DYNAMIC MATERIALS CORPORATION
ASSET PURCHASE AGREEMENT
among
DYNAMIC MATERIALS CORPORATION,
PRECISION MACHINED PRODUCTS, INC.,
XXXXXXX X. XXXXXXX
AND
XXXXXXXX X. XXXXXXX
Dated
November 18, 1998
TABLE OF CONTENTS
PAGE
1. Transfer of Assets, Payment, and Related Matters.........................1
1.1 Transfer of Assets................................................1
1.2 Retained Assets...................................................1
1.3 Certain Assumption of Obligations and Liabilities.................2
1.4 Consideration.....................................................2
1.5 Allocation of Consideration.......................................4
1.6 Sales and Use Taxes...............................................4
1.7 Instruments of Conveyance, Transfer and Assumption................4
1.8 Consents and Approvals............................................5
2. Closing..................................................................6
3. Representations and Warranties by Seller and Principals..................6
3.1 Organization and Standing.........................................6
3.2 Corporate Power; Authorization....................................6
3.3 No Breach, Etc....................................................7
3.4 Financial Statements..............................................7
3.5 Title to Properties: Liens: Condition of Properties...............7
3.6 Taxes.............................................................8
3.7 No Liabilities....................................................8
3.8 Litigation, Etc...................................................8
3.9 Patents, Trade Names and Trademarks...............................9
3.10 Compliance with Laws.............................................10
3.11 Environmental Matters............................................10
3.12 Governmental Permits.............................................11
3.13 Disclosure of Material Information...............................11
3.14 Insurance........................................................12
3.15 Inventory........................................................13
3.16 Major Customers..................................................13
3.17 Existing Employment Contracts....................................13
3.18 Employee Benefits................................................14
3.19 Required Consents and Approvals..................................15
3.20 Absence of Certain Changes.......................................15
3.21 Product Warranty and Product Liability...........................17
3.22 Controlling Stockholder List.....................................17
3.23 Assets Necessary to Business.....................................17
3.24 Contracts and Commitments........................................18
4. Representations and Warranties of Purchaser.............................19
4.1 Organization and Standing........................................19
4.2 Corporate Power; Authorization...................................19
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4.3 No Breach, Etc...................................................20
5. Further Covenants of Seller and Principals..............................20
5.1 Access to Information and Records................................20
5.2 Conduct of Business Pending the Closing..........................20
5.3 Change of Corporate Name.........................................22
5.4 Consents.........................................................22
5.5 Other Action.....................................................22
5.6 Disclosure.......................................................22
5.7 Non-Competition Agreements.......................................22
6. Conditions Precedent to Purchaser's Obligations.........................22
6.1 Representations and Warranties True on the Closing Date..........22
6.2 Compliance with Agreement........................................23
6.3 Finders Fees; Payments...........................................23
6.4 Absence of Suit..................................................23
6.5 Consents and Approvals...........................................23
6.6 Due Diligence....................................................23
6.7 Employees........................................................23
7. Conditions Precedent to Seller's Obligations............................24
7.1 Representations and Warranties True on the Closing Date..........24
7.2 Compliance with Agreement........................................24
7.3 Absence of Suit..................................................24
8. Closing.................................................................24
8.1 Time and Place...................................................24
8.2 Actions at Closing...............................................24
9. Post-Closing Matters....................................................26
9.1 Use of Seller's Name.............................................26
9.2 Sales Tax Matters................................................26
9.3 Finders Fees; Payments...........................................26
9.4 SEC Filings......................................................27
9.5 Accounts Receivable..............................................27
10. Indemnification.........................................................27
10.1 Indemnification of Purchaser.....................................27
10.2 Indemnification of Seller........................................28
11. Indemnification Procedures..............................................28
11.1 Notice...........................................................28
11.2 Third Party Claims...............................................28
11.3 Other Claims.....................................................29
11.4 Calculation of Losses............................................29
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11.5 Nonexclusivity of Indemnification Remedies.......................29
11.6 Minimum Damages..................................................29
12. Survival of Representations and Warranties..............................29
13. Confidentiality Provisions..............................................30
13.1 Obligation.......................................................30
13.2 Exclusions.......................................................30
13.3 Remedies.........................................................30
14. Entire Agreement and Amendments; Section Headings.......................30
15. Counterparts............................................................31
16. Successors and Assigns..................................................31
17. Applicable Law..........................................................31
18. Expenses................................................................31
19. Equitable Relief........................................................31
20. "Knowledge" Definition..................................................31
21. Further Assurances......................................................31
22. Notices.................................................................32
23. Severability and Waiver.................................................32
24. Public Announcements....................................................32
25. Third Party Beneficiaries...............................................33
26. Pronouns................................................................33
27. Attorneys' Fees.........................................................33
EXHIBITS
--------
Exhibit A Assets
Exhibit B Legal Description of Real Property
Exhibit C Operating Lease
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Exhibit D Option and Right of First Offer Agreement
Exhibit E Stock Agreement
Exhibit F Adjustment Statement
Exhibit G July 31, 1998 Balance Sheet
Exhibit H Xxxx of Sale and Assumption Agreement
Exhibit I Disclosure Schedules
Exhibit J Non-Competition Agreement
Exhibit K Consulting Engagement and Proprietary Information Agreement
(Bellows)
Exhibit L Opinion of Xxxxx Xxxxxx & Xxxxxx LLP
Exhibit M Proprietary Information Agreement
Exhibit N Opinion of Xxxxx, Xxxxxxxxx & Xxx, P.C.
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("AGREEMENT") is entered into as of the
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day of November, 1998 (the "EFFECTIVE DATE") among Dynamic Materials
Corporation, a Delaware corporation ("PURCHASER"), having a principal place of
business at 000 Xxxxx Xxxxx Xxxxx, Xxxxxxxxx, XX 00000, Precision Machined
Products, Inc., a Colorado corporation ("SELLER"), having a principal place of
business at 0000 Xxxxxxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxxx 00000 and Xxxxxxx X.
Xxxxxxx and Xxxxxxxx X. Xxxxxxx (each a "PRINCIPAL"), having a principal place
of business at 0000 Xxxxxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxxx 00000.
RECITALS
A. Seller owns a metal working business located at 0000 Xxxxxxxxxx Xxxxx,
Xxxx Xxxxxxx, Xxxxxxxx 00000 and owns certain tangible and intangible assets
related to such business. That business, as Seller currently conducts it, is
referred to as the "BUSINESS."
B. Seller desires to sell such business and assets and Purchaser desires
to purchase such business and assets.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement hereby agree as follows:
TERMS
1. TRANSFER OF ASSETS, PAYMENT, AND RELATED MATTERS.
1.1 TRANSFER OF ASSETS. In consideration of the payment to Seller by
Purchaser pursuant to Section 1.4 below, and subject to the terms and conditions
of this Agreement, Seller hereby assigns, conveys, transfers and sells to
Purchaser as of the closing provided for in Section 2 below (the "CLOSING"), all
right, title and interest in and to all of the assets of Seller relating to the
Business, including without limitation, those tangible, intangible and contract
assets, rights and personal properties, all subject to Section 1.2 below, as
more particularly described in Exhibit A attached hereto and incorporated herein
by reference (collectively, the "ASSETS").
1.2 RETAINED ASSETS. The foregoing notwithstanding, Seller shall retain and
the Assets shall not include the following (collectively, the "RETAINED
ASSETS"):
a. Seller's corporate franchise, corporate record books containing
minutes of meetings of the board of directors, stockholders, and such other
records as have to do exclusively with Seller's organization or capitalization
(provided, however, that Purchaser and its representatives shall have
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access to such documents at reasonable times and on reasonable notice for the
purpose of inspecting and making copies of them);
b. real property consisting of land and buildings located in Larimer
County, Colorado, with a street address of 0000 Xxxxxxxxxx Xxxxx, Xxxx Xxxxxxx,
Xxxxxxxx 00000, as is more particularly described in Exhibit B attached hereto
and by this reference incorporated herein, at which the Business operates
(collectively the "REAL PROPERTY") and which will be subject to an Operating
Lease and an Option and Right of First Offer Agreement substantially in the form
of Exhibits C and D hereto, respectively;
c. any Materials of Environmental Concern (as defined in Section
3.11(b) hereof);
d. any cash, cash equivalents, bank accounts and marketable
securities; and
e. Adjustments, dividends or refunds related to the cancellation of
Seller's workers compensation insurance policy prior to closing and any
insurance premium refunds.
1.3 CERTAIN ASSUMPTION OF OBLIGATIONS AND LIABILITIES. Purchaser shall
undertake, assume and agree to perform, pay or discharge all current liabilities
associated with the Assets or the Business, including accrued vacation (the
"ASSUMED CURRENT LIABILITIES"). Purchaser shall not undertake, assume or agree
to perform, pay or discharge any other liabilities, obligations or the like of
or related to Seller, except for the Assumed Current Liabilities. In addition,
except for the Assumed Current Liabilities, Seller shall remain fully
responsible for all liabilities or obligations arising from activities conducted
on and all conditions (including, without limitation, any environmental
contamination) of the site where the Assets are located, and all adjacent sites,
including the Real Property, and for all activities conducted off the site which
relate to the Assets or the operations in which the Assets were previously
employed, but only to the extent such liabilities or obligations arise from
activities or conditions taking place or existing prior to the Closing. Seller's
responsibility (as described in the preceding sentence) shall include, without
limitation, the responsibility to perform any and all response activities
required under any federal, state, or local law, regulation or requirement
relating to any environmental condition or circumstance, but only to the extent
such activities are required due to environmental conditions or circumstances
taking place or existing prior to the Closing.
1.4 CONSIDERATION.
a. Subject to the terms and conditions of this Agreement, as
consideration for the Assets transferred to Purchaser hereunder, Purchaser shall
pay to Seller at the Closing in the manner described below (the "PURCHASE
PRICE"). The Purchase Price includes estimated values as follows: Assumed
Current Liabilities of [$149,000]; Accounts Receivable of [$472,023]; and
Inventory (as defined in Exhibit A) of [$273,853] which estimated values are
derived from the July Balance Sheet (as defined in Subparagraph d(4) below),
except for the Assumed Current Liabilities amount which represents Seller's
current estimate.
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b. Purchaser shall pay the Purchase Price as follows:
(1) At the Closing, the Purchaser shall deliver a cash payment
of [Six Million Eight Hundred Thousand Dollars ($6,800,000)] (the "CASH
DELIVERY"). The Cash Delivery is subject to adjustment as provided in
Subparagraph c. below.
(2) At the Closing, Purchaser shall deliver to Seller 40,000
shares of Purchaser's unregistered Common Stock, par value $.05 per share, which
shall be issued pursuant to and subject to restrictions as set forth in the
Stock Agreement attached hereto as Exhibit E (the "PURCHASE STOCK").
c. ADJUSTMENT PROCEDURE.
