company to any employee
(including any director or officer), whether such person is listed on
Exhibit 2.30 or not, and no extraordinary compensation or bonus will be
paid by the Company.
2.31. Disclosure. No representation or warranty made by Sellers in
this Agreement or in any agreement, instrument, document, certificate,
statement or letter furnished to Holdings, by or on behalf of Sellers in
connection with any of the transactions contemplated by this Agreement
contains any untrue statement of fact or omits to state a fact necessary in
order to make the statements herein or therein not misleading in light of
the circumstances in which they are made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings hereby represents and warrants to the Sellers, as follows:
3.1. Corporate Organization, etc. Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Delaware and will be qualified to do business in Michigan on the
Closing Date.
3.2. Capitalization. As of the date of this Agreement, Holdings has
authorized capital stock consisting of 10,000 shares of Common Stock, par
value $1.00 per share.
3.3. Authorization, etc. Holdings has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of Holdings has duly authorized
the execution and delivery of this Agreement and the transactions
contemplated hereby, and no other corporate proceedings on its part are
necessary to authorize this Agreement and the transactions contemplated
hereby.
3.4. No Violation. Holdings is not subject to or obligated under any
certificate of incorporation, bylaw, Law, or any agreement or instrument,
or any license, franchise or permit, which would be breached or violated by
its execution, delivery or performance of this Agreement. Holdings will
comply with all Laws in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
3.5. Governmental Authorities. Holdings is not required to submit any
notice, report or other filing with and no consent, approval or
authorization is required by any governmental or regulatory authority in
connection with Holdings' execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE IV
COVENANTS OF THE SELLERS
Except as otherwise consented to or approved by Holdings in writing,
until the Closing, the Sellers jointly and severally covenant and agree
(and will cause the Company to act or refrain from acting where required
hereinafter) as follows:
4.1. Regular Course of Business. The Company will operate its business
in the ordinary course, diligently and in good faith, consistent with past
management practices; will maintain all of its properties in customary
repair, order and condition, reasonable wear and tear excepted; will
maintain (except for expiration due to lapse of time) all leases and
contracts described herein in effect without change except as expressly
provided herein; will comply with the provisions of all Laws applicable to
the conduct of its business; will not engage in any significant or unusual
transaction; will not cancel, release, waive or compromise any debt, claim
or right in its favor having a value in excess of $5,000 other than in
connection with returns for credit or replacement in the ordinary course of
business; will maintain insurance coverage up to the Closing Date in
amounts adequate to protect and insure the Company against perils which
good business practice demands be insured against or which are normally
insured against by other industry members similarly situated.
4.2. Amendments. Except as required for the transactions contemplated
in this Agreement, no change or amendment shall be made in the Company's
articles or certificate of incorporation or bylaws. The Company will not
merge into or consolidate with any other corporation or person, or change
the character of its business.
4.3. Capital Changes. The Company will not (i) issue or sell any
shares of its capital stock of any class or issue or sell any securities
convertible into, or options, warrants to purchase or rights to subscribe
to, any shares of its capital stock of any class or (ii) directly or
indirectly, redeem, purchase or otherwise acquire any shares of its capital
stock.
4.4. Dividends; Bonuses. Except as described in Exhibit 2.9, the
Company will not declare, pay or set aside for payment any dividend or
other distribution in respect of its capital stock. The Company will not
pay, set aside, accrue, agree to or become liable in any manner for any
bonus, of any nature or type, to Sellers or to any employee or officer of
the Company.
4.5. Capital and Other Expenditures. The Company will not make any
capital expenditures, or commitments with respect thereto, except as set
forth in Exhibit 2.25. The Company will not prepay any debt or obligation
(except for prepaying trade accounts payable in the normal course of
business to take advantage of cash discounts).
4.6. Borrowing. The Company will not incur, assume or guarantee any
indebtedness or capital leases. The Company will not create or permit to
become effective any mortgage, pledge, lien, encumbrance or charge of any
kind upon its assets other than in the ordinary course of business.
4.7. Other Commitments. Except in the ordinary course of business
consistent with past practices, the Company will not enter into any
transaction, make any commitment or incur any obligation.
4.8. Interim Financial Information. The Company will supply Holdings
with unaudited monthly financial statements within 20 business days of the
end of each month ending between the Financial Statement Date and the
Closing Date certified by its President and chief financial officer as
having been prepared in accordance with procedures employed by the Company
in preparing prior monthly financial statements. All such financial
statements shall be accompanied by a certificate of the Company's President
and chief financial officer certifying that such financial statements were
prepared on a basis consistent with the unaudited financial statements for
the preceding months and such unaudited statements include all adjustments
(all of which were normal recurring adjustments) necessary to fairly
present the financial position, results of operations and changes in
financial position at and for such period.
4.9. Full Access and Disclosure.
(a) The Company shall afford to Holdings and its counsel, accountants
and other authorized representatives reasonable access during business
hours to the Company's plants, properties, books and records in order that
Holdings may have full opportunity to make such reasonable investigations
as it shall desire to make of the affairs of the Company and the Company
will cause its officers and employees to furnish such additional financial
and operating data and other information as Holdings shall from time to
time reasonably request.
