Exhibit 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of December 8,
2005, between each of Xxxx X. Xxxxx and Xxxxx X. Xxxxxxx in their individual
capacities (each a "Seller" and, collectively, "Sellers"), Xxxxx Regulator Co.,
a Massachusetts corporation ("Buyer"), and, solely for purposes of Section 8.14
hereof, Xxxxx Water Technologies, Inc., a Delaware corporation ("Buyer Parent").
Capitalized terms used herein are defined in the text.
PREAMBLE
Sellers are the owners of all of the issued and outstanding shares (the
"Shares") of Dormont Manufacturing Company, a Pennsylvania corporation (the
"Company"). Sellers desire to sell the Shares to Buyer, and Buyer desires to
purchase the Shares from Sellers, all upon the terms and subject to the
conditions set forth herein. Therefore, the parties agree as follows with the
intent to be legally bound.
AGREEMENT
ARTICLE I
PURCHASE AND SALE OF SHARES; CLOSING
1.01. Purchase and Sale of Shares. On the Closing Date, Sellers will sell
to Buyer, and Buyer will purchase from Sellers, all of Sellers' rights, title
and interest in and to the Shares.
1.02. Excluded Assets and Liabilities.
(a) On or before the Closing Date, Sellers may, at their election,
cause the Company to take the following actions (and to the extent that any of
the following identified assets are, in fact, cancelled, dividended or
distributed by the Company on or prior to the Closing Date, they are referred to
herein as the "Excluded Assets"):
(i) cancel the liabilities of each Seller or his Affiliates
which are in favor of the Company and are set forth on
subsection (a)(i) of Schedule 1.02 (alternatively, Sellers
may, at their option, cause any of such liabilities to be
repaid and thereupon cause the cash generated by such
repayment to be dividended to Sellers pursuant to Section
1.02(a)(ii));
(ii) dividend to Sellers any cash or cash equivalents
(including investments in debt securities) remaining in the
Company as of the Closing Date; and
(iii) distribute and/or assign to Sellers (or their nominee)
all rights and assets described on subsection (a)(iii) of
Schedule 1.02, including the Company's right to receive
distributions out of the Flexible Metal, Inc., escrow account
described thereon (the "FMI Escrow") (it being understood and
agreed, however, that the amounts in such escrow account shall
continue to be available to the Company
to satisfy valid claims ("FMI Indemnity Claims") made against
the FMI Escrow prior to May 12, 2006 in accordance with its
terms). The parties acknowledge and agree that any FMI
Indemnity Claims arising prior to May 12, 2006 shall be
handled in the manner set forth on subsection (a)(iii) of
Schedule 1.02.
(b) Subject to Section 1.07 hereof, on or before the Closing Date,
Sellers will satisfy or cause to be satisfied (including by causing the Company
to satisfy) or make arrangements to assume the following liabilities as of the
Closing Date (collectively, the "Excluded Liabilities"):
(i) all Indebtedness of the Company, all of which
Indebtedness, as of the date hereof, is set forth on
subsection (b)(i) of Schedule 1.02;
(ii) those liabilities of the Company in favor of Sellers or
their Affiliates that are set forth on subsection (b)(ii) of
Schedule 1.02;
(iii) all liabilities of the Company to pay any amounts to its
employees resulting solely from the consummation of the
transactions contemplated hereby, including all Phantom Plan
Payments and payments pursuant to all Change-In Control
Agreements (it being agreed that Sellers may, at their option,
cause the Company to vest all unvested Performance Units under
the Phantom Plan immediately prior to Closing and thereafter
to terminate the Phantom Plan); and
(iv) all third-party legal, financial advisory and accounting
fees and expenses incurred by the Company or Sellers in
connection with the transactions contemplated by this
Agreement, including (a) one-half of the filing fees related
to any required filings under the HSR Act and (b) the Xxxxxx
Xxxxxxxx Payment.
As used herein, the following terms, when capitalized, have the following
meanings:
1. "Change-In Control Agreements" means the three Change-In
Control Agreements between the Company and each of
Xxxxxxx Xxxxxx, Xxxxxxx Xxxxx and Xxxxxxx Xxxxx,
respectively, which amend and, in part, supersede the
provisions of the Phantom Plan.
2. "Indebtedness" means (a) all indebtedness or liability
for or on account of money borrowed by, or deposits with
or advances to, the Company, (b) all obligations of the
Company evidenced by bonds, debentures, notes or similar
instruments (including any liabilities under any
interest rate swaps entered into by the Company in
connection with such obligations), (c) all indebtedness
or liability for or on account of property or services
acquired by the Company (other than trade debt
incurred in the ordinary course of business), (d) all
amounts secured by Liens on property owned by the
Company (other than Excluded Assets) and capital leases
(without regard to any limitation of the rights and
remedies of the holder of such Lien or the lessor under
any capitalized lease to repossession or sale of such
property), (e) all amounts actually drawn, advanced or
otherwise owed as of the Closing Date on any letters of
credit, lines of credit or similar facilities with
respect to which the Company is the account party;
provided, that the term "Indebtedness"does not include
any liabilities of the Company related to that certain
lease for a trade show booth with Xxxxx Fargo Equipment
Finance, Inc., and related promissory note in the
original principal amount of $120,365.37.
3. "Performance Units" has the meaning given to such term
in the Phantom Plan.
4. "Phantom Plan" means, collectively, the Amended and
Restated Dormont Manufacturing Company Phantom Stock
Plan, the Performance Units granted to date thereunder,
and the Change-In Control Agreements.
5. "Phantom Plan Payments" means any and all payments or
liabilities of the Company under the Phantom Plan.
1.03. Purchase Price. The purchase price for the Shares (the "Purchase
Price") will be the amount equal to (i) Ninety-Four Million Five Hundred
Thousand U.S. Dollars ($94,500,000) less (ii) the Real Property Purchase Price
(as defined below), which amount is subject to adjustment in accordance with
Section 1.04 and is payable by Buyer on the Closing Date as follows:
(a) Four million seven hundred twenty-five thousand U.S. Dollars
($4,725,000) in immediately available funds (the "Escrow Fund") will be
delivered to a federally insured commercial bank reasonably acceptable to Buyer
and Sellers (the "Escrow Agent"), to be held or disbursed in accordance with the
terms of an Escrow Agreement in substantially the form of Exhibit A (the "Escrow
Agreement");
(b) an amount, in immediately available funds, equal to the
Post-Closing Bond Defeasance Amount (as defined in Section 1.07 below) will be
delivered to PNC Bank, National Association ("PNC") to be held or disbursed in
accordance with the terms of the Bond Release and Escrow Agreement (as defined
in Section 1.07 below); and
(c) the balance will be paid to Sellers in immediately available
funds.
The Purchase Price shall be allocated among Sellers in proportion to their
respective holdings of the Shares (each Seller's "Pro Rata Share"), as set forth
on Schedule 2.05. As used herein, the term "Real Property Purchase Price" means
the Purchase Price (as defined in Section 2 of the Real Property Transfer
Agreement).
1.04. Working Capital Adjustment.
(a) Not more than 10 business days prior to the Closing Date,
Sellers will, in good faith, estimate the Working Capital of the Company as of
the Closing Date on a reasonable basis using the Company's then available
financial information. The amount of Working Capital as so estimated by Sellers
is hereinafter referred to as "Estimated Working Capital". At the Closing, the
Purchase Price (with proportionate allocation as between the cash portion and
the escrow portion) will be adjusted on a dollar-for-dollar basis as follows: if
Estimated Working Capital exceeds $6,682,608 (the "Target Working Capital"),
then the Purchase Price will be increased by the amount of such excess; if
Estimated Working Capital is less than Target Working Capital, then the Purchase
Price will be decreased by the amount of such deficiency. As used herein,
"Working Capital" means the sum of the following:
(i) current assets of the Company; minus
(ii) any current assets of the Company which are Excluded Assets;
minus
(iii) current liabilities of the Company; plus
(iv) any current liabilities of the Company which are Excluded
Liabilities; plus
(v) any Approved Capital Expenditures.
in each case determined in accordance with Schedule 1.04 hereof and, to the
extent not inconsistent with Schedule 1.04, in accordance with generally
accepted accounting principles ("GAAP") applied in a manner consistent with that
used by the Company in preparing its historical financial statements; provided,
however, that for purposes of calculating Estimated Working Capital and Closing
Working Capital, the term "Working Capital" shall include as a "current
liability of the Company" the Section 1374 Amount (as defined in Section
6.04(b)(iv) hereof) (such current liability, as included on the Closing Balance
Sheet, the "Section 1374 Reserve"). As used herein, the term "Approved Capital
Expenditures" means the actual costs expended by the Company between the date
hereof and the Closing Date to purchase (including installment payments on)
assets that (i) would be characterized as long-term assets on a balance sheet
prepared in accordance with GAAP, and (ii) either (A) are permitted pursuant to
Section 4.01 hereof, or (B) are approved in writing by Buyer. By way of example,
Exhibit B sets forth a balance sheet (the "Current Balance Sheet") of the
Company as of October 31, 2005 (the "Financial Statement Date"), and a
calculation of Working Capital as of such date therefrom (assuming that all
assets which could qualify as Excluded Assets (i.e., if they were in fact
dividended, cancelled or distributed, as contemplated by Section 1.02(a)) are
deemed to be Excluded Assets).
(b) Sellers and Buyer shall, on a weekend reasonably close to the
Closing Date to be mutually agreed upon by the parties, jointly count the
inventory of the Company. Within 60 days after the Closing Date, Buyer will
prepare and deliver to Sellers a balance sheet of the Company as of the Closing
Date (as the same may be adjusted in accordance with this subsection, the
"Closing Balance Sheet") together with the related statement of income or loss
for the period beginning immediately following the Financial Statement Date
through the Closing Date (collectively with the Closing Balance Sheet, the
"Closing Financial Statements"). The Closing Financial Statements shall be
prepared using the accounting principles, policies and practices set forth on
Schedule 1.04, and shall include Buyer's calculation of Working Capital as of
the Closing Date (as the same may be adjusted in accordance with this
subsection, "Closing Working Capital"). Sellers will have a period of 30 days
after their receipt of the Closing Balance Sheet and calculation of Closing
Working Capital to review the same and to notify Buyer of any disputes regarding
the same. As part of such review, Sellers and their advisors will have
reasonable access to Buyer's work papers and to the preparers of the Closing
Balance Sheet and to the books and records on which the Closing Balance Sheet is
based. If Sellers notify Buyer of any dispute within such review period, then
the parties shall negotiate in good faith in an effort to resolve such dispute.
If Sellers (i) fail to so notify Buyer of any objections or proposed changes
within the review period, (ii) notify Buyer that they have no objections or
proposed changes to any of such items, or (iii) agree with Buyer in writing on
the resolution of all such objections or changes within 30 days following
delivery to Buyer of such objections or proposed changes, then the Closing
Balance Sheet and the Closing Working Capital as proposed by Buyer, with any
changes as may be agreed upon in writing with Sellers, shall be final and
binding. If Sellers notify Buyer of a dispute and the parties are unable to
resolve such dispute within 30 days after Buyer receives notice of the same,
then either party may submit such dispute to an independent accounting firm of
recognized national or regional standing mutually acceptable to Buyer and
Sellers for resolution or, if they cannot agree, a Big Four accounting firm
chosen by lot (after elimination of those Big Four accounting firms having
relationships with the parties). Each of Buyer and Sellers will be afforded the
opportunity to present to such accounting firm any material related to the
determination and to discuss the determination with such accountants. The
determination by such accounting firm will be conclusive and binding upon the
parties. The fees and expenses of such accounting firm will be shared equally by
Sellers and Buyer.
(c) If Closing Working Capital, as finally determined, (i) is less
than Estimated Working Capital, Sellers shall pay to Buyer an amount in cash
equal to the dollar amount of such deficiency, or (ii) is in excess of Estimated
Working Capital, then Buyer shall pay to Sellers (pro rata in the same manner
and proportion as the distribution of the Purchase Price) an amount in cash
equal to the dollar amount of such excess. Any payment under this subsection
will be made within 15 days after Closing Working Capital has been finally
determined, and will bear interest from the Closing Date through the date of
payment at the rate of 8% per annum. Buyer, in its sole discretion, shall have
the right (but not the obligation) to receive any payment owed to Buyer under
this subsection by instructing the Escrow Agent to return any such deficiency,
plus interest, to Buyer from the Escrow Fund.
1.05. Closing. Subject to the satisfaction and/or waiver of the closing
conditions set forth in Article V hereof, the closing of the transactions
contemplated hereby (the "Closing") will take place on the third business day
following HSR Clearance (as defined in Section 4.05(a) hereof) at the offices of
Xxxxx & Xxxxxxx, P.C., 00 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx
00000, or at such other place, or on such other date not later than January 31,
2006 (the "Outside Date"), as the parties may mutually agree upon. The date on
which the Closing actually occurs is referred to herein as the "Closing Date."
1.06 Withholding Obligations. Each of Buyer and the Company shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement any Mandatory Withholding Amount (as defined below).
To the extent that such amount is so withheld by Buyer or the Company, as the
case may be, such withheld amount shall be treated for all purposes of this
Agreement as having been paid to the Person with respect of which such deduction
and withholding was made by Buyer or the Company, as the case may be. Buyer
shall also have the right to collect Forms W-8 or W-9, or such other forms
relating to United States federal withholding obligations as may be applicable,
from Sellers or any other relevant Person. As used herein, the term "Mandatory
Withholding Amount" means the amount which the Company and/or Buyer is required
under the Internal Revenue Code of 1986, as amended (the "Code"), or any other
applicable Tax law, to deduct and withhold from the payments contemplated by
this Agreement, as (i) mutually agreed in writing by Sellers and Buyer, or (ii)
if Sellers and Buyer are unable to agree on such amount, then as determined in
writing by an independent tax counsel reasonable acceptable to both Buyer and
Sellers (the fees of which counsel shall be borne equally by the Company and
Sellers).
1.07 Bond Defeasance; Raffles Letter of Credit.
(a) Post-Closing Bond Defeasance. Capitalized terms used, but not
defined in this Section 1.07(a), have the meanings given to such terms on
Schedule 1.07(a) hereto. The parties acknowledge and agree that the obligations
of the Company in respect of the Bonds and under the PNC Security Documents
constitute "Indebtedness" of the Company, that such obligations may be satisfied
(defeased) only in compliance with the requirements under the Indentures and
such PNC Security Documents, and that such requirements make it impracticable or
impossible for Sellers to satisfy such Indebtedness on or prior to the Closing.
Accordingly, the parties acknowledge and agree as follows:
(i) Notice of Redemption. On or immediately following the
Closing Date, Sellers will cause the Current Trustee to give a notice of
redemption under all of the then outstanding Bonds (the "Then Outstanding
Bonds") (it being acknowledged that Sellers may cause the 1992 Bonds to be
satisfied (defeased) prior to Closing), with such redemption to take place as
soon as practicable following the date of such notice but in no event later than
ninety (90) days following the Closing Date (the "Applicable Redemption Date").
(ii) Release of PNC Security Interests; Bond Escrow Fund.
Sellers will use their commercially reasonable efforts to enter into a written
agreement with PNC prior to Closing, in form and substance reasonably
satisfactory to Sellers, PNC and Buyer (the "Bond Release and Escrow
Agreement"), pursuant to which:
(A) PNC will allow the Bond L/C to remain in place
post-Closing for purposes of facilitating a redemption of the
Then Outstanding Bonds;
(B) Sellers will, on the Closing Date, cause to be deposited
(out of the Purchase Price proceeds) into an account
controlled by and in the name of PNC (the "Bond Escrow
Account") an amount (the "Post-Closing Bond Defeasance
Amount") equal to the sum of:
(1) the total outstanding principal amounts of the Then
Outstanding Bonds as of the Closing Date;
(2) the total amount of interest payable (assuming the
maximum interest rate permitted thereunder) on the Then
Outstanding Bonds between the Closing Date and the
Applicable Redemption Date; and
(3) the costs and expenses otherwise reasonably expected
to be incurred by PNC or by the Current Trustee in
connection with the defeasance of the Then Outstanding
Bonds;
(C) PNC will release all of the PNC Security Interests as of
the Closing Date; and
(D) PNC will have the right to reimburse itself out of the
Bond Escrow Account for all such costs incurred by it in
connection with the redemption of the Then Outstanding Bonds,
with any remaining amounts in such Bond Escrow Account to be
used first to pay the costs and expenses of the Current
Trustee and second to be refunded to Sellers following such
defeasance.
