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EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
AMONG
SL INDUSTRIES, INC.,
AND
SL INDUSTRIES ACQUISITION CORP.
AND
TEAL ELECTRONICS CORPORATION
DATED AS OF MAY 1, 1995
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TABLE OF CONTENTS
PAGE
SECTION 1. SALE AND PURCHASE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.1 Sale and Purchase of the Purchased Assets. . . . . . . . . . . . . . . . . . . . . . . . 11
1.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.3 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.4 Assumption of Liabilities; Retained Liabilities. . . . . . . . . . . . . . . . . . . . . 14
SECTION 2. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1 Place of Closing and Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Closing Deliveries of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Closing Deliveries of Purchaser and SLI. . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER . . . . . . . . . . . . . . . . 18
3.1 Organization of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.5 List of Properties, Contracts and Personnel Data. . . . . . . . . . . . . . . . . . . . . 20
3.6 Purchased Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.7 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.8 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.9 Leases and Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.10 Permits and Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.13 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.14 Labor Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.15 Absence of Changes or Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.16 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.17 Proceedings re Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . 25
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3.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.19 Absence of Certain Business Practices. . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.20 Transactions with Certain Persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.21 Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.22 Business Description. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER AND SLI . . . . . . . . . . 27
4.1 Organization of Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3 Operation of Purchaser During the Earnout Period. . . . . . . . . . . . . . . . . . . . . 28
4.4 Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5. COVENANT NOT TO COMPETE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6. CONDUCT OF BUSINESS PRIOR TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7. TRANSFER EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8. CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Conditions Precedent to Purchaser's and SLI's Obligations. . . . . . . . . . . . . . . . 30
8.2. Conditions Precedent to Seller's Obligations. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 9. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . . . . . . . . . 34
SECTION 11. DISPUTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
STATEMENT OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
ANNEX A
DESCRIPTION OF BUSINESS
ANNEX B
ESCROW AGREEMENT
ANNEX C
BILL OF SALE
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ANNEX D
KEY EMPLOYEES AND CONTRACTS OF EMPLOYMENT
ANNEX E
COVENANT NOT TO COMPETE AGREEMENTS
SCHEDULE 1
EQUIPMENT AND MACHINERY
SCHEDULE 2
REAL PROPERTY LEASES
SCHEDULE 3
PERSONAL PROPERTY LEASES
SCHEDULE 4
CONTRACTS AND AGREEMENTS
SCHEDULE 5
LICENSES AND PERMITS
SCHEDULE 6
PURCHASE ORDERS FOR MATERIAL OR EQUIPMENT
SCHEDULE 7
EMPLOYEE PLANS
SCHEDULE 8
LABOR AGREEMENTS
SCHEDULE 9
DEFINITION OF TANGIBLE NET BOOK VALUE
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into as of May 1, 1995
(the "Agreement"), by and among SL Industries, Inc., a New Jersey Corporation
("SLI"), SL Industries Acquisition Corp., a California corporation
("Purchaser") and Teal Electronics Corporation, a California corporation
("Seller"), at San Diego, California.
WITNESSETH:
WHEREAS, SLI desires to acquire the Business of Seller and has organized
Purchaser as a wholly-owned subsidiary corporation to purchase from Seller
substantially all of the assets and properties of Seller ("Purchased Assets"),
subject to certain liabilities, all upon the terms and conditions herein set
forth;
WHEREAS, Seller desires to sell and transfer to Purchaser, the Purchased
Assets" subject to certain liabilities, all upon the terms and conditions
herein set forth; and
WHEREAS, SLI intends that Seller's Business will be operated by
Purchaser in a semi-autonomous manner, which is consistent with the procedure
followed by SLI in operating its other businesses.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties, intending to be legally bound thereby,
agree as follows:
SECTION 1. SALE AND PURCHASE TRANSACTION.
1.1 SALE AND PURCHASE OF THE PURCHASED ASSETS.
Subject to the terms and conditions set forth in this Agreement and on
the basis of and in reliance upon the representations, warranties, obligations
and agreements set forth in this Agreement, Seller hereby agrees to sell,
assign, transfer, convey and deliver to Purchaser, and Purchaser hereby agrees
to purchase, acquire and accept from Seller, the Purchased Assets. The
Purchased Assets include, without limitation, the assets and properties
described in the following paragraphs (a) through (n):
(a) All notes and accounts receivable of Seller, including accounts
receivable from employees of Seller (exclusive of any shareholder notes and any
accrued interest thereon ("Receivables");
(b) The prepaid expenses of Seller, including insurance premiums
allocable to periods subsequent to the Closing Date ("Prepaid Expenses");
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(c) All inventories, materials and supplies of Seller (including,
without limitation, raw materials, work in process and finished goods,
including those in the possession of suppliers and customers) ("Inventories");
(d) All equipment, machinery, trucks, automobiles and furniture and
fixtures of Seller including, without limitation, those listed in Schedule 1
hereto ("Equipment and Machinery");
(e) The real property leases, including security deposits and leasehold
improvements on the facilities leased by Seller and used in operation of
Seller's Business (as described in Annex A hereto), listed in Schedule 2
hereto;
(f) The personal property leases listed in Schedule 3 hereto;
(g) Any rights and interests of Seller in and to any patents,
copyrights and trademarks;
(h) All rights of Seller to the extent assignable under or pursuant to
the warranties, representations and guarantees made by suppliers in connection
with products or services furnished to Seller or affecting the Equipment and
Machinery used in connection with the Purchased Assets;
(i) All manufacturing, engineering and other drawings, technical
information, engineering data, design and engineering specifications and
similar materials recording or evidencing Seller's proprietary expertise
relating to the Purchased Assets;
(j) All rights and interest of Seller to any pending or executory
contracts with respect to employee benefits, the purchase of materials,
supplies, services and claims, or the sale of the products or services of
Seller, including customer deposits and further including without limitation,
those set forth in Schedule 4 hereto;
(k) All rights and interests of Seller in or to any licenses, permits,
approvals or similar permissions relating to use of the Purchased Assets,
including, without limitation, those set forth in Schedule 5 hereto;
(l) Seller's interest in its name or in any trade names and slogans;
(m) Seller's Business, including the goodwill of such Business; and
(n) All records, files and papers relating to the Purchased Assets,
including, without limitation, drawings, engineering information, computer
programs, manuals and data, catalogues, quotations, sales and advertising
materials, sales and purchase correspondence, lists of present and former
customers and suppliers, customer credit information (except any which is
subject to an agreement of confidentiality), customer pricing information,
books of account and personnel, employment records and other records relating
to the Purchased Assets.
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The Purchased Assets do not include any of Seller's cash or any refund
of worker's compensation premiums received subsequent to the Closing which are
based upon Seller's operations prior to the Closing.
1.2 PURCHASE PRICE.
The price to be paid for the Purchased Assets acquired pursuant to
Section 1.1 ("Purchase Price") shall be
(a) Six Million One Hundred Thirty Three Thousand Dollars ($6,133,000);
and
(b) A contingent amount ("Earnout") equal to 50% of the Net Profits of
Seller's Business (the only business intended to be operated by Purchaser) as
operated by Purchaser subsequent to the Closing Date, in excess of $1,100,000
for each of the five fiscal years beginning on the first day of the first
fiscal month of Purchaser following the Closing; provided that if the Closing
occurs on or before May 8, 1995, the five year Earnout period shall begin on
May 1, 1995. Such computation shall be made year-by-year and not cumulatively.
(c) A computation of the Earnout for each of the five years included
therein shall be made by Purchaser quarterly during the Earnout period and
shall be distributed in accordance with Section 1.3(c) hereof, together with
Purchaser's financial statements for such quarterly periods.
