AGREEMENT FOR PURCHASE AND SALE OF STOCK
THIS AGREEMENT (this "Agreement"), dated as of the 9th day of April,
1998, is made by and among ADVANCED D.C. HOLDINGS, INC., a Delaware
corporation ("Holdings"), XXXXXXX X. XXXXXXX, XXXXXX X. XXXXXXXXX, XXXXXXX
XXXXXXX and XXXXXX XXXXXX (all of said individuals being hereinafter
collectively referred to as the "Sellers"), such Sellers at Closing being the
holders of all of the outstanding shares of capital stock of ADVANCED D.C.
MOTORS, INC. a New York corporation ("ADCM"), and such Sellers at Closing
being the owners of all the outstanding shares of stock of the following
affiliated corporations: D.C.M. Holding Corp., a New York corporation ("DCM
Holdings"), Electric Vehicle Power Systems Inc., a New York corporation
("EVPS"), Sermed USA Inc., a Texas corporation ("Sermed USA"); Jencoil, Inc.,
a Texas corporation ("Jencoil"); Xxxxxxxx Industries, Inc., a Texas
corporation ("Xxxxxxxx Industries"); Xxxxxxxx Motors & Parts Inc., a Texas
corporation ("WMP"); Electric Vehicle Components, Ltd., a New York corporation
("EVC (NY)") (collectively, the "ADCM Affiliates"), and such Sellers at
Closing also being the indirect owners of certain outstanding shares of stock
of the following subsidiaries of ADCM: Electric Vehicle Components Ltd., a
California corporation and a 50% owned subsidiary of ADCM ("EVC (CA)"); Sermed
S.A.R.L., a French corporation and a 99% owned subsidiary of ADCM ("Sermed");
Advanced DC Motors GmbH, a German corporation and a 90% owned subsidiary of
ADCM and Sermed ("ADCM-Germany"); and R&A Machine Tool Corporation, a New York
corporation and a 20% owned subsidiary of EVC (NY) ("R&A") (collectively, the
"Partially-Owned Subsidiaries") (ADCM, the ADCM Affiliates and the
Partially-Owned Subsidiaries herein collectively referred to as the "ADCM
Companies" and individually as an "ADCM Company").
ARTICLE I
PURCHASE AND SALE; PRICE
1.1 Purchase and Sale of the Shares and the Noncompetition
Agreements. At the Closing (hereinafter defined) and in the manner herein
provided, the Sellers shall sell and deliver all of the shares of capital
stock of ADCM and the ADCM Affiliates (the "Shares") to Holdings, and Holdings
shall purchase the Shares from Sellers, together with the Noncompetition
Agreements (defined below), on the terms and conditions set forth herein. At
the Closing, the Shares shall represent all of the issued and outstanding
shares of capital stock of ADCM and the ADCM Affiliates.
1.2 Purchase Price. Subject to the terms and conditions of this
Agreement and in reliance on the representations and warranties of the Sellers
herein contained, and in consideration of the sale, conveyance, transfer and
delivery of the Shares provided for in this Agreement and the execution of the
Noncompetition Agreements, Holdings agrees to pay to the Sellers an aggregate
purchase price of $53,000,000, plus the amounts payable pursuant to the
Contingent Purchase Price Plan (defined below) (the "Purchase Price"), payable
and allocated to the Sellers as more particularly set forth on Exhibit 1.5
attached hereto based on the number of Shares purchased by Holdings from each
of the Sellers, as follows:
(a) $53,000,000, less the Reserve Amount (defined in Section
1.4(b)), less any Excluded Liabilities (defined in Section 1.3(a)(ii)) and
less the Escrow Amount (defined in Section 6.10), by delivery at the Closing
to the Sellers of a certified or cashier's check or funds by wire transfer to
account(s) designated by the Sellers in writing no later than five business
days prior to Closing, which amount includes the $600,000 payment for the
Noncompetition Agreements;
(b) The contingent purchase price payable in accordance with the
terms and conditions of the Contingent Purchase Price Plan set forth in
Exhibit 1.2 ("Contingent Purchase Price Plan");
(c) If and when required by Section 1.4(b) hereof, Holdings
shall pay the Sellers all or a portion of the Reserve Amount by delivery to
the Sellers of a certified or cashier's check or by wire transfer or transfers
to an account or accounts designated by the Sellers; and
(d) If and when required by Section 6.10 hereof, the Sellers
shall be entitled to receive from the Escrow Agent, all or a portion of the
Escrow Amount in accordance with the terms of the Escrow Agreement.
1.3 Payment of Liabilities; Definitions.
(a) Liabilities.
(i) Payment of Liabilities Other Than Permitted Liabilities.
The Sellers acknowledge and agree that the Purchase Price has been calculated,
and is being paid, based on the agreement that the ADCM Companies will have
paid in full immediately prior to the Closing all liabilities and obligations
of the ADCM Companies other than the Permitted Liabilities. "Permitted
Liabilities" shall mean only trade accounts payable, accrued payroll, accrued
vacation, accrued payroll taxes, accrued sales taxes, accrued contributions
required of any of the ADCM Companies under any Welfare Benefit Plan or
Pension Benefit Plan (as defined in Section 2.18), and accrued operating
expenses, the total of which at the Closing shall not in the aggregate exceed
$5,000,000.
(ii) Excluded Liabilities. "Excluded Liabilities" shall mean
all liabilities of the ADCM Companies other than the Permitted Liabilities,
including, without limitation, all interest bearing debt, mortgages,
shareholder loans, shareholder redemption obligations, dividends payable,
other capital debt or capital lease obligations, income taxes payable, any
bonuses payable to the Class B nonvoting common shareholders of ADCM, any
capital expenditure or other liability incurred outside the normal course of
business or any similar obligation; provided, however, such liabilities shall
only constitute Excluded Liabilities to the extent such liabilities are
reflected in the final and complete Closing Financials and Computations or set
forth on Exhibit 1.3. From and after the date of this Agreement, the Sellers
shall give prior Notice (hereinafter defined) to Holdings before any of the
ADCM Companies incurs any Excluded Liabilities. In the event any Excluded
Liabilities exist at the Closing, then such amounts shall not constitute
Damages (defined below); instead, the Purchase Price shall be reduced by the
aggregate amount of such Excluded Liabilities on a dollar-for-dollar basis.
If the Purchase Price has already been paid when such Excluded Liabilities or
obligations are discovered by Holdings, then Holdings may offset such Excluded
Liabilities or obligations against the Reserve Amount. If the Reserve Amount
has been paid to Sellers or has been retained by Holdings pursuant to Section
1.4(b), then the Sellers will immediately pay such Excluded Liabilities or
repay Holdings for any expenditure incurred by Holdings in relation to such
Excluded Liabilities.
(b) Calculations; Definitions.
(i) Calculation of DFCS. "DFCS" shall mean debt free common
shares and shall equal (x) the aggregate dollar amount of the ADCM Companies'
Total Assets (hereinafter defined) less (y) the aggregate dollar amount of the
Permitted Liabilities less (z) any Excluded Liabilities which the Sellers have
not caused to be discharged pursuant to Section 1.3(a)(ii). The parties agree
that the ADCM Companies' DFCS as of November 30, 1997 was $13,297,073, and the
basis of that calculation is set forth on Exhibit 1.3(a). In the calculation
of DFCS as of a particular date, the ADCM Companies will calculate DFCS
consistent with the preparation of the DFCS Example set forth on Exhibit
1.3(a) and provide for all anticipated year-end expense adjustments for the
year in which the Closing Date falls on a pro-rata basis, and based upon the
respective fiscal year-end of each of the ADCM Companies.
(ii) Definition of Total Assets. "Total Assets" shall mean the
amount of all assets (net of reserves for bad debts, depreciation and similar
"contra-asset" items) of the ADCM Companies.
(iii) Definition of GAAP or Generally Accepted Accounting
Principles. "GAAP" or "generally accepted accounting principles" shall mean
such principles, applied on a consistent basis, as set forth in Opinions of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards Board
which are applicable in the circumstances as of the date in question. For
purposes of this definition, the requirement that such principles be applied
on a "consistent basis" shall mean that accounting principles observed in the
current period are comparable in all material respects to those applied in the
preceding periods, except as change is permitted or required under or pursuant
to such accounting principles.
(iv) Definition of Laws. "Laws" shall mean, without limitation,
all foreign, state and local laws, statutes, rules, regulations, codes,
ordinances, plans, orders, judicial decrees, writs, injunctions, notices,
decisions or demand letters issued, entered or promulgated pursuant to any
foreign, federal, state or local law.
1.4 Financial Requirements Regarding Purchased DFCS; Post
Closing Adjustments.
(a) Financial Requirements. Notwithstanding the terms of
Section 4.4, to the extent the DFCS of the ADCM Companies at the Closing Date
is less than $13,297,000 ("Minimum DFCS"), which the Sellers and Holdings
agree is the DFCS at the Financial Statement Date, the Purchase Price shall be
reduced on a dollar for dollar basis in accordance with the provisions of
Section 1.4(b) below.
(b) Post-Closing Adjustments. Within 30 business days of the
Closing, Holdings shall cause the ADCM Companies to compile the balance sheet
of the ADCM Companies as of the Closing Date (on a combined or consolidated
basis as appropriate) (the "Closing Date Balance Sheet"), which shall be
presented to Ernst & Young LLP ("E&Y"), for its review within 30 business days
of the Closing Date. Holdings shall cause E&Y within 60 business days after
E&Y's receipt of the Closing Date Balance Sheet to deliver to the Sellers an
audited balance sheet of the ADCM Companies (on a combined or consolidated
basis as appropriate) as of the Closing Date, together with a determination of
DFCS as of the Closing Date (the "Closing Date Financials and Computations").
If a majority of the Sellers have any objections to or otherwise dispute the
Closing Date Financials and Computations including, without limitation, the
determination of any Excluded Liabilities, they shall notify Holdings within
30 business days of their receipt of such Closing Date Financials and
Computations, describing their objections and the basis therefor in reasonable
detail. The failure of a majority of the Sellers to so notify Holdings within
such 30 business day period, or notification by a majority of the Sellers that
they have no objection to the Closing Date Financials and Computations shall
constitute acceptance thereof, whereupon the Closing Date Financials and
Computations shall be deemed complete and final. Alternatively, if Holdings
accepts the proposed changes of a majority of the Sellers, the Closing Date
Financials and Computations shall be deemed complete and final upon written
acceptance by Holdings. If Holdings does not respond to the changes proposed
by a majority of the Sellers within 30 business days following Holdings'
receipt of such proposed changes, the same shall be deemed to have been
accepted by Holdings, and the Closing Date Financials and Computations as so
changed shall be deemed complete and final. The parties agree that the
provisions of Section 12.7(b) hereof will apply in resolving any dispute
regarding the Closing Financials and Computations. Immediately after the
completion of the Closing Financials and Computations, and the review and
acceptance of the same by a majority of the Sellers, or, if applicable, the
resolution in accordance herewith of any dispute between the parties with
respect to the Closing Financials and Computations, the parties agree that the
Reserve Amount, or portions thereof, shall be retained by Holdings to the
extent that the DFCS of the ADCM Companies on the Closing Date and as
reflected in the final and complete Closing Date Financials and Computations
is less than Minimum DFCS (the "Deficiency"). Within five (5) business days
thereafter, Holdings shall pay to the Sellers the remaining Reserve Amount, if
any, or all of the Reserve Amount, if appropriate. To the extent that the
Deficiency at Closing exceeds the Reserve Amount, such Deficiency shall not
constitute Damages (hereinafter defined in Article XI), but shall be
immediately due and payable to Holdings by the Sellers. Any Deficiency will
first be satisfied out of the Reserve Amount and then, if necessary, from the
Escrow Amount in accordance with the terms of Section 6.10, and then, if
necessary, such deficiency shall be immediately paid by the individual
Sellers. The term "Reserve Amount" shall mean $1,000,000, which amount shall
be retained by Holdings and disbursed pursuant to this Agreement.
(c) Pro-Rata Adjustments. The Sellers and Holdings will provide
for all year-end expense adjustments for all expenses on a pro-rata basis in
accordance with GAAP prior to the preparation of the Closing Financials and
Computations and disbursement of the Reserve Amount in accordance with Section
1.4(b) above.
1.5 Allocations of the Purchase Price Among Sellers. The
Purchase Price shall be paid and allocated among the Sellers as provided in
the allocation set forth on Exhibit 1.5 hereto, including an aggregate
allocation of $600,000 for the Noncompetition Agreements.
1.6 Accounts and Notes Receivable. Sellers will deliver to
Holdings a schedule of all accounts and notes receivable (and the face amounts
thereof) which are outstanding on the Closing Date. All accounts and notes
receivable listed on the schedule delivered at the Closing will constitute
valid claims against third parties not affiliated with the ADCM Companies
arising in the ordinary course of business of the ADCM Companies. The parties
hereto agree that Holdings may assign to Sellers any accounts and notes
receivable which are outstanding on the Closing Date and which are uncollected
as of the date six months after the Closing Date, and concurrently with such
assignment Sellers shall pay to Holdings, in cash, an amount equal to the
aggregate value of such accounts and notes receivable to the extent the same
exceeds the reserve for doubtful accounts on the Closing Date Balance Sheet.
All amounts which are collected by Holdings or any of the ADCM Companies from
an account or note debtor after the Closing Date shall be applied to reduce
the outstanding balance on such account or with such note debtor for which
such payment applies, as requested by such account or note debtor without the
direction of Holdings or any of the ADCM Companies with respect to which
portion of the outstanding balance the payment should be applied to reduce.
1.7 Product Claims and Returns. Sellers shall be responsible
for customer claims relating to services rendered by the ADCM Companies prior
to the Closing Date, and customer claims relating to, or returns of, products
of the ADCM Companies sold and shipped by the ADCM Companies prior to the
Closing Date or in the finished goods inventory of the ADCM Companies as of
the Closing Date to the extent that such claims and returns are in excess of
the respective historical percentages for claims and returns set forth below.
The historical percentage for claims and returns of motors which have not been
incorporated into a finished product ("OE Returns") is .23%, such percentage
being determined by dividing the number of OE Returns in a calendar year by
the total number of motors sold by the ADCM Companies in that calendar year.