(iii) Trustee Security Interests to Remain In Place. Buyer
does hereby consent to the continued existence of the Trustee Security Interests
pending the redemption of the Then Outstanding Bonds.
(iv) Redemption Date Actions. On the Applicable Redemption
Date, (A) Sellers will take, and Buyer will cause the Company to take (at the
Sellers' request and expense), such reasonable actions as are necessary to
satisfy the conditions of such redemption, including, as applicable, the
delivery of any required opinions concerning the defeasance, (B) the Current
Trustee's costs and expenses will be paid out of the Bond Escrow Account, and
(C) the Current Trustee will be asked to execute a release and satisfaction,
including with respect to the Trustee Security Interests.
(b) Raffles Letter of Credit. Prior to Closing, Sellers and Buyer
will cooperate with each other and take such actions as are reasonably necessary
to cause (i) the Company's current letter of credit (issued by PNC) in support
of the Company's self-insurance arrangement with Raffles Insurance LTD (as more
fully described on Schedule 2.22, the "Existing Raffles LOC") to be cancelled,
and (ii) a new letter of credit (issued on behalf of the Buyer and/or the
Company) to be substituted in place of such Existing Raffles LOC. It is the
intention of the parties that any costs and expenses associated with the
termination of the Existing Raffles LOC (e.g., any early termination fees and
expense under the line of credit facility pursuant to which such Existing
Raffles LOC has been issued) will be borne by Sellers, and that any costs and
expenses incurred in connection with the new letter of credit will be borne by
Buyer. In the event that it is impracticable or impossible to effect such letter
of credit substitution by the Closing Date, whether due to legal impediments in
the documents governing the Raffles relationship or otherwise, then the parties
agree to cooperate in good faith to find an alternative arrangement which
preserves such insurance relationship for the benefit of the Company
post-Closing, but which does not otherwise affect the relative economic costs
and benefits otherwise contemplated by such letter of credit substitution.
1.08 Post-Closing Bonus and Profit Sharing Payments. Buyer agrees to cause
the Company to pay, promptly (and in no event more than sixty (60) days)
following the Closing, to the Company's employees, those bonus and profit
sharing payments described on Schedule 1.08.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth on the corresponding numbered sections (each a
"Schedule") of the initial disclosure letter attached hereto as Exhibit C (as
the same may be amended or supplemented by Sellers prior to the Closing Date to
reflect changes in the ordinary course of business after the date hereof, but
only to the extent not resulting from a breach by Sellers of their covenants and
agreement set forth in Article IV hereof, the "Disclosure Letter"), each Seller
hereby represents and warrants to Buyer as follows:
2.01. Organization and Qualification. The Company is a corporation duly
organized and validly subsisting in the Commonwealth of Pennsylvania. The
Company is duly qualified to do business as a foreign corporation and is in good
standing (or validly subsisting, as applicable) in all jurisdictions in which
the ownership of its properties or the nature of its business makes such
qualification necessary, except to the extent that the failure to be so
qualified, individually or in the aggregate, is not likely to have a Material
Adverse Effect, and all of such jurisdictions are listed on Schedule 2.01. As
used herein, the term "Material Adverse Effect" means any effect or change that
would be materially adverse to the assets, liabilities, business, condition
(financial or otherwise) or results of operations of the Company, taken as a
whole, or to the ability of Sellers to consummate timely the transactions
contemplated hereby; provided, that none of the following shall be deemed to
constitute, and none of the following shall be taken into account in determining
whether there has been, a Material Adverse Effect: any adverse change, event,
development, or effect to the extent arising from or relating to (1) general
business or economic conditions, (2) the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence of any military or terrorist attack upon the United
States, or any of its territories, (3) financial, banking, or securities markets
(including any disruption thereof and any decline in the price of any security
or any market index), (4) changes in United States generally accepted accounting
principles, (5) the taking of any action contemplated by this Agreement and the
other Transaction Documents, (6) changes in laws, rules, regulations, orders, or
other binding directives issued by any Governmental Entity, or (7) changes in
customer, supplier, employee or other commercial relationships of the Company
after the date hereof to the extent resulting from public or industry knowledge
of the transactions contemplated hereby.
2.02. Power and Authority. The Company has the corporate power and
authority to own its assets and to conduct its business as presently conducted
and to execute, deliver and perform the Transaction Documents to which it is a
party.
2.03. Execution and Enforceability. This Agreement has been, and on the
Closing Date the other Transaction Documents to which such Seller is or is
designated to be a party will be, duly and validly executed and delivered or
made available by such Seller and, assuming the due and valid authorization,
execution and delivery of such agreements by Buyer and each other party thereto
constitute (or upon the execution and delivery thereof by such Seller will
constitute) legal, valid and binding obligations of such Seller enforceable
against such Seller in accordance with their respective terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights and remedies or by equitable
principles. The Transaction Documents to which the Company is or is designated
to be a party have been duly authorized by all requisite corporate action on the
part of the Company and will be duly and validly executed and delivered by the
Company and, assuming the due and valid execution and delivery of such
agreements by each other party thereto, will constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except to the extent that enforceability may be limited
by bankruptcy, insolvency, moratorium or similar laws affecting creditors'
rights and remedies or by equitable principles.
2.04. No Breach, Default, Violation or Consent. Assuming that the Company
or Sellers obtain all the consents under Business Agreements and Business
Permits listed on Schedule 2.04, the execution, delivery and performance by each
Seller of this Agreement and the Transaction Documents to which such Seller is a
party, and the execution, delivery and performance by the Company of the
Transaction Documents to which the Company is a party, do not and will not:
(a) violate the Company's charter or bylaws;
(b) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, result in the creation of any Lien on the assets of the Company (other
than Excluded Assets) under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any Business
Agreement or Business Permit or any other agreement to which any Seller is a
party or by which any Seller or any of the Shares held by such Seller is bound;
(c) breach or otherwise violate any order, writ, judgment,
injunction or decree (each a "Governmental Order") issued by any court,
arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (each a "Governmental Entity")
which names the Company or such Seller or is directed to the Company, such
Seller or any of their respective assets;
(d) result in any material violation of any law, rule, regulation,
administrative order, ordinance or code of any Governmental Entity (each a
"Governmental Rule"); or
(e) require any material consent, authorization, approval, exemption
or other action by, or any filing, registration or qualification with, any
individual, firm, corporation, partnership, company, limited liability company,
trust, joint venture, association or other entity, including any Governmental
Entity (each a "Person"), other than such filings and approvals as may be
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 and the
regulations promulgated thereunder, as amended (the "HSR Act").
2.05. Title to Shares. Such Seller owns the Shares listed on Schedule 2.05
as being owned by such Seller. Such Seller has good and marketable title
(subject to compliance with applicable federal and state securities laws) to the
Shares which are to be transferred to Buyer by such Seller pursuant hereto and,
upon consummation of the purchase contemplated hereby, Buyer will acquire from
such Seller good and marketable title to such Shares, free and clear of all
Liens.
2.06. Capitalization; Phantom Equity.
(a) The authorized capitalization of the Company consists of
1,297,500 shares of common stock, no par value. The Shares (i) consist of
347,270 shares of such common stock, (ii) were duly authorized and validly
issued and are fully-paid and non-assessable, and (iii) constitute all of the
issued and outstanding shares of the Company's capital stock. All of the issued
and outstanding shares of capital stock of the Company have been offered, issued
and sold by the Company in compliance with all applicable federal and state
securities laws.
(b) There are no outstanding or authorized (i) options, warrants,
subscriptions, agreements or other rights for the acquisition (from the Company
or any Seller) of shares of capital stock of the Company, (ii) securities or
other obligations of the Company which are convertible into or exchangeable for
such shares or (iii) options, sale agreements, shareholder agreements, pledges,
proxies, voting trusts, powers of attorney, restrictions on transfer or other
agreements or instruments which are binding on such Seller and which relate to
the ownership, voting or transfer of any of the Shares. The Company has no
obligation (contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right, or to issue or distribute to holders
of any shares of its capital stock any evidences of indebtedness or assets of
the Company. The Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or to make any other distribution in
respect thereof.
(c) There are 10,473 Performance Units granted under the Phantom
Plan of which 7,163 units are vested as of the date hereof and the balance of
which are currently unvested. Except for the Phantom Plan, such Change-In
Control Agreements and such Performance Units, there are no outstanding or
authorized phantom stock, phantom equity, stock appreciation or other
contractual rights which are designed to afford the holder thereof with economic
rights which are similar to the economic rights of the holders of the Company's
capital stock. Section 2.06(c) of the Disclosure Letter sets forth a complete
and accurate list of all holders of outstanding Performance Units, indicating
the date of grant of such Performance Units, and the vesting schedule (including
any acceleration provisions with respect thereto). The Company has provided to
Buyer complete and accurate copies of the Phantom Plan and all Change-In Control
Agreements.
(d) There is no agreement, written or oral, between the Company and
any holder of its securities, or among any holders of its securities, relating
to the sale or transfer (including agreements relating to rights of first
refusal, co-sale rights or "drag-along" rights), or voting of the capital stock
of the Company.
2.07. Financial Matters; Undisclosed Liabilities.
(a) The books of account and other financial records of the Company,
all of which have been made available to Buyer, are correct and complete in all
material respects, represent actual, bona fide transactions and have been
maintained in accordance with sound business and accounting practices. Each
transaction is properly and accurately recorded in the books and records of the
Company, and each document upon which entries in the Company's books and records
are based is correct and complete in all material respects. The Company
maintains an adequate system of internal accounting controls.
(b) Sellers have previously delivered or made available to Buyer
correct and complete copies of (i) the Company's audited balance sheets and
statements of income as of and for its fiscal years ended December 31, 2002,
2003 and 2004, including the footnotes thereto (the "Audited Financial
Statements"), and (ii) the Company's unaudited interim balance sheet and
statements of income as of and for the ten months ended October 31, 2005 (the
"Current Financial Statements" and, together with the Audited Financial
Statements, the "Financial Statements"). The Financial Statements fairly present
in all material respects the financial condition of the Company as at the end of
the periods covered thereby and the results of its operations and the changes in
its financial position for the periods covered thereby, and were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, subject, in the case of the Current Financial Statements, to
normal year-end audit adjustments and the lack of footnotes and other
presentation items.
(c) As of the Financial Statement Date, the Company had no
liabilities that would be required to be set forth on a balance sheet prepared
in accordance with GAAP, except liabilities stated or adequately reserved
against on the Current Financial Statements (and only to the extent of the
amount provided for therein).
(d) The Company does not have any liabilities that would be required
to be set forth on a balance sheet prepared in accordance with GAAP, except
liabilities (i) stated or adequately reserved against on the Current Financial
Statements (and only to the extent of the amount provided for therein), or (ii)
incurred in the ordinary course of business after the Financial Statement Date.
(e) Invoiced Product. The Company has not recognized revenue for any
products that have not been shipped as of the date one day prior to the Closing
Date.
2.08. Tax Matters.
(a) All returns, declarations, reports and information statements
with respect to Taxes which are required to be filed by or on behalf of the
Company with any Governmental Entity, including any consolidated, combined or
unitary Tax returns (collectively, "Tax Returns"), have been properly prepared
and filed and correctly state in all material respects the Company's Tax
liability.
(b) The Company has paid, or has made adequate reserves on its books
(excluding reserves for deferred Taxes) for the payment of, all taxes, charges,
fees, levies and assessments (whether computed on a separate, consolidated,
combined, unitary or other basis), including all income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipts, capital stock, production, net worth, business and
occupation, disability, social security, employment, payroll, license,
estimated, stamp, custom duties, severance and withholding taxes or charges,
imposed by any Governmental Entity, and any interest or penalties thereon
(collectively, "Taxes" and any of them a "Tax"), shown to be due on such Tax
Returns or claimed to be due by any Governmental Entity or which the Company
otherwise is liable for or is required to withhold on behalf of any other
Person.
(c) [Intentionally Omitted]
(d) There is no proposed assessment of any additional Taxes against
the Company by any Governmental Entity or, to Sellers' knowledge, of any basis
for any such assessment (whether or not reserved against).
(e) The Company is not currently being audited by any Governmental
Entity, and no such audit is pending or, to Sellers' knowledge, threatened.
(f) The Company: (i) has never been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (ii)
has not made any payments, is not obligated to make any payments, nor is a party
to any agreement that could obligate it to make any payments that may be treated
as an "excess parachute payment" under Section 280G of the Code (determined
without regard to Section 280G(b)(4) of the Code); and (iii) has no actual or
potential liability for any Taxes of any Person (other than the Company) under
Treasury Regulation Section 1.1502-6 (or any similar provision of law), or as a
transferee or successor, by contract, or otherwise.
(g) None of the assets of the Company: (i) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; or (ii) directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code.
(h) There are no adjustments under Section 481 of the Code (or any
similar adjustments under any provision of the Code or corresponding Tax laws)
that are required to be taken into account by the Company in any period ending
after the Closing Date by reason of a change in method of accounting in any
taxable period ending on or before the Closing Date.
(i) The Company has not distributed to its shareholders or security
holders stock or securities of a controlled corporation, nor has stock or
securities of the Company been distributed, in a transaction to which Section
355 of the Code applies (i) in the two years prior to the date of this Agreement
or (ii) in a distribution that could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of the
Code) that includes the transactions contemplated by this Agreement.
(j) At all times since July 1, 1996, for federal income Tax
purposes, the Company has validly been treated as an "S Corporation" within the
meaning of Section 1361(a) of the Code and has validly been treated in a similar
manner for purposes of the income Tax laws of all states in which it has been
subject to taxation.
(k) Sellers are eligible to make a Section 338(h)(10) Election with
respect to the purchase and sale of the Shares.
(l) Except with respect to the Company's prior subsidiary, Flexible
Metal, Inc., there is not and has not been an election under Treasury Regulation
Section 301.7701-3 (or similar provisions of foreign, state or local Tax law) to
treat any subsidiary as an entity disregarded from its owner for Tax purposes.
(m) The Company does not own any interest in an entity that is
characterized as a partnership for federal income Tax purposes.
2.09. Litigation. There is no pending or, to Sellers' knowledge,
threatened suit, investigation, action or proceeding by or before any
Governmental Entity (a) against the Company or its assets, (b) against a Seller
involving the Company or (c) which would reasonably be expected to prevent or
hinder the consummation of the transactions contemplated by this Agreement.
There is not in existence on the date hereof, and there will not be on the
Closing Date, any Governmental Order, of any Governmental Entity enjoining or
requiring the Company to take any action of any kind with respect to its
business, assets or properties.
2.10. Absence of Certain Changes and Events. Since the Financial Statement
Date:
(a) the Company has not incurred any material obligation or
liability that would be required to be set forth on a balance sheet prepared in
accordance with GAAP except for normal trade obligations incurred in the
ordinary course of business;
(b) no Lien has been placed on any of the assets of the Company
which remains in existence on the date hereof or will remain on the Closing
Date;
(c) no uninsured casualty, loss or damage in excess of $250,000 in
the aggregate has occurred with respect to any of the Company's assets;
(d) the Company has not sold, transferred or otherwise disposed of
any of its properties or assets or any interest therein, or agreed to do any of
the foregoing, except for sales of inventory in the ordinary course of business;
(e) the Company has not written off as uncollectible any accounts
receivable, or written down the value of any of its assets, except in each case
in the ordinary course of business and at a rate not greater than during the
12-month period ending on the Financial Statement Date;
(f) no executive officer of the Company has left his or her
employment with the Company;
(g) the Company has not granted, and is not committed to grant, any
salary or wage increases to any of its employees other than in the ordinary
course of business and consistent with past practice;
(h) the Company has not made, or committed to make, any capital
expenditures in excess of $250,000 in the aggregate;
(i) the Company has not introduced any material change with respect
to its business, including with respect to the products or services it sells,
the areas in which such products or services are sold, its methods of
manufacturing or distributing its products, the levels of inventory that it
maintains, its marketing techniques or its accounting methods;
(j) there has not been any labor dispute or claim of unfair labor
practices involving the Company; any change, other than in the ordinary course
of business consistent with past practice, in the compensation (in the form of
salaries, wages, incentive arrangements or otherwise) payable or to become
payable by the Company to any of its agents or independent contractors, or any
payment or arrangement made to or with any of such agents or independent
contractors; entering into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
officer, director or employee of the Company;
(k) there has not been any change, and Sellers have not obtained any
information concerning a prospective change, with respect to the officers or
management of the Company, any grant of any severance or termination pay to any
officer or employee of the Company or any increase in benefits payable under any
existing severance or termination pay policies or employment agreements;
(l) there has not been any material change in the manner of keeping
books, accounts or records, accounting methods or practices, standard costs,
credit practices or collection or pricing policies used by the Company;
(m) the Company has not entered into any other material transaction
other than transactions in the ordinary course of business;
(n) there has not been any change in the kind and amount of
insurance maintained by the Company;
(o) the Company has not made any payment on any Indebtedness or
capital leases, except regularly scheduled payments pursuant to the terms of
such Indebtedness;
(p) the Company has not entered into any agreement, whether in
writing or otherwise, that would result in any of the transactions or events or
require the Company to take any of the actions specified in paragraphs (a)
through (o) above; and
(q) to Sellers' knowledge, no event has occurred and no condition
exists which, individually or in the aggregate, has had, or is likely to have, a
Material Adverse Effect.