(1) The Cash Delivery paid at the Closing shall be derived
from the estimated values of the Inventory, Accounts Receivable and Assumed
Current Liabilities. Within 30 days after the Closing, Seller shall deliver to
Purchaser the Closing Balance Sheet. Seller shall determine the amounts of the
difference between the July Balance Sheet and the Closing Balance Sheet with
respect to the Inventory, Accounts Receivable and Assumed Current Liabilities,
if any, and the resulting adjustment to be made to the Cash Delivery, and shall
deliver a statement of that adjustment in substantially the form attached hereto
as Exhibit F (the "ADJUSTMENT STATEMENT") within that 30 day period. Purchaser
shall have 30 business days after it receives the Adjustment Statement to object
to any calculation contained in the Adjustment Statement. If Purchaser does not
make any objection within that period, the Adjustment Statement and Closing
Balance Sheet shall be deemed final and conclusive with respect to the
determination of any adjustment to be made to the Cash Delivery, and shall be
binding on the parties to this Agreement.
(2) If Purchaser objects to any calculation on the Adjustment
Statement, the parties shall, within 10 business days, mutually determine the
correct calculation. If the parties cannot resolve the objection within that
time, they shall refer the dispute to the Independent Accountant (as defined
below).
(3) The Independent Accountant shall review the calculation to
which Purchaser objected, and shall resolve all objections as soon as
practicable, but no later than 10 business days after the Independent Accountant
receives all information from Seller and Purchaser that the Independent
Accountant may reasonably request regarding the objection. The Adjustment
Statement as the Independent Accountant may modify or approve shall be deemed
final and conclusive with respect to the determination of any adjustment to be
made to the Purchase Price, and shall be binding on the parties to this
Agreement. Seller and Purchaser shall each pay one-half of the Independent
Accountant's fees and expenses in resolving any such objection.
(4) ADJUSTMENT TO CASH DELIVERY. The amount of the cash
component of the Purchase Price shall be based on the final determination of the
Adjustment Statement, whether by Seller and Purchaser or the Independent
Accountant. If that final amount is greater than the Cash Delivery that
Purchaser made at the Closing, then Purchaser shall immediately deliver to
Seller, in cash by wire transfer or certified funds, the additional amount of
the Cash Delivery due to Seller and
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any interest accrued thereon from the date of the Closing. If that final amount
is less than the Cash Delivery that Purchaser made at the Closing, then Seller
shall pay to Purchaser in cash, by wire transfer or certified funds, the
additional amount of the Cash Delivery due to Purchaser. Any adjusted amount
required to be made under this Section 1.4(c) to the amount of Cash Delivery
shall not accrue interest for the first sixty (60) days from the Closing, and
thereafter interest shall accrue at a rate of eight percent (8%) per annum.
d. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(1) "CLOSING BALANCE SHEET" means Seller's unaudited balance
sheet dated as of the Closing Date.
(2) "JULY BALANCE SHEET" means Seller's unaudited balance
sheet dated as of July 31, 1998, attached hereto as Exhibit G. The July Balance
Sheet shall serve as the Closing Balance Sheet for all purposes herein until
such time as the Closing Balance is available, except with respect to Section
1.4(c) hereof.
(3) "INDEPENDENT ACCOUNTANT" means an accounting firm mutually
selected by Seller and Purchaser. If Seller and Purchaser are unable to agree on
the Independent Accountant within 5 business days after Purchaser delivers to
Seller any objection to the Adjustment statement within the time provided above,
then the Independent Accountant shall be Xxxxxx Xxxxxxxx, LLP. If Seller objects
to Xxxxxx Xxxxxxxx LLP as the Independent Accountant, Seller may choose and hire
any other Big Five accounting firm, with which neither party has a relationship,
at Seller's sole cost and expense, and such firm shall serve as the Independent
Accountant in lieu of Xxxxxx Xxxxxxxx LLP.
1.5 ALLOCATION OF CONSIDERATION. The allocation of consideration paid by
Purchaser for the Assets shall be preliminarily allocated as determined by
Purchaser as of Closing and approved by Seller, which approval shall not be
unreasonably withheld or delayed. A final allocation shall be made within sixty
(60) days of the Closing and approved by Seller. Purchaser and Seller hereby
affirm that they shall each adhere to any such allocation for the purposes of
all tax returns filed by them subsequent to such date, including the
determination by Seller of taxable gain or loss on the sale of the Assets and
the determination by Purchaser of the tax basis of the Assets, for the purposes
of all financial statements and in all other circumstances.
1.6 SALES AND USE TAXES. Seller and Purchaser shall bear equal
responsibility for and shall pay all sales, use and other transfer taxes
(collectively, "TRANSFER TAXES") arising by reason of the transfer of the Assets
according to the terms of this Agreement.
1.7 INSTRUMENTS OF CONVEYANCE, TRANSFER AND ASSUMPTION. Seller agrees to
deliver or cause to be delivered to Purchaser at the Closing full possession of
all of the Assets at the place or places where the Assets are located as of the
Effective Date, together with (i) a xxxx of sale attached as Exhibit H hereto
(the "XXXX OF SALE AND ASSUMPTION AGREEMENT"); (ii) such other instruments of
conveyance and transfer as shall be effective to vest in Purchaser all right,
title and interest in and to the Assets free and clear of all liens, charges,
easements, mortgages, pledges, claims and other
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encumbrances in favor of any third party, except as disclosed in the Disclosure
Schedule (as defined below); and (iii) any and all tangible manifestations of
the Assets including, without limitation, all notes, records, files, prints,
drawings, schematics diagrams, specifications and tangible items of any sort in
Seller's possession or under Seller's control relating to the Assets, and
including original trademarks and related registrations, copyrights and related
registrations, and certificates of letters patent, and applications and
disclosures therefor, if any. Such delivery shall include all present versions
and, to the extent in Seller's possession or control, predecessor versions.
1.8 CONSENTS AND APPROVALS. Seller shall use its best efforts to obtain all
consents (including, without limiting the generality of the foregoing, consents
or approvals of any government or governmental agency) necessary to the
assignment and transfer to Purchaser to effect the sale, delivery, transfer and
conveyance of the Assets contemplated by Section 1.1. From time to time after
the Closing, at Purchaser's request and without further consideration, Seller
agrees to execute and deliver such other instruments of conveyance and transfer
and take such other action as Purchaser reasonably may require more effectively
to convey, transfer to and vest in Purchaser, and to put Purchaser in possession
of, any property to be sold, conveyed, transferred and delivered hereunder. All
consents, waivers or approvals required with respect to all of the Contracts or
other rights as listed on Section 3.19 of the Disclosure Schedule have been
obtained.
1.9 EMPLOYEES.
a. AFFECTED EMPLOYEES. "Affected Employees" shall mean employees of
the Seller, if any, who are employed by Purchaser immediately after the Closing.
b. RETAINED RESPONSIBILITIES. Seller agrees to satisfy, or cause its
insurance carriers to satisfy, all claims for benefits, whether insured or
otherwise (including, but not limited to, workers' compensation, life insurance,
medical and disability programs, and accrued vacation), under Seller's employee
benefit programs brought by, or in respect of, Affected Employees and other
employees and former employees of the Seller, which claims arise out of events
occurring on or prior to the Closing Date, in accordance with the terms and
conditions of such programs or applicable workers' compensation statutes without
interruption as a result of the employment by Purchaser of any such employees
after the Closing Date.
c. PAYROLL TAX. Seller agrees to make a clean cut-off of payroll and
payroll tax reporting with respect to the Affected Employees paying over to the
federal, state and city governments those amounts respectively withheld or
required to be withheld for periods ending on or prior to the Closing Date.
Seller also agrees to issue, by the date prescribed by IRS Regulations, Forms
W-2 for salaries, wages and other compensation paid through the Closing Date.
Except as set forth in this Agreement, Purchaser shall be responsible for all
payroll and payroll tax obligations with respect to employment compensation
accruing after the Closing Date for Affected Employees.
d. TERMINATION BENEFITS. Purchaser shall be solely responsible for,
and shall pay or cause to be paid, severance payments and other termination
benefits, if any, to Affected Employees who may become entitled to such benefits
by reason of any events occurring after Closing, except for any accrued
vacation. If any action on the part of Seller prior to the Closing, or if the
sale to
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Purchaser of the business and assets of Seller pursuant to this Agreement or the
transactions contemplated hereby, or if any decision by Purchaser not to hire as
an employee of Purchaser any employee of Seller, shall result in any liability
or claim of liability for severance payments, termination benefits, accrued
vacation pay or other compensation or benefits, or any liability, forfeiture,
fine or other obligation by virtue of any state, federal or local
"plant-closing" or similar law, such liability or such other liability,
forfeiture, fine or other obligation or claim of liability shall be the sole
responsibility of Seller, and from and after the Closing Seller and Principals
shall, jointly and severally, indemnify and hold harmless Purchaser for any
losses resulting directly or indirectly therefrom.
2. CLOSING. The closing of the transactions provided for in Section 1 above
shall take place at the offices of Xxxxx, Xxxxxxxxx & Xxx, P.C., 000 Xxxx Xxx
Xxxxxx, Xxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxxx, at 10:00 a.m., on December, 1998
(the "CLOSING DATE"), or such other place, time and date as the parties may
agree, with such Closing being effective as of 11:59 p.m. on November 30, 1998.
3. REPRESENTATIONS AND WARRANTIES BY SELLER AND PRINCIPALS. Seller and
Principals, jointly and severally, make the following representations and
warranties to Purchaser, each of which is true and correct on the date hereof,
shall remain true and correct up to and including the Closing Date, shall be
unaffected by any investigation heretofore and hereafter made by Purchaser, or
any knowledge of Purchaser, except as set forth in the appropriate sections of
the Disclosure Schedule in Exhibit I attached hereto and incorporated by
reference herein (the "DISCLOSURE SCHEDULE"), and shall survive the Closing of
the transactions provided for herein.
3.1 ORGANIZATION AND STANDING. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
Seller has all requisite power under the Colorado Revised Statutes (the
"CORPORATE LAW"), its Articles of Incorporation and Bylaws to own and operate
its properties and assets, and to carry on its business as conducted and
possesses all licenses, franchises, rights and privileges necessary for the
conduct of its business. Seller is qualified to do business in all jurisdictions
in which such qualification is required, except where the failure to qualify
does not have a material adverse effect on Seller or the Business. Seller does
not own any interest in any corporation, partnership or other entity.
