ASSET PURCHASE AGREEMENT
By and Among
STANDARD AUTOMOTIVE CORPORATION
and
AL-XXX, INC.
and
XXXXXX XXXXX
and
XXXXXXX XXXXX
DATED AS OF JANUARY 15, 1999
TABLE OF CONTENTS
Page
----
1. DEFINITIONS.......................................................... 1
1.1 "Adjustment Date".................................................... 1
1.2 "Affiliate".......................................................... 1
1.3 "Ancillary Documents"................................................ 1
1.4 "Assets"............................................................. 1
1.5 "Code"............................................................... 3
1.6 "Commitments"........................................................ 3
1.7 "Long-Term Debt"..................................................... 3
2. ACQUISITION OF ASSETS; ASSUMPTION OF LIABILITIES..................... 3
2.1 Acquisition of Assets................................................ 3
2.2 Liabilities.......................................................... 3
3. CONSIDERATION........................................................ 4
3.1 Purchase Price....................................................... 4
3.2 Deposit.............................................................. 6
3.3 Payment at Closing................................................... 6
3.4 Allocation of Consideration for Tax Purposes......................... 6
3.5 Balance Sheet........................................................ 7
4. CLOSING.............................................................. 8
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER......................... 9
5.1 Organization, Good Standing, Power, Etc.............................. 9
5.2 Ownership Interests.................................................. 9
5.3 Articles of Incorporation and By-Laws................................ 9
5.4 Subsidiaries, Divisions and Affiliates............................... 9
5.5 Equity Investments................................................... 10
5.6 Authorization, Etc................................................... 10
5.7 Effect of Agreement.................................................. 10
5.8 Restrictions......................................................... 10
5.9 Governmental and Other Consents...................................... 10
5.10 Financial Statements................................................. 11
5.11 Absence of Certain Changes or Events................................. 11
5.12 Title to Assets; Absence of Liens and Encumbrances................... 11
5.13 Equipment............................................................ 12
5.14 Insurance............................................................ 12
5.15 Agreements, Arrangements, Etc........................................ 13
5.16 Patents, Trademarks, Copyrights, Etc................................. 15
5.17 Permits, Licenses, Etc............................................... 16
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5.18 Compliance with Applicable Laws...................................... 16
5.19 Litigation........................................................... 16
5.20 Adverse Interests.................................................... 16
5.21 Customers, Suppliers, Distributors and Agents........................ 17
5.22 Books and Records.................................................... 17
5.23 Employee Benefit Plans............................................... 17
5.24 Powers of Attorney................................................... 18
5.25 Sufficiency of Assets and Commitments................................ 18
5.26 Labor Disputes, Unfair Labor Practices............................... 18
5.27 Past Due Obligations................................................. 19
5.28 Environmental Matters................................................ 19
5.29 Tax and Other Returns and Reports.................................... 20
5.30 Certain Tax Definitions.............................................. 20
5.31 Recent Dividends and Other Distributions............................. 20
5.32 Inventory............................................................ 21
5.33 Purchase and Sale Obligations........................................ 21
5.34 Other Information.................................................... 21
5.35 Accounts Receivable and Accounts Payable............................. 21
5.36 Knowledge of the Seller and the Shareholders......................... 21
5.37 Brokers and Finders.................................................. 21
5.38 Personnel............................................................ 22
5.39 Bank Accounts........................................................ 22
5.40 Long-Term Debt....................................................... 22
6. MANAGEMENT OF THE SELLER AFTER CLOSING............................... 22
7. REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 23
7.1 Organization......................................................... 23
7.2 Authorization of Agreement........................................... 23
7.3 Litigation........................................................... 23
7.4 Brokers and Finders.................................................. 23
7.5 Effect of Agreement.................................................. 24
7.6 Restrictions......................................................... 24
7.7 Governmental and Other Consents...................................... 24
8. PRE-CLOSING COVENANTS OF SELLER...................................... 24
8.1 Conduct of Business Until Closing Date............................... 24
8.2 Approvals, Consents and Further Assurances........................... 26
8.3 Access to Properties, Records, Suppliers, Agents, Etc................ 26
8.4 Advice of Changes.................................................... 26
8.5 Conduct.............................................................. 26
8.6 Employee Benefit Plans............................................... 26
8.7 Satisfaction of Conditions by Seller. ............................... 26
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9. PRE-CLOSING COVENANTS OF BUYER....................................... 27
9.1 Satisfaction of Conditions by Buyer.................................. 27
9.2 Environmental Audit.................................................. 27
10. POST-CLOSING COVENANTS............................................... 27
10.1 Further Assurances................................................... 27
10.2 Personal Guarantees.................................................. 27
10.3 Product Liability Insurance.......................................... 27
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER..................... 28
11.1 Accuracy of Representations and Warranties........................... 28
11.2 Performance of Agreements............................................ 28
11.3 Litigation, Etc...................................................... 28
11.4 Approvals and Consents............................................... 29
11.5 Officer's Certificate................................................ 29
11.6 Good Standing Certificate............................................ 29
11.7 No Material Adverse Change........................................... 29
11.8 Actions, Proceedings, Etc............................................ 29
11.9 Opinion of Counsel to the Seller..................................... 29
11.10 Licenses, Permits, Consents, Etc..................................... 29
11.11 Documentation of Rights.............................................. 30
11.12 Employment Agreements................................................ 30
11.13 Title Documents...................................................... 30
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER................ 30
12.1 Accuracy of Representations and Warranties........................... 30
12.2 Performance of Agreements............................................ 30
12.3 No Injunction........................................................ 30
12.4 Opinion of Counsel to Buyer.......................................... 30
12.5 Employment Agreements................................................ 30
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.......... 31
13.1 Survival............................................................. 31
13.2 Indemnification by the Shareholders and the Company. ............... 31
13.3 Indemnification by Buyer............................................. 31
13.4 Right to Defend...................................................... 32
13.5 Subrogation.......................................................... 32
13.6 Limits on Liability.................................................. 32
14. MISCELLANEOUS........................................................ 33
14.1 Expenses............................................................. 33
14.2 Termination Events. ................................................ 33
14.3 Effect of Termination................................................ 34
14.4 Waivers.............................................................. 34
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14.5 Binding Effect; Benefits............................................. 34
14.6 Assignment........................................................... 34
14.7 Notices.............................................................. 34
14.8 Entire Agreement..................................................... 35
14.9 Headings; Certain Terms.............................................. 36
14.10 Counterparts......................................................... 36
14.11 Governing Law........................................................ 36
14.12 Severability......................................................... 36
14.13 Amendments........................................................... 36
14.14 Transaction Taxes.................................................... 36
14.15 Section References................................................... 36
iv
EXHIBIT INDEX
1. Exhibit 1.3(b) Inventory
2. Exhibit 1.3(c) Equipment
3. Exhibit 1.3(d) Rights (Patents, Trademarks, Copyrights, etc.)
4. Exhibit 1.3(k) Excluded Assets
5. Intentionally Omitted
6. Exhibit 5.1 Good Standing Certificates - the Company
7. Exhibit 5.2 Outstanding Offers, Options, Warrants, Securities, Etc.
8. Exhibit 5.3 Articles of Incorporation and By-Laws of the Company
9. Exhibit 5.4 Subsidiaries, Divisions and Affiliates of the Company
10. Exhibit 5.5 Equity Investments
11. Exhibit 5.8 Restrictions
12. Exhibit 5.9 Governmental and Other Consents
13. Exhibit 5.10 Financial Statements of the Company
14. Exhibit 5.11 Absence of Certain Changes or Events
15. Exhibit 5.12 Title to Assets; Absence of Liens and Encumbrances
16. Exhibit 5.14 Insurance Policies
17. Exhibit 5.15 Commitments
18. Exhibit 5.16 Patents, Trademarks, Copyrights
19. Exhibit 5.19 Material Litigation
20. Exhibit 5.20 5% Interest Ownership Table
21. Exhibit 5.21(a) Customers, Suppliers, Distributors and Agents
22. Exhibit 5.21(b) Ten Largest Buyers and Providers
23. Exhibit 5.23 Employee Benefit Plans
24. Exhibit 5.24 Powers of Attorney
25. Exhibit 5.25 Sufficiency of Assets and Commitments
26. Exhibit 5.26 Labor Disputes, Unfair Labor Practices
27. Exhibit 5.27 Past Due Obligations
28. Exhibit 5.28 Environmental Matters
29. Exhibit 5.29(a) Tax Examination Dates
30. Exhibit 5.29(b) Examinations of Tax Returns by Governmental Agency
31. Exhibit 5.29(c) Proposal by Governmental Entity of Deficiency, Assessment
of Claim of Taxes
32. Exhibit 5.31 Recent Dividends and Other Distributions
33. Exhibit 5.32 Inventory
34. Exhibit 5.35 Accounts Receivable and Accounts Payable
35. Exhibit 5.38 Personnel
36. Exhibit 5.39 Bank Accounts
37. Exhibit 8 Conduct of Business Prior to Closing
38. Exhibit 11.9 Opinion of Counsel to the Seller
39. Exhibit 12.4 Opinion of Counsel to Buyer
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ANNEX
Annex A Employment Agreement of Xxx Xxxxx
Annex B Employment Agreement of Xxxxxx Xxxxx
Annex C Employment Agreement of Xxxxxxx Xxxxx
Annex D Assumed Liabilities
vi
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
this 15 day of January, 1999, by and among Standard Automotive Corporation, a
Delaware corporation ("Buyer" or "Standard") and Al-Xxx, Inc., an Iowa
corporation (the "Company" or "Seller"), and Xxxxxx Xxxxx and Xxxxxxx Xxxxx, the
shareholders of Seller (the "Shareholders").
RECITALS:
Shareholders are the record and beneficial owners of all of the issued and
outstanding capital stock of the Company.
This Agreement sets forth the terms and conditions upon which the
Shareholders will cause the Company to sell, convey, transfer, assign and
deliver to Buyer, and upon which Buyer will purchase and acquire from the
Company, all of the property, plant, assets, and business as a going concern of
Seller as of the Closing Date (as defined herein). The business heretofore
conducted and currently being conducted by the Company is referred to herein as
the Business.
In consideration of the foregoing, the mutual covenants and agreements of
the parties hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. DEFINITIONS
1.1 "Adjustment Date" shall mean as of the close of business on December
31, 1998.
1.2 "Affiliate" as used in this Agreement, the term "Affiliate" shall
mean, as applied to any person, any other person directly or indirectly
controlling, controlled by, or under common control with, that person. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by", and "under common control with") as
applied to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of that
person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
1.3 "Ancillary Documents" shall have the meaning set forth in Section 9
hereof.