2.11. Customers and Suppliers. Schedule 2.11 sets forth a correct and
complete list of the top fifteen (i) customers, (ii) representatives, (iii)
dealers or distributors (collectively, "Distributors"), and (iv) suppliers of
the Company (in each case, in terms of dollar volume of goods and services
purchased or sold) during its fiscal year ended December 31, 2004 and during the
ten months ended October 31, 2005. The Company is not required to provide any
material bonding or other financial security arrangements in connection with any
of its transactions with any such customer, representatives, Distributor or
supplier. Since the Financial Statement Date, no such customer, representative,
Distributor or supplier has terminated its relationship with, or materially
reduced its purchases from or sales to, the Company, and Sellers have no
knowledge that any such customer, representative, Distributor or supplier
intends to terminate its relationship with, or materially reduce its purchases
from or sales to, the Company.
2.12. Constituent Documents and Government Rules. The Company is in
compliance (a) with its charter and bylaws (correct and complete copies of which
have been delivered to Buyer) and (b) in all material respects with all
Governmental Rules applicable to the Company or its business or assets.
2.13. Governmental Orders. Schedule 2.13 sets forth a correct and complete
list of all Governmental Orders that name the Company or are directed to the
Company or any of its assets, together with the Governmental Entity which issued
the same and the general subject matter thereof. The Company is in compliance
with all such Governmental Orders.
2.14. Business Permits; Industry Certifications.
(a) Schedule 2.14(a) sets forth a correct and complete list of all
permits, licenses, franchises, certificates, authorizations, consents and
approvals that are required to operate the business of, or are otherwise held by
the Company (collectively, the "Business Permits"), and indicates for each
whether any consent or other action is required in order for the same to remain
in full force and effect following the Closing. No violations have been recorded
against any such Business Permit; no citation, notice or warning has been issued
by any Governmental Entity with respect to any such Business Permit; no
investigation or hearing has been held by or before any Governmental Entity with
respect to any such Business Permit; and, the Company has not received any
notice from any Governmental Entity that it intends to cancel, revoke,
terminate, suspend or not renew any such Business Permit. Each Business Permit
is validly held by the Company and is in full force and effect, and the Company
is in material compliance with all such Business Permits. The Business Permits
are sufficient in order for the Company to conduct its business under applicable
Governmental Rules.
(b) Schedule 2.14(b) sets forth a correct and complete list of all
certifications and accreditations of any industry standards association that the
Company has in respect of any of its products (collectively, the "Industry
Certifications"). The Company (i) has made available to the Buyer complete and
accurate copies of each of the Industry Certifications, (ii) has not received
any notice from the entity or association responsible for granting any such
Industry Certifications that the Company is not in compliance with such Industry
Certifications, and (iii) does not hold itself out as holding any other Industry
Certifications.
2.15. Environmental Matters.
(a) Schedule 2.15 sets forth a correct and complete list of all
reports of environmental audits or investigations that have been performed by or
on behalf of any Seller, or the Company, or that are otherwise in any Seller's
or the Company's possession, custody or control with respect to any Company
operation or activity or real property now or previously owned, leased, occupied
or used by the Company. The Company has provided or made available to Buyer all
material documents, records and information known to the Company, whether
prepared by the Company or by others, concerning any environmental or health and
safety matter relevant to the Company or to any property now or formerly owned,
leased, occupied or used by the Company, including without limitation,
environmental risk assessments, site assessments, documentation regarding
off-site disposal of Hazardous Substances, and reports, correspondence, permits,
licenses, approvals, consents and other authorizations related to environmental
or health and safety matters issued by any Governmental Entity.
(b) Since January 1, 1993 (the "Current Operations Date") and, to
Sellers' knowledge, prior to such date, no Hazardous Substances have been
generated, used, processed, treated, stored, released, handled, recycled,
transported or disposed of by the Company, except in compliance with applicable
Environmental Rules in all material respects.
(c) The Company has not received any request for information,
demand, administrative inquiry, notice of claim, notice of intent to bring a
"citizens suit" under any Environmental Rules, informal complaint or claim, or
other notification or information indicating that, it is or may be potentially
liable or responsible under Environmental Rules, and there is no civil,
administrative or criminal proceeding pending or, to the knowledge of Sellers,
threatened against the Company or any Person for whose conduct the Company is or
may be held responsible, under any Environmental Rules.
(d) Sellers have no knowledge of information that would reasonably
be expected to give rise to a claim that the Company's present or former
employees may have been injured by exposure to conditions existing in the
workplace, including, but not limited to, exposure to asbestos or welding fumes.
(e) No underground or aboveground storage tanks are located on any
real property now or, to Sellers' knowledge, formerly owned, leased, occupied or
used by the Company (other than any identified in the reports referred to in
paragraph (a) above). To Sellers' knowledge, no polychlorinated biphenyls
("PCBs") or equipment containing PCB's; asbestos or asbestos containing
materials; lead or lead based paint; urea formaldehyde foam insulation; or toxic
mold are present at any property currently owned, leased, occupied or used by
the Company.
(f) Since the Current Operations Date, and to Sellers' knowledge,
prior to such date, the Company has complied with and is in compliance with all
Environmental Rules in all material respects, and holds and is in compliance in
all material respects with all environmental permits, certificates, licenses,
approvals, registrations and authorizations required under all Environmental
Rules ("Company Environmental Permits"). All Company Environmental Permits are
in full force and effect in accordance with their terms. To the knowledge of
Sellers, no appeal or any other proceeding is pending to modify or revoke any
such Company Environmental Permit. The Company has provided or made available to
Buyer the Company Environmental Permits.
(g) Since the Current Operations Date and, to Sellers' knowledge,
prior to such date, neither the Company, nor, to Sellers' knowledge, any Person
for whose conduct the Company is or may be held responsible, has transported or
disposed of, or allowed or arranged for any third party to transport or dispose
of, any Hazardous Substances to or at any location that is listed or proposed
for listing on the National Priorities List (the "NPL") promulgated pursuant to
CERCLA, the Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS"), or any list of sites under any analogous state
program. To the knowledge of Sellers, no solid waste or hazardous waste
transporter or owner of any treatment storage or disposal facility, that in
either case, has been used by the Company has any liability involving the
transportation, treatment, storage or disposal of solid waste or hazardous waste
of the Company.
(h) Since the Current Operations Date and, to Sellers' knowledge,
prior to such date, except as authorized by Environmental Rules, (i) neither the
Company, nor, to Sellers' knowledge, any Person for whose conduct the Company is
or may be held responsible, has Released any Hazardous Substances on, in, from,
under or at any real property now or, to the knowledge of Sellers, formerly
owned, leased, occupied or used by the Company, and (ii) no Hazardous Substances
have been Released by the Company, or to Sellers' knowledge, by any other any
Person for whose conduct the Company is or may be held responsible into, are
threatened to be Released into, or have come to be located in the Environment at
any property now or formerly owned, leased, occupied or used by the Company, and
no such property is listed or proposed for listing on the NPL, CERCLIS or any
equivalent list of sites under any analogous state program.
(i) There is no hazardous waste treatment, storage or disposal
facility, landfill, surface impoundment or underground injection well (as those
terms are defined by Environmental Rules) located at any of the real property
now or, to the knowledge of Sellers, formerly owned, leased, occupied or used by
the Company or at facilities currently or, to the knowledge of Sellers, formerly
utilized by the Company.
(j) There are no environmental Liens recorded on any properties
owned by the Company.
(k) No consent, approval, authorization, registration or filing is
required under Environmental Rules in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
Except for the representations and warranties in Section 2.13, the
representations and warranties contained in this Section 2.15 are the exclusive
representations and warranties in this Agreement dealing with the Company's
compliance with Environmental Rules and Company Environmental Permits.
As used in this Agreement the following terms have the following meanings.
"Environment" means soil, sediment, surface waters (including
navigable waters, ocean waters, streams, ponds, drainage basins and wetlands),
groundwaters, drinking water supplies, land, surface or subsurface strata,
ambient air (including indoor air), plant and animal life (including fish and
all other aquatic life), and any other environmental medium or natural
resources.
"Environmental Rule" means any Governmental Rule that relates to
Hazardous Substances, pollution or protection of the Environment, natural
resources, public health or safety, including any Governmental Rule relating to
the generation, use, processing, treatment, storage, release, transport or
disposal of Hazardous Substances, together with all rules, regulations and
orders issued thereunder, as any of the same may be amended, including, but not
limited to the following:
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss. 9601 et seq. ("CERCLA"); the Resource Conservation and Recovery Act,
42 X.X.X.xx. 6901 et seq.; the Federal Water Pollution Control Act, 33 X.X.X.xx.
1251 et seq.; the Clean Air Act, 42 X.X.X.xx. 7401 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1471 et seq.; the Toxic Substances
Control Act, 15 X.X.X.xx.xx. 2601 through 2629; the Oil Pollution Act, 33 U.S.C.
ss. 2701 et seq.; the Emergency Planning and Community Xxxxx-xx-Xxxx Xxx, 00
X.X.X.xx. 00000 et seq.; the Safe Drinking Water Act, 42 U.S.C. xx.xx. 300f
through 300j; and all similar Governmental Rules of any Governmental Entity
having jurisdiction over the assets or activities of the Company.
"Hazardous Substance" means any substance that constitutes, in whole
or in part, a pollutant, contaminant or toxic or hazardous substance or waste
under, or the generation, use, processing, treatment, storage, Release,
transport or disposal of which is regulated by, any Governmental Rule.
"Release" has the meaning given to it in CERCLA.
2.16. Real Property.
(a) Schedule 2.16 sets forth a correct and complete list of all real
property (other than the Excluded Real Property (as defined below)) that is
owned, leased, occupied or used by the Company (collectively, the "Real
Property") and indicates whether such property is owned (the "Owned Real
Property") or leased (the "Leased Real Property") by the Company. Fee simple
ownership of all Owned Real Property is vested in the Company free and clear of
all Liens other than Real Property Permitted Liens. Fee simple ownership of all
Leased Real Property is vested in the Dormont Realty Partners, L.P. ("DRP"),
free and clear of all Liens. As used herein, (i) the term "Excluded Real
Property" means that certain real property owned by DRP that is located in Penn
Township and known as Xxx 00 xx Xxxxx Xxx Xxxxxxxxx Xxxx and designated as Tax
Map # 55-05-00-0-088-00-00 in the Xxxxxxxxxxxx County records, and (ii) the term
"Real Property Permitted Liens" means collectively, any Permitted Liens and any
other Liens described as such on Schedule 2.16(a).
(b) Schedule 2.16 sets forth a correct and complete list of (i) all
leases, subleases and other material agreements or rights pursuant to which any
Person has the right to occupy or use any Real Property owned by the Company and
(ii) all leases, subleases and other material agreements or rights pursuant to
which the Company has the right to occupy or use any Real Property owned by
others.
(c) All buildings and other improvements located on the Real
Property and the use of the Real Property by the Company comply with all
Governmental Rules relating to safety, zoning, utilities, land sales and land
use and with all easements, covenants and other restrictions applicable to the
Real Property, and the Company has not received written notice of a violation of
any of such Governmental Rule, easement, covenant or other restriction.
(d) The Real Property: (i) is adequately serviced by all utilities
necessary for the Company to conduct its business as currently conducted
thereon; (ii) has adequate means of ingress and egress, either directly or by
means of perpetual easements or rights-of-way which run with the Real Property;
and (iii) is not located in whole or in part within an area identified as a
flood hazard area by any Governmental Entity. To Sellers' knowledge, there are
no material defects in the physical condition of any land, buildings or
improvements constituting part of the Real Property, including without
limitation, structural elements, mechanical systems, parking and loading areas,
and all such buildings and improvements have been maintained in accordance with
good engineering practices.
(e) The Company has not sublet any portion of any of the Real
Property. Other than the Company, no party has the right to occupy, possess or
use any portion of the Real Property (subject to the rights of DRP under the
lease agreements between the Company and DRP with respect to the Leased Real
Property).
(f) There are no actions, suits or proceedings (including
arbitration or condemnation proceedings) pending or, to Sellers' knowledge,
threatened, which could have a material adverse effect on any portion of the
Real Property or the Company's interest therein, at law or in equity or before
or by any Governmental Entity.
(g) The Company has never owned nor held any ownership interest in
the Excluded Real Property.
2.17. Personal Property.
(a) Schedule 2.17 sets forth a correct and complete list of (i) all
Equipment owned by the Company for which the Company maintains a depreciation
schedule, and (ii) each lease pursuant to which the Company leases any Equipment
where the total remaining payments under such lease are in excess of $100,000.
As used herein, the term "Equipment" means any machinery, tools, fixtures,
vehicles, computer hardware, furniture or similar items that are either owned or
leased by the Company in the operation of its business.
(b) The Equipment is in good repair and operating condition and is
suitable for the purposes for which it is used, normal wear and tear excepted.
The Equipment constitutes all equipment, machinery, fixtures, vehicles, computer
hardware and furniture necessary for the Company to conduct its business as
currently conducted.
(c) All raw material, work-in-process and finished goods inventory
of the Company (i) is set forth on Schedule 2.17(c); (ii) is in all material
respects usable or salable, as applicable, in the ordinary course of business
(except to the extent of applicable reserves therefor contained in the Current
Financial Statements or on the Closing Balance Sheet); (iii) except for such
items acquired or produced after the Financial Statement Date, is reflected on
the Current Financial Statements at the lower of cost (with inventories being
recorded at standard cost, which approximates actual costs determined on a
first-in, first-out basis) or market in accordance with GAAP applied on a
consistent basis, with adequate provisions or adjustments having been made for
inventory obsolescence and shrinkage; and (iv) is of the type and quantity
necessary to conduct the business of the Company in a manner consistent with
past practices.
(d) All accounts receivable of the Company (i) represent amounts
receivable for goods actually delivered or services actually provided (or, in
the case of non-trade receivables, represent amounts receivable in respect of
other bona fide business transactions), (ii) to Sellers' knowledge, are not
subject to any material defenses or counterclaims, (iii) have been billed and
are generally due and payable within 30 to 60 days after billing (although
certain customers as set forth on Schedule 2.17(d) have been granted longer
terms as set forth on Schedule 2.17(d)) and (iv) are fully collectible in the
ordinary course of business except, in the case of receivables arising prior to
the Financial Statement Date, to the extent of the reserves set forth in the
Current Financial Statements and, in the case of receivables arising after such
date, to the extent of a reasonable allowance as set forth on Schedule 2.17(d)
(consistent with past practice) for bad debts. The Company has no accounts or
loans receivable from any director, officer, employee or affiliate of the
Company. Since the Financial Statement Date, the Company has collected its
accounts receivable in the ordinary course of business and in a manner
consistent with past practices and has not accelerated any such collections.
(e) The Company has no subsidiaries, and the assets of the Company
do not include any stock, partnership interest, joint venture interest or other
equity interest in any other Person.
(f) Schedule 2.17(f) sets forth a correct and complete list of the
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company maintains accounts of any
nature, the type and number of all such accounts and the names of all persons
authorized to make withdrawals therefrom.
2.18. Intellectual Property.
(a) As used herein, the term "Intellectual Property" means (1) all
patents, registered and unregistered trademarks, service marks, logos, corporate
and trade names, trade dress, logos, packaging design, slogans, domain names and
registered and unregistered copyrights, and all applications therefor, and (2)
to the extent not otherwise falling within clause (1) of this definition, all
Trade Secrets. "Trade Secrets" means trade secrets, inventions, discoveries,
invention disclosures, techniques, algorithms, data, processes, methods,
formulae, designs, computer software, confidential or proprietary information,
research in process, drawings, schematics, blueprints, flow charts, models,
strategies, prototypes, Beta testing procedures, Beta testing results, know-how
and ideas, in each case that have proprietary value arising out of their
non-public nature.
