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Exhibit 2.1
STOCK PURCHASE AGREEMENT
DATED
MAY 13, 1999
BETWEEN
THE MONARCH MACHINE TOOL COMPANY
AND
THE STOCKHOLDERS OF
PRECISION INDUSTRIAL CORPORATION
REGARDING THE STOCK OF
PRECISION INDUSTRIAL CORPORATION
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TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE OF SHARES......................................................................1
1.1. Purchase of Shares....................................................................1
1.2. Purchase Price........................................................................1
ARTICLE II THE CLOSING AND THE STOCK ISSUANCE......................................................3
2.1. Time and Place of Closing.............................................................3
2.2. Selling Stockholders' Actions at Closing..............................................3
2.3. Buyer's Actions at Closing............................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES..........................................................6
3.1. Selling Stockholders' Individual Representations and Warranties.......................6
3.2. Selling Stockholders' Joint Representations and Warranties............................7
3.3. Buyer's Representations and Warranties...............................................19
3.4. Remedy for Breaches of Representations and Warranties................................22
ARTICLE IV ACTIONS PRIOR TO THE CLOSING...........................................................23
4.1. Activities Until Closing Date........................................................23
4.2. Financing............................................................................25
4.3. HSR Act Filings......................................................................25
4.4. No Interference with Employee Relationships..........................................26
4.5. Selling Stockholders' Efforts to Fulfill Conditions..................................26
4.6. Buyer's Efforts to Fulfill Conditions................................................26
ARTICLE V CONDITIONS PRECEDENT TO CLOSING........................................................26
5.1. Conditions to Buyer's Obligations....................................................26
5.2. Conditions to Selling Stockholders' Obligations......................................29
ARTICLE VI TERMINATION............................................................................31
6.1. Right to Terminate...................................................................31
6.2. Effect of Termination................................................................34
ARTICLE VII INDEMNIFICATION........................................................................35
7.1. Indemnification Against Loss Due to Inaccuracies in Selling
Stockholders' Representations and Warranties.........................................35
7.2. Indemnification Against Loss Due to Inaccuracies in Buyer's
Representations and Warranties.......................................................35
7.3. Indemnification Against Liabilities with Regard to Previously Sold
Companies............................................................................36
7.4. Tax Indemnification..................................................................36
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TABLE OF CONTENTS
(CONTINUED)
PAGE
7.5. Limitation on Liabilities of Selling Stockholders....................................38
7.6. Indemnification Sole Remedy..........................................................38
7.7. Computation of Loss..................................................................39
7.9. Procedure Regarding Third Party Claims...............................................40
7.10. Buyer's Right to Withhold Stock Consideration........................................41
7.11. Apportionment of Liability Among Selling Stockholders................................42
ARTICLE VIII ABSENCE OF BROKERS.....................................................................43
8.1. Representations and Warranties Regarding Brokers and Others..........................43
ARTICLE IX STOCKHOLDERS REPRESENTATIVE............................................................44
9.1. Appointment of Stockholders Representative...........................................44
ARTICLE X GENERAL................................................................................45
10.1. Expenses.............................................................................45
10.2. Access to Properties, Books and Records..............................................45
10.3. Press Releases.......................................................................48
10.4. Entire Agreement.....................................................................48
10.5. Captions.............................................................................49
10.6. Assignments..........................................................................49
10.7. Notices and Other Communications.....................................................49
10.8. Governing Law........................................................................50
10.9. Amendments...........................................................................50
10.10. Counterparts.........................................................................50
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STOCK PURCHASE AGREEMENT
This is an agreement dated May 13, 1999 between The Monarch Machine
Tool Company (the "Buyer"), an Ohio corporation, and the persons listed on A
(the "Selling Stockholders") relating to the purchase by the Buyer from the
Selling Stockholders of all the outstanding capital stock of Precision
Industrial Corporation (the "Company"), a Delaware corporation, which capital
stock is comprised of (giving effect to exercise of currently outstanding
options) a total of 551,818 shares of Class A Voting Common Stock, par value
$.01 per share, and 1,173,282 shares of Class B Non-Voting Common Stock, par
value $.01 per share (collectively, the "Shares"):
ARTICLE I
PURCHASE OF SHARES
1.1. Purchase of Shares. At the Closing described in Paragraph 2.1, the
Buyer will purchase from each Selling Stockholder the number of Shares of each
class shown opposite the name of that Selling Stockholder in Exhibit A, and each
Selling Stockholder will sell those Shares to the Buyer, free and clear of any
liens, encumbrances or claims of other persons, other than liens or encumbrances
imposed by reason of acts of the Buyer.
1.2. Purchase Price. (a) The purchase price (the "Purchase Price") to
be paid by the Buyer for all the Shares will be (i) (t) $54,900,000 plus (u)
$19,000,000, minus (v) the indebtedness of the Company for borrowed money at the
Closing Date (the "Closing Date Indebtedness"), plus (w) the cash on hand at the
Closing Date, minus (x) any of the cash on hand at the Closing Date which is
subject to a trust to fund a deferred compensation arrangement, minus (y) any of
the cash on hand which is held in escrow in connection with the sale of Salem
Furnace Company, minus (z) any amount by which the consolidated working capital
of the Company and its subsidiaries at the Closing Date, calculated as provided
in subparagraph (c), (the "Closing Date Working Capital") is less than
$3,500,000 (together, the "Cash Portion" of the Purchase Price), plus (ii)
500,000 shares (the "Stock Consideration") of common stock, no par value, of the
Buyer ("Buyer Common Stock"), plus (iii) the Special Subordinated Note described
in subparagraph (b).
(b) To the extent that by the Closing Date, the Company has not
sold the assets or received the payments listed on Exhibit 1.2-B(1) (the
"Non-Operating Assets"), at the Closing, the Buyer will issue to the Selling
Stockholders a senior subordinated note (the "Special Subordinated Note")
substantially in the form of Exhibit 1.2-B(2) in a principal amount equal to the
values shown on Exhibit 1.2-B(1) for the Non-Operating Assets which have not
been sold or received.
(c) For the purposes of this Paragraph, the consolidated working
capital of the Company and its subsidiaries at the Closing Date will be their
consolidated current assets (excluding cash on hand, other than cash on hand
held in escrow to fund a deferred compensation arrangement, and excluding
Non-Operating Assets), minus their consolidated current liabilities (other than
(u) short term borrowings, (v) the current portion of long term debt, (w) any
liabilities which are payable with funds held in escrow, or any liabilities
which are secured by a $350,000 letter of credit, in connection with the sale of
Salem Furnace Co., (y) any accruals for severance compensation to Xxxxxxx Xxxxxx
III ("Xxxxxx") and (z) any accruals for
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expenses as a result of the transactions which are the subject of this
Agreement), calculated in accordance with generally accepted accounting
principles ("GAAP") applied in the same manner the Company applies them in
preparing its financial statements, as shown on a consolidated balance sheet of
the Company and its subsidiaries at the Closing Date certified by the chief
financial officer of the Company to have been prepared in accordance with GAAP
and to present fairly the consolidated financial position (including the
consolidated working capital, calculated as provided above) of the Company and
its subsidiaries at the Closing Date (the "Closing Date Balance Sheet"). The
Buyer will cause the Company's chief financial officer to prepare the Closing
Date Balance Sheet and deliver copies to the Stockholders Representative
described in Paragraph 9.1 and to the Buyer as soon as practicable after the
Closing Date. For the purpose of determining the cash payment to be made at the
Closing, 48 hours before the Closing, the chief financial officer of the Company
will deliver to the Buyer and the Stockholders Representative an estimate of
what the consolidated working capital of the Company and its subsidiaries shown
on the Closing Date Balance Sheet (calculated as provided above) will be, and
what the amount of the wire transfer described in Paragraph 2.3(a) will be based
upon an assumption that the consolidated working capital shown on the Closing
Date Balance Sheet will be 90% of the sum shown on the estimate. Promptly after
the Closing Date Balance Sheet is delivered to the Stockholders Representative,
the Buyer will pay any additional cash amount (or the Selling Stockholders will
refund any excess cash amount) due because the consolidated working capital
shown on the Closing Date Balance Sheet is different from 90% of the sum shown
on the estimate, plus interest on the amount paid at 10% per annum from the
Closing Date to the payment date.
ARTICLE II
THE CLOSING AND THE STOCK ISSUANCE
2.1. Time and Place of Closing. The closing (the "Closing") of the
purchase of the Shares will take place at the offices of Xxxxxx & Xxxxx, 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 A.M. New York City time, on the day
(the "Closing Date") which is the last to occur of (i) July 1, 1999, (ii) the
first day on which all the conditions in Paragraphs 5.1 and 5.2, other than
conditions relating to occurrences which are to take place on the Closing Date,
have been fulfilled and (iii) the third business day after the day on which all
waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000
(xxx "XXX Xxx") expire or are terminated.
2.2. Selling Stockholders' Actions at Closing. At the Closing, the
Selling Stockholders will deliver to the Buyer the following:
(a) The certificates representing all the Shares, endorsed or
accompanied by documents of assignment which comply with the requirements of
Section 8-401 of the Uniform Commercial Code as in effect in Delaware (but
without any requirement of signature guarantees).
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(b) A document by which each Selling Stockholder acknowledges that
he, she or it is aware that the Buyer Common Stock included in the Stock
Consideration (i) has not been registered under the Securities Act of 1933, as
amended (the "Securities Act") and may not be sold or transferred other than in
a transaction which is registered under that Act or is exempt from the
registration requirements of that Act and (ii) is subject to the Agreement
Regarding Shares described in Paragraph 2.3(d) and may not be sold or
transferred other than as provided in the Agreement Regarding Shares.
2.3. Buyer's Actions at Closing. At the Closing, the Buyer will deliver
to the Stockholders Representative described in Paragraph 9.1 the following:
(a) Evidence of a wire transfer of immediately available funds in
an amount equal to the Cash Portion of the Purchase Price, calculated as
provided in Paragraph 1.2, to an account specified at least 48 hours before the
Closing by the Stockholders Representative.
(b) A letter acknowledging that the Buyer will be acquiring the
Shares for investment, and not with a view to their resale or distribution.
(c) A certificate representing the 500,000 shares of Stock
Consideration, registered in the name of the Stockholders Representative, or
such other name as the Stockholders Representative may specify to the Buyer at
least 48 hours before the Closing. That certificate may bear legends to the
effect that the shares it represents (i) have not been registered under the
Securities Act and may not be sold or transferred other than in a transaction
which is registered under that Act or is exempt from the registration
requirements of that Act, and (ii) are subject to the Agreement Regarding Shares
described in subparagraph (d) and may not be sold or transferred other than as
provided in the Agreement Regarding Shares.
(d) An agreement (the "Agreement Regarding Shares"), executed by
the Buyer, in which the Buyer agrees that: (i) At the request of the
Stockholders Representative made on or after the first anniversary of the
Closing Date, the Buyer will issue, in exchange for the certificate registered
in the name of the Stockholders Representative described in subparagraph (c) or
the replacement certificate described in Paragraph 7.10, separate certificates,
registered in the names of the respective Selling Stockholders, with the number
of shares represented by the certificate registered in the name of each Selling
Stockholder being (x) the total number of shares represented by the certificate
the Stockholders Representative presents for exchange, divided by (y) 1,725,100,
times (z) the number of Shares the Selling Stockholder sold to the Buyer as
shown on Exhibit A (with cash in lieu of fractional shares based on the Fair
Value of the Buyer Common Stock (calculated as provided in Paragraph 7.10) on
the first anniversary of the Closing Date.