(d) Net Profits as used in this Section 1.3 means the income from the
operation of Seller's Business determined in accordance with generally accepted
accounting principles consistently applied by Seller prior to the Closing and
maintained throughout such 5 year Earnout period. In calculating Net Profits:
(i) Revenues from the sale of all Teal products and services,
whether manufactured in San Diego or elsewhere and whether generated by
referral from SLI or elsewhere, after customary returns and allowances, will
be included in net sales;
(ii) Cost of goods sold will consist of actual material, labor and
overhead charges, including depreciation and amortization expense, determined
on the same basis as determined by Seller prior to the Closing;
(iii) Operating expenses will include normal charges in
accordance with the with the manner in which such expenses were booked by
Seller in its financial records prior to the Closing;
(iv) No overhead, capital management, amortization and/or
depreciation expense of any Purchased Assets in excess of their net book
value on the Closing Date, or other charges of any kind of SLI or its
affiliates, other than Purchaser, will be included in the expenses of Seller's
Business; and
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(v) No United States, foreign or state income or California
franchise taxes will be deducted in arriving at Net Profits.
1.3 PAYMENT OF PURCHASE PRICE.
The Purchase Price will be paid on the Closing Date as follows:
(a) Five Million Nine Hundred Eighty Three Thousand Dollars
($5,983,000) by wire transfer to the account of Seller;
(b) One Hundred Fifty Thousand Dollars ($150,000) by wire transfer to
Nossaman, Guthner, Knox & Elliott, as Escrow Agent under that certain Escrow
Agreement dated the Closing Date in the form of Annex B hereto; and
(c) The Earnout shall be paid to Seller by Purchaser or SLI in
quarterly installments, as earned, with sixty percent (60%) of the amount
fiscal year in the Earnout period paid within thirty days of the end of the
fiscal quarter, and the balance, if any, for the fiscal year paid within sixty
days after the end of each of the five fiscal years in the Earnout period. SLI
guarantees Purchaser's performance of this payment obligation.
1.4 ASSUMPTION OF LIABILITIES; RETAINED LIABILITIES.
On the terms and subject to the conditions set forth in this Agreement,
Purchaser and SLI shall assume and agree to pay, perform and discharge in due
course only those debts, liabilities, obligations, contracts, leases,
commitments and undertakings of Seller set forth below, provided they have been
incurred by Seller in the ordinary course of its Business (consistent with past
practice) and exclusively pertain to the Purchased Assets ("Assumed
Liabilities"):
(a) Trade accounts payable and accrued payroll, including commissions
and bonuses, payroll taxes, payroll deduction items, vacation and sick
leave, wage garnishments and 401K amounts;
(b) State or local sales taxes relating to periods before the Closing
Date incurred in respect of the operation of its Business;
(c) Liabilities of Seller for insurance premiums related to Seller's
operation of its Business prior to the Closing Date;
(d) Seller's obligations (other than those which by their nature cannot
be performed by Purchaser) and liabilities with respect to the Purchased Assets
relating to periods subsequent to the Closing Date, under the real property
lease described in Schedule 2 hereto, personal property leases described in
Schedule 3 hereto and contracts and agreements set forth in Schedule 4 hereto;
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(e) Seller's obligations with respect to any unfilled purchase orders
for goods to be delivered by Seller; and
(f) Seller's obligations with respect to any purchase orders for
material or equipment to be purchased by Seller, excluding purchase
orders for material or equipment which exceed $10,000 for any single purchase
order or $50,000 in the aggregate for all of such purchase orders, unless
approved in writing by Purchaser or listed in Schedule 6 hereto.
Notwithstanding anything to the contrary set forth above, neither
Purchaser nor SLI shall assume, nor shall Purchaser or SLI pay, perform, defend
or discharge any debts, liabilities, obligations, contracts, loans, commitments
or undertakings of Seller, whether fixed, unliquidated, absolute, contingent or
otherwise, unless expressly described above, including without limitation, the
following ("Retained Liabilities"):
(g) Any liability of Seller the existence of which would constitute a
breach of any of Seller's representations and warranties contained in Section 3
of this Agreement;
(h) Liabilities of Seller with respect to any indebtedness for borrowed
money or for the deferred purchase price of property or services;
(i) Obligations of Seller under any direct or indirect product
warranties from sales made prior to the Closing Date;
(j) Liabilities for property or income taxes or other taxes of Seller
measured by the income of Seller;
(k) Liabilities of Seller for any worker's compensation claims or
worker's compensation insurance premiums;
(l) Liabilities of Seller for product liability claims relating to
products sold by Seller prior to the Closing Date, but only to the extent that
such claims are not covered by insurance;
(m) Liabilities based on tortious or illegal conduct by Seller prior to
the Closing Date, but only to the extent that such liabilities are not covered
by insurance;
(n) Any liability related to any litigation in which Seller is a
defendant, or litigation threatened against Seller, prior to the Closing Date;
(o) Liabilities arising or incurred by Seller after the Closing Date;
and
(p) Except as otherwise provided herein, liabilities of Seller
resulting from the negotiation and consummation of the transactions
contemplated by this Agreement and any Federal income or California Franchise
Tax resulting from the sale of the Purchased Assets under this Agreement.
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In determining the liabilities not assumed by Purchaser and which were
retained and are payable by Seller, Seller will be given credit for any
reserves for liabilities contained in Seller's financial statements, including
the reserve established for state income or California franchise taxes.
SECTION 2. CLOSING.
The transactions contemplated by this Agreement shall be consummated at
a closing ("Closing").
2.1 PLACE OF CLOSING AND CLOSING DATE.
The Closing shall be held at the offices of the Seller, 10350 Sorrento Valley
Road, San Diego, California 92121, on Monday, May 8, 1995 (the "Closing Date"),
in which event Seller's books and records shall be closed as of the close of
business on Sunday, April 30, 1995 with an accounting adjustment to said books
to reflect changes in the physical inventory between April 30, 1995 and May 8,
1995 (but not inclusive of April 30, or May 8). The Earnout period shall
commence on May 1, 1995, as contemplated by Section 1.2(b).
2.2 PRORATIONS.
In lieu of any prorations otherwise due Purchaser or Seller as a result
of the Closing Date, Purchaser shall pay to Seller the sum of $30,000 on the
Closing Date.
2.3 CLOSING DELIVERIES OF SELLER.
On the Closing Date, Seller shall deliver to Purchaser, in form
reasonably satisfactory to counsel for Purchaser, the following:
(a) A Bill of Sale in substantially the form attached hereto as Annex C
to Purchaser from Seller covering all of the Purchased Assets, and any other
instruments of sale, conveyance, transfer and assignment, and such documents,
insurance policies (with endorsements), certifications, notices or assurances
as Purchaser may reasonably require, as necessary or desirable to transfer,
assign and convey to Purchaser as of the Closing Date, good and marketable
title to all of the Purchased Assets;
(b) A certificate of the Secretary of Seller stating that (i) the
directors of Seller have authorized and approved the transactions contemplated
by this Agreement, and (ii) the shareholders of Seller owning the requisite
number of the issued and outstanding shares of capital stock of Seller, in
proceedings duly held for the purpose of approving the transactions under this
Agreement in accordance with applicable law, voted affirmatively for said
transactions;
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(c) The Certificate of Seller referred to in Section 8.1(i) hereof;
(d) The Covenant Not to Compete Agreements referred to in Section
8.1(g) hereto; and
(e) An opinion of counsel for Seller, to Purchaser, dated the Closing
Date, that:
(1) Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of California;
(2) Seller has the corporate power and authority to operate its
Business and use the Purchased Assets, as presently operated;
(3) This Agreement and the transactions contemplated hereby have
been duly approved and adopted by all requisite corporate action of
Seller, including its shareholders, and this Agreement has been duly and validly
executed and delivered by Seller. This Agreement is the valid and binding
agreement of Seller, enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization or
other laws or equitable principles relating to the enforcement of creditors'
rights generally; and
(4) The instruments of sale, conveyance, transfer and assignment
delivered by Seller to Purchaser pursuant to Sections 1 and 2 of this Agreement
have been duly authorized, executed and delivered by Seller and will transfer
to Purchaser Seller's interest in the Purchased Assets.