(b) Schedule 2.18 sets forth a correct and complete list of all
Intellectual Property that is owned by the Company (collectively, the "Owned
Intellectual Property"); provided, that Schedule 2.18 need not list any Owned
Intellectual Property constituting know-how, trade secrets, unregistered
copyrights or other types of Intellectual Property which, by their nature, are
not readily susceptible to finite identification and disclosure.
(c) Schedule 2.18 sets forth a list of all licenses or other
agreements pursuant to which any Person has the right to use any Owned
Intellectual Property.
(d) Schedule 2.18 sets forth a list of all licenses or other
agreements pursuant to which the Company has the right to use any Intellectual
Property owned by others (excluding "shrink wrap" or "click wrap" or similar
licenses or agreements applicable to software applications that are generally
available to the public) (such Intellectual Property, collectively, the
"Licensed Intellectual Property").
(e) The Company has the lawful right to use all of the Intellectual
Property as currently being used by it, free and clear of all Liens that are
registered at the United States Patent and Trademark Office, and, to Sellers'
knowledge, no such use infringes upon or conflicts with in any material respect
the lawful rights of any other Person, and, to Sellers' knowledge, neither the
Company nor any of its employees has misappropriated any Third Party Rights. To
Sellers' knowledge, no Person is using any Intellectual Property in a manner
which materially infringes upon the lawful rights of the Company. The Owned
Intellectual Property and the Licensed Intellectual Property (collectively, the
"Company Intellectual Property") constitutes all of the Intellectual Property
necessary for the Company to conduct its business as currently conducted.
(f) There are no pending, or, to Sellers' knowledge, threatened
claims against the Company or any of their respective former or current
employees alleging that (i) any of the Company Intellectual Property or the
business of the Company infringes or conflicts with the rights of any other
party under any patent, trademark, service xxxx, copyright, trade secret,
confidential information or other Intellectual Property ("Third Party Rights")
or (ii) the Company or any of its employees has misappropriated any Third Party
Rights. The Company has not received any communications alleging that any of the
Company Intellectual Property is invalid or unenforceable.
(g) All items of the Owned Intellectual Property which have been
issued by, or registered or the subject of an application filed with, as
applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office or
in any similar office or agency anywhere in the world are currently in
compliance with formal legal requirements (including without limitation, as
applicable, payment of filing, examination and maintenance fees, proofs of
working or use, timely post-registration filing of affidavits of use and
incontestability and renewal applications) and are valid and enforceable.
(h) No current or former employee or consultant of the Company, owns
or, to Sellers' knowledge, has claimed any rights in or to, any of the Company
Intellectual Property. To Sellers' knowledge, no employee of the Company has
entered into any agreement that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the employee to
transfer, assign or disclose information concerning his work to anyone other
than the Company.
(i) The Company (i) has not directly or indirectly licensed or
granted to anyone rights of any nature with respect to any of the Company
Intellectual Property; and (ii) is not obligated to and does not pay royalties
or other fees to anyone with respect to the ownership, use, license or transfer
of any of the Company Intellectual Property.
(j) The Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of all Trade Secrets owned or purported
to be owned or used or held for use by the Company relating to its business (the
"Company Trade Secrets"), including, without limitation, requiring each employee
and consultant with access to the Company Trade Secrets to execute a
confidentiality agreement, the general forms of which have been provided to
Buyer and, to Sellers' knowledge, there has not been any breach by any party to
such confidentiality agreements.
2.19. Title Matters. The Company has (a) good and marketable title to all
assets purported to be owned by it and (b) good leasehold title to all assets
purported to be leased by it, in each case free and clear of all liens, claims
and encumbrances of any nature whatsoever (collectively, "Liens") other than
Permitted Liens. No financing statement under the Uniform Commercial Code with
respect to any such property or assets of the Company is active in any
jurisdiction, and the Company has not signed any such active financing statement
or any security agreement authorizing any secured party thereunder to file any
such financing statement. On the Closing Date the Company's assets will be free
and clear of all Liens other than the following ("Permitted Liens"):
(i) mechanics', carriers', workmen's, repairmen's or other like
Liens arising or incurred in the ordinary course of business;
(ii) pledges or deposits to secure obligations under workmen's
compensation, social security or unemployment compensation laws or similar
legislation;
(iii) Liens for taxes that are not due and payable or that may
thereafter be paid without penalty or that are being contested in good faith by
appropriate proceedings;
(iv) until the last Applicable Redemption Date, the Trustee Security
Interests, and
(v) those Liens listed on Schedule 2.19.
2.20. Pension and Welfare Plans.
(a) Schedule 2.20 sets forth a correct and complete list of all
Pension Plans and Welfare Plans (collectively, "Plans").
(b) Each Plan and each related trust has been established,
maintained, administered and funded, if applicable, in all material respects in
compliance with ERISA, the Code and all other applicable Governmental Rules.
(c) No transaction or omission has occurred with respect to any Plan
or related trust that would reasonably be expected to subject the Company to any
Tax or penalty under ERISA, the Code or other applicable Governmental Rules.
(d) None of the Pension Plans or related trusts has any unfunded
liabilities.
(e) None of the Plans (i) is a "multiemployer plan" (as defined in
Section 3(37) of ERISA), (ii) is a "defined benefit plan" (as defined in Section
3(35) of ERISA), (iii) is subject to the minimum funding requirements of Section
302 of ERISA or Section 412 of the Code, or (iv) provides medical, health, life
insurance or other welfare-type benefits to former employees of the Company or
any ERISA Affiliate, except as required by applicable Governmental Rules,
including Section 4980B of the Code.
(f) There are no actions, suits, investigations or other proceedings
pending or, to Sellers' knowledge, threatened against any Plan or related trust
or any fiduciary thereof.
(g) There are no outstanding Governmental Orders that name any Plan
or related trust or any fiduciary thereof or are directed to any Plan or related
trust, any fiduciary thereof or any assets thereof.
(h) Each Plan and related trust that is intended to be tax-qualified
meets the requirements of a tax-qualified plan or tax-exempt trust under Section
401(a) and Section 501(a), respectively, of the Code, and has received a
favorable determination letter from the IRS as to the qualification of such Plan
and the tax-exempt status of the related trust (or has filed with the IRS a
request for such a determination letter within the applicable remedial amendment
period or is a standardized plan for which the prototype plan sponsor has
received a favorable determination letter from the IRS as to the qualification
of the standardized plan). No event has occurred which would cause any such Plan
to lose its qualified status.
(i) Each Plan that is a "Nonqualified Deferred Compensation Plan"
(as defined in Section 409A(d)(i) of the Code) is in compliance with the
requirements of Section 409A(a)(2), (3) and (4) of the Code.
(j) No Plan ever maintained by the Company or any Affiliate has ever
provided, or promised to provide, health care or any other non-pension benefits
to any employees after their employment is terminated (other than as required by
part 6 of subtitle B of title I of ERISA (COBRA)).
(k) With respect to each Plan listed on Schedule 2.20, complete and
correct copies of the following documents (if applicable to such Plan) have
previously been delivered or made available to Buyer: (i) all documents
embodying or governing such Plan, and any funding medium for the Plan
(including, without limitation, trust agreements) including all amendments; (ii)
the most recent IRS determination or approval letter and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, including all applicable schedules and
accountants' opinions; (iv) the three most recent actuarial valuation reports
completed; (v) the summary Plan description (or other descriptions of such Plan
provided to employees) and all modifications thereto; (vi) any insurance policy
(including any fiduciary liability insurance policy or fidelity bond) related to
such Plan; (vii) any registration statement or other filing made pursuant to any
federal or state securities law and (viii) all correspondence to and from any
state or federal agency.
(l) Each Plan listed in Schedule 2.20 may be amended, terminated, or
otherwise modified by the Company, to the greatest extent permitted by
applicable Governmental Rules, including the elimination of any and all future
benefit accruals under any Plan (other than (i) the Company's bonus and profit
sharing accruals to the extent accrued or reserved for on the Closing Balance
Sheet, and (ii) matching obligations under the Company's 401(k) plan for fiscal
year 2006) and no employee communications or provision of any Plan document has
failed to effectively reserve the right of the Company to so amend, terminate or
otherwise modify such Plan.
As used in this Agreement the following terms have the following meanings:
"ERISA" means the Employee Retirement Income Security Act of 1974
and the regulations promulgated thereunder, as amended.
"ERISA Affiliate" means any trade or business which, together with
the Company, is treated as a single employer under Section 4001(b)(1) of ERISA
or Sections 414(b), (c), (m) or (o) of the Code.
"Pension Plan" means any "employee pension benefit plan" as defined
in Section 3(2) of ERISA which is maintained for past or present employees of
the Company or any ERISA Affiliate or with respect to which the Company or any
ERISA Affiliate has any current or potential liability, including any withdrawal
liability.
"Welfare Plan" means (i) any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA which is maintained for past or present
employees of the Company or any ERISA Affiliate or with respect to which the
Company or any ERISA Affiliate has any current or potential liability and (ii)
any other plan or program maintained for past or present employees of the
Company, including without any limitation health insurance plan, life insurance
plan, stock option plan, stock purchase plan, bonus plan, savings plan or
severance plan, any plan or arrangement intended to comply with Code Sections
120, 125, 127, 129 or 137, deferred compensation agreements, vacation plans and
any plan to which more than one unaffiliated employee contribute.
2.21. Personnel Matters.
(a) Schedule 2.21 sets forth a correct and complete list of (i) all
directors and executive officers of the Company, (ii) all other employees of the
Company whose annual compensation (including bonuses) during the Company's
fiscal year ended December 31, 2004 was $50,000 or more, (iii) the current job
title of each such Person described in clauses (i) and (ii) above, and (iv) the
amount of compensation (including bonuses and commissions) paid to each such
Person during the Company's fiscal year ended December 31, 2004 and which each
of them is expected to receive in the Company's current fiscal year (assuming
continued employment through such period).
(b) Schedule 2.21 lists each employment or similar agreement,
written or oral, to which the Company is a party with any Person.
(c) [intentionally omitted]
(d) (i) No employee of the Company is represented by any labor union
or similar organization, (ii) the Company is not party to any collective
bargaining or similar agreement covering any of its employees and (iii) no labor
union or similar organization or group of employees has made a written demand
for recognition, filed a petition seeking a representation proceeding, given the
Company written notice of any intention to hold an election of a collective
bargaining representative or engaged in any organizing activities at any time
during the past three years.
(e) (i) No strike, work stoppage, contract dispute or other labor
disturbance involving any employees of the Company currently exists, has
occurred in the past year, or, to Sellers' knowledge, is threatened and (ii) no
investigation, action or proceeding by or before any Governmental Entity that
relates to allegedly unfair or discriminatory employment or labor practices by
the Company or the violation by the Company of any Governmental Rule relating to
employment or labor practices is pending or, to Sellers' knowledge, threatened.
(f) (i) To Sellers' knowledge, the Company has not engaged in any
unfair labor practice; (ii) the Company is in compliance, in all material
respects, with all applicable laws and regulations respecting labor, employment,
fair employment practices, work place safety and health, terms and conditions of
employment, wages and hours; (iii) the Company is not delinquent in any payments
to any employee or any independent contractor or consultant ("Contingent
Worker") for any wages, salaries, commissions, bonuses, fees or other direct
compensation due with respect to any services performed for it to the date
hereof or amounts required to be reimbursed to such employees or Contingent
Worker (provided, however, that Sellers make no representation herein regarding
any Temporary Agency Workers not directly paid by the Company); (iv) there are
no, and within the last three (3) years there have been no formal grievances,
complaints or charges with respect to employment or labor matters (including,
without limitation, allegations of employment discrimination, retaliation or
unfair labor practices) pending or, to Sellers' knowledge, threatened against
the Company in any judicial, regulatory or administrative forum, or under any
private dispute resolution procedure; (v) the Company is not, and within the
last three (3) years the Company has not been, subject to any Governmental Order
by any Governmental Entity or private settlement contract in respect of any
labor or employment matters; (vi) the Company is in material compliance with the
requirements of the Immigration Reform Control Act of 1986; (vii) all employees
are employed at-will and no employees are subject to any employment contract
with the Company; and (viii) there is no policy, plan or program of paying
severance pay or any form of severance compensation in connection with the
termination of any employee or Contingent Worker.
(g) The Company has not experienced a "plant closing," "business
closing" or "mass layoff" as defined in the Worker Adjustment and Retraining Act
of 1986 (the "WARN Act") or any similar state, local or foreign law or
regulation affecting any site of employment of the Company or one or more
facilities or operating units within any site of employment or facility of the
Company, and, during the 90-day period preceding the date hereof, no employee
has suffered an "employment loss," with respect to the Company as defined in the
WARN Act. Schedule 2.21 sets forth for each employee who has suffered such an
"employment loss" (if any) during the 90-day period preceding the date hereof
(i) the name of such employee (ii) the date of hire of such employee, (iii) such
employee's regularly scheduled hours over the six month period prior to such
"employment loss" and (iv) such employee's last job title(s), location,
assignment(s) and department(s).
(h) To the extent that any Contingent Workers are retained, the
Company has properly classified and treated them in accordance with applicable
Governmental Rules and for purposes of all employee benefit plans and
perquisites.
(i) Schedule 2.21(i) describes any material relationships that the
Company has with any temporary employment agencies, including a reasonable
description of the number and types of workers that are currently engaged by the
Company via such agencies and whose compensation is paid directly by such
agencies (collectively, "Temporary Agency Workers"). The Company is not
delinquent with respect to any payments owed to such temporary employment
agencies.
2.22. Insurance.
(a) Schedule 2.22 sets forth a correct and complete list of all
insurance policies of which the Company is the owner, insured, loss payee or
beneficiary (collectively, the "Insurance Policies") and indicates for each such
policy any pending claims thereunder.
(b) There has been no failure to give any notice or present any
material claim under any Insurance Policy in a timely fashion or as otherwise
required by such policy. All premiums under the Insurance Policies which are due
and payable have been paid in full, the Insurance Policies are in full force and
effect, in accordance with their terms, and the Company is in compliance in all
material respects with the terms of the Insurance Policies. There is no claim by
the Company pending under any such policies as to which coverage has been
questioned or disputed by the insurer. Each such insurance policy shall continue
to be in full force and effect through the date of the Closing. The Company has
not received notice of any material increase in the premium under, cancellation
or non-renewal of or disallowance of any claim under any such policy.
2.23. Other Material Business Agreements. Schedule 2.23 sets forth a
correct and complete list of all contracts, agreements, leases, licenses,
commitments and purchase orders to which the Company is a party or by which the
Company or any of its assets is bound, all of which have been delivered or made
available to Buyer (collectively, the "Business Agreements") other than (a)
Business Agreements listed on any of Schedule 2.16 through Schedule 2.22, (b)
Business Agreements involving the future payment by or to the Company, or
creating any current or future liability of the Company, of less than $100,000
over the remaining term thereof and (c) Business Agreements which constitute,
create, evidence or secure any Excluded Assets or Excluded Liabilities.
2.24. Status of Business Agreements; Required Consents.
(a) Each Business Agreement listed on any of Schedule 2.16 through
Schedule 2.23 is in full force and effect and is enforceable against the Company
and, to Sellers' knowledge, the other parties thereto, in accordance with its
terms, except to the extent that enforceability is limited by bankruptcy,
insolvency, fraudulent conveyance or other moratorium or similar laws affecting
creditors' rights and remedies or by equitable principles. The Company is in
compliance with each such Business Agreement in all material respects. To
Sellers' knowledge, all other parties to such Business Agreements are in
compliance with the terms thereof in all material respects.
(b) No consent or other action is required in order for such
Business Agreements to remain in full force and effect following the Closing.
2.25. Warranty and Product Liability.
(a) Sellers have previously delivered or made available to Buyer a
correct and complete copy or description of each standard written form of
product and service warranty given by the Company in connection with the sale of
products and services. Schedule 2.25 sets forth:
(i) the dollar amount expended by the Company in satisfying warranty
claims on account of the Company's products and services in each of calendar
years 2002, 2003 and 2004 and for the seven-month period ended July 31, 2005;
and
(ii) the dollar amount expended by the Company in satisfying product
liability claims on account of the Company's products and services in each of
calendar years 2002, 2003 and 2004 and for the seven-month period ended July 31,
2005.