The historical percentage for claims and returns of motors which have been
incorporated into a finished product ("Warranty Returns") is .25%, which
percentage is determined by dividing the number of Warranty Returns in a
calendar year by the number of motors sold by the ADCM Companies in that
calendar year. If a customer makes a claim or seeks a return and such claim
or return is proper in the judgment of the then management of the appropriate
ADCM Company which received the submitted claim or return, then the
appropriate ADCM Company shall replace or repair, as the case may be, the
services rendered or product purchased at the appropriate ADCM Company's then
generally prevailing prices and labor rates. Such repairs or returns shall be
for the account of Sellers who shall promptly reimburse Holdings for the
amounts thereof in excess of reserves for such items included in the Closing
Date Balance Sheet.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers hereby jointly and severally represent and warrant to
Holdings, as follows:
2.1. Incorporation, etc. Each of the ADCM Companies is a corporat
ion duly incorporated, validly existing and in good standing under the laws of
the state of its incorporation with all requisite corporate power and
authority to carry on its business as it is now being conducted and to own,
operate and lease its properties and assets. Exhibit 2.1.1 lists each of the
states where each ADCM Company is incorporated and is qualified as a foreign
corporation. The conduct of its business and its ownership or use of property
do not require any of the ADCM Companies to be qualified or licensed to do
business as a foreign corporation in any state except those listed in Exhibit
2.1.1. Exhibit 2.1.2 contains complete and correct copies of each ADCM
Company's (i) articles or certificate of incorporation; (ii) bylaws; (iii)
good standing certificates from the secretary of state of (A) the state of
incorporation of each ADCM Company (except for WMP, R&A, Sermed and
ADCM-Germany) and (B) each of the states listed on Exhibit 2.1.1. and (iv)
certificates of authority for the states listed in Exhibit 2.1.1, each as
amended to date. Each ADCM Company has all federal, state, local and foreign
licenses, permits or other approvals required for the operation of its
business as now being conducted.
2.2. Capital Stock, Options. The authorized capital stock of
each ADCM Company and the shares of capital stock of each ADCM Company issued
and outstanding, of all classes, and the respective holdings of each of
Sellers, are as set forth in Exhibit 2.2. The Shares at Closing will
represent all of the issued and outstanding capital stock of the ADCM
Companies, the Shares are all listed on Exhibit 2.2, and at Closing, none of
the ADCM Companies will have any treasury stock except as set forth on Exhibit
2.2. Except as set forth on Exhibit 2.2, all of the Shares are validly
issued, fully paid and nonassessable and are owned by Sellers, free and clear
of all encumbrances or claims. Except as set forth on Exhibit 2.2, there are
no issued and outstanding options, warrants, rights, securities, contracts,
commitments, understandings or arrangements by which any of the ADCM Companies
is bound to issue any additional shares of its capital stock or options to
purchase shares of its capital stock.
2.3. Subsidiaries and Affiliates. Except as set forth on
Exhibit 2.3, none of the ADCM Companies has any subsidiaries, Affiliates or
investments in any other entity or business operation. The term "Affiliates"
includes each shareholder, director, officer and employee of the ADCM
Companies, the family members of each Seller, and any director, officer or
employee of the ADCM Companies, and any corporation, partnership or other
entity in which any of the ADCM Companies, any Seller, any family member of a
Seller or director or officer of any of the ADCM Companies has any financial
interest or is a controlling person, as that term is used in connection with
the federal securities laws, if such person or entity has, or in the past had,
a contractual relationship with or is transacting, or has in the past
transacted, business with any of the ADCM Companies. All of the outstanding
shares of all classes of capital stock of each subsidiary of any of the ADCM
Companies owned by such ADCM Company are free of any liens, security
interests, claims or encumbrances. The ADCM Companies have no Affiliates
whose liabilities or obligations will be assumed by Holdings.
2.4 Authorization, etc. The Sellers have full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. Except for Xxxxxx Xxxxxx, none of the Sellers is a
resident of any state that has enacted community property statutes nor is any
Seller subject to any community property statutes.
2.5 No Violation. Except as set forth in Exhibit 2.5, none of
the ADCM Companies is subject to or obligated under any article or certificate
of incorporation, bylaw, Law, or any agreement or instrument, or any license,
franchise or permit, which would be breached or violated by Sellers'
execution, delivery and performance of this Agreement. Sellers will comply
with all applicable Laws in connection with their execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
2.6 Governmental Authorities. Neither the Sellers nor any of
the ADCM Companies are required to submit any notice, report or other filing
with, and no consent, approval or authorization is required, by any
governmental or regulatory authority in connection with their execution,
delivery, consummation or performance of this Agreement or the transactions
contemplated hereby other than those required under the HSR Act, as defined in
Section 4.14 below.
2.7 Financial Statements. Exhibit 2.7(a) contains (a) ADCM's
reviewed balance sheet as of December 31st for each of the years 1994 and 1995
and reviewed statements of income, statements of changes in stockholders'
equity and statements of cash flows for the fiscal years then ended, each such
statements being prepared by Piaker & Xxxxx; (b) ADCM's audited balance sheet
as of December 31, 1996 and an audited statement of income, statement of
changes in stockholders equity and statement of cash flows for the year then
ended, each such statement being prepared by Piaker & Xxxxx; (c) EVPS's
audited balance sheet as of November 30, 1996 and an audited statement of
income, statement of changes in stockholders' equity and statement of cash
flows for the year then ended, each such statement being prepared by Piaker &
Xxxxx. All such balance sheets and the notes thereto are complete and
accurate and fairly present the financial position of ADCM and EVPS as of the
respective dates thereof, and such statements of income, statement of changes
in stockholders' equity and statements of cash flows and the notes thereto
fairly present the results of operations for the periods therein referred to,
all in accordance with GAAP except as set forth in the audit report of Piaker
& Xxxxx or on Exhibit 2.7(b). Exhibit 2.7(c) contains internal,
management-prepared, unaudited balance sheets of ADCM, EVPS, DCM Holdings, EVC
(NY), EVC (CA), Sermed USA, Xxxxxxxx Industries, WMP and Jencoil as of
November 30, 1997 or December 31, 1997, as indicated, and statements of
income, statements of changes in stockholders' equity and statements of cash
flows for the relevant periods then ended for ADCM and EVPS, respectively.
All such balance sheets and the notes thereto are complete and accurate and
fairly present the financial position of ADCM, EVPS, DCM Holdings, EVC (NY),
EVC (CA), Sermed USA, Xxxxxxxx Industries, WMP and Jencoil as of the date
thereof, and such statements of income, statements of changes in stockholders'
equity and statements of cash flows and the notes thereto fairly present the
results of operations for the period therein referred to, all in accordance
with GAAP except as set forth on Exhibit 2.7(b). Exhibit 2.7(d) contains
internal, management-prepared, unaudited combined balance sheets and combined
income statement presentations of the ADCM Companies, as of December 31, 1995,
December 31, 1996, and December 31, 1997, and for the respective periods then
ended and all such balance sheets and the notes thereto are complete and
accurate and fairly present the financial position of the ADCM Companies as of
the respective date thereof, and such statements of income fairly represent
the results of operations for the respective period therein referred to, all
in accordance with GAAP except as set forth on Exhibit 2.7(b). The Balance
Sheets as of November 30, 1997 are referred to as the "Balance Sheets."
November 30, 1997 is referred to as the "Financial Statement Date." Exhibit
2.7(e) contains an unaudited combined balance sheet presentation and combined
income statement presentation of the ADCM Companies as of November 30, 1997
and for the respective periods then ended (the "Combined Financial
Statements").
2.8. No Undisclosed Liabilities, Claims. Except as set forth on
Exhibit 2.8 and except for (a) liabilities fully reflected or reserved against
in the Balance Sheet; and (b) regular and usual liabilities and obligations
incurred in the ordinary course of business consistent with past practices
after the Financial Statement Date, none of the ADCM Companies has any
liabilities, obligations or claims (absolute, accrued, fixed or contingent,
matured or unmatured, or otherwise), including any liabilities, obligations or
claims which may become known or which arise only after the Closing and which
result from actions, omissions or occurrences of the Company prior to the
Closing.
2.9. Absence of Certain Changes. Except as set forth on Exhibit
2.9, since the Financial Statement Date, there has not been (a) any adverse
change in the business, prospects, financial condition, earnings or operations
of the business of any of the ADCM Companies; (b) any damage, destruction or
loss, whether covered by insurance or not, adversely affecting the properties
and business of any of the ADCM Companies; (c) any declaration, setting aside
or payment of any dividend whether in cash, stock or property with respect to
the capital stock of any of the ADCM Companies, or any redemption or other
acquisition of such stock by any of the ADCM Companies; (d) any increase in
the compensation payable or to become payable by any of the ADCM Companies to
their directors, officers, key employees, Affiliates or any of the Sellers or
any adoption of or increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such party; (e)
any entry by any of the ADCM Companies into any commitment or transaction,
including, without limitation, any borrowing or capital expenditure other than
in accordance with the schedule of capital expenditures (Exhibit 2.25); (f)
any change by any of the ADCM Companies in accounting methods, practices or
principles; (g) any termination or waiver of any rights of value to the
business of any of the ADCM Companies; (h) any other transaction or event
other than in the ordinary course of the business of any of the ADCM
Companies; (i) any transaction or conduct inconsistent with the past business
practices of any of the ADCM Companies; (j) any adoption or amendment of any
collective bargaining, bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, or other plan, agreement, trust,
fund or arrangement for the benefit of employees; or (k) any agreement or
understanding made or entered into to do any of the foregoing.
2.10. Contracts. Exhibit 2.10 contains a schedule of, and
copies of, all Contracts to which any of the ADCM Companies is a party. The
term "Contracts" shall include, but shall not be limited to, all oral (which
shall be summarized in Exhibit 2.10) and written contracts, agreements, agency
agreements, loan agreements, mortgages, indentures, deeds of trust,
guarantees, commitments, joint venture agreements, purchase and/or sale
agreements, collective bargaining, union, consulting and/or employment
contracts, leases of real or personal property, easements, distribution or
dealer agreements, service agreements, license agreements and advertising
agreements (except there shall not be included agreements which do not exceed,
in the case of any one agreement, an obligation of $10,000, and in the case of
all related agreements, an aggregate obligation of $30,000). None of the ADCM
Companies is in default or alleged to be in default under any Contract nor are
Sellers aware of any default by any other party to any Contract, and there
exists no event, condition or occurrence which, after notice or lapse of time,
or both, would constitute a default under any Contract. All of the Contracts
are in full force and effect and constitute legal, valid and binding
obligations of the parties thereto in accordance with their terms, and will
remain in full force and effect after the Closing without any notice to or
consent by any other party.
2.11. True and Complete Copies. Copies of all agreements,
contracts and documents delivered and to be delivered hereunder by Sellers or
ADCM are and will be true and complete copies of such agreements, contracts
and documents. All written summaries of oral agreements will be true and
complete with respect to the disclosure of the substantive terms of such oral
agreements.
2.12. Title and Related Matters. Each of the ADCM Companies has
good title to all of the properties and assets reflected in the Balance Sheet
or acquired after the date thereof (except properties sold or otherwise
disposed of since the date thereof in the ordinary course of business and
consistent with past practices), including, without limitation, the specific
assets referred to in paragraphs (a), (b) and (c) below, free and clear of all
mortgages, security interests, liens, pledges, claims, escrows, options,
rights of first refusal, indentures, easements, licenses, security agreements
or other agreements, arrangements, contracts, commitments, understandings,
obligations, charges or encumbrances of any kind or character, except as
reflected on the Balance Sheet or except as set forth in Exhibit 2.12. Each of
the ADCM Companies owns or leases, directly or indirectly, all of the assets
and properties, and is a party to all licenses and other agreements, presently
used or necessary to carry on the business or operations of that ADCM Company
as presently conducted.
(a) Real Property.
(i) DCM Holdings has good title in fee simple to the land,
including buildings and improvements thereon, shown on the Combined Financial
Statements. All such land, buildings and improvements of DCM Holdings are
owned free and clear of all encumbrances, restrictions and charges of every
kind and character including, without limitation, any of the various types
listed above, except as set forth on Exhibit 2.12.
(ii) None of the ADCM Companies is a tenant under any lease(s)
of real property used by any ADCM Company except as described on Exhibit
2.10. With respect to the leased real property described on Exhibit 2.10 and
except as set forth on Exhibit 2.12: (A) all such leases are in full force and
effect and constitute valid and binding obligations of the respective parties
thereto; (B) there have not been and there currently are not any defaults
thereunder by any ADCM Company or, to the Sellers' best knowledge, by any
other party thereto; (C) no event has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a default thereunder entitling the lessor to terminate the lease;
and (D) the continuation, validity and effectiveness of all such leases under
the current rentals and other current terms thereof will in no adverse way be
affected by the transactions contemplated by this Agreement or, if any would
be so affected, Sellers shall use all necessary means at their disposal to
cause an appropriate consent to such transactions to be delivered to Holdings
prior to the Closing Date at no cost or other adverse consequences to the
Company ((A) through (D) are hereinafter collectively referred to as "Lease
Restrictions").
(iii) Except as shown on Exhibit 2.12, each parcel of real
property, building, structure and improvement owned, leased or otherwise
utilized by the ADCM Companies (collectively the "Premises") conforms in all
respects to all applicable Laws, including zoning regulations, none of which
will, upon the sale of the Shares to Holdings, prohibit the use of such
properties, buildings, structures or improvements, for the purposes for which
they are now utilized. The Premises are of good quality construction
throughout, are in good condition and working order, are adequate for the
purposes for which they are currently being used, and, have no structural or
other substantial deficiencies.
(iv) The ADCM Companies do not currently have, and in the past
has not had, any interest (as owner, tenant or otherwise) in any real property
except as disclosed on Exhibit 2.12.