3.2 CORPORATE POWER; AUTHORIZATION. Seller has all requisite power and
authority to enter into this Agreement and the Exhibits attached hereto, to sell
and transfer the Assets, and to carry out and perform all of its obligations
under the terms of this Agreement and the Exhibits. All action on the part of
Seller and Seller's officers, directors, stockholders, assignees and other
holders of voting control of or beneficial interests in the Seller that is
necessary for the authorization, execution and delivery of this Agreement and
the Exhibits by Seller and for the performance of Seller's obligations hereunder
and thereunder for the sale and transfer of the Assets has been taken in
accordance with the Colorado Revised Statutes, Seller's Articles of
Incorporation and Bylaws. This Agreement and the Exhibits, when executed and
delivered, shall constitute the legal and binding obligations of Seller,
enforceable against Seller in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and by rules of law governing specific performance, injunctive relief or other
equitable remedies.
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3.3 NO BREACH, ETC. The execution and delivery of this Agreement by Seller
and Principals and all documents to be executed by Seller and Principals in
connection with the transactions contemplated hereby do not, and the performance
and consummation by Seller and Principals of the transactions contemplated by
this Agreement and the Exhibits will not, result in any conflict with, breach or
violation of or default, termination, forfeiture or lien under (or upon the
failure to give notice or the lapse of time, or both, result in any conflict
with, breach or violation of or default, termination, forfeiture or lien under)
any terms or provisions of Seller's Articles of Incorporation and Bylaws or
similar charter documents, each as amended, or any statute, rule, regulation,
judicial or governmental decree, order or judgment, or any agreement, lease or
other instrument, to which either Seller or either Principal is a party or to
which either of them or the Assets are subject.
3.4 FINANCIAL STATEMENTS. Seller has previously delivered to Purchaser
unaudited balance sheets and statements of operations of Seller as of and for
the fiscal years ended December 31, 1995, 1996 and 1997. Seller has also
previously delivered unaudited balance sheets and statements of operations of
Seller for the period ending July 31, 1998 (collectively, the "FINANCIAL
STATEMENTS"). To the best of Seller's knowledge, all of the Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied consistently during the periods covered thereby and present fairly the
financial condition of Seller at the dates of such statements and the results of
its operations for the periods covered thereby.
3.5 TITLE TO PROPERTIES: LIENS: CONDITION OF PROPERTIES.
a. Seller has good and marketable title to all of the Assets. No
default by Seller or either of the Principals exists under or with respect to
any of such Assets and none of the Assets is subject to any mortgage, pledge,
lien (statutory or otherwise), claims, license, option, lease and purchase
agreement, assessment, easement, covenant, conditional sale agreement, security
interest, encumbrance or charge of any nature whatsoever (collectively, the
"LIENS"), except as set forth in Section 3.5(a) of the Disclosure Schedule. None
of the Assets are subject to any restrictions with respect to the
transferability thereof.
b. As of the Closing Date, each item of machinery and equipment owned
or leased by Seller and included in the Assets is in good working order and
repair, subject to normal wear and tear, and all such buildings, machinery, and
equipment have been well maintained and are in a condition suitable for Seller's
operation of the Business. The Assets conform with all material applicable
ordinances, regulations and zoning or other laws and do not encroach on the
property of others.
c. As of the date of this Agreement there is to Seller's knowledge no
pending or threatened change in any such ordinance regulation or zoning or other
law, and there is to Seller's knowledge no pending or threatened condemnation of
any or all such buildings, machinery and equipment.
d. Except as set forth in Section 3.5(d) of the Disclosure Schedule,
the Assets shall include all rights, properties, interest in properties and
assets necessary to permit Purchaser to conduct the Business after the Closing
substantially as it has been conducted prior to the Closing.
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At the Closing, Purchaser will receive good and marketable title to all the
Assets free and clear of all Liens.
3.6 TAXES. With respect to the Business and the Assets, Seller and each of
the Principals have accurately prepared and timely filed all income tax returns
and other tax returns or other reports which are required to be filed, and has
paid, or made provision for the payment of, all federal, state and local taxes,
including, but not limited to, income, property, franchise, excise, and sales
and use taxes, which have or may have become due pursuant to said returns or
reports or pursuant to any notice of deficiency or any assessment which has been
received by it. Neither Seller nor either Principal is a party to any pending
action or proceeding, nor, to the best knowledge of Seller, is any such action
or proceeding threatened by any governmental authority for the assessment or
collection of taxes, interest, penalties, assessments or deficiencies, and no
claim for assessment or collection of taxes, interest, penalties, assessments or
deficiencies has been asserted against Seller or either of the Principals with
respect to the Business or the Assets.
3.7 NO LIABILITIES. As of the date of this Agreement, Seller does not have
any liabilities or obligations (absolute or contingent) of any nature, except as
set forth in Section 3.7 of the Disclosure Schedule. There has not been any
change in the nature of the Business, results of operations, prospects,
financial condition, method of accounting or accounting practice or manner of
conducting the Business, other than changes in the ordinary course of such
business, which has had, or may reasonably be expected to have, a material
adverse effect on the Assets or the Business, or the results of operations,
prospects, financial condition or manner of operating the Assets or conducting
the Business taken as a whole.
3.8 LITIGATION, ETC. With respect to the Business and the Assets, no
action, suit, proceeding or investigation of any nature, including any claims
alleging infringement of the intellectual property rights of others, is pending
or, to either Principals' or Seller's knowledge, threatened against Seller or
either Principal, nor, to the best knowledge of Seller, is there any basis
therefor. The foregoing includes, without limitation: any action, suit,
proceeding or investigation, pending or threatened, which questions the validity
of this Agreement or the Exhibits or the right of Seller or either Principal to
enter into this Agreement or the Exhibits or to sell and transfer the Assets, or
which might result, either individually or in the aggregate, in any material
adverse change in the Assets, condition, affairs or prospects of the Business or
of Seller or either Principal, financial or otherwise; any litigation pending or
to Seller's knowledge threatened which might affect the ability of Purchaser to
operate the Business or to use the Assets; and any litigation pending or, to
Seller's or either Principal's knowledge, threatened against Seller or either
Principal by reason of the past employment relationship of any employee, officer
or consultant of Seller or either Principal, the activities of Seller or either
Principal, or negotiations by Seller or either Principal with possible
purchasers of, or investors in, Seller, all with respect to the Business or the
Assets. There is no judgment, decree, injunction, rule or order of any court,
governmental department, commission agency, instrumentality or arbitrator or
other similar ruling outstanding against Seller or either Principal affecting
the Business or the Assets. No action, suit, proceeding or investigation is
pending or threatened by Seller or either Principal affecting the Business or
the Assets.
3.9 PATENTS, TRADE NAMES AND TRADEMARKS. All patents, patent applications,
registered copyrights, trade names, registered trademarks and trademark
applications which are owned by or
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licensed to Seller and are associated with the Business or are included in the
Assets are listed in Section 3.9 of the Disclosure Schedule, which section
indicates with respect to each the nature of Seller's interest therein and the
expiration date thereof or the date on which Seller's interest therein
terminates. All such patents, patent applications, registered trademarks and
trademark applications have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, and all such registered copyrights
have been duly registered in, filed in or issued by the United States Copyright
Office, or, in each case, the corresponding offices of other countries
identified on Section 3.9 of the Disclosure Schedule, and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and each such country. Except as
set forth in Section 3.9 of the Disclosure Schedule, Seller's use of said
patents, patent applications, registered copyrights, other copyrights, trade
names, registered trademarks, trademark applications and other trademarks, and
trade secrets (collectively, the "INTELLECTUAL PROPERTY") does not require the
consent of any other person and the same are freely transferable (except as
otherwise provided by law) and are owned exclusively by Seller, free and clear
of any licenses, charges, attachments, liens, encumbrances or adverse claims.
Except as set forth in Section 3.9 of the Disclosure Schedule: (a) no other
person has an interest in or right or license to use, or the right to license
others to use, any of the Intellectual Property, (b) there are no asserted
claims or demands of any other person pertaining thereto and no proceedings have
been instituted, or are pending or, to the best knowledge of Seller and
Principals, is threatened, which challenge Seller's rights in respect thereof,
(c) none of the Intellectual Property is subject to any outstanding order,
decree, judgment or stipulation, or, to the best knowledge of Seller, is being
infringed by others, (d) no claim has been made and no proceeding has been filed
or, to the best knowledge of Seller and Principals, is threatened to be filed
charging Seller with infringement of any adversely held patent, trade name,
trademark or copyright, and (e) to the best knowledge of Seller and Principals,
there does not exist (i) any unexpired patent with claims which are or would be
infringed by products of Seller or by apparatus, methods or designs employed by
Seller in manufacturing such products or (ii) any patent or application therefor
or invention which would materially adversely affect Seller's ability to
manufacture, use or sell any such product, apparatus, method or design. There
are no royalties, fees or other payments payable by Seller to any person by
reason of the ownership, use, license, sale or disposition of any instrument or
agreement governing any of the Intellectual Property.
3.10 COMPLIANCE WITH LAWS. Seller is not in violation of any laws and
regulations which apply to the conduct of the Business, including, without
limitation, laws and regulations relating to employment, occupational safety and
environmental matters that would have a material adverse affect on the Business
or the Assets. Seller has not received notice of, and to Seller's knowledge,
there has never been, any citation, fine or penalty imposed upon or asserted
against Seller under any federal, state or local law or regulation relating to
employment, occupational safety, zoning or environmental matters relating to the
Business or the Assets.
3.11 ENVIRONMENTAL MATTERS.
a. To the best knowledge of Seller and Principals, Seller has
materially complied with, and is in material compliance with, all applicable
Environmental Laws (as defined below). To the best knowledge of Seller and
Principals, Seller possesses, and has provided to Purchaser true and accurate
copies of, all permits, approvals, registrations, licenses or other
authorizations required by
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any governmental authority pursuant to any Environmental Law applicable to the
Business or the Assets, the absence of which would have a material adverse
effect on the Business or the Assets. There is no pending or, to Seller's
knowledge, threatened civil or criminal litigation, written notice of violation,
formal administration proceeding, or investigation, inquiry or information
request by any governmental authority, relating to any Environmental Law to
which Seller is a party or to Seller's knowledge is threatened to be made a
party. For purposes of this Agreement, "ENVIRONMENTAL LAW" means any federal,
state or local law, statute, rule or regulation or the common law relating to
the environment or occupational health and safety, including without limitation
any statute, regulation or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and solid contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wild life, marine sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and containers;
(vii) underground and other storage tanks or vessels, abandoned, disposed or
discarded barrels, containers and other closed receptacles; (viii) health and
safety of employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste. As used herein, the
terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Compensation, Liability and Response Act of
1980 ("CERCLA").
b. Except as set forth in Section 3.11(b) of the Disclosure Schedule,
since the date on which Seller began operating the Business, there have been no
releases of any Materials of Environmental Concern (as defined below) into the
environment at any parcel of real property or any facility presently or formerly
owned, operated or controlled by Seller, which at the time of such release was
occupied by the Seller or the Business. Except as set forth in Section 3.11(b)
of the Disclosure Schedule, to Seller's knowledge, prior to the date on which
Seller began operating the Business, there have been no such releases of any
Materials of Environmental Concern. With respect to any releases of Materials of
Environmental Concern, Seller has given all required notices to government
authorities, copies of which have been provided to Purchaser. Seller is not
aware of any releases into the environment of Materials of Environmental Concern
at parcels of real property or facilities presently or formerly owned, operated
or controlled by Seller, which at the time of such release was occupied by the
Seller or the Business, that could reasonably be expected to have an impact on
the real property or facilities owned, operated or controlled by Seller. For
purposes of this Agreement, "MATERIALS OF ENVIRONMENTAL CONCERN" means any
chemicals, pollutants or contaminants, hazardous substances (as such term is
defined under CERCLA), solid wastes and hazardous wastes (as such terms are
defined under Federal Resources Conservation and Recovery Act), toxic materials,
oil or petroleum and petroleum products.
c. Set forth in Section 3.11(c) of the Disclosure Schedule is a list
of all environmental reports, investigations and audits in the possession of
Seller with respect to the operations of, or real property owned or leased by
Seller (whether conducted by or on behalf of Seller or a third party and whether
done at the initiative of Seller or directed by a governmental authority or
other third party).