(b) From time to time prior to the Closing Date, the Company will
promptly supplement or amend in writing information previously delivered to
Holdings with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or disclosed.
4.10. Consents. The Company will use all reasonable means at its
disposal to obtain on or prior to the Closing Date all consents necessary
to the consummation of the transactions contemplated hereby.
4.11. Breach of Agreement. Neither Sellers nor the Company will take
any action which, if taken prior to the Closing Date, would constitute a
breach of this Agreement.
4.12. Further Assurances. The Company, Sellers and the Company's
counsel will furnish Holdings with such other and further documents,
certificates, opinions, consents and information as Holdings shall
reasonably request to enable Holdings to borrow funds from a bank or other
lending entity or individual(s) for the purchase of the Shares and to
evidence compliance with the terms and conditions of any credit agreement
to be entered into between Holdings or and a bank and/or other lending
entities or individuals.
4.13. Fulfillment of Conditions. Sellers and the Company will take all
commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith, to satisfy each condition to the obligations
of Holdings contained in this Agreement and will not take or fail to take
any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
4.14. HSR Filing. Sellers and the Company will (a) take promptly all
actions necessary to make the filings required of Seller or its affiliates
under Section 7A of the Xxxxxxx Act (Title II of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended), and the rules and
regulations promulgated thereunder (the "HSR Act"), (b) comply at the
earliest practicable date with any request for additional information
received by the Company, Sellers or its affiliates from the Federal Trade
Commission or the Antitrust Division of the Department of Justice pursuant
to the HSR Act and (c) cooperate with Holdings in connection with Holdings'
filing under the HSR Act and in connection with resolving any investigation
or other inquiry concerning the transactions contemplated by this Agreement
commenced by the Federal Trade Commission, the Antitrust Division of the
Department of Justice or any state attorney general.
ARTICLE V
COVENANTS OF HOLDINGS
Holdings hereby covenants and agrees with the Sellers that:
5.1. Confidentiality. Holdings will hold in strict confidence and not
disclose to any other party (other than its counsel and other advisors),
without all of the Sellers' prior consents, all information received by
Holdings from any of Sellers or the Company, any of the Company's officers,
directors, employees, agents, counsel or auditors in connection with the
transactions contemplated hereby, except as may be required by applicable
law or as otherwise contemplated herein.
5.2. Books and Records. Holdings shall preserve and keep the Company's
books and records delivered hereunder for a period of three years from the
date hereof and shall, during such period, make such books and records
available to former officers and directors of the Company and its
authorized agents for any reasonable purpose.
5.3. HSR Xxxxxx.Xxxxxxxx will (a) take promptly all actions necessary
to make the filings required of Holdings under Section 7A of the HSR Act,
(b) comply at the earliest practicable date with any request for additional
information received by Holdings or its affiliates from the Federal Trade
Commission or the Antitrust Division of the Department of Justice pursuant
to the HSR Act and (c) cooperate with Sellers in connection with Sellers'
filing under the HSR Act and in connection with resolving any investigation
or other inquiry concerning the transactions contemplated by this Agreement
commenced by the Federal Trade Commission, the Antitrust Division of the
Department of Justice or any state attorney general.
5.4. Section 338 Election. Holdings and the Company shall not (i) make
any election under Code section 338, the Treasury Regulations promulgated
thereunder or any successor provision thereto, with respect to or otherwise
in connection with its purchase of Shares or (ii) take any position on any
tax return that is inconsistent with treating the purchase of Shares as a
stock acquisition for tax purposes.
ARTICLE VI
OTHER AGREEMENTS
Holdings and the Sellers covenant and agree that:
6.1. Agreement to Defend. In the event any action, suit, proceeding or
investigation of the nature specified in Section 7.5 or Section 8.2 hereof
is commenced, whether before or after the Closing Date, all the parties
hereto agree to cooperate and use their best efforts to defend against and
respond thereto.
6.2. Consultants, Brokers and Finders. The Sellers and Holdings each
represent and warrant to the other that they have retained the following
consultants, brokers or finders in connection with the transactions
contemplated by this Agreement: Mesirow Financial retained by Sellers and
The Xxxxxx Company retained by Holdings. The Sellers and Holdings each
hereby agree to indemnify, defend and hold the other party and its
officers, directors, employees and affiliates, harmless from and against
any and all claims, liabilities or expenses for any brokerage fees,
commissions or finders fees due to any consultant, broker or finder
retained by the indemnifying party.
6.3. Noncompetition Agreement. At the Closing, Holdings and Sellers
will enter into a Noncompetition Agreement in the form set forth in Exhibit
6.3 (collectively, the "Noncompetition Agreements").
6.4. Taxes.
(a) The Sellers shall be liable and indemnify Holdings and the Company
for all Taxes of the Company to the extent such Taxes are not adequately
provided for as current Taxes on the Company's Closing Balance Sheet (i)
for taxable periods ending on or before the Closing Date and (ii) for any
period not ending on or before the Closing Date, for the portion of any
Taxes attributable to the period ending on the Closing Date as set forth in
Section 6.4(b).