(b) Personal Property. ADCM Companies have good title to all
the personal property and assets, tangible or intangible, shown on the
Combined Financial Statements except to the extent sold or disposed of in
transactions entered into in the ordinary course of business consistent with
past practices since the Financial Statement Date. The personal property in
the aggregate is in good condition and working order, and each individual item
of personal property which would cost in excess of $5,000 to replace is in
good condition and working order. None of such assets is subject to any (i)
contracts of sale or lease, except contracts for the sale of inventory in the
ordinary and regular course of business; or (ii) security interests,
encumbrances, liens or charges of any kind or character, except as set forth
in Exhibit 2.12. Except as set forth in Exhibit 2.12, there are no Lease
Restrictions with respect to the personal property leased by any of the ADCM
Companies.
(c) Inventories. Except as set forth on Exhibit 2.12, in
addition to subsection (b) of this Section, the inventories of the ADCM
Companies included on the Combined Financial Statements, to be included on
interim balance sheets provided pursuant to Section 4.8 and owned by the ADCM
Companies on the Closing Date: (i) are valued with respect to each category of
inventory at the lower of cost (on a FIFO basis) or market; and (ii) do not
include any items which are below standard quality, damaged or spoiled,
obsolete or of a quality or quantity not usable or salable in the normal
course of the business of the ADCM Companies as currently conducted within
normal inventory "turn" experience, the value of which has not been fully
written down, or with respect to which adequate reserves have not been
provided or with respect to which the costs can be recouped from the supplier.
The ADCM Companies, as a whole, have the proper amount of inventories to
conduct their business consistent with past practices. Except as set forth on
Exhibit 2.12, there has not been since the Financial Statement Date any
provision for markdowns or shrinkage with respect to inventories other than in
the ordinary and regular course of business consistent with past practices or
as otherwise consented to by Holdings.
(d) No Disposition of Assets. There has not been since the
Financial Statement Date any sale, lease or any other disposition or
distribution by any of the ADCM Companies of any of their assets or properties
and any other assets now or hereafter owned by them, except transactions,
including shareholder distributions, in the ordinary and regular course of
business consistent with past practices, or as otherwise consented to by
Holdings.
2.13. Litigation. Except as set forth in Exhibit 2.13, there is
no suit, action, investigation or proceeding pending threatened in writing, or
to the Sellers' best knowledge, otherwise threatened against any of the ADCM
Companies or any of Sellers which, if adversely determined, would adversely
affect the business, prospects, operations, earnings, properties or the
condition, financial or otherwise, of any of the ADCM Companies, nor is there
any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against any of the ADCM Companies having, or which, insofar as can be
reasonably foreseen, in the future may have, any such effect.
2.14 Tax Matters. The term "Taxes" means all net income,
capital gains, gross income, gross receipts, sales, use, transfer, ad valorem,
franchise, profits, license, capital, withholding, payroll, employment,
excise, goods and services, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees or assessments, or
other governmental charges of any kind whatsoever, together with any interest,
fines and any penalties, additions to tax or additional amounts incurred or
accrued under applicable Law or assessed, charged or imposed by any
governmental authority, domestic or foreign, provided that any interest,
penalties, additions to tax or additional amounts that relate to Taxes for any
taxable period (including any portion of any taxable period ending on or
before the Closing Date) shall be deemed to be Taxes for such period,
regardless of when such items are incurred, accrued, assessed or imposed. For
the purposes of this Section 2.14 and Section 6.5, the ADCM Companies shall be
deemed to include any predecessor of any of the ADCM Companies or any person
or entity from which any of the ADCM Companies incurs a liability for Taxes as
a result of any transferee liability. Except as stated in Exhibit 2.14.1:
(a) Each of the ADCM Companies has duly and timely filed (and
prior to the Closing Date will duly and timely file) true, correct and
complete tax returns, reports or estimates, all prepared in accordance with
applicable Laws, for all years and periods (and portions thereof) and for all
jurisdictions (whether federal, state, local or foreign) in which any such
returns, reports or estimates were due. All Taxes shown as due and payable on
such returns, reports and estimates have been paid, and there is no current
liability for any Taxes due and payable in connection with any such returns.
All Taxes not yet due and payable have been fully accrued on the books of the
applicable ADCM Company and adequate reserves have been established therefor;
the charges, accruals and reserves for Taxes provided for on the financial
statements delivered or to be delivered pursuant to Section 2.7 and Section
4.8 are adequate; and there are no unpaid assessments for additional Taxes for
any period nor is there any basis therefor. Copies of all federal, state and
foreign tax returns filed by the ADCM Companies for the past five (5) years,
where applicable, have been previously provided to Holdings.
(b) The ADCM Companies are not, and never have been, members of
any consolidated, combined or unitary group for federal, state, local or
foreign tax purposes and none of the ADCM Companies is a party to any joint
venture, partnership or other arrangement that could be treated as a
partnership for federal income tax purposes.
(c) Each of the ADCM Companies has (i) withheld all required
amounts from its employees, agents, contractors and nonresidents and remitted
such amounts to the proper agencies; (ii) paid all employer contributions and
premiums and (iii) filed all federal, state, local and foreign returns and
reports with respect to employee income tax withholding, and social security
and unemployment taxes and premiums, all in compliance with the withholding
tax provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
as in effect for the applicable year or any prior provision thereof and other
applicable Laws.
(d) The federal income tax returns of the ADCM Affiliates and
EVC (CA) have been examined by the Internal Revenue Service (the "IRS"), or
have been closed by the applicable statute of limitations, for all periods
through December 31, 1993; the federal income tax returns of ADCM have been
examined by the IRS for all periods through December 31, 1995; the state
income or franchise tax returns of the ADCM Companies have been examined by
the relevant state agencies or such returns have been closed by the applicable
statute of limitations for all periods through December 31, 1993; no
deficiencies or reassessments for any Taxes have been proposed, asserted or
assessed against any ADCM Company by any federal, state, local or foreign
taxing authority. Exhibit 2.14.1 describes the status of any federal, state,
local or foreign tax audits or other administrative proceedings, discussions
or court proceedings that are presently pending with regard to any Taxes or
tax returns of the ADCM Companies (including a description of all issues
raised by the taxing authorities in connection with any such audits or
proceedings), and no additional issues are being asserted against any of the
ADCM Companies in connection with any existing audits or proceedings.
(e) None of the ADCM Companies has executed or filed any
agreement or other document extending the period for assessment, reassessment
or collection of any Taxes, and no power of attorney granted by any of the
ADCM Companies with respect to any Taxes is currently in force.
(f) None of the ADCM Companies has entered into any closing or
other agreement with any taxing authority which affects any taxable year of
any of the ADCM Companies ending after the Closing Date, and none of the ADCM
Companies is a party to any tax sharing agreement or similar arrangement for
the sharing of tax liabilities or benefits.
(g) None of the ADCM Companies has agreed with the IRS to, nor
is required to, make any adjustment by reason of a change in accounting
methods that affects any taxable year ending after the Closing Date, the IRS
has not proposed to any of the ADCM Companies any such adjustment or change in
accounting methods that affects any taxable year ending after the Closing
Date, and none of the ADCM Companies has any application pending with any
taxing authority requesting permission for any changes in accounting methods
that relate to its business or operations and that affects any taxable year
ending after the Closing Date.
(h) None of the ADCM Companies has consented to the application
of Code Section 341(f).
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of any of the ADCM Companies that,
individually or collectively, could give rise to the payment by any of the
ADCM Companies of any amount that would not be deductible by reason of Code
Section 280G.
(j) No asset of any of the ADCM Companies is tax exempt use
property under Code Section 168(h), and no portion of the cost of any asset of
any of the ADCM Companies has been financed directly or indirectly from the
proceeds of any tax exempt state or local government obligation described in
Code Section 103(a).
(k) None of the assets of any of the ADCM Companies is property
that any of the ADCM Companies is required to treat as being owned by any
other person pursuant to the safe harbor lease provision of former Code
Section 168(f)(8).
(l) Except for Sermed and ADCM-Germany, none of the ADCM
Companies has or has had a permanent establishment in any foreign country,
engages in or has engaged in a trade or business in any foreign country, and
none of the Sellers and none of the ADCM Companies is a foreign person within
the meaning of Code Section 1445. Each of Sermed and ADCM-Germany is treated
as a corporation for United States income tax purposes.
(m) Neither Holdings nor any of the ADCM Companies will be
liable for any federal, state, local, foreign and other sales, use,
documentary, recording, stamp, transfer or similar Taxes applicable to,
imposed upon or arising out of the transfer of the Shares to Holdings and the
transactions contemplated by this Agreement.
(n) ADCM has duly elected to be treated as an S corporation
pursuant to Code section 1362(a) and the laws of the State of New York
effective September 1, 1994; DCM Holdings has duly elected to be treated as an
S corporation pursuant to Code section 1362(a) and the laws of the State of
New York effective March 3, 1993; Xxxxxxxx has duly elected to be treated as
an S corporation pursuant to Code section 1362(a) and the laws of the State of
Texas effective March 19, 1993; WMP has duly elected to be treated as an S
corporation pursuant to Code section 1362(a) and the laws of the State of
Texas effective January 8, 1996; Jencoil has duly elected to be treated as an
S corporation pursuant to Code section 1362(a) and the laws of the State of
Texas effective March 19, 1993; and EVC (NY) has duly elected to be treated as
an S corporation pursuant to Code section 1362(a) and the laws of the State of
New York effective August 18, 1992. Such elections are currently in effect
and no event has occurred (other than the transactions contemplated by this
Agreement) that would terminate any such elections and no taxing authority has
challenged the effectiveness of these elections. None of the other ADCM
Companies has made an S election under the Code or for state law purposes.
2.15. Government Contracts. No Contract or other aspect of the
business of any of the ADCM Companies is subject to the Armed Services
Procurement Regulations or other regulations of any governmental agency. None
of the ADCM Companies has bid on or been awarded any "small business set aside
contract", any other "set aside contract" or other order or contract requiring
small business or other special status at any time during the last three
years. None of the expected sales or orders of any of the ADCM Companies will
be lost, and the ADCM Companies' customer relations will not be damaged, as a
result of continuing the operations of an entity that does not qualify as a
small business.
2.16. Compliance with Law.
(a) None of the ADCM Companies has previously failed nor is any
of the ADCM Companies currently failing to comply with any applicable Laws
relating to their business or the operation of their respective assets where
such failure or failures would individually or in the aggregate have an
adverse effect on the financial condition, business, operations or prospects
of the ADCM Companies taken as a whole. In particular and subject to the same
limitations, but without limiting the generality of the foregoing, each of the
ADCM Companies is in compliance with all applicable Laws relating to
anti-competitive practices, price fixing, health and safety, environmental,
employment and discrimination matters. There are no proceedings of record and
no proceedings are pending or threatened in writing, nor has any of the ADCM
Companies or any of the Sellers received any written notice regarding any
violation of any Law, including, without limitation, any requirement of OSHA
or any pollution or environmental control agency (including air and water).
(b) Exhibit 2.16 contains copies of all reports received by any
of the ADCM Companies of inspections by representatives of any federal, state
or local governmental entity or agency of the business and properties of any
of the ADCM Companies from January 1, 1993 through the date hereof under OSHA
and under all other applicable health and safety Laws. The deficiencies, if
any, noted on such reports or any deficiencies noted by such inspections
through the Closing Date shall be corrected by the Closing Date. None of the
Sellers knows or has reason to know of any other safety, health,
environmental, anti-competitive or discrimination problems relating to the
financial condition, business, assets, operations, prospects, earnings or
employment practices of the ADCM Companies.
2.17. Absence of Certain Business Practices. None of the
Sellers, any person or entity related to or affiliated with any of the
Sellers, any officer, employee or agent of the ADCM Companies or any of the
Sellers, any other person or entity acting on behalf of or associated with the
ADCM Companies or any of the Sellers, nor any other entity directly or
indirectly owned or controlled by any of the Sellers or the ADCM Companies,
acting alone or together, has (a) received, directly or indirectly, any
rebates, payments, commissions, promotional allowances or any other economic
benefit, regardless of its nature or type, from any customer, supplier,
trading company, shipping company, governmental employee or other entity or
individual with whom any of the ADCM Companies has done business directly or
indirectly; or (b) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company, shipping company,
governmental employee or other person or entity who is or may be in a position
to help or hinder the business of any of the ADCM Companies (or assist any of
the ADCM Companies in connection with any actual or proposed transaction)
which (i) might subject any of the ADCM Companies to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (ii) if not
given in the past, might have had an adverse effect on the assets, business or
operations of any of the ADCM Companies as reflected in the Combined Financial
Statements; or (iii), if not continued in the future, would have an adverse
effect on the assets, business, operations or prospects of any of the ADCM
Companies or which would subject any of the ADCM Companies to suit or penalty
in any private or governmental litigation or proceeding.
2.18. ERISA and Related Employee Benefit Matters.
(a) Welfare Benefit Plans. None of the ADCM Companies
contributes or is required to contribute to any multi-employer plan. Exhibit
2.18.1 lists each and every "employee welfare benefit plan" (within the
meaning of Section 3(l) of the Employee Retirement Income Security Act of 1974
("ERISA")) maintained by the ADCM Companies or to which any ADCM Company
contributes or is required to contribute ("Welfare Benefit Plan") and sets
forth as of the most recent valuation date (i) the amount of any liability of
any ADCM Company for payments due with respect to any Welfare Benefit Plan,
and (ii) the amount of any payment made and to be made, stated separately, by
any ADCM Company with respect to any Welfare Benefit Plan for the plan year
during which the Closing is to occur. No Welfare Benefit Plan provides
benefits to any former employees or retirees of any of the ADCM Companies,
except to the extent required under Section 4980B of the Code and Title 1,
Part 6 of ERISA. No Welfare Benefit Plan is subject to the provisions of
Section 505 of the Code.
(b) Pension Benefit Plans. Exhibit 2.18.2 lists each and every
"employee pension benefit plan" (within the meaning of Section 3(2) of ERISA)
maintained by the ADCM Companies or to which the ADCM Companies contribute or
are required to contribute including any multi-employer plan ("Pension Benefit
Plan"). With respect to each Pension Benefit Plan, Exhibit 2.18.2 sets forth
as of the valuation date (i) the amount of any liability of each of the ADCM
Companies for any contributions due with respect to such Pension Benefit Plan
and (ii) the amount of any contribution paid and to be paid, stated
separately, by each of the ADCM Companies with respect to such Pension Benefit
Plan for the plan year during which the Closing is to occur. No Pension
Benefit Plan: (i) is subject to Title IV of ERISA, (ii) is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA; or (iii) is subject to
Title 1, Part 3 of ERISA regarding "funding."