2.4 CLOSING DELIVERIES OF PURCHASER AND SLI.
On the Closing Date, SLI and/or Purchaser shall deliver to Seller, in
form reasonably satisfactory to counsel for Seller, the following:
(a) Evidence of the wire transfer called for in Section 1.3(a) and (b)
hereof;
(b) A certificate of an officer of each of SLI and Purchaser stating
that their directors have authorized and approved the transactions
contemplated by this Agreement;
(c) The Certificates of SLI and Purchaser referred to in Section 8.2(c)
hereof;
(d) The Employment Agreements referred to in Section 8.2(d) hereof;
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(e) An opinion of Nossaman, Guthner, Knox & Elliott, counsel for
Purchaser, to Seller, dated the Closing Date, that:
(1) Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of California;
(2) Purchaser has the corporate power and authority to consummate
the transactions provided for herein; and
(3) This Agreement and the transactions contemplated hereby have
been duly approved and adopted by all requisite corporate action of
Purchaser and this Agreement has been duly and validly executed and delivered by
Purchaser and is the valid and binding agreement of Purchaser enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or other laws or equitable principles relating to or
affecting the enforcement of creditors' rights generally.
(f) An opinion of Ted D. Taubeneck, General Counsel to SLI, to Seller,
dated the Closing date that:
(1) SLI is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey;
(2) SLI has the corporate power and authority to consummate the
transactions provided for herein; and
(3) This Agreement and the transactions contemplated hereby have
been duly approved and adopted by all requisite corporate action of SLI
and this Agreement has been duly and validly executed and delivered by SLI and
is the valid and binding agreement of SLI enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws or equitable principles relating to or affecting
the enforcement of creditors' rights generally.
SECTION 3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER.
As an inducement to Purchaser and SLI to enter into this Agreement and
to consummate the transactions contemplated herein, except as set forth in the
attached Statement of Exceptions to Representations and Warranties, Seller
represents and warrants to Purchaser and SLI and agrees as follows:
3.1 ORGANIZATION OF SELLER.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has full corporate power
to own its properties and conduct the Business presently being conducted by it.
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3.2 CORPORATE AUTHORITY.
The execution, delivery and performance of this Agreement by Seller
have been duly authorized and approved by all requisite corporate action
on the part of Seller, including approval by Seller's shareholders of the sale
of the Purchased Assets to Purchaser, and neither the execution nor the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
nor compliance with or fulfillment of the terms and provisions of this
Agreement, will (a) conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, the Articles of Incorporation
or Bylaws of Seller, or any instrument, agreement, mortgage, lease, judgment,
order, award, decree or other instrument or restriction to which it is a party
or by which it is bound, (b) require any affirmative approval, consent,
authorization or other order or action of any court, governmental authority or
regulatory body or of any creditor of Seller, or (c) give any party with rights
under any such instrument, agreement, mortgage, judgment, order, award, decree
or other restriction the right to terminate, modify or otherwise change the
rights or obligations of Seller under such instrument, agreement, mortgage,
judgment, order, award, decree or other restriction. All corporate acts and
other proceedings required to be taken by or on the part of Seller to authorize
it to carry out this Agreement and such other agreements and instruments as are
contemplated hereby and the transactions contemplated hereby and thereby have
been duly and properly taken. This Agreement and such other agreements and
instruments when duly executed and delivered by Seller will constitute valid and
binding obligations of Seller and will be enforceable in accordance with their
respective terms.
3.3 SUBSIDIARIES.
The Company has no subsidiaries or affiliates, and has no interest, and
no commitment to purchase or sell any interest, in, and has no undertaking in
favor of, any other corporation, partnership, joint venture or other business
enterprise or entity. The Business carried on by Seller, which is described in
Annex A hereto, has not been conducted through any other entity.
3.4 FINANCIAL STATEMENTS.
Seller has delivered to Purchaser copies (initialed by one of its
officers and identified with a reference to this section of this Agreement) of
the following financial statements together with relevant footnotes and reports
thereon (hereinafter collectively called the "Financial Statements"), all of
which are complete and correct, have been prepared from the books and records
of Seller in accordance with generally accepted accounting principles
consistently applied and maintained throughout the periods indicated and fairly
present the financial condition of Seller as at their respective dates and the
results of its operations for the periods covered thereon:
(a) balance sheets of Seller as at December 31, 1990, 1991, 1992, 1993
and 1994 and statements of earnings and cash flows for the years then ended,
and the independent auditor's reports thereto; and
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(b) an unaudited balance sheet of Seller ("Balance Sheet") as at
February 28, 1995 ("Balance Sheet Date"), and unaudited statements of earnings
and cash flows for the fiscal period then ended.
Such statements of earnings do not contain any material items of
special or nonrecurring income or any other income not earned in the
ordinary course of business, except as expressly specified therein, and such
Financial Statements include all provisions and adjustments, including normal
recurring accruals, necessary for such fair presentation.
3.5 LIST OF PROPERTIES, CONTRACTS AND PERSONNEL DATA.
Seller has delivered to Purchaser true, correct and complete lists,
certified to be accurate by an officer of Seller as of the date hereof, of the
matters set forth in the following subsections (a) through (k), together, where
specified, with true and complete copies of the documents referred to in said
subsections, certified to be correct by an officer of Seller as of the date
hereof:
(a) All real property. in which the Seller has a leasehold or other
interest or which is used by it in the operation of its Business, together with
a description of each lease or other instrument under which it holds such
leasehold or other interest, identifying the parties thereto, the rental or
other payment terms, the expiration date and the cancellation and renewal terms
thereof.
(b) As of the Balance Sheet Date, all of the Receivables and
payables of Seller (which shall include trade accounts, loans and
advances), together with detailed information as to each such listed Receivable
or payable or receivable which has been outstanding for more than 60 days.
(c) As of the Balance Sheet Date, a list of all non-cancelable
orders in the backlog of Seller from bona fide, responsible customers,
that, to the best of Seller's knowledge, can and will be shipped and paid for.
(d) As of the Balance Sheet Date, the Inventories of Seller and as
of the date of this Agreement, all of the material purchase commitments
for goods and materials that would become items of Inventory.
(e) All Equipment and Machinery owned, leased or used by Seller,
except for items having a book value of less than $1,000 which do not,
in the aggregate, have a total book value of more than $25,000, setting forth
with respect to all such listed property a summary description of all leases,
identifying the parties thereto, the rental or other payment terms, the
expiration date and cancellation and renewal terms thereof.
(f) All patents, patent applications, patent licenses, trademarks,
trademark registrations, service marks, service names, trade names, copyrights
and copyright registrations, owned or held by Seller or used in the operation
of its Business.
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(g) All fire, theft, casualty, liability, workers compensation and
other insurance policies insuring Seller and its property, personnel and
operations, specifying with respect to each such policy the name of the insurer,
the risk insured against, the limits of coverage, the deductible amount (if
any), the premium and the date through which coverage will continue by virtue of
premiums already paid. Such policies are with reputable insurers and provide
adequate coverage for all normal risks incident to Seller's property, personnel
and operations.