(ii) When shares of Buyer Common Stock are delivered as
described in subparagraph (i), resales of that Buyer Common Stock by the Selling
Stockholders will have been registered under the Securities Act, and the
registration statement relating to those resales will be effective.
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(iii) The Buyer will keep the registration statement described
in subparagraph (ii) effective and available with regard to resales of Buyer
Common Stock by the Selling Stockholders until at least the second anniversary
of the Closing Date, or until such earlier time as all the Buyer Common Stock
delivered to Selling Stockholders under this Agreement has been sold or counsel
to the Company has delivered to the Stockholders Representative an opinion that
all the Buyer Common Stock which is still owned by Selling Stockholders may be
sold without registration under the Securities Act, and the Buyer will do all
other things which are required so the Selling Stockholders will at all times be
able to resell the Buyer Common Stock they receive without violating the
Securities Act.
(e) If applicable, the Special Subordinated Note.
(f) If applicable, the Seller Subordinated Notes and Warrants
described in Paragraph 6.1(e).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
ARTICLE IV
4.1. Selling Stockholders' Individual Representations and Warranties.
Each Selling Stockholder represents and warrants to the Buyer, as to himself,
herself or itself, but not as to any other Selling Stockholder, as follows:
(a) The Selling Stockholder has all power and authority necessary
to enable him, her or it to enter into this Agreement and carry out the
transactions contemplated by this Agreement. Any corporate, partnership or other
actions necessary to authorize the Selling Stockholder to enter into this
Agreement and carry out the transactions contemplated by it have been taken.
This Agreement has been duly executed by the Selling Stockholder and is a valid
and binding agreement of the Selling Stockholder, enforceable against the
Selling Stockholder in accordance with its terms.
(b) Neither the execution or delivery of this Agreement or of any
document to be delivered in accordance with this Agreement nor the consummation
of the transactions contemplated by this Agreement or by any document to be
delivered in accordance with this Agreement will violate, result in a breach of,
or constitute a default (or an event which, with notice or lapse of time or both
would constitute a default) under, the Certificate of Incorporation, by-laws,
partnership agreement or other organizational or governing documents of the
Selling Stockholder, if any, any agreement or instrument to which the Selling
Stockholder or any subsidiary of the Selling Stockholder is a party or by which
any of them is bound, any law, or any order, rule or regulation of any court or
governmental agency or other regulatory organization having jurisdiction over
the Selling Stockholder or any of its subsidiaries.
(c) The Selling Stockholder owns all the Shares he, she or it will
be selling to the Buyer as shown on Exhibit A, free and clear of any liens,
encumbrances or claims of other persons (except that 50,000 shares to be sold by
Xxxxxx X. Xxxxxxx ("Xxxxxxx") are the subject of options which have not been
exercised at the date of this Agreement, but will be exercised at or before the
Closing), and the Selling Stockholder has full authority to sell those Shares as
contemplated by this Agreement. Except for the Stockholder Agreements listed on
Exhibit 3.1-
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C, the Selling Stockholder has not granted any option or right, and is not a
party to any other agreement, which requires, or upon the passage of time, the
payment of money, or the occurrence of any other event, may require the Selling
Stockholder to transfer any of those Shares to anyone other than the Buyer. When
the Buyer acquires Shares from the Selling Stockholder as contemplated by this
Agreement, the Buyer will become the owner of those Shares, free and clear of
any liens, encumbrances or claims of other persons, other than liens or
encumbrances imposed by reason of acts of the Buyer.
4.2. Selling Stockholders' Joint Representation and Warranties. The
Selling Stockholders, jointly and severally, represent and warrant to the Buyer
as follows:
(a) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Copies of the Certificate of Incorporation and all
amendments, and of the by-laws, of the Company, as currently in effect, are
attached as Exhibit 3.2-A(1). The Company and each of its subsidiaries is
qualified to do business as a foreign corporation in each state in which it is
required to be qualified, except states in which the failure to qualify, in the
aggregate, would not have a material adverse effect upon the Company and it
subsidiaries, taken as a whole. Exhibit 3.2-A(2) is a list of all the
jurisdictions in which the Company and each of its subsidiaries is qualified to
do business as a foreign corporation on the date of this Agreement. Whenever any
representation or warranty of the Selling Stockholders (other than the
representation and warranty in subparagraph (g)) contains an exception or
limitation relating to "materiality," "material adverse" events or omissions,
"material adverse effects" or similar concepts (collectively, "Materiality
Tests"), the Materiality Tests will be deemed to have been met (i.e., the event
or omission will be deemed to be "material," "materially adverse," have a
"material adverse effect" or otherwise meet a similar test), and the
representation or warranty will be deemed to have been breached, if the event or
omission results in an adverse impact with respect to the Company's assets of
$200,000 or more or an adverse impact with respect to the Company's consolidated
earnings of $200,000 or more; and (ii) whenever any representation or warranty
of the Buyer contains a Materiality Test, that representation or warranty will
be deemed to have been breached if the event or omission which is the subject of
the representation or warranty results in an adverse impact with respect to the
Selling Stockholders of $200,000 or more.
(b) If the consents listed on Exhibit 3.2-B are obtained, neither
the execution or delivery of this Agreement or of any document to be delivered
in accordance with this Agreement nor the consummation of the transactions
contemplated by this Agreement or by any document to be delivered in accordance
with this Agreement will violate, result in a breach of, or constitute a default
(or an event which, with notice or lapse of time or both would constitute a
default) under, the Certificate of Incorporation or by-laws of the Company or
any of its subsidiaries, any agreement or instrument to which the Company or any
subsidiary of the Company is a party or by which any of them is bound, any law,
or any order, rule or regulation of any court or governmental agency or other
regulatory organization having jurisdiction over the Company or any of its
subsidiaries.
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(c) The only authorized stock of the Company consists of 554,605
shares of Class A Voting Common Stock, par value $.01 per share, 1,465,395
shares of Class B Non-Voting Common Stock, par value $.01 per share, and 90,000
shares of Preferred Stock, par value $.01 per share, of which 551,818, shares,
1,173,282 shares and no shares, respectively are issued and outstanding
(including 50,000 shares which are the subject of options which have not yet
been exercised, but will be exercised by the Closing Date and are included in
the Shares listed on Exhibit A). On the Closing Date, the Shares will constitute
100% of the outstanding stock of the Company. Each of the Shares has been duly
authorized and issued and is fully paid and nonassessable. Except as shown on
Exhibit 3.2-C, the Company has not issued any options, warrants or convertible
or exchangeable securities, and is not a party to any other agreements, which
require, or upon the passage of time, the payment of money or the occurrence of
any other event may require, the Company to sell or issue any of its stock.
(d) No governmental filings, authorizations, approvals or
consents, or other governmental action with regard to the Company or any of its
subsidiaries, other than the termination or expiration of waiting periods under
the HSR Act, are required to permit the Selling Stockholders to fulfill all
their obligations under this Agreement.
(e) Exhibit 3.2-E is a complete list of all the corporations and
other entities of which the Company owns directly or indirectly 50% or more of
the equity (each corporation or other entity of which the Company owns directly
or indirectly 50% or more of the equity being a "subsidiary" of the Company) and
all corporations and other entities of which the Company owns directly or
indirectly an equity interest of between 20% and 50%. Except as shown on Exhibit
3.2-E, the Company owns all the outstanding shares of, or other equity interests
in, each of its subsidiaries. Each of the shares owned by the Company of each of
its subsidiaries which is a corporation has been duly authorized and validly
issued and is fully paid and nonassessable. Neither the Company nor any of its
subsidiaries has issued any options, warrants or convertible or exchangeable
securities, or is a party to any other agreements, which require, or upon the
passage of time, the payment of money or the occurrence of any other event may
require, the Company or any subsidiary to transfer to anyone or issue any stock
of, or other equity interest in, any subsidiary.
(f) The consolidated financial statements of the Company and its
subsidiaries at December 31, 1996, March 31, 1997 and March 31, 1998, and for
the three month, three month and one year periods ended on those dates, and
unaudited consolidated financial statements at March 31, 1999 and for the year
ended on that date, copies of which are included in Exhibit 3.2-F, were prepared
in accordance with GAAP applied on a consistent basis and present fairly the
consolidated financial condition and results of operations of the Company and
its subsidiaries at the dates, and for the periods, to which they relate (except
that the financial statements at March 31, 1999 and for the year ended on that
date are without footnotes and are subject to year end adjustments). The Balance
Sheet at March 31, 1999 included in Exhibit 3.2-F is referred to in this
Agreement as the "Balance Sheet."
(g) Since March 31, 1999 (i) there has not been any material
adverse change in the consolidated financial condition or results of operations
of the Company and its subsidiaries compared with the consolidated financial
condition of the Company and its subsidiaries at March 31, 1999, or the
consolidated results of operations of the Company and its subsidiaries for the
comparable period of the prior year, (ii) the Company and its subsidiaries have
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conducted their businesses in the ordinary course and in the same manner in
which they were being conducted on March 31, 1999, and (iii) there has not been
any material adverse change, or any event of which any of the persons listed on
Exhibit 3.2-G (each a "Management Person") is aware which could reasonably be
expected to cause a material adverse change, in the business, operations,
properties, prospects or condition (financial or other) of the Company and its
subsidiaries taken as a whole.
(h) The assets of the Company and its subsidiaries are sufficient
to enable them to operate their businesses after the Closing substantially as
they are being operated on the date of this Agreement.
(i) The Company and its subsidiaries have all licenses and permits
from all governmental authorities which are necessary or useful to permit the
Company and its subsidiaries to conduct their businesses as those businesses are
being conducted at the date of this Agreement, other than licenses and permits
from governmental authorities the lack of which would not in aggregate have a
Material Adverse Effect. Exhibit 3.2-I is a complete list of all licenses and
permits which the Company or any of its subsidiaries holds at the date of this
Agreement. The Company and its subsidiaries have at all times operated their
businesses in accordance with applicable law in all material respects.
(j) Exhibit 3.2-J is a list of all real property, including office
space, owned or leased (including subleased) by the Company or by any of its
subsidiaries, showing as to each property whether it is owned or leased, by whom
it is owned or leased and, if it is leased, the identity of the lessor and the
date of the lease. All that real property is being used by the Company or the
applicable subsidiary in conformance in all material respects with all zoning,
environmental and other laws and regulations, deed restrictions, covenants and
lease provisions applicable to it. As to real property which is owned, the
Company or the applicable subsidiary owns fee title to the real property, free
and clear of any liens or other encumbrances, except (i) the liens and
encumbrances shown on Exhibit 3.2-J, (ii) liens securing indebtedness reflected
on the Balance Sheet and (iii) easements or similar encumbrances which do not
interfere with the use of the real property as it currently is being used and as
the Company or a subsidiary currently anticipates using it. As to real property
which is leased, the Company or the subsidiary which is the lessee under each of
the leases (including subleases) has complied in all material respects with the
terms of the lease, and no officer of the Company or any subsidiary has been
informed by the lessor under any of the leases, or has any other reason to
believe, that the lessor has taken, or intends to take, action to terminate the
lease. No Management Person is aware of any obligation of the Company or any of
its subsidiaries which would require the Company or a subsidiary to expend more
than $100,000 on termination of a lease, assuming no deterioration in the
condition of any leased property from its condition at the date of this
Agreement. The transactions contemplated by this Agreement will not be a basis
for any party to any lease (including sublease) listed on Exhibit 3.2-J to
terminate that lease.