(c) Compliance with Applicable Law. Each of the Pension Benefit
Plans, Welfare Benefit Plans, any related trust agreements, insurance
contracts, annuity contracts, and other funding instruments, are in compliance
with the provisions of ERISA and the Code and all other statutes, orders,
governmental rules and regulations applicable to such Welfare Benefit Plans
and Pension Benefit Plans. Each of the ADCM Companies has performed all of
its obligations currently required to have been performed under all Welfare
Benefit Plans and Pension Benefit Plans. There are no actions, suits or claims
(other than routine claims for benefits) pending or threatened against or with
respect to any Welfare Benefit Plans, Pension Benefit Plans or the assets of
such plans and no facts exist that could give rise to any actions, suits, or
claims (other than routine claims for benefits) against such plans or the
assets of such plans. Each Pension Benefit Plan which is intended to be
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service. No event has occurred
that will or would result in the disqualification of any Pension Benefit Plan
under Code Section 401(a). No event has occurred that will subject any
Welfare Benefit Plan or Pension Benefit Plan to tax under Section 511 of the
Code.
(d) Administration of Plans. Each Welfare Benefit Plan and each
Pension Benefit Plan has been administered to date in compliance with the
requirements of ERISA and the Code. No plan fiduciary of any Welfare Benefit
Plan or Pension Benefit Plan has engaged in (i) any transaction in violation
of Section 406(a) or (b) of ERISA, or (ii) any "prohibited transaction"
(within the meaning of Section 4975(c)(1) of the Code) for which no exemption
exists under Section 408 of ERISA or Section 4975(d) of the Code.
(e) Other Employee Benefit Plans and Agreements. Exhibit 2.18.3
lists each fringe benefit, profit sharing, deferred compensation, bonus, stock
option, stock purchase, pension, retainer, consulting, retirement, welfare, or
other incentive plan or agreement, employment agreement not terminable on 30
days or less written notice, and any other employee benefit plan, agreement,
arrangement, or commitment not previously listed on the Exhibits to this
Section that is maintained by the ADCM Companies or to which the ADCM
Companies contribute or are required to contribute. Exhibit 2.18.3 also
contains a complete list of all employees of the ADCM Companies and the amount
of vacation pay currently accrued to each such employee. The execution and
performance of this Agreement will not result in any payment (whether
severance pay or otherwise) becoming due or accelerate the time of payment or
vesting, or increase the amount, of any benefit payable or compensation due to
any employee, officer, director, shareholder or contractor of any ADCM Company
under any Welfare Benefit Plan or Pension Benefit Plan. There is no Welfare
Benefit Plan, Pension Benefit Plan, contract or arrangement covering any
employee of any ADCM Company which could give rise to the payment of any
amount which would constitute an "excess parachute payment" as defined in
Section 280G of the Code.
(f) Copies of Plans. Exhibit 2.18.4 includes true and complete
copies of: each Welfare Benefit Plan, related trust agreements, insurance
contracts and other funding arrangements; each Pension Benefit Plan, related
trust agreements, annuity contracts and other funding instruments; each plan,
agreement, arrangement, and commitment referred to in subsection (e) of this
Section; favorable determination letters; annual reports (Form 5500 series)
required to be filed with any governmental agency for each Welfare Benefit
Plan, Pension Benefit Plan, and fringe benefit plan for the three most recent
plan years, including, without limitation, all schedules thereto and all
financial statements with attached opinions of independent accountants; and
current summary plan descriptions.
(g) Continuing Coverage Requirements. All group health plans of
the Company (including any plans of affiliates of the Company that must be
taken into account under Section 4980B of the Code) have been operated in
compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code and Title I, Part 6 of ERISA.
(h) Valid Obligations. All Welfare Benefit Plans, Pension
Benefit Plans, related trust agreements, annuity contracts or other funding
instruments, and all plans, agreements, arrangements and commitments referred
to in subsection (e) of this Section are legal, valid and binding and in full
force and effect, and there are no defaults thereunder. Except as specified in
Exhibit 2.18.5, none of the rights of the ADCM Companies thereunder will be
impaired by the consummation of the transactions contemplated by this
Agreement, and all of the rights of the ADCM Companies thereunder will be
enforceable by Holdings at and after the Closing without the consent or
agreement of any other party other than consents and agreements specifically
listed in Exhibit 2.18.5.
2.19. Intellectual Property. Each ADCM Company has good title
to, and Exhibit 2.19 contains a detailed listing of, each copyright,
trademark, trade name, service xxxx, trade dress, patent, franchise, trade
secret, product designation, formula, process, know-how, right of publicity,
design and other similar rights (collectively "Intellectual Property Rights")
used in, or necessary for, the operation of its business as currently
conducted. Except as otherwise set forth on Exhibit 2.19, all of said
Intellectual Property Rights are free and clear of all royalty obligations,
security interests, liens and encumbrances. Except as set forth on Exhibit
2.19, each ADCM Company has the exclusive right to use all Intellectual
Property Rights used in, or necessary for, the operation of its business as
currently conducted. The Sellers have taken all action reasonably necessary to
protect against and defend against, and have no knowledge of, any conflicting
use of any such Intellectual Property Rights. None of the ADCM Companies has
or utilizes any Intellectual Property Rights except those which are set forth
in Exhibit 2.19. Except as set forth in Exhibit 2.19, none of the ADCM
Companies is a party in any capacity to any franchise, license, royalty or
other agreement respecting or restricting any Intellectual Property Rights,
and the Intellectual Property Rights used by the ADCM Companies in the conduct
of their businesses do not conflict with the Intellectual Property Rights of
any third party. No product currently made, sold or distributed by any of the
ADCM Companies or service provided by any of the ADCM Companies violates any
license or infringes any Intellectual Property Rights of any third party, and
there are no pending claims or demands by any third party to the contrary.
2.20. Warranties. Except as set forth in Exhibit 2.20, there
are no claims existing or, to Sellers' best knowledge, threatened under or
pursuant to any warranty, whether expressed or implied, on products or
services sold by the ADCM Companies, and the Balance Sheet reserves, if any,
for anticipated claims are adequate to cover any such claims. Exhibit 2.20
includes a copy of the form of all written warranties furnished by the ADCM
Companies to purchasers of any product since January 1, 1997.
2.21. Labor Relations. Except as set forth in Exhibit 2.21,
there have been no strikes, work stoppages or, any demands for collective
bargaining by any union or labor organization since January 1, 1994, there is
no collective bargaining relationship between any of the ADCM Companies and
any union, there is no dispute or controversy with any union or labor
organization with respect to any of the ADCM Companies' employees, and there
are no arbitration proceedings pending or, to the Sellers' best knowledge,
threatened involving a dispute or controversy. Except as set forth in Exhibits
2.21 or 2.18, there have been no claims asserted against any of the ADCM
Companies under or pursuant to the Fair Labor Standards Act, the Family and
Medical Leave Act of 1994, the Americans with Disabilities Act of 1990, the
Veterans Reemployment Rights Act, Title VII of the Civil Rights Act of 1964,
as amended by the Civil Rights Act of 1991, the Immigration Reform and Control
Act of 1986, the Age Discrimination in Employment Act, the Older Workers
Benefit Protection Act, the Equal Employment Opportunities Act, the
Occupational Safety and Health Act, the Employee Retirement Security Act of
1974, or any similar Laws, each as amended to date, relating to
employer/employee rights and obligations. Except as disclosed in Exhibit 2.21
and since January 1, 1994, not more than 50 non-officer employees of any ADCM
Company (per year), and no officers of any ADCM Company have resigned, advised
the Sellers of an intention to resign from such employment or refused to
continue employment with any ADCM Company. Exhibit 2.21 lists each former
employee and/or officer of the ADCM Companies whose annual compensation
exceeded $50,000 and whose employment by any ADCM Company has ceased for any
reasons since January 1, 1994. Set forth opposite the name of each such
employee and/or officer are: the positions held; the beginning and ending
employment dates; and the reason (if known) for the cessation of employment.
2.22. Insurance. Exhibit 2.22 includes summaries of all
existing insurance policies of the ADCM Companies and on or prior to the
Closing, the Sellers shall deliver to Holdings updated summaries of the then
existing insurance policies of the ADCM Companies, including the premiums
therefor and the coverage of each policy. Such policies and the amount of
coverage and the risks insured are, in the aggregate, sufficient to insure the
ADCM Companies against perils which good business practice demands be insured
against or which are normally insured against by other industry members
similarly situated, and will remain in full force and effect after the
Closing.
2.23. Products Liability. There exist no claims against any of
the ADCM Companies for injury to person or property of their employees or any
third parties suffered as a result of the sale of any product or performance
of any service by any of the ADCM Companies, including, but not limited to,
claims arising out of the defective or unsafe nature of their products or
services. The ADCM Companies have the insurance coverage for potential
products liability claims against it in the amounts set forth on Exhibit 2.23,
which coverages are in the aggregate, sufficient to insure the ADCM Companies
against such claims to the extent good business practice demands such coverage
or to the extent normally insured against by other industry members similarly
situated. The products liability and personal injury insurance maintained by
the ADCM Companies has been on an "occurrence" basis during the six (6) year
period prior to the Closing Date.
2.24. Environmental.
(a) For purposes of this Section:
(1) "Hazardous Materials" means any hazardous, infectious or
toxic substance, chemical, pollutant, contaminant, emission or waste which is
currently regulated by any local, state, federal or foreign authority.
Hazardous Materials include, without limitation, anything which is: (i)
defined as a "pollutant" pursuant to 33 U.S.C. ' 1362(6); (ii) defined as a
"hazardous waste" pursuant to 42 U.S.C. ' 6921; (iii) defined as a "regulated
substance" pursuant to 42 U.S.C. ' 6991; (iv) defined as a "hazardous
substance" pursuant to 42 U.S.C. ' 9601(14); (v) defined as a "pollutant or
contaminant" pursuant to 42 U.S.C. ' 9601(33); (vi) petroleum; (vii) asbestos;
and (viii) polychlorinated biphenyl.
(2) "Environmental Laws and Regulations" means all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Laws relating to pollution,
nuisance, or the environment including, without limitation, (i) the Federal
Clean Air Act, 42 U.S.C. '' 7401 et seq.; (ii) the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. '' 9601 et seq.; (iii)
the Federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. ''
1101 et seq.; (iv) the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. '' 136 et seq.; (v) the Federal Water Pollution Control Act, 33 U.S.C.
'' 1251 et seq.; (vi) the Solid Waste Disposal Act, 42 U.S.C. '' 6901 et seq.;
(vii) the Toxic Substances Control Act, 15 U.S.C. '' 2601 et seq.; (viii) Laws
relating in whole or part to emissions, discharges, releases, or threatened
releases of any Hazardous Material; and (ix) Laws relating in whole or part to
the manufacture, processing, distribution, use, coverage, disposal,
transportation, storage or handling of any Hazardous Material.
(3) "Material" for the purposes of this Section 2.24 shall mean
any claim, circumstance or state of facts which results in or would reasonably
be expected to result in Damages (as defined in Section 11.1) or the
expenditure or commitment of $7,500 or more.
Except as disclosed in Exhibit 2.24:
(b) The operations and activities of the ADCM Companies
currently comply, and to the Sellers' best knowledge have in the past
complied, in all material respects, with all Environmental Laws and
Regulations.
(c) Each of the ADCM Companies has obtained and is and has been
in material compliance with all requirements, permits, licenses and other
authorizations which are required with respect to the Company's operations, as
well as the transactions contemplated hereby under all Environmental Laws and
Regulations. Exhibit 2.24 lists each such permit, license or other
authorization.
(d) There is no civil, criminal, administrative or other action,
suit, demand, claim, hearing, notice of violation, proceeding, investigation,
notice or demand pending, received, or, to the Sellers' best knowledge,
threatened against any of the ADCM Companies relating in any way to any
Environmental Laws and Regulations.
(e) None of the ADCM Companies has caused, experienced or been
advised of any past or present events, conditions, circumstances, plans or
other matters relating to the operations of any of the ADCM Companies which:
(i) are not in material compliance with all Environmental Laws and
Regulations; (ii) may give rise to any statutory, common law, or other legal
liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing or notice of violation based on or relating to Hazardous
Materials including, without limitation, such matters relating to any property
owned, leased or utilized by any of the ADCM Companies at any time; (iii)
arise from inventory of or waste from Hazardous Materials; or (iv) arise from
or are related to any off-site or on-site disposal, release or threatened
release of Hazardous Materials.
(f) No asbestos or polychlorinated biphenyls are on any real
property or in any building now owned, operated, leased or utilized by any of
the ADCM Companies, or, to the Sellers' best knowledge, previously owned,
operated, leased or utilized by any of the ADCM Companies.
(g) None of the ADCM Companies has received any notice or
indication from any governmental agency or private or public entity advising
it that it is or may be responsible for any investigation or response costs
with respect to a release, threatened release or cleanup of chemicals or
materials produced by, resulting from or related to any business, commercial
or industrial activities, operations or processes, including, without
limitation, any Hazardous Materials. The Sellers are not aware of any facts
which might give rise to such notices.
(h) No underground tanks and related piping of any type exist or
have existed on any real property now or, to the Sellers' best knowledge,
previously owned, operated, leased or utilized by any of the ADCM Companies.
(i) Exhibit 2.24 contains complete copies of all environmental
investigations, assessments, audits, studies, tests and related materials in
possession of the ADCM Companies or its agents, which relate to the current or
prior operations of the ADCM Companies or any real property now owned,
operated, leased or utilized by the ADCM Companies.
2.25. Capital Expenditures. The ADCM Companies have outstanding
commitments for capital expenditures as set forth in Exhibit 2.25, which
includes a schedule of substantially all monies disbursed on account of
capital expenditures made by any of the ADCM Companies between the Financial
Statement Date and the date hereof. After the date hereof, no capital
expenditures or commitments in excess of $5,000 in the aggregate will be made
by any of the ADCM Companies, except as set forth in Exhibit 2.25 or with
Holdings' prior written consent.