(h) All sales representation or distributorship agreements, and
agreements providing for the services of an independent contractor, to which
Seller is a party or by which it is bound.
(i) All agreements, commitments or licenses relating to patents,
trademarks, trade names, copyrights, competition, territorial rights,
inventions, processes, know-how, formulae or trade secrets to which Seller is a
party or by which it is bound.
(j) All loan agreements, mortgages, pledges, conditional sale or title
retention agreements, security agreements, equipment obligations, guarantees,
or instruments relating to money or credit to which Seller is a party or by
which it is bound.
(k) All pension, profit sharing, bonus, disability, group insurance,
or other similar employee benefit plan, program or arrangement, written
or otherwise, for the benefit of or relating to the employees of Seller or any
of them, established, maintained or contributed to by Seller, and any related
insurance contracts and trust and custodial agreements (collectively, "Employee
Plans") listed in Schedule 7 hereto, accompanied by copies thereof, and, with
respect to each employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), accompanied by (i)
the most recent annual actuarial report, if any, (ii) the last filed Form 5500
and Schedule A or B thereto or both, (iii) the Summary Plan Description and all
modifications thereto, and (iv) the most recent annual and periodic report, if
any, of Employee Plan assets; provided, however, that in the case of any
multi-employer plans within the meaning of Section 3(37) of ERISA, Seller shall
only be required to use reasonable efforts to provide any of the items referred
to in subsections (i), (ii), (iii) and (iv) hereof;
3.6 PURCHASED ASSETS.
(a) Seller owns, leases or has the legal right to use all of the
Purchased Assets.
(b) To the best knowledge of Seller, the Equipment and Machinery of
Seller are in good condition and suitable for the uses for which intended, in
normal operating condition, free from any known defects, except such defects as
do not interfere with the continued use of such Equipment and Machinery in the
normal operation of the Purchased Assets as heretofore operated.
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(c) The Purchased Assets and their uses, to the best knowledge of
Seller, conform in all material respects to all applicable zoning and
building laws; and, if such zoning and building laws include conditional use
permits or variances, then such conditional use permits or variances will apply
to Purchaser and will permit it to use the Purchased Assets in approximately the
same manner that they are being used by Seller.
(d) Seller has good and marketable title to, or, in the case of
leases, valid and subsisting leasehold interests in, all of the Purchased
Assets, free and clear of all liens, mortgages, pledges, encumbrances,
conditional sales agreements, security interests, title retention devices or
charges of any kind, except (i) liens, mortgages, pledges, encumbrances,
conditional sales agreements, security interests, title retention devices or
charges reflected in Seller's Balance Sheet which do not materially detract from
the value of any property or asset subject thereto or affected thereby or
interfere to any extent with the continuation of the present use of the
properties subject thereto or affected thereby or otherwise materially impair
the Purchased Assets, and (ii) liens for current taxes or assessments not yet
due and payable. The instruments of sale, conveyance, transfer and assignment
delivered by Seller to Purchaser pursuant to Sections 1 and 2 of this Agreement
will effectively transfer to Purchaser beneficial ownership and Seller's
interest in the Purchased Assets. With respect to leases, Seller has not
received any notice of cancellation or termination under any option or right
reserved to the lessor under any such lease or any notice of default under any
such lease and there is no event which, with notice or lapse of time or both,
would constitute a default under any such lease.
3.7 RECEIVABLES.
All Receivables which are reflected in the Balance Sheet, and all such
Receivables which have arisen since the date thereof, have arisen only from
bona fide transactions in the ordinary course of business consistent with prior
practice and shall be (or have been) fully collected when due or within 120
days after they arose (whichever is earlier), without resort to litigation and
without offset, discount, return or allowance, in the aggregate face amounts
thereof, as reflected on the Balance Sheet.
3.8 INVENTORY.
Substantially all items of Inventory reflected on the Balance Sheet or
thereafter acquired (and not subsequently disposed of in the ordinary course of
business consistent with prior practice) are suitable and usable for the
production or completion of merchantable products in the ordinary course of
business as first quality goods at normal mark-ups; and no significant quantity
of such items is hazardous or toxic.
3.9 LEASES AND CONTRACTS.
Each lease, contract or other agreement or commitment listed on
Schedules 3 and 4 hereto is, to the best of Seller's knowledge, in full force
and effect on the date hereof, and is valid and enforceable in accordance with
its terms.
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3.10 PERMITS AND LICENSES.
Seller, to the best of its knowledge, owns or has acquired all permits,
licenses or similar permissions required under any Federal laws or regulations
or required under any state, county or local laws or regulations for conducting
the Business of Seller, as listed in Schedule 5 hereto, and each is in full
force and effect on the date hereof.
3.11 TAXES.
To the best of Seller's knowledge, all taxes, assessments and other
charges, including, without limitation, income, franchise, property, sales,
use, added value, employees' withholding, unemployment, disability and social
security taxes, imposed by the United States or by any foreign country or by
any state or municipality, or by any other taxing authority, which are due or
payable by Seller, and all interest and penalties thereon, whether disputed or
not, have been paid in full; all tax and information returns required to be
filed in connection therewith have been, to the best of Seller's knowledge,
accurately prepared and duly and timely filed; and all deposits required by law
to be made by Seller with respect to employees' withholding or other taxes have
been duly and timely made. Seller has not been delinquent in the payment of
any tax and has no deficiency or claim proposed or assessed against it and
there is no basis for any such deficiency or claim. Seller's Federal and state
income tax returns have never been audited, except for a Federal audit of
Seller's 1987 income tax return which resulted in no adjustments, and there is
not now in force any extension of time with respect to the date on which any
tax return was or is due to be filed by or with respect to it, or any waiver or
agreement for the extension of time for the assessment of any tax.
3.12 LITIGATION.
There is no pending or, to the best of Seller's knowledge, threatened
action, lawsuit, claim, proceeding, or investigation against, by or affecting
Seller which if decided adversely against Seller would have an adverse effect
upon the Purchased Assets, in any court, or before any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
Seller is not in default with respect to any order, writ, injunction, or decree
of any court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting or relating to the Purchased Assets.
3.13 COMPLIANCE WITH LAWS.
Seller has no knowledge of any noncompliance or alleged noncompliance
with applicable statutes, orders, rules and regulations promulgated by
governmental authorities relating in any material respect to the Purchased
Assets or the operation thereof, including, without limitation, any thereof
relating to wages, hours, hiring, promotion, retirement, working conditions,
air, water, solid or liquid waste or pollution,
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discrimination, health, safety, pensions, benefits, the production, processing,
advertising and sales of products, trade regulation or antitrust, and Seller
has not received any notice of any sort of alleged violation of any such
statute, order, rule or regulation.
3.14 LABOR AGREEMENTS.
Seller is not a party to any labor agreement with any labor organization
with respect to the operation of the Purchased Assets other than as
specifically described in Schedule 8 hereto and there is no employee
disturbance pending or threatened against Seller with respect to the operation
of the Purchased Assets.