(k) On the Closing Date, the Company and each of its subsidiaries
will own all its assets free and clear of any liens or encumbrances other than
(i) the lien of taxes not yet due or other statutory liens relating to
governmental obligations which are not yet due, (ii) liens securing indebtedness
reflected on the Balance Sheet which do not interfere with the use of the assets
to which they relate for the purposes for which those assets were acquired, and
(iii) liens
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disclosed on Exhibit 3.2-J or 3.2-K, all of which secure obligations arising out
of, or otherwise relating to, the businesses of the Company and its
subsidiaries.
(l) Exhibit 3.2-L is a complete list of each agreement to which
the Company or any of its subsidiaries is a party which will require the Company
or any of its subsidiaries to make payments, or under which the Company expects
it or its subsidiaries to receive revenues, of more than $200,000 after the
Closing Date over the remaining term of the agreement and cannot be cancelled by
the Company or the subsidiary, as the case may be, without payment of a penalty
in excess of $50,000, other than (i) customer purchase orders entered into in
the ordinary course of business and (ii) purchase orders to suppliers (other
than purchase orders having a remaining term of more than twelve months or
involving the purchase of fixed assets having a purchase price in excess of
$250,000) entered into in the ordinary course of business ordering materials
which are available from at least several suppliers in quantities consistent
with the customary purchasing practices of the Company or the applicable
subsidiary and with the customary purchasing practices in the industries in
which the Company or the applicable subsidiary participates. The Company and
each of its subsidiaries has fulfilled in all material respects all its
obligations under all the agreements listed on Exhibit 3.2-L to which it is a
party, no Management Person has been informed by any other party to any of those
agreements that the Company or any subsidiary is in default in its obligations
under any of those agreements and no Management Person has any other reason to
believe that another party to any of those agreements intends to terminate the
agreement before its stated termination date. Except as shown on Exhibit 3.2-L,
the transactions contemplated by this Agreement will not be a basis for any
party to any agreement listed on Exhibit 3.2-L to terminate that agreement or
alter the basis on which it will being doing business with the Company or with
any of its subsidiaries, as the case may be, under that agreement.
(m) Exhibit 3.2-M is a complete list of all patents, patent
applications, patent licenses, trademarks, trademark licenses, trade names and
service marks which are material to the businesses of Company and its
subsidiaries taken as a whole. The Company and each subsidiary is entitled to
use all the patents, trademarks, trade names and service marks which it uses in
connection with its businesses, other than patents, trademarks, trade names and
service marks which the Company and the subsidiaries could stop using without
there being a Material Adverse Effect. Except as described on Exhibit 3.2-M, no
Management Person has been informed of any claim, or is aware, that the Company
or any of its subsidiaries is violating any patent, trademark or service xxxx,
or unlawfully using any trade secret or other intellectual property, owned by
any other person or that any of them is using any name which is confusingly
similar to that of any other person. The transactions which are the subject of
this Agreement will not result in the termination of, or otherwise require the
consent of any party to, any patent license or trademark license listed on
Exhibit 3.2-M.
(n) The Company and each of its subsidiaries has filed when due
all Tax Returns (as defined below) which it has been required to file and has
paid all Taxes (as defined below) shown on those returns to be due. Those Tax
Returns accurately reflect the Taxes required to have been paid, except to the
extent of items which may be disputed by applicable taxing authorities but for
which there is substantial authority to support the position taken by the
Company or the subsidiary and which have been adequately reserved against on the
Balance Sheet. Except as shown on Exhibit 3.2-N, (i) no extension of time given
by the Company or any of its subsidiaries for completion of the audit of any of
its Tax Returns is in effect, (ii) no tax lien has been filed by any taxing
authority against the Company or any of its subsidiaries or any of
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their assets, (iii) no Federal, state or local audits or other administrative
proceedings or court proceedings with regard to Taxes are presently pending with
regard to the Company or any of its subsidiaries, (iv) neither the Company nor
any subsidiary is a party to any agreement providing for the allocation or
sharing of Taxes, (v) neither the Company nor any subsidiary has participated in
or cooperated with an international boycott as that term is used in Section 999
of the Internal Revenue Code of 1986, as amended (the "Code") and (vi) neither
the Company nor any subsidiary has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a Subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by the Company or any subsidiary. For the purposes
of this Agreement, the term "Tax" or "Taxes" means all taxes, charges, fees,
levies or other assessments imposed by any Federal, state, local, or foreign
taxing authority, including without limitation, income, excise, property, sales,
use, transfer, payroll, license, employment, production, gross receipts,
windfall profits, severance, tariffs, withholding and franchise taxes (including
any interest, penalties or additions attributable to or imposed on or with
respect to any such assessment); and any amounts that could be charged against
the Company or any of its subsidiaries under a tax sharing agreement. "Tax
Return" means any return, report, information return, or other document
(including any related or supporting information) filed or required to be filed
with any Federal, state, local, or foreign governmental entity or other
authority in connection with the determination, assessment or collection of any
Taxes or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
(o) Except as shown on Exhibit 3.2-O, neither the Company nor any
subsidiary is a party to any suit or proceeding in any court, or by or before
any governmental agency, nor has any Management Person been notified that any
suit or proceeding is threatened against any of those entities, other than suits
or proceedings in each of which the other party seeks only money damages of less
than $200,000, nor is any Management Person aware of any circumstances with
regard to which there is a reasonable possibility that a suit or proceeding will
be brought against the Company or a subsidiary which would result in a payment
by the Company or a subsidiary to the other party, not covered by insurance, of
more than $500,000.
(p) Exhibit 3.2-P(1) is a complete list of all unions which
represent any employees of the Company or any of its subsidiaries. No union is
attempting to organize or otherwise become the bargaining representative for any
employees of the Company or any of the subsidiaries. Exhibit 3.2-P(2) is a
complete list of (i) all written agreements and plans, including written
employment ,severance, deferred compensation and bonus agreements (other than
employment agreements calling for salaries of less than $100,000 per year with
terms of not more than 2 years) and including "employee benefit plans," as that
term is defined in the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or other written employee benefit arrangements, to which the
Company or any of its subsidiaries is a party under which it is providing
compensation, retirement benefits or other benefits to employees, and (ii) all
agreements or other commitments by the Company or any of its subsidiaries to
provide post-retirement medical benefits or other post-employment benefits to
employees or former employees. Except as shown on Exhibit 3.2-P(2), (v) each
employee benefit plan or arrangement listed on Exhibit 3.2-P(2) which is
intended to be qualified under Section 401 of the Code is qualified under that
Section, (w) each employee benefit plan listed on Exhibit 3.2-P(2) has been
maintained in all material respects in accordance with its terms and any
applicable provisions of ERISA or the Code and any other applicable laws, (x) no
plan listed on Exhibit 3.2-P(2) is a "defined benefit plan," as that term is
defined in ERISA, (y) neither the Company nor any subsidiary is an "employer" or
part of a "single employer," as those terms are used in
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ERISA or the Code, with regard to any benefit plan and (z) no plan shown on
Exhibit 3.2-P(2) has an unfunded benefit liability as that term is used in
ERISA.
(q)(i) Except as shown on Exhibit 3.2-Q, the Company and its
subsidiaries are in compliance with all applicable Environmental Laws, other
than failures to comply which would not, in the aggregate, have a Material
Adverse Effect.
(i) The Company and its subsidiaries hold all
Environmental Permits necessary to enable them to conduct their
respective operations as they are currently conducted without
violating any Environmental Laws. No Management Person has any
reason to believe that any such Environmental Permits (A) will not
be renewed, or (B) will be renewed under terms that are reasonably
likely to have a Material Adverse Effect.
(ii) No Materials of Environmental Concern are present
at, have been released from, or since September 30, 1996 have been
removed from, any property currently or formerly owned, leased or
otherwise operated by the Company or any subsidiary, that are
reasonably likely to be in violation, in a material respect of, or
otherwise to give rise to material liability of the Company or any
subsidiary under, any Environmental Law.
(iii) Except as shown on Exhibit 3.2-Q, neither the
Company nor any of its subsidiaries has during the past five years
been required to make any reports to any governmental authorities
pursuant to any Environmental Laws concerning spills or other
releases at or from any property currently or formerly owned, leased
or otherwise operated by the Company or any subsidiary, for which
spills or other releases the Company or a subsidiary may be liable
under any Environmental Law. True and complete copies of all written
reports concerning such spills and other releases have been made
available to the Buyer.
(iv) None of the following is or, insofar as any
Management Person is aware, has been, on, under, in or at any
property currently or formerly owned, leased or otherwise operated
by the Company or any subsidiary at any time while or before the
Company or its subsidiary owned, leased or otherwise operated the
property: (A) underground or aboveground storage tanks containing
any Materials of Environmental Concern, (B) polychlorinated
biphenyls, (C) asbestos or asbestos-containing materials, (D) septic
tanks, septic fields, dry-xxxxx, or similar structures, (E) lagoons,
impoundments, or other bodies of water into which Materials of
Environmental Concern have been discharged, (F) landfills, dumping
areas, or similar locations where Materials of Environmental Concern
have been placed.
(v) Neither the Company nor any subsidiary has received
any Environmental Claim, and, insofar as any Management Person is
aware, no Environmental Claim against the Company or any subsidiary
is threatened.
(vi) Except as shown on Exhibit 3.2-Q, neither the
Company nor any subsidiary has entered into or agreed to, nor is the
Company or any subsidiary otherwise subject to, any judgment,
decree, order or similar requirement under any
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Environmental Law, nor is the Company or any subsidiary negotiating
any such judgment, decree, order or requirement.
(vii) Neither the Company nor any subsidiary has assumed
or retained, contractually or by operation of law, any material
liabilities or obligations, contingent or otherwise, in connection
with any Environmental Law (other than as part of a Sold Company
Indemnity described in Paragraph 7.3);
(viii) There are no past or present actions, activities,
events, conditions or circumstances known to any Management Person,
including without limitation, the release, threatened release,
emission, discharge, generation, treatment, storage or disposal of
Materials of Environmental Concern, that give rise to any material
liability or obligation of the Company or any subsidiary under any
Environmental Laws.
(ix) The Company has made available to the Buyer copies
of each of the Phase I studies of properties owned by the Company
listed on Exhibit 3.2-Q. No Management Person is aware of any
condition on any of the properties which is the subject of any of
those Phase I studies which (i) is not shown on the applicable Phase
I study, but (ii) violates any applicable Federal, state or local
environmental laws or regulations.
(x) As used in this Agreement the following terms have
the following meanings:
"Environmental Claim" means a written notice by any
governmental authority alleging potential liability arising out of,
based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern or (b)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
"Environmental Law" means law, rule, regulation,
guideline, code or other legally enforceable requirement of any
governmental authority regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment or
environmental conditions effecting human health or safety.
"Environmental Permit" means any permit, authorization,
license, approval or filing required under any Environmental Law.
"Materials of Environmental Concern" means gasoline,
petroleum or petroleum products, polychlorinated biphenyls,
urea-formaldehyde insulation, asbestos, pollutants, contaminants,
radioactive materials, and any other substances or forces defined as
hazardous or toxic under any Environmental Law, or that is regulated
pursuant to or could give rise to liability under any Environmental
Law.
