SECOND AMENDMENT
TO
STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT, dated as of December 13, 1995, by and between
Bridgewater Resources Corp. ("Seller"), the sole shareholder of Peerless Chain
Company (the "Company"), and Discus Acquisition Corporation ("Buyer") amends
that certain Stock Purchase Agreement dated November 22, 1995 by and between
Seller and Buyer for the sale of the outstanding capital stock of the Company
(as amended by Amendment dated December 1, 1995, the "Agreement"). Except as
otherwise provided herein, all capitalized terms herein are as defined in the
Agreement.
IN CONSIDERATION of the mutual promises and covenants contained herein,
the parties agree to amend the Agreement as follows:
1. Section 1.3 is hereby amended to be as follows:
1.3 Payment of Purchase Price. One Million Two Hundred
Thousand Dollars ($1,200,000) of the Purchase Price will be paid in
accordance with and pursuant to a Stock Purchase Note in the form of
Exhibit G hereto to be issued and delivered by Buyer to Seller at
Closing (the "Stock Purchase Note"). The remainder of the Base Price
will be paid at Closing by wire transfer of immediately available funds
to accounts designated by Seller prior to Closing. In the event of any
adjustment to the Purchase Price pursuant to Section 1.2(a) or (b),
immediately upon determination of such adjustment Seller will promptly
reimburse Buyer the amount of such adjustment in immediately available
funds. In the event of any delay in the payment of such adjustment,
such amount will bear interest from the due date until paid in full at
the default interest rate under the Note (as defined in Section 5.5).
2. The following Section 1.4 is hereby added:
1.4 Warrant. In addition to the Purchase Price and in
connection with the Stock Purchase Note, Buyer will issue and deliver
to Seller at Closing a Warrant for Purchase of Securities in the form
of Exhibit H hereto ("Warrant").
3. The date under Sections 2.1 and 11.1(b) is hereby amended to
December 13, 1995.
4. Section 2.3 is hereby amended as follows:
(a) The words ", the Stock Purchase Note and the Warrant" are
hereby added after the word "Agreement" in the third line of
Section 2.3(c);
(b) Sections 2.3(c) through (i) are hereby relettered (e)
through (k);
(c) New Sections 2.3(c) and (d) are hereby added as follows:
(c) the Stock Purchase Note duly executed;
(d) the Warrant duly executed;
5. The first sentence of Section 3.2 is hereby amended to be as
follows:
The authorized capital stock of the Company consists of one thousand
(1,000) shares of common stock, par value $.01 per share, of which ten
(10) shares are issued and outstanding, all of which are beneficially
owned by Seller and will be redeemed pursuant to Section 5.5 or
transferred at Closing to Buyer hereunder, in either case free and
clear of all mortgages, pledges, liens, security interests,
encumbrances, restrictions, adverse claims or charges or third party
rights of any kind ("Encumbrances").
6. Section 4.3 is hereby amended to be as follows:
4.3 Due Authorization, Execution and Delivery by Buyer; Effect
of Agreement. The execution, delivery and performance by Buyer of this
Agreement, the Note, the Stock Purchase Note and the Warrant and the
consummation by Buyer of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on
the part of Buyer. This Agreement has been duly and validly executed
and delivered by Buyer and constitutes, and the Note, the Stock
Purchase Note and the Warrant when duly and validly executed and
delivered by Buyer will constitute, the legal, valid and binding
obligations of Buyer, enforceable against it in accordance with their
terms, except to the extent that such enforceability (a) may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally, and (b) is subject to
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Neither the
execution, delivery and performance of this Agreement, the Note, the
Stock Purchase Note or the Warrant nor the consummation of the
transactions contemplated herein or therein will: (i) violate or be in
conflict with any provision of the articles of incorporation or bylaws
of Buyer; or (ii) be in conflict with, or constitute a default, however
defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to any right
of termination, cancellation, imposition of fees or penalties under,
any debt, instrument, commitment, contract or other agreement or
obligation to which Buyer is a party or by which Buyer or any of its
properties or assets is or may be bound or result in the creation or
imposition of any Encumbrance upon any property or assets of Buyer; or
(iii) violate any provision of law, rule or regulation to which Buyer
is subject or any order, judgment or decree applicable to Buyer.
7. The following Section 4.9 is hereby added:
4.9 Capitalization. The authorized capital stock of Buyer
consists of ten million (10,000,000) shares of common stock, no par
value, of which four million nine hundred sixty-six thousand six
hundred twenty-nine (4,966,629) shares will be issued and outstanding
on the Closing Date, all of which will be on the Closing Date duly
authorized, validly issued, fully paid, nonassessable and without and
not issued in violation of preemptive rights, assuming clearance of
subscription payments received but not cleared as of the Closing Date.
There are outstanding no securities convertible into, exchangeable for
or carrying the right to acquire, equity securities of Buyer, or
subscriptions, warrants, options, rights or other arrangements or
commitments obligating Buyer to issue or acquire any of its equity
securities or any ownership interest therein, other than with respect
to the Warrant, and except as set forth on Exhibit I hereto.
8. Section 5.5 is hereby amended by replacing the fraction
"17,750/23,750" with the words "7.5 shares."
9. Section 7.7 is hereby amended to add the following sentence to
the end:
Any payment by the Company against the Ten Thousand Dollar ($10,000)
invoice claimed by Computer Associates International, Inc. to be owing
by the Company made to obtain consent of such party to assignment of
Seller's license with such party to the Company will be subject to
Seller's fifty percent (50%) contribution obligation above.
10. The following Section 7.8 is hereby added:
7.8 Seller Enhanced L/Cs. In the event any Seller Enhanced
L/Cs remain outstanding after Closing, and Seller has any continuing
obligation or has any funds subject to a continuing pledge with respect
thereto, Buyer will indemnify and hold harmless Seller and its officers
and directors from and against any and all Loss (as defined in Section
10.1) suffered by reason of, arising out of or resulting from such
Seller Enhanced L\C or any claim with respect thereto, and will take
such action as is necessary to cause Seller to be released from any
such continuing obligation and Seller's funds to be released from any
such continuing pledge not later than January 31, 1996. Buyer will pay
Seller a financing fee of Two Hundred Fifty Dollars ($250) at Closing,
in addition to the Purchase Price, in consideration of such credit
extension.
11. Exhibit A is hereby amended to include the following Section
1(i):
(i) The Intercompany Debt Balance will include as an amount
owing from the Company to Seller all checks issued by the Company
outstanding on the date as of which the Intercompany Debt Balance is
determined.
12. Exhibit D is hereby amended as follows:
(a) Paragraph (iii) of Exhibit D is hereby amended to be as
follows:
(iii) The execution, delivery and performance by
Buyer of the Agreement, the Note, the Stock Purchase Note and the
Warrant and the consummation by Buyer of the transactions contemplated
thereby have been duly authorized by all necessary corporate action on
the part of Buyer. The Agreement, the Note, the Stock Purchase Note and
the Warrant have been duly and validly executed and delivered by Buyer
and constitute the legal, valid and binding obligations of Buyer,
enforceable against it in accordance with their terms, except to the
extent that such enforceability (a) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to creditors' rights generally, and (b) is subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Neither the execution,
delivery and performance of the Agreement, the Note, the Stock Purchase
Note or the Warrant nor the consummation of the transactions
contemplated therein will: (i) violate or be in conflict with any
provision of the articles of incorporation or bylaws of Buyer; or (ii)
be in conflict with, or constitute a default, however defined (or an
event which, with the giving of due notice or lapse of time, or both,
would constitute such a default), under, or cause or permit the
acceleration of the maturity of, or give rise to any right of
termination, cancellation, imposition of fees or penalties under, any
debt, instrument, commitment, contract or other agreement or obligation
known to such counsel to which Buyer is a party or by which Buyer or
any of its properties or assets is or may be bound or result in the
creation or imposition of any Encumbrance upon any property or assets
of Buyer under any debt, instrument, commitment, contract or other
agreement or obligation known to such counsel; or (iii) violate any
provision of law, rule or regulation to which Buyer is subject or any
order, judgment or decree known to such counsel applicable to Buyer.
(b) The following new paragraph (viii) is hereby added:
(viii) The authorized capital stock of Buyer consists of ten
million (10,000,000) shares of common stock, no par value, of which
four million nine hundred sixty-six thousand six hundred twenty-nine
(4,966,629) shares are issued and outstanding (inclusive of shares
payment for which we understand from Buyer has been received but not
yet cleared), all of which will be on the Closing Date duly authorized,
validly issued, fully paid, nonassessable and without and not issued in
violation of preemptive rights (subject to such clearance of payments).
To the knowledge of such counsel, there are outstanding no securities
convertible into, exchangeable for or carrying the right to acquire,
equity securities of Buyer, or subscriptions, warrants, options, rights
or other arrangements or commitments obligating Buyer to issue or
acquire any of its equity securities or any ownership interest therein,
other than with respect to the Warrant, and except as set forth on
Exhibit I to the Agreement.
13. Exhibit E is hereby amended in its entirety to be in the form
of Exhibit E hereto.
14. Exhibit F is hereby amended in its entirety to be in the form
of Exhibit F hereto.
15. Exhibit G hereto is hereby added as Exhibit G.
16. Exhibit H hereto is hereby added as Exhibit H.
17. Exhibit I hereto is hereby added as Exhibit I.
18. The first sentence to Section 3 of the Amendment to the
Agreement dated December 1, 1995 is hereby amended to be as
follows:
In the course of preparing the Closing Balance Sheet, the Seller
Accountants will determine the change in the net intercompany balance
between Seller and the Company from November 30, 1995 to the Closing
Date, such intercompany balances determined in each case without regard
to checks of the Company issued and outstanding as of the date with
respect to which such determination is made, which determinations will
be subject to review by the Buyer Accountants and resolution by the
Accountant Arbitrator of any unresolved issues between the Seller
Accountants and the Buyer Accountants with respect thereto.
19. The Disclosure Schedule is hereby amended to add the
information scheduled on attached Exhibit A.
20. Except as set forth hereinabove, the Agreement remains in full
force and effect in accordance with its terms.
IN WITNESS WHEREOF, each of the parties hereto has caused this Second
Amendment to be executed on its behalf as of the date first above written.
DISCUS ACQUISITION CORPORATION
By /s/ Xxxxxxx X. Xxxxx
Its CEO
BRIDGEWATER RESOURCES CORP.
By Xxxx X. Xxxxxx
Its CEO
Exhibit A
AMENDMENTS TO DISCLOSURE SCHEDULE
Schedule 3.1 - Colorado has been added to States of Foreign Qualification.
Schedule 3.10 - Item 70 is revised as follows: "70. Agreement between the
Company and Northwestern Xxxx Telephone Company d/b/a US West Communications
dated January 8, 1991, and Amendment thereto dated August 6, 1993."
Schedule 3.17 - Environment is revised to include the following:
The following additional environmental reports have been prepared for the
properties, the information contained in which being incorporated in Schedule
3.17:
1. Limited Environmental Assessment for Peerless Chain Company,
Dallas, Texas facility prepared by Northern Environmental
Technologies, Incorporated, November 20, 1995.
2. Limited Environmental Assessment for Peerless Chain Company,
Atlanta, Georgia facility prepared by Northern Environmental
Technologies, Incorporated, November 20, 1995.
3. Limited Environmental Assessment for Peerless Chain Company,
Denver, Colorado facility prepared by Northern Environmental
Technologies, Incorporated, November 20, 1995.
4. Limited Environmental Assessment for Peerless Chain Company,
Manchester, Iowa facility prepared by Northern Environmental
Technologies, Incorporated, November 20, 1995.
5. Limited Environmental Assessment for Peerless Chain Company,
Winona, Minnesota facility prepared by Northern Environmental
Technologies, Incorporated, November 20, 1995.
6. Limited Environmental Assessment for Peerless Chain Company,
Camp Hill, Pennsylvania facility prepared by Northern
Environmental Technologies, Incorporated, November 20, 1995.
7. Phase I Environmental Assessment (Volumes I & II) for Peerless Chain
Company, Winona, Minnesota facility prepared by Northern Environmental
Technologies, Incorporated, November 27, 1995.
8. Subsurface Investigation for Peerless Chain Company, Winona,
Minnesota facility prepared by Northern Environmental
Technologies, Incorporated, November 27, 1995.
Item 11 is added as follows: Flooding lubrication systems on most of the
Company's forming equipment and welding equipment result in oil dripping on the
floor beneath the equipment either because the oil overflows the existing catch
system or because the equipment does not have a catch system. Management is in
the process of designing improved catch systems for 120 machines, and estimates
$100,000 for materials and $25,000 for labor to build and install such systems.
No program for building and installing such systems has been budgeted or
defined.
Exhibit B
[There is no Exhibit B]
Exhibit C
[There is no Exhibit C]
Exhibit D
[There is no Exhibit D]
Exhibit E
REDEMPTION NOTE
$2,500,000 December ___, 1995
FOR VALUE RECEIVED, the undersigned, Peerless Chain Company
(the "Company"), a Minnesota corporation, hereby promises to pay to the order of
Bridgewater Resources Corp. ("Seller"), a Texas corporation, at the address
provided under Section 8 in lawful money of the United States in accordance with
the terms hereof the sum of Two Million Five Hundred Thousand Dollars
($2,500,000) plus interest thereon at the rate provided herein from the date
hereof until paid in full.
1. Purchase Agreement. This Note is given pursuant to that
certain Stock Purchase Agreement dated November 22, 1995 (as amended, the
"Purchase Agreement") by and between Discus Acquisition Corporation ("Buyer"), a
Minnesota corporation, and Seller for the sale of all of the outstanding capital
stock of the Company by Seller to Buyer, and as partial payment under the
Redemption (as defined in the Purchase Agreement). Capitalized terms not
otherwise defined herein will have the meanings set forth in the Purchase
Agreement. To the extent the terms of this Note as executed vary from Exhibit A
to the Purchase Agreement or the description hereof contained in the Purchase
Agreement, the terms hereof govern.
2. Definitions. Unless the context otherwise requires, the
following terms have the following meanings:
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, Buyer, (ii) which beneficially owns or holds five percent
(5%) or more of any class of the capital stock of Buyer or (iii) five percent
(5%) or more of the capital stock (or in the case of a Person which is not a
corporation, five percent (5%) or more of the equity interest) of which is
beneficially owned or held by Buyer or a Subsidiary. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of capital stock, by contract or otherwise.
"CIT" means The CIT Group/Business Credit, Inc.
"Guaranty" means any obligations (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) of Buyer or the Company guarantying in any manner, whether directly
or indirectly, any obligation, direct or indirect, absolute, contingent or
inchoate, whether existing now or in the future, of any other Person.
"Indebtedness" means any and all amounts owing or which may
become owing by the Company pursuant to the terms of this Note.
"Permitted Investments" means:
(a) Investments in commercial paper maturing in two hundred
seventy (270) days or less from the date of issuance which, at the time of
acquisition, is accorded the highest rating by Standard & Poor's Corporation or
Moodys Investors Services, Inc. (or other nationally recognized credit rating
agency of similar standing if neither of such corporations is then in the
business of rating commercial paper);
(b) Investments in direct obligations of the United
States of America or any agency thereof maturing within one (1)
year from the date of acquisition thereof;
(c) Investments in bank accounts or certificates of deposit
maturing within one (1) year from the date of origin and issued by a bank or
trust company having capital, surplus and undivided profits aggregating at least
One Hundred Million Dollars ($100,000,000); and
(d) Investments in money market preferred stocks for so long
as the same are accorded the highest rating by Standard & Poor's Corporation or
Moodys Investors Service, Inc. (or other nationally recognized credit rating
agency of similar standing if neither of such corporations is then in the
business of rating such preferred stocks).
"Person" means an individual, partnership, corporation, trust
or unincorporated organization, and a governmental agency or political
subdivision.
"Pledged Stock" is as defined in Section 6.2.
"Senior Credit Facility" means the credit facilities with CIT
under that certain Financing Agreement dated December __, 1995, or any
replacement credit facility.
"Senior Obligations" means the Senior Credit Facility and
the Winona Lease.
"Senior Pledge" means the security interest in the Pledged
Stock granted pursuant to that certain Stock Pledge Agreement by and between
Buyer and CIT dated December __, 1995, and any security interest in the Pledged
Stock granted to the holder of any replacement Senior Credit Facility pursuant
to which such holder agrees to deliver the stock certificates representing the
Collateral, upon satisfaction of such Senior Credit Facility, to the holder of
this Note or the holder of a succeeding replacement Senior Credit Facility
taking a security interest in the Pledged Stock including such terms.
"Spell Employment Agreement" means the Employment Agreement
dated December __, 1995 by and between the Company and Xxxxxxx Xxxxx.
"Stock Purchase Note" means the Stock Purchase Note dated
December __, 1995 issued by Buyer to the order of Seller pursuant to the
Purchase Agreement.
"Subordination Agreement" means the Subordination Agreement
dated December __, 1995 by and among CIT, Seller, Buyer, the Company and
Peerless Chain of Iowa, Inc.
"Subsidiary" means any corporation of which more than fifty
percent (50%) (by number of votes) of the voting stock is owned by Buyer and/or
one or more corporations which are themselves Subsidiaries of Buyer.
"Winona Lease" means that certain Lease Agreement by and
between PRC Corp. (formerly Peerless Chain Company) and Corporate Property
Associates 6 dated June 18, 1986, as assigned to the Company by Assignment and
Assumption Agreement dated September 26, 1989, as amended by Lease Amendment
dated September 26, 1989, Letter Amendment dated August 2, 1994 and Amendment to
Lease dated December __, 1995.
"Winona Lease Obligations" means the obligations of the
Company under the Winona Lease.
3. Payment Terms.
3.1 Interest. Interest will accrue on the unpaid principal of
this Note at the annual rate of eight percent (8%) until maturity; provided that
in the event any amount due hereunder is past due, interest will accrue on the
unpaid principal of this Note at the annual rate of thirteen percent (13%),
compounded annually. Accrued interest will be due quarterly on the last day of
December, March, June and September commencing December 31, 1995 until maturity
of all principal of this Note (by acceleration or otherwise).
3.2 Principal. The principal of this Note, together with all
accrued and unpaid interest not then otherwise due, will be due December __,
1998, unless maturity thereof is accelerated pursuant to the terms hereof;
provided, however, that to the extent any claims are pending for indemnification
under Section 7.2, 10.1 or 10.2 of the Purchase Agreement on such stated
maturity date, with respect to each such claim, the maturity date with respect
to an amount of principal of this Note equal to the amount of such claim will be
extended until such claim is finally resolved; provided, further, that in the
event the amount of any such claim is reduced prior to final resolution of such
claim, an amount of principal of this Note equal to such reduction will become
due upon such reduction; and provided, further, that no such extension will be
made in the event of a prior acceleration, and any such extension will terminate
upon acceleration, of maturity of the principal of this Note pursuant to the
terms hereof.
3.3 Prepayments; Application of Payments. This Note may be
prepaid, in whole or in part, at any time and from time to time without premium
or penalty. Payments on, and credits under Section 3.4 against, this Note will
be applied first to accrued interest due and unpaid, next (to the extent such
payment is a prepayment) to accrued interest unpaid and not yet due, next to
costs and expenses accrued hereunder, with the balance to principal.
3.4 Offsets. Any liability of Seller under Sections 7.2, 10.1,
10.2 or 10.5 of the Purchase Agreement will be offset against Indebtedness
(whether or not then due) to the extent of the balance outstanding hereunder as
of the final determination of such liability.
4. Buyer and Company Covenants. From the date hereof and
continuing so long as any amount remains unpaid on this Note:
4.1 Corporate Existence, etc. Buyer and the Company each will
preserve and keep in force and effect its corporate existence and all licenses
and permits necessary to the proper conduct of the business of Buyer and the
Company taken as a whole.
4.2 Restricted Buyer Distributions. Buyer will not declare or
pay any dividends or make any other payment or distribution, either in cash or
property, on or in purchase, redemption or retirement of any shares of Buyer's
capital stock of any class or any warrants, rights or options to acquire any
such shares by purchase, conversion or otherwise, provided that nothing herein
restricts Buyer from making payment under the Stock Purchase Note or any
resulting full or partial termination or expiration of the Warrant for Purchase
of Securities dated December __, 1995 issued by Buyer to Seller pursuant to the
Stock Purchase Agreement.
4.3 Restricted Company Issuances and Distributions. The
Company will not:
(a) issue any shares of the Company's capital stock of any
class or any warrants, rights or options to purchase any shares of the Company's
capital stock, whether by reason of stock split or combination or
reclassification, dividend, exchange, new consideration or otherwise;
(b) declare or pay any dividends or make any other payment or
distribution, either in cash or property, on or in purchase, redemption or
retirement of any shares of the Company's capital stock, or make any other
payment or distribution, either directly or indirectly, in respect of the
Company's capital stock or otherwise, including without limitation for goods or
services, to Buyer or to any Affiliate of Buyer, except (i) payments equal to
state and federal income tax liability on Buyer's consolidated tax returns
resulting from the Company's operations, made on the due date of the applicable
return, (ii) payments when and as due under the Spell Employment Agreement,
(iii) provided that when made, no Default exists hereunder, payments equal to
amounts due under redemption provisions under Repurchase Agreements entered into
on the Closing Date with management personnel of the Company with respect to an
aggregate of not more than four hundred twenty-five thousand four hundred
fifty-one (425,451) shares of the common stock of Buyer, (iv) payments applied
by Buyer in payment of the Stock Purchase Note, and (v) payments not to exceed
One Hundred Eighty-Eight Thousand Dollars ($188,000) annually to fund normal
operating expenses of Buyer.
4.4 Mergers, Consolidations and Sales of Assets. The Company
will not (i) consolidate with or be a party to a merger with any other
corporation, or (ii) sell, lease or otherwise dispose of all or any substantial
part of its assets.
4.5 Guaranties. The Company will not become or be liable in
respect of any Guaranty except Guaranties entered into in the ordinary course of
the Business and Guaranties of Buyer of loans to management personnel of the
Company for the purchase of an aggregate of not more than four hundred
twenty-five thousand four hundred fifty-one (425,451) shares of the common stock
of Buyer.
4.6 Transactions with Affiliates. Buyer and the Company each
will not enter into or be a party to any transaction or arrangement with any
Affiliate (including without limitation the purchase from, sale to or exchange
of property with, or the rendering of any service by or for, any such
Affiliate), except pursuant to the reasonable requirements of such party's
business and upon fair and reasonable terms no less favorable to such party than
would obtain in a comparable arm's-length transaction with a person other than
an Affiliate. The Spell Employment Agreement and promissory notes issued by
Buyer on the date of this Note to the order of Xxxxx Xxxxx and Pyramid Partners
c/o Perkins Capital Management in the aggregate principal amount of Two Hundred
Twenty- Five Thousand Dollars ($225,000) with interest at an initial rate of
twenty percent (20%) per annum are deemed to meet the requirements of this
Section 4.6.
4.7 Reports and Rights of Inspection. Buyer and the Company
each will keep proper books of record and account in which full and correct
entries will be made of all dealings or transactions of or in relation to the
business and affairs of Buyer or the Company, in accordance with generally
accepted accounting principles consistently applied (except for changes in
application disclosed in the financial statements furnished to the holder hereof
pursuant to this Section 4.7 and concurred in by the independent public
accountants referred to in (b) hereof), and will furnish to the holder hereof:
(a) As soon as available and in any event within forty-five
(45) days after the end of each quarterly fiscal period of each fiscal year
consolidated and consolidating balance sheets of Buyer and the Company as of the
close of such period, and consolidated and consolidating statements of income
and retained earnings and statements of cash flows of Buyer and the Company for
the quarterly fiscal period then ending and for the portion of the fiscal year
ending with such period in each case setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail and certified by an authorized financial officer of Buyer to
the effect that (except for the exclusion in unaudited quarterly financial
statements of certain footnote and other information normally presented with
annual audited financial statements, and subject to changes resulting from
year-end adjustments) such financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied (except for
changes in application in which the accountants referred to in clause (b) hereof
concur) and present fairly the financial condition of Buyer and the Company.
(b) As soon as available and in any event within ninety (90)
days after the close of each fiscal year of Buyer consolidated and consolidating
balance sheets of Buyer and the Company as of the close of such fiscal year, and
consolidated and consolidating statements of income and retained earnings and
statements of cash flows of Buyer and the Company for such fiscal year, in each
case setting forth in comparative form the figures for the preceding fiscal
year, all in reasonable detail and accompanied by an opinion thereon of a firm
of independent public accountants of recognized national standing selected by
Buyer to the effect that the financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except for changes in application in which such accountants concur and as are
noted therein) and present fairly the financial condition of Buyer and the
Company and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, includes such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances.
(c) Promptly upon receipt thereof, each interim or special
audit made by independent accountants of the books of Buyer or the Company.
(d) Promptly upon their becoming available, each financial
statement, report, notice or proxy statement sent by Buyer to stockholders
generally, and each report and any registration statement or prospectus filed by
Buyer with NASDAQ or any securities exchange or the Securities Exchange
Commission or any successor agency, and copies of any orders in any proceedings
to which Buyer or the Company is a party issued by any governmental agency,
federal or state, having jurisdiction over Buyer or the Company.
(e) Within the periods provided in paragraphs (a) and (b)
above, a certificate of an authorized financial officer of Buyer stating that
such officer has reviewed the provisions of this Note and setting forth, to the
best of such officer's knowledge, whether there existed as of the date of such
financial statements and whether there exists on the date of the certificate or
existed at any time during the period covered by such financial statements any
Default or any condition which but for the passage of time or the giving of
notice or both would constitute a Default and, if any such condition or event
existed during such period or exists on the date of the certificate, specifying
the nature and period of existence thereof and the action Buyer has taken or is
taking and proposes to take with respect thereto;
(f) The annual plans and operating projections Buyer and
the Company furnish to CIT when and as so furnished.
5. Subordination. Anything in this Note to the contrary
notwithstanding, the Indebtedness evidenced by this Note will be subordinate and
junior in right of payment to the Senior Obligations, whether outstanding on the
date of this Note or incurred after the date of this Note, to the extent and in
the manner hereinafter set forth:
(a) Notwithstanding anything to the contrary contained
herein, this Note is in all respects subject to the terms and
provisions of the Subordination Agreement.
(b) In the event of any sale under or in accordance with any
judgment or decree rendered with respect to this Note in any proceeding by or on
behalf of the holder hereof or in the event of any distribution, division or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of the Company, or the proceeds
thereof, to creditors of the Company occurring by reason of any liquidation,
dissolution or winding up of the Company or in the event of any execution sale,
receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization
or other similar proceeding relative to the Company or its debts or properties,
then in any such event the Winona Lease Obligations will be preferred in
payment, and the Winona Lease Obligations will be first paid and satisfied in
full before any payment or distribution of any kind or character, whether in
cash, property or securities (other than securities which are subordinate and
junior in right of payment to the payment of the Winona Lease which may at the
time be outstanding), will be made upon this Note; and in any such event any
distribution of any kind or character, whether in cash, property or securities
(other than in securities which are subordinate and junior in right of payment
to the payment of the Winona Lease which may at the time be outstanding), which
is made upon or in respect of the Indebtedness will be paid over to the lessor
under the Winona Lease for application to the Winona Lease Obligations unless
and until the Winona Lease Obligations is paid and satisfied in full, and such
amounts so paid over will be deemed not to be made upon or in respect of the
Indebtedness, or the holder of this Note will be subrogated to the rights of the
lessor under the Winona Lease to the extent thereof, as elected by the holder of
this Note;
(c) In the event that pursuant to the provisions hereof this
Note is declared or becomes due and payable before its expressed maturity
because of an occurrence of a Default (under circumstances when the foregoing
clause (b) is not applicable) or otherwise, no amount will be paid by the
Company in respect of Indebtedness in excess of current interest payments as
provided herein, except at the stated maturity thereof (all subject to the
foregoing clause (b) above), unless and until the Winona Lease Obligations has
been paid in full or payment thereof has been provided for in a manner
satisfactory to the lessor under the Winona Lease;
(d) Without limiting the effect of any of the other provisions
hereof, during the continuance of any default in the payment of rent or any
other amount with respect to the Winona Lease, no payment will be made on or
with respect to the Indebtedness, if either (i) notice of such default in
writing has been given to the Company by the lessor under the Winona Lease,
provided that judicial proceedings are commenced with respect to such default
within one hundred eighty (180) days thereafter, or (ii) judicial proceedings
are pending in respect of such default.
(e) The holder hereof irrevocably authorizes and empowers the
holder of the Winona Lease, in any proceeding under Title 11 of the United
States Code in which the Company is subject, to file a proof of claim in behalf
of the holder hereof with respect to the obligations hereunder if the holder
hereof fails to file a proof of its claims prior to 30 days before the
expiration of the time period during which such claims must be submitted, to
accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the obligations hereunder in an
amount not in excess of that portion of the Winona Lease Obligation then
outstanding (unless CIT is entitled to such payment under the terms of the
Subordination Agreement) and to take such other action as may be reasonably
necessary to effectuate the foregoing. Unless CIT has filed a proof of claim or
has otherwise sought the same information or documents, the holder hereof will
provide to the lessor of the Winona Lease all information and documents
necessary to present claims or seek enforcement as aforesaid.
(f) To the extent that the lessor under the Winona Lease
receives any amounts from the holder hereof in accordance with the provisions of
the Note which, when added to the total amount received directly by the lessor
under the Winona Lease from any other source, exceeds the total Winona Lease
Obligation, the lessor under the Winona Lease will be obligated to pay the
excess to the holder hereof. In the event that as a result of an avoidance
action under Title 11 of the United States Code (including, but not necessarily
limited to, any action under 11 U.S.C. xx.xx. 544, 545, 547, 548, 549 and/or
550), the holder hereof is required to return to the Company or its bankruptcy
estate any payment received by the holder hereof and paid over to the lessor
under the Winona Lease pursuant to this Section 5, thereupon the lessor of the
Winona Lease will pay back to the holder hereof such amount paid over to the
lessor of the Winona Lease.