3.15 ABSENCE OF CHANGES OR EVENTS.
Since the Balance Sheet Date, Seller has conducted its business only in
the ordinary course and has not:
(a) to the best of Seller's knowledge, incurred any obligation or
liability, contingent or otherwise, except current liabilities for trade or
business obligations incurred in connection with the purchase of goods or
services in the ordinary course of business and consistent with prior practice;
(b) mortgaged, pledged or subjected to lien, security interest or any
other encumbrance or restriction, any of its properties;
(c) sold, transferred, leased or otherwise disposed of any of its
properties, except for Inventory sold in the ordinary course of business,
consistent with prior practice, or canceled or compromised any debt or claim,
or waived or released any right of substantial value;
(d) received any notice of termination of any agreement or suffered any
damage, destruction or loss (whether or not covered by insurance) which, in any
case or in the aggregate, has had or could have a materially adverse effect on
the properties, operations or prospects of Seller;
(e) encountered any labor union organizing activity or had any material
change in its relations with its employees, agents, customers or suppliers;
(f) failed to replenish its Inventories and supplies in a normal and
customary manner consistent with prior practice, or made any purchase
commitment in excess of the normal requirements of its Business or at any price
in excess of the then current market price or upon terms and conditions more
onerous than those customary in the industry, or made any change in its selling
or pricing practices inconsistent with its prior practices;
(g) made any change in the rate of compensation or other remuneration
payable, or paid or agreed or orally promised to pay, any bonus, extra
compensation,
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pension or severance or vacation pay, to any shareholder, director, officer,
employee, representative or consultant of Seller, except in the ordinary course
of business, or the increase is less than 10% of such person's base wages;
(h) acquired any interest in any business enterprise, or otherwise made
any loan or advance to, or entered into any undertaking in favor of, any
person;
(i) made, or committed to make, any capital expenditures, other than in
the ordinary course of business;
(j) instituted, to the best of Seller's knowledge, been named in,
settled or agreed to settle any litigation, action or proceeding before any
court or governmental body relating to it or its properties; or
(k) to the best of Seller's knowledge suffered any change which, in any
case or in the aggregate, has had or may have a materially adverse effect on
its condition or prospects (financial or otherwise), properties, liabilities or
operations;
and no matter or occurrence has come to the attention of the Seller that is
likely to cause any adverse change in the financial position, results of
operations, cash flows or prospects of Seller.
3.16 RECORDS.
The books of account of the Company are complete and correct in all
material respects, and there have been no transactions involving its Business
which properly should have been set forth therein but which have not been
accurately so set forth.
3.17 PROCEEDINGS RE EMPLOYEE BENEFIT PLANS.
Seller has a Section 401(k) Plan in existence for its employees, but has
no other Pension Plans and is not a party to or covered by any Multiemployer
Plans. Seller has no liability (contingent or otherwise) for any funding with
respect to such Section 401(k) Plan.
3.18 ENVIRONMENTAL MATTERS.
(a) Seller, to the best of its knowledge, is in compliance with all
applicable federal, state and local laws, administrative rulings, regulations
and regulatory approvals relating to the protection of the environment
(including laws prohibiting the creation of a public nuisance).
(b) Seller, to the best of its knowledge, has obtained all
environmental licenses, permits and authorizations material to the conduct of
its Business, all of which will be in full force and effect as of the Closing
and will be effectively transferred or
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assigned to Purchaser at the Closing without adversely affecting the operation
of Seller's Business after the Closing. No violation of any such licenses,
permits or authorizations has been asserted in the past five years, and no
proceeding is pending or threatened which might result in the revocation or
limitation of any such licenses, permits or authorizations.
(c) Neither Seller nor any "Affiliate" of Seller (as hereinafter
defined), nor any lessee, licensee or other party acting at the direction or
with consent of Seller or any Affiliate of Seller has manufactured, treated,
stored or disposed of any "Hazardous Substance" (as hereinafter defined),
except with respect to the operation of its business.
(d) To the best of Seller's knowledge, no toxic, explosive or otherwise
dangerous materials or Hazardous Substances have been concealed within, buried
beneath, or released on or from Seller's facilities.
(e) Seller has received no notification that it is a potentially
responsible party under Section 107 of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"). Seller has not
received notification from any state or local government or agency under any
similar provisions of state or local law.
(f) The term "Affiliate of the Company" as used in this Section 3.18
shall mean any person or other entity which, prior to the Closing Date,
directly or indirectly controlled, was controlled by, or was under common
control with the Company and includes any person or entity of which the
ultimate parent of the Company (or a majority controlled subsidiary of such
ultimate parent) controlled a majority of the voting power.
(g) For purposes of this Section 3.18, the term "Hazardous Substance"
includes, but is not limited to, any substance identified in Section 101(14) of
CERCLA, or in the regulations under that or any other Federal or state law for
the protection of the environment, petroleum (including crude oil or any
fraction thereof), and the term "release" shall have the meaning given to such
term in Section 101 (22) of CERCLA.
3.19 ABSENCE OF CERTAIN BUSINESS PRACTICES.
To the best of Seller's knowledge, no officer, employee or agent of
Seller, nor any other person acting on its or their behalf, has, directly or
indirectly, within the past five years engaged in any illegal activity which if
not continued in the future, might adversely affect Seller's properties,
Business, operations or prospects.
3.20 TRANSACTIONS WITH CERTAIN PERSONS.
During the past three years Seller has not, directly or indirectly,
purchased, leased or otherwise acquired any property or obtained any services
from, or sold, leased or otherwise disposed of any property or furnished any
services to, or otherwise dealt with (except with respect to compensation for
services rendered as a director, officer or employee of Seller), (a) any
shareholder of Seller or (b) any person, firm or corporation which is
controlled by or is under common control of any shareholder of Seller.
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3.21 FINDERS.
No act of Seller has given or will give rise to any valid claim
against Purchaser for a brokerage commission, finder's fee or other like
payment.
3.22 BUSINESS DESCRIPTION.
Annex A attached hereto contains an accurate and substantially
complete summary description of Seller's Business and the general
development of such Business and of management's relations with employees and
unions, if any, and of all inventions, permits, licenses and franchises relating
thereto, including, without limitation, (a) the percentage of total unit sales,
revenues, gross income and net income attributable to each line of business of
Seller for its last two fiscal years which accounted for 10% or more of total
revenues or net income, (b) the extent to which Seller makes sales or payments
to, or derives revenues or makes purchases from, sources located in foreign
countries, (c) the name of each customer, supplier, distributor or
representative of Seller, the loss of which might materially and adversely
affect its Business, (d) the extent to which Seller derives revenue from, or
makes payments for, licenses or royalties, and (e) all circumstances known to
Seller that threaten or might threaten any of the foregoing.
SECTION 4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER AND SLI.
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, SLI and Purchaser hereby
represent and warrant to Seller and agrees as follows:
4.1 ORGANIZATION OF PURCHASER.
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of California.
(b) SLI is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey.
4.2 CORPORATE AUTHORITY.
The execution, delivery and performance of this Agreement by each
Purchaser and SLI have been duly authorized and approved by all requisite
corporate action on the part of Purchaser and SLI, and neither the execution
nor the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance with or fulfillment of the terms and
provisions of the Agreement, will (a) conflict with or result in a breach of
the terms, condition or provisions of or constitute a default under the
Articles of Incorporation or Bylaws of either Purchaser or SLI or any
instrument, agreement, mortgage, judgment, lease, order, award, decree or other
instrument or restriction to which either Purchaser or SLI is a party or by
which it is
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bound, (b) require any affirmative approval, consent or authorization of any
court, governmental authority or regulatory body or of any creditor of either
Purchaser or SLI, or (c) give any party any rights under any such instrument,
agreement, mortgage, judgment, order, award, decree or other restriction.
Purchaser and SLI each has full power and authority to do and perform all acts
and things required to be done by it under this Agreement. All corporate acts
and other proceedings required to be taken by or on the part of Purchaser and
SLI to authorize it to carry out this Agreement and such other agreements and
instruments as are contemplated hereby and the transactions contemplated hereby
and thereby have been duly and properly taken. The Agreement constitutes, and
such other agreements and instruments when duly executed and delivered by each
of Purchaser and SLI will constitute, valid and binding obligations of
Purchaser and SLI and will be enforceable in accordance with their respective
terms.