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Complete and accurate copies of each such report, or the results of each such
investigation or audit, have been provided to Purchaser.
d. Seller is not aware of any material environmental liability
arising out of the utilization by Seller of any solid and hazardous waste
transporter or treatment, storage and disposal facility.
3.12 GOVERNMENTAL PERMITS. Seller owns, holds or possesses all federal,
state or local governmental permits, certificates, licenses, franchises,
privileges, immunities, approvals and other authorizations which are necessary
to entitle it to own or lease, operate and use the Assets and to carry on and
conduct the Business (herein collectively called "GOVERNMENTAL PERMITS"), except
for such Governmental Permits that can now or hereafter be obtained without
delay and at nominal cost and as to which the failure to so own, hold or possess
would not have a material adverse effect on the Assets or the Business. In
connection with the Assets and the Business, Seller has fulfilled and performed
its obligations under each of the Governmental Permits owned, held or possessed
by it, and no event has occurred or exists which constitutes a breach or default
under any such Governmental Permit or which permits, or after notice or lapse of
time or both, would permit revocation or termination of any such Governmental
Permit or which may adversely affect in any material respect the rights of
Seller thereunder.
3.13 DISCLOSURE OF MATERIAL INFORMATION. With respect to the Business and
the Assets, neither this Agreement nor any Exhibit or Schedule hereto contains
any untrue statement of a material fact, or omits to state a material fact
necessary to make the statements herein or therein not misleading. No
representation or warranty by Seller or either Principal in this Agreement, nor
any statement, certificate, schedule or exhibit hereto furnished or to be
furnished by or on behalf of Seller or either Principal pursuant to this
Agreement, nor any document or certificate delivered to Purchaser pursuant to
this Agreement or in connection with transactions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained therein not misleading.
All statements and information contained in any certificate, instrument,
Disclosure Schedule or document delivered by or on behalf of Seller or either
Principal shall be deemed representations and warranties by the Seller and
Principals. Except for factors generally applicable to Seller's industry and the
international economy and business environment, there is no fact known to Seller
or either Principal which materially adversely affects or may in the future
materially adversely affect the operations, properties or condition (financial
or otherwise) of the Business or the Assets.
3.14 INSURANCE. Set forth in Section 3.14 of the Disclosure Schedule is a
complete and accurate list and summary description of all policies of fire,
casualty, general liability, product liability, workers compensation, health and
other forms of insurance presently in effect with respect to the business and
properties of Seller, true and correct copies of which have heretofore been
delivered to Purchaser. Section 3.14 of the Disclosure Schedule includes,
without limitation, the carrier, the description of coverage, the limits of
coverage, retention or deductible amounts, amount of annual premiums, date of
expiration and the date through which premiums have been paid with respect to
each such policy, and any pending claims in excess of $50,000. All such policies
are valid, outstanding and enforceable policies and provide insurance coverage
for the properties, assets and operations of Seller, of the kinds, in the
amounts and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
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subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. Section 3.14 of the
Disclosure Schedule indicates each policy as to which (a) the coverage limit has
been reached or (b) the total incurred losses to date equal 75 % or more of the
coverage limit. No notice of cancellation or termination has been received with
respect to any such policy, and Seller has no knowledge of any act or omission
of Seller which could result in cancellation of any such policy prior to its
scheduled expiration date (except any cancellations resulting from the
consummation of the transactions contemplated by this Agreement). Seller has not
been refused any insurance with respect to any aspect of the operations of the
Business nor has its coverage been limited by any insurance carrier to which it
has applied for insurance or with which it has carried insurance during the last
three years. Seller duly and timely made all claims that, to Seller's knowledge,
it has been entitled to make under each policy of insurance. Since Seller's
inception, all products liability and general liability policies maintained by
or for the benefit of Seller have been "occurrence" policies and not "claims
made" policies. There is no claim by Seller pending under any such policies as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies, and Seller does not have knowledge of any basis for denial of any
claim under any such policy. Seller has not received any written notice from or
on behalf of any insurance carrier issuing any such policy that insurance rates
therefor will hereafter be substantially increased (except to the extent that
insurance rates may be increased for all similarly situated risks) or that there
will hereafter be a cancellation or an increase in a deductible (or an increase
in premiums in order to maintain an existing deductible) or nonrenewal of any
such policy. Such policies are sufficient in all material respects for
compliance by Seller with all requirements of law and with requirements of all
contracts to which Seller is a party.
3.15 INVENTORY. All inventories of raw materials, work-in-process, tooling
and finished goods (including all such in transit) of Seller, together with all
related packaging materials, reflected on Seller's Closing Balance Sheet
consists of a quality and quantity usable and saleable in the ordinary course of
business, have commercial values at least equal to the value shown on the
Closing Balance Sheet and is valued in accordance with Seller's current
valuation procedure which Seller believes complies with generally accepted
accounting principles. All Inventory purchased since the date of the July
Balance Sheet consists of a quality and quantity usable and saleable in the
ordinary course of business. Except as set forth in Section 3.15 of the
Disclosure Schedule, all Inventory is located on premises owned or leased by
Seller as reflected in this Agreement. All work-in-process contained in
Inventory constitutes items in process of production pursuant to contracts or
open orders taken in the ordinary course of business, from regular customers of
Seller with no recent history of credit problems with respect to Seller; neither
Seller nor any such customer is in material breach of the terms of any
obligation to the other, and no valid grounds exist for any consideration or
set-off of amounts billable to such customers upon the completion of orders to
which work-in-process relates. All work-in-process is of a quality ordinarily
produced in accordance with the requirements of the orders to which such
work-in-process is identified, and will require no material rework with respect
to work performed prior to Closing. Purchaser shall be responsible for all
rework on finished products shipped prior to Closing, provided that such rework
is not unusual for the Seller's Business.
3.16 MAJOR CUSTOMERS. Section 3.16 of the Disclosure Schedule contains a
list of the five (5) largest customers of Seller for the most recent fiscal year
(determined on the basis of the total dollar amount of net sales) showing the
total dollar amount of net sales to each such customer during each
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such year. Except as set forth in Section 3.16 of the Disclosure Schedule,
Seller does not have any knowledge or information of any facts indicating, nor
any other reason to believe specific to any particular customer, that any of the
customers listed in Section 3.16 of the Disclosure Schedule will not continue to
be customers of Purchaser after the Closing at substantially the same level of
purchases as heretofore.
3.17 EXISTING EMPLOYMENT CONTRACTS. Section 3.17 of the Disclosure Schedule
contains a list of all employment contracts and collective bargaining
agreements, and all pension, bonus, profit sharing, or other agreements or
arrangements providing for employee remuneration or benefits to which Seller is
a party or by which they are bound; all of these contracts and arrangements are
in full force and effect, and neither Seller nor any other party is in default
under them. There have been no claims of defaults and, to the best of Seller's
knowledge there are no facts or conditions which if continued, or on notice,
will result in a default under these contracts or arrangements. There is no
pending or, to the best of Seller's knowledge, threatened labor dispute, strike,
or work stoppage affecting the Assets or the Business.
3.18 EMPLOYEE BENEFITS.
a. Section 3.18 of the Disclosure Schedule lists all Employee Plans
covering persons currently or formerly employed by Seller ("EMPLOYEES"). The
term "EMPLOYEE PLAN" includes any pension, retirement, savings, disability,
medical, dental, health, life (including, without limitation, any individual
life insurance policy under which any Employee is the named insured and as to
which Seller makes premium payments, whether or not Seller is the owner,
beneficiary or both of such policy), death benefit, group insurance,
profit-sharing, deferred compensation, stock option, bonus (including without
limitation, holiday, vacation, Christmas and other bonus practices to which
Seller is a party or is bound or which relate to the operation of the Business
with respect to Employees), incentive, vacation pay, severance pay, or other
employee benefit plan, trust arrangement, agreement, policy or commitment
(including, without limitation, any employee pension benefit plan as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("PENSION PLAN"), and any employee welfare benefit plan as defined in
Section 3(1) of ERISA ("WELFARE PLAN")), whether or not any of the foregoing is
funded or insured and whether written or oral, which is intended to provide or
does in fact provide benefits to any or all current Employee's, and (i) to which
Seller is party or by which Seller (or any of the rights, properties or assets
of the Company) is bound, (ii) with respect to which Seller has made any
payments, contributions or commitments, or may otherwise have any liability
(whether or not Seller still maintains such plan, trust, arrangement, contract,
agreement, policy or commitment) or (iii) under which any current Principal,
Employee or agent of Seller is a beneficiary as a result of his employment or
affiliation with Seller.
b. With respect to any Employee, Seller has no obligation to
contribute to (or any other liability with respect to) any funded or unfunded
Welfare Plan, whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retirees or
current, future or former Employees (including their dependents and spouses)
except for limited continued medical benefit coverage for former Employees,
their spouses and their other dependents as required to be provided under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
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amended ("COBRA"), and Seller is in compliance in all material respects with the
continued medical and other welfare benefit coverage requirements of COBRA and
all other applicable laws.
c. With respect to any Employee, Seller does not maintain, contribute
to or have any material liability under (or with respect to) any Pension Plan
which is a tax qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) or, a tax-qualified "defined contribution plan" (as defined in Section
3(34) of ERISA), or a non-qualified deferred compensation plan for certain
highly compensated or management employees whether or not terminated. All
contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid to each Employee Plan or
are reflected as a liability on the books of Seller and all contributions for
any period ending on or before the Effective Date which are not yet due have
been paid to each such Employee Plan or accrued in accordance with the past
custom and practice of Seller. All premiums or other payments for all periods
ending on or before the Closing Date have been paid with respect to each such
Employee Plan which is a Welfare Plan.