(b) To Sellers' knowledge, there are no pending or threatened
product liability claims (whether sounding in tort, strict liability, breach of
warranty, failure to adequately warn or any other similar theories) against the
Company for products sold, assembled or manufactured by the Company on or prior
to the Closing Date (the "Company Products"). The Company has not received any
statements, citations, correspondence or decisions by any Governmental Entity
stating that any Company Product is defective or unsafe or fails to meet any
product warranty or any standards promulgated by any Governmental Entity. There
have been no notices of recall served on the Company by any Governmental Entity
with respect to any Company Product. To Sellers' actual knowledge, there is no
(i) fact relating to any Company Product that would impose upon the Company a
duty under applicable law to recall any Company Product or to warn customers of
a defect in any Company Product, or (ii) liability for warranty claims or
returns with respect to any Company Product except in the ordinary course of
business consistent with the past experience of the Company for such kind of
claims and liabilities.
2.26. Transactions with Related Parties. (a) None of the customers,
suppliers, distributors or sales representatives of the Company is a Related
Party; (b) none of the Company's assets are owned or used by or leased to any
Related Party; (c) no Related Party is a party to any Business Agreement; and
(d) no Related Party provides any legal, accounting or other services to the
Company except as an employee of the Company. Schedule 2.26 describes any
current relationships between the Company and any Related Party (except as an
employee of the Company).
As used in this Agreement, the following terms have the following
meanings:
"Affiliate" of a Person means any other Person who Controls, is
Controlled by or is under common Control with such Person, and "Control" means,
with respect to any Person, the direct or indirect ability to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Related Party" means (i) any Seller, (ii) any Affiliate of the
Company or any Seller, (iii) any director, officer or equity holder of the
Company or of any Affiliate of the Company or any Seller and (iv) any Affiliate
of any Person described in clause (iii) above.
2.27. Brokers. Except for the relationship with, and the payment required
to be made upon Closing to, Xxxxxx Xxxxxxxx & Co. ("Xxxxxx Xxxxxxxx") (which
payment (the "Xxxxxx Xxxxxxxx Payment") will be borne solely by Sellers and will
be paid on or prior to the Closing Date), neither the Company nor any Seller has
employed or retained, or has any liability to, any broker, agent or finder on
account of this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby, and no broker or finder is entitled
to any brokerage or finder's fee or other commissions in respect of such
transactions based upon agreements, arrangements or understandings made by or on
behalf of the Company or any Seller.
2.28. Delivery of Documents. Sellers or the Company have made available to
Buyer correct and complete copies of each Business Permit and each Business
Agreement listed on Schedule 2.16 through Schedule 2.23 (including written
descriptions in the case of any of the foregoing that are oral).
2.29 Government Contracts. The Company has (a) no obligation to
renegotiate any agreements, contracts, subcontracts or commitments with any
Governmental Entity (each a "Government Contract"), (b) been suspended, debarred
or, to Sellers' knowledge, proposed for suspension and/or debarment, voluntarily
excluded from qualifying to bid and/or bidding on or otherwise found not
responsible to bid on any Government Contract, (c) been audited or investigated
by any Governmental Entity with respect to any Government Contract and, to
Sellers' knowledge, no such audit or investigation is threatened, and (d) had a
Government Contract terminated by any Governmental Entity for default or failure
to perform in accordance with applicable standards. The Company is not a party
to any Government Contract which requires it to obtain or maintain a United
States government security clearance or a foreign government security clearance.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
3.01. Organization. Buyer is a corporation duly organized, validly
existing and in good standing in Massachusetts.
3.02. Power and Authority. Buyer has the corporate power and authority to
own its properties and assets, to conduct its business as presently conducted
and to execute, deliver and perform the Transaction Documents to which it is a
party.
3.03. Execution and Enforceability. This Agreement has been, and on the
Closing Date the other Transaction Documents to which Buyer is, or is designated
to be, a party will be, duly and validly executed and delivered by Buyer and,
assuming the due and valid authorization, execution and delivery of such
agreements by Sellers and each other party thereto constitute (or upon such
execution and delivery will constitute) legal, valid and binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance or other moratorium or similar laws affecting
creditors' rights and remedies or by equitable principles.
3.04. No Breach, Default, Violation or Consent. The execution, delivery
and performance by Buyer of the Transaction Documents to which it is a party do
not and will not:
(a) violate Buyer's articles of organization or bylaws (or
equivalent constating documents);
(b) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under, result in the creation of any Lien on any
assets of Buyer under or give to others any rights of termination, acceleration,
suspension, revocation, cancellation or amendment of, any agreement to which
Buyer is a party or by which Buyer or any of its assets is bound;
(c) breach or otherwise violate any Governmental Order which names
Buyer or is directed to Buyer or any of its assets;
(d) violate any Governmental Rule; or
(e) require any consent, authorization, approval, exemption or other
action by, or any filing, registration or qualification with, any Person, other
than such filings and approvals as are required under the HSR Act.
3.05. Brokers. Neither Buyer nor any of its affiliates has employed or
retained, or has any liability to, any broker, agent or finder on account of
this Agreement or any of the other Transaction Documents or the transactions
contemplated hereby or thereby.
3.06. Investment Representations. Buyer is purchasing the Shares for its
own account (and not as nominee or agent), for investment purposes and has no
intent to distribute or make a public offering of such Shares in violation of
applicable Governmental Rules. Buyer is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
3.07. Sufficient Funds. Buyer has cash available and/or existing committed
borrowing facilities which together are sufficient to enable it to consummate
the transactions contemplated by the Transaction Documents.
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING
4.01. Conduct of Business Prior to Closing. Except with the consent of
Buyer, at all times prior to the Closing Date, Sellers will cause the Company to
(subject to the rights of the Company and Sellers to take the actions
contemplated by Section 1.02 and Section 1.07 hereof):
(a) operate its business only in the ordinary course and consistent
with past practice;
(b) use commercially reasonable efforts to preserve its business
organization intact, to keep available the services of its present officers and
employees and to preserve the goodwill of customers, representatives,
Distributors, suppliers and others having business relations with the Company;
(c) maintain the Equipment in good repair and operating condition,
ordinary wear and tear excepted;
(d) maintain in full force and effect all Business Permits and
Insurance Policies;
(e) not enter into any contract or commitment, except those (i) with
a term of one year or less, (ii) made in the ordinary course of business, the
terms of which are consistent with past practice and reasonable in light of
current conditions and (iii) involving the future payment by or to the Company,
or creating any current or future liability of the Company, of less than
$100,000 over the term thereof;
(f) not borrow any funds or otherwise incur, whether directly or by
way of guaranty or otherwise, any Indebtedness for borrowed money;
(g) not affirmatively terminate, cause the termination of, amend,
renew or extend any Business Agreement (other than the termination of Business
Agreements that constitute, create, evidence or secure any Excluded Liabilities)
unless in each case such action is believed to be in the best interest of the
Company;
(h) not sell, lease, exchange, license, transfer or otherwise
dispose of any of its assets or any interest therein, or solicit offers in
respect of or agree to do any of the foregoing, except for sales of assets or
consumption of inventory in the ordinary course of business (and except for
dispositions of obsolete inventory or other assets that have reached the end of
their useful lives, both consistent with past practice);
(i) not incur, make, assume, permit to be created or suffer to exist
any Lien, tenancy or other matter affecting title to any of its assets other
than Permitted Liens;
(k) comply with applicable Governmental Rules in all material
respects;
(k) not merge with or into, or otherwise combine with, any other
Person;
(l) take no action, and use its reasonable commercial efforts to
prevent the occurrence of any event or the existence of any condition, which
would result in any of Sellers' representations and warranties herein not being
true and correct in all material respects;
(m) promptly inform Buyer of the occurrence of any event or the
existence of any condition which has had or is likely to have a Material Adverse
Effect;
(n) not declare or pay any dividend or make any other distribution,
in each case other than dividends or distributions paid to Sellers in cash;
(o) not make any increase in, or any commitment to increase, the
compensation, benefits or other payments payable or provided to, or to become
payable to, any officer, director, employee, Seller or agent other than in the
ordinary course of business consistent with past practice;
(p) not alter the manner of keeping its books, accounts or records
or change any of the accounting practices, principles, periods or methods used
by it, except insofar as may be required by a generally applicable change in
GAAP;
(q) not create, modify or increase any benefits under any bonus,
deferred compensation, pension, profit sharing, retirement, insurance, stock
purchase, stock option or other fringe benefit plan, arrangement or practice or
any other employee program, whether formal or informal, or pay any benefit not
required under any such plan, arrangement or practice as in effect on the date
hereof;
(r) not change the terms of any accounts receivable or cancel any
debts or waive any claims or rights of substantial value;
(s) not organize any new subsidiary or acquire any capital stock of
any Person or any equity or ownership interest in any business;
(t) not enter into or modify any employment agreement or similar
commitment;
(u) not enter into or modify, or engage in any negotiations with
respect to, any collective bargaining, union agreement or similar commitment;
(v) not make or commit to any capital expenditure or acquire any
property or assets (other than raw materials, parts and components purchased in
the ordinary course of business consistent with past practice) which,
individually or in the aggregate, exceed $50,000;
(w) not enter into any agreement or commitment that restricts the
Company from carrying on its business anywhere in the world;
(x) not pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than any payment, discharge
or satisfaction in the ordinary course of business and consistent with past
practice;
(y) not make or change any Tax election, file any amended Tax
Return, enter into any closing agreement, settle any Tax claim or assessment
relating to the Company, surrender any right to claim a refund of Taxes, consent
to any extension or waiver of the limitation period applicable to any Tax claim
or assessment relating to the Company, or take any other similar action relating
to the filing of any Tax Return or the payment of any Tax; or
(z) not agree or otherwise commit, whether in writing or otherwise,
to do any of the foregoing.
4.02. Exclusivity. Until such time as this Agreement has been terminated
as provided herein, Sellers will and will cause the Company to deal exclusively
with Buyer in connection with the proposed sale of the Shares and neither
Sellers nor the Company nor any Person acting on their behalf will directly or
indirectly solicit, initiate, encourage submission of, discuss or negotiate
with, provide any nonpublic information to or consider the merits of any
inquiries or proposals from any Person (other than Buyer) relating to any
transaction directly or indirectly involving the sale of any equity securities
or assets of the Company. Sellers agree to promptly notify Buyer of any such
proposal or offer, or any inquiry or contact with respect thereto, received by
the Company or any Seller.
4.03. Access to Information. At all times prior to the Closing Date (and
except as may be limited by applicable law or as may be necessary to preserve
applicable privileges) Sellers will furnish, or will cause the Company to
furnish, to Buyer and its representatives (a) reasonable access during normal
business hours, and upon reasonable advance prior notice, to the properties,
books and records and personnel of the Company and (b) all such information
concerning the Company as any of them may reasonably request. Notwithstanding
the foregoing, neither Buyer nor any of its agents or representatives shall, at
any time prior to the Closing Date contact any employees, customers or suppliers
of the Company except pursuant to such reasonable terms and conditions as may be
established by Sellers (which conditions may include requiring that a
representative of Seller be present during any such communication).
4.04. Notification of Changes. If, at any time prior to the Closing, any
Seller or Buyer becomes aware that any of its or his representations or
warranties set forth herein is false or misleading in any material respect
(other than as a result of changes in the ordinary course of business between
the date of execution of this Agreement and the Closing), it or he will promptly
notify the other party of the same.
4.05. Commercially Reasonable Efforts. The parties agree to use their
commercially reasonable efforts to take or cause to be taken and to do or cause
to be done all such actions and things as are necessary or advisable, or as may
be reasonably requested by the other party, in order to consummate the
transactions contemplated hereby and by the other Transaction Documents. Without
limiting the generality of the foregoing:
(a) each of the parties will (i) file (and Sellers will cause the
Company to file) a Notification and Report Form pursuant to the HSR Act with
respect to the transactions contemplated hereby no later than the next business
day after the date of execution of this Agreement, (ii) request early
termination with respect to such HSR Act filing, (iii) supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act, and (iv) otherwise use their reasonable best
efforts to cause the expiration or termination of the applicable waiting periods
under the HSR Act with respect to the transactions contemplated hereby ("HSR
Clearance") as soon as practicable; provided, that neither party will be
required to enter into any hold separate or divest agreement, to respond to a
second request, or to take similar action in connection with any filing under
the HSR Act; and
(b) the parties agree to take or cause to be taken all commercially
reasonable actions necessary in order to obtain any other consent or approval of
any third party, including any Governmental Entity, which is required in
connection with this Agreement, including without limitation the consents listed
on Schedule 2.04 if and as requested by Buyer, or the other Transaction
Documents or any of the transactions contemplated hereby or thereby. For
purposes of this Agreement, "commercially reasonable efforts" will not be deemed
to require a Person to undertake extraordinary or unreasonable measures,
including the payment of amounts in excess of normal and usual filing fees and
processing fees, if any, or other payments with respect to any Business
Agreement or Business Permit that are significant in the context of such matter
(or significant on an aggregate basis to all such matters).
4.06 FIRPTA Affidavit. At or prior to the Closing, the Company shall have
delivered to Buyer certificates, either (i) duly completed and executed pursuant
to Section 1.1445-2(b)(2) of the Treasury Regulations, certifying that each
Seller is not a "foreign person" within the meaning of Section 1445 of the Code,
or (ii) duly completed and executed pursuant to Sections 1.897-2(h) and
1.1445-2(c) of the Treasury Regulations, issued by the Company certifying that
the Shares are not United States real property interests; provided, however,
that if the certificates required under this Section 4.06 are not provided,
Buyer may withhold any required Taxes as provided in Section 1.06 of this
Agreement.
4.07 Employee Payments. On or before the Closing Date, Sellers shall cause
the Company to satisfy any and all liabilities of the Company to pay any amounts
to its employees resulting solely from the consummation of the transactions
contemplated hereby, including all Phantom Plan Payments and payments pursuant
to all Change-In-Control Agreements, and Sellers shall cause the Company to
deduct and withhold from such payments such amounts as it is required to deduct
and withhold with respect to the making of such payments under the Code or any
other applicable Tax law and to pay any Taxes of the Company resulting from such
payments.
ARTICLE V
CLOSING CONDITIONS
5.01. Conditions Precedent to Obligations of Buyer. Buyer's obligation to
proceed with the Closing is subject to the satisfaction by Sellers on or prior
to the Closing Date of each of the following conditions precedent:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Sellers set forth herein (without giving effect to any
supplements or amendments to the Disclosure Letter after the date of this
Agreement) shall be true and correct on and as of the Closing Date (other than
such representations and warranties that speak as of a specific date or time
other than the Closing Date, which need only be true and correct as of such date
or time) with the same force and effect as though made on and as of such date,
except, in any case, to the extent that any such failure to be true and correct
has not had, and would not reasonably be expected to have, a Material Adverse
Effect.
(b) Performance and Compliance. Sellers shall have performed or
complied in all material respects with each covenant and agreement to be
performed or complied with by them hereunder on or prior to the Closing Date.
(c) Consents and Approvals. Sellers or the Company, as applicable,
shall have obtained or made each consent, authorization, approval, exemption,
filing, registration or qualification listed on Schedule 5.01(c) (the "Closing
Condition Consents") hereto, relating to Business Agreements or Business
Permits.
(d) HSR Clearance. Any applicable waiting period (and any extension
thereof) under the HSR Act relating to the transactions contemplated hereby
shall have expired or been terminated.
(e) Litigation. There shall be no pending or threatened action by or
before any Governmental Entity seeking to restrain, prohibit or invalidate any
of the transactions contemplated by this Agreement or the Transaction Documents
or seeking monetary relief against Buyer or the Company by reason of the
consummation of such transactions, and there will not be in effect any
Governmental Order which has such effect.
(f) Material Adverse Effect. No event will have occurred after the
date hereof and no condition will exist which has had a Material Adverse Effect
(it being acknowledged and agreed that the determination of whether there has
occurred a Material Adverse Effect shall not be affected by any update to the
Disclosure Letter as permitted by the introductory paragraph to Article II
hereof).
(g) Opinion of Counsel. Sellers will have delivered to Buyer an
opinion of Sellers' counsel dated the Closing Date and in form and substance
reasonably satisfactory to Buyer and its counsel.
(h) Other Transaction Documents. Sellers and any other parties
thereto (other than Buyer) shall have executed and delivered or made available
to Buyer the Escrow Agreement and the Bond Release and Escrow Agreement (the
Escrow Agreement, together with the Real Property Transfer Agreement (as defined
below), the "Transaction Documents").