(b) All Taxes attributable to the operations of the Company for all
periods (or portions thereof) after the Closing Date shall be borne by the
Company. For any period that includes but does not end on the Closing Date,
(i) liability for any Taxes determined by reference to income, capital
gains, gross income, gross receipts, sales, net profits, windfall profits
or similar items or resulting from a transfer of assets shall be allocated
between the Sellers and the Company based on the date on which such items
accrued; and (ii) liability for all other Taxes shall be allocated between
the Sellers and the Company, pro rata based on the number of days in the
taxable period for which each party is liable for Taxes hereunder. With
respect to the Subchapter S Corporation tax year of the Company that ends
on the Closing Date, the tax liability of the Sellers for items described
in Code Section 1366(a) shall be determined as provided in Code Section
1362(e)(3) and an appropriate election shall be made thereunder. The
Sellers agree that the Sellers will not permit the Subchapter S Corporation
status of the Company to terminate prior to the Closing Date.
(c) The Sellers shall cause the Company to prepare and file all tax
returns and reports of the Company due on or prior to the Closing Date,
which returns and reports shall be prepared and filed timely and on a basis
consistent with existing procedures for preparing such returns and reports
and in a manner consistent with prior practice with respect to the
treatment of specific items on the returns or reports; provided, however,
that if the treatment of any item on any such return or report has not been
provided by prior practice, the Sellers shall cause the Company to report
such items in a manner that would result in the least amount of aggregate
tax liability to the Company for all taxable periods ending before, on, or
after the Closing Date. Holdings shall cause the Company to prepare and
file all tax returns and reports of the Company due after the Closing Date,
which returns and reports, to the extent they relate to taxable periods
beginning prior to, but including the Closing Date, and for the purpose of
determining the Sellers' liability for taxes, shall be prepared and filed
timely and on a basis consistent with existing procedures for preparing
such returns and in a manner consistent with prior practice with respect to
the treatment of specific items on the returns and reports, unless such
treatment does not have sufficient legal support to avoid the imposition of
penalties. Holdings shall, or shall cause the Company to, submit such
returns to the Sellers for their review and comment no later than thirty
(30) business days prior to the due date for filing such returns. Upon
completion of its review of the returns, Sellers shall remit to the Company
the amounts payable under Section 6.4(a)(ii) hereof no later than three (3)
business days prior to the due date for filing such returns.
(d) Holdings, the Company and the Sellers shall provide each other
with such assistance as may reasonably be requested by the others in
connection with the preparation of any return or report of Taxes, any audit
or other examination by any taxing authority, or any judicial or
administrative proceedings relating to liabilities for Taxes. Holdings, the
Company and the Sellers will retain for the full period of any statute of
limitations and provide the others with any records or information which
may be relevant to such preparation, audit, examination, proceeding or
determination.
(e) If in connection with any examination, investigation, audit or
other proceeding in respect of any tax return covering the operations of
the Company on or before the Closing Date, any governmental body or
authority issues to the Company a written notice of deficiency, a notice of
reassessment, a proposed adjustment, an assertion of claim or demand
concerning the taxable period covered by such return, Holdings or the
Company shall notify the Sellers of its receipt of such communication from
the governmental body or authority within thirty (30) business days after
receiving such notice of deficiency, reassessment, adjustment or assertion
of claim or demand. No failure or delay of Holdings or the Company in the
performance of the foregoing shall reduce or otherwise affect the
obligations or liabilities of the Sellers pursuant to this Agreement,
except to the extent that such failure or delay shall have adversely
affected the Sellers' ability to defend against any liability or claim for
Taxes that the Sellers are obligated to pay hereunder. With respect to
returns for taxable periods ending after the Closing Date, but which
include the Closing Date, Sellers shall have the nonexclusive right to
participate in the contest of such assessment, proposal, claim,
reassessment, demand or other proceedings an the resolutions of any such
controversy shall be jointly agreed to between Sellers and the Company. The
Sellers shall, at his, her or its expense, have the sole and exclusive
right to control the contest of any such assessment, proposal, claim,
reassessment, demand or other proceedings in connection with any tax return
covering taxable periods of the Company ending on or before the Closing
Date. Holdings and the Company will not be obligated to settle or resolve
any issue related to Taxes for such a period, which, if so settled or
resolved, could have an effect on the Company or Holdings for periods after
the Closing Date, unless the Sellers agree in writing with Holdings and the
Company, in terms reasonably satisfactory to Holdings and the Company, to
indemnify Holdings and the Company from any cost, damage, loss or expense
relating to such settlement or resolution.
(f) If there is an adjustment to any return or report of Taxes for the
Company which creates a deficiency in any Taxes for which the Sellers are
liable under the provisions of Section 6.4(b) hereof, the Sellers shall pay
to Holdings the amount of such deficiency in Taxes. No liability of the
Sellers under this Section 6.4(f) shall be payable until there is a
decision, judgment, decree, or other order issued by a court of competent
jurisdiction or government agency, which is final, the IRS or equivalent
administrative agency has entered into a binding agreement or rendered a
determination that is final or is otherwise acquiesced in by the Sellers
during the course of any audit or any proceeding relating to Taxes. All
payments required to be made by the Sellers pursuant to this Section 6.4(f)
shall be made within ten (10) business days of the occurrence of the event
described in the immediately preceding sentence.