d. Seller has, with respect to all current and former Employee Plans
(and all related trusts, insurance contracts and funds), at all times complied
in all material respects with the applicable requirements of ERISA, the Internal
Revenue Code of 1986, as amended (the "CODE") and all other applicable statutes,
common law, regulations and regulatory pronouncements, or has, in the exercise
of its reasonable judgment, determined that such statutes (including ERISA),
common law, regulations and regulatory pronouncements were and are not
applicable to Seller. Seller has not engaged in nor is it bound to enter into,
any transaction with respect to any Employee Plan which would subject Seller to
any material liability due to either a civil penalty assessed pursuant to
Section 502(I) of ERISA or the tax or penalty on prohibited transactions imposed
by Section 4975 of the Code. No actions, suits or claims with respect to the
assets of any Employee Plan (and all related trusts, insurance contracts and
funds), other than routine claims for benefits, are pending or to Seller's
knowledge threatened which could result in a material adverse effect on the
Business. There are not now, nor have there been, any tax-qualified retirement
plans sponsored or maintained by Seller for Employees since January 1, 1975, nor
are there any unfunded obligations with respect thereto. With respect to any
Employee, Seller has no obligation to contribute to (or any other liability with
respect to) any "multi-employer plan," as defined in the Multi-employer Pension
Plan Amendments Act of 1980, and Seller has not incurred any current or
potential withdrawal or termination liability as a result of a complete or
partial withdrawal from any multi-employer plan or the sale of the Assets. Each
Employee Plan intended to qualify under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be qualified under the
requirements of section 401(a) of the Code, the Internal Revenue Service has
issued a determination letter to that effect, and such letter remains effective
and has not been revoked. No unfulfilled obligation to contribute with respect
to an Employee Plan exists with respect to any Employee Plan year ending on or
before December 31, 1997, except as shown in the Closing Balance Sheet. There is
no agreement or promise, written or oral, of Seller to the effect that any
Employee Plan may not be terminated at Seller's discretion at any time, subject
to applicable law. The Closing Balance Sheet reflects all accrued vacation and
other benefits for Seller's employees as of the date thereof.
3.19 REQUIRED CONSENTS AND APPROVALS. Except as set forth in Section 3.19 of
the Disclosure Schedule, Seller and each of the Principals has the right, power,
legal capacity, and authority to enter into, and perform their respective
obligations under, this Agreement, and no approvals or consents
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of any persons are necessary in connection with it. The execution and delivery
of this Agreement by Seller has been duly authorized by its directors in
accordance with the Corporate Act and Seller's Articles of Incorporation and
Bylaws. Except as set forth in Section 3.19 of the Disclosure Schedule, no
Contract or other right necessary to effect the sale, delivery, transfer and
conveyance of the Assets requires the consent, waiver or approval of any person
or entity.
3.20 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set forth in
Section 3.20 of the Disclosure Schedule, since July 31, 1998 through the Closing
Date, there has not been:
a. ADVERSE CHANGE. Any material adverse change in the financial
condition, assets, liabilities, business, prospects or operations of Seller;
b. DAMAGE. Any loss, damage or destruction, whether covered by
insurance or not, affecting Seller's business or properties;
c. INCREASE IN COMPENSATION. Any increase in the salaries, wages or
other remuneration or compensation, or in any benefits payable or to become
payable to any employee or agent of Seller (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing, retirement or
other plan or commitment), or any bonus or other employee benefit granted, made
or accrued;
d. LABOR DISPUTES. Any labor dispute or disturbance;
e. COMMITMENTS. Any commitment or transaction by Seller (including,
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of business consistent with past practice;
f. DIVIDENDS OR DISTRIBUTIONS. Except as set forth in Section 3.20(f)
of the Disclosure Schedule, any declaration, setting aside, or payment of any
dividend or any other distribution in respect of Seller's Capital Stock; any
redemption, purchase or any other distribution in respect of any Capital Stock
of Seller, or any security relating thereto; or any other payment to any
shareholder of Seller as a principal. Any liquidating or non-liquidating
distribution made to any stockholder or assignee with respect to a equity
interest in Seller, including any distribution made by reason of the death or
retirement of a Principal, or any other payment to any stockholder or assignee
of Seller as such a stockholder, officer, director or employee;
g. DISPOSITION OF PROPERTY. Any sale, lease or other transfer or
disposition of any properties or assets of Seller, except for the sale of
inventory items in the ordinary course of business;
h. INDEBTEDNESS. Any indebtedness for borrowed money incurred,
assumed or guaranteed by Seller or either Principal;
i. LIENS. Any mortgage, pledge, lien or encumbrance made on any of
the properties or assets of Seller or either Principal;
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j. AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by Seller of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
k. LOANS AND ADVANCES. Any loan or advance (other than advances to
employees in the ordinary course of business for travel and entertainment in
accordance with past practice) to any person including, but not limited to, any
officer, manager or employee of Seller, or any stockholder, assignee or
affiliate;
l. CREDIT. Any grant of credit to any customer on terms or in amounts
more favorable than those which have been extended to such customer in the past,
any other change in the terms of any credit heretofore extended, or any other
change of Seller's policies or practices with respect to the granting of credit;
or
m. NO UNUSUAL EVENTS. Any other event or condition not in the
ordinary course of business of Seller or either Principal.
3.21 PRODUCT WARRANTY AND PRODUCT LIABILITY. Section 3.21 of the Disclosure
Schedule contains a true, correct and complete copy of all of Seller's express,
written warranties for its products and services. There have been no variations
from such warranties, except as set forth in Section 3.21 of the Disclosure
Schedule. Except as stated herein or provided as a matter of common or statutory
law, there are no express warranties, commitments or obligations with respect to
Seller's products or performance of services. Section 3.21 of the Disclosure
Schedule contains (1) the estimated aggregate annual cost to Seller of
performing warranty obligations for customers for the last fiscal years and the
current fiscal year to the date of the September 30, 1998 balance sheet and (2)
a description of all product liability claims and similar claims, actions,
litigation and other proceedings relating to Seller's products or services
rendered, which are presently pending or which to Seller's knowledge are
threatened, or which have been asserted or commenced against Seller within the
last year, in which a party thereto either requests injunctive relief (whether
temporary or permanent) or alleges damages (whether or not covered by
insurance). for all amounts except for Inventory, Accounts Receivable and
Assumed Current Liabilities. There are no defects in Seller's products or
services which would adversely affect performance of Seller's products or
services or create an unusual risk of injury to persons or property. To the best
knowledge of Seller and Principals, Seller's products and services have been
designed or performed so as to meet and comply with all governmental standards
and specifications currently in effect and have received all governmental and
customer approvals necessary to allow their production or performance.
3.22 CONTROLLING STOCKHOLDER LIST. Section 3.22 of the Disclosure Schedule
sets forth a complete list of the names of all the stockholders, assignees or
other persons who beneficially own an economic or voting control interest in
Seller, together with the percentage interest in voting rights and in the
capital, profits and losses beneficially owned by each such stockholder,
assignee or other person. Each person so listed that is an individual is a
competent adult and is the beneficial owner of the equity interest so listed in
his or her name, with the sole right to vote, dispose of, and receive
distributions with respect to such equity interest.
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3.23 ASSETS NECESSARY TO BUSINESS. The Assets include all property and
assets, tangible and intangible, and all leases, licenses and other agreements,
which are reasonably necessary to permit Purchaser to carry on, or currently use
or hold for use in, the Business as presently conducted.
3.24 CONTRACTS AND COMMITMENTS.
a. REAL PROPERTY LEASES. Except as set forth in Section 3.24(a) of
the Disclosure Schedule, Seller does not have any leases of real property.
b. PERSONAL PROPERTY LEASES. Except as set forth in Section 3.24(b)
of the Disclosure Schedule, Seller does not have any leases of personal
property.
c. PURCHASE COMMITMENTS. Seller does not have any purchase
commitments for inventory items or supplies that, together with amounts on hand,
constitute in excess of three (3) months normal usage or which are at an
excessive price.
d. SALES COMMITMENTS. Except as set forth in Section 3.24(d) of the
Disclosure Schedule, Seller does not have any sales contracts or commitments to
customers which aggregate in excess of $50,000 to any one customer (or group of
affiliated customers). Seller does not have any sales contracts or commitments,
except those made in the ordinary course of business, at arm's length, and no
such contract or commitment is for a sales price which would result in a loss of
more than $1,000 (determined on a gross profit margin basis) to Seller.
e. CONTRACTS WITH AFFILIATES AND CERTAIN OTHERS. Except as set forth
in Section 3.24(c) of the Disclosure Schedule, Seller does not have any
agreement, understanding, contract or commitment (written or oral) with any
affiliate or any other manager, director, officer, employee, agent, or
consultant that is not cancelable by Seller on notice of not longer than 30 days
without liability, penalty or premium of any nature or kind whatsoever.
x. XXXXXX OF ATTORNEY. Neither Seller nor either Principal has given
a power of attorney, which is currently in effect, to any person, firm or
corporation for any purpose whatsoever.
g. COLLECTIVE BARGAINING AGREEMENTS. Seller is not a party to any
collective bargaining agreements with any unions, guilds, shop committees or
other collective bargaining groups.
h. LOAN AGREEMENTS. Except as set forth in Section 3.24(h) of the
Disclosure Schedule, Seller is not obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness as a
signatory, guarantor or otherwise.
i GUARANTEES. Neither Seller nor either Principal has guaranteed the
payment or performance of any person, firm or corporation, agreed to indemnify
any person or act as a surety, or otherwise agreed to be contingently or
secondarily liable for the obligations of any person.
j. CONTRACTS SUBJECT TO RENEGOTIATION. Seller is not a party to any
contract with any governmental body which is subject to renegotiation.
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k. BURDENSOME OR RESTRICTIVE AGREEMENTS. Except as shown on Section
3.24(k) of the Disclosure Schedule, Seller is not a party to nor is either bound
by any agreement, deed, lease or other instrument which is so burdensome as to
materially affect or impair the operation of the Business. Without limiting the
generality of the foregoing, and except as shown on Section 3.24(k) of the
Disclosure Schedule, neither Seller nor either Principal is a party to nor is
either of them bound by any agreement requiring Seller or either Principal to
assign any interest in any trade secret or proprietary information, or
prohibiting or restricting Seller or either Principal from competing in any
business or geographical area or soliciting customers or otherwise restricting
the Business from carrying on its business anywhere in the world.
l. OTHER MATERIAL CONTRACTS. Seller has no lease, contract or
commitment of any nature involving consideration or other expenditure in excess
of $25,000 or involving performance over a period of more than three months, or
which is otherwise individually material to the operations of Seller, except as
explicitly described in Section 3.24(l) of the Disclosure Schedule.
m. NO DEFAULT. Neither Seller nor either Principal is in default
under any lease, contract or commitment, nor has any event or omission occurred
which through the passage of time or the giving of notice, or both, would
constitute a default thereunder or cause the acceleration of any of Seller's or
either Principal's obligations or result in the creation of any lien on any of
the assets owned, used or occupied by Seller or either Principal. Based on
Seller's best knowledge or what Seller reasonably should know, no third party is
in default under any lease, contract or commitment to which Seller is a party,
nor has any event or omission occurred which, through the passage of time or the
giving of notice, or both, would constitute a default thereunder or give rise to
an automatic termination, or the right of discretionary termination, thereof.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser makes the following
representations and warranties to Seller and Principals, each of which is true
and correct on the date hereof, shall remain true and correct to and including
the Closing Date, shall be unaffected by any investigation heretofore or
hereafter by Seller or any notice to Seller, and shall survive the Closing of
the transactions provided for herein.