(r) There are no contracts, agreements or other arrangements which
could result in the payment by the Company or by any subsidiary of an "Excess
Parachute Payment" as that term is used in Section 280G of the Code.
(s) The Company has made available to the Buyer a report dated April 1,
1999 of Xxxxxx Xxxxxxxx LLP (the "Y2K Report") relating to the extent to which
computer software and hardware and other equipment used by the Company and its
subsidiaries in the conduct of their
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business is capable of recognizing that dates in the year 2000 are subsequent to
December 31, 1999 and is otherwise able to operate without being adversely
affected by the change from the twentieth to the twenty-first century. No
Management Person is aware of any facts which make anything in the Y2K Report
incorrect in any material respect.
4.3. Buyer's Representations and Warranties. The Buyer represents and
warrants to each of the Selling Stockholders as follows:
(a) The Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio.
(b) The Buyer has all corporate power and authority necessary to
enable it to enter into this Agreement and carry out the transactions
contemplated by this Agreement. All corporate actions necessary to authorize the
Buyer to enter into this Agreement and carry out the transactions contemplated
by it have been taken. This Agreement has been duly executed by the Buyer and is
a valid and binding agreement of the Buyer, enforceable against the Buyer in
accordance with its terms.
(c) Neither the execution and delivery of this Agreement or of any
document to be delivered in accordance with this Agreement nor the consummation
of the transactions contemplated by this Agreement or by any document to be
delivered in accordance with this Agreement will violate, result in a breach of,
Ior constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, the Articles of Incorporation or
Regulations of the Buyer, any agreement or instrument to which the Buyer or any
subsidiary is a party or by which it is bound, any law, or any order, rule or
regulation of any court or governmental agency or other regulatory organization
having jurisdiction over the Buyer or any of its subsidiaries.
(d) No governmental filings, authorizations, approvals or
consents, or other governmental action, other than termination or expiration of
the waiting periods under the HSR Act, are required to permit the Buyer to
fulfill all its obligations under this Agreement.
(e) The Buyer has all funds which the Buyer will require, in
addition to the Purchase Financing described in Paragraph 4.2, to carry out the
transactions which are the subject of this Agreement.
(f) The only authorized stock of the Buyer consists of 12,000,000
shares of Buyer Common Stock and 500,000 shares of preferred stock, no par
value, of which 3,782,817 shares of Common Stock and 14,642 shares of preferred
stock are issued and outstanding. Except as shown on Exhibit 3.3-F, the Buyer
has not issued any options, warrants, or convertible or exchangeable securities,
and is not party to any other agreements, which require, or upon passage of
time, the payment of money or the occurrence of any other event may require, the
Company to sell or issue any of its stocks.
(g) When the Buyer issues the Stock Consideration as contemplated
by this Agreement, all the shares of the Buyer Common Stock included in the
Stock Consideration will be duly authorized and issued, fully paid and
nonassessable, and the Selling Stockholders will become the owners of the shares
of Stock being issued to them, free and clear of any liens or encumbrances other
than liens or encumbrances created by the Selling Stockholders.
(h) The Buyer's Annual Report on Form 10-K for the year ended
December 31, 1998 (the "1998 10-K"), filed with the Securities and Exchange
Commission contained all the information required to be included in that Report
and did not contain a misstatement of material fact or a omit to state any fact
necessary to make statements made in it not misleading.
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(i) Without limiting anything which is stated in subparagraph (h),
the consolidated financial statements of Buyer and its subsidiaries at December
31, 1997 and 1998 and for the two years ended on those dates included in the
1998 10-K were prepared in accordance with GAAP applied on a consistent basis
and present fairly the consolidated financial condition and results of
operations of the Buyer and its subsidiaries at the dates, and for the periods
to which they relate.
(j) Since December 1998 (i) there has not been any material
adverse change in the consolidated financial condition or results of operations
of the Buyer and its subsidiaries compared with the consolidated financial
condition of the Buyer and its subsidiaries at December 31, 1998 reflected on
the balance sheet at that date included in the 1998 10-K, or the consolidated
results of operations of Buyer and its subsidiaries for the comparable period of
the prior year, other than a decline in the results of operations of its Machine
Tool Division for the quarter ended March 31, 1999, when compared with the
comparable period of the prior year, (ii) the Buyer and its subsidiaries have
conducted their businesses in the ordinary course and in the same manner in
which they were being conducted on December 31, 1998, and (iii) there has not
been any material adverse change, or any event of which any executive officer of
the Buyer is aware which could reasonably be expected to cause a material
adverse change, in the business, operations, properties, prospects, or condition
(financial or other) of the Buyer and its subsidiaries taken as a whole, other
than the matters related to the Buyer's Machine Tool Division in referred to in
clause (i). Since December 31, 1998, there has been no occurrence which the
Buyer was required to report on a Form 8-K to be filed with the Securities and
Exchange Commission, except that the Buyer was required to file, and did file, a
Form 8-K relating to the Buyer's acquisition of GFP Corporation.
(k) If the Buyer issues either or both of the Special Subordinated
Note or the Seller Notes described in Paragraph 6.1(e), when they are issued,
they will be valid and binding debt instruments of the Buyer, enforceable
against the Buyer in accordance with their respective terms, (ii) if the Buyer
issues Warrants as described in Paragraph 6.1(e) and Exhibit 6.1-E, when they
are issued, they will be valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their terms and (iii) if the Buyer issues
shares of Buyer Common Stock on exercise of Warrants or conversion of the Seller
Notes, when those shares are issued, they will be duly authorized and issued,
fully paid and nonassessable.
(l) The issuance of the Stock Consideration, and the issuances of
shares of Buyer Common Stock on exercise of Warrants, or conversion of the
Seller Notes, described in Paragraph 6.1(e) and Exhibit 6.1-E, have been
approved by the Board of Directors of the Buyer, and therefore Chapter 1704 of
the Ohio General Corporation Law will not apply to the acquisition of the Stock
Consideration by the Selling Stockholders (or by the Stockholders Representative
on their behalf) or to the acquisition of Buyer Common Stock (or other
securities) upon exercise of Warrants or conversion of Seller Notes.
4.4. Remedy for Breaches of Representations and Warranties. The
indemnification in Paragraphs 7.1 and 7.2 will be the only remedies available to
the Buyer or the Selling Stockholders for breaches of representations and
warranties contained in Paragraph 3.1, 3.2 or 3.3. Any claim for that
indemnification must be made as provided in Paragraph 7.6. The only remedy
available to the Buyer or to any Selling Stockholder prior to the Closing for
breaches of representations and warranties contained in Paragraph 3.1, 3.2 or
3.3 will be to terminate this Agreement to the extent permitted by Paragraph 6.1
or 6.2 and, if applicable, seek remedies because the Selling Stockholders or the
Buyer failed to fulfill their or its obligations under this Agreement, as
provided in Section 6.2.
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ARTICLE V
ACTIONS PRIOR TO THE CLOSING
5.1. Activities Until Closing Date. From the date of this Agreement
until the Closing Date, the Selling Stockholders will ensure that the Company
and its subsidiaries will, except with the written consent of the Buyer:
(a) Operate their respective businesses in the ordinary course and
in a manner consistent with the manner in which they are being operated at the
date of this Agreement.
(b) Take all reasonable steps available to them to maintain the
goodwill of their businesses and, except as otherwise requested by the Buyer,
the continued employment of their executives and other employees.
(c) At their expense, maintain all their assets in good repair and
condition, except to the extent of reasonable wear and use and damage by fire or
other unavoidable casualty.
(d) Not make any borrowings other than borrowings in the ordinary
course of business under working capital lines which are disclosed or reflected
on the Balance Sheet.
(e) Not enter into any contractual commitments involving capital
expenditures, loans or advances, and not voluntarily incur any contingent
liabilities, except in each case in the ordinary course of business.
(f) Not pay any dividends, or make any other distributions,
payments or repayments of debt to stockholders other than (i) dividends paid by
subsidiaries to the Company or to wholly owned subsidiaries of the Company and
(ii) reimbursement of travel and other expenses incurred in the ordinary course
by stockholders who are officers or directors of the Company.
(g) Not make any loans or advances (other than advances for travel
and other normal business expenses) to stockholders, directors, officers or
employees.
(h) Maintain their books of account and records in the usual
manner, in accordance with GAAP applied on a consistent basis, subject to normal
year-end adjustments and accruals.
(i) Comply in all material respects with all applicable laws and
regulations of governmental agencies.
(j) Not sell, dispose of or encumber any property or assets, or
engage in any activities or transactions, except in each case in the ordinary
course of business (with all sales of fixed assets being deemed not to be
transactions in the ordinary course of business).
(k) Not make any change or amendment to, or repeal, its charter or
bylaws or comparable governing instruments.
(l) Not issue or sell shares of its capital stock or any other
equity securities (other than the Company's issuance of stock on exercise of
options which are outstanding at the date of this Agreement), of any of them or
issue any securities convertible into or exchangeable for, or rights to purchase
relating to, or enter into any contract, commitment or arrangement with respect
to the issuance of, any shares of capital stock or any other equity securities
of any of them, or adjust, split, combine or reclassify any of their capital
stock or other equity securities, or otherwise make any other changes in their
capital structures.
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(m) Not (i) adopt or amend any bonus, profit sharing,
compensation, severance, stock option, pension, retirement or other employee
benefit agreement, trust, plan or arrangement for the benefit or welfare of any
present or former director, officer or employee of any of them or (ii) increase
the compensation or fringe benefits of any present or former director, officer
or employee (except that, in the case of employees who are not officers,
individual merit increases and promotional increases, not to exceed 5% of
salary, in accordance with past practices may be granted, but no across-the
board or generally applicable increases may be granted), or pay any bonus,
compensation or benefit not required by any existing Plan, or hire any employee
at an annual rate of compensation (including anticipated incentive compensation,
if any) in excess of $100,000, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
(n) Not adopt, or become an employer with regard to, any employee
compensation, employee benefit or post-employment benefit plan.
5.2. Financing. The Buyer will do all things it is reasonably able to
do, including to the extent necessary paying reasonable commitment fees and
agreeing to pay or reimburse expenses, to arrange for the commitment letters
described in Paragraph 6.1(e) to be delivered to the Stockholders Representative
by May 31, 1999 (or such later date as is the same number of days after May 31,
1999 that the day on which the Company delivers the Audited 1999 Financial
Statements to the Buyer is after May 20, 1999) and for lenders to make the Loan,
and purchasers to purchase the Subordinated Notes, on or before July 1, 1999.
5.3. HSR Act Filings. The Company and the Buyer will each make as
promptly as practicable the filing it is required to make under the HSR Act with
regard to the transactions which are the subject of this Agreement and each of
them will take all reasonable steps within its control (including providing
information to the Federal Trade Commission and the Department of Justice) to
cause the waiting periods required by the HSR Act to be terminated or to expire
as promptly as practicable. The Company and the Buyer will each provide
information and cooperate in all other respects to assist the other of them in
making its filing under the HSR Act.
5.4. No Interference with Employee Relationships. Neither the Buyer nor
anyone else acting on behalf of the Buyer will, without the prior written
consent of the Stockholders Representative, discuss or make any arrangement with
any officer or other member of the operating management of the Company, other
than Xxxxxxx regarding whether, or on what terms (including what terms as to
compensation), that person will be employed by the Company, its subsidiaries or
the Buyer after the Closing.