1.4 "Assets" as used in this Agreement, the term "Assets" shall mean all
of the assets of the Company (as of the Closing), including, without limitation
the following:
(a) the Business as a going concern, the goodwill pertaining thereto
and all of the Company's right, title and interest in and to the names
used by the Company in connection with the Business, as well as all logos
relating thereto;
(b) all items of inventory owned by the Company including, without
limitation, all raw materials, work-in-progress and finished products of
the Company (all of which are collectively referred to hereinafter as
"Inventory"), as set forth in Exhibit 1.4(b);
(c) all vehicles, machinery, equipment (including equipment which
has previously been fully depreciated and all equipment loaned to
customers), furniture, fixtures and non-inventory supplies of the Company
(including containers, packaging and shipping material, tools and spare
parts and other similar tangible personal property owned by the Company,
including but not limited to the items listed on Exhibit 1.4(c), all of
which are collectively referred to hereinafter as the "Equipment");
(d) all of the Company's right, title and interest in and to the
United States and foreign rights of the Company currently owned or used by
the Company (and the rights proposed to be used) which are set forth on
Exhibit 1.4(d), in the conduct of the Business, with respect to
copyrights, licenses, patents, trademarks, trademark rights, trade names,
service marks, service right marks, trade secrets, shop rights, know-how,
technical information, techniques, discoveries, designs, proprietary
rights and non-public information and registrations, reissues and
extensions thereof and applications and licenses therefor, including the
items listed on Exhibit 1.4(d) (all of such rights being collectively
referred to hereinafter as the "Rights");
(e) all books and records of the Company including all in-house
mailing lists, other customer and supplier lists, trade correspondence,
production and purchase records, promotional literature, data storage
tapes and computer disks, computer software, order forms, accounts payable
records (including invoices, correspondence and all related documents),
accounts receivable ledgers, all documents relating to uncollected
invoices, and all shipping records;
(f) all contracts, agreements and purchase and sale orders for
goods; all corporate opportunities under discussion and related to the
Business, including any documentation related thereto;
(g) all trade receivables of the Company and all advance payments,
prepaid items, rights to offset and credits of all kinds of the Company;
(h) all real property owned or leased by the Company together with
all fixtures attached thereto, including, without limitation, the plant in
Ottumwa, Iowa and all contracts to acquire real estate associated with the
Business;
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(i) all real property and all tangible personal property owned by
the Company which is not specifically included in, or specifically
excluded by, the foregoing subsections (a) through (h);
(j) all rights under or pursuant to all warranties, representations
and guarantees made by suppliers in connection with the Assets, all
claims, causes of action, rights of recovery and rights of set-off of any
kind against any person or entity relating to the Assets, the Company; and
(k) all assets included or reflected as such under "Assets" on the
July 31 Balance Sheet (as hereinafter defined) with such additions thereto
as may be acquired by the Company between July 31 and the Closing, except
as specifically excluded on Exhibit 1.4(k) ("Excluded Assets").
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and/or superseded.
1.6 "Commitments" shall mean all agreements, indentures, mortgages, plans,
policies, arrangements, and other instruments, including all amendments thereto
(or where they are verbal, written summaries of the material terms thereof),
fixed or contingent, required to be disclosed on Exhibit 5.15.
1.7 "Long-Term Debt" shall mean any and all obligations of the Company for
borrowed money pursuant to the Agreement with First Star Bank denominated Long
Term Debt on Annex D. The Company acknowledges and agrees that Long-Term Debt,
measured on the Adjustment Date, shall not exceed $1,000,000. For purposes of
this Section 1.7, Long-Term Debt shall not include the amounts now or hereafter
due under the Company's current revolving line of credit pursuant to the
agreement (the "Revolving Credit Agreement") described on Annex D hereto and the
Company's obligations pursuant to such other agreements as are described on
Annex D.
2. ACQUISITION OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Acquisition of Assets. In exchange for the consideration specified
herein, and upon and subject to the terms and conditions of this Agreement,
Buyer shall purchase and acquire from the Company, and the Company shall sell,
assign, transfer, convey and deliver to Buyer at the Closing, the Assets. All of
the Assets will be acquired by Buyer free and clear of all security interests,
liens, claims and any other third party rights other than the Permitted
Encumbrances (as defined herein).
2.2 Liabilities.
2.2.1 Assumption of Liabilities. In addition to the consideration
provided for in Section 3, at the Closing Buyer shall assume and shall
thereafter discharge and satisfy all
3
obligations of the Company related to or arising out of the Business, including
but not limited to, trade payables, accrued wages, amounts due under the
Revolving Credit Agreement and the Long Term Debt (the "Assumed Liabilities") in
accordance with the terms thereof. Except to the extent expressly assumed by
Buyer pursuant to Section 2.2.1 hereof, Buyer shall not assume or otherwise be
responsible or be bound by any liabilities or obligations of the Company of any
kind or nature, known or unknown, actual or contingent, matured or unmatured,
liquidated or unliquidated, or otherwise arising out of occurrences on or
through the Closing Date.
3. CONSIDERATION
3.1 Purchase Price. The consideration (the "Consideration") for the Assets
will be as follows:
3.1.1 Cash Consideration.
(a) The sum of the product of five times the Company's EBITDA
for the fiscal year ended December 31, 1998, as determined by Xxxxxx
Xxxxxxxx & Co. (or another firm of accountants selected by Buyer and
not reasonably objected to by the Company, in all events, referred
to as "Xxxxxx Xxxxxxxx") but in no event less than $9,000,000 nor
more than $11,000,000 (hereinafter, the "EBITDA Product"), (i) minus
the Long-Term Debt of the Company (as of the Adjustment Date), and
(ii) plus or minus any Current Net Worth Adjustment in accordance
with Section 3.1.1(b). Notwithstanding anything contained herein to
the contrary, the Current Net Worth Adjustment shall not result in
an increase or decrease in the aggregate cash consideration of more
than $250,000 (the "Current Net Worth Adjustment Collar").
(b) For purposes hereof, the "Current Net Worth Adjustment"
shall be calculated as follows:
(i) If Current Assets (as defined below) exceed Current
Liabilities by less than $2,032,000, the amount of the Current Net
Worth Adjustment shall be equal to (the Current Assets minus the
Current Liabilities) minus $2,032,000 and such amount shall be
subtracted from the cash consideration, subject to the Current Net
Worth Adjustment Collar.
Example: If Current Assets are $2,000,000 and Current
Liabilities are $1,000,000, the Current Net Worth Adjustment
would be $1,032,000 calculated as follows: ($2,000,000 -
$1,000,000) - $2,032,000 = - $1,032,000. However, the Current
Net Worth Adjustment Collar will limit such reduction in the
cash consideration to $250,000.
(ii) If Current Assets exceed Current Liabilities by
more than $2,232,000, the amount of the Current Net Worth Adjustment
shall be equal to
4
(the Current Assets minus the Current Liabilities) minus $2,032,000
and such amount shall be added to the cash consideration, subject to
the Current Net Worth Adjustment Collar.
Example: If Current Assets are $5,000,000 and Current
Liabilities are $2,000,000, the Current Net Worth Adjustment
would be $968,000 calculated as follows: ($5,000,000 -
$2,000,000) minus $2,032,000 = $968,000. However, the Current
Net Worth Adjustment Collar will limit such increase in the
cash consideration to $250,000.
(iii) If the result when the Current Liabilities is
subtracted from the Current Assets is equal to or greater than
$2,032,000 and less than or equal to $2,232,000, the Net Worth
Adjustment shall be zero.
For purposes of this Agreement, the Current Assets shall be the current
assets of the Company as of the Adjustment Date as reflected in the Closing
Balance Sheet and the Current Liabilities shall be the Current Liabilities of
the Company as of the Adjustment Date assumed by Buyer less the current portion
of the Long Term Debt as reflected on the Closing Balance Sheet. Further, for
purposes of this Agreement Long Term Debt is as described in Annex D.
For purposes of computing the Current Net Worth Adjustment, the
Company's obligations under the Revolving Credit Agreement described on Annex D
hereto and the Company's obligations pursuant to such other agreements as are
described on Annex D shall be deemed a Current Liability; provided, however, in
no event shall the Long-Term Debt as described on Annex D be deemed a Current
Liability.
3.1.2 Stock. At the Closing Buyer shall deliver to the Company
shares of Standard valued at One Million ($1,000,000) Dollars based upon the
average of the closing price for the ten trading days ending the second business
day prior to the Closing Date. If, however, the stock is valued at less than $12
per share, as calculated pursuant to the preceding sentence, then Buyer shall
have the option to pay One Million ($1,000,000) Dollars cash to Seller in lieu
of the shares of stock.
3.1.3 Additional Goodwill Payouts. (a) No later than ninety (90)
days after the end of each of the calendar years 1999 through 2003 (a "Target
Year"), Buyer shall pay to Seller an amount equal to one-third of the excess of
(i) Adjusted EBITDA for such Target Year over (ii) the sum of $2,200,000 plus
Amortized Expansion Costs for such Target Year.
(b) If the EBITDA Product is less than $11,000,000 and the Adjusted EBITDA
for the fiscal year ended December 31, 1999 (the "Initial Test Year") is greater
than the EBITDA for the year ended December 31, 1998 (the "Base Year"), then, in
addition to the amount provided for in 3.1.3(a), there shall be paid to the
Company an amount equal to the product of five times (the Initial Test Year
EBITDA minus the Base Year EBITDA) provided that the sum of the EBITDA Product
plus the amount paid pursuant to this subsection shall not exceed $11,000,000.
5
(c) Xxxxxx Xxxxxxxx'x computation of Base Year EBITDA and the Initial Test
Year EBITDA, and the computation of the amounts due the Company as a result
thereof, shall be subject to a review by the Company in accordance with the
procedure set forth in Section 3.5.1.
For purposes of this Section, Adjusted EBITDA shall mean the earnings
before interest, taxes, depreciation and amortization generated through the use
of the assets acquired hereby (the "Al-Xxx Business"), without giving effect to
any corporate overhead factor allocated to the Al- Xxx Business, as computed by
the firm of independent public accountants engaged by the Company. For purposes
hereof, Amortized Expansion Costs shall be the amount spent by the Company after
the Closing Date to expand plant capacity above the $20,000,000 level per year.
Such Amortized Expansion Costs shall include the purchase of new equipment,
amortized at a rate of 20% per year, plus interest on the unamortized balance at
the cost of money to the Company or, if lower, its ultimate corporate parent.
However, no routine maintenance or replacement expenses shall be included in
such calculation.
Example: If $1,500,000 is spent on plant expansion in the first year and
interest is 10% per annum, the Amortized Expansion Costs for the first year will
be $300,000 plus interest from the time of investment to the end of the year.
The Amortized Expansion Costs for the second year will be $300,000 plus $120,000
of interest. For the third year the Amortized Expansion Cost will be $300,000
plus $90,000 of interest, etc.
3.2 Deposit. Buyer has concurrent with the signing of this Agreement,
deposited $200,000 in escrow with the Company's attorney, with such amount to be
credited towards the cash consideration to be paid by Buyer at the Closing or
otherwise distributed in accordance with Section 14.3.
3.3 Payment at Closing. The deposit shall be released to the Company and
the balance of the cash consideration as determined pursuant to Section 3.1.1
hereof on the basis of a good faith Adjustment Date Balance Sheet (the "Closing
Balance Sheet") prepared by Seller under the supervision of Buyer shall be
payable at the Closing to Seller by wire transfer in immediately available
funds, provided good and marketable title to the Assets is delivered, free and
clear of any liens or encumbrances (other than the Permitted Encumbrances) and
provided all other terms and conditions of this Agreement have been complied
with. Two (2) business days prior to the Closing, Seller shall provide written
wire instructions to Buyer showing the name and address of the financial
institution to receive the cash consideration due Seller from Buyer pursuant to
this Agreement, including the name and account receiving payment, and the name
and telephone number of the authorized contact person at the financial
institution and such other wire transfer instructions as may be required to
complete the wire transfer of the cash consideration. Wire transfer of funds
shall be deemed to be conclusive payment of the cash consideration required by
this Agreement.
3.4 Allocation of Consideration for Tax Purposes. The parties agree to
allocate the consideration paid pursuant to this Agreement, first to the real
property transferred (to the fair market value thereof), second to the remaining
tangible assets (to the amount of the book value
6
thereof) and the balance to goodwill. Notwithstanding the foregoing, all
payments made pursuant to Section 3.1.3 and any payment made pursuant to Section
3.1.1 as a result of the 1999 EBITDA will be allocated to goodwill. None of the
parties shall, at any time hereafter, in any tax or information return filed
with any state or federal agency or in any audit, other tax proceeding or
otherwise, take a position which is contrary to such allocation.