2.26. Suppliers. Except as set forth on Exhibit 2.9, no
suppliers of goods or services to the ADCM Companies that has made sales or
provided services representing, individually or in the aggregate, more than
$5,000 in payments or commitments by ADCM Companies within the last 12 months
has (i) ceased, or indicated any intention to cease, doing business with any
of the ADCM Companies, or (ii) changed or indicated any intention to change
any terms or conditions for future supply or sale of products or services from
the terms or conditions that existed with respect to the supply or sale of
such products or services during the 12 month period ending on the date
hereof.
2.27. Dealings with Affiliates. Exhibit 2.27 sets forth a
complete list (including the parties) and copies (or a detailed summary in the
case of an oral agreement) of all oral or written contracts, arrangements or
other agreements to which any ADCM Company or any Affiliate is, will be or has
been a party at any time from January 1, 1994 to the Closing Date, and to
which any other Affiliate or any ADCM Company was or is also a party.
2.28. Business Generally. Since the Balance Sheet Date, except
as set forth on Exhibit 2.28, there have been no events, transactions or
information which have come to the attention of the Sellers (other than
matters in the public domain) which could be expected to have an adverse
effect on the business and operations of ADCM Companies taken as a whole, and
none of the ADCM Companies is a party to any agreement, contract or covenant
limiting any of the ADCM Companies from competing in any line of business or
with any person or other entity in any geographic area.
2.29. Bank Accounts. Exhibit 2.29 is a list of all bank
accounts, lock boxes, post office boxes and safe deposit boxes maintained in
the name of or controlled by each of the ADCM Companies and the names of the
persons having access thereto.
2.30. Compensation. Exhibit 2.30 lists the current job title
and total remuneration (including, without limitation, salary, commissions and
bonuses) for each of the Sellers and for each officer, director, employee or
consultant of each of the ADCM Companies who received annual remuneration in
excess of $50,000 from the respective company that employed such individual
during the 1997 fiscal year or who is expected to receive annual remuneration
in excess of such amount during the fiscal years or who is expected to receive
annual remuneration in excess of such amount during the current fiscal year.
Except as disclosed on Exhibit 2.30, none of the ADCM Companies has, since the
Financial Statement Date, nor will prior to the Closing Date, increase or
commit to increase the base compensation, commission, bonus or the rate (or
any other component) of total compensation payable or to become payable by
such company to any employee (including any director or officer), whether such
person is listed on Exhibit 2.30 or not, and no extraordinary compensation or
bonus will be paid by any of the ADCM Companies.
2.31. Disclosure. No representation or warranty made by the
Sellers in this Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to Holdings, by or on behalf of the
Sellers in connection with any of the transactions contemplated by this
Agreement contains any untrue statement of fact or omits to state a fact
necessary in order to make the statements herein or therein not misleading in
light of the circumstances in which they are made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings hereby represents and warrants to the Sellers, as follows:
3.1. Corporate Organization, etc. Holdings is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
3.2. Capitalization. As of the date of this Agreement, Holdings
has authorized capital stock consisting of 10,000 shares of Common Stock, par
value $1.00 per share.
3.3. Authorization, etc. Holdings has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of Holdings has duly authorized
the execution and delivery of this Agreement and the transactions contemplated
hereby, and no other corporate proceedings on its part is necessary to
authorize this Agreement and the transactions contemplated hereby.
3.4. No Violation. Holdings is not subject to or obligated
under any certificate of incorporation, bylaw, Law, or any agreement or
instrument, or any license, franchise or permit, which would be breached or
violated by its execution, delivery or performance of this Agreement.
Holdings will comply with all Laws in connection with its execution, delivery
and performance of this Agreement and the transactions contemplated hereby.
3.5. Governmental Authorities. Holdings is not required to
submit any notice, report or other filing with and no consent, approval or
authorization is required by any governmental or regulatory authority in
connection with their execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby other than those required
under the HSR Act, pursuant to Section 5.3 below.
3.6. Financing. Through access to the cash and financing
available to Motors and Gears, Inc., Holdings has sufficient funds available
to satisfy, among other things, the obligation to pay (a) the initial cash
portion of the Purchase Price and the other components of the Purchase Price;
and (b) all expenses incurred by Holdings in connection with the transaction
contemplated hereby. Holdings has furnished to Sellers a reliance letter,
dated the date hereof, of Motors and Gears, Inc., substantially in the form of
Exhibit 3.6 (the "Reliance Letter").
ARTICLE IV
COVENANTS OF THE SELLERS
Except as otherwise consented to or approved by Holdings in writing,
until the Closing, the Sellers jointly and severally covenant and agree (and
will cause the ADCM Companies to act or refrain from acting where required
hereinafter) as follows:
4.1. Ordinary Course of Business. Each of the ADCM Companies
will operate its business in the ordinary course, diligently and in good
faith, consistent with past management practices; will maintain all of its
properties in customary repair, order and condition, reasonable wear and tear
excepted; will maintain (except for expiration due to lapse of time) all
leases and contracts described herein in effect without change except as
expressly provided herein; will comply with the provisions of all Laws
applicable to the conduct of its business; will not engage in any significant
or unusual transaction; will not cancel, release, waive or compromise any
debt, claim or right in its favor having a value in excess of $5,000 other
than in connection with returns for credit or replacement in the ordinary
course of business; will maintain insurance coverage up to the Closing Date in
aggregate amounts sufficient to insure the ADCM Companies against perils which
good business practice demands be insured against or which are normally
insured against by other industry members similarly situated.
4.2. Amendments. No change or amendment shall be made in the
articles or certificate of incorporation or bylaws of any of the ADCM
Companies. None of the ADCM Companies will merge into or consolidate with any
other corporation or person, or change the character of its business.
4.3. Capital Changes. None of the ADCM Companies will (i) issue
or sell any shares of their capital stock of any class or issue or sell any
securities convertible into, or options, warrants to purchase or rights to
subscribe to, any shares of their capital stock of any class or (ii) except as
set forth on Exhibit 4.3, directly or indirectly, redeem, purchase or
otherwise acquire any shares of its capital stock.
4.4. Dividends, Bonuses. None of the ADCM Companies will
declare, pay or set aside for payment any dividend or other distribution in
respect of its capital stock, other than S Corporation distributions
consistent with and for purposes similar to such distributions declared and
paid in the past and which will not cause the ADCM Companies to have less than
$12,297,000 in DFCS on the Closing Date. Except for the payment of bonuses
already authorized, the ADCM Companies will not pay, set aside, accrue, agree
to or become liable in any manner for any bonus, of any nature or type, to
Sellers or to any employee or officer of any of the ADCM Companies and which
will not cause the ADCM Companies to have less than $12,297,000 in DFCS on the
Closing Date.
4.5. Capital and Other Expenditures. The ADCM Companies will
not make any capital expenditures, or commitments with respect thereto, except
as set forth in Exhibit 2.25, or any such expenditures or commitment which
would cause the ADCM Companies to have less than $13,297,000 in DFCS on the
Closing Date. The ADCM Companies will not prepay any debt or obligation
(except for prepaying trade accounts payable in the normal course of business
to take advantage of cash discounts).
4.6. Borrowing. The ADCM Companies will not incur, assume or
guarantee any indebtedness or capital leases. None of the ADCM Companies will
not create or permit to become effective any mortgage, pledge, lien,
encumbrance or charge of any kind upon its assets other than in the ordinary
course of business.
4.7. Other Commitments. Except in the ordinary course of
business consistent with past practices and except for existing commitments,
none of the ADCM Companies will enter into any transaction, make any
commitment or incur any obligation without the prior written consent of
Holdings.
4.8. Interim Financial Information. ADCM and EVPS will supply
Holdings with unaudited monthly financial statements of ADCM and EVPS and with
an unaudited Balance Sheet and statement of income before officers' salaries
and other items for the ADCM Companies (the "Combined Statements") within 15
business days of the end of each month ending between the Financial Statement
Date and the Closing Date certified by the respective President of the ADCM
Companies as having been prepared in accordance with procedures historically
employed by ADCM and EVPS in preparing prior monthly financial statements and
prior Combined Statements. All such financial statements shall be accompanied
by a certificate of each President of each of the ADCM Companies certifying
that, except for the variations set forth in such Certificate, such financial
statements were prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the unaudited financial
statements for the preceding months and such unaudited statements include all
adjustments (all of which were normal recurring adjustments) necessary to
fairly present the financial position, results of operations and changes in
financial position at and for such period.
4.9. Full Access and Disclosure.
(a) Subject to an ongoing obligation of confidentiality by
Holdings and its agents, the ADCM Companies shall afford to Holdings and its
counsel, accountants and other authorized representatives, on reasonable
notice to the appropriate ADCM Company, access during business hours to the
plants, properties, books and records of the ADCM Company in order that
Holdings may have full opportunity to make such reasonable investigations as it
shall desire to make of the affairs of the ADCM Companies and the ADCM
Companies will cause their officers and employees to furnish such additional
financial and operating data and other information as Holdings shall from time
to time reasonably request.
(b) From time to time prior to the Closing Date, the ADCM
Companies will promptly supplement or amend in writing information previously
delivered to Holdings with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required
to be set forth or disclosed.
4.10. Consents. Each of the ADCM Companies will use all
necessary means at its disposal to obtain on or prior to the Closing Date all
consents necessary to the consummation of the transactions contemplated
hereby.
4.11. Breach of Agreement. Neither Sellers nor any of the ADCM
Companies will take any action which, if taken prior to the Closing Date,
would constitute a breach of this Agreement.
4.12. Further Assurances. The ADCM Companies, Sellers and the
counsel for the ADCM Companies will furnish Holdings with such other and
further documents, certificates, opinions, consents and information as either
Holdings shall reasonably request to enable Holdings to borrow funds from a
bank or other lending entity or individual(s) to fund Holdings' purchase of
the Shares and to evidence compliance with the terms and conditions of any
credit agreement to be entered into between Holdings and a bank and/or other
lending entities or individuals.
4.13. Fulfillment of Conditions. Sellers and the ADCM Companies
will take all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith, to satisfy each condition to the
obligations of Holdings contained in this Agreement and will not take or fail
to take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
4.14. HSR Filing. Sellers and the ADCM Companies will (a) take
promptly all actions necessary to make the filings required of Sellers or
their affiliates under Section 7A of the Xxxxxxx Act (Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended), and the
rules and regulations promulgated thereunder (the "HSR Act"), (b) comply at
the earliest practicable date with any request for additional information
received by the ADCM Companies, Sellers or their affiliates from the Federal
Trade Commission or the Antitrust Division of the Department of Justice
pursuant to the HSR Act and (c) cooperate with Holdings in connection with
Holdings' filing under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by
this Agreement commenced by the Federal Trade Commission, the Antitrust
Division of the Department of Justice or any state attorney general.
4.15. Mix and Composition of Assets. Sellers will cause the ADCM
Companies to take all actions necessary to ensure that the mix and composition
of both assets and liabilities of the ADCM Companies, taken as a whole, at the
Closing are substantially similar to the mix and composition of the assets and
liabilities of the ADCM Companies, taken as a whole, as reflected in the
Balance Sheet, adjusted for events occurring in the ordinary course of
business subsequent to the date of the Balance Sheet. In particular, there
will be no undisclosed or contingent liabilities, other than those previously
disclosed to Holdings in the Exhibits to this Agreement, including, without
limitation, those liabilities relating to taxes, pension obligations,
litigation, environmental contamination or deferred capital expenditures and
maintenance.
4.16 WARN Act. The Sellers agree not to cause or allow any of
the ADCM Companies to lay off any of their employees in violation of the WARN
Act (as defined in Section 5.7) on or prior to the Closing. Any obligations
imposed upon Holdings or any of the ADCM Companies relating to pre-Closing
violations by any of the ADCM Companies of the WARN Act, or any state law
regarding plant closing, mass layoff, or notification obligations, shall be
the responsibility of the Sellers, and the Sellers agree to indemnify Holdings
and hold Holdings harmless from all potential liability under such laws.
ARTICLE V
COVENANTS OF HOLDINGS
Holdings hereby covenants and agrees with the Sellers that:
5.1. Confidentiality. Holdings will hold in strict confidence
and not disclose to any other party (other than its counsel and other
professional advisors), without all of the Sellers' prior consent, all
information received by Holdings from or about any of Sellers or the ADCM
Companies, any of their officers, directors, employees, agents, counsel or
auditors in connection with the transactions contemplated hereby, except as
may be required by applicable law or as otherwise contemplated herein.
5.2. Books and Records. Holdings shall preserve and keep the
books and records of the ADCM Companies delivered hereunder for a period of
six years from the date hereof and shall, during such period, make such books
and records available to former officers and directors of the ADCM Companies
for any reasonable purpose.
5.3. HSR Filing. Holdings will (a) take promptly all actions
necessary to make the filings required of Holdings, under Section 7A of the
HSR Act, (b) comply at the earliest practicable date with any request for
additional information received by Holdings or its affiliates from the Federal
Trade Commission or the Antitrust Division of the Department of Justice
pursuant to the HSR Act and (c) cooperate with Sellers in connection with
Sellers' filing under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by
this Agreement commenced by the Federal Trade Commission, the Antitrust
Division of the Department of Justice or any state attorney general.
5.4. Consents. Holdings will use all necessary means at its
disposal to obtain on or prior to the Closing Date all consents necessary to
the consummation of the transactions contemplated hereby.
5.5. Breach of Agreement. Holdings will not take any action
which, if taken prior to the Closing Date, would constitute a breach of this
Agreement.
5.6. Further Assurances. Holdings and the counsel for Holdings
will furnish ADCM and the Sellers with such other and further documents,
certificates, opinions, consents and information as either ADCM or the Sellers
shall reasonably request to enable the Sellers and any of the ADCM Companies
to obtain any consents or approvals required as a condition precedent to the
Seller's consummation of the transactions contemplated hereby.
5.7 WARN Act. Holdings agrees not to cause any of the ADCM
Companies to lay off any of their employees in violation of the Worker
Adjustment and Retraining Notification Act (the "WARN Act"). Any obligations
imposed upon the Sellers relating to post-Closing violations by any of the
ADCM Companies of the WARN Act, or any state law regarding plant closing, mass
lay off, or notification obligations based upon layoffs or plant closings
occurring as of or subsequent to the Closing Date, shall be the responsibility
of Holdings, and Holdings agrees to indemnify the Sellers and hold the Sellers
harmless from all potential liability under such laws.