(g) The provisions of this Section 5 will be subject and
subordinate to the rights of CIT under the Subordination Agreement. The holder
hereof will not be required to take any action, perform any obligation or make
any payment hereunder which it reasonably believes would: (i) be in conflict
with or contrary to the terms of the Subordination Agreement; and/or (ii)
prevent it from performing any of its obligations under the Subordination
Agreement; and/or (iii) prevent or frustrate CIT from exercising any of its
rights under the Subordination Agreement. The lessor under the Winona Lease will
not exercise any rights hereunder to the extent doing so would: (x) be in
conflict with or contrary to the terms of the Subordination Agreement; and/or
(y) prevent the holder hereof from performing any of its obligations under the
Subordination Agreement; and/or (z) prevent or frustrate CIT from exercising any
of its rights under the Subordination Agreement.
(h) No right of any present or future holder of the Senior
Obligations to enforce subordination as herein provided will at any time or in
any way be prejudiced or impaired by any failure to act on the part of Buyer or
the Company, or by any noncompliance by Buyer or the Company with the terms,
provisions and covenants of this Note, regardless of any knowledge thereof that
any such holders of the Senior Obligations may have or with which they may be
otherwise charged. The provisions of this Section 5 are solely for the purpose
of defining the relative rights of the holders of the Senior Obligations on the
one hand, and the holder hereof on the other hand, and nothing in this Section 5
will impair, as between Buyer or the Company and the holder hereof as
applicable, the obligations of Buyer and the Company to pay to the holder hereof
Indebtedness in accordance with the remaining terms of this Note, nor will
anything herein prevent the holder hereof from exercising all remedies otherwise
permitted by applicable law or hereunder upon any Default, subject to the
rights, if any, of the holders of the Senior Obligations as herein provided.
Without limiting the foregoing, no suspension of any payment of Indebtedness
pursuant to the provisions of this Section 5 will suspend or defer the due date
of such payment as determined by the remaining provisions of this Note.
6. Buyer Guaranty and Security Agreement.
6.1 Guaranty. Buyer absolutely, irrevocably and
unconditionally guarantees to the holder hereof the payment of the
Indebtedness promptly when due, by acceleration or otherwise.
6.2 Security Interest. In order to secure the Indebtedness,
Buyer hereby grants to the holder hereof a security interest in all shares of
stock owned by Buyer in the Company (and any and all additions thereto,
substitutions therefor, and proceeds thereof) (the "Pledged Stock").
6.3 Warranties and Obligations of Buyer. Buyer hereby
warrants and covenants to the holder hereof:
(a) The Pledged Stock represents 100% of the issued and
outstanding shares of capital stock of the Company.
(b) Buyer has and will maintain during the term of this Note
sole title to and beneficial ownership of the Pledged Stock, free of all liens,
charges, security interests and encumbrances (other than the security interest
created hereby and under the Senior Pledge), and has full power and authority to
subject the Pledged Stock to the security interest created hereby.
(c) Buyer will hereafter from time to time execute and deliver
such financing statements, assignments separate from certificates and other
instruments or documents, deliver the certificates representing the Pledged
Stock to the holder hereof upon termination of the Senior Pledge and perform
such other acts as the holder hereof may reasonably request to establish,
protect and maintain a perfected security interest in the Pledged Stock and an
ability to effectively enforce its remedies hereunder with respect to the
Pledged Stock. Buyer will at all times cause all certificates representing the
Pledged Stock to include a legend referencing this Note and the security
interest of the holder hereof provided hereunder.
6.4 Priority. The holder of this Note by acceptance hereof
agrees that the security interest granted hereunder in the Pledged Stock is
subordinate and junior in interest and priority to the Senior Pledge.
6.5 Nonimpairment. The holder hereof may from time to time,
without notice to Buyer, and without impairing or affecting the security
interest created hereby: (a) acquire a security interest in any property in
addition to the Pledged Stock, or release any such interest so acquired or
release any security interest in any of the Pledged Stock, or permit any
substitution or exchange for such property or any part thereof; (b) acquire the
primary or secondary liability of any party or parties with respect to all or
any of the Indebtedness, or release, modify, or compromise the same or any part
thereof; (c) modify, extend or renew for any period any of the Indebtedness; and
(d) resort to the Pledged Stock for payment of the Indebtedness whether or not
the holder hereof has resorted to any other collateral or proceeding against any
party primarily or secondarily liable on the Indebtedness.
6.6 Voting Rights. Buyer hereby grants to the holder hereof an
irrevocable proxy, coupled with an interest, to vote any or all of the Pledged
Stock, which proxy may be exercised by the holder hereof only at such time as a
Default in the payment of principal under this Note is continuing and no Senior
Pledge is in effect. Such proxy will remain in effect until this Note is
satisfied in full. Except for those instances where the holder hereof exercises
such proxy, Buyer will be entitled to exercise the voting power with respect to
the Pledged Stock consistent with the terms or purposes of this Note.
6.7 Remedies. In the event a Default hereunder has occurred
and is continuing, the holder hereof will have, in addition to any other rights
and remedies a secured party can assert under the Minnesota Uniform Commercial
Code and to the extent not inconsistent with nonwaivable provisions thereof, the
following rights and remedies, without having to give notice except as is
hereinafter specifically provided:
(a) The holder hereof may sell the Pledged Stock, or any part
thereof, at a public or private sale, following the notice hereinafter provided,
for cash, upon credit, or for future delivery at such price or prices as the
holder hereof deems satisfactory. The holder hereof, or any parties related to
or affiliated with the holder hereof, may purchase any or all of the Pledged
Stock sold at a public sale. The holder hereof is authorized at any sale, if the
holder hereof deems it advisable to do so, to restrict the prospective bidders
or purchasers to persons who will represent and agree that they are purchasing
for their own account for investment, and not with a view to the distribution or
sale of any of the Pledged Stock. Upon any such sale, the holder hereof will
have the right to deliver, assign, and transfer to the purchaser thereof the
Pledged Stock so sold. Each purchaser at any such sale will hold the property
sold absolutely free from any claim or right of Buyer of whatsoever kind,
including any equity or right of redemption of Buyer which Buyer has under any
rule of law or statute now existing or hereafter adopted; and as to such
purchaser, Buyer hereby specifically waives all such rights of redemption, of
stay, or of appraisal, which might in any way affect such purchaser. The holder
hereof will give Buyer at least ten (10) days' written notice of intention to
make such public or private sale, which notice will state the time and place
fixed for such public sale or the time after which such private sale may be
consummated and whether the sale is to be public or private. At any such sale
the Pledged Stock may be sold in one lot as an entirety or in separate parcels,
as the holder hereof may determine. In case of any sale on credit or for future
delivery, the Pledged Stock so sold may be retained by the holder hereof until
the selling price is paid by the purchaser thereof, and the holder hereof will
not incur any liability in case of the failure of such purchaser to take up and
pay for the Pledged Stock so sold, and in case of any such failure, such Pledged
Stock may be again sold upon like notice. The holder hereof will not be
obligated to complete any sale for which the holder hereof sends out notice and
may, without notice or publication, adjourn any sale or cause the same to be
adjourned by announcement at the time and place fixed for such sale, and such
sale may thereafter be made at the time and place to which the same has been so
adjourned.
(b) The holder hereof, instead of exercising the power of
nonjudicial sale herein conferred, may proceed by a suit or suits at law or in
equity to foreclose the pledge and sell the Pledged Stock, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(c) Without limiting the rights of the holder hereof under any
other provision of this Note, and in addition thereto, Buyer will be obligated,
to the maximum extent permitted by law, if a Default is continuing and if
counsel for the holder hereof determines that it is necessary for the lawful
sale of the Pledged Stock in a commercially reasonable manner, upon written
request from the holder hereof, to vote its shares to cause the Company, at the
Company's or Buyer's expense, to prepare, file and cause to become effective
promptly, a registration statement complying with the Securities Act of 1933, as
amended, for the public sale of such of the Pledged Stock as the holder hereof
may elect, and to take comparable action to permit such sales under the
securities laws of such state jurisdictions as the holder hereof may designate.
If such registration statement is filed, Buyer further will be obligated to vote
its shares to cause the Company, at the Company's or Buyer's expense, to enter
into and perform its obligations under one or more underwriting agreements in
connection therewith, containing customary representations, warranties,
covenants, and indemnities and contribution provisions if requested by the
holder hereof. Buyer will be obligated to vote its shares to cause the Company,
at the Company's or Buyer's expense, (i) to keep any such registration statement
and related prospectus current and in compliance with applicable federal and
state securities laws so long as required to satisfy applicable prospectus
delivery requirements and (ii) at the request of the holder hereof at any time
after the effective date of any such registration statement, to file
post-effective amendments to such registration statement so that sales of
Pledged Stock by the holder hereof will be covered by a current prospectus and
can be made in compliance with all applicable federal and state securities laws.
(d) Buyer further will be obligated to (i) take such action as
is necessary to cause the Company to delivery to the holder hereof such
information as the holder hereof reasonably requests for inclusion in any
registration statement, prospectus or offering memorandum or in any preliminary
prospectus or preliminary offering memorandum or any amendment or supplement to
any thereof or in any other writing prepared in connection with the offer, sale
or resale of all or any portion of the Pledged Stock and to deliver such
information regarding Buyer as the holder hereof reasonably requests, which
information will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated or necessary to make such
information not misleading, and (ii) vote its shares to do or cause to be done
all such other acts and things as may be necessary to make such offer, sale or
resale of all or any portion of the Pledged Stock valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental agencies or instrumentalities, domestic or foreign, having
jurisdiction over any such offer, sale or resale.
(e) Without limiting paragraphs (c) and (d) of this Section
6.7, if the holder hereof decides to exercise its right to sell all or any of
the Pledged Stock, upon written request Buyer will from time to time take such
action as is necessary to cause to be furnished to the holder hereof all such
information as the holder hereof may request and as is accessible to Buyer in
order to qualify such Pledged Stock as exempt securities, or the sale or release
of such Pledged Stock as exempt transactions, under federal or state securities
laws. Buyer will be obligated to take such action as is necessary to cause the
Company to allow the holder hereof and any underwriter access at reasonable
times and places to the books, records and premises of the Company; Buyer
further will be obligated to assist, and take such action as is necessary to
cause the Company to assist the holder hereof, any underwriter, any agent of any
thereof, and any counsel, accountant or other expert for any thereof, in
inspection, evaluation, and any other "due diligence" action of or with respect
to any such books, records and premises; and Buyer further will be obligated to
cause any independent public accountant for the Company to furnish a letter to
the holder hereof and underwriters in customary form and covering matters of the
type customarily covered by letters of accountants for issuers to underwriters.
(f) Buyer further acknowledges the impossibility of
ascertaining the amount of damages which would be suffered by the holder hereof
by reason of the failure by Buyer to perform any of the covenants contained in
this Section and, consequently, agrees that, if Buyer fails to perform any of
such covenants, the holder hereof will be entitled to equitable relief for the
enforcement of the provisions of this Section 6.7. Buyer will indemnify the
holder hereof for any and all fees, charges, reimbursements, judgments or other
expenses incurred by the holder hereof due to any failure of Buyer to perform
its obligations under this Section 6.7.
(g) Notwithstanding the foregoing provisions of this Section
6.7, the holder of this Note will not be permitted to exercise any of the
foregoing rights or remedies contained or referenced in this Section 6.7 for so
long as any Senior Pledge remains in effect without the prior written consent of
the holder thereof.
6.8 Application of Proceeds. The proceeds of any sale
of the Pledged Stock hereunder will be applied by the holder
hereof:
(a) first, to the payment of the costs and expenses of
such sale, including reasonable attorneys' fees and all expenses
and advances made or incurred by it in connection therewith;
(b) second, to the payment of the Indebtedness;
(c) finally, to the payment to Buyer or its successors
and assigns of any surplus then remaining from such proceeds.
(d) The holder hereof will not be required to make any
allocation or distribution to Buyer of proceeds from sale except from collected
funds after satisfaction or release of all indemnification or other payment
obligations that may be asserted against the holder hereof or such proceeds in
connection with such sale. Any collected funds retained pursuant to this
provision will be promptly deposited or invested in Permitted Investments until
disbursed in accordance herewith.
6.9 Waivers. The holder hereof may at any time and from time
to time, without the consent of or notice to Buyer, without incurring
responsibility to Buyer, without releasing, impairing or affecting the liability
of Buyer hereunder, upon or without any terms or conditions and in whole or in
part: (a) sell, pledge, surrender, compromise, settle, release, renew,
subordinate, extend, substitute, exchange, change, or otherwise dispose of or
deal with in any manner and in any order any Indebtedness, any evidence thereof,
or any security therefor; (b) accept any security for or other guarantors of any
Indebtedness; and (c) fail, neglect or omit to obtain, realize upon or protect
any Indebtedness or any security therefor, to exercise any lien upon or right to
any money, credit or property toward the liquidation of the Indebtedness, or to
exercise any other right against Buyer, the Company or any other person. No act
or thing, except full payment and discharge of the Indebtedness, which but for
this provision could act as a release or impairment of the liability of Buyer
hereunder, will in any way release, impair or affect such liability.
6.10 Primary Obligation. This guaranty is a primary obligation
of Buyer and the holder hereof will not be required to first resort for payment
of the Indebtedness to the Company or any other person, their properties or
estates, or any security or other rights or remedies whatsoever. Buyer will be
and remain liable for any deficiency remaining after foreclosure of any mortgage
or security interest securing Indebtedness, whether or not the liability of the
Company or any other person for such deficiency is discharged pursuant to
statute, judicial decision or otherwise. If any payment applied by the holder
hereof to the Indebtedness is thereafter set aside, recovered, rescinded or
required to be returned for any reason (including without limitation the
bankruptcy, insolvency or reorganization of Buyer or any other person), the
Indebtedness to which such payment was applied will for the purposes of Buyer's
guaranty be deemed to have continued in existence, notwithstanding such
application, and this guaranty will be enforceable as to such Indebtedness as
fully as if such application had never been made.
6.11 Additional Waivers. Buyer waives: (a) notice of
acceptance of its guaranty hereunder and of the creation and existence of the
Indebtedness; (b) presentment, demand for payment, notice of dishonor, notice of
nonpayment, and protest of any instrument evidencing the Indebtedness; and (c)
all other demands and notices to Buyer, the Company or any other person and all
other actions to establish the liability of Buyer hereunder.
7. Default, Remedies
7.1 Default. Any one or more of the following
constitutes a Default as that term is used herein:
(a) Failure of the Company to pay any principal amount or
interest hereunder when due and continuation of such condition for fifteen (15)
days after written notice thereof by the holder hereof to the Company;
(b) Failure to perform any obligation of the Company hereunder
other than for the payment of money and continuation of such condition for
thirty (30) days after written notice thereof by the holder hereof to the
Company;
(c) Failure of Buyer to pay any principal amount or interest
under the Stock Purchase Note when due and continuation of such condition for
fifteen (15) days after written notice thereof by the holder thereof to Buyer;
(d) Failure to perform any obligation of Buyer under the Stock
Purchase Agreement other than for the payment of money and continuation of such
condition for thirty (30) days after written notice thereof by the holder
thereof to Buyer;
(e) Failure of the Company to pay any amount under the
Senior Obligations when due for so long as such condition
continues;
(f) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against Buyer or the
Company and, if instituted against Buyer or the Company are consented to or are
not dismissed within sixty (60) days after such institution; or
(g) Buyer or the Company becomes insolvent or bankrupt,
generally does not pay its debts as they become due or makes an assignment for
the benefit of creditors, or Buyer or the Company applies for or consents to the
appointment of a custodian, trustee or receiver for Buyer or the Company or for
the major part of the property of either, or a custodian, trustee or receiver is
appointed for Buyer or the Company or for the major part of the property of
either and is not discharged within sixty (60) days after such appointment.
7.2 Acceleration of Maturity. When any Default described in
Sections 7.1(b), (d) or (g) has happened and is continuing, and in the case of
Section 7.1(b) or (d) provided no Senior Obligation is then outstanding, the
holder hereof may, by written notice to the Company, declare the entire
principal and all interest accrued hereunder to be, and the same will thereupon
become, immediately due and payable, without any presentment, demand, protest or
other notice of any kind. When a Default described in Section 7.1 (f) has
occurred, the entire principal and all interest accrued hereunder will thereupon
become immediately due and payable without presentment, demand, protest or other
notice of any kind.
7.3 Costs of Enforcement. Upon a Default, the Company will be
obligated to pay all costs of collection and enforcement of the rights and
remedies of the holder hereof, including court costs and attorneys' fees,
whether or not legal proceedings are commenced.
7.4 Waivers. The Company waives presentment for payment,
demand, protest, notice of protest and notice of dishonor. No delay by the
holder hereof in exercising any right or remedy hereunder, at law or in equity
will operate as a waiver of such right or remedy and no single or partial
exercise of any such right or remedy will preclude any further exercise thereof,
or the exercise of any other rights or remedies.
8. Notices. Any notice, request, instruction or other document to be
given hereunder by Buyer, the Company or the holder of this Note to any such
other party will be in writing and delivered personally or by telephonic
facsimile transmission or sent by registered or certified mail, postage prepaid
(and if by telephonic facsimile transmission with a copy sent by mail),
if to the holder of this Note to:
Bridgewater Resources Corp.
c/o BRC Management Corp.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx
Suite 3400, Plaza VII
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
if to Buyer or the Company to:
Discus Acquisition Corporation
0000 Xxxxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx and Xxxxxx
2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
or at such other address for a party as may be specified by like notice. Any
notice which is delivered personally or by telephonic facsimile transmission in
the manner provided herein will be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party (or its agent for
notices hereunder). Any notice which is addressed and mailed in the manner
herein provided will be conclusively presumed to have been duly given to
the party to which it is addressed at the close of business, local time of the
recipient, on the third day after the day it is so placed in the mail.
9. Arbitration. Subject to the last sentence of this Section, any
controversy or claim arising out of or relating to any provisions of this Note
or the breach hereof, unless resolved by mutual agreement of the parties, will
be finally settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect on the effective date of
this Agreement by a single arbitrator appointed in accordance with said Rules.
The determination of the arbitrator will be final and binding upon the parties
to the arbitration and judgment upon the award rendered by the arbitrator will
be entered in any court of competent jurisdiction. The place of arbitration will
be Minneapolis, Minnesota. Notwithstanding the foregoing, a party may seek
injunctive relief with respect to any controversy or claim arising out of or
relating to any provisions of this Note in any court of competent jurisdiction.
10. Governing Law; Consent to Jurisdiction. This Note will be
construed in accordance with and governed by the laws of the State of Minnesota
applicable to agreements made and to be performed in such jurisdiction without
reference to conflicts of law principles. Buyer and the Company by execution and
delivery of this Note, and the holder of this Note by acceptance hereof, each
irrevocably consents that any legal action or proceeding against it under,
arising out of or in any manner relating to this Note may be brought only in an
arbitration proceeding as provided in Section 9 or in a court of the State of
Minnesota or in the United States District Court for the District of Minnesota.
Each of Buyer, the Company and the holder of this Note further expressly and
irrevocably assents and submits to the personal jurisdiction of the arbitrators
selected pursuant to Section 9 or any of such courts in any such action or
proceeding. Each of Buyer, the Company and the holder of this Note further
irrevocably consents to the service of any complaint, summons, notice or other
process relating to any such action or proceeding by delivery thereof to it by
hand or by mail in the manner provided for in Section 8 hereof. Each of Buyer,
the Company and the holder of this Note further hereby expressly and irrevocably
waives any claim or defense in any action or proceeding based on any alleged
lack of personal jurisdiction, improper venue or forum non conveniens or any
similar basis.
11. Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed and delivered on the day and year first above written.
PEERLESS CHAIN COMPANY
By
Its
IN CONSIDERATION of Seller's acceptance of the Note and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, Buyer hereby agrees to the guaranty and grant of security interest
and all other terms of Sections 4, 5, 6, 7, 8, 9 and 10 and, to the extent
applicable to such Sections, Section 2 of the foregoing Note.
DISCUS ACQUISITION CORPORATION
By
Its
Exhibit F
BUYER FINANCINGS
TRANSACTION SOURCES AND USES
(thousands)
SOURCES: USES:
Revolver $ 9,543,000 Cash to Seller $20,050,000
Sr. Term Loan 6,700,000 Seller Sub Debt 2,500,000
Seller Sub Debt 1,200,000 Transaction Costs 1,043,000
Preferred Stock 2,500,000
Common Stock 4,850,000
----------- -----------
Total $24,793,000 Total $24,793,000
=========== ===========
EQUITY SOURCES:
Preferred Shareholders $1,800,000
New Common Shareholders 2,000,000
Discus Acquisition 2,250,000
Exhibit G
STOCK PURCHASE NOTE
$1,200,000 December ___, 1995
FOR VALUE RECEIVED, the undersigned, Discus Acquisition Corporation
("Buyer"), a Minnesota corporation, hereby promises to pay to the order of
Bridgewater Resources Corp. ("Seller"), a Texas corporation, at the address
provided under Section 8 in lawful money of the United States in accordance with
the terms hereof the sum of One Million Two Hundred Thousand Dollars
($1,200,000) plus interest thereon at the rate provided herein from the date
hereof until paid in full.
1. Purchase Agreement. This Note is given pursuant to that certain
Stock Purchase Agreement dated November 22, 1995 (as amended, the "Purchase
Agreement") by and between Buyer and Seller for the sale of all of the
outstanding capital stock of Peerless Chain Company (the "Company"), a Minnesota
corporation, by Seller to Buyer, and as partial payment of the Purchase Price
(as defined in the Purchase Agreement). Capitalized terms not otherwise defined
herein will have the meanings set forth in the Purchase Agreement. To the extent
the terms of this Note as executed vary from Exhibit G to the Purchase Agreement
or the description hereof contained in the Purchase Agreement, the terms hereof
govern.
2. Definitions. Unless the context otherwise requires, the following
terms have the following meanings:
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, Buyer, (ii) which beneficially owns or holds five percent
(5%) or more of any class of the capital stock of Buyer or (iii) five percent
(5%) or more of the capital stock (or in the case of a Person which is not a
corporation, five percent (5%) or more of the equity interest) of which is
beneficially owned or held by Buyer or a Subsidiary. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of capital stock, by contract or otherwise.
"CIT" means The CIT Group/Business Credit, Inc.
"Closing Notes" means promissory notes issued by Buyer on the
date of this Agreement to the order of Xxxxx Xxxxx and Pyramid Partners c/o
Perkins Capital Management in the aggregate principal amount of Two Hundred
Twenty-Five Thousand Dollars ($225,000).
"Guaranty" means any obligations (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) of Buyer or the Company guarantying in any manner, whether directly
or indirectly, any obligation, direct or indirect, absolute, contingent or
inchoate, whether existing now or in the future, of any other Person.
"Indebtedness" means any and all amounts owing or which may
become owing by Buyer pursuant to the terms of this Note.
"Permitted Investments" means:
(a) Investments in commercial paper maturing in two hundred
seventy (270) days or less from the date of issuance which, at the time of
acquisition, is accorded the highest rating by Standard & Poor's Corporation or
Moodys Investors Services, Inc. (or other nationally recognized credit rating
agency of similar standing if neither of such corporations is then in the
business of rating commercial paper);
(b) Investments in direct obligations of the United States of
America or any agency thereof maturing within one (1) year from the date of
acquisition thereof;
(c) Investments in bank accounts or certificates of deposit
maturing within one (1) year from the date of origin and issued by a bank or
trust company having capital, surplus and undivided profits aggregating at least
One Hundred Million Dollars ($100,000,000); and
(d) Investments in money market preferred stocks for so long
as the same are accorded the highest rating by Standard & Poor's Corporation or
Moodys Investors Service, Inc. (or other nationally recognized credit rating
agency of similar standing if neither of such corporations is then in the
business of rating such preferred stocks).
"Person" means an individual, partnership, corporation, trust
or unincorporated organization, and a governmental agency or political
subdivision.
"Pledged Stock" is as defined in Section 6.1.
"Redemption Note" means the Redemption Note dated December __,
1995 issued by the Company to the order of Seller pursuant to the Purchase
Agreement.
"Senior Credit Facility" means the credit facilities with CIT
under that certain Financing Agreement dated December __, 1995, or any
replacement credit facility.
"Senior Obligations" means the Senior Credit Facility and
the Winona Lease.
"Senior Pledge" means the security interest in the Pledged
Stock granted pursuant to that certain Stock Pledge Agreement by and between
Buyer and CIT dated December __, 1995, and any security interest in the Pledged
Stock granted to the holder of any replacement Senior Credit Facility pursuant
to which such holder agrees to deliver the stock certificates representing the
Collateral, upon satisfaction of such Senior Credit Facility, to the holder of
this Note or the holder of a succeeding replacement Senior Credit Facility
taking a security interest in the Pledged Stock including such terms.
"Spell Employment Agreement" means the Employment Agreement
dated December __, 1995 by and between the Company and Xxxxxxx Xxxxx.
"Subordination Agreement" means the Subordination Agreement
dated December __, 1995 by and among CIT, Seller, Buyer, the Company and
Peerless Chain of Iowa, Inc.
"Subsidiary" means any corporation of which more than fifty
percent (50%) (by number of votes) of the voting stock is owned by Buyer and/or
one or more corporations which are themselves Subsidiaries of Buyer.
"Winona Lease" means that certain Lease Agreement by and
between PRC Corp. (formerly Peerless Chain Company) and Corporate Property
Associates 6 dated June 18, 1986, as assigned to the Company by Assignment and
Assumption Agreement dated September 26, 1989, as amended by Lease Amendment
dated September 26, 1989, Letter Amendment dated August 2, 1994 and Amendment to
Lease dated December __, 1995.
"Winona Lease Obligations" means the obligations of the
Company under the Winona Lease.
3. Payment Terms.
3.1 Interest. Interest will accrue on the unpaid principal of
this Note at the annual rate of twenty percent (20%) through March 31, 1996,
eight percent (8%) from April 1, 1996 through August 31, 1996, and thirteen
percent (13%), compounded annually, from September 1,1996 until this Note is
paid in full.
3.2 Principal. The principal of this Note, together with all
accrued and unpaid interest not then otherwise due, will be due March 31, 1996.
3.3 Prepayments; Application of Payments. This Note may be
prepaid, in whole or in part, at any time and from time to time without premium
or penalty. Payments on this Note will be applied first to accrued interest due
and unpaid, next (to the extent such payment is a prepayment) to accrued
interest unpaid and not yet due, next to costs and expenses accrued hereunder,
with the balance to principal.
4. Buyer Covenants. From the date hereof and continuing so
long as any amount remains unpaid on this Note:
4.1 Corporate Existence, etc. Buyer will, and will cause the
Company to, preserve and keep in force and effect its corporate existence and
all licenses and permits necessary to the proper conduct of the business of
Buyer and the Company taken as a whole.
4.2 Restricted Buyer Issuances and Distributions. Buyer
will not:
(a) issue any shares of Buyer's capital stock of any class or
any warrants, rights or options to purchase any shares of Buyer's capital stock,
whether by reason of stock split or combination or reclassification, dividend,
exchange, new consideration or otherwise, except (i) issuances of shares of
capital stock of Buyer the proceeds of which are applied in payment of the
Indebtedness, (ii) issuances of options for up to six hundred sixteen thousand
five hundred (616,500) shares of the common stock of Buyer under Buyer's 1994
Stock Option Plan (net of any shares the option for which is terminated in
connection with any such issuance) and issuances of shares of such common stock
upon exercise thereof or of any options scheduled on Exhibit I to the Purchase
Agreement, (iii) consummation of issuance of shares payment for which has been
received by Buyer but not yet cleared as of the date of this Note, and (iv)
issuances of shares of common stock of Buyer the proceeds of which are applied
in payment of the Closing Notes.
(b) declare or pay any dividends or make any other payment or
distribution, either in cash or property, on or in purchase, redemption or
retirement of any shares of Buyer's capital stock of any class or any warrants,
rights or options to acquire any such shares by purchase, conversion or
otherwise, except, provided that when made, no Default exists hereunder, amounts
due under redemption provisions under Repurchase Agreements entered into on the
Closing Date with management personnel of the Company with respect to an
aggregate of not more than four hundred twenty-five thousand four hundred
fifty-one (425,451) shares of the common stock of Buyer.
4.3 Restricted Company Issuances and Distributions. Buyer will
cause the Company to not:
(a) issue any shares of the Company's capital stock of any
class or any warrants, rights or options to purchase any shares of the Company's
capital stock, whether by reason of stock split or combination or
reclassification, dividend, exchange, new consideration or otherwise;
(b) declare or pay any dividends or make any other payment or
distribution, either in cash or property, on or in purchase, redemption or
retirement of any shares of the Company's capital stock, or make any other
payment or distribution, either directly or indirectly, in respect of the
Company's capital stock or otherwise, including without limitation for goods or
services, to Buyer or to any Affiliate of Buyer, except (i) payments equal to
state and federal income tax liability on Buyer's consolidated tax returns
resulting from the Company's operations, made on the due date of the applicable
return, (ii) payments when and as due under the Spell Employment Agreement,
(iii) provided that when made, no Default exists hereunder, payments equal to
amounts due under redemption provisions under Repurchase Agreements entered into
on the Closing Date with management personnel of the Company with respect to an
aggregate of not more than four hundred twenty-five thousand four hundred
fifty-one (425,451) shares of the common stock of Buyer, (iv) payments applied
by Buyer in payment of the Indebtedness, and (v) payments not to exceed One
Hundred Eighty- Eight Thousand Dollars ($188,000) annually to fund normal
operating expenses of Buyer.
4.4 Mergers, Consolidations and Sales of Assets. Buyer will
cause the Company to not (i) consolidate with or be a party to a merger with any
other corporation, or (ii) sell, lease or otherwise dispose of all or any
substantial part of its assets.
4.5 Guaranties. Buyer will not, and will cause the Company to
not, become or be liable in respect of any Guaranty except Guaranties entered
into in the ordinary course of the Business, Buyer's Guaranty of the Redemption
Note, Buyer's Guaranty of any Senior Obligations and Guaranties of Buyer of
loans to management personnel of the Company for the purchase of an aggregate of
not more than four hundred twenty-five thousand four hundred fifty-one (425,451)
shares of the common stock of Buyer.
4.6 Transactions with Affiliates. Buyer will, and will cause
the Company to, not enter into or be a party to any transaction or arrangement
with any Affiliate (including without limitation the purchase from, sale to or
exchange of property with, or the rendering of any service by or for, any such
Affiliate), except pursuant to the reasonable requirements of such party's
business and upon fair and reasonable terms no less favorable to such party than
would obtain in a comparable arm's-length transaction with a person other than
an Affiliate. The Spell Employment Agreement and the Closing Notes are deemed to
meet the requirements of this Section 4.6.