3.5 Balance Sheet.
3.5.1 As soon as practicable after the Closing Date (but not later
than 60 days after the Closing Date), Buyer will prepare, and cause its
regularly engaged independent accountants or another firm of accountants not
reasonably objected to by Seller ("CPA's) to audit and report upon the balance
sheet of the Seller at the close of business on the Adjustment Date. Such
balance sheet shall be referred to herein as the "Closing Balance Sheet." Except
as specifically provided herein, the Closing Balance Sheet will be prepared in
accordance with generally accepted accounting principles consistent with the
accounting principles, practices and assumptions utilized by the Company in the
preparation of its audited balance sheet at December 31, 1997 and the related
notes thereto, attached hereto as Exhibit 5.10. The Closing Balance Sheet will
include only those items transferred to or assumed by Buyer pursuant hereto. The
inventory reflected on the Closing Balance Sheet will be based on a physical
inventory taken on or about the Adjustment Date by Seller and observed by CPA's
(at Buyer's expense). Seller will cooperate with Buyer and CPA's in facilitating
the preparation and audit of the Closing Balance Sheet.
3.5.2 Immediately after the audit of the Closing Balance Sheet has
been completed, Buyer will compute the Long Term Debt, Current Assets and
Current Liabilities as of the Adjustment Date.
3.5.3 Buyer's computation of the cash portion of the consideration,
based on the Closing Balance Sheet, shall be delivered to the Company in writing
no later than 30 days after the Closing (the "Closing Consideration Statement").
During the 25-day period following the Seller's receipt of the Closing
Consideration Statement, the Seller's accountants will be permitted to review
the audit working papers of CPA's relating to the Closing Balance Sheet and will
have access to Buyer's personnel as may be reasonably necessary in connection
therewith and, in general, Buyer will cooperate with the Seller and the Seller's
accountants in facilitating such review. The Closing Consideration Statement
shall become final and binding upon the parties on the twenty-fifth day
following the Seller's receipt thereof unless the Seller gives written notice of
its disagreement as to the Closing Balance Sheet or the Closing Consideration
Statement ("Notice of Disagreement") to Buyer prior to such date. Any Notice of
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. If a Notice of Disagreement is received by Buyer in a timely manner
then the Closing Consideration Statement shall become final and binding upon the
parties on the earlier of (x) the date the parties hereto resolve in writing all
differences they have with respect to any matter specified in the Notice of
Disagreement and (y) the date all disputed matters are finally resolved in
writing by the Arbitrators or Third Arbitrator, as the case may be (as such
terms are defined in Section 3.5.4).
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The Closing Consideration Statement that becomes final and binding on the
parties in accordance with the terms of this Section is referred to herein as
the "Final Closing Statement." Notwithstanding Buyer's computation of the Long
Term Debt, Current Assets and Current Liabilities, and the resulting Final
Closing Statement, in no event shall the cash portion of the Purchase Price be
less than $9,000,000 minus the Long Term Debt and plus or minus the Current Net
Worth Adjustment.
3.5.4 During the 15-day period following the delivery of any Notice
of Disagreement, the parties hereto shall attempt to resolve in writing any
differences which they may have with respect to any matter specified in any
Notice of Disagreement. If, at the end of such 15-day period, the parties have
not reached agreement on such matters, either Buyer or the Seller shall submit
the matters which remain in dispute to the arbitrators (the "Arbitrators"), for
review and resolution. The Arbitrators shall be two persons or entities with
offices in Chicago, Illinois, one of which shall be selected by each of Buyer
and the Seller. If within 20 days of receipt by the Arbitrators of the matters
which remain in dispute, the Arbitrators have failed to resolve such matters,
the Arbitrators shall mutually agree upon a third person or entity with offices
in Chicago, Illinois (the "Third Arbitrator") to review and resolve the disputed
matters. The decision of the Third Arbitrator with respect to all disputed
matters shall be final and binding on the parties.
3.5.5 The fees of each Arbitrator shall be borne by the party
selecting such person or entity. The fees of the Third Arbitrator, if any, shall
be borne fifty percent by the Seller and fifty percent by Buyer. The fees of
CPA's incurred in connection with the audit of the Closing Balance Sheet and in
any arbitration shall be borne by Buyer, and the fees of the Seller's
accountants incurred in connection with their review of the Closing Balance
Sheet and the Closing Consideration Statement and in any arbitration shall be
borne by the Seller.
3.5.6 If the cash consideration reflected on the Final Closing
Statement exceeds the cash consideration paid at Closing, then Buyer will pay to
the Seller, on the tenth day after the determination of the Final Closing
Statement (the "Payment Date"), an amount equal to such excess. If the cash
consideration shown on the Final Closing Statement is less than the cash
consideration paid at Closing, then Seller will pay to Buyer, on the Payment
Date, an amount equal to such excess. Any payment under this Section shall be
made by certified or official bank check.
4. CLOSING
Subject to the provisions of this Agreement, the consummation of the
transactions contemplated by this Agreement (the "Closing") shall be held at
such place as selected by Buyer at 10:00 A.M. (local time), on February 15,
1999, or at such later date, place or time as the parties shall otherwise
mutually agree upon (the date of the Closing being referred to herein as the
"Closing Date"). All Closing transactions shall be deemed to take place
simultaneously, and no Closing transaction shall be deemed consummated until all
transactions to take place at the Closing have been consummated.
8
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to Buyer to enter into this Agreement and perform its
obligations hereunder, the Seller and the Shareholders, jointly and severally,
hereby represent and warrant to Buyer as follows, each of such representations
and warranties being material to and relied upon by Buyer, and each of which is
true as of the date hereof and shall be true as of the Closing, with the same
effect as if said representations and warranties had been made at and as of the
Closing Date:
5.1 Organization, Good Standing, Power, Etc. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Iowa. The Seller is authorized or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
of its assets or the conduct of the Business requires such qualification, except
where the failure to be so qualified would not have a material adverse impact on
the Business. The Seller has all requisite power and authority to (i) execute,
deliver and perform its obligations under this Agreement and (ii) to consummate
the transactions contemplated hereby. The Company has all requisite power and
authority to own or lease and operate its properties and assets, and carry on
the Business as it was heretofore and is presently being conducted.
5.2 Ownership Interests.
(a) The Company has an authorized capital stock of 2,500 shares of
which 2,500 shares are issued and outstanding. All of the outstanding capital
stock of the Company are owned, beneficially and of record by the Shareholders
and all of such shares are duly authorized, fully paid, non-assessable, and were
issued in compliance with all federal and applicable state securities laws. All
of the outstanding capital stock of the Company is free and clear of all liens,
charges, encumbrances or claims of any kind whatsoever, except for Permitted
Encumbrances and restrictions imposed by federal or applicable state securities
laws.
(b) Except as set forth in Exhibit 5.2(b) hereof, there are no
outstanding offers, options, warrants, rights, calls, commitments, obligations
(verbal or written), conversion rights, plans or other agreements (conditional
or unconditional) of any character providing for, requiring or permitting the
offer, sale, purchase or issuance of any capital stock of the Company.
5.3 Articles of Incorporation and By-Laws. Included in Exhibit 5.3 hereto
are correct and complete copies of the Articles of Incorporation and By-Laws of
the Company, as amended to date. Such Articles of Incorporation and By-Laws are
in full force and effect.
5.4 Subsidiaries, Divisions and Affiliates. Except as set forth on Exhibit
5.4, there are no subsidiaries, divisions or Affiliates of the Seller. Except as
set forth on Exhibit 5.4, the Business has been conducted solely by the Seller
and not through any Affiliate, joint venture or other entity, person or under
any other name.
9
5.5 Equity Investments. Except as set forth in Exhibit 5.5, the Company
does not own or have any rights to any equity interest, directly or indirectly,
in any corporation, partnership, joint venture, firm or other entity.
5.6 Authorization, Etc. The Seller has full power and authority and has
taken all action necessary to own, lease and operate the Assets, to enter into
this Agreement and to carry out the transactions contemplated hereby. The Board
of Directors and Shareholders of the Seller have taken all action required by
law, the Company's Certificate of Incorporation and By-Laws or otherwise to be
taken to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and the Shareholders and is a legal,
valid and binding obligation of the Company and the Shareholders enforceable
against each of them in accordance with its terms except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
5.7 Effect of Agreement. The execution, delivery and performance of this
Agreement by the Company and the Shareholders and the consummation of the
transactions contemplated hereby, will not, with or without the giving of notice
and the lapse of time, or both, (a) violate any provision of law, statute, rule,
regulation or executive order to which the Seller is subject; (b) violate any
judgment, order, writ or decree of any court applicable to the Seller; or (c)
result in the breach of or conflict with any term, covenant, condition or
provision of, result in the modification or termination of, constitute a default
under, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the Assets pursuant to any corporate charter,
by-law, commitment, contract or other agreement or instrument, including any of
the Commitments, to which the Company is a party or by which any of the Assets
are or may be bound or affected or from which the Company derives benefit, which
breach, conflict, modification, termination, default or encumbrance described in
this clause (c) would be material to the Business or any of the Assets.
5.8 Restrictions. Except as set forth on Exhibit 5.8, neither the Company
nor the Shareholders is party to any contract, commitment or agreement, nor are
any of them or the Assets subject to, or bound or affected by, any provision of
the Articles of Incorporation, ByLaws, Partnership Agreement or other
restriction, or any order, judgment, decree, law, statute, ordinance, rule,
regulation or other restriction of any kind or character, which would,
individually or in the aggregate, materially adversely affect the Business or
any of the Assets.
5.9 Governmental and Other Consents. Except as set forth on Exhibit 5.9,
no consent, authorization or approval of, or exemption by, any governmental or
public body or authority is required in connection with the execution, delivery
and performance by the Seller of this Agreement or of any of the instruments or
agreements herein referred to, or the taking of any action herein contemplated.
10
5.10 Financial Statements. The Seller has delivered to Buyer, and included
in Exhibit 5.10 hereto, correct and complete copies of financial statements of
the Seller for the fiscal years ended December 31, 1997, 1996 and 1995, and
unaudited for the period ended July 31, 1998, (collectively, the "Financial
Statements"). The Financial Statements are in accordance with the books and
records of the Seller, have been prepared in accordance with generally accepted
accounting principles and practices consistently applied and accurately present
the financial position of the Seller at their respective dates and the results
of operations and cash flows for the respective periods covered thereby and all
items that could have a material adverse effect on the willingness of a
prospective purchaser to acquire the Business have been disclosed in the
Financial Statements or in the Exhibits to this Agreement.
5.11 Absence of Certain Changes or Events. Except as set forth on Exhibit
5.11, since July 31, 1998, the Company has not: (a) suffered any adverse change
in, or the occurrence of any events which, individually or in the aggregate, has
or have had, or might reasonably be expected to have, a material adverse effect
on, the Company's financial condition, results of operations or the Business or
the value of the Assets; (b) incurred damage to or destruction of any material
Asset or Assets individually or in the aggregate having a replacement cost in
excess of $50,000, whether or not covered by insurance; (c) made or entered into
contracts or commitments to make any capital expenditures in excess of Ten
Thousand Dollars ($10,000.00); (d) mortgaged, pledged or subjected to lien or
any other encumbrance any of the Assets; (e) sold, transferred or leased any
material Asset or Assets individually or in the aggregate having a replacement
cost in excess of $50,000, or canceled or compromised any debt or material
claims, except in each case, in the ordinary course of business; (f) sold,
assigned, transferred or granted any rights under or with respect to any
licenses, agreements, patents, inventions, trademarks, trade names, copyrights
or formulae or with respect to know-how or any other intangible asset including,
but not limited to, the Rights; (g) amended or terminated any of the contracts,
agreements, leases or arrangements which otherwise would have been set forth on
Exhibit 5.15 hereto; (h) waived or released any other rights of material value;
(i) declared or paid any dividend on its capital stock or set apart any money
for distribution to or for its partners or shareholders; (j) redeemed any
portion of its capital stock; (k) entered into, or amended the terms of, any
Employment or Consulting Agreement not terminable on more than 30-days notice
without liability to the Seller; (l) incurred any indebtedness for borrowed
money or guaranteed any such indebtedness of another entity or individual, or
entered into any other arrangement having the economic effect of any of the
foregoing; or (m) entered into any transactions not in the ordinary course of
business which would, individually or in the aggregate, materially adversely
affect the Assets or the Business.