ARTICLE VI
OTHER AGREEMENTS
Holdings and the Sellers covenant and agree that:
6.1. Agreement to Defend. In the event any action, suit,
proceeding or investigation of the nature specified in Section 7.5 or Section
8.2 hereof is commenced, whether before or after the Closing Date, all the
parties hereto agree to cooperate and use their commercially reasonable
efforts to defend against and respond thereto.
6.2. Consultants, Brokers and Finders. The Sellers, on the one
hand and Holdings on the other hand, each represent and warrant to the other
that they have not retained any consultant, broker or finder in connection
with the transactions contemplated by this Agreement, except for W.E. Xxxxxx
retained by Holdings. The Sellers, on the one hand, and Holdings on the other
hand, each hereby agree to indemnify, defend and hold the other party and its
officers, directors, employees and affiliates, harmless from and against any
and all claims, liabilities or expenses for any brokerage fees, commissions or
finders fees due to any consultant, broker or finder retained by the
indemnifying party.
6.3. Summary of Key Employment Terms. At the Closing, Holdings
will cause ADCM to enter into a Summary of Key Employment Terms with each of
the Sellers, each such Summary of Key Employment Terms to contain provisions
consistent with those set forth in the forms set forth respectively in
Exhibits 6.3 (a), (b), (c) and (d).
6.4. Noncompetition Agreement. At the Closing, Holdings and each
of the Sellers will enter into a Noncompetition Agreement in the form set
forth in Exhibit 6.4 (collectively, the "Noncompetition Agreements").
6.5. Taxes.
(a) Except for Taxes that directly result from any Section
338(h)(10) Election provided for in Section 6.9, the Sellers shall be liable
and indemnify Holdings and the ADCM Companies for all Taxes of the ADCM
Companies to the extent such Taxes are not adequately provided for as current
Taxes on the Closing Balance Sheet (i) for taxable periods ending on or before
the Closing Date and (ii) for any period not ending on or before the Closing
Date, for the portion of any Taxes attributable to the period ending on the
Closing Date.
(b) All Taxes attributable to the operations of the ADCM
Companies for periods after the Closing Date shall be borne by the appropriate
ADCM Company. For any period that includes but does not end on the Closing
Date, (i) liability for any Taxes determined by reference to income, capital
gains, gross income, gross receipts, sales, net profits, windfall profits or
similar items or resulting from a transfer of assets shall be allocated
between the Sellers and the appropriate ADCM Company based on the date on
which such items accrued; and (ii) liability for all other Taxes shall be
allocated between the Sellers and the appropriate ADCM Company pro rata based
on the number of days in the taxable period for which each party is liable for
Taxes hereunder. With respect to the Subchapter S Corporation tax year of each
applicable ADCM Company that ends on the Closing Date, the tax liability of
the Sellers for items described in Code Section 1366(a) shall be determined as
provided in Code Section 1362(e)(3) and an appropriate election shall be made
thereunder. The Sellers agree that the Sellers will not permit the Subchapter
S Corporation status of any of the ADCM Companies to terminate prior to the
Closing Date.
(c) The Sellers shall cause each ADCM Company to prepare and
file all tax returns and reports of such ADCM Company due on or prior to the
Closing Date, which returns and reports shall be prepared and filed timely and
on a basis consistent with existing procedures for preparing such returns and
reports and in a manner consistent with prior practice with respect to the
treatment of specific items on the returns or reports; provided, however, that
if the treatment of any item on any such return or report has not been
provided by prior practice, the Sellers shall cause the applicable ADCM
Company to report such items in a manner that would result in the least amount
of Tax liability to the applicable ADCM Company. Holdings shall cause each
ADCM Company to prepare and file all tax returns and reports of such ADCM
Company due after the Closing Date, which returns and reports, to the extent
they relate to taxable periods beginning prior to, but including the Closing
Date, and for the purpose of determining the Sellers' liability for taxes,
shall be prepared and filed timely and on a basis consistent with existing
procedures for preparing such returns and in a manner consistent with prior
practice with respect to the treatment of specific items on the returns and
reports, unless such treatment does not have sufficient legal support to avoid
the imposition of penalties. In the event the Sellers are liable under Section
6.5(a) hereof for Taxes due in connection with the returns described in the
preceding sentence, the Sellers shall pay the amount of such liability to the
appropriate ADCM Company within five (5) business days of a request therefor
or at least three (3) business days prior to the filing of such returns,
whichever is later.
(d) Holdings, each ADCM Company and the Sellers shall provide
each other with such assistance as may reasonably be requested by the others
in connection with the preparation of any return or report of Taxes, any audit
or other examination by any taxing authority, or any judicial or
administrative proceedings relating to liabilities for Taxes. Holdings, each
ADCM Company and the Sellers will retain for the full period of any statute of
limitations and provide the others with any records or information which may
be relevant to such preparation, audit, examination, proceeding or
determination.
(e) If in connection with any examination, investigation, audit
or other proceeding in respect of any tax return covering under which the
Sellers may have an indemnification obligation under Section 6.5(a), any
governmental body or authority issues to any of the ADCM Companies a written
audit notice, notice of deficiency, a notice of reassessment, a proposed
adjustment, an assertion of claim or demand concerning the taxable period
covered by such return, Holdings or the appropriate ADCM Company shall notify
the Sellers of its receipt of such communication from the governmental body or
authority as soon as possible but not more than thirty (30) business days
after receiving such audit notice, notice of deficiency, reassessment,
adjustment or assertion of claim or demand. No failure or delay of Holdings or
the Company in the performance of the foregoing shall reduce or otherwise
affect the obligations or liabilities of the Sellers pursuant to this
Agreement, except to the extent that such failure or delay shall have
adversely affected the Sellers' ability to defend against any liability or
claim for Taxes that the Sellers are obligated to pay hereunder. Except as
provided below, the Sellers shall, at his, her or its expense, have the
nonexclusive right to participate in the negotiation or contest of any such
audit, assessment, proposal, claim, reassessment, demand or other proceedings
in connection with any tax return covering taxable periods of the Company
ending on or before the Closing Date. Holdings and the Company will not be
obligated to settle or resolve any issue related to Taxes for such a period,
which, if so settled or resolved, could have an effect on the Company or
Holdings for periods after the Closing Date, unless the Sellers agree in
writing with Holdings and the Company, in terms reasonably satisfactory to
Holdings and the Company, to indemnify Holdings and the Company from any cost,
damage, loss or expense relating to such settlement or resolution.
Notwithstanding anything in this Agreement to the contrary, if any
examination, investigation, audit or other proceeding relates to a tax return
for a period that begins before and ends after the Closing Date, Holdings and
the appropriate ADCM Company shall solely participate in, control and resolve
such examination, investigation, audit or other proceeding, provided that
Holdings shall communicate with the Sellers regarding the status of such
examination, investigation, audit or proceeding.
(f) If there is an adjustment to any return or report of Taxes
for any ADCM Company which creates a deficiency in any Taxes for which the
Sellers are liable under the provisions of Section 6.5(b) hereof, the Sellers
shall pay to Holdings the amount of such deficiency in Taxes. No liability of
the Sellers under this Section 6.5(f) shall be payable until the occurrence of
any action by any Tax authority that is final or, if not final, is acquiesced
in by the Sellers during the course of any audit or any proceeding relating to
Taxes. All payments required to be made by the Sellers pursuant to this
Section 6.5(f) shall be made within ten (10) business days of the occurrence
of the event described in the immediately preceding sentence.
(g) All federal, state, local, foreign and other transfer,
sales, use or similar Taxes applicable to, imposed upon or arising out of the
transfer of the Shares shall be paid by the Sellers.
(h) The provisions of this Section 6.5 shall not be governed by
the limitations contained in Section 11.1 and to the extent of any
inconsistency between this Section 6.5 and Article XI, the provisions of this
Section 6.5 shall control.
6.6. Spousal Consent. On or prior to the Closing, the Sellers
shall cause Xx. Xxxxx Xxxxxx to execute and deliver the Spousal Consent in the
form set forth in Exhibit 6.6 (the "Spousal Consent").
6.7. Releases. At the Closing, each of the Sellers shall have
executed and delivered to Holdings a Release in the form set forth in Exhibit
6.7 (the "Releases").
6.8. Contingent Purchase Price Plan. At the Closing, Holdings
and each of the Sellers shall execute the form of Contingent Purchase Price
Plan in the form set forth in Exhibit 1.2.
6.9 Section 338 Elections.
(a) At the request of Holdings, each of the Sellers agrees to
join, in an appropriate and timely manner, with Holdings in making elections
under Section 338(h)(10) of the Code (and to the extent necessary to allow for
an election under Section 338(h)(10) of the Code, an election under Section
338(g) of the Code) and any corresponding election under foreign, state, or
local law (the "Section 338(h)(10) Elections") with respect to Holdings'
acquisition of the shares of ADCM, DCM Holdings, Xxxxxxxx, WMP, Jencoil,
and/or EVC (NY) (collectively referred to as the "ADCM S Corporations").
(b) If Holdings requests that a Section 338(h)(10) election be
made with respect to any or all of the ADCM S Corporations, each of the
Sellers agree to cooperate with Holdings to take all actions necessary or
appropriate to effect and preserve timely Section 338(h)(10) Elections with
respect to such ADCM S Corporation(s), including, but not limited to,
participating in the filing of IRS Form 8023 and any related or comparable
forms for state, local, or foreign law purposes (the "Section 338(h)(10)
Forms") for each acquisition that Holdings elects to make a Section 338(h)(10)
Election. If a Section 338(h)(10) Election is made with respect to any ADCM S
Corporation, Holdings shall be responsible for preparing and filing all
Section 338(h)(10) Forms with respect to each applicable acquisition and for
allocating the Modified Aggregate Deemed Sales Price (as defined in Treasury
Regulation Section 1.338(h)(10)-1(f)) for each application acquisition among
the assets of the applicable ADCM S Corporation.
(c) If a Section 338(h)(10) Election is made for any ADCM S
Corporation, each of the Sellers and Holdings agrees to report, or caused to
be reported, and take no position that is inconsistent with the Section
338(h)(10) Elections or the allocation of the Modified Aggregate Deemed Sales
Price.
(d) The intent of this Section 6.9(d) is that the Sellers will
be in the same position with respect to Taxes as they would have been had no
Section 338(h)(10) Election been made with respect to the acquisition of the
shares of any ADCM S Corporation owned. For each Section 338(h)(10) Election
that is made with respect to Holdings' acquisition of the ADCM S Corporations
that directly results in the Sellers paying to the Internal Revenue Service or
any state taxing authority Taxes over the amount of Taxes that they would have
been required to pay had no Section 338(h)(10) been made with respect to the
acquisition of such ADCM S Corporation (less any amounts previously paid to
Sellers pursuant to this Section 6.9(d) with respect to such acquisition),
Holdings shall reimburse such additional amounts, including penalties incurred
by the Sellers with respect thereto (except to the extent such penalties are
caused by the Sellers' failure to report the transaction in accordance with
the Section 338(h)(10) Election, the Section 338(h)(10) Forms or in accordance
with the allocation of the Modified Aggregate Deemed Sales Price) to Sellers
within ten (10) business days of such payment. Conversely, for each Section
338(h)(10) Election that is made with respect to the acquisition of the ADCM S
Corporations that directly results in the Sellers paying (or receiving an
extra refund or credit) less Taxes, the Sellers shall pay to Holdings the
savings (including any amount previously paid to Sellers pursuant to this
Section 6.9(d) with respect to such acquisition) within ten (10) business days
of the receipt of any refund or credit, together with any interest received or
credited to such refund or credit, or if such determination is made on or
prior to the date the Sellers file their tax returns for the year in which the
Section 338(h)(10) Election is effective, within ten (10) business days of the
date such returns are filed. Notwithstanding the foregoing, Holdings shall
have no liability for increased Taxes (including any penalties) that would
have occurred but for a breach of a representation in Section 2.14. The
obligations of Holdings and each of the Sellers under this Section 6.9(d)
shall expire fifteen (15) days after the expiration of the applicable statute
of limitations.
(e) If a Section 338(h)(10) Election is made with respect to any
ADCM S Corporation, Holdings shall be liable for any Taxes imposed on or
incurred by such ADCM S Corporation(s) that directly result from the Section
338(h)(10) Election, other than Taxes resulting from the Section 338(h)(10)
Election that would not have occurred but for a breach of a representation in
Section 2.14.
6.10. Escrow Agreement; Escrow Amount and Distributions.
(a) Escrow Agreement. At the Closing, Holdings, each of the
Sellers and The Bank of New York, as escrow agent (the "Escrow Agent"), shall
have executed and delivered the Escrow Agreement in the form set forth in
Exhibit 6.10 (the "Escrow Agreement").
(b) Escrow Amount. The parties hereto agree that on the Closing
Date, Holdings shall deposit $1,000,000 of the cash portion of the Purchase
Price with the Escrow Agent (the "Escrow Amount"), such Escrow Amount to be
held by the Escrow Agent in accordance with the terms of the Escrow Agreement
and disbursed pursuant to Section 6.10(c) below. Until the Expiration Date
(defined below), the Sellers jointly and severally agree to deposit such sums
as from time-to-time necessary to maintain the full amount of the Escrow
Amount ($1,000,000). The Sellers agree to deposit such amounts with the
Escrow Agent within five (5) business days after their receipt of Notice from
Holdings requesting that such additional deposits be made.
(c) Disbursement.
(i) Initial Disbursement. The parties agree to send a joint
written instruction to the Escrow Agent directing the Escrow Agent to disburse
to Holdings such amount necessary to satisfy any Deficiency not otherwise
satisfied by the Reserve Amount. The parties agree to send such written
notice to the Escrow Agent within five (5) business days after the Closing
Date Financials and Computations are complete and final or within five (5)
business days after the resolution of any dispute regarding the Closing Date
Financials and Computations in accordance with Section 12.7(b) (the "Initial
Disbursement").