4.7 Reports and Rights of Inspection. Buyer will, and will
cause the Company to, keep proper books of record and account in which full and
correct entries will be made of all dealings or transactions of or in relation
to the business and affairs of Buyer or the Company, in accordance with
generally accepted accounting principles consistently applied (except for
changes in application disclosed in the financial statements furnished to the
holder hereof pursuant to this Section 4.7 and concurred in by the independent
public accountants referred to in (b) hereof), and will furnish to the holder
hereof:
(a) As soon as available and in any event within forty-five
(45) days after the end of each quarterly fiscal period of each fiscal year
consolidated and consolidating balance sheets of Buyer and the Company as of the
close of such period, and consolidated and consolidating statements of income
and retained earnings and statements of cash flows of Buyer and the Company for
the quarterly fiscal period then ending and for the portion of the fiscal year
ending with such period in each case setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail and certified by an authorized financial officer of Buyer to
the effect that (except for the exclusion in unaudited quarterly financial
statements of certain footnote and other information normally presented with
annual audited financial statements, and subject to changes resulting from
year-end adjustments) such financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied (except for
changes in application in which the accountants referred to in clause (b) hereof
concur) and present fairly the financial condition of Buyer and the Company.
(b) As soon as available and in any event within ninety (90)
days after the close of each fiscal year of Buyer consolidated and consolidating
balance sheets of Buyer and the Company as of the close of such fiscal year, and
consolidated and consolidating statements of income and retained earnings and
statements of cash flows of Buyer and the Company for such fiscal year, in each
case setting forth in comparative form the figures for the preceding fiscal
year, all in reasonable detail and accompanied by an opinion thereon of a firm
of independent public accountants of recognized national standing selected by
Buyer to the effect that the financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except for changes in application in which such accountants concur and as are
noted therein) and present fairly the financial condition of Buyer and the
Company and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, includes such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances.
(c) Promptly upon receipt thereof, each interim or special
audit made by independent accountants of the books of Buyer or the Company.
(d) Promptly upon their becoming available, each financial
statement, report, notice or proxy statement sent by Buyer to stockholders
generally, and each report and any registration statement or prospectus filed by
Buyer with Nasdaq or any securities exchange or the Securities Exchange
Commission or any successor agency, and copies of any orders in any proceedings
to which Buyer or the Company is a party issued by any governmental agency,
federal or state, having jurisdiction over Buyer or the Company.
(e) Within the periods provided in paragraphs (a) and (b)
above, a certificate of an authorized financial officer of Buyer stating that
such officer has reviewed the provisions of this Note and setting forth, to the
best of such officer's knowledge, whether there existed as of the date of such
financial statements and whether there exists on the date of the certificate or
existed at any time during the period covered by such financial statements any
Default or any condition which but for the passage of time or the giving of
notice or both would constitute a Default and, if any such condition or event
existed during such period or exists on the date of the certificate, specifying
the nature and period of existence thereof and the action Buyer has taken or is
taking and proposes to take with respect thereto;
(f) The annual plans and operating projections Buyer and the
Company furnish to CIT when and as so furnished.
5. Subordination. Notwithstanding anything to the contrary contained
herein, this Note is in all respects subject to the terms and provisions of the
Subordination Agreement. No right of any present or future holder of the Senior
Credit Facility to enforce subordination as herein provided will at any time or
in any way be prejudiced or impaired by any failure to act on the part of Buyer
or the Company, or by any noncompliance by Buyer or the Company with the terms,
provisions and covenants of this Note, regardless of any knowledge thereof that
any such holders of the Senior Credit Facility may have or with which they may
be otherwise charged. The provisions of this Section 5 are solely for the
purpose of defining the relative rights of the holders of the Senior Credit
Facility on the one hand, and the holder hereof on the other hand, and nothing
in this Section 5 will impair, as between Buyer or the Company and the holder
hereof as applicable, the obligations of Buyer and the Company to pay to the
holder hereof Indebtedness in accordance with the remaining terms of this Note,
nor will anything herein prevent the holder hereof from exercising all remedies
otherwise permitted by applicable law or hereunder upon any Default, subject to
the rights, if any, of the holders of the Senior Credit Facility as herein
provided. Without limiting the foregoing, no suspension of any payment of
Indebtedness pursuant to the provisions of this Section 5 will suspend or defer
the due date of such payment as determined by the remaining provisions of this
Note.
6. Security Agreement.
6.1 Security Interest. In order to secure the Indebtedness,
Buyer hereby grants to the holder hereof a security interest in all shares of
stock owned by Buyer in the Company (and any and all additions thereto,
substitutions therefor, and proceeds thereof) (the "Pledged Stock").
6.2 Warranties and Obligations of Buyer. Buyer hereby warrants
and covenants to the holder hereof:
(a) The Pledged Stock represents 100% of the issued and
outstanding shares of capital stock of the Company.
(b) Buyer has and will maintain during the term of this Note
sole title to and beneficial ownership of the Pledged Stock, free of all liens,
charges, security interests and encumbrances (other than the security interest
created hereby and under the Senior Pledge), and has full power and authority to
subject the Pledged Stock to the security interest created hereby.
(c) Buyer will hereafter from time to time execute and deliver
such financing statements, assignments separate from certificates and other
instruments or documents, deliver the certificates representing the Pledged
Stock to the holder hereof upon termination of the Senior Pledge and perform
such other acts as the holder hereof may reasonably request to establish,
protect and maintain a perfected security interest in the Pledged Stock and an
ability to effectively enforce its remedies hereunder with respect to the
Pledged Stock. Buyer will at all times cause all certificates representing the
Pledged Stock to include a legend referencing this Note and the security
interest of the holder hereof provided hereunder.
6.3 Priority. The holder of this Note by acceptance hereof
agrees that the security interest granted hereunder in the Pledged Stock is
subordinate and junior in interest and priority to the Senior Pledge.
6.4 Nonimpairment. The holder hereof may from time to time,
without notice to Buyer, and without impairing or affecting the security
interest created hereby: (a) acquire a security interest in any property in
addition to the Pledged Stock, or release any such interest so acquired or
release any security interest in any of the Pledged Stock, or permit any
substitution or exchange for such property or any part thereof; (b) acquire the
primary or secondary liability of any party or parties with respect to all or
any of the Indebtedness, or release, modify, or compromise the same or any part
thereof; (c) modify, extend or renew for any period any of the Indebtedness; and
(d) resort to the Pledged Stock for payment of the Indebtedness whether or not
the holder hereof has resorted to any other collateral or proceeding against any
party primarily or secondarily liable on the Indebtedness.
6.5 Voting Rights. Buyer hereby grants to the holder hereof an
irrevocable proxy, coupled with an interest, to vote any or all of the Pledged
Stock, which proxy may be exercised by the holder hereof only at such time as a
Default in the payment of principal under this Note is continuing and no Senior
Pledge is in effect. Such proxy will remain in effect until this Note is
satisfied in full. Except for those instances where the holder hereof exercises
such proxy, Buyer will be entitled to exercise the voting power with respect to
the Pledged Stock consistent with the terms or purposes of this Note.
6.6 Remedies. In the event a Default hereunder has occurred
and is continuing, the holder hereof will have, in addition to any other rights
and remedies a secured party can assert under the Minnesota Uniform Commercial
Code and to the extent not inconsistent with nonwaivable provisions thereof, the
following rights and remedies, without having to give notice except as is
hereinafter specifically provided:
(a) The holder hereof may sell the Pledged Stock, or any part
thereof, at a public or private sale, following the notice hereinafter provided,
for cash, upon credit, or for future delivery at such price or prices as the
holder hereof deems satisfactory. The holder hereof, or any parties related to
or affiliated with the holder hereof, may purchase any or all of the Pledged
Stock sold at a public sale. The holder hereof is authorized at any sale, if the
holder hereof deems it advisable to do so, to restrict the prospective bidders
or purchasers to persons who will represent and agree that they are purchasing
for their own account for investment, and not with a view to the distribution or
sale of any of the Pledged Stock. Upon any such sale, the holder hereof will
have the right to deliver, assign, and transfer to the purchaser thereof the
Pledged Stock so sold. Each purchaser at any such sale will hold the property
sold absolutely free from any claim or right of Buyer of whatsoever kind,
including any equity or right of redemption of Buyer which Buyer has under any
rule of law or statute now existing or hereafter adopted; and as to such
purchaser, Buyer hereby specifically waives all such rights of redemption, of
stay, or of appraisal, which might in any way affect such purchaser. The holder
hereof will give Buyer at least ten (10) days' written notice of intention to
make such public or private sale, which notice will state the time and place
fixed for such public sale or the time after which such private sale may be
consummated and whether the sale is to be public or private. At any such sale
the Pledged Stock may be sold in one lot as an entirety or in separate parcels,
as the holder hereof may determine. In case of any sale on credit or for future
delivery, the Pledged Stock so sold may be retained by the holder hereof until
the selling price is paid by the purchaser thereof, and the holder hereof will
not incur any liability in case of the failure of such purchaser to take up and
pay for the Pledged Stock so sold, and in case of any such failure, such Pledged
Stock may be again sold upon like notice. The holder hereof will not be
obligated to complete any sale for which the holder hereof sends out notice and
may, without notice or publication, adjourn any sale or cause the same to be
adjourned by announcement at the time and place fixed for such sale, and such
sale may thereafter be made at the time and place to which the same has been so
adjourned.
(b) The holder hereof, instead of exercising the power of
nonjudicial sale herein conferred, may proceed by a suit or suits at law or in
equity to foreclose the pledge and sell the Pledged Stock, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(c) Without limiting the rights of the holder hereof under any
other provision of this Note, and in addition thereto, Buyer will be obligated,
to the maximum extent permitted by law, if a Default is continuing and if
counsel for the holder hereof determines that it is necessary for the lawful
sale of the Pledged Stock in a commercially reasonable manner, upon written
request from the holder hereof, to vote its shares to cause the Company, at the
Company's or Buyer's expense, to prepare, file and cause to become effective
promptly, a registration statement complying with the Securities Act of 1933, as
amended, for the public sale of such of the Pledged Stock as the holder hereof
may elect, and to take comparable action to permit such sales under the
securities laws of such state jurisdictions as the holder hereof may designate.
If such registration statement is filed, Buyer further will be obligated to vote
its shares to cause the Company, at the Company's or Buyer's expense, to enter
into and perform its obligations under one or more underwriting agreements in
connection therewith, containing customary representations, warranties,
covenants, and indemnities and contribution provisions if requested by the
holder hereof. Buyer will be obligated to vote its shares to cause the Company,
at the Company's or Buyer's expense, (i) to keep any such registration statement
and related prospectus current and in compliance with applicable federal and
state securities laws so long as required to satisfy applicable prospectus
delivery requirements and (ii) at the request of the holder hereof at any time
after the effective date of any such registration statement, to file
post-effective amendments to such registration statement so that sales of
Pledged Stock by the holder hereof will be covered by a current prospectus and
can be made in compliance with all applicable federal and state securities laws.
(d) Buyer further will be obligated to (i) take such action as
is necessary to cause the Company to delivery to the holder hereof such
information as the holder hereof reasonably requests for inclusion in any
registration statement, prospectus or offering memorandum or in any preliminary
prospectus or preliminary offering memorandum or any amendment or supplement to
any thereof or in any other writing prepared in connection with the offer, sale
or resale of all or any portion of the Pledged Stock and to deliver such
information regarding Buyer as the holder hereof reasonably requests, which
information will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated or necessary to make such
information not misleading, and (ii) vote its shares to do or cause to be done
all such other acts and things as may be necessary to make such offer, sale or
resale of all or any portion of the Pledged Stock valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental agencies or instrumentalities, domestic or foreign, having
jurisdiction over any such offer, sale or resale.
(e) Without limiting paragraphs (c) and (d) of this Section
6.6, if the holder hereof decides to exercise its right to sell all or any of
the Pledged Stock, upon written request Buyer will from time to time take such
action as is necessary to cause to be furnished to the holder hereof all such
information as the holder hereof may request and as is accessible to Buyer in
order to qualify such Pledged Stock as exempt securities, or the sale or release
of such Pledged Stock as exempt transactions, under federal or state securities
laws. Buyer will be obligated to take such action as is necessary to cause the
Company to allow the holder hereof and any underwriter access at reasonable
times and places to the books, records and premises of the Company; Buyer
further will be obligated to assist, and take such action as is necessary to
cause the Company to assist the holder hereof, any underwriter, any agent of any
thereof, and any counsel, accountant or other expert for any thereof, in
inspection, evaluation, and any other "due diligence" action of or with respect
to any such books, records and premises; and Buyer further will be obligated to
cause any independent public accountant for the Company to furnish a letter to
the holder hereof and underwriters in customary form and covering matters of the
type customarily covered by letters of accountants for issuers to underwriters.
(f) Buyer further acknowledges the impossibility of
ascertaining the amount of damages which would be suffered by the holder hereof
by reason of the failure by Buyer to perform any of the covenants contained in
this Section and, consequently, agrees that, if Buyer fails to perform any of
such covenants, the holder hereof will be entitled to equitable relief for the
enforcement of the provisions of this Section 6.6. Buyer will indemnify the
holder hereof for any and all fees, charges, reimbursements, judgments or other
expenses incurred by the holder hereof due to any failure of Buyer to perform
its obligations under this Section 6.6.
(g) Notwithstanding the foregoing provisions of this Section
6.6, the holder of this Note will not be permitted to exercise any of the
foregoing rights or remedies contained or referenced in this Section 6.6 for so
long as any Senior Pledge remains in effect without the prior written consent of
the holder thereof.
6.7 Application of Proceeds. The proceeds of any sale of the
Pledged Stock hereunder will be applied by the holder hereof:
(a) first, to the payment of the costs and expenses of such
sale, including reasonable attorneys' fees and all expenses and advances made or
incurred by it in connection therewith;
(b) second, to the payment of the Indebtedness;
(c) finally, to the payment to Buyer or its successors and
assigns of any surplus then remaining from such proceeds.
(d) The holder hereof will not be required to make any
allocation or distribution to Buyer of proceeds from sale except from collected
funds after satisfaction or release of all indemnification or other payment
obligations that may be asserted against the holder hereof or such proceeds in
connection with such sale. Any collected funds retained pursuant to this
provision will be promptly deposited or invested in Permitted Investments until
disbursed in accordance herewith.
7. Default, Remedies
7.1 Default. Any one or more of the following constitutes a
Default as that term is used herein:
(a) Failure of Buyer to pay any principal amount or interest
hereunder when due and continuation of such condition for fifteen (15) days
after written notice thereof by the holder hereof to Buyer;
(b) Failure to perform any obligation of Buyer hereunder other
than for the payment of money and continuation of such condition for thirty (30)
days after written notice thereof by the holder hereof to Buyer;
(c) Failure of the Company to pay any principal amount or
interest under the Redemption Note when due and continuation of such condition
for fifteen (15) days after written notice thereof by the holder thereof to the
Company;
(d) Failure to perform any obligation of the Company under the
Redemption Note other than for the payment of money and continuation of such
condition for thirty (30) days after written notice thereof by the holder
thereof to the Company;
(e) Failure of the Company to pay any amount under the Senior
Obligations when due for so long as such condition continues;
(f) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against Buyer or the
Company and, if instituted against Buyer or the Company are consented to or are
not dismissed within sixty (60) days after such institution; or
(g) Buyer or the Company becomes insolvent or bankrupt,
generally does not pay its debts as they become due or makes an assignment for
the benefit of creditors, or Buyer or the Company applies for or consents to the
appointment of a custodian, trustee or receiver for Buyer or the Company or for
the major part of the property of either, or a custodian, trustee or receiver is
appointed for Buyer or the Company or for the major part of the property of
either and is not discharged within sixty (60) days after such appointment.
7.2 Acceleration of Maturity. When any Default described in
Sections 7.1(b), (d) or (g) has happened and is continuing, and in the case of
Section 7.1(b) or (d) provided no Senior Obligation is then outstanding, the
holder hereof may, by written notice to the Company, declare the entire
principal and all interest accrued hereunder to be, and the same will thereupon
become, immediately due and payable, without any presentment, demand, protest or
other notice of any kind. When a Default described in Section 7.1 (f) has
occurred, the entire principal and all interest accrued hereunder will thereupon
become immediately due and payable without presentment, demand, protest or other
notice of any kind.
7.3 Costs of Enforcement. Upon a Default, Buyer will be
obligated to pay all costs of collection and enforcement of the rights and
remedies of the holder hereof, including court costs and attorneys' fees,
whether or not legal proceedings are commenced.
7.4 Waivers. Buyer waives presentment for payment, demand,
protest, notice of protest and notice of dishonor. No delay by the holder hereof
in exercising any right or remedy hereunder, at law or in equity will operate as
a waiver of such right or remedy and no single or partial exercise of any such
right or remedy will preclude any further exercise thereof, or the exercise of
any other rights or remedies.
8. Notices. Any notice, request, instruction or other document to be
given hereunder by Buyer or the holder of this Note to the other party will be
in writing and delivered personally or by telephonic facsimile transmission or
sent by registered or certified mail, postage prepaid (and if by telephonic
facsimile transmission with a copy sent by mail),
if to the holder of this Note to:
Bridgewater Resources Corp.
c/o BRC Management Corp.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx
Suite 3400, Plaza VII
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
if to Buyer to:
Discus Acquisition Corporation
0000 Xxxxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx and Xxxxxx
2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
or at such other address for a party as may be specified by like notice. Any
notice which is delivered personally or by telephonic facsimile transmission in
the manner provided herein will be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party (or its agent for
notices hereunder). Any notice which is addressed and mailed in the manner
herein provided will be conclusively presumed to have been duly given to the
party to which it is addressed at the close of business, local time of the
recipient, on the third day after the day it is so placed in the mail.
9. Arbitration. Subject to the last sentence of this Section, any
controversy or claim arising out of or relating to any provisions of this Note
or the breach hereof, unless resolved by mutual agreement of the parties, will
be finally settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect on the effective date of
this Agreement by a single arbitrator appointed in accordance with said Rules.
The determination of the arbitrator will be final and binding upon the parties
to the arbitration and judgment upon the award rendered by the arbitrator will
be entered in any court of competent jurisdiction. The place of arbitration will
be Minneapolis, Minnesota. Notwithstanding the foregoing, a party may seek
injunctive relief with respect to any controversy or claim arising out of or
relating to any provisions of this Note in any court of competent jurisdiction.
10. Governing Law; Consent to Jurisdiction. This Note will be construed
in accordance with and governed by the laws of the State of Minnesota applicable
to agreements made and to be performed in such jurisdiction without reference to
conflicts of law principles. Buyer by execution and delivery of this Note, and
the holder of this Note by acceptance hereof, each irrevocably consents that any
legal action or proceeding against it under, arising out of or in any manner
relating to this Note may be brought only in an arbitration proceeding as
provided in Section 9 or in a court of the State of Minnesota or in the United
States District Court for the District of Minnesota. Each of Buyer and the
holder of this Note further expressly and irrevocably assents and submits to the
personal jurisdiction of the arbitrators selected pursuant to Section 9 or any
of such courts in any such action or proceeding. Each of Buyer and the holder of
this Note further irrevocably consents to the service of any complaint, summons,
notice or other process relating to any such action or proceeding by delivery
thereof to it by hand or by mail in the manner provided for in Section 8 hereof.
Each of Buyer and the holder of this Note further hereby expressly and
irrevocably waives any claim or defense in any action or proceeding based on any
alleged lack of personal jurisdiction, improper venue or forum non conveniens or
any similar basis.
11. Neither this Note nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
12. This Note is not an obligation of the Company.
IN WITNESS WHEREOF, Buyer has caused this Note to be duly executed and
delivered on the day and year first above written.
DISCUS ACQUISITION CORPORATION
By
Its
Exhibit H
WARRANT FOR PURCHASE OF
SECURITIES
OF
DISCUS ACQUISITION CORPORATION
December __, 1995
For value received, Bridgewater Resources Corp. (it and its registered
assigns hereinafter referred to as the "Holder") is entitled to purchase from
Discus Acquisition Corporation, a Minnesota corporation (the "Company"), on or
after April 1, 1996 until and to the extent this Warrant expires or terminates
by its terms, one million six hundred fifty-nine thousand seven hundred
twenty-one (1,659,721) fully paid and nonassessable shares of the Company's
common stock, no par value, (such class of stock being hereinafter referred to
as the "Common Stock" and such Common Stock as may be acquired upon exercise
hereof being hereinafter referred to as the "Warrant Stock"), at an aggregate
price of Ten Thousand Dollars ($10,000), and at a ratable price per share in
accordance with such aggregate price.
This Warrant has been issued to the Holder by the Company pursuant to a
Stock Purchase Agreement between the Company and the named Holder dated November
22, 1995 (as amended, the "Purchase Agreement").
This Warrant is subject to the following provisions, terms and
conditions:
1. (a) This Warrant will terminate upon payment in full of that certain
Stock Purchase Note dated December __, 1995 issued by the Company to the order
of the named Holder pursuant to the Purchase Agreement (the "Stock Purchase
Note") on or before March 31, 1996.
(b) In the event the Stock Purchase Note is paid in full
within any month scheduled below, this Warrant will expire and will no longer be
exercisable with respect to the number of shares of Warrant Stock scheduled
opposite the applicable month, or, if less, the total number of shares of
Warrant Stock then remaining available for exercise hereunder, in each case
subject to adjustment pursuant to Section 3:
Number of Shares
Payment Period Terminated
April, 1996 1,409,102
May, 1996 1,142,486
June, 1996 858,291
July, 1996 554,720
August, 1996 229,719
(c) This Warrant will expire and will no longer be exercisable
with respect to all shares of Warrant Stock for which this Warrant is then
unexercised upon payment in full of the Stock Purchase Note and that certain
Redemption Note dated December __, 1995 issued by Peerless Chain Company to the
order of the named Holder pursuant to the Stock Purchase Agreement.
2. The rights represented by this Warrant may be exercised by the
Holder, in whole or in part, by written notice of exercise delivered to the
Company accompanied by the surrender of this Warrant (properly endorsed if
required) at the principal office of the Company and upon payment to it, by
cash, certified check or bank draft, of the warrant exercise price for such
shares. The Warrant Stock so purchased will be deemed to be issued as of the
close of business on the date on which this Warrant has been surrendered and
payment has been made for such Warrant Stock as aforesaid. Certificates for the
shares of the Warrant Stock so purchased will be delivered to the Holder within
fifteen (15) days after the rights represented by this Warrant have been so
exercised, and, unless this Warrant has expired, a new Warrant representing the
number of shares of the Common Stock, if any, with respect to which this Warrant
has not been exercised will also be delivered to the Holder within such time.
Notwithstanding the foregoing, however, the Company will not be required to
deliver any certificates for shares of the Warrant Stock except in accordance
with the provisions and subject to the limitations of Section 6 below. In lieu
of issuance of any fractional share, the Company may pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the higher
of the Stock Price Standard (as defined in Section 4(a) below) in effect on the
date of exercise or the market price per share of Common Stock as of the close
of business on the date of exercise. For purposes hereof, "market price" means,
if the Common Stock is traded on a securities exchange or the Nasdaq National
Market System, the closing price of the Common Stock sales on such exchange or
the Nasdaq National Market System, or, if the Common Stock is otherwise traded
in the over-the-counter market, the closing bid price averaged over a period of
twenty (20) consecutive business days prior to the date as of which "market
price" is being determined. If at any time the Common Stock is not traded on an
exchange or the Nasdaq National Market System, or otherwise traded in the
over-the-counter market, the "market price" will be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within sixty (60) days preceding
the date as of which the determination is to be made, or (ii) the fair value
thereof on the date as of which the determination is to be made determined in
good faith by the Board of Directors of the Company.
3. The Company covenants and agrees that all shares of the Warrant
Stock that may be issued upon the exercise of this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof. The Company
further covenants and agrees that until expiration of this Warrant, the Company
will at all times have authorized, and reserved for the purpose of issuance or
transfer upon exercise of this Warrant, a sufficient number of shares of the
Common Stock to provide for the exercise of this Warrant.
4. The foregoing provisions are, however, subject to the following:
(a) The "Stock Price Standard" means One and 10/100 Dollars
($1.10) per share, subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Stock Price Standard, the Holder will
thereafter be entitled to purchase, at the Stock Price Standard resulting from
such adjustment, the number of shares obtained by multiplying the Stock Price
Standard in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Stock Price Standard resulting from such adjustment.
(b) Except for options to purchase shares of Common Stock
scheduled on Exhibit I to the Purchase Agreement or hereafter granted pursuant
to the Company's 1994 Stock Option Plan or other similar plans adopted by the
Company and except for shares of Common Stock issued upon the exercise thereof
(provided that the aggregate number of shares thus covered by unexercised
options and thus issued are not in excess of one million one hundred eighty-one
thousand seven hundred fifty (1,181,750) (appropriately adjusted to reflect any
stock splits, stock dividends, reorganizations, consolidations and similar
changes)), if and whenever the Company issues or sells any shares of its Common
Stock for a consideration per share less than the Stock Price Standard in effect
immediately prior to the time of such issue or sale, then, forthwith upon such
issue or sale, the Stock Price Standard will be reduced to the price (calculated
to the nearest $.001) determined by dividing (1) an amount equal to the sum of
(aa) the number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing Stock Price Standard, and (bb) the
consideration, if any, received by the Company upon such issue or sale, by (2)
an amount equal to the sum of (aa) the number of shares of Common Stock
outstanding immediately prior to such issue or sale and (bb) the number of
shares thus issued or sold.
For the purposes of this Section 4(b), the following
provisions (i) to (viii), inclusive, will also be applicable:
(i) In case at any time the Company grants (whether
directly or by assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, (a) Common Stock or (b) any
obligations or any shares of stock of the Company which are convertible into, or
exchangeable for, Common Stock (any of such obligations or shares of stock being
hereinafter called "Convertible Securities"), whether or not such rights or
options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined by dividing (x) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of such rights
or options, plus, in the case of such Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue of
such Convertible Securities and upon the conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or options) is
less than the Stock Price Standard in effect immediately prior to the time of
the granting of such rights or options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such rights or options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options will (as of the
date of granting of such rights or options) be deemed to have been issued for
such price per share. Except as provided in Section 4(b)(viii) below, no further
adjustments of the Stock Price Standard will be made upon the actual issue of
such Common Stock or of such Convertible Securities upon exercise of such rights
or options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) In case the Company issues or sells (whether directly
or by assumption in a merger or otherwise) any Convertible Securities, whether
or not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange (determined by dividing (x) the total amount received or receivable
by the Company as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) is less than the Stock Price
Standard in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities will (as of the date of the issue or
sale of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that (a) except as provided in
Section 4(b)(viii) below, no further adjustments of the Stock Price Standard
will be made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities, and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any rights to subscribe for
or to purchase or any option to purchase any such Convertible Securities for
which adjustments of the Stock Price Standard have been or are to be made
pursuant to other provisions of this Section 4(b), no further adjustment of the
Stock Price Standard will be made by reason of such issue or sale.
(iii) In case the Company declares a dividend or makes any
other distribution upon any capital stock of the Company payable in Common Stock
or Convertible Securities, or in any rights or options to purchase any Common
Stock or Convertible Securities, any such Common Stock or Convertible
Securities, or any such rights or options, as the case may be, issuable in
payment of such dividend or distribution will be deemed to have been issued or
sold without consideration.
(iv) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities are issued or sold for cash, the consideration received
therefor will be deemed to be the amount received by the Company therefor,
without deducting therefrom any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or Convertible Securities
are issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be deemed to be the
fair value of such consideration as determined by the Board of Directors of the
Company, without deducting therefrom any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase such Common Stock or Convertible Securities are
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration therefor will be deemed
to be the fair value as determined by the Board of Directors of the Company of
such portion of the assets and business of the non-surviving corporation or
corporations as such Board determines to be attributable to such Common Stock,
Convertible Securities, rights or options, as the case may be. In the event of
any consolidation or merger of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or substantially all of
the assets of the Company for stock or other securities of any other
corporation, the Company will be deemed to have issued a number of shares of its
Common Stock for stock or securities of the other corporation computed on the
basis of the actual exchange ratio on which the transaction was predicated and
for a consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and if any
such calculation results in adjustment of the Stock Price Standard, the
determination of the number of shares of Common Stock issuable upon exercise
hereof immediately prior to such merger, conversion or sale, for purposes of
Section 4(d) below, will be made after giving effect to such adjustment of the
Stock Price Standard.
(v) In case the Company takes a record of the holders of
its Common Stock for the purpose of entitling them (a) to receive a dividend or
other distribution payable in Common Stock or in Convertible Securities, or in
any rights or options to purchase any Common Stock or Convertible Securities, or
(b) to subscribe for or purchase Common Stock or Convertible Securities, then
the date of such record will be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such rights of subscription or purchase, as the case may
be.
(vi) The number of shares of Common Stock outstanding at
any given time will not include shares owned or held by or for the account of
the Company, and the disposition of any such shares will be considered an issue
or sale of Common Stock for the purpose of this Section 4(b). The number of
shares of Common Stock outstanding at any given time will be deemed to include
shares of Common Stock deemed issued pursuant to Section 4(b)(i) or (ii), and
any additional shares of Common Stock covered by outstanding rights to subscribe
for or purchase, or any outstanding options or warrants for the purchase of,
Common Stock.
(vii) Except as provided in Sections 4(b)(i) and (ii), the
consideration received by the Company upon issuance or sale of shares of Common
Stock will be deemed to include the consideration received upon issuance of
Convertible Securities converted into such shares of Common Stock, and the
consideration received upon issuance of any rights to subscribe for or to
purchase, or options for the purchase of, such shares of Common Stock or such
Convertible Securities.