5.5. Selling Stockholders' Efforts to Fulfill Conditions. Each of the
Selling Stockholders will use his, her or its best efforts to cause all the
conditions contained in Paragraph 5.1 to be fulfilled, insofar as fulfillment of
those conditions involves any action by the Selling Stockholder, anything else
over which the Selling Stockholder has control, or anything which requires
approval of the Company's stockholders (as to which the Selling Stockholder will
vote all the stock of the Company which the Selling Stockholder owns or
otherwise is entitled to vote in favor of the required approval).
5.6. Buyer's Efforts to Fulfill Conditions. The Buyer will use its best
efforts to cause all the conditions contained in Paragraph 5.2 to be fulfilled
prior to or at the Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
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6.1. Conditions to Buyer's Obligations. The obligations of the Buyer at
the Closing are subject to satisfaction of the following conditions (any or all
of which may be waived by the Buyer):
(a) The representations and warranties of the Selling Stockholders
contained in this Agreement will, except as contemplated by this Agreement, be
true and correct in all material respects at the Closing Date with the same
effect as though made on that date, and each of the Selling Stockholders will
have delivered to the Buyer a certificate dated that date and signed by the
Selling Stockholder; or an officer, general partner or other person authorized
to sign on behalf of the Selling Stockholder, to that effect. For the purposes
of this subparagraph, materiality will be as defined in Paragraph 3.2(a), but
with the figure $1,000,000 substituted for the figure $200,000.
(b) Each of the Selling Stockholders will have fulfilled in all
material respects all his, her or its obligations under this Agreement required
to have been fulfilled prior to or at the Closing.
(c) No order will have been entered by any court or governmental
authority and be in force which invalidates this Agreement or restrains the
Buyer from completing the transactions which are the subject of this Agreement
and no action will be pending against the Buyer or the Company relating to the
transactions which are the subject of this Agreement which presents a reasonable
likelihood of resulting in an award of damages against the Buyer or the Company
which would be material to the Buyer and its subsidiaries taken as a whole, or
to the Company and its subsidiaries taken as a whole.
(d) The consents described in Exhibit 3.2-B will have been
obtained.
(e) The Buyer will have received an opinion from Xxxxxx & Xxxxx
LLP, counsel to the Selling Stockholders, to the effect that (i) the Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (ii) all the Shares have been duly authorized and
issued and are fully paid and nonassessable; (iii) insofar as that counsel is
aware, each Selling Stockholder has all power and authority necessary to enable
him, her or it to enter into this Agreement and carry out the transactions
contemplated by this Agreement; (iv) this Agreement has been duly executed by
each of the Selling Stockholders, and is a valid and binding agreement each of
the Selling Stockholders, enforceable against each of them in accordance with
its terms, except to the extent enforceability may be affected by bankruptcy,
reorganization or similar laws affecting the rights of creditors generally or by
equitable principles of general application relating to the availability of
remedies (whether in an action at law or a proceeding in equity); (v) neither
the execution and delivery of this Agreement or of any document to be delivered
in accordance with this Agreement nor the consummation of the transactions
contemplated by this Agreement or by any document to be delivered in accordance
with this Agreement will violate, result in a breach of, or constitute a default
(or an event which, with notice or lapse of time or both would constitute a
default) under, the Certificate of Incorporation or by-laws of the Company, any
agreement or instrument of which that counsel is aware to which the Company or
any subsidiary of the Company or any Selling Stockholder is a party or by which
any of them is bound, any law or rule or regulation of any governmental
authority applicable to the Company or any of its subsidiaries or, insofar as
that counsel is aware, applicable to any Selling Stockholder, or any order of
which that counsel is aware of any court or governmental agency having
jurisdiction over the Company or any of its subsidiaries or any Selling
Stockholder; and (vi) no governmental filings, authorizations, approvals or
consents, or other governmental actions, with regard to the Company or, insofar
as that counsel is aware with regard to any Selling Stockholder, other than the
termination or expiration of the waiting periods under the HSR Act (which has
occurred), are required to permit the Selling
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Stockholders to fulfill all their obligations under this Agreement. The letter
containing that opinion will state that in instances in which the opinion is
limited to matters of which counsel is aware (x) with regard to the Company, the
opinion is given after reasonable investigation, (y) with regard to Selling
Stockholders, the opinion is given after inquiry of each of the Selling
Stockholders, but without any other investigation, and (z) awareness of counsel
refers to awareness of the attorneys in the firm who are working on the
transactions which are the subject of this Agreement.
(f) The Closing Date will be not later than August 31, 1999.
6.2. Conditions to Selling Stockholders' Obligations. The obligations
of the Selling Stockholders at the Closing are subject to the following
conditions (any or all of which may be waived by the Stockholders
Representative):
(a) The representations and warranties of the Buyer contained in
this Agreement will, except as contemplated by this Agreement, be true and
correct in all material respects at the Closing Date with the same effect as
though made on that date, and the Buyer will have delivered to the Stockholders
Representative a certificate dated that date and signed by the President or a
Vice President of the Buyer to that effect. For the purposes of this
subparagraph, materiality will be as defined in Paragraph 3.2(a), but with the
figure $1,000,000 substituted for the figure $200,000.
(b) The Buyer will have fulfilled in all material respects all its
obligations under this Agreement required to have been fulfilled prior to or at
the Closing.
(c) No order will have been entered by any court or governmental
authority and be in force which invalidates this Agreement or restrains any
Selling Stockholder from completing the transactions which are the subject of
this Agreement and no action will be pending against any Selling Stockholder
relating to the transactions which are the subject of this Agreement which
presents a reasonable likelihood of resulting in an award of damages against
that Selling Stockholder which would be material to that Selling Stockholder and
its subsidiaries taken as a whole.
(d) The Stockholders Representative will have received an opinion from Xxxxxxxx
Xxxx & Xxxxx LLP, counsel to the Buyer, to the effect that (i) the Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio, (ii) the Buyer has all corporate power and authority
necessary to enable it to enter into this Agreement and carry out the
transactions contemplated by this Agreement; (iii) all corporate actions
necessary to authorize the Buyer to enter into this Agreement and carry out the
transactions contemplated by it have been taken; (iv) this Agreement and the
Agreement Regarding Shares each has been duly executed by the Buyer and each of
them is a valid and binding agreement of the Buyer, enforceable against the
Buyer in accordance with its terms, except to the extent enforceability may be
affected by bankruptcy, reorganization or similar laws affecting the rights of
creditors generally or by equitable principles of general application relating
to the availability of remedies (whether in an action at law or a proceeding in
equity); (v) neither the execution and delivery of this Agreement or of any
document to be delivered in accordance with this Agreement (including the
Agreement Regarding Shares) nor the consummation of the transactions
contemplated by this Agreement or by any document to be delivered in accordance
with this Agreement will violate, result in a breach of, or constitute a default
(or an event which, with notice or lapse of time or both would constitute a
default) under, the Articles of Incorporation or Regulations of the Buyer, any
agreement or instrument of which that counsel is aware, after a reasonable
investigation, to which the Buyer or any subsidiary of the Buyer is a party or
by which any of them is bound, any law or rule or regulation of any governmental
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authority, or any order of which that counsel is aware, after a reasonable
investigation, of any court or governmental agency having jurisdiction over the
Buyer or any of its subsidiaries; and (vii) no governmental filings,
authorizations, approvals or consents, or other governmental actions, other than
the termination or expiration of the waiting periods under the HSR Act (which
has occurred), are required to permit the Buyer to fulfill all its obligations
under this Agreement, (viii) when issued as contemplated by this Agreement, all
the shares of Buyer Common Stock issued as the Stock Consideration will be duly
authorized and issued, fully paid and nonassessable, (ix) if either or both of
the Special Subordinated Note or the Seller Notes are issued, when they are
issued, they will be valid and binding debt obligations of the Buyer,
enforceable against the Buyer in accordance with their respective terms, except
to the extent enforceability may be affected by bankruptcy, reorganization or
similar laws affecting the rights of creditors generally or by equitable
principles of general application relating to the availability of remedies
(whether in an action of law or a proceeding in equity); (x) if Warrants are
issued as described in Paragraph 6.1(e) and Exhibit 6.1-E, when they are issued,
those Warrants will be valid and binding obligations of the Buyer enforceable
against the Buyer in accordance with their terms, except to the extent
enforceability may be affected by bankruptcy, reorganization or similar laws
affecting the rights of creditors generally or by equitable principles of
general application relating to the availability of remedies (whether in an
action at law or a proceeding in equity); and (xi) if shares of Buyer Common
Stock are issued upon exercise of Warrants or conversion of the Seller Notes,
when they are issued, those shares of Buyer Common Stock will be duly authorized
and issued, fully paid and nonassessable shares of Buyer Common Stock. The
letter containing the opinion will state that in instances in which an opinion
is limited to matters of which counsel is aware, the opinion is given after
reasonable investigation and may state that awareness of counsel refers to
awareness of the attorneys in the firm who are working on the transactions which
are the subject of this agreement.
(e) The Closing Date will be not later than August 31, 1999.
ARTICLE VII
TERMINATION
7.1. Right to Terminate. This Agreement may be terminated at any time
prior to the Closing:
(a) By mutual consent of the Buyer and the Stockholders
Representative.
(b) By either the Buyer or the Stockholders Representative if,
without fault of the terminating party, the Closing does not occur on or before
the applicable date specified in Paragraph 5.1(f) or 5.2(e).
(c) By the Buyer if (i) (x) it is determined that any of the
representations or warranties of any Selling Stockholder contained in this
Agreement was not complete and accurate in all material respects on the date of
this Agreement (with materiality being as defined in Paragraph 3.2(a), but with
the figure $1,000,000 substituted for the figure $200,000), (y) the Buyer has
notified the Stockholders Representative of the condition which was different
from that which was represented or warranted, and (z) that condition has
continued for more than 15 days after the notice (or until the Closing Date, if
that is earlier), or (ii) any of the conditions in Paragraph 5.1 is not
satisfied or waived by the Buyer prior to or on the Closing Date.
(d) By the Stockholders Representative if (i) (x) it is determined
that any of the representations or warranties of the Buyer contained in this
Agreement was not complete and accurate in all material respects on the date of
this Agreement (with materiality being as defined
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in Paragraph 3.2(a), but with the figure $1,000,000 substituted for the figure
$200,000), (y) the Stockholders Representative has notified the Buyer of the
condition which was different from that represented or warranted, and (z) that
condition has continued for more than 15 days after the notice (or until the
Closing Date, if that is earlier), or (ii) any of the conditions in Paragraph
5.2 is not satisfied or waived by the Stockholders Representative prior to or on
the Closing Date.