(i) Share Certificates. Sellers will have delivered to Buyer the
certificates evidencing the Shares, together with stock powers duly endorsed in
blank.
(j) Sellers Bringdown Certificate. Sellers shall have delivered to
Buyer a certificate of Sellers dated as of the Closing Date to the effect that
the conditions set forth in paragraph (a) through (f) above in this Section 5.01
have been satisfied (the "Sellers' Bringdown Certificate").
(k) Good Standing Certificate. Buyer shall have received a
certificate of the Secretary of State of the Commonwealth of Pennsylvania as to
the legal existence and good standing of the Company in Pennsylvania.
(l) Secretary's Certificate. Buyer shall have received a certificate
of the Secretary of the Company dated the Closing Date and certifying to Buyer
(i) that correct and complete copies of its organizational documents are
attached thereto, and (ii) the incumbency and signatures of the officers of the
Company authorized to execute and deliver the Transaction Documents on behalf of
the Company.
(m) Resignations. Buyer shall have received resignations of each
director and each officer of the Company, such resignations to be effective as
of the Closing.
(n) Real Property Transfer Agreement. Sellers shall have caused DRP
to have executed and delivered to Buyer (or Buyer's nominee) the instrument
attached hereto as Exhibit D (the "Real Property Transfer Agreement") pursuant
to which the Leased Real Property is to be transferred to Buyer (or Buyer's
nominee).
(o) Payoff Letters. Buyer shall have received payoff letter(s), in
customary form, from the Company's lenders with respect to all Indebtedness of
the Company (or other reasonably satisfactory evidence of outstanding
indebtedness in the case of Indebtedness secured by an indenture or the
equivalent).
(p) Termination of Agreements: The following agreements shall have
been terminated (i) the Phantom Plan, (ii) that certain Stockholder Agreement
among the Company, Xxxx X. Xxxxx and Xxxxx X. Xxxxxxx dated December 30, 1993,
(iv) that certain Restricted Stock Agreement between the Company and Xxxxx X.
Xxxxxxx dated February 27, 2004, and (v) that certain agreement between the
Company and Xxxx X. Xxxxx dated June 1, 1994, providing for continuation of
salary and other benefits to Xx. Xxxxx'x family upon his death.
(q) Title Insurance Policy. Sellers shall have arranged for issuance
of a title insurance commitment for the Leased Real Property (with the
premium(s) therefore being at Buyer's expense), in form and substance reasonably
acceptable to Buyer, and with all exceptions listed therein reasonably
acceptable to Buyer, whether or not such exceptions constitute Real Property
Permitted Liens hereunder.
5.02. Conditions Precedent to Obligations of Sellers. Sellers' obligation
to proceed with the Closing is subject to the satisfaction by Buyer on or prior
to the Closing Date of each of the following conditions precedent:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Buyer set forth herein shall be true and correct on and as of
the Closing Date (other than such representations and warranties that speak as
of a specific date or time other than the Closing Date, which need only be true
and correct as of such date or time) with the same force and effect as though
made on and as of such date, except, in any case, to the extent that any such
failure to be true and correct has not had, and would not reasonably be expected
to have, a Buyer Material Adverse Effect.
(b) Performance and Compliance. Buyer shall have performed or
complied in all material respects with each covenant and agreement to be
performed or complied with by it hereunder on or prior to the Closing Date.
(c) Consents and Approvals. Buyer shall have obtained or made each
consent, authorization, approval, exemption, filing, registration or
qualification, if any, necessary (under applicable Governmental Rules or
otherwise) for Buyer to execute, deliver and perform the Transaction Documents,
including the Closing Condition Consents.
(d) HSR Clearance. Any applicable waiting period (and any extension
thereof) under the HSR Act relating to the transactions contemplated hereby
shall have expired or been terminated.
(e) Litigation. There shall be no pending or threatened action by or
before any Governmental Entity seeking to restrain, prohibit or invalidate any
of the transactions contemplated by the Transaction Documents or seeking
monetary relief against any Seller by reason of the consummation of such
transactions, and there will not be in effect any Governmental Order which has
such effect.
(f) Secretary's Certificate. Buyer will have delivered to Sellers a
certificate of its Secretary dated the Closing Date and certifying to Sellers
(i) that correct and complete copies of its organizational documents are
attached thereto, (ii) that correct and complete copies of each resolution of
its board of directors approving the Transaction Documents and authorizing the
execution thereof and the consummation of the transactions contemplated thereby
are attached thereto and (iii) the incumbency and signatures of the officers of
Buyer authorized to execute and deliver the Transaction Documents on behalf of
Buyer.
(g) Other Transaction Documents. Buyer and any other parties thereto
(other than Sellers) will have executed and delivered to Sellers each of the
Transaction Documents to which Buyer and such other parties are a party. PNC
will have executed and delivered to Sellers the Bond Release and Escrow
Agreement.
(h) Purchase Price. Buyer will have delivered to the Escrow Agent
the Escrow Fund, to the Bond Escrow Account the Post-Closing Bond Defeasance
Amount and to Sellers the remainder of the Purchase Price.
(i) Real Property Purchase Price. Buyer will have executed and
delivered to Dormont Realty Partners, L.P. the Real Property Transfer Agreement,
shall have paid to Dormont Realty Partners, L.P. the purchase price specified in
such Real Property Transfer Agreement, and Buyer shall have paid one-half of any
realty transfer taxes arising out of the transactions contemplated thereby.
(j) Buyers' Bringdown Certificate. Buyer shall have delivered to
Sellers a certificate of Buyer dated as of the Closing Date to the effect that
the conditions set forth in paragraph (a) through (e) above in this Section 5.02
have been satisfied (the "Buyer's Bringdown Certificate").
ARTICLE VI
CERTAIN POST-CLOSING MATTERS
6.01. Non-Competition and Non-Solicitation.
(a) During the three-year period commencing with the Closing Date
(the "Restricted Period"), no Seller and none of such Seller's Affiliates may
(i) engage in any Competing Business or (ii) own, be employed by, provide
financing to, consult with or otherwise render services to any Person who is
engaged in any Competing Business; provided, that the ownership of an equity
interest of not more than 2% in a publicly traded entity that is engaged in a
Competing Business is not a violation of this covenant so long as such Person
has no active participation in the business of such entity.
(b) During the Restricted Period, no Seller and none of such
Seller's Affiliates shall solicit or induce any employee, customer,
representative, Distributor, agent or contractor of Buyer, the Company or any of
their respective Affiliates to terminate his or its employment or other
relationship with Buyer, the Company or any of their respective Affiliates;
provided, that the foregoing shall not be deemed to prevent any Person from
soliciting or hiring any such employee pursuant to a public general
advertisement that is not directed at such employees.
(c) If any Seller is in breach of any of the provisions of
subsections (a) or (b) above, then the time periods set forth in such
subsections, as they relate to such Seller, will be extended by the length of
time during which such Seller is in breach of any of such provisions.
(d) Sellers acknowledge and agree that Buyer would be irreparably
damaged if any of the provisions of this Section are not performed in accordance
with their specific terms or are otherwise breached. Accordingly, Sellers agree
that Buyer is entitled to an injunction or injunctions to prevent breaches of
this Section and has the right to specifically enforce this Section against each
Seller in addition to any other remedy to which Buyer may be entitled hereunder,
at law or in equity.
(e) The parties hereto agree that the duration and geographic scope
of the non-competition and non-solicitation provisions set forth in this Section
6.01 are reasonable. In the event that any court of competent jurisdiction
determines that the duration or the geographic scope, or both, are unreasonable
and that such provisions are to that extent unenforceable, the parties hereto
agree that the provisions shall remain in full force and effect for the greatest
time period and in the greatest area that would not render them unenforceable.
The parties intend that these non-competition and non-solicitation provisions
shall be deemed to be a series of separate covenants, one for each and every
county of each and every state of the United States of America and each and
every political subdivision of each and every country outside the United States
of America where these provisions are intended to be effective.
As used in this Agreement the following terms have the following meanings:
"Competing Business" means the manufacture, marketing or sale of
products or services that are (i) competitive with any Products and (ii)
directly or indirectly marketed or sold in the Territory.
"Product" means any product or service which the Company is
marketing and selling immediately prior to the Closing Date or which the Company
has marketed or sold in the three years preceding the Closing Date or which the
Company has, in the twelve-months preceding the Closing Date, committed
substantial resources to developing for sale.
"Territory" means any state in the United States, any Canadian
province and any foreign country, in each case in which the Company is marketing
or selling any Products on the Closing Date.
6.02 Access to Information. After the Closing, Buyer will cause the
Company to make available to Sellers upon request, for any proper purpose, any
and all books and records of the Company existing on the Closing Date; provided,
that such access will be upon reasonable prior notice, during normal business
hours, at Sellers' expense and conducted in a manner so as not to unreasonably
interfere with the Company's business. Buyer will cause the Company to hold all
of such books and records for a period of seven years from the Closing Date
unless, at least 60 days prior to disposing of the same, Buyer offers in writing
to surrender them to Sellers.
6.03. Directors' and Officers' Indemnification and Insurance. For a period
of six years from the Closing Date Buyer will cause the Company to indemnify,
defend and hold harmless the past and existing directors and officers of the
Company, and other persons entitled to indemnification by the Company under the
Pennsylvania Business Corporation Law and the charter and bylaws of the Company
as in effect on the date hereof, to the same extent that such persons are
entitled to indemnification under such laws, and the Company's charter and
bylaws as in effect on the date hereof. Buyer will cause the Company to include
and maintain in effect in its charter and bylaws provisions regarding limitation
of liability and indemnification of directors, officers and other persons which
are at least as favorable to such persons as those contained in the charter and
bylaws of the Company on the date hereof for a period of six years from the
Closing Date.
6.04 Certain Tax Matters.
(a) For purposes of this Section 6.04 the following terms shall have
the following meanings:
"Income Tax" means all federal, state and local income taxes that
are measured by income, together with any interest, penalties or
additions to tax imposed with respect thereto.
"Income Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Income Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
"Post-Closing Tax Period" means any taxable period beginning after
the Closing Date.
"Pre-Closing Tax Period" means any taxable period ending on or
before the Closing Date.
"Straddle Period" means any taxable period or portion thereof
beginning before and ending after the Closing Date.
"Tax Proceeding" any action, arbitration, audit, hearing,
litigation, or suit (whether civil, criminal, administrative or
investigative) commenced, brought, conducted, or heard by or before
any Governmental Authority or arbitrator and involving Taxes.
(b) Sellers' Liability. Sellers will be solely responsible for the
following Taxes (collectively, the "Pre-Closing Tax Liabilities"), but only to
the extent such Taxes (in the aggregate) exceed the accruals or reserves
therefor (other than (i) accruals or reserves for deferred Taxes and (ii) the
Section 1374 Reserve), if any, included on the Closing Balance Sheet:
(i) all Taxes imposed upon Sellers with respect to the
Company's operations and all Taxes imposed on the Company with respect to
Pre-Closing Tax Periods;
(ii) with respect to Straddle Periods (if any), all Taxes
imposed upon the Company which are allocable, pursuant to Section 6.04(d), to
the portion of such taxable year or period ending on the Closing Date;
(iii) any Taxes for any Pre-Closing Tax Period, and any Taxes
with respect to a Straddle Period which are allocable, pursuant to Section
6.04(d), to the portion of such taxable year or period ending on the Closing
Date, for which the Company has any liability under Treasury Regulation Section
1.1502-6 or under any comparable or similar provision of state, local or foreign
laws, as a transferee or successor, or pursuant to any contractual obligation ;
and
(iv) any Taxes attributable to the making of a Section
338(h)(10) Election, including, but not limited to any Tax imposed under Section
1.338(h)(10) of the Treasury Regulations; provided, however, that Sellers shall
have no obligation to pay directly or reimburse to Buyer or the Company any Tax
imposed under Section 1374 of the Code (or any corresponding provision of state,
local, or foreign Tax law) as a result of the Section 338(h)(10) Election (the
"Section 1374 Amount") except to the extent that there is a determination, as
defined in Section 1313 of the Code or an agreed upon settlement with the
applicable Taxing authority (in either case, a "Final Section 1374
Determination"), that the Section 1374 Amount exceeds the Section 1374 Reserve,
in which case Sellers shall be liable solely for such excess.
(c) Buyer's Liability. Buyer will be solely responsible for any and
all Taxes (collectively, the "Post-Closing Tax Liabilities") of, or payable by,
the Company which do not constitute Pre-Closing Tax Liabilities, including in
the case of a Straddle Period, all Taxes imposed upon the Company which are
allocable pursuant to Section 6.04(d) to the portion of such taxable year or
period commencing after the Closing Date. If there is a Final Section 1374
Determination that the Section 1374 Amount is less than the Section 1374
Reserve, then Buyer shall promptly notify Sellers thereof and pay to Sellers (in
accordance with their Pro Rata Shares) the difference.
(d) Apportionment of Taxes. In order to apportion appropriately any
Taxes relating to any taxable year or period that includes a Straddle Period,
the parties will, to the extent permitted under applicable laws, elect with the
relevant Tax authority or agency to treat for all purposes the Closing Date as
the last day of the taxable year or period of the Company. Any Taxes for a
Straddle Period shall be apportioned for purposes of this Section 6.04(d),
between the portion of the period ending on the Closing Date and the portion of
the period commencing on the day immediately following the Closing Date based on
the actual operations of the Company during such portions of the periods. For
purposes of computing the Taxes attributable to the two portions of a taxable
period pursuant to this Section 6.04(d), the amount of any item that is taken
into account only once for each taxable period (e.g., the benefit of graduated
tax rates, exemption amounts, etc.) shall be allocated between the two portions
of the period in proportion to the number of days in each portion.
(e) Preparation of Tax Returns.
(i) Sellers will prepare and file (or cause to be prepared and
filed) in a timely manner the Income Tax Returns required to be filed by the
Company (after giving effect to any valid extensions of the due date for filing
any such Income Tax Returns) for any Pre-Closing Tax Periods and all other Tax
Returns due on or before the Closing Date. Sellers will timely pay (or cause to
be timely paid) all Taxes shown as due and owing on all such Tax Returns.
(ii) Buyer will prepare and file (or cause to be prepared and
filed) in a timely manner all other Tax Returns of the Company; provided, that
Buyer shall submit Tax Returns with respect to a Straddle Period to Sellers with
a proposed allocation of the Taxes for which Sellers are responsible pursuant to
Section 6.04(b) with respect to such Straddle Period (the "Sellers' Straddle
Period Allocation"), for review and approval, at least 30 days prior to the
filing date (after giving effect to any valid extensions). Buyer will pay (or
cause to be paid) all Taxes shown as due and owing by the Company on all such
Tax Returns. Within 15 days after receipt of the Tax Returns relating to a
Straddle Period, Sellers shall deliver to Buyer written notice of any
disagreement with respect to the Tax Returns or the calculation of Sellers'
Straddle Period Allocation. Buyer and Sellers shall attempt to resolve any
disputes with respect to such Tax Returns or calculations; provided that if they
are unable to do so within 15 days after delivery of notice of the disagreement,
such disputed items shall be submitted to an independent accounting firm of
recognized national or regional standing mutually acceptable to Buyer and
Sellers for final resolution or, if they cannot agree, a Big Four accounting
firm chosen by lot (after elimination of those Big Four accounting firms having
relationships with the parties). Each of Buyer and Sellers will be afforded the
opportunity to present to such accounting firm any material related to the
determination and to discuss the determination with such accountants. The
determination by such accounting firm will be conclusive and binding upon the
parties. The fees and expenses of such accounting firm will be shared equally by
Sellers and Buyer. Sellers shall pay to Buyer on or before the date which is the
later of three business days before the due date of the final Tax Return for the
Straddle Period (after giving effect to any valid extensions), or five days
after the final determination thereof (per the above), the amount of the Tax
liability for the Straddle Period that Sellers are responsible for as determined
in Section 6.04(b) and this Section 6.04(e). All Tax Returns with respect to a
Straddle Period or a Pre-Closing Tax Period shall be prepared in a manner
consistent with past practices of the Company.
(f) Other Covenants. Buyer and Sellers shall not take, nor shall
Buyer cause or permit the Company to take, any action or omit to take any action
(other than actions specifically contemplated hereby) which could increase the
liability of the other party in connection with any Taxes under this Agreement.