(viii) If (x) the purchase price provided for in any right
or option referred to in Section 4(b)(i), or (y) the additional consideration,
if any, payable upon the conversion or exchange of Convertible Securities
referred to in Section 4(b)(i) or (ii), or (z) the rate at which any Convertible
Securities referred to in Section 4(b)(i) or (ii) are convertible into or
exchangeable for Common Stock, changes at any time (other than under or by
reason of provisions designed to protect against dilution), the Stock Price
Standard then in effect hereunder will forthwith be increased or decreased to
such Stock Price Standard as would have obtained had the adjustments made upon
the issuance of such rights, options or Convertible Securities been made upon
the basis of (a) the issuance of the number of shares of Common Stock
theretofore actually delivered upon the exercise of such options or rights or
upon the conversion or exchange of such Convertible Securities, and the total
consideration received therefor, and (b) the issuance at the time of such change
of any such options, rights, or Convertible Securities then still outstanding
for the consideration, if any, received by the Company therefor and to be
received on the basis of such changed price; and on the expiration of any such
option or right or the termination of any such right to convert or exchange such
Convertible Securities, the Stock Price Standard then in effect hereunder will
forthwith be increased to such Stock Price Standard as would have obtained had
the adjustments made upon the issuance of such rights or options or Convertible
Securities been made upon the basis of the issuance of the shares of Common
Stock theretofore actually delivered (and the total consideration received
therefor) upon the exercise of such rights or options or upon the conversion or
exchange of such Convertible Securities. If (xx) the purchase price provided for
in any right or option referred to in Section 4(b)(i), or (yy) the additional
consideration, if any, payable upon conversion or exchange of Convertible
Securities referred to in Section 4(b)(i) or (ii), or (zz) the rate at which any
Convertible Securities referred to in Section 4(b)(i) or (ii) are convertible
into or exchangeable for Common Stock, decreases at any time under or by reason
of provisions with respect thereto designed to protect against dilution, then in
case of the delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible Security, the
Stock Price Standard then in effect hereunder will forthwith be decreased to
such Stock Price Standard as would have obtained had the adjustments made upon
the issuance of such right, option or Convertible Security been made upon the
basis of the issuance of (and the total consideration received for) the shares
of Common Stock delivered as aforesaid.
(c) In case the Company at any time subdivides the outstanding
Common Stock into a greater number of shares or declares a dividend payable in
the Common Stock, the Stock Price Standard in effect immediately prior to such
subdivision will be proportionately reduced, and conversely, in case the
outstanding Common Stock are combined into a smaller number of shares, the Stock
Price Standard in effect immediately prior to such combination will be
proportionately increased.
(d) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation is effected in such a way that holders of the Common Stock
are entitled to receive stock, securities or assets ("Substituted Property")
with respect to or in exchange for such Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, the Holder
will have the right to purchase and receive upon the basis and upon the terms
and conditions specified in this Warrant and in lieu of the Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such Substituted Property as would have been issued
or delivered to the Holder if it had exercised this Warrant and had received
upon exercise of this Warrant the Common Stock prior to such reorganization,
reclassification, consolidation, merger or sale. The Company will not effect any
such consolidation, merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets assumes by
written instrument executed and mailed to the Holder at the last address of the
Holder appearing on the books of the Company, the obligation to deliver to the
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase.
(e) If the Company takes any other action, or if any other
event occurs which does not come within the scope of the provisions of Sections
4(b), (c) or (d), but which should result in an adjustment in the Stock Price
Standard and/or the number of shares subject to this Warrant in order to fairly
protect the purchase rights of the Holder, an appropriate adjustment in such
purchase rights will be made by the Company.
(f) Upon any adjustment of the Stock Price Standard and/or the
number of shares of Warrant Stock, the Company will give written notice thereof,
by first-class mail, postage prepaid, addressed to the Holder at the address of
the Holder as shown on the books of the Company, which notice will state the
Stock Price Standard resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(g) As used herein the term "Common Stock" means and includes
the Company's presently authorized Common Stock and also includes any capital
stock of any class of the Company hereafter authorized which is not limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Company; provided that
the shares receivable pursuant to exercise of this Warrant includes shares
designated as Common Stock of the Company as of the date of this Warrant, or, in
case of any reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in Section 4(d) above.
5. This Warrant will not entitle the Holder to any voting rights or
other rights as a stockholder of the Company.
6. The Holder, by acceptance hereof, represents and warrants that (a)
it is acquiring this Warrant for its own account for investment purposes only
and not with a view to its resale or distribution and (b) it has no present
intention to resell or otherwise dispose of all or any part of this Warrant
other than pursuant to registration under federal and state securities laws or
an exemption from such registration, the availability of which the Company will
determine in its sole discretion. The Company may condition such issuance or
sale, pledge, assignment or other disposition on the receipt from the party to
whom this Warrant is to be so transferred or to whom any shares of Warrant Stock
are to be issued or so transferred of any representations and agreements
requested by the Company in order to permit such issuance or transfer to be made
pursuant to exemptions from registration under federal and applicable state
securities laws. Each certificate representing this Warrant (or any part
thereof) and any shares of Warrant Stock will be stamped with appropriate
legends setting forth these restrictions on transferability. The Holder, by
acceptance hereof, agrees to give written notice to the Company before
exercising or transferring this Warrant or transferring any shares of the
Warrant Stock of the Holder's intention to do so, describing briefly the manner
of any proposed exercise or transfer. Within thirty (30) days after receiving
such written notice, the Company will notify the Holder as to whether such
exercise or transfer may be effected.
7. (a) If at any time during the period commencing April 1, 1996 and
ending on the date of final expiration of this Warrant or two (2) years after
the last exercise of this Warrant, whichever last occurs, the Company proposes
to register any of its securities under the Securities Act of 1933 (the
"Securities Act"), the Company will give to all registered holders of this
Warrant or the Warrant Stock (which term, for purposes of this Section 7, will
be deemed to include any securities into which the shares of Warrant Stock may,
by their terms, be converted) written notice of its intention in that regard and
use its best efforts to effect the registration under the Securities Act, if
such registration is permissible, of such shares of Warrant Stock as may be
specified by written notice from any of such holders delivered to the Company
within twenty (20) days after such notice is given (which notice will be deemed
to have been given upon the deposit thereof in first class or express U. S.
mail, postage pre-paid, addressed to each holder at the address of such holder
as shown in the books of the Company), provided, however, that (i) the Company
will not be required to include any such shares of Warrant Stock in any such
registration for any holder who is able to sell during a period of six months or
less all shares of Warrant Stock owned by such holder (or issuable to such
holder upon exercise of this Warrant) pursuant to Rule 144 under the Securities
Act (or similar rule or regulation); (ii) the Company will not be required to
include this Warrant in any such registration; (iii) the Company will not be
required to give such notice with respect to, or to include such shares of
Warrant Stock in, any such registration which is exclusively (y) a registration
of a stock option plan or other employee benefit plan or of securities issued or
issuable pursuant to any such plan, or (z) a registration of securities proposed
to be issued in exchange for securities or assets of, or in connection with a
merger or consolidation with, another corporation, (iv) the Company will not be
required to give such notice with respect to, or to include such shares of
Warrant Stock in, any such registration which is at the request or demand of any
holder or holders of its securities having contractual registration rights and
which does not include any issuance of securities by the Company; (v) the
Company will not be required to include in any such registration any securities
previously duly registered under the Securities Act; (vi) the Company may, in
its sole discretion, withdraw any such registration statement and abandon the
proposed offering in which any such holder had requested to participate; (vii)
if the offering to which the registration statement relates is to be distributed
by or through an underwriter, each such holder will agree, as a condition to the
inclusion of such holder's shares of Warrant Stock in such registration, to sell
the shares of Warrant Stock held by such holder to be so registered through such
underwriter on the same terms and conditions as the underwriter agrees to sell
securities on behalf of the Company and not to sell, transfer, pledge, assign or
otherwise dispose of any shares of Warrant Stock not sold by such holder in such
offering for such period (up to one hundred eighty (180) days after the
effective date of the registration statement) as may be required by the
underwriter, provided that the restrictions imposed by the underwriter on such
holders will not be more onerous than any such restriction imposed upon
affiliates of the Company; and (viii) if the offering to which the registration
statement relates is to be distributed by or through an underwriter and a
greater number of securities is offered for participation in the proposed
underwriting than in the opinion of the Company's underwriter can be
accommodated without significantly adversely affecting the proposed
underwriting, the amount of such securities otherwise to be included in the
underwritten offering on behalf of all persons other than the Company may be
reduced pro rata, in accordance with the securities proposed to be sold by each
such holder, or may be eliminated entirely from such underwritten public
offering. The costs and expenses of such offering, including but not limited to
legal fees, special audit fees, printing expenses, filing fees, fees and
expenses relating to qualifications under state securities or blue sky laws and
the premiums for insurance, if any, incurred by the Company in connection with
any registration made pursuant to this Section 7(a) will be borne entirely by
the Company; provided, however, that any holders participating in such
registration will bear their own underwriting discounts and commissions and the
fees and expenses of their own counsel or accountants in connection with any
such registration.
(b) If the Company receives a written request therefor from any record
holder or holders of this Warrant or shares of Warrant Stock constituting an
aggregate of at least 60% of the shares of Warrant Stock issued or issuable and
not previously duly registered under the Securities Act, the Company will
prepare and file a registration statement under the Securities Act on Form S-3
or any successor form promulgated by the Securities and Exchange Commission
("Form S-3") covering the shares of Warrant Stock which are the subject of such
request and use its best efforts to cause such registration statement to become
effective, provided Form S-3 is then available for use by the Company and such
record holder or holders. The Company will give to all registered holders of
this Warrant or the shares of Warrant Stock written notice of any such request
and use its best efforts to cover under such Form S-3 registration such shares
of Warrant Stock as may be specified by written notice from any such holders
delivered to the Company within twenty (20) days after such notice is given
(which notice will be deemed to have been given upon the deposit thereof in
first class or express U.S. Mail, postage pre-paid, addressed to each holder at
the address of such holder as shown in the books of the Company). Such holders
may exercise the foregoing registration right any number of times. The costs and
expenses of the offering, including but not limited to legal fees, special audit
fees, printing expenses, filing fees, fees and expenses relating to
qualifications under state securities or blue sky laws and the premiums for
insurance, if any, incurred by the Company in connection with the first Form S-3
registration made pursuant to this Section 7(b) will be borne by the Company;
provided, however, that any holders participating in such registration will bear
their own underwriting discounts and commissions and the fees and expenses of
their own counsel or accountants in connection with any such registration. The
costs and expenses of the offering incurred by the Company in connection with
each additional Form S-3 registration made pursuant to this Section 7(b) will be
borne by the holders participating in such registration pro rata according to
the number of shares of Warrant Stock included therein.
(c) In the event of any registration of a security pursuant to
this Section 7, the Company will indemnify each such holder, its officers and
directors and each person, if any, who controls such holder within the meaning
of Section 15 of the Securities Act against all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus (and as
amended or supplemented) relating to such registration, or caused by any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances under which they are made unless such statement or omission
was made in reliance upon and in conformity with information furnished in
writing to the Company by such holder expressly for use therein. The obligations
of the Company to register any of its securities in accordance with the
foregoing will be subject to the condition that each holder agrees in writing to
indemnify the Company, its officers and directors, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act, and
each underwriter of the shares of Warrant Stock so registered, and each person,
if any, who controls such underwriter within the meaning of Section 15 of the
Securities Act, with respect to losses, claims, damages and liabilities caused
by any untrue statement or omission made in reliance upon and in conformity with
information furnished in writing by such holder to the Company expressly for use
in such registration statement or prospectus, provided that the obligation of
each holder hereunder will not exceed the amount of proceeds received by such
holder from the sale of any securities registered under this Section 7.
(d) The Company will, at its expense (or at the expense of the
participating holders to the extent provided in Section 7(b)), also take
reasonable measures to qualify the shares of Warrant Stock included in any
registration statement pursuant to this Section 7 for sale under applicable blue
sky laws of such states as the Company determines are reasonably necessary for
the sale of such shares of Warrant Stock.
(e) Upon the exercise of registration rights pursuant to this
Section 7, each holder agrees to supply the Company with such information as may
be required by the Company to register or qualify such shares of Warrant Stock.
8. The Company will not, by amendment of its articles of incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of stock receivable on the exercise of this
Warrant above the amount payable therefor on such exercise, (b) will not take
any action that would result, by operation of the provisions of Section 4, in
decreasing the amount payable for any shares of Warrant Stock below the par
value therefor, and (c) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of this Warrant.
9. In the event of:
a. any taking by the Company of a record of the holders of the
Common Stock for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
b. any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
c. any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then and in each such event the Company will give
prior written notice to each Holder specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right,
and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or other securities) will be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up.
10. This Warrant will be transferable only on the books of the Company
by the Holder in person, or by duly authorized representative, on surrender of
this Warrant, properly assigned.
11. Any notice, request, instruction or other document to be given
hereunder by the Company or the Holder to any such other party will be in
writing and delivered personally or by telephonic facsimile transmission or sent
by registered or certified mail, postage prepaid (and if by telephonic facsimile
transmission with a copy sent by mail),
if to the Holder to:
Bridgewater Resources Corp.
c/o BRC Management Corp.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx
Suite 3400, Plaza VII
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
if to the Company to:
Discus Acquisition Corporation
0000 Xxxxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx and Xxxxxx
2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
or at such other address for a party as may be specified by like notice. Any
notice which is delivered personally or by telephonic facsimile transmission in
the manner provided herein will be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party (or its agent for
notices hereunder). Any notice which is addressed and mailed in the manner
herein provided will be conclusively presumed to have been duly given to the
party to which it is addressed at the close of business, local time of the
recipient, on the third day after the day it is so placed in the mail.
12. Subject to the last sentence of this Section, any controversy or
claim arising out of or relating to any provisions of this Warrant or the breach
hereof, unless resolved by mutual agreement of the parties, will be finally
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association in effect on the effective date of this
Agreement by a single arbitrator appointed in accordance with said Rules. The
determination of the arbitrator will be final and binding upon the parties to
the arbitration and judgment upon the award rendered by the arbitrator will be
entered in any court of competent jurisdiction. The place of arbitration will be
Minneapolis, Minnesota. Notwithstanding the foregoing, a party may seek
injunctive relief with respect to any controversy or claim arising out of or
relating to any provisions of this Warrant in any court of competent
jurisdiction.
13. This Warrant will be construed in accordance with and governed by
the laws of the State of Minnesota applicable to agreements made and to be
performed in such jurisdiction without reference to conflicts of law principles.
The Company by execution and delivery of this Warrant, and the Holder by
acceptance hereof, each irrevocably consents that any legal action or proceeding
against it under, arising out of or in any manner relating to this Warrant may
be brought only in an arbitration proceeding as provided in Section 12 or in a
court of the State of Minnesota or in the United States District Court for the
District of Minnesota. Each of the Company and the Holder further expressly and
irrevocably assents and submits to the personal jurisdiction of the arbitrators
selected pursuant to Section 12 or any of such courts in any such action or
proceeding. Each of the Company and the Holder further irrevocably consents to
the service of any complaint, summons, notice or other process relating to any
such action or proceeding by delivery thereof to it by hand or by mail in the
manner provided for in Section 11 hereof. Each of the Company and the Holder
further hereby expressly and irrevocably waives any claim or defense in any
action or proceeding based on any alleged lack of personal jurisdiction,
improper venue or forum non conveniens or any similar basis.
14. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer effective the date first above written.
DISCUS ACQUISITION CORPORATION
By
Its
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, ASSIGNED
OR OTHERWISE DISPOSED OF, AND NO TRANSFER OF THE SECURITIES WILL BE MADE BY THE
COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Exhibit I
OUTSTANDING BUYER OPTIONS
Number of Exercise
Optionee Shares(1) Price
Xxxxxxx X. Xxxxx 31,250(2) $ .32
50,000(3) 1.10
Xxxxxxx X. Xxxxxxxx 30,000(4) .29
18,000 .875
32,000(3) 1.10
Xxxxxxx X. Xxxxxx 10,000(4) .29
Xxxxxxx X. Xxxxx 190,000 1.35
40,000 .75
175,000(3) 1.10
Xxxxx X. Xxxxx 45,000 1.35
22,000 .75
18,000 .875
32,000(3) 1.10
Xxxxx X. Xxxxxxx 20,000 1.35
16,000 .75
18,000 .875
32,000(3) 1.10
Xxxxxxx X. Xxxxxxx 45,000 1.35
22,000 .75
18,000 .875
32,000(3) 1.10
Xxxxxx X. Xxxx 8,000 .94
Xxxxxxxx X. Xxxxxx 8,000 .94
Xxxxxxx X. Xxxxxx 3,000 .875
3,000(3) 1.10
Xxx xxx Xxxxxxxxxx 60,000(3) 1.10
Xxxxxx Xxxxxxx 40,000(3) 1.10
Xxxx Xxxxxxxx 33,000(3) 1.10
Xxxxxx Xxxxx 33,000(3) 1.10
Xxxx XxXxxxxx 27,500(3) 1.10
Xxxxxxx Xxxxxx 17,500(3) 1.10
Xxxxxxx Xxxxxx 17,500(3) 1.10
Xxxxxx Xxxx 17,500(3) 1.10
Xxxxxxx Xxxxxxxx 17,500(3) 1.10
(1) Except as otherwise indicated, all options have been granted under
Buyer's 1994 Stock Option Plan.
(2) Granted under Buyer's 1984 Stock Option Plan.
(3) Options are subject to obtaining shareholder approval.
(4) Not granted under any plan.
AMENDMENT
TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT, dated as of December 1, 1995, by and between
Bridgewater Resources Corp. ("Seller"), the sole shareholder of Peerless Chain
Company (the "Company"), and Discus Acquisition Corporation ("Buyer") amends
that certain Stock Purchase Agreement dated November 22, 1995 by and between
Seller and Buyer for the sale of the outstanding capital stock of the Company
(the "Agreement"). Except as otherwise provided herein, all capitalized terms
herein are as defined in the Agreement.
IN CONSIDERATION of the mutual promises and covenants contained herein,
the parties agree to amend the Agreement as follows:
1. The date under Sections 2.1 and 11.1(b) is amended to December
7, 1995.
2. For purposes of determining the Intercompany Debt Balance, the
Closing Balance Sheet and the Closing Net Worth, Closing will be
deemed to occur on November 30, 1995.
3. In the course of preparing the Closing Balance Sheet, the Seller Accountants
will determine the change in the net intercompany balance between Seller and the
Company from November 30, 1995 to the Closing Date, which determination will be
subject to review by the Buyer Accountants and resolution by the Accountant
Arbitrator of any unresolved issues between the Seller Accountants and the Buyer
Accountants with respect thereto. The Purchase Price will be increased by the
amount of any increase in such intercompany balance, and any decrease in such
intercompany balance will be credited as a payment against the Purchase Price.
Buyer will pay Seller the amount of any such increase, and Seller will reimburse
Buyer any resulting overpayment of Purchase Price, in immediately available
funds promptly upon determination thereof. In the event of any delay in the
payment of such adjustment, such amount will bear interest from the due date
until paid in full at the default interest rate under the Note.
4. For purposes of Sections 10.2(b) and 10.7, the Closing Date will be deemed to
be November 30, 1995, except that the second sentence of Section 10.7 applies to
all covenants and agreements contained in the Agreement to be performed or
complied with at or prior to the Closing.
5. Section 1.3 of the Agreement will apply to both Section 1.2(a) and (b) of the
Agreement.
6. Except as set forth hereinabove, the Agreement remains in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed on its behalf as of the date first above written.
DISCUS ACQUISITION CORPORATION
By /s/ Xxxxxxx X. Xxxxx
Its CEO
BRIDGEWATER RESOURCES CORP.
By Xxxx X. Xxxxxx
Its CEO
STOCK PURCHASE AGREEMENT
BETWEEN
BRIDGEWATER RESOURCES CORP.
AND
DISCUS ACQUISITION CORPORATION
FOR THE CAPITAL STOCK OF
PEERLESS CHAIN COMPANY
DATED AS OF NOVEMBER 22, 1995
TABLE OF CONTENTS
Page
ARTICLE I SALE AND PURCHASE OF STOCK............................................................... 1
1.1 Sale of the Stock.................................................................... 1
1.2 Purchase Price....................................................................... 1
1.3 Payment of Purchase Price............................................................ 3
ARTICLE II CLOSING.............................................................................. 3
2.1 The Closing.......................................................................... 3
2.2 Deliveries of Seller................................................................. 3
2.3 Deliveries of Buyer.................................................................. 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER............................................. 5
3.1 Corporate Organization............................................................... 5
3.2 Capitalization....................................................................... 5
3.3 Authorization........................................................................ 6
3.4 Non-Contravention.................................................................... 6
3.5 Consents and Approvals............................................................... 6
3.6 Financial Statements................................................................. 7
3.7 Absence of Certain Changes or Events................................................. 7
3.8 Title to Assets...................................................................... 8
3.9 Real Properties...................................................................... 8
3.10 Commitments.......................................................................... 8
3.11 Bank Accounts; Powers of Attorney.................................................... 10
3.12 Insurance............................................................................ 10
3.13 Intellectual Property Rights......................................................... 10
3.14 Taxes................................................................................ 11
3.15 Employee Benefit Plans; ERISA........................................................ 11
3.16 Labor Matters........................................................................ 12
3.17 Environment.......................................................................... 13
3.18 Compliance with Laws................................................................. 14
3.19 Litigation........................................................................... 14
3.20 Equipment............................................................................ 14
3.21 Customers and Suppliers.............................................................. 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.............................................. 14
4.1 Buyer's Organization................................................................. 14
4.2 The Company's Authority.............................................................. 14
4.3 Due Authorization, Execution and Delivery by
Buyer; Effect of Agreement........................................................... 15
4.4 Due Authorization, Execution and Delivery by the
Company; Effect of Agreement......................................................... 15
4.5 Consents............................................................................. 16
4.6 HSR.................................................................................. 16
4.7 Litigation........................................................................... 16
4.8 Investment Intent.................................................................... 16
ARTICLE V COVENANTS OF SELLER.................................................................. 16
5.1 Cooperation and Assignments.......................................................... 16
5.2 Conduct of Business.................................................................. 17
5.3 Access............................................................................... 17
5.4 Intercompany Debt.................................................................... 17
5.5 Redemption........................................................................... 17
ARTICLE VI COVENANTS OF BUYER................................................................... 18
6.1 Cooperation and Assumption........................................................... 18
6.2 Buyer Financing...................................................................... 18
6.3 Lease Consents....................................................................... 18
6.4 Termination of Letters of Credit..................................................... 19
6.5 Company Bank Accounts................................................................ 19
ARTICLE VII ADDITIONAL COVENANTS................................................................. 19
7.1 Books and Records; Personnel......................................................... 19
7.2 Tax Returns, Payments of Taxes, Transfer Taxes
and Audits........................................................................... 20
7.3 Cooperation; Access to Information and Retention
of Records Concerning Taxes.......................................................... 21
7.4 Section 338(h)(10) Election with Respect to
Taxes................................................................................ 22
7.5 Allocation with Respect to Taxes..................................................... 22
7.6 Continuation of Insurance Coverages.................................................. 22
7.7 Additional Cooperation............................................................... 23
ARTICLE VIII CONDITIONS TO SELLER'S OBLIGATIONS................................................... 23
8.1 Representations, Warranties and Covenants of
Buyer................................................................................ 23
8.2 No Prohibition....................................................................... 23
8.3 Further Action....................................................................... 24
8.4 Deliveries........................................................................... 24
8.5 No Challenges........................................................................ 24
8.6 Seller Lease Guaranty................................................................ 24
8.7 Seller Enhanced L/Cs................................................................. 24
8.8 Seller Bank Guaranties............................................................... 24
8.9 Intercompany Debt Balance............................................................ 24
8.10 Acceptance of Other Agreements....................................................... 24
CONDITIONS TO BUYER'S OBLIGATIONS............................................................................... 25
9.11 Representations, Warranties and Covenants of
Sellers.............................................................................. 25
9.12 No Prohibition....................................................................... 25
9.13 Further Action....................................................................... 25
9.14 Deliveries........................................................................... 25
9.15 No Challenges........................................................................ 25
9.16 Lessor Consent and Lease Amendments.................................................. 26
9.17 Buyer Financings..................................................................... 26
9.18 Employment Agreements................................................................ 26
9.19 Environmental Review................................................................. 26
9.20 Document Review. ................................................................... 26
ARTICLE IX INDEMNIFICATION AND RELATED MATTERS.................................................. 26
10.1 Indemnification by Seller............................................................ 26
10.2 Additional Indemnifications by Seller................................................ 26
10.3 Indemnification by Buyer............................................................. 28
10.4 Notice of Indemnification............................................................ 28
10.5 Indemnification Procedure for Third-Party
Claims............................................................................... 28
10.6 Limitation on Indemnification Liabilities............................................ 29
10.7 Survival of Representations, Warranties and
Covenants............................................................................ 29
10.8 Exclusive Remedy..................................................................... 30
ARTICLE X TERMINATION PRIOR TO CLOSING......................................................... 30
11.1 Termination.......................................................................... 30
11.2 Effect on Obligations................................................................ 31
ARTICLE XI MISCELLANEOUS........................................................................ 31
12.1 Entire Agreement; Amendments......................................................... 31
12.2 Successors and Assigns............................................................... 31
12.3 Counterparts......................................................................... 31
12.4 Headings............................................................................. 31
12.5 Modifications and Waivers............................................................ 31
12.6 Expenses............................................................................. 32
12.7 Notices.............................................................................. 32
12.8 Arbitration.......................................................................... 33
12.9 Governing Law; Consent to Jurisdiction............................................... 33
12.10 Public Announcements................................................................. 34
12.11 Confidentiality and Nonsolicitation.................................................. 34
12.12 Further Assurances................................................................... 35
12.13 Severability......................................................................... 35
12.14 Definition of Seller's "Best Knowledge".............................................. 36
12.15 No Third Party Beneficiaries......................................................... 36
12.16 Rule of Construction................................................................. 36
EXHIBITS
Exhibit A - Closing Balance Sheet Instructions
Exhibit B - Commitments Not In the Company's Name
Exhibit C - Opinion of Counsel of Seller
Exhibit D - Opinion of Counsel of Buyer
Exhibit E - Note
Exhibit F - Buyer Financings
DEFINITIONS
Defined Term Section
Accountant Arbitrator 1.2(c)
Allocation Schedule 7.5(a)
Base Price 1.2
Best knowledge 12.14
Business First Recital
Buyer Opening Paragraph
Buyer Accountants 1.2(c)
Buyer Financing Commitments 6.2
Buyer Financings 6.2
Closing 2.1
Closing Balance Sheet 1.2(c)
Closing Date 2.1
Closing Net Worth 1.2(c)
Code 3.14(b)
Commitments 3.10
Company Opening Paragraph
Consent 3.5
Disclosure Schedule 3.1
Election 7.4(a)
Employee Benefit Plans 3.15(a)
Encumbrances 3.2
Environmental Law 3.17
Environmentally Regulated Materials 3.17
ERISA 3.15(a)
ERISA Affiliate 3.15(b)
Financial Statements 3.6
GAAP 1.2(b)
HSR Act 4.6
Indemnitee 10.4
Indemnitor 10.4
Information 12.11(a)
Intellectual Property Rights 3.13
Intercompany Debt Balance 5.4
Leased Real Property 3.9(b)
Litigation 3.19
Loss 10.1
Note 5.5
October Balance Sheet 3.6
Post-Closing Return 7.2(b)
Pre-Closing Return 7.2(a)
Purchase Price 1.2
Redemption 5.5
Representatives 12.11(a)
Seller Opening Paragraph
Seller Accountants 1.2(c)
Seller Affiliate 3.7(e)
Seller Bank Guaranties 6.5
Seller Enhanced L/Cs 6.4
Seller Lease Guaranty 6.3
September Balance Sheet 3.6
Stock Second Recital
Subsidiary First Recital
Taxes 3.14(a)
Tax Returns 3.14(a)
Threshold Amount 10.6
Winona Lease 6.3
Winona Lease Lessor 6.3
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into this 22nd day of November, 1995,
is by and between Bridgewater Resources Corp., a Texas corporation ("Seller"),
the sole shareholder of Peerless Chain Company, a Minnesota corporation (the
"Company"), and Discus Acquisition Corporation, a Minnesota corporation
("Buyer").
RECITALS:
FIRST, the Company and its subsidiary Peerless Chain of Iowa, Inc., an
Iowa corporation (the "Subsidiary") are primarily engaged in the business of the
manufacture and distribution of chain, traction and wire form products (the
"Business").
SECOND, Seller is the owner of all shares of the issued and outstanding
capital stock of the Company (the "Stock"), and Buyer desires to purchase and
Seller desires to sell all of the Stock;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF STOCK
1.1 Sale of the Stock. Subject to the terms and conditions of this
Agreement, on the Closing (as defined in Section 2.1) Seller will sell to Buyer,
and Buyer will purchase from Seller, the Stock outstanding at Closing and not
redeemed concurrently with Closing as hereinafter provided for the consideration
specified herein. Seller will bear the cost of any documentary, stamp, sales,
transfer, excise or other taxes payable in respect of the transactions
contemplated hereby.
1.2 Purchase Price. The aggregate purchase price to be paid by Buyer to
Seller for the Stock to be transferred to Buyer hereunder (the "Purchase Price")
will be Six Million Fifty Thousand Dollars ($6,050,000) (the "Base Price"),
subject to reduction as follows:
(a) The Base Price will be reduced on a dollar-for-
dollar basis by the amount, if any, by which the Company's Closing Net Worth (as
defined below) on Closing is less than the sum of Ten Million Four Hundred
Sixty-Three Thousand Dollars ($10,463,000).
(b) The Base Price will be reduced on a dollar-for-
dollar basis by the amount, if any, by which the Intercompany Debt Balance (as
defined in Section 5.4) (without taking into effect the contribution to capital
of the Intercompany Debt Balance and determined in accordance with the
instructions listed on Exhibit A and otherwise in accordance with generally
accepted accounting principles ("GAAP") on a basis consistent with the Company's
latest audited balance sheet) is less than Nine Million One Hundred Thousand
Dollars ($9,100,000).
(c) Promptly after Closing, Buyer will cause the Company to prepare a
consolidated balance sheet as of Closing in accordance with GAAP on a basis
consistent with the Company's latest audited balance sheet, but without taking
into account the effect of the Election (as defined in Section 7.4(a)), the
contribution to capital of the Intercompany Debt Balance or the Redemption (as
defined in Section 5.5), and provided that such balance sheet will be prepared
in accordance with the instructions listed on Exhibit A hereto regardless of
whether such instructions conform to GAAP or are consistent with the Company's
latest audited balance sheet. Buyer will cause such balance sheet to be audited
by the Company's current audit group within Coopers & Xxxxxxx L.L.P. (the
"Seller Accountants"). Buyer's accountant group within Coopers & Xxxxxxx L.L.P.