(e) By the Stockholders Representative if the Buyer does not by
May 31, 1999, or such later date as is the same number of days after May 31,
1999 that the day on which the Audited 1999 Financial Statements are delivered
to the Buyer is after May 20, 1999, deliver to the Stockholders Representative
binding commitments, in form reasonably satisfactory to the Stockholders
Representative, from a lender or lenders to make a loan (the "Loan") to the
Buyer, and of purchasers to purchase subordinated notes of the Buyer
("Subordinated Notes"), with proceeds totaling not less than $90,000,000, which
commitments will not be subject to any conditions other than absence of
subsequent material adverse change in the financial condition, results of
operations, business or prospects of the Company and its subsidiaries taken as a
whole, and completion of customary documentation, except that if the total
proceeds the Buyer will receive from the Loan and the Subordinated Notes is more
than $75,000,000 but less than $95,000,000 the Stockholders Representative may
not terminate this Agreement under this Paragraph if the Buyer, by a notice
given to the Stockholders Representative not later than May 31, 1999, or such
later date as is the same number of days after May 31, 1999 that the day on
which the Audited 1999 Financial Statements are delivered to the Buyer is after
May 20, 1999, requires the Selling Stockholders to purchase for $15 million
subordinated notes ("Seller Subordinated Notes") and warrants ("Warrants")
having the terms set forth on Exhibit 6.1-E. If the Buyer elects to require the
Selling Stockholders to purchase the Seller Subordinated Notes and the Warrants,
promptly after the Buyer notifies the Stockholders Representative of the Buyer's
election to require the Selling Stockholders to purchase the Seller Subordinated
Notes and Warrants, the Stockholders Representative, on behalf of the Selling
Stockholders, and the Buyer will enter into an agreement under which (i) the
Selling Stockholders agree to purchase from the Buyer, and the Buyer agrees to
sell to the Selling Stockholders, Seller Subordinated Notes and Warrants
(including the right under some circumstances to receive additional Warrants in
the future) at the Closing for $15,000,000, with the obligations of the Selling
Stockholders being subject to (i) all the conditions set forth in Paragraph 5.2,
(ii) the Buyer's delivering to the Stockholders Representative at the Closing
the Seller Subordinated Notes and the Warrants which are to be issued
simultaneously with the issuance of the Seller Subordinated Notes and (iii) the
Buyer's purchasing all the Shares from the Selling Stockholders. The term
"Audited 1999 Financial Statements" means consolidated financial statements of
the Company and its subsidiaries at March 31, 1999 and for the year ended on
that date, which have been audited by Xxxxxx Xxxxxxxx LLP and are accompanied by
a report of that firm containing its unqualified opinion.
(f) By the Buyer, by a notice given to the Stockholders
Representative not later than the tenth day after the day on which the Audited
1999 Financial Statements are delivered to the Buyer, if (i) the consolidated
net worth of the Company and its subsidiaries show on the balance sheet included
in the Audited 1999 Financial Statements is less than $7,188,000 or (ii) the
consolidated EBITDA of the Company and its subsidiaries, based upon the results
of operations of the Company and its subsidiaries for the year ended March 31,
1999, reflected on the Audited 1999 Financial Statements, is less than
$12,183,000. For the purposes of this Paragraph, the consolidated EBITDA of the
Company and its subsidiaries for the year ended March 31, 1999 will be their
consolidated (A) earnings before interest and taxes, plus (B) any expense for
severance compensation to Castor, plus (C) any expense relating either to the
proposed sale of the Company to a group of which Castor was a participant or to
the
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transactions which are the subject of this Agreement, plus (D) any other
non-recurring charges, plus (E) compensation expense resulting from issuances of
stock or grants of stock options, plus (F) depreciation and amortization, all as
reflected on the Audited 1999 Financial Statements (all as illustrated on
Exhibit 6.1-F).
7.2. Effect of Termination. If this Agreement is terminated pursuant to
Paragraph 6.1, after this Agreement is terminated, no party will have any
further rights or obligations under this Agreement, except that if this
Agreement is terminated pursuant to subparagraph (e), within five days after the
Stockholders Representative notifies the Buyer of the termination of this
Agreement under that subparagraph, the Buyer will pay the Selling Stockholders,
by wire transfer to an account specified by the Stockholders Representative, the
sum of $250,000 to reimburse the Selling Stockholders for expenses incurred and
opportunities lost because of the negotiation and execution of this Agreement.
Nothing contained in this Paragraph will, however, relieve any party of
liability for any breach of this Agreement which occurs before this Agreement is
terminated.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification Against Loss Due to Inaccuracies in Selling
Stockholders' Representations and Warranties. Subject to the limitations in
Paragraph 7.5, (a) each Selling Stockholder indemnifies the Buyer against, and
agrees to hold the Buyer harmless from, all losses, liabilities and expenses
(including, but not limited to, as to claims by third persons, reasonable fees
and expenses of counsel and accountants and expenses of investigation) incurred
directly or indirectly because (i) any matter which is the subject of a
representation and warranty by that Selling Stockholder contained in Paragraph
3.1 was not as represented or warranted, or (ii) the Selling Stockholder fails
to fulfill in any respect any of its obligations under this Agreement or under
any document delivered in accordance with this Agreement which is required to be
fulfilled after the Closing and (b) the Selling Stockholders jointly and
severally indemnify the Buyer against, and agree to hold the Buyer harmless
from, all losses, liabilities and expenses (including, but not limited to, as to
claims by third persons, reasonable fees and expenses of counsel and expenses of
investigation) because any matter which is the subject of a representation and
warranty in Paragraph 3.2 is not as represented and warranted.
8.2. Indemnification Against Loss Due to Inaccuracies in Buyer's
Representations and Warranties. The Buyer indemnifies and each of the Selling
Stockholders against, and agrees to hold and each of the Selling Stockholders
harmless from, all losses, liabilities and expenses (including, but not limited
to, reasonable fees and expenses of counsel and accountants and expenses of
investigation) incurred directly or indirectly because (i) any matter which is
the subject of a representation or warranty contained in Paragraph 3.3 is not as
represented or warranted, or (ii) the Buyer fails to fulfill in any respect any
of its obligations under this Agreement or under any document delivered in
accordance with this Agreement which is required to be fulfilled after the
Closing.
8.3. Indemnification Against Liabilities with Regard to Previously Sold
Companies. The Selling Stockholders jointly and severally indemnify the Company
against, and agree to hold the Company harmless from, any liabilities under any
indemnification provision of any of the agreements listed on Exhibit 7.3 or
because of a breach of a representation, warranty or covenant in any such
agreement ("Sold Company Indemnities") and all legal fees and other out of
pocket expenses reasonably incurred by the Company in defending against claims
for Sold Company Indemnities. If any claim is made against the Company after the
Closing for any Sold Company Indemnity, that claim will be subject to Paragraph
7.9. The indemnification in this Paragraph 7.3 will extend to the Buyer and to
subsidiaries of the Company to the extent, but
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only to the extent, that a claim is made against the Buyer or a subsidiary of
the Company that it is contractually obligated to the claimant under an
indemnification provision of an agreement listed on Exhibit 7.3. If such a claim
is made against the Buyer or a subsidiary, all the provisions of this Paragraph
relating to the Company will apply to the Buyer or the subsidiary.
8.4. Tax Indemnification. Without limiting the obligations of the
Selling Stockholders under Paragraph 7.1, the Selling Stockholders agree to pay,
and jointly and severally indemnify the Company and its subsidiaries against,
and agree to hold the Company and its subsidiaries harmless from, any liability
for Taxes which relate to a period which ends on or before the Closing Date,
whether or not the Taxes were required to be paid on or before the Closing Date,
except that the Selling Stockholders will not be required to pay, or indemnify
the Company or any subsidiaries against, any Taxes for which an accrual is
reflected on the Balance Sheet or which are attributable to operations of the
Company or any of its subsidiaries after March 31, 1999. The Company will permit
the Stockholders Representative or persons designated by the Stockholders
Representative to oversee the preparation of all Tax Returns prepared after the
Closing with regard to periods which end on or before the Closing Date and to
control all decisions as to elections which may be made on, or after
discretionary decisions (including interpretations of requirements of applicable
Tax laws or regulations) with regard to, those Tax Returns. The Buyer will cause
the Company to cooperate with the Stockholders Representative in all reasonable
ways in the preparation of Tax Returns relating periods ending on or before the
Closing Date. The Company will bear the costs of preparing those Tax Returns,
but the Stockholders Representative will pay the costs of all persons it
designates to assist in overseeing the preparation of those Tax Returns. If the
Company or any subsidiary is notified that any governmental authority intends to
begin an audit or an administrative or judicial proceeding relating to Taxes for
which the Company or the subsidiary intends to seek indemnification under this
Paragraph, the Company or the subsidiary will promptly notify the Stockholders
Representative that the audit or the administrative or judicial proceeding is
going to take place and the Stockholders Representative may, if it elects to do
so, control the audit, or the defense of the administrative or judicial
proceeding, on behalf of the Company or the subsidiary. If, because the Company
or a subsidiary makes any Tax payment for which it is indemnified under this
Paragraph, the Company or a subsidiary becomes entitled to a refund or reduction
of Taxes with regard to any other period (whether before or after the Closing),
any other type of Tax, or any Tax in any other jurisdiction, the liability of
the Selling Stockholders under this Paragraph will be limited to the amount by
which the Taxes for which the Company or subsidiary is entitled to be
indemnified under this Paragraph exceed the amount of the refunds or reductions
in Taxes to which the Company or a subsidiary become, or will become, entitled
because of the payment of Taxes for which the Company or a subsidiary is
entitled to be indemnified under this Paragraph. If the amounts of refunds or
reductions in Taxes cannot be determined with reasonable certainty, they will be
estimated, based on the highest rate of Federal corporate income tax at the time
the indemnification payment is due.
8.5. Limitation on Liabilities of Selling Stockholders Except in
instances of knowing, intentional fraud, neither the Selling Stockholders
together, nor any individual Selling Stockholder, will be liable under Paragraph
7.1, or any other provision of this Agreement, because matters which are the
subject of representations or warranties contained in Paragraph 3.2 (other than
Paragraph 3.2(c)) are not as represented or warranted, to the extent the losses,
liabilities and expenses incurred by the Buyer for which the Buyer is entitled
to indemnification under clause (b) of Paragraph 7.1, or for which any Selling
Stockholder would, except for this Paragraph, otherwise be liable, are in total
less than $500,000 or exceed in total $ 4,500,000. The liability of an
individual Selling Stockholder under Paragraph 7.1 or otherwise because
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matters which are the subject of representations and warranties contained in
Paragraph 3.2 (other than Paragraph 3.2(c)) are not as represented or warranted
will under no circumstances exceed (x) $4,000,000 times (y) the percentage of
all the Shares which that Selling Stockholder is selling to the Buyer.
8.6. Indemnification Sole Remedy. The indemnification in Paragraph 7.1
and 7.2, as the case may be, will be the sole remedy of the Buyer or any Selling
Stockholder because any matter which is the subject of a representation or
warranty contained in Paragraph 3.1, 3.2 or 3.3 is not as represented or
warranted. Any claim for that indemnification, other than a claim for
indemnification with regard to Paragraph 3.1(c) or the last sentence of
Paragraph 3.2(c), must be made not later than December 31, 2000 in a written
notification to the party from which indemnification is sought which describes
in reasonable detail the claim and the facts on which it is based. A claim for
indemnification with regard to Paragraph 3.1(c) or the last sentence of
Paragraph 3.2(c) may be made at any time in a written notification containing
the information described in the preceding sentence. None of the Selling
Stockholders or the Buyer will have any liability because any matter which is
the subject of a representation or warranty contained in Paragraph 3.1, 3.2 or
3.3 is not as represented or warranted, unless it is described in a notification
given as (including within the time) provided in this Paragraph.