(ii) Final Disbursements. Without limiting Holdings' other
rights under this Agreement, the parties agree that the Escrow Amount shall be
maintained pursuant to the terms of the Escrow Agreement for a period of 28
months after the Closing Date (the "Expiration Date"), in order to support the
Sellers' indemnification obligations under Section 11.1. The parties also
agree that an arbitrator, pursuant to the dispute resolution process contained
in Section 12.7, shall have the right to direct the Escrow Agent to disburse
the Escrow Amount, or any portion thereof, to Holdings as such arbitrator
deems appropriate in order to satisfy the indemnification obligations of the
Sellers under Section 11.1. Within five (5) business days after the
Expiration Date, the parties agree to send a joint written instruction to the
Escrow Agent directing the Escrow Agent to disburse to the Sellers the
remaining amount of the Escrow Amount, if any; provided, however, the Escrow
Amount shall not be disbursed to the Sellers prior to the Expiration Date and
no portion of the Escrow Amount shall be disbursed to the Sellers after the
Expiration Date if Holdings has asserted prior to the Expiration Date a claim
for indemnification pursuant to Section 11.1 which has not been resolved
pursuant to Section 12.7.
(d) Interest. The parties agree that any interest accrued on
the Escrow Amount shall be paid at the same time and in proportion with the
amount of the Escrow Amount paid to each such party.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF HOLDINGS
Each and every obligation of Holdings under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by Holdings:
7.1. Representations and Warranties; Performance. The
representations and warranties made by the Sellers herein shall be true and
correct on the date of this Agreement and on the Closing Date with the same
effect as though made on such date; the Sellers shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by them prior to the Closing Date;
Sellers shall have, and shall have caused the President of ADCM to have
delivered to Holdings a certificate, dated the Closing Date, in the form
designated Exhibit 7.1 hereto, certifying to such matters and the other
conditions contained in this Article VII.
7.2. Consents and Approvals. All consents from and filings with
third parties, regulators and governmental agencies required to consummate the
transactions contemplated hereby, or which, either individually or in the
aggregate, if not obtained, would cause a material adverse effect on the
financial condition or business of the ADCM Companies taken as a whole shall
have been obtained and delivered to Holdings. Without limiting the above, the
applicable waiting period under the HSR Act shall have terminated or expired.
7.3. Opinion of Sellers' Counsel. Holdings shall have received
an opinion of Sellers' counsel, dated the Closing Date, substantially in the
form attached hereto as Exhibit 7.3.
7.4. No Adverse Change. There shall have been no material
adverse change since the Financial Statement Date in the business, prospects,
financial condition, earnings or operations of the business of the ADCM
Companies taken as a whole.
7.5. No Proceeding or Litigation. No action, suit or proceeding
before any court or any governmental or regulatory authority shall have been
commenced or, to the knowledge of any party hereto, threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced or, to the knowledge of any party hereto, threatened against any of
the Sellers, any of the ADCM Companies or Holdings or any of their respective
principals, officers or directors seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of
any of such transactions or seeking damages in connection with any of such
transactions.
7.6. Comfort Letter and Solvency Certificate. Holdings shall
have received (a) a "comfort" letter from ADCM's independent certified public
accountants, dated the Closing Date, based upon a limited review (but not an
audit) conducted no earlier than five (5) business days preceding the Closing
Date and (b) a "solvency" certificate from Sellers and ADCM's President
substantially in the forms of Exhibits 7.6.1 and 7.6.2 hereto, respectively,
which documents shall relate to the operations and financial conditions of the
ADCM Companies and the interim financial statements delivered pursuant to
Section 4.8 hereof.
7.7. Financial Condition at Closing. Notwithstanding any
provision hereof to the contrary, each of the financial conditions set forth
in this Section 7.7 shall be satisfied on or before the Closing Date:
(a) The ADCM Companies' net sales for the 12 months ending
December 31, 1998 shall be on schedule (run rate) to equal at least
$45,000,000. The ADCM Companies' net sales for the 12 months ended December
31, 1997, shall equal or exceed $39,800,000.
(b) The ADCM Companies' net income before provision for interest
and income taxes calculated in accordance with GAAP ("EBIT") for the 12 months
ending December 31, 1998 shall be on schedule to equal at least $10,250,000.
The ADCM Companies' EBIT for the 12 months ended December 31, 1997, shall
equal or exceed $8,900,000.
(c) Except for liabilities set forth in the Balance Sheet, for
Excluded Liabilities relating to the redemption of the Class B nonvoting
common shareholders of ADCM, EVPS and DCM Holdings and accounts payable
incurred in the ordinary course of business of the ADCM Companies consistent
with past practices, the ADCM Companies shall not owe any debt at the Closing
Date. The term "debt" includes notes payable and the short-term and long-term
portions of any and all debt or obligations, including capitalized lease
obligations.
(d) The mix and composition of the assets and liabilities of the
ADCM Companies taken as a whole on the Closing Date will not be materially
different from those indicated on the Balance Sheet, adjusted for events
occurring in the ordinary course of business subsequent to the Financial
Statement Date and before giving effect to the Excluded Liabilities associated
with the redemption of the Class B nonvoting common shareholders of ADCM, EVPS
and DCM Holdings. In particular, there will be no undisclosed or contingent
liabilities, other than those previously disclosed to Holdings in the Exhibits
to this Agreement, including, without limitation, those liabilities relating
to taxes, pension obligations, litigation, environmental contamination or
deferred capital expenditures and maintenance.
(e) Except as permitted by Section 4.4, since the Financial
Statement Date, none of the ADCM Companies shall have (i) paid any shareholder
dividends or distributions, (ii) repaid any debt in excess of the amount
required to be repaid pursuant to written contractual obligations or pursuant
to Section 1.3 or (iii) paid any bonuses or excessive compensation to any of
the Sellers, without first notifying Holdings of such action.
(f) The anticipated annual capital expenditures of the ADCM
Companies shall be equal to or less than $1,000,000 for each of the years 1998
and 1999.
(g) At the Closing Date, the DFCS of the ADCM Companies shall be
no less than $12,300,000, and the President of ADCM shall have delivered a
Certificate stating such to Holdings no sooner than 10 calendar days before
the Closing Date.
(h) E&Y shall have conducted a physical inventory of the ADCM
Companies, the results of which shall be satisfactory to Holdings.
7.8. Retention of Key Personnel. None of the Sellers shall have
terminated their respective positions with ADCM or with any of the other ADCM
Companies that employ any of the Sellers.
7.9 Due Diligence Review. A full due diligence review of the
ADCM Companies' business shall be completed by Holdings, its legal counsel,
its outside consultants, or others appointed by Holdings. Holdings shall be
satisfied in its sole and absolute discretion with the results of Holdings'
due diligence review of the ADCM Companies and their business operations,
prospects and assets. Holdings shall bear the costs of this review.
7.10 Shareholder Matters. Sellers will furnish Holdings with
executed copies of documents pursuant to which any stock held by the former
shareholders of ADCM and the ADCM Affiliates was purchased by the Sellers or
redeemed by any of the ADCM Companies, and all obligations under such
agreements shall have been fully paid and all shares of stock issued to such
former shareholders shall be delivered to Holdings at Closing marked
"cancelled", all pursuant to documentation in a form reasonably satisfactory
to Holdings and its counsel. The Sellers shall have terminated, on or prior
to Closing, the First Amendment to Class A Stock Redemption Agreement of ADCM,
dated December 15, 1990. ADCM and Xxxxxx Xxxxxxxxx shall have terminated the
Stockholders Agreement regarding EVC (CA) and Xxxxxx Xxxxxxxxx shall have
assigned all of his interest in and to controller technology developed in the
course of his employment with EVC (CA) to EVC (CA).
7.11. Other Documents. Sellers will furnish or cause the ADCM
Companies to furnish Holdings with such other and further documents and
certificates (including, without limitation, certificates of good standing),
of its officers and others as Holdings shall reasonably request to evidence
compliance with the conditions set forth in this Agreement.
7.12. Other Agreements. The Agreements described in Article VI
shall have been executed and delivered.
7.13. Estoppel Certificate. The Sellers shall have furnished
Holdings with an estoppel certificate in the form attached hereto as Exhibit
7.13, which shall have been executed by each lessor under the leases described
on Exhibit 2.12.
7.14. Withholding Certificate. Holdings shall have received from
each of the Sellers an executed withholding certificate in the form attached
hereto as Exhibit 7.14.
7.15. No Liens. All liens or encumbrances against the assets of
each of the ADCM Companies shall have been removed, or provision for their
removal shall have been submitted to Holdings in form reasonably acceptable to
Holdings.
7.16. HSR. All applicable waiting periods under the HSR Act
shall have expired.
7.17. Customer Survey. Holdings shall have completed to its
reasonable satisfaction, a customer survey and/or customer interviews of the
ADCM Companies.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by all of the Sellers:
8.1. Representations and Warranties, Performance. The
representations and warranties made by Holdings herein shall be true and
correct on the date of this Agreement and on the Closing Date with the same
effect as though made on such date; Holdings shall have performed and complied
with all agreements, covenants and conditions required by this Agreement to be
performed and complied with by it prior to the Closing Date; Holdings shall
have delivered to the Sellers a certificate of the President of Holdings,
dated the Closing Date, certifying to the fulfillment of the conditions set
forth herein, in the form designated as Exhibit 8.1 and the other conditions
contained in this Article VIII.
8.2. No Proceeding or Litigation. No action, suit or
proceeding before any court or any governmental or regulatory authority shall
have been commenced, or, to the knowledge of any party hereto, threatened, and
no investigation by any governmental or regulatory authority shall have been
commenced, or, to the knowledge of any party hereto, threatened, against any
of the ADCM Companies, Holdings, any of the Sellers, or any of their
respective principals, officers or directors, seeking to restrain, prevent or
change the transactions contemplated hereby or questioning the validity or
legality of any of such transactions or seeking damages in connection with any
of such transactions.
8.3. Opinion of Counsel. The Sellers shall have received an
opinion of counsel to Holdings dated the Closing Date substantially in the
form of Exhibit 8.3.
8.4. Payment. The payment(s) described in Section 1.2 shall have
been made.
8.5. Other Documents. Holdings will furnish the Sellers with
such other and further documents and certificates of its officers and others
as Sellers shall reasonably request to evidence compliance with the conditions
set forth in this Agreement.
8.6. Other Agreements. The agreements described in Article VI
shall executed and delivered by Holdings.
8.7 HSR. All applicable waiting periods under the HSR Act shall
have expired.
ARTICLE IX
CLOSING
9.1. Closing. Unless this Agreement shall have been terminated
or abandoned pursuant to the provisions of Article X hereof, a closing (the
"Closing") shall be held on Friday, May 15, 1998 at the offices of Xxxxxx,
Xxxxxxx & Xxxxx, 431 East Fayette Street, Syracuse, New York, or on such other
date (the "Closing Date") and at such other location mutually agreed upon by
the Sellers and Holdings. Holdings shall have the right at any time to extend
the Closing Date for a period of up to 15 business days from the date stated
above, by written Notice to the Sellers.
9.2. Deliveries at Closing.
(a) At the Closing, the Sellers shall transfer and assign to
Holdings all of the Shares by delivering certificates representing each of the
Shares, duly endorsed for transfer to Holdings with signatures guaranteed,
and, the cash consideration, the Contingent Purchase Price Plan, and the other
agreements, certifications and other documents required to be executed and
delivered hereunder at the Closing shall be duly and validly executed and
delivered.
(b) From time to time after the Closing, at Holdings' request
and without further consideration from Holdings, the Sellers shall execute and
deliver such other instruments of conveyance and transfer and take such other
action as Holdings reasonably may require to convey, transfer to and vest in
Holdings and to put Holdings in possession of the Shares to be sold, conveyed,
transferred and delivered hereunder.
9.3. Legal Actions. If, prior to the Closing Date, any action
or proceeding shall have been instituted by any third party before any court
or governmental agency to restrain or prohibit this Agreement or the
consummation of the transactions contemplated herein, the Closing shall be
adjourned at the option of any party hereto for a period of up to one hundred
twenty (120) days. If, at the end of such 120-day period, the action or
proceeding shall not have been favorably resolved, in the opinion of any party
to this Agreement, any party hereto may, by written notice thereof to the
other party or parties, terminate its obligation hereunder.
9.4. Specific Performance. The parties agree that if any party
hereto is obligated to, but nevertheless does not, consummate this
transaction, then any other party, in addition to all other rights or
remedies, shall be entitled to the remedy of specific performance mandating
that the other party or parties consummate this transaction. In an action for
specific performance by any party hereto against any other party, the other
party shall not plead adequacy of damages at law.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1. Methods of Termination. This Agreement may be terminated
and the transactions herein contemplated may be abandoned at any time
(notwithstanding approval by the Sellers or by the Board of Directors of
Holdings):
(a) by mutual consent of Holdings and all of the Sellers; or
(b) by either Holdings or Sellers, if (i) such party is not in
breach hereunder and the other party is in breach hereunder, and (ii) this
Agreement is not consummated on or before the Closing Date, including
extensions.
10.2. Procedure Upon Termination. In the event of termination
and abandonment pursuant to Section 10.1 hereof, this Agreement shall
terminate and shall be abandoned, without further action by any of the parties
hereto. If this Agreement is terminated as provided herein:
(a) each party will upon request redeliver all documents and
other materials of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) no party hereto shall have any liability or further
obligation to any other party to this Agreement except to abide by the
provisions of the Confidentiality and Non-Disclosure Agreement dated October
23, 1996; and
(c) each party shall bear its own expenses.