(the "Buyer Accountants") will be provided access to review the audit workpapers
of the Seller Accountants and full opportunity to raise with the Seller
Accountants any issues the Buyer Accountants may have with respect to such
balance sheet and the resulting Closing Balance Sheet (as hereinafter defined)
as audited by the Seller Accountants. In the event any such issues raised by the
Buyer Accountants are not resolved by mutual agreement of the Seller Accountants
and the Buyer Accountants, such unresolved issues will be submitted thereby to
Coopers & Xxxxxxx L.L.P. partner Xxxxxx X. Xxxxxxxxxx or, if Xxxxxx X.
Xxxxxxxxxx is not then a partner of Coopers & Xxxxxxx L.L.P., another Coopers &
Xxxxxxx L.L.P. partner mutually acceptable to the parties (the "Accountant
Arbitrator"), whose decision on any such issues will be final and binding on the
parties. The "Closing Balance Sheet" means such balance sheet as so audited, and
after resolution as hereinabove provided of all issues raised by the Buyer
Accountants with respect thereto. "Closing Net Worth" means the Company's
consolidated stockholder's equity as of Closing as reported on the Closing
Balance Sheet adjusted in accordance with the instructions listed on Exhibit A
hereto regardless of whether such instructions conform to GAAP or are consistent
with the Company's latest audited balance sheet, and after resolution as
hereinabove provided of all issues raised by the Buyer Accountants with respect
thereto. The Closing Net Worth as so determined will be binding upon the
parties. Buyer and Seller will use their best efforts to cause the Closing
Balance Sheet to be completed and the Closing Net Worth to be determined within
ninety (90) days after Closing. Seller will bear the first Two Thousand Five
Hundred Dollars ($2,500) of the costs of such audit by the Seller Accountants
(as a contribution to Buyer's costs incurred in environmental due diligence in
connection herewith), and Buyer and Seller will share equally the remainder of
such costs and any fees of the Accountant Arbitrator. Buyer will bear the costs
of the Buyer Accountants.
1.3 Payment of Purchase Price. The Purchase Price will be paid at
Closing by wire transfer of immediately available funds to accounts designated
by Seller prior to Closing. In the event of any adjustment to the Purchase Price
pursuant to Section 1.2(a), immediately upon determination of such adjustment
Seller will promptly reimburse Buyer the amount of such adjustment in
immediately available funds. In the event of any delay in the payment of such
adjustment, such amount will bear interest from the due date until paid in full
at the default interest rate under the Note (as defined in Section 5.5).
ARTICLE II
CLOSING
2.1 The Closing. The closing of the transactions contemplated hereby
(the "Closing") will take place at the offices of Xxxxxx and Xxxxxx,
Minneapolis, Minnesota, at 9:00 a.m. on December 1, 1995, unless the parties
otherwise mutually agree (the "Closing Date"). All matters at the Closing and
the Redemption (as defined in Section 5.5) will be considered to take place
simultaneously effective immediately after the close of business on the Closing
Date and no delivery of any document will be deemed complete until all
transactions and deliveries of documents are completed.
2.2 Deliveries of Seller. At the Closing, Seller will deliver the
following documents to Buyer:
(a) certificates representing the Stock duly endorsed
in blank for transfer or accompanied by duly executed stock powers
assigning the Stock in blank;
(b) the articles of incorporation, bylaws, minute
books and stock transfer books of the Company and the Subsidiary, certified by
the Secretary of Seller to be complete, correct and as in effect as of the
Closing Date;
(c) resolutions of the shareholder and board of
directors of Seller authorizing the execution, delivery and performance of this
Agreement by Seller, certified by the Secretary of Seller to be complete,
correct and as in effect as of the Closing Date;
(d) a certificate of incumbency with respect to the
officers of Seller certified by the Secretary of Seller as correct
as of the Closing Date;
(e) the officer's certificate required pursuant to
Section 9.1;
(f) a mutual release executed by Seller on the one
hand and the Company and the Subsidiary on the other hand under which each
releases the other from any and all claims it or they may have against the other
relating to any period prior to the Closing Date, except with respect to
obligations of Seller hereunder and except with respect to claims of
indemnification and contribution Seller may have for liability for the
obligations of the Company or the Subsidiary;
(g) such assignments of such agreements scheduled on
Exhibit B hereto to the Company as Buyer requests, in such forms as are approved
by Buyer prior to Closing (such approval not to be unreasonably withheld);
(h) an opinion of counsel for Seller, in substantially
the form of Exhibit C attached hereto; and
(i) any other documents reasonably requested by the
Buyer, to confirm the accuracy of the representations and warranties and the
performance of the agreements of the Seller hereunder.
2.3 Deliveries of Buyer. At the Closing, Buyer will
deliver to Seller the following:
(a) the Purchase Price to be paid in immediately
available funds at Closing;
(b) the Note duly executed;
(c) resolutions of the board of directors of Buyer
authorizing the execution, delivery and performance of this Agreement by Buyer
and the execution, delivery and performance of the Note by the Company and by
Buyer as guarantor under the Note, certified by the Secretary of Buyer to be
complete, correct and as in effect as of the Closing Date;
(d) a certificate of incumbency with respect to the
officers of Buyer certified by the Secretary of Buyer as correct as
of the Closing Date;
(e) resolutions of the board of directors and
shareholder of the Company effective simultaneously with Closing authorizing and
ratifying the execution, delivery and performance of the Note by the Company,
certified by the Secretary of the Company to be complete, correct and as in
effect as of the Closing Date;
(f) a certificate of incumbency with respect to the
officers of the Company effective simultaneously with Closing
certified by the Secretary of the Company as correct as of the
Closing Date;
(g) the officer's certificate required pursuant to
Section 8.1;
(h) the opinion of counsel for Buyer, in the form of
Exhibit D attached hereto; and
(i) any other documents reasonably requested by the
Seller, to confirm the accuracy of the representations and warranties and the
performance of the agreements of the Buyer hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
3.1 Corporate Organization. The Company owns and controls one hundred
percent (100%) of the outstanding capital stock of the Subsidiary. Each of the
Company and the Subsidiary is a corporation duly organized, validly existing and
in good standing under the law of the state of its incorporation, and each has
corporate power and authority to carry on its business as it is now being
conducted and to own, lease and operate its properties and assets. Schedule 3.1
of the Disclosure Schedule dated the date hereof and delivered to Buyer in
connection herewith (the "Disclosure Schedule") sets forth for each of the
Company and the Subsidiary its state of incorporation and each state in which it
is qualified or licensed to do business, and as of the date of this Agreement
its officers and directors.
3.2 Capitalization. The authorized capital stock of the Company
consists of one thousand (1,000) shares of common stock, par value $.01 per
share, of which ten (10) shares are issued and outstanding, all of which are
beneficially owned by Seller and will be transferred at Closing to Buyer
hereunder free and clear of all mortgages, pledges, liens, security interests,
encumbrances, restrictions, adverse claims or charges or third party rights of
any kind ("Encumbrances"). All issued and outstanding shares of capital stock of
the Company are duly authorized, validly issued, fully paid, nonassessable and
are without and were not issued in violation of preemptive rights. There are
outstanding no securities convertible into, exchangeable for or carrying the
right to acquire, equity securities of the Company, or subscriptions, warrants,
options, rights or other arrangements or commitments obligating the Company to
issue or acquire any of its equity securities or any ownership interest therein.
In the case of the Subsidiary: (a) all of the issued and outstanding shares of
capital stock are duly authorized, validly issued, fully paid, nonassessable and
are without and were not issued in violation of preemptive rights; (b) all
outstanding capital stock and other equity securities are owned or controlled
directly or indirectly by the Company free and clear of all Encumbrances; and
(c) there are outstanding no securities convertible into, exchangeable for, or
carrying the right to acquire, equity securities of the Subsidiary, or
subscriptions, warrants, options, rights or other arrangements or commitments
obligating the Subsidiary to issue or acquire any of its equity securities or
any ownership interest therein.
3.3 Authorization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Seller of this Agreement and the consummation by
Seller of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Seller. This Agreement has been duly
and validly executed by Seller and constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except to the extent that such enforceability (a) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally, and (b) is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.4 Non-Contravention. Except as set forth in Schedule 3.4 of the
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated herein will: (a)
violate or be in conflict with any provision of the articles or certificates of
incorporation or bylaws of the Company, the Subsidiary or Seller; or (b) be in
conflict with, or constitute a default, however defined (or an event which, with
the giving of due notice or lapse of time, or both, would constitute such a
default), under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation, imposition of fees or penalties
under, any debt, instrument, commitment, contract or other agreement or
obligation to which the Company, the Subsidiary or Seller is a party or by which
the Company, the Subsidiary or Seller or any of the Company's, the Subsidiary's
or Seller's properties or assets is or may be bound or result in the creation or
imposition of any Encumbrance upon any property or assets of the Company or the
Subsidiary, except such as may result from actions of Buyer; or (c) violate any
provision of law, rule or regulation to which the Company, the Subsidiary or
Seller is subject or any order, judgment or decree applicable to the Company,
the Subsidiary or Seller.
3.5 Consents and Approvals. With respect to the Company, the Subsidiary
and Seller, except as set forth in Schedule 3.5 of the Disclosure Schedule, and
assuming the correctness of Buyer's representations and warranties contained in
Section 4.4, no consent, waiver, approval, order or authorization of or from, or
registration, notification, declaration or filing with, any governmental or
regulatory authority or any individual or other private entity (hereinafter
sometimes separately referred to as a "Consent" and sometimes collectively as
"Consents") is required in connection with the execution, delivery or
performance of this Agreement by Seller or the consummation by Seller of the
transactions contemplated herein.
3.6 Financial Statements. Seller has furnished to Buyer audited balance
sheets of the Company as of December 31, 1993 and 1994 and the Company's
unaudited balance sheets as of September 30 and October 31, 1995 (the September
30, 1995 balance sheet is hereinafter referred to as the "September Balance
Sheet" and the October 31, 1995 balance sheet is hereinafter referred to as the
"October Balance Sheet") and related consolidated statements of operations and
retained earnings and cash flows for the nine (9) months, year and years to date
then ended respectively (together, the "Financial Statements"). Except as set
forth in Schedule 3.6 of the Disclosure Schedule, to Seller's best knowledge,
the Financial Statements are in accordance with the books and records of the
Company and the Subsidiary, have been prepared in conformity with GAAP
consistently applied throughout the periods and fairly present the financial
position of the Company and the Subsidiary as of the respective dates thereof,
the results of the operations and changes in financial position for the periods
then ended, all in accordance with GAAP consistently applied throughout the
periods.
3.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.7 of the Disclosure Schedule, since September 30, 1995, neither the
Company nor the Subsidiary has (a) suffered any damage, destruction or casualty
loss materially and adversely affecting the condition (financial or otherwise),
working capital, assets, properties, liabilities, obligations, reserves,
businesses, prospects, goodwill or going concern value or experienced any event
or failed to take any action which reasonably could be expected to result in
such an adverse change; (b) discharged or incurred any material obligation or
liability with respect to the Business, except in the ordinary course of
business; (c) entered into any transaction with respect to the Business not in
the ordinary course of its business, except as provided in Article V; (d)
declared, set aside or paid any dividend or other distribution (whether in cash,
stock, property or any combination thereof) in respect of its capital stock, or
redeemed or acquired any of its capital stock; (e) otherwise transferred any
cash or other assets to Seller or any entity directly or indirectly controlling,
under common control with or controlled by Seller (a "Seller Affiliate"), except
pursuant to ordinary course operation of the Company's intercompany zero balance
cash management system; (f)(i) increased the rate or terms of compensation
payable or to become payable by the Company or the Subsidiary to their
respective directors, officers or employees or of any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with any
such directors, officers or employees, except increases occurring in the
ordinary course of business in accordance with its customary practices (which
includes normal periodic performance reviews and related compensation and
benefit increases) or (ii) paid, lent or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with
any such directors, officers or employees, other than the regular payment of
salaries and travel advances in the ordinary course of business and consistent
with past practice; or (g) incurred any indebtedness for borrowed money.
3.8 Title to Assets. The Company and the Subsidiary have good title or
a valid lease with respect to all of the properties, rights, contracts, claims
and other assets which are used in the Business, free and clear of all
Encumbrances, except (a) as set forth in the Disclosure Schedule or reflected on
the September Balance Sheet or the notes thereto and (b) Encumbrances which,
individually or in the aggregate, do not have an adverse effect on the Business.
3.9 Real Properties.
(a) Neither the Company nor the Subsidiary has
interests of any kind in any real property other than as set forth in Section
3.9(b) or has owned any real property.
(b) Schedule 3.9 of the Disclosure Schedule sets forth
a list of all real properties in which the Company or the Subsidiary has a
leasehold interest (the "Leased Real Property") and the lease agreements of the
Company or the Subsidiary, as applicable, with respect thereto.
(c) To Seller's best knowledge, neither the Company
nor the Subsidiary has received any written notice of any pending, threatened or
contemplated condemnation proceeding affecting the Leased Real Property or any
part thereof, or of any sale or other disposition of the Leased Real Property or
any part thereof in lieu of condemnation, or that any of the Leased Real
Property is not in compliance with all applicable codes, ordinances and
regulations.
3.10 Commitments. To Seller's best knowledge, Schedule 3.10 of the
Disclosure Schedule contains a list of all contracts, agreements and commitments
to which the Company or the Subsidiary is a party or by which the Company or the
Subsidiary or any of their respective properties is bound and which are
individually material to the Business or which meet any of the criteria set
forth in any subpart of this Section 3.10 scheduled below (collectively, the
"Commitments"). Except as disclosed in the Disclosure Schedule, to Seller's best
knowledge, all Commitments are valid and in full force and effect and
enforceable against the Company or the Subsidiary, as applicable, and any other
party thereto in accordance with their terms (subject to bankruptcy, insolvency,
creditors' rights, equitable considerations and public policy, and except that
no representation or warranty is given concerning the availability of specific
performance or other equitable remedies) and neither the Company nor the
Subsidiary nor any other party thereto is in material default thereunder, nor
are there circumstances which with the giving of notice or passing of time or
both would constitute a material default thereunder by the Company or the
Subsidiary or any other party thereto, nor has the Company or the Subsidiary
received any notice claiming any such default or circumstance. Commitments
include, without limitation, any contract, agreement or commitment to which the
Company or the Subsidiary is a party or by which the Company or the Subsidiary
or any of their respective properties is bound:
(a) which represents a commitment on the part of the
Company or the Subsidiary for the expenditure of more than $5,000, other than
contracts entered into in the ordinary course of the Business;
(b) which, together with all related agreements, is
for the lease of personal property to or from any person providing
for lease payments in excess of $10,000 per year;
(c) which, together with all related agreements, is
for the purchase or sale of raw materials, commodities, supplies, products or
other personal property, or for the furnishing or receipt of services or
products, the performance of which will extend over a period of more than one
year or involve consideration in excess of $10,000, excluding contracts for the
purchase or sale of raw materials, supplies, products or services which are
entered into in the ordinary course of business and may be terminated upon not
more than thirty (30) days notice;
(d) which concerns a partnership or joint venture;
(e) under which, together with all related agreements,
the Company or the Subsidiary has incurred, created, assumed or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation, in excess
of $10,000 or under which either has imposed a security interest on any of its
assets, tangible or intangible;
(f) which concerns confidentiality or noncompetition;
(g) which is a profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, bonus, severance or other
material plan or arrangement for the benefit of current or former directors,
officers and employees;
(h) which is a collective bargaining agreement;
(i) under which any individual is employed on a full-
time basis, consulting or other basis providing annual compensation
in excess of $50,000 or providing severance benefits;
(j) under which the Company or the Subsidiary has
advanced or loaned any amount to any officers or employees of the
Company or the Subsidiary outside the ordinary course of the
Business;
(k) under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the Company
and the Subsidiary;
(l) to which Seller or any other Seller Affiliate is
a party; or
(m) the performance of which, together with all
related agreements, involves consideration in excess of $10,000.
3.11 Bank Accounts; Powers of Attorney. Schedule 3.11 of the Disclosure
Schedule sets forth: (a) the names of all financial institutions, investment
banking and brokerage houses, and other similar institutions at which the
Company or the Subsidiary maintains an account or safe deposit box and the names
of all persons authorized to draw thereon or make withdrawals therefrom; and (b)
the names of all persons or entities holding general or special powers of
attorney from the Company or the Subsidiary.
3.12 Insurance. Schedule 3.12 of the Disclosure Schedule contains a
list of all policies or binders of fire and other casualty, general liability,
theft, life, workers' compensation, health, directors and officers, business
interruption and other forms of insurance owned or held by the Company or the
Subsidiary, specifying the insurer, the policy number and the term of the
coverage.
3.13 Intellectual Property Rights. Except as disclosed in Schedule 3.13
of the Disclosure Schedule, to Seller's best knowledge (a) the Company and the
Subsidiary own or possess adequate licenses or other valid rights to use all
patents, patent rights, trademarks, service marks, trade names, copyrights,
applications therefor, trade secrets, know-how and other intellectual property
("Intellectual Property Rights") material to the conduct of the Business, (b)
the conduct of the Business does not conflict with or infringe on any valid
Intellectual Property Rights of others in any way which materially and adversely
affects the condition (financial or otherwise), working capital, assets,
properties, liabilities, obligations, reserves, businesses, prospects, goodwill
or going concern value of the Company or the Subsidiary, and (c) neither the
Company nor the Subsidiary has received any charge, complaint, claim, demand or
notice alleging any interference with, infringement upon, misappropriation of or
violation of any Intellectual Property Rights of others (including any claim
that the Company or the Subsidiary must license or refrain from using any
Intellectual Property Rights of others). To Seller's best knowledge, Schedule
3.13 of the Disclosure Schedule sets forth a list of all material United States
and foreign patents, trademarks, service marks, trade names and registered
copyrights, and applications therefor, used by the Company or the Subsidiary in
the conduct of the Business and all licenses to or by the Company or the
Subsidiary of Intellectual Property Rights which the Company or the Subsidiary
owns or uses in the conduct of the Business. To Seller's best knowledge, no
third party has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property Rights of the Company or the
Subsidiary.
3.14 Taxes.
(a) Except as set forth in Schedule 3.14 of the
Disclosure Schedule, to Seller's best knowledge: (i) the Company and the
Subsidiary have duly and timely filed (and until the Closing Date will duly and
timely file or obtain valid extensions to file) all tax and information reports,
returns and related documents required to be filed by them ("Tax Returns") with
respect to income, franchise, gross receipts, sales, use, occupation,
employment, withholding, excise, transfer, real and personal property and other
taxes, charges and levies, including without limitation interest, penalties,
assessments, deficiencies and other charges due or claimed to be due from it by
any governmental authority, ("Taxes") and have duly paid, or made adequate
provision for the due and timely payment of, all such Taxes; (ii) all Tax
Returns were (or will be) true, correct and complete in all material respects
when filed for all periods ending on or before the Closing Date; (iii) no
deficiencies for any Taxes for which the Company or the Subsidiary may be liable
have been asserted in writing or assessed against the Company or the Subsidiary
or any former subsidiary for which the Company or the Subsidiary may be liable
which remain unpaid; and (iv) there are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any such Tax Returns
for any period.
(b) Seller is not a foreign person within the meaning
of Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended ("Code")
and will provide an affidavit meeting the requirements of such section at
Closing.
3.15 Employee Benefit Plans; ERISA.
(a) To Seller's best knowledge, Schedule 3.15 of the
Disclosure Schedule hereto sets forth a true and complete list of each material
"employee benefit plan" (as that term is defined under Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and any
other plan, program, arrangement or agreement that is maintained by the Company
or the Subsidiary related to the employment of any present or former director,
officer or employee of the Company or the Subsidiary under which the Company or
the Subsidiary has any present or future obligation or liability (the "Employee
Benefit Plans").
(b) To Seller's best knowledge: each of the Employee Benefit
Plans that is subject to ERISA is in compliance with ERISA in all material
respects; each of the Employee Benefit Plans intended to be "qualified" within
the meaning of Code Section 401(a) is so qualified; each trust maintained in
connection with each such qualified plan is tax-exempt under Code Section
501(a); nothing has occurred to cause the loss of the qualified status of any
such qualified plan; no Employee Benefit Plan has an accumulated or waived
funding deficiency within the meaning of Code Section 412; neither the Company
nor the Subsidiary nor any trade or business which together with the Company or
the Subsidiary would be deemed a "single employer" within the meaning of ERISA
Section 4001 ("ERISA Affiliate") has incurred, directly or indirectly, any
material liability (including any material contingent liability) to or on
account of an Employee Benefit Plan pursuant to Title IV of ERISA; no
proceedings have been instituted to terminate any Employee Benefit Plan that is
subject to Title IV of ERISA; no "reportable event," as such term is defined in
ERISA Section 4043(b), has occurred with respect to any Employee Benefit Plan;
and no condition exists that presents a material risk to the Company or an ERISA
Affiliate of incurring a liability to or on account of a Employee Benefit Plan
pursuant to Title IV of ERISA.
(c) To Seller's best knowledge: no Employee Benefit
Plan is a multiemployer plan (within the meaning of ERISA Section 4001(a)(3))
and no Employee Benefit Plan is a multiple employer plan as defined in Code
Section 413; all material contributions or other amounts that are required to be
paid by the Company or the Subsidiary as of the Closing Date with respect to
each Employee Benefit Plan with respect to current or prior plan years have been
either paid or accrued; and there are no material, pending, threatened or
anticipated claims (other than routine claims for benefits) by, or on behalf of
or against any of the Employee Benefit Plans or any trusts related thereto.
(d) To Seller's best knowledge, neither the Company
nor the Subsidiary, nor any ERISA Affiliate, nor any Employee Benefit Plan, nor
any trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the Company, the Subsidiary,
any ERISA Affiliate, any Employee Benefit Plan, any such trust, or any trustee
or administrator thereof, or any party dealing with any Employee Benefit Plan or
any such trust could be subject to either a material civil penalty assessed
pursuant to ERISA Section 409, 502(i) or 502(l) or a material tax imposed
pursuant to Code Section 4975 or 4976.
(e) To Seller's best knowledge, with respect to each
Employee Benefit Plan that is a "group health plan" within the meaning of ERISA
Section 601(a) and that is subject to Code Section 4980B, including but not
limited to any medical plan, dental plan, health care reimbursement plan or
employee assistance program, the Company and the Subsidiary have operated such
plans in material compliance with the continuation coverage requirements of
those provisions and Part 6 of Title I of ERISA.
3.16 Labor Matters. Except as set forth in Schedule 3.16 of the
Disclosure Schedule, to Seller's best knowledge, neither the Company nor the
Subsidiary is obligated by or subject to any collective bargaining agreement or
collective bargaining obligation. Except as set forth in Schedule 3.16 of the
Disclosure Schedule, to Seller's best knowledge, there are no strikes, slowdowns
or picketing against the Company or the Subsidiary previously experienced since
September 26, 1989, pending or threatened, nor are there nor have there been any
efforts to organize any unions or employee associations at the Business, nor are
there any pending or threatened grievances or unfair labor charges.
3.17 Environment. Except as set forth in Schedule 3.17 of the
Disclosure Schedule, to Seller's best knowledge neither the Company nor the
Subsidiary or any former subsidiary nor any prior or current other owner or
lessee has generated, handled, manufactured, treated, stored, used, released,
transported or disposed of any Environmentally Regulated Materials (as defined
below) on, beneath, to, from or about any of the Leased Real Property or any
other properties formerly owned, leased or operated by the Company or the
Subsidiary or any former subsidiary, except for the generation, handling,
manufacture, treatment, storage, use, release, transportation and disposal, in
compliance with all applicable laws, of such substances used in the ordinary
course of the Business. Except as set forth in Schedule 3.17 of the Disclosure
Schedule, to Seller's best knowledge, no Environmentally Regulated Material has
been disposed of or allowed to be disposed of on or off any of such properties
which may give rise to a clean-up responsibility, personal injury liability or
property damage claim against the Company or the Subsidiary, or give rise to the
Company or the Subsidiary being named a potentially responsible party for any
such clean-up costs, personal injuries or property damage, or create any cause
of action by any third party against the Company or the Subsidiary under any
Environmental Laws (as defined below). Except as set forth in Schedule 3.17 of
the Disclosure Schedule, to Seller's best knowledge, neither the Company nor the
Subsidiary has received any notices or claims of violations or liabilities
relating to pollution control or protection of the environment. The term
"Environmentally Regulated Materials" means any element, compound pollutant,
contaminant, substance, material or waste, or any mixture thereof, designated,
listed, referenced, regulated or identified pursuant to any Environmental Law.
The term "Environmental Law" means the National Environmental Policy Act, 42
U.S.C. xx.xx. 4321 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. xx.xx. 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. xx.xx. 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. xx.xx. 1251 et seq., the Federal Clean Air Act,
42 U.S.C. xx.xx. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C.
xx.xx. 2601 et seq., the Emergency Planning and Community Right to Know Act, 42
U.S.C. P. 11001, the Hazard Communication Act xx.xx. 651 et seq., and the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss. 136, each as
amended, and applicable state and local counterparts.
3.18 Compliance with Laws. Except as set forth in Schedule 3.18 of the
Disclosure Schedule, to Seller's best knowledge, each of the Company and the
Subsidiary has operated and is operating the Business in compliance with all
laws, rules, regulations and orders applicable to the Business in all material
respects.
3.19 Litigation. Except as set forth in Schedule 3.19 of the Disclosure
Schedule, to Seller's best knowledge, there is no action, order, proceeding or
investigation in or by any court or before or by any arbitrator, mediator or
governmental authority ("Litigation") outstanding, pending or threatened (a) by
or against or involving the Company or the Subsidiary or any of their leased or
owned properties or any of their officers, directors, agents or employees (but
only in such capacities) or the Business, or (b) which seeks to enjoin or obtain
damages in respect of the consummation of the transactions contemplated hereby.
3.20 Equipment. Except as set forth in Schedule 3.20 of the Disclosure
Schedule, to Seller's best knowledge, as of the date of this Agreement the
production equipment and other fixed assets of the Company and the Subsidiary
necessary for current levels of production are in good working order, ordinary
wear and tear excepted.
3.21 Customers and Suppliers. Except as set forth in Schedule 3.21 of
the Disclosure Schedule, to Seller's best knowledge, none of the Company's top
twenty (20) customers during the ten (10) month period ending October 31, 1995
in terms of the Company's consolidated revenues, and no supplier of five percent
(5%) or more of the Company's consolidated raw material purchases during such
ten (10) month period intends not to regularly conduct business with the Company
and the Subsidiary after Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Buyer's Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota,
and has all requisite corporate power and authority to carry on its business as
it is now being conducted, and to execute, deliver and perform this Agreement
and the Note and to consummate the transactions contemplated hereby.
4.2 The Company's Authority. The Company has all requisite
corporate power and authority to execute, deliver and perform, as
applicable, the Redemption and the Note and to consummate the
transactions contemplated thereby.
4.3 Due Authorization, Execution and Delivery by Buyer; Effect of
Agreement. The execution, delivery and performance by Buyer of this Agreement
and the Note and the consummation by Buyer of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes, and the Note when duly and validly executed
and delivered by Buyer will constitute, the legal, valid and binding obligations
of Buyer, enforceable against it in accordance with their terms, except to the
extent that such enforceability (a) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally, and (b) is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Neither the execution, delivery and performance of this Agreement or the Note
nor the consummation of the transactions contemplated herein or therein will:
(i) violate or be in conflict with any provision of the articles of
incorporation or bylaws of Buyer; or (ii) be in conflict with, or constitute a
default, however defined (or an event which, with the giving of due notice or
lapse of time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to any right of
termination, cancellation, imposition of fees or penalties under, any debt,
instrument, commitment, contract or other agreement or obligation to which Buyer
is a party or by which Buyer or any of its properties or assets is or may be
bound or result in the creation or imposition of any Encumbrance upon any
property or assets of Buyer; or (iii) violate any provision of law, rule or
regulation to which Buyer is subject or any order, judgment or decree applicable
to Buyer.
4.4 Due Authorization, Execution and Delivery by the Company; Effect of
Agreement. The execution, delivery and performance, as applicable, by the
Company of the Redemption and the Note and the consummation by the Company of
the transactions contemplated thereby will have been duly authorized by all
necessary corporate action on the part of the Company contemporaneously with the
Closing. The Note will have been duly and validly executed and delivered by the
Company contemporaneously with the Closing and upon Closing the Note will
constitute the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms, except to the extent that such
enforceability (a) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally, and
(b) is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). To Buyer's
best knowledge, neither the execution, delivery or performance, and applicable,
of the Redemption or the Note nor the consummation of the transactions
contemplated therein or in this Agreement will: (i) violate or be in conflict
with any provision of the articles of incorporation or bylaws of the Company; or
(ii) be in conflict with, or constitute a default, however defined (or an event
which, with the giving of due notice or lapse of time, or both, would constitute
such a default), under, or cause or permit the acceleration of the maturity of,
or give rise to any right of termination, cancellation, imposition of fees or
penalties under, any debt, instrument, commitment, contract or other agreement
or obligation to which the Company is a party or by which the Company or any of
its properties or assets is or may be bound or result in the creation or
imposition of any Encumbrance upon any property or assets of the Company under
any debt, instrument, commitment, contract or other agreement or obligation; or
(iii) violate any provision of law, rule or regulation to which the Company is
subject or any order, judgment or decree applicable to the Company.
4.5 Consents. No Consent is required in connection with the execution,
delivery or performance by Buyer of the Agreement or by Buyer or the Company of
the Note or the taking of any other action contemplated hereby or thereby.
4.6 HSR. For purposes of determining whether the purchase of the
outstanding capital stock of the Company contemplated hereunder requires
compliance with the filing and waiting period requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), Buyer is the "acquiring person"
within the meaning of Rule 801.2(a) of the HSR Act with respect to such
transaction, and Buyer has total assets of less than Ten Million Dollars
($10,000,000) and annual net sales of less than Ten Million Dollars
($10,000,000) as determined under Rule 801.11 of the HSR Act.
4.7 Litigation. There is no Litigation pending or, to Buyer's best
knowledge, threatened which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby.
4.8 Investment Intent. Buyer is acquiring the Stock solely
for the purpose of investment and not with a present intention or
view toward, or for sale in connection with, any distribution
thereof.