8.7. Computation of Loss.
(a) The Buyer's loss because any matter which is the subject of a
representation or warranty in Paragraph 3.1 or 3.2 is not as represented or
warranted will be (i) the amount by which the value of the Shares on the Closing
Date is less because that matter was not as represented or warranted than it
would have been if the matter had been as represented or warranted (taking
account, among other things, of any insurance proceeds or other sums received by
the Company with regard to the matter) plus (ii) the amount of any losses,
liability or expenses incurred directly by the Buyer because the matter was not
as represented or warranted.
(b) Whenever the Buyer or any Selling Stockholder (the
"Indemnifying Party") is required by Paragraph 7.1 or 7.2, or any other
provision of this Article VII, to indemnify any other of them (the "Indemnified
Party") against, and hold the Indemnified Party harmless from, any item of loss,
liability or expense, the Indemnifying Party will pay the Indemnified Party the
sum which, after payment by the Indemnified Party of all Federal (but not state
or local) income or gains taxes, or similar Taxes, resulting from the payment,
minus all tax savings because of deductions or credits available to the
Indemnified Party because of the loss, liability or expense, will equal the
amount of the loss, liability or expense.
8.8. Indemnification Against Pending Litigation and Directors and
Officers Claims. The Selling Stockholders jointly and severally indemnify the
Company against, and agree to hold the Company harmless from, the following:
(a) Any loss, liability or expense (other than fees and expenses
of counsel shared with other defendants) in any of the actions listed on Exhibit
7. 8 The Stockholders Representative may, if it chooses to do so, assume control
of the defense of any or all of those actions, but if the Stockholders
Representative causes the Company to be represented by separate counsel in any
of those actions, the Selling Stockholders will pay the costs of that separate
counsel. The Selling Stockholders will not be responsible for the costs of any
settlement of any of the actions listed on Exhibit 7.8, unless the Stockholders
Representative consents to that settlement.
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(b) Any sums the Company or any subsidiary is required to pay to
persons who were directors or officers of the Company or any subsidiary before
the Closing Date as indemnification under the Company's or its subsidiary's
by-laws or otherwise, because of acts or omissions by them on or before the
Closing Date in their capacities as directors or officers of the Company or a
subsidiary, to the extent the Company's or its subsidiary's indemnification
obligation is not covered by insurance.
8.9. Procedure Regarding Third Party Claims. If a third party makes a
claim or demand against an indemnified party as to which the indemnified party
intends to seek indemnification under this Article VII (other than under
Paragraph 7.8) with regard to the claim or demand, the indemnified party will
promptly, and in any event within 30 days after receipt of notice of the claim
or demand, notify the indemnifying party (or, as to notice to the Selling
Stockholders, notify the Stockholders Representative) of the claim or demand,
provided that failure to notify the indemnifying party of a claim or demand will
not relieve the indemnifying party from any obligations it may have to the
indemnified party, except to the extent that the defense against the claim or
demand, or the cost of that defense, is prejudice by the failure to give notice.
If a demand for indemnification is made under the Article VII with regard to a
claim or demand of a third party, the indemnifying party will be entitled to
participate in the defense of the claim or demand, and if it wishes to do so to
assume and control the defense against the claim or demand with counsel of its
choice. If the indemnifying party assumes the defense against a claim or demand,
(a) the indemnified party will be entitled to participate in the defense, but
only at the indemnified party's cost and expense and without any right to be
reimbursed by the indemnifying party for that expense, and (b) no settlement or
compromise of the subject matter of the claim or demand may be effected by the
indemnified party without the consent of the indemnifying party. If the
indemnifying party does not assume the defense against a claim or demand, no
compromise or settlement with regard to that claim or demand maybe effected at
the expense of the indemnifying party without the consent of the indemnifying
party, which consent will not be unreasonably with held or delayed. In any
event, the indemnified party will cooperate with indemnifying party in the
defense against any claim or demand for which the indemnified party is entitled
to be indemnified.
8.10. Buyer's Right to Withhold Stock Consideration.
(a) If, at least 10 days before the first anniversary of Closing
Date, the Buyer notifies the Stockholders Representative that the Buyer wishes
to apply Stock Consideration to satisfy a sum due from the Selling Stockholders
to the Buyer under this Article VII which the Buyer had requested at least 30
days before the first anniversary of Closing Date, the Stockholders
Representative will return to the Buyer, and the Buyer will apply against the
sum which has been unpaid for at least 30 days, a number of shares of Buyer
Common Stock, valued at their Fair Value on the day which is 10 days before the
first anniversary of the Closing Date, with a value equal to the sum which has
been unpaid for at least 30 days. As used in this Agreement, the Fair Value of a
share of Buyer Common Stock on a day will be the average of the last sale price
of the Buyer Common Stock reported on the New York Stock Exchange Composite Tape
(or in such other market as may be the principal market for the Buyer Common
Stock) on each of the twenty trading days immediately preceding (but not
including) the day on which the Fair Value is determined.
(b) If the Stockholders Representative is required by subparagraph
(a) to return Buyer Common Stock to the Buyer, prior to the fist anniversary of
the Closing Date, the Stockholders Representative will deliver to the Buyer the
certificate delivered to the
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Stockholders Representative at the Closing, and the Buyer will issue in exchange
a stock certificate representing the number of shares of Buyer Common Stock, net
of the shares applied against the sum due to the Buyer, to which the Selling
Stockholders are entitled.
(c) If the reason a sum has been unpaid for more than 30 days is
that the Stockholders Representative has contested an assertion by the Buyer
that the Selling Stockholders are required to pay that sum, the Stockholders
Representative will not return Buyer Common Stock to the Company with regard to
that sum, but when the Stockholders Representative distributes the Stock
Consideration to the Selling Stockholders, the Stockholders Representative (i)
will retain a number of shares of Buyer Common Stock which has a Fair Value on
the day which is ten days before the first anniversary of the Closing Date equal
to the contested sum, (ii) will promptly sell those shares, and (iii) will hold
the sale proceeds until there is a final determination of whether the Selling
Stockholders are required to pay all or a portion of the contested sum to the
Buyer, at which time the Stockholders Representative will (x) pay to the Buyer
out of the sale proceeds any amount to which it is determined the Buyer is
entitled, and (y) distribute the balance of the sale proceeds, and any interest
earned on the sale proceeds, to the Selling Stockholders. Failure of the Buyer
to request the return of Buyer Common Stock and apply the Buyer Common Stock
against an obligation of the Selling Stockholders under this Article VII,
whether because the Buyer has not yet made the claim which creates that
obligation or otherwise, will not affect the obligation. It will, however, end
the right of the Buyer to apply Stock Consideration against the obligation.
8.11. Apportionment of Liability Among Selling Stockholders. Each
Selling Stockholder will be responsible for a portion of any sums the Selling
Stockholders are required to pay under Paragraph 7.1 equal to the portion of all
the Shares which that Selling Stockholder is selling to the Company. If any
Selling Stockholder is required by any court order to otherwise to pay a greater
portion of any sum the Selling Stockholders are required to pay under Paragraph
7.1 than is provided in the preceding sentence, each of the other Selling
Stockholders will make a payment to that Selling Stockholder so that, after the
payment to that Selling Stockholder (and to any other Selling Stockholder who or
which are required to pay a greater portion of the sum the Selling Stockholders
are required to pay under Paragraph 7.1 than that provided in the preceding
sentence), each of the Selling Stockholders will have paid the portion provided
in the preceding sentence of the total sum the Selling Stockholders are required
to pay under Paragraph 7.1. In any action or proceeding brought against any
Selling Stockholder to recover a sum it is claimed the Selling Stockholders are
required to pay under Paragraph 7.1, that Selling Stockholder may implead the
other Selling Stockholders so that any award can be apportioned among the
Selling Stockholders in the manner provided in the first sentence of this
Paragraph. This Paragraph will not affect the liabilities of the respective
Selling Stockholders to the Buyer, which will be individual or joint and several
as provided in the respective provisions under which the indemnification
obligations arise.
ARTICLE IX
ABSENCE OF BROKERS
9.1. Representations and Warranties Regarding Brokers and Others. The
Buyer, and the Selling Stockholders jointly, each represents and warrants to the
other of them that nobody acted as a broker, a finder or in any similar capacity
in connection with the transactions which
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are the subject of this Agreement, except that (i) ING Baring Xxxxxx Xxxx
("Xxxxxx Xxxx") as financial advisor to the Buyer and (ii) Xxxxxxx Xxxxx Barney,
Inc. ("SSB") acted as financial advisor to the Selling Stockholders. All fees of
Xxxxxx Xxxx will be paid by the Buyer and all fees of SSB will be paid by the
Selling Stockholders. The Buyer, and the Selling Stockholders jointly, each
indemnifies the other of them against, and agrees to hold the other of them
harmless from, all losses, liabilities and expenses (including, but not limited
to, reasonable fees and expenses of counsel and costs of investigation) incurred
because of any claim by anyone for compensation as a broker, a finder or in any
similar capacity by reason of services allegedly rendered to the indemnifying
party in connection with the transactions which are the subject of this
Agreement.
ARTICLE X
STOCKHOLDERS REPRESENTATIVE
10.1. Appointment of Stockholders Representative
(a) Each Selling Stockholder, by executing this Agreement,
irrevocably appoints Three Cities Research, Inc. (the "Stockholders
Representative") to serve as the representative of that Selling Stockholder with
respect to all matters concerning the Selling Stockholders set forth in this
Agreement or in any other agreements entered into by the Selling Stockholders in
accordance with this Agreement. Any action taken by the Stockholders
Representative will bind each Selling Stockholder as fully as though it had been
taken by the Selling Stockholder himself, herself or itself. If, for any reason,
the Stockholders Representative named in this Paragraph becomes unable or
unwilling to serve, the Selling Stockholders will promptly designate a successor
Stockholders Representative, which or who will have all the powers of the
Stockholders Representative described in this Paragraph and elsewhere in this
Agreement.
(b) Without limiting what is said in subparagraph (a), each of the
Selling Stockholders, by executing this Agreement, irrevocably appoints the
Stockholders Representative as the agent, proxy and attorney in fact for that
Selling Stockholder to, among other things, (i) deliver all documents and take
all other actions which are required in order to complete the transactions
contemplated by this Agreement, (ii) receive on behalf of that Selling
Stockholder (for disbursement to that Selling Stockholder) any payments to which
the Selling Stockholder is entitled under this Agreement, (iii) receive on
behalf of that Selling Stockholder (for delivery to that Selling Stockholder)
any document the Selling Stockholder is entitled to receive under this Agreement
and (iv) execute and deliver on behalf of that Selling Stockholder any document
which is required by this Agreement. When any payment is made, or document is
delivered, to the Stockholders Representative as agent of a Selling Stockholder,
that payment or document will be deemed to have been made or delivered to that
Selling Stockholder. The agency and proxy contained in this subparagraph will be
deemed coupled with an interest, and therefore to be irrevocable, and will, to
the fullest extent permitted under applicable law, survive the death,
incapacity, bankruptcy or dissolution of any Selling Stockholder.
(c) Whenever any payment due to the Selling Stockholders is made
to the Stockholders Representative (including the Cash Portion of the Purchase
Price and payments with regard to the Seller Subordinated Notes) or securities
(including Buyer Common Stock or Warrants) are delivered to the Stockholders
Representative, the payment or delivery to the Stockholders Representative will
constitute payment or delivery by the Buyer to the Selling Stockholders, and the
Stockholders Representative will be responsible for distributing the payment or
the securities to the individual Selling Stockholders.