(g) All federal, state, local, foreign and other transfer, sales, use
or similar Taxes applicable to, imposed upon or arising out of the transfer
of the Shares shall be paid by the Sellers.
(h) (i) If any Tax Adjustment is made to any tax return and if such
Tax Adjustment results in an increase in any liability for Taxes borne by
Sellers ("Sellers' Tax Detriment") and results in a Tax Benefit, as defined
below, to the Company or any Affiliate of the Company with respect to a
period or portion thereof ending after the Closing Date, such benefited
party shall remit to Sellers the amount of such Tax Benefit within three
(3) business days after the filing of the applicable tax return for the
period in which such Tax Benefit is realized. Any deduction, credit,
decrease in income or decrease in recapture of credit not resulting in an
actual Tax Benefit for the period to which it relates shall be carried
forward to succeeding taxable years until used
(ii) If any Tax Adjustment is made to any tax return and if such Tax
Adjustment results in an increase in any liability for Taxes borne by
the Company or any Affiliate of the Company ("Company Tax Detriment")
and results in a Tax Benefit to Sellers with respect to a period or
portion thereof ending on or prior to the closing Date, Sellers shall
remit to the Company the amount of such Tax Benefit within three (3)
business days after the filing of the applicable tax return for the
period in which such tax savings is realized. Any deduction, credit,
decrease in income or decrease in recapture of credit not resulting in
an actual Tax Benefit for the period to which it relates shall be
carried forward to succeeding taxable years until used.
(iii) For purposes of this Section 6.4(h), "Tax Adjustment" shall mean
any decision, judgment, decree or other order issued by a court of
competent jurisdiction or government agency, which is final, or the
IRS or equivalent administrative agency has entered into a binding
agreement or rendered a determination that is final or is otherwise
acquiesced in by the Sellers and the Company and Holdings.
(iv) For purposes of this Section 6.4(h), "Tax Benefit" means the
decrease in any liability for Taxes resulting from (x) a decrease in
income or in recapture of credits or (y) an increase in deductions on
credits. The Tax Benefit shall be equal to the actual tax savings
produced by such deduction, credit, decrease in income or decrease in
recapture of credit and shall be deemed to be realized in the taxable
period for which such deduction, credit, decrease in income or
decrease in recapture of credit results in a reduction (and shall
equal the amount of such reduction) in the Taxes paid or results in an
increase in any refund of Taxes received including interest thereon)
(and shall equal the amount of such increase), for such period as
compared to the Taxes that would have been paid or the refund of Taxes
that would have been received for such period in the absence of such
deduction, credit, decrease in income or recapture of credit.
(i) The provisions of this Section 6.4 shall not be governed by the
limitations contained in Section 11.1 and to the extent of any
inconsistency between this Section 6.4 and Article XI, the provisions of
this Section 6.4 shall control.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF HOLDINGS
Each and every obligation of Holdings under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by Holdings:
7.1. Representations and Warranties; Performance. The representations
and warranties made by the Sellers herein shall be true and correct on the
date of this Agreement and on the Closing Date with the same effect as
though made on such date; the Sellers shall have performed and complied
with all agreements, covenants and conditions required by this Agreement to
be performed and complied with by them prior to the Closing Date; Sellers
shall have, and shall have caused the President and chief financial officer
of the Company to have delivered to Holdings a certificate, dated the
Closing Date, in the form designated Exhibit 7.1 hereto, certifying to such
matters and the other conditions contained in this Article VII.
7.2. Consents and Approvals. All consents from and filings with third
parties, regulators and governmental agencies required to consummate the
transactions contemplated hereby, or which, either individually or in the
aggregate, if not obtained, would cause an adverse effect on the Company's
financial condition or business shall have been obtained and delivered to
Holdings. Without limiting the above, the applicable waiting period under
the HSR Act shall have terminated or expired.
7.3. Opinion of Sellers' Counsel. Holdings shall have received an
opinion of Sellers' counsel, dated the Closing Date, substantially in the
form attached hereto as Exhibit 7.3.
7.4. No Adverse Change. There shall have been no material adverse
change since the Financial Statement Date in the business, prospects,
financial condition, earnings or operations of the Company's business.
7.5. No Proceeding or Litigation. No action, suit or proceeding before
any court or any governmental or regulatory authority shall have been
commenced or threatened, and no investigation by any governmental or
regulatory authority shall have been commenced or threatened against any of
the Sellers, the Company, Holdings or any of their respective principals,
officers or directors seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of
any of such transactions or seeking damages in connection with any of such
transactions.
7.6. Comfort Letter and Solvency Certificate. Holdings shall have
received (a) a "comfort" letter from the Company's independent certified
public accountants, dated the Closing Date, based upon a limited review
(but not an audit) conducted no earlier than five (5) business days
preceding the Closing Date and (b) a "solvency" certificate from Sellers
and the Company's President and chief financial officer substantially in
the forms of Exhibits 7.6.1 and 7.6.2 hereto, respectively, which documents
shall relate to the operations and financial conditions of the Company and
the interim financial statements delivered pursuant to Section 4.8 hereof.