ARTICLE V
COVENANTS OF SELLER
From and after the date hereof and until the Closing Date, Seller
covenants and agrees with Buyer as follows:
5.1 Cooperation and Assignments. Seller will use its best efforts, and
will cooperate with Buyer, to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as are required in
order to enable Seller to effect the transactions contemplated hereby, and
otherwise will use its best efforts to cause the consummation of such
transactions in accordance with the terms and conditions hereof, provided that
Seller will not be obligated to incur any liability or expense in connection
therewith, except the cost and expense of its employees and representatives
engaged in such efforts or as otherwise expressly set forth herein.
5.2 Conduct of Business. Except as Buyer otherwise may consent to in
writing (which consent will not be unreasonably withheld), Seller will cause the
Company and the Subsidiary (a) to operate the Business in the ordinary course in
all material respects; and (b) not to take any action which would result in a
breach of the representations and warranties contained in Section 3.7 as though
made on and as of the Closing Date. Without limiting the foregoing, Seller will
cause the Company to operate within its normal operating policies and procedures
with respect to the collection of accounts receivable and payment of accounts
payable so as not to take or omit actions outside the ordinary course of
business to accelerate the collection of accounts receivable or defer the
payment of accounts payable.
5.3 Access. Seller will provide Buyer with such information as Buyer
from time to time reasonably may request with respect to the Business and to
personnel of the Company and the Subsidiary and the transactions contemplated by
this Agreement, and will permit Buyer and its representatives reasonable access,
during regular business hours and upon reasonable notice, to the properties,
books and records of the Business and to personnel of the Company and the
Subsidiary, as Buyer from time to time reasonably may request. Any disclosure
whatsoever during such investigation by Buyer will not constitute an enlargement
of or additional warranties or representations of Seller beyond those
specifically set forth in this Agreement.
5.4 Intercompany Debt. All amounts due the Company from Seller as of
Closing will be offset against all amounts then due Seller from the Company, and
effective on Closing Seller will contribute to the capital of the Company the
balance due Seller from the Company (the "Intercompany Debt Balance").
5.5 Redemption. Effective on the Closing and after giving effect to the
contribution of the Intercompany Debt Balance to the capital of the Company, the
Company will redeem from Seller 17,750/23,750 of the Stock for a redemption
price of Seventeen Million Seven Hundred Thousand] Dollars ($17,700,000),
Fifteen Million Two Hundred Thousand Dollars ($15,200,000) to be paid by wire
transfer of immediately available funds to accounts designated by Seller prior
to Closing, and Two Million Five Hundred Thousand Dollars ($2,500,000) to be
paid in accordance with a promissory note executed by the Company, guaranteed by
Buyer, payable to the order of Seller and issued on the terms contained in and
in the form of Exhibit E hereto (the "Note") and delivered to Seller at Closing.
ARTICLE VI
COVENANTS OF BUYER
From and after the date hereof and until the Closing Date, Buyer hereby
covenants and agrees with Seller as follows:
6.1 Cooperation and Assumption. Buyer will use its best efforts, and
will cooperate with Seller, to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as are required in
order to enable Buyer to effect the transactions contemplated hereby, and will
otherwise use its best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof, provided
that Buyer will not be obligated to incur any liability or expense in connection
therewith, except the cost and expense of its employees and representatives
engaged in such efforts or as otherwise expressly set forth herein.
6.2 Buyer Financing. Buyer will use its best efforts to arrange for
financings to fund payment of the Purchase Price and the cash portion of the
Redemption and to provide working capital for the operations of the Company as
outlined in Exhibit F hereto or as otherwise arranged by Buyer and reasonably
acceptable to Seller as providing adequate funding for the Purchase Price and
the Redemption and meeting any conditions precedent to any such financing or to
any required consents from the Xxxxxx Xxxxxx (as defined below) (the "Buyer
Financings") and to obtain and deliver to Seller on or before November 24, 1995
written commitments for the Buyer Financings reasonably acceptable to Seller in
form and content (the "Buyer Financing Commitments"), provided that Buyer will
not be obligated to incur any liability or expense in connection therewith,
except the cost and expense of its employees and representatives engaged in such
efforts, and the commitment fees, costs and expenses of the parties providing
the Buyer Financing Commitments in amounts ordinary and usual for the party
receiving the financing to bear for the amount and type of financing to be
provided.
6.3 Lease Consents. Buyer will be responsible for obtaining, and will
use its best efforts to obtain, all necessary consents and agreements from the
lessor (the "Winona Lease Lessor") under the Company's lease of its Winona,
Minnesota facility (the "Winona Lease") with respect to the transactions
contemplated hereby, including without limitation the release of Seller from its
Subordination Agreement and its Guaranty and Suretyship Agreement (together, the
"Seller Lease Guaranty") in connection with the Winona Lease, and for obtaining
any additional consents and agreements of the Winona Lease Lessor desired by
Buyer, provided that Buyer will not be obligated to incur any liability or
expense in connection therewith, except the cost and expense of its employees
and representatives engaged in such efforts. Buyer acknowledges that necessary
consents and agreements of the Winona Lease Lessor includes any necessary
consents or agreements from third parties holding assignments, collateral or
otherwise, of the Winona Lease or the Seller Lease Guaranty, including the
mortgagees of the Leased Real Property under the Winona Lease.
6.4 Termination of Letters of Credit. Buyer will use its best efforts
to obtain termination on or before Closing of all letters of credit outstanding
for the benefit of the Company in connection with the Company's import of goods
and the Company's workers' compensation liability, or otherwise with respect to
which Seller has provided credit enhancement (the "Seller Enhanced L/Cs").
6.5 Company Bank Accounts. Buyer acknowledges that all existing bank
account balances of the Company as of Closing will be transferred to Seller at
Closing, without reserve for checks issued thereon then outstanding. Buyer will
be responsible for obtaining, and will use its best efforts to obtain, the
release of Seller on or before Closing from all liabilities and obligations with
respect to the Company's bank accounts, including without limitation with
respect to checks issued thereon outstanding at Closing (the "Seller Bank
Guaranties").
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Books and Records; Personnel. For a period of seven (7) years after
the Closing (or such longer period as may be required by any governmental agency
or ongoing Litigation or in connection with any administrative proceeding):
(a) Buyer will not dispose of or destroy any of the
business records and files of the Business. If Buyer wishes to dispose of or
destroy such records and files after that time, it will first give thirty (30)
days' prior written notice to Seller and Seller will have the right, at its
option and expense, upon prior written notice to Buyer within such 30 day
period, to take possession of the records and files within sixty (60) days after
the date of Seller's notice to Buyer.
(b) Buyer will allow Seller and its representatives
access, when there is a legitimate business purpose not injurious to Buyer, to
all business records and files of the Business which are transferred to Buyer in
connection herewith, during regular business hours and upon reasonable notice at
Buyer's principal place of business or at any location where such records are
stored, and Seller will have the right, at its own expense, to make copies of
any such records and files; provided, however, that any such access or copying
will be had or done in such a manner so as not to interfere with the normal
conduct of Buyer's business or operations.
(c) Buyer will make available to Seller, upon
reasonable written request and at Seller's expense (subject to Section 7.3(a)
and otherwise at a charge equal to the compensation and benefits paid by the
Company or the Subsidiary to such personnel for the period that such personnel
are assisting Buyer), the Company's and the Subsidiary's personnel to assist
Seller in locating and obtaining records and files maintained by the Company or
to provide assistance or participation as reasonably required by Seller in
anticipation of, or preparation for, existing or future Litigation, tax return
preparation or other matters in which Seller or any of its affiliates is
involved and which is related to the Business. Buyer will not be obligated to
provide such personnel to the extent that Buyer, in its reasonable discretion,
believes that such assistance will adversely affect the operations of the
Company.
7.2 Tax Returns, Payments of Taxes, Transfer Taxes and Audits.
(a) Seller will prepare and file, or cause to be
prepared and filed, on a timely basis all tax returns (including any amendments
thereto) of the Company with respect to any income Taxes for any period ending
on or prior to the close of business on the Closing Date and any Taxes due as a
result of the transactions contemplated under this Agreement (a "Pre-Closing
Return").
(b) Buyer will prepare and file, or cause to be
prepared and filed, on a timely basis, all tax returns (including any amendments
thereto) of the Company with respect to any Taxes for any period ending after
the Closing Date (a "Post-Closing Return").
(c) Seller will pay, or cause to be paid, and will
indemnify and hold harmless Buyer and the Company from and against, any and all
income Taxes for any period ending on or prior to the close of business on the
Closing Date and any Taxes due as a result of the transactions contemplated
under this Agreement, including without limitation all Taxes arising as a result
of the Election (as defined in Section 7.4(a)) and any additional or carry-over
tax liabilities which may be owed due to the Company's inclusion in any
consolidated income Tax Return of Seller, including without limitation any gain
resulting from the recapture of depreciation or cancellation of Intercompany
Indebtedness. Subject to the provisions of Section 7.2(d) below, if Buyer or the
Company pays to any taxing authority an amount for which Seller is liable under
this Section 7.2(c), Seller will pay such amount to Buyer within five (5) days
of Buyer's or the Company's written demand therefor delivered with reasonable
supporting documentation. Seller will be entitled to any and all refunds that
may become due with respect to any income Taxes for any period thereof ending on
or prior to the close of business on the Closing Date.
(d) Each of Seller and Buyer will have the right, at its own
expense, to control any audit or determination by any taxing authority, to
initiate any claim for refund or file any amended tax return, and to contest,
resolve and defend against any assessment, notice of deficiency, or other
adjustment or proposed adjustment of Taxes for any taxable period for which it
is charged with responsibility for filing a tax return under this Agreement;
provided, however, that no party will have the right to agree to any assessment,
deficiency, settlement, or other adjustment or proposed adjustment of Taxes that
would adversely affect the interest of another party without such other party's
written consent, which consent will not be unreasonably withheld. Each party
will notify the other party within twenty (20) days after the initiation of any
activity by a taxing authority that could lead to such a claim.
7.3 Cooperation; Access to Information and Retention of Records
Concerning Taxes.
(a) Cooperation. The parties agree to cooperate with one
another following the Closing with respect to matters regarding Taxes. Without
limiting the generality of the foregoing, each of Seller and Buyer will provide
the other, and Buyer, after the Closing, will cause the Company to provide
Seller with the right, at reasonable times and upon reasonable notice, to have
access to, and to copy and use, any records or information which may be relevant
for the taxable period for which the requesting party is charged with payment
responsibility for Taxes under this Agreement in connection with the preparation
of any Tax Returns, any audit or other examination by any taxing authority, the
filing of any claim for a refund of any Taxes or for the allowance of any credit
of Taxes, or any judicial or administrative proceedings relating to liability
for Taxes. To the extent necessary or appropriate, Buyer will appoint
representatives of Seller as authorized to deal with any governmental body or
personnel in connection with any audit or examination for which Seller is
responsible. The party requesting assistance hereunder will reimburse the other
party for reasonable expenses incurred in providing such assistance, provided
that the Company will provide such assistance from its personnel as may be
reasonably requested by Seller in the preparation of Pre-Closing Returns for the
periods ending the Closing Date at no charge to Seller, with customary
participation by Seller's independent accountants at Seller's cost and expense.
Any information obtained pursuant to this Section 7.3(a) will be held in strict
confidence and will be used solely in connection with the reason for which it
was requested.
(b) Business Records and Files. For a period of fifteen (15)
years from the Closing, Seller and the Company will not dispose of or destroy
any of the business records and files of Seller or the Company relating to Taxes
pertaining to taxable periods ending on or prior to the Closing.
7.4 Section 338(h)(10) Election with Respect to Taxes.
(a) Buyer will make a timely election under Section 338(g) of
the Code and any corresponding elections under state and local tax laws, and
Seller and Buyer will jointly make an election under section 338(h)(10) of the
Code and any corresponding elections under state and local tax laws
(collectively, the "Election"), including execution of Form 8023-A under the
Code.
(b) Seller and Buyer will, as promptly as practicable
following the Closing, cooperate with each other to take all actions necessary
and appropriate (including filing such forms, returns, elections, schedules and
other documents as may be required) to effectuate and preserve a timely Election
in accordance with Section 338(h)(10) of the Code and the corresponding
provisions of state and local tax laws.
(c) Seller and Buyer will report the sale of the Stock
pursuant to this Agreement consistently with the Election and will take no
position contrary thereto in any tax return, any discussion with or proceeding
before any tax authority, or otherwise.
7.5 Allocation with Respect to Taxes.
(a) In connection with the Election, Buyer will prepare (or
cause to be prepared) an allocation (the "Allocation Schedule") of the Purchase
Price among the assets of the Company. Such allocation of the Purchase Price
will be made in accordance with Section 338(b) of the Code and any applicable
rules or regulations thereunder. Seller will have the right to review and
reasonably approve the Allocation Schedule, and Seller and Buyer will consult
and resolve in good faith any issues arising as a result of Seller's review of
such Allocation Schedule.
(b) Seller and Buyer (i) will be bound by the allocation
contained in the Allocation Schedule for purposes of determining any and all
consequences with respect to Taxes of the transactions contemplated herein, (ii)
will prepare and file all tax returns to be filed with any tax authority in a
manner consistent with such Allocation Schedule, and (iii) will take no position
inconsistent with such Allocation Schedule in any tax return, any discussion
with or proceeding before any tax authority, or otherwise. In the event that
such Allocation Schedule is disputed by any tax authority, the party receiving
notice of such dispute will promptly notify the other party thereof.
7.6 Continuation of Insurance Coverages. Buyer will cause the Company
to continue to carry insurance for at least the same coverages and limits and
for not more than the same deductibles and co-payables as currently carried by
or for the Company with respect to any exposures to Seller under its
indemnification obligations under Sections 10.1 and 10.2. In the event the
Company fails to maintain such coverages, Seller's liability under Sections 10.1
and 10.2 will be determined as if such coverages had been maintained in full
force and effect during all relevant time periods.
7.7 Additional Cooperation. In the event any necessary consent to
assignment to the Company of any agreement scheduled on Exhibit B is not
obtained prior to Closing, Seller will (a) take all reasonable steps necessary
to obtain the consent of any such third party, provided that Seller will not be
obligated to incur any liability or expense in connection therewith, except the
cost and expense of its employees and representatives engaged in such efforts
and except that Seller will contribute fifty percent (50%) of any payment
required by any such third party to provide any such consent; (b) cooperate with
Buyer and the Company in any reasonable and lawful arrangements designed to
provide the benefits of such agreement to the Company so long as the Company
fully cooperates with Seller in such arrangements and promptly reimburses Seller
for all payments, charges or other liabilities made or suffered by Seller in
connection therewith; and (c) enforce, at the request of Buyer or the Company
and at the expense and for the account of the Company, any rights of Seller
arising from such agreement against the other party or parties thereto
(including the right to elect to terminate any such agreement in accordance with
the terms thereof upon the written advice of Buyer or the Company).
ARTICLE VIII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller under this Agreement to consummate the
transactions contemplated hereby are, at the option of Seller, subject to
satisfaction of the following conditions precedent on or before the Closing.
8.1 Representations, Warranties and Covenants of Buyer. Buyer will have
complied in all material respects with all of its agreements and covenants
contained herein to be performed at or prior to the Closing Date, and all of the
representations and warranties of Buyer contained herein will be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except (a) as otherwise contemplated hereby,
and (b) to the extent that such representations and warranties were made as of a
specified date (and as to such representations and warranties the same continue
on the Closing Date to have been true as of the specified date). Seller will
have received a certificate of Buyer, dated as of the Closing Date and signed by
an officer of Buyer, certifying as to the fulfillment of the conditions set
forth in this Section 8.1.
8.2 No Prohibition. No statute, rule or regulation or
order of any court or administrative agency will be in effect which
prohibits Seller from consummating the transactions contemplated
hereby.
8.3 Further Action. All consents, approvals, authorizations, exemptions
and waivers from third parties that are required in order to enable Seller to
consummate the transactions contemplated hereby will have been obtained (except
where the failure to obtain any such actions, consents, approvals,
authorizations, exemptions and waivers would not have a material adverse effect
on Seller or the Business).
8.4 Deliveries. Buyer will have made or caused to be made the delivery
to Seller the documents and other items specified in Section 2.3 and in this
Agreement.
8.5 No Challenges. No action or proceeding by any governmental
authority or other person will have been instituted and not discharged which
would enjoin, restrain or prohibit, or is reasonably likely to result in damages
in respect of, this Agreement or the complete consummation of the transactions
contemplated hereby, and which could, in the reasonable judgment of counsel to
Seller, make it inadvisable to consummate such transactions, and no order or
decree of any court will have been entered in any action or proceeding which
enjoins, restrains or prohibits this Agreement or the complete consummation of
the transactions contemplated hereby.
8.6 Seller Lease Guaranty. Seller will have been released from the
Seller Lease Guaranty, provided that Buyer may transfer to the Winona Lease
Lessor in exchange for such release up to Three Million Eight Hundred Thousand
Dollars ($3,800,000) of the Purchase Price, less aggregate amounts transferred
to the Winona Lease Lessor by Seller on or before the Closing Date in exchange
for such release.
8.7 Seller Enhanced L/Cs. The Seller Enhanced L/Cs will have been
terminated.
8.8 Seller Bank Guaranties. The Seller Bank Guaranties will have been
terminated.
8.9 Intercompany Debt Balance. The Intercompany Debt Balance
(determined in accordance with the instructions listed on Exhibit A and
otherwise in accordance with GAAP on a basis consistent with the Company's
latest audited balance sheet) will not be in excess of the sum of (a) Nine
Million Seven Hundred Thousand Dollars ($9,700,000) plus (b) seventy-five
percent (75%) of the Company's currently payable and net deferred income tax
balances added to the Intercompany Debt Balance for November 1995 in accordance
with Exhibit A, or Buyer will have paid Seller the amount of such excess in
exchange for an assignment thereof.
8.10 Acceptance of Other Agreements. The subordination requirements
required by lenders under the Buyer Financings and by the Winona Lease Lessor
with respect to the Note, the financial covenants contained in the Buyer
Financings and the Winona Lease, the terms of the preferred stock being issued
by Buyer in connection with the transactions contemplated herein, the terms of
the employment agreement to be entered into between the Company and Xxxxxxx
Xxxxx, and the redemption and Company guarantee commitments entered into in
connection with Company management purchase of Buyer capital stock are
acceptable to Seller.
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer under this Agreement to consummate the
transactions contemplated hereby are, at the option of Buyer, subject to
satisfaction of the following conditions precedent on or before the Closing.
9.1 Representations, Warranties and Covenants of Sellers. Seller will
have complied in all material respects with all of its agreements and covenants
contained herein to be performed at or prior to the Closing Date, and all the
representations and warranties of Seller contained herein will be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except (a) as otherwise contemplated hereby,
and (b) to the extent that such representations and warranties were made as of a
specified date (and as to such representations and warranties the same continue
on the Closing Date to have been true as of the specified date). Buyer will have
received a certificate of Seller, dated as of the Closing Date and signed by an
officer of Seller, certifying as to the fulfillment of the conditions set forth
in this Section 9.1.
9.2 No Prohibition. No statute, rule or regulation or order of any
court or administrative agency will be in effect which prohibits Buyer from
consummating the transactions contemplated hereby.
9.3 Further Action. All consents, approvals, authorizations, exemptions
and waivers from third parties that are required in order to enable Buyer to
consummate the transactions contemplated hereby will have been obtained (except
where the failure to obtain any such consents, approvals, authorizations,
exemptions and waivers would not have a material adverse effect on the
Business).
9.4 Deliveries. Seller will have made or caused to be made delivery to
Buyer of the documents and other items set forth in Section 2.2 hereof.
9.5 No Challenges. No action or proceeding by any governmental
authority or other person will have been instituted and not discharged which
would enjoin, restrain or prohibit, or is reasonably likely to result in damages
in respect of, this Agreement or the complete consummation of the transactions
contemplated hereby, and which could, in the reasonable judgment of counsel to
Buyer, make it inadvisable to consummate such transactions, and no order or
decree of any court will have been entered in any action or proceeding which
enjoins, restrains or prohibits this Agreement or the complete consummation of
the transactions contemplated hereby.
9.6 Lessor Consent and Lease Amendments. The Winona Lease Lessor will
have consented to the sale of Stock and will have agreed to amendments to the
financial performance covenants in the Winona Lease consistent with the
financial performance covenants contained in Buyer's senior term loan financing
included in the Buyer Financings, and to an amendment to the Winona Lease
permitting the Company to reduce Consumer Price Index rent adjustments provided
for in the Winona Lease by fifty percent (50%) by payment of not more than One
Million Three Hundred Thousand Dollars ($1,300,000) on or before May 1, 1996.
9.7 Buyer Financings. Buyer will have closed the Buyer Financings.
9.8 Employment Agreements. The Company will have entered into
employment agreements approved by Buyer with such Company employees as Buyer
designates.
9.9 Environmental Review. Buyer is satisfied with the results of its
environmental review of the Company's facility leased under the Winona Lease.
9.10 Due Diligence Review. Buyer is satisfied with its review of the
Disclosure Schedule and the documents identified in its two letters to Seller
dated November 21, 1995.
ARTICLE X
INDEMNIFICATION AND RELATED MATTERS
10.1 Indemnification by Seller. Subject to Section 7.6, Seller will
indemnify and hold harmless Buyer and its officers and directors from and
against any and all damages, loss, cost or expense (including reasonable
attorney's fees and expenses actually incurred), (collectively, "Loss") suffered
by reason of, arising out of or resulting from: (a) any misrepresentation or
breach of warranty made by Seller in or pursuant to this Agreement (other than,
with respect to any such officer or director who is an officer or director of
the Company on the date of this Agreement, any such misrepresentation or breach
of warranty known to such officer or director on the Closing Date); or (b) any
failure by Seller to fulfill any covenants or agreements under this Agreement.
10.2 Additional Indemnifications by Seller. In addition, subject to
Section 7.6, Seller will indemnify and hold harmless Buyer and its officers and
directors as follows.
(a) Six (6) months after the Closing Date, Buyer may provide
to Seller proforma adjustments to the inventory obsolescence and bad debt
reserves on the Closing Balance Sheet resulting from all facts known by Buyer as
of the end of such six (6) month period that existed but were unknown by the
parties as of finalization of the Closing Balance Sheet, with a schedule of all
such facts and the proforma adjustment resulting from each such fact. Such
proforma adjustments and schedule will be prepared by the Buyer Accountants, and
the Seller Accountants will be provided access to review the workpapers of the
Buyer Accountants in connection therewith and full opportunity to raise with the
Buyer Accountants any issues the Seller Accountants may have with respect to
such proforma adjustments. In the event any such issues raised by the Seller
Accountants are not resolved by mutual agreement of the Seller Accountants and
the Buyer Accountants, such unresolved issues will be submitted thereby to the
Accountant Arbitrator, whose decision on any such issues will be final and
binding on the parties. In the event the aggregate of such reserves would have
been increased on the Closing Balance Sheet if all such facts known by Buyer as
of the end of such six (6) month period had been taken into account in setting
such reserves in accordance with GAAP as applied in the preparation of the
Closing Balance Sheet, as determined in accordance with the foregoing procedure,
and to the extent such increase exceeds One Hundred Thousand Dollars ($100,000),
Seller will pay to Buyer the amount of such excess increase promptly upon
determination thereof, subject to the maximum payment limitation provided under
Section 10.6.
(b) In the event that any third party gives written notice to
the Company or Buyer within eighteen (18) months after the Closing Date that
such third party has any claim that would constitute a breach of the
representations and warranties of Seller under Section 3.17 if such
representations and warranties had been made without regard to Seller's
knowledge and without regard to manifests referenced in Schedule 3.17 of the
Disclosure Schedule, to the extent such claim involves sites at which the
manufacturing operations of the Business were conducted prior to relocation of
the Business to the Leased Real Property under the Winona Lease, and provided
that Buyer gives Seller written notice of such claim within such eighteen (18)
month period, promptly upon final adjudication or settlement of such claim,
Seller will pay to Buyer the amount, if any, by which the amount of such finally
adjudicated judgment or settlement, together with all costs, expenses and
reasonable attorneys fees incurred by Buyer or the Company in connection
therewith, net of any insurance proceeds received by the Company thereon,
exceeds the remainder, if any, of Three Hundred Fifty Thousand Dollars
($350,000) less the aggregate liability of the Company or Buyer under all claims
previously submitted to Seller for application of this Section 10.2(b), provided
that Seller's liability under this Section 10.2(b) will not in any event exceed
Seven Hundred Fifty Thousand Dollars ($750,000). For purposes of the foregoing,
written notice by a third party includes without limitation written notice from
any governmental agency that the Company may be responsible for remediation with
respect to an identified release or threatened release of any Environmentally
Regulated Materials under any Environmental Law.
(c) In the event that the aggregate liability of the Company
under all Litigation scheduled at Schedule 3.19 of the Disclosure Schedule, as
finally adjudicated or settled, net of any insurance proceeds received by the
Company thereon, exceeds One Hundred Fifty-Five Thousand Dollars ($155,000),
Seller will promptly pay to Buyer the amount of such excess when and as so
determined, subject to the provisions of Section 10.6.
(d) In the event that any third party gives written notice to
the Company or Buyer within twelve (12) months after the Closing Date that such
third party has any claim for any liability of the Company or the Subsidiary
incurred on or before the Closing Date which is not included in the Closing
Balance Sheet or disclosed in the notes thereto or the Disclosure Schedule, and
which is not within the scope of claims scheduled at Schedule 3.19 of the
Disclosure Schedule, and provided that Buyer gives Seller written notice of such
claim within such twelve (12) month period, promptly upon final adjudication or
settlement of any such claim, Seller will pay to Buyer the amount of such
liability as so determined, net of any insurance proceeds received by the
Company thereon, subject to the provisions of Section 10.6 hereof.
10.3 Indemnification by Buyer. Buyer will indemnify and hold harmless
Seller and its officers and directors from and against any and all Loss suffered
by reason of, arising out of or resulting from: (a) any material
misrepresentation or breach of warranty made by Buyer in or pursuant to this
Agreement; (b) any failure by Buyer to fulfill any covenants or agreements under
this Agreement; or (c) any and all liabilities of the Company or the Subsidiary,
or third party claims therefor, for which Seller is not obligated to indemnify
Buyer under this Agreement.
10.4 Notice of Indemnification. In the event any legal proceeding is
threatened or instituted or any claim or demand is asserted by any person
(including a party hereto) in respect of which payment may be sought by one
party hereto from the other party under the provisions of this Article X, the
party seeking indemnification (the "Indemnitee") will promptly cause written
notice of the assertion of any such claim of which it has knowledge which is
covered by this indemnity to be forwarded to the other party (the "Indemnitor").
Any notice of a claim by reason of any of the representations, warranties or
covenants contained in this Agreement will state specifically the
representation, warranty or covenant with respect to which the claim is made,
the facts giving rise to an alleged basis for the claim, and the amount of the
liability asserted against the Indemnitor by reason of the claim.
10.5 Indemnification Procedure for Third-Party Claims. In the event of
the initiation of any legal proceeding against an Indemnitee by a third party,
the Indemnitor will have the absolute right after the receipt of notice, at its
option and at its own expense, to be represented by counsel of its choice, and
to defend against, negotiate, settle or otherwise deal with any proceeding,
claim, or demand which relates to any loss, liability or damage indemnified
against hereunder; provided, however, that the Indemnitee may participate in any
such proceeding with counsel of its choice and at its expense. The parties will
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such legal proceeding, claim or demand. To the extent the
Indemnitor elects not to defend such proceeding, claim or demand, and the
Indemnitee defends against or otherwise deals with any such proceeding, claim or
demand, the Indemnitee may retain counsel, at the expense of the Indemnitor, and
control the defense of such proceeding. Neither the Indemnitor nor the
Indemnitee may settle any such proceeding without the consent of the other
party, such consent not to be unreasonably withheld. After any final judgment or
award has been rendered by a court, arbitration board or administrative agency
of competent jurisdiction and the time in which to appeal therefrom has expired,
or a settlement has been consummated, or the Indemnitee and the Indemnitor have
arrived at a mutually binding agreement with respect to each separate matter
alleged to be indemnified by the Indemnitor hereunder, the Indemnitee will
forward to the Indemnitor notice of any sums due and owing by it with respect to
such matter and, subject to the last sentence of Section 10.6, the Indemnitor
will pay all of the sums so owing to the Indemnitee by wire transfer, certified
or bank cashier's check within thirty (30) days after the date of such notice.
10.6 Limitation on Indemnification Liabilities. The indemnifications
and payment obligations in favor of Buyer contained in Sections 10.1 and 10.2(c)
and (d) hereof will not be effective until the aggregate dollar amount of all
Loss and payment obligations within the scope of such Sections exceeds Three
Hundred Fifty Thousand Dollars ($350,000) (the "Threshold Amount"), and then
only to the extent such aggregate amount exceeds the Threshold Amount; provided,
however, that indemnifications with respect to covenants of Seller under Section
7.2 are not subject to the foregoing restriction and will not be aggregated
against the Threshold Amount. The liability of Seller under Section 10.1
(exclusive of indemnifications with respect to covenants of Seller under Section
7.2), under Section 10.2(a) hereof in excess of One Hundred Thousand Dollars
($100,000), and under Sections 10.2(c) and (d) hereof, in the combined
aggregate, is limited to Seven Hundred Fifty Thousand Dollars ($750,000). Any
liability of Seller under Sections 10.1 and 10.2 (exclusive of indemnifications
with respect to covenants of Seller under Section 7.2) will be offset against
Buyer's obligations under the Note to the extent of the balance outstanding
thereunder as of the final determination of such liability.
10.7 Survival of Representations, Warranties and Covenants. The
representations and warranties made at Section 3.6 will not survive Closing. The
representations and warranties otherwise made in this Agreement and the
covenants and agreements contained herein to be performed or complied with at or
prior to the Closing Date will survive for twelve (12) months after the Closing
Date, and no legal action or arbitration proceeding may be commenced thereafter
with respect to any alleged breach thereof except as a counterclaim in any
action or proceeding commenced hereunder prior to the expiration of such period,
provided that nothing in this sentence limits the period during which claims of
indemnification may be brought pursuant to Section 10.2(b). The covenants
contained in Sections 7.2 and 7.3 will survive for a period of seven (7) years
after the later of the Closing Date or the filing date of the Tax Return with
respect to which such covenants relate, and no legal action or arbitration
proceeding may be commenced thereafter with respect to any alleged breach
thereof except as a counterclaim in any action or proceeding commenced hereunder
prior to the expiration of such period.