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ARTICLE XI
GENERAL
11.1. Expenses. The Buyer and the Selling Stockholders will each pay
its or their own expenses in connection with the transactions which are the
subject of this Agreement, including legal fees. The Selling Stockholders will
reimburse the Company for any payments it is required to make (i) to prepay
indebtedness at or before the Closing, (ii) after the Closing Date to reimburse
Castor for expenses relating to his efforts to purchase the Company or (iii)
after the Closing Date to Xxxxx X. Xxxxxxx under a Severance Agreement dated
April 29, 1999, to the extent the payments to Xxxxx X. Xxxxxxx under that
agreement which are made after the Closing Date exceed $28,750.
11.2. Access to Properties, Books and Records.
(a) From the date of this Agreement until the Closing Date, the
Selling Stockholders will cause the Company and each of its subsidiaries to give
representatives of the Buyer full access during normal business hours to all of
their respective properties, books and records to the extent (but only to the
extent) examination of those properties, books and records is, or could be,
relevant to the Buyer's determination whether the representations and warranties
of the Selling Stockholders in Article III are true and correct in all material
respects or whether there is any other reason why the Buyer is not required to
complete the transactions which are the subject of this Agreement. The Buyer
will not include among its representatives who are to be given access to the
properties, books and records of the Company anybody who, on behalf of Buyer, is
involved in decisions as to how products sold by the Buyer which compete with
products sold by the Company are priced or marketed. Until the Closing, the
Buyer will, and will cause its representatives to, hold all information it
receives as a result of its access to the properties, books and records of the
Company or its subsidiaries in confidence and use that information solely in
connection with the transactions which are the subject of this Agreement, except
to the extent that information (i) is or becomes available to the public (other
than through a breach of this Agreement), (ii) becomes available to the Buyer
from a third party which, insofar as the Buyer is aware, is not under an
obligation to the Selling Stockholders, to the Company or to a subsidiary to
keep the information confidential, (iii) was known to the Buyer before it was
made available to the Buyer or its representative by a Selling Stockholder, the
Company or a subsidiary, or (iv) otherwise is independently developed by the
Buyer. If this Agreement is terminated prior to the Closing, the Buyer will, at
the request of the Stockholders Representative, deliver to the Stockholders
Representative all documents and other material obtained by the Buyer from any
Selling Stockholder, the Company or a subsidiary in connection with the
transactions which are the subject of this Agreement or evidence that that
material has been destroyed by the Buyer.
(b) After the Closing, the Buyer will use its best efforts to
cause the Company to provide each Selling Stockholder with access to the books
and records and knowledgeable personnel of the Company and of its subsidiaries
during normal business hours in connection with the preparation of financial
statements by the Selling Stockholder or its affiliates, the preparation of Tax
Returns by the Selling Stockholder or its affiliates or audits of Tax Returns
which were filed by the Selling Stockholder or its affiliates. Each Selling
Stockholder will, and will cause its affiliates and representatives to, hold all
the information the Selling Stockholder receives as a result of access to the
books, records and knowledgeable personnel of the Company and its subsidiaries
in confidence and use that information solely for the purposes
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described in the preceding sentence, except to the extent that information (i)
is or becomes available to the public (other than through a breach of this
Agreement), (ii) becomes available to the Selling Stockholder from a third party
which, insofar as the Selling Stockholder is aware, is not under an obligation
to the Buyer, to the Company or to a subsidiary to keep the information
confidential, (iii) was known to the Selling Stockholder before it was made
available to the Selling Stockholder or its affiliate or representative by the
Company or a subsidiary, or (iv) otherwise is independently developed by the
Selling Stockholder or by an affiliate or representative of the Selling
Stockholder.
(c) Until the third anniversary of the Closing Date, as to Three
Cities Fund II, L.P. and Three Cities Offshore II C.V. (the "Three Cities
Funds") and until the first anniversary of the Closing Date as to X.X. Xxxxxxxxx
("Xxxxxxxxx") (each the "Noncompetition Period" as to the applicable entities or
person), none of the Three Cities Funds or Xxxxxxxxx will invest in, or engage
directly or indirectly, as an employee, a director or otherwise, in the business
of, any of the companies listed on Exhibit 10.2-C, PROVIDED, HOWEVER, that
nothing in this Paragraph 10.2 will prevent the Three Cities Funds together, or
Xxxxxxxxx, from owning less than 5% of the outstanding stock of any
publicly-traded corporation. During the applicable Noncompetition Period,
neither of the Three Cities Funds nor Xxxxxxxxx will, on behalf of any entity
other than the Company or a subsidiary, solicit or otherwise attempt to hire or
retain, in any capacity, any person who is, at that time an employee or officer
of the Company or a subsidiary or attempt to cause any such person to terminate
his or her employment with the Company or a subsidiary. If the final judgment of
a court of competent jurisdiction declares that any term or provision of this
Paragraph is invalid or unenforceable, the parties agree that the court making
the determination of invalidity or unenforceability will have the power to
reduce the scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement will be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
11.3. Press Releases. Neither the Buyer nor the Selling
Stockholders will issue any press release or otherwise make any public statement
regarding this Agreement or the transactions contemplated by it, unless the
press release or public statement has been approved by the Buyer and by the
Stockholders Representative, except that nothing in this Paragraph will prevent
any party from making any statement when and as required by law or by the rules
of any securities exchange or securities quotation system on which securities of
that party or an affiliate are listed or quoted.
11.4. Entire Agreement. This Agreement (including the Exhibits)
and the documents to be delivered in accordance with this Agreement contain the
entire agreement between the Buyer and the Selling Stockholders relating to the
transactions which are the subject of this Agreement and those other documents,
all prior negotiations, understandings and agreements between the Buyer and any
of the Selling Stockholders are superseded by this Agreement and those other
documents, and there are no representations, warranties, understandings or
agreements concerning the transactions which are the subject of this Agreement
or those other documents other than those expressly set forth in this Agreement
or those other documents.
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11.5. Captions. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
11.6. Assignments. Neither this Agreement nor any right of any party
under it may be assigned, except that the Buyer may assign its rights and
obligations under this Agreement to a corporation which is wholly owned by the
Buyer, if the Buyer unconditionally guarantees that the corporation to which the
Buyer's rights and obligations are assigned will perform fully all the
obligations of the Buyer under this Agreement.
11.7. Notices and Other Communications. Any notice or other
communication under or relating to this Agreement must be in writing and will be
deemed given when delivered in person or sent by facsimile (with proof of
receipt at the number to which it is required to be sent), on the business day
after the day on which it is delivered to a major nationwide delivery service
for overnight delivery, or on the third business day after the day on which it
is mailed by first class mail from within the United States of America, to the
following addresses (or such other address as may be specified as provided in
this Agreement after the date of this Agreement by the party to which the notice
or communication is sent):
If to any Selling Stockholder:
Three Cities Research, Inc.
as Stockholders Representative
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: W. Xxxxxx Xxxxxx II
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
If to the Buyer:
The Monarch Machine Tool Company
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, President
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxx & Xxxxx LLP
0000 Xxxxxxxxxx Xxxxx X.X.
Xxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
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11.8. Governing Law. This Agreement will be governed by, and construed
under, the substantive laws of the State of Delaware.
11.9. Amendments. This Agreement may be amended only by a document in
writing signed by both the Buyer and the Stockholders Representative.
11.10. Counterparts. This Agreement may be executed in two or more
counterparts, some of which may be signed by fewer than all the parties or may
contain facsimile copies of pages signed by some of the parties. Each of those
counterparts will be deemed to be an original copy of this Agreement, but all of
them together will constitute one and the same agreement.
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IN WITNESS WHEREOF, the Buyer and the Selling Stockholders have
executed this Agreement, intending to be legally bound by it, on the day shown
on the first page of this Agreement.
THE MONARCH MACHINE TOOL
COMPANY.
By:_______________________________
Title:
THREE CITIES FUND II, L.P. THREE CITIES OFFSHORE II C.V
By TCR Associates, L.P. By: TCR Offshore Associates L.P.
General Partner General Partner
By: THREE CITIES RESEARCH, INC By: THREE CITIES ASSOCIATES N.V.
General Partner General Partner
By:_______________________________ By:_______________________________
Title: Title:
ALLIED CAPITAL CORPORATION ALLIED INVESTMENT CORPORATION
By:_______________________________ By:_______________________________
Title: Title:
WYNNEFIELD PARTNERS SMALL CAP
_______________________________ VALUE, L.P.
Xxxxxxx X. Xxxxxx III
_______________________________ By:_______________________________
Xxxxxx X. Xxxxxxx Title:
* *
------------------------------- -------------------------------
Xxxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx
* *
------------------------------- -------------------------------
X. Xxxxxxx Xxxxxx M. Xxxxx Xxxxxxx
* *
------------------------------- -------------------------------
Xxxxxxx X. Xxxxx Xxxxxx X. Xxxxxxx
* *
------------------------------- -------------------------------
X.X. Xxxxxxxxx Xxxxx X. Xxxxxx
* *
------------------------------- -------------------------------
Xxxxxxx X. Xxxxx Xxxx X. Xxxxxxx
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* *
------------------------------- -------------------------------
Xxxxxx X. Xxxxxxxxx Xxxxxx X. Xxxxxxxxxxxx
* *
------------------------------- -------------------------------
Xxxxxxx X. Xxxxxx Xxxxxx X. Xxxxxxx
* *
------------------------------- -------------------------------
Xxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx
* *
------------------------------- -------------------------------
Xxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx
* *
------------------------------- -------------------------------
Xxxxxx X. Xxxx Xxxx X. Xxxx
* *
------------------------------- -------------------------------
Xxxxxx X. Xxxxx Xxxx X. Xxxxxx
* *
------------------------------- -------------------------------
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxxxxx
* *
------------------------------- -------------------------------
Xxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxx
* *
------------------------------- -------------------------------
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxx
* *
------------------------------- -------------------------------
Xxxxx X. Xxxxxxxxx Xxxxxx X. Xxxxxx
* *
------------------------------- -------------------------------
Xxxx X. Xxxxxxx Xxxxx X. Xxxxxxxxx
* *
------------------------------- -------------------------------
Xxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxxxx
* *
------------------------------- -------------------------------
Xxxxxxx X. XxXxxx Xxxxx X. Xxxxxxx
* *
------------------------------- -------------------------------
Xxxxxxx X. XxXxx Xxxxxxx X. Xxxxxxxx
* *
------------------------------- -------------------------------
Xxxxx X. XxXxxxx Xxxxxxx X. Xxxxxxxx
* *
------------------------------- -------------------------------
Xxxx X. Xxxxxxxxx Xxxxx X. Xxxxx
* *
------------------------------- -------------------------------
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx
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* *
------------------------------- -------------------------------
Xxxxx X. Xxxxxx Xxxxxxx X. Xxxxx
* *
------------------------------- -------------------------------
Xxxxxxx X. Stock Xxxxxx X. Xxxxx
* *
------------------------------- -------------------------------
Xxxxx X. Xxxxxx Xxxxx X. Xxxx
*
-------------------------------
Xxxx X. Xxxxxxxxxx
*
-------------------------------
Xxxx X. Xxxxx
*By_________________________
W. Xxxxxx Xxxxxx II
Attorney-in-Fact
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