5.12 Title to Assets; Absence of Liens and Encumbrances. Except as set
forth on Exhibit 5.12, (a) the Seller has good title to, and owns outright, the
Assets, which include all of the assets reflected in the most recent Financial
Statements (except (i) as sold, used or otherwise disposed of in the ordinary
course of business, and (ii) as disclosed in the Financial Statements), free and
clear of all mortgages, claims, liens, charges, encumbrances, security
interests, restrictions on use or transfer or other defects as to title other
than those disclosed in the July 31 Balance Sheet or noted on Exhibit 5.12 (the
"Permitted Encumbrances"); and (b)
11
immediately following the Closing, the Buyer will have good and marketable title
to all Assets, free and clear of all mortgages, claims, liens, charges,
encumbrances, security interests, restrictions on use or transfer, or other
defects of any nature except for these granted or incurred by Buyer. The leases
and other agreements or instruments under which the Seller holds, leases or is
entitled to the use of any real or personal property included in the Assets are
in full force and effect and all rentals, royalties or other payments accruing
thereunder prior to the date hereof have been duly paid. The Seller enjoys
peaceable and undisturbed possession under all such leases, and the change in
ownership of the Assets will not adversely affect such leases, other agreements
and instruments. To the knowledge of Seller, all Assets are in conformance with
all applicable zoning and other laws, ordinances, rules and regulations; and no
notice of violation of any law, ordinance, rule or regulation thereunder has
been received by the Seller or the Company. All buildings, structures,
appurtenances and material items of machinery, equipment and other material
tangible assets used by the Seller are in good operating condition and repair,
reasonable wear and tear excepted, are usable in the ordinary course of
business, are adequate and suitable for the uses to which they are being put and
to the knowledge of Seller, conform in all material respects to all applicable
statutes, laws, regulations, ordinances, codes, rules, judgments, orders,
decrees, agreements or governmental restrictions relating to their construction,
use and operation. The Assets are sufficient to operate and conduct the Business
as presently conducted.
5.13 Equipment. Set forth on Exhibit 1.4(c) is a correct and complete list
as of July 31, 1998 of all items of Equipment (which specifically excludes any
item included in Inventory) having individually a fair market value of $3,000.00
or more (as defined in Section 1.4(c)), indicating for each piece of Equipment
whether it is owned or leased. Except as set forth on Exhibit 1.4(c), none of
the Equipment has been disposed of since July 31, 1998. Except as noted on
Exhibit 1.4(c), all of the Equipment (a) is in good working condition, with no
material defects, and is suitable for the uses that should be reasonably
expected of such Equipment and (b) to the knowledge of Seller, conforms in all
material respects with any laws, ordinances, regulations, orders or other
similar governmental requirements relating to its use, as the same are currently
in effect.
5.14 Insurance. There are no outstanding or unsatisfied written
requirements or verbal recommendations imposed or made by any of the Seller's
current insurance companies with respect to current policies covering any of the
Assets, or by any governmental authority requiring or recommending, with respect
to any of the Assets, that any repairs or other work be done on or with respect
to, or requiring or recommending any equipment or facilities be installed on or
in connection with, any of the Assets. Except as set forth on Exhibit 5.14, the
Seller carries, and (with respect to any period for which a claim against the
Seller may still arise will carry) has always carried product liability
insurance, worker's compensation insurance in reasonable amounts, and other
insurance which is reasonably necessary to the conduct of the Business. On
Exhibit 5.14 is set forth a correct and complete list of (a) all currently
effective insurance policies and bonds covering the Assets or the Business, and
their respective annual premiums (as of the last renewal or purchase of new
insurance), and (b) for the five-year period ending on the date hereof, (i) all
accidents, casualties or damage occurring on or to the Assets
12
or relating to the Business or products of the Seller which in the aggregate are
in excess of Ten Thousand Dollars ($10,000.00), and (ii) claims for product
liability, damages, contribution or indemnification and settlements (including
pending settlement negotiations) relating thereto which in the aggregate are in
excess of Ten Thousand Dollars ($10,000.00). Except as set forth on Exhibit
5.14, as of the date hereof there are no disputes with underwriters of any such
policies or bonds, and all premiums due and payable have been paid. There are no
pending or, to the knowledge of Seller, threatened terminations or premium
increases with respect to any of such policies or bonds and there is no
condition or circumstance applicable to the Business, other than the sale of the
Assets pursuant to this Agreement, which may result in such termination or
increase. The Seller is in compliance with all conditions contained in such
policies or bonds, except for noncompliance which, individually or in the
aggregate, would not have a material adverse affect on the business of the
Seller or the Assets.
5.15 Agreements, Arrangements, Etc.
5.15.1 Except as set forth on Exhibit 5.15.1(a)-(t), Seller is not a
party to, nor are the Assets subject to or bound by any:
(a) lease agreement (whether as lessor or lessee),
(b) license agreement, assignment or contract (whether as
licensor or licensee, assignor or assignee) relating to trademarks,
trade names, patents, or copyrights (or applications therefor),
unpatented designs or processes, formulae, know-how or technical
assistance, or other proprietary rights;
(c) employment or other contract or agreement with an employee
or independent contractor which (i) may not be terminated without
liability to the Seller upon notice to the employee or independent
contractor of not more than 30 days, or (ii) provides payments
(contingent or otherwise) of more than $30,000 per year (including
all salary, bonuses and commissions);
(d) agreement, contract or order with any buying agent,
supplier or other individual or entity who assists, provides or is
otherwise involved in the acquisition, supplying or providing Assets
or other goods to the Seller;
(e) non-competition, secrecy or confidentiality agreements;
(f) agreement or other arrangement for the sale of goods or
services by the Seller to any third party (including the government
or any other governmental authority);
(g) agreement with any labor union;
13
(h) policy of insurance (including bonds) in force with
respect to the Seller or any of its operations, properties, assets,
executive officers or shareholders;
(i) agreement, contract or order with any distributor, dealer,
leasing company, sales agent or representative, other than contracts
or orders for the purchase, sale or license of goods made in the
usual and ordinary course of business at an aggregate price per
contract or more than $10,000 and a term of more than six months
under any such contract or order;
(j) agreement, contract or order with any manufacturer,
leasing company, supplier or customer (including those agreements
which allow discounts or allowances or extended payment terms);
(k) agreement with any distributor or brokerage company,
leasing company, management company or any other individual or
entity who assists, places, brokers or otherwise is involved with
the marketing or distribution of the Seller's products to its
customers;
(l) joint venture or partnership agreement with any other
person or entity;
(m) agreement guaranteeing, indemnifying or otherwise becoming
liable for the obligations or liabilities of another;
(n) agreement with any banks or other persons, for the
borrowing or lending of money or payment or repayment of draws on
letters of credit or currency swap or exchange agreements (other
than purchase money security interests which may, under the terms of
invoices from its suppliers, be granted to suppliers with respect to
goods so purchased);
(o) agreement with any bank, finance company or similar
organization which acquires from the Seller receivables or contracts
for sales on credit;
(p) agreement granting any person a lien, security interest or
mortgage on any of the Assets, including, without limitation, any
factoring or agreement for the assignment of receivables or
inventory;
(q) agreement for the incurrence of any capital expenditure in
excess of $10,000;
(r) advertising, publication or printing agreement;
14
(s) agreement which restricts the Seller from doing business
anywhere in the world; or
(t) agreement or statute or regulation giving any party the
right to renegotiate or require a reduction in prices or the
repayment of any amount.
Correct and complete copies of all Commitments required to be shown
on Exhibit 5.15 have been separately delivered to Buyer prior to the date
hereof.
5.15.2 Each of the Commitments is valid, in full force and effect
and enforceable by the Seller in accordance with its terms.
5.15.3 Except as set forth on Exhibit 5.15, the Seller has
fulfilled, or has taken all action reasonably necessary to enable it to fulfill
when due, all of its obligations under the Commitments, except where the failure
to do so would not, individually or in the aggregate, have a material adverse
affect on the Business or the Assets. Furthermore, there has not occurred any
default by the Seller or any event which, with the lapse of time or the election
of any person other than the Seller, will become a default, nor has there
occurred any default by others or any event which, with the lapse of time or the
election of the Seller, will become a default under any of the Commitments,
except for such defaults, if any, which (a) have not resulted and will not
result in any material loss to or liability of the Seller or any of its
successors or assigns or (b) have been indicated on Exhibit 5.15. The Seller is
not in arrears in any material respect with respect to the performance or
satisfaction of the terms or conditions to be performed or satisfied by it under
any of the Commitments and no waiver or variance has been granted by any of the
parties hereto.
5.15.4 Except as set forth on Exhibit 5.15, consummation of the
transaction contemplated hereby does not require the consent of the other party
to any of the Commitments or give any such party the right to terminate or
modify any of such Commitments. To the extent such consents are required Seller
has obtained the same and will provide copies to Buyer prior to Closing.
5.16 Patents, Trademarks, Copyrights, Etc. Exhibit 1.4(d) sets forth (i)
the registered and beneficial owner and the expiration date, to the extent
applicable, for each of the Rights set forth on such Exhibit and (ii) the
product, service, or products or services of the Company which make use of, or
are sold, licensed or made under, each such Right. All of the Rights are
included in the Assets and constitute all Rights necessary for the conduct of
the Business, as such Business is currently being conducted. Except as set forth
on Exhibit 5.15, the Company has not sold, assigned, transferred, licensed,
sub-licensed or conveyed the Rights, or any of them, or any interest in the
Rights, or any of them, to any person, and has the entire right, title and
interest (free and clear of all security interests, liens and encumbrances of
every nature) in and to the Rights necessary to the conduct of the Business as
currently being conducted; neither has the validity of such items been, nor is
the validity of such items, nor the use thereof by the
15
Seller, the subject of any pending or threatened opposition, interference,
cancellation, nullification, conflict, concurrent use, litigation or other
proceeding. The conduct of the Business as currently operated, and the use of
the Assets does not and will not conflict with, or infringe, legally enforceable
rights of third parties. Except as set forth on Exhibit 5.16, the Rights owned
by or licensed to the Seller have not been used, and no use is now being made,
by any entity except the Seller and other entities duly licensed to use the
same. Except as set forth on Exhibit 5.16, there is no infringement of any
proprietary right owned or licensed by the Company.
5.17 Permits, Licenses, Etc. To the knowledge of the Company it has all
permits, licenses, registrations, memberships, orders or approvals of
governmental or administrative authorities required to carry on the Business as
currently conducted other than permits, licenses, orders or approvals, the
failure to obtain which would not, individually or in the aggregate, have a
material adverse affect on the Assets or on the Business.
5.18 Compliance with Applicable Laws. To the knowledge of the Seller, the
conduct by the Seller of the Business does not violate or infringe, and there is
no basis for any claims of violation or infringement of, any law, statute,
ordinance, regulation or executive order (including, without limitation, the
Occupational Safety and Health Act and the Foreign Corrupt Practices Act and the
respective regulations thereunder and similar applicable state laws and
regulations) currently in effect. To the knowledge of the Seller, the Seller is
not in default under any governmental or administrative registration, membership
or license issued to it, under any governmental or administrative order or
demand directed to it, or with respect to any order, writ, injunction or decree
of any court.