4.1 ORGANIZATION AND STANDING. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser has all requisite corporate power to own and operate its properties
and assets, and to carry on its business as conducted and possesses all
licenses, franchises, rights and privileges necessary for the conduct of its
business. Purchaser is qualified to do business in all jurisdictions in which
such qualification is required.
4.2 CORPORATE POWER; AUTHORIZATION. Purchaser has all requisite legal and
corporate power and authority to enter into this Agreement and to carry out and
perform all of its obligations under the terms of this Agreement. All corporate
action on the part of Purchaser and all action on the part of its shareholders,
officers and directors necessary for the authorization, execution and delivery
of this Agreement and the Exhibits by Purchaser and for the performance of
Purchaser's obligations hereunder has been taken, and this Agreement and the
Exhibits, when duly executed and delivered, shall constitute the legal and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors'
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rights and by rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.3 NO BREACH, ETC. The execution and delivery of this Agreement b
Purchaser and all documents to be executed by Purchaser in connection with the
transactions contemplated hereby do not, and the performance and consummation by
Purchaser of the transactions contemplated by this Agreement and the Exhibits
will not, result in any conflict with, breach or violation of or default,
termination, forfeiture or lien under (or upon the failure to give notice or the
lapse of time, or both, result in any conflict with, breach or violation of or
default, termination, forfeiture or lien under) any terms or provisions of
Purchaser's Certificate of Incorporation or Bylaws or similar charter documents,
each as amended, or any statute, rule, regulation, judicial or governmental
decree, order or judgment, or any agreement, lease or other instrument, to which
Purchaser is a party or by which its assets are bound.
4.4 COMMITMENT OF FINANCING. Purchaser has accepted a binding commitment
for financing necessary for the transactions contemplated hereunder from an
established financial institution, a copy of which has been provided to Seller.
5. FURTHER COVENANTS OF SELLER AND PRINCIPALS
Seller and Principals covenant and agree as follows:
5.1 ACCESS TO INFORMATION AND RECORDS. During the period prior to the
Closing, Seller shall give Purchaser, its counsel, accountants and other
representatives (i) access during normal business hours to all of the
properties, books, records, contracts and documents of Seller for the purpose of
such inspection, investigation and testing as Purchaser deems appropriate (and
Seller shall furnish or cause to be furnished to Purchaser and its
representatives all information with respect to the business and affairs of
Seller as Purchaser may request); (ii) access to employees, agents and
representatives for the purposes of such meetings and communications as
Purchaser reasonably desires; and (iii) with the prior consent of Seller to the
nature of any questions to be asked by Purchaser, which consents shall not be
unreasonably withheld, in each instance (which consent shall not be unreasonably
withheld), access to vendors, customers, manufacturers of its machinery and
equipment, and others having business dealings with Seller.
5.2 CONDUCT OF BUSINESS PENDING THE CLOSING. From the date hereof until the
Closing, except as otherwise approved in writing by the Purchaser.
a. NO CHANGES. Seller will carry on its business diligently and in
the same manner as heretofore and will not make or institute any changes in its
methods of purchase, sale, management, accounting or operation.
b. MAINTAIN ORGANIZATION. Seller will take such action as may be
reasonably necessary to maintain, preserve, renew and keep in favor and effect
the existence, rights and franchises of Seller and will use its best efforts to
preserve the business organization of Seller intact, to keep available to
Purchaser the present officers and employees, and to preserve for Purchaser its
present relationships with suppliers and customers and others having business
relationships with Seller.
c. NO BREACH. Seller and Principals will not do or omit any act, or
permit any omission to act, which may cause a breach of any material contract,
commitment or obligation, or any breach of any representation, warranty,
covenant or agreement made by Seller and/or the Principals herein,
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or which would have required disclosure on Schedule 3.20 of the Disclosure
Schedule had it occurred after the date of the July Balance Sheet and prior to
the date of this Agreement.
d. NO MATERIAL CONTRACT. No contract or commitment will be entered
into, and no purchase of raw materials or supplies and no sale of assets (real,
personal, or mixed, tangible or intangible) will be made, by or on behalf of
Seller, except contracts, commitments, purchases or sales which (i) are (A)
contracts or commitments for the purchase of, and purchases of, raw materials
and supplies made in the ordinary course of business and consistent with past
practice, (B) contracts or commitments for the sale of, and sales of, product or
inventory in the ordinary course of business and consistent with past practice,
or (C) other contracts, commitments, purchases or sales in the ordinary course
of business and consistent with past practice, and (ii) are not material to the
Seller (individually or in the aggregate) and would not have been required to be
disclosed in the Disclosure Schedule had they been in existence on the date of
this Agreement.
e. NO CORPORATE CHANGES. Seller shall not amend its Articles of
Incorporation or Bylaws or other constituent documents, make any changes in
authorized or issued capital stock, or take or commence the taking of any action
with respect to the dissolution, liquidation or winding up of the Seller.
f. MAINTENANCE OF INSURANCE. Seller shall maintain all of the
insurance in effect as of the date hereof.
g. MAINTENANCE OF PROPERTY. Seller shall use, operate, maintain and
repair all property of Seller in a normal business manner.
h. INTERIM FINANCIALS. Seller will provide Purchaser with interim
monthly financial statements and other management reports as and when they are
available.
i. NO NEGOTIATIONS. Neither Seller nor any Principal will directly or
indirectly (through a representative or otherwise) solicit or furnish any
information to any prospective purchaser, commence, or conduct ongoing,
negotiations with any other party or enter into any agreement with any other
party concerning the sale of Seller, Seller's assets or business or any part
thereof or any equity securities of Seller (an "acquisition proposal"), and
Seller and Principals shall immediately advise Purchaser of the receipt of any
acquisition proposal.
5.3 CHANGE OF CORPORATE NAME. Concurrently with the Closing, Seller shall
change its corporate name to a new name bearing no resemblance to its present
name so as to permit the use of its present name by Purchaser.
5.4 CONSENTS. Seller and Principals will use their best efforts prior to
Closing to obtain all consents necessary for the consummation of the
transactions contemplated hereby, including, without limitation, the consent of
each lessor of real or personal property leased by Seller under leases being
assumed by Purchaser herein to assignment of the lessee's interest under the
lease of such property to Purchaser. All such consents shall be in writing and
executed counterparts thereof
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shall be delivered to Purchaser promptly after Seller's receipt thereof but in
no event later than two business days prior to the Closing.
5.5 OTHER ACTION. Seller and Principals shall use their best efforts to
cause the fulfillment at the earliest practicable date of all of the conditions
to their obligations to consummate the transactions contemplated in this
Agreement.
5.6 DISCLOSURE. Seller and Principals shall have a continuing obligation to
promptly notify Purchaser in writing with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Disclosure
Schedule, but no such disclosure shall cure any breach of any representation or
warranty which is inaccurate.
5.7 NON-COMPETITION AGREEMENTS. Prior to the Closing Date, Purchaser and
Seller shall determine which of Seller's key employees ("KEY EMPLOYEES") will be
required to execute Non-Competition Agreement in the form attached hereto as
Exhibit J.
6. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Each and every obligation of Purchaser to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. Each of the
representations and warranties made by Seller and Principals in this Agreement,
and the statements contained in the Disclosure Schedule or in any instrument,
list, certificate or writing delivered by Seller pursuant to this Agreement,
shall be true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing Date as though
such representations and warranties were made or given on and as of the Closing
Date, except for any changes permitted by the terms of this Agreement or
consented to in writing by Purchaser.
6.2 COMPLIANCE WITH AGREEMENT. Seller and Principals shall have in all
material respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date, including the delivery of the closing
documents specified in Section 8.
6.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or any
governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Purchaser, Seller or any of the affiliates, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
6.4 CONSENTS AND APPROVALS. All approvals, consents and waivers that are
required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to
Purchaser. Notwithstanding the foregoing, receipt of the consent of any third
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party to the assignment of an Assumed Contract which is not (and is not required
to be) disclosed in the Disclosure Schedule shall not be a condition to
Purchaser's obligation to close, provided that the aggregate of all such
Contracts does not represent a material portion of Seller's sales or
expenditures. After the Closing, Seller and Principals will continue to use
their best effects to obtain any such consents or approvals, and, except as
herein specifically provided, neither Seller nor any Principal shall hereby be
relieved of any liability hereunder for failure to perform any of their
respective covenants or for the inaccuracy of any representation or warranty.
6.5 ENVIRONMENTAL AUDIT. The results of any environmental audit shall not
have disclosed any past or present condition, process or practice with respect
to Seller or any property owned, occupied or operated by Seller which is not in
full compliance with all applicable Environmental Laws, if a reasonable estimate
by Purchaser of the cost of remediation, or the potential liability to third
persons (including statutory liability) arising from such condition, process or
practice, or the cost of bringing Seller or such property into full compliance
with all applicable Environmental Laws, would exceed $10,000 in the aggregate
with respect to all matters described in this Section.
6.6 DUE DILIGENCE. Purchaser shall be satisfied with the results of its
investigation of the customers and suppliers of Seller.
6.7 EMPLOYEES. Purchaser shall be satisfied with the number and type of
employees who agree to accept employment with Purchaser after the Closing.
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Each and every obligation of Seller and Principals to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the Closing of
the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. Each of the
representations and warranties made by Purchaser in this Agreement shall be true
and correct in all material respects when made and shall be true and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date.
7.2 COMPLIANCE WITH AGREEMENT. Purchaser shall have in all material
respects performed and complied with all of Purchaser's agreements and
obligations under this Agreement which are to be performed or complied with by
Purchaser prior to or on the Closing Date.
7.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or any
governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Purchaser, Seller or any of the affiliates, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
8. CLOSING.
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8.1 TIME AND PLACE. The Closing shall be held as contemplated by Section 2.