Neither Buyer nor any Affiliate thereof shall amend, refile or otherwise modify,
or cause or permit the Company to amend, refile or otherwise modify, any Tax
election or Tax Return with respect to any Pre-Closing Tax Period or Straddle
Period without the prior written consent of Sellers, which shall not be
unreasonably withheld. Sellers shall be entitled to all refunds, if any,
attributable to Taxes for any Pre-Closing Tax Period for which Sellers otherwise
bear responsibility under Section 6.04(b), and Buyer shall deliver such refunds
to Sellers as promptly as possible upon receipt. Buyer shall, if Sellers so
requests and at Sellers' expense, cause the Company to file for and use its
reasonable best efforts to obtain and expedite any claim for (and any receipt
of) any refund to which Sellers are entitled under this Section 6.04(f).
(g) Contests.
(i) Buyer will immediately notify Sellers in writing of any
proposed assessment or claim or the commencement of any Tax Proceeding which, if
determined adversely, could result in a liability to Sellers under this
Agreement or which could cause an adjustment in the Tax liability of Sellers or
their Affiliates. Sellers will immediately notify Buyer in writing of any
proposed assessment or claim or the commencement of any Tax Proceeding which, if
determined adversely, could affect the determination of Taxes to which the
Company may be subject in or for Post-Closing Tax Periods, but only to the
extent that Sellers are notified thereof. In each case, such notice shall
contain factual information to the extent known, describing the asserted Tax
liability in reasonable detail, and shall include copies of any notice or other
document received from any Tax authority in respect of any such asserted Tax
liability.
(ii) In the case of a Tax Proceeding that relates to any
Pre-Closing Tax Period, Sellers will have the right at their own expense to
control the conduct of such Tax Proceeding including settling or compromising
the issue or matter except if such settlement or compromise affects the Tax
liability of the Company for any Post-Closing Tax Period, in which case no
settlement or compromise shall be made without the consent of Buyer, which shall
not be unreasonably withheld. If Sellers elect to direct such Tax Proceeding,
Sellers shall, within 30 days of its becoming aware of any Tax Proceeding,
notify Buyer of Sellers' intent to do so, and Buyer shall cooperate and shall
cause the Company to fully cooperate, at Sellers' expense, in each phase of the
Tax Proceeding. If Sellers elect not to direct such Tax Proceeding, Buyer or the
Company, as applicable, may assume control of such Tax Proceeding (at Buyer's
expense); provided, however, in such case, Buyer shall provide Sellers with a
timely and reasonably detailed account of each phase of the Tax Proceeding, and
neither Buyer nor the Company may settle or compromise any asserted liability
without the prior written consent of Sellers, which shall not be unreasonably
withheld. In any event, Sellers may participate, at their own expense, in any
Tax Proceeding related to any Pre-Closing Tax Period, and Buyer may participate,
at its own expense, in any Tax Proceeding related to any Taxes which could
affect the determination of Taxes to which the Company may be subject in or for
any Post-Closing Tax Period.
(iii) In the case of any Tax Proceeding that relates to any
Tax for any Straddle Period, Sellers may elect to direct and control, through
counsel of their own choosing, such audit or Proceeding, except that Sellers may
not settle or compromise the issue or matter if such settlement or compromise
affects the Tax liability of the Straddle Period allocated to the Company under
Section 6.04(d), without the consent of Buyer, which shall not be unreasonably
withheld. If Sellers elect to direct such Tax Proceeding, Sellers shall, within
30 days of their becoming aware of any such Tax Proceeding, notify Buyer of
Sellers' intent to do so, and Buyer shall cooperate and shall cause the Company
to fully cooperate, at Sellers' expense, in each phase of the Tax Proceeding. If
Sellers elect not to direct such Tax Proceeding, Buyer or the Company, as
applicable, may assume control of such Tax Proceeding (at Buyer's expense);
provided, however, in such case, Buyer shall provide Sellers with a timely and
reasonably detailed account of each phase of the Tax Proceeding, and neither
Buyer nor the Company may settle or compromise any asserted liability without
the prior written consent of Sellers, which shall not be unreasonably withheld.
In any event, Sellers may participate, at their own expense, in any Tax
Proceeding related to a Straddle Period. Except as provided otherwise in this
Section 6.04(g), Buyer will control, at its own expense, any and all Tax
Proceedings of the Company.
(h) Cooperation. Sellers and Buyer shall provide each other, at no
charge, with such cooperation and information as any of them reasonably may
request of the other (and Buyer shall cause the Company to provide such
cooperation and information) in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes or participating in or conducting any Tax Proceeding. Buyer and Sellers
shall preserve and cause to be preserved all information, returns, books,
records and documents relating to any liabilities for Taxes with respect to a
taxable period, until the later of the expiration of all applicable statutes of
limitation and extensions thereof, or the conclusion of all litigation with
respect to Taxes for such period.
(i) Section 338(h)(10) Election. The Company and each Seller will
join with Buyer in making an election under Section 338(h)(10) of the Code (and
any corresponding election under state, local and foreign Tax law) with respect
to the purchase and sale of Shares hereunder (a "Section 338(h)(10) Election").
The Company, each Seller and Buyer shall be jointly responsible for preparing
and timely filing any forms used to make a Section 338(h)(10) Election,
including the joint preparation and filing of IRS Form 8023 and related
schedules. Such forms shall be filed timely following the Closing Date. Sellers
shall sign, and shall cause the Company to sign, prior to or at the Closing, all
federal and state forms used to make a Section 338(h)(10) Election requiring
their signatures, which forms shall be held in escrow by Xxxxxx Xxxxxx Xxxxxxxxx
Xxxx and Xxxx LLP and thereafter filed by Buyer and Sellers as described in the
preceding sentence. Sellers will provide, and will cause the Company to provide,
Buyer with any information regarding the Company as is necessary for Buyer to
complete IRS Form 8883 and any supplements thereto. As soon as reasonably
practicable after the Closing Date, Buyer will provide Sellers with an
allocation of the Purchase Price among the assets of the Company as determined
by a third-party appraisal firm mutually acceptable to Buyer and Sellers (the
"Section 1060 Allocation"), and Sellers shall have a reasonable opportunity to
review and comment on the Section 1060 Allocation. Buyer shall complete Form
8883 taking into account the Section 1060 Allocation. Buyer will provide a copy
of the completed Form 8883 to the Company and Sellers. Buyer shall be
responsible for filing the Form 8023. Each of the Company, Sellers and Buyer
shall be responsible for filing the Form 8883 with the appropriate Tax Returns.
None of the Company, Sellers or Buyer will take any position (whether in audits,
Tax Returns or otherwise) that is inconsistent with the Section 1060 Allocation
unless required to do so by applicable law.
6.05 WARN Act. Buyer shall not carry out, within 90 days following the
Closing Date, any plant closing or mass layoff which would require prior notice
pursuant to the federal WARN Act or pursuant to any similar state or foreign
statute at any facility of the Company.
ARTICLE VII
INDEMNIFICATION
7.01. Indemnification by Sellers. Subject to the express limitations set
forth in this Article VII (and except as otherwise set forth in Section
7.06(d)), each Seller, individually, and not jointly or severally, will defend,
indemnify and hold harmless Buyer, its Affiliates and (after the Closing) the
Company and their respective equity holders, directors, officers, employees and
agents (each a "Seller Indemnitee") from and against and in respect of such
Seller's Pro Rata Share of any and all claims, damages, losses, liabilities,
judgments, fines, penalties, costs and expenses (including reasonable attorneys'
fees, disbursements and expenses of attorneys, accountants and consultants and
court costs) sustained, suffered or incurred by (collectively, "Losses") any
Seller Indemnitee that arise out of or result from:
(a) any breach of any representation or warranty made by any Seller
in this Agreement or in any Transaction Document or in the Sellers' Bringdown
Certificate (a "Seller Warranty Breach");
(b) any breach of any covenant or agreement made by any Seller or
the Company in this Agreement or in any Transaction Document;
(c) notwithstanding whether there is a breach of any of the
representations and warranties set forth in Article II hereof (including without
limitation, Section 2.08), any Pre-Closing Tax Liabilities for which Sellers are
responsible under Section 6.04(b);
(d) any Excluded Liabilities; or
(e) the failure by Sellers to cause all of the Then Outstanding
Bonds to be redeemed in their entirety and all remaining Trustee Security
Interests to be released, in each case, by the date that is 90 days following
the Closing Date.
7.02. Indemnification by Buyer. Buyer will defend, indemnify and hold
harmless Sellers and their respective equity holders, directors, officers,
employees and agents (each a "Buyer Indemnitee") from and against any and all
Losses that arise out of or result from:
(a) any breach of any representation or warranty made by Buyer in
this Agreement or in any Transaction Document or in the Buyer's Bringdown
Certificate (a "Buyer Warranty Breach"); or
(b) any breach of any covenant or agreement made by Buyer in this
Agreement or in any Transaction Document.
7.03. Third Party Claims. If any investigation, action or other proceeding
(each a "Proceeding") is initiated against any Seller Indemnitee or Buyer
Indemnitee (each an "Indemnitee") by any third party and such Indemnitee intends
to seek indemnification from Sellers or Buyer (each an "Indemnitor"), as
applicable, under this Article VII on account of its involvement in such
Proceeding, then such Indemnitee will give prompt notice (a "Claim Notice") to
the applicable Indemnitor of such Proceeding; provided, that the failure to so
notify such Indemnitor will not relieve such Indemnitor of its obligations under
this Article VII except to the extent Indemnitor is materially prejudiced
thereby. Upon receipt of any such Claim Notice, such Indemnitor shall be
entitled to assume the defense of such proceeding, in which case it shall give
notice thereof to the Indemnitee within ten business days of Indemnitor's
receipt of such Claim Notice and shall diligently defend against such Proceeding
on behalf of such Indemnitee at its own expense (subject to the limitations set
forth herein) using counsel reasonably acceptable to such Indemnitee; provided,
that if such Indemnitor declines to so assume such defense or if a diligent good
faith defense is not being or ceases to be conducted by such Indemnitor, or such
Indemnitee has been advised by counsel that it may have defenses available to it
which are different from or in addition to those available to such Indemnitor,
or that its interests in such Proceeding are adverse to such Indemnitor's
interests, then such Indemnitee may defend against such Proceeding at such
Indemnitor's expense (subject to the limitations set forth herein). Such
Indemnitor or Indemnitee, as applicable, may participate in any Proceeding being
defended against by the other at its own expense, and will not settle any
Proceeding without the prior consent of the other, which consent will not be
unreasonably withheld; provided, that the consent of an Indemnitor is not
required if such Indemnitor declined (or failed to give timely notice of its
intent to) assume the defense of Indemnitee in the Proceeding that is being
settled. Such Indemnitor and Indemnitee will cooperate with each other in the
conduct of any such Proceeding, and Indemnitor and Indemnitee shall make
available all information and assistance that the Indemnitor and Indemnitee, as
applicable, may reasonably request.
7.04. Notice and Satisfaction of Indemnification Claims.
(a) All indemnification claims against Sellers shall be satisfied
first out of the Escrow Fund before proceeding against any Seller individually.
(b) No indemnification claim will be deemed to have been asserted
until the applicable Indemnitor has been given notice by the Indemnitee of the
amount of such claim and specific facts giving rise to such claim and the
purported basis for such claim under this Agreement (the "Notice of Claim"). If
the Indemnitee is not Buyer or a Seller, then such notice will be given on
behalf of such Indemnitee by Buyer or Sellers, as applicable. If within thirty
(30) days after receiving the Notice of Claim the Indemnitor does not give
written notice to the Indemnitee regarding its position with respect to such
indemnity claim (such a failure to give notice, a "Default Objection"), then the
indemnity claim set forth in the Notice of Claim shall be deemed to have been
objected to in its entirety. If the Indemnitor provides written notice to the
Indemnitee within such 30 day period that it contests such indemnity in whole or
in part, the parties shall attempt in good faith to reach an agreement with
regard thereto within thirty (30) days of delivery of the Indemnitor's notice.
If the parties cannot reach agreement within such 30 day period or if there is a
Default Objection, the matter shall be submitted to J.A.M.S./Endispute, Inc. for
arbitration pursuant to Section 8.12.
7.05. Duration of Certain Indemnification Obligations. Claims for
indemnification under Sections 7.01(a) and 7.02(a) may only be asserted within
the following time periods:
(a) claims arising out of any Seller Warranty Breach under Section
2.01 (Organization and Qualification), Section 2.02 (Power and Authority),
Section 2.03 (Execution and Enforceability), clauses (a) or (c) of Section 2.04
(No Breach, Default, Violation or Consent), Section 2.05 (Title to Shares),
Section 2.06 (Capitalization, Phantom Equity), Section 2.08 (Tax Matters) and
Section 2.27 (Brokers) (collectively, "Sellers' Fundamental Warranties"), or out
of any Buyer Warranty Breach under Section 3.01 (Organization), Section 3.02
(Power and Authority), Section 3.03 (Execution and Enforceability), clauses (a)
or (c) of Section 3.04 (No Breach, Default, Violation or Consent) or Section
3.05 (Brokers) (collectively, "Buyer's Fundamental Warranties"), shall not be
limited as to time;
(b) claims arising out of any Seller Warranty Breach under Section
2.15 (Environmental Matters), Section 2.20 (Pension and Welfare Plans), or
Section 2.25 (Warranty and Product Liability) may be asserted for a period of 36
months after the Closing Date, provided that any claim for indemnification as to
which a Notice of Claim has been given prior to the expiration of the 36th month
after the Closing Date shall survive such expiration until final resolution of
such claim; and
(c) claims arising out of or in connection with (i) any Seller
Warranty Breach not covered by Section 7.05(b), other than with respect to
Sellers' Fundamental Warranties, or (ii) any Buyer Warranty Breach other than
with respect to Buyer's Fundamental Warranties, may be asserted for a period of
18 months after the Closing Date, provided that any claim for indemnification as
to which a Notice of Claim has been given prior to the expiration of the 18th
month after the Closing Date shall survive such expiration until final
resolution of such claim.
7.06. Indemnification Basket and Cap.
(a) Notwithstanding any other provision hereof, no Indemnitor will
have any indemnification obligations under Section 7.01(a) (other than a Seller
Warranty Breach involving any of Sellers' Fundamental Warranties) or Section
7.02(a) (other than a Buyer Warranty Breach involving any of Buyer's Fundamental
Warranties) unless and until the claims asserted against such Indemnitor
thereunder exceed $472,500 in the aggregate (the "Basket Amount"); thereafter,
such Indemnitor will (subject to the other limitations set forth herein) be
liable for all indemnification claims properly asserted against it, except for
those constituting the Basket Amount.
(b) Sellers' indemnification obligations under Section 7.01(a) with
respect to breaches of representations and warranties other than Sellers'
Fundamental Warranties, will be capped at Eighteen Million Nine Hundred Thousand
U.S. Dollars ($18,900,000).
(c) The representations of each Seller in Section 2.05 concerning
the ownership of his Shares are individual and not joint or several obligations.
This means that the particular Seller making the representation in Section 2.05
shall be solely responsible for any Losses resulting from any breach of such
representation with respect to Shares purported to be owned by him. Except for
the foregoing, each Seller will only be liable to Seller Indemnitees for his Pro
Rata Share of any indemnification obligations under this Article VII.
(d) In no event shall either Sellers' indemnification obligations
under this Agreement exceed his Pro Rata Share of the Purchase Price. In no
event shall Buyer's indemnification obligations under this Agreement exceed the
Purchase Price.
7.07. Other Limitations and Indemnity Provisions.
(a) Notwithstanding anything herein to the contrary, and for the
avoidance of any doubt, Seller Indemnitees shall be entitled to
dollar-for-dollar indemnification from the first dollar and shall not be subject
to the Basket Amount, or the representation and warranty cap in Section 7.06(b),
or any limitation as to time in seeking indemnification with respect to any of
the following:
(i) Losses described in or arising under Sections 7.01(b),
(c), (d) or (e); and
(ii) Losses described in or arising under Section 7.01(a) with
respect to breaches of Sellers' Fundamental Warranties.
(b) Notwithstanding anything herein to the contrary, and for the
avoidance of any doubt, Buyer Indemnitees shall be entitled to dollar-for-dollar
indemnification from the first dollar and shall not be subject to the Basket
Amount, or the representation and warranty cap in Section 7.06(c), or any
limitation as to time in seeking indemnification with respect to any of the
following:
(i) Losses described in or arising under Sections 7.02(b); and
(ii) Losses described in or arising under Section 7.02(a) with
respect to breaches of Buyer's Fundamental Warranties.