7.7. Financial Condition at Closing.
(a) Except for liabilities set forth in the Balance Sheet and accounts
payable incurred in the ordinary course of business of the Company
consistent with past practices, the Company shall not owe any debt at the
Closing Date other than Permitted Liabilities. The term "debt" includes
notes payable and the short-term and long-term portions of any and all debt
or obligations, including capitalized lease obligations.
(b) The Company's net sales for the fiscal year ending December 31,
1997 to be on schedule (run rate) to equal at least $15,000,000. The
Company's net sales for the fiscal year ended December 31, 1996, calculated
in accordance with GAAP, shall equal or exceed $14,624,000. The Company's
net sales for the fiscal year ended December 31, 1995, calculated in
accordance with GAAP, shall equal or exceed $13,196,000. The Company's net
sales for the fiscal year ended December 31, 1994, calculated in accordance
with GAAP, shall equal or exceed $11,318,000.
(c) The Company's net income before provision for interest, income
taxes, owners' bonuses and non-continuing expenses ("Adjusted EBIT") for
the fiscal year ending December 31, 1997 to be on schedule to equal at
least $3,801,000. The Company's Adjusted EBIT for the fiscal year ended
December 31, 1996 shall equal or exceed $3,683,000. The Company's Adjusted
EBIT for the fiscal year ended December 31, 1995 shall equal or exceed
$2,674,000. The Company's Adjusted EBIT for the fiscal year ended December
31, 1994 shall equal or exceed $3,223,000.
(d) The mix and composition of the assets and liabilities of the
Company on the Closing Date will not be materially different than those
indicated on the Balance Sheet.
(e) At the Closing Date, the DFCE of the Company shall be no less than
$4,000,000 plus all earnings and profits of the Company for the period from
July 31, 1997, to the day preceding the Closing Date less $600,000.
(f) Except as set forth in Exhibit 2.9, since July 31, 1997, the
Company shall not have (i) paid any shareholder dividends or distributions,
(ii) repaid any debt in excess of the amount required to be repaid pursuant
to written contractual obligations or pursuant to Section 1.3 or (iii) paid
any bonuses or excessive compensation to any of the Sellers.
7.8. Retention of Key Personnel. None of Xxxx XxXxxxx,
Xxx Xxxxxxxx, Xxxxx Xxxxx or Xxxxxxx Xxxxx shall have terminated
their respective positions with the Company.
7.9. Certified Audit. Ernst & Young LLP shall conduct a
certified audit of the Company as at December 31, 1996 and July 31, 1997,
the results of which shall be satisfactory to Holdings in its sole and
absolute discretion.
7.10. Review. A full due diligence review of the Company's business
shall be completed by Holdings, its legal counsel, its outside consultants,
or others appointed by Holdings. Holdings shall be satisfied in its sole
and absolute discretion with the results of Holdings' due diligence review
of the Company and its business operations, prospects and assets. Holdings
shall bear the costs of this review.
7.11. Other Documents. Sellers will furnish or cause the Company to
furnish Holdings with such other and further documents and certificates of
its officers and others as Holdings shall reasonably request to evidence
compliance with the conditions set forth in this Agreement.
7.12. Other Agreements. The Agreements described in Article VI shall
have been entered into and delivered.
7.13. Estoppel Certificate. The Sellers shall have furnished Holdings
with an estoppel certificate in the form attached hereto as Exhibit 7.13,
which shall have been executed by the lessor under the lease described on
Exhibit 2.12.
7.14. Withholding Certificate. Holdings shall have received from each
of the Sellers an executed withholding certificate in the form attached
hereto as Exhibit 7.14.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by all of the Sellers:
8.1. Representations and Warranties; Performance. The representations
and warranties made by Holdings herein shall be true and correct on the
date of this Agreement and on the Closing Date with the same effect as
though made on such date; Holdings shall have performed and complied with
all agreements, covenants and conditions required by this Agreement to be
performed and complied with by it prior to the Closing Date; Holdings shall
have delivered to the Sellers a certificate of its President, dated the
Closing Date, certifying to the fulfillment of the conditions set forth
herein, in the form designated as Exhibit 8.1 and the other conditions
contained in this Article VIII.
8.2. No Proceeding or Litigation. No action, suit or proceeding before
any court or any governmental or regulatory authority shall have been
commenced, or threatened, and no investigation by any governmental or
regulatory authority shall have been commenced, or threatened, against the
Company, Holdings, any of the Sellers, or any of their respective
principals, officers or directors, seeking to restrain, prevent or change
the transactions contemplated hereby or questioning the validity or
legality of any of such transactions or seeking damages in connection with
any of such transactions.
8.3. Opinion of Counsel. The Sellers shall have received an opinion of
counsel to Holdings dated the Closing Date substantially in the form of
Exhibit 8.3.
8.4. Payment. The payment(s) described in Section 1.2
shall have been made.