8.2 ACTIONS AT CLOSING. At the Closing, in order to consummate the
transactions contemplated by this Agreement, each of the following actions shall
occur:
a. AGREEMENT EXECUTED BY BOTH PARTIES. If not already completed, each
party shall duly execute and deliver to the other party this Agreement.
b. PERFORMANCE BY PURCHASER. At the Closing, Purchaser shall duly
execute (where applicable) and deliver, or cause to be executed and delivered,
to Seller the following:
(1) The Cash Delivery by wire transfer to those accounts
designated by Seller (including, without limitation, wire transfers necessary to
pay the liabilities contemplated below);
(2) An agreement providing for Purchaser to engage Xxxxxxx
Xxxxxxx as a consultant after the Closing (the "CONSULTING AGREEMENT") in the
form attached hereto as Exhibit K;
(3) The Operating Lease;
(4) The Option Agreement;
(5) The Stock Agreement;
(6) An opinion of Xxxxx, Xxxxxx & Xxxxxx, LLP, counsel to
Purchaser, in the form attached hereto as Exhibit L;
(7) The Purchase Stock; and
(8) Satisfactory evidence of any approval of any regulatory
authorities whose approvals to the transactions contemplated by this Agreement
are required by law.
(9) A certified copy of resolutions of Purchaser's Board
approving the transactions contemplated by this Agreement as required by
applicable law, Purchaser's Certificate of Incorporation and Bylaws, or any
other applicable instrument;
(10) Such other evidence of the performance of all covenants
required of Purchaser by this Agreement at or before the Closing, as Seller or
its counsel may reasonably require.
c. PERFORMANCE BY SELLER. At the Closing, Seller and/or either or
both Principal shall duly execute and deliver, or cause to be executed and
delivered, to Purchaser the following:
(1) The Xxxx of Sale and Assumption Agreement;
(2) The Non-Competition Agreements of Xxxxx Xxx and other key
employees (the "KEY EMPLOYEES") in the form attached hereto as Exhibit J;
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(3) The Proprietary Information Agreement in the form attached
hereto as Exhibit M, which shall be executed by all employees subsequently
employed by Purchaser, or produce originally executed Confidential Information
Agreements, in the form provided to Purchaser, for all employees subsequently
employed by Purchaser;
(4) The Operating Lease;
(5) The Option Agreement;
(6) The Stock Agreement;
(7) Evidence satisfactory to Purchaser in its reasonable
discretion, that as of the Closing all of Seller's liabilities and accrued
obligations have been fully paid, other than those payroll and employee benefit
obligations to be paid within fourteen (14) days after Closing, and Assumed
Current Liabilities and which are set forth on the Closing Balance Sheet, and
that all liens, mortgages or other security interests relating to those
liabilities and obligations have been released;
(8) The waivers, consents and approvals contemplated by
Section 1.8 above that Seller has obtained as of the Closing;
(9) An opinion of Xxxxx, Xxxxxxxxx & Xxx, P.C., counsel to
Seller, in the form attached hereto as Exhibit N;
(10) Satisfactory evidence of any approval of any regulatory
authorities whose approvals are required by law;
(11) A certified copy of resolutions of Seller's Board,
stockholders approving the transactions contemplated by this Agreement as
required by applicable law, Seller's Articles of Incorporation and Bylaws, or
any other applicable instrument;
(12) Certificate of Good Standing of Seller; and
(13) Such other evidence of the performance of all covenants
required of Seller by this Agreement at or before the Closing, as Purchaser or
its counsel may reasonably require.
d. By closing the transactions contemplated by this Agreement, each
party acknowledges that all deliveries required in this Section 8.2 have been
received; other than any deliveries permitted after the Closing, including,
without limitation, any consents, waivers or other approvals contemplated in
Section 1.8.
9. POST-CLOSING MATTERS.
9.1 USE OF SELLER'S NAME. At the Closing, Seller shall assign all its
rights and interest in the names "Precision Machined Products" and "Precision
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Machined Products, Inc." along with all of Seller's other trademarks or trade
names, to Purchaser. Following Closing, neither Seller nor any affiliate shall,
without the prior written consent of Purchaser, make any use of the name
"Precision Machined Products, Inc.," "Precision Machined Products" or any of
Seller's other trademarks or trade names, or any other trade name or trademark
confusingly similar thereto, except as may be necessary for Seller to pay its
liabilities, prepare tax returns and other reports and to otherwise windup and
conclude its business.
9.2 SALES TAX MATTERS. As soon as reasonably practicable following the
Closing, Seller and Purchaser shall timely file with the appropriate
governmental authority all state and local transfer, sales and use tax returns
and shall make all other filings which may be required in connection with the
transactions contemplated hereby.
9.3 FINDERS FEES; PAYMENTS. Each party agrees to pay its own broker or
finders' fees in connection with any of the transactions contemplated by this
Agreement. Each party represents and warrants to the other that neither it, nor
any of its managers, officers, directors, employees, shareholders, assignees or
agents, have retained, employed or used any broker or other finder in connection
with the transactions contemplated by this Agreement or in connection with the
negotiation of this Agreement. Seller and Purchaser further agree to indemnify,
defend and hold harmless the other from against any loss, liability, damage,
cost claim, or expense, including, without limitation, reasonable attorneys'
fees, incurred by reason of any brokerage, commission, or finder's fee alleged
to be payable because of any act, omission, or statement of the indemnifying
party.
9.4 SEC FILINGS. Seller shall provide reasonable assistance to Purchaser,
at Purchaser's sole cost and expense, in furnishing reasonable financial data
relating to the Assets for inclusion in connection with a filing by the
Purchaser of Form 8-K with the Securities and Exchange Commission ("SEC"), if
required, during a period of sixty (60) days following the Closing. Such
assistance shall include furnishing financial data to Purchaser's independent
auditors.
9.5 RIGHT OF ACCESS. For a period of five (5) years after the Closing Date,
the Principals shall have access to the financial records and statements of the
Seller for the period prior to the Closing Date and have the right to copy such
documents as may be necessary to prepare any required tax or regulatory filings,
or respond to any audits or similar inquiries.
9.6 ACCOUNTS RECEIVABLE. Seller guarantees that all Accounts Receivable, as
defined in Exhibit A attached hereto shall be collected by Purchaser. In the
event some Accounts Receivable are not collected within sixty (60) days of the
Closing, Seller shall pay to Purchaser such amount not collected. Purchaser
shall then assign back that specific Accounts Receivable so that Seller may
attempt to collect such amount from the customer. Purchaser makes no
representation or guarantees regarding any Accounts Receivable assigned back to
Seller.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION OF PURCHASER. Notwithstanding any investigation of the
business, financial condition, prospects or assets of Seller and Principals made
by or on behalf of Purchaser prior to the Closing, Seller and Principals shall,
jointly and severally, indemnify, defend and hold harmless Purchaser and its
respective officers, directors, employees, control persons, advisors and agents
from and against all damages, losses (including, without limitation, with
respect to clause (c) hereof, lost profits), expenses and liabilities (including
reasonable attorneys' fees) whether or not involving a
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Third Party Claim (the foregoing are referred to collectively as "DAMAGES")
relating to or arising out of or in connection with (a) any breach of warranty
or covenant or any inaccurate, incomplete or erroneous representation of Seller
or Principals contained in or made pursuant to this Agreement or in any
schedule, exhibit, agreement, document, certificate, list or other instrument
executed and delivered pursuant hereto or in connection with the transactions
contemplated hereby; (b) any damages arising from a claim of or against Seller,
the assets or the Business not specifically assumed by Purchaser pursuant
hereto; or (c) any Damages arising from or in connection with the one-half of
Transfer Taxes, manufacture, sale, delivery, operation or breach of warranty of
any products manufactured or sold before the Closing. Purchaser's right to
receive Damages under this Section 10.1 shall be limited to $1,500,000 and
notice of any such Damages must be made within eighteen (18) months of the
Closing Date, except for any Damages arising from claims relating to title of
assets held by Seller, amounts of existing indebtedness or taxes of Seller,
which shall not be subject to any dollar or time restrictions, and except for
environmental claims relating to Seller's business, of which Seller must be
notified within five years of the Closing Date, unless Purchaser exercises its
option pursuant to the Option Agreement, then such notification period is
extended an additional five years.
10.2 INDEMNIFICATION OF SELLER. Notwithstanding any investigation of the
business, financial condition, prospects or assets of Purchaser made by or on
behalf of Seller prior to the Closing, Purchaser shall indemnify, defend and
hold harmless Seller and its respective officers, managers, employees, control
persons, advisors and agents from and against all Damages relating to or arising
out of or in connection with any breach of warranty or covenant or any
inaccurate, incomplete or erroneous representation of Purchaser contained in
this Agreement or in any schedule, exhibit, agreement, certificate, list or
other instrument delivered pursuant hereto.
11. INDEMNIFICATION PROCEDURES.
11.1 NOTICE. In the event Purchaser, Seller or their respective officers,
directors, managers, employees, control persons, advisors and agents (each
individually the "INDEMNIFIED PARTY") seeks indemnification or defense under
Section 10 above, the Indemnified Party shall give the party from whom
indemnification is requested (the "INDEMNIFYING PARTY") written notice as
promptly as practicable after the Indemnified Party has received notice or
obtains knowledge of the matter that has given or could give rise to a right of
indemnification or defense under this Agreement. Such notice shall state the
amount of losses, if any, and the method of computation thereof, all with
reasonable specificity and shall contain a reference to the provisions of this
Agreement with respect to which such right of indemnification or defense is
claimed.
11.2 THIRD PARTY CLAIMS. With respect to any Damages to which the indemnity
or defense obligations of Section 10 apply and which arise from any third party
claim (a "THIRD PARTY CLAIM"), the Indemnified Party shall give the Indemnifying
Party written notice as promptly as practicable after receiving notice of any
Third Party Claim, but the failure to notify the Indemnifying Party will not
relieve the Indemnifying Party of any liability that it may have to any
Indemnified Party, except to the extent that the Indemnifying Party demonstrates
that the defense of such action is prejudiced by the Indemnifying Party's
failure to give such notice. If the Indemnifying Party acknowledges in writing
its obligation to indemnify the Indemnified Party hereunder against any losses
that may result from any Third Party Claim (subject to the limitations set forth
in this Section 11), then the
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Indemnifying Party shall be entitled, at its option, to assume and control the
defense of such Third Party Claim at its expense and through counsel of its
choice (subject to the consent of the Indemnified party, not to be unreasonably
withheld or delayed) upon giving written notice of its intention to do so to the
Indemnified Party. In such case, the Indemnified Party shall be permitted, at
its option, to participate in the defense of any such Third Party Claim with
counsel of its own choosing and at its own expense; provided, however, that the
Indemnified Party shall have the right at the Indemnifying Party's expense, to,
at its option, have separate counsel if, in the reasonable judgment of the
Indemnified Party upon advice of outside counsel, representation of both the
Indemnified Party and the Indemnifying Party by the Indemnifying Party's counsel
would be inappropriate due to an actual or potential conflict of interest
between such parties, or if any such claim involves a matter which could have a
material adverse effect upon the Business. The parties agree to cooperate to the
fullest extent possible in connection with any claim for which indemnification
is or may be sought hereunder. If the Indemnifying Party does not elect to
assume and control the defense of such Third Party Claim, then the Indemnified
Party may, at its option, elect to assume and control such defense at the
reasonable expense of the Indemnifying Party and through counsel of the
Indemnified Party's choice. If the Indemnifying Party exercises its right to
undertake the defense of any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with the Indemnifying Party and make available
to the Indemnifying Party all pertinent records, materials and information in
its possession or under its control as is reasonably requested by the
Indemnifying Party. Similarly, if the Indemnified Party rightfully undertakes
the defense of any Third Party Claim, the Indemnifying Party shall cooperate
with the Indemnified Party and make available to it all such records, materials
and information in the Indemnifying Party's possession or under its control
relating thereto as is reasonably requested by the Indemnified Party. No Third
Party Claim may be settled by the Indemnifying Party or the Indemnified Party
without the written consent, not to be unreasonably withheld or delayed, of the
other party; provided, however, that if such settlement involves the payment of
money only and, by the payment of that money, the Indemnified Party is fully
indemnified and the Indemnified Party refuses to consent thereto, the
Indemnifying Party shall cease to be obligated with respect to such Third Party
Claim. In no event will either party conduct the defense of any Third Party
Claim in a manner that will unreasonably detract from or otherwise interfere
with or disrupt the other party's business or customers.