10.8 Exclusive Remedy. The exclusive remedy available to a party hereto
in respect of the matters covered by Section 10.1 or Section 10.2 hereof is to
proceed in the manner and subject to the limitations contained in this Article
X.
ARTICLE XI
TERMINATION PRIOR TO CLOSING
11.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of Buyer and Seller; or
(b) by either Seller or Buyer in writing (provided the
conditions to such party's obligations stated in the applicable sections of
Article VIII or IX are not then satisfied or waived) if the Closing has not
occurred on or before December 1, 1995; or
(c) by either Seller or Buyer in writing, if there is in
effect a non-appealable order of a court of competent jurisdiction prohibiting
the consummation of the transactions contemplated hereby; or
(d) by Seller at any time after November 24, 1995 unless prior
to such termination the conditions precedent of Buyer under Section 9.6 have
been waived by Buyer in writing and Seller has received written assurances
satisfactory to Seller that the Seller Lease Guaranty will be terminated at
Closing for an aggregate payment not to exceed Three Million Eight Hundred
Thousand Dollars ($3,800,000); or
(e) by Seller at any time after November 24, 1995 unless prior
to such termination the conditions precedent of Buyer under Section 9.7 have
been waived by Buyer in writing and Seller has received Buyer Financing
Commitments for all of the Buyer Financings; or
(f) by Seller at any time after November 24, 1995 unless prior
to such termination, Buyer has designated in writing each Company employee
required to enter into an employment agreement pursuant to Section 9.8 and Buyer
and each such employee have agreed in writing to the terms of the applicable
employment agreement, or the conditions precedent of Buyer under Section 9.8
have been waived by Buyer in writing.
11.2 Effect on Obligations. Termination of this Agreement pursuant to
this Article will terminate all obligations of the parties hereunder; provided,
however, that termination pursuant to clause (b) of Section 11.1 hereof will not
relieve any defaulting or breaching party from any liability to the other party
hereto, and provided, further, that the provisions of Article XII will survive
termination of this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Entire Agreement; Amendments. This Agreement (including the
Disclosure Schedule delivered pursuant hereto) constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No amendment,
modification, supplement or waiver of any provision of this Agreement will be
binding unless executed in writing by the party to be bound thereby.
12.2 Successors and Assigns. The terms and conditions of this Agreement
will inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties hereto. This Agreement may not be assigned by
either party without the prior written consent of the other party hereto.
12.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will for all purposes be deemed to be an original
and all of which will constitute the same instrument.
12.4 Headings. The headings of the sections of this Agreement are
included for convenience only and will not be deemed to constitute part of this
Agreement or to affect the construction hereof.
12.5 Modifications and Waivers. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement will
be deemed to or will constitute a waiver of any other provisions hereof (whether
or not similar).
12.6 Expenses. Seller and Buyer will each pay all costs and expenses
incurred by them or on their behalf in connection with this Agreement and the
transactions contemplated hereby, including without limitation fees and expenses
of their own brokers, finders, financial consultants, accountants and counsel.
If any dispute between Seller and Buyer, either occurring under, relating to or
in connection with any of the provisions of this Agreement, is submitted to a
court, arbitrator, tribunal or other appropriate entity, then all costs and
expenses of the parties (including reasonable attorneys' fees) will be paid by
the party against whom a determination by such court, arbitrator, tribunal or
entity is made or, in the absence of a determination wholly against one party,
as such court, arbitrator, tribunal or entity directs.
12.7 Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party will be in writing and
delivered personally or by telephonic facsimile transmission or sent by
registered or certified mail, postage prepaid (and if by telephonic facsimile
transmission with a copy sent by mail),
if to Seller to:
Bridgewater Resources Corp.
c/o BRC Management Corp.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx
Suite 3400, Plaza VII
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
if to Buyer to:
Discus Acquisition Corporation
0000 Xxxxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
32
with a copy to:
Xxxxxx and Xxxxxx
2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
or at such other address for a party as may be specified by like notice. Any
notice which is delivered personally or by telephonic facsimile transmission in
the manner provided herein will be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party (or its agent for
notices hereunder). Any notice which is addressed and mailed in the manner
herein provided will be conclusively presumed to have been duly given to the
party to which it is addressed at the close of business, local time of the
recipient, on the third day after the day it is so placed in the mail.
12.8 Arbitration. Subject to the last sentence of this Section, any
controversy or claim arising out of or relating to any provisions of this
Agreement or the breach hereof, unless resolved by mutual agreement of the
parties, will be finally settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the effective date of this Agreement by a single arbitrator appointed in
accordance with said Rules. The determination of the arbitrator will be final
and binding upon the parties to the arbitration and judgment upon the award
rendered by the arbitrator will be entered in any court of competent
jurisdiction. The place of arbitration will be Minneapolis, Minnesota.
Notwithstanding the foregoing, either party may seek injunctive relief with
respect to any controversy or claim arising out of or relating to any provisions
of this Agreement in any court of competent jurisdiction.
12.9 Governing Law; Consent to Jurisdiction. This Agreement will be
construed in accordance with and governed by the laws of the State of Minnesota
applicable to agreements made and to be performed in such jurisdiction without
reference to conflicts of law principles. Buyer and Seller each irrevocably
consents that any legal action or proceeding against it under, arising out of or
in any manner relating to this Agreement or any other agreement, document or
instrument arising out of or executed in connection with this Agreement may be
brought only in an arbitration proceeding as provided in Section 12.8 or in a
court of the State of Minnesota or in the United States District Court for the
District of Minnesota. Each of Buyer and Seller by the execution and delivery of
this Agreement, expressly and irrevocably assents and submits to the personal
jurisdiction of the arbitrators selected pursuant to Section 12.8 or any of such
courts in any such action or proceeding. Each of Buyer and Seller further
irrevocably consents to the service of any complaint, summons, notice or other
process relating to any such action or proceeding by delivery
33
thereof to it by hand or by mail in the manner provided for in Section 12.7
hereof. Each of Buyer and Seller hereby expressly and irrevocably waives any
claim or defense in any action or proceeding based on any alleged lack of
personal jurisdiction, improper venue or forum non conveniens or any similar
basis.
12.10 Public Announcements. Neither Seller (nor any of its affiliates)
nor Buyer (nor any of its affiliates) will make any public statements, including
without limitation any press releases, with respect to this Agreement and the
transactions contemplated hereby without the prior written consent of the other
party (which consent may not be unreasonably withheld), except as may be
required by law and except that the party required to make such announcement
will, whenever practicable, consult with the other party concerning the timing
and content of such announcement before such announcement is made.
12.11 Confidentiality and Nonsolicitation.
(a) "Information") means information received by Buyer
or any of its agents, directors, officers, employee, counsel, consultants,
affiliates or advisors ("Representatives") from Seller or the Company or their
Representatives in the course of Buyer's investigation of the Company and
negotiation and performance of this Agreement, including without limitation
trade secret and other proprietary technical, financial and other information
relating to the Business or the Company's products, whether past, present or
anticipated, including information about the Company's research, development,
manufacturing, purchasing, accounting, engineering, marketing, selling or
servicing, and any analyses, compilations, studies, materials, memoranda, data,
notes or documents prepared by Buyer or its Representatives and concerning such
information received by Buyer or its Representatives.
(b) The Information will be kept confidential and will
not, without the prior written consent of Seller, be disclosed by Buyer or its
Representatives in any manner whatsoever, in whole or in part, and will not be
used by Buyer or its Representatives other than in connection with the
transactions contemplated hereunder. The Information will be disclosed by Buyer
and its Representatives only to Buyer's Representatives who have a "need to
know" such Information and who have been informed by Buyer of the confidential
nature of the Information and who have first agreed to be bound by the terms and
conditions of this Section 12.11.
(c) Immediately upon termination of this Agreement,
the Information which consists of analyses, compilations, studies, material,
memoranda, data, notes or other documents prepared by Buyer or its
Representatives in that capacity will be destroyed and such destruction will be
certified in writing to Seller by an authorized officer supervising such
destruction, and all other Information will be returned to Seller without Buyer
retaining any copies thereof.
34
(d) In the event that Buyer or anyone to whom Buyer
transmits the Information pursuant to the provisions of this Section 12.11
becomes legally compelled to disclose any of the Information, Buyer will provide
Seller with prompt notice before such Information is disclosed so that Seller
may seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Section 12.11. In the event that such protective
order or other remedy is not obtained, Buyer will furnish only that portion of
the Information which Buyer is advised by written reasonable opinion of counsel
is legally required and will exercise Buyer's best efforts to assist Seller in
obtaining a protective order or other reliable assurance that confidential
treatment will be accorded to the Information that is disclosed.
(e) Nothing contained in this Section 12.11 will in
any way restrict or impair Buyer's right to use, disclose or otherwise deal
with: (i) Information which at the time of its disclosure is, or which
thereafter becomes through no fault of Buyer or its Representatives, part of the
public domain by publication or otherwise; and (ii) Information which Buyer can
show was in Buyer's possession or the possession of one or more of its
Representatives at the time of disclosure, and was not acquired, directly or
indirectly, under any secrecy obligation to Seller or another party.
(f) Buyer will not directly or indirectly solicit the
employment of any employee, customer, supplier, distributor or licensee of the
Company during the term of this Agreement and for a period of two (2) years
after termination hereof, except to the extent contemplated under Section 9.8.
(g) The provisions of this Section 12.11 will lapse
and be of no further force or effect upon Closing.
12.12 Further Assurances. Subject to the other provisions of this
Agreement after the execution and delivery hereof, either party will, at the
request of the other party and at such other party's expense, execute and
deliver any further instruments or documents of conveyance, transfer, assignment
or assumption and take all such further action as such party reasonably may
request in order to consummate and make effective the transactions contemplated
by this Agreement.
12.13 Severability. Upon a finding of the invalidity or
unenforceability of any particular provision of this Agreement, the remaining
provisions hereof will be construed in all respects as if such invalid or
unenforceable provisions were omitted. All provisions of this Agreement will be
enforced to the fullest extent permitted by law.
35
12.14 Definition of Seller's "Best Knowledge". For purposes of this
Agreement, "best knowledge" of Seller includes only matters actually known by
Xxxx Xxxxxx or Xxxx xxx Xxxxxxxxxx and executive management staff of the Company
reporting directly to Xxxx xxx Xxxxxxxxxx.
12.15 No Third Party Beneficiaries. Except as expressly
permitted by this Agreement, nothing in this Agreement will confer
any rights upon any person or entity which is not a party or
permitted assignee of a party to this Agreement.
12.16 Rule of Construction. The parties hereto acknowledge and agree
that each has negotiated and reviewed the terms of this Agreement, assisted by
such legal and tax counsel as they desired, and has contributed to its
revisions. The parties further agree that the rule of construction that any
ambiguities are resolved against the drafting party will be subordinated to the
principle that the terms and provisions of this Agreement will be construed
fairly as to all parties and not in favor of or against any party.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
DISCUS ACQUISITION CORPORATION
By /s/ Xxxxxxx X. Xxxxx
Its CEO
BRIDGEWATER RESOURCES CORP.
By Xxxx X. Xxxxxx
Its CEO
Exhibit A
INSTRUCTIONS FOR CLOSING BALANCE SHEET
1. The Closing Balance Sheet will be prepared in accordance with GAAP
on a basis consistent with the Company's latest audited balance sheet, but
without taking into account the effect of the Election, the contribution to
capital of the Intercompany Debt Balance or the Redemption, and provided that
the Closing Balance Sheet will be prepared in accordance with the following
instructions regardless of whether such instructions comply with GAAP or are
consistent with the Company's latest audited balance sheet as included in
Seller's latest audited balance sheet:
(a) Property and equipment will be accounted for according to
the allocation of purchase price by the Company at the time the Company acquired
the Business.
(b) The reserve for supplies inventory obsolescence in the
Closing Balance Sheet will be the same as such reserves included in the October
Balance Sheet.
(c) The reserve for inventory obsolescence will be determined
in accordance with the Company's inventory obsolescence methodology as applied
in preparation of the Company's latest audited balance sheet, provided that no
reserve for inventory obsolescence will be made with respect to import bulk
chain, import traction products, import plastic chain or import cordage.
(d) With respect to accrual of postretirement medical benefits
and pension benefit obligations, the assumptions with respect thereto disclosed
in Seller's year-end disclosures in its financial statements for the year ended
December 31, 1994 will apply.
(e) The reserves for pending litigation in the Closing Balance
Sheet will be the same as such reserves included in the October Balance Sheet.
(f) The reserves for obsolescence and returns for domestic
traction products in the Closing Balance Sheet will be the same as such reserves
included in the October Balance Sheet.
(g) The lease of premises at 000 Xxxxx Xxxxxx, Xxxxxxxxxx,
Xxxx, if reflected in the Closing Balance Sheet, will be accounted for as an
operating lease.
(h) The Intercompany Debt Balance will contain the Company's
currently payable and net deferred income tax balances computed using a
thirty-seven percent (37%) effective income tax rate consistent with the
Company's interim accounting procedure used from January 1, 1995 to October 31,
1995 as reflected in the October Balance Sheet.
2. The Closing Net Worth will be determined in accordance with the
following instructions regardless of whether such instructions comply with GAAP
or are consistent with the Company's latest audited balance sheet or related
statement of operations and retained earnings as included in Seller's latest
audited balance sheet and related statement of operations and retained earnings:
(a) The Closing Net Worth will be the Company's consolidated
stockholder's equity as of the Closing as reported on the Closing Balance Sheet
adjusted to exclude the effect of revenues of traction products accrued from
November 1, 1995 through the Closing Date and cost of goods sold with respect
thereto, and all discounts, returns, write-offs and other set-offs and reserves
therefor accrued during such period on traction products.
Exhibit B
COMMITMENTS NOT IN THE COMPANY'S NAME
1. Fleet Lease Agreement between Associates Leasing, Inc. and
Seller dated August 6, 1990.
2. Master Lease and related Supplements dated January 23, 1992
between Norwest Equipment Financing and Seller.
3. Option To Purchase Agreement dated January 23, 1992 between
Norwest Equipment Financing and Seller.
4. Software License Agreement, dated October 15, 1990, as
amended, including related software support services, between
QuestComp, Inc. and Seller.
5. Software License Agreement dated October 5, 1990, as upgraded,
between Xxxxxxxx, Xxxx and Xxxx Ltd. and Seller.
6. Agreement dated June 29, 1990 regarding the purchase or license of
certain software between Computer Associates (f/k/a Data 3 Systems,
Inc., a division of ASK Computer Systems Inc.)
and Seller.
7. License Agreement dated June 29, 1990, as amended, between
Software Plus (f/k/a SYSGEN, Inc. or Integral) and Seller to
the Company.
8. License Agreement dated June 28, 1990, as amended, between
Synon, Inc. and Seller.
9. Agreement regarding maintenance of a tape drive between
Decision One Corp. (f/k/a Xxxx Atlantic) and Seller.
10. The following Agreements between International Business
Machines and Seller:
a. Agreement for Exchange of Confidential Information dated
September 11, 1995.
b. Agreement for Exchange of Confidential Information, dated
February 2, 1995.
c. Equipment and Program Loan Agreement dated October 12,
1995.
d. IBM Customer Agreement dated December 9, 1994 regarding
support line services.
e. IBM Hardware Maintenance Agreement originally effective
December 1, 1987, as supplemented.
f. Blanket Order with IBM regarding maintenance services.
g. Agreement for Exchange of Confidential Information dated
June 28, 1995.
h. Equipment Program Loan Agreement with International Business
Machines Corporation, dated February 16, 1995, regarding the
Company's use of computer hardware relating to the AS/400-40S
System.
11. Software License Agreement (105002) dated November 30, 1990, as amended
by the Software License Agreement (116749) dated October 24, 1991 and
Software License Agreement (117737) dated May 4, 1992, between ACS
Network Systems, a division of
Premenos Corporation, and Seller.
Exhibit C
FORM OF OPINION OF COUNSEL FOR SELLER
At the Closing, Buyer will receive an opinion from counsel for Sellers,
dated the Closing Date and substantially to the effect that [conform to
representations and warranties in Agreement]:
(i) The Disclosure Schedule sets forth the name and
jurisdiction of incorporation of the Company and the Subsidiary. Each
of the Company and the Subsidiary is a corporation duly organized,
validly existing and in good standing under the law of the state of its
incorporation.
(ii) The authorized capital stock of the Company consists of
one thousand (1,000) shares of common stock, par value $.01 per share,
of which ten (10) shares are outstanding, all of which are in the
record name of Seller. All issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid,
nonassessable and are without and were not issued in violation of
preemptive rights. To the knowledge of such counsel, there are
outstanding no securities convertible into, exchangeable for, or
carrying the right to acquire, equity securities of the Company, or
subscriptions, warrants, options, rights or other arrangements or
commitments obligating the Company to issue or acquire any of its
equity securities or any ownership interest therein. In the case of the
Subsidiary: (a) all of the issued and outstanding shares of capital
stock are duly authorized, validly issued, fully paid, nonassessable
and are without and were not issued in violation of preemptive rights;
(b) all outstanding capital stock and other equity securities are in
the record name of the Company; (c) to the knowledge of such counsel,
there are outstanding no securities convertible into, exchangeable for,
or carrying the right to acquire, equity securities of the Subsidiary,
or subscriptions, warrants, options, rights or other arrangements or
commitments obligating the Subsidiary to issue or acquire any of its
equity securities or any ownership interest therein.
(iii) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and has all
requisite corporate power and authority to execute, deliver and perform
the Agreement and to consummate the transactions contemplated thereby.
The execution, delivery and performance by Seller of the Agreement and
the consummation by Seller of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part
of Seller. The Agreement has been duly and validly executed by Seller
and constitutes the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except to the
extent that such enforceability (a) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to creditors' rights generally, and (b) is subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(iv) Except as set forth in Schedule 3.4 of the Disclosure
Schedule, neither the execution, delivery and performance of the
Agreement nor the consummation of the transactions contemplated therein
will: (a) violate or be in conflict with any provision of the articles
or certificates of incorporation or bylaws of the Company, the
Subsidiary or Seller; or (b) be in conflict with, or constitute a
default, however defined (or an event which, with the giving of due
notice or lapse of time, or both, would constitute such a default),
under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation, imposition of fees or
penalties under, any debt, instrument, commitment, contract or other
agreement or obligation known to such counsel to which the Company, the
Subsidiary or Seller is a party or by which the Company, the Subsidiary
or Seller or any of the Company's, the Subsidiary's or Seller's
properties or assets is or may be bound or result in the creation or
imposition of any Encumbrance upon any property or assets of the
Company or the Subsidiary under any debt, instrument, commitment,
contract or other agreement or obligation known to such counsel, except
such as may result from actions of Buyer; or (c) violate any provision
of law, rule or regulation to which the Company, the Subsidiary or
Seller is subject or any order, judgment or decree known to such
counsel applicable to the Company, the Subsidiary or Seller.
(v) With respect to the Company, the Subsidiary and Seller,
except as set forth in Schedule 3.5 of the Disclosure Schedule, and
assuming the correctness of Buyer's representations and warranties
contained in Section 4.4, no Consent from any governmental or
regulatory authority or under any Commitment known to such counsel is
required in connection with the execution, delivery or performance of
the Agreement by Seller or the consummation by Seller of the
transactions contemplated therein.
(vi) To the knowledge of such counsel, except as set forth in
Schedule 3.19 of the Disclosure Schedule, there is no Litigation
outstanding or pending or threatened (a) by or against or involving the
Company or the Subsidiary or any of their properties or any of their
officers, directors, agents or employees (but only in such capacities)
or the Business, or (b) which seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated by the
Agreement.
Exhibit D
FORM OF OPINION OF COUNSEL FOR BUYER
At the Closing, Seller will receive an opinion from counsel for Buyer,
dated the Closing Date and substantially to the effect that:
(i) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota, and has
all requisite corporate power and authority to carry on its business as
it is now being conducted, and to execute, deliver and perform the
Agreement and the Note and to consummate the transactions contemplated
thereby.
(ii) The Company has all requisite corporate power and
authority to execute, deliver and perform, as applicable, the
Redemption and the Note and to consummate the transactions contemplated
thereby.
(iii) The execution, delivery and performance by Buyer of the
Agreement and the Note and the consummation by Buyer of the
transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of Buyer. The Agreement and the
Note have been duly and validly executed and delivered by Buyer and
constitute the legal, valid and binding obligations of Buyer,
enforceable against it in accordance with their terms, except to the
extent that such enforceability (a) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to creditors' rights generally, and (b) is subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Neither the execution,
delivery and performance of the Agreement or the Note nor the
consummation of the transactions contemplated therein will: (i) violate
or be in conflict with any provision of the articles of incorporation
or bylaws of Buyer; or (ii) be in conflict with, or constitute a
default, however defined (or an event which, with the giving of due
notice or lapse of time, or both, would constitute such a default),
under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation, imposition of fees or
penalties under, any debt, instrument, commitment, contract or other
agreement or obligation known to such counsel to which Buyer is a party
or by which Buyer or any of its properties or assets is or may be bound
or result in the creation or imposition of any Encumbrance upon any
property or assets of Buyer under any debt, instrument, commitment,
contract or other agreement or obligation known to such counsel; or
(iii) violate any provision of law, rule or regulation to which Buyer
is subject or any order, judgment or decree known to such counsel
applicable to Buyer.
(iv) The execution, delivery and performance, as applicable,
by the Company of the Redemption and the Note and the consummation by
the Company of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the
Company. The Note has been duly and validly executed and delivered by
the Company and constitutes the legal, valid and binding obligations of
the Company enforceable against it in accordance with their terms,
except to the extent that such enforceability (a) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally, and (b) is subject to
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Neither the
execution, delivery or performance, as applicable, of the Redemption or
the Note nor the consummation of the transactions contemplated therein
or in the Agreement will: (i) violate or be in conflict with any
provision of the articles of incorporation or bylaws of the Company; or
(ii) be in conflict with, or constitute a default, however defined (or
an event which, with the giving of due notice or lapse of time, or
both, would constitute such a default), under, or cause or permit the
acceleration of the maturity of, or give rise to any right of
termination, cancellation, imposition of fees or penalties under, any
debt, instrument, commitment, contract or other agreement or obligation
known to such counsel to which the Company is a party or by which the
Company or any of its properties or assets is or may be bound or result
in the creation or imposition of any Encumbrance upon any property or
assets of the Company under any debt, instrument, commitment, contract
or other agreement or obligation known to such counsel; or (iii)
violate any provision of law, rule or regulation to which the Company
is subject or any order, judgment or decree known to such counsel
applicable to the Company.
(v) No Consent from any governmental or regulatory authority
or under any commitment, contract or other agreement or obligation
known to such counsel to which Buyer or the Company is a party or by
which Buyer or the Company or any of their respective properties is
bound is required in connection with the execution, delivery or
performance by Buyer of the Agreement or by Buyer or the Company of the
Note or the taking of any other action contemplated thereby.
(vi) For purposes of determining whether the purchase of the
outstanding capital stock of the Company contemplated under the
Agreement requires compliance with the filing and waiting period
requirements of the HSR Act, Buyer is the "acquiring person" within the
meaning of Rule 801.2(a) of the HSR Act with respect to such
transaction, and, based upon relevant financial statements of Buyer
provided to such counsel, Buyer has total assets of less than Ten
Million Dollars ($10,000,000) and annual net sales of less than Ten
Million Dollars ($10,000,000) as determined under Rule 801.11 of the
HSR Act.
(vii) To the knowledge of such counsel, there is no Litigation
pending or threatened which seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated by the
Agreement.
Exhibit E
PURCHASE MONEY NOTE
$2,500,000 November ___, 1995
FOR VALUE RECEIVED, the undersigned, Peerless Chain Company (the
"Company"), a Minnesota corporation, hereby promises to pay to the order of
Bridgewater Resources Corp. ("Seller"), a Texas corporation, at the address
provided under Section 8 in lawful money of the United States in accordance with
the terms hereof the sum of Two Million Five Hundred Thousand Dollars
($2,500,000) plus interest thereon at the rate provided herein from the date
hereof until paid in full.
1. Purchase Agreement. This Note is given pursuant to that certain
Stock Purchase Agreement dated November __, 1995 (the "Purchase Agreement") by
and between Discus Acquisition Corporation ("Buyer"), a Minnesota corporation,
and Seller for the sale of all of the outstanding capital stock of the Company
by Seller to Buyer, and as partial payment under the Redemption (as defined in
the Purchase Agreement). Capitalized terms not otherwise defined herein will
have the meanings set forth in the Purchase Agreement. To the extent the terms
of this Note as executed vary from Exhibit A to the Purchase Agreement or the
description hereof contained in the Purchase Agreement, the terms hereof govern.
2. Definitions. Unless the context otherwise requires, the following
terms have the following meanings:
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, Buyer, (ii) which beneficially owns or holds five percent
(5%) or more of any class of the capital stock of Buyer or (iii) five percent
(5%) or more of the capital stock (or in the case of a Person which is not a
corporation, five percent (5%) or more of the equity interest) of which is
beneficially owned or held by Buyer or a Subsidiary. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of capital stock, by contract or otherwise.
"CIT" means The CIT Group/Business Credit, Inc.
"Guarantee" means any obligations (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) of Buyer or the Company guaranteeing in any manner, whether directly
or indirectly, any obligation, direct or indirect, absolute, contingent or
inchoate, whether existing now or in the future, of any other Person.
"Indebtedness" means any and all amounts owing or which may
become owing by the Company pursuant to the terms of this Note.
"Permitted Investments" means:
(a) Investments in commercial paper maturing in two hundred
seventy (270) days or less from the date of issuance which, at the time of
acquisition, is accorded the highest rating by Standard & Poor's Corporation or
Moodys Investors Services, Inc. (or other nationally recognized credit rating
agency of similar standing if neither of such corporations is then in the
business of rating commercial paper);
(b) Investments in direct obligations of the United States of
America or any agency thereof maturing within one (1) year from the date of
acquisition thereof;
(c) Investments in bank accounts or certificates of deposit
maturing within one (1) year from the date of origin and issued by a bank or
trust company having capital, surplus and undivided profits aggregating at least
One Hundred Million Dollars ($100,000,000); and
(d) Investments in money market preferred stocks for so long
as the same are accorded the highest rating by Standard & Poor's Corporation or
Moodys Investors Service, Inc. (or other nationally recognized credit rating
agency of similar standing if neither of such corporations is then in the
business of rating such preferred stocks).
"Person" means an individual, partnership, corporation, trust
or unincorporated organization, and a governmental agency or political
subdivision.
"Pledged Stock" is as defined in Section 6.2.
"Preferred Stock" means shares of Buyer's Series A convertible
Preferred Stock issued to Northland Business Capital, L.L.P. pursuant to Stock
Purchase Agreement dated November __, 1995.
"Senior Credit Facility" means the credit facilities with CIT
under that certain Financing Agreement dated November __, 1995, or any
replacement credit facility.
"Senior Obligations" means the Senior Credit Facility and
the Winona Lease.
"Senior Pledge" means the security interest in the Pledged
Stock granted pursuant to that certain Stock Pledge Agreement by and between
Buyer and CIT dated November __, 1995, and any security interest in the Pledged
Stock granted to the holder of any replacement Senior Credit Facility pursuant
to which such holder agrees to deliver the stock certificates representing the
Collateral, upon satisfaction of such Senior Credit Facility, to the holder of
this Note or the holder of a succeeding replacement Senior Credit Facility
taking a security interest in the Pledged Stock including such terms.
"Subordination Agreement" means the Subordination Agreement
dated November __, 1995 by and among CIT, Seller, Buyer, the Company and
Peerless Chain of Iowa, Inc.
"Subsidiary" means any corporation of which more than fifty
percent (50%) (by number of votes) of the voting stock is owned by Buyer and/or
one or more corporations which are themselves Subsidiaries of Buyer.
"Winona Lease" means that certain Lease Agreement by and
between PRC Corp. (formerly Peerless Chain Company) and Corporate Property
Associates 6 dated June 18, 1986, as assigned to the Company by Assignment and
Assumption Agreement dated September 26, 1989, as amended by Lease Amendment
dated September 26, 1989, Letter Amendment dated August 2, 1994 and Amendment to
Lease dated November __, 1995.
"Winona Lease Obligations" means the obligations of the
Company under the Winona Lease.
3. Payment Terms.
3.1 Interest. Interest will accrue on the unpaid principal of
this Note at the annual rate of eight percent (8%) until maturity; provided that
in the event any amount due hereunder is past due, interest will accrue on the
unpaid principal of this Note at the annual rate of thirteen percent (13%),
compounded annually. Accrued interest will be due quarterly on the last day of
December, March, June and September commencing December 31, 1995 until maturity
of all principal of this Note (by acceleration or otherwise).
3.2 Principal. The principal of this Note, together with all
accrued and unpaid interest not then otherwise due, will be due November __,
1998, unless maturity thereof is accelerated pursuant to the terms hereof;
provided, however, that to the extent any claims are pending for indemnification
under Section 7.2, 10.1 or 10.2 of the Purchase Agreement on such stated
maturity date, with respect to each such claim, the maturity date with respect
to an amount of principal of this Note equal to the amount of such claim will be
extended until such claim is finally resolved; provided, further, that in the
event the amount of any such claim is reduced prior to final resolution of such
claim, an amount of principal of this Note equal to such reduction will become
due upon such reduction; and provided, further, that no such extension will be
made in the event of a prior acceleration, and any such extension will terminate
upon acceleration, of maturity of the principal of this Note pursuant to the
terms hereof.
3.3 Prepayments; Application of Payments. This Note may be
prepaid, in whole or in part, at any time and from time to time without premium
or penalty. Payments on, and credits under Section 3.4 against, this Note will
be applied first to accrued interest due and unpaid, next (to the extent such
payment is a prepayment) to accrued interest unpaid and not yet due, next to
costs and expenses accrued hereunder, with the balance to principal.
3.4 Offsets. Any liability of Seller under Sections 7.2, 10.1,
10.2 or 10.5 of the Purchase Agreement will be offset against Indebtedness
(whether or not then due) to the extent of the balance outstanding hereunder as
of the final determination of such liability.
4. Buyer and Company Covenants. From the date hereof and continuing so
long as any amount remains unpaid on this Note:
4.1 Corporate Existence, etc. Buyer and the Company each will
preserve and keep in force and effect its corporate existence and all licenses
and permits necessary to the proper conduct of the business of Buyer and the
Company taken as a whole.