8.5. Other Documents. Holdings will furnish the Sellers with such
other documents and certificates to evidence compliance with the conditions
set forth in this Article as may be reasonably requested by the Sellers.
8.6. Other Agreements. The agreements described in Article VI shall
have been entered into and delivered.
ARTICLE IX
CLOSING
9.1. Closing. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article X hereof, a closing (the
"Closing") shall be held on October 15, 1997, or on such other date (the
"Closing Date") mutually agreed upon at such place or places as Holdings
shall designate. Each party has the right at any time to extend the Closing
Date for a period of up to 30 business days from the date stated above, by
written notice to the other party or parties.
9.2. Deliveries at Closing.
(a) At the Closing, the Sellers shall transfer and assign to Holdings
all of the Shares by delivering certificates representing each of the
Shares, duly endorsed for transfer to Holdings with signatures guaranteed,
and the cash consideration, the note(s), and the other agreements,
certifications and other documents required to be executed and delivered
hereunder at the Closing shall be duly and validly executed and delivered.
(b) From time to time after the Closing, at Holdings' request and
without further consideration from Holdings, the Sellers shall execute and
deliver such other instruments of conveyance and transfer and take such
other action as Holdings reasonably may require to convey, transfer to and
vest in Holdings and to put Holdings in possession of the Shares to be
sold, conveyed, transferred and delivered hereunder.
9.3. Legal Actions. If, prior to the Closing Date, any action or
proceeding shall have been instituted by any third party before any court
or governmental agency to restrain or prohibit this Agreement or the
consummation of the transactions contemplated herein, the Closing shall be
adjourned at the option of any party hereto for a period of up to one
hundred twenty (120) days. If, at the end of such 120-day period, the
action or proceeding shall not have been favorably resolved, any party
hereto may, by written notice thereof to the other party or parties,
terminate its obligation hereunder.
9.4. Specific Performance. The parties agree that if any party hereto
is obligated to, but nevertheless does not, consummate this transaction,
then any other party, in addition to all other rights or remedies, shall be
entitled to the remedy of specific performance mandating that the other
party or parties consummate this transaction. In an action for specific
performance by any party hereto against any other party, the other party
shall not plead adequacy of damages at law.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1. Methods of Termination. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time
(notwithstanding approval by the Board of Directors of Holdings):
(a) by mutual consent of Holdings and all of the
Sellers; or
(b) by either Holdings or Sellers, if (i) such party is not in breach
hereunder and the other party is in breach hereunder, and (ii) this
Agreement is not consummated on or before the Closing Date, including
extensions.
10.2. Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 10.1 hereof, this Agreement shall terminate
and shall be abandoned, without further action by any of the parties
hereto. If this Agreement is terminated as provided herein:
(a) each party will upon request redeliver all documents and other
materials of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the
party furnishing the same;
(b) no party hereto shall have any liability or further
obligation to any other party to this Agreement; and
(c) each party shall bear its own expenses.
ARTICLE XI
INDEMNIFICATION
11.1. Indemnification of Sellers. The Sellers and Warrantor, jointly
and severally, agree to indemnify Holdings and each of its shareholders,
officers and directors against any loss, damage, or expense, (including but
not limited to reasonable attorneys' fees) ("Damages"), incurred or
sustained by Holdings or any of its shareholders, officers or directors as
a result of (a) any breach of any term, provision, covenant or agreement
contained in this Agreement by the Sellers or Warrantor; (b) any inaccuracy
in any of the representations or warranties made by the Sellers or
Warrantor in Article II of this Agreement; or (c) any inaccuracy or
misrepresentation in any certificate or other document or instrument
delivered by the Sellers or the Company in accordance with any provision of
this Agreement. The obligations of the Sellers and Warrantor as set forth
in Section 11.1(b) shall be subject to and limited by the following:
(i) No claim for Damages shall be made until the cumulative amount of
such Damages shall equal or exceed $175,000; provided, however, that
such limitation shall not apply to any Damages resulting from
violations under Sections 2.2, 2.4, 2.12, 2.14, 2.18, 2.20, 2.23 or
2.24 hereof, or from intentional or fraudulent actions,
misrepresentations or breaches;
(ii) Holdings shall give written notice to the Sellers stating
specifically the basis for the claim for Damages, the amount thereof
and shall tender defense thereof to the Sellers as provided in Section
11.2;
(iii) In addition to any other remedy, Holdings shall be entitled, but
shall not be obligated, to offset all such claims for Damages against
any obligation of Holdings to Sellers now or hereafter existing
including, without limitation, payments of principal or interest in
the order of installments due on the Subordinated Note delivered
pursuant to Section 1.2(b); and
(iv) Warrantor shall be liable jointly and severally for Damages under
this Section 11.1 only to the extent she has received a portion of the
Purchase Price from any of the Sellers and her liability shall be
limited to the amount of the Purchase Price received. For purposes
hereof, any transfer of property from any Seller to Warrantor after
the Closing Date shall be deemed Purchase Price.