4.3 OPERATION OF PURCHASER DURING THE EARNOUT PERIOD.
During the five year term of the Earnout, provided Purchaser's Net
Profits for the previous fiscal year amount to at least $1,100,000:
(a) SLI will provide Purchaser with an adequate amount of cash with
which to operate, permitting (but not limited to) Purchaser to maintain
adequate inventory levels and promptly to pay its suppliers;
(b) SLI will leave Purchaser's employees free from responsibilities
other than operating Seller's Business except to meet concerning, or
discuss, management, technical, marketing or other business subjects;
(c) SLI will not divest Purchaser of any significant assets or product
lines without the prior written approval of Seller's shareholders as they
existed on the Closing Date; and
(d) SLI will maintain Purchaser as a separate subsidiary corporation
or division of SLI, and will not combine it with other SLI affiliates or
businesses.
In the event that Purchaser's Net Profits in any fiscal year during the
Earnout amount to less than $1,100,000, then this Section 4.3 shall not be
operative, except for subsection (d); provided that if Purchaser's Net Profits
in a subsequent fiscal year during the Earnout period exceed $1,100,000, then
subsections (a), (b) and (c) of this Section 4.3 shall again become operative
and remain operative throughout the balance of the Earnout period so long as
Purchaser's Net Profits for a fiscal year amount to at least $1,100,000;
provided that during the time that subsections (a), (b) and (c) are not
operative, SLI shall take no action which would so effect the operations of
Purchaser as to render it substantially impractical for Purchaser's Net Profits
from future operations to exceed $1,100,000 in any fiscal year remaining in the
Earnout period.
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4.4 FINDERS.
No act of Purchaser has given or will give rise to any valid claim
against Seller for a brokerage commission, finder's fee or other like payment.
SECTION 5. COVENANT NOT TO COMPETE.
(a) Seller covenants with Purchaser, for its benefit and that of all
persons who now are or hereafter become its shareholders, that, from the
Closing Date through June 30, 2002, Seller will not, in any city or county in
the State of California or in any other state in the United States or in
Canada, Mexico, Argentina, Brazil, Switzerland, European Common Market, Israel,
South Africa, Australia, Singapore, Taiwan, Hong Kong, China, Japan or South
Korea, participate, directly or indirectly, in the ownership management or
operation of any person, firm, corporation or other entity which carries on a
Business that is similar to or competitive with the Business operated by
Seller.
(b) The term "Business operated by Seller" is defined to mean the
business described in Annex A hereto.
(c) Should this covenant be deemed in restraint of trade by reason of
broadness of the terms hereof, it shall not be deemed void and shall
nevertheless be enforceable for the maximum term and to the maximum extent that
it is deemed reasonable to restrain such competitive conduct in relation to the
transaction involving the sale of Seller's assets and the scope of Seller's
business.
(d) Seller acknowledges that damages for any breach of this covenant
would be an inadequate remedy and, therefore, in addition to all other remedies
at law or in equity, the terms of this covenant shall be specifically
enforceable against Seller and that injunctive relief is appropriate to
preclude any threatened or continuing breach of this covenant.
(e) Any provision herein to the contrary notwithstanding, Seller
shall be entitled to own capital stock in a public company competitive
to Seller, not in excess of 5% of the outstanding capital stock of such company.
SECTION 6. CONDUCT OF BUSINESS PRIOR TO CLOSING.
(a) OPERATE IN ORDINARY COURSE. Prior to the Closing, Seller shall
conduct its Business and affairs only in the ordinary course and consistent
with its prior practice and shall maintain, keep and preserve its properties in
good condition and repair and maintain insurance thereon in accordance with
present practices, (a) and will present to Purchaser the Business and
organization of Seller intact, (b) keep available to Purchaser, to the extent
Purchaser so desires, the services of Seller's present officers, employees,
agents and independent contractors, (c) preserve for the benefit of Purchaser
the goodwill of Seller's suppliers, customers, landlords, banks and others
having business
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or financial relations with it, and (d) cooperate with Purchaser and use
reasonable efforts to assist Purchaser in obtaining the consent of any landlord
or other party to any lease or contract where the consent of such landlord or
other party may be required by reason of the transactions contemplated hereby.
(b) ACCESS TO INFORMATION AND DOCUMENTS. Upon reasonable notice and
during regular business hours, Seller will give SLI's employees and other
representatives full access to its personnel and all of its properties,
documents, contracts, books and records, and will furnish SLI with copies of
such documents (certified by Seller if so requested) and with such information
with respect to its affairs, as SLI may from time to time request, and SLI will
keep such information confidential and not improperly disclose the same prior
to the Closing. Any such furnishing of such information to SLI or any
investigation by SLI shall not affect SLI's right to rely on the
representations and warranties made in this Agreement or in connection herewith
or pursuant hereto.
SECTION 7. TRANSFER EXPENSES.
Purchaser will pay any transfer taxes and filing or recording fees
payable in connection with the instruments of transfer herein provided for, and
will likewise pay any sales, use or similar tax arising out of the transactions
contemplated by this Agreement.
SECTION 8. CONDITIONS.
8.1 Conditions Precedent to Purchaser's and SLI's Obligations.
All obligations of Purchaser and SLI hereunder are subject, at the
joint option of Purchaser and SLI, to the fulfillment of each of the
following conditions at or prior to the Closing, and Seller shall exert its best
efforts to cause each such condition to be so fulfilled.
(a) REPRESENTATIONS TRUE. All representations and warranties of
Seller and the Company contained herein or in any document delivered
pursuant hereto shall be true and correct in all material respects except for
changes in the ordinary course of business after the date hereof consistent with
prior practice in conformity with the covenants and agreements contained herein.
(b) AGREEMENTS PERFORMED. All covenants, agreements and obligations
required by the terms of this agreement to be performed by seller at or before
the closing shall have been duly and properly performed in all material
respects.
(c) CHANGES. Since the date of this Agreement there shall not have
occurred any material adverse change in the condition (financial or otherwise),
Business, properties, operations or prospects of Seller.
(d) CONSENTS. Seller shall have obtained written consents to the
transfer or assignment to purchaser of all material permits, licenses, leases
and other
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material contracts of seller where the consent of any other party to any such
contract may, in the opinion of purchaser's counsel, be required.
(e) NET WORTH. The tangible net book value of Seller, as defined in
Schedule 9 hereto, shall be not less than $1,950,000 on the Closing Date. In
the event the Tangible Net Book Value of Seller is less than $1,950,000, seller
shall pay an amount equal to the difference to purchaser, with interest at the
rate of 8% per annum from the Closing Date until the date of payment.
(f) EMPLOYMENT CONTRACTS. Seller shall use reasonable efforts to have
William D. Carpenter, William D. Bickel and Randall J. Redding, execute and
deliver to Purchaser, Employment Contracts substantially in the form of Annex D
hereto.
(g) COVENANTS NOT TO COMPETE. Seller's shareholders shall execute and
deliver to Purchaser and SLI, Covenant Not to Compete Agreements substantially
in the form of Annex E hereto.
(h) NO ACTION TO PREVENT CLOSING. No action by a third party shall be
pending or threatened which might delay or prevent the Closing.
(i) CERTIFICATE. There shall be delivered to Purchaser and SLI a
certificate executed by Seller, dated the Closing Date, certifying that the
conditions set forth in paragraphs (a), (b), (c), (d), (e), (f), (g) and (h) of
this Section 8.1, have been fulfilled.