4.2 Restricted Buyer Distributions. Buyer will not declare or
pay any dividends or make any other payment or distribution, either in cash or
property, on or in purchase, redemption or retirement of any shares of Buyer's
capital stock of any class or any warrants, rights or options to acquire any
such shares by purchase, conversion or otherwise, except (i) provided that when
made, no Default exists hereunder, dividends then due and unpaid on Buyer's
outstanding shares of Preferred Stock and amounts due [UNDER REDEMPTION
PROVISIONS APPROVED BY SELLER IN MANAGEMENT STOCK AGREEMENTS], and (ii)
issuances of options for the common stock of Buyer under [AN INCENTIVE STOCK
OPTION PLAN APPROVED BY SELLER] and issuances of shares of such common stock
upon exercise thereof.
4.3 Restricted Company Issuances and Distributions. The
Company will not:
(a) issue any shares of the Company's capital stock of any
class or any warrants, rights or options to purchase any shares of the Company's
capital stock, whether by reason of stock split or combination or
reclassification, dividend, exchange, new consideration or otherwise;
(b) declare or pay any dividends or make any other payment or
distribution, either in cash or property, on or in purchase, redemption or
retirement of any shares of the Company's capital stock, or make any other
payment or distribution, either directly or indirectly, in respect of the
Company's capital stock or otherwise, including without limitation for goods or
services, to Buyer or to any Affiliate of Buyer, except (i) payments equal to
state and federal income tax liability on Buyer's consolidated tax returns
resulting from the Company's operations, made on the due date of the applicable
return, (ii) payments when and as due under that certain Employment Agreement
dated November __, 1995 by and between the Company and Xxxxxxx Xxxxx, and (iii)
provided that when made, no Default exists hereunder, payments equal to
dividends then due and unpaid on Buyer's outstanding shares of Preferred Stock
and payments equal to amounts due [UNDER REDEMPTION PROVISIONS APPROVED BY
SELLER IN MANAGEMENT STOCK AGREEMENTS].
4.4 Mergers, Consolidations and Sales of Assets. The Company
will not (i) consolidate with or be a party to a merger with any other
corporation, or (ii) sell, lease or otherwise dispose of all or any substantial
part of its assets.
4.5 Guarantees. The Company will not become or be liable in
respect of any Guarantee except Guarantees entered into in the ordinary course
of the Business and [GUARANTEES APPROVED BY SELLER OF LOANS FOR MANAGEMENT STOCK
PURCHASES].
4.6 Transactions with Affiliates. Buyer and the Company each
will not enter into or be a party to any transaction or arrangement with any
Affiliate (including without limitation the purchase from, sale to or exchange
of property with, or the rendering of any service by or for, any such
Affiliate), except pursuant to the reasonable requirements of such party's
business and upon fair and reasonable terms no less favorable to such party than
would obtain in a comparable arm's-length transaction with a person other than
an Affiliate. That certain Employment Agreement dated November __, 1995 by and
between the Company and Xxxxxxx Xxxxx is deemed to meet the requirements of this
Section 4.6.
4.7 Reports and Rights of Inspection. Buyer and the Company
each will keep proper books of record and account in which full and correct
entries will be made of all dealings or transactions of or in relation to the
business and affairs of Buyer or the Company, in accordance with generally
accepted accounting principles consistently applied (except for changes in
application disclosed in the financial statements furnished to the holder hereof
pursuant to this Section 4.7 and concurred in by the independent public
accountants referred to in (b) hereof), and will furnish to the holder hereof:
(a) As soon as available and in any event within forty-five
(45) days after the end of each quarterly fiscal period of each fiscal year
consolidated and consolidating balance sheets of Buyer and the Company as of the
close of such period, and consolidated and consolidating statements of income
and retained earnings and statements of cash flows of Buyer and the Company for
the quarterly fiscal period then ending and for the portion of the fiscal year
ending with such period in each case setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail and certified by an authorized financial officer of Buyer to
the effect that (except for the exclusion in unaudited quarterly financial
statements of certain footnote and other information normally presented with
annual audited financial statements, and subject to changes resulting from
year-end adjustments) such financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied (except for
changes in application in which the accountants referred to in clause (b) hereof
concur) and present fairly the financial condition of Buyer and the Company.
(b) As soon as available and in any event within ninety (90)
days after the close of each fiscal year of Buyer consolidated and consolidating
balance sheets of Buyer and the Company as of the close of such fiscal year, and
consolidated and consolidating statements of income and retained earnings and
statements of cash flows of Buyer and the Company for such fiscal year, in each
case setting forth in comparative form the figures for the preceding fiscal
year, all in reasonable detail and accompanied by an opinion thereon of a firm
of independent public accountants of recognized national standing selected by
Buyer to the effect that the financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except for changes in application in which such accountants concur and as are
noted therein) and present fairly the financial condition of Buyer and the
Company and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, includes such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances.
(c) Promptly upon receipt thereof, each interim or special
audit made by independent accountants of the books of Buyer or the Company.
(d) Promptly upon their becoming available, each financial
statement, report, notice or proxy statement sent by Buyer to stockholders
generally, and each report and any registration statement or prospectus filed by
Buyer with Nasdaq or any securities exchange or the Commission or any successor
agency, and copies of any orders in any proceedings to which Buyer or the
Company is a party issued by any governmental agency, federal or state, having
jurisdiction over Buyer or the Company.
(e) Within the periods provided in paragraphs (a) and (b)
above, a certificate of an authorized financial officer of Buyer stating that
such officer has reviewed the provisions of this Note and setting forth, to the
best of such officer's knowledge, whether there existed as of the date of such
financial statements and whether there exists on the date of the certificate or
existed at any time during the period covered by such financial statements any
Default or any condition which but for the passage of time or the giving of
notice or both would constitute a Default and, if any such condition or event
existed during such period or exists on the date of the certificate, specifying
the nature and period of existence thereof and the action Buyer has taken or is
taking and proposes to take with respect thereto;
(f) The annual plans and operating projections Buyer and the
Company furnish to CIT when and as so furnished.
5. Subordination. Anything in this Note to the contrary
notwithstanding, the Indebtedness evidenced by this Note will be subordinate and
junior in right of payment to the Senior Obligations, whether outstanding on the
date of this Note or incurred after the date of this Note, to the extent and in
the manner hereinafter set forth:
(a) Notwithstanding anything to the contrary contained herein,
this Note is in all respects subject to the terms and provisions of the
Subordination Agreement.
(b) In the event of any sale under or in accordance with any
judgment or decree rendered with respect to this Note in any proceeding by or on
behalf of the holder hereof or in the event of any distribution, division or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of the Company, or the proceeds
thereof, to creditors of the Company occurring by reason of any liquidation,
dissolution or winding up of the Company or in the event of any execution sale,
receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization
or other similar proceeding relative to the Company or its debts or properties,
then in any such event the Winona Lease Obligations will be preferred in
payment, and the Winona Lease Obligations will be first paid and satisfied in
full before any payment or distribution of any kind or character, whether in
cash, property or securities (other than securities which are subordinate and
junior in right of payment to the payment of the Winona Lease which may at the
time be outstanding), will be made upon this Note; and in any such event any
distribution of any kind or character, whether in cash, property or securities
(other than in securities which are subordinate and junior in right of payment
to the payment of the Winona Lease which may at the time be outstanding), which
is made upon or in respect of the Indebtedness will be paid over to the lessor
under the Winona Lease for application to the Winona Lease Obligations unless
and until the Winona Lease Obligations is paid and satisfied in full, and such
amounts so paid over will be deemed not to be made upon or in respect of the
Indebtedness, or the holder of this Note will be subrogated to the rights of the
lessor under the Winona Lease to the extent thereof, as elected by the holder of
this Note;
(c) In the event that pursuant to the provisions hereof this
Note is declared or becomes due and payable before its expressed maturity
because of an occurrence of a Default (under circumstances when the foregoing
clause (b) is not applicable) or otherwise, no amount will be paid by the
Company in respect of Indebtedness in excess of current interest payments as
provided herein, except at the stated maturity thereof (all subject to the
foregoing clause (b) above), unless and until the Winona Lease Obligations has
been paid in full or payment thereof has been provided for in a manner
satisfactory to the lessor under the Winona Lease;
(d) Without limiting the effect of any of the other provisions
hereof, during the continuance of any default in the payment of rent or any
other amount with respect to the Winona Lease, no payment will be made on or
with respect to the Indebtedness, if either (i) notice of such default in
writing has been given to the Company by the lessor under the Winona Lease,
provided that judicial proceedings are commenced with respect to such default
within one hundred eighty (180) days thereafter, or (ii) judicial proceedings
are pending in respect of such default.
(e) The holder hereof irrevocably authorizes and empowers the
holder of the Winona Lease, in any proceeding under Title 11 of the United
States Code in which the Company is subject, to file a proof of claim in behalf
of the holder hereof with respect to the obligations hereunder if the holder
hereof fails to file a proof of its claims prior to 30 days before the
expiration of the time period during which such claims must be submitted, to
accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the obligations hereunder in an
amount not in excess of that portion of the Winona Lease Obligation then
outstanding (unless CIT is entitled to such payment under the terms of the
Subordination Agreement) and to take such other action as may be reasonably
necessary to effectuate the foregoing. Unless CIT has filed a proof of claim or
has otherwise sought the same information or documents, the holder hereof will
provide to the lessor of the Winona Lease all information and documents
necessary to present claims or seek enforcement as aforesaid.
(f) To the extent that the lessor under the Winona Lease
receives any amounts from the holder hereof in accordance with the provisions of
the Note which, when added to the total amount received directly by the lessor
under the Winona Lease from any other source, exceeds the total Winona Lease
Obligation, the lessor under the Winona Lease will be obligated to pay the
excess to the holder hereof. In the event that as a result of an avoidance
action under Title 11 of the United States Code (including, but not necessarily
limited to, any action under 11 U.S.C. xx.xx. 544, 545, 547, 548, 549 and/or
550), the holder hereof is required to return to the Company or its bankruptcy
estate any payment received by the holder hereof and paid over to the lessor
under the Winona Lease pursuant to this Section 5, thereupon the lessor of the
Winona Lease will pay back to the holder hereof such amount paid over to the
lessor of the Winona Lease.
(g) The provisions of this Section 5 will be subject and
subordinate to the rights of CIT under the Subordination Agreement. The holder
hereof will not be required to take any action, perform any obligation or make
any payment hereunder which it reasonably believes would: (i) be in conflict
with or contrary to the terms of the Subordination Agreement; and/or (ii)
prevent it from performing any of its obligations under the Subordination
Agreement; and/or (iii) prevent or frustrate CIT from exercising any of its
rights under the Subordination Agreement. The lessor under the Winona Lease will
not exercise any rights hereunder to the extent doing so would: (x) be in
conflict with or contrary to the terms of the Subordination Agreement; and/or
(y) prevent the holder hereof from performing any of its obligations under the
Subordination Agreement; and/or (z) prevent or frustrate CIT from exercising any
of its rights under the Subordination Agreement.
(h) No right of any present or future holder of the Senior
Obligations to enforce subordination as herein provided will at any time or in
any way be prejudiced or impaired by any failure to act on the part of Buyer or
the Company, or by any noncompliance by Buyer or the Company with the terms,
provisions and covenants of this Note, regardless of any knowledge thereof that
any such holders of the Senior Obligations may have or with which they may be
otherwise charged. The provisions of this Section 5 are solely for the purpose
of defining the relative rights of the holders of the Senior Obligations on the
one hand, and the holder hereof on the other hand, and nothing in this Section 5
will impair, as between Buyer or the Company and the holder hereof as
applicable, the obligations of Buyer and the Company to pay to the holder hereof
Indebtedness in accordance with the remaining terms of this Note, nor will
anything herein prevent the holder hereof from exercising all remedies otherwise
permitted by applicable law or hereunder upon any Default, subject to the
rights, if any, of the holders of the Senior Obligations as herein provided.
Without limiting the foregoing, no suspension of any payment of Indebtedness
pursuant to the provisions of this Section 5 will suspend or defer the due date
of such payment as determined by the remaining provisions of this Note.
6. Buyer Guaranty and Security Agreement.
6.1 Guaranty. Buyer absolutely, irrevocably and
unconditionally guarantees to the holder hereof the payment of the Indebtedness
promptly when due, by acceleration or otherwise.
6.2 Security Interest. In order to secure the Indebtedness,
Buyer hereby grants to the holder hereof a security interest in all shares of
stock owned by Buyer in the Company (and any and all additions thereto,
substitutions therefor, and proceeds thereof) (the "Pledged Stock").
6.3 Warranties and Obligations of Buyer. Buyer hereby warrants
and covenants to the holder hereof:
(a) The Pledged Stock represents 100% of the issued and
outstanding shares of capital stock of the Company.
(b) Buyer has and will maintain during the term of the Note
sole title to and beneficial ownership of the Pledged Stock, free of all liens,
charges, security interests and encumbrances (other than the security interest
created hereby and under the Senior Pledge), and has full power and authority to
subject the Pledged Stock to the security interest created hereby.
(c) Buyer will hereafter from time to time execute and deliver
such financing statements, assignments separate from certificates and other
instruments or documents, deliver the certificates representing the Pledged
Stock to the holder hereof upon termination of the Senior Pledge and perform
such other acts as the holder hereof may reasonably request to establish,
protect and maintain a perfected security interest in the Pledged Stock and an
ability to effectively enforce its remedies hereunder with respect to the
Pledged Stock. Buyer will at all times cause all certificates representing the
Pledged Stock to include a legend referencing this Note and the security
interest of the holder hereof provided hereunder.
6.4 Priority. The holder of this Note by acceptance hereof
agrees that the security interest granted hereunder in the Pledged Stock is
subordinate and junior in interest and priority to the Senior Pledge.
6.5 Nonimpairment. The holder hereof may from time to time,
without notice to Buyer, and without impairing or affecting the security
interest created hereby: (a) acquire a security interest in any property in
addition to the Pledged Stock, or release any such interest so acquired or
release any security interest in any of the Pledged Stock, or permit any
substitution or exchange for such property or any part thereof; (b) acquire the
primary or secondary liability of any party or parties with respect to all or
any of the Indebtedness, or release, modify, or compromise the same or any part
thereof; (c) modify, extend or renew for any period any of the Indebtedness; and
(d) resort to the Pledged Stock for payment of the Indebtedness whether or not
the holder hereof has resorted to any other collateral or proceeding against any
party primarily or secondarily liable on the Indebtedness.
6.6 Voting Rights. Buyer hereby grants to the holder hereof an
irrevocable proxy, coupled with an interest, to vote any or all of the Pledged
Stock, which proxy may be exercised by the holder hereof only at such time as a
Default in the payment of principal under this Note is continuing and no Senior
Pledge is in effect. Such proxy will remain in effect until the Note is
satisfied in full. Except for those instances where the holder hereof exercises
such proxy, Buyer will be entitled to exercise the voting power with respect to
the Pledged Stock consistent with the terms or purposes of this Note.
6.7 Remedies. In the event a Default hereunder has occurred
and is continuing, the holder hereof will have, in addition to any other rights
and remedies a secured party can assert under the Minnesota Uniform Commercial
Code and to the extent not inconsistent with nonwaivable provisions thereof, the
following rights and remedies, without having to give notice except as is
hereinafter specifically provided:
(a) The holder hereof may sell the Pledged Stock, or any part
thereof, at a public or private sale, following the notice hereinafter provided,
for cash, upon credit, or for future delivery at such price or prices as the
holder hereof deems satisfactory. The holder hereof, or any parties related to
or affiliated with the holder hereof, may purchase any or all of the Pledged
Stock sold at a public sale. The holder hereof is authorized at any sale, if the
holder hereof deems it advisable to do so, to restrict the prospective bidders
or purchasers to persons who will represent and agree that they are purchasing
for their own account for investment, and not with a view to the distribution or
sale of any of the Pledged Stock. Upon any such sale, the holder hereof will
have the right to deliver, assign, and transfer to the purchaser thereof the
Pledged Stock so sold. Each purchaser at any such sale will hold the property
sold absolutely free from any claim or right of Buyer of whatsoever kind,
including any equity or right of redemption of Buyer which Buyer has under any
rule of law or statute now existing or hereafter adopted; and as to such
purchaser, Buyer hereby specifically waives all such rights of redemption, of
stay, or of appraisal, which might in any way affect such purchaser. The holder
hereof will give Buyer at least ten (10) days' written notice of intention to
make such public or private sale, which notice will state the time and place
fixed for such public sale or the time after which such private sale may be
consummated and whether the sale is to be public or private. At any such sale
the Pledged Stock may be sold in one lot as an entirety or in separate parcels,
as the holder hereof may determine. In case of any sale on credit or for future
delivery, the Pledged Stock so sold may be retained by the holder hereof until
the selling price is paid by the purchaser thereof, and the holder hereof will
not incur any liability in case of the failure of such purchaser to take up and
pay for the Pledged Stock so sold, and in case of any such failure, such Pledged
Stock may be again sold upon like notice. The holder hereof will not be
obligated to complete any sale for which the holder hereof sends out notice and
may, without notice or publication, adjourn any sale or cause the same to be
adjourned by announcement at the time and place fixed for such sale, and such
sale may thereafter be made at the time and place to which the same has been so
adjourned.
(b) The holder hereof, instead of exercising the power of
nonjudicial sale herein conferred, may proceed by a suit or suits at law or in
equity to foreclose the pledge and sell the Pledged Stock, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(c) Without limiting the rights of the holder hereof under any
other provision of this Note, and in addition thereto, Buyer will be obligated,
to the maximum extent permitted by law, if a Default is continuing and if
counsel for the holder hereof determines that it is necessary for the lawful
sale of the Pledged Stock in a commercially reasonable manner, upon written
request from the holder hereof, to vote its shares to cause the Company, at the
Company's or Buyer's expense, to prepare, file and cause to become effective
promptly, a registration statement complying with the Securities Act for the
public sale of such of the Pledged Stock as the holder hereof may elect, and to
take comparable action to permit such sales under the securities laws of such
state jurisdictions as the holder hereof may designate. If such registration
statement is filed, Buyer further will be obligated to vote its shares to cause
the Company, at the Company's or Buyer's expense, to enter into and perform its
obligations under one or more underwriting agreements in connection therewith,
containing customary representations, warranties, covenants, and indemnities and
contribution provisions if requested by the holder hereof. Buyer will be
obligated to vote its shares to cause the Company, at the Company's or Buyer's
expense, (i) to keep any such registration statement and related prospectus
current and in compliance with applicable federal and state securities laws so
long as required to satisfy applicable prospectus delivery requirements and (ii)
at the request of the holder hereof at any time after the effective date of any
such registration statement, to file post-effective amendments to such
registration statement so that sales of Pledged Stock by the holder hereof will
be covered by a current prospectus and can be made in compliance with all
applicable federal and state securities laws.
(d) Buyer further will be obligated to (i) take such action as
is necessary to cause the Company to delivery to the holder hereof such
information as the holder hereof reasonably requests for inclusion in any
registration statement, prospectus or offering memorandum or in any preliminary
prospectus or preliminary offering memorandum or any amendment or supplement to
any thereof or in any other writing prepared in connection with the offer, sale
or resale of all or any portion of the Pledged Stock and to deliver such
information regarding Buyer as the holder hereof reasonably requests, which
information will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated or necessary to make such
information not misleading, and (ii) vote its shares to do or cause to be done
all such other acts and things as may be necessary to make such offer, sale or
resale of all or any portion of the Pledged Stock valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental agencies or instrumentalities, domestic or foreign, having
jurisdiction over any such offer, sale or resale.
(e) Without limiting paragraphs (c) and (d) of this Section
6.7, if the holder hereof decides to exercise its right to sell all or any of
the Pledged Stock, upon written request Buyer will from time to time take such
action as is necessary to cause to be furnished to the holder hereof all such
information as the holder hereof may request and as is accessible to Buyer in
order to qualify such Pledged Stock as exempt securities, or the sale or release
of such Pledged Stock as exempt transactions, under federal or state securities
laws. Buyer will be obligated to take such action as is necessary to cause the
Company to allow the holder hereof and any underwriter access at reasonable
times and places to the books, records and premises of the Company; Buyer
further will be obligated to assist, and take such action as is necessary to
cause the Company to assist the holder hereof, any underwriter, any agent of any
thereof, and any counsel, accountant or other expert for any thereof, in
inspection, evaluation, and any other "due diligence" action of or with respect
to any such books, records and premises; and Buyer further will be obligated to
cause any independent public accountant for the Company to furnish a letter to
the holder hereof and underwriters in customary form and covering matters of the
type customarily covered by letters of accountants for issuers to underwriters.
(f) Buyer further acknowledges the impossibility of
ascertaining the amount of damages which would be suffered by the holder hereof
by reason of the failure by Buyer to perform any of the covenants contained in
this Section and, consequently, agrees that, if Buyer fails to perform any of
such covenants, the holder hereof will be entitled to equitable relief for the
enforcement of the provisions of this Section 6.7. Buyer will indemnify the
holder hereof for any and all fees, charges, reimbursements, judgments or other
expenses incurred by the holder hereof due to any failure of Buyer to perform
its obligations under this Section 6.7.
(g) Notwithstanding the foregoing provisions of this Section
6.7, the holder of this Note will not be permitted to exercise any of the
foregoing rights or remedies contained or referenced in this Section 6.7 for so
long as any Senior Pledge remains in effect without the prior written consent of
the holder thereof.
6.8 Application of Proceeds. The proceeds of any sale of the
Pledged Stock hereunder will be applied by the holder hereof:
(a) first, to the payment of the costs and expenses of such
sale, including reasonable attorneys' fees and all expenses and advances made or
incurred by it in connection therewith;
(b) second, to the payment of the Indebtedness;
(c) finally, to the payment to Buyer or its successors and
assigns of any surplus then remaining from such proceeds.
(d) The holder hereof will not be required to make any
allocation or distribution to Buyer of proceeds from sale except from collected
funds after satisfaction or release of all indemnification or other payment
obligations that may be asserted against the holder hereof or such proceeds in
connection with such sale. Any collected funds retained pursuant to this
provision will be promptly deposited or invested in Permitted Investments until
disbursed in accordance herewith.
6.9 Waivers. The holder hereof may at any time and from time
to time, without the consent of or notice to Buyer, without incurring
responsibility to Buyer, without releasing, impairing or affecting the liability
of Buyer hereunder, upon or without any terms or conditions and in whole or in
part: (a) sell, pledge, surrender, compromise, settle, release, renew,
subordinate, extend, substitute, exchange, change, or otherwise dispose of or
deal with in any manner and in any order any Indebtedness, any evidence thereof,
or any security therefor; (b) accept any security for or other guarantors of any
Indebtedness; and (c) fail, neglect or omit to obtain, realize upon or protect
any Indebtedness or any security therefor, to exercise any lien upon or right to
any money, credit or property toward the liquidation of the Indebtedness, or to
exercise any other right against Buyer, the Company or any other person. No act
or thing, except full payment and discharge of the Indebtedness, which but for
this provision could act as a release or impairment of the liability of Buyer
hereunder, will in any way release, impair or affect such liability.
6.10 Primary Obligation. This guaranty is a primary obligation
of Buyer and the holder hereof will not be required to first resort for payment
of the Indebtedness to the Company or any other person, their properties or
estates, or any security or other rights or remedies whatsoever. Buyer will be
and remain liable for any deficiency remaining after foreclosure of any mortgage
or security interest securing Indebtedness, whether or not the liability of the
Company or any other person for such deficiency is discharged pursuant to
statute, judicial decision or otherwise. If any payment applied by the holder
hereof to the Indebtedness is thereafter set aside, recovered, rescinded or
required to be returned for any reason (including without limitation the
bankruptcy, insolvency or reorganization of Buyer or any other person), the
Indebtedness to which such payment was applied will for the purposes of Buyer's
guaranty be deemed to have continued in existence, notwithstanding such
application, and this guaranty will be enforceable as to such Indebtedness as
fully as if such application had never been made.
6.11 Additional Waivers. Buyer waives: (a) notice of
acceptance of its guaranty hereunder and of the creation and existence of the
Indebtedness; (b) presentment, demand for payment, notice of dishonor, notice of
nonpayment, and protest of any instrument evidencing the Indebtedness; and (c)
all other demands and notices to Buyer, the Company or any other person and all
other actions to establish the liability of Buyer hereunder.
7. Default, Remedies
7.1 Default. Any one or more of the following constitutes a
Default as that term is used herein:
(a) Failure of the Company to pay any principal amount or
interest hereunder when due and continuation of such condition for fifteen (15)
days after written notice thereof by the holder hereof to the Company;
(b) Failure to perform any obligation of the Company hereunder
other than for the payment of money and continuation of such condition for
thirty (30) days after written notice thereof by the holder hereof to the
Company;
(c) Failure of the Company to pay any amount under the Senior
Obligations when due for so long as such condition continues;
(d) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against Buyer or the
Company and, if instituted against Buyer or the Company are consented to or are
not dismissed within sixty (60) days after such institution; or
(e) Buyer or the Company becomes insolvent or bankrupt,
generally does not pay its debts as they become due or makes an assignment for
the benefit of creditors, or Buyer or the Company applies for or consents to the
appointment of a custodian, trustee or receiver for Buyer or the Company or for
the major part of the property of either, or a custodian, trustee or receiver is
appointed for Buyer or the Company or for the major part of the property of
either and is not discharged within sixty (60) days after such appointment.
7.2 Acceleration of Maturity. When any Default described in
Sections 7.1(b) or (e) has happened and is continuing, and in the case of
Section 7.1(b) provided no Senior Obligation is then outstanding, the holder
hereof may, by written notice to the Company, declare the entire principal and
all interest accrued hereunder to be, and the same will thereupon become,
immediately due and payable, without any presentment, demand, protest or other
notice of any kind. When a Default described in Section 7.1 (d) has occurred,
the entire principal and all interest accrued hereunder will thereupon become
immediately due and payable without presentment, demand, protest or other notice
of any kind.
7.3 Costs of Enforcement. Upon a Default, the Company will be
obligated to pay all costs of collection and enforcement of the rights and
remedies of the holder hereof, including court costs and attorneys fees, whether
or not legal proceedings are commenced.
7.4 Waivers. The Company waives presentment for payment,
demand, protest, notice of protest and notice of dishonor. No delay by the
holder hereof in exercising any right or remedy hereunder, at law or in equity
will operate as a waiver of such right or remedy and no single or partial
exercise of any such right or remedy will preclude any further exercise thereof,
or the exercise of any other rights or remedies.
8. Notices. Any notice, request, instruction or other document to be
given hereunder by Buyer, the Company or the holder of this Note to any such
other party will be in writing and delivered personally or by telephonic
facsimile transmission or sent by registered or certified mail, postage prepaid
(and if by telephonic facsimile transmission with a copy sent by mail),
if to the holder of this Note to:
Bridgewater Resources Corp.
c/o BRC Management Corp.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx
Suite 3400, Plaza VII
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
if to Buyer or the Company to:
Discus Acquisition Corporation
0000 Xxxxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx and Xxxxxx
2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
or at such other address for a party as may be specified by like notice. Any
notice which is delivered personally or by telephonic facsimile transmission in
the manner provided herein will be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party (or its agent for
notices hereunder). Any notice which is addressed and mailed in the manner
herein provided will be conclusively presumed to have been duly given to the
party to which it is addressed at the close of business, local time of the
recipient, on the third day after the day it is so placed in the mail.
9. Arbitration. Subject to the last sentence of this Section, any
controversy or claim arising out of or relating to any provisions of this Note
or the breach hereof, unless resolved by mutual agreement of the parties, will
be finally settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect on the effective date of
this Agreement by a single arbitrator appointed in accordance with said Rules.
The determination of the arbitrator will be final and binding upon the parties
to the arbitration and judgment upon the award rendered by the arbitrator will
be entered in any court of competent jurisdiction. The place of arbitration will
be Minneapolis, Minnesota. Notwithstanding the foregoing, a party may seek
injunctive relief with respect to any controversy or claim arising out of or
relating to any provisions of this Agreement in any court of competent
jurisdiction.
10. Governing Law; Consent to Jurisdiction. This Note will be construed
in accordance with and governed by the laws of the State of Minnesota applicable
to agreements made and to be performed in such jurisdiction without reference to
conflicts of law principles. Buyer and the Company by execution and delivery of
this Note, and the holder of this Note by acceptance hereof, each irrevocably
consents that any legal action or proceeding against it under, arising out of or
in any manner relating to this Note may be brought only in an arbitration
proceeding as provided in Section 9 or in a court of the State of Minnesota or
in the United States District Court for the District of Minnesota. Each of
Buyer, the Company and the holder of this Note further expressly and irrevocably
assents and submits to the personal jurisdiction of the arbitrators selected
pursuant to Section 9 or any of such courts in any such action or proceeding.
Each of Buyer, the Company and the holder of this Note further irrevocably
consents to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to it by hand or
by mail in the manner provided for in Section 8 hereof. Each of Buyer, the
Company and the holder of this Note further hereby expressly and irrevocably
waives any claim or defense in any action or proceeding based on any alleged
lack of personal jurisdiction, improper venue or forum non conveniens or any
similar basis.
IN WITNESS WHEREOF, Buyer has caused this Note to be duly executed and
delivered on the day and year first above written.
PEERLESS CHAIN COMPANY
By
Its
IN CONSIDERATION of Seller's acceptance of the Note and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, Buyer hereby agrees to the guaranty and grant of security interest
and all other terms of Sections 4, 5, 6, 7, 8, 9 and 10 and, to the extent
applicable to such Sections, Section 2 of the foregoing Note.
DISCUS ACQUISITION CORPORATION
By
Its
Exhibit F
BUYER FINANCINGS
TRANSACTION SOURCES AND USES
(thousands)
SOURCES: USES:
Revolver $ 9,543,000 Cash to Seller $21,250,000
Sr. Term Loan 6,700,000 Seller Sub Debt 2,500,000
Seller Sub Debt 2,500,000 Transaction Costs 1,043,000
Preferred Stock 1,800,000
Common Stock 4,250,000
----------- -----------
Total $24,793,000 Total $24,793,000
=========== ===========
EQUITY SOURCES:
Preferred Shareholders $1,800,000
New Common Shareholders 2,000,000
Discus Acquisition 2,250,000