11.2. Tender of Defense for Damages. Promptly upon receipt by Holdings
of a notice of a claim by a third party which may give rise to a claim for
Damages, Holdings shall give written notice thereof to the Sellers. No
failure or delay of Holdings in the performance of the foregoing shall
relieve, reduce or otherwise affect the Sellers' and Warrantor's
obligations and liability to indemnify Holdings pursuant to this Agreement,
except to the extent that such failure or delay shall have adversely
affected the Sellers' ability to defend against such claim for Damages. If
the Sellers give to Holdings an agreement in writing, in a form reasonably
satisfactory to Holdings' counsel, to defend such claim for Damages, the
Sellers may, at their sole expense, undertake the defense against such
claim and may contest or settle such claim on such terms, at such time and
in such manner as the Sellers, in their sole discretion, shall elect and
Holdings shall execute such documents and take such steps as may be
reasonably necessary in the opinion of counsel for the Sellers to enable
the Sellers to conduct the defense of such claim for Damages. If the
Sellers fail or refuse to defend any claim for Damages, the Sellers may
nevertheless, at their own expense, participate in the defense of such
claim by Holdings and in any and all settlement negotiations relating
thereto. In any and all events, the Sellers shall have such access to the
records and files of Holdings relating to any claim for Damages as may be
reasonably necessary to effectively defend or participate in the defense
thereof.
11.3. Litigation Matters. Sellers agree to indemnify and hold harmless
Holdings for any and all claims arising out of the suits or proceedings
listed in Exhibit 2.13 and shall pay all out of pocket costs of Holdings,
including but not limited to attorney's fees, court costs, damage award
amounts and settlement amounts, that may be assessed against Holdings, in
connection with such suits of proceedings.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written
agreement of all of the Sellers and Holdings.
12.2. Waiver of Compliance; Consents. Any failure of the Sellers on
the one hand, or Holdings on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived in writing by
Holdings or the Sellers, respectively, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be
given in writing in a manner consistent with the requirements for a waiver
of compliance as set forth in this Section 12.2.
12.3. Expenses. Each party will pay its own legal, accounting and
other expenses incurred by such party or on its behalf in connection with
this Agreement and the transactions contemplated herein. If the Company
shall at any time pay any expenses incurred in connection with this
Agreement or any part thereof or any of the proceedings and transactions
contemplated hereunder including, without limitation, any legal,
accounting, printing, filing or other costs, then the cash portion of the
Purchase Price shall be reduced by an equal amount.
12.4. Investigations; Survival of Warranties. The respective
representations and warranties of the Sellers and Holdings contained herein
or in any certificates or other documents delivered prior to or at the
Closing are true, accurate and correct and shall not be deemed waived or
otherwise affected by any investigation made by any party hereto or by the
occurrence of the Closing. Each and every such representation and warranty
shall survive for a period of three years from the Closing Date; provided,
however, all representations and warranties and other agreements made
pursuant to Sections 2.2, 2.4, 2.12, 2.14, 2.18, 2.20, 2.23, 2.24 and 6.4
shall never expire and the covenant contained in Section 5.4 shall survive
until the expiration of the statute of limitations; and all claims for
Damages based on intentional or fraudulent actions, misrepresentations or
breaches shall never expire.
12.5. Notices. Any notice, request, consent or communication
(collectively, a "Notice") under this Agreement shall be effective only if
it is in writing and (i) personally delivered, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid, (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed,
or (iv) telecopied, with receipt confirmed, addressed as follows:
(a) If to the Sellers, to:
Xxxx Xxxxxx
x/x Xxxxxx Xxxx
Xxxxx 000
00000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000)000-0000
Telecopier: (000) 000-0000
in each case with a copy to:
Xxxx X. Xxxxxxx, Xx.
Xxxx X. Xxxxxxxxx
Xxxxxx Long
00000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and
Xxxxxxxxx X. Xxxxx
000 Xxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or to such other person or address as any Seller shall furnish to Holdings
in writing.
(b) If to Holdings to:
Xxxxxx X. Xxxxx, President
Xxxxxx X. Xxxxxx, Manager, Business Development
Jordan Industries, Inc.
ArborLake Centre, Suite 000
Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to:
G. Xxxxxx Xxxxxx, Esq.
Xxxxxx X. Xxxx, Esq.
Xxxxx Xxxx LLP
0000 Xxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
or such other persons or addresses as shall be furnished in writing by any
party to the other party. A Notice shall be deemed to have been given as of
the date when (i) personally delivered, (ii) five (5) days after the date
when deposited with the United States mail properly addressed, (iii) when
receipt of a Notice sent by an overnight delivery service is confirmed by
such overnight delivery service, or (iv) when receipt of the telecopy is
confirmed, as the case may be, unless the sending party has actual
knowledge that a Notice was not received by the intended recipient.
12.6. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by Sellers without the prior written consent of Holdings.
12.7. Governing Law; Dispute Resolution.
(a) This Agreement shall be governed by the laws of the State of
Michigan (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law of the state of Michigan) as to
all matters including, but not limited to, matters of validity,
construction, effect, performance and remedies.