(j) DOCUMENTS DELIVERED. All documents required to be delivered to
Purchaser at or prior to the Closing pursuant to Section 2 hereof, shall have
been so delivered.
(k) ENVIRONMENTAL REPORT. Purchaser shall have received a report
from an environmental consultant (retained by Purchaser at its cost)
generally to the effect that there are no significant environmental problems
related to Seller's facilities or its operations which, if not corrected prior
to the Closing, could result in a material liability subsequent to the Closing.
(l) BOARD APPROVAL. The Board of Directors of SLI shall have approved
the purchase of the Purchased Assets in accordance with the terms of this
Agreement, including the exhibits hereto.
8.2. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
All obligations of Seller at the Closing are subject, at its option,
to the fulfillment of each of the following conditions at or prior to
the Closing, and Purchaser and SLI shall exert their best efforts to cause each
such condition to be so fulfilled:
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(a) REPRESENTATIONS TRUE. All representations and warranties of
purchaser and SLI contained herein or in any document delivered pursuant hereto
shall be true and correct in all material respects when made and as of the
Closing.
(b) AGREEMENTS PERFORMED. All obligations required by the terms of
this Agreement to be performed by Purchaser and SLI at or before the
Closing shall have been duly and properly performed in all material respects.
(c) CERTIFICATE. There shall be delivered to Seller a certificate
executed by an officer of Purchaser and SLI, dated the Closing Date, certifying
that the conditions set forth in paragraphs (a) and (b) of this Section 8.2(c)
have been fulfilled.
(d) EMPLOYMENT CONTRACTS. The Employment Contracts called for in
Section 8.1(f) shall have been delivered.
(e) CONSIDERATION AND DOCUMENTS DELIVERED. The wire transfers and any
other documents to be delivered to Seller at or prior to the Closing pursuant
to Section 2 hereof, shall have been so delivered.
SECTION 9. INDEMNIFICATION.
(a) BY SELLER. Subject to the limitation in Section 10, seller hereby
agrees to indemnify and hold Purchaser and SLI harmless from, against and in
respect of (and shall on demand reimburse purchaser or SLI for) any and all
loss, liability, damage or expense suffered or incurred by purchaser or SLI by
reason of any untrue representation, breach of warranty or nonfulfillment of
any agreement requiring performance after the Closing or of any covenant
contained herein or in any certificate, document or instrument delivered to
Purchaser or SLI pursuant hereto or in connection herewith.
(i) If Purchaser or SLI makes a claim against Seller for
indemnification pursuant to this Section 9, and Seller agrees that Purchaser or
SLI is entitled to indemnification, then Seller agrees that Purchaser or SLI
may obtain indemnification either through the Escrow created pursuant to
Section 1.3(b) and/or by withholding funds due seller under the earnout
provided in Section 1.2(b).
(ii) If Purchaser or SLI makes a claim against Seller for
indemnification pursuant to this Section 9 and Seller does not agree that
Purchaser or SLI is entitled to indemnification, or with the amount of the
claim for indemnification, then purchaser or SLI may provide the Escrow Holders
of the Escrow created pursuant to Section 1.3(b) with written notification of
its claim for indemnification in which event Escrow Holder shall place a hold
on the Escrowed Funds to the extent of the claim and such Escrowed Funds shall
continue to be held in this Escrow until such claim for indemnification is
resolved by Sellers and Purchaser or SLI, and further, Purchaser or SLI may
withhold funds due Seller under the Earnout provided in Section 1.2(b), with
such
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withholding continuing until such claim for indemnification is resolved by
sellers and purchaser or SLI.
(b) ASSIGNMENT OF RECEIVABLES. Upon Seller's payment to Purchaser
or SLI of the face amount of any uncollected receivable by reason of the
failure of such receivable to be fully collected as warranted pursuant to the
provisions contained in Section 3.7 hereof, Purchaser shall assign such
receivable to Seller, without recourse.
(c) BY PURCHASER OR SLI. Subject to the limitation in Section 10,
Purchaser and SLI, jointly and severally, hereby agree to indemnify and hold
Seller harmless from, against and in respect of (and shall on demand reimburse
Seller for) any and all loss, liability, damage or expense suffered or incurred
by Seller by reason of any untrue representation, breach of warranty or
nonfulfillment of any agreement requiring performance after the Closing or of
any covenant contained herein or in any certificate, document or instrument
delivered to seller pursuant hereto or in connection herewith.
(d) NOTICE RE INDEMNIFICATION. Promptly after receipt by an
indemnified party of notice of the commencement of any action against
such indemnified party with respect to a claim which the indemnified party
believes is covered by this Section 9, the indemnified party shall notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than as to the a
particular item as to which indemnification is then being sought solely pursuant
to this Section 9. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
reasonably assume the defense thereof, subject to the provisions herein stated,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 9 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party. The indemnifying party shall have the
right to settle any action against an indemnified party for which the
indemnifying party is liable.
(e) Any provision herein to the contrary notwithstanding, an
indemnifying party shall have no obligation to indemnify the indemnified party
unless and until the aggregate amount of the claims or liabilities for which
the indemnifying party is liable exceeds $20,000.
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SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
(a) NATURE OF STATEMENTS, ETC.; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. Each statement, representation, warranty, covenant, agreement or
indemnity made by Seller in this Agreement or in any document, certificate or
other instrument delivered by or on behalf of Seller pursuant to this Agreement
or in connection herewith shall be deemed the statement, representation,
warranty, covenant, agreement or indemnity of Seller. All statements,
representations, warranties, covenants, agreements or indemnities made by the
parties hereto shall survive the Closing and thereafter expire 547 days from
the Closing Date; and provided that Purchaser and SLI shall have 90 days after
such statements, representations, warranties, covenants, agreements or
indemnities expire within which to make a claim for indemnity.
(b) RECOVERY OF COSTS. In the event any party seeks to enforce its
rights hereunder against any other party, then, in addition to all damages and
other remedies to which the prevailing party is or becomes entitled by reason
of such default, the losing party shall promptly pay to the prevailing party an
amount equal to all costs and expenses (including reasonable attorneys' fees)
paid or incurred by the prevailing party in connection with such enforcement
proceeding.
(c) INTEREST. In the event that the prevailing party is entitled to
receive an amount of money by reason of any default hereunder, then, in
addition to such amount of money, the defaulting party shall promptly pay to
the prevailing party a sum equal to interest on such amount of money accruing
at the rate of one percent per month, but not to exceed the maximum rate
allowed by law, during the period between the date such payment should have
been made hereunder and the date of the actual payment thereof.
SECTION 11. DISPUTES.
Seller and Purchaser and SLI have agreed on the following mechanisms in
order to obtain prompt, expeditious and equitable resolution of disputes
between them which may arise subsequent to the Closing:
(a) ARBITRATION.
(i) Any dispute involving a claim under this Agreement shall be
submitted to binding arbitration in accordance with the terms set forth herein.
The Arbitrator shall be an attorney agreed upon by Seller and Purchaser or SLI.
(ii) If Seller and Purchaser or SLI are unable to agree upon such
Arbitrator within 10 days of a written request to do so by either Seller or
Purchaser or SLI, then Seller and Purchaser or SLI shall each select an
Arbitrator within 10 days after such failure to agree upon an Arbitrator and
within 10 days after their selection those two shall select a third Arbitrator,
failing which the chief administrative officer for the
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American Arbitration Association in San Diego, California, shall appoint the
additional Arbitrator.
(iii) The venue of such arbitration shall be in San Diego,
California, and such arbitration shall be conducted in accordance with
the laws of the State of California and the rules and procedures of the American
Arbitration Association in San Diego, California.