ARTICLE XI
INDEMNIFICATION
11.1. Indemnification of Sellers. The Sellers, jointly and
severally, agree to indemnify Holdings and each of its shareholders, officers
and directors for a period of 28 months after the Closing Date (or for a
longer period if the representation still survives under Section 12.4),
against any loss, damage, or expense, (including but not limited to reasonable
attorneys' fees) ("Damages"), incurred or sustained by Holdings or any of its
shareholders, officers or directors as a result of (a) any breach of any term,
provision, covenant or agreement contained in this Agreement by the Sellers;
(b) any inaccuracy in any of the representations or warranties made by the
Sellers in Article II of this Agreement; (c) any inaccuracy or
misrepresentation in any certificate or other document or instrument delivered
by the Sellers or any of the ADCM Companies in accordance with any provision
of this Agreement; or (d) the presence of Hazardous Materials on, in, or under
the property located at 000 Xxxxxx Xxxxxx in Syracuse, New York (aka Tyson
Place) or the property located at 0000 Xxxx Xxxxxx Xxxx in East Syracuse, New
York. The obligations of the Sellers as set forth in this Section 11.1 shall
be subject to and limited by the following:
(i) No claim for Damages shall be made until the cumulative
amount of such Damages shall equal or exceed $500,000, at which point the full
amount of such claim(s) for Damages may be made without deduction of any kind;
provided, however, that in no event shall the aggregate indemnification
obligation of Sellers hereunder exceed the amount of the Purchase Price; and
further provided, however, that such limitations shall not apply to any
Damages resulting from (a) violations under Sections 2.2, 2.4, 2.14, 2.23 or
2.24 hereof, (b) the presence of Hazardous Materials on, in or under the
property located at 000 Xxxxxx Xxxxxx in Syracuse, New York (aka Tyson Place)
or the property located at 0000 Xxxx Xxxxxx Xxxx in East Syracuse, New York,
(c) violations under Section 2.18 related to or arising from (i) any written
or unwritten employee benefit plan or arrangement which is not disclosed in
Exhibit 2.18, (ii) any employee benefit plan or arrangement sponsored by Staff
Leasing of Texas, L.P. for employees leased by Jencoil, WMP, and/or Sermed
USA, (iii) the effect(s) under Section 410(b) of the Code of any leased
employees and/or (iv) any employee benefit plan, arrangement or requirement
related to Sermed or ADCM-Germany, or (d) from intentional or fraudulent
actions, misrepresentations or breaches;
(ii) Holdings shall give written Notice to the Sellers
stating specifically the basis for the claim for Damages, the amount thereof
and shall tender defense thereof to the Sellers as provided in Section 11.3;
and
(iii) In addition to any other remedy, Holdings shall be
entitled, but shall not be obligated, to offset all such claims for Damages
against any obligation of Holdings to Sellers now or hereafter existing
including, without limitation, payments in the order of installments due under
the Contingent Purchase Price Plan set forth in Section 1.2(b).
Notwithstanding the foregoing, any dispute between Sellers and Holdings
concerning the validity of any claim for Damages shall be resolved in
accordance with the provisions of Section 12.7(b). Holdings shall hold its
claim for Damages in abeyance and not exercise its right of set-off hereunder
until any disputed claim has been finally resolved in accordance with the
provisions of Section 12.7(b).
11.2. Indemnification of Holdings. Holdings agrees to indemnify
the Sellers and their respective successors and assigns against any Damages
incurred or sustained by any Seller as the result of (a) any breach of any
term, provision, covenant or agreement contained in this Agreement by
Holdings; (b) any inaccuracy in any of the representations or warranties made
by Holdings in Article III of this Agreement; or (c) any inaccuracy or
misrepresentation in any certificate or other document or instrument delivered
by Holdings in accordance with any provision of this Agreement. The
obligations of Holdings as set forth in this Section 11.2 shall be subject to
and limited by the following:
(i) no claim for Damages shall be made until the
cumulative amount of such Damages shall equal or exceed $500,000 at which
point the full amount of such claim(s) for Damages may be made without
deduction of any kind; provided, however, that such limitation shall not apply
to any Damages resulting from intentional or fraudulent actions,
misrepresentations or breaches;
(ii) Sellers shall give written notice to Holdings
stating specifically the basis for the claim for Damages, the amount thereof
and shall tender defense thereof to Holdings as provided in Section 11.3.
11.3. Tender of Defense for Damages. Promptly upon receipt by
any party entitled to indemnification hereunder (the "Indemnified Party"), of
a notice of a claim by a third party which may give rise to a claim for
Damages, the Indemnified Party shall give Notice thereof to the party(ies)
obligated to provide such indemnification (the "Indemnifying Party"). No
failure or delay of the Indemnified Party in the performance of the foregoing
shall relieve, reduce or otherwise affect the Indemnifying Party's obligations
and liability to indemnify the Indemnified Party pursuant to this Agreement,
except to the extent that such failure or delay shall have adversely affected
the Indemnifying Party's ability to defend against such claim for Damages. If
the Indemnifying Party gives to the Indemnified Party an agreement in writing,
in a form reasonably satisfactory to counsel for the Indemnified Party, to
defend such claim for Damages, the Indemnifying Party may, at their sole
expense, undertake the defense against such claim and may contest or settle
such claim on such terms, at such time and in such manner as the Indemnifying
Party, in their sole discretion, shall elect and the Indemnified Party shall
execute such documents and take such steps as may be reasonably necessary in
the opinion of counsel for the Indemnifying Party to enable the Indemnifying
Party to conduct the defense of such claim for Damages. If the Indemnifying
Party fails or refuses to defend any claim for Damages, the Indemnifying Party
may nevertheless, at their own expense, participate in the defense of such
claim by the Indemnified Party and in any and all settlement negotiations
relating thereto. In any and all events, the Indemnifying Party shall have
such access to the records and files of the Indemnified Party relating to any
claim for Damages as may be reasonably necessary to effectively defend or
participate in the defense thereof.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1. Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented only by written
agreement of all of the Sellers and Holdings.
12.2. Waiver of Compliance; Consents. Any failure of the Sellers
on the one hand, or Holdings on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived in writing by Holdings,
on the one hand, or the Sellers, on the other hand, respectively, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 12.2.
12.3. Expenses. Each party will pay its own legal, accounting
and other expenses incurred by such party or on its behalf in connection with
this Agreement and the transactions contemplated herein. If any of the ADCM
Companies shall at any time pay any expenses incurred in connection with this
Agreement or any part thereof or any of the proceedings and transactions
contemplated hereunder including, without limitation, any legal, accounting,
printing, filing or other costs, then the cash portion of the Purchase Price
shall be reduced by an equal amount.
12.4. Investigations, Survival of Warranties. The respective
representations and warranties of the Sellers and Holdings contained herein or
in any certificates or other documents delivered prior to or at the Closing
are true, accurate and correct and shall not be deemed waived or otherwise
affected by any investigation made by any party hereto or by the occurrence of
the Closing. Each and every such representation and warranty shall survive for
a period of 28 months from the Closing Date; provided, however, all claims for
Damages relating to the representations and warranties made pursuant to
Sections 2.14, 2.18, 2.23 and 2.24 hereof shall expire when the applicable
statute of limitations shall terminate plus a period of fifteen (15) days, and
further provided, however, all claims for Damages relating to the
representations and warranties made pursuant to Sections 2.2 and 2.4 hereof or
for Damages based on intentional or fraudulent actions, misrepresentations or
breaches shall never expire. In the event that an indemnification claim for
Damages shall be pending as of the end of the applicable period referred to
above, such indemnity shall survive with respect to such indemnification claim
until the final disposition thereof.
12.5. Notices. Any notice, request, consent or communication
(collectively, a "Notice") under this Agreement shall be effective only if it
is in writing and (i) personally delivered, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid, (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed, or
(iv) telecopied, with receipt confirmed, addressed as follows:
(a) If to the Sellers, to:
Advanced D.C. Motors, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
in each case with a copy to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxxx, Xxxxxxx & Xxxxx, LLP
000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: 716/000-0000
Telecopier: 716/232-2152
or to such other person or address as any Seller shall furnish to Holdings in
writing.
(b) If to Holdings to:
Xxxxxx X. Xxxxx, President
Xxx Xxxxxx
Xxxxxx X. Xxxxxx
Jordan Industries, Inc.
ArborLake Centre, Suite 550
0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to:
G. Xxxxxx Xxxxxx, Esq.
Xxxxx X. Xxxxxxx, Esq.
Xxxxx Xxxx LLP
0000 Xxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
or such other persons or addresses as shall be furnished in writing by any
party to the other party. A Notice shall be deemed to have been given as of
the date when (i) personally delivered, (ii) five (5) days after the date when
deposited with the United States mail properly addressed, (iii) when receipt
of a Notice sent by an overnight delivery service is confirmed by such
overnight delivery service, or (iv) when receipt of the telecopy is confirmed,
as the case may be, unless the sending party has actual knowledge that a
Notice was not received by the intended recipient.
12.6. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by Sellers without the prior written consent of Holdings or by
Holdings without the prior written consent of Sellers except that an
assignment by Holdings to an affiliate of Holdings or to a financial
institution in order to facilitate the financing of the acquisition of the
ADCM Companies is expressly permitted without the consent of the Sellers.
12.7. Governing Law, Dispute Resolution.
(a) This Agreement shall be governed by the laws of the State of
New York (regardless of the laws that might otherwise govern under applicable
principles of conflicts of law of the State of New York) as to all matters
including, but not limited to, matters of validity, construction, effect,
performance and remedies.
(b) Any dispute between any of the parties hereto or any claim
by a party against another party arising out of or relating to this Agreement
or relating to any alleged breach thereof including, without limitation, the
calculation of the Closing Financials and Computations and the payments
pursuant to Section 1.4, shall be determined by arbitration in accordance with
the rules then in force of the American Arbitration Association. The
arbitration proceedings shall take place in Chicago, Illinois if initiated by
any of the Sellers or in Syracuse, New York if initiated by Holdings. The
arbitration proceedings shall be subject to the substantive laws of the State
of New York. There shall be one arbitrator, as shall be agreed upon by the
parties in dispute, who shall be an individual skilled in the legal and
business aspects of the subject matter of this Agreement and of the dispute.
In the absence of such an agreement, each party in dispute shall select one
arbitrator and the arbitrators so selected shall select a third arbitrator. In
the event the arbitrators cannot agree upon the selection of a third
arbitrator such third arbitrator shall be appointed by the American
Arbitration Association at the request of any of the parties in dispute. The
arbitrator shall be an individual skilled in the legal and the business
aspects of the subject matter of this Agreement and of the dispute. The
decision rendered by the arbitrator shall be accompanied by a written opinion
in support thereof. Such decision shall be final and binding upon the parties
in dispute without right of appeal. Judgment upon any such decision may be
entered into in any court having jurisdiction thereof, or application may be
made to such court for a judicial acceptance of the decision in an order of
enforcement. Costs of the arbitration shall be assessed by the arbitrator
against all or any of the parties in dispute and shall be paid promptly by the
party or parties so assessed. The arbitration proceeding required by this
Agreement may be held as part of an arbitration proceeding required by any
other agreement entered into in connection with this Agreement.
12.8. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.9. Neutral Interpretation. This Agreement constitutes the
product of the negotiation of the parties hereto and the enforcement hereof
shall be interpreted in a neutral manner, and not more strongly for or against
any party based upon the source of the draftsmanship hereof.
12.10. Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.11. Entire Agreement. This Agreement, which term as used
throughout includes the Exhibits hereto, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants or undertakings other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first hereinabove set forth.
ADVANCED D.C. HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Vice President
SELLERS:
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
SCHEDULE OF EXHIBITS TO
AGREEMENT FOR PURCHASE AND SALE OF STOCK
Exhibits Title
H Exhibit 1.2 Contingent Purchase Price Plan
S Exhibit 1.3 Excluded Liabilities
E&Y Exhibit 1.3(a) DFCS Example
S Exhibit 1.5 Allocation
S Exhibit 2.1.1 Foreign Qualifications
S Exhibit 2.1.2 Certificate of Articles of
Incorporation, Bylaws and Certificates of Authority of the Company
S Exhibit 2.2 Schedule of Authorized, Issued and
Outstanding Capital Stock of the Company
S Exhibit 2.5 Restrictions of Ability to
Perform
S Exhibit 2.7(a)-(e) Financial Statements
S Exhibit 2.8 Other Liabilities
S Exhibit 2.9 Material Adverse Changes
S Exhibit 2.10 Schedule of Contracts
S Exhibit 2.12 Title and Related Matters
S Exhibit 2.13 Legal Proceedings and
Judgments
S Exhibit 2.14.1 Certain Tax Matters
S Exhibit 2.16 Copies of Reports and
Inspections
S Exhibit 2.18.1 Welfare Benefit Plans; Retiree
Health Benefits
S Exhibit 2.18.2 Pension Benefits Plans
S Exhibit 2.18.3 Other Benefit Plans
Including Vacation
S Exhibit 2.18.4 Other Plan Deliveries
S Exhibit 2.18.5 Consents and Agreements
S Exhibit 2.19 Schedule of Intellectual
Property Rights
S Exhibit 2.20 Warranties and Claims Under
Warranties
S Exhibit 2.21 Labor Relations
S Exhibit 2.22 Schedule of Insurance
S Exhibit 2.23 Products Liability Insurance
Coverage
S Exhibit 2.24 Environmental Matters
S Exhibit 2.25 Schedule of Capital
Expenditures
S Exhibit 2.27 Schedule of Contracts with
Affiliates
S Exhibit 2.28 Change in Business and
Operations
S Exhibit 2.29 Bank Accounts
S Exhibit 2.30 Compensation Schedule
H Exhibit 3.6 Reliance Letter
S Exhibit 4.3 Permitted Purchases
H Exhibit 6.3(a) Xxxxxxx Xxxxxxx - Summary of
Employment Terms
H Exhibit 6.3(b) Xxxxxx Xxxxxx - Summary of Employment
Terms
H Exhibit 6.3(c) Xxxxxxx X. Xxxxxxx - Summary of
Employment Terms
H Exhibit 6.3(d) Xxxxxx X. Xxxxxxxxx - Summary of
Employment Terms
H Exhibit 6.4 Noncompetition Agreement
H Exhibit 6.6 Spousal Consent
H Exhibit 6.7 Release
H Exhibit 6.10 Escrow Agreement
H Exhibit 7.1 Certificate of Fulfillment of
Conditions by Sellers and the Company
H Exhibit 7.3 Opinion of the Sellers' Counsel
H Exhibit 7.6.1 Comfort Letter
H Exhibit 7.6.2 Solvency Certificate
H Exhibit 7.13 Estoppel Certificate
H Exhibit 7.14 Withholding Certificate
H Exhibit 8.1 Certificate of Fulfillment of
Conditions of Holdings
H Exhibit 8.3 Opinion of Holdings' Counsel
S - First draft to be prepared by
counsel for the Sellers
H - First draft to be prepared by
counsel for Holdings