(b) Any dispute between any of the parties hereto or any claim by a
party against another party arising out of or relating to this Agreement or
relating to any alleged breach thereof including, without limitation, the
calculation of the Closing Financials and Computations and the payments
pursuant to Section 1.4, shall be determined by arbitration in accordance
with the rules then in force of the American Arbitration Association. The
arbitration proceedings shall take place in Chicago, Illinois or such other
location as the parties in dispute may agree upon. The arbitration
proceedings shall be subject to the substantive laws of the state of
Michigan. There shall be one arbitrator, as shall be agreed upon by the
parties in dispute, who shall be an individual skilled in the legal and
business aspects of the subject matter of this Agreement and of the
dispute. In the absence of such an agreement, each party in dispute shall
select one arbitrator and the arbitrators so selected shall select a third
arbitrator. In the event the arbitrators cannot agree upon the selection of
a third arbitrator such third arbitrator shall be appointed by the American
Arbitration Association at the request of any of the parties in dispute.
The arbitrator shall be an individual skilled in the legal and the business
aspects of the subject matter of this Agreement and of the dispute. The
decision rendered by the arbitrator shall be accompanied by a written
opinion in support thereof. Such decision shall be final and binding upon
the parties in dispute without right of appeal. Judgment upon any such
decision may be entered into in any court having jurisdiction thereof, or
application may be made to such court for a judicial acceptance of the
decision in an order of enforcement. Costs of the arbitration shall be
assessed by the arbitrator against all or any of the parties in dispute and
shall be paid promptly by the party or parties so assessed.
12.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.9. Neutral Interpretation. This Agreement constitutes the product
of the negotiation of the parties hereto and the enforcement hereof shall
be interpreted in a neutral manner, and not more strongly for or against
any party based upon the source of the draftsmanship hereof.
12.10. Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.11. Entire Agreement. This Agreement, which term as used throughout
includes the Exhibits hereto, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings other than those expressly set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first hereinabove set forth.
ELECTRICAL DESIGN AND CONTROL COMPANY
By_____________________________
Xxxxxx Xxxxxx, Vice President
SELLERS:
-------------------------------
Xxxx Xxxxxx
-------------------------------
Xxxx XxXxxx
-------------------------------
Xxxxx Xxxxxx (as Beneficiary of the
Xxxxx Xxxxxx Voting Trust)
-------------------------------
Xxxxxxxxx X. Xxxxx (as Trustee of the
Xxxxx Xxxxxx Voting Trust)
WARRANTOR:
------------------------------
Xxxxxxx Xxxxxx
SCHEDULE OF EXHIBITS
TO
AGREEMENT FOR PURCHASE AND SALE OF
STOCK OF E. D. AND C. COMPANY, INC.
Exhibits Title
Exhibit 1.2 Subordinated Note
Exhibit 1.3 DFCE Example
Exhibit 1.4 Additional Purchase Price Amount
Exhibit 1.5 Allocation
Exhibit 1.6 Excluded Assets
Exhibit 2.1.1 Foreign Qualifications
Exhibit 2.1.2 Certificate or Articles of
Incorporation, Bylaws and
Certificates of Authority of the
Company
Exhibit 2.2 Schedule of Authorized, Issued and
Outstanding Capital Stock of the
Company
Exhibit 2.3 Schedule of Subsidiaries and
Affiliates
Exhibit 2.4 Spousal Consent
Exhibit 2.5 Restrictions on Ability to Perform
Exhibit 2.7 Financial Statements
Exhibit 2.9 List of Distributions
Exhibit 2.10 Schedule of Contracts
Exhibit 2.12 Title and Related Matters
Exhibit 2.13 Legal Proceedings and Judgments
Exhibit 2.14.1 Certain Tax Matters
Exhibit 2.14.2 Tax Returns
Exhibit 2.16 Copies of Reports and Inspections
Exhibit 2.18.1 Welfare Benefit Plans; Retiree
Health Benefits
Exhibit 2.18.2 Employee Pension Benefits Plans
Exhibit 2.18.3 Other Benefit Plans Including
Vacation
Exhibit 2.18.4 Other Plan Deliveries
Exhibit 2.18.5 Consents and Agreements
Exhibit 2.19 Schedule of Intellectual Property
Rights
Exhibit 2.20 Warranties and Claims Under
Warranties
Exhibit 2.21 Labor Relations
Exhibit 2.22 Schedule of Insurance
Exhibit 2.24 Environmental Matters
Exhibit 2.25 Schedule of Capital Expenditures
Exhibit 2.27 Schedule of Contracts with
Affiliates
Exhibit 2.29 Bank Accounts
Exhibit 2.30 Compensation Schedule
Exhibit 6.3 Noncompetition Agreement
Exhibit 7.1 Certificate of Fulfillment of
Conditions by Sellers and the
Company
Exhibit 7.3 Opinion of the Sellers' Counsel
Exhibit 7.6.1 Comfort Letter
Exhibit 7.6.2 Solvency Certificate
Exhibit 7.13 Estoppel Certificate
Exhibit 7.14 Withholding Certificate
Exhibit 8.1 Certificate of Fulfillment of
Conditions of Holdings
Exhibit 8.3 Opinion of Holdings' Counsel