5.19 Litigation. Except as set forth on Exhibit 5.19, there is no claim,
action, suit, proceeding, arbitration, reparation, investigation or hearing or
notice of hearing, pending or, to the knowledge of Seller, threatened, before
any court or governmental, administrative or other competent authority or
private arbitration tribunal against or relating to or affecting (directly or
indirectly, including by way of indemnification) the Business or any of the
Assets, or the transactions contemplated by this Agreement; nor are any facts
known to the Seller, which it believes could reasonably give rise to any such
claim, action, suit, proceeding, arbitration, investigation or hearing, which
may have any adverse affect, individually or in the aggregate in excess of Ten
Thousand Dollars ($10,000) upon the Business, the value of the Assets or the
transactions contemplated by this Agreement. The Seller has not waived any
statute of limitations or other affirmative defense with respect to any of its
obligations. There is no continuing order, injunction or decree of any court,
arbitrator or governmental, administrative or other competent authority to which
the Seller is a party, or to which the Seller is subject. Neither the Seller nor
any current officer, director or employee of the Seller or any Affiliate of the
Seller has been permanently or temporarily enjoined or barred by order, judgment
or decree of any court or other tribunal or any agency or other body from
engaging in or continuing any conduct or practice in connection with the
Business.
5.20 Adverse Interests. Set forth on Exhibit 5.20 is a list describing the
extent to which the Seller or any officer, director or shareholder of the Seller
or any Affiliate of any of
16
the foregoing, directly or indirectly, owns more than a five percent (5%)
interest in or controls or is an employee, officer, director, or partner of or
participant in (but only to the extent such a participation exceeds one
percent), or consultant to any corporation, partnership, limited partnership,
joint venture, association or other entity which is a competitor of Seller or
which is a supplier or customer of Seller, or has any type of business or
professional relationship with Seller. Except as set forth in Exhibit 5.20, no
officer, director or shareholder of the Seller is presently a party to any
transaction with the Seller including, without limitation, any contract,
agreement or arrangement (i) providing for the furnishing of services, (ii)
providing for rental, real or personal property, or (iii) otherwise requiring
payments to any such person, trust, corporation or entity to which such person
has any interest including in any property, real or personal, tangible,
including without limitation, inventions, patents, trademarks or trade names,
used in or pertaining to the Business. Buyer acknowledges that the Shareholders
have engaged and in the future may engage in transactions with customers of the
Company, which transactions have not and will not have a material adverse impact
on the Business.
5.21 Customers, Suppliers, Distributors and Agents. Except as set forth on
Exhibit 5.21(a), the Seller has no knowledge or reason to believe that any
customer, client, distributor, supplier or any other person or entity with
material business dealings with the Business, will or may cease to continue such
relationship with the Business, or will or may substantially reduce the extent
of such relationship, at any time prior to or after the Closing Date. Except for
common public information, the Seller has no knowledge of (1) any other existing
or contemplated modification or change in the business relationship of the
Business with, or (2) any existing condition or state of facts which has
affected adversely, will adversely affect (in a material manner), or has a
reasonable likelihood of adversely affecting the Business with its customers,
clients, suppliers or other persons or entities with material business dealings
with the Business or which has prevented or will prevent the Business from being
carried on under its new ownership after the Closing in essentially the same
manner as it is currently carried on. Exhibit 5.21(b) sets forth as to the
Seller (a) the ten largest (in dollar value) purchasers of its goods and/or
services and (b) the ten largest (in dollar value) providers of goods and/or
services to it, with respect to each of the fiscal years ended December 31, 1997
and 1996.
5.22 Books and Records. The books of account and other financial and
corporate records of the Seller are in all material respects complete, correct
and up to date, with all necessary signatures, and are in all material respects
accurately reflected in the Financial Statements.
5.23 Employee Benefit Plans. Except as described in Exhibit 5.23, the
Seller does not have any hospitalization, health insurance, pension, retirement,
profit sharing, stock option or similar plans. Exhibit 5.23 sets forth a correct
and complete list of each and every employee benefit plan, including each
pension, profit sharing, stock bonus, bonus, deferred compensation, severance,
stock option or purchase plan, or other retirement plan or arrangement, covering
employees of the Seller (the "Employee Benefit Plans"). For each such employee
pension plan, multi-employer plan or welfare plan as those terms are defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and for each Employee
17
Benefit Plan with respect to which the Seller is a "party in interest" as
defined in Section 3 of ERISA, or a "disqualified person" as defined in Section
4975 of the Code, Seller has delivered to Buyer complete and accurate copies of
(i) all Employee Benefit Plans and all amendments thereto; (ii) the trust
instrument or insurance contract, if any, forming a part of the plans, and all
amendments thereto; (iii) the most recent and preceding year's Internal Revenue
Service Form 5500 and all schedules thereto; (iv) the most recent Internal
Revenue Service determination letter, or if no letter has been issued, any
pending application to the Internal Revenue Service for a determination letter
regarding qualified status; (v) any bond required by Section 412 of ERISA; and
(vi) the summary plan description. To the Seller's knowledge it has complied
with all of the rules and regulations governing each of the Employee Benefit
Plans maintained for the benefit of the Seller's employees, including, without
limitation, rules and regulations promulgated pursuant to ERISA and the Code, by
the Department of Treasury, Department of Labor, and the Pension Benefit Plans
Guaranty Corporation, and each of the Employee Benefit Plans now operated has
since its inception been operated in accordance with its provisions and is in
compliance with such rules and regulations. To the knowledge of the Seller,
neither the Seller nor any Employee Benefit Plans maintained by the Seller or
any fiduciaries thereof have engaged in any prohibited transaction, as that term
is defined in Section 406 of ERISA or Section 4975 of the Code, nor have any of
them committed any breach of fiduciary responsibility with respect to any of the
Employee Benefit Plans, and the Seller does not have any knowledge that any
other person has not complied with these rules and regulations.
5.24 Powers of Attorney. Except as set forth on Exhibit 5.24, no person
has any power of attorney to act on behalf of the Seller in connection with any
of the Seller's properties or business affairs other than such powers to so act
as normally pertain to the Partners of the Seller.
5.25 Sufficiency of Assets and Commitments. Except as set forth in Exhibit
5.25, the Assets and the Commitments, taken in the aggregate, are sufficient,
and constitute all of the property and Rights necessary, for the continuation of
the Business on a basis consistent with past operations.
5.26 Labor Disputes, Unfair Labor Practices. Except as set forth on
Exhibit 5.26, the Seller is not engaged in any labor practice which would have a
material adverse affect on the Assets or the Business. There is no pending or
affirmatively threatened (i) unfair labor practice complaint, charge, labor
dispute, strike, slowdown, walkout or work stoppage before the National Labor
Relations Board or any other authority or (ii) grievance or arbitration
proceeding arising out of or under a collective bargaining agreement involving
employees of the Seller. There have been no strikes, labor disputes, slow-downs,
walkouts, or work stoppages involving employees of the Company and Seller during
the last five (5) years. Union representation of employees exists only as set
forth on Exhibit 5.26. The Seller has not received notice from any of its
employees earning or who is reasonably expected to earn more than $75,000 in the
year ended December 31, 1998, of such employee's intent to terminate his or her
employment or bring any action against the Seller for any reason related to the
transactions contemplated by this Agreement or for any other reason.
18
5.27 Past Due Obligations. Except as set forth on Exhibit 5.27, no past
due obligations of the Seller over $5,000 have given rise or shall give rise
within 5 days after the Closing Date (except as such will be performed by the
Seller prior to the Closing Date so as to relieve Buyer of all liability
therefor) to any additional liability to Buyer on account of their being past
due.
5.28 Environmental Matters. (a) Except as set forth on Exhibit 5.28, (i)
the Seller is in substantial compliance with all environmental laws,
regulations, permits and orders applicable to it, and with all laws,
regulations, permits and orders governing or relating to asbestos removal and
abatement; (ii) the Seller has not transported, stored, treated or disposed, or
arranged for any third parties to transport, store, treat or dispose, of any
Hazardous Substances to or at any location other than a site lawfully permitted
to receive such Hazardous Substances for such purposes, or had performed or
arranged for any method or procedure such transportation, storage, treatment or
disposal in contravention of any laws or regulations nor has the Seller disposed
of, or arranged for any third parties to dispose of, Hazardous Substances upon
property owned or leased by it in contravention of any applicable laws or
regulations; (iii) there has not occurred, nor is there presently occurring, a
Release by Seller of any Hazardous Substance on, into or beneath the surface of
any parcel of real property in which the Seller has an ownership interest or any
leasehold interest in contravention of any applicable laws or regulations; (iv)
the Seller has not transported or disposed of, or allowed or arranged for any
third parties to transport or dispose of, any Hazardous Substance to or at a
site which, pursuant to the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), has been placed
on the National Priorities List or its state equivalent; (v) the has not
received notice and the Seller has no actual knowledge of any facts which could
give rise to substantive notice, that the Seller is a potentially responsible
party for a federal or state environmental cleanup site or for corrective action
under CERCLA or notice of any other Environmental Claim; (vi) the Seller has not
undertaken (or been requested to undertake) any response or remedial actions or
cleanup actions of any kind at the request of any federal, state or local
governmental entity, or at the request of any other person or entity; and (vii)
there are no laws, regulations, ordinances, licenses, permits or orders relating
to environmental matters requiring any work, repairs, construction or capital
expenditures with respect to the assets or properties of the Seller.
(b) For the purposes of this Agreement: (i) "Environmental Claim" shall
mean any written demand, claim, governmental notice or threat of litigation or
the actual institution of any action, suit or proceeding which asserts that an
Environmental Condition constitutes a violation of any statute, ordinance,
regulation, or other governmental requirement relating to the emission,
discharge, or Release of any Hazardous Substance into the environment or the
generation, treatment, storage, transportation, or disposal of any Hazardous
Substance, prior to Closing Date in each case in contravention of any applicable
laws or regulations; (ii) "Environmental Condition" shall mean the presence on
any real property during the period from the date such real property was first
owned, leased or used by the Seller to the Closing Date, in surface water,
ground water, drinking water supply, land surface, subsurface strata or ambient
air of any Hazardous Substance arising out of or otherwise related to the
operations or other activities of the Seller conducted or undertaken prior to
the Closing Date, and in each case in contravention
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of any applicable laws or regulations; (iii) "Hazardous Substance" shall mean
any substance defined in the manner set forth in Section 101(14) of the U.S.
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, as applicable on the Closing Date, and shall include any additional
substances designated under Section 102(a) thereof prior to the Closing Date;
and (iv) "Release" shall mean releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment in each case in contravention of any applicable
laws or regulations.
5.29 Tax and Other Returns and Reports. The Seller has timely filed or
will file all Tax Returns and information returns required to be filed and has
paid all Taxes due for all periods ending on or before June 30, 1998. Adequate
provision has been made in the books and records of the Seller and in the
Financial Statements referred to in Section 5.10 above, for all Taxes whether or
not due and payable and whether or not disputed. Exhibit 5.29(a) lists the date
or dates within the past three years through which any governmental entity has
examined any Tax Return of the Seller. All required Tax Returns, including
amendments to date, have been prepared in good faith without negligence or
willful misrepresentation and are complete and accurate in all material
respects. Except as set forth in Exhibit 5.29(b), no governmental entity has,
during the past three years, examined or is in the process of examining any Tax
Returns of the Seller. Except as set forth on Exhibit 5.29(c), no governmental
entity has proposed (tentatively or definitively), asserted or assessed or
threatened to propose or assert, any deficiency, assessment, lien, or other
claim for Taxes and there would be no basis for any such delinquency,
assessment, lien or claim. There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the assessment
of any Taxes or deficiency against the Seller or with respect to any Tax Return
filed or to be filed by the Seller.