(c) No Indemnitee will be entitled to recover from an Indemnitor for
any Losses as to which indemnification is provided under this Agreement, any
amount in excess of actual damages, court costs and reasonable attorney fees
suffered by such party, and the parties waive any right to assert (other than to
the extent that such amounts have been incurred as Losses vis-a-vis a
third-party) consequential, special, punitive or exemplary damages arising in
connection with or with respect to the indemnification provisions hereof.
(d) Any payment made by an Indemnitor to an Indemnitee pursuant to
this Article in respect of any claim will be net of any insurance proceeds
actually realized by and paid to the Indemnitee in respect of such claim.
(e) Each Person entitled to indemnification hereunder shall seek
recovery under all insurance policies covering any claim to the extent it would
if such claim were not subject to indemnification hereunder, and no Indemnitee
shall terminate, permit to terminate (including, in the case of the post-Closing
Company, by failing to pay assessments for prior periods under the Raffles
insurance arrangement), or cancel any insurance coverage in effect for periods
prior to Closing.
7.08. Exclusive Remedy. Except for (i) such equitable remedies as may be
available to enforce the provisions of Sections 6.01, 8.02 and 8.07, and (ii)
claims based on actual fraud or intentional misrepresentation, the
indemnifications under this Article are the parties' sole and exclusive
remedies, each against the other, with respect to matters arising under this
Agreement or the Transaction Documents of any kind or nature. The parties hereby
waive and release any other rights, remedies, causes of action or claims arising
under this Agreement, of any kind or nature.
7.09. Tax Treatment. Any indemnification payments under this Article will
be treated, for Tax purposes, as adjustments to the Purchase Price.
ARTICLE VIII
GENERAL PROVISIONS
8.01. Assignment. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned, pledged or otherwise transferred by any
party, whether by operation of law or otherwise, without the prior consent of
the other party or parties; provided, that Buyer may assign its rights hereunder
to an Affiliate so long as such Affiliate executes a joinder hereto in form and
substance reasonably acceptable to Sellers and Buyer remains liable hereunder.
8.02. Confidentiality.
(a) As used in this Section, the "Confidential Information" of a
party means all information concerning or related to the business, operations,
financial condition or prospects of such party or any of its Affiliates,
regardless of the form in which such information appears and whether or not such
information has been reduced to a tangible form, and specifically includes (i)
all information regarding the officers, directors, employees, equity holders,
customers, suppliers, representatives, Distributors and licensees of such party
and its Affiliates, in each case whether present or prospective, (ii) all
inventions, discoveries, trade secrets, processes, techniques, methods,
formulae, ideas and know-how of such party and its Affiliates, (iii) all
financial statements, audit reports, budgets and business plans or forecasts of
such party and its Affiliates, (iv) all strategic, business and marketing plans,
product plans and specifications, financial and pricing information, sales
volumes and methods, existing and proposed strategic and alliance agreements,
current and potential customer information, (v) all manufacturing processes and
methods (including processes and methods disclosed or observed in connection
with any access given to Company facilities), (v) information regarding
equipment and vendors, and (vi) the Transaction Documents and the transactions
contemplated thereby; provided, that the Confidential Information of a party
does not include (A) information which is or becomes generally known to the
public through no act or omission of the other party and (B) information which
hereafter is lawfully obtained by the other party from a source other than the
party to whom such Confidential Information belongs (or any of its Affiliates or
their respective officers, directors, employees, equity holders or agents) so
long as, in the case of information obtained from a third party, such third
party was or is not, directly or indirectly, subject to an obligation of
confidentiality owed to the party to whom such Confidential Information belongs
or any of its Affiliates at the time such Confidential Information was or is
disclosed to the other party.
(b) Except as otherwise permitted by subsection (c) below, each
party agrees that it will not, without the prior written consent of the other
party, disclose or use for its own benefit any Confidential Information of the
other party.
(c) Notwithstanding subsection (b) above, each of the parties is
permitted to:
(i) disclose Confidential Information of the other party to
its officers, directors, employees, equity holders, lenders, agents and
Affiliates, but only to the extent reasonably necessary in order for such party
to perform its obligations and exercise its rights and remedies under this
Agreement, and such party will take all such actions as are necessary or
desirable in order to ensure that each of such Persons maintains the
confidentiality of any Confidential Information that is so disclosed;
(ii) make additional disclosures of or use for its own benefit
Confidential Information of the other party, but only if and to the extent that
such disclosures or use are specifically contemplated by this Agreement; and
(iii) disclose Confidential Information of the other party to
the extent, but only to the extent, required by Governmental Rules; provided,
that prior to making any disclosure pursuant to this subsection, the disclosing
party will notify the affected party of the same, and the affected party will
have the right to participate with the disclosing party in determining the
amount and type of Confidential Information of the affected party, if any, which
must be disclosed in order to comply with Governmental Rules.
8.03. Expenses. Except as otherwise specifically provided herein or in any
other Transaction Document, each party is responsible for such expenses as it
may incur in connection with the negotiation, preparation, execution, delivery,
performance and enforcement of the Transaction Documents; provided, that (A) any
sales Tax, transfer Tax or similar Tax payable as a result of the transactions
contemplated hereby (other than pursuant to the Real Property Transfer Agreement
which Tax will be payable one-half by Buyer and one-half by Sellers) will be
paid by Buyer, and (B) one-half of the filing fees payable under the HSR Act
will be paid each by Buyer and Sellers.
8.04. Further Assurances. The parties will from time to time do and
perform such additional acts and execute and deliver or make available such
additional documents and instruments as may be required by applicable
Governmental Rules or reasonably requested by any party to establish, maintain
or protect its rights and remedies or to effect the intents and purposes of this
Agreement and the other Transaction Documents.
8.05. Knowledge Parties. References in this Agreement to Sellers'
knowledge or words of similar import mean the actual knowledge of Xxxx X. Xxxxx,
Xxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx, and
Xxxxxxx X. Xxxxx, in each case after due inquiry.
8.06. Notices. Unless otherwise specifically provided herein, all notices,
consents, requests, demands and other communications required or permitted
hereunder: (a) will be in writing; (b) will be sent by messenger, certified or
registered U.S. mail, a reliable express delivery service or telecopier (with a
copy sent by one of the foregoing means), charges prepaid as applicable, to the
appropriate address(es) or number(s) set forth below; and (c) will be deemed to
have been given on the date of receipt by the addressee (or, if the date of
receipt is not a business day, on the first business day after the date of
receipt), as evidenced by (i) a receipt executed by the addressee (or a
responsible Person in his or her office), the records of the Person delivering
such communication or a notice to the effect that such addressee refused to
claim or accept such communication, if sent by messenger, U.S. mail or express
delivery service, or (ii) a receipt generated by the sender's telecopier showing
that such communication was sent to the appropriate number on a specified date,
if sent by telecopier. All such communications will be sent to the following
addresses or numbers, or to such other addresses or numbers as any party may
inform the others by giving five business days' prior notice:
If to Sellers: With a copy to:
Xxxx X. Xxxxx, Xxxxx & Xxxxxxx, P.C.
000 Xxxxxxx Xxxx 00 Xxxxxxx Xx., 00xx Xxxxx
Xxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxxxx, Esq.
FAX No.: (000) 000-0000
And
Xxxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
If to Buyer or Buyer Parent: With a copy to:
Xxxxx Regulator Co. Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
c/x Xxxxx Water Technologies, Inc. 00 Xxxxx Xx.
000 Xxxxxxxx Xxxxxx Xxxxxx, XX 00000
Xxxxx Xxxxxxx, XX 00000 Attn: Xxxxx X. Xxxxx, Esq.
Attn: General Counsel FAX No.: 000-000-0000
FAX No.: 000-000-0000
8.07. Publicity. Neither party will make any press release or other public
announcement regarding this Agreement or the other Transaction Documents or any
transaction contemplated hereby or thereby until the text of such release or
announcement has been submitted to the other party and the other party has
consented to and approved the same.
8.08. Termination.
(a) This Agreement may be terminated at any time prior to the
Closing:
(i) by mutual agreement of Buyer and Sellers;
(ii) by Sellers, if any of the conditions in Section 5.02
shall not have been fulfilled by the Outside Date), or shall have become
incapable of fulfillment by the Outside Date (other than through the failure of
Sellers to comply fully with any of their obligations under this Agreement) and
such conditions shall not have been waived by Sellers;
(iii) by Buyer, if any of the conditions set forth in Section
5.01 shall not have been fulfilled by the Outside Date, or shall have become
incapable of fulfillment by the Outside Date (other than through the failure of
Buyer to comply fully with its obligations under this Agreement) and such
conditions shall not have been waived by Buyer.
(b) If this Agreement is terminated by either Sellers or Buyer as
provided above, then neither party will have any further obligations or
liabilities hereunder except for obligations or liabilities arising from a
breach of this Agreement prior to such termination or which survive such
termination by their own terms.
8.09. Disclosure Schedules.
(a) Any disclosure under one of the Schedules shall be deemed
disclosed under another Schedule only to the extent it would be reasonably
apparent from a reading of the disclosure that such disclosure would be
applicable to such other Schedule. Disclosure of any matter in the Disclosure
Letter shall not constitute an expression of a view (and shall not imply) that
such matter is required to be disclosed pursuant to this Agreement.
(b) To the extent that any representation or warranty set forth in
this Agreement is qualified by the materiality of the matter(s) to which the
representation or warranty relates, the inclusion of any matter in the
Disclosure Letter does not constitute a determination by Sellers or the Company
that any such matter is material. The disclosure of any information concerning a
matter in the Disclosure Letter does not imply that any other, undisclosed
matter that has a greater significance or value is material.
8.10. Definitions and Construction. Unless this Agreement expressly
provides otherwise, each definition herein applies (i) for purposes of this
entire Agreement, and (ii) to both the singular and plural forms (and other
grammatical variations) of the defined term. Unless the context indicates
otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms "including",
"includes", "include" and words of like import shall be construed broadly as if
followed by the words "without limitation". The terms "herein", "hereunder",
"hereof" and words of like import refer to this entire Agreement instead of just
the provision in which they are found. This Agreement shall not be construed
strictly against the drafter (and any rule of construction to that effect shall
not be applied). All monetary amounts stated herein are U.S. dollars.
8.11. Miscellaneous. This Agreement: (a) may be amended only by a writing
signed by each of the parties; (b) may be executed in several counterparts, each
of which is deemed an original but all of which constitute one and the same
instrument, and delivery of an executed counterpart by fax or e-mail shall be
equally effective as delivery of a manually executed counterpart of this
Agreement; (c) together with the other Transaction Documents, contains the
entire agreement of the parties with respect to the transactions contemplated
hereby and thereby and supersedes all prior written and oral agreements, and all
contemporaneous oral agreements, relating to such transactions; (d) is governed
by, and will be construed and enforced in accordance with, the laws of the
Commonwealth of Pennsylvania, without giving effect to any conflict of laws
rules; and (f) is binding upon, and will inure to the benefit of, the parties
and their respective heirs, successors and permitted assigns. The due
performance or observance by a party of any of its obligations under this
Agreement may be waived only by a writing signed by the party against whom
enforcement of such waiver is sought, and any such waiver will be effective only
to the extent specifically set forth in such writing. The waiver by a party of
any breach or violation of any provision of this Agreement will not operate as,
or be construed to be, a waiver of any subsequent breach or violation hereof.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability, without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
8.12. Dispute Resolution.
(a) Except with respect to injunctive relief, which may be sought in
a court of competent jurisdiction, as more specifically set forth below, all
disputes, claims or controversies arising out of or relating to this Agreement
or any other agreement executed and delivered pursuant to this Agreement or the
negotiation, validity or performance hereof and thereof or the transactions
contemplated hereby and thereby that are not resolved by mutual agreement shall
be resolved solely and exclusively by binding arbitration to be conducted before
J.A.M.S./Endispute, Inc. or its successor. The arbitration shall be held in New
York, New York before a single arbitrator and shall be conducted in accordance
with the rules and regulations promulgated by J.A.M.S./Endispute, Inc. unless
specifically modified herein.
(b) The parties covenant and agree that the arbitration shall
commence within ninety (90) days of the date on which any party files a written
demand for arbitration hereto. In connection with the arbitration proceeding,
the arbitrator shall have the power to order the production of documents by each
party and any third-party witnesses. In addition, each party may take up to
three depositions as of right, and the arbitrator may in his or her discretion
allow additional depositions upon good cause shown by the moving party. However,
the arbitrator shall not have the power to order the answering of
interrogatories or the response to requests for admission. In connection with
any arbitration, each party shall provide to the other, no later than seven (7)
business days before the date of the arbitration, the identity of all persons
that may testify at the arbitration and a copy of all documents that may be
introduced at the arbitration or considered or used by a party's witness or
expert. The arbitrator's decision and award shall be made and delivered within
six (6) months of the selection of the arbitrator. The arbitrator's decision
shall set forth a reasoned basis for any award of damages or finding of
liability. The arbitrator shall not have the power to award damages in excess of
actual compensatory damages and shall not multiply actual damages or award
punitive damages or any other damages that are specifically excluded under this
Agreement, and each party hereby irrevocably waives any claim to such damages.
(c) The parties covenant and agree that they will participate in the
arbitration in good faith, that they will share equally the fees and expenses of
J.A.M.S./Endispute, Inc. and that they will each bear their own attorneys' fees
and expenses, except as otherwise provided herein. The arbitrator may in his or
her discretion assess costs and expenses (including the reasonable attorneys'
fees and expenses of the prevailing party) against any party to a proceeding.
Any party unsuccessfully refusing to comply with an order of the arbitrators
shall be liable for costs and expenses, including attorneys' fees, incurred by
the other party in enforcing the award. This Section 8.12 applies equally to
requests for temporary, preliminary or permanent injunctive relief, except that
in the case of temporary or preliminary injunctive relief any party may proceed
in court without prior arbitration for the limited purpose of avoiding immediate
and irreparable harm. The provisions of this Section 8.12 shall be enforceable
in any court of competent jurisdiction. The prevailing party in any action for
injunctive relief will be entitled to payment of reasonable attorneys' fees and
expenses.
(d) Each of the parties hereto irrevocably and unconditionally
consents to the exclusive jurisdiction of J.A.M.S./Endispute, Inc. to resolve
all disputes, claims or controversies arising out of or relating to this
Agreement or any other agreement executed and delivered pursuant to this
Agreement or the negotiation, validity or performance hereof and thereof or the
transactions contemplated hereby and thereby and further consents to the
jurisdiction of the courts of New York for the purposes of enforcing the
arbitration provisions of this Section 8.12. Each party further irrevocably
waives any objection to proceeding before J.A.M.S./Endispute, Inc. based upon
lack of personal jurisdiction or to the laying of the venue and further
irrevocably and unconditionally waives and agrees not to make a claim in any
court that arbitration before J.A.M.S./Endispute, Inc. has been brought in an
inconvenient forum. Each of the parties hereto hereby consents to service of
process by registered mail at the address to which notices are to be given. Each
of the parties hereto agrees that its or his submission to jurisdiction and its
or his consent to service of process by mail are made for the express benefit of
the other parties hereto.
8.13 Equitable Relief. Sellers acknowledge and agree that the Company's
business is unique and that the damages that may result from any wrongful
failure of Sellers to consummate the transactions contemplated by this Agreement
and that damages at law would be inadequate for such failure or breach.
Accordingly, the Company and Sellers acknowledge that Buyer will be entitled to
specific performance, an injunction or other appropriate equitable relief in
connection with any such failure or breach. Sellers further acknowledge and
agree that this Section 8.13 shall not, and shall not be deemed to, limit in any
way any other rights or remedies which Buyer may have at law or otherwise due to
such failure or breach.
8.14 Parent Guaranty. Buyer Parent hereby fully and unconditionally
guarantees the performance by Buyer of its obligations under this Agreement in
each case for as long as and to the extent that such obligations of Buyer
survive under the terms hereof.
[Signature Page Follows]
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
SELLERS
/s/ Xxxx X. Xxxxx
---------------------------------
Xxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxxx
---------------------------------
Xxxxx X. Xxxxxxx
XXXXX REGULATOR CO.
By: /s/ Xxxxxxx X. X'Xxxxx
-----------------------------
Name: Xxxxxxx X. X'Xxxxx
---------------------------
Title: Chief Executive Officer
--------------------------
XXXXX WATER TECHNOLOGIES, INC.*
By: /s/ Xxxxxxx X. X'Xxxxx
-----------------------------
Name: Xxxxxxx X. X'Xxxxx
---------------------------
Title: Chief Executive Officer
--------------------------
* Solely for purposes of Section 8.14 hereof.