11.3 OTHER CLAIMS. A claim for indemnification for any matter not involving
a Third Party Claim may be asserted by notice to the party from whom
indemnification is sought.
11.4 CALCULATION OF LOSSES. The parties shall make appropriate adjustments
for the proceeds of any insurance coverage of, or any other form of cost
recovery obtained by, the Indemnified Party in determining the amount of Damages
for purposes of Section 10, provided that the indemnifiable Damages shall then
be increased by any additional expense or liability associated with the
obtaining of benefits under such coverage, to the extent of and as a result of
such Damages.
11.5 NONEXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies in Sections 10 and 11 hereof shall not be deemed to
be exclusive. Accordingly, the exercise by any person of any of its rights under
Sections 10 and 11 hereof shall not be deemed to be an election of remedies and
shall not be deemed to prejudice, or to constitute or operate as a waiver of,
any other right or remedy that such person may be entitled to exercise, whether
under this
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Agreement, under any other contract, under any statute, rule or other legal
requirement, at common law, in equity or otherwise.
11.6 MINIMUM DAMAGES. No party shall have any obligation or liability to any
other party under Section 10 and 11 hereof until the aggregate amount of all
Damages for which the Indemnified Party seeks or claims defense or
indemnification pursuant to Section 11 (the "INDEMNIFIED DAMAGES") exceeds a
threshold of $50,000. Once an Indemnified Party's Indemnified Damages meet or
exceed $50,000, such party may seek or claim defense or indemnification for the
full amount of Indemnified Damages, less $10,000.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by Seller and Purchaser under this Agreement in connection with
the transactions contemplated hereby or in any schedule, exhibit, agreement,
certificate, list or other instrument delivered pursuant hereto shall survive
the Closing and any investigation made at any time with respect thereto.
13. CONFIDENTIALITY PROVISIONS.
13.1 OBLIGATION. Prior to the Closing, the terms of Section 21 of the Letter
of Intent, dated October 9, 1998 by and between the Purchaser and Seller (the
"LETTER OF INTENT"), shall be in full force and effect. Seller and Principal
agree that upon the Closing Date all of the Assets shall be the sole and
exclusive property of Purchaser and any Confidential Information (as defined
below) relating to the Assets shall comprise a special, valuable and unique
asset of Purchaser's business, and that the confidentiality and restricted use
of such Confidential Information is an integral part of its ascribed value.
Seller and Principal shall use all reasonable efforts, not less than those used
to maintain the confidentiality of their own confidential information, not to
disclose or use such information after the date of this Agreement. For purposes
of this Agreement, "CONFIDENTIAL INFORMATION" shall mean (a) any information,
know-how, data, process, technique, design, drawing, formula or test data
relating to any research project, work in process, future development,
engineering, manufacturing, marketing, business plan, servicing, financial or
personnel matter relating to the Assets, the Business, Purchaser, its present or
future products, sales, suppliers, customers, employees, investors or business,
whether in oral, written, graphic or electronic form; and (b) any information
disclosed to Seller by any third party which Seller is obligated to treat as
confidential or proprietary, including all whole or partial copies and versions
thereof occurring in any form which satisfies the terms and conditions of this
Section 13.1.
13. EXCLUSIONS. Confidential Information shall not include and Seller shall
not be obligated to hold in confidence any information which (i) is or becomes
public knowledge without breach of this Agreement, or (ii) which is or becomes
publicly available without a confidentiality restriction and without breach of
this Agreement from a source other than Purchaser.
13.3 REMEDIES. Seller acknowledges that disclosure or use of any
Confidential Information prior to or after the Closing Date in a manner
inconsistent with this Section 10 or any other provision of this Agreement will
cause Purchaser irreparable injury which may not be adequately compensated by
damages. Accordingly, in addition to all other remedies that Purchaser may have
hereunder Purchaser shall have the right to equitable and injunctive relief to
prevent the unauthorized use or disclosure of any such Confidential Information
and the right to such damages (including without
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limitation, court costs and reasonable attorneys' fees) as are occasioned by
such unauthorized use or disclosure.
14. ENTIRE AGREEMENT AND AMENDMENTS; SECTION HEADINGS. This Agreement,
including the Exhibits and schedules referred to herein, which are incorporated
herein and made a part hereof, contains the final complete and exclusive
understanding of the parties hereto with respect to the subject matter contained
herein and may be amended or terminated only by a written instrument executed by
Seller and Purchaser or their respective successors or assigns. There are no
representations, promises, warranties, covenants or undertakings other than
those expressly set forth herein. Any representations, promises warranties,
covenants or undertakings prior to the Closing, including the Letter of Intent,
except for Section 21 of the same, are hereby merged into this Agreement. The
section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
15. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
16. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto; provided, however, that neither
this Agreement nor any rights or obligations accruing hereunder may be assigned
or is assignable by Seller or Purchaser, or may be delegated or is delegable,
and any attempted assignment or delegation shall be null and void.
17. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Colorado without regard to its
choice-of or conflict-of-laws rules and venue for any action to enforce or
interpret this Agreement shall be in a court of competent jurisdiction located
in the State of Colorado and each of the parties consents to the jurisdiction of
such court in any such action or proceeding and waives any objection to venue
laid therein.
18. EXPENSES. Each party shall be responsible for its own fees and
expenses, including fees and expenses of legal counsel and/or accountants,
incurred in connection with the negotiation and preparation of this Agreement,
the associated documents and the consummation of the transactions contemplated
hereby and thereby.
19. EQUITABLE RELIEF. Each party further acknowledges that any breach of
warranty or covenant or any other provision of this Agreement will cause the
other party irreparable injury which may not be adequately compensated by
damages. Accordingly, in addition to all other remedies that a party may have
hereunder, each party shall have the right to equitable and injunctive relief,
including the right to request specific performance of the other party's
obligations hereunder.
20. "KNOWLEDGE" DEFINITION. As used herein, the expressions "knowledge,"
"best of knowledge," "aware" or similar expressions include only the actual
knowledge of an individual or, in the case of Seller or Purchaser, the named
individuals listed below and the knowledge any of them should reasonably have by
virtue of his or her position, authority, responsibilities and activities,
including all such information as is in the files under the control or sued by
such individual. When such terms are used in connection with the knowledge of
Seller, such knowledge shall mean the
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knowledge of Xxxxxxx X. Xxxxxxx and Xxxxxxxx X. Xxxxxxx. When such terms are
used in connection with the knowledge of Purchaser such knowledge shall mean the
knowledge of Xxxxxx Xxxxxxx, Xxxxxxx Santa and Xxxx Xxxxxx.
21. FURTHER ASSURANCES. The parties shall at their own cost and expense
execute and deliver such further documents and instruments and shall take such
other actions as may be reasonably required or appropriate to carry out the
intent and purposes of this Agreement.
22. NOTICES. All notices, requests, demands and other communications under
this Agreement shall be given in writing and shall be served either personally,
by facsimile or delivered by first class mail, registered or certified, return
receipt requested, postage prepaid and properly addressed as follows:
If to the Purchaser: Dynamic Materials Corporation
000 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Santa, Chief Financial Officer
Fax: 303/000-0000
With a copy to: Xxxxx, Xxxxxx & Xxxxxx LLP
Suite 4700
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxxxxx Xxxxxx
Fax: 303/000-0000
If to Seller: Precision Machined Products, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxx Xxxxxxx
With a copy to: Xxxxx, Xxxxxxxxx & Xxx, P.C.
000 Xxxx Xxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxx
Fax: 303/000-0000
Notice shall be deemed received upon the earliest of actual receipt,
confirmed facsimile or three (3) business days following mailing pursuant to
this Section.
23. SEVERABILITY AND WAIVER. In the event that any provision of this
Agreement is held to be invalid or unenforceable, the valid or enforceable
portion thereof and the remaining provisions of this Agreement will remain in
full force and effect. Any waiver (express or implied) by either party of any
default or breach of this Agreement shall not constitute a waiver of any other
or subsequent default or breach.
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24. PUBLIC ANNOUNCEMENTS. Purchaser and Seller shall consult upon the
substance of any and all press releases, publicity statements and other
communications to the public or to vendors and customers of Seller with respect
to this Agreement and the transactions contemplated hereby. However, prior to
Closing, neither party shall not at any time make any such communication without
the consent of the other, including, without limitation, any information that
discloses the Purchase Price or the magnitude of the same.
25. THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall be construed
to create any rights in any of Seller's or Purchaser's employees or in any other
person as a third party beneficiary or otherwise.
26. PRONOUNS. All pronouns used in this Agreement shall be deemed to refer
to the masculine, feminine or neuter gender, as the context requires.
27. ATTORNEYS' FEES. Should any litigation or arbitration occur between the
parties to this Agreement respecting or arising out of this Agreement, the
successful or prevailing party shall be entitled to recover its reasonable
attorneys' fees and other costs in connection therewith, including, without
limitation, any attorneys' fees incurred after a judgment has been rendered by a
court of competent jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have fully executed this Agreement as
of the date first written above.
PURCHASER:
DYNAMIC MATERIALS CORPORATION
/s/ XXXXXX X. XXXXXXX
-----------------------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
SELLER:
PRECISION MACHINED PRODUCTS, INC.
/s/ XXXXXXX X. XXXXXXX
-----------------------------------------
Xxxxxxx X. Xxxxxxx
President
PRINCIPALS:
/s/ XXXXXXX X. XXXXXXX
-----------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ XXXXXXXX X. XXXXXXX
-----------------------------------------
Xxxxxxxx X. Xxxxxxx
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