5.30 Certain Tax Definitions. For purposes of this Agreement, the term
"Taxes" means all taxes, including without limitation all Federal, State of
Iowa, Ottumwa and Wapello County franchise, sales, use, property, payroll,
withholding, environmental, alternative or add-on minimum and other taxes,
assessments, charges, duties, fees, levies or charges of my kind whatsoever, and
all estimated taxes, deficiency assessments, additions to tax, penalties, and
interest, and any contractual or other obligation to indemnify or reimburse any
person with respect to any such assessment. For purposes of this Agreement, the
term "Tax Return" shall mean any report, statement, return, declaration of
estimated tax or other information required to be supplied by or on behalf of
the Seller to a taxing authority of in connection with Taxes, or with respect to
grants of tax exemption, including any consolidated, combined, unitary, joint or
other return filed by any person that properly includes the income, deductions
or other tax information concerning the Seller, except that to the extent that
Seller is representing as to actions taken or examinations made by governmental
authorities within the past three years in respect of Tax Returns, such
representation is made with respect to actions taken by any and all governmental
entities, and is not limited to actions taken by Federal, State of Iowa, Ottumwa
or Wapello County Authorities.
5.31 Recent Dividends and Other Distributions. Except as set forth on
Schedule 5.31, there has been no dividend or other distribution of assets or
securities whether consisting or
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money, property or any other thing of value, declared, issued or paid to or for
the benefit of the Seller's Shareholders subsequent to the date of the most
recent Financial Statements described in Section 5.10.
5.32 Inventory. Except as set forth in Exhibit 5.32, all of the Inventory
and is of a quantity and quality usable in the ordinary course of business.
5.33 Purchase and Sale Obligations. All purchases, sales and orders and
all other commitments for purchases, sales and orders made by or on behalf of
the Seller have been made in the usual and ordinary course of its business in
accordance with normal practices. On the Closing Date, the Seller shall deliver
to Buyer a schedule of all such uncompleted purchase and sale orders and other
commitments with respect to any of the Seller's obligations as of a date not
earlier than ten (10) days prior to the Closing.
5.34 Other Information. To the best knowledge of the Seller, none of the
information which has been or may be furnished by the Seller or any of its
representatives to Buyer or any of its representatives in connection with the
transactions contemplated hereby, which is contained in this Agreement
(including the Annexes and Exhibits hereto) or any Ancillary Document or any
certificate or instrument delivered or to be delivered by or on behalf of the
Seller in connection with the transactions contemplated hereby, does or will
contain any untrue statement of a material fact or omit a material fact
necessary to make the information contained herein or therein not misleading.
5.35 Accounts Receivable and Accounts Payable. All of the accounts
receivable of the Seller are actual and bona fide accounts receivable
representing obligations for the total dollar amount thereof showing on the
books of the Seller, and the accounts receivable are not and will not be subject
to any recoupments, set-offs or counter-claims. Except as otherwise reflected in
the Financial Statements, such accounts receivable are collectible in the
ordinary course of business. Exhibit 5.35 sets forth a true and correct aged
(30-60-90 days) list of all accounts receivable and accounts payable of the
Seller as of the end of the calendar month preceding the date hereof.
5.36 Knowledge of the Seller and the Shareholders. As to each
representation and warranty made by the Seller and the Shareholders under this
Article 5, any fact or information known to Xxx Xxxxx, Xxxxxx Xxxxx or Xxxxxxx
Xxxxx, or notice received by the Seller or its shareholders, shall be imputed to
the Seller as if such fact or information were known to the Seller or such
notice received by the Seller. If a representation or warranty is made to "the
knowledge of Seller" it is likewise limited to the knowledge of Xxx Xxxxx,
Xxxxxx Xxxxx or Xxxxxxx Xxxxx. Buyer acknowledges that Xxxxxxx Xxxxx is not
actively engaged in the Business and has limited knowledge of its activities.
5.37 Brokers and Finders. Except for Colorado Business Consultants, whose
fees shall be paid by the Seller, neither the Seller nor any of its officers,
directors, shareholders or employees have employed any broker or finder or
incurred any liability for any brokerage fees,
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commissions or finders' fees in connection with the transactions contemplated by
this Agreement and the Seller agrees to indemnify and hold Buyer harmless from
any liability, loss, cost, claim and/or demand that Colorado Business
Consultants or any other broker or finder may have in connection with this
transaction as a result of actions taken by or agreements made by the Seller or
its officers, directors, shareholders or employees.
5.38 Personnel. Exhibit 5.38 sets forth a true and complete list of:
(a) the names and current salaries of all directors and elected and
appointed officers of the Seller;
(b) the wage rates for non-salaried and nonexecutive salaried
employees of the Seller by classification; and
(c) if any, all non-employee salespersons within the United States
of the Seller and as to each salesperson, the details of his or her
compensation arrangement with the Seller including assigned customers,
territory and commission rates.
5.39 Bank Accounts. Exhibit 5.39 sets forth the names and locations of all
banks, trust companies, savings and loan associations and other financial
institutions at which the Seller maintains safe deposit boxes, lock boxes or
accounts of any nature.
5.40 Long-Term Debt. Long-Term Debt (as defined on Annex D) measured as of
the Closing Date does not exceed $1,000,000.
6. MANAGEMENT OF THE SELLER AFTER CLOSING.
(a) For a period of five (5) years from the Closing Date, the Al-Xxx
Business shall be managed on a day-to-day basis by an Operating Committee
comprised of three persons, two of which shall be appointed by the Seller
and one of which shall be appointed by Buyer.
(b) In the event Buyer overrides the Operating Committee on any
material matter, the Seller may, at its option, convert its remaining
entitlement to Earnout compensation pursuant to Section 3.1.3 hereof, if
any, to a 3-year promissory note payable to the Seller in the amount of
$3,000,000, less all Earn Out payments previously made pursuant to Section
3.1.3 hereof, which note shall bear interest at the rate of 10% per year.
Payments will be based on a 3-year amortization schedule with principal
and interest due and payable annually.
(c) In the event that Xxxxxx Xxxxx is required by Buyer to devote
more than 10% of his working time to performing services other than for
the Al-Xxx Business, an
22
appropriate portion of his salary, compensation expenses and business
expenses shall be paid from sources other than the Al-Xxx Business.
(d) In addition to such bonuses as are regularly paid to certain
employees of the Company (including, but not limited to Xxxxx Xxxxxxxxxx,
Leaf Xxxxxx and Xxxxxxx Xxxxxxx), the Operating Committee shall have the
discretion to distribute up to 5% of EBT (earnings before tax) generated
and attributed to the Al-Xxx Business each year as a bonus pool. Any such
distribution shall reduce (on a dollar for dollar basis) EBITDA for
purposes of calculating same pursuant to Section 3.1.3 hereof.
7. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller as follows, each of
which representation and warranty shall be true as of the Closing Date:
7.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Buyer has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.
7.2 Authorization of Agreement. Buyer has full corporate power and
authority and has taken all corporate action necessary to enter into this
Agreement and to carry out the transactions contemplated hereby. The Board of
Directors of Buyer have taken all action required by law, its Certificate of
Incorporation, By-Laws or otherwise to be taken to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Buyer and is a
legal, valid and binding obligation of Buyer enforceable against it in
accordance with its terms except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
7.3 Litigation. To the best knowledge of Buyer, there are no actions,
suits, proceedings or governmental investigations or inquiries pending or
threatened against it which, in its reasonable judgment, would prevent the
consummation of the transactions contemplated hereby.
7.4 Brokers and Finders. Except for Redstone Capital, whose fees shall be
paid by Buyer, neither Buyer nor any of its officers, directors or employees has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement and Buyer agrees to indemnify and hold the Company harmless from
any liability, loss, cost, claim and/or demand that
23
Redstone Capital or any other broker or finder may have in connection with this
transaction as a result of actions taken by or agreements made by Buyer or its
officers, directors or employees.
7.5 Effect of Agreement. The execution, delivery and performance of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby, will not, with or without the giving of notice and the
lapse of time, or both, (a) violate any provision of law, statute, rule,
regulation or executive order to which Buyer is subject; (b) violate any
judgment, order, writ or decree of any court applicable to Buyer; or (c) except
for liens previously granted or to be granted at closing to Buyer's lenders,
result in the breach of or conflict with any term, covenant, condition or
provision of, result in the modification or termination of, constitute a default
under, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the Assets pursuant to any corporate charter,
by-law, commitment, contract or other agreement or instrument, to which the
Buyer is a party or by which any of the assets of Buyer are or may be bound or
affected or from which the Buyer derives benefit, which breach, conflict,
modification, termination, default or encumbrance described in this clause (c)
would be material to the Business or any of the Assets.
7.6 Restrictions. The Buyer is not party to any contract, commitment or
agreement, or bound or affected by, any other restriction, or any order,
judgment, decree, law, statute, ordinance, rule, regulation or other restriction
of any kind or character, which would, individually or in the aggregate,
materially adversely affect the Business or any of the Assets.
7.7 Governmental and Other Consents. Except for such governmental consents
or permits which are necessary for it to operate the Business, no consent,
authorization or approval of, or exemption by, any governmental or public body
or authority is required in connection with the execution, delivery and
performance by the Buyer of this Agreement of any of the instruments or
agreements herein referred to, or the taking of any action herein contemplated.
8. PRE-CLOSING COVENANTS OF SELLER
The Shareholders and the Seller hereby covenant and agree with Buyer that
they shall do, or cause to be done, the following, between the date of this
Agreement and the Closing Date or date of termination of this Agreement, as the
case may be:
8.1 Conduct of Business Until Closing Date. Except as permitted or
required hereby or as set forth on Exhibit 8.1, the Seller shall:
8.1.1 use its best efforts to operate the Business only in the
usual, regular and ordinary manner, and (a) preserve the present business
organization of the Seller intact, (b) keep available the services of the
present employees of the Seller, and (c) preserve the current business
relationships of the Seller with customers, clients, suppliers, distributors and
others having business dealings with it;
24
8.1.2 bear the risk of loss or damage to the Assets on and prior to
the Closing Date where such risk of loss is not the legal obligation of another,
and maintain all properties necessary for the conduct of the Business, whether
owned or leased;
8.1.3 maintain the books, records and accounts of the Seller in the
usual, regular and ordinary manner, on the basis consistent with prior periods;
8.1.4 use its best efforts to duly comply with all laws, rules and
regulations applicable to the Seller and to the conduct of the Business;
8.1.5 use its best efforts to perform all of the obligations of the
Seller without default, unless such default is of no significance to the Seller
and could have no adverse impact on the Seller, its Assets or the Business;
8.1.6 neither (a) amend the Seller's Articles of Incorporation or
By-Laws; (b) merge with or into, consolidate, amalgamate or otherwise combine
with, any other entity; nor (c) change the character of the Business;
8.1.7 neither (a) encumber, mortgage, or voluntarily subject to lien
any of the existing Assets; (b) transfer, sell, lease, license or otherwise
dispose of any of, or any part of, the Assets (other than in the ordinary course
of business); (c) convey, transfer or acquire any material Asset or property to,
for or on behalf of the Seller other than in the ordinary course of business;
(d) enter into any new arrangement, agreement or undertaking, with respect to
any of the employees relating to the payment of bonus, severance, profit-sharing
or special compensation or any increase in the compensation payable or to become
payable to any such employee; nor (e) except for borrowings under the Revolving
Credit Line and otherwise in the ordinary course of business, incur any material
fixed or contingent obligation, including, without limitation incur any
indebtedness for borrowed money, or enter into any other arrangement having the
economic effect of any of the foregoing, or enter into any agreement,
commitment, contract or other transaction or arrangement relating to the
Business or the Assets;
8.1.8 not make any distributions or dividends of Assets or
securities, nor any changes to the capital structure of the Seller; not agree to
make or make any sales of its securities provided, however, that notwithstanding
anything contained in this Agreement, the Seller may make appropriate
distributions for taxes payable by its shareholders on the (i) income of the
Business through the Closing Date attributable to them by virtue of their status
as shareholders of the Seller and (ii) their income received from the Seller in
the ordinary course of business;
8.1.9 neither modify, change nor terminate any of its material
obligations other than in the ordinary course of business, nor grant any power
of attorney with respect to the Business or the Assets; and
25
8.1.10 anything in this Section 8.1 notwithstanding, the Seller
shall have the right in its discretion to make all decisions and expenditures
regarding the new plant and equipment therefor required to keep that project on
schedule.