(iv) The cost of the proceeding shall initially be borne
equally by Seller and Purchaser or SLI but the prevailing party in such
proceeding shall be entitled to recover, in addition to reasonable attorneys'
fees and all other costs, its contribution for the reasonable costs of the
Arbitrator as an item of damage or recoverable costs or both. If any of Seller
or Purchaser or SLI refuses to pay its share of the costs at the time(s)
required, the other party may do so, in which event that party will be entitled
to recover (or offset) the amount advanced, with interest, even if that party is
not the prevailing party. The Arbitrator shall include such costs in any award.
(b) ENTRY OF JUDGMENT. Any decision by an Aarbitrator shall be
binding on the Seller and Purchaser or SLI and judgment thereon may be
entered in any court having jurisdiction thereof.
(c) COOPERATION. Seller and Purchaser or SLI shall diligently
cooperate with one another to resolve a dispute, and shall perform such
acts as may be necessary to obtain a prompt and expeditious resolution of the
dispute. If Seller or Purchaser or SLI refuses to cooperate diligently, and
another party, after first giving notice of its intent to rely on the provisions
of this section, incurs additional expenses or attorneys' fees wholly or partly
as a result of such failure to cooperate diligently, then the judge or
Arbitrator may award such additional expenses and attorneys' fees to the party
giving such notice, even if the party is not the prevailing party in the
dispute.
SECTION 12. MISCELLANEOUS.
(a) Termination.
(i) This Agreement may be terminated and the transactions
contemplated herein abandoned at any time prior to the Closing upon mutual
written agreement of Seller and Purchaser or SLI.
(ii) Seller or Purchaser or SLI shall have the right to
terminate this Agreement prior to the Closing upon a material breach by
the other party of any provision of this Agreement if such breach is not cured
within ten days after receipt of written notice stating the nature of such
breach.
(b) WAIVER. No waiver of any claim, right, breach or default
hereunder shall be considered valid unless in writing and signed by the
party giving such waiver, and such waiver shall not be deemed a waiver of any
subsequent breach or default of the same
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or similar nature. It is further understood and agreed that no failure or
delay by either party in exercising any right, power or privilege hereunder
will operate as a waiver thereof, nor will any signal or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.
(c) FURTHER ASSURANCES. Seller, at its own reasonable expense, will,
at such time and from time to time on and after the Closing Date, upon
the reasonable request of Purchaser or SLI, promptly execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered, all
such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances that may reasonably be required for the better
conveying, transferring, assigning, delivering, assuring and confirming to
purchaser, or to its respective successors and assigns, or for aiding and
assisting in collecting or reducing to possession, any or all of the properties
and assets of seller sold hereunder. Notwithstanding the foregoing, Purchaser
will pay, or reimburse Seller for, out-of-pocket expenses incurred later than 90
days after the Closing Date in connection with fulfillment of this covenant, up
to a maximum of $1000.
(d) CHANGE OF NAME. Immediately following the Closing, Seller shall
change its corporate name so that it does not contain the name "Teal" or any
other name or combination of letters or words that implies an affiliation with
the Business and shall discontinue the use of any and all literature,
stationery and other documents and information containing the name "Teal."
(e) EXPENSES. Each party hereto shall pay its own expenses incident
to this Areement and the consummation of the transactions provided
herein.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors or assigns of the
parties hereto.
(g) BENEFIT. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this agreement.
(h) NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be personally delivered to
an executive officer of the party receiving such notice or shall be given by
certified U.S. Mail, private courier service or fax, followed by a hard copy
transmitted by U.S. Mail, addressed:
If to Purchaser or SLI: SL Industries, Inc.
520 Fellowship Road, Suite 306
Mt. Laurel, New Jersey 08054
Attn: Owen Farren, President
and
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If to Seller Teal Electronics Corporation
10350 Sorrento Valley Road
San Diego, California 92121
Attn: William D. Carpenter
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
(j) SCHEDULES. The Schedules and Annexes to this Agreement shall be
construed as an integral part of this Agreement to the same extent as if they
had been set forth verbatim herein.
(k) TITLES AND HEADINGS. Titles and headings to Sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
(l) EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the
same agreement, and shall become a binding agreement when one or more
counterparts have been signed by each party and delivered to the other party.
(m) COMPLETE AGREEMENT. This Agreement, including the Schedules and
Annexes attached hereto and the documents referred to herein, shall constitute
the
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entire Agreement be tween the parties hereto with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed these presents the
day and year first above written.
SL INDUSTRIES, INC.
(Corporate Seal)
By:
--------------------------
President
ATTEST:
- ------------------------------
Secretary
SL INDUSTRIES ACQUISITION CORP.
(Corporate Seal)
By:
--------------------------
President
ATTEST:
- ------------------------------
Secretary
TEAL ELECTRONICS CORPORATION
(Corporate Seal)
By:
--------------------------
President
ATTEST:
- ------------------------------
Secretary
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STATEMENT OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
EXCEPTION TO SECTIONS 3.10, 3.13, AND 3.18(a) AND (b)
1. Air Pollution Control District (APCD) permit to operate Diesel Generator.
2. Hazardous Materials Business Plan filed with the Hazardous Materials
Management Division (HMMD) of the San Diego County Department of Environmental
Health.
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SCHEDULE 9
DEFINITION OF TANGIBLE NET BOOK VALUE
Tangible Net Book Value as used in this Agreement means the aggregate of all
assets purchased minus liabilities assumed by Purchaser which consist of the
following:
ASSETS PURCHASED:
Accounts receivable at face value without reduction for any reserve for
uncollectible accounts
Inventory at lower of weighted average cost or market, net of any reserve for
excess or obsolete inventory
Prepaid business insurance & other prepaid expenses
Refundable deposits
Payroll advances and other advances
Machinery and equipment on books at book value after reduction for depreciation
Machinery, equipment and tooling not on books at approximate cost less
depreciation
Leasehold improvements at book value after reduction for amortization
Patents & trademarks at book value
ASSETS NOT PURCHASED:
Cash
Shareholder notes and accrued interest thereon
LABILITIES ASSUMED:
Tade accounts payable
Acrued sales commissions and bonuses
Acrued payroll
Accrued bonuses (manager & employee plan)
Accrued payroll taxes
Accrued vacation pay
Accrued wage garnishments
Accrued 401k amounts
Accrued California sales & use tax
Customer deposits
LIABILITIES NOT ASSUMED:
Income and franchise taxes
Bad debt reserve
Accrued warranty expense
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List of Annexes and Schedules
Omitted From Asset Purchase Agreement
Upon request, the Registrant shall furnish supplementally a copy of
any omitted annex or schedule to the Commission.
Annex A Description of Business
Addition to Annex A
Asset Purchase Agreement-Rev. 4/28/95
Key Teal Suppliers
Annex B Escrow Agreement dated May 8, 1995, by and among
Teal, Registrant, SL Industries Acquisition Corp.,
and Nossaman, Guthner, Know & Elliott
Annex C Bill of Sale
Annex D Key Employees and Contracts of Employment
(filed with Report on Form 8-K)
Annex E Covenant Not To Compete Agreements
(filed with Report on Form 8-K)
Schedule 1 Equipment and Machinery
Schedule 1A
Fixed Assets Not on Books as of February 28, 1995
Schedule 2 Real Property Leases
Schedule 3 Personal Property Leases
Schedule 4 Contracts and Agreements
Schedule 5 Licenses and Permits
Schedule 6 Purchase Orders for Material or Equipment
Schedule 7 Employee Plans
Schedule 8 Labor Agreements - None
Schedule 9 Definition of Tangible Net Book Value
(filed with Report on Form 8-K)
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