8.2 Approvals, Consents and Further Assurances. The Shareholders shall use
and shall cause the Seller to use its best efforts to obtain in writing as
promptly as possible all approvals, consents and waivers required in order to
effectuate the transactions contemplated hereby, and shall deliver to Buyer
copies, reasonably satisfactory in form and substance to counsel to Buyer, of
such approvals and consents. The Shareholders shall also use and cause the
Seller to use its best efforts to ensure that the other conditions set forth in
Article 11 hereof are satisfied by the Closing Date.
8.3 Access to Properties, Records, Suppliers, Agents, Etc. Seller shall
give to Buyer and to Buyer's counsel, financiers, accountants and other
representatives access to and copies of such of the Seller's properties,
personnel, books, tax returns, contracts, commitments and records as relate to
the Assets, suppliers, agents, distributors, etc. or other aspects of the
Business; and shall furnish to Buyer and such representatives all such
additional instruments, contracts, documents or other written obligations
(certified by Seller, if so requested) and financial and other information
concerning such business, Assets, suppliers, agents, etc. as Buyer or its
representatives may from time to time request.
8.4 Advice of Changes. If the Seller becomes aware of any fact or facts
which, if known at the date hereof, would have been required to be set forth or
disclosed in or pursuant to this Agreement or which, individually or in the
aggregate, could materially adversely affect the Business or Assets, Seller
shall promptly advise Buyer in writing thereof.
8.5 Conduct. Except as permitted or required hereby or as Buyer may
otherwise consent in writing, the Seller shall not enter into any transaction or
take any action which would result in any of the representations and warranties
of the Seller contained in this Agreement or in any Ancillary Document not being
true and correct as of the time immediately after such transaction has been
entered into or such event has occurred and on the Closing Date.
8.6 Employee Benefit Plans. Except for payment of the Seller's current
obligations, the Seller shall not incur any additional obligations or
liabilities, including (i) all liabilities for all claims incurred, whether or
not reported, on or before the Closing Date under all "employee welfare benefit
plans," within the meaning of Section 3(1) of ERISA, (ii) all liabilities or
obligations for vacations or sick leave or retiree, medical or life benefits to
employees or former employees of the Seller, and (iii) all liabilities of the
Seller for all benefits accrued under any "employee pension benefit plan,"
within the meaning of Section 3(2) of ERISA under each Employee Benefit Plan.
8.7 Satisfaction of Conditions by Seller. The Shareholders and the Seller
hereby covenant and agree with Buyer that, between the date of this Agreement
and the Closing Date
26
or date of termination of this Agreement, as the case may be, they shall use
their best efforts to assure that the conditions set forth in Article 11 hereof
are satisfied by the Closing Date.
9. PRE-CLOSING COVENANTS OF BUYER
9.1 Satisfaction of Conditions by Buyer. Buyer hereby covenants and agrees
with the Seller that, between the date of this Agreement and the Closing Date or
date of termination of this Agreement, as the case may be, Buyer shall use its
best efforts to cause the conditions set forth in Article 12 hereof to be
satisfied by the Closing Date.
9.2 Environmental Audit. Buyer has conducted or prior to Closing will
conduct an environmental audit (the "Environmental Audit") of the Seller and its
properties, assets and operations. Buyer will deliver prior to Closing a copy of
the Environmental Audit report to the Seller and will otherwise keep the
Environmental Audit, its terms and any related documents strictly confidential.
10. POST-CLOSING COVENANTS
10.1 Further Assurances. After the Closing hereunder, the Seller, at the
request of Buyer, shall execute, acknowledge and deliver to Buyer, without
further consideration, all such further assignments, conveyances, endorsements,
deeds, powers of attorney, consents and other documents (together with the
instruments referred to in Section 1.3, referred to herein collectively as the
"Ancillary Documents") and take such other action as Buyer may reasonably
request (a) to transfer to and fully vest in Buyer, and protect Buyer's right,
title and interest in and to all of the Seller's right, title and interest in
and to the Assets, and (b) otherwise to consummate the transactions contemplated
by this Agreement.
10.2 Personal Guarantees. After the Closing the Buyer shall cooperate with
the Seller and the Shareholders and take such steps as are reasonably requested
to obtain for the Shareholders (and anyone else who may have guaranteed
obligations of the Seller) a release from any and all personal guarantees which
the Shareholders may have given in respect of the obligations of the Seller.
10.3 Product Liability Insurance. Subsequent to the Closing, Buyer will
maintain or cause to be maintained product liability insurance covering the
operations conducted with the Assets and shall cause the officers, directors and
shareholders of Seller to be named as additional insureds under such policies.
Buyer's obligation under this paragraph shall end on the twentieth anniversary
of the Closing.
10.4 Long Term Debt. Immediately after theClosing Buyer will pay-off the
Long Term Debt.
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11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligations of Buyer pursuant to this Agreement are subject to the
satisfaction at the Closing of each of the following conditions, any or all of
which conditions may be waived by Buyer in its sole discretion:
11.1 Accuracy of Representations and Warranties. All representations and
warranties made by the Seller (contained in this Agreement, any Exhibit or
Schedule hereto, or any certificate or instrument delivered to Buyer or its
representatives by the Seller or its representatives) shall be true on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date (i.e., with respect to representations that a state of facts exists
on or as of the date hereof, it is a condition that such state of facts exists
on or as of the Closing Date; and with respect to a representation that a state
of facts has or has not changed between a date prior to the date hereof and the
date hereof, it is a condition that such state of facts has or has not changed
between such prior date and the Closing Date), except as affected by
transactions contemplated hereby or by the operations of the Business in the
ordinary course, provided that such discrepancies resulting from the operation
of the business in the ordinary course will not be material to the future
prospects of the Business.
11.2 Performance of Agreements. The Seller shall have performed and
complied with all covenants, obligations and agreements to be performed or
complied with by it on or before the Closing Date pursuant to this Agreement.
11.3 Litigation, Etc.
11.3.1 Except as set forth on Exhibit 5.19, no claim, action, suit,
proceeding, arbitration, investigation or hearing or note of hearing shall be
pending or threatened against or affecting the Seller or the Assets, which (a)
might result either in an action or enjoin or prevent the consummation of the
transactions contemplated by this Agreement; (b) would materially adversely
affect the Business or the ability of Buyer to consummate the transactions
contemplated by this Agreement or to own the Assets or to operate the Business.
11.3.2 To the knowledge of the Seller, the Seller shall not be in
violation of any law, statute, ordinance, rule, regulation or executive order,
the enforcement of which would, individually or in the aggregate, materially
adversely affect the Assets or the Business or which would individually or in
the aggregate, materially adversely affect the ability of Buyer to consummate
the transactions contemplated by this Agreement or to own the Assets or to
operate the Business.
11.3.3 No law, regulation or decree shall have been proposed,
adopted or promulgated, or have become effective, the enforcement of which would
materially adversely affect the ability of Buyer to consummate the transactions
contemplated by this Agreement or to own the Assets or to operate the Business.
28
11.4 Approvals and Consents. The Seller shall have obtained, and Buyer
shall have received copies of, all of the approvals and consents referred to in
Section 8.2, each of which approvals and consents shall be in full force and
effect and reasonably satisfactory in form and substance to Buyer and its
counsel.
11.5 Officer's Certificate. Buyer shall have received an accurate
certificate of an officer of the Company, dated the Closing Date, satisfactory
in form and substance to Buyer and its counsel, certifying (a) as to the
fulfillment of the matters specified in Sections 11.1 through 11.3, (b) any
changes that Buyer is required to be notified of pursuant to Section 8.4, or
that previously had not been disclosed to Buyer and stating, among other things,
that he is not aware of any material omissions or facts that would materially
alter any of the Financial Statements, nor is he aware of any facts or factors
that are reasonably likely to occur, or if known to other parties, that could
have a material adverse effect on the financial condition, business, operations,
Assets, liabilities, management or prospects of the Business.
11.6 Good Standing Certificate. Buyer shall have received a certificate of
the office of the Secretary of State of Iowa, dated within 90 days before the
Closing Date, certifying that the records of such state regarding the Company
reflect neither a certificate of dissolution, a court order declaring
dissolution, a merger or consolidation which terminated its existence, nor
suspension of its corporate or partnership powers, rights and privileges, and
that in accordance with the records of such state, such corporation is
authorized to exercise all of its corporate powers, rights and privileges in
such state. Seller will use its best efforts to provide such certificate before
the Closing Date. Alternatively, Buyer shall have received proof before the
Closing Date that the Company is currently existing.
11.7 No Material Adverse Change. There shall have been no material adverse
changes in the financial condition, business, operations, assets, liabilities,
management or prospects of the Seller.
11.8 Actions, Proceedings, Etc. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
shall have been completed.
11.9 Opinion of Counsel to the Seller. Buyer shall have received an
opinion of counsel to the Seller and the Shareholders, addressed to Buyer, dated
the Closing Date, to the effect set forth in, and substantially in the form, of
Exhibit 11.9.
11.10 Licenses, Permits, Consents, Etc. Buyer shall have received
evidence, in form and substance reasonably satisfactory to counsel for Buyer,
that such licenses, permits, consents, approvals, authorizations or orders of
governmental authorities which to the knowledge of Buyer are necessary to the
consummation of the transactions contemplated by this Agreement and the
continued operation of the Business have been obtained.
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11.11 Documentation of Rights. The Seller shall have delivered to Buyer
true and complete copies of all of the documentation held by the Seller relating
to each of the Rights.
11.12 Employment Agreements. Each of Xxx Xxxxx, Xxxxxx Xxxxx and Xxxxxxx
Xxxxx shall have executed and delivered an Employment Agreement with Buyer in
substantially the form attached hereto. Xxx Xxxxx'x Employment Agreement shall
recite, among other things, that Xx. Xxxxx shall be compensated at an annual
rate of $100,000, payable in monthly increments. Xxxxxx Xxxxx'x Employment
Agreement shall have a term of three (3) years and shall recite, among other
things, that Xx. Xxxxx shall receive a base salary at $180,000 per year, with
bonuses and raises to be determined by the Board of Directors. Xx. Xxxxx'x
Employment Agreement shall provide, among other things, that he shall receive
annual compensation for a term of three (3) years no less than $150,000 per
annum plus 1% of sales for which he is responsible.
11.13 Title Documents. Buyer shall have received bills of sale,
endorsements, assignments and other instruments of transfer as will effect the
assignment and delivery of the Assets free and clear of all liens and
encumbrances all duly executed and acknowledged by Seller in form and substance
satisfactory to Buyer and in recordable form to the extent appropriate.
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
The obligations of the Seller under this Agreement are subject to the
satisfaction at the Closing of each of the following conditions.
12.1 Accuracy of Representations and Warranties. All representations and
warranties by Buyer in this Agreement shall be true as of the Closing Date with
the same force and effect as though made on and as of the Closing Date.
12.2 Performance of Agreements. Buyer shall have performed and complied in
all material respects with all covenants, obligations and agreements to be
performed or complied with by it on or before the Closing Date pursuant to this
Agreement.
12.3 No Injunction. No third party injunction, stay or restraining order
shall be in effect prohibiting the consummation of the transactions contemplated
hereby.
12.4 Opinion of Counsel to Buyer. The Seller shall have received an
opinion of counsel to Buyer, addressed to the Seller, dated as of the Closing
Date, to the effect set forth in, and substantially in the form, of Exhibit
12.4.
12.5 Employment Agreements. The Buyer shall have executed and delivered
the Xxx Xxxxx, the Xxxxxx Xxxxx and Xxxxxxx Xxxxx Employment Agreements and
shall have caused to be issued to Xxxxxx Xxxxx and Xxxxxxx Xxxxx an option to
purchase 30,000 shares of publicly
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traded common stock exercisable at a price equal to the average of the closing
price for the ten (10) trading days ending the second trading day prior to the
Closing Date for a period of four years commencing on the first anniversary of
the Closing.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
13.1 Survival. The representations and warranties set forth in this
Agreement, in any Exhibit or Schedule hereto and in any certificate or
instrument delivered in connection herewith shall survive for a period of two
(2) years after the Closing Date and shall thereupon terminate and expire and
shall be of no force or effect thereafter, except (i) with respect to any claim,
written notice of which shall have been delivered to Buyer or the Seller or the
Company, as the case may be, within such two (2) year period, such claim shall
survive the termination of such period and shall survive for as long as such
claim is unsettled, and (ii) with respect to any litigation which shall have
been commenced to resolve such claim on or prior to such date. Notwithstanding
the foregoing, with respect to taxes, the period shall be the applicable statute
of limitations, and with respect to environmental claims, the period shall be
four (4) years.
Further, with respect to environmental conditions existing as of the
Closing Date and first discovered by Buyer after the fourth anniversary of the
Closing Date, Buyer shall have no claim against Seller in respect thereof on
account of this Agreement and shall not commence an action against Seller for
contribution pursuant to such statutory remedies as may be available.
13.2 Indemnification by the Shareholders and the Company. Subject to the
limitations set forth in Sections 13.1 and 13.6 the Shareholders and the Company
hereby covenant and agree with Buyer that, regardless of any investigation made
at any time by or on behalf of Buyer or any information Buyer may have and,
regardless of the Closing hereunder, the Shareholders and the Company, jointly
and severally, shall indemnify Buyer and its directors, officers, employees and
Affiliates, and each of their successors and assigns (individually, a "Buyer
Indemnified Party"), and hold them harmless from, against and in respect of any
and all costs, losses, claims, liabilities, fines, penalties, damages and
expenses (including interest which may be imposed in connection therewith, court
costs and reasonable fees and disbursements of counsel) incurred by any of them
resulting from any misrepresentation, breach of warranty or nonfulfillment of
any agreement, covenant or obligation by the Shareholders or the Company made in
this Agreement (including without limitation any Exhibit hereto and any
certificate or instrument delivered in connection herewith).
In determining whether the Buyer has any obligation under this Section
13.3 and, if so, the extent thereof, there shall be deducted from any loss the
proceeds received from any insurance in respect of the incident giving rise to
such loss.
13.3 Indemnification by Buyer. Subject to the limitations set forth in
Section 13.1, Buyer hereby covenants and agrees with the Shareholders and the
Company that regardless of any investigation made at any time by or on behalf of
Shareholders or the Company or any information they may have and, regardless of
the Closing hereunder, Buyer shall indemnify the
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Shareholders and the Company and the officers, directors and Affiliates of the
Company ("Seller Indemnified Parties") and hold them harmless from, against and
in respect of any and all costs, losses, claims, liabilities, fines, penalties,
damages and expenses (including interest which may be imposed in connection
therewith and court costs and reasonable fees and disbursements of counsel)
incurred by any of them resulting, from any misrepresentation, breach of
warranty or the nonfulfillment of any agreement, covenant or obligation by Buyer
made in this Agreement (including without limitation any Exhibit hereto and any
certificate or instrument delivered in connection herewith). Further, Buyer
agrees to indemnify the Seller Indemnified Parties and hold them harmless from
and against any and all losses, claims, liabilities, fines, penalties, damages
and expenses (including interest which may be imposed in connection therewith
and court costs and reasonable fees and disbursements of counsel) incurred by
any of them resulting from or arising out of any environmental claim first
arising more that four years after the Closing Date.
In determining whether the Buyer has any obligation under this Section
13.2 and, if so, the extent thereof, there shall be deducted from any loss the
proceeds received from any insurance in respect of the incident giving rise to
such loss.
13.4 Right to Defend. If the facts giving rise to any such indemnification
shall involve any actual claim or demand by any third party against a Buyer
Indemnified Party or Seller Indemnified Parties (referred to hereinafter as an
"Indemnified Party"), the indemnifying parties shall be entitled to notice of
and entitled (without prejudice to the right of any Indemnified Party to
participate at its own expense through counsel of its own choosing) to defend or
prosecute such claim at their expense and through counsel of their own choosing
if they give written notice of their intention to do so no later than the time
by which the interest of the Indemnified Party would be materially prejudiced as
a result of its failure to have received such notice; provided, however, that if
the defendants in any action shall include both the indemnifying parties and an
Indemnified Party, and the Indemnified Party shall have reasonably concluded
that counsel selected by the indemnifying parties has a conflict of interest
because of the availability of different or additional defenses to the
Indemnified Party, the Indemnified Party shall cooperate fully in the defense of
such claim and shall make available to the indemnifying parties pertinent
information under its control relating thereto, but shall be entitled to be
reimbursed, as provided in this Article 13, for all costs and expense incurred
by it in connection therewith.
13.5 Subrogation. If the Indemnified Party receives payment or other
indemnification from the indemnifying party hereunder, the indemnifying party
shall be subrogated to the extent of such payment or indemnification to all
rights in respect of the subject matter of such claim to which the Indemnified
Party may be entitled, to institute appropriate action for the recovery thereof,
and the Indemnified Party agrees reasonably to assist and cooperate with the
indemnifying party at no expense to the Indemnified Party in enforcing such
rights.
13.6 Limits on Liability. The Shareholders and the Company shall have no
liability for indemnification or otherwise be liable for a breach of a
representation or warranty contained herein unless and until the aggregate gross
amount for which indemnification is sought exceeds $100,000 (the "Seller's
Basket"), in which event Seller and the Shareholders shall only be
32
responsible for losses in excess of $100,000, except that the Seller's Basket
shall not be applicable with respect to a breach of Sections 5.28, 5.29 and
5.37. The maximum aggregate liability of the Shareholders and the Company
hereunder shall not exceed all amounts paid by Buyer pursuant to Article 3
hereof.
14. MISCELLANEOUS
14.1 Expenses. Except as and to the extent otherwise provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, the Seller, the Shareholders and Buyer shall each pay their own
respective expenses and the fees and expenses of their respective counsel and
other experts.
14.2 Termination Events. Subject to the provisions of this Section 14.2,
this Agreement may, by written notice given at or prior to the Closing Date in
the manner hereinafter provided, be terminated:
(a) by either Buyer or the Seller if a material default or breach
shall be made by the other party hereto with respect to the due and timely
performance of any of its covenants and agreements contained herein, or with
respect to the due compliance with any of its representations, warranties or
covenants, and such default cannot be cured prior to the Closing Date and has
not been waived;
(b) (i) by Buyer if all of the conditions set forth in Section 11
shall not have been satisfied on or before Closing Date, other than through
failure of Buyer to fully comply with its obligations hereunder, and shall not
have been waived by Buyer on or before such date; or
(ii) by the Seller, if all of the conditions set forth in
Section 12 shall not have been satisfied on or before the Closing Date, other
than through failure of the Seller or the Shareholders to fully comply with its
obligations hereunder, and shall not have been waived by the Seller on or before
such date.
(c) by mutual consent of Buyer and the Seller; or
(d) by either Buyer or the Seller if the Closing shall not have
occurred, other than through failure of any such party to fulfill its
obligations hereunder, on or before March 15, 1999 or such later date as may be
agreed upon by the parties.
Each party's right of termination hereunder is in addition to any
other rights it may have hereunder or otherwise and the exercise of a right of
termination shall not be an election of remedies.
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14.3 Effect of Termination.
(a) If this Agreement is terminated by the Seller pursuant to
Section 14.2(a), 14.2(b)(ii) or 14.2(d) and the Seller is not in violation of or
has not failed to fulfill any of its obligations hereunder, the Seller shall be
paid the Deposit. Upon receipt of the Deposit the Seller shall have no further
claim against Buyer in respect of this Agreement.
(b) If this Agreement is terminated by Buyer pursuant to Section
14.2(a), 14.2(b)(i), or 14.2(d), and Buyer is not in violation of or has not
failed to fulfill any of its obligations hereunder, then, in addition to the
return of the Deposit, Buyer shall have the right to seek such remedies as may
be available to it at law or in equity, including the right to seek specific
performance.
14.4 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein or in any other documents. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach. Any party
hereto may, at or before the Closing, waive any conditions to its obligations
hereunder which are not fulfilled.
14.5 Binding Effect; Benefits. This Agreement shall inure to the benefit
of the parties hereto and shall be binding upon the parties hereto and their
respective successors and assigns. Except as otherwise set forth herein, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
14.6 Assignment. No party to this Agreement may assign its rights or
obligations hereunder without the prior written consent of all of the other
parties; provided, however, that Buyer may assign this Agreement, without the
consent of the Shareholders or the Company to (i) an Affiliate Company whose
shares are publicly traded, or (ii) any third party entity in which Buyer holds
a 100% equity interest.
14.7 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
upon receipt when transmitted by facsimile or telex or after dispatch by
certified or registered first class mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
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If to Buyer, to:
Xx. Xxxxxxx Xxxxxx
Standard Automotive Corporation
000 Xxxx Xxxxxx
00xx Xxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
With a copy to:
Xxxxxxx X. XxXxxx, Esq.
Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Ballon LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: 000-000-0000
If to the Seller, to:
Xxxxxxx Xxxxx
With a copy to:
Xxxxxx Xxxxx
With a copy to:
Xxxxxxx X. Xxxxx, Esq.
0000 Xxxx Xxxxxx
Xxxxx 000
Xxxx, Xxxxxxxxxx 00000
Fax:
14.8 Entire Agreement. This Agreement (including the Exhibits hereto) and
the Ancillary Documents constitute the entire agreement and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof and supersede all prior agreements,
representations, warranties, statements, promises and understandings, whether
written or oral, with respect to the subject matter hereof. No party hereto
shall be bound by or charged with any written or oral arguments,
representations, warranties, statements, promises or understandings no
specifically set forth in this Agreement or in any Exhibit hereto or any
Ancillary Documents, or in certificates and instruments to be delivered pursuant
hereto on or before the Closing.
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14.9 Headings; Certain Terms. The section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "including" means "including, but
not limited to" unless otherwise specified; the word "or" means "and/or," and
the word "person" means and refers to any individual, corporation, trust,
partnership, joint venture, government or governmental authority, or any other
entity; and the plural and singular forms are used interchangeably.
14.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed, shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
14.11 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Illinois, without giving effect to the choice of law
principles thereof.
14.12 Severability. If any term or provision of this Agreement shall to
any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the agreement shall be
valid and enforced to the fullest extent permitted by law.
14.13 Amendments. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by the party or parties against
whom enforcement of any such modification or amendment is sought.
14.14 Transaction Taxes. The Buyer and Seller shall each pay one-half of
any and all taxes imposed upon the sale of the Assets and transfer of ownership
thereof.
14.15 Section References. All references contained in this Agreement to
any section number are references to sections of this Agreement unless otherwise
specifically stated.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement, or have
caused this Agreement to be signed in their respective names by an officer
thereunder duly authorized, on the date first above written.
/s/ Xxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxx
A shareholder
/s/ Xxxxxxx Xxxxx
--------------------------------
Xxxxxxx Xxxxx
A shareholder
AL-XXX, INC
By: /s/ Xxxxxx Xxxxx
-----------------------------
Name: Xxxxxx Xxxxx
Title:
STANDARD AUTOMOTIVE CORPORATION
By: /s/ Xxxxxxx Xxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxx
Title: Secretary
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